[Federal Register Volume 80, Number 39 (Friday, February 27, 2015)]
[Rules and Regulations]
[Pages 10750-10877]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-03751]



[[Page 10749]]

Vol. 80

Friday,

No. 39

February 27, 2015

Part II





Department of Health and Human Services





-----------------------------------------------------------------------





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





Patient Protection and Affordable Care Act; HHS Notice of Benefit and 
Payment Parameters for 2016; Final Rule

Federal Register / Vol. 80 , No. 39 / Friday, February 27, 2015 / 
Rules and Regulations

[[Page 10750]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 147, 153, 154, 155, 156 and 158

[CMS-9944-F]
RIN 0938-AS19


Patient Protection and Affordable Care Act; HHS Notice of Benefit 
and Payment Parameters for 2016

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule sets forth payment parameters and provisions 
related to the risk adjustment, reinsurance, and risk corridors 
programs; cost sharing parameters and cost-sharing reductions; and user 
fees for Federally-facilitated Exchanges. It also finalizes additional 
standards for the individual market annual open enrollment period for 
the 2016 benefit year, essential health benefits, qualified health 
plans, network adequacy, quality improvement strategies, the Small 
Business Health Options Program, guaranteed availability, guaranteed 
renewability, minimum essential coverage, the rate review program, the 
medical loss ratio program, and other related topics.

DATES: These regulations are effective on April 28, 2015 except the 
amendments to Sec. Sec.  156.235, 156.285(d)(1)(ii), and 158.162 are 
effective on January 1, 2016.

FOR FURTHER INFORMATION CONTACT: 
    For general information: Jeff Wu, (301) 492-4305.
    For matters related to guaranteed availability, guaranteed 
renewability, rate review, or the applicability of Title I of the 
Affordable Care Act in the U.S. Territories: Jacob Ackerman, (301) 492-
4179.
    For matters related to risk adjustment or the methodology for 
determining the reinsurance contribution rate and payment parameters: 
Kelly Horney, (410) 786-0558.
    For matters related to reinsurance generally, distributed data 
collection good faith compliance policy, or administrative appeals: 
Adrianne Glasgow, (410) 786-0686.
    For matters related to the definition of common ownership for 
purposes of reinsurance contributions: Adam Shaw, (410) 786-1019.
    For matters related to risk corridors: Jaya Ghildiyal, (301) 492-
5149.
    For matters related to essential health benefits, network adequacy, 
essential community providers, or other standards for QHP issuers: 
Leigha Basini, (301) 492-4380.
    For matters related to the qualified health plan good faith 
compliance policy: Cindy Yen, (301) 492-5142.
    For matters related to the Small Business Health Options Program: 
Christelle Jang, (410) 786-8438.
    For matters related to the Federally-facilitated Exchange user fee 
or minimum value: Krutika Amin, (301) 492-5153.
    For matters related to cost-sharing reductions or the premium 
adjustment percentage: Pat Meisol, (410) 786-1917.
    For matters related to re-enrollment, open enrollment periods, or 
exemptions from the individual shared responsibility payment: Christine 
Hammer, (301) 492-4431.
    For matters related to special enrollment periods: Rachel Arguello, 
(301) 492-4263.
    For matters related to minimum essential coverage: Cam Moultrie 
Clemmons, (206) 615-2338.
    For matters related to quality improvement strategies: Marsha 
Smith, (410) 786-6614.
    For matters related to the medical loss ratio program: Julie 
McCune, (301) 492-4196.
    For matters related to meaningful access to QHP information, 
consumer assistance tools and programs of an Exchange, or cost-sharing 
reduction notices: Tricia Beckmann, (301) 492-4328.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary
II. Background
    A. Legislative and Regulatory Overview
    B. Stakeholder Consultation and Input
III. Provisions of the Final Regulations and Analysis and Responses 
to Public Comments
    A. Part 144--Requirements Relating to Health Insurance Coverage
    1. Definitions (Sec.  144.103)
    a. Plan
    b. State
    B. Part 147--Health Insurance Reform Requirements for the Group 
and Individual Health Insurance Markets
    1. Guaranteed Availability of Coverage (Sec.  147.104)
    2. Guaranteed Renewability of Coverage (Sec.  147.106)
    C. Part 153--Standards Related to Reinsurance, Risk Corridors, 
and Risk Adjustment Under the Affordable Care Act
    1. Provisions for the State Notice of Benefit and Payment 
Parameters (Sec.  153.100)
    2. Provisions and Parameters for the Permanent Risk Adjustment 
Program
    a. Risk Adjustment User Fee (Sec.  153.610(f))
    b. Overview of the HHS Risk Adjustment Model (Sec.  153.320)
    c. Proposed Updates to Risk Adjustment Model (Sec.  153.320)
    d. List of Factors To Be Employed in the Model (Sec.  153.320)
    e. Cost-Sharing Reductions Adjustments (Sec.  153.320)
    f. Model Performance Statistics (Sec.  153.320)
    g. Overview of the Payment Transfer Formula (Sec.  153.320)
    h. HHS Risk Adjustment Methodology Considerations (Sec.  
153.320)
    i. State-Submitted Alternate Risk Adjustment Methodology (Sec.  
153.330)
    3. Provisions and Parameters for the Transitional Reinsurance 
Program
    a. Common Ownership Clarification
    b. Reinsurance Contributing Entities and Minimum Value
    c. Self-Insured Expatriate Plans (Sec.  153.400(a)(1)(iii))
    d. Determination of Debt (Sec.  153.400(c))
    e. Reinsurance Contribution Submission Process
    f. Consistency in Counting Methods for Health Insurance Issuers 
(Sec.  153.405(d))
    g. Snapshot Count and Snapshot Factor Counting Methods 
(Sec. Sec.  153.405(d)(2) and (e)(2))
    h. Uniform Reinsurance Contribution Rate for 2016
    i. Uniform Reinsurance Payment Parameters for 2016
    j. Uniform Reinsurance Payment Parameters for 2015
    k. Deducting Cost-Sharing Reduction Amounts From Reinsurance 
Payments
    4. Provisions for the Temporary Risk Corridors Program
    a. Application of the Transitional Policy Adjustment in Early 
Renewal States
    b. Risk Corridors Payments for 2016
    5. Distributed Data Collection for the HHS-Operated Risk 
Adjustment and Reinsurance Programs
    a. Good Faith Safe Harbor (Sec.  153.740(a))
    b. Default Risk Adjustment Charge (Sec.  153.740(b))
    c. Information Sharing (Sec.  153.740(c))
    D. Part 154--Health Insurance Issuer Rate Increases: Disclosure 
and Review Requirements
    1. General Provisions
    a. Definitions (Sec.  154.102)
    2. Disclosure and Review Provisions
    a. Rate Increases Subject to Review (Sec.  154.200)
    b. Submission of Rate Filing Justification (Sec.  154.215)
    c. Timing of Providing the Rate Filing Justification (Sec.  
154.220)
    d. CMS's Determinations of Effective Rate Review Programs (Sec.  
154.301)
    E. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act
    1. General Provisions
    a. Definitions (Sec.  155.20)
    2. General Functions of an Exchange
    a. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    b. Standards Applicable to Navigators and Non-Navigator 
Assistance Personnel Carrying Out Consumer Assistance Functions 
Under Sec. Sec.  155.205(d) and (e) and 155.210 in a Federally-
Facilitated Exchange and to Non-Navigator

[[Page 10751]]

Assistance Personnel Funded Through an Exchange Establishment Grant 
(Sec.  155.215)
    c. Ability of States To Permit Agents and Brokers To Assist 
Qualified Individuals, Qualified Employers, or Qualified Employees 
Enrolling in QHPs (Sec.  155.220)
    d. Standards for HHS-Approved Vendors of Federally-Facilitated 
Exchange Training for Agents and Brokers (Sec.  155.222)
    3. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance 
Affordability Programs
    a. Annual Eligibility Redetermination (Sec.  155.335)
    4. Exchange Functions in the Individual Market: Enrollment in 
Qualified Health Plans
    a. Enrollment of Qualified Individuals Into QHPs (Sec.  155.400)
    b. Annual Open Enrollment Period (Sec.  155.410)
    c. Special Enrollment Periods (Sec.  155.420)
    d. Termination of Exchange Enrollment or Coverage (Sec.  
155.430)
    5. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
    a. Eligibility Standards for Exemptions (Sec.  155.605)
    b. Required Contribution Percentage (Sec.  155.605)
    6. Exchange Functions: Small Business Health Options Program 
(SHOP)
    a. Standards for the Establishment of a SHOP (Sec.  155.700)
    b. Functions of a SHOP (Sec.  155.705)
    c. Eligibility Standards for SHOP (Sec.  155.710)
    d. Enrollment of Employees Into QHPs Under SHOP (Sec.  155.720 
and Sec.  156.285)
    e. Enrollment Periods Under SHOP (Sec.  155.725 and Sec.  
156.285)
    f. Termination of SHOP Enrollment or Coverage (Sec.  155.735 and 
Sec.  156.285)
    7. Exchange Functions: Certification of Qualified Health Plans
    a. Certification Standards for QHPs (Sec.  155.1000)
    b. Recertification of QHPs (Sec.  155.1075)
    F. Part 156--Health Insurance Issuer Standards Under the 
Affordable Care Act, Including Standards Related to Exchanges
    1. General Provisions
    a. Definitions (Sec.  156.20)
    b. FFE User Fee for the 2016 Benefit Year (Sec.  156.50(c))
    2. Essential Health Benefits Package
    a. State Selection of Benchmark (Sec.  156.100)
    b. Provision of EHB (Sec.  156.115)
    c. Collection of Data To Define Essential Health Benefits (Sec.  
156.120)
    d. Prescription Drug Benefits (Sec.  156.122)
    e. Prohibition on Discrimination (Sec.  156.125)
    f. Cost-Sharing Requirements (Sec.  156.130)
    g. Premium Adjustment Percentage (Sec.  156.130)
    h. Reduced Maximum Annual Limitation On Cost Sharing (Sec.  
156.130)
    i. Minimum Value (Sec.  156.145)
    3. Qualified Health Plan Minimum Certification Standards
    a. QHP Issuer Participation Standards (Sec.  156.200)
    b. Transparency in Coverage (Sec.  156.220)
    c. Network Adequacy Standards (Sec.  156.230)
    d. Essential Community Providers (Sec.  156.235)
    e. Meaningful Access to Qualified Health Plan Information (Sec.  
156.250)
    f. Enrollment Process for Qualified Individuals (Sec.  156.265)
    g. Termination of Coverage or Enrollment for Qualified 
Individuals (Sec.  156.270)
    h. Segregation of Funds for Abortion Services (Sec.  156.280)
    i. Non-Renewal and decertification of QHPs (Sec.  156.290)
    4. Health Insurance Issuer Responsibility for Advance Payments 
of the Premium Tax Credit and Cost-Sharing Reductions
    a. Plan Variations (Sec.  156.420)
    b. Changes in Eligibility for Cost-Sharing Reductions (Sec.  
156.425)
    c. Cost-Sharing Reductions Reconciliation (Sec.  156.430)
    5. Minimum Essential Coverage
    a. Other Coverage That Qualifies as Minimum Essential Coverage 
(Sec.  156.602)
    6. Enforcement Remedies in Federally-Facilitated Exchanges
    a. Available Remedies; Scope (Sec.  156.800)
    b. Plan Suppression (Sec.  156.815)
    7. Quality Standards
    a. Quality Improvement Strategy (Sec.  156.1130)
    8. Qualified Health Plan Issuer Responsibilities
    a. Administrative Appeals (Sec.  156.1220(c))
    G. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate 
Requirements
    1. Treatment of Cost-Sharing Reductions in MLR Calculation 
(Sec.  158.140)
    2. Reporting of Federal and State Taxes (Sec.  158.162)
    3. Distribution of Rebates to Group Enrollees in Non-Federal 
Governmental Plans (Sec.  158.242)
IV. Collection of Information Requirements
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
    F. Unfunded Mandates
    G. Federalism
    H. Congressional Review Act Regulations Text

Acronyms

Affordable Care Act The collective term for the Patient Protection 
and Affordable Care Act (Pub. L. 111-148) and the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), as amended
AHFS American hospital formulary system
AV Actuarial value
CFR Code of Federal Regulations
CMS Centers for Medicare & Medicaid Services
COBRA Consolidated Omnibus Budget Reconciliation Act of 1985 (Pub. 
L. 99-272) (29 U.S.C. 1161, et seq.)
ECP Essential community provider
EHB Essential health benefits
ERISA Employee Retirement Income Security Act of 1974 (Pub. L. 93-
406)
FFE Federally-facilitated Exchange
FF-SHOP Federally-facilitated Small Business Health Options Program
FPL Federal Poverty Level
FQHC Federally qualified health center
HCC Hierarchical condition category
HHS United States Department of Health and Human Services
HIPAA Health Insurance Portability and Accountability Act of 1996 
(Pub. L. 104-191)
IRS Internal Revenue Service
LEP Limited English proficient/proficiency
MLR Medical loss ratio
MV Minimum value
NAIC National Association of Insurance Commissioners
OMB Office of Management and Budget
OPM United States Office of Personnel Management
PHS Act Public Health Service Act
PRA Paperwork Reduction Act of 1995
P&T committee Pharmacy and therapeutics committee
QHP Qualified health plan
QIS Quality improvement strategy
SADP Stand-alone Dental Plan
SEP Special enrollment period
SHOP Small Business Health Options Program
The Code Internal Revenue Code of 1986
TPA Third-party administrator
URL Uniform resource locator
USP United States Pharmacopeia

I. Executive Summary

    Qualified individuals and qualified employers are now able to 
purchase private health insurance coverage through competitive 
marketplaces called Affordable Insurance Exchanges, or ``Exchanges'' 
(also called Health Insurance Marketplaces, or ``Marketplaces''). 
Individuals who enroll in qualified health plans (QHPs) through 
individual market Exchanges may be eligible to receive a premium tax 
credit to make health insurance more affordable and for cost-sharing 
reductions to reduce out-of-pocket expenses for health care services. 
Additionally, in 2014, HHS began operationalizing the premium 
stabilization programs established by the Affordable Care Act. These 
programs--the risk adjustment, reinsurance, and risk corridors 
programs--are intended to mitigate the potential impact of adverse 
selection and stabilize the price of health insurance in the individual 
and small group markets. These programs, together with other reforms of 
the Affordable Care Act, are making high-quality health insurance 
affordable and accessible to millions of Americans.
    We have previously outlined the major provisions and parameters 
related to the advance payments of the premium tax credit, cost-sharing 
reductions, and premium stabilization programs. This rule finalizes 
additional

[[Page 10752]]

provisions and modifications related to the implementation of the 
premium stabilization programs, as well as key payment parameters for 
the 2016 benefit year.
    The HHS Notice of Benefit and Payment Parameters for 2014 (78 FR 
15410) (2014 Payment Notice) finalized the risk adjustment methodology 
that HHS will use when it operates the risk adjustment program on 
behalf of a State. Risk adjustment factors reflect enrollee health risk 
and the costs of a given disease relative to average spending. This 
final rule recalibrates the HHS risk adjustment models for the 2016 
benefit year by using 2011, 2012, and 2013 claims data from the Truven 
Health Analytics 2010 MarketScan[supreg] Commercial Claims and 
Encounters database (MarketScan) to develop updated risk factors.
    Using the same methodology as set forth in the 2014 Payment Notice 
and the HHS Notice of Benefit and Payment Parameters for 2015 (79 FR 
13744) (2015 Payment Notice), we finalize a 2016 uniform reinsurance 
contribution rate of $27 annually per enrollee, and the 2016 uniform 
reinsurance payment parameters--a $90,000 attachment point, a $250,000 
reinsurance cap, and a 50 percent coinsurance rate. We are decreasing 
the attachment point for the 2015 benefit year from $70,000 to $45,000, 
while retaining the $250,000 reinsurance cap and a 50 percent 
coinsurance rate. In this rule, we also finalize the definition of 
``common ownership'' for purposes of determining whether a contributing 
entity uses a third-party administrator for core administrative 
functions. In addition, this final rule discusses the reinsurance 
contribution payment schedule and accompanying notifications. We also 
extend the good faith safe harbor for non-compliance with the HHS-
operated risk adjustment and reinsurance data requirements through the 
2015 calendar year.
    We are finalizing a clarification and a modification to the risk 
corridors program. We clarify that the risk corridors transitional 
adjustment policy established in the 2015 Payment Notice, which makes 
an adjustment to a QHP issuer's risk corridors calculation based on 
Statewide enrollment in transitional plans, does not include in that 
calculation enrollment in so-called ``early renewal plans'' (plans that 
renewed before January 1, 2014 and before the end of their 12-month 
terms) unless and until the plans renew in 2014 and become transitional 
plans. Additionally, for the 2016 benefit year, we are finalizing an 
approach for the treatment of risk corridors collections under the 
policy set forth in our April 11, 2014, FAQ on Risk Corridors and 
Budget Neutrality,\1\ in the event that risk corridors collections 
available in 2016 exceed risk corridors payment requests from QHP 
issuers.
---------------------------------------------------------------------------

    \1\ Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/faq-risk-corridors-04-11-2014.pdf.
---------------------------------------------------------------------------

    We also finalize several provisions related to cost sharing. First, 
we establish the premium adjustment percentage for 2016, which is used 
to set the rate of increase for several parameters detailed in the 
Affordable Care Act, including the maximum annual limitation on cost 
sharing for 2016. We establish the maximum annual limitations on cost 
sharing for the 2016 benefit year for cost-sharing reduction plan 
variations. For reconciliation of 2014 cost-sharing reductions, we are 
finalizing and expanding our proposal to permit issuers whose plan 
variations meet certain criteria to estimate the portion of claims 
attributable to non-essential health benefits to calculate cost-sharing 
reductions provided.
    For 2016, we finalize a Federally-facilitated Exchange (FFE) user 
fee rate of 3.5 percent of premium, the same rate as for 2015. This 
rule also finalizes provisions to enhance the transparency and 
effectiveness of the rate review program and standards related to 
minimum essential coverage, the individual market annual open 
enrollment period for the 2016 benefit year, and amendments to a number 
of Small Business Health Options Program (SHOP) provisions, including 
minimum participation rates. This final rule amends the medical loss 
ratio (MLR) provisions relating to the treatment of cost-sharing 
reductions and certain taxes in MLR and rebate calculations, as well as 
the distribution of rebates by group health plans not subject to the 
Employee Retirement Income Security Act of 1974 (Pub. L. 93-406) 
(ERISA). This final rule provides more specificity about the meaningful 
access requirements applicable to Exchanges, to QHP issuers, and to 
agents and brokers subject to Sec.  155.220(c)(3)(i), related to access 
for individuals with limited English proficiency (LEP). This final rule 
requires issuers to provide a summary of benefits and coverage (SBC) 
for each plan variation of the standard QHP and to provide adequate 
notice to enrollees of changes in cost-sharing reduction eligibility. 
This final rule also includes additional quality improvement strategy 
reporting provisions for QHP issuers, specifies the circumstances that 
may lead an Exchange to suppress a QHP from being offered to new 
enrollees through an Exchange, and extends the good faith compliance 
policy for QHP issuers in the FFEs through the 2015 calendar year.
    In this final rule, we are finalizing a number of standards 
relating to essential health benefits (EHBs), including a definition of 
habilitative services, coverage of pediatric services, and coverage of 
prescription drugs. This final rule also provides examples of 
discriminatory plan designs and amends requirements for essential 
community providers (ECPs).

II. Background

A. Legislative and Regulatory Overview

    The Patient Protection and Affordable Care Act (Pub. L. 111-148) 
was enacted on March 23, 2010. The Health Care and Education 
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised 
several provisions of the Patient Protection and Affordable Care Act, 
was enacted on March 30, 2010. In this final rule, we refer to the two 
statutes collectively as the ``Affordable Care Act.''
    Subtitles A and C of title I of the Affordable Care Act 
reorganized, amended, and added to the provisions of part A of title 
XXVII of the Public Health Service Act (PHS Act) relating to group 
health plans and health insurance issuers in the group and individual 
markets.
    Section 2701 of the PHS Act, as added by the Affordable Care Act, 
restricts the variation in premium rates that may be charged by a 
health insurance issuer for non-grandfathered health insurance coverage 
in the individual or small group market to certain specified factors. 
The factors are: Family size, rating area, age, and tobacco use (within 
specified limits).
    Section 2701 of the PHS Act operates in coordination with section 
1312(c) of the Affordable Care Act. Section 1312(c) of the Affordable 
Care Act generally requires a health insurance issuer to consider all 
enrollees in all health plans (except for 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 market and small group market risk pools under section 
1312(c)(3) of the Affordable Care Act.
    Section 2702 of the PHS Act, as added by the Affordable Care Act, 
requires health insurance issuers that offer health insurance coverage 
in the group or individual market in a State to offer coverage to and 
accept every employer

[[Page 10753]]

and individual in the State that applies for such coverage unless an 
exception applies.
    Section 2703 of the PHS Act, as added by the Affordable Care Act, 
requires health insurance issuers that offer health insurance coverage 
in the group or individual market to renew or continue in force such 
coverage at the option of the plan sponsor or individual unless an 
exception applies.
    Section 2718 of the PHS Act, as added by the Affordable Care Act, 
generally requires health insurance issuers to submit an annual MLR 
report to HHS and provide rebates to enrollees if they do not achieve 
specified MLR thresholds.
    Section 2794 of the PHS Act, as added by the Affordable Care Act, 
directs the Secretary of HHS (the Secretary), in conjunction with the 
States, to establish a process for the annual review of ``unreasonable 
increases in premiums for health insurance coverage.'' \2\ The law also 
requires health insurance issuers to submit justifications to the 
Secretary and the applicable State entities for unreasonable premium 
increases prior to the implementation of the increases. Section 
2794(b)(2) of the PHS Act further specifies that, beginning in 2014, 
the Secretary, in conjunction with the States, will monitor premium 
increases of health insurance coverage offered through an Exchange and 
outside of an Exchange.
---------------------------------------------------------------------------

    \2\ The implementing regulations in part 154 limit the scope of 
the requirements under section 2794 of the PHS Act to health 
insurance issuers offering health insurance coverage in the 
individual market or small group market. See Rate Increase 
Disclosure and Review; Final Rule, 76 FR 29964, 29966 (May 23, 
2011).
---------------------------------------------------------------------------

    Section 1302 of the Affordable Care Act provides for the 
establishment of an essential health benefits (EHB) package that 
includes coverage of EHB (as defined by the Secretary) and cost-sharing 
limits, and meets statutorily defined actuarial value (AV) 
requirements. The law directs that EHBs be equal in scope to the 
benefits covered by 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) 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 Affordable Care Act describes the various 
levels of coverage based on AV. Consistent with section 1302(d)(2)(A) 
of the Affordable Care Act, AV is calculated based on the provision of 
EHB to a standard population. Section 1302(d)(3) of the Affordable Care 
Act directs the Secretary to develop guidelines that allow for de 
minimis variation in AV calculations.
    Section 1311(b)(1)(B) of the Affordable Care Act directs the SHOP 
to assist qualified small employers in facilitating the enrollment of 
their employees in QHPs offered in the small group market. Sections 
1312(f)(1) and (2) of the Affordable Care Act define qualified 
individuals and qualified employers. Under section 1312(f)(2)(B) of the 
Affordable Care Act, beginning in 2017, States will have the option to 
allow issuers to offer QHPs in the large group market through the 
SHOP.\3\
---------------------------------------------------------------------------

    \3\ If a State elects to offer QHPs in the large group market 
through the SHOP, the rating rules in section 2701 of the PHS Act 
and its implementing regulations will apply to all coverage offered 
in such State's large group market (except for self-insured group 
health plans) under section 2701(a)(5) of the PHS Act.
---------------------------------------------------------------------------

    Section 1311(c)(1)(B) of the Affordable Care Act requires the 
Secretary to establish minimum criteria for provider network adequacy 
that a health plan must meet to be certified as a QHP. Section 
1311(c)(1)(E) of the Affordable Care Act specifies that, to be 
certified as a QHP participating in Exchanges, each health plan must 
implement a quality improvement strategy (QIS), which is described in 
section 1311(g)(1) of the Affordable Care Act.
    Section 1311(c)(5) of the Affordable Care Act requires the 
Secretary to continue to operate, maintain, and update the Internet 
portal developed under section 1103 of the Affordable Care Act to 
provide information to consumers and small businesses on affordable 
health insurance coverage options.
    Section 1311(c)(6)(B) of the Affordable Care Act states that the 
Secretary is to set annual open enrollment periods for Exchanges for 
calendar years after the initial enrollment period.
    Section 1301(a)(1)(B) of the Affordable Care Act directs all 
issuers of QHPs to cover the EHB package described in section 1302(a) 
of the Affordable Care Act, including the services described in section 
1302(b) of the Affordable Care Act, to adhere to the cost-sharing 
limits described in section 1302(c) of the Affordable Care Act, and to 
meet the AV levels established in section 1302(d) of the Affordable 
Care Act. Section 2707(a) of the PHS Act, which is effective for plan 
or policy years beginning on or after January 1, 2014, extends the 
coverage of the EHB package to non-grandfathered individual and small 
group 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 
sections 1302(c)(1) and (2) of the Affordable Care Act.
    Sections 1313 and 1321 of the Affordable Care Act provide the 
Secretary with the authority to oversee the financial integrity of 
State Exchanges, their compliance with HHS standards, and the efficient 
and non-discriminatory administration of State Exchange activities. 
Section 1321 of the Affordable Care Act provides for State flexibility 
in the operation and enforcement of Exchanges and related requirements.
    Section 1321(a) of the Affordable Care Act provides the Secretary 
with broad authority to establish standards and regulations to 
implement statutory requirements related to Exchanges, QHPs, and other 
components of title I of the Affordable Care Act. Under the authority 
established in section 1321(a)(1) of the Affordable Care Act, the 
Secretary promulgated the regulations at Sec.  155.205(d) and (e). 
Section 155.205 authorizes Exchanges to perform certain consumer 
service functions. Section 155.205(d) provides that each Exchange must 
conduct consumer assistance activities, including the Navigator program 
described in Sec.  155.210, and Sec.  155.205(e) provides that each 
Exchange must conduct outreach and education activities to inform 
consumers about the Exchange and insurance affordability programs to 
encourage participation. Sections 155.205(d) and (e) also allow for the 
establishment of a non-Navigator consumer assistance program. Section 
155.215 establishes standards for Navigators and non-Navigator 
assistance personnel in FFEs and for non-Navigator assistance personnel 
that are

[[Page 10754]]

funded with Exchange establishment grant funds under section 1311(a) of 
the Affordable Care Act.
    When operating an FFE under section 1321(c)(1) of the Affordable 
Care Act, HHS has the authority under sections 1321(c)(1) and 
1311(d)(5)(A) of the Affordable Care Act to collect and spend user 
fees. In addition, 31 U.S.C. 9701 permits a Federal agency to establish 
a charge for a service provided by the agency. Office of Management and 
Budget (OMB) Circular No. A-25 Revised establishes Federal policy 
regarding user fees and specifies that a user charge will be assessed 
against each identifiable recipient for special benefits derived from 
Federal activities beyond those received by the general public.
    Section 1321(c)(2) of the Affordable Care Act authorizes the 
Secretary to enforce the Exchange standards using civil money penalties 
(CMPs) on the same basis as detailed in section 2723(b) of the PHS Act. 
Section 2723(b) of the PHS Act authorizes the Secretary to impose CMPs 
as a means of enforcing the individual and group market reforms 
contained in Part A of title XXVII of the PHS Act when a State fails to 
substantially enforce these provisions.
    Section 1321(d) of the Affordable Care Act provides that nothing in 
title I of the Affordable Care Act should be construed to preempt any 
State law that does not prevent the application of title I of the 
Affordable Care Act. Section 1311(k) of the Affordable Care Act 
specifies that Exchanges may not establish rules that conflict with or 
prevent the application of regulations issued by the Secretary.
    Section 1341 of the Affordable Care Act provides for the 
establishment of a transitional reinsurance program in each State to 
help pay the cost of treating high-cost enrollees in the individual 
market in the 2014 through 2016 benefit years. Section 1342 of the 
Affordable Care Act directs the Secretary to establish a temporary risk 
corridors program that protects against inaccurate rate setting in the 
2014 through 2016 benefit years. Section 1343 of the Affordable Care 
Act establishes a permanent risk adjustment program that is intended to 
provide increased payments to health insurance issuers that attract 
higher-risk populations, such as those with chronic conditions, funded 
by payments from those that attract lower-risk populations, thereby 
reducing incentives for issuers to avoid higher-risk enrollees.
    Sections 1402 and 1412 of the Affordable Care Act provide for 
reductions in cost sharing for EHBs for qualified low- and moderate-
income enrollees in silver level health plans offered through the 
individual market Exchanges. These sections also provide for reductions 
in cost sharing for Indians enrolled in Exchange plans at any metal 
level.
    Section 5000A of the Internal Revenue Code (the Code), as added by 
section 1501(b) of the Affordable Care Act, requires an individual to 
have minimum essential coverage for each month, qualify for an 
exemption, or make a shared responsibility payment with his or her 
Federal income tax return. Section 5000A(f) of the Code defines minimum 
essential coverage as any of the following: (1) Coverage under a 
specified government sponsored program; (2) coverage under an eligible 
employer-sponsored plan; (3) coverage under a health plan offered in 
the individual market within a State; or (4) coverage under a 
grandfathered health plan. Section 5000A(f)(1)(E) of the Code 
authorizes the Secretary, in coordination with the Secretary of the 
Treasury, to designate other health benefits coverage as minimum 
essential coverage.
1. Premium Stabilization Programs
    In the July 15, 2011 Federal Register (76 FR 41930), we published a 
proposed rule outlining the framework for the premium stabilization 
programs. We implemented the premium stabilization programs in a final 
rule, published in the March 23, 2012 Federal Register (77 FR 17220) 
(Premium Stabilization Rule). In the December 7, 2012 Federal Register 
(77 FR 73118), we published a proposed rule outlining the benefit and 
payment parameters for the 2014 benefit year to expand the provisions 
related to the premium stabilization programs, and establish payment 
parameters for those programs (proposed 2014 Payment Notice). We 
published the 2014 Payment Notice final rule in the March 11, 2013 
Federal Register (78 FR 15410).
    In the December 2, 2013 Federal Register (78 FR 72322), we 
published a proposed rule outlining the benefit and payment parameters 
for the 2015 benefit year to expand upon the provisions related to the 
premium stabilization programs, setting forth certain oversight 
provisions, and establishing the 2015 payment parameters for those 
programs (proposed 2015 Payment Notice). We published the 2015 Payment 
Notice final rule in the March 11, 2014 Federal Register (79 FR 13744).
2. Program Integrity
    In the June 19, 2013 Federal Register (78 FR 37032), we published a 
proposed rule that proposed certain program integrity standards related 
to Exchanges and the premium stabilization programs (proposed Program 
Integrity Rule). The provisions of that proposed rule were finalized in 
two rules, the ``first Program Integrity Rule'' published in the August 
30, 2013 Federal Register (78 FR 54070) and the ``second Program 
Integrity Rule'' published in the October 30, 2013 Federal Register (78 
FR 65046).
3. Exchanges
    We published 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. We proposed a 
rule in the July 15, 2011 Federal Register (76 FR 41866) to implement 
components of the Exchange, and a rule in the August 17, 2011 Federal 
Register (76 FR 51202) regarding Exchange functions in the individual 
market, eligibility determinations, and Exchange standards for 
employers. A final rule implementing components of the Exchanges and 
setting forth standards for eligibility for Exchanges was published in 
the March 27, 2012 Federal Register (77 FR 18310) (Exchange 
Establishment Rule).
    We established standards for the administration and payment of 
cost-sharing reductions and the SHOP in the 2014 Payment Notice and in 
the Amendments to the HHS Notice of Benefit and Payment Parameters for 
2014 interim final rule, published in the March 11, 2013 Federal 
Register (78 FR 15541). The provisions established in the interim final 
rule were finalized in the second Program Integrity Rule. We also set 
forth standards related to Exchange user fees in the 2014 Payment 
Notice. We also established an adjustment to the FFE user fee in the 
Coverage of Certain Preventive Services Under the Affordable Care Act 
final rule, published in the July 2, 2013 Federal Register (78 FR 
39870) (Preventive Services Rule).
    In a final rule published in the July 17, 2013 Federal Register (78 
FR 42859), we established standards for Navigators and non-Navigator 
assistance personnel in FFEs and for non-Navigator assistance personnel 
funded through an Exchange establishment grant.
4. Essential Health Benefits and Actuarial Value
    We initially established requirements relating to EHBs and AVs in 
the Standards Related to Essential Health Benefits, Actuarial Value, 
and Accreditation Final Rule, which was

[[Page 10755]]

published in the February 25, 2013 Federal Register (78 FR 12834) (EHB 
Rule). We established standards for updating the AV Calculator for 
future plan years in the 2015 Payment Notice and established an 
expedited prescription drug exception process based on exigent 
circumstances for plans providing EHB in the Exchange and Insurance 
Market Standards for 2015 and Beyond Final Rule (2015 Market Standards 
Rule) that was published in the May 27, 2014 Federal Register (79 FR 
30240).
5. Market Rules
    A proposed rule relating to the Health Insurance Market Rules was 
published in the November 26, 2012 Federal Register (77 FR 70584). A 
final rule implementing the Health Insurance Market Rules was published 
in the February 27, 2013 Federal Register (78 FR 13406) (2014 Market 
Rules).
    A proposed rule relating to Exchanges and Insurance Market 
Standards for 2015 and Beyond was published in the March 21, 2014 
Federal Register (79 FR 15808) (2015 Market Standards Proposed Rule). 
The 2015 Market Standards Rule was published in the May 27, 2014 
Federal Register (79 FR 30240).
6. Rate Review
    We published a proposed rule to establish the rate review program 
in the December 23, 2010 Federal Register (75 FR 81004). We implemented 
the rate review program in a final rule published in the May 23, 2011 
Federal Register (76 FR 26694). We subsequently amended the rate review 
provisions in a final rule published in the September 6, 2011 Federal 
Register (76 FR 54969) and in the 2014 Market Rules.
7. Medical Loss Ratio (MLR)
    We published a request for comment on section 2718 of the PHS Act 
in the April 14, 2010 Federal Register (75 FR 19297), and published 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 published in the December 7, 2011 Federal Register 
(76 FR 76574). An interim final rule with a 60-day comment period was 
published in the December 7, 2011 Federal Register (76 FR 76596). A 
final rule was published in the Federal Register on May 16, 2012 (77 FR 
28790).

B. Stakeholder Consultation and Input

    HHS has consulted with stakeholders on policies related to the 
operation of Exchanges, including the SHOP and the premium 
stabilization programs. HHS has held a number of listening sessions 
with consumers, providers, employers, health plans, the actuarial 
community, and State representatives to gather public input. HHS 
consulted with stakeholders through regular meetings with the National 
Association of Insurance Commissioners (NAIC), regular contact with 
States through the Exchange Establishment grant and Exchange Blueprint 
approval processes, and meetings with Tribal leaders and 
representatives, health insurance issuers, trade groups, consumer 
advocates, employers, and other interested parties. We considered all 
of the public input as we developed the policies in this final rule.

III. Provisions of the Final Regulations and Analysis and Responses to 
Public Comments

    In the November 26, 2014 Federal Register (79 FR 70674), we 
published the ``Patient Protection and Affordable Care Act; HHS Notice 
of Benefit and Payment Parameters for 2016'' proposed rule. We received 
313 comments from various stakeholders, including States, health 
insurance issuers, consumer groups, labor entities, industry groups, 
provider groups, patient safety groups, national interest groups, and 
other stakeholders. The comments ranged from general support of or 
opposition to the proposed provisions to very specific questions or 
comments regarding proposed changes. We received a number of comments 
and suggestions that were outside the scope of the proposed rule and 
therefore will not be addressed in this final rule.
    In this final rule, we provide a summary of each proposed 
provision, a summary of the public comments received and our responses 
to them, and the provisions we are finalizing.
    Comment: We received a number of comments requesting that the 
comment period be extended to 60 days. Several commenters asked that 
HHS develop a standard timeline for issuance of the proposed and final 
Payment Notices, one commenter asked that the final Payment Notice be 
published by mid-January each year, and another asked that it be 
published by February 1st each year.
    Response: The timeline for publication of this final rule 
accommodates issuer filing deadlines for the 2016 benefit year. We 
appreciate the deadlines that States, Exchanges, issuers, and other 
entities face in implementing these rules.
    Comment: We received one comment disapproving of the wide array of 
topics covered in the rule.
    Response: Many of the programs covered by this final rule are 
closely linked. To simplify the regulatory process, facilitate public 
comment, and provide the information needed to meet statutory 
deadlines, we elected to propose and finalize these regulatory 
provisions in one rule.
    Comment: One commenter asked that HHS allow States to continue 
their oversight of their insurance markets and defer to the NAIC for 
the development of important industry-wide, State-based standards.
    Response: Title XXVII of the PHS Act contemplates that States will 
exercise primary enforcement authority over health insurance issuers in 
the group and individual markets to ensure compliance with the Federal 
market reforms. HHS has the responsibility to enforce these provisions 
in the event that a State notifies HHS that it does not have the 
statutory authority to enforce or that it is not otherwise enforcing, 
or if HHS determines that a State is not substantially enforcing, these 
requirements. This enforcement framework, in place since 1996, ensures 
that all consumers in all States have the protections of the Affordable 
Care Act and other parts of the PHS Act. We aim to establish Federal 
oversight standards that complement State standards while meeting 
Federal obligations, and intend to continue to coordinate with State 
authorities to address compliance issues and to reduce the burden on 
stakeholders.
    Comment: One commenter urged HHS to ensure that all regulatory 
information related to the premium stabilization programs be presented 
in a transparent and timely fashion.
    Response: We strive to publicize and present all information 
related to the premium stabilization programs in a transparent and 
timely fashion.

A. Part 144--Requirements Relating to Health Insurance Coverage

1. Definitions (Sec.  144.103)
    Section 144.103 sets forth definitions of terms that are used 
throughout parts 146 through 150. In the proposed rule, we proposed to 
amend the definitions of ``plan'' and ``State.''
a. Plan
    We proposed to make the definition of ``plan'' more specific by 
clarifying that the term means the pairing of the health insurance 
coverage benefits under a ``product'' with a particular cost-sharing 
structure, provider network, and service

[[Page 10756]]

area.\4\ The same definition would be used for purposes of part 154, 
rate review, and part 156, health insurance issuer standards.
---------------------------------------------------------------------------

    \4\ Under Sec.  144.103, the term ``product'' means a discrete 
package of health insurance coverage benefits that a health 
insurance issuer offers using a particular product network type 
within a service area. Examples of product network types include 
health maintenance organization (HMO), preferred provider 
organization (PPO), exclusive provider organization (EPO), point of 
service (POS), and indemnity.
---------------------------------------------------------------------------

    We noted that issuers can modify the health insurance coverage for 
a product upon coverage renewal and sought comment on standards for 
determining when a plan that has been modified should be considered to 
be the ``same plan'' for purposes of rate review, plan identification 
in the Health Insurance Oversight System (HIOS), and other programs. In 
particular, we sought comment on whether these standards should be 
similar to those applicable at the product level under the uniform 
modification provision at Sec.  147.106(e).
    We are finalizing the amendments to the definition of ``plan'' as 
proposed. We are also specifying standards for determining when a plan 
that has been modified will be considered to be the ``same plan.''
    Comment: Many commenters were supportive of the proposed definition 
of ``plan'' stating it more closely aligns with issuer operations and 
consumer expectations. However, some commenters believed that parts of 
the definition were too vague, such as the references to ``cost-sharing 
structure'' and ``provider network.'' For example, one commenter stated 
that the reference to a ``particular'' cost-sharing structure could 
mean that each cost-sharing reduction plan variation of the standard 
QHP would constitute a separate ``plan.'' One commenter recommended 
adding the prescription drug formulary as a distinct plan 
characteristic. Other commenters cautioned HHS to be mindful of the 
operational impacts of changing the definition of ``plan.''
    Response: We believe the proposed definition accurately reflects 
the key features of a plan: a package of benefits paired with a cost-
sharing structure and provider network that operates within a service 
area. By ``provider network,'' we mean the defined set of providers 
under contract with the issuer for the delivery of medical care 
(including items and services paid for as medical care), if applicable. 
We recognize that the prescription drug formulary is an important 
element of plan coverage, but do not specifically include it in the 
definition, because each aspect of the formulary--the covered drugs and 
the tiering design--are represented by the plan's benefits and cost-
sharing structure. Further, we clarify that each plan variation of a 
standard QHP would not constitute a ``particular cost-sharing 
structure'' for purposes of the definition and thus would not 
constitute a separate plan.
    The final rule adopts the definition of ``plan'' as proposed. We 
believe many issuers already distinguish their plans according to these 
characteristics, and we do not anticipate significant downstream issues 
as a result of these clarifications. Nevertheless, we will work with 
States and issuers to make any necessary adjustments to plan 
identifiers in Federal systems.
    Comment: We received some comments addressing when a plan should be 
considered to be the ``same plan'' following modifications at the plan 
level. Several commenters agreed with the option we presented in the 
preamble to the proposed rule of using standards similar to those for 
uniform modification of a product for identifying modifications to a 
plan that would result in the plan remaining the ``same plan.'' 
Commenters stated that we should permit changes to cost sharing 
designed to maintain the same metal level and modifications 
attributable to Federal or State legal requirements to constitute the 
same plan. Two commenters recommended standards regarding provider 
network and service area.
    Response: In this final rule, we specify when a plan that has been 
modified will be considered to be the ``same plan.'' Based on the 
comments received, the final rule generally adopts the standards for 
uniform modification at the product level for changes made at the plan 
level. These standards reflect characteristics relevant to the 
definition of ``plan,'' including provider network, an additional 
characteristic not reflected in the uniform modification provision. We 
specifically omit those standards at Sec.  147.106(e)(3) related to 
issuer, product network type, and covered benefits, which are relevant 
only at the product level. We note that modifications to these 
characteristics in a manner that exceeds the standards for uniform 
modification would result in a new product and, consequently, new plans 
within the product.
    The final rule provides that a plan that has been modified at the 
time of coverage renewal in accordance with Sec.  147.106 will be 
considered to be the same plan if it meets the following conditions:
    <bullet> Has the same cost-sharing structure as before the 
modification, or any variation in cost sharing is solely related to 
changes in cost or utilization of medical care (that is, medical 
inflation or demand for services based on inflationary increases in the 
cost of medical care), or is to maintain the same metal tier level 
described in sections 1302(d) and (e) of the Affordable Care Act (that 
is, bronze, silver, gold, platinum, or catastrophic).
    <bullet> Continues to cover a majority of the same service area.
    <bullet> Continues to cover a majority of the same provider network 
(as applicable).
    We recognize that a plan's provider network may change throughout 
the plan year. Therefore, for purposes of determining whether a plan 
maintains a majority of the same provider network, the plan's provider 
network on the first day of the plan year is compared with the plan's 
provider network on the first day of the preceding plan year. If at 
least 50 percent of the contracted providers at the beginning of the 
plan year are still contracted providers at the beginning of the next 
plan year, the plan will be considered to have maintained a majority of 
the same provider network.
    Furthermore, similar to the standard for uniform modification of a 
product, a plan also will not fail to be treated as the same plan to 
the extent the changes are made uniformly and solely pursuant to 
applicable Federal or State requirements, provided that the changes are 
made within a reasonable time period after the imposition or 
modification of the Federal or State requirement and are directly 
related to the imposition or modification of the Federal or State 
requirement.
    The cost-sharing provision under this final rule is identical to 
the cost-sharing provision under the uniform modification standard. In 
the 2015 Market Standards Rule (79 FR 30251), which established 
criteria for uniform modification, we stated that the cost-sharing 
provision is intended to establish basic parameters around cost-sharing 
modifications to protect consumers from extreme changes in deductibles, 
copayments, and coinsurance, while preserving issuer flexibility to 
make reasonable and customary adjustments from year to year.
    Finally, as with the uniform modification provision, States have 
flexibility to broaden the definition of ``same plan.'' States may, at 
their option, permit greater changes to cost-sharing structure, or 
designate a lower threshold than the ``majority'' standard in this 
final rule for changes in provider network and service area, to 
constitute the same plan. We intend to monitor issues around compliance 
with the

[[Page 10757]]

categorization of ``plans'' and may provide future guidance as 
necessary.
b. State
    We proposed to amend the definition of ``State'' to exclude 
application of the Affordable Care Act market reforms under part 147 to 
issuers in the U.S. Territories of Puerto Rico, the Virgin Islands, 
Guam, American Samoa, and the Northern Mariana Islands. The change 
codifies HHS's interpretation, outlined in letters to the Territories 
on July 16, 2014, that the new provisions of the PHS Act enacted in 
title I of the Affordable Care Act are appropriately governed by the 
definition of ``State'' set forth in that title, and therefore do not 
apply to group or individual health insurance issuers in the 
Territories.\5\
---------------------------------------------------------------------------

    \5\ See for example, Letter to Virgin Islands on the Definition 
of State (July 16, 2014). Available at: http://www.cms.gov/CCIIO/Resources/Letters/Downloads/letter-to-Francis.pdf.
---------------------------------------------------------------------------

    As explained in the July 16, 2014 letters and reiterated in the 
preamble to the proposed rule (79 FR 70681), this interpretation 
applies only to health insurance that is governed by the PHS Act. It 
does not affect the PHS Act requirements that were enacted in the 
Affordable Care Act and incorporated into ERISA and the Code and apply 
to group health plans (whether insured or self-insured), because such 
applicability does not rely upon the term ``State'' as it is defined in 
either the PHS Act or Affordable Care Act. It also does not affect the 
PHS Act requirements that were enacted in the Affordable Care Act and 
apply to non-Federal governmental plans. As a practical matter, 
therefore, PHS Act, ERISA, and Code requirements applicable to group 
health plans continue to apply to such coverage, and issuers selling 
policies to both private sector and public sector employers in the 
Territories should ensure their products comply with the relevant 
Affordable Care Act amendments to the PHS Act applicable to group 
health plans since their customers--the group health plans--are subject 
to those provisions. These include the prohibition on lifetime and 
annual limits (section 2711 of the PHS Act), the prohibition on 
rescissions (section 2712 of the PHS Act), coverage of preventive 
health services (section 2713 of the PHS Act), and the revised internal 
and external appeals process (section 2719 of the PHS Act).
    We are finalizing these amendments as proposed.
    Comment: Several commenters supported the proposed amendments to 
the term ``State'' to avoid undermining the stability of the 
Territories' health insurance markets. One commenter encouraged HHS to 
work with the Territories to improve access to coverage for their 
residents.
    Response: We are committed to partnering with the Territories to 
ensure their markets are robust and competitive, so that consumers have 
access to quality, affordable health insurance.

B. Part 147--Health Insurance Reform Requirements for the Group and 
Individual Health Insurance Markets

1. Guaranteed Availability of Coverage (Sec.  147.104)
    We proposed several modifications to the guaranteed availability 
requirements under Sec.  147.104. First, we proposed to remove 
regulation text in Sec.  147.104(b)(2) establishing a special 
enrollment period (also referred to as a ``limited open enrollment 
period'') for individuals enrolled in non-calendar year individual 
market plans, because the requirement is incorporated through cross-
reference in the same paragraph to the Exchange rules at Sec.  
155.420(d)(1)(ii).
    Second, we proposed to add new paragraph Sec.  147.104(f), which 
would move and recodify, with minor modifications for clarity, the 
requirement under existing Sec.  147.104(b)(2) for non-grandfathered 
individual and merged market plans to be offered on a calendar year 
basis.
    Third, we proposed to amend Sec.  147.104(b)(4) by adding a cross-
reference to the advance availability of special enrollment periods 
under Sec.  155.420(c)(2). This would align with the Exchange 
regulations and allow individuals to make a plan selection 60 days 
before and after certain triggering events when enrolling inside or 
outside the individual market Exchanges.
    Finally, we proposed amending Sec.  147.104(b)(1)(i)(C) to update 
the citation to the SHOP regulations to conform with changes made in 
this rulemaking. The cross-reference is changed from Sec.  
155.725(a)(2) to Sec.  155.725.
    We are finalizing these amendments as proposed.
    Comment: Most commenters supported extending the 60-day advance 
availability provisions to ensure market-wide consistency in special 
enrollment periods. One commenter recommended a 30-day special 
enrollment period. Other commenters recommended maintaining the 60-day 
special enrollment period.
    Response: We agree with commenters who urged consistency in access 
to special enrollment periods inside and outside the individual market 
Exchanges. We believe these provisions will help consumers avoid gaps 
in coverage when they experience certain significant life changes 
without resulting in adverse selection.
2. Guaranteed Renewability of Coverage (Sec.  147.106)
    Consistent with previous guidance, we proposed that an issuer will 
not satisfy the requirements for product discontinuation under the 
guaranteed renewability regulations at Sec.  146.152(c)(2), Sec.  
147.106(c)(2), or Sec.  148.122(d)(2) if the issuer automatically 
enrolls a plan sponsor or individual (as applicable) into a product of 
another licensed health insurance issuer.\6\ However, this would not 
prevent an issuer that decides to withdraw from the market in a State 
from mapping enrollees to a product of another licensed issuer, to the 
extent permitted by applicable State law, and provided the issuer 
otherwise satisfies the requirements for market withdrawal.
---------------------------------------------------------------------------

    \6\ See Insurance Standards Bulletin, Form and Manner of Notices 
When Discontinuing or Renewing a Product in the Group or Individual 
Market, section IV (September 2, 2014). Available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Renewal-Notices-9-3-14-FINAL.PDF. See also Patient Protection and 
Affordable Care Act; Annual Eligibility Redeterminations for 
Exchange Participation and Insurance Affordability Programs; Health 
Insurance Issuer Standards Under the Affordable Care Act, Including 
Standards Related to Exchanges, 79 FR at 53000 (September 5, 2014).
---------------------------------------------------------------------------

    We stated that allowing an issuer to transfer blocks of business to 
another issuer could create opportunities for risk segmentation, but 
also recognized that regulating these matters could have implications 
for certain corporate reorganization practices. We sought comment on 
how to interpret the guaranteed renewability provisions in the context 
of various corporate transactions involving a change of ownership, such 
as acquisitions, mergers, or other corporate transactions; how common 
such transactions are and how they are typically structured; whether 
auto-enrollment should be allowed into a product of the post-
transaction issuer; how the market reforms such as the single risk pool 
provision should be applied; and what protections should be provided to 
consumers when their product is transferred.
    Because ownership transfers have implications for the operational 
processes of HHS-administered programs, such as advance payments of the 
premium tax credit, cost-sharing reduction payments, FFE user fees, and 
the premium stabilization programs, we proposed a notification 
requirement on

[[Page 10758]]

issuers of a QHP, a plan otherwise subject to risk corridors, or a 
reinsurance-eligible plan or a risk adjustment covered plan, in cases 
of changes of ownership. We proposed that the post-transaction issuer 
notify HHS of the transaction by the date the transaction is entered 
into or the 30th day prior to the effective date of the transaction, 
whichever is later. We sought comments on all aspects of the 
notification, including what further notification requirements should 
apply to ownership transfers, and whether the notification requirement 
should apply to all plans subject to the guaranteed renewability 
requirements, including grandfathered health plans.
    We are finalizing the notification requirement in cases of changes 
of ownership as recognized by the State in which the issuer offers 
coverage. In light of the comments discussed below, we are not 
codifying the provision prohibiting an issuer from automatically 
enrolling plan sponsors or individuals (as applicable) into a product 
of another licensed health insurance issuer. We intend to consult with 
the NAIC and other stakeholders before releasing further guidance on 
this issue.
    Comment: Many commenters encouraged HHS to defer to State 
determinations on matters regarding change of ownership, including when 
it is appropriate for an issuer to renew coverage through another 
licensed issuer. One commenter requested that HHS expressly recognize 
an offer of coverage by an affiliated issuer as an exception to the 
prohibition on auto-enrollment. Several commenters emphasized the need 
for continuity of care and recommended that, in cases of mid-year 
changes of ownership, the acquiring issuer retain some or all of the 
characteristics of the original plan, such as the same benefits, cost 
sharing, formulary, and network. Conversely, another commenter noted 
that the same coverage features rarely remain in place after an 
ownership transfer. Some commenters recommended HHS work with States 
and issuers before releasing guidance on how corporate transactions 
should be handled.
    Response: After careful review of the comments submitted on this 
issue and the relevant statutory language, we are not codifying the 
prohibition on auto-enrollment into a product of another licensed 
issuer at this time. We intend to consult with the NAIC and other 
stakeholders to develop guidance on how to handle corporate 
transactions involving a change of ownership. We will generally look to 
the applicable State authority on matters regarding changes of 
ownership until further guidance is issued. In the interim, we will 
continue to apply our interpretation of the guaranteed renewability 
requirements, set forth in previous guidance,\7\ to prohibit auto-
enrollment into a product of another issuer in cases where the auto-
enrollment does not occur in connection with a change of ownership.
---------------------------------------------------------------------------

    \7\ Id.
---------------------------------------------------------------------------

    Comment: Some commenters recommended that HHS provide flexibility 
to issuers to determine liability of each party in a transaction for 
advance payments of the premium tax credit, cost-sharing reductions 
payments, and the premium stabilization programs.
    Response: We intend to take these comments into consideration as we 
consider whether guidance on liability is necessary as it relates to 
the HHS-administered programs described above.
    Comment: In response to the proposed notification requirement for 
issuers experiencing a change of ownership, some commenters recommended 
that HHS defer to State definitions of change of ownership. One 
commenter suggested notice is unnecessary, as QHP issuers in the FFEs 
must already provide HHS with notice of change of ownership under Sec.  
156.330. One commenter recommended issuers be required to provide 
notice only after a transaction is completed, and sought clarification 
that HHS will collect only the minimum information necessary to 
facilitate operational processes and has no intention of collecting the 
information for purposes other than for continuity of operations.
    Response: We are finalizing the proposal to require notification 
when an issuer experiences a change of ownership, as recognized by the 
State in which the issuer offers coverage. The definition of change of 
ownership for the purpose of notification is intended simply to capture 
situations in which such a change may have operational implications for 
the above mentioned programs. We recognize that States have existing 
regulatory processes for reviewing changes of ownership.
    We also recognize that FFE issuers are subject to a notification 
requirement under Sec.  156.330; however, changes of ownership may have 
operational implications for HHS-administered programs beyond the FFEs. 
The HHS-administered programs described above affect QHP issuers in 
both the FFEs and State-based Exchanges, as well as issuers offering 
plans outside of Exchanges. To work closely with issuers to anticipate 
and resolve potential issues arising from such transactions, we are 
finalizing the notice requirement for an issuer of a QHP, a plan 
otherwise subject to risk corridors, a risk adjustment covered plan, or 
a reinsurance-eligible plan, as proposed. We intend to limit the 
information collected to those elements necessary for HHS and issuers 
to determine how the change of ownership affects operations of HHS-
administered programs. These elements include the legal name, HIOS plan 
identifier, tax identification number of the original and post-
transaction issuers, the effective date of the change of ownership, and 
the summary description of transaction. Depending on the nature of the 
transaction, additional information may be necessary to ensure smooth 
operations of affected programs. We anticipate addressing the need for 
additional information on a case-by-case basis, through discussion with 
affected issuers, with the participation of affected issuers.
    Finally, we are sensitive to the fluid nature of change of 
ownership transactions, but believe that our proposed dates for 
notification accommodate most transactional timelines. In addition, the 
information we intend to require from issuers is limited in scope and 
should not substantially burden either issuers or HHS, even if the 
transaction is not ultimately consummated. To ensure continuity of 
operations, particularly for administration of monthly payments and 
charges for advance payments of the premium tax credit and cost-sharing 
reductions, it is in the interest of both issuers and HHS to coordinate 
prior to the effective date of the transaction.

C. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk 
Adjustment Under the Affordable Care Act

1. Provisions for the State Notice of Benefit and Payment Parameters 
(Sec.  153.100)
    In Sec.  153.100(c), we established a deadline of March 1 of the 
calendar year prior to the applicable benefit year for a State to 
publish a State notice of benefit and payment parameters if the State 
is required to do so under Sec.  153.100(a) or (b)--that is, if the 
State is operating a risk adjustment program, or if the State is 
establishing a reinsurance program and wishes to modify the data 
requirements for issuers to receive reinsurance payments from those 
specified in the HHS notice of benefit and payment parameters for the 
benefit year, wishes to collect additional reinsurance contributions or 
use

[[Page 10759]]

additional funds for reinsurance payments, or elects to use more than 
one applicable reinsurance entity. As of the date of publication of 
this final rule, Connecticut is the only State that has elected to 
establish a transitional reinsurance program and Massachusetts is the 
only State that has elected to operate a risk adjustment program. We 
proposed to modify Sec.  153.100(c) so that the publication deadline 
for the State notice of benefit and payment parameters would be the 
later of March 1 of the calendar year prior to the applicable benefit 
year, or the 30th day following publication of the final HHS notice of 
benefit and payment parameters for that benefit year.
    We are finalizing this modification as proposed.
    Comment: One commenter disagreed with our proposal, stating that 
delaying the publication of the State notices would not give issuers 
enough time to develop product and rate filings.
    Response: Although HHS intends to issue the final HHS notice of 
benefit and payment parameters in a timely fashion, it is difficult for 
States to publish such a notice by the required deadline if the final 
HHS notice of benefit and payment parameters for the applicable benefit 
year has not yet been published.
2. Provisions and Parameters for the Permanent Risk Adjustment Program
    The risk adjustment program is a permanent program created by 
section 1343 of the Affordable Care Act that transfers funds from lower 
risk, non-grandfathered plans to higher risk, non-grandfathered plans 
in the individual and small group markets, inside and outside the 
Exchanges, to balance risk and maintain market stability. In subparts D 
and G of the Premium Stabilization Rule, we established standards for 
the administration of the risk adjustment program. 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.
a. Risk Adjustment User Fee
    If a State is not approved to operate or chooses to forgo operating 
its own risk adjustment program, HHS will operate risk adjustment on 
the State's behalf. As described in the 2014 Payment Notice, HHS's 
operation of risk adjustment on behalf of States is funded through a 
risk adjustment user fee. Section 153.610(f)(2) provides that an issuer 
of a risk adjustment covered plan must remit a user fee to HHS equal to 
the product of its monthly enrollment in the plan and the per-enrollee-
per-month risk adjustment user fee specified in the annual HHS notice 
of benefit and payment parameters for the applicable benefit year.
    OMB Circular No. A-25R establishes Federal policy regarding user 
fees, and specifies that a user charge will be assessed against each 
identifiable recipient for special benefits derived from Federal 
activities beyond those received by the general public. The risk 
adjustment program will provide special benefits as defined in section 
6(a)(1)(b) of Circular No. A-25R to issuers of risk adjustment covered 
plans because it will mitigate the financial instability associated 
with potential adverse risk selection. The risk adjustment program also 
will contribute to consumer confidence in the health insurance industry 
by helping to stabilize premiums across the individual and small group 
health insurance markets.
    In the 2015 Payment Notice, we estimated Federal administrative 
expenses of operating the risk adjustment program to be $0.96 per-
enrollee-per-year, based on our estimated contract costs for risk 
adjustment operations. For the 2016 benefit year, we proposed to use 
the same methodology to estimate our administrative expenses to operate 
the program. These contracts cover development of the risk adjustment 
model and methodology, collections, payments, account management, data 
collection, data validation, program integrity and audit functions, 
operational and fraud analytics, stakeholder training, and operational 
support. To calculate the user fee, we divided HHS's projected total 
costs for administering the risk adjustment programs on behalf of 
States by the expected number of enrollees in risk adjustment covered 
plans in HHS-operated risk adjustment programs for the benefit year 
(other than plans not subject to market reforms and student health 
plans, which are not subject to payments and charges under the risk 
adjustment methodology HHS uses when it operates risk adjustment on 
behalf of a State).
    We estimated that the total cost for HHS to operate the risk 
adjustment program on behalf of States for 2016 will be approximately 
$50 million, and that the risk adjustment user fee would be $1.75 per 
enrollee per year. The increased risk adjustment user fee for 2016 is 
the result of the increased contract costs to support the risk 
adjustment data validation process when HHS operates risk adjustment, 
which HHS will administer for the first time in 2016. We are finalizing 
the proposed methodology for benefit year 2016 and are finalizing a per 
capita risk adjustment user fee of $1.75 per enrollee per year, which 
we will apply as a per-enrollee-per-month risk adjustment user fee of 
$0.15.
    Comment: One commenter did not support the higher risk adjustment 
user fee for 2016, noting that issuers are already bearing significant 
costs for risk adjustment data validation audits, and requested that 
CMS identify efficiencies that could be leveraged in risk adjustment 
data validation operations that will keep costs down. Another commenter 
supported the higher risk adjustment user fee for 2016 to support risk 
adjustment data validation audits, reiterating the importance of these 
audits to ensure that the risk adjustment program is as accurate and 
effective as possible over time. One commenter requested clarification 
that the risk adjustment user fee is assessed on issuers, not States.
    Response: As we stated in the 2014 Payment Notice, we believe that 
a reliable funding source is necessary to ensure a robust Federal risk 
adjustment program. We also agree with the commenter that risk 
adjustment data validation audits are critical to ensure that risk 
adjustment is as accurate, fair, and effective as possible over time. 
The risk adjustment user fee was established for the sole purpose of 
funding HHS's costs for operating the Federal risk adjustment program, 
and we intend to keep the user fee amount as low as possible. The risk 
adjustment user fee must be remitted by issuers of risk adjustment 
covered plans, rather than States.
b. Overview of the HHS Risk Adjustment Model
    The HHS risk adjustment model predicts plan liability for an 
enrollee based on that person's age, sex, and diagnoses (risk factors), 
producing a risk score. The HHS risk adjustment methodology utilizes 
separate models for adults, children, and infants to account for cost 
differences in each of these age groups. In each of the adult and child 
models, the relative costs assigned to an individual's age, sex, and 
diagnoses are added together to produce a risk score. Infant risk 
scores are determined by inclusion in one of 25 mutually exclusive 
groups based on the infant's maturity and the severity of his or her 
diagnoses. If applicable, the risk score is multiplied by a cost-
sharing reduction adjustment.
    The enrollment-weighted average risk score of all enrollees in a 
particular risk adjustment-covered plan, or the plan liability risk 
score, within a geographic rating area is one input into the

[[Page 10760]]

payment transfer formula, which determines an issuer's transfer 
(payment or charge) for that plan. Thus, the HHS risk adjustment model 
predicts individual-level risk scores, but is designed to predict 
average group costs to account for risk across plans, which, as we 
stated in the 2014 Payment Notice, accords with the Actuarial Standards 
Board's Actuarial Standards of Practice for risk classification. We 
received several general comments about the HHS risk adjustment model.
    Comment: Several commenters requested additional guidance about the 
ICD-10 transition and how the risk adjustment model will implement 
these changes.
    Response: We will publish updated ICD-9 instructions and software 
and then a combined set of ICD-9 and ICD-10 instructions and software 
on our Web site, as we did for the original ICD-9 software and 
instructions, which we have updated annually.\8\ Because ICD-10 codes 
will be accepted for risk adjustment beginning October 1, 2015, we 
intend to publish these documents shortly.
---------------------------------------------------------------------------

    \8\ The HHS-Developed Risk Adjustment Model Algorithm Software 
and Instructions are available at: http://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/index.html 
under ``Regulations & Guidance'' (posted under ``Guidance'' on June 
2, 2014).
---------------------------------------------------------------------------

    Comment: One commenter requested an additional 60 days for review 
of the risk adjustment recalibration, stating that the 30-day comment 
period was insufficient to review the model and provide sufficient 
comments. Another commenter stressed that issuers need 60 to 90 days 
prior to filing dates to account for final risk adjustment model 
changes.
    Response: We are sympathetic to these concerns; however, we 
received numerous detailed, substantive comments on the proposed risk 
adjustment recalibration. Additionally, the timeline for publication of 
this final rule accommodates many commenters' requests that the final 
rule be published prior to filing deadlines for the 2016 benefit year.
    Comment: One commenter requested that the Sec.  153.420(b) data 
submission deadline of April 30 of the year following the benefit year 
be moved to July 31 for the initial year of risk adjustment.
    Response: We have been working with issuers to ensure that issuers' 
data submissions for 2014 benefit year risk adjustment and reinsurance 
will be complete and accurate by April 30, 2015. We do not intend to 
delay the final data submission deadline for 2014 risk adjustment (and 
reinsurance).
c. Proposed Updates to Risk Adjustment Models
    We proposed to continue to use the same risk adjustment methodology 
finalized in the 2014 Payment Notice, with changes to reflect more 
current data, as described below. As we stated above, in the adult and 
child models, enrollee health risks are estimated using the HHS risk 
adjustment methodology, which assigns a set of additive factors that 
reflect the relative costs of demographics and diagnoses. Risk 
adjustment factors are developed using claims data and reflect the 
costs of a given disease relative to average spending. The longer the 
lag in data used to develop the risk factors, the greater the potential 
that the costs of treating one disease versus another have changed in a 
manner not fully reflected in the risk factors.
    To provide risk adjustment factors that best reflect more recent 
treatment patterns and costs, we proposed to recalibrate the HHS risk 
adjustment models for 2016 by using more recent claims data to develop 
updated risk factors. The risk factors published in the 2014 Payment 
Notice for use in 2014 and 2015 were developed using the Truven Health 
Analytics 2010 MarketScan[supreg] Commercial Claims and Encounters 
database (MarketScan); we proposed to update the risk factors in the 
HHS risk adjustment models using 2010, 2011, and 2012 MarketScan data. 
We also proposed that if 2013 MarketScan data becomes available after 
the publication of the proposed rule, we would update the risk factors 
in the HHS risk adjustment model using the 3 most recent years of data 
available--MarketScan 2011, 2012, and 2013 data. These updated risk 
factors would be published and finalized in this final rule.
    We proposed to implement the recalibrated risk adjustment factors 
in 2016 to provide sufficient time for issuers to account for risk 
adjustment model changes. However, we also sought comment on making the 
recalibrated HHS risk adjustment models effective beginning for the 
2015 benefit year instead of the 2016 benefit year. We sought comment 
on this approach, including whether we should update risk factors based 
on 2013 MarketScan data when it becomes available after publication of 
the proposed rule, and whether the updated risk factors should be 
implemented for 2015 or 2016. We are finalizing the HHS risk adjustment 
recalibration using 2011, 2012, and 2013 MarketScan data to develop 
final risk adjustment factors to be implemented in the 2016 benefit 
year. We are making no changes for the 2015 benefit year.
    Comment: Commenters supported recalibrating the risk adjustment 
model based on the most recent data available, noting that the 
underlying data is dated and that updating the factors will boost 
issuers' confidence in the model's predictive power, which could reduce 
risk selection behaviors and help stabilize premiums. One commenter 
suggested that we provide simulated results between the proposed 3-year 
recalibration approach and the 2014 risk adjustment factors for the 
2015 benefit year. Another commenter requested that CMS provide a 
report that includes a detailed analysis of the impact that 
recalibration may have, including details sufficient for issuers to 
make adjustments to premium rates as appropriate. Most commenters 
supported recalibrating for the 2016 benefit year, since 2015 rates 
have already been set, with some commenters supporting implementation 
of recalibration in the 2015 benefit year. Commenters supported using 
2013 data as long as the data would be available prior to publication 
of the final 2016 Payment Notice and would be available prior to 2016 
rate filings. Other commenters did not support using 2013 MarketScan 
data, instead suggesting that 2010, 2011, and 2012 data are sufficient.
    Response: We agree on the importance of using recent data to 
calibrate our models. However, we also agree that timely notice of risk 
adjustment model changes is necessary for orderly rate development. 
Therefore, we will implement the recalibrated risk adjustment models in 
the 2016 benefit year. Additionally, because we received and were able 
to prepare the 2013 MarketScan dataset prior to the publication of this 
final rule, we have developed the 2016 risk adjustment factors using 
2011, 2012, and 2013 MarketScan data. We believe this incorporation 
allows for the use of the most recent data available to HHS, while 
giving issuers the notice required for rate setting for the 2016 
benefit year. We will continue to assess how we may ameliorate the data 
lag in future recalibrations. We believe that the transfer equation 
provided in the 2014 Payment Notice and the updated risk adjustment 
factors provided in this final Payment Notice are sufficient for 
issuers to evaluate the impact of risk adjustment on their rate 
development for 2016.
    We believe that using multiple years of data will promote market 
stability and minimize volatility in coefficients for certain rare 
diagnoses. In using multiple years of data to recalibrate the

[[Page 10761]]

risk adjustment model, we considered either pooling data from 3 sample 
years or averaging coefficients from three separately estimated 
calibrations, based on the 2010, 2011, and 2012 data, and sought 
comment on the two approaches. We examined the effects of pooling data 
and averaging separate calibrations, and did not find a quantitatively 
important difference between the resulting coefficients. However, we 
believe that averaging coefficients offers the advantage of 
transparency and ease in future recalibrations. Averaging coefficients 
using the 3 most recent years of separately estimated calibrations 
allows for most recent data to be incorporated into the model, while 
ensuring that coefficients remain relatively stable, and are therefore 
finalizing our approach to average the coefficients from 3 separately 
estimated sample years. Below we publish the R-squared statistics of 
the 3 separately estimated sample years' estimates, and the blended 
coefficient for each risk adjustment factor.
    Comment: Commenters supported the transparency and ease of 
averaging coefficients from three separately estimated calibrations, 
with one commenter recommending that we consider statistical best 
practices in the decision as to whether to average coefficients or pool 
data. Another commenter requested that we average coefficients, 
validate the results using pooled data, and publish a report detailing 
the results of the two methods.
    Response: We carefully considered the two approaches, noting the 
benefits of each approach--transparency with averaging, and a single R-
squared statistic and larger sample sizes for each model with pooling. 
However, when we compared the coefficients from both approaches, we did 
not find quantitatively important differences across the coefficients. 
We will continue to evaluate the coefficient averaging approach and 
consider any refinements in future recalibrations.
    We made minor refinements to the underlying MarketScan 
recalibration samples from which the risk adjustment factors are 
derived. In particular, we changed our treatment of Age 0 infants 
without birth hierarchical condition categories (HCCs). There may be 
cases in which there is no separate infant birth claim from which to 
gather diagnoses. For example, mother and infant claims may be bundled 
such that infant diagnoses appear on the mother's record. Where newborn 
diagnoses appear on the mother's claims, HHS has issued operational 
guidance on how best to associate those codes with the appropriate 
infant.\9\
---------------------------------------------------------------------------

    \9\ HHS-Developed Risk Adjustment Model Algorithm Software 
Instructions. June 2, 2014. http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/DIY-instructions-5-20-14.pdf
---------------------------------------------------------------------------

    However, we proposed a change in how we categorize age 0 infants 
who do not have birth codes. We previously stated in the operational 
guidance referenced above that infants without birth codes would be 
assigned an ``Age 0, Term'' factor in risk adjustment operations. We 
did so under the assumption that issuers paid the birth costs, yet the 
birth HCCs were missing (perhaps because claims were bundled with the 
mother's, whose claims were excluded). Upon further analysis of age 0 
and age 1 claims, we found that age 0 infants without birth HCCs had 
costs more similar to age 1 infants by severity level. We believe that 
these infants should be assigned to age 1 in situations where the 
issuer did not pay the birth costs during the plan year. For many age 0 
infants without birth HCCs, the birth could have occurred in the prior 
year or was paid for by a different issuer. We proposed that age 0 
infants without birth HCCs be assigned to ``Age 1'' by severity level. 
We have made this change in the recalibration samples that we are using 
to calculate risk factors for proposed implementation in the 2016 
benefit year. We also proposed to make this change in the operation of 
the risk adjustment methodology for the year in which we would 
implement the recalibrated risk adjustment factors. We are finalizing 
our approach as proposed, for implementation in the 2016 benefit year 
with the recalibrated risk adjustment models.
    Comment: Some commenters supported our reassignment of age 0 
infants without birth codes from ``Age 0, Term'' to ``Age 1, severity 
level,'' noting the reduction in the factor that occurs from these 
infants' reassignment. Other commenters disagreed with our reassignment 
of age 0 infants without birth codes to ``Age 1, severity level.'' 
Commenters suggested that bundling claims is standard industry practice 
and infants on bundled claims without birth codes should be assigned to 
``Age 0, Term,'' while another commenter suggested that this 
reassignment would result in incorrect payments for infant claims with 
discharge dates that overlap benefit years.
    Response: In previous guidance, we have stated that issuers should 
unbundle claims to receive credit for all diagnoses. We believe that 
many age 0 infants without birth codes more closely resemble the risk 
profiles of age 1 infants. In many cases, the birth codes have been 
appropriately excluded due to a birth in the previous year or a change 
in insurance status. We will continue to treat infants with discharge 
dates that overlap benefit years as age 0, unless they do not have 
birth codes, in which case we would assign them to ``age 1, severity 
level,'' as with age 0 infants without birth codes whose discharge 
dates do not overlap benefit years.
d. List of Factors To Be Employed in the Model
    The HHS risk adjustment models predict annualized plan liability 
expenditures using age and sex categories and the HHS HCCs included in 
the HHS risk adjustment model. Dollar coefficients were estimated for 
these factors using weighted least squares regression, where the weight 
was the fraction of the year enrolled.
    We are including the same HCCs that were included in the original 
risk adjustment calibration in the 2014 Payment Notice. For each model, 
the factors are the statistical regression dollar values for each HCC 
in the model divided by a weighted average plan liability for the full 
modeling sample. The factors represent the predicted relative 
incremental expenditures for each HCC. The proposed factors resulting 
from the averaged factors from the 2011, 2012, and 2013 separately 
solved models are shown in the tables below. For a given enrollee, the 
sums of the factors for the enrollee's HCCs are the total relative 
predicted expenditures for that enrollee. Table 1 contains the factors 
for each adult model, including the interactions. Table 3 contains the 
factors for each child model. Table 4 contains the factors for each 
infant model.
    Comment: One commenter requested that HHS provide the rationale for 
the modification of the child model transplant factors.
    Response: We constrained the six transplant status HCC coefficients 
(other than kidney) in the child model. The sample sizes of transplants 
are smaller in the child than the adult model. The levels and changes 
in the child transplant relative coefficients appeared to be dominated 
by random instability and therefore, we believe the accuracy of the 
model will be improved by constraining these coefficients. We intend to 
monitor the child transplant relative coefficients, and adjust them if 
needed in future recalibrations.
    Comment: Several commenters suggested that the model is not 
equipped to accurately account for the introduction of new treatments, 
and

[[Page 10762]]

recommended that HHS add drug utilization or selected classes of 
prescription medicines to the list of risk adjustment model factors. 
Commenters suggested that plans placing medications to treat serious 
chronic diseases on formulary tiers with the highest cost sharing is 
evidence that current plan designs discourage enrollment by higher-risk 
enrollees, which suggests that the current risk adjustment model is not 
effectively reducing plans' incentives to design benefits that 
discourage enrollment by higher risk and higher cost patients. One 
commenter recommended that HHS evaluate additional medical conditions 
or characteristics for new enrollees which may indicate future 
expenditures. Another commenter suggested that HHS analyze the 
difference between Truven and Medicaid claim variables for age 0-1 and 
that HHS assess the impact of habilitative and Medicaid-like benefits 
on costs which are generally not present in commercial claims. Lastly, 
a commenter suggested that the risk adjustment factors may be more 
appropriately calculated and applied regionally.
    Response: As stated above, we wish to use the same risk adjustment 
models finalized in the 2014 Payment Notice, with changes to reflect 
more current data. We did not intend to change the models' structure, 
for example by including pharmacy utilization. However, we will 
continue to consider including prescription drug data in future model 
recalibrations. Similarly, we intend to evaluate additional medical 
conditions and characteristics for new enrollees which may indicate 
future expenditures, including through Medicaid claims comparisons. The 
risk adjustment methodology takes into account Statewide average 
premium and geographic rating area in the transfer formula.

                                  Table 1--Adult Risk Adjustment Model Factors
----------------------------------------------------------------------------------------------------------------
             Factor                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
                                               Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 21-24, Male.................           0.250           0.202           0.139           0.076           0.070
Age 25-29, Male.................           0.260           0.208           0.141           0.074           0.067
Age 30-34, Male.................           0.311           0.248           0.168           0.083           0.075
Age 35-39, Male.................           0.375           0.302           0.209           0.109           0.099
Age 40-44, Male.................           0.459           0.374           0.269           0.149           0.138
Age 45-49, Male.................           0.548           0.451           0.334           0.198           0.184
Age 50-54, Male.................           0.701           0.584           0.445           0.273           0.255
Age 55-59, Male.................           0.814           0.681           0.529           0.339           0.319
Age 60-64, Male.................           0.982           0.824           0.650           0.428           0.404
Age 21-24, Female...............           0.408           0.326           0.208           0.089           0.078
Age 25-29, Female...............           0.505           0.406           0.271           0.130           0.116
Age 30-34, Female...............           0.634           0.520           0.376           0.222           0.207
Age 35-39, Female...............           0.735           0.612           0.466           0.308           0.292
Age 40-44, Female...............           0.824           0.689           0.532           0.358           0.340
Age 45-49, Female...............           0.849           0.709           0.548           0.361           0.343
Age 50-54, Female...............           0.962           0.809           0.636           0.420           0.397
Age 55-59, Female...............           0.989           0.830           0.652           0.427           0.403
Age 60-64, Female...............           1.088           0.911           0.720           0.473           0.447
----------------------------------------------------------------------------------------------------------------
                                                Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................           6.157           5.598           5.302           5.310           5.315
Septicemia, Sepsis, Systemic              12.643          12.435          12.334          12.417          12.429
 Inflammatory Response Syndrome/
 Shock..........................
Central Nervous System                     7.550           7.419           7.353           7.389           7.394
 Infections, Except Viral
 Meningitis.....................
Viral or Unspecified Meningitis.           5.290           5.002           4.868           4.805           4.803
Opportunistic Infections........          10.151          10.027           9.969           9.964           9.963
Metastatic Cancer...............          26.334          25.786          25.486          25.597          25.610
Lung, Brain, and Other Severe             12.032          11.615          11.394          11.418          11.421
 Cancers, Including Pediatric
 Acute Lymphoid Leukemia........
Non-Hodgkin's Lymphomas and                6.543           6.254           6.097           6.045           6.039
 Other Cancers and Tumors.......
Colorectal, Breast (Age <50),              5.929           5.641           5.482           5.426           5.420
 Kidney, and Other Cancers......
Breast (Age 50+) and Prostate              3.447           3.235           3.117           3.051           3.043
 Cancer, Benign/Uncertain Brain
 Tumors, and Other Cancers and
 Tumors.........................
Thyroid Cancer, Melanoma,                  1.651           1.476           1.368           1.239           1.224
 Neurofibromatosis, and Other
 Cancers and Tumors.............
Pancreas Transplant Status/                6.947           6.726           6.616           6.645           6.650
 Complications..................
Diabetes with Acute                        1.344           1.193           1.100           0.959           0.942
 Complications..................
Diabetes with Chronic                      1.344           1.193           1.100           0.959           0.942
 Complications..................
Diabetes without Complication...           1.344           1.193           1.100           0.959           0.942
Protein-Calorie Malnutrition....          15.443          15.449          15.444          15.532          15.541
Mucopolysaccharidosis...........           2.379           2.239           2.160           2.088           2.080
Lipidoses and Glycogenosis......           2.379           2.239           2.160           2.088           2.080
Amyloidosis, Porphyria, and                2.379           2.239           2.160           2.088           2.080
 Other Metabolic Disorders......
Adrenal, Pituitary, and Other              2.379           2.239           2.160           2.088           2.080
 Significant Endocrine Disorders
Liver Transplant Status/                  16.879          16.651          16.547          16.575          16.581
 Complications..................
End-Stage Liver Disease.........           6.272           5.972           5.825           5.852           5.857
Cirrhosis of Liver..............           2.548           2.348           2.252           2.213           2.210

[[Page 10763]]

 
Chronic Hepatitis...............           2.339           2.170           2.077           1.994           1.987
Acute Liver Failure/Disease,               4.521           4.324           4.225           4.215           4.216
 Including Neonatal Hepatitis...
Intestine Transplant Status/              41.078          41.016          40.976          41.009          41.010
 Complications..................
Peritonitis/Gastrointestinal              13.554          13.224          13.049          13.108          13.115
 Perforation/Necrotizing
 Enterocolitis..................
Intestinal Obstruction..........           7.453           7.114           6.952           6.996           7.004
Chronic Pancreatitis............           6.273           5.985           5.849           5.891           5.898
Acute Pancreatitis/Other                   3.183           2.950           2.834           2.778           2.772
 Pancreatic Disorders and
 Intestinal Malabsorption.......
Inflammatory Bowel Disease......           3.283           2.988           2.831           2.693           2.677
Necrotizing Fasciitis...........           7.506           7.254           7.120           7.153           7.157
Bone/Joint/Muscle Infections/              7.506           7.254           7.120           7.153           7.157
 Necrosis.......................
Rheumatoid Arthritis and                   3.834           3.534           3.373           3.349           3.348
 Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and           1.306           1.154           1.066           0.949           0.936
 Other Autoimmune Disorders.....
Osteogenesis Imperfecta and                3.633           3.399           3.262           3.188           3.179
 Other Osteodystrophies.........
Congenital/Developmental                   3.633           3.399           3.262           3.188           3.179
 Skeletal and Connective Tissue
 Disorders......................
Cleft Lip/Cleft Palate..........           1.639           1.453           1.348           1.246           1.236
Hemophilia......................          46.716          46.362          46.145          46.164          46.167
Myelodysplastic Syndromes and             13.937          13.773          13.686          13.711          13.714
 Myelofibrosis..................
Aplastic Anemia.................          13.937          13.773          13.686          13.711          13.714
Acquired Hemolytic Anemia,                10.383          10.181          10.065          10.058          10.057
 Including Hemolytic Disease of
 Newborn........................
Sickle Cell Anemia (Hb-SS)......          10.383          10.181          10.065          10.058          10.057
Thalassemia Major...............          10.383          10.181          10.065          10.058          10.057
Combined and Other Severe                  5.543           5.353           5.257           5.270           5.272
 Immunodeficiencies.............
Disorders of the Immune                    5.543           5.353           5.257           5.270           5.272
 Mechanism......................
Coagulation Defects and Other              3.203           3.085           3.015           2.982           2.978
 Specified Hematological
 Disorders......................
Drug Psychosis..................           3.915           3.627           3.471           3.346           3.332
Drug Dependence.................           3.915           3.627           3.471           3.346           3.332
Schizophrenia...................           3.294           3.004           2.852           2.750           2.741
Major Depressive and Bipolar               1.889           1.703           1.590           1.449           1.433
 Disorders......................
Reactive and Unspecified                   1.889           1.703           1.590           1.449           1.433
 Psychosis, Delusional Disorders
Personality Disorders...........           1.234           1.097           0.994           0.840           0.822
Anorexia/Bulimia Nervosa........           2.860           2.670           2.560           2.473           2.462
Prader-Willi, Patau, Edwards,              2.958           2.806           2.723           2.663           2.655
 and Autosomal Deletion
 Syndromes......................
Down Syndrome, Fragile X, Other            1.262           1.152           1.073           0.972           0.960
 Chromosomal Anomalies, and
 Congenital Malformation
 Syndromes......................
Autistic Disorder...............           1.234           1.097           0.994           0.840           0.822
Pervasive Developmental                    1.234           1.097           0.994           0.840           0.822
 Disorders, Except Autistic
 Disorder.......................
Traumatic Complete Lesion                 14.620          14.420          14.307          14.313          14.313
 Cervical Spinal Cord...........
Quadriplegia....................          14.620          14.420          14.307          14.313          14.313
Traumatic Complete Lesion Dorsal          10.397          10.195          10.085          10.079          10.078
 Spinal Cord....................
Paraplegia......................          10.397          10.195          10.085          10.079          10.078
Spinal Cord Disorders/Injuries..           6.455           6.200           6.068           6.041           6.039
Amyotrophic Lateral Sclerosis              3.907           3.620           3.478           3.430           3.427
 and Other Anterior Horn Cell
 Disease........................
Quadriplegic Cerebral Palsy.....           1.158           0.914           0.795           0.709           0.701
Cerebral Palsy, Except                     0.126           0.080           0.050           0.020           0.017
 Quadriplegic...................
Spina Bifida and Other Brain/              0.090           0.021           0.000           0.000           0.000
 Spinal/Nervous System
 Congenital Anomalies...........
Myasthenia Gravis/Myoneural                5.561           5.383           5.290           5.262           5.259
 Disorders and Guillain-Barre
 Syndrome/Inflammatory and Toxic
 Neuropathy.....................
Muscular Dystrophy..............           2.284           2.088           1.993           1.902           1.893
Multiple Sclerosis..............           9.513           9.024           8.764           8.834           8.842
Parkinson's, Huntington's, and             2.284           2.088           1.993           1.902           1.893
 Spinocerebellar Disease, and
 Other Neurodegenerative
 Disorders......................
Seizure Disorders and                      1.588           1.408           1.305           1.202           1.192
 Convulsions....................
Hydrocephalus...................           8.049           7.897           7.806           7.777           7.773
Non-Traumatic Coma, and Brain             10.501          10.329          10.227          10.228          10.227
 Compression/Anoxic Damage......
Respirator Dependence/                    40.044          40.031          40.014          40.103          40.113
 Tracheostomy Status............
Respiratory Arrest..............          12.390          12.191          12.082          12.179          12.191
Cardio-Respiratory Failure and            12.390          12.191          12.082          12.179          12.191
 Shock, Including Respiratory
 Distress Syndromes.............
Heart Assistive Device/                   37.771          37.451          37.284          37.380          37.392
 Artificial Heart...............
Heart Transplant................          37.771          37.451          37.284          37.380          37.392
Congestive Heart Failure........           3.598           3.462           3.391           3.390           3.391

[[Page 10764]]

 
Acute Myocardial Infarction.....          11.768          11.329          11.100          11.278          11.300
Unstable Angina and Other Acute            6.075           5.719           5.555           5.592           5.600
 Ischemic Heart Disease.........
Heart Infection/Inflammation,              7.146           6.980           6.891           6.869           6.867
 Except Rheumatic...............
Specified Heart Arrhythmias.....           3.350           3.170           3.073           3.007           3.000
Intracranial Hemorrhage.........          11.056          10.700          10.519          10.548          10.554
Ischemic or Unspecified Stroke..           4.012           3.770           3.665           3.685           3.690
Cerebral Aneurysm and                      4.709           4.455           4.331           4.287           4.284
 Arteriovenous Malformation.....
Hemiplegia/Hemiparesis..........           6.343           6.218           6.155           6.223           6.231
Monoplegia, Other Paralytic                3.968           3.805           3.724           3.700           3.699
 Syndromes......................
Atherosclerosis of the                    12.395          12.261          12.194          12.299          12.311
 Extremities with Ulceration or
 Gangrene.......................
Vascular Disease with                      8.583           8.349           8.230           8.246           8.249
 Complications..................
Pulmonary Embolism and Deep Vein           4.542           4.335           4.229           4.206           4.204
 Thrombosis.....................
Lung Transplant Status/                   37.791          37.528          37.388          37.504          37.517
 Complications..................
Cystic Fibrosis.................          12.367          11.975          11.747          11.763          11.764
Chronic Obstructive Pulmonary              1.090           0.958           0.871           0.762           0.750
 Disease, Including
 Bronchiectasis.................
Asthma..........................           1.090           0.958           0.871           0.762           0.750
Fibrosis of Lung and Other Lung            2.365           2.217           2.143           2.098           2.093
 Disorders......................
Aspiration and Specified                   8.585           8.482           8.429           8.454           8.457
 Bacterial Pneumonias and Other
 Severe Lung Infections.........
Kidney Transplant Status........          11.146          10.803          10.642          10.645          10.649
End Stage Renal Disease.........          42.543          42.217          42.036          42.222          42.243
Chronic Kidney Disease, Stage 5.           2.440           2.308           2.248           2.244           2.245
Chronic Kidney Disease, Severe             2.440           2.308           2.248           2.244           2.245
 (Stage 4)......................
Ectopic and Molar Pregnancy,               1.455           1.260           1.139           0.891           0.856
 Except with Renal Failure,
 Shock, or Embolism.............
Miscarriage with Complications..           1.455           1.260           1.139           0.891           0.856
Miscarriage with No or Minor               1.455           1.260           1.139           0.891           0.856
 Complications..................
Completed Pregnancy With Major             4.050           3.489           3.288           3.066           3.065
 Complications..................
Completed Pregnancy With                   4.050           3.489           3.288           3.066           3.065
 Complications..................
Completed Pregnancy with No or             4.050           3.489           3.288           3.066           3.065
 Minor Complications............
Chronic Ulcer of Skin, Except              2.575           2.425           2.354           2.337           2.337
 Pressure.......................
Hip Fractures and Pathological            10.290          10.016           9.873           9.943           9.951
 Vertebral or Humerus Fractures.
Pathological Fractures, Except             2.010           1.868           1.782           1.681           1.669
 of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone                 34.090          34.078          34.067          34.095          34.098
 Marrow, Transplant Status/
 Complications..................
Artificial Openings for Feeding           11.500          11.373          11.306          11.372          11.379
 or Elimination.................
Amputation Status, Lower Limb/             5.978           5.779           5.679           5.721           5.728
 Amputation Complications.......
 
Severe illness x Opportunistic            12.043          12.306          12.433          12.560          12.572
 Infections.....................
Severe illness x Metastatic               12.043          12.306          12.433          12.560          12.572
 Cancer.........................
Severe illness x Lung, Brain,             12.043          12.306          12.433          12.560          12.572
 and Other Severe Cancers,
 Including Pediatric Acute
 Lymphoid Leukemia..............
Severe illness x Non-Hodgkin's            12.043          12.306          12.433          12.560          12.572
 Lymphomas and Other Cancers and
 Tumors.........................
Severe illness x Myasthenia               12.043          12.306          12.433          12.560          12.572
 Gravis/Myoneural Disorders and
 Guillain-Barre Syndrome/
 Inflammatory and Toxic
 Neuropathy.....................
Severe illness x Heart Infection/         12.043          12.306          12.433          12.560          12.572
 Inflammation, Except Rheumatic.
Severe illness x Intracranial             12.043          12.306          12.433          12.560          12.572
 Hemorrhage.....................
Severe illness x HCC group G06            12.043          12.306          12.433          12.560          12.572
 (G06 is HCC Group 6 which
 includes the following HCCs in
 the blood disease category: 67,
 68)............................
Severe illness x HCC group G08            12.043          12.306          12.433          12.560          12.572
 (G08 is HCC Group 8 which
 includes the following HCCs in
 the blood disease category: 73,
 74)............................
Severe illness x End-Stage Liver           2.634           2.785           2.855           2.974           2.984
 Disease........................
Severe illness x Acute Liver               2.634           2.785           2.855           2.974           2.984
 Failure/Disease, Including
 Neonatal Hepatitis.............
Severe illness x Atherosclerosis           2.634           2.785           2.855           2.974           2.984
 of the Extremities with
 Ulceration or Gangrene.........
Severe illness x Vascular                  2.634           2.785           2.855           2.974           2.984
 Disease with Complications.....
Severe illness x Aspiration and            2.634           2.785           2.855           2.974           2.984
 Specified Bacterial Pneumonias
 and Other Severe Lung
 Infections.....................
Severe illness x Artificial                2.634           2.785           2.855           2.974           2.984
 Openings for Feeding or
 Elimination....................

[[Page 10765]]

 
Severe illness x HCC group G03             2.634           2.785           2.855           2.974           2.984
 (G03 is HCC Group 3 which
 includes the following HCCs in
 the musculoskeletal disease
 category: 54, 55)..............
----------------------------------------------------------------------------------------------------------------


      Table 2--HHS HCCs in the Severity Illness Indicator Variable
------------------------------------------------------------------------
                               Description
-------------------------------------------------------------------------
 Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock.
 Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis.
 Seizure Disorders and Convulsions.
 Non-Traumatic Coma, Brain Compression/Anoxic Damage.
 Respirator Dependence/Tracheostomy Status.
 Respiratory Arrest.
 Cardio-Respiratory Failure and Shock, Including Respiratory Distress
 Syndromes.
 Pulmonary Embolism and Deep Vein Thrombosis.
------------------------------------------------------------------------


                                  Table 3--Child Risk Adjustment Model Factors
----------------------------------------------------------------------------------------------------------------
             Factor                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
                                               Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male...................           0.262           0.191           0.097           0.016           0.009
Age 5-9, Male...................           0.179           0.128           0.058           0.000           0.000
Age 10-14, Male.................           0.229           0.176           0.099           0.034           0.028
Age 15-20, Male.................           0.302           0.241           0.161           0.084           0.077
Age 2-4, Female.................           0.212           0.150           0.066           0.004           0.002
Age 5-9, Female.................           0.141           0.095           0.036           0.000           0.000
Age 10-14, Female...............           0.213           0.162           0.093           0.037           0.033
Age 15-20, Female...............           0.358           0.283           0.180           0.079           0.070
----------------------------------------------------------------------------------------------------------------
                                                Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................           3.905           3.443           3.195           3.035           3.022
Septicemia, Sepsis, Systemic              19.194          19.011          18.921          18.952          18.957
 Inflammatory Response Syndrome/
 Shock..........................
Central Nervous System                    12.691          12.467          12.344          12.356          12.357
 Infections, Except Viral
 Meningitis.....................
Viral or Unspecified Meningitis.           3.766           3.517           3.386           3.226           3.210
Opportunistic Infections........          25.545          25.461          25.417          25.403          25.402
Metastatic Cancer...............          40.241          39.934          39.739          39.739          39.738
Lung, Brain, and Other Severe             13.408          13.064          12.852          12.768          12.758
 Cancers, Including Pediatric
 Acute Lymphoid Leukemia........
Non-Hodgkin's Lymphomas and               10.279           9.971           9.778           9.654           9.639
 Other Cancers and Tumors.......
Colorectal, Breast (Age < 50),             4.078           3.830           3.661           3.498           3.479
 Kidney, and Other Cancers......
Breast (Age 50+) and Prostate              3.274           3.044           2.901           2.749           2.731
 Cancer, Benign/Uncertain Brain
 Tumors, and Other Cancers and
 Tumors.........................
Thyroid Cancer, Melanoma,                  1.832           1.650           1.520           1.360           1.342
 Neurofibromatosis, and Other
 Cancers and Tumors.............
Pancreas Transplant Status/               35.005          34.817          34.724          34.753          34.755
 Complications..................
Diabetes with Acute                        2.695           2.350           2.169           1.832           1.794
 Complications..................
Diabetes with Chronic                      2.695           2.350           2.169           1.832           1.794
 Complications..................
Diabetes without Complication...           2.695           2.350           2.169           1.832           1.794
Protein-Calorie Malnutrition....          15.577          15.458          15.387          15.437          15.442
Mucopolysaccharidosis...........           6.759           6.440           6.245           6.182           6.176
Lipidoses and Glycogenosis......           6.759           6.440           6.245           6.182           6.176
Congenital Metabolic Disorders,            6.759           6.440           6.245           6.182           6.176
 Not Elsewhere Classified.......
Amyloidosis, Porphyria, and                6.759           6.440           6.245           6.182           6.176
 Other Metabolic Disorders......
Adrenal, Pituitary, and Other              6.759           6.440           6.245           6.182           6.176
 Significant Endocrine Disorders
Liver Transplant Status/                  35.005          34.817          34.724          34.753          34.755
 Complications..................
End-Stage Liver Disease.........          15.326          15.150          15.059          15.061          15.063
Cirrhosis of Liver..............          10.171           9.978           9.868           9.837           9.836
Chronic Hepatitis...............           1.316           1.149           1.025           0.917           0.908
Acute Liver Failure/Disease,              10.916          10.745          10.640          10.615          10.614
 Including Neonatal Hepatitis...
Intestine Transplant Status/              35.005          34.817          34.724          34.753          34.755
 Complications..................
Peritonitis/Gastrointestinal              17.618          17.189          16.947          16.982          16.986
 Perforation/Necrotizing
 Enterocolitis..................

