82308 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

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. 

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 HHSoperated 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 fixeddollar 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82309 

1The 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.’’ 

2See sections 1301, 1302, 1311, 1312, 1313, 1321, 

1331, and 1343 of the ACA and sections 2718 and 

2792 of the PHS Act. 

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 

(§ 153.630(b)) 

C. ICRs Regarding Engaging in Compliance 

Reviews and Taking Enforcement 

Actions Against Lead Agents for 

Insurance Agencies (§ 155.220) 

D. ICRs Regarding System Suspension 

Authority (§ 155.220(k)) 

E. ICRs Regarding Updating the Model 

Consent Form (§ 155.220) 

F. ICRs Regarding Notification of Two Year 

Failure To File and Reconcile Population 

(§ 155.305) 

G. ICRs Regarding General Program 

Integrity and Oversight Requirements 

(§ 155.1200) 

H. ICRs Regarding Essential Community 

Provider Certification Reviews 

(§ 156.235) 

I. ICRs Regarding Quality Improvement 

Strategy Information (§ 156.1130) 

J. ICRs Regarding Medical Loss Ratio 

(§§ 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. 

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), costsharing 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82310 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

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. 

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 nondiscriminatory 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 employersponsored 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

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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82311 

4See 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). 

5CMS. (2018). Updated 2019 Benefit Year Final 

HHS Risk Adjustment Model Coefficients. https://

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/2019-Updtd-Final-HHS-RAModel-Coefficients.pdf. 

6CMS. (2020). Final 2021 Benefit Year Final HHS 

Risk Adjustment Model Coefficients. https://

www.cms.gov/CCIIO/Resources/Regulations-andGuidance/Downloads/Final-2021-Benefit-YearFinal-HHS-Risk-Adjustment-Model-Coefficients.pdf. 

catastrophic coverage under 

§§ 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: 

• In the March 23, 2012 Federal 

Register (77 FR 17219) (Premium 

Stabilization Rule), we implemented the 

premium stabilization programs. 

• 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. 

• 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. 

• 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. 

• 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. 

• 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. 

• 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. 

• 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. 

• 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. 

• 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. 

• 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. 

• 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

• 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. 

• 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. 

• 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. 

• On May 12, 2020, consistent with 

§ 153.320(b)(1)(i), we issued the 2021 

Benefit Year Final HHS Risk 

Adjustment Model Coefficients on the 

CCIIO website.6

• 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. 

• 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82312 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

7CMS. (2021). 2022 Benefit Year Final HHS Risk 

Adjustment Model Coefficients. https://

www.cms.gov/files/document/updated-2022- 

benefit-year-final-hhs-risk-adjustment-modelcoefficients-clean-version-508.pdf. 

8CMS (2022). 2023 Benefit Year Final HHS Risk 

Adjustment Model Coefficients. https://

www.cms.gov/files/document/2023-benefit-yearfinal-hhs-risk-adjustment-model-coefficients.pdf. 

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. 

• 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. 

• 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. 

• On July 19, 2021, consistent with 

§ 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

• 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 enrolleelevel 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. 

• 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. 

• 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 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 § 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 § 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 reenrollment 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 webbrokers 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 reenrollment 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 

§ 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 § 156.135(g) provisions 


lotter on DSK11XQN23PROD with PROPOSALS2
82314 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

9Sessions, 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-paymentmemo.pdf. 

10See New York v. U.S. Dep’t of Health & Human 

Servs., No. 18–cv–00683 (RJS) (S.D.N.Y. filed Jan. 

26, 2018). 

11BHP program year means a calendar year for 

which a standard health plan provides coverage for 

BHP enrollees. See 42 CFR 600.5. 

for updating the AV Calculator in future 

plan years. In the 2017 Payment Notice 

(81 FR 12349), we amended the 

provisions at § 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 § 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 § 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 § 156.115(d) on issuers 

from including routine non-pediatric 

dental services as an EHB beginning 

with PY 2027. In addition, we revised 

§ 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 EHBbenchmark 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 § 155.200(d) 

to direct Exchanges to evaluate quality 

improvement strategies, and 

§ 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 

§ 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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82315 

12 ‘‘Metal tiers’’ refer to the different actuarial 

value plan levels offered on the Exchanges. Bronzelevel 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. 

13OMB. (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. 

14CMS. (2022, December 14). CMS Model 

Consent Form for Marketplace Agents and Brokers. 

PRA package (CMS–10840, OMB 0938–1438). 

Continued 

(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. 

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 HHSoperated 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. 

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 § 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 § 155.220(j)(2)(i), (ii) or 

(iii) and the privacy and security 

standards under § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82316 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

https://www.cms.gov/files/document/cms-modelconsent-form-marketplace-agents-and-brokers.pdf. 

15ARP, 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. 

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. 

We propose to amend § 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 § 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 § 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 § 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 

§ 155.400(g), but which we propose to 

modify). 

We propose revisions to § 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 § 155.1000 to 

state explicitly that an Exchange may 

deny certification to any plan that does 

not meet the general certification 

criteria at § 155.1000(c). We also 

propose to amend § 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 

§ 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. 

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 § 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 § 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 § 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 § 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 § 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 

§ 158.140(b)(4)(ii) to allow qualifying 

issuers to not adjust incurred claims by 

the net payments or receipts related to 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82317 

16https://www.medicaid.gov/sites/default/files/ 

2019-11/final-admin-order-2018-revised-paymentmethodology.pdf. 

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 § 158.103 to add a definition 

of ‘‘qualifying issuer.’’ 

We also propose amendments to 

§ 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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
82318 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

17Some 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. 

18 87 FR 77731, 77737. 

19 Id. at 77732. 20Section 1331(d)(3)(A)(ii) of the PHS Act. 

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. 

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 silverlevel 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. 

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. 

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: 

(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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82319 

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

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

23OMB. (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. 

24Public Law 99–177 (1985). 

25Public Law 117–58, 135 Stat. 429 (2021). 

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. 

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-thanaverage 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 

§ 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. 

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 HHSoperated 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). 

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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
82320 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

26 2 U.S.C. 901a. 

27The 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 highcost risk pool payment and charge terms that apply 

beginning with the 2018 benefit year). See, for 

example, 81 FR 94080. 

28For 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 HCCcontingent enrollment duration factors for up to 6 

months in the adult models. See, for example, 87 

FR 27228 through 27230. 

29For 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. 

30See table 4 for a list of factors in the adult 

models, and table 5 for a list of factors in the child 

models. 

31See 87 FR 27224 through 27228. Also see table 

6 below. 

32 84 FR 17463 through 17466. 

33Although 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. 

34See, 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. 

program through fiscal year 2031 at a 

rate of 5.7 percent per fiscal year.26

2. HHS Risk Adjustment (§ 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

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. 

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 PHEimpacted 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. 

Consistent with the approach for use 

of 2020 and 2021 benefit year enrolleelevel 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82321 

35As described in the 2016 Risk Adjustment 

White Paper (https://www.cms.gov/cciio/resources/ 

forms-reports-and-other-resources/downloads/ramarch-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. 

36Additionally, 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. 

37For discussion relating to the Hepatitis C 

Pricing Adjustment for previous benefit years, see, 

for example, 89 FR 26237 through 26238. 

38See 81 FR 12218 through 12219. 

39The Hepatitis C drugs market pricing 

adjustment to plan liability is applied for all 

enrollees taking Hepatitis C drugs in the data used 

for recalibration. 

40See 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/companystatements/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-mavyretglecaprevirpibrentasvir-for-treatment-chronichepatitis-c-in-all-major-genotypes-gt-1-6-in-asshort-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-cus.ashx. 

41See, supra, notes 38 and 39. 42Because 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. 43See 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-cus.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-costwhitepaper.ashx. See also, supra, note 35. 

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 

§ 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. 

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. 

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.41 42 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82322 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

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. 

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. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82323 

44See 85 FR 29185 through 29187. 

45See 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-hivinfection-pre-exposure-prophylaxis. 

46On 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 

Continued 

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 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.021</GPH>

TABLE 1: Proposed Transition of the Hepatitis C Market Pricing Adjustment (Hep C 

Trend) to the Specialty Drug Trend for HHS Risk Adjustment Model Recalibration 

Year of Year-to-Year Trend Rate Used 

EDGE 2020- 2021- 2022- 2023- 2024- 2025- 2026- 2027- 2028-

Data 2021 2022 2023 2024 2025 2026 2027 2028 2029 

2020 HepC HepC HepC HepC HepC Specialty * * * 

Data Trend Trend Trend Trend Trend Drug 

Year Trend 

2021 HepC HepC HepC HepC Specialty Specialty * * 

Data Trend Trend Trend Trend Drug Drug 

Year Trend Trend 

2022 HepC HepC HepC Specialty Specialty Specialty * 

Data Trend Trend Trend Drug Drug Drug 

Year Trend Trend Trend 

2023 HepC HepC Specialty Specialty Specialty Specialty 

Data Trend Trend Drug Drug Drug Drug 

Year Trend Trend Trend Trend 

2024 HepC Specialty Specialty Specialty Specialty 

Data Trend Drug Drug Drug Drug 

Year Trend Trend Trend Trend 

2025 -- Specialty Specialty Specialty Specialty 

Data Drug Drug Drug Drug 

Year Trend Trend Trend Trend 

*Data year projected to no longer be used for the applicable benefit year recalibration 
82324 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

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). 

47For 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. 

48See 86 FR 24164. 

49See the 2018 Payment Notice (81 FR 94074 

through 94080). See also the March 31, 2016, HHSOperated Risk Adjustment Methodology Meeting 

Questions & Answers. June 8, 2016. Available at 

https://www.cms.gov/CCIIO/Resources/Fact-Sheetsand-FAQs/Downloads/RA-OnsiteQA-060816.pdf. 

50See 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. 

51Prior 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. 

52See the 2014 Payment Notice Proposed Rule 

(77 FR 73128). See, also, the 2018 Payment Notice 

Proposed Rule (81 FR 61470). 

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. 

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

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 wellspecified, 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. 

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’ PrEPassociated 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. 

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. 

Principle 1—Like HCCs and RXCs, an 

ACF should be clinically meaningful, 

but in the case of ACFs, such variables 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82325 

53For 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. 

54As discussed later in this section, it may be 

appropriate to remove generic drugs to ensure 

homogeneity of costs within a PrEP ACF. 

55See 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-hivprep-guidelines-2021.pdf) 

56See, supra, note 54. 

57See NADAC (National Average Drug 

Acquisition Cost) 2024 reference data (available at 

https://data.medicaid.gov/dataset/99315a95-37ac4eee-946a-3c523b4c481e) and the NADAC 

Equivalency Metrics (available at https://

www.medicaid.gov/medicaid/prescription-drugs/ 

downloads/retail-price-survey/nadac-equivmetrics.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. 

58See, supra, note 55. 

59The 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 agesex 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-hivprevention-and-care-outcomes.html). 

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 wellspecified 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

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 overprescribing 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82326 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

61Long-acting injectable PrEP may be beneficial 

in encouraging adherence to a PrEP medication 

regimen. (See, for example, https://

getprepbroward.com/documents/Long-ActingInjectable-PrEP.pdf). As such, we anticipate that 

treatment guidelines may recommend its use over 

oral PrEP in the future. 

62See, supra, note 57. 

63See, for example, the 2019 Payment Notice (83 

FR 16942). 

64Risk 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 yearover-year. 

65See the 2021 Payment Notice (85 FR 29187). 

66The 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/understandinghiv/fact-sheets/post-exposure-prophylaxis-pep#:∼:

text=PEP%20stands%20for%20post%2Dexposure

,used%20only%20in%20emergency%20situations.) 

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. 

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. 

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. 

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 enrolleelevel 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. 

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 antiretroviral 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.65 66 To address the 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82327 

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. 

68For 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). 

concerns for adherence to Principle 6, 

we will need to create a mutually 

exclusive NDC classification between 

RXC 1 and a PrEP ACF. 

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 (AntiHIV 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

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. 


lotter on DSK11XQN23PROD with PROPOSALS2
82328 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.022</GPH>

TABLE 2: Estimated Unconstrained HHS Risk Adjustment Adult Model Factors for a 

PrEP ACF (ACF 01) and Other Adult Model Factors with Absolute Coefficient Impacts of 

at Least .01 When Adding a PrEP ACF to the Adult Models Using the 2021 Enrollee-Level 

EDGE Data 

Estimated 

Coefficient Change 

Estimated Relative to Model 

HCC/RXC/ACF Model Without PrEP 

Metal Level Number Factor Coefficient ACF* 

Platinum ACFOl HIV Pre-Exposure 2.678 +2.678 

Pro h taxis 

Age 25-29, Male 0.203 -0.017 

Age 30-34, Male 0.236 -0.019 

Age 35-39, Male 0.256 -0.016 

Age 40-44, Male 0.290 -0.012 

HCC003 Central Nervous System 7.525 -0.014 

Infections, Except Viral 

Meningitis 

HCC004 Viral or Unspecified 7.607 -0.013 

Meningitis 

HCC037 2 Chronic Hepatitis, Except 0.551 -0.010 

Chronic Viral Hepatitis C 

HCC088 Major Depressive Disorder, 0.861 -0.010 

Severe, and Bipolar Disorders 

HCC090 Personality Disorders 0.685 -0.010 

RXCOI Anti-HIV Agents 4.550 +0.010 

Rx.CO2 Anti-Hepatitis C (HCV) 8.757 -0.039 

Agents, Direct Acting Agents 

RXC 02 x Additional effect for enrollees -0.827 +0.040 

HCC037_1, 036, with RXC 02 and (HCC 

035_2, 035_1, 037 I or 036 or 035 2 or - - 034 035 I or 034} 

RXClOx Additional effect for enrollees 37.424 +0.015 

HCC159, 158 with RXC 10 and (HCC 159 

or 158 

Gold ACFOl HIV Pre-Exposure 2.618 +2.618 

Pro h taxis 

Age 25-29, Male 0.135 -0.016 

Age 30-34, Male 0.163 -0.018 

Age 35-39, Male 0.180 -0.015 

Age 40-44, Male 0.209 -0.011 

HCC003 Central Nervous System 7.438 -0.014 

Infections, Except Viral 

Meningitis 

HCC004 Viral or Unspecified 7.512 -0.013 

Menin itis 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82329 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.023</GPH>

Estimated 

Coefficient Change 

Estimated Relative to Model 

HCC/RXC/ACF Model Without PrEP 

Metal Level Number Factor Coefficient ACF* 

HCC037 2 Chronic Hepatitis, Except 0.492 -0.010 

Chronic Viral Hepatitis C 

HCC088 Major Depressive Disorder, 0.772 -0.010 

Severe, and Bipolar Disorders 

11CC090 Personality Disorders 0.608 -0.011 

RXC0l Anti-HIV Agents 4.092 +0.010 

RXC02 Anti-Hepatitis C (HCV) 8.235 -0.039 

Agents, Direct Acting Agents 

RXC 02 x Additional effect for enrollees -0.692 +0.039 

HCC037_1, 036, with RXC 02 and (HCC 

035_2, 035_1, 037 I or 036 or 035 2 or - - 034 035 1 or 034) 

