Vol. 78 Wednesday, 

No. 186 September 25, 2013 

Part III 

Department of Health and Human Services 

Centers for Medicare & Medicaid Services 

42 CFR Part 600 

Office of the Secretary 

45 CFR Part 144 

Basic Health Program: State Administration of Basic Health Programs; 

Eligibility and Enrollment in Standard Health Plans; Essential Health 

Benefits in Standard Health Plans; Performance Standards for Basic Health 

Programs; Premium and Cost Sharing for Basic Health Programs; Federal 

Funding Process; Trust Fund and Financial Integrity; Proposed Rule 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59122 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 600 

Office of the Secretary 

45 CFR Part 144 

[CMS–2380–P] 

RIN 0938–AR93 

Basic Health Program: State 

Administration of Basic Health 

Programs; Eligibility and Enrollment in 

Standard Health Plans; Essential 

Health Benefits in Standard Health 

Plans; Performance Standards for 

Basic Health Programs; Premium and 

Cost Sharing for Basic Health 

Programs; Federal Funding Process; 

Trust Fund and Financial Integrity 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

SUMMARY: This proposed rule would 

establish the Basic Health Program, as 

required by section 1331 of the 

Affordable Care Act. The Basic Health 

Program provides states the flexibility to 

establish a health benefits coverage 

program for low-income individuals 

who would otherwise be eligible to 

purchase coverage through the state’s 

Affordable Insurance Exchange 

(Exchange, also called a Health 

Insurance Marketplace). The Basic 

Health Program would complement and 

coordinate with enrollment in a QHP 

through the Exchange, as well as with 

enrollment in Medicaid and the 

Children’s Health Insurance Program 

(CHIP). This proposed rule sets forth a 

framework for Basic Health Program 

eligibility and enrollment, benefits, 

delivery of health care services, transfer 

of funds to participating states, and 

federal oversight. Additionally, this rule 

would amend other rules issued by the 

Secretary of the Department of Health 

and Human Services (Secretary) in order 

to clarify the applicability of those rules 

to the Basic Health Program. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on November 25, 2013. 

ADDRESSES: In commenting, please refer 

to file code CMS–2380–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

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

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–2380– 

P, P.O. Box 8016, Baltimore, MD 21244– 

8016. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Attention: CMS–2380– 

P, Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call telephone number (410) 786– 

7195 in advance to schedule your 

arrival with one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

Submission of comments on 

paperwork requirements. You may 

submit comments on this document’s 

paperwork requirements by following 

the instructions at the end of the 

‘‘Collection of Information 

Requirements’’ section in this 

document. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Jessica Schubel (410) 786–3032 or Carey 

Appold (410) 786–2117. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

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

appointment to view public comments, 

phone 1–800–743–3951. 

Table of Contents 

To assist readers in referencing 

sections contained in this document, we 

are providing the following table of 

contents. 

I. Executive Summary 

II. Background 

A. Introduction 

B. Stakeholder Consultation and Input 

III. Provisions of the Proposed Rule 

A. Scope and definitions (§ 600.5) 

B. Establishment of a Basic Health Program 

1. Program description (§ 600.100) 

2. Basis, scope and applicability 

(§ 600.105) 

3. Basic Health Program Blueprint 

(§ 600.110) 

4. Development and submission of a BHP 

Blueprint (§ 600.115) 

5. Certification of a BHP Blueprint 

(§ 600.120) 

6. Revisions to a certified Blueprint 

(§ 600.125) 

7. Withdrawal of a Blueprint prior to 

implementation (§ 600.130) 

8. Notice of timing of HHS action on a BHP 

Blueprint (§ 600.135) 

9. State termination of BHP (§ 600.140) 

10. HHS withdrawal of certification and 

termination of a BHP (§ 600.142) 

11. State program administration and 

program operations (§ 600.145) 

12. Enrollment assistance and information 

requirements (§ 600.150) 

13. Tribal Consultation (§ 600.155) 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59123 

14. Provision of BHP to American Indians 

and Alaskan Natives (§ 600.160) 

15. Nondiscrimination standards 

(§ 600.165) 

16. Annual report content and timing 

(§ 600.170) 

C. Federal Program Administration 

1. Federal program reviews and audits 

(§ 600.200) 

D. Eligibility and Enrollment 

1. Basis, scope and applicability 

(§ 600.300) 

2. Eligible individuals (§ 600.305) 

3. Application (§ 600.310) 

4. Certified Application Counselors 

(§ 600.315) 

5. Determination of eligibility for and 

enrollment in BHP (§ 600.320) 

6. Coordination with other insurance 

affordability programs (§ 600.330) 

7. Appeals (§ 600.335) 

8. Periodic renewal of BHP eligibility 

(§ 600.340) 

9. Eligibility verification (§ 600.345) 

10. Privacy and security of information 

(§ 600.350) 

E. Standard Health Plan 

1. Basis, scope and applicability 

(§ 600.400) 

2. Standard health plan coverage 

(§ 600.405) 

3. Competitive contracting process 

(§ 600.410) 

4. Contracting qualifications and 

requirements (§ 600.415) 

5. Enhanced availability of standard health 

plans (§ 600.420) 

6. Coordination with other insurance 

affordability programs (§ 600.425) 

F. Enrollee Financial Responsibilities 

1. Basis, scope and applicability 

(§ 600.500) 

2. Premiums (§ 600.505) 

3. Cost sharing (§ 600.510) 

4. Public schedule of enrollee premium 

and cost-sharing (§ 600.515) 

5. General cost-sharing protections 

(§ 600.520) 

6. Disenrollment procedures and 

consequences for nonpayment of 

premiums (§ 600.525) 

G. Payment to States 

1. Basis, scope and applicability 

(§ 600.600) 

2. BHP payment methodology (§ 600.605) 

3. Secretarial determination of BHP 

payment amount (§ 600.610) 

4. Deposit of federal BHP payment 

(§ 600.615) 

H. BHP Trust Fund 

1. Basis, scope and applicability 

(§ 600.700) 

2. BHP trust fund (§ 600.705) 

3. Fiscal policies and accountability 

(§ 600.710) 

4. Corrective action, restitution and 

disallowance of questioned BHP 

transactions (§ 600.715) 

IV. Collection of Information Requirements 

V. Response to Comments 

VI. Regulatory Impact Analysis 

Acronyms 

Because of the many organizations 

and terms to which we refer by acronym 

in this proposed rule, we are listing 

these acronyms and their corresponding 

terms in alphabetical order below: 

[the] Act Social Security Act 

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)) 

APTC Advance Payments of the Premium 

Tax Credit 

BHP Basic Health Program 

CHIP Children’s Health Insurance Program 

CMS Centers for Medicare & Medicaid 

Services 

[the] Code Internal Revenue Code of 1986 

EHBs Essential Health Benefits 

FEHBP Federal Employees Health Benefits 

Program (5 U.S.C 8901, et seq.) 

FPL Federal poverty level 

HCERA Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152, enacted March 30, 2010) 

HHS [U.S. Department of] Health and 

Human Services 

IHS Indian Health Service 

MAGI Modified adjusted gross income 

PHS Act Public Health Service Act 

PRA Paperwork Reduction Act of 1995 

QHP Qualified Health Plan 

SHOP Small Business Health Options 

Program 

I. Executive Summary 

This proposed rule would implement 

section 1331 of the Patient Protection 

and Affordable Care Act (Pub. L. 111– 

148, enacted on March 23, 2010) and the 

Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 

111.152, enacted on March 30, 2010), 

which are collectively referred to as the 

Affordable Care Act. Section 1331 

directs the Secretary to establish the 

Basic Health Program (BHP). In 

addition, this proposed rule would 

amend certain other federal regulations, 

clarifying their applicability to the new 

program. 

Beginning in 2014, individuals and 

small businesses will be able to 

purchase private health insurance 

coverage through competitive 

marketplaces, also termed ‘‘Exchanges’’ 

(or the Health Insurance Marketplace). 

At the same time, states will have the 

opportunity to provide coverage under 

Medicaid for a broader range of lowincome individuals. New administrative 

procedures discussed in prior 

rulemaking establishes a system for 

coordinating coverage across all 

insurance affordability programs. 

Beginning January 1, 2015, under this 

proposed rule, states will have an 

additional option to establish a Basic 

Health Program for certain low-income 

individuals who would otherwise be 

eligible to obtain coverage through the 

Exchange. 

This proposed rule: (1) Establishes 

requirements for certification of state 

submitted BHP Blueprints, and state 

administration of the BHP consistent 

with that Blueprint; (2) establishes 

eligibility and enrollment requirements 

for standard health plan coverage 

offered through the BHP; (3) establishes 

requirements for the benefits covered by 

such standard health plans; (4) provides 

for federal funding of certified state 

BHPs; (5) establishes the purposes for 

which states can use such federal 

funding; (6) sets forth parameters for 

enrollee financial participation; and (7) 

establishes requirements for state and 

federal administration and oversight of 

BHP funds. This issuance addresses 

everything that we believe to be 

essential to the establishment and 

operation of the BHP, with the specific 

exception of details on payment which 

will be issued separately. We continue 

to review existing regulations to identify 

areas for further development and 

coordination and we invite comment on 

additional areas that might be included. 

II. Background 

A. Introduction 

Section 1331 of the Affordable Care 

Act provides states with a new coverage 

option, the Basic Health Program (BHP), 

for individuals who do not qualify for 

Medicaid but whose income does not 

exceed 200 percent of the federal 

poverty level (FPL). This proposed rule 

implements statutory provisions of the 

BHP and other provisions necessary to 

ensure coordination with the other 

coverage options that, along with BHP, 

are collectively referred to as ‘‘insurance 

affordability programs’’ (coverage 

obtained through an Exchange, 

Medicaid, and the Children’s Health 

Insurance Program, along with premium 

tax credits and cost sharing reductions). 

Coordination is necessary to ensure that 

consumers are determined eligible for 

the appropriate program through a 

streamlined and seamless process and 

are enrolled in appropriate coverage 

without unnecessary paperwork or 

delay. This proposed rule also describes 

standards for state administration and 

federal oversight of the BHP. 

To maximize the coordination 

between BHP and other insurance 

affordability programs, rather than 

establish new and different rules for the 

BHP, we have proposed, when possible, 

to align BHP rules with existing rules 

governing coverage through the 

Exchange, Medicaid, or CHIP. This 

approach is supported by the statutory 

linkage between the minimum benefit 

coverage, maximum cost sharing, and 

overall funding for the BHP with the 

Exchange. It is also advisable in most 

instances to promote simplification and 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59124 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

coordination among programs. Where 

necessary to accommodate unique 

features of the BHP, we have adapted 

existing regulations or established 

specific rules for the new program. 

Recognizing that states may choose 

different ways to structure their BHP, 

when possible, we offer states flexibility 

in choosing to administer the program 

in accordance with Exchange rules or 

those governing Medicaid or CHIP. In 

those sections in which we propose to 

offer states the choice, states must adopt 

all of the standards in the referenced 

Medicaid or Exchange regulations. 

B. Stakeholder Consultation and Input 

HHS has consulted extensively with 

interested states and stakeholders on 

policies related to the BHP. 

On September 14, 2011 (76 FR 56767), 

HHS published a Request for 

Information (RFI) inviting the public to 

provide input regarding the 

development of standards for the 

establishment and operation of a BHP. 

In particular, HHS asked states, tribal 

representatives, consumer advocates, 

and other interested stakeholders to 

comment on the general establishment 

of the BHP, standard health plan 

requirements and contracting process, 

the coordination between the BHP and 

other state programs, eligibility and 

enrollment, amount of payment, and 

Secretarial oversight. The comment 

period closed on October 31, 2011. 

The public response to the RFI 

yielded comments from states, 

consumer advocacy organizations, 

health plans, and provider associations. 

The majority of the comments were 

related to the general administrative 

functions and standards for the BHP, the 

financial methodology used to 

determine a state’s BHP payment 

amount, coordination between 

insurance affordability programs, 

benefit package, health plan selection 

and delivery systems, and the effect that 

the BHP may have on a state’s 

Exchange. 

The comments received are described, 

where applicable, in discussing specific 

regulatory proposals. 

HHS also held a number of listening 

sessions with state representatives, 

consumer groups and health plans to 

gather input, and has directly engaged 

with interested states by establishing a 

‘‘learning collaborative’’ to seek state 

input related to operations and 

coordination of the BHP with other 

insurance affordability programs. We 

considered input from these stakeholder 

meetings and responses to the RFI as we 

developed the policies in this proposed 

rule. 

This proposed rule may be of interest 

to, and affect, American Indians/Alaska 

Natives. Therefore, we plan to consult 

with Tribes during the comment period 

and prior to publishing a final rule. 

III. Provisions of the Proposed Rule 

A. Scope and Definitions (§ 600.1 and 

§ 600.5) 

In § 600.1, we set forth the overall 

design of the BHP established under the 

authority of section 1331 of the 

Affordable Care Act. Generally, this 

provision authorizes federal funding for 

states that elect to operate an alternative 

program for eligible low-income 

individuals instead of offering such 

coverage through qualified health plans 

in the Exchange, if the Secretary 

certifies that the alternative program 

meets certain requirements. This 

proposed rule would implement that 

authority. 

In proposed § 600.5, we set forth 

definitions for terms that are used 

throughout this part. Where a term used 

in this part has been defined in section 

36B of the Internal Revenue Code (the 

Code) or in published regulations 

codifying the Affordable Care Act as 

related to operation of the Exchange, the 

Medicaid program and CHIP, we have 

adopted those definitions here 

consistent with the explicit statutory 

direction at section 1331(h) of the 

Affordable Care Act that terms used in 

section 36B of the Code shall have the 

same meaning under BHP. These 

definitions would incorporate 

interpretations, guidance and operating 

methodologies applicable under section 

36B of the Code, to ensure a coordinated 

approach. Definitions for ‘‘Basic Health 

Program Blueprint,’’ ‘‘program year,’’ 

‘‘certification,’’ ‘‘enrollee,’’ ‘‘standard 

health plan,’’ and ‘‘standard health plan 

offeror’’ are created for the purpose of 

this proposed rule. We propose to 

define a regional compact to mean an 

agreement between two or more states to 

jointly procure and enter into contracts 

with standard health plans covering 

eligible individuals in those states. 

We propose to adopt the definition of 

the ‘‘single streamlined application’’ 

used by both Medicaid and the 

Exchange, and found in 42 CFR 

431.907(b)(1) of this chapter and 45 CFR 

155.405(a) and (b) . 

We propose to adopt the Exchange 

definitions of ‘‘family and family size,’’ 

‘‘household income,’’ ‘‘qualified health 

plan,’’ ‘‘residency,’’ and ‘‘modified 

adjusted gross income’’ in accordance 

with 26 CFR 1.36B–1. We are proposing 

to define ‘‘Minimum essential coverage’’ 

to have the meaning set forth in 26 CFR 

1.5000A–2, including any coverage 

recognized by the Secretary under 26 

CFR 1.5000A–2(f). Under that authority, 

we are also proposing to recognize BHP 

coverage as minimum essential 

coverage, and would specifically 

include BHP coverage in our definition. 

It is our intention to clarify that BHP 

meets the requirements for the 

individual mandate, and, as such, we 

invite comment on the placement of this 

provision. 

The proposed definition of ‘‘Indian’’ 

is the same as used in the Exchange for 

eligibility for cost-sharing reductions 

codified at 45CFR 155.300(a). This 

definition means any individual defined 

in section 4(d) of the Indian SelfDetermination and Education 

Assistance Act (Pub. L. 93–638, 88 Stat. 

2203), in accordance with section 

1402(d)(1) of the Affordable Care Act. 

The definition of ‘‘lawfully present’’ 

found in 45 CFR 152.2 is also applied 

to BHP. 

B. Establishment of a Basic Health 

Program 

We propose adding subpart B 

consisting of § 600.100 through 

§ 600.170 to specify the general 

requirements for certification of a state 

BHP. In this subpart, we propose 

required elements of the BHP Blueprint 

and procedures for development and 

submission of the BHP Blueprint. We 

would then require that states operate 

the BHP in accordance with a BHP 

Blueprint that has been certified by the 

Secretary. We also set forth certain 

overall principles for operation of the 

BHP. When possible, we have drawn on 

definitions and standards applied to 

other insurance affordability programs 

to promote state flexibility and reduce 

administrative burden. 

1. Program description (§ 600.100) 

Section 600.100 contains a general 

description of a state BHP that is 

operated in accordance with a BHP 

Blueprint certified by the Secretary to 

meet the requirements of this Part. 

2. Basis, scope and applicability of 

subpart B (§ 600.105) 

Proposed § 600.105 of subpart B 

specifies the general authority for and 

scope of standards proposed in part 600 

that establish minimum requirements 

for the state option to operate a BHP. 

3. Basic Health Program Blueprint 

(§ 600.110) 

This section sets forth standards 

related to the content of a BHP 

Blueprint. We are proposing to adopt 

the construct of the Exchange blueprint 

for the BHP and are using the Blueprint 

as the mechanism by which the 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59125 

Secretary will certify a state’s proposed 

BHP and grant operational authority for 

the program. The Blueprint will include 

information necessary to establish 

compliance with many of the standards 

of the program. We further propose that 

the Blueprint be accompanied by a 

funding plan that identifies the funding 

sources, if any, beyond the BHP trust 

fund used to cover projected 

expenditures over a 12 month period. 

We recognize that it may be difficult to 

complete all sections of the Blueprint 

with certainty prior to finalizing 

contracts with standard health plan 

offerors or receiving notification of final 

funding amounts. Therefore, we intend 

to accept certain parts of the Blueprint 

in draft or proposed form, and provide 

states with a certification in principle, 

pending submission of final Blueprint 

provisions. We welcome comment on 

which aspects of the Blueprint will need 

to be submitted in draft or proposed 

form given the operational realities of 

program establishment. 

Finally, we propose in this section 

that HHS will post submitted Blueprints 

on-line in the interest of public 

transparency. 

4. Development and submission of a 

BHP Blueprint (§ 600.115) 

We propose that the Governor or the 

Governor’s designee must sign the 

state’s Blueprint which must identify, 

by position or title, the agency and 

officials within that agency with 

responsibility for program operations, 

administration and finances. 

In § 600.115 we propose to adopt the 

Exchange standard that a state must 

seek public comment on the BHP 

Blueprints, including significant 

revisions, before submission to the 

Secretary for certification. Unlike the 

Exchange process, which appears in 

statute, we have not proposed a specific 

list of stakeholders, with the exception 

of federally recognized tribes residing in 

the state, who must be addressed with 

public notification. We are extending 

flexibility to the state to contact 

stakeholders that may be affected. We 

welcome comment on any need to 

further require notification to particular 

interested parties. 

5. Certification of a BHP Blueprint 

(§ 600.120) 

We propose to have the date of 

signature by the Secretary be the 

effective date of certification, before 

which no payments may be made under 

this part. Once certified, we propose 

that Blueprints remain in effect unless 

revised by the state, terminated by the 

state, or the Secretary withdraws 

certification. 

We propose standards for 

certification, which include sufficient 

information for the Secretary to 

establish compliance with the 

requirements of section 1331 of the 

Affordable Care Act and this Part, 

adequate planning for the integration of 

BHP with other insurance affordability 

programs, and sufficient planning to 

demonstrate operational readiness. 

6. Revisions to a certified Blueprint 

(§ 600.125) 

At § 600.125(a) we propose that a state 

wishing to make significant changes to 

the terms of its Blueprint must submit 

changes to the Secretary for review and 

certification. While not exhaustive, 

significant changes within this scope 

include changes that have a direct 

impact on the enrollee experience in 

BHP or the program financing. 

7. Withdrawal of a BHP Blueprint prior 

to implementation (§ 600.130) 

We propose in this section a process 

for withdrawing a BHP Blueprint, 

whether certified or not, as long as the 

state has not begun enrollment. If a state 

has begun enrollment, we consider the 

action a state would be taking as a 

program termination and the state 

would need to follow procedures as 

proposed in § 600.140. 

8. Notice and timing of HHS action on 

a BHP Blueprint (§ 600.135) 

We recognize that HHS has a 

responsibility to respond timely to a 

state requesting certification of a BHP 

Blueprint, or approval for revision of a 

certified Blueprint, to enable states to 

offer BHP as a part of the continuum of 

insurance affordability programs. We 

therefore propose at § 600.135(a) that 

HHS will act on all certification 

requests, including revisions, in a 

timely manner. We propose at 

§ 600.135(b) that a state will receive a 

response from HHS to a complete 

certification request that includes 

information on impediments to 

approval. 

9. State termination of a BHP (§ 600.140) 

At § 600.140 we propose that for a 

certified program that is operational, or 

has begun enrollment, a state wishing to 

cease the operation of their BHP must 

follow specific termination procedures. 

We propose that a state must submit 

notification to the Secretary to terminate 

its BHP 120 days in advance of the 

planned termination date along with a 

transition plan. Proposed termination 

procedures also include written notice 

to participating standard health plan 

offerors and enrollees at least 90 days in 

advance, as well as other enrollee 

protections to facilitate an orderly 

transition to other coverage without 

gaps in coverage. Section 600.140 

further proposes that a state terminating 

its BHP will fulfill contractual 

obligations to standard health plans 

offerors, data reporting requirements to 

HHS, and the completion of any 

necessary financial reconciliation with 

the federal government. Notices to 

standard health plan offerors and 

enrollees must meet accessibility and 

readability standards set by the 

Exchange at § 155.230(b). 

10. HHS Withdrawal of Certification 

and Termination of a BHP (§ 600.142) 

We propose standards and conditions 

for a Secretarial finding that a BHP 

Blueprint no longer meets certification 

standards based on findings in an 

annual review, a program review 

conducted in accordance with proposed 

§ 600.200, or from evidence of 

beneficiary harm, financial malfeasance 

or fraud. We propose that a state receive 

notice prior to withdrawal of 

certification and that all reasonable 

efforts are made to resolve the findings. 

Timing standards for notice to the state 

and eventual decertification are 

proposed. The effective date of an HHS 

determination withdrawing BHP 

certification is proposed as not earlier 

than 120 days following the finding of 

non-compliance. 

11. State Program Administration and 

Program Operations (§ 600.145) 

We propose at § 600.145(a) the 

requirements under which a state must 

operate its BHP. 

At § 600.145(b) through (d), we 

propose certain principles to apply once 

a state has elected to implement a BHP. 

Specifically, the state must ensure that 

all persons have a right to apply, and if 

found eligible, to be enrolled into 

coverage that conforms to this part, and 

the state must operate the program 

statewide. The state would not be 

permitted to limit enrollment to a lower 

income level than prescribed in the 

statute, cap enrollment or impose 

waiting lists. These principles are set 

forth because individuals eligible for 

BHP in a state operating BHP are 

specifically excluded from receipt of the 

premium tax credit or cost-sharing 

reductions through the Exchange under 

section 1331(e)(2) of the Affordable Care 

Act and the establishment of a BHP 

must not leave individuals without an 

option for affordable coverage. 

