4424 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

1The Patient Protection and Affordable Care Act 

(Pub. L. 111–148, 124 Stat. 119) was enacted on 

March 23, 2010. The Healthcare and Education 

Reconciliation Act of 2010 (Pub. L. 111–152, 124 

Stat. 1049), which amended and revised several 

provisions of the Patient Protection and Affordable 

Care Act, was enacted on March 30, 2010. In this 

rulemaking, the two statutes are referred to 

collectively as the ‘‘Patient Protection and 

Affordable Care Act,’’ ‘‘Affordable Care Act,’’ or 

‘‘ACA.’’ 

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

1331, and 1343 of the ACA and sections 2718 and 

2792 of the PHS Act. 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of the Secretary 

45 CFR Parts 153, 155, 156, and 158 

[CMS–9888–F] 

RIN 0938–AV41 

Patient Protection and Affordable Care 

Act; HHS Notice of Benefit and 

Payment Parameters for 2026; and 

Basic Health Program 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), Department 

of Health and Human Services (HHS). 

ACTION: Final rule. 

SUMMARY: This final rule includes 

payment parameters and provisions 

related to the HHS-operated risk 

adjustment and risk adjustment data 

validation (HHS–RADV) programs, as 

well as 2026 benefit year user fee rates 

for issuers that participate in the HHSoperated risk adjustment program and 

the 2026 benefit year user fee rates for 

issuers offering qualified health plans 

(QHPs) through Federally-facilitated 

Exchanges (FFEs) and State-based 

Exchanges on the Federal platform 

(SBE–FPs). This final rule also includes 

requirements related to modifications to 

the calculation of the Basic Health 

Program (BHP) payment; and changes to 

the Initial Validation Audit (IVA) 

sampling approach and Second 

Validation Audit (SVA) pairwise means 

test for HHS–RADV. It also addresses 

HHS’ authority to engage in compliance 

reviews of and take enforcement action 

against lead agents of insurance 

agencies for violations of HHS’ 

Exchange standards and requirements; 

HHS’ system suspension authority to 

address noncompliance by agents and 

brokers; an optional fixed-dollar 

premium payment threshold; 

permissible plan-level adjustment to the 

index rate to account for cost-sharing 

reductions (CSRs); reconsideration 

standards for certification denials; 

changes to the approach for conducting 

Essential Community Provider (ECP) 

certification reviews; a policy to 

publicly share aggregated, summarylevel Quality Improvement Strategy 

(QIS) information on an annual basis; 

and revisions to the medical loss ratio 

(MLR) reporting and rebate 

requirements for qualifying issuers that 

meet certain standards. 

DATES: These regulations are effective 

on January 15, 2025. 

FOR FURTHER INFORMATION CONTACT: 

Jeff Wu, (301) 492–4305, Rogelyn 

McLean, (301) 492–4229, Grace Bristol, 

(410) 786–8437, for general information. 

Ayesha Anwar, (301) 492–4000 or 

Joshua Paul, (301) 492–4347 for matters 

related to HHS-operated risk 

adjustment. 

Leanne Scott, (410) 786–1045 or 

Ayesha Anwar, (301) 492–4000 for 

matters related to HHS-operated risk 

adjustment data validation. 

Preeti Juturu, (301) 450–3234 or 

Leanne Scott, (410) 786–1045, for 

matters related to user fees. 

Lisa Cuozzo (410) 786–1746, for 

matters related to the single risk pool. 

Brian Gubin, (410) 786–1659, for 

matters related to agent, broker, and 

web-broker guidelines. 

Zarin Ahmed, (301) 492–4400, for 

matters related to enrollment of 

qualified individuals into QHPs and 

termination of Exchange enrollment or 

coverage for qualified individuals. 

Christina Whitefield, (301) 492–4172, 

for matters related to the medical loss 

ratio program. 

Preeti Hans, (301) 492–5144, for 

matters related to Quality Improvement 

Strategy. 

Ken Buerger, (410) 786–1190, for 

matters related to certification standards 

for QHPs. 

Nikolas Berkobien, (667) 290–9903, 

for matters related to standardized plan 

options, non-standardized plan option 

limits and exceptions, and financial 

requirements for issuers of QHPs on the 

FFEs. 

Adelaide Balenger, (667) 414–0691, 

for matters related to the Actuarial 

Value Calculator. 

Mary Evans, (470) 890–4113, for 

matters related to the Failure to File and 

Reconcile process. 

Chris Truffer, (410) 786–1264, for 

matters related to the Basic Health 

Program (BHP) provision. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Executive Summary 

II. Background 

A. Legislative and Regulatory Overview 

B. Summary of Major Provisions 

III. Summary of the Provisions of the 

Proposed Regulations and Analysis of 

and Responses to Public Comments 

A. 42 CFR Part 600—BHP Methodology 

Regarding the Value of the Premium 

Adjustment Factor (PAF) 

B. 45 CFR Part 153—Standards Related to 

Reinsurance, Risk Corridors, and Risk 

Adjustment 

C. 45 CFR Part 155—Exchange 

Establishment Standards and Other 

Related Standards Under the Affordable 

Care Act 

D. 45 CFR Part 156—Health Insurance 

Issuer Standards Under the Affordable 

Care Act, Including Standards Related to 

Exchanges 

E. 45 CFR Part 158—Issuer Use of Premium 

Revenue: Reporting and Rebate 

Requirements 

F. Severability 

IV. Waiver of Delay in Effective Date 

V. Collection of Information Requirements 

A. Wage Estimates 

B. ICRs Regarding the Initial Validation 

Audit (IVA) Sample—Enrollees Without 

HCCs, Removal of the FPC, and Neyman 

Allocation (§ 153.630(b)) 

C. ICRs Regarding Engaging in Compliance 

Reviews and Taking Enforcement 

Actions Against Lead Agents for 

Insurance Agencies (§ 155.220) 

D. ICRs Regarding Agent and Broker 

System Suspension Authority 

(§ 155.220(k)) 

E. ICRs Regarding Updating the Model 

Consent Form (§ 155.220) 

F. ICRs Regarding Notification of 2-Year 

Failure To File and Reconcile Population 

(§ 155.305) 

G. ICRs Regarding General Program 

Integrity and Oversight Requirements 

(§ 155.1200) 

H. ICRs Regarding Essential Community 

Provider Certification Reviews 

(§ 156.235) 

I. ICRs Regarding Quality Improvement 

Strategy Information (§ 156.1130) 

J. ICRs Regarding Medical Loss Ratio 

(§§ 158.103, 158.140, 158.240) 

K. Summary of Annual Burden Estimates 

for Finalized Requirements 

L. Submission of PRA-Related Comments 

VI. Regulatory Impact Analysis 

A. Statement of Need 

B. Overall Impact 

C. Impact Estimates of the Payment Notice 

Provisions and Accounting Table 

D. Regulatory Alternatives Considered 

E. Regulatory Flexibility Act (RFA) 

F. Unfunded Mandates Reform Act 

(UMRA) 

G. Federalism 

H. Congressional Review Act 

I. Executive Summary 

We are finalizing changes to the 

provisions and parameters implemented 

through prior rulemaking to implement 

the ACA.1 These requirements are 

published under the authority granted 

to the Secretary by the ACA and the 

Public Health Service (PHS) Act.2 In 

this final rule, we are finalizing changes 

related to some of the ACA provisions 

and parameters we previously 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4425 

implemented and are finalizing new 

provisions. Our goal with these 

requirements is to provide quality, 

affordable coverage to consumers while 

minimizing administrative burden and 

ensuring program integrity. The changes 

in this final rule are intended to help 

advance health equity, mitigate health 

disparities, and alleviate discrimination. 

II. Background 

A. Legislative and Regulatory Overview 

Title I of the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) added a new title XXVII 

to the PHS Act to establish various 

reforms to the group and individual 

health insurance markets. These 

provisions of the PHS Act were later 

augmented by other laws, including the 

ACA. Subtitles A and C of title I of the 

ACA reorganized, amended, and added 

to the provisions of part A of title XXVII 

of the PHS Act relating to group health 

plans and health insurance issuers in 

the group and individual markets. The 

term ‘‘group health plan’’ includes both 

insured and self-insured group health 

plans. 

Below, we summarize sections of the 

PHS Act and ACA that are relevant to 

this final rule. 

Section 2718 of the PHS Act, as added 

by the ACA, generally requires health 

insurance issuers offering group or 

individual health insurance coverage to 

submit an annual medical loss ratio 

(MLR) report to HHS and provide 

rebates to enrollees if the issuers do not 

achieve specified MLR thresholds. 

Section 1301(a)(1)(B) of the ACA 

directs all issuers of qualified health 

plans (QHPs) to cover the essential 

health benefits (EHB) package described 

in section 1302(a) of the ACA, including 

coverage of the services described in 

section 1302(b) of the ACA, adherence 

to the cost-sharing limits described in 

section 1302(c) of the ACA, and meeting 

the Actuarial Value (AV) levels 

established in section 1302(d) of the 

ACA. Section 2707(a) of the PHS Act, 

which is effective for plan or policy 

years beginning on or after January 1, 

2014, extends the requirement to cover 

the EHB package to non-grandfathered 

individual and small group health 

insurance coverage, irrespective of 

whether such coverage is offered 

through an Exchange. In addition, 

section 2707(b) of the PHS Act directs 

non-grandfathered group health plans to 

ensure that cost sharing under the plan 

does not exceed the limitations 

described in section 1302(c)(1) of the 

ACA. 

Section 1302 of the ACA provides for 

the establishment of an EHB package 

that includes coverage of EHBs (as 

defined by the Secretary of HHS), costsharing limits, and AV requirements. 

The law directs that EHBs be equal in 

scope to the benefits provided under a 

typical employer plan, and that they 

cover at least the following 10 general 

categories: ambulatory patient services; 

emergency services; hospitalization; 

maternity and newborn care; mental 

health and substance use disorder 

services, including behavioral health 

treatment; prescription drugs; 

rehabilitative and habilitative services 

and devices; laboratory services; 

preventive and wellness services and 

chronic disease management; and 

pediatric services, including oral and 

vision care. 

Sections 1302(b)(4)(A) through (D) of 

the ACA establish that the Secretary 

must define EHB in a manner that: (1) 

reflects appropriate balance among the 

10 categories; (2) is not designed in such 

a way as to discriminate based on age, 

disability, or expected length of life; (3) 

takes into account the health care needs 

of diverse segments of the population; 

and (4) does not allow denials of EHBs 

based on age, life expectancy, disability, 

degree of medical dependency, or 

quality of life. 

Section 1302(d) of the ACA describes 

the various levels of coverage based on 

AV. Consistent with section 

1302(d)(2)(A) of the ACA, AV is 

calculated based on the provision of 

EHB to a standard population. Section 

1302(d)(3) of the ACA directs the 

Secretary of HHS to develop guidelines 

that allow for de minimis variation in 

AV calculations. 

Section 1311(c) of the ACA provides 

the Secretary the authority to issue 

regulations to establish criteria for the 

certification of QHPs. Section 

1311(c)(1)(B) of the ACA requires, 

among the criteria for certification that 

the Secretary must establish by 

regulation, that QHPs ensure a sufficient 

choice of providers. Section 

1311(d)(4)(A) of the ACA requires the 

Exchange to implement procedures for 

the certification, recertification, and 

decertification of health plans as QHPs, 

consistent with guidelines developed by 

the Secretary under section 1311(c) of 

the ACA. Section 1311(e)(1) of the ACA 

grants the Exchange the authority to 

certify a health plan as a QHP if the 

health plan meets the Secretary’s 

requirements for certification issued 

under section 1311(c) of the ACA, and 

the Exchange determines that making 

the plan available through the Exchange 

is in the interests of qualified 

individuals and qualified employers in 

the State. Section 1311(c)(6)(C) of the 

ACA directs the Secretary of HHS to 

require an Exchange to provide for 

special enrollment periods and section 

1311(c)(6)(D) of the ACA directs the 

Secretary of HHS to require an Exchange 

to provide for a monthly enrollment 

period for Indians, as defined by section 

4 of the Indian Health Care 

Improvement Act. 

Section 1311(d)(3)(B) of the ACA 

permits a State, at its option, to require 

QHPs to cover benefits in addition to 

EHB. This section also requires a State 

to make payments, either to the 

individual enrollee or to the issuer on 

behalf of the enrollee, to defray the cost 

of these additional State-required 

benefits. 

Section 1312(c) of the ACA generally 

requires a health insurance issuer to 

consider all enrollees in all health plans 

(except grandfathered health plans) 

offered by such issuer to be members of 

a single risk pool for each of its 

individual and small group markets. 

States have the option to merge the 

individual and small group market risk 

pools under section 1312(c)(3) of the 

ACA. 

Section 1312(e) of the ACA provides 

the Secretary with the authority to 

establish procedures under which a 

State may allow agents or brokers to (1) 

enroll qualified individuals and 

qualified employers in QHPs offered 

through Exchanges and (2) assist 

individuals in applying for advance 

payments of the premium tax credit 

(APTC) and CSRs for QHPs sold through 

an Exchange. 

Section 1312(f)(1)(B) of the ACA 

provides that an individual shall not be 

treated as a qualified individual for 

enrollment in a QHP if, at the time of 

enrollment, the individual is 

incarcerated, other than incarceration 

pending the disposition of charges. 

Sections 1313 and 1321 of the ACA 

provide the Secretary with the authority 

to oversee the financial integrity of State 

Exchanges, their compliance with HHS 

standards, and the efficient and nondiscriminatory administration of State 

Exchange activities. Section 

1313(a)(5)(A) of the ACA provides the 

Secretary with the authority to 

implement any measure or procedure 

that the Secretary determines is 

appropriate to reduce fraud and abuse 

in the administration of the Exchanges. 

Section 1321 of the ACA provides for 

State flexibility in the operation and 

enforcement of Exchanges and related 

requirements. 

Section 1321(a) of the ACA provides 

broad authority for the Secretary to 

establish standards and regulations to 

implement the statutory requirements 

related to Exchanges, QHPs and other 

components of title I of the ACA, 


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4426 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

3 In the 2014 through 2016 benefit years, HHS 

operated the risk adjustment program in every State 

and the District of Columbia, except Massachusetts. 

Beginning with the 2017 benefit year, HHS has 

operated the risk adjustment program in all 50 

States and the District of Columbia. 

4See section 1341 of the ACA (transitional 

reinsurance program), section 1342 of the ACA (risk 

corridors program), and section 1343 of the ACA 

(risk adjustment program). 

including such other requirements as 

the Secretary determines appropriate. 

When operating an FFE under section 

1321(c)(1) of the ACA, HHS has the 

authority under sections 1321(c)(1) and 

1311(d)(5)(A) of the ACA to collect and 

spend user fees. Office of Management 

and Budget (OMB) Circular A–25 

Revised establishes Federal policy 

regarding user fees and specifies that a 

user charge will be assessed against 

each identifiable recipient for special 

benefits derived from Federal activities 

beyond those received by the public. 

Section 1321(d) of the ACA provides 

that nothing in title I of the ACA must 

be construed to preempt any State law 

that does not prevent the application of 

title I of the ACA. Section 1311(k) of the 

ACA specifies that Exchanges may not 

establish rules that conflict with or 

prevent the application of regulations 

issued by the Secretary. 

Section 1331 of the ACA provides 

States with an option to establish a 

Basic Health Program (BHP). In the 

States that elect to operate a BHP, the 

BHP makes affordable health benefits 

coverage available for individuals under 

age 65 with household incomes between 

133 percent and 200 percent of the 

Federal poverty level (FPL) who are not 

otherwise eligible for Medicaid, the 

Children’s Health Insurance Program 

(CHIP), or affordable employersponsored coverage, or for individuals 

whose income is equal to or below 200 

percent of FPL but are lawfully present 

non-citizens ineligible for Medicaid. For 

those States that have expanded 

Medicaid coverage under section 

1902(a)(10)(A)(i)(VIII) of the Social 

Security Act (the Act), the lower income 

threshold for BHP eligibility is 

effectively 138 percent of the FPL due 

to the application of a required 5 

percent income disregard in 

determining the upper limits of 

Medicaid income eligibility (section 

1902(e)(14)(I) of the Act). 

Section 1343 of the ACA establishes 

a permanent risk adjustment program to 

provide payments to health insurance 

issuers that attract higher-than-average 

risk populations, such as those with 

chronic conditions, funded by charges 

collected from those issuers that attract 

lower-than-average risk populations, 

thereby reducing incentives for issuers 

to avoid higher-risk enrollees. Section 

1343(b) of the ACA provides that the 

Secretary, in consultation with States, 

shall establish criteria and methods to 

be used in carrying out the risk 

adjustment activities under this section. 

Consistent with section 1321(c) of the 

ACA, the Secretary is responsible for 

operating the HHS risk adjustment 

program in any State that fails to do so.3

Section 1401(a) of the ACA added 

section 36B to the Internal Revenue 

Code (the Code), which, among other 

things, requires that a taxpayer reconcile 

APTC for a year of coverage with the 

amount of the premium tax credit (PTC) 

the taxpayer is allowed for the year. 

Section 1402 of the ACA provides for, 

among other things, reductions in cost 

sharing for EHB for qualified low- and 

moderate-income enrollees in silver 

level QHPs offered through the 

individual market Exchanges. This 

section also provides for reductions in 

cost sharing for Indians enrolled in 

QHPs at any metal level. 

Section 1411(f) of the ACA requires 

the Secretary, in consultation with the 

Secretary of the Treasury and the 

Secretary of Homeland Security, and the 

Commissioner of Social Security, to 

establish procedures for hearing and 

making decisions governing appeals of 

Exchange eligibility determinations. 

Section 1411(f)(1)(B) of the ACA 

requires the Secretary to establish 

procedures to redetermine eligibility on 

a periodic basis, in appropriate 

circumstances, including eligibility to 

purchase a QHP through the Exchange 

and for APTC and CSRs. 

Section 1411(g) of the ACA allows the 

use of applicant information only for the 

limited purpose of, and to the extent 

necessary for, ensuring the efficient 

operation of the Exchange, including by 

verifying eligibility to enroll through the 

Exchange and for APTC and CSRs, and 

limits the disclosure of such 

information. 

Section 1413 of the ACA directs the 

Secretary to establish, subject to 

minimum requirements, a streamlined 

enrollment process for enrollment in 

QHPs and all insurance affordability 

programs. 

Section 5000A of the Code, as added 

by section 1501(b) of the ACA, requires 

individuals to have minimum essential 

coverage (MEC) for each month, qualify 

for an exemption, or make an individual 

shared responsibility payment. Under 

the Tax Cuts and Jobs Act, which was 

enacted on December 22, 2017, the 

individual shared responsibility 

payment is reduced to $0, effective for 

months beginning after December 31, 

2018. Notwithstanding that reduction, 

certain exemptions are still relevant to 

determine whether individuals aged 30 

and above qualify to enroll in 

catastrophic coverage under 

§§ 155.305(h) and 156.155(a)(5). 

Section 1902(r)(2)(A) of the Act 

permits States to apply less restrictive 

methodologies than cash assistance 

program methodologies in determining 

eligibility for certain eligibility groups. 

1. Premium Stabilization Programs 

The premium stabilization programs 

refer to the risk adjustment, risk 

corridors, and reinsurance programs 

established by the ACA.4 For past 

rulemaking, we refer readers to the 

following rules: 

• In the March 23, 2012 Federal 

Register (77 FR 17219) (Premium 

Stabilization Rule), we implemented the 

premium stabilization programs. 

• In the March 11, 2013 Federal 

Register (78 FR 15409) (2014 Payment 

Notice), we finalized the benefit and 

payment parameters for the 2014 benefit 

year to expand the provisions related to 

the premium stabilization programs and 

set forth payment parameters in those 

programs. 

• In the October 30, 2013 Federal 

Register (78 FR 65046), we finalized the 

modification to the HHS risk adjustment 

methodology related to community 

rating States. 

• In the November 6, 2013 Federal 

Register (78 FR 66653), we issued a 

correcting amendment to the 2014 

Payment Notice to address how an 

enrollee’s age for the risk score 

calculation would be determined under 

the HHS risk adjustment methodology. 

• In the March 11, 2014 Federal 

Register (79 FR 13743) (2015 Payment 

Notice), we finalized the benefit and 

payment parameters for the 2015 benefit 

year to expand the provisions related to 

the premium stabilization programs, set 

forth certain oversight provisions, and 

establish payment parameters in those 

programs. 

• In the May 27, 2014 Federal 

Register (79 FR 30240), we announced 

the fiscal year 2015 sequestration rate 

for the HHS-operated risk adjustment 

program. 

• In the February 27, 2015 Federal 

Register (80 FR 10749) (2016 Payment 

Notice), we finalized the benefit and 

payment parameters for the 2016 benefit 

year to expand the provisions related to 

the premium stabilization programs, set 

forth certain oversight provisions, and 

establish the payment parameters in 

those programs. 

• In the March 8, 2016 Federal 

Register (81 FR 12203) (2017 Payment 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4427 

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

HHS Risk Adjustment Model Coefficients. https://

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

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

Risk Adjustment Model Coefficients. https://

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

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

Adjustment Model Coefficients. https://

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

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

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

Adjustment Model Coefficients. https:// 

Continued 

Notice), we finalized the benefit and 

payment parameters for the 2017 benefit 

year to expand the provisions related to 

the premium stabilization programs, set 

forth certain oversight provisions, and 

establish the payment parameters in 

those programs. 