RXCl0x Additional effect for enrollees 37.489 +0.014 

HCC159, 158 with RXC 10 and (HCC 159 

or 158 

Silver ACF OJ HlV Pre-Exposure 2.553 +2.553 

Pro~h~ !axis 

Age 25-29, Male 0.089 -0.016 

Age 30-34, Male 0.111 -0.018 

Age 35-392 Male 0.123 -0.015 

Age 40-44, Male 0.147 -0.012 

11CC003 Central Nervous System 7.398 -0.013 

Infections, Except Viral 

Mellin itis 

11CC004 Viral or Unspecified Meningitis 7.464 -0.013 

HCC088 Major Depressive Disorder, 0.691 -0.010 

Severe2 and Bi:Qolar Disorders 

HCC090 Personality Disorders 0.514 -0.011 

RXC0l Anti-HIV Agents 3.798 +0.010 

RXC02 Anti-Hepatitis C (HCV) 8.190 -0.037 

Agents, Direct Acting Agents 

RXC02x Additional effect for enrollees -0.598 +0.038 

HCC03 7 _ 1, 036, with RXC 02 and (HCC 

035_2,035_1,034 037 1 or 036 or 035 2 or - -

035 1 or 034} 

RXC !Ox Additional effect for enrollees 37.573 +0.014 

HCC159, 158 with RXC 10 and (HCC 159 

or 158 

Bronze ACF OJ HIV Pre-Exposure 2.495 +2.495 

Prophylaxis 

Age 25-29, Male 0.057 -0.015 

Age 30-34, Male 0.073 -0.018 

Age 35-39, Male 0.081 -0.014 

Age 40-44, Male 0.100 -0.011 

HCC003 Central Nervous System 7.331 -0.013 

Infections, Except Viral 

Menin itis 
82330 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

69 Ibid. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.024</GPH>

Estimated 

Coefficient Change 

Estimated Relative to Model 

HCC/RXC/ACF Model Without PrEP 

Metal Level Number Factor Coefficient ACF* 

HCC004 Viral or Unspecified 7.380 -0.012 

Meningitis 

HCC090 Personality Disorders 0.395 -0.010 

RXC02 Anti-Hepatitis C (HCV) 8.023 -0.036 

Agents, Direct Acting Agents 

RXC 02x Additional effect for enrollees -0.472 +0.038 

HCC037_1, 036, with RXC 02 and (HCC 

035_2, 035_1, 037 1 or 036 or 035 2 or - - 034 035 1 or 034} 

RXC10x Additional effect for enrollees 37.680 +0.014 

HCC159, 158 with RXC 10 and (HCC 159 

or 158 

Catastrophic ACF OJ HIV Pre-Exposure 2.493 +2.493 

Prop_hy__laxis 

Age 25-29, Male 0.056 -0.015 

Age 30-34, Male 0.072 -0.018 

Age 35-39, Male 0.079 -0.015 

Age 40-44, Male 0.099 -0.011 

HCC003 Central Nervous System 7.329 -0.013 

Infections, Except Viral 

Meningitis 

HCC004 Viral or Unspecified 7.377 -0.013 

Meningitis 

HCC090 Personality Disorders 0.391 -0.010 

RXC0l Anti-HIV Agents 3.343 +0.010 

RXC02 Anti-Hepatitis C (HCV) 8.022 -0.036 

Agents, Direct Acting Agents 

RXC02x Additional effect for enrollees -0.468 +0.038 

HCC037_1, 036, with RXC 02 and (HCC 

035_2, 035_1, 037 1 or 036 or 035 2 or - -

034 035 1 or 034} 

RXC10x Additional effect for enrollees 37.687 +0.013 

HCC159, 158 with RXC 10 and (HCC 159 

or 158) 

*For these estimates, for consistency with the estimated model coefficients, which were calculated using 

the 2021 enrollee-level EDGE data and 2025 benefit year risk adjustment model specifications, we 

estimated these coefficient changes by comparing the estimated model coefficients to the final 2025 

benefit year HHS risk adjustment model coefficients for each metal level. 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82331 

70As compared to the HCC 1 coefficients in table 

5. 71For 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. 

72See, supra, note 36. 

73As finalized in the 2020 Payment Notice (84 FR 

17466 through 17468), we will maintain the highcost risk pool parameters for the 2020 benefit year 

and beyond, unless amended through notice-andcomment 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. 

74See, supra, note 36. 

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. 

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. 

d. Proposed List of Factors To Be 

Employed in the HHS Risk Adjustment 

Models (§ 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. 

BILLING CODE 4120–01–P 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.025</GPH>

TABLE 3: Estimated Unconstrained HHS Risk Adjustment Child Model Factors for a 

PrEP ACF (ACF 01) 

Metal Level 

Platinum 

Gold 

Silver 

Bronze 

Catastrophic 

Estimated Model 

Coefficient for 

ACFOl 

1.304 

1.263 

1.214 

1.161 

1.160 
82332 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.026</GPH>

TABLE 4: Proposed Adult HHS RiskAd"ustment Model Factors for the 2026 Benefit Year 

5-29 Male 

0-34, Male 

5-39 Male 0.258 0.185 

0-44 Male 0.288 0.210 

5-49 Male 0.322 0.241 

0-54 Male 0.381 0.293 

0.423 0.328 0.255 0.196 0.185 

0.466 0.363 0.283 0.217 0.204 

0.285 0.199 0.131 0.083 0.073 

0.312 0.218 0.144 0.090 0.078 

0.377 0.278 0.199 0.139 0.126 

0.428 0.326 0.245 0.181 0.169 

0.478 0.372 0.287 0.217 0.203 

HCC00l HIV/AIDS 0.324 0.249 0.214 0.184 0.182 

HCC002 Septicemia, Sepsis, Systemic 8.769 8.567 8.520 8.428 8.425 

Inflammatory Response 

S ndrome/Shock 

HCC003 Centrcll NeIVous System Infections, 7.904 7.806 7.760 7.687 7.675 

Ex .. 

HCC004 ·tis 7.686 7.583 7.533 7.454 7.442 

HCC006 8.506 8.456 8.403 8.327 8.309 

HCC008 Metastatic Cancer 22.556 22.165 22.139 22.021 22.026 

HCC009 Lung, Brain, and Other Severe Cancers, 12.532 12.260 12.214 12.096 12.090 

Including Pediatric Acute Lymphoid 

Leukemia 

HCC0IO Non-Hodgkin Lymphomas and Other 5.519 5.346 5.280 5.167 5.154 

Cancers and Tumors 

HCC0ll Colorectal, Breast (Age< 50), Kidney, 3.718 3.537 3.464 3.342 3.327 

and Other Cancers 

HCC012 Breast (Age 50+) and Prostate Cancer, 2.399 2.267 2.201 2.101 2.087 

Benign/Uncertain Brain Tumors, and 

Other Cancers and Tumors 

HCC013 Thyroid Cancer, Melanoma, 0.972 0.882 0.795 0.690 0.671 

Neurofibromatosis, and Other Cancers 

and Tumors 

HCC018 6.001 6.000 6.012 6.016 6.008 

HCC019 0.224 0.182 0.141 0.101 0.093 

HCC020 0.224 0.182 0.141 0.101 0.093 

HCC021 Diabetes without Com lication 0.224 0.182 0.141 0.101 0.093 

HCC022 Type 1 Diabetes Mellitus, add-on to 0.224 0.200 0.163 0.098 0.083 

Diabetes HCCs 19-21 

HCC023 Protein-Calorie Malnutrition 10.678 10.559 10.519 10.449 10.441 

HCC026 21.504 21.326 21.298 21.232 21.231 

HCC027 Li idoses and Gl co enosis 21.504 21.326 21.298 21.232 21.231 

HCC029 Amyloidosis, Porphyria, and Other 6.053 5.953 5.914 5.848 5.839 

Metabolic Disorders 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82333 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.027</GPH>

HCC or Factor 

RXC No. 

HCC030 Adrenal, Pituitary, and Other 1.277 1.204 1.153 1.080 1.067 

Sil!11ificant Endocrine Disorders 

HCC034 Liver Transplant Status/Complications 5.771 5.833 5.891 5.973 5.986 

HCC035 l" Acute Liver Failure/Disease, Including 7.001 6.815 6.775 6.699 6.700 

Neonatal Hepatitis 

HCC035 2 Chronic Liver Failure/End-Stage Liver 2.215 2.052 2.012 1.928 1.922 

Disorders 

HCC036 Cirrhosis of Liver 0.668 0.588 0.546 0.478 0.467 

HCC037 1 Chronic Vintl Hepatitis C 0.540 0.480 0.432 0.378 0.371 

HCC037_2 Chronic Hepatitis, Except Chronic 0.540 0.480 0.432 0.378 0.371 

Vmtl Heoatitis C 

HCC041 Intestine Transplant 5.771 5.833 5.891 5.973 5.986 

Status/Complications 

HCC042 Peritonitis/Gastrointestinal 10.677 10.534 10.530 10.490 10.492 

Perforation/Nccrotizing Enterocolitis 

HCC045 Intestinal Obstruction 4.906 4.701 4.639 4.517 4.506 

HCC046 Chronic Pancreatitis 2.255 2.087 2.037 1.945 1.939 

HCC047 Acute Pancreatitis 2.255 2.087 2.032 1.922 1.913 

HCC048 Inflammatorv Bowel Disease 1.988 1.892 1.814 1.689 1.663 

HCC054 Necrotizing Fasciitis 7.354 7.204 7.177 7.119 7.116 

HCC055 Bone/Joint/Muscle Infections/Necrosis 4.337 4.167 4.140 4.077 4.077 

HCC056 Rheumatoid Arthritis and Specified 1.220 1.126 1.067 0.987 0.974 

Autoimmune Disorders 

HCC057 Systemic Lupus Erythematosus and 0.361 0.295 0.220 0.124 0.104 

Other Autoimmune Disorders 

HCC061 Osteogenesis Imperfecta and Other 1.743 1.623 1.560 1.460 1.446 

Osteodvstroohies 

HCC062 Congenital/Developmental Skeletal and 1.743 1.623 1.560 1.460 1.446 

Connective Tissue Disorders 

HCC063 Cleft Lio/Cleft Palate 0.716 0.616 0.552 0.467 0.454 

HCC066 Hemophilia 73.949 73.659 73.629 73.537 73.541 

HCC067 Myclodysplastic Syndromes and 10.804 10.680 10.652 10.586 10.578 

Mvclofibrosis 

HCC068 Aplastic Anemia 10.804 10.680 10.652 10.586 10.578 

HCC069 Acquired Hemolytic Anemia, Including 10.804 10.680 10.652 10.586 10.578 

Hemolvtic Disease of Newborn 

HCC070 Sickle Cell Anemia (Hb-SS) and 1.693 1.605 1.548 1.476 1.465 

Thalassemia Beta Zero 

HCC071 Sickle-Cell Disorders, Except Sickle- 1.653 1.584 1.538 1.476 1.465 

Cell Anemia (Hb-SS) and Thalassemia 

Beta Zero: Beta Thalassemia Maior 

HCC073 Combined and Other Severe 4.305 4.215 4.189 4.135 4.128 

Immunodeficiencies 

HCC074 Disorders of the Immune Mechanism 4.305 4.215 4.189 4.135 4.128 

HCC075 Coagulation Defects and Other 2.134 2.053 2.005 1.934 1.922 

Soecified Hematological Disorders 

HCC081 Drug Use with Psychotic 1.503 1.376 1.284 1.151 1.126 

Complications 

HCC082 Drug Use Disorder, Moderate/Severe, 1.503 1.376 1.284 1.151 1.126 

or Drug Use with Non-Psychotic 

Comolications 

HCC083 Alcohol Use with Psychotic 0.863 0.751 0.678 0.575 0.558 

Complications 

HCC084 Alcohol Use Disorder, 0.863 0.751 0.678 0.575 0.558 

Moderate/Severe, or Alcohol Use with 

Specified Non-Psychotic 

Comolications 
82334 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.028</GPH>

IICC or Factor 

RXC No. 

HCC087 1 Schizophrenia 2.220 2.055 1.974 1.849 1.834 

HCC087_2 Delusional and Other Specified 2.107 1.948 1.863 1.725 1.705 

Psychotic Disorders, Unspecified 

Psvchosis 

HCC088 Major Depressive Disorder, Severe, 0.929 0.834 0.750 0.640 0.619 

and Bipolar Disorders 

HCC090 Personality Disorders 0.643 0.569 0.479 0.372 0.348 

HCC094 Anorexia/Bulimia Nervosa 1.901 1.797 1.730 1.627 1.610 

HCC096 Prader-Willi, Patau, Edwards, and 9.086 9.059 9.029 8.993 8.981 

Autosomal Deletion Svndromes 

HCC097 Down Syndrome, Fragile X, Other 0.819 0.758 0.713 0.655 0.644 

Chromosomal Anomalies, and 

Conl!"enital Malformation Svndromes 

HCC102 Autistic Disorder 0.684 0.610 0.524 0.431 0.411 

HCC103 Pervasive Developmental Disorders, 0.643 0.569 0.479 0.372 0.348 

Except Autistic Disorder 

HCC106 Traumatic Complete Lesion Cervical 9.269 9.111 9.058 8.961 8.951 

Spinal Cord 

HCC107 Omuirinle lria 9.269 9.111 9.058 8.961 8.951 

HCC108 Traumatic Complete Lesion Dorsal 6.184 6.041 5.985 5.886 5.874 

Soinal Cord 

HCC109 Paraplelria 6.184 6.041 5.985 5.886 5.874 

HCCll0 Spinal Cord Disorders/Injuries 4.886 4.708 4.657 4.554 4.544 

HCClll Amyotrophic Lateral Sclerosis and 4.966 4.824 4.756 4.643 4.627 

Other Anterior Hom Cell Disease 

HCC112 Om,rlrinlegic Cerebral Palsv 0.612 0.524 0.458 0.364 0.347 

HCC113 Cerebral Palsv, Except O .. ~ .. inleltic 0.339 0.274 0.220 0.148 0.134 

HCC114 Spina Bifida and Other 1.165 1.083 1.027 0.938 0.921 

Brain/Spinal/Nervous System 

CoMenital Anomalies 

HCC115 Myasthenia Gravis/Myoneural 5.056 4.973 4.956 4.917 4.915 

Disorders and Guillain-Barre 

Syndrome/Inflammatory and Toxic 

Ncurooathv 

HCC117 Muscular Dvstroohv 1.328 1.239 1.173 1.079 1.062 

HCC118 Multiple Sclerosis 2.666 2.536 2.479 2.383 2.370 

HCC119 Parl<lnson's, Huntington's, and 1.328 1.239 1.173 1.079 1.062 

Spinocerebellar Disease, and Other 

Neurodegenerative Disorders 

HCC120 Seizure Disorders and Convulsions 0.940 0.850 0.787 0.696 0.681 

HCC121 Hvdroceohalus 9.454 9.362 9.314 9.244 9.232 

HCC122 Nontraumatic Coma, Except Diabetic, 9.882 9.748 9.694 9.603 9.590 

Hepatic, or Hypoglycemic; 

Nontraumatic Brain 

Compression/ Anoxic Damaee 

HCC123 Narcolemw and Cataolexv 4.531 4.404 4.343 4.247 4.233 

HCC125 Respirator Dependence/fracheostomy 21.608 21.401 21.360 21.273 21.271 

Status 

HCC126 Respiratorv Arrest 8.172 7.957 7.913 7.823 7.821 

HCC127 Cardio-Respiratory Failure and Shock, 8.172 7.957 7.913 7.823 7.821 

Including Respiratmy Distress 

Svndromcs 

HCC128 Heart Assistive Device/ Artificial Heart 15.142 15.048 15.018 14.981 14.985 

HCC129 Heart Trnnsplant Status/Complications 15.142 15.048 15.018 14.981 14.985 

HCC130 Heart Failure 1.769 1.684 1.647 1.582 1.572 

HCC131 Acute Mvocardial Infarction 4.648 4.428 4.402 4.328 4.331 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82335 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.029</GPH>

HCC or Factor 

RXC No. 