Additionally, at § 600.145(e) we 

propose a group of core operating 

functions that states must be able to 

perform to operate a BHP. These 

functions include making eligibility 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59126 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

determinations using the single 

streamlined application, processing 

appeals, contracting with standard 

health plan offerors, performing 

oversight and financial integrity 

functions, providing consumer 

assistance, extending essential 

protections to American Indians and 

Alaska Natives, ensuring civil rights 

protections, and collecting and 

reporting data necessary for program 

operations and oversight. Finally, 

terminating the program, if necessary, in 

accordance with proposed § 600.140 is 

also defined as a core operation. We 

solicit comment on whether these are, 

in fact, the core operating functions or 

whether there are other functions that 

should be recognized and considered 

essential to the successful establishment 

and operation of a BHP. 

12. Enrollment Assistance and 

Information Requirements (§ 600.150) 

Section 600.150(a)(1), (2), (3) and (4) 

set forth proposed requirements for the 

provision of information to consumers 

that is accessible and explanatory, 

aiding individuals’ knowledge about the 

program, enrollment choices, and 

covered benefits, including additional 

benefits provided outside of standard 

health plan coverage, as well as other 

benefit options and limitations. This 

information should facilitate enrollment 

and participation in BHP. We are 

proposing that information provided to 

consumers by participating standard 

health plan offerors should be 

publically available, be clear and 

informative regarding premiums, 

covered services, and cost-sharing and 

should follow state specifications for 

format. We propose that such 

information be provided in a manner 

that complies with accessibility and 

readability standards of the Exchange. 

Further, we propose that states require 

participating standard health plan 

offerors to make current provider lists 

available. 

13. Tribal Consultation (§ 600.155) 

The BHP as proposed uses many 

Exchange concepts such as the 

development of a Blueprint to attain 

certification. Similarly, we extend in 

this rule many of the protections for 

American Indian/Alaska Native 

populations as are extended in the 

Exchange. To further this alignment, we 

propose in this section to use the tribal 

consultation agreements used by the 

state or federal Exchange for the BHP. 

We invite comment on this policy. 

14. Basic Health Program Protections for 

American Indians and Alaska Natives 

(§ 600.160) 

We propose that states adopt the same 

protections for American Indian and 

Alaska Native populations as they 

would receive in an Exchange. In 

§ 600.160(a) we propose to apply the 

same special enrollment status for 

enrollment in standard health plans as 

established in 45 CFR 155.420, which 

permits Indians to enroll in Qualified 

Health Plans (QHPs) or change QHPs 

once per month. This status is 

independent of policies set by the state 

for open enrollment generally. We 

propose at § 600.160(b) that a state 

permit tribal organizations to pay 

premiums on behalf of enrolled 

individuals as is permitted in the 

Exchange at 45 CFR 155.240. At 

§ 600.160(c) we propose that cost 

sharing may not be imposed on Indians 

to further align the Exchange’s costsharing protections for Indians with 

household incomes at BHP levels. We 

also propose that BHP standard health 

plans must pay primary to Indian health 

programs for covered services; in other 

words, Indian health programs shall be 

the ‘‘payers of last resort’’ for services 

received through such programs that are 

covered by a standard health plan (with 

respect to the standard health plan). 

15. Nondiscrimination standards 

(§ 600.165) 

We propose that the BHP and 

standard health plans must comply with 

all applicable non-discrimination 

statutes and the nondiscrimination 

requirements applicable to the Exchange 

and recipients of federal assistance. 

16. Annual report content and timing 

(§ 600.170) 

In compliance with section 1331(f) of 

the Affordable Care Act, which 

substantially conforms to Exchange 

functions codified at 45 CFR 155.200(c) 

through (f), we propose at § 600.170(a) 

requirements for an annual report on the 

state’s BHP. This report is both a 

mechanism to report state knowledge of 

any program fraud, waste or abuse, and 

to ensure compliance with eligibility 

verification requirements, the use of 

federal funds, and quality and 

performance standards. We continue to 

work towards aligning quality and 

performance expectations across all 

insurance affordability programs. We 

intend to issue additional guidance with 

respect to quality and performance 

standards, harmonizing the BHP to the 

maximum extent possible with 

requirements of QHPs in the Exchange, 

including quality ratings assigned under 

section 1311(c)(3) of the Affordable Care 

Act and consumer satisfaction surveys 

under section 1311(c)(4) of the 

Affordable Care Act, which will also 

align with our efforts for Medicaid and 

CHIP. We invite public comment on this 

approach. 

Finally, at § 600.170(b) we propose a 

timing standard for annual reports, due 

60 days prior to the end of each 

operational year. The annual report 

confirms the appropriate use of federal 

funds, as well as key operational 

features, confirming that the release of 

federal funding for the subsequent year 

is appropriate. 

C. Federal Program Administration 

We propose to add subpart C 

consisting of § 600.200 to specify the 

provisions for federal program 

administration of the BHP. In adding 

this proposed subpart, we have drawn 

from the administrative standards 

established for the other health 

insurance affordability programs to 

promote program efficiencies. 

1. Federal program reviews and audits 

(§ 600.200) 

The proposed BHP review standards 

at § 600.200(a) and (b) specify that HHS 

may review state administration of the 

BHP, as needed, but no less frequently 

than annually, to determine whether the 

state is complying with the federal 

requirements and provisions of its BHP 

Blueprint. We provide that the federal 

compliance review may either be based 

on the state’s annual report, or on a 

separate direct federal review. We 

anticipate that separate federal reviews 

will generally be conducted only when 

there is a specific federal concern about 

program compliance. We then provide a 

protocol for identifying and resolving 

compliance concerns, providing 

opportunities for the state to 

substantiate compliance or develop 

corrective actions to address 

compliance. We also set forth a protocol 

for raising and resolving concerns about 

the improper use of BHP trust fund 

resources. Finally, the proposed audit 

standards in § 600.200(c) provide that 

the HHS Office of Inspector General 

(OIG) may periodically audit state 

operations and standard health plan 

practices consistent with the purpose 

and processes applied in Medicaid, as 

described in § 430.33(a). 

D. Eligibility and Enrollment 

As with other sections of this 

proposed rule, subpart D, which 

consists of § 600.300 through § 600.350, 

adopts eligibility and enrollment 

provisions from other insurance 

affordability programs wherever 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59127 

possible. We have done this to prevent 

gaps in coverage, promote simplicity 

and continuity for consumers if they 

move from one insurance affordability 

program to another, or have family 

members eligible for different programs, 

to simplify program administration, 

promote reuse of administrative 

processes and infrastructure, and 

promote administrative simplification 

for states. In some instances we have 

adopted, with modification, standards 

from other insurance affordability 

programs or are proposing new rules to 

fit the eligibility and enrollment 

provisions of the BHP. 

1. Basis, scope and applicability 

(§ 600.300) 

Section 600.300 of subpart D specifies 

the general authority for and scope of 

standards proposed in this subpart that 

establishes eligibility requirements for 

the BHP. 

2. Eligible individuals (§ 600.305) 

We propose to implement the 

eligibility standards for the BHP in 

accordance with sections 1331(e)(1) and 

(e)(2) of the Affordable Care Act. 

Because BHP provides coverage in lieu 

of coverage through the Exchange that is 

supported by advanced payment of 

premium tax credits (APTC) and cost 

sharing reductions (CSR), we have 

adopted many of the eligibility rules 

used to determine eligibility for APTC 

and CSR in the Exchange and applied 

them to BHP. In some circumstances, 

particularly around eligibility processes, 

we propose to adopt Medicaid or CHIP 

rules, or to offer a state the option to 

apply either Exchange or Medicaid/

CHIP rules. Where a state is given 

choice between applying Exchange 

standards or Medicaid standards, it is 

our intention that it chooses all the 

standards of Medicaid or the Exchange 

within one particular area. 

At § 600.305(a) we propose to codify 

the eligibility requirements established 

in section 1331(e)(1) of the Affordable 

Care Act. With narrow exceptions, as 

reflected in the regulation text, 

individuals eligible for BHP would be 

eligible for premium tax credit support 

to enroll in a QHP in the Exchange if the 

state did not offer a BHP. 

In situations in which an individual 

is enrolled in both limited-benefits 

Medicaid (because the Medicaid 

coverage does not meet the definition of 

minimum essential coverage (MEC) or 

because it does not include the 10 

essential health benefits) and in the 

BHP, standard coordination of benefits 

rules set forth in § 433.139(b)(1) of the 

Medicaid regulations would apply, with 

Medicaid serving as the secondary 

payer. 

3. Application (§ 600.310) 

The Affordable Care Act requires the 

use of a single, streamlined application, 

developed by the Secretary, for all 

insurance affordability programs. We 

propose to codify at § 600.310 this 

requirement for BHP by adopting by 

reference the regulations at 

§ 431.907(b)(1) and 45 CFR 155.405(a) 

and (b). We further propose to adopt the 

Medicaid rule relating to an individual’s 

opportunity to apply without delay 

(§ 435.906) and for assistance with an 

application at § 435.908. We note that 

call centers required of the Exchange 

(§ 155.205(a)) are encouraged to provide 

information on all insurance 

affordability programs. 

The state may permit the use of 

authorized representatives to assist 

individuals with their applications or 

renewal of eligibility. If the state permits 

authorized representatives we propose 

that they follow the standards of either 

the Exchange (§ 155.227) or Medicaid 

(§ 435.923). 

4. Certified Application Counselors 

(600.315) 

Some individuals may need 

assistance with completing applications, 

enrolling in coverage, or with ongoing 

communications once determined 

eligible. State Medicaid and CHIP 

agencies have long allowed beneficiaries 

to use application counselors to 

promote enrollment and assist with 

application preparation, and current 

regulations at § 435.908 provides for 

states to certify Medicaid application 

counselors to ensure that they are 

properly trained in applicable rules and 

requirements. Similarly, 45 CFR 155.225 

provides for Exchanges to certify 

application counselors to help 

individuals apply for enrollment in 

QHPs. We propose at § 600.315 to give 

a state the option to certify application 

counselors to assist individuals in 

applying for enrollment in in BHP, and 

to adopt the standards for a certification 

program found in either § 155.225 

(relating to the Exchange) or § 435.908 

(relating to Medicaid/CHIP). We expect 

the state to adopt all of either the 

Exchange of Medicaid standards. 

5. Determination of eligibility for and 

enrollment in a BHP (§ 600.320) 

At § 600.320(a) we propose to allow 

BHPs to determine eligibility directly or 

to have eligibility determined by any 

governmental entity that determines 

eligibility for Medicaid, or the 

Exchange. 

At § 600.320(b) we propose that the 

state adopt standards to conform with 

§ 435.912, similar to both Medicaid and 

CHIP, regarding the timeliness of 

eligibility determinations. 

At § 600.320(c) we propose that the 

state determine the effective date for 

eligibility using the method in place for 

either the Exchange or Medicaid. 

Finally, at § 600.320(d), we propose 

that the state choose between the 

enrollment policies of the Exchange or 

the continuous enrollment of Medicaid. 

If choosing the Exchange enrollment 

policies, the state must adopt open and 

special enrollment periods equivalent to 

those specified for the Exchange at 45 

CFR 155.410 and § 155.420 to minimize 

gaps in coverage for eligible individuals. 

Specifically, consistent with the 

Exchange provisions at 45 CFR 

155.420(d), we propose to require the 

state to allow eligible individuals to 

enroll in BHP outside of the annual 

open enrollment period if, for example, 

they experience a triggering event 

including: the loss of minimum 

essential coverage; gaining a dependent 

or becoming a dependent; gaining status 

as a citizen, national or as lawfully 

present when previously he/she did not 

have such status; or making a 

permanent move. Additionally, Indians 

are provided one special enrollment per 

month. 

6. Coordination with other Insurance 

Affordability Programs (§ 600.330) 

We propose standards of coordination 

between insurance affordability 

programs in accordance with section 

1331(c)(4) of the Affordable Care Act by 

adopting applicable provisions of 45 

CFR 155.345(a) and incorporating 

§ 435.1200 which pertain to 

coordination options and 

responsibilities for the Exchange and 

Medicaid respectively. Under existing 

regulations, Medicaid and CHIP 

agencies may make final Medicaid and 

CHIP eligibility determinations based on 

the BHP’s assessment; or the state 

Medicaid or CHIP agency may accept a 

final eligibility determination made by a 

BHP that uses state Medicaid and CHIP 

eligibility rules and standards. Further, 

the Exchange may contract eligibility 

determinations to eligible entities. We 

propose to adapt the provisions of 

§ 435.1200(c) through (e) to BHP to 

reflect this flexibility and to establish 

the standards and guidelines to ensure 

a simple, coordinated and timely 

eligibility determination process and 

accurate eligibility determinations 

regardless of the option elected by the 

state. 

Specifically, we propose to require an 

agreement between the Medicaid/CHIP 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59128 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

agency, the Exchange, and the BHP, that 

includes the same elements as those 

required in § 155.345(a) and 

§ 435.1200(b)(3), to include a 

delineation of the responsibilities of 

each agency to minimize burden on 

individuals, as well as to ensure timely 

determinations of eligibility and 

enrollment in the appropriate program. 

Because all insurance affordability 

programs will be collecting the same 

information, the state will have the 

information necessary to evaluate MAGI 

based eligibility across programs. We 

propose to require that the state operate 

in full compliance with 45 CFR 

155.345(a) and (h) regarding agreements 

with the Exchange, Medicaid and CHIP 

agencies, as well as the secure exchange 

of information including electronic 

account transfers. 

Similarly, we propose to require the 

BHP agency to notify any referring 

agency of final eligibility determinations 

in accordance with § 600.330. 

An effective notification process is 

important to ensure a high quality 

consumer experience and a coordinated 

eligibility and enrollment system as 

provided under section 1413 of the 

Affordable Care Act and section 1943 of 

the Act. We propose to adopt the 

standards for notices, in accordance 

with § 435.913 and § 155.230, and the 

requirement for electronic notices in 

§ 435.918 for the BHP. Consistent with 

the provisions of the Affordable Care 

Act for a coordinated system across 

insurance affordability programs, we 

further propose to adopt the provisions 

for coordinated and combined notices at 

§ 435.1200. 

7. Appeals (§ 600.335) 

Eligibility for BHP is largely based 

upon eligibility for participation in the 

Exchange, within applicable income 

limits. As such, many of the eligibility 

processes for BHP will be substantially 

the same as those for the Exchange. We 

propose that individuals will have an 

opportunity to appeal BHP eligibility 

determinations but that opportunity 

cannot be modeled on the Exchange 

appeal process because a core 

component of the Exchange appeals 

process is the federal level appeal. 

There is no independent authority for a 

federal level appeals process for BHP 

like the federal level appeal for the 

Exchange. Therefore, we propose that 

the state use the Medicaid appeals 

process for BHP, under an agreement 

with the Medicaid program. We 

appreciate that some state Medicaid 

programs may choose to delegate 

Medicaid appeals to the Exchange. In 

these states, there will not be complete 

alignment between appeals processes 

for Medicaid and BHP, since BHP 

appeals will not be inclusive of the 

federal process. We invite comment on 

this proposal. 

8. Periodic Renewal of BHP eligibility 

(§ 600.340) 

Consistent with the Exchange, 

Medicaid and CHIP, we propose at 

§ 600.340(b) that the state shall redetermine an individual’s eligibility 

every 12 months. If a state has chosen 

to match the Exchange policies on 

enrollment at § 600.320(d), the 

redetermination process will occur as 

part of the annual open enrollment. If 

the state has chosen the 12 month 

renewal process of Medicaid, the 

redetermination process will occur 12 

months from the initial determination. 

Consistent with the rules established for 

the Exchange, we propose to adopt the 

Exchange provisions at 45 CFR 

155.330(b) that the state require 

enrollees to report changes that could 

affect eligibility within 30 days, and 

must redetermine eligibility based on 

verified information received, or 

updated information from data sources. 

For purposes of encouraging 

continuity of care, we have also 

proposed that, if an enrollee remains 

eligible at annual redetermination, the 

state must maintain the individual’s 

enrollment in the current standard 

health plan under BHP unless the 

individual affirmatively takes action to 

choose a different standard health plan. 

9. Eligibility verification (§ 600.345) 

We propose that the state establish 

verification plans that are practical for 

all agencies determining eligibility for 

BHP. We propose to give the state the 

option to apply to BHP the same 

eligibility verification processes used by 

either the Exchange at 45 CFR 155.315 

and 320 or the Medicaid agency at 

§ 435.945 through § 435.956. 

Regardless of which approach is 

chosen, the verification process must 

include verification of citizenship and 

lawfully present status. Self-attestation 

is not an acceptable verification method 

for citizenship and immigration status. 

The state may choose to verify 

additional factors and adopt reasonable 

verification procedures, and specify 

those factors for which self-attestation 

will be accepted. 

10. Privacy and security of information 

(§ 600.350) 

The state must comply with all 

requirements on the use and disclosure 

of personally identifiable information in 

operating BHP that are applicable to the 

operation of an Exchange. We propose 

to apply to the BHP 45 CFR 155.260(b) 

which sets limits on the use and 

disclosure of personally identifiable 

information. We also propose to apply 

§ 155.260(c), which clarifies that data 

sharing agreements made between BHP 

and other agencies must comply with 

other applicable law including section 

1942 of the Act. 

E. Standard Health Plan 

We propose to add subpart E 

consisting of § 600.400 through 

§ 600.425 to specify the standard health 

plan coverage and the delivery of such 

coverage. 

Section 1331(b) of the Affordable Care 

Act provides that a standard health plan 

is a benefits plan which, at a minimum, 

provides essential health benefits 

described in section 1302(b) of the 

Affordable Care Act to BHP enrollees 

and, if offered by a health insurance 

issuer, has a medical loss ratio of at least 

85 percent. Standard health plan 

offerors, as provided for in section 

1331(g) of the Affordable Care Act, may 

include a licensed health maintenance 

organization, a licensed health 

insurance insurer, or a network of 

health providers. 

Section 1331(c) of the Affordable Care 

Act provides for the establishment of a 

competitive process for the state to 

contract with standard health plan 

offerors to provide standard health plan 

coverage. The statute requires that the 

competitive process include the 

selection of standard health plans, the 

negotiation of premiums, cost sharing 

and benefits, as well as the 

consideration of innovative features 

such as care coordination and 

incentives to encourage the use of 

preventive services and appropriate 

utilization of health care services. The 

competitive process must also take into 

account the health and resource 

differences of the BHP population and 

participating providers, techniques to 

manage service utilization, 

establishment of performance measures, 

enhancement of standard health plan 

availability to BHP enrollees and 

coordination with other insurance 

affordability programs. 

While much that is proposed in this 

subpart is new, given the need to set 

forth parameters in the establishment of 

a new program, we have adopted, where 

appropriate, existing Exchange or 

Medicaid standards consistent with our 

goal to create coordination across all 

insurance affordability programs, 

promote efficiencies and reduce 

administrative costs. This includes 

adopting the Exchange’s coverage 

standards and protections at proposed 

§ 600.405. In light of the specific 

statutory requirement for a competitive 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59129 

procurement process, we propose to 

require that the state adopt contracting 

processes consistent with the 

procurement standards and competition 

requirements set forth in 45 CFR 

92.36(b) through (i). We have further 

adapted standards from the Exchange 

and Medicaid with respect to the 

contract requirements that apply when 

the state contracts for the provision of 

standard health plans. 

1. Basis, scope and applicability 

(§ 600.400) 

Proposed § 600.400(a) specifies the 

statutory basis, scope, and applicability 

for the provisions regarding the 

minimum coverage standards included 

in BHP’s standard health plans as well 

as the delivery of such coverage, the 

competitive contracting process and 

contract requirements the state must use 

when contracting for the provision of 

standard health plans, and other 

applicable requirements to enhance the 

availability of standard health plan 

coverage. 

2. Standard health plan coverage 

(§ 600.405) 

We propose in this section to align the 

minimum benefit BHP standard with 45 

CFR 156.110 and 45 CFR 156.122 

regarding prescription drug coverage, 

which defines the EHBs for the 

Exchange and includes any subsequent 

changes resulting from periodic reviews 

by the Secretary specified in 

1302(b)(4)(G) and (H) of the Affordable 

Care Act. As required by statute, the 

minimum benefit standard must include 

at least the ten general EHB 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. 

Provision of essential health benefits 

means that the standard health plan 

coverage provided by the BHP will not 

include any limitations on coverage that 

are not substantially equal to the EHBbenchmark or reference plan. Nothing in 

this proposed rule should be interpreted 

to preclude a state from offering 

additional benefits within the state’s 

standard health plan or in addition to 

the state’s standard health plan. 

Additionally, section 1302(b)(4) of the 

Affordable Care Act requires that benefit 

design or implementation of benefit 

design cannot discriminate ‘‘on the 

basis of an individual’s age, expected 

length of life, or of an individual’s 

present or predicted disability, degree of 

medical dependency, or quality of life 

or other health conditions.’’ We further 

propose to implement this section by 

adopting the coverage protections set 

forth at 45 CFR 156.125, applicable to 

the Exchange. 

Within the construct of the required 

coverage of essential health benefits, 

there is no requirement in BHP that all 

enrollees receive the same or 

comparable benefits (known in 

Medicaid as the comparability 

requirement). States may have reason to 

provide specialized standard health 

plans to targeted populations to the 

extent that the targeting criteria are not 

based on pre-existing conditions or 

health status-related factors, and the 

proposed regulation offers states that 

option. We are also proposing to adopt 

the Exchange’s substitution and 

supplementation of coverage standards 

described at 45 CFR 156.115(b) and 45 

CFR 156.110(b)(1) for the BHP. 

Additionally, we are proposing to adopt 

the Medicaid model permitting the 

selection of more than one option for 

establishing essential health benefits 

using a base benchmark or reference 

plan. We are proposing these policies, 

in combination, to provide states 

flexibility in benefit definition and 

configuration, while assuring that all 

standard health plans cover all ten 

essential health benefits, as well as 

other benefits based on the state’s 

selected base benchmark plan. 

The intent of the reference plan is to 

reflect both the scope of services and 

limits offered by a typical employer 

plan in the state and set a reference or 

benchmark by which to measure the 

provision of substantially equal benefits. 

