Vol. 78 Wednesday, 

No. 118 June 19, 2013 

Part III 

Department of Health and Human Services 

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

Patient Protection and Affordable Care Act; Program Integrity: Exchange, 

SHOP, Premium Stabilization Programs, and Market Standards; Proposed 

Rule 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
37032 Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

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

156 

[CMS–9957–P] 

RIN 0938–AR82 

Patient Protection and Affordable Care 

Act; Program Integrity: Exchange, 

SHOP, Premium Stabilization 

Programs, and Market Standards 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule sets forth 

financial integrity and oversight 

standards with respect to Affordable 

Insurance Exchanges; Qualified Health 

Plan (QHP) issuers in Federallyfacilitated Exchanges (FFEs); and States 

with regard to the operation of risk 

adjustment and reinsurance programs. It 

also proposes additional standards with 

respect to agents and brokers. These 

standards, which include financial 

integrity provisions and protections 

against fraud and abuse, are consistent 

with Title I of the Patient Protection and 

Affordable Care Act as amended by the 

Health Care and Education 

Reconciliation Act of 2010, referred to 

collectively as the Affordable Care Act. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on July 19, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–9957–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–9957–P, P.O. Box 8010, Baltimore, 

MD 21244–8010. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–9957–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244– 

1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–7195 in 

advance to schedule your arrival with 

one of our staff members. Comments 

erroneously mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Leigha Basini at (301) 492–4307, or 

Noah Isserman at (301) 492–4401 for 

general information. Ariel Novick at 

(301) 492–4309, for matters related to 

cost-sharing reductions and advance 

payments of the premium tax credit. 

Adam Shaw at (410) 786–1091, for 

matters related to the risk adjustment, 

reinsurance and risk corridors 

programs. 

Shelley Bain at (301) 492–4453, or Anne 

Pesto at (410) 786–3492, for matters 

related to Part 155, Subpart M. 

Cindy Yen at (301) 492–5142, for 

matters related to Part 155, Subparts 

C and E, and Part 156. 

Scott Dafflitto at (301) 492–4198, for 

matters relating to SHOP. 

Jacob Ackerman at (301) 492–4179, for 

matters related to Parts 144 and Part 

147 and the single risk pool. 

Rebecca Zimmermann at (301) 492– 

4396, for matters related to quality 

standards, Part 156, Subpart L. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

Electronic Access 

This Federal Register document is 

also available from the Federal Register 

online database through Federal Digital 

System (FDsys), a service of the U.S. 

Government Printing Office. This 

database can be accessed via the 

internet at http://www.gpo.gov/fdsys. 

Acronyms and Short Forms 

Because of the many organizations 

and terms to which we refer by acronym 

in this proposed rule, we are listing 

these acronyms and their corresponding 

terms in alphabetical order below: 

Affordable Care Act The Affordable Care 

Act of 2010 (which is the collective term 

for the Patient Protection and Affordable 

Care Act (Pub. L. 111–148) and the Health 

Care and Education Reconciliation Act 

(Pub. L. 111–152)) 

ALJ Administrative Law Judge 

APTC Advance payments of the premium 

tax credit 

ARF Allowable rating factor 

AV Actuarial Value 

CAHPS® Consumer Assessment of 

Healthcare Providers and Systems 

CFR Code of Federal Regulations 

CMP Civil money penalty 

CMS Centers for Medicare & Medicaid 

Services 

DOI State Department of Insurance 

DOL U.S. Department of Labor 

FEHB Federal Employees Health Benefits 

FFE Federally-facilitated Exchange 

FFE API Federally-facilitated Exchange 

application programming interface 

FF–SHOP Federally-facilitated Small 

Business Health Options Program 

GAAP Generally-accepted accounting 

principles 

GAAS Generally accepted auditing 

standards 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 37033 

1Patient Protection and Affordable Care Act; 

Establishment of Exchanges and Qualified Health 

Plans; Exchange Standards for Employers, 77 FR 

18310 (March 27, 2012). 

2Patient Protection and Affordable Care Act; 

Standards Related to Reinsurance, Risk Corridors 

and Risk Adjustment, 77 FR 17220 (March 23. 

2012). 

3Patient Protection and Affordable Care Act; HHS 

Notice of Benefit and Payment Parameters for 2014 

and Amendments to the HHS Notice of Benefit and 

Payment Parameters for 2014, 78 FR 15410 and 

15541 (Mar. 11, 2013). 

GAGAS Generally accepted governmental 

auditing standards 

GAO United States Government 

Accountability Office 

HHS U.S. Department of Health and Human 

Services 

HIPAA Health Insurance Portability and 

Accountability Act of 1996 (Pub. L. 104– 

191) 

IRS Internal Revenue Service 

MLR Medical Loss Ratio 

NAIC National Association of Insurance 

Commissioners 

NCQA National Committee for Quality 

Assurance 

OIG Office of the Inspector General of the 

U.S. Department of Health and Human 

Services 

OMB Office of Management and Budget 

PHS Act Public Health Service Act 

PII Personally Identifiable Information 

PRA Paperwork Reduction Act 

QHP Qualified Health Plan 

SHOP Small Business Health Options 

Program 

The Code Internal Revenue Code of 1986 

TIN Taxpayer Identification Number 

Executive Summary 

Starting on January 1, 2014, qualified 

individuals and qualified employers 

will be able to be covered by private 

health insurance through competitive 

marketplaces called Affordable 

Insurance Exchanges, or ‘‘Exchanges’’ 

(also called Health Insurance 

Marketplaces). This proposed rule sets 

forth oversight and financial integrity 

standards with respect to Exchanges, 

QHP issuers in Federally-facilitated 

Exchanges (FFEs), and States with 

regard to the operation of risk 

adjustment and reinsurance programs. It 

also proposes additional standards for 

special enrollment periods, survey 

vendors that may conduct enrollee 

satisfaction surveys on behalf of QHP 

issuers in Exchanges, issuer 

participation in an FFE, and States’ 

operation of a SHOP. Finally, it 

proposes additional standards for agents 

and brokers, geographic rating areas, 

and guaranteed availability and 

renewability. Nothing in these proposed 

regulations would limit the authority of 

the Office of the Inspector General of the 

U.S. Department of Health and Human 

Services (OIG) as prescribed by the 

Inspector General Act of 1978 or any 

other law. 

Although many of the proposed 

provisions in this proposed rule would 

become effective by 2014, we do not 

believe that affected parties will have 

difficulty complying with the provisions 

by their effective dates, because most of 

the proposed standards are based on 

existing standards currently in effect in 

the private market, were previously 

proposed through the Blueprint process, 

discussed in agency-issued subregulatory guidance, or were discussed 

in the preambles to the Exchange 

Establishment Rule,1 Premium 

Stabilization Rule,2 and the HHS Notice 

of Benefit and Payment Parameters for 

2014.3 In addition to general comments 

on the substance of the proposed 

provisions, we seek input on ways to 

implement these proposed policies to 

minimize burden. 

Table of Contents 

I. Background 

A. Legislative Overview 

B. Stakeholder Consultation and Input 

C. Structure of the Proposed Rule 

II. Provisions of the Proposed Rule 

A. Part 144—Requirements Related to 

Health Insurance Coverage 

B. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

C. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment under the Affordable Care 

Act 

1. Subpart A—General Provisions 

2. Subpart C—State Standards Related to 

the Reinsurance Program 

3. Subpart D—State Standards Related to 

the Risk Adjustment Program 

4. Risk Adjustment Methodology 

5. Subpart E—Health Insurance Issuer and 

Group Health Plan Standards Related to 

the Reinsurance Program 

6. Subpart F—Health Insurance Issuer 

Standards Related to the Risk Corridors 

Program 

7. Subpart G—Health Insurance Issuer 

Standards Related to the Risk 

Adjustment Program 

8. Subpart H—Distributed Data Collection 

for HHS-Operated Programs 

D. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. Subpart A—General Provisions 

2. Subpart B—General Standards Related to 

the Establishment of an Exchange 

3. Subpart C—General Functions of an 

Exchange 

4. Subpart D—Exchange Functions in the 

Individual Market: Eligibility 

Determinations for Exchange 

Participation and Insurance Affordability 

Programs 

5. Subpart E—Exchange Functions in the 

Individual Market: Enrollment in 

Qualified Health Plans 

6. Subpart H—Exchange Functions: Small 

Business Health Options Program 

(SHOP) 

7. Subpart M—Oversight and Program 

Integrity Standards for State Exchanges 

E. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

1. Subpart A—General Provisions 

2. Subpart C—Qualified Health Plan 

Minimum Certification Standards 

3. Subpart D—Federally-facilitated 

Exchange Qualified Health Plan Issuer 

Standards 

4. Subpart E—Health Insurance Issuer 

Responsibilities with Respect to 

Advance Payments of the Premium Tax 

Credit and Cost-sharing Reductions 

5. Subpart H—Oversight and Financial 

Integrity Standards for Issuers of 

Qualified Health Plans in Federallyfacilitated Exchanges 

6. Subpart I—Enforcement Remedies in 

Federally-facilitated Exchanges 

7. Subpart J—Administrative Review of 

QHP Issuer Sanctions in Federallyfacilitated Exchanges 

8. Subpart K—Cases Forwarded to 

Qualified Health Plans and Qualified 

Health Plan Issuers in Federallyfacilitated Exchanges by HHS 

9. Subpart L—Quality Standards 

10. Subpart M—Qualified Health Plan 

Issuer Responsibilities 

III. Collection of Information Requirements 

IV. Response to Comments 

V. Regulatory Impact Analysis 

I. Background 

A. Legislative Overview 

The Patient Protection and Affordable 

Care Act (Pub. L. 111–148) was enacted 

on March 23, 2010. The Health Care and 

Education Reconciliation Act of 2010 

(Pub. L. 111–152), which amended and 

revised several provisions of the Patient 

Protection and Affordable Care Act, was 

enacted on March 30, 2010. In this 

proposed rule, we refer to the two 

statutes collectively as the ‘‘Affordable 

Care Act.’’ Subtitles A and C of Title I 

of the Affordable Care Act reorganized, 

amended, and added to the provisions 

of part A of Title XXVII of the Public 

Health Service Act (PHS Act) relating to 

health insurance issuers in the group 

and individual markets and to group 

health plans that are non-Federal 

governmental plans. As relevant here, 

these PHS Act provisions include 

section 2701 (fair health insurance 

premiums), section 2702 (guaranteed 

availability of coverage), and section 

2703 (guaranteed renewability of 

coverage). 

Starting on October 1, 2013 for 

coverage starting as soon as January 1, 

2014, qualified individuals and 

qualified employers will be able to 

purchase QHPs—private health 

insurance that has been certified as 

meeting certain standards—through 

competitive marketplaces called 

Exchanges or Health Insurance 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
37034 Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 

4Section 1321(c) of the Affordable Care Act 

erroneously cites to section 2736(b) of the PHS Act 

instead of 2723(b) of the PHS Act. This was clearly 

a typographical error, and we have interpreted 

section 1321(c) of the Affordable Care Act to 

incorporate section 2723(b) of the PHS Act. 

Marketplaces. The Departments of 

Health and Human Services, Labor, and 

the Treasury have been working in close 

coordination to release guidance related 

to QHPs and Exchanges in several 

phases. The word ‘‘Exchanges’’ refers to 

both State Exchanges, also called Statebased Exchanges, and Federallyfacilitated Exchanges (FFEs). In this 

proposed rule, we use the terms ‘‘State 

Exchange’’ or ‘‘FFE’’ when we are 

referring to a particular type of 

Exchange. When we refer to ‘‘FFEs,’’ we 

are also referring to State Partnership 

Exchanges, which are a form of FFEs. 

In this proposed rule, we encourage 

State flexibility within the boundaries of 

the law. Sections 1311(b) and 1321(b) of 

the Affordable Care Act provide that 

each State has the opportunity to 

establish an Exchange. Section 

1311(b)(1) gives each State the 

opportunity to establish an Exchange 

that both facilitates the purchase of 

QHPs and provides for the 

establishment of a Small Business 

Health Options Program (SHOP) that 

will help qualified employers enroll 

their employees in QHPs. Section 

1311(b)(2) contemplates the separate 

operation of the individual market 

Exchange and the SHOP under different 

governance and administrative 

structures, because it permits the 

individual market Exchange and SHOP 

to be merged only if States have 

adequate resources to assist both 

populations (individual and small 

employers) as a merged entity. 

Section 1311(c)(4) of the Affordable 

Care Act directs the Secretary to 

establish an enrollee satisfaction survey 

system that would evaluate the level of 

enrollee satisfaction of members in each 

QHP offered through an Exchange with 

more than 500 enrollees in the previous 

year. 

Section 1321(a) of the Affordable Care 

Act provides general authority for the 

Secretary to establish standards and 

regulations to implement the statutory 

requirements related to Exchanges, 

QHPs, and other components of Title I 

of the Affordable Care Act. 

Section 1321(c)(1) requires the 

Secretary of Health and Human Services 

(referred to throughout this rule as the 

Secretary) to establish and operate an 

FFE within States that either: do not 

elect to establish an Exchange; or, as 

determined by the Secretary, will not 

have any required Exchange operational 

by January 1, 2014. 

Section 1321(c)(2) of the Affordable 

Care Act authorizes the Secretary to 

enforce the Exchange standards using 

civil money penalties (CMPs) on the 

same basis as detailed in section 2723(b) 

of the PHS Act.4 Section 2723(b) of the 

PHS Act authorizes the Secretary to 

impose CMPs as a means of enforcing 

the individual and group market 

reforms contained in Title XXVII, Part A 

of the PHS Act when a State fails to 

substantially enforce these provisions. 

Section 1311(d)(5)(A) of the 

Affordable Care Act provides that 

States, when establishing Exchanges, 

must ensure that such Exchanges are 

self-sustaining beginning in 2015, 

including allowing Exchanges to charge 

assessments or user fees to participating 

issuers to generate funding to support 

their operations. Section 1311(d)(5)(B) 

contains a prohibition on the wasteful 

use of funds. When operating an FFE 

under section 1321(c)(1) of the 

Affordable Care Act, HHS has the 

authority under sections 1321(c)(1) and 

1311(d)(5)(A) to collect and spend such 

user fees. In addition, 31 U.S.C. 9701 

permits a Federal agency to establish a 

charge for a service provided by the 

agency. Office of Management and 

Budget (OMB) Circular A–25 Revised 

establishes Federal policy regarding 

user fees and specifies that a user charge 

will be assessed against each 

identifiable recipient for special benefits 

derived from Federal activities beyond 

those received by the general public. 

Section 1311(e)(1)(B) of the 

Affordable Care Act specifies that an 

Exchange may certify a health plan as a 

QHP if the Exchange determines that 

making available such a health plan 

through the Exchange is in the interests 

of qualified individuals and qualified 

employers in the State or States in 

which the Exchange operates. 

Section 1312(c) of the Affordable Care 

Act directs a health insurance issuer to 

consider all enrollees in all health plans 

(other than grandfathered health plans) 

offered by such issuer to be members of 

a single risk pool for each of its 

individual and small group markets. 

Section 1312(c) of the Affordable Care 

Act gives States the option to merge the 

individual and small group markets 

within the State into a single risk pool. 

Section 1312(e) of the Affordable Care 

Act directs the Secretary to establish 

procedures under which a State may 

permit agents and brokers to enroll 

qualified individuals and qualified 

employers in QHPs through an 

Exchange, and to assist individuals in 

applying for advance payments of the 

premium tax credit and cost-sharing 

reductions. 

Section 1313 of the Affordable Care 

Act, combined with section 1321 of the 

Affordable Care Act, provides the 

Secretary with the authority to oversee 

the financial integrity, compliance with 

HHS standards, and efficient and nondiscriminatory administration of State 

Exchange activities. Section 

1313(a)(6)(A) of the Affordable Care Act 

specifies that payments made by, 

through, or in connection with an 

Exchange are subject to the False Claims 

Act (31 U.S.C. 3729, et seq.) if those 

payments include any Federal funds. 

Section 1341 of the Affordable Care 

Act establishes a transitional 

reinsurance program which begins in 

2014 and is designed to provide issuers 

with greater payment stability as 

insurance market reforms are 

implemented and Exchanges facilitate 

increased enrollment. Section 1342 of 

the Affordable Care Act establishes a 

temporary risk corridors program which 

permits the Federal government and 

QHPs to share in gains or losses 

resulting from inaccurate rate setting 

from 2014 through 2016. Section 1343 

of the Affordable Care Act establishes a 

permanent risk adjustment program 

which is intended to provide increased 

payments to health insurance issuers 

that attract higher-risk populations, 

such as those with chronic conditions, 

and eliminate incentives for issuers to 

avoid higher-risk enrollees. 

Section 1401 of the Affordable Care 

Act amended the Internal Revenue Code 

(26 U.S.C.) to add section 36B, allowing 

a refundable premium tax credit to help 

individuals and families afford health 

insurance coverage. Under sections 

1401, 1411, and 1412 of the Affordable 

Care Act and 45 CFR part 155, subpart 

D, an Exchange will make a 

determination of advance payments of 

the premium tax credit for individuals 

who enroll in QHP coverage through an 

Exchange and seek financial assistance. 

Section 1402 of the Affordable Care Act 

provides for the reduction of cost 

sharing for certain individuals enrolled 

in a QHP through an Exchange, and 

section 1412 of the Affordable Care Act 

provides for the advance payment of 

these reductions to issuers. 

Section 1411(g) of the Affordable Care 

Act specifies that information provided 

by an applicant or received from a 

Federal agency may be used only for the 

purpose of, and to the extent necessary 

in ensuring the efficient operation of the 

Exchange, including for the purpose of 

verifying the eligibility of an individual 

to enroll through an Exchange, to claim 

a premium tax credit or cost-sharing 

reduction, or for verifying the amount of 

the tax credit or reduction. 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 37035 

5Patient Protection and Affordable Care Act; 

Health Insurance Market Rules; Rate Review’’ 78 FR 

13406 (February 27, 2013). 

6Section 2791(e)(1)(B) and (e)(4) of the PHS Act. 

7See Affordable Care Act Implementation 

FAQs—Set 5, Q8 (December 22, 2010). Available at: 

http://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/aca_implementation_faqs5.html. 

Section 1411(h) of the Affordable Care 

Act sets forth civil penalties that any 

person will be subject to if a person 

provides inaccurate information as part 

of the application or improperly uses or 

discloses information. 

Unless otherwise specified, the 

provisions in this proposed rule related 

to the establishment of minimum 

functions of an Exchange are based on 

the general authority of Secretary under 

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

Act. Nothing in these proposed 

regulations would limit the authority of 

the OIG as prescribed by the Inspector 

General Act of 1978 or any other law. 

B. Stakeholder Consultation and Input 

HHS has consulted with stakeholders 

on a number of polices related to the 

operation of Exchanges, including the 

SHOP, and premium stabilization 

programs. HHS has held a number 

listening sessions with consumers, 

providers, employers, health plans, and 

State representatives to gather public 

input. HHS consulted with stakeholders 

through regular meetings with the 

National Association of Insurance 

Commissioners (NAIC), regular contact 

with States through the Exchange grant 

process, and meetings with tribal 

leaders and representatives, health 

insurance issuers, trade groups, 

consumer advocates, employers, and 

other interested parties. We considered 

all of the public input as we developed 

the policies in this proposed rule. 

C. Structure of the Proposed Rule 

The regulations outlined in this 

proposed rule would be codified in 45 

CFR parts 144, 147, 153, 155, and 156. 

Part 153 outlines select oversight 

provisions related to the premium 

stabilization programs, such as 

maintenance of records, and sanctions 

for failing to establish a dedicated 

distributed data environment. Part 155 

outlines the standards relative to the 

establishment, operation, and minimum 

functionality of Exchanges, including 

oversight provisions related to State 

Exchanges, such as those pertaining to 

financial integrity and maintenance of 

records. It also includes standards for 

States’ establishment of a SHOP and 

agents and brokers. Part 156 outlines the 

standards for health insurance issuers 

with respect to participation in an 

Exchange, including minimum 

certification standards for QHPs and 

select oversight provisions related to 

QHP issuers in FFEs, such as those 

pertaining to maintenance of records, 

compliance reviews, and sanctions. It 

also includes provisions related to 

quality, the handling of consumer cases 

by issuers, and issuer standards related 

to the SHOP. 

We note that this rule includes 

standards for the SHOP to coordinate 

with the functions of the individual 

market Exchange for determining 

eligibility for insurance affordability 

programs in § 155.705(c). This provision 

was previously proposed in recent 

rulemaking and published in the 

Federal Register (78 FR 4723) on 

January 22, 2013. We received several 

comments on this provision. Some 

commenters supported the proposal in 

§ 155.705(c), while other commenters 

raised concerns that the proposed rules 

were overly burdensome and unrealistic 

in scope and practicability. 

After review of comments, and in 

light of the proposal included in this 

rule permitting a State to operate only 

a SHOP including the changes to part 

155 of this rule, we are reproposing 

§ 155.705(c) in this rulemaking. 

II. Provisions of the Proposed 

Regulations 

A. Part 144—Requirements Related to 

Health Insurance Coverage 

In § 144.102(c), we propose a 

technical correction to clarify whether 

coverage sold through associations is 

group or individual coverage under the 

PHS Act. The Market Reform Rule 5

provided, among other things, that if 

health insurance coverage ‘‘is offered to 

an association’s employer-member that 

is maintaining a group health plan that 

has fewer than two participants who are 

current employees on the first day of the 

plan year,’’ the coverage is considered 

individual health insurance coverage for 

purposes of Title XXVII of the PHS Act. 

This statement reflects the definition of 

‘‘individual market’’ under the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA), but 

does not reflect the amendments made 

by the Affordable Care Act redefining 

‘‘small employer’’ to include an 

employer with an average of at least one 

employee.6 Accordingly, we propose to 

delete the reference to group health 

plans with fewer than two participants 

who are current employees on the first 

day of the plan year from the rule. We 

propose conforming amendments to the 

definitions of ‘‘group market’’ and 

‘‘individual market’’ in § 144.103. 

In § 144.103, we propose to amend the 

definition of ‘‘policy year’’ with respect 

to non-grandfathered coverage in the 

individual market or in a market in 

which the State has merged the 

individual and small group risk pools, 

pursuant to section 1312(c)(3) of the 

Affordable Care Act and implementing 

regulations at 45 CFR 156.80(c). Under 

this proposal, ‘‘policy year’’ means a 

calendar year for which health 

insurance coverage provides coverage 

for health benefits. This is consistent 

with the proposed technical 

clarification to § 147.104 discussed 

below. 

We also propose to amend the 

definitions of ‘‘small employer’’ and 

‘‘large employer’’ in § 144.103, 

consistent with PHS Act section 

2791(e), as amended by the Affordable 

Care Act. Section 2791(e)(2) generally 

defines a large employer as an employer 

with an average of at least 101 

employees. Section 2791(e)(4) generally 

defines a small employer as an 

employer with an average at least one 

but not more than 100 employees. 

Pursuant to section 1304(b)(3) of the 

Affordable Care Act, each State has the 

option to limit small employers to 

having no more than 50 employees until 

2016. 

Although the Affordable Care Act 

amended the definitions of ‘‘small 

employer’’ and ‘‘large employer’’ for 

purposes of the PHS Act, ERISA and the 

Code continue to define a small 

employer as one that has 50 or fewer 

employees.7 Additionally, although the 

Affordable Care Act removed an 

exception for very small plans 

contained in PHS Act section 2721(a) 

(providing that title XXVII of PHS Act 

generally does not apply to plans (and 

health insurance coverage offered in 

connection with such plans) with less 

than two participants who are current 

employees), parallel provisions in 

ERISA (section 732(a)) and the Code 

(section 9831(a)(2)) generally continue 

to provide that the requirements of part 

7 of ERISA, and chapter 100 of the 

Code, do not apply to such plans. The 

Departments of HHS, Labor, and the 

Treasury recognize that these statutory 

changes may create a conflict between 

the provisions of title XXVII of the PHS 

Act and part 7 of ERISA and chapter 100 

of the Code with respect to insured 

group health plans. We solicit 

comments on what interpretations of the 

statute, if any, are necessary to ensure 

smooth implementation across the PHS 

Act, ERISA, and the Code, including 

comments to help ensure that shared 

provisions are administered to have the 

same effect at all times, as required 

under HIPAA section 104 and the 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
37036 Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 

8See 64 FR 70164 (December 15, 1999). 

9Questions and Answers Related to the Health 

Insurance Market Reforms, (April 26, 2013). 

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

Fact-Sheets-and-FAQs/qa_hmr.html. 

10Available at: http://www.cms.gov/CCIIO/ 

Resources/Fact-Sheets-and-FAQs/Downloads/ 

marketplace-faq-5-14-2013.pdf. 

11Patient Protection and Affordable Care Act; 

HHS Notice of Benefit and Payment Parameters for 

2014, 78 FR 15410 (March 11, 2013). 

Departments’ Memorandum of 

Understanding.8

B. Part 147—Health Insurance Reform 

Requirements for the Group and 

Individual Health Insurance Markets 

1. Fair Health Insurance Premiums 

(§ 147.102) 

Section 2701 of the PHS Act, as added 

by the Affordable Care Act, and 

implementing regulations at 45 CFR 

147.102, direct a health insurance issuer 

offering non-grandfathered health 

insurance coverage in the individual 

and small group markets, beginning 

with plan or policy years starting in 

2014, to limit any variation in premium 

rates with respect to a particular plan or 

coverage to family size, age, tobacco use, 

and geographic rating area. Under 

§ 147.102(c), generally, issuers in the 

individual and small group markets 

must calculate premiums on a permember basis by adding the rate of each 

covered family member or employees 

and their dependents to determine the 

total family or group premium, 

respectively. 

HHS has received several inquiries 

since the issuance of the Market Reform 

Rule asking whether geographic rating 

in the small group market is based on 

employee or employer address. HHS has 

also received several inquiries asking 

which rating areas should be used for 

individual market coverage if family 

members live in multiple locations. 

PHS Act section 2701(a)(4) and 

§ 147.102(c) require any rating variation 

for age and tobacco use to be applied on 

a per-member basis, but do not impose 

the same requirement on rating for 

geography. Accordingly, consistent with 

guidance released on April 26, 2013 

describing our intended clarification,9

we propose to clarify in 

§ 147.102(a)(1)(ii) that the rating area is 

determined in the small group market 

using the principal business address of 

the group policyholder, and in the 

individual market, using the address of 

the primary policyholder, regardless of 

the location of other individuals 

covered under the plan or coverage. 

This would apply both inside and 

outside of the Exchange and SHOP. We 

seek comment on this proposal. 

Additionally, to clarify the connection 

between the premium rating 

requirements of PHS Act section 2701 

and the single risk pool requirement of 

section 1312(c) of the Affordable Care 

Act, we propose in § 147.102(a) to add 

a cross-reference to the single risk pool 

standard codified in 45 CFR 156.80. 

Because of this connection, HHS 

considers both provisions to be subject 

to the general enforcement authority 

under PHS Act section 2723. 

2. Guaranteed Availability and 

Renewability of Coverage (§§ 147.104, 

147.106) 

Section 2702 of the PHS Act, as 

amended by the Affordable Care Act, 

generally directs a health insurance 

issuer that offers health insurance 

coverage in the individual or ‘‘group 

market’’ in a State to accept every 

individual or employer in the State that 

applies for such coverage. Section 2703 

of the PHS Act, as amended by the 

Affordable Care Act, generally requires 

an issuer in the individual or ‘‘group’’ 

market to renew or continue in force 

coverage at the option of the plan 

sponsor or individual, as applicable. 

Both of these statutes and their 

implementing regulations, codified at 45 

CFR 147.104 and 147.106, do not 

distinguish between the different 

segments of the group market, meaning 

the large group and small group 

markets. We explained in the preamble 

of the Market Reform Rule (78 FR 

13419), in the context of the market 

withdrawal exception to guaranteed 

renewability, that because the statutory 

language refers only to the ‘‘group 

market,’’ the regulations implement the 

statute without segmenting the group 

market. 

After further review and 

consideration of the statutory 

provisions, we are proposing to clarify 

that the guaranteed availability and 

renewability requirements apply within 

the applicable market segment (the 

individual, small group, or large group 

market). This clarification is consistent 

with the information we provided in a 

document titled, ‘‘Frequently Asked 

Questions on Health Insurance 

Marketplaces,’’ dated May 14, 2013.10

We recognize that issuers in the large 

group and small group markets may be 

subject to distinct requirements under 

the PHS Act (for example, requirement 

to cover the essential health benefits 

package under section 2707(a)) and that 

failing to segment the markets for 

purposes of guaranteed availability and 

guaranteed renewability would have 

consequences not contemplated by the 

PHS Act. Accordingly, we propose 

amendments recognizing the distinction 

of the large group and small group 

markets for purposes of the guaranteed 

availability and guaranteed renewability 

requirements. The proposed 

clarifications would make clear, for 

example, that a health insurance issuer 

must offer to a large employer all 

products that are approved for sale in 

the large group market, but not those 

products approved for sale only in the 

small group market, and vice versa. We 

propose similar amendments 

recognizing the distinction of the large 

group and small group segments of the 

group market for purposes of the 

guaranteed renewability provisions. 

Also, in § 147.104(b)(2), we propose a 

clarification that, as of January 1, 2015, 

all non-grandfathered coverage in the 

individual market or in a market in 

which the State has merged the 

individual and small group risk pools, 

pursuant to section 1312(c)(3) of the 

Affordable Care Act and implementing 

regulations at 45 CFR 156.80(c), must be 

offered on a calendar year basis. This 

simply clarifies the intent of the Market 

Reform Rule. It is essential that all nongrandfathered coverage in the 

individual and merged markets be on a 

calendar year basis as of January 1, 2015 

to line up with coverage in the 

Exchanges and also to be consistent 

with the requirements of the single risk 

pool in § 156.80. For purposes of new 

enrollment effective on any date other 

than January 1, the first policy year 

following such enrollment may 

comprise a prorated policy year, ending 

on December 31. 

C. Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment under the Affordable Care 

Act 

In this part, we propose certain 

provisions related to program integrity 

for State-operated risk adjustment and 

reinsurance programs. Specifically, we 

propose an accounting requirement for 

State-operated reinsurance and risk 

adjustment programs, and requirements 

relating to summary reports and 

independent external audits for these 

programs. We also propose a provision 

restricting the use of reinsurance funds 

for administrative expenses, which we 

discussed in the preamble to the HHS 

Notice of Benefit and Payment 

Parameters for 2014 11 (2014 Payment 

Notice). In addition, we propose record 

retention standards for States operating 

risk adjustment, and for contributing 

entities and reinsurance-eligible plans 

when HHS operates reinsurance on 

behalf of a State. We seek comment on 

these proposals. We set forth a general 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 37037 

12Available at: http://www.cms.gov/CCIIO/ 

Resources/Fact-Sheets-and-FAQs/Downloads/ 

marketplace-faq-5-14-2013.pdf. 13We described some of the characteristics of 

major medical coverage in the 2014 Payment 

Notice, at 78 FR 15456. We propose further 

clarification of this concept below. 

description of these provisions in a 

document titled, ‘‘Frequently Asked 

Questions on Health Insurance 

Marketplaces,’’ dated May 14, 2013.12

We intend to engage in further 

consultations with stakeholders, and to 

propose additional standards related to 

the oversight of the premium 

stabilization programs in future 

regulations and guidance, including 

standards governing data validation for 

risk adjustment when HHS operates that 

program on behalf of a State. 

1. Subpart A—General Provisions 

a. Definitions (§ 153.20) 

In this section, we propose an 

amendment to the definition of a 

‘‘contributing entity.’’ The current 

definition states that ‘‘Contributing 

entity means a health insurance issuer 

or self-insured group health plan. A selfinsured group health plan is responsible 

for the reinsurance contributions, 

though it may elect to use a third party 

administrator or administrative services 

only contractor for transfer of the 

reinsurance contributions.’’ This 

definition does not address the situation 

in which the benefit provided to a 

participant under a group health plan is 

partially insured, and partially selfinsured (for example, the medical 

benefits are provided under a selfinsured arrangement but the 

prescription drug benefits are provided 

under an insured arrangement, or vice 

versa). However, the reinsurance 

contribution counting rules at 45 CFR 

153.405(f), which we promulgated in 

the 2014 Payment Notice, do address 

this situation, and place liability for 

reinsurance contributions on the plan. 

We propose to amend the definition of 

‘‘contributing entity’’ to clarify that for 

purposes of that definition, a selfinsured group health plan includes a 

group health plan that is partially selfinsured and partially insured, but only 

where the insured coverage does not 

constitute major medical coverage 

(whether or not the self-insured 

coverage is major medical coverage).13

This amendment would clarify that if a 

group health plan is structured in such 

a manner, the group health plan would 

be liable for reinsurance contributions 

under the counting rules applicable to 

self-insured group health plans at 45 

CFR 153.405(f), but if the insured 

coverage is major medical coverage, the 

issuer is liable for the contributions. For 

a discussion of group health plans 

under which certain coverage options 

under the plan are insured and other 

coverage options are self-insured, see 

the last paragraph of the preamble 

discussion of proposed § 153.400 below. 

2. Subpart C—State Standards Related 

to the Reinsurance Program 

Section 1341 of the Affordable Care 

Act provides for the establishment of a 

transitional reinsurance program in each 

State to help stabilize premiums for 

coverage in the individual market from 

2014 through 2016. The reinsurance 

program is designed to alleviate the 

need to build into premiums the 

unknown costs of enrolling individuals 

with significant unmet medical needs. 

In subparts C and E of 45 CFR part 153, 

finalized on March 23, 2012 in the 

Premium Stabilization Rule (77 FR 

17220), we established standards for the 

administration of the reinsurance 

program. Below, we propose certain 

provisions related to the oversight of 

State-operated reinsurance programs. 

a. Maintenance of Records (§ 153.240(c)) 

We propose to amend 45 CFR 

153.240(c), a maintenance of records 

requirement applicable when a State 

establishes the reinsurance program, to 

be consistent with proposed 

§ 153.310(c)(4), a maintenance of 

records requirement for State-operated 

risk adjustment programs, which is 

discussed below. We propose to amend 

§ 153.240(c) such that if a State 

establishes a reinsurance program, the 

State would be directed to maintain 

documents and records relating to the 

reinsurance program, whether paper, 

electronic, or in other media, for each 

benefit year for at least 10 years, and 

make them available upon request from 

HHS, the OIG, the Comptroller General, 

or their designees, to any such entity. 

The documents and records must be 

sufficient to enable an evaluation of the 

State-operated reinsurance program’s 

compliance with Federal standards. 

States would also be directed to ensure 

that their contractors, subcontractors, 

and agents similarly maintain and make 

relevant documents and records 

available upon request from HHS, the 

OIG, the Comptroller General, or their 

designees. We note that a State may 

satisfy this standard by archiving these 

documents and records and ensuring 

that they are accessible if needed in the 

event of an investigation, audit, or other 

review. We seek comment on this 

proposal. 

b. General Oversight Requirements for 

State-Operated Reinsurance Programs 

(§ 153.260) 

HHS expects that States will operate 

the reinsurance program under section 

1341 of the Affordable Care Act in an 

effective and efficient manner, and in 

accordance with the provisions of 

subpart C of 45 CFR part 153. We are 

therefore proposing, pursuant to our 

authority under sections 1321(a)(1) and 

1341 of the Affordable Care Act, certain 

general oversight requirements for Stateoperated reinsurance programs. In 

§ 153.260(a), we propose that a State 

establishing the reinsurance program 

would be directed to ensure that its 

applicable reinsurance entity keeps, for 

each benefit year, an accounting of the 

following: (1) All reinsurance funds 

received from HHS for reinsurance 

payments and for administrative 

expenses; (2) all claims for reinsurance 

payments received from issuers of 

reinsurance-eligible plans; (3) all 

reinsurance payments made to issuers of 

reinsurance-eligible plans; and (4) all 

administrative expenses incurred for the 

State’s reinsurance program. This 

accounting must be kept in accordance 

with generally accepted accounting 

principles (GAAP), consistently applied. 

This accounting would enable HHS to 

ensure that the appropriate amount of 

reinsurance funds collected by the 

Federal government is spent for 

reinsurance payments and 

administrative expenses. We seek 

comment on this proposal. 

In § 153.260(b), we propose that a 

State that establishes the reinsurance 

program would be directed to submit to 

HHS and make public a summary report 

on its reinsurance program operations 

for each benefit year, in the manner and 

timeframe specified by HHS. This report 

must include a summary of the 

accounting for the benefit year as set 

forth in proposed § 153.260(a). We note 

that, in the interest of transparency, 

HHS intends to publish periodic reports 

on its operation of the reinsurance 

program on States’ behalf. We anticipate 

that these reports will not correspond 

entirely in format and substance to 

those required of States that operate the 

reinsurance program due to the fact that 

HHS is already subject to a number of 

auditing and program integrity 

requirements, including requirements 

relating to periodic reviews of improper 

payments of Federal funds under the 

Improper Payments Elimination and 

Recovery Act of 2010. 

In § 153.260(c), we propose that a 

State that establishes the reinsurance 

program engage an independent 

qualified auditing entity to perform a 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
37038 Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 

14See, Government Auditing Standards (2011 

Revision), available at: http://www.gao.gov/ 

yellowbook. For public companies, the Public 

Company Accounting Oversight Board (PCAOB) 

sets audit standards. See, http://pcaobus.org/ 

Standards/Auditing/Pages/default.aspx. For nonpublic companies, the AICPA sets audit standards. 

See, http://www.aicpa.org/Research/Standards/ 

AuditAttest/Pages/SAS.aspx. 

financial and programmatic audit of the 

program for each benefit year in 

accordance with generally accepted 

auditing standards (GAAS). This 

auditing entity would be licensed, be in 

good standing in one or more States, 

and be free from bias or the appearance 

of bias. This entity may be a government 

entity. Pursuant to proposed 

§ 153.260(c)(2), the State would be 

directed to ensure that this audit 

addresses the prohibitions set forth in 

proposed § 153.265 (concerning 

improper use of reinsurance funds for 

administrative expenses). We seek 

comment on this proposal, and intend 

to provide more information on auditing 

standards in future guidance. 

In paragraph (c)(1), we propose that 

the State provide to HHS the results of 

the independent external audit for each 

benefit year, and in paragraph (c)(3), we 

propose that the State identify to HHS 

any material weakness or significant 

deficiency identified in the audit (as 

these terms are defined in GAAS issued 

by the American Institute of Certified 

Public Accountants, and Government 

Auditing Standards issued by the 

Government Accountability Office 

(GAO) 14). We further propose that the 

State address in writing to HHS how it 

intends to correct any such material 

weakness or significant deficiency. To 

ensure transparency and accountability 

of a State-operated reinsurance 

program’s finances and activities, we 

propose in paragraph (c)(4) that the 

State make public a summary of the 

results of the external audit, including 

any material weakness or significant 

deficiency in a manner and timeframe 

specified by HHS. We believe that these 

measures are necessary to ensure the 

proper use of reinsurance contributions 

under the national contribution rate, 

which HHS will collect from all 

contributing entities pursuant to 45 CFR 

153.220. We seek comment on this 

proposal. 

c. Restrictions on Use of Reinsurance 

Funds for Administrative Expenses 

(§ 153.265) 

To achieve the intended purposes of 

the reinsurance program, reinsurance 

contributions collected must be spent 

on reinsurance payments, payments to 

the U.S. Treasury, and on reasonable 

expenses to administer the reinsurance 

program. As stated in the 2014 Payment 

Notice, the total reinsurance 

contributions to be collected for Federal 

administrative expenses for operating 

reinsurance for the 2014 benefit year is 

$20.3 million, resulting in a national per 

capita contribution rate of $0.11 

annually for HHS administrative 

expenses. The funds for administrative 

expenses will be collected by HHS from 

all contributing entities, and will be 

apportioned as follows: $0.055 of the 

total administrative expenses collected 

per capita will be allocated to 

administrative expenses incurred in the 

collection of contributions from 

contributing entities; and $0.055 of the 

total administrative expenses collected 

per capita will be allocated to expenses 

incurred for activities supporting the 

administration of payments to issuers of 

reinsurance-eligible plans. 

The total amounts allocated towards 

administrative expenses for reinsurance 

payments will be allocated in 

proportion to the State-by-State total 

requests for reinsurance payments made 

under the national reinsurance payment 

parameters. Thus, if a State that operates 

reinsurance receives total requests for 

reinsurance payments under the 

national reinsurance payment 

parameters that represent 5 percent of 

the total requests received for all States, 

then the State would receive a 

disbursement of 5 percent of the 

reinsurance contributions allocated to 

expenses incurred to support 

administration of payments to 

reinsurance-eligible plans to support its 

administration of reinsurance payments 

in that State. Pursuant to proposed 

§ 153.260(a), a State operating 

reinsurance would be directed to keep 

an accurate accounting of the 

reinsurance funds received from HHS 

for administrative expenses and all the 

administrative expenses incurred for the 

State-operated reinsurance program. If a 

State incurs fewer expenses in operating 

reinsurance for a benefit year than are 

allocated to it under the national 

reinsurance contribution rate, the State 

would be directed to carry over those 

funds for use in operating reinsurance 

in subsequent benefit years. 

Section 1311(d)(5)(B) of the 

Affordable Care Act prohibits an 

Exchange from utilizing any funds 

intended for the administrative and 

operational expenses of the Exchange 

for staff retreats, promotional giveaways, 

excessive executive compensation, or 

promotion of Federal or State legislative 

and regulatory modifications. In 

§ 153.265, we propose to extend these 

prohibitions to State-operated 

reinsurance programs so that a State 

establishing the reinsurance program 

would be directed to ensure that its 

applicable reinsurance entity does not 

use any funds for the support of 

operations of the reinsurance program, 

including any reinsurance contributions 

collected under the national 

contribution rate for administrative 

expenses, for any of the prohibited 

purposes stated in section 1311(d)(5)(B) 

of the Affordable Care Act. We seek 

comment on this proposal. 

3. Subpart D—State Standards Related 

to the Risk Adjustment Program 

The risk adjustment program is a 

permanent program created by section 

1343 of the Affordable Care Act that 

transfers funds from lower-risk, nongrandfathered plans to higher-risk, nongrandfathered plans in the individual 

and small group markets, inside and 

outside of the Exchanges. In subparts D 

and G of 45 CFR part 153, finalized 

March 23, 2012 (77 FR 17220), we 

established standards for the 

administration of the risk adjustment 

program. A State approved (or 

conditionally approved) by the 

Secretary to operate an Exchange may 

establish a risk adjustment program. 

Alternatively, a State may have HHS 

operate a risk adjustment program on its 

behalf. Pursuant to our authority under 

sections 1321(a)(1) and 1343 of the 

Affordable Care Act, we propose below 

certain provisions related to the 

oversight of State-operated risk 

adjustment programs. 

a. Maintenance of Records 

(§ 153.310(c)(4)) 

In § 153.310(c)(4), we propose that a 

State operating a risk adjustment 

program would be directed to maintain 

documents and records relating to the 

risk adjustment program, whether 

paper, electronic, or in other media, for 

each benefit year for at least 10 years, 

and make them available upon request 

from HHS, the OIG, the Comptroller 

General, or their designees, to any such 

entity. The documents and records must 

be sufficient to enable the evaluation of 

a State-operated risk adjustment 

program’s compliance with Federal 

standards. States would also be directed 

to ensure that their contractors, 

subcontractors, and agents maintain and 

make those documents and records 

available upon request from HHS, the 

OIG, the Comptroller General, or their 

designees. We note that a State may 

satisfy this standard by archiving these 

documents and records and ensuring 

that they are accessible if needed in the 

event of an investigation, audit, or other 

review. This provision is consistent 

with the requirements set forth in 

proposed § 153.240(c), which contains 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 37039 

15See, Government Auditing Standards (2011 

Revision), available at: http://www.gao.gov/ 

yellowbook. For public companies, the Public 

Company Accounting Oversight Board (PCAOB) 

sets audit standards. See, http://pcaobus.org/ 

Standards/Auditing/Pages/default.aspx. For nonpublic companies, the AICPA sets audit standards. 

See, http://www.aicpa.org/Research/Standards/ 

AuditAttest/Pages/SAS.aspx. 

record retention standards for Stateoperated reinsurance programs. We seek 

comment on this proposal. 

b. Interim Report and State Summary 

Report (§ 153.310(d)) 

In § 153.310(d)(3), we propose that, in 

addition to the requirements set forth in 

45 CFR 153.310(d)(1) and (d)(2), to 

obtain recertification from HHS to 

operate risk adjustment for a third 

benefit year, a State would be directed 

to, in the first benefit year for which it 

operates risk adjustment, provide to 

HHS an interim report, in a manner 

specified by HHS, that includes a 

detailed summary of its risk adjustment 

activities in the first 10 months of the 

benefit year. We propose that this report 

would be due no later than December 

31st of the first benefit year for which 

a State operates risk adjustment. The 

interim report is intended to provide 

HHS with the information needed to 

assess the State’s compliance with the 

applicable Federal standards related to 

risk adjustment. We note that because 

the process for receiving certification to 

operate risk adjustment begins more 

than one year before the beginning of 

the applicable benefit year, the first 

benefit year for which an interim report 

based on the first year’s operations 

could be used for certification purposes 

is the third benefit year. We intend to 

provide more information on the risk 

adjustment interim report in future 

guidance, and we seek comment on the 

content and format of this report. 

We propose to amend 45 CFR 

153.310(f) and re-designate it as 

§ 153.310(d)(4). In § 153.310(d)(4), we 

propose that in order to obtain 

recertification from HHS to operate risk 

adjustment for each benefit year after 

the third benefit year for which it is 

certified, each State operating a risk 

adjustment program would be directed 

to submit to HHS and make public a 

detailed summary of risk adjustment 

program operations for the most recent 

benefit year for which risk adjustment 

operations have been completed, in the 

manner and timeframe specified by 

HHS. We propose in § 153.310(d)(4)(i) 

that this summary report include the 

results of a programmatic and financial 

audit for the benefit year of the Stateoperated risk adjustment program 

conducted by an independent qualified 

auditing entity in accordance with 

GAAS. As discussed above, this entity, 

which may be a government entity, 

must be licensed and in good standing 

in one or more States, and must be free 

from bias or the appearance of bias. In 

§ 153.310(d)(4)(ii), we propose that the 

summary report would identify to HHS 

any material weakness or significant 

deficiency (as these terms are defined in 

GAAS issued by the American Institute 

of Certified Public Accountants, and 

Government Auditing Standards issued 

by the GAO 15) identified in the external 

audit and address in writing to HHS 

how the State intends to correct any 

such material weakness or significant 

deficiency. 

We seek comment on these proposals, 

including on the content and format of 

the summary reports. 

c. General Oversight Requirements for 

State-Operated Risk Adjustment 

Programs (§ 153.365) 

To enable HHS to recertify States to 

operate risk adjustment pursuant to 45 

CFR 153.310(d), HHS proposes in 

§ 153.365 that a State operating a risk 

adjustment program keep an accounting 

of all receipts and expenditures related 

to risk adjustment payments and 

charges and the administration of risk 

adjustment-related functions and 

activities for each benefit year. This 

accounting would be kept in accordance 

with GAAP, consistently applied. This 

requirement parallels proposed 

§ 153.260(a), which applies to the 

reinsurance program when operated by 

a State. 

4. Risk Adjustment Methodology 

a. Modification to the Transfer Formula 

in the HHS Risk Adjustment 

Methodology (78 FR at 15430–15434) 

In the Payment Notice (78 FR 15430– 

34), we noted our intent to modify the 

risk adjustment payment transfer 

formula in order to accommodate 

community rated States that utilize 

family tiering rating factors. In noncommunity rated States, family policy 

premiums must be developed by 

summing the applicable rates of each 

individual covered under the policy, as 

required under 45 CFR 147.102(c)(1). In 

the case of families with more than 

three children in non-community rated 

States, only the applicable rates of the 

three oldest covered children under age 

21 are counted towards the family 

policy premium rate (for example, for a 

family with four children under age 21, 

only the applicable individual rates of 

the three oldest children would count 

towards the family policy premium). 

These family rating requirements do not 

apply to community rated States that 

utilize family tiering rating factors. In 

community rated States, family tiering 

rating factors do not have to yield 

premiums that are equal to the sum of 

each policy member’s applicable rate, 

nor do they have to be set in a way that 

only counts the rates of the oldest three 

children under age 21 within a family 

policy. For example, a community rated 

State could establish a family tiering 

rating factor of 1.0 for an adult policy, 

1.8 for a policy covering one adult and 

one or more children, 2.0 for a policy 

covering two adults, and 2.8 for a policy 

covering two adults and one or more 

children. 

In order to account for the differences 

in family rating practices between 

family tiering States and non-family 

tiering States, we are proposing two 

changes to the risk adjustment payment 

transfer formula that HHS will use when 

operating risk adjustment on behalf of a 

State. These changes would only apply 

to States that are using family tiering 

rating structures. In the 2014 Payment 

Notice, we stated that billable members 

exclude children who do not count 

towards family rates (that is, children 

who do not count toward family policy 

premiums are excluded) (78 FR 15432, 

15434). We propose to clarify that in the 

case of family tiering States, billable 

members would be based on the number 

of children that implicitly count 

towards the premium under a State’s 

family rating factors. For example, 

assume a State has the following four 

family tiers: One adult; one adult plus 

one or more children; two adults; and 

two adults plus one or more children. 

Under this tiering structure, only one 

child would be counted as a billable 

member in the payment transfer 

formula, because additional children 

covered under a family policy would 

not affect the policy’s premium. 

Additionally, we are proposing a 

modification to the allowable rating 

factor (ARF) formula that would be used 

for family tiering States. In the Payment 

Notice (78 FR 15433), the ARF is 

calculated as the member month 

weighted average of the age factor 

applied to each billable enrollee. In nonfamily tiering States, the ARF is 

intended to measure the extent to which 

plans are increasing or decreasing their 

premiums based on allowable age rating 

factors. In the case of family tiering 

States, premium revenue will not vary 

by age-specific rating factors. Rather, 

policy level premiums will vary only 

based on the family tiering factors. In 

order to capture the impact of the family 

tiering factors on plans’ premium 

revenue we are proposing that the ARF 

formula for family tiering States be 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
37040 Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 

16We note that, after 2014, such arrangements 

generally would only be permissible in the large 

employer group context, as issuers of small 

employer group market insurance coverage are 

required to provide all essential health benefits 

under any policy they offer that does not qualify as 

‘‘excepted benefits.’’ 

