Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 16453 

CALIFORNIA—OZONE—Continued 

[8-Hour standard] 

Designated area 

Designation a Classification 

Date 1 Type Date 1 Type 

That portion of San Bernardino County 

which lies north and east of a line described as follows: Beginning at the San 

Bernardino-Riverside County boundary 

and running north along the range line 

common to Range 3 East and Range 2 

East, San Bernardino Base and Meridian; 

then west along the Township line common to Township 3 North and Township 

2 North to the San Bernardino-Los Angeles County boundary; And that portion of 

San Bernardino County which lies south 

and west of a line described as follows: 

latitude 35 degrees, 10 minutes north 

and longitude 115 degrees, 45 minutes 

west. 

* * * * * * * 

San Diego County, CA: 

San Diego County (part) ........................ Nonattainment ........................ Subpart 1. 

That portion of San Diego County that excludes La Posta Areas #1 and #2,b

Cuyapaipe Area,b Manzanita Area,b and 

Campo Areas #1 and #2.b

San Diego County (part) 

La Posta Areas #1 and #2 b ........................ Unclassifiable/Attainment 

Cuyapaipe Area b ........................ Unclassifiable/Attainment 

Manzanita Area b ........................ Unclassifiable/Attainment 

Campo Areas #1 and #2 b ........................ Unclassifiable/Attainment 

* * * * * * * 

a Includes Indian Country located in each county or area, except as otherwise specified. 

bThe boundaries for these designated areas are based on coordinates of latitude and longitude derived from EPA Region 9’s GIS database 

and are illustrated in a map entitled ‘‘Eastern San Diego County Attainment Areas for the 8-Hour Ozone NAAQS,’’ dated March 9, 2004, including an attached set of coordinates. The map and attached set of coordinates are available at EPA’s Region 9 Air Division office. The designated 

areas roughly approximate the boundaries of the reservations for these tribes, but their inclusion in this table is intended for CAA planning purposes only and is not intended to be a Federal determination of the exact boundaries of the reservations. Also, the specific listing of these tribes 

in this table does not confer, deny, or withdraw Federal recognition of any of the tribes so listed nor any of the tribes not listed. cThe use of reservation boundaries for this designation is for purposes of CAA planning only and is not intended to be a Federal determination 

of the exact boundaries of the reservations. Nor does the specific listing of the Tribes in this table confer, deny, or withdraw Federal recognition 

of any of the Tribes listed or not listed. 1This date is June 15, 2004, unless otherwise noted. 

2This date is June 4, 2010. 

* * * * * 

[FR Doc. 2012–6562 Filed 3–20–12; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Parts 144, 147, and 158 

CMS–9981–F 

RIN 0938–AQ95 

Student Health Insurance Coverage 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule establishes 

requirements for student health 

insurance coverage under the Public 

Health Service (PHS) Act and the 

Patient Protection and Affordable Care 

Act (Affordable Care Act). The final rule 

defines ‘‘student health insurance 

coverage’’ as a type of individual health 

insurance coverage, and specifies that 

certain PHS Act requirements are 

inapplicable to this type of individual 

health insurance coverage. This final 

rule also amends the medical loss ratio 

and annual limits requirements for 

student health insurance coverage under 

the PHS Act. 

DATES: Effective Date. This rule is 

effective on April 20, 2012. 

Applicability Dates. The amendment 

to 45 CFR Part 147 applies to student 

health insurance coverage for policy 

years beginning on or after July 1, 2012. 

The amendments to 45 CFR Part 158 

apply beginning January 1, 2013, to 

health insurance issuers offering student 

health insurance coverage. 

FOR FURTHER INFORMATION CONTACT: 

Robert Imes, (410) 786–1565. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Patient Protection and Affordable 

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

on March 23, 2010, and the Health Care 

and Education Reconciliation Act of 

2010 (Pub. L. 111–152) was enacted on 

March 30, 2010. We refer to the two 

statutes collectively as the Affordable 

Care Act. The Affordable Care Act 

reorganizes, amends, and adds to the 

provisions of Part A of Title XXVII of 

the Public Health Service (PHS) Act 

relating to group health plans and 

health insurance issuers in the group 

and individual markets. 


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16454 Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 

Section 1560(c) of the Affordable Care 

Act provides that ‘‘nothing in this title 

(or an amendment made by this title) 

shall be construed to prohibit an 

institution of higher education (as such 

term is defined for purposes of the 

Higher Education Act of 1965) from 

offering a student health insurance plan, 

to the extent that such requirement is 

otherwise permitted under applicable 

Federal, State, or local law.’’ 

On February 11, 2011, we published 

a proposed rule (76 FR 7767) regarding 

section 1560(c) entitled ‘‘Student Health 

Insurance Coverage.’’ In the preamble of 

the proposed rule, we explained that we 

interpreted section 1560(c) to mean that 

if particular requirements in the 

Affordable Care Act would have, as a 

practical matter, the effect of prohibiting 

an institution of higher education from 

offering a student health plan otherwise 

permitted under Federal, State or local 

law, such requirements would be 

inapplicable pursuant to section 

1560(c). Accordingly, the proposed rule 

defined ‘‘student health insurance 

coverage’’ and specified that a small 

number of individual market 

requirements in the PHS Act and the 

Affordable Care Act would not apply to 

student health insurance coverage. We 

also asked for comments on how other 

Affordable Care Act requirements 

should apply in the case of student 

health insurance coverage. We received 

approximately one hundred comments 

in response to the proposed rule. They 

include comments from institutions of 

higher education and their associations, 

students and student organizations, 

faculty members, consumer 

organizations, health insurance issuers, 

and brokers. 

II. Provisions of the Proposed Rule 

The February 11, 2011 proposed rule 

included the following: 

Definition. The proposed rule defined 

student health insurance coverage as a 

type of individual market health 

insurance coverage offered to students 

and their dependents under a written 

agreement between an institution of 

higher education and an issuer. Student 

health insurance coverage could not be 

offered to individuals other than 

students and their dependents, could 

not condition eligibility based on health 

status, and had to satisfy any additional 

requirements imposed under State law. 

Exemptions from the PHS Act. The 

proposed rule would exempt student 

health insurance coverage from the 

guaranteed availability requirement of 

PHS Act section 2741(e)(1) and the 

guaranteed renewability requirement of 

PHS Act section 2742(b)(5). The 

proposed rule also would provide that 

student health insurance coverage could 

not establish an annual dollar limit on 

coverage lower than $100,000 for policy 

years beginning prior to September 23, 

2012. The proposed rule would apply 

the generally applicable annual dollar 

limit requirements for individual health 

insurance coverage for subsequent 

policy years. 

Student Administrative Health Fees. 

The proposed rule would clarify that 

student administrative health fees were 

not cost-sharing for purposes of PHS Act 

section 2713, which requires that 

certain preventive services be covered 

without cost-sharing. Student 

administrative health fees were defined 

as fees charged by institutions of higher 

education on a periodic basis to provide 

health care through school clinics, 

regardless of whether students utilize 

the clinics or enroll in student health 

insurance coverage. 

Notice. The proposed rule would 

require that issuers give students a 

notice informing them of their 

coverage’s exceptions from the specified 

PHS Act requirements. The notice 

would have to be prominently displayed 

in 14-point bold type on the front of the 

insurance policy or certificate and any 

other plan materials. Model language 

was provided. 

Applicability. The proposed rule 

would be applicable to student health 

insurance coverage for policy years 

beginning on or after January 1, 2012. 

III. Analysis of and Responses to Public 

Comments 

We carefully considered all of the 

comments in drafting this final rule. The 

major comments are summarized below 

with our responses. 

A. Definition of Student Health 

Insurance Coverage (§ 147.145 (a)) 

Comment: We received several 

comments concerning the proposed 

definition of student health insurance 

coverage in § 147.145(a). An issuer, a 

college association and a student 

advocacy group noted that, in addition 

to individual universities, consortia of 

universities and State boards of regents 

sometimes sponsor student health 

insurance coverage plans. In addition, 

they noted that student associations 

have sponsored insurance plans. A 

broker asked for clarification whether 

student health insurance coverage could 

encompass coverage sold to students 

attending high school. A college 

association requested clarification on 

what individuals can be included as 

dependents under student health 

insurance coverage. Lastly, an issuer 

proposed that temporary continuations 

of coverage following loss of student 

status be limited to 90 days. 

Response: The proposed definition of 

student health insurance coverage 

would not prevent consortia of 

universities or State boards of regents 

from acting on behalf of an institution 

of higher education in entering into a 

written agreement with an issuer to 

provide student health insurance 

coverage since those bodies are either a 

collection of universities or part of the 

university system. Student associations 

sponsoring insurance plans are not 

institutions of higher education under 

the Higher Education Act of 1965, and 

therefore such coverage would not be 

student health coverage within the 

meaning of the proposed rule. However, 

depending on their circumstances, 

student associations may qualify as 

bona fide associations under § 144.103 

which would allow them to be exempt 

from the current PHS Act guaranteed 

availability and guaranteed renewability 

requirements. The proposed definition 

would not include coverage provided 

under an agreement between an issuer 

and a high school, as the definition of 

an institution of higher education under 

the Higher Education Act does not 

include secondary institutions. 

As discussed in the proposed rule’s 

preamble, student health insurance 

plans have flexibility in determining 

which dependents, if any, are eligible 

for coverage under their plan terms. 

Similarly, student health insurance 

plans would have discretion under the 

proposed rule to allow temporary 

continuations of coverage upon events 

such as the loss of student status. For 

example, while a 90-day extension 

would be reasonable to allow a 

graduating student to transition to other 

coverage, a very lengthy extension, such 

as a 12-month extension, would not be 

consistent with the proposed 

requirement of § 147.145(a) that 

eligibility for student health insurance 

coverage be limited to students and 

their dependents. We are therefore 

adopting the proposed definition of 

student health insurance coverage in the 

final rule without change. 

Comment: Nine colleges and 

universities urged that we allow student 

coverage, at least in some instances, to 

continue to be offered as short-term 

limited duration coverage. These 

commenters noted the temporary nature 

of student coverage, the fact that 

universities generally were issued a new 

policy each year, and the cost of 

compliance with the Affordable Care 

Act. Further, some universities and 

issuers asserted that student coverage 


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was not intended to provide 

comprehensive coverage and should 

rather be seen as part of the universities’ 

risk mitigation strategies. A consumer 

group supported defining student health 

insurance as individual health 

insurance and noted the definition’s 

consistency with past CMS statements. 

A higher education association 

recommended that any short-term 

limited duration policies issued to 

students be required to disclose that 

they do not comply with Affordable 

Care Act provisions. 

Response: As discussed in the 

proposed rule’s preamble, we 

understand that in the past many issuers 

have claimed that student health 

insurance coverage was short-term 

limited duration coverage and have not 

complied with the PHS Act. To that 

effect, issuers sometimes included 

coverage terms that were only minutes 

short of one year and placed disclaimers 

on the front pages of policies asserting 

non-renewable and short-term limited 

duration status. However, in practice, 

these policies often—(1) Allowed 

students to renew coverage as long as 

their schools had chosen to retain the 

policy (and, in some cases, the issuers 

cooperated with the universities in 

automatically renewing students who 

did not affirmatively opt out); (2) had 

significant numbers of students keep 

coverage for longer than one year; and 

(3) in some cases, even based annual 

and lifetime dollar limitations and 

preexisting condition exclusion 

limitation periods on students’ coverage 

under the policies from the same issuer 

during prior academic years. 

The effective date of this rule is 

intended to provide issuers and 

universities that operated with a 

reasonable belief that their policies were 

short-term limited duration coverage to 

come into compliance with the 

Affordable Care Act and the PHS Act. 

While there may be instances where 

short-term limited duration coverage is 

appropriately sold to students—for 

instance, foreign students studying for 

only one semester in the United States 

or U.S. citizens studying abroad for one 

summer—the short-term limited 

duration model does not apply to 

coverage that a student could have 

through the same health insurance 

issuer for one or more years during the 

course of his or her undergraduate or 

graduate education. CMS, along with 

the States, will monitor issuers’ 

compliance with properly classifying 

student health insurance coverage 

following the effective date of this rule. 

Further, we point out that CMS has 

authority to impose penalties on health 

insurance issuers for failures to comply 

with the requirements of the PHS Act. 

Comment: In the proposed rule, we 

specifically requested comments on the 

prevalence, structure, and State 

regulation of self-funded student health 

plans, given that the PHS Act does not 

provide authority for HHS to regulate 

such plans. In response, three consumer 

advocacy groups asked that we 

affirmatively encourage States to 

regulate self-funded student health 

plans to the extent permissible under 

Federal and State law. One issuer 

asserted that colleges would self-fund 

student health plans in response to a 

determination that insured student 

health plans fall under the Affordable 

Care Act, in order to avoid some of the 

requirements of the Affordable Care Act. 