[[Page 10766]]

 
Intestinal Obstruction..........           6.347           6.064           5.897           5.782           5.768
Chronic Pancreatitis............          11.190          10.860          10.691          10.687          10.687
Acute Pancreatitis/Other                   3.182           3.026           2.921           2.791           2.774
 Pancreatic Disorders and
 Intestinal Malabsorption.......
Inflammatory Bowel Disease......           6.004           5.576           5.331           5.179           5.161
Necrotizing Fasciitis...........           5.256           4.965           4.789           4.706           4.699
Bone/Joint/Muscle Infections/              5.256           4.965           4.789           4.706           4.699
 Necrosis.......................
Rheumatoid Arthritis and                   3.436           3.177           3.005           2.858           2.843
 Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and           1.257           1.086           0.962           0.795           0.775
 Other Autoimmune Disorders.....
Osteogenesis Imperfecta and                1.796           1.655           1.544           1.435           1.421
 Other Osteodystrophies.........
Congenital/Developmental                   1.796           1.655           1.544           1.435           1.421
 Skeletal and Connective Tissue
 Disorders......................
Cleft Lip/Cleft Palate..........           1.859           1.618           1.468           1.300           1.281
Hemophilia......................          59.085          58.511          58.167          58.146          58.143
Myelodysplastic Syndromes and             21.395          21.190          21.067          21.051          21.050
 Myelofibrosis..................
Aplastic Anemia.................          21.395          21.190          21.067          21.051          21.050
Acquired Hemolytic Anemia,                 8.368           8.039           7.846           7.752           7.742
 Including Hemolytic Disease of
 Newborn........................
Sickle Cell Anemia (Hb-SS)......           8.368           8.039           7.846           7.752           7.742
Thalassemia Major...............           8.368           8.039           7.846           7.752           7.742
Combined and Other Severe                  7.081           6.862           6.737           6.659           6.649
 Immunodeficiencies.............
Disorders of the Immune                    7.081           6.862           6.737           6.659           6.649
 Mechanism......................
Coagulation Defects and Other              5.332           5.169           5.053           4.945           4.932
 Specified Hematological
 Disorders......................
Drug Psychosis..................           5.134           4.831           4.672           4.584           4.576
Drug Dependence.................           5.134           4.831           4.672           4.584           4.576
Schizophrenia...................           5.630           5.184           4.940           4.795           4.784
Major Depressive and Bipolar               2.003           1.776           1.618           1.392           1.366
 Disorders......................
Reactive and Unspecified                   1.974           1.745           1.588           1.360           1.334
 Psychosis, Delusional Disorders
Personality Disorders...........           0.857           0.726           0.603           0.390           0.363
Anorexia/Bulimia Nervosa........           2.863           2.630           2.484           2.385           2.374
Prader-Willi, Patau, Edwards,              3.910           3.649           3.524           3.486           3.481
 and Autosomal Deletion
 Syndromes......................
Down Syndrome, Fragile X, Other            1.795           1.582           1.460           1.334           1.320
 Chromosomal Anomalies, and
 Congenital Malformation
 Syndromes......................
Autistic Disorder...............           1.899           1.691           1.543           1.329           1.304
Pervasive Developmental                    0.958           0.819           0.685           0.447           0.417
 Disorders, Except Autistic
 Disorder.......................
Traumatic Complete Lesion                 14.568          14.494          14.454          14.554          14.565
 Cervical Spinal Cord...........
Quadriplegia....................          14.568          14.494          14.454          14.554          14.565
Traumatic Complete Lesion Dorsal          12.632          12.373          12.237          12.245          12.248
 Spinal Cord....................
Paraplegia......................          12.632          12.373          12.237          12.245          12.248
Spinal Cord Disorders/Injuries..           5.814           5.533           5.376           5.274           5.263
Amyotrophic Lateral Sclerosis             10.349          10.046           9.870           9.821           9.813
 and Other Anterior Horn Cell
 Disease........................
Quadriplegic Cerebral Palsy.....           4.321           3.997           3.842           3.871           3.876
Cerebral Palsy, Except                     1.066           0.840           0.715           0.595           0.582
 Quadriplegic...................
Spina Bifida and Other Brain/              1.352           1.182           1.075           0.973           0.961
 Spinal/Nervous System
 Congenital Anomalies...........
Myasthenia Gravis/Myoneural               10.325          10.110           9.984           9.926           9.919
 Disorders and Guillain-Barre
 Syndrome/Inflammatory and Toxic
 Neuropathy.....................
Muscular Dystrophy..............           3.561           3.323           3.187           3.077           3.064
Multiple Sclerosis..............           6.515           6.125           5.899           5.854           5.850
Parkinson's, Huntington's, and             3.561           3.323           3.187           3.077           3.064
 Spinocerebellar Disease, and
 Other Neurodegenerative
 Disorders......................
Seizure Disorders and                      2.308           2.110           1.968           1.774           1.751
 Convulsions....................
Hydrocephalus...................           6.416           6.260           6.175           6.167           6.166
Non-Traumatic Coma, and Brain              9.357           9.165           9.058           9.011           9.005
 Compression/Anoxic Damage......
Respirator Dependence/                    43.573          43.432          43.370          43.553          43.572
 Tracheostomy Status............
Respiratory Arrest..............          14.726          14.485          14.364          14.374          14.375
Cardio-Respiratory Failure and            14.726          14.485          14.364          14.374          14.375
 Shock, Including Respiratory
 Distress Syndromes.............
Heart Assistive Device/                   35.005          34.817          34.724          34.753          34.755
 Artificial Heart...............
Heart Transplant................          35.005          34.817          34.724          34.753          34.755
Congestive Heart Failure........           7.529           7.399           7.313           7.259           7.252
Acute Myocardial Infarction.....           8.526           8.355           8.262           8.268           8.270
Unstable Angina and Other Acute            4.832           4.731           4.675           4.688           4.692
 Ischemic Heart Disease.........
Heart Infection/Inflammation,             18.137          17.976          17.883          17.866          17.865
 Except Rheumatic...............
Hypoplastic Left Heart Syndrome            7.760           7.525           7.350           7.178           7.156
 and Other Severe Congenital
 Heart Disorders................

[[Page 10767]]

 
Major Congenital Heart/                    2.184           2.053           1.918           1.752           1.734
 Circulatory Disorders..........
Atrial and Ventricular Septal              1.355           1.243           1.121           0.985           0.970
 Defects, Patent Ductus
 Arteriosus, and Other
 Congenital Heart/Circulatory
 Disorders......................
Specified Heart Arrhythmias.....           5.208           4.988           4.842           4.750           4.739
Intracranial Hemorrhage.........          19.273          18.970          18.808          18.815          18.816
Ischemic or Unspecified Stroke..           8.661           8.495           8.414           8.461           8.466
Cerebral Aneurysm and                      4.442           4.184           4.044           3.962           3.950
 Arteriovenous Malformation.....
Hemiplegia/Hemiparesis..........           6.306           6.169           6.101           6.077           6.074
Monoplegia, Other Paralytic                4.394           4.195           4.095           4.052           4.049
 Syndromes......................
Atherosclerosis of the                    15.443          15.201          15.064          14.935          14.918
 Extremities with Ulceration or
 Gangrene.......................
Vascular Disease with                     17.744          17.530          17.416          17.432          17.433
 Complications..................
Pulmonary Embolism and Deep Vein          16.259          16.035          15.925          15.959          15.964
 Thrombosis.....................
Lung Transplant Status/                   35.005          34.817          34.724          34.753          34.755
 Complications..................
Cystic Fibrosis.................          14.929          14.393          14.082          14.107          14.110
Chronic Obstructive Pulmonary              0.519           0.439           0.332           0.187           0.170
 Disease, Including
 Bronchiectasis.................
Asthma..........................           0.519           0.439           0.332           0.187           0.170
Fibrosis of Lung and Other Lung            4.441           4.279           4.165           4.066           4.055
 Disorders......................
Aspiration and Specified                   9.634           9.540           9.477           9.494           9.494
 Bacterial Pneumonias and Other
 Severe Lung Infections.........
Kidney Transplant Status........          16.696          16.265          16.038          16.049          16.054
End Stage Renal Disease.........          38.999          38.735          38.594          38.720          38.733
Chronic Kidney Disease, Stage 5.           8.885           8.683           8.557           8.433           8.417
Chronic Kidney Disease, Severe             8.885           8.683           8.557           8.433           8.417
 (Stage 4)......................
Ectopic and Molar Pregnancy,               1.245           1.056           0.919           0.640           0.606
 Except with Renal Failure,
 Shock, or Embolism.............
Miscarriage with Complications..           1.245           1.056           0.919           0.640           0.606
Miscarriage with No or Minor               1.245           1.056           0.919           0.640           0.606
 Complications..................
Completed Pregnancy With Major             3.528           3.009           2.801           2.513           2.500
 Complications..................
Completed Pregnancy With                   3.528           3.009           2.801           2.513           2.500
 Complications..................
Completed Pregnancy with No or             3.528           3.009           2.801           2.513           2.500
 Minor Complications............
Chronic Ulcer of Skin, Except              1.703           1.596           1.500           1.407           1.397
 Pressure.......................
Hip Fractures and Pathological             6.420           6.099           5.893           5.758           5.744
 Vertebral or Humerus Fractures.
Pathological Fractures, Except             1.784           1.641           1.509           1.327           1.308
 of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone                 35.005          34.817          34.724          34.753          34.755
 Marrow, Transplant Status/
 Complications..................
Artificial Openings for Feeding           16.599          16.457          16.401          16.574          16.594
 or Elimination.................
Amputation Status, Lower Limb/             9.440           9.135           8.972           8.856           8.841
 Amputation Complications.......
----------------------------------------------------------------------------------------------------------------


                                 Table 4--Infant Risk Adjustment Models Factors
----------------------------------------------------------------------------------------------------------------
              Group                  Platinum          Gold           Silver          Bronze       Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature *, Severity           434.244         432.604         431.540         431.548         431.554
 Level 5 (Highest)..............
Extremely Immature *, Severity           218.568         216.965         215.930         215.892         215.892
 Level 4........................
Extremely Immature *, Severity            63.306          62.118          61.302          60.931          60.895
 Level 3........................
Extremely Immature *, Severity            63.306          62.118          61.302          60.931          60.895
 Level 2........................
Extremely Immature *, Severity            63.306          62.118          61.302          60.931          60.895
 Level 1 (Lowest)...............
Immature *, Severity Level 5             218.648         217.060         216.033         216.039         216.046
 (Highest)......................
Immature *, Severity Level 4....          97.820          96.171          95.105          95.087          95.091
Immature *, Severity Level 3....          56.283          54.855          53.924          53.770          53.758
Immature *, Severity Level 2....          33.845          32.464          31.571          31.302          31.279
Immature *, Severity Level 1              33.845          32.464          31.571          31.302          31.279
 (Lowest).......................
Premature/Multiples *, Severity          177.856         176.320         175.329         175.253         175.251
 Level 5 (Highest)..............
Premature/Multiples *, Severity           36.022          34.500          33.543          33.349          33.338
 Level 4........................
Premature/Multiples *, Severity           19.582          18.378          17.607          17.163          17.121
 Level 3........................
Premature/Multiples *, Severity           10.730           9.739           9.072           8.420           8.342
 Level 2........................
Premature/Multiples *, Severity            7.152           6.431           5.831           5.073           4.987
 Level 1 (Lowest)...............
Term *, Severity Level 5                 155.054         153.597         152.653         152.503         152.492
 (Highest)......................
Term *, Severity Level 4........          19.318          18.169          17.434          16.891          16.841
Term *, Severity Level 3........           7.022           6.305           5.738           4.947           4.851
Term *, Severity Level 2........           4.219           3.676           3.163           2.300           2.193
Term *, Severity Level 1                   1.785           1.511           1.033           0.268           0.196
 (Lowest).......................
Age 1 *, Severity Level 5                 42.616          41.994          41.549          41.337          41.318
 (Highest)......................
Age 1 *, Severity Level 4.......           7.142           6.731           6.402           6.146           6.123
Age 1 *, Severity Level 3.......           2.678           2.410           2.191           1.927           1.899
Age 1 *, Severity Level 2.......           1.625           1.426           1.231           0.958           0.931

[[Page 10768]]

 
Age 1 *, Severity Level 1                  0.636           0.527           0.321           0.138           0.124
 (Lowest).......................
Age 0 Male......................           0.728           0.673           0.659           0.607           0.594
Age 1 Male......................           0.158           0.137           0.128           0.094           0.090
----------------------------------------------------------------------------------------------------------------


     Table 5--HHS HCCS Included in Infant Model Maturity Categories
------------------------------------------------------------------------
          Maturity category                     HCC/Description
------------------------------------------------------------------------
Extremely Immature...................  Extremely Immature Newborns,
                                        Birthweight <500 Grams.
Extremely Immature...................  Extremely Immature Newborns,
                                        Including Birthweight 500-749
                                        Grams.
Extremely Immature...................  Extremely Immature Newborns,
                                        Including Birthweight 750-999
                                        Grams.
Immature.............................  Premature Newborns, Including
                                        Birthweight 1000-1499 Grams.
Immature.............................  Premature Newborns, Including
                                        Birthweight 1500-1999 Grams.
Premature/Multiples..................  Premature Newborns, Including
                                        Birthweight 2000-2499 Grams.
Premature/Multiples..................  Other Premature, Low Birthweight,
                                        Malnourished, or Multiple Birth
                                        Newborns.
Term.................................  Term or Post-Term Singleton
                                        Newborn, Normal or High
                                        Birthweight.
Age 1................................  All age 1 infants.
------------------------------------------------------------------------


     Table 6--HHS HCCs Included in Infant Model Severity Categories
------------------------------------------------------------------------
              Severity category                           HCC
------------------------------------------------------------------------
Severity Level 5 (Highest)...................  Metastatic Cancer.
Severity Level 5.............................  Pancreas Transplant
                                                Status/Complications.
Severity Level 5.............................  Liver Transplant Status/
                                                Complications.
Severity Level 5.............................  End-Stage Liver Disease.
Severity Level 5.............................  Intestine Transplant
                                                Status/Complications.
Severity Level 5.............................  Peritonitis/
                                                Gastrointestinal
                                                Perforation/Necrotizing
                                                Enterocolitis.
Severity Level 5.............................  Respirator Dependence/
                                                Tracheostomy Status.
Severity Level 5.............................  Heart Assistive Device/
                                                Artificial Heart.
Severity Level 5.............................  Heart Transplant.
Severity Level 5.............................  Congestive Heart Failure.
Severity Level 5.............................  Hypoplastic Left Heart
                                                Syndrome and Other
                                                Severe Congenital Heart
                                                Disorders.
Severity Level 5.............................  Lung Transplant Status/
                                                Complications.
Severity Level 5.............................  Kidney Transplant Status.
Severity Level 5.............................  End Stage Renal Disease.
Severity Level 5.............................  Stem Cell, Including Bone
                                                Marrow, Transplant
                                                Status/Complications.
Severity Level 4.............................  Septicemia, Sepsis,
                                                Systemic Inflammatory
                                                Response Syndrome/Shock.
Severity Level 4.............................  Lung, Brain, and Other
                                                Severe Cancers,
                                                Including Pediatric
                                                Acute Lymphoid Leukemia.
Severity Level 4.............................  Mucopolysaccharidosis.
Severity Level 4.............................  Major Congenital
                                                Anomalies of Diaphragm,
                                                Abdominal Wall, and
                                                Esophagus, Age <2.
Severity Level 4.............................  Myelodysplastic Syndromes
                                                and Myelofibrosis.
Severity Level 4.............................  Aplastic Anemia.
Severity Level 4.............................  Combined and Other Severe
                                                Immunodeficiencies.
Severity Level 4.............................  Traumatic Complete Lesion
                                                Cervical Spinal Cord.
Severity Level 4.............................  Quadriplegia.
Severity Level 4.............................  Amyotrophic Lateral
                                                Sclerosis and Other
                                                Anterior Horn Cell
                                                Disease.
Severity Level 4.............................  Quadriplegic Cerebral
                                                Palsy.
Severity Level 4.............................  Myasthenia Gravis/
                                                Myoneural Disorders and
                                                Guillain-Barre Syndrome/
                                                Inflammatory and Toxic
                                                Neuropathy.
Severity Level 4.............................  Non-Traumatic Coma, Brain
                                                Compression/Anoxic
                                                Damage.
Severity Level 4.............................  Respiratory Arrest.
Severity Level 4.............................  Cardio-Respiratory
                                                Failure and Shock,
                                                Including Respiratory
                                                Distress Syndromes.
Severity Level 4.............................  Acute Myocardial
                                                Infarction.
Severity Level 4.............................  Heart Infection/
                                                Inflammation, Except
                                                Rheumatic.
Severity Level 4.............................  Major Congenital Heart/
                                                Circulatory Disorders.
Severity Level 4.............................  Intracranial Hemorrhage.
Severity Level 4.............................  Ischemic or Unspecified
                                                Stroke.
Severity Level 4.............................  Vascular Disease with
                                                Complications.
Severity Level 4.............................  Pulmonary 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.............................  Hip Fractures and
                                                Pathological Vertebral
                                                or Humerus Fractures.
Severity Level 4.............................  Artificial Openings for
                                                Feeding or Elimination.
Severity Level 3.............................  HIV/AIDS.
Severity Level 3.............................  Central Nervous System
                                                Infections, Except Viral
                                                Meningitis.
Severity Level 3.............................  Opportunistic Infections.
Severity Level 3.............................  Non-Hodgkin's Lymphomas
                                                and Other Cancers and
                                                Tumors.
Severity Level 3.............................  Colorectal, Breast (Age
                                                <50), Kidney and Other
                                                Cancers.
Severity Level 3.............................  Breast (Age 50+),
                                                Prostate Cancer, Benign/
                                                Uncertain Brain Tumors,
                                                and Other Cancers and
                                                Tumors.
Severity Level 3.............................  Lipidoses and
                                                Glycogenosis.

[[Page 10769]]

 
Severity Level 3.............................  Adrenal, Pituitary, and
                                                Other Significant
                                                Endocrine Disorders.
Severity Level 3.............................  Acute Liver Failure/
                                                Disease, Including
                                                Neonatal Hepatitis.
Severity Level 3.............................  Intestinal Obstruction.
Severity Level 3.............................  Necrotizing Fasciitis.
Severity Level 3.............................  Bone/Joint/Muscle
                                                Infections/Necrosis.
Severity Level 3.............................  Osteogenesis Imperfecta
                                                and Other
                                                Osteodystrophies.
Severity Level 3.............................  Cleft Lip/Cleft Palate.
Severity Level 3.............................  Hemophilia.
Severity Level 3.............................  Disorders of the Immune
                                                Mechanism.
Severity Level 3.............................  Coagulation Defects and
                                                Other Specified
                                                Hematological Disorders.
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/
                                                Injuries.
Severity Level 3.............................  Cerebral Palsy, Except
                                                Quadriplegic.
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 Ischemic Heart
                                                Disease.
Severity Level 3.............................  Atrial and Ventricular
                                                Septal Defects, Patent
                                                Ductus Arteriosus, and
                                                Other Congenital Heart/
                                                Circulatory Disorders.
Severity Level 3.............................  Specified Heart
                                                Arrhythmias.
Severity Level 3.............................  Cerebral Aneurysm and
                                                Arteriovenous
                                                Malformation.
Severity Level 3.............................  Hemiplegia/Hemiparesis.
Severity Level 3.............................  Cystic Fibrosis.
Severity Level 3.............................  Fibrosis of Lung and
                                                Other Lung Disorders.
Severity Level 3.............................  Pathological Fractures,
                                                Except of Vertebrae,
                                                Hip, or Humerus.
Severity Level 2.............................  Viral or Unspecified
                                                Meningitis.
Severity Level 2.............................  Thyroid, 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.
Severity Level 2.............................  Chronic Pancreatitis.
Severity Level 2.............................  Inflammatory Bowel
                                                Disease.
Severity Level 2.............................  Rheumatoid Arthritis and
                                                Specified Autoimmune
                                                Disorders.
Severity Level 2.............................  Systemic Lupus
                                                Erythematosus and Other
                                                Autoimmune Disorders.
Severity Level 2.............................  Congenital/Developmental
                                                Skeletal and Connective
                                                Tissue Disorders.
Severity Level 2.............................  Acquired Hemolytic
                                                Anemia, Including
                                                Hemolytic Disease of
                                                Newborn.
Severity Level 2.............................  Sickle Cell Anemia (Hb-
                                                SS).
Severity Level 2.............................  Drug Psychosis.
Severity Level 2.............................  Drug Dependence.
Severity Level 2.............................  Down Syndrome, Fragile X,
                                                Other Chromosomal
                                                Anomalies, and
                                                Congenital Malformation
                                                Syndromes.
Severity Level 2.............................  Spina Bifida and Other
                                                Brain/Spinal/Nervous
                                                System Congenital
                                                Anomalies.
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
                                                Pulmonary Disease,
                                                Including
                                                Bronchiectasis.
Severity Level 2.............................  Chronic Ulcer of Skin,
                                                Except Pressure.
Severity Level 1 (Lowest)....................  Chronic Hepatitis.
Severity Level 1.............................  Acute Pancreatitis/Other
                                                Pancreatic Disorders and
                                                Intestinal
                                                Malabsorption.
Severity Level 1.............................  Thalassemia Major.
Severity Level 1.............................  Autistic Disorder.
Severity Level 1.............................  Pervasive Developmental
                                                Disorders, Except
                                                Autistic Disorder.
Severity Level 1.............................  Multiple Sclerosis.
Severity Level 1.............................  Asthma.
Severity Level 1.............................  Chronic Kidney Disease,
                                                Severe (Stage 4).
Severity Level 1.............................  Amputation Status, Lower
                                                Limb/Amputation
                                                Complications.
Severity Level 1.............................  No Severity HCCs.
------------------------------------------------------------------------

e. Cost-Sharing Reductions Adjustments
    We proposed to continue to include an adjustment for the receipt of 
cost-sharing reductions in the model, and proposed to continue not to 
adjust for receipt of reinsurance payments in the model. We have 
updated the adjustments to the HHS risk adjustment models for 
individuals who receive cost-sharing reductions to be consistent with 
the cost-sharing reductions advance payment formula finalized in the 
2015 Payment Notice, for implementation in 2015 benefit year risk 
adjustment. The silver plan variation and zero cost sharing factors are 
unchanged from those finalized in the 2014 Payment Notice. The

[[Page 10770]]

adjustment factors are set forth in Table 7. These adjustments are 
multiplied against the sum of the demographic, diagnosis, and 
interaction factors. We will continue to evaluate this adjustment as 
more data becomes available. We received no comments on this approach, 
and are finalizing it as proposed.

               Table 7--Cost-Sharing Reduction Adjustment
------------------------------------------------------------------------
                                                              Induced
        Household income                 Plan AV            utilization
                                                              factor
------------------------------------------------------------------------
                    Silver Plan Variation Recipients
------------------------------------------------------------------------
100-150% of FPL................  Plan Variation 94%.....            1.12
150-200% of FPL................  Plan Variation 87%.....            1.12
200-250% of FPL................  Plan Variation 73%.....            1.00
>250% of FPL...................  Standard Plan 70%......            1.00
------------------------------------------------------------------------
                      Zero Cost Sharing Recipients
------------------------------------------------------------------------
<300% of FPL...................  Platinum (90%).........            1.00
<300% of FPL...................  Gold (80%).............            1.07
<300% of FPL...................  Silver (70%)...........            1.12
<300% of FPL...................  Bronze (60%)...........            1.15
------------------------------------------------------------------------
                     Limited Cost Sharing Recipients
------------------------------------------------------------------------
>300% of FPL...................  Platinum (90%).........            1.00
>300% of FPL...................  Gold (80%).............            1.07
>300% of FPL...................  Silver (70%)...........            1.12
>300% of FPL...................  Bronze (60%)...........            1.15
------------------------------------------------------------------------

f. Model Performance Statistics
    To evaluate model performance, we examined R-squared statistics and 
predictive ratios. The R-squared statistic, which calculates the 
percentage of individual variation explained by a model, measures the 
predictive accuracy of the model overall. The predictive ratios measure 
the predictive accuracy of a model for different validation groups or 
subpopulations. The predictive ratio 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 predictive ratio 
represents how well the model does on average at predicting plan 
liability for that subpopulation. A subpopulation that is predicted 
perfectly would have a predictive ratio of 1.0. For each of the HHS 
risk adjustment models, the R-squared statistic and the predictive 
ratio are in the range of published estimates for concurrent risk 
adjustment models.\10\ Because we are averaging the coefficients from 
separately solved models based on MarketScan 2011, 2012 and 2013 data, 
we are publishing the R-squared statistic for each model and year 
separately to verify their statistical validity. The R-squared 
statistic for each model is shown in Table 8.
---------------------------------------------------------------------------

    \10\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis 
of Claims-Based Tools for Health Risk Assessment.'' Society of 
Actuaries. April 2007.

                           Table 8--R-Squared Statistic for HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
                                                                                R-squared statistic
                      Risk adjustment model                      -----------------------------------------------
                                                                       2011            2012            2013
----------------------------------------------------------------------------------------------------------------
Platinum Adult..................................................           0.368           0.394           0.382
Platinum Child..................................................           0.283           0.286           0.277
Platinum Infant.................................................           0.337           0.284           0.322
Gold Adult......................................................           0.363           0.389           0.377
Gold Child......................................................           0.278           0.280           0.272
Gold Infant.....................................................           0.335           0.282           0.319
Silver Adult....................................................           0.360           0.387           0.374
Silver Child....................................................           0.275           0.277           0.268
Silver Infant...................................................           0.334           0.281           0.318
Bronze Adult....................................................           0.358           0.384           0.372
Bronze Child....................................................           0.272           0.273           0.265
Bronze Infant...................................................           0.334           0.281           0.318
Catastrophic Adult..............................................           0.358           0.384           0.371
Catastrophic Child..............................................           0.271           0.273           0.265
Catastrophic Infant.............................................           0.334           0.281           0.318
----------------------------------------------------------------------------------------------------------------


[[Page 10771]]

g. Overview of the Payment Transfer Formula
    We do not propose to alter our payment transfer methodology. Plan 
average risk scores would be calculated as the member month-weighted 
average of individual enrollee risk scores. We defined the calculation 
of plan average actuarial risk and the calculation of payments and 
charges in the Premium Stabilization Rule. In the 2014 Payment Notice, 
we combined those concepts into a risk adjustment payment transfer 
formula. Risk adjustment transfers (payments and charges) will be 
calculated following the completion of issuer risk adjustment data 
reporting. The payment transfer formula includes a set of cost 
adjustment terms that require transfers to be calculated at the 
geographic rating area level for each plan (that is, HHS will calculate 
two separate transfer amounts for a plan that operates in two rating 
areas).
    The payment transfer formula is designed to provide a per member 
per month (PMPM) transfer amount. The PMPM transfer amount derived from 
the payment transfer formula will be multiplied by each plan's total 
member months for the benefit year to determine the total payment due 
or charge owed by the issuer for that plan in a rating area.
(1) Overview of the Payment Transfer Formula
    Though we did not propose to change the payment transfer formula 
from what was finalized in the 2014 Payment Notice (78 FR 15430-15434), 
we believe it useful to republish the formula in its entirety, since we 
are finalizing recalibrated HHS risk adjustment models. Transfers 
(payments and charges) will be calculated as the difference between the 
plan premium estimate reflecting risk selection and the plan premium 
estimate not reflecting risk selection. As finalized in the 2014 
Payment Notice, the HHS risk adjustment payment transfer formula is:
[GRAPHIC] [TIFF OMITTED] TR27FE15.000

Where:

PPS = State average premium;
 PLRSi = plan i's plan liability risk score;
AVi = plan i's metal level AV;
ARFi = allowable rating factor;
IDFi = plan i's induced demand factor;
GCFi = plan i's geographic cost factor;
si = plan i's share of State enrollment;

and the denominator is summed across all plans in the risk pool in the 
market in the State.
    The difference between the two premium estimates in the payment 
transfer formula determines whether a plan pays a risk transfer charge 
or receives a risk transfer payment. Note that the value of the plan 
average risk score by itself does not determine whether a plan would be 
assessed a charge or receive a payment--even if the risk score is 
greater than 1.0, it is possible that the plan would be assessed a 
charge if the premium compensation that the plan may receive through 
its rating practices (as measured through the allowable rating factor) 
exceeds the plan's predicted liability associated with risk selection. 
Risk adjustment transfers are calculated at the risk pool level and 
catastrophic plans are treated as a separate risk pool for purposes of 
risk adjustment.
h. HHS Risk Adjustment Methodology Considerations
    In the 2014 Payment Notice, we finalized the methodology that HHS 
will use when operating a risk adjustment program on behalf of a State. 
In the second Program Integrity Rule (78 FR 65046), we clarified the 
modification to the transfer formula to accommodate community rated 
States that utilize family tiering rating factors. We further clarified 
this formula in the proposed rule to ensure that the allowable rating 
factor (ARF) is appropriately applied in the transfer formula in 
community rated States for 2014 risk adjustment. In the second Program 
Integrity Rule, we stated that the ARF formula should be modified so 
that the numerator is a summation over all subscribers of the product 
of the family tiering factor and the subscriber member months, and the 
denominator the sum of billable member months. However, we do not 
believe the revised formula accurately reflects that description, as it 
does not distinguish between subscriber months (months attributed to 
the sole subscriber) and billable member months (months attributed to 
all allowable members of the family factored into the community 
rating). The calculation of ARF for family tiering States that was 
published in the second Program Integrity Rule that would be calculated 
at the level of the subscriber, was as follows:
[GRAPHIC] [TIFF OMITTED] TR27FE15.001

Where:

ARF<INF>s</INF> is the rating factor for the subscriber(s) (based on 
family size/composition), and
M<INF>s</INF> is the number of billed person-months that are counted 
in determining the premium(s) for the subscriber(s).

    While the preamble description in the second Program Integrity Rule 
is correct, as we noted, the formula itself is incorrect in that it 
does not distinguish between billable member months and subscriber 
months by using the same variable for both. Therefore, we proposed a 
technical change to the ARF calculation for family tiering States, as 
follows:
[GRAPHIC] [TIFF OMITTED] TR27FE15.002

Where:

ARFi is the allowable rating factor for plan i,
ARFs is the allowable rating factor--also known as the family rating 
tier--for subscriber (family) s in plan i,
MSs is the number of subscriber months for subscriber s, and
MBs is the number of billable member months for subscriber (family) 
s.

    The numerator is summed over the product of the allowable rating 
factor and the number of subscriber months (that is, months of family 
subscription), and the denominator is the sum over all billable 
members. Each family unit covered under a single contract is considered 
a single ``subscriber.'' Therefore, a family of four that purchases 
coverage for a period from January through December will accumulate 12 
subscriber months (MSs), although coverage is being provided for 48 
member months (both billable and non-billable). Billable members are 
individuals who are counted for purposes of placing the subscriber in a 
family tier. For example, in a community rated State that rates based 
on two adults and one or more children with one full year of 
enrollment, the family of four would have 36 billable member months 
(MBs), (12 billable member months for the subscriber, 12 billable 
member months for the second adult, and 12 billable months for the 
first child). We received no comments on this correction and are 
finalizing it as proposed.

[[Page 10772]]

i. State-Submitted Alternate Risk Adjustment Methodology
    For 2016, we are recertifying the alternate risk adjustment 
methodology submitted by Massachusetts and certified in the 2014 
Payment Notice (78 FR 15439-15452).
3. Provisions and Parameters for the Transitional Reinsurance Program
    The Affordable Care Act directs that a transitional reinsurance 
program be established in each State to help stabilize premiums for 
coverage in the individual market from 2014 through 2016. In the 2014 
Payment Notice, we expanded on the standards set forth in subparts C 
and E of the Premium Stabilization Rule and established the reinsurance 
payment parameters and uniform reinsurance contribution rate for the 
2014 benefit year. In the 2015 Payment Notice, we established the 
reinsurance payment parameters and uniform reinsurance contribution 
rate for the 2015 benefit year and certain oversight provisions related 
to the operation of the reinsurance program.
a. Common Ownership Clarification
    The definition of a ``contributing entity'' at Sec.  153.20 
provides that for the 2015 and 2016 benefit years, a contributing 
entity is (i) a health insurance issuer or (ii) a self-insured group 
health plan, including a group health plan that is partially self-
insured and partially insured, where the health insurance coverage does 
not constitute major medical coverage, that uses a TPA in connection 
with claims processing or adjudication, including the management of 
internal appeals, or plan enrollment for services other than for 
pharmacy benefits or excepted benefits within the meaning of section 
2791(c) of the PHS Act. Solely for purposes of the reinsurance program, 
a self-insured group health plan will not be deemed to use a TPA if it 
uses an unrelated third party: (a) To obtain a provider network and 
related claims repricing services; or (b) for up to 5 percent of claims 
processing or adjudication or plan enrollment, based on either the 
number of transactions processed by the third party, or the value of 
the claims processing and adjudication and plan enrollment services 
provided by the third party.
    The definition of a ``contributing entity'' does not include 
qualifying self-administered, self-insured group health plans for the 
purpose of the requirement to make reinsurance contributions for the 
2015 and 2016 benefit years. In the preamble to the 2015 Payment 
Notice, we indicated that we consider a TPA to be, with respect to a 
self-insured group health plan, an entity that is not under common 
ownership or control with the self-insured group health plan or its 
plan sponsor that provides the specified core administrative services 
(79 FR 13773).
    We received a number of inquiries seeking clarification on how to 
determine common ownership or control for purposes of the definition of 
a ``contributing entity'' in Sec.  153.20. In response, in the proposed 
rule, we proposed to clarify that principles similar to the controlled 
group rules of section 414(b) and (c) of the Code be used to determine 
whether the TPA is under common ownership or control with the self-
insured group health plan or the plan sponsor, because these rules are 
familiar to many stakeholders. We also noted that similar ownership or 
control rules apply for other purposes under the Affordable Care Act, 
such as the shared responsibility payment for applicable large 
employers that do not offer full-time employees and dependents the 
opportunity to enroll in minimum essential coverage, and the annual fee 
on health insurance issuers under section 9010 of the Affordable Care 
Act.
    We sought comment on this proposal and on alternative definitions 
that would be familiar to stakeholders for determining whether a TPA is 
under common ownership or control with the self-insured group health 
plan or its sponsor for purposes of the definition of ``contributing 
entity'' at Sec.  153.20.
    We finalize this proposal with one clarification--we are limiting 
the incorporation of the section 414 rules to sections 414(b) and (c).
    Comment: One commenter stated that the common ownership or control 
test should mirror, ``not use similar principles to,'' the section 414 
controlled group rules, so that one consistent test of determining 
common ownership applies for all employer compliance purposes under the 
Affordable Care Act.
    Response: The section 414 controlled group rules address a variety 
of structures for related corporations and businesses, some of which 
are not relevant to defining a ``contributing entity,'' such as 
sections 414(m), (n), and (o). The intent of the proposed language was 
to limit the incorporation of the section 414 rules to sections 414(b) 
and (c), the provisions most applicable to defining a contributing 
entity. Therefore, we are finalizing the proposal with that 
clarification.
b. Reinsurance Contributing Entities and Minimum Value
    Section 1341(b)(3)(B) of the Affordable Care Act and the 
implementing regulations at Sec.  153.400(a)(1) require contributing 
entities to make reinsurance contributions for major medical coverage 
that is considered to be part of a commercial book of business. We 
define major medical coverage at Sec.  153.20 as coverage meeting 
minimum value (MV) or that is subject to the actuarial value (AV) 
requirements. In light of this definition, stakeholders have asked 
whether plans that do not offer inpatient hospital coverage, but that 
are considered to offer MV for purposes of the employer shared 
responsibility payment because they were in place before HHS and IRS 
guidance \11\ on MV was issued November 4, 2014, must make reinsurance 
contributions for the 2015 benefit year. As detailed in the November 4, 
2014 guidance, we clarify that plans that entered into a binding 
agreement or began enrolling employees prior to November 4, 2014, with 
plan years beginning by March 1, 2015, are considered to meet MV 
requirements until the end of the current plan year for purposes of the 
employer shared responsibility penalties. We clarify that these plans 
will therefore also be deemed to satisfy the definition of ``major 
medical coverage'' in Sec.  153.20 for purposes of reinsurance 
contributions, since these plans meet the previous definition of MV 
until plan renewal.
---------------------------------------------------------------------------

    \11\ Group Health Plans that Fail to Cover In-Patient 
Hospitalization Services, Notice 2014-69, available at: http://www.irs.gov/pub/irs-drop/n-14-69.pdf.
---------------------------------------------------------------------------

c. Self-Insured Expatriate Plans (Sec.  153.400(a)(1)(iii))
    Section 1341(b)(3)(B) of the Affordable Care Act and the 
implementing regulations at Sec.  153.400(a)(1) require contributing 
entities to make reinsurance contributions for major medical coverage 
that is considered to be part of a commercial book of business. In the 
2014 Payment Notice (78 FR 15457), we stated that we interpret this 
language to exclude expatriate health coverage, as defined by the 
Secretary, and we codified this approach in regulatory text at Sec.  
153.400(a)(1)(iii). In the March 8, 2013, FAQs about the Affordable 
Care Act Implementation Part XIII,\12\ an expatriate health plan is 
defined as an insured group health plan for which

[[Page 10773]]

enrollment is limited to primary insured who reside outside of their 
home country for at least 6 months of the plan year and any covered 
dependents, and its associated group health insurance coverage. 
Therefore, under our current regulation, self-insured expatriate plans 
that would otherwise meet the conditions outlined in the March 8, 2013 
FAQ are required to make reinsurance contributions if these plans 
provide major medical coverage, unless another exemption in Sec.  
153.400(a) applies, because the definition in the FAQ applies only to 
insured expatriate plans.
---------------------------------------------------------------------------

    \12\ Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs13.html.
---------------------------------------------------------------------------

    We proposed to amend Sec.  153.400(a)(1)(iii), which currently 
exempts expatriate health coverage, as defined by the Secretary, from 
reinsurance contributions, so that it also exempts, for the 2015 and 
2016 benefit years only, any self-insured group health plan for which 
enrollment is limited to participants, and any covered dependents, who 
reside outside of their home country for at least 6 months of the plan 
year. This definition would be applicable solely to the transitional 
reinsurance program.
    We received one comment in support of this proposal, which also 
stated that the expatriate plan requirements should be revised to 
reflect the effect of the recently enacted Expatriate Health Coverage 
Clarification Act of 2014, as part of the Consolidated and Further 
Continuing Appropriations Act, 2015, H.R. 83 (2014 Expatriate Health 
Coverage Act). Since the expatriate plan requirements (and accompanying 
definitions) enacted in the 2014 Expatriate Health Coverage Act only 
apply to expatriate plans issued or renewed on or after July 1, 2015, 
we are finalizing the amendment as proposed, and we intend to undertake 
future rulemaking in conjunction with the Departments of the Treasury 
and Labor governing the application of the Affordable Care Act to 
expatriate plans to harmonize our regulations (as may be necessary) 
with the 2014 Expatriate Health Coverage Act. We do not anticipate that 
this future rulemaking will affect the availability of the exemption 
for the expatriate plans described in this final rule.
d. Determination of Debt (Sec.  153.400(c))
    Consistent with the determination of debt provision set forth in 
Sec.  156.1215(c), we proposed to clarify in Sec.  153.400(c) that any 
amount owed to the Federal government by a self-insured group health 
plan (including a group health plan that is partially self-insured and 
partially insured, where the health insurance coverage does not 
constitute major medical coverage), including reinsurance contributions 
that are not remitted in full in a timely manner, would be a 
determination of a debt.
    We received no comments on this proposal and are finalizing this 
provision as proposed.
e. Reinsurance Contribution Submission Process
    On May 22, 2014, we released an FAQ about the reinsurance 
contribution submission process.\13\ As detailed in this FAQ, we 
implemented a streamlined process for the collection of reinsurance 
contributions. A contributing entity, or a TPA or administrative 
services-only (ASO) contractor on behalf of the contributing entity, 
must complete all required steps for the reinsurance contribution 
submission process on www.pay.gov (Pay.gov). The ``ACA Transitional 
Reinsurance Program Annual Enrollment and Contributions Submission 
Form'' available on Pay.gov must be completed and submitted by a 
contributing entity or a TPA or ASO contractor on its behalf no later 
than November 15 of the benefit year under Sec.  153.405(b).
---------------------------------------------------------------------------

    \13\ Available at: http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Reinsurance-contributions-process-FAQ-5-22-14.pdf.
---------------------------------------------------------------------------

    We proposed to amend Sec.  153.405(b), which requires a 
contributing entity to submit its annual enrollment count of the number 
of covered lives of reinsurance contribution enrollees for the 
applicable benefit year to HHS no later than November 15 of benefit 
year 2014, 2015, or 2016. When November 15 does not fall on a business 
day, we proposed that a contributing entity submit its annual 
enrollment count of the number of covered lives of reinsurance 
contribution enrollees for the applicable benefit year to HHS no later 
than November 15, 2014, 2015, or 2016, or, if such date is not a 
business day, the next business day. Similarly, because November 15, 
2015 and January 15, 2017 do not fall on a business day, we proposed to 
amend Sec.  153.405(c)(2) so that a contributing entity must remit 
reinsurance contributions to HHS no later than January 15, 2015, 2016, 
or 2017, as applicable, or, if such date is not a business day, the 
next applicable business day, if making a combined contribution or the 
first payment of the bifurcated contribution; and no later than 
November 15, 2015, 2016, or 2017, as applicable, or, if such date is 
not a business day, the next applicable business day, if making the 
second payment of the bifurcated contribution.\14\
---------------------------------------------------------------------------

    \14\ To be comprehensive, we included all reinsurance 
contribution submission dates throughout the entirety of the 
program, understanding that some dates noted here have passed.
---------------------------------------------------------------------------

    Although we stated in the 2015 Payment Notice (79 FR 13776) that, 
for operational reasons, HHS would not permit contributing entities to 
elect to make the entire benefit year's reinsurance contribution by 
January 15, 2015, 2016, or 2017, as applicable, we have resolved those 
operational barriers, and now offer contributing entities the option to 
pay: (1) The entire 2014, 2015 or 2016 benefit year contribution in one 
payment no later than January 15, 2015, 2016, or 2017, as applicable 
(or, if such date is not a business day, the next applicable business 
day), reflecting the entire uniform contribution rate applicable to 
each benefit year (that is, $63 per covered life for 2014, $44 per 
covered life for 2015, and $27 per covered life for 2016); or (2) in 
two separate payments for the 2014, 2015, or 2016 benefit years, with 
the first remittance due by January 15, 2015, 2016, and 2017, as 
applicable (or, if such date is not a business day, the next applicable 
business day) reflecting the first payment of the bifurcated 
contribution (that is, $52.50 per covered life for 2014, $33.00 per 
covered life for 2015, and $21.60 per covered life for 2016); and the 
second remittance due by November 15, 2015, 2016, or 2017, as 
applicable (or, if such date is not a business day, the next applicable 
business day) reflecting the second payment of the bifurcated 
contribution (that is, $10.50 reinsurance fee per covered life for 
2014, $11.00 per covered life for 2015, and $5.40 per covered life for 
2016).
    Under Sec.  153.405(c)(1), HHS must notify the contributing entity 
of the reinsurance contribution amount allocated to reinsurance 
payments and administrative expenses to be paid for the applicable 
benefit year following submission of the annual enrollment count. We 
clarified that this notification will occur when the contributing 
entity enters the gross annual enrollment count into the Pay.gov form 
and the form auto-calculates the contribution amount owed. No separate 
notification or invoice will be sent to a contributing entity, unless a 
discrepancy in data or payment has been identified by the entity or HHS 
after the form is submitted. In addition, we proposed to delete Sec.  
153.405(c)(2), to be consistent with HHS permitting flexibility for a 
contributing entity (or the TPA or ASO contractor on its behalf) to 
remit the

[[Page 10774]]

entire contribution in one payment, rather than requiring a bifurcated 
payment. Notification of the reinsurance contribution amount related to 
the allocation for reinsurance payments, administrative expenses, and 
payments to the U.S. Treasury for the applicable benefit year will also 
be made through the automatic calculation of this amount when a 
contributing entity (or the TPA or ASO contractor on its behalf) 
completes the reinsurance contribution submission process and submits 
the form through Pay.gov.
    We also proposed to amend and redesignate Sec.  153.405(c)(3) to 
(c)(2) to clarify that a contributing entity must schedule its 
contribution payment for the applicable benefit year to occur no later 
than January 15, 2015, 2016, or 2017, as applicable (or, if such date 
is not a business day, the next applicable business day) if making a 
combined payment or the first payment of the bifurcated payment, and no 
later than November 15, 2015, 2016, or 2017, as applicable (or, if such 
date is not a business day, the next applicable business day) if making 
the second payment of the bifurcated payment. However, we noted that 
the form must be completed and the reinsurance contribution payment(s) 
must be scheduled no later than November 15, 2014, 2015, or 2016, as 
applicable, to successfully comply with the deadline set forth in Sec.  
153.405(b) and complete the reinsurance contribution submission process 
through Pay.gov.\15\ The reinsurance contribution payments must be 
scheduled by this deadline regardless of whether the contributing 
entity (or the TPA or ASO contractor on its behalf) is remitting a 
combined payment or two payments under the bifurcated schedule.
---------------------------------------------------------------------------

    \15\ We note that for the 2014 benefit year, we extended the 
filing deadline to December 5, 2014.
---------------------------------------------------------------------------

    We noted that if a contributing entity elects to follow the 
bifurcated schedule, then the contributing entity is required to submit 
two separate forms through Pay.gov. However, the annual enrollment 
count reported on both forms must be the same. This is consistent with 
Sec.  153.405(b) and previous guidance, which provide that no later 
than November 15 of benefit year 2014, 2015, or 2016, as applicable, a 
contributing entity must submit an annual enrollment count of the 
number of covered lives of reinsurance contribution enrollees one time 
for the applicable benefit year to HHS.
    Finally, we proposed to amend Sec.  153.405(g)(4)(1)(i) and (ii), 
which require a plan sponsor who maintains multiple group health plans 
to report to HHS the average number of covered lives calculated, the 
counting method used, and the names of the multiple plans being treated 
as a single group health plan as determined by the plan sponsor. A plan 
sponsor would continue to be required to determine this information, 
but would only need to report to HHS the average number of covered 
lives calculated and the other data elements required through the 
Pay.gov reinsurance contribution submission process. Under Sec.  
153.405(h), plan sponsors should retain this additional information 
(that is, the counting method used and the names of the multiple plans 
being treated as a single group health plan), as this information may 
be requested to assess the plan sponsor's compliance with the 
reinsurance contribution requirements.
    We are finalizing these provisions as proposed.
    Comment: Several commenters asked that HHS publicize the amount of 
reinsurance contributions collected by December 31st of the benefit 
year for issuers to assess the possible proration of reinsurance 
payments.
    Response: We intend to issue a report of the estimated total 
contributions collected in the spring of the year following the 
applicable benefit year. This estimate would include the amount of 
contributions already paid and scheduled to be paid for the entire 
benefit year.
f. Consistency in Counting Methods for Health Insurance Issuers (Sec.  
153.405(d))
    As noted in the 2014 Payment Notice (78 FR 15462), the counting 
methods for the transitional reinsurance program are designed to align 
with the methods permitted for purposes of the fee to fund the Patient-
Centered Outcomes Research Trust Fund (PCORTF). The PCORTF Final Rule 
(77 FR 72729) requires consistency in the use of counting methods for 
calculating covered lives for the duration of the year. We proposed for 
the 2015 and 2016 benefit years \16\ to amend Sec.  153.405(d) to 
similarly require a contributing entity that is a health insurance 
issuer to use the same counting method to calculate its annual 
enrollment count of covered lives of reinsurance contribution enrollees 
in a State (including both the individual and group markets) for a 
benefit year even if the fully insured major medical plans for which 
reinsurance contributions are required enroll different covered lives. 
If a health insurance issuer has multiple major medical plans covering 
different lives in different States, the issuer may use different 
counting methods for all major medical plans in each State (including 
both the individual and group markets). We noted that this amendment 
would not prevent an issuer from using different counting methods for 
different benefit years. We did not propose a similar requirement for 
self-insured group health plans and sought comments on whether a 
similar uniformity requirement should extend to self-insured group 
health plans that are contributing entities.
---------------------------------------------------------------------------

    \16\ As noted in an FAQ issued on October 21, 2014, we also 
encouraged this approach for the 2014 benefit year. Available at: 
https://www.regtap.info/, FAQ# 6037.
---------------------------------------------------------------------------

    We are finalizing this provision as proposed.
    Comment: One commenter stated that it is difficult for self-insured 
plans to use consistent counting methods for multiple plans.
    Response: In many instances, a plan sponsor's multiple group health 
plans may be administered by different entities, making implementation 
of a uniformity of counting method requirement potentially more 
difficult. Therefore, we are finalizing this policy.
g. Snapshot Count and Snapshot Factor Counting Methods (Sec. Sec.  
153.405(d)(2) and (e)(2))
    Under Sec.  153.400(a)(1), reinsurance contributions are generally 
required for major medical coverage that is considered to be part of a 
commercial book of business, but contributions are not required to be 
paid more than once for the same covered life. Reinsurance 
contributions are generally calculated based on the number of covered 
lives covered by a plan or coverage that provides major medical 
coverage. The reinsurance contribution required from a contributing 
entity is calculated by multiplying the number of covered lives 
(determined under a permitted counting method set forth in Sec.  
153.405(d) through Sec.  153.405(g)) during the applicable calendar 
year for all applicable plans and coverage of the contributing entity 
by the applicable contribution rate for the respective benefit year.
    We proposed to clarify how the counting methods set forth in 
Sec. Sec.  153.405(d)(2) and (e)(2) are to be used in those situations 
when a plan terminates or is established in the middle of a quarter to 
effectuate the principle that contributions are required to be paid 
once for the same covered life. Under the snapshot count method, 
described at Sec.  153.405(d)(2), to determine the number of covered 
lives for the purposes of reinsurance contributions, the issuer or 
self-insured group health plan must add the total number of lives 
covered on any date (or

[[Page 10775]]

more dates, if an equal number of dates are used for each quarter) 
during the same corresponding month in each of the first 3 quarters of 
the benefit year, and divide that total by the number of dates on which 
a count was made. Under the snapshot factor method, described at Sec.  
153.405(e)(2), to determine the number of covered lives for the 
purposes of reinsurance contributions, the self-insured group health 
plan must add the total number of lives covered on any date (or more 
dates, if an equal number of dates are used for each quarter) during 
the same corresponding month in each of the first 3 quarters of the 
benefit year, and divide that total by the number of dates on which a 
count was made, except that the number of lives covered on a date is 
calculated by adding the number of participants with self-only coverage 
on the date to the product of the number of participants with coverage 
other than self-only coverage on the date and a factor of 2.35. For 
each of these counting methods, the same months must be used for each 
quarter (for example, January, April, July), and the date used for the 
second and third quarter must fall within the same week of the quarter 
as the corresponding date used for the first quarter.
    We understand that a health insurance plan or coverage may be 
established, terminated, or change funding mechanisms (that is, from 
fully insured to self-insured or self-insured to fully insured), in the 
middle of a quarter. In these circumstances, it is possible that the 
new plan or coverage would not have covered lives enrolled in the plan 
or coverage for the entire quarter. If this occurs, a contributing 
entity could, due to its selection of dates, be required to pay an 
amount significantly greater or lesser than the amount that would be 
due based on its average count of covered lives over the course of the 
9-month counting period. To avoid this result, we proposed to clarify 
that, if the plan or coverage in question had enrollees on any day 
during a quarter and if the contributing entity elects to (and is 
permitted to) use either the snapshot count or snapshot factor method, 
it must choose a set of counting dates for the 9-month counting period 
such that the plan or coverage has enrollees on each of the dates, if 
possible. However, the enrollment count for a date during a quarter in 
which the plan or coverage was in existence for only part of the 
quarter could be reduced by a factor reflecting the amount of time 
during the quarter for which the plan or coverage was not in existence. 
This approach is intended to accurately capture the amount of time 
during the quarter for which major medical coverage that is part of a 
commercial book of business and subject to reinsurance contributions 
was provided to enrollees, while not requiring contributions to be paid 
more than once for the same covered life. For example, a contributing 
entity that has a plan that terminates on August 31st (that is, 62 days 
into the third quarter) would not be permitted to use September 1st as 
the date for the third quarter under the snapshot count or snapshot 
factor methods because this would not properly reflect the number of 
covered lives of reinsurance contribution enrollees under the plan in 
the third quarter of the benefit year. However, it would be entitled to 
reduce its count of covered lives during that quarter by 30/92, the 
proportion of the quarter during which the plan had no enrollment. This 
reduction factor would only be applicable for the snapshot count and 
snapshot factor methods set forth in Sec. Sec.  153.405(d)(2) and 
(e)(2), respectively, as all of the other permitted counting methods 
automatically account for partial year enrollment.
    Comment: One commenter asked that the 2.35 factor in the snapshot 
factor counting method set forth in Sec.  153.405(e)(2) be optional, 
rather than required, since some plans may only cover one employee and 
a spouse or only one employee and one dependent.
    Response: We decline to make this change, but note that a number of 
different counting methods are available and contributing entities have 
flexibility to choose the one that best meets their needs and 
circumstances.
h. Uniform Reinsurance Contribution Rate for 2016
    Section 153.220(c) provides that HHS is to publish in the annual 
HHS notice of benefit and payment parameters the uniform reinsurance 
contribution rate for the upcoming benefit year. Section 
1341(b)(3)(B)(iii) of the Affordable Care Act specifies that $10 
billion for reinsurance contributions are to be collected from 
contributing entities for the 2014 benefit year (the reinsurance 
payment pool), $6 billion for the 2015 benefit year, and $4 billion for 
the 2016 benefit year. Additionally, sections 1341(b)(3)(B)(iv) and 
1341(b)(4) of the Affordable Care Act direct that $2 billion in funds 
are to be collected for contribution to the U.S. Treasury for the 2014 
benefit year, $2 billion for the 2015 benefit year, and $1 billion for 
the 2016 benefit year. Finally, section 1341(b)(3)(B)(ii) of the 
Affordable Care Act authorizes the collection of additional amounts for 
administrative expenses. Taken together, these three components make up 
the total dollar amount to be collected from contributing entities for 
each of the 2014, 2015, and 2016 benefit years under the uniform 
reinsurance contribution rate.
    As discussed in the 2014 and 2015 Payment Notices, each year, the 
uniform reinsurance contribution rate will be calculated by dividing 
the sum of the three amounts (the reinsurance payment pool, the U.S. 
Treasury contribution, and administrative costs) by the estimated 
number of enrollees in plans that must make reinsurance contributions:
[GRAPHIC] [TIFF OMITTED] TR27FE15.003

As discussed in greater detail below, we proposed collecting $32 
million for administrative expenses for the 2016 benefit year. 
Therefore, the total amount to be collected for the 2016 benefit year 
would be approximately $5.032 billion. Our estimate of the number of 
enrollees in plans that must make reinsurance contributions yields an 
annual per capita contribution rate of $27 for the 2016 benefit year.
(1) Allocation of Uniform Reinsurance Contribution Rate
    Section 153.220(c) provides that HHS is to establish in the annual 
HHS notice of benefit and payment parameters for the applicable benefit 
year the proportion of contributions collected

[[Page 10776]]

under the uniform reinsurance contribution rate to be allocated to 
reinsurance payments, payments to the U.S. Treasury, and administrative 
expenses. In the 2014 and 2015 Payment Notices, we stated that 
reinsurance contributions collected for the 2014 and 2015 benefit years 
would be allocated pro rata to the reinsurance payment pool, 
administrative expenses, and the U.S. Treasury, up to $12.02 billion 
for 2014 and up to $8.025 billion for 2015. However, we amended this 
approach in the 2015 Market Standards Rule,\17\ such that, if 
reinsurance collections fall short of our estimates for a particular 
benefit year, we will allocate reinsurance contributions collected 
first to the reinsurance payment pool, with any remaining amounts being 
then allocated to the U.S. Treasury and administrative expenses, on a 
pro rata basis. We proposed following a similar approach for the 2016 
benefit year, such that if reinsurance contributions fall short of our 
estimates, contributions collected will first be allocated to the 
reinsurance payment pool, with any remaining amounts being then 
allocated to the U.S. Treasury and administrative expenses, on a pro 
rata basis. In the proposed rule, we also proposed to use any excess 
contributions for reinsurance payments for the current benefit year by 
increasing the coinsurance rate for the 2016 benefit year up to 100 
percent before rolling over any remaining funds to the next year and 
sought comment on whether to expend all of the contributions in 2016 or 
roll over any excess funds to the 2017 benefit year.
---------------------------------------------------------------------------

    \17\ 79 FR 30259.
---------------------------------------------------------------------------

(2) Administrative Expenses
    In the 2015 Payment Notice, we estimated that the Federal 
administrative expenses of operating the reinsurance program would be 
$25.4 million, based on our estimated contract and operational costs. 
We used the same methodology to estimate the administrative expenses 
for the 2016 benefit year. These estimated costs would cover the costs 
related to contracts for developing the uniform reinsurance payment 
parameters and the uniform reinsurance contribution rate, collecting 
reinsurance contributions, making reinsurance payments, and conducting 
account management, data collection, program integrity and audit 
functions, operational and fraud analytics, training for entities 
involved in the reinsurance program, and general operational support. 
To calculate our reinsurance administrative expenses for 2016, we 
divided HHS's projected total costs for administering the reinsurance 
programs on behalf of States by the expected number of covered lives 
for which reinsurance contributions are to be made for 2016.
    We estimated this amount to be approximately $32 million for the 
2016 benefit year. This estimate increased for the 2016 benefit year 
due to increased audit and data validation contract costs. We believe 
that this amount reflects the Federal government's significant 
economies of scale, which helps to decrease the costs associated with 
operating the reinsurance program. Based on our estimate of covered 
lives for which reinsurance contributions are to be made for 2016, we 
proposed a uniform reinsurance contribution rate of $0.17 annually per 
capita for HHS administrative expenses. We provide details below on the 
methodology we used to develop the 2016 enrollment estimates.
    Similar to the allocation for 2015, for the 2016 benefit year, 
administrative expenses are allocated equally between contribution and 
payment-related activities. Because we anticipate that our additional 
activities in the 2016 benefit year, including our program integrity 
and audit activities, will also be divided approximately equally 
between contribution and payment-related activities, we again proposed 
to allocate the total administrative expenses equally between these two 
functions. Therefore, as shown in Table 9, we will apportion the annual 
per capita amount of $0.17 of administrative expenses as follows: (a) 
$0.085 of the total amount collected per capita for administrative 
expenses for the collection of contributions from contributing 
entities; and (b) $0.085 of the total amount collected per capita for 
administrative expenses for reinsurance payment activities, supporting 
the administration of payments to issuers of reinsurance-eligible 
plans.

              Table 9--Breakdown of Administrative Expenses
                          [Annual, per capita]
------------------------------------------------------------------------
                                                             Estimated
                       Activities                            expenses
------------------------------------------------------------------------
Collecting reinsurance contributions from health                  $0.085
 insurance issuers and certain self-insured group health
 plans..................................................
Calculation and disbursement of reinsurance payments....           0.085
                                                         ---------------
    Total annual per capita administrative expenses for             0.17
     HHS to perform all reinsurance functions...........
------------------------------------------------------------------------

    If HHS operates the reinsurance program on behalf of a State, HHS 
would retain the annual per capita fee to fund HHS's performance of all 
reinsurance functions, which would be $0.17. If a State establishes its 
own reinsurance program, HHS would transfer $0.085 of the per capita 
administrative fee to the State for purposes of administrative expenses 
incurred in making reinsurance payments, and retain the remaining 
$0.085 to offset HHS's costs of collecting contributions. We note that 
the administrative expenses for reinsurance payments will be 
distributed to those States that operate their own reinsurance program 
in proportion to the State-by-State total requests for reinsurance 
payments made under the uniform reinsurance payment parameters.
    We are finalizing the 2016 contribution rate as proposed and 
finalizing our policy to increase the 2016 coinsurance rate to 100 
percent prior to rolling over any excess funds to 2017.
    Comment: Several commenters supported our proposal to increase the 
2016 coinsurance rate to 100 percent if collections exceed the requests 
for reinsurance payments. Some commenters further supported rolling 
over any excess collections to 2017 if excess funds remain after 
increasing the coinsurance rate to 100 percent, while other commenters 
disagreed with our proposal to roll over the excess funds to 2017 
asking that HHS instead increase the reinsurance cap in 2016 to expend 
all contributions collected in 2016.
    Response: We will continue with our policy to increase the 
coinsurance rate to 100 percent for the 2016 benefit year

[[Page 10777]]

in the event collections exceed the requests for reinsurance payments. 
If additional funds remain after the increase in the coinsurance rate 
to 100 percent, we will roll over the excess funds to 2017 to extend 
the premium stabilization effects of the program.
i. Uniform Reinsurance Payment Parameters for 2016
    Section 1341(b)(2)(B) of the Affordable Care Act directs the 
Secretary, in establishing standards for the transitional reinsurance 
program, to include a formula for determining the amount of reinsurance 
payments to be made to issuers for high-risk individuals that provides 
for the equitable allocation of funds. In the Premium Stabilization 
Rule, we provided that reinsurance payments to eligible issuers will be 
made for a portion of an enrollee's claims costs paid by the issuer 
(the coinsurance rate, meant to reimburse a proportion of claims while 
giving issuers an incentive to contain costs) that exceeds an 
attachment point (when reinsurance would begin), subject to a 
reinsurance cap (when the reinsurance program stops paying claims for a 
high-cost individual). The coinsurance rate, attachment point, and 
reinsurance cap together constitute the uniform reinsurance payment 
parameters.
    Given the smaller pool of reinsurance contributions to be collected 
for the 2016 benefit year, we proposed that the uniform reinsurance 
payment parameters for the 2016 benefit year be established at an 
attachment point of $90,000, a reinsurance cap of $250,000, and a 
coinsurance rate of 50 percent. We estimated that these uniform 
reinsurance payment parameters will result in total requests for 
reinsurance payments of approximately $4 billion for the 2016 benefit 
year. We believe setting the coinsurance rate at 50 percent and 
increasing the attachment point allows for the reinsurance program to 
help pay for nearly the same group of high-cost enrollees as was the 
case for the 2014 and 2015 benefit years, while still encouraging 
issuers to contain costs.
    As discussed in the 2014 and 2015 Payment Notices, to assist with 
the development of the uniform reinsurance payment parameters and the 
premium adjustment percentage index, HHS developed the Affordable Care 
Act Health Insurance Model (ACAHIM). The ACAHIM generates a range of 
national and State-level outputs for 2016, using updated assumptions 
reflecting more recent data, but using the same methodology described 
in the 2014 and 2015 Payment Notices.\18\
---------------------------------------------------------------------------

    \18\ See the proposed 2014 Payment Notice (77 FR 73160) and the 
proposed 2015 Payment Notice (78 FR 72344) for more information on 
the ACAHIM methodology.
---------------------------------------------------------------------------

    Specifically, the ACAHIM uses the Health Intelligence Company, LLC 
(HIC) database from calendar year 2010, with the claims data trended to 
2016 to estimate total medical expenditures per enrollee by age, 
gender, and area of residence. The expenditure distributions are 
further adjusted to take into account plan benefit design, or ``metal'' 
level (that is, ``level of coverage,'' as defined in Sec.  156.20) and 
other characteristics of individual insurance coverage in an Exchange. 
To describe a State's coverage market, the ACAHIM computes the pattern 
of enrollment using the model's predicted number and composition of 
participants in a coverage market. These estimated expenditure 
distributions were the basis for the uniform reinsurance payment 
parameters.
    We are finalizing the 2016 payment parameters as proposed.
    Comment: Several commenters supported the proposed 2016 uniform 
reinsurance payment parameters. One commenter asked that HHS consider 
when setting the parameters that some issuers are unable to obtain 
commercial reinsurance and therefore are left unprotected from large 
losses.
    Response: We are finalizing the 2016 uniform reinsurance payment 
parameters as proposed, and as we explained above and in the 2014 and 
2015 Payment Notices, these parameters are set in an effort not to 
interfere with commercial reinsurance, although we understand not all 
issuers can obtain commercial reinsurance. Additionally, we believe 
that maintaining the reinsurance cap for the 2016 benefit year while 
ensuring that the coinsurance rate sufficiently compensates issuers for 
high-risk individuals will make it easier for issuers to estimate the 
effects of reinsurance.
    Comment: Several commenters asked that HHS not change the uniform 
reinsurance payment parameters for 2016 finalized in this rule in 
subsequent rulemaking.
    Response: We are finalizing the 2016 uniform payment parameters as 
proposed, and do not intend to make any future adjustments to these 
parameters.
j. Uniform Reinsurance Payment Parameters for 2015
    In the proposed rule, we proposed lowering the 2015 attachment 
point from $70,000 to $45,000 as this would allow the reinsurance 
program to make more payments for high-cost enrollees in individual 
market reinsurance-eligible plans without increasing the contribution 
rate. We did not propose to adjust the 2015 coinsurance rate of 50 
percent or reinsurance cap of $250,000.
    We are finalizing the reduction of the 2015 attachment point to 
$45,000 as proposed.
    Comment: Some commenters supported our proposal to lower the 2015 
attachment point to $45,000. Other commenters disagreed with our 
proposal to lower the 2015 attachment point, noting that this change 
would affect premium rates already submitted. One commenter noted that 
lowering the attachment point would result in lower MLRs, requiring 
issuers to rebate excess funds. Additionally, some noted that changing 
the 2015 payment parameters at this point could interfere with any 
State supplemental reinsurance program that depends on the national 
reinsurance payment parameters.
    Response: In the 2015 Market Standards Rule,\19\ we signaled our 
intention to propose to lower the 2015 attachment point from $70,000 to 
$45,000 for the 2015 benefit year in an effort to notify issuers of 
this change in advance of rate settings for 2015 coverage. 
Additionally, we believe that lowering the attachment point to $45,000 
will further the premium stabilization effects of the program in 2015 
as more individuals enroll in non-grandfathered, individual market 
plans that are compliant with Sec. Sec.  147.102, 147.104 (subject to 
Sec.  147.145), 147.106 (subject to Sec.  147.145), 156.80, and subpart 
B of part 156 than in 2014.
---------------------------------------------------------------------------

    \19\ 79 FR 30259.
---------------------------------------------------------------------------

k. Deducting Cost-Sharing Reduction Amounts From Reinsurance Payments
    We proposed to modify the methodology finalized in the 2015 Payment 
Notice (79 FR 13780) regarding the deduction of cost-sharing reduction 
amounts from reinsurance payments. Under Sec.  156.410, if an 
individual is determined eligible to enroll in an individual market 
Exchange QHP and elects to do so, the QHP issuer must assign the 
individual to a standard plan or cost-sharing plan variation based on 
the enrollment and eligibility information submitted by the Exchange. 
Issuers of individual market Exchange QHPs will receive cost-sharing 
reduction payments for enrollees who have effectuated coverage in cost-
sharing plan variations. To avoid double payment by the Federal 
government, we indicated in the 2014 Payment Notice

[[Page 10778]]

(78 FR 15499) that the enrollee-level claims data submitted by an 
issuer of a reinsurance-eligible plan should be net of cost-sharing 
reductions provided through a cost-sharing plan variation (which are 
reimbursed by the Federal government).
    In the 2015 Payment Notice (79 FR 13780), we explained the 
methodology HHS will use to deduct the amount of cost-sharing 
reductions paid on behalf of an enrollee enrolled in a QHP in an 
individual market through an Exchange. For each enrollee enrolled in a 
QHP plan variation,\20\ we will subtract from the QHP issuer's total 
plan paid amounts for the enrollee in a reinsurance-eligible plan the 
difference between the annual limitation on cost sharing for the 
standard plan and the annual limitation on cost sharing for the plan 
variation. For policies with multiple enrollees, such as family 
policies, we stated we would allocate the difference in annual 
limitation in cost sharing across all enrollees covered by the family 
policy in proportion to the enrollees' QHP issuer total plan paid 
amounts.
---------------------------------------------------------------------------

    \20\ Except for limited cost-sharing plan variations, for which 
we stated we would not reduce the QHP issuer's plan paid amounts.
---------------------------------------------------------------------------

    We also stated that for an enrollee who is assigned to different 
plan variations during the benefit year, we would calculate the 
adjustment for cost-sharing reductions based on the annual limitation 
on cost sharing applicable to the plan variation in which the enrollee 
was last enrolled during the benefit year, because cost sharing 
accumulates over the benefit year across plan variations of the same 
standard plan. We proposed a modification to this particular policy.
    Specifically, if an enrollee is assigned to different plan 
variations during the benefit year, we proposed to calculate the 
adjustment for cost-sharing reductions based on the difference between 
the annual limitation on cost sharing for the standard plan and the 
average annual limitation on cost sharing in the plan variations 
(including any standard plan), weighted by the number of months the 
enrollee is enrolled in each plan variation during the benefit 
year.\21\
---------------------------------------------------------------------------

    \21\ We did not propose any changes to the approach finalized in 
the 2015 Payment Notice with respect to the QHP issuer's plan paid 
amounts for purposes of calculating reinsurance payments for an 
Indian in a limited cost-sharing plan variation.
---------------------------------------------------------------------------

    We are finalizing this proposal as proposed.
    Comment: Several commenters stated that our proposed modification 
was too complex, and would increase the burden on issuers to make 
additional calculations and data system enhancements.
    Response: We believe that our modified approach will permit HHS to 
more accurately allocate the difference in annual limitations in a 
family policy to individual family members when a member exits or 
enters the policy mid-year, or if there are other changes in 
circumstances that impact the cost-sharing reductions provided to 
enrollees covered by the family policy. We will continue to work with 
issuers and provide technical support to help with the updates to the 
calculations and data system enhancements that may be necessary.
4. Provisions for the Temporary Risk Corridors Program
a. Application of the Transitional Policy Adjustment in Early Renewal 
States
    On November 14, 2013, the Federal government announced a 
transitional policy under which it will not consider certain health 
insurance coverage in the individual or small group markets that is 
renewed for a policy year starting after January 1, 2014, under certain 
conditions to be out of compliance with specified 2014 market rules, 
and requested that States adopt a similar non-enforcement 
policy.<SUP>22 23</SUP> In the 2015 Payment Notice, HHS implemented an 
adjustment to the administrative cost ceiling and profit floor of the 
risk corridors formula for the 2014 benefit year to help further offset 
losses that might occur under the transitional policy as a result of 
increased claims costs not accounted for when setting 2014 premiums. 
Because we believe that the Statewide effect on the risk pool in States 
that adopted the Federal transitional policy would increase with an 
increase in the percentage enrollment in transitional plans in the 
State, we stated that we would vary the State-specific percentage 
adjustment to the risk corridors formula with the percentage of member-
months enrollment in these transitional plans in the State.\24\
---------------------------------------------------------------------------

    \22\ Letter to Insurance Commissioners, Center for Consumer 
Information and Insurance Oversight, November 14, 2013. Available 
at: http://www.cms.gov/CCIIO/Resources/Letters/Downloads/commissioner-letter-11-14-2013.PDF.
    \23\ HHS extended the transitional policy on March 5, 2014, 
permitting issuers to renew transitional policies through policy 
years beginning on or before October 1, 2016.
    \24\ As stated in the 2015 Payment Notice, HHS will calculate 
the amount of the adjustment that applies to each State based on the 
State's member-month enrollment count for transitional plans and 
non-transitional plans in the individual and small group markets.
---------------------------------------------------------------------------

    In response to stakeholder questions, we proposed to clarify in the 
2016 Payment Notice that the transitional adjustment applies only for 
plans under the transitional policy--that is, plans that renew after 
January 1, 2014 for which HHS and the applicable State are not 
enforcing market rules. We proposed to further clarify that member-
months of enrollees in early renewal plans would not be counted towards 
the risk corridors transitional policy adjustment (that is, unless and 
until the plan becomes a transitional plan in a transitional State upon 
renewal in 2014).\25\ We are finalizing this clarification as proposed, 
and are maintaining the policy previously finalized in the 2015 Payment 
Notice under Sec.  153.500 and Sec.  153.530 without modification.
---------------------------------------------------------------------------

    \25\ Sec.  153.530 sets forth the data requirements for this 
information collection. HHS published 60-day and 30-day notices in 
the Federal Register, providing the public with an opportunity to 
submit written comments on the information collection. The data 
collection is approved under OMB Control Number 0938-1267.
---------------------------------------------------------------------------

    Comment: Several commenters recommended that HHS modify our policy 
to include the experience of early renewal plans. One commenter 
suggested that HHS include early renewals in the adjustment because our 
announcement did not occur until November 11, 2013, which was too late 
to be reflected in the rates that were finalized in July 2013. Another 
commenter requested that HHS modify its policy to accommodate issuers 
in States that decided to allow early renewals after the announcement 
of the transitional policy.
    Response: We believe that issuers were aware of State policy for 
early renewals when they set their 2014 rates; moreover, the 
transitional policy adjustment was intended to address the Federal 
transitional policy, not State early renewal policies. Under our 
current policy, HHS counts months occurring after an early renewal plan 
becomes a transitional plan when we calculate the transitional 
adjustment for each State. We believe that this approach for counting 
member months towards the risk corridors transitional adjustment is 
consistent with the intent of the transitional policy adjustment set 
forth in the 2015 Payment Notice.
    Comment: One commenter suggested that the transitional adjustment 
be applied to the risk corridors calculation for the entire market for 
2014, not just in markets where the transitional policy is in effect. 
Another commenter requested that HHS implement the transitional 
adjustment in a manner that does not disadvantage States that did not 
adopt the Federal transitional policy for 2014.

[[Page 10779]]

    Response: We are maintaining the policy finalized in the 2015 
Payment Notice under Sec.  153.500 and Sec.  153.530, which provides, 
for 2014, that the effect of the transitional adjustment will vary 
according to the member-month enrollment in a State, such that the 3 
percent profit floor and 20 percent allowable administrative cost 
ceiling will apply in States that did not adopt the Federal 
transitional policy (QHP issuers in these States will receive a risk 
corridors transitional adjustment equal to zero). We believe that 
issuers in States that did not adopt the Federal transitional policy 
will not require the transitional adjustment to help mitigate 
mispricing that may have occurred due to unexpected changes in the risk 
pool resulting from the Federal transitional policy. We note that the 
adjustment will account for the effect of the Federal transitional 
policy in the entire market within a State that adopted the 
transitional policy, such that a QHP issuer in a transitional State 
will be eligible to receive an adjustment to its risk corridors 
calculation even if the issuer has not issued transitional policies.
b. Risk Corridors Payments for 2016
    On April 11, 2014, we issued a bulletin titled ``Risk Corridors and 
Budget Neutrality,'' which described how we intend to administer risk 
corridors over the 3-year life of the program.\26\ Specifically, we 
stated that if any risk corridors funds remain after prior and current 
year payment obligations have been met, they will be held to offset 
potential insufficiencies in risk corridors collections in the next 
year. We also stated that we would establish in future guidance how we 
would calculate risk corridors payments in the event that cumulative 
risk corridors collections do not equal cumulative risk corridors 
payment requests.
---------------------------------------------------------------------------

    \26\ The Centers for Medicare and Medicaid Services, Center for 
Consumer Information and Insurance Oversight. ``Risk Corridors and 
Budget Neutrality,'' April 11, 2014. Available at: https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/faq-risk-corridors-04-11-2014.pdf.
---------------------------------------------------------------------------

    In the proposed 2016 Payment Notice, we proposed that if, for the 
2016 benefit year, cumulative risk corridors collections exceed 
cumulative risk corridors payment requests, we would make an adjustment 
to our administrative expense definitions (that is, the profit margin 
floor and the ceiling for allowable administrative costs) to account 
for the excess funds. That is, if, when the risk corridors program 
concludes, cumulative risk corridors collections exceed both 2016 
payment requests under the risk corridors formula and any unpaid risk 
corridors amounts from previous years, we would increase the 
administrative cost ceiling and the profit floor in the risk corridors 
formula by a percentage calculated to pay out all collections to QHP 
issuers. The administrative cost ceiling and the profit floor would be 
adjusted by the same percentage.
    We proposed to determine the percentage adjustment to the 
administrative cost ceiling and profit margin floor by evaluating the 
amount of excess risk corridors collections (if any) available after 
risk corridors payments for benefit year 2016 have been calculated. As 
stated in our bulletin on risk corridors and budget neutrality, after 
receiving charges from issuers for the 2016 benefit year, we would 
first prioritize payments to any unpaid risk corridors payments 
remaining from the 2015 benefit year. We would then calculate benefit 
year 2016 risk corridors payments for eligible issuers based on the 3 
percent profit floor and 20 percent allowable administrative cost 
ceiling, as required by regulation. If, after making 2015 payments and 
calculating (but not paying) risk corridors payments for benefit year 
2016, we determine that the aggregate amount of collections (including 
any amounts collected for 2016 and any amounts remaining from benefit 
years 2014 and 2015) exceed what is needed to make 2016 risk corridors 
payments, we would implement an adjustment to the profit floor and 
administrative cost ceiling to increase risk corridors payments for 
eligible issuers for benefit year 2016. We would examine data that 
issuers have submitted for calculation of their 2016 risk corridors 
ratios (that is, allowable costs and target amount) and determine, 
based on the amount of collections available, what percentage increase 
to the administrative cost ceiling and profit floor could be 
implemented for eligible issuers while maintaining budget neutrality 
for the program overall. Although all eligible issuers would receive 
the same percentage adjustment, we proposed that the amount of 
additional payment made to each issuer would vary based on the issuer's 
allowable costs and target amount. We proposed that, once HHS 
calculated the adjustment and applied it to eligible issuers' risk 
corridors formulas, it would make a single risk corridors payment for 
benefit year 2016 that would include any additional, adjusted payment 
amount.
    Because risk corridors collections are a user fee to be used to 
fund premium stabilization under risk corridors and no other programs, 
we proposed to limit this adjustment to excess amounts collected. We 
also proposed to apply this adjustment to allowable administrative 
costs and profits for the 2016 benefit year only to plans whose 
allowable costs (as defined at Sec.  153.500) are at least 80 percent 
of their after-tax premiums, because issuers under this threshold would 
generally be required to pay out MLR rebates to consumers.\27\ For 
plans whose ratio of allowable costs to after-tax premium is below 80 
percent, we proposed that the 3 percent risk corridors profit margin 
and 20 percent allowable administrative cost ceiling would continue to 
apply. Furthermore, we proposed that, to the extent that applying the 
proposed adjustment to a plan could increase its risk corridors payment 
and affect its MLR calculation, the MLR calculation would ignore these 
adjustments.
---------------------------------------------------------------------------

    \27\ Because of some differences in the MLR numerator and the 
definition of allowable costs that applies with respect to the risk 
corridors formula, in a small number of cases, an issuer with 
allowable costs that are at least 80 percent of after-tax premium, 
may be required to pay MLR rebates to consumers.
---------------------------------------------------------------------------

    As previously stated, we anticipate that risk corridors collections 
will be sufficient to pay for all risk corridors payments. HHS 
recognizes that the Affordable Care Act requires the Secretary to make 
full payments to issuers. In the unlikely event that risk corridors 
collections, including any potential carryover from the prior years, 
are insufficient to make risk corridors payments for the 2016 program 
year, HHS will use other sources of funding for the risk corridors 
payments, subject to the availability of appropriations.
    We are finalizing this policy as proposed.
    Comment: We received one comment on the proposed approach for 
allocating excess risk corridors collections at the end of the program. 
The commenter supported our approach. Another commenter supported 
language in the proposed Payment Notice that reaffirmed HHS's 
commitment to make full risk corridors payments if collections are 
insufficient to fund payments.
    Response: We are finalizing the policy regarding allocation of 
excess risk corridors collections for 2016 as proposed.

[[Page 10780]]

5. Distributed Data Collection for the HHS-Operated Risk Adjustment and 
Reinsurance Programs
a. Good Faith Safe Harbor (Sec.  153.740(a))
    In the second Program Integrity Rule,\28\ HHS finalized a good 
faith safe harbor policy which provided that civil money penalties 
(CMPs) will not be imposed for non-compliance with the HHS-operated 
risk adjustment and reinsurance data requirements during 2014, if the 
issuer has made good faith efforts to comply with these 
requirements.\29\ That safe harbor parallels a similar safe harbor for 
QHP issuers in FFEs under Sec.  156.800.
---------------------------------------------------------------------------

    \28\ 78 FR 65046.
    \29\ We note that HHS also clarified in a March 28, 2014 FAQ 
that CMPs would not be imposed on an issuer for non-compliance 
during the 2014 calendar year, if the issuer made good efforts to 
comply with these requirements. See, FAQ 1212, published March 28, 
2014. Available at: https://www.regtap.info/faq_viewu.php?id=1212.
---------------------------------------------------------------------------

    We proposed to amend Sec.  153.740(a) to extend the safe harbor for 
non-compliance with the HHS-operated risk adjustment and reinsurance 
data requirements during the 2015 calendar year if the issuer has made 
good faith efforts to comply with these requirements. This proposal 
acknowledged that the distributed data collection requirements have 
been the subject of modifications through the 2014 calendar year, 
including the introduction of cloud-based virtual options for the 
distributed data environment. We note that good faith efforts could 
include notifying, communicating with, and cooperating with HHS for 
issues that arise with the establishment and provisioning of the 
issuers' dedicated distributed data environment.
    The extension of this good faith safe harbor would not affect HHS's 
ability to assess issuers of risk adjustment covered plans a default 
risk adjustment charge under Sec.  153.740(b).\30\ Additionally, we 
noted that the good faith safe harbor would not apply to non-compliance 
with dedicated distributed data environment standards applicable during 
2016, even if the non-compliance in the 2016 calendar year relates to 
data for the 2015 benefit year. For example, the data loading schedule 
applicable to the 2015 benefit year for risk adjustment and reinsurance 
data extends into the 2016 calendar year (the final loading deadline is 
April 30, 2016). Therefore, the good faith safe harbor would not apply 
to non-compliance with the dedicated distributed data environment 
standards applicable during 2016.
---------------------------------------------------------------------------

    \30\ According to Sec.  153.740(b), if an issuer of a risk 
adjustment covered plan fails to establish a dedicated distributed 
data environment or fails to provide HHS with access to the required 
data in such environment in accordance with Sec.  153.610(a), Sec.  
153.700, Sec.  153.710, or Sec.  153.730 such that HHS cannot apply 
the applicable Federally certified risk adjustment methodology to 
calculate the risk adjustment payment transfer amount for the risk 
adjustment covered plan in a timely fashion, HHS will assess a 
default risk adjustment charge.
---------------------------------------------------------------------------

    Comment: Several commenters supported our proposal to extend the 
good faith safe harbor to the 2015 benefit year. The commenters asked 
that we clarify that the safe harbor extension would apply to conduct 
that occurred in a covered year (2014 or 2015) regardless of when an 
enforcement action is initiated. These commenters also asked that the 
good faith safe harbor apply for any risk adjustment or reinsurance 
data requirements that apply to the 2015 benefit year, even if the data 
is reported in 2016.
    Response: As we clarified in the 2015 Payment Notice (79 FR 13791), 
HHS will not impose CMPs for noncompliance for dedicated distributed 
data environment standards for the 2014 benefit year, if the issuer 
attempted in good faith to comply, simply by waiting until 2015 to 
initiate the enforcement action. We will follow the same approach with 
respect to the extension of the good faith safe harbor through the 2015 
calendar year. However, the good faith safe harbor will not apply to 
non-compliance with dedicated distributed data environment standards 
applicable during the 2016 calendar year, even if the non-compliance in 
2016 relates to data for the 2015 benefit year.
    Comment: One commenter asked that we extend the good faith safe 
harbor to 2016.
    Response: We are not extending the good faith compliance safe 
harbor to 2016.
b. Default Risk Adjustment Charge (Sec.  153.740(b))
    In the second Program Integrity Rule and the 2015 Payment Notice, 
HHS indicated that a default risk adjustment charge will be assessed if 
an issuer does not establish a dedicated distributed data environment 
or submits inadequate risk adjustment data. However, we did not 
establish how the money collected from the default charge will be 
allocated among risk adjustment covered plans.
    We proposed to allocate collected per member per month default 
charge funds proportional to each plan's relative revenue requirement, 
the product of PLRS*IDF*GCF (Plan Liability Risk Score * Induced Demand 
Factor * Geographic Cost Factor) relative to the market average of 
these products, across all risk adjustment covered plans in the market 
in the State. This approach would allocate funds proportionally to a 
plan's enrollment, adjusted for factors such as health risk, actuarial 
value, and geographic cost differences. This approach would also 
allocate the default charge funds in accordance with plans' expected 
revenue requirements as calculated in the transfer formula. By 
contrast, an approach that allocates risk adjustment default charge 
funds in accordance with enrollment or premiums, for example, would 
favor plans with lower metal levels, low risk selection, or lower 
geographic costs.
    This allocation would occur only in risk adjustment markets with at 
least one noncompliant plan, and these steps would be used to calculate 
each compliant plan's allocation of the default charges collected from 
the noncompliant plan(s). We would calculate risk transfers among the 
compliant plans only and exclude all data from noncompliant plans. 
Using the same inputs of the compliant plans as used in the transfer 
formula, we would calculate the distribution of default charges paid by 
noncompliant plans among the compliant plans using the following 
formula:
[GRAPHIC] [TIFF OMITTED] TR27FE15.004

Where:

DCi is the total amount of default charges allocated to plan i;
``Total default charges collected'' is the sum, in dollars, 
collected from all noncompliant plans (aggregate dollars, that is, 
not on a per member per month basis);
Other terms are as defined in the usual risk transfer calculations, 
and restricted to

[[Page 10781]]

compliant plans only (si = plan i's share of State enrollment; PLRSi 
= plan i's plan liability risk score, IDFi = plan i's induced demand 
factor, GCFi = plan i's geographic cost factor);
and i indexes compliant plans, and the summation in the denominator 
is over compliant plans only.

    Comment: One commenter agreed with the proposed allocation of 
default risk adjustment charges to risk adjustment compliant plans, 
noting that it provides an equitable distribution of default risk 
adjustment charges.
    Response: We are finalizing the allocation of default risk 
adjustment charges as proposed.
c. Information Sharing (Sec.  153.740(c))
    In Sec.  153.740, we established the enforcement remedies available 
to HHS for an issuer of a risk adjustment covered plan or a 
reinsurance-eligible plan's failure to comply with HHS-operated risk 
adjustment and reinsurance data requirements. Consistent with the 
policy set forth at Sec.  156.800(d), as finalized in the 2015 Market 
Standards Rule,\31\ we proposed adding paragraph (c) to clarify that 
HHS may consult with and share information about issuers of a risk 
adjustment covered plan or a reinsurance-eligible plan with other 
Federal and State regulatory and enforcement entities to the extent 
that the consultation or information is necessary for HHS to determine 
whether an enforcement remedy against the issuer of the risk adjustment 
covered plan or reinsurance-eligible plan under Sec.  153.740 is 
appropriate. For example, HHS may consult other Federal and State 
regulatory and enforcement entities to identify issuers within a State 
that have failed to establish a dedicated distributed data environment. 
No personally identifiable information would be transferred as part of 
such a consultation.
---------------------------------------------------------------------------

    \31\ 79 FR 30240.
---------------------------------------------------------------------------

    We received no comments on this proposal. We are finalizing this 
provision as proposed.

D. Part 154--Health Insurance Issuer Rate Increases: Disclosure and 
Review Requirements

1. General Provisions
    In the proposed rule, we proposed several modifications to enhance 
the transparency and effectiveness of the rate review program under 
part 154. These provisions were proposed to apply generally beginning 
with rates filed in 2015 for coverage effective on or after January 1, 
2016. We requested comment on whether the proposal provides States and 
issuers sufficient time to transition to the new rate review 
requirements.
    Comment: While some commenters believed the proposed timeframe was 
adequate, others suggested that issuers would not have sufficient time 
to implement the requirements to meet deadlines for the 2015 filing 
year. Some commenters noted it would take time for HHS to modify the 
Unified Rate Review Template (URRT) to accommodate the new plan-level 
trigger under proposed Sec.  154.200(c). Commenters recommended the 
plan-level requirements not apply until the 2016 filings for plan years 
beginning in 2017.
    Response: In response to comments, to provide adequate time to make 
necessary adjustments to the URRT, the revised definition of ``rate 
increase'' and plan-level trigger under Sec. Sec.  154.102 and 
154.200(c) of this final rule will apply beginning with rates filed in 
2016 for coverage effective on or after January 1, 2017. The uniform 
rate review and disclosure timelines under Sec. Sec.  154.220 and 
154.301 of this final rule will apply beginning with rates filed in 
2015 for coverage effective on or after January 1, 2016. As discussed 
below, the individual market annual open enrollment period for the 2016 
benefit year will not begin until November 1, 2015, which provides 
additional time to meet the filing deadlines for 2016 rates.
a. Definitions (Sec.  154.102)
    Under Sec.  154.102, we set forth definitions of terms that are 
used throughout part 154. We proposed adding a new definition of 
``plan'' and revising the definitions of ``individual market,'' ``small 
group market,'' and ``State.'' For the most part, these terms would 
have the meaning given such terms in Sec.  144.103. For a discussion of 
the terms ``plan'' and ``State,'' please see the preamble for Sec.  
144.103 in this final rule.
    We also proposed to modify the definition of ``rate increase.'' The 
revisions would conform with our proposal in Sec.  154.200 to consider 
rate increases at the plan-level when determining whether a rate 
increase is subject to review.
    We did not receive comments on the definitions of ``individual 
market,'' ``small group market,'' and ``rate increase.'' We are 
finalizing these revisions as proposed, except that the revised 
definition of ``rate increase'' has been modified to clarify that the 
changes made to conform with the proposal in Sec.  154.200 will apply 
for rates filed for coverage effective on or after January 1, 2017. The 
other definitions will apply for rates filed for coverage effective on 
or after January 1, 2016.
    Comment: Several commenters did not agree with our proposal to 
apply the definition of ``plan'' in the context of the rate review 
program. The commenters expressed concern that this would add 
complexity and create delays to the product filing and review process.
    Response: Because this final rule establishes a trigger for review 
of rate increases at the plan level, we are adopting the definition of 
``plan'' at Sec.  144.103 of this final rule for purposes of the rate 
review requirements under part 154. While changing to a plan-level 
trigger may increase the number of rate filings subject to review, we 
believe doing so will more accurately reflect consumer expectations for 
the rate review program. We note that nothing in this final rule 
changes the scope of issuer rate filings, which will continue to be 
submitted at the product level.
2. Disclosure and Review Provisions
a. Rate Increases Subject to Review (Sec.  154.200)
    In Sec.  154.200, we proposed modifications to the standards for 
rate increases that are subject to review. In paragraphs (a)(1) and 
(2), we proposed technical corrections to clarify that rate increases 
are applicable to a 12-month period that begins on January 1 rather 
than September 1 of each year.
    In paragraph (c), we proposed that rate increases would be 
calculated at the plan level (as opposed to the product level) when 
determining whether an increase is subject to review. Under this 
approach, if any plan within a product in the individual or small group 
market experiences an increase in the plan-adjusted index rate (as 
described in Sec.  156.80) that meets or exceeds the applicable 
threshold (either 10 percent or a State-specific threshold), the entire 
product would be subject to review to determine whether the rate 
increase is unreasonable. This proposal was intended to ensure that a 
plan that experiences a significant rate increase could not avoid 
review simply because the average increase for the product did not meet 
or exceed the applicable threshold.
    We sought comment on all aspects of these proposals, including the 
benefits and costs to States of carrying out the plan-level trigger for 
review.
    Comment: We received comments that suggested some confusion as to 
whether rate increases would be reviewed at the product level or the 
plan level when determining whether an increase is an unreasonable rate 
increase.