17As discussed in relation to the amendment to 

45 CFR 153.20 above, where a group health plan 

has mixed self-insured and insured coverage, 

liability for reinsurance contributions, if any, falls 

upon the self-insured plan, as already established 

under our rules. 

based on the family tiering factors 

instead of age rating factors. 

Specifically, for family tiering States, 

the ARF would be calculated at the level 

of the subscriber, as follows: 

Where: 

ARFs is the rating factor for the subscriber (s) 

(based on family size/composition) and 

Ms is the number of billed personmonths that are counted in determining 

the subscriber (s) premium. 

We note that aside from the changes 

to the billable member months 

definition and the ARF formula 

discussed above, payment transfers in 

family tiering States will be calculated 

using the formulas provided in the 

Payment Notice (78 FR at 15431–34). 

Additionally, the changes to the billable 

member month definition and the ARF 

formula would not apply to community 

rated States that do not implement 

family tiering rating factors. 

5. Subpart E—Health Insurance Issuer 

and Group Health Plan Standards 

Related to the Reinsurance Program 

a. Reinsurance Contribution Funds 

(§ 153.400) 

In some health coverage 

arrangements, an insured group health 

plan may provide benefits through more 

than one policy to the same covered 

lives, where each policy standing alone 

does not constitute major medical 

coverage, but the total benefits do.16

Under such an arrangement, a group 

health plan could, for example, have 

two policies with different issuers, one 

providing benefits for hospitalization 

and the other providing benefits for 

outpatient treatments and prescription 

drugs, with the same individuals 

simultaneously enrolled in both 

policies. In such a situation, the 

question has been raised as to whether 

the issuers would be required to make 

reinsurance contributions for the 

insured policies since neither policy 

would constitute major medical 

coverage, and whether the group health 

plan would be required to make 

reinsurance contributions because it 

would not be a self-insured plan. 

Therefore, to clarify the application of 

the rules (solely for the purpose of 

reinsurance contributions), we propose 

to amend paragraph (a)(1)(i) of 45 CFR 

153.400(a) and add a new paragraph 

(a)(3) that would address liability for 

reinsurance contributions in cases 

where an insured group health plan 

provides health insurance coverage 

through more than one policy to the 

same covered lives, where, as described 

above, none of the policies provides 

major medical coverage individually, 

but their combined benefits meet the 

definition of major medical coverage. 

This paragraph (a)(3) would be an 

exception to the rule under paragraph 

(a)(1)(i), which provides that an issuer 

of health insurance coverage is not 

required to make reinsurance 

contributions for coverage to the extent 

the coverage is not major medical 

coverage. 

Under the proposed paragraph (a)(3), 

notwithstanding paragraph (a)(1)(i), a 

health insurance issuer providing 

coverage under a group health plan 

would make reinsurance contributions 

for lives under its health insurance 

coverage even if the insurance coverage 

does not constitute major medical 

coverage, if (i) The group health plan 

provides health insurance coverage for 

the same covered lives through more 

than one insurance policy that in 

combination constitute major medical 

coverage but individually do not; (ii) the 

lives are not covered by self-insured 

coverage of the group health plan 

(except for self-insured coverage limited 

to excepted benefits); and (iii) the health 

insurance coverage under the policy 

offered by the health insurance issuer 

represents a percentage of the total 

health insurance coverage offered in 

combination by the group health plan 

greater than the percentage offered 

under any of the other policies. Clause 

(i) describes the arrangement described 

in the paragraphs above. Clause (ii) 

makes clear that this exception would 

apply where group health coverage was 

divided only among insurance policies, 

and no portion of the coverage is selfinsured.17 Finally, clause (iii) describes 

how to determine which issuer is liable 

for reinsurance contributions in the 

situation described above—where 

multiple insurance policies cover the 

same lives in an insured group health 

plan and each insurance policy is not 

major medical coverage, but in 

combination they are. We propose in 

that clause that an issuer of health 

insurance coverage providing a 

percentage of the benefits provided by 

the group health plan that is greater 

than the percentage provided by any of 

the other insurance policies would be 

liable for the reinsurance contributions. 

We further propose that for purposes of 

paragraph (a)(3), the percentage of 

coverage offered under various policies 

would be determined based on the 

average premium per covered life for 

those policies. In the event that the 

percentage of coverage for two or more 

insurance policies is equal, the issuer of 

the policy that provides the greatest 

portion of in-network hospitalization 

benefits will be responsible for 

reinsurance contributions. For example, 

if an insured group health plan covered 

the same lives under two different 

health insurance policies, one with a 

monthly average premium per covered 

life of $250 and the other with a 

monthly average premium per covered 

life of $200, the issuer of the insurance 

policy with the monthly average 

premium per covered life of $250 would 

be liable for the reinsurance 

contributions. 

Because an issuer of group health 

insurance coverage that does not, by 

itself, constitute major medical 

coverage, may not be aware of the 

existence of, or premium for, other 

health insurance coverage obtained by a 

plan sponsor covering the same lives 

under a group health plan, we are 

considering directing such an issuer to 

seek a representation from the plan 

sponsor regarding the relative 

percentage of coverage offered by the 

issuer. We seek comment on whether 

and in what circumstances an issuer 

should be entitled to rely upon such 

representations and what other means 

we should consider for ensuring that the 

relevant issuer knows of its obligation to 

make the reinsurance contributions, 

including with respect to any role that 

the employer should have in ensuring 

that issuers have information necessary 

to determine which issuer is responsible 

for reinsurance contributions. 

We seek comment on these proposals, 

as well as alternative approaches that 

should be considered for determining 

responsibility for reinsurance 

contributions in such circumstances. 

For example, the liability rules could 

impose responsibility for the 

reinsurance contributions on the issuer 

of the coverage that provides the 

hospitalization coverage or the rules 

could allocate liability among the 

issuers in proportion to the benefits 

offered under the respective policies. 

We are also considering proposing a 

definition for ‘‘major medical coverage’’ 

that would provide additional clarity 

around the responsibility to make 

payments. While HHS believes that 

responsibility for issuers and group 


tkelley on DSK3SPTVN1PROD with PROPOSALS3EP19JN13.013</GPH>
Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 37041 

18 In the preamble to the Exchange Establishment 

Rule, we note that each Exchange can require, as 

a condition of certification, comprehensive medical 

QHPs to offer and price the pediatric dental EHB 

(if covered) separately, if doing so would be in the 

best interest of consumers. For the 2014 coverage 

year, CMS will not require comprehensive medical 

QHP issuers that provide pediatric dental coverage 

to offer and price the pediatric dental EHB 

separately from the rest of the plan in connection 

with certification by an FFE. We have provided this 

guidance in Chapter 4 of the 2014 Letter to Issuers 

on Federal and Partnership Marketplaces (April 5, 

2013). 

health plans is clear, we seek comment 

on what further clarification is needed 

and what the definition should be. 

Finally, we have received inquiries as 

to how reinsurance contribution 

obligations would be addressed in the 

case of a group health plan under which 

some benefit options for employees are 

insured by an issuer, and some options 

offer benefits without the involvement 

of an issuer in insuring the benefits 

(because either the group health plan or 

some non-issuer entity assumes the risk 

for that coverage option). We are 

proposing that in such a case, if a 

coverage option is insured by an issuer, 

the issuer would be responsible for the 

reinsurance contribution associated 

with that coverage option. If an 

employee coverage option under such a 

group health plan is not insured 

(because either the group health plan or 

other non-issuer assumes the risk), then 

the group health plan would be 

responsible for the reinsurance 

contribution associated with that 

coverage option. We seek comment on 

this proposed approach. 

b. Maintenance of Records (§ 153.405(h) 

and § 153.410(c)) 

Pursuant to our obligation to 

safeguard Federal funds, we propose to 

amend § 153.405 by adding paragraph 

(h), in which we propose that a 

contributing entity would be directed to 

maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to substantiate the 

enrollment count submitted pursuant to 

that section for at least 10 years, and 

make that evidence available upon 

request from HHS, the OIG, the 

Comptroller General, or their designees, 

to any such entity, for verification of 

reinsurance contribution amounts. We 

also propose to amend § 153.410 by 

adding paragraph (c), in which we 

propose that an issuer of a reinsuranceeligible plan in a State where HHS 

operates reinsurance would be directed 

to maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to substantiate the 

requests for reinsurance payments made 

pursuant to that section for at least 10 

years, and make that evidence available 

upon request from HHS, the OIG, the 

Comptroller General, or their designees, 

(or, in a State where the State is 

operating reinsurance, the State or its 

designee), to any such entity, for 

verification of reinsurance payment 

requests. We note that these standards 

may be satisfied if the contributing 

entity or issuer of a reinsurance-eligible 

plan archives the documents and 

records and ensures that they are 

accessible if needed in the event of an 

investigation, audit, or other review. 

These proposed provisions are 

consistent with the requirements for 

record retention under the False Claims 

Act and those set forth in proposed 

§ 153.620(b), which apply to issuers of 

risk adjustment covered plans. We seek 

comment on these proposals. 

6. Subpart F—Health Insurance Issuer 

Standards Related to the Risk Corridors 

Program 

Section 1342(a) of the Affordable Care 

Act provides that ‘‘a qualified health 

plan offered in the individual or small 

group market’’ is to participate in the 

risk corridors program. In the Exchange 

Establishment Rule, we stated that a 

stand-alone dental plan is ‘‘a type of 

qualified health plan.’’ However, we did 

not intend for all requirements 

applicable to a QHP to apply to standalone dental plans. For example, under 

45 CFR 155.1065(a)(3), certain QHP 

standards are not applicable to a standalone dental plan if they cannot be met, 

given the limited benefit package 

offered by the plan. We believe that it 

would not be appropriate to subject 

stand-alone dental plans to the risk 

corridors program because such plans 

are considered excepted benefits plan 

under section 2791(c) of the PHS Act, 

meaning that these plans are not subject 

to the Federal prohibition on 

underwriting premiums or the 

requirement to base pricing using the 

single risk pool or fair health insurance 

premiums limitations. Thus, although 

States have the option to prohibit 

underwriting for excepted benefits 

plans, and issuers of stand-alone dental 

plans in an FFE may voluntarily choose 

to underwrite these plans, we believe 

that, in general, an issuer of a standalone dental plan will not be subject to 

the same rate-setting uncertainty in 

2014 as the issuer of a major medical 

plan, and will not need the premium 

risk-sharing protections of risk 

corridors.18

We note that stand-alone dental plans 

are similarly excluded from 

participation in the two other premium 

stabilization programs—reinsurance and 

risk adjustment. We also note that, 

consistent with the exclusion of 

excepted benefits plans from the 

medical loss ratio (MLR) requirements, 

stand-alone dental claims would not be 

pooled along with an issuer’s other 

claims for the purposes of determining 

‘‘allowable costs’’ in the risk corridors 

calculation, as defined at 45 CFR 

153.500. We seek comment on this 

approach. 

7. Subpart G—Health Insurance Issuer 

Standards Related to the Risk 

Adjustment Program 

We propose to amend § 153.620(b) to 

add a standard that would direct an 

issuer that offers risk adjustment 

covered plans to maintain documents 

and records, whether paper, electronic, 

or in other media, sufficient to enable 

the evaluation of the issuer’s 

compliance with applicable risk 

adjustment standards, and to make that 

evidence available upon request from 

HHS, OIG, the Comptroller General, or 

their designees (or in a State where the 

State is operating risk adjustment, the 

State or its designee), to any such entity. 

This standard, which is consistent with 

other records maintenance standards in 

this proposed rule, would direct an 

issuer of a risk adjustment covered plan 

to retain additional records—not only 

those pertaining to data validation—to 

substantiate its compliance with risk 

adjustment standards, whether risk 

adjustment is operated by HHS or a 

State. We note that we anticipate that 

the bulk of the record maintenance 

obligations will relate to data validation, 

but that certain records, for instance 

those relating to premium rating or 

small group status, will not. We seek 

comment on this proposal. 

8. Subpart H—Distributed Data 

Collection for HHS-Operated Programs 

a. Failure To Comply With HHSOperated Risk Adjustment and 

Reinsurance Data Requirements 

(§ 153.740) 

In § 153.740(a), we propose that HHS 

may pursue an enforcement action for 

CMPs against an issuer in a State where 

HHS operates the reinsurance or risk 

adjustment program, if an issuer fails to: 

(a) establish a secure, dedicated 

distributed data environment pursuant 

to 45 CFR 153.700(a); (b) provide HHS 

with access to enrollee-level plan 

enrollment information, enrollee claims 

data, or enrollee encounter data through 

its dedicated distributed data 

environment pursuant to 45 CFR 

153.710(a); (c) otherwise comply with 

the requirements of 45 CFR 153.700 

through 153.730; (d) adhere to the 

reinsurance data submission 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
37042 Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 

19As described at 45 CFR 153.720(b), masked 

data means data associated with a unique identifier, 

where the unique identifier does not include the 

enrollee’s PII. 

requirements set forth in 45 CFR 

153.420; or (e) adhere to the risk 

adjustment data submission and data 

storage requirements set forth in 45 CFR 

153.610 through 153.630. 

Risk Adjustment: For risk adjustment 

covered plans, HHS will need access to 

the risk adjustment enrollee-level plan 

enrollment information, enrollee claims 

data, or enrollee encounter data from 

the issuer by April 30th of the year 

following the applicable benefit year in 

order to calculate payment transfers 

based on claims experience and 

premiums as set forth in 45 CFR 

153.730. Pursuant to section 1321(c)(2) 

of the Affordable Care Act, in HHS’s 

role in operating risk adjustment on 

behalf of a State, to enforce the risk 

adjustment standards, we propose to 

apply the standards in proposed 

§ 156.805 in connection with the 

imposition of CMPs under this section. 

If a risk adjustment covered plan does 

not comply with the requirements set 

forth in 45 CFR 153.610 through 

153.630 and 45 CFR 153.700 through 

153.730, we intend to apply the 

proposed sanction so that the level of 

the enforcement action would be 

proportional to the level of the 

violation. While we would reserve the 

right to impose penalties up to the 

maximum amounts proposed in 

§ 156.805(c), as a general principle, we 

intend to work collaboratively with 

issuers to address problems in 

establishing dedicated distributed data 

environments in 2014. In our 

application of the proposed sanction, 

we would take into account the totality 

of the issuer’s circumstances, including 

such factors as an issuer’s previous 

record (if any), the frequency and level 

of the violation, and any aggravating or 

mitigating circumstances. Our intent is 

to encourage QHP issuers to address 

non-compliance and not to severely 

affect their financial condition, 

especially where the issuer 

demonstrates good faith in monitoring 

compliance with applicable standards, 

identifies any suspected occurrences of 

non-compliance, and attempts to 

remedy any non-compliance. We note 

that HHS would reserve the right to 

impose, or not impose, CMPs as 

appropriate. For instance, if an issuer of 

a risk adjustment covered plan does not 

establish a dedicated distributed data 

environment or provide access to the 

necessary risk adjustment data to permit 

HHS to timely calculate the applicable 

risk adjustment transfer amounts, we are 

proposing that HHS will assess the 

default risk adjustment charge described 

below. However, HHS may elect to 

pursue CMPs in conjunction with the 

imposition of the default risk 

adjustment charge if an issuer failed to 

comply with applicable data security or 

privacy standards, putting the interests 

of third-parties at risk. 

Reinsurance: Similar to our proposal 

for risk adjustment covered plans, we 

propose that an issuer of a reinsuranceeligible plan may be subject to CMPs for 

failure to comply with 45 CFR 153.420, 

or 45 CFR 153.700 through 153.730. In 

our application of the proposed 

sanction, we would take into account 

the totality of the issuer’s 

circumstances, including such factors as 

an issuer’s previous record (if any), the 

frequency and level of the violation, and 

any aggravating or mitigating 

circumstances. In certain cases, we may 

not pursue CMPs. For example, if an 

issuer of a reinsurance-eligible plan fails 

to set up a dedicated distributed data 

environment or meet certain data 

requirements stated above, and as a 

consequence, HHS would not have the 

necessary data to calculate or distribute 

reinsurance payments for the 

reinsurance-eligible plan, the 

reinsurance-eligible plan would not 

receive reinsurance payments that it 

otherwise might have received. 

However, HHS would reserve the right 

to pursue CMPs irrespective of whether 

or not an issuer becomes ineligible for 

reinsurance payments as a result of 

failing to comply with 45 CFR 153.420, 

or 45 CFR 153.700 through 153.730. 

b. Default Risk Adjustment Charge 

As described in the Premium 

Stabilization Rule and the 2014 

Payment Notice, HHS will employ a 

distributed data collection approach for 

risk adjustment. Under this approach, 

issuers in States where HHS operates 

risk adjustment will be required to 

establish dedicated, secure data 

environments, and provide HHS with 

access to ‘‘masked’’ 19 enrollee-level 

plan enrollment information, enrollee 

claims data, and enrollee encounter data 

pursuant to 45 CFR 153.710 and 45 CFR 

153.720. We would not store any 

enrollee PII or individual claim-level 

information in connection with this data 

collection, except for the purposes of 

data validation and audit. We believe 

that this approach minimizes issuer 

burden while protecting enrollees’ 

privacy. Issuers must provide access to 

required risk adjustment data by April 

30th of the year following a benefit year 

in order for HHS to calculate risk 

adjustment payment transfer amounts 

pursuant to 45 CFR 153.730. 

In cases where an issuer does not set 

up a dedicated distributed data 

environment or submits inadequate risk 

adjustment data, HHS would not have 

the required risk adjustment data from 

the issuer to calculate risk scores or 

payment transfers. This data is 

necessary to properly calculate risk 

adjustment payments and charges for 

the entire applicable market for the 

State. If HHS cannot perform this 

calculation for a particular issuer, risk 

adjustment payment transfers would be 

affected for all other issuers in the State 

market because payments transfers are 

determined within a market within a 

State such that they will net to zero. 

Therefore, we believe that we must 

establish an administrative capability to 

calculate payments and charges for all 

plans, to avoid penalizing those plans 

that submit timely, complete risk 

adjustment data. 

Pursuant to section 1343(b) of the 

Affordable Care Act, we have the 

authority to develop and apply criteria 

and methods for carrying out risk 

adjustment activities, such as applying 

a default charge to issuers in the 

individual or small group market that 

fail to provide complete data. Under the 

HHS-operated risk adjustment 

methodology, we require a balanced 

payment transfer approach in which 

issuers with a higher risk enrollee 

population will receive a payment, 

while issuers with a lower risk enrollee 

population will be assessed a charge in 

order to stabilize premiums; these 

transfers will be calculated 

simultaneously and will net to zero in 

each market in each State. Under the 

balanced payment transfer approach, we 

believe we must calculate risk 

adjustment transfers for issuers that fail 

to provide data in a timely fashion into 

the risk adjustment payment transfer 

formula so that compliant issuers are 

not penalized. If issuers that would 

otherwise be subject to risk adjustment 

charges do not comply with these 

standards, payments to compliant 

issuers would be smaller and charges 

owed by compliant issuers would be 

larger. 

Therefore, in § 153.740(b), we propose 

that if an issuer of a risk adjustment 

covered plan fails to establish a 

dedicated distributed data environment 

or fails to provide HHS with access to 

risk adjustment data in such 

environment by April 30th of the year 

following the applicable benefit year in 

accordance with § 153.610(a), § 153.700, 

§ 153,710, or § 153.730, such that HHS 

cannot apply its Federally certified risk 

adjustment methodology to calculate the 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 37043 

20See Exchange Establishment Rule, 77 FR at 

18395, see also id. at 18314, 18316, and 18326. 

21We previously signaled our intent to propose 

this approach through rulemaking. See http:// 

www.cms.gov/CCIIO/Resources/Fact-Sheets-andFAQs/Downloads/shop-marketplace-5–10– 

2013.pdf. 

plan’s risk adjustment payment transfer 

amount in a timely fashion, HHS would 

assess a default risk adjustment charge. 

We note that delaying our calculation of 

risk adjustment payment transfers in a 

market in a State until all risk 

adjustment covered plans submit 

complete risk adjustment data would 

weaken the integrity of the April 30th 

data submission deadline and would 

jeopardize related deadlines for the risk 

corridors and MLR programs. We seek 

comment on our proposed default 

charge approach. We intend to provide 

future guidance on any applicable 

review processes available to those 

issuers for whom we propose to assess 

a default charge. 

We are considering two different 

methods for calculating the default risk 

adjustment charge. One option would be 

to use the highest per-member-permonth charge among risk adjustment 

covered plans in a risk pool in the 

market in the plan’s geographic rating 

area. A second option would be to use 

a per-member-per-month default charge 

that is two standard deviations above 

the mean charge in the market in the 

plan’s geographic rating area. With 

respect to this second option, we believe 

that a two standard deviation 

calculation will adequately encourage 

compliance with the applicable data 

requirements while remaining tied to 

the market realities of the applicable 

geographic rating area. 

In order to calculate a plan’s risk 

adjustment payment transfer amount, 

we must consider the enrollment data of 

the plan. As such, if a risk adjustment 

covered plan fails to provide HHS with 

enrollment data, we propose that the 

default charge would be based on the 

average enrollment in the State market. 

If enrollment data is provided, we 

propose that the default charge would 

be based on average annual enrollment 

for the plan in a risk pool in the State 

market. We seek comment on these 

methods, other appropriate methods for 

calculating a default risk adjustment 

charge, and other sources of data HHS 

could use to determine enrollment data 

for non-compliant issuers, such as MLR 

or NAIC filings, or information supplied 

by a State Department of Insurance 

(DOI). We also seek comment on 

whether to allocate a non-compliant 

issuer’s default charge to issuers in the 

market as part of payments and charges 

in the concurrent benefit year, during a 

subsequent benefit year, or sometime 

between annual payments and charges 

processes. 

D. Part 155—Exchange Establishment 

Standards and Other Related Standards 

Under the Affordable Care Act 

1. Subpart A—General Provisions 

a. Definitions (§ 155.20) 

Section 1311(b) of the Affordable Care 

Act provides States with the 

opportunity to establish and operate an 

Exchange that both facilitates the 

purchase of QHPs and provides for the 

establishment of a SHOP. Previously, 

we have interpreted this provision to 

mean that a State must elect to carry out 

both these functions in order to 

establish an ‘‘Exchange’’ in accordance 

with the Affordable Care Act.20

However, since we advanced that 

interpretation of the statute, some States 

in which HHS would otherwise operate 

both the individual market Exchange 

and the SHOP have expressed a desire 

to establish and operate only a SHOP, 

and not to establish and operate an 

individual market Exchange. In light of 

HHS’s limited resources, and these 

States’ willingness to take on operation 

of the SHOP-specific functions required 

by the Affordable Care Act, we now 

interpret sections 1311(b) and 1321 of 

the Affordable Care Act to permit a State 

to elect to establish just a SHOP.21 This 

interpretation is supported by the 

language in section 1311(b)(2) of the 

Affordable Care Act, which 

contemplates the separate operation of 

the individual market Exchange and the 

SHOP under different governance and 

administrative structures, because it 

permits the individual market Exchange 

and SHOP to be merged only if the State 

has adequate resources to assist both 

populations (individuals and small 

employers) as a merged entity. It is also 

supported by section 1321(c) of the 

Affordable Care Act, which provides 

that if a State will not have ‘‘any 

required Exchange operational’’ the 

Secretary shall ‘‘establish and operate 

such Exchange’’ (emphasis added). 

Thus, under the interpretation we now 

propose, if the State will establish only 

a SHOP, and will not operate the 

individual market Exchange, the 

Secretary must establish and operate the 

individual market Exchange. 

We propose to amend 45 CFR 155.20 

to reflect this new flexibility for States 

by modifying the definition for 

‘‘Exchange.’’ 

Exchange 

We propose that ‘‘Exchange’’ would 

mean a governmental agency or nonprofit entity that meets the applicable 

standards of Part 155 and makes QHPs 

available to qualified individuals and/or 

qualified employers. Unless otherwise 

identified, under the proposed 

definition this term would include an 

Exchange serving the individual market 

for qualified individuals and a SHOP 

serving the small group market for 

qualified employers, regardless of 

whether the Exchange is established and 

operated by a State (including a regional 

Exchange or subsidiary Exchange) or by 

HHS. 

We also clarify that we intend the 

phrase ‘‘meets the applicable standards 

of this part’’ in the proposed 

amendment to the definition to refer to 

any applicable standard of Part 155, 

including but not limited to the 

proposed amendments to §§ 155.100, 

155.105, and 155.200 discussed below, 

and the special rules applicable to 

regional Exchanges pursuant to 

§ 155.140 (together with the proposed 

amendments to that section). Pursuant 

to the proposed amendment to the 

definition, there could be several types 

of Exchanges operating in a State, all of 

which would meet the regulatory 

definition, so long as the applicable 

standards of Part 155 were met. We 

further clarify that there must be an 

individual market Exchange and a 

SHOP in each State. We invite general 

comments on this proposal, including 

on whether we should amend 

provisions of Part 155 in addition to 

those we propose amending here to 

provide States with the flexibility to 

establish and operate only a SHOP. 

We are also adding a new definition 

for ‘‘issuer customer service 

representative.’’ 

Issuer Customer Service Representative 

For the same reasons that we propose 

adding § 155.415 below, we propose to 

define an ‘‘issuer customer service 

representative’’ to mean an employee, 

contractor, or agent of a QHP issuer that 

provides assistance to applicants and 

enrollees, but is not licensed as an 

agent, broker, or producer under State 

law. 

We are also making a clarification 

regarding the definition of ‘‘qualified 

health plan.’’ 

Qualified Health Plan 

With regard to the definition of 

‘‘qualified health plan’’ in the preamble 

to the Exchange Establishment Rule, we 

stated that health plans that are 

‘‘substantially the same’’ as a QHP are 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
37044 Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 

22Patient Protection and Affordable Care Act; 

Standards Related to Essential Health Benefits, 

Actuarial Value, and Accreditation (78 FR 12834) 

(February 25, 2013). 

23See, HHS Notice of Benefit and Payment 

Parameters for 2014 Proposed Rule, 77 FR 73185. 

24 In guidance, we have previously signaled our 

intent to propose this approach through 

rulemaking. See Small Business Health Options 

Program (SHOP)-Only Marketplace FAQs (May 10, 

2013). available at: http://www.cms.gov/CCIIO/ 

Resources/Fact-Sheets-and-FAQs/Downloads/shopmarketplace-5–10–2013.pdf. 

treated as the same QHP for purposes of 

45 CFR 156.255(b), which requires a 

QHP issuer to charge the same premium 

rate for each QHP of the issuer without 

regard to whether the plan is offered 

through an Exchange or whether the 

plan is offered directly from the issuer 

or through an agent. In the Premium 

Stabilization Rule, we offered similar 

guidance with respect to which plans 

offered outside the Exchange would be 

considered the same QHP for purposes 

of the risk corridors program (77 FR 

17237), and stated that HHS might 

clarify this standard in future 

rulemaking or guidance. 

We are now proposing to specify that, 

for a plan offered outside the Exchange 

to be considered the same plan as one 

that is certified as a QHP and offered 

through the Exchange, among other 

things, the benefits package, provider 

network, service areas, and cost-sharing 

structure of the two offerings must be 

identical. Under this proposal, a plan 

that is certified as a QHP and that meets 

the requirements for sale in the 

applicable market outside of the 

Exchange is a QHP for the entire 

applicable market within a State. We 

note that nothing in this proposal would 

relieve an issuer of a plan that has been 

certified as a QHP by the Exchange from 

the requirement to charge the same 

premium for the QHP sold to consumers 

outside of the Exchange (pursuant to 

sections 1301(a)(C)(iii) of the Affordable 

Care Act and 45 CFR 156.255(b) and 45 

CFR 147.104). 

We also propose to clarify that a plan 

sold to consumers outside of the 

Exchange would only be subject to the 

risk corridors program if it is the same 

as a QHP actually offered by that issuer 

on the Exchange. We believe that 

sections 1301(a)(1)(A) and 1311(e) of the 

Affordable Care Act, and the definition 

of a QHP at 45 CFR 155.20, contemplate 

certification of a QHP for offer on the 

Exchange, so that (with the exception of 

stand-alone dental plans) a plan sold to 

consumers exclusively outside of the 

Exchange could not obtain QHP 

certification. We note that the EHB final 

rule 22 outlined an arrangement where 

health insurance issuers could offer a 

health plan to an individual without the 

pediatric dental EHB if the issuer is 

reasonably assured that the individual 

has obtained the EHB through an 

Exchange-certified stand-alone dental 

plan (78 FR 12853). 

We believe that the proposed policy 

set forth in this section is consistent 

with the intent of the statute and 

existing regulations with respect to the 

offering and certification of QHPs, and 

helps to maintain the integrity of the 

risk corridors program, which we 

believe is intended primarily to stabilize 

premiums of plans offered through the 

Exchanges. 

We request comment on all aspects of 

this approach, particularly on issues 

that may be raised by this approach for 

State requirements for product or policy 

form filings, including filings for 

coverage riders (whether mandatory or 

optional), State-required benefits, and 

State-required service areas (including 

tiered networks within service areas). 

We seek comment on whether the 

criteria laid out above—benefits, 

provider network, service areas, and 

cost-sharing structure—are the proper 

criteria for determining whether 

offerings are the same plan, and whether 

additional criteria such as allowances 

for de minimis variations that do not 

change plan actuarial value should be 

included, or whether no criteria are 

necessary because it is clear from State 

oversight processes when a plan is the 

same plan or a different plan. We also 

seek comment on how this proposed 

approach would affect what is 

considered a new plan offering, and the 

potential impact of this proposal on 

plan renewals. Finally, we seek 

comment on the operational feasibility 

of the proposed requirements, 

particularly with regard to issuers in the 

small group market. 

2. Subpart B—General Standards 

Related to the Establishment of an 

Exchange 

a. Establishment of a State Exchange, 

Approval of a State Exchange, 

(§§ 155.100, 155.105, and 155.140) 

Consistent with our proposed 

amendments to the definition of 

‘‘Exchange’’ in § 155.20, we propose to 

amend § 155.100 to permit a State to 

operate only a State-based SHOP while 

the individual market Exchange is 

operated as an FFE. This proposed 

amendment would permit a State to 

elect to establish and operate only the 

SHOP and to focus on effective 

implementation of that program. A State 

that is electing to establish only a SHOP 

must establish an Exchange entity— 

consistent with section 1311(d)(1) of the 

Affordable Care Act and §§ 155.100(b) 

and 155.110—to perform only the SHOP 

functions. 

We considered whether to propose 

allowing a State to establish and operate 

only the individual market Exchange 

while HHS operates the SHOP, but 

decided not to do so for the reasons 

described below. Accordingly, under 

the proposed amendments, a State could 

not elect to establish and operate just 

the individual market Exchange. We 

believe that building and operating the 

SHOP is an excellent way for a State to 

move towards operating both a SHOP 

and an individual market Exchange. 

Further, while a State operating a SHOP 

has a variety of options available to 

ensure a robust choice of QHPs and 

issuers, for example, through its direct 

regulation of the individual and small 

group insurance markets, these options 

may not be available to HHS because 

they would require HHS to go beyond 

its traditional market role under the 

PHS Act. The only tool HHS can rely 

upon for incentivizing issuer 

participation in the SHOP is the QHP 

certification process, and this tool is a 

limited one if the individual market 

Exchange is operated by the State.23

Additionally, if the State has already 

built the structure and systems needed 

to run an individual market Exchange, 

it would be inefficient and burdensome 

for HHS to step in and build those 

functions solely so that it can operate 

the SHOP, when the State would be in 

a better position to operate both 

Exchanges. Therefore, we have not 

proposed that a State be allowed to 

operate an individual market Exchange 

while the Department is responsible for 

the operation of an FF–SHOP in the 

State. As discussed above, we seek 

comment generally on this proposal, 

and particularly on this aspect of it. 

We propose in § 155.100(a)(3) that a 

State that has timely applied for 

certification of an Exchange for 2014, 

and that has received conditional 

approval for its application, would be 

able to modify its Blueprint pursuant to 

45 CFR 155.105(e) to exclude the 

operation of the individual market 

Exchange functions for 2014.24 Because 

such States have been preparing to 

establish and operate both the 

individual market and SHOP 

Exchanges, they would be in a position 

to establish and operate just the SHOP 

in 2014. In contrast, States that have not 

received conditional approval to operate 

both Exchanges, but which want to 

operate only a SHOP for 2014, would 

have to develop a fully functioning 

SHOP by the time open enrollment 

begins on October 1, 2013; this is a 


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25See Exchange Establishment Rule, 77 FR 

18322. 

26Role of Agents, Brokers, and Web-brokers in 

Health Insurance Marketplaces, (May 1, 2013). 

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

Regulations-and-Guidance/Downloads/agentbroker-5-1-2013.pdf. 

compressed time frame to accomplish 

establishment and full operation. 

Therefore, under this proposed rule, 

States that have not received 

conditional approval for 2014 may not 

exercise the option to operate only a 

SHOP for the 2014 plan year. For the 

2015 plan year and beyond, we would 

consider new Blueprints from States 

proposing to operate only the SHOP, 

pursuant to 45 CFR § 155.106. We seek 

comment on this proposed approach. 

We further propose to amend 

§ 155.105 so that the Exchange approval 

criteria set forth therein would be 

consistent with the Exchange 

operational models now proposed in 

§§ 155.20, 155.100, and 155.200, and to 

permit HHS to operate only a FFE that 

will make QHPs available to qualified 

individuals when a State has elected to 

operate only an Exchange providing for 

the establishment of a SHOP pursuant to 

proposed § 155.100(a)(2). In paragraphs 

(b)(1) and (b)(2) we clarify that a State 

establishing and operating only a SHOP 

would have to perform the minimum 

functions described in subpart H and all 

applicable references to other subparts 

contained therein, and need not comply 

with other provisions that by their 

express terms apply only to an 

individual market Exchange. 

We propose to amend paragraph (f) to 

clarify that where a State has elected to 

establish and operate only a SHOP, the 

FFE must meet the requirements set 

forth in §§ 155.120(c), 155.130, and 

subparts C, D, E, and K of this part; 

however, it need not implement the 

standards for the establishment of a 

SHOP described in subpart H. We seek 

comment on this proposal. 

We are also proposing an amendment 

to § 155.105(f) to clarify that the 

regulatory provisions that will apply in 

an FFE include the nondiscrimination 

requirements of § 155.120(c). Section 

155.120(c), as written, applies to all 

Exchanges, and its previous omission 

from the list of provisions referenced in 

§ 155.105(f) was inadvertent. 

We propose to amend § 155.140 to 

clarify how a subsidiary or regional 

Exchange may operate in light of the 

proposed amendments to permit a State 

to establish and operate an Exchange 

only providing for the establishment of 

a SHOP. Under this proposal, a State 

establishing and operating only a SHOP 

could still establish subsidiary SHOP 

Exchanges. Multiple States that wish to 

establish and operate only SHOPs could 

still form a regional Exchange only 

providing for the establishment of a 

SHOP across the region covered by the 

participating states. 

Previously, we had created the 

standards for regional and subsidiary 

Exchanges such that the geographic area 

served by such Exchanges must be the 

same for the individual market 

Exchange and the SHOP.25 We propose 

in paragraph (c)(2)(ii) to generally 

preserve this standard, except in the 

case of an Exchange established 

pursuant to proposed § 155.100(a)(2). 

In paragraph (c)(2)(ii)(A), we propose 

that in the case of a regional Exchange 

established pursuant to proposed 

§ 155.100(a)(2) to provide only for the 

establishment and operation of a SHOP, 

the regional SHOP would be required to 

encompass a geographic area that 

matches the combined geographic areas 

of the individual market Exchanges 

established by HHS to serve the States 

establishing the regional SHOP. 

In paragraph (c)(ii)(B), we propose 

that in the case of a subsidiary Exchange 

established pursuant to § 155.100(a)(2) 

to provide only for the establishment 

and operation of a SHOP, the combined 

geographic area of all subsidiary SHOPs 

established by the State would be 

required to encompass the geographic 

area of the individual market Exchange 

established by HHS to serve the State. 

In addition, under 45 CFR 153.310(a), 

a State that elects to operate an 

Exchange is eligible to establish a risk 

adjustment program using a 

methodology that has obtained federal 

certification. We are considering 

whether a State that elects to operate a 

SHOP but not an individual market 

Exchange under the proposed approach 

described above should be eligible to 

establish a risk adjustment program, and 

in particular whether such a State 

should be eligible to establish a risk 

adjustment program only for the small 

group market or should be required to 

establish the program for both markets. 

We seek comment on this issue. 

3. Subpart C—General Functions of the 

Exchange 

a. Functions of an Exchange (§ 155.200) 

Consistent with the proposed 

amendments described above to 

§§ 155.20, 155.100, 155.105, and 

155.140, which permit a State to operate 

only an Exchange providing for the 

establishment of a SHOP, in § 155.200 

we propose that a State operating only 

an Exchange which provides for the 

establishment of a SHOP need perform 

only the minimum functions described 

in subpart H and all applicable 

provisions of other subparts referenced 

therein. Under such circumstances, the 

Exchange operated by HHS need not 

perform the minimum functions related 

to the establishment of a SHOP. 

b. Ability of States To Permit Agents 

and Brokers to Assist Qualified 

Individuals, Qualified Employers, or 

Qualified Employees Enrolling in QHPs 

(§ 155.220) 

Section 1312(e) of the Affordable Care 

Act authorizes the Secretary to establish 

procedures that permit agents and 

brokers to enroll qualified individuals 

and qualified employers in QHPs 

through an Exchange, and to assist 

individuals in applying for advance 

payments of the premium tax credit and 

cost-sharing reductions, to the extent 

allowed by States. 

In 45 CFR 155.220(c), 155.220(d), and 

155.220(e), we established general 

Exchange standards that agents and 

brokers must meet to assist individuals 

in enrolling in QHPs and applying for 

advance payments of the premium tax 

credit and cost-sharing reductions, 

including registration, training, 

compliance with the privacy and 

security standards adopted by the 

Exchange, compliance with applicable 

State law, and execution of an 

agreement with the Exchange. Section 

155.220(c)(3) established additional 

standards for agents and brokers that 

use Internet Web sites to assist qualified 

individuals in enrolling in a QHP. 

In CMS’s guidance titled ‘‘Role of 

Agents, Brokers, and Web-brokers in 

Health Insurance Marketplaces,’’ 26 we 

further clarified that in States where an 

FFE is operating, agents or brokers 

assisting individuals in selecting or 

enrolling in individual market QHPs 

through an FFE may use one of two 

pathways. First, an agent or broker may 

use a QHP issuer’s Internet Web site to 

assist or enroll individuals, if the agent 

or broker has a relationship with an 

issuer, and the issuer has direct 

enrollment capabilities. Alternatively, 

an agent or broker may use an FFE 

Internet Web site to assist individuals. 

Regardless of what pathway they use, 

all agents and brokers must register with 

CMS before they may assist qualified 

individuals in enrolling in individual 

market coverage through an FFE. Once 

an agent or broker has completed the 

registration process, which includes 

undergoing basic CMS identity proofing, 

completing an FFE training course, and 

signing an agreement with CMS, he or 

she will receive an active FFE user 

identification number, which will be the 

agent’s or broker’s unique identifier in 

an FFE. This would allow CMS to 

monitor and oversee the activities of 


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agents and brokers in an FFE, which is 

discussed in more detail later in this 

section, and would also facilitate 

payment for agent and broker services 

from issuers. 

Web-broker Policies and Procedures 

Section 155.220(c)(3) establishes 

standards that apply if an agent or 

broker uses its publicly-facing Internet 

Web site to assist individuals in 

selecting or enrolling in a QHP through 

the Exchange. Agents or brokers who do 

so are referred to as ‘‘Web-brokers’’ for 

the purposes of this proposed rule. We 

propose amending § 155.220(c)(3)(i), 

which currently requires that a Webbroker meet all standards for disclosure 

and display of QHP information 

contained in §§ 155.205(b)(1) and 

155.205(c). In particular, § 155.205(b)(1) 

requires the display of standardized 

comparative information on each 

available QHP, including its: (a) 

Premium and cost-sharing information; 

(b) summary of benefits and coverage; 

(c) metal level (bronze, silver, gold, or 

platinum); (d) enrollee satisfaction 

survey results; (e) quality ratings; (f) 

medical loss ratio, (g) transparency of 

coverage measures, and (h) provider 

directory. 

After taking into consideration 

concerns from issuers, we propose to 

limit the Web-broker’s obligation to 

disclose and display the QHP 

information to all the information 

provided to the Web-broker by the 

Exchange or directly by the issuer. We 

recognize that an Exchange may not be 

able to provide all Web-brokers with 

certain data elements necessary to meet 

the § 155.205(b)(1) requirements, such 

as premium and rate information, 

depending upon confidentiality 

requirements, the extent to which Webbrokers are appointed by individual 

QHP issuers, and State laws regarding 

agent and broker appointments. We also 

recognize that some of the required data, 

such as quality rating and enrollee 

satisfaction survey results, may not be 

available in the first year of Exchange 

operations, in which case Web-brokers 

would also not need to display this 

information. We seek comment on 

whether this provision should be 

limited to FFEs. 

We note that we do not intend this 

amendment to alter Web-brokers’ 

obligations to meet all existing 

standards for disclosure and display of 

QHP information contained in 

§ 155.205(c), regardless of the 

availability of QHP issuer information 

from issuers or the Exchange. 

Additionally, the Web-broker should 

display all information provided by the 

Exchange or an issuer in a manner that 

is as consistent with the requirements in 

§ 155.205(b)(1) as possible. We solicit 

comments on how to monitor this 

provision to ensure that Web-brokers 

display QHP information received by an 

Exchange or QHP issuers in a manner 

consistent with the QHP information 

displayed on an Exchange Web site. 

Even if a Web-broker is unable to 

display certain QHP information 

identified in § 155.205(b)(1) because it is 

not provided by the Exchange or a QHP 

issuer, it must still display a list of all 

available QHPs for the consumers to 

view, as required by § 155.220(c)(3)(ii). 

We also propose that, to address 

situations where the Web-broker is 

unable to display certain QHP 

information identified in 

§ 155.205(b)(1), the Web-broker must 

display a link to the Exchange Web site 

so the consumer may obtain the 

additional information. 

Instead of modifying only 

§ 155.220(c)(3)(i), we considered 

removing § 155.220(c)(3)(ii), which 

requires Web-brokers to provide 

consumers with the ability to view all 

QHPs offered through the Exchange. We 

decided not to propose this approach so 

that the consumer would be aware of all 

available QHP options, even if some of 

the specific plan details may not be 

available on the Web-broker’s Internet 

Web site. We invite comment on this 

proposal. 

We also propose to amend 

§ 155.220(c)(3) by adding a new 

paragraph (c)(3)(vii), which would 

require Web-brokers’ Internet Web sites 

in an FFE to prominently display 

language notifying consumers that: (a) 

the Web-broker’s Internet Web site is 

not an FFE Web site; (b) the Webbroker’s Web site might not display all 

QHP data available on the Exchange 

Web site; (c) the Web-broker has entered 

into an agreement with HHS pursuant to 

§ 155.220(d); and (d) the Web-broker 

agrees to comply with standards 

specified in § 155.220(c) and (d). We 

believe that this additional standard is 

in the best interest of the consumers in 

an FFE, as it will help consumers 

distinguish between an FFE Web site 

and the Internet Web sites of Webbrokers, and it will inform consumers 

that agents and brokers must comply 

with FFE standards and requirements 

before they can assist and enroll 

consumers. We welcome comments on 

this proposal. HHS expects to make 

available an application programming 

interface that would permit Web-brokers 

to use their public-facing Internet Web 

sites to assist consumers in enrolling 

through individual market QHPs offered 

through an FFE (‘‘FFE API’’). An FFE 

API would allow a person seeking to 

enroll in a QHP to initiate his or her 

shopping experience on a Web-broker’s 

Internet Web site, connect securely to an 

FFE Web site to complete the eligibility 

application and determination process, 

and return securely to the Web-broker’s 

Internet Web site compare and select 

QHPs. 

We understand that some Webbrokers may enter into arrangements 

with other agents and brokers under 

which those agents and brokers would 

be able to enroll qualified individuals in 

an FFE through the Web-broker’s 

Internet Web site. We are concerned 

about these arrangements that would 

allow other agents and brokers to use 

the Web-broker’s connection to HHS, 

because they would not require the 

agent or broker to be a party to the Webbroker’s agreement with HHS, or to 

become an employee or subcontractor of 

the Web-broker. We are considering 

prohibiting such arrangements outright, 

in part because such entities are not a 

party to the Web-broker’s agreement 

with HHS. However, we also want to 

make sure that agents and brokers have 

many possible avenues to participate in 

the FFE. If we do not prohibit such 

arrangements, we believe that a Webbroker should not be able to enter into 

these arrangements unless the Webbroker ensures that the agent or broker 

using its connection to HHS agrees to 

comply with the same FFE standards 

and requirements applicable to Webbrokers under § 155.220(c) and (d). We 

therefore propose to add a new 

§ 155.220(c)(4) that would require any 

Web-broker who makes an Internet Web 

site available to other agents and brokers 

for this purpose to require as a 

condition of agreement or contract that 

the agent or broker accessing and using 

the Internet Web site complies with 

§ 155.220(c) and (d). We also propose 

that the Web-broker would be required 

to provide to HHS a list of agents and 

brokers who are under such 

arrangements, and that the Web-broker 

be required to ensure that the agent or 

broker accessing or using the Internet 

Web site would be required to comply 

with the policies that the Web-broker 

would be required to develop under 

§ 155.220(d)(4), as proposed below. 

Because we would require the agent or 

broker accessing or using the Webbroker’s connection to comply with 

§ 155.220(d), that agent or broker would 

also have to enter into a Web-broker 

agreement with HHS. If the agent or 

broker accessing or using the Internet 

Web site fails to comply with either 

provision, both parties to the 

arrangement would be found to be 

noncompliant with the regulatory 


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requirements, and HHS would have 

cause to terminate its agreements with 

both parties. We seek comments on this 

circumstance and proposal, on whether 

these arrangements should be 

prohibited outright, and on whether 

there are other options to consider. 

Agent and Broker Policies and 

Procedures on Privacy and Security in 

an FFE 

Section 155.220(d)(3) currently 

directs all agents or brokers assisting 

qualified individuals with enrollment in 

QHPs to comply with the Exchange 

privacy and security requirements. We 

propose to establish a new standard in 

§ 155.220(d)(4) requiring agents and 

brokers assisting or enrolling consumers 

in the individual market of an FFE to 

establish policies and procedures 

implementing the privacy and security 

standards pursuant to § 155.220(d)(3); to 

train their employees, representatives, 

contractors, and agents with regard to 

those policies and procedures on a 

periodic basis; and to ensure that their 

employees, representatives, contractors, 

and agents comply with those policies 

and procedures. Because agents and 

brokers will have access to PII provided 

by consumers we want to ensure that 

the agents and brokers have appropriate 

procedures, training and monitoring 

safeguards in place to protect PII. We 

invite comments on the appropriate 

frequency of retraining requirements. 

Standards for Agent and Broker 

Agreement Termination in an FFE 

We propose adding a new 

§ 155.220(f), which would require 

agents and brokers who wish to 

terminate their agreement with an FFE 

to send to HHS a 30-day advance 

written notice of the intent to terminate. 

This notice would also include the 

intended date of termination. If the 

notice does not specify a date of 

termination, or the date is not 

acceptable to HHS, HHS may set a date 

that will be no less than 30 days from 

the date of the agent or broker’s notice 

of termination. We believe that this 

additional standard would be in the best 

interest of FFE consumers, as the 30-day 

pre-termination period would allow 

agents and brokers to complete any 

application or enrollment activity 

initiated prior to the notice. As of the 

date of termination, an agent or broker 

would not be able to conduct business 

in an FFE, although the agent’s or 

broker’s related duty to protect and 

maintain the privacy and security of PII 

it has created, collected, accessed, or 

acquired during its period of 

relationship with an FFE would survive 

the termination. We are considering 

whether to require such agents and 

brokers to also directly notify their 

clients of the termination plan during 

the pre-termination period. We welcome 

comment on this proposal. 

We also propose to establish new 

standards for agents and brokers in the 

FFEs, so that agents and brokers that 

register with an FFE have a clear 

understanding of the rights and 

standards governing their participation 

in an FFE. In new section § 155.220(g), 

we propose the standards under which 

HHS may terminate an agent’s or 

broker’s agreement with an FFE for 

cause. 

In § 155.220(g)(1), we propose that 

HHS may pursue termination with 

notice of an agent’s or broker’s 

agreement with an FFE executed 

pursuant to § 155.220(d) if, in HHS’s 

determination, a specific finding of 

noncompliance or pattern of 

noncompliance is sufficiently severe. 

Under this proposal, termination of the 

agreement with notice would mean that 

after a 30-day opportunity to cure, HHS 

would take necessary steps to prohibit 

an agent or broker from assisting or 

enrolling individuals in an individual 

market QHP offered through an FFE, or 

a Web-broker’s ability to securely 

exchange information with HHS. 

In § 155.220(g)(2), we propose that an 

agent or broker would be considered 

noncompliant if HHS finds that the 

agent or broker violated: (a) Any 

standard specified under § 155.220; (b) 

any term or condition of its agreement 

with the FFE, including but not limited 

to the FFE privacy and security 

standards; (c) any applicable State law; 

or (d) any other applicable Federal law. 

We propose that if HHS finds 

noncompliance or patterns of 

noncompliance to be sufficiently severe, 

such a finding would form the basis for 

a termination for cause. We believe that 

HHS must maintain the ability to 

terminate an agent’s or broker’s 

agreement for cause to protect the 

interest of consumers in cases of severe 

violations and patterns of violations, 

particularly violations with respect to 

privacy and security protections. 

