[Federal Register Volume 89, Number 197 (Thursday, October 10, 2024)]
[Proposed Rules]
[Pages 82308-82411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-23103]



[[Page 82307]]

Vol. 89

Thursday,

No. 197

October 10, 2024

Part II





Department of Health & Human Services





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 Centers for Medicare & Medicaid Services





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42 CFR Part 600

45 CFR Parts 153, 155, 156, et al.





Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2026; and Basic Health Program; Proposed Rule

Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / 
Proposed Rules

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 600

Office of the Secretary

45 CFR Parts 153, 155, 156, and 158

[CMS-9888-P]
RIN 0938-AV41


Patient Protection and Affordable Care Act; HHS Notice of Benefit 
and Payment Parameters for 2026; and Basic Health Program

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Proposed rule.

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SUMMARY: This proposed rule includes payment parameters and provisions 
related to the HHS-operated risk adjustment and risk adjustment data 
validation (HHS-RADV) programs, as well as 2026 benefit year user fee 
rates for issuers that participate in the HHS-operated risk adjustment 
program and the 2026 benefit year user fee rates for issuers offering 
qualified health plans (QHPs) through Federally-facilitated Exchanges 
(FFEs) and State-based Exchanges on the Federal platform (SBE-FPs). 
This proposed rule also includes proposed requirements related to 
modifications to the calculation of the Basic Health Program (BHP) 
payment; and changes to the Initial Validation Audit (IVA) sampling 
approach and Second Validation Audit (SVA) pairwise means test for HHS-
RADV. It also addresses HHS' authority to engage in compliance reviews 
of and take enforcement action against lead agents of insurance 
agencies for violations of HHS' Exchange standards and requirements; 
HHS' system suspension authority to address noncompliance by agents and 
brokers; an optional fixed-dollar premium payment threshold; proposed 
reconsideration standards for certification denials; proposed changes 
to the approach for conducting Essential Community Provider (ECP) 
certification reviews; a proposal to publicly share aggregated, 
summary-level Quality Improvement Strategy (QIS) information on an 
annual basis; and proposed revisions to the medical loss ratio (MLR) 
reporting and rebate requirements for qualifying issuers that meet 
certain standards.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, by November 12, 2024.

ADDRESSES: In commenting, please refer to file code CMS-9888-P.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9888-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.

    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9888-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace 
Bristol, (410) 786-8437, for general information.
    Ayesha Anwar, (301) 492-4000, Joshua Paul, (301) 492-4347, or 
Debbie Noymer, (301) 448-3755 for matters related to HHS-operated risk 
adjustment.
    Leanne Scott, (410) 786-1045 or Ayesha Anwar, (301) 492-4000 for 
matters related to HHS-operated risk adjustment data validation.
    Aaron Franz, (410) 786-8027, for matters related to user fees.
    Brian Gubin, (410) 786-1659, for matters related to agent, broker, 
and web-broker guidelines.
    Zarin Ahmed, (301) 492-4400, for matters related to enrollment of 
qualified individuals into QHPs and termination of Exchange enrollment 
or coverage for qualified individuals.
    Christina Whitefield, (301) 492-4172, for matters related to the 
medical loss ratio program.
    Preeti Hans, (301) 492-5144, for matters related to Quality 
Improvement Strategy.
    Ken Buerger, (410) 786-1190, for matters related to certification 
standards for QHPs.
    Nikolas Berkobien, (667) 290-9903, for matters related to 
standardized plan options, non-standardized plan option limits and 
exceptions, and financial requirements for issuers of QHPs on the FFEs.
    Adelaide Balenger, (667) 414-0691, for matters related to the 
Actuarial Value Calculator.
    Mary Evans, (470) 890-4113, for matters related to the Failure to 
File and Reconcile process.
    Chris Truffer, (410) 786-1264, for matters related to the Basic 
Health Program (BHP) provision.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: Comments received before the close 
of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post comments received 
before the close of the comment period on the following website as soon 
as possible after they have been received: http://www.regulations.gov. 
Follow the search instructions on that website to view public comments. 
CMS will not post on Regulations.gov public comments that make threats 
to individuals or institutions or suggest that the commenter will take 
actions to harm an individual. CMS continues to encourage individuals 
not to submit duplicative comments. We will post acceptable comments 
from multiple unique commenters even if the content is identical or 
nearly identical to other comments.
    Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a 
summary of not more than 100 words in length of this proposed rule, in 
plain language, may be found at https://www.regulations.gov/.
    Intention of Future Rulemaking: HHS and the Departments of Labor 
and Treasury intend to issue a future notice of proposed rulemaking 
address the issues arising out of HIV and Hepatitis Policy Institute et 
al. v. U.S. Department of Health and Human Services et al., Civil 
Action No. 22-2604 (D.D.C. Sept. 29, 2023), namely, the applicability 
of drug manufacturer support to the annual limitation on cost sharing.

Table of Contents

I. Executive Summary
II. Background
    A. Legislative and Regulatory Overview
    B. Summary of Major Provisions
III. Provisions of the Proposed Regulations
    A. 42 CFR Part 600--Administration, Eligibility, Essential 
Health Benefits, Performance Standards, Service Delivery 
Requirements, Premium and Cost Sharing, Allotments, and 
Reconciliation
    B. 45 CFR Part 153--Standards Related to Reinsurance, Risk 
Corridors, and Risk Adjustment

[[Page 82309]]

    C. 45 CFR Part 155--Exchange Establishment Standards and Other 
Related Standards Under the Affordable Care Act
    D. 45 CFR Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    E. 45 CFR Part 158--Issuer Use of Premium Revenue: Reporting and 
Rebate Requirements
    F. Severability
IV. Collection of Information Requirements
    A. Wage Estimates
    B. ICRs Regarding the Initial Validation Audit (IVA) Sample--
Enrollees Without HCCs and Neyman Allocation (Sec.  153.630(b))
    C. ICRs Regarding Engaging in Compliance Reviews and Taking 
Enforcement Actions Against Lead Agents for Insurance Agencies 
(Sec.  155.220)
    D. ICRs Regarding System Suspension Authority (Sec.  155.220(k))
    E. ICRs Regarding Updating the Model Consent Form (Sec.  
155.220)
    F. ICRs Regarding Notification of Two Year Failure To File and 
Reconcile Population (Sec.  155.305)
    G. ICRs Regarding General Program Integrity and Oversight 
Requirements (Sec.  155.1200)
    H. ICRs Regarding Essential Community Provider Certification 
Reviews (Sec.  156.235)
    I. ICRs Regarding Quality Improvement Strategy Information 
(Sec.  156.1130)
    J. ICRs Regarding Medical Loss Ratio (Sec. Sec.  158.103, 
158.140, 158.240)
    K. Summary of Annual Burden Estimates for Proposed Requirements
    L. Submission of PRA-Related Comments
    M. Response to Comments
V. Regulatory Impact Analysis
    A. Statement of Need
    B. Overall Impact
    C. Impact Estimates of the Payment Notice Provisions and 
Accounting Table
    D. Regulatory Alternatives Considered
    E. Regulatory Flexibility Act (RFA)
    F. Unfunded Mandates Reform Act (UMRA)
    G. Federalism

I. Executive Summary

    We are proposing changes to the provisions and parameters 
implemented through prior rulemaking to implement the ACA.\1\ These 
proposed requirements are published under the authority granted to the 
Secretary by the ACA and the PHS Act.\2\ In this proposed rule, we are 
proposing changes related to some of the ACA provisions and parameters 
we previously implemented and are proposing new provisions. Our goal 
with these proposed requirements is providing quality, affordable 
coverage to consumers while minimizing administrative burden and 
ensuring program integrity. The changes proposed in this rule are also 
intended to help advance health equity, mitigate health disparities, 
and alleviate discrimination.
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    \1\ The Patient Protection and Affordable Care Act (Pub. L. 111-
148) was enacted on March 23, 2010. The Healthcare and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and 
revised several provisions of the Patient Protection and Affordable 
Care Act, was enacted on March 30, 2010. In this rulemaking, the two 
statutes are referred to collectively as the ``Patient Protection 
and Affordable Care Act,'' ``Affordable Care Act,'' or ``ACA.''
    \2\ See sections 1301, 1302, 1311, 1312, 1313, 1321, 1331, and 
1343 of the ACA and sections 2718 and 2792 of the PHS Act.
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II. Background

A. Legislative and Regulatory Overview

    Title I of the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA) added a new title XXVII to the PHS Act to establish 
various reforms to the group and individual health insurance markets.
    These provisions of the PHS Act were later augmented by other laws, 
including the ACA.
    Subtitles A and C of title I of the ACA reorganized, amended, and 
added to the provisions of part A of title XXVII of the PHS Act 
relating to group health plans and health insurance issuers in the 
group and individual markets. The term ``group health plan'' includes 
both insured and self-insured group health plans.
    Section 2718 of the PHS Act, as added by the ACA, generally 
requires health insurance issuers in the group and individual markets 
to submit an annual medical loss ratio (MLR) report to HHS and provide 
rebates to enrollees if the issuers do not achieve specified MLR 
thresholds.
    Section 1301(a)(1)(B) of the ACA directs all issuers of qualified 
health plans (QHPs) to cover the EHB package described in section 
1302(a) of the ACA, including coverage of the services described in 
section 1302(b) of the ACA, adherence to the cost-sharing limits 
described in section 1302(c) of the ACA, and meeting the Actuarial 
Value (AV) levels established in section 1302(d) of the ACA. Section 
2707(a) of the PHS Act, which is effective for plan or policy years 
beginning on or after January 1, 2014, extends the requirement to cover 
the EHB package to non-grandfathered individual and small group health 
insurance coverage, irrespective of whether such coverage is offered 
through an Exchange. In addition, section 2707(b) of the PHS Act 
directs non-grandfathered group health plans to ensure that cost 
sharing under the plan does not exceed the limitations described in 
section 1302(c)(1) of the ACA.
    Section 1302 of the ACA provides for the establishment of an EHB 
package that includes coverage of EHBs (as defined by the Secretary of 
HHS), cost-sharing limits, and AV requirements. The law directs that 
EHBs be equal in scope to the benefits provided under a typical 
employer plan, and that they cover at least the following 10 general 
categories: ambulatory patient services; emergency services; 
hospitalization; maternity and newborn care; mental health and 
substance use disorder services, including behavioral health treatment; 
prescription drugs; rehabilitative and habilitative services and 
devices; laboratory services; preventive and wellness services and 
chronic disease management; and pediatric services, including oral and 
vision care.
    Sections 1302(b)(4)(A) through (D) of the ACA establish that the 
Secretary must define EHB in a manner that: (1) reflects appropriate 
balance among the 10 categories; (2) is not designed in such a way as 
to discriminate based on age, disability, or expected length of life; 
(3) takes into account the health care needs of diverse segments of the 
population; and (4) does not allow denials of EHBs based on age, life 
expectancy, disability, degree of medical dependency, or quality of 
life.
    Section 1302(d) of the ACA describes the various levels of coverage 
based on AV. Consistent with section 1302(d)(2)(A) of the ACA, AV is 
calculated based on the provision of EHB to a standard population. 
Section 1302(d)(3) of the ACA directs the Secretary of HHS to develop 
guidelines that allow for de minimis variation in AV calculations.
    Section 1311(c) of the ACA provides the Secretary the authority to 
issue regulations to establish criteria for the certification of QHPs. 
Section 1311(c)(1)(B) of the ACA requires, among the criteria for 
certification that the Secretary must establish by regulation, that 
QHPs ensure a sufficient choice of providers. Section 1311(d)(4)(A) of 
the ACA requires the Exchange to implement procedures for the 
certification, recertification, and decertification of health plans as 
QHPs, consistent with guidelines developed by the Secretary under 
section 1311(c) of the ACA. Section 1311(e)(1) of the ACA grants the 
Exchange the authority to certify a health plan as a QHP if the health 
plan meets the Secretary's requirements for certification issued under 
section 1311(c) of the ACA, and the Exchange determines that making the 
plan available through the Exchange is in the interests of qualified 
individuals and qualified employers in the State. Section 1311(c)(6)(C) 
of the ACA directs the Secretary of HHS to

[[Page 82310]]

require an Exchange to provide for special enrollment periods and 
section 1311(c)(6)(D) of the ACA directs the Secretary of HHS to 
require an Exchange to provide for a monthly enrollment period for 
Indians, as defined by section 4 of the Indian Health Care Improvement 
Act.
    Section 1311(d)(3)(B) of the ACA permits a State, at its option, to 
require QHPs to cover benefits in addition to EHB. This section also 
requires a State to make payments, either to the individual enrollee or 
to the issuer on behalf of the enrollee, to defray the cost of these 
additional State-required benefits.
    Section 1312(c) of the ACA generally requires a health insurance 
issuer to consider all enrollees in all health plans (except 
grandfathered health plans) offered by such issuer to be members of a 
single risk pool for each of its individual and small group markets. 
States have the option to merge the individual and small group market 
risk pools under section 1312(c)(3) of the ACA.
    Section 1312(e) of the ACA provides the Secretary with the 
authority to establish procedures under which a State may allow agents 
or brokers to (1) enroll qualified individuals and qualified employers 
in QHPs offered through Exchanges and (2) assist individuals in 
applying for advance payments of the premium tax credit (APTC) and 
cost-sharing reductions (CSRs) for QHPs sold through an Exchange.
    Section 1312(f)(1)(B) of the ACA provides that an individual shall 
not be treated as a qualified individual for enrollment in a QHP if, at 
the time of enrollment, the individual is incarcerated, other than 
incarceration pending the disposition of charges.
    Sections 1313 and 1321 of the ACA provide the Secretary with the 
authority to oversee the financial integrity of State Exchanges, their 
compliance with HHS standards, and the efficient and non-discriminatory 
administration of State Exchange activities. Section 1313(a)(5)(A) of 
the ACA provides the Secretary with the authority to implement any 
measure or procedure that the Secretary determines is appropriate to 
reduce fraud and abuse in the administration of the Exchanges. Section 
1321 of the ACA provides for State flexibility in the operation and 
enforcement of Exchanges and related requirements.
    Section 1321(a) of the ACA provides broad authority for the 
Secretary to establish standards and regulations to implement the 
statutory requirements related to Exchanges, QHPs and other components 
of title I of the ACA, including such other requirements as the 
Secretary determines appropriate. When operating an FFE under section 
1321(c)(1) of the ACA, HHS has the authority under sections 1321(c)(1) 
and 1311(d)(5)(A) of the ACA to collect and spend user fees. Office of 
Management and Budget (OMB) Circular A-25 Revised establishes Federal 
policy regarding user fees and specifies that a user charge will be 
assessed against each identifiable recipient for special benefits 
derived from Federal activities beyond those received by the public.
    Section 1321(d) of the ACA provides that nothing in title I of the 
ACA must be construed to preempt any State law that does not prevent 
the application of title I of the ACA. Section 1311(k) of the ACA 
specifies that Exchanges may not establish rules that conflict with or 
prevent the application of regulations issued by the Secretary.
    Section 1331 of the ACA provides States with an option to establish 
a Basic Health Program (BHP). In the States that elect to operate a 
BHP, the BHP makes affordable health benefits coverage available for 
individuals under age 65 with household incomes between 133 percent and 
200 percent of the Federal poverty level (FPL) who are not otherwise 
eligible for Medicaid, the Children's Health Insurance Program (CHIP), 
or affordable employer-sponsored coverage, or for individuals whose 
income is equal to or below 200 percent of FPL but are lawfully present 
non-citizens ineligible for Medicaid. For those States that have 
expanded Medicaid coverage under section 1902(a)(10)(A)(i)(VIII) of the 
Social Security Act (the Act), the lower income threshold for BHP 
eligibility is effectively 138 percent of the FPL due to the 
application of a required 5 percent income disregard in determining the 
upper limits of Medicaid income eligibility (section 1902(e)(14)(I) of 
the Act).
    Section 1343 of the ACA establishes a permanent risk adjustment 
program to provide payments to health insurance issuers that attract 
higher-than-average risk populations, such as those with chronic 
conditions, funded by charges collected from those issuers that attract 
lower-than-average risk populations, thereby reducing incentives for 
issuers to avoid higher-risk enrollees. Section 1343(b) of the ACA 
provides that the Secretary, in consultation with States, shall 
establish criteria and methods to be used in carrying out the risk 
adjustment activities under this section. Consistent with section 
1321(c) of the ACA, the Secretary is responsible for operating the HHS 
risk adjustment program in any State that fails to do so.\3\
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    \3\ In the 2014 through 2016 benefit years, HHS operated the 
risk adjustment program in every State and the District of Columbia, 
except Massachusetts. Beginning with the 2017 benefit year, HHS has 
operated the risk adjustment program in all 50 States and the 
District of Columbia.
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    Section 1401(a) of the ACA added section 36B to the Internal 
Revenue Code (the Code), which, among other things, requires that a 
taxpayer reconcile APTC for a year of coverage with the amount of the 
premium tax credit (PTC) the taxpayer is allowed for the year.
    Section 1402 of the ACA provides for, among other things, 
reductions in cost sharing for EHB for qualified low- and moderate-
income enrollees in silver level QHPs offered through the individual 
market Exchanges. This section also provides for reductions in cost 
sharing for Indians enrolled in QHPs at any metal level.
    Section 1411(f) of the ACA requires the Secretary, in consultation 
with the Secretary of the Treasury and the Secretary of Homeland 
Security, and the Commissioner of Social Security, to establish 
procedures for hearing and making decisions governing appeals of 
Exchange eligibility determinations. Section 1411(f)(1)(B) of the ACA 
requires the Secretary to establish procedures to redetermine 
eligibility on a periodic basis, in appropriate circumstances, 
including eligibility to purchase a QHP through the Exchange and for 
APTC and CSRs.
    Section 1411(g) of the ACA allows the use of applicant information 
only for the limited purpose of, and to the extent necessary for, 
ensuring the efficient operation of the Exchange, including by 
verifying eligibility to enroll through the Exchange and for APTC and 
CSRs, and limits the disclosure of such information.
    Section 1413 of the ACA directs the Secretary to establish, subject 
to minimum requirements, a streamlined enrollment process for 
enrollment in QHPs and all insurance affordability programs.
    Section 5000A of the Code, as added by section 1501(b) of the ACA, 
requires individuals to have minimum essential coverage (MEC) for each 
month, qualify for an exemption, or make an individual shared 
responsibility payment. Under the Tax Cuts and Jobs Act, which was 
enacted on December 22, 2017, the individual shared responsibility 
payment is reduced to $0, effective for months beginning after December 
31, 2018. Notwithstanding that reduction, certain exemptions are still 
relevant to determine whether individuals aged 30 and above qualify to 
enroll in

[[Page 82311]]

catastrophic coverage under Sec. Sec.  155.305(h) and 156.155(a)(5).
    Section 1902(r)(2)(A) of the Act permits States to apply less 
restrictive methodologies than cash assistance program methodologies in 
determining eligibility for certain eligibility groups.
1. Premium Stabilization Programs
    The premium stabilization programs refer to the risk adjustment, 
risk corridors, and reinsurance programs established by the ACA.\4\ For 
past rulemaking, we refer readers to the following rules:
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    \4\ See section 1341 of the ACA (transitional reinsurance 
program), section 1342 of the ACA (risk corridors program), and 
section 1343 of the ACA (risk adjustment program).
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    <bullet> In the March 23, 2012 Federal Register (77 FR 17219) 
(Premium Stabilization Rule), we implemented the premium stabilization 
programs.
    <bullet> In the March 11, 2013 Federal Register (78 FR 15409) (2014 
Payment Notice), we finalized the benefit and payment parameters for 
the 2014 benefit year to expand the provisions related to the premium 
stabilization programs and set forth payment parameters in those 
programs.
    <bullet> In the October 30, 2013 Federal Register (78 FR 65046), we 
finalized the modification to the HHS risk adjustment methodology 
related to community rating States.
    <bullet> In the November 6, 2013 Federal Register (78 FR 66653), we 
issued a correcting amendment to the 2014 Payment Notice to address how 
an enrollee's age for the risk score calculation would be determined 
under the HHS risk adjustment methodology.
    <bullet> In the March 11, 2014 Federal Register (79 FR 13743) (2015 
Payment Notice), we finalized the benefit and payment parameters for 
the 2015 benefit year to expand the provisions related to the premium 
stabilization programs, set forth certain oversight provisions, and 
establish payment parameters in those programs.
    <bullet> In the May 27, 2014 Federal Register (79 FR 30240), we 
announced the fiscal year 2015 sequestration rate for the HHS-operated 
risk adjustment program.
    <bullet> In the February 27, 2015 Federal Register (80 FR 10749) 
(2016 Payment Notice), we finalized the benefit and payment parameters 
for the 2016 benefit year to expand the provisions related to the 
premium stabilization programs, set forth certain oversight provisions, 
and establish the payment parameters in those programs.
    <bullet> In the March 8, 2016 Federal Register (81 FR 12203) (2017 
Payment Notice), we finalized the benefit and payment parameters for 
the 2017 benefit year to expand the provisions related to the premium 
stabilization programs, set forth certain oversight provisions, and 
establish the payment parameters in those programs.
    <bullet> In the December 22, 2016 Federal Register (81 FR 94058) 
(2018 Payment Notice), we finalized the benefit and payment parameters 
for the 2018 benefit year, added the high-cost risk pool parameters to 
the HHS risk adjustment methodology, incorporated prescription drug 
factors in the adult models, established enrollment duration factors 
for the adult models, and finalized policies related to the collection 
and use of enrollee-level External Data Gathering Environment (EDGE) 
data.
    <bullet> In the April 17, 2018 Federal Register (83 FR 16930) (2019 
Payment Notice), we finalized the benefit and payment parameters for 
the 2019 benefit year, created the State flexibility framework 
permitting States to request a reduction in risk adjustment State 
transfers calculated by HHS, and adopted a new error rate methodology 
for HHS-RADV adjustments to transfers.
    <bullet> In the May 11, 2018 Federal Register (83 FR 21925), we 
issued a correction to the 2019 HHS risk adjustment coefficients in the 
2019 Payment Notice.
    <bullet> On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i), 
we updated the 2019 benefit year final HHS risk adjustment model 
coefficients to reflect an additional recalibration related to an 
update to the 2016 enrollee-level EDGE data set.\5\
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    \5\ CMS. (2018). Updated 2019 Benefit Year Final HHS Risk 
Adjustment Model Coefficients. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.
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    <bullet> In the July 30, 2018 Federal Register (83 FR 36456), we 
adopted the 2017 benefit year HHS risk adjustment methodology as 
established in the final rules issued in the March 23, 2012 (77 FR 
17220 through 17252) and March 8, 2016 (81 FR 12204 through 12352) 
editions of the Federal Register. The final rule set forth an 
additional explanation of the rationale supporting the use of Statewide 
average premium in the State payment transfer formula for the 2017 
benefit year, including the reasons why the program is operated by HHS 
in a budget-neutral manner. The final rule also permitted HHS to resume 
2017 benefit year HHS risk adjustment payments and charges. HHS also 
provided guidance as to the operation of the HHS-operated risk 
adjustment program for the 2017 benefit year in light of the 
publication of the final rule.
    <bullet> In the December 10, 2018 Federal Register (83 FR 63419), 
we adopted the 2018 benefit year HHS risk adjustment methodology as 
established in the final rules issued in the March 23, 2012 (77 FR 
17219) and the December 22, 2016 (81 FR 94058) editions of the Federal 
Register. In the rule, we set forth an additional explanation of the 
rationale supporting the use of Statewide average premium in the State 
payment transfer formula for the 2018 benefit year, including the 
reasons why the program is operated by HHS in a budget-neutral manner.
    <bullet> In the April 25, 2019 Federal Register (84 FR 17454) (2020 
Payment Notice), we finalized the benefit and payment parameters for 
the 2020 benefit year, as well as the policies related to making the 
enrollee-level EDGE data available as a limited data set for research 
purposes and expanding the HHS uses of the enrollee-level EDGE data, 
approval of the request from Alabama to reduce HHS risk adjustment 
transfers by 50 percent in the small group market for the 2020 benefit 
year, and updates to HHS-RADV program requirements.
    <bullet> On May 12, 2020, consistent with Sec.  153.320(b)(1)(i), 
we issued the 2021 Benefit Year Final HHS Risk Adjustment Model 
Coefficients on the CCIIO website.\6\
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    \6\ CMS. (2020). Final 2021 Benefit Year Final HHS Risk 
Adjustment Model Coefficients. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
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    <bullet> In the May 14, 2020 Federal Register (85 FR 29164) (2021 
Payment Notice), we finalized the benefit and payment parameters for 
the 2021 benefit year, as well as adopted updates to the HHS risk 
adjustment models' hierarchical condition categories (HCCs) to 
transition to the 10th revision of the International Statistical 
Classification of Diseases (ICD-10) codes, approved the request from 
Alabama to reduce HHS risk adjustment transfers by 50 percent in the 
small group market for the 2021 benefit year, and modified the outlier 
identification process under the HHS-RADV program.
    <bullet> In the December 1, 2020 Federal Register (85 FR 76979) 
(Amendments to the HHS-Operated Risk Adjustment Data Validation Under 
the Patient Protection and Affordable Care Act's HHS-Operated Risk 
Adjustment Program (2020 HHS-RADV Amendments Rule)), we adopted the 
creation and application of Super HCCs in the sorting step that assigns 
HCCs to failure rate groups, finalized a sliding scale adjustment in 
HHS-RADV error rate calculation, and added a constraint

[[Page 82312]]

for negative error rate outliers with a negative error rate. We also 
established a transition from the prospective application of HHS-RADV 
adjustments to apply HHS-RADV results to risk scores from the same 
benefit year as that being audited.
    <bullet> In the September 2, 2020 Federal Register (85 FR 54820), 
we issued an interim final rule containing certain policy and 
regulatory revisions in response to the COVID-19 public health 
emergency (PHE), wherein we set forth HHS risk adjustment reporting 
requirements for issuers offering temporary premium credits in the 2020 
benefit year.
    <bullet> In the May 5, 2021 Federal Register (86 FR 24140) (part 2 
of the 2022 Payment Notice), we finalized a subset of proposals from 
the December 4, 2020 Federal Register (85 FR 78572) (the 2022 Payment 
Notice proposed rule), including policy and regulatory revisions 
related to the HHS-operated risk adjustment program, finalization of 
the benefit and payment parameters for the 2022 benefit year, and 
approval of the request from Alabama to reduce HHS risk adjustment 
transfers by 50 percent in the individual and small group markets for 
the 2022 benefit year. In addition, this final rule established a 
revised schedule of collections for HHS-RADV and updated the provisions 
regulating second validation audit (SVA) and initial validation audit 
(IVA) entities.
    <bullet> On July 19, 2021, consistent with Sec.  153.320(b)(1)(i), 
we released Updated 2022 Benefit Year Final HHS Risk Adjustment Model 
Coefficients on the CCIIO website, announcing some minor revisions to 
the 2022 benefit year final HHS risk adjustment adult model 
coefficients.\7\
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    \7\ CMS. (2021). 2022 Benefit Year Final HHS Risk Adjustment 
Model Coefficients. https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf.
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    <bullet> In the May 6, 2022 Federal Register (87 FR 27208) (2023 
Payment Notice), we finalized revisions related to the HHS-operated 
risk adjustment program, including the benefit and payment parameters 
for the 2023 benefit year, HHS risk adjustment model recalibration, and 
policies related to the collection and extraction of enrollee-level 
EDGE data. We also finalized the adoption of the interacted HCC count 
specification for the adult and child models, along with modified 
enrollment duration factors for the adult models, beginning with the 
2023 benefit year.\8\ We also repealed the ability for States, other 
than prior participants, to request a reduction in HHS risk adjustment 
State transfers starting with the 2024 benefit year. In addition, we 
approved a 25 percent reduction to 2023 benefit year HHS risk 
adjustment transfers in Alabama's individual market and a 10 percent 
reduction to 2023 benefit year HHS risk adjustment transfers in 
Alabama's small group market. We also finalized further refinements to 
the HHS-RADV error rate calculation methodology beginning with the 2021 
benefit year.
---------------------------------------------------------------------------

    \8\ CMS (2022). 2023 Benefit Year Final HHS Risk Adjustment 
Model Coefficients. https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf.
---------------------------------------------------------------------------

    <bullet> In the April 27, 2023 Federal Register (88 FR 25740) (2024 
Payment Notice), we finalized the benefit and payment parameters for 
the 2024 benefit year, amended the EDGE discrepancy materiality 
threshold and data collection requirements, and reduced the risk 
adjustment user fee. For the 2024 benefit year, we approved 50 percent 
reductions to HHS risk adjustment transfers for Alabama's individual 
and small group markets, and repealed prior participant States' ability 
to request reductions of their risk adjustment transfers for the 2025 
benefit year and beyond. We finalized several refinements to HHS-RADV 
program requirements, such as shortening the window to confirm SVA 
findings or file a discrepancy report, changing the HHS-RADV 
materiality threshold for random and targeted sampling, and no longer 
exempting exiting issuers from adjustments to risk scores and HHS risk 
adjustment transfers when they are negative error rate outliers. We 
also announced the discontinuance of the Lifelong Permanent Condition 
List (LLPC) and Non-EDGE Claims (NEC) in HHS-RADV beginning with the 
2022 benefit year.
    <bullet> In the April 15, 2024 Federal Register (89 FR 26218) (2025 
Payment Notice), we finalized the benefit and payment parameters for 
the 2025 benefit year, including the 2025 risk adjustment models and 
updated the adjustment factors for the receipt of CSRs for the American 
Indian and Alaska Native (AI/AN) subpopulation who are enrolled in zero 
and limited cost-sharing plans to improve prediction in the HHS risk 
adjustment models. In addition, we finalized that in certain cases, we 
may require a corrective action plan (CAP) to address an observation 
identified in an HHS risk adjustment program audit.
2. Program Integrity
    We have finalized program integrity standards related to the 
Exchanges and premium stabilization programs in two rules: the ``first 
Program Integrity Rule'' issued in the August 30, 2013 Federal Register 
(78 FR 54069), and the ``second Program Integrity Rule'' issued in the 
October 30, 2013 Federal Register (78 FR 65045). We also refer readers 
to the 2019 Patient Protection and Affordable Care Act; Exchange 
Program Integrity final rule (2019 Program Integrity Rule) issued in 
the December 27, 2019 Federal Register (84 FR 71674).
    In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment 
Notice), we finalized a policy to implement improper payment pre-
testing and assessment (IPPTA) requirements for State Exchanges to 
ensure adherence to the Payment Integrity Information Act of 2019. In 
addition, we finalized allowing additional time for HHS to review 
evidence submitted by agents and brokers to rebut allegations 
pertaining to Exchange agreement suspensions or terminations. We also 
introduced consent and eligibility application documentation 
requirements for agents, brokers, and web-brokers that assist Exchange 
consumers in FFE and SBE-FP States.
3. Market Rules
    In the February 27, 2013 Federal Register (78 FR 13406), we issued 
the health insurance market rules, including provisions related to the 
single risk pool. We amended requirements related to index rates under 
the single risk pool provision in a final rule issued in the July 2, 
2013 Federal Register (78 FR 39870). In the October 30, 2013 Federal 
Register (78 FR 65046), we clarified when issuers may establish and 
update premium rates. In the March 8, 2016 Federal Register (81 FR 
12203), we clarified single risk pool provisions related to student 
health insurance coverage. We finalized minor adjustments to the single 
risk pool regulations in the 2018 Payment Notice, issued in the 
December 22, 2016 Federal Register (81 FR 94058).
4. Exchanges
    We issued a request for comment relating to Exchanges in the August 
3, 2010 Federal Register (75 FR 45584). We issued initial guidance to 
States on Exchanges on November 18, 2010. In the March 27, 2012 Federal 
Register (77 FR 18310) (Exchange Establishment Rule), we implemented 
the Affordable Insurance Exchanges (Exchanges), consistent with title I 
of the ACA, to provide competitive marketplaces for individuals and 
small employers to directly compare available private health insurance 
options on the basis of price, quality, and other factors. This

[[Page 82313]]

included implementation of components of the Exchanges and standards 
for eligibility for Exchanges, as well as network adequacy and 
essential community provider (ECP) certification standards.
    In the August 17, 2011 Federal Register (76 FR 51201), we issued a 
proposed rule regarding eligibility determinations, including the 
regulatory requirement to verify incarceration status. In the March 27, 
2012 Federal Register (77 FR 18310) we finalized the regulatory 
requirement to verify incarceration attestation using an approved 
electronic data source that is current and accurate, and to resolve the 
inconsistency when attestations are not reasonably compatible with 
information in an approved data source. We also established 
requirements regarding accessible communications for individuals with 
disabilities and those with LEP.
    In the 2014 Payment Notice and the Amendments to the HHS Notice of 
Benefit and Payment Parameters for 2014 interim final rule, issued in 
the March 11, 2013 Federal Register (78 FR 15541), we set forth 
standards related to Exchange user fees. We established an adjustment 
to the FFE user fee in the Coverage of Certain Preventive Services 
under the Affordable Care Act final rule, issued in the July 2, 2013 
Federal Register (78 FR 39869) (Preventive Services Rule).
    In the 2016 Payment Notice, we also set forth the ECP certification 
standard at Sec.  156.235, with revisions in the 2017 Payment Notice in 
the March 8, 2016 Federal Register (81 FR 12203) and the 2018 Payment 
Notice in the December 22, 2016 Federal Register (81 FR 94058).
    In the 2018 Payment Notice, issued in the December 22, 2016 Federal 
Register (81 FR 94058), we set forth the standards for the request for 
reconsideration of denial of certification specific to the FFEs at 
Sec.  155.1090.
    In an interim final rule, issued in the May 11, 2016 Federal 
Register (81 FR 29146), we made amendments to the parameters of certain 
special enrollment periods (2016 Interim Final Rule). We finalized 
these in the 2018 Payment Notice, issued in the December 22, 2016 
Federal Register (81 FR 94058).
    In the Market Stabilization final rule, issued in the April 18, 
2017 Federal Register (82 FR 18346), we amended standards relating to 
special enrollment periods and QHP certification. In the 2019 Payment 
Notice, issued in the April 17, 2018 Federal Register (83 FR 16930), we 
modified parameters around certain special enrollment periods. In the 
April 25, 2019 Federal Register (84 FR 17454), the 2020 Payment Notice 
established a new special enrollment period.
    In the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment 
Notice), we finalized revisions to the parameters of special enrollment 
periods and the quality rating information display standards for State 
Exchanges and amended the periodic data matching requirements.
    In the January 19, 2021 Federal Register (86 FR 6138) (part 1 of 
the 2022 Payment Notice), we finalized only a subset of the proposals 
in the 2022 Payment Notice proposed rule. In the May 5, 2021 Federal 
Register (86 FR 24140), we issued part 2 of the 2022 Payment Notice. In 
part 3 of the 2022 Payment Notice, issued in the September 27, 2021 
Federal Register (86 FR 53412), in conjunction with the Department of 
the Treasury, we finalized amendments to certain policies in part 1 of 
the 2022 Payment Notice.
    In the May 6, 2022 Federal Register (87 FR 27208), we finalized 
changes to maintain the user fee rate for issuers offering plans 
through the FFEs and maintain the user fee rate for issuers offering 
plans through the SBE-FPs for the 2023 benefit year. We also finalized 
various policies to address certain agent, broker, and web-broker 
practices and conduct. We also finalized updates to the requirement 
that all Exchanges conduct special enrollment period verifications.
    In the 2024 Payment Notice, issued in the April 27, 2023 Federal 
Register (88 FR 25740), we revised Exchange Blueprint approval 
timelines, lowered the user fee rate for QHPs in the FFEs and SBE-FPs, 
and amended re-enrollment hierarchies for enrollees. We also finalized 
policies to update FFE and SBE-FP standardized plan options; reduced 
the risk of plan choice overload on the FFEs and SBE-FPs by limiting 
the number of non-standardized plan options that issuers may offer 
through Exchanges on the Federal platform to four for PY 2024 and to 
two for PY 2025 and subsequent years; and ensure correct QHP 
information. In addition, we amended coverage effective date rules, 
lengthened the special enrollment period from 60 to 90 days for those 
who lose Medicaid coverage, and prohibited QHPs on FFEs and SBE-FPs 
from terminating coverage mid-year for dependent children who reach the 
applicable maximum age. We also finalized policies on verifying 
consumer income and permitting door-to-door assisters to solicit 
consumers. To ensure provider network adequacy, we finalized provider 
network and ECP policies for QHPs. We revised the failure to file and 
reconcile process to ensure enrollees would not lose APTC eligibility 
until they or their tax filer failed to file their Federal income taxes 
and reconcile APTC for two consecutive tax years.
    In the 2025 Payment Notice, issued in the April 15, 2024 Federal 
Register (89 FR 26218), we required a State seeking to operate a State 
Exchange to first operate an SBE-FP for at least one plan year, revised 
Exchange Blueprint requirements for States transitioning to a State 
Exchange, established additional minimum standards for Exchange call 
center operations, required an Exchange to operate a centralized 
eligibility and enrollment platform on its website, and finalized 
various policies for web-brokers and direct enrollment entities. In 
addition, we required State Exchanges and State Medicaid agencies to 
remit payment to HHS for their use of certain income data, amended re-
enrollment hierarchies for enrollees enrolled in catastrophic coverage, 
revised the parameters around a State Exchange adopting an alternative 
open enrollment period, and extended the availability of a special 
enrollment period for APTC-eligible qualified individuals with a 
projected annual household income no greater than 150 percent of the 
Federal Poverty Level (FPL). To ensure provider network adequacy in 
State Exchanges and SBE-FPs, we finalized provider network adequacy 
policies applicable to such Exchanges for PY 2026 and subsequent plan 
years. We also further lowered the user fee rate for QHPs in the FFEs 
and SBE-FPs. In addition, we finalized the policy to maintain FFE and 
SBE-FP standardized plan option metal levels from the 2024 Payment 
Notice and finalized an exceptions process to the limitation on non-
standardized plan options in FFEs and SBE-FPs. We also finalized the 
requirement for Exchanges to provide notification to enrollees or their 
tax filers who have failed to file their Federal income taxes and 
reconcile APTC for one tax year.
5. Essential Health Benefits
    We established requirements relating to EHBs in the Standards 
Related to Essential Health Benefits, Actuarial Value, and 
Accreditation Final Rule, which was issued in the February 25, 2013 
Federal Register (78 FR 12834) (EHB Rule). We established at Sec.  
156.135(a) that AV is generally to be calculated using the AV 
Calculator developed and made available by HHS for a given benefit 
year. In the 2015 Payment Notice (79 FR 13743), we established at Sec.  
156.135(g) provisions

[[Page 82314]]

for updating the AV Calculator in future plan years. In the 2017 
Payment Notice (81 FR 12349), we amended the provisions at Sec.  
156.135(g) to allow for additional flexibility in our approach and 
options for updating of the AV Calculator.
    In the 2025 Payment Notice, issued in the April 15, 2024 Federal 
Register (89 FR 26218), we revised Sec.  155.170(a) to codify that 
benefits covered in a State's EHB-benchmark plan are not considered in 
addition to EHB, even if they had been required by State action taking 
place after December 31, 2011, other than for purposes of compliance 
with Federal requirements. We finalized three revisions to the 
standards for State selection of EHB-benchmark plans for benefit years 
beginning on or after January 1, 2026: we revised the typicality 
standard at Sec.  156.111 for States to demonstrate that their new EHB-
benchmark plan provides a scope of benefits that is equal to that of a 
typical employer plan in the State and removed the generosity standard; 
removed the requirement for States to submit a formulary drug list as 
part of their application unless they are changing their prescription 
drug EHBs; and consolidated the options for States to change their EHB-
benchmark plans. We also removed the regulatory prohibition at Sec.  
156.115(d) on issuers from including routine non-pediatric dental 
services as an EHB beginning with PY 2027. In addition, we revised 
Sec.  156.122 to codify that prescription drugs in excess of those 
covered by a State's EHB-benchmark plan are considered EHB. We also 
stated that HHS and the Departments of Labor and the Treasury intend to 
propose rulemaking that would align the standards applicable to large 
group market health plans and self-insured group health plans with 
those applicable to individual and small group market plans, so that 
all group health plans and health insurance coverage subject to 
sections 2711 and 2707(b) of the PHS Act, as applicable, would be 
required to treat prescription drugs covered by the plan or coverage in 
excess of the applicable EHB-benchmark plan as EHB for purposes of the 
prohibition of lifetime and annual limits and the annual limitation on 
cost sharing, which would further strengthen the consumer protections 
in the ACA.
6. Medical Loss Ratio (MLR)
    We issued a request for comment on section 2718 of the PHS Act in 
the April 14, 2010 Federal Register (75 FR 19297) and issued an interim 
final rule with a 60-day comment period relating to the MLR program on 
December 1, 2010 (75 FR 74864). A final rule with a 30-day comment 
period was issued in the December 7, 2011 Federal Register (76 FR 
76573). An interim final rule with a 60-day comment period was issued 
in the December 7, 2011 Federal Register (76 FR 76595). A final rule 
was issued in the Federal Register on May 16, 2012 (77 FR 28790). The 
MLR program requirements were amended in final rules issued in the 
March 11, 2014 Federal Register (79 FR 13743), the May 27, 2014 Federal 
Register (79 FR 30339), the February 27, 2015 Federal Register (80 FR 
10749), the March 8, 2016 Federal Register (81 FR 12203), the December 
22, 2016 Federal Register (81 FR 94183), the April 17, 2018 Federal 
Register (83 FR 16930), the May 14, 2020 Federal Register (85 FR 
29164), the May 5, 2021 Federal Register (86 FR 24140), and the May 6, 
2022 Federal Register (87 FR 27208), and an interim final rule that was 
issued in the September 2, 2020 Federal Register (85 FR 54820).
7. Quality Improvement Strategy
    We issued regulations in Sec.  155.200(d) to direct Exchanges to 
evaluate quality improvement strategies, and Sec.  156.200(b) to direct 
QHP issuers to implement and report on a quality improvement strategy 
or strategies consistent with section 1311(g) standards as QHP 
certification criteria for participation in an Exchange. In the 2016 
Payment Notice, issued in the February 27, 2015 Federal Register (80 FR 
10749), we finalized regulations at Sec.  156.1130 to establish 
standards and the associated timeframe for QHP issuers to submit the 
necessary information to implement quality improvement strategy 
standards for QHPs offered through an Exchange.
8. Basic Health Program
    In the March 12, 2014, Federal Register (79 FR 14111), we issued a 
final rule entitled the ``Basic Health Program: State Administration of 
Basic Health Programs; Eligibility and Enrollment in Standard Health 
Plans; Essential Health Benefits in Standard Health Plans; Performance 
Standards for Basic Health Programs; Premium and Cost Sharing for Basic 
Health Programs; Federal Funding Process; Trust Fund and Financial 
Integrity'' (hereinafter referred to as the BHP final rule) 
implementing section 1331 of the ACA, which governs the establishment 
of BHPs. The BHP final rule established the standards for State and 
Federal administration of BHPs, including provisions regarding 
eligibility and enrollment, benefits, cost-sharing requirements and 
oversight activities. In the BHP final rule, we specified that the BHP 
Payment Notice process would include the annual publication of both a 
proposed and final BHP payment methodology.
    On October 11, 2017, the Attorney General of the United States 
provided HHS and the Department of the Treasury (the Departments) with 
a legal opinion \9\ indicating that the permanent appropriation at 31 
U.S.C. 1324, from which the Departments had historically drawn funds to 
make CSR payments, cannot be used to fund CSR payments to insurers. In 
light of this opinion--and in the absence of any other appropriation 
that could be used to fund CSR payments--HHS directed CMS to 
discontinue CSR payments to issuers until Congress provides for an 
appropriation. As a result of this opinion, CMS discontinued CSR 
payments to issuers in the States operating a BHP (that is, New York 
and Minnesota). The States then sued the Secretary for declaratory and 
injunctive relief in the United States District Court for the Southern 
District of New York.\10\ On May 2, 2018, the parties filed a 
stipulation requesting a stay of the litigation so that HHS could issue 
an administrative order revising the 2018 BHP payment methodology. 
After consideration of the States' comments on the administrative order 
revising the payment methodology, we issued a Final Administrative 
Order on August 24, 2018 (Final Administrative Order) setting forth the 
payment methodology that would apply to the 2018 BHP program year.
---------------------------------------------------------------------------

    \9\ Sessions, J. (2017, Oct. 11). Legal Opinion Re: Payments to 
Issuers for Cost Sharing Reductions (CSRs). Office of the Attorney 
General. https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
    \10\ See New York v. U.S. Dep't of Health & Human Servs., No. 
18-cv-00683 (RJS) (S.D.N.Y. filed Jan. 26, 2018).
---------------------------------------------------------------------------

    In the November 5, 2019 Federal Register (84 FR 59529) (hereinafter 
referred to as the November 2019 final BHP Payment Notice), we 
finalized the payment methodologies for BHP program years 2019 and 
2020.\11\ The 2019 payment methodology is the same payment methodology 
described in the Final Administrative Order. The 2020 payment 
methodology is the same methodology as the 2019 payment methodology 
with one additional adjustment to account for the impact of individuals 
selecting different metal tier level plans in the Exchange, referred to 
as the Metal Tier Selection Factor

[[Page 82315]]

(MTSF).\12\ In the August 13, 2020 Federal Register (85 FR 49264) 
(hereinafter referred to as the August 2020 final BHP Payment Notice), 
we finalized the payment methodology for BHP program year 2021. The 
2021 payment methodology is the same methodology as the 2020 payment 
methodology, with one adjustment to the income reconciliation factor 
(IRF). In the July 7, 2021 Federal Register (86 FR 35615) (hereinafter 
referred to as the July 2021 final BHP Payment Notice), we finalized 
the payment methodology for BHP program year 2022. The 2022 payment 
methodology is the same as the 2021 payment methodology, with the 
exception of the removal of the Metal Tier Selection Factor.
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    \11\ BHP program year means a calendar year for which a standard 
health plan provides coverage for BHP enrollees. See 42 CFR 600.5.
    \12\ ``Metal tiers'' refer to the different actuarial value plan 
levels offered on the Exchanges. Bronze-level plans generally must 
provide 60 percent actuarial value; silver-level 70 percent 
actuarial value; gold-level 80 percent actuarial value; and 
platinum-level 90 percent actuarial value. See 45 CFR 156.140.
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    In the December 20, 2022 Federal Register (87 FR 77722) (hereafter 
referred to as the 2023 final BHP Payment Notice), we finalized the 
payment methodology for BHP program year 2023. The 2023 payment 
methodology is the same as the 2022 payment methodology, except for the 
addition of a factor to account for a State operating a BHP and 
implementing an approved State Innovation Waiver under section 1332 of 
the ACA; this is the section 1332 waiver factor (WF). In the 2023 final 
BHP Payment Notice (87 FR 77723), we also revised the schedule for 
issuance of payment notices and allowed payment notices to be effective 
for 1 or multiple program years, as determined by and subject to the 
direction of the Secretary, beginning with the 2023 payment 
methodology. In the 2025 Payment Notice, issued in the April 15, 2024 
Federal Register (89 FR 26218), we finalized that States may start BHP 
applicants' effective date of eligibility on the first day of the month 
following the date of application. In addition, we finalized that, 
subject to HHS approval, a State may establish its own effective date 
of eligibility for enrollment policy.

B. Summary of Major Provisions

    The regulations outlined in this proposed rule would be codified in 
42 CFR part 600 and 45 CFR parts 153, 155, 156, and 158.
1. 42 CFR Part 600
    We are proposing changes to the methodology regarding the premium 
adjustment factor (PAF), which is used to calculate the adjusted 
reference premium (ARP) for BHP payment. We propose maintaining the PAF 
value at 1.188 for States that have fully implemented BHP and are using 
Second Lowest Cost Silver Plan (SLCSP) premiums from a year in which 
BHP was fully implemented. As previously clarified, for States in their 
first year of implementing BHP and choosing to use prior year SLCSP 
premiums to determine BHP payment, the PAF value would be set to 1.00. 
We propose that if a State is using SLCSP premiums from a year in which 
BHP was not fully implemented, the PAF is calculated by determining the 
CSR adjustment that QHP issuers included in the SLCSP premiums, 
reporting the CSR adjustments for the SLCSP for each region in the 
State to CMS, and then CMS calculating the PAF as 1.20 divided by 1 
plus the adjustment. Additionally, we are proposing a technical 
clarification for BHP payment rates in cases of multiple SLCSP premiums 
in an area.
2. 45 CFR Part 153
    In accordance with the OMB Report to Congress on the Joint 
Committee Reductions for Fiscal Year 2025, the HHS-operated risk 
adjustment program is subject to the fiscal year 2025 
sequestration.\13\ Therefore, the HHS-operated risk adjustment program 
will sequester payments made from fiscal year 2025 resources (that is, 
funds collected during the 2025 fiscal year) at a rate of 5.7 percent.
---------------------------------------------------------------------------

    \13\ OMB. (2024). OMB Report to the Congress on the BBEDCA 251A 
Sequestration for Fiscal Year 2025. https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf.
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    We propose to recalibrate the 2026 benefit year HHS risk adjustment 
models using the 2020, 2021, and 2022 benefit year enrollee-level EDGE 
data. Starting with the 2026 benefit year, we propose to begin phasing 
out the market pricing adjustment to the plan liability associated with 
Hepatitis C drugs in the HHS risk adjustment models (see, for example, 
84 FR 17463 through 17466). We also are proposing to incorporate pre-
exposure prophylaxis (PrEP) as a separate, new type of factor called an 
Affiliated Cost Factor (ACF) in the HHS risk adjustment adult and child 
models starting with the 2026 benefit year. We also request information 
on whether the HHS-operated risk adjustment program should take into 
account the time value of money for the collection and remittance of 
State transfers that occur 8 to 10 months after the conclusion of the 
benefit year. We also propose a risk adjustment user fee for the 2026 
benefit year of $0.18 per member per month (PMPM).
    Beginning with the 2025 benefit year of HHS-RADV, we propose to 
exclude enrollees without HCCs, which includes enrollees with only 
prescription drug categories (RXCs), from the IVA sample, remove the 
Finite Population Correction (FPC) from the IVA sampling methodology, 
and replace the source of the Neyman allocation data used for HHS-RADV 
sampling with the most recent 3 years of consecutive HHS-RADV data. In 
addition, beginning with the 2024 benefit year of HHS-RADV, we propose 
to modify the SVA pairwise means test, which tests for statistical 
differences between the IVA and SVA results, to use a bootstrapped 90 
percent confidence interval methodology and to increase the initial SVA 
subsample size from 12 enrollees to 24 enrollees.
3. 45 CFR Part 155
    We seek comment on how assisters who perform their assister duties 
in a hospital and hospital system may, within the bounds of the 
statute, refer consumers to programs designed to reduce medical debt.
    We address our authority to investigate and undertake compliance 
reviews and enforcement actions in response to misconduct or 
noncompliance with applicable agent, broker, and web-broker Exchange 
requirements or standards occurring at the insurance agency level and 
how we intend to hold lead agents of insurance agencies accountable for 
such misconduct or noncompliance.
    We propose to revise Sec.  155.220(k)(3) to reflect our authority 
to suspend an agent's or broker's ability to transact information with 
the Exchange in instances where HHS discovers circumstances that pose 
unacceptable risk to accuracy of Exchange eligibility determinations, 
Exchange operations, applicants, or enrollees, or Exchange information 
technology systems, including but not limited to risk related to 
noncompliance with the standards of conduct under Sec.  
155.220(j)(2)(i), (ii) or (iii) and the privacy and security standards 
under Sec.  155.260, until the circumstances of the incident, breach, 
or noncompliance are remedied or sufficiently mitigated to HHS' 
satisfaction.
    We propose to update the Model Consent Form that agents, brokers, 
and web-brokers can use to obtain and document consumer consent.\14\ 
The

[[Page 82316]]

updates would expand the resource to include a standardized form that 
agents, brokers, and web-brokers can use to document the consumer's 
review and confirmation of the accuracy of information in their 
Exchange eligibility application, which is a new standard of conduct 
that was also implemented as part of the 2024 Payment Notice (88 FR 
25809 through 25814). The proposed updates would also add scripts that 
agents, brokers, and web-brokers could utilize to meet the consumer 
consent and eligibility application review requirements finalized in 
the 2024 Payment Notice via an audio recording. We are not proposing 
any regulatory text changes since the use of the updated Model Consent 
Form would not be mandatory.
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    \14\ CMS. (2022, December 14). CMS Model Consent Form for 
Marketplace Agents and Brokers. PRA package (CMS-10840, OMB 0938-
1438). https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf.
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    We propose to amend Sec.  155.305(f)(4) to require Exchanges to 
provide notice to consumers and tax filers who have failed to file and 
reconcile their APTC for 2 consecutive years.
    We propose to add Sec.  155.400(d)(1) to codify HHS' guidance that 
requires that, within 60 calendar days after a State Exchange receives 
a data inaccuracy from an issuer operating in an State Exchange that 
includes a description of an inaccuracy that meets the requirements at 
Sec.  156.1210(a)-(c) and all the information that the State Exchange 
requires or requests to properly assess the inaccuracy, State Exchanges 
must review and resolve the State Exchange issuer's enrollment data 
inaccuracies and submit to HHS a description of the resolution of any 
inaccuracies described by the State Exchange issuer that the State 
Exchange confirms to be inaccuracies in a format and manner specified 
by HHS.
    We propose to revise Sec.  155.400(g) to allow issuers to adopt a 
fixed-dollar payment threshold of $5 or less, adjusted for inflation, 
under which issuers would not be required to trigger a grace period or 
terminate enrollment for enrollees who fail to pay the full amount of 
their portion of premium owed. We propose to limit application of this 
fixed-dollar payment threshold to premium payments after coverage is 
effectuated. Issuers would be required to apply the fixed-dollar 
threshold uniformly to all enrollees and without regard to their health 
status. Issuers would be allowed to apply either the fixed-dollar 
payment threshold or one of two percentage-based thresholds (one of 
which is currently permitted under Sec.  155.400(g), but which we 
propose to modify).
    We propose revisions to Sec.  155.505(b) to codify an option for 
application filers to file appeals on behalf of applicants and 
enrollees on the application filer's Exchange application, as this 
would streamline the appeals process and ensure operational consistency 
between the FFEs and the HHS appeals entity or State Exchange appeals 
entity.
    We propose to amend Sec.  155.1000 to state explicitly that an 
Exchange may deny certification to any plan that does not meet the 
general certification criteria at Sec.  155.1000(c). We also propose to 
amend Sec.  155.1090 with refinements to the standards for a request 
for the reconsideration of a denial of certification specific to the 
FFEs.
    We propose that in addition to collecting the information and data 
currently provided by Exchanges under Sec.  155.1200 to monitor 
performance and compliance, we would use the information and data that 
Exchanges submit to increase transparency into Exchange operations and 
to promote program improvements. We anticipate publicly releasing the 
Exchanges annual State-based Marketplace Annual Reporting Tools 
(SMARTs), programmatic and financial audits, Blueprint applications, 
and additional data points in the Open Enrollment (OE) Data Reports. We 
are seeking input on how to best display these data points and how to 
best develop a performance measurement tool to assess Exchange quality 
and consumer experience.
4. 45 CFR Part 156
    We solicit comments on reducing the risk of issuer insolvencies 
adversely impacting the integrity of the FFEs.
    We propose 2026 benefit year FFE and SBE-FP user fee rates of 2.5 
percent and 2.0 percent of total monthly premiums, respectively. 
However, if the enhanced PTC subsidies as currently enacted \15\ or at 
a higher level are extended through the 2026 benefit year by March 31, 
2025, we propose a 2026 benefit year FFE user fee rate range between 
1.8 and 2.2 percent of total monthly premiums and a 2026 benefit year 
SBE-FP user fee rate range between 1.4 and 1.8 of total monthly 
premiums, with each of these ranges to be set at a single rate in the 
final rule.
---------------------------------------------------------------------------

    \15\ ARP, Public Law 117-2 (2021). These enhanced subsidies were 
extended under the IRA, Public Law 117-169 (2022) and are scheduled 
to expire after the 2025 calendar year.
---------------------------------------------------------------------------

    We affirm that certain CSR loading practices that are permitted by 
State regulators are permissible under Federal law to the extent that 
they are reasonable and actuarially justified. We seek comment on 
whether we should codify this guidance at Sec.  156.80(d).
    We intend to revise the method for updating the AV Calculator, 
starting with the 2026 AV Calculator. Under this approach, for a plan 
year, we would only release a single, final version of the AV 
Calculator. We would also solicit public comments on the AV Calculator 
for a plan year generally but would only plan to incorporate this 
feedback into the development and release of the following plan year's 
AV Calculator.
    We propose to make minor updates to the standardized plan option 
designs for PY 2026 to ensure these plans continue to have AVs within 
the permissible de minimis range for each metal level and to maintain a 
high degree of continuity with the approaches to standardized plan 
options finalized in the 2023, 2024, and 2025 Payment Notices. In 
addition, we propose to amend Sec.  156.201 to require issuers that 
offer multiple standardized plan options within the same product 
network type, metal level, and service area to meaningfully 
differentiate these plans from one another in terms of included 
benefits, provider networks, and/or formularies.
    We propose to amend Sec.  156.202(b) and (d) to properly reflect 
the flexibility that issuers have been operationally permitted since 
these requirements were introduced to vary the inclusion of the 
distinct adult dental benefit coverage, pediatric dental benefit 
coverage, and/or adult vision benefit coverage categories under the 
non-standardized plan option limit in accordance with Sec.  
156.202(c)(1) through (3).
    We propose to conduct ECP certification reviews of plans for which 
issuers submit QHP certification applications in FFEs in States 
performing plan management functions, beginning in PY 2026.
    We propose to share aggregated, summary-level QIS information 
publicly on an annual basis beginning on January 1, 2026, with 
information QHP issuers submit during the PY 2025 QHP Application 
Period.
    We propose to amend Sec.  156.1220(a) to introduce a new 
materiality threshold for HHS-RADV appeals, such that HHS would rerun 
HHS-RADV results and adjust HHS-RADV adjustments to State transfers in 
response to a successful appeal when the impact of that appeal to the 
filer's HHS-RADV adjustments to State transfers is greater than or 
equal to $10,000.
5. 45 CFR Part 158
    We propose to amend Sec.  158.140(b)(4)(ii) to allow qualifying 
issuers to not adjust incurred claims by the net payments or receipts 
related to

[[Page 82317]]

the risk adjustment program for MLR reporting and rebate calculation 
purposes beginning with the 2026 MLR reporting year (MLR reports due in 
2027). We propose that for qualifying issuers, earned premium would 
account for net risk adjustment receipts by simply adding these net 
receipts to total premium, without subsequently subtracting them from 
adjusted earned premium, such that these net receipts would impact the 
MLR denominator rather than MLR numerator. We propose to amend Sec.  
158.103 to add a definition of ``qualifying issuer.''
    We also propose amendments to Sec.  158.240(c) to add an 
illustrative example of how qualifying issuers would calculate the 
amount of rebate owed to each enrollee to accurately reflect how such 
issuers would incorporate the net risk adjustment transfer amounts into 
the MLR and rebate calculations differently from other issuers, as well 
as a conforming amendment to clarify that the current illustrative 
example in paragraph (c)(2) would apply to issuers that are not 
qualifying issuers.

III. Provisions of the Proposed Regulations

A. 42 CFR Part 600 BHP Methodology Regarding the Value of the Premium 
Adjustment Factor (PAF)

1. Overview of the Payment Methodology and Calculation of the Payment 
Amount
    Section 1331(d)(3) of the ACA directs the Secretary to consider 
several factors when determining the Federal BHP payment amount, which, 
as specified in the statute, must equal 95 percent of the value of the 
PTC under section 36B of the Code and CSRs under section 1402 of the 
ACA that would have been paid on behalf of BHP enrollees had they 
enrolled in a QHP through an Exchange. Thus, the BHP payment 
methodology is designed to calculate the PTC and CSRs as consistently 
as possible and in general alignment with the methodology used by 
Exchanges to calculate advance payments of the PTC (APTC) and CSRs, and 
the methodology used to reconcile APTC with the amount of the PTC 
allowed for the tax year under section 36B of the Code. In accordance 
with section 1331(d)(3)(A)(iii) of the ACA, the final payment 
methodology must be certified by the Chief Actuary of CMS, in 
consultation with the Office of Tax Analysis (OTA) of the Department of 
the Treasury, as having met the requirements of section 
1331(d)(3)(A)(ii) of the ACA.
    Section 1331(d)(3)(A)(ii) of the ACA specifies that the payment 
determination shall take into account all relevant factors necessary to 
determine the value of the PTC and CSRs that would have been paid on 
behalf of eligible individuals, including but not limited to, the age 
and income of the enrollee, whether the enrollment is for self-only or 
family coverage, geographic differences in average spending for health 
care across rating areas, the health status of the enrollee for 
purposes of determining risk adjustment payments and reinsurance 
payments that would have been made if the enrollee had enrolled in a 
QHP through an Exchange, and whether any reconciliation of APTC and CSR 
would have occurred if the enrollee had been enrolled. Under all 
previous payment methodologies, the total Federal BHP payment amount 
has been calculated using multiple rate cells in each BHP State. Each 
rate cell represents a unique combination of age range (if applicable), 
geographic area, coverage category (for example, self-only or two-adult 
coverage through the BHP), household size, and income range as a 
percentage of FPL, and there is a distinct rate cell for individuals in 
each coverage category within a particular age range who reside in a 
specific geographic area and are in households of the same size and 
income range. The BHP payment rates developed are also consistent with 
the State's rules on age rating. Thus, in the case of a State that does 
not use age as a rating factor on an Exchange, the BHP payment rates 
would not vary by age.
    Under the methodology finalized in the July 2021 final BHP Payment 
Notice, the rate for each rate cell is calculated in 2 parts. The first 
part is equal to 95 percent of the estimated PTC that would have been 
allowed if a BHP enrollee in that rate cell had instead enrolled in a 
QHP in an Exchange. The second part is equal to 95 percent of the 
estimated CSR payment that would have been made if a BHP enrollee in 
that rate cell had instead enrolled in a QHP in an Exchange. These two 
parts are added together and the total rate for that rate cell would be 
equal to the sum of the PTC and CSR rates. As noted in the July 2021 
final BHP Payment Notice, we currently assign a value of zero to the 
CSR portion of the BHP payment rate calculation, because there is 
presently no available appropriation from which we can make the CSR 
portion of any BHP payment.
    The 2023 final BHP Payment Notice provides a detailed description 
of the structure of the BHP payments, including the equations, factors, 
and the values of the factors used to calculate the BHP payments. We 
are proposing one change to the methodology regarding the premium 
adjustment factor (PAF).
    The PAF is used to calculate the adjusted reference premium (ARP) 
that is used to calculate the BHP payment. The adjusted reference 
premium (ARP) is used to calculate the estimated PTC that would be 
allowed if BHP-eligible individuals enrolled in QHPs through an 
Exchange and is based on the premiums for the applicable second lowest 
cost silver plan during the applicable plan year. The PAF considers the 
premium increases in other States that took effect after we 
discontinued payments to issuers for CSRs provided to enrollees in QHPs 
offered through Exchanges. Despite the discontinuance of Federal 
payments for CSRs, QHP issuers are required to provide CSRs to eligible 
enrollees. As a result, many QHP issuers increased the silver-level 
plan premiums to account for those additional costs; these premium 
adjustments and how they were applied (for example, to only silver-
level plans or to all metal tier plans) varied across States. For the 
States operating BHPs in 2018, the increases in premiums were 
relatively minor, because the majority of enrollees eligible for CSRs 
(and all who were eligible for the largest CSRs) were enrolled in the 
BHP and not in QHPs on the Exchanges, and therefore issuers in BHP 
States did not significantly raise premiums to cover costs related to 
HHS not making CSR payments.
    In the Final Administrative Order and the 2019 through 2023 final 
BHP Payment Notices, we incorporated the PAF into the BHP payment 
methodologies to capture the impact of how other States responded to 
HHS ceasing to make CSR payments.\16\ We also reserved the right that 
in the case an appropriation for CSR payments is made for a future 
year, we would determine whether and how to modify the PAF in the 
payment methodology.
---------------------------------------------------------------------------

    \16\ https://www.medicaid.gov/sites/default/files/2019-11/final-admin-order-2018-revised-payment-methodology.pdf.
---------------------------------------------------------------------------

    Under the Final Administrative Order, we calculated the PAF by 
using information sought from QHP issuers in each State and the 
District of Columbia and determined the premium adjustment that the 
responding QHP issuers made to each silver level plan in 2018 to 
account for the discontinuation of CSR payments to QHP issuers. Based 
on the data collected, we estimated the median adjustment for silver 
level QHPs nationwide (excluding those in the two BHP States). To the 
extent that QHP issuers made no adjustment (or the adjustment was 
zero), this was counted as zero in determining the median

[[Page 82318]]

adjustment made to all silver level QHPs nationwide. If the amount of 
the adjustment was unknown--or we determined that it should be excluded 
for methodological reasons (for example, the adjustment was negative, 
an outlier, or unreasonable)--then we did not count the adjustment 
towards determining the median adjustment.\17\ The median adjustment 
for silver level QHPs is referred to as the nationwide median 
adjustment.
---------------------------------------------------------------------------

    \17\ Some examples of outliers or unreasonable adjustments 
include (but are not limited to) values over 100 percent (implying 
the premiums doubled or more because of the adjustment), values more 
than double the otherwise highest adjustment, or non-numerical 
entries.
---------------------------------------------------------------------------

    For each of the two BHP States, we determined the median premium 
adjustment for all silver level QHPs in that State, which we refer to 
as the State median adjustment. The PAF for each BHP State equaled one 
plus the nationwide median adjustment divided by one plus the State 
median adjustment for the BHP State. In other words,

PAF = (1 + Nationwide Median Adjustment) / (1 + State Median 
Adjustment).