HCC132 Unstable Angina and Other Acute 3.381 3.185 3.139 3.036 3.030 

Ischemic Heart Disease 

HCC135 Heart Infection/Inilaimnation, Except 8.377 8.292 8.237 8.153 8.137 

Rheumatic 

HCC137 Hypoplastic Left Heart Syndrome and 2.031 1.943 1.886 1.810 1.798 

Other Severe Congenital Heart 

Disorders 

HCC138 Major Congenital Heart/Circulatory 2.031 1.943 1.886 1.810 1.798 

Disorders 

HCCl39 Atrial and Ventricular Septa! Defects, 2.031 1.943 1.886 1.810 1.798 

Patent Ductus Arteriosus, and Other 

Con~enital Heart/Circulatorv Disorders 

HCC142 Specified Heart Arrhvthmias 1.828 1.726 1.660 1.556 1.536 

HCC145 Intracranial Hemorrhage 10.183 10.022 9.976 9.889 9.882 

HCC146 Ischemic or Unspecified Stroke 1.382 1.269 1.232 1.160 1.153 

HCC149 Cerebral Aneurysm and Arteriovenous 2.096 1.979 1.920 1.819 1.803 

Malformation 

HCC150 Hemiplecia/Hemiparesis 2.952 2.831 2.813 2.765 2.766 

HCC151 Monoplegia, Other Paralytic 2.464 2.353 2.306 2.226 2.217 

Svndromes 

HCC153 Atherosclerosis of the Extremities with 7.862 7.701 7.708 7.682 7.691 

Ulcemtion or Gan!!Tene 

HCC154 Vascular Disease with Complications 4.946 4.803 4.760 4.678 4.670 

HCC156 Pulmonary Embolism and Deep Vein 7.348 7.269 7.200 7.095 7.071 

Thrombosis 

HCC158 Lum? Trammlant Status/Complications 11.134 11.054 11.027 10.996 11.000 

HCC159 Cvstic Fibrosis 3.817 3.697 3.645 3.565 3.555 

HCC160 Chronic Obstructive Pulmonary 0.620 0.546 0.472 0.381 0.363 

Disease, Includim1 Bronclriectasis 

HCC161 1 Severe Asthma 0.620 0.546 0.472 0.381 0.363 

HCC161 2 Asthma, Except Severe 0.620 0.546 0.472 0.381 0.363 

HCC162 Fibrosis of Lung and Other Lung 1.544 1.465 1.411 1.329 1.314 

Disorders 

HCC163 Aspiration and Specified Bacterial 7.234 7.126 7.082 7.011 7.001 

Pneumonias and Other Severe Lung 

Infections 

HCC174 Exudative Macular De.e;eneration 1.162 1.038 0.948 0.814 0.793 

HCC183 Kidney Transplant 6.001 6.000 6.012 6.016 6.008 

Status/Complications 

HCC184 End Sta.e;e Renal Disease 19.250 18.854 18.967 18.808 18.721 

HCC187 Chronic Kidnev Disease. Staee 5 0.723 0.649 0.643 0.605 0.594 

HCC188 Chronic Kidney Disease, Severe (Stage 0.723 0.649 0.643 0.605 0.594 

4) 

HCC203 Ectopic and Molar Pre~:mcv 1.579 1.424 1.295 1.099 1.065 

HCC204 Miscarria.e;e with Complications 0.605 0.530 0.412 0.252 0.210 

HCC205 Miscarriage with No or Minor 0.605 0.530 0.412 0.252 0.210 

Complications 

HCC207 Pregnancy with Delivery with Major 3.611 3.337 3.146 2.824 2.782 

Complications 

HCC208 Pregnancy with Delivery with 3.611 3.337 3.146 2.824 2.782 

Complications 

HCC209 Pregnancy with Delivery with No or 2.666 2.465 2.249 1.883 1.811 

Minor Complications 

HCC210 (Ongoing) Pregnancy without Delivery 0.695 0.606 0.465 0.292 0.252 

with Major Comolications 

HCC211 (Ongoing) Pregnancy without Delivery 0.464 0.395 0.270 0.138 0.107 

with Comolications 
82336 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.030</GPH>

Catastrophic 

HCC212 (Ongoing) Pregnancy without Delivecy 0.011 0.000 0.000 0.000 0.000 

with No or Minor Com lications 

HCC217 Chronic Ulcer of Skin, Exce t Pressure 1.442 1.349 1.315 1.257 1.251 

HCC218 Extensive Third-De ree Burns 25.026 24.830 24.788 24.706 24.701 

HCC219 Ma· or Skin Burn or Condition 2.495 2.374 2.316 2.230 2.220 

HCC223 17.509 17.362 17.298 17.192 17.176 

HCC226 Hi and Pelvic Fractures 7.706 7.461 7.433 7.349 7.351 

HCC228 Vertebral Fractures without Spinal 4.015 3.856 3.784 3.662 3.646 

Cord In· 

HCC234 Traumatic Amputations and 4.454 4.299 4.273 4.209 4.208 

Am utation Com lications 

HCC251 Stem Cell, Including Bone Marrow, 18.843 18.873 18.850 18.846 18.843 

Trans lant Status/Co lications 

HCC253 Artificial Openings for Feeding or 5.485 5.366 5.341 5.287 5.284 

Eli.mi.nation 

HCC254 Amputation Status, Upper Limb or 0.862 0.766 0.731 0.669 0.663 

Lower Limb 

-5.771 -5.833 -5.891 -5.973 -5.986 

Severe illness 2 -5.615 -5.693 -5.729 -5.792 -5.798 

Severe illness 3 -4.802 -4.863 -4.817 -4.790 -4.774 

Severe illness 4 -4.155 -4.159 -4.030 -3.889 -3.848 

Severe illness 5 -3.519 -3.451 -3.251 -3.011 -2.952 

Severe illness 6 -3.161 -2.997 -2.734 -2.401 -2.328 

Severe illness. 7 -2.535 -2.249 -1.923 -1.504 -1.419 

Severe illness 8 -2.261 -1.896 -1.537 -1.036 -0.942 

Severe illness. 9 -0.347 0.162 0.579 1.162 1.267 

Severe illness, 10 or more payment 6.494 7.367 7.904 8.706 8.837 

HCCs 

Transplant severe illness, 4 payment 3.479 3.363 3.296 3.168 3.138 

HCCs 

Transplant severe illness, 5 payment 6.565 6.435 6.380 6.259 6.233 

HCCs 

Transplant severe illness, 6 payment 10.720 10.578 10.529 10.408 10.380 

HCCs 

Transplant severe illness, 7 payment 14.798 14.641 14.590 14.473 14.448 

HCCs 

Transplant severe illness, 8 or more 30.301 30.241 30.218 30.135 30.110 

HCCs 

ntHCC 

Enrolled for 2 months, at least one 5.271 4.545 4.055 3.588 3.505 

mentHCC 

led for 3 months, at least one 3.355 2.883 2.542 2.223 2.168 

entHCC 

Enrolled for 4 months, at least one 2.108 1.785 1.538 1.312 1.272 

vmentHCC 

led for 5 months, at least one 1.583 1.343 1.152 0.975 0.942 

entHCC 

ed for 6 months, at least one 1.014 0.837 0.689 0.548 0.521 

Anti-Hepatitis C (HCV) Agents, Direct 

Actin A ents 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82337 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.031</GPH>

HCC or Factor Catastro)lhic 

RXC No. 

RXC03b Antiarrhythmics 

----

0.070 0.063 0.056 0.046 0.046 

RXC04 Phosohate Binders 0.920 1.051 0.885 1.053 1.217 

RXC05 Inflammatory Bowel Disease Agents 1.213 1.149 1.062 0.957 0.932 

RXC06 Insulin 1.345 1.183 1.021 0.860 0.827 

RXC07 Anti-Diabetic Agents, Except Insulin 0.862 0.761 0.637 0.457 0.417 

and Metfonnin Only 

RXC08 Multiole Sclerosis Agents 14.243 13.511 13.322 12.953 12.903 

RXC09 InnnW1e Suppressants and 11.920 11.394 11.363 11.214 11.227 

InnnW1omodulators 

RXClO CYstic Fibrosis Agents 20.797 20.324 20.299 20.170 20.180 

RXC0lx Additional effect for emollees with 2.337 2.374 2.650 2.960 3.040 

HCC00l RXC 01 and HCC 001 

RXC02x Additional effect for emollees with -0.540 -0.480 -0.432 -0.378 --0.371 

HCC037_1, RXC 02 and (HCC 037_1 or036 or 

036, 035_2, 035_2 or035_1 or034) 

035 l 034 

RXC03 x Additional effect for emollees with 0.000 0.000 0.000 0.000 0.000 

HCC142 RXC 03 and HCC 142 

RXC04x Additional effect for enrollees with 0.000 0.000 0.000 0.000 0.000 

HCC184, RXC 04 and (HCC 184 or 183 or 187 

183, 187, or 188) 

188 

RXC05x Additional effect for enrollees with -0.868 -0.830 -0.781 -0.706 --0.690 

HCC048, RXC 05 and (HCC 048 or 041) 

041 

RXC06x Additional effect for enrollees with 0.398 0.430 0.501 0.497 0.503 

HCC018, RXC 06 and (HCC 018 or019 or020 

019, 020, or02 I) 

021 

RXC07x Additional effect for emollees with -0.224 -0.181 -0.141 -0.101 -0.093 

HCC018, RXC 07 and (HCC 018 or019 or020 

019, 020, or021) 

021 

RXC08x Additional effect for enrollees with -0.686 -0.368 -0.134 0.196 0.274 

HCC118 RXC 08 and HCC 118 

RXC09x Additional effect for enrollees with 0.441 0.500 0.552 0.628 0.644 

HCC056or RXC 09 and (HCC 048 or 041) and 

057 and048 (HCC 056 or 057) 

or041 

RXC09x Additional effect for enrollees with -1.220 -1.126 -1.067 -0.987 --0.974 

HCC056 RXC 09 and HCC 056 

RXC09x Additional effect for enrollees with -0.361 -0.295 -0.220 -0.124 --0.104 

HCC057 RXC 09 and HCC 057 

RXC09x Additional effect for enrollees with -0.104 -0.015 0.050 0.151 0.171 

HCC048, RXC 09 and (HCC 048 or 041) 

041 

RXC lOx Additional effect for enrollees with 42.842 42.900 42.986 43.095 43.118 

HCC159, RXC 10 and (HCC 159 or 158) 

158 

a/ HCC numbers that appear with an Wlderscore in this document will appear without the Wlderscore in the DIY 

software. For example, HCC 35_1 in this table will appear as HCC 351 in the DIY software. 

b/ We constrain RXC 03 to be equal to average plan liability for RXC 03 drugs, RXC 04 to be equal to the average 

plan liability forRXC 04 drugs, and we constrainRXC 03 x HCC142 andRXC 04 xHCCl84, 183, 187, 188 to be 

equal to 0. See .March 2016 Risk Adjustment Methodology Discussion Paper (March 24, 2016), available at 

https://www .cms.gov/cciio/resources/fonns-reports-and-other-resources/downloads/ra-march-31-white-paper03 2416. pdf (where we previously discussed the use of constraints in the HHS risk adjustment models). 
82338 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.032</GPH>

TABLE 5: Proposed Child HHS Risk Adjustment Model Factors for the 2026 Benefit Year 

A e2-4, Male 

A e 5-9, Male 

A e10-14,Male 

A e 15-20 Male 

A e 2-4, Female 

A e 5-9, Female 

A e 10-14, Female 

A e 15-20, Female 

HIV/AIDS 4.432 4.020 3.933 3.744 3.737 

Septicemia, Sepsis, Systemic Inflammatory 15.159 14.969 14.894 14.777 14.766 

Res onse S ndrome/Shock 

Central Nervous System Infections, Except 14.258 14.125 14.065 13.983 13.972 

Viral Menin itis 

Viral or Uns ecified Menin itis 13.861 13.735 13.667 13.575 13.559 

19.550 19,503 19.430 19.350 19.333 

Metastatic Cancer 31.112 30.879 30.817 30.711 30.704 

Lung, Bn:tin, and Other Severe Cancers, 9.342 9.119 9.022 8.874 8.855 

Including Pediatric Acute Lymphoid 

Leukemia 

Non-Hodgkin Lymphomas and Other Cancers 8.439 8.247 8.142 7.988 7.963 

and Tumors 

Colorectal, Breast (Age< 50), Kidney, and 4.086 3.946 3.864 3.740 3.716 

Other Cancers 

Breast (Age 50+) and Prostate Cancer, 4.086 3.946 3.864 3.740 3.716 

Benign/Uncertain Brain Tumors, and Other 

Cancers and Tumors 

Thyroid Cancer, Melanoma, 1.309 1.199 1.105 0.987 0.963 

Neurofibromatosis, and Other Cancers and 

Tumors 

Pancreas Trans lant Status 12.114 12.103 12.087 12.074 12.069 

Diabetes with Acute Com lications 2.221 1.995 1.784 1.480 1.431 

Diabetes with Chronic Com lications 2.221 1.995 1.784 1.480 1.431 

Diabetes without Com lication 2.221 1.995 1.784 1.480 1.431 

Protein-Calorie Malnutrition 19.116 19.000 18.960 18.905 18.898 

Muco ol saccharidosis 30.871 30.641 30.596 30.496 30.493 

Li idoses and Gl co enosis 30.871 30.641 30.596 30.496 30.493 

Congenital Metabolic Disorders, Not 4.743 4.634 4.577 4.500 4.489 

Elsewhere Classified 

Amyloidosis, Porphyria, and Other Metabolic 4.743 4.634 4.577 4.500 4.489 

Disorders 

Adrenal, Pituitary, and Other Significant 5.040 4.820 4.751 4.645 4.637 

Endocrine Disorders 

Liver Trans lant Status/Com lications 12.114 12.103 12.087 12.074 12.069 

Acute Liver Failure/Disease, Including 9.374 9.241 9.203 9.132 9.121 

Neonatal He atitis 

Chronic Liver Failure/End-Stage Liver 7.833 7.686 7.638 7.549 7.536 

Disorders 

Cirrhosis of Liver 3.898 3.779 3.716 3.629 3.614 

Chronic Viral He atitis C 1.186 1.081 1.008 0.923 0.907 

Chronic Hepatitis, Except Chronic Viral 0.473 0.401 0.326 0.239 0.218 

He atitis C 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82339 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.033</GPH>

Factor 

Intestine Transplant Status/Complications 14.935 14.859 14.793 14.709 14.693 

Peritonitis/Gastrointestinal 18.316 18.056 18.004 17.906 17.903 

Perforation/Necrotizing Enterocolitis 

Intestinal Obstruction 4.523 4.352 4.262 4.128 4.109 

Chronic Pancreatitis 8.313 8.165 8.114 8.016 8.002 

Acute Pancrcatitis 6.026 5.805 5.717 5.565 5.546 

Inflammatory Bowel Disease 10.352 9.970 9.879 9.690 9.676 

Necrotizing Fasciitis 4.288 4.095 4.002 3.869 3.852 

Bone/Joint/Muscle Infections/Necrosis 4.288 4.095 4.002 3.869 3.852 

Rheumatoid Arthritis and Specified 4.773 4.527 4.447 4.318 4.307 

Autoimmune Disorders 

Systemic Lupus Erythematosus and Other 0.975 0.876 0.784 0.672 0.650 

Autoimmune Disorders 

Osteogenesis lmperfecta and Other 1.213 1.112 1.041 0.953 0.939 

Osteodystroohies 

Congenital/Developmental Skeletal and 1.213 1.112 1.041 0.953 0.939 

Connective Tissue Disorders 

Cleft Lip/Cleft Palate 0.884 0.761 0.665 0.541 0.519 

Hemophilia 62.038 61.611 61.536 61.361 61.352 

Myelodysplastic Syndromes and 12.776 12.620 12.565 12.477 12.468 

Mve lofibrosis 

Aplastic Anemia 12.776 12.620 12.565 12.477 12.468 

Acquired Hemolytic Anemia, Including 12.776 12.620 12.565 12.477 12.468 

Hemolytic Disease ofNewborn 

Sickle Cell Anemia (Hb-SS) and Thalassemia 3.334 3.185 3.102 2.992 2.974 

Beta Zero• 

Sickle-Cell Disorders, Except Sickle-Cell 3.334 3.185 3.102 2.992 2.974 

Anemia (Hb-SS) and Thalassemia Beta Zero; 