Specific findings of noncompliance that 

HHS might determine to be sufficiently 

severe to warrant termination for cause 

would include, but not be limited to, 

violations of the Exchange privacy and 

security standards. Patterns of 

noncompliance that HHS might 

determine to be sufficiently severe to 

warrant termination for cause would 

include, for example, repeated 

violations of any of the standards set 

forth in § 155.220 for which the agent or 

broker was previously found to be 

noncompliant. We seek comment on 

this proposal and on other 

circumstances that should result in an 

HHS termination for cause. 

Prior to pursuing the termination of 

an agent’s or broker’s agreement for 

cause, we are considering implementing 

informal procedures, which may be 

published in future sub-regulatory 

guidance. The informal procedures 

would allow agents and brokers, at HHS 

discretion, to resolve certain 

noncompliance issues within a time 

period determined reasonable by HHS. 

Through this informal process, HHS 

would notify an agent or broker of the 

reason for the potential termination, the 

potential consequences of continued 

noncompliance, and any applicable 

administrative procedures. However, 

HHS would retain the right to bypass 

these informal procedures. 

Upon identification of a sufficiently 

severe violation under the proposed 

§ 155.220(g)(2), HHS would formally 

notify the agent or broker of the specific 

finding of noncompliance or pattern of 

noncompliance, as proposed in 

§ 155.220(g)(3). The agent or broker 

would then have a period of 30 days 

from the date of the notice to correct the 

noncompliance to HHS’s satisfaction, 

through good-faith efforts. If after 30 

days, the noncompliance is not 

appropriately addressed, HHS may 

terminate the agreement for cause. In 

§ 155.220(g)(4), we propose that 

termination for cause would result in 

the loss of the ability to assist 

individuals enroll in QHPs and transact 

data with HHS, including transactions 

through the FFE API. We believe this 

approach would provide an opportunity 

for agents and brokers to remedy any 

noncompliance issue in advance of a 

potential termination for cause. 

We request comment on the informal 

resolution approach we are considering 

implementing through future subregulatory guidance, specifically on 

whether we should consider any 

alternative proposals. We also solicit 

comment on the appropriate time length 

for a cure period, and on whether we 

should include a provision permitting 

HHS to terminate an agent’s or broker’s 

agreement immediately and 

permanently for cause if findings of 

noncompliance are sufficiently 

egregious. We are also considering an 

option that would allow HHS to 

immediately but temporarily suspend 

an agent or broker by prohibiting the 

agent or broker from assisting 

individuals to enroll in a QHP offered 

through the FFE and/or ability to 

securely exchange information with 

HHS, including through the FFE API, 

without advance notice. We are 

considering this option because there 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
37048 Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 

27ASC X12 is chartered by the American National 

Standards Institute. See, http://www.x12.org/. 

28Compare the definitions of individually 

identifiable health information and protected health 

information at 45 CFR 160.103 and the definition 

may be instances where a specific 

violation could pose immediate harm to 

consumers or to HHS’s ability to 

properly administer the FFE. Under this 

scenario, as soon as possible following 

the temporary suspension, HHS would 

notify to the agent or broker of HHS’s 

action and the noncompliance issue. If 

the agent or broker satisfactorily 

addresses the issue, HHS would notify 

the agent or broker that the temporary 

suspension had been lifted. We request 

comments on this approach, and the 

circumstances under which it would be 

needed. 

We further propose a new section 

§ 155.220(h) to establish a one-level 

process through which an agent or 

broker may request reconsideration of 

HHS’s decision to terminate the 

agreement for cause. In § 155.220(h)(2), 

we propose that an agent or broker must 

submit a request for reconsideration to 

an appropriate HHS designee 

(‘‘reconsideration entity’’) within 30 

calendar days of the date of the notice 

in order to obtain a reconsideration. In 

§ 155.220(h)(3), we propose that the 

reconsideration entity would provide 

the agent or broker with a written 

reconsideration decision within 30 

calendar days of the date it receives the 

request for reconsideration. This 

decision would constitute HHS’s final 

determination. 

We believe this approach would 

afford agents and brokers an 

opportunity to furnish any facts and 

information that might not have been 

considered as part of HHS’s decision to 

terminate the agreement for cause, and 

to provide due process. We intend to 

provide future guidance on the manner 

and form in which agents and brokers 

should present requests for 

reconsideration, HHS’s designation of 

an appropriate reconsideration entity, 

and additional procedures related to 

agent and broker revocation and 

reconsideration. We invite comments on 

this reconsideration proposal. 

We expect that States will continue to 

license and monitor agents and brokers, 

and will continue to oversee and 

regulate all agents and brokers, both 

inside and outside of the Exchange. We 

expect that all State laws related to 

agents and brokers, including State laws 

related to appointments, contractual 

relationships with issuers, and licensing 

and marketing requirements, will 

continue to apply. Therefore, to avoid 

duplication of oversight activities 

related to agents and brokers enrolling 

or assisting consumers through an FFE, 

HHS will focus its oversight activities 

primarily on ensuring that agents and 

brokers in an FFE meet the standards 

outlined in § 155.220. In particular, 

HHS plans to focus its oversight efforts 

on protecting the privacy and security of 

PII, to the extent this is not already 

covered under existing State or Federal 

law. 

Prior to releasing additional guidance 

on agent and broker activities in the 

FFE, we intend to collaborate with State 

DOIs to further develop standard 

operating procedures for an FFE that 

will be critical to HHS oversight of 

agents and brokers working with an 

FFE. We encourage comment on the 

information required to carry out these 

activities, and on any existing 

definitions, timeframes, or procedures 

described in our proposed amendments 

to § 155.220. 

c. Electronic Information Exchange With 

Covered Entities (§ 155.270) 

Section 155.270 of 45 CFR directs 

Exchanges that perform electronic 

transactions with a covered entity to use 

standards, implementation 

specifications, operating rules, and code 

sets adopted by the Secretary in 45 CFR 

parts 160 and 162. When 45 CFR 

155.270 was finalized in its current 

form, HHS believed that the HIPAA 

standard transactions, as defined in 45 

CFR Parts 160 and 162, were the most 

appropriate standards for transmitting 

information electronically between 

Exchanges and issuers. Since then, the 

Accredited Standards Committee X12, 

also known as ‘‘ASC X12,’’ 27 which 

governs the electronic transactions 

addressed in 45 CFR parts 160 and 162, 

has determined that the current 

transaction used to communicate 

payment-related information, the 

HIPAA ASC X12 005010X218 (820), 

cannot provide the program-level 

payment information necessary for the 

risk adjustment, reinsurance, and risk 

corridors programs, and therefore does 

not meet the business requirements of 

the Affordable Care Act programs. As a 

result, the ASC X12 standards body 

developed and finalized the ASC X12 

005010X306 (820), referred to as the 

‘‘HIX 820.’’ The HIX 820 has the same 

security and technical requirements as 

HIPAA standards, but it is a new 

implementation of the transaction, so it 

has not yet been adopted by the 

Secretary in 45 CFR parts 160 and 162. 

We believe that the HIX 820 is the most 

appropriate method for transmitting 

payment-related information between 

the Exchange and a covered entity. For 

this reason, and to provide for flexibility 

should similar situations arise in the 

future, we propose to amend § 155.270 

to specify that to the extent that an 

Exchange performs electronic 

transactions with a covered entity, an 

Exchange must use standards, 

implementation specifications, 

operating rules, and code sets that are 

adopted by the Secretary in 45 CFR 

parts 160 and 162 or that are otherwise 

approved by HHS. We further propose 

to approve the HIX 820 transaction for 

transmitting payment-related 

information between the Exchange and 

a covered entity. We seek comment on 

this proposal. 

d. Oversight and Monitoring of Privacy 

and Security Requirements (§ 155.280) 

In § 155.280, consistent with section 

1411(g) and (h) of the Affordable Care 

Act, we propose that HHS will monitor 

any individual or entity who would be 

subject to the privacy and security 

requirements as established and 

implemented by an Exchange under 

§ 155.260. 

We propose in § 155.280(a) that HHS 

will oversee and monitor the FFEs and 

non-Exchange entities associated with 

FFEs for compliance with the privacy 

and security standards established and 

implemented by the FFEs pursuant to 

§ 155.260 for compliance with those 

standards. HHS will monitor State 

Exchanges for compliance with the 

privacy and security standards 

established and implemented by the 

State Exchanges pursuant to § 155.260. 

In addition, we propose that State 

Exchanges will oversee and monitor 

non-Exchange entities associated with 

the State Exchange for compliance with 

the standards implemented by the State 

Exchange pursuant to § 155.260. 

In § 155.280(b), we propose the 

oversight activities that HHS may 

conduct in order to ensure adherence to 

the privacy and security requirements in 

§ 155.260. These may include, but are 

not limited to, audits, investigations, 

inspections and any reasonable 

activities necessary for appropriate 

oversight of compliance with the 

Exchange privacy and security 

standards as permitted under sections 

1313(a)(2) and (a)(3) of the Affordable 

Care Act. 

In § 155.280(c)(1)(i) and (ii), we 

propose definitions for the terms 

‘‘incident’’ and ‘‘breach’’ as they apply 

to privacy and security. We considered 

but declined to use the definitions for 

these terms provided under the HIPAA 

regulations because the protected health 

information (PHI) that triggers the 

HIPAA requirements is considered a 

subset of PII,28 and we believe that the 


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of PII in Office of Management and Budget (OMB) 

Memorandum M–07–16 (see 77 FR 18340 for an 

explanation of how the OMB definition of PII 

applies to Exchanges). 

HIPAA definitions would not provide 

broad enough protections to satisfy the 

requirements under the Privacy Act of 

1974 (5 U.S.C. 552a), the e-Government 

Act of 2002 (Pub. L. 107–347), other 

laws to which HHS is subject, or the 

expectations of the other Federal 

agencies that will be providing PII to 

facilitate Exchange eligibility 

determinations. We considered the 

definitions and explanations for 

‘‘incident’’ in the following 

publications: OMB Memorandum M– 

06–19, OMB Memorandum M–07–16, 

and the National Institute of Standards 

and Technology Special Publication 

800–61, and propose that ‘‘incident’’ 

would mean, the act of violating an 

explicit or implied security policy, 

which includes attempts (either failed 

or successful) to gain unauthorized 

access to a system or its data, unwanted 

disruption or denial of service, the 

unauthorized use of a system for the 

processing or storage of data; and 

changes to system hardware, firmware, 

or software characteristics without the 

owner’s knowledge, instruction, or 

consent. We propose that the definition 

for ‘‘breach’’ be the same as the 

definition in OMB Memorandum M–07– 

16, Safeguarding and Responding to the 

Breach of Personally Identifiable 

Information, which defines ‘‘breach’’ as 

the loss of control, compromise, 

unauthorized disclosure, unauthorized 

acquisition, unauthorized access, or any 

similar term referring to situations 

where persons other than authorized 

users and for an other than authorized 

purpose have access or potential access 

to personally identifiable information, 

whether physical or electronic. We 

welcome comment on the use of these 

definitions for incident and breach as 

they relate to PII. 

In § 155.280(c)(2) we propose that in 

the event of an incident or breach, the 

entity where the incident or breach 

occurs would be responsible for 

reporting and managing it according to 

the entity’s documented incident 

handling or breach notification 

procedures. We believe that incident 

handling and breach notification 

procedures should be among the written 

policies and procedures required for 

Exchanges under § 155.260(d). NonExchange entities associated with the 

Exchanges would be required to have 

policies and procedures in place for 

reporting breaches and incidents as a 

condition of the contracts or agreements 

that are required under § 155.260(b). 

Under § 155.260(a)(3)(viii), Exchanges 

would also be required to establish 

accountability standards that would 

include the development and 

implementation of policies and 

procedures including incident handling 

and breach notification procedures. 

In § 155.280(c)(3) we propose that 

FFEs, non-Exchange entities associated 

with FFEs, and State Exchanges must 

report all privacy and security incidents 

and breaches to HHS within one hour of 

discovering the incident or breach. We 

also propose that a non-Exchange entity 

associated with a State Exchange must 

report all privacy and security incidents 

and breaches to the State Exchange with 

which they are associated. We welcome 

comment on these proposals. 

4. Subpart D—Exchange Functions in 

the Individual Market: Eligibility 

Determinations for Exchange 

Participation and Insurance 

Affordability Programs 

a. Eligibility Process (§ 155.310) 

In our consultations with states and in 

the operational development of 

Exchanges, we have identified with 

States the need to establish a 

standardized process for handling 

applications that are submitted without 

information that is necessary for 

determining eligibility. It is our 

understanding that States have an 

existing process for handling 

incomplete applications for other 

programs, such as Medicaid, and may 

want to establish a consistent process 

for handling incomplete applications 

submitted to the Exchange. Accordingly, 

the language of this proposed regulation 

is designed to provide flexibility to 

States so they may align this process 

with Medicaid and CHIP. Further, we 

intend to work with States to implement 

these procedures and in 2014 to 

accommodate States with processes 

established for handling incomplete 

applications that does not match the 

process described in these regulations. 

We are adding § 155.310(k), to 

provide that if an application filer does 

not provide sufficient information on an 

application for the Exchange to conduct 

an eligibility determination for 

enrollment in a QHP through the 

Exchange, or for insurance affordability 

programs (if the application includes a 

request for an eligibility determination 

for insurance affordability programs), 

the Exchange will provide notice 

through the eligibility determination 

notice described in 45 CFR 155.310(g). 

The notice would indicate that 

information necessary to complete an 

eligibility determination is missing, 

specifying the missing information, and 

include instructions on how to provide 

the missing information. We propose 

that the Exchange will provide the 

applicant with a period of no less than 

15 days and no more than 90 days from 

the date this notice is sent to the 

applicant to provide the necessary 

information. Further, we propose that 

during this period, the Exchange will 

not proceed with the applicant’s 

eligibility determination or provide 

advance payments of the premium tax 

credit or cost-sharing reductions, unless 

an application filer has provided 

sufficient information to determine his 

or her eligibility for enrollment in a 

QHP through the Exchange, in which 

case the Exchange must make such a 

determination for enrollment in a QHP. 

We propose that the Exchange may 

make an eligibility determination for 

enrollment in a QHP through the 

Exchange if an applicant has provided 

sufficient information to make an 

eligibility determination for enrollment 

in a QHP through the Exchange. For 

example, if there is sufficient 

information to determine eligibility for 

enrollment in a QHP, but an applicant 

who requested an eligibility 

determination for insurance 

affordability programs has not provided 

information regarding employersponsored coverage, which is needed to 

determine eligibility for advance 

payments of the premium tax credit and 

cost-sharing reductions, the Exchange 

will determine the applicant’s eligibility 

for enrollment in a QHP through the 

Exchange but may not provide advance 

payments of the premium tax credit or 

cost-sharing reductions. 

We believe this process is consistent 

with current Medicaid and CHIP 

policies regarding the process for 

handling incomplete applications. We 

propose a flexible timeframe of no less 

than 15 days and no more than 90 days. 

While we believe it does not benefit an 

applicant to have a long timeframe 

because no advance payments of the 

premium tax credits and cost-sharing 

reductions will be provided during the 

period, we understand that State 

Medicaid and CHIP agencies use 

periods similar to this length, and we 

also believe that it is important to allow 

flexibility for the Exchange to align with 

the time period for inconsistencies, 

which is a period of 90 days as specified 

in 45 CFR 155.315(f)(2)(ii). We note that 

the online and telephonic applications 

are structured to minimize situations in 

which an applicant can fail to provide 

necessary information. Accordingly, we 

anticipate that this paragraph will be 

implicated most frequently with respect 

to paper applications. We seek comment 


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on this proposal, including whether 

Exchange flexibility is appropriate; 

whether 15 days and 90 days are the 

right lower and upper limits; and 

whether additional language is needed 

to ensure coordination between the 

Exchange, Medicaid, and CHIP. 

b. Verification of Eligibility for 

Minimum Essential Coverage Other 

Than Through an Eligible EmployerSponsored Plan (§ 155.320) 

As finalized in the Exchange 

Establishment Rule, § 155.320(b) 

specifies standards related to the 

verification of eligibility for minimum 

essential coverage other than through an 

eligible employer-sponsored plan. We 

propose to redesignate paragraph (b)(1) 

as (b)(1)(i) and (b)(2) as (b)(1)(ii) to 

consolidate the standards for Exchange 

responsibilities in connection with 

verification of eligibility for minimum 

essential coverage other than through an 

eligible employer-sponsored plan. In 

paragraph (b)(1)(i), we also propose to 

add the phrase ‘‘for verification 

purposes’’ to the end of existing text. 

This would clarify that HHS would 

provide a response to the Exchange to 

verify the information transmitted from 

the Exchange to HHS about an 

applicant’s eligibility for or enrollment 

in minimum essential coverage other 

than through an eligible employer 

sponsored plan, Medicaid, CHIP, or the 

Basic Health Program. The Exchange 

would submit specific identifying 

information to HHS and HHS would 

verify applicant information with 

information from the Federal and State 

agencies or programs that provide 

eligibility and enrollment information 

regarding minimum essential coverage. 

Such agencies or programs may include 

but are not limited to Veterans Health 

Administration, TRICARE, and 

Medicare. HHS will work with the 

appropriate Federal and State agencies 

to complete the appropriate computer 

matching agreements, data use 

agreements, and information exchange 

agreements which will comply with all 

appropriate Federal privacy and 

security laws and regulations. The 

information obtained from Federal and 

State agencies will be used and 

redisclosed by HHS as part of the 

eligibility determination and 

information verification process set 

forth in subpart D of part 155. 

In connection with the proposal to 

redesignate paragraph (b)(2) to 

paragraph (b)(1)(ii), we are not 

proposing any change to the text of the 

provision as previously finalized. 

Consistent with the authorizations for 

the disclosure of certain information 

under 42 CFR 435.945(c) and 

457.300(c), this regulation provides for 

an Exchange to verify whether an 

applicant has already been determined 

eligible for coverage through Medicaid, 

CHIP, or the Basic Health Program, 

using information obtained from the 

agencies administering such programs. 

Finally, we propose to add paragraph 

(b)(2) to provide that consistent with 45 

CFR 164.512(k)(6)(i) and 45 CFR 

155.270, a health plan that is a 

government program providing public 

benefits, is expressly authorized to 

disclose PHI, as that term is defined at 

45 CFR 160.103, that relates to 

eligibility for or enrollment in the health 

plan to HHS for verification of applicant 

eligibility for minimum essential 

coverage as part of the eligibility 

determination process for advance 

payments of the premium tax credit or 

cost-sharing reductions. We intend for 

this provision to enable any health plan 

that is a government program within the 

scope of 45 CFR 164.512(k)(6)(i) to 

disclose the protected health 

information necessary for HHS to be 

able to verify of minimum essential 

coverage as required to conduct 

eligibility determinations for insurance 

affordability programs. We seek 

comment on this proposal. 

c. Administration of Advance Payments 

of the Premium Tax Credit and CostSharing Reductions (§ 155.340) 

We propose to amend § 155.340 by 

adding paragraph (h), which sets forth 

additional requirements applicable 

when a State Exchange is facilitating the 

collection and payment of premiums to 

QHP issuers. We propose that if the 

Exchange discovers that it did not 

reduce an enrollee’s premium by the 

amount of the advance payment of the 

premium tax credit in accordance with 

45 CFR 155.340(g), the Exchange would 

be required to refund to the enrollee any 

excess premium paid by or for the 

enrollee. The Exchange would also 

notify the enrollee of the improper 

application of the advance payment of 

the premium tax credit no later than 30 

calendar days after the Exchange 

discovers it. We note that an Exchange 

may provide the refund to the enrollee 

by reducing the enrollee’s portion of the 

premium in the following month, as 

long as the reduction is provided no 

later than 30 calendar days after the 

Exchange discovers the improper 

application of the advance payment of 

the premium tax credit. If the Exchange 

elects to provide the refund by reducing 

the enrollee’s portion of the premium 

for following month and the refund 

exceeds the enrollee’s portion of the 

premium for the following month, then 

the Exchange would need to refund to 

the enrollee the excess, no later than 30 

calendar days after the Exchange 

discovers the improper application of 

the advance payment of the premium 

tax credit. These provisions are similar 

to the policy we propose in § 156.460, 

when a QHP issuer is collecting 

premiums directly from enrollees and 

fails to apply the advance payment of 

the premium tax credit to the enrollee’s 

portion of the premiums. The parallel 

requirements are designed to ensure that 

all enrollees, regardless of whether a 

QHP issuer or the Exchange is collecting 

premiums, are afforded the same level 

of protection. 

We are considering requiring the 

Exchange to provide to HHS for each 

quarter, in a manner and timeframe 

specified by HHS, a report detailing the 

occurrence of any improper application 

of the advance payment of the premium 

tax credit. We believe that it is 

important that an Exchange timely 

address improper applications of the 

advance payments of the premium tax 

credit in order to mitigate potential 

harm to enrollees. However, we 

recognize that, given operational 

constraints, it may be difficult at this 

point for Exchanges to develop systems 

that can produce these types of 

quarterly reports for the 2014 benefit 

year. Therefore, we are considering 

requiring Exchanges to provide such 

reports to HHS beginning in the 2015 

benefit year. We seek comment on 

whether HHS should establish a 

minimum error rate or threshold before 

an Exchange is required to inform HHS 

of such improper applications of the 

advance payment of the premium tax 

credit in a quarterly report, as well as 

what an appropriate error rate or 

threshold should be. For example, we 

are considering requiring issuers to 

report the number of enrollees for whom 

the Exchange improperly applied the 

advance payment of the premium tax 

credit compared to the total number of 

enrollees in the Exchange receiving 

Federal premium subsidies. We also 

seek comment on whether such reports 

should be provided to HHS less 

frequently than quarterly. 

5. Subpart E—Exchange Functions in 

the Individual Market: Enrollment in 

Qualified Health Plans 

a. Allowing Issuer Customer Service 

Representatives To Assist With 

Eligibility Applications (§ 155.415) 

Section 1413 of the Affordable Care 

Act directs the Secretary to establish, 

subject to minimum requirements, a 

streamlined enrollment process for 

enrollment in QHPs and all insurance 

affordability programs. Many issuers 


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currently have customer service 

representatives who assist applicants in 

the application and plan selection 

process and assist enrollees in making 

changes to their coverage. Some of these 

representatives might not be licensed by 

the State as agents, brokers, or 

producers. Accordingly, we propose to 

add section § 155.415 that would, at the 

Exchange’s option and to the extent 

permitted by State law, permit issuer 

customer service representatives who do 

not meet the definition of agent or 

broker in § 155.20 to assist qualified 

individuals in the individual market 

with: (a) Applying for an eligibility 

determination or redetermination for 

coverage through the Exchange; (b) 

applying for insurance affordability 

programs; and (c) facilitating the 

selection of a QHP offered by the issuer 

represented by the customer service 

representative, provided that such 

issuer customer service representatives 

meet the proposed requirements set 

forth in § 156.1230(a)(2). 

b. Special Enrollment Periods 

(§ 155.420) 

In accordance with section 

1311(c)(6)(C) of the Affordable Care Act, 

the Secretary must establish special 

enrollment periods for all Exchanges, 

including special enrollment periods 

specified in section 9801 of the Internal 

Revenue Code of 1986 and under 

circumstances similar to such periods 

under Part D of title XVIII of the Social 

Security Act. Under this authority, we 

propose to amend § 155.420(d) to clarify 

that a special enrollment period will be 

available when a Exchange determines 

that a consumer has been incorrectly or 

inappropriately enrolled in coverage 

due to misconduct on the part of the 

non-Exchange entity. We propose to add 

a new paragraph § 155.420(d)(10) to 

create this new special enrollment 

period for qualified individuals. We 

propose to limit this special enrollment 

opportunity to the individual market 

Exchange and not extend it to the 

SHOP. 

We propose that the Exchange would 

extend a special enrollment period to a 

qualified individual when, in the 

determination of the Exchange, 

misconduct on the part of a nonExchange entity has caused the 

qualified individual to be enrolled 

incorrectly or inappropriately in 

coverage such that they are not enrolled 

in QHP coverage as desired, are not 

enrolled in their selected QHP, or have 

been determined eligible for but are not 

receiving advance payments of the 

premium tax credit or cost-sharing 

reductions. 

Non-Exchange entities will be 

performing enrollment activities, 

including providing assistance with 

enrollment activities, and in some cases 

will be enrolling consumers directly in 

QHPs. Consumers would be harmed if 

they fail to enroll in a health plan or are 

enrolled in a QHP they did not select as 

a result of misconduct on the part of a 

non-Exchange entity. Consumers would 

also be harmed if they are eligible for, 

but not receiving advance payments of 

the premium tax credit or cost-sharing 

reductions as a result of misconduct on 

the part of a non-Exchange entity. The 

proposed provision would ensure that 

all qualified individuals and enrollees 

have similar protections against these 

harms. 

For purposes of this proposed 

provision, we would interpret a nonExchange entity providing enrollment 

assistance or conducting enrollment 

activities to include, but not be limited 

to, those individuals and entities that 

are authorized by the Exchange to assist 

with enrollment in QHPs (such as a 

Navigator, as described in § 155.210; 

non-Navigator consumer assistance 

personnel, as authorized by § 155.205(d) 

and (e); a certified application 

counselor, as described in proposed 

§ 155.225; an agent or broker assisting 

consumers in an Exchange under 

§ 155.220; issuer customer service 

representatives assisting consumers in 

an Exchange under proposed § 155.415; 

or a QHP conducting direct enrollment 

under proposed § 156.1230). 

We further propose in 

§ 155.420(d)(10) that misconduct on the 

part of a non-Exchange entity providing 

enrollment assistance or conducting 

enrollment activities could include, but 

would not be limited to, the failure of 

a non-Exchange entity to comply with 

applicable requirements set forth in 

Exchange regulations or other 

applicable Federal or State laws. 

For purposes of the proposed 

provision, the Exchange could base the 

determination triggering the special 

enrollment period on findings of HHS or 

a State; the Exchange’s evaluation of 

consumer complaints, including the 

complaint of the affected individual; 

audits; information provided by the 

consumer, issuer, or non-Exchange 

entity; or other mechanisms. All 

requests for special enrollment periods, 

including those that may be initiated by 

the Exchange through its own audits or 

other mechanisms, should be evaluated 

by the Exchange as part of the eligibility 

determination process established 

pursuant to 45 CFR 155.310. We expect 

to develop further guidance and 

standard operating procedures for 

making the determinations that would 

trigger this special enrollment period. If 

a qualified individual is harmed due to 

an error or inaction on the part of a nonExchange entity, the qualified 

individual may also seek to demonstrate 

the existence of exceptional 

circumstances to the Exchange under 

existing regulations at § 155.420(d)(9). If 

the Exchange determines that the error 

or inaction on the part of the nonExchange entity caused the qualified 

individual to be harmed (including, but 

not limited to failure to be enrolled in 

a health plan, enrolled in the incorrect 

health plan or failure to receive advance 

payments of the premium tax credit or 

cost-sharing reduction), the Exchange 

may provide for a special enrollment 

opportunity to correct the error. 

We solicit comments on these 

proposals. 

6. Subpart H—Exchange Functions: 

Small Business Health Options Program 

(SHOP) 

a. Standards for the Establishment of a 

SHOP (§ 155.700) 

We propose to amend § 155.700 by 

adding a definition for ‘‘SHOP 

application filer.’’ 

We propose that ‘‘SHOP application 

filer’’ would mean an applicant, an 

authorized representative, an agent or 

broker of the employer, or an employer 

filing for its employees where not 

prohibited by other law. By broadening 

who can file an employee application 

beyond just an employee, we propose to 

permit the entities that have 

traditionally assisted employees in 

filing applications to provide such 

assistance. 

b. Functions of a SHOP (§ 155.705) 

In § 155.705, we propose adding 

paragraph (b)(6)(i) so that a SHOP 

would require QHP issuers to make 

changes to rates at a uniform time that 

is no more frequently than quarterly. 

This proposed paragraph would 

conform to the proposed issuer standard 

at § 156.80 regarding the frequency of 

indexed rate updates. In paragraph 

(b)(6)(ii), we propose providing issuers 

participating in the FF–SHOP with the 

maximum amount of flexibility 

permitted under § 156.80 as proposed in 

this rule and new (b)(6)(i), standardizing 

the effective dates for rate updates in the 

FF–SHOP, and providing that FF–SHOP 

issuers would have to submit rates to 

HHS 60 days in advance of the effective 

date. Consistent with technical guidance 

provided to issuers through the Health 

Insurance Oversight System on April 8, 

2013, issuers would be able to submit 

updated quarterly rates for the FF– 

SHOP no sooner than for the third 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
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29See Rate Changes for Small Group Market Plans 

and System Processing of Rates (April 8, 2013). 

30See 78 FR 4723. 

quarter of 2014, due to current system 

limitations.29

We are also re-proposing a new 

pargraph (c). We previously proposed 

this paragraph in a recent rulemaking 30

to coordinate SHOP functions with the 

functions of the individual market 

Exchange for determining eligibility for 

insurance affordability programs. We 

propose that in Exchanges where the 

State or Federal government operates 

both the individual market and SHOP 

Exchanges, the SHOP would provide 

data related to the eligibility and 

enrollment for a qualified employee 

(that is, an employee who is enrolled in 

a QHP through the SHOP or is eligible 

to enroll in coverage through a SHOP 

because of an offer of coverage from a 

qualified employer) to the individual 

market Exchange that corresponds to the 

service area in which the SHOP is 

operating. We intend this proposal to 

ensure that the Exchange can use SHOP 

data for purposes of verifying 

enrollment in an eligible employersponsored plan and eligibility for 

qualifying coverage in an eligible 

employer-sponsored plan. We now repropose this standard with an 

exemption for a State operating only a 

SHOP. Developing such data sharing 

would be a challenge in such a State. 

In paragraph (d), we propose to 

provide additional flexibility to States 

with respect to the operation of the 

SHOP Navigator program when the 

State has elected to establish and 

operate only the SHOP. In most cases, 

there need not be separate Navigator 

programs for the SHOP and individual 

market Exchange. However, when the 

SHOP is operated by the State, and the 

individual market Exchange is operated 

by the Federal government, there would 

be two Navigator programs: a Federal 

Navigator program for the individual 

market Exchange, and a State Navigator 

program for the SHOP. We propose to 

clarify that when a State establishes and 

operates a SHOP independently of a 

Federally-facilitated individual market 

Exchange, as proposed in this 

rulemaking, the SHOP would have the 

flexibility to focus its Navigator program 

on outreach and education to small 

employers. If the State takes this option, 

SHOP Navigators would be able to 

fulfill their statutory and regulatory 

obligations under section 1311(i) of the 

Affordable Care Act and 45 CFR 155.210 

to facilitate enrollment in QHPs, and to 

refer consumers with complaints, 

questions, and grievances to applicable 

offices of health insurance consumer 

assistance or ombudsmen, by referring 

small businesses to agents and brokers 

for these types of assistance, so long as 

State law permits agents and brokers to 

carry out these functions. The option of 

carrying out these two Navigator 

functions via referrals to agents and 

brokers would not be available in any 

other circumstances. Additionally, this 

provision would not prevent a State 

operating a separate SHOP from 

requiring SHOP Navigators to perform 

the full range of Navigator services with 

equal focus and without making 

referrals to agents and brokers, if it so 

desires. 

c. Application Standards for SHOP 

(§ 155.730) 

In § 155.730, we propose amending 

the application filing standard to relieve 

SHOPs of having to of accept paper 

applications and accept applications by 

telephone. Such relief may reduce the 

cost of operating a SHOP while 

permitting SHOPs to provide 

applications in the manner that will best 

serve their enrollees. Nothing in this 

proposed standard would prohibit 

SHOPs from accepting paper 

applications or applications by 

telephone. Additionally, in this section 

we clarify that an employer or an 

employee application may be filed by a 

‘‘SHOP application filer,’’ that is, an 

applicant, an authorized representative 

of the applicant, an agent or broker, and, 

if not prohibited by other law, an 

employer filing on behalf of employees. 

By broadening who can file an 

employee application beyond just an 

employee, we propose to permit the 

entities that have traditionally assisted 

employees in filing applications to 

provide such assistance. 

d. Termination of Coverage (§ 155.735) 

In § 155.735, we propose that each 

SHOP would be required to develop 

uniform standards for the termination of 

coverage in a QHP. Standardizing the 

timing, form, and manner of a group’s 

termination in the SHOP would ensure 

that an employer offering coverage 

through multiple health insurance 

issuers (that is, in a SHOP offering 

employee choice) will be subject to 

uniform, predictable termination 

policies. Some SHOPs have considered 

developing termination standards using 

their authority to establish a uniform 

enrollment timeline and process 

pursuant to § 155.720(b). We propose 

this section to clarify the authority for 

SHOPs to establish termination 

standards and to set such standards for 

the FF–SHOP. Because SHOPs will not 

be required to offer employee choice 

and premium aggregation until plan 

years beginning on or after January 1, 

2015, we created a transition policy 

such that these standards would be 

required starting in 2015. However, we 

are proposing these standards now, for 

two reasons. First, State Exchanges may 

desire to implement employee choice 

and premium aggregation in 2014 and, 

if so, would be required to apply these 

standards. Second, we are proposing 

these standards in response to 

comments received from issuers on the 

Exchange Final Rule and 2014 Payment 

Notice requesting detailed guidance 

well in advance of implementation to so 

that they are better able to build 

conforming systems. 

Proposed paragraph (b) addresses 

employer requests for termination of 

employer group coverage. In paragraph 

(b)(1), we propose that each SHOP 

would be required to set policies 

regarding advance notice of such 

terminations and when coverage will 

end following the SHOP’s receipt of 

notice that an employer wishes to 

terminate coverage. 

In paragraph (b)(2), we propose that 

employer-requested terminations of 

employer group coverage through an 

FF–SHOP would be effective only on 

the last day of a month. We also propose 

that notice of termination would have to 

be received from the employer on or 

before the 15th of a given month for it 

to be effective on the last day of that 

month. If notification of termination is 

provided after the 15th of the month, we 

propose the group’s coverage be 

terminated on the last day of the 

following month. 

Proposed paragraph (c) addresses 

terminations of employer group 

coverage for non-payment of premiums. 

In paragraph (c)(1), we propose that 

each SHOP would be required to 

establish standards for termination due 

to non-payment, including defining 

grace periods, due dates for premium 

payments made to a SHOP pursuant to 

§ 155.705(b)(4), employer and employee 

notices, and reinstatement policies. 

Standardized grace periods, due dates 

for payment and reinstatement policies, 

and notices would ensure that an 

employer offering coverage through 

multiple health insurance issuers is 

subject to clear and consistent rules. 

In paragraph (c)(2), we propose the 

policies for terminations for nonpayment of premiums in the FF–SHOP. 

As proposed, payment for a group’s 

coverage for a given month would be 

due to the FF–SHOP by the first day of 

the coverage month. Additionally, we 

propose that the employer would have 

a 31-day grace period from the first day 

of the coverage month for making this 

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provided small group market payment 

grace periods rules that currently exist, 

we believe a grace period of this length 

would never be shorter than the 

protections currently offered by any 

State and therefore does not prevent the 

application of existing State law. 

In paragraph (c)(2)(iii), we propose 

that an employer would have 30 days 

from the date of its termination from 

coverage under the FF–SHOP to request 

the reinstatement of its group in the 

previous coverage. Additionally, we 

propose that the employer would pay in 

full all outstanding premiums and the 

premium for the next month’s coverage 

before reinstatement could occur. 

Proposed paragraph (d) addresses 

terminations of employee or dependent 

coverage. In paragraph (d)(1), we 

propose that each SHOP would be 

required to establish consistent policies 

across QHP issuers regarding the 

process and effective dates for 

termination of employee and dependent 

coverage in the SHOP. Furthermore, this 

provision would clarify the specific 

circumstances under which the SHOP 

would be permitted to terminate an 

employee’s coverage. 

In paragraph (d)(2), we propose that 

in the FF–SHOP, terminations for the 

reasons enumerated in paragraph (d)(1) 

would be effective on the last day of the 

month in which the FF–SHOP receives 

notice of the event. We further propose 

that the FF–SHOP must have received 

notice prior to the proposed date of the 

termination. Notwithstanding the 

standards promulgated in 45 CFR 

147.120, under this proposed standard a 

person who loses coverage as a 

dependent when she turns 26 years old 

would have to be covered on the 

parent’s plan through the end of the 

month. 

In paragraph (e), we direct that all 

SHOPs comply with the general 

administrative requirements of 

§ 155.430(c). This compliance would 

ensure that the SHOP keeps sufficient 

records of terminations and that 

reasonable accommodations would be 

made for enrollees with disabilities. 

In paragraph (f), we propose that the 

standards set in this section would 

apply to all SHOPs for coverage 

beginning on or after January 1, 2015. 

Additionally, because these provisions 

propose to harmonize issuer termination 

policies where employee choice exists, 

we propose that SHOPs offering 

employee choice and premium 

aggregation prior to January 1, 2015 

would need to comply with these 

standards by the time they are 

operational. We do not expect this 

provision to place additional burden on 

such States, as we expect them to have 

already developed such policies 

consistent with this proposal pursuant 

to § 155.720(b). 

7. Subpart M—Oversight and Financial 

Integrity Standards for State Exchanges 

Sections 1311, 1313, and 1321 of the 

Affordable Care Act provide the 

Secretary with oversight of financial 

integrity and program integrity in the 

State Exchanges. More specifically, the 

statutory authority for HHS oversight of 

the programmatic integrity of an 

Exchange is found in section 1313(a)(1) 

of the Affordable Care Act, which 

requires an Exchange to keep an 

accurate accounting of all activities as 

stated above, and section 1313(a)(2) of 

the Affordable Care Act which gives the 

Secretary the authority to investigate the 

affairs of an Exchange and examine the 

properties and records of an Exchange 

in relation to activities undertaken by an 

Exchange. In addition, section 

1313(a)(5) of the Affordable Care Act 

directs the Secretary to provide for the 

efficient and non-discriminatory 

administration of Exchange activities 

and to implement any measure or 

procedure that the Secretary determines 

is appropriate to reduce fraud and 

abuse. The key principles underlying 

the Secretary’s State Exchange oversight 

program design include: effectiveness, 

efficiency, integrity, coordination, 

transparency and accountability in State 

Exchange operations. The State 

Exchange oversight program builds on 

existing State oversight efforts, where 

possible, by coordinating with State 

authorities to address compliance issues 

and concerns. State Exchange 

compliance with the Affordable Care 

Act and the regulatory requirements 

being proposed in this proposed rule (if 

finalized) would include submitting 

financial and operational reports and 

maintaining records in a standardized 

fashion. 

These proposed standards will enable 

HHS to carry out its responsibility of 

ensuring that Federal funds are used 

appropriately in the administration of 

State Exchange activities. Therefore, we 

are proposing that the State Exchange 

must submit to HHS financial reports 

and must oversee its activities to ensure 

that it is complying with Federal 

requirements, such as those governing 

eligibility determinations for advance 

payments of the premium tax credit and 

cost-sharing reductions. 

These sections, § 155.1200 and 

§ 155.1210, would ensure that the State 

Exchange has financial and operational 

safeguards in place to avoid making 

inaccurate eligibility determinations, 

including those related to advance 

payment of the premium tax credit, 

cost-sharing reductions, and 

enrollments. These sections are not 

intended to be a part of any prospective 

measurement program that may be 

required under the Improper Payments 

Elimination and Recovery Act at 31 

U.S.C. 3321. 

We are not proposing that these 

standards should be applicable to the 

FFE, because CMS, which will operate 

the FFE, is already subject to similar 

standards in its role as a government 

agency. For example, OMB Circular A– 

123 dated December 21, 2004, provides 

instruction on internal controls 

(financial and operational) for Federal 

agencies. 

a. General Financial Integrity and 

Oversight Requirements (§ 155.1200) 

Section 1313(a)(1) of the Affordable 

Care Act requires an Exchange to keep 

an accurate accounting of all activities, 

receipts, and expenditures, and 

annually submit to the Secretary a 

report concerning such accounting. In 

§ 155.1200(a), we propose that the State 

Exchange maintain an accounting of all 

its receipts and expenditures, in 

accordance with GAAP. In addition, we 

propose that the State Exchange develop 

and implement a process for monitoring 

all Exchange-related activities for 

effectiveness, efficiency, integrity, 

transparency and accountability. We 

believe that these activities would help 

to ensure State Exchange compliance 

with Federal requirements as set forth in 

Part 155 and ensure the appropriate 

administration of Federal funds, 

including advance payment of the 

premium tax credit and cost-sharing 

reductions. In § 155.1200(b), we propose 

that the State Exchange submit several 

types of reports to HHS. The State 

Exchange would submit at least 

annually a report to allow for 

transparency of State Exchanges 

activities. The report must include a 

financial statement presented in 

accordance with GAAP. This report is 

due to HHS by April 1st of each year. 

Additionally, the State Exchange must 

submit reports in a form and manner to 

be specified by HHS regarding eligibility 

and enrollment. These reports will focus 

on eligibility determination errors, nondiscrimination safeguards, accessibility 

of information, and fraud and abuse 

incidences. The State Exchange must 

also submit performance monitoring 

data that includes financial 

sustainability, operational efficiency, 

and, consumer satisfaction. We solicit 

comments on our approach, including 

comments on the content, format, and 

timing of such reports. 

Section 1313(a)(3) of the Affordable 

Care Act requires that an Exchange be 


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subject to an annual audit by the 

Secretary. In § 155.1200(c), we propose 

that the State Exchange engage an 

independent qualified auditing entity, 

whether governmental or private, which 

meets accepted professional and 

business standards and follows 

generally accepted governmental 

auditing standards (GAGAS), to perform 

an independent external financial and 

programmatic audit of the State 

Exchange. This entity should be 

selected to avoid any real or potential 

perception of conflict of interest, 

including being free from personal, 

external and organizational impairments 

to independence or the appearance of 

such impairments of independence. 

External audits are a standard practice 

used to maintain accountability and 

internal controls. An external audit will 

help ensure the consistency and 

accuracy of State Exchange financial 

reporting and program activities. We 

propose that this requirement may be 

satisfied through an audit by an 

independent State-government entity. 

The State Exchange will submit to HHS, 

concurrent with the annual report, the 

results of the audit along with proposals 

on how it will remedy any material 

weakness or significant deficiency (the 

terms ‘‘material weakness’’ and 

‘‘significant deficiency’’ are defined in 

OMB Circular A–133, Audits of States, 

Local Governments and Non-Profit 

Organizations). 

In § 155.1200(d), we propose that 

independent audits address specific 

processes and activities of State 

Exchanges including financial and 

programmatic activities and those 

related to the verification and 

determination of applicants’ eligibility 

for enrollment in the State Exchanges 

and the subsequent enrollments. We 

propose that the external audit address 

whether the Exchange is complying 

with § 155.1200(a)(1) by keeping an 

accurate accounting of Exchange 

receipts and expenditures in accordance 

with generally accepted accounting 

principles (GAAP). We note that 

accurate eligibility determinations by 

the State Exchanges are important to the 

implementation of the Affordable Care 

Act. Failure to apply Federal standards 

appropriately could result in improper 

Federal payments in the form of 

advance payments of the premium tax 

credit and cost sharing reductions. 

Therefore, we also propose that the 

external audits and annual reports 

required under paragraphs (b) and (c) of 

this section address State Exchange 

processes and procedures to comply 

with the standards for Exchanges under 

45 CFR Part 155 related to advance 

payments of the premium tax credit and 

cost-sharing reductions. These 

standards include the requirements 

under subpart D regarding eligibility 

determinations, including the 

requirements regarding the 

confidentiality, disclosure, 

maintenance, and use of information as 

set forth in 45 CFR 155.302(d)(3); 

subpart E regarding individual market 

enrollment in QHPs; and subpart K 

regarding QHP certification. We propose 

that such audits and annual reports 

assess whether a State Exchange has 

processes and procedures in place to 

prevent improper eligibility 

determinations and enrollment 

transactions. Assessing whether State 

Exchanges are complying with Federal 

requirements in these areas will assist in 

ensuring that eligible individuals are 

appropriately enrolled and receiving 

appropriate advance payments of the 

premium tax credit and cost-sharing 

reductions. Determining whether there 

are appropriate internal controls and 

standard operating procedures in place 

to identify and correct weaknesses in 

these particular areas will mitigate the 

creation of improper payments, thereby 

safeguarding Federal funds. 

We seek comment on the proposed 

annual audits, and other activities that 

State Exchanges should specifically be 

required to audit annually or on an 

interim basis. 

b. Maintenance of Records (§ 155.1210) 

Under section 1313(a)(2) of the 

Affordable Care Act, the Secretary, in 

coordination with the Inspector General 

of HHS, may investigate, examine 

properties and records, and require 

periodic reports from the State 

Exchange. Under section 1313(a)(3) of 

the Affordable Care Act, the State 

Exchange is subject to annual audits by 

the Secretary. We anticipate conducting 

a limited number of targeted audits each 

year, informed by information from the 

external audit, annual report, 

prospective measurement programs of 

improper payments, consumer 

complaints, or other data sources. To 

prepare for such audits, the State 

Exchange would be required to maintain 

records pursuant to this section. 

Preparation for such audits would also 

require the State Exchange to ensure its 

contractors, subcontractors, and agents 

maintain these records. 

In § 155.1210, we propose the 

requirements for records maintenance 

for the State Exchange. We propose that 

the State Exchange and its contractors, 

subcontractors, and agents maintain 

records for 10 years, including 

documents and records (whether paper, 

electronic or other media) and other 

evidence of accounting procedures and 

practices of the State Exchange. These 

records must be sufficient and 

appropriate to respond to any periodic 

auditing, inspection or investigation of 

the State Exchange’s financial records or 

to enable HHS or its designee to 

appropriately evaluate the State 

Exchange’s compliance with Federal 

requirements. In addition, we propose 

that the State Exchange must make all 

records of this section available to HHS, 

the OIG, the Comptroller General, or 

their designees, upon request. We have 

proposed this 10-year retention period 

to be consistent with the statute of 

limitations for the False Claims Act at 

31 U.S.C. 3731. We request comment on 

auditing procedures and the length of 

document retention requirements. 

E. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related To 

Exchanges 

1. Subpart A—General Provisions 

a. Definitions (§ 156.20) 

We propose to amend 45 CFR 156.20 

by adding the definitions for ‘‘Delegated 

entity,’’ ‘‘Downstream entity,’’ ‘‘Enrollee 

satisfaction survey vendor,’’ and 

‘‘Registered user of the enrollee 

satisfaction survey data warehouse,’’ in 

alphabetical order to read as follows: 

Delegated Entity 

We propose to define a delegated 

entity as any party, including an agent 

or a broker that enters into an agreement 

with a QHP issuer to provide 

administrative services or health care 

services to qualified individuals, 

qualified employers, or qualified 

employees and their dependents. 

Downstream Entity 

We propose to define a downstream 

entity as any party, including an agent 

or a broker, that enters into an 

agreement with a delegated entity or 

with another downstream entity for 

purposes of providing administrative or 

health care services related to the 

agreement between the delegated entity 

and the QHP issuer. The term 

‘‘downstream entity’’ is intended to 

reach the entity that directly provides 

administrative services or health care 

services to qualified individuals, 

qualified employers, or qualified 

employees and their dependents. 

Enrollee Satisfaction Survey Vendors 

We propose to define an ‘‘enrollee 

satisfaction survey vendor’’ as an 

organization that has relevant survey 

administration experience (for example, 

Consumer Assessment of Healthcare 


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31Rate Changes for Small Group Market Plans 

and System Processing of Rates (April 8, 2013). 

Providers and Systems (CAHPS®) 

surveys), organizational survey capacity, 

and quality control procedures for 

survey administration. 

Exchange 

An ‘‘Exchange’’ has the meaning 

given to the term in § 155.20 of this 

subchapter. Registered user of the 

enrollee satisfaction survey data 

warehouse 

We propose to define a ‘‘registered 

user of the enrollee satisfaction survey 

data warehouse’’ as enrollee satisfaction 

survey vendors, QHP issuers, and 

Exchanges authorized to access CMS’s 

secure data warehouse to submit survey 

data and to preview survey results prior 

to public reporting. 

b. Single Risk Pool (§ 156.80) 

We are proposing to add a new 

paragraph (d)(3) in § 156.80 to clarify 

when issuers may modify rates under 

the single risk pool provision. These 

proposed market-wide rate modification 

limitations would align with the 

limitations on rate setting schedules in 

the Exchange and SHOP, which is 

necessary to reduce the risk of adverse 

selection between plans offered outside 

the Exchange and QHPs offered through 

the Exchange. Furthermore, the 

frequency of rate modifications affects 

the rate review process because each 

time an issuer adjusts its index rate, the 

new rates of all of its plans must be 

subjected to rate review. 

Accordingly, in paragraph (d)(3)(i), 

we propose that issuers in individual 

markets or markets in which the 

individual and small group risk pools 

were merged by the State would be 

permitted to make changes to their 

market-wide adjusted index rate and 

plan-specific pricing on an annual basis, 

as discussed in the preamble to the 

Market Reform Rule (78 FR 13422). In 

a State in which the individual and 

small group risk pools were merged by 

the State, an issuer would be able to 

adjust its index rate and plan-specific 

pricing no more frequently than 

annually, since the stricter standard of 

the individual market must be applied 

to the entire merged market for 

consistency throughout the single risk 

pool. 

In paragraph (d)(3)(ii), we propose 

that issuers in the small group market 

generally would be permitted to make 

such changes on a quarterly basis, 

beginning with rates effective for the 

third quarter of 2014. This proposal is 

consistent with technical guidance 

provided to issuers through the Health 

Insurance Oversight System on April 8, 

2013.31 These quarterly rates would 

apply to both new and renewing 

business for the entire plan year, 

depending on the plan year of the 

employer. For example, if an employer’s 

plan year begins February 1 and the 

issuer had adjusted its index rate on 

January 1, the issuer’s January 1 rate 

would apply to the employer’s plan 

only on February 1. Additionally, 

although the issuer would be able to 

adjust its index rate on a quarterly basis 

in the small group market, any new 

rates set by the issuer after February 1 

would apply only upon the plan’s 

renewal the following year. As 

discussed in section II.D.6.b of this 

preamble and the April 8, 2013 

technical guidance to issuers, due to 

current system limitations, the 

submission of rates updated on a 

quarterly basis (or any basis other than 

an annual basis) cannot currently be 

processed for QHPs in the FF–SHOPs. 