The permitted reference, or base 

benchmark plans as defined in 45 CFR 

156.100(a)(1) through (4) are: the largest 

plan by enrollment in any of the three 

largest small group insurance products 

in the state’s small group insurance 

market as defined in 45 CFR 155.20; any 

of the largest three state employee 

health benefit plans by enrollment; any 

of the largest three national Federal 

Employees Health Benefits Program 

(FEHBP) plan options by enrollment 

that are open to federal employees; or 

the largest insured commercial nonMedicaid HMO operating in the state. 

By permitting states to choose more 

than one base benchmark or reference 

plan in combination with substitution of 

benefits we are proposing to provide 

states flexibility to achieve similar plan 

structures as under alternative benefit 

plan structures in Medicaid. 

Substitution of benefits does not 

preclude states from drawing benefits 

from the Medicaid state plan to meet the 

EHB benchmark benefit package as long 

as they are actuarially equivalent and in 

the same EHB category, with the 

exception of prescription drugs for 

which substitution is not permitted. 

Plans providing essential health 

benefits in BHP must meet all the 

requirements in 45 CFR 156.115(a) 

defining substantially equal, prohibiting 

the exclusion of individuals from 

coverage in any benefit category, and 

complying with all the specific 

requirements for the provision of 

prescription drugs, mental health, 

substance abuse, preventive health 

services, and habilitative services. 

In addition to the essential health 

benefits described in detail previously, 

we propose to set forth conditions 

applicable when the standard health 

plan is subject to state insurance 

mandates requiring additional benefits. 

(This is not the same as a state choosing 

to add additional benefits only to its 

standard health plan(s).) We propose 

that the state adopt the determination of 

the Exchange at 45 CFR 155.170(a)(3) in 

deciding which benefits, enacted after 

December 31, 2011, are in addition to 

the EHBs and are, therefore, outside of 

the reference premium structure that 

will be used to determine the amount of 

the premium tax credit and cost sharing 

reductions forming the basis for federal 

payments to states. Payment for these 

benefits would come from either state 

funds or trust fund surplus. 

Finally, section 1303 of the Affordable 

Care Act sets forth special rules relating 

to coverage of abortion services and the 

segregation of funding for those 

services. Abortion services are 

prohibited from inclusion as essential 

health benefits and federal funding for 

abortion services, except in the case of 

endangerment of the woman’s life, rape 

or incest, is prohibited. If states provide 

abortion services for which public 

funding is prohibited, the state is not 

eligible for any federal contribution, and 

payments for those services must be 

kept in separate allocation accounts. 

3. Competitive contracting process 

(§ 600.410) 

The competitive contracting process 

is a unique feature to BHP, and while 

we have aligned, to the greatest extent 

possible, with existing standards for the 

Exchange, Medicaid, and CHIP, this 

section also proposes new standards 

specific to BHP consistent with the 

statute. To receive HHS certification, we 

propose that the state assure in its BHP 

Blueprint that it follows a competitive 

contracting process that includes a 

negotiation of the elements described in 

§ 600.410(d) as well as consideration of 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59130 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

the elements described in § 600.410(e). 

We are interpreting the requirement for 

a competitive process to permit any 

state procedures that are consistent with 

the standards set out in section 45 CFR 

92.36(b) through (i). These standards 

provide a state considerable flexibility 

in how they solicit bids, how bids are 

evaluated, and how contracts are 

awarded, while ensuring that the 

competition will be open and free of 

unnecessary restrictions. While we 

understand that a state may be 

interested in joint procurements for BHP 

and other programs (such as Medicaid 

or other state health programs), the state 

must ensure that such a joint 

procurement meets the highest 

standards for competition of any of the 

involved programs, involves negotiation 

of at least the elements required under 

the BHP statute, does not unnecessarily 

restrict competition, and ensures that 

there is no cross-subsidization of costs 

between programs. We invite comments 

on this approach as we are interested in 

ensuring both state flexibility and free 

and open competition for the provision 

of standard health plans. 

In § 600.410(c), we propose 

exceptions to the initial implementation 

of a competitive contracting process in 

the event that the state is unable to 

implement such a process for program 

year 2015. The proposed exceptions are 

subject to HHS approval during the 

certification process as proposed in 

§ 600.120. We are seeking comment on 

this provision as we anticipate that a 

state may be interested in leveraging 

existing Medicaid managed care 

contracts to ensure an efficient and 

quick implementation of BHP effective 

January 1, 2015. As these contracts may 

not have been procured consistent with 

the procedures proposed in this section, 

we have proposed this exception to help 

promote coordination and continuity of 

care during the initial implementation 

of BHP in 2015. 

We have proposed in § 600.410(d) 

three elements specified in the statute 

that a state must negotiate during its 

competitive contracting process. In 

addition to proposing the negotiation of 

premiums, cost sharing and benefits, we 

propose that a state ensure the inclusion 

of innovative features in the negotiation 

process, such as care coordination, case 

management, the use of incentives to 

promote preventive services and 

encourage enrollee involvement in 

health care decision making, such as the 

ability for enrollees to select their 

providers. We further propose in 

paragraph (e) of this section that a state 

also include in its competitive process 

the consideration of health and 

resources differences of enrollees and 

health care providers. We also proposed 

in paragraph (e) that a state also include 

in its competitive process the use of 

managed care, or a similar process to 

improve the quality, accessibility, 

appropriate utilization, and efficiency 

costs and prices of services provided to 

enrollees as well as measures to prevent, 

identify theft, and address fraud, waste 

and abuse and ensure consumer 

protections. We share the goal of states 

to focus on improving the quality of care 

and health outcomes, and as such, have 

proposed that the state consider specific 

measures and standards that focus on 

these important objectives as well as 

consider how to coordinate with other 

health insurance affordability programs. 

We seek comment on the specific 

measures to consider and include in the 

final rule. Specifically, we are 

considering the use of measures that 

ensure enrollee protection, such as 

tracking and monitoring grievance and 

claims appeals while, at the same time, 

balancing our goals of state flexibility 

and effective contracting. Finally, in 

paragraph (f) of this section, we propose 

that nothing in this competitive process 

shall permit or encourage 

discrimination in enrollment based on 

pre-existing conditions or other health 

status-related factors. 

4. Contracting qualifications and 

requirements (§ 600.415) 

In § 600.415(a), we propose the 

criteria by which an offeror is eligible to 

contract with a state for the 

administration and provision of one or 

more standard health plans under BHP. 

In addition to the criteria specified in 

statute, we propose that an eligible 

offeror also include a non-licensed 

health maintenance organization to the 

extent that the offeror participates in 

Medicaid or CHIP. 

The proposed eligible offeror criteria 

include a network of health care 

providers with the capacity to 

administer and provide standard health 

plan coverage. We do not anticipate that 

individual providers would be eligible 

to administer and provide a standard 

health plan. A network of providers, 

such as an independent physician 

association, or a large health system that 

provides, for example, both inpatient 

and outpatient health care services, or 

an accountable care organization, is 

necessary to not only deliver the 

coverage specified under the program 

but also to provide care coordination 

and case management as required by 

statute. 

Finally, we have proposed including 

a non-licensed health maintenance 

organization that participates in 

Medicaid or CHIP to provide the state 

with the flexibility to contract with 

Medicaid or CHIP managed care 

organizations that may not meet the 

requirements of a qualified health plan 

on the Exchange. We believe providing 

such flexibility furthers the objective of 

the program by encouraging continuity 

of care for BHP enrollees, who may 

frequently enroll and disenroll between 

the state’s Medicaid program and BHP. 

We believe that the proposed 

requirements assure that non-licensed 

standard health plan offerors have the 

capacity to deliver high quality care to 

enrollees in a manner that is consistent 

with Medicaid standards; however, we 

invite comments on this approach. 

During the October 2011 RFI process, 

we received several comments regarding 

the use of managed care under BHP, and 

whether a state must contract with 

managed care organizations for the 

provision of standard health plans. 

While the statute directs that the state 

contract for the provision of a standard 

health plan under BHP, it does not 

restrict the state’s option to contract 

with qualified health plans operating in 

the Exchange or with Medicaid 

managed care organizations. We believe 

the statute also provides a state with the 

flexibility to operate its BHP under an 

integrated care model as the state has 

the option to contract with a network of 

providers to provide a standard health 

plan to enrollees to the extent that the 

network of providers meet the elements 

specified in statute. 

With respect to the specific contract 

requirements for a standard health plan, 

we propose requiring that the state 

establish specific contract provisions 

that are unique to its BHP and 

applicable state laws to the extent 

needed to address network adequacy, 

service provision and authorization, 

quality and performance, enrollment 

procedures, disenrollment procedures, 

noticing, provisions protecting the 

privacy and security of personally 

identifiable information, and other 

applicable contract requirements as 

determined by the Secretary. We 

anticipate providing future guidance 

that will further describe the minimum 

contract requirements needed for HHS 

certification of a state’s BHP; however, 

at this time, we will apply a ‘‘safe 

harbor’’ approach to a state 

incorporating the contract requirements 

from either 45 CFR part 156 (the 

Exchange’s qualified health plan 

requirements) or 42 CFR part 438 

(Medicaid managed care requirements). 

This ‘‘safe harbor’’ approach means that 

a state modeling its contract 

requirements off of the Exchange or 

Medicaid will meet the contract 

requirements for purposes of HHS 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59131 

certification unless and until the next 

contract cycle after HHS issues 

additional guidance. We believe that the 

contract requirements under the 

Exchange and Medicaid assure the 

provision of high quality care while 

maintaining sufficient consumer 

protections; however, we invite 

comments on this approach to 

determine whether it accomplishes the 

objectives of promoting program 

efficiencies and promoting 

administrative simplicity. 

We further propose that a state 

include in its standard health plan 

contracts provisions that define a sound 

and complete procurement contract, as 

required by 45 CFR part 92(i), which is 

consistent with existing federal 

procurement guidance. Also under 

paragraph (b), we propose that contracts 

with standard health plans that provide 

health insurance coverage offered by a 

health insurance issuer must comply 

with the requirement at section 

1331(b)(3) of the Affordable Care Act for 

a medical loss ratio of at least 85 

percent. Finally, the state must, as 

proposed at § 600.415(c), include in its 

BHP Blueprint the standard set of 

contract requirements that will be 

incorporated into its standard health 

plan contracts in order to receive HHS 

certification. 

5. Enhanced availability of Standard 

Health Plans (§ 600.420) 

Section 1331(c)(3)(A) of the 

Affordable Care Act specifies that, to the 

maximum extent feasible, a state should 

seek to make multiple standard health 

plans available to individuals to ensure 

choice of standard health plans. While 

we recognize the number of standard 

health plans may not equal the number 

of QHPs offered in the Exchange, we 

believe that BHP applicants and 

enrollees should have not only choice of 

standard health plans, but also a similar 

experience to consumers purchasing 

coverage in the Exchange, including the 

ability to compare the benefits packages, 

premiums, cost-sharing charges, etc. 

between the available plans (this 

includes different standard health plans 

offered by the same standard health 

plan offeror). In order to ensure that 

BHP applicants and enrollees are 

afforded the opportunity to compare 

available standard health plans, we 

believe that a state must ensure that 

there are at least two standard health 

plans offered under the program. In 

addition to ensuring a similar coverage 

purchasing experience for BHP 

enrollees, we believe that offering at 

least two standard health plans will 

ensure there is always one standard 

health plan available in the event that 

the availability of the second standard 

health plan is affected. We understand 

that while choice of health plan may not 

always occur in Medicaid, BHP, unlike 

Medicaid, does not have a fee-forservice program available in the event 

that a single standard health plan 

suddenly becomes unavailable. We 

invite comment on the proposal to 

assure that at least two standard health 

plans are offered under the program. 

A state has the option, as defined in 

section 1331(c)(3)(B) of the Affordable 

Care Act, to enter into a regional 

compact with other states for the joint 

procurement of standard health plans. 

As this is a new option afforded to states 

operating a BHP, we propose in 

§ 600.420 that a state may enter into a 

regional compact to provide standard 

health plans statewide, or in 

geographically specific areas within the 

states. If the state contracts for the 

provision of a geographically specific 

standard health plan, the state must 

assure in its BHP Blueprint that 

enrollees, regardless of residency within 

the State, continue to have choice of at 

least two standard health plans. The 

state must include in its BHP Blueprint 

which state(s) will participate in the 

regional compact; the specific areas 

within the participating states in which 

the standard health plans will operate, 

if applicable; an assurance that the 

competitive contracting process used in 

the joint procurement complies with 

proposed § 600.410; and any variations 

in benefits, premiums and/or cost 

sharing that may result due to regional 

differences within the participating 

states. A state operating a geographically 

specific standard health plan under a 

regional compact must still operate a 

BHP statewide. 

6. Coordination with other Insurance 

Affordability Programs (§ 600.425) 

Due to income or household 

composition changes that may occur, 

coverage for some individuals will shift 

from BHP to the Exchange, Medicaid or 

CHIP coverage during open enrollment 

or in special enrollment periods during 

the year as well as possible shifts of 

coverage for some individuals from 

those other programs to BHP. Section 

1331(c)(4) of the Affordable Care Act 

requires that BHP coordinate with 

Medicaid, CHIP, the Exchange and any 

other state-administered health 

insurance program. This coordination is 

important not only for eligibility and 

enrollment, but also with respect to the 

provision of health care benefits as 

enrollees transition in or out of BHP. 

Our goal is to ensure that enrollees do 

not experience a disruption in care and 

that coordination exists between all 

insurance affordability programs to 

promote continuity of care. As such, we 

are proposing in § 600.425 that a state 

describe such coordination to prevent 

disruptions in care for transitioning 

enrollees. Examples of how a state can 

ensure coordination across the 

insurance affordability programs 

include, but are not limited to, 

describing how the state will: 

(1) Ensure that individuals who are 

undergoing an ongoing course of 

treatment can continue receiving such 

treatment and have access to their 

provider(s) through the duration of their 

prescribed treatment (or, as appropriate, 

until a transition can be made without 

disruption, inconvenience or burden for 

the enrollee); 

(2) Promote the sharing of data 

through the use of health information 

technology; 

(3) Promote access to the same 

providers and services through BHP 

available through other insurance 

affordability programs, through 

coordinated provider enrollment 

procedures, coordinated coverage 

procurement procedures, or similar 

coverage definitions and protocols; and 

(4) Use auto-enrollment protocols in 

BHP, Medicaid and CHIP that seek to 

maximize continuity with a provider. 

F. Enrollee Financial Responsibilities 

We propose adding subpart F 

consisting of § 600.500 through 600.525 

to specify the monthly premium and 

cost-sharing standards applicable to 

BHP. 

1. Basis, scope and applicability 

(§ 600.500) 

Section 1331(a)(2)(A)(i) of the 

Affordable Care Act permits a state 

operating a BHP to collect monthly 

premiums to the extent that they do not 

exceed the amount of the monthly 

premium that the enrollee would have 

been required to pay if he or she had 

enrolled in the applicable second lowest 

cost silver plan, as defined in section 

36B(b)(3)(B) of the Code, offered to the 

individual through an Exchange. The 

amount of the required monthly 

premium, either under BHP or under 

the applicable second lowest cost silver 

plan, will be determined after 

accounting for any premium tax credit 

and cost-sharing reduction. 

Section 1331(a)(2)(A)(ii) of the 

Affordable Care Act limits cost sharing 

for BHP enrollees with incomes at or 

below 150 percent of the FPL to the 

amount required under a platinum plan 

and for BHP enrollees with incomes 

above 150 percent of the FPL, the 

amount required under a gold plan. 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59132 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

At § 600.520, we propose to adopt 

three cost-sharing provisions that are 

directly based on Exchange 

requirements related to cost-sharing 

protections for preventive health 

services, Indians, and the cost-sharing 

standards in QHPs that enroll 

consumers with similar incomes as BHP 

enrollees. Finally, at § 600.525, we 

propose disenrollment procedures and 

consequences for nonpayment of 

premiums. 

2. Premiums (§ 600.505) 

As discussed previously, the statute 

requires that a BHP enrollee’s monthly 

premium not exceed the monthly 

premium the individual would have 

paid had he or she enrolled in a plan 

with a premium equal to the premium 

of the applicable benchmark plan, as 

defined in 26 CFR 1.36B–3(f). In 

§ 600.505(a), we propose that a state 

assure in its BHP Blueprint that the BHP 

monthly premium does not exceed what 

an otherwise qualified enrollee would 

receive through the Exchange. The state 

must also assure that when determining 

the amount of the enrollee’s monthly 

premium, it took into account 

reductions for the premium tax credit 

that would otherwise be available to the 

enrollee. As currently proposed, we are 

not requiring that the state assure that 

it accounted for the cost-sharing 

reduction when determining the 

enrollee’s monthly premium as it is 

already assumed in the actuarial values 

of the applicable standard health plan. 

We further propose in this section that 

the state include in its BHP Blueprint 

the proposed enrollee monthly premium 

amounts for each group or groups of 

enrollees subject to the applicable 

premiums, the collection method and 

procedure for an enrollee to make his or 

her premium payment, and the 

consequences for nonpayment of 

premium. 

3. Cost sharing (§ 600.510) 

We propose that the state include in 

its BHP Blueprint the group or groups 

of enrollees subject to cost sharing, and 

to assure that cost-sharing standards, 

including the establishment of an 

effective system to ensure compliance, 

are in accordance with § 600.520. 

We propose to adopt at § 600.510(b) 

the Exchange’s approach (which is also 

consistent with Medicaid’s approach) to 

cost sharing for preventive health 

services as described at 45 CFR 147.130 

and 45 CFR 155.115(a)(4). These 

provisions establish that preventive 

services without cost sharing are a 

required element of the provision of 

essential health benefits. By cross 

referencing to these provisions, we 

propose to incorporate the same 

prohibition on the imposition of 

copayments, deductibles, coinsurance 

or other forms of cost sharing with 

respect to recommended preventive 

health services or items in BHP that 

applies to the provision of essential 

health benefits in other insurance 

affordability programs and in the overall 

marketplace. We believe that this 

approach is both required by the 

statutory provision that standard health 

plans offer essential health benefits, and 

also accomplishes the goal of not 

exceeding the cost sharing that would 

have otherwise occurred if the 

individual had been enrolled on the 

Exchange. Furthermore, this policy 

promotes consistent treatment and 

continuity of care for consumers who 

may move between BHP, the Exchange 

and Medicaid in a given coverage year. 

4. Public schedule of enrollee premiums 

and cost sharing (§ 600.515) 

Under § 600.515(a), we propose that 

the state must ensure that applicants 

and enrollees have access to information 

concerning premiums and cost-sharing 

amounts for a specific item or service 

under a standard health plan that would 

apply for individuals at different 

income levels. We propose to align with 

the Exchange’s minimum standard of 

publishing such information through an 

Internet Web site as well as through 

other means for individuals who do not 

have Internet access. In addition to the 

publication of the premiums and costsharing amounts, we propose that the 

state make publicly available 

information regarding the nonpayment 

of premiums. Under paragraph (b), we 

propose that the premium and cost 

sharing information must be made 

available to applicants for standard 

health plan coverage and for enrollees 

in such coverage at time of enrollment, 

re-enrollment, determination of 

eligibility, when premium and/or costsharing amounts change, and upon 

request by the individual. We believe 

that applying similar transparency 

standards utilized in the Exchange (and 

consistent with Medicaid and CHIP) 

will ensure efficiencies between 

insurance affordability programs as well 

as provide a more seamless experience 

for consumers who may transition out 

of, or into, the BHP. 

5. General cost-sharing protections 

(§ 600.520) 

We propose at § 600.520(a) to adopt 

similar cost-sharing protections for 

lower income enrollees that currently 

apply in CHIP at § 457.530 and the 

Exchange at 45 CFR 156.420(e). In both 

insurance affordability programs, 

premiums and cost sharing may vary to 

the extent that they do not favor 

enrollees with higher incomes over 

those with lower incomes. At proposed 

§ 600.520(b), we have adopted the 

Exchange standards set forth at 45 CFR 

156.420(b)(1) and (d) regarding the costsharing protections applied to Indians, 

which are also consistent with the rules 

in Medicaid and CHIP. Specifically, 

states will not be permitted to impose 

cost sharing on Indians enrolled in BHP 

for essential health benefits. We believe 

that these protections are legally 

required to ensure that this population 

does not experience higher cost sharing 

than what would otherwise have been 

required had they enrolled on the 

Exchange. 

As noted previously, section 

1331(a)(2)(A)(ii) of the Affordable Care 

Act provides that the cost sharing 

required for individuals under 150 

percent of the FPL not exceed what is 

required under a platinum plan offered 

through the Exchange. Similarly, the 

statute specifies that the cost sharing 

required for individuals above 150 

percent of the FPL not exceed what is 

required under a gold plan offered 

through the Exchange. We received 

many comments on this particular 

section of the statute during our October 

2011 request for information. 

Specifically, we received questions 

regarding the actuarial value of the 

platinum and gold plans HHS would 

use to align BHP’s on cost-sharing 

reduction standards. Actuarial value is 

a measure of the percentage of expected 

health care costs a health plan will 

cover, and can be considered a general 

summary measure of health plan 

generosity. Section 1302(d)(2) of the 

Affordable Care Act defines actuarial 

value relative to coverage of the EHB for 

a standard population, and is generally 

calculated by computing the ratio of the 

total expected payments by the plan for 

EHB over the total costs for the EHB the 

standard population is expected to 

incur. For example, a plan with an 80 

percent actuarial value would be 

expected to pay, on average, 80 percent 

of a standard population’s expected 

medical expenses for the EHB. The 

individuals covered by the plan would 

be expected to pay, on average, the 

remaining 20 percent of the expected 

expenses in the form of deductibles, copayments, and coinsurance. 

We considered two options to ensure 

that BHP enrollees do not experience 

higher cost sharing when enrolled in 

BHP relative to what they would have 

experienced had they been enrolled 

through the Exchange. The first option 

we considered required BHP plans to 

meet the same actuarial value standards 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59133 

applicable to Exchange plans for this 

population pursuant to the revisions 

made by section 1001(b)(1)(A) of 

HCERA to section 1402(c)(2)(B) of the 

Affordable Care Act. The second option 

would be based on a comparison of the 

BHP plan to a selected model gold or 

platinum plan available under the 

Exchange. Under the first option, 

required cost sharing, on average, would 

not be more than 6 percent of the cost 

of coverage for the lowest income BHP 

population, and not more than 13 

percent of the cost of coverage for other 

BHP enrollees. Under the second 

option, required cost sharing could 

exceed such levels but could not exceed 

the levels that would be required under 

the model Exchange plans. 