[[Page 10782]]

    Response: We clarify that the plan-level threshold under this final 
rule is simply a trigger for review. The review will continue to occur, 
as it does today, at the product level, taking into account the 
combined experience of the plans within the product.
    Comment: Many commenters supported the proposal to apply the 
trigger for review at the plan level, suggesting it better reflected 
the intent of Congress to protect consumers against unreasonable rate 
increases. Other commenters opposed the proposal and urged HHS to 
retain the current product-level trigger for review. Many of these 
commenters were concerned that the proposed rule would significantly 
increase the number of rate filings subject to review, placing greater 
burden on State regulators and increasing administrative cost to 
issuers. Several commenters additionally stated the plan-level trigger 
is inappropriate because plan-level rates vary naturally due to common 
market factors, such as provider contracting and deductible leveraging. 
Multiple other commenters urged us to lower the threshold for review--
for example, tying it to growth in national health expenditures. One 
commenter suggested maintaining a 10 percent threshold at the product 
level and applying a 20 percent threshold at the plan level.
    Response: Because consumers are affected by rate increases at the 
plan level, we believe that increases for the plan, not the product, 
should be the trigger for determining whether an increase is subject to 
review. We acknowledge the concerns about burden, but believe the 
consumer protection benefits of this policy outweigh the costs and 
further the intent of section 2794 of the PHS Act to protect consumers 
against unreasonable rate increases. Therefore, we are finalizing the 
trigger for determining whether an increase is subject to review based 
on rate increases at the plan level. However, as noted above, we are 
modifying the final rule to apply this change effective for rates filed 
for coverage beginning on or after January 1, 2017. We have updated the 
regulation text at Sec.  154.200(a) to maintain the current trigger for 
determining whether the increase is subject to review for rates filed 
for coverage effective before January 1, 2017. HHS will continue to 
collect and review available data on trends in rate and medical 
increases in assessing whether to modify the 10 percent threshold for 
review.
    Comment: One commenter recommended considering not only increases 
in the plan-adjusted index rate, but also changes in premium rating 
factors including those for geography and tobacco use.
    Response: We interpret section 2794 of the PHS Act as requiring the 
Secretary to establish a process for the annual review of unreasonable 
increases in the underlying rates that are used to develop the 
premiums, as opposed to the actual premiums themselves (75 FR 81009). 
Therefore, the final rule considers only increases in the plan-adjusted 
index rate described in Sec.  156.80 rather than the premium rating 
factors described in Sec.  147.102. We note that nothing in this 
regulation prevents a State from reviewing other aspects of an 
insurance rate filing, including premium rating factors.
b. Submission of Rate Filing Justification (Sec.  154.215)
    In Sec.  154.215(a), we proposed a technical correction to clarify 
that issuers must submit a rate filing justification for all products 
in the issuer's single risk pool when ``any plan within a product'' in 
the individual or small group market is subject to a rate increase. 
This is true regardless of whether the rate increase meets or exceeds 
the subject to review threshold. We proposed this clarification take 
effect with the effective date of the final rule. We are finalizing 
this clarification as proposed.
    Comment: Some commenters encouraged HHS to clarify throughout Sec.  
154.215 that issuers must justify rate increases at the plan level, in 
addition to justifying them at the product level.
    Response: The final rule does not adopt this suggestion. Because 
rate increases that are subject to review are reviewed at the product 
level, issuers will likewise submit the rate filing justification at 
the product level rather than the plan level.
c. Timing of Providing the Rate Filing Justification (Sec.  154.220)
    To provide consistency and transparency in the rate submission 
process, ensure a more meaningful opportunity for public review and 
comment, and reduce the opportunity for anti-competitive behavior, we 
proposed to modify Sec.  154.220 to establish a uniform timeline by 
which health insurance issuers must submit to CMS or the applicable 
State a completed rate filing justification for proposed rate 
increases--for both QHPs and non-QHPs--in the individual and small 
group markets. Under the proposed rule, the issuer would be required to 
submit the justification by the earlier of the following: (1) The date 
by which the State requires a proposed rate increase to be filed with 
the State; or (2) the date specified by the Secretary in guidance. We 
suggested that we were considering specifying a deadline to coincide 
with the end of the QHP application window for the FFE. States would 
have flexibility to impose earlier rate filing deadlines to meet their 
specific State needs. We sought comment on this proposal.
    We are finalizing these provisions as proposed. We intend to 
specify the submission deadline for the 2015 filing year in forthcoming 
guidance.
    Comment: We received many comments regarding the proposal to 
establish a uniform rate filing timeline. Commenters who supported the 
proposal generally agreed it would increase transparency and encourage 
public participation in the rate review process. Commenters also viewed 
the common submission deadline for both QHP and non-QHP rate filings as 
a positive step to protect against shadow pricing among competing 
issuers and create a level playing field inside and outside the 
Exchange.
    Commenters who opposed the proposal were concerned that the HHS 
deadline would not provide issuers sufficient time to collect claims 
data and appropriately develop rates for the upcoming benefit year. 
Commenters also expressed concern that requiring rates for QHPs and 
non-QHPs to be submitted at the same time would impose an increased 
workload on State regulators, making it difficult to conduct thorough 
reviews and potentially creating delays in the review and approval 
process. Many commenters objected to a nationally uniform rate review 
timeline and urged State flexibility to set their own filing deadlines, 
particularly in States with effective rate review programs and States 
that operate their own Exchanges. Some commenters believed it would be 
sufficient for HHS to simply establish a deadline for States to 
complete their reviews.
    Several commenters remarked on the specific deadline for rate 
filing submissions. One commenter recommended HHS establish a rate 
filing deadline of no sooner than May 15, while another commenter 
recommended a mid-summer deadline. Another commenter recommended that 
issuers have 90 days after the end of the FFE QHP application window to 
prepare the rate filing justification. Some commenters asserted that 
the filing deadline must accommodate a sufficient public comment 
period.
    One commenter suggested that grandfathered and transitional plans 
should not be subject to the same filing deadlines as single risk pool 
compliant

[[Page 10783]]

plans. Finally, some commenters recommended the NAIC convene a 
workgroup to make recommendations to HHS regarding the rate review 
timeline.
    Response: We believe the rate review process should be both 
predictable and transparent. To achieve this objective, we believe it 
is necessary to establish a uniform submission deadline for issuers to 
submit proposed rate increases for single risk pool coverage in the 
individual and small group markets. Therefore, we are finalizing 
proposed Sec.  154.220 authorizing the Secretary to establish in 
guidance the deadline for issuers to submit the rate filing 
justification for proposed rate increases for both QHPs and non-QHPs in 
the individual and small group markets. We will carefully consider 
commenters' suggestions and consult with the NAIC and other interested 
parties when developing such guidance which we expect to issue soon. We 
anticipate the deadline will provide issuers adequate time to develop 
rates and afford States and the public the necessary time for review.
    We note that States retain significant flexibility to stage the 
timing of their reviews consistent with this final rule. This could 
include establishing filing deadlines prior to the HHS deadline, 
staggering the submission of forms and rates, or establishing varying 
deadlines for the individual and small group markets.
    Finally, we clarify that, while transitional plans are generally 
subject to the rate review requirements, the uniform submission 
timeline applies only to non-grandfathered individual and small group 
market coverage that is subject to the single risk pool requirement. 
Grandfathered health plans are not subject to the Federal rate review 
program.
d. CMS's Determinations of Effective Rate Review Programs (Sec.  
154.301)
    We proposed to amend Sec.  154.301(b) to specify the timeframe for 
a State with an effective rate review program to provide public access 
to information about proposed and final rate increases.
    Under the proposed rule, for proposed rate increases subject to 
review, the State would be required to provide public access from its 
Web site to the information contained in Parts I, II, and III of the 
rate filing justification that CMS makes available on its Web site (or 
provide CMS's web address for such information). The proposed rule 
would require that the State take this action no later than the date 
specified by the Secretary in guidance. We suggested the 10th business 
day following receipt of all rate filings in the relevant State market 
as the potential timeframe we may specify for this purpose. The 
proposed rule would also continue to require that the State have a 
mechanism for receiving public comments on those proposed rate 
increases.
    For all final rate increases (including those not subject to 
review), the proposed rule would similarly require that the State 
provide public access from its Web site to the information contained in 
Parts I, II, and III of the rate filing justification that CMS makes 
available on its Web site (or provide CMS's web address for such 
information). The State would be required to take this action no later 
than the first day of the individual market annual open enrollment 
period.
    Nothing in this proposal would prevent States from making 
additional information available to the public, or prevent States from 
establishing earlier timeframes for public disclosure. States that 
elect to establish earlier posting timeframes would be required under 
the proposed rule to notify CMS in writing at least 30 days prior to 
the date the information will be made public. States would also be 
required to ensure that rate information released to the public is made 
available at a uniform time for all proposed and final rate increases 
(as applicable) in the relevant market segment and without regard to 
whether coverage is offered through an Exchange or outside of an 
Exchange.
    We sought comment on these proposals, including how the timeframes 
may interact with current State practice and workload. We also sought 
comment on whether States with effective rate review programs should be 
required to post rate information on the State's Web site, rather than 
being permitted to provide a link to CMS's Web site for such 
information.
    We are finalizing these provisions as proposed. We are also 
maintaining the option for States to continue to provide public access 
from their Web site via link to rate information made available on the 
CMS Web site.
    Comment: Some commenters suggested that CMS should not require the 
release of rate information before rates are finalized. Another 
commenter requested that all proposed rates be made available to the 
public, not only those subject to review.
    Response: Section 2794 of the PHS Act requires the Secretary to 
ensure the public disclosure of information, including the 
justification for an unreasonable rate increase. We believe that 
Congress intended the rate review process to be transparent, and that 
this objective is served by giving consumers timely access to basic 
information regarding the proposed increase that is under review by CMS 
or States and prior to the implementation of the increase. The proposed 
rule and this final rule do not change the existing requirements 
regarding the scope of the information that must be disclosed under the 
current regulations.
    Comment: Several commenters expressed opposition to our proposal to 
specify the timeframe for posting information about proposed rate 
increases that are subject to review. Commenters generally asserted 
that States have existing processes for rate disclosure and requested 
State flexibility to manage publication timeframes in the way most 
appropriate to their market and regulatory structure. One commenter 
suggested CMS establish a timeframe of 5 business days for States to 
post information about proposed rate increases subject to review. 
Another commenter requested clarification about the information CMS 
intends to post on its Web site and how the suggested timeframe of 10 
business days from the filing deadline would provide sufficient time to 
redact issuers' confidential and proprietary information protected by 
the Freedom of Information Act.
    Response: We are finalizing the proposal for the Secretary to 
specify the timeframe for States with effective rate review programs to 
provide public access to information about proposed rate increases that 
are subject to review. This timeframe will be specified in guidance. We 
anticipate specifying a deadline of the 10th business day after receipt 
of all rate filings in the relevant State market. We note this 
provision applies only to products with proposed rate increases that 
are subject to review and only includes the information in Parts I, II, 
and III of the rate filing justification that CMS makes available on 
its Web site. Under Sec.  154.215(h), CMS makes available on its Web 
site only the information that is not considered a trade secret or 
confidential commercial or financial information as defined in Freedom 
of Information Act regulations, 45 CFR 5.65. We note that States may 
choose to make additional information available as permitted by 
applicable State law and regulations.
    Comment: Many commenters emphasized the need for sufficient 
opportunity for public review and comment before rates are finalized, 
with suggested timeframes ranging from 30 to 90 days of public comment.
    Response: Under current regulations, a State with an effective rate 
review program must have a mechanism for receiving public comments on 
proposed rate increases that are subject to review.

[[Page 10784]]

We believe this standard is sufficient to encourage public 
participation in the rate review process, while affording States 
flexibility to manage the public comment process in the way most 
appropriate for the State.
    Comment: Some commenters stated that information about final rate 
increases should be released prior to the start of the annual open 
enrollment period to allow consumers, assisters, and other interested 
stakeholders greater opportunity to familiarize themselves with issuer 
rates. These commenters offered various suggestions, most commonly 
recommending that final rates be posted 15 days in advance of the 
annual open enrollment period. Other commenters were concerned about 
the workload and burden on States of completing reviews for both 
Exchange and non-Exchange plans at the same time.
    Response: The final rule retains the proposal that information 
about final rate increases must be posted by the first day of the 
annual open enrollment period. We believe this timeframe strikes the 
appropriate balance between providing State and Federal regulators 
sufficient time to complete their reviews, while providing consumers 
the information needed to make informed purchasing decisions. We note 
that States may establish earlier posting timeframes with appropriate 
notice to CMS.
    Comment: One commenter recommended clarifying in Sec.  
154.301(b)(1)(ii) that the term ``annual open enrollment period'' 
refers to the open enrollment period in the individual market.
    Response: The final rule adopts the suggestion to reference the 
``individual market'' annual open enrollment period under Sec.  
154.301(b)(1)(ii).
    Comment: One commenter stated that CMS should also establish 
posting deadlines for States in which CMS is conducting the reviews.
    Response: While the rate review timeline under this final rule 
establishes minimum standards for submission and posting of rate 
information in States with effective rate review programs, we will also 
apply these timelines in States without effective rate review programs 
where CMS conducts the reviews.
    Comment: Some commenters recommended that States be required to 
post rate information directly on their Web sites instead of relying on 
the CMS Web site. Other commenters stated it would be costly and 
unnecessary to impose this requirement on States, since CMS already 
provides consumers with information about rate increases on its Web 
site. These commenters recommended that States continue to be permitted 
to link to the CMS Web site.
    Response: We agree that specifying that States must separately post 
rate information is not necessary at this time. Through CMS's Web site 
(www.ratereview.healthcare.gov), consumers and other stakeholders can 
easily review rate increases requested by issuers in every State.\32\ 
We therefore retain the option for States to continue to provide public 
access from their Web site via link to rate information made available 
on the CMS Web site.
---------------------------------------------------------------------------

    \32\ Rate filing information can also be accessed at http://www.cms.gov/CCIIO/Resources/Data-Resources/ratereview.html.
---------------------------------------------------------------------------

    Comment: Some commenters believed that States should be required to 
provide public access to the entire rate filing justification, rather 
than only the information contained in Parts I, II and III that CMS 
makes available on its Web site. Other commenters indicated that States 
have policies and procedures governing rate increase disclosure and 
contended that States should have discretion to determine what 
information to release.
    Response: The proposed rule and this final rule do not change the 
scope of information disclosure under the current regulations. The 
existing rules establish the minimum level of information that States 
with effective rate review programs must make available to the public, 
either directly on their Web sites or via link to the CMS Web site. We 
note that States have discretion to make additional information 
available to the public, as permitted by applicable State law and 
regulation.
    Comment: Some commenters opposed the requirement that States must 
notify CMS in writing 30 days prior to making rate information public. 
The commenters were concerned the 30-day notice requirement was 
impractical and unnecessary, and may interfere with State and issuer 
rate negotiations and timelines. One commenter recommended that States 
simply make a good-faith effort to provide advance notice to CMS.
    Response: We maintain in the final rule the requirement that States 
must provide at least 30-day notice of their intent to release proposed 
or final rate information when the State publication timeline is 
earlier than that specified by CMS. As we stated in the preamble to the 
proposed rule (79 FR 70703), this information will enable CMS to better 
coordinate the availability of rate information, increasing 
transparency nationally into the rate-setting process.

E. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act

1. General Provisions
a. Definitions (Sec.  155.20)
    In Sec.  155.20, we proposed to amend the definitions of 
``applicant,'' ``enrollee,'' and ``qualified employee.'' First, we 
proposed to specify that a qualified employer could elect to offer 
coverage through a SHOP to its former employees that may include 
retirees, as well as former employees to whom an employer might be 
obligated to provide continuation coverage under applicable State or 
Federal law. Second, we proposed to specify that a qualified employer 
could also elect to offer coverage through the SHOP to dependents of 
employees or former employees. Third, we proposed to specify that 
business owners may enroll in SHOP coverage provided that at least one 
employee enrolls. We proposed to amend these definitions to make it 
clear that SHOPs may allow small group enrollment practices that were 
in place before the Affordable Care Act to continue, to preserve 
continuity for issuers and employers, and to reduce the administrative 
complexity involved with transitioning to SHOP coverage for qualified 
employers.
    We are finalizing the amendments to the definitions of applicant 
and qualified employee as proposed, and are modifying the amendments to 
the definition of enrollee in light of comments we received.
    The preamble to the proposed rule also sought comment on whether 
other provisions of the Exchange rules in parts 155 and 156 would need 
to be amended to implement the changes proposed to these definitions. 
HHS interprets Sec.  155.220(i) to give SHOPs the flexibility to permit 
web-brokers to enroll not just ``qualified employees,'' but all 
enrollees, consistent with the expansion of the definition of 
``enrollee'' that is being finalized in this rule. Therefore, we are 
also modifying Sec.  155.220(i) to refer to facilitating enrollment in 
coverage through the SHOP for enrollees instead of qualified employees.
    Comment: One commenter commented that the proposed definition of an 
``applicant'' does not capture all situations in which a person could 
become eligible for continuation coverage, such as divorce or loss of 
dependent child status.
    Response: Not every person eligible to enroll in coverage purchased 
through the SHOP is considered a SHOP applicant. In the case of 
individuals

[[Page 10785]]

eligible to enroll in coverage through the SHOP due to a continuation 
coverage qualifying event, such as a divorce or a loss of dependent 
status, such an individual qualifies for such coverage by virtue of his 
or her coverage through the SHOP that existed on the day prior to the 
qualifying event. Such an individual need not file an application with 
the SHOP to continue to receive coverage after a qualifying event. 
Instead, consistent with current business practices, the qualified 
beneficiary should notify the employer or plan administrator of his or 
her desire to participate in continuation coverage. The employer or 
plan administrator must then notify the SHOP.\33\ Where appropriate, 
such notification will allow the SHOP to individually bill the 
continuation coverage enrollee.
---------------------------------------------------------------------------

    \33\ 26 CFR 54.4980B-6 A-1(b) defines an election to enroll in 
continuation coverage as the date the notification is sent to the 
plan administrator, and Sec.  157.205(f) requires qualified 
employers participating in the SHOP to provide the SHOP with 
information regarding changes in dependent or employee eligibility 
status for coverage.
---------------------------------------------------------------------------

    Comment: One commenter asked for clarification on whether at least 
one employee has to be eligible for or enrolled in SHOP coverage, and 
requested that HHS clarify whether a business owner may enroll in a QHP 
through the SHOP if at least one employee is eligible for coverage 
through SHOP but has not enrolled.
    Response: We clarify that where a business's only enrollee(s) in 
coverage through the SHOP would be the owner(s) of the business, the 
owner is not eligible to enroll in coverage sold through the SHOP.\34\
---------------------------------------------------------------------------

    \34\ Persons may enroll in coverage available through the SHOP 
only if the plan constitutes a group health plan maintained by a 
small employer. A group health plan is an ``employee welfare benefit 
plan'' as defined by the Employee Retirement Income Security Act of 
1974 (ERISA), and is a form of employee benefit plan, see ERISA 
Sec.  3(3), 29 U.S.C. 1002(3). An ``employee benefit plan'' does not 
exist if there are no ``employees'' participating in the plan, 29 
CFR 2510.3-3(b), and for the purpose of identifying an employee 
benefit plan an ``employee'' does not include the sole owner of a 
business or a spouse of the business owner, Id. Sec. Sec.  2510.3-
3(c), 2590.732(d).
---------------------------------------------------------------------------

    Comment: Some commenters requested clarification on whether an 
employee may enroll dependents without enrolling him or herself in the 
plan. Another commenter opposed the exclusion of child-only plans in 
the SHOP and stated that all children should have access to coverage 
even if they do not qualify as a ``qualified employee.''
    Response: We note that under common market practice, dependents of 
an employee offered employer-sponsored coverage generally may enroll in 
such coverage only as a dependent, if the employee enrolls in the 
coverage.\35\ Except for continuation coverage, coverage offered 
through the SHOP does not depart from this general practice. Except as 
may be provided under otherwise applicable law, dependents of a 
qualified employee may enroll in a QHP through the SHOP through the 
qualified employee only if the qualified employee also enrolls in the 
same QHP through the SHOP. We note that this does not relieve issuers 
from the obligation to offer child-only coverage under the group health 
plan where the child is the primary subscriber, such as where the 
employee is 18 years old. Consistent with our policy for individual 
market QHPs at section 1302(f) of the Affordable Care Act, QHP issuers 
could satisfy this standard by offering employee-only coverage under 
the group health plan to qualified applicants seeking child-only 
coverage, as long as the QHP includes rating for child-only coverage in 
accordance with applicable premium rating rules.\36\
---------------------------------------------------------------------------

    \35\ See, for example, 29 U.S.C. 1002(7) & (8), defining a 
beneficiary of an employee welfare benefit plan in relationship to a 
participant in such a plan.
    \36\ Exchange Establishment Rule, 77 FR 18310 at 18415.
---------------------------------------------------------------------------

    In light of this comment, we note that the proposed amendments to 
the definition of ``enrollee'' did not account for a situation in which 
a person is enrolled in coverage because she is eligible for 
continuation coverage, but is no longer a dependent of the qualified 
employee or other primary subscriber. To account for this situation, we 
are modifying the proposed definition of ``enrollee'' to include any 
other person who is enrolled in a QHP through the SHOP consistent with 
applicable law and the terms of the group health plan.
    Comment: Some commenters stated that the inclusion of ``former 
employees'' in the definition of qualified employee is not appropriate 
except in the case of continuation coverage.
    Response: The inclusion of ``former employee'' in the Exchange 
rules' definitions of ``applicant'' and ``qualified employee'' does not 
provide eligibility for individuals to enroll in coverage if they are 
not otherwise eligible to enroll in small group coverage under HIPAA, 
COBRA, and other applicable Federal or State law. If individuals 
qualify for coverage under the terms of the plan and under existing 
statute and regulations governing eligibility to enroll in group health 
coverage, they may enroll in group health coverage through the 
SHOP.\37\ The SHOP regulations do not impose any additional obligation 
upon employers to offer former employees coverage sold through the 
SHOP, and employers may do so where permitted under the terms of the 
plan. In light of this comment, and to clarify that the persons listed 
in the definition of ``enrollee'' are generally meant to include all 
those who have enrolled in coverage through the SHOP consistent with 
applicable law and the terms of the group health plan, we are modifying 
the definition of ``enrollee'' to include, in addition to the listed 
individuals, any other person who is enrolled in a QHP through the SHOP 
consistent with applicable law and the terms of the group health plan.
---------------------------------------------------------------------------

    \37\ See, for example, Sec.  146.145(a)(1) defining a ``group 
health plan'' as, among other things, a plan that provides medical 
care to current and former employees, and Sec.  146.150(b) defining 
an individual eligible to enroll in coverage sold in the small group 
market as an individual eligible to enroll in group health insurance 
coverage offered to a group health plan in accordance with the terms 
of the group health plan.
---------------------------------------------------------------------------

    Comment: One commenter asked how expanding the definition of 
``enrollee'' to include a business owner will impact eligibility 
thresholds for the Small Business Health Care Tax Credit.
    Response: The inclusion of owners in the definition of ``enrollee'' 
does not modify qualification requirements for the Small Business 
Health Care Tax Credit, as determinations for the credit do not rely on 
the SHOP's definition of ``enrollee.''
2. General Functions of an Exchange
a. Consumer Assistance Tools and Programs of an Exchange (Sec.  
155.205)
    In the proposed rule, we proposed to amend Sec.  155.205(c) to 
specify the oral interpretation services that are required for certain 
entities subject to Sec.  155.205(c). Specifically, for each Exchange, 
QHP issuer, and agent or broker subject to Sec.  155.220(c)(3)(i) 
(referred to in this section as a ``web-broker''), we proposed that the 
requirement to provide oral interpretation services under Sec.  
155.205(c)(2)(i) would include making available telephonic interpreters 
in at least 150 languages. We also proposed amendments to Sec.  156.250 
that are discussed below, and that would require QHP issuers to provide 
all information that is critical for obtaining health insurance 
coverage or access to health care services through the QHP, including 
applications, forms, and notices, to qualified individuals, applicants, 
qualified employers, qualified employees, and enrollees in

[[Page 10786]]

accordance with the standards described in Sec.  155.205(c), including 
the provision of telephonic interpreter services in at least 150 
languages.
    We proposed to limit the applicability of the proposed 150 
languages standard for telephonic interpreter services to Exchanges, 
web-brokers, and QHP issuers. We did not propose to apply this standard 
to Navigators and non-Navigator assistance personnel because, as we 
stated in the proposed rule, the smaller non-profit organizations that 
frequently make up the bulk of these consumer assistance entities have 
limited resources.
    In the proposed rule, we also solicited comment on whether we 
should consider more or different language accessibility standards in 
Sec.  155.205(c). We provided certain examples in the preamble. With 
respect to written translations, we gave an example of requiring 
written translations in the languages spoken by the top 10 limited 
English proficiency (LEP) groups in the State or spoken by 10,000 
persons or greater, whichever yields the greater number of languages. 
With respect to taglines (short statements informing individuals of the 
availability of language access services), we gave an example of 
requiring taglines in the top 30 non-English languages spoken 
nationwide on documents required by State or Federal law or containing 
information that is critical to obtaining health insurance coverage or 
access to health care services through a QHP. We also provided an 
example that would establish a uniform, national standard that written 
translations, taglines on notices and Web site content, and oral 
interpretation services be provided in the top 15 languages spoken by 
LEP individuals in the United States. Finally, we provided an example 
specific to Web site content that would have required the content to be 
translated in each non-English language spoken by an LEP population 
that reaches 10 percent of the State population.
    Based on comments received, as discussed below, we are finalizing 
the proposal with the following modifications:
    To give new web-brokers more time for implementation, we are 
revising Sec.  155.205(c)(2)(i) to specify that for an agent or broker 
subject to Sec.  155.220(c)(3)(i), the standard to provide telephonic 
interpreter services in at least 150 languages applies no later than 
November 1, 2015, the first day of the individual market open 
enrollment period for the 2016 benefit year, or 1 year after such 
entity has been registered with the Exchange, whichever is later.
    We are revising Sec.  155.205(c)(2)(iii) to specify that, beginning 
at the start of the individual market open enrollment period for the 
2017 benefit year, for Exchanges, QHP issuers, and agents or brokers 
subject to Sec.  155.220(c)(3)(i), the general standard to provide 
taglines in non-English languages indicating the availability of 
language services includes taglines on Web site content and documents 
that are critical for obtaining health insurance coverage or access to 
health care services through a QHP for qualified individuals, 
applicants, qualified employers, qualified employees, or enrollees 
indicating the availability of language services in at least the top 15 
languages spoken by the LEP population of the relevant State, as 
determined in HHS guidance. Documents are considered to be ``critical'' 
if the entity is required by State or Federal law or regulation to 
provide them to a qualified individual, applicant, qualified employer, 
qualified employee, or enrollee. We added that for an agent or broker 
subject to Sec.  155.220(c)(3)(i), this standard will apply beginning 
no later than at the start of the individual market open enrollment 
period for the 2017 benefit year, or when the entity has been 
registered with the Exchange for at least 1 year, whichever date is 
later. HHS plans to provide sample taglines in all languages triggered 
by this threshold. For purposes of Sec.  155.205(c)(2), the meaning of 
the terms ``qualified individual,'' ``applicant,'' ``qualified 
employer,'' ``qualified employee,'' and ``enrollee'' is intended to be 
consistent with the definitions for these terms under Sec.  155.20.
    We also modified the language following Sec.  155.205(c)(2)(i) and 
Sec.  155.205(c)(2)(iii) to make clear that the general standards with 
respect to oral interpretation and taglines continue to apply to all 
entities subject to Sec.  155.205(c).
    We added Sec.  155.205(c)(2)(iv) to create a new standard related 
to translations of Web site content for Exchanges, QHP issuers, and 
agents or brokers subject to Sec.  155.220(c)(3)(i). The new standard 
specifies that beginning at the start of the individual market open 
enrollment period for the 2017 benefit year, the content of a Web site 
maintained by an Exchange or QHP issuer must be translated into any 
non-English language that is spoken by an LEP population that reaches 
10 percent or more of the population of the relevant State, as 
determined in HHS guidance. For an agent or broker subject to Sec.  
155.220(c)(3)(i), this standard will apply beginning at the start of 
the individual market open enrollment period for the 2017 benefit year 
or when the entity has been registered with the Exchange for at least 1 
year, whichever date is later. We clarify that for Exchanges and web-
brokers, this requirement applies to all content that is intended for 
qualified individuals, applicants, qualified employers, qualified 
employees, or enrollees that is maintained by the entity on the Web 
site and is not limited to information that is critical for obtaining 
health insurance coverage or access to health care services through a 
QHP. We note that QHP issuers are not required to translate all Web 
site content that is intended for qualified individuals, applicants, 
qualified employers, qualified employees, or enrollees; rather, the 
type of Web site content that must be translated aligns with the 
definition of ``critical'' information to which QHP issuers must 
provide meaningful access under Sec.  156.250 as finalized in this 
rule. In addition, an entity that is required to translate Web site 
content consistent with this provision must also still include 
taglines, in accordance with Sec.  155.205(c)(2)(iii), on its English 
version Web pages. This entity would not, however, be required to 
include taglines on its non-English version Web pages, but it could do 
so voluntarily.
    Comment: The majority of comments received regarding the proposed 
standard for telephonic interpreter services in 150 languages were 
supportive. A few commenters stated that telephonic interpretation is a 
cost-effective means of providing language access relative to written 
translations, which, according to the commenters, are demanded with 
much less frequency than oral interpretation. Many commenters stated 
that the proposal would help ensure that LEP individuals obtain 
language access, helping them enroll in health insurance coverage. 
These commenters suggested requiring bilingual customer service 
representatives in addition to language lines. Several commenters 
stated that specifying telephonic interpreter services in 150 languages 
was arbitrary, overly prescriptive, and potentially burdensome for 
smaller entities. Some commenters suggested that telephonic interpreter 
services be available in any language requested, as they are under 
certain State laws, like California's, or in as many languages as are 
necessary to serve the oral interpretation needs of applicants and 
enrollees within the applicable service area.
    Response: We appreciate the comments regarding this proposal. We 
believe that providing telephonic

[[Page 10787]]

interpreter services in 150 languages is a useful and cost-effective 
tool to ensure that most LEP consumers in the service area are able to 
receive oral interpretation services that are required by existing 
Federal regulations at Sec.  155.205(c)(2)(i). HHS expects to monitor 
the extent that the industry standard for telephonic interpreter 
services might diverge substantially from the 150-language threshold. 
We also clarify that this standard should not be construed to mean that 
other ways of providing oral interpretation, such as in-person 
interpreters or bilingual customer service representatives, are 
prohibited or should be displaced by telephonic interpreter services. 
We recognize that these alternative services can provide a superior 
experience for the consumer which, in turn, can ultimately benefit the 
entity.
    Comment: Commenters generally supported our proposal that web-
brokers provide telephonic interpreter services. In particular, one 
supporter reasoned that because web-brokers are ``standing in'' for an 
issuer or Exchange, they should be subject to the same requirement as 
issuers and Exchanges. Another commenter, while supporting the goal of 
increasing language accessibility and extending health coverage to 
diverse populations, opposed the requirement and suggested that we give 
new participant web-brokers to the Exchange more time to comply.
    Response: We believe that, in regard to language access, a web-
broker should be expected to provide the same minimum level of service 
to a consumer as would be expected from an Exchange or QHP issuer. In 
response to the concerns that newer web-brokers may be smaller 
companies less able to incur the costs of this requirement, we are 
providing web-brokers until November 1, 2015, the first day of the open 
enrollment period for the 2016 benefit year, or 1 year from the date 
the web-broker registers with the Exchange, whichever date is later, to 
comply. As a reminder, we note that a web-broker, like every other 
entity subject to Sec.  155.205(c), is required to provide accessible 
information to individuals who are LEP according to the more general 
standards under Sec.  155.205(c)(2), even before the web-broker would 
be subject to the more specific standards finalized in this rule. 
Moreover, under Sec.  155.205(c)(3), a web-broker is required to inform 
individuals who are LEP of the availability of the full range of 
language access services described in Sec.  155.205(c)(2), and how to 
access such services. If a web-broker is not yet providing telephonic 
interpreter services in at least 150 languages directly, it must 
provide oral interpretation services and inform individuals of the 
availability of this service from other sources, such as the Exchange's 
Call Center.
    Comment: With respect to our proposal to not require Navigators and 
non-Navigator assistance personnel to provide telephonic interpreter 
services in at least 150 languages, comments were mixed. Some 
commenters believed that our approach of exempting Navigators ran 
counter to a Navigator's statutory duty to provide information in a 
manner that is culturally and linguistically appropriate to the needs 
of the population being served by the Exchange or Exchanges.\38\ Others 
who opposed the proposal stated that while these entities should strive 
to hire bi- or multi-lingual staff for the most prevalent non-English 
languages spoken by LEP individuals in their community, for less 
frequently encountered languages, or for smaller entities for whom 
hiring staff with special language skills is not possible, requiring 
access to telephonic interpreter services is a cost-effective strategy 
for providing language access services. Among those who agreed with our 
proposal, commenters stated that specifically requiring each entity to 
provide telephonic interpreter services in 150 languages could be cost 
prohibitive and potentially force organizations to opt out of serving 
as assisters. At the same time, these commenters also stated that 
Navigators and non-Navigator assistance personnel should be responsive 
to and accommodate, to the extent possible, any LEP consumer's language 
access needs. These commenters suggested a number of options, such as 
requiring referrals to the Exchange's Call Center if an entity cannot 
meet a specific need; partnering with other organizations to provide 
telephonic interpreter services; hiring bi- and multi-lingual staff to 
meet the ``most significant'' language needs of the community; or 
having HHS contract with a language line that these entities could use 
so that the entity would not bear additional costs.
---------------------------------------------------------------------------

    \38\ Section 1311(i)(3)(E) of Affordable Care Act.
---------------------------------------------------------------------------

    Response: We are not extending the requirement to provide 
telephonic interpreter services in 150 languages to Navigators and non-
Navigator assistance personnel at this time. We recognize that ensuring 
that the language needs of a consumer are met is an important component 
of providing high-quality application and enrollment assistance. We 
will continue to consider options for making language access services 
more robust for Navigators and non-Navigator assistance personnel.
    There are a number of existing language access standards under 
current regulations applicable to Navigators that are consistent with 
the requirement under section 1311(i)(3)(E) of the Affordable Care Act 
that Navigators provide information in a manner that is culturally and 
linguistically appropriate to the needs of the population being served 
by the Exchange or Exchanges. For example, under Sec.  155.210(e)(5), 
Navigators in all Exchanges must provide information in a manner that 
is culturally and linguistically appropriate to the needs of the 
population being served by the Exchange, including individuals with 
LEP. Further, the general requirements at Sec.  155.205(c) to provide 
oral interpretation, written translations, and taglines in non-English 
languages indicating the availability of language services, continue to 
apply to all entities carrying out activities under Sec.  155.205(d) 
and (e), including Navigators and non-Navigator assistance personnel, 
even though the more specific standards finalized here do not apply to 
those entities. As noted above, included in this general requirement is 
the requirement under Sec.  155.205(c)(3) to inform individuals who are 
LEP about the availability of the full range of language access 
services described in Sec.  155.205(c)(2) and how to access such 
services. As such, if they lack the immediate capacity to help an LEP 
individual, all Navigators and non-Navigator assistance personnel in 
every Exchange should inform that individual about the availability of 
language access services through other sources, such as the Exchange 
Call Center. In addition, Navigators and non-Navigator assistance 
personnel in FFEs and State Partnership Exchanges, and non-Navigator 
assistance personnel funded through an Exchange Establishment grant, 
must comply with the standards set forth in Sec.  155.215(c)(3), which 
require them to provide consumers with information and assistance in 
the consumer's preferred language, at no cost to the consumer, 
including the provision of oral interpretation of non-English languages 
and the translation of written documents in non-English languages when 
necessary or when requested by the consumer to ensure effective 
communication. Exempting Navigators and non-Navigator assistance 
personnel from the specific requirements finalized here does not exempt 
them from complying with other applicable laws and regulations that 
govern the language accessibility of their work.
    Comment: We received comments regarding whether we should consider

[[Page 10788]]

additional, specific standards pertaining to written translations, 
taglines, and Web site content, as well as suggestions for standards 
other than those that we had specifically mentioned in the preamble of 
the proposed rule, as described above. Some commenters agreed in 
principle that improved language access services will help consumers. 
While some commenters broadly agreed that language access services 
should account for the demographics in a particular service area, 
comments were mixed with respect to the specific thresholds that should 
trigger written translations. Some commenters opposed requiring more 
specific standards beyond the proposed telephonic interpreter services 
standard. Still other commenters added that written translations should 
be required only upon request, rather than automatically, reasoning 
that limiting the standard to requests would help reduce the burden on 
entities as well as on State insurance departments, which often require 
issuers to file translated versions of previously filed forms for State 
review. One commenter asserted that additional standards for stand-
alone dental plan issuers were not warranted.
    Response: We are not finalizing any specific standards with respect 
to written translations at this time. We will continue to consider 
solutions that balance the language access needs of consumers who apply 
for and enroll in coverage through Exchanges with the burdens on 
entities in providing quality written translations in a timely fashion. 
It is important to note that even though we are not finalizing specific 
written translations standards, the general standard under Sec.  
155.205(c)(2)(ii) continues to apply to all entities subject to Sec.  
155.205(c), as do the general standards with respect to oral 
interpretation and taglines in non-English languages indicating the 
availability of language services. We have modified the language 
following Sec.  155.205(c)(2)(i) and Sec.  155.205(c)(2)(iii) to make 
clear that the general standards with respect to oral interpretation 
and taglines continue to apply to all entities subject to Sec.  
155.205(c).
    Comment: Some commenters who commented on our proposal on language 
accessibility standards for taglines suggested that notices and Web 
site content provided by HHS should be available in the top 30 
languages spoken nationwide by LEP populations. Some commenters 
suggested that for all other entities besides the FFEs, a State-
specific approach should be adopted, specifically recommending that 
notices and Web site content provided by a State Exchange, QHP issuer, 
or web-broker include taglines in the top 15 languages spoken in the 
relevant State(s) by LEP populations. One commenter did not suggest a 
specific numeric threshold, but stressed that a uniform standard should 
be adopted across entities.
    Response: We agree with many commenters' views that the 
demographics of a State's LEP population, rather than nationwide 
demographics, should be taken into account when taglines are used. This 
approach identifies languages tailored to the needs of each State and 
thus is more attuned to the anticipated language access needs of 
individuals serviced by entities. We also believe we should avoid 
creating a situation in which 30 taglines take up significant space on 
written content, potentially adding to printing costs.
    In light of these considerations, we are finalizing a standard 
whereby an Exchange, QHP issuer, or web-broker would be required to 
include taglines on Web site content and any document that is critical 
for obtaining health insurance coverage or access to health care 
services through a QHP for qualified individuals, applicants, qualified 
employers, qualified employees, or enrollees in at least the top 15 
languages spoken by the LEP population in the relevant State. If an 
entity's service area covers multiple States, the top 15 languages 
spoken by LEP individuals may be determined by aggregating the top 15 
languages spoken by all LEP individuals among the total population of 
the relevant States. A document is deemed to be critical for obtaining 
health insurance coverage or access to health care services through a 
QHP if it is required to be provided by State or Federal law or 
regulation to a qualified individual, applicant, qualified employer, 
qualified employee, or enrollee. Taglines must be included if a 
document is considered ``critical'' information to which QHP issuers 
must provide meaningful access under Sec.  156.250 as finalized in this 
rule, so that most LEP consumers might receive notice of language 
access services regardless of whether such ``critical'' information is 
being provided to them by an Exchange, a QHP issuer, or a web-broker. 
This requirement with respect to taglines adds to the standard set 
forth in Sec.  156.250 because it applies to all Web site content that 
is provided to qualified individuals, applicants, qualified employers, 
qualified employees, and enrollees by an Exchange, QHP issuer, or web-
broker, regardless of whether such content must be translated in 
accordance with Sec.  155.205(c)(2)(iv) as finalized in this rule. We 
included this requirement because all consumers, regardless of their 
English proficiency, are encouraged to apply for and enroll in coverage 
through an Exchange online, and we believe that consumers with LEP 
should be able to immediately identify taglines informing them of their 
ability to obtain language access services on the Web sites of entities 
subject to this standard.
    It is also important that LEP consumers, whether they are being 
served by an Exchange, QHP issuer, or web-broker, are able to obtain 
the same minimum number of taglines on such documents, and therefore 
are applying this standard equally across these entities. However, in 
recognition of the fact that newer web-brokers are often smaller 
entities that may not as easily meet this standard as an Exchange or 
QHP issuer, we are providing them additional lead time to comply, 
specifically, until the first day of the individual market open 
enrollment period for the 2017 benefit year or when such entity has 
been registered with the Exchange for at least 1 year, whichever is 
later. To facilitate compliance with this standard, beginning in early 
2016, we plan to issue guidance which identifies the applicable non-
English languages in each State.\39\ We also expect to provide sample 
taglines in all languages triggered by this threshold beginning in 
early 2016.
---------------------------------------------------------------------------

    \39\ We anticipate releasing this guidance on an annual basis 
beginning in early 2016, soon after the most recently published 
American Community Survey data is expected to become available.
---------------------------------------------------------------------------

    Comment: We received comments supporting a possible additional 
standard discussed in the preamble to the proposed rule, under which 
Web site content should be translated into each non-English language 
spoken by an LEP population that reaches 10 percent of the State 
population, though one commenter suggested that we consider requiring 
translation into the top three languages spoken by the LEP population 
in a given State. A few commenters expressed concerns about costs. 
Another commenter opposed applying the standard to web-brokers, and 
suggested that we give new participant web-brokers to the Exchange more 
time to comply.
    Response: We recognize that Web site content is an important source 
of information for qualified individuals, applicants, qualified 
employers, qualified employees, and enrollees, particularly in light of 
the fact that applying for and enrolling into a QHP or insurance 
affordability programs online is a generally more efficient process 
than other means. In addition,

[[Page 10789]]

the Web site content of an Exchange or web-broker often contains 
consumer tools and education materials that, while not always 
``critical'' for obtaining health care coverage or access to health 
care services through a QHP within the meaning of Sec.  156.250, 
nonetheless can help consumers understand their eligibility for 
coverage, how much financial assistance they might qualify for, and 
other important information that help consumers make an informed 
decision. We believe it is appropriate to require Exchanges, QHP 
issuers, and web-brokers to translate Web site content into each non-
English language spoken by an LEP population that reaches 10 percent or 
more of a State's population beginning at the start of the individual 
market open enrollment period for the 2017 benefit year. We note that 
the FFE is already meeting this standard. We clarify that for Exchanges 
and web-brokers, this requirement applies to all information intended 
for qualified individuals, applicants, qualified employers, qualified 
employees, or enrollees that is maintained by the entity on the Web 
site and is not limited to information that is critical for obtaining 
health insurance coverage or access to health care services through a 
QHP. We note that for QHP issuers, the type of Web site content for 
which translation is required aligns with the definition set forth in 
Sec.  156.250, as finalized in this rule, of ``critical'' information 
to which QHP issuers must provide meaningful access. If certain Web 
site content that is maintained by an Exchange, QHP issuer, or web-
broker contains information that specifically applies to non-QHPs only 
and does not contain information that is either (for Exchanges and web-
brokers) intended for a qualified individual, applicant, qualified 
employer, qualified employee, or enrollee or (for QHP issuers) 
``critical'' within the meaning of Sec.  156.250, then the entity is 
not required to translate it into an applicable non-English language.
    Given the substantial effort and resources involved in translating 
Web site content, we believe that the suggestion to translate Web site 
content in the top three languages spoken by the LEP population in the 
State is too burdensome. In addition, partly because of concerns raised 
about burden as well as our guiding principle of focusing on the 
demographics and anticipated language needs of the community being 
served using stable and reliable data, we are also not finalizing the 
standard discussed in the preamble to the proposed rule that would have 
required a uniform standard for written translations, taglines, and Web 
site content translations in the top 15 languages spoken nationwide 
among the LEP population.
    We also believe it is important that LEP consumers in a given State 
are able to obtain the same minimum level of language access services 
from the Exchange, QHP issuers operating in the Exchange, and web-
brokers operating in the State and therefore are applying a Web site 
content translation standard across these entities. However, we are 
providing web-brokers additional time to comply. Specifically, web-
brokers will have until the first day of the individual market open 
enrollment period for the 2017 benefit year, or when such entity has 
been registered with the Exchange for at least 1 year, whichever is 
later.
    As noted above, regardless of whether an entity is required to 
translate Web site content into an applicable non-English language 
under this provision, the entity's English Web site content will always 
be required to display taglines in at least the top 15 non-English 
languages spoken among the LEP population of the relevant State, 
consistent with Sec.  155.205(c)(2)(iii) of this rule, so that a wider 
range of LEP individuals whose language does not meet the 10 percent 
threshold in Sec.  155.205(c)(2)(iv) may still obtain language access 
services through oral interpretation or written translations, as 
applicable. For example, if an entity is required to translate Web site 
content into Spanish because the Spanish-speaking LEP population in the 
applicable State reaches 10 percent of the State's population, the 
entity's English version Web site must still display taglines in the 
top 15 non-English languages spoken by the LEP population of the 
relevant State. To facilitate compliance with this standard, beginning 
in early 2016, we plan to issue guidance that identifies the applicable 
languages and States meeting this threshold.
    We note that for an entity whose service area covers multiple 
States, if at least one language in one of the States it serves meets 
the 10 percent threshold in Sec.  155.205(c)(2)(iv), then the 
applicable information on the entity's Web site must be translated into 
that language.
    Comment: In regards to our solicitation for comment regarding the 
proposed implementation date for the 150-language standard and other 
possible specific language access standards, a few commenters indicated 
that they were already meeting or exceeding the 150-language standard 
for their language line. Many commenters stated that to the extent 
additional requirements beyond telephonic interpreter services are 
required, additional time would be necessary.
    Response: With respect to the requirement to provide telephonic 
interpreter services in at least 150 languages, Exchanges and QHP 
issuers will be required to comply with this requirement when this rule 
takes effect. Web-brokers will have until the later of November 1, 
2015, the first day of the individual market open enrollment period for 
the 2016 benefit year, or 1 year from the date the web-broker registers 
with the Exchange to comply with the requirement to provide telephonic 
interpreter services in at least 150 languages. For the requirements 
finalized for taglines and translation of Web site content, as stated 
in the regulation text, such standards will apply for Exchanges and QHP 
issuers no later than the first day of the open enrollment period in 
the individual market for the 2017 benefit year. To give web-brokers 
participating on an Exchange additional time, the specific requirements 
to provide taglines and translated Web site content will apply on the 
first day of the individual market open enrollment period for the 2017 
benefit year, or when the web-broker has been registered with the 
Exchange for at least 1 year, whichever date is later.
    Comment: Several commenters requested that we emphasize that the 
provisions set forth in Sec.  155.205(c) do not limit or abrogate 
requirements under Title VI of the Civil Rights Act of 1964 and section 
1557 of the Affordable Care Act.
    Response: As we stated in the preamble of the proposed rule, we 
remind relevant covered entities of the obligations they may have under 
other Federal laws to meet existing effective communication 
requirements for individuals with disabilities and limited English 
proficiency. Such obligations are independent of the responsibilities 
these entities may have under Sec. Sec.  155.205(c), 155.230(b), 
156.200(e), and 156.250.
b. Standards Applicable to Navigators and Non-Navigator Assistance 
Personnel Carrying Out Consumer Assistance Functions Under Sec. Sec.  
155.205(d) and (e) and 155.210 in a Federally-Facilitated Exchange and 
to Non-Navigator Assistance Personnel Funded Through an Exchange 
Establishment Grant (Sec.  155.215)
    To clarify that only a non-Navigator entity must maintain a 
physical presence in the Exchange service area, rather than each 
individual non-

[[Page 10790]]

Navigator associated with a non-Navigator entity, we proposed to amend 
Sec.  155.215(h) to limit the physical presence requirement specified 
under that section to non-Navigator entities. In the proposed rule, we 
explained that we believe that the amendment would strike an 
appropriate balance in allowing individuals providing non-Navigator 
assistance subject to Sec.  155.215 to provide assistance via the 
telephone, Internet, or through other remote means, particularly in 
circumstances in which remote assistance would be more effective or 
practical than face-to-face assistance, while also ensuring that the 
organization with which they are affiliated is in a position to 
understand and meet the specific needs of the communities they serve 
and to facilitate consumer protection efforts, as applicable, in their 
State. We added that if an individual non-Navigator is not affiliated 
with a larger entity, we would consider the individual to be the entity 
specified in the amended language under proposed Sec.  155.215(h). We 
also proposed to add the title ``Physical presence'' to paragraph (h) 
for improved clarity.
    We are finalizing this clarification as proposed.
    Comment: The vast majority of commenters expressed support for this 
proposal, indicating that the proposed change would benefit consumers 
seeking remote assistance from individual non-Navigators who may not be 
physically present in the area served by the Exchange but who can 
nonetheless provide effective assistance to an individual through the 
use of technology tools. One commenter suggested that we require non-
Navigator entities to ensure that at least half of their personnel 
serving a particular State conduct in-person assistance in the State. 
Another opposed the proposal on the grounds that it was too 
prescriptive because it would bar an otherwise well-suited organization 
from serving consumers in the State if the organization maintained no 
physical presence.
    Response: We agree with commenters that remote assistance is 
valuable, especially when a consumer is unable to meet in person with 
an individual non-Navigator. We believe that the requirement on the 
organization to maintain a physical presence in the State is a 
reasonable measure to facilitate a State's consumer protection efforts 
and enhance the organization's ability to provide culturally competent 
assistance \40\ which, at the same time, does not preclude an 
organization's ability to provide remote assistance to consumers.\41\ 
We also note that an organization that is well-suited to performing 
application and enrollment assistance but does not maintain a physical 
presence in the Exchange service area may be able to participate in the 
certified application counselor program because the Federal 
requirements governing this program do not include the requirement to 
maintain a physical presence.
---------------------------------------------------------------------------

    \40\ See Sec.  155.215(c) for a list of standards regarding the 
provision of culturally and linguistically appropriate standards 
which apply in an Exchange operated by HHS during the exercise of 
its authority under Sec.  155.105(f) and to non-Navigator assistance 
personnel funded through an Exchange Establishment Grant under 
section 1311(a) of the Affordable Care Act.
    \41\ 79 FR 30287 (May 27, 2014).
---------------------------------------------------------------------------

c. Ability of States To Permit Agents and Brokers To Assist Qualified 
Individuals, Qualified Employers, or Qualified Employees Enrolling in 
QHPs (Sec.  155.220)
    In Sec.  155.20, we are amending the definition of enrollee in the 
SHOP to include individuals other than qualified employees. To conform 
to this amendment, we are finalizing a modification to Sec.  
155.220(i). For a discussion of this amendment, please see the preamble 
for Sec.  155.20.
d. Standards for HHS-Approved Vendors of Federally-Facilitated Exchange 
Training and Information Verification for Agents and Brokers (Sec.  
155.222)
    In Sec.  155.222, we proposed a process for HHS to approve vendors 
to offer training and information verification services as an 
additional avenue to the available HHS training, by which State 
licensed agents and brokers could complete the training requirements 
necessary to assist consumers seeking coverage through the FFEs. In 
Sec.  155.222(a), we proposed an application and approval process for 
vendors seeking recognition as HHS-approved vendors of FFE training and 
information verification for agents and brokers. As part of an approved 
training and information verification program, we proposed that the 
vendor must require agents and brokers to successfully complete 
identity proofing, provide identifying information, and successfully 
complete the required curriculum. Further, we proposed that no training 
program would be recognized unless it included an information 
verification component under which the vendor confirms the identity and 
applicable State licensure of the person who is credited with 
successful completion of the training program. We proposed that only 
HHS-approved vendors that meet the designated standards would have 
their programs recognized by HHS. We proposed that vendors be approved 
for one-year terms, and that vendors seeking to continue their 
recognition as HHS-approved vendors for FFE agent and broker training 
and information verification the following year be re-approved through 
a process to be determined by HHS.
    In paragraph (b), we proposed the standards that a vendor must meet 
to be approved by HHS to offer FFE training and information 
verification to agents and brokers. In paragraph (b)(1), we proposed 
that the vendor submit a complete and accurate application by the 
deadline established by HHS, which demonstrates prior experience with 
successfully conducting online training and identity proofing, as well 
as providing technical support to a large customer base. We proposed in 
paragraph (b)(2) that the vendor be required to adhere to HHS 
specifications for content, format, and delivery of training and 
information verification. HHS would require vendors to have their 
training approved for continuing education units accepted by State 
regulatory entities. In paragraph (b)(3) we proposed that vendors be 
required to collect, store, and share with HHS all data from agent and 
broker users of the vendor's training and information verification in a 
manner specified by HHS, and protect the data in accordance with 
applicable privacy and security laws and regulations. In paragraph 
(b)(4), we proposed that the vendor be required to execute an agreement 
with HHS, in a form and manner to be determined by HHS, which requires 
the vendor to comply with HHS guidelines for interfacing with HHS data 
systems, the implementation of the training and information 
verification processes, and the use of all data collected. We also 
proposed to require vendors to adopt a fee structure that is consistent 
with the fee structure for comparable trainings offered by the vendor 
to comparable audiences. In paragraph (b)(5), we proposed that the 
vendor be required to permit any individual who holds a valid State 
license or equivalent State authority to sell health insurance products 
to access the vendor's training and information verification process.
    In paragraph (c), we proposed that once HHS has completed the 
approval process for vendors for a given year, HHS would publish a list 
of approved entities on an HHS Web site. In paragraph (d), we proposed 
that HHS may monitor and audit approved vendors and their records 
related to the

[[Page 10791]]

FFE training and information verification functions to ensure the 
approved vendors' ongoing compliance with the standards outlined in 
paragraph (b). We proposed that if HHS determines that the approved 
vendor is no longer in compliance with standards under paragraph (b), 
HHS may remove the vendor from the list described in paragraph (c), and 
may direct the vendor to cease performing the training and information 
verification functions described in this section.
    In paragraph (e), we proposed that such a vendor may appeal HHS's 
decision by notifying HHS in writing within 15 days of receipt of the 
notification by HHS of not being approved or having its approval 
revoked, and submitting additional documentation demonstrating how the 
vendor meets the standards in paragraph (b) and (if applicable) the 
terms of their agreement with HHS. HHS will review the submitted 
documentation and make a final determination within 30 days from 
receipt of the submission of the additional documentation.
    We are finalizing these provisions as proposed, with the 
modifications detailed below.
    Comment: Most commenters generally supported the proposal to permit 
approved vendors to provide training and information verification to 
agents and brokers assisting consumers in the FFEs, so that agents and 
brokers would have more choice and greater opportunity to complete the 
required FFE training. Several commenters expressed concern that 
external vendors would not be able to provide training that is 
comprehensive, accurate, and without bias. These commenters urged HHS 
to provide standards for quality control and oversight.
    Response: We agree that expanding the available avenues for agents 
and brokers to fulfill the FFE training requirements will allow the 
FFEs to leverage the experience, contacts, and networks of approved 
vendors. To ensure that the training and information verification 
programs adhere to uniform standards for content, format, and delivery, 
under Sec.  155.222(b)(2), HHS-approved vendors will be required to 
adhere to HHS specifications for content, format, and delivery of 
training and information verification. Vendors may choose to charge 
agents and brokers for their training; HHS will consider current 
training costs for State-licensed agents and brokers for comparable 
trainings to comparable audiences when reviewing vendor applications 
with proposed fee structures.
    After HHS launches 2016 plan year training, planned for the summer 
of the 2015 calendar year, HHS intends to monitor vendor training 
programs and work with vendors to make sure that the FFE training 
content and delivery continues to meet HHS standards. HHS may audit 
approved vendors throughout the plan year in accordance with Sec.  
155.222(d). HHS intends to issue future guidance regarding Sec.  
155.222(b)(2) that will outline the training specifications for content 
and coverage . If a vendor's training program fails to meet HHS 
standards after public release, HHS may revoke the vendor's approval to 
offer FFE training, and would work with affected agents and brokers to 
ensure they have the required training.
    Comment: Several commenters had recommendations and requests for 
further clarification of requirements relating to the application and 
the agreement between HHS and vendors. One commenter requested 
clarification on what constitutes an enforcement action for purposes of 
the application and the agreement. One commenter asked about 
demonstrating experience with identity proofing, since most vendors 
offering training and continuing education programs do not conduct 
identity proofing in the same manner as HHS.
    Response: HHS intends to release the application form to become an 
HHS approved vendor of FFE training and information verification for 
the 2016 plan year in the first quarter of 2015. HHS further intends to 
release guidance related to the application process in the first 
quarter of 2015 to help interested vendors better understand the 
application process. The vendor must submit the application by the 
deadline specified by HHS. We intend to issue guidance that will 
provide details on the timeline for the application process. We expect 
that vendors will be approved for one-year terms.
    In the preamble to paragraph (b)(1) (79 FR 70706), we explained 
that HHS would only approve vendors if no current or past regulatory, 
enforcement, or legal action has been taken by a State or Federal 
regulator against the entity in the 3 years prior to the application or 
renewal application deadline under this section. After careful 
consideration of the various events at the State and Federal level that 
may constitute an ``enforcement'' action, we note that HHS will take 
into consideration justifications, corrective actions taken, or other 
mitigating or aggravating circumstances (for example, the financial 
impact of the violation, or the number of individuals affected by the 
violation) in evaluating whether a past or current violation would 
exclude a potential vendor from participation. Vendors whose 
applications are denied will have the opportunity to appeal HHS's 
decision under Sec.  155.222(e), and may submit additional 
documentation for HHS to consider about potential mitigating 
circumstances.
    To more accurately describe the information verification 
functionality that vendors must provide to agents and brokers, we are 
adding ``proof of valid State licensure'' in paragraph (a)(2). Because 
HHS expects vendors to demonstrate prior experience with verifying 
State licensure on the application, we are adding ``verification of 
valid State license'' in paragraph (b)(1)(i). In response to a comment 
that explained that organizations that currently conduct agent and 
broker training may not have experience with identity proofing, we are 
amending the requirement in paragraph (b)(1)(ii) so that vendors must 
demonstrate the ability to conduct identity proofing, but do not have 
to provide proof of prior experience. The goal of the information 
verification process is to confirm the State licensure and identity of 
agents and brokers who successfully complete FFE training before they 
are permitted by HHS to assist consumers with FFE eligibility 
determinations and QHP selections as an agent or broker. Therefore, 
vendors must demonstrate a current capability of verifying both the 
identity of the person completing the training, as well as his or her 
State licenses or equivalent State authorizations to sell health 
insurance products.
    Comment: Several commenters made suggestions for training content, 
and the format and frequency for exchanging training and information 
verification data with HHS.
    Response: All of the recommended training topics are currently part 
of the existing HHS FFE training for agents and brokers (for example, 
advance payments of the premium tax credit and cost-sharing reductions, 
and Medicaid and CHIP eligibility). Vendors approved to offer training 
in the future will be required to include those topics in the 
curriculum for their respective FFE training programs for agents and 
brokers. Based on the comments we received, we are adding language at 
paragraph (b)(3) to indicate that vendors must be able to share 
training and information verification data with HHS in a manner, 
format, and frequency specified by HHS. Specifically, we are adding 
``format, and frequency'' to paragraph (b)(3) with respect to the 
collection, storage, and sharing of data

[[Page 10792]]

to further protect the personally identifiable information of agents 
and brokers, and aid HHS in the monitoring of vendors' training and 
information verification programs. We anticipate issuing future 
technical guidance that will detail the manner, format, and frequency 
for the exchange of data under Sec.  155.222(b)(3).
    Comment: In response to the solicitation of comments on what 
additional components a training program should include in order to 
qualify for HHS approval, some commenters requested that the training 
be applicable across States and that vendors be required to offer 
continuing education units (CEUs) in multiple States. Other commenters 
suggested that States should incorporate Federal materials in existing 
training and licensing programs to promote cost-effectiveness and 
efficiency, and that HHS should eliminate the requirement that agents 
and brokers receive approval by an Exchange. One commenter suggested 
that States be able to become vendors.
    Response: HHS will require vendors to offer training that is 
applicable in all FFE States, consistent with the current HHS training. 
As noted in the preamble to the proposed rule (79 FR 70706), the 
establishment of standards for HHS-approved vendors of alternative 
training and information verification processes, we seek to make the 
FFE training and registration process easier for agents and brokers 
while also attracting greater agent and broker participation in the 
FFEs through the development of partnerships with vendors. After 
careful consideration of these comments, we have amended paragraph 
(b)(2) to require vendors to offer CEU credit for their training 
programs in at least five States in which an FFE is operating, 
effective for plan year 2016 training. Many businesses, trade 
associations, and States currently offer training that qualifies for 
CEUs, so we do not believe this requirement will be a significant 
burden for vendors. We believe five is a reasonable number of States in 
this initial year of the vendor-hosted FFE training and information 
verification alternative avenue, and we intend to monitor and evaluate 
whether this number should be modified in future years. States may 
apply to be recognized as HHS-approved vendors to offer FFE training 
and information verification to agents and brokers, and must comply 
with the same standards as other vendor applicants. HHS will continue 
to require the Exchanges, including FFEs, to enter into agreements with 
and register agents and brokers, as described in Sec.  155.220(d) and 
Sec.  155.260(b).
    We are finalizing these provisions as proposed, with the following 
modifications. We are dividing proposed paragraph (a) into three 
paragraphs. To add description to the information verification 
functionality that vendors must provide to agents and brokers, we are 
adding ``proof of valid licensure'' in paragraph (a)(2), and also 
adding ``verification of valid State license'' to the new paragraph 
(b)(1)(i). We are adding paragraph (b)(1)(ii) to clarify that vendors 
must have the ability to host identity proofing, but do not need to 
demonstrate prior experience. In paragraph (b)(2), we are adding 
``offering continuing education units (CEUs) for at least five States 
in which an FFE is operating.'' We are adding ``format, and frequency'' 
to paragraph (b)(3) with respect to the collection, storage, and 
sharing of data to further protect the personally identifiable 
information of agents and brokers, and aid HHS in the monitoring of 
vendors' training and information verification programs.
3. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exchange Participation and Insurance Affordability 
Programs
a. Annual Eligibility Redetermination (Sec.  155.335)
    In Sec.  155.335, we proposed permitting Exchanges to implement 
alternative re-enrollment hierarchies in future benefit years. We 
sought comment on a default re-enrollment hierarchy that consumers 
could opt into that would be triggered if the enrollee's current plan's 
premium increased from the prior year, or increased relative to the 
premium of other similar plans (such as plans of the same metal tier), 
by more than a threshold amount, such as 5 percent or 10 percent. We 
also sought comment on whether SBMs should have the flexibility to 
implement alternative re-enrollment hierarchies beginning with the 2016 
open enrollment and whether to adopt any such alternatives in the FFE 
for 2017 open enrollment.
    In light of the comments discussed below, we are not finalizing our 
proposal to explore alternative re-enrollment hierarchies for the FFE 
at this time. However our current rules permit Exchanges to implement 
alternative re-enrollment hierarchies under Sec.  155.335(a)(2)(iii) 
based on a showing by the Exchange that the alternative procedures 
would facilitate continued enrollment in coverage for which the 
enrollee remains eligible, provide clear information about the process 
to the qualified individual or enrollee (including regarding any action 
by the qualified individual or enrollee necessary to obtain the most 
accurate redetermination of eligibility), and provide adequate program 
integrity protections, and we welcome efforts by SBEs to develop 
alternative hierarchies consistent with these standards that meet the 
needs of their consumers.
    Comment: We received many comments regarding the proposed 
alternative re-enrollment hierarchies. Commenters who opposed 
permitting alternative enrollment hierarchies, particularly those that 
prioritize low-premium plans, noted that, in most cases, the plan a 
consumer chooses during open enrollment is one that the consumer has 
shopped for and has determined best meets his or her needs. 
Additionally, commenters highlighted that low-cost premiums do not 
necessarily lead to lower overall cost of coverage because deductibles, 
copayments, coinsurance, and out-of-pocket limits may be higher.
    In contrast, some commenters supported the proposal's emphasis on 
low-cost premiums. One commenter believed that multiple re-enrollment 
hierarchies should be available to consumers, but cautioned that these 
options should be limited to two, and be easy to understand.
    Commenters had concerns that consumers may not realize that opting 
into a default enrollment hierarchy based on low-cost premiums may 
result in other significant changes to their coverage, as noted above. 
Commenters also requested that, if alternative hierarchies are 
implemented, consumers be made aware of the consequences of selecting 
this default re-enrollment option both at the time of initial 
enrollment when a person could opt into this and also prior to re-
enrollment.
    Some commenters noted that the proposal may not keep consumers 
actively engaged in the process of re-enrollment and making coverage 
choices. Commenters emphasized that, if alternative hierarchies are 
implemented, Exchanges must educate consumers at the time of enrollment 
about their choice and what it may mean for their future health 
coverage and costs. Commenters stressed that consumer notices should 
emphasize the benefit of returning to the Exchange during the open 
enrollment period to examine plan options and encouraged focus testing 
to determine messaging that best communicates the implications of 
opting into a re-enrollment hierarchy.
    We received a few alternative ideas for re-enrollment hierarchies, 
including basing re-enrollment on factors consumers identify as most 
important to them. One commenter recommended

[[Page 10793]]

permitting consumers to choose between a default re-enrollment 
hierarchy that prioritizes the consumer's choice of plan, as the 
current policy does, versus prioritizing the consumer's original choice 
of premium. The commenter believed that presenting these two hierarchy 
choices to consumers would greatly increase consumer understanding of 
the significance and consequences of selecting one hierarchy over the 
other. Another commenter suggested limiting the low-cost premium 
hierarchy option to only those consumers who are currently enrolled in 
the lowest-cost or second-lowest cost silver plan to target consumers 
who are most likely to notice a change in premium and make it 
administratively easier to implement.
    Finally, several commenters emphasized the need to continue to 
focus on the development of the current redetermination and re-
enrollment process. Commenters noted improvements should be made to the 
technical ability to support automatic eligibility redeterminations, 
particularly those including determinations for advance payments of the 
premium tax credit and cost-sharing reductions. We received several 
comments recommending that HHS wait to implement any alternative 
hierarchies until the current enrollment hierarchies have operated for 
a few years and more information and lessons can be gleaned from the 
experience. In contrast, a few commenters, who supported the proposal, 
encouraged early adoption of the policy, and one commenter suggested 
that consumers would not want to wait to take advantage of this low-
cost option.
    Response: We appreciate the many comments received regarding 
alternative re-enrollment hierarchies and are sensitive to the concerns 
raised by commenters. Consumers consider many factors when selecting 
health coverage in addition to the premium, including the provider 
network, cost-sharing, deductibles, and other factors which affect 
overall costs, continuity of care, and the consumer experience. At the 
same time, we continue to believe that default re-enrollment of 
consumers in the same plan (or a similar plan) may not best serve 
consumers' interests in cases where the premium for their plan relative 
to available alternatives has changes substantially. Due to concerns 
expressed by commenters, we are not finalizing changes to the re-
enrollment hierarchies. Instead, the existing re-enrollment hierarchies 
will remain in place. In accordance with commenters' suggestions, we 
may revisit alternative hierarchies as we learn more about consumer 
preferences and gain implementation experience. We will also work to 
continue to improve the current annual redetermination and renewal 
processes, including the concerns expressed by commenters for the need 
for greater consumer education and engagement efforts. As noted below, 
we encourage SBEs to consider alternative re-enrollment hierarchies.
    Comment: Most commenters, including those representing SBEs, 
supported the proposed flexibility for SBEs to implement alternative 
re-enrollment hierarchies. Commenters saw this flexibility as a way to 
further test alternative hierarchies before they are implemented more 
widely, and also as a way to meet the unique characteristics of each 
Exchange. Additionally, one commenter expressed opposition to providing 
State flexibility by the 2016 benefit year out of concern that 
consumers would not have enough time to be properly educated about re-
enrollment by operation of the alternative hierarchy and because no 
precedent exists for reassigning a consumer to an entirely new set of 
coverage benefits. Finally, one commenter, who supported permitting 
State flexibility in this regard, did not believe HHS should permit 
States to prioritize issuer continuity.
    Response: SBEs play an important role in implementing policies and 
providing important feedback regarding their success and difficulties, 
particularly because each SBE has a unique consumer base and market. As 
noted above, under our current regulations, SBEs may gain approval from 
HHS to implement alternative default re-enrollment hierarchies. We 
encourage SBEs to consider alternative hierarchies and we will closely 
examine the results of any SBE actions in this area.
    Comment: We received a few comments requesting more information 
regarding how this proposal would impact stand-alone dental plans 
(SADPs). Several commenters noted that the process for re-enrolling in 
a SADP should be separate and independent from re-enrollment in a QHP.
    Response: Because we will not implement the proposed alternative 
re-enrollment hierarchies at this time, we are not addressing how this 
policy would affect SADPs. However, we appreciate the comments raising 
this issue and, if the proposal is revisited in the future, we will 
address concerns regarding SADPs then.
4. Exchange Functions in the Individual Market: Enrollment in Qualified 
Health Plans
a. Enrollment of Qualified Individuals Into QHPs (Sec.  155.400)
    We proposed to amend Sec.  155.400(e) to explicitly provide for an 
Exchange to establish a standard policy for setting deadlines for 
payment of the first month's premium.
    For the FFEs, we proposed several possible payment deadlines tied 
to the coverage effective date for regular effective dates (meaning 
coverage effective the first day of the following month for plan 
selections made between the first and fifteenth of the month, and 
coverage effective the first day of the second month following a plan 
selection made between the 16th and the end of the month). Some options 
we considered included providing consumers until the coverage effective 
date, or the day before the coverage effective date, to make their 
first month premium payment. Alternatively, we considered providing 
consumers additional time after the coverage effective date to make 
their premium payment (5 days, 10 days, or 30 days after the coverage 
effective date). We sought comment on the period of time following the 
coverage effective date an issuer could be required or permitted to 
accept a first month's premium payment for that coverage.
    With respect to effective dates other than regular effective dates, 
meaning retroactive or accelerated coverage effective dates resulting 
from enrollment under certain special enrollment periods (including 
birth and marriage), resulting from the resolution of appeals, or 
resulting from amounts newly due for prior coverage based on issuer 
corrections of under-billing, we considered a premium payment deadline 
of 10-15 business days from when the issuer receives the enrollment 
transaction.
    We sought comment on which proposed premium payment deadlines give 
issuers an acceptable amount of time to send an invoice and allow for 
timely payment by the consumer, and give consumers sufficient time to 
make the payment. We also sought comment on how such a policy would 
likely affect issuer operations and consumers' ability to obtain 
coverage.
    We noted that because this rulemaking will likely not be finalized 
until after open enrollment for 2015, any such deadlines would not be 
applicable for that open enrollment period.
    We are finalizing the provisions proposed in Sec.  155.400 of the 
proposed

[[Page 10794]]

rule, with the inclusion of premium payment deadline policies for the 
FFEs, selected from among the options described in the proposed rule. 
Specifically, we revised paragraph Sec.  155.400(e) to establish a 
standard policy for premium payment deadlines in the FFEs, while 
leaving other Exchanges the option of establishing such policies. We 
added Sec.  155.400(e)(1) to establish a premium payment deadline 
policy for the first month's premium payment for a first-time 
enrollment on an FFE or for an active or passive reenrollment in a plan 
within a new product or with a new issuer.
    In new Sec.  155.400(e)(1)(i), we establish a policy for the FFEs 
that premium payment deadlines for the first month's premium for a new 
enrollment must be no earlier than the coverage effective date, but no 
later than 30 calendar days from the coverage effective date in cases 
where coverage becomes effective with regular coverage effective dates, 
as provided for in Sec.  155.410(f) and Sec.  155.420(b)(1).
    We also added Sec.  155.400(e)(1)(ii) whereby the premium payment 
deadlines for the first month's premium must be 30 calendar days from 
the date the issuer receives the enrollment transaction, in cases where 
coverage becomes effective under special effective dates, as provided 
for in Sec.  155.420(b)(2).
    Comment: We received several comments recommending that HHS give 
issuers flexibility surrounding payment deadlines, with the rationale 
that flexibility in the first year helped maximize enrollment by 
accommodating those who require additional time to make payment. 
Several commenters suggested giving consumers 30 days to make their 
first month's premium payment, while a large number of commenters 
supported establishing a standard policy requiring consumers to make 
their first month's premium payment prior to the effective date. Most 
concerns raised by commenters opposed allowing premium payments after 
the coverage effective date due to the uncertainty of payment for 
services provided after the coverage effective date if a premium is not 
paid and the enrollee is subsequently cancelled.
    Response: We recognize that decisions regarding payment of the 
first month's premium have traditionally been business decisions made 
by issuers, subject to State rules. We believe that having some minimum 
standards could benefit issuers and consumers by ensuring a consistent 
operational procedure while still giving issuers flexibility. Within 
this context, we also sought to provide flexibility for SBEs to 
establish their own policies for premium payment deadlines. 
Accordingly, we are finalizing Sec.  155.400(e) to indicate that an 
Exchange may establish a standard policy for setting premium payment 
deadlines, and are establishing a policy for the FFEs, as described 
above.
    This policy gives issuers flexibility while allowing additional 
time for individuals who may have circumstances that would not 
otherwise provide standard timeframes for payment.
    Comment: Several commenters were confused about the additional 
language to allow first month's premium payments after the coverage 
effective date, thinking that a person's coverage could be effectuated 
prior to the person making their payment. Many providers and some 
issuers were opposed to allowing more individuals to appear to have 
effective coverage and then have the coverage not be effectuated due to 
non-payment of premium by the payment deadline, resulting in having to 
reverse claims for payment for services rendered during the time 
between the intended coverage effective date and the payment deadline.
    Response: Payment for first month's premium is still required prior 
to coverage being effectuated. For the FFE, in cases where a person, 
consistent with an issuer's payment policy, makes their premium payment 
after the coverage effective date, but before the premium payment 
deadline set by the issuer, the consumer would receive a retroactive 
effective date. Issuers may pend claims while waiting for the first 
month's premium payment and either deny or reverse those claims based 
on whether the individual makes their first month's payment by the 
premium payment deadline. We believe that it is better to allow 
payments, if the issuer chooses, after the coverage effective date.
    Comment: Several commenters supported a uniform payment deadline, 
but wanted clarification that SBEs can establish their own policy for 
premium payments.
    Response: While we believe that having uniform minimum standards 
for all issuers for payment of a first month's premium to effectuate 
enrollments could benefit issuers and consumers by ensuring a 
consistent operational procedure while still giving issuers 
flexibility, our intent in the proposed rule was to let each Exchange 
decide whether to develop its own payment deadline policy for the first 
month's premium. We are finalizing a revised Sec.  155.400(e) 
indicating an Exchange may establish a standard policy for setting 
premium payment deadlines, and establishing the FFEs premium payment 
deadline policy for the first month's premium payment.
    Comment: Some commenters suggested that the if HHS implements a 
uniform policy for the first month's premium payment deadlines, HHS 
should take into account consumers who have unusual circumstances (for 
example, when consumers are eligible for retroactive effective dates, 
an issuer fails to issue a bill in a timely manner, a consumer's 
payment is misdirected by mail, etc.).
    We also received several comments suggesting that for irregular 
effective dates, the premium payment date should be 10-15 business days 
from when the consumer receives the invoice from the issuer, not when 
the issuer receives the enrollment transaction. Commenters suggested 
that this would create a level playing field for consumers since some 
issuers may take longer to process their enrollment transactions
    Response: In this final rule, we are adding Sec.  
155.400(e)(1)(ii), which accommodates consumers who are given an 
accelerated or retroactive effective date based, for example, on a 
change in circumstance. We want to give consumers with irregular 
effective dates sufficient time to pay the first month's premium and we 
believe, based on comments received that suggested giving consumers 
with irregular effective dates more time to make their first month's 
premium payment, 30 calendar days is sufficient and reduces the 
complexity of accounting for weekends and holidays. We also recognize 
that issuers do not all have a mandated standard for timeliness of 
billing consumers, but we believe issuers want to collect the first 
month's premium payment and have no intention to delay billing on their 
end. Furthermore, depending on the issuers and how the consumer elects 
to make payment, not all enrollees will be sent an invoice (for 
instance, in cases where a consumer is redirected by the FFE to the 
issuer's Web site and pays the premium online), whereas the FFE will 
always send an enrollment transaction to the issuer when a consumer 
selects a plan. Therefore, we are finalizing this rule with a standard 
under which these individuals are given 30 calendar days from the date 
the issuer receives the enrollment transaction to make their first 
month's premium payment.
b. Annual Open Enrollment Period (Sec.  155.410)
    In Sec.  155.410, we proposed to amend paragraph (e), which 
provides the dates

[[Page 10795]]

for the annual open enrollment period in which qualified individuals 
and enrollees may apply for or change coverage in a QHP. We proposed to 
restructure paragraph (e) by placing the current provision regarding 
the 2015 benefit year in paragraph (e)(1) and the proposed requirement 
for all benefit years beginning on or after 2016 in paragraph (e)(2). 
Specifically, in paragraph (e)(2), we proposed that for benefit years 
beginning on or after January 1, 2016, the annual open enrollment 
period would begin on October 1 and extend through December 15 of the 
calendar year preceding the benefit year. We also proposed to 
redesignate the annual open enrollment coverage effective date 
provisions in paragraphs (f) and (f)(1) through (3) as (f)(1) and 
(f)(1)(i) through (iii), and to add a new (f)(2), which would specify 
that, for enrollments made under any annual open enrollment periods for 
benefit years beginning on or after January 1, 2016, coverage would be 
effective on January 1 of the year following the open enrollment 
period.
    We are finalizing the provisions only with regard to the 2016 
benefit year, with a modification. In response to comments, at Sec.  
155.410(e)(2), we are providing that for the benefit year beginning on 
January 1, 2016, the annual open enrollment period begins on November 
1, 2015 and extends through January 31, 2016 (2 weeks earlier but the 
same length as the open enrollment period for the 2015 benefit year). 
Additionally, we have revised the proposed language at Sec.  
155.410(f)(2) and added three paragraphs to require that for the 2016 
benefit year, the Exchange must ensure that coverage is effective 
January 1, 2016, for QHP selections received by the Exchange on or 
before December 15, 2015, February 1, 2016, for QHP selections received 
by the Exchange from December 16, 2015, through January 15, 2016, or 
March 1, 2016, for QHP selections received by the Exchange from January 
16, 2016, through January 31, 2016.
    Comment: We received a variety of comments regarding our proposal 
to set the annual open enrollment period for benefit year 2016 and 
beyond. A large portion of comments focused on the specific dates 
proposed for the annual open enrollment period. Several commenters 
noted their support for establishing a standard annual open enrollment 
period to promote consistency from year to year. Commenters also 
supported annual open enrollment dates that overlap with Medicare's 
annual open enrollment period as well as the annual open enrollment 
period for much employer-sponsored coverage, which commenters believed 
would ensure a smoother transition for consumers moving between the 
group and individual markets. One commenter supported the proposed 
timeframe and noted that starting the Exchange annual open enrollment 
period 2 weeks before Medicare's annual open enrollment period may 
reduce stress on resources, particularly customer service call centers, 
agents, brokers, and other consumer resources that are frequently 
relied on during open enrollment periods.
    A few commenters supported establishing the annual open enrollment 
period during the last quarter of the calendar year, but recommended 
slight variations on the proposed timeframe. For example, one commenter 
recommended the annual open enrollment period run November 1 through 
December 15, suggesting that a longer enrollment period does not lead 
to better consumer decisions and that issuers may benefit from a later 
start to the annual open enrollment period. Another commenter indicated 
that ending the enrollment period on December 15 was too late to 
accommodate the operational steps necessary to ensure a universal 
January 1 coverage effective date, particularly given the complexity 
associated with managing active selections, automatic renewals, and 
other changes. The commenter suggested ending the enrollment period on 
November 30 to give more time to issuers and Exchanges to handle 
renewals. A few commenters recommended aligning with Medicare's annual 
open enrollment period, October 15 through December 7. In contrast, a 
few commenters requested that HHS extend the proposed annual open 
enrollment period to the end of January to capture additional 
consumers. Of particular concern for these commenters were consumers 
who are auto-renewed into a new plan and will not have an opportunity 
to use the plan before the end of the annual open enrollment period, 
following which they could be unable to shop for coverage, absent a 
special enrollment period (SEP).
    Finally, a few commenters representing State-based Exchanges (SBEs) 
and health insurance issuers shared concerns that shifting the annual 
open enrollment period to October would significantly strain timelines 
for product development, rate setting, product filing, and review. 
These groups questioned whether notices, regulations, and templates 
would be completed by HHS in time for issuers and States to fulfill 
their obligations prior to annual open enrollment. Commenters noted 
that starting the annual open enrollment period earlier would increase 
administrative burden and constrain resources and requested giving 
States and issuers additional time to prepare.
    Response: We agree that establishing a consistent timeframe for 
annual open enrollment will help reduce consumer confusion, and 
administrative complexity. However, we understand that beginning annual 
open enrollment more than a month earlier for 2016 than for 2015 
requires significant advanced planning and preparation by Exchanges, 
State regulatory authorities, issuers, and assisters. We were persuaded 
by the concerns expressed by many commenters about the additional 
burden caused by shifting the annual open enrollment period, and 
therefore we are finalizing an annual open enrollment period for the 
2016 benefit year that begins 1 month later than the one we had 
proposed, and that will run from November 1, 2015 through January 31, 
2016. We anticipate that this timeframe will ease the burden on State 
regulatory authorities, Exchanges, and issuers while giving HHS the 
time to conduct a thorough certification process. Additionally, the 
finalized timeframe will permit additional time for consumers following 
the winter holidays to complete plan selection or to select a different 
plan if they do not like the plan into which they were auto-enrolled. 
Finally, the finalized timeframe will continue to partially overlap 
with Medicare annual open enrollment and most employer offerings, which 
will benefit consumers by creating smooth transitions between coverage 
and create process efficiencies for issuers handling enrollments and 
re-enrollments during the same period.
    Comment: Many commenters focused on the length of the proposed 
annual open enrollment period. Several commenters supported 
establishing a shorter annual open enrollment period. However, a few 
commenters considered the proposed annual open enrollment period too 
short to provide consumers sufficient time to research coverage options 
and seek help from assisters. These commenters noted that consumers are 
still becoming familiar with Exchange-based coverage and that the 
length of the proposed open enrollment period will be a barrier to 
obtaining insurance. Similarly, many commenters requested that 
consumers have the opportunity to preview and compare plans starting on 
September 15 of each year, even if they are unable to enroll, to 
provide additional time for consumers to review and compare plans to 
make informed decisions. One commenter recommended that plans be

[[Page 10796]]

made available as soon as they are certified so that consumers, 
assisters, non-profit organizations, and researchers can review the 
plan options available.
    Response: Recognizing that consumers, issuers, State regulatory 
authorities, and Exchanges may still be acclimating to the annual open 
enrollment process, we are finalizing the provisions with modification 
to set the annual open enrollment period for the 2016 benefit year to 
run from November 1, 2015 through January 31, 2016. We will take these 
recommendations under advisement as we consider options for the 2017 
annual open enrollment period and beyond.
    Comment: Several commenters recommended establishing the annual 
open enrollment period so that it either overlaps or aligns with tax 
filing season. In support of this idea, commenters noted that consumer 
financial liquidity is lowest during the months of November and 
December whereas many consumers receive tax refunds beginning in late 
January through April, which could encourage consumers to enroll in 
coverage. Commenters also noted that incurring a fee at tax filing for 
not being enrolled in coverage could create an opportune moment to 
encourage enrollment. One commenter maintained that aligning annual 
open enrollment with tax filing would alleviate private-sector 
administrative burdens because open enrollment periods for Medicare, 
employer plans, and the Exchange will then not all overlap, increasing 
the workload on issuers and agents and brokers. Finally, commenters 
noted that tax filing provides the best possible income information for 
consumers to increase accuracy of eligibility determinations, minimize 
repayments, and strengthen program integrity.
    Response: We appreciate the concerns that commenters raised. As 
noted above, for the 2016 benefit year, we are finalizing the 
provisions with modification to set the annual open enrollment period 
for the 2016 benefit year to run from November 1, 2015 through January 
31, 2016. We note that there are several SEPs that provide an 
opportunity to enroll in coverage mid-year if a qualifying event 
occurs. In addition, there are several exemptions available to 
consumers, including hardship-based exemptions, which will help prevent 
a consumer from being assessed a fee, and may be claimed on a 
consumer's Federal income tax return. Although commenters saw 
overlapping annual open enrollment with Medicare and employer offerings 
as burdensome, we maintain that this overlap maximizes process 
efficiencies for issuers and streamlines transitions between different 
forms of coverage for consumers.
    Aligning more closely with the calendar year permits consumers to 
plan financially on a calendar year basis. We also note that consumers 
who qualify for financial assistance can immediately receive it with 
their premium upon enrollment, and consumers also may be given 
additional time in which to pay their initial premium, pursuant to the 
amendment to Sec.  155.400(e) described in section III.E.4.a of this 
final rule, both of which should help alleviate low consumer financial 
liquidity.
    Comment: A few commenters representing SBEs requested that SBEs be 
permitted to set their own annual open enrollment period and maintain 
their own QHP filing timing.
    Response: Section 1311(c)(6)(B) of the Affordable Care Act 
specifically directs the Secretary to provide for annual open 
enrollment periods, as determined by the Secretary for calendar years 
after the initial open enrollment period. We have determined that 
permitting multiple annual open enrollment periods that differ by State 
will be confusing for consumers and create additional burdens on 
issuers to meet variable deadlines for QHP certification, re-
certification, and rate-setting. Therefore, we are finalizing this rule 
with a uniform annual open enrollment period across all Exchanges for 
the 2016 benefit year.
    Comment: One commenter requested that when the end of annual open 
enrollment falls on a weekend (Saturday or Sunday) or a Federal 
holiday, it should extend to the next business day.
    Response: While we understand the concern raised by this comment, 
we believe the value of establishing set dates for the annual open 
enrollment period outweigh it. We anticipate that it will be easiest 
for all stakeholders, particularly consumers, to remember and implement 
annual open enrollment processes based on a standard set of dates from 
year to year.
    Comment: One commenter requested that HHS commit to publishing more 
enrollment data and analyze it to maximize enrollment.
    Response: HHS has published weekly enrollment reports for the 37 
States using HealthCare.gov during the 2015 annual open enrollment 
period. We intend to continue to gather and analyze information to 
improve our processes over the course of future annual open enrollment 
periods.
c. Special Enrollment Periods (Sec.  155.420)
    In Sec.  155.420, we proposed certain provisions relating to 
special enrollment periods. We proposed to revise paragraphs (b)(2)(i), 
(b)(2)(ii), (b)(2)(iv), and add paragraphs (b)(2)(v), (b)(2)(vi), and 
(b)(2)(vii), which pertain to effective dates for special enrollment 
periods; to amend paragraphs (c)(2)(i) and (c)(2)(ii), which pertain to 
availability and length of special enrollment periods, and to revise 
paragraphs (d)(1)(ii), (d)(1)(v), (d)(2), (d)(4), and remove paragraph 
(d)(10), which pertain to specific types of special enrollment periods. 
We also proposed to delete the option for consumers to choose a 
coverage effective date of the first of the month following the birth, 
adoption, placement for adoption or placement in foster care and to 
permit the Exchange to allow a qualified individual or enrollee to 
elect a regular coverage effective date in accordance with paragraph 
(b)(1) of this section.
    We proposed to amend paragraph (b)(2)(iv) to allow persons who make 
a permanent move as described in paragraph (d)(7) to have a coverage 
effective date of the first day of the month following the move if plan 
selection is made before or on the day of the loss of coverage and, 
effective January 1, 2016, allow consumers advanced access to the 
special enrollment period where a qualified individual or enrollee, or 
his or her dependent, gains access to new QHPs due to a permanent move 
under paragraph (d)(7).
    In addition, we proposed to add new paragraphs (b)(2)(v) and 
(b)(2)(vi), which pertain to effective dates for coverage that must be 
obtained under court orders, including child support orders, and the 
death of an enrollee or his or her dependent. In paragraph (b)(2)(v), 
we proposed to require an Exchange to make coverage effective the first 
day the court order is effective to minimize any gap in coverage the 
individual may experience and allow Exchanges to provide consumers with 
a choice for regular effective dates under paragraph (b)(1). In 
paragraph (b)(2)(vi), we proposed to require that an Exchange ensure 
coverage is effective the first day of the month following a death of 
the enrollee or his or her dependent, and at the option of the Exchange 
and the consumer, allow for regular effective dates under paragraph 
(b)(1) of this section.
    We proposed to combine paragraphs (c)(2)(i) and (c)(2)(ii) to a new 
paragraph (c)(2) to simplify the regulatory text. In addition, we 
proposed to allow

[[Page 10797]]

consumers to report a permanent move 60 days in advance of the move for 
the purposes of receiving special enrollment period to reduce the 
likelihood of a gap in coverage. We proposed that this change would 
take effect on January 1, 2016.
    We proposed to amend paragraph (d)(1)(ii) so that this special 
enrollment period is available for a qualified individual or his or her 
dependent who, in any year, has coverage under a group health plan or 
an individual plan with a plan or policy year that is not offered on a 
calendar year basis. We proposed to add paragraph (d)(2)(i) to include 
situations where a court order requires a qualified individual to cover 
a dependent or other person. We also proposed to add paragraph 
(d)(2)(ii) to allow enrollees who experience a loss of a dependent or 
lose dependent status through legal separation, divorce, or death to be 
determined eligible for a special enrollment period. We proposed to 
amend paragraph (d)(4), to include situations where a non-Exchange 
entity is providing enrollment assistance. Concurrently, we proposed to 
strike paragraph (d)(10) which provides a separate special enrollment 
period for non-Exchange entity misconduct.
    We proposed to add paragraph (d)(6)(iv) to create a special 
enrollment period for a qualified individual in a non-Medicaid 
expansion State who was previously ineligible for advance payments of 
the premium tax credit solely because the qualified individual had a 
household income below 100 percent of the FPL, who was ineligible for 
Medicaid during that same timeframe, and experienced a change in 
household income that made the individual newly eligible for advance 
payments of the premium tax credit.
    We also sought comments on other situations that may warrant a 
special enrollment period, particularly situations specific to the 
initial years in which consumers have an opportunity to purchase 
coverage through an Exchange.
    We are finalizing paragraph (b)(2)(i) with a minor modification. 
Specifically, we are retaining the option of the Exchange to allow 
consumers to elect a coverage effective date of the first of the month 
following a birth, adoption, placement for adoption, or placement in 
foster care or on the date of the birth, adoption, placement for 
adoption, or placement in foster care. These options are in addition to 
the option for regular effective dates in paragraph (b)(1) of this 
section as proposed. We are amending paragraph (b)(2)(iv) to allow 
these persons to have a coverage effective date of the first day of the 
month following the move if plan selection is made before or on the day 
of the move. We are adding paragraph (b)(2)(v) to make coverage 
effective the first day of the court order and to allow Exchanges to 
provide consumers with a choice for a regular effective date, in 
accordance with paragraph (b)(1). We are adding paragraph (b)(2)(vi) to 
require Exchanges to ensure coverage is effective the first day of the 
month following the date of plan selection due to a death of the 
enrollee or his or her dependent and to allow Exchanges to provide 
consumer with a choice for a regular effective date, as specified in 
paragraph (b)(1). The proposed paragraph (b)(2)(vi) incorrectly 
referenced paragraph (d)(2)(iv), which was changed to correctly 
reference paragraph (d)(2)(ii) for loss of a dependent or dependent 
status. Additionally, we corrected paragraph (b)(2)(vi) to state that 
coverage will be effective following the date of plan selection, 
instead of following the date of death.
    We are combining paragraphs (c)(2)(i) and (c)(2)(ii) to a new 
paragraph (c)(2), and, in paragraph (c)(2), we are also adding a 
reference in this paragraph to individuals who receive a special 
enrollment period under paragraph (d)(7) to allow these consumers to 
report a permanent move 60 days in advance of the move for the purposes 
of receiving a special enrollment period to reduce the likelihood of a 
gap in coverage. After consideration of comments received, persons who 
are eligible for a special enrollment period under paragraph (d)(7) 
will be able to exercise this flexibility effective January 1, 2017, or 
earlier at the option of the Exchange. In paragraph (c)(3), we are 
removing reference to paragraph (d)(10), which is now included in 
paragraph (d)(4).
    As proposed, in paragraph (d)(1)(ii), we are deleting the 
expiration date of 2014 for non-calendar year health insurance 
policies. We are adding paragraph (d)(2)(i), which includes when a 
qualified individual gains a dependent or becomes a dependent through 
marriage, birth, adoption, placement for adoption, placement in foster 
care, or through a child support or other court order. At the option of 
the Exchange, we are adding paragraph (d)(2)(ii) for where an enrollee 
loses a dependent or is no longer considered a dependent through 
divorce or legal separation, as defined by State law. Paragraph (d)(4) 
is amended to include situations where a non-Exchange entity is 
providing enrollment assistance. Concurrently, we proposed to strike 
paragraph (d)(10) which provides a separate special enrollment period 
for non-Exchange entity misconduct. We are adding paragraph (d)(6)(iv) 
to include qualified individuals in non-Medicaid expansion States who 
were previously ineligible for advance payments of premium tax credits 
solely because the individual had household income under 100 percent of 
the FPL, who was ineligible for Medicaid during that same timeframe, 
and experiences a change in household income to become eligible for 
advance payments of the premium tax credit.
    Comment: Commenters were divided in their responses to the proposed 
changes to coverage effective dates for special enrollment periods 
resulting from birth, adoption, placement for adoption, and placement 
in foster care, as proposed in paragraph (b)(2)(i) of this section. 
Some commenters expressed concern about the potential gap in coverage 
if a parent were to elect a prospective coverage effective date for the 
child, while others expressed concern regarding our proposal to remove 
the option for coverage to be effective the first day of the month 
following the triggering event. We also received comments in support of 
our proposal to increase flexibility for electing a coverage effective 
date that best fits the family's needs.
    Response: Current regulations require Exchanges to ensure coverage 
is effective retroactive to the date of birth, adoption, placement for 
adoption, or placement in foster care and allow Exchanges the option to 
provide prospective coverage effective dates to the first of the month 
following the triggering event. We agree with commenters emphasizing 
the importance of coverage effective dates that best fit the needs of a 
family. Accordingly, we are finalizing the addition of a new option for 
coverage to be effective following regular effective dates, as 
proposed, and are not removing the option for coverage to be effective 
the first of the month following a birth, adoption, placement for 
adoption, or placement in foster care. If the Exchange allows for 
prospective coverage effective dates, it would be at the option of the 
consumer to elect this date or to elect the retroactive coverage 
effective date back to the date of birth, adoption, placement for 
adoption, or placement in foster care.
    Comment: Several commenters urged HHS to clarify the proposed 
changes to the special enrollment period for a permanent move, 
including specifying that consumers must submit proof of a change of 
address and providing clarification that changes to the special 
enrollment period for a permanent move