Accordingly, in order to align with the 

timing of the adjustments permitted in 

the SHOP based on these operational 

considerations, issuers would be 

required under the amendment to this 

section to set rates for nongrandfathered plans in the small group 

market on an annual basis market-wide 

until the FF–SHOPs’ capability to 

process quarterly rate updates is 

established. We anticipate that the FF– 

SHOPs will be capable of processing 

quarterly updated rates effective for the 

third quarter of 2014. 

2. Subpart C—Qualified Health Plan 

Minimum Certification Standards 

a. Additional Standards Specific to 

SHOP (§ 156.285) 

We propose to amend § 156.285 to 

ensure that all QHP issuers offering 

coverage in a SHOP comply with the 

termination of coverage requirements 

proposed at § 155.735 as a condition of 

certification for plan years beginning on 

or after January 1, 2015, when § 155.735 

will apply to all SHOPs. Some SHOPs 

may decide to implement employee 

choice and premium aggregation before 

January 1, 2015, and § 155.735 would 

apply in such SHOPs as an operational 

requirement. 

3. Subpart D—Federally-Facilitated 

Exchange Qualified Health Plan Issuer 

Standards 

a. Changes of Ownership of Issuers of 

Qualified Health Plans in the FederallyFacilitated Exchange (§ 156.330) 

Proposed § 156.330 describes the 

notice required to be submitted by QHP 

issuers offering QHPs through FFEs, 

including the FF–SHOPs, when such 

issuers undergo a change of ownership, 

as recognized by the State in which the 

issuer offers the QHP, during the term 

of its QHP agreement. We propose that 

the issuer be required to notify HHS, in 

a manner to be specified by HHS, and 

provide the legal name, the Taxpayer 

Identification Number (TIN) of the new 

owner, and the effective date of the 

change at least 30 days prior to the date 

of change. We also propose that the new 

owner must agree to adhere to all 

applicable statutes and regulations. 

These provisions would provide HHS 

with adequate notice so that it could 

monitor or audit the new owner to 

ensure that the new owner meets all 

QHP certification standards and clarify 

that the new owner would agree to 

adhere to all applicable statutes and 

regulations. We considered proposing a 

standard similar to that in the Medicare 

Parts C and D programs, in which HHS, 

the current issuer, and the prospective 

new issuer would enter into a novation 

agreement prior to the change of 

ownership. We further considered 

requiring the prospective new issuer to 

submit financial and solvency 

information to HHS in advance of the 

change of ownership. However, based 

on research of existing State law, we 

believe that such standards could 

largely duplicate existing State 

requirements. We welcome comments 

about the 30-day notice requirement, 

about the information being requested 

when a change of ownership occurs, 

and about whether to specifically 

require a novation. 

b. Standards for Downstream and 

Delegated Entities (§ 156.340) 

Section 1321(a)(1)(B) of the 

Affordable Care Act establishes that the 

Secretary must issue regulations setting 

forth standards for the offering of QHPs 

through the Exchanges. Based on this 

general authority, we propose in 

§ 156.340 standards for delegated and 

downstream entities, similar to existing 

standards for such entities that contract 

with Medicare Advantage organizations, 

described at 42 CFR 422.504(i)(3)–(4). In 

§ 156.340(a), we propose the general 

requirement that, notwithstanding any 

relationship(s) that a QHP issuer may 

have with delegated or downstream 

entities, the QHP issuer maintains 

responsibility for its compliance and the 

compliance of any of its delegated or 

downstream entities, with all applicable 

standards, including those we propose 

at § 156.340(a)(1) through (4). In 

paragraphs (a)(1) through (a)(4), we 

propose that the QHP issuer be required 

to comply with Federal standards, 


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32Available at: http://www.cms.gov/CCIIO/ 

Resources/Fact-Sheets-and-FAQs/Downloads/ 

marketplace-faq-5-14-2013.pdf. 

specifically the obligations as set forth 

under: subpart C of part 156, which 

governs QHP minimum certification 

standards; subpart K of part 155, which 

governs Exchange functions pertaining 

to QHP certification; subpart H of part 

155, which governs the Exchange 

functions of the SHOP; standards in 

§ 155.220 with respect to assisting with 

enrollment in QHPs; and standards in 

§ 156.705 and § 156.715 for maintenance 

of records and compliance reviews for 

QHP issuers operating in an FFE and an 

FF–SHOP. 

Because a QHP issuer generally 

cannot enforce an agreement to which it 

is not a party, we believe that the most 

legally effective way to ensure that a 

QHP issuer retains the necessary control 

and oversight over its delegated or 

downstream entities would be to require 

that all agreements governing the 

relationships among a QHP issuer and 

its delegated and downstream entities 

(that is, those between the QHP issuer 

and its delegated entity; those between 

the delegated entity and any 

downstream entity; and those between 

downstream entities) contain provisions 

specifically describing each of the 

delegated and downstream entity’s 

obligations to fulfill the QHP issuer’s 

responsibilities proposed in paragraph 

(a) of this section. Such a requirement 

would be similar to the existing 

requirement for agreements governing 

the relationship among entities that 

contract with Medicare Advantage 

organizations, described at 42 CFR 

422.504(i)(3)–(4). Therefore, in 

§ 156.340(b)(1)–(2), we propose that all 

agreements among the QHP issuer’s 

delegated and downstream entities be 

required to specify delegated activities 

and reporting responsibilities, and 

either provide for revocation of the 

delegated activities and reporting 

standards, or specify other remedies in 

instances where HHS or the QHP issuer 

determines that such parties have not 

performed satisfactorily. 

Furthermore, we propose in 

§ 156.340(b)(3) that all agreements 

among the QHP issuer’s delegated and 

downstream entities be required to 

specify that the delegated or 

downstream entity must comply with 

all applicable laws and regulations 

relating to the standards specified under 

paragraph (a) of this section. In 

§ 156.340(b)(4) of this proposed rule, we 

propose that the QHP issuer’s agreement 

with any delegated or downstream 

entity must specify that the delegated 

and downstream entity must permit 

access by the Secretary and the OIG or 

their designees in connection with their 

right to evaluate through audit, 

inspection, or other means, to the 

delegated or downstream entity’s books, 

contracts, computers, or other electronic 

systems, including medical records and 

documentation, relating to the QHP 

issuer’s obligations in accordance with 

Federal standards under paragraph (a) of 

this section until 10 years from the final 

date of the agreement period. Such a 

requirement would be similar to the 

existing requirement for agreements 

governing the relationship among 

entities that contract with Medicare 

Advantage organizations, described at 

42 CFR 422.504(i)(2)–(4). 

Finally, we propose in § 156.340(b)(5) 

that all existing agreements contain 

specifications described in paragraph (b) 

of this section by no later than January 

1, 2015. We believe the effective date 

recognizes the time that QHP issuers 

may need to amend existing agreements 

with delegated and downstream entities 

to comply with the requirements under 

paragraph (b). For agreements that are 

newly entered into as of October 1, 

2013, we propose an effective date for 

the specifications described in 

paragraph (b) of this section to be no 

later than the effective date of the 

agreement. 

4. Subpart E—Health Insurance Issuer 

Responsibilities With Respect to 

Advance Payments of the Premium Tax 

Credit and Cost-Sharing Reductions 

In this subpart, pursuant to section 

1321(a)(1)(B) of the Affordable Care Act, 

we propose standards for oversight of 

QHP issuers with respect to cost-sharing 

reductions and advance payments of the 

premium tax credit. We believe that it 

is important to establish robust 

oversight relating to cost-sharing 

reductions and advance payments of the 

premium tax credit in order to ensure 

that Federal funds are used efficiently 

and in full compliance with the 

provisions of the Affordable Care Act, 

and that consumers receive the financial 

assistance afforded them under the 

statute. The standards proposed in this 

subpart are consistent with the 

information we provided in the 

‘‘Frequently Asked Questions on Health 

Insurance Marketplaces’’ dated May 14, 

2013.32

In particular, we propose 

requirements and timeframes for 

refunds to eligible enrollees and 

providers when a QHP issuer 

incorrectly applies the cost-sharing 

reductions or advance payments of the 

premium tax credit, or incorrectly 

assigns an individual to a plan variation 

(or standard plan without cost-sharing 

reductions), resulting in the enrollee or 

the provider paying a portion of the cost 

sharing or premium amount that should 

otherwise have been reduced. The 

proposed provisions are intended to 

ensure that enrollees and providers are 

promptly refunded any excess cost 

sharing they should not have paid. 

a. Definitions (§ 156.400) 

Section 156.400 of this subpart 

defines a ‘‘most generous,’’ and a ‘‘more 

generous,’’ plan variation. We propose 

to supplement those definitions by 

clarifying that the definitions of a ‘‘least 

generous,’’ and a ‘‘less generous,’’ plan 

variation have the opposite meanings of 

the existing definitions of a ‘‘most 

generous,’’ or a ‘‘more generous’’ plan 

variation. Specifically, we propose that, 

as between two plan variations (or a 

plan variation and a standard plan 

without cost-sharing reductions), the 

plan variation or standard plan without 

cost-sharing reductions designed for the 

category of individuals first listed in 45 

CFR 155.305(g)(3) would be deemed the 

less generous one. The term less 

generous is used in this proposed rule 

to address circumstances in which a 

QHP issuer would reassign an enrollee 

from a more generous plan variation to 

a less generous plan variation (or 

standard plan without cost-sharing 

reductions), as discussed in greater 

detail below. We also propose a 

technical modification to change ‘‘QHP 

or plan variation’’ to ‘‘standard plan or 

plan variation’’ to clarify that a plan 

variation is not distinct from a QHP. 

b. Improper Plan Assignment and 

Application of Cost-Sharing Reductions 

(§ 156.410(c)–(d)) 

To address misapplication of costsharing reductions due to an enrollee, in 

§ 156.410, we propose to add new 

paragraphs (c) and (d) to specify the 

actions a QHP issuer would take if it 

does not provide the appropriate costsharing reductions to an individual, or 

if it does not assign an individual to the 

appropriate plan variation (or standard 

plan without cost-sharing reductions) in 

accordance with § 156.410(a)–(b) or 

§ 156.425(a)–(b) of this subpart. The 

QHP issuer is responsible under these 

provisions for ensuring that individuals 

are assigned to the appropriate plan 

variation (or standard plan without costsharing reductions) and ensuring that 

the cost-sharing reduction is applied 

when the cost sharing is collected. We 

believe that enrollees and providers 

should be held harmless if the QHP 

issuer misapplies the cost-sharing 

reduction, such that the QHP issuer 

should not recoup excess funds paid for 

the individual or to the provider. 


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However, because we believe an 

enrollee should be afforded at a 

minimum the financial assistance 

specified in the statute and regulations, 

we believe that the QHP issuer should 

be responsible for refunding any excess 

cost sharing paid by the enrollee or 

provider, as applicable. 

Accordingly, in paragraph (c)(1), we 

propose that if a QHP issuer fails to 

ensure that an individual assigned to a 

QHP plan variation receives the costsharing reductions required under the 

applicable plan variation, taking into 

account the requirement regarding cost 

sharing previously paid under other 

plan variations of the same QHP under 

§ 156.425(b), the QHP would notify the 

enrollee of the improper application of 

the cost-sharing reductions and refund 

any excess cost sharing paid by or for 

the enrollee during such period no later 

than 30 calendar days after discovery of 

the improper application of the costsharing reductions. This refund would 

be paid to the person or entity that paid 

the excess cost sharing, whether the 

enrollee or the provider. 

In paragraph (c)(2), we propose that if 

a QHP issuer provides an enrollee 

assigned to a plan variation more costsharing reductions than required under 

the applicable plan variation, taking 

into account § 156.425(b) concerning 

continuity of deductibles and out-ofpocket amounts, if applicable, then the 

QHP issuer will not be eligible for 

reimbursement of any excess costsharing reductions provided to the 

enrollee, and may not seek 

reimbursement from the enrollee or the 

provider for any of the excess costsharing reductions. As noted above, 

because the QHP issuer is responsible 

for ensuring the cost-sharing reduction 

is provided appropriately, we do not 

believe that the QHP issuer should be 

able to recoup overpayments of costsharing reductions that resulted from 

the QHP issuer’s own errors. 

In paragraph (d), we propose that if a 

QHP issuer does not comply with 

§ 156.410(b) by improperly assigning an 

enrollee to a plan variation (or standard 

plan without cost-sharing reductions), 

or the QHP issuer does not change the 

enrollee’s assignment due to a change in 

eligibility in accordance with 

§ 156.425(a), in each case, based on the 

eligibility and enrollment information 

or notification provided by the 

Exchange, then the QHP issuer would, 

no later than 30 calendar days after 

discovery of the improper assignment, 

reassign the enrollee to the applicable 

plan variation (or standard plan without 

cost-sharing reductions) and notify the 

enrollee of the improper assignment. 

If a QHP issuer reassigns an enrollee 

from a more generous to a less generous 

plan variation of a QHP (or a standard 

plan without cost-sharing reductions), 

for example from a silver plan variation 

with an 87 percent AV to a silver plan 

variation with an 73 percent AV, to 

correct an improper assignment on the 

part of the issuer pursuant to proposed 

paragraph (d)(1), the QHP issuer will 

not be eligible for, and may not seek 

from the enrollee or provider, 

reimbursement for any of the excess 

cost-sharing reductions provided to or 

for the enrollee following the effective 

date of eligibility required by the 

Exchange. Because the QHP issuer is 

responsible for assigning and 

reassigning the enrollee to a plan 

variation of a QHP (or standard plan 

without cost-sharing reductions) and 

because of the reliance interests of the 

enrollee, we believe that the QHP issuer 

should not be able to recover excess 

cost-sharing reductions if it erroneously 

assigns an individual to a more 

generous plan variation. This aligns the 

policy proposed in this section with 

respect to the misapplication of the costsharing reductions. 

Conversely, proposed paragraph (d)(2) 

provides that, if a QHP issuer reassigns 

an enrollee from a less generous plan 

variation (or a standard plan without 

cost-sharing reductions) to a more 

generous plan variation of a QHP (for 

example from a silver plan variation 

with an 87 percent AV to a silver plan 

variation with an 94 percent AV) to 

correct an improper assignment on the 

part of the issuer, the QHP issuer would 

recalculate the individual’s liability for 

cost sharing paid between the effective 

date of eligibility required by the 

Exchange and the date on which the 

issuer effectuated the change. The QHP 

issuer would refund any excess cost 

sharing paid by or for the enrollee 

during such period, no later than 30 

calendar days after discovery of the 

incorrect assignment. This refund 

would be paid to the person or entity 

that paid the excess cost sharing, 

whether the enrollee or the provider. 

For example, if a QHP issuer improperly 

assigned an individual to a silver plan 

variation with an 87 percent AV for the 

plan year starting January 1, 2014, but 

on March 1, 2014, discovers that the 

individual should have been assigned to 

a silver plan variation with a 94 percent 

AV, then the QHP issuer would be 

required to reassign the individual to 

the silver plan variation with a 94 

percent AV by March 31, 2014. The 

issuer would also refund any excess cost 

sharing paid by or for the enrollee 

between January 1, 2014 and the date 

the reassignment is effectuated, that is, 

March 31, 2014. 

We seek comment on the proposed 

approach, including the 30 calendar day 

timeframe for QHP issuers to reassign an 

individual to the correct plan variation 

and refund any excess cost sharing paid 

by or for the enrollee. We also seek 

comment on whether the timeframe 

should depend on the point in the 

month the issuer discovers the improper 

assignment, considering the amount of 

time issuers may require to effectuate 

the reassignment, as well as the impact 

on enrollees due to a delay in 

reassignment. We note that the date of 

the reassignment will not affect the 

initial effective date of eligibility, and 

that the enrollee would still be refunded 

any excess cost sharing paid by or for 

the enrollee between the effective date 

of eligibility and the date of the 

reassignment. 

We are also considering requiring 

that, for each quarter, a QHP issuer 

provide to HHS and the Exchange, in a 

manner and timeframe specified by 

HHS, a report detailing the occurrence 

of any improper applications of costsharing reductions in violation of the 

standards finalized and proposed in 

§ 156.410(a) and (c) and § 156.425(b), as 

well as instances when it did not refund 

any excess cost sharing paid by or for 

an enrollee in accordance with 

proposed § 156.410(c)(1) and 

§ 156.410(d)(2), or was reimbursed for 

excess cost sharing provided in 

violation of proposed § 156.410(d)(1). 

This quarterly report would alert HHS 

and the Exchange to patterns of such 

errors or omissions, and could identify 

areas where issuer performance can be 

improved. However, we recognize that, 

given operational constraints, it may be 

difficult at this point for QHP issuers to 

develop systems that can produce these 

types of quarterly reports for the 2014 

benefit year. Therefore, we are 

considering requiring issuers to produce 

these reports beginning in the 2015 

benefit year. We seek comment on the 

proposed approach, including whether 

such reports should be provided less 

frequently. We also seek comment on 

whether HHS should establish a 

minimum error rate or threshold before 

a QHP issuer is required to inform HHS 

of such improper applications of costsharing reductions in the quarterly 

report, as well as what an appropriate 

error rate or threshold should be. 

c. Failure To Reduce an Enrollee’s 

Premium To Account for Advance 

Payments of the Premium Tax Credit 

(§ 156.460(c)) 

We also propose to add new 

paragraph (c) to § 156.460, related to the 


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failure to reduce an enrollee’s share of 

premium to account for advance 

payments of the premium tax credit. In 

paragraph (c), we propose that if a QHP 

issuer discovers that it did not reduce 

the portion of the premium charged to 

or for the enrollee for the applicable 

month(s) by the amount of the advance 

payment of the premium tax credit as 

required in § 156.460(a)(1), the QHP 

issuer would be required to refund to 

the enrollee any excess premium paid 

by or for the enrollee and notify the 

enrollee of the improper assignment no 

later than 30 calendar days after the 

QHP issuer discovers the improper 

assignment. We note that a QHP issuer 

may provide the refund to the enrollee 

by reducing the enrollee’s portion of the 

premium in the following month, as 

long as the reduction is provided no 

later than 30 calendar days after the 

QHP issuer discovers the improper 

assignment. If the QHP issuer elects to 

provide the refund by reducing the 

enrollee’s portion of the premium for 

the following month, and the refund 

exceeds the enrollee’s portion of the 

premium for the following month, then 

the QHP issuer would need to refund to 

the enrollee the excess no later than 30 

calendar days after the QHP issuer 

discovers the improper assignment. 

Additionally, we are also considering 

that for each quarter beginning in 2015, 

a QHP issuer would be required to 

provide a report to HHS and the 

Exchange, in a manner and timeframe 

specified by HHS, detailing the 

occurrence of instances of improper 

applications of the requirements of 

§ 156.460. This would be similar to the 

quarterly reporting requirements with 

respect to the misapplication of costsharing reduction discussed in the 

previous section of this subpart, and we 

note that we would anticipate utilizing 

a single process for issuers to submit 

such quarterly reports. We seek 

comment on the proposed approach, 

including the timeframe for issuers to 

refund any excess premiums to 

enrollees, the timeframes for providing 

the quarterly report to HHS and the 

Exchange, whether HHS should also 

establish a minimum rate or threshold 

before a QHP issuer is required to notify 

HHS of any such instances, and what an 

appropriate rate or threshold would be. 

d. Oversight of the Administration of 

Cost-Sharing Reductions and Advance 

Payments of the Premium Tax Credit 

Programs (§ 156.480) 

In § 156.480, we propose general 

provisions related to the oversight of 

QHP issuers in relation to cost-sharing 

reductions and advance payments of the 

premium tax credit. Cost-sharing 

reduction reimbursements and advance 

payments of the premium tax credit are 

Federal funds, which will pass from 

HHS directly to QHP issuers. Therefore, 

we believe that it is necessary for HHS 

to oversee QHP issuer compliance in 

these areas, regardless of whether the 

QHP is offered through a State Exchange 

or an FFE. We seek comment on this 

approach, including with respect to how 

HHS may coordinate with State 

Exchanges and State authorities to 

address non-compliance with Federal 

requirements regarding cost-sharing 

reductions or advance payments of the 

premium tax credit. We note that in 

States where there is a State Exchange, 

the State has enforcement authority over 

QHP issuers that are not in compliance 

with the standards set forth in subpart 

E of this Part. If the State does not 

enforce such standards against the QHP 

issuers in the individual market 

participating on the State Exchange, 

HHS will enforce QHP issuer 

compliance with these requirements, 

including the imposition of CMPs as 

provided for under Section 1321(c) of 

the Affordable Care Act. In instances 

where HHS enforces QHP issuer 

compliance with respect to cost-sharing 

reductions and advanced payments of 

the premium tax credit, we envision 

CMPs would be imposed using the same 

standards and processes as proposed for 

QHP issuers in an FFE in subpart I of 

this Part. 

To effectively oversee the provision of 

cost-sharing reductions and advance 

payments of the premium tax credit by 

issuers of QHPs on State Exchanges, we 

propose to apply certain standards 

proposed in part 156, subpart H for QHP 

issuers participating in FFEs to QHP 

issuers participating in the individual 

market on a State Exchanges. In 

paragraph (a), we propose to extend the 

standards set forth in proposed 

§ 156.705 concerning maintenance of 

records to a QHP issuer in the 

individual market on a State Exchange 

in relation to cost-sharing reductions 

and advance payments of the premium 

tax credit. We also propose that QHP 

issuers ensure that any delegated 

entities and downstream entities adhere 

to these requirements, in parallel with 

the standards for QHP issuers on an FFE 

proposed in § 156.340. We believe 

applying these provisions to QHP 

issuers participating in State Exchanges 

is necessary to allow HHS, pursuant to 

its oversight authority, to access records 

and investigate compliance with the 

requirements of this subpart. We note 

that a QHP issuer and its delegated 

entities and downstream entities may 

satisfy this standard by maintaining the 

relevant records for a period of 10 years 

and ensuring that they are accessible if 

needed in the event of an investigation 

or audit. 

We also propose that QHP issuers 

participating in State Exchanges and 

FFEs be subject to reporting and 

oversight requirements that are intended 

to assist in monitoring a QHP issuer’s 

compliance with Federal standards with 

regard to cost-sharing reductions and 

advance payments of the premium tax 

credit, in order to safeguard Federal 

funds distributed through these 

programs, and to correct improper 

payments to the QHPs. 

In paragraph (b), we propose that an 

issuer that offers a QHP in the 

individual market through a State 

Exchange or an FFE report to HHS 

annually, in a timeframe and manner 

required by HHS, summary statistics 

with respect to administration of costsharing reductions and advance 

payments of the premium tax credit. 

This proposed provision would permit 

HHS to obtain summary information 

regarding cost-sharing reductions and 

advance payments of the premium tax 

credit across a broad range of issuers to 

identify systemic issues and errors, 

without requiring annual audits. We 

contemplate that this information will 

include (1) The total amount of costsharing paid under each plan variation, 

including the amount paid by the 

individual and amount reduced by the 

cost-sharing reductions program, (2) an 

annual error rate reflecting the 

misapplication of the cost-sharing 

reductions and advance payments of the 

premium tax credit by plan variation, 

and (3) the total number of enrollees 

who received a refund as well as the 

total and average refunds made to 

enrollees and providers by plan 

variation resulting from underpayments. 

Additionally, in paragraph (c), as is 

required under other Federal programs 

such as Medicare Advantage, we 

propose that HHS or its designee may 

audit an issuer that offers a QHP in the 

individual market through a State 

Exchange or an FFE to assess 

compliance with the requirements of 

this subpart. An audit may be triggered 

by sources such as the annual reports 

proposed in § 156.480(b) of this Part, 

consumer complaints, and information 

received from State regulatory agencies. 

We note that we intend to coordinate 

any audits of QHP issuers in an FFE 

with the compliance reviews proposed 

in § 156.715 of subpart H. We seek 

comment on these proposed reporting 

requirements, including the operational 

readiness of issuers to report these data, 

our proposed approach to audits, and 

how such oversight activities may be 


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coordinated with State Exchange 

oversight activities to avoid duplication 

of effort. 

5. Subpart H—Oversight & Financial 

Integrity Requirements for Issuers of 

Qualified Health Plans in FederallyFacilitated Exchanges 

a. Maintenance of Records for the 

Federally-facilitated Exchanges 

(§ 156.705) 

Section 1313(a)(2) of the Affordable 

Care Act authorizes HHS to examine 

records and solicit reports regarding 

activities undertaken by the Exchanges. 

So that HHS can prepare for and 

successfully complete compliance 

reviews and audits to account for 

expenditures and protect against fraud 

and abuse, we propose that QHP issuers 

must retain certain records. The record 

retention standards we propose in this 

section are similar to those already 

established for the Medicare Advantage 

Program, and described at 42 CFR 

422.504(d). 

We propose in § 156.705(a) that 

issuers offering QHPs in an FFE 

maintain all documents and records 

(whether paper, electronic, or other 

media) and other evidence of 

accounting procedures and practices, 

which are critical for HHS to conduct 

activities necessary to safeguard the 

financial and programmatic integrity of 

the FFEs. We propose that such 

activities include: (1) periodic auditing 

of the QHP issuer’s financial records 

related to the QHP issuer’s participation 

in an FFE, and to evaluate the ability of 

the QHP issuer to bear the risk of 

potential financial losses; and (2) 

compliance reviews and other 

monitoring of a QHP issuer’s 

compliance with all Exchange standards 

applicable to issuers offering QHPs in 

the FFE listed in part 156. We 

considered requiring maintenance of 

other types of records, but we propose 

limiting our scope to Exchange-specific 

records as applicable to the FFEs. We 

seek comment on the type and scope of 

records we propose must be maintained 

by QHP issuers participating in the 

FFEs. 

In § 156.705(b), we propose to clarify 

that the records described in proposed 

paragraph (a) of this section include the 

sources listed in proposed 

§ 155.1210(b)(2), (b)(3), and (b)(5). Our 

intent is to align record maintenance 

standards of the FFEs and State 

Exchanges to the extent possible. 

In § 156.705(c), we propose that 

issuers offering QHPs in an FFE must 

maintain the records described in this 

section, as well as records required by 

§ 155.710 (to determine SHOP 

eligibility), for 10 years. This proposed 

standard parallels standards in part 155 

as well as existing part 153 standards 

(45 CFR 153.240(c), 153.520(e) and 

153.620(b) and proposed 

§§ 153.310(c)(4), 153.405(h), and 

153.410(c)). It is also consistent with the 

statute of limitations for the False 

Claims Act (31 U.S.C. 3731(b)). Our 

proposed 10-year record retention 

requirement supports the Federal 

government’s right under the False 

Claims Act to investigate and pursue 

claims based on violations involving 

Federal funds that have occurred within 

the last 10 years. 

Proposed § 156.705(d) explains that 

the records referenced in paragraph (a) 

must be made available to HHS, the 

OIG, the Comptroller General, or their 

designees, upon request. 

These proposed standards pertain 

only to Exchange-specific areas of 

concern (for example, matters pertaining 

to advance payments of premium tax 

credits or cost-sharing reductions) 

within the FFEs, as HHS would expect 

the State DOI to oversee the 

maintenance of records pertaining to 

other aspects of QHP issuer operations 

as required under State law. We 

welcome comments on these proposed 

standards. 

b. Compliance Reviews of QHP 

Issuers in Federally-facilitated 

Exchanges (§ 156.715) 

Section 1313(a)(5) of the Affordable 

Care Act requires the Secretary to 

establish any measure or procedure that 

the Secretary has authority to 

implement in Title I of the Affordable 

Care Act or any other act to protect 

against fraud and abuse. Additionally, 

in accordance with section 1321 of the 

Affordable Care Act, the Secretary has 

the authority to issue regulations on the 

establishment and operation of an 

Exchange, the offering of QHPs through 

the Exchange, the establishment of 

reinsurance and risk adjustment 

programs, and other requirements as the 

Secretary determines appropriate. 

Based on this authority, we propose 

in § 156.715(a) that issuers offering 

QHPs in an FFE be subject to 

compliance reviews by HHS to ensure 

ongoing compliance with Exchange 

standards applicable to issuers offering 

QHPs in the FFE. We envision our 

oversight of QHP issuers in FFEs to be 

primarily focused on Exchange 

standards applicable only to issuers 

offering QHPs in the FFE because 

oversight of market-wide standards will 

generally be performed by States as part 

of their regulatory oversight. We intend 

to rely on data related to these standards 

to inform our selection of the QHP 

issuers for compliance reviews. We 

anticipate that the majority of QHP 

issuers selected for compliance review 

will be identified using a risk-based 

approach and include an analysis of the 

data collected by an FFE during 

certification and the plan year. Given 

the primary role States play in 

regulating health insurance, these 

compliance reviews will be less rigorous 

than in Medicare Advantage. In 

paragraph (b), we describe the proposed 

scope of documents that HHS may 

inspect as part of the compliance 

review. We propose that HHS may 

review the records of the QHP issuer 

pertaining to its activities within an 

FFE, which include but are not limited 

to the QHP issuer’s books and contracts, 

policy manuals and other QHP plan 

benefit information provided to the QHP 

issuer’s enrollees, and the QHP issuer’s 

policies and procedures related to the 

QHP issuer’s activities in an FFE. We 

further propose that the scope of 

information subject to the compliance 

review include any other information 

reasonably necessary, as determined by 

HHS, for HHS to: (a) evaluate the QHP’s 

issuer’s compliance with Exchange 

standards applicable to issuers offering 

QHPs in the FFE and their performance 

in the FFE; (b) verify that the QHP 

issuer has performed the duties attested 

to as part of the QHP certification 

process; and (c) assess the likelihood of 

fraud and abuse. An example of an area 

that may be reviewed, evaluated, or 

inspected is compliance with proper 

application and documentation of 

advance payments of the premium tax 

credit and cost-sharing reductions. We 

invite comment regarding other areas 

that should be included or considered 

for inclusion in the compliance reviews. 

We note that under section 

1311(e)(1)(B) of the Affordable Care Act, 

which is codified in 45 CFR 

155.1000(c), the Exchange may make the 

health plan available on the Exchange if 

doing so is in the interest of the 

qualified individuals and qualified 

employers. Accordingly, under 

§ 156.715(c), we propose that HHS’s 

findings from compliance reviews may 

be used in conjunction with other 

findings related to the QHP issuer’s 

compliance with certification standards 

to confirm that permitting the issuer’s 

QHPs to be available in an FFE is in the 

interest of qualified individuals and 

qualified employers as provided under 

§ 155.1000(c)(2). 

In § 156.715(d), similar to 

requirements for Medicare Part C audits, 

we propose that QHP issuers in an FFE 

make available to HHS the issuer’s 

premises, physical facilities, and 

equipment for compliance reviews. We 

believe that on-site reviews are standard 

within the health insurance industry 


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across a broad range of products and 

that QHP issuers would therefore be 

used to such a standard, even if they 

have not participated in the Medicare 

Part C program. We expect to focus our 

compliance review efforts around FFErelated standards and activities, which 

we believe will reduce the burden on 

QHP issuers that have been selected for 

compliance reviews. We considered the 

two ways of conducting compliance 

reviews: an onsite review for which 

reviewers would be physically present 

on the QHP issuer’s premises, and a 

desk review, during which the reviews 

would be conducted off-site. 

Recognizing the need to be flexible 

depending on the specific 

circumstances giving rise to the need for 

a compliance review, we propose that 

HHS will have the discretion to conduct 

either an onsite or desk review. We 

further propose in this paragraph that 

§ 156.715, as proposed, is not intended 

to supplant the application of any other 

Federal laws and regulations related to 

information privacy and security. 

In § 156.715(e), we propose a time 

period for which HHS may conduct 

compliance reviews. We propose that 

HHS may conduct compliance reviews 

of a QHP issuer’s operations during any 

plan benefit year for up to 10 years from 

the last day of that plan benefit year, 

except when a QHP is no longer 

available through an FFE, HHS would 

be able to conduct a compliance review 

of the last plan benefit year of that QHP 

only up to 10 years from the last day 

that the QHP’s certification was 

effective. For example, if a QHP’s 

current benefit plan year ended on 

December 31, 2014, then HHS may 

conduct a compliance review of that 

benefit plan year until December 31, 

2024. If QHP was decertified on May 1, 

2014, then HHS may conduct a 

compliance review of the QHP’s last 

benefit plan year until May 1, 2024. In 

the event that the 10 year review period 

ends during an ongoing compliance 

review, the ongoing compliance review 

would be permitted to continue beyond 

the 10 year review period. We invite 

comments on this proposal. 

6. Subpart I—Enforcement Remedies in 

Federally-Facilitated Exchanges 

In subpart I, we propose the 

enforcement remedies that may be used 

in an FFE with respect to QHP issuers 

participating in an FFE. 

a. Available Remedies; Scope 

(§ 156.800) 

Section 1321(c)(2) of the Affordable 

Care Act authorizes the Secretary to 

enforce Exchange standards applicable 

to issuers offering QHPs in the FFE 

using CMPs as detailed in section 

2723(b) of the PHS Act ‘‘without regard 

to any limitation on the application of 

those provisions to group health plans.’’ 

Section 2723(b) of the PHS Act 

authorizes the Secretary to impose 

CMPs as a means of enforcing the 

individual and group market reforms 

contained in Title XXVII, Part A of the 

PHS Act when a State fails to 

substantially enforce these provisions. 

Section 1311(d)(4) of the Affordable 

Care Act requires an Exchange to 

implement procedures for the 

certification, recertification, and 

decertification of health plans as QHPs. 

Accordingly, we propose that HHS may 

determine that a QHP offered through 

an FFE will be decertified and no longer 

offered through an FFE under specified 

circumstances, including where the 

QHP no longer meets the conditions of 

the general certification criteria under 

45 CFR 155.1000(c). We intend to focus 

our enforcement efforts on Exchange 

standards applicable to issuers offering 

QHPs in the FFE given that enforcement 

of market-wide standards will generally 

be performed by States as part of their 

traditional regulatory roles. In the 

interest of avoiding duplication of 

efforts, we intend to generally rely on 

determinations by States that have the 

authority to enforce Federal standards 

related to participation in a Federallyfacilitated Exchange and are in fact, 

substantially enforcing these standards. 

In § 156.800, paragraphs (a) and (b), we 

propose CMPs and QHP decertification, 

respectively, as the two formal 

enforcement actions that HHS may take 

against issuers of QHPs offered in an 

FFE. These are the two tools that the 

Affordable Care Act authorizes the 

Secretary to use for addressing areas of 

non-compliance of QHP issuers in FFEs. 

As with our proposed approach to 

monitoring QHP issuers participating in 

an FFE, we intend to coordinate our 

enforcement actions with State efforts in 

order to streamline the oversight of QHP 

issuers by HHS and States and to avoid 

inappropriately duplicative enforcement 

actions. We solicit comment on the use 

of these proposed compliance tools. We 

also invite comments on how HHS can 

collaborate with States on enforcement 

actions. 

b. Bases and Process for Imposing 

Civil Money Penalties in Federallyfacilitated Exchanges (§ 156.805) 

In § 156.805(a), we propose the bases 

on which HHS can impose CMPs on 

QHP issuers in FFEs. We propose 

imposing CMPs where there misconduct 

in the FFE or substantial noncompliance with Exchange standards 

applicable to issuers offering QHPs in 

the FFE. Examples include falsifying 

information furnished to an individual 

or entity upon which HHS relies to 

make evaluations of the QHP issuer’s 

ongoing compliance with Exchange 

standards applicable to issuers offering 

QHPs in the FFE, or which have the 

effect of hindering the operations of an 

FFE. We intend to apply these penalties 

in a manner such that the level of the 

enforcement action would vary based on 

our assessment of the scope or level of 

the violation, taking into account the 

issuer’s previous record of compliance, 

the frequency of the violation, and any 

aggravating or mitigating factors. 

Because QHPs are one of several 

commercial market insurance products 

operating in State markets, HHS will 

seek not to unnecessarily duplicate or 

interfere with the traditional regulatory 

roles played by State DOIs. HHS 

generally intends to focus its QHP 

oversight to Exchange standards 

applicable to issuers offering QHPs (for 

example, correctly administering 

advance payments of the premium tax 

credits and cost-sharing reductions and 

offering benefits consistent with those 

set forth in the QHP applications 

approved by HHS) because oversight of 

market-wide standards will generally be 

performed by States in their traditional 

regulatory roles. We will also seek to 

work collaboratively with State 

Departments of Insurance on topics of 

mutual concern, in the interest of 

efficiently deploying oversight resources 

and avoiding unnecessarily duplicative 

regulatory roles. We seek comment on 

this proposal. 

In § 156.805(b), we propose factors 

that HHS may take into consideration in 

determining the amount of CMPs to 

assess. HHS recognizes that 2014 will be 

a transitional year for issuers offering 

QHPs. As a general principle, while 

HHS proposes to establish authority to 

impose penalties consistent with this 

proposed rule, we note that we intend 

to work collaboratively with issuers to 

address problems that may arise, 

particularly in 2014. We propose that an 

issuer’s previous and ongoing record of 

compliance; the level of the violation, 

including the frequency of the violation 

and the impact of the violation on 

affected individuals; as well as any 

aggravating or mitigating circumstances 

be taken into consideration. Section 

2723(b)(2)(C) of the PHS Act limits the 

CMP amount to $100 for each day for 

each individual adversely affected. 

Therefore in § 156.805(c), we propose 

that the maximum amount of penalty 

imposed for each violation to be $100 

per day for each QHP issuer, for each 

individual adversely affected by the 

non-compliance. For violations where 

the number of individuals adversely 


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affected by the non-compliance cannot 

be determined, we propose giving HHS 

the authority to estimate the number of 

individuals likely to be adversely 

affected by the non-compliance. We 

solicit comment on these proposals in 

addition to comments on whether an 

appropriately fixed maximum penalty 

amount per occurrence, per submission, 

or per some other relevant marker, or 

alternatively on a formula for estimating 

the number of individuals adversely 

affected by the violation would be more 

appropriate. 

We expect this amount to be 

necessary and adequate for encouraging 

issuers to correct identified occurrences 

of non-compliance as quickly as 

possible. Our intent is to encourage 

QHP issuers to address issues of noncompliance rather than to impose a 

punitive monetary assessment, 

especially in situations where the issuer 

demonstrates good faith in monitoring 

compliance with applicable standards, 

identifying any occurrences of noncompliance, and resolving of issues of 

non-compliance. We believe that taking 

into consideration the various factors 

proposed in paragraph (b) provides HHS 

flexibility to consider the totality of the 

circumstances in determining a 

reasonable amount of CMP to assess. In 

paragraph (d), we propose standards for 

notifying QHP issuers of the intent to 

assess a civil money penalty, which 

notice must include an explanation of 

the QHP issuer’s right to a hearing 

under subpart J of this part, which 

appeals process we propose to model 

after the process that applies to appeals 

of HIPAA violations. Section 156.805(e) 

contains our proposed provisions on the 

consequences of failing to timely 

request a hearing, which we have 

modeled after 45 CFR 150.347. 

We seek comment on the content and 

scope of these provisions. 

c. Bases and Process for Decertification 

of a QHP Offered by an Issuer through 

the Federally-facilitated Exchanges 

(§ 156.810) 

Section 1311(d)(4) of the Affordable 

Care Act directs that each Exchange 

must implement procedures for the 

certification, recertification, and 

decertification of health plans as QHPs, 

consistent with guidelines developed by 

the Secretary. We have considered the 

possibility of decertification at (1) the 

issuer level, (2) the QHP level, and (3) 

both at the issuer level and at the QHP 

level. We considered all three options 

because some of the bases for decertification include failure to comply 

with applicable standards at the issuer 

level, while others uniquely involve 

compliance at the QHP level. However, 

since certification is granted at the plan 

(QHP) level, we propose that 

decertification should also occur at the 

QHP level. 

In § 156.810(a), we propose the bases 

for decertification. We considered 

events that are likely to undermine the 

integrity or operations of an FFE, harm 

the health of enrollees by limiting 

access to healthcare, and or 

substantially interfere with HHS’ ability 

to ensure that QHPs offered in an FFE 

are in the interests of qualified 

individuals and qualified employers. 

Recognizing that QHP issuers are 

voluntarily electing to participate in an 

FFE, and that participation is not 

required by any statutory mandate, we 

expect the majority of QHP issuers to 

cooperate with HHS in resolving any 

issues of non-compliance. As such and 

absent any extraordinary circumstances, 

we expect few decertifications, 

especially in the first plan year. With 

these considerations in mind, we 

propose in paragraph (a)(1), that a QHP 

may be decertified if the issuer 

substantially fails to comply with 

Federal laws and regulations applicable 

to QHP issuers participating in an FFE. 

In paragraphs (a)(2), (3), and (4), we 

propose that a QHP may be decertified 

if the issuer substantially fails to comply 

with other specific Federal standards 

applicable to its participation in an FFE, 

as related to the risk adjustment 

program, transparency in coverage, QHP 

marketing and benefit design, privacy 

and security standards, and advance 

payment of the premium tax credit and 

cost-sharing reductions. In paragraph 

(a)(5), we propose that a QHP may be 

decertified if the issuer operates in a 

manner that hinders the efficient and 

effective administration of an FFE. In 

paragraph (a)(6), we propose that failure 

of a QHP to meet the requirements of 

the applicable certification criteria 

would be a basis for decertification. In 

paragraph (a)(7), we propose that a QHP 

may be decertified when there is 

credible evidence that the issuer has 

committed or participated in fraudulent 

or abusive activities affecting the 

Exchange, including submission of false 

or fraudulent data. In paragraphs (a)(8) 

and (9), we propose as bases for 

decertification, when the QHP issuer 

substantially fails to meet Federal 

standards related to enrollees’ ability to 

access necessary medical items and 

services which failure could have the 

effect of seriously harming enrollees. In 

paragraph (a)(10), we propose as a basis 

for decertification, when the State 

recommends to HHS that the QHP 

should no longer be available in an FFE. 

We note that in the first year, we expect 

decertification under these bases to be 

used only in extreme cases, and only 

after the issuer has a sufficient 

opportunity to come into compliance, 

unless the deficiency is egregious and 

the harm to enrollees or to the integrity 

or operations of the FFE is immediate 

and severe. 

In § 156.810(b)(1), we propose that 

HHS may consider a previous or 

ongoing regulatory or enforcement 

actions taken by a State against a QHP 

issuer as a factor in determining 

whether to decertify a QHP offered by 

that issuer. We believe this is important 

to ensure that mitigating factors 

identified by the State are thoroughly 

considered in the decision to decertify 

a QHP. We believe that, by collaborating 

with the State in which a QHP is being 

considered for decertification, we can 

make a more informed decision about 

whether decertification is an 

appropriate course of action by HHS. In 

paragraph (b)(2), we propose that HHS 

may decertify a QHP offered by an 

issuer in an FFE based on a 

determination or action of a State as 

they relate to the issuer offering QHPs 

in an FFE, including, but not limited to, 

when a State places an issuer or its 

parent organization into receivership or 

when the State has recommended to 

HHS that a QHP should no longer be 

made available in an FFE. We invite 

comments on whether these bases are 

appropriate. 

In § 156.810(c) and (d), we propose 

two processes for decertification 

actions, in consideration of the different 

bases which may result in 

decertification. Where the basis for 

decertification does not put the QHP 

enrollees’ ability to access necessary 

medical items and services at risk or 

substantially compromise the integrity 

of FFEs, we propose a standard 

decertification process under 

§ 156.810(c). Under the standard 

process, we propose that written notice 

of the decertification would be sent to 

the QHP issuer, enrollees in the QHP 

being decertified, and the State DOI in 

the State in which the QHP is being 

decertified. The written notice would 

specify the effective date of the 

decertification, which would not be 

earlier than 30 days after the date of 

issuance of the notice. Additionally, we 

propose that the written notice would 

state the reason for the decertification, 

including the legal basis; inform the 

issuer of the effect of decertification and 

the procedure for appeal; and inform the 

QHP enrollees of the effect of 

decertification and the availability of a 

special enrollment period under 

§ 155.420. 


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Where the basis for a decertification is 

one in which the QHP enrollees’ ability 

to access necessary medical items or 

services is at risk or the integrity of an 

FFE is substantially compromised, we 

propose that the QHP issuer would be 

subject to an expedited decertification 

process under § 156.810(d). This would 

include cases in which there is credible 

evidence of fraud, the issuer 

substantially fails to provide enrollees 

of its QHPs access to necessary medical 

items or services, or other specified 

circumstances. We propose that the 

expedited decertification process would 

be similar to the standard process, 

except that the effective date of the 

decertification could be immediate. We 

recognize that, under the expedited 

decertification process, a QHP issuer 

may lose enrollees during the appeal 

process. However, given that the bases 

for expedited decertification are limited 

to when the enrollees’ ability to access 

needed health items or services is at risk 

or the integrity of an FFE is 

substantially compromised, and that 

enrollees should be offered an 

opportunity to transition to another 

QHP in these circumstances, we believe 

that this expedited decertification 

process is appropriate. Furthermore, the 

QHP issuer’s interests are adequately 

protected by the opportunity for a 

hearing after decertification, and the 

potential for QHP reinstatement 

depending on the outcome of the appeal 

process. 

Both the standard and expedited 

decertification processes would afford 

the issuer of the decertified QHP the 

right to appeal the decertification 

through an administrative hearing 

process under § 156.810(e), only the 

timing of that appeal would differ. We 

propose that, under the standard 

decertification process, the appeal 

would be available prior to the 

decertification; under the expedited 

decertification process, the appeal 

generally would be available postdecertification. Under § 156.810(e), we 

propose that an issuer may appeal the 

decertification of a QHP offered by that 

issuer by filing a request for hearing 

under part 156, subpart J. If the issuer 

makes a request for hearing and the 

decertification is proceeding under the 

standard process, we propose that the 

decertification would not take effect 

until after the final administrative 

decision in the appeal, notwithstanding 

the effective date specified in the notice 

of decertification. If the decertification 

is proceeding under the expedited 

process, we propose that the 

decertification would still take effect on 

the effective date specified in the notice 

of decertification; however, we propose 

that the certification of the QHP could 

be reinstated immediately upon 

issuance of a final administrative 

decision that the QHP should not be 

decertified. 

We welcome comment on all of the 

proposed decertification procedures, 

specifically, we invite comment on the 

two processes for decertification 

(standard and expedited) and the bases 

for each process. 

7. Subpart J—Administrative Review of 

QHP Issuer Sanctions in a FederallyFacilitated Exchange 

a. Administrative Review in a FederallyFacilitated Exchange (§§ 156.901– 

156.963) 

Section 1321(c)(2) of the Affordable 

Care Act authorizes the Secretary to use 

CMPs as a means to enforce the 

Exchange standards, including in an 

FFE. Section 1311(d)(4)(A) of the 

Affordable Care Act authorizes 

Exchanges, including an FFE, to take 

action to decertify QHPs offered through 

the Exchange. Enforcement actions 

taken by a Federal agency are generally 

subject to the Administrative Procedure 

Act, 5 U.S.C. 554 and 556. 

Consequently, we believe that QHP 

issuers in an FFE that are subject to an 

enforcement action authorized by the 

Affordable Care Act and proposed 

subpart I of 45 CFR part 156 are entitled 

to the protections provided by the 

Administrative Procedure Act, 

including a hearing. 

(1) Civil Money Penalty 

45 CFR 150.401 through 150.463 sets 

forth an administrative hearing process 

for individuals and entities against 

whom a CMP has been imposed in the 

individual and group health markets. 

This process is intended to provide the 

individual or entity an opportunity to 

submit evidence to be considered by the 

administrative law judge (ALJ). 45 CFR 

150.401 through 150.463 establish the 

evidentiary and procedural rules 

governing the administrative hearing. 

Under these provisions, the ALJ decides 

whether there is a basis for assessing a 

CMP against the individual or entity 

and whether the amount assessed is 

reasonable. In order to appeal the CMP, 

an individual or entity must request a 

hearing within 30 days after the date of 

the issuance of a notice of assessment. 

If no hearing is requested, the 

assessment constitutes a final and unappealable order. 

We believe that the process set forth 

in 45 CFR 150.401 through 150.463 is 

similar to the processes most States 

have in place for issuers to appeal State 

enforcement actions. These regulations 

also established the administrative 

review process for enforcement actions 

against individuals and entities for 

HIPAA violations, which have been 

expanded to apply to appeals of marketwide reform enforcement actions. 

Because the process established in 45 

CFR Part 150 is similar to existing State 

appeals processes, and we expect that 

issuers should be familiar with HIPAA 

enforcement processes given the long 

history of that statute, we believe there 

is significant benefit in modeling the 

administrative hearing process for 

appeals of sanctions against QHP issuers 

in an FFE after the process established 

in Part 150. Furthermore, we believe 

that the process as described in the 

relevant sections of Part 150 sufficiently 

protects the procedural rights of QHP 

issuers. Therefore, we propose in 45 

CFR 156.901 through 156.963 an 

administrative appeals process modeled 

after that set forth in 45 CFR 150.401 

through 150.463. We seek comment on 

whether this process, as proposed, 

should include additional protections 

and whether certain provisions could be 

eliminated to expedite the 

administrative review process and 

reduce administrative burden. We also 

invite comments on whether other 

models, such as the appeals process for 

CMPs under section 1128A of the Social 

Security Act, would be more 

appropriate models to use. We propose 

numbering these sections in a manner 

similar to the numbering in Part 150 for 

simplicity. 