Response: From the comments to the 

proposed rule, it appears that there are 

approximately 200,000 students covered 

through student health plan 

arrangements that are self-funded 

through colleges and universities. While 

some commenters would prefer uniform 

regulation of all student plans; as stated 

in the proposed rule’s preamble, 

however, we do not have the authority 

to regulate self-funded student health 

plans. The PHS Act and the Affordable 

Care Act give HHS regulatory authority 

over health insurance issuers in the 

group and individual markets and over 

non-Federal governmental group health 

plans, but self-funded student health 

plans do not fit into these categories. 

The proposed rule acknowledged that 

because self-funded student health 

plans are neither health insurance 

coverage nor group health plans, as 

those terms are defined in the PHS Act, 

HHS has no authority to regulate them, 

including extending Affordable Care Act 

policies to them. As explained in the 

proposed rule, these self-funded student 

health plans may be regulated by the 

States. 

B. Exemptions From the Public Health 

Service Act (§ 147.145(b)) 

Comment: Nine issuers and four 

universities were concerned that 

eliminating annual and lifetime dollar 

limits would result in dramatic 

premium hikes for student plans and 

that many students will not be able to 

afford insurance. As a result, some 

commenters asserted that this 

elimination would cause universities to 

stop sponsoring student health 

insurance plans. An issuer opined that 

smaller schools would not have 

sufficiently large enrollments that could 

generate the premiums necessary to 

cover the risk exposure from unlimited 

maximums on plan dollar limits. These 

commenters proposed alternatives such 

as a slower phase-in of the annual limits 

rules, a permanent exception from these 

rules, and a waiver program under 

which universities could request 

exceptions from the generallyapplicable rules. 

Conversely, seven commenters, 

including some universities and 

consumer interest groups, supported the 

elimination of annual and lifetime 

dollar limits on student health 

insurance plans without a phase-in. 

Two commenters noted that while few 

students even come close to meeting 

these limits, the uncovered medical 

expenses could be catastrophic for those 

that do. 

Response: In recognition of the 

considerable increase from $100,000 to 

$2 million in one year and in response 

to these comments, we have modified 

the proposed rule to the following 

schedule for restrictions on annual 

dollar limits—(1) annual limits of no 

less than $100,000 for policy years 

beginning on or after July 1, 2012 but 

before September 23, 2012; (2) annual 

limits of no less than $500,000 for 

policy years beginning on or after 

September 23, 2012, but before January 

1, 2014; and (3) consistent with section 

2711, no annual dollar limits for policy 

years beginning on or after January 1, 

2014. The $500,000 annual dollar limit 

requirement for policy years beginning 

on or after September 23, 2012 provides 

student health insurance coverage a 

more gradual transition to full 

compliance with PHS Act section 2711 

in 2014 but also protects students from 

catastrophic claims except in extreme 

cases. This schedule ensures persons 

with student health insurance coverage 

will be more fully protected from 

catastrophic claims within a few years, 

while allowing any costs associated 

with this important protection to be 

incorporated gradually. We point out 

that the student policies likely to see 

premium increases from this 

requirement are those policies that 

currently leave students with very 

significant financial exposure in the 

event of illness or accident. 

Comment: Commenters, including 

universities, brokers, and issuers, 

generally recommended that preventive 

service coverage be provided at student 

health centers, unless referrals were 

needed to other providers. Industry and 

university commenters noted that 

student health insurance coverage 

benefits typically coordinate with 

services offered at the student health 

center and that this coordination 

eliminates duplication of benefits and 

makes student plans more affordable. 

Industry commenters noted that student 

health fees, separate from the student 


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16456 Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 

health insurance coverage premiums, 

often cover access to certain preventive 

services from campus providers for both 

students enrolled in student health 

insurance coverage and other students 

who may have other or no coverage. 

Response: Student health insurance 

coverage must include the preventive 

services specified under PHS Act 

section 2713 and the implementing 

regulations (45 CFR § 147.140). 

However, PHS Act section 2713 and the 

implementing regulations do not 

prevent student health insurance 

coverage from coordinating with student 

health centers to ensure the provision of 

these services. For example, an issuer 

can arrange for a student health center 

to serve as its in-network provider 

where students could receive preventive 

services without cost-sharing. This final 

rule also retains the clarification that 

student administrative health fees are 

not cost-sharing under section 2713 of 

the PHS Act. Student administrative 

health fees are those that are charged to 

all students enrolled at a college or 

university, regardless of whether a 

student enrolls in student health 

coverage or utilizes any services offered 

by the clinic, which gives all students 

access to a student health clinic’s 

services and supports a number of 

services and activities that foster a 

healthier campus community. 

Comment: Most commenters asserted 

that it would be inappropriate to apply 

section 2719A, which allows choice of 

certain health care professionals, to 

student health insurance coverage 

because of the unique nature of the 

student health system environment. 

More than two dozen commenters, 

including industry, university and 

consumer interest groups, noted the 

need to preserve the student health 

centers’ role in providing care to 

students. Commenters emphasized the 

fact that student health insurance 

coverage’s benefits are customized to 

take into account the services available 

from campus providers. Commenters 

also noted that campus providers serve 

as gatekeepers for care and as medical 

homes. Conversely, one consumer group 

asserted that it was not necessary to 

grant an exception from section 2719A 

to student health insurance coverage 

because students already are 

incentivized to use the geographically 

closest providers. Additionally, a 

consumer advocacy group noted that 

students would also need adequate 

access to health care when away from 

campus. 

Response: The proposed rule does not 

prevent a student health insurance plan 

from designating providers at a student 

health center as its in-network providers 

and allowing students to choose from 

among those providers for purposes of 

satisfying section 2719A, provided that 

the centers have sufficient provider 

capacity and range of services available 

to support this designation. We believe 

that this provides an adequate incentive 

for students to obtain health care at the 

student health clinic while they are on 

campus, while also providing them with 

choice of providers when away from 

campus. We also note that student 

health centers vary in capacity and 

design, and some are not equipped to 

provide emergency services. Therefore, 

the final rule does not modify the 

proposed rule to grant student health 

insurance coverage exceptions from the 

provider choice requirements of section 

2719A. 

Comment: Commenters offered 

various approaches concerning how 

grandfather status should apply to 

student health insurance coverage. A 

university proposed that grandfather 

status apply to student health insurance 

coverage in the same manner that it 

applies to other individual health 

insurance coverage. Other commenters 

including issuers and brokers asserted 

that special treatment regarding 

grandfather status was advisable 

because issuers and universities were 

not able to predict the direction of this 

rule in advance and because the 

effective date of this rule as proposed 

(that is, policy years beginning on or 

after January 1, 2012) is much later than 

the Affordable Care Act’s general date 

(March 23, 2010) for determining 

grandfather status. Commenters 

requested accommodations such as—(1) 

assessing grandfather status based on 

the student plan in place for the 

academic year 2011–2012; (2) setting 

grandfather status based on whether a 

university had the same or a similar 

policy within the parameters of the 

grandfather rule, not on a student-bystudent basis, as a straight-forward 

application of the individual market 

rules would dictate; and (3) allowing 

issuers and universities a limited 

opportunity to revoke benefit changes 

that otherwise would trigger loss of 

grandfather status. 

Response: While we understand the 

unique issues regarding grandfather 

status of student health insurance 

coverage, we do not have the legal 

discretion to alter the generally 

applicable grandfather rules. 

Grandfathering rules apply to health 

insurance issuers and plans across all 

markets. The rule defines student health 

insurance coverage to be a form of 

individual market coverage, and as 

such, grandfather status is determined 

as to the coverage in which each 

individual student was enrolled on 

March 23, 2010. Any coverage in which 

an individual student is newly enrolled 

after March 23, 2010 is nongrandfathered. 

Comment: In response to the NPRM, 

a public health group, a women’s rights 

organization, a student organization 

from a religiously-affiliated university, 

and an individual student commented 

on the importance of student health 

insurance coverage including benefits 

for contraception. The student 

organization and the individual student 

specifically noted that their schools’ 

plans excluded coverage for 

contraceptive methods. 

Subsequent to the NPRM on student 

health insurance coverage, on August 3, 

2011, CMS, along with the Department 

of Labor and the Department of the 

Treasury (the Departments), published 

interim final rules (IFR) with request for 

comments (76 FR 46621) amending the 

Interim Final Rules Relating to Coverage 

of Preventive Services, codified at 45 

CFR § 147.130. The August 3, 2011 

amended IFR provided the Health 

Resources and Services Administration 

(HRSA) authority to exempt group 

health plans established or maintained 

by certain religious employers (and 

group health insurance coverage 

provided in connection with those 

group health plans) from any 

requirement to cover contraceptives 

required as a result of any HRSA 

guidelines. 

In response to the August 3, 2011 

amended IFR, the Departments received 

comments from a council of religiouslyaffiliated schools and from numerous 

religious-affiliated colleges and 

universities requesting that, among 

other suggestions, the exemption be 

broadened to include plans that meet 

the definition of a church plan under 

section 414(e) of the Internal Revenue 

Code and also to include student health 

insurance plans facilitated by 

religiously-affiliated colleges and 

universities. Conversely, the 

Departments received comments from 

women’s advocacy organizations and 

from a constitutional rights organization 

requesting that the exemption either be 

stricken from the IFR or at least 

narrowed. 

Response: With respect to certain 

non-profit institutions of higher 

education with religious objections to 

covering contraceptive services whose 

student health insurance plans are not 

grandfathered health plans, if the 

college or university and its student 

health insurance plan satisfy the terms 

applicable to an employer and its group 

health plan (and group health insurance 

coverage provided in connection with 


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Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 16457 

1 ‘‘Guidance on the Temporary Enforcement Safe 

Harbor for Certain Employers, Group Health Plans 

and Group Health Insurance Issuers with Respect to 

the Requirement to Cover Contraceptive Services 

Without Cost Sharing Under Section 2713 of the 

Public Health Service Act, Section 715(a)(1) of the 

Employee Retirement Income Security Act, and 

Section 9815(a)(1) of the Internal Revenue Code’’, 

February 10, 2012, which can be found at: http:// 

cciio.cms.gov/resources/files/Files2/02102012/ 

20120210-Preventive-Services-Bulletin.pdf. 

that group health plan) under the 

Guidance released on February 10, 

2012, establishing a temporary one-year 

enforcement safe harbor for group 

health plans established or maintained 

by certain non-profit, non-exempt 

employers with religious objections to 

covering contraceptive services (and 

group health insurance coverage 

provided in connection with those 

group health plans),1 the college or 

university and the issuer of the student 

health insurance coverage will also be 

subject to the temporary one-year 

enforcement safe harbor, and 

contraceptive benefits will not have to 

be provided in its student health 

insurance plan until policy years 

beginning on or after August 1, 2013. 

Satisfaction of such terms includes 

sending the requisite notice to the 

students enrolled in the student health 

insurance plan and the institution of 

higher education maintaining on file the 

requisite self-certification. 

Before the end of the temporary 

enforcement safe harbor, the 

Departments will work with 

stakeholders to develop alternative ways 

of providing contraceptive coverage 

without cost-sharing to students of nonprofit religious institutions of higher 

education with religious objections to 

such coverage. Specifically, the 

Departments plan to initiate rulemaking 

to require issuers to offer student health 

insurance plans without contraceptive 

coverage through such an institution 

and simultaneously to offer 

contraceptive coverage without costsharing directly to the student health 

insurance plan enrollees (and their 

dependents). Under this approach, the 

Department also will require that, in 

this circumstance, there be no charge for 

the contraceptive coverage. Actuaries, 

economists and experts have found that 

coverage of contraceptives is at least 

cost neutral when taking into account 

all costs and benefits in the health plan. 

C. Notice (§ 147.145(d)) 

Comment: While commenters 

uniformly supported a notice 

requirement concerning how student 

health insurance coverage differs from 

other individual market coverage, they 

had various recommendations 

concerning the notice’s content and 

appearance. Some consumer groups 

agreed with the proposed rule’s specific 

approach. Other commenters, including 

provider associations, consumer 

advocacy groups and issuers, submitted 

a range of proposed changes to the 

notice, including that it—(1) Use terms 

likely to be understood by enrollees, 

such as using ‘‘new health reform law’’ 

in place of ‘‘PHS Act’’; (2) provide 

contact information for State or local 

consumer assistance services; (3) clearly 

list exceptions from the PHS Act and 

the Affordable Care Act in a bulleted 

fashion; (4) be limited to one sentence 

in length; (5) use a conspicuous font and 

display; (6) permit font and display to 

conform more to the style of the 

document into which it is incorporated; 

(7) be provided in languages other than 

English; and (8) be allowed to be posted 

on schools’ intranets. One consumer 

group suggested that notice regarding 

the special rules on guaranteed 

availability and renewability are 

unnecessary. In addition, two 

commenters recommended that the 

notice requirement sunset when the 

annual dollar limit requirement for 

student health insurance becomes 

consistent with that for all other 

individual health insurance coverage. 