Beta Thalassemia Maior 

Combined and Other Severe 5.418 5.282 5.226 5.136 5.125 

Immunodeficiencies 

Disorders of the Immune Mechanism 5.418 5.282 5.226 5.136 5.125 

Coagulation Defects and Other Specified 3.928 3.824 3.756 3.667 3.652 

Hematological Disorders 

Drug Use with Psvchotic Complications 2.337 2.195 2.104 1.972 1.949 

Drug Use Disorder, Moderate/Severe, or Drug 2.337 2.195 2.104 1.972 1.949 

Use with Non-Psychotic Complications 

Alcohol Use with Psychotic Comolications 0.778 0.650 0.545 0.397 0.373 

Alcohol Use Disorder, Moderate/Severe, or 0.778 0.650 0.545 0.397 0.373 

Alcohol Use with Specified Non-Psychotic 

Complications 

Schizophrenia 3.540 3.296 3.177 2.995 2.970 

Delusional and Other Specified Psychotic 3.132 2.909 2.778 2.582 2.553 

Disorders, Unspecified Psychosis 

Major Depressive Disorder, Severe, and 2.588 2.398 2.271 2.101 2.073 

Bipolar Disorders 

Personality Disorders 11.458 11.375 11.273 0.158 11.133 

Anorexia/Bulimia N ervosa 2.173 2.039 1.948 1.821 1.798 

Prader-Willi, Patau, Edwards, and Autosomal 12.591 12.534 12.493 12.442 12.431 

Deletion Syndromes 

Down Syndrome, Fragile X, Other 0.870 0.763 11.692 0.590 0.572 

Chromosomal Anomalies, and Congenital 

Malformation Svndromes 

Autistic Disorder 2.588 2.398 2.271 2.101 2.1173 

Pervasive Developmental Disorders, Except 0.484 0.414 11.333 0.251 0.234 

Autistic Disorder 

Traumatic Complete Lesion Cervical Spinal 10.809 10.632 10.574 10.475 10.467 

Cord 

Quadriplegia 10.809 10.632 10.574 10.475 10.467 
82340 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.034</GPH>

F'a(·tor 

Traumatic Complete Lesion Dorsal Spinal 

Cord 

S inal Cord Disorders/In'uries 

Amyotrophic Lateral Sclerosis and Other 

Anterior I lorn Cell Disease 

Spina Bifida and Other Brain/Spinal/Nervous 

S stem Con enital Anomalies 

Myasthenia Gravis/Myoneural Disorders and 

Guillain-Barre Syndrome/Inflammatory and 

Toxic Neuro ath 

Parkinson's, Huntington's, and 

Spinocerebellar Disease, and Other 

Neurode enerative Disorders 

Seizure Disorders and Convulsions 

H droce halus 

N ontramnatic Coma, Except Diabetic, 

Hepatic, or Hypoglycemic; Nontraumatic 

Brain Com ression/ Anoxic Dama e 

Status 

Cardio-Respiratory Failure and Shock, 

Includin Res irato Distress S ndromes 

Heart Assistive Device/ Artificial Heart 

Heart Trans lant Status/Com lications 

Heart Failure 

Acute M ocardial Infarction 

Unstable Angina and Other Acute lschemic 

Heart Disease 

Heart Infection/Inflammation, Except 

Rheumatic 

Hypoplastic Left Heart Syndrome and Other 

Severe Con enital Heart Disorders 

Ma'or Con enital Heart/Circulato Disorders 

Atrial and Ventricular Septa! Defects, Patent 

Ductus Arteriosus, and Other Congenital 

Heart/Circulato Disorders 

Cerebral Aneu1ysm and Arteriovenous 

Malformation 

Atherosclerosis of the Extremities with 

Ulceration or Gano-rene 

Vascular Disease with Com lications 

Pulmonary Embolism and Deep Vein 

Thrombosis 

Chronic Obstructive Pulmonary Disease, 

Includin Bronchiectasis 

Hl#Wiiiiil 

9.868 9.650 

9.868 9.650 

4.587 4.409 

45.490 45.226 

0.831 0.651 

0.381 0.266 

1.523 1.414 

10.844 10.706 

5.690 5.547 

7.657 7.323 

5.690 5.547 

1.475 1.352 

12.442 12.383 

11.881 11.883 

4.158 4.015 

25.819 25.590 

15.588 15.336 

15.588 15.336 

14.935 14.859 

14.935 14.859 

3.788 3.690 

1.293 1.229 

1.293 1.229 

15.964 15.860 

3.733 3.594 

0.957 0.868 

0.487 0.406 

3.007 2.866 

12.917 12.857 

1.196 1.087 

0.788 0.690 

5.113 4.995 

2.053 1.940 

10.494 10.279 

10.563 10.421 

20.314 20.192 

14.935 14.859 

51.368 50.854 

1.574 1.429 

Fiiiiiiiii 

9.591 9.476 9.466 

9.591 9.476 9.466 

4.306 4.146 4.118 

45.175 45.069 45.058 

0.579 0.461 0.449 

0.204 0.124 0.109 

1.350 1.252 1.237 

10.684 10.631 10.630 

5.476 5.366 5.349 

7.253 7.109 7.103 

5.476 5.366 5.349 

1.242 1.102 1.074 

12.338 12.292 12.280 

11.873 11.873 11.870 

3.919 3.783 3.752 

25.527 25.420 25.412 

15.257 15.114 15.103 

15.257 15.114 15.103 

14.793 14.709 14.693 

14.793 14.709 14.693 

3.638 3.557 3.542 

1.179 1.104 1.091 

1.179 1.104 1.091 

15.788 15.694 15.675 

3.485 3.351 3.326 

0.769 0.670 0.651 

0.327 0.251 0.238 

2.784 2.671 2.654 

12.829 12.790 12.784 

1.028 0.938 0.926 

0.638 0.553 0.537 

4.936 4.846 4.836 

1.874 1.773 1.757 

10.205 10.071 10.061 

10.369 10.279 10.271 

20.129 20.039 20.025 

14.793 14.709 14.693 

50.808 50.658 50.665 

1.324 1.188 1.165 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82341 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.035</GPH>

Factor 

Severe Asthma 1.300 1.150 1.025 0.871 0.843 

Asthma, Except Severe 0.315 0.248 0.171 0.105 0.091 

Fibrosis of Lung and Other Lung Disorders 1.467 1.341 1.229 1.097 1.072 

Aspiration and Specified Bacterial 11.748 11.771 11.801 11.852 11.859 

Pneumonias and Other Severe Lung Infections 

Kidney Transplant Status/Complications 12.114 12.103 12.087 12.074 12.069 

End Stage Renal Disease 25.623 25.420 25.403 25.337 25.332 

Chronic Kidney Disease, Stage 5 0.853 0.779 0.729 0.672 0.665 

Chronic Kidney Disease, Severe (Stage 4) 0.853 0.779 0.729 0.672 0.665 

Ectopic and Molar Pre1mancy 0.755 0.625 0.472 0.330 0.308 

Miscarriage with Complications 0.389 0.294 0.158 0.035 0.011 

Miscarriage with No or Minor Complications 0.389 0.294 0.158 0.035 0.011 

Pregnancy with Delivery with Major 3.064 2.797 2.554 2.151 2.065 

Complications 

Pre1mancy with Delivery with Complications 3.064 2.797 2.554 2.151 2.065 

Pregnancy with Delivery with No or Minor 2.183 1.985 1.734 1.324 1.218 

Complications 

(Ongoing) Pregnancy without Delivery with 0.420 0.308 0.145 0.014 0.000 

Major Complications 

(Ongoing) Pregnancy without Delivery with 0.420 0.308 0.145 0.014 0.000 

Complications 

(Ongoing) Pregnancy without Delivery with 0.210 0.128 0.027 0.000 0.000 

No or Minor Complications 

Chronic Ulcer of Skin, Except Pressure 2.287 2.195 2.121 2.041 2.027 

Extensive Third-Degree Bums 22.632 22.402 22.326 22.204 22.186 

Major Skin Bum or Condition 2.587 2.430 2.328 2.189 2.168 

Severe Head Injury 22.632 22.402 22.326 22.204 22.186 

Hip and Pelvic Fractures 4.602 4.393 4.289 4.153 4.136 

Vertebral Fractures without Spinal Cord 4.311 4.117 4.000 3.829 3.802 

Injury 

Traumatic Amputations and Amputation 4.308 4.125 4.026 3.865 3.835 

Complications 

Stem Cell, Including Bone Marrow, 14.935 14.859 14.793 14.709 14.693 

Transplant Status/Complications 

Artificial Openings for Feeding or Elimination 5.156 4.991 4.958 4.879 4.875 

Amputation Status, Upper Limb or Lower 4.308 4.125 4.026 3.865 3.835 

Limb 

- . - . 

Severe illness, 1 payment HCC -11.721 -11.771 -11.801 -11.852 -11.859 

Severe illness, 2 pavment HCCs -11.721 -11.771 -11.801 -11.852 -11.859 

Severe illness, 3 payment HCCs -10.550 -10.621 -10.563 -10.542 -10.525 

Severe illness, 4 payment HCCs -9.240 -9.248 -9.085 -8.937 -8.892 

Severe illness, 5 payment HCCs -8.082 -8.043 -7.823 -7.606 -7.548 

Severe illness, 6 or 7 payment HCCs -3.581 -3.360 -3.017 -2.629 -2.542 

Severe illness, 8 or more payment HCCs 16.144 16.838 17.409 18.129 18.259 

Transplant severe illness, 4 or more payment 13.212 13.245 13.253 13.269 13.271 

HCCs 
82342 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.036</GPH>

TABLE 6: Proposed HCCs Selected for the HCC Interacted Counts Variables for the HHS 

Risk Adjustment Adult and Child Models for the 2026 Benefit Year 

Pa~mcnt HCC Severity Illness Transplant Indicator 

Indicator 

HCC 2 Septicemia, Sepsis, Systemic Inflammatory X Response Syndrome/Shock 

HCC 3 Central Nervous System Infections, Except Viral X 

Meningitis 

HCC 4 Viral or Unspecified Meningitis X 

HCC 6 Opportunistic Infections X 

HCC 23 Protein-Calorie Malnutrition X 

HCC 34 Liver Transplant Status/Complications X X 

HCC 41 Intestine Transplant Status/Complications X X 

HCC 42 Peritonitis/Gastrointestinal Perforation/Necrotizing X Enteroco I itis 

HCC 96 Prader-Willi, Patau, Edwards, and Autosomal X 

Deletion Syndromes 

HCC 121 Hvdroceohalus X 

HCC 122 Nontraumatic Coma, Except Diabetic, Hepatic, or 

Hypoglycemic; Nontraumatic Brain Compression/Anoxic X 

Damage 

HCC 125 Respirator Dependence/Tracheostomv Status X 

HCC 135 Heart Infection/Inflammation, Except Rheumatic X 

HCC 145 Intracranial Hemorrhage X 

HCC 156 Pulmonary Embolism and Deep Vein Thrombosis X 

HCC 158 Lung Transplant Status/Complications X X 

HCC 163 Aspiration and Specified Bacterial Pneumonias X 

and Other Severe Lung Infections 

HCC 218 Extensive Third-Degree Bums X 

HCC 223 Severe Head Iniurv X 

HCC 251 Stem Cell, Including Bone Marrow, Transplant X X Status/Complications 

G 13 (Includes HCC 126 Respiratory Arrest and HCC 127 

Cardio-Respiratory Failure and Shock, Including Respiratory X 

Distress Syndromes) 

G 14 (Includes HCC 128 Heart Assistive Device/ Artificial X X Heart and HCC 129 Heart Transplant Status/Complications) 

G24 (Includes HCC 18 Pancreas Transplant Status and HCC X X 183 Kidney Transplant Status/Complications) 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82343 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.037</GPH> EP10OC24.038</GPH>

TABLE 7: Proposed Infant HHS Risk Adjustment Model Factors for the 2026 Benefit 

Year 

i 

Immature * Severi Level 4 135.710 134.101 133.672 132.966 132.922 

Immature * Severi Leve13 31.009 29.686 29.283 28.690 28.647 

Extreme] Immature * Severi Leve12 31.009 29.686 29.283 28.690 28.647 

Extremely Immature * Severity Level 1 31.009 29.686 29.283 28.690 28.647 

Lowest 

Immature * Severi 129.458 128.096 127.837 127.350 127.343 

Immature * Severi 68.163 66.651 66.320 65.727 65.699 

Immature * Severi 31.009 29.686 29.283 28.690 28.647 

Immature * Severi 26.411 25.209 24.810 24.230 24.181 

Immature * Severi Lowest 23.143 21.917 21.486 20.866 20.806 

Premature/Multiples * Severity Level 5 110.758 109.418 109.135 108.626 108.606 

Hi hest 

Level 4 28.791 27.494 27.114 26.514 26.473 

Level 3 12.969 12.062 11.572 10.902 10.797 

Premature/Mu Level 2 7.878 7.175 6.664 5.992 5.863 

Premature/Multiples * Severity Level 1 5.519 4.934 4.429 3.846 3.726 

Lowest 

Term * Severi 81.499 80.353 80.008 79.461 79.415 

Term * Severi 16.505 15.543 15.080 14.433 14.351 

Term * Severi 5.467 4.914 4.413 3.825 3.702 

Term * Severi 3.655 3.183 2.680 2.112 1.991 

Term * Severi 1.955 1.593 1.156 0.813 0.752 

A el * Severi 67.661 66.998 66.818 66.533 66.516 

A el* Severi 12.321 11.828 11.591 11.279 11.240 

A el* Severi 2.767 2.515 2.325 2.133 2.100 

A el* Severi 1.792 1.572 1.374 1.176 1.136 

A el* Severi owest 0.576 0.485 0.431 0.396 0.389 

A e0Male 0.606 0.569 0.541 0.484 0.471 

A e 1 Male 0.074 0.060 0.044 0.025 0.021 

TABLES: Proposed HHS HCCs Included in HHS Risk Adjustment Infant Model 

Maturity Categories for 2026 Benefit Year 

Maturit~ Categor~ I HCC/Description 

Extremely Immature Extremely Immature Newborns, Birth weight < 500 Grams 

Extremely Immature Extremely Immature Newborns, Including Birth weight 500-749 Grams 

Extremely Immature Extremely Immature Newborns, Including Birth weight 750-999 Grams 

Immature Premature Newborns, Including Birth weight 1000-1499 Grams 

Immature Premature Newborns, Including Birth weight 1500-1999 Grams 

Premature/Multio Jes Premature Newborns, Including Birth weight 2000-2499 Grams 

Premature/Multip Jes Other Premature, Low Birth weight, Malnourished, or Multiple Birth Newborns 

Term Term or Post-Term Singleton Newborn, Normal or High Birth weight 

Age 1 All age 1 infants 
82344 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.039</GPH>