(2) Decertification of QHPs 

Section 1311(d) of the Affordable Care 

Act requires an FFE to implement 

procedures for decertification of QHPs 

offered through an FFE. 45 CFR 

155.1080 codifies this requirement and, 

in paragraph (d) requires an FFE to 

establish a process for appealing the 

decertification of a QHP. We considered 

two approaches to the decertification 

appeals process. The first approach 

would be to expand the proposed 

process for CMP appeals to include 

appeals of decertifications of QHPs 

offered in an FFE. Under this approach, 

the issuer of a QHP that is being 

decertified would have the opportunity 

to request a hearing before an ALJ. The 

appeals process would be governed by 

explicit procedural and evidentiary 

rules that would afford issuers due 

process protections. As explained 

above, this approach is modeled after 

the HIPAA administrative hearing 

process for CMPs assessed against 

issuers in the group and individual 

markets, and is similar to appeals 

processes that currently exist at the 


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State level. We note that the HIPAA 

administrative process has been 

expanded to apply to appeals of 

enforcement actions of market-wide 

reform standards. We believe this 

approach would be familiar to QHP 

issuers and would therefore cause 

minimal confusion and uncertainty. The 

second approach that we considered is 

the hearing process used for 

terminations of contracts with Medicare 

Part C organizations under 42 CFR 

422.510(a), which appeals process is 

described at 42 CFR part 422, subpart N. 

Under this approach, the hearing would 

take place before a hearing officer rather 

than an ALJ. Although the Medicare 

Part C approach might take less time to 

result in a final administrative decision 

on decertification, we considered the 

possibility that QHP issuers that are 

unfamiliar with the Medicare program 

could be confused by this hearing 

process. Therefore, after careful 

consideration of the benefits and risks of 

the two approaches, we propose 

modeling the hearing process for QHP 

decertification after the HIPAA process. 

Similar to our proposal for the CMP 

appeals hearing process, for 

decertification hearings, we propose 

generally to adopt the regulatory process 

set forth 45 CFR part 150, subpart D. 

Although we propose to preserve the 

large majority of the regulatory text from 

part 150, there are two principal 

exceptions. In § 156.903(a), we propose 

modifying the part 150 approach to 

expand the scope of the ALJ’s authority 

to issue a decision concerning the 

decertification of a QHP in an FFE. In 

§ 156.917(a), we propose modifying the 

part 150 approach by including a 

paragraph (a)(3) to provide that the ALJ 

has the authority to hear and decide 

whether a basis exists for an FFE’s 

determination to decertify a QHP. In 

other places, where necessary, we make 

conforming amendments to refer to 

appeals of decertifications as well as of 

CMP assessments; otherwise, our intent 

is to not alter the regulatory process set 

forth in 45 CFR part 150, subpart D. We 

seek comment on whether this appeals 

process should include additional 

protections or whether certain aspects of 

the part 150 approach could be 

eliminated to expedite the 

administrative review process and 

reduce administrative burden. We also 

invite comments on whether other 

models, such as the appeals process for 

CMPs under section 1128A of the Social 

Security Act, would be more 

appropriate models to use. 

8. Subpart K—Cases Forwarded to 

Qualified Health Plans and Qualified 

Health Plan Issuers in FederallyFacilitated Exchanges by HHS 

a. Standards (§ 156.1010) 

We propose in § 156.1010 to set 

requirements for resolving cases 

forwarded to the QHP issuer operating 

in an FFE by HHS. A case is 

communication brought by a 

complainant that expresses 

dissatisfaction with a specific person or 

entity subject to State or Federal laws 

regulating insurance, concerning the 

person or entity’s activities related to 

the offering of insurance, other than a 

communication with respect to an 

adverse benefit determination as 

defined in 45 CFR 147.136(a)(2)(i). 

Cases could include concerns about the 

operations of a QHP issuer operating in 

an FFE such as: waiting times when 

contacting an issuer’s call center, the 

demeanor of customer service 

personnel, or the failure to receive 

materials related to coverage under the 

QHP, such as the Summary of Benefits 

and Coverage. While we expect that 

most cases will be brought by or on 

behalf of QHP applicants and enrollees, 

some cases may be brought by providers 

or other interested parties. HHS 

recognizes that States currently play an 

important role in handling various types 

of cases related to health plans and 

issuers, and HHS envisions the States 

will continue to play an important role 

in assisting applicants, enrollees, 

providers and others. We anticipate that 

many cases will be presented in the first 

instance to the State DOI and will be 

addressed by the State in accordance 

with its own laws, regulations, and 

processes. For a case forwarded to a 

QHP issuer operating in an FFE by a 

State, the QHP issuer is expected to 

comply with applicable standards 

established by State laws and 

regulations. Additionally, some cases 

not related to FFE-specific topics will be 

brought to HHS rather than to the State. 

HHS intends to work with each State to 

ensure that such cases are addressed by 

the State in accordance with its own 

laws, regulations, and processes. We 

intend that cases received by a QHP 

issuer operating in an FFE directly from 

a complainant or the complainant’s 

authorized representative will be 

handled by the issuer through its 

internal customer service process. For 

cases related to FFE-specific topics 

brought to HHS, we propose that such 

cases will be addressed and resolved by 

HHS and the issuer, as appropriate, 

pursuant to the proposed standards in 

§ 156.1010. 

In § 156.1010(a), we propose the 

definition of a case. In § 156.1010(b), we 

propose that QHP issuers operating in 

an FFE must investigate and resolve, as 

appropriate, cases brought by a 

complainant or the complainant’s 

authorized representative and 

forwarded to the issuer by HHS. QHP 

issuers operating in an FFE are 

reminded that issues and inquiries 

related to an adverse benefit 

determination as defined in 45 CFR 

147.136(a)(2)(i) are not covered by this 

proposed section, and are subject to the 

regulations governing internal claims 

appeals and external review in 45 CFR 

147.136. 

Section 156.1010(c) proposes that 

cases may be forwarded to a QHP issuer 

operating in an FFE through a casework 

tracking system developed by HHS, or 

through other means as determined by 

HHS. Cases may be input into a tracking 

system developed by HHS by a variety 

of individuals, including HHS staff, 

Navigators and other assistors, and 

Consumer Assistance Programs. 

Section 156.1010(d) proposes that 

cases forwarded by HHS to a QHP issuer 

operating in an FFE must be resolved 

within 15 calendar days of receipt of the 

case. We propose that such cases 

involving the need for urgent medical 

care must be resolved no more than 72 

hours after receipt of the case. QHP 

issuers operating in an FFE must make 

every effort to quickly resolve cases 

when an enrollee has an urgent need to 

access needed medical items and 

services, pursuant to proposed 

paragraph (e) of this section. We further 

propose that, for cases forwarded by 

HHS to a QHP issuer operating in an 

FFE, where applicable State laws and 

regulations establish timeframes for case 

resolutions that are stricter than the 

standards under this paragraph, QHP 

issuers are required to comply with the 

stricter State laws and regulations. 

In 156.1010(e) we propose that an 

urgent case is one in which there is an 

immediate need for health services 

because a non-urgent standard could 

seriously jeopardize the enrollee’s or 

potential enrollee’s life, or health or 

ability to attain, maintain, or regain 

maximum function. 

In § 156.1010(f), for cases forwarded 

by HHS we propose that QHP issuers 

operating in an FFE are required to 

provide notice to complainants 

regarding the disposition of a case as 

soon as possible upon resolution of the 

case, but in no event later than seven (7) 

business days after the case is resolved. 

Notification may be by verbal or written 

means as determined most expeditious 

by the QHP issuer. 


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33 General Guidance on Federally-facilitated 

Exchanges, May 16, 2012. Available at http:// 

cciio.cms.gov/resources/files/ffe-guidance-05-16- 

2012.pdf. 

In § 156.1010(g), we propose that the 

QHP issuer operating in an FFE must 

document in a casework tracking system 

developed by HHS, or by other means 

determined by HHS, that the case has 

been resolved, no later than seven (7) 

business days after resolution of the 

case. The resolution record must 

include a clear and concise narrative 

explaining how the case was resolved 

including information about how and 

when the complainant was notified of 

the resolution. 

In § 156.1010(h) we propose that cases 

received by a QHP issuer operating in 

an FFE from the State in which the 

issuer offers QHPs must be investigated 

and resolved according to applicable 

State laws and regulations. In addition, 

QHP issuers operating in an FFE must 

cooperate fully with a State, HHS, or 

any other appropriate regulatory 

authority that is handling a case. 

HHS will use casework data within 

the HHS developed casework tracking 

system, including data entered by HHS 

and other users such as QHP issuers 

operating in FFEs, Consumer Assistance 

Programs, and Navigators, to identify 

trends, areas of concern, and 

compliance issues. 

9. Subpart L—Quality Standards 

a. Establishment of Standards for HHSapproved Enrollee Satisfaction Survey 

Vendors for Use by QHP Issuers in 

Exchanges (§ 156.1105) 

Section 1311(c)(4) of the Affordable 

Care Act directs the Secretary to 

develop an enrollee satisfaction survey 

that evaluates the level of enrollee 

satisfaction with each QHP that is 

offered through an Exchange, for QHPs 

that had more than 500 enrollees in the 

previous year. The results of the 

evaluation are to be publicly reported 

on the Exchange’s Internet portal, in a 

manner that allows for easy comparison 

of enrollee satisfaction levels among 

comparable plans. HHS intends to begin 

public reporting of these survey results 

in 2016. 45 CFR 155.200(d) directs 

Exchanges to oversee the 

implementation of enrollee satisfaction 

surveys and the assessment and ratings 

of health care quality and outcomes, in 

accordance with sections 1311(c)(1), 

1311(c)(3) and 1311(c)(4) of the 

Affordable Care Act. Further, as part of 

minimum certification standards, 45 

CFR 156.200(b)(5) directs QHP issuers 

to disclose and report information on 

health care quality and outcomes and 

implement appropriate enrollee 

satisfaction surveys. 

In order to carry out these functions, 

we propose processes under which HHS 

would approve and oversee enrollee 

satisfaction survey vendors that will 

administer enrollee satisfaction surveys 

on behalf of QHP issuers. In future 

rulemaking, we intend to direct QHP 

issuers to contract with HHS-approved 

enrollee satisfaction survey vendors to 

fulfill the requirements established in 

45 CFR 156.200(b)(5). The enrollee 

satisfaction survey vendors would need 

to be approved by mid-2014 to allow 

time for QHP issuers to contract with 

these vendors by late 2014, well before 

any relevant quality reporting standards 

must be implemented. We have 

previously stated that quality reporting 

standards (including the enrollee 

satisfaction survey) would be 

implemented in 2016, and available for 

consumers to use during 2017 open 

enrollment.33 This implementation 

timeline is reflective of the earliest 

possible time that issuers would be able 

to report performance data on their QHP 

populations. HHS intends to also utilize 

the enrollee satisfaction survey 

information to engage in oversight 

activities of QHP issuers and in QHP 

recertification decisions. 

We also intend to establish, in future 

rulemaking, that the enrollee 

satisfaction survey be modeled on the 

CAHPS® Health Plan survey which 

typically assesses patients’ satisfaction 

with their health care, personal doctors, 

and health plans. To administer the 

CAHPS® survey to Medicare Parts C and 

D enrollees, Medicare Parts C and D 

utilize a similar process to the one we 

are proposing in § 156.1105 to approve 

enrollee satisfaction survey vendors. We 

anticipate that enrollee satisfaction 

survey vendors would also be 

responsible for submitting survey 

results directly to HHS and other 

entities specified by HHS, such as 

Exchanges. We also plan to promulgate 

additional quality reporting standards 

for QHP issuers and Exchanges. We seek 

comment on this proposed approach to 

approving and monitoring enrollee 

satisfaction survey vendors. 

In § 156.1105(a), we propose an 

application and approval process for 

enrollee satisfaction survey vendors. We 

propose that only HHS-approved 

enrollee satisfaction survey vendors 

could administer the survey on behalf of 

QHP issuers. We believe that this 

proposed process will help to ensure 

that survey results are valid, reliable, 

and unbiased. This process would also 

allow QHP issuers to easily find 

approved vendors since we plan to 

publish a list of approved vendors. We 

propose that enrollee satisfaction survey 

vendors will be approved for one-year 

terms, which could mean that, to 

maintain their HHS approval, each 

vendor would submit annual 

applications to HHS demonstrating that 

the vendor meets all of the application 

and approval requirements. Survey 

vendor application forms will be 

developed and released at a later date. 

Survey vendors that are not approved by 

HHS are invited to re-apply. HHS will 

work with those vendors so that they 

could meet the standards specified in 

§ 156.1105(b) for re-application. We are 

also considering developing a process 

for revoking HHS approval of vendors 

and a related appeals process in future 

rulemaking. We seek comment on these 

processes. 

In paragraph (b), we propose the 

standards that an enrollee satisfaction 

survey vendor must meet to be 

approved by HHS. 

We have not proposed specific 

minimum business criteria in paragraph 

(b)(11) for enrollee satisfaction survey 

vendors. However, we intend to align 

these criteria with existing criteria set 

for Medicare Advantage CAHPS®

Survey vendors, including but not 

limited to relevant survey experience 

and organizational survey capacity. 

Specifically, we are considering the 

following criteria: (a) Having at least 

two years of experience conducting 

similar types of survey administration; 

(b) possessing appropriate staff 

credentials and expertise to conduct 

survey administration; and (c) minimum 

facility requirements, such as ability to 

store secure data. We seek comment on 

these minimum business criteria and 

any additional criteria that we should 

consider. 

Finally, we propose in paragraph (c) 

that once HHS has approved enrollee 

satisfaction survey vendors, HHS would 

publish a list of approved entities on an 

HHS Web site. 

10. Subpart M—Qualified Health Plan 

Issuer Responsibilities 

a. Confirmation of HHS Payment and 

Collections Reports (§ 156.1210) 

We anticipate sending each applicable 

issuer a monthly payment and 

collections reports that will show, with 

respect to certain provisions under Title 

I of the Affordable Care Act, payments 

HHS owes to the issuer, as well as those 

the issuer owes HHS. For the 2014 

calendar year, we anticipate this report 

will include advance payments of the 

premium tax credit and advance 

payments of cost-sharing reductions that 

HHS is paying to the issuer for each 

policy listed on the payment report, any 


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34Affordable Exchanges Guidance: Letter to 

Issuers on Federally-facilitated and State 

Partnership Exchanges, (April 5, 2013). Available 

at: http://www.cms.gov/CCIIO/Resources/ 

Regulations-and-Guidance/Downloads/ 

2014_letter_to_issuers_04052013.pdf 

amounts owed by the issuer for FFE 

user fees, as well as any adjustments 

from previous payments under those 

programs. Any applicable issuer will 

need to review this payment and 

collections report against the payments 

it expects for each policy based on the 

eligibility and enrollment information 

transmitted by the Exchange, and, any 

amounts it expects HHS to collect for 

FFE user fees. In order to ensure 

accurate payments and make 

adjustments, in § 156.1210, we propose 

that, within 15 calendar days of the date 

of a payment and collections report, the 

issuer would either confirm to HHS that 

the payment and collections report 

accurately lists payments owed by HHS 

and the issuer for the timeframe 

specified in the payment and collections 

report, or describe to HHS any 

inaccuracy it identifies in these amounts 

(including incorrect payment amounts, 

or extra or missing policies in the 

report). These notifications would be 

provided in a format specified by HHS. 

HHS will work with issuers to resolve 

any discrepancies between the amounts 

listed in the payment and collections 

report and the amounts the issuer 

believes it should receive for the time 

period specified on the report. 

This proposed provision will help 

align enrollment and eligibility data 

transmitted by the Exchange, payments 

provided by and collected by HHS, and 

the issuer’s own records of payments 

due. In addition to the provisions 

proposed in § 156.410 and § 156.460 of 

this Part, this proposed provision will 

also help ensure that the correct 

amounts of advance payments of the 

premium tax credit and advance costsharing reductions are paid to issuers on 

behalf of eligible individuals. We note 

the need to protect enrollees from 

unanticipated tax liability that could 

result if the advance payments of the 

premium tax credit they receive are 

greater than the amounts of premium 

tax credit available to them. We seek 

comment on this provision, and in 

particular on the length of time issuers 

should have to respond to the payment 

and collections report. 

b. Direct Enrollment With the QHP 

Issuer in a Manner Considered To Be 

Through the Exchange (§ 156.1230) 

Section 1413 of the Affordable Care 

Act directs the Secretary to establish, 

subject to minimum requirements, a 

streamlined enrollment process for 

enrollment in QHPs and all insurance 

affordability programs. We anticipate 

that many individuals will approach 

issuers directly for purposes of QHP 

enrollment. Many issuers currently use 

their Web sites to enroll individuals into 

health coverage. Accordingly, consistent 

with HHS’s guidance titled ‘‘Affordable 

Exchanges Guidance: Letter to Issuers 

on Federally-facilitated and State 

Partnership Exchanges,’’ 34 we propose 

to add paragraph § 156.1230(a)(1)(i) that 

would allow, at the Exchange’s option, 

a QHP issuer to enroll an applicant who 

initiates enrollment directly with the 

QHP issuer in a manner that is 

considered enrollment through the 

Exchange if the QHP issuer follows the 

enrollment process for qualified 

individuals set forth in § 156.265. 

We are also proposing paragraphs 

(a)(1)(ii)–(a)(1)(v) whereby QHP issuers 

that seek to directly enroll a qualified 

individual in a manner considered to be 

through the Exchange would be 

required to meet certain minimum 

consumer protections. The proposed 

protections would ensure that 

consumers know how to access 

available coverage options and are able 

to make informed plan selections. We 

propose in a new paragraph 

§ 156.1230(a)(1)(ii) that QHP issuers that 

seek to directly enroll qualified 

individuals in a manner considered to 

be through the Exchange must provide 

applicants the ability to view the QHPs 

offered by the issuer with data elements 

set forth at 45 CFR 155.205(b)(1). Under 

this proposal, QHP issuers would need 

to ensure their Web sites provide 

standardized comparative information 

on each available QHP offered by the 

QHP issuer, including premium and 

cost-sharing information; the summary 

of benefits and coverage established 

under section 2715 of the PHS Act; 

identification of whether the QHP is a 

bronze, silver, gold or platinum metal 

level or a catastrophic plan; the results 

of the enrollee satisfaction survey, as 

described in section 1311(c)(4) of the 

Affordable Care Act; quality ratings 

assigned in accordance with section 

1311(c)(3) of the Affordable Care Act; 

MLR information as reported to HHS in 

accordance with 45 CFR part 158; 

transparency of coverage measures 

reported to the Exchange during 

certification; and the provider directory 

in accordance with § 156.230. We note 

that for 2014, the information referenced 

in 45 CFR 155.205(b)(1)(iv), (v), and (vii) 

will not be required because the 

information will not be available. 

We also propose in 

§ 156.1230(a)(1)(iii) that QHP issuers 

that seek to directly enroll qualified 

individuals in a manner considered to 

be through the Exchange using the 

issuer’s Web site must clearly 

distinguish between QHPs for which the 

consumer is eligible and non-QHPs that 

the issuer may offer. We propose that 

this distinction must also clearly 

articulate that APTC and CSRs apply 

only to QHPs offered through the 

Exchange. 

In addition, in § 156.1230(a)(1)(iv) we 

propose that QHP issuers that seek to 

directly enroll qualified individuals in a 

manner considered to be through the 

Exchange be required to notify 

applicants of the availability of other 

QHP products offered through the 

Exchange to consumers, regardless of 

whether they apply through a Web site, 

in-person or by phone. The QHP issuer 

would also be required to display the 

Web link to or describe how to access 

the Exchange Web site. We seek 

comment if HHS should require a 

universal disclaimer to be displayed by 

the issuer that informs applicants that 

other coverage options exist in the 

Marketplace and that not all coverage 

options are displayed. 

In § 156.1230(a)(1)(v) we propose that 

a QHP issuer be required to ensure that, 

when an applicant initiates enrollment 

directly with the QHP issuer and the 

QHP issuer seeks to directly enroll the 

applicant in a manner considered to be 

through the Exchange, the applicant is 

allowed to select an APTC amount, if 

applicable, in accordance with 

§ 155.310(d)(2), provided that the 

applicant makes the attestations 

required by § 155.310(d)(2)(ii). 

In § 156.1230(a)(2) we propose that, if 

permitted by the Exchange pursuant to 

§ 155.415 of this part, a QHP issuer 

seeking to directly enroll applicants in 

a manner considered to be through the 

Exchange enter into an agreement with 

the Exchange prior to allowing any of its 

customer service representatives to 

assist qualified individuals in the 

individual market with: (a) Applying for 

an eligibility determination or 

redetermination for coverage through 

the Exchange; (b) applying for insurance 

affordability programs; or (c) facilitating 

the selection of a QHP offered by the 

issuer represented by the customer 

service representative whereby the QHP 

issuer would agree to require each of its 

customer service representatives to at a 

minimum: (i) receive training on QHP 

options and insurance affordability 

programs, eligibility, and benefits rules 

and regulations; (ii) comply with the 

Exchange’s privacy and security 

standards adopted consistent with 

§ 155.260; and (iii) comply with 

applicable State law related to the sale, 

solicitation, and negotiation of health 

insurance products, including 


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35BLS March 2013 Employer Costs for Employee 

Compensation Report (March 12, 2013). Available 

at http://www.bls.gov/news.release/ecec.toc.htm 

36We use an estimate of self-insured entities 

published by the DOL in the March 2013 ‘‘Report 

to Congress: Annual Report of Self-insured Group 

applicable State law related to agent, 

broker, and producer licensure; 

confidentiality; and conflicts of interest. 

We solicit comments on these 

proposals. 

We also propose to add paragraph 

(a)(3) to ensure that the premium that a 

QHP issuer charges to a qualified 

individual or enrollee is the same as 

was accepted by the Exchange in its 

certification of the QHP issuer after 

accounting for any APTC. We propose 

that if the QHP issuer identifies an error 

in the amount it has charged the 

qualified individual, the QHP issuer 

must retroactively correct the error no 

later than 30 calendar days after its 

discovery. We also propose that for 

issuers of QHPs in the FFE, HHS may 

review the premiums charged to 

qualified individuals through the 

compliance reviews proposed in 

§ 156.715(a). 

Finally, in paragraph (b), we state that 

the individual market FFE will permit 

the conduct set forth in this section, to 

the extent permitted by applicable State 

law. 

c. Enrollment Process for Qualified 

Individuals (§ 156.1240) 

We realize that a segment of the 

population that will seek health 

insurance coverage through an 

Exchange will not have bank accounts 

or credit cards, and we have received 

numerous questions and comments on 

this topic. These people should be able 

to access coverage through an Exchange 

on the same basis as those with a bank 

account or credit card and should not be 

unable to access coverage merely due to 

the inability to pay their share of the 

premium. Therefore, we propose to 

require QHP issuers at a minimum 

accept a variety of payment formats, 

including, but not limited to, paper 

checks, cashier’s checks, money orders, 

and replenishable pre-paid debit cards, 

so that individuals without a bank 

account will have readily available 

options for making monthly premium 

payments. Issuers may also offer 

electronic funds transfer from a bank 

account and automatic deduction from 

a credit or debit card as payment 

options. We seek comment on this 

proposal and whether other payment 

methods should be included. 

III. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), we are required to 

provide 60-day notice in the Federal 

Register and solicit public comment 

before a collection of information 

requirement is submitted to the Office 

and Management and Budget (OMB) for 

review and approval. To fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 (PRA) requires 

that we solicit comment on the 

following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

The following sections of this 

document contain estimates of burden 

imposed by the associated information 

collection requirements (ICRs); 

however, not all of these estimates are 

subject to the ICRs under the PRA for 

the reasons noted. Salaries for the 

positions cited were mainly taken from 

the Bureau of Labor Statistics (BLS) Web 

site (http://www.bls.gov/oco/ 

ooh_index.htm). 

The salaries for the health policy 

analyst and the senior manager were 

taken from the Office of Personnel 

Management Web site. Fringe Benefits 

estimates were taken from the BLS 

March 2013 Employer Costs for 

Employee Compensation Report.35

A. ICRs Regarding Program Integrity 

Provisions Related to State Operation of 

the Reinsurance Program (§ 153.260) 

In § 153.260 of this proposed rule, we 

direct a State-operated reinsurance 

program to: (1) Keep an accurate 

accounting of reinsurance contributions, 

payments, and administrative expenses; 

(2) submit to HHS and make public a 

summary report on program operations; 

and (3) engage an independent qualified 

auditing entity to perform a financial 

and programmatic audit for each benefit 

year. Fewer than 10 States have 

informed HHS that they will operate 

reinsurance for the 2014 benefit year. 

While these reinsurance records 

requirements are subject to the PRA, we 

believe the associated burden is exempt 

under 5 CFR 1320.3(c)(4) and 44 U.S.C. 

3502(3)(A)(i), since fewer than 10 

entities would be affected. Therefore, 

we are not seeking approval from OMB 

for these information collection 

requirements. 

B. ICRs Regarding Program Integrity 

Provisions Related to State Operation of 

the Risk Adjustment Program 

(§ 153.310(c)(4) and § 153.310(d)(3)–(4), 

and § 153.365) 

In § 153.310(c)(4), § 153.310(d)(3)–(4), 

and § 153.365 of this proposed rule, we 

require a State operating risk adjustment 

to: (1) Retain records for a 10-year 

period; (2) submit an interim report in 

its first year of operation; (3) submit to 

HHS and make public a summary report 

on program operations for each benefit 

year; and (4) keep an accurate 

accounting for each benefit year of all 

receipts and expenditures related to risk 

adjustment payments, charges, and 

administrative expenses. Fewer than 10 

States have informed HHS that they will 

operate risk adjustment for the 2014 

benefit year. Since the burden 

associated with collections from fewer 

than 10 entities is exempt from the PRA 

under 5 CFR 1320.3(c)(4) and 44 U.S.C. 

3502(3)(A)(i), we are not seeking 

approval from OMB for the risk 

adjustment information collection 

requirements. However, if more than 

nine States elect to operate risk 

adjustment in the future, we will seek 

approval from OMB for these 

information collections. 

C. ICRs Regarding Maintenance of 

Records for Contributing Entities and 

Reinsurance-Eligible Plans (§ 153.405(h) 

and § 153.410(c)) 

In § 153.405(h) and § 153.410(c), we 

propose record retention standards for 

contributing entities and reinsuranceeligible plans. In proposed § 153.405(h), 

we require contributing entities to 

maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to substantiate the 

enrollment count submitted pursuant to 

this section for a period of at least 10 

years, and must make that evidence 

available upon request to HHS, the OIG, 

the Comptroller General, or their 

designees, to any such entity, for 

purposes of verification of reinsurance 

contribution amounts. This requirement 

may be satisfied if the contributing 

entity archives the documents and 

records and ensures that they are 

accessible if needed in the event of an 

investigation or audit. 

We estimate that 26,200 contributing 

entities will be subject to this 

requirement, based on the Department 

of Labor’s (DOL) estimated count of selfinsured plans and the number of fully 

insured issuers that we estimate will 

make reinsurance contributions.36 We 


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Health Plans,’’ which reflects only those selfinsured health plans (including 19,800 self-insured 

plans and 4,000 plans that mixed self-insurance and 

insurance) that are required to file a Form 5500 

with the DOL. 

believe that most of these contributing 

entities will already have the systems in 

place for record maintenance, and that 

the additional burden associated with 

this requirement is the time, effort, and 

additional labor cost required to 

maintain the records. On average, we 

estimate that it will take each 

contributing entity approximately 5 

hours annually to maintain records. We 

estimate that it will take an insurance 

operations analyst 5 hours (at $38.49 an 

hour) to meet these requirements. On 

average, the cost for each contributing 

entity would be approximately $192.45 

annually. Therefore, for 26,200 

contributing entities, we estimate an 

aggregate burden of $5,042,190 and 

131,000 hours as a result of this 

requirement. 

In proposed § 153.410(c), we require 

issuers of reinsurance-eligible plans to 

maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to substantiate the 

requests for reinsurance payments made 

pursuant to this section for a period of 

at least 10 years, and must make that 

evidence available upon request to HHS, 

the OIG, the Comptroller General, or 

their designees, (or, in the case of a State 

operating reinsurance, the State or its 

designees), to any such entity, for 

purposes of verification of reinsurance 

payment requests. We estimate that 

1,900 issuers of reinsurance-eligible 

plans will be subject to this 

requirement, based on HHS’s most 

recent estimate of the number of fully 

insured issuers that will submit requests 

for reinsurance payments. On average, 

we estimate that it will take each issuer 

of a reinsurance-eligible plan 

approximately 10 hours annually to 

maintain records. We estimate that it 

will take an insurance operations 

analyst 10 hours (at $38.49 an hour) to 

meet these requirements. On average, 

the cost estimate for each issuer is 

approximately $384.90 annually. 

Therefore, for 1,900 issuers, we estimate 

an aggregate burden of $731,310 and 

19,000 hours as a result of this 

requirement. 

The burden estimates for these two 

recordkeeping requirements are broad 

estimates that include not only the 

maintenance of data, but all records and 

documents that may be necessary to 

substantiate the enrollment count and 

requests for reinsurance payments made 

pursuant to 45 CFR 153.405 and 

153.410, respectively. Because the scope 

of these requirements is substantially 

less than the scope of the recordkeeping 

requirement applicable to a State 

operating reinsurance, these estimates 

are lower than those that were set forth 

for State-operated reinsurance programs 

record maintenance requirement (45 

CFR 153.240(c)) in the Premium 

Stabilization Rule published March 23, 

2012 (77 FR 17220), and the associated 

information collection request approved 

under OMB Control Number 0938–1155. 

We note that we will account for the 

additional burden associated with 

submitting this information to HHS in a 

future information collection request 

that will go through the requisite notice 

and comment period and subsequent 

OMB review and approval process. 

D. ICRs Related to Ability of States To 

Permit Agents and Brokers To Assist 

Qualified Individuals, Qualified 

Employers, or Qualified Employees 

Enrolling in Qualified Health Plans in 

the Federally-Facilitated Exchange 

(§ 155.220) 

Section 155.220 authorizes HHS to 

terminate an agent’s or broker’s 

agreement with an FFE if HHS 

determines that the agent or broker is 

out of compliance with the standards 

outlined in 45 CFR 155.220. Section 

155.220(g) sets forth the process 

whereby an agent or broker can request 

reconsideration of HHS’s termination. 

Specifically, the agent or broker must 

submit the request for reconsideration 

within 30 calendar days of receipt of the 

date of the notice of termination. 

The burden estimates for the reporting 

requirements in § 155.220 reflect our 

assumption that there will be 254,095 

agents and brokers registered in an FFE. 

The NAIC indicates that there are 

between 600,000 and 700,000 total 

licensed brokers selling health 

insurance at any point in time in the 

United States. We selected the 

midpoint, 650,000, as our estimate of 

the number of licensed brokers. We 

estimate that 37 percent of these brokers 

are in States with State Exchanges. This 

means an estimated 63 percent, or 

409,500, are in FFE States. We estimate 

that 85 percent, or 348,000, will be 

registered in an FFE. States have 

traditionally overseen agents and 

brokers in the health insurance market 

and we expect that States will continue 

in that regulatory role and be the 

primary regulator of agents and brokers 

in their respective States. Given that our 

oversight of agents and brokers will be 

narrowly tailored to FFE-specific 

standards, we expect terminations to be 

infrequent, especially in the first plan 

year. For purposes of this burden 

estimate, we assume that two agents or 

brokers will have their access 

suspended or revoked and that both 

agents or brokers will appeal these 

actions. We solicit comments on these 

assumptions. 

As stated in § 155.220(g)(2), an agent 

or broker may submit a request for 

reconsideration of any termination 

decision by HHS within 30 calendar 

days of notification of the decision. We 

assume the need to terminate an agent’s 

or broker’s agreement with an FFE will 

occur only rarely. For purposes of this 

initial burden estimate we estimate that 

revocation notices will be sent to 2 

agents or brokers each year. The hour 

burden associated with this action is the 

time and effort needed by the agent or 

broker to create the written request and 

submit it electronically to HHS. The 

associated costs are labor costs for 

gathering the necessary background 

information and then preparing and 

submitting the request. 

We assume that all agents and brokers 

who receive a notice of termination will 

submit a request for reconsideration. We 

expect the request to address the issues 

presented in the original notice of 

termination from HHS. The hours 

involved in preparing and submitting 

this request may vary. For the purpose 

of this burden estimate we estimate that 

it will take 18 hours for an agent or 

broker to prepare and submit this 

request: 10 hours (at $28.81 an hour) for 

the brokerage clerk to gather and 

assemble necessary background 

materials and 8 hours (at $41.15 an 

hour) for the agent or broker to prepare 

the written request and submit it 

electronically. This is a total of 18 hours 

annually at a cost of $617.30 per agent 

or broker. Therefore, we estimate an 

aggregate burden of 36 hours at a cost 

of $1,234.60 for the two agents or 

brokers. We solicit comments on these 

estimates. 

E. ICRs Related to the Eligibility Process 

(§ 155.310) 

Section § 155.310(k) provides that if 

an Exchange does not have enough 

information to conduct an eligibility 

determination for advance payments of 

the premium tax credit or cost-sharing 

reductions, the Exchange must provide 

notice to the applicant regarding the 

incomplete application. We anticipate 

that this notice requirement is not a 

separate notice to an individual but text 

within the eligibility determination 

notice described in § 155.310(g) and 

discussed in a separate information 

collection request that is associated with 

the notice of proposed rulemaking that 

published on January 22. 2013 (78 FR 

4594). We therefore do not include a 

separate burden estimate to develop this 

notice but the time and cost associated 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
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with this notice is included within the 

estimate in § 155.310(g). 

Section 155.310(k)(2) provides that 

the Exchange must provide the 

applicant with a period of no less than 

15 days and no more than 90 days from 

the date on which the notice is sent to 

the applicant to provide the information 

needed to complete the application to 

the Exchange. 

Given the fact that the Exchange 

eligibility process is entirely new and 

involves the use of new electronic data 

sources in combination with a new 

application, it is not possible to provide 

estimates for the number of applicants 

for whom we expect to have an 

incomplete application. However, we 

anticipate that this number will 

decrease as applicants become more 

familiar with the eligibility process, as 

more data become available 

electronically, and as customer service 

resources evolve based on experience. 

Therefore, we estimate the time and 

effort for one individual to comply with 

this provision. We expect that this will 

take an individual one hour to gather 

the relevant documentation and enter 

the missing information online or 

contact the call center to provide the 

necessary information. Our estimate that 

it will take an individual one hour to 

gather the relevant documentation 

depends on whether or not the 

individual already has the necessary 

documentation on hand, or whether the 

documents are presently unavailable 

and the individual needs to spend 

additional time to gather the 

documentation. As such, it could take 

significantly less time if an individual 

already had the documents on hand, or 

potentially more time if certain 

documents were unavailable at the time 

an individual needed to complete the 

application. 

F. ICRs Related to Oversight and 

Financial Integrity Standards for State 

Exchanges (§ 155.1200 to § 155.1210) 

In subpart M of part 155, we describe 

the information collection and thirdparty disclosure standards related to the 

oversight and financial integrity of State 

Exchanges. 

Section 155.1200(a)(1)–(3) requires 

the State Exchange to follow GAAP and 

to monitor and report to HHS all 

Exchange-related activities. This 

includes keeping an accurate accounting 

of all Exchange receipts and 

expenditures. The burden associated 

with this reporting requirement is the 

time and effort needed to develop and 

submit Exchange-related activities to 

HHS. The State Exchanges will 

electronically maintain the information 

as a result of normal business practices; 

therefore, the burden does not include 

the time and effort needed to maintain 

the Exchange-related activity 

information. State Exchanges most 

likely will already have accounting 

systems in place to store accounting 

information. The burden associated 

with this requirement includes a 

computer programmer taking 8 hours (at 

$48.61 an hour) to modify the system to 

maintain and monitor the information 

required under § 155.1200(a)(1) through 

(3), an analyst taking 8 hours (at $58.05 

an hour) to pull the necessary data 

under § 155.1200(a)(1) through (3) in the 

State Exchange accounting system, and 

a senior manager taking 2 hours (at 

$77.00 an hour) to oversee the 

development and transmission of the 

reported data. We estimate that it will 

take 18 total hours at a cost of $1,007.28 

for each State Exchange. We estimate 

the total burden to be 324 hours for a 

total cost of $18,131.04 for all State 

Exchanges. 

Section 155.1200(b)(1) requires the 

State Exchange to submit a financial 

statement, in accordance with GAAP to 

HHS. The information under 

§ 155.1200(b) must be submitted at least 

annually by April 1 to HHS and must 

also be publicly displayed. The burden 

associated with this reporting 

requirement is the time and effort 

needed to develop and submit the 

financial statement to HHS. The State 

Exchanges will electronically submit the 

information. Therefore, the burden is 

the time and effort needed to develop 

and publically display the financial 

statement. The State Exchanges will 

electronically maintain the information 

as a result of normal business practices, 

therefore the burden does not include 

the time and effort needed to develop 

and maintain the financial information. 

The burden associated with this 

requirement includes a computer 

programmer taking 40 hours (at $48.61 

an hour) to design the financial 

statement report, an analyst taking 8 

hours (at $58.05 an hour) pulling the 

necessary data and inputting it into the 

financial statement report, and a senior 

manager taking 2 hours (at $77.00 an 

hour) overseeing the development and 

transmission of the reported data. We 

estimate a burden of 50 total hours for 

each State Exchange at a cost of 

$2,562.80, for a total cost of $45,410.40 

for all Exchanges. 

Section 155.1200(b)(2) requires the 

State Exchange to submit eligibility and 

enrollment reports to HHS. The State 

Exchanges will electronically maintain 

the information as a result of normal 

business practices, therefore the burden 

does not include the time and effort 

required to develop and maintain the 

source information. The burden 

associated with this reporting 

requirement includes the time and effort 

necessary for a computer programmer 

taking 40 hours (at $48.61 an hour) to 

design the report template, an analyst 

taking 8 hours (at $58.05 an hour) to 

compile the statistics for the report for 

submission to HHS, a privacy officer 

taking 8 hours (at $64.98 an hour) and 

senior manager taking 2 hours (at $77.00 

an hour) overseeing the development 

and submission of the reported data. 

The burden also includes the time and 

effort necessary to post the data on the 

State Exchange Web site. We estimate 

an initial year burden of 58 hours at a 

cost of $3,082.64 to each State Exchange 

and a total burden of 1,044 hours at a 

cost of $55, 487.52 for all State 

Exchanges. 

As discussed in § 155.1200(b)(3), the 

State Exchange will report performance 

monitoring data to HHS. The 

performance monitoring data includes 

information on financial sustainability, 

operational efficiency, and consumer 

satisfaction which will be reported on 

an annual basis. The State Exchanges 

will electronically maintain the 

information as a result of normal 

business practices developed under 

Establishment Grants from HHS for this 

purpose. Therefore the burden does not 

include the time and effort needed to 

develop and maintain the performance 

data. The burden associated with 

meeting the reporting requirement 

includes the time and effort necessary 

for a computer programmer taking 40 

hours (at $48.61 an hour) to design the 

report, for an analyst taking 12 hours (at 

$58.05 an hour) to pull data into the 

report and prepare for submission to 

HHS and for a senior manager taking 2 

hours (at $77.00 an hour) to oversee the 

development and transmission of the 

reported data. Section 155.1200(b) 

requires the State Exchange to submit to 

HHS and to display publicly financial, 

eligibility and enrollment reports and 

performance data at least annually. For 

those measures reported annually, we 

estimate that in the initial year a burden 

of 54 hours for the State Exchanges at 

a cost of $2,795.00 each and a total 

burden of $50,031.00. 

Section 155.1200(c)(1) through (3) 

direct the State Exchange to engage an 

independent audit/review organization 

to perform an external financial and 

programmatic audit of the State 

Exchange. The State Exchange must 

provide the results of the audit and 

identify any material weakness or 

significant deficiency and any intended 

corrective action. The burden associated 

with meeting this third party disclosure 

requirement includes the burden for an 


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analyst level employee taking 3 hours 

(at $48.61 an hour) to pull data into a 

report, the time and effort necessary for 

a health policy analyst taking 2 hours (at 

$58.05 an hour) to prepare the report of 

the audit results, and the time for senior 

management taking 1 hour (at $77.00 an 

hour) to review and submit to HHS. We 

estimate a burden of 6 hours for each 

State Exchange at a cost of $338.93 and 

a total burden of $6,100.74. 

As stated in § 155.1210(a), the State 

Exchange and its contractors and 

subcontractors must maintain for 10 

years, books, records, documents, and 

other evidence of accounting procedures 

and practices. Section 155.1210(b) 

specifics the records contain 

information concerning management 

and operation of the State Exchange’s 

financial and other record keeping 

systems. The records must include 

financial statements, including cash 

flow statements, and accounts 

receivable and matters pertaining to the 

costs of operation. Additionally, the 

records must contain any financial 

report filed with other Federal programs 

or State authorities. Finally, the records 

must contain data and records relating 

to the State Exchange’s eligibility 

verifications and determinations, 

enrollment transactions, appeals, plan 

variation certifications, QHP contracting 

data, consumer outreach, and Navigator 

grant oversight information. State 

Exchanges most likely already have 

systems in place to store records. The 

burden associated with this record 

keeping requirement includes the time 

and effort necessary for a network 

administrator taking 16 hours (at $46.86 

an hour) to modify the State systems to 

maintain the information required 

under § 155.1210(b), for a health policy 

analyst taking 8 hours (at $58.05 an 

hour) to enter the data under 

§ 155.1210(b) into the State Exchange 

record retention system, and for senior 

management taking 2 hours (at $73.41 

an hour) to oversee record collection 

and retention. We estimate that it will 

take 26 hours for the State Exchange to 

comply with this requirement for a total 

of 468 hours. We estimate one year 

burden for the State Exchanges at a cost 

of $1360.98 each and a total burden of 

$24,497.64. 

G. ICRs Related to Change of Ownership 

(§ 156.330) 

The QHP issuer must notify HHS of 

the change in a manner to be specified 

by HHS and provide the legal name and 

tax identification number of the new 

owner of the QHP and the effective date 

of the change of ownership. The 

information must be submitted at least 

30 days prior to the effective date of the 

change of ownership. The burden 

associated with the QHP issuer 

notifying HHS of a change of ownership 

includes a health policy analyst taking 

1 hour to draft a notice of change of 

ownership and 1 one hour for a senior 

manager to review the notice and 

transmit it electronically to HHS. We 

estimate that it will cost a QHP issuer 

$128.43 to comply with this reporting 

requirement. At this time, we cannot 

estimate the number of QHP issuers that 

will be reporting changes of ownership. 

When it becomes clearer as to the 

potential number that may report a 

change of ownership, we will update 

our estimates to reflect the potential 

number. 

H. ICRs Related to Oversight of CostSharing Reductions and Advance 

Payments of the Premium Tax Credit 

(§ 156.480) 

In proposed § 156.480(a), we propose 

to extend the standards set forth in 

proposed § 156.705 concerning 

maintenance of records to a QHP issuer 

in the individual market on State 

Exchange with respect to cost-sharing 

reductions and advance payments of the 

premium tax credit. We believe that the 

burden of maintaining records related to 

cost-sharing reductions and advance 

payments of the premium tax credit for 

QHP issuers in an FFE is already 

accounted for in the burden for 

proposed § 156.705, described 

elsewhere in the Collection of 

Information section of this proposed 

rule. On average, we estimate each QHP 

issuer in a State Exchange will incur a 

cost of approximately $2,232.54 to 

comply with this record maintenance 

requirement. This reflects 46 hours of 

work by an insurance operations analyst 

(at $38.49 an hour) and 6 hours by a 

senior manager (at $77 an hour), for a 

total of 52 burden hours. Based on our 

most recent estimates, we assume that 

there will be approximately 791 QHP 

issuers in the individual market on State 

Exchanges in 2014. Therefore, we 

estimate an aggregate burden of 41,132 

hours and a total cost of approximately 

$1,765,939.10 as a result of this 

requirement. 

In § 156.480(b), we propose that, for 

each benefit year, an issuer that offers a 

QHP in the individual market through a 

State Exchange or an FFE report to HHS 

annually, in a timeframe and manner 

required by HHS, summary statistics 

with respect to cost-sharing reductions 

and advance payments of the premium 

tax credit. This proposed provision will 

permit HHS to obtain critical 

information regarding cost-sharing 

reductions and advance payments of the 

premium tax credit across a broad range 

of issuers to identify systemic problems 

and errors, without requiring intrusive 

annual investigations. We believe that 

QHP issuers will already have the 

information and data systems in place 

necessary to generate a summary report, 

and that there will only be a small 

additional burden as a result of this 

submission requirement. We estimate 

that it will take an insurance operations 

analyst 16 hours (at $38.49 an hour) 

annually and one senior manager 2 

hours (at $77 an hour) to gather 

summary information and prepare a 

report for submission to HHS. 

Therefore, we estimate an additional 

burden of 21,600 hours and total costs 

of approximately $923,808 for 1,200 

QHP issuers ($769.84, on average, for 

each QHP issuer) as a result of this 

requirement. 

I. ICRs Related to Oversight and 

Financial Integrity Standards for Issuers 

of Qualified Health Plans in the 

Federally-Facilitated Exchange 

(§ 156.705 to § 156.715) 

The burden estimates for the 

collections of information in Part 156, 

Subpart H, of the regulation reflect the 

assumption that an FFE will include 

409 QHP issuers. The labor categories 

and salary estimates used to calculate 

the cost burden of these collections on 

issuers are derived from the Bureau of 

Labor Statistics’ (BLS) May 2012 

Occupational Employment Statistics 

data for selected occupations. These 

burden estimates generally reflect 

burden for the first year. We anticipate 

that the burden in subsequent years will 

be significantly lower because issuers 

will have met many of the requirements 

in the regulation, including developing 

automated processes that will reduce 

the total time, effort, and financial 

resources they need to expend in order 

to respond to the collections in this 

subpart. For this reason, these estimates 

should be considered an upper bound of 

burden for issuers. 

Section 156.705 provides that issuers 

offering QHPs in an FFE must maintain 

all documents and records (whether 

paper, electronic or other media), and 

other evidence of accounting procedures 

and practices necessary for HHS to 

conduct activities necessary to 

safeguard the financial and 

programmatic integrity of the FFEs. 

Such activities include: (1) Periodic 

auditing of the QHP issuer’s financial 

records, including data related to the 

QHP issuer’s ability to bear the risk of 

potential financial losses; and (2) 

compliance reviews and other 

monitoring of a QHP issuer’s 

compliance with all Exchange standards 

applicable to issuers offering QHPs in 


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the FFEs listed in part 156. These 

standards are limited to Exchangespecific records as applicable to the 

FFEs, and are not enforced by States as 

primary regulators. This standard 

mirrors the maintenance of records 

standard applicable to State Exchanges 

and set forth in § 155.1210. The burden 

includes utilizing existing technology 

and systems to process and maintain 

this information. We estimate that it 

will take 100 hours at a cost of 

$4,420.60 for a QHP issuer to maintain 

these records for a total of 30,000 hours 

and $1,326,180.00. 

Section 156.705(d) provides that QHP 

issuers must make all records described 

in paragraph (a) of this section available 

to HHS, the OIG, the Comptroller 

General, or their designees, upon 

request. In estimating the annual hour 

and cost burden on QHP issuers of 

making these records available to such 

authorities upon request, we assumed 

that such requests would normally be 

made in connection with a formal audit 

or compliance review or a similar 

process. Our burden estimates for this 

section address the hour and cost 

burden of making records available to 

HHS, the OIG, the Comptroller General, 

or their designees, for audit. Our 

estimates reflect our assumptions that 

about 47 QHP issuers would be subject 

to a formal audit in a given year and that 

the burden on issuers of making the 

records available would include the 

time, effort, and associated cost of 

compiling the information, reviewing it 

for completeness, submitting it to the 

auditor(s), and participating in 

telephone or in-person interviews. We 

anticipate using a risk-based approach 

to selection of the majority of QHP 

issuers for compliance review so that 

burdens to the issuer community would 

generally be linked to the QHP issuers’ 

risk. We estimate it will take 90 hours 

at a cost of $4,221.20 for an issuer to 

make their records available for an audit 

for a total of 9,000 hours and 

$422,120.00 across all QHP issuers 

subject to this requirement, which we 

estimate at an upper end as 100 issuers. 

Section 156.715 establishes the 

general standard that QHP issuers are 

subject to compliance reviews. Our 

burden estimates for § 156.715 address 

the estimated annual hour and cost 

burden on QHP issuers of complying 

with the records disclosure 

requirements associated with 

compliance reviews conducted by an 

FFE. 

Section 156.715 provides standards 

for compliance reviews in the FFEs, 

stating that QHP issuers offering QHPs 

in the FFEs may be subject to 

compliance reviews. This section also 

describes the categories of records and 

information issuers must make available 

to an FFE in conducting such reviews. 

Compliance reviews evaluate a QHP 

issuer’s compliance with the Affordable 

Care Act and applicable regulations. 

Compliance reviews will target high-risk 

QHP issuers and not every issuer will be 

reviewed each year. The results of 

compliance reviews will also provide 

insight into trends across the 

compliance statuses of QHP issuers, 

enabling HHS to prioritize areas of 

oversight and technical assistance. 

We assume that HHS will conduct 

desk reviews of 31 QHP issuers each 

year. For each QHP issuer desk review 

we estimate an average of 40 hours for 

administrative work to assemble the 

requested information, 19.5 hours to 

review the information for 

completeness, and 30 minutes to submit 

the information to HHS. There will also 

be an additional 10 hours to spend on 

phone interviews conducted by the 

reviewer and 2 hours to spend speaking 

through processes with the reviewer. 

We estimate it will take 72 hours at a 

cost of $2,877.40 for an issuer to make 

information available to HHS for a desk 

review for a total of 2,232 hours and 

$89,199.40 across all issuers that may be 

subject to this information collection 

requirement. 

We assume that HHS will conduct 

onsite reviews of 16 QHP issuers each 

year. For each onsite review we estimate 

it will take an average of 40 hours for 

administrative work to assemble the 

requested information, 19.5 hours to 

review the information for completeness 

and 30 minutes to submit the 

information to HHS in preparation for 

an onsite review. An onsite review 

requires an additional 2 hours to 

schedule the onsite activities with the 

compliance reviewer, 4 hours for 

introductory meeting, 8 hours to tour 

reviewers onsite, 10 hours of interview 

time, 2 hours to walk through processes 

with the reviewer, and 4 hours for 

concluding meetings. This is a total of 

approximately 60 hours of preparation 

time and an additional 30 hours for 

onsite time for each QHP. We estimate 

it will take 90 hours at a cost of 

$3,566.84 for an issuer to make 

information available to HHS for an 

onsite review. We estimate that the 

burden for all respondents that may be 

subject to this information collection 

will be 1,440 hours at a cost of 

$57,069.44. 