    To determine the PAF described above, we sought to collect QHP 
information from QHP issuers in each State and the District of Columbia 
to determine the premium adjustment those issuers made to each silver 
level plan offered through the Exchange in 2018 to account for the end 
of CSR payments. Specifically, we sought information showing the 
percentage change that QHP issuers made to the premium for each of 
their silver level plans to cover benefit expenditures associated with 
the CSRs, given the lack of CSR payments in 2018. This percentage 
change was a portion of the overall premium increase from 2017 to 2018.
    According to our 2018 records, there were 1,233 silver-level QHPs 
operating on Exchanges in 2018. Of these 1,233 QHPs, 318 QHPs (25.8 
percent) responded to our request for the percentage adjustment applied 
to silver-level QHP premiums in 2018 to account for the discontinuance 
of HHS making CSR payments. These 318 QHPs operated in 26 different 
States, with 10 of those States running State Exchanges (while we 
requested information only from QHP issuers in States serviced by an 
FFE, many of those issuers also had QHPs in State Exchanges and 
submitted information for those States as well). Thirteen of these 318 
QHPs were in New York (and none were in Minnesota). Excluding these 13 
QHPs from the analysis, the nationwide median adjustment was 20.0 
percent. Of the 13 QHPs in New York that responded, the State median 
adjustment was 1.0 percent. We believed that this was an appropriate 
adjustment for QHPs in Minnesota, as well, based on the observed 
changes in New York's QHP premiums in response to the discontinuance of 
CSR payments (and the operation of the BHP in that State) and our 
analysis of expected QHP premium adjustments for States with BHPs. We 
calculated the proposed PAF as (1 + 20%) / (1 + 1%) (or 1.20/1.01), 
which results in a value of 1.188.
    We set the value of the PAF to 1.188 for all program years for 2018 
through 2024, with limited exceptions.\18\ We believe that this value 
for the PAF continues to reasonably account for the increase in silver-
level premiums experienced in non-BHP States that took effect after the 
discontinuance of the CSR payments.
---------------------------------------------------------------------------

    \18\ 87 FR 77731, 77737.
---------------------------------------------------------------------------

    Starting in 2023, we made one limited exception in setting the 
value of the PAF as part of the 2023 final BHP Payment Notice.\19\ In 
the case of a State in the first year of implementing a BHP, if the 
State chooses to use prior year second lowest cost silver plan (SLCSP) 
premiums to determine the BHP payment (for example, the 2025 premiums 
for the 2026 program year), we set the value of the PAF to 1.00. In 
this case, we believe that adjustment to the QHP premiums to account 
for the discontinuation of CSR payments would be included fully in the 
prior year premiums, and no further adjustment would be necessary.
---------------------------------------------------------------------------

    \19\ Id. at 77732.
---------------------------------------------------------------------------

    We propose to make a change to the calculation of the PAF starting 
in program year 2026. There are cases in which a State may not have 
fully implemented BHP for a full program year. For example, a State may 
operate BHP for only a portion of the year (in other words, less than 
12 months); there may be other such cases in which a State would be 
deemed to have partially implemented BHP for a program year.
    For a State that initially only partially implemented BHP, it is 
likely that, in the year (or years) when the BHP is only partially 
implemented, the percentage adjustment to the premiums for the program 
year to account for the discontinuation of CSR payments may be 
significantly higher than the 1 percent adjustment we determined for 
BHP States in 2018. In these cases, it is probable that QHP issuers 
would include a larger premium adjustment (that is, greater than 1 
percent) because more individuals would be eligible for CSRs (and 
individuals eligible for relatively larger CSRs) would be enrolled in a 
QHP on the Exchange, for part or all of the initial implementation 
year. If premiums with a larger CSR adjustment are used as a basis for 
calculating the BHP payments and the current value of the PAF (1.188) 
is used, it is likely that this would ``double count'' a portion of the 
adjustment and lead to an effective CSR adjustment over 20 percent.
    For example, assume a State implements BHP for only 6 months in a 
program year. As a result, QHP issuers may include a 10 percent 
adjustment to the premiums to account for the discontinuation of the 
CSR for the portion of the year when CSR eligible individuals would 
have QHP coverage. The issuers would be liable for roughly half of the 
CSR amounts they would have had to provide if there was no BHP in 
place. Under the previous BHP payment methodology, if these premiums 
that already partially account for CSRs are used to calculate the BHP 
payment, we would increase the reference premium by 18.8 percent for 
the PAF, leading to an effective increase of 30.68 percent (1.188 
multiplied by 1.10 minus 1). This is significantly larger than the 20 
percent adjustment we determined as the basis for the PAF for States 
that have operated their BHP for more than two full program years.
    Under the Secretary's general authority to account for all relevant 
factors necessary to determine the value of the premium and cost-
sharing reductions that would have been provided to eligible 
individuals now enrolled in BHP coverage \20\ and to avoid such an 
overpayment, we propose the following changes to the PAF:
---------------------------------------------------------------------------

    \20\ Section 1331(d)(3)(A)(ii) of the PHS Act.
---------------------------------------------------------------------------

    (1) If a State has fully implemented BHP and is using SLSCP 
premiums for a year in which the BHP was fully implemented, then the 
value of the PAF would remain 1.188, as described above.
    (2) If a State is in the first year of implementing a BHP and the 
State chooses to use prior year SLCSP premiums to determine the BHP 
payment (for example, the 2025 premiums for the 2026 program year), we 
set the value of the PAF to 1.00. This is the same approach described 
in the 2023 final BHP Payment Notice.
    (3) If a State is using SLCSP premiums from a year in which BHP was 
not fully implemented, then the PAF is calculated as follows:

First, the State must determine the CSR adjustment that QHP issuers 
included in the SLSCP premiums for individual

[[Page 82319]]

market Exchange plans. The State should identify the SLSCP in each 
region, as defined for the Exchange. For each SLSCP, the State should 
determine the CSR adjustment that the QHP issuer included in the 
premium. This may be done by (1) reviewing any materials submitted by 
the QHP issuer describing the calculation of the premium; or (2) 
requesting that the QHP issuer provide the adjustment, or an estimate 
of the adjustment used in calculating the premium. Second, the State 
should report the CSR adjustments for the SLCSP for individual market 
Exchange plans for each region in the State to CMS. Third, CMS will 
take this percentage adjustment and calculate the PAF as 1.20 divided 
by 1 plus the adjustment. For example, if the percentage adjustment for 
the CSR is 5 percent, the PAF would be (1.20 / 1.05), or 1.143. The 
maximum value of the PAF would be 1.188, and the minimum value of the 
PAF would be 1.00.

    This approach would apply based on the premium year, not 
necessarily the program year. If the State has fully implemented BHP 
but is using the prior year premiums and BHP was not fully implemented 
in that year, this modified approach would still apply. For example, if 
a State partially implemented BHP in 2026 and fully implemented BHP in 
2027, when determining the BHP payments for 2027, we would then use 
1.188 for the value of the PAF if the State elected to use 2027 QHP 
premiums to determine the payment; if the State elected to use the 2026 
QHP premiums, then we would use the modified PAF calculation described 
in this section. CMS would make a determination of whether or not a BHP 
was fully implemented based on a review of the Blueprint and provide 
that determination to the State.
    We considered other approaches to the modified PAF. We considered 
whether or not CMS would collect data on the underlying CSR adjustment 
in the SLCSP premiums; however, we believe that such activities fall 
within States roles as BHP administrators and States are better able to 
work with QHP issuers to administer this data collection process. We 
also considered if States should survey all QHP issuers (not just those 
with the SLSCP premium). We believe that only using the CSR adjustment 
from individual market Exchange plans with the SLCSPs would be a more 
reasonable approach and would minimize the burden on States and QHP 
issuers by only requiring the State to work with one issuer in each 
region, as opposed to all issuers in each region. We also considered 
whether or not we should make further changes to the PAF, but we 
believe that this approach balances maintaining accurate BHP payments 
with stability and limited burden for BHP States. We request comments 
on this approach or alternative approaches to calculating the PAF.
2. Technical Clarification for Calculation of BHP Payment Rates in 
Cases of Multiple Second Lowest Cost Silver Plan Premiums in an Area
    The BHP payment rates are based on the second lowest cost silver 
plan premium among individual market QHPs operating on the Exchanges in 
each rating area (or county) in a State. This is the basis for the 
reference premium (or RP) in the BHP payment methodology.
    In general, we expect that each county would have a unique second 
lowest cost silver plan premium, which is used to calculate the payment 
rates for residents of that county for the BHP payment. However, in 
some cases, we have found that States may have more than one second 
lowest cost silver plan within a county. This may occur in cases where 
the State has allowed QHPs to operate in only a portion of the county 
instead of the entire county on the Exchange.
    In our previous BHP payment methodologies, we do not describe how 
such a case would be handled for calculating BHP payments. In our 
technical guidance to States, we have instructed States to report the 
premiums for the second lowest cost silver plan operating in the 
largest part of the county as measured by total population.
    Under the Secretary's general authority to account for all relevant 
factors necessary to determine the value of the premium and cost-
sharing reductions that would have been provided to eligible 
individuals now enrolled in BHP coverage,\21\ for the 2026 payment 
methodology and all subsequent years, we propose to clarify that in 
cases where there are more than one second lowest cost silver plans in 
a county, the BHP payment would be based on the premium of the second 
lowest cost silver plan applicable to the largest portion of the county 
as measured by total population. We welcome comments on this approach.
---------------------------------------------------------------------------

    \21\ Section 1331(d)(3)(A)(ii) of the PHS Act.
---------------------------------------------------------------------------

B. 45 CFR Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment

    In subparts A, B, D, G, and H of part 153, we established standards 
for the administration of the risk adjustment program. The risk 
adjustment program is a permanent program created by section 1343 of 
the ACA that transfers funds from issuers of lower-than-average risk, 
risk adjustment covered plans to issuers of higher-than-average risk, 
risk adjustment covered plans in the individual, small group markets, 
or merged markets, inside and outside the Exchanges. In accordance with 
Sec.  153.310(a), a State that is approved or conditionally approved by 
the Secretary to operate an Exchange may establish a risk adjustment 
program or have HHS do so on its behalf.\22\ HHS did not receive any 
requests from States to operate risk adjustment for the 2026 benefit 
year. Therefore, HHS will operate risk adjustment in every State and 
the District of Columbia for the 2026 benefit year.
---------------------------------------------------------------------------

    \22\ See also 42 U.S.C. 18041(c)(1).
---------------------------------------------------------------------------

1. Sequestration
    In accordance with the OMB Report to Congress on the Joint 
Committee Reductions for Fiscal Year 2025, the HHS-operated risk 
adjustment program is subject to the fiscal year 2025 
sequestration.\23\ The Federal government's 2025 fiscal year will begin 
on October 1, 2024. Therefore, the HHS-operated risk adjustment program 
will be sequestered at a rate of 5.7 percent for payments made from 
fiscal year 2025 resources (that is, funds collected during the 2025 
fiscal year).
---------------------------------------------------------------------------

    \23\ OMB. (2024). OMB Report to the Congress on the BBEDCA 251A 
Sequestration for Fiscal Year 2025. https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf.
---------------------------------------------------------------------------

    HHS, in coordination with OMB, has determined that, under section 
256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of 
1985 (BBEDCA),\24\ as amended, and the underlying authority for the 
HHS-operated risk adjustment program, the funds that are sequestered in 
fiscal year 2025 from the HHS-operated risk adjustment program will 
become available for payment to issuers in fiscal year 2026 without 
further Congressional action. If Congress does not enact deficit 
reduction provisions that replace the Joint Committee reductions, the 
program would be sequestered in future fiscal years, and any 
sequestered funding would become available in the fiscal year following 
that in which it was sequestered.
---------------------------------------------------------------------------

    \24\ Public Law 99-177 (1985).
---------------------------------------------------------------------------

    Additionally, we note that the Infrastructure Investment and Jobs 
Act \25\ amended section 251A(6) of the BBEDCA and extended 
sequestration for the HHS-operated risk adjustment

[[Page 82320]]

program through fiscal year 2031 at a rate of 5.7 percent per fiscal 
year.\26\
---------------------------------------------------------------------------

    \25\ Public Law 117-58, 135 Stat. 429 (2021).
    \26\ 2 U.S.C. 901a.
---------------------------------------------------------------------------

2. HHS Risk Adjustment (Sec.  153.320)
    The HHS risk adjustment models predict plan liability for an 
average enrollee based on that person's age, sex, and diagnoses (also 
referred to as hierarchical condition categories (HCCs)), producing a 
risk score. The State payment transfer formula \27\ that is part of the 
HHS Federally certified risk adjustment methodology utilizes separate 
models for adults, children, and infants to account for clinical and 
cost differences in each age group. In the adult and child models, the 
relative risk assigned to an individual's age, sex, and diagnoses are 
added together to produce an individual risk score. Additionally, to 
calculate enrollee risk scores in the adult models, we added enrollment 
duration factors beginning with the 2017 benefit year,\28\ and 
prescription drug categories (RXCs) beginning with the 2018 benefit 
year.\29\ Starting with the 2023 benefit year, we removed the severity 
illness factors in the adult models and added interacted HCC count 
factors (that is, additional factors that express the presence of a 
severity or transplant HCC in combination with a specified number of 
total payment HCCs or HCC groups on the enrollee's record) to the adult 
and child models \30\ applicable to certain severity and transplant 
HCCs.\31\
---------------------------------------------------------------------------

    \27\ The State payment transfer formula refers to part of the 
Federally certified risk adjustment methodology that applies in 
States where HHS is responsible for operating the program. The 
formula calculates payments and charges at the State market risk 
pool level (prior to the calculation of the high-cost risk pool 
payment and charge terms that apply beginning with the 2018 benefit 
year). See, for example, 81 FR 94080.
    \28\ For the 2017 through 2022 benefit years, there is a set of 
11 binary enrollment duration factors in the adult models that 
decrease monotonically from 1 to 11 months, reflecting the increased 
annualized costs associated with fewer months of enrollments. See, 
for example, 81 FR 94071 through 94074. These enrollment duration 
factors were replaced beginning with the 2023 benefit year with HCC-
contingent enrollment duration factors for up to 6 months in the 
adult models. See, for example, 87 FR 27228 through 27230.
    \29\ For the 2018 benefit year, there were 12 RXCs, but starting 
with the 2019 benefit year, the two severity-only RXCs were removed 
from the adult models. See, for example, 83 FR 16941.
    \30\ See table 4 for a list of factors in the adult models, and 
table 5 for a list of factors in the child models.
    \31\ See 87 FR 27224 through 27228. Also see table 6 below.
---------------------------------------------------------------------------

    Infant risk scores are determined by inclusion in one of 25 
mutually exclusive groups, based on the infant's maturity and the 
severity of diagnoses. If applicable, the risk score for adults, 
children, or infants is multiplied by a cost sharing reduction (CSR) 
adjustment factor. The enrollment-weighted average risk score of all 
enrollees in a particular risk adjustment covered plan (also referred 
to as the plan liability risk score (PLRS)) within a geographic rating 
area is one of the inputs into the State payment transfer formula, 
which determines the State transfer payment or charge that an issuer 
will receive or be required to pay for that plan for the applicable 
State market risk pool for a given benefit year. Thus, the HHS risk 
adjustment models predict average group costs to account for risk 
across plans, in keeping with the Actuarial Standards Board's Actuarial 
Standards of Practice for risk classification.
a. Data for HHS Risk Adjustment Model Recalibration for the 2026 
Benefit Year
    We are proposing to recalibrate the 2026 benefit year HHS risk 
adjustment models with the 2020, 2021, and 2022 enrollee-level EDGE 
data. Consistent with the approach outlined in the 2020 Payment Notice, 
we propose to recalibrate the HHS risk adjustment models for the 2026 
benefit year using only enrollee-level EDGE data, and to continue to 
use blended, or averaged, coefficients from the 3 years of separately 
solved models for the 2026 benefit year model recalibration.\32\ 
Additionally, as outlined in the 2022 Payment Notice (86 FR 24140, 
24152), we propose to use the 3 most recent consecutive years of 
enrollee-level EDGE data that are available at the time we estimate the 
draft recalibrated coefficients published in the proposed rule for the 
applicable benefit year.\33\ We believe this promotes stability, meets 
the goal of the HHS-operated risk adjustment program, and allows 
issuers more time to incorporate this information when pricing their 
plans for the upcoming benefit year.
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    \32\ 84 FR 17463 through 17466.
    \33\ Although we do receive the next year of enrollee-level EDGE 
data prior to the proposed rule, that data must go through several 
quality and analysis checks before it is useable for HHS risk 
adjustment model recalibration.
---------------------------------------------------------------------------

    In the 2024 Payment Notice (88 FR 25740 through 25749), we 
finalized the use of 2018, 2019 and 2020 benefit year enrollee-level 
EDGE data for recalibration of the 2024 benefit year HHS risk 
adjustment models for all model coefficients. As explained in the 2024 
Payment Notice proposed rule (87 FR 78215 through 78216) and final rule 
(88 FR 25749 through 25753), we analyzed the 2020 benefit year data to 
identify possible impacts of the COVID-19 Public Health Emergency 
(PHE). Our analysis generally found that the 2020 enrollee-level EDGE 
data were anomalous primarily in the volume and frequencies of certain 
types of claims, but that the relative costs of specific services, at 
least those associated with payment HCCs in the HHS risk adjustment 
models, were largely unaffected. Because the HHS risk adjustment models 
predict relative costs of care for specific conditions on an enrollee-
level basis and tend not to rely on overall patterns of utilization, 
the minimal impacts to relative costs of care for payment HCCs likewise 
resulted in minimal impacts on the coefficients fitted by the 2020 
enrollee-level EDGE recalibration data.
    Then, in the 2025 Payment Notice (89 FR 26236 through 26238), we 
finalized the use of 2019, 2020 and 2021 benefit year enrollee-level 
EDGE data for recalibration of the 2025 benefit year HHS risk 
adjustment models for all model coefficients. As explained in the 2025 
Payment Notice proposed rule (88 FR 82527 through 82529) and final rule 
(89 FR 26236 through 26238), we recognized that the COVID-19 PHE was 
still in effect throughout the 2021 benefit year.\34\ Therefore, 
similar to our analysis of 2020 benefit year data to identify possible 
impacts of the COVID-19 PHE, we conducted additional analyses to 
determine whether any anomalies in the 2021 benefit year enrollee-level 
EDGE data were present beyond expected year-to-year variation and 
whether the use of 2 years of PHE-impacted data presented any 
additional concerns. Our analysis found that the coefficients for the 
2021 benefit year enrollee-level EDGE recalibration data were similar 
to the 2019 and 2020 benefit year's coefficients, with levels of 
variation consistent with typical changes in coefficients for new years 
of data. We did not identify any significant anomalies and incorporated 
the 2021 benefit year enrollee-level EDGE data in the 2025 risk 
adjustment model recalibration without exception.
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    \34\ See, for example, ASPR. (2023, February 9). Renewal of 
Determination that a Public Health Emergency Exists. https://aspr.hhs.gov/legal/PHE/Pages/COVID19-9Feb2023.aspx.
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    Consistent with the approach for use of 2020 and 2021 benefit year 
enrollee-level EDGE data, we performed reviews of the 2022 benefit year 
enrollee-level EDGE data to identify potential anomalies prior to 
incorporating the 2022 benefit year enrollee-level EDGE data as part of 
the proposed recalibration of the HHS risk adjustment models for the 
2026 benefit year. Our review did not identify systematic anomalies in 
the 2022 enrollee-level EDGE data. Therefore, after considering our 
analysis of the 2020, 2021 and 2022

[[Page 82321]]

enrollee-level EDGE data, we propose to determine coefficients for the 
2026 benefit year HHS risk adjustment models based on a blend of 
separately solved coefficients from the 2020, 2021, and 2022 benefit 
years' enrollee-level EDGE data, with the costs of services identified 
from the data trended between the relevant year of data and the 2026 
benefit year.\35\ The draft coefficients listed reflect the use of 
trended 2020, 2021, and 2022 benefit year enrollee-level EDGE data, as 
well as other HHS risk adjustment model updates proposed in this 
proposed rule (including, for example, the proposed phasing out of the 
pricing adjustment for Hepatitis C drugs).\36\ However, we note that 
the draft coefficients could change between the proposed and final rule 
if we identify an error after publication of this proposed rule or if 
any proposed models are modified or not finalized in response to 
comments. In addition, consistent with Sec.  153.320(b)(1)(i), if we 
are unable to finalize the final coefficients in time for publication 
in the final rule, we would publish the final coefficients for the 2026 
benefit year in guidance soon after the publication of the final rule.
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    \35\ As described in the 2016 Risk Adjustment White Paper 
(https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf) and the 2017 
Payment Notice (81 FR 12218), we subdivide expenditures into 
traditional drugs, specialty drugs, medical services, and preventive 
services and determine trend factors separately for each category of 
expenditure. In determining these trend factors, we consult our 
actuarial experts, review relevant Unified Rate Review Template 
(URRT) submission data, analyze multiple years of enrollee-level 
EDGE data, and consult National Health Expenditure Accounts (NHEA) 
data as well as external reports and documents published by third 
parties. In this process, we aim to determine trends that reflect 
changes in cost of care rather than gross growth in expenditures. As 
such, we believe the trend factors we used for each expenditure 
category for the proposed 2026 benefit year models are appropriate 
for the most recent changes in cost of care that we have seen.
    \36\ Additionally, this rulemaking includes a proposal to 
incorporate pre-exposure prophylaxis (PrEP) into a separate model 
factor in the HHS risk adjustment adult and child models for the 
2026 benefit year. Although a separate proposed PrEP risk adjustment 
model factor is not included in tables 4 through 9, we do provide a 
comprehensive analysis of our considerations and structure for 
including a separate PrEP risk adjustment model factor, including 
the impact of the proposed addition of a PrEP factor on other model 
factors in that section of this rulemaking.
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    We seek comment on the proposal to determine 2026 benefit year 
coefficients for the HHS risk adjustment models based on a blend of 
separately solved coefficients from the 2020, 2021, and 2022 enrollee-
level EDGE data.
b. Pricing Adjustment for the Hepatitis C Drugs
    Beginning with the 2026 benefit year, we propose to begin phasing 
out the market pricing adjustment \37\ to the plan liability associated 
with Hepatitis C drugs in the HHS risk adjustment models and start 
trending Hepatitis C drugs consistent with the other drugs \38\ in the 
HHS risk adjustment models. Since the 2020 benefit year HHS risk 
adjustment models, we have included a market pricing adjustment to the 
plan liability associated with Hepatitis C drugs to reflect future 
market pricing prior to solving for coefficients for the models.\39\ 
The purpose of this market pricing adjustment was to account for 
significant pricing changes between the data years used for 
recalibrating the models and the applicable benefit year of risk 
adjustment as a result of the introduction of new and generic Hepatitis 
C drugs.\40\ We have committed to annually reassessing the Hepatitis C 
pricing adjustment with additional years of enrollee-level EDGE data as 
the data becomes available.
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    \37\ For discussion relating to the Hepatitis C Pricing 
Adjustment for previous benefit years, see, for example, 89 FR 26237 
through 26238.
    \38\ See 81 FR 12218 through 12219.
    \39\ The Hepatitis C drugs market pricing adjustment to plan 
liability is applied for all enrollees taking Hepatitis C drugs in 
the data used for recalibration.
    \40\ See Milligan, J. (2018). A perspective from our CEO: Gilead 
Subsidiary to Launch Authorized Generics to Treat HCV. Gilead. 
https://www.gilead.com/news-and-press/company-statements/authorized-generics-for-hcv. See also AbbVie. (2017). AbbVie Receives U.S. FDA 
Approval of MAVYRETTM (glecaprevir/pibrentasvir) for the Treatment 
of Chronic Hepatitis C in All Major Genotypes (GT 1-6) in as Short 
as 8 Weeks. Abbvie. https://news.abbvie.com/news/abbvie-receives-us-fda-approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-6-in-as-short-as-8-weeks.htm. See also Silseth, S., & Shaw, H. (2021). Analysis of 
prescription drugs for the treatment of hepatitis C in the United 
States [White paper]. Milliman. https://www.milliman.com/-/media/milliman/pdfs/2021-articles/6-11-21-analysis-prescription-drugs-treatment-hepatitis-c-us.ashx.
---------------------------------------------------------------------------

    As part of the 2026 benefit year model recalibration analysis, we 
reassessed the cost trend for Hepatitis C drugs using available 
enrollee-level EDGE data (including 2022 benefit year data) to consider 
whether the pricing adjustment was still needed and, if it is still 
needed, whether it should be modified. We found that projected costs 
for Hepatitis C drugs have begun to rise alongside the expected cost of 
other specialty drugs after many years of decline and stagnation due to 
the introduction of new and generic Hepatitis C drugs. Therefore, we 
believe that it is appropriate to begin phasing out the market pricing 
adjustment for Hepatitis C drugs and start trending the cost of these 
drugs consistent with other similar drugs in the HHS risk adjustment 
models to ensure that we continue to use the most appropriate estimates 
of the average cost of Hepatitis C treatments for recalibration of the 
HHS risk adjustment models for the 2026 benefit year and beyond.
    To explain further, because the annual recalibration of our risk 
adjustment models use the most recent 3 years of enrollee-level EDGE 
data available at the time of the proposed rule (in the case of this 
proposed rule and the recalibration of the 2026 benefit year models: 
the 2020, 2021, and 2022 enrollee-level EDGE data) in our simulation of 
plan liability for the applicable benefit year, we apply trend factors 
to different categories of medical expenditures, including specialty 
drugs, for every calendar year between the applicable benefit year and 
each year of enrollee-level EDGE data.<SUP>41 42</SUP> For example, to 
project costs for 2026 benefit year risk adjustment, we trend the 2020 
enrollee-level EDGE data forward 6 years, the 2021 enrollee-level EDGE 
data forward 5 years, and the 2022 enrollee-level EDGE forward four 
years. We have previously developed the Hepatitis C market pricing 
adjustment by applying a separate annual trend factor to Hepatitis C 
drugs in lieu of applying the annual specialty drug trend we apply to 
all other specialty drugs. The intent of this adjustment is to track 
the projected decrease and stagnation of Hepatitis C drug prices due to 
the introduction of new and generic versions of Hepatitis C drugs as 
identified in various sources of available market data \43\ and through 
consultation with our actuarial experts. As illustrated by table 1, 
this proposal would continue to trend Hepatitis C drugs separately from 
specialty drugs to project decrease and stagnation of Hepatitis C 
treatment pricing changes

[[Page 82322]]

between 2020 and 2021 (for the 2020 EDGE data), between 2021 and 2022 
(for the 2020 and 2021 EDGE data), and between 2022 and 2023, between 
2023 and 2024, and between 2024 and 2025 for all three data years 
(2020, 2021, and 2022 EDGE data) used for recalibration of the 2026 
benefit year HHS risk adjustment models. Once we have trended Hepatitis 
C costs to reflect no growth from the 2020, 2021, and 2022 enrollee-
level EDGE data to the 2025 benefit year, under this proposal for 2026 
benefit year risk adjustment, we would complete the trending of these 3 
years of data from the 2025 benefit year to the 2026 benefit year by 
applying the specialty drug trend factor, rather than the Hepatitis C 
trend factor that reflects the unique market pricing adjustment for 
these drugs.
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    \41\ See, supra, notes 38 and 39.
    \42\ Because EDGE data do not generally account for drug rebates 
per the EDGE Business Rules (available at https://regtap.cms.gov/reg_librarye.php?i=3765), for the purposes of risk adjustment 
recalibration, we also incorporate assumptions about the incidence 
of drug rebates in our trending of prescription drug data.
    \43\ See 88 FR 25753-25754. See also, Silseth, S., & Shaw, H. 
(2021). Analysis of prescription drugs for the treatment of 
Hepatitis C in the United States. Milliman White Paper. https://www.milliman.com/-/media/milliman/pdfs/2021-articles/6-11-21-analysis-prescription-drugs-treatment-hepatitis-c-us.ashx. See also, 
Cline, M., Schweitzer, K., Sileth, S., & Wang, M. (2021). Projected 
U.S. national hepatitis C treatment costs and estimated reduction to 
medical costs. Milliman White Paper. https://www.milliman.com/-/media/milliman/pdfs/2021-articles/9-22-21-hcv-treatment-and-medical-cost-whitepaper.ashx. See also, supra, note 35.
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    In other words, we propose to adopt a phased approach (See table 1) 
to transition the Hepatitis C drugs' trending as part of the annual 
recalibration of the HHS risk adjustment models beginning with the 2026 
benefit year to move away from the current unique market pricing 
adjustment for these drugs and align with the trending approach for 
specialty drugs as we expect that the current growth in Hepatitis C 
drug costs will continue to be similar to growth in specialty drug 
costs in future years. As described above, to begin this transition for 
the 2026 benefit year HHS risk adjustment models, we propose to apply 
the specialty drug trend to 1 year of trending Hepatitis C treatment 
costs (that is, the trend from 2025 to 2026) for all 3 years of 
enrollee-level EDGE data used in recalibration (that is, 2020, 2021, 
and 2022 enrollee-level EDGE data). These 3 years of enrollee-level 
EDGE data would otherwise be trended forward using the lower trend rate 
reflecting the market pricing adjustment for Hepatitis C treatments 
through the 2025 benefit year. As such, 2026 benefit year recalibration 
data for Hepatitis C would reflect 1 year of growth in the cost of 
treatment at the same rate as other specialty drugs. To continue the 
transition of phasing out the Hepatitis C drug pricing adjustment in 
future benefit years' annual model recalibration, under this proposal, 
we would annually increase the number of years for which we would use 
the specialty drug trend and decrease the number of years that would 
use the unique market pricing adjustment for Hepatitis C drugs. For 
example, as seen in table 1, for the recalibration of the 2027 benefit 
year HHS risk adjustment models, under this proposal, we would apply 
the specialty drug trend to 2 years of the trending used in the models 
to project growth in Hepatitis C drugs. Specifically, assuming that the 
2027 benefit year would use 2021, 2022, and 2023 enrollee-level EDGE 
data for the annual model recalibration, we would project Hepatitis C 
treatment pricing changes reflecting the unique market pricing 
adjustment between 2021 and 2022 (for the 2021 EDGE data), between 2022 
and 2023 (for the 2021 and 2022 EDGE data), and between 2023 and 2024 
and between 2024 and 2025 for all three data years (2021, 2022, and 
2023 EDGE data) used for the recalibration of the 2027 benefit year HHS 
risk adjustment models. Again, once we have trended Hepatitis C drug 
costs to reflect the unique market pricing adjustment from the 2021, 
2022, and 2023 enrollee-level EDGE data to the 2025 benefit year, under 
the proposed transitional approach, for recalibration of the 2027 
benefit year HHS risk adjustment models, we would complete the trending 
of these 3 years of data from the 2025 benefit year to the 2027 benefit 
year by applying the specialty drug trend factor between the 2025 and 
2026 benefit years and between the 2026 and 2027 benefit years. This 
approach would continue until such time as all enrollee-level EDGE data 
years used for the recalibration of the HHS risk adjustment models are 
from benefit year 2025 or later (See table 1), at which time the 
specialty drug cost trend would be fully applied to Hepatitis C drug 
costs consistent with other specialty drugs in the HHS risk adjustment 
models and we would stop applying the separate market pricing 
adjustment for Hepatitis C drugs as part of the annual model 
recalibration.

[[Page 82323]]

[GRAPHIC] [TIFF OMITTED] TP10OC24.021

    We propose this transitional approach because we continue to 
believe a market pricing adjustment specific to Hepatitis C drugs in 
the simulation of plan liability as part of the annual recalibration of 
the HHS risk adjustment models for benefit years that involve the use 
of enrollee-level EDGE data prior to 2025 (for example, for 2026 
recalibration, the 2020 through 2022 enrollee-level EDGE data, and the 
2023 through 2025 intermediate years of trending) is necessary and 
appropriate to account for the lack of growth in Hepatitis C drug 
prices relative to other prescription drugs in the market between those 
data years and the 2025 benefit year.
    We seek comment on our proposal to phase out the market pricing 
adjustment and trend Hepatitis C drugs consistent with other specialty 
drugs starting with the annual recalibration of the 2026 benefit year 
HHS risk adjustment models.
c. Proposed Inclusion of Pre-Exposure Prophylaxis (PrEP) in the HHS 
Risk Adjustment Adult and Child Models as an Affiliated Cost Factor 
(ACF)
    We are proposing to incorporate human immunodeficiency virus (HIV) 
pre-exposure prophylaxis (PrEP) as a separate, new type of factor 
called an Affiliated Cost Factor (ACF) in the HHS risk adjustment adult 
and child models starting with the 2026 benefit year. This proposed 
change would reflect an evolution in our approach to defining the 
factors used in the HHS risk adjustment models to include a factor that 
is not indicative of an active condition and would change our current 
policy that models the costs of PrEP alongside all other preventive 
services.
    Starting with the 2021 benefit year HHS risk adjustment models, as 
finalized in the 2021 Payment Notice (85 FR 29185 through 29187), we 
incorporated PrEP in the simulation of plan liability in the HHS risk 
adjustment adult and child models as a preventive service with zero 
cost sharing after careful analysis of preventive drugs that are 
recommended at grade A or B by the United States Preventive Services 
Task Force (USPSTF), including analysis on when PrEP can used as a 
preventive service.\44\ Specifically, in June 2019, the USPSTF 
recommended the use of PrEP as a preventive service for persons who are 
at high risk of HIV acquisition.\45\ Because Section 2713 of the PHS 
Act, as added by Section 1001 of the ACA, requires that non-
grandfathered group health plans and health insurance issuers in the 
group and individual markets cover certain recommended preventive 
services without imposing cost sharing,\46\ we modified the

[[Page 82324]]

simulation of plan liability as part of the annual recalibration of the 
HHS risk adjustment adult and child models to account for the higher 
level of cost sharing associated with its status as a preventive 
service, similar to how we treat other preventive services.
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    \44\ See 85 FR 29185 through 29187.
    \45\ See US Preventive Services Task Force. Preexposure 
prophylaxis for the prevention of HIV infection: US Preventive 
Services Task Force recommendation statement. JAMA. 
2019;321(22):2203-2213. The USPSTF issued an updated recommendation 
on August 22, 2023. The updated recommendation is available at 
https://www.uspreventiveservicestaskforce.org/Page/Document/RecommendationStatementFinal/prevention-of-human-immunodeficiency-virus-hiv-infection-pre-exposure-prophylaxis.
    \46\ On March 30, 2023, the United States District Court for the 
Northern District of Texas issued a final judgment in the case 
Braidwood Management Inc. v. Becerra, Civil Action No. 4:20-cv-
00283-O (N.D. Tex. Mar. 30, 2023) holding that that the USPSTF's 
recommendations operating in conjunction with PHS Act section 
2713(a)(1) violate the Appointments Clause of Article II of the 
United States Constitution and are therefore unlawful. On appeal, 
the U.S. Court of Appeals for the Fifth Circuit affirmed the 
district court on the merits but held that prospective and 
retrospective relief was limited to the named plaintiffs. The case 
was remanded to the District Court for further proceedings. On 
August 28, 2024, based on the Defendants' intent to file a petition 
for writ of certiorari by September 19, 2024, the District Court 
issued an order to stay proceedings in the District Court through 
the conclusion of proceedings in the United States Supreme Court. 
The Departments filed a petition for writ of certiorari on September 
19, 2024. Braidwood Mgmt., Inc. v. Becerra, Civil Action No. 23-
10326 (5th Cir. June 21, 2024), petition for cert filed, U.S. Sept. 
19, 2024 (24-316).
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    As a general principle, we currently incorporate preventive 
services into each of the HHS risk adjustment models to ensure that 100 
percent of the cost of those services are reflected in the simulation 
of plan liability. In the simulation of plan liability, services are 
only counted as preventive when they occur in the recommended 
circumstances (for example, age) to the extent we can identify such 
circumstances from enrollee-level EDGE data. As with other preventive 
services, the incorporation of PrEP into the simulation of plan 
liability as a preventive service tends to impact the age-sex 
coefficients for the population that is most likely to utilize the 
given preventive service. For PrEP, this population is typically males 
between the ages of 25 and 39, because this group composes the most 
frequent utilizers of PrEP in the enrollee-level EDGE data. In addition 
to PrEP drugs, like other preventive services,\47\ ancillary services 
related to PrEP care (for example, HIV screenings) qualify as 
preventive services and as such are also currently calibrated at 100 
percent plan liability in the recalibration of the HHS risk adjustment 
adult and child models.\48\
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    \47\ For example, colonoscopies typically require a combination 
of several services between the drugs needed for the colonoscopy and 
the professional and institutional claims for the visit and 
procedure itself. Likewise, contraception coverage often requires a 
doctor's visit to obtain a prescription for the contraception.
    \48\ See 86 FR 24164.
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    However, as a part of our commitment to consider ways to 
continually improve the HHS risk adjustment models, we continued to 
monitor and assess different ways to incorporate PrEP in the HHS risk 
adjustment models. In this regard, since the adoption of the current 
approach beginning with the 2021 benefit year HHS risk adjustment adult 
and child models, we have continued to assess the incorporation of PrEP 
into these models as we do other preventive services. We have also 
continued to receive recommendations from some interested parties that 
PrEP be incorporated into the HHS risk adjustment adult models 
differently than other preventive services in the calculation of plan 
liability due to the high cost of PrEP. We previously considered 
changing the treatment of PrEP to incorporate it in the HHS risk 
adjustment adult models as an RXC; however, we have always been 
concerned with this approach because RXCs are specifically incorporated 
as separate factors to impute a missing diagnosis or indicate severity 
of a diagnosis.\49\ As such, we did not incorporate PrEP into RXC 1 
(Anti-HIV Agents) because PrEP utilization does not indicate an HIV/
AIDS diagnosis or the severity of a diagnosis. We also considered 
incorporating the use of PrEP in the HHS risk adjustment models as a 
separate HCC, but we did not believe that approach would be appropriate 
because the principles for including an HCC into the models require 
that each HCC represents well-specified, clinically significant, 
chronic or systematic medical conditions.\50\ Because there is no 
active chronic medical condition involved, the use of PrEP for 
prevention of an HIV infection does not satisfy these criteria either.
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    \49\ See the 2018 Payment Notice (81 FR 94074 through 94080). 
See also the March 31, 2016, HHS-Operated Risk Adjustment 
Methodology Meeting Questions & Answers. June 8, 2016. Available at 
https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf.
    \50\ See CMS. (2021). HHS-Operated Risk Adjustment Technical 
Paper on Possible Model Changes. Section 1.2.1 (Principles of Risk 
Adjustment). https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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    Additionally, when we initially incorporated PrEP as a preventive 
service in the simulation of plan liability in the HHS risk adjustment 
adult and child models, we expected that any risk of adverse selection 
regarding PrEP would decrease over time as we expected the costs of 
PrEP to decrease due to generics entering the market and gaining market 
share. We also expected minimal differences in issuers' populations of 
PrEP users because, under Section 2713 of the PHS Act and its 
implementing regulations at 45 CFR 147.130, all issuers of risk 
adjustment covered plans are required to cover PrEP and its ancillary 
services at zero cost sharing, consistent with the applicable USPSTF 
recommendation. Thus, we anticipated that the expected similarity 
across issuers' PrEP-associated cost sharing parameters would also 
mitigate the risk of adverse selection.
    More recently, we have continued to analyze PrEP and its usage in 
the individual, small group, and merged markets as additional benefit 
years of enrollee-level EDGE data became available. Because of PrEP's 
high costs relative to other preventive services, and in contrast to 
our initial assumptions about pricing decreases, our analysis of 2022 
benefit year enrollee-level data \51\ found that PrEP services can pose 
a unique risk of adverse selection to the extent that utilization of 
PrEP services differs between plans. More specifically, our analysis 
found that there are statistically significant, substantial differences 
in PrEP prevalence between issuers in rating areas where PrEP use is 
most common, indicating that the addition of a PrEP factor in the adult 
and child risk adjustment models would be appropriate and would have a 
meaningful impact on risk adjustment State transfers. Furthermore, our 
analysis also found that other considerations that helped inform the 
current approach (such as the expected decrease in costs as generics 
entered the market and gained market share) have not addressed the 
uniquely high costs of PrEP as a preventive service as we previously 
expected. For these reasons, we started to reconsider our approach and 
whether it should evolve to address other costs in the market (such as 
PrEP) that could impact the assessment of actuarial risk but which do 
not indicate the presence of a specific diagnosis.
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    \51\ Prior to the 2021 Benefit Year, Plan ID and Rating Area 
were not included as part of the enrollee-level data extracted from 
issuers' EDGE data submissions. As finalized in the 2023 Payment 
Notice (87 FR 27241 through 27251), we now extract these fields as 
part of the enrollee-level EDGE dataset and are able to include them 
in our analyses. As such, this analysis and proposal reflects our 
earliest opportunity to reliably detect differences in prevalence 
within rating areas for any medical expenditures, including PrEP.
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    We therefore tested incorporating a non-RXC and non-HCC model 
factor for PrEP in the HHS risk adjustment adult and child models to 
capture differences in costs for PrEP utilizers relative to the average 
enrollee. To signify that the potential new factor would not indicate 
the presence of a specific active medical condition, we refer to the 
potential new type of factor as an ``affiliated cost factor'' (ACF), 
thereby distinguishing this new type of potential factor from RXCs and 
HCCs.
    Generally speaking, similar to our approach when determining the 
HCCs and RXCs to be included in the HHS risk adjustment models,\52\ if 
adopted, we would rely on a set of principles to guide our decision 
making in developing any new ACF variable.
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    \52\ See the 2014 Payment Notice Proposed Rule (77 FR 73128). 
See, also, the 2018 Payment Notice Proposed Rule (81 FR 61470).
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    Principle 1--Like HCCs and RXCs, an ACF should be clinically 
meaningful, but in the case of ACFs, such variables

[[Page 82325]]

would be comprised of National Drug Codes (NDCs) or procedure codes 
that are not indicative of a diagnosis for a specific serious medical 
condition, in contrast to HCCs and RXCs. In other words, an ACF may 
refer to a preventive service (as in the case of a potential PrEP ACF), 
or to classes of treatments that may be applicable to a wide variety of 
disease states and are therefore too general to indicate a specific 
diagnosis. Nevertheless, codes included in an ACF should all relate to 
a reasonably well-specified pharmacologic, therapeutic or chemical 
characteristic that defines the category. The adherence to the 
principle of clinical meaningfulness maintains the face validity of the 
classification system and the models' interpretability.
    Principle 2--Like HCCs and RXCs, ACFs should meaningfully predict 
total medical and drug expenditures. Additionally, NDCs and procedure 
codes in an ACF should be reasonably homogeneous for their effect on 
current year costs, that is, the annual costs associated with NDCs or 
procedure codes triggering the ACF should fall within a reasonably 
limited range. Relative to the majority of NDCs or procedure codes in a 
given ACF, there should not be any extremely low or high cost NDCs or 
procedure codes included in the ACF.
    Principle 3--Like HCCs and RXCs, because ACFs would affect State 
transfers, these factors should have adequate sample sizes to permit 
accurate and stable estimates of expenditures. For example, it is 
difficult to reliably determine the expected cost of extremely rare 
categories.\53\
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    \53\ For example, one extremely rare category that we have 
continued to analyze and consider for incorporation in the HHS risk 
adjustment models is gene therapy treatments. However, because these 
treatments are for rare conditions, and because there is substantial 
variation in costs from patient to patient for these treatments, 
through our ongoing monitoring and consideration of gene therapy 
treatments, we continue to find insufficient sample size and stable 
estimates of costs for the purposes of creating a new factor for 
these treatments in the HHS risk adjustment models.
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    Principle 4--Like HCCs and RXCs, in creating an individual's 
clinical profile, hierarchies should be used to characterize the 
person's illness level within each disease process, where appropriate, 
while the effects of unrelated disease processes accumulate. Therefore, 
related HCCs, RXCs and ACFs should be treated hierarchically such that 
the most severe manifestation of a given specific potential disease 
process principally defines its impact on costs. As such, the presence 
of a relevant HCC or RXC in an enrollee's medical record, which would 
indicate the presence of a specific active medical condition, should 
preclude the application of a related ACF because ACFs do not indicate 
the presence of a specific active medical condition.
    Principle 5--As with HCCs and RXCs, issuers should not be penalized 
for a provider prescribing additional NDCs or coding additional medical 
conditions (monotonicity). This principle has two consequences for 
modeling of ACFs: (1) Like HCCs and RXCs, ACFs should not carry a 
negative payment weight; and (2) an HCC or RXC, or a relevant 
combination of an HCC, RXC, and interaction factor(s), reflecting the 
presence of a potential disease process to which the ACF is directly 
related should have at least as large a payment weight as the ACF.
    Principle 6--Like RXCs, we expect ACFs to primarily be composed of 
NDCs or service codes. As such, the classification for ACFs, like RXCs, 
should assign NDCs or service codes to only one ACF or RXC variable 
(mutually exclusive classification). Because each NDC can map to more 
than one RXC or ACF, the classification should map NDCs to the primary 
RXC or ACF variable based on considerations such as route of 
administration, intended application of the product, ingredient list 
identifier, label, dosage form, and strength of the drug.
    Principle 7--As with HCCs and RXCs, in evaluating the inclusion of 
ACFs, discretionary and noncredible drug or diagnosis categories should 
be excluded from payment models. ACFs that are particularly subject to 
prescribing variation or inappropriate prescribing by health plans or 
providers or to intentional or unintentional discretionary coding, or 
that are not clinically or empirically credible as cost predictors, 
should not be included.
    In developing an ACF variable reflecting PrEP, we are considering 
whether PrEP satisfies these principles and what approaches are 
necessary to appropriately balance all seven principles. A PrEP ACF 
would easily satisfy Principle 1 (clinically meaningful and specific), 
Principle 2 (meaningful and predictable costs \54\), Principle 3 
(sample size), and Principle 7 (low risk of inappropriate prescribing). 
PrEP is a well-defined regimen of medication that is only recommended 
to enrollees who meet certain risk factors,\55\ providing clinical 
meaningfulness and specificity. Regarding cost, with the exception of 
generics,\56\ the commonly available forms of PrEP are expensive and 
have similar costs,\57\ making the costs both meaningful and 
predictable. Furthermore, there are a sufficient number of enrollees in 
the enrollee-level EDGE data to produce a reliable estimate of PrEP 
costs for the HHS risk adjustment adult and child models. Finally, for 
a preventive service such as PrEP, we consider the uniquely high costs 
and low likelihood of over-prescribing to provide clinical and 
empirical credibility towards cost prediction, thereby satisfying the 
low risk of inappropriate prescribing required by Principle 7. 
Specifically, we consider there to be a low likelihood of 
overprescribing PrEP due to the high degree of ancillary services 
generally required to obtain and maintain access to a PrEP 
prescription. For example, as reflected by the U.S. Public Health 
Service clinical practice guidelines for PrEP,\58\ patients receiving 
oral PrEP generally must see a provider to be tested for HIV and other 
sexually transmitted infections every 3 months and have key liver and 
kidney function indicators tested every 6 months to 1 year.\59\ 
Additionally, we suspect \60\ that

[[Page 82326]]

there is a relatively low utilization rate of PrEP services among 
specific indicated populations, which would also indicate a low 
likelihood that PrEP is being overprescribed.
---------------------------------------------------------------------------

    \54\ As discussed later in this section, it may be appropriate 
to remove generic drugs to ensure homogeneity of costs within a PrEP 
ACF.
    \55\ See Centers for Disease Control and Prevention: US Public 
Health Service: Preexposure prophylaxis for the prevention of HIV 
infection in the United States--2021 Update: a clinical practice 
guideline. https://www.cdc.gov/hiv/pdf/risk/prep/cdc-hiv-prep-guidelines-2021.pdf)
    \56\ See, supra, note 54.
    \57\ See NADAC (National Average Drug Acquisition Cost) 2024 
reference data (available at https://data.medicaid.gov/dataset/99315a95-37ac-4eee-946a-3c523b4c481e) and the NADAC Equivalency 
Metrics (available at https://www.medicaid.gov/medicaid/prescription-drugs/downloads/retail-price-survey/nadac-equiv-metrics.pdf). See also https://getprepbroward.com/documents/Long-Acting-Injectable-PrEP.pdf for estimates of the cost of Long Acting 
Injectable PrEP, which is administered by a provider in a clinical 
setting and is not available in NADAC data.
    \58\ See, supra, note 55.
    \59\ The costs of these ancillary services are currently 
captured in the age-sex coefficients, but the addition of a PrEP ACF 
to the HHS risk adjustment adult and child models would shift the 
risk contributed by ancillary services out of the age-sex factors 
into the PrEP ACF factor.
    \60\ In the enrollee-level EDGE data, we are unable to assess 
utilization rates from PrEP indicated populations because we are 
generally unable to identify the population of enrollees who would 
be eligible for PrEP but who are not utilizing the preventive 
service. Additionally, specific estimates of PrEP utilization among 
specific indicated populations are difficult to attain from other 
data sources at this point in time. The CDC has paused the 
publication of estimates of PrEP coverage in indicated populations 
and has advised against citing specific data points until June 2025 
due to data availability issues. (See Centers for Disease Control 
and Prevention. Monitoring selected national HIV prevention and care 
objectives by using HIV surveillance data--United States and 6 
territories and freely associated States, 2022. HIV Surveillance 
Supplemental Report 2024; 29(No. 2). https://www.cdc.gov/hiv-data/nhss/national-hiv-prevention-and-care-outcomes.html).
---------------------------------------------------------------------------

    As mentioned above, we have found that PrEP overall satisfies 
Principle 2, having meaningful and predictable costs. In particular, 
our analyses found that the utilization patterns of PrEP medications 
have been fairly consistent year-over-year, with previously approved 
versions of PrEP medications maintaining substantial market share 
despite the availability of generic versions and new market entrants 
such as Apretude. If ACF medications and services that were commonly 
used in 1 year were largely supplanted by different medications or 
services in the following year, the cost predictions based on previous 
years of data may be inaccurate. Nevertheless, although we will 
continue to monitor the market for PrEP drugs, we generally do not 
anticipate substantial decrease in costs in the near future for 
enrollees taking brand name drugs due to the more convenient drugs and 
dose-forms (for example, long-acting injectable forms) coming to market 
\61\ and the retention of market share by existing branded drugs.
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    \61\ Long-acting injectable PrEP may be beneficial in 
encouraging adherence to a PrEP medication regimen. (See, for 
example, https://getprepbroward.com/documents/Long-Acting-Injectable-PrEP.pdf). As such, we anticipate that treatment 
guidelines may recommend its use over oral PrEP in the future.
---------------------------------------------------------------------------

    Despite the overall anticipation that PrEP costs are consistent and 
will remain high over the next several years, we have found that there 
exists a large disparity in the costs of generic PrEP medication and 
the costs of brand name PrEP medication.\62\ Due to this disparity, if 
we include all PrEP medications in the definition of an ACF, the 
estimated coefficient will likely lead to overprediction for enrollees 
receiving generic medications and underprediction for enrollees 
receiving brand name medications. As such, it may be appropriate to 
exclude generic PrEP medication from the PrEP ACF, if one is adopted, 
which would exclude about 50 percent of enrollees with a PrEP 
prescription claim from the calculation of a PrEP ACF coefficient 
according to 2022 enrollee-level EDGE data. Such a low-cost exclusion 
from the ACF may improve predictions for enrollees receiving either 
generic or brand name PrEP medication and has precedent in our adoption 
of other factors in the HHS risk adjustment models. Specifically, we 
previously excluded generic drugs from RXC 9, Immune Suppressants and 
Immunomodulators, due to concern over patient access and health plan 
selection behavior.\63\ However, we believe that such an exclusion for 
a potential PrEP ACF could create incentives for prescribing brand over 
generic PrEP and therefore we solicit comments on balancing these 
considerations to help inform our consideration of the design of a 
potential PrEP ACF variable.
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    \62\ See, supra, note 57.
    \63\ See, for example, the 2019 Payment Notice (83 FR 16942).
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    As outlined by our discussion of Principles 1, 2, 3, and 7, our 
preliminary testing found minimal empirical concerns with a new PrEP 
ACF variable being added to the current HHS risk adjustment adult and 
child models, as the sample size for such a variable is reasonable for 
both the adult and child models, the clinical specifications are well 
defined, costs are generally predictable, and the resulting preliminary 
coefficient estimates for PrEP in the adult and child models are 
meaningful. However, in assessing Principles 4 (hierarchical factor 
definitions), 5 (monotonicity), and 6 (mutually exclusive 
classification), we found that the creation of a PrEP ACF variable 
would require further careful consideration.
    To satisfy Principle 4 (hierarchical factor definitions), the most 
severe manifestation of a given specific potential disease process must 
principally define its impact on costs. Therefore, related HCCs and 
RXCs (in the case of a PrEP ACF, the related HCC 1 for HIV/AIDS, and 
RXC 1 for anti-HIV agents) should be treated hierarchically. As such, 
in considering PrEP as a potential ACF, the presence of HCC 1 or RXC 1 
in an enrollee's medical record should preclude the application of the 
PrEP ACF, as the prevention of HIV infection clearly indicates a less 
severe manifestation of the specific potential disease process than 
treatment of an active HIV infection.
    However, the coefficient for HIV/AIDS (HCC 1) in the adult models 
\64\ has generally been lower than the coefficient we estimate would be 
calculated for a PrEP ACF. As such, without constraints applied to the 
HCC 1, RXC 1, and PrEP ACF coefficients, an adult enrollee who was on 
PrEP and later tested positive for HIV but did not start anti-
retroviral therapy for treatment within the same benefit year would 
have their risk score decrease between the initial application of the 
PrEP ACF, and its later replacement with HCC 1, violating monotonicity 
(Principle 5). Such enrollees make up a very small proportion of 
enrollees with a PrEP prescription claim (approximately 1.9 percent of 
enrollees with a PrEP prescription claim in the 2021 enrollee-level 
EDGE data). Additionally, this violation of monotonicity is not 
expected to take place in the HHS risk adjustment child models, as the 
lack of RXCs in the child models causes the coefficient for HCC 1 to be 
high enough that a PrEP ACF coefficient would not exceed the HCC for 
HIV/AIDS among child enrollees. Nevertheless, for consistency with the 
established principles for the HHS-operated risk adjustment program and 
the proposed principles to guide development of potential new ACF 
variables, we are considering solutions, described below, to the 
monotonicity concern for a PrEP ACF in the HHS risk adjustment adult 
models should we finalize the adoption of the proposed factor.
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    \64\ Risk associated with HIV infection can be expressed in the 
value of HCC 1 or in the value of RXC 1. Because these factors are 
highly correlated, the value of each coefficient taken alone may 
fluctuate between benefit years. However, the additive value of 
these two factors in the HHS risk adjustment adult models is fairly 
consistent year-over-year.
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    Additionally, a PrEP ACF could pose issues for mutually exclusive 
classification (Principle 6). Specifically, the compounds used in PrEP 
medication are also used to treat HIV. As such, NDCs for medications 
used for PrEP or the individual compounds alone are not enough to 
distinguish between an enrollee receiving PrEP and an enrollee in 
treatment for an active HIV infection. However, due to the necessity of 
the additional anti-retroviral compounds for HIV infection treatment, 
with special considerations and data filtering, we are generally able 
to distinguish enrollees that are receiving antiretroviral therapy for 
PrEP and those receiving antiretroviral treatment as treatment for HIV/
AIDS for the purposes of calculating plan liability with 100 percent 
cost sharing for PrEP and typical cost sharing treatment of HIV 
infection.<SUP>65 66</SUP> To address the

[[Page 82327]]

concerns for adherence to Principle 6, we will need to create a 
mutually exclusive NDC classification between RXC 1 and a PrEP ACF.
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    \65\ See the 2021 Payment Notice (85 FR 29187).
    \66\ The medications used to treat HIV are also used as post-
exposure prophylaxis (PEP). Unlike PrEP, we are unable to 
distinguish between prescriptions for HIV treatment and 
prescriptions for PEP because the current guidelines for known 
exposures to HIV recommend the prescription of the same drugs as are 
used in treatment (See for example, https://stacks.cdc.gov/view/cdc/20711) https://stacks.cdc.gov/view/cdc/20711). However, we note that 
PEP requires a 28-day treatment regimen and, as such, has a much 
more limited impact on calculations of plan liability and risk than 
either treatment for an active HIV infection or PrEP. (See, for 
example, https://hivinfo.nih.gov/understanding-hiv/fact-sheets/post-
exposure-prophylaxis-
pep#:~:text=PEP%20stands%20for%20post%2Dexposure,used%20only%20in%20e
mergency%20situations.)
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    To address the HHS risk adjustment adult modeling concerns we 
identified regarding Principles 4, 5 and 6, we are considering two 
alternative approaches. First, we could modify the current definition 
of RXC 1 (Anti-HIV agents) by treating PrEP NDCs as RXC 1 NDCs in 
limited circumstances based on individual enrollee characteristics. 
Alternatively, we could place the PrEP ACF in a hierarchy with RXC 1 
but define no hierarchical restrictions between PrEP and HCC 1 (HIV/
AIDS). We discuss these alternatives in detail below.
    Under the first approach, modifying the current definition of RXC 
1, we would add PrEP NDCs into RXC 1 (Anti-HIV agents) in limited 
circumstances to address situations where the adult enrollee has both a 
claim for PrEP and a claim for RXC 1 within the benefit year. 
Operationally, to capture these cases, the adult enrollees with a PrEP 
prescription claim would receive the RXC 1 flag instead of the ACF only 
in cases where the enrollee has both a PrEP prescription claim and an 
HIV diagnosis but does not have a typical RXC 1 prescription claim 
because the enrollee did not begin treatment for HIV, or because their 
treatment medication was provided at no cost to the issuer and 
therefore no claim was submitted to EDGE. As such, a PrEP NDC's 
classification as RXC 1 or the ACF would be contingent on the presence 
of HCC 1 (HIV/AIDS) on an adult enrollee's record. We estimate that 
less than 2 percent of adult enrollees with a PrEP prescription claim 
would meet these criteria, and that such enrollees would account for 
less than 1 percent of enrollees receiving RXC 1. As such, the sample 
size of the PrEP ACF would remain high and the impact on the RXC 1 
coefficient would be minimal. This approach to defining the 
hierarchical relationship between HCC 1, RXC 1, and the PrEP ACF would 
ensure that an adult enrollee with a PrEP prescription claim who later 
tested positive for HIV would have an increase in their risk score as a 
result of the additional diagnosis, satisfying Principles 4 
(hierarchical factor definitions) and 5 (monotonicity). Although this 
approach would not be strictly consistent with mutually exclusive 
classification of diagnosis codes and NDCs into only one variable 
(Principle 6), we find this to be acceptable in this limited 
circumstance because it would precisely dictate which model factor an 
adult enrollee would receive (which satisfies the intent of Principle 
6, mutually exclusive classification) and because PrEP medications can 
be part of an approved HIV treatment protocol when additional anti-
retroviral drugs are used. Thus, it is not unreasonable to assume that 
the few adult enrollees with PrEP prescription claims and an HIV 
diagnosis are also receiving the additional medications needed to meet 
treatment requirements.\67\
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    \67\ It is possible such medications may not appear in the 
enrollee-level EDGE data if the issuer cost is completely covered by 
rebates or other assistance. In such cases, the cost of the 
medication would not influence plan liability calculations and would 
not impact the coefficient of a PrEP ACF.
---------------------------------------------------------------------------

    Under the alternative approach, we would address the violation of 
monotonicity in the HHS risk adjustment adult models by placing the 
PrEP ACF below RXC 1 in a hierarchy but defining no hierarchical 
relationship between the PrEP ACF and HCC 1 (HIV/AIDS), allowing adult 
enrollees without RXC 1 to receive the PrEP ACF along with HCC 1 in 
cases where the enrollee has both a PrEP prescription claim and an HCC 
1 diagnosis in their medical records for the benefit year. This 
approach would also ensure that an adult enrollee with a PrEP 
prescription claim who later tested positive for HIV would have an 
increase in their risk score as a result of the additional diagnosis, 
satisfying Principles 4 (hierarchical factor definitions) and 5 
(monotonicity). This alternative PrEP ACF-RXC 1 hierarchy approach 
would likewise satisfy the intent of Principle 6 (mutually exclusive 
classification) by using similar considerations and filtering steps to 
those we currently use in our simulation of plan liability for PrEP. We 
solicit comments on addressing these hierarchy, monotonicity, and 
mutual exclusivity concerns, and both alternative approaches outlined 
above that are designed to address those concerns.
    Table 2 below displays our testing of estimated values for the 
proposed PrEP ACF for the 2026 benefit year adult models using only 
2021 benefit year enrollee-level EDGE data, but otherwise following the 
specifications of the 2025 benefit year HHS risk adjustment adult 
models.\68\ We also included the values of the adult model factors that 
would likely be most impacted by the addition of a PrEP ACF to the 2026 
benefit year risk adjustment models in table 2. This helps demonstrate 
whether the PrEP ACF would adhere to Principles 4, 5, and 6 described 
above. As indicated in the table, the addition of the adult model 
coefficients for a PrEP ACF (in each metal level) to the adult models 
would only minorly impact other coefficients, with the most impacted 
model coefficients being the age-sex coefficients for males between the 
ages of 25 and 44, RXC 1 (Anti-HIV Agents), and a small handful of 
other HCCs and RXCs. All impacts beyond those displayed in this table 
reflect absolute impacts on HHS risk adjustment adult model coefficient 
values of less than 0.01. However, we note that these values have not 
been subjected to either our normal modeling constraints, nor any of 
the constraints discussed in relation to Principles 4, 5 and 6.
---------------------------------------------------------------------------

    \68\ For the specifications of the 2025 benefit year HHS risk 
adjustment adult and child models, including the Hepatitis C pricing 
adjustment and the list of factors included in the models, see the 
2025 Payment Notice (89 FR 26238 through 26256).

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    Table 3 below displays estimated values for the proposed PrEP ACF 
for the 2026 benefit year HHS risk adjustment child models using only 
2021 benefit year enrollee-level EDGE data, but otherwise following the 
specifications of the 2025 benefit year HHS risk adjustment child 
models.\69\ Unlike the adult models, for the HHS risk adjustment child 
models, our testing found there are no impacts greater than 0.01 to the 
unconstrained coefficients for other child model factors. In this 
analysis for the child models, the approximate value of the
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    \69\ Ibid.