TABLE 9: Proposed HHS HCCs Included in HHS Risk Adjustment Infant Model Severity 

Categories for 2026 Benefit Year 

Severity Level 4 

Level 4 

Level 4 

Level 4 

Level 4 

Level 4 

Metastatic Cancer 

Peritonitis/Gastrointestinal Perforation/Necrotizin Enterocolitis 

Heart Assistive Device/Artificial Heart 

Heart Trans ]ant Status/Com lications 

Heart Failure 

hoid Leukemia 

Combined and Other Severe Immunodeficiencies 

Lateral Sclerosis and Other Anterior Hom Cell Disease 

Cerebral Pals 

Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory 

and Toxic Neuro ath 

Nontraumatic Coma, Except Diabetic, Hepatic, or Hypoglycemic; Nontraumatic Brain 

Com ression/ Anoxic Dama e 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82345 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.040</GPH>

Se\ei-ily Caleg,oi-y I HCC/Desc,-iplion 

Severity Level 4 Intracranial I lemorrhage 

Severity Level 4 lschemic or Unspecified Stroke 

Severity Level 4 Vascular Disease with Complications 

Severity Level 4 Pulmona.-v Embolism and Deep Vein Thrombosis 

Severity Level 4 Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections 

Severity Level 4 Chronic Kidney Disease, Stage 5 

Severity Level 4 Artificial Openings for Feeding or Elimination 

Severity Level 3 HIV/AIDS 

Severity Level 3 Central Nervous Svstem Infections, Except Viral Meningitis 

Severity Level 3 Opportunistic Infections 

Severity Level 3 Non-Hodgkin Lvmphomas and Other Cancers and Tumors 

Severity Level 3 Colorectal, Breast (Age < 50), Kidney and Other Cancers 

Severity Level 3 Breast (Age 50+) and Prostate Cancer, Benign/Uncertain Brain Tumors, and Other 

Cancers and Tumors 

Severity Level 3 Lipidoses and Glycogenosis 

Severity Level 3 Intestinal Obstruction 

Severity Level 3 Necrotizing Fasciitis 

Severity Level 3 Bone/Joint/Muscle Infections/Necrosis 

Severity Level 3 Osteogenesis Jmperfecta and Other Osteodystrophies 

Severity Level 3 Cleft Lip/Cleft Palate 

Severity Level 3 Hemophilia 

Severity Level 3 Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero 

Severity Level 3 Disorders of the Immune Mechanism 

Severity Level 3 Coagulation Defects and Other Specified Hematological Disorders 

Severity Level 3 Drug Use with Psychotic Complications 

Severity Level 3 Drug Use Disorder Moderate/Severe or Drug Use with Non-Psychotic Complications 

Severity Level 3 Alcohol Use with Psychotic Complications 

Severity Level 3 A !coho I Use Disorder, Moderate/Severe, or Alcohol Use with Specified Non-Psychotic 

Complications 

Severity Level 3 Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes 

Severity Level 3 Traumatic Complete Lesion Dorsal Spinal Cord 

Severity Level 3 Paraplegia 

Severity Level 3 Spinal Cord Disorders/Iniuries 

Severity Level 3 Cerebral Palsy, Except Quadriplegic 

Severity Level 3 Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies 

Severity Level 3 Muscular Dystrophy 

Severity Level 3 Parkinson's, Huntington's, and Spinocerebellar Disease, and Other Neurodegenerative 

Disorders 

Severity Level 3 Hydrocephalus 

Severity Level 3 Unstable Angina and Other Acute Ischcmic Heart Disease 

Severity Level 3 Atrial and Ventricular Septa) Defects, Patent Ductus Arteriosus, and Other Congenital 

Heart/Circulatory Disorders 

Severity Level 3 Specified Heart Arrhythmias 

Severity Level 3 Cerebral Aneurysm and Arleriovenous Malf'ormalion 

Severity Level 3 Hemiplegia/Hemiparesis 

Severity Level 3 Cvstic Fibrosis 

Severity Level 3 Extensive Third-Degree Bums 

Severity Level 3 Severe Head Injury 

Severity Level 3 I lip and Pelvic Fractures 

Severity Level 3 Vertebral Fractures without Spinal Cord Injury 

Severity Level 2 Viral or Unspecified Meningitis 

Severity Level 2 Thvroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and Tumors 

Severity Level 2 Diabetes with Acute Complications 

Severity Level 2 Diabetes with Chronic Complications 

Severity Level 2 Diabetes without Complication 

Severity Level 2 Protein-Calorie Malnutrition 

Severity Level 2 Congenital Metabolic Disorders, Not Elsewhere Classified 

Severity Level 2 Amyloidosis, Porphyria, and Other Metabolic Disorders 

Severity Level 2 Cirrhosis of Liver 
82346 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

75See 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. 

76See CSR adjustment factors finalized in the 

2025 Payment Notice at 89 FR 26252 through 

26254. 

77Hileman, 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. 

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 noticeand-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. 

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

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. 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.041</GPH>

Se\ erih Cate on HCC/Descri tion 

Severity Level 2 Chronic Pancreatitis 

Severity Level 2 Acute Pancreatitis 

Severity Level 2 Inflammatory Bowel Disease 

Severity Level 2 Rheumatoid Arthritis and Specified Autoimmune Disorders 

Severity Level 2 Systemic Lupus Ervthematosus and Other Autoimmune Disorders 

Severity Level 2 Congenital/Developmental Skeletal and Connective Tissue Disorders 

Severity Level 2 Acouired Hemolytic Anemia, Including Hemolytic Disease ofNewbom 

Severity Level 2 Sickle-Cell Disorders, Except Sickle-Cell Anemia (Hb-SS) and Thalassemia Beta Zero; 

Beta Thalassemia Major 

Severity Level 2 Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital 

Malformation Syndromes 

Severity Level 2 Seizure Disorders and Convulsions 

Severity Level 2 Monoplegia, Other Paralytic Syndromes 

Severity Level 2 Atherosclerosis of the Extremities with Ulceration or Gangrene 

Severity Level 2 Chronic Obstructive Pulmonarv Disease Including Bronchiectasis 

Severity Level 2 Severe Asthma 

Severity Level 2 Fibrosis of Lung and Other Lung Disorders 

Severity Level 2 Chronic Kidney Disease Severe (Stage 4) 

Severity Level 2 Chronic Ulcer of Skin, Except Pressure 

Severity Level 2 Major Skin Burn or Condition 

Severity Level 1 (Lowest) Chronic Viral Hepatitis C 

Severity Level 1 Chronic Hepatitis Except Chronic Viral Hepatitis C 

Severity Level 1 Autistic Disorder 

Severity Level 1 Pervasive Developmental Disorders Except Autistic Disorder 

Severity Level 1 Multiple Sclerosis 

Severity Level 1 Asthma, Except Severe 

Severity Level 1 Traumatic Amputations and Amputation Complications 

Severity Level 1 Amputation Status, Upper Limb or Lower Limb 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82347 

78See 81 FR 94081. See also 84 FR 17467. 

79Charges 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. 

80The 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. 

81Risk 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. 

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-andcomment 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

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. 

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 HHSoperated 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 lowerthan-average actuarial risk are able to 

benefit from the availability of capital 

from the collection of premiums for 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.042</GPH>

TABLE 10: R-Squared Statistic for the Proposed 2026 HHS Risk Adjustment Models 

Models 2020 Enrollee- 2021 Enrollee- 2022 EnrolleeLevel EDGE Data Level EDGE Data Level EDGE Data 

Platinum Adult 0.4377 0.4187 0.4067 

Gold Adult 0.4317 0.4129 0.4007 

Silver Adult 0.4293 0.4105 0.3980 

Bronze Adult 0.4252 0.4063 0.3936 

Catastrophic Adult 0.4246 0.4057 0.3928 

Platinum Child 0.3453 0.3554 0.3620 

Gold Child 0.3421 0.3526 0.3594 

Silver Child 0.3401 0.3506 0.3574 

Bronze Child 0.3371 0.3476 0.3544 

Catastrophic Child 0.3365 0.3470 0.3537 

Platinum Infant 0.2928 0.3072 0.2862 

Gold Infant 0.2892 0.3037 0.2827 

Silver Infant 0.2878 0.3023 0.2813 

Bronze Infant 0.2856 0.3000 0.2790 

Catastrophic Infant 0.2853 0.2997 0.2787 
82348 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

82Section 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. 

83The IRS publishes all annual short-term AFRs 

at: https://www.irs.gov/applicable-federal-rates. 

January 2016 AFR: https://www.irs.gov/pub/irsdrop/rr-16-01.pdf; January 2023 AFR: https://

www.irs.gov/pub/irs-drop/rr-23-01.pdf. 

84See Circular No. A–25 Revised. https://

www.whitehouse.gov/wp-content/uploads/2017/11/ 

Circular-025.pdf. 

85 Ibid. 

86HHS 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. 

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.’’ 

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 higherthan-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. 

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-thanaverage 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. 

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 (§ 153.610(f)) 

We propose an HHS risk adjustment 

user fee for the 2026 benefit year of 

$0.18 PMPM. Under § 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. 

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 HHSoperated 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

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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82349 

87ARP. Public Law 117–2 (2021). 88CMS. (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-adjustmenttransfers-2022-benefit-year.pdf. 89 Inflation Reduction Act. Public Law 1217–169 

(2022). 90Since the 2017 benefit year, HHS has operated 

the risk adjustment program in all 50 States and the 

District of Columbia. 

91Adult 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. 

92Neyman 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-ofsurvey-research-methods/n324.xml. 

93Activities 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. 

94See 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-guidancedocuments/ACA_HHS_OperatedRADVWhitePaper_

062213_5CR_050718.pdf. 

95We 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. 

96An FPC is traditionally used when sampling 

without replacement from a finite population and 

the sample size, n, is significant in comparison with 

Continued 

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) 87 88 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. 

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) (§§ 153.350 

and 153.630) 

HHS conducts risk adjustment data 

validation under §§ 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 highquality 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-thanaverage 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 § 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. 

a. Initial Validation Audit (IVA) 

Sampling Methodology—Enrollees 

Without HCCs, Finite Population 

Correction, and Neyman Allocation 

(§ 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

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.94 95 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82350 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

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. 97See 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. 98See 79 FR 13756 through 13758. 99See 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. 

101See 78 FR 72332. 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. 

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. 

104See 79 FR 13757. 

105Failure 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. 

106See 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/reissuing2018-hhs-radv-results.pdf. 

107See 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-riskadjustment-transfers-2022-benefit-year.pdf. 

108As 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. 

109Only 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 

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.98 99 100

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

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: 

• Strata 1–3 includes low, medium, 

and high risk adults with the presence 

of at least one HCC or RXC. 

• Strata 4–6 includes low, medium, 

and high risk children with the presence 

of at least one HCC. 

• Strata 7–9 includes low, medium, 

and high risk infants with the presence 

of at least one HCC. 

• 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: 

Where: 

• Ni,h is the population size of the hth stratum 

of issuer i. 

• ni is the IVA sample size of issuer i. 

• H is the total number of strata. 

• Si,h represents the standard deviation of 

risk score error amount for the hth

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

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 HCCfailure 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.107 108 109 In 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.043</GPH>
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82351 

in HHS–RADVs. See Section 7.2.1.9 RXC Sample 

Size of the 2023 Benefit Year PPACA HHS–RADV 

Protocols. 

110See 88 FR 25790 through 25796. 

111See 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. 

112For more detail on the 2024 Payment Notice 

policies regarding the LLPC list and non-EDGE 

claims, see 88 FR 25790 through 25796. 

113As 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. 

114As 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. 

116Under 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 deduplicated 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 deduplicated EDGE Super HCCs. See 87 FR 27254. 

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

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 HCCassociated 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. 

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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
82352 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

117An 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. 

118An issuer’s EDGE population only consists of 

enrollees in their risk adjustment covered plans. 

See §§ 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. 

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. 

121As 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. 

123As noted later in this preamble, this estimate 

reflects the combined impact of all proposed 

changes to the IVA sampling methodology. 

124A 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 

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. 

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

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 riskbased triggers that would warrant more 

frequent audits) under the materiality 

threshold exemption at 

§ 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. 

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

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).124 125 We considered 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82353 

structure of the HHS–RADV timeline. https://

regtap.cms.gov/uploads/library/2023_RADV_

Timeline_5CR_072424.pdf. 

125As 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. 

126The 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. 

127See Section 2.3.6 Precision of Current Sample 

Sizes of the 2019 HHS–RADV White Paper. 

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 

§ 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® 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. 

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 highrisk 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. 

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. 

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, 


lotter on DSK11XQN23PROD with PROPOSALS2
82354 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

128Activities 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. 

129A 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. 131See 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. 

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 (§ 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

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 

§ 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

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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82355 

132These 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. 

133The 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. 

134We 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/HHSRADV_2023_Benefit_Year_Protocols_v1_5CR_

060424.pdf. 

135See 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. 

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 ttest 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.132 133

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. 

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

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 


lotter on DSK11XQN23PROD with PROPOSALS2
82356 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

136For 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. 

137Navigators 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 § 92.201: 

https://www.ecfr.gov/current/title-45/subtitle-A/ 

subchapter-A/part-92. 

138Consumer Financial Protection Bureau. (n.d.) 

Medical Debt. https://www.consumerfinance.gov/ 

rules-policy/medical-debt/. 

139See 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-americanshidden-medical-debt/. 

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 

(§ 156.1220(a)(2)) 

We propose to amend § 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 

§ 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 (§ 156.1220) 

below. 

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 (§§ 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 § 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 § 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 (§ 155.210(e)), non-Navigator 

assistance personnel (§ 155.215, through 

the cross-reference to § 155.210(e)), and 

CACs (§ 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 postenrollment 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. NonNavigator 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. 

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. 

We are interested in receiving 

comments about what we may do 

within the scope of our authority as it 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82357 

140For purposes of this proposal, ‘‘agency-level’’ 

misconduct or noncompliance refers to misconduct 

or noncompliance with HHS Exchange standards 

and requirements under § 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 § 155.220 that 

involves the agency’s lead agent(s) or that the 

agency endorsed or is otherwise involved in. 

141The 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. 

142The term also includes an agent or broker 

direct enrollment technology provider. See 

§ 155.20. 

143There 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 Webbroker 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. 145See supra note 138. 

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 (§ 155.220) 

a. Engaging in Compliance Reviews and 

Taking Enforcement Actions Against 

Lead Agents for Insurance Agencies 

We address our authority under 

§ 155.220 to reach misconduct or 

noncompliance occurring at an agencylevel,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 § 155.220. 

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 § 155.20 as an individual agent or 

broker, group of agents or brokers, or 

business entity registered with an 

Exchange under § 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 

§ 155.220(c)(3) or § 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. 

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 § 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 § 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. 

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 webbrokers. 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 § 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 webbrokers. This includes the agent, broker, 

and web-broker compliance reviews and 

enforcement actions under § 155.220, 

which allow HHS to periodically 

monitor and audit an agent, broker, or 


lotter on DSK11XQN23PROD with PROPOSALS2
82358 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

146 45 CFR 155.220(c)(5). 

147We notify State Departments of Insurance 

when we suspend or terminate the Exchange 

Agreement(s) of an agent, broker, or web-broker 

under § 155.220(g), per § 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-andtermination-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). 

154This includes the extension of the HHS 

authorities under § 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. 

155Open Enrollment Survey, conducted between 

January 29, 2024, and February 14, 2024. 

156Based on the PY 2024 enrollment total of 16 

million consumers. 