Response: While we retain the 

proposal that a notice should be 

provided to a student and any 

dependents describing how their 

coverage differs from other individual 

market coverage, and that the disclosure 

should be provided in the insurance 

policy or certificate and any other 

written materials for the coverage (for 

example, enrollment information), we 

include some modifications in the final 

rule in response to comments. We note 

that the proposed rule set out a model 

notice, with the intent of allowing 

health insurance issuers flexibility to 

create their own notice, provided that it 

met certain criteria. 

In response to recommendations from 

commenters, the final rule modifies the 

content of the notice requirement, as 

well as simplifies the model notice. The 

content criteria was modified by 

removing the notice regarding 

guaranteed availability and guaranteed 

renewability, leaving only the content to 

inform students if the policy does not 

meet the annual limits restrictions. 

Additionally, the revised model notice 

in the final rule uses the term ‘‘health 

care reform law,’’ given that this phrase 

may be more understandable to 

consumers. Required language was also 

added advising students that they may 

be eligible for coverage under their 

parents’ employer group health plan or 

a parent’s individual market coverage if 

they are under the age of 26. This is 

important because coverage under a 

parent’s employer or a parent’s 

individual market plan may contain all 

of the protections of the Affordable Care 

Act, including adherence to the annual 

dollar limits requirements. In addition, 

we clarify that the notice must be 

provided in the insurance policy or 

certificate and in any other plan 

materials summarizing the terms of the 

coverage (such as a summary 

description document). Finally, the final 

rule sunsets the notice requirement 

when the annual limits requirement is 

consistent with other individual health 

insurance coverage. 

D. Applicability (§ 147.145(e)) 

Comment: One consumer advocacy 

group recommended that January 1, 

2012 be the latest date for student health 

insurance coverage to comply with the 

individual market requirements. This 

commenter expressed concern that by 

establishing policy years beginning on 

or after January 1, 2012 as the effective 

date for the rule, most students will 

have to wait until the 2012–2013 school 

year to benefit from the rule. A related 

concern of the commenter was that this 

effective date allows issuers to increase 

premiums and collect as much profit as 

possible before the Federal MLR 

requirements take effect. 

One issuer urged HHS to issue a final 

rule no later than August 1, 2011 or 

otherwise delay the effective date so 

that issuers have adequate time to 

prepare for compliance. The commenter 

explained that negotiations for and sales 

of 2012–2013 academic year policies 

will occur in the Fall of 2011. 

Response: We recognize the concerns 

of issuers regarding timing, but we had 

to ensure that the final rule is consistent 

with other policies. We believe that the 

timing of this final rule provides 

sufficient time for issuers to comply 

with the new provisions for the 2012– 

2013 academic year. 

Comment: Issuers and brokers raised 

several general issues concerning the 

applicability of the PHS Act and the 

Affordable Care Act to foreign students 

studying in the United States. They 

asserted that plans for inbound foreign 

students have unique administrative 

cost structures, benefit designs, and 

medical utilization patterns, which 

differ substantially from plans for 

domestic students. These commenters 

suggested that, because of these 

differences, schools should be allowed 

to offer separate plans for international 

students that are subject to different 

requirements than domestic health 

plans. One commenter asked that we 

exempt health plans for students who 

are not United States citizens from the 


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PHS Act and the Affordable Care Act. In 

contrast, a consumer group and a school 

interest group urged HHS to subject 

international student plans to the same 

rules as all other individual market 

coverage. 

Response: Health insurance coverage 

issued in a State, as that term is defined 

by the PHS Act and the Affordable Care 

Act, must comply with the applicable 

provisions of such Acts, without regard 

to the individuals being insured. 

However, as previously discussed, there 

may be circumstances where student 

coverage appropriately may still be sold 

on a short-term limited duration basis to 

foreign students, and thus the issuer 

would not have to comply with the PHS 

Act and the Affordable Care Act. 

Comment: Issuers noted that the State 

Department’s Bureau of Educational and 

Cultural Affairs requires students on J– 

1 Exchange Visitor visas to maintain 

health insurance coverage that includes 

medical benefits of at least $50,000 per 

accident or illness, includes a 

deductible of not more than $500 per 

accident or illness, and meets other 

requirements (22 CFR 62.14). One 

commenter requested that we ensure 

that our final rule and 22 CFR 62.14 do 

not conflict. 

Response: We reviewed the 

requirements under 22 CFR 62.14 and 

believe that issuers will be able to 

comply both with those rules and this 

final rule. 

Comment: Commenters offered a 

range of comments on the rule’s 

interaction with State laws. A State 

insurance department requested a 

clarification that States could impose 

more stringent standards on student 

health insurance coverage than those 

under this rule. The State insurance 

department offered an example of a 

State requiring more detailed 

disclosures. One issuer requested this 

rule preempt State laws imposing 

additional standards on student health 

insurance coverage. On the other hand, 

several universities submitted a form 

letter urging that student health 

insurance coverage be subject only to 

State laws. A broker asserted that most 

States regulate student health insurance 

coverage as a form of blanket or group 

health insurance and urged that CMS 

allow States to continue to regulate 

student health insurance coverage in 

that fashion. Finally, several consumers 

expressed concern that student health 

insurance coverage would not be subject 

to rate review under PHS Act section 

2794, as added by Affordable Care Act 

section 1003. 

Response: As discussed in the 

preamble to the proposed rule, the PHS 

Act only preempts State standards and 

requirements to the extent that they 

prevent the application of a PHS Act 

requirement. (PHS Act sections 2724 

and 2762). States may impose additional 

requirements on student health 

insurance (for example, additional 

disclosure requirements) and States may 

continue to regulate student health 

insurance coverage as a form of group or 

blanket health insurance, provided 

these standards do not prevent the 

application of the relevant individual 

market provisions of the PHS Act. 

Section 1560(c) permits limited 

exemptions for student health insurance 

coverage from those generally 

applicable Affordable Care Act 

requirements that, as a practical matter, 

would prohibit the offering of student 

health insurance coverage. Section 

1560(c) does not allow CMS to except 

student health insurance coverage from 

compliance with all Federal 

requirements. Further, many 

commenters pointed out the inadequacy 

of many current student health 

insurance plans, which suggests that 

compliance solely with State laws has 

failed to ensure that students had access 

to comprehensive coverage in the past. 

Issuers must comply with the Federal 

rate review process in 45 CFR Part 154 

for non-grandfathered health insurance 

coverage that is included under a State’s 

definition of individual market coverage 

or small group market coverage. 

E. Issuer Use of Premium Revenue: 

Reporting and Rebate Requirements 

(Part 158) 

Comment: While the proposed rule 

did not include a specific proposal as to 

how Federal medical loss ratio (MLR) 

requirements in PHS Act section 2718 

would apply to student health insurance 

coverage, we specifically requested 

comments on this issue. Section 2718 

provides for the calculation of an 

issuer’s MLR based on the percentage of 

premium revenue that is spent on health 

care claims and quality improvement, 

and directs that rebates be paid if this 

amount does not meet the minimum 

standard. We specifically invited 

comments on whether to make an 

adjustment to the MLR methodology to 

reflect the ‘‘special circumstances’’ of 

student health coverage, as allowed 

under PHS Act section 2718(c). 

Pursuant to our request in the proposed 

rule, we received several comments on 

the Federal MLR requirements as they 

relate to student health insurance 

coverage. 

One university and student advocates 

strongly supported applying Federal 

MLR requirements to student health 

insurance coverage in the same manner 

as they apply to individual market 

insurance generally. This would mean 

using the standard methodology for 

calculating the MLR and applying the 

80 percent standard for individual 

market insurance to the MLR produced 

by this standard methodology. 

A majority of the brokers, agents, 

TPAs and issuers, however, asserted 

that applying the Federal MLR 

requirements to student health coverage 

without any special circumstances 

adjustment would be inappropriate and 

would force issuers to leave the student 

health insurance market. These 

commenters asserted that it would be 

difficult for student coverage to meet the 

Federal MLR requirements because of 

the unique operational and 

administrative nature of such plans. 

Most issuers stated that if the standard 

method for calculating the Federal MLR 

were applied, their MLRs would be 

between 65 percent and 82 percent. One 

issuer commented that only large 

issuers would be able to fold student 

insurance into their overall individual 

market blocks of business and continue 

to operate at the required Federal MLR 

standard if no adjustment were made to 

the methodology for calculating the 

MLR. 

Specific examples of the unique 

administrative costs cited by several 

commenters include—(1) The transient 

nature of the student population, 

leading to high turnover; (2) more 

frequent enrollment periods; (3) the 

level of plan design customization 

required by different schools; (4) the 

operation and administration of student 

waiver programs; and (5) special billing 

practices related to student health 

centers. Additionally, one issuer 

asserted that college students’ 

unfamiliarity with the health care 

system increases the cost of 

administrative expenses for student 

health plans. 

Several issuers also provided specific 

recommendations to address the 

application of the Federal MLR 

requirements. A majority of these 

commenters proposed developing a 

special MLR methodology for student 

coverage. Two issuers recommended 

that student coverage in effect should be 

held to no higher than a 70 percent or 

75 percent MLR. Several commenters 

suggested that student plans should be 

aggregated nationally as their own pool, 

and a few requested that the MLR 

reporting year should be based on an 

academic year or a policy year because 

this is how student plans are sold. One 

issuer specifically noted that it does not 

sell other individual health insurance 

coverage and, therefore, would not have 

any other individual market business to 

aggregate with the student experience. 


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2Because student health insurance plan data will 

be aggregated nationally, a single 80 percent MLR 

standard will apply in determining rebates, even if 

some of the aggregated data come from States with 

adjusted individual market percentages. 

Another issuer had specific comments 

regarding when rebates should be due, 

and who should receive them. 

Lastly, two commenters including an 

educational association recommended 

that HHS research, either independently 

or through an independent organization, 

whether student health plans have 

unique administrative expenses that 

warrant special treatment. 

Response: We considered the 

comments and have reviewed additional 

data that supports the claim that student 

health plans have special circumstances 

specifically relating to their 

administrative cost structures. 

Accordingly, this final rule amends 45 

CFR Part 158 by expressly stating that 

issuers of student health insurance 

coverage are subject to the individual 

market reporting and rebate 

requirements of the MLR rule. While 

some commenters requested modifying 

the Federal MLR percentage standard 

for student plans, HHS does not have 

the authority to change the MLR 

percentage standard for plans. HHS does 

have authority under PHS Act section 

2718(c), however, ‘‘to take into account 

the special circumstances of smaller 

plans, different types of plans, and 

newer plans’’ in determining the 

methodology for calculating an issuer’s 

MLR. This amendment to Part 158 

exercises this authority by recognizing 

the special circumstances of student 

plans for purposes of the application of 

the Federal MLR requirements. The 

amendment to Part 158 provides that 

the experience for student coverage is to 

be reported separately from other 

individual market coverage. Further, 

given that student health insurance 

coverage is provided a separate pool, 

apart from other individual market 

coverage, the amendment provides for 

national aggregation of student health 

insurance coverage.2 In addition, by 

taking into account the special 

circumstances of student health 

insurance coverage and helping to 

ensure continued access to student 

health insurance coverage, this 

amendment to Part 158 comports with 

section 1560(c) of the Affordable Care 

Act, which provides that nothing in 

Title I of the Affordable Care Act (or any 

amendments) be construed to prohibit 

universities from offering student health 

insurance plans. 

Also in response to comments from 

issuers, universities and student 

advocates and data from issuers and the 

NAIC, this amendment to Part 158 

provides that the calculation of incurred 

claims and quality improving activities 

is to be multiplied by 1.15 in 2013. HHS 

has determined that this phased-in 

adjustment to the numerator for student 

health insurance coverage for the MLR 

requirements is sufficient to account for 

the special circumstances of student 

health plans, specifically their unique 

administrative costs. As mentioned 

above, issuers of student health 

insurance coverage commented that, 

based on current operations and unique 

costs associated with student coverage, 

they currently meet a 70 percent to 75 

percent MLR standard and, therefore, 

would need an adjustment to meet the 

80 percent MLR standard and place 

them on a glide path to compliance in 

2014. The student health plan-specific 

MLR methodology is in effect for MLR 

reporting year 2013, and no special 

treatment is provided in MLR reporting 

year 2014 and beyond. As mentioned 

above, issuers provided many examples 

of the unique administrative expenses 

in the student market. While some of 

the expenses are inherent in the nature 

of student coverage (such as, high 

enrollee turnover and manual claims 

processing for student clinics), there are 

other administrative costs where issuers 

can potentially gain efficiencies in their 

operations (such as, marketing and plan 

customization). The phase-in of the 

MLR requirements is intended to 

provide issuers additional time to 

become more efficient in their 

operations and meet the individual 

market MLR requirement of 80 percent. 

We believe that this policy is responsive 

to the concerns of commenters, while 

still maintaining the protections under 

the Affordable Care Act. The rule also 

provides that the MLR reporting year for 

student coverage will be on a calendar 

year basis, beginning January 1, 2013. 