[[Page 10798]]

includes individuals who are being released from incarceration. There 
was also a request to amend the proposed implementation effective date 
for this special enrollment period, which was set for January 1, 2016.
    Response: Exchanges must verify residency information as outlined 
in Sec.  155.315(d) to make an eligibility determination, which 
includes a determination of eligibility for enrollment periods, per 
Sec.  155.305(b). As noted in the preamble to Exchange Establishment 
Rule, 77 FR 18310 (March 27, 2012), qualified individuals newly 
released from incarceration are eligible for the special enrollment 
period afforded to individuals who gain access to a new qualified 
health plan as a result of a permanent move. Therefore, under the rule 
being finalized, incarcerated individuals would be able to report a 
permanent move up to 60 days in advance of their release from 
incarceration, once a formal release date has been set. Recognizing 
that Exchanges may need more time than previously afforded in the 
proposed rule to implement this special enrollment period, it will be 
effective January 1, 2017. Exchanges are encouraged to implement as 
soon as possible.
    Comment: Several commenters requested HHS provide authority for 
additional triggering events for special enrollment periods. Some 
commenters requested that pregnancy trigger a special enrollment 
period, so that women who are either not enrolled or are enrolled in a 
catastrophic plan can select and enroll in or change qualified health 
plan coverage prior to the birth of a newborn. Other commenters 
requested that, when an individual reports that he or she is a victim 
of domestic abuse, it triggers a special enrollment period, so that he 
or she may select and enroll in a qualified health plan on a separate 
application from his or her abuser, along with any dependents.
    Response: We are not finalizing additional triggering events based 
on life changes at this time. Specifically, flexibility afforded under 
Sec.  155.420(d)(9) allows the Secretary to provide for additional 
special enrollment periods in the case of exceptional circumstances, as 
determined appropriate, and HHS will continue to exercise that 
authority through sub regulatory guidance. Furthermore, a State may 
establish additional special enrollment periods to supplement those 
described in this section as long as they are more consumer protective 
than those contained in this section and otherwise comply with 
applicable laws and regulations.
    Comment: We received comments both in support of, and opposed to, 
changes to coverage effective dates for the newly proposed special 
enrollment period for court orders, including a child support order at 
Sec.  155.420(b)(2)(v). Some commenters supported increased flexibility 
for consumers to elect a retroactive coverage effective date back to 
the day of the court order, while other commenters requested that 
changes always be made effective the first of the month following the 
court order.
    Response: Based on comments received, we believe that it is most 
consistent to treat consumers who gain a dependent, regardless of the 
means, in an equitable manner. In addition, a court order may be 
effective in the middle of a month and requiring the individual to wait 
until the first of the following month to enroll in coverage may 
violate State law. Accordingly, we are finalizing the rule as proposed 
whereby the effective date for the special enrollment period for a 
court order will be effective in accordance with paragraph (b)(2)(i) of 
this section.
    Comment: We received comments that requested changes to coverage 
effective dates for the newly proposed special enrollment period for 
losing a dependent as a result of death at Sec.  155.420(b)(2)(vi). 
Some commenters requested coverage be effective retroactive to the date 
of death, others supported the proposed regulatory text to provide 
coverage effective the first day of the month following the death, 
while other commenters requested that HHS limit the number of 
situations which will allow for retroactivity. Some commenters also 
requested that all family members, regardless of whether they are part 
of the enrollment group or are enrolled in a qualified health plan 
through the Exchange, receive a special enrollment period. Another 
commenter requested that no special enrollment period be given for 
death as other special enrollment periods likely apply.
    Response: In response to comments, we believe it makes sense to 
limit the number of situations that will allow for retroactivity, we 
have modified the proposed regulatory text to finalize the coverage 
effective date as the first day of the month following the date of plan 
selection, rather than the date of death. Providing a coverage 
effective date of the first of the month following the date of death 
would give the consumer retroactivity if they are reporting the death 
late in the special enrollment period window. We believe this balances 
the need to provide dependents of the deceased a special enrollment 
period, while addressing requests from commenters to limit the middle 
of the month and retroactive coverage effective dates. In addition, we 
encourage issuers to maintain qualified health plan coverage for 
remaining members of the enrollment group through the end of the month. 
The special enrollment period as a result of a death is intended for 
remaining enrollees on an application whose health insurance coverage 
is impacted due to the death; therefore, only the affected members will 
be provided a special enrollment period. As noted by commenters, non-
enrollees may be determined eligible for other special enrollment 
periods including that for loss of coverage.
    Comment: Commenters supported the proposed language which provided 
for a special enrollment period for individuals enrolled in non-
calendar year group health plans or individual health insurance 
coverage. One commenter requested clarification that this would also 
apply to group health plans outside of the Exchange.
    Response: We are finalizing this policy as proposed. We note that, 
as specified in the proposed rule, this policy provides a special 
enrollment period inside the Exchange for individuals whose coverage in 
group health plans and individual market plans offered outside of the 
Exchange is expiring, including grandfathered and transitional plans. 
Under Sec.  147.104, this special enrollment period also applies to 
individuals who seek to enroll in individual market coverage off the 
Exchange.
    Comment: Commenters requested that HHS provide additional 
clarification and flexibility for the special enrollment period for 
loss of a dependent or dependent status due to legal separation, 
divorce, or death. Comments included requests to extend this special 
enrollment period to individuals not currently enrolled in a qualified 
health plan, to include same sex couples who enter into a legally 
recognized relationship other than marriage, such as domestic 
partnerships and civil unions, and to provide Exchanges increased 
flexibility for implementation.
    Response: We believe the text provides flexibility for consumers to 
be determined eligible for the special enrollment period if the 
separation or termination of a civil union or domestic partnership is 
in accordance with State law. In addition, we note that consumers not 
currently enrolled in a qualified health plan who experience one of the 
life events described in this provision may be determined eligible for 
a special enrollment period in

[[Page 10799]]

accordance with existing special enrollment period provisions, 
specifically loss of coverage. Recognizing that Exchanges may need more 
time to implement the necessary functional IT changes, we are making 
paragraph (d)(2)(ii) effective January 1, 2017. Exchanges are 
encouraged to implement the policy as soon as possible.
    Comment: Several commenters requested that the special enrollment 
period provided in paragraph (d)(8) of this section be extended to 
include the dependents of Indians to allow them to change enrollment in 
a qualified health plan once per month.
    Response: An Indian as provided under section 4(d) of the Indian 
Self-Determination and Education Assistance Act (ISDEAA) and section 4 
of the Indian Health Care Improvement Act (IHCIA) is defined as an 
individual who is a member of an Indian tribe. Both ISDEAA and IHCIA 
have nearly identical language that refers to a number of Indian 
entities that are included in this definition on the basis that they 
are recognized as eligible for the special programs and services 
provide by the United States to Indians because of their status as 
Indians. As such, the statute specifically provides the special 
enrollment period defined in paragraph (d)(8) of this section as 
applying to the individual who is eligible for special programs and 
services because of their status as an Indian, and not their 
dependents.
    Comment: We received many comments in response to our proposal to 
extend a special enrollment period to individuals below 100 percent of 
the FPL in non-Medicaid expansion States that later become eligible for 
advance payments of the premium tax credit at Sec.  155.420(d)(6)(iv). 
A few commenters asked for HHS to clarify that an individual would be 
eligible for the special enrollment period if he or she experienced a 
change in household composition or size, in addition to a change in 
household income, and one commenter requested that change in household 
income required a change in percentage of the FPL.
    Response: We are finalizing this policy as proposed. We note that 
for purposes of determining eligibility for this special enrollment 
period, an individual's percentage of the FPL is a function of 
household income, composition and size; therefore, individuals who gain 
eligibility because of a change in income or a change in household 
composition will be eligible for this special enrollment period.
    Comment: Several commenters requested that HHS include additional 
special enrollment periods pertaining to provider networks, 
specifically when a consumer enrolls in a qualified health plan with an 
inaccurate provider directory, enrolls in a plan which changes their 
health plan's provider or pharmacy networks mid-year, or enrolls in a 
plan with no in-network providers within a 25 mile radius of the 
consumer.
    Response: We acknowledge the need for consumers to have access to 
correct information about their QHPs and participating providers and 
pharmacies, and have promulgated provisions pertaining to the 
maintenance and dissemination of provider and pharmacy directories in 
this rule. However, provider and pharmacy network participation changes 
frequently. Therefore, determining who would be eligible for the type 
of special enrollment period suggested by commenters would require that 
issuers report to the Exchange whenever provider and pharmacy network 
participation changes and that the Exchange notify consumers 
potentially impacted by such changes. As such, we are not making 
changes in response to these comments, and note that consumers may be 
determined eligible for the special enrollment period provided in 
paragraph (d)(5) of this section if an issuer substantially violates 
their contract with the enrollee.
    Comment: We received comments that requested the length of the 
special enrollment period for loss of coverage provided in paragraph 
(d)(1) of this section be shortened from 120 days to 30 or 60 days, to 
reduce the administrative burden on the Exchange and issuer to enroll 
the consumer in retroactive coverage.
    Response: We note that the special enrollment period for loss of 
coverage, as provided in paragraph (c)(2) of this section, is 60 days. 
We clarify that, while an individual has 60 days before and after the 
loss of coverage to select a qualified health plan through the 
Marketplace, the coverage generally may not be effective until the 
first day of the month following the loss of coverage in accordance 
with paragraph (b)(2)(iv) of this section. Both the advanced 
availability of this special enrollment period and its duration are 
intended to minimize the likelihood that an individual will experience 
a significant gap in coverage.
    Comment: We received comments requesting that Exchanges provide 
health insurance companies with the specific reason for a special 
enrollment period so that the health insurance company may determine 
during the benefit year if a change to a policy is a result of a 
special enrollment period or a modification to an existing policy.
    Response: HHS has issued technical guidance, including the Standard 
Companion Guide Version 1.5 (issued March 22, 2013), which provides 
Exchanges with the information necessary to build the ability to send 
the reason for Special Enrollment Periods on the enrollment 
transaction. The FFEs also use a casework system to provide insurance 
companies with the type of special enrollment period being provided to 
a consumer.
    Comment: A commenter requested that HHS reduce the number of 
special enrollment periods other than qualifying life events.
    Response: We believe that the current special enrollment periods 
requirements appropriately account for changes in circumstances that 
necessitate when individuals would need to select a new or different 
qualified health plan and balance these needs with the administrative 
burdens of enrollment changes for issuers.
    Comment: A commenter requested that all special enrollment periods 
be available both through the Exchange, and individual and small group 
market plans.
    Response: We note that in accordance with Sec.  147.104(b)(2) 
health insurance issuers in the individual market must provide a 
limited open enrollment period for the special enrollment periods 
provided in paragraph (d) of this section, with the exclusion of 
paragraphs (3), (8), and (9).
    Comment: We received general support for the proposed changes to 
include non-Exchange entities in the special enrollment period where 
enrollment or non-enrollment in a qualified health plan through the 
Marketplace is a result of the error of the Exchange. Commenters noted 
concern regarding the subjectivity of defining an error of the Exchange 
and requested CMS outline the specific scenarios which would warrant 
such a special enrollment period.
    Response: We believe the flexibility for Exchanges to determine 
when a special enrollment period is warranted due to an error of the 
Exchange protects consumers. HHS has issued guidance and will continue 
to issue guidance, as needed, related to how Exchanges define errors of 
the Exchange in accordance with paragraph (d)(4) of this section.
    Comment: We received a comment that HHS provide clarification that 
the existing special enrollment period available for loss of minimum 
essential coverage (MEC) at paragraph (d)(1)(i) should not be triggered 
when a

[[Page 10800]]

consumer's policy ends at the end of the benefit year because 
guaranteed renewability prevents the consumer from losing their 
coverage.
    Response: We do not think the recommended clarification is 
necessary. The existing language in the final rule specifies that the 
date of the loss of coverage is the last day the consumer would have 
coverage under his or her previous plan is sufficient. We also note the 
availability of the special enrollment period in Sec.  
155.420(d)(1)(ii) for consumers in individual market plans with non-
calendar year plan years.
d. Termination of Exchange Enrollment or Coverage (Sec.  155.430)
    Under our current rules, Sec.  155.430(b)(1) requires an Exchange 
to permit an enrollee to terminate his or her coverage in a qualified 
health plan (QHP) following appropriate notice to the Exchange or the 
QHP. We proposed to amend this paragraph by adding a sentence to 
clarify that, to the extent the enrollee has the right to cancel the 
coverage under applicable State laws, including ``free look'' 
cancellation laws--that is, laws permitting cancellation within a 
certain period of time, even following effectuation of the enrollment, 
the enrollee may do so, in accordance with the requirements of such 
laws. Furthermore, we proposed to amend Sec.  155.430(d)(2) to add a 
new paragraph (d)(2)(v) allowing a retroactive termination effective 
date when an enrollee initiates the termination, if specified by 
applicable State laws, such as ``free look'' provisions.
    Additionally, we proposed to amend Sec.  155.430(b)(1) by removing 
the language requiring the appropriate notice to the Exchange or QHP 
since the notice requirement is addressed in Sec.  155.430(d) and this 
would give greater flexibility for other enrollee initiated 
terminations where appropriate notice is not defined.
    We also proposed to explicitly state that the requirement for 
Exchanges to ensure appropriate actions are taken in connection with 
retroactive terminations, currently set forth in paragraph (d)(6) 
regarding special enrollment periods, applies to all retroactive 
terminations, including valid cancellations of coverage under a ``free 
look'' law. To do so, we proposed to move the applicable language to a 
new paragraph (d)(8). We also proposed to add reconciliation of 
Exchange user fees to the list of items Exchanges would need to 
address. Under that requirement, the Exchange will ensure that 
appropriate actions are taken to make necessary adjustments to advance 
payments of the premium tax credit, cost-sharing reductions, Exchange 
user fees, premiums, and claims, while adhering to any State law. We 
noted that, under our proposal, the enrollee would not become eligible 
to receive a special enrollment period as a direct result of the ``free 
look'' cancellation.
    We also proposed to add a new paragraph (b)(1)(iii) which would 
require Exchanges to establish processes for a third party to report 
the death of a consumer.
    We noted that we interpret market-wide guaranteed availability and 
renewability requirements to mean that a QHP offered through the 
Exchange must generally be available and renewable outside the 
Exchange. We proposed to make changes to Exchange regulations that 
could be construed to limit coverage in a QHP to coverage through the 
Exchange. For example, we proposed to amend Exchange regulations 
referencing ``termination of coverage'' so that they appropriately 
refer to termination of enrollment through the Exchange and not 
necessarily termination of the coverage altogether.
    We are finalizing the provisions proposed in Sec.  155.430 of the 
proposed rule, with a minor modification. We are revising Sec.  
155.430(b)(1)(i) to specify that an enrollee has a right to terminate, 
and not just cancel coverage according to any applicable State law. 
Cancellation is a specific type of termination and, as further 
explained below, we want to accommodate State laws that provide for 
termination, not just cancellation. We also corrected a typographical 
error in Sec.  155.430(b)(1)(iii). We also make conforming revisions to 
Sec. Sec.  155.430, 155.735, 156.270, 156.285 and 156.290 of the 
Exchange and SHOP regulations to align them with our interpretation of 
the guaranteed availability and guaranteed renewability requirements, 
changing references to ``coverage'' to now also refer to ``enrollment 
through the Exchange,'' ``enrollment through the SHOP,'' or 
``enrollment,'' as applicable.
    Comment: Commenters, mainly issuers, opposed allowing termination 
of coverage after the coverage effective date, citing an increase in 
administrative costs and a potential to create a less healthy risk 
pool; many consumer advocates and the NAIC supported the free-look 
proposal. Other commenters stated that HHS should not establish 
specific requirements related to free look periods, but should 
explicitly state that issuers should continue to adhere to existing 
State laws for Exchange enrollees.
    Response: Our intent in the proposed rule was to accommodate State 
laws that provided consumer protections such as ``free look'' 
provisions, to give consumers in States with such laws the right to 
terminate coverage in accordance with those laws. Therefore, the intent 
of the regulation is to ensure that issuers adhere to existing State 
laws for Exchange enrollees, not to create new Federal laws. Thus, this 
change should not increase the burden on issuers. To make sure that we 
do not unintentionally limit the applicability of these types of laws, 
we are finalizing Sec.  155.430(b)(1)(i) to use the word ``terminate'' 
in place of ``cancel,'' specifying that the enrollee has the right to 
terminate their coverage under any applicable State laws.
    Comment: Some commenters were concerned with the cost and burden of 
correcting financial information for retroactive terminations, and the 
uncertainty of payment for services as a result of retroactive 
terminations.
    Response: We acknowledge that retroactive terminations may cause 
some administrative burden for correcting financial information. 
However, there are scenarios that currently exist in the Exchange that 
result in retroactive terminations. Furthermore, it remains necessary 
that the enrollment group pay the correct amounts for a given policy as 
already codified in Sec.  155.430(d)(6). We note issuers and providers 
should continue to follow existing policies when dealing with 
retroactive terminations. Therefore, we are finalizing Sec.  
155.430(d)(8) to ensure that appropriate actions are taken to make 
necessary adjustments to advance payments of the premium tax credit, 
cost-sharing reductions, Exchange user fees, premiums, and claims, 
while to adhering to State law.
    Comment: We received several comments urging that an SEP be given 
to consumers who exercise their free-look provision outside of open 
enrollment. These commenters suggested that the unavailability of an 
SEP significantly undercuts the value of the free-look provision.
    Response: Granting an SEP for an individual exercising a 
retroactive termination under State law could result in multiple 
successive enrollments and terminations pursuant to a free look law, 
which we believe would create unwarranted burden on issuers and 
providers.
    Comment: Several commenters asked us to clarify that the protection 
outlined in Sec.  155.430 applies in States with ``free look laws.'' 
One commenter recommended that the protection apply more widely, 
including for States that have policies related to termination of 
coverage, like ``free look provisions,''

[[Page 10801]]

that may not be law but that are otherwise enforceable by the State. 
Another commenter expressed concern on deferring to State laws because 
of the resulting variance in applicable standards. The commenter 
recommended establishing Federal standards and allowing States the 
option to establish more protective standards.
    Response: Our intent was to clarify that consumers in States with 
such laws have the right to terminate coverage in accordance with those 
laws. We do not intend to create Federal standards that give consumers 
additional reasons to terminate coverage. For States that have policies 
related to termination of coverage, like ``free look provisions,'' that 
may not be law but that are otherwise enforceable by the State, issuers 
must adhere to such policy as enforced by the State. Accordingly, we 
are finalizing Sec.  155.430(b)(1)(i) to specify that the enrollee has 
the right to terminate their coverage under applicable State laws.
    Comment: We received a comment recommending that HHS reflect 
retroactive termination dates on 834s and include termination reason 
codes.
    Response: The 834s currently include the effective date of the 
termination as well as a high-level maintenance reason (INS04) and an 
additional maintenance reason indicating that the transaction is a 
termination or cancellation. We are working on future functionality to 
indicate more specific additional maintenance reasons for terminations 
and cancellations.
    Comment: Commenters generally supported the proposed provisions 
that require Exchanges to establish a process for a third party to 
report the death of a qualified health plan enrollee. One commenter 
requested clarification regarding whether the report of death may be 
made to the issuer or the Exchange.
    Response: We are finalizing this provision as proposed, and clarify 
that Exchanges have flexibility to establish a process for reporting 
the death of an enrollee. For instance, in the Federally-facilitated 
Exchange, the reporting of a death of an enrollee is initiated with the 
Exchange.
    Comment: One commenter requested that an individual's agent or 
broker be able to report their client's death to the Exchange to 
initiate a termination of their coverage.
    Response: An individual's agent or broker may report their client's 
death to the Exchange in accordance with the process established by the 
Exchange. Depending on the Exchange-specific procedures, the agent or 
broker may be required to submit documentation proving the death of the 
individual.
    Comment: We received several comments on our proposal to conform 
the Exchange regulations with our interpretation of the guaranteed 
availability and renewability requirements. Many commenters supported 
the proposal. One commenter was concerned about Exchanges' ability to 
distinguish circumstances warranting termination of Exchange enrollment 
from circumstances warranting full termination of coverage. Another 
commenter was concerned about issuers' ability to seamlessly continue 
coverage of terminated Exchange enrollees outside the Exchange and 
recommended that HHS delay finalizing the proposal until its 
operational feasibility could be assessed.
    Response: Loss of eligibility for enrollment in a QHP through the 
Exchange is not necessarily a basis for non-renewal or termination of 
an individual's or employer's coverage in the market outside the 
Exchange. Therefore, we make conforming amendments in this final rule 
to the following sections of the Exchange and SHOP rules: Sec. Sec.  
155.430, 155.735, 156.270, 156.285 and 156.290. These amendments are 
intended to more clearly distinguish termination of enrollment through 
the Exchange from termination of coverage with the issuer. Termination 
of coverage is governed by the guaranteed renewability provisions in 
section 2703 of the PHS Act and Sec.  147.106. Therefore, Sec.  
156.270(a) is further amended to include to a cross-reference to Sec.  
147.106 to clarify when and how an issuer may terminate coverage under 
applicable law. We also made a conforming amendment in Sec.  
155.430(b)(2)(vi) clarifying that any of the exceptions to guaranteed 
renewability that would permit an issuer to terminate an enrollee's 
coverage also could be a basis for terminating enrollment through the 
Exchange.
    We acknowledge the operational concerns of commenters, but note 
that these revisions are simply technical clarifications to eliminate 
potential conflict with the requirements that currently apply to 
issuers under sections 2702 and 2703 of the PHS Act. Furthermore, it is 
anticipated that, in most situations involving termination by the 
Exchange, such as decertification of the QHP or non-payment of premium, 
the issuer will know the reason for the termination. When the issuer 
knows the reason for Exchange termination and it is not a basis for 
non-renewal or termination of the enrollee's coverage, the issuer 
generally must continue the coverage outside the Exchange, at the 
option of the enrollee, in order to satisfy the issuer's 
responsibilities under the guaranteed renewability requirements, unless 
an exception applies. When the issuer does not know the reason for 
termination of an enrollee's Exchange enrollment, the issuer should 
continue the enrollee's coverage outside the Exchange if approached by 
the enrollee to do so, unless following investigation, the reason for 
the termination will permit the issuer to terminate the coverage.
5. Exchange Functions in the Individual Market: Eligibility 
Determinations for Exemptions
a. Eligibility Standards for Exemptions (Sec.  155.605)
    In Sec.  155.605, we proposed amendments to two hardship exemptions 
and a correction to a cross-reference. First, we proposed to amend 
Sec.  155.605(g)(3) to permit an individual with gross income below the 
filing threshold and who is not a dependent of another taxpayer to 
qualify for a hardship exemption through the tax filing process and 
without having to obtain an exemption certificate number (ECN) from the 
Exchange. Second, we proposed amending Sec.  155.605(g)(6)(i) to 
correct the citation to 42 CFR 447.50 by changing it to 42 CFR 447.51, 
which cross-references the Medicaid definition for Indian. Third, we 
proposed new paragraph Sec.  155.605(g)(6)(iii) to align the exemption 
process for those individuals who are eligible for services through the 
Indian Health Service (IHS), a Tribal health facility, or an Urban 
Indian organization (collectively, ITU) with the process available to 
members of Federally-recognized Tribes. Specifically, the proposed 
amendment will provide individuals who are eligible for services 
through an ITU to claim an exemption on their Federal income tax return 
without obtaining an ECN.
    We are finalizing the provisions as proposed.
    Comment: Comments on this provision supported the proposed changes. 
We received a few comments noting that, despite this additional avenue 
to receive an exemption, some American Indians/Alaskan Natives (AI/ANs) 
who qualify for a recurring ECN may continue to prefer the Exchange 
exemption process rather than claiming an exemption annually through 
the Federal tax-filing process. For this reason, these commenters 
encouraged CMS to retain and improve the Exchange exemption application 
process.

[[Page 10802]]

    Response: We remain committed to improving the Exchange exemptions 
process. We note that the Exchange exemptions process remains available 
to AI/ANs under Sec.  155.605(f) and (g)(6)(i).
b. Required Contribution Percentage (Sec.  155.605)
    Under section 5000A of the Code, an individual must have minimum 
essential coverage for each month, qualify for an exemption, or make a 
shared responsibility payment with his or her Federal income tax 
return. Section 5000A of the Code and section 1311(d)(4)(H) of the 
Affordable Care Act authorizes the Secretary to determine individuals' 
eligibility for exemptions, including the hardship exemption. Under 
section 5000A(e)(1) of the Code, an individual is exempt if the amount 
that he or she would be required to pay for minimum essential coverage 
(required contribution) exceeds a particular percentage (the required 
contribution percentage) of his or her actual household income for a 
taxable year. In addition, under Sec.  155.605(g)(2) an individual is 
exempt if his or her required contribution exceeds the required 
contribution percentage of his or her projected household income for a 
year. Finally, under Sec.  155.605(g)(5), certain employed individuals 
are exempt if, on an individual basis, the cost of self-only coverage 
is less than the required contribution percentage but the aggregate 
cost of self-only coverage through employers exceeds the required 
contribution percentage and no family coverage is available through an 
employer at a cost less than the required contribution percentage.
    The required contribution percentage for 2014 is 8 percent under 
section 5000A(e)(1)(A) of the Code. Section 5000A(e)(1)(D) of the Code 
and 26 CFR 1.5000A-3(e)(2)(ii) provide that for plan years after 2014, 
the required contribution percentage is the percentage determined by 
the Secretary that reflects the excess of the rate of premium growth 
between the preceding calendar year and 2013, over the rate of income 
growth for that period. In the 2015 Market Standards Rule, we 
established a method for determining the excess of the rate of premium 
growth over the rate of income growth each year, and published the 2015 
rate. We stated that future adjustments would be published annually in 
the HHS notice of benefit and payment parameters.
    Under the method previously established, the rate of premium growth 
over the rate of income growth for 2016 is the quotient of (x), which 
is equal to one plus the rate of premium growth between the preceding 
year (in this case, 2015), and 2013, carried out to ten significant 
digits, divided by (y), which is equal to one plus the rate of income 
growth between the preceding year (2015), and 2013, carried out to ten 
significant digits.\42\ The result of this calculation is carried out 
to ten significant digits and multiplied by the required contribution 
percentage specified in section 5000A(e)(1)(A) of the Code (8.00 
percent). The result is then rounded to the nearest hundredth of a 
percent, to yield the required contribution percentage for 2016.
---------------------------------------------------------------------------

    \42\ We defined premium growth for this measure as the same 
annually adjusted measure of premium growth used below in this rule 
to establish the annual maximum and reduced maximum limitations on 
cost sharing for plan benefit designs. That is, the premium 
adjustment percentage.
---------------------------------------------------------------------------

    Under the methodology described above, the total rate of premium 
growth for the 2-year period from 2013-2015 is 1.0831604752, or 8.3 
percent. We describe the methodology for obtaining this number below in 
Sec.  156.130(e). In the 2015 Market Standards rule, we also 
established a methodology for calculating the rate of income growth for 
the purpose of calculating the annual adjustment to the required 
contribution percentage.
    The measure of income growth is based on projections of per capita 
Gross Domestic Product (GDP) used for the National Health Expenditure 
Accounts (NHEA), which is calculated by the CMS Office of the Actuary. 
Accordingly, using the NHEA data, the rate of income growth for 2016 is 
the percentage (if any) by which the most recent projection of per 
capita GDP for the preceding calendar year ($56,660 for 2015) exceeds 
the per capita GDP for 2013, ($53,186), carried out to ten significant 
digits. The total rate of income growth for the 2-year period from 
2013-2015 is estimated to be 1.0653179408 or 6.5 percent. We note that 
the 2013 per capita GDP used for this calculation has been updated to 
reflect the latest NHEA data.
    Thus, the excess of the rate of premium growth over the rate of 
income growth for 2013-2015 is 1.0831604752/1.0653179408, or 
1.0167485534, or 1.7 percent. This results in a required contribution 
percentage for 2016 of 8.00*1.0167485534, or 8.13 percent, when rounded 
to the nearest one-hundredth of one percent.
    We received no comments on the calculation of the required 
contribution percentage and are therefore finalizing the percentage as 
proposed.
6. Exchange Functions: Small Business Health Options Program (SHOP)
a. Standards for the Establishment of a SHOP (Sec.  155.700)
    We proposed to amend Sec.  155.700(b) such that the previous 
definition of ``group participation rule'' would conform with the 
terminology we proposed to use in Sec.  155.705(b)(10). Specifically, 
we proposed to modify the term to refer to a ``group participation 
rate,'' which is a minimum percentage of all eligible individuals or 
employees of an employer that must be enrolled.
    We received no comments on this proposal and we are finalizing this 
amendment as proposed.
b. Functions of a SHOP (Sec.  155.705)
    In Sec.  155.705, we proposed to redesignate paragraph 
(b)(4)(ii)(B) as new paragraph (b)(4)(ii)(C), redesignate paragraph 
(b)(4)(ii)(A) as new paragraph (b)(4)(ii)(B), add new paragraph 
(b)(4)(ii)(A), and amend paragraphs (b)(4)(i)(B), (b)(7), and (b)(10).
    In the proposed amendment to paragraph (b)(4)(i)(B) and proposed 
new paragraph (b)(4)(ii)(A), we proposed to permit the SHOP to assist a 
qualified employer in the administration of continuation coverage in 
which former employees seek to enroll through the SHOP. We proposed 
that where a qualified employer is offering Federal or State 
continuation coverage,\43\ and where a SHOP has entered into an 
agreement with a qualified employer to provide this service, the SHOP 
may assist the employer in administration of such coverage by billing 
for and collecting premiums for the continuation coverage directly from 
the covered employee or qualified beneficiary, rather than the 
employer, if the qualified employer elects to have the SHOP carry out 
this function. We sought comment on the interaction of the FF-SHOP's 
payment grace periods and termination policies at Sec.  155.735 with 
the COBRA rules the IRS has codified at 26 CFR part 54. We are 
finalizing the proposed changes to Sec.  155.705(b) with a modification 
to clarify that individuals other than former employees might be 
enrolled in continuation coverage through a SHOP, and we are also 
amending Sec.  155.735 to better align the SHOP rules with the IRS's 
COBRA rules in light of the comments discussed below.
---------------------------------------------------------------------------

    \43\ 29 U.S.C. 1161, et seq. (``COBRA'') or applicable State 
law.
---------------------------------------------------------------------------

    We considered whether the FF-SHOP should accept premium payment 
using a credit card. Currently, qualified employers participating in 
the FF-

[[Page 10803]]

SHOP may only pay premiums to the FF-SHOP using a check or bank draft. 
We sought comment on the extent to which employers would use this 
option. Some commenters stated that it may be more convenient for a 
small employer to pay by credit card than by check or bank draft. 
However, in light of the comments discussed below, HHS does not intend 
to take action on this policy at this time.
    We also proposed to revise paragraph (b)(7) to align the SHOP 
regulations with the Protecting Access to Medicare Act of 2014 (Pub. L. 
113-93), which repealed requirements related to deductible maximums for 
employer-sponsored coverage at section 1302(c)(2) of the Affordable 
Care Act. This proposal would remove the only reference in the SHOP 
regulations to the requirements of Affordable Care Act section 
1302(c)(2). We did not receive any comments on the proposed revisions 
to paragraph (b)(7) of this section and are finalizing this proposal as 
proposed.
    In paragraph (b)(10), we proposed to modify the calculation of 
minimum participation rates in the SHOP. We proposed that a SHOP 
(either a State-based or an FF-SHOP) that elects to establish a minimum 
participation rate would be required to establish a single, uniform 
rate that applies to all groups and issuers in the SHOP, rather than 
establishing general rules about minimum participation rates or a 
threshold over which the minimum percentage may not be raised. We also 
proposed that if a SHOP authorizes a minimum participation rate, such a 
rate would have to be based on the rate of employee participation in 
the SHOP and in coverage through another group health plan, 
governmental coverage (such as Medicare, Medicaid or TRICARE), coverage 
sold through the individual market, or in other minimum essential 
coverage, and not on the rate of employee participation in any 
particular QHP or QHPs of any particular issuer. We proposed that 
State-based SHOPs would be expected to conform to the proposal by its 
effective date.
    In paragraph (b)(10)(i), we proposed to amend existing language 
about employees accepting coverage under the employer's group health 
plan to instead refer to employees accepting coverage offered by a 
qualified employer to better account for employee choice.
    We also proposed to amend paragraph (b)(10)(i) regarding how the 
minimum participation rate would be calculated in the FF-SHOP. We 
proposed to calculate the minimum participation rate in the FF-SHOP as 
the number of full-time employees accepting coverage offered by the 
qualified employer through the SHOP plus the number of full-time 
employees who are enrolled in coverage through another group health 
plan, in governmental coverage (such as Medicare, Medicaid or TRICARE), 
in coverage sold through the individual market, or in other minimum 
essential coverage, divided by the number of full-time employees 
offered coverage through the SHOP.
    We sought comment on whether this definition of which employees 
would be included in the calculation should be extended beyond the SHOP 
to the entire small group market to create uniformity among issuer 
practices and prevent further gaming by issuers through their use of 
non-standard definitions for other acceptable coverage.
    We are finalizing the proposed amendments to paragraph (b)(10) with 
modifications. We are modifying the proposed amendments to the language 
following (b)(10); adding the amendments we proposed at paragraph 
(b)(10)(i) at a new paragraph (b)(10)(ii); amending current paragraph 
(b)(10)(i) to reflect that it will remain in effect for plan years 
beginning prior to January 1, 2016; and redesignating paragraph 
(b)(10)(ii) as (b)(10)(iii) and making a minor conforming amendment to 
that paragraph to reflect the addition of new paragraph (b)(10)(ii). 
The modifications clarify that the amendments to the minimum 
participation rate calculation methodology requiring counting of 
employees accepting coverage offered by the qualified employer through 
the SHOP, and counting of employees enrolled in coverage through 
another group health plan, in governmental coverage (such as Medicare, 
Medicaid, or TRICARE), in coverage sold through the individual market, 
or in other minimum essential coverage, will apply only to the FF-SHOP, 
effective for plan years beginning on or after January 1, 2016. For 
plan years beginning prior to January 1, 2016, the FF-SHOP will apply 
the methodology at current (b)(10)(i). We are also modifying paragraph 
(b)(10)(i) to explain that former employees would be excluded from the 
calculation of minimum participation rates in the FF-SHOP under the 
methodology that will remain in effect for plan years beginning prior 
to January 1, 2016, to ensure that the same methodology currently being 
used will continue to be used after the modification to the definition 
of qualified employee in this rule takes effect. State-based SHOPs and 
small group markets outside of the Exchanges are not expected to 
conform to the amended calculation methodology.
    Comment: Several commenters supported the proposal that would 
permit a SHOP to bill for and collect premiums for COBRA. One commenter 
disagreed with the policy. One commenter requested that HHS preserve 
the flexibility proposed for SHOPs to determine whether they wish to 
offer this service.
    Many commenters requested that HHS align SHOP rules with applicable 
COBRA standards and work with the applicable agencies to ensure 
clarity. These commenters expressed concern that a lack of harmony 
between the SHOP rules, COBRA standards, and requirements from other 
Federal agencies would lead to confusion. One commenter requested HHS 
specify which IRS rules are applicable.
    Response: As we indicated in the preamble to the proposed rule, the 
IRS has promulgated rules regarding the administration of COBRA 
continuation coverage at 26 CFR 54.4980B, et seq. Our SHOP regulations 
do not affect or narrow an individual's existing substantive and 
procedural rights under COBRA or other Federal agencies' rules 
interpreting COBRA. To harmonize existing SHOP rules regarding 
terminations of coverage with the IRS's COBRA rules at Sec.  54.4980B-
8, we are adding paragraphs (c)(2)(iv) and (c)(3) to Sec.  155.735 in 
this final rule. Paragraph (c)(2)(iv) is necessary because, in cases 
other than COBRA continuation coverage, the FF-SHOP does not provide an 
additional grace period for payments less than the total premium amount 
due for a group's cost of coverage. Paragraph (c)(3) is necessary to 
specify that the section does not modify existing obligations under 26 
CFR 54.4980B.
    To further align with existing COBRA requirements, including COBRA 
eligibility for dependents and former dependents, we are modifying the 
language of paragraph (b)(4)(ii)(A) of Sec.  155.705 to permit the 
collection of such premiums from any person enrolled in continuation 
coverage through the SHOP consistent with applicable law and the terms 
of the group health plan. For improved clarity, we are also replacing 
the reference in proposed Sec.  155.705(b)(4)(ii)(A) to ``Federally 
mandated continuation coverage'' with a reference to continuation 
coverage required under 29 U.S.C. 1161, et seq.
    Comment: One commenter stated that SHOPs should also administer 
required notices that relate to continuation of coverage.
    Response: HHS continues to examine the feasibility of expanding 
SHOP's flexibility to support additional COBRA

[[Page 10804]]

administration functions, including COBRA notification requirements. 
Significant modifications may be necessary to existing SHOP rules to 
ensure conformity with existing IRS rules if a SHOP were to fully 
administer COBRA on behalf of an employer. Therefore, HHS does not 
intend to take action on this policy at this time.
    Comment: Some commenters stated that both a State-based SHOP's and 
a FF-SHOP's implementation of continuation coverage administration 
should extend to State-mandated continuation coverage. Some commenters 
expressed concern that limiting FF-SHOP continuation coverage support 
to COBRA may cause confusion among small employers regarding 
responsibility for continuation coverage requirements. Another 
commenter requested relief from existing SHOP payment rules requiring 
the flow of funds through the SHOP where a SHOP fails to provide 
payment support for continuation coverage.
    Response: The finalized language does not require SHOPs to limit 
this service to the collection of premiums related to Federal 
continuation coverage. Both State-based SHOPs and the FF-SHOP may elect 
to collect payments related to State-required continuation coverage 
sold through the SHOP on behalf of small employers.
    We continue to examine applicable State law to determine the 
feasibility of the FF-SHOP providing this service for both State and 
Federal continuation coverage. Variation in State continuation coverage 
laws would add substantial complexity to the FF-SHOP's implementation 
of premium collection for State continuation coverage. Therefore, the 
FF-SHOP may more quickly provide relief to small employers by first 
supporting COBRA continuation coverage administration while HHS 
determines how it may best support State-mandated continuation 
coverage.
    HHS continues to believe that the flow of funds through the SHOP 
best supports the administration of employee choice and therefore is 
not modifying existing requirements related to the flow of funds 
through the SHOP.
    Comment: One commenter sought clarification on how continuation 
coverage would be operationalized, including whether 820 and 834 
transactions will identify members covered under continuation coverage.
    Response: HHS recognizes that QHP issuers will need substantially 
more detailed information to effectively integrate with a SHOP 
facilitating continuation coverage. If the FF-SHOP implements 
administration of premiums for continuation coverage, HHS intends to 
issue further guidance.
    Comment: We received several comments about whether the FF-SHOP 
should accept premium payments made with a credit card. Several 
commenters were in favor of this idea. However, these commenters also 
noted that HHS should consider the benefits of this option against the 
costs that will be incurred with this additional functionality. Some 
commenters opposed accepting premium payments through a credit card and 
were particularly concerned about the fees associated with the use of a 
credit card. Some commenters recommended that the credit card fee 
should be included as part of the user fee that HHS is already 
collecting, while other commenters stated that the credit card fee 
should be borne by the FF-SHOP and not issuers. One commenter noted 
that the cost of the credit card fee will add to the cost of coverage 
for consumers and may impact the calculation of the Medical Loss Ratio 
if it is considered an administrative cost payable by an issuer. One 
commenter believed that the use of credit cards to make premium 
payments should not be limited to the initial payment, and instead 
should be used for recurring payments.
    Response: HHS will continue to consider whether there is a cost-
effective way to permit employers to pay premiums through the SHOP with 
a credit card. HHS does not intend to take action on this policy at 
this time.
    Comment: We received one comment on our proposed amendments to the 
SHOP rules about the minimum participation rate in Sec.  
155.705(b)(10), asking whether issuers may maintain varying 
participation requirements based on group size if this policy is 
finalized to extend to the small group market outside the SHOP. We also 
received comments on the proposed calculation methodology for 
calculating the minimum participation rate. Some commenters supported 
our proposal and some believed that our proposed methodology will 
weaken the ability of the FF-SHOP to protect against adverse selection 
and is not considered common market practice. One commenter recommended 
not including individuals with coverage in the individual market 
Exchanges because it undercuts employer-based coverage. One commenter 
stated that minimum participation rates are a barrier to coverage for 
businesses.
    While we received some comments supporting the extension of our 
proposed policy to the entire small group market, several commenters 
opposed such an extension, including State-based SHOPs. One commenter 
opposed our proposal because SHOP issuers are protected by programs 
that issuers not participating in the SHOP are not protected by, such 
as the risk corridors program. Several of these commenters stated that 
the off-Exchange market should use a methodology that works best for 
their market and State, and that it should be up to the State to 
establish how to calculate the minimum participation rate inside and 
outside of the Exchanges.
    In addition to these comments, we received queries on how HHS would 
verify the coverage of individuals included in the calculation of the 
minimum participation rate. Several commenters also asked for details 
on the one-month exception period for minimum participation rates.
    Response: We are finalizing a policy under which a SHOP (either a 
State-based SHOP or an FF-SHOP) that elects to establish a minimum 
participation rate would be required to establish a single, uniform 
rate that applies to all groups and issuers in the SHOP, rather than 
establishing general rules about minimum participation rates or a 
threshold over which the minimum percentage may not be raised. Under 
the methodology we have finalized for calculating a minimum 
participation rate, a SHOP cannot vary its minimum participation rate 
based on the employer group size. In the final rule, we are modifying 
the proposal to give State-based SHOPs the flexibility to establish a 
different minimum participation rate calculation methodology than the 
one being finalized for the FF-SHOP, but State-based SHOPs must 
continue to base the rate on employee participation in the SHOP or in 
the SHOP and other coverage (as in the FF-SHOP), and may not base the 
rate on employee participation in a particular QHP or QHPs of any 
particular issuer. We believe that providing State-based SHOPs with 
this flexibility will allow States to set a calculation methodology 
that aligns with their current market practice. We are also finalizing 
our proposal on the calculation of the minimum participation rate in 
the FF-SHOP and who is included in the methodology, but are modifying 
the proposal to specify that the new FF-SHOP calculation methodology 
will take effect only for plan years beginning on or after January 1, 
2016. For plan years beginning before January 1, 2016, the calculation 
methodology currently in place for the FF-SHOP will remain in effect.
    We note that consistent with current Sec.  155.705(b)(10)(ii) 
(which is

[[Page 10805]]

redesignated at Sec.  155.705(b)(10)(iii) in this rule), the FF-SHOP 
may establish a different minimum participation rate in a State if 
there is evidence that a State law sets a different minimum 
participation rate or that a higher or lower minimum participation rate 
is customarily used by the majority of QHP issuers in the State for 
products in the State's small group market outside the SHOP. HHS 
considered various minimum participation rate calculation 
methodologies, and believes that the calculation methodology we are 
finalizing for the FF-SHOP aligns with current practice in many States' 
small group markets. The difficulty of verifying other coverage exists 
today in the market and is not exacerbated by this rule. Additionally, 
HHS believes that using this approach to calculating minimum 
participation rates reduces unnecessary barriers for employer groups 
seeking to cover their employees because the calculation includes 
individuals with other forms of coverage, thus making it easier for 
employer groups to reach the required minimum participation rate. By 
including in the calculation individuals with individual market 
coverage, we believe this methodology does not undercut employer-based 
coverage, but rather treats employers fairly. Under the approach taken 
in the final rule to accommodate for State-specific policies, State-
based SHOPs may use a calculation methodology that aligns with current 
market practice in their State, and that works best for their market 
and State, and are therefore not required to follow the same 
calculation methodology as will apply in the FF-SHOPs.
    The final rule does not modify or eliminate the one-month period 
between November 15 and December 15 of each year, during which employer 
groups may enroll in coverage notwithstanding any employer contribution 
or group participation rules under Sec.  147.104(b)(1)(i)(B). Thus, 
SHOPs may not apply the minimum participation rate to prevent initial 
enrollments and renewals that occur during this one-month period.
    We do not believe the proposed modification to calculation of the 
FF-SHOP minimum participation rate will result in significant adverse 
selection. In some States in which the FF-SHOP currently operates, its 
minimum participation rate is more restrictive on enrollment than the 
rate currently generally applied by issuers in the market. The proposed 
modifications to the FF-SHOP's minimum participation rate will align 
the calculation of the rate with current practices in these States by 
including other sources of coverage in the calculation. We acknowledge 
that this change will make the FF-SHOP's minimum participation rate 
more inclusive than minimum participation rates in the market in some 
other States. However, under current law, no group may be excluded from 
the small group market altogether because it fails to meet a minimum 
participation rate. Any group may enroll during the annual month-long 
period under Sec.  147.104(b)(1)(B) during which no minimum 
participation rate can be applied to deny coverage. Further, the new 
methodology for the participation rate calculation is only more 
permissive in that it lets in groups with additional sources of other 
coverage. There is no basis to suggest that such a group represents 
worse than average risk.
c. Eligibility Standards for SHOP (Sec.  155.710)
    In Sec.  155.710, we proposed to amend paragraph (e) to specify 
that where an employer has offered dependent coverage, a qualified 
employee would be eligible to enroll his or her dependents in coverage 
through the SHOP.
    We received a comment supporting our proposal. We are finalizing 
our amendment as proposed.
d. Enrollment of Employees Into QHPs Under SHOP (Sec.  155.720 and 
Sec.  156.285)
    In Sec.  155.720, we proposed to remove paragraph (b)(7),which 
requires all SHOPs to establish effective dates for employee coverage 
in the SHOP, and to make minor conforming changes to the list structure 
in paragraph (b). Current Sec.  155.720(b)(7) is redundant in light of 
the proposed requirements to establish effective dates under Sec.  
155.725, which we are finalizing as proposed.
    We received no comments on these proposed amendments. We are 
finalizing the amendments as proposed.
    We proposed to amend paragraph (e), which provides that issuers 
must notify SHOP consumers regarding coverage effective dates so that 
the provision would refer to enrollees and not qualified employees, and 
proposed to remove a reference in this section to Sec.  156.260(b), in 
keeping with the proposed amendments to Sec.  155.725 regarding 
coverage effective dates. Under the proposal, issuers would be required 
to provide this notice to anyone who enrolled in coverage through the 
SHOP under the proposed amendments to the definitions of qualified 
employee and enrollee, including dependents (including a new dependent 
of the employee, when the dependent separately joins the plan), former 
employees of a qualified employer, and certain business owners. We 
noted that the notices required under this proposal could be 
incorporated into existing notifications that QHPs provide to their new 
customers, for example in a welcome document. We also proposed a 
conforming amendment to Sec.  156.285(c) to ensure that QHP issuers 
participating in the SHOP would provide notice to a new enrollee of the 
enrollee's effective date of coverage.
    We are finalizing the provisions with the modifications noted 
below.
    Comment: We received several comments on our proposed amendments to 
effective date notices pursuant to Sec.  155.720(e). Some commenters 
supported continuing to require issuers to send the required notices, 
while others stated that the notice requirement should be shifted to 
the SHOP. We also received comments on expanding the notice requirement 
to the amended definition of an enrollee, which includes dependents. 
Some commenters stated that notices regarding the coverage effective 
date should only be provided to qualified employees and adult 
dependents. Some commenters stated that these notices should be 
provided separately to dependents of qualified employees if the last 
known address for the dependent is different from the subscriber. We 
also received one comment requesting additional time and flexibility 
for issuers to implement the notice requirement for dependents under 
the new definition of an enrollee.
    Response: We agree that generally, when a dependent lives with the 
qualified employee, separate notification to the dependent is 
duplicative. As such, we are modifying the proposal to specify that 
when a primary subscriber and his or her dependents live at the same 
address, a separate notice need not be sent to each dependent at that 
address, so long as the notice sent to each primary subscriber at that 
address contains all the required information about the coverage 
effective date for the primary subscriber and each of his or her 
dependents at that address. We note that when dependents live at a 
different address from the primary subscriber a separate notice must be 
sent to those dependents.
    Amending the definition of an enrollee and amending Sec.  
155.720(e) to require notice to enrollees will create additional notice 
obligations for issuers. To permit issuers to update their systems and 
fulfill this requirement, we will provide issuers until plan years 
beginning on or after January 1, 2017 to fulfill the requirement of 
sending

[[Page 10806]]

effective date notices to enrollees other than qualified employees. 
Because issuers have already been providing these notices to qualified 
employees under the current rule, we do not believe the inclusion of 
former employees that is being finalized in this rulemaking presents 
similar system challenges. Thus, issuers will be required to send the 
notices to everyone who meets the new definition of qualified employee 
as soon as this rule takes effect. We are providing an additional year 
only for issuers to begin providing notice to enrollees other than 
qualified employees.
    We are also making minor changes to the wording of the proposed 
requirement at 156.285(c)(3), so that the final rule refers to a 
requirement to ``notify'' new enrollees, rather than to ``provide'' 
them ``with notice.''
e. Enrollment Periods Under SHOP (Sec.  155.725 and Sec.  156.285)
    We proposed to amend paragraphs (a), (g), (h), and (j)(5) of Sec.  
155.725 and Sec.  156.285(b)(1) and (b)(4) to provide clarity regarding 
the effective dates for coverage that all SHOP Exchanges must 
establish. First, we proposed to remove the reference at current Sec.  
155.725(a)(1) to the start of the initial open enrollment period for 
2014 coverage, and the reference in current Sec.  155.725(a)(2) to 
Sec.  156.260. We proposed to remove the reference to effective dates 
under Sec.  156.260 because we are proposing to specify effective dates 
in Sec.  155.725 or to more directly cross-reference the appropriate 
effective date. Second, we proposed to amend Sec.  155.725(h) so that 
SHOPs would need only establish effective dates for employees enrolling 
in coverage during the initial group enrollment and the employee annual 
open enrollment period, rather than for special enrollment periods. At 
proposed paragraph (h)(2), we also codified the effective dates for 
coverage in the FF-SHOP for enrollments during initial and annual open 
enrollment periods. Specifically, we proposed to include language in 
the SHOP regulations specifying the same effective dates that were 
previously adopted for the FF-SHOP under our interpretation of the 
cross reference in Sec.  156.285(b)(4) to Sec.  156.260, which in turn 
cross-references Sec.  155.410(c). We noted that the dates set forth in 
Sec.  155.725(h)(2) would apply only to the FF-SHOP and State-based 
SHOPs would be free to establish their own effective dates for initial 
and annual open enrollment.
    Third, we proposed several amendments to paragraph Sec.  155.725(g) 
regarding enrollment for newly qualified employees. A newly qualified 
employee is an employee who becomes eligible to participate in the 
employer's group health plan outside of a qualified employer's initial 
or annual enrollment period; for example, because he or she was hired 
outside of those periods. We proposed to move paragraph (g) to 
paragraph (g)(1), and proposed amendments to the existing language to 
make explicit our interpretation of current paragraph (g), which is 
that a newly qualified employee becomes eligible for an enrollment 
period that begins on the first day of becoming a newly qualified 
employee regardless of whether the employee is subject to a waiting 
period. Additionally, we proposed that the duration of a newly 
qualified employee's enrollment period be at least 30 days. Where the 
employee is subject to a waiting period in excess of 45 days, we 
proposed that the duration of the employee's enrollment period extend 
until 15 days before what would be the conclusion of the waiting period 
if the employee selected a plan on the first day of becoming eligible. 
We noted that if an employee waits to choose a plan until the end of 
such an extended enrollment period, this could have the effect of 
further delaying the effective date of coverage, consistent with Sec.  
147.116(a). We also proposed to add a new paragraph (g)(2) in Sec.  
155.725 to provide that the effective date for a newly hired employee 
would be determined using the same rule for initial and open 
enrollments that would be established by the SHOP under proposed Sec.  
155.725(h). Thus, in the FF-SHOP, coverage effective dates for newly 
qualified employees would be established according to Sec.  
155.725(h)(2): Plan selections made between the first and the fifteenth 
day of any month would be effective the first day of the following 
month, and plan selections made between the 16th and the last day of 
any month would be effective the first day of the second following 
month. A newly qualified employee may also be subject to a waiting 
period under Sec.  147.116, however, and in such cases, the effective 
date may be on the first day of a month that is later than the month in 
which coverage would take effect under the usual rules established by 
the SHOP under Sec.  155.725(h). However, in no case could the 
effective date fail to comply with the limitations on waiting period 
durations at Sec.  147.116 of this subchapter.
    Fourth, we proposed to amend paragraph Sec.  155.725(j)(5) to make 
it clearer that the effective dates for special enrollment periods in 
the SHOP should be determined according to Sec.  155.420(b).
    Fifth, we proposed to harmonize Sec.  156.285(b)(1) and (4) with 
the proposed amendments to effective dates described above, to specify 
that QHP issuers must abide by the effective dates established under 
Sec.  155.725, and must enroll qualified employees in accordance with 
the qualified employer's initial and annual enrollment periods in Sec.  
155.725.
    We also proposed to amend Sec.  155.725(b) to harmonize rolling 
enrollment in the SHOP with the regulations applicable to guaranteed 
availability in States with merged individual and small group markets. 
Section 147.104(f), as moved from Sec.  147.104(b)(2) by this rule, 
requires that all individual and small group health insurance coverage 
sold in a State with merged individual and small group risk pools be 
offered on a calendar year basis, meaning that it must end on December 
31 of the year in which the policy was issued. Section 155.725(b), in 
contrast, requires that SHOPs permit qualified employers to purchase 
coverage for a small group at any point throughout the calendar year, 
and that SHOPs ensure that a participating group's plan year lasts for 
12 months beginning with the first effective date of coverage. Section 
155.725(b) was intended to ensure that qualified employers can offer 
health insurance through the SHOP at any point during the year while 
receiving a guaranteed rate 12 months following the purchase of 
coverage, consistent with the current practice in the small group 
market. We proposed to harmonize these two provisions in States with 
merged markets, by proposing that SHOP plan years in a State with 
merged risk pools would terminate on December 31st of the year in which 
they began, even if certain qualified employers' plan years would thus 
be shorter than 12 months. This proposal would not affect a small 
employer's ability to enroll in coverage at any point in the year. 
Instead, it would standardize the renewal date of such a plan in a 
State with merged risk pools at the beginning of each calendar year.
    We also proposed to modify paragraph (i) to permit a SHOP to elect 
to renew a qualified employer's offer of coverage where the employer 
has taken no action during its annual election period to modify or 
withdraw the prior year's offer of coverage. The qualified employer's 
offer would not be automatically renewed under this proposal if the 
employer is no longer eligible to participate in the SHOP. Renewal of 
the coverage offer would

[[Page 10807]]

also not be automatic if the employer is offering a single QHP and that 
QHP will no longer be available through the SHOP. We proposed this 
modification at the request of State-based SHOPs that desire to conform 
to existing small group market practice regarding automatic annual 
renewal of coverage for an employer group. A SHOP would not be required 
to implement this rule.
    Finally, we proposed to add paragraph (k) to make clear that SHOP 
coverage may not be effectuated if the policy may not be issued to the 
employer because the group fails to meet an applicable minimum 
participation rate calculated at the time of initial group enrollment 
or renewal, subject to Sec.  147.104(b)(1)(i)(B).
    We did not receive comments on the proposed amendments to Sec.  
156.285(b)(1) and (4), and are finalizing them as proposed. We are also 
finalizing the provisions under Sec.  155.725 as proposed.
    Comment: We received one comment on establishing effective dates 
for employees enrolling in coverage during the initial group enrollment 
and the annual open enrollment period. The commenter supported our 
proposed provision because it establishes flexibility for State-based 
SHOPs to establish their own effective dates during the initial and 
annual open enrollment periods, including mid-month effective dates. 
Commenters supported the proposed provision to keep effective dates for 
special enrollment periods standardized. Some commenters supported the 
proposed provision to ensure effective dates for special enrollment 
periods are consistent with Sec.  155.420(b). One commenter opposed the 
effective dates for special enrollment periods under Sec.  155.725(j) 
and recommended allowing States flexibility to prescribe their own 
effective dates for initial, annual, and special enrollment periods, 
because there may be other implications to the effectuation of coverage 
for employees and dependents with a special enrollment period.
    Response: We are finalizing the provisions as proposed. We believe 
that the proposed amendments allow flexibility for State-based SHOPs to 
set and maintain effective dates for initial and annual open enrollment 
periods to accommodate coverage effective dates for a group as soon as 
possible under local market conditions. Coverage effective dates for 
initial and annual open enrollment periods for the FF-SHOP will be 
finalized as proposed to create a uniform enrollment timeline. We 
continue to believe that the effective dates for special enrollment 
periods should be standardized for all SHOPs to ensure a minimum 
standard for special enrollment periods. We note that pursuant to Sec.  
155.420, SHOPs have existing authority to set earlier effective dates 
for certain special enrollment periods.
    Comment: We received several comments on the timeline for an 
employee to select a SHOP plan as it relates to employee waiting 
periods. Some commenters supported our proposed policy on employee 
enrollment periods and waiting period rules. One commenter noted that a 
scenario could arise where an employee would need to select a SHOP plan 
on a timeline that does not align with the waiting period.
    Response: We are finalizing our provision as proposed. SHOPs should 
ensure that an employee waiting period does not exceed the duration 
permitted under Sec.  147.116. State-based SHOPs may continue to set 
their own rules regarding enrollment timelines for newly qualified 
employees so long as such rules comply with Sec.  147.116.
    Comment: We received comments supporting the proposed enrollment 
process for newly qualified employees. These commenters stated the 
process provides sufficient time for employees to select a plan. One 
commenter stated that an employee election period of more than 30 days 
may cause confusion to consumers and may cause significant IT 
modifications for issuers.
    Response: We are finalizing the provision as proposed. We note that 
while the rule sets a 30-day minimum for a newly qualified employee's 
enrollment period, it does not require a SHOP to provide an enrollment 
period in excess of 30 days to newly qualified employees. A longer 
enrollment period might, however, be mandated by State law or permitted 
under the terms of the plan. Because this rule provides only for a 
minimum length, which already constitutes common market practice, 
finalizing this rule is not expected to cause consumer confusion or 
necessitate IT modifications.
    Comment: We received several comments on our proposed policies to 
harmonize our provision on rolling enrollment in a merged market. We 
received a comment supporting rolling enrollment in States with a 
merged market. Some commenters stated they believed our proposed 
policies would be disruptive to States with merged markets. One 
commenter asked HHS to develop a more targeted set of policy solutions 
to address the specific issues associated with enrollment timelines in 
States with merged markets. One commenter asked HHS to clarify whether 
States with markets that are merged only for purposes of State law, but 
not Federal law, are subject to these proposed rules.
    Response: We are finalizing our provision as proposed. We continue 
to believe that rolling enrollment in States with merged markets 
provides employers an opportunity to offer health insurance through the 
SHOP at any point during the year, pursuant to our policies on 
guaranteed availability. We are not limiting small employer groups in 
States with a merged market to the individual market enrollment periods 
or otherwise prohibiting them from seeking coverage at any point during 
the year. However, to align with the requirements to offer plans in the 
merged market on a calendar year basis pursuant to Sec.  147.104(f), as 
moved from Sec.  147.104(b)(2) by this rule, SHOP coverage with a plan 
year starting at any time during the year would have the plan year end 
on December 31 and renew effective January 1 of the following year. 
Rolling enrollment in the SHOP, as it aligns with this policy, would 
allow for plan years shorter than 12 months. For coverage that has an 
effective date after January 1, a 12-month plan year would not align 
with the requirement for coverage to be offered on a calendar year 
basis, and is therefore not permitted in States with merged markets. We 
note that the additional language finalized in this rule at Sec.  
155.725(b) is only applicable in States that have merged their markets 
under section 1312(c)(3) of the Affordable Care Act. This language does 
not apply in States with markets that are not considered to be merged 
for purposes of Federal law.
    Comment: Several commenters supported the proposal permitting 
automatic renewal of employers' offers of coverage. One commenter asked 
HHS to specify what it means to become ineligible for SHOP coverage and 
to specify whether an employer may be eligible for automatic renewal if 
the employer group falls below one non-owner full-time equivalent 
employee. We also received a comment asking HHS to specify if States 
may renew an employer's coverage if the employer's Employee 
Identification Number (EIN) changes provided that the employer retains 
the same legal identity. We also received a comment opposing automatic 
renewals and requests that HHS streamline processes to allow employer 
groups to quickly update only necessary information for a more 
simplified re-enrollment process. It was also recommended that agents 
and brokers be provided with an opt-in or opt-out choice for employees 
rather than an automatic renewal.

[[Page 10808]]

    Response: We are finalizing our provision as proposed. We do not 
believe that a streamlined process to allow employer groups to update 
information about their group is necessary because qualified employers 
are already required to update this information to the SHOP throughout 
the plan year. See Sec.  157.205(f). We believe our broad provision 
regarding SHOP coverage renewal will provide employer groups and their 
employees and enrollees an efficient way to renew and avoid any gaps in 
their coverage. Because not all groups work with an agent or broker, we 
believe that providing agents and brokers with an opt-in or opt-out 
choice for employees will not cover the universe of renewals that will 
occur.
    An employer is considered eligible to participate in the SHOP if it 
is a ``small employer'' as defined in Sec.  155.20 and if it meets the 
requirements set forth at Sec.  155.710(b). To qualify, employers must 
have at least one employee who is not the owner or the spouse of the 
owner.\44\ With one limited exception, if a group fails to meet any of 
these eligibility criteria, including if it no longer has at least one 
employee who is not the owner or the owner's spouse, it may not renew 
coverage through the SHOP. The limited exception applies, under Sec.  
155.710(d), to employers that cease to be small employers solely by 
reason of an increase in the number of employees, so long as they 
otherwise meet the eligibility criteria and continue to purchase 
coverage for qualified employees through the SHOP. For purposes of 
renewing coverage, if an employer's EIN changes, but it retains the 
same legal identity, then the group can renew their coverage as long as 
they continue being eligible for coverage, if permitted by applicable 
State law. HHS considers an employer to have the same legal identity if 
the group maintains all other identifiable information including the 
business ownership structure and State in which the business operates.
---------------------------------------------------------------------------

    \44\ See Exchange Establishment Rule, 77 FR 18310 at 18399.
---------------------------------------------------------------------------

    Comment: We received some comments related to the calculation of 
and enforcement of minimum participation rates, but we did not receive 
specific comments on the proposed policy at Sec.  155.725(k).
    Response: We are finalizing the provision as proposed, and note 
that applicable minimum participation rates are calculated and enforced 
at the time of initial group enrollment or renewal, subject to Sec.  
147.104(b)(1)(B).
f. Termination of SHOP Enrollment or Coverage (Sec.  155.735 and Sec.  
156.285)
    In Sec.  155.735, we proposed to amend paragraph (c)(2)(ii) to 
specify that in the FF-SHOP, a termination of coverage due to non-
payment of premiums would be effective on the last day of the month for 
which the FF-SHOP received full payment. Prior to this proposal, the 
effective date of such a termination was not specified in the rule. We 
are finalizing this policy as proposed.
    In paragraph (c)(2)(iii), we proposed to specify that, in the FF-
SHOP, a qualified employer whose coverage was terminated for non-
payment of premiums could be reinstated in its prior coverage only once 
per calendar year. We are finalizing this provision as proposed.
    Paragraphs (c)(2)(iv) and (c)(3) are added in light of comments 
related to COBRA continuation coverage, as discussed in the preamble 
discussion of Sec.  155.705.
    In paragraphs (d)(1)(iii) and (g) of Sec.  155.735 and in Sec.  
156.285(d)(1)(ii), we proposed to amend certain existing notice 
requirements by transferring them from QHP issuers to the SHOP. Under 
current Sec.  156.285(d)(1)(ii), a QHP issuer must notify an enrollee 
and a qualified employer if the enrollee or employer is terminated due 
to a loss of eligibility, due to a qualified employer's non-payment of 
premiums, due to a rescission of coverage for fraud or 
misrepresentation of material fact in accordance with Sec.  147.128, or 
because the QHP issuer elects not to seek recertification with the 
Exchange for its QHP. We proposed to transfer two of these notice 
requirements to the SHOP. At Sec.  155.735(g)(1), we proposed that the 
SHOP be required to provide notice to the enrollee if an enrollee is 
terminated due to non-payment of premium or a loss of eligibility for 
participation in the SHOP, including when an enrollee loses eligibility 
due to a qualified employer's loss of eligibility. We also proposed at 
Sec.  155.735(g)(2) that the SHOP be required to provide notice to 
qualified employers for termination due to nonpayment of premiums or 
where applicable, due to loss of the employer's eligibility. Proposed 
Sec.  155.735(g)(2) would apply to terminations for a reason other than 
the employer reporting information to the SHOP resulting in a loss of 
eligibility.
    Through the proposed amendments to the definition of ``enrollee'' 
discussed above, we also proposed to expand the class of people who 
would receive notices under the proposed amendments to Sec.  155.735 
and Sec.  156.285(d)(1)(ii). Additionally, we proposed that QHP issuers 
in the SHOP would continue to be required to provide notice to 
qualified employers and enrollees when an enrollee's coverage is 
terminated due to a rescission in accordance with Sec.  147.128, and 
when an enrollee's coverage is terminated due to an election by a QHP 
issuer not to seek recertification with the Exchange for its QHP. We 
proposed to amend Sec.  155.735(d)(1)(iii), which currently refers to 
terminations of SHOP coverage due to a QHP's termination or 
decertification, by adding a reference to terminations of SHOP coverage 
due to the non-renewal of a QHP's certification. By proposing to 
include a cross-reference to Sec.  155.735(d)(1)(iii) in Sec.  
156.285(d)(1)(ii), we also proposed to expand the notice a QHP issuer 
must provide regarding the discontinuation of a product in which a 
qualified employee is enrolled to include circumstances where the QHP 
is terminated or is decertified as described in Sec.  155.1080. We are 
finalizing the provisions with modifications noted below.
    We also proposed that each notice required under Sec.  155.735(g) 
and the proposed amendments to Sec.  156.285(d)(1)(ii) would have to be 
provided by the SHOP or QHP issuer promptly and without undue delay. We 
explained that we would consider an electronic notice that was sent no 
more than 24 hours after the SHOP or QHP issuer determined coverage was 
to be terminated to have been provided ``promptly and without undue 
delay.'' In the case of paper notices, we would consider notices that 
were mailed no later than 48 hours after the SHOP determined coverage 
was to be terminated to have been provided ``promptly and without undue 
delay.'' We have revisited these deadlines in light of comments 
received, and are finalizing the proposal with a modification to allow 
3 business days for electronic notices and 5 business days for mailed 
notices. New paragraph Sec.  155.735(g) and the corresponding 
amendments related to issuer notice requirements at Sec.  
156.285(d)(1)(ii) are effective on January 1, 2016.
    We are also finalizing amendments to Sec.  155.735 and Sec.  
156.285 to conform with our interpretation of the guaranteed 
availability and guaranteed renewability requirements. For a discussion 
of these revisions, please see the preamble for Sec.  155.430 in this 
final rule.
    Comment: We received several comments in support of HHS codifying 
the termination effective date for non-payment of premiums as the last 
day of the month for which the FF-SHOP received a full payment.

[[Page 10809]]

    Response: We are finalizing the provision as proposed regarding 
termination effective dates for the FF-SHOP due to non-payment of 
premiums.
    Comment: We received a comment recommending HHS provide a more 
``robust approach'' to reinstatements for a given employer. The 
commenter stated that costs resulting from those that fail to pay 
premiums on time are ultimately borne by other insurers. However, the 
commenter did not discuss any alternative approach. We also received a 
comment asking HHS to specify that this provision only applies to the 
FF-SHOP.
    Response: We are finalizing our provision as proposed to discourage 
employers from repeatedly failing to make timely payments in the FF-
SHOP. We note that to be reinstated, an employer must pay its premium 
in full and, generally, in order for new coverage to be effectuated, 
the FF-SHOP would require an employer to pay its first month's premium 
in full. Therefore, we do not believe that in this case, an employer's 
failure to make timely payments will impact another issuer. We note 
this policy, like all the policies set forth at Sec.  155.735(c)(2), 
only applies in the FF-SHOP. HHS is not regulating the number of 
reinstatements that State-based SHOPs may choose to enforce.
    Comment: We received several comments on the transfer of certain 
notice requirements from QHP issuers to the SHOP. Many commenters 
supported our proposed policies because the SHOP has better information 
regarding the timing of non-payment of premiums and why an enrollee or 
employer lost his or her eligibility. Some commenters stated that the 
notices should only be provided to qualified employees and adult 
dependents, while others stated that the notices should be provided to 
qualified employees and their dependents if the last known address for 
the dependent is different from the subscriber. Additionally, we also 
received a comment requesting HHS specify that the notice requirement 
also applies to SADP issuers. One commenter recommended employers that 
actively provide to the SHOP information which indicates a loss of 
eligibility also receive a notice. We received a comment stating 
issuers should not be required to send any notices of termination to 
individual employees as it is not common market practice.
    Response: We have modified the final notice requirement to specify 
that when a primary subscriber and his or her dependents live at the 
same address, a separate notice need not be sent to each dependent at 
that address, so long as the notice sent to each primary subscriber at 
that address contains all the required information about the 
termination for that primary subscriber and each of his or her 
dependents at that address. We note that when dependents live at a 
different address from the primary subscriber, a separate notice must 
be sent to those dependents. We note the broad language of the notice 
requirement applies to both medical and dental coverage sold through 
the SHOP. We do not believe a notice to the employer is necessary when 
an employer reports to the SHOP that it no longer meets the SHOP 
eligibility criteria. The SHOP eligibility criteria are sufficiently 
simple that we believe that under such circumstances the loss of 
eligibility would be self-evident to the employer.
    HHS believes that these notices of termination should be sent to 
all individual, qualified employees affected by the termination of 
coverage or enrollment. By communicating directly with qualified 
employees through a notice of termination, the SHOP or the issuer can 
provide more timely notice regarding termination of coverage or 
enrollment, allowing employers and enrollees to seek other coverage and 
reduce gaps in coverage.
    Comment: A commenter recommended that in a State that operates its 
own SHOP, the SHOP should provide the notice unless State law requires 
that the notice be provided by the issuer. We also received a comment 
requesting that sending these notices should be at the discretion of 
issuers so that issuers can communicate and maintain relationships that 
they have with employer groups and their enrollees.
    Response: We appreciate the commenters' concern regarding 
unnecessary duplication of notices. As such, we are finalizing the 
proposal with a modification that provides that if a State law requires 
such notices be provided by the issuer, then the SHOP is not required 
to also send these notices. In a State with no such law, if an issuer 
would like to send these notices to maintain its relationships with 
employer groups and enrollees, it may do so. But the fact that the 
issuer sent the notice would not exempt a SHOP from the notice 
requirement.
    Comment: We received a comment asking HHS to provide specific 
information on the required termination notices about how employer 
groups can maintain coverage or obtain other coverage, reinstatement 
rights and processes, how to reapply for coverage, and information 
about other coverage options.
    Response: When sending these notices in States with an FF-SHOP, HHS 
intends to provide additional information about how to avoid a gap in 
coverage and other coverage options. However, we do not believe that 
this content is necessary for the notice requirement to be met, and are 
therefore not requiring that it be included in the notices sent by all 
SHOPs and issuers.
    Comment: Some commenters support a SHOP sending termination notices 
to enrollees and employer groups ``promptly and without undue delay.'' 
However, one commenter requested flexibility to issuers to ensure 
notices are provided consistent with existing State criteria. We also 
received comments requesting that the standard for timing be broader, 
and recommending delivery of termination notices occur at least 30 days 
prior to the termination effective date, rather than timing the notice 
as proposed. One commenter recommended that HHS specify that the timing 
of sending notices be expressed in business days.
    Response: We recognize that the timeline described as a safe harbor 
in the preamble to the proposed rule might not give QHP issuers 
sufficient time to mail notices. We therefore are modifying the 
proposal to specify that SHOPs and issuers should send the required 
notices within 3 business days where notice is provided electronically 
and within 5 business days when hard copy notices are mailed.
    We are also making minor changes to the wording of the proposed 
requirements at Sec.  155.735(g) and at Sec.  156.285(d)(1)(ii), so 
that the final rule refers to a requirement to ``notify'' new 
enrollees, rather than to ``provide'' them ``with a notice.'' We are 
also finalizing new Sec.  155.735(g) and the amendments to Sec.  
156.285(d)(1)(ii) with an effective date of January 1, 2016.
7. Exchange Functions: Certification of Qualified Health Plans
a. Certification Standards for QHPs (Sec.  155.1000)
    In Sec.  155.1000, we proposed to add paragraph (d) to harmonize 
QHP certification with rolling enrollment in the SHOP. Under the 
proposal, where a SHOP certifies QHPs on a calendar year basis, a QHP's 
certification will be in effect for the duration of any employer's plan 
year that began in the calendar year for which the plan was certified.
    We are finalizing as proposed with the modification noted below.
    Comment: We received some comments supporting the proposed

[[Page 10810]]

policy for QHPs in SHOPs that certify QHPs on a calendar year basis to 
retain their certification for the duration of any employer's plan year 
that began in the calendar year for which the plan was certified. We 
also received one comment recommending that we specify that this 
proposed policy applies with the exception provided in Sec.  155.1080.
    Response: In light of comments received, we are amending the 
proposed language to specify that Sec.  155.1000(d) does not apply when 
there is a decertification by the Exchange of QHPs, pursuant to Sec.  
155.1080.
b. Recertification of QHPs (Sec.  155.1075)
    We are making a conforming amendment to align the date by which an 
Exchange must complete the QHP recertification process with the date 
finalized in this rule at Sec.  155.410(e)(2) for the beginning of the 
open enrollment period for the benefit year beginning on January 1, 
2016. In the Exchange Establishment Rule, we finalized Sec.  
155.1075(b) to state that the Exchange must complete the QHP 
recertification process on or before September 15 of the applicable 
calendar year. In that rule, we also finalized the open enrollment 
periods for years other than the 2014 benefit year as running from 
October 15 through December 7 of the preceding year (77 FR 18462). This 
gave Exchanges until 1 month before the beginning of the open 
enrollment period to complete the recertification process.
    In the proposed rule, we proposed that the beginning of the open 
enrollment period for the benefit year beginning on or after January 1, 
2016, would begin on October 1, 2015--approximately 2 weeks after the 
QHP recertification deadline. As discussed elsewhere in this final 
rule, we are finalizing an open enrollment period for coverage 
beginning in 2016 that would begin 1 month later, on November 1. To 
align the date by which an Exchange must complete recertification and 
the beginning of the open enrollment period in a manner that provides 
issuers, State regulators, and Exchanges additional time to complete 
the plan review and certification processes without placing any 
substantive burden on consumers, we are amending Sec.  155.1075(b) to 
require Exchanges to complete recertification of QHPs no later than 2 
weeks prior to the beginning of open enrollment.

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

1. General Provisions
a. Definitions (Sec.  156.20)
    In Sec.  156.20, we proposed that for purposes of part 156, the 
term ``plan'' have the meaning given the term in Sec.  144.103, as 
proposed to be amended in this rulemaking. Please refer to section 
III.A.1 for a discussion of the term ``plan,'' which is being finalized 
as proposed.
b. FFE User Fee for the 2016 Benefit Year (Sec.  156.50(c))
    Section 1311(d)(5)(A) of the Affordable Care Act contemplates an 
Exchange charging assessments or user fees to participating health 
insurance issuers to generate 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 Affordable Care Act 
directs HHS to operate an Exchange within the State. In addition, 31 
U.S.C. 9701 permits a Federal agency to establish a charge for a 
service provided by the agency. Accordingly, at Sec.  156.50(c), we 
specified that a participating issuer offering a plan through an FFE 
must remit a user fee to HHS each month that is 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 under the plan where 
enrollment is through an FFE.
    OMB Circular No. A-25 Revised (Circular No. A-25R) establishes 
Federal policy regarding user fees, and specifies that a user charge 
will be assessed against each identifiable recipient for special 
benefits derived from Federal activities beyond those received by the 
general public. As in benefit year 2015, issuers seeking to participate 
in an FFE in benefit year 2016 will receive two special benefits not 
available to the general public: (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. 
Activities performed by the Federal government that do not provide 
issuers participating in an FFE with a special benefit will not be 
covered by this user fee.
    Circular No. A-25R further states that user charges should 
generally be set at a level so that they are sufficient to recover the 
full cost to the Federal government of providing the service when the 
government is acting in its capacity as sovereign (as is the case when 
HHS operates an FFE). We proposed to set the 2016 user fee rate for all 
participating issuers at 3.5 percent of the monthly premium charged by 
the issuer. This rate is the same as the 2015 user fee rate. We are 
finalizing the 2016 user fee rate as proposed. Circular No. A-25R 
allows for exceptions to this policy, with OMB approval. An exception 
was in place for establishing the 2015 user fee rate. To ensure that 
FFEs can support many of the goals of the Affordable Care Act, we 
received an exception to this policy again for 2016.
    Comment: We received one comment on the underlying structure of the 
FFE user fee, recommending that HHS establish broad-based financing for 
FFEs, such as an assessment on all health care industry entities. If 
the existing fee structure is kept, the commenter stated that it should 
be paid by consumers and small employers that purchase coverage through 
an FFE. The commenter also stated that the user fee should not be set 
as a percent of premium, as the cost to run an Exchange is not related 
to the cost of coverage.
    Response: We will continue to assess the FFE user fee as a percent 
of the monthly premium charged by issuers participating in an FFE. In 
accordance with Circular No. A-25R, issuers are charged the user fee in 
exchange for receiving special benefits beyond those that accrue to the 
general public. Setting the user fee as a percent of premium ensures 
that the user fee generally aligns with the business generated by the 
issuer as a result of participation in an FFE.
    Comment: One commenter recommended that HHS publish cost estimates 
for the FFEs, disclose how funds will be spent, and develop performance 
metrics for the FFEs. The commenter stated that any increase in an 
issuer's aggregate liability for FFE user fees should be capped at 
changes in the Consumer Price Index, and that total user fee 
collections across all issuers should be capped at the level of 
expended costs. The commenter urged that if user fee collections exceed 
FFE costs, issuers should receive a rebate or credit against future 
fees.
    Response: HHS will continue to publish cost estimates through the 
Federal budget process, and publish periodic performance measures, such 
as HHS reports on Marketplace call center wait times, and Web site 
visits and rates of eligibility determinations through HealthCare.gov. 
We will also continue to set the user fee rate based on the expected 
costs to the Federal

[[Page 10811]]

government of providing the special benefits to issuers; however, for 
2016 as noted above, we received an exception to this policy because we 
wish to ensure that the FFEs can support many of the goals of the 
Affordable Care Act. Because we set the user fee rate below that which 
is expected to cover full Federal costs (as in 2014 and 2015), we do 
not see the need at this time to address a situation in which user fee 
collections exceed costs.
2. Essential Health Benefits Package
a. State Selection of Benchmark (Sec.  156.100)
    We proposed to amend paragraph (c) of Sec.  156.100 to delete the 
language regarding the default base-benchmark plan in the U.S. 
Territories of Guam, the U.S. Virgin Islands, American Samoa, and the 
Northern Mariana Islands. The change reflects HHS's determination, 
described in more detail in section III.A.1.b of this final rule, that 
certain provisions of the PHS Act enacted in title I of the Affordable 
Care Act that apply to health insurance issuers are appropriately 
governed by the definition of ``State'' set forth in that title. 
Therefore, the rules regarding EHB (section 2707 of the PHS Act) do not 
apply to health insurance issuers in the U.S. Territories. We also 
proposed to make a technical change to this section by replacing 
``defined in Sec.  156.100 of this section'' with ``described in this 
section.'' We note that this has no effect on Medicaid and CHIP 
programs and that Alternative Benefit Plans will still have to comply 
with the essential health benefit requirements.
    We did not receive any comments regarding this proposal. We are 
finalizing the provisions as proposed.
b. Provision of EHB (Sec.  156.115)
(1) Habilitative Services
    One of the 10 categories of benefits that must, under section 
1302(b)(1)(G) of the Act, be included under the Secretary's definition 
of EHB is rehabilitative and habilitative services and devices. If a 
benchmark plan does not include habilitative services, Sec.  
156.110(c)(6) of the current EHB regulations requires the issuer to 
cover habilitative services as specified by the State under Sec.  
156.110(f) or, if the State does not specify, then the issuer must 
cover habilitative services in the manner specified in Sec.  
156.115(a)(5). Section 156.115(a)(5) states that a health plan may 
provide habilitative coverage by covering habilitative services 
benefits that are similar in scope, amount, and duration to benefits 
covered for rehabilitative services or otherwise determine which 
services are covered and report the determination to HHS. In some 
instances, those options have not resulted in comprehensive coverage 
for habilitative services. Therefore, we proposed amending Sec.  
156.115(a)(5) to establish a uniform definition of habilitative 
services that may be used by States and issuers. In addition, we 
proposed to remove Sec.  156.110(c)(6) because that provision gives 
issuers the option to determine the scope of habilitative services.
    We believe that adopting a uniform definition of habilitative 
services would minimize the variability in benefits and lack of 
coverage for habilitative services versus rehabilitative services. 
Defining habilitative services clarifies the difference between 
habilitative and rehabilitative services. Habilitative services, 
including devices, are provided for a person to attain, maintain, or 
prevent deterioration of a skill or function never learned or acquired 
due to a disabling condition. Rehabilitative services, including 
devices, on the other hand, are provided to help a person regain, 
maintain, or prevent deterioration of a skill or function that has been 
acquired but then lost or impaired due to illness, injury, or disabling 
condition.
    We proposed adopting the definition from the Glossary of Health 
Coverage and Medical Terms \45\: Health care services that help a 
person keep, learn, or improve skills and functioning for daily living. 
Examples include therapy for a child who is not walking or talking at 
the expected age. These services may include physical and occupational 
therapy, speech-language pathology and other services for people with 
disabilities in a variety of inpatient and/or outpatient settings.
---------------------------------------------------------------------------

    \45\ http://www.cms.gov/CCIIO/Resources/Files/Downloads/uniform-glossary-final.pdf.
---------------------------------------------------------------------------

    We did not propose any changes to Sec.  156.110(f), which allows 
States to determine services included in the habilitative services and 
devices category if the base-benchmark plan does not include coverage. 
Several States have made such a determination following benchmark 
selection for the 2014 plan year, and we wish to continue to defer to 
States on this matter as long as the State definition complies with EHB 
policies, including non-discrimination. If the State does not 
supplement missing habilitative services or does not supplement the 
services in an EHB-compliant manner, issuers should cover habilitative 
services and devices as defined in Sec.  156.115(a)(5)(i).
    We also proposed to revise current Sec.  156.115(a)(5)(ii) to 
provide that plans required to provide EHB cannot impose limits on 
coverage of habilitative services that are less favorable than any such 
limits imposed on coverage of rehabilitative services. Since the 
statutory category includes both rehabilitative and habilitative 
services and devices, we interpret the statute to require coverage of 
each. Therefore, issuers that previously excluded habilitative 
services, but subsequently added them, would be required under our 
proposal to impose separate limits on each service rather than 
retaining the rehabilitative services visit limit and having 
habilitative services count toward the same visit limit. Because we 
proposed to establish a uniform definition of habilitative services in 
new Sec.  156.115(a)(5)(i), we also proposed to delete Sec.  
156.110(c)(6), which would remove the option for issuers to determine 
the scope of the habilitative services. In Sec.  156.110 we proposed to 
make a technical change to amend the list structure of paragraph (c) by 
replacing the ``and'' in (c)(5) with a period and adding an ``and'' at 
the end of (c)(4).
    We are finalizing our policy as proposed, adopting the definition 
of habilitative services from the Uniform Glossary in its entirety, to 
be effective beginning with the 2016 plan year and requiring separate 
limits on habilitative and rehabilitative services beginning with the 
2017 plan year. We are codifying this final policy in revised Sec.  
156.115(a)(5) and removing Sec.  156.110(c)(6).
    Comment: Several commenters requested more State flexibility, even 
in cases where the benchmark plan includes habilitative services; they 
sought assurance that a Federal definition will not supersede a State 
law, and that State-required benefits that could be considered 
habilitative services would be treated as EHB.
    Response: States are required to supplement the benchmark plan if 
the base benchmark plan does not include coverage of habilitative 
services as defined in this final rule. We are codifying the definition 
of habilitative services as a minimum for States to use when 
determining whether plans cover habilitative services. State laws 
regarding habilitative services are not pre-empted so long as they do 
not prevent the application of the Federal definition. State laws 
enacted in order to comply with Sec.  156.110(f) are not considered 
benefits in addition to the EHB; such laws ensure compliance with Sec.  
156.110(a) which requires coverage of all EHB categories. Therefore, 
there is

[[Page 10812]]

no obligation to defray the cost of such State-required benefits.
    Comment: Several commenters objected to imposing separate limits on 
rehabilitative and habilitative services and devices, claiming issuers 
do not have operational capacity to differentiate between habilitative 
and rehabilitative services and devices based on enrollee diagnosis or 
whether the enrollee is seeking to maintain or achieve function.
    Response: We are finalizing the requirement to ensure coverage of 
each with separate limits, but the requirement will not become 
effective until 2017. This delay is intended to provide issuers with 
the opportunity to resolve operational issues with their claims 
systems.
    Comment: Several commenters asked that ``devices'' be included in 
the definition of habilitative services.
    Response: We originally omitted devices because the term is already 
included in the statutory description of this category of EHB. In 
response to comments, however, we have added ``devices'' to our 
regulatory definition. We remind issuers that the statute requires 
coverage of devices for both rehabilitative and habilitative services.
    Comment: Several commenters requested that we require issuers to 
have an exceptions process similar to the process required by OPM for 
multi-State plans, in case a patient needs treatment that exceeds the 
visit limits allowed by the plan.
    Response: Enrollees wishing to appeal an adverse benefit 
determination, including denial of habilitative services, should follow 
the process established in Sec.  147.136, which implements section 2719 
of the PHS Act for internal claims and appeals and external review 
processes.
    Comment: Commenters offered many suggestions for specific services 
and devices, such as orthotics and prosthetics, which they stated 
should be required to be covered as habilitative services and devices 
by all issuers.
    Response: We are not codifying such a list at this time, as we 
continue to allow States to maintain their traditional role in defining 
the scope of insurance benefits, but we encourage issuers to cover 
additional services and devices beyond those covered by the benchmark 
plan.
(2) Pediatric Services
    In the preamble of the EHB Rule, we stated that pediatric services 
should be provided until at least age 19 (78 FR 12843). States, 
issuers, and stakeholders requested clarification on this standard. To 
provide this clarification, we proposed amending Sec.  156.115(a) to 
add paragraph (6), specifying that EHB coverage for pediatric services 
should continue until the end of the plan year in which the enrollee 
turns 19 years of age. This was proposed as a minimum requirement.
    This age limit is consistent with section 1201 of the Affordable 
Care Act, \46\ which phased in the prohibition on preexisting 
conditions exclusions by first prohibiting them for children under age 
19, as well as the age limit for eligibility to enroll in CHIP. In 
addition, as noted in the EHB Rule, this proposed policy aligns with 
Medicaid rules (78 FR 12843), which require States to cover children up 
to age 19 with family incomes up to 100 percent of the FPL as a 
mandatory eligibility category.
---------------------------------------------------------------------------

    \46\ Section 1201 of the Affordable Care Act added section 2704 
of the PHS Act, which prohibited preexisting condition exclusions. 
Section 1255 of the Affordable Care Act states that the provisions 
of section 2704 of the PHS Act, as they apply to enrollees who are 
under 19 years of age, shall become effective for plan years 
beginning on after September 23, 2010.
---------------------------------------------------------------------------

    Comment: Many commenters requested that pediatric services continue 
only until the end of the month in which the enrollee turns 19, stating 
that this is the industry standard.
    Response: Although we proposed to require pediatric services until 
the end of the plan year in which the enrollee turns 19, we recognize 
these commenters' concerns. Accordingly, we are finalizing a policy in 
Sec.  156.115(a)(6), under which issuers must provide coverage for 
pediatric services until at least the end of the month in which the 
enrollee turns 19. We encourage issuers to cover services under the 
pediatric services EHB category beyond the 19th birthday month if non-
coverage of those services after that time would negatively affect 
care.
c. Collection of Data To Define Essential Health Benefits (Sec.  
156.120)
    In the Patient Protection and Affordable Care Act; Data Collection 
to Support Standards Related to Essential Health Benefits; Recognition 
of Entities for the Accreditation of Qualified Health Plans final rule 
(EHB Data Collection Rule),\47\ we required issuers in each State to 
submit certain data regarding the three largest health insurance 
products by enrollment (as of March 31, 2012) to HHS by September 4, 
2012. These data, gathered from 2012 plans, were used to determine, for 
each State, the benefits and limitations of the three largest small 
group products by enrollment, which were used to establish potential 
benchmark plans. The EHB Rule unintentionally deleted Sec.  156.120, 
which included the data submission requirement.
---------------------------------------------------------------------------

    \47\ Patient Protection and Affordable Care Act; Data Collection 
to Support Standards Related to Essential Health Benefits; 
Recognition of Entities for the Accreditation of Qualified Health 
Plans, 77 FR 42658 (July 20, 2013) (codified at part 156).
---------------------------------------------------------------------------

    We proposed to allow each State to select a new base-benchmark plan 
for the 2017 plan year, allowing States to choose a 2014 plan that 
meets the requirements of Sec.  156.110 as the new EHB-benchmark plan, 
so that issuers can design substantially equal EHB-compliant products 
for the 2017 plan year. We believe that this would ultimately create 
efficiencies for issuers in designing plans. As stated in Sec.  
156.115(a), provision of EHB means that a health plan provides benefits 
that are substantially equal to the EHB-benchmark plan. Therefore, 
health plans offering EHB in the 2017 plan year will be required to 
provide benefits substantially equal to the benefit amounts, duration 
and scope of benefits covered by the 2014 EHB-benchmark plan 
(supplemented as necessary).
    If a category of base-benchmark plans under Sec.  156.100(a)(1)-(4) 
does not include a plan that meets the requirements of Sec.  156.110, 
we considered permitting the State to select a base-benchmark plan that 
does not meet the requirements of Sec.  156.110 in that category and 
supplement its base-benchmark plan as provided in Sec.  156.110(b) to 
ensure that all 10 categories of benefits are covered in a benchmark 
plan.
    We proposed re-codifying part of Sec.  156.120, in a manner similar 
to that which appeared in our regulations prior to the effective date 
of the EHB Rule. We proposed to require a State that chooses a new 
benchmark plan in the State or, if a State does not choose a new 
benchmark plan, the issuer of the default benchmark plan, to provide 
benchmark plan data as of a date specified by HHS. We anticipate 
collection of new benchmark plan data for the 2017 plan year and the 
data discussed in Sec.  156.120(b), including administrative data and 
descriptive information pertaining to all health benefits in the plan, 
treatment limitations, drug coverage, and exclusions. We believe that 
this information is already included in the issuer's form filing that 
the issuer submitted to the State regulator. The definitions previously 
adopted in Sec.  156.120(a) for the terms health benefits, health plan, 
State, and treatment limitations are still applicable and would be 
codified as previously defined. However, we are not finalizing the 
definitions for ``health insurance market'' or ``small group market'' 
in

[[Page 10813]]

Sec.  156.120(a), as they are not used in this section.
    Comment: Some commenters requested use of a 2014 plan as the 
benchmark for 2016 rather than 2017. Several commenters suggested we 
use a 2015 plan as the benchmark for 2017, noting that the final 
regulations pertaining to the Mental Health Parity and Addiction Equity 
Act will not be effective until 2015.
    Response: For the 2016 plan year, HHS expects to begin the 
certification process for QHPs in the FFEs in early spring of 2015. 
Because issuers are required to design QHP plans that provide EHB that 
are substantially equal to the EHB-benchmark plan, based on the base-
benchmark plan chosen and supplemented as necessary by the State, it is 
not operationally possible for us to collect and publish new EHB-
benchmark plans prior to the QHP certification process for the 2016 
plan year if we allow States to choose a 2014 plan as their new base-
benchmark plan and supplement if necessary. As codified in Sec.  
156.115(a)(3), an EHB-compliant plan must provide mental health and 
substance use disorder services, including behavioral health treatment 
services in compliance with MHPAEA and its corresponding regulations. 
While we agree that it would be easier for issuers to design plans if 
the base-benchmark plan chosen by the State were compliant with MHPAEA 
(that is, based on a 2015 plan), nothing in this rule negates the 
current requirement that EHB-compliant plans comply with MHPAEA and any 
associated regulatory requirements in effect at the time. Based on the 
timelines needed for issuers to design plans, if we permitted States to 
select 2015 plans as new base-benchmark plans, we do not believe that 
issuers would be able to design substantially equal EHB-compliant 
products until the 2018 plan year, based on those benchmarks, which we 
believe is not in consumers' best interest. Therefore, we are 
finalizing the re-codification of part of Sec.  156.120 as proposed, as 
well as our proposal to allow issuers to design a plan that is 
substantially equal to the newly selected 2014 benchmark plan for the 
2017 plan year.
    Comment: Several States and other commenters requested more details 
on the process for selection and reassurance that they can supplement 
their benchmark plan.
    Response: We did not propose to make changes to Sec.  156.100(a) or 
(b); therefore, the options from which a base-benchmark plan may be 
selected remain the same. HHS issued a PRA package regarding collection 
of benchmark information on November 26, 2014.\48\ As stated there, HHS 
proposes to obtain the certificate of coverage and other plan documents 
that describe covered services, exclusions, limitations, cost sharing, 
and all other terms and conditions of plan benefits that are provided 
to enrollees. States that select, or issuers in States that default to 
a benchmark due to lack of selection, would submit the documents 
securely via email. HHS intends to work collaboratively with States to 
identify responsive documents and to secure such documents during the 
second quarter of 2015. HHS then intends to publish selected and 
default benchmark plans and supporting documents. States retain the 
ability to supplement the base-benchmark plan, as codified in Sec.  
156.110(b)(1), and retain the ability to determine whether the base-
benchmark plan covers the EHB category or whether supplementation is 
warranted. We also reiterate that supplementation is the addition of 
the entire category of such benefits to satisfy Sec.  156.110(a), while 
substitution is the removal of one particular item or service for 
another actuarially-equivalent item or service within the same 
category. Supplementation ensures that all EHB categories are covered. 
Substitution, which is permitted within an EHB category at the issuer's 
discretion, allows for greater variety of plan designs.
---------------------------------------------------------------------------

    \48\ CMS-10448; http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS-10448.html.
---------------------------------------------------------------------------