157Examples, 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. 

web-broker to assess their compliance 

with the applicable requirements of 

§ 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 webbroker fails to comply with the 

requirements of § 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 

§ 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. 

Consistent with § 155.220(l), the FFE 

standards and requirements in § 155.220 

also apply to agents, brokers, and webbrokers 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 § 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 § 155.220. We 

believe this would better align our 

oversight and enforcement approach 

with how States regulate agencies. 

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 webbrokers 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 § 155.220(c)(5) or 

enforcement action by HHS under 

§ 155.220(c)(4)(ii), (g)(1), (g)(3)(ii), (g)(5), 

(k)(1)(i), (k)(1)(ii), and (k)(3). 

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 agencylevel 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 § 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 § 155.200(j)(2)(iii). 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82359 

158We would look at agent, broker, and webbroker 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 webbroker and an agency. 

159Fabricating an individual’s income violates 

§§ 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). 

160Appleby, 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-brokersobamacare-stop-fraud. 

161Consumers 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/. 162Failing to speak with the enrollee or applicant 

prior to enrolling them in a QHP offered on the 

Exchange violates § 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 § 155.220(j)(2)(iii) 

to obtain and document the consumer’s consent 

prior to assisting the consumer with the Exchange 

application and enrollment. 

163For information on how to address any tax 

implications of APTC, consumers should refer to 

resources available at: https://www.healthcare.gov/ 

taxes/. 

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. 

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 webbrokers 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.160 161

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 nonexhaustive 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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
82360 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

164Section 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 § 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. 

165This includes the extension of the system 

suspension authority under § 155.220(k)(3). 

166 84 FR 17517. Also see the 2020 Payment 

Notice proposed rule, 84 FR 272. 

167This is similar to the authority captured at 

§ 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. 

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 webbrokers. 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 § 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 

§ 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 

§ 155.220(j)(2)(i), (ii) or (iii) or the 

privacy and security standards at 

§ 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). 

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 § 155.220, which 

establishes standards and requirements 

applicable to agents, brokers, and webbrokers assisting individuals, 

employers, or employees with 

enrollment in QHPs offered through the 

FFEs, including the system suspension 

authority in § 155.220(k)(3). Consistent 

with § 155.220(l), the FFE standards and 

requirements in § 155.220 also apply to 

agents, brokers and web-brokers that 

assist with or facilitate enrollment in 

States with SBE–FPs.165

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 § 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 § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82361 

169For 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-InsuranceMarketplaces/Downloads/Role-of-ABs-inMarketplace_Nov-2016_Final.pdf. 

170 84 FR 17517. 

171We are not proposing to add a reference to 

web-brokers as part of these amendments to 

§ 155.220(k)(3) because, as DE entities, web-brokers 

are subject to the system suspension authority at 

§ 155.221(e). See § 155.221(a)(2). This is similar to 

the authority captured at § 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. 

172Complaints may be submitted to the 

Marketplace Call Center. See https://www.cms.gov/ 

files/document/agent/broker-help-desks.pdf. 

suspended under this authority, they 

remain registered with the FFEs and are 

authorized to assist FFE and SBE–FP 

consumers using the Exchange (or sideby-side) Pathway 169 and the 

Marketplace Call Center, unless and 

until their Exchange Agreements are 

suspended or terminated under 

§ 155.220(f) or (g).170

We propose to amend § 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 § 155.220(j)(2)(i), (ii) or 

(iii) and the privacy and security 

standards under § 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. 

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 § 155.220(j)(2)(i), (ii) or (iii) 

or the privacy and security standards at 

§ 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 timeframe, 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

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 § 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 

§ 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 

§ 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 

§ 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 

§ 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 § 155.220(j)(2)(ii) and (iii) 

for consumers cited in the suspension 

notice from agents and brokers we 

system suspend under § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82362 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

173CMS. (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-systemchanges-stop-unauthorized-agent-and-brokermarketplace-activity. 

174When 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. 

175A 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 § 155.220(j)(2)(iii). 

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 § 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 

§ 155.220(g). As previously noted, 

agents and brokers whose ability to 

transact information with the Exchange 

is suspended under § 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 

§ 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 

§ 155.220(j)(2)(i), (ii) or (iii) or the 

privacy and security standards at 

§ 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

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 zerodollar 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 § 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 

§ 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 

§ 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 § 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. 

Though we believe our current 

authority in § 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 § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82363 

176Consistent with § 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. 

178See § 155.220(g)(4) and (5)(iii). 

179CMS. (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-modelconsent-form-marketplace-agents-and-brokers.pdf. 

approach to implement system 

suspensions. The proposed amendments 

would also better encapsulate the 

original intent of the § 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 § 155.220(k)(3) could also lead to 

an enforcement action under 

§ 155.220(g). However, there are 

important distinctions between these 

authorities. For example, system 

suspensions under § 155.220(k)(3) allow 

HHS to immediately suspend an agent 

or broker’s system access. These 

suspensions differ from suspensions or 

terminations under § 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 

§ 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 webbrokers, system suspensions under the 

proposed amendments to § 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. 

In contrast, an enforcement action 

under § 155.220(g) to suspend or 

terminate an agent’s, broker’s, or webbroker’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 webbroker’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 webbrokers 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. 

Though we would only initiate 

enforcement action under 

§ 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 § 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 § 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 

§ 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 § 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 

§ 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 

§ 155.220(j)(2)(ii)(A) and (j)(2)(iii)(A)– 

(C) via an audio recording. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
82364 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

180 45 CFR 155.220(j)(2)(iii). 

181See § 155.220(j)(2)(ii). 

182CMS. (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-modelconsent-form-marketplace-agents-and-brokers.pdf. 

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 

§ 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 

§ 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. 

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 § 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 

§ 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. 

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 webbrokers, 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 

§ 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 

§ 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 § 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 

§ 155.220(j)(2)(ii). 

Because the requirements of 

§ 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 

§ 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 § 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 

§ 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 (§ 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 § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82365 

183CMS. (2024, Aug. 14). Reporting and 

Reviewing Data Inaccuracy Reports in State-based 

Exchanges (SBE) Frequently Asked Questions 

(FAQs). https://www.cms.gov/cciio/programs-andinitiatives/health-insurance-marketplaces/ 

downloads/faqs-SBE-reporting-enrollment-datainaccuracies.pdf. 

184OMB Control No: 0938–1312 and 0938–1341. 

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 Recheck 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 § 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 § 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 onetax 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 § 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/inperson-assisters/applications-formsnotices/notices. 

We seek comment on this proposal. 

4. Timeliness Standard for State 

Exchanges To Review and Resolve 

Enrollment Data Inaccuracies 

§ 155.400(d)(1) 

We propose to add § 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 § 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 § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82366 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

185See 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’’). 

186See 45 CFR 156.480 requiring State Exchange 

issues to maintain relevant records for 10 years. 

187CMS. (2024, August 14). Reporting and 

Reviewing Data Inaccuracy Reports in State-based 

Exchanges (SBE) Frequently Asked Questions 

(FAQs). https://www.cms.gov/cciio/programs-andinitiatives/health-insurance-marketplaces/ 

downloads/faqs-SBE-reporting-enrollment-datainaccuracies.pdf. 

188See CMS. (2023). Federally-facilitated 

Exchange (FFE) Enrollment Manual. Section 6.2. 

https://www.cms.gov/files/document/ffeenrollment-manual-2023-5cr-071323.pdf. 

Exchanges to act upon enrollment data 

inaccuracies submitted to the State 

Exchange by a State Exchange issuer 

that meets the requirements at 

§ 156.1210(a)–(c). 

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, 

§ 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 

§ 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 

§ 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

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 § 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 § 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. 

We solicit comments on this proposal. 

5. Establishment of Optional FixedDollar Premium Payment Threshold and 

Total Premium Threshold (§ 155.400(g)) 

We propose to codify a provision 

related to the premium payment 

threshold policies under § 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 

§ 155.400(g) for clarity. 

Currently, issuers have the option 

under § 155.400(g) to adopt a 

percentage-based premium payment 

threshold which allows issuers to 

effectuate coverage in accordance with 

binder payment rules at § 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 § 156.270(d) or a 

grace period under State rules, and may 

avoid terminating enrollment for nonpayment of premiums. Under this 

policy, if the total amount of premium 

owed by an enrollee (including 

aggregate amounts over multiple 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82367 

189 2017 Payment Notice, 81 FR 12203, 12272. 190See CMS. (2023, July 12). 2023 Federallyfacilitated Exchange (FFE) Enrollment Manual. 

(Section 6.2, pp. 89–91). https://www.cms.gov/files/ 

document/ffe-enrollment-manual-2023–5cr071323.pdf. 

191See CMS. (n.d.). National health expenditure 

data—Projected. https://www.cms.gov/dataresearch/statistics-trends-and-reports/nationalhealth-expenditure-data/projected. 

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 § 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 enrolleeresponsible portion of the premium 

would be a reasonable threshold.190

This threshold must be applied 

uniformly to all enrollees. 

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 enrolleeresponsible 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 fixeddollar payment threshold and the 

amount of the threshold. 

We thus propose to modify 

§ 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 fixeddollar premium threshold to $5 or less 

because, unlike the current percentagebased 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 percentagebased threshold. However, we also 

recognize that within a percentagebased 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

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 § 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. 


lotter on DSK11XQN23PROD with PROPOSALS2
82368 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

192See CMS (2024) Effectuated Enrollment: Early 

2024 Snapshot and Full Year 2023 Average. https:// 

www.cms.gov/files/document/early-2024-and-fullyear-2023-effectuated-enrollment-report.pdf. 

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 percentagebased 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 § 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 percentagebased and therefore more similar to the 

premium payment threshold that is 

currently allowed under § 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 enrolleeresponsible 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 nonpayment 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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82369 

193Section 1311(c)(1)(B) of the ACA and 

§ 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 nonexhaustive 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). 

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 (§ 155.505) 

We propose revising § 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 § 155.20 to file 

applications on behalf of an applicant. 

However, the appeals regulation at 

§ 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 § 155.20, does not have 

parallel authority under § 155.505(b) to 

appeal a contested eligibility 

determination on behalf of that 

applicant through the same 

HealthCare.gov account. 

This limitation under § 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 

(§ 155.1000) 

We propose to amend § 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 

§ 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 § 155.1000, 

and under § 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 

§ 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

However, an Exchange’s authority to 

deny certification is not explicitly 

referenced in 45 CFR part 155. Several 

regulations, including §§ 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 

§ 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 § 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 § 155.1000 to formalize 


lotter on DSK11XQN23PROD with PROPOSALS2
82370 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

195Section 1311(c)(1)(B) of the ACA and 

§ 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. 

196See § 155.1000(c)(1): ‘‘The health insurance 

issuer provides evidence during the certification 

process in § 155.1010 that it complies with the 

minimum certification requirements outlined in 

subpart C of part 156, as applicable.’’ 

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 § 155.1000(c). 

Under this proposal, an Exchange may 

deny certification if the issuer does not 

provide evidence during the 

certification process in § 155.1010 that it 

complies with the minimum 

certification requirements (under 

§ 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 § 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 (§ 155.1090) 

We propose to amend § 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 § 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. 

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 § 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 

§ 155.1000(c), and HHS denied 

certification to these plans. Some of 

these issuers submitted reconsideration 

requests to HHS under § 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 

§ 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 

§ 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 

§ 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. 

We also propose to revise 

§ 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 

§ 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 

§ 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82371 

197OMB. 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. 

198OMB control number: 0938–1119. 

199See, for example, CMS. (2024, March 22). 2024 

Marketplace Open Enrollment Period Public Use 

Files. https://www.cms.gov/data-research/statisticstrends-reports/marketplace-products/2024- 

marketplace-open-enrollment-period-public-usefiles. 

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 

§ 155.1000(c)(2)) that would require 

HHS to perform de novo analysis before 

open enrollment. 

Finally, we propose to revise the title 

of § 155.1090 to state, ‘‘Request for the 

reconsideration of a denial of 

certification’’ and the subtitle of 

§ 155.1090(a) to state, ‘‘Request for the 

reconsideration of a denial of 

certification specific to a Federallyfacilitated Exchange.’’ 

We seek comment on this proposal. 

9. General Program Integrity and 

Oversight Requirements (§ 155.1200) 

We currently collect certain 

information and data from State 

Exchanges and SBE–FPs under 

§ 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 § 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. 

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. 

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 

§ 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82372 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

200National Association of Insurance 

Commissioners. (2024, Jan. 1). Risk-Based Capital. 

https://content.naic.org/cipr-topics/risk-basedcapital. 

201Corporate Finance Institute. (n.d.) Quick 

Ratio. https://corporatefinanceinstitute.com/ 

resources/accounting/quick-ratio-definition/. 

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 wellunderstood and industry-standard 

financial measures, such as the riskbased 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 riskbased 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

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 riskbased 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. 

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’ riskbased 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 § 156.815, 

instituting enrollment caps—which 

have been previously operationalized by 

implementing QHP suppressions under 

§ 156.815(b)(5) based on the guaranteed 

availability exceptions at § 147.104(c) 

and (d), denying QHP certification 

applications under § 155.1000(c), or 

decertifying QHPs under § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82373 

202ARP, 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. 203 Ibid. 

204See OMB. (n.d.) Circular No. A–25 Revised. 

https://www.whitehouse.gov/wp-content/uploads/ 

2017/11/Circular-025.pdf. 

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 § 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 (§ 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. 

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. 

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 § 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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
82374 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

205We 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. 

206ARP, Public Law 117–2 (2021). 

207CMS. (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-adjustmenttransfers-2022-benefit-year.pdf. 

208 Inflation Reduction Act, Public Law 1217–169 

(2022). 

209For 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-letter2024-final-july-2024.pdf). 

210CMS. (2021, Sept. 7). American Rescue Plan 

Provides States Additional Funding to Lower Health 

Coverage Costs, Increase Affordability for 

Americans. https://www.cms.gov/newsroom/pressreleases/american-rescue-plan-provides-statesadditional-funding-lower-health-coverage-costsincrease. 

211An 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. 

212Twenty 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-databrief-042024-508-final.pdf. 

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: 

• Provision of consumer assistance 

tools; 

• Consumer outreach and education; 

• Management of a Navigator 

program; 

• Regulation of agents and brokers; 

• Eligibility determinations; 

• Enrollment processes; and 

• 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. 

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 noncatastrophic market risk pool in most 

States, due to the enhanced PTC 

subsidies provided for in the ARP 206 207

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. 

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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82375 

213Overall, 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-databrief-042024-508-final.pdf. 

214Premium 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-evaluationalaska-2021.pdf. 

215See https://www.cms.gov/files/document/ 

early-2024-and-full-year-2023-effectuatedenrollment-report.pdf. 

216From 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/dataresearch/statistics-trends-reports/marketplaceproducts/2022-marketplace-open-enrollmentperiod-public-use-files) and 2024 Marketplace Open 

Enrollment Period Public Use Files (https://

www.cms.gov/data-research/statistics-trendsreports/marketplace-products/2024-marketplaceopen-enrollment-period-public-use-files). 

217According 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. 

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. 

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. 

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. 

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-feeeligible 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 § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82376 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

218Sessions, 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/csrpayment-memo.pdf. 

219CMS. (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/Regulationsand-Guidance/Downloads/Offering-plans-notQHPs-without-CSR-loading.pdf. 

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 (§ 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. 

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 § 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 § 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 

§ 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 § 156.80. 

Since we continue to receive 

questions about permissible actuarial 

loading practices, we affirm that silverloading 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 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 § 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 § 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 

(§ 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 (§ 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 § 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 § 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 nonsubstantive 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82378 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

220 523 F. Supp. 3d 731 (D. Md. 2021). 221See Or. Admin. R. 836–053–0009. 