In cases in which HHS could 

potentially require clarification around 

submitted information, HHS may need 

to contact QHP issuers within 30 days 

of information submission. This would 

be the case for approximately 20 issuers. 

We estimate it will take an issuer 2 

hours at a cost of $53.75 to respond to 

questions for a total of 40 hours and 

$1,075.00. 

J. ICRs Regarding Enforcement 

Remedies in Federally-Facilitated 

Exchanges (§ 156.800 to § 156.810) 

Subpart I of Part 156 discusses the 

enforcement remedies in the FFEs. 

Section 156.800 authorizes HHS to 

impose sanctions on QHP issuers in an 

FFE that are not in compliance with 

Federal standards. These sanctions may 

be in the form of a CMP, as set forth in 

§ 156.805; or decertification of QHPs, as 

set forth in § 156.810. The burden 

estimates for the collections of 

information in this Part reflect our 

assumption that there will be 409 QHP 

issuers and 12,000–18,000 QHPs in all 

FFEs. 

Section 156.805(a) sets forth the 

general process and bases for imposing 

a CMP on issuers offering QHPs in an 

FFE. As explained in the preamble to 

Subpart I, HHS intends to work 

collaboratively with QHP issuers, where 

possible, especially during the first plan 

year, when problems arising concerning 

compliance with applicable standards. 

CMPs will be imposed only for serious 

issues of non-compliance. We expect to 

provide technical assistance to issuers, 

as appropriate, to assist them in 

maintaining compliance with the 

applicable standards. We also plan to 

coordinate with States in our oversight 

and enforcement activities to avoid 

inappropriately duplicative enforcement 

efforts. Consequently, we anticipate that 

CMPs will be rare, especially in the first 

benefit year. For purposes of calculating 

the estimated burden, we assume that 

one issuer each year will be subject to 

a CMP and that the issuer will request 

an appeal of the enforcement action. We 

seek comment on these assumptions. 

Section 156.810 sets forth the bases 

for the decertification of a QHP in an 

FFE and the general process for 

decertification. As with CMPs, HHS 

expects that decertification will be 

relatively infrequent, and reserved for 

only serious instances of noncompliance with applicable standards. 

Therefore, for purposes of this estimated 

burden, we assume that only one QHP 

in an FFE will be decertified each year. 

We assume that the issuer offering the 

decertified QHP will appeal the 

decertification action. We solicit 

comments on these assumptions. 

Because we anticipate that fewer than 

10 issuers would be subject to a 

decertification or CMP in a given year, 

we have not calculated a burden 

estimate. If the number of issuers 

approaches 10, we will submit a burden 


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estimate at that time. We solicit 

comments on this section and these 

assumptions. 

K. ICRs Regarding Administrative 

Review of QHP Issuer Sanctions in a 

Federally-Facilitated Exchange 

(§ 156.901 to § 156.963) 

Subpart J of Part 156 sets forth the 

administrative process for issuers 

subject to a CMP or decertification of a 

QHP offered by the issuer to appeal the 

enforcement action. In this process, an 

ALJ decides whether there is a basis for 

HHS to assess a CMP against the issuer 

and whether the amount of an assessed 

penalty is reasonable, or whether there 

is a basis for decertifying a QHP offered 

by the issuer, as applicable. Section 

156.905 (intended to parallel 45 CFR 

150.405) provides that a party has a 

right to a hearing before an ALJ if it files 

a valid request for a hearing within 30 

days after the date of issuance of HHS’s 

notice of proposed assessment 

decertification. An issuer’s request for a 

hearing must include the information 

listed in § 156.907. 

The burden associated with this 

request includes the time and effort 

needed by the issuer to create the 

written request and submit it 

electronically to the appropriate entity. 

The associated costs are labor costs for 

gathering the necessary background 

information and then preparing and 

submitting the written statement. The 

burden estimates for the collections of 

information in Part 156, Subpart J, of the 

regulation reflect the assumption that 

there will be a total of 409 QHP issuers 

in all FFEs. 

We base our burden estimate on the 

assumptions that one issuer will be 

subject to CMPs and that one issuer will 

have a QHP that it offers in an FFE 

decertified. We assume that both issuers 

will choose to exercise their right to a 

hearing and will submit a valid request 

for hearing. The hours involved in 

preparing this request may vary; for the 

purpose of this burden estimate we 

estimate an average of 24 hours will be 

needed: 10 hours for the compliance 

officer to gather and assemble necessary 

background materials and prepare the 

written request, 12 hours for an attorney 

to review the background materials and 

written request and provide 

recommendations to the senior manager, 

and 2 hours for the senior manager to 

discuss the attorney’s recommendations 

and submit the written request 

electronically. We estimate that it will 

take 24 hours at a cost of $1,649.02 for 

an issuer to prepare and submit a 

request for a hearing for a total of 48 

hours and $3,298.04for both issuers. 

This estimate includes any statement of 

good cause under § 156.805(e)(3), if 

applicable. We solicit comments on 

these assumptions. 

As stated in § 156.905, an issuer has 

the right to a hearing before an ALJ if 

the issuer files a request for a hearing 

that complies with § 156.907(a) within 

30 days of the issuance of a notice of 

proposed assessment or decertification 

from HHS under § 156.805 or § 156.810. 

The request for a hearing must identify 

any factual or legal bases for the 

assessment or decertification with 

which the issuer disagrees. It must also 

describe with reasonable specificity the 

basis for the disagreement, including 

any affirmative facts or legal arguments 

on which the respondent is relying. The 

request must also identify the relevant 

notice of assessment or decertification 

by date and attach a copy of the notice. 

An issuer’s request for a hearing must 

include the information listed in 

§ 156.907. The burden associated with 

this request includes the time and effort 

needed by the issuer to create the 

written request and submit it 

electronically to the appropriate entity. 

The only associated costs are labor costs 

for gathering the necessary background 

information and then preparing and 

submitting the written request. 

Because we only estimate that one 

issuer per year would appeal a CMP and 

one issuer will have its QHP offered in 

an FFE decertified, we do not include 

this burden estimate in our overall 

calculation of burden for this proposed 

rule. We seek comment on this 

assumption. 

L. ICRs Regarding Consumer Cases 

Related to Qualified Health Plans and 

Qualified Health Plan Issuers 

(§ 156.1010) 

In subpart K of part 156, we describe 

the information collection requirements 

that pertain to the resolution of 

consumer cases related to QHPs and 

QHP issuers. Section 156.1010(e) states 

that QHP issuers must record a clear 

and concise narrative documenting the 

resolution of a consumer case in the 

HHS-developed casework tracking 

system. The burden associated with this 

requirement is the time and effort 

necessary for a QHP issuer to gather the 

necessary information related to the 

consumer complaint, draft the narrative, 

and enter the narrative into the 

electronic HHS-developed case tracking 

system. For the purpose of estimating 

burden, we estimate 1,200 issuers. We 

estimate that it will take approximately 

60 hours annually at a cost of $8,580.87 

for the time and effort to develop and 

submit the narrative to HHS for a total 

of 72,000 hours and a cost of 

$10,297,044.00 for all respondents. 

M. ICRs Related to Quality Standards 

(§ 156.1105) 

In subpart L of part 156, we describe 

the information collection and 

disclosure requirements that pertain to 

the approval of enrollee satisfaction 

survey vendors. The burden estimate 

associated with these disclosure 

requirements includes the time and 

effort required for survey vendors to 

develop, compile, and submit the 

application information and any 

documentation necessary to support 

oversight in the form and manner 

required by HHS. HHS is developing a 

model enrollee satisfaction survey 

vendor application that will include 

data elements necessary for HHS review 

and approval. In the near future, HHS 

will publish the model application and 

will solicit public comment. At that 

time, and per the requirements outlined 

in the PRA, we will estimate the burden 

on survey vendors for complying with 

this provision of the regulation. We 

solicit comment on the burden for the 

application and review process for these 

entities. 

N. ICRs Related to Confirmation of 

Payment and Collection Reports 

(§ 156.1210) 

In § 156.1210, we propose that, within 

15 calendar days of the date of a 

payment and collections report from 

HHS, the issuer must, in a format 

specified by HHS, either confirm to 

HHS that the payment and collections 

report accurately lists for the timeframe 

specified in the report applicable 

payments owed by the issuer to HHS 

and the payments owed to the issuer by 

HHS; or describe to HHS any inaccuracy 

it identifies in the payment and 

collections report. We believe that 

issuers will generally be able to perform 

this confirmation automatically, and 

that there will only be a small 

additional burden as a result of this 

requirement. We estimate that it will 

take an insurance operations analyst 1 

hour (at $38.49 an hour) monthly to 

make the comparison and note any 

discrepancies to HHS (approximately 

$461.88 for each issuer annually). Based 

on our most recent estimates, we believe 

that 2,400 issuers will be affected by 

this requirement, resulting in aggregate 

burden of approximately $1,108,512. 

O. ICRs Related to Enrollment Process 

for Qualified Individuals (§ 156.1230) 

Proposed § 156.1230(a)(1)(ii) would 

require issuers who pursue the option to 

use their Web site to enroll qualified 

individuals into QHPs directly, to 

provide information on available QHPs. 

The QHP information required to be 


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posted on the Web site would include 

premium and cost-sharing information, 

the summary of benefits and coverage, 

levels of coverage (‘‘metal levels’’) for 

each QHP, results of the enrollee 

satisfaction survey, quality ratings, 

medical loss ratio information, 

transparency of coverage measures, and 

a provider directory. Under proposed 

§ 156.1230(a)(1)(i), an issuer would also 

be required to direct an individual to 

complete an application with the 

Exchange and receive eligibility 

determinations from the Exchange to 

allow for an accurate plan selection 

process. Additionally, 

§ 156.1230(a)(1)(iv) would require the 

issuer Web site to inform applicants 

about the availability of other QHP 

products available through an Exchange 

and to display a Web link to the 

appropriate Exchange Web site. Finally, 

an issuer would submit enrollment 

information back to the Exchange. 

The burden for this requirement 

would be for the issuer to develop its 

own template and code and integrate it 

with the Exchange. After this initial 

step, the burden on the issuer would be 

to maintain the Internet Web site by 

populating the Web site with 

information collected per information 

collection requirements in this rule and 

future rulemaking by HHS. We do not 

have an estimate on the number of 

issuers who will choose to utilize the 

direct to enrollment approach subject to 

these third-party disclosure 

requirements. We estimate that it will 

take 610 hours at a cost of $32,104.25 

for an issuer to meet these third-party 

disclosure requirements. 

Proposed § 156.1230(a)(2) would 

allow qualified individuals to apply for 

an eligibility determination or 

redetermination for coverage through 

the Exchange and insurance 

affordability programs, and select QHPs 

with the assistance of an issuer 

customer service representative if the 

issuer customer service representative 

complies with the terms of an agreement 

between the issuer and the Exchange. 

The agreement would ensure that an 

issuer customer service representative 

receives training and provide additional 

standards governing the conduct of 

issuer customer service representatives. 

The burden for this requirement 

would include the time and effort 

necessary to develop training materials 

for the customer service representative 

and the time and effort necessary to 

amend the agreement between the issuer 

and the Exchange if the Exchange 

implements this provision. 

The Exchange would be required to 

develop training materials for issuer 

staff. We assume that the 18 State 

Exchanges will implement this 

standard. However, we expect 

Exchanges would use training materials 

that will either be developed by HHS for 

other types of assister training, 

including agent/broker training or use 

their own training materials that they 

have already developed for other 

assisters. Therefore, we anticipate that 

the time and costs associated with 

developing a training program for 

issuers will be minimal. We estimate it 

will take a training specialist 10 hours 

at $26.64 an hour and a training and 

development manager 5 hours at $64.43 

an hour to develop training materials for 

the customer service representative, for 

a total time burden of 15 hours. The 

estimated cost burden for developing 

training materials for issuer customer 

service representatives for each 

Exchange is therefore $588.55 with a 

total cost of $10,593.90 across all 

respondents if 18 State Exchanges 

undertake these activities. 

As specified in § 156.1230(a)(2), each 

Exchange would amend its agreement 

with every issuer wanting its staff to 

assist consumers. We assume that the 18 

State Exchanges will implement this 

standard. We estimate it will take a 

health policy analyst 20 hours at $49.35 

an hour and a senior manager 10 hours 

at $79.08 an hour to amend an 

agreement with the issuer, for a total 

time burden of 30 hours. The estimated 

burden for amending the agreements for 

each Exchange is therefore 30 hours at 

a cost of $1,777.87 and a total cost of 

$32,001.66. 

If you comment on these information 

collection and recordkeeping 

requirements, please do either of the 

following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

[CMS–9957–P], Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

IV. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

V. Regulatory Impact Analysis 

In accordance with the provisions of 

Executive Order 12866, this rule was 

reviewed by the OMB. 

A. Summary 

As stated earlier in this preamble, this 

proposed rule sets financial integrity 

and oversight standards with respect to 

Exchanges; QHP issuers in an FFE; and 

States in regards to the operation of risk 

adjustment and reinsurance. It also 

proposes additional standards for 

special enrollment periods; survey 

vendors that may conduct enrollee 

satisfaction surveys on behalf of QHP 

issuers in Exchanges; issuer 

participation in an FFE; and States’ 

operation of the SHOP. Finally, it 

proposes additional standards for 

SHOPs, agents and brokers and 

customer service representatives; 

privacy and security; geographic rating 

areas; and guaranteed availability and 

renewability. 

HHS has crafted this proposed rule to 

implement the protections intended by 

Congress in an economically efficient 

manner. We have examined the effects 

of this proposed rule as required by 

Executive Order 12866 (58 FR 51735, 

September 1993, Regulatory Planning 

and Review), the Regulatory Flexibility 

Act (RFA) (September 19, 1980, Pub. L. 

96–354), section 1102(b) of the Social 

Security Act, the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4), 

Executive Order 13132 on Federalism, 

and the Congressional Review Act (5 

U.S.C. 804(2)). In accordance with OMB 

Circular A–4, HHS has quantified the 

benefits and costs where possible, and 

has also provided a qualitative 

discussion of some of the benefits and 

costs that may stem from this proposed 

rule. 

B. Executive Orders 13563 and 12866 

Executive Order 12866 (58 FR 51735) 

directs agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects; distributive impacts; and 

equity). Executive Order 13563 (76 FR 

3821, January 21, 2011) is supplemental 

to and reaffirms the principles, 

structures, and definitions governing 

regulatory review as established in 

Executive Order 12866. 

Section 3(f) of Executive Order 12866 

defines a ‘‘significant regulatory action’’ 

as an action that is likely to result in a 

proposed rule—(1) Having an annual 

effect on the economy of $100 million 


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or more in any one year, or adversely 

and materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year), and a 

‘‘significant’’ regulatory action is subject 

to review by the OMB. OMB has 

designated this proposed rule as a 

‘‘significant regulatory action.’’ Even 

though it is not certain whether it would 

have economic impacts of $100 million 

or more in any one year, HHS has 

provided an assessment of the potential 

costs and benefits associated with this 

proposed regulation. 

1. Need for Regulatory Action 

Starting in 2014, qualified individuals 

and qualified employers will be able to 

use coverage provided by QHPs— 

private health insurance that has been 

certified as meeting certain standards— 

through Exchanges. A transitional 

reinsurance program and a permanent 

risk adjustment program would be in 

place to ensure premium stability for 

health insurance issuers as enrollment 

increases and issuers enroll high-risk 

individuals. This proposed rule would 

establish general oversight requirements 

for State-operated reinsurance and risk 

adjustment programs; establish 

oversight of issuers inside and outside 

of the Exchange when HHS operates risk 

adjustment or reinsurance on behalf of 

a State; and establish oversight and 

monitoring of State Exchanges, FFEs, 

SHOPs (both State Exchanges and FFEs) 

and issuers of QHPs, specifically with 

respect to financial integrity, 

maintenance of records, and privacy 

and security of PII. This proposed rule 

would also restrict the use of funds for 

administrative expenses generated for 

State Exchanges and State-operated 

reinsurance programs; propose 

procedures for oversight of advance 

payments of the premium tax credit and 

cost-sharing reductions; propose 

procedures to ensure the accuracy of 

data collection, calculations, and 

submissions; allow a State to establish 

and operate only the SHOP and 

establish standards for SHOPs; establish 

requirements for customer service 

representatives and agents and brokers 

who assist consumers; establish 

requirements for enrollee satisfaction 

survey vendors; and propose additional 

standards for special enrollment 

periods. 

2. Summary of Impacts 

In accordance with OMB Circular A– 

4, Table V.1 below depicts an 

accounting statement summarizing 

HHS’s assessment of the benefits and 

costs associated with this regulatory 

action. The period covered by the RIA 

is 2014–2017. 

HHS anticipates that the provisions of 

this proposed rule will ensure smooth 

operation of Exchanges, integrity of the 

reinsurance and risk adjustment 

programs, safeguard the use of Federal 

funds, prevent fraud and abuse, increase 

access to healthcare coverage and 

provide consumer protections. Affected 

entities such as States, QHP issuers, 

agents, and brokers would incur costs to 

maintain records, submit reports to HHS 

and Exchanges, comply with privacy 

and security standards for PII, provide 

records for compliance reviews, and to 

comply with enforcement actions. In 

accordance with Executive Order 12866, 

HHS believes that the benefits of this 

regulatory action justify the costs. 

TABLE V.1—ACCOUNTING TABLE

Benefits: 

Qualitative: 

* Ensure integrity of reinsurance and risk adjustment programs, smooth functioning of State Exchanges and FFEs. 

* Prevent fraud and abuse. 

* Safeguard the use of Federal funds provided as cost-sharing reductions and advance payments of the premium tax credit and provide value 

for taxpayers’ dollars. 

* Enable a State to focus on effective implementation of the SHOP by allowing it to operate a State-based SHOP while the Exchange is operated as an FFE. 

* Increased access to fair and unbiased customer assistance and information about coverage options for consumers, enabling consumers to 

make informed decisions. 

* Ensure privacy and security protections. 

* Ensure prompt refund of any excess premium paid or any excess cost sharing. 

Estimate Year dollar Discount 

rate percent 

Period 

covered 

Costs: 

Annualized Monetized ($/year) ............................. $23.3 million 1 ....................................................... 2013 7 2014–2017 

$23.2 million 2 ....................................................... 2013 3 2014–2017 

Annual costs related to financial oversight, maintenance of records and reporting requirements for State Exchanges and State-operated reinsurance and risk-adjustment programs; record retention requirements for contributors and recipients for reinsurance programs; audit costs for 

State programs—Exchanges, risk adjustment and reinsurance; costs for QHP issuers related to reporting requirements, record maintenance, 

audits, Web site standards, training for customer service representatives, and documentation of resolution of consumer cases; costs to agents 

and brokers and QHPs related to enforcement actions. 


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37 ‘‘CBO’s February 2013 Estimate of the Effects 

of the Affordable Care Act on Health Insurance,’’ 

Congressional Budget Office, February 2013. 

TABLE V.1—ACCOUNTING TABLE—Continued 

Qualitative: 

* Costs to Exchanges and non-Exchange entities associated with FFEs and agents and brokers assisting consumers, to comply with privacy 

and security standards. 

* Costs incurred by enrollee satisfaction survey vendors related to annual application and meeting HHS standards. 

* Possible reduction in costs for SHOPs due to elimination of the requirement to accept paper applications and applications by telephone. 

* Cost incurred by SHOPs to develop uniform standards for the termination of a group’s coverage in a QHP and to keep sufficient records of terminations and reasonable accommodations. 

Note: 1. Approximately $20.6 million of these costs are estimated in section III and $2.7 million are estimated below in the RIA, including the 

audit costs in Table V.2. 2. Approximately $20.5 million of these costs are estimated in section III and $2.7 million are estimated below in the 

RIA, including the audit costs in Table V.2. 

3. Anticipated Benefits and Costs 

Starting in 2014, individuals and 

small businesses will be able to use 

health insurance coverage purchased 

through Exchanges. The Congressional 

Budget Office estimated that the number 

of people enrolled in coverage through 

Exchanges will increase from 7 million 

in 2014 to 26 million in 2017.37

Exchanges will create competitive 

marketplaces where qualified 

individuals and qualified employers can 

shop for insurance coverage, and are 

expected to reduce the unit price of 

quality insurance for the average 

consumer by pooling risk and 

promoting competition. 

The proposed rule would specify the 

standards and processes for the 

oversight and accountability of entities 

responsible for operations of the 

Exchanges and reinsurance and risk 

adjustment programs. Affected entities 

would include States, in their roles of 

establishing and operating Exchanges 

and SHOPs and administering 

reinsurance and risk adjustment 

programs; FFEs and FF-SHOPs; issuers 

of QHPs; health insurance issuers 

offering coverage both inside and 

outside of the Exchange when HHS 

operates risk adjustment or reinsurance 

on behalf of the State; contractors or 

other subsidiaries of these 

organizations; and insurance agents and 

brokers. 

a. Benefits 

This proposed rule would implement 

oversight, record maintenance and 

enforcement provisions that would 

ensure integrity of the reinsurance and 

risk adjustment programs, State 

Exchanges and FFE functions; prevent 

fraud and abuse; and establish 

consumer protection measures. 

The proposed rule includes 

provisions that would create a system of 

oversight, financial integrity and 

program integrity in the Exchanges and 

the risk adjustment, reinsurance and 

risk corridors programs. The proposed 

oversight requirements for HHSoperated and State-operated reinsurance 

and risk-adjustment programs would 

ensure that these programs are effective 

and efficient, and use program funds 

appropriately. The proposed standards 

would also ensure that Federal funds 

are used appropriately in the 

administration of State Exchange 

activities. By monitoring financial 

reports and overseeing State Exchange 

activities, HHS would safeguard the use 

of Federal funds provided as costsharing reductions and advance 

payments of the premium tax credit and 

provide value for taxpayers’ dollars. 

The proposed rule would also allow 

a State to operate a State-based SHOP 

while the Exchange is operated as an 

FFE. This would enable the State to 

focus on effective implementation of the 

SHOP and gain experience that would 

help prepare it to operate both a SHOP 

and State Exchange in the future. Each 

SHOP would also be required to 

develop uniform standards for the 

termination of coverage in a QHP, 

starting in 2015, unless the SHOP offers 

employee choice before then. 

Standardizing the timing, form, and 

manner of a group’s termination in the 

SHOP would ensure that an employer 

offering coverage through multiple 

health insurance issuers (under the 

SHOP ‘employee choice’’ model) will be 

subject to uniform, predictable 

termination policies. 

The proposed rule would implement 

consumer protections that would ensure 

privacy and security of PII, increased 

access to customer assistance, 

information about coverage options and 

allow consumers to make informed 

coverage decisions. Permitting issuer 

customer service representatives to 

assist individuals with applying for 

eligibility determinations or 

redeterminations for coverage through 

the Exchange would increase assistance 

available to consumers, while the 

training and compliance standards 

would ensure that such assistance is fair 

and unbiased. The proposed rule would 

establish requirements for customer 

service representatives and agents and 

brokers who assist consumers, requiring 

them to comply with registration and 

training requirements. The proposed 

rule would also establish standards 

under which HHS could terminate its 

relationship with agents and brokers in 

the FFE, to help ensure that agents and 

brokers continue to meet Exchange 

standards. In addition, the requirement 

for QHP issuers conducting direct 

enrollment to provide standardized 

comparative information on their Websites would ensure that consumers can 

readily differentiate and compare plan 

choices leading to informed decisions. 

Consumers without bank accounts or 

credits cards would also have a variety 

of payment options. 

The provisions of this rule would also 

ensure that enrollees are promptly 

refunded any excess premium paid or 

any excess cost sharing they should not 

have paid. Individuals harmed by 

misconduct on the part of non-Exchange 

entities would also be eligible for a 

special enrollment period. A QHP 

would also be required to promptly 

reassign an enrollee improperly 

assigned to a plan variation (or standard 

plan without cost-sharing reductions), 

minimizing consumer harm. 

The annual application requirement 

for enrollee satisfaction survey vendors 

would allow HHS to ensure that these 

entities participate in relevant training 

and post-training certification, follow 

protocols related to quality assurance 

and the use of HHS data, and adhere to 

privacy and security standards when 

handling data. This would help to 

ensure that ultimately the enrollee 

satisfaction survey data are reliable and 

valid and that the information is 

sufficiently protected. 

The proposed enforcement actions 

such as CMPs and decertification of a 

QHP, termination of agent and broker 

agreement for participation in the 


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individual market of an FFE, would 

improve program performance, reduce 

non-compliance by QHPs and agents 

and brokers, and decrease the likelihood 

of errors and adverse outcomes for 

consumers. 

b. Costs 

Affected entities would incur costs to 

comply with the provisions of this 

proposed rule. Costs related to 

information collection requirements 

subject to PRA are discussed in detail in 

section III and include administrative 

costs incurred by States, issuers and 

agents and brokers related to record 

maintenance and reporting 

requirements; oversight and financial 

integrity standards; enforcement 

actions; enrollment process for qualified 

individuals; and training requirements . 

In this section we discuss other costs 

related to the proposed provisions. 

States operating reinsurance programs 

would be required to maintain records. 

The costs related to this provision are 

generally accounted for in the RIA of the 

Payment Notice and are not included in 

this RIA. States operating reinsurance 

would be required to keep an accurate 

accounting for each benefit year, of all 

reinsurance funds received from HHS 

for reinsurance payments and for 

administrative expenses, as well as all 

claims for reinsurance payments from 

issuers of reinsurance-eligible plans, all 

payments made to those issuers, and all 

administrative expenses incurred. Stateoperated reinsurance programs will 

already have a system in place to track 

reinsurance funds received from HHS, 

claims from and payments to issuers, 

and expenses incurred to operate the 

reinsurance program. The cost for States 

operating reinsurance to maintain any 

records associated with the reinsurance 

program was previously estimated in 

the RIA of the Payment Notice, and we 

believe that the administrative costs 

associated with this requirement are 

generally accounted for in that estimate. 

State-operated reinsurance programs 

would submit to HHS annually and 

make public a summary report of their 

program operations, which would 

include a summary of the accounting 

kept pursuant to proposed § 153.260(a). 

We assume that the data already 

collected and used to report to issuers 

and HHS would be the same used to 

prepare this annual report. Therefore, 

the cost associated with this 

requirement is the incremental time and 

cost to prepare an annual report to HHS 

and the public on program operations. 

We estimate it will take insurance 

management analysts 16 hours (at $51 

per hour) and a senior manager 2 hours 

(at $77 per hour) to prepare the report. 

Therefore, we estimate it would cost 

each State that operates reinsurance 

approximately $970 to submit this 

report to HHS. Because two States will 

operate reinsurance in the 2014 benefit 

year, we estimate that an aggregate cost 

of $1,940 as a result of this requirement 

in the first year. We note that HHS will 

provide a portion of the reinsurance 

contributions it collects to a State 

operating reinsurance for the purposes 

of supporting State administration of 

reinsurance payments, which would 

likely cover the costs associated with 

this requirement. 

A State operating a risk adjustment 

program would be directed to maintain 

documents and records relating to the 

risk adjustment program, whether 

paper, electronic or in other media, for 

each benefit year for at least 10 years, 

and make them available upon request 

from HHS, the OIG, the Comptroller 

General, or their designees, to any such 

entity. The documents and records must 

be sufficient to enable the evaluation of 

a State-operated risk adjustment 

program’s compliance with Federal 

standards. States would also be directed 

to ensure that their contractors, 

subcontractors, and agents maintain and 

make those documents and records 

available upon request from HHS, the 

OIG, the Comptroller General, or their 

designees. States operating risk 

adjustment programs should already 

have the documents and records of 

accounting procedures needed for 

periodic audits. Therefore we estimate 

that the additional burden associated 

with this requirement is the time, effort, 

and additional labor cost required to 

maintain and archive the records. We 

assume that it would take an insurance 

operations analyst 10 hours (at $38.49 

an hour) to maintain records. Therefore, 

the average cost for each state would be 

approximately $385. Because one State 

will operate risk adjustment for the 2014 

benefit year, we estimate an aggregate 

cost of $385 to comply with this 

requirement in the first year. 

A State operating a risk adjustment 

program would be required to submit by 

December 31st of the first benefit year 

an interim summary report on the first 

10 months of risk adjustment activities, 

in order to obtain re-certification for the 

third benefit year. The cost of 

complying with this provision is the 

time and effort to write the interim 

report and submit it to HHS. We 

estimate it would take an insurance 

management analyst 16 hours (at $51 

per hour) and a senior manager 2 hours 

(at $77 per hour) to prepare the interim 

summary report. Therefore, we estimate 

it would cost each state operating risk 

adjustment $970 to submit this report to 

HHS (an aggregate cost of $970 in the 

2014 benefit year). A State operating a 

risk adjustment program would submit 

and make public, a summary report of 

its risk adjustment program operations 

for each benefit year after the first 

benefit year for which the State operates 

the program. We propose that this 

summary report include the results of a 

programmatic and financial audit for 

each benefit year conducted by an 

independent qualified auditing entity. 

We believe the cost of this annual report 

would be the same as the cost of 

producing the interim first-year report 

above, except for the cost of audits 

required in subsequent years, and these 

annual audit costs are estimated later in 

this RIA. These estimates also include 

the administrative costs related to the 

requirement for State-operated risk 

adjustment programs to keep accurate 

accounting for each benefit year of all 

receipts and expenditures related to risk 

adjustment payments, charges, and 

administration of the program. 

States would face a variety of costs 

due to the monitoring requirements in 

this proposed rule. Conducting 

oversight of the Exchanges, Stateoperated risk adjustment and 

reinsurance programs, administration of 

the advance payments of the premium 

tax credit or cost-sharing reductions, 

and other activities require independent 

external audits, investigations, 

rectification of errors, and the 

development of summary reports which 

would be submitted to HHS. The 

estimated total audit costs for State 

reinsurance, risk adjustment and 

Exchange programs are presented in 

Table V.2. It is expected that 18 States 

will establish State Exchanges in 2014 

and we assume that number will stay 

the same during the period covered by 

the RIA. We also assume that each State 

would conduct a financial audit and a 

programmatic audit annually, which 

would encompass reinsurance and risk 

adjustment programs. Financial audit 

costs are estimated based on prices 

among the big four audit firms for 

governmental entities of similar size to 

those of the anticipated State Exchanges 

for a financial statement audit and 

Yellowbook Report (report on internal 

controls) that reflects different levels of 

cost for small, medium, and large 

entities, for entities with low, medium, 

and high risk. Programmatic audit 

estimates reflect the experience of 

Federal entitlement programs similar to 

Medicaid audited under an A–133 

program compliance supplement, and 

vary only by the size of the program 

(small medium and large). For example, 

a small Exchange judged to have low 


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38 ‘‘Table of Size Standards Matched To North 

American Industry Classification System Codes,’’ 

effective January 7, 2013, U.S. Small Business 

Administration, available at http://www.sba.gov. 

risk would have a combined financial 

and programmatic audit cost of $90,000; 

a large Exchange, in a State that also 

administers a reinsurance program 

(which implies a more complex, high 

risk operation) would have combined 

financial and programmatic audit costs 

of $360,000. Audit prices are based on 

2012 pricing and reflect an annual 

increase of 3 percent each year, based 

on recent industry experience. 

TABLE V.2.—ESTIMATED AUDIT COSTS FOR STATE PROGRAMS: EXCHANGES, RISK ADJUSTMENT AND REINSURANCE

2014 2015 2016 2017 

Mid-range point estimate ................................................................................. $2,572,000 $2,649,160 $2,728,635 $2,810,494 

Range .............................................................................................................. $2,320,000– 

$2,820,000 

$2,389,600– 

$2,904,600 

$2,461,288– 

$2,991,738 

$2,535,127– 

$3,081,490 

Exchanges and non-Exchange entities 

associated with FFEs and agents and 

brokers permitted by States to assist 

consumers would incur costs to comply 

with the privacy and security standards 

for PII, informing individuals about 

related policies, procedures and 

technologies developing policies and 

procedures, executing training, posting 

privacy policies on Web sites and 

providing reports of any violations to 

HHS. Issuers would also incur expenses 

to provide privacy and security training 

to their customer service 

representatives. It is anticipated that 

Exchanges and issuers’ IT systems will 

need minimal changes to comply with 

these provisions. 

The proposed rule would require the 

enrollee satisfaction survey vendors 

engaged by issuers to meet HHS 

standards. Survey vendors would apply 

for approval annually in order to 

administer enrollee satisfaction surveys 

to QHP enrollees on behalf of a QHP 

issuer. Vendors would incur costs to 

submit the annual applications to HHS 

and to meet the requirements necessary 

to meet approval. 

The proposed rule would also amend 

existing requirements so that SHOPs 

would no longer be required to accept 

paper applications and applications by 

telephone. This could reduce the cost of 

operating a SHOP. A SHOP would also 

incur costs to develop uniform 

standards for the termination of a 

group’s coverage in a QHP and to keep 

sufficient records of terminations and 

reasonable accommodations. 

C. Regulatory Alternatives 

Under the Executive Order, HHS is 

required to consider alternatives to 

issuing rules and alternative regulatory 

approaches. HHS considered the 

following alternatives while developing 

this proposed rule: 

1. Increased Uniformity of FFE and 

State Exchange Standards 

Under this alternative, HHS would 

require a single standard for Exchanges 

across the nation regardless of whether 

the Exchange was established and 

operated by a State or was Federallyfacilitated. The proposed rule would 

defer to State discretion in oversight of 

QHPs. This element of State flexibility 

would be precluded if greater 

uniformity in operations and standards 

were to be imposed. Greater 

standardization would have an 

uncertain impact on Federal oversight 

activities but would likely impose 

greater costs of compliance on State 

operations and issuers of QHPs in those 

States. 

2. Placing More Responsibility on the 

States to Oversee Standards, Including 

Those for FFES 

Under this alternative, HHS would 

place more responsibility on States and 

State Exchanges to interpret and meet 

statutory requirements. This approach 

could create a number of problems. If 

every State developed its own 

monitoring standards, oversight of 

different Exchanges could be quite 

uneven, as States across the country 

have varying levels of fiscal resources 

with which to monitor activities. States 

currently have certain levels of 

responsibility under the Affordable Care 

Act to oversee standards for Exchanges, 

QHPs, and other programs. State 

Exchanges also have latitude in the 

number, type, and standardization of 

plans they certify and accept into the 

Exchange as QHPs. 

There are a number of provisions in 

the Affordable Care Act that devolve 

responsibilities from the Federal 

government to States. Increased 

devolution could decrease the need of 

Federal oversight, while granting States 

increased flexibility to regulate 

Exchanges within their borders. There 

would also be a decrease in oversightrelated activities for the Federal 

government such as HHS investigations 

or audits. On the other hand, States 

would likely face an increase in their 

own oversight activities and related 

costs. 

HHS believes that the options adopted 

for this proposed rule strike the best 

balance of ensuring efficient operation 

and integrity of Exchanges and the 

reinsurance and risk adjustment 

programs while providing flexibility to 

the States and minimizing the burden 

on States. 

D. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

requires agencies that issue a rule to 

analyze options for regulatory relief of 

small businesses if a rule has a 

significant impact on a substantial 

number of small entities. The RFA 

generally defines a ‘‘small entity’’ as— 

(1) A proprietary firm meeting the size 

standards of the Small Business 

Administration (SBA), (2) a nonprofit 

organization that is not dominant in its 

field, or (3) a small government 

jurisdiction with a population of less 

than 50,000 (States and individuals are 

not included in the definition of ‘‘small 

entity’’). HHS uses as its measure of 

significant economic impact on a 

substantial number of small entities a 

change in revenues of more than 3 

percent to 5 percent. HHS anticipates 

that the proposed rule would not have 

a significant economic impact on a 

substantial number of small entities. 

As discussed in the Web Portal final 

rule published on May 5, 2010 (75 FR 

24481), HHS examined the health 

insurance industry in depth in the RIA 

we prepared for the proposed rule on 

establishment of the Medicare 

Advantage program (69 FR 46866, 

August 3, 2004). In that analysis it was 

determined that there were few, if any, 

insurance firms underwriting 

comprehensive health insurance 

policies (in contrast, for example, to 

travel insurance policies or dental 

discount policies) that fell below the 

size thresholds for ‘‘small’’ business 

established by the SBA (currently $7 

million in annual receipts for health 

issuers).38 In addition, HHS used the 

data from Medical Loss Ratio (MLR) 

annual report submissions for the 2011 

MLR reporting year to develop an 

estimate of the number of small entities 


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that offer comprehensive major medical 

coverage. These estimates may overstate 

the actual number of small health 

insurance issuers that would be 

affected, since they do not include 

receipts from these companies’ other 

lines of business. It is estimated that out 

of 466 issuers nationwide, there are 22 

small entities each with less than $7 

million in earned premiums that offer 

individual or group health insurance 

coverage and would therefore be subject 

to the requirements of this proposed 

regulation. Thirty six percent of these 

small issuers belong to larger holding 

groups, and many if not all of these 

small issuers are likely to have other 

lines of business that would result in 

their revenues exceeding $7 million. It 

is uncertain how many of these 466 

issuers would offer QHPs and be subject 

to the provisions of this proposed rule. 

Based on this analysis, however, HHS 

expects that this proposed rule will not 

affect small issuers. 

Some of the agents and brokers 

affected by the provisions of this 

proposed rule may be small entities and 

would incur costs to comply with the 

provisions of this proposed rule. The 

size threshold for ‘‘small’’ business 

established by the SBA is currently $7 

million in annual receipts for insurance 

agencies and brokerages. We anticipate 

that agents and brokers will continue to 

be an important source of assistance for 

many consumers seeking access to 

health insurance coverage through an 

Exchange, including those who own 

and/or are employed by small 

businesses. Due to lack of data, HHS is 

unable to estimate how many agents and 

brokers permitted by States to assist 

consumers would be small entities. We 

invite comments on this issue. 

E. Unfunded Mandates Reform Act 

Section 202 of the Unfunded 

Mandates Reform Act (UMRA) of 1995 

requires that agencies assess anticipated 

costs and benefits before issuing any 

proposed rule that includes a Federal 

mandate that could result in 

expenditure in any one year by State, 

local or tribal governments, in the 

aggregate, or by the private sector, of 

$100 million in 1995 dollars, updated 

annually for inflation. In 2013, that 

threshold level is approximately $141 

million. 

UMRA does not address the total cost 

of a proposed rule. Rather, it focuses on 

certain categories of cost, mainly those 

‘‘Federal mandate’’ costs resulting 

from—(1) imposing enforceable duties 

on State, local, or tribal governments, or 

on the private sector; or (2) increasing 

the stringency of conditions in, or 

decreasing the funding of, State, local, 

or tribal governments under entitlement 

programs. 

The proposed rule would direct States 

to undertake oversight activities for 

State Exchanges, State-operated 

reinsurance and risk adjustment 

programs. The costs related to oversight 

activities, recordkeeping, reporting and 

audits are estimated to be approximately 

$2.8 million in 2014. There are no 

mandates on local or tribal 

governments. The private sector, for 

example, QHP issuers and agents and 

brokers, would incur costs to comply 

with the record maintenance and 

reporting requirements set forth in this 

proposed rule. The related costs are 

estimated to be approximately $21.8 

million in 2014. However, consistent 

with policy embodied in UMRA, this 

proposed rule has been designed to be 

a low-burden alternative for State, local 

and tribal governments, and the private 

sector while achieving the objectives of 

the Affordable Care Act. 

F. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule that imposes substantial 

direct requirement costs on State and 

local governments, preempts State law, 

or otherwise has Federalism 

implications. 

States are the primary regulators of 

health insurance coverage. States will 

continue to apply State laws regarding 

health insurance coverage. However, if 

any State law or requirement prevents 

the application of a Federal standard, 

then that particular State law or 

requirement would be preempted. State 

requirements that are more stringent 

than the Federal requirements would be 

not be preempted by this proposed rule. 

Accordingly, States have significant 

latitude to impose requirements with 

respect to health insurance coverage 

that are more restrictive than the 

Federal law. 

States would continue to license, 

monitor and regulate all agents and 

brokers, both inside and outside of 

Exchanges. All State laws related to 

agents and brokers, including State laws 

related to appointments, contractual 

relationships with issuers, and licensing 

and marketing requirements, would 

continue to apply. Under the proposed 

rule, States would have the option to 

operate only a State-based SHOP while 

the Exchange is operated as an FFE. The 

proposed rule would also provide 

additional flexibility to States with 

respect to the operation of a SHOPspecific Navigator program when the 

State operates only a SHOP Exchange. 

The State Exchange oversight program 

builds on State oversight efforts, where 

possible, by coordinating with State 

authorities to address compliance issues 

and concerns. HHS would coordinate 

enforcement actions for QHP issuers 

with State efforts in order to streamline 

the oversight of QHP issuers by States 

and to avoid inappropriate duplication 

of enforcement actions. Because QHPs 

are one of several commercial market 

insurance products operating in State 

markets, HHS would not seek to 

inappropriately duplicate or interfere 

with the traditional regulatory roles 

played by the State DOIs. HHS would 

generally confine its QHP oversight to 

Exchange-specific requirements and 

attributes. HHS would also seek to work 

collaboratively with State DOIs on 

topics of mutual concern, in the interest 

of efficiently deploying oversight 

resources and avoiding needlessly 

duplicative regulatory roles. HHS may 

consider the regulatory action taken by 

a State against a QHP issuer as a factor 

in determining whether to decertify a 

QHP. As mentioned earlier in the 

preamble, HHS recognizes that States 

play an important role in handling 

consumer cases related to health 

insurance and HHS anticipates that 

States will continue to assist consumers 

with these grievances and complaints. 

QHP issuers are expected to comply 

with standards established by State law 

and regulation for cases forwarded to an 

issuer by a State in which it offers 

QHPs. 

The requirements specified in this 

proposed rule would impose direct 

costs on State and local governments 

and we seek comments on how to 

minimize those costs. State Exchanges 

and State-operated reinsurance and riskadjustment programs would be required 

to undertake oversight, record 

maintenance and reporting activities. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have Federalism implications or limit 

the policymaking discretion of the 

States, HHS has engaged in efforts to 

consult with and work cooperatively 

with affected States. Throughout the 

process of developing this proposed 

rule, HHS has attempted to balance the 

States’ interests in regulating health 

insurance issuers, and the Congress’ 

intent to provide uniform protections to 

consumers in every State. By doing so, 

it is HHS’ view that it has complied 

with the requirements of Executive 

Order 13132. Under the requirements 

set forth in section 8(a) of Executive 

Order 13132, and by the signatures 

affixed to this rule, HHS certifies that 

the CMS Center for Consumer 

Information and Insurance Oversight 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
37078 Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 

has complied with the requirements of 

Executive Order 13132 for the attached 

proposed rule in a meaningful and 

timely manner. 

G. Congressional Review Act 

This proposed rule is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

U.S.C. 801 et seq.), which specifies that 

before a rule can take effect, the Federal 

agency promulgating the rule shall 

submit to each House of the Congress 

and to the Comptroller General a report 

containing a copy of the rule along with 

other specified information, and has 

been transmitted to the Congress and 

the Comptroller General for review. 

List of Subjects 

45 CFR Part 144 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements. 

45 CFR Part 147 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 

45 CFR Part 153 

Administrative practice and 

procedure, Adverse selection, Health 

care, Health insurance, Health records, 

Organization and functions 

(Government agencies), Premium 

stabilization, Reporting and 

recordkeeping requirements, 

Reinsurance, Risk adjustment, Risk 

corridors, Risk mitigation, State and 

local governments. 

45 CFR Part 155 

Administrative practice and 

procedure, Health care access, Health 

insurance, Reporting and recordkeeping 

requirements, State and local 

governments, Cost-sharing reductions, 

Advance payments of premium tax 

credit, Administration and calculation 

of advance payments of the premium 

tax credit, Plan variations, Actuarial 

value. 

45 CFR Part 156 

Administrative practice and 

procedure, Advertising, Advisory 

Committees, Brokers, Conflict of 

interest, Consumer protection, Grant 

programs-health, Grants administration, 

Health care, Health insurance, Health 

maintenance organization (HMO), 

Health records, Hospitals, American 

Indian/Alaska Natives, Individuals with 

disabilities, Loan programs-health, 

Organization and functions 

(Government agencies), Medicaid, 

Public assistance programs, Reporting 

and recordkeeping requirements, State 

and local governments, Sunshine Act, 

Technical assistance, Women, and 

Youth. 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services proposes to amend 45 

CFR parts 144, 147, 153, 155, and 156 

as set forth below: 

PART 144—REQUIREMENTS 

RELATING TO HEALTH INSURANCE 

COVERAGE 

■ 1. The authority citation for part 144 

is revised to read as follows: 

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg-63, 300gg-91, 

and 300gg-92). 

■ 2. Section 144.102 is amended by 

revising the second sentence of 

paragraph (c) to read as follows: 

§ 144.102 Scope and applicability. 

* * * * * 

(c) * * * If the coverage is offered to 

an association member other than in 

connection with a group health plan, 

the coverage is considered individual 

health insurance coverage for purposes 

of 45 CFR parts 144 through 148. * * * 

* * * * * 

■ 3. Section 144.103 is amended by 

revising the definitions of ‘‘Group 

market,’’ ‘‘Individual market,’’ ‘‘Large 

employer,’’ ‘‘Policy year,’’ and ‘‘Small 

employer’’ to read as follows: 

§ 144.103 Definitions. 

* * * * * 

Group market means the market for 

health insurance coverage offered in 

connection with a group health plan. 

* * * * * 

Individual market means the market 

for health insurance coverage offered to 

individuals other than in connection 

with a group health plan. 

* * * * * 

Large employer means, in connection 

with a group health plan with respect to 

a calendar year and a plan year, an 

employer who employed an average of 

at least 101 employees on business days 

during the preceding calendar year and 

who employs at least 1 employee on the 

first day of the plan year. In the case of 

plan years beginning before January 1, 

2016, a State may elect to define large 

employer by substituting ‘‘51 

employees’’ for ‘‘101 employees.’’ 

* * * * * 

Policy year means, with respect to— 

(1) A grandfathered health plan 

offered in the individual health 

insurance market, the 12-month period 

that is designated as the policy year in 

the policy documents of the individual 

health insurance coverage. If there is no 

designation of a policy year in the 

policy document (or no such policy 

document is available), then the policy 

year is the deductible or limit year used 

under the coverage. If deductibles or 

other limits are not imposed on a yearly 

basis, the policy year is the calendar 

year. 

(2) A non-grandfathered health plan 

offered in the individual health 

insurance market, or in a market in 

which the State has merged the 

individual and small group risk pools, 

beginning January 1, 2015, a calendar 

year for which health insurance 

coverage provides coverage for health 

benefits. 

* * * * * 

Small employer means, in connection 

with a group health plan with respect to 

a calendar year and a plan year, an 

employer who employed an average of 

at least 1 but not more than 100 

employees on business days during the 

preceding calendar year and who 

employs at least 1 employee on the first 

day of the plan year. In the case of plan 

years beginning before January 1, 2016, 

a State may elect to define small 

employer by substituting ‘‘50 

employees’’ for ‘‘100 employees.’’ 

* * * * * 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 4. The authority citation for part 147 

continues to read as follows: 

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg-63, 300gg-91, 

and 300gg-92), as amended. 

■ 5. Section 147.102 is amended by 

revising paragraph (a) introductory text 

and adding a sentence at the end of 

paragraph (a)(1)(ii) to read as follows: 

§ 147.102 Fair health insurance premiums. 

* * * * * 

(a) In general. With respect to the 

premium rate charged by a health 

insurance issuer in accordance with 

§ 156.80 of this subchapter for health 

insurance coverage offered in the 

individual or group market— 

(1) * * * 

(ii) * * * For purposes of this 

paragraph (a)(1), rating area is 

determined in the small group market 

using the group policyholder’s principal 

business address and in the individual 

market using the primary policyholder’s 

address. 

* * * * * 


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■ 6. Section 147.104 is amended by 

revising paragraph (a), adding a 

sentence at the end of paragraph (b)(2), 

and revising paragraphs (c)(2), (d)(1)(ii), 

and (d)(2) introductory text to read as 

follows: 

§ 147.104 Guaranteed availability of 

coverage. 

(a) Guaranteed availability of 

coverage in the individual and group 

market. Subject to paragraphs (b) 

through (d) of this section, a health 

insurance issuer that offers health 

insurance coverage in the individual, 

small group, or large group market in a 

State must offer to any individual or 

employer in the State all products that 

are approved for sale in the applicable 

market, and must accept any individual 

or employer that applies for any of those 

products. 

* * * * * 

(b) * * * 

(2) * * * As of January 1, 2015, 

health insurance coverage in the 

individual market or in a market in 

which the State has merged the 

individual and small group risk pools 

must be offered on a calendar year basis. 

* * * * * 

(c) * * * 

(2) An issuer that denies health 

insurance coverage to an individual or 

an employer in any service area, in 

accordance with paragraph (c)(1)(ii) of 

this section, may not offer coverage in 

the individual, small group, or large 

group market, as applicable, for a period 

of 180 calendar days after the date the 

coverage is denied. This paragraph (c)(2) 

does not limit the issuer’s ability to 

renew coverage already in force or 

relieve the issuer of the responsibility to 

renew that coverage. 

* * * * * 

(d) * * * 

(1) * * * 

(ii) It is applying this paragraph (d)(1) 

uniformly to all employers or individual 

in the large group, small group, or 

individual market, as applicable, in the 

State consistent with applicable State 

law and without regard to the claims 

experience of those individuals, 

employers and their employees (and 

their dependents) or any health statusrelated factor relating to such 

individuals, employees, and 

dependents. 

(2) An issuer that denies health 

insurance coverage to any employer or 

individual in a State under paragraph 

(d)(1) of this section may not offer 

coverage in the large group, small group, 

or individual market, as applicable, in 

the State before the later of either of the 

following dates: 

* * * * * 

7. Section 147.106 is amended by 

revising paragraphs (a) and (d)(1) 

introductory text to read as follows: 

§ 147.106 Guaranteed renewability of 

coverage. 