    Comment: Several States and other commenters requested further 
clarification regarding how new benchmark plan selection will affect 
our policy at Sec.  155.170 pertaining to State-required benefits.
    Response: We did not propose any changes to Sec.  155.170. 
Therefore, only new State-required benefits enacted on or prior to 
December 31, 2011 are included as EHB, and States are expected to 
continue to defray the cost of State-required benefits enacted on or 
after January 1, 2012 unless those State-required benefits were 
required in order to comply with new Federal requirements. HHS intends 
to continue to publish a list of non-EHB State-required benefits on its 
Web site on an annual basis.
    Comment: Some commenters expressed their desire for HHS to abandon 
the benchmark policy in the future, and specify a list of services that 
issuers must cover in each EHB category instead.
    Response: To maintain State flexibility while ensuring 
comprehensive coverage, we believe that the benchmark policy continues 
to be the most appropriate at this time. Therefore, the benchmark 
policy will continue to establish EHBs through plan year 2017. Since 
the first EHB plan year just ended, we will examine how the policy 
affected enrollees and what changes, if any, should be made in the 
future. We believe that it is important to have a more complete sense 
of how EHB policy is working before proposing changes to the benchmark 
approach.
d. Prescription Drug Benefits (Sec.  156.122)
i. Sec.  156.122(a)
    Under our regulations at Sec.  156.122(a), EHB plans are required 
to cover the greater of one drug per United States Pharmacopeia (USP) 
category and class or the same number of drugs in each USP category and 
class as the State's EHB-benchmark plan. In the proposed rule, we 
proposed several revisions to this policy. First, we proposed to retain 
Sec.  156.122(a)(2), with one modification to change ``drug list'' to 
``formulary drug list'' for uniformity purposes for this section, and 
to renumber this paragraph from Sec.  156.122(a)(2) to Sec.  
156.122(a)(1). Due to some concerns detailed in the proposed rule about 
the drug count standard under current Sec.  156.122(a)(1), we proposed 
an alternative to the drug count standard. Specifically, we proposed 
that plans have a pharmacy and therapeutics (P&T) committee and use 
that committee to ensure that the plan's formulary drug list covers a 
sufficient number and type of prescription drugs. We proposed that the 
P&T committee standards must be met for the prescription drug coverage 
to be considered EHB. We stated our belief that the use of a P&T 
committee in conjunction with other standards that we proposed would 
ensure that an issuer's formulary drug list covers a broad array of 
prescription drugs. We noted that standards defined by the Medicare 
Part D Prescription Drug Program (Medicare Part D), the NAIC,\49\ and 
other stakeholders, and we solicited comments on these standards and 
whether we should adopt them in lieu of or in addition to the standards 
we are proposing.
---------------------------------------------------------------------------

    \49\ Medicare Part D plans are required to maintain P&T 
committees by the Social Security Act section 1860D-4(b)(3)(G) 
codified at 42 CFR 423.120(b), 42 CFR 423.272(b)(2). NAIC has a 
Model Act entitled Health Carriers Prescription Drug Benefit 
Management Model Act (July 2003) that includes P&T Committee 
provisions at: http://www.naic.org/store/free/MDL-22.pdf.
---------------------------------------------------------------------------

    In the proposed rule, we proposed to specify P&T committee 
standards on

[[Page 10814]]

membership, meetings, and establishment and development of a formulary 
drug list. For P&T committee membership, we proposed requiring the P&T 
committee to include members from a sufficient number of clinical 
specialties to adequately represent the needs of enrollees. For 
instance, we would expect that the P&T committee members include 
experts in chronic diseases and in the care of individuals with 
disabilities. We proposed that the majority of members be practicing 
physicians, practicing pharmacists, and other practicing health care 
professionals. Additionally, we proposed to require that members of the 
P&T committee that have a conflict of interest with the issuer or a 
pharmaceutical manufacturer would be permitted to sit on the P&T 
committee but would be prohibited from voting on matters for which the 
conflict exists. We also proposed that at least 20 percent of the P&T 
committee's membership have no conflict of interest with respect to 
either the issuer or to any pharmaceutical manufacturer. Under these 
standards, a member who holds more than one health care license, for 
example as a nurse practitioner and a pharmacist, would only count as 
one person. We also solicited comments on the percentage of committee 
members that should have no conflict of interest, and the proposed 
requirement that the members of the P&T committee with conflicts of 
interest should be permitted to sit on the P&T committee but would be 
prohibited from voting on matters for which the conflict exists. We 
considered requiring a set number of participants to be independent and 
have no conflicts of interest, but we were concerned that absent a 
limitation on the total number of committee members, requiring a 
specific number of committee members to be independent and not have a 
conflict of interest would have a variable impact, depending on the 
size of the P&T committee. We also proposed that the P&T committee 
would be responsible for defining a reasonable definition of conflict 
of interest and for managing the conflicts of interest of its committee 
members. As part of this standard, the P&T committee would require its 
P&T committee members to sign a conflict of interest statement 
revealing economic or other relationships with entities, including the 
issuer and any pharmaceutical manufacturers, affected by drug coverage 
decisions that could influence committee decisions. We solicited 
comments on this proposed standard, including the implementation of 
this conflict of interest standard, whether there are additional 
conflict of interest standards that should apply and what would 
constitute a conflict of interest. In particular, we sought comments on 
what could be considered a permissible relationship with respect to the 
issuer or a pharmaceutical manufacturer. We stated that we would 
consider providing further guidance regarding conflicts of interest.
    We also proposed that the P&T committee must meet at least 
quarterly, and maintain written documentation of all decisions 
regarding development and revision of formulary drug lists. For 
formulary drug list establishment and management, we proposed that the 
P&T committee must develop and document procedures to ensure 
appropriate drug review and inclusion on the formulary drug list, as 
well as make clinical decisions based on scientific evidence, such as 
peer-reviewed medical literature, and standards of practice, such as 
well-established clinical practice guidelines. The P&T committee would 
be required to consider the therapeutic advantages of prescription 
drugs in terms of safety and efficacy when selecting formulary drugs 
and making recommendations for their formulary tier. The P&T committee 
would be required to review both newly FDA-approved drugs and new uses 
for existing drugs. We also proposed that the P&T committee would be 
required to ensure that an issuer's formulary drug list covers a range 
of drugs across a broad distribution of therapeutic categories and 
classes and recommended drug treatment regimens that treat all disease 
states and does not discourage enrollment by any group of enrollees.
    Lastly, we proposed to require that issuers' formularies provide 
appropriate access to drugs that are included in broadly accepted 
treatment guidelines and which are indicative of and consistent with 
general best practice formularies in widespread use. Broadly accepted 
treatment guidelines and general best practices could be based on 
industry standards or other appropriate guidelines that are issued by 
expert organizations that are current at the time. For instance, 
broadly accepted treatment guidelines could include guidelines provided 
in the National Guideline Clearinghouse (NGC), which is a publicly 
available database of evidence-based clinical practice guidelines and 
related documents. As a result of this proposed policy, we would expect 
that a health plan's formulary drug list would ensure that appropriate 
access is being afforded to drugs in widely accepted national treatment 
guidelines and which are indicative of general best practices at the 
time. Given our proposal to use broadly accepted treatment guidelines 
and best practices, we would also expect that plans' formulary drug 
lists be similar to those formulary drug lists then currently in 
widespread use. We also noted that States have primary responsibility 
for enforcing EHB requirements and, if finalized, States would be 
responsible for the oversight and enforcement of the P&T committee 
standards. We sought comment on these proposed revisions to Sec.  
156.122(a), including on the oversight and enforcement of these 
standards, and whether other standards are needed for P&T committees.
    As an alternative to, or in combination with, the above-proposed 
P&T committee requirements, we considered whether to replace the USP 
standard with a standard based on the American Hospital Formulary 
Service (AHFS). We sought comments on the proposed P&T committee 
standard, and whether we should consider adopting AHFS or another drug 
classification system, as well as on any other standards that may be 
appropriate for this purpose. For instance, for the AHFS system, we 
considered amending the minimum standard established in the EHB Final 
Rule that requires coverage of at least the greater of one drug in 
every USP category and class or the same number of drugs in each USP 
category and class as the State's EHB-benchmark plan to require at 
least the greater of one drug in each AHFS class and subclass or the 
same number of drugs in each AHFS class and subclass as the State's 
EHB-benchmark plan. We explained that if we were to finalize a P&T 
committee process in combination with a drug count standard based on 
either the AHFS system or the USP system, we would expect the health 
plan to establish and maintain its formulary drug list in compliance 
with the P&T committee standards, and in addition, the resulting health 
plan's formulary drug list would also need to comply with the drug 
count standard. We discussed continuing to use the existing USP drug 
count standard, and updating the USP drug count system to a more 
current version. We proposed to implement proposed Sec.  156.122(a)(2) 
to start in the 2017 plan year, seeking comments on this proposed 
timing of implementation. Based on comments

[[Page 10815]]

received, as described in detail below, we are finalizing an approach 
that combines the use of a P&T committee (satisfying standards largely 
as proposed) with the current drug count standard that requires 
coverage of at least the greater of one drug per USP category and class 
or the same number of drugs in each USP category and class as the 
State's EHB benchmark plan.
    Comment: Some commenters supported replacing the current drug 
standard with the P&T committee approach only, and some commenters 
recommended that we defer to a health plan's accreditation by the 
National Committee for Quality Assurance (NCQA) or URAC, or use 
Medicare Part D standards. Some commenters did not support the P&T 
committee approach because they were concerned it could result in plans 
with widely varying formularies, leading to consumer confusion. They 
also had concerns about oversight and enforcement. Several commenters 
supported combining the P&T committee with a drug count standard. Of 
those who commented on the drug count standard, some supported USP, 
some supported AHFS, and others supported the creation of a new 
standard. Some commenters recommended changes to the manner in which 
the drug count is calculated. For example, some commenters suggested 
that the drug count metric change to the greater of two drugs per 
category and class or the number of drugs in the benchmark. Other 
commenters sought clarification on the counting of chemically distinct 
drugs and the modes of delivery.
    Response: We are finalizing an approach that combines the use of a 
P&T committee with the current drug count standard that requires 
coverage of at least the greater of one drug per USP category and class 
or the same number of drugs in each USP category and class as the 
State's EHB benchmark plan. We believe that a combination of a 
qualitative and quantitative approach will best ensure robust formulary 
design, because the two standards can complement each other. For 
instance, the requirement of the P&T committee to review new drugs 
addresses one of our concerns that the current drug count system does 
not incentivize coverage of new drugs. However, the drug count standard 
can provide a minimum standard for coverage.
    For the P&T committee requirements, we considered deferring to 
other standards, such as those established by NCQA, URAC and Medicare 
Part D. However, Sec.  156.122 establishes a market-wide standard, and 
not all plans are required to be accredited by those organizations. We 
also do not believe that some accreditation standards are as 
transparent as Medicare Part D standards--for example, some 
accreditation standards are proprietary and could be costly and 
burdensome for an issuer to implement. Further, stakeholders are 
already familiar with Medicare Part D's P&T committee standards and we 
believe that these standards will best ensure the P&T committee is able 
to ensure a robust formulary. For these reasons, we are finalizing P&T 
committee standards modeled on Medicare Part D's P&T committee 
standards that have been modified, as explained below, to better 
address the private health plan population and the needs of plans 
required to cover EHB. We also believe that adopting P&T committee 
standards that generally align with the existing Medicare Part D 
standards and guidance, where possible, will better ensure uniformity 
between standards to help reduce the burden on issuers. As explained 
below, we are finalizing the proposed conflict of interest standards. 
Although these standards are different than those adopted by Medicare 
Part D, we believe that these standards are similar to practices in the 
private insurance market.
    We are retaining the USP drug count standard because stakeholders 
are now familiar with the USP system after using it for 2 years, and we 
were persuaded by the comments supporting the continued use of USP. 
Issuers have already developed 2 years of formularies based on it, 
States have already developed systems to review those formularies, and 
stakeholders are familiar with the system. Thus, while AHFS had the 
benefit of being updated more frequently and incorporating a broader 
set of classes and subclasses, commenters did not uniformly support its 
use because of several issues, including a lack of transparency, the 
need to supplement certain classes when compared with USP, and the 
complexity of the AHFS system. We also believe that retaining USP will 
reduce the administrative burden and costs on States and issuers in 
implementing a combined P&T committee process with a drug count 
standard. In implementing the revised Sec.  156.122(a), we intend to 
use the most up-to-date version of the USP system available at the time 
that we build our formulary review tools for each plan year, starting 
with the 2017 plan year, and will refer to the version number in the 
methodology document that we update each year.\50\
---------------------------------------------------------------------------

    \50\ See the Essential Health Benefits (EHB) Rx Crosswalk 
Methodology at: https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/ehb-rx-crosswalk.pdf.
---------------------------------------------------------------------------

    To codify our final policy, we are retaining Sec.  156.122(a)(1) 
(with one technical change to delete the ``and''), we are retaining 
current Sec.  156.122(a)(2) (with one technical correction to replace 
``drug list'' with ``formulary drug list'' and to add an ``and''), and 
we are adding a new Sec.  156.122(a)(3). Under the new Sec.  
156.122(a)(3), a health plan must establish and maintain its formulary 
drug list in compliance with the P&T committee standards. These 
standards are in addition to the requirement that the health plan's 
formulary drug list comply with the drug count standard under Sec.  
156.122(a)(1) as the minimum standard of coverage, and the requirement 
that the health plan submit its formulary drug list to the Exchange, 
the State, or OPM. While issuers must have a P&T committee, nothing 
under Sec.  156.122(a) precludes issuers from using the same P&T 
committee across multiple issuers. However, we recognize that using the 
same P&T committee across multiple issuers may be complex to 
administer. Because States are primarily responsible for enforcing EHB 
requirements, States will be responsible for the oversight and 
enforcement of the P&T committee standards and the drug count standard. 
We intend to work with States to implement these provisions and may 
consider developing additional tools and resources to assist States in 
reviewing formulary drug lists. New Sec.  156.122(a)(3) will apply 
starting with the 2017 plan year to give States, issuers, and PBMs time 
to implement the new P&T committee standards.
    Comment: Many commenters wanted the P&T committee membership to 
include certain types of representatives. Some commenters also wanted 
membership on the P&T committee to be limited to a certain number. 
Commenters supported limiting the P&T committee membership category for 
``other practicing health professionals'' to ``other practicing health 
care professionals that can prescribe.'' Comments sought clarification 
that a practicing provider on the committee could be practicing part-
time, and clarification on the P&T committee's documentation of its 
decisions. Some commenters supported the proposed conflict of interest 
standards, while other commenters were concerned it would be difficult 
to meet the standards. Others recommended other conflict of interest 
standards. Some commenters

[[Page 10816]]

supported the conflict of interest percentage of 20 percent, and others 
recommended that it be 50 percent. Some commenters recommended 
implementing the Office of Inspector General's recommendations on 
conflicts of interest for Medicare Part D P&T committees,\51\ and 
others sought transparency requirements for the operation and 
management of the P&T committee.
---------------------------------------------------------------------------

    \51\ See the Department of Health and Human Services' Office of 
the Inspector General Report on Gaps in Overview of Conflicts of 
Interest in Medicare Prescription Drug Decisions at: http://oig.hhs.gov/oei/reports/oei-05-10-00450.pdf.
---------------------------------------------------------------------------

    Response: We are finalizing the requirement that the P&T committee 
must be comprised of members that represent a sufficient number of 
clinical specialties to adequately meet the needs of enrollees. We 
would expect that the P&T committee membership include experts in 
chronic diseases and in the care of individuals with disabilities and 
that it would be composed of a diverse set of experts. We have 
established certain minimum standards for membership to ensure the 
integrity of the P&T committee and to allow flexibility to issuers in 
designing the P&T committee. However, we also expect the P&T committee 
would consult with experts in management of the relevant condition for 
each drug being considered. The P&T committee's membership is also 
required to include a majority of practicing physicians, practicing 
pharmacists, and other practicing health care professionals. The other 
practicing health care professionals on the P&T committee, excluding 
pharmacists, must be licensed to prescribe drugs. The practicing 
physicians, pharmacists, and other health care professionals on the P&T 
committee may be practicing part-time. However, under these standards, 
a member who holds more than one health care license, for example, as a 
nurse practitioner and a pharmacist, only counts as one member of the 
P&T committee.
    We are finalizing the conflict of interest requirements as 
proposed. These conflict of interest standards are not the same as 
Medicare Part D's standards, but we believe that issuers are currently 
using similar practices in the private health insurance market. Members 
of the P&T committee that have a conflict of interest with respect to 
the issuer or a pharmaceutical manufacturer are permitted to sit on the 
P&T committee but are prohibited from voting on matters for which the 
conflict exists. We would expect that in implementing this standard, if 
a particular member of a P&T committee has to abstain from a majority 
of votes, that the P&T committee should consider removal of the member 
from the P&T committee. Additionally, at least 20 percent of the P&T 
committee's membership must have no conflicts of interest with respect 
to either the issuer or to any pharmaceutical manufacturer. We 
considered the comments we received on other P&T committee standards 
and on the requirements for the number and percentage of conflict free 
members. However, due to concerns about issuers' ability to meet a 
requirement with a higher threshold and concerns about setting a fixed 
number of members required to be conflict free when we did not also set 
the limit on the number of participants on the P&T committee, we 
believe that requiring 20 percent of the P&T committee's membership to 
be conflict free is a reasonable threshold in combination with Sec.  
156.122(a)(3)(i)(C). As part of this standard, the P&T committee 
members must sign a conflict of interest statement at least annually 
revealing economic or other relationships with entities affected by the 
committee's drug coverage decisions, including the issuer and any 
pharmaceutical manufacturers. The P&T committee is responsible for 
establishing a reasonable definition of conflict of interest and for 
managing the conflicts of interest of its committee members. We will 
consider providing further guidance regarding the P&T committee's 
management and oversight, including its operation and management of 
conflicts of interest, in the future.
    Comment: Commenters generally supported the requirements regarding 
the establishment and management of the formulary drug list, and 
recommended specifying the timing of reviews for new drugs as well as 
other specified guidelines or best practices. Some commenters wanted 
the P&T committees' decisions to be binding on the plan, and others 
wanted the P&T committee's decisions to be advisory. Some commenters 
opposed the use of treatment guidelines or best practices, and some 
wanted clarification that the P&T committee can use pharmacoeconomic 
studies in formulary development. Commenters were concerned about the 
documentation requirements of P&T committees' decisions and others 
wanted additional standards, such as to require the P&T committee to 
have an appeals process for a consumer or provider to request a drug to 
be placed on the formulary.
    Response: To ensure better uniformity of P&T committee practice, we 
are finalizing new Sec.  156.122(a)(3)(iii), which generally aligns 
with the Medicare Part D standards and guidance on this subject. Under 
Sec.  156.122(a)(3)(iii)(A), the P&T committee must develop and 
document procedures to ensure appropriate drug review and inclusion. 
This includes documentation of decisions regarding formulary 
development and revision and utilization management activities. P&T 
committee recommendations regarding which drugs are placed on the 
plan's formulary are binding on the plan. This clarification reflects 
practices by Medicare Part D. We also encourage P&T committees to be 
transparent about their operation and function, and while we are not 
requiring that P&T committees publicly post information on the P&T 
committee, we encourage issuers to consider providing this level of 
transparency to consumers. We are also finalizing a new Sec.  
156.122(a)(3)(iii)(B), which is consistent with Medicare Part D 
standards at 42 CFR 423.120(b)(1)(iv) and which requires the P&T 
committee to base clinical decisions on the strength of scientific 
evidence and standards of practice, and requires the P&T committee to 
assess peer-reviewed medical literature, pharmacoeconomic studies, 
outcomes research data, and other such information as it determines 
appropriate. Formulary management decisions must be based on scientific 
evidence, and may also be based on pharmacoeconomic considerations that 
achieve appropriate, safe, and cost-effective drug therapy. Under Sec.  
156.122(a)(3)(ii)(C), drugs' therapeutic advantages in terms of safety 
and efficacy must be considered when selecting formulary drugs. We are 
finalizing this provision, except we are not finalizing the requirement 
that drugs' therapeutic advantages be considered when placing the drugs 
on formulary tiers, to better align with 42 CFR 423.120(b)(1)(v).
    We are also adding new Sec.  156.122(a)(3)(iii)(D) through (F), 
which are consistent with Medicare Part D standards at 42 CFR 
423.120(b)(1)(vi), (vii), and (ix), respectively. The new standard in 
Sec.  156.122(a)(3)(iii)(D) will require the P&T committee to review 
policies that guide exceptions and other utilization management 
processes, including drug utilization review, quantity limits, and 
therapeutic interchange. The purpose of finalizing these reviews, which 
is a typical practice by P&T committees, is to ensure that formulary 
management techniques do not undermine access to covered drugs.
    The new standard in Sec.  156.122(a)(3)(iii)(E) requires the P&T 
committee to evaluate and analyze treatment protocols and procedures

[[Page 10817]]

related to the plan's formulary at least annually, which is also a 
typical practice of P&T committees today. Furthermore, under Sec.  
156.122(a)(3)(iii)(F), the P&T committee must review and approve all 
clinical prior authorization criteria, step therapy protocols, and 
quantity limit restrictions applied to each drug. P&T committee 
recommendations, with respect to a P&T committee's clinical 
appropriateness review of the practices and policies for formulary 
management activities, such as prior authorizations, step therapies, 
quantity limitations, and other drug utilization activities that affect 
access, are advisory only and not binding on the issuer, a standard 
that we believe reflects current practice in both the private health 
insurance and Medicare Part D markets. However, issuers must take the 
recommendations into good faith consideration. Similar to the new 
standards in Sec.  156.122(a)(3)(iii)(D), the purpose of finalizing 
these reviews is to better ensure that formulary management techniques 
do not undermine access to covered drugs.
    Under Sec.  156.122(a)(3)(iii)(G), which was proposed as Sec.  
156.122(a)(3)(iii)(D), the P&T committee must review all new FDA-
approved drugs and new uses for existing drugs. To implement this 
requirement, the P&T committee must make a reasonable effort to review 
a new FDA approved drug product (or new FDA approved indication) within 
90 days, and make a decision on each new FDA approved drug product (or 
new FDA approved indication) within 180 days of its release onto the 
market, or a clinical justification must be documented if this 
timeframe is not met.
    A health plan's formulary drug list, under Sec.  
156.122(a)(3)(iii)(H), must cover a range of drugs across a broad 
distribution of therapeutic categories and classes and recommended drug 
treatment regimens that treat all disease states and must not 
discourage enrollment by any group of enrollees. The formulary drug 
list must also ensure appropriate access to drugs in accordance with 
widely accepted national treatment guidelines and general best 
practices at the time. To comply with Sec.  156.122(a)(3)(iii)(H), 
broadly accepted treatment guidelines and general best practices could 
be based on industry standards or other appropriate guidelines that are 
issued by expert organizations that are current at the time. For 
instance, broadly accepted treatment guidelines could include 
guidelines provided in the National Guideline Clearinghouse (NGC), 
which is a publicly available database of evidence-based clinical 
practice guidelines and related documents.
ii. Section 156.122(c)
    Section 156.122(c) currently requires issuers of EHB plans to have 
procedures in place that allow an enrollee to request and gain access 
to clinically appropriate drugs not covered by the plan. This 
requirement, commonly referred to as the ``exceptions process,'' 
applies to drugs that are not included on the plan's formulary drug 
list. As established in the EHB Final Rule (78 FR 12834) and the Market 
Standards Rule (79 FR 30240), such procedures must include a process 
that allows an enrollee, the enrollee's designee, or the enrollee's 
prescribing physician (or other prescriber) to request an expedited 
review based on exigent circumstances. Exigent circumstances exist when 
an enrollee is suffering from a serious health condition that may 
seriously jeopardize the enrollee's life, health, or ability to regain 
maximum function, or when an enrollee is undergoing a current course of 
treatment using a non-formulary drug. A health plan must make its 
coverage determination on an expedited review request based on exigent 
circumstances, and notify the enrollee or the enrollee's designee and 
the prescribing physician (or other prescriber, as appropriate) of its 
coverage determination no later than 24 hours after it receives the 
request. A health plan that grants an exception based on exigent 
circumstances must provide coverage of the non-formulary drug for the 
duration of the exigency.
    In the proposed rule, we proposed to build on the expedited 
exception process by proposing to also adopt similar requirements for 
the standard exception process. We also proposed to adopt standards for 
a secondary external review process if the first exception request is 
denied by the plan (regardless of whether the exception is requested 
using the standard process or the expedited process).
    We proposed at Sec.  156.122(c), that a health plan providing EHB 
must have certain exception processes in place that allow an enrollee, 
the enrollee's designee, or the enrollee's prescribing physician (or 
other prescriber) to request and gain access to clinically appropriate 
drugs not covered by the health plan, and when an exception requested 
under one of these processes is granted, the plan must treat the 
excepted drug as EHB for all purposes, including accrual to the annual 
limitation on cost sharing. Proposed Sec.  156.122(c)(1) sets forth the 
standard exception process. Under this process, we proposed that a 
health plan have a process for an enrollee, the enrollee's designee, or 
the enrollee's prescribing physician (or other prescriber) to request a 
standard review of a coverage decision for a drug that is not covered 
by the plan. We proposed that the health plan must make its coverage 
determination on a standard exception request and notify the enrollee 
or the enrollee's designee and the prescribing physician (or other 
prescriber, as appropriate) of its coverage determination no later than 
72 hours after it receives the request. We proposed to require a health 
plan that grants an exception based on the standard review process to 
provide coverage of the non-formulary drug for the duration of the 
prescription, including refills, and we stated that in such a case the 
excepted drug would be considered EHB for all purposes, including for 
counting towards the annual limitation on cost sharing. As stated in 
the EHB Rule, plans are permitted to go beyond the number of drugs 
offered by the benchmark without exceeding EHB. Therefore, if the plan 
is covering drugs beyond the number of drugs covered by the benchmark, 
all of these drugs are EHB and must count towards the annual limitation 
on cost sharing.
    We proposed moving the language regarding the expedited exceptions 
process from Sec.  156.122(c)(1) to new Sec.  156.122(c)(2) and to 
replace ``Such procedures must include'' with ``A health plan must 
have'' in current (c)(1) proposed as a new paragraph (c)(2)(i).
    In Sec.  156.122(c)(3), we proposed that if the health plan denies 
an exception request for a non-formulary drug, the issuer must have a 
process for an enrollee, the enrollee's designee, or the enrollee's 
prescribing physician (or other prescriber, as appropriate) to request 
that an independent review organization review the exception request 
and the denial of that request by the plan. For this external exception 
review, we proposed to apply the same timing that applied to the 
initial review. Thus, if the enrollee requested the drug under the 
proposed standard process and the request was denied, then the 
independent review organization would have to make its determination 
and the health plan would have to notify the enrollee or enrollee's 
designee and the prescribing physician (or other prescriber, as 
appropriate) no later than 72 hours after the time it receives the 
external exception review request. Likewise, if the initial exception 
request is for an expedited review and that request is denied by the 
plan, then the independent review organization would

[[Page 10818]]

have to make its coverage determination and provide appropriate 
notification no later than 24 hours after the time it receives the 
external exception review request. We are finalizing the updated 
standards in Sec.  156.122(c) as proposed, with an addition to clarify 
the duration of coverage of the excepted drug when accessed through the 
external review process.
    Comment: Many commenters supported revising Sec.  156.122(c), 
relating to the exceptions process. Some commenters wanted the same 
standards as Medicare Part D, and others wanted the same standards as 
the appeals process codified at Sec.  147.136. Other commenters had 
concerns about conflict with State requirements, the definitions of 
expedited review and the current course of treatment, and the 
administrative cost of the exceptions process. Some commenters were 
concerned about time limits and wanted clarification on when the time 
limits begin, recommending that the time limits should be measured in 
business days instead of hours, or be different for the external review 
process. Others sought additional requirements related to the operation 
of the exception process such as requiring coverage of the non-
formulary drug during the review process, requiring issuers to begin 
the external review if the original exception request is denied, and 
requiring issuers to submit or release information on its consideration 
of exception requests. Although some commenters recommended using a 
separate review organization for the external review, several 
commenters supported allowing issuers to use the same independent 
review organization for the external review as for the final external 
review decision under Sec.  147.136. Commenters also supported 
requiring coverage of the excepted drug for the duration of the 
prescription, including refills, and others supported permitting the 
issuer to determine and notify the enrollees of the duration of the 
coverage for the excepted drug.
    Response: The purpose of revising Sec.  156.122(c) was to establish 
a more uniform exceptions process across plans and issuers providing 
EHB to help reduce consumer confusion in accessing, understanding, and 
using the exception process. We believe that uniform standards in this 
area will better ensure consumers' ability to understand and access 
this consumer protection. Because of the importance of this process in 
ensuring enrollee access to clinically appropriate medications, we are 
finalizing the 72-hour review period for the standard exception review, 
continuing the 24-hour review period for an expedited review, and 
applying the related timing standards to the external review periods. 
This exceptions process applies to drugs that are not included on the 
plan's formulary drug list, and Sec.  147.136 applies if an enrollee 
receives an adverse benefit determination for a drug that is included 
on the plan's formulary drug list. Because these two processes serve 
different purposes, we believe they are not duplicative. Furthermore, 
while our exception process standards are not the same as those under 
Medicare Part D, they have similar elements. Since issuers that provide 
EHB are already required under our regulations to have formulary 
exceptions processes and procedures in place that allow an enrollee to 
request and gain access to clinically appropriate drugs not covered by 
the plan, we do not expect that these new requirements will 
significantly increase the administrative cost burden on issuers. 
Furthermore, to permit flexibility in implementing this policy for 
issuers, we have declined to establish additional requirements at this 
time, such as requiring issuers to begin the external review absent an 
enrollee request if the original exception request is denied, and 
requiring issuers' to submit or release information on its 
consideration of exception requests.
    The 24-hour timing policy for the expedited review was adopted in 
the final rule on the Market Standards Rule (79 FR 30240), and we are 
finalizing the 72-hour standard review, as well as the timing for the 
external reviews, in this final rule. All of these timeframes begin 
when the issuer or its designee receives a request. An enrollee or the 
enrollee's prescribing physician (or other prescriber) should strive to 
submit a completed request; however, issuers should not fail to 
commence review if they have not yet received information that is not 
necessary to begin review. Therefore, we interpret new Sec.  156.122(c) 
to mean that the review must begin following the receipt of information 
sufficient to begin review. Issuers should not request irrelevant or 
overly burdensome information. Issuers must be equipped to accept these 
requests in writing, electronically, and telephonically.
    As part of the request for a standard review, the prescribing 
physician or other prescriber should support the request by including 
an oral or written statement that provides a justification supporting 
the need for the non-formulary drug to treat the enrollee's condition, 
including a statement that all covered formulary drugs on any tier will 
be or have been ineffective, would not be as effective as the non-
formulary drug, or would have adverse effects.
    Following a favorable decision on the standard or external review, 
the enrollee must be provided access to the prescribed drug without 
unreasonable delay. Therefore, issuers need to be prepared to 
communicate rapidly with pharmacies and pharmacy benefit managers, as 
applicable. At a minimum, we expect issuers to update certificates of 
coverage to reflect the availability of this process, and to be able to 
provide instruction to enrollees or their designees and providers or 
their designees on how to use the process.
    For the external exception review, we are finalizing a standard 
under which the independent review organization that conducts the 
external review must be accredited by a nationally recognized private 
accrediting organization. As part of this process, the issuer should 
provide the independent review organization with all relevant 
information to conduct the review, including the initial denial of the 
exception request. The issuer may use the same independent review 
organization for the external review for the drug exception process 
under Sec.  156.122(c)(3) that the plan contracts with for the final 
external review decision under Sec.  147.136. As established in revised 
Sec.  156.122(c), any drug covered through the exception process must 
be treated as an EHB, including by counting any cost sharing towards 
the plan's annual limitation on cost sharing and when calculating the 
plan's actuarial value. We believe that ensuring that an enrollee has 
the option to request an external review of a denied exception request 
and that a drug covered through the exception process count towards the 
plan's annual limitation on cost sharing are important consumer 
protections that help ensure enrollees' access to clinically 
appropriate medications.
    We do not believe that enrollees should have to continue to make 
requests under Sec.  156.122(c) to access a refill of the same 
clinically appropriate drugs that they initially obtained through the 
exceptions process. Therefore, we are finalizing a standard under which 
non-grandfathered health plans in the individual and small group 
markets that must provide coverage of the essential health benefit 
package under section 1302(a) of the Affordable Care Act must cover a 
drug accessed through the standard exception process for the duration 
of the prescription, including refills. To provide further 
clarification on the operation of the external review process, we are 
also finalizing a new standard under which,

[[Page 10819]]

if a health plan providing EHB grants an external exception review of a 
standard exception request, the health plan must provide coverage of 
the non-formulary drug for the duration of the prescription, including 
refills. Likewise, if a health plan grants an external exception review 
of an expedited exception request, the health plan must provide 
coverage of the non-formulary drug for the duration of the exigency. 
Nothing under this policy precludes a State from requiring stricter 
standards in this area. Issuers will be required to comply with the new 
standard exception process and external review process requirements 
starting with the 2016 plan year.
iii. Section 156.122(d)
    Under Sec.  156.122(d), we proposed adding a requirement to the EHB 
prescription drug benefit that a health plan must publish an up-to-
date, accurate, and complete list of all covered drugs on its formulary 
drug list, including any tiering structure that it has adopted and any 
restrictions on the manner in which a drug can be obtained, in a manner 
that is easily accessible to plan enrollees, prospective enrollees, the 
State, the Exchange, HHS, OPM, and the general public. We also 
solicited comment on whether the formulary tiering information should 
include cost sharing information, such as the enrollee's applicable 
pharmacy deductible (for example, $100), copayment (for example, $20), 
or cost-sharing percentage for the enrollee (for example, 20 percent). 
We proposed that a formulary drug list be considered easily accessible 
when the general public is able to view the formulary drug list on the 
plan's public Web site through a clearly identifiable link or tab and 
without creating or accessing an account or entering a policy number. 
The general public should be able to easily discern which formulary 
drug list applies to which plan if the issuer maintains multiple 
formularies, and the plan associated with each formulary drug list 
should be clearly identified on the plan's Web site. As a result of 
this proposed requirement, we would expect the issuers' formulary drug 
list to be up-to-date, meaning that the formulary drug list must 
accurately list all of the health plan's covered drugs at that time. We 
solicited comments on this timing. Also, the formulary drug list URL 
link under this section should be the same direct formulary drug list 
URL link for obtaining information on prescription drug coverage in the 
Summary of Benefits and Coverage, in accordance with Sec.  
147.200(a)(2)(i)(K). We proposed that this requirement would be 
effective beginning with the 2016 plan year. We solicited comments on 
these proposed requirements, including whether we should require that 
additional types of information be included in the formulary drug list.
    As part of this proposed requirement that issuers' formulary drug 
list must be made available to the general public, we considered 
requiring issuers to make this information publicly available on their 
Web sites in a machine-readable file and format specified by HHS. The 
purpose of establishing machine-readable files with the formulary drug 
list data would be to provide the opportunity for third parties to 
create resources that aggregate information on different plans. As an 
alternative, we considered whether the formulary drug list information 
could be submitted to HHS though an HHS-designed standardized template, 
while recognizing that there could be challenges with keeping this type 
of template information updated. We solicited comments on these 
options. We are finalizing these requirements largely as proposed, with 
language to clarify that the requirement to publish an up-to-date, 
accurate and complete list of all covered drugs applies beginning with 
the 2016 plan year, and to require that QHPs in the FFEs make available 
this information to HHS in a format and at times determined by HHS 
beginning with the 2016 plan year.
    Comment: Most commenters generally supported the proposed standards 
regarding the ease with which consumers should be able to view 
formulary drug lists on issuers' Web sites, and some recommended 
requirements on the format for the formulary drug list on the Web site. 
Many commenters wanted detailed cost-sharing information to be included 
on the formulary drug list, including deductible, copay, and specific 
coinsurance dollar amounts. Others opposed providing that level of 
detail on the formulary drug list because of difficulties in keeping 
the formulary drug list up to date and potential consumer confusion 
because every plan design, including each silver plan variant, would 
need a separate formulary drug list. Other commenters sought 
clarification on definitions, including all covered drugs and any 
restrictions on the manner in which the drug can be obtained. Others 
supported or opposed the proposed definition of ``up to date.''
    Response: The purpose of Sec.  156.122(d) is to improve the 
transparency of formulary drug lists for plans required to cover the 
essential health benefits by requiring accurate, complete and up-to-
date information on the drugs that the plan covers to assist consumers. 
Thus, while we recognize the value in providing consumers with detailed 
cost-sharing information on the formulary drug list (such as the 
enrollee's applicable pharmacy deductible, copayment, or cost-sharing 
percentage for the enrollee), our goal with this provision is to ensure 
that the formulary drug list is accurate, complete, and up-to-date. 
Providing detailed cost-sharing information on the formulary drug list 
is not a typical practice in the private health insurance market. 
Therefore, we are finalizing Sec.  156.122(d) as proposed at this time. 
Issuers' formulary drug lists must include any tiering structure that 
it has adopted and any restrictions on the manner in which a drug can 
be obtained, and while we are not requiring detailed cost-sharing 
information under Sec.  156.122(d) at this time, we encourage issuers 
to provide this level of transparency on the formulary drug list where 
feasible to help consumers make more informed decisions about their 
health insurance coverage. In general, consumers should be able to use 
the formulary drug list in conjunction with the summary of benefits and 
coverage or other plan documents to determine their applicable cost 
sharing. For example, a formulary drug list would list which drugs are 
in Tier 1 (or similar category of prescription drug coverage), and the 
SBC would indicate that drugs in Tier 1, or similar category, have a 
$20.00 copayment. While the SBC must list any applicable coinsurance 
and major limitations or exceptions, an issuer's SBC would not list the 
specific dollar amounts an enrollee would pay for a drug that is 
subject to coinsurance, given that the SBC is only a summary of cost-
sharing features. For the purpose of this section, references to the 
URL have been removed to clarify that our standards apply to the actual 
formulary drug list, not the Web address.
    For the purpose of Sec.  156.122(d), for a formulary drug list to 
be considered complete, the formulary drug list must list all drugs 
that are EHB and when the formulary drug list specifies all drug names 
that are currently covered by the plan at that time. This requirement 
means that issuers are prohibited from listing only the most commonly 
prescribed medications. The formulary drug list does not have to list 
every covered formulation for each covered drug, but the issuer should 
be prepared to provide information on the specific formulations upon 
request to the plan's enrollees, prospective enrollees, the State, the 
Exchange, HHS, OPM, and the

[[Page 10820]]

general public. Issuers must also include accurate information on any 
restrictions on the manner in which the drug can be obtained in the 
formulary drug list, including prior authorization, step therapy, 
quantity limits, and any access restrictions related to obtaining the 
drug from a brick and mortar retail pharmacy, such as only being 
accessible through a mail-order pharmacy because the drug requires 
special handling. The formulary drug list must be up-to-date, which 
means that the formulary drug list must accurately list all of the 
health plan's covered drugs at that time. To meet this requirement, we 
would expect that the issuer would make any coverage changes 
simultaneously with updating the formulary drug list and therefore, if 
an issuer makes a change to its formulary, it would not implement the 
change until the issuer has posted the change to the formulary drug 
list on its Web site. We understand that our standard for updating the 
formulary drug list is stricter than is the case for the typical 
private market plan, but we believe that the value of increased 
transparency to consumers is critically important to ensuring that 
consumers are making informed decisions about their health care. 
Issuers are prohibited from limiting the updates to their formulary 
drug list to only formulary changes that negatively impact enrollees, 
such as removal of drugs from the formulary drug list. Also, the URL 
that takes a consumer to the issuer's formulary drug list on its Web 
site must be the same direct formulary drug list URL link for obtaining 
information on prescription drug coverage in the SBC, in accordance 
with Sec.  147.200(a)(2)(i)(K), and for QHPs on the Exchanges, this 
link must be the same link displayed to prospective enrollees on the 
applicable Exchange Web site. As discussed in the preamble to Sec.  
156.250, in addition to the requirements imposed by Sec.  156.250, QHP 
issuers may also have duties to make this information accessible to 
individuals with disabilities and individuals with LEP under Federal 
civil rights laws that also might apply, including section 1557 of the 
Affordable Care Act, section 504 of the Rehabilitation Act of 1973, and 
Title VI of the Civil Rights Act. For the FFEs, this URL must be the 
one that issuers provide through the QHP application for display on 
HealthCare.gov. While these regulations do not prohibit issuers from 
providing their drug lists in a searchable or dynamic format on their 
Web sites, consumers should not have to create an account, be an 
enrollee in the plan, or navigate multiple Web pages to view the 
formulary drug list. Specifically, the link needs to be the direct link 
to the formulary drug list. Further, if an issuer has multiple 
formulary drug lists, consumers should be able to easily discern which 
formulary drug list applies to which plan. Also, the Web page should 
clearly list which plans the formulary drug list applies to using the 
marketing name for the plan, which for Marketplace plans would be the 
marketing name used on HealthCare.gov. The revised Sec.  156.122(d) is 
effective beginning with the 2016 plan year, and we expect that most 
issuers already have a formulary drug list available via a URL link and 
will only need to make certain minor modifications to its link to be in 
compliance with the new Sec.  156.122(d)(1).
    Comment: Several commenters supported the proposal for issuers to 
make the formulary drug list information available in a machine-
readable file or a format specified by HHS, stating that this would 
improve transparency and foster development of additional tools to help 
consumers make informed decisions about their coverage. Commenters 
recommended types of information that should be included and the 
development of tools similar to tools developed by the Medicare Part D 
program. Others supported allowing various options on how to search for 
covered drugs, such as by the drug name or listing alphabetically. 
Conversely, some commenters opposed the proposal, expressing concerns 
about data integrity, accuracy, confidentiality, and managing third 
parties' use of this data. Some commenters were concerned that the 
machine-readable data collection would be duplicative, and noted that 
implementing any standard would be time-consuming and requested the 
opportunity to provide additional stakeholder feedback. Some commenters 
suggested use of an application programming interface (API) to support 
making formulary drug list information more transparent.
    Response: We believe a machine-readable file or a format specified 
by HHS will increase transparency by allowing software developers to 
access this information and create innovative and informative tools to 
help enrollees better understand plans' formulary drug lists. Based on 
the comments received asking us to make formulary drug list information 
more transparent and accessible to consumers, HHS is finalizing this 
rule by adding Sec.  156.122(d)(2) to require QHPs in the FFEs to make 
available the information on the formulary drug list on its Web site in 
a HHS specified format and also submit this information to HHS, in a 
format and at times determined by HHS. We agree with commenters that 
creating a vehicle for consumers to easily determine which plans cover 
which drugs will help consumers select QHPs that best meet their needs. 
We recognize that this will require issuer resources, and will provide 
further details about the specific data elements, frequency of updates, 
file types, and other crucial information in future guidance.
iv. Section 156.122(e)
    Under Sec.  156.122(e), we proposed to require that enrollees be 
provided with the option to access their prescription drug benefit 
through retail (brick-and-mortar or non-mail order) pharmacies. This 
requirement would mean that a health plan that is required to cover the 
EHB package cannot have a mail-order only prescription drug benefit. 
This proposed requirement would still allow a health plan to charge a 
different cost-sharing amount when an enrollee obtains a drug at an in-
network retail pharmacy than he or she would pay for obtaining the same 
covered drug at a mail-order pharmacy. However, as a part of these 
requirements, we proposed to clarify that this additional cost sharing 
for the covered drug would count towards the plan's annual limitation 
on cost sharing under Sec.  156.130 and would need to be taken into 
account when calculating the actuarial value of the health plan under 
Sec.  156.135. Additionally, under this proposed policy, issuers would 
still retain the flexibility to charge a lower cost-sharing amount when 
obtaining the drug at an in-network retail pharmacy. While this 
proposal requires coverage of a drug at an in-network retail pharmacy, 
for plans that do not have a network, the enrollee would be able to go 
to any pharmacy to access their prescription drug benefit and those 
plans would, therefore, be in compliance with this proposed standard.
    As part of this proposed policy, we proposed that the health plan 
may restrict access to a particular drug when: (1) The FDA has 
restricted distribution of the drug to certain facilities or 
practitioners (including physicians); or (2) appropriate dispensing of 
the drug requires special handling, provider coordination, or patient 
education that cannot be met by a retail pharmacy. If the health plan 
finds it necessary to restrict access to a drug for either of the two 
reasons listed above, we proposed that it must indicate this restricted 
access on the formulary drug list under Sec.  156.122(d). We are 
finalizing these policies as proposed with a technical edit to Sec.  
156.122(e)(2) to replace

[[Page 10821]]

``higher'' cost sharing with ``different'' cost sharing.
    Comment: Several commenters supported proposed Sec.  156.122(e) as 
helping to ensure that plans do not discourage enrollment by, and thus 
discriminate against, transient individuals and individuals who have 
conditions that they wish to keep confidential and discussed other 
cases in which obtaining a prescription from a mail-order pharmacy is 
difficult for an enrollee, such as cases where an enrollee with a 
serious health condition may be unable to wait for the prescription to 
be filled via a mail-order pharmacy. Other commenters opposed these 
requirements, stating that it would be costly, limit consumer choice of 
plans that use mail-order benefits, be contrary to specialty drug 
market practices, not account for the quality standards used by 
specialty pharmacies, be contrary to precedent from other Federal 
programs, and be duplicative. Some commenters were concerned that the 
issue is outside the scope of EHB, is not reflective of a typical 
employer plan, does not take into account existing privacy laws, and 
should require additional rulemaking that, for instance, takes into 
account the NAIC's pending model act on network adequacy. Other 
commenters wanted clarification that preventive services drugs must be 
covered at no cost sharing at retail pharmacies, and other commenters 
discussed similar and overlapping State requirements. Several 
commenters wanted additional exceptions, such as an exclusion related 
to specialty drugs and pharmacies, and some commenters supported 
implementing this provision in 2016 while others supported a 2017 
implementation date.
    Response: The intention of Sec.  156.122(e) is to ensure all 
enrollees in plans required to cover EHB are able to use the 
prescription drug benefit if needed, and is intended to expand options 
for these enrollees. Thus, the purpose of this policy is not to limit 
the ability of issuers to use mail-order pharmacies--issuers can 
continue to influence consumer choice through cost sharing. The issuers 
need only provide enrollees with the option to access drugs that are 
not exempted under Sec.  156.122(e)(1)(i) and (ii) at an in-network 
retail pharmacy. There are instances in which obtaining a drug through 
a mail-order pharmacy may not be a viable option, such as when an 
individual does not have a stable living environment and does not have 
a permanent address, or when a retail pharmacy option better ensures 
that consumers can access their EHB prescription drug benefit on short 
notice. In such cases, we do not believe that making drugs available 
only by mail order constitutes fulfilling the obligation under section 
1302(b)(1)(F) of the Affordable Care Act to provide prescription drug 
coverage as part of EHB. We also believe that making drugs available 
only by mail order could discourage enrollment by, and thus 
discriminate against, transient individuals and individuals who have 
conditions that they wish to keep confidential. We also believe that 
this provision is important to ensure uniformity in benefit design and 
consumer choice. Therefore, we are finalizing Sec.  156.122(e) as 
proposed and with a clarification that this policy will be effective 
beginning with the 2017 plan year.
    Issuers retain the ability to charge different cost sharing for 
drugs obtained at a retail pharmacy, but for non-grandfathered health 
plans in the individual and small group markets that must provide 
coverage of the essential health benefit package under section 1302(a) 
of the Affordable Care Act, all cost sharing, including any difference 
between the cost sharing for mail order and the cost sharing for 
retail, must count towards the plan's annual limitation on cost sharing 
in accordance with Sec.  156.130(a) and must be taken into account when 
calculating the actuarial value of the health plan in accordance with 
Sec.  156.135. We are clarifying that these issuers can apply higher or 
lower cost sharing, that is, nothing requires an issuer to use higher 
cost sharing for drugs obtained from a retail pharmacy. As a result, 
some or all of the costs associated with this option may be passed on 
to the consumer who chooses to use it. However, nothing in this 
provision supersedes State law that may apply other cost sharing 
standards to mail-order pharmacies. For plans that do not have a 
network, enrollees should be able to go to any pharmacy to access their 
prescription drug benefit, and those plans would, therefore, be in 
compliance with this standard. In addition, this requirement is not 
intended to disrupt or supersede the rules regarding cost sharing for 
preventive service benefits when such coverage includes drugs.
    In response to comments, we considered an exceptions process under 
which an enrollee could make a request to obtain the prescription at a 
brick and mortar retail pharmacy. However, we are concerned that if we 
allow an exception process, the issuer would retain the option to deny 
the request, and such a process could be seen as burdensome on the 
enrollee. In particular, an exception process could be burdensome for 
enrollees with complex health conditions if they had to seek an 
exception request for each of their prescription drugs that they take.
    We understand that specialty pharmacies provide more integrated 
services, aimed at improving clinical outcomes while limiting costs 
relating to the delivery and management of the product, than a typical 
mail-order pharmacy or a brick and mortar retail pharmacy. We 
understand that drugs on the specialty tier of a formulary are not 
necessarily the same drugs that a specialty pharmacy would provide. Our 
intention with this policy was not to disrupt the specialty pharmacy 
market, and we understand that exceptions will be needed for many drugs 
that are only accessible via a specialty pharmacy. For these reasons, 
we are finalizing the exceptions that allow a health plan to restrict 
access to certain drugs in limited circumstances. As part of this 
requirement, a health plan may restrict access to mail order, which may 
include specialty pharmacies, for a particular drug when: (1) The FDA 
has restricted distribution of the drug to certain facilities or 
practitioners (including physicians); or (2) appropriate dispensing of 
the drug requires special handling, provider coordination, or patient 
education that cannot be met by a retail pharmacy. For instance, 
certain drugs have a Risk Evaluation and Mitigation Strategy (REMS) 
that includes Elements to Assure Safe Use that may require that 
pharmacies, practitioners, or health care settings that dispense the 
drug be specially certified and that may limit access to the drugs to 
certain health care settings.\52\ If the health plan finds it necessary 
to restrict access to a drug for either of the reasons listed above, it 
must indicate this restricted access on the formulary drug list that 
plans must make publicly available under Sec.  156.122(d). The 
provisions at Sec.  156.122(e)(1)(i) and (ii) allow an issuer to 
restrict access to certain drugs at a retail pharmacy for the specific 
reasons noted in those paragraphs. Although issuers may subject these 
drugs to reasonable utilization management techniques, the fact that 
these drugs have restricted access should not in and of itself be a 
justification for applying these techniques to these drugs.
---------------------------------------------------------------------------

    \52\ FDA requires a Risk Evaluation and Mitigation Strategies 
(REMS) for certain drugs to ensure that the benefits of a drug or 
biological product outweigh its risks. The following is FDA's list 
of currently approved REMS at: http://www.fda.gov/drugs/drugsafety/postmarketdrugsafetyinformationforpatientsandproviders/ucm111350.htm.
---------------------------------------------------------------------------

    Issuers must implement the revised Sec.  156.122(e) no later than 
for the start of

[[Page 10822]]

the 2017 plan year, and we have added this clarification to the 
regulation.
v. Other Comments on the Preamble to Sec.  156.122
    In addition to the proposed provisions above, we urged issuers to 
temporarily cover non-formulary drugs (including drugs that are on an 
issuer's formulary but require prior authorization or step therapy) as 
if they were on formulary (or without imposing prior authorization or 
step therapy requirements) during the first 30 days of coverage. We 
encouraged plans to adopt this policy to accommodate the immediate 
needs of enrollees, while allowing the enrollee sufficient time to go 
through the prior authorization or drug exception processes.
    Comment: Some commenters sought clarification about coverage of 
medical drugs and preventive service drugs. Others recommended 
requiring limits to formulary changes during the plan year. Several 
commenters recommended that we require issuers to temporarily cover 
non-formulary drugs during the first 30 days of coverage or longer and 
other commenters were against this policy, stating that it is not a 
typical requirement in the private market, and that it is costly and 
counterintuitive to formulary transparency. Other commenters supported 
transition policies, but acknowledged the importance of flexibility for 
issuers in developing these policies.
    Response: Preventive services, including preventive service drugs, 
are required to be covered as part of EHB. Non-grandfathered group 
health plans and health insurance coverage must provide benefits for 
preventive health services, including preventive service drugs, without 
cost sharing, consistent with the requirements of section 2713. 
Similarly, the rules set forth under Sec.  156.122 are specific to 
coverage of drugs under the prescription drug EHB category. Issuers 
could cover drugs administered as part of another service (such as 
during an inpatient hospitalization or a physician service) under the 
EHB category that covers that service, in addition to covering the drug 
under the prescription drug EHB category. We believe this clarification 
reflects the current practice of issuers.
    We are also concerned about issuers making mid-year formulary 
changes, especially changes that negatively affect enrollees. We are 
monitoring this issue to consider whether further standards are needed. 
We also note that, under guaranteed renewability requirements and the 
definitions of ``product'' and ``plan,'' issuers generally may not make 
plan design changes, including changes to drug formularies, other than 
at the time of plan renewal. We recognize that certain mid-year changes 
to drug formularies related to the availability of drugs in the market 
may be necessary and appropriate.
    We are not requiring coverage of a transitional fill at this time. 
As stated in the proposed rule, we will consider whether additional 
requirements may be needed in this area. We remain concerned that new 
enrollees may be unfamiliar with what is covered on their new plan's 
formulary drug list and the process and procedures under the plan. 
Further, some new enrollees whose drugs are covered by the plan's 
formulary may need to obtain prior authorization or go through step 
therapy to have coverage for their drugs, and others may need time to 
work with their provider to determine which formulary drug the 
individual should be transitioned to. For these reasons, we urge 
issuers to temporarily fill drugs that are not on the formulary (or are 
on an issuer's formulary but require prior authorization or step 
therapy) as if they were on formulary (or without imposing prior 
authorization or step therapy requirements) during the first 30 days of 
coverage. We encourage plans to adopt this policy to accommodate the 
immediate needs of enrollees, while allowing the enrollee sufficient 
time to go through the prior authorization or drug exception processes.
    Comment: Some commenters recommended that we implement the 
prescription benefit requirements in 2017 or later. Others recommended 
that all of the prescription drug benefit changes be implemented in 
2016. Some had separate recommendations for the timing or only 
commented on the timing for certain requirements.
    Response: We recognize that certain prescription benefit changes 
under Sec.  156.122 will be easier to implement than others. For that 
reason, we are finalizing our proposal effective dates for Sec.  
156.122(c) and new Sec.  156.122(d), such that they are effective for 
plan years beginning or after January 1, 2016. These requirements are 
typical of the current market and would require updating and modifying 
of systems and procedures to align with the finalized policy. We are 
finalizing our proposed effective dates for the revisions to Sec.  
156.122(a) and new Sec.  156.122(e) such that they are effective for 
plan years beginning on or after January 1, 2017 to better ensure a 
smooth transition in implementing these policies.
e. Prohibition on Discrimination (Sec.  156.125)
    Section 1302(b)(4) of the Affordable Care Act directs the Secretary 
to address certain standards in defining EHB, including elements 
related to balance, discrimination, the needs of diverse sections of 
the population, and denial of benefits. We have interpreted this 
provision, in part, as a prohibition on discrimination by issuers 
providing EHB. Under Sec.  156.125, which implements the prohibition on 
discrimination provisions, an issuer does not provide EHB if its 
benefit design, or the implementation of its benefit design, 
discriminates based on an individual's age, expected length of life, 
present or predicted disability, degree of medical dependency, quality 
of life, or other health conditions.
    As described in the proposed rule, since we finalized Sec.  
156.125, we have become aware of benefit designs that we believe would 
discourage enrollment by individuals based on age or based on health 
conditions, in effect making those plan designs discriminatory, thus 
violating this prohibition. Some issuers have maintained limits and 
exclusions that were included in the State EHB benchmark plan. As we 
have previously stated in guidance, EHB-benchmark plans may not reflect 
all requirements effective for plan years starting on or after January 
1, 2014. Therefore, when designing plans that are substantially equal 
to the EHB-benchmark plan, issuers should design plan benefits, 
including coverage and limitations, to comply with requirements and 
limitations that apply to plans beginning in 2014.\53\
---------------------------------------------------------------------------

    \53\ Guide to Reviewing EHB Benchmark Plans-- http://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.html#review 
benchmarks.
---------------------------------------------------------------------------

    In the proposed rule, we discussed three examples of potentially 
discriminatory practices: (1) Attempts to circumvent coverage of 
medically necessary benefits by labeling the benefit as a ``pediatric 
service,'' thereby excluding adults; (2) refusal to cover a single-
tablet drug regimen or extended-release product that is customarily 
prescribed and is just as effective as a multi-tablet regimen, absent 
an appropriate reason for such refusal; and (3) placing most or all 
drugs that treat a specific condition on the highest cost tiers.
    In this final rule, CMS adopts the same approach as described in 
the proposed rule. As we indicated in the proposed rule and the 2014 
Letter to Issuers, we will notify an issuer when we see an indication 
of a reduction in the generosity of a benefit in some

[[Page 10823]]

manner for subsets of individuals that is not based on clinically 
indicated, reasonable medical management practices.\54\ We conduct this 
examination whenever a plan subject to the EHB requirement reduces 
benefits for a particular group. Issuers are expected to impose 
limitations and exclusions based on clinical guidelines and medical 
evidence, and are expected to use reasonable medical management. 
Issuers may be asked to submit justification with supporting 
documentation to HHS or the State explaining how the plan design is not 
discriminatory.
---------------------------------------------------------------------------

    \54\ Letter to Issuers on Federally-facilitated and State 
Partnership Exchanges, April 5, 2013, page 15 and 2015 Letter to 
Issuers in the Federally facilitated Marketplaces, March 14, 2014, 
page 29.
---------------------------------------------------------------------------

    We note that other nondiscrimination and civil rights laws may 
apply, including the Americans with Disabilities Act, section 1557 of 
the Affordable Care Act, Title VI of the Civil Rights Act of 1964, the 
Age Discrimination Act of 1975, section 504 of the Rehabilitation Act 
of 1973 and State law. Compliance with Sec.  156.125 is not 
determinative of compliance with any other applicable requirements, and 
Sec.  156.125 does not apply to the Medicaid and CHIP programs, but a 
parallel provision applies to EHBs furnished by Medicaid Alternative 
Benefit Plans.
    Comment: Many commenters requested that we clarify that the 
examples provided are only examples and not per se discriminatory. 
Other commenters requested that we codify the examples and suggested 
additional examples of discriminatory practices that should be codified 
as well.
    Response: We are not prohibiting certain practices in regulatory 
text at this time. Several factors must be taken into consideration 
during benefit design, and a discrimination determination is often 
dependent on the specific facts and circumstances. However, the 
examples identified in the proposed rule contain indications that they 
are discriminatory, and therefore further investigation by the 
enforcing entity may be required. We strongly caution issuers that the 
examples cited appear discriminatory in their application when looking 
at the totality of the circumstances, and may therefore be prohibited.
    Additionally, as described later in this preamble, section 1302(b) 
of the Affordable Care requires that the definition of EHB be based on 
the scope of benefits provided under a typical employer plan, subject 
to requirements under the joint interpretive jurisdiction of the 
Departments of HHS, Labor, and the Treasury.\55\ Because the 
nondiscrimination provisions are related to many other such 
requirements, HHS will consult with relevant Federal agencies, such as 
the Departments of Labor and the Treasury, as necessary, in developing 
new guidance related to discriminatory benefit designs.
---------------------------------------------------------------------------

    \55\ To inform the determination as to the scope of a typical 
employer plan, section 1302(b)(2)(A) of the Affordable Care act 
requires the Secretary of Labor to conduct a survey of employer-
sponsored coverage to determine the benefits typically covered by 
employers, and to provide a report to the Secretary of HHS. These 
provisions suggest that, while detailed requirements for EHB in the 
individual and small group health insurance markets were deemed 
necessary, the benefits covered by typical employer plans providing 
primary coverage at the time the Affordable Care Act was enacted 
were seen as sufficient to satisfy the Act's objectives for the 
breadth of benefits needed for health plan coverage and, in fact, to 
serve as the basis for determining EHB.
---------------------------------------------------------------------------

    Comment: Some commenters asked whether discrimination would be 
identified during certification or approval and therefore a finding of 
discrimination would be prospective only.
    Response: As provided under Sec.  156.125(a), an issuer does not 
provide EHB if the implementation of a benefit design discriminates 
based on an individual's age, expected length of life, present or 
predicted disability, degree of medical dependency, quality of life, or 
other health conditions. Some discriminatory practices might not be 
discovered until an enrollee files a complaint with the appropriate 
body. Once a discriminatory practice is identified, the issuer may be 
asked to submit a justification with supporting documentation to HHS or 
the State explaining why the practice is not discriminatory.
    Comment: Some commenters expressed concern regarding the example of 
placing most or all drugs for a certain condition on a high cost tier. 
They noted that drug tiering reflects current realities of the drug 
market and is based on costs. The commenters asked CMS to clarify that 
having a specialty tier is not discriminatory.
    Response: The examples provided in the proposed rule are 
potentially discriminatory if there is no appropriate non-
discriminatory reason for the noted practice. Having a specialty tier 
is not on its face discriminatory; however, placing most or all drugs 
for a certain condition on a high cost tier without regard to the 
actual cost the issuer pays for the drug may often be discriminatory in 
application when looking at the totality of the circumstances, and 
therefore prohibited. When CMS or the State requests a justification 
for such a practice, issuers should be able to identify an appropriate 
non-discriminatory reason that supports their benefit design, including 
their formulary design.
    Comment: Several commenters requested more detailed information 
regarding how CMS and States monitor and enforce discrimination.
    Response: Enforcement of the requirement to cover EHB is governed 
by section 2723 of the PHS Act, which looks first to States for 
enforcement, then to the Secretary where a State informs CMS that it is 
not enforcing the requirement, or CMS finds that the State has failed 
to substantially enforce. Therefore the State, or CMS in States that 
are not substantially enforcing market-wide standards, is responsible 
for enforcing EHB standards, including the non-discrimination standard. 
In an FFE, CMS notifies an FFE issuer when we see an indication of a 
reduction in the generosity of a benefit for a subset of individuals 
and it is not apparent that the reduction is based on a clinical 
indication or reasonable medical management practices.\56\ We conduct 
this examination whenever a plan on an FFE reduces benefits for a 
particular group. Limitations and exclusions are expected to be based 
on clinical guidelines and medical evidence, and medical management 
standards are expected to be reasonable. Issuers may be asked to submit 
a justification with supporting documentation to CMS or the State 
explaining how the plan design is not discriminatory.
---------------------------------------------------------------------------

    \56\ Letter to Issuers on Federally-facilitated and State 
Partnership Exchanges, April 5, 2013, page 15 and 2015 Letter to 
Issuers in the Federally-facilitated Marketplaces, March 14, 2014, 
page 29.
---------------------------------------------------------------------------

    HHS's Office for Civil Rights (OCR) has independent authority to 
enforce section 1557 of the Affordable Care Act (42 U.S.C. 18116), 
which prohibits discrimination on the basis of race, color, national 
origin, sex, age, or disability in any health program or activity, any 
part of which receives Federal financial assistance. OCR also enforces 
Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d, et seq.), 
section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and the 
Age Discrimination Act of 1975 (42 U.S.C. 6101, et seq.) and their 
respective implementing regulations, which prohibit discrimination on 
the basis of race, color, national origin, disability, or age in health 
programs and activities that receive Federal financial assistance.
f. Cost-Sharing Requirements (Sec.  156.130)
    We proposed to amend Sec.  156.130 to clarify how the annual 
limitation on

[[Page 10824]]

cost sharing applies to plans that operate on a non-calendar year, and 
to make a technical correction to the special rule for network plans. 
First, we proposed to add new Sec.  156.130(b), which would provide 
that non-calendar year plans that are subject to the annual limitation 
on cost sharing in section 1302(c)(1) must adhere to the annual 
limitation that is specific to the calendar year in which the plan 
begins. That annual limitation amount would serve as the maximum for 
the entire plan year. The purpose of this proposal is to ensure that 
the enrollee would only be required to accumulate cost sharing that 
applies to one annual limit per year. We also stated that under section 
1302(c)(3) of the Affordable Care Act, the term ``cost sharing'' 
includes deductibles, coinsurance, copayments, or similar charges, and 
any other expenditure required of an individual that is a qualified 
medical expense (within the meaning of section 223(d)(2) of the Code) 
for EHB covered under the plan. Expenditures that meet this definition 
of cost sharing must, under section 1302(c) of the Affordable Care Act, 
count toward the annual limitation on cost sharing incurred under a 
health plan that is required to cover EHB. Cost sharing does not 
include premiums, balance billing amounts for non-network providers, or 
spending for non-covered services. This definition was codified in 
Sec.  155.20.
    Additionally, we proposed to make a technical correction to the 
text at Sec.  156.130(c) on the special rule for network plans to 
replace ``shall not'' with ``is not required to.'' This proposed 
amendment was intended to clarify that issuers have the option to count 
the cost sharing for out-of-network services towards the annual 
limitation on cost sharing, but are not required to do so. This out-of-
network cost sharing would not count toward the calculation of 
actuarial value under Sec.  156.135(b)(4) or meeting a given level of 
coverage under Sec.  156.140.
    Lastly, in the proposed rule, we proposed clarifying that the 
annual limitation on cost sharing for self-only coverage applies to all 
individuals regardless of whether the individual is covered by a self-
only plan or is covered by a plan that is other than self-only. In both 
of these cases, an individual's cost sharing for EHB may never exceed 
the self-only annual limitation on cost sharing. For example, under the 
proposed 2016 annual limitation on cost sharing, if an other than self-
only plan has an annual limitation on cost sharing of $10,000 and one 
individual in the family plan incurs $20,000 in expenses from a 
hospital stay, that particular individual would only be responsible for 
paying the cost sharing related to the costs of the hospital stay 
covered as EHB up to the annual limit on cost sharing for self-only 
coverage (assuming an annual limitation of $6,850 for 2016, the maximum 
for that year). We sought comments on these proposed requirements and 
clarifications as well as whether other requirements and clarifications 
were needed. We are finalizing our proposal that the annual limitation 
on cost sharing for self-only coverage applies to all individuals 
regardless of whether the individual is covered by a self-only plan or 
is covered by a plan that is other than self-only and the technical 
correction we proposed to make to the text at Sec.  156.130(c).
    Comment: Several commenters were supportive of the proposed Sec.  
156.130(b) as ensuring that cost sharing for non-calendar plans accrues 
for a 12-month period, and ensuring that an enrollee only has to 
accumulate cost sharing towards one annual limitation on cost sharing. 
Other commenters opposed the proposed Sec.  156.130(b) because small 
employer plans typically operate on a non-calendar year basis, but 
accumulate towards a calendar year annual limitation on cost sharing. 
These commenters saw the proposed requirements as disruptive, confusing 
to consumers, and difficult to implement. Commenters asked for an 
exception from the new Sec.  156.130(b) for large and self-funded group 
health plans and indicated that issuers would need time to implement 
the rules, and would require a clear transitional policy.
    Response: The purpose of proposed Sec.  156.130(b) was to ensure 
that issuers could not reset the annual limitation on cost sharing more 
frequently than once a year and was not intended to disrupt the 
employer group health insurance market. After careful consideration of 
comments received, we are not finalizing this policy at this time. At 
this time, we believe it is important to retain flexibility in the 
employer health insurance market on the timeframe under which the 
employer sets the annual limitation on cost sharing, but we do maintain 
that the annual limitation cost sharing is to apply on an annual basis 
regardless of whether it is a calendar year or a non-calendar year 
plan.
    Comment: Some commenters were supportive of the proposed technical 
correction to Sec.  156.130(c) to replace ``shall not'' with ``is not 
required to.'' Some commenters recommended that we expand this 
requirement to require the counting of out-of-network services toward 
the annual limit on cost sharing, including in cases where the issuer 
is failing to meet network adequacy standards or in cases of emergency 
services, or to expand the types of cost sharing that must count 
towards the annual limitation on cost sharing.
    Response: The purpose of this correction was to better align this 
regulation with the Affordable Care Act Implementation FAQs (Set 18) 
that were prepared jointly by the Departments of Labor, HHS, and the 
Treasury.\57\ In this final rule, we do not intend to expand this 
requirement to require counting of out-of-network services toward the 
annual limitation on cost sharing and believe that requiring coverage 
of out-of-network services for cases where an enrollee is unable to 
access an in-network provider for covered services is beyond the scope 
of the regulation related to cost sharing requirements, which applies 
in different ways in a broad range of markets, some of which may be 
subject to varying network adequacy requirements. However, revised 
Sec.  156.130(c) ensures that an issuer has the option to count the 
cost sharing for these out-of-network services towards the annual 
limitation on cost sharing. In addition, issuers' obligations under 
Sec.  156.130(g) and Sec.  147.138(b)(3) regarding coverage of 
emergency services are applicable. Accordingly, we are finalizing these 
changes to Sec.  156.130(c) as proposed.
---------------------------------------------------------------------------

    \57\ http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs18.html. (January 8, 2014).
---------------------------------------------------------------------------

    Comment: Several commenters supported the clarification in the 
preamble that the self-only coverage limit for the annual limitation on 
cost sharing applies to all individuals regardless of whether the 
individual has other than self-only coverage, as a step toward greater 
consistency in consumer protections. Commenters who opposed this 
clarification were primarily concerned that this provision would limit 
the ability of issuers to offer high deductible health plans with a 
health savings account. Other commenters raised concerns about whether 
this clarification was within the Congressional intent of the statute, 
and whether this policy would be more generous than other Federal 
programs. Other commenters wanted additional clarification on how the 
annual limitation on cost sharing may be applied for other than self-
only coverage.
    Response: We believe that this clarification is an important 
consumer protection, as we are aware that some consumers have been 
confused by the applicability of the annual limitation on cost sharing 
in other than self-only

[[Page 10825]]

plans. Therefore, we are finalizing this clarification. The annual 
limitation on cost sharing for self-only coverage applies to all 
individuals regardless of whether the individual is covered by a self-
only plan or is covered by a plan that is other than self-only.
    Section 156.130 is specific to the annual limitation on cost 
sharing. While cost sharing incurred towards the deductible must count 
towards the annual limitation on cost sharing for EHB, the deductible 
limit is not regulated in the same manner as the annual limitation on 
cost sharing. Therefore, family high deductible health plans that count 
the family's cost sharing to the deductible limit can continue to be 
offered under this policy. The only limit will be that the family high 
deductible health plan cannot require an individual in the family plan 
to exceed the annual limitation on cost sharing for self-only coverage. 
We also note that this policy, that the annual limitation on cost 
sharing for self-only coverage applies to all individuals regardless of 
whether the individual is covered by a self-only plan or is covered by 
a plan that is other than self-only, would also apply to catastrophic 
plans under Sec.  156.155 and that plans are required to comply with 
reduced maximum annual limitation on cost sharing under Sec.  156.420. 
We note that 2016 plans must comply with this policy.
g. Premium Adjustment Percentage (Sec.  156.130)
    Section 1302(c)(4) of the Affordable Care Act directs the Secretary 
to determine an annual premium adjustment percentage, which is used to 
set the rate of increase for three parameters detailed in the 
Affordable Care Act: The maximum annual limitation on cost sharing 
(defined at Sec.  156.130(a)), the required contribution percentage by 
individuals for minimum essential health coverage the Secretary may use 
to determine eligibility for hardship exemptions under section 5000A of 
the Code, and the assessable payment amounts under section 4980H(a) and 
(b) of the Code (finalized at 26 CFR 54.4980H in the ``Shared 
Responsibility for Employers Regarding Health Coverage,'' published in 
the February 12, 2014 Federal Register (79 FR 8544)). Section 
156.130(e) provides that the premium adjustment percentage is the 
percentage (if any) by which the average per capita premium for health 
insurance coverage for the preceding calendar year exceeds such average 
per capita premium for health insurance for 2013, and that this 
percentage will be published annually in the HHS notice of benefit and 
payment parameters.
    We established a methodology for estimating average per capita 
premium for purposes of calculating the premium adjustment percentage 
in the 2015 Payment Notice. Under that methodology, the premium 
adjustment percentage is calculated based on the projections of average 
per enrollee employer-sponsored insurance (ESI) premiums from the NHEA, 
which is calculated by the CMS Office of the Actuary.
    Accordingly, using the ESI data, the premium adjustment percentage 
for 2016 is the percentage (if any) by which the most recent NHEA 
projection of per enrollee ESI premiums for 2015 ($5,744) exceeds the 
most recent NHEA projection of per enrollee ESI premiums for 2013 
($5,303).\58\ We are finalizing the proposed premium adjustment 
percentage for 2016 at 8.316047520 percent. We note that the 2013 
premium used for this calculation has been updated to reflect the 
latest NHEA data. We are also finalizing the following cost-sharing 
parameters for calendar year 2016, based on our finalized premium 
adjustment percentage for 2016.
---------------------------------------------------------------------------

    \58\ See http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology2012.pdf and Table 17 in http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2012.pdf for 
additional information.
---------------------------------------------------------------------------

    Maximum Annual Limitation on Cost Sharing for Calendar Year 2016. 
Under Sec.  156.130(a)(2), for the 2016 calendar year, cost sharing for 
self-only coverage may not exceed the dollar limit for calendar year 
2014 increased by an amount equal to the product of that amount and the 
premium adjustment percentage for 2016, and for other than self-only 
coverage, the limit is twice the dollar limit for self-only coverage. 
Under Sec.  156.130(d), these amounts must be rounded down to the next 
lowest multiple of 50. Using the premium adjustment percentage of 
8.316047520 for 2016 we established above, and the 2014 maximum annual 
limitation on cost sharing of $6,350 for self-only coverage, which was 
published by the IRS on May 2, 2013,\59\ we are finalizing the proposed 
2016 maximum annual limitation on cost sharing at $6,850 for self-only 
coverage and $13,700 for other than self-only coverage.
---------------------------------------------------------------------------

    \59\ See http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

    Comment: Two commenters expressed concern with the increase in the 
maximum limitation on cost sharing, and asked HHS to consider 
alternative factors to those that make up the methodology or an 
alternate methodology to protect patients from increasing out-of-pocket 
costs. One commenter stated that the proposed increase of $500 for 
self-only and $1,000 for family policies over the 2014 maximums will 
deter enrollees from using drugs, and continual annual increases of 
this magnitude would nullify the protection afforded patients from 
limits on out-of-pocket expenses. Another commenter stated that the 
proposed percentage increase far exceeds any recent percentage increase 
in the maximum annual limit on deductibles proposed by the Internal 
Revenue Service for High Deductible Health Plans, the index used to 
establish maximum annual limits on cost sharing in the first year of 
the Affordable Care Act. The commenter stated that consumers do not 
commonly experience both annual premium increases and significant 
increases in the cost of benefits.
    Response: We are finalizing the 2016 maximum annual limit on cost 
sharing as proposed. As discussed above, section 1302(c)(4) of the 
Affordable Care Act directs the Secretary to set the maximum limitation 
on cost sharing using an annual premium adjustment percentage. Other 
indices may use different factors. HHS recognizes that significant 
annual increases in out-of-pocket expenses would have a deleterious 
effect on consumers' ability to access health care. The methodology to 
establish the maximum annual limitation on cost sharing was finalized 
in the 2015 Payment Notice, and as stated there, we will consider 
adjusting the methodology in 2017 as additional data on health 
insurance premiums become available through the Exchanges and other 
sources.
h. Reduced Maximum Annual Limitation on Cost Sharing (Sec.  156.130)
    Sections 1402(a) through (c) of the Affordable Care Act direct 
issuers to reduce cost sharing for EHBs for eligible individuals 
enrolled in a silver level QHP. In the 2014 Payment Notice, we 
established standards related to the provision of these cost-sharing 
reductions. Specifically, in part 156 subpart E, we specified that QHP 
issuers must provide cost-sharing reductions by developing plan 
variations, which are separate cost-sharing structures for each 
eligibility category that change how the cost sharing required under 
the QHP is to be shared between the enrollee and the Federal 
government. At Sec.  156.420(a), we detailed the structure of these 
plan variations and specified that QHP

[[Page 10826]]

issuers must ensure that each silver plan variation has an annual 
limitation on cost sharing no greater than the applicable reduced 
maximum annual limitation on cost sharing specified in the annual HHS 
notice of benefit and payment parameters. Although the amount of the 
reduction in the maximum annual limitation on cost sharing is specified 
in section 1402(c)(1)(A) of the Affordable Care Act, section 
1402(c)(1)(B)(ii) of the Affordable Care Act states that the Secretary 
may adjust the cost-sharing limits to ensure that the resulting limits 
do not cause the AVs of the health plans to exceed the levels specified 
in section 1402(c)(1)(B)(i) (that is, 73 percent, 87 percent or 94 
percent, depending on the income of the enrollee(s)). Accordingly, we 
proposed to use a method we established in the 2014 Payment Notice for 
determining the appropriate reductions in the maximum annual limitation 
on cost sharing for cost-sharing plan variations. As finalized above, 
the 2016 maximum annual limitation on cost sharing is $6,850 for self-
only coverage and $13,700 for other than self-only coverage. We 
analyzed the effect on AV of the reductions in the maximum annual 
limitation on cost sharing described in the statute to determine 
whether to adjust the reductions so that the AV of a silver plan 
variation will not exceed the AV specified in the statute. Below, we 
describe our analysis for the 2016 benefit year and the results 
described in the proposed rule, which are being finalized as proposed.
    Reduced Maximum Annual Limitation on Cost Sharing for Benefit Year 
2016. Consistent with our analysis in the 2014 and 2015 Payment 
Notices, we developed three model silver level QHPs, and analyzed the 
impact on AV of the reductions described in the Affordable Care Act to 
the estimated 2016 maximum annual limitation on cost sharing for self-
only coverage ($6,850). The model plan designs are based on data 
collected for 2015 plan year QHP certification to ensure that they 
represent a range of plan designs that we expect issuers to offer at 
the silver level of coverage through the Exchange. For 2016, the model 
silver level QHPs included a PPO with a typical cost-sharing structure 
($6,850 annual limitation on cost sharing, $2,000 deductible, and 20 
percent in-network coinsurance rate), a PPO with a lower annual 
limitation on cost sharing ($4,600 annual limitation on cost sharing, 
$2,550 deductible, and 20 percent in-network coinsurance rate), and an 
HMO ($6,850 annual limitation on cost sharing, $2,700 deductible, 20 
percent in-network coinsurance rate, and the following services with 
copays that are not subject to the deductible or coinsurance: $500 
inpatient stay per day, $350 emergency department visit, $25 primary 
care office visit, and $50 specialist office visit). All three model 
QHPs meet the AV requirements for silver level health plans.
    We then entered these model plans into the proposed 2016 AV 
calculator developed by HHS and observed how the reductions in the 
maximum annual limitation on cost sharing specified in the Affordable 
Care Act affected the AVs of the plans. We found that the reduction in 
the maximum annual limitation on cost sharing specified in the 
Affordable Care Act for enrollees with a household income between 100 
and 150 percent of the FPL (\2/3\ reduction in the maximum annual 
limitation on cost sharing), and 150 and 200 percent of the FPL (\2/3\ 
reduction), would not cause the AV of any of the model QHPs to exceed 
the statutorily specified AV level (94 and 87 percent, respectively). 
In contrast, the reduction in the maximum annual limitation on cost 
sharing specified in the Affordable Care Act for enrollees with a 
household income between 200 and 250 percent of the FPL (\1/2\ 
reduction), would cause the AVs of two of the model QHPs to exceed the 
specified AV level of 73 percent. As a result, we are finalizing our 
proposal that the maximum annual limitation on cost sharing for 
enrollees in the 2016 benefit year with a household income between 200 
and 250 percent of the FPL be reduced by approximately \1/5\, rather 
than \1/2\. We are further finalizing as proposed a requirement that 
the maximum annual limitation on cost sharing for enrollees with a 
household income between 100 and 200 percent of the FPL be reduced by 
approximately \2/3\, as specified in the statute, and as shown in Table 
10. These reductions in the maximum annual limitation on cost sharing 
should adequately account for unique plan designs that may not be 
captured by our three model QHPs. We also note that selecting a 
reduction for the maximum annual limitation on cost sharing that is 
less than the reduction specified in the statute will not reduce the 
benefit afforded to enrollees in aggregate because QHP issuers are 
required to further reduce their annual limitation on cost sharing, or 
reduce other types of cost sharing, if the required reduction does not 
cause the AV of the QHP to meet the specified level.
    We note that for 2016, as described in Sec.  156.135(d), States are 
permitted to submit for approval by HHS State-specific data sets for 
use as the standard population to calculate AV. No State submitted a 
data set by the September 1 deadline.

  Table 10--Reductions in Maximum Annual Limitation on Cost Sharing for
                                  2016
------------------------------------------------------------------------
                                                        Reduced  maximum
                                     Reduced  maximum  annual limitation
                                    annual limitation   on cost sharing
       Eligibility category          on cost sharing     for other than
                                      for self-only        self-only
                                    coverage for 2016  coverage for 2016
------------------------------------------------------------------------
Individuals eligible for cost-                 $2,250             $4,500
 sharing reductions under Sec.
 155.305(g)(2)(i) (that is, 100-
 150 percent of FPL)..............
Individuals eligible for cost-                  2,250              4,500
 sharing reductions under Sec.
 155.305(g)(2)(ii) (that is, 150-
 200 percent of FPL)..............
Individuals eligible for cost-                  5,450             10,900
 sharing reductions under Sec.
 155.305(g)(2)(iii) (that is, 200-
 250 percent of FPL)..............
------------------------------------------------------------------------

    Comment: We received one comment supporting the proposed reductions 
in the maximum annual limitation on cost sharing for 2016 for enrollees 
with a household income between 200 and 250 percent of the FPL, with 
the caveat that HHS design policies in future plan years to lower up-
front cost sharing, such as through lower deductibles. Other commenters 
stated that HHS should consider reducing the cost-sharing limits for 
individuals with a household income between 200 and 400 percent of the 
FPL as the proposed cost-sharing limits may pose significant financial

[[Page 10827]]

challenge for enrollees with significant expenditures. One commenter 
urged HHS to systematically analyze the reduced annual limitation on 
cost sharing provided by cost-sharing reduction plans in each State or 
rating area for their impact on people with chronic illnesses.
    Response: As discussed in the proposed rule, selecting a reduction 
for the maximum annual limitation on cost sharing that is less than the 
reduction specified in the statute will not reduce the benefit afforded 
to enrollees in aggregate, because QHP issuers are required to further 
reduce their annual limitation on cost sharing, or other types of cost 
sharing, to meet the specified AV for the plan variation. Therefore, we 
are finalizing the reductions to the maximum annual limitation on cost 
sharing for 2016 as proposed.
i. Minimum Value (Sec.  156.145)
    Section 1401(a) of the Affordable Care Act added a new section 36B 
to the Code, providing a premium tax credit for certain individuals 
with household incomes between 100 percent and 400 percent of the FPL 
who enroll in, or who have one or more family members enrolled in an 
individual market QHP through an Exchange, who are not otherwise 
eligible for MEC. An employer-sponsored plan is MEC, but for purposes 
of the premium tax credit under section 36B(c)(2)(C)(ii) of the Code, 
an employee is generally treated as not eligible for MEC under an 
employer-sponsored plan unless the plan is affordable and provides 
minimum value (MV). An employer-sponsored plan provides MV if the 
plan's share of the total allowed costs of benefits provided under the 
plan is greater than or equal to 60 percent of the costs. An employee 
who is eligible for coverage under an employer-sponsored plan that is 
both affordable and provides MV to the employee may not receive a 
premium tax credit under section 36B of the Code for the employee's 
coverage in a QHP. If the employer coverage does not provide MV, the 
employee may be entitled to a premium tax credit even if the coverage 
is affordable.
    Section 1513 of the Affordable Care Act added a new section 4980H 
to the Code providing for shared responsibility for employers regarding 
health coverage. An applicable large employer that does not offer 
coverage that is affordable and provides MV may be liable for an 
employer shared responsibility payment under section 4980H of the Code 
if one or more of its full-time employees receives a premium tax 
credit.
    Under our regulations, the MV standard of 60 percent of the total 
allowed costs of benefits provided under the plan is based on an amount 
equivalent to the plan's share of total allowed costs required for a 
bronze level QHP offered on an Exchange. Section 1302(d)(2)(C) of the 
Affordable Care Act provides that regulations promulgated by the 
Secretary of HHS under section 1302(d)(2), addressing actuarial value, 
apply in determining under this title, the Public Health Service Act, 
and the Internal Revenue Code . . . the percentage of the total allowed 
costs of benefits provided under a group health plan or health 
insurance coverage that are provided by such plan or coverage. 
Accordingly, HHS regulations under section 1302(d) implementing 
actuarial value requirements, which an insurer offering essential 
health benefits (EHB) must meet for a non-grandfathered individual 
market or small group health insurance plan to be considered a bronze 
plan under section 1302(d)(1)(3) of the Affordable Care Act, also form 
the basis for determining the percentage of the total allowed costs of 
benefits provided for purposes of whether the value of coverage meets 
the MV standard under section 36B(c)(2)(C)(ii) of the Code.
    HHS published final regulations implementing section 1302(d)(2) on 
February 25, 2013 (78 FR 12834). The regulations at Sec.  156.20 define 
the percentage of the total allowed costs of benefits as (1) the 
anticipated covered medical spending for EHB coverage paid by a health 
plan for a standard population, (2) computed in accordance with the 
plan's cost sharing, and (3) divided by the total anticipated allowed 
charges for EHB coverage provided to the standard population. HHS 
regulations at Sec.  156.145(b)(2) apply this definition in the context 
of MV by taking into account benefits a plan provides that are included 
in any one of the State EHB benchmarks.
    The IRS and Treasury Department published proposed regulations on 
May 3, 2013 (78 FR 25909), applying the HHS regulations in defining MV 
for employer-sponsored plans. The proposed regulations provide that the 
MV percentage is determined by dividing a plan's anticipated medical 
spending (based on the plan's cost-sharing) for plan benefits that are 
EHB covered under a particular EHB benchmark plan for the MV standard 
population by the total allowed charges for EHB coverage for the 
standard population and converting the result to a percentage. Proposed 
26 CFR 1.36B-6(c). Taxpayers may apply the proposed regulations for 
taxable years ending before January 1, 2015.
    The final HHS regulations and proposed Treasury regulations allow 
plans to determine the MV percentage by using the MV Calculator 
published by HHS. It came to our attention that certain group health 
plan designs that provide no coverage of inpatient hospital services 
were being promoted, and that representations were being made, based on 
the MV Calculator, that these plan designs would cover 60 percent of 
the total allowed costs of benefits provided, and thus provide MV under 
the test in the current regulations. We understand that these designs 
have been promoted as a way of both minimizing the cost of the plan to 
the employer (a consequence not only of excluding inpatient 
hospitalization benefits but also of making an offer of coverage that a 
substantial percentage of employees will not accept) and avoiding 
potential liability for employer shared responsibility payments. By 
offering coverage that is affordable to the employee and that purports 
to provide MV, employers adopting these plan designs were seeking, to 
deny their employees the ability to obtain a premium tax credit that 
could result in the employer becoming subject to a section 4980H 
employer shared responsibility payment.
    In Notice 2014-69 (2014-48 IRB, November 24, 2014), released on 
November 4, 2014, HHS and Treasury advised that regulations would be 
proposed providing that plans that fail to provide substantial coverage 
of inpatient hospital or physician services do not provide MV. Allowing 
these designs to be treated as providing MV not only would allow an 
employer to avoid the shared responsibility payment that the statute 
imposes when an employer does not offer its full-time employees 
adequate health coverage, but would adversely affect employees 
(particularly those with significant health risks) who understandably 
would find this coverage unacceptable, by denying them access to a 
premium tax credit for individual coverage purchased through an 
Exchange. Plans that omit critical benefits used disproportionately by 
individuals in poor health will enroll far fewer of these individuals, 
effectively driving down employer costs at the expense of those who, 
because of their individual health status are discouraged from 
enrolling.
    That the MV standard may be interpreted to require that employer-
sponsored plans cover critical benefits is evident in the structure of 
the Affordable Care Act, the context in which the grant of the 
authority to the Secretary to prescribe regulations under section 1302 
was enacted, and the

[[Page 10828]]

policy underlying the legislation. Section 1302(b) authorizes the 
Secretary of HHS to define EHB to be offered by individual market and 
small group health insurance plans, provided that this definition 
include at least 10 specified categories of benefits, and that the 
benefits be equal to the scope of benefits provided under a typical 
employer plan. To inform this determination as to the scope of a 
typical employer plan, section 1302(b)(2)(A) provides that the 
Secretary of Labor shall conduct a survey of employer-sponsored 
coverage to determine the benefits typically covered by employers, 
including multiemployer plans, and provide a report on such survey to 
the Secretary [of HHS].\60\ These provisions suggest that, while 
detailed requirements for EHB in the individual and small group health 
insurance markets were deemed necessary, the benefits covered by 
typical employer plans providing primary coverage at the time the 
Affordable Care Act was enacted were seen as sufficient to satisfy the 
Act's objectives for the breadth of benefits needed for health plan 
coverage and, in fact, to serve as the basis for determining EHB. They 
also suggest that any meaningful standard of minimum coverage may 
require providing certain critical benefits.
---------------------------------------------------------------------------

    \60\ See Department of Labor. Special Report: Selected Medical 
Benefits: A Report from the Department of Labor to the Department of 
Health and Human Services. http://www.bls.gov/ncs/ebs/sp/selmedbensreport.pdf.
---------------------------------------------------------------------------

    Employer-sponsored plans in the large group market and self-insured 
employers continue to have flexibility in designing their plans. They 
are not required to cover all EHB. Providing flexibility, however, does 
not mean that these plans can offer whatever benefits they choose and 
automatically meet MV requirements. A plan that excludes substantial 
coverage for inpatient hospital and physician services is not a health 
plan in any meaningful sense and is contrary to the purpose of the MV 
requirement to ensure that an employer-sponsored plan, while not 
required to cover all EHB, nonetheless must offer coverage with minimum 
value at least roughly comparable to that of a bronze plan offered on 
an Exchange.
    For these reasons, the Secretary has concluded that the provisions 
of section 1302(d)(2) of the Affordable Care Act--requiring that the 
regulations for determining the percentage of the total allowed costs 
of benefits that apply to plans that must cover all EHB also be applied 
as a basis for determining minimum value--reflect a statutory design to 
provide basic minimum standards for health benefits coverage through 
the MV requirement, without requiring large group market plans and 
self-insured plans to meet all EHB standards. Given the scope of 
benefits covered by typical employer plans, the MV requirement is 
properly viewed as a means of ensuring that employer-sponsored plans 
satisfy basic minimum standards while also accommodating flexibility in 
the design of those plans.
    Employers have been able to claim that plans without coverage of 
inpatient hospital services provide MV under the current quantitative 
MV test by designing a benefit package that, based on standardized 
actuarial assumptions used in the MV calculator, offsets the absence of 
actuarial value derived from spending on inpatient hospital coverage 
with increased spending on other benefits. Accordingly, some plan 
designs may pass the current quantitative test without offering a 
critical benefit universally understood to be included in any minimally 
acceptable employer health plan coverage, and which the Department of 
Labor study determined was included in all employer plans it surveyed.
    As noted previously, we have concluded that the quantitative test 
for MV is not exclusive. Accordingly, we are finalizing our proposal to 
amend Sec.  156.145 to require that, to provide MV, an employer-
sponsored plan not only must meet the quantitative standard of the 
actuarial value of benefits, but also must provide a benefit package 
that meets a minimum standard of benefits. Specifically, we are 
finalizing as proposed the policy to revise Sec.  156.145 to provide 
that, to satisfy MV, an employer plan must provide substantial coverage 
of both inpatient hospital services and physician services.
    We are not requiring that large employer or self-insured employer 
group health plans provide all EHB as defined under section 1302 of the 
Affordable Care Act. Rather, we are only requiring that, to provide MV, 
employer-sponsored plans provide substantial coverage of the two types 
of benefits that we believe were envisioned for health plan coverage 
meeting the MV standard. We have concluded that plans that omit these 
types of coverage fail to meet universally accepted minimum standards 
of value expected from, and inherent in the nature of, any arrangement 
that can reasonably be called a health plan intended to provide the 
primary health coverage for employees.
    Consistent with Notice 2014-69, we are finalizing our proposal that 
these changes to our regulations on MV will apply to employer-sponsored 
plans, including plans that are in the middle of a plan year, 
immediately on the effective date of the final regulations. However, 
because some employers adopted plans prior to publication of Notice 
2014-69, we are finalizing our proposal that the final regulations not 
apply before the end of the plan year (as in effect under the terms of 
the plan on November 3, 2014) to plans that before November 4, 2014, 
entered into a binding written commitment to adopt, or began enrolling 
employees into, the plan, so long as that plan year begins no later 
than March 1, 2015. For these purposes, a binding written commitment 
exists when an employer is contractually required to pay for an 
arrangement, and a plan begins enrolling employees when it begins 
accepting employee elections to participate in the plan. The Department 
of the Treasury and the IRS are expected to publish proposed 
regulations making clear that this delayed applicability date applies 
solely for purposes section 4980H of the Code. At no time will any 
employee be required to treat a plan that fails to provide substantial 
coverage of inpatient hospital services or physician services as 
providing MV for purposes of eligibility for the premium tax credit 
under section 36B of the Code.
    Comment: We received several comments supporting our proposal and 
urging HHS to broaden the MV requirement to include outpatient 
services, emergency services and prescription coverage. Several 
commenters recommended establishing a clear standard for ``substantial 
coverage'' to determine whether an employer has met the requirements: 
One commenter suggested conducting a survey of employer-sponsored plans 
to establish a benchmark, three commenters suggested using the Federal 
Employees Health Benefits (FEHB) plan as a benchmark, and one commenter 
suggested using 4 days of minimum hospital stays coverage as a 
threshold based on an analysis of hospital stays among individuals in 
employer-sponsored plans. Several commenters requested that HHS 
establish a good faith compliance standard for plans offering coverage 
with inpatient hospital and physician services for the 2015 plan year.
    Response: We are finalizing the policy as proposed. As discussed in 
the proposed rule, because under the terms of the statute large 
employers are not required to offer EHB as defined by the Secretary, we 
are not requiring that large employer or self-insured employer group 
health plans provide all EHB as defined under section 1302 of the 
Affordable Care Act. Rather, we are only