We maintained the calendar year MLR 

reporting structure for student coverage 

because, under Part 158, issuers 

currently report other individual market 

coverage on a calendar year basis. In 

addition, issuers of student health 

insurance coverage will be subject to the 

rebate provisions in Part 158, consistent 

with other individual market coverage. 

Since student health insurance coverage 

is individual market coverage, the 

rebates will be distributed directly to 

the student in the same manner as 

rebates from other individual market 

coverage. Lastly, the amendment to Part 

158 includes conforming changes 

clarifying how life-years and credibility 

adjustments are applied to the student 

market. 

F. Provisions of the Public Health 

Service Act Effective in 2014 

Comment: Pursuant to our request in 

the proposed rule for comments on the 

applicability of other Affordable Care 

Act provisions, we received a large 

number of comments on the interaction 

between student health insurance 

coverage and various Affordable Care 

Act reforms effective in 2014. 

Five commenters argued that PHS Act 

section 2702 and 2703, the 2014 

guaranteed availability and renewability 

provisions, should not apply to student 

health insurance coverage, consistent 

with the proposed rule’s exemption 

from PHS Act section 2741 and 2742, 

the current HIPAA guaranteed 

availability and renewability 

requirements. One commenter further 

pointed out the need to have flexibility 

to limit guaranteed availability to open 

enrollment periods. 

Three universities and a consumer 

advocacy group expressed concern that 

universities would stop sponsoring 

student health insurance due to 

coverage being available through the 

Affordable Insurance Exchanges. One 

university asserted students are better 

served purchasing coverage while 

enrolling for classes, while another 

university expressed concern that 

provider networks could be inadequate 

for students with coverage through an 

out-of-state Exchange. Four commenters 

requested that the subsidies available 

through the Affordable Insurance 

Exchanges be available for use with 

student health insurance coverage and 

self-funded student plans. On the other 

hand, three commenters opposed the 

offering of student health insurance 

coverage through the Affordable 

Insurance Exchanges, arguing that this 

would interfere with the administration 

of colleges’ mandatory insurance 

requirements and that, in any event, 

most students’ family income levels 

would disqualify them for subsidies. 

Several commenters requested that 

student health insurance coverage and 

self-funded student health plans be 

specifically recognized as minimum 

essential coverage. Two commenters 

suggested that self-funded student 

health plans be required to meet the 

same coverage requirements as student 

health insurance coverage in order to be 

deemed minimum essential coverage. 

Lastly, two commenters proposed that 

student health insurance coverage 

continue to have its experience 

separately pooled, notwithstanding the 

single risk pool requirement that 

otherwise goes into effect for the 

individual market in 2014, and one 

commenter proposed that student health 


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16460 Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 

3This estimate is based on data from the 2009 

National Association of Insurance Commissioners 

(NAIC) Annual Accident and Health Policy 

Experience Exhibit and the American Council on 

Education (ACE). The 2009 NAIC filings show that 

there are 58 health insurance issuers offering 

student health coverage; however this data does not 

include managed care plans in California, and may 

include some issuers offering K–12 student 

accidental health coverage. In addition, data from 

the American Council on Education suggests that 

there are several smaller plans offering student 

health plans. 

insurance coverage be deemed large 

group coverage and therefore exempt 

from the essential health benefits 

package requirements. 

Response: We considered the 

comments concerning those Affordable 

Care Act provisions that become 

effective in 2014 and have decided to 

address these issues with respect to 

student coverage in conjunction with 

final regulations concerning the 

Affordable Insurance Exchanges, the 

market requirements of the PHS Act, the 

definition of minimum essential 

coverage, tax credits for premium 

assistance, and other 2014 issues. 

As noted, the proposed rule included 

exemptions for student health plans 

from the current guaranteed issue and 

renewability requirements of PHS Act 

sections 2741 and 2742 for policy years 

beginning on or after July 1, 2012. 

IV. Provisions of the Final Regulations 

For the most part, this final rule 

incorporates the provisions of the 

proposed rule. The provisions of this 

final rule that differ from the proposed 

rule are: 

• Annual limits. We modified the 

phase-in schedule so that student health 

insurance coverage cannot have annual 

dollar limits on essential health benefits 

less than $500,000 for policy years 

beginning on or after September 23, 

2012, but before January 1, 2014. 

• Notice Requirement. We 

streamlined the content of the notice 

requirement by removing notice of the 

exemption regarding guaranteed 

availability and guaranteed renewability 

and simplified the model notice by 

using terms more easily understood by 

students and their dependents. Required 

language was also added advising 

students that they may be eligible for 

coverage under their parents’ employer 

or individual market coverage if they are 

under the age of 26. In addition, we 

added a sunset provision to the notice 

in 2014 for when the annual limits 

requirements become consistent with 

other individual health insurance 

coverage. 

• Medical Loss Ratio. We amended 45 

CFR Part 158 by expressly stating that 

issuers of student health insurance 

coverage are subject to the reporting and 

rebate requirements of the MLR rule. 

However, as allowed by PHS Act section 

2718(b)(1)(A)(ii), adjustments to the 

MLR numerators are provided for MLR 

reporting year 2013 due to their unique 

circumstances. In addition, we added 

specific provisions to § 158.120 

providing that student coverage will be 

aggregated nationally as its own pool 

rather than on a State by State basis, and 

its experience will be reported separate 

from other policies. Lastly, the rule 

includes conforming changes regarding 

how credibility adjustments are applied 

to the student health insurance market. 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for 45 CFR 

147.145(d), which contains information 

collection requirements (ICRs). Section 

147.145(d)(1) requires issuers of student 

health insurance coverage to provide 

notice to enrollees that the policy does 

not meet the minimum annual limits 

requirement of the Affordable Care Act. 

In addition, the final regulation requires 

that the disclosure must be prominently 

displayed in clear, conspicuous 14- 

point bold type. Additionally, the final 

regulation provides model language that 

issuers of student health insurance 

coverage can use in order to be in 

compliance with the notice 

requirement. The model language is 

provided in 45 CFR 147.145(d)(2). 

In order to provide the notices, the 

issuers of student health insurance 

coverage will need to review the model 

language or draft their own language, 

incorporate the plan or issuer’s name 

into the model notice (or a notice that 

is similar to the model), and print the 

notice in any plan or policy documents 

that are regularly sent to student 

enrollees. 

Minor changes in the notice 

requirement from the proposed rule 

create no additional burden beyond that 

calculated in the proposed rule. The 

final rule modifies the content of the 

notice requirement, as well as simplifies 

the model notice. The content was 

modified by removing the notice 

regarding guaranteed availability and 

guaranteed renewability and by using 

the term ‘‘health care reform law.’’ 

Required language was also added 

advising students that they may be 

eligible for coverage under their parents’ 

employer or individual market coverage 

if they are under the age of 26. In this 

final rule, we are adopting the burden 

estimate in the student health insurance 

coverage proposed rule. This burden 

estimate encompasses the entire notice 

process which includes assembly of the 

notice. It is estimated that 

approximately 75 student health 

insurance coverage issuers will have to 

provide such notice.3 We estimate that 

it will take approximately 2 minutes per 

student enrollee or approximately 1,000 

hours per student health insurance 

issuer to prepare and mail the notices to 

students. Including hourly wage and 

printing and mailing costs, we estimate 

the annual cost burden will be $40,840 

per affected issuer for a total cost of 

$3,063,000. In some cases, actual 

burden per notice (for example, postage) 

may be lower because we expect that 

many issuers will insert the model 

language into the existing plan materials 

that they were already intending to send 

to enrollees each year. 


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TABLE 1—ANNUAL REPORTING, RECORDKEEPING AND DISCLOSURE BURDEN

Regulation 

section(s) 

OMB 

Control 

No. 

Respondents Responses 

Burden 

per response 

(hours) 

Total annual 

burden (hours) 

Hourly labor 

cost of 

reporting 

($) 

Total labor 

cost of 

reporting 

($) 

Total capital/ 

maintenance 

costs 

($) 

Total cost 

($) 

§ 147.145 ............... 0938—New 75 2,250,000 .0333 75,000 26.14 3,063,000 0 3,063,000 

Total ................ ..................... 75 2,250,000 ...................... 75,000 ...................... ...................... ...................... 3,063,000 

For purposes of MLR and rebate 

reporting under Part 158, this final rule 

generally conforms the requirements for 

issuers of student plans to the 

requirements for the individual market 

under the MLR interim final regulation. 

One exception is that health insurance 

issuers that sell student plans will 

report the experience separately from 

other coverage. In addition, such 

experience will be aggregated on a 

national basis. Because the MLR interim 

final rule accounted for health 

insurance issuers for individual market 

coverage reporting on an annual basis, 

we are not imposing any additional 

requirements for health insurance 

issuers. In fact, as a result of the 

national aggregation of these plans, the 

burden on health insurance issuers of 

complying with this final rule will 

decrease. 

We have submitted an information 

collection request to OMB for review 

and approval of the information 

collection requirements contained in 

this final rule. The requirements are not 

effective until approved by OMB and 

assigned a valid OMB control number. 

VI. Regulatory Impact Analysis 

In accordance with the provisions of 

Executive Order 12866, this rule was 

reviewed by the Office of Management 

and Budget. 

A. Summary 

As stated earlier in this preamble, this 

final rule is designed to address several 

issues that have arisen regarding the 

applicability of the Affordable Care Act 

to student health insurance coverage, 

including how this coverage is 

categorized under the PHS Act. 

Specifically, the provisions in this final 

rule clarify which protections of the 

PHS Act and the Affordable Care Act 

apply to student health insurance 

coverage, and to what extent students 

and their dependents enrolled in these 

plans have the benefit of these 

consumer protection provisions. This 

final rule defines student health 

insurance coverage as a type of 

individual health insurance coverage 

and specifies certain PHS Act and 

Affordable Care Act provisions as 

inapplicable to this type of individual 

health insurance coverage. These 

provisions are generally effective for 

student health insurance policy years 

beginning on or after July 1, 2012. 

CMS has crafted this rule to 

implement the protections intended by 

Congress in the most economically 

efficient manner possible. We have 

examined the effects of this 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, 

CMS has quantified the benefits, costs 

and transfers where possible, and has 

also provided a qualitative discussion of 

some of the benefits, costs and transfers 

that may stem from this final 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 

final rule—(1) Having an annual effect 

on the economy of $100 million 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. 

As discussed below, we have 

concluded that this final rule would 

likely not have economic impacts of 

$100 million or more in any one year or 

otherwise meet the definition of an 

‘‘economically significant regulation’’ 

under Executive Order 12866. 

Nevertheless, CMS has opted to provide 

an assessment of the potential costs, 

benefits, and transfers associated with 

this final rule. This assessment is based 

primarily on the estimated 

administrative costs to issuers 

associated with providing the required 

notifications to student health plan 

enrollees. As discussed below, we 

believe that this final rule will have a 

minimal effect on premiums. 

1. Need for Regulatory Action 

In order to address several issues that 

have arisen regarding the applicability 

of the Affordable Care Act to student 

health insurance coverage, including 

how this coverage is categorized under 

the PHS Act, this final rule specifies 

that student health insurance coverage 

will be defined as a type of individual 

health insurance coverage and, with the 

exception of certain specific provisions, 

be subject to the individual market 

provisions of the PHS Act and the 

Affordable Care Act. As discussed 

elsewhere in the preamble, in clarifying 

the general applicability of the PHS Act 

and the Affordable Care Act to student 

health insurance coverage, this final 

rule also specifies that a limited number 

of provisions of the PHS Act and the 

Affordable Care Act are inapplicable to 

student health insurance coverage. 

Section 1560(c) of the Affordable Care 

Act provides that ‘‘[N]othing in this title 

(or an amendment made by this title) 


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16462 Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 

4U.S. Department of Education, National Center 

for Education Statistics. (2010). Digest of Education 

Statistics, 2009 Table 265. http://nces.ed.gov/ 

programs/digest/d09/tables/dt09_265.asp. 

shall be construed to prohibit an 

institution of higher education (as such 

term is defined for purposes of the 

Higher Education Act of 1965) from 

offering a student health insurance plan, 

to the extent that such requirement is 

otherwise permitted under applicable 

Federal, State, or local law.’’ CMS 

interprets this provision of the 

Affordable Care Act to mean that if 

particular requirements added by the 

Affordable Care Act would have, as a 

practical matter, the effect of prohibiting 

an institution of higher education from 

offering a student health plan otherwise 

permitted under Federal, State or local 

law, such requirements would be 

inapplicable pursuant to the rule of 

construction in section 1560(c). As 

discussed elsewhere in the preamble, 

based on data provided by stakeholders 

representing colleges and universities 

and students, CMS has determined that 

if student health insurance coverage 

were required to comply with certain 

provisions of the Affordable Care Act, 

this would be the functional equivalent 

of ‘‘prohibiting’’ the educational 

institutions from making such coverage 

available to students. Therefore, this 

final rule clarifies that student 

administrative health fees are not costsharing requirements under section 

2713 of the PHS Act; and provides for 

a transition period for issuers of student 

health insurance coverage to comply 

with the restricted annual dollar limits 

requirements and methodology for 

calculating the MLR under the 

Affordable Care Act. The final rule also 

announces a temporary one-year 

enforcement safe harbor with respect to 

certain non-profit colleges and 

universities with religious objections to 

covering contraceptive services. CMS 

believes that the clarifications that are 

included in this final rule are necessary 

to facilitate the offering of student 

health insurance plans, consistent with 

the requirements of section 1560(c) of 

the Affordable Care Act. 