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 

(§ 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 § 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.’’ 

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. 

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 § 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 

§ 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 enrolleeweighted 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 

§ 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82379 

222See QHP Certification Standardized Plan 

Options FAQs, https://

www.qhpcertification.cms.gov/s/Standardized%20

Plan%20Options%20FAQs. 

SBE–FP—including both the Classic DE 

and EDE Pathways—at 

§§ 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 § 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 § 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 

§ 156.420(b) were not required, to clarify 

that while issuers must, under 

§ 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. 

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 

§ 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 

§ 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 § 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 § 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 § 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 childonly 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82380 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

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 § 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 nonstandardized plan options that issuers 

can offer is limited in accordance with 

§ 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 

§ 156.201 to add paragraph (c). 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82381 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.044</GPH>

TABLE 11: 2026 Proposed Standardized Plan Options Set One (For All FFE and SBE-FP 

Issuers, Excluding Issuers in Delaware, Louisiana, and Oregon) 

Expanded Standard Silver Silver Silver Gold Platinum Bronze Silver 73CSR 87CSR 94CSR 

Actuarial Value 64.42% 70.01% 73.07% 87.04% 94.11% 78.04% 88.03% 

Deductible $7,500 $6,000 $3,000 $700 $0 $2,000 $0 

Annual Limitation on Cost $9,200 $8,900 $7,400 $3,300 $2,200 $8,200 $5,200 

Sharing 

Emergency Room Services 60% 40% 40% 30% 25%* 25% $100* 

Inpatient Hospital Services 60% 40% 40% 30% 25%* 25% $350* 

(Including Mental Health & 

Substance Use Disorder) 

Primarv Care Visit $60* $40* $40* $20* $0* $30* $10* 

Urgent Care $90* $60* $60* $30* $5* $45* $15* 

Specialist Visit $120* $80* $80* $40* $10* $60* $20* 

Mental Health & Substance $60* $40* $40* $20* $0* $30* $10* 

Use Disorder Outpatient 

Office Visit 

Imaging (CT/PET Scans, 60% 40% 40% 30% 25%* 25% $100* 

MRis) 

Speech Therapy $60* $40* $40* $20* $0* $30* $10* 

Occupational, Physical $60* $40* $40* $20* $0* $30* $10* 

Therapy 

Laboratory Services 60% 40% 40% 30% 25%* 25% $30* 

X-ravs/Dia!!Tlostic Imaging 60% 40% 40% 30% 25%* 25% $30* 

Skilled Nursing Facility 60% 40% 40% 30% 25%* 25% $150* 

Outpatient Facility Fee 60% 40% 40% 30% 25%* 25% $150* 

(Ambulatory Surgery 

Center) 

Outpatient Surgery 60% 40% 40% 30% 25%* 25% $150* 

Physician & Services 

Generic Drugs $25* $20* $20* $10* $0* $15* $5* 

Preferred Brand Drugs $50 $40* $40* $20* $15* $30* $10* 

Non-Preferred Brand Drugs $100 $80 $80 $60 $50* $60* $50* 

Specialty Drugs $500 $350 $350 $250 $150* $250* $150* 

*Benefit category not subject to the deductible. 
82382 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

7. Non-Standardized Plan Option Limits 

(§ 156.202) 

We propose to exercise our authority 

under sections 1311(c)(1) and 

1321(a)(1)(B) of the ACA to amend 

§ 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 § 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 § 156.202(a) and (b) 

limiting the number of nonstandardized 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 § 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 § 156.202(d) 

and (e) permitting FFE and SBE–FP 

issuers to offer more than two nonstandardized 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 nonstandardized plans offered beyond the 

limit at § 156.202(b) have specific 

design features that would substantially 

benefit consumers with chronic and 

high-cost conditions and meet certain 

other requirements. 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.045</GPH>

TABLE 12: 2026 Proposed Standardized Plan Options Set Two (For Issuers in Delaware 

and Louisiana) 

Expanded Standard Silver Silver Silver Gold Platinum Bronze Silver 73CSR 87CSR 94CSR 

Actuarial Value 64.42% 70.01% 73.09% 87.07% 94.09% 78.02% 88.01% 

Deductible $7,500 $6,000 $3,000 $700 $0 $2,000 $0 

Annual Limitation on Cost $9,200 $8,900 $7,400 $3,300 $2,400 $8,300 $5,300 

Sharing 

Emergency Room Services 60% 40% 40% 30% 25%* 25% $100* 

Inpatient Hospital Services 60% 40% 40% 30% 25%* 25% $350* 

(Including Mental Health 

& Substance Use Disorder) 

Primary Care Visit $60* $40* $40* $20* $0* $30* $10* 

Urgent Care $90* $60* $60* $30* $5* $45* $15* 

Specialist Visit $120* $80* $80* $40* $10* $60* $20* 

Mental Health & $60* $40* $40* $20* $0* $30* $10* 

Substance Use Disorder 

Outpatient Office Visit 

Imaging (CT/PET Scans, 60% 40% 40% 30% 25%* 25% $100* 

MRls) 

Speech Therapy $60* $40* $40* $20* $0* $30* $10* 

Occupational, Physical $60* $40* $40* $20* $0* $30* $10* 

Therapy 

Laboratory Services 60% 40% 40% 30% 25%* 25% $30* 

X-ravs/Diagnostic Imaging 60% 40% 40% 30% 25%* 25% $30* 

Skilled Nursing Facility 60% 40% 40% 30% 25%* 25% $150* 

Outpatient Facility Fee 60% 40% 40% 30% 25%* 25% $150* 

(Ambulatory Surgery 

Center) 

Outpatient Surgery 60% 40% 40% 30% 25%* 25% $150* 

Physician & Services 

Generic Drugs $25* $20* $20* $10* $0* $15* $5* 

Preferred Brand Drugs $50 $40* $40* $20* $5* $30* $10* 

Non-Preferred Brand $100 $80 $80 $60 $10* $60* $50* 

Drugs 

Specialty Drugs $150 $125 $125 $100 $20* $100* $75* 

*Benefit category not subject to the deductible. 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 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 § 156.202(c) under the 

non-standardized plan option limits at 

§ 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 nonstandardized 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 § 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. 


lotter on DSK11XQN23PROD with PROPOSALS2
82384 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

As such, we propose to amend the 

regulation text at § 156.202(b) and (d) to 

properly reflect the flexibility that 

issuers have been operationally 

permitted since we introduced nonstandardized 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 nonstandardized plan option limit at 

§ 156.202(b) in accordance with 

§ 156.202(c)(1) through (3) for PY 2025 

and subsequent plan years. 

In particular, we propose to amend 

§ 156.202(b) to properly distinguish 

between adult dental benefit coverage at 

§ 156.202(c)(1) and pediatric dental 

benefit coverage at § 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 § 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 § 156.202), in any service 

area. 

Consistent with our proposed 

amendment of § 156.202(b), we propose 

a conforming amendment to 

§ 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 

§ 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 nonstandardized 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. 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.046</GPH>

TABLE 13: Issuer Flexibility Under the Non-Standardized Plan Option Limit of 

Two for PY 2025 and Subsequent Years 

Plan 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

31 

32 

Adult Pediatric Adult 

Dental Dental Vision 

\,liii~:I 

t~~AA'~~ij\ 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82385 

223CMS. (2024, April 10). 2025 Final Letter to 

Issuers in the Federally-facilitated Exchanges. 

https://www.cms.gov/files/document/2025-letterissuers.pdf. 

224Twelve FFEs operate in States performing plan 

management functions: Delaware, Hawaii, Iowa, 

Kansas, Michigan, Montana, Nebraska, New 

Hampshire, Ohio, South Dakota, Utah, and West 

Virginia. 

225Systems for Electronic Rates & Forms Filing 

(SERFF) is a portal utilized by States for form 

submittal, document management, and review. 

226HIOS 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. 

227OMB Control Number 0938–1415: Essential 

Community Provider-Network Adequacy (ECP/NA) 

Data Collection to Support QHP Certification 

(CMS–10803). 

228For 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. 

We propose these modifications to 

align the regulation text of § 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

We seek comment on these proposed 

modifications. 

8. Essential Community Provider 

Reviews for States Performing Plan 

Management (§ 156.235) 

Under § 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

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, medicallyunderserved individuals. Federal ECP 

standards were first detailed in the 

Exchange Establishment Rule (77 FR 

18310) and codified at § 156.235. ECP 

certification reviews under § 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. 

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 

(§ 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. 


lotter on DSK11XQN23PROD with PROPOSALS2
82386 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

229Refer to OMB control number 0938–1286. 

230The CMS National Quality Strategy for Quality 

Improvement in Health Care available at http://

www.cms.gov/medicare/quality/meaningfulmeasures-initiative/cms-quality-strategy. 

231 Id. 

232See Care Compare at https://www.cms.gov/ 

medicare/quality/physician-compare-initiative. 

233See, 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-insuranceexchanges-qrs-program-plan-year-2024-resultsglance.pdf. 

234See, 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-insuranceexchanges-qrs-program-plan-year-2024-resultsglance.pdf. 

235Section 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 healthrelated information to consumers and others. 

236For the purposes of this proposal, ‘‘appeals’’ 

refers to all three steps of the administrative appeals 

process as listed in § 156.1220, which includes the 

request for reconsideration, informal hearing, and 

review by the Administrator of CMS. 

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 § 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 § 155.200(d) that direct 

Exchanges to evaluate each QIS, and 

§ 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. 

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, summarylevel 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. 

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. 

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 deidentified 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 

(§ 156.1220(a)(2)) 

We propose to amend § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82387 

237For 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. 

238The 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. 

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. 

240Consistent with § 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 § 153.630(d)(2) and (3), 

it was so identified, and remains unresolved. 

241The 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. 

242The 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. 

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 § 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

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 § 156.1220(a)(1)(vii) and 

(viii).239 240 An issuer can also request an 

informal hearing before a CMS hearing 

officer to appeal HHS’ reconsideration 

decision in accordance with 

§ 156.1220(b) and may request review 

by the CMS Administrator of the CMS 

hearing officer’s discretion as outlined 

in § 156.1220(c). Currently, 

§ 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. 

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. 

To further explain the uniqueness of 

HHS–RADV, we want to compare the 

existing HHS–RADV appeal materiality 

threshold at § 156.1220(a)(2) to that of 

the EDGE data discrepancies in 

§ 153.630(d)(2). Under § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82388 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

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 § 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 

§ 156.1220(b) or a request for CMS 

Administrator review under 

§ 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 HHSoperated 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 § 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 (§ 158.103) 

We propose to amend § 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 (§§ 158.140, 

158.240) 

We propose to amend 

§ 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 

§ 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82389 

243Section 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. 

244The 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). 

245See 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). 

246See 45 CFR 158.221(b)(5). See also the Student 

Health Insurance Coverage Final Rule, 77 FR 16453, 

16458 through 16459 (March 21, 2012). 

247See 45 CFR 158.221(b)(7). See also the 2015 

Market Standards Rule, 79 FR 30240, 30320 (May 

27, 2014). 

248See 45 CFR 158.221(b)(6). See also 79 FR 

30320 (May 27, 2014). 

249See 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). 

250See 45 CFR 158.230 and 158.232. See also 75 

FR 74880 (Dec. 01, 2010). 

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 

§ 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 § 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 § 158.221, in a 

manner similar to the adjustment of 

allowable costs in the risk corridors 

formula set forth in § 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. 

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 

§ 158.130, which is included in the 

denominator of the MLR calculation in 

§ 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82390 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

251See 45 CFR 158.221. See also the 

Transparency in Coverage Final Rule, 85 FR 72158, 

72246 (Nov. 12, 2020). 

252See Transitional Reinsurance Program 

Payment Audits, available at: https://www.cms.gov/ 

center-consumer-information-and-insuranceoversight. 

253On 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. 

254See 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-rcrecoveries-and-mlr-final.pdf. 

choose lower-cost, higher-value 

providers.251

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 § 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 

§ 158.130(b)(5)) in a relevant State and 

market is greater than or equal to 50 

percent. We also propose to modify 

§ 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 § 158.221(b) 

for such qualifying issuers. We do not 

propose to make any changes to the 

definition of premium revenue in 

§ 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 § 158.221(c) and 

§ 158.240(c), respectively. We also 

propose to make a conforming 

amendment to § 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 § 158.140(b)(2)(i) and 

(ii). 

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 §§ 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. 

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}] + 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 § 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 § 158.140 and 

§ 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. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82391 

255See, for example, NAIC, Supplemental Health 

Care Exhibit Instructions for Part 2, Line 1.1. 

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 

§ 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 § 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 § 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 

§ 158.221(c) and § 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

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 }] + 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 § 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, summarylevel 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: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of the agency. 


lotter on DSK11XQN23PROD with PROPOSALS2
82392 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

256See 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. 

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. 

258OMB Control No: 0938–1155 (exp. April 30, 

2025). https://www.reginfo.gov/public/do/ 

PRAViewICR?ref_nbr=202308-0938-015. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

each of these issues for 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. 

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. 

B. ICRs Regarding the Initial Validation 

Audit (IVA) Sample—Enrollees Without 

HCCs, Removal of the FPC, and Neyman 

Allocation (§ 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 RXConly 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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.047</GPH>

TABLE 14: Adjusted Hourly Wages Used in Burden Estimates 

Business Operations Specialists, 13-1199 38.26 38.26 76.52 11 Other 

Health Information Technologists 9-9021 30.28 30.28 60.56 and Medical Re istrars 

13-1041 36.38 36.38 72.76 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82393 

259A total of 605 issuers participated in the HHSoperated 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/premiumstabilization-programs/downloads/ra-reportby2023pdf. 

260This 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 mediumand higher-risk strata, which are generally 

composed of enrollees with more medical records 

whereby reducing our estimated number of medical 

records for review. 

261This 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). 

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. 

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. 

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 

(§ 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82394 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

262 5 CFR 1320.4(a)(2). 

263 5 CFR 1320.4(a)(2). 264 88 FR 25890 through 25891. 

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. 

We seek comment on these 

assumptions. 

D. ICRs Regarding Agent and Broker 

System Suspension Authority 

(§ 155.220(k)) 

This proposal would expand HHS’ 

authority to suspend Exchange system 

access for agents and brokers under 

§ 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 

§ 155.220(j)(2)(i), (ii) or (iii) or the 

privacy and security standards at 

§ 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 § 155.220(j)(2)(ii) and (iii) for 

consumers cited in the suspension 

notice from agents and brokers we 

system suspend under § 155.220(k)(3). 

The system suspension authority in 

§ 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. 

We seek comment on these 

assumptions. 

E. ICRs Regarding Updating the Model 

Consent Form (§ 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 

§ 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 

§ 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 § 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. 

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 webbrokers 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 webbrokers 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. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82395 

265OMB Control Number 0938–1415: Essential 

Community Provider-Network Adequacy (ECP/NA) 

Data Collection to Support QHP Certification 

(CMS–10803). 

F. ICRs Regarding Notification of Two 

Year Failure To File and Reconcile 

Population (§ 155.305) 

We are proposing to amend current 

regulation at § 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 

(§ 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 

(§ 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 

§ 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. 

I. ICRs Regarding Quality Improvement 

Strategy Information (§ 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 

(§§ 158.103, 158.140, 158.240) 

We propose to add a definition of 

‘‘qualifying issuer’’ to § 158.103, amend 

§ 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 

§ 158.240(c)(2), and add § 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 

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 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.048</GPH>

45CFR 

153.630 

TOTAL 

TABLE 15: Proposed Annual Recordkeeping and Reporting Requirements 

0938-1155 600 600 -1,022.55 -613,529 -$47,473,149 -$47,473,149 

600 600 -613,529 -$47 473 149 -$47 473 149 
82396 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

266Office 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-orderon-modernizing-regulatory-review/. 