• In the December 22, 2016 Federal 

Register (81 FR 94058) (2018 Payment 

Notice), we finalized the benefit and 

payment parameters for the 2018 benefit 

year, added the high-cost risk pool 

parameters to the HHS risk adjustment 

methodology, incorporated prescription 

drug factors in the adult models, 

established enrollment duration factors 

for the adult models, and finalized 

policies related to the collection and use 

of enrollee-level External Data Gathering 

Environment (EDGE) data. 

• In the April 17, 2018 Federal 

Register (83 FR 16930) (2019 Payment 

Notice), we finalized the benefit and 

payment parameters for the 2019 benefit 

year, created the State flexibility 

framework permitting States to request 

a reduction in risk adjustment State 

transfers calculated by HHS, and 

adopted a new error rate methodology 

for HHS–RADV adjustments to transfers. 

• In the May 11, 2018 Federal 

Register (83 FR 21925), we issued a 

correction to the 2019 HHS risk 

adjustment coefficients in the 2019 

Payment Notice. 

• On July 27, 2018, consistent with 45 

CFR 153.320(b)(1)(i), we updated the 

2019 benefit year final HHS risk 

adjustment model coefficients to reflect 

an additional recalibration related to an 

update to the 2016 enrollee-level EDGE 

data set.5

• In the July 30, 2018 Federal 

Register (83 FR 36456), we adopted the 

2017 benefit year HHS risk adjustment 

methodology as established in the final 

rules issued in the March 23, 2012 (77 

FR 17220 through 17252) and March 8, 

2016 (81 FR 12204 through 12352) 

editions of the Federal Register. The 

final rule set forth an additional 

explanation of the rationale supporting 

the use of Statewide average premium 

in the State payment transfer formula 

for the 2017 benefit year, including the 

reasons why the program is operated by 

HHS in a budget-neutral manner. The 

final rule also permitted HHS to resume 

2017 benefit year HHS risk adjustment 

payments and charges. HHS also 

provided guidance as to the operation of 

the HHS-operated risk adjustment 

program for the 2017 benefit year in 

light of the publication of the final rule. 

• In the December 10, 2018 Federal 

Register (83 FR 63419), we adopted the 

2018 benefit year HHS risk adjustment 

methodology as established in the final 

rules issued in the March 23, 2012 (77 

FR 17219) and the December 22, 2016 

(81 FR 94058) editions of the Federal 

Register. In the rule, we set forth an 

additional explanation of the rationale 

supporting the use of Statewide average 

premium in the State payment transfer 

formula for the 2018 benefit year, 

including the reasons why the program 

is operated by HHS in a budget-neutral 

manner. 

• In the April 25, 2019 Federal 

Register (84 FR 17454) (2020 Payment 

Notice), we finalized the benefit and 

payment parameters for the 2020 benefit 

year, as well as the policies related to 

making the enrollee-level EDGE data 

available as a limited data set for 

research purposes and expanding the 

HHS uses of the enrollee-level EDGE 

data, approval of the request from 

Alabama to reduce HHS risk adjustment 

transfers by 50 percent in the small 

group market for the 2020 benefit year, 

and updates to HHS–RADV program 

requirements. 

• On May 12, 2020, consistent with 

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

Benefit Year Final HHS Risk 

Adjustment Model Coefficients on the 

CCIIO website.6

• In the May 14, 2020 Federal 

Register (85 FR 29164) (2021 Payment 

Notice), we finalized the benefit and 

payment parameters for the 2021 benefit 

year, as well as adopted updates to the 

HHS risk adjustment models’ 

hierarchical condition categories (HCCs) 

to transition to the 10th revision of the 

International Classification of Diseases 

(ICD–10) codes, approved the request 

from Alabama to reduce HHS risk 

adjustment transfers by 50 percent in 

the small group market for the 2021 

benefit year, and modified the outlier 

identification process under the HHS– 

RADV program. 

• In the December 1, 2020 Federal 

Register (85 FR 76979) (Amendments to 

the HHS-Operated Risk Adjustment 

Data Validation Under the Patient 

Protection and Affordable Care Act’s 

HHS-Operated Risk Adjustment 

Program (2020 HHS–RADV 

Amendments Rule)), we adopted the 

creation and application of Super HCCs 

in the sorting step that assigns HCCs to 

failure rate groups, finalized a sliding 

scale adjustment in HHS–RADV error 

rate calculation, and added a constraint 

for negative error rate outliers with a 

negative error rate. We also established 

a transition from the prospective 

application of HHS–RADV adjustments 

to apply HHS–RADV results to risk 

scores from the same benefit year as that 

being audited. 

• In the September 2, 2020 Federal 

Register (85 FR 54820), we issued an 

interim final rule containing certain 

policy and regulatory revisions in 

response to the COVID–19 public health 

emergency (PHE), wherein we set forth 

HHS risk adjustment reporting 

requirements for issuers offering 

temporary premium credits in the 2020 

benefit year. 

• In the May 5, 2021 Federal Register 

(86 FR 24140) (part 2 of the 2022 

Payment Notice), we finalized a subset 

of proposals from the December 4, 2020 

Federal Register (85 FR 78572) (the 

2022 Payment Notice proposed rule), 

including policy and regulatory 

revisions related to the HHS-operated 

risk adjustment program, finalization of 

the benefit and payment parameters for 

the 2022 benefit year, and approval of 

the request from Alabama to reduce 

HHS risk adjustment transfers by 50 

percent in the individual and small 

group markets for the 2022 benefit year. 

In addition, this final rule established a 

revised schedule of collections for 

HHS–RADV and updated the provisions 

regulating second validation audit 

(SVA) and initial validation audit (IVA) 

entities. 

• On July 19, 2021, consistent with 

§ 153.320(b)(1)(i), we released Updated 

2022 Benefit Year Final HHS Risk 

Adjustment Model Coefficients on the 

CCIIO website, announcing some minor 

revisions to the 2022 benefit year final 

HHS risk adjustment adult model 

coefficients.7

• In the May 6, 2022 Federal Register 

(87 FR 27208) (2023 Payment Notice), 

we finalized revisions related to the 

HHS-operated risk adjustment program, 

including the benefit and payment 

parameters for the 2023 benefit year, 

HHS risk adjustment model 

recalibration, and policies related to the 

collection and extraction of enrolleelevel EDGE data. We also finalized the 

adoption of the interacted HCC count 

specification for the adult and child 

models, along with modified enrollment 

duration factors for the adult models, 

beginning with the 2023 benefit year.8


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4428 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

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

We also repealed the ability for States, 

other than prior participants, to request 

a reduction in HHS risk adjustment 

State transfers starting with the 2024 

benefit year. In addition, we approved a 

25 percent reduction to 2023 benefit 

year HHS risk adjustment transfers in 

Alabama’s individual market and a 10 

percent reduction to 2023 benefit year 

HHS risk adjustment transfers in 

Alabama’s small group market. We also 

finalized further refinements to the 

HHS–RADV error rate calculation 

methodology beginning with the 2021 

benefit year. 

• In the April 27, 2023 Federal 

Register (88 FR 25740) (2024 Payment 

Notice), we finalized the benefit and 

payment parameters for the 2024 benefit 

year, amended the EDGE discrepancy 

materiality threshold and data 

collection requirements, and reduced 

the risk adjustment user fee. For the 

2024 benefit year, we approved 50 

percent reductions to HHS risk 

adjustment transfers for Alabama’s 

individual and small group markets and 

repealed prior participant States’ ability 

to request reductions of their risk 

adjustment transfers for the 2025 benefit 

year and beyond. We finalized several 

refinements to HHS–RADV program 

requirements, such as shortening the 

window to confirm SVA findings or file 

a discrepancy report, changing the 

HHS–RADV materiality threshold for 

random and targeted sampling, and no 

longer exempting exiting issuers from 

adjustments to risk scores and HHS risk 

adjustment transfers when they are 

negative error rate outliers. We also 

announced the discontinuance of the 

Lifelong Permanent Condition List 

(LLPC) and Non-EDGE Claims (NEC) in 

HHS–RADV beginning with the 2022 

benefit year. 

• In the April 15, 2024 Federal 

Register (89 FR 26218) (2025 Payment 

Notice), we finalized the benefit and 

payment parameters for the 2025 benefit 

year, including the 2025 risk adjustment 

models and updated the adjustment 

factors for the receipt of CSRs for the 

American Indian and Alaska Native (AI/ 

AN) subpopulation who are enrolled in 

zero and limited cost-sharing plans to 

improve prediction in the HHS risk 

adjustment models. In addition, we 

finalized that in certain cases, we may 

require a corrective action plan (CAP) to 

address an observation identified in an 

HHS risk adjustment program audit. 

2. Program Integrity 

We have finalized program integrity 

standards related to the Exchanges and 

premium stabilization programs in two 

rules: the ‘‘first Program Integrity Rule’’ 

issued in the August 30, 2013 Federal 

Register (78 FR 54069), and the ‘‘second 

Program Integrity Rule’’ issued in the 

October 30, 2013 Federal Register (78 

FR 65045). We also refer readers to the 

2019 Patient Protection and Affordable 

Care Act; Exchange Program Integrity 

final rule (2019 Program Integrity Rule) 

issued in the December 27, 2019 

Federal Register (84 FR 71674). 

In the April 27, 2023 Federal Register 

(88 FR 25740) (2024 Payment Notice), 

we finalized a policy to implement 

improper payment pre-testing and 

assessment (IPPTA) requirements for 

State Exchanges to ensure adherence to 

the Payment Integrity Information Act of 

2019. In addition, we finalized allowing 

additional time for HHS to review 

evidence submitted by agents and 

brokers to rebut allegations pertaining to 

Exchange Agreement suspensions or 

terminations. We also introduced 

consent and eligibility application 

documentation requirements for agents, 

brokers, and web-brokers that assist 

Exchange consumers in FFE and SBE– 

FP States. 

3. Market Rules 

In the February 27, 2013 Federal 

Register (78 FR 13406), we issued the 

health insurance market rules, including 

provisions related to the single risk 

pool. We amended requirements related 

to index rates under the single risk pool 

provision in a final rule issued in the 

July 2, 2013 Federal Register (78 FR 

39870). In the October 30, 2013 Federal 

Register (78 FR 65046), we clarified 

when issuers may establish and update 

premium rates. In the March 8, 2016 

Federal Register (81 FR 12203), we 

clarified single risk pool provisions 

related to student health insurance 

coverage. We finalized minor 

adjustments to the single risk pool 

regulations in the 2018 Payment Notice, 

issued in the December 22, 2016 

Federal Register (81 FR 94058). 

4. Exchanges 

We requested comment relating to 

Exchanges in the August 3, 2010 

Federal Register (75 FR 45584). We 

issued initial guidance to States on 

Exchanges on November 18, 2010. In the 

March 27, 2012 Federal Register (77 FR 

18310) (Exchange Establishment Rule), 

we implemented the Affordable 

Insurance Exchanges (Exchanges), 

consistent with title I of the ACA, to 

provide competitive marketplaces for 

individuals and small employers to 

directly compare available private 

health insurance options based on price, 

quality, and other factors. This included 

implementation of components of the 

Exchanges and standards for eligibility 

for Exchanges, as well as network 

adequacy and ECP certification 

standards. 

In the August 17, 2011 Federal 

Register (76 FR 51201), we issued a 

proposed rule regarding eligibility 

determinations, including the regulatory 

requirement to verify incarceration 

status. In the March 27, 2012 Federal 

Register (77 FR 18310), we finalized the 

regulatory requirement to verify 

incarceration attestation using an 

approved electronic data source that is 

current and accurate, and to resolve the 

inconsistency when attestations are not 

reasonably compatible with information 

in an approved data source. We also 

established requirements regarding 

accessible communications for 

individuals with disabilities and those 

with LEP. 

In the 2014 Payment Notice and the 

Amendments to the HHS Notice of 

Benefit and Payment Parameters for 

2014 interim final rule, issued in the 

March 11, 2013 Federal Register (78 FR 

15541), we set forth standards related to 

Exchange user fees. We established an 

adjustment to the FFE user fee in the 

Coverage of Certain Preventive Services 

under the Affordable Care Act final rule, 

issued in the July 2, 2013 Federal 

Register (78 FR 39869) (Preventive 

Services Rule). 

In the 2016 Payment Notice, we also 

set forth the ECP certification standard 

at § 156.235, with revisions in the 2017 

Payment Notice in the March 8, 2016 

Federal Register (81 FR 12203) and the 

2018 Payment Notice in the December 

22, 2016 Federal Register (81 FR 

94058). 

In the 2018 Payment Notice, issued in 

the December 22, 2016 Federal Register 

(81 FR 94058), we set forth the 

standards for the request for 

reconsideration of denial of certification 

specific to the FFEs at § 155.1090. 

In an interim final rule, issued in the 

May 11, 2016 Federal Register (81 FR 

29146), we made amendments to the 

parameters of certain special enrollment 

periods (2016 Interim Final Rule). We 

finalized these in the 2018 Payment 

Notice, issued in the December 22, 2016 

Federal Register (81 FR 94058). 

In the Market Stabilization final rule, 

issued in the April 18, 2017 Federal 

Register (82 FR 18346), we amended 

standards relating to special enrollment 

periods and QHP certification. In the 

2019 Payment Notice, issued in the 

April 17, 2018 Federal Register (83 FR 

16930), we modified parameters around 

certain special enrollment periods. In 

the April 25, 2019 Federal Register (84 

FR 17454), the 2020 Payment Notice 


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established a new special enrollment 

period. 

In the May 14, 2020 Federal Register 

(85 FR 29164) (2021 Payment Notice), 

we finalized revisions to the parameters 

of special enrollment periods and the 

quality rating information display 

standards for State Exchanges and 

amended the periodic data matching 

requirements. 

In the January 19, 2021 Federal 

Register (86 FR 6138) (part 1 of the 2022 

Payment Notice), we finalized only a 

subset of the proposals in the 2022 

Payment Notice proposed rule. In the 

May 5, 2021 Federal Register (86 FR 

24140), we issued part 2 of the 2022 

Payment Notice. In part 3 of the 2022 

Payment Notice, issued in the 

September 27, 2021 Federal Register (86 

FR 53412), in conjunction with the 

Department of the Treasury, we 

finalized amendments to certain 

policies in part 1 of the 2022 Payment 

Notice. 

In the May 6, 2022 Federal Register 

(87 FR 27208), we finalized changes to 

maintain the user fee rate for issuers 

offering plans through the FFEs and 

maintain the user fee rate for issuers 

offering plans through the SBE–FPs for 

the 2023 benefit year. We also finalized 

various policies to address certain agent, 

broker, and web-broker practices and 

conduct. We also finalized updates to 

the requirement that all Exchanges 

conduct special enrollment period 

verifications. 

In the 2024 Payment Notice, issued in 

the April 27, 2023 Federal Register (88 

FR 25740), we revised Exchange 

Blueprint approval timelines, lowered 

the user fee rate for QHPs in the FFEs 

and SBE–FPs, and amended reenrollment hierarchies for enrollees. We 

also finalized policies to update FFE 

and SBE–FP standardized plan options; 

reduce the risk of plan choice overload 

on the FFEs and SBE–FPs by limiting 

the number of non-standardized plan 

options that issuers may offer through 

Exchanges on the Federal platform to 

four for Plan Year (PY) 2024 and to two 

for PY 2025 and subsequent years; and 

ensure correct QHP information. In 

addition, we amended coverage 

effective date rules, lengthened the 

special enrollment period from 60 to 90 

days for those who lose Medicaid 

coverage, and prohibited QHPs on FFEs 

and SBE–FPs from terminating coverage 

mid-year for dependent children who 

reach the applicable maximum age. We 

also finalized policies on verifying 

consumer income and permitting doorto-door assisters to solicit consumers. 

To ensure provider network adequacy, 

we finalized provider network and ECP 

policies for QHPs. We revised the 

failure to file and reconcile process to 

ensure enrollees would not lose APTC 

eligibility until they or their tax filer 

failed to file their Federal income taxes 

and reconcile APTC for 2 consecutive 

tax years. 

In the 2025 Payment Notice, issued in 

the April 15, 2024 Federal Register (89 

FR 26218), we required a State seeking 

to operate a State Exchange to first 

operate an SBE–FP for at least one PY, 

revised Exchange Blueprint 

requirements for States transitioning to 

a State Exchange, established additional 

minimum standards for Exchange call 

center operations, required an Exchange 

to operate a centralized eligibility and 

enrollment platform on its website, and 

finalized various policies for webbrokers and direct enrollment entities. 

In addition, we required State 

Exchanges and State Medicaid agencies 

to remit payment to HHS for their use 

of certain income data, amended reenrollment hierarchies for enrollees 

enrolled in catastrophic coverage, 

revised the parameters around a State 

Exchange adopting an alternative open 

enrollment period, and extended the 

availability of a special enrollment 

period for APTC-eligible qualified 

individuals with a projected annual 

household income no greater than 150 

percent of the Federal Poverty Level 

(FPL). To ensure provider network 

adequacy in State Exchanges and SBE– 

FPs, we finalized provider network 

adequacy policies applicable to such 

Exchanges for PY 2026 and subsequent 

plan years. We also further lowered the 

user fee rate for QHPs in the FFEs and 

SBE–FPs. In addition, we finalized the 

policy to maintain FFE and SBE–FP 

standardized plan option metal levels 

from the 2024 Payment Notice and 

finalized an exceptions process to the 

limitation on non-standardized plan 

options in FFEs and SBE–FPs. We also 

finalized the requirement for Exchanges 

to provide notification to enrollees or 

their tax filers who have failed to file 

their Federal income taxes and reconcile 

APTC for 1 tax year. 

5. Essential Health Benefits 

We established requirements relating 

to EHBs in the Standards Related to 

Essential Health Benefits, Actuarial 

Value, and Accreditation Final Rule, 

which was issued in the February 25, 

2013 Federal Register (78 FR 12834) 

(EHB Rule). We established at 

§ 156.135(a) that AV is generally to be 

calculated using the AV Calculator 

developed and made available by HHS 

for a given benefit year. In the 2015 

Payment Notice (79 FR 13743), we 

established at § 156.135(g) provisions 

for updating the AV Calculator in future 

plan years. In the 2017 Payment Notice 

(81 FR 12349), we amended the 

provisions at § 156.135(g) to allow for 

additional flexibility in our approach 

and options for updating of the AV 

Calculator. 

In the 2025 Payment Notice, issued in 

the April 15, 2024 Federal Register (89 

FR 26218), we revised § 155.170(a) to 

codify that benefits covered in a State’s 

EHB-benchmark plan are not considered 

in addition to EHB, even if they had 

been required by State action taking 

place after December 31, 2011, other 

than for purposes of compliance with 

Federal requirements. We finalized 

three revisions to the standards for State 

selection of EHB-benchmark plans for 

benefit years beginning on or after 

January 1, 2026: we revised the 

typicality standard at § 156.111 for 

States to demonstrate that their new 

EHB-benchmark plan provides a scope 

of benefits that is equal to that of a 

typical employer plan in the State and 

removed the generosity standard; 

removed the requirement for States to 

submit a formulary drug list as part of 

their application unless they are 

changing their prescription drug EHBs; 

and consolidated the options for States 

to change their EHB-benchmark plans. 

We also removed the regulatory 

prohibition at § 156.115(d) on issuers 

from including routine non-pediatric 

dental services as an EHB beginning 

with PY 2027. 

In addition, we revised § 156.122 to 

codify that prescription drugs in excess 

of those covered by a State’s EHBbenchmark plan are considered EHB. 

We also stated that the 2025 Payment 

Notice does not address the application 

of this policy to large group market 

health plans and self-insured group 

health plans, and that HHS and the 

Departments of Labor and the Treasury 

intend to propose rulemaking that 

would align the standards applicable to 

large group market health plans and 

self-insured group health plans with 

those applicable to individual and small 

group market plans, so that all group 

health plans and health insurance 

coverage subject to sections 2711 and 

2707(b) of the PHS Act, as applicable, 

would be required to treat prescription 

drugs covered by the plan or coverage 

in excess of the applicable EHBbenchmark plan as EHB for purposes of 

the prohibition of lifetime and annual 

limits and the annual limitation on cost 

sharing, which would further strengthen 

the consumer protections in the ACA. 

6. Medical Loss Ratio (MLR) 

We requested comment on section 

2718 of the PHS Act in the April 14, 

2010 Federal Register (75 FR 19297) 


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9Sessions, J. (2017, Oct. 11). Legal Opinion Re: 

Payments to Issuers for Cost Sharing Reductions 

(CSRs). Office of the Attorney General. https://

www.hhs.gov/sites/default/files/csr-paymentmemo.pdf. 10See Complaint, New York v. U.S. Dep’t of 

Health & Human Servs., No. 1:18–cv–00683 (RJS) 

(S.D.N.Y. filed Jan. 26, 2018). 11BHP program year means a calendar year for 

which a standard health plan provides coverage for 

BHP enrollees. See 42 CFR 600.5. 