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[[Page 82331]]

PrEP ACF coefficient for children for the 2026 benefit year would fall 
below the HCC 1 (HIV/AIDS) coefficient for each metal level,\70\ 
affirming that the identified concerns over Principles 4, 5 and 6 among 
the HHS risk adjustment adult models do not apply to the HHS risk 
adjustment child models.
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    \70\ As compared to the HCC 1 coefficients in table 5.
    [GRAPHIC] [TIFF OMITTED] TP10OC24.025
    
    Again, the above coefficient values in tables 2 and 3 have been 
calculated using the 2021 enrollee-level EDGE data only, with the 2025 
benefit year HHS risk adjustment model specifications, and without our 
normal modeling constraints nor any of the constraints discussed in 
relation to Principles 4, 5 and 6. Although we anticipate that these 
values will change slightly when the modeling constraints and the 2026 
benefit year risk adjustment model specifications are applied, if the 
proposed new PrEP ACF variable is added to the adult and child models, 
we believe these offer reliable estimates of the potential impact of 
the adoption of the proposed new PrEP ACF variable on other factors and 
approximate values for the proposed draft new PrEP ACF coefficients for 
the adult and child models. If this proposal is finalized, the final 
coefficients will be made available in the final rule or through 
subsequent notice-and-comment rulemaking or guidance, as appropriate.
    We solicit comments on our proposal to create a new ACF category of 
model factors for incorporation into the HHS risk adjustment models to 
account for unique medical expenses or services (such as PrEP) that do 
not meet the criteria to qualify as HCC or RXC factors, but impact the 
actuarial risk presented to issuers of risk adjustment covered plans. 
In addition, we solicit comments on our proposal to modify the 
treatment of PrEP in the HHS risk adjustment adult and child models 
beginning with the 2026 benefit year, as well as how to 
methodologically define a potential ACF category of model factors that 
accounts for PrEP (or other unique medical expenses or services) and 
what other considerations should be part of the analysis and modeling 
for this proposed new category of model factors (such as the 
availability of drug rebates \71\ or differences in medication 
adherence for PrEP). Furthermore, we solicit comments regarding the 
principles to guide inclusion of potential ACF factors and the 
discussed alternative approaches for defining a PrEP ACF's hierarchical 
relationship to HCC 1 and RXC1 to address the concerns related to 
hierarchical factor definitions (Principle 4), violations of 
monotonicity (Principle 5), and violations of mutually exclusive 
classification (Principle 6) in the HHS risk adjustment adult models. 
Additionally, we solicit comments on whether generic versions of PrEP 
medication should be excluded from the definition of the proposed ACF 
for PrEP. Lastly, we solicit comments concerning whether there are any 
similar medical expenses or services that we should consider for 
potential new ACFs alongside PrEP.
---------------------------------------------------------------------------

    \71\ For example, we believe there are likely substantial 
rebates for Descovy that are not captured in issuers' EDGE data 
submissions. See, for example, Dickson, S., Gabriel, N., and 
Hernandez, I. Estimated changes in price discounts for tenofovir-
inclusive HIV treatments following introduction of tenofovir 
alafenamide. AIDS. 2022 Dec 1;36(15):2225-2227. doi: 10.1097/
QAD.0000000000003401. See, also, Krakower, D. and Marcus, J.L. 
Commercial Determinants of Access to HIV Preexposure Prophylaxis. 
JAMA Network Open. 2023;6(11):e2342759. doi:10.1001/
jamanetworkopen.2023.42759. See, also, McManus, K.A., et al. 
Geographic Variation in Qualified Health Plan Coverage and Prior 
Authorization Requirements for HIV Preexposure Prophylaxis. JAMA 
Network Open. 2023;6(11):e2342781. doi:10.1001/
jamanetworkopen.2023.42781.
---------------------------------------------------------------------------

d. Proposed List of Factors To Be Employed in the HHS Risk Adjustment 
Models (Sec.  153.320)
    The proposed 2026 benefit year HHS risk adjustment model factors 
resulting from the equally weighted (averaged) blended factors from 
separately solved models using the 2020, 2021, and 2022 enrollee-level 
EDGE data are shown in tables 4 through 9.\72\ The HHS risk adjustment 
adult, child, and infant models have been truncated to account for the 
high-cost risk pool payment parameters by removing 60 percent of costs 
above the $1 million threshold.\73\ Table 4 contains proposed factors 
for each adult model, including the age-sex, HCCs, RXCs, RXC-HCC 
interactions, interacted HCC counts, and enrollment duration 
coefficients. Table 5 contains the proposed factors for each child 
model, including the age-sex, HCCs, and interacted HCC counts 
coefficients.\74\ Table 6 lists the proposed HCCs selected for the 
interacted HCC counts factors that would apply to the HHS risk 
adjustment adult and child models. Table 7 contains the proposed 
factors for each HHS risk adjustment infant model. Tables 8 and 9 
contain the HCCs included in the HHS risk adjustment infant models' 
maturity and severity categories, respectively.
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    \72\ See, supra, note 36.
    \73\ As finalized in the 2020 Payment Notice (84 FR 17466 
through 17468), we will maintain the high-cost risk pool parameters 
for the 2020 benefit year and beyond, unless amended through notice-
and-comment rulemaking. We are not proposing changes to the high-
cost risk pool parameters for the 2026 benefit year. Therefore, we 
will maintain the $1 million threshold and 60 percent coinsurance 
rate for the 2026 benefit year.
    \74\ See, supra, note 36.
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BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
e. Cost-Sharing Reduction Adjustments
    In the 2025 Payment Notice (89 FR 26252 through 26254), we 
finalized the updated CSR adjustment factors for American Indian/Alaska 
Native (AI/AN) zero-cost sharing and limited cost sharing CSR plan 
variant enrollees for the 2025 benefit year, and for all future benefit 
years, unless changed through notice-and-comment rulemaking. In the 
2025 Payment Notice (89 FR 26252 through 26254), we also finalized 
maintaining the existing CSR adjustment factors for silver plan variant 
enrollees (70 percent, 73 percent, 87 percent, and 94 percent AV plan 
variants) \75\ for the 2025 benefit year and beyond, unless changed 
through notice-and-comment rulemaking. Under this approach, we will no 
longer republish these factors in future annual HHS notice of benefit 
and payment parameter rules unless changes are being proposed.
---------------------------------------------------------------------------

    \75\ See 83 FR 16930 at 16953; 84 FR 17478 through 17479; 85 FR 
29190; 86 FR 24181; 87 FR 27235 through 27236; 88 FR 25772 through 
25774; and 89 FR 26252 through 26254.
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    For the 2026 benefit year, we are not proposing to change the CSR 
adjustment factors as finalized in the 2025 Payment Notice and will 
maintain the existing CSR adjustment factors for the 2026 benefit year. 
Since we are not proposing any changes to the CSR adjustment factors 
for the 2026 benefit year, we are not republishing the CSR adjustment 
factors in this rule.\76\
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    \76\ See CSR adjustment factors finalized in the 2025 Payment 
Notice at 89 FR 26252 through 26254.
---------------------------------------------------------------------------

f. Model Performance Statistics
    Each benefit year, to evaluate the HHS risk adjustment model 
performance, we examine each model's R-squared statistic and predictive 
ratios (PRs). The R-squared statistic, which calculates the percentage 
of individual variation explained by a model, measures the predictive 
accuracy of the model overall. The PR for each of the HHS risk 
adjustment models is the ratio of the weighted mean predicted plan 
liability for the model sample population to the weighted mean actual 
plan liability for the model sample population. The PR represents how 
well the model does on average at predicting plan liability for that 
subpopulation.
    A subpopulation that is predicted perfectly would have a PR of 1.0. 
For each of the current and proposed HHS risk adjustment models, the R-
squared statistic and the PRs are in the range of published estimates 
for concurrent HHS risk adjustment models.\77\ Because we propose to 
blend the coefficients from separately solved models based on the 2020, 
2021 and 2022 benefit years' enrollee-level EDGE data, we are 
publishing the R-squared statistic for each model separately to verify 
their statistical validity. The R-squared statistics for the proposed 
2026 benefit HHS risk adjustment models are shown in table 10.
---------------------------------------------------------------------------

    \77\ Hileman, G., & Steele, S. (2016). Accuracy of Claims-Based 
Risk Scoring Models. Society of Actuaries. https://www.soa.org/4937b5/globalassets/assets/files/research/research-2016-accuracy-claims-based-risk-scoring-models.pdf.

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3. Overview of the HHS Risk Adjustment Methodology: State Payment 
Transfer Formula
    In part 2 of the 2022 Payment Notice (86 FR 24183 through 24186), 
we finalized the proposal to continue to use the State payment transfer 
formula finalized in the 2021 Payment Notice for the 2022 benefit year 
and beyond, unless changed through notice-and-comment rulemaking. We 
explained that under this approach, we will no longer republish these 
formulas in future annual HHS notice of benefit and payment parameters 
rules unless changes are being proposed. We are not proposing any 
changes to the formula in this rule, and therefore, are not 
republishing the formulas in this rule. We therefore would continue to 
apply the formula as finalized in the 2021 Payment Notice (86 FR 24183 
through 24186) in the States where HHS operates the risk adjustment 
program in the 2026 benefit year.
    Additionally, as finalized in the 2020 Payment Notice (84 FR 17466 
through 17468), we will maintain the high-cost risk pool parameters for 
the 2020 benefit year and beyond, unless amended through notice-and-
comment rulemaking. We are not proposing any changes to the high-cost 
risk pool parameters for the 2025 benefit year; therefore, we would 
maintain the $1 million threshold and 60 percent coinsurance rate.\78\
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    \78\ See 81 FR 94081. See also 84 FR 17467.
---------------------------------------------------------------------------

4. Solicitation of Comments--Time Value of Money in HHS-Operated Risk 
Adjustment Program
    HHS received feedback from some interested parties that, for the 
2023 benefit year, issuers of risk adjustment covered plans were 
impacted more by the time value of money, for the collection and 
remittance of State transfers that occurs 8 to 10 months after the 
conclusion of the benefit year,\79\ than in any previous benefit years 
of the HHS-operated risk adjustment program. Given that interest rates 
were the highest in 2023 than in any year since the passage of the ACA, 
the impact of the time value of money has changed and is higher than it 
has been historically. We therefore solicit comments on what impact the 
time value of money may have on issuers' assessment of actuarial risk 
and incentives for adverse selection.
---------------------------------------------------------------------------

    \79\ Charges are typically sent out in August in the year after 
the benefit year and the majority of payments typically made in 
September and October in the year after the benefit year; payments 
held for sequestration from charges collected prior to October 1st 
are released in November of the same year.
---------------------------------------------------------------------------

    Unlike Medicare Advantage's risk adjustment program, under which 
CMS makes risk-adjusted monthly payments to Medicare Advantage 
organizations during the coverage year (in advance of each month of 
coverage) using interim risk scores and then does a reconciliation to 
updated risk scores after the final deadline for submission of all risk 
adjustment data, the HHS-operated risk adjustment program for the 
individual, small group and merged markets uses a final data submission 
deadline 4 months after the end of the benefit year and calculates 
issuers' plan liability risk scores and the State transfer amounts 2 
months after that, resulting in State transfers being made 8 to 10 
months after the end of the benefit year.\80\ HHS typically announces 
State transfer amounts no later than June 30 of the year following the 
benefit year,\81\ begins to collect charges in August of the year 
following the benefit year, and begins to make payments to issuers in 
the fall of the year following the applicable benefit year. This 
process means that issuers whose enrollees have higher-than-average 
actuarial risk do not receive their State transfer payments until the 
fall of the year following the benefit year. Over this same time 
period, issuers whose enrollees have lower-than-average actuarial risk 
are able to benefit from the availability of capital from the 
collection of premiums for

[[Page 82348]]

investment that could accrue interest between the benefit year and when 
the collection of charges begins in August of the year following the 
benefit year, which we refer to as the ``time value of money.''
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    \80\ The EDGE data submission deadline is April 30, or if such 
date is not a business day, the next applicable business day. See 45 
CFR 153.730. We note that the deadline for submission of 2023 
benefit year data was extended to provide issuers flexibility in 
managing the challenges associated with the Change HealthCare 
cybersecurity incident and its impact on risk adjustment covered 
plans. See CMS Announcement BY2023 EDGE Data Submission MLR 
Extension https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/by_2023_announcement_edge_data_submission_mlr_extension.pdf.
    \81\ Risk adjustment transfer amounts are typically announced no 
later than June 30, or if such date is not a business day, the next 
applicable business day. See 45 CFR 153.310(e). The date for 
announcement of transfer amounts for the 2023 benefit year was 
extended in recognition of the extension of the deadline for EDGE 
data submissions. See supra note 92. After transfer amounts for a 
benefit year are announced, collection of charges typically begins 
in August with payments beginning in September.
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    To continue to ensure appropriate incentives exist in the 
individual, small group, and merged markets to cover both healthy and 
sick enrollees, we believe that this market dynamic, the time value of 
money, and its potential impact on actuarial risk and adverse selection 
should be discussed and considered. Consistent with section 1343 of the 
ACA, in States where HHS is responsible for operating the program,\82\ 
we calculate average actuarial risk to assess charges to issuers with 
risk adjustment covered plans with lower-than-average actuarial risk 
and to make payments to issuers with risk adjustment covered plans with 
higher-than-average actuarial risk. The ACA's permanent risk adjustment 
program for the individual, small group, and merged markets is intended 
to minimize the incentives for adverse selection, to help level the 
playing field between insurance companies, and to foster a stable 
market in which issuers provide coverage to individuals with higher 
health care costs and those who are sick have access to the coverage 
they need.
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    \82\ Section 1321(c)(1) of the ACA directs the HHS Secretary to 
operate the risk adjustment program in any State that fails to elect 
to do so. Since the 2017 benefit year, HHS has operated the program 
in all 50 States and the District of Columbia.
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    The impact of the time value of money has increased to levels 
significantly higher than those seen in the initial years after the 
passage of the ACA. For example, in January 2016, the annual short-term 
Applicable Federal Rate (AFR) interest rate was 0.75 percent, whereas 
in January 2023 the AFR interest rate had increased to 4.50 
percent.\83\ This increase in the time value of money could impact the 
individual, small group, and merged markets by changing the incentives 
faced by issuers enrolling lower-than-average risk populations rather 
than higher-than-average risk populations, as lower-risk populations 
not only have lower claims costs, but could result in potential accrued 
interest for their premium revenues, whereas issuers with higher-risk 
populations are expected to incur higher claims costs and would 
generally not be able to collect the potential accrued interest for 
their premium revenues. To further illustrate this issue, in a 
hypothetical State market risk pool with only two issuers, where the 
risk adjustment issuer with lower-risk enrollees owes a $1,000,000 
charge and the risk adjustment issuer with higher-risk enrollees 
receives a payment of $1,000,000, the charge issuer may have accrued an 
additional $45,000 in interest from the initial $1,000,000, and after 
paying the risk adjustment charge, would retain the $45,000, while the 
payment issuer is deprived of the same opportunity. Thus, we have 
received feedback from interested parties expressing concern about this 
scenario in the context of the HHS-operated risk adjustment program and 
concerns about how it could create incentives for adverse selection 
that could result in issuers that receive State transfer payments 
raising premiums to recoup lost opportunity costs from the time value 
of money.
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    \83\ The IRS publishes all annual short-term AFRs at: https://www.irs.gov/applicable-federal-rates. January 2016 AFR: https://www.irs.gov/pub/irs-drop/rr-16-01.pdf; January 2023 AFR: https://www.irs.gov/pub/irs-drop/rr-23-01.pdf.
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    For these reasons, we solicit comments on the impact of the time 
value of money on the HHS-operated risk adjustment program, including 
the impact of the time value of money on issuers' assessment of 
actuarial risk and the incentives for adverse selection, and what 
possible solutions or mitigating steps we should consider to address 
the impact of the time value of money on the HHS-operated risk 
adjustment program in future rulemaking.
5. HHS Risk Adjustment User Fee for the 2026 Benefit Year (Sec.  
153.610(f))
    We propose an HHS risk adjustment user fee for the 2026 benefit 
year of $0.18 PMPM. Under Sec.  153.310, if a State is not approved to 
operate, or chooses to forgo operating, its own risk adjustment 
program, HHS will operate risk adjustment on its behalf. For the 2026 
benefit year, HHS will operate risk adjustment in every State and the 
District of Columbia. As described in the 2014 Payment Notice (78 FR 
15416 through 15417), HHS' operation of the risk adjustment program on 
behalf of States is funded through a risk adjustment user fee. Section 
153.610(f)(2) provides that, where HHS operates a risk adjustment 
program on behalf of a State, an issuer of a risk adjustment covered 
plan must remit a user fee to HHS equal to the product of its monthly 
billable member enrollment in the plan and the PMPM risk adjustment 
user fee specified in the annual HHS notice of benefit and payment 
parameters for the applicable benefit year.
    OMB Circular No. A-25 established Federal policy regarding user 
fees, and specifies that a user charge will be assessed against each 
identifiable recipient for special benefits derived from Federal 
activities beyond those received by the general public.\84\ The HHS-
operated risk adjustment program provides special benefits as defined 
in section 6(a)(1)(B) of OMB Circular No. A-25 to issuers of risk 
adjustment covered plans because it mitigates the financial instability 
associate with potential adverse risk selection.\85\ The HHS-operated 
risk adjustment program also contributes to consumer confidence in the 
health insurance industry by helping to stabilize premiums across the 
individual, merged, and small group markets.
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    \84\ See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.
    \85\ Ibid.
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    In the 2025 Payment Notice (89 FR 26218), we calculated the Federal 
administrative expenses of operating the HHS risk adjustment program 
for the 2025 benefit year to result in a risk adjustment user fee rate 
of $0.18 PMPM based on our estimated costs for HHS risk adjustment 
operations and estimated billable member months (BMM) for individuals 
enrolled in risk adjustment covered plans. For the 2026 benefit year, 
HHS proposes to use the same methodology to estimate our administrative 
expenses to operate the program. These costs cover development of the 
models and methodology, collections, payments, account management, data 
collection, data validation, program integrity and audit functions, 
operational and fraud analytics, interested parties training, 
operational support, and administrative and personnel costs dedicated 
to HHS-operated risk adjustment program activities. To calculate the 
risk adjustment user fee, we divided HHS' projected total costs for 
administering the program on behalf of States by the expected number of 
BMM in risk adjustment covered plans in States where the HHS-operated 
risk adjustment program will apply in the 2026 benefit year.\86\
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    \86\ HHS did not receive any requests from States to operate 
risk adjustment for the 2026 benefit year. Therefore, HHS will 
operate risk adjustment in every State and the District of Columbia 
for the 2026 benefit year.
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    We estimate that the total cost for HHS to operate the risk 
adjustment program on behalf of States for the 2026 benefit year will 
be approximately $65 million, roughly the same as the amount estimated 
for the 2025 benefit year.
    Similar to prior benefit years, we projected risk adjustment 
enrollment scenarios for the 2026 benefit year. For the 2021 through 
2025 benefit years, we projected increased enrollment in the

[[Page 82349]]

individual non-catastrophic market risk pool in most States, due to the 
enhanced PTC subsidies provided for in the American Rescue Plan Act of 
2021 (ARP) <SUP>87 88</SUP> and the extension of the enhanced PTC 
subsidies under Section 12001 of the Inflation Reduction Act of 2022 
(IRA) through the 2025 benefit year.\89\ For our 2026 user fee 
projected enrollment numbers, we considered the impact of the 
expiration of the enhanced PTC subsidies established in section 9661 of 
the ARP and extended in section 12001 of the IRA through the 2025 
benefit year on the enrollment in the individual, small group, and 
merged market risk pools for the 2026 benefit year and used those 
estimates to project the proposed 2026 benefit year HHS risk adjustment 
user fee rate. We also note that if any events such as Congress passing 
an extension of enhanced PTC subsidies, resulting in larger than 
expected growth in individual on Exchange enrollment or some other 
deviation from our expectations of current conditions that would 
significantly change our estimates around costs, enrollment 
projections, or the finalization of proposed risk adjustment policies 
between this proposed rule and the final rule, we may modify the HHS 
risk adjustment user fee rate proposed in this rule in the final rule. 
Because we project a similar budget to operate the HHS-operated risk 
adjustment program and do not estimate increased enrollment in the 2026 
benefit year beyond the 2024 benefit year level, we propose an HHS risk 
adjustment user fee of $0.18 PMPM for the 2026 benefit year.
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    \87\ ARP. Public Law 117-2 (2021).
    \88\ CMS. (2023). Summary Report on Permanent Risk Adjustment 
Transfers for the 2022 Benefit Year. (p. 8). https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf.
    \89\ Inflation Reduction Act. Public Law 1217-169 (2022).
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    We seek comment on the proposed HHS risk adjustment user fee for 
the 2026 benefit year.
6. Risk Adjustment Data Validation Requirements When HHS Operates Risk 
Adjustment (HHS-RADV) (Sec. Sec.  153.350 and 153.630)
    HHS conducts risk adjustment data validation under Sec. Sec.  
153.350 and 153.630 in any State where HHS is responsible for operating 
the risk adjustment program.\90\ The purpose of risk adjustment data 
validation is to ensure issuers are providing accurate high-quality 
information to HHS, which is crucial for the proper functioning of the 
HHS-operated risk adjustment program. HHS-RADV also ensures that risk 
adjustment transfers calculated under the State payment transfer 
formula reflect verifiable actuarial risk differences among issuers, 
rather than risk score calculations that are based on poor quality 
data, thereby helping to ensure that the HHS-operated risk adjustment 
program assesses charges to issuers with plans with lower-than-average 
actuarial risk while making payments to issuers with plans with higher-
than-average actuarial risk. HHS-RADV consists of an initial validation 
audit (IVA) and a second validation audit (SVA). Under Sec.  153.630, 
each issuer of a risk adjustment covered plan must engage an IVA 
entity. The issuer provides demographic, enrollment, and medical record 
documentation for a sample of enrollees selected by HHS to its IVA 
entity for data validation. Each issuer's IVA is followed by an SVA, 
which is conducted by an entity HHS retains to verify the accuracy of 
the findings of the IVA. Based on the findings from the IVA, or SVA (as 
applicable), HHS conducts error estimation to calculate an HHS-RADV 
error rate. The HHS-RADV error rate is then applied to adjust the plan 
liability risk scores of outlier issuers, as well as the risk 
adjustment transfers calculated under the State payment transfer 
formula for the applicable State market risk pools, for the benefit 
year being audited.
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    \90\ Since the 2017 benefit year, HHS has operated the risk 
adjustment program in all 50 States and the District of Columbia.
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a. Initial Validation Audit (IVA) Sampling Methodology--Enrollees 
Without HCCs, Finite Population Correction, and Neyman Allocation 
(Sec.  153.630(b))
    To better align the IVA sampling methodology with the HHS-RADV 
error estimation methodology that estimates hierarchical condition 
categories (HCC) error rates and to improve overall sampling precision, 
we are proposing to exclude enrollees without HCCs \91\ from IVA 
sampling, to remove the Finite Population Correction (FPC), and to 
replace the source of the Neyman allocation \92\ data used for IVA 
sampling purposes with 3 years of available HHS-RADV data beginning 
with benefit year 2025 HHS-RADV.\93\
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    \91\ Adult enrollees with only RXCs do not have any HCCs, and 
therefore, as further explained in this preamble, would be excluded 
from IVA sampling under this proposal.
    \92\ Neyman allocation is a method to allocate samples to strata 
based on the strata variances. A Neyman allocation scheme provides 
the most precision for estimating a population mean given a fixed 
total sample size. See http://methods.sagepub.com/reference/encyclopedia-of-survey-research-methods/n324.xml.
    \93\ Activities related to the 2025 benefit year of HHS-RADV 
will generally begin in Spring 2026, when issuers can start 
selecting their IVA entity, and IVA entities can start electing to 
participate in HHS-RADV for the 2025 benefit year. Changes to the 
IVA sampling methodology need to be finalized before HHS-RADV 
activities begin; therefore, we are proposing these IVA sampling 
changes begin with 2025 benefit year HHS-RADV due to the timing of 
this rulemaking. For an example of the typical annual HHS-RADV 
timeline, see the 2023 Benefit Year HHS-RADV Activities Timeline. 
https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf.
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1. IVA Sampling Background
    HHS-RADV IVA sampling policy was originally described in the 2014 
Payment Notice (78 FR 15436) where we stated that HHS would choose a 
sample size of enrollees for HHS-RADV such that the estimated risk 
score errors would be statistically sound, and the enrollee-level risk 
score distributions would reflect enrollee characteristics for each 
issuer. To implement this approach, in the 2015 Payment Notice (79 FR 
13756 through 13758), we finalized two key aspects of the IVA sampling 
methodology. First, HHS set the IVA sample size as 200 enrollees per 
issuer, as sample size precision analyses performed at the time with 
data available from Medicare Advantage RADV (MA-RADV) program, which 
utilizes a similar HCC-based methodology as the HHS-RADV methodology, 
indicated that a sample size of 200 enrollees would achieve the 
targeted precision for an average sized issuer and that there would be 
no meaningful improvement in the estimated level of precision with 
larger sample sizes. In particular, to establish this 200-enrollee 
sample, we set a 10 percent sampling precision target at a two-sided 95 
percent confidence level. That is, we aimed to obtain a sample size 
such that 1.96 multiplied by the standard error, divided by the 
estimated adjusted risk score, equals 10 percent or 
less.<SUP>94 95</SUP> To translate this policy to small issuers, we 
established an FPC factor to calculate a modified IVA sample size 
smaller than 200 enrollees.\96\ If an issuer

[[Page 82350]]

has between 51 and 3,999 enrollees, the issuer's IVA sample size is 
calculated by multiplying the FPC factor, which is a factor less than 
one, by the standard sample size of 200.\97\ If an issuer has 50 or 
fewer enrollees, its sample size is equal to its enrollment. Second, 
the policies finalized in the 2015 Payment Notice established that the 
IVA sampling methodology would use a simple age and risk score 
stratification that categorizes the relevant population into 10 strata, 
representing different demographic and risk score bands, and use a 
Neyman allocation sampling methodology to select an issuer's IVA sample 
for a given benefit year.<SUP>98 99 100</SUP> This stratified design 
was intended to ensure adequate sample selection of the higher risk 
portion of the enrollee population and the Neyman allocation increases 
the likelihood that the sample achieves targeted levels of precision 
because strata with greater variance will be sampled more heavily.\101\
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    \94\ See 79 FR 13756 through 13758. Also see CMS. (2013). 
Affordable Care Act (ACA) HHS-Operated Risk Adjustment Data 
Validation (RADV) Process White Paper. (pp. 26-28). https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/ACA_HHS_OperatedRADVWhitePaper_062213_5CR_050718.pdf.
    \95\ We established this sampling precision target in the 
initial year of HHS-RADV based on a survey of guidance from the OMB, 
Internal Revenue Service (IRS), and the HHS-developed Payment Error 
Rate Measurement (PERM) program.
    \96\ An FPC is traditionally used when sampling without 
replacement from a finite population and the sample size, n, is 
significant in comparison with the population size, N, so that no 
more than 5 percent of the population is sampled. The FPC formula 
can be found in Section 2.6: Cochran, William G., Sampling 
Techniques, third edition, John Wiley & Sons, 1977.
    \97\ See the 2023 Benefit Year PPACA HHS-RADV Protocols. Section 
7.2.1.8 (Alternate Sample Sizes) (June 4, 2024) available at: 
https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
    \98\ See 79 FR 13756 through 13758.
    \99\ See supra note 92.
    \100\ In the initial years of HHS-RADV, we constrained the 
``10th stratum'' of the IVA sample--that is, enrollees without HCCs 
selected for the IVA sample--to be one-third of the sampled IVA 
enrollees. In the 2020 Payment Notice, we finalized the extension of 
the Neyman allocation sampling methodology to the 10th stratum to 
improve sample precision and permit for a larger portion of the 
sample to be allocated to the HCC strata. See 84 FR 17494 through 
17495.
    \101\ See 78 FR 72332.
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    Under the current risk score stratification in IVA sampling, to 
align with the HHS-operated risk adjustment program's three separate 
models for adult, child, and infants, we group each issuer's enrollee 
population into 10 strata based on age group, risk level, and presence 
of HCCs and prescription drug factors (RXCs) \102\ as follows:
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    \102\ In the 2020 Payment Notice, we finalized piloting the 
incorporation of RXCs into the HHS-RADV process in the 2018 benefit 
year, which was the first year that RXCs were incorporated into the 
risk adjustment models. We also finalized incorporating RXC 
validation into HHS-RADV as a method of discovering materially 
incorrect EDGE server data submissions in a manner similar to how we 
address demographic and enrollment errors discovered during HHS-RADV 
beginning with the 2019 benefit year. See 84 FR 17501. We later 
extended the pilot years of incorporating RXCs into HHS-RADV to the 
2019 and 2020 benefit years of HHS-RADV to increase consistency 
between the operations of these benefit years' HHS-RADV and 
facilitate the combination of the HHS-RADV adjustments for these 
benefit years as we transitioned to a concurrent application of HHS-
RADV results. See 85 FR 77002 through 77005.
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    <bullet> Strata 1-3 includes low, medium, and high risk adults with 
the presence of at least one HCC or RXC.
    <bullet> Strata 4-6 includes low, medium, and high risk children 
with the presence of at least one HCC.
    <bullet> Strata 7-9 includes low, medium, and high risk infants 
with the presence of at least one HCC.
    <bullet> Stratum 10 includes the No-HCC and No-RXC population, 
which is not further stratified by age group, because we assume this 
stratum has a uniformly low risk level.
    The current IVA sampling methodology relies on MA-RADV proxy data 
to conduct the Neyman allocation, which optimizes stratum sample size 
by selecting the number of enrollees to be sampled from each of the 10 
strata, listed above, that is proportional to each stratum's 
contribution to the total standard deviation of the population.\103\ 
The Neyman allocation formula for the overall sample size for each 
stratum of the issuer's IVA sample (ni,h) is:
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    \103\ In the Neyman allocation, risk score error is measured as 
the actual difference between enrollee's audit risk scores and EDGE 
risk scores and does not reflect the error rate derived in HHS-RADV 
error estimation.
[GRAPHIC] [TIFF OMITTED] TP10OC24.043

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Where:

<bullet> Ni,h is the population size of the h<SUP>th</SUP> stratum 
of issuer i.
<bullet> ni is the IVA sample size of issuer i.
<bullet> H is the total number of strata.
<bullet> Si,h represents the standard deviation of risk score error 
amount for the h<SUP>th</SUP> stratum.

    As described in the 2015 Payment Notice (79 FR 13756 through 
13758), we use MA-RADV data to calculate the standard deviation of risk 
score error (Si,h) across all 10 strata. At the time, we chose to use 
MA-RADV data when establishing the Neyman allocation because HHS-RADV 
data was not available and the MA-RADV program utilizes a similar HCC-
based methodology. Because MA-RADV data does not have child or infant 
age groups, we can only calculate a single standard deviation of risk 
score error for each risk-score subgrouping (low, medium and high). 
Therefore, to use the MA-RADV data, we assume that the standard 
deviation of risk score error within a risk-score subgrouping is the 
same for each of the three age groups (adult, child, and infant) in the 
HHS-RADV population. Given our assumptions on the strata net risk score 
errors and variances from the MA-RADV data, we found that 200 enrollees 
would be an appropriate IVA sample size to achieve 10 percent sampling 
precision for net risk score error for an average-sized issuer. We also 
explained that we intended to test and evaluate HHS-RADV data for use 
for this purpose in future years when it became available.\104\
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    \104\ See 79 FR 13757.
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    HHS-RADV error estimation has been modified over time without 
making corresponding changes to the IVA sampling methodology. For 
example, in the 2019 Payment Notice (83 FR 16961 through 16965), we 
finalized an HCC-failure rate error estimation methodology that adjusts 
an issuer's enrollees' risk scores when the issuer's failure rate for a 
group of HCCs is statistically different from a national 
benchmark.\105\ This methodology specifically calculates IVA-sampled 
enrollees' risk scores using their HCCs on EDGE and adjusts the HCC-
portion of enrollees' risk scores based on audit results for issuers 
identified as outliers.\106\ In the 2020 Payment Notice, we finalized a 
policy to incorporate RXCs beginning with 2018 benefit year HHS-RADV, 
and the 2021 Payment Notice finalized treating RXC validations in HHS-
RADV as late-filed discrepancies, similar to demographic and enrollment 
errors.<SUP>107 108 109</SUP> In

[[Page 82351]]

addition, in the 2024 Payment Notice, to promote consistency between 
the EDGE Server Business Rules and the HHS-RADV Protocols, HHS 
discontinued the Lifelong Permanent Conditions List and the policy 
permitting the submission of non-EDGE claims in HHS-RADV beginning with 
the 2022 benefit year of HHS-RADV.\110\
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    \105\ Failure rates are calculated based on the rate at which 
the IVA Entity (or the SVA Entity if these results are being used) 
was able to validate an issuer's HCCs during the HHS-RADV audit. 
Previously, individual HCCs were the unit of analysis for 
calculating failure rates. The 2023 Payment Notice finalized that 
coefficient estimation groups would be de-duplicated beginning with 
2021 benefit year HHS-RADV, thereby altering the unit of analysis of 
failure rates to be de-duplicated Super HCCs, rather than individual 
HCCs. See 2023 Payment Notice, 87 FR 27208 at 27253-27256.
    \106\ See the HHS Notice of Benefit and Payment Parameters for 
2019; Final Rule, 83 FR 16930 at 16961-16965 (April 17, 2018). Also 
see CMS. (2022, January 20). Reissuing 2018 Benefit Year HHS Risk 
Adjustment Data Validation (RADV) Results Memo. https://www.cms.gov/files/document/reissuing-2018-hhs-radv-results.pdf.
    \107\ See CMS. (2023). Summary Report on Permanent Risk 
Adjustment Transfers for the 2022 Benefit Year. (p. 8). https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf.
    \108\ As finalized in the 2020 Payment Notice, HHS does not use 
demographic and enrollment or RXC errors identified in HHS-RADV in 
its error rate calculations. Demographic and enrollment or RXC 
errors discovered during HHS-RADV are handled as late-filed 
discrepancies and may result in adjustments to the applicable 
benefit year RA transfer amount. See 84 FR 84 FR 17498 through 
17503. Also see for example, Section 10.4 Validation of the 2023 
Benefit Year PPACA HHS-RADV Protocols (June 4, 2024) available at 
https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
    \109\ Only adult enrollees can have RXCs and the frequency of 
RXCs among adult enrollees is relatively low. HHS currently uses the 
enrollees with RXCs in the IVA sample for validating RXCs in HHS-
RADVs. See Section 7.2.1.9 RXC Sample Size of the 2023 Benefit Year 
PPACA HHS-RADV Protocols.
    \110\ See 88 FR 25790 through 25796.
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    After running the HHS-RADV program for several years, we now have 
several years of HHS-RADV data that could be evaluated and used to 
improve our IVA sampling methodology. When we finalized the IVA 
sampling methodology, we stated that we would reexamine our sampling 
assumptions and methodology over time using actual HHS-RADV enrollee 
data as it becomes available. As a result of these analyses and for the 
reasons explained in the sections below, we are proposing changes to 
the IVA sampling methodology.
2. Proposal To Exclude Enrollees Without HCCs From IVA Sampling
    We first propose to modify IVA sampling to exclude stratum 10 
enrollees, which would exclude enrollees that do not have HCCs nor RXCs 
and adult enrollees in strata 1 through 3 that have RXCs only, from IVA 
sampling beginning with benefit year 2025 HHS-RADV. The purpose of this 
proposal to remove these enrollees (``enrollees without HCCs'') is to 
better align our IVA sampling methodology with the error estimation 
methodology that was established in the 2019 Payment Notice, which 
calculates issuer risk score error rates and applies these error rates 
to the HCC-related portion of issuers' plan liability risk scores,\111\ 
and the HHS-RADV policies finalized in the 2024 Payment Notice to 
discontinue the Lifelong Permanent Conditions (LLPC) list and no longer 
allow non-EDGE claims beginning with the 2022 benefit year of HHS-RADV, 
which emphasize HHS-RADV's focus on validating enrollee HCCs on 
EDGE.\112\ After the finalization of these policies, to validate an HCC 
in HHS-RADV, a risk adjustment eligible diagnosis must be supported by 
appropriate medical record documentation and linked to a risk 
adjustment eligible claim accepted by the issuer's EDGE server. IVA and 
SVA entities can no longer rely on the LLPC list or non-EDGE claims to 
support abstracting diagnoses that are not linked to an accepted risk 
adjustment eligible claim on the issuer's EDGE server. Under the 
current IVA sampling methodology, enrollees without HCCs are grouped 
into stratum 10 if they have no HCCs or RXCs, or into strata 1, 2, or 3 
if they are adult enrollees with RXCs only (``RXC-only enrollees''). 
However, these enrollees do not have EDGE HCCs to validate during HHS-
RADV. Moreover, they have HCC-associated EDGE risk scores equal to 
zero, so there is no risk score to adjust as a result of HHS-RADV. 
Therefore, this proposed policy to exclude enrollees without HCCs from 
IVA sampling ensures that issuers, IVA Entities, and SVA Entities (as 
applicable) are focusing resources on enrollees who have a more direct 
impact on Super HCC failure rates,\113\ issuers' group failure rates, 
and issuers' error rates in HHS-RADV.
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    \111\ See 83 FR 16930 at 16961 through 16965. Also see CMS. 
(2022, January 20). Reissuing 2018 Benefit Year HHS Risk Adjustment 
Data Validation (RADV) Results Memo. https://www.cms.gov/files/document/reissuing-2018-hhs-radv-results.pdf.
    \112\ For more detail on the 2024 Payment Notice policies 
regarding the LLPC list and non-EDGE claims, see 88 FR 25790 through 
25796.
    \113\ As previously mentioned, the 2023 Payment Notice altered 
the unit of analysis of failure rates to be de-duplicated Super 
HCCs, rather than individual HCCs. See 87 FR 27208 at 27253--27256. 
For more detail on how Super HCC failure rates are calculated, see 
Section 13.3.1.1.3 Calculate Super HCC Failure Rates and Categorize 
Super HCCs into Low, Medium, and High Failure Rate Groups of the 
2023 Benefit Year PPACA HHS Risk Adjustment Data Validation (HHS-
RADV) Protocols (June 4, 2024) available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
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    Furthermore, RXC-only enrollees have been included in the HHS-RADV 
sampling of strata 1 through 3 to ensure an adequate number of 
enrollees with RXCs in issuers' samples to complete HHS-RADV RXC 
validation.\114\ However, EDGE data from benefit years 2019 through 
2022 shows that on average less than 12 percent of an issuer's adult 
enrollee population with RXCs has no HCCs. Therefore, the vast majority 
of adult enrollees with RXCs also have HCCs and will therefore still be 
captured in strata 1 through 3 in the IVA sample and eligible for 
inclusion in the HHS-RADV RXC validation.\115\ In addition, removing 
RXC-only enrollees from IVA sampling aligns our IVA sampling 
methodology with the HHS-RADV error estimation methodology, which does 
not consider RXCs in error estimation. We anticipate that this change 
will improve the precision of issuers' group failure rates for any 
given sample size by ensuring that all enrollees from stratum 1, 2 or 3 
have EDGE HCCs to validate in HHS-RADV that contribute to issuers' 
error rate calculation. For these reasons, we propose to remove all 
enrollees without HCCs, which consists of stratum 10 enrollees and RXC-
only enrollees, from IVA sampling. Under the proposal, enrollees 
without HCCs would be excluded from IVA sampling such that all 200 
enrollees selected for IVA audit would have at least one EDGE HCC and 
would fall within strata 1 through 9.
---------------------------------------------------------------------------

    \114\ As explained earlier in this preamble, HHS-RADV RXC 
validations are treated as late-filed discrepancies similar to 
demographic and enrollment errors. See 84 FR 17498 through 17503.
    \115\ IVA Entities validate RXCs by reviewing claims, not 
medical records. See Section 10.4 Validation of the 2023 Benefit 
Year PPACA HHS Risk Adjustment Data Validation (HHS-RADV) Protocols 
(June 4, 2024) available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
---------------------------------------------------------------------------

3. Proposal To Remove the Finite Population Correction (FPC)
    We propose to remove the FPC from the IVA sampling methodology such 
that, with the exclusion of enrollees without HCCs from IVA sampling, 
all issuers with at least 200 enrollees with HCCs in their enrollee 
population would have an IVA sample size of 200. Under this proposal, 
all issuers with fewer than 200 enrollees with HCCs would have an IVA 
sample size equal to their population of enrollees with HCCs. As 
previously explained, under the current IVA sampling methodology, 
issuers with between 51 and 3,999 enrollees in their total enrollee 
population are subject to the FPC and we calculate modified IVA sample 
sizes that are less than 200 enrollees using an FPC factor. Under the 
current approach, issuers with 50 or fewer enrollees have IVA sample 
sizes equal to their total enrollee population. We have found in recent 
years of HHS-RADV results that issuers with IVA sample sizes less than 
200 enrollees are less likely to meet the 30 Super HCC constraint for 
outlier identification in a failure rate group.\116\ If an issuer fails 
to meet the 30 Super HCC constraint in all three failure rate groups, 
the issuer cannot be determined to be an outlier and then the risk 
scores of their sampled enrollees are not

[[Page 82352]]

adjusted during error estimation.\117\ However, in our analysis of the 
proposal to exclude enrollees without HCCs from IVA sampling, we found 
that removing the FPC would give smaller issuers a better opportunity 
to increase the count of Super HCCs in their IVA sample because all 
enrollees sampled would have at least one HCC. Alternatively, retaining 
the FPC would continue to adjust these issuers' sample sizes downwards 
and greatly limit the number of Super HCCs in their IVA samples. By 
including more enrollees with HCCs in these smaller issuers' IVA 
samples, we would increase these issuers' probability of meeting the 30 
Super HCC constraint and improve the precision of group failure rates 
during error estimation, as well as improve the precision of net risk 
score error as discussed below. In addition, for small issuers that 
meet the 30 Super HCC threshold, this proposal would further allow 
these issuers' risk scores to be appropriately adjusted if they are 
identified as outliers, and it would allow them to gain additional 
insights from a richer set of data elements reported in their HHS-RADV 
results to improve coding practices and EDGE data submission procedures 
(as applicable). For these reasons, we are proposing to remove the FPC 
beginning with 2025 benefit year HHS-RADV.
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    \116\ Under the outlier identification policy finalized in the 
2021 Payment Notice, when HCCs were the unit of analysis of failure 
rates, an issuer could not be identified as an outlier in any 
failure rate group in which that issuer had fewer than 30 Super 
HCCs. See 85 FR 29196 through 29198. In the 2023 Payment Notice, 
when the unit of analysis of failure rates was altered to de-
duplicated Super HCCs, we finalized the policy to not consider an 
issuer as an outlier in any failure rate group in which that issuer 
has fewer than 30 de-duplicated EDGE Super HCCs. Issuers with fewer 
than 30 de-duplicated EDGE Super HCCs in a failure rate group may 
still be considered an outlier in other failure rate groups in which 
they have 30 or more de-duplicated EDGE Super HCCs. See 87 FR 27254.
    \117\ An issuer cannot be considered an outlier for a failure 
rate group in which the issuer has fewer than 30 de-duplicated EDGE 
Super HCCs but data from these issuers' failure rates is included in 
the calculation of national benchmarks. See 87 FR 27254 through 
27255.
---------------------------------------------------------------------------

    Under this proposal, issuers with less than 200 enrollees with HCCs 
would have all enrollees with HCCs in their IVA sample. The issuer-
specific sample size would be equal to the sum of all of their 
enrollees with HCCs in strata 1 through 9 in their EDGE population 
subject to HHS-RADV.\118\ For issuers with at least 200 enrollees with 
HCCs, their IVA sample size would remain at 200 enrollees and HHS would 
continue to use the Neyman allocation to determine stratum sample sizes 
for enrollees with HCCs in strata 1 through 9.\119\
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    \118\ An issuer's EDGE population only consists of enrollees in 
their risk adjustment covered plans. See Sec. Sec.  153.610(a) and 
153.700(a). However, for example, issuers that are the sole issuer 
in a State market risk pool are not subject to risk adjustment data 
validation and therefore a sole issuer risk pool's enrollment would 
not be included in the population subject to HHS-RADV sampling. See 
83 FR 16967.
    \119\ If the Neyman-allocated sample size for a stratum exceeds 
the number of enrollees in that stratum, HHS uses the actual number 
of enrollees in that stratum in the issuer's population in place of 
the target Neyman-allocated sample size for that stratum. The Neyman 
optimal allocation method is then performed again using a positive 
or negative incremental value to adjust the target sample size, 
until the actual sample size derived by summing the Neyman output 
for strata 1 through 9 meets the target IVA sample size of 200.
---------------------------------------------------------------------------

    Based on an analysis of historical HHS-RADV data, we estimate that 
issuers with less than 1,200 enrollees or approximately 10,000 billable 
member months statewide would be likely to have insufficient enrollees 
with HCCs in strata 1 through 9 to create an IVA sample size with 200 
enrollees. These issuers would therefore have an IVA sample size equal 
to their EDGE population of enrollees who have HCCs. In the absence of 
the FPC, small issuers may have IVA sample sizes that are larger or 
smaller than their IVA sample size would have been if subjected to the 
FPC under the current methodology. However, any increase in IVA sample 
size would only be realized in the years that a smaller issuer is 
selected for HHS-RADV, which is approximately once every 3 years 
(barring any risk-based triggers that would warrant more frequent 
audits) under the materiality threshold exemption at Sec.  
153.630(g)(2).\120\ In addition, we anticipate that the smaller issuers 
whose sample sizes would increase if the proposal to remove the FPC is 
finalized would also have an increase in Super HCC count in their IVA 
samples and group failure rate precision.\121\ As the set of data used 
to estimate an issuer's group failure rates increases, the precision of 
those sample estimates also increases, which is important as the 
issuer's outlier status depends on whether their group failure rates 
fall within the national benchmark confidence intervals. More 
specifically, we estimate that issuers receiving the FPC under the 
current methodology and whose IVA sample sizes would increase under the 
proposed methodology would see a 35 percent increase in Super HCC count 
in their IVA samples and a 26 percent increase in group failure rate 
precision on average across all three failure rate groups.\122\ We 
discuss the aggregate impact of all proposed IVA sampling policies, 
including the proposed removal of the FPC, on issuer burden in section 
5 of this preamble and in the ICR section of this rule.
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    \120\ Issuers at or below the materiality threshold of 30,000 
billable member months are only subject to random and targeted 
sampling every 3 years (barring any risk-based triggers based on 
experience that will warrant more frequent audit), and issuers below 
500 billable member months statewide are exempt from HHS-RADV. See 
88 FR 25788 through 25790.
    \121\ As explained in section 5 of this preamble, this estimate 
is based on the combination of all proposed changes to the IVA 
sampling methodology.
    \122\ Ibid.
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4. Proposal To Source the IVA Sampling Neyman Allocation With HHS-RADV 
Data
    We also propose to change the current IVA sampling methodology to 
replace the source of the Neyman allocation data with HHS-RADV data now 
that we have accumulated sufficient HHS-RADV data to test and evaluate 
using it for IVA sampling purposes. As explained earlier in this 
preamble, relying on the MA-RADV in the Neyman allocation requires a 
simplifying assumption that the standard deviation of risk score error 
within a risk-score subgrouping (low, medium, and high) is the same for 
the three age groups (adult, child, and infant). However, we have found 
that the variance of net risk score error differs considerably, both 
between the MA-RADV data and the available HHS-RADV data and across 
strata. Because the Neyman allocation calculates the optimal allocation 
to each stratum such that strata with greater variance in net risk 
score error are sampled more intensely and strata with less variance in 
net risk score error are sampled less intensely, this implies that the 
MA-RADV data yields considerably different sample sizes for each 
stratum than the HHS-RADV data. For example, our analysis found that 
while the median sample proportion of stratum 3 (Adult--High risk) 
enrollees is 39 percent using the MA-RADV data, this could decrease to 
19 percent of the sample being composed of stratum 3 enrollees if HHS-
RADV data were used.\123\
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    \123\ As noted later in this preamble, this estimate reflects 
the combined impact of all proposed changes to the IVA sampling 
methodology.
---------------------------------------------------------------------------

    For these reasons, beginning with 2025 benefit year HHS-RADV, we 
are proposing to no longer use MA-RADV data to calculate the standard 
deviation of risk score error (Si,h) for use in the Neyman allocation 
and instead use a 3-year rolling-window of available HHS-RADV data. For 
a given benefit year of HHS-RADV, we would use the 3 most recent 
consecutive years of HHS-RADV data with results that have been released 
before that benefit year's HHS-RADV activities begin as the source data 
for the Neyman allocation and would continue to combine enrollees in 
each stratum across all issuers to create a national variance of net 
risk score error to calculate the standard deviation of risk score 
error (Si,h).<SUP>124 125</SUP> We considered

[[Page 82353]]

creating an issuer-specific variance of net risk score error given the 
proposed shift to using HHS-RADV data instead of MA-RADV data for IVA 
sampling purposes, but this would not be possible for all issuers as 
some issuers would not have 3 consecutive years of HHS-RADV data. For 
example, consistent with Sec.  153.630(g)(2), an issuer that is at or 
below the materiality threshold for random and targeted sampling will 
only be sampled for HHS-RADV approximately once every 3 years and 
therefore would not have HHS-RADV data for the years that they are not 
sampled. These issuers would have to rely on fewer years of HHS-RADV 
data, meaning significantly fewer data points compared to other issuers 
that participated in all years, which could result in large variations 
in IVA sample stratum size and increased uncertainty in HHS-RADV. 
Therefore, we propose to continue calculating Si,h with a national 
variance of net risk score error, but to use a 3-year rolling window of 
HHS-RADV data rather than the MA-RADV data as the source data for the 
Neyman allocation. Under this proposed approach, we would re-calculate 
Si,h during each benefit year of HHS-RADV to use the 3 most recent 
consecutive years of HHS-RADV data with results that have been released 
before each benefit year's HHS-RADV activities begin. This proposed 
approach is consistent with our shift from the use of 
MarketScan[supreg] data to recalibrate the HHS risk adjustment models 
to instead use the 3 most recent consecutive years of enrollee-level 
EDGE data that are available at the time we incorporate the data in the 
draft recalibrated risk adjustment model coefficients published in the 
proposed rule for the applicable benefit year. In the context of HHS-
RADV, a 3-year rolling window would capture population changes that 
occur over time while promoting stability in the estimates of Si,h in 
HHS-RADV year over year. For example, annual improvements in issuers' 
EDGE data submission could decrease differences between enrollees' HHS-
RADV audit risk scores and EDGE risk scores, while annual changes in 
enrollment and EDGE enrollee risk profiles could change the enrollee 
stratification, such that the standard deviation of risk score error 
for each stratum changes over time. In addition, under our random and 
targeted sampling policy for HHS-RADV, issuers below the materiality 
threshold participate in HHS-RADV approximately once every 3 years. 
Therefore, using a 3-year rolling window will help ensure the majority 
of issuers participating in HHS-RADV are reflected in the strata 
metrics.
---------------------------------------------------------------------------

    \124\ A new benefit year of HHS-RADV activities generally begins 
in the spring the year following the applicable benefit year when 
issuers can start selecting their IVA entity and IVA entities can 
start electing to participate in HHS-RADV for that benefit year. 
See, for example, the 2023 Benefit Year HHS-RADV Activities Timeline 
for the general structure of the HHS-RADV timeline. https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf.
    \125\ As an example, if finalized as proposed, we would use HHS-
RADV data from benefit years 2021, 2022 and 2023 for the Neyman 
allocation for benefit year 2025 HHS-RADV.
---------------------------------------------------------------------------

    In addition, the proposal to use HHS-RADV data rather than the MA-
RADV data as the source data for the Neyman allocation would decrease 
burden on issuers and IVA Entities. More specifically, our analysis 
found that the MA-RADV data yields considerably different sample sizes 
for each stratum than the HHS-RADV data, and that using the HHS-RADV 
data rather than the MA-RADV data is likely to increase the proportion 
of the sample in the lower-risk groups and decrease the proportion of 
the sample in the high-risk group. This proposed change in sampled 
enrollees means that under this proposal, issuers would have relatively 
fewer medical records to review because of the increase in the 
proportion of sampled enrollees in the lower-risk strata and the 
decrease in the proportion of enrollees in higher-risk strata. To 
further explain, this decrease in estimated medical record review would 
occur because higher-risk enrollees tend to have relatively more 
medical records to review than lower-risk enrollees. Issuers spend time 
and resources on retrieving, reviewing, and submitting medical records 
and documentation for HHS-RADV, so the estimated decrease in the 
average number of medical records reviewed per enrollee in the IVA 
sample from replacing MA-RADV data with HHS-RADV data is expected to 
lead to a decrease in issuer burden. We further address the estimated 
aggregate burden impact of all IVA sampling policies proposed in this 
rule in section 5 of this preamble and the ICR section of this rule.
5. Impact of IVA Sampling Proposals
    In preparation for proposing changes to HHS-RADV IVA sampling, HHS 
conducted several analyses to evaluate the impact of these proposals. 
Our analysis revealed that the proposed modifications to switch data 
for the Neyman allocation to use the 3 most recent consecutive years of 
HHS-RADV data with results that have been released before HHS-RADV 
activities begin for the given benefit year, combined with the proposal 
to remove enrollees without HCCs from IVA sampling, and to remove the 
FPC would improve our ability to reach the 10 percent sampling 
precision target for net risk score error for a greater proportion of 
issuers in HHS-RADV.\126\ More specifically, when we evaluated the 
proposed IVA sampling methodology reflecting the changes outlined in 
this rule, which excludes enrollees without HCCs, removes the FPC, and 
replaces the MA-RADV data with available HHS-RADV data as the source 
data for the Neyman allocation, using HHS-RADV data from the 2022 
benefit year, we found that more than 99 percent of issuers met the 10 
percent sampling precision target for net risk score error at a two-
sided 95 percent confidence level.
---------------------------------------------------------------------------

    \126\ The precision of net risk score error reflects the ability 
of the IVA sampling methodology to consistently estimate the percent 
difference between enrollees' audit risk scores and EDGE risk 
scores. See Section 1. IVA Sampling Background of this preamble for 
more detail on how the 10 percent sampling target was derived.
---------------------------------------------------------------------------

    Our analysis also focused on the impact of the proposed policies on 
group failure rate precision. Previously, in the 2019 HHS-RADV White 
Paper, we evaluated how precise the current IVA sampling methodology 
was in measuring group failure rates and estimated that approximately 
60 percent of issuers with a sample size of 200 enrollees met 10 
percent group failure rate precision in all three HCC groups.\127\ In 
comparison, under the proposed changes to the IVA sampling methodology 
in this rule, our analysis found that approximately 91 percent of all 
issuers in HHS-RADV would meet the 10 percent group failure rate 
precision in all three Super HCC groups. Moreover, approximately 87 
percent of issuers with IVA sample sizes less than 200 would also meet 
the 10 percent group failure rate precision target in all three Super 
HCC groups.
---------------------------------------------------------------------------

    \127\ See Section 2.3.6 Precision of Current Sample Sizes of the 
2019 HHS-RADV White Paper.
---------------------------------------------------------------------------

    In addition, we anticipate that the proposed changes to the IVA 
sampling methodology in this rule would result in an overall decrease 
in the number of medical records reviewed by IVA Entities. Issuers 
spend time and resources on retrieving, reviewing, and submitting 
medical records and documentation for IVA Entities to review, so the 
estimated decrease in medical records reviewed is expected to lead to a 
decrease in issuer burden. Although every enrollee sampled for the IVA 
would have HCCs, the proportion of enrollees sampled from strata 1 
through 9 would change such that enrollees with more medical records 
are sampled less intensely due to the replacement of MA-RADV data with 
HHS-RADV data for the Neyman allocation. As mentioned earlier in this 
preamble, the median sample proportion of high-risk adult enrollees,

[[Page 82354]]

who have more medical records to review on average, could decrease from 
39 percent of the sample to 19 percent under the updated IVA sampling 
methodology reflecting the proposed changes in this rule. We describe 
our estimates of the proposed methodology on issuer burden in more 
detail in the ICR section of this rule.
    We also analyzed the impact of replacing the source data for the 
Neyman allocation with HHS-RADV data while continuing to include 
enrollees without HCCs in IVA sampling and retaining the FPC. However, 
this would result in sampling a greater proportion of enrollees without 
HCCs, who do not have risk scores to adjust when calculating issuers' 
error rates during HHS-RADV. In addition, keeping the FPC while 
excluding enrollees without HCCs from IVA sampling and replacing the 
source data for the Neyman allocation with available HHS-RADV data 
would lead to a dramatic increase in the number of issuers subject to 
the FPC and therefore decrease the total count of Super HCCs in 
issuers' IVA samples. For example, we estimate that the average Super 
HCC count for issuers currently subject to the FPC would decrease by 26 
percent by keeping the FPC, which would increase the proportion of 
issuers that fail to meet the 30 Super HCC constraint in HHS-RADV. In 
contrast, removing the FPC would increase the average Super HCC count 
for these same issuers by 30 percent, which would improve these 
issuers' probability of meeting the 30 Super HCC constraint. Overall, 
we found that making all proposed modifications in unison led to the 
greatest improvements in sampling precision and group failure rate 
precision across all issuers and a decrease in aggregate issuer burden.
    As explained above, removing enrollees without HCCs and the FPC, 
and updating the source of the IVA sampling Neyman allocation data to 
use HHS-RADV data, leads to an IVA sample that improves sampling 
precision while decreasing burden on issuers and IVA Entities on 
average. Therefore, we are proposing to exclude enrollees without HCCs 
from IVA sampling such that each enrollee in an issuer's IVA sample 
must have at least one HCC, remove the FPC, and discontinue use of MA-
RADV data as the source for the Neyman allocation calculation and begin 
using the 3 most recent consecutive years of HHS-RADV data with results 
that have been released before HHS-RADV activities for the benefit year 
begin.
    We solicit comments on these proposed changes to the IVA sampling 
methodology, the estimated impact of the changes, the timing of the 
implementation of the IVA sampling changes and feedback on whether 
there are other IVA sample changes that should be considered.
    We seek comment on these proposals.
a. b. Second Validation Audit (SVA) Pairwise Means Test (Sec.  
153.630(c))
    To improve the sensitivity of the SVA pairwise means test, we 
propose to modify the test, which currently uses a paired sample t-test 
methodology, to use a bootstrapping methodology, and to increase the 
initial SVA subsample size from 12 enrollees to 24 enrollees beginning 
with 2024 benefit year HHS-RADV.\128\
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    \128\ Activities related to the 2024 benefit year of HHS-RADV 
will generally begin in March 2025, when issuers can start selecting 
their IVA entity, and IVA entities can start electing to participate 
in HHS-RADV for the 2024 benefit year. The SVA typically starts the 
January 2 years after the applicable benefit year (January 2026 for 
the 2024 benefit year of HHS-RADV) once issuers' IVA results have 
been submitted. See HHS. (2024, March 27). 2023 Benefit Year HHS-
RADV Activities Timeline for the general structure of the HHS-RADV 
timeline. https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf. These changes to the SVA 
framework do not impact or change issuer or IVA Entity obligations 
or requirements; therefore, we are proposing to implement the 
proposed changes to the SVA pairwise means test starting with the 
2024 benefit year HHS-RADV.
---------------------------------------------------------------------------

    In the 2014 Payment Notice (78 FR 15437), we established that an 
SVA will be conducted by an entity retained by HHS to verify the 
accuracy of the findings of the IVA. Consistent with Sec.  153.630(c), 
HHS selects a subsample of the risk adjustment data validated by the 
IVA for the SVA. The HHS-RADV SVA sampling methodology was originally 
developed in the 2015 Payment Notice (79 FR 13761) and is designed to 
identify statistical differences between the IVA and SVA results. To do 
this, the SVA Entity currently starts by reviewing the medical records 
of an initial subsample of 12 enrollees from the IVA sample. The SVA 
subsample expands to include 24, 50, and 100 enrollees in the IVA 
sample \129\ when statistically significant differences between the IVA 
and SVA results are identified at the sample-level under review. The 
SVA Entity identifies statistically significant differences in 
subsampled enrollees' IVA and SVA results using a paired sample t-test, 
which currently uses the t-distribution to build a 95 percent 
confidence interval around the difference between enrollee's IVA and 
SVA risk scores. If this confidence interval includes zero, then a 
statistically significant difference is not detected, and the issuer's 
IVA results are used in error estimation. If this confidence interval 
does not include zero, then there is a pairwise means testing failure 
at that subsample level, which requires SVA expansion to the next 
subsample level. As finalized in the 2020 Payment Notice (84 FR 17498), 
if the issuer fails the pairwise means test at SVA 100, a precision 
analysis is performed to determine whether the SVA audit results from 
the SVA 100 subsample can be used in error estimation or if the SVA 
sample needs to expand to the full IVA sample of 200 enrollees \130\ 
with the SVA 200 results used in error estimation.\131\
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    \129\ A standard HHS-RADV IVA sample size is 200 enrollees, and 
it applies to the majority of issuers of risk adjustment covered 
plans. CMS calculates a smaller IVA sample sizes for issuers with 
smaller populations by using a Finite Population Correction (FPC) 
factor. All issuers are subject to the same SVA subsample sizes, but 
the maximum SVA subsample for pairwise testing is one half of the 
issuer's IVA sample size. As discussed in section II.B.5.a, we are 
proposing changes to the IVA sampling methodology that would exclude 
enrollees without HCCs from IVA sampling and remove the FPC factor 
such that all IVA samples will consist of 200 enrollees with HCCs or 
the issuer's total population of enrollees with HCCs if they have 
less than 200 enrollees with HCCs beginning with the 2025 benefit 
year of HHS-RADV. Under this policy, the SVA subsample size 
expansion for issuers with less than 200 enrollees with HCCs would 
continue to follow the standard SVA subsample sizes with a maximum 
SVA subsample for pairwise testing equal to one half of the issuer's 
IVA sample size. If the issuer fails at the maximum SVA subsample 
size for pairwise testing, a precision analysis is performed to 
determine whether the SVA audit results from that maximum SVA 
subsample size can be used in error estimation or if the SVA sample 
needs to expand to the full IVA sample.
    \130\ Id.
    \131\ See Section 11.6.2 Pairwise Means Test to Determine 
Accepted Results (IVA vs. SVA) of the 2023 Benefit Year PPACA HHS 
Risk Adjustment Data Validation (HHS-RADV) Protocols (June 4, 2024) 
available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf. For issuers with 
the FPC, if there is insufficient agreement between IVA and SVA 
findings at the maximum total SVA subsample for pairwise testing, a 
precision analysis is performed to determine whether it is necessary 
to expand the SVA sample to the full IVA sample for error 
estimation.
---------------------------------------------------------------------------

    The pairwise means testing procedure promotes the integrity and 
effectiveness of HHS-RADV by ensuring that error estimation and the 
HHS-RADV adjustments to risk scores are based on the most reliable 
medical coder review data possible. As such, it is important that the 
pairwise means testing procedure can detect when issuers' IVA results 
significantly differ from their SVA results at the initial sample size. 
Based on our experience operating HHS-RADV for the past several benefit 
years, we have reassessed the sensitivity of our pairwise means testing 
procedure, meaning the ability of the statistical test to identify 
statistically significant differences between IVA and

[[Page 82355]]

SVA risk scores when they exist, to see whether changes are needed. 
Based on our reassessment, we believe that the pairwise means testing 
procedure should be modified to use a 90 percent bootstrapped 
confidence interval, rather than a t-test with a 95 percent confidence 
interval, and to increase the initial SVA subsample level from 12 
enrollees to 24 enrollees beginning with 2024 benefit year HHS-RADV to 
improve the detection of differences between IVA and SVA results.
    To assess our current pairwise means testing procedure, we 
conducted a power analysis to investigate its sensitivity in detecting 
population-level differences. The analysis focused on ``false 
negatives,'' a detection error that occurs when there are significant 
differences between IVA and SVA results, but the statistical test does 
not identify a statistically significant difference between IVA and SVA 
enrollee risk scores. We are concerned about ``false negatives'' and 
therefore focused on them because they result in an atypical issuer 
passing the pairwise means test and the conclusion of the SVA review 
without further investigation at a higher subsample level. Our power 
analysis found that when using a subsample size of 12 enrollees the 
current paired sample t-test using a 95 percent confidence interval 
results in a false negative rate of over the target false negative rate 
of 20 percent at any of the simulated effect sizes.<SUP>132 133</SUP>
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    \132\ These effect sizes use the Cohen's D effect size measure 
and correspond to the recommended interpretations of a small, 
medium, and large effect size. See Cohen, Jacob (1988). Statistical 
Power Analysis for the Behavioral Sciences. Routledge. ISBN 978-1-
134-74270-7. pp 25-27.
    \133\ The conventional minimum power desired for most research 
settings is 80 percent, which implies a false negative rate of 20 
percent. See Cohen, Jacob (1988). Statistical Power Analysis for the 
Behavioral Sciences. Routledge. ISBN 978-1-134-74270-7. pp. 25-27.
---------------------------------------------------------------------------

    As part of our examination of ways to address our concerns about 
false negatives in the current pairwise means testing procedure, we 
expanded our power analysis by investigating the use of a bootstrapping 
methodology as an alternative pairwise means testing procedure to 
identify statistically significant differences between IVA and SVA risk 
scores. A bootstrapping approach is a useful technique to construct 
confidence intervals when the underlying distribution is unknown, when 
sample size may be too small to assume a normal sampling distribution, 
or when no formula exists to describe the sampling distribution of a 
particular point estimate.\134\ When conducting the SVA pairwise means 
test, we do not know each issuer's population distribution of IVA and 
SVA risk score differences because our sample is limited to the 
applicable SVA subsample level. However, by simulating bootstrapped 
samples based on observed IVA and SVA risk score differences at a given 
SVA subsample level, we can build each issuer's sampling distribution 
and calculate standard errors and confidence intervals to improve the 
sensitivity of the test used to identify statistically significant 
differences between IVA and SVA results.
---------------------------------------------------------------------------