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. 

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. 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82397 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.049</GPH>

TABLE 16: Accounting Table 

Benefits: Estimate I Year Dollar Discount Rate I Period Covered 

Annualized Monetized ($/vear) $39 million I 2024 2 percent I 2025-2029 

Quantitative: 

• Cost savings of$47,473, 149 annually for issuers for conducting IYAs due to IYA sampling methodology 

changes reducing the estimated number of medical records for review beginning with the 2025 benefit 

year ofHHS-RADV. 

• Total cost savings of$1,884,632.40 annually for the 12 FFE States currently performing plan management 

functions associated with reduced administrative burden as proposed since they would no longer be 

responsible for ECP data review. 

• Reduced Federal costs by approximately $75,000 per year and administrative burden associated with the 

HHS-RADY materiality threshold proposal, as this proposal would eliminate situations wherein HHS is 

required to reissue HHS-RADY for all issuers when the impact is less than $10,000 beginning in 2025. 

Qualitative: 

• Decreased risk of adverse selection with respect to coverage of PrEP users, resulting in an increase in health 

equity among this population due to the proposal to incorporate PrEP in HHS risk adjustment adult and child 

models, as a new, separate type of model factor. 

• Improved education of tax filers and enrollees regarding the new two-tax year FTR requirements . 

• Improved processing by State Exchanges of enrollment data inaccuracies, which benefits consumers by 

ensuring accurate payment of APTCs by proposing to codify HHS' standard for reporting enrollment 

inaccuracies and for the State Exchange to resolve them. 

• Reduced enrollment barriers, particularly for low-income enrollees who would be disproportionately 

impacted by disruptions in coverage, associated with the proposal to allow issuers to implement a fixeddollar premium payment threshold. 

• Increased compliance with A Y de minimis ranges associated with the approach to release the AV Calculator 

earlier. 

• Increased transparency in Exchanges by publishing annual State Exchange and SBE-FP SMAR Ts, 

programmatic and financial audits, Blueprint applications, and additional data points in the OE data reports 

Costs: Estimate I YearDollar Discount Rate I Period Covered 

Annualized Monetized ($/year) $3 million I 2024 2 percent I 2025-2029 

Quantitative: 

• Cost increase for the medical review by approximately $1.5 million annually for the Federal government 

due to initial SY A subsample size increase beginning with the 2024 benefit year of HHS-RADY. 

• Annual cost increase of $500,000 to the Federal government for increases to SY A medical record review 

due to the proposed SY A pairwise means testing procedure resulting in more SY A subsamples being 

expanded for review beginning with the 2024 benefit year of HHS-RADY. 

• One-time cost of $250,000 to the Federal government to code modifications to the existing SV A pairwise 

means test in the Audit Tool beginning with the 2024 benefit year of HHS-RADY. 

• Annual costs of $134,000 to the Federal government to send initial direct FTR notices to the two-tax year 

FTR population starting in benefit year 2025. 

• Annual costs of $31,920 to State Exchanges for FTR notices for the two-tax year population . 

• Regulatory review costs of$1,963,438.75 for interested parties to review and analyze this proposed rule . 

Qualitative: 

• Not a significant increase in administrative burden or financial impact on the Federal government for ECP 

data review due to the proposal to conduct ECP certification reviews for plans offered by issuers in FFEs in 

States performing plan management functions beginning in PY 2026, due to using existing system 

infrastructure for the FFEs. 

Transfers: Estimates I Year Dollar Discount Rate I Period Covered 

20 

Annualized Monetized ($/year) Primary: $1.098 billion 2024 2 percent 25 

-
82398 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

267Reinsurance collections ended in FY 2018 and 

outlays in subsequent years reflect remaining 

payments, refunds, and allowable activities. 

1. BHP Methodology Regarding the 

Value of the Premium Adjustment 

Factor (42 CFR Part 600) 

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 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.050</GPH> EP10OC24.051</GPH>

Low: $909 million 

High: $1.186 billion 

Quantitative: 

2024 2 percent 

2024 2 percent 

20 

29 

20 

25 

20 

29 

20 

25 

20 

29 

• An estimated annual transfer of APTC of$481,477,453.60 from the Federal government to enrollees whose 

coverage would otherwise be terminated for non-payment as a result of the proposal to establish an optional 

fixed-dollar premium payment threshold beginning in 2025. 

• 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 user fee level 

were maintained in subsequent years. Under the alternate FFE and SBE-FP user fee proposal, which reflects 

different enrollment assumptions, we estimate increases in FFE and SBE-FP user fee transfers compared to if 

the 2025 benefit year user fee level were maintained for 2026 and beyond from issuers to the Federal 

government within a range of$425 million to $690 million in 2026, $585 million to $950 million in 2027, 

$607 million to $985 million in 2028, and $629 million to $1.021 billion in 2029 if user fee rates in the 

alternate range were maintained in subsequent years. 

• Annual cost of$8,155 associated with ECP enforcement action is transferred from the FFEs in States 

performing plan management functions to the Federal government in accordance with the proposal for HHS 

to conduct ECP reviews for these States. 

• Reduced rebates paid by issuers to consumers or increased premiums collected by issuers from consumers of 

approximately $20 million annually beginning with the 2026 MLR reporting year associated with the 

proposal to add a definition of"qualifying issuer" 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. 

TABLE 17: Estimated Federal Government Outlays and Receipts for the Risk Adjustment 

and Reinsurance Programs from Fiscal Year 2026-2030, in billions of dollars1 

Risk Adjustment and Reinsurance 

Pro ram Pa ments 

Risk Adjustment and Reinsurance 

Pro am Collections 

9 

-10 -10 

49 

-10 -10 -10 -50 

Note: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over 

time. Source: Congressional Budget Office. Federal Subsidies for Health Insurance Coverage for People Under Age 

65: 2023 to 2033. Table A-2. September 2023. https://www.cbo.gov/systemlfiles/2023-09/59273-healthcoverage.pdf 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 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 

(§ 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 HHSoperated 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 

(§ 153.630(b)) 

Under § 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 (§ 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 HHSoperated 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 

(§ 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 webbrokers. This proposal is also designed 

to reduce consumer harm associated 

with unauthorized enrollments or badVerDate Sep<11>2014 17:49 Oct 09, 2024 Jkt 265001 PO 00000 Frm 00093 Fmt 4701 Sfmt 4702 E:\FR\FM\10OCP2.SGM 10OCP2

lotter on DSK11XQN23PROD with PROPOSALS2
82400 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

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 (§ 155.220(k)) 

We believe the impact related to the 

proposed changes to § 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 § 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 § 155.220(j)(2)(i), (ii) or 

(iii) or the privacy and security 

standards at § 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 

(§ 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 § 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 § 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 § 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 

§ 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 (§ 155.305) 

We anticipate a small financial impact 

related to our proposed changes at 

§ 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82401 

268Available at sam.gov. 

269CMS. (2024, Aug. 14). Reporting and 

Reviewing Data Inaccuracy Reports in State-based 

Exchanges (SBE) Frequently Asked Questions 

(FAQs). https://www.cms.gov/cciio/programs-andinitiatives/health-insurance-marketplaces/ 

downloads/faqs-SBE-reporting-enrollment-datainaccuracies.pdf. 

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. 

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 

(§ 155.400(d)(1)) 

We propose to add § 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 § 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 § 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 

§ 156.1210(a)–(c). 

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 FixedDollar Premium Payment Threshold and 

Total Premium Threshold (§ 155.400(g)) 

We anticipate that the proposal to 

allow issuers to implement a fixeddollar 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82402 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

270See CMS (2024) Effectuated Enrollment: Early 

2024 Snapshot and Full Year 2023 Average. https:// 

www.cms.gov/files/document/early-2024-and-fullyear-2023-effectuated-enrollment-report.pdf. 

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. 

11. General Eligibility Appeals 

Requirements (§ 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 § 155.505(b). 

12. Proposed Amendments to 

Certification Standards for QHPs, 

Request for the Reconsideration of 

Denial of Certification, and NonCertification and Decertification of 

QHPs (§§ 155.1000 and 155.1090) 

We propose to amend § 155.1000 by 

clarifying that an Exchange may deny 

certification to any plan that does not 

meet the general certification criteria at 

§ 155.1000 and amend § 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 §§ 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 (§ 155.1200) 

As part of § 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 (§ 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 (§ 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 EHBbenchmark 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 

(§ 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, 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 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 

§ 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 

§§ 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 nonExchange 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 § 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 (§ 156.202) 

We propose to amend § 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 nonstandardized plan option limit at 

§ 156.202(b) in accordance with 

§ 156.202(c)(1) through (3). 

In particular, we propose to amend 

§ 156.202(b) to properly distinguish 

between adult dental benefit coverage at 

§ 156.202(c)(1) and pediatric dental 

benefit coverage at § 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 § 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 § 156.202), in any service 

area. 

We propose a similar conforming 

amendment to § 156.202(d), such that 

for PY 2025 and subsequent plan years, 

an issuer may offer additional nonstandardized 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 § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
82404 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

271CMS. (2024, April 10). 2025 Final Letter to 

Issuers in the Federally-facilitated Exchanges. 

https://www.cms.gov/files/document/2025-letterissuers.pdf. 

272Twelve 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. 

273Occupational 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. 

274We 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. 

275A 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. 

Notice.271 Given that issuers have had 

this flexibility since the nonstandardized plan option limit was first 

introduced PY 2024, we do not any 

anticipate any impact on relevant 

interested parties. 

We seek comment on these impact 

estimates and assumptions. 

18. Essential Community Provider 

Certification Review for States 

Performing Plan Management Functions 

(§ 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 fulltime 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. 

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. 

We seek comment on these impact 

estimates and assumptions. 

19. HHS–RADV Materiality Threshold 

for Rerunning HHS–RADV Results 

(§ 156.1220(a)(2)) 

We propose to amend § 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 (§§ 158.103, 

158.140, 158.240) 

We propose to add a definition of 

‘‘qualifying issuer’’ to § 158.103, amend 

§ 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 § 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 

§ 158.240(c) to clarify that the current 

illustrative example in paragraph (c)(2) 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82405 

276U.S. Bureau of Labor Statistics. (2024, April 9). 

Occupational Employment and Wage Statistics. 

https://www.bls.gov/oes/current/oes_nat.htm. 277As 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. 

278As explained in the preamble of this rule, 

enrollees without HCCs include stratum 10 

enrollees that do not have HCCs nor RXCs and RXConly enrollees in strata 1 through 3. 

279As noted earlier in this preamble, this estimate 

is based on the combined impact of all proposed 

changes to the IVA sampling methodology. 

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 

§ 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 § 158.140(b)(4)(ii) and 

§ 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 × 

$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 × 

5,125 reviewers). 

D. Regulatory Alternatives Considered 

Under § 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 issuerspecific 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. 

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 


lotter on DSK11XQN23PROD with PROPOSALS2
82406 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

280A 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. 

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. 

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 RXConly 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

We considered taking no action 

regarding the proposed changes at 

§ 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 

§ 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 fixeddollar premium payment threshold, we 

are also considering whether to 

implement a $5 or $10 cap on the fixeddollar 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 § 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 § 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 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 82407 

281SBA. (n.d.). Table of size standards. https://

www.sba.gov/document/support--table-sizestandards. 

282CMS. (n.d.). Medical Loss Ratio Data and 

System Resources. https://www.cms.gov/CCIIO/ 

Resources/Data-Resources/mlr.html. 

283 $20 million/487 issuers participating in the 

MLR program = approximately $41,076.67. 

HHS–RADV adjustments and applying a 

1 percent test to align with the EDGE 

materiality threshold in § 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 nonhealth 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. 

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. 

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. 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.052</GPH>

TABLE 18: Detailed Annual Costs for Small Entities 

Description of Cost Annual Cost per Small Entity 

HHS-RADV IVA changes -$79,121.92 

MLRchanges -$41,067.76 

Total -$120,189.68 
82408 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

284United 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. 

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. 

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 Exchangerelated 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 


lotter on DSK11XQN23PROD with PROPOSALS2EP10OC24.053</GPH>

TABLE 19: Aggregate Annual Costs for Small Entities 

Affected Entity Affected Small Annual Cost per Entity Aggregate Annual Cost for 

Entities Small Entities 

Issuer 87 -$120,189.68 -$10,456,502.16 
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 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 

■ 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. 

■ 2. Section 155.220 is amended by 

revising paragraph (k)(3) to read as 

follows: 

§ 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 § 155.260, until the 

circumstances of the incident, breach, or 

noncompliance are remedied or 

sufficiently mitigated to HHS’ 

satisfaction. 

* * * * * 

■ 3. Section 155.305 is amended by 

adding paragraph (f)(4)(ii) to read as 

follows: 

§ 155.305 Eligibility standards. 

* * * * * 

(f) * * * 

(4) * * * 

(ii) If HHS notifies the Exchange as 

part of the process described in 

§ 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 § 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. 

* * * * * 

■ 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: 

§ 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 § 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 Federallyfacilitated 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 fixeddollar 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 percentagebased 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 § 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 §§ 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 § 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, 


lotter on DSK11XQN23PROD with PROPOSALS2
82410 Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 

described by §§ 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 § 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 §§ 156.270(g) of this 

subchapter and 155.430(b)(2)(ii)(A) and 

(B). 

* * * * * 

■ 5. Section 155.505 is amended by 

revising paragraph (b) introductory text 

to read as follows: 

§ 155.505 General Eligibility Appeals 

Requirements. 

* * * * * 

(b) Right to appeal. An applicant, 

enrollee, or application filer must have 

the right to appeal. 

* * * * * 

■ 6. Section 155.1000 is amended by 

adding paragraph (e) to read as follows: 

§ 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 

§ 155.1000(c). 

■ 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: 

§ 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 

§ 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 § 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 

■ 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. 

■ 9. Section 156.201 is amended by 

adding paragraph (c) to read as follows: 

§ 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. 

■ 10. Section 156.202 is amended by 

revising paragraph (b) and paragraph (d) 

introductory text to read as follows: 

§ 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 § 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 nonstandardized 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. 

* * * * * 

■ 11. Section 156.1220 is amended by 

adding paragraph (a)(2)(i) and reserved 

paragraph (a)(2)(ii) to read as follows: 

§ 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 

■ 12. The authority citation for part 158 

continues to read as follows: 

Authority: 42 U.S.C. 300gg–18. 

■ 13. Section 158.103 is amended by 

adding a definition for ‘‘Qualifying 

issuer’’ in alphabetical order to read as 

follows: 

§ 158.103 Definitions. 

* * * * * 

Qualifying issuer means an issuer 

whose ratio of net payments related to 


lotter on DSK11XQN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 / Proposed Rules 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 § 158.130(b)(5)) in a 

relevant State and market is greater than 

or equal to 50 percent. 

* * * * * 

■ 14. Section 158.140 is amended by 

revising paragraph (b)(4)(ii) to read as 

follows: 

§ 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 § 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 § 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 

§ 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. 

* * * * * 

■ 15. Section 158.240 is amended by 

revising paragraph (c)(2) and adding 

paragraph (c)(3) to read as follows: 

§ 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 § 153.500 of 

this subchapter, equal to zero percent). 

If the issuer is not a qualifying issuer 

(defined in § 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 § 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 §§ 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 

§§ 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 

§ 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 §§ 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 

§§ 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 


lotter on DSK11XQN23PROD with PROPOSALS2