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

value plan levels offered on the Exchanges. Bronzelevel plans generally must provide 60 percent 

actuarial value; silver-level 70 percent actuarial 

value; gold-level 80 percent actuarial value; and 

platinum-level 90 percent actuarial value. See 45 

CFR 156.140. 

and issued an interim final rule with a 

60-day comment period relating to the 

MLR program on December 1, 2010 (75 

FR 74864). A final rule with a 30-day 

comment period was issued in the 

December 7, 2011 Federal Register (76 

FR 76573). An interim final rule with a 

60-day comment period was issued in 

the December 7, 2011 Federal Register 

(76 FR 76595). A final rule was issued 

in the Federal Register on May 16, 2012 

(77 FR 28790). The MLR program 

requirements were amended in final 

rules issued in the March 11, 2014 

Federal Register (79 FR 13743), the May 

27, 2014 Federal Register (79 FR 

30339), the February 27, 2015 Federal 

Register (80 FR 10749), the March 8, 

2016 Federal Register (81 FR 12203), 

the December 22, 2016 Federal Register 

(81 FR 94183), the April 17, 2018 

Federal Register (83 FR 16930), the May 

14, 2020 Federal Register (85 FR 

29164), the May 5, 2021 Federal 

Register (86 FR 24140), the May 6, 2022 

Federal Register (87 FR 27208), and an 

interim final rule that was issued in the 

September 2, 2020 Federal Register (85 

FR 54820). 

7. Quality Improvement Strategy 

We issued regulations in § 155.200(d) 

to direct Exchanges to evaluate quality 

improvement strategies, and 

§ 156.200(b) to direct QHP issuers to 

implement and report on a quality 

improvement strategy or strategies 

consistent with section 1311(g) 

standards as QHP certification criteria 

for participation in an Exchange. In the 

2016 Payment Notice, issued in the 

February 27, 2015 Federal Register (80 

FR 10749), we finalized regulations at 

§ 156.1130 to establish standards and 

the associated timeframe for QHP 

issuers to submit the necessary 

information to implement quality 

improvement strategy standards for 

QHPs offered through an Exchange. 

8. Basic Health Program 

In the March 12, 2014, Federal 

Register (79 FR 14111), we issued a 

final rule entitled the ‘‘Basic Health 

Program: State Administration of Basic 

Health Programs; Eligibility and 

Enrollment in Standard Health Plans; 

Essential Health Benefits in Standard 

Health Plans; Performance Standards for 

Basic Health Programs; Premium and 

Cost Sharing for Basic Health Programs; 

Federal Funding Process; Trust Fund 

and Financial Integrity’’ (hereinafter 

referred to as the BHP final rule) 

implementing section 1331 of the ACA, 

which governs the establishment of 

BHPs. The BHP final rule established 

the standards for State and Federal 

administration of BHPs, including 

provisions regarding eligibility and 

enrollment, benefits, cost-sharing 

requirements and oversight activities. In 

the BHP final rule, we specified that the 

BHP Payment Notice process would 

include the annual publication of both 

a proposed and final BHP payment 

methodology. 

On October 11, 2017, the Attorney 

General of the United States provided 

HHS and the Department of the 

Treasury (the Departments) with a legal 

opinion 9 indicating that the permanent 

appropriation at 31 U.S.C. 1324, from 

which the Departments had historically 

drawn funds to make CSR payments, 

cannot be used to fund CSR payments 

to insurers. In light of this opinion—and 

in the absence of any other 

appropriation that could be used to fund 

CSR payments—HHS directed CMS to 

discontinue CSR payments to issuers 

until Congress provides for an 

appropriation. As a result of this 

opinion, CMS discontinued CSR 

payments to issuers in the States 

operating a BHP (that is, New York and 

Minnesota). The States then sued the 

Secretary for declaratory and injunctive 

relief in the United States District Court 

for the Southern District of New York.10

On May 2, 2018, the parties filed a 

stipulation requesting a stay of the 

litigation so that HHS could issue an 

administrative order revising the 2018 

BHP payment methodology. After 

consideration of the States’ comments 

on the administrative order revising the 

payment methodology, we issued a 

Final Administrative Order on August 

24, 2018 (Final Administrative Order) 

setting forth the payment methodology 

that would apply to the 2018 BHP 

program year. 

In the November 5, 2019 Federal 

Register (84 FR 59529) (hereinafter 

referred to as the November 2019 final 

BHP Payment Notice), we finalized the 

payment methodologies for BHP 

program years 2019 and 2020.11 The 

2019 payment methodology is the same 

payment methodology described in the 

Final Administrative Order. The 2020 

payment methodology is the same 

methodology as the 2019 payment 

methodology with one additional 

adjustment to account for the impact of 

individuals selecting different metal tier 

level plans in the Exchange, referred to 

as the Metal Tier Selection Factor 

(MTSF).12 In the August 13, 2020 

Federal Register (85 FR 49264) 

(hereinafter referred to as the August 

2020 final BHP Payment Notice), we 

finalized the payment methodology for 

BHP program year 2021. The 2021 

payment methodology is the same 

methodology as the 2020 payment 

methodology, with one adjustment to 

the income reconciliation factor (IRF). 

In the July 7, 2021 Federal Register (86 

FR 35615) (hereinafter referred to as the 

July 2021 final BHP Payment Notice), 

we finalized the payment methodology 

for BHP program year 2022. The 2022 

payment methodology is the same as the 

2021 payment methodology, with the 

exception of the removal of the Metal 

Tier Selection Factor. 

In the December 20, 2022 Federal 

Register (87 FR 77722) (hereafter 

referred to as the 2023 final BHP 

Payment Notice), we finalized the 

payment methodology for BHP program 

year 2023. The 2023 payment 

methodology is the same as the 2022 

payment methodology, except for the 

addition of a factor to account for a State 

operating a BHP and implementing an 

approved State Innovation Waiver 

under section 1332 of the ACA; this is 

the section 1332 waiver factor (WF). In 

the 2023 final BHP Payment Notice (87 

FR 77722), we also revised the schedule 

for issuance of payment notices and 

allowed payment notices to be effective 

for 1 or multiple program years, as 

determined by and subject to the 

direction of the Secretary, beginning 

with the 2023 payment methodology. In 

the 2025 Payment Notice, issued in the 

April 15, 2024 Federal Register (89 FR 

26218), we finalized that States may 

start BHP applicants’ effective date of 

eligibility on the first day of the month 

following the date of application. In 

addition, we finalized that, subject to 

HHS approval, a State may establish its 

own effective date of eligibility for 

enrollment policy. 

B. Summary of Major Provisions 

The regulations outlined in the final 

rule are codified in 42 CFR part 600 and 

45 CFR parts 153, 155, 156, and 158. 

1. 42 CFR Part 600 

We are finalizing changes to the 

methodology regarding the premium 

adjustment factor (PAF), which is used 

to calculate the adjusted reference 


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13OMB. (2024). OMB Report to the Congress on 

the BBEDCA 251A Sequestration for Fiscal Year 

2025. https://www.whitehouse.gov/wp-content/ 

uploads/2024/03/BBEDCA_251A_Sequestration_

Report_FY2025.pdf. 

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

Consent Form for Marketplace Agents and Brokers. 

PRA package (CMS–10840, OMB Control Number 

0938–1438). https://www.cms.gov/files/document/ 

cms-model-consent-form-marketplace-agents-andbrokers.pdf. 15OMB Control No: 0938–1312 and 0938–1341. 

premium (ARP) for BHP payment. We 

are finalizing maintaining the PAF value 

at 1.188 for States that have fully 

implemented BHP and are using Second 

Lowest Cost Silver Plan (SLCSP) 

premiums from a year in which BHP 

was fully implemented. As previously 

clarified, for States in their first year of 

implementing BHP and choosing to use 

prior year SLCSP premiums to 

determine BHP payment, the PAF value 

will be set to 1.00. We are finalizing that 

if a State is using SLCSP premiums from 

a year in which BHP was not fully 

implemented, the PAF is calculated by 

determining the CSR adjustment that 

QHP issuers included in the SLCSP 

premiums, reporting the CSR 

adjustments for the SLCSP for each 

region in the State to CMS, and then 

CMS calculating the PAF as 1.20 

divided by 1 plus the adjustment. 

Additionally, we are finalizing a 

technical clarification for BHP payment 

rates in cases of multiple SLCSP 

premiums in an area. 

2. 45 CFR Part 153 

In accordance with the OMB Report to 

Congress on the Joint Committee 

Reductions for Fiscal Year 2025, the 

HHS-operated risk adjustment program 

is subject to the fiscal year 2025 

sequestration.13 Therefore, the HHSoperated risk adjustment program will 

sequester payments made from fiscal 

year 2025 resources (that is, funds 

collected during the 2025 fiscal year) at 

a rate of 5.7 percent. 

We are unable to complete the 

calculations for the final coefficients for 

the 2026 benefit year in time to publish 

them in this final rule. Therefore, 

consistent with § 153.320(b)(1)(i), we are 

finalizing the datasets to be used to 

calculate the final coefficients in this 

rule and will publish the final 

coefficients for the 2026 benefit year in 

guidance after the publication of this 

final rule. Starting with the 2026 benefit 

year, we are finalizing the proposal to 

begin phasing out the market pricing 

adjustment to the plan liability 

associated with Hepatitis C drugs in the 

HHS risk adjustment models (see, for 

example, 84 FR 17463 through 17466). 

We are also finalizing the incorporation 

of pre-exposure prophylaxis (PrEP) as a 

separate, new type of factor called an 

Affiliated Cost Factor (ACF) in the HHS 

risk adjustment adult and child models 

starting with the 2026 benefit year. We 

are finalizing a risk adjustment user fee 

for the 2026 benefit year of $0.20 per 

member per month (PMPM). 

Beginning with the 2025 benefit year 

of HHS–RADV, we are finalizing the 

proposals to exclude enrollees without 

HCCs, which includes adult enrollees 

with only prescription drug categories 

(RXCs), from the IVA sample, remove 

the Finite Population Correction (FPC) 

from the IVA sampling methodology, 

and replace the source of the Neyman 

allocation data used for HHS–RADV 

sampling with the most recent 3 

consecutive years of HHS–RADV data. 

In addition, beginning with the 2024 

benefit year of HHS–RADV, we are 

finalizing the proposals to modify the 

SVA pairwise means test, which tests 

for statistically significant differences 

between the IVA and SVA results, to use 

a bootstrapped 90 percent confidence 

interval methodology and to increase 

the initial SVA subsample size from 12 

enrollees to 24 enrollees. 

3. 45 CFR Part 155 

We address our authority to 

investigate and undertake compliance 

reviews and enforcement actions in 

response to misconduct or 

noncompliance with applicable agent, 

broker, and web-broker Exchange 

requirements or standards occurring at 

the insurance agency level and how we 

intend to hold lead agents of insurance 

agencies accountable for such 

misconduct or noncompliance. 

We are finalizing revisions at 

§ 155.220(k)(3) to reflect our authority to 

suspend an agent’s or broker’s ability to 

transact information with the Exchange 

in instances where HHS discovers 

circumstances that pose unacceptable 

risk to accuracy of Exchange eligibility 

determinations, Exchange operations, 

applicants, or enrollees, or Exchange 

information technology systems, 

including but not limited to risk related 

to noncompliance with the standards of 

conduct under § 155.220(j)(2)(i), (ii) or 

(iii) and the privacy and security 

standards under § 155.260, until the 

circumstances of the incident, breach, or 

noncompliance are remedied or 

sufficiently mitigated to HHS’ 

satisfaction. 

We are finalizing updates to the 

model consent form that agents, brokers, 

and web-brokers can use to obtain and 

document consumer consent.14 The 

updates expand the resource to include 

a standardized form that agents, brokers, 

and web-brokers can use to document 

the consumer’s review and confirmation 

of the accuracy of information in their 

Exchange eligibility application, which 

is a new standard of conduct that was 

also implemented as part of the 2024 

Payment Notice (88 FR 25809 through 

25814). The updates also add scripts 

that agents, brokers, and web-brokers 

may utilize to meet the consumer 

consent and eligibility application 

review requirements finalized in the 

2024 Payment Notice via an audio 

recording. 

We are finalizing, in connection with 

the failure to file and reconcile process 

at § 155.305(f)(4), that Exchanges are 

required to send notices to tax filers or 

their enrollees for the second year in 

which they have been determined to 

have failed to reconcile APTC 

explaining that they risk being 

determined ineligible for APTC. A 

notice to the tax filer may specifically 

explain that if they fail to file and 

reconcile for a second consecutive year, 

they risk being determined ineligible for 

APTC. Alternatively, an Exchange may 

send a more general notice to the 

enrollee or their tax filer explaining that 

they are at risk of losing APTC, without 

the additional detail that the tax filer 

has failed to file and reconcile APTC. 

We are finalizing the addition of 

§ 155.400(d)(1) to codify HHS’ guidance 

that requires that, within 60 calendar 

days after a State Exchange receives a 

data inaccuracy from an issuer operating 

in an State Exchange that includes a 

description of an inaccuracy that meets 

the requirements at § 156.1210(a) 

through (c) and all the information that 

the State Exchange requires or requests 

to properly assess the inaccuracy, State 

Exchanges must review and resolve the 

State Exchange issuer’s enrollment data 

inaccuracies and submit to HHS a 

description of the resolution of any 

inaccuracies described by the State 

Exchange issuer that the State Exchange 

confirms to be inaccuracies in a format 

and manner specified by HHS.15

We are finalizing a provision at 

§ 155.400(g) to allow issuers to adopt a 

fixed-dollar payment threshold of $10 or 

less, to be adjusted for inflation by 

annual agency guidance, under which 

issuers would not be required to trigger 

a grace period or terminate enrollment 

for enrollees who fail to pay the full 

amount of their portion of premium 

owed, provided they do not owe more 

than the threshold amount. We are also 

finalizing a provision allowing issuers 

to adopt a gross percentage-based 

premium threshold of 98 percent or 

higher, which similarly would not 

require issuers to trigger a grace period 


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4432 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

16ARP, Public Law 117–2, 135 Stat. 4 (2021). 

These enhanced subsidies were extended under the 

IRA, Public Law 117–169, 136 Stat. 1818 (2022) and 

are scheduled to expire after the 2025 calendar year. 

or terminate enrollment for enrollees 

who fail to pay the full amount of their 

portion of premium owed, provided 

they do not owe more than the 

threshold amount. In addition, we are 

finalizing a provision that permits 

issuers to set the premium payment 

threshold based on net premium owed 

by the enrollee at 95 percent or higher 

of the net premium, rather than 

providing for a ‘‘reasonable’’ standard as 

is currently set forth in regulation. We 

are finalizing a policy limiting 

application of the fixed-dollar payment 

threshold and gross premium 

percentage-based threshold to premium 

payments after coverage is effectuated. 

Issuers will be allowed to apply the 

fixed-dollar payment threshold and/or 

one of two percentage-based thresholds 

(but not both percentage-based 

thresholds). Issuers will be required to 

apply all chosen premium payment 

thresholds uniformly to all enrollees 

and without regard to their health 

status. 

We are finalizing a provision at 

§ 155.505(b) to codify an option for 

application filers as defined under 

§ 155.20 to file appeals on behalf of 

applicants and enrollees on the 

application filer’s Exchange application. 

We are finalizing amendments at 

§ 155.1000 to state explicitly that an 

Exchange may deny certification to any 

plan that does not meet the general 

certification criteria at § 155.1000(c). We 

also finalize amending § 155.1090 with 

refinements to the standards for a 

request for the reconsideration of a 

denial of certification specific to the 

FFEs. 

We are finalizing that in addition to 

collecting the information and data 

currently provided by State Exchanges 

under § 155.1200 to monitor 

performance and compliance, we would 

use the information and data that State 

Exchanges submit to increase 

transparency into Exchange operations 

and to promote program improvements. 

We anticipate publicly releasing the 

State Exchange spending on outreach 

(including Navigators), Open 

Enrollment call center metrics (call 

center volume, average wait time, 

average call abandonment rate), and 

website visits and visitors. We are 

stating in this final rule that we no 

longer intend to publicly release the 

State Exchanges’ annual State-based 

Marketplace Annual Reporting Tools 

(SMARTs). In addition, we intend to 

only post those metrics for which we 

also have reasonably comparable data 

from Exchanges on the Federal platform. 

4. 45 CFR Part 156 

We are finalizing 2026 benefit year 

FFE and SBE–FP user fee rates of 2.5 

percent and 2.0 percent of total monthly 

premiums, respectively. We are also 

finalizing alternative 2026 benefit year 

FFE and SBE–FP user fee rates of 2.2 

percent and 1.8 percent of total monthly 

premiums, respectively, if enhanced 

PTC subsidies,16 at the level currently 

enacted or at a higher level, are 

extended through the 2026 benefit year 

by July 31, 2025. 

We are finalizing amendments to 

§ 156.80(d)(2)(i) to affirm that CSR 

loading practices that are permitted by 

State regulators are permissible under 

Federal law to the extent that they are 

actuarially justified and provided the 

issuer does not otherwise receive 

reimbursement for such CSR amounts. 

We are finalizing changes to the 

method for updating the AV Calculator, 

starting with the 2026 AV Calculator. 

Under this approach, for a plan year, we 

will only release a single, final version 

of the AV Calculator. 

We are finalizing minor updates to the 

standardized plan option designs for PY 

2026 to ensure these plans continue to 

have AVs within the permissible de 

minimis range for each metal level and 

to maintain a high degree of continuity 

with the approaches to standardized 

plan options finalized in the 2023, 2024, 

and 2025 Payment Notices. In response 

to comments requesting the expanded 

bronze metal level designs revert to the 

50 percent coinsurance rate used in 

previous years, we have revised this 

plan design to maintain this 

consistency, instead of raising it to 60 

percent for PY 2026, as proposed. We 

made several additional modifications 

to both sets of plan designs at the 

expanded bronze metal. 

In addition, we are finalizing 

amendments at § 156.201 to require 

issuers that offer multiple standardized 

plan options within the same product 

network type, metal level, and service 

area to meaningfully differentiate these 

plans from one another in terms of 

included benefits, provider networks, 

included prescription drugs, or a 

combination of some or all these factors. 

We are finalizing amendments at 

§ 156.202(b) and (d) to properly reflect 

the flexibility that issuers have been 

operationally permitted since these 

requirements were introduced to vary 

the inclusion of the distinct adult dental 

benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage categories under the 

non-standardized plan option limit in 

accordance with § 156.202(c)(1) through 

(3). 

We are finalizing conducting ECP 

certification reviews of plans for which 

issuers submit QHP certification 

applications in FFEs in States 

performing plan management functions, 

beginning in PY 2026. 

We are finalizing the proposal to 

share aggregated, summary-level QIS 

information publicly on an annual basis 

beginning on January 1, 2026, with 

information QHP issuers submit during 

the PY 2025 QHP Application Period. 

We are finalizing an amendment to 

§ 156.1220(a) to introduce a new 

materiality threshold for HHS–RADV 

appeals, such that we will rerun HHS– 

RADV results and adjust HHS–RADV 

adjustments to State transfers in 

response to a successful appeal when 

the impact of that appeal to the filer’s 

HHS–RADV adjustments to State 

transfers is greater than or equal to 

$10,000. 

5. 45 CFR Part 158 

We are finalizing amendments to 

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

issuers to not adjust incurred claims by 

the net payments or receipts related to 

the risk adjustment program for MLR 

reporting and rebate calculation 

purposes beginning with the 2026 MLR 

reporting year (MLR reports due in 

2027), with certain modifications. 

Specifically, we are finalizing that at the 

option of qualifying issuers, earned 

premium would account for net risk 

adjustment receipts by simply adding 

these net receipts to total premium, 

without subsequently subtracting them 

from adjusted earned premium, such 

that these net receipts would impact the 

MLR denominator rather than MLR 

numerator. We are also finalizing an 

amendment to § 158.103 to add a 

definition of ‘‘qualifying issuer,’’ with 

certain clarifications. 

We also are finalizing amendments to 

§ 158.240(c) to add an illustrative 

example of how qualifying issuers that 

opt to apply risk adjustment transfer 

amounts as described in 

§ 158.140(b)(4)(ii) will calculate the 

amount of rebate owed to each enrollee 

to accurately reflect how such issuers 

will incorporate the net risk adjustment 

transfer amounts into the MLR and 

rebate calculations differently from 

other issuers, as well as a conforming 

amendment to clarify that the current 

illustrative example in paragraph (c)(2) 

will apply to issuers that are not 

qualifying issuers and to qualifying 

issuers that do not opt to apply risk 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4433 

17https://www.medicaid.gov/sites/default/files/ 

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

18Some examples of outliers or unreasonable 

adjustments include (but are not limited to) values 

over 100 percent (implying the premiums doubled 

or more because of the adjustment), values more 

than double the otherwise highest adjustment, or 

non-numerical entries. 

adjustment transfer amounts as 

described in § 158.140(b)(4)(ii). 

III. Summary of the Provisions of the 

Proposed Regulations and Analysis of 

and Responses to Public Comments 

A. 42 CFR Part 600—BHP Methodology 

Regarding the Value of the Premium 

Adjustment Factor (PAF) 

1. Overview of the Payment 

Methodology and Calculation of the 

Payment Amount 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82317), we proposed 

to make a change to the calculation of 

the PAF starting in program year 2026. 

Section 1331(d)(3) of the ACA directs 

the Secretary to consider several factors 

when determining the Federal BHP 

payment amount, which, as specified in 

the statute, must equal 95 percent of the 

value of the PTC under section 36B of 

the Code and CSRs under section 1402 

of the ACA that would have been paid 

on behalf of BHP enrollees had they 

enrolled in a QHP through an Exchange. 

Thus, the BHP payment methodology is 

designed to calculate the PTC and CSRs 

as consistently as possible and in 

general alignment with the methodology 

used by Exchanges to calculate advance 

payments of the PTC (APTC) and CSRs, 

and the methodology used to reconcile 

APTC with the amount of the PTC 

allowed for the tax year under section 

36B of the Code. In accordance with 

section 1331(d)(3)(A)(iii) of the ACA, 

the final payment methodology must be 

certified by the Chief Actuary of CMS, 

in consultation with the Office of Tax 

Analysis (OTA) of the Department of the 

Treasury, as having met the 

requirements of section 1331(d)(3)(A)(ii) 

of the ACA. 