In our proposed rule, we have elected 

the first option as we have interpreted 

the revisions made by section 

1001(b)(1)(A) of HCERA to the actuarial 

values described in section 1402(c)(2)(B) 

of the Affordable Care Act to apply to 

the applicable populations enrolled in 

BHP; therefore, proposed § 600.520(c) 

adopts the cost-sharing standards set 

forth at 45 CFR 156.420(a)(1) and (2), (c) 

and (e). As proposed at § 600.520(c), the 

cost-sharing standard for non-Indian 

enrollees with income below 150 

percent of the FPL cannot exceed what 

is required under a platinum plan with 

an actuarial value of 94 percent. The 

cost-sharing standard for non-Indian 

enrollees with incomes above 150 

percent of the FPL cannot exceed what 

is required under a gold plan with an 

actuarial value of 87 percent. By 

incorporating the Exchange cost-sharing 

standards at 45 CFR 156.420(a)(1) and 

(2), the out-of-pocket cost-sharing 

maximums also apply to individuals 

enrolled in BHP. We invite comment on 

our proposed approach. 

6. Disenrollment Procedures and 

Consequences for Nonpayment of 

Premiums (§ 600.525) 

We propose in paragraph (a)(1) of this 

section that a state assure compliance 

with the disenrollment procedures for 

nonpayment of premiums set forth at 45 

CFR 155.430. At paragraph (a)(2), we 

propose that a state aligning its 

enrollment policy to 45 CFR 155.410 

and § 155.420 comply with the premium 

grace period standards set forth at 45 

CFR 156.270 for required premium 

payment prior to disenrollment. We 

believe aligning the Exchange standards 

will ensure consistency for a state 

electing to model its BHP enrollment 

policies after the Exchange’s. Should a 

state elect to implement a continuous 

enrollment policy similar to Medicaid, 

we propose in paragraph (b)(3), a 30-day 

premium grace period, which is 

consistent with the premium grace 

period standard that is applied in CHIP. 

At § 600.525(b), we propose to again 

base consequences of nonpayment of 

premium to the state’s enrollment 

policies. Specifically, in paragraph 

(b)(1), we propose that a state applying 

the Exchange enrollment policies to its 

BHP may not restrict reenrollment to 

BHP beyond the next open enrollment 

period, or if applicable, the next special 

enrollment period. At paragraph (b)(2), 

we propose that a state implementing a 

continuous enrollment policy apply the 

CHIP reenrollment standards set forth in 

§ 457.570(c). Specifically, a state would 

be prohibited from imposing a lockout 

period of more than 90 days, from 

continuing to impose a lockout period 

after an enrollee has paid past due 

premiums, and could not require 

collection of past due premiums as a 

condition of eligibility for reenrollment 

upon the expiration of the lockout 

period. Nothing in this proposed rule 

would preclude a state from continuing 

to seek past due premiums from an 

individual. Should a state elect to 

implement a premium lockout period, it 

must define the length of such a period 

in its BHP Blueprint. As with the 

disenrollment requirements described 

in paragraph (a), we believe that 

aligning the consequences of 

nonpayment of premiums to the state’s 

enrollment policies with ensure 

program continuity and consistency. 

G. Payments to States 

We propose adding subpart G 

consisting of § 600.600 through 

§ 600.615 to specify the BHP payment 

methodology and the procedures by 

which HHS will determine a state’s BHP 

payment amount. 

1. Basis, scope and applicability 

(§ 600.600) 

Section 1331(d)(1) of the Affordable 

Care Act specifies that the Secretary 

must transfer each fiscal year federal 

funds to a state’s BHP trust fund in the 

amount determined by the Secretary in 

accordance with the requirements set 

forth in section 1331(d)(3). Specifically, 

the statute requires the Secretary 

determine a per enrollee payment 

amount based on 95 percent of the 

premium tax credit under section 36B of 

the Code, and the cost-sharing 

reductions under section 1402 of the 

Affordable Care Act, that would have 

been provided to the enrollee in that 

fiscal year if he or she had been enrolled 

in a qualified health plan through an 

Exchange. When determining this 

payment amount, the statute further 

directs the Secretary to consider 

additional factors, such as age and 

income of the enrollee as well as 

geographic rating differences. 

Given the unique statutory 

requirements regarding the transfer and 

determination of a state’s BHP payment 

amount, we propose, at § 600.605, the 

two components (the premium tax 

credit component and the cost-sharing 

reduction component) used in the 

general calculation of the state’s federal 

payment. At § 600.610, we propose the 

process by which the Secretary will 

determine the state’s BHP amount, and 

in § 600.615, we propose that HHS make 

quarterly federal deposits into the state’s 

BHP trust fund. 

2. BHP payment methodology 

(§ 600.605) 

As described previously, section 

1331(d)(3) of the Affordable Care Act 

directs the Secretary to determine the 

amount of payment to equal 95 percent 

of the premium tax credit and the costsharing reductions that the enrollee 

would have received had he or she 

enrolled in a qualified health plan 

through the Exchange. We received 

numerous comments during our October 

2011 RFI process requesting clarity 

regarding the amount of the cost-sharing 

reductions that the Secretary will use 

when determining the BHP payment 

amount. Commenters expressed 

confusion by the placement of the 

comma in the statutory language and 

requested that HHS specify whether it 

would use 100 percent of the costsharing reductions, or 95 percent, which 

would coincide with the percentage of 

the premium tax credit. We have 

carefully considered this issue, and 

have interpreted the statute to read that 

the payment amount equals 95 percent 

of the cost-sharing reductions. 

We are interpreting the statutory 

language directing the Secretary to make 

payments on a fiscal year to apply to a 

federal fiscal year. In addition, while 

payments to states will be made based 

on the federal fiscal year, the 

determination of payment rates will be 

made consistent with the calendar year 

operations utilized on the Exchange. 

Given that the determination of BHP 

payment rates requires data from the 

Exchange, we believe that utilizing 

calendar year based data will provide a 

more accurate determination of the 

payment rate. 

We propose codifying in § 600.605(b) 

the seven factors specified in statute 

that must be considered when 

determining a state’s BHP payment 

amount. We anticipate that these seven 

factors will be included in the funding 

formula which will be published on an 

annual basis in the proposed payment 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59134 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

notice process as described further in 

§ 600.610. 

We are also seeking specific 

comments on our proposed approach to 

address the statutory requirement that 

the federal payment take into account 

the health status of the enrollee for 

purposes of determining risk adjustment 

and reinsurance payments that would 

have been made had the individual 

enrolled in a QHP through the 

Exchange. As finalized in the March 11, 

2013 Federal Register notice of benefit 

and payment parameters for 2014, 45 

CFR 153.400(a)(2)(iv) excludes BHP 

participating plans from contributions 

to the reinsurance program. As such, 

BHP plans are not eligible to receive 

reinsurance payments since they are not 

contributing to the program; therefore, 

we are proposing to exclude reinsurance 

payments from consideration in the 

BHP funding formula. 

With respect to risk adjustment, we 

have carefully considered this issue as 

we have received several comments 

from both states and stakeholders 

emphasizing the importance risk 

adjustment can have on not only a 

state’s decision to elect BHP as an 

alternative source of coverage for low 

income adults, but also to the program’s 

sustainability. Given the challenges 

associated with applying risk 

adjustment in the early years of both 

BHP and the individual market, we 

considered two possible approaches to 

recognize that BHP enrollees might 

differ from consumers in the individual 

market with respect to health status, 

associated health care service 

utilization, and program uptake. One 

possible approach we considered was to 

include BHP plans in risk adjustment as 

well as require that BHP enrollees and 

plans be included in the individual 

market risk pool. Under this approach, 

the funding mechanism would take into 

account the actual payments that would 

be made from that risk pool. The second 

approach was to account for the various 

differences between BHP enrollees and 

individual market enrollees in the BHP 

funding methodology only. We also 

considered under this approach the 

most appropriate time to include a risk 

adjustment factor in the BHP funding 

methodology; that is, whether we 

should address risk adjustment for year 

one or in the future, as well as the 

potential consequences of such timing. 

We have carefully considered both 

approaches, and have decided that the 

most appropriate approach is to develop 

a risk adjustment factor to include in the 

BHP funding methodology rather than 

include BHP in the individual market 

risk pool. Our rationale for this 

approach is twofold. Specifically, 

potential differences may exist between 

BHP and Exchange benefit packages and 

the market reform rules in the 

Affordable Care Act, such as the 

requirements for guaranteed issue, 

standard premium rating, and other 

such requirements may not apply to 

some standard health plan offerors. We 

believe that developing an appropriate 

factor in the BHP funding formula that 

accounts for the potential difference in 

health status between BHP enrollees 

and individual market enrollees would 

ensure that the BHP payment accurately 

reflects the statute’s requirement to 

consider the impact of risk adjustment. 

In addition, we believe that this would 

provide a level of funding to BHP that 

more accurately reflects the expected 

health care costs for BHP enrollees. 

Finally, the risk adjustment method 

being applied in the individual market 

is a concurrent model, which means 

that a current year’s experience is 

applied retrospectively to premiums; 

however, we are proposing, as discussed 

further below, to limit the retrospective 

adjustments in calculating the federal 

payment amount for BHP to a small set, 

including enrollment, to improve 

predictability for states in the amount of 

federal funding they will receive in a 

given fiscal year. In so doing, we are not 

proposing to retrospectively apply risk 

adjustment to the federal payment 

amount. 

While we seek comment on this 

approach, we will provide additional 

guidance that will further address this 

factor in our proposed Payment Notice 

which will be published in the fall of 

2013 and will provide an additional 

opportunity for comment. Finally, we 

are not proposing to consider the issue 

of risk corridors in the BHP funding 

methodology as section 1342 of the 

Affordable Care Act specifically limits 

the program to QHPs. 

Section 1331(d)(3)(B) of the 

Affordable Care Act directs the 

Secretary to adjust the payment for any 

fiscal year to reflect any error in the 

determination of the payment amount in 

the preceding fiscal year. We believe 

that the statutory language supports the 

idea that an adjustment that would 

trigger a repayment obligation is limited 

to ‘‘errors’’ in the determination of 

payment, and does not include 

adjustments to improve the underlying 

methodology for the per member per 

month payment rates. Specifically, the 

statute does not appear to contemplate 

adjustment to the certified methodology 

as an error; instead, it appears to 

contemplate that adjustments to the 

methodology are only made 

prospectively and do not include 

retroactive corrections/repayment. 

Section 1331(d)(3)(A) of the Affordable 

Care Act specifies that the Secretary 

must determine the payment based on a 

certified methodology, and to the extent 

that the determination accurately 

reflects that methodology, there would 

be no error. Furthermore, we believe 

that the statute supports the idea that no 

retrospective adjustment would be 

necessary, subsequent to certification of 

the methodology, if the adjustment is an 

improvement in the methodology (for 

example, based on new data or analysis 

that would improve the accuracy of that 

methodology). The following list 

includes several examples of when a 

retrospective adjustment may or may 

not occur: 

• Retrospective adjustment would be 

warranted for mathematical errors in 

applying the certified methodology. 

• Retrospective adjustment in 

aggregate payments would be warranted 

if based on incorrect enrollment data. 

• Retrospective adjustment would not 

appear to be warranted if the 

determination accurately reflected the 

certified methodology, and thus was 

consistent with the requirements of 

section 1331(d)(3)(A) of the Affordable 

Care Act, even if, based on new data or 

analysis, the same methodology would 

not be certified for subsequent fiscal 

years. 

The interpretation of a prospective 

annual adjustment, except in the case of 

an error, means that the payment 

methodology published in accordance 

with the process set forth in § 600.610 

will remain in effect for an entire fiscal 

year. The Secretary will only change the 

methodology for the following fiscal 

year in order to improve the accuracy of 

the methodology or to reflect more 

accurate data sources and assumptions. 

Should a change in methodology occur, 

the change will be applied on a 

prospective basis only. In addition to 

limiting retrospective adjustments to 

error, we also propose, as described 

further below, to adjust a state’s 

preceding fiscal year payment amounts 

based on actual enrollment in that year. 

We believe that this process will ensure 

the financial stability of the program as 

well as provide fiscal certainty for states 

as they develop their budgets each year. 

3. Secretarial determination of BHP 

payment amount (§ 600.610) 

Section 1331(d)(3)(B) of the 

Affordable Care Act requires that the 

Chief Actuary of CMS, in consultation 

with the Department of Treasury’s 

Office of Tax Analysis, certify the 

methodology to ensure that it meets the 

requirements set forth in the statute. 

The statute further provides that the 

certification must be based on sufficient 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59135 

data from the state and from comparable 

states regarding their experiences with 

other insurance affordability programs. 

We propose, at § 600.610(a), that 

beginning in fiscal year 2015, and upon 

receipt of certification, HHS will 

determine and publish in the Federal 

Register a proposed payment notice 

describing the BHP payment 

methodology utilized to calculate the 

payment factors and federal payment 

amount for the next fiscal year. This 

proposed payment notice will be 

published in October of each year. For 

example, in October 2014, HHS will 

publish the proposed BHP payment 

methodology that would be used to 

calculate the payment rates for fiscal 

year 2016. This approach is consistent 

with how payment parameters for 

Exchanges will be determined as well as 

how CHIP allotments were determined 

during the initial implementation of the 

program. In addition, we propose that 

the proposed payment notice may 

require states to submit data in order for 

the Secretary to determine and publish 

the BHP payment factors and to support 

the calculation of an estimated federal 

payment amount for the fiscal year in a 

subsequent Federal Register notice. We 

believe that publishing a proposed 

payment notice that includes the 

payment methodology would provide 

appropriate opportunity for public 

comment. We believe this timing would 

provide a state the information it needs 

to appropriately budget for BHP each 

year as well as provide fiscal assurance, 

a concern raised during our October 

2011 RFI process from both states and 

other stakeholder groups. 

We propose in § 600.610(b) that the 

Secretary determine and publish the 

final BHP payment methodology and 

payment factors that could be used to 

calculate an estimated federal payment 

amount based on a state’s projected 

enrollment in a subsequent Federal 

Register notice. We propose publishing 

this notice in February of each year to 

provide states sufficient time to make 

any necessary adjustments to their BHP 

contracts well in advance of the new 

coverage year that begins in January. 

The final BHP payment amount will be 

calculated quarterly, as determined by 

using the final payment methodology 

and factors as well as actual enrollment 

and other data provided at regular 

intervals as specified in the notice. If 

needed, other applicable data will be 

used as determined by the Secretary in 

the final notice. 

Given the timing of this proposed 

regulation and the January 1, 2015 

implementation date, we intend to 

modify the publication dates of the 

payment notices for the first year of BHP 

implementation. Specifically, because 

we will need to gather data from an 

interested state in order to model and 

calibrate the payment method and 

associated factors needed to determine 

preliminary payment amount, we intend 

to determine and publish in the Federal 

Register a proposed payment notice 

describing the BHP payment 

methodology for fiscal year 2015 in the 

fall of 2013. This notice will include 

requests for data to help the Secretary 

determine payment amounts. A 

subsequent Federal Register notice 

containing the final fiscal year 2015 

BHP funding methodology and payment 

amounts (which will be calculated by 

inputting the appropriate data into the 

final BHP funding methodology) will be 

published concurrently with the final 

BHP regulation. We invite comment on 

our proposed approach to the use, and 

publication, of the proposed and final 

payment notices, especially with respect 

to the variation in fiscal year 2014, to 

determine whether this approach 

ensures administrative and financial 

stability for states interested in 

participating in BHP. 

Under § 600.610(c)(1,) we propose to 

determine, on a quarterly basis, state 

specific prospective aggregate payment 

amounts. This prospective amount will 

be calculated using the payment 

methodology and factors in the final 

payment notice. This prospective 

amount will be determined by 

multiplying the payment rates described 

in § 600.610(b) of this section by the 

projected number of BHP enrollees. This 

calculation may include different 

payment rates for enrollees related to 

the factors described in § 600.605(b). We 

are proposing this approach to quarterly 

prospective aggregate payments to 

provide the state with financial stability 

and assurance. 

In § 600.610(c)(2), we propose 

retrospective adjustments to the 

aggregate amount described in 

§ 600.610(c)(1) to account for any errors 

and to account for actual enrollment. 

The adjustment to account for actual 

enrollment would occur sixty days after 

the end of a quarter, and we would use 

the same method when determining a 

state’s prospective aggregate payment 

amount; however, the enrollment 

numbers used in this calculation will be 

based on actual enrollment for the 

previous quarter rather than projected 

numbers. In the event that an 

adjustment to the payment amount is 

needed to account for differences in 

projected versus actual enrollment, we 

propose either depositing an additional 

payment in the state’s BHP trust fund 

(to account for higher-than-projected 

enrollment), or a reduction in the state’s 

upcoming quarter’s prospective 

aggregate payment amount (to account 

for lower-than-projected enrollment). 

We have proposed this process given 

that statute only authorizes payment on 

a per enrollee basis; therefore, we have 

determined that payments in excess of 

the per enrollee amount would not be 

permitted by statute. As with our 

proposed approach to determining 

proposed and final payment notices, we 

seek comment on this method of 

calculating and adjusting aggregate BHP 

payment amounts. 

Finally, in § 600.615, we propose to 

make quarterly deposits to the state’s 

BHP trust fund based on the aggregate 

quarterly payment amounts discussed in 

§ 600.610(c). 

H. BHP Trust Fund 

We propose adding subpart H 

consisting of § 600.700 through 600.715 

to specify the use of BHP trust funds, 

establishment of fiscal policies and 

accountability, and restitution and 

disallowance procedures. 

1. Basis, scope and applicability 

(§ 600.700) 

Section 1331(d)(2) of the Affordable 

Care Act specifies that a state 

implementing a BHP must establish a 

trust for the deposit of federal BHP 

payments. Because the trust fund is an 

integral feature of the BHP, we propose 

at § 600.705 to set new standards with 

respect to the establishment of the trust 

fund as well as the standards for 

allowable BHP trust fund expenditures. 

We propose at § 600.710 that a state 

establish appropriate fiscal and 

accountability standards to ensure that 

BHP trust funds are expended in 

accordance with the new standards set 

forth in § 600.705. At § 600.715, we 

propose restitution and disallowance 

procedures in the event that a 

determination is made that BHP trust 

funds have been improperly expended. 

2. BHP Trust Fund (§ 600.705) 

Section 1331(d)(2) of the Affordable 

Care Act specifies that the state 

establish a trust fund to receive federal 

deposits for the provision of the BHP. 

The statute also provides that the state 

may use unspent BHP trust funds to 

reduce premiums and cost sharing, or to 

provide additional benefits, for BHP 

enrollees. Under § 600.705(a), we 

propose that the state establish a trust 

fund at an independent entity, or as a 

subset account to the state’s General 

Fund, and identify trustees responsible 

for oversight of the BHP trust fund along 

with individuals with the power to 

authorize withdrawal of funds. In 

addition to the federal deposits, we are 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59136 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

proposing in paragraph (b) that a state 

may deposit non-federal funds into its 

trust fund, which can include receipts 

from enrollees, providers or other third 

parties for standard health coverage. 

However, once non-federal funds have 

been deposited, such funds will be 

treated in the same manner as federal 

funds, must remain in the BHP trust 

fund and adhere to the same standards 

in accordance with paragraphs (c) and 

(d) in this section. We propose at 

§ 600.705(c) to codify the statutory 

requirement which permits the use of 

BHP trust funds only to reduce 

premiums and cost sharing of standard 

health plan coverage, or to provide 

additional benefits for, eligible 

individuals enrolled in standard health 

plans within the state. 

Finally, section 1331(d)(2) specifies 

particular limitations on the use of BHP 

trust funds. Specifically, states are not 

permitted to use BHP trust funds for 

purposes of meeting any matching or 

expenditure requirement of any 

federally-funded program, such as 

Medicaid or CHIP. We propose in 

§ 600.705(d) to specify this as well 

additional situations in which the 

expenditure of BHP trust funds are not 

permitted, including the statutory 

prohibition of the use of funds to cover 

administrative costs. In § 600.705(e), we 

propose that a state may maintain in its 

trust fund a surplus or reserve of 

unexpended funds until such time as 

those funds are expended in accordance 

with the standards set forth in 

§ 600.705(c) and (d). 

3. State fiscal policies and 

accountability (§ 600.710) 

We propose at § 600.710 to require the 

inclusion of fiscal policies and 

accountability requirements in the 

state’s BHP Blueprint so that the state 

can document the use of BHP trust 

funds for authorized purposes. 

Specifically, under § 600.710(a), we 

propose that the state maintain an 

accounting and record system to ensure 

that BHP trust funds are properly 

maintained and expended. In 

accounting for such expenditures, the 

state must adhere to the cost principles 

applicable to governmental entities 

under Office of Management and Budget 

(OMB) Circulars A–87 and A–133. 

We propose at § 600.710(b) that the 

state obtain an annual certification from 

the BHP trustees, the chief financial 

officer, or designee, certifying: (1) The 

program’s financial statements for the 

fiscal year; (2) the separation of BHP 

trust funds from other state program 

funding to assure that BHP trust funds 

are not being used as the non-federal 

share to meet matching or expenditure 

requirements of any federally-funded 

program, such as Medicaid or CHIP; and 

(3) compliance with all federal 

requirements consistent with those 

specified for the administration and 

provision of the program. In accounting 

for such expenditures, the state must 

adhere to the cost principles applicable 

to governmental entities under Office of 

Management and Budget (OMB) 

Circulars A–87 and A–133. 

Under § 600.710(c), we propose that 

the state conduct an independent audit 

of BHP trust fund expenditures over a 

period of three years to determine 

whether the expenditures made during 

this time period were allowable and 

applied only to costs associated with 

reducing premiums and/or cost sharing, 

or provision of benefits. The 

independent audit may be conducted as 

a sub-audit of the single state audit 

conducted in accordance with OMB 

Circular A–133, and must follow the 

cost accounting principles in OMB 

Circular A–87. We propose that the state 

conduct the independent annual audit 

consistent with the standards set forth 

in chapter 3 of the Government 

Accountability Office’s Government 

Auditing Standards (which are also 

consistent with those in Medicaid). As 

currently proposed, the state may elect 

to contract with a third party to conduct 

the audit, or may elect to use a state 

agency to the extent that the state can 

assure the audit was conducted in an 

independent manner. 

We further propose in § 600.710(d) 

that the state publish annual reports on 

the use of funds, including a separate 

line item that tracks the use of funds 

described in § 600.705(e) to further 

reduce premiums and cost sharing, or 

for the provision of additional benefits, 

within 10 days of approval by the 

trustees. If applicable for the reporting 

year, the annual report must also 

contain the findings for the audit 

conducted in accordance with 

paragraph (c) of this section. At 

§ 600.710(e), we propose that the BHP 

Blueprint establish and maintain BHP 

trust fund restitution procedures, in the 

event that the state or trustees must 

restore funds to the trust fund due to 

unallowable expenditures. We propose 

that the state maintain records for three 

years after the date of submission of a 

final expenditure report, or beyond, in 

instances where audit findings have not 

been resolved, consistent with the 

current standards in CHIP. 