2. Summary of Impacts 

In accordance with OMB Circular 

A–4, Table 2 below depicts an 

accounting statement summarizing 

CMS’s assessment of the benefits, costs, 

and transfers associated with this 

regulatory action. CMS has limited the 

period covered by the regulatory impact 

analysis (RIA) to 2012–2013. Estimates 

are not provided for subsequent years 

because there will be significant 

changes in the marketplace in 2014 

related to the offering of new individual 

and small group plans through the 

Affordable Insurance Exchanges. 

Additionally, because this final rule 

clarifies that student health insurance 

coverage is subject to the provisions in 

the Affordable Care Act, including how 

these plans are categorized under the 

PHS Act, the RIA does not estimate the 

overall effect of imposing the Affordable 

Care Act provisions on these plans. 

Instead, the RIA focuses on the 

modifications to the applicability of 

individual market requirements that 

would have a potential impact during 

the years 2012 to 2013. That is, 

providing for a transition period for 

issuers of student health insurance 

coverage to comply with the restricted 

annual dollar limits policy of section 

2711 of the PHS Act and the MLR 

calculation methodology of section 2718 

of the PHS Act, and announcing a 

temporary one-year enforcement safe 

harbor with respect to certain non-profit 

colleges and universities with religious 

objections to covering contraceptive 

services. These modifications are 

designed consistent with section 1560(c) 

of the Affordable Care Act. Because 

some final rule provisions are modified 

from the proposed rule, the RIA has 

been revised to reflect these changes. 

CMS anticipates that the provisions of 

this final rule will help ensure that 

institutions of higher education can 

maintain the offering of student health 

insurance coverage by clarifying the 

inapplicability of certain requirements 

of the PHS Act and Affordable Care Act 

that would prohibit the offering of such 

coverage. In accordance with Executive 

Order 12866, CMS believes that the 

benefits of this regulatory action justify 

the costs. 

TABLE 2—ACCOUNTING TABLE

Benefits: 

Qualitative: 

* Continued coverage, access to preventive services and other Affordable Care Act patient protections, and continuity of care for students. 

* Increased transparency relating to benefits offered in student health insurance coverage. 

Costs and Transfers: Estimate Year dollar Discount rate 

percent 

Period 

covered 

Annualized Monetized ($millions/year) ..................................................... 3.1 2011 7 2012–2013 

3.1 2011 3 2012–2013 

Annual costs related to providing notifications to enrollees. 

Qualitative: 

* Reduced rate of premium growth for student health insurance coverage from 2012 through 2013 than would have occurred under immediate compliance with the restricted annual dollar limit requirements. 

* Increased out-of-pocket costs for a small number of enrollees. 

* Reduced rebate receipts for a small number of enrollees. 

3. Estimated Number of Affected 

Entities 

Comprehensive sources of data 

concerning the number of persons 

covered by student health insurance 

plans and the benefit structure of those 

plans are not readily available. 

Additionally, available survey data do 

not adequately capture this population 

due to small sample sizes and the 

difficulty of differentiating student 

health insurance coverage from other 

individual market coverage. However, 

we were able to develop some estimates 

based on a Government Accountability 

Office (GAO) report and data provided 

by the American Council on Education 

(ACE). 

a. Estimated Number of Plans Offering 

Student Health Insurance Coverage 

There were 4,409 degree-granting 

institutions in 2009, including two-year 

and four-year institutions.4 The GAO 

found that 57 percent of colleges and 


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Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 16463 

5 Government Accountability Office, ‘‘Health 

Insurance: Most College Students Are Covered 

through Employer-Sponsored Plans, and Some 

Colleges and States Are Taking Steps to Increase 

Coverage,’’ March 2008, GAO–08–389, p. 17. 

6 It is estimated that approximately 200,000 

students (less than 1 percent of the market) are 

enrolled in coverage offered through self-funded 

health plans. As discussed earlier in the preamble, 

these self-funded student plans are not subject to 

the requirements of the PHS Act because they are 

neither health insurance coverage nor group health 

plans, as those terms are defined in the PHS Act. 

7 Government Accountability Office, March 2008, 

pp. 24, 27. 

8 Government Accountability Office, March 2008, 

p. 10. 

9U.S. Department of Education, National Center 

for Education Statistics. (2009), Digest of Education 

Statistics, 2008, Table 190. http://nces.ed.gov/ 

fastfacts/display.asp?id=98. 

10Based on information compiled by the 

American Council on Education, primarily from the 

American College Health Association and the 

health insurance industry, September 2010. 

11This represents data for 32 health insurance 

issuers (for example, licensed entities with unique 

NAIC company codes) that reported earned 

premiums and enrollment for student business in 

the individual or group markets on the NAIC 

Accident & Health (A&H) Policy Experience Exhibit 

for 2009, and excludes experience for companies 

regulated by the California Department of Managed 

Health Care. These issuers represent a subset of the 

58 total issuers who reported any kind of student 

business on the NAIC A&H Policy Experience 

Exhibit for that year. CMS estimates that 16 issuers 

whose average premium per enrollee was 

approximately $200 or less were primarily reporting 

data for K–12 student accidental health coverage, 

which is not subject to the provisions of this rule. 

CMS also excluded 10 issuers that did not report 

valid premium and/or enrollment data for student 

business from this analysis. In cases where data for 

member years were unavailable for certain issuers, 

CMS used data that were reported for covered lives 

or number of policies/certificates as a proxy. 

12These four percentages do not sum to 100 

percent due to rounding. 

universities offered student insurance 

plans from 2007 to 2008,5 suggesting 

that approximately 2,500 colleges and 

universities offered such an insurance 

plan. According to industry sources, 

approximately 1,500 to 2,000 

institutions offer student health plans, 

and the vast majority of these plans are 

insured (rather than self-funded) plans.6

In a survey of colleges with student 

health plans, GAO found that all but 4 

percent established some maximum 

benefit amount during the 2007 to 2008 

academic year. Most (68 percent of 

plans) defined the maximum in terms of 

per condition per lifetime. 

Approximately 24 percent of the plans 

defined an annual limit (including plans 

with a per year or per condition per year 

limit).7

Additionally, as discussed earlier in 

the Collection of Information 

Requirements section, CMS estimates 

that there are approximately 75 health 

insurance issuers that offer student 

health insurance coverage that is 

provided to eligible students and their 

dependents through written agreements 

that are negotiated with the 

abovementioned colleges and 

universities that offer such coverage. 

b. Estimated Number of Individuals 

Enrolled in Student Health Insurance 

Coverage 

The GAO has estimated the 

percentage of college students aged 18 

through 23 years old who are insured 

through non-employer-sponsored 

private health insurance programs, 

including student health insurance 

programs. GAO found that 7 percent of 

college students aged 18 through 23 

were covered by non-employersponsored private health insurance 

programs, including student health 

insurance programs.8 However, almost 

one-half of all college students are not 

in this age group. 

The National Center for Education 

statistics (NCES) has projected that there 

will be 19.0 million college students in 

2012, including both undergraduate and 

graduate, approximately one-half of 

whom will be in the 18–23 age range.9

Based on the previous GAO findings, a 

reasonable estimate of the total number 

of persons with student health 

insurance is approximately 1.3 million 

(approximately 7 percent of the 

estimated 19.0 million total college 

students). A separate source of 

information estimates that the five 

largest carriers offering student health 

insurance account for approximately 1.2 

to 1.5 million undergraduate and 

graduate enrollees; in addition, industry 

sources estimate that approximately 

200,000 students are covered through 

student health plan arrangements that 

are self-funded through colleges and 

universities, and a relatively small 

number by insurers beyond the five 

largest carriers.10 By comparison, 2009 

data from the National Association of 

Insurance Commissioners’ (NAIC) 

Accident and Health (A&H) Policy 

Experience Exhibit suggest that health 

insurance issuers offered college student 

policies with approximately 1.1 million 

enrollees (based on estimated member 

years, including dependents).11 There is 

clearly some uncertainty about the 

number of people enrolled in student 

health insurance coverage, but it 

appears likely that there are between 1.1 

million and 1.5 million enrollees. 

Table 3 presents the estimated 

distribution of persons covered by 

student health insurance according to 

the annual limits of their policies, based 

on two different data sources. 

Regardless of which data source is used, 

the estimated number of students 

affected by this rule is small. The first 

data source represents the distribution 

of annual limits in the individual 

market, as presented in Table 3.3 of the 

interim final rule relating to section 

2711 of the Affordable Care Act, 

regarding lifetime and annual dollar 

limits on benefits (75 FR 37188, June 28, 

2010). Because that table did not use the 

annual limits thresholds relevant to this 

rule, the estimated number of persons in 

each cell was prorated. Because the 

Affordable Care Act prohibits group 

health plans and health insurance 

issuers offering group or individual 

health insurance coverage from 

establishing lifetime dollar limits, for 

purposes of this analysis we assume that 

the plans with such limits (for example, 

71.9 percent of the 199 plans in the 

GAO survey) have no annual limit. 

Another 4.0 percent of plans have had 

no limit of any type. Of the plans with 

per condition per year limits (13.6 

percent), none had limits exceeding 

$100,000. The distribution of the 

remaining 10.6 percent of plans was 

estimated based on three statistics 

reported in the GAO report.12

The second data source represents the 

findings from the 2008 GAO report. 

According to the GAO’s analysis, only 

24 percent of student health plans had 

an annual limit of any sort. Although 

the GAO found that most student health 

insurance coverage included lifetime 

benefit limits during the 2007 to 2008 

academic year (for example, per 

condition per lifetime), such limits are 

prohibited under current law and hence 

are not relevant to this analysis. 

A commenter expressed concerns 

about the data in Table 3, that it was 

inconsistent with the finding from the 

GAO study that annual limits ranged 

from $15,000 to $250,000, with the 

median being $50,000. We would like to 

clarify that this statement applies to 

only the plans that had annual limits. 

The preceding paragraphs explain how 

the data from the GAO study was used 

to estimate the distribution in Table 3. 

In the GAO study, only 24 percent of the 

plans had annual limits, 71.9 percent of 

the plans had lifetime limits but no 

annual limit and another 4 percent had 

no annual or lifetime limits. As 

explained previously, for the purpose of 

this analysis, plans with lifetime limits 

only were treated as having no annual 

limits. 

The GAO estimate suggests that 

approximately 300,000 students would 

potentially be affected by the rule to 

allow student health insurance coverage 

to have annual dollar limits on essential 

health benefits lower than the $750,000 

that would be required in the absence of 

this rule. 


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13This represents data for 29 health insurance 

issuers (e.g., licensed entities with unique NAIC 

company codes) that reported earned premiums and 

enrollment for student business in the individual or 

group markets on the NAIC Accident & Health 

(A&H) Policy Experience Exhibit for 2009, and 

excludes experience for companies regulated by the 

California Department of Managed Health Care. 

These issuers represent a subset of the 58 total 

issuers who reported any kind of student business 

on the NAIC A&H Policy Experience Exhibit for that 

year. The Department estimates that 16 issuers 

whose average premium per enrollee was 

approximately $200 or less were primarily reporting 

data for K–12 student accidental health coverage, 

which is not subject to the provisions of this rule. 

The Department also excluded 10 issuers that did 

not report valid premium and/or enrollment data 

for student business, and 2 issuers that reported 

anomalous combinations of premiums and claims 

(e.g., zero premiums and positive claims or negative 

claims and positive premiums) from this analysis. 

In cases where data for member years were 

unavailable for certain issuers, the Department used 

data that were reported for covered lives or number 

of policies/certificates as a proxy. 

14Life-years are the total number of months of 

coverage for enrollees whose premiums and claims 

experience is included in the data reported, divided 

by 12. 

TABLE 3—ESTIMATED NUMBER OF PERSONS WITH STUDENT HEALTH INSURANCE COVERAGE SUBJECTED TO ANNUAL

LIMITS, BY DATA SOURCE

Annual limit 

CMS estimated distribution for all plans 

offered in the individual market 

GAO distribution for student health 

plans with annual limits, 2007–2008 

Percent Number 

(in thousands) Percent Number (in thousands) 

Less Than $100,000 ................................................................ 0.2 3 21.6 281 

$100,000–$499,999 ................................................................. 1.4 18 2.5 33 

$500,000–$1,999,999 .............................................................. 13.6 177 0.0 0 

$2,000,000 or Higher (including no annual limit) .................... 84.8 1,102 75.9 986 

Total .................................................................................. 100.0 1,300 100.0 1,300 

Note: The estimated number of persons in each cell has been prorated. 