Section 1331(d)(3)(A)(ii) of the ACA 

specifies that the payment 

determination shall take into account all 

relevant factors necessary to determine 

the value of the PTC and CSRs that 

would have been paid on behalf of 

eligible individuals, including but not 

limited to, the age and income of the 

enrollee, whether the enrollment is for 

self-only or family coverage, geographic 

differences in average spending for 

health care across rating areas, the 

health status of the enrollee for 

purposes of determining risk adjustment 

payments and reinsurance payments 

that would have been made if the 

enrollee had enrolled in a QHP through 

an Exchange, and whether any 

reconciliation of APTC and CSR would 

have occurred if the enrollee had been 

enrolled. Under all previous payment 

methodologies, the total Federal BHP 

payment amount has been calculated 

using multiple rate cells in each BHP 

State. Each rate cell represents a unique 

combination of age range (if applicable), 

geographic area, coverage category (for 

example, self-only or two-adult coverage 

through the BHP), household size, and 

income range as a percentage of FPL, 

and there is a distinct rate cell for 

individuals in each coverage category 

within a particular age range who reside 

in a specific geographic area and are in 

households of the same size and income 

range. The BHP payment rates 

developed are also consistent with the 

State’s rules on age rating. Thus, in the 

case of a State that does not use age as 

a rating factor on an Exchange, the BHP 

payment rates would not vary by age. 

Under the methodology finalized in 

the July 2021 final BHP Payment Notice, 

the rate for each rate cell is calculated 

in two parts. The first part is equal to 

95 percent of the estimated PTC that 

would have been allowed if a BHP 

enrollee in that rate cell had instead 

enrolled in a QHP in an Exchange. The 

second part is equal to 95 percent of the 

estimated CSR payment that would have 

been made if a BHP enrollee in that rate 

cell had instead enrolled in a QHP in an 

Exchange. These two parts are added 

together and the total rate for that rate 

cell would be equal to the sum of the 

PTC and CSR rates. As noted in the July 

2021 final BHP Payment Notice, we 

currently assign a value of zero to the 

CSR portion of the BHP payment rate 

calculation, because there is presently 

no available appropriation from which 

we can make the CSR portion of any 

BHP payment. 

The 2023 final BHP Payment Notice 

provides a detailed description of the 

structure of the BHP payments, 

including the equations, factors, and the 

values of the factors used to calculate 

the BHP payments. We proposed one 

change to the methodology regarding 

the premium adjustment factor (PAF). 

The PAF is used to calculate the 

adjusted reference premium (ARP) that 

is used to calculate the BHP payment. 

The ARP is used to calculate the BHP 

payment. The ARP is used to calculate 

the estimated PTC that would be 

allowed if BHP-eligible individuals 

enrolled in QHPs through an Exchange 

and is based on the premiums for the 

applicable second lowest cost silver 

plan during the applicable plan year. 

The PAF considers the premium 

increases in other States that took effect 

after we discontinued payments to 

issuers for CSRs provided to enrollees in 

QHPs offered through Exchanges. 

Despite the discontinuance of Federal 

payments for CSRs, QHP issuers are 

required to provide CSRs to eligible 

enrollees. As a result, many QHP issuers 

increased the silver-level plan 

premiums to account for those 

additional costs; these premium 

adjustments and how they were applied 

(for example, to only silver-level plans 

or to all metal tier plans) varied across 

States. For the States operating BHPs in 

2018, the increases in premiums were 

relatively minor, because the majority of 

enrollees eligible for CSRs (and all who 

were eligible for the largest CSRs) were 

enrolled in the BHP and not in QHPs on 

the Exchanges, and therefore, issuers in 

BHP States did not significantly raise 

premiums to cover costs related to HHS 

not making CSR payments. 

In the Final Administrative Order and 

the 2019 through 2023 final BHP 

Payment Notices, we incorporated the 

PAF into the BHP payment 

methodologies to capture the impact of 

how other States responded to HHS 

ceasing to make CSR payments.17 We 

also reserved the right that in the case 

an appropriation for CSR payments is 

made for a future year, to determine 

whether and how to modify the PAF in 

the payment methodology. 

Under the Final Administrative 

Order, we calculated the PAF by using 

information sought from QHP issuers in 

each State and the District of Columbia 

and determined the premium 

adjustment that the responding QHP 

issuers made to each silver level plan in 

2018 to account for the discontinuation 

of CSR payments to QHP issuers. Based 

on the data collected, we estimated the 

median adjustment for silver level QHPs 

nationwide (excluding those in the two 

BHP States). To the extent that QHP 

issuers made no adjustment (or the 

adjustment was zero), this was counted 

as zero in determining the median 

adjustment made to all silver level 

QHPs nationwide. If the amount of the 

adjustment was unknown—or we 

determined that it should be excluded 

for methodological reasons (for 

example, the adjustment was negative, 

an outlier, or unreasonable)—then we 

did not count the adjustment towards 

determining the median adjustment.18

The median adjustment for silver level 

QHPs is referred to as the nationwide 

median adjustment. 

For each of the two BHP States, we 

determined the median premium 

adjustment for all silver level QHPs in 

that State, which we refer to as the State 


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4434 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

19See the Federal Funding Methodology for 

Program Year 2023 and Changes to the Basic 

Health Program Payment Notice Process at 87 FR 

77722, 77731, 77737. 

20 Id. at 77731–32. 21Section 1331(d)(3)(A)(ii) of the PHS Act. 

median adjustment. The PAF for each 

BHP State equaled one plus the 

nationwide median adjustment divided 

by one plus the State median 

adjustment for the BHP State. In other 

words, 

PAF = (1 + Nationwide Median 

Adjustment) ÷ (1 + State Median 

Adjustment). 

To determine the PAF described 

above, we sought to collect QHP 

information from QHP issuers in each 

State and the District of Columbia to 

determine the premium adjustment 

those issuers made to each silver level 

plan offered through the Exchange in 

2018 to account for the end of CSR 

payments. Specifically, we sought 

information showing the percentage 

change that QHP issuers made to the 

premium for each of their silver level 

plans to cover benefit expenditures 

associated with the CSRs, given the lack 

of CSR payments in 2018. This 

percentage change was a portion of the 

overall premium increase from 2017 to 

2018. 

According to our 2018 records, there 

were 1,233 silver-level QHPs operating 

on Exchanges in 2018. Of these 1,233 

QHPs, 318 QHPs (25.8 percent) 

responded to our request for the 

percentage adjustment applied to silverlevel QHP premiums in 2018 to account 

for the discontinuance of HHS making 

CSR payments. These 318 QHPs 

operated in 26 different States, with 10 

of those States running State Exchanges 

(while we requested information only 

from QHP issuers in States serviced by 

an FFE, many of those issuers also had 

QHPs in State Exchanges and submitted 

information for those States as well). 

Thirteen of these 318 QHPs were in 

New York (and none were in 

Minnesota). Excluding these 13 QHPs 

from the analysis, the nationwide 

median adjustment was 20.0 percent. Of 

the 13 QHPs in New York that 

responded, the State median adjustment 

was 1.0 percent. We believed that this 

was an appropriate adjustment for QHPs 

in Minnesota, as well, based on the 

observed changes in New York’s QHP 

premiums in response to the 

discontinuance of CSR payments (and 

the operation of the BHP in that State) 

and our analysis of expected QHP 

premium adjustments for States with 

BHPs. We calculated the proposed PAF 

as (1 + 20 percent) ÷ (1 + 1 percent) (or 

1.20/1.01), which results in a value of 

1.188. 

We set the value of the PAF to 1.188 

for all program years for 2018 through 

2024, with limited exceptions.19 We 

believe that this value for the PAF 

continues to reasonably account for the 

increase in silver-level premiums 

experienced in non-BHP States that took 

effect after the discontinuance of the 

CSR payments. 

Starting in 2023, we made one limited 

exception in setting the value of the 

PAF as part of the 2023 final BHP 

Payment Notice.20 In the case of a State 

in the first year of implementing a BHP, 

if the State chooses to use prior year 

second lowest cost silver plan (SLCSP) 

premiums to determine the BHP 

payment (for example, the 2025 

premiums for the 2026 program year), 

we set the value of the PAF to 1.00. In 

this case, we believe that adjustment to 

the QHP premiums to account for the 

discontinuation of CSR payments would 

be included fully in the prior year 

premiums, and no further adjustment 

would be necessary. 

We proposed to make a change to the 

calculation of the PAF starting in 

program year 2026. There are cases in 

which a State may not have fully 

implemented BHP for a full program 

year. For example, a State may operate 

BHP for only a portion of the year (in 

other words, less than 12 months); there 

may be other such cases in which a 

State would be deemed to have partially 

implemented BHP for a program year. 

For a State that initially only partially 

implemented BHP, it is likely that, in 

the year (or years) when the BHP is only 

partially implemented, the percentage 

adjustment to the premiums for the 

program year to account for the 

discontinuation of CSR payments may 

be significantly higher than the 1 

percent adjustment we determined for 

BHP States in 2018. In these cases, it is 

probable that QHP issuers would 

include a larger premium adjustment 

(that is, greater than 1 percent) because 

more individuals would be eligible for 

CSRs (and individuals eligible for 

relatively larger CSRs) would be 

enrolled in a QHP on the Exchange, for 

part or all of the initial implementation 

year. If premiums with a larger CSR 

adjustment are used as a basis for 

calculating the BHP payments and the 

current value of the PAF (1.188) is used, 

it is likely that this would ‘‘double 

count’’ a portion of the adjustment and 

lead to an effective CSR adjustment over 

20 percent. 

For example, assume a State 

implements BHP for only 6 months in 

a program year. As a result, QHP issuers 

may include a 10 percent adjustment to 

the premiums to account for the 

discontinuation of the CSR for the 

portion of the year when CSR eligible 

individuals would have QHP coverage. 

The issuers would be liable for roughly 

half of the CSR amounts they would 

have had to provide if there was no BHP 

in place. Under the previous BHP 

payment methodology, if these 

premiums that already partially account 

for CSRs are used to calculate the BHP 

payment, we would increase the 

reference premium by 18.8 percent for 

the PAF, leading to an effective increase 

of 30.68 percent (1.188 multiplied by 

1.10 minus 1). This is significantly 

larger than the 20 percent adjustment 

we determined as the basis for the PAF 

for States that have operated their BHP 

for more than 2 full program years. 

Under the Secretary’s general 

authority to account for all relevant 

factors necessary to determine the value 

of the premium and cost-sharing 

reductions that would have been 

provided to eligible individuals now 

enrolled in BHP coverage 21 and to avoid 

such an overpayment, we proposed the 

following changes to the PAF: 

(1) If a State has fully implemented 

BHP and is using SLSCP premiums for 

a year in which the BHP was fully 

implemented, then the value of the PAF 

would remain 1.188, as described above. 

(2) If a State is in the first year of 

implementing a BHP and the State 

chooses to use prior year SLCSP 

premiums to determine the BHP 

payment (for example, the 2025 

premiums for the 2026 program year), 

we set the value of the PAF to 1.00. This 

is the same approach described in the 

2023 final BHP Payment Notice. 

(3) If a State is using SLCSP premiums 

from a year in which BHP was not fully 

implemented, then the PAF is 

calculated as follows: 

First, the State must determine the 

CSR adjustment that QHP issuers 

included in the SLSCP premiums for 

individual market Exchange plans. The 

State should identify the SLSCP in each 

region, as defined for the Exchange. For 

each SLSCP, the State should determine 

the CSR adjustment that the QHP issuer 

included in the premium. This may be 

done by (1) reviewing any materials 

submitted by the QHP issuer describing 

the calculation of the premium; or (2) 

requesting that the QHP issuer provide 

the adjustment, or an estimate of the 

adjustment used in calculating the 

premium. Second, the State should 

report the CSR adjustments for the 

SLCSP for individual market Exchange 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4435 

22CMS. (September 15, 2023). Basic Health 

Program; Federal Funding Methodology for Program 

Year 2024. Accessed at: https://www.medicaid.gov/ 

federal-policy-guidance/downloads/cib091523.pdf. 23Section 1331(d)(3)(A)(ii) of the PHS Act. 

plans for each region in the State to 

CMS. Third, CMS will take this 

percentage adjustment and calculate the 

PAF as 1.20 divided by 1 plus the 

adjustment. For example, if the 

percentage adjustment for the CSR is 5 

percent, the PAF would be (1.20 ÷ 1.05), 

or 1.143. The maximum value of the 

PAF would be 1.188, and the minimum 

value of the PAF would be 1.00. 

We noted in the proposed rule (89 FR 

82319) that this approach would apply 

based on the premium year, not 

necessarily the program year. If the State 

has fully implemented BHP but is using 

the prior year premiums and BHP was 

not fully implemented in that year, this 

modified approach would still apply. 

For example, if a State partially 

implemented BHP in 2026 and fully 

implemented BHP in 2027, when 

determining the BHP payments for 

2027, we would then use 1.188 for the 

value of the PAF if the State elected to 

use 2027 QHP premiums to determine 

the payment; if the State elected to use 

the 2026 QHP premiums, then we 

would use the modified PAF calculation 

described in this section. CMS would 

make a determination of whether or not 

a BHP was fully implemented based on 

a review of the Blueprint and provide 

that determination to the State. 

We also noted in the proposed rule 

(89 FR 82319) that we considered other 

approaches to the modified PAF. We 

considered whether or not CMS would 

collect data on the underlying CSR 

adjustment in the SLCSP premiums; 

however, we believe that such activities 

fall within States roles as BHP 

administrators and States are better able 

to work with QHP issuers to administer 

this data collection process. We also 

considered if States should survey all 

QHP issuers (not just those with the 

SLSCP premium). We believe that only 

using the CSR adjustment from 

individual market Exchange plans with 

the SLCSPs would be a more reasonable 

approach and would minimize the 

burden on States and QHP issuers by 

only requiring the State to work with 

one issuer in each region, as opposed to 

all issuers in each region. We also 

considered whether or not we should 

make further changes to the PAF, but we 

believe that this approach balances 

maintaining accurate BHP payments 

with stability and limited burden for 

BHP States. We requested comments on 

this approach or alternative approaches 

to calculating the PAF. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing the approach to calculating 

the PAF as proposed. We summarize 

and respond to public comments 

received on the proposed change to the 

calculation of the PAF below. 

Comment: Several commenters were 

supportive of the change to adjust the 

PAF for BHP in program years in which 

States have not fully implemented BHP. 

Response: We appreciate these 

comments in support of the proposed 

change. 

Comment: One commenter noted 

‘‘relying on silver CSR loads from 2018 

in the development of the population 

adjustment factor may not reflect actual 

silver loads because these 2018 

premiums are based on experience from 

a time when CSRs were fully funded,’’ 

while also acknowledging there are 

other factors ‘‘including state-specified 

loads, the impact of States’ 1332 

waivers, the effects of the COVID–19 

pandemic and related Medicaid 

coverage policies, and other factors’’ 

that may affect these adjustments in 

States. 

Response: We acknowledge that there 

are limitations to relying on the 2018 

CSR loads for calculation of the PAF. 

We also agree that other factors that may 

affect CSR loads and these factors 

complicate updating the PAF. We did 

not propose and are not making any 

changes to the standard calculation of 

the PAF in this final rule. 

2. Technical Clarification for 

Calculation of BHP Payment Rates in 

Cases of Multiple Second Lowest Cost 

Silver Plan Premiums in an Area 

The BHP payment rates are based on 

the second lowest cost silver plan 

premium among individual market 

QHPs operating on the Exchanges in 

each rating area (or county) in a State. 

This is the basis for the reference 

premium (or RP) in the BHP payment 

methodology. 

In general, we expect that each county 

would have a unique second lowest cost 

silver plan premium, which is used to 

calculate the payment rates for residents 

of that county for the BHP payment. 

However, in some cases, we have found 

that States may have more than one 

second lowest cost silver plan within a 

county. This may occur in cases where 

the State has allowed QHPs to operate 

in only a portion of the county instead 

of the entire county on the Exchange. 

In our previous BHP payment 

methodologies, we do not describe how 

such a case would be handled for 

calculating BHP payments. In our 

technical guidance to States,22 we have 

instructed States to report the premiums 

for the second lowest cost silver plan 

operating in the largest part of the 

county as measured by total population. 

Under the Secretary’s general 

authority to account for all relevant 

factors necessary to determine the value 

of the premium and cost-sharing 

reductions that would have been 

provided to eligible individuals now 

enrolled in BHP coverage,23 for the 2026 

payment methodology and all 

subsequent years, we proposed to clarify 

that in cases where there are more than 

one second lowest cost silver plans in 

a county, the BHP payment would be 

based on the premium of the second 

lowest cost silver plan applicable to the 

largest portion of the county as 

measured by total population. We 

sought comment on this approach. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy as proposed. We 

summarize and respond to public 

comments received on the proposed 

clarification of the correct premiums to 

use below. 

Comment: Several commenters were 

supportive of the clarification for which 

second lower cost silver plan premiums 

to use in these cases for the purposes of 

calculating the Federal BHP payment. 

Response: We appreciate these 

comments in support of the proposed 

change. 

Comment: Two commenters noted 

that in one State that has operated a 

BHP, the State is using a different silver 

plan premium (the third lowest cost 

silver plan premium) in cases when 

there are two or more second lowest 

cost silver plan premiums in an area. 

Commenters noted that using the 

proposed approach would present 

operational challenges for the State. The 

commenters requested flexibility on this 

in the BHP payment methodology. 

Response: We appreciate the 

comments and understand that there 

may be some operational issues; 

however, we believe that these issues 

can be easily addressed, and we note 

that other BHP States have been able to 

determine premiums in accordance with 

these requirements. In addition, we do 

not believe there is any basis to use any 

premiums other than the second lowest 

cost silver plans (even if there are two 

or more in an area) for the purposes of 

the BHP payment methodology. 


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4436 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

24See also 42 U.S.C. 18041(c)(1). 

25OMB. (2024). OMB Report to the Congress on 

the BBEDCA 251A Sequestration for Fiscal Year 

2025. https://www.whitehouse.gov/wp-content/ 

uploads/2024/03/BBEDCA_251A_Sequestration_

Report_FY2025.pdf. 

26Public Law 99–177, 99 Stat. 1037 (1985). 

27Public Law 117–58, 135 Stat. 429 (2021). 

28 2 U.S.C. 901a. 

29The State payment transfer formula refers to 

part of the Federally certified risk adjustment 

methodology that applies in States where HHS is 

responsible for operating the program. The formula 

calculates payments and charges at the State market 

risk pool level (prior to the calculation of the highcost risk pool payment and charge terms that apply 

beginning with the 2018 benefit year). See, for 

example, 81 FR 94080. 

30For the 2017 through 2022 benefit years, there 

was a set of 11 binary enrollment duration factors 

in the adult models that decreased monotonically 

from 1 to 11 months, reflecting the increased 

annualized costs associated with fewer months of 

enrollments. See, for example, 81 FR 94071 through 

94074. These enrollment duration factors were 

replaced beginning with the 2023 benefit year with 

HCC-contingent enrollment duration factors for up 

to 6 months in the adult models. See, for example, 

87 FR 27228 through 27230. 

31For the 2018 benefit year, there were 12 RXCs, 

but starting with the 2019 benefit year, the two 

severity-only RXCs were removed from the adult 

models. See, for example, 83 FR 16941. 

32See Table 4 in the proposed rule for a list of 

draft factors in the adult models, and Table 5 in the 

proposed rule for a list of draft factors in the child 

models. 

33See 87 FR 27224–28. Also see Table 6 in the 

proposed rule. 

34See 89 FR 82308, 82320–21. 

35As described in the 2016 Risk Adjustment 

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

forms-reports-and-other-resources/downloads/ramarch-31-white-paper-032416.pdf) and the 2017 

Payment Notice (81 FR 12218), we subdivide 

expenditures into traditional drugs, specialty drugs, 

medical services, and preventive services and 

B. 45 CFR Part 153—Standards Related 

to Reinsurance, Risk Corridors, and Risk 

Adjustment 

In subparts A, B, D, G, and H of part 

153, we established standards for the 

administration of the risk adjustment 

program. The risk adjustment program 

is a permanent program created by 

section 1343 of the ACA that transfers 

funds from issuers of lower-thanaverage risk, risk adjustment covered 

plans to issuers of higher-than-average 

risk, risk adjustment covered plans in 

the individual, small group markets, or 

merged markets, inside and outside the 

Exchanges. In accordance with 

§ 153.310(a), a State that is approved or 

conditionally approved by the Secretary 

to operate an Exchange may establish a 

risk adjustment program or have HHS 

do so on its behalf.24 HHS did not 

receive any requests from States to 

operate risk adjustment for the 2026 

benefit year. Therefore, HHS will 

operate risk adjustment in every State 

and the District of Columbia for the 

2026 benefit year. 

1. Sequestration 

In accordance with the OMB Report to 

Congress on the Joint Committee 

Reductions for Fiscal Year 2025, the 

HHS-operated risk adjustment program 

is subject to the fiscal year 2025 

sequestration.25 The Federal 

Government’s 2025 fiscal year began on 

October 1, 2024. Therefore, the HHSoperated risk adjustment program is 

sequestered at a rate of 5.7 percent for 

payments made from fiscal year 2025 

resources (that is, funds collected 

during the 2025 fiscal year). 