4. Resolution of questions about BHP 

transactions: Corrective action, 

restitution and disallowance of 

improper expenditures from the BHP 

Trust Fund (§ 600.715) 

We propose at §§ 600.715(a) and (b) 

that when a question about the proper 

use of trust fund resources arises 

through the application of state fiscal 

policies, or through state or federal 

review and audit processes, the state 

and BHP trustees shall review those 

questions, and develop a written 

response to the questions raised no later 

than 60 days upon receipt of such a 

report, unless otherwise specified in the 

report, review or audit. In addition, 

based on that review, the state and BHP 

trustees shall take corrective action to 

ensure proper use of funds and 

restitution of questioned funds, as 

appropriate, to the state’s trust fund. We 

further propose in paragraph (b) of this 

section, to the extent that the state and 

the BHP trustees determine that BHP 

trust funds may not have been properly 

spent, they shall ensure restitution to 

the BHP trust fund of amounts 

questioned by HHS, OIG or state 

auditors or reviewers. These policies are 

consistent with the normal business 

operations and proper management of a 

trust fund, with the possibility of 

ongoing reconciliation and correction of 

expenditures in the context of ongoing 

relationships with contractors and other 

business associates. 

As proposed in § 600.715(b), to the 

extent that the state and BHP trustees 

determine that BHP trust funds may not 

have been properly spent, they must 

ensure restitution to the trust fund of 

the amounts in question. This is 

consistent with the nature of a trust 

fund, and the fiduciary relationship that 

trustees and other controlling entities 

have in the management of a trust fund. 

Restitution may be made directly, or by 

a liable third party (which could 

include the recipient of the improper 

expenditures, or an indemnifying 

insurer). Trustees may be the 

beneficiaries of indemnification 

agreements entered into by the state, the 

BHP trustees or an insurer. 

We propose in § 600.715(c) to provide 

considerable flexibility in the timing of 

such restitution; restitutions may occur 

in a lump sum amount, or in equal 

installments. Restitution to the BHP 

trust fund cannot exceed a two year 

period from the date of the written 

response in accordance with paragraph 

(a) of this section. We propose providing 

a state with flexibility to determine the 

restitution option that best fits the 

circumstances so as to ensure the 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59137 

viability and sustainability of its 

program. 

We believe that most questioned 

expenditures will be resolved through 

these steps based on preliminary 

findings prior to any final determination 

that there has been an improper or 

unauthorized expenditure. To the extent 

that the BHP trustees and the state 

assure restitution of questioned BHP 

expenditures, the result will be that 

there will be no net improper or 

unauthorized expenditure. But if 

questioned funding is not restored to the 

BHP trust fund, and the questions are 

not otherwise resolved, then there 

would be an improper expenditure of 

federal funds. The state is not entitled 

to retain federal grant funding expended 

for purposes not statutorily authorized, 

and would need to return any such 

amounts. 

To provide for the return of federal 

funding not expended for statutory 

authorized purposes, we propose at 

§ 600.715(d) a procedure for HHS to 

disallow federal BHP funding that the 

Secretary (or a designated hearing 

officer) determines to have been 

improperly expended, after taking into 

account provisions for restitution of 

funds (other than when the restitution 

schedule elected by the BHP trustees 

and state has not been maintained). 

While we believe such disallowances 

will be rare in light of the oversight that 

we expect will be exercised on a state 

level through the trustees and the state 

audit process, disallowances are a 

necessary part of the federal oversight 

process and ensure that the statutory 

conditions for BHP funding are met. 

Because we believe that the issues 

underlying a federal disallowance will 

generally have been fully developed in 

these state level audit and reviews, or 

through federal audit and review 

processes that will provide ample 

opportunity for resolution by the BHP 

trustees and the state questions through 

corrective action and restitution, we 

provide for a simplified disallowance 

process. After notice of an initial finding 

that contains a written explanation of 

the basis for the determination, the state 

will have an opportunity to submit 

information and argument for 

administrative reconsideration. Upon 

receipt of such a submission, the 

Secretary (or designated hearing officer) 

will determine if further information or 

procedures are necessary. The Secretary 

will then issue a final decision within 

90 days after the later of the date of 

receipt of the reconsideration request or 

the date of the last scheduled 

proceeding or submission. 

In § 600.715(f), we set forth the timing 

of the return of disallowed federal BHP 

funding. Disallowed federal BHP 

funding must be returned to HHS within 

60 days after the later of the date of the 

disallowance notice or the final 

administrative reconsideration 

upholding the disallowance. Such 

repayment cannot be made from BHP 

trust funds, but must be made with 

other, non-federal, funds. 

Finally, we propose to revise the 

definition of ‘‘individual market’’ as 

described in 45 CFR 144.103 to clarify 

that Medicaid, CHIP and BHP coverage 

is not considered health insurance 

coverage available on the individual 

market. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

To derive average costs, we used data 

from the U.S. Bureau of Labor Statistics 

for all salary estimates. The salary 

estimates include the cost of fringe 

benefits, calculated at 35 percent of 

salary, which is based on the March 

2011 Employer Costs for Employee 

Compensation report by the Bureau. 

We are soliciting public comment on 

each of the section 3506(c)(2)(A)- 

required issues for the following 

information collection requirements 

(ICRs): 

A. ICRs Regarding the BHP Blueprint 

(§§ 600.110, 600,115, 600.125, 600.305, 

600.320, 600.345, 600.405, 600.410, 

600.415, 600.420, 600.425, 600.505, 

600.510, 600.525, 600.530, and 600.710) 

In § 600.110, states wishing to 

participate in the BHP would prepare 

and submit a ‘‘Blueprint’’ to the 

Secretary for certification of the state’s 

program. Although we intend to issue a 

template outlining the required 

components of a Blueprint, that 

template will be made available at a 

later time. In the meantime, we are 

setting out the Blueprint’s burden 

estimates since its requirements are 

proposed in this proposed rule. 

Section 600.115, specifies that the 

Blueprint must be signed by the state’s 

governor or signed by an official 

delegated by the governor. The 

Blueprint must identify the agency and 

officials, by position or title, who are 

responsible for program administration, 

operations, and financial oversight. The 

Blueprint would also be required to 

identify the required characteristics for 

all BHP Trust Fund trustees. 

In § 600.305, the Blueprint would be 

required to be consistent with the 

standards used to determine BHP 

eligibility. The state may not impose 

conditions of eligibility other than those 

identified in this section. 

In §§ 600.320 and 600.345, the 

Blueprint would be required to ensure 

that the state’s enrollment, 

disenrollment, and verification policies 

are consistent with these sections. It 

must also include a plan to ensure 

coordination with and eliminate gaps in 

coverage for individuals transitioning 

between other insurance affordability 

programs. 

In § 600.405, the Blueprint would be 

required to ensure that standard health 

plan coverage include (at a minimum) 

EHBs including any changes resulting 

from periodic reviews. While states 

have the option to allow benefits in 

addition to the EHBs, standard health 

plan coverage must be in compliance 

with 45 CFR 156.280 regarding abortion 

services. 

In § 600.410, states would be required 

to assure that they comply with 

competitive contracting provisions in 

§ 600.410(b), (c), and (d). This includes 

but is not limited to a justification for 

states unable to implement a 

competitive contracting process for 

benefit year 2015 as well as a 

description of the process it will use to 

enter into contracts for standard health 

plans. The state must also include a 

proposed timeline for implementing a 

competitive contracting process and 

provide assurance that the process 

includes specific negotiation criteria. 

In § 600.415, states would be required 

to enter into a contract (with an offeror) 

for the administration and provision of 

standard health plans. A standard set of 

contract requirements would be 

included in the Blueprint. 

In § 600.420, the Blueprint would be 

required to include a description of how 

the state will ensure (to the greatest 

extent possible) enrollee choice of 

standard health plans. States may also 

enter into a joint procurement with 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59138 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

other states. States electing this option 

must address the Blueprint provisions 

in § 600.420(b)(2). 

In § 600.425, the Blueprint would be 

required to demonstrate how the state 

will ensure coordination with other 

insurance affordability programs. 

In § 600.505, the Blueprint would be 

required to describe: the amount of the 

premium imposed on enrollees; the 

group or groups that are subject to the 

applicable premium; the collection 

method and procedure for the payment 

of an enrollee’s premium; the 

disenrollment procedures and 

consequences of nonpayment of 

premiums. The Blueprint must also 

ensure that the total premium liability 

for an enrollee does not exceed the 

monthly premium that the enrollee 

would have paid had he/she enrolled in 

the second lowest cost silver plan 

offered through an Exchange. 

With regard to cost sharing imposed 

on enrollees, § 600.510 would require 

that the Blueprint identifies the group or 

groups of enrollees that may be subject 

to the cost sharing, and an assurance 

that the state has established a system 

to monitor and track the cost-sharing 

standards specified in § 600.520. 

In § 600.525(a), the Blueprint would 

be required to assure that the state is in 

compliance with the disenrollment 

procedures described in 45 CFR 

155.430. 

If a state has elected to implement a 

continuous enrollment policy, the state 

may also impose a lockout period after 

an enrollee has been disenrolled from 

the program. The Blueprint must define 

the length of the state’s lockout period 

and assure that it will not continue to 

impose a premium lockout period after 

an enrollee’s past due premiums have 

been paid and will not require the 

collection of past due premiums as a 

condition of eligibility for reenrollment 

once the state-defined lockout period 

has expired. 

In § 600.710, the Blueprint would be 

required to ensure that the state’s fiscal 

policies and accountability standards 

are consistent with this section. In this 

regard, the Blueprint must ensure that 

the BHP administering agency will 

maintain an accounting system and 

support fiscal records to assure that the 

trust funds are maintained and 

expended in accordance with federal 

requirements. The Blueprint would also 

be required to assure that the 

administering agency will obtain an 

annual certification from the state’s BHP 

trustees, or chief financial officer (or 

designee), certifying the state’s trust 

fund financial statements for the fiscal 

year, that the trust funds are not being 

used as the non-federal share to meet 

matching or expenditure requirements 

of any federally-funded program, and 

that the trust fund is used in accordance 

with federal requirements. 

The Blueprint would include an 

assurance that the administering agency 

will conduct an audit of trust fund 

expenditures, publish annual reports on 

the use of funds and audit findings (if 

applicable), establish and maintain trust 

fund restitution procedures, and retain 

records. The Blueprint must also be 

accompanied by a funding plan that 

describes the enrollment and cost 

projections for the first 12 months of 

operation and funding sources beyond 

the trust fund (if any). The plan must 

demonstrate that federal funds will only 

be used to reduce premiums and costsharing or to provide additional 

benefits. 

Finally, the Blueprint would be 

required to describe how the state will 

ensure program integrity, including how 

the state will address potential issues of 

fraud, waste, and abuse and ensure 

consumer protections. 

While a few states have expressed 

interest in pursuing the Basic Health 

Program in their state, HHS does not 

have an estimate of how many states 

will pursue this option. As such, we 

provide the burden estimate for one 

state and seek comment on the number 

of likely states to pursue this option. We 

estimate that it will take a state 

approximately 100 hours to develop the 

Blueprint and submit to the Secretary. 

For purposes of this estimate, we 

assume that meeting these requirements 

will take a health policy analyst 80 

hours (at an average wage rate of $43 an 

hour) and a senior manager 20 hours (at 

an average wage rate of $77 an hour). 

The estimated cost burden for one state 

is $4,980. 

As described in § 600.125, a state 

must notify HHS of any significant 

changes to its Blueprint. We estimate 

that it will take one state 12 hours to 

revise its Blueprint and submit it to 

HHS. We presume that it will take a 

health policy analyst 10 hours at $43 an 

hour and a senior manager 2 hours at 

$77 an hour to submit the change. The 

estimated cost burden for one state is 

$584. 

Since we estimate less than 10 annual 

respondents, the requirements/burden 

are exempt from formal OMB review 

and approval under 5 CFR 1320.3(c). 

Consequently, a PRA package is not 

applicable. 

B. ICRs Regarding the Operation of a 

Basic Health Program (§§ 600.145, 

600.150, and 600.170, and Subpart E) 

The ongoing burden associated with 

the requirements under § 600.145 is the 

time and effort it would take each 

participating State Medicaid Program to 

perform the recordkeeping and 

reporting portions of the core operating 

functions of a BHP including eligibility 

determinations and appeals as well as 

enrollment and disenrollment, health 

plan contracting, oversight and financial 

integrity, consumer assistance, and if 

necessary program termination. 

BHPs would function as part of a 

coordinated eligibility and enrollment 

structure over all insurance affordability 

programs. They need to maintain and 

transfer eligibility accounts with equal 

accuracy and efficiency as the 

Exchange, as well as maintain 

enrollment data reported monthly to 

HHS. As such, we are estimating equal 

burden to the Exchange for this 

function. We estimate that it will take 

52 hours annually to ensure the 

collection of enrollment data. 

Additionally we estimate it will take 12 

hours to submit monthly enrollment 

data and 12 hours to reconcile data 

monthly. 

The BHP will issue notices to 

applicants and eligible individuals 

regarding eligibility status. These 

notices must be developed and 

processed in a coordinated fashion with 

other insurance affordability programs. 

The burden estimates here are only for 

added burden of customizing to the 

BHP. We estimate that it will take a state 

16 hours annually to customize notices 

and processes for the BHP. 

We estimate that is will take 356 

hours ((24 × 12) + 52 + 16) for a BHP 

to meet these reporting requirements for 

eligibility and enrollment functions. We 

presume that it will take an operations 

analyst 220 hours (at $55 an hour), a 

health policy analyst 80 hours (at $43 

and hour) and a senior manager 56 

hours (at $77 an hour). To carry out the 

requirements for this function, we 

estimate the total cost of the reporting 

burden to be $19,852 per state. 

Part 600, subpart E, describes 

reporting requirements associated with 

the core function of standard health 

plan contracting and operations. Each 

state BHP must contract with standard 

health plan offerors and require 

participating standard health plans to 

provide transparency in covered 

benefits, cost-sharing and participating 

providers by reporting and making 

public such information annually. We 

estimate that it will take a state 120 

hours to create and evaluate the request 

for proposals for participating standard 

health plans. Using the same estimates 

as the Exchange, we presume that it will 

take an additional 24 hours to collect 

the information necessary to ensure that 

coverage and transparency requirements 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59139 

are met for a total annual burden per 

state of 144 hours. We presume that it 

will take a health policy analyst 100 

hours (at $43 an hour), an operations 

analyst 20 hours (at $55 an hour) and a 

senior manager 24 hours (at $77 an 

hour). The cost burden per state is 

$7,248. 

Oversight and financial integrity are 

core functions of the BHP that include 

annual reporting requirements to HHS 

on the operation of the trust fund, 

providing annual data necessary to 

acquire and reconcile federal funding 

and complete financial sections of the 

annual report in § 600.170. We estimate 

that it will take a state operating a BHP 

24 hours annually to complete these 

reporting requirements. We presume 

that it will take an operations analyst 10 

hours (at $55 an hour), a financial 

analyst 10 hours (at $62 and hour) and 

a senior manager 4 hours (at $77 an 

hour) for cost burden of $1,478 for one 

state. 

Finally, BHPs are required in 

§ 600.150 to ensure that there is 

enrollment assistance and information 

readily available to understand the 

program and any choices a consumer 

would have. We estimate that it will 

take a state 48 hours annually to create 

and share its format for required 

information with participating health 

plan offerors and to provide the 

necessary oversight to ensure that each 

offeror has complied with the 

specifications. Additionally, the state 

must publish enrollment choices, 

covered services and any options and 

limitations in a manner that meets 

accessibility and readability standards. 

The total burden estimate for program 

termination is 48 hours per state. We 

presume that it would take a health 

policy analyst 40 hours (at $43 an hour) 

and an operations analyst 8 hours (at 

$55 an hour) to fulfill the enrollment 

assistance and information requirements 

burden. The total cost burden to the 

state for this function is $2,160. 

Since we estimate less than 10 annual 

respondents, the requirements/burden 

are exempt from formal OMB review 

and approval under 5 CFR 1320.3(c). 

Consequently, a PRA package is not 

applicable. 

C. ICRs Regarding the Termination of a 

Basic Health Program (§ 600.140) 

Section 600.140 would direct a state 

electing to terminate its BHP to submit 

a notice and transition plan to the 

Secretary. We estimate that it would 

take a state 24 hours to create and 

submit such information. A state must 

submit written notice to all participating 

standard health plans and to all 

enrollees regarding their plans to 

terminate. Consistent with other notice 

estimates in the Exchange and BHP, we 

estimate that it would take 16 hours to 

prepare and submit each notification for 

a total of 32 hours per state. Finally, the 

state would be required to perform 

eligibility account transfers on behalf of 

enrollees. Due to the requirement that a 

state use the single eligibility service for 

all insurance affordability programs, we 

do not believe this requirement to 

necessitate much effort. We estimate 

that a state can fulfill this requirement 

in 8 hours. 

The total burden estimate for program 

termination is 64 hours (24 + 32 + 8) per 

state. We presume that it would take a 

health policy analyst 44 hours (at $43 an 

hour), an operations analyst 10 hours (at 

$55 an hour) and a senior manager 10 

hours (at $77 an hour) to fulfill the 

program termination reporting burden. 

The total cost burden to the state for this 

function is $3,212. 

Since we estimate less than 10 annual 

respondents, the requirements/burden 

are exempt from formal OMB review 

and approval under 5 CFR 1320.3(c). 

Consequently, a PRA package is not 

applicable. 

D. Submission of PRA-Related 

Comments 

We invite public comments on these 

potential information collection 

requirements. If you comment on these 

information collection and 

recordkeeping requirements, please do 

either of the following: 

1. Submit your comments 

electronically as specified in the 

ADDRESSES section of this proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

(CMS–2380–P) Fax: (202) 395–6974; or 

Email: OIRA_submission@omb.eop.gov. 

Comments must be received on/by 

November 25, 2013. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the ‘‘DATES’’ section 

of this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VI. Regulatory Impact Statement (or 

Analysis) 

A. 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 1102(b) of the Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(March 22, 1995; Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999) 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). Section 3(f) of Executive Order 

12866 defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) Having an annual 

effect on the economy of $100 million 

or more in any 1 year, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). The 

Basic Health Program provides states 

the flexibility to establish an alternative 

coverage program for low-income 

individuals who would otherwise be 

eligible to purchase coverage through 

Exchange. We are uncertain as to 

whether the effects of this rulemaking 

will be ‘‘economically significant’’ as 

measured by the $100 million threshold, 

and hence not a major rule under the 

Congressional Review Act. We seek 

comment on the analysis provided 

below to help inform this assessment by 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59140 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

1Hwang, A., S. Rosenbaum, and B. D. Sommers. 

‘‘Creation Of State Basic Health Programs Would 

Lead To 4 Percent Fewer People Churning Between 

Medicaid And Exchanges.’’ Health Affairs 31.6 

(2012): 1314–1320. 

Buettgens, M., A. Nichols, and S. Dorn. 

‘‘Churning Under the ACA and State Policy Options 

for Mitigation: Timely Analysis of Immediate 

Health Policy Issues.’’ Urban Institute (2012). 

Available at http://www.urban.org/UploadedPDF/

412587-Churning-Under-the-ACA-and-State-PolicyOptions-for-Mitigation.pdf. 

the time of the final rule. In accordance 

with the provisions of Executive Order 

12866, this regulation was reviewed by 

the Office of Management and Budget. 

1. Need for the Rule 

Section 1331 of the Affordable Care 

Act (codified at 42 USC § 18051) 

requires the Secretary to establish a 

Basic Health Program. This proposed 

rule implements that section. 

2. Benefits 

We anticipate that the Basic Health 

Program will provide benefits to both 

consumers and states. 

a. Benefits to Consumers 

The Basic Health Program (BHP) 

targets low-income individuals who 

would be eligible for premium and costsharing reductions, if they purchased 

health insurance through an Exchange. 

These individuals often have variable 

income that causes them to move 

between insurance programs. For 

example, if their income drops, they 

may be eligible for Medicaid, and when 

their income rises, they would be 

eligible to purchase insurance (with 

premium and cost-sharing reductions) 

on an Exchange. This variability in 

income can result in individuals moving 

back and forth between Medicaid and 

an Exchange, a phenomenon known as 

‘‘churning.’’ Because Medicaid health 

plans and health plans offered on 

Exchanges vary in terms of benefits, 

provider networks, cost-sharing, and 

administration, churn can be disruptive 

and lead to poorer health outcomes due 

to lack of continuity of care. Researchers 

have estimated that the Basic Health 

Program will significantly reduce the 

number of individuals that churn 

between Medicaid and Exchanges.1

We request additional comments and 

data that would help us assess the 

benefits of a Basic Health Program to 

consumers. 

b. Benefits to States 

Several states currently operate health 

insurance programs for low-income 

adults with income above Medicaid 

eligibility levels. These states believe 

that the programs confer benefit to their 

residents beyond what those individuals 

could obtain by purchasing health 

insurance on an Exchange. The Basic 

Health Program established by this rule 

would give states the option to maintain 

these programs rather than sending 

those individuals to purchase insurance 

on the Exchange. We request additional 

comments and data that would help us 

assess the benefits of a Basic Health 

Program to states. 

3. Costs 

The provisions of this rule were 

designed to minimize regulatory costs. 

Rarely did we create new administrative 

structures, both because the Basic 

Health Program does not include 

administrative funding and because of 

the need for states to coordinate with 

other insurance affordability programs. 

To the extent possible, we borrowed 

structures from existing programs. We 

request comments and data that would 

help us assess the costs of a Basic 

Health Program. 

4. Transfers 

The provisions of this rule are 

designed to transfer funds that would be 

available to individuals for premium 

and cost-sharing reductions for coverage 

purchased on an Exchange to states to 

offer coverage through a Basic Health 

Program. In states that choose to 

implement a Basic Health Program, 

eligible individuals will not be able to 

purchase health insurance through the 

Exchange. As a result, fewer individuals 

will use the Exchange to purchase 

health insurance. This choice may have 

economic impact, and we seek 

comments and data that would help us 

assess that impact. 