Sources: The CMS distribution was derived from CMS, 75 FR 37188, Table 3.3; the GAO distribution was derived from GAO, March 2008, 

GAO–08–389, pp. 24, 27. 

Given that provisions of this final rule 

would be applicable for policy years 

beginning on or after July 1, 2012, and 

assuming that most students enrolling 

in student health insurance coverage do 

so at the beginning of the fall semester, 

we believe that this final rule is not 

likely to impact a significant number of 

students until late summer of 2012, at 

which point approximately 280,000 

enrollees will see their annual limits 

increase to no less than $100,000 on 

essential benefits (for student health 

insurance coverage policy years 

beginning on or after July 1, 2012, but 

before September 23, 2012), according 

to the GAO-based results. 

Because this final rule includes a 

phased transition to the restricted 

annual dollar limits thresholds that are 

required under the Affordable Care Act, 

some students that would have 

otherwise experienced increases in their 

annual dollar limits for policy years 

beginning before September 23, 2012 

under current law will not experience 

those increases. This includes an 

estimated 33,000 persons with coverage 

offering annual limits between $100,000 

and $499,999. In the late summer of 

2013, approximately 314,000 persons 

enrolled in coverage with annual dollar 

limits below $500,000 will experience 

an increase in their annual dollar limits 

(to no less than $500,000 for essential 

health benefits). Consistent with the 

provisions of the Affordable Care Act, 

no non-grandfathered student health 

insurance coverage will be allowed to 

have annual dollar limits for policy 

years beginning on or after January 1, 

2014. These estimates are different from 

the proposed rule, which had different 

annual dollar limit thresholds. 

The final rule also specifies a phasedin transition to the methodology for 

MLR calculation, authorized by section 

2718 of the PHS Act. Section 2718(b) of 

the PHS Act requires issuers to provide 

an annual rebate to each enrollee if the 

ratio of the amount of premium revenue 

expended on reimbursement for clinical 

services and activities that improve 

quality is less than the applicable 

minimum standard and also specifies 

how the rebate is to be calculated. For 

the MLR reporting year 2013, the total 

of incurred claims and expenditures for 

activities that improve health care 

quality is multiplied by a factor of 1.15 

for student health insurance coverage. 

Limited data for student business in the 

individual and group market is available 

for 29 health insurance issuers in the 

2009 NAIC Accident and Health (A&H) 

Policy Experience Exhibit.13 Of these, 

10 issuers had less than 1,000 lifeyears 14 each and thus, as provided by 

45 CFR 158.230(c)(3) and (d), would be 

presumed to meet or exceed the 80 

percent MLR standard. For the 

remaining 19 issuers, the estimated 

unadjusted MLRs for student health 

insurance plans range from 

approximately 12 percent to 125 

percent. Of these, only 3 issuers have 

sufficient numbers of enrollees to have 

fully credible experience. The 

remaining 16 issuers would receive a 

credibility adjustment, or boost, to their 

MLR to take into account the fact that 

their experience is not large enough to 

be fully credible. In the absence of data 

required for calculating the adjusted 

MLRs, the unadjusted MLR has been 

used to estimate the impact of the 

transitional phase in. Table 4 presents 

the estimated total rebates and the 

number of issuers and enrollees affected 

under the provisions in this final rule 

and under the methodology used to 

calculate an issuer’s MLR without any 

adjustment for the special 

circumstances of student health 

insurance coverage or credibility. It is 

estimated that 14 issuers will be 

required to pay approximately 

$53,000,000 in rebates if the special 

circumstances of student health 

insurance coverage are not taken into 

account. Rebates owed by individual 

issuers range from $34,000 to over $33 

million. High rebate amounts could 

affect the viability of some of the 

affected issuers and cause them to 

withdraw from the market, thereby 

reducing access to student health 

insurance coverage. If the total of 

incurred claims and expenditures for 

activities that improve health care 

quality are multiplied by a factor of 

1.15, then it is estimated that 7 issuers 

will not meet the MLR requirements and 

will be required to pay approximately 

$7,000,000 in rebates. This is a high 

range estimate and once all the 

adjustments consistent with the 

provisions of section 2718 of the 

Affordable Care Act are applied, the 

number of issuers affected and the 

amount of rebates will likely be 

reduced. It is also possible that issuers 

will undertake quality improvement 

activities and operational changes and 

efficiencies that will further increase 


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Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 16465 

15Andrews, Michelle, ‘‘Health-Care Overhaul 

Offers Insurance Benefits to Young Adults,’’ The 

Washington Post, May 25, 2010, accessed at 

http://www.washingtonpost.com/wp-dyn/content/ 

article/2010/05/24/AR2010052403141.html. 

their MLRs and reduce the rebate 

amounts. 

TABLE 4—ESTIMATED NUMBER OF ISSUERS OF STUDENT HEALTH INSURANCE COVERAGE AFFECTED BY PHASED

TRANSITION OF MEDICAL LOSS RATIO CALCULATION METHODOLOGY

MLR calculation methodology 

(MLR requirement—80%) 

Number of 

affected issuers 

Total rebate 

amount 

MLR calculated without any multiplier ......................................................................................................... 14 $53,460,000 

MLR calculated with a multiplier of 1.15 ..................................................................................................... 7 7,115,000 

While the final rule also announces a 

temporary one-year enforcement safe 

harbor with respect to certain non-profit 

institutions of higher education with 

religious objections to covering 

contraceptive services we have 

insufficient information with which to 

estimate its effect. 

4. Anticipated Benefits, Costs and 

Transfers 

As discussed earlier, because this 

final rule clarifies that student health 

insurance coverage policies are subject 

to the provisions in the Affordable Care 

Act, the RIA does not estimate the 

overall effect of imposing the Affordable 

Care Act provisions on these plans. 

Therefore, the discussion of anticipated 

benefits, costs and transfers focuses on 

the impacts associated with the 

clarification in this final rule that a 

limited number of requirements of the 

PHS Act and the Affordable Care Act are 

inapplicable to student health insurance 

coverage, in order to facilitate the 

offering of student health insurance 

plans, consistent with section 1560(c) of 

the Affordable Care Act. 

a. Benefits 

The final rule defines student health 

insurance coverage as a type of 

individual health insurance coverage 

and specifies certain PHS Act and 

Affordable Care Act provisions as 

inapplicable to this type of individual 

health insurance coverage. One such 

provision of this rule is to provide for 

a transition period for issuers of student 

health insurance coverage to comply 

with the restricted annual dollar limits 

requirements under the Affordable Care 

Act. For example, student health 

insurance coverage will be allowed to 

impose an annual dollar limit of no less 

than $100,000 on essential health 

benefits for policy years beginning on or 

after July 1, 2012, but prior to 

September 23, 2012 and $500,000 for 

policy years beginning on or after 

September 23, 2012, but before January 

1, 2014. 

Another provision of this rule is to 

provide for a transition period for 

issuers of student health insurance 

coverage to comply with the MLR 

requirements of the Affordable Care Act. 

For example, issuers will be allowed to 

calculate their MLRs by applying a 

multiplier of 1.15 to the total of incurred 

claims and expenditures for activities 

that improve health care quality for the 

2013 MLR reporting year. Aside from 

these adjustments to the annual dollar 

limits and MLR requirements, students 

enrolled in student health insurance 

coverage will benefit from the other 

Affordable Care Act individual market 

protections, including the prohibition 

against rescissions, the prohibition 

against lifetime dollar limits, the 

dependents under 26 coverage 

requirements, preventive services and 

the patients’ bill of rights. 

While we cannot quantify them at this 

time, we believe there would be 

economic benefits to this rule resulting 

from improved coverage and access to 

health services for students because in 

the absence of the provisions in this 

rule, it is likely that there would be 

some reductions in student health 

insurance availability—for example, due 

to the more restricted annual dollar 

limits and MLR methodology 

requirements that otherwise would have 

applied in these years. 

One rationale for the provision of a 

transition period for issuers of student 

health insurance coverage to comply 

with the restricted annual dollar limits 

requirements is that many student plans 

currently have annual limits 

substantially lower than the $1.25 

million requirement that will be in 

effect for plan years beginning on or 

after September 23, 2011. Concerns have 

been expressed that some institutions of 

higher education would not be able to 

offer student health insurance coverage 

if the annual dollar limits were 

immediately increased by those 

amounts. Similarly, many student plans 

currently have unadjusted MLRs that 

are significantly lower than the 80 

percent requirement. According to 

issuers of student health insurance 

coverage, these plans have significantly 

higher administrative costs due to 

factors such as high rates of manual 

claims processing, low persistency rates, 

multiple enrollment periods in a year 

and varied network and referral 

requirements. If the issuers are required 

to comply with the MLR methodologies 

applicable to traditional health 

insurance immediately, it might lead to 

reduced access to student health plans. 

While some students have access to 

dependent coverage through their 

parents’ health insurance plans up to 

age 26, this may not be an option for 

older students and students whose 

parents do not have coverage.15 Some 

students may be able to find coverage in 

the medically underwritten individual 

market in the absence of a student 

health plan, and others may be able to 

access the Pre-existing Condition 

Insurance Program if they meet other 

eligibility criteria. However, in the 

absence of the provisions of this final 

rule, it is likely that some affected 

students would not be able to find 

affordable alternative coverage and 

become uninsured. To the extent that 

the transition period for issuers of 

student health insurance coverage to 

comply with the annual dollar limits 

and MLR calculation methodology 

applicable to other types of individual 

market coverage results in institutions 

of higher education continuing to offer 

coverage, benefits are realized. Students 

who otherwise might have been 

uninsured will have continued access to 

coverage. 

Several other provisions in this final 

rule will also help colleges and 

universities to continue offering student 

health insurance coverage by 

maintaining current industry 

practices—including the temporary oneyear enforcement safe harbor with 

respect to certain non-profit institutions 

of higher education with religious 

objections to covering contraceptive 

services, clarifications relating to the 

inapplicability of the current guaranteed 

availability and renewability 

requirements in the PHS Act (in order 

to allow student health insurance 


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coverage to be limited to eligible 

students and their dependents), and the 

clarification that student administrative 

health fees are not cost-sharing 

requirements under section 2713 of the 

PHS Act. Additionally, the notice 

requirements in this final rule will 

provide increased transparency relating 

to the benefits that are offered in student 

health insurance coverage. This will 

assist students in making the best 

selection among their available coverage 

options. 

b. Costs and Transfers 

In addition, as discussed earlier in the 

preamble, for plan years beginning after 

September 23, 2011, the minimum 

annual limit under the Affordable Care 

Act is $1.25 million. This level is higher 

than many of the current annual dollar 

limits for student health plans. The 

required 80 percent MLR is also higher 

than the MLRs currently observed for 

student health plans. If the higher 

annual dollar limits and MLR 

methodology requirements are applied 

immediately, without adjustment, to 

student health insurance coverage 

benefit designs, and issuers are not able 

to adjust their operations quickly 

enough, it could require large premium 

increases or high rebate payments that 

could effectively ‘‘prohibit an 

institution of higher education * * * 

from offering a student health insurance 

plan.’’ (Affordable Care Act section 

1560(c)). 

However, at the same time, a small 

number of student enrollees are likely to 

face higher out-of-pocket costs than they 

would have faced if there were no 

transition period for issuers of student 

health insurance coverage to comply 

with the restricted annual dollar limits. 

Thus, there is a small transfer from this 

group which would have had higher 

out-of-pocket costs to the population of 

students purchasing student plans 

through lower premiums. Similarly, a 

small number of enrollees will not 

receive rebate payments that they would 

have received if there was no transition 

period for calculating the components of 

the MLR. Thus, there is a transfer from 

this group to the issuers of student 

health plans. In addition, a small 

number of enrollees will be affected by 

the temporary enforcement safe harbor 

with respect to contraceptive services. 

Finally, CMS estimates that there will 

be some administrative costs to issuers 

associated with the notice requirements. 

As discussed in the Collection of 

Information Requirements section, we 

estimate that approximately 75 student 

health insurance issuers will have to 

provide notices to students and any 

dependents indicating that the coverage 

does not meet all of the requirements of 

the Affordable Care Act. We estimate 

that it will take approximately 2 

minutes per student enrollee or 

approximately 1,000 hours per student 

health insurance issuer to prepare and 

mail the notices to student enrollees. In 

other words, it would take a team of ten 

individuals 21⁄2 weeks to prepare and 

mail the notices. Including hourly wage 

and printing and mailing costs, we 

estimate the annual cost burden will be 

$40,840 per affected issuer, for a total 

cost of $3,063,000. We believe that these 

cost estimates represent the upper limit, 

as most issuers are likely to insert the 

model notice language into the existing 

plan documents that they distribute to 

their enrollees, thus reducing their 

estimated costs. 