HHS, in coordination with OMB, has 

determined that, under section 256(k)(6) 

of the Balanced Budget and Emergency 

Deficit Control Act of 1985 (BBEDCA),26

as amended, and the underlying 

authority for the HHS-operated risk 

adjustment program, the funds that are 

sequestered in fiscal year 2025 from the 

HHS-operated risk adjustment program 

will become available for payment to 

issuers in fiscal year 2026 without 

further Congressional action. If the 

Congress does not enact deficit 

reduction provisions that replace the 

Joint Committee reductions, the 

program would be sequestered in future 

fiscal years, and any sequestered 

funding would become available in the 

fiscal year following that in which it 

was sequestered. 

Additionally, we note that the 

Infrastructure Investment and Jobs 

Act 27 amended section 251A(6) of the 

BBEDCA and extended sequestration for 

the HHS-operated risk adjustment 

program through fiscal year 2031 at a 

rate of 5.7 percent per fiscal year.28

One comment was received on this 

section of the proposed rule that 

acknowledges the fiscal year 2025 

sequestration rate. Therefore, after 

consideration of this comment and for 

reasons outlined in the proposed rule 

and this final rule, the HHS-operated 

risk adjustment program will sequester 

payments made from fiscal year 2025 

resources at a rate of 5.7 percent. 

2. HHS Risk Adjustment (§ 153.320) 

The HHS risk adjustment models 

predict plan liability for an average 

enrollee based on that person’s age, sex, 

and diagnoses (also referred to as HCCs) 

producing a risk score. The State 

payment transfer formula 29 that is part 

of the HHS Federally certified risk 

adjustment methodology utilizes 

separate models for adults, children, 

and infants to account for clinical and 

cost differences in each age group. In 

the adult and child models, the relative 

risk assigned to an individual’s age, sex, 

and diagnoses are added together to 

produce an individual risk score. 

Additionally, to calculate enrollee risk 

scores in the adult models, we added 

enrollment duration factors beginning 

with the 2017 benefit year,30 and 

prescription drug categories (RXCs) 

beginning with the 2018 benefit year.31

Starting with the 2023 benefit year, we 

removed the severity illness factors in 

the adult models and added interacted 

HCC count factors (that is, additional 

factors that express the presence of a 

severity or transplant HCC in 

combination with a specified number of 

total payment HCCs or HCC groups on 

the enrollee’s record) to the adult and 

child models 32 applicable to certain 

severity and transplant HCCs.33

Infant risk scores are determined by 

inclusion in one of 25 mutually 

exclusive groups, based on the infant’s 

maturity and the severity of diagnoses. 

If applicable, the risk score for adults, 

children, or infants is multiplied by a 

CSR adjustment factor. The enrollmentweighted average risk score of all 

enrollees in a particular risk adjustment 

covered plan (also referred to as the 

plan liability risk score (PLRS)) within 

a geographic rating area is one of the 

inputs into the State payment transfer 

formula, which determines the State 

transfer payment or charge that an 

issuer will receive or be required to pay 

for that plan for the applicable State 

market risk pool for a given benefit year. 

Thus, the HHS risk adjustment models 

predict average group costs to account 

for risk across plans, in keeping with the 

Actuarial Standards Board’s Actuarial 

Standards of Practice for risk 

classification. 

a. Data for HHS Risk Adjustment Model 

Recalibration for the 2026 Benefit Year 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82320 through 

82321), we proposed to recalibrate the 

2026 benefit year HHS risk adjustment 

models with the 2020, 2021, and 2022 

enrollee-level EDGE data. In the 

proposed rule, we noted the history of 

recalibrating the risk adjustment 

models, the transition to use of enrolleelevel EDGE data for this purpose, and 

why we use 3 years of blended data for 

recalibration.34 Given this history and 

reasoning, we proposed to determine 

coefficients for the 2026 benefit year 

based on a blend of separately solved 

coefficients from the 2020, 2021, and 

2022 benefit years’ enrollee-level EDGE 

data, with the costs of services 

identified from the data trended 

between the relevant year of data and 

the 2026 benefit year.35 We sought 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4437 

determine trend factors separately for each category 

of expenditure. In determining these trend factors, 

we consult our actuarial experts, review relevant 

Unified Rate Review Template submission data, 

analyze multiple years of enrollee-level EDGE data, 

and consult National Health Expenditure Accounts 

(NHEA) data as well as external reports and 

documents published by third parties. In this 

process, we aim to determine trends that reflect 

changes in cost of care rather than gross growth in 

expenditures. As such, we believe the trend factors 

we used for each expenditure category for the 2026 

benefit year models are appropriate for the most 

recent changes in cost of care that we have seen. 

36Since the start of model calibration for the HHS 

risk adjustment models in benefit year 2014, the 

COVID–19 PHE has been the only such situation to 

date. Other events and policy changes have not 

risen to the same level of uniqueness or potential 

impact. 

37 89 FR 82308, 82320. 

38 87 FR 78214–18. 

39 88 FR 25749–54. 

40This analysis included assessing how the 2020 

benefit year enrollee-level EDGE recalibration data 

compares to 2019 benefit year enrollee-level EDGE 

recalibration data. 

41See the 2025 Payment Notice Final Rule, 89 FR 

26218, 26236–37. 

42 89 FR 82308, 82347. 

43See 89 FR 82308, 82347. 

44See Hileman, G., & Steele, S. (2016). Accuracy 

of Claims-Based Risk Scoring Models. Society of 

Actuaries. https://www.soa.org/4937b5/ 

globalassets/assets/files/research/research-2016- 

accuracy-claims-based-risk-scoring-models.pdf. 

45HHS was unable to incorporate an analysis of 

new enrollees for the 2019 benefit year of enrolleelevel of EDGE data at the time of the analysis of Rsquared changes. As such, R-squared changes for 

new enrollees only considered the difference 

between 2020 benefit year and 2022 benefit year Rsquared values. 

46 Ibid. 

comment on the proposal to determine 

2026 benefit year coefficients for the 

HHS risk adjustment models based on a 

blend of separately solved coefficients 

from the 2020, 2021, and 2022 enrolleelevel EDGE data. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and our responses to comments, we 

are finalizing the approach to use the 

2020, 2021 and 2022 enrollee-level 

EDGE data to calculate the 2026 benefit 

year coefficients as proposed. We 

summarize and respond to public 

comments received on the proposed 

enrollee-level EDGE data to be used for 

HHS risk adjustment model 

recalibration for the 2026 benefit year 

below. Because we were unable to 

complete the calculations for the final 

coefficients in time to publish them in 

this final rule, we will publish the final 

2026 benefit year coefficients in 

guidance after the publication of this 

final rule consistent with 

§ 153.320(b)(1)(i). We will release this 

guidance by the spring of 2025, in time 

for rate setting for the 2026 benefit year. 

Comment: A few commenters 

supported utilizing the 2020, 2021, and 

2022 enrollee-level EDGE data to 

recalibrate the HHS risk adjustment 

models for the 2026 benefit year as 

proposed. Other commenters opposed 

or noted concern about using these 

years of enrollee-level EDGE data due to 

concerns about the potential impact of 

the COVID–19 PHE on 2020 and 2021 

benefit year enrollee-level EDGE data. 

Response: We are finalizing the use of 

the 2020, 2021, and 2022 enrollee-level 

EDGE data to recalibrate the 2026 

benefit year HHS risk adjustment 

models as proposed. As described in the 

proposed rule (89 FR 82308, 82320) and 

detailed further below, our analyses 

found the 2020 and 2021 benefit year 

enrollee-level EDGE data is sufficiently 

similar to prior years of enrollee-level 

EDGE data such that exclusion of these 

data years from the risk adjustment 

model recalibration is not warranted. 

We recognize that if a benefit year of 

enrollee-level EDGE data has significant 

changes that differentially impact 

certain conditions or populations 

relative to others or is sufficiently 

anomalous relative to expected future 

patterns of care, we should carefully 

consider what impact that benefit year 

of data could have if it is used in the 

annual recalibration of the HHS risk 

adjustment models.36 This includes 

consideration of whether to exclude or 

adjust that benefit year of data to 

increase the models’ predictive validity 

or otherwise limit the impact of 

anomalous trends. For this reason, as 

described in the 2026 Payment Notice 

proposed rule,37 we conducted 

extensive analysis on the 2020 benefit 

year enrollee-level EDGE data to 

consider its inclusion in the 

recalibration of the 2024 benefit year 

risk adjustment models. For example, in 

the 2024 Payment Notice proposed 

rule 38 and final rule 39 we discussed our 

analysis of the 2020 benefit year data to 

identify possible impacts of the COVID– 

19 PHE.40 Likewise, when we 

conducted recalibration of the 2025 

benefit year risk adjustment models, we 

conducted similar analyses on the 2021 

benefit year enrollee-level EDGE data as 

we did to the 2020 benefit year enrolleelevel EDGE data to examine the 

potential impact of the COVID–19 

PHE.41 We did not find any notable 

anomalous trends, and determined that 

deviations identified in 2020 or 2021 

benefit year data were within the 

expected level for any individual data 

year. Further, we believe the blending of 

the coefficients from the separately 

solved models for benefit years 2020 

and 2021 with benefit year 2022 for 

purposes of the 2026 benefit year model 

recalibration sufficiently stabilizes any 

differences resulting from the COVID– 

19 PHE in the 2020 or 2021 datasets. As 

the 2020 and 2021 benefit years’ 

enrollee-level EDGE data used to 

recalibrate the 2025 benefit year risk 

adjustment models are identical to the 

2020 and 2021 enrollee-level EDGE data 

used to recalibrate the 2026 benefit year 

risk adjustment models, the analyses 

and conclusions discussed in prior 

rulemaking equally apply to the 

recalibration of the risk adjustment 

models for the 2026 benefit year. 

Comment: One commenter noted 

decreases in the risk adjustment model 

R-squared values for the 2022 benefit 

year enrollee-level EDGE data relative to 

prior benefit years as presented in Table 

10 of the proposed rule.42 This 

commenter requested information 

regarding any analysis HHS has 

conducted concerning the reduction in 

this model performance statistic. 

Response: First, as demonstrated by 

Table 10 of the proposed rule,43 each 

individually solved model that 

contributes to the blended HHS risk 

adjustment models has an R-squared 

statistic within the expected range for 

concurrent claims-based risk scoring 

models 44 such as the models used for 

the HHS-operated risk adjustment 

program. Nevertheless, we are aware of 

and intend to continue monitoring the 

slight decrease in the R-squared values 

for the HHS risk adjustment models 

over the past few years of enrollee-level 

EDGE data which indicates that the 

models are explaining slightly less of 

the variation in plan liability for the 

2022 benefit year enrollee-level EDGE 

data compared to prior benefit years of 

enrollee-level EDGE data. In our quality 

control assessments of the recalibration 

process for the proposed draft 2026 

benefit year coefficients, we explored 

two possible explanations for this 

decrease in R-squared values—a shift in 

enrollment and the presence of outlier 

enrollees with very high costs in the 

enrollee-level EDGE data. 

Our analysis found that the largest 

percentage decreases in R-squared 

values between the 2022 benefit year 

and the 2019 (or 2020) 45 benefit year of 

enrollee-level EDGE data for adult 

enrollees were for enrollees without 

HCCs, enrollees with only 1 month of 

enrollment, and new enrollees (that is, 

enrollees new to an issuer, whose 

system identifier was not present for the 

issuer in the prior year).46 We interpret 

these results to be consistent with a 

hypothesis that new enrollees and a 

greater proportion of relatively healthier 

enrollees in 2022 were partially 


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4438 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

47See, supra, notes 22–24, and 26. 

48For discussion relating to the Hepatitis C 

Pricing Adjustment for previous benefit years, see, 

for example, 89 FR 26218, 26237–38. 

49See 81 FR 12204, 12218–19. 

50The Hepatitis C drugs market pricing 

adjustment to plan liability is applied for all 

enrollees taking Hepatitis C drugs in the data used 

for recalibration. 

51See Milligan, J. (2018). A perspective from our 

CEO: Gilead Subsidiary to Launch Authorized 

Generics to Treat HCV. Gilead. https://

www.gilead.com/news-and-press/companystatements/authorized-generics-for-hcv. See also 

AbbVie. (2017). AbbVie Receives U.S. FDA 

Approval of MAVYRETTM (glecaprevir/ 

pibrentasvir) for the Treatment of Chronic Hepatitis 

C in All Major Genotypes (GT 1–6) in as Short as 

8 Weeks. Abbvie. https://news.abbvie.com/news/ 

abbvie-receives-us-fda-approval-mavyretglecaprevirpibrentasvir-for-treatment-chronichepatitis-c-in-all-major-genotypes-gt-1-6-in-asshort-as-8-weeks.htm. See also Silseth, S., & Shaw, 

H. (2021). Analysis of prescription drugs for the 

treatment of hepatitis C in the United States [White 

paper]. Milliman. https://www.milliman.com/-/ 

media/milliman/pdfs/2021-articles/6-11-21- 

analysis-prescription-drugs-treatment-hepatitis-cus.ashx. 

52See 89 FR 82308, 82321–23. 

responsible for a decrease in model Rsquared values between the 2022 benefit 

year and the 2019 through 2021 benefit 

years of enrollee-level EDGE data, in 

that the R-squared value decreases are 

largest for subgroups that are likely to 

contain more new enrollees or are 

difficult to predict, for example, new 

enrollees to an issuer and enrollees 

without HCCs. 

Likewise, our analysis found that the 

removal of outlier enrollees always 

resulted in an increase in R-squared 

values and the impacts were notably 

higher for 2020, 2021, and 2022 

enrollee-level EDGE data than for 2019 

enrollee-level EDGE data. We interpret 

these results to imply that recent data 

years have exhibited more influential 

high-cost enrollees. However, we do not 

see the presence of cost outliers in the 

enrollee-level EDGE data to be 

problematic at this time because we 

generally expect the number of cost 

outliers to vary from year to year, and 

we did not find evidence that suggests 

a clear data error exists related to any 

of these outliers. 

In short, although we were able to 

identify likely contributing factors to the 

observed slight decrease in R-squared 

values and will continue to monitor the 

R-squared values in the future, the Rsquared values for 2026 benefit year risk 

adjustment model recalibration remain 

high and within the expected range of 

R-squared values for the type of model 

used for the HHS-operated risk 

adjustment program. We remain 

confident the HHS risk adjustment 

models continue to operate effectively 

and appropriately predict plan liability 

for an average enrollee. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule, this final rule, the 2024 Payment 

Notice, the 2025 Payment Notice,47 and 

our responses to comments above, we 

are finalizing this approach as proposed. 

However, to account for the 

incorporation of the human 

immunodeficiency virus (HIV) preexposure prophylaxis (PrEP) affiliated 

cost factor (ACF) with the generic drug 

exclusion and hierarchy specifications 

finalized in this rule, we were unable to 

complete the calculations for the final 

coefficients in time to publish them in 

this final rule. Therefore, consistent 

with § 153.320(b)(1)(i), we are finalizing 

the use of the 2020, 2021 and 2022 

enrollee-level data to calculate the 2026 

benefit year coefficients and will 

publish the final coefficients for the 

2026 benefit year in guidance after the 

publication of this final rule. We will 

release this guidance in time for rate 

setting for the 2026 benefit year. 

b. Pricing Adjustment for the Hepatitis 

C Drugs 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82321), we proposed 

that beginning with the 2026 benefit 

year, we would begin phasing out the 

market pricing adjustment 48 to the plan 

liability associated with Hepatitis C 

drugs in the HHS risk adjustment 

models and start trending Hepatitis C 

drugs consistent with the other drugs 49

in the HHS risk adjustment models. 

Since the 2020 benefit year HHS risk 

adjustment models, we have included a 

market pricing adjustment to the plan 

liability associated with Hepatitis C 

drugs to reflect future market pricing 

prior to solving for coefficients for the 

models.50 The purpose of this market 

pricing adjustment was to account for 

significant pricing changes between the 

data years used for recalibrating the 

models and the applicable benefit year 

of risk adjustment as a result of the 

introduction of new and generic 

Hepatitis C drugs.51 For the reasons and 

history described in the proposed rule, 

we proposed to adopt a multi-year 

phase out approach to transition the 

Hepatitis C drugs’ trending to move 

away from the current unique market 

pricing adjustment for these drugs and 

align Hepatitis C drugs’ trending with 

the trending approach for specialty 

drugs.52 To begin this transition for the 

2026 benefit year HHS risk adjustment 

models, we proposed to apply the 

specialty drug trend to 1 year of 

trending Hepatitis C treatment costs 

(that is, the trend from 2025 to 2026) for 

all 3 years of enrollee-level EDGE data 

used in recalibration (that is, 2020, 

2021, and 2022 enrollee-level EDGE 

data). As such, 2026 benefit year 

recalibration data for Hepatitis C would 

reflect 1 year of growth in the cost of 

treatment at the same rate as other 

specialty drugs. To continue the 

transition of phasing out the Hepatitis C 

drug pricing adjustment in future 

benefit years’ annual model 

recalibration, we proposed to annually 

increase the number of years for which 

we would use the specialty drug trend 

and decrease the number of years that 

would use the unique market pricing 

adjustment for Hepatitis C drugs. We 

proposed to continue this approach 

until such time as all enrollee-level 

EDGE data years used for the 

recalibration of the HHS risk adjustment 

models are from benefit year 2025 or 

later, at which time the specialty drug 

cost trend would be fully applied to 

Hepatitis C drug costs consistent with 

other specialty drugs in the HHS risk 

adjustment models and we would stop 

applying the separate market pricing 

adjustment for Hepatitis C drugs as part 

of the annual model recalibration. 

We sought comment on our proposal 

to begin to phase out the Hepatitis C 

drugs market pricing adjustment and 

trend Hepatitis C drugs consistent with 

other specialty drugs starting with the 

annual recalibration of the 2026 benefit 

year HHS risk adjustment models. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy as proposed. We 

summarize and respond to public 

comments received on the proposal to 

begin to phase out the market pricing 

adjustment for Hepatitis C drugs starting 

with the 2026 benefit year below. 

Comment: Many commenters 

supported the proposal to begin to 

phase out the market pricing adjustment 

and trend Hepatitis C drugs consistent 

with other specialty drugs starting with 

the annual recalibration of the 2026 

benefit year HHS risk adjustment 

models. Many of these commenters 

agreed with HHS’ assessment that the 

cost trend for Hepatitis C drugs has 

begun to rise alongside the expected 

cost of other specialty drugs. A couple 

of commenters recommended close 

monitoring of costs and utilization of 

Hepatitis C drugs to ensure that access 

to these drugs is not interrupted for 

enrollees. 

Response: We are finalizing the 

phasing out of the market pricing 

adjustment for Hepatitis C drugs starting 

with the 2026 benefit year as proposed. 

We agree with commenters that the cost 


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53See 86 FR 24140, 24163. 

54See 89 FR 26218, 26247–48. 

55 Ibid. 

56See https://www.fda.gov/news-events/pressannouncements/fda-approves-first-gene-therapiestreat-patients-sickle-cell-disease. 

57For example, the new sickle cell gene therapy 

treatments are expected to exceed the high-cost risk 

pool payment threshold. See, DeMartino P, Haag 

MB, Hersh AR, Caughey AB, Roth JA. A Budget 

Impact Analysis of Gene Therapy for Sickle Cell 

Disease: The Medicaid Perspective. JAMA Pediatr. 

2021 Jun 1;175(6):617–623. doi: 10.1001/ 

jamapediatrics.2020.7140. Erratum in: JAMA 

Pediatr. 2021 Jun 1;175(6):647. PMID: 33749717; 

PMCID: PMC7985816. Accessed at https://

www.ncbi.nlm.nih.gov/pmc/articles/PMC7985816/. 

58As background, RXC 07 (Anti Diabetic Agents, 

Except Insulin and Metformin Only) is a 

pharmacotherapeutic class of drugs, which contains 

a broad array of anti-diabetic medications that vary 

in cost. RXC 07 (Anti Diabetic Agents, Except 

Insulin and Metformin Only) does not include all 

GLP–1 drugs currently on the market; drugs that 

carry an FDA indication for chronic weight 

management are excluded from RXC 07 (Anti 

Diabetic Agents, Except Insulin and Metformin 

Only). The RXC 07 (Anti Diabetic Agents, Except 

Insulin and Metformin Only) coefficient in the HHS 

risk adjustment adult models is meant to reflect the 

average enrollee cost for individuals being treated 

by any of the drugs in this class. 

trend for Hepatitis C drugs has changed 

and resulted in the need to reexamine 

the treatment of these drugs in the HHS 

risk adjustment models, including 

consideration of phasing out the market 

pricing adjustment for these drugs. We 

also note that the policy adopted in this 

final rule to phase out the market 

pricing adjustment for these drugs will 

allow Hepatitis C drug costs to increase 

as appropriate alongside other specialty 

drugs in the simulation of plan liability 

used for annual HHS risk adjustment 

model recalibration. Starting this 

transition beginning with the 2026 

benefit year and appropriately 

accounting for price increases of 

Hepatitis C drugs in the HHS risk 

adjustment models alongside other 

specialty drugs in the simulation of plan 

liability responds to these observed 

emerging trends and will better reflect 

the actuarial risk of an issuer’s 

population, especially for issuers that 

attract a large number of enrollees using 

Hepatitis C drugs, helping to prevent 

adverse selection and the associated 

perverse incentives. As such, we are 

finalizing the policy to begin phasing 

out of the Hepatitis C market pricing 

adjustment starting with the 2026 

benefit year recalibration of the HHS 

risk adjustment models as proposed, but 

we will also continue to monitor costs 

and utilization of drugs, including 

Hepatitis C drugs, as part of our ongoing 

efforts to examine ways to continually 

improve the HHS risk adjustment 

models for future benefit years. 