    \134\ We use bootstrapping techniques in other parts of HHS-RADV 
error estimation, such as for calculating error rate precision. See 
Section 11.6.3 Calculating Error Rate Precision of the 2023 Benefit 
Year PPACA HHS Risk Adjustment Data Validation (HHS-RADV) Protocols 
(June 4, 2024) available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
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    In particular, at a given SVA subsample level, the proposed 
pairwise bootstrapping methodology would perform 10,000 iterations of 
resampling with replacement from the enrollees in the issuer's SVA 
subsample at that level. The average difference between enrollees' IVA 
and SVA risk scores would be calculated for each resample to build an 
issuer-specific confidence interval for statistical testing of 
enrollee's IVA and SVA risk scores. Like the current pairwise means 
test, if the bootstrapped confidence interval contains zero, the 
bootstrapping procedure would show non-significant differences between 
IVA and SVA risk scores, and the issuer would pass pairwise means 
testing at that SVA subsample level and IVA results would be used in 
error estimation. If the bootstrapped confidence interval does not 
include zero, the differences between IVA and SVA risk scores 
identified would be statistically significant, and the issuer would 
fail pairwise means testing at that SVA subsample level. In these 
circumstances, the SVA subsample would be expanded and the pairwise 
means test conducted at that new SVA subsample level. If the issuer 
continues to fail the pairwise means test at the SVA 100-level, a 
precision analysis would be performed to determine whether the SVA 
audit results from the SVA 100 subsample can be used in error 
estimation or if the SVA sample needs to expand to the full IVA sample 
of 200 enrollees with the SVA 200 results used in error 
estimation.\135\
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    \135\ See Section 11.6.2 Pairwise Means Test to Determine 
Accepted Results (IVA vs. SVA) of the 2023 Benefit Year PPACA HHS 
Risk Adjustment Data Validation (HHS-RADV) Protocols (June 4, 2024) 
available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
---------------------------------------------------------------------------

    We tested the bootstrapping methodology using a variety of 
confidence levels and found that using a bootstrapped confidence 
interval of 90 percent, rather than the current paired t-test with a 95 
percent confidence interval, improves the pairwise means testing 
procedure's sensitivity and ability to detect when issuers' IVA results 
differ substantially from their SVA results. The proposed bootstrapping 
methodology with a 95 percent confidence interval achieves a lower rate 
of false negatives at smaller sample sizes for any given effect size 
compared to the current paired t-test methodology. Moreover, decreasing 
the size of the confidence interval from 95 percent to 90 percent under 
the bootstrapping methodology decreases the sample size required to 
achieve a targeted false negative rate of 20 percent, and therefore 
increases the probability of detecting significant differences when 
they exist. On the other hand, decreasing the confidence interval from 
95 percent to 90 percent implies that the rate of false positives, or 
the rate at which an enrollee population with no major differences 
between IVA and SVA results would return a statistically significant 
finding at a given sample size, would increase from 5 percent to 10 
percent. The reasonable increased false positive rate, in combination 
with the increased sensitivity of the bootstrapping methodology, would 
result in more issuers being expanded to larger SVA sample sizes during 
pairwise means testing. However, we believe that the increased false 
positive rate is necessary and appropriate to achieve an acceptable 
rate of false negatives and ensure that reliable audit results are used 
in error estimation. We also believe that in comparison to false 
negatives, false positives can be addressed through the expansion of 
the sample size and therefore, pose less of a concern than false 
negatives, which cannot be corrected for since a false negative would 
end the SVA review at the lower sample size. Therefore, we believe that 
the proposed changes to improve the sensitivity of the SVA pairwise 
means test achieve the right balance between false negatives and false 
positives.
    Because the false negative rate decreases as sample size increases, 
the power analysis also showed the advantages of increasing the initial 
SVA subsample size beyond 12 enrollees. Specifically, under the 
proposed

[[Page 82356]]

bootstrapping methodology using a 90 percent confidence interval, we 
could achieve a false negative rate of 20 percent at medium and large 
effect sizes by increasing the initial SVA subsample size to 24 
enrollees. We also recognize these proposed changes to increase the 
initial review sample size and adopt the proposed bootstrapping 
methodology using a 90 percent confidence interval, would likely 
increase the scale of HHS' SVA review and therefore increase the costs 
to conduct the SVA. While the increase in the scale of HHS' SVA review 
would increase costs, as discussed in the regulatory alternatives 
section of this rule, we do not anticipate the proposed changes to 
improve the sensitivity of the SVA pairwise means test will 
significantly impact the timeline to conduct error estimation. As in 
any year of HHS-RADV, the timeline for conducting error estimation may 
be adjusted in response to the volume of SVA discrepancies submitted 
because the SVA discrepancy window occurs prior to the release of error 
rate results. Ultimately, we believe that these proposed changes to 
improve the sensitivity of the SVA pairwise means test are necessary 
and appropriate to address the identified concerns regarding ``false 
negatives'' and to promote the integrity of HHS-RADV. Therefore, we are 
proposing to modify the pairwise means test to use a bootstrapping 
methodology using a 90 percent confidence interval and to increase the 
initial SVA subsample size from 12 enrollees to 24 enrollees beginning 
with 2024 benefit year HHS-RADV.
    We seek comment on the proposal to modify the SVA pairwise means 
testing procedure to use a bootstrapped 90 percent confidence interval 
and to increase the initial SVA subsample size from 12 enrollees to 24 
enrollees beginning with 2024 benefit year HHS-RADV.
b. c. HHS-RADV Materiality Threshold for Rerunning HHS-RADV Results 
(Sec.  156.1220(a)(2))
    We propose to amend Sec.  156.1220(a) to codify a new, second 
materiality threshold for HHS-RADV appeals, hereafter referred to as 
the materiality threshold for rerunning HHS-RADV results.\136\ This 
proposal would codify a standard for when HHS would take action to 
rerun HHS-RADV results and adjust HHS-RADV adjustments to State 
transfers in response to a successful appeal. We propose to amend Sec.  
156.1220 to add a new paragraph (a)(2)(i) to provide that HHS would 
rerun HHS-RADV results in response to an appeal when the impact to the 
issuer who submitted the appeal (that is, the filer's) HHS-RADV 
adjustments to State transfers is greater than or equal to $10,000. 
This proposal is further discussed in part 156 (Sec.  156.1220) below.
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    \136\ For purposes of this proposal, rerunning HHS-RADV results 
involves recalculating all national program benchmarks and issuers' 
error rate results, reissuing issuers' error rate results, 
conducting discrepancy reporting and appeal windows for the reissued 
results, applying the reissued error rates to the applicable benefit 
year's State transfers, and invoicing, collecting, and distributing 
any additional changes to the HHS-RADV adjustments to State 
transfers.
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C. Part 155--Exchange Establishment Standards and Other Related 
Standards

1. Solicitation of Comments--Navigator, Non-Navigator Assistance 
Personnel, and Certified Application Counselor Program Standards 
(Sec. Sec.  155.210, 155.215, and 155.225)
    We are soliciting comment regarding how assisters who perform their 
assister duties in a hospital and hospital system may, within the 
bounds of the statute, refer consumers to programs designed to reduce 
medical debt.
    Sections 1311(d)(4)(K) and 1311(i) of the ACA direct all Exchanges 
to establish a Navigator program. Navigator duties and requirements for 
all Exchanges are set forth in section 1311(i) of the ACA and Sec.  
155.210. Section 1321(a)(1) of the ACA directs the Secretary to issue 
regulations that set standards for meeting the requirements of title I 
of the ACA, for, among other things, the establishment and operation of 
Exchanges. Pursuant to section 1321(a)(1) of the ACA, the Secretary 
issued Sec.  155.205(d) and (e), which requires Exchanges to perform 
certain consumer service functions in addition to the Navigator 
program. To satisfy these requirements, Exchanges may establish a non-
Navigator assistance personnel program, as the FFEs have done, and must 
have a Certified Application Counselor (CAC) program. Existing 
regulations outlining duties and required activities for Navigators 
(Sec.  155.210(e)), non-Navigator assistance personnel (Sec.  155.215, 
through the cross-reference to Sec.  155.210(e)), and CACs (Sec.  
155.225(c)) were initially finalized in the 2015 Market Standards final 
rule (79 FR 30240).
    The purpose of these assister programs is to ensure there are 
various ways consumers can receive help as they apply for and enroll in 
coverage through the Exchanges. In particular, Navigators (among other 
duties) help consumers make informed decisions during the health 
coverage selection process in a fair and impartial way, provide 
assistance in culturally and linguistically appropriate ways,\137\ and 
assist consumers with certain post-enrollment activities such as 
understanding the process of filing eligibility appeals as well as 
basic concepts and rights related to health coverage and how to use it. 
Non-Navigator assistance personnel conduct direct assister-to-consumer 
outreach alongside Navigators to provide consumers with information in 
a fair and impartial way, which includes providing assistance with 
submitting the eligibility application, clarifying distinctions among 
health coverage options and helping consumers make informed decisions 
during the health coverage selection process. CACs provide information 
to consumers about the full range of QHP options and insurance 
affordability programs for which they are eligible, assist consumers 
with applying for coverage in a QHP, and help facilitate enrollment of 
eligible individuals in QHPs and insurance affordability programs.
---------------------------------------------------------------------------

    \137\ Navigators receiving federal financial assistance are 
required to comply with the Section 1557's requirements on access 
for individuals with limited English proficiency, see CFR 45 Sec.  
92.201: https://www.ecfr.gov/current/title-45/subtitle-A/subchapter-A/part-92.
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    The Consumer Financial Protection Bureau estimates that $88 billion 
of outstanding medical bills are currently in collections, affecting 
one in five Americans.\138\ High levels of medical debt, and their 
impact on consumer credit scores, have led to cascading negative 
effects for consumers and their families such as reduced credit, 
greater risk of personal bankruptcy, delays in seeking necessary health 
care services, and housing insecurity. These challenges also 
disproportionately fall on more vulnerable or underserved consumers, 
including young adults, veterans, people with low incomes, and Black 
and Hispanic populations.\139\ Assister programs located within 
hospitals or as part of hospital systems could help ensure that the 
consumers they serve are aware of the financial assistance programs 
those entities provide. This can ultimately help to ensure the 
financial well-being of consumers as they seek health care.
---------------------------------------------------------------------------

    \138\ Consumer Financial Protection Bureau. (n.d.) Medical Debt. 
https://www.consumerfinance.gov/rules-policy/medical-debt/.
    \139\ See for example, Levey, N. (2022, June 16). 100 Million 
People in America Are Saddled With Health Care Debt--KFF Health 
News. KFF Health News. https://kffhealthnews.org/news/article/diagnosis-debt-investigation-100-million-americans-hidden-medical-debt/.
---------------------------------------------------------------------------

    We are interested in receiving comments about what we may do within 
the scope of our authority as it

[[Page 82357]]

relates to Navigators and other assisters to help connect consumers to 
financial assistance programs within hospitals, hospital systems, and 
their communities.
2. Ability of States To Permit Agents and Brokers and Web-Brokers To 
Assist Qualified Individuals, Qualified Employers, or Qualified 
Employees Enrolling in QHPs (Sec.  155.220)
a. Engaging in Compliance Reviews and Taking Enforcement Actions 
Against Lead Agents for Insurance Agencies
    We address our authority under Sec.  155.220 to reach misconduct or 
noncompliance occurring at an agency-level,\140\ by undertaking 
compliance reviews of and enforcement action against an insurance 
agency's (``agency's'') ``lead agent(s),'' \141\ and discuss how we 
intend to utilize this authority to hold agencies accountable for 
misconduct or noncompliance with applicable HHS Exchange standards and 
requirements under Sec.  155.220.
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    \140\ For purposes of this proposal, ``agency-level'' misconduct 
or noncompliance refers to misconduct or noncompliance with HHS 
Exchange standards and requirements under Sec.  155.220 associated 
with an eligibility application or enrollment transaction that lists 
an agency's NPN or that the agency was involved in or facilitated 
the submission of, or misconduct or noncompliance with HHS Exchange 
standards and requirements under Sec.  155.220 that involves the 
agency's lead agent(s) or that the agency endorsed or is otherwise 
involved in.
    \141\ The term ``lead agent'' refers to any person who registers 
and/or maintains a business with a State and/or any person who 
registers a business National Producer Number (NPN) with the 
Exchange, who typically is an executive or person with a leadership 
role within an agency.
---------------------------------------------------------------------------

    Section 155.220 currently applies to an agent, broker, or web-
broker that assists with or facilitates enrollment of qualified 
individuals, qualified employers, or qualified employees in a QHP in a 
manner that constitutes enrollment through the Exchange or assists 
individuals in applying for APTC and CSRs for coverage offered through 
an Exchange. ``Web-broker'' is defined in Sec.  155.20 as an individual 
agent or broker, group of agents or brokers, or business entity 
registered with an Exchange under Sec.  155.220(d)(1) that develops and 
hosts a non-Exchange website that interfaces with an Exchange to assist 
consumers with direct enrollment in QHPs offered through the Exchange 
as described in Sec.  155.220(c)(3) or Sec.  155.221.\142\ Section 
155.20 defines ``agent or broker'' as a person or entity licensed by 
the State as an agent, broker or insurance producer.
---------------------------------------------------------------------------

    \142\ The term also includes an agent or broker direct 
enrollment technology provider. See Sec.  155.20.
---------------------------------------------------------------------------

    We are not proposing amendments to our existing regulations to 
codify our approach to hold agencies accountable for misconduct or 
noncompliance with applicable standards and requirements in Sec.  
155.220 because they can reasonably be interpreted to apply to agencies 
that are involved in Exchange enrollment transactions, since agencies 
are entities licensed by the State as an agent, broker, or insurance 
producer. As such, agencies would fall under the current definitions of 
``agent or broker'' and ``web-broker'' in Sec.  155.20.
    Many FFE or SBE-FP enrollments are conducted by individual agents, 
brokers, or web-brokers who work for an agency and provide the agency's 
business NPN on the consumer's eligibility application submitted to an 
FFE or SBE-FP. An agency's business NPN can be included on a consumer's 
eligibility application when individual agents, brokers, or web-brokers 
who work at the agency are assisting consumers with enrolling in QHPs 
or applying for APTC and CSRs and the person associated with the 
agency's business NPN completes the FFE registration process, takes the 
required training, and signs the applicable Exchange Agreements \143\ 
with CMS. These are annual requirements that need to be met anew each 
plan year.\144\ In addition, Exchange enrollees or applicants may 
provide their consent to enroll in a QHP offered through an Exchange to 
an entire agency instead of, or in addition to, an individual agent, 
broker, or web-broker. This provides more flexibility, both for agents, 
brokers, web-brokers, and enrollees and applicants, by helping ensure 
consumers are able to reach someone who is authorized to assist them if 
they have questions or wish to make a plan change in the future, which 
also helps improve the consumer's experience.
---------------------------------------------------------------------------

    \143\ There are currently three Exchange Agreements with CMS 
that extend to agents or brokers assisting consumers in the FFEs and 
SBE-FPs: (1) the Agent Broker General Agreement for Individual 
Market FFEs and SBE-FPs, (2) the Agent Broker Privacy and Security 
Agreement for Individual Market FFEs and SBE-FPs, and (3) the Agent 
Broker SHOP Privacy and Security Agreement. Web-brokers assisting 
consumers in the FFEs and SBE-FPs are required to sign the Web-
broker General Agreement, and web-brokers who are primary Enhanced 
Direct Enrollment (EDE) entities that assist consumers in the FFEs 
and SBE-FPs are required to sign the EDE Business Agreement and the 
Interconnection Security Agreement.
    \144\ In addition, each individual agent or broker who wishes to 
include the business entity NPN on Exchange eligibility applications 
must also complete the annual registration process, take the 
required trainings, and sign the applicable Exchange Agreements with 
CMS for the applicable plan year using their individual NPN.
---------------------------------------------------------------------------

    The listing of a business NPN on the consumer's eligibility 
application or enrollment transaction submitted to an FFE or SBE-FP 
underscores the importance of holding agencies accountable for 
complying with the same standards and requirements as individual 
agents, brokers, or web-brokers. Applications and enrollments submitted 
to an FFE or SBE-FP that include a business NPN can impact Exchange 
operations, Exchange information technology systems, and Exchange 
enrollees or applicants, similar to situations where an individual 
agent, broker, or web-broker who does not work for an agency submits an 
application or enrollment to an FFE or SBE-FP. As such, we are 
addressing our authority to reach misconduct or noncompliance occurring 
at an agency-level and discussing how we intend to utilize this 
existing authority to hold agencies accountable for agency-level 
misconduct or noncompliance.
    Section 1312(e) of the ACA directs the Secretary to establish 
procedures under which a State may permit agents and brokers to enroll 
individuals and employers in QHPs through an Exchange and to assist 
individuals in applying for financial assistance for QHPs sold through 
an Exchange. In addition, section 1313(a)(5)(A) of the ACA directs the 
Secretary to provide for the efficient and nondiscriminatory 
administration of Exchange activities and to implement any measure or 
procedure the Secretary determines is appropriate to reduce fraud and 
abuse. Section 1321(a) of the ACA provides broad authority to the 
Secretary to establish standards and issue regulations to implement the 
statutory requirements related to Exchanges, QHPs, and other components 
of title I of the ACA, which includes sections 1312 and 1313 of the 
ACA, and this statutory provision also provides the Secretary authority 
to implement other requirements as the Secretary determines 
appropriate. In prior rulemakings, we used these authorities to adopt 
Sec.  155.220, which establishes standards and requirements applicable 
to agents, brokers, and web-brokers assisting individuals, employers, 
or employees with enrollment in QHPs offered through an Exchange.
    We propose to utilize the same authorities against lead agents 
\145\ that are currently used to engage in compliance reviews of and 
enforcement actions against agents, brokers, and web-brokers. This 
includes the agent, broker, and web-broker compliance reviews and 
enforcement actions under Sec.  155.220, which allow HHS to 
periodically monitor and audit an agent, broker, or

[[Page 82358]]

web-broker to assess their compliance with the applicable requirements 
of Sec.  155.220.\146\ Section 155.220(g) sets forth standards for 
suspension and termination of the agent's, broker's, or web-broker's 
Exchange Agreements for cause, which ends their participation in the 
FFEs.\147\ These enforcement actions may be taken in three situations: 
(1) for specific findings or patterns of noncompliance,\148\ (2) 
failure to maintain proper licensure in all States where the agent, 
broker, or web-broker is assisting consumers,\149\ and (3) for engaging 
in fraud or abusive conduct.\150\ Section 155.220(k) sets forth 
penalties other than suspension or termination of the agent's, 
broker's, or web-broker's Exchange Agreements for the current plan 
year. If an agent, broker, or web-broker fails to comply with the 
requirements of Sec.  155.220, HHS may deny an agent, broker, or web-
broker the right to enter into Exchange Agreements in future years 
\151\ or impose a civil money penalty as described in Sec.  
155.285.\152\ Lastly, HHS may immediately impose a system suspension 
against an agent or broker if HHS discovers circumstances that pose 
unacceptable risk to Exchange operations or Exchange information 
technology systems.\153\ System suspensions differ from Exchange 
Agreement suspensions because they prevent the agent or broker from 
utilizing Direct Enrollment (DE) platforms to enroll consumers but do 
not prevent them from enrolling consumers using HealthCare.gov or the 
Marketplace Call Center because they are still considered registered 
with the FFE.
---------------------------------------------------------------------------

    \145\ See supra note 138.
    \146\ 45 CFR 155.220(c)(5).
    \147\ We notify State Departments of Insurance when we suspend 
or terminate the Exchange Agreement(s) of an agent, broker, or web-
broker under Sec.  155.220(g), per Sec.  155.220(g)(6). We also 
maintain and publish the Agent and Broker Federally-facilitated 
Marketplace (FFM) Registration Termination List, which allows QHP 
issuers, consumers, and other interested parties to search for NPNs 
associated with agents, brokers, and web-brokers whose Exchange 
Agreement(s) have been terminated or suspended. See https://data.healthcare.gov/ab-suspension-and-termination-list.
    \148\ 45 CFR 155.220(g)(1).
    \149\ 45 CFR 155.220(g)(3)(ii).
    \150\ 45 CFR 155.220(g)(5).
    \151\ 45 CFR 155.220(k)(1)(i).
    \152\ 45 CFR 155.220(k)(1)(ii).
    \153\ 45 CFR 155.220(k)(3). HHS also authority to temporarily 
suspend the ability of a web-broker to make its non-Exchange website 
available to transact information with HHS, if HHS discovers a 
security and privacy incident or breach, for the period in which HHS 
begins to conduct an investigation and until the incident or breach 
is remedied to HHS' satisfaction. See 45 CFR 155.220(c)(4)(ii).
---------------------------------------------------------------------------

    Consistent with Sec.  155.220(l), the FFE standards and 
requirements in Sec.  155.220 also apply to agents, brokers, and web-
brokers that assist with or facilitate enrollment in States with SBE-
FPs.\154\ Under the approach described in this preamble, leveraging the 
existing definitions of ``agent or broker'' and ``web-broker'' in Sec.  
155.20, we would also extend our authority to engage in compliance 
reviews and take enforcement actions to reach lead agents in both FFE 
and SBE-FP States who may be engaged in misconduct or are noncompliant 
with applicable standards and requirements in Sec.  155.220. We believe 
this would better align our oversight and enforcement approach with how 
States regulate agencies.
---------------------------------------------------------------------------

    \154\ This includes the extension of the HHS authorities under 
Sec.  155.220 to engage in compliance reviews and take enforcement 
actions with respect to misconduct or noncompliance by agents, 
brokers, or web-brokers in States with SBE-FPs.
---------------------------------------------------------------------------

    The NPN is a unique identifier for an agent, broker, web-broker, or 
agency that the National Association of Insurance Commissioners assigns 
during the State licensing application process. The NPN can be recorded 
as part of the consumer's Exchange eligibility application and is used 
to track which individual agents, brokers, or web-brokers and agencies 
assisted Exchange consumers. QHP issuers use the NPN to identify the 
agent, broker, web-broker, or agency for compensation purposes. Either 
the NPN of the individual agent, broker, or web-broker assisting the 
consumer, or the business NPN of the agency, may be listed on the 
consumer's eligibility application submitted to an FFE or SBE-FP. In 
the most recent Open Enrollment survey, approximately 4 percent of 
respondents attested to using a business NPN for all their 
enrollments.\155\ That means at least 640,000 enrollments \156\ 
contained an NPN that did not belong to an individual agent, broker, or 
web-broker. The NPN, when provided, is a key identifying element in any 
compliance review under Sec.  155.220(c)(5) or enforcement action by 
HHS under Sec.  155.220(c)(4)(ii), (g)(1), (g)(3)(ii), (g)(5), 
(k)(1)(i), (k)(1)(ii), and (k)(3).
---------------------------------------------------------------------------

    \155\ Open Enrollment Survey, conducted between January 29, 
2024, and February 14, 2024.
    \156\ Based on the PY 2024 enrollment total of 16 million 
consumers.
---------------------------------------------------------------------------

    Under the approach described in this preamble, when information 
suggests there is agency-level misconduct or noncompliance, an 
investigation or compliance review would occur, and enforcement action 
may be taken. Any such compliance review, or enforcement action would 
be directed at the lead agent(s) and any other agent, broker, or web-
broker who is discovered to be involved in the misconduct or 
noncompliant activity. When the misconduct or noncompliant activity is 
occurring at the agency-level, we believe it is appropriate for the 
lead agents to be subject to the compliance review, or enforcement 
action, in addition to the agents, brokers, or web-brokers working at 
or for an agency that may have been involved in the misconduct or 
noncompliant activity, as those lead agents are the individuals 
responsible for directing and/or overseeing their employees' and 
contractors' behavior and activity. Engaging in compliance reviews and 
taking enforcement actions against lead agents in these circumstances 
would ensure that the individuals who are directing and/or overseeing 
the misconduct or noncompliance are held accountable.
    The first step (of two) we would take in determining if we would 
engage in a compliance review or enforcement action against the lead 
agents would be to determine if there appears to be agency-level 
endorsement of, or agency-level involvement in,\157\ the misconduct or 
noncompliant behavior or activities of the agency's employees, 
contractors, or other agents, brokers, or web-brokers. Endorsement 
would involve the agency supporting or approving, either explicitly or 
implicitly, the relevant misconduct or noncompliant behavior or 
activities. Explicit endorsement may include written directives to 
agents, brokers, or web-brokers to engage in certain impermissible 
behavior, such as to submit eligibility applications without obtaining 
and documenting review and confirmation by the consumer (or their 
authorized representative) of the accuracy of the eligibility 
application information, as required by Sec.  155.200(j)(2)(ii). 
Implicit endorsement may involve an agency continuing to employ an 
agent, broker, or web-broker whom they know has submitted consumer 
eligibility applications without first obtaining and documenting 
consumer consent, as required by Sec.  155.200(j)(2)(iii).
---------------------------------------------------------------------------

    \157\ Examples, but not an exhaustive list, of agency-level 
involvement could be agency-level directives or materials provided 
to employees telling them to engage in such activity or the agency 
not stopping noncompliant behavior when the agency is aware of it.
---------------------------------------------------------------------------

    Agency-level endorsement would indicate the misconduct or 
noncompliant behavior or activities are not random, isolated 
occurrences undertaken by a singular agent, broker, or web-broker and 
that the agency, and its lead agent(s), may be complicit in such 
misconduct or noncompliant behavior or activities. Determining if there 
is agency-level endorsement or involvement would involve review of

[[Page 82359]]

several sources of information, some of which we discuss below. One 
source of information is data metrics involving lead agents, such as 
compliance data, to determine if we have received complaints directed 
towards an individual who is a lead agent for the agency in question. 
An agency whose lead agent is named in complaints, especially for 
unauthorized enrollments or other potentially fraudulent or 
noncompliant activity, could trigger a compliance review or enforcement 
action against the lead agent(s) at the agency, as it could indicate 
agency endorsement of or involvement in misconduct or noncompliant 
behavior or activities, including inaction by the agency to try to curb 
the misconduct or noncompliant behavior or activities. We would also 
look to see if complaints against a lead agent for an agency are 
similar to complaints received against the agency's other agents, 
brokers, or web-broker,\158\ which could indicate agency-level 
endorsement or involvement in the misconduct or noncompliant behavior 
or activities.
---------------------------------------------------------------------------

    \158\ We would look at agent, broker, and web-broker email 
addresses or other submitted information, such as consent 
documentation or the NPN listed on the Exchange eligibility 
application, to help discern if there is a connection or 
relationship between an agent, broker, or web-broker and an agency.
---------------------------------------------------------------------------

    Additionally, we would utilize system monitoring to identify 
potential misconduct or noncompliant behavior or activities. For 
example, we currently engage, and would continue to engage, in system 
monitoring by analyzing person searches on approved Classic DE and EDE 
partner sites to identify data trends that could indicate potential 
misconduct or noncompliant behavior or activities. Past investigations 
using system monitoring data have borne results that show a connection 
between potentially noncompliant, fraudulent, or abusive behavior and 
the trends we monitor. For example, we monitor the number of 
unsuccessful person searches on approved Classic DE and EDE partner 
sites because, in our experience, there is often a correlation between 
a high volume of unsuccessful person searches and noncompliant, 
fraudulent, or abusive behavior. The person search feature is intended 
to help agents, brokers, and web-brokers find consumer applications to 
prevent duplicate enrollments, but in our experience, bad actors use 
this feature to find applications and make plan changes or NPN changes 
without consumer knowledge or consent, negatively impacting the 
consumer and compliant agents, brokers, and web-brokers. However, 
because bad-acting agents, brokers, or web-brokers often do not have 
exact or complete consumer information, their person searches may not 
direct them to the consumer applications they are searching for, 
frequently leading them to run more unsuccessful searches using 
slightly different, yet incomplete or otherwise inaccurate, consumer 
information. Therefore, we monitor and would, under this proposal, 
continue to monitor, unsuccessful person searches on approved Classic 
DE and EDE partner websites to identify potential bad-actors.
    Discovering agency-wide resources, such as company practices or 
directives, training manuals, or marketing material that suggests 
agency endorsement of or involvement in misconduct or noncompliant 
behavior or activities is another source of information we would use to 
determine whether to engage in a compliance review or take an 
enforcement action against the lead agents or other agents, brokers, or 
web-brokers who may be involved in the misconduct or noncompliant 
behavior or activities. We have seen agency-wide resources, such as 
training manuals or marketing documents, that contain information, 
promotions, or sales tactics suggestive of agency endorsement of or 
involvement in misconduct or noncompliant behavior or activities. For 
example, as part of compliance investigations and enforcement actions, 
we have seen agency documentation instructing agents and brokers who 
work at the agency to fabricate enrollee or applicant incomes on 
eligibility applications submitted to the FFEs or SBE-FPs to ensure the 
enrollee or applicant has a zero-dollar policy.\159\ This can lead to 
consumers being enrolled in QHPs offered through Exchanges with zero-
dollar premiums without their knowledge or consent. This, in turn, can 
lead to consumers owing money to the IRS during tax reconciliation 
because they were receiving APTC amounts but were not aware of this 
because their monthly premium was zero dollars.<SUP>160 161</SUP> 
Additionally, as part of these investigations and actions, we have 
reviewed agency procedures and directives instructing agents and 
brokers who work at the agency to not speak with the enrollee or 
applicant prior to enrolling them in a plan.\162\ Not speaking with 
enrollees or applicants prior to submitting an enrollment may cause the 
consumer to receive incorrect APTC amounts, which the consumer will 
have to repay in the future, or may cause a consumer to receive data 
matching issues (DMIs), which, if left unresolved, can lead to loss of 
coverage.\163\ Upon eligibility application submission, certain 
consumer data is checked against trusted data sources to ensure a match 
between what is in the application submission and the information HHS 
receives from the trusted data source(s). If the trusted data source 
does not have the consumer data or the data is inconsistent with the 
information provided on the application, a DMI is generated. A non-
exhaustive list of DMIs include the Annual Income DMI, Citizenship/
Immigration DMI, and American Indian/Alaskan Native Status DMI. Certain 
DMIs may lead to loss of Exchange coverage, including a Citizenship/
Immigration DMI, which occurs when the consumer is unable to verify an 
eligible citizenship or lawful presence status.
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    \159\ Fabricating an individual's income violates Sec. Sec.  
155.220(j)(2)(ii) and (j)(2)(ii)(E), which generally state that 
agents, brokers, and web-brokers must ``Provide the Federally-
facilitated Exchanges with correct information . . .'' and household 
income projections must only be submitted when ``. . . the consumer 
or the consumer's authorized representative . . . has knowingly 
authorized and confirmed as accurate.'' The same standards and 
requirements apply to SBE-FP States. See 45 CFR 155.220(l).
    \160\ Appleby, J. (2024, May 7). How the government is trying to 
stop rogue brokers from plaguing ACA enrollees. KFF News, https://www.npr.org/sections/health-shots/2024/05/07/1249417648/aca-health-insurance-brokers-obamacare-stop-fraud.
    \161\ Consumers who find errors on their Form 1095-A, which 
contains information on APTC received, should contact the 
Marketplace Call Center to report any errors and discuss next steps 
for resolution. Additional information can be found here: https://www.healthcare.gov/taxes/.
    \162\ Failing to speak with the enrollee or applicant prior to 
enrolling them in a QHP offered on the Exchange violates Sec.  
155.220(j)(2)(ii)(A), which states eligibility application 
information must be ``reviewed by and confirmed to be accurate by 
the consumer . . .'' prior to submission. It also calls in question 
whether the agent, broker, or web-broker complied with the 
requirement in Sec.  155.220(j)(2)(iii) to obtain and document the 
consumer's consent prior to assisting the consumer with the Exchange 
application and enrollment.
    \163\ For information on how to address any tax implications of 
APTC, consumers should refer to resources available at: https://www.healthcare.gov/taxes/.
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    Once we determined there is information or evidence suggesting 
there may be agency-level endorsement of or involvement in misconduct 
or noncompliant behavior or activities, we would then determine if the 
agency was involved in or facilitated the submission of the consumer's 
eligibility application or enrollment to the FFEs or SBE-FPs. This 
would also inform our determination of whether to engage in a 
compliance review or take enforcement action against the lead agent(s) 
or other agents, brokers, or web-brokers who may be involved in the 
misconduct or

[[Page 82360]]

noncompliant behavior or activities. Determining if the agency was 
involved in or facilitated the submission of the consumer's eligibility 
application or enrollment to the FFEs or SBE-FPs would involve looking 
at the agency's business practices and what resources it provides its 
agents, brokers, or web-brokers. In our experience, the more resources 
an agency allocates to supporting the ability of an agent, broker, or 
web-broker to enroll enrollees and applicants, the more indicative it 
is that the agency facilitates the submission of the eligibility 
application and enrollments to an FFE or SBE-FP. For example, if an 
agency provides an agent, broker, or web-broker with a training 
program, an email address with an agency domain, and access to other 
agency resources that support enrollment, such as a call center that 
intakes potential consumers to gather basic information, these are all 
indications the agency wants to make enrollments easier for the agent, 
broker, or web-broker and that the agency facilitates the submission of 
Exchange applications and enrollments. As previously noted, the 
inclusion of the business NPN is another clear indication of the 
agency's involvement in the submission of the Exchange application or 
enrollment transaction. This would be another critical piece of 
information that we would consider as we determine whether to engage in 
a compliance review or take enforcement action against the lead 
agent(s) or other agents, brokers, or web-brokers who may be involved 
in the misconduct or noncompliant behavior or activities.
    We seek comment on these proposals. In particular, we are 
interested in comments from States as to the specific or unique 
characteristics of their agency oversight policies and procedures, 
including how they define or describe the term ``lead agent,'' or 
whatever term of art each State uses to capture our definition of 
``lead agent'' in this preamble, as well as suggestions from States for 
ways to enhance collaboration and alignment of our oversight and 
enforcement of agencies that assist consumers applying for and 
enrolling in QHPs through the FFEs and SBE-FPs. We are also interested 
in comments from Classic DE and EDE partners, issuers, and other 
interested parties regarding whether we should consider an agent, 
broker, or web-broker that allows their NPN to be used by other agents, 
brokers, or web-brokers to be a lead agent and potentially held 
responsible for misconduct or noncompliant behavior or activities 
committed by another agent, broker, or web-broker using their NPN.
b. System Suspension Authority
    We propose to amend Sec.  155.220(k)(3), which outlines our 
authority to immediately suspend an agent's or broker's ability to 
transact information with the Exchange if we discover circumstances 
that pose unacceptable risk to Exchange operations or Exchange 
information technology systems until the incident or breach is 
sufficiently remedied or sufficiently mitigated to HHS' satisfaction. 
Specifically, we propose to add language to reflect that Sec.  
155.220(k)(3) system suspensions may be imposed in instances in which 
we discover circumstances that pose unacceptable risk to the accuracy 
of the Exchange's eligibility determinations, Exchange operations, 
applicants, or enrollees, or Exchange information technology systems, 
including but not limited to risk related to noncompliance with the 
standards of conduct under Sec.  155.220(j)(2)(i), (ii) or (iii) or the 
privacy and security standards at Sec.  155.260,\164\ until the 
circumstances of the incident, breach, or noncompliance are remedied or 
sufficiently mitigated to HHS' satisfaction. We believe these 
amendments are necessary and appropriate Exchange program integrity 
measures to support the efficient administration of Exchange 
activities, reduce fraud and abuse, and protect Exchange applicant or 
enrollee personally identifiable information (PII).
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    \164\ Section 155.220(d)(3) requires agents and brokers to enter 
into a Privacy and Security Agreement pursuant to which they agree 
to comply with Exchange privacy and security standards adopted 
consistent with Sec.  155.260. There are two Privacy and Security 
Agreements between CMS and the agent, broker, and web-broker for 
FFEs and SBE-FPs: (1) one is for the individual market FFEs and SBE-
FPs, and (2) one is for the FF-SHOPs and SBE-FP-SHOPs.
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    Section 1312(e) of the ACA provides the Secretary with authority to 
establish procedures under which a State may allow agents or brokers to 
(1) enroll individuals and employers in any QHPs in the individual or 
small group market once the plan is offered through an Exchange in the 
State; and (2) assist individuals in applying for PTC and CSRs for 
plans sold through an Exchange. In addition, section 1313(a)(5)(A) of 
the ACA directs the Secretary to provide for the efficient and non-
discriminatory administration of Exchange activities and to implement 
any measure or procedure the Secretary determines is appropriate to 
reduce fraud and abuse. Section 1321(a) of the ACA provides broad 
authority to the Secretary to establish standards and issue regulations 
to implement the statutory requirements related to Exchanges, QHPs, and 
other components of title I of the ACA, which includes sections 1312 
and 1313. Section 1321(a) of the ACA also provides the Secretary with 
authority to implement other requirements as the Secretary determines 
appropriate. In prior rulemakings, we used these authorities to adopt 
Sec.  155.220, which establishes standards and requirements applicable 
to agents, brokers, and web-brokers assisting individuals, employers, 
or employees with enrollment in QHPs offered through the FFEs, 
including the system suspension authority in Sec.  155.220(k)(3). 
Consistent with Sec.  155.220(l), the FFE standards and requirements in 
Sec.  155.220 also apply to agents, brokers and web-brokers that assist 
with or facilitate enrollment in States with SBE-FPs.\165\
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    \165\ This includes the extension of the system suspension 
authority under Sec.  155.220(k)(3).
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    As we explained in the 2020 Payment Notice,\166\ to promote 
information technology system security in the FFEs and SBE-FPs, 
including the protection of consumer data, we codified paragraph Sec.  
155.220(k)(3) to capture HHS' authority to immediately suspend an 
agent's or broker's ability to transact information with the Exchange 
if HHS discovers circumstances that pose unacceptable risk to Exchange 
operations or Exchange information technology systems until the 
incident or breach is remedied or sufficiently mitigated to HHS' 
satisfaction.\167\ We explained this provision was necessary and 
appropriate to ensure that HHS can take immediate action to stop 
unacceptable risks to Exchange operations or systems posed by agents 
and brokers, as well as take immediate action to protect sensitive 
consumer data.\168\ This provision currently applies to agents and 
brokers who, once registered under Sec.  155.220(d)(1), obtain 
credentials that provide access to Exchange systems that may be misused 
in a manner that threatens the security of the Exchange's operations or 
information technology systems. When an agent's or broker's ability to 
transact information with the Exchange is

[[Page 82361]]

suspended under this authority, they remain registered with the FFEs 
and are authorized to assist FFE and SBE-FP consumers using the 
Exchange (or side-by-side) Pathway \169\ and the Marketplace Call 
Center, unless and until their Exchange Agreements are suspended or 
terminated under Sec.  155.220(f) or (g).\170\
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    \166\ 84 FR 17517. Also see the 2020 Payment Notice proposed 
rule, 84 FR 272.
    \167\ This is similar to the authority captured at Sec.  
155.221(e) that applies to DE entities and permits HHS to 
immediately suspend the DE entity's ability to transact information 
with the Exchange if HHS discovers circumstances that pose 
unacceptable risk to the accuracy of the Exchange's eligibility 
determinations, Exchange operations, or Exchange information 
technology systems until the incident or breach is remedied or 
sufficiently mitigated to HHS' satisfaction.
    \168\ 84 FR 17517. Also see the 2020 Payment Notice proposed 
rule, 84 FR 272.
    \169\ For more information on the Exchange Pathway, please see, 
CMS. (2016, Nov. 8). Health Insurance Marketplace Guidance: Role of 
Agents, Brokers, and Web-brokers in Health Insurance Marketplace. 
https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Role-of-ABs-in-Marketplace_Nov-2016_Final.pdf.
    \170\ 84 FR 17517.
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    We propose to amend Sec.  155.220(k)(3) to reflect that HHS may 
immediately suspend the agent's or broker's ability to transact 
information with the Exchange if HHS discovers circumstances that pose 
unacceptable risk to the accuracy of the Exchange's eligibility 
determinations, Exchange operations, applicants, or enrollees, or 
Exchange information technology systems, including but not limited to 
risk related to noncompliance with the standards of conduct under Sec.  
155.220(j)(2)(i), (ii) or (iii) and the privacy and security standards 
under Sec.  155.260, until the circumstances of the incident, breach, 
or noncompliance are remedied or sufficiently mitigated to HHS' 
satisfaction.\171\ We are pursuing these amendments in the interest of 
transparency and to more clearly capture in regulation when HHS may 
invoke this authority. As noted above, we also believe these are 
necessary and appropriate Exchange program integrity measures to 
support the efficient administration of Exchange activities, reduce 
fraud and abuse, and protect Exchange applicant or enrollee PII.
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    \171\ We are not proposing to add a reference to web-brokers as 
part of these amendments to Sec.  155.220(k)(3) because, as DE 
entities, web-brokers are subject to the system suspension authority 
at Sec.  155.221(e). See Sec.  155.221(a)(2). This is similar to the 
authority captured at Sec.  155.221(e) that applies to DE entities 
and permits HHS to immediately suspend the DE entity's ability to 
transact information with the Exchange if HHS discovers 
circumstances that pose unacceptable risk to the accuracy of the 
Exchange's eligibility determinations, Exchange operations, or 
Exchange information technology systems until the incident or breach 
is remedied or sufficiently mitigated to HHS' satisfaction.
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    We continuously monitor for behaviors or activities related to 
Exchange operations or access to Exchange systems and enrollee or 
applicant PII that we believe, based on our experience overseeing 
agents and brokers on the FFEs and SBE-FPs, may be indicative of 
misconduct or noncompliance with applicable HHS Exchange standards or 
requirements. Our experience overseeing agents and brokers on the FFEs 
and SBE-FPs includes past completed agent, broker, and web-broker 
investigations and enforcement actions, and observations of behavior by 
agents and brokers that may not comply with the standards of conduct at 
Sec.  155.220(j)(2)(i), (ii) or (iii) or the privacy and security 
standards at Sec.  155.260 and that could endanger the accuracy of 
Exchange eligibility determinations, applicant or enrollee PII, or 
Exchange operations or systems in a number of ways.
    A non-exhaustive list of agent or broker data we monitor to 
identify behaviors or activities that may be indicative of misconduct 
or noncompliance with applicable HHS Exchange standards or requirements 
includes: (1) the number of Exchange transactions submitted to the FFEs 
or SBE-FPs to change enrollee or applicant eligibility application 
information or plan selections, (2) the volume of person search 
activities, (3) the number of submitted eligibility applications with 
missing Social Security Numbers (SSNs), (4) the number of enrollments 
submitted within a specified time-frame, and (5) the volume of 
submitted eligibility applications with NPN changes. We also review and 
consider complaints from enrollees, applicants, and other individuals 
or entities concerning agent and broker activities.\172\
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    \172\ Complaints may be submitted to the Marketplace Call 
Center. See https://www.cms.gov/files/document/agent/broker-help-desks.pdf.
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    Once we receive a complaint or identify concerning or anomalous 
data, we review the complaint and/or data to determine if there is 
information that suggests the impacted enrollees or applicants may have 
authorized the agent or broker to submit an Exchange eligibility 
application, or an update to an existing enrollment, on their behalf. 
We then review the available documentation and application details and 
may contact the agent or broker and interview Exchange enrollees or 
applicants to gather more information. Depending on the results of this 
preliminary investigation, agents or brokers may be provided additional 
education and technical assistance, or we may implement a system 
suspension under Sec.  155.220(k)(3) if we discover circumstances that 
pose unacceptable risk to Exchange operations or Exchange information 
technology systems.
    There are different factors we consider when deciding whether to 
implement a system suspension under Sec.  155.220(k)(3) or offer 
technical assistance. These factors include the number of times that 
our data, including complaints we receive, indicate that an agent or 
broker may have engaged in misconduct or noncompliance with applicable 
HHS Exchange standards or requirements, the number of consumers 
impacted by their suspected misconduct or noncompliant behavior or 
activities, and the severity of the alleged misconduct or noncompliant 
behavior or activities. We would continue these practices for system 
suspensions under the proposed updates in this rule to Sec.  
155.220(k)(3), which would expand the bases for imposing a system 
suspension to include situations that pose unacceptable risk to the 
accuracy of Exchange eligibility determinations, Exchange applicants, 
and Exchange enrollees. This proposed amendment to Sec.  155.220(k)(3) 
aligns with the approach outlined in the 2020 Payment Notice (84 FR 
17517) and is in response to misconduct and noncompliant behavior and 
activities by agents and brokers that we have observed in connection 
with our oversight of the FFEs and SBE-FPs. This proposal is designed 
to promote information technology system security in the FFEs and SBE-
FPs, including the protection of consumer data, reduce fraud and abuse, 
and support the efficient administration of Exchange activities.
    Consistent with the existing framework, in circumstances where we 
would impose a system suspension under the proposed amendments to Sec.  
155.220(k)(3), we would notify the agent or broker of the suspension 
and they would have an opportunity to submit evidence and information 
or to demonstrate that the circumstances of the incident, breach, or 
noncompliance are sufficiently remedied or mitigated to HHS' 
satisfaction to warrant lifting the suspension to reinstate their 
system access. We would review such evidence and information submitted 
by the agent or broker to determine if the circumstances of the 
incident, breach, or noncompliance are sufficiently remedied or 
mitigated to warrant lifting the suspension to reinstate their system 
access. For example, we anticipate receiving documentation of consumer 
consent and/or review and confirmation of the accuracy of the Exchange 
eligibility application information and assessing whether the 
documentation complies with Sec.  155.220(j)(2)(ii) and (iii) for 
consumers cited in the suspension notice from agents and brokers we 
system suspend under Sec.  155.220(k)(3). If such evidence or 
information sufficiently remedies or mitigates the incident, breach or 
noncompliance to our satisfaction, we would lift the

[[Page 82362]]

suspension and reinstate Exchange system access for the agent or 
broker.
    In cases where such evidence and information does not sufficiently 
remedy or mitigate the circumstances of the incident, breach or 
noncompliance to HHS' satisfaction (including situations where there is 
no response from the agent or broker), we would not lift the suspension 
under Sec.  155.220(k)(3) to reinstate the agent's or broker's system 
access and would pursue a suspension or termination of the agent's or 
broker's Exchange Agreements under Sec.  155.220(g). As previously 
noted, agents and brokers whose ability to transact information with 
the Exchange is suspended under Sec.  155.220(k)(3) remain registered 
with the FFEs and are authorized to assist consumers using the Exchange 
(or side-by-side) pathway and the Marketplace Call Center, unless and 
until their Exchange Agreements are suspended or terminated under Sec.  
155.220(f) or (g).
    We are pursuing these amendments at this time in light of recent 
increases in behavior by agents and brokers that indicate potential 
violations of Sec.  155.220(j)(2)(i), (ii) or (iii) or the privacy and 
security standards at Sec.  155.260 and endangers applicant or enrollee 
PII or Exchange program integrity in a manner that poses unacceptable 
risk to the accuracy of Exchange eligibility determinations, Exchange 
operations, applicants, or enrollees, or Exchange information 
technology systems.
    Since the start of PY 2024 Open Enrollment, we have seen an 
increase in complaints from enrollees, applicants, and other 
individuals and entities to the Agent/Broker Help Desk regarding 
enrollments submitted without enrollee or applicant consent, enrollee 
or applicant eligibility applications submitted with incorrect 
information and without enrollee or applicant review or confirmation of 
the eligibility application information, and changes to enrollee or 
applicant eligibility applications made without enrollee or applicant 
consent.\173\ A significant portion of these complaints have involved 
unauthorized changes to the plans in which enrollees or applicants were 
enrolled, impacting the ability of enrollees or applicants to utilize 
their desired coverage and access care.\174\
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    \173\ CMS. (2024, July 19). CMS Statement on System Changes to 
Stop Unauthorized Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-statement-system-changes-stop-unauthorized-agent-and-broker-marketplace-activity.
    \174\ When consumers call the Marketplace Call Center to report 
unauthorized enrollments, we resolve their complaints through a 
combination of the following: (1) we review the complaint to verify 
that the consumer's plan switch was unauthorized and identify the 
plan that the consumer wants to be enrolled in; (2) we instruct the 
issuer offering the plan the consumer wants to be enrolled in to 
reinstate the consumer's enrollment in that plan as if it had not 
been terminated. The insurer is instructed to cover all eligible 
claims incurred and accumulate all cost sharing toward applicable 
deductibles and annual limits on cost sharing; and/or (3) consumers 
receive updated tax forms and information via a 1095-A that is 
generated by HHS and which the enrollee sends to the IRS to prevent 
adverse tax implications as a result of the unauthorized plan switch 
activity.
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    Unauthorized plan changes may harm enrollees or applicants by 
removing them from their selected plan and placing them in another plan 
that may not provide coverage that meets their needs (for example, 
different plans can have different formularies and provider networks). 
Unauthorized enrollments can also involve situations where individuals 
are enrolled in an Exchange plan without having an existing Exchange 
plan. Being enrolled in an Exchange plan, including in the case of an 
unauthorized enrollment, may impact a consumer's future ability to 
enroll in health insurance through the Exchange or enroll in Medicare 
or Medicaid, as a consumer may not enroll in more than one plan 
simultaneously. Unauthorized enrollments may also create premium costs 
for the consumer if the unauthorized enrollment is in a non-zero-dollar 
premium plan. Unauthorized plan changes and enrollments cost the 
consumer time to learn about and resolve the discrepancy and either (1) 
unenroll from a plan they did not want, or (2) change the plan to one 
that better meets their needs.
    Additionally, submission of eligibility applications with 
inaccurate enrollee or applicant data, such as an incorrect income, may 
cause harm by providing the enrollee or applicant with an incorrect 
APTC amount. An incorrect APTC amount can result in a consumer 
erroneously receiving a zero-dollar monthly premium. Because the 
consumer does not receive monthly billing notifications due to the 
zero-dollar premiums, they may not know they were enrolled or that 
their eligibility application information was incorrect. However, once 
the consumer files their taxes, a reconciliation may reveal that the 
consumer must repay the incorrect APTC amount they were receiving. By 
their nature, these unauthorized enrollments and plan changes involve 
the misuse of enrollee or applicant PII, and they threaten the 
efficient administration of the Exchange and the accuracy of Exchange 
eligibility determinations.
    Our experience monitoring compliance with the new requirements in 
Sec.  155.220(j)(2)(i), (ii), and (iii) has also shown that agents, 
brokers, and web-brokers are engaging in misconduct or noncompliant 
behavior or activities. For example, their consumer consent and 
eligibility application information review documentation often lacks 
the required content specified in Sec.  155.220(j)(2)(ii) or (iii) that 
demonstrates the applicant or enrollee has taken an action to provide 
consent or confirm the accuracy of the eligibility application 
information prior to submission to the Exchange. For example, we have 
seen consent documentation that solely lists numbers that the agent, 
broker, or web-broker claims tie back to the consumer's IP address, 
which we cannot verify and does not meet the consent documentation 
requirements of Sec.  155.220(j)(2)(iii). Additionally, we have 
received consent documentation that is merely a name, typed using a 
cursive script, with no indication the consumer took an action to 
confirm their consent to the assistance provided by the agent, broker, 
or web-broker, such as a text message response, email response, or 
signature.\175\ The proposed amendments to Sec.  155.220(k)(3) to 
permit immediate system suspensions would support HHS' efforts to take 
immediate action to prevent further enrollee, applicant, Exchange 
operational, Exchange information technology, or Exchange program 
integrity harm caused by agents and brokers engaged in these types of 
misconduct.
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    \175\ A typed name using a cursive script, alone, makes it 
impossible for CMS to determine if the consumer, or their authorized 
representative, provided the consent and typed the signature. In 
these situations, supplemental documentation is required for CMS to 
assess compliance with the consent requirements of Sec.  
155.220(j)(2)(iii).
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    Though we believe our current authority in Sec.  155.220(k)(3) 
allows HHS to implement system suspensions broadly based on 
circumstances that pose unacceptable risk to Exchange operations or 
Exchange information technology systems, in light of the increasing 
complaints about unauthorized enrollments, we propose amendments to 
Sec.  155.220(k)(3) to increase transparency concerning the reach and 
application of system suspensions and more accurately capture in 
regulation when HHS may invoke this authority. These proposed 
amendments would allow HHS to immediately respond to discovered risks 
to the accuracy of Exchange eligibility determinations, Exchange 
operations, applicants, or enrollees, or Exchange information 
technology systems. They would also provide agents and brokers with an 
increased understanding of our

[[Page 82363]]

approach to implement system suspensions. The proposed amendments would 
also better encapsulate the original intent of the Sec.  155.220(k)(3) 
suspension authority, which included protecting against unacceptable 
risk to consumer Exchange data.
    We note that the types of misconduct or noncompliant behaviors or 
activities that could lead to a system suspension under Sec.  
155.220(k)(3) could also lead to an enforcement action under Sec.  
155.220(g). However, there are important distinctions between these 
authorities. For example, system suspensions under Sec.  155.220(k)(3) 
allow HHS to immediately suspend an agent or broker's system access. 
These suspensions differ from suspensions or terminations under Sec.  
155.220(g) because they do not suspend or terminate the agent's or 
broker's Exchange Agreement(s).\176\ Rather, they prevent agents or 
brokers from submitting Exchange applications and enrollments through 
the Direct Enrollment Pathways, whether Classic DE or EDE. However, 
while a system suspension is in place, the agent or broker remains 
registered with the FFEs, unless and until their Exchange Agreements 
are suspended or terminated under Sec.  155.220(f) or (g). As such, a 
system suspension does not prohibit the agent or broker from enrolling 
enrollees or applicants via the Marketplace Call Center on a three-way 
call with the enrollees or applicants or side-by-side with an enrollee 
or applicant on HealthCare.gov (also known as the ``Exchange 
Pathway'').\177\ In cases where there is imminent danger to applicants' 
or enrollees' PII or to Exchange program integrity in such a manner 
that poses unacceptable risk to the accuracy of Exchange eligibility 
determinations, Exchange operations, applicants, or enrollees, or 
Exchange information technology systems from the misconduct of agents, 
brokers, or web-brokers, system suspensions under the proposed 
amendments to Sec.  155.220(k)(3) would provide a more immediate action 
to protect applicants' or enrollees' PII and the efficient 
administration of the Exchange, as well as reduce potential fraud and 
abuse.
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    \176\ Consistent with Sec.  155.220(d), there are currently 
three Exchange Agreements with CMS that extend to agents or brokers 
assisting consumers in the FFEs and SBE-FPs: (1) the Agent Broker 
General Agreement for Individual Market FFEs and SBE-FPs, (2) the 
Agent Broker Privacy and Security Agreement for Individual Market 
FFEs and SBE-FPs, and (3) the Agent Broker SHOP Privacy and Security 
Agreement. Web-brokers assisting consumers in the FFEs and SBE-FPs 
are required to sign the Web-broker General Agreement, and web-
brokers who are primary Enhanced Direct Enrollment (EDE) entities 
that assist consumers in the FFEs and SBE-FPs are required to sign 
the EDE Business Agreement and the Interconnection Security 
Agreement. In addition, each individual agent or broker who wishes 
to include the business entity NPN on Exchange eligibility 
applications must also complete the annual registration process, 
take the required trainings, and sign the applicable Exchange 
Agreements with CMS for the applicable plan year using their 
individual NPN.
    \177\ In this pathway, registered agents and brokers help a 
consumer obtain an eligibility determination and select a plan 
directly on HealthCare.gov. The consumer creates an account, logs in 
to the HealthCare.gov website with a consumer account, and 
``drives'' the process; the agent or broker does not log in to 
HealthCare.gov. Generally, the Exchange Pathway requires the agent 
or broker to be sitting side-by-side with the consumer because the 
consumer must sign in to HealthCare.gov without sharing their log-in 
credentials with the agent or broker.
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    In contrast, an enforcement action under Sec.  155.220(g) to 
suspend or terminate an agent's, broker's, or web-broker's Exchange 
Agreement(s) results in the agent, broker, or web-broker no longer 
being registered with the FFEs.\178\ When an agent's, broker's, or web-
broker's Exchange Agreements are suspended, or following the 
termination of the agent's, broker's, or web-broker's Exchange 
Agreements, the agent, broker, or web-broker is also no longer 
permitted to assist with or facilitate enrollment of qualified 
individuals, qualified employers, or qualified employees in coverage in 
a manner that constitutes enrollment through an FFE or SBE-FP, or 
assist individuals in applying for APTC and CSRs for QHPs. As such, 
these agents, brokers, and web-brokers cannot submit Exchange 
applications and enrollments through any of the available pathways--
through Classic DE, EDE, the Marketplace Call Center, and/or through 
the Exchange pathway.
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    \178\ See Sec.  155.220(g)(4) and (5)(iii).
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    Though we would only initiate enforcement action under Sec.  
155.220(k)(3) against agents and brokers based on data or other 
information that suggest noncompliance or misconduct, we recognize that 
data or other information could suggest there is noncompliance or 
misconduct by a compliant agent or broker. For example, in some 
instances, this could occur if an agent or broker works largely or 
exclusively with a specific group of consumers, including those who 
live in low-income communities, communities where life changes 
necessitating eligibility application changes may be more common, or 
communities where some consumers may not have SSNs but are nonetheless 
eligible for Exchange coverage. Consistent with the existing framework, 
when pursuing system suspensions under Sec.  155.220(k)(3), as proposed 
to be amended, agents and brokers would be notified of the system 
suspension and would have an opportunity to submit evidence or other 
information (such as documentation of consumer consent and review of 
the eligibility application information that is compliant with Sec.  
155.220(j)(2)(ii) and (iii)), to demonstrate that the circumstances of 
the incident, breach, or noncompliance concerns are sufficiently 
remedied or mitigated to HHS' satisfaction to merit reinstatement of 
their system access. Where there is clear evidence of compliance, 
compliant agents and brokers would be able to quickly respond to or 
otherwise remediate the risks identified by HHS that led to the system 
suspension under Sec.  155.220(k)(3) such that their system access 
could be reinstated more swiftly than the lifting of a suspension or 
reinstatement of an agent's or broker's Exchange Agreement(s) following 
an enforcement action under Sec.  155.220(g).
    We seek comment on this proposal.
c. Model Consent Form Updates
    We are proposing to modify the Model Consent Form that was created 
as part of the 2024 Payment Notice (88 FR 25809 through 25811).\179\ 
Our proposed modifications include updating the Model Consent Form to 
include a section for documentation of consumer review and confirmation 
of the accuracy of their Exchange eligibility application information 
under Sec.  155.220(j)(2)(ii)(A)(1)-(2), as well as scripts agents, 
brokers, and web-brokers could use when meeting the requirements 
codified at Sec.  155.220(j)(2)(ii)(A) and (j)(2)(iii)(A)-(C) via an 
audio recording.
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    \179\ CMS. (2022, December 14). CMS Model Consent Form for 
Marketplace Agents and Brokers. PRA package (CMS-10840, OMB 0938-
1438). https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf.
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    Agents, brokers, and web-brokers are required to obtain consumer 
consent prior to assisting with and facilitating enrollment in coverage 
through FFEs and SBE-FPs or assisting an individual with applying for 
APTC and CSRs for QHPs. Until we finalized new requirements related to 
consumer consent in the 2024 Payment Notice, there was no mandate to 
document the receipt of consent of the consumer or their authorized 
representative, or to maintain such documentation. The absence of a 
consent documentation requirement led to disputes between consumers and 
agents, brokers, and web-brokers that were difficult for us to 
adjudicate because neither party had documentary proof of consent. In 
the 2024 Payment Notice (88 FR 25809 through 25811), we finalized 
regulations

[[Page 82364]]

requiring receipt of consent of the consumer or their authorized 
representative to be documented.\180\ Under these regulations, the 
consent documentation must contain certain minimum elements as 
enumerated in Sec.  155.220(j)(2)(iii)(B) and must be retained by the 
assisting agent, broker, or web-broker for a minimum of 10 years and 
produced to HHS upon request in response to monitoring, audit, and 
enforcement activities pursuant to Sec.  155.220(j)(2)(iii)(C). Our 
goal in codifying these consent documentation requirements was to 
minimize the risk of fraudulent activities, such as unauthorized 
enrollments, and help us resolve disputes and adjudicate claims related 
to the provision of consumer consent.
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    \180\ 45 CFR 155.220(j)(2)(iii).
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    We also finalized regulations in the 2024 Payment Notice (88 FR 
25804 through 25809) requiring agents, brokers, and web-brokers 
assisting with and facilitating enrollment in coverage through FFEs and 
SBE-FPs or assisting an individual with applying for APTC and CSRs for 
QHPs to document that eligibility application information has been 
reviewed by and confirmed to be accurate by the consumer or their 
authorized representative prior to application submission.\181\ Under 
these regulations, this documentation must contain certain minimum 
elements as enumerated in Sec.  155.220(j)(2)(ii)(A)(1) and must be 
retained by the assisting agent, broker, or web-broker for a minimum of 
10 years and produced to HHS upon request in response to monitoring, 
audit, and enforcement activities pursuant to Sec.  
155.220(j)(2)(ii)(A)(2). Our goal in codifying these requirements was 
to minimize the risk of fraudulent activities, such as providing false 
information to the Exchange, help us resolve disputes and DMIs and 
adjudicate claims related to inaccurate eligibility information on 
submitted applications, and ensure consumers receive accurate 
eligibility determinations and do not receive incorrect APTC 
determinations, which may result in consumers owing money during tax 
reconciliation.
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    \181\ See Sec.  155.220(j)(2)(ii).
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    The Model Consent Form \182\ created and provided to agents, 
brokers, and web-brokers on June 30, 2023, has been used by agents, 
brokers, and web-brokers, either as is or as a starting point for 
creating their own consent documentation. However, no Model Consent 
Form was created for agents, brokers, and web-brokers to use to meet 
the documentation of consumer review and confirmation of the accuracy 
of the eligibility application information requirements enumerated in 
Sec.  155.220(j)(2)(ii)(A)(1). Since the 2024 Payment Notice 
requirements went into effect, agents, brokers, and web-brokers have 
asked us to provide a model documentation that they could use to meet 
these requirements under Sec.  155.220(j)(2)(ii). We are proposing to 
update the Model Consent Form to include a section for documentation of 
consumer review and confirmation of the accuracy of their Exchange 
eligibility application information in response to these requests. This 
proposed addition to the Model Consent Form is meant to provide clarity 
to agents, brokers, and web-brokers on how to meet the regulatory 
requirements under Sec.  155.220(j)(2)(ii) and help them comply with 
this regulation by providing a standardized form they may use to do so. 
Furthermore, we believe providing a clearly written Model Consent Form 
would provide more consumer clarity and assurance that the agent, 
broker, or web-broker they are working with is complying with Sec.  
155.220(j)(2)(ii).
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    \182\ CMS. (2022, December 14). CMS Model Consent Form for 
Marketplace Agents and Brokers. PRA package (CMS-10840, OMB 0938-
1438). https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf.
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    Because the requirements of Sec.  155.220(j)(2)(ii)(A) and 
(j)(2)(iii) can be met via an audio recording, we are also proposing to 
create appendices to the Model Consent Form that would contain scripts 
agents, brokers, and web-brokers may use to document compliance with 
these requirements via an audio recording. Our goal is to provide 
agents, brokers, and web-brokers who assist consumers verbally with 
guidance on meeting the consent and eligibility application review 
documentation requirements contained in Sec.  155.220(j)(2)(iii) and 
(j)(2)(ii)(A), respectively, similar to how the current Model Consent 
Form helps agents, brokers, and web-brokers documenting consent via a 
physical document with handwritten signatures demonstrate compliance 
with the new consent documentation requirements.
    The proposed scripts, to the extent they are utilized by agents, 
brokers, and web-brokers, would help ensure agents, brokers, and web-
brokers are following the regulatory requirements when enrolling 
consumers. We believe this would reduce consumer harm by reducing 
unauthorized enrollments, which can result in financial harm if a 
consumer receives an improper APTC amount upon enrollment. We also 
believe this proposal would clarify and simplify how regulated entities 
can meet regulatory requirements. This proposal does not involve any 
revisions to Sec.  155.220(j)(2)(ii)(A) and (j)(2)(iii)(A)-(C). If 
finalized as proposed, it would not be mandatory for agents, brokers, 
or web-brokers to use the amended Model Consent Form or new scripts to 
comply with the requirements set forth in Sec.  155.220(j)(2)(ii)(A) 
and (j)(2)(iii)(A)-(C).
    We seek comment on these proposals.
3. Requirement for Notification of Tax Filers and Consumers Who Have 
Failed To File and Reconcile APTC for Two Consecutive Tax Years (Sec.  
155.305)
    As part of the 2024 Payment Notice, we changed the FTR process such 
that an Exchange may only determine enrollees ineligible for APTC due 
to their FTR status after a tax filer (or a tax filer's spouse, if 
married) has failed to file a Federal income tax return and reconcile 
their APTC for 2 consecutive years (specifically, years for which tax 
data will be utilized for verification of household income and family 
size). However, in that rule, we did not impose a requirement for 
Exchanges to notify enrollees or their tax filers that the applicable 
tax filer failed to file and reconcile. In the 2025 Payment Notice, we 
imposed a requirement for Exchanges to send direct or indirect notices 
for the first year in which the tax filer was determined to have failed 
to file and reconcile. We are now proposing to revise Sec.  
155.305(f)(4) to require Exchanges to send a direct or indirect notice 
(as defined below) to enrollees or their tax filers who have not filed 
their Federal income tax return and reconciled their APTC for two 
consecutive tax years.
    To our knowledge, when FTR operations were conducted in prior years 
before the new two-year process that was implemented as part of the 
2023 Payment Notice (87 FR 27208), it was the practice of Exchanges to 
send notices to enrollees or their tax filers (or both) who were at 
risk of being determined ineligible for APTC due to failing to file and 
reconcile APTC for the previous tax year. Enrollees or their tax filers 
would be sent notices after the initial identification of FTR status 
prior to Open Enrollment and/or during the FTR Re-check process, 
depending on the process of the Exchange. In addition, it has also been 
the practice of Exchanges to notify enrollees or their tax filers (or 
both) of their FTR status when they attest that they have filed their 
Federal income tax return and reconciled APTC, but IRS data has not 
been updated to reflect their compliance with the requirement to file 
and reconcile. FTR Re-check is the post