C. Regulatory Alternatives 

Under the Executive Order, CMS is 

required to consider alternatives to 

issuing rules and alternative regulatory 

approaches. CMS considered the two 

regulatory alternatives below. 

1. Require Student Health Insurance 

Coverage To Be Offered Through a Bona 

Fide Association 

CMS considered requiring student 

health insurance coverage to meet the 

definition of a bona fide association, as 

that term is defined at 45 CFR 144.103, 

in order to be exempt from guaranteed 

availability and guaranteed renewability 

requirements under current law 

provisions before 2014. This approach 

would have required issuers of student 

health insurance coverage to comply 

with all of the individual market 

requirements of the PHS Act and the 

Affordable Care Act, except for current 

guaranteed availability and guaranteed 

renewability provisions. However, the 

approach would have been costprohibitive on some institutions of 

higher education, causing them to drop 

coverage since student health insurance 

coverage today rarely is offered through 

associations (that is, student 

associations). In addition, associations 

affiliated with newly-established 

institutions of higher education would 

have been unable to satisfy the 

requirement that a bona fide association 

be in existence for five years. 

2. Change the Definition of Short-Term 

Limited Duration Coverage 

CMS also considered modifying the 

definition of short-term limited-duration 

insurance in 45 CFR 144.103 to make it 

more difficult for student health 

insurance coverage to qualify as such 

(for example, shorten the time limit 

from 12 months to 6 months). However, 

this change would have had broader 

implications for the health insurance 

market because there are currently 

health insurance policies being offered 

in the general market that meet the 

current definition of short-term limited 

duration insurance. As indicated earlier, 

these products serve as stop-gap 

coverage for individuals who need 

health coverage for short periods of 

time. To change the definition of shortterm limited duration insurance would 

have implications for this type of 

coverage. 

CMS believes that the option adopted 

for this final rule (defining student 

health insurance coverage as individual 

health insurance coverage and limiting 

the applicability of the PHS Act and the 

Affordable Care Act through its 

authority under Affordable Care Act 

section 1560(c)) strikes the best balance 

of extending certain protections of the 

Affordable Care Act to students and 

their dependents enrolled in the student 

health insurance plans while preserving 

the availability and affordability of such 

coverage. 

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’’). CMS 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. 

As discussed in the Web Portal 

interim final rule (75 FR 24481), we 

examined the health insurance industry 

in depth in the Regulatory Impact 

Analysis we prepared for the final rule 

on establishment of the Medicare 

Advantage program (69 FR 46866, 

August 3, 2004). In that analysis we 

determined that there were few if any 

insurance firms underwriting 

comprehensive health insurance 

policies (in contrast, for example, to 

travel insurance policies or dental 

discount policies) that fell below the 

size thresholds for ‘‘small’’ business 

established by the SBA (currently $7 

million in annual receipts for health 

insurers, based on North American 


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Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 16467 

16 ‘‘Table of Size Standards Matched To North 

American Industry Classification System Codes,’’ 

effective November 5, 2010, U.S. Small Business 

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

17As discussed earlier in this regulatory impact 

analysis, these 32 health insurance issuers are 

licensed entities with unique NAIC company codes 

that reported earned premiums and enrollment for 

student business in the individual and group 

markets on the NAIC Accident & Health Policy 

Experience Exhibit in 2009, and exclude companies 

regulated by the California Department of Managed 

Health Care. This represents a subset of the 58 total 

issuers who reported any kind of student business 

on the NAIC A&H Policy Experience Exhibit for that 

year (including some that CMS estimates are 

primarily offering K–12 student accident health 

coverage that is not subject to the provisions of this 

final rule). 

Industry Classification System Code 

524114).16

Additionally, as discussed in the 

Medical Loss Ratio interim final rule (75 

FR 74918, December 1, 2010, as 

modified by technical corrections (75 

FR 82277, December 30, 2010)), CMS 

used a data set created from 2009 

National Association of Insurance 

Commissioners (NAIC) Health and Life 

Blank annual financial statement data to 

develop an updated estimate of the 

number of small entities that offer 

comprehensive major medical coverage 

in the individual and group markets. 

For purposes of that analysis, CMS used 

total A&H earned premiums as a proxy 

for annual receipts. CMS estimated that 

there were 28 small entities with less 

than $7 million in A&H earned 

premiums offering individual or group 

comprehensive major medical coverage; 

however, this estimate may overstate the 

actual number of small health insurance 

issuers offering such coverage, since it 

does not include receipts from these 

companies’ other lines of business. 

As discussed earlier in this regulatory 

impact analysis, comprehensive sources 

of data concerning the student health 

insurance market are not readily 

available. However, for purposes of this 

regulatory flexibility analysis, CMS has 

used data for issuers who reported 

offering student coverage on the 2009 

NAIC Accident & Health Policy 

Experience exhibit as a proxy for 

estimating the potential number of small 

issuers that could be affected by the 

provisions in this final rule. Based on 

these data, CMS estimates that there are 

4 small entities with less than $7 

million in A&H earned premiums that 

offer student health insurance coverage 

that is the subject of this final rule. 

These small entities account for 13 

percent of the estimated 32 total issuers 

who reported offering such coverage.17

CMS estimates that 100 percent of 

these small issuers are subsidiaries of 

larger carriers, and 100 percent also 

offer other types of A&H coverage. On 

average, CMS estimates that student 

health insurance coverage in the group 

market accounts for approximately 29 

percent of total A&H earned premiums 

for these small issuers. Additionally, 

CMS estimates that the annual cost 

burden for these small entities relating 

to the notice requirements in this final 

rule will be $40,840 per issuer 

(accounting for 2.3 percent of their total 

A&H earned premiums). As discussed 

earlier, CMS believes that these 

estimates overstate the number of small 

entities that will be affected by the 

requirements in this rule, as well as the 

relative impact of these requirements on 

these entities because CMS has based its 

analysis on issuers’ total A&H earned 

premiums (rather than their total annual 

receipts). Therefore, the Secretary 

certifies that this final rule will not have 

a significant impact on a substantial 

number of small entities. 

In addition, section 1102(b) of the 

Social Security Act requires us to 

prepare a regulatory impact analysis if 

a final rule may have a significant 

economic impact on the operations of a 

substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. This final rule would not affect 

small rural hospitals. Therefore, the 

Secretary has determined that this final 

rule would not have a significant impact 

on the operations of a substantial 

number of small rural hospitals. 

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 

final 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 2011, that 

threshold level was approximately $136 

million. 

UMRA does not address the total cost 

of a final 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. 

This final rule includes no mandates 

on State, local, or tribal governments. 

Under the final rule, issuers will be 

required to provide important 

Affordable Care Act and PHS Act 

protections for students enrolled in 

student health insurance coverage. 

Further, the estimated annual costs 

associated with the provisions of this 

final rule are approximately $40,840 per 

affected entity (or approximately 

$3,063,000 per year across all affected 

entities). Thus, this final rule does not 

impose an unfunded mandate on State, 

local or tribal governments or the 

private sector. However, consistent with 

policy embodied in UMRA, this final 

rule has been designed to be the least 

burdensome 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 final 

rule that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has federalism implications. 

In CMS’ view, while the requirements 

specified in this final rule would not 

impose substantial direct costs on State 

and local governments, this final rule 

has federalism implications due to 

direct effects on the distribution of 

power and responsibilities among the 

State and Federal governments relating 

to the rule of student health insurance 

coverage. 

As discussed earlier in the preamble, 

some States do not regulate student 

health insurance as individual health 

insurance coverage, but rather as a type 

of association ‘‘blanket coverage’’ or as 

non-employer group coverage. Under 

this final rule, student health insurance 

coverage will be defined as a type of 

individual health insurance coverage, 

and will therefore be subject to the 

individual market provisions of the PHS 

Act and the Affordable Care Act, with 

the exception of certain specific 

provisions that are identified in the final 

rule. States would continue to apply 

State laws regarding student 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. Additionally, 

State requirements that are more 

stringent than the Federal requirements 

would be not be preempted by this final 

rule. Accordingly, States have 

significant latitude to impose 

requirements with respect to student 

health insurance coverage that are more 

restrictive than the Federal law. 

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 


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16468 Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 

States, CMS has engaged in efforts to 

consult with and work cooperatively 

with affected States, including 

consulting with State insurance officials 

on an individual basis. 

Throughout the process of developing 

this final rule, CMS has attempted to 

balance the States’ interests in 

regulating health insurance issuers, and 

Congress’ intent to provide uniform 

protections to consumers in every State. 

By doing so, it is CMS’ 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 has complied with the 

requirements of Executive Order 13132 

for the attached final rule in a 

meaningful and timely manner. 

G. Congressional Review Act 

This final rule is subject to the 

Congressional Review Act provisions of 

the Small Business Regulatory 

Enforcement Fairness Act of 1996 (5 

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

before a rule can take effect, the Federal 

agency promulgating the rule shall 

submit to each House of the Congress 

and to the Comptroller General a report 

containing a copy of the rule along with 

other specified information, and has 

been transmitted to 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 158 

Administrative practice and 

procedure, Claims, Health care, Health 

insurance, Health plans, Penalties, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services amends 45 CFR 

Subtitle A, Subchapter B as set forth 

below: 

PART 144—REQUIREMENTS 

RELATING TO HEALTH INSURANCE 

COVERAGE 

■ 1. The authority citation for part 144 

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. 

■ 2. Section 144.103 is amended by: 

■ a. Revising the introductory text. 

■ b. Adding the definition of ‘‘student 

health insurance coverage’’ in 

alphabetical order. 

The revision and addition read as 

follows: 

§ 144.103 Definitions. 

For purposes of parts 146 (group 

market), 147 (health reform 

requirements for the group and 

individual markets), 148 (individual 

market), and 150 (enforcement) of this 

subchapter, the following definitions 

apply unless otherwise provided: 

* * * * * 

Student health insurance coverage 

has the meaning given the term in 

§ 147.145. 

* * * * * 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 3. The authority citation for part 147 

continues to read as follows: 

Authority: Sections 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. 

■ 4. Add § 147.145 to read as follows: 

§ 147.145 Student health insurance 

coverage. 

(a) Definition. Student health 

insurance coverage is a type of 

individual health insurance coverage (as 

defined in § 144.103 of this subchapter) 

that is provided pursuant to a written 

agreement between an institution of 

higher education (as defined in the 

Higher Education Act of 1965) and a 

health insurance issuer, and provided to 

students enrolled in that institution of 

higher education and their dependents, 

that meets the following conditions: 

(1) Does not make health insurance 

coverage available other than in 

connection with enrollment as a student 

(or as a dependent of a student) in the 

institution of higher education. 

(2) Does not condition eligibility for 

the health insurance coverage on any 

health status-related factor (as defined 

in § 146.121(a) of this subchapter) 

relating to a student (or a dependent of 

a student). 

(3) Meets any additional requirement 

that may be imposed under State law. 

(b) Exemptions from the Public Health 

Service Act. (1) Guaranteed availability 

and guaranteed renewability. For 

purposes of sections 2741(e)(1) and 

2742(b)(5) of the Public Health Service 

Act, student health insurance coverage 

is deemed to be available only through 

a bona fide association. 

(2) Annual limits. (i) Notwithstanding 

the annual dollar limits requirements of 

§ 147.126, for policy years beginning 

before September 23, 2012, a health 

insurance issuer offering student health 

insurance coverage may not establish an 

annual dollar limit on essential health 

benefits that is lower than $100,000. 

(ii) Notwithstanding the annual dollar 

limits requirements of § 147.126, for 

policy years beginning on or after 

September 23, 2012, but before January 

1, 2014, a health insurance issuer 

offering student health insurance 

coverage may not establish an annual 

dollar limit on essential health benefits 

that is lower than $500,000. 

(iii) For policy years beginning on or 

after January 1, 2014, a health insurance 

issuer offering student health insurance 

coverage must comply with the annual 

dollar limits requirements in § 147.126. 

(c) Student administrative health fees. 

(1) Definition. A student administrative 

health fee is a fee charged by the 

institution of higher education on a 

periodic basis to students of the 

institution of higher education to offset 

the cost of providing health care 

through health clinics regardless of 

whether the students utilize the health 

clinics or enroll in student health 

insurance coverage. 

(2) Preventive services. 

Notwithstanding the requirements 

under section 2713 of the Public Health 

Service Act and its implementing 

regulations, student administrative 

health fees as defined in paragraph 

(c)(1) of this section are not considered 

cost-sharing requirements with respect 

to specified recommended preventive 

services. 

(d) Notice. (1) Requirements. (i) A 

health insurance issuer that provides 

student health insurance coverage, and 

does not meet the annual dollar limits 

requirements under section 2711 of the 

Public Health Service Act, must provide 

a notice informing students that the 

policy does not meet the minimum 

annual limits requirements under 

section 2711 of the Public Health 

Service Act. The notice must include 

the dollar amount of the annual limit 

along with a description of the plan 

benefits to which the limit applies for 

the student health insurance coverage. 