[[Page 10829]]

requiring that, to provide MV, employer-sponsored plans provide 
substantial coverage of the two types of benefits that we believe were 
envisioned as essential to health plan coverage meeting the MV 
standard. We have concluded that plans that omit these types of 
coverage fail to meet universally accepted minimum standards of value 
expected from, and inherent in, the nature of any arrangement that can 
reasonably be called a health plan intended to provide the primary 
health coverage for employees. We intend to provide further clarity on 
the requirement to provide ``substantial coverage,'' as circumstances 
warrant.
    Comment: Several commenters raised concerns that the Affordable 
Care Act only requires coverage of 60 percent of costs of benefits and 
HHS is imposing other benefits requirements without statutory basis. 
One of the commenters recommended HHS create a safe harbor for plans 
establishing coverage designs based on good faith belief that the plan 
meets the 60 percent actuarial value threshold.
    Response: As discussed above, we believe that section 1302(d)(2) of 
the Affordable Care Act--requiring that the regulations for determining 
the percentage of the total allowed costs of benefits that apply to 
plans that must cover all EHB also be applied as a basis for 
determining minimum value--reflect a statutory design to incorporate 
basic minimum standards for health benefits coverage similar in scope 
to EHB through the MV requirement, without requiring large group market 
plans and self-insured plans to meet all EHB standards. Given the scope 
of benefits covered by typical employer plans, the MV requirement is 
properly viewed as a means of ensuring that employer-sponsored plans 
that prevent employees from accessing the premium tax credit for 
comprehensive coverage in the Marketplace satisfy basic minimum 
standards while also accommodating flexibility in the design of those 
plans. We believe that our rules on effective dates adequately address 
transition issues. As described above, for purposes of section 4980H of 
the Code, the changes to our regulations on MV requirements will not 
apply before the end of the plan year for employers that adopted plans 
prior to November 4, 2014, so long as the plan begins no later than 
March 1, 2015. However, under no circumstances will an employee be 
denied the premium tax credit under section 36B of the Code for a plan 
that does not cover at least 60 percent of the total allowed costs of 
benefits, and/or fails to provide substantial coverage of inpatient 
hospital services or physician services.
    Comment: Several commenters raised the concern that the MV 
requirements will increase the number of plans affected by the excise 
tax on high-cost employer-sponsored health coverage, and that many 
employers have limited benefits to avoid the tax or are considering 
passing off the excise tax costs to individuals.
    Response: Our analysis shows plans likely to be affected by these 
clarifications of the MV requirements generally have annual costs far 
below the thresholds above which the excise tax will apply in 2018; 
$10,200 for self-only and $27,500 for other-than-self-only coverage. 
Pursuant to the statute, the thresholds may be increased for excess 
growth in health care costs through 2018 and based on inflation 
annually thereafter. We thus do not believe that this policy will 
affect the number of employer plans affected by the excise tax and are 
finalizing the policy as proposed.
3. Qualified Health Plan Minimum Certification Standards
a. QHP Issuer Participation Standards (Sec.  156.200)
    We proposed to revise Sec.  156.200(b)(7) to require that a QHP 
issuer comply with the standards under part 153 and not just the 
standards related to the risk adjustment program. This amendment 
clarifies that a QHP issuer must maintain responsibility for its 
compliance and, under Sec.  156.340, the compliance of any of its 
delegated or downstream entities with the standards set forth in part 
153, not just those specifically pertaining to risk adjustment. We 
received no comments on this proposal. We are finalizing this provision 
as proposed.
b. Transparency in Coverage (Sec.  156.220)
    The transparency in coverage standards established under section 
1311(e)(3) of the Affordable Care Act, as implemented at Sec.  
155.1040(a) and Sec.  156.220, require health insurance issuers that 
offer a QHP in accordance with a certification from an Exchange to 
provide specified information to HHS, the Exchange, and the State 
insurance commissioner and to make this information available to the 
public in ``plain language.'' In a frequently asked question dated 
April 29, 2013,\61\ HHS clarified that, to comply with section 
1311(e)(3), issuers offering QHPs certified by an Exchange would be 
required to begin submitting this information only after QHPs have been 
certified for one benefit year.\62\ We noted in the proposed rule (79 
FR 70726) that because a full year of claims data will be available, we 
anticipate the collection and public display of the required 
information listed in Sec.  156.220 from QHP issuers offering coverage 
through Exchanges beginning in 2016. We requested comments to inform 
future policies, regarding the data elements, format, and timeframe for 
the data submission, as well as the manner in which HHS, the Exchanges, 
and QHPs should publicly display the collected information. We also 
sought feedback on how to minimize duplication with information that 
issuers must already submit to HHS, States, or other entities (for 
example, accreditation organizations). Finally, we requested feedback 
on whether State Exchanges should display the same information and in 
the same format and manner as in the FFEs.
---------------------------------------------------------------------------

    \61\ Affordable Care Act Implementation Set 15, available at: 
http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs15.html.
    \62\ The FAQ also states that because section 2715A of the PHS 
Act simply extends the transparency provisions set forth in section 
1311(e)(3) of the Affordable Care Act to group health plans and 
health insurance issuers offering group and individual health 
insurance coverage, the Departments clarified that the reporting 
requirements under section 2715A of the PHS Act will become 
applicable to group health plans and health insurance issuers 
offering group and individual health insurance coverage no sooner 
than when the reporting requirements under section 1311(e)(3) of the 
Affordable Care Act become applicable. Nothing in these proposed 
regulations would apply any transparency reporting requirements 
related to section 2715A of the PHS Act, incorporated into section 
715(a)(1) of ERISA and section 9815(a)(1) of the Code.
---------------------------------------------------------------------------

    Comment: One commenter asked whether the transparency in coverage 
standards are applicable to stand-alone dental plans.
    Response: The transparency in coverage reporting standards, 
established at Sec.  156.220, are applicable to all QHPs offered on 
Exchanges, including stand-alone dental plans.
    Comment: Several commenters recommended that HHS narrow any data 
elements it collects to reflect only information that would be useful 
to consumers as they select a QHP. Commenters were concerned with 
duplication of collections that are already required by States or HHS. 
Some commenters suggested that data collection should rely on what is 
already publicly available when possible. Some commenters expressed 
concerns regarding protection of proprietary information and suggested 
that HHS should not request or display data that could have unintended, 
anticompetitive consequences. A few

[[Page 10830]]

commenters suggested examples of data elements, the frequency of 
collection, the format of display, and data sources that could be used 
to meet the requirements for specific elements.
    Response: We intend to provide detail regarding the referenced data 
collection and display at a future date. We will take the commenters' 
suggestions into account when we do so. We intend to collect and 
display information in a standardized manner to minimize burden on 
issuers and maximize utility for consumers.
    Comment: Some commenters recommended that transparency of coverage 
standards not be implemented for 1 year following issuance of the final 
guidance operationalizing them. These commenters were concerned about 
having sufficient time to put resources in place to submit and display 
data. Commenters also suggested that issuers be given an opportunity to 
comment on the specific elements that will be collected, the definition 
of those elements, and how the data will be used. One commenter 
suggested that HHS conduct beta testing before the requirements are 
fully implemented. In contrast, a few commenters were concerned with 
the 2016 implementation date for transparency requirements and 
recommended that HHS collect and display the required information as 
soon as possible.
    Response: We believe a 2016 date will allow sufficient time for HHS 
to provide detailed guidance regarding the data collection, review, and 
public display of transparency elements and will allow HHS and 
Exchanges to collect a full set of data reflecting post-2014 
experience. We intend to solicit additional comments on the specific 
approach before it is finalized.
c. Network Adequacy Standards (Sec.  156.230)
    In Sec.  156.230, we established the minimum network adequacy 
criteria that health and dental plans must meet to be certified as 
QHPs, under the Secretary's authority in section 1311(c)(1)(B) of the 
Affordable Care Act. In this rule, we proposed modifying Sec.  
156.230(a) to specify that this section only applies to QHPs that use a 
provider network and that a provider network includes only providers 
that are contracted as in-network. This means that the general 
availability of out-of-network providers will not be counted for 
purposes of meeting network adequacy requirements.
    We believe that networks that provide sufficient access to benefits 
are a priority for issuers and consumers. HHS continues to take great 
interest in ensuring strong network access, particularly for QHPs that 
must meet the standards in Sec.  156.230. As stated in the proposed 
rule, HHS is aware that the NAIC has formed a workgroup that is 
drafting a model act relative to network adequacy and will await the 
results of this workgroup before proposing significant changes to 
network adequacy policy. For 2016, HHS expects to continue the 
reasonable access standard adopted in the 2015 Letter to Issuers in the 
Federally-facilitated Marketplaces \63\ and assess the provider 
networks information submitted as part of the QHP certification 
process. We urge State-based Exchanges to employ the same standard when 
examining network adequacy.
---------------------------------------------------------------------------

    \63\ 2015 Letter to Issuers in the Federally-facilitated 
Marketplaces, March 14, 2014, available at: http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2015-final-issuer-letter-3-14-2014.pdf.
---------------------------------------------------------------------------

    In addition to the changes above, we are also cognizant that new 
enrollees in QHPs may need a transition period to switch to a provider 
that is in-network in their new plan. We encourage QHP issuers that use 
a network of providers to offer new enrollees transitional care for an 
ongoing course of treatment. We suggest that this begin with the 
effective date of coverage of a new enrollee and last for at least 29 
days thereafter (for a minimum of 30 days). These benefits would extend 
to health care services furnished by any provider to the new enrollee, 
regardless of whether the provider is in the plan's network, as long as 
the enrollee received health services from that provider under an 
ongoing course of treatment in the 90 days prior to the effective date 
of coverage. Because different plans may have different provider 
networks, when an individual enrolls in a new health plan, he or she 
may be undergoing a course of treatment with a provider that is not in 
the new issuer's provider network. In such a case, it may take time for 
the new enrollee to select a new in-network provider and to meet with 
the new provider to ensure that there is no disruption in treatment. We 
encourage issuers to adopt this policy to accommodate the immediate 
needs of enrollees, while allowing the enrollee sufficient time to go 
through the process of selecting an in-network provider in their new 
plan. As we stated in the proposed rule, we are considering whether 
requirements may be needed in this area in the future.
    We are renumbering Sec.  156.230(b), to (b)(1) and adding (b)(2) to 
strengthen the provider directory requirement effective for plan years 
beginning on or after January 1, 2016. Specifically, we proposed that a 
QHP issuer must publish an up-to-date, accurate, and complete provider 
directory, including information on which providers are accepting new 
patients, the provider's location, contact information, specialty, 
medical group, and any institutional affiliations, in a manner that is 
easily accessible to plan enrollees, prospective enrollees, the State, 
the Exchange, HHS, and OPM. As part of this requirement, we proposed 
that a QHP issuer must update the directory information at least once a 
month, and that a provider directory will be considered easily 
accessible when the general public is able to view all of the current 
providers for a plan on the plan's public Web site through a clearly 
identifiable link or tab without having to create or access an account 
or enter a policy number. The general public should be able to easily 
discern which providers participate in which plan(s) and provider 
network(s) if the health plan issuer maintains multiple provider 
networks, and the plan(s) and provider network(s) associated with each 
provider, including the tier in which the provider is included, should 
be clearly identified on the Web site and in the provider directory. We 
solicited comments on this proposal, including comments regarding how 
often updating should occur. We are finalizing this policy as proposed, 
retaining the monthly timeline.
    We also finalize the requirement for issuers to make this 
information publicly available on their Web sites in a machine-readable 
file and format specified by HHS. The purpose of establishing machine-
readable files with this data would be to provide the opportunity for 
third parties to create resources that aggregate information on 
different plans. We believe this will increase transparency by allowing 
software developers to access this information and create innovative 
and informative tools to help enrollees better understand the 
availability of providers in a specific plan. To facilitate this 
change, we proposed adding Sec.  156.230(c) to require QHP issuers to 
make available and submit to HHS information about providers in its 
provider networks.
    We specifically solicited comments on this requirement and other 
options, including the technical requirements for developing a machine-
readable file and format for a provider directory, as well as other 
technical considerations, such as processes and considerations that 
should be taken into account. We have established these requirements to 
enhance transparency of QHP provider directories and to help consumers 
make

[[Page 10831]]

more informed decisions about their health care coverage. We solicited 
comments on these proposed requirements, including how frequently 
provider data should be updated, and whether additional types of 
information should be required to be included in the provider 
directory. We understand the complexity of this undertaking, and 
recognize that this will require issuer resources. Therefore, HHS 
intends to provide additional details about the data submission 
requirements.
    We also requested comments on the feasibility and merits of 
incorporating information on physical accessibility for individuals 
with disabilities, including accessibility information regarding 
facilities and equipment, or other information that would be important 
to enrollees and potential enrollees, as a part of network adequacy 
standards in the future.
    Comment: A number of commenters supported stronger network adequacy 
standards. Commenters were divided between supporting our proposal to 
wait for NAIC recommendations before taking further action, and urging 
us to act immediately and implement stronger network adequacy 
standards. Commenters suggested a wide range of network adequacy 
criteria for HHS to adopt, including provider to patient ratios; time 
and distance metrics; geographic-based metrics; minimum numbers of 
specialty providers; specific criteria for areas of concern including 
pediatric, dialysis centers, and autoimmune and rare disorders; 
monitoring of plans; and secret shopping. One commenter requested 
increased transparency regarding evaluation of network adequacy. This 
commenter suggested that HHS should modify the provider data template 
for QHP issuers in the FFEs to allow greater flexibility, and should 
clarify how reasonable access will be determined in situations where a 
sufficient number of providers are not willing to contract with the 
issuer.
    Response: We are finalizing the rule without making any additional 
changes to the network adequacy general requirements at this point as 
the NAIC finishes its work on the network adequacy model act. We expect 
that the final product of the NAIC work will reflect the viewpoints of 
the various stakeholders. This reflects our general position that 
network adequacy is an area subject to significant State regulation and 
oversight. We agree with commenters that QHP networks should provide 
access to a range of health care providers, and we continue to require 
all QHP issuers to provide reasonable access to all covered services in 
accordance with Sec.  156.230(a) of this rule. We are also planning 
changes to the template used to collect network data to improve the 
collection process for QHP issuers in the FFE during the QHP 
certification process.
    Comment: A number of commenters support the clarification that only 
in-network providers will be considered when determining if a plan's 
medical network meets reasonable access requirements, and urged CMS to 
clarify that issuers must be able to provide reasonable access with the 
providers available in their lowest cost tier. Other commenters also 
urged CMS to require issuers to have an internal exceptions or appeals 
process to obtain out-of-network services at in-network cost when 
adequate access is not available, while others stressed that out-of-
network referrals should be rare. Similarly, several commenters voiced 
concerns about consumers being charged out-of-network charges while 
being treated in an in-network hospital because not all of the treating 
providers were in-network. In such circumstances, commenters urged that 
the consumer only be charged in-network costs, and that in-network 
hospitals should be required to have sufficient in-network providers to 
furnish all covered services. Some commenters raised concerns about the 
standard use of out-of-network providers for dental networks and the 
lack of availability of dentists who will contract with issuers.
    Response: In light of the general support of the proposed change, 
we intend to finalize the regulation as proposed. We understand the 
concern about confusion created when a hospital is listed as in-network 
and has providers that are out-of-network for particular in-house 
services. We remind issuers that all covered services must be 
reasonably accessible, and in accordance with this regulatory change, 
must be available in-network. We urge issuers to evaluate their in-
network hospitals to make certain that all required services are 
accessible without unreasonable delay from in-network providers. We 
appreciate the concerns voiced regarding coverage of dental providers 
and are contemplating whether further guidance is warranted.
    Comment: A number of commenters strongly supported the transition 
policy allowing new enrollees to have access to providers from whom 
they received services before they joined their new plan. Some 
commenters urged HHS to require the transition policies, and some 
advocated for longer transition periods, such as 60 or 90 days or 6 
months with reassessment, to determine if continued care is necessary 
at the end of the set time period. Some commenters suggested expanding 
transitional policies to include current enrollees whose in-network 
providers become out-of-network providers mid-year due to network 
changes. Conversely, some commenters expressed that clear and accurate 
provider directories make transitional policies unnecessary, and some 
believe the policy would negatively impact care management and that 
many States already have requirements for transitional care. Similarly, 
some suggested that transitional policies should have specific limits, 
including specific situations and types of care, to reduce the impact 
on premiums. Many commenters expressed concern about what payment rates 
would be if there is no contract with the out-of-network provider and 
suggested HHS should require plans to reimburse providers the 
reasonable and customary value for out-of-network services and prohibit 
balance billing of consumers for anything above what they would have 
been charged for the services in-network. Commenters also stated that 
this is an area that many States already regulate closely.
    Response: There are strong opinions supporting and opposing a 
requirement for a transitional policy, as well as varying opinions 
about the amount of time transitional policies should cover. We 
continue to encourage issuers to adopt appropriate transitional polices 
and to pay close attention to issues around continuity of care for both 
new enrollees and enrollees whose current providers become unavailable. 
We expect to continue to analyze this area and may propose standards 
concerning this topic in the future.
    Comment: Commenters generally supported the proposal to strengthen 
provider directory requirements and agreed that provider data should be 
updated at least monthly, especially for on-line directories. Some 
commenters urged more frequent updates and urged CMS to move towards 
requiring ``real time'' updates in the future. Concerns were raised 
about penalizing issuers if there were errors in the directories 
because providers may fail to notify the issuer of changes, and the 
administrative burden and costs associated with strengthened provider 
directory requirements. Conversely, other commenters urged that issuers 
be required to honor what is listed in the provider directory even if 
it erroneous, and that plans be required to monitor data for accuracy.
    Response: We are finalizing the regulation as proposed. We are 
requiring that directories be updated at least

[[Page 10832]]

monthly and encourage more frequent updating when possible. We also 
understand and appreciate the concern about issuers being held 
accountable for errors in directories and encourage issuers to work 
with their providers to ensure that their directories are as current 
and accurate as possible. We understand that there may be some 
administrative burden associated with updating directories, but believe 
it is necessary for consumers to be fully informed about network 
access. Similarly, we appreciate commenters who stated that issuers 
should honor what is listed in their directories even if there are 
errors, and while we are not requiring that at this time, we strongly 
encourage that practice.
    Comment: Some commenters supported the inclusion of the proposed 
data elements in provider directories, including indicating if the 
provider is accepting new patients. Conversely, some commenters were 
concerned about being required to list if the provider is accepting new 
patients, citing the administrative burden because that status can 
frequently change. There was also concern about consumer confusion that 
could be caused by the requirement to indicate whether specialists are 
``accepting new patients.'' Some commenters noted that in the case of 
specialists for whom a referral is needed, indicating the specialist is 
``accepting new patients'' could be misleading to consumers, who may 
understand that to mean that they can request an appointment directly 
with the specialist. To alleviate confusion about referrals, it was 
suggested that another column or notation be included that indicates if 
a referral is needed, and it was also suggested that issuers retain 
flexibility in what is included in their directories.
    Response: We are finalizing all of these requirements as proposed, 
including the requirement that issuers must indicate if providers are 
accepting new patients. All of the required data, including information 
on whether providers are accepting new patients, are critical for 
consumers to make educated decisions about their health coverage.
    Comment: Some commenters suggested that additional data should be 
required as part of provider directories to make it easier for 
consumers to compare plans. Some of the specific data elements 
suggested included: hours physician traditionally practices at 
referenced practices, board certification(s), sub-specialties 
practiced, language spoken by each provider, interpreter services or 
communication and language assistance services that are available at 
the provider's facilities and information about how enrollees can 
obtain such services, publication date of directory, and a field for 
providing advance notice that the provider will be leaving the network. 
Commenters also urged requiring plans to provide a dedicated email 
address to be used to notify the plan of inaccuracies in the plan 
directory, and holding the issuer accountable for making changes when 
notified. Similarly, it was suggested that plans should monitor 
provider directories to determine if they are accurate.
    Response: We are finalizing our proposal requiring the issuer to 
publish an up-to-date, accurate, and complete provider directory, 
including information on which providers are accepting new patients, 
the provider's location, contact information, specialty, medical group, 
and any institutional affiliations, in a manner that is easily 
accessible to plan enrollees, prospective enrollees, the State, the 
Exchange, HHS, and OPM. We believe the new requirements will greatly 
strengthen provider directory requirements and provide consumers with 
valuable information to help them determine which QHP best meets their 
needs. We encourage issuers to continuously evaluate the data they 
include in their directories and aim to provide all of the information 
that will help consumers understand their network. We appreciate the 
suggestion that issuers have a dedicated email address for enrollees 
and providers to submit changes or inaccuracies, and while we are not 
requiring it at this time, we encourage the practice.
    Comment: There was some concern raised that including items such as 
location, contact information, and specialty type on a real time basis 
could conflict with what is in National Plan and Provider Enumeration 
System (NPPES), which providers may fail to update, and would result in 
confusion. To alleviate possible NPPES confusion, it was suggested that 
issuers only include information from the previous month's information 
in the NPPES database.
    Response: We appreciate this concern but are finalizing the 
regulation as proposed. The requirement for issuers to publish an up-
to-date, accurate, and complete provider directory takes into account 
the issuers' obligation to develop a system to ensure that the 
information about providers that they publish in the provider directory 
is accurate and up-to-date, including ensuring it is consistent with 
what is listed in the NPPES database.
    Comment: Some commenters supported the requirement that issuers 
provide access to provider directories through the issuer's public Web 
site without the need to create an account or enter policy information, 
and HHS was asked to clarify the term ``user-friendly'' when used to 
describe the location of provider directories on issuer Web sites.
    Response: We are finalizing this policy as proposed. In response to 
requests for clarification about the term ``user friendly,'' we suggest 
issuers adopt common industry standards for publishing the provider 
directory in an area of their Web site where it will be easy for 
enrollees to find and that enrollees will be able to access without the 
need for an account or policy number as stated in this rule at Sec.  
156.230(b)(2)(i). To reiterate, consumers should not have to create a 
user ID, log on, enter a policy number, or be enrolled in a plan to 
view the network. The URL that issuers provide to HHS for publication 
on HealthCare.gov for QHPs in an FFE should link directly to the 
applicable provider directory. If it does not, it should link to a list 
of the issuer's provider directories, and it should be readily 
discernible to a consumer which directory applies to which QHP.
    Comment: Some commenters supported the proposal for issuers to make 
available provider information in a machine-readable file and format 
specified by HHS, citing that this would improve transparency and 
support informed consumer decision-making without burdening issuers. 
Conversely, some commenters opposed the proposal and voiced concerns 
about data accuracy, including how HHS would hold third parties 
accountable for data errors, and cost. Some commenters stated that if 
data are not frequently updated, consumers could receive inaccurate 
information, upon which they might rely to select a QHP, while other 
commenters were concerned that frequent updating would be burdensome to 
issuers. Some commenters also noted that implementing any standard 
could be time-consuming and requested the opportunity to provide 
additional feedback. A number of commenters provided suggestions 
regarding the format, structure, file type, and content of the data 
they believe should be collected. Some commenters also suggested that 
any machine-readable databases should be accessible through an API.
    Response: We believe a machine-readable file or a format specified 
by HHS will increase transparency by allowing software developers to 
access

[[Page 10833]]

this information and create innovative and informative tools to help 
enrollees better understand the plan's provider network. Based on the 
comments received asking us to make provider information more 
transparent and accessible to consumers, HHS is finalizing this rule by 
adding Sec.  156.230(c), to require QHP issuers in the FFEs to make 
available the information on the provider list on its Web site in a HHS 
specified format and also submit this information to HHS, in a format 
and at times determined by HHS. We agree with commenters that creating 
a vehicle for consumers to easily determine which providers are in 
which networks will help consumers select QHPs that best meet their 
needs. We recognize that this will require issuer resources, and will 
provide further details about the specific data elements, frequency of 
updates, file types, and other crucial information in future guidance.
    Comment: Commenters supported having issuers list detailed 
information in provider directories about physical accessibility for 
individuals with disabilities to help consumers choose plans and 
providers. Some sought information about exam table access, transfer 
assistance, and wheelchair access. One commenter urged caution in this 
area out of concern that including information on accessibility 
features for certain providers could be read to imply that other 
providers need not offer such features, even though they are legally 
obligated to do so pursuant to the Americans with Disabilities Act and 
section 504 of the Rehabilitation Act.
    Response: We appreciate the complexity of this topic, and do not 
intend to issue additional regulation on this topic at this time. We 
urge all issuers and providers to continue to ensure that they are 
providing full and equal access to all covered services to all 
enrollees, including those people with disabilities, and we remind them 
of the obligation to adhere to the requirements of the Americans with 
Disabilities Act and section 504 of the Rehabilitation Act. Issuers are 
encouraged to consult relevant Department of Justice guidance on 
accessibility of medical providers and effective communications at 
www.ada.gov. We will continue to monitor this issue.
d. Essential Community Providers (Sec.  156.235)
    At Sec.  156.235, we proposed to strengthen the essential community 
provider (ECP) standard in accordance with section 1311(c)(1)(C) of the 
Affordable Care Act, which requires that a QHP's network include ECPs, 
where available, that serve predominantly low-income and medically-
underserved populations. As established in section 1311(c)(1)(C) of the 
Affordable Care Act, ECPs include entities defined in section 
340B(a)(4) of the PHS Act and providers described in section 
1927(c)(1)(D)(i)(IV) of the Act as set forth by section 211 of Pub. L. 
111-8. Additionally, we proposed that ECPs may include not-for-profit 
or State-owned providers that would be entities described in section 
340B of the PHS Act but do not receive Federal funding under the 
relevant section of law, as these providers satisfy the same 340B 
requirements and therefore meet the definition of ECPs by virtue of the 
following description in section 1311(c)(1)(C) of the Affordable Care 
Act--health care providers defined in section 340B(a)(4) of the PHS Act 
and providers in section 1927(c)(1)(D)(i)(IV) of the Act. For the same 
reasons described above, we proposed that such providers also include 
not-for-profit or governmental family planning service sites that do 
not receive a grant under Title X of the PHS Act. Other providers that 
provide health care to populations residing in low-income zip codes or 
Health Professional Shortage Areas could also be considered ECPs. We 
proposed that the above proposals apply to benefit years 2016 and 
thereafter.
    To assist issuers in ensuring that, in future QHP certification 
years, they are providing sufficient consumer access to ECPs to satisfy 
the requirement in section 1311(c)(1)(C) of the Affordable Care Act, we 
also proposed in new paragraph (a)(2)(i) of this section that, for QHP 
certification cycles beginning with the 2016 benefit year, a health 
plan seeking certification to be offered through an FFE must satisfy 
the general ECP standard described in paragraph (a)(1) of this section 
by demonstrating in its applications for QHP certification that a 
sufficient percentage, as determined annually by HHS and specified in 
HHS guidance, of available ECPs in the plan's service area have a 
contractual agreement to participate in the plan's provider network. 
For purposes of this general ECP standard, we proposed that multiple 
providers at a single location would count as a single ECP toward the 
issuer's satisfaction of the proposed ECP participation standard. Any 
update to the general ECP inclusion standards would be based on HHS's 
post-certification assessments of the adequacy of ECP participation, 
and geographic distribution of such providers, and evidence of 
contractual negotiation efforts provided by issuers in the ECP 
supplemental response forms.
    In addition, we proposed in paragraph (a)(2)(ii) of this section 
that, to satisfy the general ECP standard, the issuer of the plan 
seeking certification as a QHP in an FFE would be required to offer 
contracts for participation in the plan for which a certification 
application is being submitted to the following: (1) All available 
Indian health providers in the service area, applying the special terms 
and conditions necessitated by Federal law and regulations as 
referenced in the recommended model QHP addendum for Indian health 
providers developed by HHS; and (2) at least one ECP in each ECP 
category (see Table 11) in each county in the service area, where an 
ECP in that category is available and provides medical or dental 
services that are covered by the issuer plan type. We expect that 
issuers will offer contracts in good faith. A good faith contract offer 
should offer the same rates and contract provisions as other contracts 
accepted by or offered to similarly situated providers that are not 
ECPs.

                                   Table 11--ECP Categories and Types in FFEs
----------------------------------------------------------------------------------------------------------------
             Major ECP category                                       ECP provider types
----------------------------------------------------------------------------------------------------------------
Federally Qualified Health Centers (FQHC)...  FQHC and FQHC ``Look-Alike'' Clinics,\64\ Outpatient health
                                               programs/facilities operated by tribes, tribal organizations,
                                               programs operated by Urban Indian Organizations.
Ryan White Providers........................  Ryan White HIV/AIDS Providers.
Family Planning Providers...................  Title X Family Planning Clinics and Title X ``Look-Alike'' Family
                                               Planning Clinics.\65\
Indian Health Care Providers................  Tribes, Tribal Organization and Urban Indian Organization
                                               Providers, Indian Health Service Facilities.
Hospitals...................................  Disproportionate Share Hospital (DSH) and DSH-eligible Hospitals,
                                               Children's Hospitals, Rural Referral Centers, Sole Community
                                               Hospitals, Free-standing Cancer Centers, Critical Access
                                               Hospitals.

[[Page 10834]]

 
Other ECP Providers.........................  STD Clinics, TB Clinics, Rural Health Clinics, Black Lung Clinics,
                                               Community Mental Health Centers, Hemophilia Treatment Centers,
                                               and other entities that serve predominantly low-income, medically
                                               underserved individuals.
----------------------------------------------------------------------------------------------------------------

    We proposed to add paragraph (a)(3) to this section to specify that 
if an issuer's QHP certification application to the FFE does not 
satisfy the ECP standard described in paragraph (a)(2) of this section, 
the issuer must include as part of its application a narrative 
justification describing how the provider network(s) of the plans for 
which certification applications have been submitted provides an 
adequate level of service for individuals residing in low-income zip 
codes or Health Professional Shortage Areas within the plan's service 
area and how the plan's provider network will be strengthened toward 
satisfaction of the ECP standard prior to the start of the benefit 
year. The narrative justification should include the following: The 
number of contracts offered to ECPs for the benefit year; the number of 
additional contracts the issuer expects to offer for the benefit year 
and the timeframe of planned negotiations; the names of the ECP 
hospitals FQHCs, Ryan White providers, family planning providers, 
Indian health providers, and other ECPs to which the issuer has offered 
contracts, but with whom an agreement has not yet been reached; and 
contingency plans for how the issuer's provider network(s), as 
currently designed, will provide adequate care to enrollees who might 
otherwise be cared for by relevant ECPs. Through HHS's post-
certification assessments, HHS may examine an issuer's progress toward 
satisfying the applicable ECP standard to ensure that the issuer 
continues to qualify for offering its plan on the Exchange, while OPM 
would retain this responsibility for issuers of multi-State plans, 
acting in coordination with HHS as may be appropriate.
---------------------------------------------------------------------------

    \64\ For more information on FQHC ``Look-Alike'' Clinics, see 
http://bphc.hrsa.gov/about/lookalike/index.html and section 
1861(a)(4) and section 1905(l)(2)(B) of the Act.
    \65\ For more information on Title X ``Look-Alike'' Clinics, see 
section 1927(c)(1)(D)(i)(IV) of the Social Security Act.
---------------------------------------------------------------------------

    We proposed to redesignate current paragraph (a)(3) as paragraph 
(a)(4), in which we clarify that nothing in the requirements under 
paragraphs (a)(1) through (a)(3) of this section requires any QHP to 
provide coverage for any specific medical procedure. We also proposed 
to redesignate current paragraph (a)(2) as paragraph (a)(5).
    We proposed in paragraph (b)(1) that the alternate ECP standard 
described in Sec.  156.235(a)(5) will apply to issuers with plans that 
provide a majority of covered professional services through physicians 
employed by the issuer or through a single contracted medical group 
that offer QHPs in any Exchange. Additionally, for plans seeking QHP 
certification in FFEs, we proposed that a QHP issuer described in 
paragraph (a)(5) of this section be determined to have a sufficient 
number and geographic distribution of employed or contracted providers 
by demonstrating in its QHP application that the number of its 
providers in the following locations meets a percentage specified in 
HHS guidance of the number of available ECPs in the service area: (i) 
Located within a Health Professional Shortage Areas; or (ii) located 
within five-digit zip codes in which 30 percent or more of the 
population falls below 200 percent of the Federal Poverty Line. For 
purposes of this alternate ECP standard, multiple providers at a single 
location will count as one ECP toward the available ECPs in the plan's 
service area and toward the issuer's satisfaction of the proposed ECP 
participation standard to ensure a sufficient number and geographic 
distribution of ECPs as required under Sec.  156.235(a). Any 
modification to the alternate ECP inclusion standard in future benefit 
years would be based on HHS's post-certification assessments of the 
adequacy of ECP participation and geographic distribution of such 
providers to ensure reasonable and timely access to such ECPs for low-
income, medically underserved individuals.
    Furthermore, we proposed in new paragraph (b)(3) of this section 
that if a QHP certification application of a plan for the FFE does not 
satisfy the alternate ECP standard described in paragraph (b)(2) of 
this section, the issuer must include as part of its QHP application a 
narrative justification describing how the issuer's provider network(s) 
provides an adequate level of service for low-income and medically 
underserved enrollees. When assessing whether an issuer has provided a 
satisfactory narrative justification under either the general or 
alternate ECP standard, as applicable, HHS will take into account 
factors and circumstances identified in the ECP Supplemental Response 
Form,\66\ along with an explanation of how the issuer will provide 
access for individuals residing in low-income zip codes or Health 
Professional Shortage Areas within the plan's service area and how the 
plan's provider network will be strengthened toward satisfaction of the 
ECP standard prior to the start of the benefit year. Additionally, 
justifications that include verification of contracts offered in good 
faith, that include terms that a willing, similarly-situated, non-ECP 
provider would accept or has accepted, would be considered toward 
satisfaction of the ECP standard.
---------------------------------------------------------------------------

    \66\ More information on the supplemental response can be found 
on the CCIIO Web site at: http://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/qhp.html.
---------------------------------------------------------------------------

    Finally, we proposed in paragraph (c) of this section to remove the 
language defining ECPs as meeting the criteria on the initial date of 
the regulation's publication. We proposed this change in recognition of 
the fact that the universe of ECPs, as well as the databases we use to 
delineate this universe, may vary over time for many reasons, including 
demographic and provider characteristics. We requested comment on these 
proposed changes. We are now finalizing these changes with 
modifications. The final rule specifies in regulation text that 
entities that could receive funding under Title X and 340B are ECPs, 
clarifies the application to SADPs, clarifies standards related to 
covered services, and clarifies the standard for integrated delivery 
systems.
    Comment: A number of commenters supported the clarification that 
ECPs include not-for-profit or State-owned providers that would be 
entities described in section 340B of the PHS Act but do not receive 
Federal funding under the relevant section of law, including not-for-
profit or governmental family planning service sites that do not 
receive a grant under Title X of the PHS Act. These commenters urged 
that HHS include this clarification in the regulation text. Some 
commenters recommended that we provide clear language to States and 
issuers indicating that Indian health providers are among

[[Page 10835]]

the ECP groups to which issuers must extend contract offers in good 
faith to satisfy Sec.  156.235(a) of the ECP standard.
    Response: Based on the comments received, we are codifying the 
inclusion of the following entities in the definition of an ECP in 
Sec.  156.235(c): Not-for-profit or State-owned providers that would be 
entities described in section 340B of the PHS Act but do not receive 
Federal funding under the relevant section of law; not-for-profit or 
governmental family planning service sites that do not receive a grant 
under Title X of the PHS Act; and Indian health care providers. 
Effective January 1, 2016, we are making this modification to emphasize 
that these providers are among the ECP groups to which issuers must 
extend contract offers in good faith to satisfy Sec.  156.235(a).
    Comment: Several commenters recommended that HHS clarify that 
providers located in low-income zip codes or HPSAs must also serve 
predominately low-income, medically underserved individuals to satisfy 
the definition of an ECP.
    Response: We agree with commenters. In alignment with the 
regulatory definition of an ECP at Sec.  156.235(c), we emphasize that 
a provider must actually serve predominantly low-income, medically 
underserved individuals to be considered an ECP, and not simply be 
located in low-income zip codes or HPSAs.
    Comment: We received a few comments expressing concern that removal 
of the language defining ECPs as meeting the criteria on the initial 
date of the regulation's publication risks the stability in the number 
and scope of ECPs and carries the risk that States, Exchanges, and 
other entities will attempt to limit the providers identified as an 
ECP.
    Response: While we understand the commenters' desire for providers 
to retain a designated ECP status as of the initial date of the 
regulation's publication, such a policy could conflict with the 
statutory definition of an ECP if interpreted to extend past the 
reexamination period for determining continued eligibility of such 
providers on the list. To avoid any such misinterpretation, we proposed 
removing this language from Sec.  156.235(c) to clarify that such 
providers must continue to qualify each benefit year as providers that 
serve predominantly low-income, medically underserved individuals to 
retain their ECP status on the list each year. Therefore, we are 
finalizing this provision as proposed, effective January 1, 2016.
    Comment: We received a number of comments in support of our 
proposal that a health plan seeking QHP certification to be offered 
through an FFE must satisfy the general ECP standard by demonstrating 
in its applications for QHP certification that a sufficient percentage, 
as determined annually by HHS and specified in HHS guidance, of 
available ECPs in the plan's service area have a contractual agreement 
to participate in the plan's provider network. Some of these commenters 
urged that we increase the percentage each year beyond the existing 30 
percent requirement. Some commenters urged that we set a minimum 
percentage requirement in the regulation text and encourage plans to 
include a greater number of ECPs in their networks as a part of 
ensuring access and continuity of care. One commenter pointed out that 
some States have implemented much higher ECP inclusion percentage 
standards.
    In contrast, one commenter stated that the QHPs lack complete 
information to adequately identify the universe of ECPs. Furthermore, 
the commenter stated that the ECP lists provided to issuers in the past 
have included providers that either do not provide medical services or 
include inaccurate provider information. The commenter recommended that 
HHS improve the utility of ECP information by including National 
Provider Identifiers (NPIs) in their database of ECPs, and by 
publishing any revised ECP lists prior to the anticipated QHP 
application submission deadline and with any modifications made 
apparent to allow issuers to easily reconcile the HHS ECP list with 
their internal records. Some commenters recommended that SADP issuers 
be exempt from the ECP inclusion standard given that certain elements 
of the ECP requirements are less suited for dental issuers than medical 
issuers, and suggested that CMS instead require SADPs to provide 
evidence of offering meaningful access to lower income enrollees in 
their service areas.
    Response: Based on our QHP certification reviews for the 2015 
benefit year and the ongoing strengthening of our ECP list, we believe 
that specifying the ECP inclusion percentage in HHS guidance for the 
2016 benefit year provides desirable flexibility at this time for HHS 
to further examine the adequacy of this inclusion standard for ensuring 
access to care for low-income, medically underserved individuals for 
future years. Furthermore, we agree with the recommendation that the 
accuracy of the ECP list be improved prior to increasing the ECP 
inclusion percentage standard. To this effect, we have recently 
published a draft ECP list for the 2016 benefit year \67\ and solicited 
public comments in an effort to make corrections to the list and 
publish the list prior to the anticipated QHP application submission 
deadline. In response to comments, we also intend to make apparent the 
modifications to the list to allow issuers to easily reconcile the HHS 
ECP list with their internal records. We will further examine the 
feasibility of the commenter's recommendation to add NPIs to the ECP 
list in future years in coordination with our Federal partners from 
whom we collect the provider data.
---------------------------------------------------------------------------

    \67\ http://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Description-and-Purpose-of-Draft-HHS-List-of-ECPs-for-PY-2016_12-24-14.pdf.
---------------------------------------------------------------------------

    Regarding the commenters' recommendation to exempt SADPs from the 
ECP inclusion standard, we proposed to modify the ECP requirement at 
Sec.  156.235(a)(2)(ii)(B) to clarify that only the providers in the 
ECP categories that provide dental services would be considered 
available for an SADP's offering of a contract. In other words, we have 
added ``and provides medical or dental services that are covered by the 
issuer plan type'' to the end of that paragraph to ensure the 
applicability of this provision to SADPs. Given that this was the only 
ECP provision unsuited for SADPs, we believe we have addressed the need 
for its suitability by making this proposed modification, and are 
finalizing this language as proposed, effective January 1, 2016.
    Comment: We received comments in support of our proposal that an 
issuer's satisfaction of the ECP inclusion percentage of available ECPs 
in the plan's service area be calculated based on multiple providers at 
a single location counting as a single ECP toward both the available 
ECPs in the plan's service area and the issuer's satisfaction of the 
ECP participation standard, stating that the proposal would help ensure 
access to a broad range of provider types and geographic distribution 
of ECPs for low-income, medically underserved individuals. However, 
several commenters suggested that counting multiple providers at a 
single location as only a single ECP may overlook availability of 
different services, and recommended that HHS count multiple providers 
at a single location as multiple ECPs toward satisfaction of the ECP 
inclusion percentage standard. One commenter contended that such a 
policy would undermine the ability of integrated

[[Page 10836]]

delivery systems to provide high levels of consistent, quality care.
    Response: We believe it is important to clarify the underlying 
rationale for this proposed provision. At Sec.  156.235(a)(1) and 
(b)(1), we have established that a QHP issuer that satisfies the ECP 
inclusion standard must include a sufficient number and geographic 
distribution of ECPs in its provider network, or through its employed 
providers and hospital facilities if the issuer qualifies for the 
alternate ECP standard described at Sec.  156.235(b). Therefore, we 
believe that our proposed provision is critical for ensuring that 
issuers satisfy both the sufficient number and geographic distribution 
requirements by not concentrating the majority of its providers at only 
one or a few locations. Furthermore, such an accounting of multiple 
providers at a single location aligns with the crediting of an issuer's 
inclusion of provider facilities on the available HHS ECP list, which 
includes practices and clinics, which generally consist of multiple 
providers at a single location. While such a policy may reduce the 
number of credited ECPs for an issuer, to the extent that multiple 
provider types practice at a given location and may map to different 
ECP categories, these different provider types could contribute to 
satisfying the requirement that an issuer offer a contract to at least 
one ECP in each category in each county in the plan's service area for 
multiple ECP categories. In response to issuers that qualify for the 
alternate ECP standard, as defined at Sec.  156.235(a)(5), and 
commenters' concern that such a policy might be disruptive to an 
integrated delivery system, the narrative justification provision at 
Sec.  156.235(b)(3) ensures that such issuers comply with the ECP 
inclusion standard by describing how the plan's provider networks 
provide an adequate level of service for low-income enrollees or 
individuals residing in HPSAs within the plan's service area. After 
careful consideration of the public comments applicable to issuers that 
qualify for both the general and alternate ECP standards, we are 
finalizing our proposal that an issuer's satisfaction of the ECP 
inclusion percentage of available ECPs in the plan's service area be 
calculated based on multiple providers at a single location counting as 
a single ECP toward both the available ECPs in the plan's service area 
and the issuer's satisfaction of the ECP participation standard, 
effective January 1, 2016.
    Comment: One commenter recommended that HHS require that issuers 
that qualify for the alternate ECP standard, as defined at Sec.  
156.235(a)(5), that are unable to provide all of the categories of 
services provided by entities in each of the ECP categories in each 
county in the service area as outlined in the general ECP standard, be 
required to contract with outside providers or facilities that can 
provide those services to low-income, medically underserved 
individuals. In contrast, another commenter expressed concern that 
HHS's methodology for assessing the adequacy of ECP inclusion for 
issuers that provide the majority of their covered professional 
services through physicians employed by the issuer or through a single 
contracted medical group does not fit well for plans with well-
established integrated care delivery systems. The commenter expressed 
concern that requirements to contract with outside providers that use 
different clinical protocols and thus have incomplete patient 
information and lack linkages for patients with chronic conditions, 
would fundamentally change how integrated delivery systems provide care 
to their patients and would undermine the ability of integrated care 
teams to provide high levels of consistent, quality care. The commenter 
contended that counting multiple providers at a single location as only 
one provider toward satisfaction of the alternate ECP standard is 
problematic for an entity that serves its members with large facilities 
and has systems in place (for example, telemedicine, etc.) that can 
serve members in a broad geographic area. This commenter urged CMS to 
better assess effectiveness of networks at delivering quality care, and 
rapid access.
    Response: While we recognize the challenges for alternate ECP 
standard issuers that offer an integrated health care delivery system, 
we believe that consumers should experience equal access to covered 
benefits, regardless of whether they are enrolled in plans offered by 
issuers that qualify for the general or the alternate ECP standard. To 
ensure such equal access, issuers that qualify for the alternate ECP 
standard must provide access to the same categories of services 
provided by entities in each of the ECP categories in each county in 
the plan's service area as issuers that qualify for the general ECP 
standard. Therefore, effective January 1, 2016, we have modified our 
proposed provision at Sec.  156.235(b)(2)(ii) to require issuers to 
provide within the issuer's integrated delivery system all of the 
categories of services provided by entities in each of the ECP 
categories in each county in the plan's service area as outlined in the 
general standard; or otherwise offer a contract to at least one ECP 
outside of the issuer's integrated delivery system per ECP category in 
each county in the plan's service area that can provide those services 
to low-income, medically underserved individuals.
    Comment: We received several comments recommending that CMS retain 
the requirement that QHP issuers offer contracts to all Indian health 
care providers in the QHP's service area. These commenters also urged 
that CMS require QHP issuers to use the recommended model QHP addendum, 
rather than our proposal to require that contract offers apply the 
special terms and conditions necessitated by Federal law and 
regulations as referenced in the recommended model QHP addendum. These 
commenters expressed concern that not requiring use of the actual model 
QHP addendum could result in loss of the following provisions in the 
executed QHP-Indian health care provider (ICHP) contracts: (1) A 
listing of each Indian-specific provision in Federal law that is 
applicable to the provider contract; and (2) a clear statement of the 
meaning of each applicable Indian-specific provision.
    Response: We believe the requirement that issuers apply the special 
terms and conditions necessitated by Federal law and regulations as 
referenced in the recommended model QHP addendum, along with 
encouraging issuer use of the recommended model QHP addendum in 
guidance, strikes the desirable balance between allowing the minimal 
flexibility that issuers have requested while ensuring inclusion of the 
fundamental provisions of the model QHP addendum within the issuer 
contractual offers to the Indian health providers. Therefore, while we 
strongly encourage issuers to use the model QHP Addendum, we are not 
requiring that they do so. We are finalizing, effective January 1, 
2016, our proposal requiring that health plans seeking certification as 
a QHP in an FFE offer contracts for participation in the plan for which 
a certification application is being submitted to all available Indian 
health providers in the service area, applying the special terms and 
conditions necessitated by Federal law and regulations as referenced in 
the recommended model QHP addendum for Indian health providers 
developed by HHS.
    Comment: One commenter recommended that if issuers met the ECP 
standard in the previous year, issuers not be required every year to 
offer contracts to all Indian health care providers in the service area 
and to at

[[Page 10837]]

least one ECP in each ECP category in each county in the service area.
    Response: We share the commenter's interest in minimizing 
contracting burden on both issuers and providers; however, given the 
dynamic nature of the health insurance industry, we believe that a 
contract denial the previous year should not carry over to future 
years. Therefore, we are finalizing, effective January 1, 2016, our 
proposal that health plans seeking certification as a QHP in an FFE 
offer contracts for participation in the plan for which a certification 
application is being submitted to all available Indian health providers 
in the service area. Satisfaction of this requirement in previous years 
does not exempt a QHP from satisfying the requirement for future QHP 
application years.
    Comment: Several commenters urged CMS to encourage application of 
the ECP inclusion requirement, including the requirement that issuers 
offer contracts to all Indian health providers, to issuers operating in 
State Exchanges, as well to issuers operating in the FFEs.
    Response: We urge State Exchanges to employ the same standard when 
examining adequacy of ECPs as outlined in Sec.  156.235, including the 
requirement that issuers offer contracts to all Indian health providers 
in the plan's service area.
    Comment: A number of commenters urged that we require issuers to 
actually contract, as opposed to offer a contract, with at least one 
ECP in each ECP category in each county in the service area, where an 
ECP in that category is available and provides medical or dental 
services that are covered by the issuer plan type. Several commenters 
urged that we require issuers to offer contracts to all available ECPs 
in the plan's service area. A few commenters suggested that we require 
that issuers offer contracts to at least two ECPs in each ECP category 
in each county in the service area, where an ECP in that category is 
available and provides medical or dental services that are covered by 
the issuer plan type.
    Several commenters supported the inclusion of Rural Health Clinics 
(RHCs) and Community Mental Health Centers in the ECP category listing 
in Table 11 of the preamble. Commenters expressed concern, though, that 
the requirement that QHPs offer contracts to at least one ECP in each 
ECP category in each county in the plan's service area is a county-
based requirement, and suggested that the requirement be based on time 
and distance within the county.
    A few commenters urged that we add freestanding birth centers 
located in medically underserved and rural areas as a new ECP category. 
Several commenters recommended that we list Hemophilia Treatment 
Centers as a separate ECP category, rather than grouped in the ``Other 
ECP Providers'' category. Another commenter suggested that we add 
migrant and community health centers as an ECP category. One commenter 
urged that HHS require issuers to offer a contract to any willing Ryan 
White provider. One commenter suggested adding dental providers, 
substance abuse and mental health providers, children's hospitals, and 
essential pediatric providers to the list of ECP categories.
    Several commenters suggested that HHS disaggregate the providers 
listed in the ``Hospitals'' ECP category and the ``Other ECP 
Providers'' category. These commenters expressed concern that by 
grouping together providers such as Hemophilia Treatment Centers, 
Community Mental Health Centers, and Rural Health Clinics into one ECP 
category such that issuers are only required to offer a contract to one 
of these and other types of providers in a given county, HHS runs the 
risk that low-income, underserved enrollees will have inadequate access 
to key providers that are uniquely suited to meet their specialized 
health needs. Another commenter urged that HHS identify Nurse Managed 
Clinics within the providers listed in the ECP categories in Table 11 
of the preamble, stating that they are primary care clinics similar to 
the FQHCs, but with a different funding source.
    One commenter recommended that we remove Indian health care 
providers as a major ECP category due to the overlapping requirement 
that issuers offer contracts to all Indian health providers in the 
service area.
    Numerous commenters urged HHS to continually monitor for issuer 
maintenance of their networks throughout the year to ensure that 
issuers do not discriminate against ECPs through contract negotiations, 
and to make sure contracts are offered in good faith. One commenter 
urged that HHS consider not just the number of ECPs included and their 
geographic distribution, but also the breadth of services they provide 
and the type of ECP providers and facilities that the networks include.
    Response: Given the ongoing strengthening of the non-exhaustive HHS 
List of ECPs (available at http://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/qhp.html), we intend to 
revisit this requirement to offer contracts in good faith and may 
consider a stronger requirement in future benefit years.
    In response to comments regarding the groupings of provider types 
in the ECP categories, we agree with the need to disaggregate several 
of these categories over time to ensure better access to a wider 
variety of health care services. More specifically, we considered 
modifying the ECP category listing to include a total of 11 ECP 
categories, by creating a separate ECP category each for children's 
hospitals and free-standing cancer centers, and disaggregating 
hemophilia treatment centers, community mental health centers, and 
rural health clinics from the ``Other ECP Providers'' category. 
However, because we recognize that issuers are in the process of 
finalizing their networks for 2016, we intend to propose this 
reclassification for 2017. We are not removing the Indian health care 
providers as a major ECP category, notwithstanding the overlapping 
requirement that issuers offer contracts to all Indian health care 
providers in the service area, because many providers and issuers rely 
on Table 11 to identify the universe of ECP types. In response to 
public comments supporting the inclusion of rural health clinics and 
Community Mental Health Centers as ECP provider types within the 
``other ECP providers'' category, we are finalizing our proposal to 
include these provider types in our ECP category listing in Table 11, 
although we will not disaggregate them into their own separate ECP 
categories at this time.
    For purposes of inclusion on the non-exhaustive HHS list of ECPs, 
we are clarifying that only those Medicare-certified rural health 
clinics that meet the following two requirements qualify: (1) Based on 
attestation, the clinic accepts patients regardless of ability to pay 
and offers a sliding fee schedule, or is located in a primary care 
Health Professional Shortage Area (whether geographic, population, or 
automatic \68\);

[[Page 10838]]

and (2) accepts patients regardless of coverage source (whether 
Medicare, Medicaid, CHIP, private health insurance, or other source). 
HHS has determined that all rural health clinics included on the non-
exhaustive HHS list of ECPs satisfy these standards.
---------------------------------------------------------------------------

    \68\ As of January 1, 2014, more than 1,000 rural health clinics 
(RHCs) were designated as an automatic Health Professional Shortage 
Area (HPSA), the criteria for which include accepting patients 
regardless of ability to pay; offering a sliding fee schedule based 
on ability to pay (income); and accepting Medicare, Medicaid, CHIP 
and private health insurance patients. To receive the automatic HPSA 
designation, each RHC is required to complete an attestation form, 
which is available at: http://bhpr.hrsa.gov/shortage/hpsas/certofeligibility.pdf. CMS intends to include RHCs that are not 
listed on the current non-exhaustive ECP list and complete the 
attestation form to receive an automatic HPSA designation through 
the Health Resources and Services Administration in future non-
exhaustive ECP lists. More information about the HPSA designation 
requirements and process is also available at: http://bhpr.hrsa.gov/shortage/hpsas/ruralhealthhpsa.html.
---------------------------------------------------------------------------

    Lastly, we agree with commenters regarding the importance of 
monitoring issuer compliance with this important provision of our ECP 
standard, and intend to continue our post-certification monitoring 
activities to help ensure that consumers have access to the essential 
health benefits guaranteed to them under the Affordable Care Act. 
Therefore, we are finalizing our proposal, effective January 1, 2016, 
that a health plan seeking certification as a QHP in an FFE be required 
to offer contracts for participation in the plan for which a 
certification application is being submitted to at least one ECP in 
each ECP category in each county in the service area, where an ECP in 
that category is available and provides medical or dental services that 
are covered by the issuer plan type.
    Comment: Some commenters recommended that we eliminate the option 
for an issuer to submit a narrative justification in cases where a 
plan's network does not meet the minimum ECP percentage requirement. 
Many of these commenters expressed concern that the narrative 
justification might be accepted in lieu of issuer compliance with the 
ECP inclusion percentage requirement specified by HHS. Commenters 
suggested that the narrative justification is inadequate in cases where 
an issuer fails to meet the minimum ECP percentage standard and 
suggested that issuers be required to contract with all available ECPs. 
These commenters also recommended that HHS make publicly available the 
narrative justifications submitted when issuers do not meet the minimum 
ECP percentage standard or other requirements of the ECP standard.
    Some commenters stated that if HHS permits issuers to continue 
submitting narrative justifications when unable to satisfy the 
statutory ECP requirements, HHS should only allow the justifications in 
extremely rare circumstances, and issuers should be required to provide 
a reason for why the plan has failed to satisfy the standard to 
discourage plans from seeking an exemption when unwarranted.
    Several commenters supported the requirement that QHPs not meeting 
the ECP standard must submit a justification describing how the plan's 
provider network is adequate for low-income enrollees in HPSAs. One of 
these commenters suggested that HHS clarify that this requirement 
extends to SADPs, as well.
    Response: Based on our QHP certification reviews for the 2015 
benefit year and the ongoing strengthening of our ECP list, we believe 
that the narrative justification provides desirable flexibility at this 
time for HHS to further assess the adequacy of our ECP inclusion 
standard, given the need to provide issuers with the flexibility to 
develop networks that deliver benefits at an affordable price to low-
income, medically underserved individuals. At the same time, the vast 
majority of issuers are complying with the requirements without 
submission of a narrative justification, and therefore we believe this 
option is being used under relatively rare circumstances. Regarding the 
suggestion to make publicly available the narrative justifications 
submitted when issuers do not meet the ECP inclusion percentage, HHS 
will consider the feasibility of providing such increased transparency 
over the next year. We expect the need for issuers to submit such 
justifications to decrease over time as issuers further develop their 
networks in adherence to HHS standards. Lastly, we clarify that the 
narrative justification standard applies to SADPs as well as QHPs that 
provide medical services.
    Comment: One commenter expressed concern that the language under 
Sec.  156.235(a)(4) (that is, ``Nothing in paragraphs (a)(1) through 
(a)(3) of this section requires any QHP to provide coverage for any 
specific medical procedure provided by an ECP'') might be interpreted 
by issuers as permitting discrimination regarding which covered 
services among those provided by an ECP it will contract with the ECP 
to provide. The commenter pointed out that section 1311(c)(1)(C) of the 
Affordable Care Act regarding the inclusion of ECPs in QHP networks 
states that nothing in this subparagraph shall be construed to require 
any health plan to provide coverage for any specific medical procedure. 
The commenter expressed concern that our proposed regulation adds the 
additional language ``provided by an ECP'' that could permit issuers to 
contract with ECPs for only some, but not all, of the services for 
which they are licensed and otherwise fully able to provide in 
accordance with the same standards that the QHP applies to other non-
ECP providers. This commenter urged HHS to remove the additional 
language from the regulatory text and clarify that, when contracting 
with ECPs, QHPs must do so for the full scope of services that the ECPs 
are licensed to provide.
    Response: We agree with the commenter in part, and so we are 
removing the additional language ``provided by an ECP'' from Sec.  
156.235(a)(4), effective January 1, 2016. However, we emphasize that we 
are not requiring that QHPs contract with ECPs for the full scope of 
services that the ECPs are licensed to provide; rather, we are 
continuing to require only that they offer the same contract provisions 
as other contracts accepted by or offered to similarly situated 
providers.
    Comment: One commenter recommended that HHS modify the language at 
Sec.  156.235(d) to reflect the language used in the preamble to ensure 
that issuers offer ECPs rates comparable to other providers. 
Specifically, the commenter suggested that we replace the language ``. 
. . if such provider refuses to accept the generally applicable payment 
rates of such issuer,'' and replace it with language that reads ``. . . 
if such provider refuses to accept the same rates and contract 
provisions as included in contracts accepted by similarly situated 
providers that are not ECPs.'' The commenter noted that this would 
provide a clearer definition of an issuer's ``generally applicable 
payment rates'' and would prevent issuers from discriminating against 
ECPs in their payment rates.
    Response: We agree with the commenter that such clarification would 
help prevent issuers from discriminating against ECPs in their payment 
rates and would align with the language used in our preamble. 
Therefore, we are making this change at Sec.  156.235(d), effective 
January 1, 2016.
    Comment: Several commenters urged that we retain the requirement 
that QHP issuers offer contracts in good faith. However, these 
commenters urged that HHS clarify that a minimum payment rate provision 
be required rather than expected, and that we include such a 
requirement in the regulation rather than in only the preamble.
    Response: We do not intend to prescribe such specificity regarding 
contract negotiations between parties. Therefore, we are not requiring 
a minimum payment rate provision, and instead reiterate our expectation 
that QHP issuers offer contracts in good faith.
e. Meaningful Access to Qualified Health Plan Information (Sec.  
156.250)
    In the proposed rule, we proposed to amend Sec.  156.250 to replace 
the cross-reference to the Exchange application and notices provision 
at Sec.  155.230(b) with a cross-reference to Sec.  155.205(c). We also 
proposed to change the title of

[[Page 10839]]

the provision to ``Meaningful access to qualified health plan 
information'' for improved clarity. As discussed above, amendments to 
Sec.  155.205(c) for oral interpretation services were also proposed.
    We also proposed to extend the requirements of Sec.  156.250 so 
that not only applications and notices to enrollees, but all 
information that is critical for obtaining health insurance coverage or 
access to health care services through the QHP to qualified 
individuals, applicants, qualified employers, qualified employees, and 
enrollees, would be provided in a manner consistent with Sec.  
155.205(c). In addition, using the summary of benefits and coverage 
(SBC) disclosure required under Sec.  147.200 as an example, we 
proposed that information would be deemed to be critical for obtaining 
health insurance coverage or access to health care services if the 
issuer were required by State or Federal law or regulation to provide 
the document to a qualified individual, applicant, qualified employer, 
qualified employee, or enrollee. We also indicated that, based on our 
proposed standard, we would consider information that is critical for 
obtaining health coverage or access to health care services to include: 
Applications; consent, grievance, appeal, and complaint forms; notices 
pertaining to the denial, reduction, modification, or termination of 
services, benefits, non-payment, or coverage; a plan's explanation of 
benefits or similar claim processing information; QHP ratings 
information; rebate notices; correspondence containing information 
about eligibility and participation criteria; notices advising 
individuals of the availability of free language assistance; and 
letters or notices that require a signature or response from the 
qualified individual, applicant, qualified employer, qualified 
employee, or enrollee. We stated that we would not consider marketing 
materials that are available for advertising purposes only and not 
otherwise required by law to be critical for obtaining health insurance 
coverage or access to health care services through the QHP, and 
therefore an issuer would not be required to be make such materials 
accessible to individuals with disabilities or limited English 
proficiency.
    We are finalizing this provision as proposed.
    Comment: Commenters expressed general support for our proposal, 
including our proposed standard for determining whether a document was 
``critical'' such that an issuer would be required to provide 
meaningful access to it in accordance with the standards set forth in 
Sec.  155.205(c). A few commenters requested that we specifically 
acknowledge other documents, such as evidences of coverage, or 
information needed to understand coverage, provider networks, or 
enrollment or re-enrollment processes, as meeting the standard. One 
commenter expressed concern that our identification in preamble of 
certain documents that we would consider to meet the standard was 
misplaced. The commenter stated that certain documents we had 
identified, such as ``rebate notices'' (concerning medical loss ratio 
requirements) and ``any letter or notice requiring a signature or 
response,'' were not inherent to obtaining services through the QHP or 
accessing health coverage.
    Response: We are finalizing the provision as proposed. Therefore, 
QHP issuers must provide all information that is critical for obtaining 
health insurance coverage or access to health care services through the 
QHP, including applications, forms, and notices, to qualified 
individuals, applicants, qualified employers, qualified employees, and 
enrollees in accordance with the standards described in Sec.  
155.205(c). Information will be deemed to be critical for obtaining 
health insurance coverage or access to health care services if the 
issuer is required by Federal or State law or regulation to provide the 
document to a qualified individual, applicant, qualified employer, 
qualified employee, or enrollee. We agree that evidences of coverage, 
group certificates of coverage, contracts of insurance, benefits 
summaries, policies, formulary drug lists, provider directories, and 
other similar documents that are relied upon by individuals to 
understand their benefits and the full terms of coverage of the QHP are 
critical for obtaining health care services through the QHP and 
therefore must be provided by the issuer in a manner that satisfies the 
requirements in Sec.  155.205(c). In addition, given the general 
significance of information, such as an MLR rebate notice, that a QHP 
issuer is required by Federal or State law or regulation to communicate 
to consumers, we believe it is appropriate to require a QHP issuer to 
provide meaningful access to such legally required information to all 
consumers in a manner that conforms to Sec.  155.205(c) so that all 
consumers serviced by the QHP issuer can access and understand the 
legal rights or duties that are frequently discussed in such 
communication. With respect to our interpretation stated in the 
preamble to the proposed rule that our proposed standard would include 
any document provided by the issuer that requires a response or 
signature from the qualified individual, applicant, qualified employer, 
qualified employee, or enrollee, in our view, these documents, by 
requiring a signature or response, typically confer an agreement or 
important acknowledgement regarding benefits or claims payment which an 
individual must be able to access and affirmatively understand. Thus, 
we believe consumers receiving such documents from a QHP issuer should 
have meaningful access to this information within the meaning of Sec.  
155.205(c).
    As we noted in the preamble to the proposed rule, we consider the 
SBC to be a document subject to Sec.  156.250 for which a QHP issuer 
must provide meaningful access in accordance with the standards of 
Sec.  155.205(c). As such, like any document that is considered to be 
``critical'' within the meaning of Sec.  156.250, in accordance with 
Sec.  155.205(c)(2)(iii)(A), beginning no later than the first day of 
the Exchange individual market open enrollment period for the 2017 
benefit year, a QHP issuer is required to include taglines with any SBC 
that reflects a QHP option or plan variation of a standard QHP option 
in the top 15 languages spoken by the LEP population in the applicable 
State. An issuer may satisfy this requirement if it includes a cover 
letter or other additional pages provided along with the SBC that 
contains all required taglines. In addition, in accordance with Sec.  
155.205(c)(2)(i), beginning when this rule takes effect, a QHP issuer 
is required to provide telephonic interpreter services in at least 150 
languages with respect to any SBC that reflects a QHP option or plan 
variation of a standard QHP option. Because the requirements with 
respect to oral interpretation and taglines that are finalized in this 
rule are different in substance than those that apply generally to the 
SBC under Sec.  147.200(a)(5) (which cross-references the internal 
claims and appeals and external review processes standards at Sec.  
147.136(e)), we clarify that these additional specific standards 
supplement the existing ``ten percent county-level'' language access 
standards in Sec.  147.200(a)(5).\69\ For example,

[[Page 10840]]

whereas the existing standards under Sec.  147.136(e) require QHP 
issuers to provide taglines and oral language services with respect to 
an applicable non-English language spoken by a given LEP population 
that comprises ten percent or more of the total population residing in 
the applicable county, QHP issuers must also provide taglines on the 
SBC (or in a cover letter or other additional pages included with the 
SBC) in the top 15 non-English languages spoken by the LEP population 
in the relevant State as well as provide telephonic interpreter 
services in at least 150 languages with respect to any SBC that 
reflects a QHP option or plan variation of a standard QHP option. We 
note that based on an analysis of current data, the top 15 languages 
Statewide standard described in Sec.  155.205(c)(2)(iii) will yield any 
language that is triggered by the county-level standards in Sec.  
147.136(e)(3).\70\ In addition, under Sec.  147.136(e)(2)(ii), a QHP 
issuer is still required to provide, upon request, a translated version 
of the SBC in an applicable non-English language if at least ten 
percent of the population in the applicable county is comprised of an 
LEP population that is literate in the same non-English language.
---------------------------------------------------------------------------

    \69\ Under Sec.  147.200(a)(5), a plan or issuer is considered 
to provide the SBC in a culturally and linguistically appropriate 
manner if the thresholds and standards of Sec.  147.136(e), 
implementing standards for the form and manner of notices related to 
internal claims appeals and external review, are met as applied to 
the SBC. When we refer to the ``ten percent county-level'' 
standards, we are referring to the standards set forth under Sec.  
147.136(e)(3), which states that with respect to an address in any 
United States county to which a notice is sent, a non-English 
language is an applicable non-English language if ten percent or 
more of the population residing in the county is literate only in 
the same non-English language, as determined in guidance published 
by the Secretary.
    \70\ In the counties for which the ten percent threshold 
triggers an applicable non-English language, Spanish is triggered in 
the vast majority of cases. In a few counties, Tagalog, Navajo, or 
Chinese are also triggered. 79 FR 78587 (Dec. 30, 2014).
---------------------------------------------------------------------------

    We make one clarification regarding our reference to ``QHP ratings 
information.'' By using this term, we intended to refer to the Quality 
Rating System and QHP Enrollee Experience Survey results established 
under sections 1311(c)(3) and (c)(4) of the Affordable Care Act. 
However, we recognize that this information, when available, is 
required to be displayed by Exchanges on the Exchange Web site, rather 
than by a QHP issuer directly. Therefore, unless a QHP issuer is 
required by other Federal or State law or regulation to provide QHP 
ratings information directly to consumers, that information would not 
be subject to Sec.  156.250. A QHP issuer voluntarily providing the 
information to consumers is encouraged, but not required, to provide it 
in a manner that conforms to Sec.  155.205(c).
    Finally, though we do not consider marketing materials that are 
available for advertising purposes only and not otherwise required by 
law to be critical for obtaining health insurance coverage or access to 
health care services through the QHP, we remind issuers that they might 
have duties to make these materials accessible to individuals with 
disabilities and individuals with LEP under Federal civil rights laws 
that also might apply, including section 1557 of the Affordable Care 
Act, section 504 of the Rehabilitation Act of 1973, and Title VI of the 
Civil Rights Act of 1964.
f. Enrollment Process for Qualified Individuals (Sec.  156.265)
    Sections 155.240 and 155.400 explicitly authorize Exchanges to 
establish certain requirements related to premium payment for 
enrollment in QHPs through the Exchange. Section 156.265 currently only 
cross-references Sec.  155.240. To clarify that both sets of 
requirements apply to QHPs, we proposed that a QHP issuer must follow 
the premium payment process established by the Exchange in accordance 
with Sec.  155.240 and the payment rules established in Sec.  
155.400(e).
    We did not receive comments concerning the proposed enrollment 
process provisions. We are finalizing the provisions proposed in Sec.  
156.265 of the proposed rule without any modifications.
g. Termination of Coverage or Enrollment for Qualified Individuals 
(Sec.  156.270)
    We are finalizing revisions in this section to conform to our 
interpretation of the guaranteed availability and guaranteed 
renewability requirements. For a discussion these revisions, please see 
the preamble for Sec.  155.430.
h. Segregation of Funds for Abortion Services (Sec.  156.280)
    Section 1303 of the Affordable Care Act and Sec.  156.280 specify 
accounting and other standards for issuers of QHPs through the Exchange 
in the individual market that cover abortion services for which public 
funding is prohibited (also referred to as non-excepted abortion 
services). The statute and regulations establish that unless otherwise 
prohibited by State law, a QHP issuer may elect to cover such services. 
If an issuer elects to cover such services under a QHP sold through the 
individual market Exchange, the issuer must ensure that no premium tax 
credit or cost-sharing reduction funds are used to pay claims for 
abortion services for which public funding is prohibited.
    In the proposed rule, we provided guidance on individual market 
Exchange issuer's responsibilities for requirements related to QHP 
coverage of abortion services for which public funding is prohibited. 
HHS works with stakeholders, including States and issuers, to help them 
fully understand and follow the statutes and regulations governing the 
provision of health insurance coverage under a QHP through the 
Exchange. As is the case with many provisions in the Affordable Care 
Act, States and State insurance commissioners are the entities 
primarily responsible for implementing and enforcing the provisions in 
section 1303 of the Affordable Care Act related to individual market 
QHP coverage of non-excepted abortion services. OPM may issue guidance 
related to these provisions for multi-State plan issuers.
    Under section 1303(b)(2)(B) of the Affordable Care Act, as 
implemented in Sec.  156.280(e)(2)(i), individual market Exchange 
issuers must collect a separate payment from each enrollee, for an 
amount equal to the AV of the coverage for abortions for which public 
funding is prohibited. However, section 1303 of the Affordable Care Act 
and Sec.  156.280 do not specify the method an issuer must use to 
comply with the separate payment requirement. As we described in the 
proposed rule, this provision may be satisfied in a number of ways. 
Several such ways include: Sending the enrollee a single monthly 
invoice or bill that separately itemizes the premium amount for non-
excepted abortion services; sending a separate monthly bill for these 
services; or sending the enrollee a notice at or soon after the time of 
enrollment that the monthly invoice or bill will include a separate 
charge for such services and specify the charge. Section 1303 of the 
Affordable Care Act permits, but does not require, a QHP issuer to 
separately identify the premium for non-excepted abortion services on 
the monthly premium bill to comply with the separate payment 
requirement. A consumer may pay the premium payment for non-excepted 
abortion services and the separate payment for all other services in a 
single transaction, with the issuer depositing the two separate 
payments into the issuer's two separate allocation accounts as required 
by section 1301(b)(2)(C) of the Affordable Care Act, as implemented in 
Sec.  156.280(e)(2)(ii) and (e)(3).
    Section 1303(b)(2)(D) of the Affordable Care Act, as implemented in 
Sec.  156.280(e)(4), establishes requirements for individual market 
Exchange issuers for how much they must charge each QHP enrollee for 
coverage of abortions for which public funding is prohibited. A QHP 
issuer must estimate the basic

[[Page 10841]]

per enrollee, per month cost, determined on an average actuarial basis, 
for including coverage of non-excepted abortion services. In making 
this estimate, a QHP issuer may not estimate the basic cost of coverage 
for non-excepted abortion services to be less than $1 per enrollee, per 
month. In the proposed rule and past guidance, we clarified that this 
means an issuer must charge each QHP enrollee a minimum premium of $1 
per month for coverage of non-excepted abortion services.
    Comment: Some commenters supported enrollees paying premiums in one 
single transaction for both non-excepted abortion services and other 
health care services. Commenters requested clarification on the 
guidance provided in the proposed rule so enrollees will not receive 
multiple notices regarding separate premium amounts. These commenters 
stated that a single payment transaction without notice to the consumer 
would minimize administrative complexity for issuers. Other commenters 
requested that QHP issuers be prohibited from collecting the two 
separate payments for coverage for non-excepted abortion services and 
other health care services, respectively, in a single transaction (for 
example, having them combined in a single check), and instead require 
that they be separated by the enrollee. Commenters also recommended HHS 
clarify the guidance regarding itemizing the two premium amounts on 
monthly invoices and provide additional technical guidance on 
maintaining separate allocation accounts for non-excepted abortion 
services and all other services, along with enforcement mechanisms.
    Response: The discussion of Sec.  156.280 in the proposed rule of 
the separate payment requirement constituted clarifying guidance, and 
did not propose to modify existing requirements under section 1303 of 
the Affordable Care Act and Sec.  156.280. We affirm the guidance in 
the proposed rule. This guidance offers QHP issuers several ways to 
comply with the requirements, while minimizing burden on QHP issuers 
and consumers.
i. Non-Renewal and Decertification of QHPs (Sec.  156.290)
    We are finalizing revisions in this section to conform with our 
interpretation of the guaranteed availability and guaranteed 
renewability requirements. For a discussion of these revisions, please 
see the preamble for Sec.  155.430. We are also correcting a 
typographical error by inserting the words ``adhere to the'' in Sec.  
156.290(a)(1).
4. Health Insurance Issuer Responsibility for Advance Payments of the 
Premium Tax Credit and Cost-Sharing Reductions
a. Plan Variations (Sec.  156.420)
    In the proposed rule, we proposed to amend Sec.  156.420 to add 
Sec.  156.420(h) and require QHP issuers to provide SBCs that 
accurately represent plan variations in a manner consistent with the 
requirements set forth at Sec.  147.200 to ensure that consumers have 
access to SBCs that accurately represent cost-sharing responsibilities 
for all coverage options, including plan variations, and are provided 
adequate notice of the plan variations.
    We proposed that QHP issuers would be required to provide SBCs for 
plan variations no later than the first day of the next Exchange open 
enrollment period for the individual market for the 2016 benefit year, 
in accordance with Sec.  155.410(e). We sought comments on whether the 
proposed applicability date would present implementation challenges for 
QHP issuers as well as on other aspects of the proposal. We also noted 
that QHP issuers would be required to provide the SBC in a manner that 
is consistent with the meaningful access requirements under Sec.  
155.205(c).
    We are finalizing this provision as proposed, with one modification 
to specify that this standard will apply no later than November 1, 
2015, which is the first day of the individual market open enrollment 
period for the 2016 benefit year.
    Comment: Commenters expressed support for the proposal. Some 
commented that the proposal would better enable consumers who are 
eligible for cost-sharing reductions to take into account the overall 
out-of-pocket costs of a given QHP benefit package, rather than 
focusing primarily on premiums.
    Response: We agree that requiring the provision of plan variation 
SBCs for individual market QHP options will increase the likelihood 
that consumers will select a plan option that is appropriate for both 
their financial and health care needs.
    Comment: Commenters supported an implementation date of no later 
than the open enrollment period for the 2016 benefit year. Some 
commenters stated that issuers are already providing plan variation 
SBCs to enrollees and did not express opposition to our proposed 
implementation timeline. However, one commenter opposed the proposed 
implementation date because it did not believe issuers could receive 
State approval of their form filings, including plan variation SBCs, in 
time to make such SBCs available.
    Response: We are finalizing the applicability date as proposed. We 
expect that States and issuers will continue to work collaboratively to 
ensure that the applicable form filing approvals are received 
sufficiently in advance of the open enrollment period for the 2016 
benefit year.
b. Changes in Eligibility for Cost-Sharing Reductions (Sec.  156.425)
    In the proposed rule, we proposed to amend Sec.  156.425 to clarify 
when a QHP issuer would be required to provide an SBC if an 
individual's assignment to a standard plan or plan variation of the QHP 
changes in accordance with Sec.  156.425(a). We proposed that a QHP 
issuer must provide an SBC that accurately represents a new plan 
variation (or the standard plan variation) as soon as practicable after 
receiving notice from the Exchange of the individual's change in 
eligibility, but in no case later than 7 business days following 
receipt of notice. We proposed that this requirement would be effective 
beginning on January 1, 2016.
    We are finalizing these provisions as proposed.
    Comment: Commenters generally expressed support. Some commenters 
requested that an additional notice, beyond the SBC, be sent to 
consumers whose eligibility for cost-sharing variations changes which 
would explain the change to the consumer, the reason for the change, 
and how many cost-sharing amounts already incurred by the consumer 
during the benefit year would be applied toward the new deductible(s) 
and out-of-pocket limit(s).
    Response: While issuers are encouraged to develop health literacy 
tools and provide consumer-friendly explanatory information to 
enrollees when their eligibility for cost-sharing reductions changes, 
we are not requiring issuers to send an additional notice beyond the 
SBC at this time. We will continue to monitor the extent to which 
consumers understand cost-sharing reductions eligibility and whether 
other information should be provided to consumers in this context.
    Comment: Some commenters requested additional time to send an SBC 
to an enrollee whose eligibility for cost-sharing reduction changes. 
One commenter requested as many as 14 business days from the date the 
issuer effectuates the assignment into a plan variation (or standard 
plan without cost-sharing reductions), while the other commenter 
requested 14 calendar days to send the SBC.

[[Page 10842]]

    Response: We are finalizing the timing requirement to send the SBC 
as proposed, that is, 7 business days from the date the issuer receives 
notice of the change in the enrollee's eligibility from the Exchange. 
Virtually all issuers subject to this requirement have already incurred 
one-time costs to develop systems necessary to generate and provide 
SBCs in an automated and efficient fashion to meet the timing 
requirements specified in Sec.  147.200. Further, in accordance with 
Sec.  147.200(a)(1)(iv)(D), QHP issuers must already send an SBC when 
an individual requests an SBC as soon as practicable, but no later than 
7 business days following the receipt of the request.
c. Cost-Sharing Reductions Reconciliation (Sec.  156.430)
    Sections 1402(a) through (c) of the Affordable Care Act provide for 
cost-sharing reductions for EHB provided by a QHP. Cost-sharing 
reductions are advanced to issuers throughout the benefit year, and 
reconciled following the benefit year against actual cost-sharing 
amounts provided by issuers to enrollees.
    The reconciliation process requires QHP issuers to submit to HHS 
the total allowed costs for EHB charged for each plan variation policy, 
the amounts paid by the issuer, and the amounts paid by or on behalf of 
the enrollee (other than by the Federal government under section 1402 
of the Affordable Care Act), as well as the amounts that would have 
been paid by the enrollee under the standard plan. Under the standard 
methodology described at Sec.  156.430(c)(2), costs paid by the issuer 
under the standard plan are calculated by applying actual cost-sharing 
requirements for the standard plan to the allowed costs for EHB under 
the enrollee's policy for the benefit year. The difference is the 
amount of cost-sharing reductions provided.
    In the proposed Payment Notice, we reiterated that issuers will not 
be reimbursed for reductions in out-of-pocket spending for benefits 
other than EHB. However, we explained that because of technology 
challenges in these early years of the cost-sharing reduction program, 
some issuers are presently unable to differentiate on a policy level 
between EHB claims and non-EHB claims, as required by HHS when applying 
the standard cost-sharing reduction reconciliation methodology. The 
difficulty occurs in plan designs that allow enrollee out-of-pocket 
spending for EHB and non-EHB claims alike to accumulate toward 
deductibles and the reduced annual limit on cost sharing. Such plan 
designs benefit enrollees by allowing them to reach their spending 
limits sooner. As a result, for the purpose of cost-sharing reduction 
reconciliation, we proposed to allow QHP issuers to submit percentage 
estimates of the portion of claims attributable to non-EHB for the 2014 
benefit year, and to reduce the total claims amount by that percentage, 
to arrive at an estimated total EHB amount. The percentage estimate 
would be the estimate of expected non-EHB claims costs previously 
submitted for each plan variation on the Uniform Rate Review Template 
(URRT) \71\ and which HHS used to calculate 2014 advance cost-sharing 
reduction payments. An issuer using this procedure would be required to 
do so for all plan variations for which the criteria below are met.
---------------------------------------------------------------------------

    \71\ Percentage of the total allowed costs of benefits as 
defined at Sec.  156.20 means the anticipated covered medical 
spending for EHB coverage (as defined in Sec.  156.110(a) of the 
subchapter) paid by a health plan for a standard population, 
computed in accordance with the plan's cost-sharing, divided by the 
total anticipated allowed charges for EHB coverage provided to a 
standard population, and expressed as a percentage.
---------------------------------------------------------------------------

    As described in proposed Sec.  156.430(c)(2)(i), this exception to 
permit QHP issuers to use plan-specific URRT estimates of non-EHB 
claims would be limited to plan designs in which out-of-pocket expenses 
for non-EHB benefits accumulate toward the deductible and reduced 
annual limitation on cost sharing, but for which copayments and 
coinsurance rates for non-EHB are not reduced. This limitation helps 
assure that the estimated percentage, which is calculated based on the 
proportion of claims attributable to EHB, does not overstate the 
proportion of reduced out-of-pocket spending associated with EHB. In 
addition, the exception would apply only when non-EHB estimated 
percentages account for less than 2 percent of total claims, helping 
assure that any inaccuracies in the estimate are unlikely to result in 
significant inaccuracies in total cost-sharing reduction reimbursement.
    Comment: We received comments in support of our proposal to permit 
estimates of non-EHB cost sharing based on the URRT. One commenter 
asked HHS to make this exception permanent. Another commenter asked HHS 
to extend the exception to the simplified method of cost-sharing 
reduction reconciliation since it, too, requires comparison of standard 
plan cost sharing to the total allowed EHB costs for a plan variation, 
and issuers face similar problems identifying EHB. Another commenter 
asked us to clarify what we mean by reducing total claims amount by the 
percentage of non-EHB, and specifically whether issuers must reduce 
every claim before re-adjudication. Finally, a commenter asked HHS to 
permit issuers to use the simplified method of cost-sharing reduction 
reconciliation permanently, stating that the double adjudication 
required under the standard methodology is too complex for the variety 
of plan designs on the individual market.
    Response: We are finalizing the exception proposed in Sec.  
156.430(c)(2)(i) to permit QHP issuers to use plan-specific URRT 
estimates of non-EHB claims, with two modifications. We are expanding 
this exception to include issuers using the simplified methodology for 
cost-sharing reduction reconciliation, since they are equally affected 
by technology challenges, and we are extending it to the 2015 benefit 
year. We also clarify that issuers should reduce total claims at the 
policy-level before re-adjudication. Finally, we believe the standard 
methodology will provide the most accurate permanent method of 
reconciling advanced cost-sharing reduction payments--the simplified 
methodology is an interim step.\72\
---------------------------------------------------------------------------

    \72\ ``Timing of Reconciliation of Cost-Sharing Reductions for 
the 2014 Benefit Year.'' February 13, 2015. https://www.regtap.info/uploads/library/APTC_CSR_Recon_timing_guidance_5CR_021315.pdf.
---------------------------------------------------------------------------

5. Minimum Essential Coverage
a. Other Coverage That Qualifies as Minimum Essential Coverage (Sec.  
156.602)
    Under Sec.  156.602, State high risk pool coverage is designated as 
minimum essential coverage for a plan or policy year beginning on or 
before December 31, 2014, for a one-year transition period. However, 
many State high risk pools have continued into the 2015 policy year. 
The proposed rule would designate as minimum essential coverage any 
qualified high risk pool (as defined by section 2744(c)(2) of the PHS 
Act) established in any State as of the publication date of the 
proposed rule. This would provide States additional time to evaluate 
State-administered high risk pools and facilitate the transition of 
State high risk pool enrollees into QHPs through the Exchange or into 
other forms of minimum essential coverage. We sought comment on whether 
the designation should be permanent or time-limited (for example, for 
2015 only). We also sought comment on the cut-off date for formation of 
State high

[[Page 10843]]

risk pools that will qualify for recognition under the regulations.
    Comment: Several commenters favored the proposal to permanently 
designate State high risk pool coverage as minimum essential coverage. 
One commenter suggested the designation should apply only through the 
2016 plan year. Another commenter stated that State high risk pools 
must at least be required to provide minimum value to be recognized as 
minimum essential coverage after 2015.
    Response: We believe States are in the best position to assess the 
unique circumstances in each State and determine when it is in the best 
interest of consumers to close State-administered high risk pools. 
While a one-year designation as minimum essential coverage would allow 
adequate time for some States to phase out high risk pools, many State 
laws require the retention of State high risk pools after 2015. 
Additionally, since the benefits are generally statutorily mandated, 
many States may not be able to easily alter the State high risk pool 
benefits to provide minimum value. Imposing a timeline that is not 
tailored to the unique circumstances of a particular State potentially 
disadvantages a vulnerable population that has significant health costs 
and that may be uninformed about the Exchanges and the availability of 
financial help to purchase health coverage. We received no comments on 
the cut-off date for formation for State high risk pools. Therefore we 
are establishing a permanent minimum essential coverage designation for 
any State high risk pool in existence as of November 26, 2014, the 
publication date of the proposed rule. The IRS has indicated that as 
long as HHS designates qualified high risk pool coverage as minimum 
essential coverage, an individual that is eligible but not enrolled in 
a qualified high risk pool will be treated as eligible for QHP coverage 
and the premium tax credit.\73\
---------------------------------------------------------------------------

    \73\ See Notice 2013-41, 2013-29 I.R.B. 60.
---------------------------------------------------------------------------

6. Enforcement Remedies in Federally-Facilitated Exchanges
a. Available Remedies; Scope (Sec.  156.800)
    In the first Program Integrity Rule,\74\ HHS finalized Sec.  
156.800(c), which established a good faith compliance policy for QHP 
issuers offering coverage through an FFE for the 2014 calendar year. 
Specifically, the first Program Integrity Rule provides that HHS will 
not impose sanctions under subpart I of part 156 against a QHP issuer 
in an FFE if the QHP issuer has made good faith efforts to comply with 
applicable Exchange requirements. HHS adopted the good faith compliance 
policy to help QHP issuers become familiar with the standards unique to 
the FFEs during the initial stage of operations.
---------------------------------------------------------------------------

    \74\ Patient Protection and Affordable Care Act; Program 
Integrity: Exchange, SHOP, and Eligibility Appeals, 78 FR 54074 
(August 30, 2013).
---------------------------------------------------------------------------

    HHS is committed to ensuring that QHP issuers have the opportunity 
to learn from their experiences in 2014 without undue concern about 
being subject to formal enforcement actions when the QHP issuer has 
made reasonable efforts to comply with applicable standards. While 
immediate formal enforcement actions may be appropriate in some cases, 
we continue to prefer resolving most compliance issues by providing 
technical assistance. Accordingly, in the proposed rule we proposed 
extending the good faith compliance standard under Sec.  156.800(c) 
through the end of calendar year 2015. We also noted, that irrespective 
of the good faith compliance standard, QHP issuers are required to 
comply with all applicable FFE standards (and any applicable Federal or 
State laws regarding privacy, security and fraud) at the time of 
certification and on an ongoing basis.
    We are finalizing the provision as proposed.
    Comment: Commenters generally supported the proposed extension of 
the good faith compliance standard. One commenter did not support the 
proposal, stating that the extension of the standard may impede HHS's 
efforts to enforce FFE standards. Some commenters also requested that 
HHS clarify that the good faith compliance policy would apply to non-
compliance occurring during the 2015 benefit year that is identified 
after calendar year 2015.
    Response: We note that issuers seeking to avoid enforcement actions 
under subpart I of part 156 through the good faith compliance standard 
may do so only by demonstrating that they exercised good faith efforts 
at complying with FFE standards. Consistent with the good faith 
compliance standard for the 2014 calendar year, HHS will determine 
whether the good faith compliance standard applies based on an 
evaluation of various factors surrounding the issuer's participation in 
the FFEs, including past instances of non-compliance, the gravity or 
severity of non-compliance, and the presence or absence of HHS guidance 
on the matter. We further clarify that the good faith compliance 
standard would apply to conduct occurring during the 2015 calendar year 
even if the activity is identified after 2015 calendar year. It would 
not apply to conduct that occurs in 2016 or later, even if that conduct 
was related to coverage provided in the 2015 calendar year.
b. Plan Suppression (Sec.  156.815)
    In Sec.  156.815(a), we proposed a definition of suppression, which 
would mean that a suppressed QHP temporarily would not be available for 
enrollment through the FFEs. In Sec.  156.815(b), we proposed the bases 
for suppression of a QHP in the FFEs. Our first proposed basis for 
suppression, Sec.  156.815(b)(1), is the issuer notifying HHS of its 
withdrawal of the QHP from the FFEs when one of the exceptions to 
guaranteed renewability of coverage related to discontinuing a 
particular product or discontinuing all coverage under Sec.  147.106(c) 
or (d) applies. In Sec.  156.815(b)(2), we proposed as a basis to 
suppress a QHP submission of data for the QHP that is incomplete or 
inaccurate. For example, incorrect rates submitted by a QHP issuer 
generally would lead to the suppression of the QHP until the rating 
data are corrected. In Sec.  156.815(b)(3), we proposed as a basis to 
suppress a QHP that is undergoing decertification under Sec.  156.810 
or the appeal of a decertification under subpart J of part 156. In 
Sec.  156.815(b)(4), we proposed as a basis to suppress a QHP pending, 
ongoing, or final State regulatory or enforcement action against the 
QHP that could affect the issuer's ability to enroll consumers or that 
otherwise relates to the issuer's ability to offer QHPs in the FFEs. In 
Sec.  156.815(b)(5), we proposed as a basis for suppression of a QHP 
application of the special rule for network plans under Sec.  
147.104(c) or the financial capacity limits provision under Sec.  
147.104(d). In Sec.  156.815(c), we proposed a basis for suppression of 
a QHP that is a multi-State plan upon notification by OPM of certain 
findings. We solicited comments on this proposal, including whether the 
proposed bases for suppression were appropriate and whether an appeals 
process should be available following suppression decisions.
    We are finalizing the provision as proposed.
    Comment: Some commenters supported the proposed provisions. 
Commenters requested that HHS clarify that QHP suppression would not be 
implemented in violation of State law. One commenter did not support 
QHP suppression, stating that it would conflict with HIPAA and one 
State's law on guaranteed renewability. Another commenter recommended 
that HHS clarify that, when the QHP continues to offer coverage through 
the FFEs but is

[[Page 10844]]

being suppressed, consumers should be notified of the suppression. One 
commenter asked if the proposed process and reasons for QHP suppression 
would apply to QHPs in the SHOP.
    Response: We envision suppressing a QHP when continuing to allow 
new enrollment in the QHP through an FFE is not in the interest of 
qualified individuals and employers, such as when the QHP has withdrawn 
from an FFE, when there is incorrect data being displayed about the 
QHP, and when the QHP will be decertified. Our experience shows that by 
removing QHPs subject to the suppression from an FFE Web site, it will 
minimize confusion by consumers, agents and brokers, and assisters 
about the QHPs that are available during plan selection. Federal 
regulations on guaranteed renewability at Sec.  147.106(c) and (d) 
provide for circumstances under which an issuer may discontinue a 
particular product or discontinue all coverage in an applicable market. 
We intend to implement QHP suppression in coordination with States to 
ensure that conflicts with State law can be avoided and adverse effects 
minimized. We note that suppression does not affect re-enrollments into 
the plan, but temporarily restricts the availability of the plan for 
new enrollments through an FFE. We further note that if suppression of 
a plan ultimately leads to the plan being no longer available through 
an FFE, the issuer may be required to offer the same plan outside an 
FFE under Sec. Sec.  147.104 and 147.106. We further clarify that the 
process and reasons for QHP suppression would also apply to QHPs in the 
FF-SHOP.
7. Quality Standards
a. Quality Improvement Strategy (Sec.  156.1130)
    In Sec.  156.1130(a), we proposed that a QHP issuer participating 
in an Exchange for at least 2 years must implement and report 
information regarding a quality improvement strategy (QIS), that is a 
payment structure that provides increased reimbursement or other 
market-based incentives in accordance with the health care topic areas 
in section 1311(g)(1) of the Affordable Care Act, for each QHP offered 
in an Exchange, consistent with the guidelines developed by HHS under 
section 1311(g)(2) of the Affordable Care Act. We noted that the 
statutory QIS requirements, similar to the other Exchange quality 
standards, extend to all Exchange types, including a State Exchange and 
the FFEs.\75\ For the QIS standards, we proposed to provide State 
Exchanges flexibility to establish the timeline, format, validation, 
and other requirements related to the annual submission of QIS data by 
QHP issuers that participate in their respective Exchanges. Under this 
proposal, the establishment and implementation of such standards and 
other requirements by State Exchanges would support compliance with 
Sec.  155.200(d), which requires the Exchange to evaluate and oversee 
implementation of the QIS (among other QHP issuer quality initiatives 
for coverage offered through Exchanges). We noted that we envisioned 
the standards that will be used for the FFEs would provide the minimum 
requirements for State Exchanges to build upon.
---------------------------------------------------------------------------

    \75\ Unless indicated otherwise, references in this section to 
the ``FFE'' include States performing plan management functions.
---------------------------------------------------------------------------

    We proposed to phase in QIS implementation standards and reporting 
requirements to provide QHP issuers the necessary time to understand 
the populations enrolling in a QHP offered through the Exchange and to 
build quality performance data on their respective QHP enrollees. We 
believe that implementation of a QIS should be a continuous improvement 
process for which QHP issuers define the health outcome needs of their 
enrollees, set goals for improvement, and provide increased 
reimbursement to their providers or other market-based incentives to 
reward achievement of those goals. This approach is consistent with 
other QHP issuer quality standards for coverage offered through an 
Exchange including implementation and reporting for the patient safety 
standards, the Quality Rating System (QRS), and the Enrollee 
Satisfaction Survey (ESS). We further noted that, consistent with 
existing regulations at Sec.  156.200(h), QHP issuers participating in 
Exchanges would be required to attest to compliance with QIS standards, 
along with the other QHP issuer quality initiatives for coverage 
offered through Exchanges established under subpart L of part 156, as 
part of the QHP application process.
    In paragraph (b), we proposed to direct a QHP issuer to submit 
validated data in a form, manner, and reporting frequency specified by 
the Exchange to support evaluation of quality improvement strategies in 
accordance with Sec.  155.200(d) and Sec.  156.200(b)(5). We noted that 
we anticipate using the data collected as part of information used to 
evaluate and oversee compliance of QHP issuers in FFEs with the 
Exchange QIS standards and encourage State Exchanges to adopt a similar 
approach. State Exchanges would maintain the flexibility to add to the 
Federal minimum QIS standards and would also have the ability to 
establish their own form, manner, and reporting frequency. We proposed 
that beginning in 2016, a QHP issuer participating in an Exchange for 
at least 2 years would submit a QIS implementation plan for the 2017 
plan year to the applicable Exchange, followed by annual progress 
updates. We noted that we anticipate that the implementation plan for a 
QHP issuer's proposed QIS would reflect a payment structure that 
provides increased reimbursement or other market-based incentives for 
addressing at least one of the topics in section 1311(g)(1) of the 
Affordable Care Act.
    We proposed requesting information from QHP issuers regarding 
percentage of payments to providers that is adjusted based on quality 
and cost of health care services as this would promote transparency and 
assist Exchanges to make better informed QHP certification decisions. 
We also proposed that 1 year after submitting the QIS implementation 
plan, the QHP issuer would submit information including an annual 
update including a description of progress of QIS implementation 
activities, analysis of progress using proposed measures and targets, 
and any modifications to the QIS.
    We noted that we believe that the implementation and reporting for 
the QIS over time would provide meaningful QIS data from QHP issuers by 
minimizing administrative effort while also allowing for flexibility 
and innovation. In the proposed rule, we explained that we anticipate 
issuing technical guidance in the future that will provide operational 
details including data validation, other data submission processes, 
timeframes and potential minimum enrollment size threshold for coverage 
offered through an FFE. We anticipate that this guidance would be 
updated on an annual basis (or more frequently as may be necessary). We 
proposed to allow State Exchanges to establish the data validation and 
submission requirements for QIS data from QHP issuers that participate 
in their respective Exchanges.
    In paragraph (c), we proposed to direct a QHP issuer to submit data 
annually for activities that are conducted related to implementation of 
its QIS, in a manner and timeframe specified by the Exchange. For 
example, an issuer that participates in an FFE for

[[Page 10845]]

2 consecutive years for coverage beginning in January 2014 and January 
2015 would submit a QIS implementation plan to an FFE during the fall 
2016 post-certification period, and in a format specified by HHS. A 
progress update on the QHP issuer's QIS activities would be required 
the following year. Similarly, an issuer participating in an FFE for 
the first time during the 2015 open enrollment period for the 2016 
coverage year and also offering coverage in the 2017 plan year would 
submit an implementation plan in the 2018 post-certification period to 
align with our proposed approach of phasing in the QIS over time and 
allowing a QHP issuer 2 years to collect data and develop quality 
improvement strategies for its QHPs offered through an Exchange, before 
the submission of an implementation plan is required. A progress update 
on the QHP issuer's QIS activities would be required the following 
year. We proposed to allow State Exchanges to establish the specific 
timeline and format requirements for the annual submission of QIS data 
by QHP issuers that participate in their respective Exchanges.
    We noted that multi-State plans, as defined in Sec.  155.1000(a), 
are subject to reporting QIS data for evaluation, as described in 
paragraph (b). In the proposed rule, we proposed to codify this general 
requirement at Sec.  156.1130(d). We noted that we anticipate that OPM 
will provide guidance on QIS reporting to issuers with whom it holds 
multi-State plan contracts.
    We sought comment on all aspects of this proposal, including 
whether the standard should apply to all types of QHPs offered through 
the Exchanges (for example, stand-alone dental plans, QHPs providing 
child-only coverage, and health savings accounts) or if different 
standards should be developed for the different types of QHPs. We also 
solicited feedback on: whether there should be a minimum enrollment 
size threshold to trigger the applicability of the QIS standards, what 
information should be included to effectively monitor and evaluate a 
QIS, and whether the information collected should be publically 
displayed to encourage transparency, support comparison of QHP issuer 
QIS activities, and align with other quality standards for QHP issuers 
participating in Exchanges.
    We are finalizing these provisions as proposed, with the following 
modifications. For the initial years of implementation, QHPs that are 
stand-alone dental plans, provide child-only coverage, or are 
compatible with health savings accounts will not be subject to the QIS. 
Additionally, HHS intends to establish a minimum enrollment size that 
triggers the QIS obligations in alignment with the other Exchange 
quality initiatives (for example, the QRS and ESS) and will do so 
through technical guidance. Further, we clarify that, in the initial 
years of QIS implementation, HHS will not require QHP issuers to select 
measures from a set of standardized or uniform performance measures 
established by HHS for inclusion in their respective QIS implementation 
plans. HHS anticipates requiring QHP issuers to provide information 
regarding their payment structure that provides increased reimbursement 
or other incentives such as the percentage of payments made across 
various categories including fee-for-service with no link of payment to 
quality; fee-for-service with a link of payment to quality; alternative 
payment models built on fee-for-service architecture; and population-
based payments, to promote transparency and align this approach with 
other current CMS and HHS payment reform initiatives. As detailed 
above, we intend to issue future technical guidance that will provide 
more information regarding these and other QIS data collection and 
submission details for QHP issuers participating on an FFE.
    Comment: Several commenters supported requiring QIS compliance from 
QHP issuers that have been participating in an Exchange for at least 2 
years. A few commenters agreed the phased-in approach of the QIS 
program would allow for the necessary preparations and knowledge 
building, while other commenters recommended a delay based on concerns 
that the timeline was too aggressive. While one commenter urged HHS to 
postpone its QIS proposals and requirements for the private sector 
until it has had time to evaluate lessons learned from the public 
sector, others recommended that HHS require all QHP issuers--not only 
those that have been participating in the Exchange for 2 or more 
consecutive years--to submit a QIS implementation plan, with one 
stating that QHP issuers will have sufficient information at the outset 
to design their quality improvement strategies.
    Response: We maintain in the final rule the approach outlined in 
the proposed rule that QHP issuers participating in an Exchange for at 
least 2 consecutive years must implement and report information 
regarding a QIS, followed by annual progress updates. We believe that 2 
years is an appropriate time period for QHP issuers to understand their 
populations who have enrolled through Exchanges, and develop relevant 
quality improvement strategies to meet the needs of that population. We 
anticipate requiring compliance with the QIS reporting requirements 
beginning in 2016 for the 2017 coverage year and will be issuing future 
guidance that addresses this, as well as other QIS operational and data 
submission details, for QHP issuers participating in the FFEs.
    Comment: Some commenters suggested that a minimum QHP enrollment 
size that aligns with the minimum threshold requirements of the 2015 
QRS beta test requirement and the QHP Enrollee Experience Survey should 
be required to trigger the applicability of the QIS certification 
standard. Other commenters suggested that all QHP issuers, regardless 
of enrollment size, should be required to develop and implement a 
quality improvement strategy.
    Response: We considered the feedback regarding the applicability of 
a minimum enrollment size. In an effort to maintain consistency with 
other Exchange quality standards in the initial years, we will direct 
QHP issuers to comply with the QIS certification standard and report 
QIS data if they meet the minimum enrollment size threshold. We intend 
to include additional details regarding the applicability of the 
minimum enrollment threshold to the QIS standards in future technical 
guidance.
    Comment: Some commenters suggested that the QIS should align with 
existing quality standards required as part of Exchange participation 
standards to be accredited by a recognized accrediting entity and that 
the accreditation certification standard should satisfy the QIS 
standards provided in Sec.  156.1130(a).
    Response: We note that the existing accreditation standards do not 
include the use of market-based incentives as outlined in Sec.  
156.1130(a) and required by section 1311(g) of the Affordable Care Act 
for QHP issuers participating in Exchanges. However, we would not 
restrict a QHP issuer from using quality improvement strategy 
information submitted to a recognized accrediting entity for QIS 
purposes as long as the information otherwise satisfies the QIS 
requirements included in this final rulemaking and future technical 
guidance.
    Comment: Commenters expressed general support for the QIS 
principles and goal of improving quality of care delivered to Exchange 
enrollees through quality improvement strategies that provide for 
increased reimbursements,

[[Page 10846]]

benefit designs, and other market-based incentives. Commenters 
supported QIS alignment of priorities, performance measures, and 
reporting requirements with the National Quality Strategy, the CMS 
Quality Strategy, and other national and regional efforts to improve 
the quality of healthcare to reduce both QHP issuer and provider 
burden. Commenters remarked on the importance of leveraging quality 
improvement efforts in the public and private sectors to hasten 
achievement of better patient outcomes and lower costs.
    Response: We made extensive efforts to incorporate similar 
standards and requirements from other quality initiatives into the QIS, 
and believe that the QIS requirements will align as consistently as 
possible with other quality initiatives. At this time, we do not intend 
to require QHP issuers to select specific measures from a set required 
by HHS.
    Comment: Comments related to whether all QHP types (SADPs, child 
only coverage, and health savings accounts) should be required to 
implement a QIS fell into two categories. The first category of 
commenters noted that all types of QHPs should meet the QIS 
certification standard and be subject to the same QIS standards. The 
second category of commenters noted that the QIS should apply to all 
QHPs, but the standards should be directly relevant to the 
population(s) covered by the QHP (that is, different standards for 
SADPs, QHPs with rural enrollees, integrated delivery systems, etc.). 
Some commenters suggested that QHP issuers be allowed to target 
specific populations within their network when implementing a QIS 
instead of targeting all their QHP enrollees. Others recommended that 
QHP issuers be provided the flexibility to address the needs of 
specific enrollee populations while recommending HHS review QIS 
submissions to ensure that the strategies do not exclude any particular 
group, either by design or effect. Other commenters stressed the need 
to review quality improvement strategies to ensure that such strategies 
do not discriminate, either by design or by effect, against any one 
group of individuals. Some commenters also recommended excluding SADPs, 
noting that SADPs do not have the same ability to implement and track 
measures, and therefore should be exempt from the QIS requirements.
    Response: We clarify in the final rule that the Federal QIS 
standards will apply to same QHP types that are required to comply with 
the QIS certification standard across all Exchange types. However, a 
QHP issuer's QIS does not need to apply to all populations covered by 
its QHPs, and the issuer has the option of developing multiple 
strategies to ensure that each QHP is covered by a QIS. We agree that 
it would be premature at this point in time to require all QHP types 
(for example, SADPs, child only coverage plans, or QHPs compatible with 
health savings accounts) to develop, implement, and track a QIS. We 
therefore clarify in the final rule that in the initial years of the 
QIS, SADPs, child only coverage plans, and QHPs that are compatible 
with health savings accounts will be exempt from the QIS certification 
and reporting requirements. This approach aligns with our current 
approach for other Exchange and QHP issuer quality requirements, allows 
the program to mature, and allows for additional measures for other QHP 
types to be developed for reporting. Consistent with the 
nondiscrimination prohibition in Sec.  156.225, QIS implementation 
plans will be reviewed to ensure that they are not designed and do not 
have the effect of discouraging the enrollment of individuals with 
significant health needs.
    Comment: We solicited comments on whether to require information 
relating to provider payment models, such as an issuer's minimum target 
or goal set with regards to the percentage of provider payments 
adjusted for quality and cost, to be submitted for compliance with QIS 
standards proposed in Sec.  156.1130. While one commenter agreed with 
the concept, other commenters recommended that QHP issuers be required 
to indicate specifically to providers how payment is tied to 
performance or questioned the need for QHP issuers to report on the 
details of their proprietary contracts with providers, and encouraged 
HHS to let market factors drive quality improvements.
    Response: We believe that understanding how QHP issuers 
participating in Exchanges are adjusting provider payments for quality 
and cost is important and directly aligns with the statutory definition 
of a QIS. As such, this type of information is subject to the periodic 
reporting of QIS information under section 1311(g)(3) of the Affordable 
Care Act. We anticipate requiring QHP issuers participating in 
Exchanges to establish and share with the applicable Exchange 
performance measure improvement targets and report on progress against 
those targets as they relate to QIS implementation. We anticipate 
alignment of QIS information collection requirements with current 
payment reform data collection efforts, including the adoption of 
safeguards to protect confidential or proprietary information. The goal 
is to collect issuer QIS information from QHP issuers participating in 
Exchanges that demonstrates compliance with 1311(g) of the Affordable 
Care Act and facilitates understanding of the issuer's payment 
structure framework that provides increased reimbursement or other 
market-based incentives for the implementation of activities related to 
the topics specified in section 1311 (g). We anticipate the display of 
a subset of this information to promote transparency and will provide 
additional details through future guidance. We do not intend that the 
public display of payment structure information will include 
information that is considered confidential or proprietary.
    Comment: Commenters provided feedback on the definition of a 
quality improvement strategy as a payment structure. Various commenters 
recommended not linking incentives to cost, including cost-independent 
protections, and suggested that HHS recognize different types of 
provider incentives, and emphasize the importance of capturing outcome 
variations within a provider's control.
    Response: We clarify that the description of a strategy described 
in 1311(g) of the Affordable Care Act is a payment structure that 
provides increased reimbursement or other market-based incentives. The 
purpose of soliciting comments was to understand the types of market-
based incentives that are currently in use by issuers to reward quality 
and value. HHS intends to issue technical guidance to assist QHP with 
compliance with the QIS standards and reporting requirements.
    Comment: Some commenters expressed concern with HHS's proposal that 
a QHP issuer could meet the QIS requirements by focusing on only one of 
the five topic areas in the Section 1311(g) of the Affordable Care Act. 
These commenters suggested requiring QHP issuers to focus on more than 
one topic area, with some commenters suggesting a requirement of at 
least three topic areas be addressed.
    Response: While we agree that ideally QHP issuers participating in 
Exchanges would focus on more than one topic area as part of their QIS, 
we are cognizant that this could be difficult for issuers to accomplish 
immediately. Therefore, consistent with the phase in approach to 
implementation, for the initial years of the QIS, QHP issuers will have 
to address at least one of the topic areas included in section 1311(g) 
of the Affordable Care Act.