Comment: One commenter requested 

that HHS continue to review the costs 

associated with specialty drugs and 

consider whether market pricing 

adjustments may be warranted for GLP– 

1 drugs, gene therapies, or other unique, 

high-cost drugs that may drive the cost 

of treating a particular condition in a 

given benefit year significantly higher 

than those reflected in the enrollee-level 

EDGE data years used in recalibration 

for that benefit year. One commenter 

noted recently available expensive gene 

therapies for sickle cell disease as an 

example of this phenomenon and 

requested that HHS consider a market 

pricing adjustment for sickle cell 

disease treatments. 

Response: We did not propose to 

change the treatment of high-cost drugs, 

such as GLP–1 drugs, sickle cell disease 

treatments, or other gene and cellular 

therapies, in the 2026 benefit year HHS 

risk adjustment models and are not 

finalizing such updates in this final 

rule. As we discussed in the 2022 

Payment Notice 53 and 2025 Payment 

Notice,54 we recognize that the data 

used to recalibrate the HHS risk 

adjustment models lag by several benefit 

years behind the applicable benefit year 

for risk adjustment and therefore may 

not account for the costs of new, 

expensive drugs, such as gene therapy 

drugs, that are expected to be available 

in the market by the applicable benefit 

year of risk adjustment. Thus, we 

continue to consider ways that we could 

better account for high-cost drugs in the 

risk adjustment models and, as part of 

this effort, analyze new data as they 

become available. 

With specific regard to new gene 

therapies for sickle cell disease, when 

we were previously analyzing the 

changes to the sickle cell disorder 

related HCCs in the 2025 benefit year 

risk adjustment models,55 we 

considered whether to add an RXC for 

existing high-cost sickle cell drugs and 

new gene therapy treatments, but 

determined that we need to continue to 

analyze the evolution and availability of 

drug treatments for sickle cell disease. 

Specifically, the new gene therapy drugs 

for sickle cell disease were not approved 

for the market until December 2023.56

Therefore, the first full year of claims 

data in which these new sickle cell 

disease treatments may be reflected will 

not be available until the 2024 benefit 

year enrollee-level EDGE data is 

available. We therefore continue to find 

that we do not have enough information 

at the present time to account for these 

treatments in the HHS risk adjustment 

models because of the general lack of 

data on the utilization and cost of gene 

therapy drugs for sickle cell disease in 

the individual, small group, and merged 

markets. We are committed to 

continuing to analyze new data as they 

become available and, consistent with 

§ 153.320(b)(1), we would propose the 

addition of any market pricing 

adjustments or other changes to the risk 

adjustment models to account for these 

treatments through notice-and-comment 

rulemaking, as appropriate. We also 

note that if an enrollee in an issuer’s 

risk adjustment covered plan has claims 

for gene therapy, other high-cost drugs, 

or other expensive treatments, that 

enrollee would be eligible for the highcost risk pool payments if claims for 

that enrollee are over $1 million.57

Considering the absence of adequate 

data, we did not propose and are not 

finalizing a new market pricing 

adjustment or other model adjustments 

for sickle cell gene therapy drugs for the 

2026 benefit year. We intend to 

continue to assess sickle cell gene 

therapy drugs and other high-cost drugs 

to consider whether model updates for 

future benefit years are warranted. 

We also intend to work with 

interested parties to continue to analyze 

plan liability for sickle cell disease and 

the impact of gene and cell therapy 

treatments, as well as explore the 

availability of alternative data sources 

that could be used to monitor utilization 

and costs outside of currently available 

enrollee-level EDGE data. 

As explained in the 2025 Payment 

Notice (89 FR 26249), we also recently 

examined the treatment of GLP–1 drugs 

in the HHS risk adjustment models 

using the 2022 benefit year enrolleelevel EDGE data and found that, at this 

time, a change was not warranted to the 

current mapping of GLP–1 drugs to RXC 

07 (Anti Diabetic Agents, Except Insulin 

and Metformin Only).58 We understand 

GLP–1 drug utilization patterns are 

changing and will continue to assess 

these trends as additional benefit years 

of enrollee-level EDGE data become 

available for potential targeted 

refinements to the HHS risk adjustment 

models in future benefit years, as 

appropriate. 

Comment: One commenter requested 

additional information on how HHS 

defines generic and specialty drugs and 

what trend assumptions HHS uses for 

each of these two categories, asserting 

that this information would help 

interested parties better evaluate the 

proposal to begin to phase out the 

Hepatitis C market pricing adjustment 

against costs experienced by issuers. 

Response: Since the 2017 benefit year, 

we have subdivided expenditures into 

traditional drugs, specialty drugs, 

medical services, and preventive 


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59See 81 FR 12218. See also the 2016 Risk 

Adjustment White Paper, available at: https://

www.cms.gov/cciio/resources/forms-reports-andother-resources/downloads/ra-march-31-whitepaper-032416.pdf. 60See, for example, ‘‘How much is health 

spending expected to grow?’’ by the Peterson-Kaiser 

Family Foundation, available at https://

www.healthsystemtracker.org/chart-collection/howmuch-is-health-spending-expected-to-grow/. See 

also ‘‘Medical cost trend: Behind the numbers 

2024’’ by PwC Health Research Institute, available 

at https://www.pwc.com/us/en/industries/healthindustries/library/assets/pwc-behind-the-numbers2024.pdf. See also ‘‘MBB Health Trends 2024’’ by 

MercerMarsh Benefits, available at https://

www.marsh.com/na/services/employee-healthbenefits/insights/health-trends-report.html. 

61See 88 FR 25740, 25754–55. 

62For example, the specialty-tier cost threshold 

specified in the Contract Year (CY) 2023 Final Part 

D Bidding Instructions (available at: https://

www.cms.gov/files/document/2023partdbidding

instructions.pdf) will be used to divide prescription 

drug claims into traditional versus specialty drugs 

for 2023 enrollee-level EDGE data when they 

become available. 

63See 85 FR 28164, 29185–87. 

64For example, colonoscopies typically require a 

combination of several services between the drugs 

needed for the colonoscopy and the professional 

and institutional claims for the visit and procedure 

itself. Likewise, contraception coverage often 

requires a doctor’s visit to obtain a prescription for 

the contraception. 

65See 86 FR 24140, 24164. 

66Prior to the 2021 Benefit Year, Plan ID and 

Rating Area were not included as part of the 

enrollee-level data extracted from issuers’ EDGE 

data submissions. As finalized in the 2023 Payment 

Notice (87 FR 27208, 27241–51), we now extract 

these fields as part of the enrollee-level EDGE 

dataset and are able to include them in our 

analyses. As such, this recent analysis reflects our 

earliest opportunity to reliably detect differences in 

prevalence within rating areas for any medical and 

prescription drug expenditures, including PrEP. 

services and determine trend factors 

separately for each category of 

expenditure.59 In determining these 

trend factors, we consult our actuarial 

experts, review relevant URRT 

submission data, analyze multiple years 

of enrollee-level EDGE data, and consult 

NHEA data as well as external reports 

and documents 60 published by third 

parties. As described in the 2024 

Payment Notice,61 in this process, we 

aim to determine trends that reflect 

changes in cost of care rather than gross 

growth in expenditures. We believe the 

trend factors we used for each 

expenditure category for the 2026 

benefit year are appropriate for the most 

recent changes in cost of care that we 

have seen in the market. We further note 

that, for the purposes of annual risk 

adjustment model recalibration 

activities, our definitions of what drugs 

qualify as either traditional (for 

example, low-cost and generic drugs) or 

specialty are also informed by 

consultations with actuarial experts and 

by reviewing price data for these drugs. 

Specific thresholds and criteria may 

vary according to the class of drugs or 

the conditions they are intended to 

treat, but we generally use the Part D 

specialty-tier cost threshold, which is 

updated periodically, to differentiate 

between traditional and specialty 

drugs.62

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments above, we are 

finalizing the proposal to begin phasing 

out the market pricing adjustment for 

Hepatitis C drugs starting with the 2026 

benefit year, as proposed. However, to 

account for the incorporation of the 

PrEP ACF with the generic drug 

exclusion and hierarchy specifications 

finalized in this final rule, we were 

unable to complete the calculations for 

the final coefficients in time to publish 

them in this final rule. Therefore, 

consistent with § 153.320(b)(1)(i), we 

will publish the final coefficients for the 

2026 benefit year in guidance after the 

publication of this final rule. We will 

release this guidance in time for rate 

setting for the 2026 benefit year. 

c. Inclusion of Pre-Exposure 

Prophylaxis (PrEP) in the HHS Risk 

Adjustment Adult and Child Models as 

an Affiliated Cost Factor (ACF) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82323), we proposed 

to incorporate human 

immunodeficiency virus (HIV) preexposure prophylaxis (PrEP) as a 

separate, new type of factor called an 

Affiliated Cost Factor (ACF) in the HHS 

risk adjustment adult and child models 

starting with the 2026 benefit year. As 

proposed, the change would reflect an 

evolution in our approach to defining 

the factors used in the HHS risk 

adjustment models to include a factor 

that is not indicative of an active 

medical condition and would change 

our current policy that models the costs 

of PrEP alongside other preventive 

services. 

As explained in the proposed rule (89 

FR 82324), as a general principle, we 

currently incorporate preventive 

services (including PrEP 63) into the 

HHS risk adjustment models to ensure 

that 100 percent of the cost of those 

services are reflected in the simulation 

of plan liability. In the simulation of 

plan liability, services are only counted 

as preventive when they occur in the 

recommended circumstances (for 

example, age) to the extent we can 

identify such circumstances from 

enrollee-level EDGE data. In addition to 

PrEP drugs, like other preventive 

services,64 ancillary services related to 

PrEP care (for example, HIV screenings) 

qualify as preventive services and as 

such are also currently calibrated at 100 

percent plan liability in the 

recalibration of the HHS risk adjustment 

adult and child models.65

However, as a part of our commitment 

to consider ways to continually improve 

the HHS risk adjustment models, we 

continued to monitor and assess 

different ways to more accurately assess 

the actuarial risk and costs associated 

with PrEP in the HHS risk adjustment 

models. In this regard, we stated in the 

proposed rule (89 FR 82324) that 

because of PrEP’s high costs relative to 

other preventive services, PrEP services 

can pose a unique risk of adverse 

selection to the extent that utilization of 

PrEP services differs between plans. Our 

analysis of 2022 benefit year enrolleelevel data 66 found that the costs of PrEP 

services remained high, in contrast to 

our initial assumptions about expected 

pricing decreases as generics entered the 

market, and that there are statistically 

significant, substantial differences in 

PrEP prevalence between issuers in 

rating areas where PrEP use is most 

common, indicating that the addition of 

a PrEP factor in the adult and child risk 

adjustment models would be 

appropriate and would have a 

meaningful impact on risk adjustment 

State transfers. Our analysis also found 

that other considerations that helped 

inform the current approach (such as 

the expected decrease in costs as 

generics entered the market and gained 

market share) have not addressed the 

uniquely high costs of PrEP as a 

preventive service as we previously 

expected. For these reasons, we 

proposed to incorporate a non-RXC and 

non-HCC model factor for PrEP in the 

HHS risk adjustment adult and child 

models to capture differences in costs 

for PrEP utilizers relative to the average 

enrollee. To signify that the proposed 

new factor would not indicate the 

presence of a specific active medical 

condition, we referred to the proposed 

new type of factor as an ‘‘affiliated cost 

factor’’ (ACF), thereby distinguishing 

this new type of factor from RXCs and 

HCCs. Furthermore, we proposed a set 

of seven principles to guide our 

development of any new ACF variable. 

We stated in the proposed rule (89 FR 

82324) that in developing an ACF 

variable reflecting PrEP, we considered 

whether PrEP satisfies those principles 

and what approaches were necessary to 

appropriately balance all seven 

principles. As described in the proposed 

rule, a PrEP ACF would easily satisfy 

the principles of clinical 

meaningfulness and specificity, 


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67As discussed later in this section, it may be 

appropriate to remove generic drugs to ensure 

homogeneity of costs within a PrEP ACF. 

68For example, we believe there are likely 

substantial rebates for Descovy that are not captured 

in issuers’ EDGE data submissions. See, for 

example, Dickson, S., Gabriel, N., and Hernandez, 

I. Estimated changes in price discounts for 

tenofovir-inclusive HIV treatments following 

introduction of tenofovir alafenamide. AIDS. 2022 

Dec 1;36(15):2225–2227. doi: 10.1097/ 

QAD.0000000000003401. See, also, Krakower, D. 

and Marcus, J.L. Commercial Determinants of 

Access to HIV Preexposure Prophylaxis. JAMA 

Network Open. 2023;6(11):e2342759. doi: 10.1001/ 

jamanetworkopen.2023.42759. See, also, McManus, 

K.A., et al. Geographic Variation in Qualified 

Health Plan Coverage and Prior Authorization 

Requirements for HIV Preexposure Prophylaxis. 

JAMA Network Open. 2023;6(11):e2342781. doi: 

10.1001/jamanetworkopen.2023.42781. 

69See, supra, note 53. 

70We previously excluded generic drugs from 

RXC 9, Immune Suppressants and 

Immunomodulators, due to concern over patient 

access and health plan selection behavior. See the 

2019 Payment Notice (83 FR 16942). 

meaningful and predictable costs,67

sufficient sample size, and low risk of 

inappropriate prescribing. However, we 

also stated in the proposed rule that that 

the creation of a PrEP ACF variable 

would require further careful 

consideration in assessing the other 

three proposed principles: specifically, 

the principles of hierarchical factor 

definitions, monotonicity, and mutually 

exclusive classification. 

We stated in the proposed rule (89 FR 

82327) that to address the HHS risk 

adjustment adult modeling concerns we 

identified regarding these three 

principles; we considered two 

alternative approaches. First, we could 

modify the current definition of RXC 1 

(Anti-HIV Agents) by treating PrEP 

NDCs as RXC 1 NDCs in limited 

circumstances based on individual 

enrollee characteristics. Operationally, 

to capture these cases, the adult 

enrollees with a PrEP prescription claim 

would receive the RXC 1 flag instead of 

the ACF only in cases where the 

enrollee has both a PrEP prescription 

claim and an HIV diagnosis but does not 

have a typical RXC 1 prescription claim 

because the enrollee did not begin 

treatment for HIV, or because their 

treatment medication was provided at 

no cost to the issuer and therefore no 

claim was submitted to the issuer’s 

EDGE server. Alternatively, we 

explained we could place the PrEP ACF 

in a hierarchy with RXC 1 but define no 

hierarchical restrictions between PrEP 

and HCC 1 (HIV/AIDS). This alternative 

would allow adult enrollees without 

RXC 1 to receive the PrEP ACF along 

with HCC 1 in cases where the enrollee 

has both a PrEP prescription claim and 

an HCC 1 diagnosis in their medical 

records for the benefit year. We solicited 

comments on addressing these 

hierarchy, monotonicity, and mutual 

exclusivity concerns, and both 

alternative approaches designed to 

address those concerns. 

We also sought comment on our 

proposal to create a new ACF category 

of model factors for incorporation into 

the HHS risk adjustment models to 

account for unique medical expenses or 

services (such as PrEP) that do not meet 

the criteria to qualify as HCC or RXC 

factors, but impact the actuarial risk 

presented to issuers of risk adjustment 

covered plans. In addition, we sought 

comment on our proposal to modify the 

treatment of PrEP in the HHS risk 

adjustment adult and child models 

beginning with the 2026 benefit year, as 

well as how to methodologically define 

a potential ACF category of model 

factors that accounts for PrEP (or other 

unique medical expenses or services) 

and what other considerations should 

be part of the analysis and modeling for 

this proposed new category of model 

factors (such as the availability of drug 

rebates 68 or differences in medication 

adherence for PrEP). Furthermore, we 

sought comment regarding the 

principles to guide inclusion of 

potential ACF factors and the alternative 

approaches for defining a PrEP ACF’s 

hierarchical relationship to HCC 1 and 

RXC1 to address the concerns related to 

hierarchical factor definitions, 

violations of monotonicity, and 

violations of mutually exclusive 

classification in the HHS risk 

adjustment adult models. 

Additionally, we solicited comments 

on whether generic versions of PrEP 

medication should be excluded from the 

definition of the proposed ACF for PrEP. 

As we stated in the proposed rule (89 

FR 82326), we found that a large 

disparity exists between the costs of 

generic PrEP medication and the costs 

of brand name PrEP medication.69 We 

explained that due to this disparity, if 

we include all PrEP medications in the 

definition of an ACF, the estimated 

coefficient would likely lead to 

overprediction for enrollees receiving 

generic medications and 

underprediction for enrollees receiving 

brand name medications. Therefore, an 

exclusion of low-cost generics from the 

PrEP ACF could improve predictions for 

enrollees receiving either generic or 

brand name PrEP medication and has 

precedent in our adoption of other 

factors in the HHS risk adjustment 

models.70

Lastly, we sought comment 

concerning whether there are any 

similar medical expenses or services 

that we should consider for potential 

new ACFs alongside PrEP. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing the addition of PrEP as an 

ACF in the HHS risk adjustment adult 

and child models, but are excluding 

generic versions of PrEP from the ACF 

at this time, and are placing the PrEP 

ACF in the adult models in a hierarchy 

below RXC 1 (Anti-HIV Agents) without 

defining any hierarchical relationship 

between the PrEP ACF and HCC 1 (HIV/ 

AIDS). In the child models, which do 

not contain RXCs, we are finalizing the 

placement of the PrEP ACF in a 

hierarchy with HCC 1. We summarize 

and respond to public comments 

received on the proposed addition of 

PrEP as an ACF in the HHS risk 

adjustment adult and child models 

starting with the 2026 benefit year 

below. 

Comment: Many commenters 

supported the proposal to add PrEP to 

the HHS risk adjustment adult and child 

models as an ACF. Many of these 

commenters noted agreement with HHS’ 

determination that PrEP presents a 

unique risk of adverse selection among 

preventive services and that the 

addition of PrEP to the HHS risk 

adjustment adult and child models 

would mitigate perverse incentives for 

issuers to minimize their exposure to 

enrollees who can benefit from PrEP 

despite the mandate to cover preventive 

services with no enrollee cost sharing. 

Several commenters stated that this 

addition to the HHS risk adjustment 

adult and child models will better align 

issuers’ incentives with the public 

health benefit of preventing HIV 

transmission. A few commenters 

acknowledged that PrEP may be 

appropriate to include in the HHS risk 

adjustment adult and child models but 

noted doubt that a new class of factors 

(that is, ACFs) was necessary. 

Response: We agree with commenters 

that PrEP should be properly 

represented in the HHS risk adjustment 

adult and child models to mitigate the 

potential for adverse selection and 

appreciate the support for the addition 

of a new PrEP ACF to these models 

beginning with the 2026 benefit year. As 

explained in the proposed rule (89 FR 

82308, 82323–24), we believe that 

creating a new class of factors is 

necessary and appropriate at this time to 

capture actuarial risks and costs that 

may contribute to adverse selection but 

are not indicative of an active medical 

condition, as is the case with PrEP, and 

therefore would not be reflected in the 


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71See 89 FR 82308, 82324–31. 

72See 81 FR 94058, 94074–80. See also the 2016 

HHS Risk Adjustment White Paper. Available at 

https://www.cms.gov/cciio/resources/forms-reportsand-other-resources/downloads/ra-march-31-whitepaper-032416.pdf. 

73 Ibid. See also the March 31, 2016, HHSOperated Risk Adjustment Methodology Meeting 

Questions & Answers. June 8, 2016. Available at 

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

74See section 2701 of the Public Health Service 

Act (42 U.S.C. 300gg) as amended by section 1201 

of the ACA. See also the Market Rules and Rate 

Review final rule (78 FR 13406, 13411–13). 75See 89 FR 82308, 82325–27. 

76See the 2014 Payment Notice Proposed Rule 

(77 FR 73118, 73128) and the 2014 Payment Notice 

Final Rule (78 FR 15410, 15420). See also Kautter, 

J. et al (2014). The HHS–HCC Risk Adjustment 

Model for Individual and Small Group Markets 

under the Affordable Care Act. Medicare and 

Medicaid Research Review, 4(3). Available at: 

https://www.cms.gov/mmrr/Downloads/ 

MMRR2014_004_03_a03.pdf. See also the 2016 

HHS Risk Adjustment White Paper (available at: 

https://www.cms.gov/cciio/resources/forms-reportsand-other-resources/downloads/ra-march-31-whitepaper-032416.pdf) and the 2021 RA Technical 

Paper (available at: https://www.cms.gov/files/ 

document/2021-ra-technical-paper.pdf). 

77See the 2018 Payment Notice Proposed Rule 

(81 FR 61456, 61470–71) and the 2018 Payment 

Notice Final Rule (81 FR 94058, 94075–80). 

HCC and RXC factors used in the HHS 

risk adjustment models. 

Although this new ACF class of 

model factors is guided by similar 

principles 71 for inclusion as the existing 

RXC class of model factors,72 we feel 

that it is conceptually appropriate to 

distinguish between these two classes. 

As stated in the 2018 Payment Notice,73

RXCs were specifically incorporated 

into the HHS risk adjustment models as 

separate factors from HCCs (which 

indicate the presence of a diagnosis 

directly) to impute a missing diagnosis 

or indicate severity of a diagnosis. 

Because the PrEP ACF (and any 

potential future ACFs) are not intended 

to be related to a diagnosis for any 

medical condition, we believe it is 

appropriate to distinguish such model 

factors from RXCs and HCCs. 