5. Regulatory Alternatives 

Many of the structures of the Basic 

Health Program are set out in statute, 

and therefore we were limited in the 

alternatives we could consider. When 

we had options, we attempted to limit 

the number of new regulatory structures 

we created. To make the program easier 

for states to implement, we adopt or 

adapt regulations from existing 

programs—Medicaid, the Children’s 

Health Insurance Program, and the 

Exchanges—whenever possible, rather 

than create new structures. Two areas in 

which we had choices are reporting 

compliance with federal rules and 

contracting with standard health plans. 

a. Reporting compliance with federal 

rules to HHS 

We followed the paradigm of adopting 

or adapting existing structures when 

creating a process for reporting state 

compliance with federal rules. Two 

existing structures we considered were 

the Exchange model of Blueprints and 

the Medicaid model of state plans. We 

chose to use the Blueprint model, which 

we believe will be less burdensome to 

states than the state plan model. We 

seek comments, data, and suggestions 

for alternative methods for states to 

report to HHS. 

b. Contracting requirements 

Similarly when choosing how to 

regulate state contracts with standard 

health plans, we looked to models in the 

Exchange and Medicaid rather than 

creating new regulatory schemes. We 

have adopted, where possible, existing 

procurement requirements in order to 

minimize the burden on states. In 

addition, we have allowed states the 

option to seek an exemption from 

competitive contracting requirements 

for program year 2015 if they are unable 

to meet the requirements in the first 

year of the program. We seek comments, 

data, and suggestions for other 

alternatives to the contracting process 

we propose. 

B. Unfunded Mandates Reform Act 

Section 2 02 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation, 

by state, local, or tribal governments, in 

the aggregate, or by the private sector. In 

2013, that threshold is approximately 

$141 million. States have the option, but 

are not required, to establish a BHP. 

Thus, this proposed rules does not 

mandate expenditures by state 

governments, local governments, or 

tribal governments 

C. 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 Act generally defines a ‘‘small 

entity’’ as (1) a proprietary firm meeting 

the size standards of the Small Business 

Administration (SBA); (2 ) a not-forprofit organization that is not dominant 

in its field; or (3) a small government 

jurisdiction with a population of less 

than 50,000. Individuals and states are 

not included in the definition of a small 

entity. Few of the entities that meet the 

definition of a small entity as that term 

is used in the RFA would be impacted 

directly by this proposed rule. 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59141 

Because this proposed rule is focused 

on eligibility and enrollment in public 

programs, it does not contain provisions 

that would have a significant direct 

impact on hospitals, and other health 

care providers that are designated as 

small entities under the RFA. However, 

the provisions in this proposed rule may 

have a substantial, positive indirect 

effect on hospitals and other health care 

providers due to the substantial increase 

in the prevalence of health coverage 

among populations who are currently 

unable to pay for needed health care, 

leading to lower rates of uncompensated 

care at hospitals. The Department 

cannot determine whether this proposed 

rule would have a significant economic 

impact on a substantial number of small 

entities, and we request public comment 

on this issue. 

Section 1102(b) of the Act requires us 

to prepare a regulatory impact analysis 

if a proposed rule may have a significant 

economic impact on the operations of a 

substantial number of small rural 

hospitals. For purposes of section 1102 

(b) of the Act, we define a small rural 

hospital as a hospital that is located 

outside of a metropolitan statistical area 

and has fewer than 100 beds. As 

indicated in the preceding discussion, 

there may be indirect positive effects 

from reductions in uncompensated care. 

Again, the Department cannot 

determine whether this proposed rule 

would have a significant economic 

impact on a substantial number of small 

rural hospitals, and we request public 

comment on this issue. 

D. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

effects on States, preempts State law, or 

otherwise has Federalism implications. 

The BHP is entirely optional for states, 

and if implemented in a state, provides 

access to a pool of funding that would 

not otherwise be available to the state. 

We have consulted with states to 

receive input on how the Affordable 

Care Act provisions codified in this 

proposed rule would affect States. We 

have participated in a number of 

conference calls and in person meetings 

with state officials. 

We continue to engage in ongoing 

consultations with states that have 

expressed interest in implementing a 

BHP through the BHP Learning 

Collaborative, which serves as a staff 

level policy and technical exchange of 

information between CMS and the 

States. Through consultations with this 

Learning Collaborative, we have been 

able to get input from States on many 

of the specific issues addressed in this 

rule. 

List of Subjects 

42 CFR Part 600 

Administrative practice and 

procedure, Health care, Health 

insurance, Penalties, and Reporting and 

recordkeeping requirements, State and 

local governments. 

45 CFR Part 144 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements. 

For the reasons set forth in the 

preamble, under the authority at section 

1331(a)(1) of the Affordable Care Act, 

the Centers for Medicare & Medicaid 

Services and the Office of the Secretary 

propose to amend 42 CFR chapter IV 

and 45 CFR subtitle A, respectively, as 

set forth below. 

Title 42 

■ 1. Subchapter I, consisting of part 600, 

is added to read as follows: 

Subchapter I— Basic Health Program 

PART 600—ADMINISTRATION, 

ELIGIBILITY, ESSENTIAL HEALTH 

BENEFITS, PERFORMANCE 

STANDARDS, SERVICE DELIVERY 

REQUIREMENTS, PREMIUM AND 

COST SHARING, ALLOTMENTS, AND 

RECONCILATION 

Subpart A—General Provisions and 

Definitions 

Sec. 

600.1 Scope. 

600.5 Definitions and use of terms. 

Subpart B— Establishment and 

Certification of State Basic Health Programs 

600.100 Program description. 

600.105 Basis, scope, and applicability of 

subpart B. 

600.110 BHP Blueprint. 

600.115 Development and submission of 

the BHP Blueprint. 

600.120 Certification of a BHP Blueprint. 

600.125 Revisions to a certified BHP 

Blueprint. 

600.130 Withdrawal of a BHP Blueprint 

prior to implementation. 

600.135 Notice and timing of HHS action 

on a BHP Blueprint. 

600.140 State termination of a BHP. 

600.142 HHS withdrawal of certification 

and termination of a BHP. 

600.145 State program administration and 

operation. 

600.150 Enrollment assistance and 

information requirements. 

600.155 Tribal consultation. 

600.160 Protections for American Indian 

and Alaskan Natives. 

600.165 Nondiscrimination standards. 

600.170 Annual report content and timing. 

Subpart C—Federal Program 

Administration 

600.200 Federal program reviews and 

audits. 

Subpart D—Eligibility and Enrollment 

600.300 Basis, scope, and applicability. 

600.305 Eligible individuals. 

600.310 Application. 

600.315 Certified application counselors. 

600.320 Determination of eligibility for and 

enrollment in a standard health plan. 

600.330 Coordination with other insurance 

affordability programs. 

600.335 Appeals. 

600.340 Periodic determination and 

renewal of BHP eligibility. 

600.345 Eligibility verification. 

600.350 Privacy and security of 

information. 

Subpart E—Standard Health Plan 

600.400 Basis, scope, and applicability. 

600.405 Standard health plan coverage. 

600.410 Competitive contracting process. 

600.415 Contracting qualifications and 

requirements. 

600.420 Enhanced availability of standard 

health plans. 

600.425 Coordination with other insurance 

affordability programs. 

Subpart F—Enrollee Financial 

Responsibilities 

600.500 Basis, scope, and applicability. 

600.505 Premiums. 

600.510 Cost-sharing. 

600.515 Public schedule of enrollee 

premium and cost sharing. 

600.520 General cost-sharing protections. 

600.525 Disenrollment procedures and 

consequences for nonpayment of 

premiums. 

Subpart G—Payment to States 

600.600 Basis, scope, and applicability. 

600.605 BHP payment methodology. 

600.610 Secretarial determination of BHP 

payment amount. 

600.615 Deposit of Federal BHP payment. 

Subpart H—BHP Trust Fund 

600.700 Basis, scope, and applicability. 

600.705 BHP trust fund. 

600.710 Fiscal policies and accountability. 

600.715 Corrective action, restitution, and 

disallowance of questioned BHP 

transactions 

Authority: Section 1331 of the Patient 

Protection and Affordable Care Act of 2010 

(Pub. L. 111–148, 124 Stat. 119), as amended 

by the Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111–152, 

124 Stat 1029). 

Subpart A—General Provisions and 

Definitions 

§ 600.1 Scope. 

Section 1331 of the Patient Protection 

and Affordable Care Act, provides for 

the establishment of the Basic Health 

Program (BHP) under which a State may 

enter into contracts to offer two or more 

standard health plans providing at least 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59142 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

essential health benefits to eligible 

individuals in lieu of offering such 

individuals the opportunity to enroll in 

coverage through an Affordable 

Insurance Exchange. States that elect to 

operate a BHP will receive federal 

funding based on the amount of 

premium tax credits and cost-sharing 

reductions that would have been 

available if enrollees had obtained 

coverage through the Exchange. 

§ 600.5 Definitions and use of terms. 

For purposes of this part, the 

following definitions apply: 

Advance payments of the premium 

tax credit means payment of the tax 

credits authorized by 26 U.S.C. 36B and 

its implementing regulations, which are 

provided on an advance basis to an 

eligible individual enrolled in a QHP 

through an Exchange in accordance 

with sections 1402 and 1412 of the 

Affordable Care Act. 

Affordable Care Act is the Patient 

Protection and Affordable Care Act of 

2010 (Pub. L. 111–148) as amended by 

the Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152). 

Basic Health Program (BHP) Blueprint 

is the operational plan that a State must 

submit to the Secretary of Health and 

Human Services (HHS) for certification 

to operate a BHP. 

Certification means authority to 

operate the program which is required 

for program operations but it does not 

create an obligation on the part of the 

State to implement a BHP. 

Code means the Internal Revenue 

Code of 1986. 

Cost sharing means any expenditure 

required by or on behalf of an enrollee 

with respect to covered health benefits; 

such term includes deductibles, 

coinsurance, copayments, or similar 

charges, but excludes premiums, 

balance billing amounts for nonnetwork providers and spending for 

non-covered services. 

Enrollee means an eligible individual 

who is enrolled in a standard health 

plan contracted to operate as part of a 

BHP. 

Essential health benefits means the 

benefits described under section 1302(b) 

of the Affordable Care Act. 

Family and family size is as defined 

at 26 CFR 1.36B–1(d). 

Federal fiscal year means the time 

period beginning October 1st and 

ending September 30th. 

Federal poverty level or FPL means 

the most recently published Federal 

poverty level, updated periodically in 

the Federal Register by the secretary of 

Health and Human Services under the 

authority of 42 U.S.C. 9902(2. 

Household income is as defined in 26 

CFR 1.36B–1(e)(1). 

Indian means any individual as 

defined in section 4 (d) of the Indian 

Self-Determination and Education 

Assistance Act (Pub. L 93–638). 

Lawfully present has the meaning 

given in 45 CFR 152.2 

Minimum essential coverage has the 

meaning set forth at 26 CFR 1.5000A– 

2, including coverage recognized by the 

Secretary as minimum essential 

coverage pursuant to 26 CFR 1.5000A– 

2(f). Under that authority, the Secretary 

recognizes coverage through a BHP 

standard health plan as minimum 

essential coverage. 

Modified adjusted gross income is as 

defined in 26 CFR 1–36B–1(e)(2). 

Premium means any enrollment fee, 

premium, or other similar charge paid to 

the standard health plan offeror. 

Preventive health services and items 

includes those services and items 

specified in 45 CFR 147.130(a). 

Program year means a calendar year 

for which a standard health plan 

provides coverage for eligible BHP 

enrollees. 

Qualified health plan or QHP means 

a health plan that has in effect a 

certification that it meets the standards 

described in subpart C of 45 CFR part 

156 issued or recognized by each 

Exchange through which such plan is 

offered in accordance with the process 

described in subpart K of 45 CFR, 

except that such term must not include 

a qualified health plan which is a 

catastrophic plan described in 45 CFR 

155.20 

Reference plan is a synonym for the 

EHB benchmark plan and is defined at 

45 CFR 156.100. 

Regional compact means an 

agreement between two or more States 

to jointly procure and enter into 

contracts with standard health plan 

offeror(s) for the administration and 

provision of a standard health plan 

under the BHP to eligible individuals in 

such States. 

Residency is determined in 

accordance with 45 CFR 155.305(a)(3). 

Single streamlined application has 

the same meaning as application 

defined at 42 CFR 431.907(b)(1) of this 

chapter and 45 CFR 155.405(a) and (b) 

. 

Standard health plan means a health 

benefits package, or product, that is 

provided by the standard health plan 

offeror. 

Standard health plan offeror means 

an entity that is eligible to enter into 

contracts with the State for the 

administration and provision of a 

standard health plan under the BHP. 

State means each of the 50 states and 

the District of Columbia as defined by 

section 1304 of the Act. 

Subpart B—Establishment and 

Certification of State Basic Health 

Programs 

§ 600.100 Program description. 

A State Basic Health Program (BHP) is 

operated consistent with a BHP 

Blueprint that has been certified by the 

Secretary to meet the requirements of 

this part. The BHP Blueprint is 

developed by the State for certification 

by the Secretary in accordance with the 

processes described in this subpart. 

§ 600.105 Basis, scope, and applicability 

of subpart B. 

(a) Statutory basis. This subpart 

implements the following sections of 

the Act: 

(1) Section 1331(a)(1) which defines a 

Basic Health Program. 

(2) Section 1331(a)(2) which requires 

the Secretary to certify a Basic Health 

Program before it may become 

operational. 

(3) Section 1331(f) which requires 

Secretarial oversight through annual 

reviews. 

(b) Scope and applicability. (1) This 

subpart sets forth provisions governing 

the administration of the BHP, the 

general requirements for development of 

a BHP Blueprint required for 

certification, for program operations and 

for voluntary program termination. 

(2) This subpart applies to all States 

that submit a BHP Blueprint and request 

certification to operate a BHP. 

§ 600.110 BHP Blueprint. 

The BHP Blueprint is a 

comprehensive written document 

submitted by the State to the Secretary 

for certification of a BHP in the form 

and manner specified by HHS. The 

program must be administered in 

accordance with all aspects of section 

1331 of the Affordable Care Act and 

other applicable law, this chapter, and 

the certified BHP Blueprint. 

(a) Content of a Blueprint. The 

Blueprint will establish compliance 

with applicable requirements by 

including a description, or if applicable, 

an assurance of the following: 

(1) The minimum benefits offered 

under a standard health plan that 

assures inclusion of essential health 

benefits as described in section 1302(b) 

of the Affordable Care Act, in 

accordance with § 600.405. 

(2) The competitive process, 

consistent with § 600.410, that the State 

will undertake to contract for the 

provision of standard health plans. 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59143 

(3) The standard contract 

requirements, consistent with § 600.415, 

that the State will incorporate in its 

standard health plan contracts. 

(4) The methods by which the State 

will enhance the availability of standard 

health plan coverage as described in 

§ 600.420. 

(5) The methods by which the State 

will ensure and promote coordination 

with other insurance affordability 

programs as described in § 600.425. 

(6) The premium imposed under the 

BHP, consistent with the standards set 

forth in § 600.505. 

(7) The cost sharing imposed under 

the BHP, consistent with the standards 

described in § 600.510. 

(8) The disenrollment procedures and 

consequences for nonpayment of 

premiums consistent with § 600.525, 

respectively. 

(9) The standards, consistent with 

§ 600.305 used to determine eligibility 

for the program. 

(10) The State’s policies regarding 

enrollment, disenrollment and 

verification consistent with §§ 600.320 

and 600.345, along with a plan to ensure 

coordination with and eliminate gaps in 

coverage for individuals transitioning to 

other insurance affordability programs. 

(11) The fiscal policies and 

accountability procedures, consistent 

with § 600.710. 

(12) The process by which BHP trust 

fund trustees shall be appointed, the 

qualifications and responsibilities of 

such trustees, and any arrangements to 

insure or indemnify such trustees 

against claims for breaches of their 

fiduciary responsibilities. 

(13) A description of how the State 

will ensure program integrity, including 

how it will address potential fraud, 

waste, and abuse and ensure consumer 

protections. 

(14) An operational assessment 

establishing operating agency readiness. 

(b) Funding plan. (1) The BHP 

Blueprint must be accompanied by a 

funding plan that describes the 

enrollment and cost projections for the 

first 12 months of operation and the 

funding sources, if any, beyond the BHP 

trust fund. 

(2) The funding plan must 

demonstrate that Federal funds will 

only be used to reduce premiums and 

cost-sharing or to provide additional 

benefits. 

(c) Transparency. HHS shall make a 

State’s BHP Blueprint available on line. 

§ 600.115 Development and submission of 

the BHP Blueprint. 

(a) State authority to submit the State 

Blueprint. A State BHP Blueprint must 

be signed by the State’s Governor or by 

the official with delegated authority 

from the Governor to sign it. 

(b) State Basic Health Program 

officials. The State must identify in the 

BHP Blueprint the agency and officials 

within that agency, by position or title, 

who are responsible for program 

administration, operations, and 

financial oversight. 

(c) Opportunity for public comment. 

The State must provide an opportunity 

for public comment on the BHP 

Blueprint content described in § 600.110 

before submission to the Secretary for 

certification. 

(1) The State must seek public 

comment on any significant subsequent 

revisions prior to submission of those 

revisions to the Secretary for 

certification. Significant revisions are 

those that alter core program operations 

required by § 600.145(e). 

(2) The process of seeking public 

comment must include Federallyrecognized tribes as defined in the 

Federally Recognized Indian Tribe List 

Act of 1994, 25 U.S.C. 479a, located in 

the State. 

(d) Submission and timing. The BHP 

Blueprint must be submitted in a 

manner and format specified by HHS. 

States may not implement the BHP prior 

to receiving certification. The date of 

implementation for this purpose is the 

first day enrollees would receive 

coverage under the BHP. 

§ 600.120 Certification of a BHP Blueprint. 

(a) Effective date of certification. The 

effective date of the certification is the 

date of signature by the Secretary. 

(b) Payments for periods prior to 

certification. No payment may be made 

under this part for periods of BHP 

operation prior to the date of 

certification. 

(c) Period in which a certified 

Blueprint remains in effect. The 

certified Blueprint remains in effect 

until: 

(1) The Blueprint is replaced by 

Secretarial certification of an updated 

Blueprint containing revisions 

submitted by the State. 

(2) The State terminates the program 

consistent with § 600.140. 

(3) The Secretary makes a finding that 

the BHP Blueprint no longer meets the 

standards for certification based on 

findings in the annual review, or reports 

significant evidence of beneficiary 

harm, financial malfeasance, fraud, 

waste or abuse by the BHP agency or the 

State consistent with § 600.142. 

(d) Blueprint approval standards for 

certification. The Secretary will certify a 

BHP Blueprint provided it meets all of 

the following standards: 

(1) The Blueprint contains sufficient 

information for the Secretary to 

determine that the BHP will comply 

with the requirements of section 1331 of 

the Affordable Care Act and this Part. 

(2) The BHP Blueprint demonstrates 

adequate planning for the integration of 

BHP with other insurance affordability 

programs in a manner that will permit 

a seamless, coordinated experience for a 

potentially eligible individual. 

(3) The Blueprint is a complete and 

comprehensive description of the BHP 

and its operations, demonstrating 

thorough planning and a concrete 

program design, without contingencies 

or reserved decisions on operational 

features. 

§ 600.125 Revisions to a certified BHP 

Blueprint. 

(a) Submission of revisions. In the 

event that a State seeks to make 

significant change(s) that alter program 

operations described in the certified 

BHP Blueprint, the State must submit a 

revised Blueprint to the Secretary for 

review and certification. 

(b) Continued operation. The State is 

responsible for continuing to operate 

under the terms of the existing certified 

Blueprint until and unless a revised 

Blueprint is certified. 

§ 600.130 Withdrawal of a BHP Blueprint 

prior to implementation. 

To the extent that a State has not 

enrolled eligible individuals into the 

BHP: 

(a) The State may submit a written 

request to stop any further consideration 

of a previously submitted BHP 

Blueprint, whether certified or not. 

(b) The written request must be signed 

by the governor, or the State official 

delegated to sign the BHP Blueprint by 

the governor. 

(c) HHS will respond with a written 

confirmation that the State has 

withdrawn the Blueprint. 

§ 600.135 Notice and timing of HHS action 

on a BHP Blueprint. 

(a) Timely response. HHS will act on 

all certification and revision requests in 

a timely manner. 

(b) Issues preventing certification. 

HHS will notify the State in writing of 

any impediments to certification that 

arise in reviewing a proposed BHP 

Blueprint. 

§ 600.140 State termination of a BHP. 

(a) If a State decides to terminate its 

BHP, the State must complete all of the 

following prior to the effective date of 

the termination or the indicated dates: 

(1) Submit written notice to the 

Secretary no later than 120 days prior to 

the proposed termination date 

accompanied by a proposed transition 

plan that describes procedures to assist 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59144 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

consumers with transitioning to other 

insurance affordability programs. 

(2) Resolve concerns expressed by the 

Secretary and obtain approval by the 

Secretary of the transition plan. 

(3) Submit written notice to all 

participating standard health plan 

offerors, and enrollees that it intends to 

terminate the program at least 90 days 

prior to the termination date. The 

notices to enrollees must include 

information regarding the State’s 

assessment of their eligibility for all 

other insurance affordability programs 

in the State. Notices must meet the 

accessibility and readability standards 

at 45 CFR 155.230(b). 

(4) Transmit all information provided 

as part of an application, and any 

information obtained or verified by the 

State or other agencies administering 

insurance affordability programs via 

secure electronic interface, promptly 

and without undue delay to the agency 

administering the Exchange and the 

Medicaid agency as appropriate. 

(5) Fulfill its contractual obligations 

to participating standard health plan 

offerors including the payment of all 

negotiated rates for participants, as well 

as plan oversight ensuring that 

participating standard health plan 

offerors fulfill their obligation to cover 

benefits for each enrollee. 

(6) Fulfill data reporting requirements 

to HHS. 

(7) Complete the annual financial 

reconciliation process with HHS to 

ensure full compliance with Federal 

financial obligations. 

(8) Refund any remaining balance in 

the BHP trust fund. 

(b) [Reserved] 

§ 600.142 HHS withdrawal of certification 

and termination of a BHP. 

(a) The Secretary may withdraw 

certification for a BHP Blueprint based 

on a finding that the BHP Blueprint no 

longer meets the standards for 

certification based on findings in the 

annual review, findings from a program 

review conducted in accordance with 

§ 600.200 or from significant evidence of 

beneficiary harm, financial malfeasance, 

fraud, waste or abuse. 

(b) Withdrawal of certification for a 

BHP Blueprint shall occur only after the 

Secretary provides the State with notice 

of the proposed finding that the 

standards for certification are not met or 

evidence of harm or misconduct in 

program operations, a reasonable period 

for the State to address the finding 

(either by substantiating compliance 

with the standards for certification or 

submitting revisions to the Blueprint, or 

securing HHS approval of a corrective 

action plan), and an opportunity for a 

hearing before issuing a final finding. 

(c) The Secretary shall make every 

reasonable effort to resolve proposed 

findings without requiring withdrawal 

of BHP certification. 