(ii) The notice must state that the 

student may be eligible for coverage as 

a dependent in a group health plan of 

a parent’s employer or under the 

parent’s individual market coverage if 

the student is under the age of 26. 


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Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 16469 

(iii) The notice must be prominently 

displayed in clear, conspicuous 14- 

point bold type on the front of the 

insurance policy or certificate and in 

any other plan materials summarizing 

the terms of the coverage (such as a 

summary description document). 

(iv) The notice must be provided for 

policy years beginning before January 1, 

2014. 

(2) Model language. The following 

model language, or substantially similar 

language, can be used to satisfy the 

notice requirement of this paragraph (d): 

‘‘Your student health insurance 

coverage, offered by [name of health 

insurance issuer], may not meet the 

minimum standards required by the 

health care reform law for the 

restrictions on annual dollar limits. The 

annual dollar limits ensure that 

consumers have sufficient access to 

medical benefits throughout the annual 

term of the policy. Restrictions for 

annual dollar limits for group and 

individual health insurance coverage 

are $1.25 million for policy years before 

September 23, 2012; and $2 million for 

policy years beginning on or after 

September 23, 2012 but before January 

1, 2014. Restrictions for annual dollar 

limits for student health insurance 

coverage are $100,000 for policy years 

before September 23, 2012, and 

$500,000 for policy years beginning on 

or after September 23, 2012, but before 

January 1, 2014. Your student health 

insurance coverage put an annual limit 

of: [Dollar amount] on [which covered 

benefits—notice should describe all 

annual limits that apply]. If you have 

any questions or concerns about this 

notice, contact [provide contact 

information for the health insurance 

issuer]. Be advised that you may be 

eligible for coverage under a group 

health plan of a parent’s employer or 

under a parent’s individual health 

insurance policy if you are under the 

age of 26. Contact the plan administrator 

of the parent’s employer plan or the 

parent’s individual health insurance 

issuer for more information.’’ 

(e) Applicability. The provisions of 

this section apply for policy years 

beginning on or after July 1, 2012. 

PART 158—ISSUER USE OF PREMIUM 

REVENUE: REPORTING AND REBATE 

REQUIREMENTS 

■ 5. The authority citation for part 158 

continues to read as follows: 

Authority: Section 2718 of the Public 

Health Service Act (42 USC 300gg–18), as 

amended. 

■ 6. Section 158.103 is amended by 

adding the definitions of ‘‘student 

administrative health fee,’’ ‘‘student 

health insurance coverage,’’ and 

‘‘student market’’ in alphabetical order, 

to read as follows: 

§ 158.103 Definitions. 

For the purposes of this part, the 

following definitions apply unless 

specified otherwise. 

* * * * * 

Student administrative health fee has 

the meaning given the term in § 147.145 

of this subchapter. 

Student health insurance coverage 

has the meaning given the term in 

§ 147.145 of this subchapter. 

Student market means the market for 

student health insurance coverage. 

* * * * * 

■ 7. Section 158.120 is amended by 

adding paragraph (d)(5) to read as 

follows: 

§ 158.120 Aggregate reporting. 

* * * * * 

(d) * * * 

(5) An issuer in the student market 

must aggregate and report the 

experience from these policies on a 

national basis, separately from other 

policies. 

■ 8. Section 158.140 is amended by 

adding paragraph (b)(3)(iv) to read as 

follows: 

§ 158.140 Reimbursement for clinical 

services provided to enrollees. 

* * * * * 

(b) * * * 

(3) * * * 

(iv) Amounts paid to a provider for 

services that do not represent 

reimbursement for covered services 

provided to an enrollee and are directly 

covered by a student administrative 

health fee. 

* * * * * 

■ 9. Section 158.220 is amended: 

■ a. In paragraph (b) introductory text 

by removing the reference ‘‘paragraph 

(c)’’ and adding in its place the 

reference ‘‘paragraphs (c) and (d).’’ 

■ b. Adding paragraph (d). 

The addition reads as follows: 

§ 158.220 Aggregation of data in 

calculating an issuer’s medical loss ratio. 

* * * * * 

(d) Requirements for MLR reporting 

years 2013 and 2014 for the student 

market only. 

(1) For the 2013 MLR reporting year, 

an issuer’s MLR is calculated using the 

data reported under this part for the 

2013 MLR reporting year only. 

(2) For the 2014 MLR reporting year— 

(i) If an issuer’s experience for the 

2014 MLR reporting year is fully 

credible, as defined in § 158.230 of this 

subpart, an issuer’s MLR is calculated 

using the data reported under this part 

for the 2014 MLR reporting year. 

(ii) If an issuer’s experience for the 

2014 MLR reporting year is partially 

credible or non-credible, as defined in 

§ 158.230 of this subpart, an issuer’s 

MLR is calculated using the data 

reported under this part for the 2013 

MLR reporting year and the 2014 MLR 

reporting year. 

■ 10. Section 158.221 is amended by 

adding paragraph (b)(5) to read as 

follows: 

§ 158.221 Formula for calculating an 

issuer’s medical loss ratio. 

* * * * * 

(b) * * * 

(5) The numerator of the MLR for 

policies that are reported separately 

under § 158.120(d)(5) of this part must 

be the amount specified in paragraph (b) 

of this section, except that for the 2013 

MLR reporting year the total of the 

incurred claims and expenditures for 

activities that improve health care 

quality is then multiplied by a factor of 

1.15. 

* * * * * 

■ 11. Section 158.231 is amended by 

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

follows: 

§ 158.231 Life-years used to determine 

credible experience. 

* * * * * 

(d) For the 2013 MLR reporting year 

for the student market only, the lifeyears used to determine credibility are 

the life-years for the 2013 MLR 

reporting year only. 

(e) For the 2014 MLR reporting year 

for the student market only— 

(1) If an issuer’s experience for the 

2014 MLR reporting year is fully 

credible, the life-years used to 

determine credibility are the life-years 

for the 2014 MLR reporting year only; 

(2) If an issuer’s experience for the 

2014 MLR reporting year only is 

partially credible or non-credible, the 

life-years used to determine credibility 

are the life-years for the 2013 MLR 

reporting year plus the life-years for the 

2014 MLR reporting year. 

■ 12. Section 158.232 is amended by 

adding paragraph (e) to read as follows: 

§ 158.232 Calculating the credibility 

adjustment. 

* * * * * 

(e) No credibility adjustment. 

Beginning with the 2015 MLR reporting 

year for the student market only, the 

credibility adjustment for an MLR based 

on partially credible experience is zero 


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16470 Federal Register / Vol. 77, No. 55 / Wednesday, March 21, 2012 / Rules and Regulations 

if both of the following conditions are 

met: 

(1) The current MLR reporting year 

and each of the two previous MLR 

reporting years included experience of 

at least 1,000 life-years; and 

(2) Without applying any credibility 

adjustment, the issuer’s MLR for the 

current MLR reporting year and each of 

the two previous MLR reporting years 

were below the applicable MLR 

standard for each year as established 

under § 158.210 in this subpart. 

Dated: October 11, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: November 3, 2011. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2012–6359 Filed 3–16–12; 4:15 pm] 

BILLING CODE 4120–01–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 1 

[WT Docket No. 05–211; FCC 12–12] 

Implementation of the Commercial 

Spectrum Enhancement Act and 

Modernization of the Commission’s 

Competitive Bidding Rules and 

Procedures 

AGENCY: Federal Communications 

Commission. 

ACTION: Final rule. 

SUMMARY: The Federal Communications 

Commission removes two modifications 

to its competitive bidding rules 

pursuant to a mandate by the U.S. Court 

of Appeals for the Third Circuit. 

DATES: Effective March 21, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Wireless Telecommunications Bureau, 

Auctions and Spectrum Access 

Division: Audrey Bashkin at (202) 418– 

0660. 

SUPPLEMENTARY INFORMATION: This is a 

summary of an Order released on 

February 1, 2012. The complete text of 

the Order, including an attachment and 

related Commission documents, is 

available for public inspection and 

copying from 8 a.m. to 4:30 p.m. Eastern 

Time (ET) Monday through Thursday or 

from 8 a.m. to 11:30 a.m. ET on Fridays 

in the FCC Reference Information 

Center, 445 12th Street SW., Room CY– 

A257, Washington, DC 20554. The 

Order and related Commission 

documents also may be purchased from 

the Commission’s duplicating 

contractor, Best Copy and Printing, Inc. 

(BCPI), 445 12th Street SW., Room CY– 

B402, Washington, DC 20554, telephone 

202–488–5300, fax 202–488–5563, Web 

site http://www.BCPIWEB.com. When 

ordering documents from BCPI, please 

provide the appropriate FCC document 

number, for example, FCC 12–12. The 

Order and related documents also are 

available on the Internet at the 

Commission’s Web site: http:// 

wireless.fcc.gov/auctions, or by using 

the search function for WT Docket No. 

05–211 on the Commission’s Electronic 

Comment Filing System (ECFS) Web 

page at http://www.fcc.gov/cgb/ecfs/. 

I. Background 

1. In Council Tree Communications, 

Inc. v. FCC, 619 F.3d 235 (3d Cir. 2010), 

cert. denied, 131 S. Ct. 1784 (2011), the 

U.S. Court of Appeals for the Third 

Circuit vacated two modifications the 

Federal Communications Commission 

(Commission) had made in 2006 to its 

competitive bidding rules for designated 

entities on the ground that the 

Commission had failed to provide the 

public an adequate opportunity for 

notice and comment. The Commission 

removes the two modifications in 

accordance with the Third Circuit’s 

mandate. 

2. The Third Circuit held that the 

Commission’s impermissible material 

relationship rule in 47 CFR 

1.2110(b)(3)(iv)(A) and its extension of 

the unjust enrichment period from five 

years to ten years in 47 CFR 1.2111(d)(2) 

had been adopted without the notice 

and opportunity for comment required 

by the Administrative Procedure Act. 

The Court thus vacated the 

impermissible material relationship rule 

and ordered reinstatement of the 

Commission’s previous five year unjust 

enrichment payment schedule. The 

Court also denied Council Tree’s 

petition for review with respect to the 

attributable-material-relationship rule 

articulated in 47 CFR 1.2110(b)(1) and 

(b)(3)(iv)(B). 

II. Discussion 

3. The Order conforms Part 1 of the 

Commission’s rules to the Court’s 

mandate by amending 47 CFR 1.2110 to 

remove paragraph (b)(3)(iv)(A) and 47 

CFR 1.2111 by removing paragraph 

(d)(2)(i) as no longer applicable and 

reinstating the previous version of the 

payment schedule in 47 CFR 

1.2111(d)(2). The Order also conforms 

other Part 1 rules, as necessary, to 

remove several references to 

impermissible material relationships. 

4. The Commission finds that notice 

and comment are unnecessary for these 

rule amendments under 5 U.S.C. 

Section 553(b), because this is a 

ministerial order issued at the direction 

of the United States Court of Appeals for 

the Third Circuit. 

III. Congressional Review Act 

5. The Commission will send a copy 

of the Order to Congress and the 

Government Accountability Office 

pursuant to the Congressional Review 

Act, see 5 U.S.C. 801(a)(1)(A). 

List of Subjects in 47 CFR Part 1 

Administrative practice and 

procedures, Auctions, Licensing, 

Telecommunications. 

Federal Communications Commission. 

Bulah P. Wheeler, 

Deputy Manager. 

For the reasons discussed in the 

preamble, the Federal Communications 

Commission amends 47 CFR part 1 as 

follows: 

PART 1—PRACTICE AND 

PROCEDURE 

■ 1. The authority citation for part 1 

continues to read as follows: 

Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 

151, 154(j), 160, 201, 225, 303, and 309. 

■ 2. Section 1.2110 is amended by 

removing paragraph (b)(3)(iv)(A) and 

redesignating paragraphs (b)(3)(iv)(B) 

and (C) as paragraphs (b)(3)(iv)(A) and 

(B) and by revising newly redesignated 

paragraph (b)(3)(iv)(B) and revising 

paragraph (j) to read as follows: 

§ 1.2110 Designated entities. 

* * * * * 

(b) * * * 

(3) * * * 

(iv) * * * 

(B) Grandfathering (1) Licensees. An 

attributable material relationship shall 

not disqualify a licensee for previously 

awarded benefits before April 25, 2006, 

based on spectrum lease or resale 

(including wholesale) arrangements 

entered into before April 25, 2006. 

(2) Applicants. An attributable 

material relationship shall not 

disqualify an applicant seeking 

eligibility in an application for a license, 

authorization, assignment, or transfer of 

control or for partitioning or 

disaggregation filed before April 25, 

2006, based on spectrum lease or resale 

(including wholesale) arrangements 

entered into before April 25, 2006. Any 

applicant seeking eligibility in an 

application for a license, authorization, 

assignment, or transfer of control or for 

partitioning or disaggregation filed after 

April 25, 2006, or in an application to 

participate in an auction in which 

bidding begins on or after June 5, 2006, 

need not attribute the material 


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