(a) General rule. Subject to paragraphs 

(b) through (d) of this section, a health 

insurance issuer offering health 

insurance coverage in the individual, 

small group, or large group market is 

required to renew or continue in force 

the coverage at the option of the plan 

sponsor or the individual, as applicable. 

* * * * * 

(d) * * * 

(1) An issuer may elect to discontinue 

offering all health insurance coverage in 

the individual, small group, or large 

group market, or all markets, in a State 

in accordance with applicable State law 

only if— 

* * * * * 

PART 153—STANDARDS RELATED TO 

REINSURANCE, RISK CORRIDORS 

AND RISK ADJUSTMENT UNDER THE 

AFFORDBALE CARE ACT 

8. The authority citation for part 153 

continues to read as follows: 

Authority: Secs. 1321, 1341–1343, Pub. L. 

111–148, 24 Stat. 119. 

9. Section 153.20 is amended by 

revising the definition of ‘‘contributing 

entity’’ to read as follows: 

§ 153.20 Definitions. 

* * * * * 

Contributing entity means a health 

insurance issuer or a self-insured group 

health plan (including a group health 

plan that is partially self-insured and 

partially insured, where the health 

insurance coverage does not constitute 

major medical coverage). A self-insured 

group health plan is responsible for the 

reinsurance contributions, although it 

may elect to use a third party 

administrator or administrative servicesonly contractor for transfer of the 

reinsurance contributions. 

* * * * * 

10. Section 153.240 is amended by 

revising paragraph (c) to read as follows: 

§ 153.240 Disbursement of reinsurance 

payments. 

* * * * * 

(c) Maintenance of records. If a State 

establishes a reinsurance program, the 

State must maintain documents and 

records relating to the reinsurance 

program, whether paper, electronic, or 

in other media, for each benefit year for 

at least 10 years, and make them 

available upon request from HHS, the 

OIG, the Comptroller General, or their 

designees, to any such entity. The 

documents and records must be 

sufficient to enable the evaluation of the 

State-operated reinsurance program’s 

compliance with Federal standards. The 

State must also ensure that its 

contractors, subcontractors, and agents 

similarly maintain and make relevant 

documents and records available upon 

request from HHS, the OIG, the 

Comptroller General, or their designees, 

to any such entity. 

* * * * * 

■ 11. Section 153.260 is added to 

subpart C to read as follows: 

§ 153.260 General oversight requirements 

for State-operated reinsurance programs. 

(a) Accounting requirements. A State 

that establishes a reinsurance program 

must ensure that its applicable 

reinsurance entity keeps an accounting 

for each benefit year of: 

(1) All reinsurance contributions 

received from HHS for reinsurance 

payments and for administrative 

expenses; 

(2) All claims for reinsurance 

payments received from issuers of 

reinsurance-eligible plans; 

(3) All reinsurance payments made to 

issuers of reinsurance-eligible plans; 

and 

(4) All administrative expenses 

incurred for the reinsurance program. 

(b) State summary report. A State that 

establishes a reinsurance program must 

submit to HHS and make public a report 

on its reinsurance program operations 

for each benefit year in the manner and 

timeframe specified by HHS. The report 

must summarize the accounting for the 

benefit year kept pursuant to paragraph 

(a) of this section. 

(c) Independent external audit. A 

State that establishes a reinsurance 

program must engage an independent 

qualified auditing entity to perform a 

financial and programmatic audit for 

each benefit year of its State-operated 

reinsurance program in accordance with 

generally accepted auditing standards. 

The State must: 

(1) Provide to HHS the results of the 

audit, in the manner and timeframe to 

be specified by HHS; 

(2) Ensure that the audit addresses the 

prohibitions set forth in § 153.265; 

(3) Identify to HHS any material 

weakness or significant deficiency 

identified in the audit, and address in 

writing to HHS how the State intends to 

correct any such material weakness or 

significant deficiency; and 

(4) Make public a summary of the 

results of the audit, including any 

material weakness or significant 

deficiency, in the manner and 

timeframe to be specified by HHS. 


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■ 12. Section 153.265 is added to 

subpart C to read as follows: 

§ 153.265 Restrictions on use of 

reinsurance funds for administrative 

expenses. 

A State that establishes a reinsurance 

program must ensure that its applicable 

reinsurance entity does not use any 

funds for the support of reinsurance 

operations, including any reinsurance 

contributions provided under the 

national contribution rate for 

administrative expenses, for any of the 

following purposes: 

(a) Staff retreats; 

(b) Promotional giveaways; 

(c) Excessive executive compensation; 

or 

(d) Promotion of Federal or State 

legislative or regulatory modifications. 

■ 13. Section 153.310 is amended by 

adding paragraphs (c)(4), (d)(3) and 

(d)(4), and by removing paragraph (f) to 

read as follows: 

§ 153.310 Risk adjustment administration. 

* * * * * 

(c) * * * 

(4) Maintenance of records. A State 

operating a risk adjustment program 

must maintain documents and records 

relating to the risk adjustment program, 

whether paper, electronic, or in other 

media, for each benefit year for at least 

10 years, and make them available upon 

request from HHS, the OIG, the 

Comptroller General, or their designees, 

to any such entity. The documents and 

records must be sufficient to enable the 

evaluation of the State-operated risk 

adjustment program’s compliance with 

Federal standards. A State operating a 

risk adjustment program must also 

ensure that its contractors, 

subcontractors, and agents similarly 

maintain and make relevant documents 

and records available upon request from 

HHS, the OIG, the Comptroller General, 

or their designees, to any such entity. 

(d) * * * 

(3) In addition to requirements set 

forth in paragraphs (d)(1) and (d)(2) of 

this section, to obtain recertification 

from HHS to operate risk adjustment for 

a third benefit year, the State must, in 

the first benefit year for which it 

operates risk adjustment, provide to 

HHS an interim report, in a manner 

specified by HHS, including a detailed 

summary of its risk adjustment activities 

in the first 10 months of the benefit 

year, no later than December 31 of the 

applicable benefit year. 

(4) To obtain recertification from HHS 

to operate risk adjustment for each 

benefit year after the third benefit year, 

each State operating a risk adjustment 

program must submit to HHS and make 

public a detailed summary of its risk 

adjustment program operations for the 

most recent benefit year for which risk 

adjustment operations have been 

completed, in the manner and 

timeframe specified by HHS. 

(i) The summary must include the 

results of a programmatic and financial 

audit for each benefit year of the Stateoperated risk adjustment program 

conducted by an independent qualified 

auditing entity in accordance with 

generally accepted auditing standards. 

(ii) The summary must identify to 

HHS any material weakness or 

significant deficiency identified in the 

audit and address in writing to HHS 

how the State intends to correct any 

such material weakness or significant 

deficiency. 

* * * * * 

■ 14. Section 153.365 is added to 

subpart D to read as follows: 

§ 153.365 General oversight requirements 

for State-operated risk adjustment 

programs. 

If a State is operating a risk 

adjustment program, it must keep an 

accounting of all receipts and 

expenditures related to risk adjustment 

payments and charges and the 

administration of risk adjustmentrelated functions and activities for each 

benefit year. 

■ 15. Section 153.400 is amended by 

revising paragraph (a)(1)(i) and by 

adding paragraph (a)(3) to read as 

follows: 

§ 153.400 Reinsurance contribution funds. 

(a) * * * 

(1) * * * 

(i) Such plan or coverage is not major 

medical coverage, subject to paragraph 

(a)(3) of this section. 

* * * * * 

(3) Notwithstanding paragraph 

(a)(1)(i) of this section, a health 

insurance issuer must make reinsurance 

contributions for lives covered by its 

group health insurance coverage even if 

the insurance coverage does not 

constitute major medical coverage, if – 

(i) The group health plan provides 

health insurance coverage for those 

covered lives through more than one 

insurance policy that in combination 

constitute major medical coverage but 

individually do not; 

(ii) The lives are not covered by selfinsured coverage of the group health 

plan (except for self-insured coverage 

limited to excepted benefits); and 

(iii) The health insurance coverage 

under the policy offered by the health 

insurance issuer represents a percentage 

of the total health insurance coverage 

offered in combination by the group 

health plan greater than the percentage 

offered under any of the other policies. 

For purposes of this paragraph, the 

percentage of coverage offered under 

various policies is determined based on 

the average premium per covered life for 

those policies. In the event that the 

percentage of coverage for two or more 

insurance policies is equal, the issuer of 

the policy that provides the greatest 

portion of in-network hospitalization 

benefits will be responsible for 

reinsurance contributions. 

* * * * * 

■ 16. Section 153.405 is amended by 

adding paragraph (h) to read as follows: 

§ 153.405 Calculation of reinsurance 

contributions. 

* * * * * 

(h) Maintenance of records. A 

contributing entity must maintain 

documents and records, whether paper, 

electronic, or in other media, sufficient 

to substantiate the enrollment count 

submitted pursuant to this section for a 

period of at least 10 years, and must 

make that evidence available upon 

request from HHS, the OIG, the 

Comptroller General, or their designees, 

to any such entity, for purposes of 

verification, investigation, audit, or 

other review of reinsurance contribution 

amounts. 

■ 17. Section 153.410 is amended by 

adding paragraph (c) to read as follows: 

§ 153.410 Requests for reinsurance 

payment. 

* * * * * 

(c) Maintenance of records. An issuer 

of a reinsurance-eligible plan must 

maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to substantiate the 

requests for reinsurance payments made 

pursuant to this section for a period of 

at least 10 years, and must make that 

evidence available upon request from 

HHS, the OIG, the Comptroller General, 

or their designees, or, in a State where 

the State is operating reinsurance, the 

State or its designee, to any such entity, 

for purposes of verification, 

investigation, audit, or other review of 

reinsurance payment requests. 

■ 18. Section 153.620 is amended by 

revising paragraph (b) to read as follows: 

§ 153.620 Compliance with risk adjustment 

standards. 

* * * * * 

(b) Issuer records maintenance 

requirements. An issuer that offers risk 

adjustment covered plans must also 

maintain documents and records, 

whether paper, electronic, or in other 

media, sufficient to enable the 

evaluation of the issuer’s compliance 


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Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 37081 

with applicable risk adjustment 

standards, and must make that evidence 

available upon request to HHS, OIG, the 

Comptroller General, or their designees, 

or in a State where the State is operating 

risk adjustment, the State or its designee 

to any such entity. 

■ 19. Section 153.740 is added to 

subpart H to read as follows: 

§ 153.740 Failure to comply with HHSoperated risk adjustment and reinsurance 

data requirements. 

(a) Enforcement actions. If an issuer of 

a risk adjustment covered plan or 

reinsurance-eligible plan fails to 

establish a dedicated distributed data 

environment in a manner and timeframe 

specified by HHS; fails to provide HHS 

with access to the required data in such 

environment in accordance with 

§ 153.700(a) or otherwise fails to comply 

with the requirements of § 153.700 

through § 153.730; fails to adhere to the 

reinsurance data submission 

requirements set forth in § 153.420; or 

fails to adhere to the risk adjustment 

data submission and data storage 

requirements set forth in § 153.610 

through § 153.630, HHS may impose 

civil money penalties in accordance 

with the procedures set forth in 

§ 156.805 of this subchapter. 

(b) Default risk adjustment charge. If 

an issuer of a risk adjustment covered 

plan fails to establish a dedicated 

distributed data environment or fails to 

provide HHS with access to the required 

data in such environment in accordance 

with § 153.610(a), § 153.700, § 153.710, 

or § 153.730 such that HHS cannot 

apply the applicable Federally certified 

risk adjustment methodology to 

calculate the risk adjustment payment 

transfer amount for the risk adjustment 

covered plan in a timely fashion, HHS 

will assess a default risk adjustment 

charge. 

PART 155—EXCHANGE 

ESTABLISHMENT STANDARDS AND 

OTHER RELATED STANDARDS 

UNDER THE AFFORDABLE CARE ACT 

■ 20. The authority citation for part 155 

continues to read as follows: 

Authority: Title I of the Affordable Care 

Act, sections 1301, 1302, 1303, 1304, 1311, 

1312, 1313, 1321, 1322, 1331, 1334, 1402, 

1411, 1412, 1413, Pub. L. 111–148, 124 Stat. 

119 (42 U.S.C. 18021–18024, 18031–18033, 

18041–18042, 18051, 18054, 18071, and 

18081–18083. 

■ 21. Section 155.20 is amended by 

revising the definition for ‘‘Exchange’’ 

and by adding a definition for ‘‘Issuer 

customer service representative’’ in 

alphabetical order to read as follows: 

§ 155.20 Definitions. 

* * * * * 

Exchange means a governmental 

agency or non-profit entity that meets 

the applicable standards of this part and 

makes QHPs available to qualified 

individuals and/or qualified employers. 

Unless otherwise identified, this term 

includes an Exchange serving the 

individual market for qualified 

individuals and a SHOP serving the 

small group market for qualified 

employers, regardless of whether the 

Exchange is established and operated by 

a State (including a regional Exchange 

or subsidiary Exchange) or by HHS. 

* * * * * 

Issuer customer service representative 

means an employee, contractor, or agent 

of a QHP issuer that provides assistance 

to applicants and enrollees, but is not 

licensed as an agent, broker, or producer 

under State law. 

* * * * * 

■ 22. Section 155.100 is amended by 

revising paragraph (a) to read as follows: 

§ 155.100 Establishment of a State 

Exchange. 

(a) General requirements. Each State 

may elect to establish: 

(1) An Exchange that facilitates the 

purchase of health insurance coverage 

in QHPs in the individual market and 

that provides for the establishment of a 

SHOP; or 

(2) An Exchange that provides only 

for the establishment of a SHOP. 

(3) Timing. For plan years beginning 

before January 1, 2015, only States with 

a conditionally approved Exchange 

Blueprint may elect to establish an 

Exchange that provides only for the 

establishment of a SHOP, pursuant to 

the process in § 155.105(e). For plan 

years beginning on or after January 1, 

2015, any State may elect to establish an 

Exchange that provides only for the 

establishment of a SHOP, pursuant to 

the process in § 155.106(a). 

* * * * * 

■ 23. Section 155.105 is amended by 

revising paragraphs (b)(1), (b)(2) and (f) 

to read as follows: 

§ 155.105 Approval of a State Exchange. 

* * * * * 

(b) * * * 

(1) The Exchange is able to carry out 

the required functions of an Exchange 

consistent with subparts C, D, E, H, and 

K of this part unless the State is 

approved to operate only a SHOP by 

HHS pursuant to § 155.100(a)(2), in 

which case the Exchange must perform 

the minimum functions described in 

subpart H and all applicable provisions 

of other subparts referenced therein; 

(2) The Exchange is capable of 

carrying out the information reporting 

requirements in accordance with section 

36B of the Code, unless the State is 

approved to operate only a SHOP by 

HHS pursuant to § 155.100(a)(2); and 

* * * * * 

(f) HHS operation of an Exchange. (1) 

If a State does not elect to operate an 

Exchange under § 155.100(a)(1) or an 

electing State does not have an 

approved or conditionally approved 

Exchange pursuant to § 155.100(a)(1) by 

January 1, 2013, HHS must (directly or 

through agreement with a not-for-profit 

entity) establish and operate such 

Exchange within the State. In this case, 

the requirements in § 155.120(c), 

§ 155.130 and subparts C, D, E, H, and 

K of this part will apply. 

(2) If an electing State has an 

approved or conditionally approved 

Exchange pursuant to § 155.100(a)(2) by 

January 1, 2013, HHS must (directly or 

through agreement with a not-for-profit 

entity) establish and operate an 

Exchange that facilitates the purchase of 

health insurance coverage in QHPs in 

the individual market and operate such 

Exchange within the State. In this case, 

the requirements in § 155.120(c), 

§ 155.130 and subparts C, D, E, and K 

of this part will apply to the Exchange 

operated by HHS. 

■ 24. Section 155.140 is amended by 

revising paragraph (c)(2)(ii) to read as 

follows: 

§ 155.140 Establishment of a regional 

Exchange or subsidiary Exchange. 

* * * * * 

(c) * * * 

(2) * * * 

(ii) Encompass the same geographic 

area for its regional or subsidiary SHOP 

and its regional or subsidiary Exchange 

except: 

(A) In the case of a regional Exchange 

established pursuant to § 155.100(a)(2), 

the regional SHOP must encompass a 

geographic area that matches the 

combined geographic areas of the 

individual market Exchanges 

established to serve the same set of 

States establishing the regional SHOP; 

and 

(B) In the case of a subsidiary 

Exchange established pursuant to 

§ 155.100(a)(2), the combined 

geographic area of all subsidiary SHOPs 

established in the State must encompass 

the geographic area of the individual 

market Exchange established to serve 

the State. 

■ 25. Section 155.200 is amended by 

revising paragraph (a) to read as follows: 


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§ 155.200 Functions of an Exchange. 

(a) General requirements. The 

Exchange must perform the minimum 

functions described in this subpart and 

in subparts D, E, H, and K of this part 

unless the State is approved to operate 

only a SHOP by HHS pursuant to 

§ 155.100(a)(2), in which case the 

Exchange operated by the State must 

perform the minimum functions 

described in subpart H and all 

applicable provisions of other subparts 

referenced therein while the Exchange 

operated by HHS must perform the 

minimum functions described in this 

subpart and in subparts D, E, and K of 

this part. 

* * * * * 

■ 26. Section 155.220 is amended by 

revising paragraph (c)(3)(i); by adding 

paragraphs (c)(3)(vii), (c)(4), (d)(4), (f), 

(g), and (h); by removing the word 

‘‘and’’ from the end of paragraph 

(c)(3)(v); and by removing the period at 

the end of paragraph (c)(3)(vi) and by 

adding ‘‘; and’’ in its place to read as 

follows:— 

§ 155.220 Ability of States to permit agents 

and brokers to assist qualified individuals, 

qualified employers, or qualified employees 

enrolling in QHPs. 

* * * * * 

(c) * * * 

(3) * * * 

(i) Disclose and display all QHP 

information provided by the Exchange 

or directly by QHP issuers consistent 

with the requirements of § 155.205(b)(1) 

and § 155.205(c), and display a Web link 

to the Exchange Web site; 

* * * * * 

(vii) For the Federally-facilitated 

Exchange, prominently display language 

notifying consumers that the agent’s or 

broker’s Web site is not the Exchange 

Web site, that the agent or broker’s Web 

site might not display all QHP data 

available on the Exchange Web site, that 

the agent or broker has entered into an 

agreement with HHS pursuant to 

paragraph (d) of this section, and that 

the agent or broker agrees to conform to 

the standards specified in paragraph (c) 

and (d) of this section. 

(4) When an Internet Web site of an 

agent or broker is used to complete the 

QHP selection in the Federallyfacilitated Exchange, and an agent or 

broker permits another agent or broker 

to access or use the Web site pursuant 

to an arrangement, the agent or broker 

who makes the Web site available must 

provide a list of agents and brokers who 

enter into such an arrangement to the 

Federally-facilitated Exchange, and 

must ensure that any agent or broker 

accessing or using the Web site pursuant 

to the arrangement: 

(i) Complies with paragraphs (c) and 

(d) of this section; and 

(ii) Complies with the policies and 

procedures that the agent or broker 

making the Web site available has 

established pursuant to paragraph (d)(4) 

of this section. 

(d) * * * 

(4) In the Federally-facilitated 

Exchange, comply with the following 

standards: 

(i) Establish policies and procedures 

to ensure compliance with paragraph 

(d)(3) of this section; 

(ii) Train its employees, 

representatives, contractors and agents 

with respect to the policies and 

procedures established pursuant to 

paragraph (d)(3) of this section on a 

periodic basis; and 

(iii) Ensure as a condition of contract 

or agreement that its employees, 

representatives, contractors, agents 

comply with the policies and 

procedures established pursuant to 

paragraph (d)(3) of this section. 

* * * * * 

(f) Termination notice to HHS. (1) An 

agent or broker may terminate its 

agreement with HHS by sending to HHS 

a written notice at least 30 days in 

advance of the date of intended 

termination. 

(2) The notice must include the 

intended date of termination, but if it 

does not specify a date of termination, 

or the date provided is not acceptable to 

HHS, HHS may set a different 

termination date that will be no less 

than 30 days from the date on the agent 

or broker’s notice of termination. 

(3) When termination becomes 

effective, the agent or broker will not be 

able to assist any individual through the 

Federally-facilitated Exchange, but the 

agent or broker must continue to protect 

PII created, collected, use or disclosed 

during the term of the agreement with 

the Federally-facilitated Exchange. 

(g) Standards for termination for 

cause from the Federally-facilitated 

Exchange. (1) If, in HHS’s 

determination, a specific finding of 

noncompliance or pattern of 

noncompliance is sufficiently severe, 

HHS may terminate an agent’s or 

broker’s agreement with the Federallyfacilitated Exchange for cause. 

(2) An agent or broker may be 

determined noncompliant if HHS finds 

that the agent or broker violated— 

(i) Any standard specified under this 

section; 

(ii) Any term or condition of its 

agreement with the Federally-facilitated 

Exchange required under paragraph (d) 

of this section, including but not limited 

to compliance with FederallyFacilitated Exchange privacy and 

security standards; 

(iii) Any State law applicable to 

agents or brokers, as required under 

paragraph (e) of this section, including 

but not limited to State laws related to 

confidentiality and conflicts of interest; 

or 

(iv) Any Federal law applicable to 

agents or brokers. 

(3) HHS will notify the agent or broker 

of the specific finding of noncompliance 

or pattern of noncompliance, and after 

30 days from the date of the notice, may 

terminate the agreement for cause if the 

matter is not resolved to the satisfaction 

of HHS. 

(4) After the period in paragraph (f)(3) 

of this section has elapsed, the agent or 

broker will no longer be registered with 

the Federally-facilitated Exchange or 

able to transact data through a secure 

connection with HHS. 

(h) Request for reconsideration of 

termination for cause from the 

Federally-facilitated Exchange. (1) 

Request for reconsideration. An agent or 

broker whose agreement with the 

Federally-facilitated Exchange has been 

terminated may request reconsideration 

of such action in the manner and form 

established by HHS. 

(2) Timeframe for request. The agent 

or broker must submit a request for 

reconsideration to the HHS 

reconsideration entity within 30 

calendar days of the date of the written 

notice from HHS. 

(3) Notice of reconsideration decision. 

The HHS reconsideration entity will 

provide the agent or broker with a 

written notice of the reconsideration 

decision within 30 calendar days of the 

date it receives the request for 

reconsideration. This decision will 

constitute HHS’s final determination. 

■ 27. Section 155.270 is amended by 

revising paragraph (a) to read as follows: 

§ 155.270 Use of standards and protocols 

for electronic transactions. 

(a) HIPAA administrative 

simplification. To the extent that the 

Exchange performs electronic 

transactions with a covered entity, the 

Exchange must use standards, 

implementation specifications, 

operating rules, and code sets that are 

adopted by the Secretary in 45 CFR 

parts 160 and 162 or that are otherwise 

approved by HHS. 

* * * * * 

■ 28. Section 155.280 is added to 

subpart C to read as follows: 

§ 155.280 Oversight and monitoring of 

privacy and security requirements. 

(a) General. HHS will oversee and 

monitor the Federally-facilitated 


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Exchanges and non-Exchange entities 

associated with Federally-facilitated 

Exchanges which are required to 

comply with the privacy and security 

standards established and implemented 

by a Federally-facilitated Exchange 

pursuant to § 155.260 for compliance 

with those standards. HHS will oversee 

and monitor State Exchanges for 

compliance with the standards State 

Exchanges establish and implement 

pursuant to § 155.260. State Exchanges 

will oversee and monitor non-Exchange 

entities associated with the State 

Exchanges for compliance with the 

standards established and implemented 

by the State Exchange pursuant to 

§ 155.260. 

(b) Audits and investigations. HHS 

may conduct oversight activities that 

include but are not limited to the 

following: audits, investigations, 

inspections, and any reasonable 

activities necessary for appropriate 

oversight of compliance with the 

Exchange privacy and security 

standards. HHS may also pursue civil, 

criminal or administrative proceedings 

or actions as determined necessary. 

(c) Security and privacy incidents and 

breaches. (1) The following definitions 

apply to privacy and security incidents 

and breaches: 

(i) Incident means the act of violating 

an explicit or implied security policy, 

which includes attempts (either failed 

or successful) to gain unauthorized 

access to a system or its data, unwanted 

disruption or denial of service, the 

unauthorized use of a system for the 

processing or storage of data; and 

changes to system hardware, firmware, 

or software characteristics without the 

owner’s knowledge, instruction, or 

consent. 

(ii) Breach means the loss of control, 

compromise, unauthorized disclosure, 

unauthorized acquisition, unauthorized 

access, or any similar term referring to 

situations where persons other than 

authorized users and for an other than 

authorized purpose have access or 

potential access to personally 

identifiable information, whether 

physical or electronic. 

(2) Incident or breach management. 

The entity where an incident or breach 

occurs is responsible for managing the 

incident or breach in accordance with 

the entity’s documented incident 

handling and breach notification 

procedures. 

(3) Reporting. Federally-facilitated 

Exchanges, non-Exchange entities 

associated with the Federally-facilitated 

Exchange, and State Exchanges must 

report all privacy and security incidents 

and breaches to HHS within one (1) 

hour of discovering the incident or 

breach. A non-Exchange entity 

associated with a State Exchange must 

report all privacy and security incidents 

and breaches to the State Exchange with 

which they are associated. 

■ 29. Section 155.310 is amended by 

adding and reserving paragraph (j) and 

adding paragraph (k) to read as follows: 

§ 155.310 Eligibility process. 

* * * * * 

(j) [Reserved] 

(k) Incomplete application. If an 

application filer submits an application 

that does not include sufficient 

information for the Exchange to conduct 

an eligibility determination for 

enrollment in a QHP through the 

Exchange or for insurance affordability 

programs, if applicable, the Exchange 

must— 

(1) Provide notice to the applicant 

indicating that information necessary to 

complete an eligibility determination is 

missing, specifying the missing 

information, and providing instructions 

on how to provide the missing 

information; and 

(2) Provide the applicant with a 

period of no less than 15 days and no 

more than 90 days from the date on 

which the notice described in paragraph 

(k)(1) of this section is sent to the 

applicant to provide the information 

needed to complete the application to 

the Exchange. 

(3) During the period described in 

paragraph (k)(2) of this section, the 

Exchange must not proceed with an 

applicant’s eligibility determination or 

provide advance payments of the 

premium tax credit or cost-sharing 

reductions, unless an application filer 

has provided sufficient information to 

determine his or her eligibility for 

enrollment in a QHP through the 

Exchange, in which case the Exchange 

must make such a determination for 

enrollment in a QHP. 

■ 30. Section 155.320 is amended by 

revising the section heading; by 

redesignating paragraphs (b)(1) and 

(b)(2) as paragraph (b)(1)(i) and (b)(1)(ii), 

by revising newly designated paragraph 

(b)(1), and by adding paragraph (b)(2) to 

read as follows: 

§ 155.320 Verification of eligibility for 

minimum essential coverage other than 

through an eligible employer-sponsored 

plan. 

* * * * * 

(b) * * * 

(1)(i) The Exchange must verify 

whether an applicant is eligible for 

minimum essential coverage other than 

through an eligible employer-sponsored 

plan, Medicaid, CHIP, or the BHP, using 

information obtained by transmitting 

identifying information specified by 

HHS to HHS for verification purposes. 

(ii) The Exchange must verify whether 

an applicant has already been 

determined eligible for coverage through 

Medicaid, CHIP, or the BHP, if a BHP 

is operating in the service area of the 

Exchange, within the State or States in 

which the Exchange operates using 

information obtained from the agencies 

administering such programs. 

(2) Consistent with § 164.512(k)(6)(i) 

of this subchapter, a health plan that is 

a government program providing public 

benefits, is expressly authorized to 

disclose protected health information, 

as that term is defined at § 160.103 of 

this subchapter, that relates to eligibility 

for or enrollment in the health plan to 

HHS for verification of applicant 

eligibility for minimum essential 

coverage as part of the eligibility 

determination process for advance 

payments of the premium tax credit or 

cost-sharing reductions. 

* * * * * 

■ 31. Section 155.340 is amended by 

adding paragraph (h) to read as follows: 

§ 155.340 Administration of advance 

payments of the premium tax credit and 

cost-sharing reductions. 

* * * * * 

(h) Failure to reduce enrollee’s 

premiums to account for advance 

payments of the premium tax credits. If 

the Exchange discovers that it did not 

reduce an enrollee’s premium by the 

amount of the advance payment of the 

premium tax credit, then the Exchange 

must refund to the enrollee any excess 

premium paid by or for the enrollee and 

notify the enrollee of the improper 

reduction no later than 30 calendar days 

after discovery of the improper 

reduction 

■ 32. Section 155.415 is added to read 

as follows: 

§ 155.415 Allowing issuer customer 

service representatives to assist with 

eligibility applications. 

(a) Exchange option. An Exchange, to 

the extent permitted by State law, may 

permit issuer customer service 

representatives who do not meet the 

definition of agent or broker at § 155.20 

to assist individuals in the individual 

market with applying for a 

determination or redetermination of 

eligibility for coverage through the 

Exchange and insurance affordability 

programs, and to facilitate selection of a 

QHP offered by the issuer represented 

by the customer service representative, 

provided that such issuer customer 

service representatives meet the 

requirements set forth in 

§ 156.1230(a)(2) of this subchapter. 


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(b) [Reserved] 

■ 33. Section 155.420 is amended by 

removing the period at the end of 

paragraph (d)(9) and by adding ‘‘; and’’ 

in its place, and by adding paragraph 

(d)(10) to read as follows: 

§ 155.420 Special enrollment periods. 

* * * * * 

(d) * * * 

(10) It has been determined by the 

Exchange that a qualified individual 

was not enrolled in QHP coverage, was 

not enrolled in the QHP selected by the 

individual, or is eligible for but is not 

receiving advance payments of the 

premium tax credit or cost-sharing 

reductions as a result of misconduct on 

the part of a non-Exchange entity 

providing enrollment assistance or 

conducting enrollment activities. For 

purposes of this provision, misconduct 

includes, but is not limited to, the 

failure of the non-Exchange entity to 

comply with applicable standards under 

this part, part 156 of this subchapter, or 

other applicable Federal or State laws, 

as determined by the Exchange. 

* * * * * 

■ 34. In § 155.700, paragraph (b) is 

amended by adding the definition of 

‘‘SHOP application filer’’ in alphabetical 

order to read as follows: 

§ 155.700 Standards for the establishment 

of a SHOP 

* * * * * 

(b) * * * 

SHOP application filer means an 

applicant, an authorized representative, 

an agent or broker of the employer, or 

an employer filing for its employees 

where not prohibited by other law. 

■ 35. Section 155.705 is amended by 

revising paragraphs (b)(6)(i), and 

(b)(6)(ii), and by adding paragraphs (c) 

and (d) to read as follows: 

§ 155.705 Functions of a SHOP. 

* * * * * 

(b) * * * 

(6) * * * 

(i) Require all QHP issuers to make 

any change to rates at a uniform time 

that is no more frequently than 

quarterly. 

(ii) In the FF–SHOP, rates may be 

updated quarterly with effective dates of 

January 1, April 1, July 1, or October 1 

of each calendar year, beginning with 

rates effective no sooner than July 1, 

2014. The updated rates must be 

submitted to HHS at least 60 days in 

advance of the effective date of the rates. 

* * * * * 

(c) Coordination with individual 

market Exchange for eligibility 

determinations. A SHOP must provide 

data related to eligibility and enrollment 

of a qualified employee to the 

individual market Exchange that 

corresponds to the service area of the 

SHOP, unless the SHOP is operated 

pursuant to § 155.100(a)(2). 

(d) Duties of Navigators in the SHOP. 

In States that have elected to operate 

only a SHOP pursuant to 

§ 155.100(a)(2), at State option and if 

State law permits the Navigator duties 

described in § 155.210(e)(3) and 

§ 155.210(e)(4) may be fulfilled through 

referrals to agents and brokers. 

■ 36. Section 155.730 is amended by 

revising paragraph (f) to read as follows: 

§ 155.730 Application standards for SHOP. 

* * * * * 

(f) The SHOP must: 

(1) Accept applications from SHOP 

application filers; and 

(2) Provide the tools to file an 

application via an Internet Web site. 

* * * * * 

■ 37. Section 155.735 is added to 

subpart H to read as follows: 

§ 155.735 Termination of coverage. 

(a) General requirements. The SHOP 

must determine the timing, form, and 

manner in which coverage in a QHP 

may be terminated. 

(b) Termination of employer group 

health coverage at the request of the 

employer. (1) The SHOP must establish 

policies for advance notice of 

termination required from the employer 

and effective dates of termination. 

(2) In the FF–SHOP, an employer may 

terminate coverage for all enrollees 

covered by the employer group health 

plan effective on the last day of any 

month, provided that the employer has 

given notice to the FF–SHOP on or 

before the 15th day of any month. If 

notice is given after the 15th of the 

month, the FF–SHOP may terminate the 

coverage on the last day of the following 

month. 

(c) Termination of employer group 

health coverage for non-payment of 

premiums. (1) The SHOP must establish 

policies for termination for nonpayment of premiums, including but not 

limited to policies regarding due dates 

for payment of premiums to the SHOP, 

grace periods, employer and employee 

notices, and reinstatement provisions. 

(2) In an FF–SHOP— 

(i) For a given month of coverage, 

premium payment is due by the first 

day of the coverage month. 

(ii) If premium payment is not 

received 31 days from the first of the 

coverage month, the FF–SHOP may 

terminate the qualified employer for 

lack of payment. 

(iii) If a qualified employer is 

terminated due to lack of premium 

payment, but within 30 days following 

its termination the qualified employer 

requests reinstatement, pays all 

premiums owed including any prior 

premiums owed for coverage during the 

grace period, and pays the premium for 

the next month’s coverage, the FF– 

SHOP must reinstate the qualified 

employer in its previous coverage. 

(d) Termination of employee or 

dependent coverage. (1) The SHOP must 

establish consistent policies regarding 

the process for and effective dates of 

termination of employee or dependent 

coverage in the following 

circumstances: 

(i) The employee or dependent is no 

longer eligible for coverage under the 

employer’s group health plan; 

(ii) The employee requests that the 

SHOP terminate the coverage of the 

employee or a dependent of the 

employee under the employer’s group 

health plan; 

(iii) The QHP in which the employee 

is enrolled terminates or is decertified 

as described in § 155.1080; 

(iv) The enrollee changes from one 

QHP to another during the employer’s 

annual open enrollment period or 

during a special enrollment period in 

accordance with § 155.725(j); or 

(v) The enrollee’s coverage is 

rescinded in accordance with § 147.128 

of this subchapter. 

(2) In the FF–SHOP, termination is 

effective on the last day of the month in 

which the FF–SHOP receives notice of 

an event described in paragraph (d)(1) of 

this section, and notice must have been 

received by the FF–SHOP prior to the 

proposed date of termination. 

(e) Termination of coverage tracking 

and approval. The SHOP must comply 

with the standards described in 

§ 155.430(c). 

(f) Effective date. The provisions of 

§ 155.735 apply to coverage— 

(1) Beginning on or after January 1, 

2015; and 

(2) In any SHOP providing qualified 

employers with the option described in 

§ 155.705(b)(2) or the option described 

in § 155.705(b)(4) before January 1, 

2015, beginning with the date that 

option is offered. 

■ 38. Subpart M is added to read as 

follows: 

Subpart M—Oversight and Program 

Integrity Standards for State 

Exchanges 

Sec. 

155.1200 General program integrity and 

oversight requirements. 

155.1210 Maintenance of records. 


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Subpart M—Oversight and Program 

Integrity Standards for State 

Exchanges 

§ 155.1200 General program integrity and 

oversight requirements. 

(a) General requirement. A State 

Exchange must: 

(1) Keep an accurate accounting of 

Exchange receipts and expenditures in 

accordance with generally accepted 

accounting principles (GAAP). 

(2) Monitor and report to HHS on 

Exchange related activities. 

(3) Collect and report to HHS 

performance monitoring data. 

(b) Reporting. The State Exchange 

must, at least annually, provide to HHS, 

in a manner specified by HHS, the 

following data and information: 

(1) A financial statement presented in 

accordance with GAAP by April 1 of 

each year, 

(2) Eligibility and enrollment reports, 

and 

(3) Performance monitoring data. 

(c) External audits. The State 

Exchange must engage an independent 

qualified auditing entity which follows 

generally accepted governmental 

auditing standards (GAGAS) to perform 

an annual independent external 

financial and programmatic audit and 

must make such information available 

to HHS for review. The State must: 

(1) Provide to HHS the results of the 

annual external audit; and 

(2) Inform HHS of any material 

weakness or significant deficiency and 

any intended corrective action 

identified in the audit; 

(d) External audit standard. The State 

Exchange must ensure that independent 

audits of State Exchange financial 

statements and program activities in 

paragraph (c) of this section address: 

(1) Compliance with paragraph (a)(1) 

of this section; 

(2) Compliance with requirements 

under subparts D, E, and K of this part; 

(3) Processes and procedures designed 

to prevent improper eligibility 

determinations and enrollment 

transactions; and 

(4) Identification of errors that have 

resulted in incorrect eligibility 

determinations. 

§ 155.1210 Maintenance of records. 

(a) General. The State Exchange must 

maintain and must ensure its 

contractors, subcontractors, and agents 

maintain for 10 years, documents and 

records (whether paper, electronic, or 

other media) and other evidence of 

accounting procedures and practices, 

which are sufficient to do the following: 

(1) Accommodate periodic auditing of 

the State Exchange’s financial records; 

and 

(2) Enable HHS or its designee(s) to 

inspect facilities, or otherwise evaluate 

the State- Exchange’s compliance with 

Federal standards. 

(b) Records. The State Exchange and 

its contractors, subcontractors, and 

agents must ensure that the records 

specified in paragraph (a) of this section 

include, at a minimum, the following: 

(1) Information concerning 

management and operation of the State 

Exchange’s financial and other record 

keeping systems; 

(2) Financial statements, including 

cash flow statements, and accounts 

receivable and matters pertaining to the 

costs of operations; 

(3) Any financial reports filed with 

other Federal programs or State 

authorities; 

(4) Data and records relating to the 

State Exchange’s eligibility verifications 

and determinations, enrollment 

transactions, appeals, and plan variation 

certifications; and 

(5) Qualified health plan contracting 

(including benefit review) data and 

consumer outreach and Navigator grant 

oversight information. 

(c) A State Exchange must make all 

records and must ensure its contractors, 

subcontractors, and agents must make 

all records in paragraph (a) of this 

section available to HHS, the OIG, the 

Comptroller General, or their designees, 

upon request. 

PART 156—HEALTH INSURANCE 

ISSUER STANARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 39. The authority citation for part 156 

continues to read as follows: 

Authority: Title I of the Affordable Care 

Act, sections 1301–1304, 1311–1313, 1321, 

1322, 1324, 1334, 1342–1343, and 1401– 

1402, Pub. L. 111–148, 124 Stat. 119 (42 

U.S.C. 18042). 

■ 40. Section 156.20 is amended by 

adding definitions for ‘‘Delegated 

entity,’’ ‘‘Downstream entity,’’ ‘‘Enrollee 

satisfaction survey vendor,’’ 

‘‘Exchange,’’ and ‘‘Registered user of the 

enrollee satisfaction survey data 

warehouse,’’ in alphabetical order to 

read as follows: 

§ 156.20 Definitions 

* * * * * 

Delegated entity means any party, 

including an agent or broker, that enters 

into an agreement with a QHP issuer to 

provide administrative services or 

health care services to qualified 

individuals, qualified employers, or 

qualified employees and their 

dependents. 

Downstream entity means any party, 

including an agent or broker, that enters 

into an agreement with a delegated 

entity or with another downstream 

entity for purposes of providing 

administrative or health care services 

related to the agreement between the 

delegated entity and the QHP issuer. 

The term ‘‘downstream entity’’ is 

intended to reach the entity that directly 

provides administrative services or 

health care services to qualified 

individuals, qualified employers, or 

qualified employees and their 

dependents. 

Enrollee satisfaction survey vendor 

means an organization has relevant 

survey administration experience (e.g., 

CAHPS® surveys), organizational survey 

capacity, and quality control procedures 

for survey administration. 

* * * * * 

Exchange has the meaning given to 

the term in § 155.20 of this subchapter. 

* * * * * 

Registered user of the enrollee 

satisfaction survey data warehouse 

means enrollee satisfaction survey 

vendors, QHP issuers, and Exchanges 

authorized to access CMS’s secure data 

warehouse to submit survey data and to 

preview survey results prior to public 

reporting. 

■ 41. Section 156.80 is amended by 

adding paragraph (d)(3) to read as 

follows: 

§ 156.80 Single risk pool. 

* * * * * 

(d) * * * 

(3) Frequency of index rate and planlevel adjustments. A health insurance 

issuer may make the market-wide index 

rate adjustment described in paragraph 

(d)(1) of this section or the plan-level 

adjustments described in paragraph 

(d)(2) of this section— 

(i) With respect to the individual 

market or markets in which the 

individual and small group risk pools 

were merged by the State pursuant to 

paragraph (c) of this section, on an 

annual basis. 

(ii) With respect to the small group 

market, on an annual basis, and 

beginning the quarter after HHS issues 

notification that the FF–SHOP can 

process quarterly rate updates, on a 

quarterly basis. 

* * * * * 

■ 42. Section 156.285 is amended by 

revising paragraphs (d)(1)(i) and (iii) to 

read as follows: 

§ 156.285 Additional standards specific to 

SHOP. 

* * * * * 

(d) * * * 

(1) * * * 


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(i) (A) Effective in plan years 

beginning on or after January 1, 2015, 

requirements regarding termination of 

coverage established in § 155.735 of this 

subchapter, if applicable to the coverage 

being terminated; otherwise 

(B) General requirements regarding 

termination of coverage established in 

§ 155.270 of this subchapter. 

* * * * * 

(iii) (A) Effective in plan years 

beginning on or after January 1, 2015, 

requirements regarding termination of 

coverage effective dates as set forth in 

§ 155.735 of this subchapter, if 

applicable to the coverage being 

terminated; otherwise 

(B) Requirements regarding 

termination of coverage effective dates 

as set forth in § 156.270(i). 

* * * * * 

■ 43. Subpart D is added to read as 

follows: 

Subpart D—Federally-Facilitated Exchange 

Qualified Health Plan Issuer Standards 

Sec. 

156.330 Changes of ownership in a 

Federally-Facilitated Exchange. 

156.340 Standards for downstream and 

delegated entities. 

Subpart D—Federally-Facilitated 

Exchange Qualified Health Plan Issuer 

Standards 

§ 156.330 Changes of ownership in a 

Federally-Facilitated Exchange. 

When a QHP issuer that offers one or 

more QHPs in a Federally-facilitated 

Exchange undergoes a change of 

ownership as recognized by the State in 

which the issuer offers the QHP, the 

QHP issuer must notify HHS of the 

change in a manner to be specified by 

HHS, and provide the legal name and 

Taxpayer Identification Number (TIN) of 

the new owner and the effective date of 

the change at least 30 days prior to the 

effective date of the change of 

ownership. The new owner must agree 

to adhere to all applicable statutes and 

regulations. 

§ 156.340 Standards for downstream and 

delegated entities. 

(a) General requirement. Effective 

October 1, 2013, notwithstanding any 

relationship(s) that a QHP issuer may 

have with delegated and downstream 

entities, a QHP issuer maintains 

responsibility for its compliance and the 

compliance of any of its delegated or 

downstream entities, as applicable, with 

all applicable standards, including— 

(1) Standards of subpart C of part 156 

with respect to each of its QHPs on an 

ongoing basis; 

(2) Exchange processes, procedures, 

and standards in accordance with 

subparts H and K of part 155 and, in the 

small group market, § 155.705 of this 

subchapter; 

(3) Standards of § 155.220 of this 

subchapter with respect to assisting 

with enrollment in QHPs; and 

(4) Standards of § 156.705 and 

§ 156.715 for maintenance of records 

and compliance reviews for QHP issuers 

operating in a Federally-facilitated 

Exchange or FF–SHOP. 

(b) Delegation agreement 

specifications. If any of the QHP issuer’s 

activities or obligations, in accordance 

with paragraph (a) of this section, are 

delegated to other parties, the QHP 

issuer’s agreement with any delegated or 

downstream entity must— 

(1) Specify the delegated activities 

and reporting responsibilities; 

(2) Provide for revocation of the 

delegated activities and reporting 

standards or specify other remedies in 

instances where HHS or the QHP issuer 

determines that such parties have not 

performed satisfactorily; 

(3) Specify that the delegated or 

downstream entity must comply with 

all applicable laws and regulations 

relating to the standards specified under 

paragraph (a) of this section; 

(4) Specify that the delegated or 

downstream entity must permit access 

by the Secretary and the OIG or their 

designees in connection with their right 

to evaluate through audit, inspection, or 

other means, to the delegated or 

downstream entity’s books, contracts, 

computers, or other electronic systems, 

including medical records and 

documentation, relating to the QHP 

issuer’s obligations in accordance with 

Federal standards under paragraph (a) of 

this section until 10 years from the final 

date of the agreement period; and 

(5) Contain specifications described in 

paragraph (b) of this section by no later 

than January 1, 2015, for existing 

agreements; and no later than the 

effective date of the agreement for 

agreements that are newly entered into 

as of October 1, 2013. 

■ 44. Section 156.400 is amended by 

revising the definition of ‘‘Most 

generous or more generous’’ to read as 

follows: 

§ 156.400 Definitions. 

* * * * * 

Most generous or more generous 

means, as between a QHP (including a 

standard silver plan) or plan variation 

and one or more other plan variations of 

the same QHP, the standard plan or plan 

variation designed for the category of 

individuals last listed in § 155.305(g)(3) 

of this subchapter. Least generous or 

less generous has the opposite meaning. 

* * * * * 

■ 45. Section 156.410 is amended by 

adding paragraphs (c) and (d) to read as 

follows: 

§ 156.410 Cost-sharing reductions for 

enrollees. 

* * * * * 

(c) Improper cost-sharing reductions. 

(1) If a QHP issuer fails to ensure that 

an individual assigned to a plan 

variation receives the cost-sharing 

reductions required under the 

applicable plan variation, taking into 

account § 156.425(b) concerning 

continuity of deductibles and out-ofpocket amounts (if applicable), then the 

QHP issuer must, no later than 30 

calendar days after discovery of the 

application of the cost-sharing 

reduction, refund any resulting excess 

cost sharing paid by or for the enrollee 

and notify the enrollee of the improper 

application. 

(2) If a QHP issuer provides an 

individual assigned to a plan variation 

more cost-sharing reductions than 

required under the applicable plan 

variation, taking into account 

§ 156.425(b) concerning continuity of 

deductibles and out-of-pocket amounts 

(if applicable), then the QHP issuer will 

not be eligible for reimbursement of any 

excess cost-sharing reductions provided 

to the enrollee, and may not seek 

reimbursement from the enrollee or the 

applicable provider for any of the excess 

cost-sharing reductions. 

(d) Improper assignment. If a QHP 

issuer does not assign an individual to 

the applicable plan variation (or 

standard plan without cost-sharing 

reductions) in accordance with 

§ 156.410(b) and § 156.425(a) based on 

the eligibility and enrollment 

information or notification provided by 

the Exchange, then the QHP issuer 

must, no later than 30 calendar days 

after discovery of the improper 

assignment, reassign the enrollee to the 

applicable plan variation (or standard 

plan without cost-sharing reductions) 

and notify the enrollee of the improper 

assignment such that— 

(1) If, pursuant to a reassignment 

under this paragraph (d), a QHP issuer 

reassigns an enrollee from a more 

generous plan variation to a less 

generous plan variation of a QHP (or a 

standard plan without cost-sharing 

reductions), the QHP issuer will not be 

eligible for reimbursement for any of the 

excess cost-sharing reductions provided 

to the enrollee following the effective 

date of eligibility required by the 

Exchange, and may not seek 

reimbursement from the enrollee or the 

applicable provider for any of the excess 

cost-sharing reductions. 


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(2) If, pursuant to a reassignment 

under this paragraph (d), a QHP issuer 

reassigns an enrollee from a less 

generous plan variation (or a standard 

plan without cost-sharing reductions) to 

a more generous plan variation of a 

QHP, the QHP issuer must recalculate 

the enrollee’s liability for cost sharing 

paid between the effective date of 

eligibility required by the Exchange and 

the date the issuer effectuated the 

change, and must refund any excess cost 

sharing paid by or for the enrollee 

during such period, no later than 30 

calendar days after discovery of the 

improper assignment. 

■ 46. Section 156.460 is amended by 

adding paragraph (c) to read as follows: 

§ 156.460 Reduction of enrollee’s share of 

premium to account for advance payments 

of the premium tax credit. 

* * * * * 

(c) Refunds to enrollees for improper 

reduction of enrollee’s share of 

premium to account for advance 

payments of the premium tax credit. If 

a QHP issuer discovers that it did not 

reduce the portion of the premium 

charged to or for an enrollee for the 

applicable month(s) by the amount of 

the advance payment of the premium 

tax credit in accordance with paragraph 

(a)(1) of this section, the QHP issuer 

must refund to the enrollee any excess 

premium paid by or for the enrollee and 

notify the enrollee of the improper 

reduction no later than 30 calendar days 

after the QHP issuer’s discovery of the 

improper reduction. 

■ 47. Section 156.480 is added to 

subpart E to read as follows: 

§ 156.480 Oversight of the administration 

of the cost-sharing reductions and advance 

payments of the premium tax credit 

programs. 

(a) Maintenance of records. An issuer 

that offers a QHP in the individual 

market through a State Exchange must 

adhere to, and ensure that any relevant 

delegated entities and downstream 

entities adhere to, the standards set 

forth in § 156.705 concerning 

maintenance of documents and records, 

whether paper, electronic, or in other 

media, by issuers offering QHPs in a 

Federally-facilitated Exchange, in 

connection with cost-sharing reductions 

and advance payments of the premium 

tax credit. 

(b) Annual reporting requirements. 

For each benefit year, an issuer that 

offers a QHP in the individual market 

through an Exchange must report to 

HHS, in the manner and timeframe 

required by HHS, summary statistics 

specified by HHS with respect to 

administration of cost-sharing reduction 

and advance payments of the premium 

tax credit programs. 