[[Page 82365]]

Open Enrollment verification process for consumers with either a one-
tax year or two-tax year FTR status. Exchanges using the Federal 
eligibility and enrollment platform begin FTR Re-check operations by 
cross referencing past FTR statuses, consumers' attestations made on 
the current plan year's applications if applicable, and IRS income data 
to confirm whether tax filers filed their Federal income tax returns 
and reconciled APTC for one or both of the most recent tax years for 
which the IRS provides data to Exchanges through the Federal Data 
Services Hub. FTR Re-check generally happens after Open Enrollment ends 
on January 15 for Exchanges using the Federal eligibility and 
enrollment platform.
    We are proposing to require, consistent with the notice requirement 
in Sec.  155.305(f)(4)(i), that, for a consumer identified as having a 
two-tax year FTR status, Exchanges provide either a direct notification 
to the tax filer that the Exchange has determined that the tax filer or 
their spouse has failed to file and reconcile their APTC for two 
consecutive tax years (``direct notice''), or a notification to the 
consumer stating that they may be at risk of losing their APTC and 
educating them about the requirement to file their Federal income taxes 
and reconcile their APTC (``indirect notice or ``combined notice''). 
The proposed revisions would require Exchanges to send a direct notice 
or a combined notice for consumers identified as having both a one tax-
year, and a two tax-year, FTR status. In addition to these notices, 
consumers who lose their APTC after the FTR Recheck process will also 
receive the eligibility determination notice (EDN) under Sec.  
155.330(e)(1)(ii).
    This proposed requirement represents the minimum requirement for 
Exchanges to provide sufficient notice to enrollees or their tax filer 
(or both) about the need to file their Federal income tax return and 
reconcile APTC, and the risks of failing to do so. Consistent with 
operations before the COVID-19 pandemic, Exchanges on the Federal 
platform provide enrollees or their tax filers (or both) with more 
notifications that go above and beyond the minimum requirement, and 
they will continue to do so. Specifically, Exchanges on the Federal 
platform send out combined notices prior to Open Enrollment, and then 
again after FTR Recheck for both the one-tax year and two-tax year FTR 
populations. Tax filers who are identified as being in either a one-tax 
year or two-tax year FTR status prior to Open Enrollment, and then 
again after FTR Recheck, also receive direct notices. HHS encourages 
State Exchanges to adopt these best practices as well to provide 
multiple points of contact to the enrollee or tax filer (or both) on 
the requirement to file and reconcile their APTC to remain eligible for 
APTC. However, due to the concerns of interested parties about the 
difficulty required to notify both enrollees and tax filers, we are 
choosing to propose requiring only notifying either the consumer or the 
tax filer for the second tax year FTR population, and we acknowledge 
that most State Exchanges' current practice already involves multiple 
notifications for consumers who are at risk of losing their APTC. As 
the proposal only requires one notification to consumers in a two-tax 
year FTR status, similarly to the current rules only requiring one 
notice for one-tax year FTR status consumers, it is possible that 
Exchanges could choose to send this notice with Open Enrollment prior 
to the plan year where the enrollee may lose APTC or during the plan 
year in which the Exchange would remove APTC.
    Therefore, we are proposing to add a section to Sec.  
155.305(f)(4)(ii) stating that if HHS informs an Exchange that APTC 
payments were made on behalf of either the tax filer or the tax filer's 
spouse, if applicable, for two consecutive tax years and they did not 
comply with the requirement to file an income tax return for those 
years as required by 26 U.S.C. 6011, 6012 and applicable regulations, 
then the Exchange must send a notice as directed in proposed 
subparagraphs (f)(4)(ii)(A) or (B) (or both). In proposed subparagraph 
(f)(4)(ii)(A), we propose to require an Exchange to send a notice 
directly to the tax filer informing the tax filer that they have been 
identified as failing to file and reconcile for two consecutive tax 
years, educating them about the requirement to file and reconcile APTC, 
and warning them that they are at risk for losing APTC eligibility 
because they, or their spouse, if applicable, did not file their 
Federal income tax return for two consecutive tax years. Exchanges that 
choose to send these direct notices must comply with statutory 
requirements to protect Federal tax information (FTI) per 26 U.S.C. 
6103. For Exchanges on the Federal platform, these direct notices are 
sent via U.S. postal mail only, and no electronic copy of the notice is 
retained to protect FTI. Finally, we propose to add new subparagraph 
(f)(4)(ii)(B), which requires an Exchange to send an indirect notice to 
either the tax filer or their enrollee that does not disclose FTI but 
educates the enrollee or their tax filer on the requirement to file 
their Federal income tax return and reconcile APTC.
    These proposed changes would ensure that either all tax filers or, 
if applicable, their enrollees who are identified as having an FTR 
status for two consecutive tax years would receive educational notices 
detailing the requirement to file and reconcile their APTC at least 
twice before losing their APTC eligibility; they would receive a notice 
for the first year they were found to be in an FTR status, and then 
again the second consecutive tax year they were found to have failed to 
file and reconcile their APTC.
    As discussed in 2025 Payment Notice (89 FR 26299), we want to 
continue to ensure tax filers and enrollees are provided appropriate 
education on the requirement to file and reconcile their ATPC before 
being determined ineligible for APTC for failing to file and reconcile 
for a second consecutive tax year. Sample notices would be available at 
https://www.cms.gov/marketplace/in-person-assisters/applications-forms-notices/notices.
    We seek comment on this proposal.
4. Timeliness Standard for State Exchanges To Review and Resolve 
Enrollment Data Inaccuracies Sec.  155.400(d)(1)
    We propose to add Sec.  155.400(d)(1) to codify HHS guidance \183\ 
that, within 60 calendar days after a State Exchange receives a data 
inaccuracy from an issuer operating in an State Exchange (hereinafter 
referred to as ``State Exchange issuer'') that includes a description 
of an inaccuracy that meets the requirements at Sec.  156.1210(a)-(c) 
and all the information that the State Exchange requires or requests to 
properly assess the inaccuracy, the State Exchange must review and 
resolve the State Exchange issuer's enrollment data inaccuracies and 
submit to HHS a description of the resolution of any inaccuracies 
described by the State Exchange issuer that the State Exchange confirms 
to be inaccuracies in a format and manner specified by HHS.\184\ This 
proposed policy aligns with the existing requirement at Sec.  
155.400(d) that a State Exchange must reconcile enrollment information 
with issuers and HHS no less than on a monthly basis. It also provides 
certainty for State Exchange issuers by providing a timeline for State

[[Page 82366]]

Exchanges to act upon enrollment data inaccuracies submitted to the 
State Exchange by a State Exchange issuer that meets the requirements 
at Sec.  156.1210(a)-(c).
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    \183\ CMS. (2024, Aug. 14). Reporting and Reviewing Data 
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked 
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
    \184\ OMB Control No: 0938-1312 and 0938-1341.
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    Section 156.1210 generally requires State Exchange issuers to 
submit a description of all enrollment data inaccuracies, including 
those that impact APTC payments, to HHS or the State Exchange, as 
indicated by State Exchange guidance, in a manner and format specified 
by HHS or the State Exchange, within 90 calendar days of the date of a 
payment and collections report from HHS. At the same time, Sec.  
156.1210(b) also acknowledges that, in limited circumstances, HHS may 
consider inaccuracies received from a State Exchange issuer to resolve 
an enrollment data inaccuracy that was submitted after 90 calendar days 
when: (1) the State Exchange issuer notifies the State Exchange or HHS, 
as applicable, within 15 calendar days after identifying the 
inaccuracy; and (2) the State Exchange issuer's failure to identify the 
inaccuracy and submit to HHS or the State Exchange within the required 
90 calendar day period was reasonable and not due to the issuer's 
misconduct or negligence.
    Most recently, in the 2024 Payment Notice (88 FR 25886), we amended 
Sec.  156.1210 to add paragraph (c), which provides a final deadline 
for issuers to submit data inaccuracies identified in payment and 
collections reports. Section 156.1210(c) specifies that to be eligible 
for resolution under Sec.  156.1210(b), an issuer must describe 
inaccuracies before the end of the 3-year period beginning at the end 
of the plan year to which the inaccuracy relates. Notwithstanding the 
above, and in alignment with obligations under the False Claims 
Act,\185\ issuers must report overpayments to HHS or the State Exchange 
and timely repay any overpayment, regardless of when a payment error is 
identified, including after the 3-year deadline.\186\
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    \185\ See 88 Fed Reg, 25740, 25887 (``Consistent with section 
1313(a)(6) of the ACA and 31 U.S.C. 3729, et seq., payments made by, 
through, or in connection with an Exchange are subject to the False 
Claims Act if those payment include any Federal funds'').
    \186\ See 45 CFR 156.480 requiring State Exchange issues to 
maintain relevant records for 10 years.
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    Because State Exchanges provide the enrollment data that HHS uses 
as the basis of APTC payments to State Exchange issuers in the 
automated Policy-Based Payment (PBP) system, State Exchanges must 
update their enrollment data before HHS makes any PBP APTC payment 
adjustments to a State Exchange issuer. Therefore, the State Exchange 
issuer must work with its State Exchange to ensure resolution of any 
inaccuracy impacting APTC payment. If a State Exchange issuer is 
directed by its State Exchange to submit inaccuracies directly to HHS, 
the State Exchange issuer should follow those submission instructions, 
but any information HHS shares in response to the submission is 
informational. If the inaccuracy remains unresolved, the State Exchange 
issuer must follow up with its State Exchange to identify and rectify 
the reason for non-resolution. In accordance with Sec.  155.400(b), a 
State Exchange must submit all enrollment data that HHS then uses to 
calculate APTC payments to State Exchange issuers. Therefore, in 
instances when a State Exchange does not timely address State Exchange 
issuer data inaccuracies, HHS cannot directly assist the State Exchange 
issuer in addressing these data inaccuracies.
    This proposal would codify guidance in the document titled, 
``Reporting and Reviewing Data Inaccuracy Reports in State-based 
Exchanges Frequently Asked Questions''.\187\ This guidance directs 
State Exchanges to review descriptions of data inaccuracies submitted 
by State Exchange issuers, resolve them, and submit to HHS a 
description of the resolution of the inaccuracies when the State 
Exchange issuer submits a description of a data inaccuracy within the 
90 calendar day deadline, or reasonably after the 90 calendar day 
deadline but before the 3-year deadline pursuant to Sec.  156.1210(b) 
and (c). The guidance directs State Exchanges to submit the resolution 
of these inaccuracies to HHS via the State Based Marketplace Inbound 
File (SBMI) within 60 calendar days after receiving from a State 
Exchange issuer a description of a data inaccuracy that includes all 
the information that the State Exchange requires or requests to 
properly assess the inaccuracy. This proposed timeline for resolution 
of enrollment data inaccuracies would require State Exchanges to timely 
review and resolve enrollment data inaccuracies; clarify the resolution 
process for State Exchange issuers; and ensure the accurate payment of 
APTCs, as enrollment data is the basis of APTC payments to State 
Exchange issuers in the automated PBP system. If this proposal is 
finalized, to track the State Exchanges' efforts to meet the 60-
calendar day requirement for submitting inaccuracies to HHS, we would 
consider modifying the State-based Marketplace Annual Reporting Tool 
(SMART) to have State Exchanges outline their processes for resolving 
data inaccuracies timely in accordance with this policy.
---------------------------------------------------------------------------

    \187\ CMS. (2024, August 14). Reporting and Reviewing Data 
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked 
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
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    We solicit comments on this proposal.
5. Establishment of Optional Fixed-Dollar Premium Payment Threshold and 
Total Premium Threshold (Sec.  155.400(g))
    We propose to codify a provision related to the premium payment 
threshold policies under Sec.  155.400(g) that would allow additional 
issuer flexibility to decide when amounts collected from an enrollee 
would be considered to satisfy their obligation to pay the enrollee-
responsible portion of the premium for certain purposes. Specifically, 
this would provide issuers with additional flexibility to not place an 
enrollee in a grace period for failure to pay the full amount of their 
portion of premiums due, and to not terminate enrollment through the 
Exchange after the applicable grace period ends without outstanding 
premiums being paid in full. This proposal would reduce the number of 
coverage terminations for enrollees who owe only a small amount of 
premium within the threshold. Specifically, we propose that issuers be 
permitted to set a fixed-dollar threshold of $5 or less, which would be 
adjusted for inflation. We are also considering permitting issuers to 
adopt a threshold that is based on the gross premium owed by the 
enrollee, rather than net premium. We also propose to modify the 
threshold of the existing premium payment threshold policy at Sec.  
155.400(g) for clarity.
    Currently, issuers have the option under Sec.  155.400(g) to adopt 
a percentage-based premium payment threshold which allows issuers to 
effectuate coverage in accordance with binder payment rules at Sec.  
155.400(e) for enrollees who pay an amount of the enrollee-responsible 
portion of the premium that is less than 100 percent but within the 
threshold (we have historically recommended a percentage equal to or 
greater than 95 percent).\188\ This avoids triggering a grace period 
for non-payment under Sec.  156.270(d) or a grace period under State 
rules, and may avoid terminating enrollment for non-payment of 
premiums. Under this policy, if the total amount of premium owed by an 
enrollee (including aggregate amounts over multiple

[[Page 82367]]

months) exceeds the threshold set by the issuer, the issuer is required 
to place the enrollee in a grace period: either the grace period for 
enrollees receiving APTC described at Sec.  156.270(d), or a grace 
period under State authority, as applicable. Any amount that is unpaid 
but within the reasonable premium payment threshold established by an 
issuer remains an amount owed by the enrollee and cannot be forgiven by 
the issuer.\189\ Currently, this threshold must be a percentage, and it 
must be reasonable. We have stated that 95 percent or more of the 
enrollee-responsible portion of the premium would be a reasonable 
threshold.\190\ This threshold must be applied uniformly to all 
enrollees.
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    \188\ See CMS. (2023). Federally-facilitated Exchange (FFE) 
Enrollment Manual. Section 6.2. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
    \189\ 2017 Payment Notice, 81 FR 12203, 12272.
    \190\ See CMS. (2023, July 12). 2023 Federally-facilitated 
Exchange (FFE) Enrollment Manual. (Section 6.2, pp. 89-91). https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.
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    In the 2017 Payment Notice (81 FR 12271 through 12272), in which 
HHS established the option for issuers to implement a percentage-based 
premium payment threshold, we received a comment requesting that 
issuers be allowed to establish a flat dollar amount threshold. At that 
time, we stated that we did not consider implementing such a threshold 
because there may be cases in which even a low flat dollar amount may 
represent a large percentage of an enrollee's portion of the premium 
less APTC (81 FR 12272).
    However, after implementation of the percentage-based threshold, we 
have realized that the percentage-based premium threshold policy does 
not always adequately enable enrollees who owe small amounts of premium 
to avoid triggering a grace period or termination of enrollment through 
the Exchange. For example, an enrollee whose enrollee-responsible 
portion of the premium was $1 after APTC, and who failed to make a 
premium payment, would be placed into a grace period even if the issuer 
had adopted a 95 percent payment threshold, despite being delinquent by 
only $1. In an analysis of Exchange data for the 2023 Plan Year, we 
found that there were 81,383 total policies terminated for non-payment 
in which $5 or less was owed by the enrollee, representing 
approximately 5.4 percent of the total number of policies terminated 
for non-payment that year. In addition, 102,728 policies in which 
enrollees owed premiums of $5.01 to $10 were terminated for non-
payment, representing approximately 6.84 percent of the total number of 
policies terminated for non-payment. Even though $5 may represent a 
large percentage of an enrollee's portion of the premium less APTC, we 
believe that triggering a grace period or terminating enrollment 
through the Exchange is too severe a consequence for non-payment of 
such limited dollar amounts.
    We are concerned about situations in which an issuer would be 
willing to avoid termination of enrollment through the Exchange if the 
enrollee owed only small amounts of premium but are prevented from 
doing so by the lack of flexibility in the current regulation. In 
addition, many of the enrollees who enter a grace period because they 
owe de minimis amounts of premium are likely low or moderate-income 
enrollees and thus might be especially hurt by disruptions in coverage. 
We recognize that issuers have historically implemented various premium 
payment thresholds, and we believe there is value in providing 
flexibility to issuers regarding whether to adopt a fixed-dollar 
payment threshold and the amount of the threshold.
    We thus propose to modify Sec.  155.400(g) to allow issuers to 
adopt a fixed-dollar premium payment threshold of $5 or less, adjusted 
for inflation, under which they could provide additional flexibility to 
enrollees who fail to pay the full amount of their portion of premium 
owed. We propose to limit the fixed-dollar premium threshold to $5 or 
less because, unlike the current percentage-based threshold, a fixed-
dollar threshold would allow enrollees, in some cases, to pay $0 in 
premium without the issuer triggering a grace period or terminating 
enrollment through the Exchange. Such a limit would ensure that 
enrollees who owe large amounts of premium do not remain enrolled in 
coverage through the Exchange and would serve to limit the number of 
times an enrollee may fail to pay premium and avoid triggering a grace 
period or termination of enrollment through the Exchange. We believe 
that a limit of $5 is sufficiently large to enable issuers to allow 
enrollees who owe de minimis amounts of premium to remain enrolled, 
while ensuring that enrollees do not accumulate excessive amounts of 
premium owed prior to triggering a grace period or termination of 
enrollment through the Exchange. We recognize that this amount might be 
lower than the threshold enrollees might be afforded under a 
percentage-based threshold. However, we also recognize that within a 
percentage-based threshold, the enrollee must pay a certain amount of 
their premium to avoid triggering a grace period or termination of 
enrollment through the Exchange, whereas with a fixed-dollar threshold, 
an enrollee may not have paid any other amount than the binder payment. 
Other factors such as the amount the enrollee has paid for their 
premium to date is not considered when applying the fixed-dollar 
payment threshold. We request comment on whether this is a reasonable 
limit for the fixed-dollar threshold, or whether an alternative amount 
(such as $10) would be more appropriate and in line with our goal of 
enabling enrollees who owe small amounts of premiums, while avoiding 
excessive accumulation of premium debt, to avoid triggering a grace 
period or termination of enrollment through the Exchange. If adopted, 
we would publish updates through subregulatory guidance to this $5 
limit to adjust for inflation, using the National Health Expenditure 
Forecast published annually by CMS' Office of the Actuary.\191\
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    \191\ See CMS. (n.d.). National health expenditure data--
Projected. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/projected.
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    Issuers that adopt such a policy could permit enrollees who owe 
less than the specified amount of premium to avoid triggering a grace 
period and termination of enrollment through the Exchange. However, we 
propose to limit application of this threshold to premium payments made 
after coverage is effectuated, so that it could not apply to the binder 
payment. Issuers have the option under the current percentage threshold 
policy at Sec.  155.400(g)(1) of applying a percentage-based threshold 
to the binder payment, but under that policy, enrollees are required to 
pay some amount of premium, even if it less than the total. By 
contrast, under a fixed-dollar premium payment threshold, enrollees 
could have their coverage effectuated without making any payment if 
their portion of the binder payment is under the threshold amount. Due 
to concerns about program integrity, we believe it is important to 
ensure that, when a binder payment is required, enrollees must always 
pay some amount of premium to effectuate coverage as an important 
signal that the coverage is desired by the enrollee. In addition, as 
under the current policy (81 FR 12272), any amount that is unpaid but 
within the reasonable premium payment threshold established by an 
issuer remains an amount owed by the enrollee and cannot be forgiven by 
the issuer. This remains true whether the premium payment threshold is 
utilized for any of the following payments: binder payments, regularly 
billed payments, or amounts owed by an enrollee while in a grace 
period.

[[Page 82368]]

    To illustrate how a fixed-dollar premium threshold will work under 
this proposal, we provide the following example:

    Example 1: During the annual Open Enrollment Period, a consumer 
selects a QHP with a total monthly premium amount of $300, and the 
consumer is determined eligible for $299 in APTC and elects to 
receive the entire amount. The consumer's enrollee-responsible 
portion of premium will thus be $1. The QHP issuer has adopted a 
fixed-dollar premium payment threshold policy under which it will 
not terminate enrollment of enrollees who owe $5 or less of the 
enrollee-responsible portion of premium. The issuer has set a binder 
payment deadline of January 30, and the consumer sends the binder 
payment of $1 ahead of the deadline and effectuates coverage 
effective January 1. Subsequently, the consumer does not make a 
payment for February, March, April, May, or June, and, as a result, 
the enrollee owes $5 in outstanding premiums. Because the issuer has 
adopted a $5 premium payment threshold, the issuer would not put the 
consumer into a grace period, since the total amount owed does not 
exceed $5. However, the issuer would not be permitted to write off 
the $5 owed, and if the consumer does not pay the premium for July 
in full, the issuer must put the consumer into a 3-month grace 
period since the total amount of premium owed would exceed the 
threshold set by the issuer. However, if within the grace period the 
consumer paid the full amount owed or a portion of the full amount 
owed that brings the amount owed under $5, the issuer could 
terminate the grace period without terminating enrollment through 
the Exchange.

    Finally, under the current percentage-based threshold policy, the 
percentage is calculated based on the percentage paid of the enrollee's 
portion of the premium (that is, the total premium minus any APTC). We 
are considering whether to further amend Sec.  155.400(g) to also 
permit issuers to set a reasonable threshold that is a percentage of 
the policy's total premium and not just the enrollee's portion of 
premium, thus allowing APTC paid on the consumer's behalf to count 
toward the threshold.
    In the 2017 Payment Notice (81 FR 12271 through 12272), we 
established the option for issuers to adopt a premium payment threshold 
based on net premium owed by the enrollee. At that time, we did not 
consider establishing a threshold based on gross premium, nor have we 
done so since then. We now recognize that this option may provide 
issuers with an alternative method of keeping consumers enrolled in 
coverage that issuers may prefer, either because it is simpler to 
implement or because it is percentage-based and therefore more similar 
to the premium payment threshold that is currently allowed under Sec.  
155.400(g).
    Establishing an option for issuers to adopt a percentage threshold 
based on gross premium owed by the enrollee with APTC counting toward 
the threshold would, in some cases, allow enrollees to remain enrolled 
in coverage or avoid triggering a grace period or termination of 
enrollment through the Exchange for owing small amounts of the 
enrollee-responsible portion of the premium. For example, an enrollee 
whose gross premium was $600, and was receiving $595 in APTC, could 
avoid triggering a grace period or termination of enrollment through 
the Exchange or termination of coverage even without paying the $5 
enrollee-responsible portion of the premium if the issuer had adopted a 
99 percent premium threshold based on gross premium because 99 percent 
of the gross premium would have been paid on the enrollee's behalf in 
the form of APTC. With the current 95 percent threshold based on net 
premium, by contrast, the enrollee would be required to pay at least 
$4.75 to avoid triggering a grace period or termination of enrollment 
through the Exchange. While historically we have not defined a specific 
threshold for the premium threshold based on net premium, we would 
implement a threshold for the premium threshold based on gross premium 
that is 99 percent or more of the gross premium. We believe the gross 
premium threshold should be higher than the net premium threshold to 
avoid the enrollee accumulating a much larger amount of premium debt, 
and to keep to a similar de minimis amount of premium owed as the net 
premium percentage-based and fixed-dollar thresholds allow. Because 
this threshold would also, in some circumstances, allow enrollees to 
temporarily avoid paying any premium, we would also propose to limit 
application of this threshold to premium payments made after coverage 
is effectuated, so that it could not apply to the binder payment (due 
to operational and program integrity concerns, as discussed earlier in 
this section).
    A percentage threshold based on gross premium may be simpler to 
implement, since it is similar to the type of threshold issuers are 
already allowed to adopt. However, we recognize that there may also be 
drawbacks to this approach, including that enrollees could accumulate 
more than $5 in premium debt, which the enrollee would continue to owe 
even if coverage were eventually terminated due to non-payment of 
premiums. Based on our experience with the current, net premium-based 
payment threshold, we do not believe this would result in significant 
premium debts accumulated by enrollees, since we are limiting the gross 
percentage-based threshold to be 99 percent or more of the gross 
premium. We recognize that a gross premium amount higher than the 
average gross premium (which was $604.78 in February 2023) \192\ might 
allow enrollees to accrue more than the $5 debt that could be accrued 
under the fixed-dollar threshold, but this is true under the existing 
net premium payment threshold as well. We also note that issuers are 
prohibited from attributing premiums owed to prior debts and not to 
binder payments, and thus issuers may not refuse to enroll enrollees in 
coverage based on failure to pay their binder payment by attributing 
binder payments to prior debts.
---------------------------------------------------------------------------

    \192\ See CMS (2024) Effectuated Enrollment: Early 2024 Snapshot 
and Full Year 2023 Average. https://www.cms.gov/files/document/early-2024-and-full-year-2023-effectuated-enrollment-report.pdf.
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    To illustrate how a premium threshold based on gross premium would 
work under this proposal, we provide the following example:

    Example 2: During the annual Open Enrollment Period, a consumer 
selects a QHP with a total monthly premium amount of $500, and the 
consumer is determined eligible for $495 in APTC and elects to 
receive the entire amount. The consumer's enrollee-responsible 
portion of premium will thus be $5. The QHP issuer has adopted a 
percentage-based premium payment threshold policy under which it 
will not trigger a grace period or termination of enrollment through 
the Exchange for enrollees who pay at least 99 percent of gross 
premium (including payments of APTC made on the enrollee's behalf), 
which here would be $5. The issuer has set a binder payment deadline 
of January 30, and the consumer sends the binder payment of $5 ahead 
of the deadline and effectuates coverage effective January 1. 
Subsequently, the consumer pays $1 in February and owes $4 in past 
due premium; because the consumer's payment is within the 99 percent 
threshold established by the issuer, the issuer would not place the 
enrollee in a grace period. The following month, the consumer does 
not pay any premium, and now owes $9 in past due premium. Since the 
$9 now owed after application of the $495 APTC paid on the 
consumer's behalf for March represents more than 1 percent of the 
$500 gross premium, the issuer must put the consumer into a 3-month 
grace period starting March 1. The issuer would not be permitted to 
write off the $9 owed, and the consumer must pay all outstanding 
premium owed before the end of the grace period (May 31) to avoid 
exhaustion of the grace period and remain enrolled in coverage.

    We seek comments on this proposal. Specifically, we request comment 
on whether a fixed-dollar threshold, as

[[Page 82369]]

proposed, or a percentage threshold based on gross premium, would 
better meet our goal of providing flexibility to issuers to allow 
enrollees to avoid triggering a grace period or termination of 
enrollment through the Exchange for owing small amounts of premium.
    We also propose changing the premium payment threshold based on net 
premium owed by the enrollee from being a ``reasonable'' standard to a 
specifically defined threshold of 95% or higher of the net premium. We 
believe this would provide clarity for issuers and Exchanges.
    We also propose limiting issuers to utilize one premium payment 
threshold, such that a fixed-dollar threshold cannot be adopted and 
utilized in tandem with a percentage-based policy, either net or gross. 
We believe that limiting this flexibility would allow issuers to choose 
and apply the threshold that works best for their payment operations 
but prevents complex situations that may arise from allowing multiple 
thresholds to be used simultaneously. We seek comment on whether we 
should allow issuers to adopt both a fixed-dollar and percentage-based 
threshold, and request commenters to consider the administrative 
feasibility of applying both thresholds, and how such a policy could be 
applied uniformly and consistently across enrollees.
6. General Eligibility Appeals Requirements (Sec.  155.505)
    We propose revising Sec.  155.505(b) to codify an option for 
application filers to file appeals on behalf of applicants and 
enrollees on the application filer's Exchange application.
    The Exchanges on the Federal platform allow application filers as 
defined under Sec.  155.20 to file applications on behalf of an 
applicant. However, the appeals regulation at Sec.  155.505(b) states 
that only applicants and enrollees may submit appeal requests to the 
HHS appeals entity or a State Exchange appeals entity. Appeal requests 
submitted online to the HHS appeals entity are linked to a consumer's 
HealthCare.gov account, which is controlled by the application filer. 
Thus, an application filer who has authority to apply for coverage 
through HealthCare.gov on behalf of an applicant under Sec.  155.20, 
does not have parallel authority under Sec.  155.505(b) to appeal a 
contested eligibility determination on behalf of that applicant through 
the same HealthCare.gov account.
    This limitation under Sec.  155.505(b) puts a burden on consumers, 
as appeals filed by application filers who are neither an applicant or 
enrollee are considered invalid based on lack of standing, requiring 
either that the applicant or enrollee resubmit their appeal or that 
they designate the application filer as an authorized representative in 
writing. These extra steps not only add unnecessary complications for 
the applicant or enrollee, but also serve to delay an appeal resolution 
that may grant or restore QHP coverage and financial assistance.
    This proposed change would allow application filers to file appeals 
through the HHS appeals entity or a State Exchange appeals entity on 
behalf of applicants and enrollees on their Exchange application, 
streamlining the appeals process and ensuring operational consistency 
throughout the application and appeals processes. We do not anticipate 
that this would impose any additional substantial burden on any 
Exchanges, including State Exchanges that operate their own platform, 
as this should not materially increase the number of appeals filed, or 
add complexity to appeals processes.
    We seek comment on this proposal.
7. Certification Standards for QHPs (Sec.  155.1000)
    We propose to amend Sec.  155.1000 by adding a new paragraph (e) 
stating that an Exchange may deny certification of any health plan as a 
QHP that does not meet the general certification criteria at Sec.  
155.1000(c).
    Section 1311(e)(1) of the ACA grants an Exchange the authority to 
certify a health plan as a QHP if the health plan meets the 
requirements for certification promulgated by the Secretary under 
section 1311(c)(1) of the ACA, and the Exchange determines that making 
the plan available through the Exchange is in the interests of 
qualified individuals and qualified employers in the State.\193\ In the 
Exchange Establishment Rule (77 FR 18310, 18404 through 18405), we 
codified the responsibilities of an Exchange to certify QHPs at Sec.  
155.1000, and under Sec.  155.1000(b), required Exchanges to only offer 
health plans which have in effect a certification issued or are 
recognized as health plans deemed certified for participation in an 
Exchange as a QHP. In that final rule, we also codified general 
certification criteria, consistent with sections 1311(e)(1)(A) and (B) 
of the ACA, at Sec.  155.1000(c): an Exchange may certify a plan as a 
QHP if: (1) the health insurance issuer provides evidence during the 
certification process that it complies with the applicable minimum 
certification requirements outlined in subpart C, part 156 of our 
regulations; and (2) the Exchange determines that making the health 
plan available through the Exchange is in the interest of qualified 
individuals and qualified employers.\194\
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    \193\ Section 1311(c)(1)(B) of the ACA and Sec.  155.1000(c)(2) 
further provide that an Exchange may not exclude a health plan (i) 
on the basis that such plan is a fee-for-service plan, (ii) through 
the imposition of premium price controls, or (iii) on the basis that 
the plan provides treatments necessary to prevent patients' deaths 
in circumstances the Exchange determines are inappropriate or too 
costly.
    \194\ In that rule, we outlined a number of non-exhaustive 
strategies an Exchange may employ to determine whether the offering 
of a health plan is in the interest of qualified individuals and 
qualified employers (77 FR 18406).
---------------------------------------------------------------------------

    However, an Exchange's authority to deny certification is not 
explicitly referenced in 45 CFR part 155. Several regulations, 
including Sec. Sec.  155.1000(c) and 155.1090, can be read to imply, 
but do not explicitly state, that an Exchange may deny certification of 
a health plan that does not meet the requirements of Sec.  155.1000(c). 
Despite this omission from our regulations, a plain reading of section 
1311(e)(1) of the ACA makes clear that an Exchange, as the entity 
statutorily responsible for determining whether a plan meets the 
minimum QHP certification standards, has the implied authority to deny 
certification of plans that do not meet these standards. Any contrary 
read of section 1311(e)(1) of the ACA would mean that an Exchange does 
not have any statutory authority to take any action for plans that do 
not meet minimum certification standards, which is not a reasonable 
result.
    We seek to revise our regulations so that they more fully and 
accurately reflect the discretion that Exchanges have to deny 
certification of any plan that does not meet the general certification 
criteria at Sec.  155.1000(c). Accordingly, we propose to use the 
authorities under section 1311(c) of the ACA (which gives HHS the 
authority to establish criteria for the certification of health plans 
as QHPs), section 1311(d)(4)(A) (which provides that Exchanges shall 
implement procedures for the certification, recertification, and 
decertification of QHPs consistent with the guidelines HHS develops 
under section 1311(c)), and section 1321(a)(1)(B) (which provides HHS 
with broad rulemaking authority to issue regulations setting standards 
for meeting the requirements under title I of the ACA (which includes 
section 1311) for the establishment and operation of Exchanges and the 
offering of QHPs through the Exchanges) to add new paragraph (e) to 
Sec.  155.1000 to formalize

[[Page 82370]]

the implicit authority that an Exchange, including State Exchanges and 
SBE-FPs, may deny certification to any plan that does not meet the 
general certification criteria at Sec.  155.1000(c). Under this 
proposal, an Exchange may deny certification if the issuer does not 
provide evidence during the certification process in Sec.  155.1010 
that it complies with the minimum certification requirements (under 
Sec.  155.1000(c)(1)), or if the Exchange determines that making the 
health plan available is not in the interest of the qualified 
individuals and qualified employers (under Sec.  155.1000(c)(2)).
    To be clear, we are not proposing to require Exchanges, including 
State Exchanges and SBE-FPs, to implement any specific procedures or 
processes for the denial of a QHP certification application. This 
proposal is not intended to amend the existing, implied authority of an 
Exchange to deny certification. This proposal is only intended to make 
that authority more explicit in our regulations, which will provide 
greater certainty to Exchanges, issuers, and consumers on an Exchange's 
role, which we expect will only improve the efficiency of the 
Exchanges.
    We seek comment on this proposal.
8. Request for the Reconsideration of Denial of Certification Specific 
to the FFEs (Sec.  155.1090)
    We propose to amend Sec.  155.1090 to revise the standards for an 
issuer to request the reconsideration of denial of certification as a 
QHP specific to the FFEs.
    Section 1311(e)(1) of the ACA grants an Exchange the authority to 
certify a health plan as a QHP if the health plan meets the 
requirements for certification promulgated by the Secretary under 
section 1311(c)(1) of the ACA, and the Exchange determines that making 
the plan available through the Exchange is in the interests of 
qualified individuals and qualified employers in the State.\195\ In the 
2018 Payment Notice (81 FR 94137), we finalized Sec.  155.1090 to allow 
an issuer to request the reconsideration of a denial of certification 
of a plan as a QHP for sale through an FFE.
---------------------------------------------------------------------------

    \195\ Section 1311(c)(1)(B) of the ACA and Sec.  155.1000(c)(2) 
further provide that an Exchange may not exclude a health plan (i) 
on the basis that such plan is a fee-for-service plan, (ii) through 
the imposition of premium price controls, or (iii) on the basis that 
the plan provides treatments necessary to prevent patients' deaths 
in circumstances the Exchange determines are inappropriate or too 
costly.
---------------------------------------------------------------------------

    HHS, as operator of the FFEs, is responsible for ensuring that 
health plans offered through the FFEs meet all Federal requirements for 
certification as QHPs under Sec.  155.1000(c). Starting with the 2014 
plan year, HHS has certified numerous health plans as QHPs on the FFEs. 
During this time, HHS has also determined that a small number of 
applications submitted by issuers for the certification of health plans 
as QHPs on the FFEs did not meet minimum certification criteria under 
Sec.  155.1000(c), and HHS denied certification to these plans. Some of 
these issuers submitted reconsideration requests to HHS under Sec.  
155.1090(a)(1). HHS ultimately sustained its denial determinations for 
these issuers' certification applications upon reconsideration review.
    Based on our experience reviewing these certification application 
reconsideration requests, we believe that it would be appropriate to 
amend Sec.  155.1090 to codify more structure for the FFEs' process for 
conducting a reconsideration of denial of certification. Accordingly, 
we propose to use the authorities under section 1311(c) of the ACA 
(which gives HHS the authority to establish criteria for the 
certification of health plans as QHPs), section 1311(d)(4)(A) (which 
provides that Exchanges shall implement procedures for the 
certification, recertification, and decertification of QHPs consistent 
with the guidelines HHS develops under section 1311(c)), and section 
1321(a)(1)(B) (which provides HHS with broad rulemaking authority to 
issue regulations setting standards for meeting the requirements under 
title I of the ACA (which includes section 1311) for the establishment 
and operation of Exchanges and the offering of QHPs through the 
Exchanges) to require that an issuer's reconsideration request meet a 
specified burden of proof. Specifically, we propose revising Sec.  
155.1090(a)(2) to state that the burden is on an issuer that is denied 
certification to provide evidence that HHS' determination that the plan 
does not meet the certification criteria at Sec.  155.1000(c) was in 
error.
    As we stated in the Exchange Establishment Rule (76 FR 41891), 
offering only QHPs through an Exchange assures consumers that the 
coverage options presented through the Exchange meet certain minimum 
Federal standards. Given the voluntary nature of QHP certification, the 
FFEs utilize a process for QHP certification whereby the burden of 
proof is on issuers to provide sufficient evidence that they comply 
with those minimum Federal standards to obtain certification.\196\ 
Consistent with this general approach towards QHP certification, we 
believe it is appropriate to propose formalizing that the burden of 
proof involved in a reconsideration request is also on issuers. Under 
this proposal, an issuer that is denied certification on an FFE would 
be responsible for submitting a request to HHS, as operator of the 
FFEs, for reconsideration of a denial determination.
---------------------------------------------------------------------------

    \196\ See Sec.  155.1000(c)(1): ``The health insurance issuer 
provides evidence during the certification process in Sec.  155.1010 
that it complies with the minimum certification requirements 
outlined in subpart C of part 156, as applicable.''
---------------------------------------------------------------------------

    We also propose to revise Sec.  155.1090(a)(2) to require that, as 
part of a reconsideration request, an issuer would be required to 
submit clear and convincing evidence that HHS' determination that the 
plan does not meet the general certification criteria at Sec.  
155.1000(c) was in error. We explained in the 2017 Payment Notice (81 
FR 12289) that HHS expects to certify the vast majority of plans that 
meet the certification standards. To maximize this amount of time for 
health plans to prepare, submit, and revise QHP applications to the 
FFEs, HHS provides as much time as it can for issuers to demonstrate 
that they comply with the certification standards. The FFE's QHP 
certification timeline provides at least three opportunities for 
issuers to submit application materials to demonstrate that it meets 
minimum certification standards for a given plan year (four 
opportunities, if the issuer avails itself of an optional early bird 
submission). As such, by the time it issues a denial of certification, 
HHS will have typically already received substantial factual 
information from the issuer over the period of several months upon 
which it will have based its denial determination. It is unlikely that 
any additional evidence that the issuer would seek to provide upon 
reconsideration request that they had not already provided during the 
three or four rounds of application submissions would meaningfully 
weigh in favor of certification unless it clearly and convincingly 
establishes that HHS' determination that the plan does not meet the 
general certification criteria at Sec.  155.1000(c) was in error.
    Under this proposal, we would expect evidence to be clear and 
convincing that HHS' determination was in error if the issuer 
demonstrates that HHS clearly misunderstood or misinterpreted facts or 
data already provided by the issuer in previously submitted application 
materials (such as network adequacy calculation errors). We would not

[[Page 82371]]

expect evidence to be clear and convincing in this regard if it is 
substantially based on new information (such as the inclusion of new 
ECPs that the issuer did not include in previously submitted 
application materials) or is comprised of disputes of HHS' authority to 
ensure compliance with certification standards (such as a determination 
that making the plan available is not in the interest of the qualified 
individuals and qualified employers, under section 1311(e)(1)(B) of the 
ACA and Sec.  155.1000(c)(2)) that would require HHS to perform de novo 
analysis before open enrollment.
    Finally, we propose to revise the title of Sec.  155.1090 to state, 
``Request for the reconsideration of a denial of certification'' and 
the subtitle of Sec.  155.1090(a) to state, ``Request for the 
reconsideration of a denial of certification specific to a Federally-
facilitated Exchange.''
    We seek comment on this proposal.
9. General Program Integrity and Oversight Requirements (Sec.  
155.1200)
    We currently collect certain information and data from State 
Exchanges and SBE-FPs under Sec.  155.1200 to monitor their performance 
and compliance. Under our authority under section 1321(a)(1)((D) of the 
ACA to promulgate appropriate requirements related to Exchanges, we are 
proposing to also use this information and data to increase 
transparency into State Exchange operations and to promote program 
improvements.
    Under Sec.  155.1200, State Exchanges must report to HHS on certain 
Exchange-related activities and performance monitoring data. State 
Exchanges must also engage an independent qualified auditing entity 
which follows generally accepted government auditing standards (GAGAS) 
to annually compile a financial statement and conduct a financial audit 
and a programmatic audit.
    To meet these requirements, under section 1313(a)(1) of the ACA, 
State Exchanges and SBE-FPs are required to submit a State Marketplace 
Annual Reporting Tool (SMART) to CMS, which CMS uses to monitor and 
evaluate State Exchange compliance with Exchange requirements under 
Title I of the ACA.\197\ Through the SMART, State Exchanges and SBE-FPs 
attest to compliance with specific regulations, provide supporting 
documentation including, if applicable, a redetermination plan for the 
upcoming plan year, an oversight and monitoring plan with fraud, waste, 
and abuse policies and procedures, nondiscrimination policies and 
standards, and an operating budget with a financial statement. 
Additionally, the Exchanges submit the financial and programmatic 
audits with corrective action plans for any identified audit or 
findings. Following review, we provide State Exchanges and SBE-FPs with 
a SMART summary letter based on the observations and action items 
identified and monitor State Exchange completion of any open findings.
---------------------------------------------------------------------------

    \197\ OMB. State-based Marketplace Annual Reporting Tool 
(SMART). OMB control number: 0938-1244. https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/smart_2017_5.pdf.
---------------------------------------------------------------------------

    State Exchanges that operate their own eligibility and enrollment 
platform also report enrollment and Exchange activity data to CMS 
weekly during Open Enrollment and twice a year outside of Open 
Enrollment.\198\ We publish Exchange Open Enrollment data 
annually.\199\ We utilize the programmatic data received from State 
Exchanges to identify program risks and provide technical assistance to 
State Exchanges on corrective actions or strategies to mitigate risks, 
as well as to inform the development of new or updated policies as part 
of our annual rule-making processes to address known risks.
---------------------------------------------------------------------------

    \198\ OMB control number: 0938-1119.
    \199\ See, for example, CMS. (2024, March 22). 2024 Marketplace 
Open Enrollment Period Public Use Files. https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2024-marketplace-open-enrollment-period-public-use-files.
---------------------------------------------------------------------------

    In the 2025 Payment Notice (89 FR 26218), we noted that in the 
interest of transparency, we are considering the development of new 
tools to provide further information to the public about the 
performance of Exchanges. We are now proposing that, in addition to 
collecting the information and data currently submitted to CMS by State 
Exchanges and SBE-FPs under Sec.  155.1200 to monitor performance and 
compliance, we would use the information and data to increase 
transparency into State Exchange operations and to promote program 
improvements. We would value feedback on our proposed approaches to 
meeting this objective.
    Specifically, we plan to publicly release the State Exchange and 
SBE-FP annual SMARTs and financial and programmatic audits in addition 
to any documentation of corrective actions or open findings. We believe 
that in addition to increasing the public's understanding of State 
Exchanges, the release of the SMARTs and related documents, including 
programmatic and financial audits, would help ensure that the SMART and 
State Exchange compliance activities are conducted in a more 
transparent manner. Our intention is to begin with publication of the 
Plan Year 2023 SMART (which was due from the State Exchanges and SBE-
FPs to CMS on June 1, 2024, and are currently under compliance review) 
beginning Spring 2025.
    We also intend to expand on current Open Enrollment data reporting 
by publishing, additional metrics on State Exchange operations and 
functionality that we currently collect from State Exchanges, but do 
not currently report to external audiences. This data includes State 
Exchange spending on outreach (including Navigators), eligibility and 
enrollment policies and processes, plan certification requirements, and 
operational performance data, including Open Enrollment call center 
metrics (call center volume, average wait time, average call 
abandonment rate) and website visits and visitors. We believe that 
increasing transparency would allow the public to better understand the 
performance of the Exchanges, and it is our intention that this public 
reporting of State Exchange operations and functionality would include 
public release of comparable metrics for the FFEs and SBE-FPs.
    We are interested in comments as to what other Exchange metrics 
would be useful to disclose to the public.

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

1. Solicitation of Comments--Reducing the Risk That Issuer Insolvencies 
Pose to the Integrity of the Federally-Facilitated Exchanges
    Several instances of issuer insolvencies (each involving multi-
State parent organizations with several subsidiaries) have in recent 
years destabilized certain State markets and caused significant 
disruption to consumers, including in the applicable Exchanges. The 
disruptive nature of these incidents prompted State Departments of 
Insurance (DOIs), trade organizations, and issuers to request that we 
intervene to restabilize affected markets and employ additional 
measures to reduce the risk of similar scenarios occurring in 
subsequent years. In response to this feedback, we are soliciting 
comments on methods that HHS, as operator of the FFEs, could 
potentially employ, in partnership with State regulators, to reduce the 
risk that

[[Page 82372]]

issuer insolvencies pose to the integrity of the FFEs.
    One example of a potential approach we are considering adopting, 
and therefore solicit comment on, could be to increase our coordination 
with State DOIs, individually and collectively in the case of multi-
State issuers, and the National Association of Insurance Commissioners 
(NAIC). Under this approach, we could review QHP applications in FFE 
States to identify issuers that are at risk of experiencing solvency-
related difficulties, both at the time of an issuer's application for 
QHP certification and on a rolling basis throughout the plan year. To 
assess issuer solvency, we could examine well-understood and industry-
standard financial measures, such as the risk-based capital ratio and 
quick ratio, in partnership with State regulators.
    The risk-based capital ratio is an industry-standard regulatory 
method used to determine the minimum amount of capital an issuer must 
maintain to cover its risk. The risk-based capital ratio an issuer must 
maintain (in accordance with State licensure requirements) is based on 
the inherent level of risk associated with its financial assets, 
insurance products, and business operations. The risk-based capital 
ratio is defined as the ratio of an issuer's total adjusted capital to 
its authorized control level risk-based capital. Total adjusted capital 
is typically cash or liquid assets being held or obtained for 
expenditures. Authorized control level risk-based capital, also 
referred to as risk-weighted assets, is the denominator in the risk-
based capital ratio. Authorized control level risk-based capital is 
used to determine the minimum amount of capital an issuer must hold in 
relation to the risk profile of its activities and other assets.\200\
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    \200\ National Association of Insurance Commissioners. (2024, 
Jan. 1). Risk-Based Capital. https://content.naic.org/cipr-topics/risk-based-capital.
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    A low risk-based capital ratio may indicate that an issuer is 
insufficiently capitalized and therefore may be unable to pay claims 
and risk adjustment charges in a longer time horizon. Thus, monitoring 
issuers' risk-based capital ratios enables regulators to identify 
potentially insufficiently capitalized issuers, which could facilitate 
necessary regulatory intervention to ensure enrollees receive benefits 
without relying on a guaranty association or taxpayer funds. In the 
context of the Exchanges, such regulatory intervention could include 
implementing plan suppressions, enrollment caps, denying QHP 
certification, or decertifying existing QHPs.
    While the risk-based capital ratio provides a measure of an 
issuer's overall long-term financial viability, it does not so readily 
indicate whether an issuer is able to pay claims or risk adjustment 
charges in the more immediate term by quickly liquidating its assets. 
For example, an issuer could have a risk-based capital ratio indicating 
a sufficient degree of capitalization but may not be able to quickly 
liquidate its assets to cover its immediate liabilities, either in the 
form of claims or risk adjustment payments.
    As such, we are interested in comments on whether we should 
consider also utilizing a second industry-standard measure of financial 
instability, the quick ratio, which is a type of liquidity ratio, to 
assess issuer solvency. The quick ratio measures an issuer's ability to 
use its near-cash or ``quick'' assets to extinguish or retire its 
current liabilities immediately. The quick ratio is defined as the 
ratio between quickly available or liquid assets and current 
liabilities.\201\ Quick assets are current assets that can presumably 
be quickly converted to cash at close to their book values. Possessing 
sufficient quick assets ensures issuers are able to timely cover all 
claims in a more immediate timeframe.
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    \201\ Corporate Finance Institute. (n.d.) Quick Ratio. https://corporatefinanceinstitute.com/resources/accounting/quick-ratio-definition/.
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    The quick ratio is a more conservative estimate of how liquid a 
company is compared to other calculations that include potentially 
illiquid assets, such as the risk-based capital ratio. In particular, 
the quick ratio addresses an issuer's ability to pay outstanding debts. 
This financial metric alone does not provide any indication about a 
company's future cash flow activity. However, the utilization of the 
quick ratio, in conjunction with the risk-based capital ratio, could 
potentially facilitate the identification of issuers with potential 
financial viability concerns that may pose risk to the integrity of the 
FFEs.
    Altogether, monitoring issuers' risk-based capital ratios could 
facilitate the assessment of an issuer's longer-term prospects for 
financial viability, while monitoring issuers' quick ratios could 
facilitate the assessment of issuers' more immediate term prospects for 
financial viability. Together, the utilization of these two 
complementary measures could potentially provide a more holistic view 
of issuers' financial viability and help HHS, as operator of the FFEs, 
in partnership with applicable State DOIs, take the action necessary to 
ensure the integrity of the FFEs (such as by suppressing QHPs under 
Sec.  156.815, instituting enrollment caps--which have been previously 
operationalized by implementing QHP suppressions under Sec.  
156.815(b)(5) based on the guaranteed availability exceptions at Sec.  
147.104(c) and (d), denying QHP certification applications under Sec.  
155.1000(c), or decertifying QHPs under Sec.  156.810).
    Under this potential approach, HHS, in partnership with State 
regulators, could assess an issuer's financial stability based on its 
risk-based capital ratio and its quick ratio using data that is 
included in the statutory annual and quarterly financial statements 
that issuers are already required to file with the NAIC. Since these 
materials are already available to HHS, this approach would not require 
issuers to prepare and submit additional materials to HHS, which would 
minimize burden on QHP issuers.
    In addition to monitoring issuers' risk-based capital ratios and 
quick ratios to identify issuers at risk of experiencing solvency-
related difficulties, HHS could work in partnership with applicable 
State regulators to identify issuers that are experiencing levels of 
enrollment growth that risk exceeding their capitalization rates, which 
has historically tended to occur in large part due to the relative 
premium position of issuers' newly-offered plans (specifically, having 
the lowest-cost bronze or silver plan in the county).
    Issuers experiencing enrollment growth disproportionately comprised 
of comparatively low-risk enrollees that exceeds their capitalization 
rates has been a primary contributing factor in each of the recent 
instances of issuer insolvencies. In particular, in these instances of 
issuer insolvencies, insufficiently capitalized issuers underpriced 
their QHPs, which attracted a high number of relatively low-risk 
enrollees. These issuers subsequently accrued significantly higher-
than-anticipated risk adjustment charges due to the relatively low risk 
profiles of their enrollees, which in turn led to these issuers being 
unable to timely pay risk adjustment charges in full.
    Upon identifying issuers with insufficient risk-based capital and 
quick ratios, and/or issuers with enrollment growth that risks 
exceeding their capitalization rates, HHS could engage applicable State 
regulators--including State regulators in the affected States, 
regulators of those issuers in their States of domicile, and regulators 
of affiliated

[[Page 82373]]

entities within the same parent organization domiciled in other States. 
HHS and those State regulators could then discuss the advisability of 
having these plans certified to be offered on their respective 
Exchanges. Discussions with State regulators could include whether 
those States should request that HHS invoke the exceptions to 
guaranteed availability for financial capacity under Sec.  147.104(d), 
and whether States should request that HHS institute a temporary 
enrollment cap if an issuer demonstrates an insufficient risk-based 
capital ratio and/or quick ratio, or if an issuer experiences 
enrollment growth that risks exceeding its capitalization rate.
    Under this potential approach, we could monitor issuers offering 
QHPs through the FFEs--but not issuers only offering QHPs through State 
Exchanges or SBE-FPs. This is because we believe that State Exchanges 
(including SBE-FPs) are best positioned to understand both the nuances 
of their respective markets and the specific needs of qualified 
individuals enrolling in QHPs. We also believe that States that have 
invested the necessary time and resources to establish State Exchanges 
have done so to implement policies that differ from those on the FFEs, 
and we do not wish to impede these efforts, so long as they comply with 
existing legal requirements. However, we believe that HHS can serve a 
useful role in identifying broader risks that span multiple markets by 
convening States that regulate multi-State issuers.
    State regulators are the primary regulators of licensure 
requirements, including solvency. Indeed, we strongly believe that 
States are best positioned to exercise these responsibilities as a 
general matter. Since HHS, as the operator of the FFEs in many States 
and as the operator of risk adjustment in all States, has a more 
complete view of multi-State issuers, and, in FFE States, the ability 
to wield Exchange-specific tools (such as plan suppressions, enrollment 
caps, denial of QHP certification applications, and the decertification 
of existing QHPs), we believe HHS can serve a useful role in promoting 
thoughtful discussions with and among State regulators around the 
advisability of certifying plans where there may be concerns around 
capitalization and enrollment growth that risks exceeding 
capitalization rates. Regardless, we underscore that nothing in this or 
any other potential approach we are considering would preempt any 
State's licensing requirements with regard to solvency or financial 
matters.
     We solicit comments on this and other potential approaches for 
reducing the risk that issuer insolvencies pose to the integrity of the 
FFEs.
2. FFE and SBE-FP User Fee Rates for the 2026 Benefit Year (Sec.  
156.50)
    For the 2026 benefit year, we propose an FFE user fee rate of 2.5 
percent of total monthly premiums and an SBE-FP user fee rate of 2.0 
percent of total monthly premiums. These significant increases in the 
FFE and SBE-FP user fee rates would be necessary if Congress does not 
act to extend enhanced PTC subsidies \202\ into 2026. In the absence of 
Congressional action, we project large decreases in enrollment for 
2026, requiring us to reverse the reductions in the FFE and SBE-FP user 
fee rates that were made possible by record-setting enrollment in 
recent years.
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    \202\ ARP, Public Law 117-2 (2021). These enhanced subsidies 
were extended under the IRA, Public Law 117-169 (2022) and are 
scheduled to expire after the 2025 calendar year.
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    However, Congressional action that extends the enhanced PTC 
subsidies under the IRA through the 2026 benefit year, prior to issuer 
rate-setting deadlines for the 2026 benefit year, would lead us to 
revise our enrollment projections and modify the FFE and SBE-FP user 
fee rates to rates closer to FFE and SBE-FP user fee rates for 2025 
than the proposed rates. Specifically, if the enhanced PTC subsidies as 
currently enacted \203\ or at a higher level are extended through the 
2026 benefit year by March 31, 2025, we propose a 2026 benefit year FFE 
user fee rate range between 1.8 and 2.2 percent of total monthly 
premiums and a 2026 benefit year SBE-FP user fee rate range between 1.4 
and 1.8 of total monthly premiums, with each of these ranges to be set 
at a single rate in the final rule. These ranges are based in part on 
projected enrollment during the 2025 open enrollment period. HHS will 
have a better understanding of the projected open enrollment numbers to 
finalize a single FFE and SBE-FP user fee rate within those ranges in 
the final rule (as more data about the 2025 open enrollment period will 
be available for calculating a single FFE and SBE-FP user fee rate for 
the final rule). In finalizing a single FFE and SBE-FP user fee rate 
within the proposed range, we would also consider any changes to our 
premium estimates or budget based on the most recently available data.
---------------------------------------------------------------------------

    \203\ Ibid.
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    HHS also notes that this same dynamic related to lower enrollment 
is present across numerous calculations HHS makes associated with 
operation of the Exchange, outside the context of this proposed rule. 
For example, a reduction in enhanced PTC subsidies may considerably 
impact pass-through funding to States for programs established under 
Section 1332 waivers. Similarly, the expiration of enhanced PTC 
subsidies may affect BHP States' ability to implement, sustain, and 
expand their BHP programs. Lastly, we note that increased enrollment 
due to enhanced PTC subsidies has increased overall projected 
enrollment. In the absence of Congressional action to extend enhanced 
PTC subsidies, those calculations and payments will assume lower 
enrollment and lower APTC and PTC levels.
    We are proposing March 31, 2025 as the date by which enhanced PTC 
subsidies must be extended in order for HHS to apply the alternative 
FFE and SBE user rates, because we anticipate this date as the latest 
date we could select that would still provide issuers the opportunity 
to take enactment of the law into account in setting rates for the 2026 
benefit year and for HHS or States, as applicable, to timely review and 
approve those rates. However, we seek comment on whether March 31, 2025 
provides sufficient time and whether we should select an earlier or 
later date.
    Section 1311(d)(5)(A) of the ACA permits an Exchange to charge 
assessments or user fees on participating health insurance issuers as a 
means of generating funding to support its operations. If a State does 
not elect to operate an Exchange or does not have an approved Exchange, 
section 1321(c)(1) of the ACA directs HHS to operate an Exchange within 
the State. Accordingly, in Sec.  156.50(c), we state that a 
participating issuer offering a plan through an FFE or SBE-FP must 
remit a user fee to HHS each month that is equal to the product of the 
annual user fee rate specified in the annual HHS notice of benefit and 
payment parameters for FFEs and SBE-FPs for the applicable benefit year 
and the monthly premium charged by the issuer for each policy where 
enrollment is through an FFE or SBE-FP. OMB Circular A-25 established 
Federal policy regarding user fees and what the fees can be used 
for.\204\ OMB Circular A-25 provides that a user fee charge will be 
assessed against each identifiable recipient of special benefits 
derived from Federal activities beyond those received by the general 
public.
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    \204\ See OMB. (n.d.) Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.
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a. FFE User Fee Rates for the 2026 Benefit Year
    Section 156.50(c)(1) provides that, to support the functions of 
FFEs, an issuer

[[Page 82374]]

offering a plan through an FFE must remit a user fee to HHS, in the 
timeframe and manner established by HHS, equal to the product of the 
monthly user fee rate specified in the annual HHS notice of benefit and 
payment parameters for the applicable benefit year and the monthly 
premium charged by the issuer for each policy where enrollment is 
through an FFE. As in benefit years 2014 through 2025, issuers seeking 
to participate in an FFE in the 2026 benefit year will receive two 
special benefits not available to issuers offering plans in State 
Exchanges: (1) the certification of their plans as QHPs; and (2) the 
ability to sell health insurance coverage through an FFE to individuals 
determined eligible for enrollment in a QHP. For the 2026 benefit year, 
issuers participating in an FFE will receive special benefits from the 
following Federal activities:
    <bullet> Provision of consumer assistance tools;
    <bullet> Consumer outreach and education;
    <bullet> Management of a Navigator program;
    <bullet> Regulation of agents and brokers;
    <bullet> Eligibility determinations;
    <bullet> Enrollment processes; and
    <bullet> Certification processes for QHPs (including ongoing 
compliance verification, recertification, and decertification).
    Activities performed by the Federal government that do not provide 
issuers participating in an FFE with a special benefit are not covered 
by the FFE user fee.
    The proposed user fee rate reflects our estimates for the 2026 
benefit year of costs for operating the FFEs, premiums, enrollment, and 
transitions in Exchange models from the FFE and SBE-FP models to either 
the SBE-FP or State Exchange models. The total enrollment in Exchanges 
in States anticipated to transition from operating an SBE-FP to a State 
Exchange model represents premiums for which we will no longer collect 
user fees, and the total enrollment in Exchanges in States anticipated 
to transition from an FFE to an SBE-FP model represents premiums for 
which we will assess user fees at the lower SBE-FP rate. Thus, these 
anticipated transitions impact our total projected collections and may 
affect the FFE and SBE-FP user fee rates and are considered as part of 
our calculation of our proposed user fee rates.
    To develop the proposed 2026 benefit year FFE user fee rates, we 
considered a range of costs, premiums, and enrollment projections.\205\ 
For the proposed 2026 benefit year user fee rates, we estimated that 
contract and labor costs would increase from the 2025 benefit year. 
Particularly, we have experienced increases in costs related to 
regulation of agents and brokers, consumer outreach and education, 
eligibility determinations, enrollment processes, and certification 
processes for QHPs.
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    \205\ We considered the most recent projections from the 
Congressional Budget Office and, as we have in prior rulemakings, 
our own internal data. See, for example, 88 FR 25845; see also, 
Congressional Budget Office. (2024, June 18). Health Insurance 
Coverage for the US Population, 2024 to 2034. https://www.cbo.gov/system/files/2024-06/60040-Health.pdf.
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    We took several factors into consideration in choosing which 
premium and enrollment projections would inform the proposed 2026 FFE 
user fee rates. First, for our estimated premium trend rate 
projections, we found based on our analysis of historical premium trend 
data that our actual average premium trend rate was lower than we had 
estimated in prior benefit years and therefore, for our projected 2026 
benefit year user fee rates, we decreased our estimated premium trend 
rate projections. This change serves to better align with our 
historical premium trend experience, and to reflect that the total 
monthly premiums to which the proposed FFE and SBE-FP user fee rates 
would be applied are likely to be lower than previously expected.
    For the 2021 through 2025 benefit years, we projected increased 
enrollment in the individual non-catastrophic market risk pool in most 
States, due to the enhanced PTC subsidies provided for in the ARP 
<SUP>206 207</SUP> and the extension of the PTC subsidies through the 
2025 benefit year under section 12001 of the IRA.\208\ Our 2026 
enrollment estimates account for the projected transitions of States 
from FFEs or SBE-FPs to State Exchanges, the enrollment impacts of 
section 1332 waivers, and transitioning Medicaid Expansion States. We 
also carefully considered the impact of the expiration of the enhanced 
PTC subsidies on 2026 benefit year Exchange enrollment in the 
individual market.
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    \206\ ARP, Public Law 117-2 (2021).
    \207\ CMS. (2023). Summary Report on Permanent Risk Adjustment 
Transfers for the 2022 Benefit Year. (p. 8). https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf.
    \208\ Inflation Reduction Act, Public Law 1217-169 (2022).
---------------------------------------------------------------------------

    We believe that the 2026 benefit year is uniquely uncertain due to 
the potential significant changes in enrollment expected if the 
enhanced PTC subsidies expire at the end of the 2025 benefit year under 
current law. We understand that many interested parties \209\ have 
expressed interest in permanently extending the enhanced PTC subsidies 
established in section 9661 of the ARP and extended in section 12001 of 
the IRA beyond the 2025 benefit year. We recognize that the expiration 
of the subsidies at the end of the 2025 benefit year creates a 
significant amount of uncertainty in the ACA markets and their 
expiration will have a ripple impact across the ACA markets.
---------------------------------------------------------------------------

    \209\ For example, permanent extension of enhanced PTC subsidies 
is discussed in the President's 2025 Fiscal Year Budget (see https://www.whitehouse.gov/wp-content/uploads/2024/03/budget_fy2025.pdf) 
and the extension of enhanced PTC subsidies has also been addressed 
by the National Association of Insurance Commissioners in a letter 
to the U.S. Senate Committee on Finance and the U.S. House of 
Representatives Committee on Ways and Means (see https://content.naic.org/sites/default/files/enhanced-subsidies-hill-letter-2024-final-july-2024.pdf).
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    For example, a reduction in enhanced PTC subsidies may considerably 
impact pass-through funding to States for programs established under 
Section 1332 waivers. In 2021, when the enhanced PTC subsidies first 
took effect, HHS and the Department of the Treasury awarded over $510 
million in additional pass-through funding to 14 States in light of the 
enhanced subsidies through the ARP.\210\ The expiration of the enhanced 
PTC subsidies would lead to a reduction in pass-through funding, which 
could require States to either allocate additional State funding to 
reinsurance programs or decrease the size of those programs.\211\ This 
could potentially leave States with less State funding to pursue 
innovative State strategies to further improve affordability or lead to 
higher premiums. A majority of Section 1332 waiver programs are State-
based reinsurance programs.\212\ State-based reinsurance programs aim 
to reduce

[[Page 82375]]

premiums for enrollees in the States' individual markets,\213\ as well 
as reduce uncertainty in the range of premium increases.\214\ A 
reduction in the amount of Federal pass-through funding for those 
programs resulting from the loss of enhanced PTC subsidies would likely 
have the inverse impact of putting upward pressure on premiums, making 
premiums higher compared to premiums without the enhanced PTC 
subsidies. This premium increase could result in lower enrollment and 
create significant uncertainty about the final combined impact of 
premium and enrollment changes on FFE and SBE-FP user fees, or it could 
result in a potentially higher user fee in order to maintain a similar 
level of user fee funding collections.
---------------------------------------------------------------------------