(d) The effective date of an HHS 

determination withdrawing BHP 

certification shall not be earlier than 120 

days following a final finding of 

noncompliance with the standards for 

certification. 

(e) Within 30 days following a final 

finding of noncompliance with the 

standards for certification, the State 

shall submit a transition plan that 

describes procedures to assist 

consumers with transitioning to other 

insurance affordability programs, and 

shall comply with the procedures 

described in § 600.140(a)(2) through (8). 

§ 600.145 State program administration 

and operation. 

(a) Program operation. The State must 

implement its BHP in accordance with 

the approved and certified State BHP 

Blueprint, any approved modifications 

to the State BHP Blueprint and the 

requirements of this chapter and 

applicable law. 

(b) Eligibility. All persons have a right 

to apply for a determination of 

eligibility and, if eligible, to be enrolled 

into coverage that conforms to these 

regulations. 

(c) Statewide program operation. A 

state choosing to operate a BHP must 

operate it statewide. 

(d) No caps on program enrollment. A 

State implementing a BHP must not be 

permitted to limit enrollment by setting 

an income level below the income 

standard prescribed in section 1331 of 

the Affordable Care Act, having a fixed 

enrollment cap or imposing waiting 

lists. 

(e) Core operations. A State operating 

a BHP must perform all of the following 

core operating functions: 

(1) Eligibility determinations as 

specified in § 600.320. 

(2) Eligibility appeals as specified in 

§ 600.335. 

(3) Contracting with standard health 

plan offerors as specified in § 600.410. 

(4) Oversight and financial integrity 

including, but not limited to, operation 

of the Trust Fund specified at 

§§ 600.705 and 600.710, compliance 

with annual reporting at § 600.170, and 

providing data required by § 600.610 for 

Federal funding and reconciliation 

processes. 

(5) Consumer assistance as required in 

§ 600.150. 

(6) Extending protections to American 

Indian/Alaska Natives specified at 

§ 600.160, as well as comply with the 

Civil Rights and nondiscrimination 

provisions specified at § 600.165. 

(7) Data collection and reporting as 

necessary for efficient and effective 

operation of the program and as 

specified by HHS to support program 

oversight. 

(8) If necessary, program termination 

procedures at § 600.145. 

§ 600.150 Enrollment assistance and 

information requirements. 

(a) Information disclosure. (1) The 

State must make accurate, easily 

understood information available to 

potential applicants and enrollees about 

the BHP coverage option along with 

information about other insurance 

affordability programs. 

(2) The State must provide accessible 

information on coverage, including 

additional benefits that may be provided 

outside of the standard health plan 

coverage, any tiers of coverage it has 

built into the BHP, including who is 

eligible for each tier. 

(3) The State must require 

participating standard health plans to 

provide clear information on premiums; 

covered services including any limits on 

amount, duration and scope of those 

services; applicable cost-sharing using a 

standard format supplied by the State, 

and other data specified in, and in 

accordance with, 45 CFR 156.220. 

(4) The State must provide 

information in a manner consistent with 

45 CFR 155.205(c). 

(5) The State must require 

participating standard health plans to 

make publicly available, and keep up to 

date, the names and locations of 

currently participating providers. 

(b) [Reserved] 

§ 600.155 Tribal consultation. 

The State must consult with Indian 

tribes located in the State on the 

development and execution of the BHP 

Blueprint using the State or Federal 

tribal consultation policy approved by 

the applicable State or Federal 

Exchange. 

§ 600.160 Protections for American Indian 

and Alaskan Natives. 

(a) Enrollment. Indians must be 

extended the same special enrollment 

status in BHP standard health plans as 

applicable to enrollment in a QHP 

through the Exchange under 45 CFR 

155.420(d)(8). Indians will be allowed to 

enroll in, or change enrollment in, 

standard health plans one time per 

month. 

(b) Premiums. The State must permit 

Indian tribes, tribal organizations and 

urban Indian organizations to pay 

standard health plan premiums on 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59145 

behalf of BHP eligible and enrolled 

individuals. 

(c) Cost sharing. No cost sharing may 

be imposed on Indians under the 

standard health plan. 

(d) Requirement. Standard health 

plans must pay primary to health 

programs operated by the Indian Health 

Service, Indian tribes, tribal 

organizations, and urban Indian 

organizations for services that are 

covered by a standard health plan. 

§ 600.165 Nondiscrimination standards. 

(a) The State and standard health 

plans, must comply with all applicable 

civil rights statutes and requirements, 

including Title VI of the Civil Rights Act 

of 1964, Title II of the Americans with 

Disabilities Act of 1990, Section 504 of 

the Rehabilitation Act of 1973, the Age 

Discrimination Act of 1975, Section 

1557 of the Affordable Care Act, and 45 

CFR part 80, part 84, and part 91 and 

28 CFR part 35. 

(b) The State must comply with the 

nondiscrimination provision at 45 CFR 

155.120(c)(2). 

§ 600.170 Annual report content and 

timing. 

(a) Content. The State must submit an 

annual report that includes any 

evidence of fraud, waste, or abuse on 

the part of participating providers, 

plans, or the State BHP agency known 

to the State, and a detailed data-driven 

review of compliance with the 

following: 

(1) Eligibility verification 

requirements for program participation 

as specified in § 600.345. 

(2) Limitations on the use of Federal 

funds received by the BHP as specified 

in § 600.705. 

(3) Requirements to collect quality 

and performance measures from all 

participating standard health plans 

focusing on quality of care and 

improved health outcomes as specified 

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

Affordable Care Act and as further 

described in § 600.415. 

(4) Requirements specified by the 

Secretary at least 120 days prior to the 

date of the annual report as requiring 

further study to assess continued State 

compliance with Federal law, 

regulations and the terms of the State’s 

certified Blueprint, based on a Federal 

review of the BHP pursuant to 

§ 600.200, and/or a list of any 

outstanding recommendations from any 

audit or evaluation conducted by the 

HHS Office of Inspector General that 

have not been fully implemented, 

including a statement describing the 

status of implementation and why 

implementation is not complete, 

(b) Timing. The annual reports, in the 

format specified by the Secretary, are 

due 60 days before the end of each 

operational year. 

Subpart C—Federal Program 

Administration 

§ 600.200 Federal program reviews and 

audits. 

(a) Federal compliance review of the 

State BHP. To determine whether the 

State is complying with the Federal 

requirements and the provision of its 

BHP Blueprint, HHS may review, as 

needed, but no less frequently than 

annually, the compliance of the State 

BHP with applicable laws, regulations 

and interpretive guidance. This review 

may be based on the State’s annual 

report submitted under § 600.170, or 

may be based on direct Federal review 

of State administration of the BHP 

Blueprint through analysis of the State’s 

policies and procedures, reviews of 

agency operation, examination of 

samples of individual case records, and 

additional reports and/or data as 

determined by the Secretary. 

(b) Action on compliance review 

findings. The compliance review will 

identify the following action items: 

(1) Requirements that need further 

study or data to assess continued State 

compliance with Federal law, 

regulations and the terms of the State’s 

certified Blueprint. Such findings must 

be addressed in the next State annual 

report due no more than 120 days after 

the date of the issuance of the Federal 

compliance review. 

(2) Requirements with which the State 

BHP does not appear to be in 

compliance that could be the basis for 

withdrawal of BHP certification. Such 

findings must be resolved by the State 

(either by substantiating compliance 

with the standards for certification or 

submitting revisions to the Blueprint) If 

not resolved, such action items can be 

the basis for a proposed finding for 

withdrawal of BHP certification. 

(3) Requirements with which the State 

BHP does not appear to be in 

compliance that are not a basis for 

withdrawal of BHP certification but 

require revision to the Blueprint must 

be resolved by the State. If not resolved, 

such action items can be the basis for 

denial of other Blueprint revisions. 

(4) Improper use of BHP trust fund 

resources. The State and the BHP 

trustees shall be given an opportunity to 

review and resolve concerns regarding 

improper use of BHP trust funds as 

indicated in § 600.715(a) through (c): 

either by substantiating the proper use 

of trust fund resources or by taking 

corrective action which include changes 

to procedures to ensure proper use of 

trust fund resources, and restitution of 

improperly used resources to the trust 

fund. 

(c) The HHS Office of Inspector 

General (OIG) may periodically audit 

State operations and standard health 

plan practices as described in 

§ 430.33(a) of this chapter. The State 

and the BHP trustees shall be given an 

opportunity to review and resolve 

concerns about improper use of BHP 

trust funds as indicated in § 600.715(a) 

through (c): either by substantiating the 

proper use of trust fund, or by taking 

corrective action that includes changes 

to procedures to ensure proper use of 

trust fund resources, and restitution of 

improperly used resources to the trust 

fund. Final reports on those audits shall 

be transmitted to both the State and the 

Secretary for actions on findings. 

Subpart D—Eligibility and Enrollment 

§ 600.300 Basis, scope, and applicability. 

(a) Statutory basis. This subpart 

interprets and implements section 

1331(e) of the Affordable Care Act 

which sets forth eligibility standards for 

the BHP and prohibits eligible 

individuals from being treated as 

qualified individuals and enrolling in 

qualified health plans offered through 

the Exchange. 

(b) Scope and applicability. This 

subpart sets forth the requirements for 

all BHPs established under section 1331 

of the Affordable Care Act regarding 

eligibility standards and application 

screening and enrollment procedures. 

§ 600.305 Eligible individuals. 

(a) Eligibility standards The State 

must determine individuals eligible to 

enroll in a standard health plan if they: 

(1) Are residents of the State not 

eligible for the State’s Medicaid program 

consisting of at least the essential health 

benefits codified in § 600.405. 

(2) Have household income which 

exceeds 133 percent but does not exceed 

200 percent of the FPL for the 

applicable family size, or, in the case of 

an individual who is a lawfully present 

non-citizen, ineligible for Medicaid due 

to such non-citizen status, whose 

household income does not exceed 200 

percent of the FPL for the applicable 

family size. 

(3) Are not eligible to enroll in 

affordable minimum essential coverage. 

If an individual meets all other 

eligibility standards, and— 

(i) Is eligible for, or enrolled in, 

Medicaid or CHIP that does not meet the 

minimum essential coverage definition, 

the individual is eligible to enroll in a 

standard health plan without regard to 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59146 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

eligibility or enrollment in such other 

programs; or 

(ii) Is eligible for Employer Sponsored 

Insurance (ESI) that is unaffordable (as 

determined under section 5000A of the 

Internal Revenue Code), the individual 

is eligible to enroll in a standard health 

plan. 

(4) Are 64 years of age or younger. 

(5) Are either a citizen or lawfully 

present non-citizen. 

(6) Are not incarcerated, other than 

during a period pending disposition of 

charges. 

(b) Eligibility restrictions. The State 

may not impose conditions of eligibility 

other than those identified in this 

section, including, but not limited to, 

restrictions on eligibility based on 

geographic location or imposition of an 

enrollment cap or waiting period for 

individuals previously eligible for or 

enrolled in other coverage. 

§ 600.310 Application. 

(a) Single streamlined application. 

The State must use the single 

streamlined application used by the 

State in accordance with § 435.907(b) of 

this chapter and 45 CFR 155.405(a) and 

(b). 

(b) Opportunity to apply and 

assistance with application. The terms 

of §§ 435.906 and 435.908 of this 

chapter, requiring the State to provide 

individuals the opportunity to apply 

and receive assistance with an 

application in the Medicaid program, 

apply in the same manner to States in 

the administration of the BHP. 

(c) Authorized representatives. The 

State may choose to permit the use of 

an authorized representative designated 

by an applicant or beneficiary to assist 

with the individual’s application, 

eligibility renewal and other ongoing 

communication with the BHP. If the 

State chooses this option, the State must 

follow the standards set forth at either 

45 CFR 155.227 or 42 CFR 435.923. 

§ 600.315 Certified application counselors. 

The State may have a program to 

certify application counselors to assist 

individuals to apply for enrollment in 

the BHP and other insurance 

affordability programs. If the State 

chooses this option, the State must 

follow the procedures and standards for 

such a program set forth in the 

regulations at either 45 CFR 155.225 or 

42 CFR 435.908. 

§ 600.320 Determination of eligibility for 

and enrollment in a standard health plan. 

(a) Determining eligibility to enroll in 

a standard health plan may be 

performed by a State or local 

governmental entity, including a 

governmental entity that determines 

eligibility for Medicaid or CHIP, and 

may be delegated by the state to an 

Exchange that is a government agency. 

(b) Timely determinations. The terms 

of 42 CFR 435.912 (relating to timely 

determinations of eligibility under the 

Medicaid program) apply to eligibility 

determinations for enrollment in a 

standard health plan exclusive of 

§ 435.912(c)(3)(i). The standards 

established by the State must be 

included in the BHP Blueprint. 

(c) Effective date of eligibility. The 

State must establish a uniform method 

of determining the effective date of 

eligibility for enrollment in a standard 

health plan following either the 

Exchange standards at 45 CFR 

155.420(b)(1) or the Medicaid process at 

42 CFR 435.915. 

(d) Enrollment periods. The State 

must offer enrollment and special 

enrollment periods equivalent to the 

Exchange at 45 CFR 155.410 and 

155.420 or the State may follow the 

continuous eligibility standard of 

Medicaid. 

§ 600.330 Coordination with other 

insurance affordability programs. 

(a) Coordination. The State must 

establish eligibility and enrollment 

mechanisms and procedures to 

maximize coordination with the 

Exchange, Medicaid and CHIP. The 

terms of 45 CFR 155.345(a) regarding 

the agreements between insurance 

affordability programs apply to a BHP. 

The State BHP agency must fulfill the 

requirements of 42 CFR 435.1200(d) and 

(e) and, if applicable, paragraph (c) for 

BHP eligible individuals. 

(b) Coordinated determinations of 

eligibility. The agency administering 

BHP must establish and maintain 

processes to make income eligibility 

determinations using modified adjusted 

gross income (MAGI), and to ensure that 

applications received by the agency, to 

the extent warranted and permitted 

under delegations from other agencies 

administering insurance affordability 

programs, also result in eligibility 

assessments or determinations for those 

other programs. The BHP must also 

accept applications transferred from 

other agencies administering insurance 

affordability programs, and ensure that 

individuals assessed or determined 

eligible for BHP by such other agencies 

are afforded the opportunity to enroll in 

a standard health plan without undue 

delay. Individuals submitting 

applications to any of the 

aforementioned agencies must not be 

required to duplicate the submission of 

information. 

(c) Account transfers. The agency 

administering the BHP must participate 

in the secure exchange of information 

with agencies administering other 

insurance affordability programs, using 

the standards set forth under 45 CFR 

155.345(h) regarding electronic account 

transfers. 

(d) Notification to referring agency. 

The terms in § 435.1200(d)(5) regarding 

the notification to other programs of the 

final determination of eligibility apply 

equally to States administering a BHP. 

(e) Notice of decision concerning 

eligibility. Every application for BHP 

shall result in a determination of 

eligibility or ineligibility, unless the 

application has been withdrawn, the 

applicant has died, or the applicant 

cannot be located. Notices of eligibility 

determinations shall be coordinated 

with other insurance affordability 

programs and Medicaid. Electronic 

notices shall be provided to the extent 

consistent with § 435.918(b). 

§ 600.335 Appeals. 

(a) Notice of eligibility appeal rights. 

Eligibility determinations must include 

a notice of the right to appeal the 

determination, and instructions 

regarding how to file an appeal. 

(b) Appeals process. Individuals must 

be given the opportunity to appeal BHP 

eligibility determinations through the 

appeals process of the state’s Medicaid 

program, as set forth in an agreement 

with the Medicaid agency, however, this 

process may not confer a second level 

appeal or an appeal to the federal 

Department of Health and Human 

Services. 

(c) Accessibility. The appeals process 

must be conducted in a manner 

accessible to individuals with limited 

English proficiency and persons with 

disabilities. 

§ 600.340 Periodic redetermination and 

renewal of BHP eligibility. 

(a) Period of eligibility. An individual 

is determined eligible for a period of 12 

months unless the eligibility is 

redetermined based on new information 

received and verified from enrollee 

reports or data sources. The State must 

require enrollees to report changes in 

circumstances, at least to the extent that 

they would be required to report such 

changes if enrolled in coverage through 

the Exchange, consistent with 45 CFR 

155.330(b). 

(b) Renewal of coverage. If an enrollee 

remains eligible for coverage in the 

BHP, the enrollee will be afforded 

notice of a reasonable opportunity to 

change plans to the extent the BHP 

offers a choice of plans, and shall 

remain in the plan selected for the 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59147 

previous year unless such enrollee 

terminates coverage from the plan by 

selecting a new plan or withdrawing 

from a plan. 

(c) Procedures. The State shall choose 

to apply equally all the redetermination 

procedures described in either 45 CFR 

155.335 or 42 CFR 435.916(a) in 

administering a BHP. 

(d) Verification. The State must verify 

information needed to redetermine and 

renew eligibility in accordance with 

§ 600.345 and comply with the 

requirements set forth in § 600.330 

relating to screening individuals for 

other insurance affordability programs 

and transmitting such individuals’ 

electronic accounts and other relevant 

information to the other program, as 

appropriate. 

(e) Notice to enrollee. The State must 

provide an enrollee with an annual 

notice of redetermination of eligibility. 

The annual notice should include all 

current information used for the most 

recent eligibility determination. The 

enrollee is required to report any 

changes with respect to information 

listed within the notice within 30 days 

of the date of the notice. The State must 

verify information in accordance with 

§ 600.345. 

§ 600.345 Eligibility verification. 

(a) The State must verify the 

eligibility of an applicant or beneficiary 

for BHP consistent either with the 

standards and procedures set forth in— 

(1) Medicaid regulations at §§ 435.945 

through 435.956 of this chapter; or 

(2) Exchange regulations at 45 CFR 

155.315 and 155.320. 

(b) [Reserved] 

§ 600.350 Privacy and security of 

information. 

The State must comply with the 

standards and procedures set forth in 45 

CFR 155.260(b) and (c) as are applicable 

to the operation of the BHP. 

Subpart E—Standard Health Plan 

§ 600.400 Basis, scope, and applicability. 

(a) Statutory basis. This subpart 

implements sections 1331(b), (c), and (g) 

of the Affordable Care Act, which set 

forth provisions regarding the minimum 

coverage standards under BHP, as well 

as the delivery of such coverage, 

including the contracting process for 

standard health plan offerors 

participating in the BHP. 

(b) Scope and applicability. This 

subpart consists of provisions relating to 

all BHPs for the delivery of, at a 

minimum, the ten essential health 

benefits as described in section 1302(b) 

of the Affordable Care Act, the 

contracting process by which States 

must contract for the provision of 

standard health plans, the minimum 

requirements States must include in 

their standard health plan contracts, the 

minimum coverage standards provided 

by the standard health plan offeror, and 

other applicable requirements to 

enhance the coordination of the 

provision of standard health plan 

coverage. 

§ 600.405 Standard health plan coverage. 

(a) Essential Health Benefits (EHBs). 

Standard health plan coverage must 

include, at a minimum, the essential 

health benefits as determined and 

specified under 45 CFR 156.110, and 45 

CFR 156.122 regarding prescription 

drugs, except that States may select 

more than one base benchmark option 

from those codified at 45 CFR 156.100 

for establishing essential health benefits 

for standard health plans. Additionally, 

States must comply with 45 CFR 

156.122(a)(2) by requiring participating 

plans to submit their drug list to the 

State. 

(b) Additional required benefits. 

Where the standard health plan for BHP 

is subject to State insurance mandates, 

the State shall adopt the determination 

of the Exchange at 45 CFR 155.170(a)(3) 

in determining which benefits enacted 

after December 31, 2011 are in addition 

to the EHBs. 

(c) Periodic review. Essential health 

benefits must include any changes 

resulting from periodic reviews required 

by section 1302(b)(4)(G) of the 

Affordable Care Act. The provision of 

such essential health benefits must meet 

all the requirements of 45 CFR 156.115. 

(d) Non-discrimination in benefit 

design. The terms of 45 CFR 156.125 

apply to standard health plans offered 

under the BHP. 

(e) Compliance. The State must 

comply with prohibitions on federal 

funding for abortion services equivalent 

to the Exchange at 45 CFR 156.280. 

§ 600.410 Competitive contracting 

process. 

(a) General requirement. In order to 

receive initial HHS certification as 

described in § 600.120, the State must 

assure in its BHP Blueprint that it 

complies with the requirements set forth 

in this section. 

(b) Contracting process. The State 

must: 

(1) Conduct the contracting process in 

a manner providing full and open 

competition consistent with the 

standards of 45 CFR 92.36(b) through (i); 

(2) Include a negotiation of the 

elements described in paragraph (d) of 

this section on a fair and adequate basis; 

and 

(3) Consider the additional elements 

described in paragraph (e) of this 

section. 

(c) Initial implementation exceptions. 

(1) If a State is not able to implement a 

competitive contracting process 

described in paragraph (b) of this 

section for program year 2015, the State 

must include a justification as to why it 

cannot meet the conditions in paragraph 

(b), as well as a description of the 

process it will use to enter into contracts 

for the provision of standard health 

plans under BHP. 

(2) The State must include a proposed 

timeline that implements a competitive 

contracting process, as described in 

paragraph (b) of this section, for 

program year 2016. 

(3) Initial implementation exceptions 

are subject to HHS approval consistent 

with the BHP Blueprint review process 

established in § 600.120, and may only 

be in effect for benefit year 2015. 

(d) Negotiation criteria. The State 

must assure that its competitive 

contracting process includes the 

negotiation of: 

(1) Premiums and cost sharing, 

consistent with the requirements at 

§§ 600.505(e) and 600.510(e); 

(2) Benefits, consistent with the 

requirements at § 600.405; 

(3) Inclusion of innovative features, 

such as: 

(i) Care coordination and care 

management for enrollees, with a 

particular focus on enrollees with 

chronic health conditions; 

(ii) Incentives for the use of 

preventive services; and 

(iii) Establishment of provider-patient 

relationships that maximize patient 

involvement in their health care 

decision-making, including the use of 

incentives for appropriate health care 

utilization and patient choice of 

provider. 

(e) Other considerations: The State 

shall also include in its competitive 

process criteria to ensure: 

(1) Consideration of health care needs 

of enrollees; 

(2) Local availability of, and access, to 

health care providers; 

(3) Use of a managed care process, or 

a similar process to improve the quality, 

accessibility, appropriate utilization, 

and efficiency of services provided to 

enrollees; 

(4) Performance measures and 

standards focused on quality of care and 

improved health outcomes as specified 

in § 600.415; 

(5) Coordination between other health 

insurance affordability programs to 

ensure enrollee continuity of care as 

described in § 600.425; and 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59148 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

(6) Measures to prevent, identify, and 

address fraud, waste and abuse and 

ensure consumer protections. 