Comment: One commenter opposed 

the proposal to add PrEP to the HHS 

risk adjustment adult and child models 

as an ACF on the basis that the 

commenter believes including PrEP in 

the HHS risk adjustment adult and child 

models is discriminatory, expressing a 

belief that risk adjustment and the 

assignment of risk scores to enrollees 

based on health conditions is 

discriminatory in general. 

Response: HHS takes seriously our 

obligation to protect individuals from 

discrimination and generally disagrees 

that the use of factors based on 

enrollees’ age, sex, and health 

conditions or utilization of services and 

treatments in risk adjustment is 

inappropriate. Consistent with section 

1343 of the ACA, the HHS-operated risk 

adjustment program reduces the 

incentives for issuers to avoid higherthan-average risk enrollees, such as 

those with chronic conditions, by using 

charges collected from issuers that 

attract lower-than-average risk enrollees 

to provide payments to health insurance 

issuers that attract higher-than-average 

risk enrollees. The ACA limits issuers’ 

ability to establish or charge premiums 

on the basis of age and prohibits issuers’ 

ability to do so on the basis of sex or any 

individual health characteristic other 

than tobacco use.74 However, the cost of 

care for and actuarial risk of enrollees is, 

in part, correlated with their age, sex, 

health conditions (or severity thereof), 

and likelihood to utilize services and 

treatments. As such, without the 

inclusion of factors related to age, sex, 

health conditions, and use of services 

and treatments in the HHS risk 

adjustment models, some issuers would 

be incentivized to design plans that are 

less attractive to potential enrollees 

whose age-sex category, health 

conditions, or use of services and 

treatments is predicted to create a 

higher liability for the issuer. The 

various factors in the HHS risk 

adjustment models help alleviate this 

incentive by ensuring that the actuarial 

risk of an issuers’ enrollee population in 

a State market risk pool, including 

issuers that enroll a higher-than-average 

proportion of enrollees who fall into a 

high-cost age-sex category or are likely 

utilizers of high-cost preventive services 

(PrEP, for example), are appropriately 

assessed as part of the calculations 

under the State payment transfer 

formula. The use of factors associated 

with age, sex, health conditions, and the 

use of services and treatments 

(including expensive preventive 

services, such as PrEP) in the HHS risk 

adjustment models is therefore 

necessary, appropriate, and helps 

reduce the likelihood that 

discrimination based on any of these 

factors will occur with respect to health 

insurance coverage issued or renewed in 

the individual and small group 

(including merged) markets. 

Comment: One commenter opposed 

the proposal due to concerns that the 

addition of ACFs would increase risk 

adjustment model complexity. A few 

commenters urged caution in 

implementing the proposal or requested 

that HHS implement the addition of the 

PrEP ACF on a pilot basis. A few 

commenters requested a technical paper 

be published on the ACF concept. 

Response: We appreciate commenters’ 

interest in carefully considering the 

impact of the addition of a PrEP ACF to 

the HHS risk adjustment adult and child 

models. We will continue to monitor the 

performance of the HHS risk adjustment 

models, including the impact of the new 

PrEP ACF. Although the HHS risk 

adjustment models are made more 

complex by the addition of any new 

model factor, we believe that the seven 

principles for considering new ACFs 

discussed in the proposed rule,75 as 

well as the existing principles for 

consideration of HCCs 76 and RXCs,77

are sufficient to ensure that new model 

factors are only added when 

appropriate. In particular, we note that 

the addition of the PrEP ACF satisfies 

the principles of clinical 

meaningfulness and specificity, 

meaningful and predictable costs, 

sufficient sample size, and low risk of 

inappropriate prescribing. Therefore, we 

determined that the addition of the PrEP 

ACF is likely to improve the predictive 

validity of the models with respect to 

the portion of the enrollee population 

that are eligible for PrEP. With the 

specifications finalized in this rule to 

address the principles of hierarchical 

factor definitions, monotonicity, and 

mutually exclusive factor definitions, 

we believe that the benefits of adding a 

new PrEP ACF outweighs the concerns 

about model complexity. In addition, 

our recent analysis of 2022 benefit year 

enrollee-level EDGE data confirmed 

there is sufficiently robust data to justify 

the addition of the PrEP ACF and 

calculate its coefficients for the HHS 

risk adjustment adult and child models 

beginning with the 2026 benefit year 

such that a pilot period for the PrEP 

ACF is unnecessary. 

As always, as part of our ongoing 

efforts to continually improve the 

precision of the HHS risk adjustment 

models, we will seek input from 

interested parties through notice-andcomment rulemaking or other 

appropriate vehicles (including 

technical papers, as appropriate) on 

potential changes to the HHS risk 

adjustment models, including any 

potential new ACFs we may consider in 

the future. However, in light of the 

rationale and data discussed in the 

proposed rule, and in response to the 

comments in support of adding the PrEP 

ACF to the HHS risk adjustment adult 

and child models beginning with the 

2026 benefit year, we do not believe a 

technical paper is warranted before 

finalizing the addition of the PrEP ACF 

to the HHS risk adjustment adult and 

child models. 


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78See https://www.cms.gov/files/document/faqsimplementation-part-68.pdf. 

79See, for example, Shepherd, Joanna. (2020). 

Pharmacy benefit managers, rebates, and drug 

prices: conflicts of interest in the market for 

prescription drugs. Yale Law & Policy Review, 

38(2), 360–396. Available at: https://heinonline.org/ 

HOL/P?h=hein.journals/yalpr38&i=390. 

80See the EDGE Server Business Rules, Version 

25 (December 2024). Available at: https://

regtap.cms.gov/reg_librarye.php?i=3765. 

Comment: Several commenters 

expressed a preference for excluding 

generic drugs from the definition of the 

PrEP ACF, noting the vast difference in 

prices between brand name and generic 

drugs. One commenter noted that their 

experience showed that prices for brand 

name PrEP drugs can be as much as 100 

times the cost of generic PrEP drugs. A 

few commenters stated that excluding 

generics would better support patients 

as advances in PrEP come to market, 

with a few commenters specifically 

noting that newer branded forms of 

PrEP drugs that are more effective, more 

tolerable, and long-acting will likely be 

the predominant form of PrEP in the 

near future. Furthermore, a few 

commenters were concerned that 

including generics in the PrEP ACF 

definition would overcompensate plans 

that prescribe more generics than 

average or would otherwise contribute 

to adverse selection incentives. 

Several other commenters noted a 

preference for generic drugs to be 

included in the definition of the PrEP 

ACF on the basis that excluding 

generics may incentivize prescription of 

brand name drugs and inefficient care 

patterns. A few of these commenters 

noted that issuers are likely receiving 

considerable manufacturer rebates for 

PrEP that may not be reflected in the 

enrollee-level EDGE data that HHS uses 

for risk adjustment model recalibration. 

One commenter who supported the 

exclusion of generics requested that 

step-therapy requirements be instituted 

for PrEP drugs that have both a generic 

and brand name formulation. A few 

commenters noted an interest in 

splitting the PrEP ACF into two ACFs 

according to brand name/generic status 

or based on oral/injectable form. 

Response: We appreciate the 

comments and agree with the position 

that the vast difference in costs between 

brand name and generic PrEP drugs 

warrants an exclusion for generic drugs 

from the definition of the PrEP ACF. 

Although excluding generic drugs from 

the definition of a model factor may, in 

many cases, encourage the prescription 

of brand name drugs over generic drugs 

and encourage inefficient care patterns, 

we do not believe this is especially 

likely in the case of PrEP due to the very 

large difference in price between the 

only generic form of PrEP available on 

the market and the multiple brand name 

forms available. Moreover, we are 

concerned that the inclusion of generic 

drugs would lead to an overpayment for 

coverage of generic drugs and an 

underpayment for coverage of brand 

name drugs, potentially incentivizing 

issuers to limit access to brand name 

drugs. Because there is presently only 

one form of generic PrEP available on 

the market (a daily oral regimen), 

barriers to accessing brand name drugs, 

including step-therapy requirements, 

would only limit access to newer and 

more tolerable formulations, including 

long-acting injectable forms of PrEP. 

Additionally, step-therapy requirements 

would be inconsistent with recently 

released guidance relating to coverage of 

preventive services under section 2713 

of the PHS Act specifying that issuers 

must cover, without cost sharing, all 

three FDA-approved PrEP formulations 

(two oral and one injectable) and are not 

permitted to use medical management 

techniques to direct individuals 

prescribed PrEP to utilize one 

formulation over another.78 As such, to 

further limit the influence of perverse 

incentives, to align with the recent 

guidance, and in recognition of the very 

large difference in price between generic 

and brand name forms of PrEP, 

beginning with the 2026 benefit year, 

we are finalizing the addition of the 

PrEP ACF to the HHS risk adjustment 

adult and child models with an 

exclusion of generic versions of PrEP 

medication from the definition of the 

PrEP ACF. We will continue to monitor 

the impact of the new PrEP ACF, as well 

as the cost and utilization of PrEP drugs 

in the market, and may consider 

alterations to the new PrEP ACF if the 

prices of generic and brand name forms 

of PrEP become more comparable, 

additional generic forms of PrEP enter 

the market, or we observe market 

distortions or other impacts resulting 

from the addition of the new PrEP ACF 

to the adult and child models that 

should be addressed. 

We may also consider the potential 

addition of a separate generic drug PrEP 

ACF in the future, but would need to 

consider whether the inclusion of an 

ACF for generic drugs would satisfy the 

principles finalized in this rule to guide 

the adoption of potential additional 

ACFs in the future. In particular, we 

would need to consider whether a 

generic drug PrEP ACF would satisfy 

the principle of meaningful and 

predictable costs (Principle 2), as the 

cost of the generic version of PrEP 

currently available on the market is 

fairly low and may not produce a 

meaningful coefficient if incorporated 

into the HHS risk adjustment adult and 

child models. As part of this future 

analysis, we may also consider whether 

a distinction between oral and injectable 

PrEP is warranted. However, we note 

that the annual costs of brand name oral 

and injectable forms are currently 

similar and that the only generic form 

of PrEP currently available is an oral 

form. Therefore, the splitting of the PrEP 

ACF into oral and injectable forms may 

still necessitate the exclusion of generic 

PrEP due to the cost disparity between 

the generic and brand name oral forms, 

which would continue to lead to 

overprediction for the generic form, 

incentivizing issuers to use medical 

management techniques to direct 

individuals prescribed oral PrEP to 

utilize the generic oral formulation over 

other branded oral forms that may have 

fewer side effects or otherwise be more 

appropriate for the enrollee. We would 

seek input from interested parties 

through notice-and-comment 

rulemaking or other appropriate 

vehicles on any such potential changes. 

Regarding the comments related to 

manufacturer rebates, we acknowledge 

that manufacturer rebates are common 

and may impact drug prices for a wide 

variety of prescription drugs.79 We note 

that issuers are currently instructed that 

they do not need to adjust the reported 

Plan Paid Amount to reflect 

manufacturer rebates in the data made 

available to HHS through issuers’ EDGE 

servers.80 As such, using enrollee-level 

EDGE data to precisely account for 

manufacturer rebates for any 

prescription drugs in the HHS risk 

adjustment adult and child models may 

necessitate changes to issuers’ data 

submission practices. We continue to 

consider these issues and different ways 

to potentially account for these rebates 

in the HHS risk adjustment models in 

future benefit years. 

Comment: All commenters on the two 

hierarchy options set forth in the 

proposed rule preferred the alternative 

approach in which HHS would allow 

adult enrollees with HIV to receive 

credit for PrEP and place the PrEP ACF 

in the adult models in a hierarchy below 

RXC 1 (Anti-HIV Agents). Commenters 

noted that this approach is the most 

straightforward approach, that it 

maintains a strong adherence to the 

seven principles for developing a new 

ACF factor set forth in the proposed 

rule, and that it ensures that the HHS 

risk adjustment models can distinguish 

between preventive use of PrEP and 

treatment of active HIV infection, thus 

mitigating overlap issues and preserving 

the integrity of the classification system. 


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81This alternative hierarchy approach satisfies 

the intent of Principle 6 (mutually exclusive 

classification) by using similar considerations and 

filtering steps to those we currently use in our 

simulation of plan liability for PrEP. 

82For information on the development of the 

RXC–HCC pairs for the adult models, including the 

guiding principles and other considerations, see the 

2018 Payment Notice Proposed Rule (81 FR 61456, 

61470–71), the 2018 Payment Notice Final Rule (81 

FR 94058, 94075–80), and the 2019 Payment Notice 

Final Rule (83 FR 16930, 16941–43). Also see 

Chapter 4, 2016 HHS Risk Adjustment White Paper, 

available at: https://www.cms.gov/cciio/resources/ 

forms-reports-and-other-resources/downloads/ramarch-31-white-paper-032416.pdf. 

83See 89 FR 82308, 82328–41. Note that these 

values are approximate and presented here only for 

illustrative purposes. We note that the proposed 

rule estimates included generic drugs in the 

definition of the PrEP ACF but in this rule we are 

finalizing that generic drugs will be excluded from 

PrEP ACF definition for both the adult and child 

models. As such, these values should be taken only 

as rough estimates of the impact of the hierarchy 

specification on the example enrollee. 

84 Ibid. 

85 Ibid. 

One commenter suggested that if the 

ACF for PrEP is added to the HHS risk 

adjustment child models, RXC 1 (AntiHIV Agents) should also be added to the 

child models with the same hierarchy 

specifications as the adult models. This 

commenter asserted that without this 

modification, it may be difficult to 

differentiate enrollees subject to the 

child models who are on PrEP from 

those who are taking antiretrovirals to 

manage active HIV infections. 

Response: We agree that the 

alternative hierarchy approach for the 

adult models set forth in the proposed 

rule is straightforward and would 

appropriately address the hierarchy 

concerns identified in the proposed rule 

with regards to the adult models, 

namely the violations of the hierarchical 

factor definitions principle (Principle 4), 

the monotonicity principle (Principle 5), 

and the mutually exclusive 

classification system principle 

(Principle 6).81 Because we are able to 

appropriately address these violations 

through the adoption of the alternative 

hierarchy approach, we also agree that 

the adult models will be able to 

appropriately distinguish between the 

preventive use of PrEP and the 

treatment of an active HIV infection. 

Therefore, in the HHS risk adjustment 

adult models we are finalizing the 

hierarchy option that places the PrEP 

ACF below RXC 1 in a hierarchy 

without defining any hierarchical 

relationship between the PrEP ACF and 

HCC 1 (HIV/AIDS). Under this 

approach, adult enrollees without RXC 

1 will receive the PrEP ACF along with 

HCC 1 in cases where the enrollee has 

both a PrEP prescription claim and an 

HCC 1 diagnosis in their medical 

records for the benefit year. Further, 

under this approach, an adult enrollee 

with a PrEP prescription claim in their 

medical records for the benefit year who 

later tests positive for HIV in the same 

benefit year would have an increase in 

their risk score for that year as a result 

of the additional diagnosis, 

appropriately satisfying the principles 

of additivity (Principle 4) and 

monotonicity (Principle 5). 

Regarding the comment requesting the 

addition of RXC 1 to the child models 

with the same hierarchy specifications 

as the adult models, we did not propose 

and are not finalizing the addition of 

any RXCs to the HHS risk adjustment 

child models. Currently, only the HHS 

risk adjustment adult models include 

RXCs. Determining whether it is 

appropriate to add any RXCs to the 

child models would require careful 

analysis and consideration, and we 

would want to solicit public comment 

on such analysis, which was not 

possible between the receipt of these 

comments and publication of this final 

rule. For example, similar to the 

development of the RXC–HCC pairs for 

the HHS risk adjustment adult models, 

we would need to work with clinicians 

to analyze, select, and tailor the RXCs 

that could be used to impute diagnoses 

and to indicate the severity of diagnoses 

otherwise indicated through medical 

coding as appropriate for the child 

models.82 We would also need to 

propose and solicit comments on such 

potential draft factors in the applicable 

HHS notice of benefit and payment 

parameters. 

However, we agree with the 

commenter that there is an important 

issue with the hierarchy specification(s) 

related to the addition of the PrEP ACF 

in the child models that needs to be 

addressed when finalizing these new 

factors for the models. To explain, we 

first note that because the HHS risk 

adjustment child models do not contain 

RXCs, the costs of HIV treatment 

(inclusive of the HIV treatment 

medication regimens captured in RXC 1 

in the adult models) are accounted for 

in the HCC 1 coefficient in the child 

models. As such, in contrast to the adult 

models, where the RXC 1 coefficient is 

generally larger than the PrEP ACF or 

HCC 1 coefficient, with the HCC 1 

coefficient having the smallest 

coefficient of the three adult model 

factors, the absence of RXC 1 in the 

child models generally results in a 

higher coefficient for HCC 1 than the 

PrEP ACF coefficient. As such, without 

a hierarchy specification limiting the 

application of the PrEP ACF in the child 

models, an enrollee subject to the child 

models who was on PrEP for part of a 

benefit year, but was later diagnosed 

with HIV (and would therefore likely be 

prescribed treatment for an active HIV 

infection instead) would receive a large 

increase to their risk score 

(approximately 3.993, per the draft 

silver coefficient for HCC 1 in the child 

models as reflected in Table 5 of the 

proposed rule) 83 because the enrollee 

would be receiving risk score 

components associated with both 

prevention and treatment of HIV. 

However, in the context of the adult 

model PrEP ACF and hierarchy 

specification finalized in this rule, a 

similar enrollee subject to the adult 

models who was on PrEP for part of a 

benefit year, but was later diagnosed 

with HIV and started to take an RXC 1 

drug for treatment would receive a 

much smaller increase to their risk score 

(approximately 1.962 per the silver 

coefficients for the adult models as 

reflected in Tables 2 and 4 of the 

proposed rule) 84 because the enrollee’s 

risk score would only reflect the 

difference in cost associated with 

treatment relative to prevention. 

Pending further research and 

consideration on the impact of adding 

RXCs (such as RXC 1) to the child 

models, to better align the 

representation of risk between the adult 

and child models and more 

appropriately reflect the cost of 

enrollees who receive both PrEP and 

HIV treatment in the same benefit year 

in the child models, we believe that an 

appropriate approach would be to place 

the PrEP ACF below HCC 1 in a 

hierarchy in the child models. This 

would allow the risk score of an 

enrollee subject to the child models who 

was on PrEP for part of a benefit year 

but was later diagnosed with HIV to 

reflect only the difference in cost 

associated with treatment relative to 

prevention (approximately 2.719 per the 

silver coefficients for the child models 

as reflected in Tables 3 and 5 of the 

proposed rule) 85 rather than the whole 

cost of both treatment and prevention. 

We are finalizing as proposed the 

addition of a new PrEP ACF to the child 

models and, in response to comments, 

we will place the PrEP ACF in a 

hierarchy below HCC 1 in the child 

models to ensure that child enrollees 

who have both a PrEP prescription 

claim and an HCC 1 (HIV/AIDS) 

diagnosis reflected in their medical 

records for a benefit year (and are 

therefore likely receiving active 

treatment) will receive an appropriate 

increase to their risk score relative to 

enrollees in the child models without an 


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86See 45 CFR 153.320(b)(1)(i). 

87For example, the final 2018 benefit year HHS 

risk adjustment model coefficients were not 

published in the 2018 Payment Notice final rule (81 

FR 94058, 81 FR 94084) but were instead published 

on the CMS website and are available at https://

www.cms.gov/cciio/programs-and-initiatives/ 

premium-stabilization-programs/downloads/2018- 

benefit-year-final-hhs-risk-adjustment-modelcoefficients.pdf. See also, for example, the final 

2021 benefit year HHS risk adjustment model 

coefficients, which were not published in the 2023 

Payment Notice final rule (85 FR 29164, 29190) but 

were instead published on the CMS website and are 

available at https://www.cms.gov/cciio/resources/ 

regulations-and-guidance/downloads/final-2021- 

benefit-year-final-hhs-risk-adjustment-modelcoefficients.pdf. 

See also, for example, the final 2023 benefit year 

HHS risk adjustment model coefficients, which 

were not published in the 2023 Payment Notice 

final rule (87 FR 27208, 27235) but were instead 

published on the CMS website and are available at 

https://www.cms.gov/files/document/2023-benefityear-final-hhs-risk-adjustment-modelcoefficients.pdf. 

88See 89 FR 26218, 26248–49. 

HCC 1 diagnosis who have a PrEP 

prescription claim in their medical 

records for that year. 

We will consider if any additional 

changes to the child models are 

necessary as we continue to monitor the 

impact of the new PrEP ACF and 

consider potential refinements to the 

ACF framework in future benefit years. 

As always, as part of our ongoing efforts 

to continually improve the precision of 

the HHS risk adjustment models, we 

will seek input from interested parties 

through notice-and-comment 

rulemaking or other appropriate 

vehicles on potential changes to the 

models in future benefit years. 

Comment: Several commenters 

offered ideas for additional ACFs to be 

added to the HHS risk adjustment 

models in the future. These included 

ACFs for biologic drugs, GLP–1 drugs, 

and cellular and gene therapies. Other 

commenters’ suggestions requested the 

use of the ACF framework to restructure 

how childbirth, organ transplants, end 

stage renal disease (ESRD), dialysis, 

respirator dependance, amputations, 

autism spectrum disorder, moderate 

forms of psychiatric illness, and 

prophylactic interventions such as 

prophylactic mastectomy are accounted 

for in the HHS-operated risk adjustment 

program. 

A few commenters requested changes 

to the risk adjustment specifications for 

one or more of these conditions without 

specifying that the ACF framework was 

the proper vehicle for addressing their 

concerns. 