(c) Audits. HHS or its designee may 

audit an issuer that offers a QHP in the 

individual market through an Exchange 

to assess compliance with the 

requirements of this subpart. 

Subpart G—[Added and Reserved] 

■ 48. Subpart G is added and reserved. 

■ 49. Subpart H is added to read as 

follows: 

Subpart H—Oversight and Financial 

Integrity Standards for Issuers of Qualified 

Health Plans in Federally-Facilitated 

Exchanges 

Sec. 

156.705 Maintenance of records for the 

Federally-Facilitated Exchange. 

156.715 Investigations and compliance 

reviews in Federally-facilitated 

Exchanges. 

Subpart H—Oversight and Financial 

Integrity Standards for Issuers of 

Qualified Health Plans in Federallyfacilitated Exchanges 

§ 156.705 Maintenance of records for the 

Federally-facilitated Exchange. 

(a) General standard. Issuers offering 

QHPs in a Federally-facilitated 

Exchange must maintain all documents 

and records (whether paper, electronic, 

or other media) and other evidence of 

accounting procedures and practices, 

necessary for HHS to do the following: 

(1) Periodically audit financial 

records related to QHP issuers’ 

participation in a Federally-facilitated 

Exchange, and evaluate the ability of 

QHP issuers to bear the risk of potential 

financial losses; and 

(2) Conduct compliance reviews or 

otherwise monitor QHP issuers’ 

compliance with all Exchange standards 

applicable to issuers offering QHPs in a 

Federally-facilitated Exchange as listed 

in this part. 

(b) Records. The records described in 

paragraph (a) of this section include the 

sources listed in § 155.1210(b)(2), (b)(3), 

and (b)(5) of this subchapter. 

(c) Record retention timeframe. 

Issuers offering QHPs in a Federallyfacilitated Exchange must maintain all 

records referenced in paragraph (a) of 

this section for 10 years. 

(d) Record availability. Issuers 

offering QHPs in a Federally-facilitated 

Exchange must make all records in 

paragraph (a) of this section available to 

HHS, the OIG, the Comptroller General, 

or their designees, upon request. 

§ 156.715 Investigations and compliance 

reviews in Federally-facilitated Exchanges. 

(a) General standard. Issuers offering 

QHPs in the Federally-facilitated 

Exchange may be subject to compliance 

reviews to ensure ongoing compliance 

with Exchange standards applicable to 

issuers offering QHPs in the Federallyfacilitated Exchange. 

(b) Records. In preparation for or in 

the course of the compliance review, a 

QHP issuer must make available for 

HHS to review the records of the QHP 

issuer that pertain to its activities within 

the Federally-facilitated Exchange. Such 

records may include, but are not limited 

to the following: 

(1) The QHP issuer’s books and 

contracts, including the QHP issuer’s 

policy manuals and other QHP plan 

benefit information provided to the QHP 

issuer’s enrollees; 

(2) The QHP issuer’s policies and 

procedures, protocols, standard 

operating procedures, or other similar 

manuals related to the QHP issuer’s 

activities in the Federally-facilitated 

Exchange; 

(3) Any other information reasonably 

necessary for HHS to— 

(i) Evaluate the QHP issuer’s 

compliance with QHP certification 

standards and other Exchange standards 

applicable to issuers offering QHPs in 

the Federally-facilitated Exchange; 

(ii) Evaluate the QHP’s performance, 

including its adherence to an effective 

compliance plan, within the Federallyfacilitated Exchange; 

(iii) Verify that the QHP issuer has 

performed the duties attested to as part 

of the QHP certification process; and 

(iv) Assess the likelihood of fraud or 

abuse. 

(c) Interest of qualified individuals 

and qualified employers. HHS’s findings 

from the compliance reviews under this 

section may be in conjunction with 

other finds related to the QHP issuers’ 

compliance with certification standards, 

used to confirm that permitting the 

issuer’s QHPs to be available through 

the Federally-facilitated Exchange is in 

the interest of the qualified individuals 

and qualified employers as provided 

under § 155.1000(c)(2) of this 

subchapter. 

(d) Onsite and desk reviews. The QHP 

issuer will make available, for the 

purposes listed in paragraph (c) of this 

section, its premises, physical facilities 

and equipment (including computer and 

other electronic systems), for HHS to 

conduct a compliance review as 

provided under this section. 

(1) A compliance review under this 

section will be carried out as an onsite 

or desk review based on the specific 

circumstances. 

(2) Unless otherwise specified, 

nothing in this section is intended to 

preempt Federal laws and regulations 


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related to information privacy and 

security. 

(e) Compliance review timeframe. A 

QHP issuer may be subject to a 

compliance review up to 10 years from 

the last day of that plan benefit year, or 

10 years from the last day that the QHP 

certification is effective if the QHP is no 

longer available through a Federallyfacilitated Exchange; provided, 

however, that if the 10 year review 

period falls during an ongoing 

compliance review, the review period 

would be extended until the compliance 

review is completed. 

■ 50. Subpart I is added to read as 

follows: 

Subpart I—Enforcement Remedies in 

Federally-Facilitated Exchanges 

Sec. 

156.800 Available remedies; Scope. 

156.805 Bases and process for imposing 

civil money penalties in Federallyfacilitated Exchanges. 

156.810 Bases and process for 

decertification of a QHP offered by an 

issuer through a Federally-facilitated 

Exchange. 

Subpart I—Enforcement Remedies in 

Federally-facilitated Exchanges 

§ 156.800 Available remedies; Scope. 

(a) Kinds of sanctions. HHS may 

impose the following types of sanctions 

on QHP issuers in a Federally-facilitated 

Exchange that are not in compliance 

with Exchange standards applicable to 

issuers offering QHPs in the Federallyfacilitated Exchange: 

(1) Civil money penalties as specified 

in § 156.805; and 

(2) Decertification of a QHP offered by 

the non-compliant QHP issuer in a 

Federally-facilitated Exchange as 

described in § 156.810. 

(b) Scope. Sanctions under this 

subpart are applicable only for noncompliance with QHP issuer 

participation standards and other 

standards applicable to issuers offering 

QHPs in a Federally-facilitated 

Exchange. 

§ 156.805 Bases and process for imposing 

civil money penalties in Federally-facilitated 

Exchanges. 

(a) Grounds for imposing civil money 

penalties. Civil money penalties may be 

imposed on an issuer in a Federallyfacilitated Exchange by HHS if, based on 

credible evidence, HHS has reasonably 

determined that the issuer has engaged 

in one or more of the following actions: 

(1) Misconduct in the Federallyfacilitated Exchange or substantial noncompliance with the Exchange 

standards applicable to issuers offering 

QHPs in the Federally-facilitated 

Exchange under subparts C through G of 

part 153 of this subchapter; 

(2) Limiting the QHP’s enrollees’ 

access to medically necessary items and 

services that are required to be covered 

as a condition of the QHP issuer’s 

ongoing participation in the Federallyfacilitated Exchange, if the limitation 

has adversely affected or has a 

substantial likelihood of adversely 

affecting one or more enrollees in the 

QHP offered by the QHP issuer; 

(3) Imposing on enrollees premiums 

in excess of the monthly beneficiary 

premiums permitted by Federal 

standards applicable to QHP issuers 

participating in the Federally-facilitated 

Exchange; 

(4) Engaging in any practice that 

would reasonably be expected to have 

the effect of denying or discouraging 

enrollment into a QHP offered by the 

issuer (except as permitted by this part) 

by qualified individuals whose medical 

condition or history indicates the 

potential for a future need for significant 

medical services or items; 

(5) Intentionally or recklessly 

misrepresenting or falsifying 

information that it furnishes— 

(i) To HHS; or 

(ii) To an individual or entity upon 

which HHS relies to make its 

certifications or evaluations of the QHP 

issuer’s ongoing compliance with 

Exchange standards applicable to 

issuers offering QHPs in the Federallyfacilitated Exchange; 

(6) Failure to remit user fees assessed 

under § 156.50(c); or 

(7) Failure to comply with the costsharing reductions and advance 

payments of the premium tax credit 

standards of subpart E of this part. 

(b) Factors in determining the amount 

of civil money penalties assessed. In 

determining the amount of civil money 

penalties, HHS may take into account 

the following: 

(1) The QHP issuer’s previous or 

ongoing record of compliance; 

(2) The level of the violation, as 

determined in part by— 

(i) The frequency of the violation, 

taking into consideration whether any 

violation is an isolated occurrence, 

represents a pattern, or is widespread; 

and 

(ii) The magnitude of financial and 

other impacts on enrollees and qualified 

individuals; and 

(3) Aggravating or mitigating 

circumstances, or other such factors as 

justice may require, including 

complaints about the issuer with regard 

to the issuer’s compliance with the 

medical loss ratio standards required by 

the Affordable Care Act and as codified 

by applicable regulations. 

(c) Maximum penalty. The maximum 

amount of penalty imposed for each 

violation is $100 for each day for each 

QHP issuer for each individual 

adversely affected by the QHP issuer’s 

non-compliance; and where the number 

of individuals cannot be determined, 

HHS may estimate the number of 

individuals adversely affected by the 

violation. 

(d) Notice of intent to issue civil 

money penalty. If HHS proposes to 

assess a civil money penalty in 

accordance with this part, HHS will 

send a written notice of this decision 

to— 

(1) The QHP issuer against whom the 

civil money penalty is being imposed, 

whose notice must include the 

following: 

(i) A description of the basis for the 

determination; 

(ii) The basis for the penalty; 

(iii) The amount of the penalty; 

(iv) The date the penalty is due; 

(v) An explanation of the issuer’s right 

to a hearing under subpart J of this part; 

and 

(vi) Information about where to file 

the request for hearing. 

(e) Failure to request a hearing. (1) If 

the QHP issuer does not request a 

hearing within 30 days of the issuance 

of the notice described in paragraph 

(d)(1) of this section, HHS may assess 

the proposed civil money penalty. 

(2) HHS will notify the QHP issuer in 

writing of any penalty that has been 

assessed and of the means by which the 

responsible entity may satisfy the 

judgment. 

(3) The QHP issuer has no right to 

appeal a penalty with respect to which 

it has not requested a hearing in 

accordance with subpart J of this part 

unless the QHP issuer can show good 

cause, as determined under 

§ 156.905(b), for failing to timely 

exercise its right to a hearing. 

§ 156.810 Bases and process for 

decertification of a QHP offered by an 

issuer through a Federally-facilitated 

Exchange. 

(a) Bases for decertification. A QHP 

may be decertified on one or more of the 

following grounds: 

(1) The QHP issuer substantially fails 

to comply with the Federal laws and 

regulations applicable to QHP issuers 

participating in the Federally-facilitated 

Exchange; 

(2) The QHP issuer substantially fails 

to comply with the standards related to 

the risk adjustment, reinsurance, or risk 

corridors programs under 45 CFR Part 

153, including providing HHS with 

valid risk adjustment, reinsurance or 

risk corridors data; 


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(3) The QHP issuer substantially fails 

to comply with the transparency and 

marketing standards in §§ 156.220 and 

156.225; 

(4) The QHP issuer substantially fails 

to comply with the standards regarding 

advance payments of the premium tax 

credit and cost-sharing in subpart E of 

this part; 

(5) The QHP issuer is operating in the 

Federally-facilitated Exchange in a 

manner that hinders the efficient and 

effective administration of the 

Exchange; 

(6) The QHP no longer meets the 

conditions of the applicable certification 

criteria; 

(7) Based on credible evidence, the 

QHP issuer has committed or 

participated in fraudulent or abusive 

activities, including submission of false 

or fraudulent data; 

(8) The QHP issuer substantially fails 

to meet the requirements under 

§ 156.230 related to network adequacy 

standards or, § 156.235 related to 

inclusion of essential community 

providers; 

(9) The QHP issuer substantially fails 

to comply with the law and regulations 

related to internal claims and appeals 

and external review processes; or 

(10) The State recommends to HHS 

that the QHP should no longer be 

available in a Federally-facilitated 

Exchange. 

(b) State sanctions and 

determinations. (1) State sanctions. 

HHS may consider regulatory or 

enforcement actions taken by a State 

against a QHP issuer as a factor in 

determining whether to decertify a QHP 

offered by that issuer. 

(2) State determinations. HHS may 

decertify a QHP offered by an issuer in 

a Federally-facilitated Exchange based 

on a determinations or actions by a State 

as it relates to the issuer offering QHPs 

in a Federally-facilitated Exchange, 

including when a State places an issuer 

or its parent organization into 

receivership or when the State 

recommends to HHS that the QHP no 

longer be available in a Federallyfacilitated Exchange. 

(c) Standard decertification process. 

For decertification actions on grounds 

other than those described in 

§ 156.810(a)(7), (a)(8), or (a)(9), HHS will 

provide written notices to the QHP 

issuer, enrollees in that QHP, and the 

State department of insurance in the 

State in which the QHP is being 

decertified. The written notice must 

include the following: 

(1) The effective date of the 

decertification, which will be a date 

specified by HHS that is no earlier than 

30 days after the date of issuance of the 

notice; 

(2) The reason for the decertification, 

including the regulation or regulations 

that are the basis for the decertification; 

(3) For the written notice to the QHP 

issuer, information about the effect of 

the decertification on the ability of the 

issuer to offer the QHP in the Federallyfacilitated Exchange and must include 

information about the procedure for 

appealing the decertification by making 

a hearing request; and 

(4) The written notice to the QHP 

enrollees must include information 

about the effect of the decertification on 

enrollment in the QHP and about the 

availability of a special enrollment 

period, as described in § 155.420 of this 

subchapter. 

(d) Expedited decertification process. 

For decertification actions on grounds 

described in § 156.810(a)(7), (a)(8), or 

(a)(9), HHS will provide written notice 

to the QHP issuer, enrollees, and the 

State department of insurance in the 

State in which the QHP is being 

decertified. The written notice must 

include the following: 

(1) The effective date of the 

decertification, which will be a date 

specified by HHS; and 

(2) The information required by 

paragraphs (c)(2) through (c)(4) of this 

section. 

(e) Appeals. An issuer may appeal the 

decertification of a QHP offered by that 

issuer under paragraph (c) or (d) of this 

section by filing a request for hearing 

under subpart J of this part. 

(1) Effect of request for hearing. If an 

issuer files a request for hearing under 

this paragraph, 

(i) If the decertification is under 

paragraph (c) of this section, the 

decertification will not take effect prior 

to the issuance of the final 

administrative decision in the appeal, 

notwithstanding the effective date 

specified in the notice under paragraph 

(c)(1) of this section. 

(ii) If the decertification is under 

paragraph (d) of this section, the 

decertification will be effective on the 

date specified in the notice of 

decertification, but the certification of 

the QHP may be reinstated immediately 

upon issuance of a final administrative 

decision that the QHP should not be 

decertified. 

(2) [Reserved] 

■ 51. Subpart J is added to read as 

follows: 

Subpart J—Administrative Review of QHP 

Issuer Sanctions in Federally-Facilitated 

Exchanges 

Sec. 

156.901 Definitions. 

156.903 Scope of Administrative Law 

Judge’s (ALJ) authority. 

156.905 Filing of request for hearing. 

156.907 Form and content of request for 

hearing. 

156.909 Amendment of notice of 

assessment or decertification request for 

hearing. 

156.911 Dismissal of request for hearing. 

156.913 Settlement. 

156.915 Intervention. 

156.917 Issues to be heard and decided by 

ALJ. 

156.919 Forms of hearing. 

156.921 Appearance of counsel. 

156.923 Communications with the ALJ. 

156.925 Motions. 

156.927 Form and service of submissions. 

156.929 Computation of time and 

extensions of time. 

156.931 Acknowledgment of request for 

hearing. 

156.935 Discovery. 

156.937 Submission of briefs and proposed 

hearing exhibits. 

156.939 Effect of submission of proposed 

hearing exhibits. 

156.941 Prehearing conferences. 

156.943 Standard of proof. 

156.945 Evidence. 

156.947 The record. 

156.949 Cost of transcripts. 

156.951 Posthearing briefs. 

156.953 ALJ decision. 

156.955 Sanctions. 

156.957 Review by Administrator. 

156.959 Judicial review. 

156.961 Failure to pay assessment. 

156.963 Final order not subject to review. 

Subpart J—Administrative Review of 

QHP Issuer Sanctions in FederallyFacilitated Exchanges 

§ 156.901 Definitions. 

In this subpart, unless the context 

indicates otherwise: 

ALJ means administrative law judge 

of the Departmental Appeals Board of 

HHS. 

Filing date means the date 

postmarked by the U.S. Postal Service, 

deposited with a carrier for commercial 

delivery, or hand delivered. 

Hearing includes a hearing on a 

written record as well as an in-person or 

telephone hearing. 

Party means HHS or the respondent. 

Receipt date means five days after the 

date of a document, unless there is a 

showing that it was in fact received 

later. 

Respondent means an entity that 

received a notice of proposed 

assessment of a civil money penalty 

issued pursuant to § 156.805 or a notice 

of decertification pursuant to 

§ 156.810(c) or § 156.810(d). 

§ 156.903 Scope of Administrative Law 

Judge’s (ALJ) authority. 

(a) The ALJ has the authority, 

including all of the authority conferred 


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by the Administrative Procedure Act (5 

U.S.C. 554a), to adopt whatever 

procedures may be necessary or proper 

to carry out in an efficient and effective 

manner the ALJ’s duty to provide a fair 

and impartial hearing on the record and 

to issue an initial decision concerning 

the imposition of a civil money penalty 

or the decertification of a QHP offered 

in a Federally-facilitated Exchange. 

(b) The ALJ’s authority includes the 

authority to modify, consistent with the 

Administrative Procedures Act (5 U.S.C. 

552a), any hearing procedures set out in 

this subpart. 

(c) The ALJ does not have the 

authority to find invalid or refuse to 

follow Federal statutes or regulations. 

§ 156.905 Filing of request for hearing. 

(a) A respondent has a right to a 

hearing before an ALJ if it files a request 

for hearing that complies with 

§ 156.907(a), within 30 days after the 

date of issuance of either HHS’ notice of 

proposed assessment under § 156.805, 

notice of decertification of a QHP under 

§ 156.810(c) or § 156.810(d). The request 

for hearing should be addressed as 

instructed in the notice of proposed 

determination. ‘‘Date of issuance’’ is five 

(5) days after the filing date, unless 

there is a showing that the document 

was received earlier. 

(b) The ALJ may extend the time for 

filing a request for hearing only if the 

ALJ finds that the respondent was 

prevented by events or circumstances 

beyond its control from filing its request 

within the time specified above. Any 

request for an extension of time must be 

made promptly by written motion. 

§ 156.907 Form and content of request for 

hearing. 

(a) The request for hearing must do 

the following: 

(1) Identify any factual or legal bases 

for the assessment or decertifications 

with which the respondent disagrees. 

(2) Describe with reasonable 

specificity the basis for the 

disagreement, including any affirmative 

facts or legal arguments on which the 

respondent is relying. 

(b) Identify the relevant notice of 

assessment or decertification by date 

and attach a copy of the notice. 

§ 156.909 Amendment of notice of 

assessment or decertification request for 

hearing. 

The ALJ may permit CMS to amend 

its notice of assessment or 

decertification, or permit the respondent 

to amend a request for hearing that 

complies with § 156.907(a), if the ALJ 

finds that no undue prejudice to either 

party will result. 

§ 156.911 Dismissal of request for hearing. 

An ALJ will order a request for 

hearing dismissed if the ALJ determines 

that: 

(a) The request for hearing was not 

filed within 30 days as specified by 

§ 156.905(a) or any extension of time 

granted by the ALJ pursuant to 

§ 156.905(b). 

(b) The request for hearing fails to 

meet the requirements of § 156.907. 

(c) The entity that filed the request for 

hearing is not a respondent under 

§ 156.901. 

(d) The respondent has abandoned its 

request. 

(e) The respondent withdraws its 

request for hearing. 

§ 156.913 Settlement. 

HHS has exclusive authority to settle 

any issue or any case, without the 

consent of the ALJ at any time before or 

after the ALJ’s decision. 

§ 156.915 Intervention. 

(a) The ALJ may grant the request of 

an entity, other than the respondent, to 

intervene if all of the following occur: 

(1) The entity has a significant interest 

relating to the subject matter of the case. 

(2) Disposition of the case will, as a 

practical matter, likely impair or impede 

the entity’s ability to protect that 

interest. 

(3) The entity’s interest is not 

adequately represented by the existing 

parties. 

(4) The intervention will not unduly 

delay or prejudice the adjudication of 

the rights of the existing parties. 

(b) A request for intervention must 

specify the grounds for intervention and 

the manner in which the entity seeks to 

participate in the proceedings. Any 

participation by an intervenor must be 

in the manner and by any deadline set 

by the ALJ. 

(c) The Department of Labor (DOL) or 

the Internal Revenue Service (IRS) may 

intervene without regard to paragraphs 

(a)(1) through (a)(3) of this section. 

§ 156.917 Issues to be heard and decided 

by ALJ. 

(a) The ALJ has the authority to hear 

and decide the following issues: 

(1) Whether a basis exists to assess a 

civil money penalty against the 

respondent. 

(2) Whether the amount of the 

assessed civil money penalty is 

reasonable. 

(3) Whether a basis exists to decertify 

a QHP offered by the respondent in the 

Federally-facilitated Exchange. 

(b) In deciding whether the amount of 

a civil money penalty is reasonable, the 

ALJ— 

(1) Will apply the factors that are 

identified in § 156.805 for civil money 

penalties. 

(2) May consider evidence of record 

relating to any factor that HHS did not 

apply in making its initial 

determination, so long as that factor is 

identified in this subpart. 

(c) If the ALJ finds that a basis exists 

to assess a civil money penalty, the ALJ 

may sustain, reduce, or increase the 

penalty that HHS assessed 

§ 156.919 Forms of hearing. 

(a) All hearings before an ALJ are on 

the record. The ALJ may receive 

argument or testimony in writing, in 

person, or by telephone. The ALJ may 

receive testimony by telephone only if 

the ALJ determines that doing so is in 

the interest of justice and economy and 

that no party will be unduly prejudiced. 

The ALJ may require submission of a 

witness’ direct testimony in writing 

only if the witness is available for crossexamination. 

(b) The ALJ may decide a case based 

solely on the written record where there 

is no disputed issue of material fact the 

resolution of which requires the receipt 

of oral testimony. 

§ 156.921 Appearance of counsel. 

Any attorney who is to appear on 

behalf of a party must promptly file, 

with the ALJ, a notice of appearance. 

§ 156.923 Communications with the ALJ. 

No party or person (except employees 

of the ALJ’s office) may communicate in 

any way with the ALJ on any matter at 

issue in a case, unless on notice and 

opportunity for both parties to 

participate. This provision does not 

prohibit a party or person from 

inquiring about the status of a case or 

asking routine questions concerning 

administrative functions or procedures. 

§ 156.925 Motions. 

(a) Any request to the ALJ for an order 

or ruling must be by motion, stating the 

relief sought, the authority relied upon, 

and the facts alleged. All motions must 

be in writing, with a copy served on the 

opposing party, except in either of the 

following situations: 

(1) The motion is presented during an 

oral proceeding before an ALJ at which 

both parties have the opportunity to be 

present. 

(2) An extension of time is being 

requested by agreement of the parties or 

with waiver of objections by the 

opposing party. 

(b) Unless otherwise specified in this 

subpart, any response or opposition to 

a motion must be filed within 20 days 

of the party’s receipt of the motion. The 


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ALJ does not rule on a motion before the 

time for filing a response to the motion 

has expired except where the response 

is filed at an earlier date, where the 

opposing party consents to the motion 

being granted, or where the ALJ 

determines that the motion should be 

denied. 

§ 156.927 Form and service of 

submissions. 

(a) Every submission filed with the 

ALJ must be filed in triplicate, including 

one original of any signed documents, 

and include: 

(1) A caption on the first page, setting 

forth the title of the case, the docket 

number (if known), and a description of 

the submission (such as ‘‘Motion for 

Discovery’’). 

(2) The signatory’s name, address, and 

telephone number. 

(3) A signed certificate of service, 

specifying each address to which a copy 

of the submission is sent, the date on 

which it is sent, and the method of 

service. 

(b) A party filing a submission with 

the ALJ must, at the time of filing, serve 

a copy of such submission on the 

opposing party. An intervenor filing a 

submission with the ALJ must, at the 

time of filing, serve a copy of the 

submission on all parties. Service must 

be made by mailing or hand delivering 

a copy of the submission to the 

opposing party. If a party is represented 

by an attorney, service must be made on 

the attorney. 

§ 156.929 Computation of time and 

extensions of time. 

(a) For purposes of this subpart, in 

computing any period of time, the time 

begins with the day following the act, 

event, or default and includes the last 

day of the period unless it is a Saturday, 

Sunday, or legal holiday observed by 

the Federal government, in which event 

it includes the next business day. When 

the period of time allowed is less than 

seven days, intermediate Saturdays, 

Sundays, and legal holidays observed by 

the Federal government are excluded 

from the computation. 

(b) The period of time for filing any 

responsive pleading or papers is 

determined by the date of receipt (as 

defined in § 156.901) of the submission 

to which a response is being made. 

(c) The ALJ may grant extensions of 

the filing deadlines specified in these 

regulations or set by the ALJ for good 

cause shown (except that requests for 

extensions of time to file a request for 

hearing may be granted only on the 

grounds specified in § 156.905(b)). 

§ 156.931 Acknowledgment of request for 

hearing. 

After receipt of the request for 

hearing, the ALJ assigned to the case or 

someone acting on behalf of the ALJ will 

send a letter to the parties that 

acknowledges receipt of the request for 

hearing, identifies the docket number 

assigned to the case, provides 

instructions for filing submissions and 

other general information concerning 

procedures, and sets out the next steps 

in the case. 

§ 156.935 Discovery. 

(a) The parties must identify any need 

for discovery from the opposing party as 

soon as possible, but no later than the 

time for the reply specified in 

§ 156.937(c). Upon request of a party, 

the ALJ may stay proceedings for a 

reasonable period pending completion 

of discovery if the ALJ determines that 

a party would not be able to make the 

submissions required by § 156.937 

without discovery. The parties should 

attempt to resolve any discovery issues 

informally before seeking an order from 

the ALJ. 

(b) Discovery devices may include 

requests for production of documents, 

requests for admission, interrogatories, 

depositions, and stipulations. The ALJ 

orders interrogatories or depositions 

only if these are the only means to 

develop the record adequately on an 

issue that the ALJ must resolve to 

decide the case. 

(c) Each discovery request must be 

responded to within 30 days of receipt, 

unless that period of time is extended 

for good cause by the ALJ. 

(d) A party to whom a discovery 

request is directed may object in writing 

for any of the following reasons: 

(1) Compliance with the request is 

unduly burdensome or expensive. 

(2) Compliance with the request will 

unduly delay the proceedings. 

(3) The request seeks information that 

is wholly outside of any matter in 

dispute. 

(4) The request seeks privileged 

information. Any party asserting a claim 

of privilege must sufficiently describe 

the information or document being 

withheld to show that the privilege 

applies. If an asserted privilege applies 

to only part of a document, a party 

withholding the entire document must 

state why the nonprivileged part is not 

segregable. 

(5) The disclosure of information 

responsive to the discovery request is 

prohibited by law. 

(e) Any motion to compel discovery 

must be filed within 10 days after 

receipt of objections to the party’s 

discovery request, within 10 days after 

the time for response to the discovery 

request has elapsed if no response is 

received, or within 10 days after receipt 

of an incomplete response to the 

discovery request. The motion must be 

reasonably specific as to the information 

or document sought and must state its 

relevance to the issues in the case. 

§ 156.937 Submission of briefs and 

proposed hearing exhibits. 

(a) Within 60 days of its receipt of the 

acknowledgment provided for in 

§ 156.931, the respondent must file the 

following with the ALJ: 

(1) A statement of its arguments 

concerning CMS’s notice of assessment 

or decertification (respondent’s brief), 

including citations to the respondent’s 

hearing exhibits provided in accordance 

with paragraph (a)(2) of this section. 

The brief may not address factual or 

legal bases for the assessment or 

decertification that the respondent did 

not identify as disputed in its request 

for hearing or in an amendment to that 

request permitted by the ALJ. 

(2) All documents (including any 

affidavits) supporting its arguments, 

tabbed and organized chronologically 

and accompanied by an indexed list 

identifying each document. 

(3) A statement regarding whether 

there is a need for an in-person hearing 

and, if so, a list of proposed witnesses 

and a summary of their expected 

testimony that refers to any factual 

dispute to which the testimony will 

relate. 

(4) Any stipulations or admissions. 

(b) Within 30 days of its receipt of the 

respondent’s submission required by 

paragraph (a) of this section, CMS will 

file the following with the ALJ: 

(1) A statement responding to the 

respondent’s brief, including the 

respondent’s proposed hearing exhibits, 

if appropriate. The statement may 

include citations to CMS’s proposed 

hearing exhibits submitted in 

accordance with paragraph (b)(2) of this 

section. 

(2) Any documents supporting CMS’s 

response not already submitted as part 

of the respondent’s proposed hearing 

exhibits, organized and indexed as 

indicated in paragraph (a)(2) of this 

section (CMS’s proposed hearing 

exhibits). 

(3) A statement regarding whether 

there is a need for an in-person hearing 

and, if so, a list of proposed witnesses 

and a summary of their expected 

testimony that refers to any factual 

dispute to which the testimony will 

relate. 

(4) Any admissions or stipulations. 

(c) Within 15 days of its receipt of 

CMS’s submission required by 


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paragraph (b) of this section, the 

respondent may file with the ALJ a 

reply to CMS’s submission. 

§ 156.939 Effect of submission of 

proposed hearing exhibits. 

(a) Any proposed hearing exhibit 

submitted by a party in accordance with 

§ 156.937 is deemed part of the record 

unless the opposing party raises an 

objection to that exhibit and the ALJ 

rules to exclude it from the record. An 

objection must be raised either in 

writing prior to the prehearing 

conference provided for in § 156.941 or 

at the prehearing conference. The ALJ 

may require a party to submit the 

original hearing exhibit on his or her 

own motion or in response to a 

challenge to the authenticity of a 

proposed hearing exhibit. 

(b) A party may introduce a proposed 

hearing exhibit following the times for 

submission specified in § 156.937 only 

if the party establishes to the 

satisfaction of the ALJ that it could not 

have produced the exhibit earlier and 

that the opposing party will not be 

prejudiced. 

§ 156.941 Prehearing conferences. 

An ALJ may schedule one or more 

prehearing conferences (generally 

conducted by telephone) on the ALJ’s 

own motion or at the request of either 

party for the purpose of any of the 

following: 

(a) Hearing argument on any 

outstanding discovery request. 

(b) Establishing a schedule for any 

supplements to the submissions 

required by § 156.937 because of 

information obtained through discovery. 

(c) Hearing argument on a motion. 

(d) Discussing whether the parties can 

agree to submission of the case on a 

stipulated record. 

(e) Establishing a schedule for an inperson hearing, including setting 

deadlines for the submission of written 

direct testimony or for the written 

reports of experts. 

(f) Discussing whether the issues for 

a hearing can be simplified or narrowed. 

(g) Discussing potential settlement of 

the case. 

(h) Discussing any other procedural or 

substantive issues. 

§ 156.943 Standard of proof. 

(a) In all cases before an ALJ— 

(1) CMS has the burden of coming 

forward with evidence sufficient to 

establish a prima facie case; 

(2) The respondent has the burden of 

coming forward with evidence in 

response, once CMS has established a 

prima facie case; and 

(3) CMS has the burden of persuasion 

regarding facts material to the 

assessment or decertification; and 

(4) The respondent has the burden of 

persuasion regarding facts relating to an 

affirmative defense. 

(b) The preponderance of the 

evidence standard applies to all cases 

before the ALJ. 

§ 156.945 Evidence. 

(a) The ALJ will determine the 

admissibility of evidence. 

(b) Except as provided in this part, the 

ALJ will not be bound by the Federal 

Rules of Evidence. However, the ALJ 

may apply the Federal Rules of 

Evidence where appropriate; for 

example, to exclude unreliable 

evidence. 

(c) The ALJ excludes irrelevant or 

immaterial evidence. 

(d) Although relevant, evidence may 

be excluded if its probative value is 

substantially outweighed by the danger 

of unfair prejudice, confusion of the 

issues, or by considerations of undue 

delay or needless presentation of 

cumulative evidence. 

(e) Although relevant, evidence is 

excluded if it is privileged under 

Federal law. 

(f) Evidence concerning offers of 

compromise or settlement made in this 

action will be inadmissible to the extent 

provided in the Federal Rules of 

Evidence. 

(g) Evidence of acts other than those 

at issue in the instant case is admissible 

in determining the amount of any civil 

money penalty if those acts are used 

under § 156.805 of this part to consider 

the entity’s prior record of compliance, 

or to show motive, opportunity, intent, 

knowledge, preparation, identity, or 

lack of mistake. This evidence is 

admissible regardless of whether the 

acts occurred during the statute of 

limitations period applicable to the acts 

that constitute the basis for liability in 

the case and regardless of whether HHS’ 

notice sent in accordance with § 156.805 

referred to them. 

(h) The ALJ will permit the parties to 

introduce rebuttal witnesses and 

evidence. 

(i) All documents and other evidence 

offered or taken for the record will be 

open to examination by all parties, 

unless the ALJ orders otherwise for good 

cause shown. 

(j) The ALJ may not consider evidence 

regarding the willingness and ability to 

enter into and successfully complete a 

corrective action plan when that 

evidence pertains to matters occurring 

after HHS’ notice under § 156.805(d) or 

§ 156.810(c) or § 156.810(d). 

§ 156.947 The record. 

(a) Any testimony that is taken inperson or by telephone is recorded and 

transcribed. The ALJ may order that 

other proceedings in a case, such as a 

prehearing conference or oral argument 

of a motion, be recorded and 

transcribed. 

(b) The transcript of any testimony, 

exhibits and other evidence that is 

admitted, and all pleadings and other 

documents that are filed in the case 

constitute the record for purposes of an 

ALJ decision. 

(c) For good cause, the ALJ may order 

appropriate redactions made to the 

record. 

§ 156.949 Cost of transcripts. 

Generally, each party is responsible 

for 50 percent of the transcript cost. 

Where there is an intervenor, the ALJ 

determines what percentage of the 

transcript cost is to be paid for by the 

intervenor. 

§ 156.951 Posthearing briefs. 

Each party is entitled to file proposed 

findings and conclusions, and 

supporting reasons, in a posthearing 

brief. The ALJ will establish the 

schedule by which such briefs must be 

filed. The ALJ may direct the parties to 

brief specific questions in a case and 

may impose page limits on posthearing 

briefs. Additionally, the ALJ may allow 

the parties to file posthearing reply 

briefs. 

§ 156.953 ALJ decision. 

The ALJ will issue an initial agency 

decision based only on the record and 

on applicable law; the decision will 

contain findings of fact and conclusions 

of law. The ALJ’s decision is final and 

appealable after 30 days unless it is 

modified or vacated under § 156.957. 

§ 156.955 Sanctions. 

(a) The ALJ may sanction a party or 

an attorney for failing to comply with an 

order or other directive or with a 

requirement of a regulation, for 

abandonment of a case, or for other 

actions that interfere with the speedy, 

orderly or fair conduct of the hearing. 

Any sanction that is imposed will relate 

reasonably to the severity and nature of 

the failure or action. 

(b) A sanction may include any of the 

following actions: 

(1) In the case of failure or refusal to 

provide or permit discovery, drawing 

negative fact inferences or treating such 

failure or refusal as an admission by 

deeming the matter, or certain facts, to 

be established. 

(2) Prohibiting a party from 

introducing certain evidence or 


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otherwise advocating a particular claim 

or defense. 

(3) Striking pleadings, in whole or in 

part. 

(4) Staying the case. 

(5) Dismissing the case. 

(6) Entering a decision by default. 

(7) Refusing to consider any motion or 

other document that is not filed in a 

timely manner. 

(8) Taking other appropriate action. 

§ 156.957 Review by Administrator. 

(a) The Administrator of CMS (which 

for purposes of this section may include 

his or her delegate), at his or her 

discretion, may review in whole or in 

part any initial agency decision issued 

under § 156.953. 

(b) The Administrator may decide to 

review an initial agency decision if it 

appears from a preliminary review of 

the decision (or from a preliminary 

review of the record on which the initial 

agency decision was based, if available 

at the time) that: 

(1) The ALJ made an erroneous 

interpretation of law or regulation. 

(2) The initial agency decision is not 

supported by substantial evidence. 

(3) The ALJ has incorrectly assumed 

or denied jurisdiction or extended his or 

her authority to a degree not provided 

for by statute or regulation. 

(4) The ALJ decision requires 

clarification, amplification, or an 

alternative legal basis for the decision. 

(5) The ALJ decision otherwise 

requires modification, reversal, or 

remand. 

(c) Within 30 days of the date of the 

initial agency decision, the 

Administrator will mail a notice 

advising the respondent of any intent to 

review the decision in whole or in part. 

(d) Within 30 days of receipt of a 

notice that the Administrator intends to 

review an initial agency decision, the 

respondent may submit, in writing, to 

the Administrator any arguments in 

support of, or exceptions to, the initial 

agency decision. 

(e) This submission of the information 

indicated in paragraph (d) of this 

section must be limited to issues the 

Administrator has identified in his or 

her notice of intent to review, if the 

Administrator has given notice of an 

intent to review the initial agency 

decision only in part. A copy of this 

submission must be sent to the other 

party. 

(f) After receipt of any submissions 

made pursuant to paragraph (d) of this 

section and any additional submissions 

for which the Administrator may 

provide, the Administrator will affirm, 

reverse, modify, or remand the initial 

agency decision. The Administrator will 

mail a copy of his or her decision to the 

respondent. 

(g) The Administrator’s decision will 

be based on the record on which the 

initial agency decision was based (as 

forwarded by the ALJ to the 

Administrator) and any materials 

submitted pursuant to paragraphs (b), 

(d), and (f) of this section. 

(h) The Administrator’s decision may 

rely on decisions of any courts and 

other applicable law, whether or not 

cited in the initial agency decision. 

§ 156.959 Judicial review. 

(a) Filing of an action for review. Any 

responsible entity against whom a final 

order imposing a civil money penalty or 

decertification of a QHP is entered may 

obtain review in the United States 

District Court for any district in which 

the entity is located or in the United 

States District Court for the District of 

Columbia by doing the following: 

(1) Filing a notice of appeal in that 

court within 30 days from the date of a 

final order. 

(2) Simultaneously sending a copy of 

the notice of appeal by registered mail 

to HHS. 

(b) Certification of administrative 

record. HHS promptly certifies and files 

with the court the record upon which 

the penalty was assessed. 

(c) Standard of review. The findings 

of HHS and the ALJ may not be set aside 

unless they are found to be unsupported 

by substantial evidence, as provided by 

5 U.S.C. 706(2)(E). 

§ 156.961 Failure to pay assessment. 

If any entity fails to pay an assessment 

after it becomes a final order, or after the 

court has entered final judgment in 

favor of CMS, CMS refers the matter to 

the Attorney General, who brings an 

action against the entity in the 

appropriate United States district court 

to recover the amount assessed. 

§ 156.963 Final order not subject to review. 

In an action brought under § 156.961, 

the validity and appropriateness of the 

final order described in § 156.945 is not 

subject to review. 

■ 52. Subpart K is added to read as 

follows: 

Subpart K—Cases Forwarded to 

Qualified Health Plans and Qualified 

Health Plan Issuers in FederallyFacilitated Exchanges 

§ 156.1010 Standards. 

(a) A case is a communication brought 

by a complainant that expresses 

dissatisfaction with a specific person or 

entity subject to State or Federal laws 

regulating insurance, concerning the 

person or entity’s activities related to 

the offering of insurance, other than a 

communication with respect to an 

adverse benefit determination as 

defined in § 147.136(a)(2)(i) of this 

subchapter. Issues related to adverse 

benefit determinations are not 

addressed in this section and are subject 

to the provisions in § 147.136 of this 

subchapter governing internal claims 

appeals and external review. 

(b) QHP issuers operating in a 

Federally-facilitated Exchange must 

investigate and resolve, as appropriate, 

cases from the complainant forwarded 

to the issuer by HHS. Cases received by 

a QHP issuer operating in a Federallyfacilitated Exchange directly from a 

complainant or the complainant’s 

authorized representative will be 

handled by the issuer through its 

internal customer service process. 

(c) Cases may be forwarded to a QHP 

issuer operating in a Federallyfacilitated Exchange through a casework 

tracking system developed by HHS or 

other means as determined by HHS. 

(d) Cases received by a QHP issuer 

operating in a Federally-facilitated 

Exchange from HHS must be resolved 

within 15 calendar days of receipt of the 

case. Urgent cases as defined in 

§ 156.1010(e) that do not otherwise fall 

within the scope of § 147.136 of this 

subchapter must be resolved no later 

than 72 hours after receipt of the case. 

Where applicable State laws and 

regulations establish timeframes for case 

resolution that are stricter than the 

standards contained in this paragraph, 

QHP issuers operating in a Federallyfacilitated Exchange must comply with 

such stricter laws and regulations. 

(e) For cases received from HHS by a 

QHP issuer operating in a Federallyfacilitated Exchange, an urgent case is 

one in which there is an immediate 

need for health services because the 

non-urgent standard could seriously 

jeopardize the enrollee’s or potential 

enrollee’s life, or health or ability to 

attain, maintain, or regain maximum 

function. 

(f) For cases received from HHS, QHP 

issuers operating in a Federallyfacilitated Exchange are required to 

notify complainants regarding the 

disposition of the as soon as possible 

upon resolution of the case, but in no 

event later than seven (7) business days 

after the case is resolved. Notification 

may be by verbal or written means as 

determined most appropriate by the 

QHP issuer. 

(g) For cases received from HHS, QHP 

issuers operating in a Federallyfacilitated Exchange must use the 

casework tracking system developed by 

HHS, or other means as determined by 


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HHS, to document, no later than seven 

(7) business days after resolution of the 

case, that the case has been resolved. 

The record must include a clear and 

concise narrative explaining how the 

case was resolved including information 

about how and when the complainant 

was notified of the resolution. 

(h) Cases received by a QHP issuer 

operating in a Federally-facilitated 

Exchange from a State in which the 

issuer offers QHPs must be investigated 

and resolved according to applicable 

State laws and regulations. With respect 

to cases directly handled by the State, 

HHS or any other appropriate regulatory 

authority, QHP issuers operating in a 

Federally-facilitated Exchange must 

cooperate fully with the efforts of the 

State, HHS, or other regulatory authority 

to resolve the case. 

■ 53. Subpart L is added to read as 

follows: 

Subpart L—Quality Standards 

§ 156.1105 Establishment of standards for 

HHS-approved enrollee satisfaction survey 

vendors for use by QHP issuers in 

Exchanges. 

(a) Application for approval. An 

enrollee satisfaction survey vendor must 

be approved by HHS, in a form and 

manner to be determined by HHS, to 

administer, on behalf of a QHP issuer, 

enrollee satisfaction surveys to QHP 

enrollees. HHS will approve enrollee 

satisfaction survey vendors on an 

annual basis, and each enrollee 

satisfaction survey vendor must submit 

an application for each year that 

approval is sought. 

(b) Standards. To be approved by 

HHS, an enrollee satisfaction survey 

vendor must meet each of the following 

standards: 

(1) Sign and submit an application 

form for approval in accordance with 

paragraph (a) of this section; 

(2) Ensure, on an annual basis, that 

appropriate staff participate in enrollee 

satisfaction survey vendor training and 

successfully complete a post-training 

certification exercise as established by 

HHS; 

(3) Ensure the accuracy of their data 

collection, calculation and submission 

processes and attest to HHS the veracity 

of the data and these processes; 

(4) Sign and execute a standard HHS 

data use agreement, in a form and 

manner to be determined by HHS, that 

establishes protocols related to the 

disclosure, use, and reuse of HHS data; 

(5) Adhere to the enrollee satisfaction 

survey protocols and technical 

specifications in a manner and form 

required by HHS; 

(6) Develop and submit to HHS a 

quality assurance plan and any 

supporting documentation as 

determined to be relevant by HHS. The 

plan must describe in adequate detail 

the implementation of and compliance 

with all required protocols and 

technical specifications described in 

paragraph (b)(5) of this section; 

(7) Adhere to privacy and security 

standards established and implemented 

under § 155.260 of this subchapter by 

the Exchange with which they are 

associated; 

(8) Comply with all applicable State 

and Federal laws; 

(9) Become a registered user of the 

enrollee satisfaction survey data 

warehouse to submit files to HHS on 

behalf of its authorized QHP contracts; 

(10) Participate in and cooperate with 

HHS oversight for quality-related 

activities, including, but not limited to: 

review of the enrollee satisfaction 

survey vendor’s quality assurance plan 

and other supporting documentation; 

analysis of the vendor’s submitted data 

and sampling procedures; and site visits 

and conference calls; and, 

(11) Comply with minimum business 

criteria as established by HHS. 

(c) Approved list. A list of approved 

enrollee satisfaction survey vendors will 

be published on an HHS Web site. 

■ 54. Subpart M is added to read as 

follows: 

Subpart M—Qualified Health Plan Issuer 

Responsibilities 

Sec. 

156.1210 Confirmation of HHS payment 

and collections reports. 

156.1230 Direct enrollment with the QHP 

issuer in a manner considered to be 

through the Exchange. 

156.1240 Enrollment process for qualified 

individuals. 

Subpart M—Qualified Health Plan 

Issuer Responsibilities 

§ 156.1210 Confirmation of HHS payment 

and collections reports. 

Within 15 calendar days of the date of 

a payment and collections report from 

HHS, the issuer must, in a format 

specified by HHS, either: 

(a) Confirm to HHS that the amounts 

identified in the payment and 

collections report for the timeframe 

specified in the report accurately 

reflects applicable payments owed by 

the issuer to HHS and the payments 

owed to the issuer by HHS; or 

(b) Describe to HHS any inaccuracy it 

identifies in the payment and 

collections report. 

§ 156.1230 Direct enrollment with the QHP 

issuer in a manner considered to be 

through the Exchange. 

(a) A QHP issuer that is directly 

contacted by a potential applicant may, 

at the Exchange’s option, enroll such 

applicant in a QHP in a manner that is 

considered through the Exchange. In 

order for the enrollment to be made 

directly with the issuer in a manner that 

is considered to be through the 

Exchange, the QHP issuer needs to 

comply with at least the following 

requirements: 

(1) QHP issuer general requirements. 

(i) The QHP issuer follows the 

enrollment process for qualified 

individuals consistent with § 156.265. 

(ii) The QHP issuer’s Web site 

provides applicants the ability to view 

QHPs offered by the issuer with the data 

elements listed in § 155.205(b)(1)(i) 

through (viii) of this subchapter. 

(iii) The QHP issuer’s Web site clearly 

distinguishes between QHPs for which 

the consumer is eligible and other nonQHPs that the issuer may offer, and 

indicate that APTC and CSRs apply only 

to QHPs offered through the Exchange. 

(iv) The QHP issuer informs all 

applicants of the availability of other 

QHP products offered through the 

Exchange and displays the Web link to 

or describes how to access the Exchange 

Web site. 

(v) The QHP issuer’s Web site allows 

applicants to select and attest to an 

APTC amount, if applicable, in 

accordance with § 155.310(d)(2) of this 

subchapter. 

(2) QHP issuer customer service 

representative eligibility application 

assistance requirements. If permitted by 

the Exchange pursuant to § 155.415 of 

this subchapter, and to the extent 

permitted by State law, a QHP issuer 

may permit its issuer customer service 

representatives who do not meet the 

definition of agent or broker at § 155.20 

of this subchapter to assist individuals 

in the individual market with applying 

for a determination or redetermination 

of eligibility for coverage through the 

Exchange and for insurance affordability 

programs, and to facilitate selection of a 

QHP offered by the issuer represented 

by the customer service representative, 

provided that such issuer customer 

service representatives comply with the 

terms of an agreement between the 

issuer and the Exchange under which 

the issuer customer service 

representative at least— 

(i) Receives training on QHP options 

and insurance affordability programs, 

eligibility, and benefits rules and 

regulations; 

(ii) Complies with the Exchange’s 

privacy and security standards adopted 


tkelley on DSK3SPTVN1PROD with PROPOSALS3
Federal Register / Vol. 78, No. 118 / Wednesday, June 19, 2013 / Proposed Rules 37095 

consistent with § 155.260 of this 

subchapter; and 

(iii) Complies with applicable State 

law related to the sale, solicitation, and 

negotiation of health insurance 

products, including applicable State law 

related to agent, broker, and producer 

licensure; confidentiality; and conflicts 

of interest. 

(3) Premium accuracy requirements. 

A QHP issuer must ensure that 

(i) The premium it charges to an 

enrollee is the same amount as was 

accepted by the Exchange in its 

certification of the QHP issuer after 

accounting for any applicable APTC. 

(ii) No later than 30 calendar days 

after discovery of an incorrect amount it 

has charged an enrollee, retroactively 

correct any incorrect amounts collected. 

(iii) For issuers of QHPs in a 

Federally-facilitated Exchange, it allows 

HHS to review the premiums charged to 

qualified individuals through 

compliance reviews as set forth in 

§ 156.715(a). 

(b) Direct enrollment in a Federallyfacilitated Exchange. The individual 

market Federally-facilitated Exchanges 

will permit issuers of QHPs in each 

Federally-facilitated Exchange to 

directly enroll applicants in a manner 

that is considered to be through the 

Exchange, pursuant to paragraph (a) of 

this section, to the extent permitted by 

applicable State law. 

§ 156.1240 Enrollment process for 

qualified individuals. 

(a) Premium payment. A QHP issuer 

must— 

(1) Follow the premium payment 

process established by the Exchange in 

accordance with § 155.240. 

(2) Offer method of payment options 

that do not discriminate against 

individuals without bank accounts or 

credit cards. 

(b) [Reserved] 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: May 28, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: May 31, 2013 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–14540 Filed 6–14–13; 1:00 pm] 

BILLING CODE 4120–01–P 


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