(f) Discrimination. Nothing in the 

competitive process shall permit or 

encourage discrimination in enrollment 

based on pre-existing conditions or 

other health status-related factors. 

§ 600.415 Contracting qualifications and 

requirements. 

(a) Eligible offerors for standard 

health plan contracts. A State may enter 

into contracts for the administration and 

provision of two or more standard 

health plans under the BHP with a: 

(1) Licensed health maintenance 

organization. 

(2) Licensed health insurance insurer. 

(3) Network of health care providers 

demonstrating capacity to meet the 

criteria set forth in § 600.410(d). 

(4) Non-licensed health maintenance 

organization participating in Medicaid 

and/or CHIP. 

(b) General contract requirements. (1) 

A State contracting with eligible 

standard health plan offerors described 

in paragraph (a) of this section must 

include contract provisions addressing 

network adequacy, service provision 

and authorization, quality and 

performance, enrollment procedures, 

disenrollment procedures, noticing and 

appeals, provisions protecting the 

privacy and security of personally 

identifiable information, and other 

applicable contract requirements as 

determined by the Secretary to the 

extent that the service delivery model 

furthers the objectives of the program. 

(2) All contracts under this part must 

include provisions that define a sound 

and complete procurement contract, as 

required by 45 CFR 92.36(i). 

(3) To the extent that the standard 

health plan is health insurance coverage 

offered by a health insurance issuer, the 

contract must provide that the medical 

loss ratio is at least 85 percent. 

(c) Notification of State election. To 

receive HHS certification, the State must 

include in its BHP Blueprint the 

standard set of contract requirements 

described in paragraph (b) of this 

section that will be incorporated into its 

standard health plan contracts. 

§ 600.420 Enhanced availability of 

standard health plans. 

(a) Choice of standard health plans. 

The State must include in its BHP 

Blueprint an assurance that at least two 

standard health plans are offered under 

BHP, and if applicable, a description of 

how it will further ensure enrollee 

choice of standard health plans. 

(b) Use of regional compacts. (1) A 

State may enter into a joint procurement 

with other States to negotiate and 

contract with standard health plan 

offerors to administer and provide 

standard health plans statewide, or in 

geographically specific areas within the 

States, to BHP enrollees residing in the 

participating regional compact States. 

(2) A State electing the option 

described in paragraph (b)(1) of this 

section must include in its BHP 

Blueprint all of the following: 

(i) The other State(s) entering into the 

regional compact. 

(ii) The specific areas within the 

participating States that the standard 

health plans will operate, if applicable. 

(A) If the State contracts for the 

provision of a geographically specific 

standard health plan, the State must 

assure that enrollees, regardless of 

residency within the State, continue to 

have choice of at least two standard 

health plans. 

(B) [Reserved] 

(iii) An assurance that the competitive 

contracting process used in the joint 

procurement of the standard health 

plans complies with the requirements 

set forth in § 600.410. 

(iv) Any variations that may occur as 

a result of regional differences between 

the participating states with respect to 

benefit packages, premiums and cost 

sharing, contracting requirements and 

other applicable elements as determined 

by HHS. 

§ 600.425 Coordination with other 

insurance affordability programs. 

A State must describe in its BHP 

Blueprint how it will ensure 

coordination for the provision of health 

care services to promote enrollee 

continuity of care between Medicaid, 

CHIP, Exchange and any other stateadministered health insurance 

programs. 

Subpart F—Enrollee Financial 

Responsibilities 

§ 600.500 Basis, scope, and applicability. 

(a) Statutory basis. This subpart 

implements section 1331(a) of the 

Affordable Care Act, which sets forth 

provisions regarding the establishment 

of the BHP and requirements regarding 

monthly premiums and cost sharing for 

enrollees. 

(b) Scope and applicability. This 

subpart consists of provisions relating to 

the imposition of monthly premiums 

and cost-sharing under all state BHPs. 

§ 600.505 Premiums. 

(a) BHP Blueprint requirements. For 

premiums imposed on enrollees, the 

State must include, or if applicable, 

assure in its BHP Blueprint: 

(1) The monthly premium imposed on 

any enrollee does not exceed the 

monthly premium that the enrollee 

would have been required to pay had he 

or she enrolled in a plan with a 

premium equal to the premium of the 

applicable benchmark plan, as defined 

in 26 CFR 1.36B–3(f). The State must 

assure that when determining the 

amount of the enrollee’s monthly 

premium, the State took into account 

reductions in the premium resulting 

from premium tax credit that the 

enrollee would have been paid on the 

enrollee’s behalf. 

(2) The group or groups of enrollees 

subject to premiums. 

(3) The collection method and 

procedure for the payment of an 

enrollee’s premium. 

(4) The consequences for an enrollee 

or applicant who does not pay a 

premium. 

(b) [Reserved] 

§ 600.510 Cost-sharing. 

(a) BHP Blueprint requirements. For 

cost sharing imposed on enrollees, the 

State must include, or if applicable, 

assure in its BHP Blueprint: 

(1) The cost sharing imposed on 

enrollees meet the standards detailed in 

§ 600.520(c). 

(2) The group or groups of enrollees 

subject to the cost sharing. 

(3) An assurance that the State has 

established an effective system to 

monitor and track the cost-sharing 

standards consistent with § 600.520(b) 

and (c) of this part. 

(b) Cost sharing for preventive health 

services. A State may not impose cost 

sharing with respect to the preventive 

health services or items, as defined in, 

and in accordance with 45 CFR 147.130. 

§ 600.515 Public schedule of enrollee 

premium and cost sharing. 

(a) The State must ensure that 

applicants and enrollees have access to 

information about all of the following, 

either upon request or through an 

Internet Web site: 

(1) The amount of and types of 

enrollee premiums and cost sharing for 

each standard health plan that would 

apply for individuals at different 

income levels. 

(2) The consequences for an applicant 

or an enrollee who does not pay a 

premium. 

(b) The information described in 

paragraph (a) of this section must be 

made available to applicants for 

standard health plan coverage and 

enrollees in such coverage, at the time 

of enrollment and reenrollment, after a 

redetermination of eligibility, when 

premiums, cost sharing, and annual 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59149 

limitations on cost sharing are revised, 

and upon request by the individual. 

§ 600.520 General cost-sharing 

protections. 

(a) Cost-sharing protections for lower 

income enrollees. The State may vary 

premiums and cost sharing based on 

household income only in a manner that 

does not favor enrollees with higher 

income over enrollees with lower 

income. 

(b) Cost-sharing protections to ensure 

enrollment of Indians. A State must 

ensure that standard health plans meet 

the standards in accordance with 45 

CFR 156.420(b)(1) and (d). 

(c) Cost-sharing standards. A State 

must ensure that standard health plans 

meet: 

(1) The standards in accordance with 

45 CFR 156.420(c) and (e); and 

(2) The cost-sharing reduction 

standards in accordance with 45 CFR 

156.420(a)(1) for an enrollee with 

household income at or below 150 

percent of the FPL, and 45 CFR 

156.420(a)(2) for an enrollee with 

household income above 150 percent of 

the FPL. 

(3) The State must establish an 

effective system to monitor compliance 

with the cost-sharing reduction 

standards in paragraph (c) of this 

section, and the cost-sharing protections 

to ensure enrollment of Indians in 

paragraph (b) of this section to ensure 

that enrollees are not held responsible 

for such monitoring activity. 

§ 600.525 Disenrollment procedures and 

consequences for nonpayment of 

premiums. 

(a) Disenrollment procedures due to 

nonpayment of premium. (1) A State 

must assure in its BHP Blueprint that it 

is in compliance with the disenrollment 

procedures described in 45 CFR 

155.430. 

(2) A State electing to enroll eligible 

individuals in accordance with 45 CFR 

155.410 and 420 must comply with the 

premium grace period standards set 

forth in 45 CFR 156.270 for required 

premium payment prior to 

disenrollment. 

(3) A State electing to enroll eligible 

individuals throughout the year must 

provide an enrollee a 30-day grace 

period to pay any required premium 

prior to disenrollment. 

(b) Consequences of nonpayment of 

premium. (1) A State electing to enroll 

eligible individuals in accordance with 

45 CFR 155.410 and 420 may not restrict 

reenrollment to BHP beyond the next 

open enrollment period. 

(2) A State electing to enroll eligible 

individuals throughout the year must 

comply with the reenrollment standards 

set forth in § 457.570(c). If applicable, 

the State must define the length of its 

premium lockout period in its BHP 

Blueprint. 

Subpart G—Payment to States 

§ 600.600 Basis, scope, and applicability. 

(a) Statutory basis. This subpart 

implements section 1331(d)(1) and (3) of 

the Affordable Care Act regarding the 

transfer of Federal funds to a State’s 

BHP trust fund and the Federal payment 

amount to State for the provision of 

BHP. 

(b) Scope and applicability. This 

subpart consists of provisions relating to 

the methodology used to calculate the 

amount of payment to a state in a given 

Federal fiscal year for the provision of 

BHP and the process and procedures by 

which the Secretary establishes a State’s 

BHP payment amount. 

§ 600.605 BHP payment methodology. 

(a) General calculation. The Federal 

payment for an eligible individual in a 

given Federal fiscal year is the sum of 

the premium tax credit component, as 

described in paragraph (a)(1) of this 

section, and the cost-sharing reduction 

component, as described in paragraph 

(a)(2) of this section. 

(1) Premium tax credit component. 

The premium tax credit component 

equals 95 percent of the premium tax 

credit for which the eligible individual 

would have qualified had he or she been 

enrolled in a qualified health plan 

through an Exchange in a given calendar 

year, adjusted by the relevant factors 

described in paragraph (b) of this 

section. 

(2) Cost-sharing reduction component. 

The cost-sharing reduction component 

equals 95 percent of the cost of the costsharing reductions for which the eligible 

individual would have qualified had he 

or she been enrolled in a qualified 

health plan through an Exchange in a 

given calendar year adjusted by the 

relevant factors described in paragraph 

(b) of this section. 

(b) Relevant factors in the payment 

methodology. In determining the 

premium tax credit and cost-sharing 

reduction components described in 

paragraph (a) of this section, the 

Secretary will consider the following 

factors to determine applicable 

adjustments: 

(1) Age of the enrollee; 

(2) Income of the enrollee; 

(3) Self-only or family coverage; 

(4) Geographic differences in average 

spending for health care across rating 

areas; 

(5) Health status of the enrollee for 

purposes of determining risk adjustment 

payments and reinsurance payments 

had the enrollee been enrolled in a 

qualified health plan through an 

Exchange; 

(6) Reconciliation of the premium tax 

credit or cost-sharing reductions had 

such reconciliation occurred if an 

enrollee had been enrolled in a qualified 

health plan through an Exchange; 

(7) Marketplace experience in other 

states with respect to Exchange 

participation and the effect of the 

premium tax credit and cost-sharing 

reductions provided to residents, 

particularly those residents with income 

below 200 percent of the FPL; and 

(8) Other factors affecting the 

development of the methodology as 

determined by the Secretary. 

(c) Annual adjustments to payment 

methodology. The Secretary will adjust 

the payment methodology on a 

prospective basis to adjust for any 

changes in the calculation of the 

premium tax credit and cost-sharing 

reduction components. 

§ 600.610 Secretarial determination of BHP 

payment amount. 

(a) Proposed payment notice. (1) 

Beginning in FY 2015 and each 

subsequent year thereafter, the Secretary 

will determine and publish in a Federal 

Register notice the next fiscal year’s 

BHP payment methodology. The 

Secretary will publish this notice 

annually in October upon receiving 

certification from the Chief Actuary of 

CMS. 

(2) A State may be required to submit 

data in accordance with the published 

proposed payment notice in order for 

the Secretary to determine the State’s 

payment rate as described in paragraph 

(b) of this section. 

(b) Final payment notice. (1) The 

Secretary will determine and publish 

the final BHP payment methodology 

and BHP payment amounts annually in 

February in a Federal Register notice. 

(2) Calculation of payment rates. State 

payment rates are determined by the 

Secretary using the final BHP payment 

methodology, data requested in the 

proposed payment notice described in 

paragraph (a) of this section, and, if 

needed, other applicable data as 

determined by the Secretary. 

(c) State specific aggregate BHP 

payment amounts. (1) Prospective 

aggregate payment amount. The 

Secretary will determine, on a quarterly 

basis, the prospective aggregate BHP 

payment amount by multiplying the 

payment rates described in paragraph 

(b) of this section by the projected 

number of enrollees. This calculation 

would be made for each category of 

enrollees based on enrollee 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
59150 Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 

characteristics and the other relevant 

factors considered when determining 

the payment methodology. The 

prospective aggregate BHP payment 

amount would be the sum of the 

payments determined for each category 

of enrollees for a State. 

(2) Retrospective adjustment to state 

specific aggregate payment amount for 

enrollment and errors. (i) Sixty days 

after the end of each fiscal year quarter, 

the Secretary will calculate a 

retrospective adjustment to the previous 

quarter’s specific aggregate payment 

amount by multiplying the payment 

rates described in paragraph (b) of this 

section by actual enrollment for the 

respective quarter. This calculation 

would be made for each category of 

enrollees based on enrollee 

characteristics and the other relevant 

factors considered when determining 

the payment methodology. The adjusted 

BHP payment amount would be the sum 

of the payments determined for each 

category of enrollees for a State. 

(ii) Upon determination that a 

mathematical error occurred during the 

application of the BHP funding 

methodology, the Secretary will 

recalculate the state’s BHP payment 

amount and make any necessary 

adjustments in accordance with 

paragraph (c)(2)(iii) of this section. 

(iii) Any difference in the adjusted 

payment and the prospective aggregate 

payment amount will result in either: 

(A) A deposit of the difference 

amount into the State’s BHP trust fund; 

or 

(B) A reduction in the upcoming 

quarter’s prospective aggregate payment 

as described in paragraph (c)(1) of this 

section by the difference amount. 

§ 600.615 Deposit of Federal BHP 

payment. 

HHS will make quarterly deposits into 

the state’s BHP trust fund based on the 

aggregate quarterly payment amounts 

described in § 600.610(c). 

Subpart H—BHP Trust Fund 

§ 600.700 Basis, scope, and applicability. 

(a) Statutory basis. This subpart 

implements section 1331(d)(2) of the 

Affordable Care Act, which set forth 

provisions regarding BHP trust fund 

expenditures, fiscal policies and 

accountability standards and restitution 

to the BHP trust fund for unallowable 

expenditures. 

(b) Scope and applicability. This 

subpart sets forth a framework for BHP 

trust funds and accounting, establishing 

sound fiscal policies and accountability 

standards and procedures for the 

restitution of unallowable BHP trust 

fund expenditures. 

§ 600.705 BHP trust fund. 

(a) Establishment of BHP trust fund. 

(1) The State must establish a BHP trust 

fund with an independent entity, or as 

a subset account within its General 

Fund. 

(2) The State must identify trustees 

responsible for oversight of the BHP 

trust fund. 

(3) Trustees must specify individuals 

with the power to authorize withdrawal 

of funds for allowable trust fund 

expenditures. 

(b) Non-Federal deposits. The State 

may deposit non-Federal funds, 

including such funds from enrollees, 

providers or other third parties for 

standard health plan coverage, into its 

BHP trust fund. Upon deposit, such 

funds will be considered BHP trust 

funds, must remain in the BHP trust 

fund and meet the standards described 

in paragraphs (c) and (d) of this section. 

(c) Allowable trust fund expenditures. 

BHP trust funds may only be used to: 

(1) Reduce premiums and cost sharing 

for eligible individuals enrolled in 

standard health plans under BHP; or 

(2) Provide additional benefits for 

eligible individuals enrolled in standard 

health plans as determined by the State. 

(d) Limitations. BHP trust funds may 

not be expended for any purpose other 

than those specified in paragraph (c) of 

this section. In addition, BHP trust 

funds may not be used for other 

purposes including but not limited to: 

(1) Determining the amount of nonFederal funds for the purposes of 

meeting matching or expenditure 

requirements for Federal funding; 

(2) Program administration of BHP or 

any other program; 

(3) Payment to providers not 

associated with BHP services or 

requirements; or 

(4) Coverage for individuals not 

eligible for BHP. 

(e) Year-to-year carryover of trust 

funds. A State may maintain a surplus, 

or reserve, of funds in its trust through 

the carryover of unexpended funds from 

year-to-year. Expenditures from this 

surplus must be made in accordance 

with paragraphs (b) and (c) of this 

section. 

§ 600.710 Fiscal policies and 

accountability. 

A BHP Blueprint must provide that 

the BHP administering agency will: 

(a) Accounting records. Maintain an 

accounting system and supporting fiscal 

records to assure that the BHP trust 

funds are maintained and expended in 

accord with applicable Federal 

requirements, such as OMB Circulars 

A–87 and A–133. 

(b) Annual certification. Obtain an 

annual certification from the BHP 

trustees, the State’s chief financial 

officer, or designee, certifying all of the 

following: 

(1) The State’s BHP trust fund 

financial statements for the fiscal year. 

(2) The BHP trust funds are not being 

used as the non-Federal share for 

purposes of meeting any matching or 

expenditure requirement of any 

Federally-funded program. 

(3) The use of BHP trust funds is in 

accordance with Federal requirements 

consistent with those specified for the 

administration and provision of the 

program. 

(c) Independent audit. Conduct an 

independent audit of BHP trust fund 

expenditures, consistent with the 

standards set forth in chapter 3 of the 

Government Accountability Office’s 

Government Auditing Standards, over a 

3-year period to determine that the 

expenditures made during the 3-year 

period were allowable as described in 

§ 600.705(b) and in accord with other 

applicable Federal requirements. The 

independent audit may be conducted as 

a sub-audit of the single state audit 

conducted in accordance with OMB 

Circular A–133, and must follow the 

cost accounting principles in OMB 

Circular A–87. 

(d) Annual reports. Publish annual 

reports on the use of funds, including a 

separate line item that tracks the use of 

funds described in § 600.705(e) to 

further reduce premiums and cost 

sharing, or for the provision of 

additional benefits within 10 days of 

approval by the trustees. If applicable 

for the reporting year, the annual report 

must also contain the findings for the 

audit conducted in accordance with 

paragraph (c) of this section. 

(e) Restitution. Establish and maintain 

BHP trust fund restitution procedures. 

(f) Record retention. Retain records for 

3 years from date of submission of a 

final expenditure report. 

(g) Record retention related to audit 

findings. If any litigation, claim, 

financial management review, or audit 

is started before the expiration of the 3- 

year period, the records shall be 

retained until all litigation, claims or 

audit findings involving the records 

have been resolved and final action 

taken. 

§ 600.715 Corrective action, restitution, 

and disallowance of questioned BHP 

transactions. 

(a) Corrective action. When a question 

has been raised concerning the authority 

for BHP trust fund expenditures in an 

OIG report, other HHS compliance 

review, State audit or otherwise, the 

BHP trustees and the State shall review 

the issues and develop a written 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2
Federal Register / Vol. 78, No. 186 / Wednesday, September 25, 2013 / Proposed Rules 59151 

response no later than 60 days upon 

receipt of such a report, unless 

otherwise specified in the report, review 

or audit. To the extent determined 

necessary in that review, the BHP 

trustees and State shall implement 

changes to fiscal procedures to ensure 

proper use of trust fund resources. 

(b) Restitution. To the extent that the 

State and BHP trustees determine that 

BHP trust funds may not have been 

properly spent, they must ensure 

restitution to the BHP trust fund of the 

funds in question. Restitution may be 

made directly by the BHP trustees, by 

the State, or by a liable third party. The 

State or the BHP trustees may enter into 

indemnification agreements assigning 

liability for restitution of funds to the 

BHP trust fund. 

(c) Timing of restitution. Restitution 

to the BHP trust fund for any 

unallowable expenditure may occur in a 

lump sum amount, or in equal 

installment amounts. Restitution to the 

BHP trust fund cannot exceed a 2-year 

period from the date of the written 

response in accordance with paragraph 

(a) of this section. 

(d) HHS disallowance of improper 

BHP trust fund expenditures. The State 

shall return to HHS the amount of 

federal BHP funding that HHS has 

determined was expended for 

unauthorized purposes, when no 

provision has been made to restore the 

funding to the BHP trust fund in 

accordance with paragraph (b) of this 

section (unless the restitution does not 

comply with the timing conditions 

described in paragraphs (c) of this 

section). When HHS determines that 

federal BHP funding is not allowable, 

HHS will provide written notice to the 

state and BHP Trustees containing: 

(1) The date or dates of the improper 

expenditures from the BHP trust fund; 

(2) A brief written explanation of the 

basis for the determination that the 

expenditures were improper; and 

(3) Procedures for administrative 

reconsideration of the disallowance 

based on a final determination. 

(e) Administrative reconsideration of 

BHP trust fund disallowances. (1) BHP 

Trustees or the State may request 

reconsideration of a disallowance 

within 60 days after receipt of the 

disallowance notice described in 

paragraph (d)(1) of this section by 

submitting a written request for review, 

along with any relevant evidence, 

documentation, or explanation, to HHS. 

(2) After receipt of a reconsideration 

request, if the Secretary (or a designated 

hearing officer) determines that further 

proceedings would be warranted, the 

Secretary may issue a request for further 

information by a specific date, or may 

schedule a hearing to obtain further 

evidence or argument. 

(3) The Secretary, or designee, shall 

issue a final decision within 90 days 

after the later of the date of receipt of 

the reconsideration request or date of 

the last scheduled proceeding or 

submission. 

(f) Return of disallowed BHP funding. 

Disallowed federal BHP funding must 

be returned to HHS within 60 days after 

the later of the date of the disallowance 

notice or the final administrative 

reconsideration upholding the 

disallowance. Such repayment cannot 

be made from BHP trust funds, but must 

be made with other, non-Federal funds. 

Title 45 

PART 144—REQUIREMENTS 

RELATING TO HEALTH INSURANCE 

COVERAGE 

■ 2. 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. 

■ 3. Section 144.103 is amended by 

revising the definition of ‘‘individual 

market’’ to read as follows: 

§ 144.103 Definitions. 

* * * * * 

Individual market means the market 

for health insurance coverage offered to 

individuals other than in connection 

with a group health plan, or other than 

coverage offered pursuant to a contract 

between the health insurance issuer 

with the Medicaid, Children’s Health 

Insurance Program, or Basic Health 

programs. 

* * * * * 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) 

Dated: September 3, 2013. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: September 10, 2013. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2013–23292 Filed 9–20–13; 4:15 pm] 

BILLING CODE 4120–01–P 


TKELLEY on DSK3SPTVN1PROD with PROPOSALS2