    \210\ CMS. (2021, Sept. 7). American Rescue Plan Provides States 
Additional Funding to Lower Health Coverage Costs, Increase 
Affordability for Americans. https://www.cms.gov/newsroom/press-releases/american-rescue-plan-provides-states-additional-funding-lower-health-coverage-costs-increase.
    \211\ An extension of the enhanced PTC subsidies' schedule has 
previously been projected to increase net Federal spending by about 
$18.4 billion in 2026. See OMB. (2024, March). Budget of the U.S. 
Government Fiscal Year 2025. Table S-6 (p. 143). https://www.whitehouse.gov/wp-content/uploads/2024/03/budget_fy2025.pdf. To 
the extent that a State's 1332 waiver reduces premiums or waives 
PTC, its 2026 pass-through funding would be higher by a portion of 
this amount.
    \212\ Twenty States have been granted State Innovation Waivers 
under Section 1332 of the ACA. Of these 20 States, 17 have 
reinsurance programs. The section 1332 website includes approved 
waivers here: https://www.cms.gov/marketplace/states/section-1332-state-innovation-waivers. Reinsurance programs can also be found 
here: https://www.cms.gov/files/document/cciio-data-brief-042024-508-final.pdf.
    \213\ Overall, from PYs 2018 to 2023, States implementing 
Section 1332 State-based reinsurance programs for the individual 
market have seen statewide average SLCSP premium reductions ranging 
from 3.75 percent to 41.17 percent, compared to premiums absent the 
waiver. See https://www.cms.gov/files/document/cciio-data-brief-042024-508-final.pdf.
    \214\ Premium growth under reinsurance programs is slower and 
more stable, and therefore more predictable, than before reinsurance 
program implementation. See https://www.cms.gov/files/document/1332-evaluation-oregon-2021.pdf, https://www.cms.gov/files/document/1332-evaluation-minnesota-2021.pdf, and https://www.cms.gov/files/document/1332-evaluation-alaska-2021.pdf.
---------------------------------------------------------------------------

    Furthermore, the expiration of enhanced PTC subsidies would impact 
funding available for States to operate BHP programs that enable 
enrollees that would otherwise be PTC-eligible to purchase healthcare 
coverage. This includes individuals under age 65 with household incomes 
between 133 percent and 200 percent of the FPL who are not otherwise 
eligible for Medicaid, CHIP, or other minimum essential coverage, or 
individuals whose income is equal to or below 133 percent of FPL but 
are lawfully present non-citizens ineligible for Medicaid, not 
otherwise eligible for minimum essential coverage. Expiration of 
enhanced PTC subsidies may affect BHP States' ability to implement, 
sustain, and expand their BHP programs, thereby impacting enrollment in 
these plans.
    We also know that the enhanced PTC subsidies have resulted in major 
enrollment gains in the ACA markets over the last few years.\215\ This 
is because ACA markets currently consist of additional enrollees who 
may not have selected plans previously during open enrollment, namely 
individuals newly eligible to receive tax credits.\216\ Increased 
enrollment due to enhanced PTC subsidies has increased projected 
enrollment in our FFE and SBE-FP user fee calculations and has 
contributed to our ability to lower user fee rates over the past few 
years.
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    \215\ See https://www.cms.gov/files/document/early-2024-and-full-year-2023-effectuated-enrollment-report.pdf.
    \216\ From 2022 to 2024, Exchange plan selection during open 
enrollment for individuals with incomes <=200% of FPL increased by 
~77%. For individuals with incomes of >200% of FPL and <=400% of 
FPL, enrollment increased by ~15%. For individuals with incomes 
above 400% of FPL, enrollment increased by ~36.7%. Prior to the IRA 
and ARP, individuals with incomes above 400% of FPL were ineligible 
for the premium tax credit. Data sources: 2022 Marketplace Open 
Enrollment Period Public Use Files (https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2022-marketplace-open-enrollment-period-public-use-files) and 2024 
Marketplace Open Enrollment Period Public Use Files (https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2024-marketplace-open-enrollment-period-public-use-files).
---------------------------------------------------------------------------

    If enhanced PTC subsidies expire, we project that the total 
enrollment through FFEs and SBE-FPs would decrease at a similar rate as 
the Congressional Budget Office projections.\217\ In turn, we 
anticipate that issuers would likely rate for the uncertainty 
associated with the expected decreased enrollment in the risk pool and 
increase premiums, potentially resulting in a decline in issuer 
participation within ACA markets in the long-term.
---------------------------------------------------------------------------

    \217\ According to Congressional Budget Office projections, 
Exchange enrollment will peak in 2025 and decline significantly by 
2027 due to the expiration of enhanced PTC subsidies in 2025. See 
Congressional Budget Office and Joint Committee on Taxation 
projections of net Federal subsidies for health insurance (2023 
through 2034): https://www.cbo.gov/system/files/2024-06/51298-2024-06-healthinsurance.pdf.
---------------------------------------------------------------------------

    Lastly, we note that the expiration of enhanced PTC subsidies is 
not expected to decrease our FFE and SBE-FP budget estimates for 
operating the FFEs and SBE-FPs for the 2026 benefit year. This is 
because, while certain cost estimates would be expected to decrease 
with the expiration of enhanced PTC subsidies, such as printing and 
mailing of educational materials to enrollees and QHP certification, 
other costs and labor estimates would be expected to increase, such as 
the rate of eligibility appeal cases and inquiries to CMS Agent/Broker 
Marketplace Help Desks and Call Centers.
    Despite the very high level of uncertainty discussed above, we 
maintain our interest in ensuring that we collect user fees at a rate 
that will allow us to sustain the operations of the FFEs. After 
considering the range of costs, premiums, and enrollment projections, 
and considering how enhanced PTC subsidies could have a notable impact 
on our FFE and SBE-FP user fee rates, we propose a 2026 user fee rate 
that will ensure adequate funding for FFE operations. The proposed 2026 
benefit year FFE user fee rate, which is 2.5 percent of total monthly 
premiums, is greater than the 2025 benefit year fee rate of 1.5 percent 
of total monthly premiums. Based on our estimates, this proposed user 
fee rate would allow us to have sufficient funding available to fully 
fund user-fee-eligible FFE activities. We note that if any events 
occurring between this proposed rule and the final rule significantly 
change our estimated costs to operate the FFEs or the Federal platform, 
or our projections of premiums or enrollment, we may finalize FFE and 
SBE-FP user fee rates that differ from these proposed rates to reflect 
those changes.
    We seek comment on the proposed 2026 benefit year FFE user fee rate 
and the alternative proposed 2026 benefit year FFE user fee rate range 
(with this range to be set at a single rate in the final rule) if the 
current or a higher level of enhanced PTC subsidies are extended 
through the 2026 benefit year by March 31, 2025, including whether 
March 31, 2025 provides issuers sufficient time to request rates and 
for States to review and approve rate requests.
b. SBE-FP User Fee Rates for the 2026 Benefit Year
    In Sec.  156.50(c)(2), we specify that an issuer offering a plan 
through an SBE-FP must remit a user fee to HHS, in the timeframe and 
manner established by HHS, equal to the product of the monthly user fee 
rate specified in the annual HHS notice of benefit and payment 
parameters for the applicable benefit year and the monthly premium 
charged by the issuer for each policy where enrollment is through an 
SBE-FP. SBE-FPs enter into a Federal platform agreement with HHS to 
leverage the systems established for the FFEs to perform certain 
Exchange functions and enhance efficiency and coordination between 
State and Federal programs. The benefits provided to issuers in SBE-FPs 
by the Federal government include use of the FFE information technology 
and call center infrastructure used in connection with eligibility 
determinations for enrollment in QHPs and other applicable State health 
subsidy programs, as defined at section 1413(e) of the ACA, and QHP 
enrollment functions under 45 CFR part 155, subpart E. The user fee 
rate for SBE-FPs is calculated based on the proportion of total FFE 
costs associated with Federal activities that provide SBE-FP issuers 
with special benefits, including costs that are associated with the FFE 
information technology infrastructure, the consumer call center

[[Page 82376]]

infrastructure, and eligibility and enrollment services.
    To calculate the proposed SBE-FP rates for the 2026 benefit year, 
we used the same assumptions related to contract costs, enrollment, and 
premiums as we used for the proposed FFE user fee rates. As we 
explained previously in this section, the user fee rate for SBE-FPs is 
calculated based on the proportion of the total FFE costs associated 
with Federal activities that provide SBE-FP issuers with special 
benefits, which we continue to estimate to be approximately 80 percent 
of total FFE costs. These FFE costs associated with Federal activities 
that provide SBE-FP issuers with special benefits include the costs 
associated with the FFE information technology infrastructure, the 
consumer call center infrastructure, and eligibility and enrollment 
services.
    Based on this methodology, the proposed 2026 benefit year SBE-FP 
user fee rate of 2.0 percent of total monthly premiums is greater than 
the user fee rate of 1.2 percent of total monthly premiums that we 
established for the 2025 benefit year. The proposed user fee rate for 
SBE-FP issuers for the 2026 benefit year also includes assumptions 
about States transitioning from either the FFE model to an SBE-FP, or 
from an SBE-FP to a State Exchange for the 2026 benefit year, which 
impacts the SBE-FP enrollment projections.
    As discussed in detail above, we believe that the 2026 benefit year 
is uniquely different due to the potential significant changes to our 
projections if enhanced PTC subsidies expire at the end of the 2025 
benefit year as currently expected. Despite this uncertainty, we 
maintain our interest in ensuring that we collect user fees at a rate 
that will allow us to sustain the Federal platform operations for the 
SBE-FPs. For these reasons, we also propose an alternative SBE-FP user 
fee range between 1.4 percent and 1.8 percent of total monthly premiums 
if current or a higher level of enhanced PTC subsidies are extended 
through the 2026 benefit year by March 31, 2025, to be set at a single 
rate in the final rule.
    We seek comment on the proposed 2026 benefit year SBE-FP user fee 
rate and the alternative proposed 2026 benefit year SBE-FP user fee 
rate range (with this range to be set at a single rate in the final 
rule) if the enhanced PTC subsidies are extended through the 2026 
benefit year by March 31, 2025.
3. Silver Loading (Sec.  156.80)
    Section 1402 of the ACA requires issuers to provide CSRs to help 
make health care more affordable for eligible low- and moderate-income 
consumers who enroll in silver level QHPs offered through the 
individual market Exchanges, as well as eligible American Indian (AI)/
Alaska Native (AN) consumers who enroll in QHPs at any metal level. 
Section 1402 further states that HHS will reimburse issuers for the 
cost of providing CSRs. Until October 2017, the Federal government 
relied on the permanent appropriation at 31 U.S.C. 1324 as the source 
of funds for Federal CSR payments to issuers. However, on October 11, 
2017, the Attorney General of the United States provided HHS and the 
Department of the Treasury with a legal opinion indicating that the 
permanent appropriation at 31 U.S.C. 1324 cannot be used to fund CSR 
payments to issuers.\218\ In light of this opinion--and in the absence 
of any other appropriation that could be used to fund CSR payments--HHS 
directed CMS to discontinue CSR payments to issuers until Congress 
provides an appropriation.
---------------------------------------------------------------------------

    \218\ Sessions, J. (2017, Oct. 11). Legal Opinion Re: Payments 
to Issuers for Cost Sharing Reductions (CSRs). Department of 
Justice's Office of Attorney General. https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
---------------------------------------------------------------------------

    In response to the termination of CSR payments to issuers, State 
DOIs generally permitted or instructed their issuers to increase 
premiums only, or primarily, on silver-level QHPs, to compensate for 
the cost of offering CSRs, since the vast majority of eligible 
enrollees receiving CSRs are enrolled in silver plans. This rating 
practice is sometimes referred to as ``silver loading'' or ``actuarial 
loading.'' Our regulations permit certain plan-level adjustments to the 
index rate on which premiums are based that are actuarially justified 
pursuant to the single risk pool requirements at Sec.  156.80, and many 
States, which are the traditional regulators of insurance and rating 
practices, have provided issuers with pricing guidance specific to 
unpaid CSRs. For enrollees in silver plans who receive PTCs, the 
increase in PTCs corresponding to the higher premium rates generally 
fully offsets the higher premiums that they would otherwise experience 
because of silver loading.
    In the January 24, 2019 Federal Register (84 FR 283), we sought 
comments on whether and how we might address the practice of silver 
loading through rulemaking, in the absence of Congressional action. All 
commenters recognized silver loading as an appropriate way to maintain 
consumer affordability and participation. In keeping with States' 
longstanding role as regulators of insurance premium setting, the 
majority of commenters urged us to continue to allow States to 
determine how to implement CSR loading. Some commenters expressed 
opposition to the practice of ``broad loading,'' in which issuers 
increase premiums on all plans (on- and off-Exchange) to mitigate the 
lack of CSR reimbursement. Those commenters stated that increasing 
premiums for all plans would force all unsubsidized consumers to pay 
higher premiums and would decrease APTC amounts. Commenters noted the 
reduction in financial assistance and large premium swings from year to 
year would cause consumer confusion and instability in the Exchanges, 
and such market disruption may lead to issuers leaving the Exchanges.
    Since the cessation of CSR payments in 2017, States and issuers 
have asked us to clarify how the single risk pool rules at Sec.  156.80 
apply to actuarial loading. In guidance published in 2018, we stated 
that ``[a] plan-level variation for the actuarial value and cost-
sharing design of a plan is permitted under Sec.  156.80(d)(2)(i). A 
health insurance issuer that offers a QHP may vary premium rates for 
the QHP based on the impact of the loss of anticipated Federal funding 
for CSR payments.'' \219\ In light of the continued absence of 
Congressional action to fund CSRs and given States' longstanding role 
as the primary regulators of insurance, we have consistently stated 
that the statute permits States' rating practices for silver loading or 
broad-loading, as long as the resulting rate adjustments are reasonable 
and actuarially justifiable pursuant to Sec.  156.80.
---------------------------------------------------------------------------

    \219\ CMS. (2018, Aug. 3). Center for Consumer Information & 
Insurance Oversight, Insurance Standards Bulletin Series--
Information, Offering of plans that are not QHPs without CSR 
``loading,'' https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Offering-plans-not-QHPs-without-CSR-loading.pdf.
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    Since we continue to receive questions about permissible actuarial 
loading practices, we affirm that silver-loading and broad-loading 
practices to increase premiums to offset amounts of unpaid CSRs that 
are permitted by State regulators are permissible under Federal law to 
the extent that they are reasonable and actuarially justified. We have 
long implemented section 1312(c) of the ACA by permitting issuers to 
vary premium rates for a particular plan from the market-wide adjusted 
index rate based on a limited set of actuarially justified plan-
specific factors, including the actuarial value and cost-sharing design 
of the plan. For example, reasonable and actuarially justified silver 
loading practices reflect such a

[[Page 82377]]

permissible variance because they relate to the actuarial value and 
cost-sharing design of silver-level plans, which are currently required 
to provide CSRs without reimbursement. We are considering codifying 
this policy by amending Sec.  156.80(d)(2)(i) to clarify that the plan-
specific factors by which issuers adjust the market-wide index rate 
include adjustments that reflect the costs associated with providing 
CSRs to the eligible enrollee population, to the extent that such 
adjustments are reasonable and actuarially justified. We seek comment 
on whether and how to codify this policy at Sec.  156.80.
4. Publication of the 2026 Premium Adjustment Percentage, Maximum 
Annual Limitation on Cost Sharing, Reduced Maximum Annual Limitation on 
Cost Sharing, and Required Contribution Percentage in Guidance (Sec.  
156.130(e))
    As established in part 2 of the 2022 Payment Notice (86 FR 24238), 
for benefit years in which we are not making changes to the methodology 
to calculate the premium adjustment percentage, the required 
contribution percentage, and maximum annual limitations on cost sharing 
and reduced maximum annual limitation on cost sharing, we will publish 
these parameters in guidance annually starting with the 2023 benefit 
year. Therefore, because we are not proposing to change the methodology 
for calculating these parameters for the 2026 benefit year, these 
parameters are not included in this rulemaking, and we intend to 
publish these parameters in guidance no later than December 31, 2024.
5. AV Calculation for Determining Level of Coverage (Sec.  156.135)
    We intend to revise the method for updating the AV Calculator, 
starting with the 2026 AV Calculator.
    Section 2707(a) of the PHS Act and section 1302 of the ACA direct 
issuers of non-grandfathered individual and small group health 
insurance coverage, including QHPs, to ensure that plans meet a level 
of coverage, or metal tier, specified in section 1302(d)(1) of the ACA. 
Each level of coverage corresponds to an AV calculated based on the 
cost-sharing features of the plan. On February 25, 2013, HHS published 
the EHB Rule (78 FR 12834), implementing section 1302(d) of the ACA, 
which requires at subsection (d)(2)(A) that, to determine the level of 
coverage for a given metal tier, the calculation of AV be based upon 
the provision of EHB to a standard population. Section 156.135(a), as 
finalized in the EHB Rule, provides that an issuer must use the AV 
Calculator developed and made available by HHS for the given benefit 
year to calculate the AV of a health plan, subject to the exception in 
paragraph (b).
    In the 2015 Payment Notice (79 FR 13744), we established at Sec.  
156.135(g) provisions for updating the AV Calculator in future plan 
years. We stated in the preamble of the 2015 Payment Notice that we 
intend to release a draft version of the AV Calculator and AV 
Calculator Methodology through guidance for public comment each plan 
year before releasing the final version. In that same rule, we noted 
that interested parties could submit feedback on changes to the AV 
Calculator, and that we would consult as needed with the American 
Academy of Actuaries and the National Association of Insurance 
Commissioners on changes to the AV Calculator.
    In the 2017 Payment Notice (81 FR 12204), we reiterated this 
approach and amended Sec.  156.135(g) to allow for additional 
flexibility in our approach and options for updating the AV Calculator 
each year, which include trend factor updates, algorithms changes, user 
interface changes, updates to the claims data and demographic 
distribution being used in the AV Calculator, and an update to the AV 
Calculator's annual limitation on cost sharing. We also stated that we 
intend to release the final AV Calculator for a respective plan year no 
later than the end of the first quarter of the preceding plan year.
    Since this time, we have largely fulfilled this intention. However, 
we have received feedback that HHS should strive to release the final 
version of the AV Calculator even sooner, in anticipation of State 
filing deadlines. SBE-FPs have also provided feedback explaining that 
they could benefit from an earlier release of the final version of the 
AV Calculator to design standardized plan options that satisfy the AV 
de minimis ranges. We believe these requests are reasonable and that we 
can accommodate them in most years when there are no material changes 
between the draft and final versions of an AV Calculator for a 
respective plan year.
    Therefore, we intend to revise the current method whereby HHS 
releases a draft version of the AV Calculator for a respective plan 
year through guidance for public comment and then releases the final 
version of the AV Calculator for that plan year no later than the end 
of the first quarter of the preceding plan year after considering any 
comments received. We intend to only release the single, final version 
of the AV Calculator for a respective plan year. Under this approach, 
we would still solicit public comments on the AV Calculator for a plan 
year generally, but we would only plan to incorporate this feedback 
into the development and release of the following plan year's AV 
Calculator, rather than to specifically inform the potential revision 
of the final version of the upcoming plan year's AV Calculator. This 
approach would allow HHS to release the final AV Calculator sooner. We 
anticipate that issuers would have the final version of the AV 
Calculator 3 to 6 months sooner than the end of the first quarter of 
the preceding plan year.
    This approach would not sacrifice the quality of the AV Calculator. 
The stability and functionality of the AV Calculator has improved every 
year, and we believe there are diminishing returns to receiving public 
comments on specific versions of it at this time. This is particularly 
evident given that we receive fewer than 10 comments on average each 
year on the draft AV Calculator. In addition, since the first AV 
Calculator was released for PY 2014, we have never made substantive 
changes in a final version of the AV Calculator for a plan year based 
on comments received on the draft version for that plan year, though 
this feedback is valuable to HHS and informs our decisions to update 
the AV Calculator in subsequent plan years. This decision to not make 
substantive changes to the final version of the AV Calculator is also 
partly influenced by the limited timeframe HHS would have to make 
substantive changes to the final AV Calculator.
    Thus, changes from the draft to the final version of the AV 
Calculator have historically only included non-substantive amendments 
to correct and clarify language in the AV Calculator Methodology or to 
add frequently asked questions to the AV Calculator User Guide. Since 
these changes have historically been so minor, we believe the time 
delay required to effectuate those changes and release the final AV 
Calculator by the end of the first quarter of the preceding plan year 
is less valuable to issuers than releasing the final version sooner. 
Under this approach, we would leave open the rare possibility that HHS 
could reissue another final version of the AV Calculator for a plan 
year if HHS discovers the AV Calculator contains an error that 
materially impacts the functionality or accuracy of that version of the 
AV Calculator. Although this has never happened to date, under the 
current framework of releasing both a

[[Page 82378]]

draft and final version of the AV Calculator, if we had discovered a 
material error in the final version, we also would have reissued a 
corrected, final version.
    Under this approach, we would still seek public comment on the AV 
Calculator for a plan year generally and would still consult with the 
American Academy of Actuaries, as well as the National Association of 
Insurance Commissioners. We would consider this feedback for 
incorporation into the following year's AV Calculator.
    In order to maximize the benefits of this approach, we intend to 
make this change effective starting with the release of the 2026 AV 
Calculator. We believe there will be minimal effect in effectuating 
this change with the 2026 AV Calculator because we intend to base the 
2026 AV Calculator substantially on the final 2025 AV Calculator, and 
do not plan to make any material changes to it.
    We seek comment on this approach.
6. Standardized Plan Options (Sec.  156.201)
    HHS proposes to exercise its authority under sections 1311(c)(1) 
and 1321(a)(1)(B) of the ACA to make updates to its approach to 
standardized plan options for PY 2026. Specifically, we propose to make 
minor updates to the plan designs for PY 2026 to ensure these plans 
continue to have AVs within the permissible de minimis range for each 
metal level. While we generally propose to maintain a high degree of 
continuity with the approaches to standardized plan options finalized 
in the 2023, 2024, and 2025 Payment Notices (87 FR 27310 through 27322, 
88 FR 25847 through 25855, and 89 FR 26357 through 26362, 
respectively), we also propose to amend Sec.  156.201 by adding 
paragraph (c) to provide that an issuer that offers multiple 
standardized plan options within the same product network type, metal 
level, and service area must meaningfully differentiate these plans 
from one another in terms of included benefits, provider networks, and/
or formularies.
    Section 1311(c)(1) of the ACA directs the Secretary to establish 
criteria for the certification of health plans as QHPs. Section 
1321(a)(1)(B) of the ACA directs the Secretary to issue regulations 
that set standards for meeting the requirements of title I of the ACA, 
which includes section 1311, for, among other matters, the offering of 
QHPs through such Exchanges.
    Standardized options were first introduced in the 2017 Payment 
Notice (81 FR 12289 through 12293). These plan designs were updated in 
the 2018 Payment Notice (81 FR 94107 through 94112). The 2018 Payment 
Notice (81 FR 94118) also introduced the authority for HHS to 
differentially display these plans on HealthCare.gov, which allowed 
consumers the ability to filter plan options to view only standardized 
options and receive an accompanying message explaining how standardized 
options differed from non-standardized options. The 2018 Payment Notice 
also introduced standardized option differential display requirements 
for approved web-broker and QHP issuer enrollment partners using a 
direct enrollment pathway to facilitate consumer enrollment through an 
FFE or SBE-FP--including both the Classic DE and EDE Pathways.
    These plans were then discontinued in the 2019 Payment Notice (83 
FR 16974 through 16975). However, the discontinuance was challenged in 
the United States District Court for the District of Maryland. On March 
4, 2021, the court decided City of Columbus, et al. v. Cochran.\220\ 
The court reviewed nine separate policies HHS had promulgated in the 
2019 Payment Notice, vacating four of them. The court specifically 
vacated the portion of the 2019 Payment Notice that ceased HHS' 
practice of designating some plans in the FFEs as ``standardized 
options.''
---------------------------------------------------------------------------

    \220\ 523 F. Supp. 3d 731 (D. Md. 2021).
---------------------------------------------------------------------------

    As a result, in part 3 of the 2022 Payment Notice (86 FR 24140, 
24264), HHS announced its intent to engage in rulemaking under which it 
would propose to resume standardized plan options in PY 2023. President 
Biden's Executive Order on Promoting Competition in the American 
Economy (86 FR 36987) also directed HHS to implement standardized plan 
options to facilitate the plan selection process for consumers on the 
Exchanges. We thus reintroduced standardized plan option requirements 
in the 2023 Payment Notice (87 FR 27310 through 27322) to enhance the 
consumer experience, increase consumer understanding, simplify the plan 
selection process, combat discriminatory benefit designs that 
disproportionately impact disadvantaged populations, and advance health 
equity.
    We made these requirements applicable to FFE and SBE-FP issuers 
offering QHPs in the individual market. We exempted FFE and SBE-FP 
issuers offering QHPs in the small group market as well as issuers in 
State Exchanges from these requirements. We also exempted issuers of 
QHPs in FFEs and SBE-FPs that were already required to offer 
standardized plan options under State action taking place on or before 
January 1, 2020, such as issuers in the State of Oregon,\221\ from the 
requirement to offer the standardized plan options specified by HHS in 
rulemaking.
---------------------------------------------------------------------------

    \221\ See Or. Admin. R. 836-053-0009.
---------------------------------------------------------------------------

    In the 2023 Payment Notice (87 FR 27312), we finalized standardized 
plan options at the following metal levels: one bronze plan, one bronze 
plan that meets the requirement to have an AV up to 5 points above the 
60 percent standard, as specified in Sec.  156.140(c) (known as an 
expanded bronze plan), one standard silver plan, one version of each of 
the three income-based silver CSR plan variations, one gold plan, and 
one platinum plan. We did not finalize standardized plan options for 
the AI/AN CSR plan variations as provided for at Sec.  156.420(b) given 
that the cost-sharing parameters for these plan variations are already 
largely specified.
    In the 2023 Payment Notice (87 FR 27312), we finalized two sets of 
standardized plan options to accommodate different States' cost sharing 
laws. Specifically, the first set of standardized plan options applied 
to all FFE and SBE-FP issuers, except issuers in Delaware, Louisiana, 
and Oregon. The second set of standardized plan options applied only to 
issuers in Delaware and Louisiana to accommodate these two States' 
specialty prescription drug cost sharing laws.
    We designed these standardized plan options to resemble the most 
popular QHP offerings that millions of consumers were already enrolled 
in by taking the following steps: selecting the most popular cost-
sharing type for each benefit category; selecting enrollee-weighted 
median values for each of these benefit categories based on PY 2022 
cost sharing and enrollment data; modifying these plans to ensure they 
were able to comply with State cost sharing laws; and decreasing the 
AVs for these plan designs to be at the floor of each AV de minimis 
range, primarily by increasing deductibles. We also used the following 
four tiers of prescription drug cost sharing in these standardized plan 
options: generic drugs, preferred brand drugs, non-preferred brand 
drugs, and specialty drugs.
    We also resumed the differential display of standardized plan 
options on HealthCare.gov pursuant to Sec.  155.205(b)(1), including 
those standardized plan options required under State action taking 
place on or before January 1, 2020. In addition, we resumed enforcing 
the standardized plan option display requirements for approved web-
brokers and QHP issuers using a direct enrollment pathway to facilitate 
enrollment through an FFE or

[[Page 82379]]

SBE-FP--including both the Classic DE and EDE Pathways--at Sec. Sec.  
155.220(c)(3)(i)(H) and 156.265(b)(3)(iv), respectively.
    As such, web-brokers and QHP issuers have been required to 
differentially display standardized plan options in accordance with the 
requirements under Sec.  155.205(b)(1) in a manner consistent with how 
standardized plan options were displayed on HealthCare.gov, unless we 
approve a deviation. Any requests from web-brokers and QHP issuers 
seeking approval of an alternate differentiation format were reviewed 
based on whether the same or a similar level of differentiation and 
clarity would be provided under the requested deviation as was provided 
on HealthCare.gov.
    In the 2024 Payment Notice (88 FR 25847 through 25855), we 
maintained a high degree of continuity with our approach to 
standardized plan options finalized in the 2023 Payment Notice. 
However, in contrast to the policy finalized in the 2023 Payment 
Notice, we finalized for PY 2024 and subsequent plan years to no longer 
include a standardized plan option for the non-expanded bronze metal 
level--primarily due to AV constraints and the infeasibility of 
designing such a plan. As such, we finalized standardized plan options 
for the following metal levels: one bronze plan that meets the 
requirement to have an AV up to 5 points above the 60 percent standard, 
as specified in Sec.  156.140(c) (known as an expanded bronze plan), 
one standard silver plan, one version of each of the three income-based 
silver CSR plan variations, one gold plan, and one platinum plan.
    We also removed the regulation text language stating that 
standardized plan options for the AI/AN CSR plan variations as provided 
for at Sec.  156.420(b) were not required, to clarify that while 
issuers must, under Sec.  156.420(b), continue to offer such plan 
variations based on standardized plan options, those plan variations 
would themselves not be standardized plan options based on designs 
specified in rulemaking.\222\ We again finalized two sets of 
standardized plan options applying to issuers in the same sets of 
States as in the 2023 Payment Notice.
---------------------------------------------------------------------------

    \222\ See QHP Certification Standardized Plan Options FAQs, 
https://www.qhpcertification.cms.gov/s/Standardized%20Plan%20Options%20FAQs.
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    In the 2025 Payment Notice (89 FR 26357 through 26362), we once 
more maintained a high degree of continuity with the approach to 
standardized plan options finalized in the 2024 Payment Notice. In 
particular, in accordance with Sec.  156.201(b), we finalized 
standardized plan options for the same metal levels as in the 2024 
Payment Notice. We again did not finalize standardized plan options for 
the AI/AN CSR plan variations as provided for at Sec.  156.420(b) but 
continued requiring issuers to offer these plan variations for all 
standardized plan options offered. We once more finalized two sets of 
standardized plan options with the same sets of designs applying to 
issuers in the same sets of States as in the 2023 and 2024 Payment 
Notices.
    We refer readers to the preambles to the 2023, 2024, and 2025 
Payment Notices discussing Sec.  156.201 (87 FR 27310 through 27322, 88 
FR 25847 through 25855, and 89 FR 26357 through 26362, respectively) 
for more detailed discussions regarding our approaches to standardized 
plan options in previous plan years.
    For PY 2026, we propose to continue following the approach 
finalized in the 2024 Payment Notice concerning standardized plan 
option metal levels, and to otherwise maintain a high degree of 
continuity with our approach to standardized plan options finalized in 
the 2023, 2024, and 2025 Payment Notices. We once more propose to make 
minor updates to the plan designs for PY 2026 to ensure these plans 
continue to have AVs within the permissible de minimis range for each 
metal level. Our proposed updates to plan designs for PY 2026 are 
detailed in tables 11 and 12, later in this section.
    We propose to maintain this high degree of continuity for several 
reasons. Primarily, we believe maintaining a high degree of continuity 
will reduce the risk of disruption for all involved interested parties, 
including issuers, agents, brokers, States, and enrollees. We continue 
to believe that making major departures from the standardized plan 
option designs finalized in the 2023, 2024, and 2025 Payment Notices 
could result in significant changes that may create undue burden for 
interested parties.
    For example, we continue to believe that if the standardized plan 
options that we create vary significantly from year to year, those 
enrolled in these plans could experience unexpected financial harm if 
the cost sharing for services they rely upon differs substantially from 
the previous year. Ultimately, we continue to believe that consistency 
in standardized plan options is important to allow issuers and 
enrollees to become accustomed to these plan designs. As such, the 
proposed standardized plan options include only modifications to the 
deductibles and maximum out-of-pocket limits (MOOPs) for several metal 
levels, but do not otherwise include modifications to the cost sharing 
structures.
    Although we propose to continue to maintain a high degree of 
continuity with our approach to standardized plan options in previous 
years, we propose to amend Sec.  156.201 to add paragraph (c) to 
require an issuer that offers multiple standardized plan options within 
the same product network type, metal level, and service area to 
meaningfully differentiate these plans from one another in terms of 
included benefits, provider networks, and/or formularies.
    This proposal is based in part on our experience with the 
meaningful difference standard, which was previously codified at Sec.  
156.298. The meaningful difference standard was introduced in the 2015 
Payment Notice (79 FR 13813 through 13814), revised in the 2017 Payment 
Notice (81 FR 12312 and 12331), and subsequently discontinued and 
removed from the regulation in the 2019 Payment Notice (83 FR 17027). 
The meaningful difference standard was originally intended to enhance 
the consumer experience on HealthCare.gov by preventing duplicative 
plan offerings and limiting plan proliferation.
    Under the original meaningful difference standard introduced in the 
2015 Payment Notice (79 FR 13813 through 13814), a plan within a 
service area and metal tier would be considered meaningfully different 
from other plans if a reasonable consumer (the typical consumer buying 
health insurance coverage) would be able to identify at least one 
material difference among six key characteristics between the plan and 
other plans to be offered by the same issuer: (1) cost sharing; (2) 
provider networks; (3) covered benefits (including prescription drugs); 
(4) plan type (for example, HMO or PPO); (5) health savings account 
eligibility; and (6) self- only, non-self-only, or child-only plan 
offerings. Under the original standard, if HHS determined that the plan 
offerings at a particular metal level within a county were limited, 
plans submitted for certification at that metal level within that 
county were not subject to the meaningful difference requirement.
    Under the meaningful difference standard revised in the 2017 
Payment Notice (81 FR 12312 and 12331), a plan was considered to be 
``meaningfully different'' from other plans in the same service area 
and metal level if the plan had at least one of the following 
characteristics: a difference in network ID; a difference in formulary 
ID; a

[[Page 82380]]

difference in MOOP type (specifically, an integrated medical and drug 
MOOP versus a separated medical and drug MOOP); a difference in 
deductible type (specifically, an integrated medical and drug 
deductible versus a separated medical and drug deductible); a 
difference in the number of in-network tiers; a $500 or more difference 
in MOOP; a $250 or more difference in deductible; or a difference in 
benefit coverage. The decision to discontinue the meaningful difference 
standard in the 2019 Payment Notice was made primarily due to the 
decreased number of plan offerings on the Exchanges.
    We propose a meaningful difference standard for PY 2026 and 
subsequent plan years at Sec.  156.201(c) because several issuers in 
recent years have offered indistinguishable standardized plan options, 
and we believe issuers may continue to do so in future plan years 
partly because the number of non-standardized plan options that issuers 
can offer is limited in accordance with Sec.  156.202(b). We do not 
believe it benefits consumers for issuers to offer identical 
standardized plan options, or standardized plan options that do not 
differ in meaningful ways, within the same product network type, metal 
level, and service area. In addition, permitting issuers to offer 
identical standardized plan options or standardized plan options that 
do not differ in meaningful ways runs counter to our goals of enhancing 
the consumer experience, increasing consumer understanding, and 
simplifying the plan selection process. Allowing issuers to offer 
duplicative standardized plan options could cause significant consumer 
confusion and unnecessary plan proliferation if the trend continues 
unabated.
    As such, under this proposal, although issuers would continue to be 
permitted to offer multiple standardized plan options within the same 
product network type, metal level, and service area, these standardized 
plan options would be required to have meaningfully different benefit 
coverage, provider networks, and/or formularies. For the purposes of 
this proposed standard, for PY 2026 and subsequent plan years, we would 
consider a standardized plan option with a different product, provider 
network, and/or formulary ID to be meaningfully different, similar to 
the version of the standard from the 2017 Payment Notice.
    In particular, in that rule, we explained that a plan within a 
service area and metal tier would be considered meaningfully different 
from other plans if a reasonable consumer (the typical consumer buying 
health insurance coverage) would be able to identify at least one 
material differences among several key characteristics between the plan 
and other plans to be offered by the same issuer. Provider networks and 
covered benefits (including prescription drugs) were included among the 
list of key characteristics that would result in a material difference 
between plans and a plan therefore being considered meaningfully 
different.
    If an issuer submitted two standardized plan options within the 
same product network type, metal level, and service area both with the 
same products, provider networks, and formulary IDs, we would not 
certify both of these plans. For example, we anticipate that we would 
seek feedback from the issuer regarding which plan to certify, assuming 
the issuer meets all other certification requirements. We also note 
that for the purposes of this proposed standard, we would not consider 
differences in plan variant marketing names, the availability of 
different language access features, or the administration of the plan 
by different vendors in determining whether two or more standardized 
plan options are meaningfully different.
    If this policy is finalized as proposed, we would monitor whether 
issuers are seeking certification of plans that technically meet this 
standard but are nearly identical. If we determined that issuers were 
attempting to circumvent this standard in this manner, we would 
consider proposing in future rulemaking a version of this meaningful 
difference standard that would require greater variation among plans 
beyond product, provider network, and/or formulary IDs. We note that we 
are not proposing such a standard for PY 2026 and subsequent plan years 
at this time because, assuming issuers do not attempt to circumvent 
this standard as explained above, we believe that that this proposed 
policy would likely be sufficient to ensure that issuers' standardized 
plan offerings support our goals of enhancing the consumer experience, 
increasing consumer understanding, and simplifying the plan selection 
process.
    We seek comment on our proposed approach to standardized plan 
options for PY 2026, including amending Sec.  156.201 to add paragraph 
(c).

[[Page 82381]]

[GRAPHIC] [TIFF OMITTED] TP10OC24.044


[[Page 82382]]


[GRAPHIC] [TIFF OMITTED] TP10OC24.045

7. Non-Standardized Plan Option Limits (Sec.  156.202)
    We propose to exercise our authority under sections 1311(c)(1) and 
1321(a)(1)(B) of the ACA to amend Sec.  156.202(b) and (d) to properly 
reflect the flexibility that issuers have operationally been permitted 
since the introduction of non-standardized plan option limits to vary 
the inclusion of distinct adult dental benefit coverage, pediatric 
dental benefit coverage, and/or adult vision benefit coverage 
categories under the non-standardized plan option limit in accordance 
with Sec.  156.202(c)(1) through (3).
    Section 1311(c)(1) of the ACA directs the Secretary to establish 
criteria for the certification of health plans as QHPs. Section 
1321(a)(1)(B) of the ACA directs the Secretary to issue regulations 
that set standards for meeting the requirements of title I of the ACA, 
which includes section 1311, for, among other things, the offering of 
QHPs through such Exchanges.
    In the 2024 Payment Notice (88 FR 25855 through 25865), we 
finalized requirements under Sec.  156.202(a) and (b) limiting the 
number of non-standardized plan options that issuers of QHPs can offer 
through Exchanges on the Federal platform (including SBE-FPs) to four 
non-standardized plan options per product network type (as described in 
the definition of ``product'' at Sec.  144.103), metal level (excluding 
catastrophic plans), inclusion of dental and/or vision benefit 
coverage, and service area for PY 2024, and two for PY 2025 and 
subsequent years.
    In the 2025 Payment Notice (89 FR 26362 through 26375), we 
finalized an exceptions process under Sec.  156.202(d) and (e) 
permitting FFE and SBE-FP issuers to offer more than two non-
standardized plan options per product network type, metal level, 
inclusion of dental and/or vision benefit coverage, and service area 
for PY 2025 and subsequent plan years, if issuers demonstrate that 
these additional non-standardized plans offered beyond the limit at 
Sec.  156.202(b) have specific design features that would substantially 
benefit consumers with chronic and high-cost conditions and meet 
certain other requirements.

[[Page 82383]]

    In the 2025 Payment Notice (88 FR 26365 through 26366), we also 
clarified that the example included in the 2024 Payment Notice that 
illustrated issuers' flexibility to vary the inclusion of dental and/or 
vision benefit coverage in accordance with Sec.  156.202(c) under the 
non-standardized plan option limits at Sec.  156.202(a) and (b) failed 
to properly distinguish between the adult and pediatric dental benefit 
coverage categories.
    In particular, in the 2024 Payment Notice (88 FR 25858), we stated 
that for PY 2025, for example, an issuer would be permitted to offer 
two non-standardized gold HMOs with no additional dental or vision 
benefit coverage, two non-standardized gold HMOs with additional dental 
benefit coverage, two non-standardized gold HMOs with additional vision 
benefit coverage, and two non-standardized gold HMOs with additional 
dental and vision benefit coverage, as well as two non-standardized 
gold PPOs with no additional dental or vision benefit coverage, two 
non-standardized gold PPOs with additional dental benefit coverage, two 
non-standardized gold PPOs with additional vision benefit coverage, and 
two non-standardized gold PPOs with additional dental and vision 
benefit coverage, in the same service area.
    However, in the 2025 Payment Notice, we clarified that in PY 2024, 
issuers had the ability to vary the inclusion of dental and/or vision 
benefit coverage (including varying the inclusion of the distinct adult 
and pediatric dental benefit coverage categories), such that issuers 
could offer plans in the manner reflected in table 13, below, instead 
of in the more limited manner reflected in the incomplete example in 
the 2024 Payment Notice.
    In the 2025 Payment Notice, we affirmed that issuers continued to 
retain this flexibility for PY 2025 and subsequent years. We thus 
explained that under the non-standardized plan option limit of two for 
PY 2025 and subsequent years, if an issuer desired to offer the 
theoretical maximum number of non-standardized plans, and if that 
issuer varied the inclusion of adult dental benefit coverage, pediatric 
dental benefit coverage, and/or adult vision benefit coverage in these 
plans in accordance with the flexibility provided for at Sec.  
156.202(c)(1) through (3), that issuer could offer a theoretical 
maximum of 16 plans in a given product network type, metal level, and 
service area in the manner demonstrated in table 13. Furthermore, we 
explained that if an issuer offered QHPs with two product network types 
(for example, HMO and PPO), that issuer could offer a theoretical 
maximum of 32 plans in a given metal level and service area in the 
manner demonstrated in table 13.

[[Page 82384]]

[GRAPHIC] [TIFF OMITTED] TP10OC24.046

    As such, we propose to amend the regulation text at Sec.  
156.202(b) and (d) to properly reflect the flexibility that issuers 
have been operationally permitted since we introduced non-standardized 
plan option limits to vary the inclusion of the distinct adult dental 
benefit coverage, pediatric dental benefit coverage, and/or adult 
vision benefit coverage under the non-standardized plan option limit at 
Sec.  156.202(b) in accordance with Sec.  156.202(c)(1) through (3) for 
PY 2025 and subsequent plan years.
    In particular, we propose to amend Sec.  156.202(b) to properly 
distinguish between adult dental benefit coverage at Sec.  
156.202(c)(1) and pediatric dental benefit coverage at Sec.  
156.202(c)(2), such that an issuer offering QHPs in an FFE or SBE-FP, 
for PY 2025 and subsequent plan years, is limited to offering two non-
standardized plan options per product network type, as the term is 
described in the definition of ``product'' at Sec.  144.103 of this 
subchapter, metal level (excluding catastrophic plans), and inclusion 
of adult dental benefit coverage, pediatric dental benefit coverage, 
and/or adult vision benefit coverage (as defined in paragraphs (c)(1) 
through (3) of Sec.  156.202), in any service area.
    Consistent with our proposed amendment of Sec.  156.202(b), we 
propose a conforming amendment to Sec.  156.202(d) to provide that, for 
PY 2025 and subsequent plan years, an issuer may offer additional non-
standardized plan options for each product network type, metal level, 
inclusion of adult dental benefit coverage, pediatric dental benefit 
coverage, and/or adult vision benefit coverage (as defined in 
paragraphs (c)(1) through (3) of Sec.  156.202), and service area if it 
demonstrates that these additional plans' cost sharing for benefits 
pertaining to the treatment of chronic and high-cost conditions 
(including benefits in the form of prescription drugs, if pertaining to 
the treatment of the condition(s)) is at least 25 percent lower, as 
applied without restriction in scope throughout the plan year, than the 
cost sharing for the same corresponding benefits in the issuer's other 
non-standardized plan option offerings in the same product network 
type, metal level, inclusion of adult dental benefit coverage, 
pediatric dental benefit coverage, and/or adult vision benefit 
coverage, and service area.

[[Page 82385]]

    We propose these modifications to align the regulation text of 
Sec.  156.202(b) and (d) with the existing flexibility that issuers 
have been operationally permitted since the non-standardized plan 
option limit was introduced in the 2024 Payment Notice.\223\
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    \223\ CMS. (2024, April 10). 2025 Final Letter to Issuers in the 
Federally-facilitated Exchanges. https://www.cms.gov/files/document/2025-letter-issuers.pdf.
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    We seek comment on these proposed modifications.
8. Essential Community Provider Reviews for States Performing Plan 
Management (Sec.  156.235)
    Under Sec.  156.235, we propose to conduct Essential Community 
Provider (ECP) certification reviews of plans for which issuers submit 
QHP certification applications in FFEs in States performing plan 
management functions effective beginning in PY 2026.\224\
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    \224\ Twelve FFEs operate in States performing plan management 
functions: Delaware, Hawaii, Iowa, Kansas, Michigan, Montana, 
Nebraska, New Hampshire, Ohio, South Dakota, Utah, and West 
Virginia.
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    Section 1311(c)(1)(C) of the ACA directs HHS to establish by 
regulation certification criteria for QHPs, including criteria that 
require QHPs to include within health insurance plan networks those 
ECPs, where available, that serve predominately low-income, medically-
underserved individuals. Federal ECP standards were first detailed in 
the Exchange Establishment Rule (77 FR 18310) and codified at Sec.  
156.235. ECP certification reviews under Sec.  156.235 ensure medical 
QHP and stand-alone dental plan (SADP) issuers include in their 
provider networks a sufficient number and geographic distribution of 
ECPs, where available.
    HHS has relied on State ECP certification reviews for the 
certification of QHPs in FFEs in States that perform plan management 
functions since PY 2015 due to system limitations in the Systems for 
Electronic Rates & Forms Filing (SERFF),\225\ which does not have 
unique network and service area IDs reliably associated with issuers' 
ECP data. From PY 2015 to PY 2024, prior to HHS' implementation of the 
user interface logic for ECPs in the Health Insurance Oversight System 
(HIOS) Marketplace Plan Management System (MPMS),\226\ HHS received ECP 
data via the ECP/Network Adequacy (NA) Template \227\ and SERFF. The 
ECP/NA Template was an Excel template created by HHS to provide to FFE 
issuers for collection and submission of both ECP and NA data. While 
issuers in FFE States would submit the ECP/NA Template with ECP data to 
HHS directly, issuers in FFEs in States performing plan management 
functions would not use the ECP/NA Template, but rather submit the ECP 
data to SERFF.\228\ Since there was no reliable mechanism for HHS to 
convert ECP data received from SERFF back into the ECP/NA Template for 
review and analysis of the data, HHS could not conduct ECP reviews for 
issuers in FFEs in States performing plan management functions and 
therefore relied on States to perform those ECP certification reviews. 
In the SERFF data, each plan has its own ECP template with its own set 
of ECPs and networks. The SERFF data does not allow HHS to conduct 
accurate ECP evaluations of each issuer's networks because multiple 
networks can share the same sequence number within the SERFF data, 
making them indistinguishable from each other in the issuer's SERFF 
binder. Initially, HHS designed a workaround to merge the SERFF issuer 
templates across each plan and remove duplicate entries to allow HHS to 
conduct the review at the plan level; but this workaround still did not 
allow for independent evaluation of each issuer's provider networks 
that share the same sequence number.
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    \225\ Systems for Electronic Rates & Forms Filing (SERFF) is a 
portal utilized by States for form submittal, document management, 
and review.
    \226\ HIOS MPMS is a web application where users can validate 
plan data as well as submit their QHPs and SADPs to CMS for annual 
review and certification.
    \227\ OMB Control Number 0938-1415: Essential Community 
Provider-Network Adequacy (ECP/NA) Data Collection to Support QHP 
Certification (CMS-10803).
    \228\ For PY 2025 there were 13 FFEs that operate in States 
performing plan management functions: Delaware, Hawaii, Illinois, 
Iowa, Kansas, Michigan, Montana, Nebraska, New Hampshire, Ohio, 
South Dakota, Utah, and West Virginia.
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    As a result of HHS' system design enhancements via MPMS, HHS is now 
able to collect ECP data directly from issuers in States performing 
plan management functions, enabling HHS to conduct ECP evaluations of 
each issuer's network. Starting with certification reviews for PY 2025, 
issuers seeking certification of plans as QHPs in FFEs, including in 
States performing plan management functions, can now enter their ECP 
data in the HIOS MPMS using the ECP user interface. Because ECP data 
can now be collected directly in MPMS from issuers applying for 
certification of plans as QHPs in FFEs in States performing plan 
management functions, HHS will now be able to independently review the 
ECP data for such issuers.
    Now, the MPMS ECP user interface also allows issuers in FFEs, 
including in States performing plan management functions, to validate 
data before submission to their States, improving data submission to 
the State as well as providing HHS with each issuer's provider network. 
Therefore, HHS will now be able to assess validated ECP data, improving 
the accuracy and efficiency of the QHP certification process.
    It was always HHS' intent to implement operational capabilities 
that would allow for more efficient and accurate ECP reviews. As a 
result, we propose to harness the flexibilities afforded by MPMS to 
conduct Federal ECP certification reviews of plans for which issuers 
submit QHP certification applications in FFEs in States that perform 
plan management functions beginning with certification reviews for PY 
2026. This proposal would allow HHS to review, evaluate, analyze, and 
compare provider networks across various FFE States. HHS would also 
consider challenges FFE issuers face across various provider networks 
and ECP categories, such as provider shortages or facility closures. As 
proposed, issuers applying for certification of plans as QHPs in FFEs, 
including in States performing plan management functions, would be 
evaluated against the same requirements and standards. FFE issuers in 
States with limited plan management staff or resources would be given 
the same ECP support, guidance, and monitoring of ECP deficiencies as 
other FFE issuers.
    This proposal would provide more consistent oversight of ECP data 
across all FFEs. Federal ECP reviews would help ensure all medical QHP 
and SADP issuers applying for certification of plans as QHPs in FFEs, 
including in States performing plan management functions, include 
sufficient provider networks. This proposal would allow HHS to 
strengthen ECP data integrity in the FFEs by validating all ECP data 
before they are submitted and displayed on the FFEs, thereby supporting 
consumer access to vitally important medical and dental services and 
health equity for low-income and medically underserved consumers.
    We seek comment on this proposal.
9. Quality Improvement Strategy (Sec.  156.1130)
    We propose to share aggregated, summary-level Quality Improvement 
Strategy (QIS) information publicly on an annual basis beginning on 
January 1, 2026, with information QHP issuers submit during the PY 2025 
QHP Application Period. We do not propose any revisions to the 
regulation text to codify this proposal.

[[Page 82386]]

    Section 1311(c)(1)(E) of the ACA specifies that to be certified as 
a QHP for participation on an Exchange, each health plan must implement 
a QIS described in section 1311(g)(1) of the ACA. Section 1311(g)(1) of 
the ACA describes this strategy as a payment structure that provides 
increased reimbursement or other incentives for improving health 
outcomes of plan enrollees, and the implementation of activities to 
prevent hospital readmissions, improve patient safety and reduce 
medical errors, promote wellness and health, and reduce health and 
health care disparities. Section 1311(g)(2) of the ACA requires the 
Secretary to develop guidelines associated with the QIS in consultation 
with health care quality experts and interested parties, including 
periodic reporting to the applicable Exchange of the activities that 
the plan has conducted to implement the QIS, as described in section 
1311(g)(3) of the ACA. In the 2016 Payment Notice (80 FR 10844 through 
10845), we issued regulations at Sec.  156.1130(a) and (c) to direct 
eligible QHP issuers to implement and report on their QIS for each QHP 
offered in an Exchange, and to submit data annually to evaluate 
compliance with the standards for a QIS in a manner and timeline 
specified by the Exchange, respectively.\229\ In addition, in the 
Exchange Establishment Rule (77 FR 18324 and 18415), we finalized 
regulations at Sec.  155.200(d) that direct Exchanges to evaluate each 
QIS, and Sec.  156.200(b)(5) that direct QHP issuers to implement and 
report on a QIS consistent with ACA section 1311(g) standards as QHP 
certification criteria for participation in an Exchange.
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    \229\ Refer to OMB control number 0938-1286.
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    The CMS National Quality Strategy,\230\ launched in 2022, builds on 
previous efforts to improve quality across the health care system. We 
continue to use a variety of levers across the agency, including but 
not limited to quality measurement, public reporting and quality 
improvement programs, to improve health care quality for all. One of 
the four priority areas of the CMS National Quality Strategy is to 
promote alignment and coordination across programs and care settings 
and to improve quality and health outcomes across the care 
journey.\231\ By developing aligned approaches across quality programs, 
we can improve coordination and comparisons across programs and across 
the continuum of care and build the evidence base for quality 
interventions to support identifying disparities in care. Across 
Medicare, Medicaid and Exchange quality programs and initiatives, we 
promote sharing health care quality information with consumers, 
providers, researchers and others using different methods such as the 
Care Compare website,\232\ and program experience reports. 
Specifically, for the Quality Rating System (QRS) program, we share a 
summary of quality ratings for each plan year in an annual Results at a 
Glance report.\233\ Additionally, we share information pertaining to 
both the QRS and QHP Enrollee Experience Survey programs with the 
public annually through the same report.\234\ Our proposal to share 
aggregated, summary-level QIS information publicly is consistent with 
the goal of these Marketplace Quality Initiatives (MQIs) to share 
information publicly and is in alignment with agency efforts to drive 
innovation and advance quality improvement across the Exchanges.
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    \230\ The CMS National Quality Strategy for Quality Improvement 
in Health Care available at http://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
    \231\ Id.
    \232\ See Care Compare at https://www.cms.gov/medicare/quality/physician-compare-initiative.
    \233\ See, for example, Health Insurance Exchanges Quality 
Rating System (QRS) for Plan Year (PY) 2024: Results at a Glance, 
available at https://www.cms.gov/files/document/health-insurance-exchanges-qrs-program-plan-year-2024-results-glance.pdf.
    \234\ See, for example, Health Insurance Exchanges Quality 
Rating System (QRS) for Plan Year (PY) 2024: Results at a Glance, 
available at https://www.cms.gov/files/document/health-insurance-exchanges-qrs-program-plan-year-2024-results-glance.pdf.
---------------------------------------------------------------------------

    Since 2017, we have been collecting QIS information from QHP 
issuers on the FFEs. Over the years, we have received feedback from 
issuers, States, and Technical Expert Panel representatives about the 
benefits of sharing QIS data more broadly to promote transparency, 
improve engagement of best practices across QHP issuers, and provide 
consumers with useful information about quality improvement efforts by 
QHP issuers on the FFEs. Therefore, recognizing the general interest in 
this information, and consistent with the general authority set forth 
in section 1701(a)(8) of the PHS Act,\235\ we propose to release 
annually, in a report format, the following aggregated, summary-level 
QHP issuer data: (1) value-based payment models used in QHPs offered by 
the issuer; (2) QIS topic area; (3) QIS market-based incentive types; 
(4) clinical areas addressed by QIS; (5) QIS activities; and (6) QRS 
measures used in QIS. We do not receive QIS data from State Exchanges 
or SBE-FPs and would not collect QIS data from State Exchanges or SBE-
FPs or their respective issuers under this proposal. As such, the 
report would provide information on QIS programs adopted by issuers 
offering QHPs in the FFEs.
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    \235\ Section 1701(a)(8) of the PHS Act, codified at 42 U.S.C. 
300u(a)(8), provides general authority to the Secretary of HHS to 
foster exchange of health-related information to consumers and 
others.
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    We believe that this proposal would promote transparency of data 
and drive innovation and quality improvement across Exchanges. Sharing 
QIS data publicly would also strengthen alignment across CMS quality 
reporting and value-based incentive programs, including the MQI 
programs, and would encourage learning to inform best practices for 
quality improvement across Exchanges, QHP issuers, researchers, and 
health care quality communities. Additionally, we believe that this 
proposal would increase accountability for QHP issuers through 
transparency of quality improvement goals, encourage State Exchanges to 
share QIS information from their State Exchange issuers publicly, and 
support HHS' mission to achieve optimal health and well-being for all 
individuals.
    We acknowledge there may be concerns related to the potential 
sharing of proprietary and/or confidential information. However, we do 
not intend to share confidential or proprietary information from a QHP 
issuer and would only share QIS data that is de-identified and in 
summary and aggregate form. We would maintain compliance with CMS 
privacy policies, and to address potential confidentiality concerns, we 
would carefully redact and omit confidential data when data are 
released aggregately and in a summary format.
    We seek comment on this proposal. In particular, we seek comment on 
the types of QHP issuer QIS data to release in an annual report, on the 
proposed approach and timeline for release of a QIS summary report with 
aggregated QIS data, and other potential mechanisms to present QIS 
information publicly in a manner that is informative to issuers and 
consumers.
10. HHS-RADV Materiality Threshold for Rerunning HHS-RADV Results 
(Sec.  156.1220(a)(2))
    We propose to amend Sec.  156.1220(a) to codify a second, new 
materiality threshold for HHS-RADV appeals,\236\ hereafter referred to 
as the materiality threshold for rerunning HHS-RADV

[[Page 82387]]

results.\237\ This proposal would codify a standard for when HHS would 
take action to rerun HHS-RADV results and adjust HHS-RADV adjustments 
to State transfers in response to a successful appeal. We propose to 
make amendments to Sec.  156.1220 to add a new paragraph (a)(2)(i) to 
provide that HHS would rerun HHS-RADV results in response to an appeal 
when the impact to the filing issuer's (that is, the issuer who 
submitted the appeal) HHS-RADV adjustments to State transfers is 
greater than or equal to $10,000, and we propose to apply this second, 
new materiality threshold beginning with 2023 benefit year HHS-
RADV.\238\
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    \236\ For the purposes of this proposal, ``appeals'' refers to 
all three steps of the administrative appeals process as listed in 
Sec.  156.1220, which includes the request for reconsideration, 
informal hearing, and review by the Administrator of CMS.
    \237\ For purposes of this proposal, rerunning HHS-RADV results 
involves recalculating all national program benchmarks and issuers' 
error rate results, reissuing issuers' error rate results, 
conducting discrepancy reporting and appeal windows for the reissued 
results, applying the reissued error rates to the applicable benefit 
year's State transfers, and invoicing, collecting, and distributing 
any additional changes to the HHS-RADV adjustments to State 
transfers.
    \238\ The appeal window for 2023 benefit year HHS-RADV is 
expected to open in July 2025, after the tentative July publication 
of the Summary Report of 2023 Benefit Year HHS-RADV Adjustments to 
2023 Benefit Year Risk Adjustment Transfers. Therefore, we are 
proposing to adopt and apply the materiality threshold for rerunning 
HHS-RADV results beginning with 2023 benefit year HHS-RADV. See the 
2023 Benefit Year HHS-RADV Activities Timeline. https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf.
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    An issuer has the opportunity to submit a request for 
reconsideration to contest its HHS-RADV second validation audit results 
(if applicable) or its error rate calculations in accordance with Sec.  
156.1220(a)(1)(vii) and (viii).<SUP>239 240</SUP> An issuer can also 
request an informal hearing before a CMS hearing officer to appeal HHS' 
reconsideration decision in accordance with Sec.  156.1220(b) and may 
request review by the CMS Administrator of the CMS hearing officer's 
discretion as outlined in Sec.  156.1220(c). Currently, Sec.  
156.1220(a)(2) specifies that an issuer may file an HHS-RADV request 
for reconsideration if the amount in dispute is equal to or exceeds 1 
percent of the applicable payment or charge from the issuer for the 
benefit year, or $10,000, whichever is less. However, the current 
regulations do not specify when HHS is required to rerun HHS-RADV 
results in response to an appeal. This allows for the possibility of an 
appeal being filed that, if granted, in its totality would result in an 
impact of $10,000 or 1 percent of the applicable payment or charge for 
the issuer for the benefit year, whichever is less. HHS may therefore 
be put into a position to rerun HHS-RADV results if any portion of that 
appeal is accepted by HHS, even if that portion has a much smaller 
impact than the materiality threshold to file the appeal. Based on our 
experience operating HHS-RADV since the 2017 benefit year, we 
determined there would be a benefit from codifying a second materiality 
threshold to address when HHS would be required to rerun HHS-RADV 
results in response to successful appeals. This second materiality 
threshold would promote the stability of HHS-RADV and avoid 
considerable expenditures to rerun HHS-RADV results in situations where 
the filing issuer only accrues a very minor financial benefit (in this 
case defined as less than $10,000), if any, and where there is a non-
material impact on State transfers in a State market risk pool. By way 
of example, assume an issuer submits an appeal of its SVA results or 
HHS-RADV error rate calculation that contests the determination for 35 
HCCs, of which 3 HCCs are validated during the appeal process. In this 
example, assume that the consequences of those modified results impact 
other issuers (non-filing issuers) and shift the national benchmarks to 
determine error rate outliers in HHS-RADV, but the filing issuer 
receives a benefit of only $100. In this situation, applying the 
proposed materiality threshold for rerunning HHS-RADV results, HHS 
would not spend the significant resources for itself and issuers to 
rerun HHS-RADV, recalculate HHS-RADV adjustments to State transfers, 
re-release HHS-RADV results, complete another discrepancy and appeal 
window for the reissued results, engage in netting and send new 
invoices to issuers, collect charges and redistribute payments for the 
reissued HHS-RADV adjustments to State transfers in response to the 
successful appeal. In contrast, if the impact on the filing issuer was 
material (that is, greater than or equal to $10,000), the impact on 
other issuers (non-filing issuers) would also likely be more 
significant, and HHS would engage in the significant effort to re-run 
HHS-RADV results.
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    \239\ Issuers are not permitted to file a request for 
reconsideration or appeal the results of the IVA audit. See 81 FR 
94106 and 84 FR 17495.
    \240\ Consistent with Sec.  156.1220(a)(4)(ii), an HHS-RADV 
request for reconsideration may be requested only if, to the extent 
the issue could have been previously identified, the issuer notified 
HHS of the dispute through the applicable process for reporting a 
discrepancy set forth in Sec.  153.630(d)(2) and (3), it was so 
identified, and remains unresolved.
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    We believe the adoption of the proposed additional materiality 
threshold to codify a standard for when HHS would rerun HHS-RADV 
results is necessary and appropriate because HHS-RADV is unique in 
comparison to other ACA financial programs, such as APTC, where the 
outcome of a successful appeal only impacts the filing issuer because 
an issuer's amount of APTC does not impact other issuers.\241\ Instead, 
an HHS-RADV appeal has the potential to impact all issuers nationwide 
who participated in the applicable benefit year's HHS-RADV.\242\ More 
specifically, because HHS-RADV uses HCC-based group failure rates from 
all issuers that participate in HHS-RADV for the benefit year being 
audited, the inclusion or exclusion of even one HCC can result in a 
change in the national program benchmarks that apply to all issuers 
nationwide who participated in HHS-RADV in the applicable benefit year. 
The national program benchmarks are used to create confidence intervals 
for outlier identification and calculate outlier issuers' error rates. 
Therefore, changes to the national program benchmarks may result in 
changes to the outlier status or error rates of all issuers, due not to 
an error in their own data, but as a result of an HHS decision on 
another issuer's HHS-RADV appeal. In these situations when there are 
minor adjustments, this would result in all issuers in States with an 
error rate outlier receiving small changes to their HHS-RADV 
adjustments to State transfers as a result of one issuer's successful 
HHS-RADV appeal.
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    \241\ The EDGE data discrepancies that can arise in States where 
the HHS-operated risk adjustment program applies have a more limited 
reach and only impact the State market risk pool with the 
discrepancy.
    \242\ The impact of successful HHS-RADV requests for 
reconsideration or appeals on HHS-RADV results and HHS-RADV 
adjustments to risk adjustment State transfers on all participating 
issuers also differs from that of high-cost risk pool audits, 
discrepancies, and appeals. Any high-cost risk pool funds HHS 
recoups as a result of audits of risk adjustment covered plans, 
actionable discrepancies, or successful appeals are used to reduce 
high-cost risk pool charges for that national high-cost risk pool in 
the next applicable benefit year for which high-cost risk pool 
payments have not already been calculated. See 87 FR 27253.
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    To further explain the uniqueness of HHS-RADV, we want to compare 
the existing HHS-RADV appeal materiality threshold at Sec.  
156.1220(a)(2) to that of the EDGE data discrepancies in Sec.  
153.630(d)(2). Under Sec.  153.630(d)(2), upon receipt of an EDGE data 
discrepancy, the impact is first analyzed by HHS, and the entirety of 
an impact must reach the materiality threshold in order for HHS to take 
further action. However, unlike HHS-RADV appeals that have the 
potential to impact the national HHS-RADV results, EDGE data 
discrepancies typically only impact the issuers at the State market 
risk pool level and therefore, they do not have the potential to 
trigger the same national level of adjustments that can be

[[Page 82388]]

triggered by successful HHS-RADV appeals. When evaluating HHS-RADV 
requests for reconsideration, the entirety of the reconsideration 
request is used to determine materiality, regardless of what portion of 
that reconsideration request is found to have merit. For example, an 
issuer can include 25 HCCs in an HHS-RADV request for reconsideration, 
and upon review, HHS can find that one of them has merit and the other 
24 do not. Under the existing materiality threshold at Sec.  
156.1220(a)(2), the materiality determination is based on the impact 
that accepting all 25 HCCs in the request for reconsideration would 
have on HHS-RADV results, rather than the impact of the one HCC 
determined to be meritorious.
    Because an HHS-RADV appeal can impact national program benchmarks 
and the HHS-RADV results and HHS-RADV adjustments of issuers 
nationally, we believe that the adoption of this proposed additional 
materiality threshold to specify when HHS would rerun HHS-RADV results 
would help ensure stability of HHS-RADV results for all issuers. In 
particular, HHS-RADV adjustments to State transfers already occur 2 
years after the end of the applicable benefit year. Rerunning HHS-RADV 
results in response to a successful appeal could occur years later 
depending on the complexity of the issues raised and whether the matter 
involves an informal hearing under Sec.  156.1220(b) or a request for 
CMS Administrator review under Sec.  156.1220(c). After the initial 
issuance of HHS-RADV adjustments, issuers generally have already closed 
their books for the applicable benefit year, and we are concerned that 
rerunning HHS-RADV results as a result of a successful HHS-RADV appeal 
that would not meet the proposed additional materiality threshold would 
require issuers to reopen their books years later, increasing burden 
and creating instability for issuers of risk adjustment covered plans 
to account for minor adjustments. In these situations, we are of the 
opinion that the benefit of the minor adjustment would be outweighed by 
the costs and burdens associated with rerunning HHS-RADV results to 
account for the additional minor adjustment to State transfers.
    We also note that it is burdensome to HHS to rerun HHS-RADV 
results, especially in situations where there is a small financial 
impact. Because of the budget-neutral nature of the HHS-operated risk 
adjustment program, including HHS-RADV, the costs associated with 
rerunning HHS-RADV are passed onto the issuers in the form of the risk 
adjustment user fees. Therefore, we believe that creating an additional 
materiality threshold for rerunning HHS-RADV results recognizes that an 
appeal must have a meaningful financial impact to justify the costs and 
burdens to HHS and issuers of rerunning HHS-RADV results. This would 
balance the policy goals of ensuring that processing errors, the 
incorrect application of the relevant methodology, or mathematical 
errors in HHS-RADV that have a material impact are appropriately 
addressed, while minimizing burden on issuers and HHS and promoting the 
stability of State transfers by not rerunning HHS-RADV results when 
there would be minor adjustments. For all of these reasons, we propose 
to adopt an additional materiality threshold for HHS-RADV appeals to 
provide a standard for when HHS would rerun HHS-RADV results. To align 
with Sec.  153.710(e), we propose to apply this materiality threshold 
for rerunning HHS-RADV results based on the financial impact on the 
filer as we believe that issuers submit HHS-RADV appeals with the 
expectation that their acceptance would meaningfully benefit them 
financially. Thus, we believe that structuring the threshold based on 
the financial impact on the filer would ensure that HHS-RADV results 
are being rerun in situations where the impact of the HHS-RADV appeal 
is meaningful to the issuer that triggered the process and would have a 
material impact on other issuers that participate in HHS-RADV in the 
applicable benefit year.
    We also reaffirm under this proposed policy that if the impact of 
the appeal meets the proposed materiality threshold for rerunning HHS-
RADV results (that is, greater than or equal to $10,000 to the filing 
issuer's HHS-RADV adjustments for the applicable benefit year), HHS 
would rerun the HHS-RADV results for that benefit year. However, if the 
impact of the appeal is less than proposed materiality threshold for 
rerunning HHS-RADV results (that is, less than $10,000 to the filing 
issuer's HHS-RADV adjustment), then HHS would take no further action. 
That is, HHS would not rerun HHS-RADV results or make any changes to 
the HHS-RADV adjustments for the filing issuer or other issuers that 
participated in HHS-RADV for that benefit year if the new proposed 
materiality threshold is not met.
    We solicit comments on the proposed materiality threshold for 
rerunning HHS-RADV results, including the proposed dollar amount for 
the materiality threshold and whether that dollar amount should be a 
higher or lower dollar amount or subject to an annual inflation 
adjustment amount, as well as the proposed applicability of this 
threshold beginning with 2023 benefit year HHS-RADV.

E. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements

1. Definitions (Sec.  158.103)
    We propose to amend Sec.  158.103 by adding a definition of 
``qualifying issuer.'' See subsection E.2 below for the discussion of 
this proposal.
2. Reimbursement for Clinical Services Provided to Enrollees 
(Sec. Sec.  158.140, 158.240)
    We propose to amend Sec.  158.140(b)(4)(ii) to allow qualifying 
issuers to not adjust incurred claims by the net payments or receipts 
related to the risk adjustment program for MLR reporting and rebate 
calculation purposes beginning with the 2026 MLR reporting year (MLR 
reports due in 2027). We also propose to amend Sec.  158.240(c) to add 
an illustrative example of how qualifying issuers would calculate the 
amount of rebate owed to each enrollee to accurately reflect how such 
issuers would incorporate the net risk adjustment transfer amounts into 
the MLR and rebate calculations differently from other issuers, as well 
as to make a conforming amendment to clarify that the current 
illustrative example in paragraph (c)(2) would apply to issuers that 
are not qualifying issuers.
    Section 2718 of the PHS Act and the implementing regulations at 45 
CFR part 158 require health insurance issuers offering group or 
individual health insurance coverage to submit an annual report to the 
Secretary of HHS concerning their MLR and issue an annual rebate to 
enrollees if the issuer's MLR is less than the applicable MLR standard 
established in sections 2718(b)(1)(A)(i) and (ii) of the PHS Act. Under 
section 2718 of the PHS Act, an issuer's MLR is defined as the ratio of 
(a) incurred claims and quality improvement activity expenses, to (b) 
premium revenue after subtracting taxes and licensing and regulatory 
fees and accounting for payments or receipts for risk adjustment, risk 
corridors, and reinsurance under sections 1341 1342, and 1343 of the 
ACA. The statute also defines the total amount of an issuer's annual 
rebate as an amount equal to the product of the amount by which the 
applicable MLR standard exceeds the issuer's MLR, multiplied by the 
issuer's premium revenue after subtracting taxes and licensing and 
regulatory fees and accounting for payments or receipts for

[[Page 82389]]

risk adjustment, risk corridors, and reinsurance under sections 1341 
1342, and 1343 of the ACA.
    In contrast, section 1342(c) of the ACA provides that allowable 
costs shall be reduced by any risk adjustment payments in the numerator 
of the risk corridors calculation.\243\ In order to preserve 
consistency between these two programs, we finalized an approach in the 
2014 Payment Notice (78 FR 15504) that accounted for all premium 
stabilization program \244\ amounts, other than reinsurance 
contribution fees, in a way that would not have a net impact on the 
adjusted earned premium revenue used in the calculation of the MLR 
denominator as defined in Sec.  158.130. Specifically, in the 2014 
Payment Notice, we explained that to account for premium stabilization 
program amounts as an adjustment to earned premium under Sec.  
158.130(b)(5), net risk adjustment program receipts, net risk corridors 
program receipts, and reinsurance program payments would be added to 
total premium and then subtracted from adjusted earned premium. Section 
158.140(b)(4) also provided that premium stabilization amounts, other 
than reinsurance contribution fees, must adjust incurred claims in the 
numerator of the MLR calculation defined in Sec.  158.221, in a manner 
similar to the adjustment of allowable costs in the risk corridors 
formula set forth in Sec.  153.500. As stated in the 2014 Payment 
Notice, we found that this approach adhered to the statutory construct 
of the MLR formula in section 2718 of the PHS Act, which we believe 
provides flexibility as to whether to account for the effects of 
collections or receipts for the premium stabilization programs in 
determining revenue (the denominator) or costs (the numerator) of the 
MLR formula, while also aligning with the treatment of risk adjustment 
transfer amounts and reinsurance payments in the calculation of risk 
corridors payments and charges under section 1342 of the ACA.
---------------------------------------------------------------------------

    \243\ Section 1342 of the ACA and the implementing regulations 
at 45 CFR part 153 established a temporary risk corridors program 
applicable to QHP issuers in the individual and small group (or 
merged) markets for the 2014, 2015, and 2016 benefit years.
    \244\ The premium stabilization programs refer to the 
reinsurance, risk corridors, and risk adjustment programs 
established by the ACA. See section 1341 of the ACA (transitional 
reinsurance program), section 1342 of the ACA (risk corridors 
program), and section 1343 of the ACA (risk adjustment program).
---------------------------------------------------------------------------

    While most commenters on the 2014 Payment Notice proposed rule (77 
FR 73187) supported the proposal to treat premium stabilization program 
amounts as an adjustment to incurred claims in the numerator of the MLR 
calculation, some commenters noted that risk adjustment transfer 
amounts are calculated based on the statewide average premium in a 
market, and asserted that it would, therefore, be more appropriate to 
include risk adjustment transfer amounts as a net adjustment to earned 
premium in Sec.  158.130, which is included in the denominator of the 
MLR calculation in Sec.  158.221(c). We recognized the validity of both 
perspectives in the 2014 Payment Notice, noting that either approach 
could be implemented in accordance with the statutory requirements for 
the MLR calculation set forth in section 2718 of the PHS Act, and 
finalized the proposal to treat premium stabilization amounts as an 
adjustment to incurred claims in the numerator of the MLR calculation 
to ensure consistency between the MLR and the risk corridors programs.
    We recognize that although we generally assume that plans are 
pricing for average risk, our experience has shown that some issuers 
with plans with especially high or low claims costs may not necessarily 
price their offerings commensurate to these costs. While treating risk 
adjustment transfer amounts as either an adjustment to incurred claims 
in the numerator of the MLR calculation or an adjustment to premiums in 
the denominator of the MLR calculation may not significantly impact 
issuers with claims costs and premiums ratios that approximate the MLR 
standard and that closely approximate average risk, if an issuer's plan 
offerings are significantly mispriced or if its earned premiums are 
influenced by external factors, such as State subsidies, such an issuer 
could be in a position of owing rebates that are a substantial portion 
of its premium under the current MLR calculation methodology, despite 
also incurring very high claims costs and receiving large risk 
adjustment payments. In rare cases, these high rebate amounts may 
result in solvency concerns for these types of issuers with very high-
risk populations and high claims expenses.
    While many complex factors influence an issuer's underwriting 
position, our internal analysis suggests that issuers with unusual 
business models characterized by ratios of risk adjustment payments to 
earned premium that are approximately 50 percent or higher may owe 
disproportionately large MLR rebates that could impact solvency. In 
these circumstances, we believe that the way the current MLR 
methodology functions is misaligned with one of the primary statutory 
goals of the program, which is to ensure that consumers receive value 
for their premium dollars, as issuers with especially high-risk 
populations spend a significant proportion of their revenue paying 
medical claims and may nonetheless also owe rebates that make continued 
operation in their current markets untenable. Consistent with section 
2718(c) of the PHS Act, the standardized methodologies for calculating 
an issuer's MLR ``shall be designed to take into account the special 
circumstances of smaller plans, different types of plans, and newer 
plans.'' We believe that modifying the treatment of risk adjustment 
transfer amounts in the MLR and rebate calculations for these issuers 
such that these amounts have a net impact on the MLR denominator rather 
than on MLR numerator would mitigate the solvency and stability 
concerns for this small subset of issuers that offer different types of 
plans with unique business models. Specifically, this proposed change 
would support the viability of issuers that offer different types of 
plans with unique business models that focus on underserved communities 
with significant rates of serious health conditions and that may 
disproportionately rely on risk adjustment payments, as opposed to 
premiums, for revenue.
    HHS has in the past exercised its authority under section 2718(c) 
of the PHS Act to take into account the special circumstances of 
different types of plans by providing adjustments to increase the MLR 
numerator for ``mini-med'' and ``expatriate'' plans,\245\ student 
health insurance plans,\246\ as well as for QHPs that incurred Exchange 
implementation costs \247\ and certain non-grandfathered plans (that 
is, ``grandmothered'' plans).\248\ This authority has also been 
exercised to recognize the special circumstances of new plans \249\ and 
smaller plans,\250\ as well as the new and different types of plans 
that provide ``shared savings'' to consumers who

[[Page 82390]]

choose lower-cost, higher-value providers.\251\
---------------------------------------------------------------------------

    \245\ See 45 CFR 158.221(b)(3) for ``mini-med'' plans and 45 CFR 
158.221(b)(4) for ``expatriate'' plans. See also the Health 
Insurance Issuers Implementing Medical Loss Ratio (MLR) Requirements 
Under the Patient Protection and Affordable Care Act Interim Final 
Rule, 75 FR 74864, 74872 (December 1, 2010).
    \246\ See 45 CFR 158.221(b)(5). See also the Student Health 
Insurance Coverage Final Rule, 77 FR 16453, 16458 through 16459 
(March 21, 2012).
    \247\ See 45 CFR 158.221(b)(7). See also the 2015 Market 
Standards Rule, 79 FR 30240, 30320 (May 27, 2014).
    \248\ See 45 CFR 158.221(b)(6). See also 79 FR 30320 (May 27, 
2014).
    \249\ See 45 CFR 158.121. See also 75 FR 74872 through 74873 
(Dec. 01, 2010) and the 2018 Payment Notice, 81 FR 94058, 94153 
through 94154 (Dec. 22, 2016).
    \250\ See 45 CFR 158.230 and 158.232. See also 75 FR 74880 (Dec. 
01, 2010).
    \251\ See 45 CFR 158.221. See also the Transparency in Coverage 
Final Rule, 85 FR 72158, 72246 (Nov. 12, 2020).
---------------------------------------------------------------------------

    Consistent with this approach, we propose to exercise our authority 
to account for the special circumstances of the small subset of issuers 
that offer different types of plans with unique business models that 
receive risk adjustment payments and that are unable to reduce premiums 
sufficiently to meet the MLR standard without risking insolvency 
(hereinafter referred to as ``qualifying issuers''). We propose to 
exercise this authority to narrowly extend flexibility for the manner 
in which risk adjustment transfer amounts must be reported by these 
qualifying issuers. Specifically, we propose to amend Sec.  158.103 to 
add a definition of ``qualifying issuer'' to mean an issuer whose ratio 
of net payments related to the risk adjustment program under section 
1343 of the ACA to earned premiums prior to accounting for the net 
payments or receipts related to the risk adjustment, risk corridors, 
and reinsurance programs (as described in Sec.  158.130(b)(5)) in a 
relevant State and market is greater than or equal to 50 percent. We 
also propose to modify Sec.  158.140(b)(4)(ii) to no longer apply net 
risk adjustment receipts as an adjustment to the incurred claims amount 
that is used to calculate the MLR numerator defined in Sec.  158.221(b) 
for such qualifying issuers. We do not propose to make any changes to 
the definition of premium revenue in Sec.  158.130.
    Under this proposal, we would modify the calculation of the MLR 
denominator and rebates as described in the 2014 Payment Notice such 
that for qualifying issuers, earned premium would account for net risk 
adjustment receipts by simply adding these net receipts to total 
premium, without subsequently subtracting them from adjusted earned 
premium. The effect of these proposed changes would be to remove these 
offsetting adjustments (the addition and the subtraction that offset 
each other) to earned premium in the MLR denominator and rebate 
calculations, such that these qualifying issuers' risk adjustment 
transfer amounts would have a net impact on the MLR denominator and 
rebate calculations in Sec.  158.221(c) and Sec.  158.240(c), 
respectively. We also propose to make a conforming amendment to Sec.  
158.240(c) to clarify that the existing illustrative example in 
paragraph (c)(2) would apply to issuers that are not qualifying 
issuers, and to add an illustrative example in a new paragraph (c)(3) 
of how qualifying issuers would determine the amount of rebate owed to 
each enrollee, to accurately reflect how qualifying issuers would 
incorporate the net risk adjustment transfer amounts into the MLR and 
rebate calculations differently from other issuers.
    We note that we are not proposing any changes that would alter the 
current treatment of Federal transitional reinsurance amounts in the 
MLR formula. Section 2718 of the PHS Act specified that Federal 
transitional reinsurance amounts under section 1341 of the ACA be 
accounted for in the denominator of the MLR calculation, while the 
Federal transitional reinsurance program expired after the 2016 benefit 
year, audit activities continue \252\ and could result in changes to 
the amounts previously provided. In addition, maintaining this 
treatment is consistent with the NAIC recommendations for the treatment 
of payments under State reinsurance programs (for example, those 
provided to issuers through a State-based reinsurance program 
established under section 1332 waivers), which are accounted for as an 
adjustment to incurred claims in Sec.  158.140(b)(2)(i) and (ii).
---------------------------------------------------------------------------

    \252\ See Transitional Reinsurance Program Payment Audits, 
available at: https://www.cms.gov/center-consumer-information-and-insurance-oversight.
---------------------------------------------------------------------------

    We additionally note that HHS no longer collects charges or makes 
payments to issuers for the temporary Federal risk corridors program 
established in section 1342 of the ACA, which expired after the 2016 
benefit year, and that therefore, the policy goal of aligning similar 
components in the risk corridors and MLR calculation no longer 
exists.\253\ We have provided guidance to issuers regarding the 
reporting of risk corridors amounts for the applicable reporting years 
through MLR Reporting Instructions and other guidance, most recently on 
December 30, 2020.\254\ While we recognize that the MLR and rebate 
calculation methodology finalized in the 2014 Payment Notice used the 
same variables to account for risk adjustment and risk corridors 
payments and risk adjustment and risk corridors charges, we do not 
believe that it is necessary to amend the regulations at Sec. Sec.  
158.130, 158.221(c), and 158.240(c) to modify the treatment of the 
Federal risk corridors amounts that are no longer being paid or 
collected. In addition, for consistency with the statutory language and 
our maintenance of the references to Federal transitional reinsurance 
amounts, we are similarly retaining the references to risk corridors in 
the formula for the MLR calculation.
---------------------------------------------------------------------------

    \253\ On April 27, 2020, the Supreme Court ruled in Maine 
Community Health Options v. United States, 140 S. Ct. 1308 (2020), 
590 U.S. (2020), that section 1342 of the ACA created an enforceable 
government obligation to pay risk corridors amounts as calculated 
under the risk corridors formula. Since that time, the United States 
has made payments from the Judgment Fund to issuers for their 
previously unpaid risk corridors amounts.
    \254\ See CMS. (2020, December 30). Insurance Standards Bulletin 
Series--Treatment of Risk Corridors Recovery Payments in the Medical 
Loss Ratio and Rebate Calculations. https://www.cms.gov/files/document/mlr-guidance-rc-recoveries-and-mlr-final.pdf.
---------------------------------------------------------------------------

    In sum, we propose that for qualifying issuers, risk adjustment 
transfer amounts would be a net adjustment to the denominator, rather 
than the numerator, of the MLR calculation as follows:

If (ra/p) > or = 50%;
Adjusted MLR = [(i + q-s + nc-rc)/{(p + s-nc + rc)-t-f-(s-nc + rc)-na + 
ra{time} ] + c

Where,

i = incurred claims
q = expenditures on quality improving activities
p = earned premiums
t = Federal and State taxes
f = licensing and regulatory fees including transitional reinsurance 
contributions
s = issuer's transitional reinsurance receipts
na = issuer's risk adjustment related payments
nc = issuer's risk corridors related payments
ra = issuer's risk adjustment related receipts
rc = issuer's risk corridors related receipts
c = credibility adjustment, if any

    For a qualifying issuer whose MLR falls below the minimum MLR 
standard in a State and market, we propose to calculate the MLR rebate 
in Sec.  158.240(c) as follows:

If (ra/p) > or = 50%;
Rebates = (m-a) * [(p + s-nc + rc)-t-f-(s-nc + rc)-na + ra]

Where:

m = the applicable minimum MLR standard for a particular State and 
market
a = issuer's MLR for a particular State and market.

    We note that, under this proposal, the proposed alternate MLR and 
rebate methodologies would only apply to qualifying issuers. For all 
other issuers, the current MLR and rebate methodologies codified at 
Sec.  158.140 and Sec.  158.240 would continue to apply. We propose 
that these amendments would be applicable beginning with the 2026 MLR 
reporting year (MLR reports due in 2027), in order to enable issuers 
that are or may be able to meet the definition of qualifying issuer to 
reflect the amendments in their premium rates.

[[Page 82391]]

    We request comment on all aspects of this proposal. Specifically, 
we request comment on the definition of ``qualifying issuer,'' and 
whether issuers should satisfy additional criteria to qualify for this 
flexibility. We also request comment on whether the proposed alternate 
MLR and rebate methodologies that would apply to qualifying issuers 
would create any inappropriate incentives for issuers that are unable 
to accurately price their products or reduce administrative costs. 
Finally, we request comment on impacts to other issuers that are not 
``qualifying issuers'' and potential market distortions that may arise 
if the proposed flexibility for MLR and rebate calculations is not 
extended to all issuers in applicable markets.
    We are also considering an alternative approach that would modify 
Sec.  158.140(b)(4)(ii) to no longer apply net risk adjustment receipts 
as an adjustment to the incurred claims amount that is used to 
calculate the MLR numerator defined in Sec.  158.221(b) for all issuers 
subject to MLR requirements, which, as noted above, we believe to be 
consistent with the construction of the MLR formula in section 2718 of 
the PHS Act. Under this alternative approach, we would not make any 
changes to the definition of premium revenue in Sec.  158.130, or to 
the regulatory treatment of Federal reinsurance or risk corridors in 
the MLR formula. Similar to the proposal above, under this alternative 
approach, we would modify the calculation of the MLR denominator and 
rebates as described in the 2014 Payment Notice such that for all 
issuers, earned premium would account for net risk adjustment receipts 
by simply adding these net receipts to total premium, without 
subsequently subtracting them from adjusted earned premium. The effect 
of this alternative approach would be that risk adjustment transfer 
amounts would have a net impact on the MLR denominator and rebate 
calculations in Sec.  158.221(c) and Sec.  158.240(c), respectively. 
This alternative approach would allow us to streamline MLR reporting in 
light of the expiration of the risk corridors program after the 2016 
benefit year. In addition, this alternative approach would align MLR 
with the accounting approach used for risk adjustment transfers in 
State financial reporting, which accounts for these amounts in 
premium.\255\
---------------------------------------------------------------------------

    \255\ See, for example, NAIC, Supplemental Health Care Exhibit 
Instructions for Part 2, Line 1.1.
---------------------------------------------------------------------------

    Under this alternative approach, risk adjustment transfer amounts 
would be a net adjustment to the denominator, rather than the 
numerator, of the MLR calculation, for all issuers, as follows:

Adjusted MLR = [(i + q-s + nc-rc)/{(p + s-nc + rc)-t-f-(s-nc + rc)-na + 
ra {time} ] + c

Where,

i = incurred claims
q = expenditures on quality improving activities
p = earned premiums
t = Federal and State taxes
f = licensing and regulatory fees including transitional reinsurance 
contributions
s = issuer's transitional reinsurance receipts
na = issuer's risk adjustment related payments
nc = issuer's risk corridors related payments
ra = issuer's risk adjustment related receipts
rc = issuer's risk corridors related receipts
c = credibility adjustment, if any

    For an issuer whose MLR falls below the minimum MLR standard in a 
State and market, we would calculate the MLR rebate in Sec.  158.240(c) 
as follows:

Rebates = (m-a) * [(p + s-nc + rc)-t-f-(s-nc + rc)-na + ra]

Where,

m = the applicable minimum MLR standard for a particular State and 
market
a = issuer's MLR for a particular State and market.

    We believe that both the proposal and the alternative approach 
present a valid means of accounting for the impact of premium 
stabilization program amounts in the MLR and rebate calculations. 
Because most issuers are above the threshold for paying MLR rebates, we 
do not believe that the alternative approach would materially impact 
rebate payments for most issuers. However, for some issuers that are 
either below or close to the MLR standard, the alternative approach 
could result in larger rebate payments, particularly for issuers that 
owe risk adjustment charges and that have plan designs that result in 
premiums that are lower than the market average. We recognize the 
possibility that some of these issuers may further adjust premiums in 
response to this alternative approach if it were finalized. We are not 
proposing this alternative approach as we believe that the more narrow, 
tailored proposal to provide this flexibility only for qualifying 
issuers is sufficient to maximize availability of coverage options 
while remaining consistent with the statutory objective of section 2718 
of the PHS Act, which is to ensure that consumers receive value for 
their premium dollars. The more narrow, tailored proposal would also 
produce a smaller reduction in rebate payments to consumers than the 
alternative approach and would cause less disruption to the industry.
    We request comment on all aspects of this alternative approach, 
including on ways that this alternative approach could potentially 
influence issuers' rebate positions, plan composition, and pricing 
decisions. Finally, we request comment on potential impacts of this 
alternative approach on consumers.

F. Severability

    As demonstrated by the number of distinct programs addressed in 
this rulemaking and the structure of this proposed rule in addressing 
them independently, HHS generally intends the rule's provisions as 
finalized to be severable from each other. For example, the proposed 
rule outlines proposed payment parameters and provisions for the HHS-
operated risk adjustment and data validation programs, 2026 user fee 
rates for issuers in these programs, and changes to the BHP payment 
calculations. It includes proposed modifications to the initial and 
second validation audit processes and addresses HHS' authority to take 
enforcement action against lead agents at insurance agencies for 
violations of HHS' Exchange standards and requirements. The rule also 
addresses certification standards, ECP reviews, public sharing of 
aggregated, summary-level QIS information on an annual basis, and 
proposed revisions to the MLR reporting and rebate requirements for 
qualifying issuers that meet certain standards. It is HHS' intent that 
if any provision of these proposed rules, if finalized, is held to be 
invalid or unenforceable by its terms, or as applied to any person or 
circumstance, the rule shall be construed so as to continue to give 
maximum effect as permitted by law, unless the holding shall be one of 
utter invalidity or unenforceability. In the event a provision as 
finalized is found to be utterly invalid or unenforceable, HHS intends 
that that provision to be severable.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide a 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. To 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comments on the following issues:
    <bullet> The need for the information collection and its usefulness 
in carrying out the proper functions of the agency.

[[Page 82392]]

    <bullet> The accuracy of our estimate of the information collection 
burden.
    <bullet> The quality, utility, and clarity of the information to be 
collected.
    <bullet> 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 the 
following sections of this document that contain information collection 
requirements (ICRs).

A. Wage Estimates

    To derive wage estimates, we generally use data from the Bureau of 
Labor Statistics to derive average labor costs (including a 100 percent 
increase for the cost of fringe benefits and overhead) for estimating 
the burden associated with the ICRs.\256\ Table 14 presents the median 
hourly wage, the cost of fringe benefits and overhead, and the adjusted 
hourly wage.
---------------------------------------------------------------------------

    \256\ See Department of Labor. (2024, April 3). Bureau of Labor 
Statistics, Occupational Employment and Wage Statistics, May 2023 
Occupation Profiles. https://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------

    As indicated, employee hourly wage estimates have been adjusted by 
a factor of 100 percent. This is necessarily a rough adjustment, both 
because fringe benefits and overhead costs vary significantly across 
employers, and because methods of estimating these costs vary widely 
across studies. Nonetheless, there is no practical alternative, and we 
believe that doubling the hourly wage to estimate total cost is a 
reasonably accurate estimation method.
[GRAPHIC] [TIFF OMITTED] TP10OC24.047

B. ICRs Regarding the Initial Validation Audit (IVA) Sample--Enrollees 
Without HCCs, Removal of the FPC, and Neyman Allocation (Sec.  
153.630(b))

    Beginning with the 2025 benefit year of HHS-RADV, we propose to 
exclude enrollees without HCCs from the IVA sampling methodology, to 
remove the FPC from IVA sampling,\257\ and to replace the source of the 
Neyman allocation data with the most recent 3 years of consecutive HHS-
RADV data with results that have been released before HHS-RADV 
activities for the benefit year begin. Specifically, these proposals 
would exclude enrollees without HCCs (stratum 10 enrollees that do not 
have HCCs nor RXCs and RXC-only enrollees in strata 1 through 3) from 
IVA sampling, remove the FPC such that issuers with 200 or more 
enrollees in strata 1 through 9 would have IVA sample sizes of 200 
enrollees and issuers with less than 200 enrollees in strata 1 through 
9 would have IVA sample sizes equal to their population of enrollees 
with HCCs, and change the source of the Neyman allocation data used to 
calculate the standard deviation of risk score error from MA-RADV data 
to HHS-RADV data. By removing enrollees without HCCs from IVA sampling, 
the Neyman allocation would only apply to enrollees with HCCs in strata 
1 through 9 in the IVA sample.
---------------------------------------------------------------------------

    \257\ In the current IVA sampling methodology, a Finite 
Population Correction factor is used to calculate a target IVA 
sample size less than 200 enrollees for issuers with less than 4,000 
enrollees.
---------------------------------------------------------------------------

    These proposals are intended to improve the validity of our IVA 
sampling assumptions and sampling precision and would decrease burden 
on issuers when implemented in combination. As noted in section III.B.6 
of this rule, the proposed changes to the IVA sampling methodology 
would result in increased sample sizes for some smaller issuers that 
are subject to the FPC and assigned IVA sample sizes less than 200 
enrollees under the current methodology. However, sample size is not 
necessarily indicative of issuer burden in HHS-RADV, as the driving 
factor of burden is the number of enrollee medical records that must be 
retrieved and reviewed for the IVA sample. Overall, the proposed IVA 
sampling methodology in this rule alters the allocation of strata 
sample sizes within the IVA sample, ultimately resulting in relatively 
fewer enrollees from medium or high-risk strata, who have more medical 
records to review, being selected for the IVA sample. Consequently, 
under these proposed changes, the average number of medical records 
reviewed per enrollee in the IVA sample and the total number of medical 
records reviewed per issuer would decrease.
    The currently approved information collection (OMB Control Number 
0938-1155/Expiration April 30, 2025) for conducting the IVA takes into 
account that the issuer must review the IVA sample and determine which 
enrollees will require medical records to validate their HCCs and 
details the processes the issuer must undertake to obtain medical 
records for their enrollees selected for the IVA sample. In the 
currently approved information collection, we estimate an upper limit 
of 650 issuers submitting samples of 200 enrollees for HHS-RADV for any 
given benefit year, five medical record requests per enrollee in the 
IVA sample size and three HCCs to be reviewed by a certified medical 
coder per enrollees with HCCs, which leads to an aggregate burden of 
conducting IVAs of approximately 1,663,729 hours and $116,963,821.\258\ 
Given the changes to the IVA sample under the proposed policies in this 
rule and recent HHS-RADV data, we estimate an upper limit of 600 
issuers

[[Page 82393]]

submitting samples of 200 enrollees for HHS-RADV for any given benefit 
year.\259\ We estimate an approximate average of two medical records 
reviewed and two HCCs reviewed per enrollee in the IVA sample.
---------------------------------------------------------------------------

    \258\ OMB Control No: 0938-1155 (exp. April 30, 2025). https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202308-0938-015.
    \259\ A total of 605 issuers participated in the HHS-operated 
risk adjustment program for the 2023 benefit year. However, some of 
these issuers are subject to exemptions from HHS-RADV under 45 CFR 
153.630(g) and would not submit IVA samples for HHS-RADV. For 
example, any issuers at or below the materiality threshold for 
random and targeted sampling only participate in HHS-RADV 
approximately once every 3 years. Therefore, we use 600 issuers as a 
conservative upper limit of the number of issuers that could 
participate in a given benefit year of HHS-RADV. See the Summary 
Report on Individual and Small Group Market Risk Adjustment 
Transfers for the 2023 Benefit Year (July 22, 2024) available at: 
https://www.cms.gov/cciio/programs-and-initiatives/premium-stabilization-programs/downloads/ra-report-by2023pdf.
---------------------------------------------------------------------------

    For our monetary and hourly burden estimates, we are incorporating 
labor and wage costs from the most recent premium stabilization 
programs information collection, ``Standards Related to Reinsurance, 
Risk Corridors, Risk Adjustment, and Payment Appeals'' (OMB Control 
Number 0938-1155/Expiration April 30, 2025). Based on an analysis that 
applies the proposed changes to remove enrollees without HCCs from IVA 
sampling, remove the FPC, and use HHS-RADV data in the Neyman 
allocation beginning with 2025 benefit year HHS-RADV, approximately 200 
enrollees in an issuer sample will require medical records to validate 
HCCs, with approximately two medical record requests per enrollee 
(approximately 400 medical record requests per issuer) if these 
policies are finalized as proposed.\260\ We estimate it will take a 
business operations specialist (occupation title ``Business Operations 
Specialists, All Other'' at an hourly wage rate of $76.52) 
approximately 1 hour to complete, review, and conduct follow-up on each 
medical record request (20 minutes each to complete each medical record 
request, review the response to each medical record request, and to 
conduct further follow-up on each medical record request). For each 
issuer, we anticipate the burden would be approximately 400 hours at a 
cost of $30,608. For an estimated 600 issuers required to submit 
samples for HHS-RADV for any given benefit year, we anticipate that the 
aggregate burden of completing medical record reviews will be 
approximately 240,000 hours and $18,364,800.
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    \260\ This estimate is a decrease from the previous estimate of 
medical record requests per enrollee because the proposed changes to 
the IVA sampling methodology in the 2026 Payment Notice, if 
finalized as proposed, would generally result in relatively fewer 
enrollees sampled from medium- and higher-risk strata, which are 
generally composed of enrollees with more medical records whereby 
reducing our estimated number of medical records for review.
---------------------------------------------------------------------------

    Based on a review of enrollee-level EDGE data for the 2017-2021 
benefit years and the proposed changes to the IVA sampling methodology 
in this rule, we have determined that for enrollee with HCCs, the 
average number of HCCs to be reviewed by a certified medical coder per 
enrollee would be approximately two HCCs if these policies are 
finalized as proposed. Additionally, based on HHS-RADV audit 
experience, we estimate that it may cost approximately $272.52 ($60.56 
per hour for 4.5 hours on average) for a certified medical coder to 
review the medical record documentation for one enrollee with roughly 
two HCCs. For 200 enrollees with HCCs in an issuer's IVA sample, the 
total cost to each issuer would be $54,504 (for 900 hours). In some 
cases, a secondary review by a senior certified medical coder 
(occupation title ``Health Information Technologists and Medical 
Registrars'' at an hourly wage rate of $60.56 per hour) will be needed 
to re-review approximately one-third of the medical record 
documentation required during the first review. Thus, a senior 
certified medical coder would need to review medical documentation for 
the equivalent of approximately 66 enrollees with HCCs in an issuer 
sample. We estimate that the total cost to each issuer would be 
approximately $17,986.32 ($60.56 per hour for 4.5 hours per enrollee). 
For this review and secondary review, the total cost to each issuer 
would be approximately $72,490.32 (1,197 total hours).
    These proposals will not affect the review of demographic and 
enrollment information, as we will continue to validate demographic and 
enrollment information for a subsample of up to 50 enrollees from the 
audit sample, or the RXC review, as the audit entity must review RXCs 
for all adult enrollees in the audit sample with at least one RXC, and 
we continue to assume that an IVA will be performed on approximately 50 
RXCs per issuer. As such, we are only changing our burden estimates of 
demographic and enrollment or RXC review to update the most recent BLS' 
median hourly wage estimates. We estimate that it may cost 
approximately $20.19 per enrollee ($60.56 per hour for 20 minutes) to 
validate demographic information for 50 enrollees in each audit sample 
totaling $1,009.33 per issuer. Similarly, we estimate that RXC 
validation for 50 enrollees would cost approximately $20.19 per RXC 
($60.56 per hour for 20 minutes), totaling $1,009.33 per issuer. In 
addition, for each issuer, we expect it would require a compliance 
officer working 40 hours at $72.76 per hour, and 2 operations managers 
working a total of 80 hours at $97.38 per hour to make available to 
external medical coders associated with the initial validation audit 
entity claims documents for review of demographic information and RXC 
review (120 hours at a combined cost of $10,701).
    For each issuer submitting audit findings for HHS-RADV in a given 
benefit year, the total burden for reporting, coding, and 
administration would be approximately 1,750.33 hours at a cost of 
$115,817.79 per issuer. For an estimated 600 issuers required to submit 
audit findings for HHS-RADV for any given benefit year, we anticipate 
that the aggregate burden of conducting IVAs will be approximately 
1,050,200 hours and $69,490,672 beginning in 2025. This reflects an 
aggregate burden decrease of 613,529 hours and $47,473,149 from the 
existing aggregate burden estimate of approximately 1,663,729 hours and 
$116,963,821.
    We seek comment on this proposal and the estimated burdens 
discussed above.

C. ICRs Regarding Engaging in Compliance Reviews and Taking Enforcement 
Actions Against Lead Agents for Insurance Agencies (Sec.  155.220)

    This proposal addresses HHS' authority to engage in compliance 
reviews of and take enforcement action against lead agents of insurance 
agencies in both FFE and SBE-FP States for misconduct or noncompliant 
activity at the agency level. We are not proposing any changes to 
regulations as the current regulatory framework and definitions 
supports this approach. Furthermore, this proposal only envisions 
collecting agency-level documentation, including but not limited to, 
training manuals, onboarding material, and marketing materials, from 
lead agents, in addition to the existing documentation collection \261\ 
for agents, brokers, or web-brokers, to investigate potential 
misconduct or noncompliant behavior or activities. Therefore, this 
collection would fall under 5 CFR 1320.4(a)(2), stating collections of 
information ``. . . during the conduct of an [. . .] investigation'' 
are exceptions

[[Page 82394]]

to the ICR requirements.\262\ The documentation that will be collected 
will solely relate to investigations of potential misconduct or 
noncompliant behavior or activities such that this exception would 
apply.
---------------------------------------------------------------------------

    \261\ This includes documentation of consumer review and 
confirmation of the accuracy of eligibility application information 
in compliance with 45 CFR 155.220(j)(2)(ii)(A)(2) and consumer 
consent documentation in compliance with 45 CFR 
155.220(j)(2)(iii)(c).
    \262\ 5 CFR 1320.4(a)(2).
---------------------------------------------------------------------------

    We seek comment on these assumptions.

D. ICRs Regarding Agent and Broker System Suspension Authority (Sec.  
155.220(k))

    This proposal would expand HHS' authority to suspend Exchange 
system access for agents and brokers under Sec.  155.220(k)(3) to also 
include situations that pose unacceptable risk to the accuracy of the 
Exchange's eligibility determinations or Exchange applicants or 
enrollees, including but not limited to risk related to noncompliance 
with the standards of conduct under Sec.  155.220(j)(2)(i), (ii) or 
(iii) or the privacy and security standards at Sec.  155.260, until the 
circumstances of the incident, breach, or noncompliance are remedied or 
sufficiently mitigated to HHS' satisfaction. Since this proposal would 
entail providing an opportunity for agents and brokers to submit 
evidence and information to demonstrate that the circumstances of the 
incident, breach, or noncompliance has been remedied or sufficiently 
mitigated to HHS' satisfaction, it would involve collecting documents 
from agents and brokers whose system access has been suspended. 
Depending on the circumstances leading to the system suspension, we 
anticipate receiving documentation of consumer consent and/or review 
and confirmation of the accuracy of the Exchange eligibility 
application information and assessing whether the documentation 
complies with Sec.  155.220(j)(2)(ii) and (iii) for consumers cited in 
the suspension notice from agents and brokers we system suspend under 
Sec.  155.220(k)(3). The system suspension authority in Sec.  
155.220(k)(3) is part of HHS' oversight and enforcement framework 
applicable to agents and brokers who participate in the FFEs and SBE-
FPs. Therefore, this collection would fall under 5 CFR 1320.4(a)(2), 
stating collections of information ``. . . during the conduct of an [. 
. .] investigation'' are exceptions to the ICR requirements.\263\ The 
documentation that would be collected would solely relate to 
investigations and responses to system suspensions, meaning this 
exception would apply.
---------------------------------------------------------------------------

    \263\ 5 CFR 1320.4(a)(2).
---------------------------------------------------------------------------

    We seek comment on these assumptions.

E. ICRs Regarding Updating the Model Consent Form (Sec.  155.220)

    We are proposing amendments to the Model Consent Form created as 
part of the 2024 Payment Notice (88 FR 25809 through 25811). The 
existing Model Consent Form only provides a template for meeting the 
consent documentation and retention requirements of Sec.  
155.220(j)(2)(iii)(A)-(C). We are proposing to update that Model 
Consent Form to also include a template to meet the requirements under 
Sec.  155.220(j)(2)(ii), which requires agents, brokers, and web-
brokers to document that eligibility application information has been 
reviewed by and confirmed to be accurate by the consumer or their 
authorized representative prior to submission of the application to the 
FFE or SBE-FP. This proposal would only update the optional Model 
Consent Form that was created as part of the 2024 Payment Notice and 
adopted on June 30, 2023. The 2024 Payment Notice \264\ considered the 
additional time it would take the assisting agent, broker, or web-
broker to process and submit each consumer's eligibility application 
and those assumptions remain valid and are unchanged. We believe these 
assumptions remain as none of the regulatory requirements established 
by the 2024 Payment Notice are being changed and no new requirements 
are being added with this proposal. Therefore, this proposal would not 
impart extra time or costs to the assisting agent, broker, or web-
broker. Agents, brokers, and web-brokers are already required to meet 
the requirements of Sec.  155.220(j)(2)(ii) and (iii), meaning the time 
required to gather the documentation required by the 2024 Payment 
Notice requirements is already a part of every agent's, broker's, and 
web-broker's enrollment process. We do not believe the updated Model 
Consent Form would impose any additional burden on agents, brokers, 
web-brokers, or consumers, because usage of this Model Consent Form 
remains optional and this updated Model Consent Form is simply intended 
to provide a useable example of how agents, brokers, agencies and web-
brokers may compliantly meet the documentation requirements already 
required by the 2024 Payment Notice. If agents, brokers, agencies or 
web-brokers elect to use this form, we do not anticipate that the 
updated Model Consent Form would take any longer to fill out than 
agent, broker, web-broker, or agency-created forms or other methods 
being already being utilized currently as the requirements for 
documentation are not changing from the documentation requirements that 
agents, brokers, agencies and web-brokers are already required to meet 
in their current agent, broker, web-broker or agency created forms or 
methods.
---------------------------------------------------------------------------

    \264\ 88 FR 25890 through 25891.
---------------------------------------------------------------------------

    The proposed Model Consent Form would also include scripts agents, 
brokers, or web-brokers could utilize to meet the consumer consent and 
eligibility application review requirements finalized in the 2024 
Payment Notice requirements when assisting consumers via an audio 
recording. The scripts would ensure agents, brokers, or web-brokers 
having verbal, recorded conversations with consumers discuss all the 
regulatory requirements with consumers. We do not anticipate these 
scripts would increase burden on any assisting agent, broker, web-
broker or consumer as no regulatory requirements have been changed. As 
agents, brokers, and web-brokers should already be complying with these 
requirements, no additional costs would be borne by the agent, broker, 
or web-broker if using the updated Model Consent Form scripts. The 
scripts are merely meant to provide agents, brokers, and web-brokers 
guidance and clarification on how the consent documentation and 
eligibility application review documentation requirements can be met 
when having a verbal, recorded conversation with a consumer. The 
proposed scripts in the updated Model Consent Form are not mandatory 
and are not intended to limit or otherwise impact the agent, broker, or 
web-broker's ability to answer consumer questions about plan selection 
or other matters.
    Finally, there is no anticipated increase in documentation 
collection burden on HHS based on the updated model consent form. We 
currently request documentation of consumer consent and eligibility 
application review for compliance reviews and, assuming agents, 
brokers, and web-brokers used the updated model consent form, that 
would not meaningfully impact the documentation collection or review by 
HHS.
    If this proposal is finalized, the updated Model Consent Form 
discussed in this section would be submitted for OMB review and 
approval in the amended PRA package (OMB Control Number 0938-1438/
Expiration date: June 30, 2026). We seek comment on these assumptions.

[[Page 82395]]

F. ICRs Regarding Notification of Two Year Failure To File and 
Reconcile Population (Sec.  155.305)

    We are proposing to amend current regulation at Sec.  155.305(f)(4) 
under which an Exchange needs to provide notification to either an 
enrollee or their tax filer (or both) who have been identified as 
having failed to file their Federal income taxes and reconcile their 
APTC after two consecutive tax years. This provision is not associated 
with an ICR under 5 CFR 1320.3(c) and not subject to the requirements 
of the PRA. We anticipate that the proposed amendment will not impact 
the information collection (OMB Control Number 0938-1207) burden for 
Exchanges.

G. ICRs Regarding General Program Integrity and Oversight Requirements 
(Sec.  155.1200)

    As discussed in the preamble of this rule, we intend to increase 
transparency into Exchange operations by publishing annual State 
Exchange and SBE-FP SMARTs, programmatic and financial audits, 
Blueprint applications, and additional data points in the Open 
Enrollment (OE) data reports. We estimate that there will be no 
additional costs or burdens on Exchanges associated with this proposal 
since this data is already collected through the Blueprint application 
(OMB Control Number: 0938-1172), SMART (OMB Control Number: 0938-1244), 
and Enrollment Metrics PRA (OMB Control Number: 0938-1119).

H. ICRs Regarding Essential Community Provider Certification Reviews 
(Sec.  156.235)

    The proposal to conduct ECP certification reviews of plans for 
which issuers submit QHP certification applications in FFEs in States 
performing plan management functions effective beginning in PY 2026 
continues our ECP data collection as permitted under the currently 
approved information collection (OMB Control Number: 0938-1187/
Expiration date: June 30, 2025).
    To satisfy the ECP requirement under Sec.  156.235, medical QHP and 
SADP issuers must complete and submit ECP data as part of their QHP 
application, in which they must list the names and geographic locations 
of ECPs with whom they have contracted to provide health care services 
to low-income, medically underserved individuals in their service 
areas. These issuers must contract with a certain percentage, as 
determined by HHS, of the available ECPs in the plan's service area. 
This proposal, if finalized, would not significantly change the burden 
currently approved under OMB Control Number 0938-1415,\265\ because the 
ECP data collected remains the same. Only the format in which the ECP 
information is submitted would be different. As described in the 
preamble, issuers in FFEs, including in States performing plan 
management functions, can now submit ECP data to HHS via MPMS. As a 
result of HHS system design enhancements via MPMS, HHS is now able to 
collect ECP data directly from issuers in FFEs in States performing 
plan management functions, enabling HHS to conduct independent ECP 
evaluations of each issuers' network.
---------------------------------------------------------------------------

    \265\ OMB Control Number 0938-1415: Essential Community 
Provider-Network Adequacy (ECP/NA) Data Collection to Support QHP 
Certification (CMS-10803).
---------------------------------------------------------------------------

I. ICRs Regarding Quality Improvement Strategy Information (Sec.  
156.1130)

    There is no information collection associated with this proposal 
and no changes are proposed to the QIS data collection requirements 
applicable to QHP issuers. QIS data collection from QHP issuers to the 
Exchange has been approved under OMB Control Number 0938-1286.

J. ICRs Regarding Medical Loss Ratio (Sec. Sec.  158.103, 158.140, 
158.240)

    We propose to add a definition of ``qualifying issuer'' to Sec.  
158.103, amend Sec.  158.140(b)(4)(ii) to no longer adjust incurred 
claims by the net payments or receipts related to the risk adjustment 
program for MLR reporting and rebate calculation purposes for 
qualifying issuers, make conforming amendments to the rebate 
calculation example in Sec.  158.240(c)(2), and add Sec.  158.240(c)(3) 
to provide a rebate calculation example for qualifying issuers. To the 
extent issuers currently report their risk adjustment transfer amounts 
on their Annual MLR Reporting Form(s), we do not expect there to be any 
impact on the reporting burden, as the affected issuers would continue 
to report the same risk adjustment transfer amounts but would include 
them on different lines of the MLR Annual Reporting Form. The burden 
related to this information collection is currently approved under OMB 
Control Number: 0938-1164.

K. Summary of Annual Burden Estimates for Proposed Requirements
[GRAPHIC] [TIFF OMITTED] TP10OC24.048

L. Submission of PRA-Related Comments

    We have submitted a copy of this proposed rule to OMB for its 
review of the rule's information collection and recordkeeping 
requirements. These requirements are not effective until they have been 
approved by the OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed collections discussed above, please visit CMS' 
websitw.cms.hhs.gov/PaperworkReductionActof1995, or call the Reports 
Clearance Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements. If you wish to comment, please submit your comments 
electronically as specified in the ADDRESSES section of this proposed 
rule

[[Page 82396]]

and identify the rule [CMS-9888-P], the ICR's CFR citation, CMS ID 
number, and OMB Control Number.
    ICR-related comments are due [DATE].

M. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Statement of Need

    This proposed rule includes payment parameters and provisions 
related to the HHS-operated risk adjustment and risk adjustment data 
validation programs, as well as 2026 user fee rates for issuers 
offering QHPs through FFEs and SBE-FPs. This proposed rule also 
includes proposed requirements related to modifications to the 
calculation of the BHP payment, changes to the IVA sampling approach 
and SVA pairwise means test for HHS-RADV, as well as proposed 
compliance reviews of and enforcement action against lead agents, 
proposed updates to the Model Consent Form, the authority for HHS to 
suspend agent and broker access to Exchange systems, consumer 
notification requirements, and proposed standards for an issuer to 
request the reconsideration of denial of certification as a QHP 
specific to the FFEs, proposed changes to the approach for conducting 
ECP certification reviews of plans for which issuers submit QHP 
certification applications in FFEs in States performing plan management 
functions, and proposed revisions to the MLR reporting and rebate 
requirements for qualifying issuers.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(January 18, 2011), Executive Order 14094 entitled ``Modernizing 
Regulatory Review'' (April 6, 2023), the Regulatory Flexibility Act 
(RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). The April 
6, 2023 Executive Order on Modernizing Regulatory Review \266\ amends 
Section 3(f) of Executive Order 12866 to define a ``significant 
regulatory action'' as an action that is likely to result in a rule 
that may: (1) have an annual effect on the economy of $200 million or 
more (adjusted every 3 years by the Administrator of OMB's Office of 
Information and Regulatory Affairs (OIRA) for changes in gross domestic 
product), or adversely affect in a material way the economy, a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or State, local, territorial, or Tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impacts of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise legal or policy issues for which centralized 
review would meaningfully further the President's priorities or the 
principles set forth in the Executive Order, as specifically authorized 
in a timely manner by the Administrator of OIRA in each case.
---------------------------------------------------------------------------

    \266\ Office of the White House. (2023, April 6). Executive 
Order on Modernizing Regulatory Review. https://www.whitehouse.gov/briefing-room/presidential-actions/2023/04/06/executive-order-on-modernizing-regulatory-review/.
---------------------------------------------------------------------------

    A regulatory impact analysis (RIA) must be prepared for significant 
rules. OMB's OIRA has determined that this rulemaking is 
``significant'' as measured by the $200 million threshold under section 
3(f)(1). We have prepared an RIA that to the best of our ability 
presents the costs and benefits of the rulemaking. OMB has reviewed 
these proposed regulations, and the Departments have provided the 
following assessment of their impact.

C. Impact Estimates of the Payment Notice Provisions and Accounting 
Table

    As required by OMB Circular A-4 (available at https://www.whitehouse.gov/wp-content/uploads/2023/11/CircularA-4.pdf), we have 
prepared an accounting statement in table 16 showing the classification 
of the impact associated with the provisions of this proposed rule.
    This proposed rule implements standards for programs that would 
have numerous effects, including providing consumers with access to 
affordable health insurance coverage, reducing the impact of adverse 
selection, and stabilizing premiums in the individual and small group 
health insurance markets and in Exchanges. We are unable to quantify 
all the benefits and costs of this proposed rule. The effects in table 
16 reflect qualitative assessment of impacts and estimated direct 
monetary costs and transfers resulting from the provisions of this 
proposed rule for health insurance issuers and consumers. The annual 
monetized transfers described in table 17 include changes to costs 
associated with the risk adjustment user fee paid to HHS by issuers.

[[Page 82397]]

[GRAPHIC] [TIFF OMITTED] TP10OC24.049


[[Page 82398]]


[GRAPHIC] [TIFF OMITTED] TP10OC24.050

[GRAPHIC] [TIFF OMITTED] TP10OC24.051

1. BHP Methodology Regarding the Value of the Premium Adjustment Factor 
(42 CFR Part 600)
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    \267\ Reinsurance collections ended in FY 2018 and outlays in 
subsequent years reflect remaining payments, refunds, and allowable 
activities.
---------------------------------------------------------------------------

    The aggregate economic impact of these proposed changes to the BHP 
payment methodology is estimated to be $0 in transfers for calendar 
year 2026 and all subsequent years. For the purposes of this analysis, 
we have assumed that two States would operate BHPs in 2026 since 
currently only two States operate BHPs, and we do not assume any more 
States would do so.
    For the States currently operating BHPs, we do not anticipate these 
proposed changes to the payment methodology would affect future 
payments. We expect that these States would have fully implemented 
programs by 2026, and thus these proposed changes would not change the 
value of the PAF used in the payment

[[Page 82399]]

methodologies for these States in 2026 and beyond. If other States 
implemented a BHP and did so on a partial basis, the proposed changes 
would be expected to reduce Federal BHP payments compared to what they 
would be under current law. The changes in payments would depend on the 
number of people on BHP in the State, the QHP premiums in the State, 
and the level of adjustments added to the premiums to account for the 
CSRs.
2. Incorporation of PrEP Affiliated Cost Factor (ACF) in the HHS Risk 
Adjustment Adult and Child Models (Sec.  153.320)
    We are proposing the incorporation of PrEP into the HHS risk 
adjustment adult and child models as part of a new proposed class of 
factors that reflect the costs associated with care that is not related 
to active medical conditions. This proposed class of factors, called 
the Affiliated Cost Factors (ACFs), which are detailed in the preamble 
discussion under 45 CFR part 153, will not result in any additional 
reporting burden for issuers. Because it will have some impact on risk 
adjustment State transfers, some issuers' State transfers will be 
impacted, either in a positive or in a negative manner, consistent with 
the budget-neutral nature of the HHS-operated risk adjustment program. 
As HHS is responsible for operating the risk adjustment program in all 
50 States and the District of Columbia, we do not expect these policies 
to place any additional burden on State governments. The proposed model 
specifications in this rule result in limited changes to the number and 
type of risk adjustment model factors; therefore, we do not expect 
these changes to impact issuer burden beyond the current burden for the 
HHS-operated risk adjustment program. This proposal will help mitigate 
risk of adverse selection for coverage of PrEP users, resulting in 
increased health equity among this population.
3. Initial Validation Audit (IVA) Sampling Methodology Changes (Sec.  
153.630(b))
    Under Sec.  153.630(b), we are proposing several changes to the IVA 
sampling methodology. Beginning with the 2025 benefit year of HHS-RADV, 
we propose to exclude enrollees without HCCs (enrollees in stratum 10 
without HCCs nor RXCs and RXC-only enrollees in strata 1 through 3) 
from IVA sampling, remove the FPC such that issuers with 200 or more 
enrollees in strata 1 through 9 would have IVA sample sizes of 200 
enrollees and issuers with less than 200 enrollees in strata 1 through 
9 would have IVA sample sizes equal to their EDGE population of 
enrollees with HCCs, and change the source of the Neyman allocation 
data used to calculate the standard deviation of risk score error from 
MA-RADV data to the 3 most recent consecutive years of HHS-RADV data 
with results that have been released before that benefit year's HHS-
RADV activities begin, beginning with benefit year 2025 HHS-RADV.
    Although issuers are already required to provide the IVA Entities 
with all documentation necessary to complete HHS-RADV, the proposed 
changes to the IVA sample would ensure all enrollees in the IVA sample 
have at least one HCC on EDGE and therefore would have associated 
medical records that would need to be submitted. In the Collection of 
Information section of this proposed rule, we estimate the decrease in 
administrative burden that would result from the proposals to modify 
the IVA sample as the average number of medical records reviewed per 
enrollee in the IVA sample and the average number of medical records 
reviewed per issuer would decrease. We estimate that the aggregate 
burden of conducting IVAs would be approximately 1,050,200 hours and 
$69,490,672 beginning with 2025 benefit year HHS-RADV, which is an 
aggregate burden decrease of 613,529 hours and $47,473,149 from the 
existing aggregate burden estimate of approximately 1,663,729 hours and 
$116,963,821. We believe that these proposed changes to the IVA 
sampling methodology would result in more precise HHS-RADV results 
which are used to adjust risk scores and associated risk adjustment 
State transfers. While this could affect the adjustments to risk 
adjustment State transfers for an individual issuer, we do not expect 
an impact on aggregate risk adjustment State transfer adjustments 
because of the proposed modifications to the IVA sampling methodology.
4. Second Validation Audit (SVA) Pairwise Means Test (Sec.  153.630(c))
    We propose to modify the pairwise means test to use a 90 percent 
confidence interval bootstrapping methodology and to increase the 
initial SVA subsample size from 12 enrollees to 24 enrollees beginning 
with 2024 benefit year HHS-RADV. Because issuers are already required 
to provide the IVA and SVA Entities with all documentation necessary to 
complete the audits, the proposed changes to the pairwise means test 
that would increase the initial SVA subsample size to 24 enrollees and 
transition to a bootstrapping methodology using a 90 percent confidence 
interval would not directly increase burden on issuers. We believe that 
these proposed changes would increase the burden and costs to the 
Federal government of conducting the SVA. We estimate that increasing 
the initial SVA sample size from 12 to 24 enrollees would increase the 
annual costs of SVA medical review by approximately $1.5 million and 
that transitioning from the current t-test pairwise means testing 
procedure to a bootstrapped procedure would increase the annual cost of 
SVA medical review by approximately $500,000 as more issuers would be 
expanded to larger SVA sample sizes under a more sensitive pairwise 
means testing procedure. In addition, there would be a one-time cost of 
approximately $250,000 to code these modifications to the existing SVA 
pairwise means test in the Audit Tool. Any increase in SVA costs would 
increase the costs to the Federal government associated with HHS-RADV 
program activities, which are covered through the risk adjustment user 
fees that are charged to issuers. While issuers would indirectly cover 
these costs through the risk adjustment user fee, we do not anticipate 
that this policy alone would increase the risk adjustment user fee as 
the costs are relatively small compared to the entirety of the budget 
to operate the HHS-operated risk adjustment program. We believe that 
the benefits from improving the SVA process for validating the IVA 
results and determining the appropriate audit results to use in error 
estimation would outweigh the increased costs to the Federal government 
and better ensure the integrity of the risk adjustment program.
5. Engaging in Compliance Reviews and Taking Enforcement Actions 
Against Lead Agents for Insurance Agencies (Sec.  155.220)
    As discussed in the preamble to this proposed rule, we address our 
authority to investigate, engage in compliance reviews of, and take 
enforcement actions against lead agents of insurance agencies who are 
engaging in potential misconduct or noncompliant behavior or activities 
in FFE and SBE-FP States. This would better align our oversight and 
enforcement approach with how States regulate agencies. This would also 
ensure enhanced consumer protections from agency-level misconduct or 
noncompliance facilitated at the agency level, which similarly impacts 
consumers negatively as misconduct or noncompliance by individual 
agents, brokers, and web-brokers. This proposal is also designed to 
reduce consumer harm associated with unauthorized enrollments or bad-

[[Page 82400]]

acting agents, brokers, or web-brokers entering incorrect income 
information on eligibility applications, leading to incorrect APTC 
calculations. An incorrect APTC amount can result in a consumer having 
a zero-dollar monthly premium, which may lead to a consumer not knowing 
they are enrolled or being incorrectly enrolled in an Exchange plan. 
This generally occurs because the consumer does not receive monthly 
billing notifications due to the zero-dollar monthly premium. However, 
once the consumer files their taxes, a reconciliation may reveal the 
consumer must repay the incorrect APTC amount they were receiving.
    This proposal is also designed to reduce consumer harm associated 
with unauthorized enrollments or unauthorized plan switches which can 
lead to the consumer receiving a DMI. Upon application submission, 
certain consumer data is checked against trusted data sources to ensure 
a match between what is in the application submission and the 
information HHS receives from the trusted data source(s). If the 
trusted data source does not have the consumer data or the data is 
inconsistent with the information provided on the application, a DMI is 
generated. A non-exhaustive list of DMIs include the Annual Income DMI, 
Citizenship/Immigration DMI, and American Indian/Alaskan Native Status 
DMI. Certain DMIs may lead to loss of Exchange coverage, including a 
Citizenship/Immigration DMI, which occurs when the consumer is unable 
to verify an eligible citizenship or lawful presence status.
6. Agent and Broker System Suspension Authority (Sec.  155.220(k))
    We believe the impact related to the proposed changes to Sec.  
155.220(k)(3) would be positive. The proposed changes would allow HHS 
to take swift action for misconduct and noncompliance with existing 
standards and requirements by expanding the bases on which Sec.  
155.220(k)(3) system suspensions may be implemented. This proposal 
would enhance consumer protection and promote program integrity by 
allowing HHS to immediately suspend an agent's or broker's access to 
Exchange systems when HHS discovers circumstances that pose 
unacceptable risk to the accuracy of the Exchange's eligibility 
determinations, Exchange operations, applicants, or enrollees, or 
Exchange information technology systems, including but not limited to 
risk related to noncompliance with the standards of conduct under Sec.  
155.220(j)(2)(i), (ii) or (iii) or the privacy and security standards 
at Sec.  155.260, until the circumstances of the incident, breach, or 
noncompliance are remedied or sufficiently mitigated to HHS' 
satisfaction. This would help reduce future consumer harm by allowing 
HHS to quickly suspend system access for agents or brokers who are 
engaged in misconduct or noncompliant behavior that impacts Exchange 
consumers, operations, and systems. This proposal would also increase 
transparency by informing agents and brokers of the full suite of HHS 
enforcement actions that may be leveraged in response to noncompliance 
or misconduct, which may help curb such activities and behaviors. We do 
not anticipate negative feedback from the entities impacted by this, 
such as agents and brokers, as these changes are meant to more quickly 
system suspend bad-acting agents and brokers. This would help build 
consumer trust in compliant agents and brokers who work with consumers 
on the FFEs and SBE-FPs.
7. Updating the Model Consent Form (Sec.  155.220)
    We are proposing to update the Model Consent Form to include a 
section that agents, brokers, and web-brokers assisting with and 
facilitating enrollment through FFEs and SBE-FPs or assisting an 
individual with applying for APTC and CSRs for QHPs can use to document 
that eligibility application information has been reviewed by and 
confirmed to be accurate by the consumer or their authorized 
representative prior to application submission in a manner that 
complies with Sec.  155.220(j)(2)(ii)(A)(1)-(2). We are also proposing 
to update the Model Consent Form to include scripts agents, brokers, 
and web-brokers could use when meeting the requirements codified at 
Sec.  155.220(j)(2)(ii)(A) and (j)(2)(iii)(A)-(C) via an audio 
recording.
    These proposals would update the optional Model Consent Form that 
was created as part of the 2024 Payment Notice and adopted on June 18, 
2023. The 2024 Payment Notice (88 FR 25890 through 25892) considered 
the additional time it would take to process and submit each consumer's 
eligibility application and those assumptions remain and are unchanged. 
We believe these assumptions remain because we are not changing the 
regulatory requirements established by the 2024 Payment Notice, and we 
are not adding requirements with this proposal. The time required to 
gather the documentation required by the 2024 Payment Notice 
requirements is already a part of every agent's, broker's, and web-
broker's enrollment process. We do not believe the updated Model 
Consent Form would impose any additional burden on agents, brokers, 
web-brokers, or consumers; we do not anticipate that the updated Model 
Consent Form would take any longer to fill out than agent, broker, web-
broker, or agency-created forms already being utilized. The use of the 
proposed Model Consent Form would not be mandatory. Therefore, the 
proposal would not impart extra time or costs to the assisting agent or 
broker.
    This updated model consent form, if finalized, would provide 
agents, brokers, and web-brokers with clarity on how to meet the 
regulatory requirements under Sec.  155.220(j)(2)(ii) and help them 
comply with this regulation by providing a standardized form they may 
use to do so. Furthermore, we believe providing a clearly written Model 
Consent Form would provide more consumer clarity and assurance that the 
agent, broker, or web-broker they are working with is complying with 
Sec.  155.220(j)(2)(ii). The proposed scripts, to the extent they are 
utilized by agents, brokers, and web-brokers, would help ensure they 
are following the regulatory requirements when enrolling consumers. We 
believe this would reduce consumer harm by reducing unauthorized 
enrollments, which can result in financial harm if a consumer receives 
an improper APTC amount upon enrollment, and DMIs, which may lead to 
cancellation of coverage if the DMIs are not resolved in a timely 
manner. We also believe this proposal would clarify and simplify how 
regulated entities can meet regulatory requirements.
    We seek comment on these assumptions.
8. Requirement for Notification of Tax Filers and Consumers Who Have 
Failed To File and Reconcile APTC for Two Consecutive Tax Years (Sec.  
155.305)
    We anticipate a small financial impact related to our proposed 
changes at Sec.  155.305(f)(4)(i)(A)(1)-(2). Prior to pausing the FTR 
process during the COVID-19 public health emergency, Exchanges provided 
notice to enrollees or their tax filers (or both) who were identified 
as at risk of losing their APTC due to their failure to file their 
Federal income taxes and reconcile their APTC using Form 8962 prior to 
the FTR Recheck process. The 2025 Payment Notice codified the 
requirement to send notices in the first tax year a tax filer was 
identified as having FTR status. This proposal would require sending 
either direct or indirect notices to tax filers and their enrollees 
when the tax filer is identified as having FTR status for a second 
consecutive tax year, which