[[Page 10847]]

    Comment: Some commenters expressed concern over the impact the QIS 
will have on providers if each QHP issuer is allowed to have extensive 
flexibility in designing its quality improvement strategies, in 
particular the performance measures used to track implementation 
progress. One commenter recommended that QHP issuers be required to use 
quality measures already in use by existing quality programs and for 
HHS to require QHP issuers to select their QIS quality measures from a 
limited subset of existing measures.
    Response: Based on input from experts and stakeholders, we 
anticipate allowing QHP issuers to select their own performance 
measures and establish targets designed to measure the impact of their 
respective QIS plans. Our concern is that imposing specific performance 
measures on QHP issuers would limit their ability to target their 
strategies to their specific populations and possibly limit innovation. 
However, we will take these comments into consideration as we assess 
whether changes are warranted in the future.
    Comment: Commenters strongly supported the proposal that QIS 
standards be developed in a public, accessible, and transparent manner 
that seeks and incorporates stakeholder feedback. Some commenters 
further recommended that HHS explicitly state that ``stakeholder 
feedback'' must include both consumer advocates and public and private 
purchasers, while another recommended that HHS reach out directly to 
State consumer health advocates, patient advocates, and case managers 
who represent consumer health perspectives.
    Response: Consistent with the statutory directive at section 
1311(g)(2) of the Affordable Care Act that requires consultation with 
experts in health care quality and stakeholders, HHS conducted numerous 
activities to seek feedback and develop the proposed approach to the 
QIS, including meetings with a QIS Technical Expert Panel and 
engagement of stakeholders through activities such as key informant 
interviews, listening sessions, discussions, and a pilot test. We will 
continue to engage a variety of public and private stakeholders, and 
will seek to incorporate their feedback to help inform the further 
development and evolution of the QIS.
    Comment: Some commenters suggested we develop specific formats for 
data collection and reporting to ensure consistency, reliability in the 
data, and to reduce provider's data reporting burden. Other commenters 
encouraged HHS to develop a uniform standardized reporting format for 
use by QHP issuers in both the FFEs and the State Exchanges to allow 
QHP issuers to implement consistent quality improvement strategies, as 
well as enable fair comparison between QHP issuers operating in State 
Exchanges and the FFEs. Others urged HHS to allow for flexibility to 
ensure that QHP issuers can develop various strategies across their 
populations and across their provider contracts.
    Response: We appreciate the feedback and clarify that we plan on 
establishing a standardized format for which QIS data must be submitted 
for those QHP issuers operating in the FFEs. We expect that the exact 
format and the validation process will be released as part of the 
operational details in technical guidance that will be issued later in 
2015. State Exchanges will have the flexibility to add reporting 
requirements beyond the minimum Federal requirements, determine how 
they will communicate the process for submission, establish the 
timeframe and validation approach for the data submission, and any 
additional quality improvement requirements they may require beyond the 
minimum Federal requirements.
    Comment: Some commenters felt that QIS data should not be made 
publicly available at all, adding that QHP issuers may be encouraged to 
take on more challenging or innovative strategies if the data are not 
made public. Other commenters suggested that if QIS data would be 
publicly available, HHS should create a uniform format for displaying 
the data using consumer-tested language, as well as provide evidence of 
effectiveness of different payment structures for QHP issuers' use. 
Some commenters urged HHS to make QIS data publicly available and 
require evaluation against benchmark data, allowing the data to be used 
for decision making by multiple stakeholder groups such as State 
Exchanges, health plans, consumers, employers, providers and provider 
organizations.
    Response: We clarify in the final rule that HHS seeks to encourage 
transparency and align with other Exchange quality standards and data 
collection for QHP issuers, while protecting information that may be 
misinterpreted or misused if made publicly available. Similar to other 
quality standards and CMS programs collecting data from QHP issuers in 
the Exchanges, we do not anticipate publicly displaying information 
that is considered confidential or proprietary. As noted above, HHS 
anticipates the display of a subset of this information to promote 
transparency and will provide additional details through future 
guidance.
    Comment: Many commenters recommended that HHS require the use of 
specific performance measures in the QIS, specifically those from the 
following organizations: NCQA (HEDIS); URAC; the Pediatric Quality 
Measurement Program; and the Dental Quality Alliance (DQA). There was 
also strong support for use of National Quality Forum (NQF)-endorsed 
measures, and measures that align with the National Quality Strategy. 
Commenters noted that requiring QHP issuers to include commonly used 
measures in their quality improvement strategies would minimize the 
data collection burden on QHP issuers as well as providers. Some 
comments supported inclusion of process-level and plan-level data and 
measures of improvement when evaluating a QIS. Some commenters stated 
that defining the health outcomes that will be the focus of 
interventions, setting goals for improvement, and the approach for 
linking improvement to payment incentives should be detailed in the QHP 
issuer's quality improvement strategy. They also suggested that these 
elements be fully disclosed so that regulators and other interested 
parties can properly evaluate a QHP issuer's quality improvement 
strategy. Other commenters supported collection of information such as 
the rationale for the targeted population, proposed performance 
measures, approaches to reducing health care disparities, and a 
description of the mitigation strategy.
    Response: HHS will not require QHP issuers to include specific 
performance measures in a QIS. Instead, we have outlined the elements 
that should be included as part of a QIS, including a rationale that 
describes its relevance to the QHP's enrollee population, proposed 
performance measures and targets, a description of activities conducted 
to implement the strategy, a description of activities conducted to 
reduce health and health care disparities, as well as other chosen 
topics, goals, timeline, and information about challenges, barriers, 
and mitigation planning. As noted above, we anticipate requiring QHP 
issuers to include information in their respective QIS implementation 
plan regarding percentage of payments to providers that is adjudicated 
based on quality and cost of services as a range within categories of 
provider payments.
    Comment: Several commenters provided comments specifically on 
evaluation. Commenters supported the evaluation of QHP issuers' quality 
improvement strategies, as long as the

[[Page 10848]]

purpose of the evaluation is to drive improvement in the strategies 
being implemented, and to create a national set of performance data 
against which to assess the strategies. Some commenters noted that 
evaluating the quality improvement strategies could be challenging, due 
to QHP issuers changing, removing, or adding QHPs, and enrollee 
movement across plans both within and outside of the Exchange. 
Additional challenges noted by commenters included aligning evaluation 
requirements with other State and Federal requirements and ensuring 
that QHP issuers have sufficient time to understand changing rules and 
regulations to meet compliance requirements.
    Response: This final rule adopts a phased-in approach to 
implementation of the QIS and accompanying reporting requirements to 
provide QHP issuers the necessary time to understand the population 
enrolling in their respective QHPs offered through the Exchanges and to 
build quality performance data on its QHP enrollees. We also finalize 
an approach that requires a QHP issuer participating in the FFEs for at 
least 2 years to submit a QIS implementation plan for each QHP offered 
in the Exchange, followed by annual progress updates. The purpose of 
requiring a QHP issuer to submit an annual progress update on its QIS 
implementation plan is to evaluate progress. As detailed in the 
proposed rule (79 FR 70735), we believe that implementation of a QIS 
should be a continuous process under which QHP issuers define the 
health outcome needs of their enrollees, set goals for improvement, and 
use increased reimbursement to their providers or other market-based 
incentives as a reward for quality improvement and to stimulate 
achievement of those goals. As such, we anticipate that QHP issuers 
will be engaged in a continuous process of evaluating the populations 
enrolling in their respective QHPs offered through Exchanges, modifying 
or otherwise adjusting their QIS plan as may be appropriate, and 
building quality performance data on its QHP enrollees. This approach 
is designed to account for the changes with respect to QHP offerings, 
as well as enrollee movement across plans both within and outside of 
Exchanges. We further note that since QHP issuers will not be penalized 
if the implementation is not demonstrating an effect on the performance 
targets set out in the implementation plan, we believe that these 
challenges are not a barrier to performing an annual evaluation review. 
Additional details on the timing of the submission of the initial QIS 
implementation plan and the annual progress reports will be included in 
technical guidance.
    Comment: Some commenters suggested that we provide additional 
technical guidance on the QIS requirements in Sec.  156.1130(b), 
specifically those related to data validation and which entity will be 
reviewing data submissions for accuracy prior to public display.
    Response: HHS intends to publish QIS technical guidance in 2015 
that will establish the minimum enrollment size threshold to trigger 
the applicability of the QIS standards, as well as data validation, 
data submission, and evaluation requirements for QHP issuers 
participating in the FFEs. We anticipate that State Exchanges will be 
issuing similar guidance to their respective QHP issuers.
8. Qualified Health Plan Issuer Responsibilities
a. Administrative Appeals (Sec.  156.1220(c))
    In the 2015 Payment Notice, we established an administrative 
appeals process designed to address unresolved discrepancies regarding 
advance payments of the premium tax credit, advance payments of cost-
sharing reductions, FFE user fee payments, payments and charges for the 
premium stabilization programs, cost-sharing reduction reconciliation 
payments and charges, and assessments of default risk adjustment 
charges. We established a three-tier appeals process: a request for 
reconsideration under Sec.  156.1220(a); a request for an informal 
hearing before a CMS hearing officer under Sec.  156.1220(b); and a 
request for review by the Administrator of CMS under Sec.  156.1220(c).
    Under Sec.  156.1220(a), we provided that an issuer may file a 
request for reconsideration of a processing error by HHS, HHS's 
incorrect application of the relevant methodology, or HHS's 
mathematical error only for advance payments of the premium tax credit, 
advance payments of cost-sharing reductions, FFE user fee payments, 
payments and charges for the premium stabilization programs, cost-
sharing reduction reconciliation payments and charges, and assessments 
of default risk adjustment charges for a benefit year. In Sec.  
156.1220(a)(6), we stated that a reconsideration decision would be 
final and binding for decisions regarding the advance payments of the 
premium tax credit, advance payments of cost-sharing reductions, and 
FFE user fees. A reconsideration decision for other matters would be 
subject to the outcome of a request for informal hearing filed in 
accordance with Sec.  156.1220(b).
    Under Sec.  156.1220(b), an issuer that elects to challenge the 
reconsideration decision may request an informal hearing before a CMS 
hearing officer. The CMS hearing officer's decision would be final and 
binding, but subject to any Administrator's review initiated in 
accordance with Sec.  156.1220(c).
    We stated in Sec.  156.1220(c)(1) that if the CMS hearing officer 
upholds the reconsideration decision, the issuer is permitted to 
request a review by the Administrator of CMS within 15 calendar days of 
the date of the CMS hearing officer's decision. We proposed a 
modification to this process to also permit CMS the opportunity to 
request review of the CMS hearing officer's decision, and to permit the 
Administrator of CMS to decline to review the CMS hearing officer's 
decision. Specifically, we proposed to amend Sec.  156.1220(c)(1) to 
permit either the issuer or CMS to request review by the Administrator 
of the CMS hearing officer's decision. We proposed to provide that any 
request for review of the hearing officer's decision must be submitted 
to the Administrator of CMS within 15 calendar days of the date of the 
hearing officer's decision, and must specify the findings or issues 
that the issuer or CMS challenges. We proposed that the issuer or CMS 
be permitted to submit for review by the Administrator a statement 
supporting the decision of the CMS hearing officer.
    We also proposed to amend Sec.  156.1220(c)(2) to provide the 
Administrator of CMS with the discretion to review or not review the 
decision of the CMS hearing officer after receiving a request for 
review under Sec.  156.1220(c)(1). We believe such discretion will 
permit the Administrator to focus resources on the priority matters, 
including disputes with implications for other issuers. In keeping with 
our current process set forth in Sec.  156.1220(c), we proposed that if 
the Administrator elects to review the CMS hearing officer's decision, 
the Administrator will review the statements of the issuer and CMS, and 
any other information included in the record of the CMS hearing 
officer's decision, and will determine whether to uphold, reverse, or 
modify the CMS hearing officer's decision. We proposed that the issuer 
or CMS be required to prove its case by clear and convincing evidence 
for issues of fact, and that the Administrator will send the decision 
and the reasons for the decision to the issuer. As established in

[[Page 10849]]

Sec.  156.1220(c)(3), the Administrator's decision will be final and 
binding.
    We received no comments on this proposal. We are finalizing these 
amendments as proposed.

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

1. Treatment of Cost-Sharing Reductions in MLR Calculation (Sec.  
158.140)
    The Premium Stabilization rule (77 FR 17220) aligned the definition 
of ``allowable costs'' under the risk corridors program at Sec.  
153.500 with the definition of incurred claims under the MLR program at 
Sec.  158.140 and expenditures for health care quality and health 
information technology under Sec.  158.150-Sec.  158.151. In the 2014 
Payment Notice, we additionally specified that allowable costs under 
risk corridors must be reduced by the amount of cost-sharing reduction 
payments received by the issuer, to the extent not reimbursed to the 
provider. To align the calculations between the two programs, we 
proposed to specify that cost-sharing reduction payments should be 
deducted from incurred claims under the MLR program just as they are 
deducted from allowable costs under the risk corridors program. As we 
explained in the proposed rule, it is our understanding that in 
capitated arrangements, issuers will generally retain the cost-sharing 
reduction payments, and in such circumstances cost-sharing reduction 
payments should be accounted for as a reduction to incurred claims 
because capitation payments (which are reflected directly in an 
issuer's incurred claims) will be raised to account for the reductions 
in the providers' cost-sharing income. In contrast, in most fee-for-
service arrangements, issuers will pass the cost-sharing reduction 
payments through to providers, and therefore no adjustment to incurred 
claims for cost-sharing reduction payments would be required in such 
situations.
    We are finalizing this provision as proposed.
    Comment: Several commenters supported our proposal as drafted, 
while one commenter opposed it. Several commenters expressed concern 
that the proposal could disadvantage issuers in capitated arrangements 
that do pass through the cost-sharing reduction payments to the 
providers.
    Response: We agree with the commenters that issuers who pursue 
innovative cost containment practices involving capitation and cost-
sharing reduction payments should not be treated differently than 
issuers in fee-for-service arrangements. However, we note that our 
proposed regulation text did not distinguish between capitation and 
fee-for-service arrangements. Under our proposal, issuers in either 
type of arrangement must deduct cost-sharing reduction payments from 
incurred claims, to the extent such payments are not reimbursed to the 
provider furnishing the item or service. Therefore, we are finalizing 
the clarification of the definition of incurred claims in Sec.  158.140 
as proposed.
2. Reporting of Federal and State Taxes (Sec.  158.162)
    The MLR December 1, 2010 interim final rule (75 FR 74864) broadly 
describes Federal and State taxes and assessments that are excluded 
from premiums in the MLR and rebate calculations, and Federal and State 
taxes and assessments not excluded from premium in MLR and rebate 
calculations. In the proposed rule (79 FR 70737), we proposed to 
further clarify for future MLR reporting years the treatment of Federal 
and State employment taxes. Specifically, we proposed to amend the 
provisions for the reporting of Federal and State taxes in Sec.  
158.162(a)(2) and (b)(2) to provide that Federal and State employment 
taxes (such as the Federal Insurance Contributions Act (FICA) and the 
Railroad Retirement Tax Act (RRTA) taxes, the Federal Unemployment Act 
(FUTA) and State unemployment taxes, and other similar taxes) should 
not be excluded from premium in the MLR and rebate calculations.
    Comment: Several commenters supported our proposal. One commenter 
noted that our proposal reflected their understanding of Congressional 
intent, as evidenced by the 2010 letter to the Secretary from six 
congressional committee chairs involved in drafting the Affordable Care 
Act.\76\ In contrast, other commenters opposed our proposal, 
questioning our authority to amend the definition of taxes. These 
commenters stated that the reference to ``excluding Federal and State 
taxes'' in section 2718 of the PHS Act does not require clarification. 
These commenters alternatively asserted that to the extent the statute 
requires interpretation, only the NAIC has the authority to do so. 
Consequently, a subset of these commenters recommended that we obtain 
an official recommendation from the NAIC before adopting any 
modifications to the definition of taxes. Some commenters additionally 
expressed concern regarding the effective date of the proposed 
provision.
---------------------------------------------------------------------------

    \76\ Available at http://www.politico.com/static/PPM170_100811_taxes.html.
---------------------------------------------------------------------------

    Response: We disagree that there is no need to clarify the 
statutory reference to taxes or that the NAIC, rather than HHS, has the 
authority to clarify it. Our review of the MLR reports submitted by 
issuers identified this issue as one that would benefit from further 
clarification for future reporting years due to the fact that there 
appeared to be inconsistent treatment among issuers. While most issuers 
do not exclude employment taxes from premium, others have adopted the 
opposite approach and exclude such taxes from premium. Further, as some 
of the commenters point out, section 2718 of the PHS Act directed the 
NAIC to develop the uniform definitions and standardized methodologies 
with regard to the MLR provisions. It directed the NAIC to develop such 
definitions and methodologies no later than December 31, 2010, and 
subjected all such definitions and methodologies to the certification 
of the Secretary. As a Federal agency, HHS retains the authority to 
implement the statute and interpret the statutory terms where 
necessary, including the authority to adjust the MLR definitions after 
2010. Furthermore, the NAIC's recommendation to the Secretary provided 
that certain Federal and State taxes should not be excluded from 
premiums in MLR and rebate calculations, supporting our belief that the 
phrase ``excluding Federal and State taxes'' requires clarification and 
does not mean all taxes of any kind. This approach--the identification 
of those Federal and State taxes that must be excluded from premium and 
those that cannot be excluded--was codified in our regulations at Sec.  
158.162 as part of the MLR December 1, 2010 interim final rule. The use 
of uniform definitions and standardized methodologies when calculating 
the MLR and associated rebates (including the treatment of employment 
taxes) is critical to both ensuring a level playing field across 
issuers and to deliver to consumers the protections promised by the 
statute. Therefore, we are finalizing the amendment to the definition 
of Federal and State taxes that may be deducted from premium in Sec.  
158.162(a)(2) and (b)(2) as proposed. In recognition of commenters' 
concerns regarding the effective date of this provision, we note that 
this provision will become effective for the 2016 reporting year, and 
therefore must be reflected in reports submitted to the Secretary by 
July 31, 2017. This should provide adequate time for those issuers that 
previously

[[Page 10850]]

interpreted the regulation differently to adjust their financial 
planning. We also reiterate that this is simply a clarification to 
explicitly require inclusion, as our data indicate most issuers have 
been doing.
3. Distribution of Rebates to Group Enrollees in Non-Federal 
Governmental Plans (Sec.  158.242)
    The December 7, 2011 MLR Rebate Requirements for Non-Federal 
Governmental Plans interim final rule (76 FR 76596) directs issuers to 
distribute rebates to the group policyholders of non-Federal 
governmental plans. Under CMS's direct enforcement authority over non-
Federal governmental plans, the interim final rule further directs the 
group policyholders of such plans to use the portion of the rebate 
attributable to the amount of premium paid by subscribers of such plans 
for the benefit of subscribers in one of three prescribed ways. These 
provisions were put in place to ensure that rebates are used for the 
benefit of enrollees of non-Federal governmental plans, who do not 
receive the protections of Employee Retirement Income Security Act of 
1974 (ERISA), as amended. Under ERISA and implementing regulations, 
most plan participants are assured that the rebate (when the rebate is 
determined to be a plan asset) is applied for their benefit within 3 
months of receipt by the policyholder.
    To afford similar protection to subscribers of non-Federal 
governmental plans, we proposed to amend the provisions for 
distribution of rebates in Sec.  158.242(b) to require group 
policyholders of non-Federal governmental plans to use the subscribers' 
portion of the rebate for the subscribers' benefit within 3 months of 
receipt of the rebate by the group policyholder. Under the proposal, 
plans would continue to be able to use the rebate to reduce the 
subscribers' portion of premium for the subsequent policy year 
(including by spreading it over the 12 months of the policy year) as 
long as the subsequent policy year commences within 3 months of receipt 
of the rebate by the group policyholder. If the subsequent policy year 
commences outside this 3-month window, the group policyholder of a non-
Federal governmental plan must distribute the subscribers' portion of 
the rebate within 3 months in the form of a cash refund or by applying 
a mid-policy year premium credit to the subscriber's portion of the 
premium. We also noted that, because under Sec.  158.242(b)(3) group 
health plans that are not governmental plans and are not subject to 
ERISA (such as church plans) must follow the same rebate distribution 
rules in order to receive the rebate directly, the same distribution 
deadline would apply to such plans.
    We are finalizing the amendments as proposed. In addition, we are 
finalizing the December 7, 2011 interim final rule (76 FR 76596) with 
minor changes after consideration of the comments received on that rule 
as noted below.
    Comment: We received one comment supporting the requirement that 
policyholders that are non-Federal governmental or other group health 
plans not subject to ERISA apply or distribute rebates within 3 months 
of receipt, or pay interest on the rebates.
    Response: We appreciate the comment regarding the distribution of 
rebates to group enrollees in non-Federal governmental and other group 
health plans not subject to ERISA. Policyholders that are non-Federal 
governmental or other group health plans not subject to ERISA that do 
not apply or distribute rebates within 3 months of receipt will be 
required to pay interest on the rebates, much the same as an issuer is 
required to do if they do not disburse the rebate to the policyholder 
by the due date.
    Comment: We received several comments supporting the rules 
governing the distribution of rebates to subscribers of non-Federal 
governmental and other group health plans not subject to ERISA, which 
were set forth in the December 7, 2011 MLR Rebate Requirements for Non-
Federal Governmental Plans interim final rule (76 FR 76596). Other 
commenters requested that we clarify the deadline for rebate 
distribution by such plans. One commenter expressed concern that the 
regulation does not afford such plans adequate time to use the rebate 
to reduce the subscribers' portion of premium or enhance benefits for a 
subsequent policy year. One commenter requested that such plans be 
permitted to distribute rebates directly to subscribers in situations 
where the policyholder has modified or ceased to offer group coverage.
    Response: We agree with the commenters regarding the need for 
clarification of the rebate distribution deadline for policyholders 
that are non-Federal governmental or other group health plans not 
subject to ERISA. As noted above, we believe that requiring such 
policyholders to use the rebate for the benefit of subscribers no later 
than 3 months of receipt of the rebate by the policyholder ensures that 
consumers in group health plans not subject to ERISA receive the 
benefit of MLR rebates in a timely manner. Accordingly, we have 
clarified the deadline in this final rule, as described in more detail 
above. In addition, we agree that policyholders that are non-Federal 
governmental or other group health plans not subject to ERISA should be 
allowed to distribute rebates directly to subscribers in situations 
where the policyholder does not offer the same plan(s) or has ceased to 
offer group coverage. Therefore, we are amending the provisions in 
Sec.  158.242(b)(1)(iii) to specify that as an alternative to providing 
a cash rebate to the subscribers enrolled in the plan option at the 
time the policyholder receives the rebate, the group policyholder may 
instead provide a cash rebate to the subscribers who were enrolled in 
the plan option during the MLR reporting year that generated the 
rebate.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. This 
final rule contains information collection requirements (ICRs) that are 
subject to review by OMB. A description of these provisions is given in 
the following paragraphs with an estimate of the annual burden, 
summarized in Table 12.
    In the November 26, 2014 (79 FR 70674) proposed rule, we requested 
public comment on each of the collection of information requirements 
contained in the proposed rule. The comments and our responses to them 
are discussed below:

A. ICRs Regarding Standards for Notification of Change of Ownership 
(Sec.  147.106(g))

    When an issuer that offers a QHP, a plan otherwise subject to risk 
corridors, a risk adjustment covered plan, or a reinsurance-eligible 
plan experiences a change of ownership as recognized by the State in 
which the plan is offered, the issuer is required to notify HHS in a 
manner to be specified by HHS and provide the legal name, Health 
Insurance Oversight System (HIOS) plan identifier,\77\ tax 
identification number of the original and post-transaction issuers, as 
applicable, and the effective date of the change of ownership, and the 
summary description of transaction. The information must be submitted 
by the latest of (1) the date the transaction is entered into; or (2) 
the 30th day prior to

[[Page 10851]]

the effective date of the transaction. The burden associated with this 
requirement is the time and effort for the issuer to notify HHS of a 
change of ownership. We estimate that it will take an insurance 
operations analyst 30 minutes (at an hourly wage rate of $56.63) to 
prepare the data related to the change of ownership, and 10 minutes for 
a senior manager (at an hourly wage rate of $103.95) to review the data 
and transmit it electronically to HHS. We estimate that it will cost an 
issuer $45.65 to comply with this reporting requirement. Although at 
this time we cannot precisely estimate the number of issuers that will 
be reporting changes of ownership, we expect that no more than 20 
issuers will be subject to this reporting requirement annually, for a 
total burden of $913.
---------------------------------------------------------------------------

    \77\ OMB Control Number: 0938-1086.
---------------------------------------------------------------------------

B. ICRs Regarding Effective Rate Review Programs (Sec.  154.301)

    Under Sec.  154.301(b)(2), if a State intends to make the 
information contained in Parts I, II, and III of the rate filing 
justification regarding proposed rate increases subject to review 
available to the public prior to the date specified in guidance by the 
Secretary, or if it intends to make the information contained in Parts 
I, II, and III of the rate filing justification regarding final rate 
increases available to the public prior to the first day of the annual 
open enrollment period in the individual market for the applicable 
calendar year, the State must notify CMS in writing of its intent to 
publish this information at least 30 days before it makes the 
information public and the date it intends to make the information 
public. We intend to seek OMB approval and solicit public comment on 
this information collection requirement, in accordance with the 
Paperwork Reduction Act of 1995, at a future date.

C. ICRs Regarding Standards for HHS-Approved Vendors of Federally-
Facilitated Exchange Training and Information Verification for Agents 
and Brokers (Sec.  155.222)

    In Sec.  155.222, we describe the information collection and 
disclosure requirements that pertain to the approval of vendors' FFE 
agent and broker training programs, including information verification 
and administration of identity proofing. The burden estimate associated 
with these disclosure requirements includes the time and effort 
required for vendors to develop, compile, and submit the application 
information and any documentation or agreement necessary to support 
oversight in the form and manner required by HHS. We estimate that HHS 
will receive applications from nine or fewer vendors, and that it will 
take each vendor approximately 10 hours to complete an application and 
the agreement, at a cost of $24.10 per hour. Therefore, we estimate a 
total burden of approximately 90 hours and a cost of $2,169 as a result 
of this requirement. HHS will develop a model vendor application that 
will include data elements necessary for HHS review and approval. HHS 
will estimate the burden on vendors for complying with this provision 
of the regulation, and submit the application for OMB approval in the 
future. For vendors that choose to charge for their training, HHS will 
consider current training costs for State-licensed agents and brokers 
for comparable training to comparable audiences when reviewing vendor 
applications with proposed fee structures.
    In Sec.  155.222(d), we establish a process through which HHS will 
monitor approved vendors for ongoing compliance. HHS may require 
additional information from approved vendors to be submitted 
periodically to ensure continued compliance related to the obligations 
described in this section. We estimate that HHS will receive 
applications from nine or fewer vendors. We estimate that it will take 
no longer than 10 hours (at a cost of $24.10 per hour) for each vendor 
to comply with any additional monitoring by HHS. Therefore, we estimate 
a total annual burden of 90 hours for all vendors for a total cost 
burden estimate of $2,169. In Sec.  155.222(e), we establish a process 
by which a vendor whose application is not approved or whose approval 
is revoked by HHS can appeal HHS's determination. We discuss the costs 
associated with the appeals process in the Regulatory Impact Analysis 
(RIA) section of this rule.
    This section establishes a new method by which agents and brokers 
may complete training and information verification components of the 
registration process to be authorized to assist with enrollment in 
individual market and SHOP coverage through the FFE. The information 
collection associated with the current process by which agents and 
brokers may be authorized to assist with enrollment through the 
Exchange is approved under OMB Control Number 0938-1204. We intend to 
revise the current collection request to incorporate this new method by 
which agents and brokers may complete training and information 
verification components of the registration process. Based on 
information not available when the current collection request was 
developed in 2013, we also expect a significant reduction in the 
overall burden, both in terms of the total number of respondents and 
the time required for each response. We intend to seek OMB approval and 
solicit public comment on this information collection requirement in 
accordance with the Paperwork Reduction Act of 1995.

D. ICRs Regarding Notification of Effective Date for SHOP (Sec.  
155.720(e))

    Section Sec.  155.720(e) has been amended to refer to enrollees and 
not qualified employees. This amendment establishes that issuers must 
provide a coverage effective date notice to anyone who enrolled in 
coverage through a SHOP under the new definition of ``enrollee,'' 
including dependents (including a new dependent of the employee, when 
the dependent separately joins the plan), former employees of a 
qualified employer, and certain business owners, who might be enrolled 
in coverage through a SHOP. We specify that when a primary subscriber 
and his or her dependents live at the same address, a separate notice 
need not be sent to each dependent at that address, so long as the 
notice sent to each primary subscriber at that address contains all the 
required information about the coverage effective date for the primary 
subscriber and each of his or her dependents at that address. When 
dependents live at a different address from the primary subscriber, a 
separate notice must be sent to those dependents. We note that the 
notices required under this proposal could be incorporated into 
existing notifications that QHPs provide to their new customers, for 
example in a welcome document. We are also making a conforming 
amendment to Sec.  156.285(c)(3) to ensure that QHP issuers 
participating in a SHOP provide notice to a new enrollee of the 
enrollee's effective date of coverage. We note that the effective date 
for this notice requirement will take effect in plan years beginning on 
or after January 1, 2017 for enrollees that are not qualified 
employees. Issuers have already been providing these notices to 
qualified employees and are expected to continue sending these notices 
under the current rule. This final rule also expands issuers' 
obligation to send notices to former employees under the amended 
definition of a qualified employee.
    The burden estimate associated with this requirement includes the 
time and effort needed to develop the notice and to distribute it 
through an automated process to enrollees, as appropriate. We estimate 
that approximately 445 QHP issuers (including dental issuers) will

[[Page 10852]]

participate on the SHOPs in all States. We estimate that it will take 
approximately 35 hours annually to develop and transmit this notice, 
including 4 hours for a health policy analyst (at an hourly wage rate 
of $58.05), 3 hours for an operations analyst (at an hourly wage rate 
of $56.63), 25 hours for a computer programmer (at an hourly wage rate 
of $48.61), 2 hours for a fulfillment manager (at an hourly wage rate 
of $27.00), and 1 hour for a senior manager (at an hourly wage rate of 
$103.95). Therefore, we estimate an aggregate burden of 15,575 hours 
and $790,004 for QHP issuers participating in a SHOP as a result of 
this requirement. We describe this burden in more detail in our 
discussion of the Information Collection Reporting section for Sec.  
156.285(d) in this final rule.

E. ICRs Regarding Collection of Data To Define Essential Health 
Benefits (Sec.  156.120)

    In Sec.  156.120, we require States that select a base-benchmark 
plan or an issuer that offers a default base-benchmark plan to submit 
to HHS certain information in a form and manner, and by a date, 
determined by HHS. We are also finalizing our proposal to allow each 
State to select a new base-benchmark plan and supplement if necessary 
for the 2017 plan year. The information collection associated with 
State or issuer submission of benchmark plan data is currently approved 
under OMB Control Number 0938-1174. We expect to collect less 
information for the 2017 plan year than we previously collected for 
this purpose, and therefore we have revised our current burden estimate 
to reflect the reduced burden on issuers. The burden estimate 
associated with this requirement includes the time and effort needed 
for issuers and States to file an electronic submission describing the 
benefits, limits, and exclusion of the plan chosen as the State 
benchmark for the 2017 benefit year. We estimate that approximately 51 
entities are subject to the reporting requirements and that it will 
take approximately 1.5 hours annually to identify and submit the 
responsive records to CMS, including 1.5 hours for an issuer or health 
policy analyst (at an hourly wage rate of $58.05). Therefore, we 
estimate an aggregate burden of 76.5 hours and $4,440.83 for issuers 
and States as a result of this requirement.
    We released information regarding this data collection requirement, 
in accordance with the Paperwork Reduction Act of 1995, on November 26, 
2014 in CMS-10448,\78\ for a 60-day comment period.\79\ We did not 
receive any comments in relation to that release. This final rule 
serves to provide notice of a 30-day public comment period in relation 
to this proposed information collection which will be available on our 
Web site.\80\
---------------------------------------------------------------------------

    \78\ http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS-10448.html?DLPage=2&DLSort=1&DLSortDir=descending.
    \79\ http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS-10448.html?DLPage=2&DLSort=1&DLSortDir=descending.
    \80\ http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing.html.
---------------------------------------------------------------------------

F. ICRs Regarding Prescription Drug Benefits (Sec.  156.122)

    In Sec.  156.122, we require health plans that are required to 
comply with EHB, as part of a committee that meets the standards 
established in that section. We expect that health plans have already 
established P&T committees that meet these standards and follow these 
processes. These processes include recordkeeping requirements for the 
P&T committee. Because we believe that issuers are already required to 
maintain such documentation, such as for accreditation purposes, and 
that issuers tend to use the same formulary drug list for multiple 
plans, we believe that the recordkeeping requirement will only impose a 
minimal additional burden on issuers. Therefore, we estimate that it 
will take a compliance officer approximately 8 hours (at an hourly wage 
rate of $43.34) to prepare for and attend meetings on a quarterly 
basis, and maintain the required documentation. Therefore, for 
approximately 2,400 plans in the individual and small group market that 
would be subject to this requirement, we estimate an aggregate annual 
burden of 76,800 hours and $3,328,512.

G. ICRs Regarding Transparency in Coverage (Sec.  156.220)

    In the proposed rule, we solicited comment regarding the type of 
information that QHP issuers would be required to provide and make 
available to the public in plain language under Sec.  156.220. We 
intend to provide further detail regarding the proposed implementation 
approach in the future. We believe that the 2016 implementation date 
finalized in this rule will allow sufficient time for HHS to provide 
details regarding the data collection, review, and public display of 
transparency elements. We intend to seek public comments on a proposed 
information collection detailing the specific data elements, frequency 
of updates, file types, and other crucial information for OMB approval 
at a future date.

H. ICRs Regarding Termination Notices for SHOP (Sec.  
156.285(d)(1)(ii)) and Sec.  155.735(d)(1)(iii) and (g))

    In Sec.  156.285(d)(1)(ii) and Sec.  155.735(d)(1)(iii) and (g) we 
require QHP issuers participating in the SHOP to provide notices to 
qualified employers and enrollees related to terminations of enrollment 
or coverage through the SHOP due to rescission in accordance with Sec.  
147.128 and due to the QHP's termination, decertification, or non-
renewal of certification, while shifting the burden of notifying 
qualified employers and enrollees of terminations due to loss of 
eligibility or nonpayment of premiums to the SHOP. The amendments to 
Sec.  156.285(d)(1)(ii) and new Sec.  155.735(g) will take effect 
January 1, 2016. We note that, while our current rules require issuers 
to provide notice of terminations when coverage through the SHOP is 
rescinded in accordance with Sec.  147.128, or when the issuer elects 
not to seek recertification for a QHP offered through the SHOP, this 
provision will expand QHP issuers' notice requirements to circumstances 
in which the QHP terminates or is decertified in accordance with Sec.  
155.1080. The notices must inform the enrollee and qualified employer 
of the termination effective date and the reason for the termination. 
We specify that when a primary subscriber and his or her dependents 
live at the same address, a separate notice need not be sent to each 
dependent at that address, so long as the notice sent to each primary 
subscriber at that address contains all the required information about 
the termination of coverage for the primary subscriber and each of his 
or her dependents at that address. We note that when dependents live at 
a different address from the primary subscriber, a separate notice must 
be sent to those dependents. The burden estimate associated with this 
requirement includes the time and effort needed to develop the notice 
and to distribute it through an automated process to qualified employer 
and the enrollee, as appropriate. We estimate that approximately 445 
QHP issuers (including dental issuers) will participate on the SHOPs in 
all States. We estimate that it will take approximately 35 hours 
annually to develop and transmit this notice, including 4 hours for a 
health policy analyst (at an hourly wage rate of $58.05), 3 hours for 
an operations analyst (at an hourly wage rate of

[[Page 10853]]

$56.63), 25 hours for a computer programmer (at an hourly wage rate of 
$48.61), 2 hours for a fulfillment manager (at an hourly wage rate of 
$27.00), and 1 hour for a senior manager (at an hourly wage rate of 
$103.95). Therefore, we estimate an aggregate burden of 15,575 hours 
across and $790,004 for QHP issuers participating in the SHOP as a 
result of this requirement. HHS intends to seek public comment on a 
proposed information collection at a later date. We note that 
amendments to the definition of ``enrollee'' that are set forth in this 
final rule and that take effect sooner than January 1, 2016, may expand 
the universe of individuals who must receive these notices under both 
the current rule and the amendments that take effect January 1, 2016. 
As part of developing and proposing the information collection for this 
ICR, HHS will estimate the effect of the modified definition of 
``enrollee'' on the information collection burden.
    Based on the above per-notice development wage rates and hours, we 
believe that each State-based SHOP will spend roughly 70 hours annually 
to prepare the two termination notices (35 hours per notice), for a 
total cost of $3,550 to design and implement the notices proposed under 
Sec.  155.735(g). We estimate that there will be approximately 18 
State-based SHOPs, and that all State-based SHOPs will be subject to 
this requirement. Therefore, we estimate an aggregate burden of 1,260 
hours and $63,900 for State-based SHOPs as a result of this 
requirement.

I. ICRs Regarding Plan Variation Notices and Changes in Eligibility for 
Cost-Sharing Reductions (Sec.  156.420 and Sec.  156.425)

    In Sec.  156.420(h), we require an issuer to provide a summary of 
benefits and coverage (SBC) for each plan variation of a QHP it offers 
in accordance with the rules set forth under Sec.  156.420 (referred to 
in this section as a ``plan variation SBC''), in a manner that is 
consistent with the standards set forth in Sec.  147.200. In Sec.  
156.425(c), we provide that if an individual's assignment to a plan 
variation or standard plan without cost-sharing reductions changes in 
the course of a benefit year (in accordance with Sec.  156.425(a)), an 
issuer must provide an SBC in a manner consistent with the standards 
set forth in Sec.  147.200, as soon as practicable after receiving 
notice from the Exchange of the individual's change in eligibility and 
no later than 7 business days following receipt of notice. The burden 
associated with this requirement is the time and effort for an issuer 
to create and provide plan variation SBCs to affected individuals under 
Sec.  156.420.
    Nearly all issuers affected by this requirement have already 
incurred one-time start-up costs related to implementing the SBC 
requirements established under Sec.  147.200, and are already providing 
SBCs that reflect the standard QHPs they offer.\81\ We believe that QHP 
issuers will leverage existing processes to generate and distribute 
plan variation SBCs under Sec.  156.420(h). We estimate that issuers 
would incur additional burden to produce and distribute plan variation 
SBCs under the proposed Sec. Sec.  156.420(h) and 156.425(c). The 
additional burden will be associated with three tasks: (1) Producing 
plan variation SBCs; (2) distributing plan variation SBCs; and (3) 
distributing a plan variation SBC (or standard QHP without cost-sharing 
reductions) after a change in eligibility in the course of a benefit 
year. We intend to revise the information collection approved under OMB 
Control Number 0938-1187 to reflect this additional burden.
---------------------------------------------------------------------------

    \81\ Summary of Benefits and Coverage and Uniform Glossary Final 
Rule (``SBC Final Rule''), 77 FR 8690 (Feb. 14, 2012). We have 
already received OMB approval under OMB control number 0938-1146 for 
the collection of information requirements related to the SBC 
provisions as finalized under current rules.
---------------------------------------------------------------------------

1. Producing Plan Variation SBCs
    Because stand-alone dental plans are not required to complete SBCs, 
we exclude these plans from the number of QHPs that we estimate are 
required to comply with the requirement. We estimate that approximately 
575 issuers participate in the Exchange, and that each issuer offers 
one QHP per metal level, with four zero cost-sharing plan variations 
and four limited cost-sharing plan variations (two per metal level per 
QHP) and three silver plan variations.\82\ Therefore, we estimate that 
each issuer offers 11 plan variations, and would produce 11 SBCs to 
reflect each plan variation, for a total of 6,325 plan variation SBCs 
annually. We estimate that it will take up to 1 hour to produce each 
plan variation SBC, for an annual time burden of 11 hours for each 
issuer. We estimate that it would take an information technology (IT) 
professional 5 hours (at an hourly wage rate of $54.39), a benefits/
sales professional 5.5 hours (an hourly wage rate of $44.9) per hour, 
and an attorney 30 minutes (at an hourly wage rate of $84.96) to comply 
with the requirements. Therefore, we estimate a total annual cost 
burden of $561.44 per issuer, and $322,828 (6,325 hours) for all 
issuers affected by this requirement.
---------------------------------------------------------------------------

    \82\ Under Sec.  156.420(a), for each of its silver health plans 
that an issuer offers, the issuer must offer three variations of the 
standard silver plan that reflect, in addition to the applicable 
annual limitation on cost-sharing, the following: (1) A silver plan 
variation with cost-sharing reductions such that the actuarial value 
(AV) of the variation is 94 percent plus or minus the de minimis 
variation for a silver plan variation; (2) a silver plan variation 
with cost-sharing reductions such that the AV of the variation is 87 
percent plus or minus the de minimis variation for a silver plan 
variation; and (3) a silver plan variation with cost-sharing 
reductions such that the AV of the variation is 73 percent plus or 
minus the de minimis variation for a silver plan variation. Under 
Sec.  156.420(b), for each QHP at any metal level that an issuer 
offers, the issuer must offer two variations to American Indians/
Alaska Natives that reflect the following: (1) A variation of the 
QHP with all cost sharing eliminated; and (2) a variation of the QHP 
with no cost-sharing on any item or service that is an essential 
health benefit furnished directly by the Indian Health Service, an 
Indian Tribe, Tribal Organization, or Urban Indian Organization, or 
through referral under contract health services.
---------------------------------------------------------------------------

2. Distributing Plan Variation SBCs
    We are unable to estimate the number of cost-sharing reduction-
eligible enrollees at this time and the related burden on issuers to 
provide for these disclosures. We expect that the vast majority 
(approximately 95 percent) of the total number of plan variation SBCs 
provided in accordance with Sec.  156.420(h) would be sent prior to 
enrollment and electronically at minimal cost, under the timing and 
form requirements set forth in Sec.  147.200(a)(1)(iv) and (a)(4)(iii). 
Of the remaining number of plan variation SBCs, we estimate that 
approximately 4 percent of these disclosures will be sent in other 
instances, in accordance with the other timing requirements that may 
apply, including, requests for a plan variation SBC made by a consumer 
in the course of the benefit year. We expect that the vast majority of 
these disclosures will be provided electronically at minimal cost. We 
assume that there are costs for paper disclosures, but no costs for 
electronic disclosures.\83\ We expect that up to 1 percent of plan 
variation SBCs will be provided in paper form. We estimate that the 
labor costs associated with distributing each SBC will be $1.63 (3 
minutes for an administrative assistant at an hourly wage rate of 
$32.59), and that printing, mailing, and supply costs will be $0.69 per 
SBC ($0.05 to print each page and $0.49 for first class postage), for a 
total cost of $2.32 per SBC. We estimate an annual burden of $331 for 
each QHP issuer and an aggregate burden of $190,240 for all issuers 
that are subject to the requirement.
---------------------------------------------------------------------------

    \83\ SBC Final Rule, 77 FR 8691 (Feb. 14, 2012).

---------------------------------------------------------------------------

[[Page 10854]]

3. Notice After Changes in Eligibility for Cost-Sharing Reductions
    In Sec.  156.425(c), we require an issuer to provide adequate 
notice to the individual about the availability of the SBC that 
accurately reflects the applicable plan variation of the QHP (or the 
standard QHP without cost-sharing reductions) if an enrollee's 
eligibility for cost-sharing reductions changes in the course of a 
benefit year. Similarly, if an enrollee changes QHPs as the result of a 
special enrollment period in accordance with Sec.  155.420(d)(6), the 
issuer of the new QHP will be required to provide the individual with 
an SBC that accurately reflects the new QHP. We are unable to estimate 
the number of cost-sharing reduction-eligible enrollees who would 
experience a change in eligibility for cost-sharing reductions at this 
time and the related burden on issuers to provide for these 
disclosures. We expect that the vast majority (approximately 99 
percent) of the total number of SBCs provided in accordance with Sec.  
156.425(c) will be sent electronically at minimal cost. We estimate 
that the labor costs associated with producing each SBC will be 
approximately $1.63 (3 minutes for an administrative assistant at an 
hourly wage rate of $32.59), and that printing, and mailing costs will 
be $0.69 ($0.05 to print each page and $0.49 for first class postage), 
for a total cost of $2.32 per SBC. We estimate a total annual cost of 
$165 for each QHP issuer and $95,120 for all QHP issuers that are 
subject to this requirement.

J. ICRs Regarding the Collection and Reporting of Quality Improvement 
Strategies (Sec.  156.1130)

    In Sec.  156.1130, we established requirements for QHP issuers 
related to data collection and submission of information regarding a 
quality improvement strategy (QIS). QIS standards will establish the 
minimum requirements for the FFEs, States with plan management 
functions and that State-based Exchanges must follow. State-based 
Exchanges can, if desired, build additional reporting requirements in 
accordance with their needs.
    Because SADPs will not be included in the initial years, this 
estimate assumes 575 QHP issuers (all issuers in all Marketplaces 
excluding SADPs) and covers the annual costs for a QHP issuer over a 3-
year period (2016-2018). The burden associated with submitting initial 
attestations as part of the QHP certification process is currently 
accounted for under OMB Control Number 0938-1187. We estimate that it 
will take each QHP issuer 48 hours (at a cost of $3,372) to collect 
this QIS data and to submit this information to the Exchange. 
Therefore, we estimate an aggregate burden of 27,600 hours and 
$1,938,900 for 575 QHP issuers as a result of these requirements.

                                             Table 12--Annual Reporting, Recordkeeping and Disclosure Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Hourly
                                                                          Burden per     Total      labor cost  Total labor  Total capital/
           Regulation section(s)             Number of      Responses      response      annual         of        cost of      maintenance    Total cost
                                            respondents                    (hours)       burden     reporting    reporting     costs  ($)        ($)
                                                                                        (hours)        ($)          ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   147.106(g).........................           20              20         0.67         13.4        68.17          913               0          913
Sec.   155.222(a).........................            9               9        10.00           90        24.10        2,169               0        2,169
Sec.   155.222(d).........................            9               9        10.00           90        24.10        2,169               0        2,169
Sec.   155.720(e) and Sec.   156.285(c)(3)          445             445        35.00       15.575        50.72      790,004               0      790,004
Sec.   155.735(g).........................           18              36        35.00        1,260        50.71       63,900               0       63,900
Sec.   156.120............................           51              51          1.5         76.5        58.05     4,480.83               0     1,480.28
Sec.   156.122............................        2,400           2,400        32.00       76,800        43.34    3,328,512               0    3,328,512
Sec.   156.285(d)(1)(ii)..................          445             445        35.00       15,575        50.72      790,004               0      790,004
Sec.   156.420............................          575           6,325         1.00        6,325        51.04      322,828               0      322,828
Sec.   156.420(h).........................          575          81,000         0.05        4,050        32.59      131,990          58,250      190,240
Sec.   156.425............................          575          41,000         0.05        2,025        32.59       65,995          29,125       95,120
Sec.   156.1130...........................          575             575           48       27,600        70.25    1,938,900               0    1,938,900
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................        2,400  ..............  ...........    149,504.9  ...........    7,441,865          87,375    7,529,240
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Copies of the supporting statement and any related forms for 
information collections identified above can be found at: http://www.cms.hhs.gov/PaperworkReductionActof1995 or can be obtained by 
emailing your request, including your address, phone number, OMB 
number, and CMS document identifier, to: <a href="/cdn-cgi/l/email-protection#83d3e2f3e6f1f4ecf1e8c3e0eef0adebebf0ade4ecf5"><span class="__cf_email__" data-cfemail="1a4a7b6a7f686d7568715a79776934727269347d756c">[email protected]</span></a>, or by 
calling the Reports Clearance Office at: 410-786-1326. If you comment 
on these proposed information collection, please reference the CMS 
document identifier and the OMB control number. To be assured 
consideration, comments and recommendations must be received in one of 
the following ways prior to the public comment deadline: 1. 
Electronically. You may submit your comments electronically to http://www.regulations.gov. Follow the instructions for ``Comment or 
Submission'' or ``More Search Options'' to find the information 
collection document(s) accepting comments. 2. By regular mail. You may 
mail written comments to the following address: CMS, Office of 
Strategic Operations and Regulatory Affairs, Division of Regulations 
Development, Attention: Document Identifier (CMS-10523), Room C4-26-05, 
7500 Security Boulevard, Baltimore, Maryland 21244-1850, and, OMB 
Office of Information and Regulatory Affairs, Attention: CMS Desk 
Officer, New Executive Office Building, Room 10235, Washington, DC 
20503, Fax Number: 202-395- 6974.

V. Regulatory Impact Analysis

A. Statement of Need

    This final rule sets forth standards related to the premium 
stabilization programs (risk adjustment, reinsurance, and risk 
corridors) for the 2016 benefit year, as well as certain modifications 
for the 2015 benefit year, that will protect issuers from the potential 
effects of adverse selection and protect consumers from increases in 
premiums due to issuer uncertainty. The Premium Stabilization Rule and 
the 2014 and 2015 Payment Notices provided detail on the implementation 
of these programs, including the specific parameters for the 2014 and 
2015 benefit years applicable to these programs. This final rule sets 
forth

[[Page 10855]]

additional standards related to essential health benefits, meaningful 
access in the Exchange, consumer assistance tools and programs of an 
Exchange, non-Navigator assistance personnel, cost-sharing parameters 
and cost-sharing reduction notices, quality improvement strategy 
standards for issuers of QHPs participating in Exchanges, guaranteed 
availability, guaranteed renewability, minimum essential coverage, the 
rate review program, the medical loss ratio program, the Small Business 
Health Options Program, and FFE user fees.

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), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), 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), and the Congressional Review Act (5 U.S.C. 
804(2)).
    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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. A regulatory impact analysis (RIA) must be prepared for 
rules with economically significant effects ($100 million or more in 
any 1 year).
    OMB has determined that this final rule is ``economically 
significant'' within the meaning of section 3(f)(1) of Executive Order 
12866, because it is likely to have an annual effect of $100 million in 
any 1 year. Accordingly, we have prepared an RIA that presents the 
costs and benefits of this rule.
    Although it is difficult to discuss the wide-ranging effects of 
these provisions in isolation, the overarching goal of the premium 
stabilization, market standards, and Exchange-related provisions and 
policies in the Affordable Care Act is to make affordable health 
insurance available to individuals who do not have access to affordable 
employer-sponsored coverage. The provisions within this final rule are 
integral to the goal of expanding access to affordable coverage. For 
example, the premium stabilization programs help prevent risk selection 
and decrease the risk of financial loss that health insurance issuers 
might otherwise expect in 2016 and the advance payments of the premium 
tax credit and cost-sharing reduction programs assist low- and 
moderate-income consumers and American Indians/Alaska Natives in 
purchasing health insurance. The combined impacts of these provisions 
affect the private sector, issuers, and consumers, through increased 
access to health care services including preventive services, decreased 
uncompensated care, lower premiums, establishment of quality 
improvement strategy standards, and increased plan transparency. 
Through the reduction in financial uncertainty for issuers and 
increased affordability for consumers, these provisions are expected to 
increase access to affordable health coverage.
    HHS anticipates that the provisions of this final rule will help 
further the Department's goal of ensuring that all consumers have 
access to quality, affordable health care and are able to make informed 
choices, that Exchanges operate smoothly, that premium stabilization 
programs work as intended, that SHOPs are provided flexibility, and 
that employers and consumers are protected from fraudulent and criminal 
activities. Affected entities such as QHP issuers will incur costs to 
comply with the provisions specified in the final rule, including 
administrative costs related to notices, quality improvement strategy 
requirements, training and recertification requirements, and, in some 
cases, establishing a larger provider network. In accordance with 
Executive Order 12866, HHS believes that the benefits of this 
regulatory action justify the costs.

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

    In accordance with OMB Circular A-4, Table 13 below depicts an 
accounting statement summarizing HHS's assessment of the benefits, 
costs, and transfers associated with this regulatory action.
    This final rule implements standards for programs that will have 
numerous effects, including providing consumers with affordable health 
insurance coverage, reducing the impact of adverse selection, and 
stabilizing premiums in the individual and small group health insurance 
markets and in an Exchange. We are unable to quantify certain benefits 
of this rule--such as improved health outcomes and longevity due to 
continuous quality improvement and increased insurance enrollment--and 
certain costs--such as the cost of providing additional medical 
services to newly-enrolled individuals. The effects in Table 13 reflect 
qualitative impacts and estimated direct monetary costs and transfers 
resulting from the provisions of this final rule for reinsurance 
contributing entities and health insurance issuers. The annualized 
monetized costs described in Table 13 reflect direct administrative 
costs to these entities as a result of these provisions, and include 
administrative costs related to notices, quality improvement strategy 
requirements, and training and recertification requirements that are 
estimated in the Collection of Information section of this final rule. 
The annual monetized transfers described in Table 13 include costs 
associated with the reinsurance contribution fee, FFE user fees, and 
the risk adjustment user fee paid to HHS by issuers, and additional MLR 
rebate payments from issuers to consumers. We also note that 
reinsurance administrative expenses, included in the reinsurance 
contribution rate, will increase slightly from 2015 to 2016. In 
addition, as a result of HHS's increased contract costs related to risk 
adjustment operations and risk adjustment data validation, we will 
collect a total of $50 million in risk adjustment user fees or $1.75 
per enrollee per year from risk adjustment issuers, which is greater 
than the $0.96 per-enrollee-per-year risk adjustment user fee amount 
established for benefit year 2015. This increase is due in large part 
to risk adjustment data validation costs that will occur in 2016. The 
increase in FFE user fee collections is a result of a constant user fee 
rate from 2015 to 2016 (3.5 percent) but expected growth in enrollment 
in the FFEs. We are also including costs associated with administrative 
appeals under Sec.  156.1220 in the RIA of this final rule.

                                           Table 13--Accounting Table
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Benefits:
----------------------------------------------------------------------------------------------------------------
Qualitative:....................................................................................................

[[Page 10856]]

 
    * Increased enrollment in the individual market leading to improved access to health care for the previously
     uninsured, especially individuals with medical conditions, which will result in improved health and
     protection from the risk of catastrophic medical expenditures..............................................
    * Encourage continuous quality improvement among QHP issuers to improve health outcomes at lower costs......
    * Allow Exchanges to make informed QHP certification decisions..............................................
    * Increasing coverage options for small businesses and their employees while mitigating the effect of
     adverse selection..........................................................................................
    * Ensure that consumers in group health plans not subject to ERISA receive the benefit of MLR rebates in a
     timely manner..............................................................................................
----------------------------------------------------------------------------------------------------------------
Costs:
----------------------------------------------------------------------------------------------------------------
                                                                Estimate   Year dollar    Discount      Period
                                                               (million)                    rate       covered
                                                                                         (percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)...............................         6.77         2015            7    2015-2018
                                                                     6.77         2015            3    2015-2018
----------------------------------------------------------------------------------------------------------------
Quantitative:...................................................................................................
    * Costs incurred by issuers and contributing entities to comply with provisions in the rule.................
    * Costs incurred by States for complying with audits of State-operated reinsurance programs.................
----------------------------------------------------------------------------------------------------------------
Transfers:
----------------------------------------------------------------------------------------------------------------
                                                                Estimate   Year dollar    Discount      Period
                                                               (million)                    rate       covered
                                                                                         (percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)...............................       418.61         2015            7    2015-2018
                                                                   418.52         2015            3    2015-2018
----------------------------------------------------------------------------------------------------------------
* Transfers reflect incremental cost increases from 2015-2016 for reinsurance administrative expenses, FFE user
 fees, and the risk adjustment user fee, which are transfers from contributing entities and health insurance
 issuers to the Federal government. FFE user fees are newly included in the estimated transfers as collections
 are now projected for the period covered. Transfers also reflect annual transfer from shareholders or nonprofit
 stakeholders to enrollees of rebates paid by issuers for coverage in the individual and group markets,
 resulting from clarification regarding MLR methodology to account for Federal and State employment taxes.......
* Unquantified: Lower premium rates in the individual market due to the improved risk profile of the insured,
 competition, and pooling risk..................................................................................
----------------------------------------------------------------------------------------------------------------

    This RIA expands upon the impact analyses of previous rules and 
utilizes the Congressional Budget Office's (CBO) analysis of the 
Affordable Care Act's impact on Federal spending, revenue collection, 
and insurance enrollment. Table 14 summarizes the effects of the risk 
adjustment and reinsurance programs on the Federal budget from fiscal 
years 2015 through 2018, with the additional, societal effects of this 
proposed rule discussed in this RIA. We do not expect the provisions of 
this final rule to significantly alter CBO's estimates of the budget 
impact of the risk adjustment, reinsurance, and risk corridors programs 
that are described in Table 14. For this RIA, we are shifting the 
estimates for the risk adjustment and reinsurance programs to reflect 
the 4-year period from fiscal years 2015 through 2018, because these 
payments and charges will begin in the 2015 calendar year for the 2014 
benefit year. We note that transfers associated with the risk 
adjustment and reinsurance programs were previously estimated in the 
Premium Stabilization Rule; therefore, to avoid double-counting, we do 
not include them in the accounting statement for this final rule (Table 
13).
    In addition to utilizing CBO projections, HHS conducted an internal 
analysis of the effects of its regulations on enrollment and premiums. 
Based on these internal analyses, we anticipate that the quantitative 
effects of the provisions finalized in this rule are consistent with 
our previous estimates in the 2015 Payment Notice for the impacts 
associated with the cost-sharing reduction program, the advance 
payments of the premium tax credit program, the premium stabilization 
programs, and FFE user fee requirements.

   Table 14--Estimated Federal Government Outlays and Receipts for the Risk Adjustment, Reinsurance, and Risk
                                      Corridors Programs From FY 2014-2018
                                            [In billions of dollars]
----------------------------------------------------------------------------------------------------------------
               Year                     2015         2016         2017         2018         2019      2015-2019
----------------------------------------------------------------------------------------------------------------
Risk Adjustment, Reinsurance, and            17         17.5         19.5           15           17           86
 Risk Corridors Program Payments..
Risk Adjustment, Reinsurance, and            18         16.5         19.5           15           17           86
 Risk Corridors Program
 Collections......................
----------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office. Updated Estimates of the Insurance Coverage Provisions of the Affordable
  Care Act, January 2015.

1. Rate Review
    The final rule will trigger review of rate increases that meet or 
exceed the applicable review threshold when such increases happen at 
the ``plan'' level rather than at the ``product'' level. This will 
protect consumers against unreasonable rate increases for their plans, 
since, under current regulations,

[[Page 10857]]

it is possible for a plan to experience a rate increase higher than the 
threshold and still avoid review because the average rate increase for 
the product does not meet or exceed the threshold. States may have to 
review more submissions and experience an increase in related costs. 
The establishment of a uniform timeframe by which issuers in every 
State must submit a completed Rate Filing Justification to CMS and the 
applicable State for all rate increases, including both QHPs and non-
QHPs, will provide timely information to consumers and other 
stakeholders and ensure that State and Federal regulators have adequate 
time for review prior to implementation of a rate increase. The 
amendment to specify the timing for States to make proposed and final 
rate increase information available to the public will ensure that 
consumers have timely access to this information. These provisions will 
also reduce the potential for anti-competitive behavior and promote 
fair market competition between issuers inside and outside of the 
Exchange.
2. Change of Ownership Notification Requirement
    This final rule provides that when an issuer of a QHP, a plan 
otherwise subject to risk corridors, a risk adjustment covered plan, or 
a reinsurance-eligible plan, experiences a change in ownership as 
recognized by the State in which the plan is offered, the issuer must 
notify HHS in a manner specified by HHS, by the latest of (1) the date 
the transaction is entered into; or (2) the 30th day prior to the 
effective date of the transaction. We expect that upon notification, 
issuers may need to work with HHS to clarify operational processes 
related to the HHS-administered programs, and will follow with guidance 
related to such operational processes. We estimate the administrative 
costs associated with the notification requirement in the Collection of 
Information section of this final rule.
3. Appeals Process for HHS-Approved Vendors for FFE Training and 
Information Verification for Agents and Brokers
    In Sec.  155.222, we proposed information collection and disclosure 
requirements that pertain to the approval of vendors to have their FFE 
agent and broker training and information verification programs 
recognized as sufficient for agents and brokers to satisfy the training 
requirement to assist or facilitate enrollment in individual market or 
SHOP coverage through the FFEs. We also establish a monitoring and 
appeals process for such HHS-approved vendors. We estimate that five 
vendors that apply may not have their application approved, and one 
vendor may have their approval revoked, and all of those vendors will 
appeal HHS's determination and submit additional documentation to HHS. 
We estimate that filing an appeal with HHS will take no longer than 1 
hour. Therefore, at an hourly wage rate of $24.10, we estimate a total 
cost of $144.60 as a result of this appeals process.
4. Risk Adjustment
    The risk adjustment program is a permanent program created by the 
Affordable Care Act that transfers funds from lower risk, non-
grandfathered plans to higher risk, non-grandfathered plans in the 
individual and small group markets, inside and outside the Exchanges. 
We established standards for the administration of the risk adjustment 
program in subparts D and G of part 45 of the CFR.
    A State 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. As described in the 2014 and 2015 Payment 
Notices, if HHS operates risk adjustment on behalf of a State, it will 
fund its risk adjustment program operations by assessing a risk 
adjustment user fee on issuers of risk adjustment covered plans. For 
the 2016 benefit year, we estimate that the total cost for HHS to 
operate the risk adjustment program on behalf of States for 2016 will 
be approximately $50 million, and that the risk adjustment user fee 
would be approximately $1.75 per enrollee per year. The increased risk 
adjustment user fee for 2016 is the result of the increased contract 
costs to support the risk adjustment data validation process.
5. Reinsurance
    The Affordable Care Act directs that a transitional reinsurance 
program be established in each State to help stabilize premiums for 
coverage in the individual market by helping to pay the cost of 
treating high-cost enrollees. In the 2014 and 2015 Payment Notices, we 
expanded upon the standards set forth in subparts C and E of the 
Premium Stabilization Rule and established the 2014 and 2015 uniform 
reinsurance payment parameters and national contribution rate. In this 
rule, we finalize the 2016 uniform reinsurance payment parameters and 
contribution rate and a modification to the 2015 benefit year 
attachment point.
    Section 153.220(c) provides that HHS will publish the uniform per 
capita reinsurance contribution rate for the upcoming benefit year in 
the annual HHS notice of benefit and payment parameters. Section 
1341(b)(3)(B)(iii) of the Affordable Care Act specifies that $10 
billion for reinsurance contributions is to be collected from 
contributing entities for the 2014 benefit year (the reinsurance 
payment pool), $6 billion for the 2015 benefit year, and $4 billion for 
the 2016 benefit year. Additionally, sections 1341(b)(3)(B)(iv) and 
1341(b)(4) of the Affordable Care Act direct that $2 billion in funds 
is to be collected for contribution to the U.S. Treasury for the 2014 
benefit year, $2 billion for the 2015 benefit year, and $1 billion for 
the 2016 benefit year. Finally, section 1341(b)(3)(B)(ii) of the 
Affordable Care Act allows for the collection of additional amounts for 
administrative expenses. Taken together, these three components make up 
the total dollar amount to be collected from contributing entities for 
2014, 2015 and 2016 benefit years for the reinsurance program under the 
uniform per capita contribution rate.
    In the 2015 Payment Notice, we estimated that the Federal 
administrative expenses of operating the reinsurance program would be 
$25.4 million, based on our estimated contract and operational costs. 
We used the same methodology to estimate the administrative expenses 
for the 2016 benefit year. We estimate this amount to be approximately 
$32 million for the 2016 benefit year. This estimate increased for the 
2016 benefit year due to increased audit and data validation contract 
costs. We believe that this figure reflects the Federal government's 
significant economies of scale, which helps to decrease the costs 
associated with operating the reinsurance program. Based on our 
estimate of covered lives for which reinsurance contributions are to be 
made for 2016, we are finalizing a uniform reinsurance contribution 
rate of $0.17 annually per capita for HHS administrative expenses. If a 
State establishes its own reinsurance program, HHS would transfer 
$0.085 of the per capita administrative fee to the State for purposes 
of administrative expenses incurred in making reinsurance payments, and 
retain the remaining $0.085 to offset the costs of collecting 
contributions. We note that the administrative expenses for reinsurance 
payments will be distributed to those States that operate their own 
reinsurance program in proportion to the State-by-State total requests 
for reinsurance payments made

[[Page 10858]]

under the uniform reinsurance payment parameters.
6. Risk Corridors
    The Affordable Care Act creates a temporary risk corridors program 
for the years 2014, 2015, and 2016 that applies to QHPs, as defined in 
Sec.  153.500. Section 1342 of the Affordable Care Act directs the 
Secretary to establish a temporary risk corridors program that protects 
issuers against inaccurate rate setting from 2014 through 2016. The 
Affordable Care Act establishes the risk corridors program as a Federal 
program; consequently, HHS will operate the risk corridors program 
under Federal rules with no State variation.
    We finalize a clarification to the risk corridors transitional 
adjustment for benefit year 2014. We clarify that we intend to 
implement the risk corridors transitional adjustment for transitional 
plans only, as stated in the 2015 Payment Notice. This clarification 
does not affect the impact of the risk corridors transitional 
adjustment.
    For benefit year 2016, we are finalizing the treatment of excess 
risk corridors collections that may remain after the 3-year duration of 
the program. We will adjust the allowable administrative cost ceiling 
and profit floor so that any excess risk corridors collections that 
remain in benefit year 2016 are paid out to eligible QHP issuers. We 
anticipate that collections will fully offset payments over the 3-year 
duration of the program. Consequently, we do not believe that this 
provision will have a monetary impact on QHP issuers or the Federal 
government.
7. SHOP
    The SHOP facilitates the enrollment of eligible employees of small 
employers into small group health insurance plans. A qualitative 
analysis of the costs and benefits of establishing a SHOP was included 
in the RIA published in conjunction with the Exchange Establishment 
Rule.\84\
---------------------------------------------------------------------------

    \84\ Available at: http://cciio.cms.gov/resources/files/Files2/03162012/hie3r-ria-032012.pdf.
---------------------------------------------------------------------------

    Please see the Collection of Information section of this proposed 
rule for the costs expected to be incurred by State-based SHOPs and QHP 
issuers participating in the SHOP related to the notification 
requirements related to terminations of coverage or enrollment through 
the SHOP and the notification requirement for the coverage effective 
date under the new definition of an enrollee. We believe the cost 
associated with termination notices is justified because SHOPs are best 
positioned to provide meaningful notice regarding terminations due to 
loss of eligibility and nonpayment of premiums in a timely manner, 
while issuers are best positioned to provide meaningful notice when 
coverage or enrollment through the SHOP is terminated due to a 
rescission in accordance with Sec.  147.128 or when the QHP is 
terminated, decertified, or its certification is not renewed, as well 
as notices of the effective date of coverage. We believe expanding the 
notice requirement under Sec.  155.720(e) benefits all individuals with 
coverage, including dependents, former employees of a qualified 
employer, and certain business owners, with a notification of effective 
date of coverage.
8. User Fees
    To support the operation of FFEs, we require in Sec.  156.50(c) 
that a participating issuer offering a plan through an FFE must remit a 
user fee to HHS each month equal to the product of the 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 under the plan where enrollment is through an 
FFE. For the 2016 benefit year, we are finalizing a monthly user fee 
rate equal to 3.5 percent of the monthly premium. As described in the 
Budget of the United States Government, Fiscal Year 2016, we expect 
approximately $1.514 billion in user fee collections would be obligated 
in fiscal year 2016. For the user fee charge assessed on issuers in the 
FFE, we received an exception to OMB Circular No. A-25R, which requires 
that the user fee charge be sufficient to recover the full cost to the 
Federal government of providing the special benefit. This exception 
ensures that the FFEs can support many of the goals of the Affordable 
Care Act, including improving the health of the population, reducing 
health care costs, and providing access to health coverage as advanced 
by Sec.  156.50(d).
9. Essential Health Benefits, Cost Sharing, and Actuarial Value
    Issuers may incur minor administrative costs associated with 
altering benefits, cost-sharing and/or AV parameters of their plan 
designs to ensure compliance with the EHB requirements in this rule. 
For example, issuers that do not currently meet the standards for EHB 
prescription drug coverage will incur contracting and one-time 
administrative costs to bring their prescription drug benefits into 
compliance. HHS expects that the process for compliance with the 
revised EHB requirements will not significantly add to existing 
compliance costs because issuers have extensive experience in offering 
products with various benefits and levels of cost sharing and these 
modifications are expected to be relatively minor for most issuers.
    In addition, we are adding standards for a health plan's formulary 
exception process that includes an external review. We believe that 
issuers that provide EHB already have formulary exceptions processes 
and procedures in place that allow an enrollee to request and gain 
access to clinically appropriate drugs not covered by the plan. We do 
not expect these requirements to significantly increase the volume of 
reviews conducted under issuers' contracts with Independent Review 
Organizations. Therefore, we do not anticipate that these requirements 
would result in any significant new cost for issuers.
10. Network Adequacy
    Issuers may incur minor administrative costs associated with 
updating their provider directory to ensure compliance with the 
requirements under this final rule. Since issuers already maintain a 
directory and the expected modification is to re-locate that directory 
to a more user-friendly location on the issuer Web site, HHS expects 
that compliance will not demand any additional resources.
11. Downstream Entities
    We revised Sec.  156.200(b)(7), to clarify that a QHP issuer is 
required to comply with the standards under part 153 and not just the 
standards related to the risk adjustment program. Under Sec.  156.340, 
notwithstanding any relationship(s) that a QHP issuer may have with 
delegated and downstream entities, a QHP issuer maintains 
responsibility for its compliance and the compliance of any of its 
delegated or downstream entities, as applicable, with all applicable 
standards, including the standards of subpart C of part 156 for each of 
its QHPs on an ongoing basis. Because we believe that QHP issuers have 
existing agreements with downstream entities that define 
responsibilities, we do not believe that this requirement will impose 
an additional burden on QHP issuers.
12. Provisions Related to Cost Sharing
    The Affordable Care Act provides for the reduction or elimination 
of cost sharing for certain eligible individuals enrolled in QHPs 
offered through the Exchanges. This assistance will help

[[Page 10859]]

many low- and moderate-income individuals and families obtain health 
insurance--for many people, cost sharing is a barrier to obtaining 
needed health care.\85\
---------------------------------------------------------------------------

    \85\ Brook, Robert H., John E. Ware, William H. Rogers, Emmett 
B. Keeler, Allyson Ross Davies, Cathy D. Sherbourne, George A. 
Goldberg, Kathleen N. Lohr, Patricia Camp and Joseph P. Newhouse. 
The Effect of Coinsurance on the Health of Adults: Results from the 
RAND Health Insurance Experiment. Santa Monica, CA: RAND 
Corporation, 1984. Available at: http://www.rand.org/pubs/reports/R3055.
---------------------------------------------------------------------------

    To support the administration of the cost-sharing reduction 
program, we set forth in this final rule the reductions in the maximum 
annual limitation on cost sharing for silver plan variations. 
Consistent with our analysis in the 2014 and 2015 Payment Notices, we 
developed three model silver level QHPs and analyzed the impact on 
their AVs of the reductions described in the Affordable Care Act to the 
estimated 2016 maximum annual limitation on cost sharing for self-only 
coverage ($6,850). We do not believe these changes will result in a 
significant economic impact.
    We are also finalizing the premium adjustment percentage for the 
2016 benefit year. Section 156.130(e) provides that the premium 
adjustment percentage is the percentage (if any) by which the average 
per capita premium for health insurance coverage for the preceding 
calendar year exceeds such average per capita premium for health 
insurance for 2013. The annual premium adjustment percentage sets the 
rate of increase for three parameters detailed in the Affordable Care 
Act: The annual limitation on cost sharing (defined at Sec.  
156.130(a)), the required contribution percentage by individuals for 
minimum essential health coverage the Secretary may use to determine 
eligibility for hardship exemptions under Section 5000A of the Code, 
and the section 4980H(a) and section 4980H(b) assessable payment 
amounts (finalized at 26 CFR 54.4980H in the ``Shared Responsibility 
for Employers Regarding Health Coverage,'' published in the Federal 
Register on February 12, 2014 (79 FR 8544)). We believe that the 2016 
premium adjustment percentage of 8.316047520 percent is well within the 
parameters used in the modeling of the Affordable Care Act, and we do 
not expect that these proposed provisions will alter CBO's January 2015 
baseline estimates of the budget impact.
13. Minimum Essential Coverage
    The final rule provides continued recognition of State high risk 
pools as minimum essential coverage. This will facilitate the 
transition of State high risk pool enrollees into QHPs through the 
Exchange or into other forms of minimum essential coverage, while 
ensuring continued access to coverage. It will also help ensure that 
this vulnerable population will not be subject to the shared 
responsibility payment during this transition, and thereby avoid an 
increase in out-of-pocket costs.
14. Quality Improvement Strategy
    The standards requiring QHP issuers participating in Exchanges to 
establish and submit information regarding a quality improvement 
strategy will encourage continuous quality improvement among QHP 
issuers to help strengthen system-wide efforts to improve health 
outcomes at lower costs, promote provider payment models that link 
quality and value of services, allow for flexibility and innovation of 
diverse market-based incentive approaches, encourage meaningful 
improvements as well as provide regulators and stakeholders with 
information to use for monitoring and evaluation purposes. We discuss 
the administrative costs associated with submitting this information in 
the Collection of Information section of this proposed rule.
15. Administrative Appeals
    In Sec.  156.1220, we establish an administrative appeals process 
to address unresolved discrepancies for advance payments of the premium 
tax credit, advance payment and reconciliation of cost-sharing 
reductions, FFE user fees, and the premium stabilization programs, as 
well as any assessment of a default risk adjustment charge under Sec.  
153.740(b). We estimated the burden associated with the administrative 
appeals process in the 2015 Payment Notice, and in the Supporting 
Statement approved under OMB Control Number 0938-1155. We will revise 
the information collection currently approved OMB Control Number 0938-
1155 with an October 31, 2015 expiration date. We do not believe that 
the provisions in this final rule will alter the economic impact of 
this requirement that was estimated in the 2015 Payment Notice.
16. Medical Loss Ratio
    This final rule clarifies the treatment of cost-sharing reductions 
in the MLR calculations. This final rule also ensures timely 
distribution of rebates for the benefit of subscribers of group health 
plans not subject to ERISA. Specifically, the amendments to the MLR 
provisions governing the distribution of rebates to group enrollees in 
non-Federal governmental and other group health plans not subject to 
ERISA ensure that group policyholders of such plans do not withhold the 
benefit of rebates from the enrollees for longer than 3 months. This 
final rule also provides an additional option for distribution of 
rebates by such policyholders. We do not anticipate that these 
provisions will have any significant effect on MLR program estimates. 
This final rule also amends the MLR regulations to provide that premium 
in MLR and rebate calculations should not be reduced by the amount of 
Federal and State employment taxes. Based on MLR data for the 2013 MLR 
reporting year, the clarification regarding the treatment of such taxes 
in the MLR and rebate calculations may result in additional rebate 
payments to consumers of approximately $35 million from issuers that 
previously interpreted the MLR December 1, 2010 interim final rule to 
permit the reduction of premium by the amount of such taxes.

D. Regulatory Alternatives Considered

    When considering the final 2016 reinsurance payment parameters we 
also considered a set of uniform reinsurance payment parameters that 
would have substantially lowered the reinsurance cap, but believe those 
uniform reinsurance payment parameters would have raised the complexity 
of estimating the effects of reinsurance for issuers.
    We also considered expanding the risk corridors transitional 
adjustment to apply to early renewal plans. This approach would have 
increased the impact of the risk corridors adjustment and altered the 
impact analysis related to the risk corridors transitional adjustment 
that was published in the 2015 Payment Notice. However, we decided not 
to propose or finalize this alternate policy.
    We considered for the 2016 benefit year requiring issuers to 
separate visit limits for rehabilitative and habilitative services and 
devices. However, we determined that issuers' claims systems are unable 
to distinguish rehabilitative and habilitative services and devices at 
this time. Therefore, we determined that this requirement should not be 
effective until 2017 to allow issuers to modify their claims systems.
    We considered ending the good faith compliance policy for QHP 
issuers. However, we determined that subjecting QHP issuers to 
increased punitive actions in the early years of the Exchange would be 
less effective than working with issuers to address compliance issues. 
We also considered

[[Page 10860]]

a more expansive good faith compliance policy, but believe that 2 years 
is a sufficient transition period.
    We considered not suppressing QHPs on the FFE, but this approach 
would have resulted in less flexibility for the FFE to address 
situations that could affect consumers' interests. For example, this 
alternative could cause disruption by requiring consumers to select a 
new QHP mid-year if their QHP was decertified rather than just 
suppressed for new enrollments.
    We also considered not recognizing vendors as an alternative avenue 
for FFE training and information verification of agents and brokers. 
However, we believe that recognizing vendors will make it easier for 
agents and brokers to identify appropriate vendors who meet HHS 
standards for training and registration.
    Additionally, we considered not requiring QIS reporting for QHP 
issuers. However, we decided to finalize the policy in this rule 
because we believe that QIS reporting will result in higher quality 
QHPs being offered in the Exchange and make it easier for consumers to 
select a high-quality QHP.

E. Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601, et seq.) (RFA) 
requires agencies to prepare an initial regulatory flexibility analysis 
to describe the impact of the proposed rule on small entities, unless 
the head of the agency can certify that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The RFA generally defines a ``small entity'' as (1) a proprietary firm 
meeting the size standards of the Small Business Administration (SBA), 
(2) a not-for-profit organization that is not dominant in its field, or 
(3) a small government jurisdiction with a population of less than 
50,000. States and individuals are not included in the definition of 
``small entity.'' HHS uses a change in revenues of more than 3 to 5 
percent as its measure of significant economic impact on a substantial 
number of small entities.
    In this final rule, we set forth standards for the risk adjustment, 
reinsurance, and risk corridors programs, which are intended to 
stabilize premiums as insurance market reforms are implemented and 
Exchanges facilitate increased enrollment. Because we believe that 
insurance firms offering comprehensive health insurance policies 
generally exceed the size thresholds for ``small entities'' established 
by the SBA, we do not believe that an initial regulatory flexibility 
analysis is required for such firms.
    For purposes of the RFA, we expect the following types of entities 
to be affected by this rule:
    <bullet> Health insurance issuers.
    <bullet> Group health plans.
    <bullet> Reinsurance entities.
    We believe that health insurance issuers and group health plans 
would be classified under the North American Industry Classification 
System (NAICS) code 524114 (Direct Health and Medical Insurance 
Carriers). According to SBA size standards, entities with average 
annual receipts of $35.5 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 would be $32.5 million or less.
    In this final rule, we set forth standards for employers that 
choose to participate in a SHOP Exchange. Until 2017, the SHOPs are 
limited by statute to employers with at least one but not more than 100 
employees. For this reason, we expect that many employers who would be 
affected by these requirements would meet the SBA standard for small 
entities. We do not believe that these provisions impose requirements 
on employers offering health insurance through the SHOP that are more 
restrictive than the current requirements on small businesses offering 
employer-sponsored insurance. We believe the processes that we have 
established constitute the minimum amount of requirements necessary to 
implement the SHOP program and accomplish our policy goals, and that no 
appropriate regulatory alternatives could be developed to further 
lessen the compliance burden.
    Based on data from MLR annual report submissions for the 2013 MLR 
reporting year, approximately 141 out of 500 issuers of health 
insurance coverage nationwide had total premium revenue of $38.5 
million or less. This estimate may overstate the actual number of small 
health insurance companies that may be affected, since 77 percent of 
these small companies belong to larger holding groups, and many if not 
all of these small companies are likely to have non-health lines of 
business that would result in their revenues exceeding $38.5 million. 
Only 16 of these small entities owed a rebate for the 2013 reporting 
year, and none of these small entities are estimated to experience a 
rebate increase of more than 0.1 percent of total premium revenue under 
the MLR provisions of this final rule. None of the small entities that 
did not previously owe rebates are expected to owe rebates as a result 
of the provisions of this final rule. Based on data from MLR annual 
report submissions for the 2013 MLR reporting year, approximately 
286,750 out of 1.6 million small group policyholders and 13,500 out of 
228,000 large group policyholders nationwide were owed rebates for the 
2013 reporting year. It is uncertain how many of the group 
policyholders obtaining coverage from health insurance issuers subject 
to MLR are both (a) small entities that fall below the size thresholds 
set by the SBA for various industries, and (b) enrolled in group health 
plans not subject to ERISA, and would therefore be subject to the 
proposed provisions related to MLR. However, the provisions of this 
final rule only establish a deadline for the use of MLR rebates by 
certain policyholders similar to the deadline that is already followed 
by most group policyholders, and do not otherwise alter the 
requirements for rebate use by such policyholders. In addition, the 
clarification regarding how health insurance issuers must treat cost-
sharing reductions in their MLR calculations simply aligns the MLR 
regulatory language with the risk corridors program.

F. Unfunded Mandates

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits and take 
certain other actions before issuing a rule that includes any Federal 
mandate that may result in expenditures in any 1 year by a State, 
local, or Tribal governments, in the aggregate, or by the private 
sector, of $100 million in 1995 dollars, updated annually for 
inflation. In 2015, that threshold is approximately $141 million. 
Although we have not been able to quantify all costs, the combined 
administrative cost and user fee impact on State, local, or Tribal 
governments and the private sector may be above the threshold. Earlier 
portions of this RIA constitute our UMRA analysis.

G. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule that imposes 
substantial direct costs on State and local governments, preempts State 
law, or otherwise has Federalism implications. Because States have 
flexibility in designing their Exchange and Exchange-related programs, 
State decisions will ultimately influence both administrative expenses 
and overall premiums. States are not required to establish an Exchange 
or risk adjustment or reinsurance program. For States electing to 
operate an Exchange, risk adjustment

[[Page 10861]]

or reinsurance program, much of the initial cost of creating these 
programs will be funded by Exchange Planning and Establishment Grants. 
After establishment, Exchanges will be financially self-sustaining, 
with revenue sources at the discretion of the State. Current State 
Exchanges may charge user fees to issuers.
    In HHS's view, while this rule would not impose substantial direct 
requirement costs on State and local governments, this regulation has 
Federalism implications due to direct effects on the distribution of 
power and responsibilities among the State and Federal governments 
relating to determining standards relating to health insurance that is 
offered in the individual and small group markets. Each State electing 
to establish an Exchange must adopt the Federal standards contained in 
the Affordable Care Act and in this rule, or have in effect a State law 
or regulation that implements these Federal standards. However, HHS 
anticipates that the Federalism implications (if any) are substantially 
mitigated because under the statute, States have choices regarding the 
structure and governance of their Exchanges and risk adjustment and 
reinsurance programs. Additionally, the Affordable Care Act does not 
require States to establish these programs; if a State elects not to 
establish any of these programs or is not approved to do so, HHS must 
establish and operate the programs in that State.
    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, HHS 
has engaged in efforts to consult with and work cooperatively with 
affected States, including participating in conference calls with and 
attending conferences of the National Association of Insurance 
Commissioners, and consulting with State insurance officials on an 
individual basis.
    Throughout the process of developing this proposed rule, HHS has 
attempted to balance the States' interests in regulating health 
insurance issuers, and Congress' intent to provide access to Affordable 
Insurance Exchanges for consumers in every State. By doing so, it is 
HHS's view that we have complied with the requirements of Executive 
Order 13132.

H. Congressional Review Act

    This rule is subject to the Congressional Review Act provisions of 
the Small Business Regulatory Enforcement Fairness Act of 1996 (5 
U.S.C. 801, et seq.), which specifies that before a rule can take 
effect, the Federal agency promulgating the rule shall submit to each 
House of the Congress and to the Comptroller General a report 
containing a copy of the rule along with other specified information, 
and has been transmitted to Congress and the Comptroller General for 
review.

List of Subjects

45 CFR Part 144

    Health care, Health insurance, and Reporting and recordkeeping 
requirements.

45 CFR Part 147

    Health care, Health insurance, Reporting and recordkeeping 
requirements, and State regulation of health insurance.

45 CFR Part 153

    Administrative practice and procedure, Adverse selection, Health 
care, Health insurance, Health records, Organization and functions 
(Government agencies), Premium stabilization, Reporting and 
recordkeeping requirements, Reinsurance, Risk adjustment, Risk 
corridors, Risk mitigation, State and local governments.

45 CFR Part 154

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

45 CFR Part 155

    Administrative practice and procedure, Health care access, Health 
insurance, Reporting and recordkeeping requirements, State and local 
governments, Required Contribution Percentage, Cost-sharing reductions, 
Advance payments of the premium tax credit, Administration and 
calculation of advance payments of the premium tax credit, Plan 
variations, Actuarial value.

45 CFR Part 156

    Administrative appeals, Administrative practice and procedure, 
Administration and calculation of advance payments of the premium tax 
credit, Advertising, Advisory Committees, American Indian/Alaska 
Natives, Brokers, Conflict of interest, Consumer protection, Cost-
sharing reductions, Grant programs-health, Grants administration, 
Health care, Health insurance, Health maintenance organization (HMO), 
Health records, Hospitals, Individuals with disabilities, Loan 
programs-health, Organization and functions (Government agencies), 
Medicaid, Payment and collections reports, 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, Health plans, Medical loss ratio, Penalties, Premium 
revenues, Rebating Reporting and recordkeeping requirements.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR parts 144, 147, 153, 154, 155, 156, 
and 158 as set forth below.

PART 144--REQUIREMENTS RELATING TO HEALTH INSURANCE COVERAGE

0
1. The authority citation for part 144 continues to read as follows:

    Authority:  Secs. 2701 through 2763, 2791, and 2792 of the 
Public Health Service Act, 42 U.S.C. 300gg through 300gg-63, 300gg-
91, and 300gg-92.


0
2. Section 144.103 is amended by revising the definitions of ``Plan'' 
and ``State'' to read as follows:


Sec.  144.103  Definitions.

* * * * *
    Plan means, with respect to an issuer and a product, the pairing of 
the health insurance coverage benefits under the product with a 
particular cost-sharing structure, provider network, and service area. 
The product comprises all plans offered with those characteristics and 
the combination of the service areas for all plans offered within a 
product constitutes the total service area of the product. With respect 
to a plan that has been modified at the time of coverage renewal 
consistent with Sec.  147.106 of this subchapter--
    (1) The plan will be considered to be the same plan if it:
    (i) Has the same cost-sharing structure as before the modification, 
or any variation in cost sharing is solely related to changes in cost 
or utilization of medical care, or is to maintain the same metal tier 
level described in sections 1302(d) and (e) of the Affordable Care Act;
    (ii) Continues to cover a majority of the same service area; and
    (iii) Continues to cover a majority of the same provider network. 
For this purpose, the plan's provider network on the first day of the 
plan year is compared with the plan's provider

[[Page 10862]]

network on the first day of the preceding plan year (as applicable).
    (2) The plan will not fail to be treated as the same plan to the 
extent the modification(s) are made uniformly and solely pursuant to 
applicable Federal and State requirements if--
    (i) The modification is made within a reasonable time period after 
the imposition or modification of the Federal or State requirement;
    (ii) The modification is directly related to the imposition or 
modification of the Federal or State requirement.
    (3) A State may permit greater changes to the cost-sharing 
structure, or designate a lower threshold for maintenance of the same 
provider network or service area for a plan to still be considered the 
same plan.
* * * * *
    State means each of the 50 States, the District of Columbia, Puerto 
Rico, the Virgin Islands, Guam, American Samoa, and the Northern 
Mariana Islands; except that for purposes of part 147, the term does 
not include Puerto Rico, the Virgin Islands, Guam, American Samoa, and 
the Northern Mariana Islands.
* * * * *

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND 
INDIVIDUAL HEALTH INSURANCE MARKETS

0
3. The authority citation for part 147 continues to read as follows:

    Authority: Secs 2701 through 2763, 2791 and 2792 of the Public 
Health Service Act (42 U.S.C. 300gg through 300gg-63, 300gg-91, and 
300gg-92), as amended.


0
4. Section 147.104 is amended by--
0
a. Revising paragraphs (b)(1)(i)(C), (b)(2), and (b)(4).
0
b. Redesignating paragraphs (f) through (h) as paragraphs (g) through 
(i), respectively.
0
c. Adding new paragraph (f).
    The revisions and addition read as follows:


Sec.  147.104  Guaranteed availability of coverage.

* * * * *
    (b) * * *
    (1) * * *
    (i) * * *
    (C) With respect to coverage in the small group market, and in the 
large group market if such coverage is offered through a Small Business 
Health Options Program (SHOP) in a State, coverage must become 
effective consistent with the dates described in Sec.  155.725 of this 
subchapter, except as provided in paragraph (b)(1)(iii) of this 
section.
* * * * *
    (2) Limited open enrollment periods. A health insurance issuer in 
the individual market must provide a limited open enrollment period for 
the events described in Sec.  155.420(d) of this subchapter, excluding 
Sec.  155.420(d)(3) of this subchapter (concerning citizenship status), 
Sec.  155.420(d)(8) of this subchapter (concerning Indians), and Sec.  
155.420(d)(9) of this subchapter (concerning exceptional 
circumstances).
* * * * *
    (4) Length of enrollment periods. (i) In the group market, 
enrollees must be provided 30 calendar days after the date of the 
qualifying event described in paragraph (b)(3) of this section to elect 
coverage.
    (ii) In the individual market, enrollees must be provided 60 
calendar days after the date of an event described in paragraph (b)(2) 
and (3) of this section to elect coverage, as well as 60 calendar days 
before certain triggering events as provided for in Sec.  155.420(c)(2) 
of this subchapter.
* * * * *
    (f) Calendar year plans. An issuer that offers coverage in the 
individual market, or in a merged market in a State that has elected to 
merge the individual market and small group market risk pools in 
accordance with section 1312(c)(3) of the Affordable Care Act, must 
ensure that such coverage is offered on a calendar year basis with a 
policy year ending on December 31 of each calendar year.
* * * * *

0
5. Section 147.106 is amended by--
0
a. Redesignating paragraphs (g) through (j) as paragraphs (h) through 
(k), respectively.
0
b. Adding new paragraph (g).
    The addition reads as follows:


Sec.  147.106  Guaranteed renewability of coverage.

* * * * *
    (g) Notification of change of ownership. If an issuer of a QHP, a 
plan otherwise subject to risk corridors, a risk adjustment covered 
plan, or a reinsurance-eligible plan experiences a change of ownership, 
as recognized by the State in which the plan is offered, the issuer 
must notify HHS in a manner specified by HHS, by the latest of--
    (1) The date the transaction is entered into; or
    (2) The 30th day prior to the effective date of the transaction.
* * * * *

PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND 
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT

0
6. The authority citation for part 153 continues to read as follows:

    Authority:  Secs. 1311, 1321, 1341-1343, Pub. L. 111-148, 24 
Stat. 119.

0
7. Section 153.100 is amended by revising paragraph (c) to read as 
follows:


Sec.  153.100  State notice of benefit and payment parameters.

* * * * *
    (c) State notice deadlines. If a State is required to publish an 
annual State notice of benefit and payment parameters for a particular 
benefit year, it must do so by the later of March 1 of the calendar 
year prior to the applicable benefit year, or by the 30th day following 
the publication of the final HHS notice of benefit and payment 
parameters for that benefit year.
* * * * *

0
8. Section 153.400 is amended by revising paragraph (a)(1)(iii) and 
adding paragraph (c) to read as follows:


Sec.  153.400  Reinsurance contribution funds.

    (a) * * *
    (1) * * *
    (iii) Such plan or coverage is expatriate health coverage, as 
defined by the Secretary, or for the 2015 and 2016 benefit years only, 
is a self-insured group health plan with respect to which enrollment is 
limited to participants who reside outside of their home country for at 
least 6 months of the plan year, and any covered dependents; or
* * * * *
    (c) Determination of a debt. Any amount owed to the Federal 
government by a self-insured group health plan (including a group 
health plan that is partially self-insured and partially insured, where 
the health insurance coverage does not constitute major medical 
coverage) and its affiliates for reinsurance is a determination of a 
debt.

0
9. Section 153.405 is amended by--
0
a. Revising paragraphs (b), (c)(1), (d) introductory text, (g)(4)(i) 
introductory text, and (g)(4)(ii) introductory text.
0
b. Removing paragraph (c)(2).
0
c. Redesignating paragraph (c)(3) as paragraph (c)(2).
0
d. Revising newly designated paragraph (c)(2).
    The revisions read as follows:


Sec.  153.405  Calculation of reinsurance contributions.

* * * * *
    (b) Annual enrollment count. No later than November 15 of benefit 
year 2014,

[[Page 10863]]

2015, or 2016, as applicable, or, if such date is not a business day, 
the next business day, a contributing entity must submit an annual 
enrollment count of the number of covered lives of reinsurance 
contribution enrollees for the applicable benefit year to HHS. The 
count must be determined as specified in paragraphs (d) through (g) of 
this section, as applicable.
    (c) * * *
    (1) Following submission of the annual enrollment count described 
in paragraph (b) of this section, HHS will notify the contributing 
entity of the reinsurance contribution amount allocated to reinsurance 
payments, administrative expenses, and the U.S. Treasury to be paid for 
the applicable benefit year.
    (2) A contributing entity must remit reinsurance contributions to 
HHS no later than January 15, 2015, 2016, or 2017, as applicable, or, 
if such date is not a business day, the next business day, if making a 
combined contribution or the first payment of the bifurcated 
contribution, and no later than November 15, 2015, 2016, or 2017, as 
applicable, or, if such date is not a business day, the next business 
day, if making the second payment of the bifurcated contribution.
    (d) Procedures for counting covered lives for health insurance 
issuers. A health insurance issuer must use the same method in a 
benefit year for all of its health insurance plans in the State 
(including both the individual and group markets) for which reinsurance 
contributions are required. To determine the number of covered lives of 
reinsurance contribution enrollees under all health insurance plans in 
a State for a benefit year, a health insurance issuer must use one of 
the following methods:
* * * * *
    (g) * * *
    (4) * * *
    (i) Multiple group health plans including an insured plan. If at 
least one of the multiple plans is an insured plan, the average number 
of covered lives of reinsurance contribution enrollees must be 
calculated using one of the methods specified in either paragraph 
(d)(1) or (2) of this section, applied across the multiple plans as a 
whole. The following information must be determined by the plan 
sponsor:
* * * * *
    (ii) Multiple group health plans not including an insured plan. If 
each of the multiple plans is a self-insured group health plan, the 
average number of covered lives of reinsurance contribution enrollees 
must be calculated using one of the methods specified either in 
paragraph (e)(1) or (2) of this section, applied across the multiple 
plans as a whole. The following information must be determined by the 
plan sponsor:
* * * * *

0
10. Section 153.500 is amended by revising the definition of 
``Adjustment percentage'' to read as follows:


Sec.  153.500  Definitions.

* * * * *
    Adjustment percentage means, with respect to a QHP:
    (1) For benefit year 2014--
    (i) For a QHP offered by a health insurance issuer with allowable 
costs of at least 80 percent of after-tax premium in a transitional 
State, the percentage specified by HHS for such QHPs in the 
transitional State; and otherwise
    (ii) Zero percent.
    (2) For benefit year 2015, for a QHP offered by a health insurance 
issuer in any State, 2 percent.
    (3) For benefit year 2016--
    (i) For a QHP offered by a health insurance issuer with allowable 
costs of at least 80 percent of after-tax premium, the percentage 
specified by HHS; and otherwise
    (ii) Zero percent.
* * * * *

0
11. Section 153.740 is amended by revising paragraph (a) and adding 
paragraph (c) to read as follows:


Sec.  153.740  Failure to comply with HHS-operated risk adjustment and 
reinsurance data requirements.

    (a) Enforcement actions. If an issuer of a risk adjustment covered 
plan or reinsurance-eligible plan fails to establish a dedicated 
distributed data environment in a manner and timeframe specified by 
HHS; fails to provide HHS with access to the required data in such 
environment in accordance with Sec.  153.700(a) or otherwise fails to 
comply with the requirements of Sec. Sec.  153.700 through 153.730; 
fails to adhere to the reinsurance data submission requirements set 
forth in Sec.  153.420; or fails to adhere to the risk adjustment data 
submission and data storage requirements set forth in Sec. Sec.  
153.610 through 153.630, HHS may impose civil money penalties in 
accordance with the procedures set forth in Sec.  156.805 of this 
subchapter. Civil monetary penalties will not be imposed for non-
compliance with these requirements during the 2014 or 2015 calendar 
years under this paragraph if the issuer has made good faith efforts to 
comply with these requirements.
* * * * *
    (c) Information sharing. HHS may consult with and share information 
about issuers of risk adjustment covered plans and reinsurance-eligible 
plans with other Federal and State regulatory and enforcement entities 
to the extent the consultation or information is necessary for purposes 
of Federal or State oversight and enforcement activities.

PART 154--HEALTH INSURANCE ISSUER RATE INCREASES: DISCLOSURE AND 
REVIEW REQUIREMENTS

0
12. The authority citation for part 154 continues to read as follows:

    Authority:  Section 2794 of the Public Health Service Act (42 
U.S.C. 300gg-94).

0
13. Section 154.102 is amended by--
0
a. Revising the definitions of ``Individual market'', ``Rate 
increase'', ``Small group market'', and ``State''.
0
b. Adding a definition of ``Plan'' in alphabetical order.
    The revisions and addition read as follows:


Sec.  154.102  Definitions.

* * * * *
    Individual market has the meaning given the term in Sec.  144.103 
of this subchapter.
* * * * *
    Plan has the meaning given the term in Sec.  144.103 of this 
subchapter.
* * * * *
    Rate increase means, with respect to rates filed--
    (1) For coverage effective prior to January 1, 2017, any increase 
of the rates for a specific product offered in the individual or small 
group market.
    (2) For coverage effective on or after January 1, 2017, any 
increase of the rates for a specific product or plan within a product 
offered in the individual or small group market.
* * * * *
    Small group market has the meaning given the term in Sec.  144.103 
of this subchapter.
    State means each of the 50 States and the District of Columbia.
* * * * *

0
14. Section 154.200 is amended by revising paragraphs (a) and (c) to 
read as follows:


Sec.  154.200  Rate increases subject to review.

    (a) A rate increase filed in a State, or effective in a State that 
does not require a rate increase to be filed, is subject to review if:
    (1) The rate increase is 10 percent or more applicable to a 12-
month period

[[Page 10864]]

that begins on January 1, as calculated under paragraph (c) of this 
section; or
    (2) The rate increase meets or exceeds a State-specific threshold 
applicable to a 12-month period that begins on January 1, as calculated 
under paragraph (c) of this section, determined by the Secretary. A 
State-specific threshold shall be based on factors impacting rate 
increases in a State to the extent that the data relating to such 
State-specific factors is available by August 1. States interested in 
proposing a State-specific threshold for approval are required to 
submit a proposal to the Secretary by August 1.
* * * * *
    (c) A rate increase meets or exceeds the applicable threshold set 
forth in paragraph (a) of this section if--
    (1) For rates filed for coverage beginning before January 1, 2017, 
the average increase for all enrollees weighted by premium volume meets 
or exceeds the applicable threshold.
    (2) For rates filed for coverage beginning on or after January 1, 
2017, an increase in the plan-adjusted index rate (as described in 
Sec.  156.80 of this subchapter) for any plan within the product meets 
or exceeds the applicable threshold.
* * * * *

0
15. Section 154.215 is amended by revising paragraph (a) to read as 
follows:


Sec.  154.215  Submission of rate filing justification.

    (a) If any plan within a product is subject to a rate increase, a 
health insurance issuer must submit a Rate Filing Justification for all 
products in the single risk pool, including new or discontinuing 
products, on a form and in a manner prescribed by the Secretary.
* * * * *

0
16. Section 154.220 is revised to read as follows:


Sec.  154.220  Timing of providing the rate filing justification.

    A health insurance issuer must submit a Rate Filing Justification 
for all rate increases that are filed in a State, or effective in a 
State that does not require the rate increase to be filed, as follows:
    (a) For rate increases for coverage effective prior to January 1, 
2016:
    (1) If a State requires that a proposed rate increase be filed with 
the State prior to the implementation of the rate, the health insurance 
issuer must submit to CMS and the applicable State the Rate Filing 
Justification on the date on which the health insurance issuer submits 
the proposed rate increase to the State.
    (2) For all other States, the health insurance issuer must submit 
to CMS and the State the Rate Filing Justification prior to the 
implementation of the rate increase.
    (b) For rate increases for coverage effective on or after January 
1, 2016, the health insurance issuer must submit to CMS and the 
applicable State a Rate Filing Justification by the earlier of the 
following:
    (1) The date by which the State requires that a proposed rate 
increase be filed with the State; or
    (2) The date specified in guidance by the Secretary.

0
17. Section 154.301 is amended by revising paragraph (b) to read as 
follows:


Sec.  154.301  CMS's determinations of Effective Rate Review Programs.

* * * * *
    (b) Public disclosure and input. (1) In addition to satisfying the 
provisions in paragraph (a) of this section, a State with an Effective 
Rate Review Program must provide:
    (i) For proposed rate increases subject to review, access from its 
Web site to at least the information contained in Parts I, II, and III 
of the Rate Filing Justification that CMS makes available on its Web 
site (or provide CMS's Web address for such information), and have a 
mechanism for receiving public comments on those proposed rate 
increases, no later than the date specified in guidance by the 
Secretary.
    (ii) Beginning with rates filed for coverage effective on or after 
January 1, 2016, for all final rate increases (including those not 
subject to review), access from its Web site to at least the 
information contained in Parts I, II, and III of the Rate Filing 
Justification (as applicable) that CMS makes available on its Web site 
(or provide CMS's Web address for such information), no later than the 
first day of the annual open enrollment period in the individual market 
for the applicable calendar year.
    (2) If a State intends to make the information in paragraph 
(b)(1)(i) of this section available to the public prior to the date 
specified by the Secretary, or if it intends to make the information in 
paragraph (b)(1)(ii) of this section available to the public prior to 
the first day of the annual open enrollment period in the individual 
market for the applicable calendar year, the State must notify CMS in 
writing, no later than 30 days prior to the date it intends to make the 
information public, of its intent to do so and the date it intends to 
make the information public.
    (3) A State with an Effective Rate Review Program must ensure the 
information in paragraphs (b)(1)(i) and (ii) of this section is made 
available to the public at a uniform time for all proposed and final 
rate increases, as applicable, in the relevant market segment and 
without regard to whether coverage is offered through or outside an 
Exchange.
* * * * *

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

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

    Authority: Title I of the Affordable Care Act, sections 1301, 
1302, 1303, 1304, 1311, 1312, 1313, 1321, 1322, 1331, 1332, 1334, 
1402, 1411, 1412, 1413, Pub. L. 111-148, 124 Stat. 119 (42 U.S.C. 
18021-18024, 18031-18033, 18041-18042, 18051, 18054, 18071, and 
18081-18083).


0
19. Section 155.20 is amended by--
0
a. Revising paragraph (2) of the definition of ``Applicant.''
0
b. Revising the definitions of ``Enrollee'' and ``Qualified employee.''
    The revisions read as follows:


Sec.  155.20  Definitions.

* * * * *
    Applicant * * *
    (2) An employer, employee, or former employee seeking eligibility 
for enrollment in a QHP through the SHOP for himself or herself, and, 
if the qualified employer offers dependent coverage through the SHOP, 
seeking eligibility to enroll his or her dependents in a QHP through 
the SHOP.
* * * * *
    Enrollee means a qualified individual or qualified employee 
enrolled in a QHP. Enrollee also means the dependent of a qualified 
employee enrolled in a QHP through the SHOP, and any other person who 
is enrolled in a QHP through the SHOP, consistent with applicable law 
and the terms of the group health plan. Provided that at least one 
employee enrolls in a QHP through the SHOP, enrollee also means a 
business owner enrolled in a QHP through the SHOP, or the dependent of 
a business owner enrolled in a QHP through the SHOP.
* * * * *
    Qualified employee means any employee or former employee of a 
qualified employer who has been offered health insurance coverage by 
such qualified employer through the SHOP for himself or herself and, if 
the qualified employer offers dependent coverage through the SHOP, for 
his or her dependents.
* * * * *

0
20. Section 155.205 is amended by revising paragraphs (c)(2)(i) and 
(iii) and

[[Page 10865]]

adding paragraph (c)(2)(iv) to read as follows:


Sec.  155.205  Consumer assistance tools and programs of an Exchange.

* * * * *
    (c) * * *
    (2) * * *
    (i) For all entities subject to this standard, oral interpretation.
    (A) For Exchanges and QHP issuers, this standard also includes 
telephonic interpreter services in at least 150 languages.
    (B) For an agent or broker subject to Sec.  155.220(c)(3)(i), 
beginning November 1, 2015, or when such entity been registered with 
the Exchange for at least 1 year, whichever is later, this standard 
also includes telephonic interpreter services in at least 150 
languages.
* * * * *
    (iii) For all entities subject to this standard, taglines in non-
English languages indicating the availability of language services.
    (A) For Exchanges and QHP issuers, beginning no later than the 
first day of the individual market open enrollment period for the 2017 
benefit year, this standard also includes taglines on Web site content 
and any document that is critical for obtaining health insurance 
coverage or access to health care services through a QHP for qualified 
individuals, applicants, qualified employers, qualified employees, or 
enrollees. A document is deemed to be critical for obtaining health 
insurance coverage or access to health care services through a QHP if 
it is required to be provided by law or regulation to a qualified 
individual, applicant, qualified employer, qualified employee, or 
enrollee. Such taglines must indicate the availability of language 
services in at least the top 15 languages spoken by the limited English 
proficient population of the relevant State, as determined in guidance 
published by the Secretary.
    (B) For an agent or broker subject to Sec.  155.220(c)(3)(i), 
beginning on the first day of the individual market open enrollment 
period for the 2017 benefit year, or when such entity has been 
registered with the Exchange for at least 1 year, whichever is later, 
this standard also includes taglines on Web site content and any 
document that is critical for obtaining health insurance coverage or 
access to health care services through a QHP for qualified individuals, 
applicants, qualified employers, qualified employees, or enrollees. A 
document is deemed to be critical for obtaining health insurance 
coverage or access to health care services through a QHP if it is 
required to be provided by law or regulation to a qualified individual, 
applicant, qualified employer, qualified employee, or enrollee. Such 
taglines must indicate the availability of language services in at 
least the top 15 languages spoken by the limited English proficient 
population of the relevant State, as determined in guidance published 
by the Secretary.
    (iv) For Exchanges, QHP issuers, and an agent or broker subject to 
Sec.  155.220(c)(3)(i), Web site translations.
    (A) For an Exchange, beginning no later than the first day of the 
individual market open enrollment period for the 2017 benefit year, 
content that is intended for qualified individuals, applicants, 
qualified employers, qualified employees, or enrollees on a Web site 
that is maintained by the Exchange must be translated into any non-
English language that is spoken by a limited English proficient 
population that reaches 10 percent or more of the population of the 
relevant State, as determined in guidance published by the Secretary.
    (B) For a QHP issuer, beginning no later than the first day of the 
individual market open enrollment period for the 2017 benefit year, if 
the content of a Web site maintained by the QHP issuer is critical for 
obtaining health insurance coverage or access to health care services 
through a QHP, within the meaning of Sec.  156.250 of this subchapter, 
it must be translated into any non-English language that is spoken by a 
limited English proficient population that reaches 10 percent or more 
of the population of the relevant State, as determined in guidance 
published by the Secretary.
    (C) For an agent or broker subject to Sec.  155.220(c)(3)(i), 
beginning on the first day of the individual market open enrollment 
period for the 2017 benefit year, or when such entity has been 
registered with the Exchange for at least 1 year, whichever is later, 
content that is intended for qualified individuals, applicants, 
qualified employers, qualified employees, or enrollees on a Web site 
that is maintained by the agent or broker must be translated into any 
non-English language that is spoken by a limited English proficient 
population that reaches 10 percent or more of the population of the 
relevant State, as determined in guidance published by the Secretary.
* * * * *

0
21. Section 155.215 is amended by revising paragraph (h) to read as 
follows:


Sec.  155.215  Standards applicable to Navigators and Non-Navigator 
Assistance Personnel carrying out consumer assistance functions under 
Sec. Sec.  155.205(d) and (e) and 155.210 in a Federally-facilitated 
Exchange and to Non-Navigator Assistance Personnel funded through an 
Exchange Establishment Grant.

* * * * *
    (h) Physical presence. All non-Navigator entities carrying out 
consumer assistance functions under Sec.  155.205(d) and (e) in an 
Exchange operated by HHS during the exercise of its authority under 
Sec.  155.105(f) and all non-Navigator entities funded through an 
Exchange Establishment Grant under section 1311(a) of the Affordable 
Care Act must maintain a physical presence in the Exchange service 
area, so that face-to-face assistance can be provided to applicants and 
enrollees. In a Federally-facilitated Exchange, no individual or entity 
shall be ineligible to operate as a non-Navigator entity or as non-
Navigator assistance personnel solely because its principal place of 
business is outside of the Exchange service area.
* * * * *

0
22. Section 155.220 is amended by revising paragraph (i) to read as 
follows:


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

* * * * *
    (i) Use of agents' and brokers' Internet Web sites for SHOP. For 
plan years beginning on or after January 1, 2015, in States that permit 
this activity under State law, a SHOP may permit agents and brokers to 
use an Internet Web site to assist qualified employers and facilitate 
enrollment of enrollees in a QHP through the Exchange, under paragraph 
(c)(3) of this section.

0
23. Section 155.222 is added to read as follows:


Sec.  155.222  Standards for HHS-approved vendors of Federally-
facilitated Exchange training and information verification for agents 
and brokers.

    (a) Application for approval. (1) A vendor must be approved by HHS, 
in a form and manner to be determined by HHS, in order to have its 
training and information verification program recognized for agents and 
brokers assisting with or facilitating enrollment in individual market 
or SHOP coverage through the Exchanges consistent with Sec.  155.220.
    (2) As part of the training program, the vendor must require agents 
and brokers to provide identifying information and proof of valid State 
licensure, and successfully complete the

[[Page 10866]]

required curriculum and identity proofing.
    (3) HHS will approve vendors on an annual basis for a given plan 
year, and each vendor must submit an application for each year that 
approval is sought.
    (b) Standards. To be approved by HHS and maintain its status as an 
approved vendor for plan year 2016 and future plan years, a vendor must 
meet each of the following standards:
    (1) Submit a complete and accurate application by the deadline 
established by HHS, which includes demonstration of the following:
    (i) Prior experience with successfully conducting online training, 
verification of valid State license, as well as providing technical 
support to a large customer base; and
    (ii) The ability to conduct identity proofing.
    (2) Adhere to HHS specifications for content, format, and delivery 
of training and information verification, which include offering 
continuing education units (CEUs) for at least five States in which a 
Federally-facilitated Exchange is operating.
    (3) Collect, store, and share with HHS all data from agent and 
broker users of the vendor's training and information verification in a 
manner, format, and frequency specified by HHS, and protect the data in 
accordance with applicable privacy and security laws and regulations.
    (4) Execute an agreement with HHS, in a form and manner to be 
determined by HHS, which requires the vendor to comply with HHS 
guidelines for interfacing with HHS data systems, the implementation of 
the training and information verification processes, and the use of all 
data collected.
    (5) Permit any individual who holds a valid State license or 
equivalent State authority to sell health insurance products to access 
the vendor's training and information verification.
    (c) Approved list. A list of approved vendors will be published on 
an HHS Web site.
    (d) Monitoring. HHS may periodically monitor and audit vendors 
approved under this subpart, and their records related to the training 
and information verification functions described in this section, to 
ensure ongoing compliance with the standards in paragraph (b) of this 
section. If HHS determines that an HHS-approved vendor is not in 
compliance with the standards required in paragraph (b) of this 
section, the vendor may be removed from the approved list described in 
paragraph (c) of this section and may be required by HHS to cease 
performing the training and information verification functions 
described under this subpart.
    (e) Appeals. A vendor that is not approved by HHS after submitting 
the application described in paragraph (a) of this section, or an 
approved vendor whose agreement is revoked under paragraph (d) of this 
section, may appeal HHS's decision by notifying HHS in writing within 
15 days from receipt of the notification of not being approved and 
submitting additional documentation demonstrating how the vendor meets 
the standards in paragraph (b) of this section and (if applicable) the 
terms of its agreement with HHS. HHS will review the submitted 
documentation and make a final approval determination within 30 days 
from receipt of the additional documentation.

0
24. Section 155.400 is amended by revising paragraph (e) to read as 
follows:


Sec.  155.400  Enrollment of qualified individuals into QHPs.

* * * * *
    (e) Premium payment. Exchanges may, and the Federally-facilitated 
Exchange will, require payment of the first month's premium to 
effectuate an enrollment. Exchanges may, and the Federally-facilitated 
Exchange will, establish a standard policy for setting premium payment 
deadlines:
    (1) In a Federally-facilitated Exchange, for first month (or binder 
payment) premiums:
    (i) For coverage being effectuated under regular coverage effective 
dates, as provided for in Sec. Sec.  155.410(f) and 155.420(b)(1), 
premium payment deadlines must be no earlier than the coverage 
effective date, but no later than 30 calendar days from the coverage 
effective date; and
    (ii) For coverage being effectuated under special effective dates, 
as provided in Sec.  155.420(b)(2), premium payment deadlines must be 
30 calendar days from the date the issuer receives the enrollment 
transaction.
    (2) [Reserved]
* * * * *

0
25. Section 155.410 is amended by revising paragraphs (e) and (f) to 
read as follows:


Sec.  155.410  Initial and annual open enrollment periods.

* * * * *
    (e) Annual open enrollment period. (1) For the benefit year 
beginning on January 1, 2015, the annual open enrollment period begins 
on November 15, 2014, and extends through February 15, 2015.
    (2) For the benefit year beginning on January 1, 2016, the annual 
open enrollment period begins on November 1, 2015 and extends through 
January 31, 2016.
    (f) Effective date. (1) For the benefit year beginning on January 
1, 2015, the Exchange must ensure coverage is effective--
    (i) January 1, 2015, for QHP selections received by the Exchange on 
or before December 15, 2014.
    (ii) February 1, 2015, for QHP selections received by the Exchange 
from December 16, 2014 through January 15, 2015.
    (iii) March 1, 2015, for QHP selections received by the Exchange 
from January 16, 2015 through February 15, 2015.
    (2) For the benefit year beginning on January 1, 2016, the Exchange 
must ensure that coverage is effective--
    (i) January 1, 2016, for QHP selections received by the Exchange on 
or before December 15, 2015.
    (ii) February 1, 2016, for QHP selections received by the Exchange 
from December 16, 2015 through January 15, 2016.
    (iii) March 1, 2016, for QHP selections received by the Exchange 
from January 16, 2016 through January 31, 2016.
* * * * *

0
26. Section 155.420 is amended by--
0
a. Revising paragraphs (b)(2)(i), (b)(2)(iv), (c)(2), (c)(3), 
(d)(1)(ii), (d)(2), and (d)(4).
0
b. Adding paragraphs (b)(2)(v), (b)(2)(vi), and (d)(6)(iv).
0
c. Removing paragraph (d)(10).
    The revisions and additions read as follows:


Sec.  155.420  Special enrollment periods.

* * * * *
    (b) * * *
    (2) * * *
    (i) In the case of birth, adoption, placement for adoption, or 
placement in foster care as described in paragraph (d)(2)(i) of this 
section, the Exchange must ensure that coverage is effective for a 
qualified individual or enrollee on the date of birth, adoption, 
placement for adoption, or placement in foster care, or it may permit 
the qualified individual or enrollee to elect a coverage effective date 
of the first of the month following the date of birth, adoption, 
placement for adoption, or placement in foster care, or in accordance 
with paragraph (b)(1) of this section. If the Exchange permits the 
qualified individual or enrollee to elect a coverage effective date of 
either the first of the month following the date of birth, adoption, 
placement for adoption or placement in foster care or in accordance 
with paragraph (b)(1) of this section, the Exchange must ensure

[[Page 10867]]

coverage is effective on the date duly selected by the qualified 
individual or enrollee.
* * * * *
    (iv) If a consumer loses coverage as described in paragraph (d)(1) 
or (d)(6)(iii), or gains access to a new QHP as described in paragraph 
(d)(7) of this section, if the plan selection is made on or before the 
day of the triggering event, the Exchange must ensure that the coverage 
effective date is on the first day of the month following the loss of 
coverage. If the plan selection is made after the day of the triggering 
event, the Exchange must ensure that coverage is effective in 
accordance with paragraph (b)(1) of this section or on the first day of 
the following month, at the option of the Exchange.
    (v) In the case of a court order as described in paragraph 
(d)(2)(i) of this section, the Exchange must ensure that coverage is 
effective for a qualified individual or enrollee on the date the court 
order is effective, or it may permit the qualified individual or 
enrollee to elect a coverage effective date in accordance with 
paragraph (b)(1) of this section. If the Exchange permits the qualified 
individual or enrollee to elect a coverage effective date in accordance 
with paragraph (b)(1) of this section, the Exchange must ensure 
coverage is effective on the date duly selected by the qualified 
individual or enrollee.
    (vi) If an enrollee or his or her dependent dies as described in 
paragraph (d)(2)(ii) of this section, the Exchange must ensure that 
coverage is effective on the first day of the month following the plan 
selection, or it may permit the enrollee or his or her dependent to 
elect a coverage effective date in accordance with paragraph (b)(1) of 
this section. If the Exchange permits the enrollee or his or her 
dependent to elect a coverage effective date in accordance with 
paragraph (b)(1) of this section, the Exchange must ensure coverage is 
effective on the date duly selected by the enrollee or his or her 
dependent.
* * * * *
    (c) * * *
    (2) Advanced availability. A qualified individual or his or her 
dependent who is described in paragraph (d)(1) or (d)(6)(iii) or, 
beginning on January 1, 2017 or earlier at the option of the Exchange, 
paragraph (d)(7) of this section, has 60 days before and after the 
triggering event to select a QHP. Prior to January 1, 2017, a qualified 
individual or his or her dependent who is described in paragraph (d)(7) 
of this section may select a QHP in accordance with paragraph (c)(1) of 
this section.
    (3) Special rule. In the case of a qualified individual or enrollee 
who is eligible for a special enrollment period as described in 
paragraphs (d)(4), (5), or (9) of this section, the Exchange may define 
the length of the special enrollment period as appropriate based on the 
circumstances of the special enrollment period, but in no event may the 
length of the special enrollment period exceed 60 days.
    (d) * * *
    (1) * * *
    (ii) Is enrolled in any non-calendar year group health plan or 
individual health insurance coverage, even if the qualified individual 
or his or her dependent has the option to renew such coverage. The date 
of the loss of coverage is the last day of the plan or policy year;
* * * * *
    (2)(i) The qualified individual gains a dependent or becomes a 
dependent through marriage, birth, adoption, placement for adoption, or 
placement in foster care, or through a child support order or other 
court order.
    (ii) At the option of the Exchange, the enrollee loses a dependent 
or is no longer considered a dependent through divorce or legal 
separation as defined by State law in the State in which the divorce or 
legal separation occurs, or if the enrollee, or his or her dependent, 
dies.
* * * * *
    (4) The qualified individual's or his or her dependent's, 
enrollment or non-enrollment in a QHP is unintentional, inadvertent, or 
erroneous and is the result of the error, misrepresentation, 
misconduct, or inaction of an officer, employee, or agent of the 
Exchange or HHS, its instrumentalities, or a non-Exchange entity 
providing enrollment assistance or conducting enrollment activities. 
For purposes of this provision, misconduct includes the failure to 
comply with applicable standards under this part, part 156 of this 
subchapter, or other applicable Federal or State laws as determined by 
the Exchange.
* * * * *
    (6) * * *
    (iv) A qualified individual in a non-Medicaid expansion State who 
was previously ineligible for advance payments of the premium tax 
credit solely because of a household income below 100 percent of the 
FPL, who was ineligible for Medicaid during that same timeframe, and 
who has experienced a change in household income that makes the 
qualified individual newly eligible for advance payments of the premium 
tax credit.
* * * * *

0
27. Section 155.430 is amended by--
0
a. Revising the section heading.
0
b. Revising paragraphs (a), (b)(1), (b)(2) introductory text, (c), (d) 
paragraph heading, (d)(2) introductory text, (d)(2)(iv), (d)(3) through 
(7), and (e)(1) and (2).
0
c. Adding paragraphs (b)(2)(vi), (d)(2)(v), and (d)(8).
    The revisions and additions read as follows:


Sec.  155.430  Termination of Exchange enrollment or coverage.

    (a) General requirements. The Exchange must determine the form and 
manner in which enrollment in a QHP through the Exchange may be 
terminated.
    (b) * * *
    (1) Enrollee-initiated terminations. (i) The Exchange must permit 
an enrollee to terminate his or her coverage or enrollment in a QHP 
through the Exchange, including as a result of the enrollee obtaining 
other minimum essential coverage. To the extent the enrollee has the 
right to terminate the coverage under applicable State laws, including 
``free look'' cancellation laws, the enrollee may do so, in accordance 
with such laws.
    (ii) The Exchange must provide an opportunity at the time of plan 
selection for an enrollee to choose to remain enrolled in a QHP if he 
or she becomes eligible for other minimum essential coverage and the 
enrollee does not request termination in accordance with paragraph 
(b)(1)(i) of this section. If an enrollee does not choose to remain 
enrolled in a QHP in such a situation, the Exchange must initiate 
termination of his or her enrollment in the QHP upon completion of the 
redetermination process specified in Sec.  155.330.
    (iii) The Exchange must establish a process to permit individuals, 
including enrollees' authorized representatives, to report the death of 
an enrollee for purposes of initiating termination of the enrollee's 
Exchange enrollment. The Exchange may require the reporting party to 
submit documentation of the death. Any applicable premium refund, or 
premium due, must be processed by the deceased enrollee's QHP in 
accordance with State law.
    (2) Exchange-initiated terminations. The Exchange may initiate 
termination of an enrollee's enrollment in a QHP through the Exchange, 
and must permit a QHP issuer to terminate such coverage or enrollment, 
in the following circumstances:
* * * * *

[[Page 10868]]

    (vi) Any other reason for termination of coverage described in 
Sec.  147.106 of this subchapter.
    (c) Termination of coverage or enrollment tracking and approval. 
The Exchange must--
    (1) Establish mandatory procedures for QHP issuers to maintain 
records of termination of enrollment in a QHP through the Exchange;
    (2) Send termination information to the QHP issuer and HHS, 
promptly and without undue delay in accordance with Sec.  155.400(b).
    (3) Require QHP issuers to make reasonable accommodations for all 
individuals with disabilities (as defined by the Americans with 
Disabilities Act) before terminating enrollment of such individuals 
through the Exchange; and
    (4) Retain records in order to facilitate audit functions.
    (d) Effective dates for termination of coverage or enrollment.
* * * * *
    (2) In the case of a termination in accordance with paragraph 
(b)(1) of this section, the last day of enrollment through the Exchange 
is--
* * * * *
    (iv) If the enrollee is newly eligible for Medicaid, CHIP, or the 
BHP, if a BHP is operating in the service area of the Exchange, the 
last day of enrollment in a QHP through the Exchange is the day before 
the individual is determined eligible for Medicaid, CHIP, or the BHP.
    (v) The retroactive termination date requested by the enrollee, if 
specified by applicable State laws.
    (3) In the case of a termination in accordance with paragraph 
(b)(2)(i) of this section, the last day of enrollment in a QHP through 
the Exchange is the last day of eligibility, as described in Sec.  
155.330(f), unless the individual requests an earlier termination 
effective date per paragraph (b)(1) of this section.
    (4) In the case of a termination in accordance with paragraph 
(b)(2)(ii)(A) of this section, the last day of enrollment in a QHP 
through the Exchange will be the last day of the first month of the 3-
month grace period.
    (5) In the case of a termination in accordance with paragraph 
(b)(2)(ii)(B) of this section, the last day of enrollment in a QHP 
through the Exchange should be consistent with existing State laws 
regarding grace periods.
    (6) In the case of a termination in accordance with paragraph 
(b)(2)(v) of this section, the last day of coverage in an enrollee's 
prior QHP is the day before the effective date of coverage in his or 
her new QHP, including any retroactive enrollments effectuated under 
Sec.  155.420(b)(2)(iii).
    (7) In the case of a termination due to death, the last day of 
enrollment in a QHP through the Exchange is the date of death.
    (8) In cases of retroactive termination dates, the Exchange will 
ensure that appropriate actions are taken to make necessary adjustments 
to advance payments of the premium tax credit, cost-sharing reductions, 
premiums, claims, and user fees.
    (e) * * *
    (1) Termination. A termination is an action taken after a coverage 
effective date that ends an enrollee's enrollment through the Exchange 
for a date after the original coverage effective date, resulting in a 
period during which the individual was enrolled in coverage through the 
Exchange.
    (2) Cancellation. A cancellation is specific type of termination 
action that ends a qualified individual's enrollment through the 
Exchange on the date such enrollment became effective resulting in 
enrollment through the Exchange never having been effective.
* * * * *

0
28. Section 155.605 is amended by revising paragraphs (g)(3) and 
(g)(6)(i) and adding paragraph (g)(6)(iii) to read as follows:


Sec.  155.605  Eligibility standards for exemptions.

* * * * *
    (g) * * *
    (3) Filing threshold. The IRS may allow an applicant to claim an 
exemption without obtaining an exemption certificate number from an 
Exchange for a taxable year if, for such year, the applicant could not 
be claimed as a dependent by another taxpayer and the applicant's gross 
income was less than the applicant's applicable return filing threshold 
described in section 5000A(e)(2) of the Code;
* * * * *
    (6) * * *
    (i) The Exchange must determine an applicant eligible for an 
exemption for any month if he or she is an Indian eligible for services 
through an Indian health care provider, as defined in 42 CFR 447.51 and 
not otherwise eligible for an exemption under paragraph (f) of this 
section, or an individual eligible for services through the Indian 
Health Service in accordance with 25 U.S.C. 1680c(a), (b), or (d)(3).
* * * * *
    (iii) The IRS may allow an applicant to claim the exemption 
specified in paragraph (g)(6) of this section without obtaining an 
exemption certificate number from an Exchange.

0
29. Section 155.700(b) is amended by removing the definition of ``Group 
participation rule'' and by adding the definition of ``Group 
participation rate'' in alphabetical order to read as follows:


Sec.  155.700  Standards for the establishment of a SHOP.

* * * * *
    (b) * * *
    Group participation rate means the minimum percentage of all 
eligible individuals or employees of an employer that must be enrolled.
* * * * *

0
30. Section 155.705 is amended by--
0
a. Revising paragraph (b)(4)(i)(B).
0
b. Redesignating paragraphs (b)(4)(ii)(A) and (B) as paragraphs 
(b)(4)(ii)(B) and (C), respectively.
0
c. Adding new paragraph (b)(4)(ii)(A).
0
d. Revising paragraphs (b)(7) and (10).
    The additions and revisions read as follows:


Sec.  155.705  Functions of a SHOP.

* * * * *
    (b) * * *
    (4) * * *
    (i) * * *
    (B) Collect from each employer the total amount due and make 
payments to QHP issuers in the SHOP for all enrollees except as 
provided for in paragraph (b)(4)(ii)(A) of this section; and
* * * * *
    (ii) * * *
    (A) The SHOP may, upon an election by a qualified employer, enter 
into an agreement with a qualified employer to facilitate the 
administration of continuation coverage by collecting premiums for 
continuation coverage enrolled in through the SHOP directly from a 
person enrolled in continuation coverage through the SHOP consistent 
with applicable law and the terms of the group health plan, and 
remitting premium payments for this coverage to QHP issuers. A 
Federally-facilitated SHOP may elect to limit this service to the 
collection of premiums related to continuation coverage required under 
29 U.S.C. 1161, et seq.
* * * * *
    (7) QHP availability in merged markets. If a State merges the 
individual market and the small group market risk pools in accordance 
with section 1312(c)(3) of the Affordable Care Act, the SHOP may permit 
a qualified employee to enroll in any QHP meeting level of coverage 
requirements described in section 1302(d) of the Affordable Care Act.
* * * * *
    (10) Participation rules. Subject to Sec.  147.104 of this 
subchapter, the SHOP

[[Page 10869]]

may authorize a uniform group participation rate for the offering of 
health insurance coverage in the SHOP, which must be a single, uniform 
rate that applies to all groups and issuers in the SHOP. If the SHOP 
authorizes a minimum participation rate, such rate must be based on the 
rate of employee participation in the SHOP, not on the rate of employee 
participation in any particular QHP or QHPs of any particular issuer.
    (i) For plan years beginning before January 1, 2016, subject to 
Sec.  147.104 of this subchapter, a Federally-facilitated SHOP must use 
a minimum participation rate of 70 percent, calculated as the number of 
qualified employees accepting coverage under the employer's group 
health plan, divided by the number of qualified employees offered 
coverage, excluding from the calculation any employee who, at the time 
the employer submits the SHOP application, is enrolled in coverage 
through another employer's group health plan or through a governmental 
plan such as Medicare, Medicaid, or TRICARE. For purposes of this 
calculation, qualified employees who are former employees will not be 
counted.
    (ii) For plan years beginning on or after January 1, 2016, subject 
to Sec.  147.104 of this subchapter, a Federally-facilitated SHOP must 
use a minimum participation rate of 70 percent, calculated as the 
number of full-time employees accepting coverage offered by a qualified 
employer plus the number of full-time employees who, at the time the 
employer submits the SHOP group enrollment, are enrolled in coverage 
through another group health plan, governmental coverage (such as 
Medicare, Medicaid, or TRICARE), coverage sold through the individual 
market, or in other minimum essential coverage, divided by the number 
of full-time employees offered coverage.
    (iii) Notwithstanding paragraphs (b)(10)(i) and (ii) of this 
section, a Federally-facilitated SHOP may utilize a different minimum 
participation rate in a State if there is evidence that a State law 
sets a minimum participation rate or that a higher or lower minimum 
participation rate is customarily used by the majority of QHP issuers 
in that State for products in the State's small group market outside 
the SHOP.
* * * * *

0
31. Section 155.710 is amended by revising paragraph (e) to read as 
follows:


Sec.  155.710  Eligibility standards for SHOP.

* * * * *
    (e) Employee eligibility requirements. An employee is a qualified 
employee eligible to enroll in coverage through a SHOP if such employee 
receives an offer of coverage from a qualified employer. A qualified 
employee is eligible to enroll his or her dependents in coverage 
through a SHOP if the offer from the qualified employer includes an 
offer of dependent coverage.

0
32. Section 155.720 is amended by:
0
a. Removing ``;'' from paragraph (b)(5) and adding ``; and'' in its 
place.
0
b. Removing ``; and'' from paragraph (b)(6) and adding a period in its 
place.
0
c. Removing paragraph (b)(7).
0
d. Revising paragraph (e).
    The revisions read as follows:


Sec.  155.720  Enrollment of employees into QHPs under SHOP.

* * * * *
    (e) Notification of effective date. (1) For plan years beginning 
before January 1, 2017, the SHOP must ensure that a QHP issuer notifies 
a qualified employee enrolled in a QHP through the SHOP of the 
effective date of his or her coverage.
    (2) For plan years beginning on or after January 1, 2017, the SHOP 
must ensure that a QHP issuer notifies an enrollee enrolled in a QHP 
through the SHOP of the effective date of his or her coverage.
    (3) When a primary subscriber and his or her dependents live at the 
same address, a separate notice of the effective date of coverage need 
not be sent to each dependent at that address, provided that the notice 
sent to each primary subscriber at that address contains all required 
information about the coverage effective date for the primary 
subscriber and his or her dependents at that address.
* * * * *

0
33. Section 155.725 is amended by revising paragraphs (a), (b), (g), 
(h), (i), and (j)(5) and adding paragraph (k) to read as follows:


Sec.  155.725  Enrollment periods under SHOP.

    (a) General requirements. The SHOP must ensure that enrollment 
transactions are sent to QHP issuers and that such issuers adhere to 
coverage effective dates in accordance with this section.
    (b) Rolling enrollment in the SHOP. The SHOP must permit a 
qualified employer to purchase coverage for its small group at any 
point during the year. The employer's plan year must consist of the 12-
month period beginning with the qualified employer's effective date of 
coverage, unless the plan is issued in a State that has elected to 
merge its individual and small group risk pools under section 
1312(c)(3) of the Affordable Care Act, in which case the plan year will 
end on December 31 of the calendar year in which coverage first became 
effective.
* * * * *
    (g) Newly qualified employees. (1) The SHOP must provide an 
employee who becomes a qualified employee outside of the initial or 
annual open enrollment period an enrollment period beginning on the 
first day of becoming a qualified employee. A newly qualified employee 
must have at least 30 days from the beginning of his or her enrollment 
period to select a QHP. The enrollment period must end no sooner than 
15 days prior to the date that any applicable employee waiting period 
longer than 45 days would end if the employee made a plan selection on 
the first day of becoming eligible.
    (2) The effective date of coverage for a QHP selection received by 
the SHOP from a newly qualified employee must always be the first day 
of a month, and must generally be determined in accordance with Sec.  
155.725(h), unless the employee is subject to a waiting period 
consistent with Sec.  147.116 of this subchapter, in which case the 
effective date may be on the first day of a later month, but in no case 
may the effective date fail to comply with Sec.  147.116 of this 
subchapter.
    (h) Initial and annual open enrollment effective dates. (1) The 
SHOP must establish effective dates of coverage for qualified employees 
enrolling in coverage for the first time, and for qualified employees 
enrolling during the annual open enrollment period described in 
paragraph (e) of this section.
    (2) For a QHP selection received by the Federally-facilitated SHOP 
from a qualified employee in his or her initial or annual open 
enrollment period:
    (i) Between the first and fifteenth day of any month, the 
Federally-facilitated SHOP must ensure a coverage effective date of the 
first day of the following month.
    (ii) Between the 16th and last day of any month, the Federally-
facilitated SHOP must ensure a coverage effective date of the first day 
of the second following month.
    (i) Renewal of coverage. (1) If a qualified employee enrolled in a 
QHP through the SHOP remains eligible for coverage, such employee will 
remain in the QHP selected the previous year unless--
    (i) The qualified employee terminates coverage from such QHP in 
accordance with standards identified in Sec.  155.430;
    (ii) The qualified employee enrolls in another QHP if such option 
exists; or
    (iii) The QHP is no longer available to the qualified employee.

[[Page 10870]]

    (2) The SHOP may treat a qualified employer offering coverage 
through the SHOP as offering the same coverage under Sec.  
155.705(b)(3) at the same level of contribution under Sec.  
155.705(b)(11) unless:
    (i) The qualified employer is no longer eligible to offer such 
coverage through the SHOP;
    (ii) The qualified employer elects to offer different coverage or a 
different contribution through the SHOP;
    (iii) The qualified employer withdraws from the SHOP; or
    (iv) In the case of a qualified employer offering a single QHP, the 
single QHP is no longer available through the SHOP.
    (j) * * *
    (5) The effective dates of coverage for special enrollment periods 
are determined using the provisions of Sec.  155.420(b).
* * * * *
    (k) Limitation. Qualified employees will not be able to enroll 
unless the employer group meets any applicable minimum participation 
rate implemented under Sec.  155.705(b)(10).

0
34. Section 155.735 is amended by--
0
a. Revising the section heading.
0
b. Revising paragraphs (a), (b), (c)(2)(ii), (c)(2)(iii), (d)(1) 
introductory text, and (d)(1)(iii), and the headings of paragraphs (d) 
and (e).
0
c. Adding paragraphs (c)(2)(iv), (c)(3), and (g).
    The revisions and additions read as follows:


Sec.  155.735  Termination of SHOP enrollment or coverage.

    (a) General requirements. The SHOP must determine the timing, form, 
and manner in which coverage or enrollment in a QHP through the SHOP 
may be terminated.
    (b) Termination of employer group health coverage or enrollment at 
the request of the employer. (1) The SHOP must establish policies for 
advance notice of termination required from the employer and effective 
dates of termination.
    (2) In the Federally-facilitated SHOP, an employer may terminate 
coverage or enrollment for all enrollees covered by the employer group 
health plan effective on the last day of any month, provided that the 
employer has given notice to the Federally-facilitated SHOP on or 
before the 15th day of any month. If notice is given after the 15th of 
the month, the Federally-facilitated SHOP may terminate the coverage or 
enrollment on the last day of the following month.
    (c) * * *
    (2) * * *
    (ii) If premium payment is not received 31 days from the first of 
the coverage month, the Federally-facilitated SHOP may terminate the 
qualified employer for lack of payment. The termination would take 
effect on the last day of the month for which the Federally-facilitated 
SHOP received full payment.
    (iii) If a qualified employer is terminated due to lack of premium 
payment, but within 30 days following its termination the qualified 
employer requests reinstatement, pays all premiums owed including any 
prior premiums owed for coverage during the grace period, and pays the 
premium for the next month's coverage, the Federally-facilitated SHOP 
must reinstate the qualified employer in its previous coverage. A 
qualified employer may be reinstated in the Federally-facilitated SHOP 
only once per calendar year.
    (iv) Enrollees enrolled in continuation coverage required under 29 
U.S.C. 1161, et seq. through the Federally-facilitated SHOP may not be 
terminated if timely payment is made to the Federally-facilitated SHOP 
in an amount that is not less than $50 less than the amount the plan 
requires to be paid for a period of coverage unless the Federally-
facilitated SHOP notifies the enrollee of the amount of the deficiency 
and the enrollee does not pay the deficiency within 30 days of such 
notice, pursuant to the notice requirements in Sec.  155.230.
    (3) Payment for COBRA Continuation Coverage. Nothing in this 
section modifies existing obligations related to the administration of 
coverage required under 29 U.S.C. 1161, et seq., as described in 26 CFR 
part 54.
    (d) Termination of employee or dependent coverage or enrollment. 
(1) The SHOP must establish consistent policies regarding the process 
for and effective dates of termination of employee or dependent 
coverage or enrollment in the following circumstances:
* * * * *
    (iii) The QHP in which the enrollee is enrolled terminates, is 
decertified as described in Sec.  155.1080, or its certification as a 
QHP is not renewed;
* * * * *
    (e) Termination of enrollment or coverage tracking and approval. * 
* *
* * * * *
    (g) Notice of termination. Beginning January 1, 2016:
    (1) Except as provided in paragraph (g)(3) of this section, if any 
enrollee's coverage or enrollment through the SHOP is terminated due to 
non-payment of premiums or due to a loss of the enrollee's eligibility 
to participate in the SHOP, including where an enrollee loses his or 
her eligibility because a qualified employer has lost its eligibility, 
the SHOP must notify the enrollee of the termination. Such notice must 
include the termination effective date and reason for termination, and 
must be sent within 3 business days if an electronic notice is sent, 
and within 5 business days if a mailed hard copy notice is sent.
    (2) Except as provided in paragraph (g)(3) of this section, if an 
employer group's coverage or enrollment through the SHOP is terminated 
due to non-payment of premiums or, where applicable, due to a loss of 
the qualified employer's eligibility to offer coverage through the 
SHOP, the SHOP must notify the employer of the termination. Such notice 
must include the termination effective date and reason for termination, 
and must be sent within 3 business days if an electronic notice is 
sent, and within 5 business days if a mailed hard copy notice is sent.
    (3) Where State law requires a QHP issuer to send the notices 
described in paragraphs (g)(1) and (2) of this section, a SHOP is not 
required to send such notices.
    (4) When a primary subscriber and his or her dependents live at the 
same address, a separate termination notice need not be sent to each 
dependent at that address, provided that the notice sent to each 
primary subscriber at that address contains all required information 
about the termination for the primary subscriber and his or her 
dependents at that address.

0
35. Section 155.1000 is amended by adding paragraph (d) to read as 
follows:


Sec.  155.1000  Certification standards for QHPs.

* * * * *
    (d) Special rule for SHOP. Except when a QHP is decertified by the 
Exchange pursuant to Sec.  155.1080, in a SHOP that certifies QHPs on a 
calendar-year basis, the certification shall remain in effect for the 
duration of any plan year beginning in the calendar year for which the 
QHP was certified, even if the plan year ends after the calendar year 
for which the QHP was certified.

0
36. Section 155.1075 is amended by revising paragraph (b) to read as 
follows:


Sec.  155.1075  Recertification of QHPs.

* * * * *
    (b) Timing. The Exchange must complete the QHP recertification 
process no later than 2 weeks prior to the beginning of the open 
enrollment date at Sec.  155.410(e)(2) of the applicable calendar year.

[[Page 10871]]

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

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

    Authority:  Title I of the Affordable Care Act, sections 1301-
1304, 1311-1313, 1321-1322, 1324, 1334, 1342-1343, 1401-1402, Pub. 
L. 111-148, 124 Stat. 119 (42 U.S.C. 18021-18024, 18031-18032, 
18041-18042, 18044, 18054, 18061, 18063, 18071, 18082, 26 U.S.C. 
36B, and 31 U.S.C. 9701).

0
38. Section 156.20 is amended by adding a definition of ``Plan'' in 
alphabetical order to read as follows:


Sec.  156.20  Definitions.

* * * * *
    Plan has the meaning given the term in Sec.  144.103 of this 
subchapter.
* * * * *

0
39. Section 156.100 is amended by revising paragraph (c) to read as 
follows:


Sec.  156.100  State selection of benchmark.

* * * * *
    (c) Default base-benchmark plan. If a State does not make a 
selection using the process described in this section, the default 
base-benchmark plan will be the largest plan by enrollment in the 
largest product by enrollment in the State's small group market.

0
40. Section 156.110 is amended by revising paragraphs (c)(4) and (5) 
and removing paragraph (c)(6) to read as follows:


Sec.  156.110  EHB-benchmark plan standards.

* * * * *
    (c) * * *
    (4) The plan described in paragraph (b)(2)(i) of this section for 
pediatric oral care benefits; and
    (5) The plan described in paragraph (b)(3)(i) of this section for 
pediatric vision care benefits.
* * * * *

0
41. Section 156.115 is amended by revising paragraphs (a)(5)(i) and 
(ii) and adding paragraphs (a)(5)(iii) and (a)(6) to read as follows:


Sec.  156.115  Provision of EHB.

    (a) * * *
    (5) With respect to habilitative services and devices--
    (i) Cover health care services and devices that help a person keep, 
learn, or improve skills and functioning for daily living (habilitative 
services). Examples include therapy for a child who is not walking or 
talking at the expected age. These services may include physical and 
occupational therapy, speech-language pathology and other services for 
people with disabilities in a variety of inpatient and/or outpatient 
settings;
    (ii) Do not impose limits on coverage of habilitative services and 
devices that are less favorable than any such limits imposed on 
coverage of rehabilitative services and devices; and
    (iii) For plan years beginning on or after January 1, 2017, do not 
impose combined limits on habilitative and rehabilitative services and 
devices.
    (6) For plan years beginning on or after January 1, 2016, for 
pediatric services that are required under Sec.  156.110(a)(10), 
provide coverage for enrollees until at least the end of the month in 
which the enrollee turns 19 years of age.
* * * * *

0
42. Section 156.120 is added to read as follows:


Sec.  156.120  Collection of data to define essential health benefits.

    (a) Definitions. The following definitions apply to this section, 
unless the context indicates otherwise:
    Health benefits means benefits for medical care, as defined at 
Sec.  144.103 of this subchapter, which may be delivered through the 
purchase of insurance or otherwise.
    Health plan has the meaning given to the term ``Portal Plan'' in 
Sec.  159.110 of this subchapter.
    State has the meaning given to that term in Sec.  155.20 of this 
subchapter.
    Treatment limitations include limits on benefits based on the 
frequency of treatment, number of visits, days of coverage, or other 
similar limits on the scope or duration of treatment. Treatment 
limitations include only quantitative treatment limitations. A 
permanent exclusion of all benefits for a particular condition or 
disorder is not a treatment limitation.
    (b) Reporting requirement. A State that selects a base-benchmark 
plan or an issuer that offers a default base-benchmark plan in 
accordance with Sec.  156.100 must submit to HHS the following 
information in a form and manner, and by a date, determined by HHS:
    (1) Administrative data necessary to identify the health plan;
    (2) Data and descriptive information for each plan on the following 
items:
    (i) All health benefits in the plan;
    (ii) Treatment limitations;
    (iii) Drug coverage; and
    (iv) Exclusions.

0
43. Section 156.122 is amended by revising paragraphs (a)(1), (a)(2), 
and (c) and adding paragraphs (a)(3), (d), and (e) to read as follows:


Sec.  156.122  Prescription drug benefits.

    (a) * * *
    (1) Subject to the exception in paragraph (b) of this section, 
covers at least the greater of:
    (i) One drug in every United States Pharmacopeia (USP) category and 
class; or
    (ii) The same number of prescription drugs in each category and 
class as the EHB-benchmark plan;
    (2) Submits its formulary drug list to the Exchange, the State or 
OPM; and
    (3) For plans years beginning on or after January 1, 2017, uses a 
pharmacy and therapeutics (P&T) committee that meets the following 
standards.
    (i) Membership standards. The P&T committee must:
    (A) Have members that represent a sufficient number of clinical 
specialties to adequately meet the needs of enrollees.
    (B) Consist of a majority of individuals who are practicing 
physicians, practicing pharmacists and other practicing health care 
professionals who are licensed to prescribe drugs.
    (C) Prohibit any member with a conflict of interest with respect to 
the issuer or a pharmaceutical manufacturer from voting on any matters 
for which the conflict exists.
    (D) Require at least 20 percent of its membership to have no 
conflict of interest with respect to the issuer and any pharmaceutical 
manufacturer.
    (ii) Meeting standards. The P&T committee must:
    (A) Meet at least quarterly.
    (B) Maintain written documentation of the rationale for all 
decisions regarding formulary drug list development or revision.
    (iii) Formulary drug list establishment and management. The P&T 
committee must:
    (A) Develop and document procedures to ensure appropriate drug 
review and inclusion.
    (B) Base clinical decisions on the strength of scientific evidence 
and standards of practice, including assessing peer-reviewed medical 
literature, pharmacoeconomic studies, outcomes research data, and other 
such information as it determines appropriate.
    (C) Consider the therapeutic advantages of drugs in terms of safety 
and efficacy when selecting formulary drugs.
    (D) Review policies that guide exceptions and other utilization 
management processes, including drug utilization review, quantity 
limits, and therapeutic interchange.

[[Page 10872]]

    (E) Evaluate and analyze treatment protocols and procedures related 
to the plan's formulary at least annually.
    (F) Review and approve all clinical prior authorization criteria, 
step therapy protocols, and quantity limit restrictions applied to each 
covered drug.
    (G) Review new FDA-approved drugs and new uses for existing drugs.
    (H) Ensure the issuer's formulary drug list:
    (1) Covers a range of drugs across a broad distribution of 
therapeutic categories and classes and recommended drug treatment 
regimens that treat all disease states, and does not discourage 
enrollment by any group of enrollees; and
    (2) Provides appropriate access to drugs that are included in 
broadly accepted treatment guidelines and that are indicative of 
general best practices at the time.
* * * * *
    (c) A health plan providing essential health benefits must have the 
following processes in place that allow an enrollee, the enrollee's 
designee, or the enrollee's prescribing physician (or other prescriber, 
as appropriate) to request and gain access to clinically appropriate 
drugs not otherwise covered by the health plan (a request for 
exception). In the event that an exception request is granted, the plan 
must treat the excepted drug(s) as an essential health benefit, 
including by counting any cost-sharing towards the plan's annual 
limitation on cost-sharing under Sec.  156.130 and when calculating the 
plan's actuarial value under Sec.  156.135.
    (1) Standard exception request. For plans years beginning on or 
after January 1, 2016:
    (i) A health plan must have a process for an enrollee, the 
enrollee's designee, or the enrollee's prescribing physician (or other 
prescriber) to request a standard review of a decision that a drug is 
not covered by the plan.
    (ii) A health plan must make its determination on a standard 
exception and notify the enrollee or the enrollee's designee and the 
prescribing physician (or other prescriber, as appropriate) of its 
coverage determination no later than 72 hours following receipt of the 
request.
    (iii) A health plan that grants a standard exception request must 
provide coverage of the non-formulary drug for the duration of the 
prescription, including refills.
    (2) Expedited exception request. (i) A health plan must have a 
process for an enrollee, the enrollee's designee, or the enrollee's 
prescribing physician (or other prescriber) to request an expedited 
review based on exigent circumstances.
    (ii) Exigent circumstances exist when an enrollee is suffering from 
a health condition that may seriously jeopardize the enrollee's life, 
health, or ability to regain maximum function or when an enrollee is 
undergoing a current course of treatment using a non-formulary drug.
    (iii) A health plan must make its coverage determination on an 
expedited review request based on exigent circumstances and notify the 
enrollee or the enrollee's designee and the prescribing physician (or 
other prescriber, as appropriate) of its coverage determination no 
later than 24 hours following receipt of the request.
    (iv) A health plan that grants an exception based on exigent 
circumstances must provide coverage of the non-formulary drug for the 
duration of the exigency.
    (3) External exception request review. For plans years beginning on 
or after January 1, 2016:
    (i) If the health plan denies a request for a standard exception 
under paragraph (c)(1) of this section or for an expedited exception 
under paragraph (c)(2) of this section, the health plan must have a 
process for the enrollee, the enrollee's designee, or the enrollee's 
prescribing physician (or other prescriber) to request that the 
original exception request and subsequent denial of such request be 
reviewed by an independent review organization.
    (ii) A health plan must make its determination on the external 
exception request and notify the enrollee or the enrollee's designee 
and the prescribing physician (or other prescriber, as appropriate) of 
its coverage determination no later than 72 hours following its receipt 
of the request, if the original request was a standard exception 
request under paragraph (c)(1) of this section, and no later than 24 
hours following its receipt of the request, if the original request was 
an expedited exception request under paragraph (c)(2) of this section.
    (iii) If a health plan grants an external exception review of a 
standard exception request, the health plan must provide coverage of 
the non-formulary drug for the duration of the prescription. If a 
health plan grants an external exception review of an expedited 
exception request, the health plan must provide coverage of the non-
formulary drug for the duration of the exigency.
    (d)(1) For plan years beginning on or after January 1, 2016, a 
health plan must publish an up-to-date, accurate, and complete list of 
all covered drugs on its formulary drug list, including any tiering 
structure that it has adopted and any restrictions on the manner in 
which a drug can be obtained, in a manner that is easily accessible to 
plan enrollees, prospective enrollees, the State, the Exchange, HHS, 
the U.S. Office of Personnel Management, and the general public. A 
formulary drug list is easily accessible when:
    (i) It can be viewed on the plan's public Web site through a 
clearly identifiable link or tab without requiring an individual to 
create or access an account or enter a policy number; and
    (ii) If an issuer offers more than one plan, when an individual can 
easily discern which formulary drug list applies to which plan.
    (2) A QHP in the Federally-facilitated Exchange must make available 
the information described in paragraph (d)(1) of this section on its 
Web site in an HHS-specified format and also submit this information to 
HHS, in a format and at times determined by HHS.
    (e) For plan years beginning on or after January 1, 2017, a health 
plan providing essential health benefits must have the following access 
procedures:
    (1) A health plan must allow enrollees to access prescription drug 
benefits at in-network retail pharmacies, unless:
    (i) The drug is subject to restricted distribution by the U.S. Food 
and Drug Administration; or
    (ii) The drug requires special handling, provider coordination, or 
patient education that cannot be provided by a retail pharmacy.
    (2) A health plan may charge enrollees a different cost-sharing 
amount for obtaining a covered drug at a retail pharmacy, but all cost 
sharing will count towards the plan's annual limitation on cost sharing 
under Sec.  156.130 and must be accounted for in the plan's actuarial 
value calculated under Sec.  156.135.

0
44. Section 156.130 is amended by revising paragraph (c) to read as 
follows:


Sec.  156.130  Cost-sharing requirements.

* * * * *
    (c) Special rule for network plans. In the case of a plan using a 
network of providers, cost sharing paid by, or on behalf of, an 
enrollee for benefits provided outside of such network is not required 
to count toward the annual limitation on cost sharing (as defined in 
paragraph (a) of this section).
* * * * *

0
45. Section 156.145 is amended by revising paragraph (a) introductory 
text to read as follows:

[[Page 10873]]

Sec.  156.145  Determination of minimum value.

    (a) Acceptable methods for determining MV. An employer-sponsored 
plan provides minimum value (MV) only if the percentage of the total 
allowed costs of benefits provided under the plan is greater than or 
equal to 60 percent, and the benefits under the plan include 
substantial coverage of inpatient hospital services and physician 
services. An employer-sponsored plan may use one of the following 
methods to determine whether the percentage of the total allowed costs 
of benefits provided under the plan is not less than 60 percent.
* * * * *

0
46. Section 156.200 is amended by revising paragraph (b)(7) to read as 
follows:


Sec.  156.200  QHP issuer participation standards.

* * * * *
    (b) * * *
    (7) Comply with the standards under 45 CFR part 153.
* * * * *

0
47. Section 156.230 is amended by revising paragraph (a) introductory 
text and paragraph (b) and adding paragraph (c) to read as follows:


Sec.  156.230  Network adequacy standards.

    (a) General requirement. Each QHP issuer that uses a provider 
network must ensure that the provider network consisting of in-network 
providers, as available to all enrollees, meets the following 
standards--
* * * * *
    (b) Access to provider directory. (1) A QHP issuer must make its 
provider directory for a QHP available to the Exchange for publication 
online in accordance with guidance from HHS and to potential enrollees 
in hard copy upon request. In the provider directory, a QHP issuer must 
identify providers that are not accepting new patients.
    (2) For plan years beginning on or after January 1, 2016, a QHP 
issuer must publish an up-to-date, accurate, and complete provider 
directory, including information on which providers are accepting new 
patients, the provider's location, contact information, specialty, 
medical group, and any institutional affiliations, in a manner that is 
easily accessible to plan enrollees, prospective enrollees, the State, 
the Exchange, HHS and OPM. A provider directory is easily accessible 
when--
    (i) The general public is able to view all of the current providers 
for a plan in the provider directory on the issuer's public Web site 
through a clearly identifiable link or tab and without creating or 
accessing an account or entering a policy number; and
    (ii) If a health plan issuer maintains multiple provider networks, 
the general public is able to easily discern which providers 
participate in which plans and which provider networks.
    (c) Increasing consumer transparency. A QHP issuer in a Federally-
facilitated Exchange must make available the information described in 
paragraph (b) of this section on its Web site in an HHS specified 
format and also submit this information to HHS, in a format and manner 
and at times determined by HHS.

0
48. Section 156.235 is revised to read as follows:


Sec.  156.235  Essential community providers.

    (a) General ECP standard. (1) A QHP issuer that uses a provider 
network must include in its provider network a sufficient number and 
geographic distribution of essential community providers (ECPs), where 
available, to ensure reasonable and timely access to a broad range of 
such providers for low-income individuals or individuals residing in 
Health Professional Shortage Areas within the QHP's service area, in 
accordance with the Exchange's network adequacy standards.
    (2) A plan applying for QHP certification to be offered through a 
Federally-facilitated Exchange has a sufficient number and geographic 
distribution of ECPs if it demonstrates in its QHP application that--
    (i) The network includes as participating providers at least a 
minimum percentage, as specified by HHS, of available ECPs in each 
plan's service area with multiple providers at a single location 
counting as a single ECP toward both the available ECPs in the plan's 
service area and the issuer's satisfaction of the ECP participation 
standard; and
    (ii) The issuer of the plan offers contracts to--
    (A) All available Indian health care providers in the service area, 
applying the special terms and conditions required by Federal law and 
regulations as referenced in the recommended model QHP addendum for 
Indian health care providers developed by HHS; and
    (B) At least one ECP in each of the ECP categories (Federally 
Qualified Health Centers, Ryan White Providers, Family Planning 
Providers, Indian Health Care Providers, Hospitals and other ECP 
providers) in each county in the service area, where an ECP in that 
category is available and provides medical or dental services that are 
covered by the issuer plan type.
    (3) If a plan applying for QHP certification to be offered through 
a Federally-facilitated Exchange does not satisfy the ECP standard 
described in paragraph (a)(2) of this section, the issuer must include 
as part of its QHP application a narrative justification describing how 
the plan's provider network provides an adequate level of service for 
low-income enrollees or individuals residing in Health Professional 
Shortage Areas within the plan's service area and how the plan's 
provider network will be strengthened toward satisfaction of the ECP 
standard prior to the start of the benefit year.
    (4) Nothing in paragraphs (a)(1) through (3) of this section 
requires any QHP to provide coverage for any specific medical 
procedure.
    (5) A plan that provides a majority of covered professional 
services through physicians employed by the issuer or through a single 
contracted medical group may instead comply with the alternate standard 
described in paragraph (b) of this section.
    (b) Alternate ECP standard. (1) A plan described in paragraph 
(a)(5) of this section must have a sufficient number and geographic 
distribution of employed providers and hospital facilities, or 
providers of its contracted medical group and hospital facilities, to 
ensure reasonable and timely access for low-income individuals or 
individuals residing in Health Professional Shortage Areas within the 
plan's service area, in accordance with the Exchange's network adequacy 
standards.
    (2) A plan described in paragraph (a)(5) of this section applying 
for QHP certification to be offered through a Federally-facilitated 
Exchange has a sufficient number and geographic distribution of 
employed or contracted providers if it demonstrates in its QHP 
application that--
    (i) The number of its providers that are located in Health 
Professional Shortage Areas or five-digit zip codes in which 30 percent 
or more of the population falls below 200 percent of the Federal 
Poverty Line satisfies a minimum percentage, specified by HHS, of 
available ECPs in the plan's service area with multiple providers at a 
single location counting as a single ECP; and
    (ii) The issuer's integrated delivery system provides all of the 
categories of services provided by entities in each of the ECP 
categories in each county in the plan's service area as outlined in the 
general ECP standard, or otherwise offers a contract to at least one 
ECP outside of the issuer's integrated delivery system per ECP category 
in

[[Page 10874]]

each county in the plan's service area that can provide those services 
to low-income, medically underserved individuals.
    (3) If a plan does not satisfy the alternate ECP standard described 
in paragraph (b)(2) of this section, the issuer must include as part of 
its QHP application a narrative justification describing how the plan's 
provider networks provide an adequate level of service for low-income 
enrollees or individuals residing in Health Professional Shortage Areas 
within the plan's service area and how the plan's provider network will 
be strengthened toward satisfaction of the ECP standard prior to the 
start of the benefit year.
    (c) Definition. An essential community provider is a provider that 
serves predominantly low-income, medically underserved individuals, 
including a health care provider defined in section 340B(a)(4) of the 
PHS Act; or described in section 1927(c)(1)(D)(i)(IV) of the Act as set 
forth by section 221 of Pub. L. 111-8; or a State-owned family planning 
service site, or governmental family planning service site, or not-for-
profit family planning service site that does not receive Federal 
funding under special programs, including under Title X of the PHS Act, 
or an Indian health care provider, unless any of the above providers 
has lost its status under either of these sections, 340(B) of the PHS 
Act or 1927 of the Act as a result of violating Federal law.
    (d) Payment rates. Nothing in paragraph (a) of this section may be 
construed to require a QHP issuer to contract with an ECP if such 
provider refuses to accept the same rates and contract provisions 
included in contracts accepted by similarly situated providers.
    (e) Payment of Federally qualified health centers. If an item or 
service covered by a QHP is provided by a Federally-qualified health 
center (as defined in section 1905(l)(2)(B) of the Act) to an enrollee 
of a QHP, the QHP issuer must pay the Federally qualified health center 
for the item or service an amount that is not less than the amount of 
payment that would have been paid to the center under section 1902(bb) 
of the Act for such item or service. Nothing in this paragraph (e) 
precludes a QHP issuer and Federally-qualified health center from 
agreeing upon payment rates other than those that would have been paid 
to the center under section 1902(bb) of the Act, as long as that rate 
is at least equal to the generally applicable payment rate of the 
issuer described in paragraph (d) of this section.

0
49. Section 156.250 is revised to read as follows:


Sec.  156.250  Meaningful access to qualified health plan information.

    A QHP issuer must provide all information that is critical for 
obtaining health insurance coverage or access to health care services 
through the QHP, including applications, forms, and notices, to 
qualified individuals, applicants, qualified employers, qualified 
employees, and enrollees in accordance with the standards described in 
Sec.  155.205(c) of this subchapter. Information is deemed to be 
critical for obtaining health insurance coverage or access to health 
care services if the issuer is required by law or regulation to provide 
the document to a qualified individual, applicant, qualified employer, 
qualified employee, or enrollee.

0
50. Section 156.265 is amended by revising paragraph (d) to read as 
follows:


Sec.  156.265  Enrollment process for qualified individuals.

* * * * *
    (d) Premium payment. A QHP issuer must follow the premium payment 
process established by the Exchange in accordance with Sec.  155.240 of 
this subchapter and the payment rules established in Sec.  155.400(e) 
of this subchapter.
* * * * *

0
51. Section 156.270 is amended by revising the section heading and 
paragraphs (a), (b), (c) introductory text, (g), and (i) to read as 
follows:


Sec.  156.270  Termination of coverage or enrollment for qualified 
individuals.

    (a) General requirement. A QHP issuer may only terminate enrollment 
in a QHP through the Exchange as permitted by the Exchange in 
accordance with Sec.  155.430(b) of this subchapter. (See also Sec.  
147.106 of this subchapter for termination of coverage.)
    (b) Termination of coverage or enrollment notice requirement. If a 
QHP issuer terminates an enrollee's coverage or enrollment in a QHP 
through the Exchange in accordance with Sec.  155.430(b)(2)(i), (ii), 
or (iii) of this subchapter, the QHP issuer must, promptly and without 
undue delay:
    (1) Provide the enrollee with a notice of termination that includes 
the termination effective date and reason for termination.
    (2) [Reserved]
    (c) Termination of coverage or enrollment due to non-payment of 
premium. A QHP issuer must establish a standard policy for the 
termination of enrollment of enrollees through the Exchange due to non-
payment of premium as permitted by the Exchange in Sec.  
155.430(b)(2)(ii) of this subchapter. This policy for the termination 
of enrollment:
* * * * *
    (g) Exhaustion of grace period. If an enrollee receiving advance 
payments of the premium tax credit exhausts the 3-month grace period in 
paragraph (d) of this section without paying all outstanding premiums, 
the QHP issuer must terminate the enrollee's enrollment through the 
Exchange on the effective date described in Sec.  155.430(d)(4) of this 
subchapter, provided that the QHP issuer meets the notice requirement 
specified in paragraph (b) of this section.
* * * * *
    (i) Effective date of termination of coverage or enrollment. QHP 
issuers must abide by the termination of coverage or enrollment 
effective dates described in Sec.  155.430(d) of this subchapter.
* * * * *

0
52. Section 156.285 is amended by--
0
a. Revising paragraphs (b)(1), (b)(4), (d) introductory text, (d)(1) 
introductory text, (d)(1)(i), and (d)(1)(iii);
0
b. Redesignating paragraphs (c)(3), (4), (5), (6), and (7) as 
paragraphs (c)(4), (5), (6), (7), and (8), respectively.
0
c. Adding new paragraph (c)(3).
0
d. Adding and reserving paragraph (d)(2).
    The revisions and addition read as follows:


Sec.  156.285  Additional standards specific to SHOP.

* * * * *
    (b) * * *
    (1) Enroll a qualified employee in accordance with the qualified 
employer's initial and annual employee open enrollment periods 
described in Sec.  155.725 of this subchapter;
* * * * *
    (4) Adhere to effective dates of coverage established in accordance 
with Sec.  155.725 of this subchapter.
    (c) * * *
    (3) Notify new enrollees of their effective date of coverage 
consistent with Sec.  155.720(e) of this subchapter.
* * * * *
    (d) Termination of coverage or enrollment in the SHOP. QHP issuers 
offering a QHP through the SHOP must:
    (1) Comply with the following requirements with respect to 
termination of enrollees in the SHOP:
    (i)(A) Effective in plan years beginning on or after January 1, 
2015, requirements regarding termination of

[[Page 10875]]

coverage or enrollment established in Sec.  155.735 of this subchapter, 
if applicable to the coverage or enrollment being terminated; otherwise
    (B) General requirements regarding termination of coverage or 
enrollment established in Sec.  156.270(a).
* * * * *
    (iii)(A) Effective in plan years beginning on or after January 1, 
2015, requirements regarding termination of coverage or enrollment 
effective dates as set forth in Sec.  155.735 of this subchapter, if 
applicable to the coverage or enrollment being terminated; otherwise
    (B) Requirements regarding termination of coverage or enrollment 
effective dates as set forth in Sec.  156.270(i).
    (2) [Reserved]
* * * * *

0
53. Section 156.285 is further amended, effective January 1, 2016, by 
revising paragraph (d)(1)(ii) to read as follows:


Sec.  156.285  Additional standards specific to SHOP.

* * * * *
    (d) * * *
    (1) * * *
    (ii) If a QHP issuer terminates an enrollee's coverage or 
enrollment through the SHOP in accordance with Sec.  155.735(d)(1)(iii) 
or (v) of this subchapter, the QHP issuer must notify the qualified 
employer and the enrollee of the termination. Such notice must include 
the termination effective date and reason for termination, and must be 
sent within 3 business days if an electronic notice is sent, and within 
5 business days if a mailed hard copy notice is sent. When a primary 
subscriber and his or her dependents live at the same address, a 
separate termination notice need not be sent to each dependent at that 
address, provided that the notice sent to each primary subscriber at 
that address contains all required information about the termination 
for the primary subscriber and his or her dependents at that address.
* * * * *

0
54. Section 156.290 is amended by revising paragraphs (a)(1), (a)(2), 
(a)(5), and (c) introductory text to read as follows:


Sec.  156.290  Non-renewal and decertification of QHPs.

    (a) * * *
    (1) Notify the Exchange of its decision prior to the beginning of 
the recertification process and adhere to the procedures adopted by the 
Exchange in accordance with Sec.  155.1075 of this subchapter;
    (2) Fulfill its obligation to cover benefits for each enrollee 
through the end of the plan or benefit year through the Exchange;
* * * * *
    (5) Terminate the coverage or enrollment through the Exchange of 
enrollees in the QHP in accordance with Sec.  156.270, as applicable.
* * * * *
    (c) Decertification. If a QHP is decertified by the Exchange, the 
QHP issuer must terminate the enrollment of enrollees through the 
Exchange only after:
* * * * *

0
55. Section 156.410 is amended by removing the second paragraph 
designated as paragraph (d)(4)(ii) and adding paragraph (d)(4)(iii) to 
read as follows:


Sec.  156.410  Cost-sharing reductions for enrollees.

* * * * *
    (d) * * *
    (4) * * *
    (iii) If the excess cost sharing was not paid by the provider, 
then, if the enrollee requests a refund, the refund must be provided to 
the enrollee within 45 calendar days of the date of the request.

0
56. Section 156.420 is amended by adding paragraph (h) to read as 
follows:


Sec.  156.420  Plan variations.

* * * * *
    (h) Notice. No later than November 1, 2015, for each plan variation 
that an issuer offers in accordance with the rules of this section, an 
issuer must provide a summary of benefits and coverage that accurately 
represents each plan variation consistent with the requirements set 
forth in Sec.  147.200 of this subchapter.

0
57. Section 156.425 is amended by adding paragraph (c) to read as 
follows:


Sec.  156.425  Changes in eligibility for cost-sharing reductions.

* * * * *
    (c) Notice upon assignment. Beginning on January 1, 2016, if an 
individual's assignment to a standard plan or plan variation of the QHP 
changes in accordance with paragraph (a) of this section, the issuer 
must provide to that individual a summary of benefits and coverage that 
accurately reflects the new plan variation (or standard plan variation 
without cost-sharing reductions) in a manner consistent with Sec.  
147.200 of this subchapter as soon as practicable following receipt of 
notice from the Exchange, but not later than 7 business days following 
receipt of notice.

0
58. Section 156.430 is amended by adding paragraph (c)(2)(i) and adding 
and reserving paragraph (c)(2)(ii) to read as follows:


Sec.  156.430  Payment for cost-sharing reductions.

* * * * *
    (c) * * *
    (2) * * *
    (i) For reconciliation of cost-sharing reduction amounts advanced 
for the 2014 and 2015 benefit years, an issuer of a QHP using the 
standard or simplified methodology may calculate claims amounts 
attributable to EHB, including cost sharing amounts attributable to 
EHB, by reducing total claims amounts by the plan-specific percentage 
estimate of non-essential health benefit claims submitted on the 
Uniform Rate Review Template for the corresponding benefit year, if the 
following conditions are met:
    (A) The non-essential health benefits percentage estimate is less 
than 2 percent; and
    (B) Out-of-pocket expenses for non-EHB benefits are included in the 
calculation of amounts subject to a deductible or annual limitation on 
cost sharing, but copayments and coinsurance rates on non-EHB benefits 
are not reduced under the plan variation.
    (ii) [Reserved]
* * * * *

0
59. Section 156.602 is amended by revising paragraph (d) to read as 
follows:


Sec.  156.602  Other coverage that qualifies as minimum essential 
coverage.

* * * * *
    (d) State high risk pool coverage. A qualified high risk pool as 
defined by section 2744(c)(2) of the Public Health Service Act 
established on or before November 26, 2014 in any State.
* * * * *

0
60. Section 156.800 is amended by revising paragraph (c) to read as 
follows:


Sec.  156.800  Available remedies; Scope.

* * * * *
    (c) Compliance standard. For calendar years 2014 and 2015, 
sanctions under this subpart will not be imposed if the QHP issuer has 
made good faith efforts to comply with applicable requirements.
* * * * *

0
61. Section 156.815 is added to subpart I to read as follows:


Sec.  156.815  Plan suppression.

    (a) Suppression means temporarily making a QHP certified to be 
offered through the Federally-facilitated

[[Page 10876]]

Exchange unavailable for enrollment through the Federally-facilitated 
Exchange.
    (b) Grounds for suppression. A QHP may be suppressed as described 
in paragraph (a) of this section on one or more of the following 
grounds:
    (1) The QHP issuer notifies HHS of its intent to withdraw the QHP 
from a Federally-facilitated Exchange when one of the exceptions to 
guaranteed renewability of coverage related to discontinuing a 
particular product or discontinuing all coverage under Sec.  147.106(c) 
or (d) of this subchapter applies;
    (2) Data submitted for the QHP is incomplete or inaccurate;
    (3) The QHP is in the process of being decertified as described in 
Sec.  156.810(c) or (d), or the QHP issuer is appealing a completed 
decertification as described in subpart J of this part;
    (4) The QHP issuer offering the QHP is the subject of a pending, 
ongoing, or final State regulatory or enforcement action or 
determination that could affect the issuer's ability to enroll 
consumers or otherwise relates to the issuer offering QHPs in the 
Federally-facilitated Exchanges; or
    (5) One of the exceptions to guaranteed availability of coverage 
related to special rules for network plans or financial capacity limits 
under Sec.  147.104(c) or (d) of this subchapter applies.
    (c) A multi-State plan as defined in Sec.  155.1000(a) of this 
subchapter may be suppressed as described in paragraph (a) of this 
section if OPM notifies the Exchange that:
    (1) OPM has found a compliance violation within the multi-State 
plan, or
    (2) One of the grounds for suppression in paragraph (b) of this 
section exists for the multi-State plan.

0
62. Section 156.1130 is added to subpart L to read as follows:


Sec.  156.1130  Quality improvement strategy.

    (a) General requirement. A QHP issuer participating in an Exchange 
for 2 or more consecutive years must implement and report on a quality 
improvement strategy including a payment structure that provides 
increased reimbursement or other market-based incentives in accordance 
with the health care topic areas in section 1311(g)(1) of the 
Affordable Care Act, for each QHP offered in an Exchange, consistent 
with the guidelines developed by HHS under section 1311(g) of the 
Affordable Care Act.
    (b) Data requirement. A QHP issuer must submit data that has been 
validated in a manner and timeframe specified by the Exchange to 
support the evaluation of quality improvement strategies in accordance 
with Sec.  155.200(d) of this subchapter.
    (c) Timeline. A QHP issuer must submit data annually to evaluate 
compliance with the standards for a quality improvement strategy in 
accordance with paragraph (a) of this section, in a manner and 
timeframe specified by the Exchange.
    (d) Multi-State plans. Issuers of multi-State plans, as defined in 
Sec.  155.1000(a) of this subchapter, must provide the data described 
in paragraph (b) of this section to the U.S. Office of Personnel 
Management, in the manner and timeframe specified by the U.S. Office of 
Personnel Management.

0
63. Section 156.1220 is amended by revising paragraph (c) to read as 
follows:


Sec.  156.1220  Administrative appeals.

* * * * *
    (c) Review by the Administrator of CMS. (1) Either the issuer or 
CMS may request review by the Administrator of CMS of the CMS hearing 
officer's decision. A request for review of the CMS hearing officer's 
decision must be submitted to the Administrator of CMS within 15 
calendar days of the date of the CMS hearing officer's decision, and 
must specify the findings or issues that the issuer or CMS challenges. 
The issuer or CMS may submit for review by the Administrator of CMS a 
statement supporting the decision of the CMS hearing officer.
    (2) After receiving a request for review, the Administrator of CMS 
has the discretion to elect to review the CMS hearing officer's 
decision or to decline to review the CMS hearing officer's decision. If 
the Administrator of CMS elects to review the CMS hearing officer's 
decision, the Administrator of CMS will also review the statements of 
the issuer and CMS, and any other information included in the record of 
the CMS hearing officer's decision, and will determine whether to 
uphold, reverse, or modify the CMS hearing officer's decision. The 
issuer or CMS must prove its case by clear and convincing evidence for 
issues of fact. The Administrator of CMS will send the decision and the 
reasons for the decision to the issuer.
    (3) The Administrator of CMS's determination is final and binding.

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

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

    Authority: Section 2718 of the Public Health Service Act (42 
U.S.C. 300gg-18), as amended.

0
65. Section 158.140 is amended by adding paragraph (b)(1)(iii) to read 
as follows:


Sec.  158.140  Reimbursement for clinical services provided to 
enrollees.

* * * * *
    (b) * * *
    (1) * * *
    (iii) Cost-sharing reduction payments received by the issuer to the 
extent not reimbursed to the provider furnishing the item or service.
* * * * *

0
66. Section 158.162 is amended by revising paragraph (a)(2) and adding 
paragraph (b)(2)(iv) to read as follows:


Sec.  158.162  Reporting of Federal and State taxes.

    (a) * * *
    (2) Federal taxes not excluded from premium under subpart B of this 
part which include Federal income taxes on investment income and 
capital gains, as well as Federal employment taxes, as other non-claims 
costs.
    (b) * * *
    (2) * * *
    (iv) State employment and similar taxes and assessments.
* * * * *

0
67. Section 158.242 is amended by
0
a. Revising paragraph (b)(1)(iii);
0
b. Amending paragraph (b)(1)(iv) by removing the period and adding ``; 
and'' in its place; and
0
c. Adding paragraph (b)(1)(v).
    The revision and addition read as follows:


Sec.  158.242  Recipients of rebates.

* * * * *
    (b) * * *
    (1) * * *
    (iii) A cash refund to subscribers of the group health plan option 
for which the issuer is providing a rebate, who were enrolled in the 
group health plan option either during the MLR reporting year that 
resulted in the issuer providing the rebate or at the time the rebate 
is received by the policyholder;
* * * * *

[[Page 10877]]

    (v) All rebate distributions made under paragraphs (b)(1)(i), (ii), 
or (iii) of this section must be made within 3 months of the 
policyholder's receipt of the rebate. Rebate distributions made after 3 
months must include late payment interest at the current Federal 
Reserve Board lending rate or 10 percent annually, whichever is higher, 
on the total amount of the rebate, accruing from the date payment was 
due under this section.
* * * * *

    Dated: February 6, 2015.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: February 17, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-03751 Filed 2-20-15; 4:15 pm]
BILLING CODE 4120-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>