[[Page 82401]]

we estimated in the 2024 Payment Notice to represent 20 percent of the 
total FTR population. We estimate the cost for Exchanges on the Federal 
platform to provide direct notices that protect Federal tax information 
to tax filers would be approximately $134,000 yearly for fiscal years 
2025 through 2029, although there is potential for future growth in the 
outyears based on increases in the cost of postage and inflation in 
future years. However, the Departments are not publishing specific 
future contract estimates in this rule in response to commenters' 
requests for more detail on estimated expenditures of Federal notice 
printing activities and the data underlying those estimates because 
publishing those contract estimates could undermine future contract 
procurements. For example, if the Department was to publish the 
projected future cost of the contracts used to provide print 
notifications, the Federal government would be meaningfully 
disadvantaged in future contract negotiations related to Federal notice 
printing activities, as bidders would know how much the Department 
anticipates such a future contract being worth. Although current 
contract awards are published and publicly available,\268\ these award 
amounts do not necessarily reflect the future value of the contract, as 
there may be future changes in policy and operations and the scope of 
the work. Our proposed regulations, if finalized, would give 
flexibility to Exchanges to choose to send the required notices to 
enrollees or tax filers, or both. Given the uncertainty about how State 
Exchanges would choose to provide notices to their enrollees as well as 
the proportion of enrollees on State Exchanges who fail to file their 
Federal income taxes and reconcile their APTC for two consecutive tax 
years, we are unable to provide exact estimates of the cost of 
providing these notices. We believe that if State Exchanges chose to 
provide direct mailing notices, the approximate cost could be $0.84 per 
notice for FY 2025 based on the cost for the Exchanges on the Federal 
platform to send an average notice and would likely grow with postage 
and inflation costs in future years. We anticipate approximately 38,000 
total notices across State Exchanges based on historical FTR data from 
the Exchanges on the Federal platform, and so in total, the estimated 
cost to State Exchanges to send these notices would be approximately 
$31,920 yearly for fiscal years 2025-2029. However, we think this is 
likely an overestimate based on conversations with interested parties 
because many State Exchanges may prefer to provide indirect notices 
that can be emailed, which would substantially reduce costs to the 
State Exchanges. There could be some cost related to creation of the 
notice, but State Exchanges could also choose to use either the 
language that Exchanges on the Federal platform already use or the 
language previously used in FTR notices.
---------------------------------------------------------------------------

    \268\ Available at sam.gov.
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    We seek comments on this proposal, including regarding additional 
costs, burdens, and benefits to issuers, consumers, and Exchanges as a 
result of this proposal.
9. Timeliness Standard for State Exchanges To Review and Resolve 
Enrollment Data Inaccuracies (Sec.  155.400(d)(1))
    We propose to add Sec.  155.400(d)(1) to codify HHS' guidance 
document titled, ``Reporting and Reviewing Data Inaccuracy Reports in 
State-based Exchanges Frequently Asked Questions,'' \269\ which 
provides that, within 60 calendar days after a State Exchange receives 
a data inaccuracy from an issuer operating in an State Exchange 
(hereinafter referred to as ``State Exchange issuer'') that includes a 
description of an inaccuracy that meets the requirements at Sec.  
156.1210(a)-(c) and all the information that the State Exchange 
requires or requests to properly assess the inaccuracy, the State 
Exchange must review and resolve the State Exchange issuers' enrollment 
data inaccuracies and submit to HHS a description of the resolution of 
any inaccuracies described by the State Exchange issuer that the State 
Exchange confirms to be inaccuracies in a format and manner specified 
by HHS. This proposed policy aligns with the existing requirement at 
Sec.  155.400(d) that a State Exchange must reconcile enrollment 
information with issuers and HHS no less than on a monthly basis. It 
also provides certainty for State Exchange issuers by providing a 
timeline for State Exchanges to act upon an enrollment data inaccuracy 
submitted to the State Exchange by a State Exchange issuer that meets 
the requirements at Sec.  156.1210(a)-(c).
---------------------------------------------------------------------------

    \269\ CMS. (2024, Aug. 14). Reporting and Reviewing Data 
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked 
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
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    We do not believe that the proposed amendment would impose 
substantial additional costs to HHS, State Exchanges, or State 
Exchanges issuers beyond the costs that are already accounted for as 
part of the existing issuers' enrollment data inaccuracies description 
process and existing State Exchange enrollment data reconciliation 
requirements. The existing process already requires State Exchange 
issuers to submit enrollment inaccuracies and the State Exchanges to 
resolve those inaccuracies and reconcile enrollment information with 
both State Issuers and HHS no less than on a monthly basis. We have no 
reason to believe that codifying a timeliness standard would increase 
burden.
    Furthermore, this proposal to codify a timeliness standard for 
resolution of enrollment data inaccuracies would clarify to issuers in 
State Exchanges the process for timely reviewing and resolving 
enrollment data inaccuracies and would ensure the accurate and timely 
payment of APTCs as this enrollment data is the basis of APTC payments 
to State Exchange issuers in the automated PBP system.
    Therefore, we anticipate that this proposal would streamline the 
existing issuers' enrollment data inaccuracies process and benefit 
consumers by ensuring accurate payment of APTCs.
    We seek comment on these impact estimates and assumptions.
10. Establishment of Optional Fixed-Dollar Premium Payment Threshold 
and Total Premium Threshold (Sec.  155.400(g))
    We anticipate that the proposal to allow issuers to implement a 
fixed-dollar premium payment threshold, adjusted for inflation, would 
benefit enrollees who may otherwise have been unable to maintain 
enrollment due to owing de minimis amounts of premium. The proposal 
would likely be especially beneficial to enrollees who are low income, 
who might be disproportionately impacted by disruptions in coverage. In 
addition, we believe that issuers that choose to implement a fixed-
dollar premium payment threshold would benefit by being able to 
continue enrollment for enrollees who owe small amounts of premium. We 
anticipate that there would be some costs associated with implementing 
a fixed-dollar threshold for those issuers that chose to do so, as well 
as State Exchanges that chose to allow issuers to do so. Since the 
proposal would be optional for issuers to adopt, and some may choose 
not to adopt a payment threshold at all, it is challenging to quantify 
the impact on APTC payments. However, assuming a fixed-dollar threshold 
of $5 or less, based on PY 2023 counts of 79,612 QHP policies 
terminated for non-payment where the enrollee had a member

[[Page 82402]]

responsibility amount of $0.01-$5.00, with an average monthly APTC of 
$604.78 per enrollee (for PY 2023), we estimate that this at most would 
result in $481,477,453.60 in APTC payments for 10 months that excludes 
the binder payment and first month of the grace period (which the 
issuer already received APTC for and wouldn't have to return) that 
issuers would retain, rather than being returned to the Federal 
government.\270\ We seek comment on quantifying a lower limit, and 
whether there are additional costs for other interested parties that 
have not been considered here.
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    \270\ See CMS (2024) Effectuated Enrollment: Early 2024 Snapshot 
and Full Year 2023 Average. https://www.cms.gov/files/document/early-2024-and-full-year-2023-effectuated-enrollment-report.pdf.
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11. General Eligibility Appeals Requirements (Sec.  155.505)
    This proposed change would allow application filers to file appeals 
through the HHS appeals entity or a State Exchange appeals entity on 
behalf of applicants and enrollees on their Exchange application, 
streamlining the appeals process and ensuring operational consistency 
between the FFEs and appeals entities. We do not anticipate any 
financial impact related to our proposed change at Sec.  155.505(b).
12. Proposed Amendments to Certification Standards for QHPs, Request 
for the Reconsideration of Denial of Certification, and Non-
Certification and Decertification of QHPs (Sec. Sec.  155.1000 and 
155.1090)
    We propose to amend Sec.  155.1000 by clarifying that an Exchange 
may deny certification to any plan that does not meet the general 
certification criteria at Sec.  155.1000 and amend Sec.  155.1090 with 
refinements to the standards for the request for the reconsideration of 
a denial of certification specific to the FFEs. We anticipate no 
appreciable changes in impact because of these proposals. We expect 
that the FFE would deny certification to one or fewer certification 
applications on average each year, so we expect the number of affected 
entities to be small. In addition, the proposed revisions to Sec. Sec.  
155.1000 and 155.1090 do not substantively alter the responsibilities 
of affected issuers or the content of reconsideration requests. As a 
result, there is no material impact on regulated entities because of 
these proposals.
13. General Program Integrity and Oversight Requirements (Sec.  
155.1200)
    As part of Sec.  155.1200, we intend to increase transparency in 
Exchanges by publishing annual State Exchange and SBE-FP SMARTs, 
programmatic and financial audits, Blueprint applications, and 
additional data points in the Open Enrollment (OE) data reports. We 
anticipate no appreciable change in impact with this proposal since 
this data is already collected through the Blueprint application (OMB 
Control Number: 0938-1172), SMART (OMB Control Number: 0938-1244), and 
Enrollment Metrics PRA (OMB Control Number: 0938-1119). We expect that 
this proposal would increase the public's understanding of State 
Exchanges, promote program improvements, and better evaluate Exchange 
quality.
14. FFE and SBE-FP User Fee Rates for the 2026 Benefit Year (Sec.  
156.50)
    We propose an FFE user fee rate of 2.5 percent of monthly premiums 
for the 2026 benefit year, which is greater than the FFE user fee rate 
finalized in the 2025 Payment Notice (89 FR 26336 through 26338) of 1.5 
percent of total monthly premiums. We also propose an SBE-FP user fee 
rate of 2.0 percent for the 2026 benefit year, which is greater than 
the SBE-FP user fee rate finalized in the 2025 Payment Notice of 1.2 
percent of total monthly premiums. As a result, we estimate an increase 
in FFE and SBE-FP user fee transfers from issuers to the Federal 
government of $644 million for benefit year 2026 compared to if the 
user fee level from the prior benefit year were maintained in 2026. We 
estimate additional increases in FFE and SBE-FP user fee transfers from 
issuers to the Federal government of $849 million in 2027, $852 million 
in 2028, and $854 million in 2029 if the proposed 2026 benefit year 
user fee level were maintained in subsequent years.
    We anticipate that these proposed user fee rates would have upward 
pressure on premiums compared to the 2025 benefit year. We believe that 
increasing the user fee rates from the 2025 Payment Notice would 
provide financial stability to the Exchanges on the Federal platform, 
ensure continuity of special benefits to issuers, and access to QHP 
plans for enrollees.
    We also propose alternate user fee rate ranges if Congress extends 
the current or a higher level of enhanced PTC subsidies for the 2026 
benefit year by March 31, 2025. We recognize that the expiration of the 
enhanced PTC subsidies at the end of the 2025 benefit year creates a 
significant amount of uncertainty in the ACA markets and despite this 
uncertainty, we maintain our interest in ensuring that we collect user 
fees at a rate that will allow us to sustain the operations of the 
FFEs. Therefore, if the enhanced PTC subsidies as currently enacted or 
higher are extended through the 2026 benefit year by March 31, 2025, we 
propose a 2026 benefit year FFE user fee rate range between 1.8 and 2.2 
percent of total monthly premiums and a 2026 benefit year SBE-FP user 
fee rate range between 1.4 and 1.8 of total monthly premiums, with each 
of these ranges to be set at a single rate in the final rule. As a 
result, if we finalize user fee rates from these ranges, we estimate an 
increase in FFE and SBE-FP user fee transfers from issuers to the 
Federal government of between $425 million to $690 million for benefit 
year 2026 compared to if the user fee level from the prior benefit year 
were maintained in 2026. We estimate additional increases in FFE and 
SBE-FP user fee transfers from issuers to the Federal government of 
between $585 million to $950 million in 2027, $607 million to $985 
million in 2028, and $629 million to $1.021 billion in 2029 if the 
alternate proposed 2026 benefit year user fee level were maintained in 
subsequent years. We seek comment on whether March 31, 2025, provides 
issuers sufficient time to request rates and for States to review rate 
requests.
15. Amendments to AV Calculator Update Methodology (Sec.  156.135)
    This approach to revise the method for updating the AV Calculator, 
starting with the 2026 AV Calculator, resulting in an earlier release 
of the final AV Calculator for a given plan year, would benefit both 
issuers and States. Issuers have previously provided feedback that HHS 
should strive to release the final version of the AV Calculator sooner, 
and this approach addresses such requests. In addition, States could 
benefit from an earlier release of the final version of the AV 
Calculator to ensure their EHB-benchmark plans comply with EHB 
requirements, and States that design their own standardized plan 
options could benefit from an earlier release to ensure they satisfy 
the AV de minimis ranges. This approach would have no impact on 
consumers.
    We seek comment on these impact estimates and assumptions.
16. Standardized Plan Options (Sec.  156.201)
    We are proposing minor updates to the standardized plan options for 
PY 2026 to ensure these plans continue to have AVs within the 
permissible de minimis range for each metal level. We believe 
maintaining a high degree of continuity in the approach to standardized 
plan options year over year minimizes the risk of disruption for 
interested parties, including issuers,

[[Page 82403]]

agents, brokers, States, and enrollees. We continue to believe that 
making major departures from the approach to standardized plan options 
set forth in the 2023, 2024, and 2025 Payment Notices could result in 
changes that may cause undue burden for interested parties. For 
example, if the standardized plan options we create vary significantly 
from year to year, those enrolled in these plans could experience 
unexpected financial harm if the cost sharing for services they rely 
upon differs substantially from the previous year. Ultimately, we 
believe consistency in standardized plan options is important to allow 
both issuers and enrollees to become accustomed to these plan designs.
    Thus, like the approach taken in the 2023, 2024, and 2025 Payment 
Notices, we are proposing standardized plan options that continue to 
resemble the most popular QHP offerings that millions of consumers are 
already enrolled in. As such, these proposed standardized plan options 
are based on updated cost sharing and enrollment data to ensure that 
these plans continue to reflect the most popular offerings in the 
Exchanges. By proposing an approach to standardized plan options like 
that taken in the 2023, 2024, and 2025 Payment Notices, issuers would 
continue to be able to utilize many existing benefit packages, 
networks, and formularies, including those paired with standardized 
plan options for PY 2025. Further, issuers would continue to not be 
required to extend plan offerings beyond their existing service areas.
    Furthermore, as discussed earlier in the preamble, we intend to 
continue to differentially display standardized plan options on 
HealthCare.gov per Sec.  155.205(b)(1). Since we intend to continue to 
assume responsibility for differentially displaying standardized plan 
options on HealthCare.gov, FFE and SBE-FP issuers would continue to not 
be subject to this burden. In addition, as noted in the preamble, we 
intend to continue enforcement of the standardized plan option display 
requirements for approved web-brokers and QHP issuers using a direct 
enrollment pathway to facilitate enrollment through an FFE or SBE-FP--
the Classic DE and EDE Pathways--at Sec. Sec.  155.220(c)(3)(i)(H) and 
156.265(b)(3)(iv), respectively. We believe that continuing the 
enforcement of these differential display requirements would not impose 
a significant burden on these entities or require major modification of 
their non-Exchange websites, especially since the bulk of this burden 
was previously imposed in the 2018 Payment Notice, which finalized the 
standardized plan option differential display requirements, or during 
the PY 2023 open enrollment period, when enforcement of these 
requirements resumed.
    Finally, since we intend to continue to allow approved web-brokers 
and QHP issuers to submit requests to deviate from the manner in which 
standardized plan options are differentially displayed on 
HealthCare.gov, the burden on these entities would continue to be 
minimal. We intend to continue providing access to information on 
standardized plan options to web-brokers through the Health Insurance 
Marketplace PUFs and QHP Landscape file to further minimize burden by 
ensuring that affected entities have timely access to accurate and 
helpful information on standardized plan option requirements, including 
those related to the differential display of these plans.
    We do not anticipate that the proposed modification at Sec.  
156.201(c) that would require an issuer that offers multiple 
standardized plan options within the same product network type, metal 
level, and service area to meaningfully differentiate these plans from 
one another in terms of included benefits, networks, and/or formularies 
would have a significant impact on issuers. This is because most 
issuers have not offered multiple standardized plan options within the 
same product network type, metal level, and service area since these 
requirements were introduced in PY 2023. In fact, current QHP 
certification submission data indicates that only three issuers intend 
to offer multiple standardized plan options within the same product 
network type, metal level, and service area in PY 2025.
    However, we acknowledge that those issuers that do offer multiple 
standardized plan options in the same product network type, metal 
level, and service area would either have to modify certain offerings 
(such as by modifying included benefits, provider networks, and/or 
formularies) or choose to discontinue certain plans to the extent they 
are not meaningfully different. That said, given that issuers would 
retain the discretion to choose between modifying or discontinuing 
plans, and given that making these modifications to plans are a routine 
part of the annual plan design process, we do not anticipate 
significant burden for affected issuers related to this proposed 
requirement.
    We seek comment on these impact estimates and assumptions.
17. Non-Standardized Plan Option Limits (Sec.  156.202)
    We propose to amend Sec.  156.202(b) and (d) to properly reflect 
the flexibility that issuers have been operationally permitted since 
the introduction of these requirements to vary the inclusion of the 
distinct adult dental benefit coverage, pediatric dental benefit 
coverage, and/or adult vision benefit coverage categories under the 
non-standardized plan option limit at Sec.  156.202(b) in accordance 
with Sec.  156.202(c)(1) through (3).
    In particular, we propose to amend Sec.  156.202(b) to properly 
distinguish between adult dental benefit coverage at Sec.  
156.202(c)(1) and pediatric dental benefit coverage at Sec.  
156.202(c)(2), such that an issuer offering QHPs in an FFE or SBE-FP, 
for PY 2025 and subsequent plan years, is limited to offering two non-
standardized plan options per product network type, as the term is 
described in the definition of ``product'' at Sec.  144.103 of this 
subchapter, metal level (excluding catastrophic plans), and inclusion 
of adult dental benefit coverage, pediatric dental benefit coverage, 
and/or adult vision benefit coverage (as defined in paragraphs (c)(1) 
through (3) of Sec.  156.202), in any service area.
    We propose a similar conforming amendment to Sec.  156.202(d), such 
that for PY 2025 and subsequent plan years, an issuer may offer 
additional non-standardized plan options for each product network type, 
metal level, inclusion of adult dental benefit coverage, pediatric 
dental benefit coverage, and/or adult vision benefit coverage (as 
defined in paragraphs (c)(1) through (3) of Sec.  156.202), and service 
area if it demonstrates that these additional plans' cost sharing for 
benefits pertaining to the treatment of chronic and high-cost 
conditions (including benefits in the form of prescription drugs, if 
pertaining to the treatment of the condition(s)) is at least 25 percent 
lower, as applied without restriction in scope throughout the plan 
year, than the cost sharing for the same corresponding benefits in an 
issuer's other non-standardized plan option offerings in the same 
product network type, metal level, inclusion of adult dental benefit 
coverage, pediatric dental benefit coverage, and/or adult vision 
benefit coverage, and service area.
    We propose these modifications to align the regulation text with 
the existing flexibility that issuers have been operationally permitted 
since the non-standardized plan option limit was introduced in the 2024 
Payment

[[Page 82404]]

Notice.\271\ Given that issuers have had this flexibility since the 
non-standardized plan option limit was first introduced PY 2024, we do 
not any anticipate any impact on relevant interested parties.
---------------------------------------------------------------------------

    \271\ CMS. (2024, April 10). 2025 Final Letter to Issuers in the 
Federally-facilitated Exchanges. https://www.cms.gov/files/document/2025-letter-issuers.pdf.
---------------------------------------------------------------------------

    We seek comment on these impact estimates and assumptions.
18. Essential Community Provider Certification Review for States 
Performing Plan Management Functions (Sec.  156.235)
    This proposal to conduct ECP certification reviews of plans for 
which issuers submit QHP certification applications in FFEs in States 
performing plan management functions beginning in PY 2026 would not 
have a significant financial impact on the Federal government. HHS 
continues to perform ECP certification reviews for plans in the FFEs, 
so the financial burden to conduct the certification reviews of plans 
for which issuers submit QHP certification applications in FFEs in 
States performing plan management functions using the existing data 
infrastructure is a marginal increase within the annual programming for 
QHP certifications. For PY 2025, HHS would use MPMS for ECP reviews for 
plans seeking QHP certification in FFEs, and HHS has all the necessary 
data infrastructure and operational processes to conduct reviews for 
States performing plan management functions for PY 2026 as proposed. 
While the Federal government would undertake additional administrative 
work to review the ECP data from QHP certification applications 
submitted by issuers seeking certification of their plans as QHPs in 
FFEs in States performing plan management functions, the transfer of 
administrative impact from the State that had been performing these 
reviews to the Federal government is marginal, as the Federal 
government already has in place processes and procedures to conduct the 
ECP certification reviews. HHS would continue ECP QHP certification 
reviews in all other FFE States.
    This proposal would reduce the administrative burden for these 
States as they would no longer be responsible for ECP data review. We 
estimate a cost savings of $157,052.70 per State annually for each of 
the 12 FFE States performing plan management functions in PY 2026.\272\ 
This is calculated by taking the mean hourly wage for a compliance 
officer of $38.55, according to the Occupational Employment and Wage 
Statistics,\273\ and adding 100 percent fringe benefits to total 
$77.10. We estimate the operations and maintenance costs for the ECP 
QHP data collection and the QHP data collection support to equal 485 
hours for 4.2 full-time equivalents,\274\ totaling $157,052.70. The 
total cost across the 12 FFE States performing plan management 
functions would be $1,884,632.40. This cost associated with ECP 
enforcement/compliance reviews would be transferred from the States 
performing plan management functions to the Federal government. We 
further estimate an annual cost of $8,155 associated with ECP 
compliance reviews that would be transferred from the FFEs in States 
performing plan management functions to the Federal government based on 
current contract costs.
---------------------------------------------------------------------------

    \272\ Twelve FFEs operate in States performing plan management 
functions for PY 2026: Delaware, Hawaii, Iowa, Kansas, Michigan, 
Montana, Nebraska, New Hampshire, Ohio, South Dakota, Utah, and West 
Virginia.
    \273\ Occupational Employment and Wage Statistics from the US 
Bureau of Labor Statistics for job code 13-1041 Compliance Officer 
from https://www.bls.gov/oes/current/oes131041.htm.
    \274\ We estimated 485 hours for 4.2 full time equivalent 
similar to the administrative burden cost for the Federal government 
as indicated in cost estimate of the Supporting Statement for 
Continuation of Data Collection to Support QHP Certification and 
other Financial Management and Exchange Operations OMB control 
number: 0938-1187.
---------------------------------------------------------------------------

    Further, this proposal should not lead to increased burden for 
issuers in the FFE in States performing plan management functions as 
they would still have to submit ECP data to HHS regardless of whether 
it is the State or HHS conducting the QHP certification review. In 
previous years, these issuers were required to submit ECP data to HHS 
via the SERFF binders, whereas these issuers are now required to submit 
their ECP data to HHS in MPMS beginning with the PY 2025 QHP 
application submission season, making it now possible for HHS to begin 
reviewing these ECP data going forward.
    In addition, this proposal would not financially impact providers 
on the HHS ECP list.\275\ There is no fee to be included in the HHS ECP 
list, and the administrative burden to complete the petition continues 
to be the same. The proposal would support consumer access to vitally 
important medical and dental services, enhancing health equity for low-
income and medically underserved consumers.
---------------------------------------------------------------------------

    \275\ A non-exhaustive list of available ECPs that primarily 
serve low-income and medically underserved populations which can be 
counted toward an issuer's satisfaction of the ECP standard as part 
of the issuer's QHP application.
---------------------------------------------------------------------------

    We seek comment on these impact estimates and assumptions.
19. HHS-RADV Materiality Threshold for Rerunning HHS-RADV Results 
(Sec.  156.1220(a)(2))
    We propose to amend Sec.  156.1220(a)(2) to codify a materiality 
threshold for when HHS would rerun HHS-RADV results in response to a 
successful HHS-RADV appeal. We believe that this proposal supports 
providing stability for issuers that participate in risk adjustment 
because it limits the potential for issuers to reopen their books for 
small changes to their State transfers because of a successful HHS-RADV 
appeal. This proposal would avoid situations where HHS is required to 
rerun HHS-RADV results, and for all issuers to reopen their books, when 
the impact for the filer of a successful HHS-RADV appeal is less than 
$10,000. Because this approach is limited to small dollar amounts, we 
do not believe that the proposal would materially impact issuers or 
their premiums and it would provide stability to issuers by limiting 
the situations where their books would need to be reopened. We believe 
that this proposal, when applicable, would reduce Federal costs by an 
estimated $75,000 due to the estimated 575 hours of contractor work. We 
also believe that this proposal, when applicable, would reduce Federal 
costs through a decrease in HHS staff work hours. These HHS staff are 
funded by the risk adjustment user fee, therefore there is no cost 
impact. Rerunning HHS-RADV results requires HHS to recalculate all 
national metrics, reissue all issuers' error rate results, and then 
apply all of those revised error rates to State transfers for the 
applicable benefit year before going through the process to net, 
invoice, collect, and redistribute the changes to the HHS-RADV 
adjustments to State transfers.
20. Medical Loss Ratio (Sec. Sec.  158.103, 158.140, 158.240)
    We propose to add a definition of ``qualifying issuer'' to Sec.  
158.103, amend Sec.  158.140(b)(4)(ii) to allow qualifying issuers to 
not adjust incurred claims by the net payments or receipts related to 
the risk adjustment program for MLR reporting and rebate calculation 
purposes beginning with the 2026 MLR reporting year, amend Sec.  
158.240(c) to add an illustrative example of how qualifying issuers 
would determine the amount of rebate owed to each enrollee, and make a 
conforming amendment to Sec.  158.240(c) to clarify that the current 
illustrative example in paragraph (c)(2)

[[Page 82405]]

would apply to issuers that are not qualifying issuers. These 
proposals, which would extend only to issuers whose ratio of net 
payments related to the risk adjustment program under section 1343 of 
the ACA, to earned premiums prior to accounting for the net payments or 
receipts related to the risk adjustment, risk corridors, and 
reinsurance programs (as described in Sec.  158.130(b)(5)) in a 
relevant State and market is greater or equal to 50 percent, would 
result in transfers to such issuers from their enrollees in the form of 
lower rebates or higher premiums. Based on MLR data for 2022, these 
proposals would reduce rebates paid by issuers to consumers or increase 
premiums collected by issuers from consumers by a total of 
approximately $20 million per year.
    Under the alternative approach we are considering, in which the 
proposed amendments to Sec.  158.140(b)(4)(ii) and Sec.  158.240(c) 
would extend to all issuers subject to the risk adjustment program, 
based on 2022 MLR data, these proposed amendments would reduce rebates 
paid by issuers to consumers or increase premiums collected by issuers 
from consumers by a net total of approximately $164 million per year.
    We seek comment on these impact estimates and assumptions.
21. Regulatory Review Cost Estimation
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this proposed rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that a range of between the total 
number of unique commenters on last year's proposed rule (251) and the 
total number of page views on last year's proposed rule (about 10,000) 
will include the actual number of reviewers of this proposed rule. We 
therefore use an average number of approximately 5,125 reviewers of 
this proposed rule. We acknowledge that this assumption may understate 
or overstate the costs of reviewing this rule. It is possible that not 
all commenters reviewed last year's rule in detail, and it is also 
possible that some page viewers did not actually read the proposed 
rule. For these reasons, we believe that the average of the number of 
commenters and number of page viewers on last year's proposed rule 
would be a fair estimate of the number of reviewers of this rule. We 
welcome any comments on the approach in estimating the number of 
entities which will review this proposed rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this proposed rule, 
and therefore, for the purposes of our estimate we assume that each 
reviewer reads approximately 55 percent of the rule (an average of the 
range from 10 percent to 100 percent of the rule). We seek comments on 
this assumption.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this rule is $106.42 per hour, including overhead and fringe 
benefits.\276\ Assuming an average reading speed of 250 words per 
minute, we estimate that it would take approximately 3.6 hours for the 
staff to review 55 percent of this proposed rule. For each entity that 
reviews the rule, the estimated cost is $383.11 (3.6 hours x $106.42 
per hour). Therefore, we estimate that the total cost of reviewing this 
regulation is approximately $1,963,438.75 ($383.11 per reviewer x 5,125 
reviewers).
---------------------------------------------------------------------------

    \276\ U.S. Bureau of Labor Statistics. (2024, April 9). 
Occupational Employment and Wage Statistics. https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

D. Regulatory Alternatives Considered

    Under Sec.  153.630(b), we propose to exclude enrollees without 
HCCs, remove the FPC, and change the source of the Neyman allocation 
data used to calculate the standard deviation of risk score error from 
MA-RADV data to HHS-RADV data beginning with the 2025 benefit year of 
HHS-RADV.
    The proposed IVA sampling methodology would use the most recent 3 
consecutive years of HHS-RADV data with results that have been released 
before that benefit year's HHS-RADV activities begin to calculate a 
national variance of net risk score error to calculate each issuer's 
standard deviation of risk score error used in the Neyman allocation 
formula, whereas the current IVA sampling methodology relies on MA-RADV 
data to calculate this national variance of net risk score error.\277\ 
When investigating the impact of switching the Neyman allocation data 
source to the most recent 3 consecutive years of HHS-RADV data with 
results that have been released before that benefit year's HHS-RADV 
activities begin, we considered creating an issuer-specific variance of 
net risk score error to calculate each issuer's standard deviation of 
risk score error used in the Neyman allocation formula. However, it 
would not be possible to calculate an issuer-specific variance of net 
risk score error for all issuers participating in a given benefit year 
of HHS-RADV as some issuers would not have 3 consecutive years of HHS-
RADV data. As explained earlier in this preamble, these issuers would 
have to rely on less years of HHS-RADV data under an issuer-specific 
calculation, meaning significantly fewer data points compared to other 
issuers that participated in all years, which could result in large 
variations in IVA sample stratum size and increased uncertainty in HHS-
RADV. Therefore, we propose to continue calculating each issuer's 
standard deviation of risk score error using a national variance of net 
risk score error, but to use a 3-year rolling window of HHS-RADV data 
rather than the MA-RADV data as the source data for the Neyman 
allocation.
---------------------------------------------------------------------------

    \277\ As noted in the preamble of this rule, a new benefit year 
of HHS-RADV activities generally begins in the spring when issuers 
can start selecting their IVA entity and IVA entities can start 
electing to participate in HHS-RADV for that benefit year. We would 
use data from the 3 most recent consecutive years of HHS-RADV where 
results have been released. See, for example, the 2023 Benefit Year 
HHS-RADV Activities Timeline for the general structure of the HHS-
RADV timeline. https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf.
---------------------------------------------------------------------------

    We considered proposing to replace the source of the Neyman 
allocation data while continuing to include enrollees without HCCs in 
IVA sampling and retaining the FPC.\278\ However, this would result in 
sampling a greater proportion of enrollees without HCCs, who do not 
have risk scores to adjust when calculating issuers' error rates during 
HHS-RADV. In addition, keeping the FPC while excluding enrollees 
without HCCs from IVA sampling and replacing the source data for the 
Neyman allocation with available HHS-RADV data would lead to a dramatic 
increase in the number of issuers subject to the FPC and therefore 
decrease the total count of Super HCCs in issuers' IVA samples. For 
example, we estimate that the average Super HCC count for issuers 
currently subject to the FPC would decrease by 26 percent by retaining 
the FPC, which would increase the proportion of issuers that fail to 
meet the 30 Super HCC constraint in HHS-RADV.\279\ In contrast, 
removing the FPC would increase the average Super HCC count for these 
same issuers by 30 percent, which would improve issuers' probability of 
meeting the 30 Super HCC constraint. Overall, our analyses found that 
making these modifications in combination would lead to the greater 
improvements in

[[Page 82406]]

sampling precision and would allow more than 95 percent of issuers to 
pass the 10 percent sampling precision target at a two-sided 95 percent 
confidence level.
---------------------------------------------------------------------------

    \278\ As explained in the preamble of this rule, enrollees 
without HCCs include stratum 10 enrollees that do not have HCCs nor 
RXCs and RXC-only enrollees in strata 1 through 3.
    \279\ As noted earlier in this preamble, this estimate is based 
on the combined impact of all proposed changes to the IVA sampling 
methodology.
---------------------------------------------------------------------------

    We also considered only excluding stratum 10 enrollees from the IVA 
sampling methodology and retaining RXC-only enrollees in strata 1 
through 3. However, we believe removing all enrollees without HCCs 
(both stratum 10 enrollees and RXC-only enrollees) is the preferred 
approach so issuers and IVA Entities are not spending resources on 
enrollees who do not have risk scores to adjust when calculating 
issuers' error rates during HHS-RADV. In addition, our analysis reveals 
the greatest improvements in precision and greatest decreases in the 
average medical records reviewed per enrollee, and therefore the 
greatest decreases in issuer and IVA Entity burden, when excluding RXC-
only enrollees and stratum 10 enrollees from the IVA sampling 
methodology.
    As an alternative respect to the SVA pairwise means test proposal 
we considered only changing the pairwise means testing procedure from 
the 95 percent confidence interval paired t-test to the 90 percent 
confidence interval bootstrapped test without increasing the initial 
SVA subsample size to 24. However, our analysis found that maintaining 
an initial SVA subsample size of 12 under the bootstrapping methodology 
did not achieve an optimal target false negative rate of approximately 
20 percent at various effect sizes. Therefore, we are proposing to 
modify the pairwise means test to use a 90 percent confidence interval 
bootstrapping methodology and to increase the initial SVA subsample 
size from 12 enrollees to 24 enrollees beginning with 2024 benefit year 
HHS-RADV.\280\
---------------------------------------------------------------------------

    \280\ A standard IVA sample size is 200 enrollees, and it 
applies to the majority of issuers of risk adjustment covered plans. 
CMS calculates a smaller IVA sample sizes for issuers for smaller 
populations by using a Finite Population Correction (FPC) factor. 
All issuers are subject to the same SVA subsample sizes, but the 
maximum SVA subsample for pairwise testing is one half of the 
issuer's IVA sample size. As discussed in section II.B.5.a., we are 
proposing changes to the IVA sampling methodology that would exclude 
enrollees without HCCs from IVA sampling and remove the FPC factor 
such that all IVA samples will consist of 200 enrollees with HCCs or 
the issuer's total EDGE population of enrollees with HCCs if they 
have less than 200 enrollees with HCCs beginning with the 2025 
benefit year of HHS-RADV. Under this policy, the SVA subsample size 
expansion for issuers with less than 200 enrollees with HCCs would 
continue to follow the standard SVA subsample sizes with a maximum 
SVA subsample for pairwise testing equal to one half of the issuer's 
IVA sample size. If the issuer fails at the maximum SVA subsample 
size for pairwise testing, a precision analysis if performed to 
determine whether the SVA audit results from that maximum SVA 
subsample size can be used in error estimation or if the SVA sample 
needs to expand to the full IVA sample.
---------------------------------------------------------------------------

    We considered taking no action regarding the proposed changes at 
Sec.  155.305(f)(4)(ii) and instead relying on the guidance released by 
CMS to inform Exchanges of noticing best practices as was previously 
done, but instead decided to codify this as a requirement to ensure 
that tax filers or their enrollees receive multiple educational notices 
regarding the requirement to file their Federal income taxes and 
reconcile their APTC.
    We considered taking no action regarding our proposal to modify 
Sec.  155.400(g) to allow issuers to adopt a fixed-dollar premium 
payment threshold or a gross premium-based percentage payment 
threshold. However, the proposal would provide important flexibility to 
issuers that wish to allow enrollees who owe de minimis amounts of 
premium to maintain their enrollment. This flexibility is limited under 
current regulation, and as a result enrollees who owe small amounts of 
premium are sometimes unable to remain enrolled. We are soliciting 
feedback from interested parties on whether a fixed-dollar threshold, 
or a percentage threshold based on gross premium, would better meet our 
goal of providing flexibility to issuers to allow enrollees to avoid 
triggering a grace period and termination of enrollment through the 
Exchange for owing small amounts of premium. For the fixed-dollar 
premium payment threshold, we are also considering whether to implement 
a $5 or $10 cap on the fixed-dollar threshold because while we believe 
the $5 cap is sufficient to help many enrollees avoid termination, CMS 
data on non-payment terminations also indicate that there are a 
considerable number of policies that were terminated in PY2023 with a 
member responsibility amount of $10 or less. We are soliciting feedback 
from interested parties in order to determine what the appropriate cap 
should be on the fixed-dollar threshold. We also considered keeping the 
existing net premium-based threshold at a ``reasonable'' limit, which 
we recommended to be 95 percent or higher, but are proposing to 
specifically define the threshold at 95 percent or higher, in order to 
provide clarity for issuers and Exchanges. We also considered whether 
it would be administratively feasible to allow issuers to adopt both a 
fixed-dollar and percentage-based threshold but restricted issuers to 
choosing one threshold method. We are soliciting feedback from 
interested parties on whether we should allow this flexibility.
    For the proposed 2026 benefit year FFE and SBE-FP user fees, we 
considered only proposing one FFE user fee rate and one SBE-FP user fee 
rate as we have done in previous years. However, we recognize that the 
expiration of the enhanced PTC subsidies at the end of the 2025 benefit 
year creates a significant amount of uncertainty in the ACA markets and 
despite this uncertainty, we maintain our interest in ensuring that we 
collect user fees at a rate that will allow us to sustain the 
operations of the FFEs. Therefore, we are proposing an FFE user fee 
rate of 2.5 percent of monthly premiums for the 2026 benefit year, 
which is greater than the FFE user fee rate finalized in the 2025 
Payment Notice (89 FR 26336 through 26338) of 1.5 percent of total 
monthly premiums, and if the enhanced PTC subsidies as currently 
enacted or at a higher level are extended through the 2026 benefit year 
by March 31, 2025, we are also proposing a 2026 benefit year FFE user 
fee rate range between 1.8 and 2.2 percent of total monthly premiums 
and a 2026 benefit year SBE-FP user fee rate range between 1.4 and 1.8 
of total monthly premiums, with each of these ranges to be set at a 
single rate in the final rule.
    We considered taking no action regarding our proposal to conduct 
ECP certification reviews of plans for which issuers submit QHP 
certification applications in FFEs in States performing plan management 
functions under Sec.  156.235. Not conducting reviews as proposed would 
maintain current certification operations for issuers in FFE States 
that perform plan management functions and continue to provide States 
with the ability to use a similar approach to Federal ECP certification 
reviews of plans for which issuers submit QHP certification 
applications in FFEs. However, due to the implementation of the MPMS 
and enhancement of the ECP user interface, issuers seeking QHP 
certification in FFEs, including States performing plan management 
functions, can now submit ECP data to HHS for data integrity of the 
Federal platform regardless of whether it is the State or HHS 
conducting the review.
    We propose to amend Sec.  156.1220(a)(2) to codify when HHS would 
take action in response to a successful HHS-RADV appeal. We considered 
several ways to design the new materiality threshold to rerun HHS-RADV 
results. For example, we considered setting the second materiality 
threshold to rerun HHS-RADV results to include a percentage of

[[Page 82407]]

HHS-RADV adjustments and applying a 1 percent test to align with the 
EDGE materiality threshold in Sec.  153.710(e). However, considering 
that the HHS-RADV adjustments to State risk adjustment transfer charges 
and State risk adjustment transfer payments are orders of magnitude 
smaller than those of the initial State risk adjustment transfer 
amounts, we were concerned that we would see situations where 1 percent 
of the applicable payment or charge could be as little as $10 based on 
our experience running HHS-RADV for the past few years. Specifically, 
we believe that structuring the threshold, as proposed, to the 
financial impact of the filer and applying an equal to or greater than 
$10,000 amount would balance the need for ensuring that HHS-RADV 
results are accurate with the desire for ensuring that changes in HHS-
RADV results actually have a meaningful financial impact. This proposed 
new materiality threshold to rerun HHS-RADV results takes into 
consideration the existing materiality threshold for filing a request 
for reconsideration, which applies to a number of different program 
appeals. To remain consistent with this existing threshold and 
recognizing that HHS-RADV adjustments are significantly smaller in 
magnitude than risk adjustment transfers, we believe that $10,000 is a 
reasonable threshold, but we solicit comment on this dollar amount and 
whether it should be higher or lower or whether we should consider 
including an inflation adjustment rate to this amount. This new 
proposed materiality threshold to rerun HHS-RADV results also considers 
the fact that it costs HHS approximately $75,000 to rerun HHS-RADV and 
re-release results. Reducing the number of times HHS-RADV needs to be 
rerun and HHS-RADV adjustments need to be re-released also helps 
maintain the stability of the market, as there are fewer instances of 
adjustments after the initial release of HHS-RADV adjustments.

E. Regulatory Flexibility Act (RFA)

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate that 
small businesses, nonprofit organizations, and small governmental 
jurisdictions are small entities as that term is used in the RFA. The 
great majority of hospitals and most other health care providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the Small Business Administration (SBA) definition of a 
small business (having revenues of less than $8.0 million to $41.5 
million in any 1 year). We do not anticipate that providers would be 
directly impacted by the proposals in this proposed rule. Individuals 
and States are not included in the definition of a small entity. The 
proposals in this proposed rule would affect Exchanges and QHP issuers.
    For purposes of the RFA, we believe that health insurance issuers 
would be classified under the NAICS code 524114 (Direct Health and 
Medical Insurance Carriers). According to SBA size standards, entities 
with average annual receipts of $47 million or less would be considered 
small entities for these NAICS codes. Issuers could possibly be 
classified in 621491 (HMO Medical Centers) and, if this is the case, 
the SBA size standard will be $44.5 million or less.\281\ We believe 
that few, if any, insurance companies underwriting comprehensive health 
insurance policies (in contrast, for example, to travel insurance 
policies or dental discount policies) would fall below these size 
thresholds. Based on data from MLR annual report submissions for the 
2022 MLR reporting year, approximately 87 out of 487 issuers of health 
insurance coverage nationwide had total premium revenue of $47 million 
or less.\282\ This estimate may overstate the actual number of small 
health insurance issuers that may be affected, since over 76 percent of 
these small issuers belong to larger holding groups, and many, if not 
all, of these small companies are likely to have non-health lines of 
business that will result in their revenues exceeding $47 million. 
Therefore, although it is likely that fewer than 87 issuers are 
considered small entities, for the purposes of this analysis, we assume 
87 small issuers would be impacted by this proposed rule.
---------------------------------------------------------------------------

    \281\ SBA. (n.d.). Table of size standards. https://www.sba.gov/document/support--table-size-standards.
    \282\ CMS. (n.d.). Medical Loss Ratio Data and System Resources. 
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

    The proposed policies that would result in an increased burden to 
small entities are described below.
    We propose to update the IVA sampling methodology, including the 
proposed removal of enrollees without HCCs (including RXC-only 
enrollees), removing the FPC, and replacing the source of the Neyman 
allocation data with the most recent 3 years of consecutive HHS-RADV 
data with results that have been released before that benefit year's 
HHS-RADV activities begin, beginning with benefit year 2025 HHS-RADV. 
The total cost savings associated with this proposal would be 
approximately $79,121.92 per issuer audited per year. For more details, 
please refer to the Regulatory Impact Analysis section associated with 
this policy in this proposed rule.
    We propose to add a definition of ``qualifying issuer'' and to no 
longer require such issuers to adjust incurred claims by the net 
payments or receipts related to the risk adjustment program for MLR 
reporting and rebate calculation purposes. This proposal would reduce 
rebates paid by these issuers to consumers or increase premiums 
collected by these issuers from consumers by approximately $20 million 
annually. The cost savings per issuer would therefore be approximately 
$41,067.76.\283\ For more details, please refer to the Regulatory 
Impact Analysis section associated with this policy in this proposed 
rule.
---------------------------------------------------------------------------

    \283\ $20 million/487 issuers participating in the MLR program = 
approximately $41,076.67.
---------------------------------------------------------------------------

    Thus, the per-entity estimated annual cost savings for small 
issuers is $120,189.68, and the total estimated annual cost savings for 
small issuers is $10,456,502.16. See tables 18 and 19.
[GRAPHIC] [TIFF OMITTED] TP10OC24.052


[[Page 82408]]


[GRAPHIC] [TIFF OMITTED] TP10OC24.053

    We seek comment on this analysis and seek information on the number 
of small issuers that may be affected by the provisions in these 
proposed rules.
    As its measure of significant economic impact on a substantial 
number of small entities, HHS uses a change in revenue of more than 3 
to 5 percent. We do not believe that this threshold will be reached by 
the requirements in this proposed rule, given that the annual per-
entity cost savings of $120,189.68 per small issuer represents 
approximately 0.06 percent of the average annual receipts for a small 
issuer.\284\ Therefore, the Secretary has certified that this proposed 
rule will not have a significant economic impact on a substantial 
number of small entities.
---------------------------------------------------------------------------

    \284\ United States Census Bureau (2020, March). 2017 SUSB 
Annual Data Tables by Establishment Industry, Data by Enterprise 
Receipt Size. https://www.census.gov/data/tables/2020/econ/susb/2020-susb-annual.html.
---------------------------------------------------------------------------

    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
the purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. While this rule is not 
subject to section 1102 of the Act, we have determined that this rule 
will not affect small rural hospitals. Therefore, the Secretary has 
certified that this proposed rule will not have a significant impact on 
the operations of a substantial number of small rural hospitals.

F. Unfunded Mandates Reform Act (UMRA)

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2024, that 
threshold is approximately $183 million. Although we have not been able 
to quantify all costs, we expect that the combined impact on State, 
local, or Tribal governments and the private sector does not meet the 
UMRA definition of unfunded mandate.

G. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on State and 
local governments, preempts State law, or otherwise has Federalism 
implications.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have Federalism 
implications or limit the policy making discretion of the States, we 
have engaged in efforts to consult with and work cooperatively with 
affected States, including participating in conference calls with and 
attending conferences of the NAIC, and consulting with State insurance 
officials on an individual basis.
    While developing this rule, we attempted to balance the States' 
interests in regulating health insurance issuers with the need to 
ensure market stability. By doing so, we complied with the requirements 
of Executive Order 13132.
    Because States have flexibility in designing their Exchange and 
Exchange-related programs, State decisions will ultimately influence 
both administrative expenses and overall premiums. States are not 
required to establish an Exchange or risk adjustment program. For 
States that elected previously to operate an Exchange, those States had 
the opportunity to use funds under Exchange Planning and Establishment 
Grants to fund the development of data. Accordingly, some of the 
initial cost of creating programs was funded by Exchange Planning and 
Establishment Grants. After establishment, Exchanges must be 
financially self-sustaining, with revenue sources at the discretion of 
the State. Current State Exchanges charge user fees to issuers.
    In our view, while this proposed rule will not impose substantial 
direct requirement costs on State and local governments, this 
regulation has Federalism implications due to potential direct effects 
on the distribution of power and responsibilities among the State and 
Federal governments relating to determining standards relating to 
health insurance that is offered in the individual and small group 
markets. For example, the proposal to conduct ECP certification reviews 
for States performing plan management functions effective beginning in 
plan year 2026 may have Federalism implications, given that HHS has not 
conducted Federal ECP certification reviews for States performing plan 
management functions since the 2015 plan year. However, these 
Federalism implications may be balanced by enabling HHS to align 
standards in these States with Federal review standards, and thereby 
increasing consumer access in these States and improving efficiency of 
the QHP certification process. Additionally, we do not believe that the 
proposed amendment to codify the timeliness guidance for State 
Exchanges to review and resolve the State Exchange issuers enrollment 
data inaccuracies within 60 calendar days would have significant 
Federalism implications because this proposal is merely codifying a 
timeline for an existing data submission requirement.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on September 30, 2024.

List of Subjects

45 CFR Part 155

    Administrative practice and procedure, Advertising, Brokers, 
Conflict of interests, Consumer protection, Grants administration, 
Grant programs--health, Health care, Health insurance, Health 
maintenance organizations (HMO), Health records, Hospitals, Indians, 
Individuals with disabilities, Intergovernmental relations, Loan 
programs--health, Medicaid, Organization and functions (Government 
agencies), Public assistance programs, Reporting and recordkeeping 
requirements, Technical assistance, Women and youth.

45 CFR Part 156

    Administrative practice and procedure, Advertising, Advisory 
committees, Brokers, Conflict of interests, Consumer protection, Grant 
programs--health, Grants

[[Page 82409]]

administration, Health care, Health insurance, Health maintenance 
organization (HMO), Health records, Hospitals, Indians, Individuals 
with disabilities, Loan programs--health, Medicaid, Organization and 
functions (Government agencies), Public assistance programs, Reporting 
and recordkeeping requirements, State and local governments, Sunshine 
Act, Technical assistance, Women, and Youth.

45 CFR Part 158

    Administrative practice and procedure, Claims, Health care, Health 
insurance, Penalties, Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, under the authority at 5 
U.S.C. 301, the Department of Health and Human Services proposes to 
amend 45 CFR subtitle A, subchapter B, as set forth below.

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

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

    Authority: 42 U.S.C. 18021-18024, 18031-18033, 18041-18042, 
18051, 18054, 18071, and 18081-18083.

0
2. Section 155.220 is amended by revising paragraph (k)(3) to read as 
follows:


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

* * * * *
    (k) * * *
    (3) HHS may immediately suspend the agent's or broker's ability to 
transact information with the Exchange if HHS discovers circumstances 
that pose unacceptable risk to the accuracy of the Exchange's 
eligibility determinations, Exchange operations, applicants, or 
enrollees, or Exchange information technology systems, including but 
not limited to risk related to noncompliance with the standards of 
conduct under paragraph (j)(2)(i), (ii), or (iii) of this section and 
the privacy and security standards under Sec.  155.260, until the 
circumstances of the incident, breach, or noncompliance are remedied or 
sufficiently mitigated to HHS' satisfaction.
* * * * *
0
3. Section 155.305 is amended by adding paragraph (f)(4)(ii) to read as 
follows:


Sec.  155.305  Eligibility standards.

* * * * *
    (f) * * *
    (4) * * *
    (ii) If HHS notifies the Exchange as part of the process described 
in Sec.  155.320(c)(3) that APTC payments were made on behalf of either 
the tax filer or their spouse, if the tax filer is a married couple, 
for 2 consecutive tax years for which tax data would be utilized for 
verification of household income and family size in accordance with 
Sec.  155.320(c)(1)(i), and the tax filer or the tax filer's spouse did 
not comply with the requirement to file an income tax return for both 
years as required by 26 U.S.C. 6011, 6012, and their implementing 
regulations and reconcile APTC for that period (``file and 
reconcile''), the Exchange must:
    (A) Send a direct notification to the tax filer, consistent with 
the standards applicable to the protection of Federal Tax Information, 
that explicitly informs the tax filer that the Exchange has determined 
that the tax filer or the tax filer's spouse, if the tax filer is 
married, has failed to file their Federal income taxes and reconcile 
APTC, and educate the tax filer of the need to file and reconcile or 
risk being determined ineligible for APTC after 2 consecutive years of 
failing to file and reconcile; or
    (B) Send an indirect notification to either the tax filer or their 
enrollee, that informs the tax filer or enrollee that they may be at 
risk of being determined ineligible for APTC after 2 years of failing 
to file and reconcile. These notices must educate tax filers or their 
enrollees on the requirement to file and reconcile, while not directly 
stating that the Internal Revenue Service indicates the tax filer or 
the tax filer's spouse, if the tax filer is married, has failed to file 
and reconcile.
* * * * *
0
4. Section 155.400 is amended by adding paragraph (d)(1) and a reserved 
paragraph (d)(2) and revising paragraph (g) to read as follows:


Sec.  155.400  Enrollment of qualified individuals into QHPs.

* * * * *
    (d) * * *
    (1) Timeliness standard for State Exchanges to review, resolve, and 
report data inaccuracies submitted by a State Exchange issuer. Within 
60 calendar days after a State Exchange receives a data inaccuracy from 
an issuer operating in the State Exchange that includes a description 
of a data inaccuracy in accordance with Sec.  156.1210 and all the 
information that the State Exchange requires or requests to properly 
assess the inaccuracy, the State Exchange must review and resolve the 
State Exchange issuer's data inaccuracies and submit to HHS a 
description of the resolution of the inaccuracies in a format and 
manner specified by HHS.
    (2) [Reserved]
* * * * *
    (g) Premium payment threshold. Exchanges may, and the Federally-
facilitated Exchanges and State-Based Exchanges on the Federal platform 
will, allow issuers to implement either a percentage-based premium 
payment threshold policy (which can be based on either the net premium 
after application of advance payments of the premium tax credit or 
gross premium) or a fixed-dollar premium payment threshold policy, 
provided that the threshold and policy is applied in a uniform manner 
to all applicants and enrollees.
    (1) Under a net premium percentage-based premium payment threshold 
policy, issuers can consider applicants or enrollees to have paid all 
amounts due for the following purposes, if the applicants or enrollees 
pay an amount sufficient to maintain a percentage of total premium paid 
out of the total premium owed equal to or greater than 95 percent of 
the net monthly premium amount owed by the enrollees. If an applicant 
or enrollee satisfies the percentage-based premium payment threshold 
policy, the issuer may:
    (i) Effectuate an enrollment based on payment of the binder payment 
under paragraph (e) of this section.
    (ii) Avoid triggering a grace period for non-payment of premium, as 
described by Sec.  156.270(d) of this subchapter or a grace period 
governed by State rules.
    (iii) Avoid terminating the enrollment for non-payment of premium 
as, described by Sec. Sec.  156.270(g) of this subchapter and 
155.430(b)(2)(ii)(A) and (B).
    (2) Under a gross premium percentage-based premium payment 
threshold policy, issuers can consider enrollees to have paid all 
amounts due for the following purposes, if the enrollees pay an amount 
sufficient to maintain a percentage of the gross premium of the policy 
before the application of advance payments of the premium tax credit 
that is equal to or greater than 99 percent of the gross monthly 
premium owed by the enrollees. If an enrollee satisfies the gross 
premium percentage-based premium payment threshold policy, the issuer 
may:
    (i) Avoid triggering a grace period for non-payment of premium, as 
described by Sec.  156.270(d) of this subchapter or a grace period 
governed by State rules.
    (ii) Avoid terminating the enrollment for non-payment of premium 
as,

[[Page 82410]]

described by Sec. Sec.  156.270(g) of this subchapter and 
155.430(b)(2)(ii)(A) and (B).
    (3) Under a fixed-dollar premium payment threshold policy, issuers 
can consider enrollees to have paid all amounts due for the following 
purposes, if the enrollees pay an amount that is less than the total 
premium owed, the unpaid remainder of which is equal to or less than a 
fixed-dollar amount of $5 or less, adjusted for inflation, as 
prescribed by the issuer. If an enrollee satisfies the fixed-dollar 
premium payment threshold policy, the issuer may:
    (i) Avoid triggering a grace period for non-payment of premium, as 
described by Sec.  156.270(d) of this subchapter or a grace period 
governed by State rules.
    (ii) Avoid terminating the enrollment for non-payment of premium 
as, described by Sec. Sec.  156.270(g) of this subchapter and 
155.430(b)(2)(ii)(A) and (B).
* * * * *
0
5. Section 155.505 is amended by revising paragraph (b) introductory 
text to read as follows:


Sec.  155.505   General Eligibility Appeals Requirements.

* * * * *
    (b) Right to appeal. An applicant, enrollee, or application filer 
must have the right to appeal.
* * * * *
0
6. Section 155.1000 is amended by adding paragraph (e) to read as 
follows:


Sec.  155.1000  Certification standards for QHPs.

* * * * *
    (e) Denial of certification. The Exchange may deny certification to 
any plan that does not meet the general certification criteria under 
Sec.  155.1000(c).
0
7. Section 155.1090 is amended by revising the section heading, the 
paragraph (a) heading, and paragraphs (a)(2) and (3) to read as 
follows:


Sec.  155.1090  Request for the reconsideration of a denial of 
certification.

    (a) Request for the reconsideration of a denial of certification 
specific to a Federally-facilitated Exchange--
* * * * *
    (2) Form and manner of request. An issuer submitting a request for 
reconsideration under paragraph (a)(1) of this section must submit a 
written request for reconsideration to HHS, in the form and manner 
specified by HHS, within 7 calendar days of the date of the written 
notice of denial of certification. The issuer must include any and all 
documentation the issuer wishes to provide in support of its request 
with its request for reconsideration. The request for reconsideration 
must provide clear and convincing evidence that HHS' determination that 
the plan does not meet the general certification criteria at Sec.  
155.1000(c) was in error.
    (3) HHS reconsideration decision. HHS will review the 
reconsideration request to determine whether the issuer's 
reconsideration request provided clear and convincing evidence that 
HHS' determination that the plan does not meet the general 
certification criteria at Sec.  155.1000(c) was in error. HHS will 
provide the issuer with a written notice of the reconsideration 
decision. The decision will constitute HHS' final determination.
* * * * *

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

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

    Authority:  42 U.S.C. 18021-18024, 18031-18032, 18041-18042, 
18044, 18054, 18061, 18063, 18071, 18082, and 26 U.S.C. 36B.

0
9. Section 156.201 is amended by adding paragraph (c) to read as 
follows:


Sec.  156.201  Standardized plan options.

* * * * *
    (c) For PY 2026 and subsequent plan years, an issuer that offers 
multiple standardized plan options within the same product network 
type, metal level, and service area must meaningfully differentiate 
these plans from one another in terms of included benefits, provider 
networks, and/or formularies. For the purposes of this standard, a 
standardized plan option with a different product, provider network, 
and/or formulary ID would be considered meaningfully different.
0
10. Section 156.202 is amended by revising paragraph (b) and paragraph 
(d) introductory text to read as follows:


Sec.  156.202  Non-standardized plan option limits.

* * * * *
    (b) For plan year 2025 and subsequent plan years, is limited to 
offering two non-standardized plan options per product network type, as 
the term is described in the definition of ``product'' at Sec.  144.103 
of this subchapter, metal level (excluding catastrophic plans), and 
inclusion of adult dental benefit coverage, pediatric dental benefit 
coverage, and/or adult vision benefit coverage (as defined in 
paragraphs (c)(1) through (3) of this section), in any service area.
* * * * *
    (d) For plan year 2025 and subsequent plan years, an issuer may 
offer additional non-standardized plan options for each product network 
type, metal level, inclusion of adult dental benefit coverage, 
pediatric dental benefit coverage, and/or adult vision benefit coverage 
(as defined in paragraphs (c)(1) through (3) of this section), and 
service area if it demonstrates that these additional plans' cost 
sharing for benefits pertaining to the treatment of chronic and high-
cost conditions (including benefits in the form of prescription drugs, 
if pertaining to the treatment of the condition(s)) is at least 25 
percent lower, as applied without restriction in scope throughout the 
plan year, than the cost sharing for the same corresponding benefits in 
the issuer's other non-standardized plan option offerings in the same 
product network type, metal level, inclusion of adult dental benefit 
coverage, pediatric dental benefit coverage, and/or adult vision 
benefit coverage, and service area.
* * * * *
0
11. Section 156.1220 is amended by adding paragraph (a)(2)(i) and 
reserved paragraph (a)(2)(ii) to read as follows:


Sec.  156.1220  Administrative appeals.

    (a) * * *
    (2) * * *
    (i) Notwithstanding paragraph (a)(1) and (2) of this section, for 
appeals related to HHS-RADV under paragraphs (a)(1)(vii) and (viii) of 
this section, HHS will only take action to adjust risk adjustment State 
payments and charges for an issuer in response to an appeal decision 
when the impact of the decision to the filer's HHS-RADV adjustments to 
risk adjustment State transfers is greater than or equal to $10,000.
    (ii) [Reserved]
* * * * *

PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE 
REQUIREMENTS

0
12. The authority citation for part 158 continues to read as follows:

    Authority: 42 U.S.C. 300gg-18.

0
13. Section 158.103 is amended by adding a definition for ``Qualifying 
issuer'' in alphabetical order to read as follows:


Sec.  158.103  Definitions.

* * * * *
    Qualifying issuer means an issuer whose ratio of net payments 
related to

[[Page 82411]]

the risk adjustment program under section 1343 of the Patient 
Protection and Affordable Care Act, 42 U.S.C. 18063, to earned premiums 
prior to accounting for the net payments or receipts related to the 
risk adjustment, risk corridors, and reinsurance programs (as described 
in Sec.  158.130(b)(5)) in a relevant State and market is greater than 
or equal to 50 percent.
* * * * *
0
14. Section 158.140 is amended by revising paragraph (b)(4)(ii) to read 
as follows:


Sec.  158.140  Reimbursement for clinical services provided to 
enrollees.

* * * * *
    (b) * * *
    (4) * * *
    (ii) Beginning with the 2026 MLR reporting year, for qualifying 
issuers (as defined in Sec.  158.103), receipts related to the 
transitional reinsurance program and net payments or receipts related 
to the risk corridors program (calculated using an adjustment 
percentage, as described in Sec.  153.500 of this subchapter, equal to 
zero percent) under sections 1341 and 1342 of the Patient Protection 
and Affordable Care Act, 42 U.S.C. 18061, 18062. For all other issuers, 
receipts related to the transitional reinsurance program and net 
payments or receipts related to the risk adjustment and risk corridors 
programs (calculated using an adjustment percentage, as described in 
Sec.  153.500 of this subchapter, equal to zero percent) under sections 
1341, 1342, and 1343 of the Patient Protection and Affordable Care Act, 
42 U.S.C. 18061, 18062, 18063.
* * * * *
0
15. Section 158.240 is amended by revising paragraph (c)(2) and adding 
paragraph (c)(3) to read as follows:


Sec.  158.240  Rebating premium if the applicable medical loss ratio 
standard is not met.

* * * * *
    (c) * * *
    (2) For example, an issuer must rebate a pro rata portion of 
premium revenue if it does not meet an 80 percent MLR for the 
individual market in a State that has not set a higher MLR. If an 
issuer has a 75 percent MLR for the coverage it offers in the 
individual market in a State that has not set a higher MLR, the issuer 
must rebate 5 percent of the premium paid by or on behalf of the 
enrollee for the MLR reporting year after subtracting a pro rata 
portion of taxes and fees and accounting for payments or receipts 
related to the reinsurance, risk adjustment and risk corridors programs 
(calculated using an adjustment percentage, as described in Sec.  
153.500 of this subchapter, equal to zero percent). If the issuer is 
not a qualifying issuer (defined in Sec.  158.103), the issuer's total 
earned premium for the MLR reporting year in the individual market in 
the State is $200,000, incurred claims are $121,250, the issuer 
received transitional reinsurance payments of $2,500, and made net 
payments related to risk adjustment and risk corridors of $20,000 
(calculated using an adjustment percentage, as described in Sec.  
153.500 of this subchapter, equal to zero percent), then the issuer's 
gross earned premium in the individual market in the State would be 
$200,000 plus $2,500 minus $20,000, for a total of $182,500. If the 
issuer's Federal and State taxes and licensing and regulatory fees, 
including reinsurance contributions, that may be excluded from premium 
revenue as described in Sec. Sec.  158.161(a), 158.162(a)(1), and 
158.162(b)(1), allocated to the individual market in the State are 
$15,000, and the net payments related to risk adjustment and risk 
corridors, reduced by reinsurance receipts, that must be accounted for 
in premium revenue as described in Sec. Sec.  158.130(b)(5), 158.221, 
and 158.240, are $17,500 ($20,000 reduced by $2,500), then the issuer 
would subtract $15,000 and add $17,500 to gross premium revenue of 
$182,500, for a base of $185,000 in adjusted premium. The issuer would 
owe rebates of 5 percent of $185,000, or $9,250 in the individual 
market in the State. In this example, if an enrollee of the issuer in 
the individual market in the State paid $2,000 in premiums for the MLR 
reporting year, or 1/100 of the issuer's total premium in that State 
market, then the enrollee would be entitled to 1/100 of the total 
rebates owed by the issuer, or $92.50.
    (3) As another example, if an issuer is a qualifying issuer 
(defined in Sec.  158.103), the issuer's total earned premium for the 
MLR reporting year in the individual market in the State is $90,000, 
incurred claims are $151,250, and the issuer received transitional 
reinsurance payments of $12,500 and net receipts related to risk 
adjustment of $110,000, then the issuer's gross earned premium in the 
individual market in the State would be $90,000 plus $12,500, for a 
total of $102,500. If the qualifying issuer's Federal and State taxes 
and licensing and regulatory fees, including reinsurance contributions, 
that may be excluded from premium revenue as described in Sec. Sec.  
158.161(a), 158.162(a)(1), and 158.162(b)(1), allocated to the 
individual market in the State are $15,000, and the reinsurance 
payments that must be accounted for in premium revenue as described in 
Sec. Sec.  158.130(b)(5), 158.221, and 158.240 are $12,500, then the 
qualifying issuer would subtract $15,000 and $12,500 from gross premium 
revenue of $102,500, for a subtotal of $75,000. The qualifying issuer 
would then add $110,000 in net receipts related to risk adjustment, for 
a base of $185,000 in adjusted premium. The qualifying issuer would owe 
rebates of 5 percent of $185,000, or $9,250 in the individual market in 
the State. In this example, if an enrollee of the issuer in the 
individual market in the State paid $900 in premiums for the MLR 
reporting year, or 1/100 of the issuer's total premium in that State 
market, then the enrollee would be entitled to 1/100 of the total 
rebates owed by the issuer, or $92.50.
* * * * *

    Dated: October 2, 2024.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2024-23103 Filed 10-4-24; 4:15 pm]
BILLING CODE 4120-01-P