Response: We did not propose and 

therefore are not finalizing the adoption 

of additional ACFs at this time. 

However, we are finalizing the adoption 

of the ACF framework and the proposed 

principles to guide any potential 

development of additional ACFs to the 

HHS risk adjustment models in the 

future. We appreciate the suggestions 

regarding other conditions or diagnoses 

for which it may be appropriate to 

leverage the ACF framework to 

restructure or refine the treatment of the 

other identified clinically meaningful 

enrollee characteristics in the HHS risk 

adjustment models. As we consider 

potential refinements to the ACF 

structure and other changes to the HHS 

risk adjustment models in the future, we 

may further consider these suggestions 

and the structure of related HCCs. As 

always, as part of our ongoing efforts to 

continually improve the precision of the 

HHS risk adjustment models, if we were 

to make changes to the ACF structure or 

other changes to the HHS risk 

adjustment models in the future, we 

will seek input from interested parties 

through notice-and-comment 

rulemaking or other appropriate 

vehicles on such potential changes. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments above, we are 

finalizing the addition of PrEP as an 

ACF in the adult and child risk 

adjustment models beginning with the 

2026 benefit year. Furthermore, we are 

finalizing the exclusion of generic 

versions of PrEP from the PrEP ACF and 

are finalizing the placement of the PrEP 

ACF in the adult models in a hierarchy 

below RXC 1 (Anti-HIV Agents) without 

defining any hierarchical relationship 

between the PrEP ACF and HCC 1 (HIV/ 

AIDS). In the child models, which do 

not contain RXCs, we are finalizing the 

placement of the PrEP ACF in a 

hierarchy below HCC 1. Additionally, 

we are finalizing the proposed ACF 

framework and principles used to 

determine whether it is appropriate to 

add a new ACF to the HHS risk 

adjustment models, and how the 

hierarchy structure associated with an 

ACF should be defined. 

We were unable to complete the 

calculations for the final coefficients in 

time to publish them in this final rule 

because additional time is needed to 

complete the calculations needed to 

account for the incorporation of the 

PrEP ACF with the generic drug 

exclusions and hierarchy specifications 

finalized in this rule. Therefore, 

consistent with § 153.320(b)(1)(i), we 

will publish the final coefficients for the 

2026 benefit year in guidance after the 

publication of this final rule. We will 

release this guidance by the spring of 

2025 in time for rate setting for the 2026 

benefit year. 

d. List of Factors To Be Employed in the 

HHS Risk Adjustment Models 

(§ 153.320) 

Consistent with § 153.320(b)(1)(i), we 

are finalizing the use of the 2020, 2021 

and 2022 enrollee-level EDGE data to 

calculate the 2026 benefit year 

coefficients and will publish the final 

coefficients for the 2026 benefit year in 

guidance after the publication of this 

final rule, as we were unable to 

complete the calculations to finalize 

them in time to publish them in this 

final rule,86 due to the additional 

calculations needed to account for the 

incorporation of the PrEP ACF with the 

generic drug exclusions and hierarchy 

specifications as finalized in this rule. 

The proposed 2026 benefit year HHS 

risk adjustment model factors resulting 

from the equally weighted (averaged) 

blended factors from separately solved 

models using 2020, 2021, and 2022 

enrollee-level data are shown in Tables 

2 through 9 of the HHS Notice of Benefit 

and Payment Parameters for 2026 

proposed rule (89 FR 82308, 82328 

through 46). As we have done for 

certain prior benefit years,87 we will 

release the final 2026 benefit year 

coefficients in guidance after 

publication of this final rule by the 

spring of 2025 in time for rate setting for 

the 2026 benefit year. We received 

several comments requesting additional 

changes to the HHS risk adjustment 

models that we did not consider or 

propose in the proposed rule. We 

respond to these comments below. 

Comment: One commenter suggested 

that HHS update the risk adjustment 

models to incorporate Tepezza and 

Graves Disease/Hyperthyroidism. 

Response: We did not propose and are 

not finalizing changes to add an RXC to 

the HHS risk adjustment adult models 

for Tepezza, which treats thyroid eye 

disease, or to add a payment HCC for 

Graves Disease/Hyperthyroidism. We 

recently discussed the approach to the 

treatment of Tepezza and Graves 

Disease/Hyperthyroidism in the HHS 

risk adjustment models in the 2025 

Payment Notice final rule,88 explaining 

that thyroid eye disease (thyrotoxicosis) 

is currently categorized in a condition 

category (Other Endocrine/Metabolic/ 

Nutritional Disorders) that is not a 

payment HCC in the HHS risk 

adjustment models. Further, all RXCs in 

the HHS adult risk adjustment models 

are associated with a payment HCC. We 

therefore generally have concerns about 

adding thyroid eye disease to the HHS 

risk adjustment models at this time as 

it is currently not categorized as a 

payment HCC and we would need to 

perform further analysis to consider 

whether it is appropriate and how best 


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89See https://www.cms.gov/files/document/2021- 

ra-technical-paper.pdf. 

90 87 FR 27208, 27221–30. 

91 Ibid. 92 Ibid. See also Figure 4.2. HHS-Operated Risk 

Adjustment Technical Paper on Possible Model 

Changes. (2021, October 26). CMS. https://

www.cms.gov/files/document/2021-ra-technicalpaper.pdf. 

93For example, see the 2024 Benefit Year Risk 

Adjustment Updated HHS-Developed Risk 

Adjustment Model Algorithm ‘‘Do It Yourself 

(DIY)’’ Software Instructions, available at: https://

www.cms.gov/files/document/cy2024-diyinstructions-09062024.pdf. 

to incorporate this condition into the 

models given these concerns. For these 

reasons, HHS did not propose and is not 

finalizing any changes with respect to 

the treatment of Tepezza for thyroid eye 

disease in the 2026 benefit year risk 

adjustment models. However, HHS 

intends to continue analysis of Graves 

Disease/Hyperthyroidism and 

thyrotoxicosis and the use of Tepezza as 

more data becomes available and 

consider potential changes to the 

treatment of this condition and drug in 

the HHS risk adjustment models for 

future benefit years. 

Comment: A few commenters 

identified certain conditions that they 

believe are undercompensated in the 

risk adjustment models. These 

conditions included autism spectrum 

disorder, ESRD, and maternal and 

newborn care. These commenters 

requested that HHS reconsider how 

these conditions and their associated 

costs are accounted for in the HHS risk 

adjustment models. Additionally, one 

commenter requested that HHS revisit 

the analysis in the 2021 RA Technical 

Paper,89 expressing concern that the risk 

associated with the lowest-risk enrollees 

remains underpredicted by the HHS risk 

adjustment models. One commenter 

recommended that HHS study the 

impact of calibrating the HHS risk 

adjustment models separately for the 

individual and small group markets due 

to differences in the characteristics of 

the enrollee population between the two 

markets. Furthermore, one commenter 

recommended that HHS consider ways 

to account for plan design generosity as 

more generous plans tend to attract 

enrollees with expensive chronic 

conditions. 

Response: We appreciate the 

suggestions regarding conditions that 

commenters identified for review of 

how they are accounted for in the HHS 

risk adjustment models. Although we 

did not propose and are not finalizing 

changes to the treatment of the 

identified conditions in the 2026 benefit 

year risk adjustment models, we 

generally note that we consistently 

monitor the performance of the risk 

adjustment models, including through 

out-of-sample analysis of predictive 

ratios associated with each model factor, 

as additional years of enrollee-level 

EDGE data become available. Results of 

these monitoring activities were a key 

impetus for several risk adjustment 

model changes finalized in the 2023 

Payment Notice 90 to address the adult 

and child models’ underprediction for 

enrollees with many HCCs. Specifically, 

we finalized the interacted HCC counts 

and HCC-contingent enrollment 

duration factor model specifications to 

improve model prediction for higher 

risk enrollees and ensure that issuers are 

being accurately compensated for these 

enrollees. As such, the potential for 

underprediction or overprediction in 

the HHS risk adjustment models is an 

area that HHS is consistently monitoring 

and addressing as needed and will 

continue to monitor and address in the 

future as part of our ongoing efforts to 

continually improve the HHS risk 

adjustment models. We also note that 

the conditions or diagnoses identified in 

these comments show strong overlap 

with the conditions that some 

commenters identified as being 

appropriate to be addressed by the ACF 

framework and that, as stated in our 

response to comments about those 

conditions in that section of this final 

rule, we will take these comments into 

consideration as we consider potential 

refinements to the HHS risk adjustment 

models in future benefit years. 

In regard to the request to revisit the 

analysis in the 2021 RA Technical 

Paper, we appreciate the commenter’s 

concern. As noted in the 2023 Payment 

Notice,91 our analysis of the addition of 

the interacted HCC counts factors in the 

adult and child models, the removal of 

the former adult model severity illness 

factors, and the replacement of the 

former enrollment duration factors with 

the HCC-contingent enrollment duration 

factors in the adult models found that 

the combined impact of these changes 

would significantly improve predictions 

across most deciles and HCC counts for 

the very highest-risk enrollees, as well 

as the lowest-risk enrollees without 

HCCs.92 These model specification 

updates were implemented starting with 

the 2023 benefit year HHS risk 

adjustment models and we intend to 

monitor the impact of these updates as 

part of future benefit years’ model 

recalibrations using additional years of 

available enrollee-level EDGE data. 

As we consider potential refinements 

to the HHS risk adjustment models in 

the future, we will also continue to 

monitor the specific conditions 

identified by commenters, along with 

the structure of related model factors, 

and the impact of recent model 

specification updates on the ability of 

the models to predict risk across all 

subgroups of enrollees and enrollees 

with chronic conditions who are more 

likely to enroll in plans with more 

generous coverage. We also will 

continue to study whether differences in 

the characteristics of the enrollee 

population between the individual and 

small groups markets would warrant 

calibrating the HHS risk adjustment 

models separately for the individual and 

small group markets. As always, as part 

of our ongoing efforts to continually 

improve the precision of the HHS risk 

adjustment models, if we were to pursue 

changes to the risk adjustment models 

in the future, we will seek input from 

interested parties through notice-andcomment rulemaking or other 

appropriate vehicles. 

Comment: Several commenters 

requested clarification regarding how 

medically administered injectable drugs 

are accounted for in the HHS risk 

adjustment models. These commenters 

were concerned that these drugs appear 

to be filtered out of enrollee claims data 

for the purpose of calculating risk 

scores. 

Response: We appreciate commenters 

bringing this concern to our attention. 

Although not expressly stated by 

commenters, we believe these concerns 

stem from the commenters’ 

interpretation of language in guidance 

document(s) such as the Risk 

Adjustment DIY Software 

Instructions.93 To clarify, for RXC 

eligibility (including medically 

administered injectable claims), a 

professional or outpatient medical claim 

does not need to have a risk adjustment 

eligible service code or bill type code. 

Instead, the professional or outpatient 

claim simply needs to have a service 

code that maps to an RXC for selection 

and inclusion in enrollee claims data for 

purposes of calculating risk scores. We 

intend to update language in these 

guidance document(s) in future releases 

to clarify this point. 

e. Cost-Sharing Reduction Adjustments 

In the 2025 Payment Notice (89 FR 

26252 through 26254), we finalized the 

updated CSR adjustment factors for 

American Indian/Alaska Native (AI/AN) 

zero-cost sharing and limited cost 

sharing CSR plan variant enrollees for 

the 2025 benefit year, and for all future 

benefit years, unless changed through 

notice-and-comment rulemaking. In the 

2025 Payment Notice (89 FR 26252 

through 26254), we also finalized 

maintaining the existing CSR 


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94See 83 FR 16930, 16953; 84 FR 17454, 17478– 

79; 85 FR 29164, 29190; 86 FR 24140, 24181; 87 FR 

27208, 27235–36; 88 FR 25740, 25772–74; and 89 

FR 26218, 26252–54. 

95See CSR adjustment factors finalized in the 

2025 Payment Notice at 89 FR 26252 through 

26254. 

96Hileman, G., & Steele, S. (2016). Accuracy of 

Claims-Based Risk Scoring Models. Society of 

Actuaries. https://www.soa.org/4937b5/ 

globalassets/assets/files/research/research-2016- 

accuracy-claims-based-risk-scoring-models.pdf. 

97See 81 FR 94058, 94081. See also 84 FR 17454, 

17467. 

adjustment factors for silver plan variant 

enrollees (70 percent, 73 percent, 87 

percent, and 94 percent AV plan 

variants) 94 for the 2025 benefit year and 

beyond, unless changed through noticeand-comment rulemaking. 

For the 2026 benefit year, we did not 

propose to change the CSR adjustment 

factors as finalized in the 2025 Payment 

Notice and we will maintain the 

existing CSR adjustment factors for the 

2026 benefit year.95 We summarize and 

respond to the public comments 

received on the CSR adjustment factors 

for the 2026 benefit year below. 

Comment: We received a few 

comments asking that HHS revisit the 

CSR factors for Massachusetts 

wraparound plans, specifically for 

wrap-around plans with AVs above 94 

percent. These commenters stated that 

the wrap-around plans with AVs above 

94 percent warrant higher CSR factors 

than the current 1.12 values. One of 

these commenters compared the current 

CSR factor used for Massachusetts wraparound plans with AVs above 94 

percent to those used in Arkansas for 

plans the commenter identified as 

having similar AVs. 

Response: For all plan liability risk 

score calculations under the State 

payment transfer formula, we use the 

CSR adjustment factor that aligns with 

the AV of the applicable plan for the 

enrollee. Thus, for unique State-specific 

plans, we apply the CSR adjustment 

factors that correspond to each plan’s 

AV. As we identify unique Statespecific plans that have higher plan 

liability than the standard plan variants, 

such as those in Massachusetts and 

Arkansas, we work with the relevant 

State Departments of Insurance and 

other relevant State agencies to identify 

the applicable CSR adjustment factor 

that corresponds to the unique Statespecific plan’s AV. 

Regarding the comparison between 

Massachusetts’ wrap-around plans and 

Arkansas’ Medicaid expansion plans, 

Arkansas Medicaid expansion plans are 

identical to other 94 percent and 100 

percent AV CSR plan variants offered on 

the Exchange and are distinguished 

from these identical plans only in their 

sources of funding and eligibility 

criteria. As such, we presently direct 

issuers in Arkansas who provide 

Medicaid expansion plans with AVs of 

94 percent and 100 percent to use 

specified plan variant codes for their 

Medicaid expansion plans only to 

differentiate the sources of funding and 

to differentiate between populations 

eligible for the Medicaid expansion 

plans from those who are eligible for 

standard 94 percent and 100 percent AV 

CSR plan variants. In contrast, in 

Massachusetts, the higher cost sharing 

wrap-around plans are variations of 

lower cost sharing plans and do not 

have the same AVs as their comparable 

plans. 

We will continue to follow this 

approach, working with the State to 

identify the applicable CSR adjustment 

factor that corresponds to that State’s 

unique State-specific plan’s AV. As of 

the release of this final rule, the 

Massachusetts Division of Insurance, 

which is the regulating body for the 

State, has not identified changes to the 

AVs of the State’s wrap-around plans. 

As such, we are maintaining our general 

approach to determining the CSR factors 

for State-specific plans, including 

Massachusetts wrap-around plans, for 

the 2026 benefit year. 

f. Model Performance Statistics 

Each benefit year, to evaluate the HHS 

risk adjustment model performance, we 

examine each model’s R-squared 

statistic and predictive ratios (PRs). The 

R-squared statistic, which calculates the 

percentage of individual variation noted 

by a model, measures the predictive 

accuracy of the model overall. The PR 

for each of the HHS risk adjustment 

models is the ratio of the weighted mean 

predicted plan liability for the model 

sample population to the weighted 

mean actual plan liability for the model 

sample population. The PR represents 

how well the model does on average at 

predicting plan liability for that 

subpopulation. 

A subpopulation that is predicted 

perfectly would have a PR of 1.0. For 

each of the current and proposed HHS 

risk adjustment models, the R-squared 

statistic and the PRs are in the range of 

published estimates for concurrent HHS 

risk adjustment models.96 Because we 

are finalizing a blend the coefficients 

from separately solved models based on 

the 2020, 2021 and 2022 benefit years’ 

enrollee-level EDGE data, we publish 

the R-squared statistic for each model 

separately to verify their statistical 

validity. We will include the R-squared 

statistics for the final 2026 benefit year 

models when we publish the final 

coefficients for the 2026 benefit year in 

guidance after publication of this final 

rule. We will release this guidance by 

the spring of 2025, in time for rate 

setting for the 2026 benefit year. 

We received one comment noting the 

decreases in the risk adjustment model 

R-squared values for the 2022 enrolleelevel EDGE data relative to prior benefit 

years as presented in Table 10 of the 

proposed rule and provide a response to 

that comment in the section on Data for 

HHS Risk Adjustment Model 

Recalibration for the 2026 Benefit Year 

above. 

3. Overview of the HHS Risk 

Adjustment Methodology: State 

Payment Transfer Formula 

In part 2 of the 2022 Payment Notice 

(86 FR 24183 through 24186), we 

finalized the proposal to continue to use 

the State payment transfer formula 

finalized in the 2021 Payment Notice for 

the 2022 benefit year and beyond, 

unless changed through notice-andcomment rulemaking. We did not 

propose any changes to the formula in 

the proposed rule, and therefore, did not 

republish the formulas in the proposed 

rule. We therefore will continue to 

apply the formula as finalized in the 

2021 Payment Notice (86 FR 24183 

through 24186) in the States where HHS 

operates the risk adjustment program in 

the 2026 benefit year. 

Additionally, as finalized in the 2020 

Payment Notice (84 FR 17466 through 

17468), we will maintain the high-cost 

risk pool parameters for the 2020 benefit 

year and beyond, unless amended 

through notice-and-comment 

rulemaking. We did not propose any 

changes to the high-cost risk pool 

parameters for the 2026 benefit year; 

therefore, we will maintain the $1 

million threshold and 60 percent 

coinsurance rate.97

We did not receive any comments in 

response to the overview of the HHS 

risk adjustment methodology applicable 

to the 2026 benefit year. 

4. Solicitation of Comments—Time 

Value of Money in HHS-Operated Risk 

Adjustment Program 

In the HHS Notice of Benefit and 

Payment Parameters 2026 proposed rule 

(89 FR 82347, 82348), HHS solicited 

comments on the impact of the time 

value of money on the HHS-operated 

risk adjustment program, including the 

impact of the time value of money on 

issuers’ assessment of actuarial risk and 

the incentives for adverse selection, and 

what possible solutions or mitigating 

steps we should consider to address the 

impact of the time value of money on 


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98HHS did not receive any requests from States 

to operate risk adjustment for the 2026 benefit year. 

Therefore, HHS will operate risk adjustment in 

every State and the District of Columbia for the 

2026 benefit year. 

99See Marketplace 2025 Open Enrollment Period 

Report National Snapshot, as of December 4, 2024: 

https://www.cms.gov/newsroom/fact-sheets/ 

marketplace-2025-open-enrollment-period-reportnational-snapshot-0. 

100See CBO June 2024 projections of health 

insurance coverage via https://www.cbo.gov/ 

system/files/2024-06/51298-2024-06- 

healthinsurance.pdf. 

101Since the 2017 benefit year, HHS has operated 

the risk adjustment program in all 50 States and the 

District of Columbia. 

the HHS-operated risk adjustment 

program in future rulemaking. HHS 

noted in the proposed rule that it 

received feedback in the past from some 

interested parties that issuers of risk 

adjustment covered plans were more 

impacted by the time value of money for 

benefit year 2023 than in any previous 

benefit years. Therefore, HHS solicited 

comment on the impact of the 8-to-10- 

month gap between the end of the 

benefit year when claims are incurred 

and the issuance of risk adjustment 

charges and allocation of payments for 

that benefit year. We thank commenters 

for their feedback and will take these 

comments into consideration in future 

rulemaking as applicable. 

5. HHS Risk Adjustment User Fee for 

the 2026 Benefit Year (§ 153.610(f)) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82348), we proposed 

an HHS risk adjustment user fee for the 

2026 benefit year of $0.18 PMPM. 

Section 153.610(f)(2) provides that, 

where HHS operates a risk adjustment 

program on behalf of a State, an issuer 

of a risk adjustment covered plan must 

remit a user fee to HHS equal to the 

product of its monthly billable member 

enrollment in the plan and the PMPM 

risk adjustment user fee specified in the 

annual HHS notice of benefit and 

payment parameters for the applicable 

benefit year. 

For the 2026 benefit year, HHS 

proposed to use the same methodology 

used in the 2025 Payment Notice (89 FR 

26218) to estimate our administrative 

expenses to operate the program. These 

costs cover development of the models 

and methodology, collections, 

payments, account management, data 

collection, data validation, program 

integrity and audit functions, 

operational and fraud analytics, 

interested parties training, operational 

support, and administrative and 

personnel costs dedicated to HHSoperated risk adjustment program 

activities. To calculate the risk 

adjustment user fee, we divided HHS’ 

projected total costs for administering 

the program on behalf of States by the 

expected number of BMMs in risk 

adjustment covered plans in States 

where the HHS-operated risk 

adjustment program will apply in the 

2026 benefit year.98

We estimated that the total costs for 

HHS to operate the risk adjustment 

program on behalf of States within the 

2026 calendar year will be 

approximately $65 million, roughly the 

same as the amount estimated for the 

2025 calendar year. Based on these costs 

and because we did not estimate 

increased enrollment in the 2026 benefit 

year beyond the 2024 benefit year level, 

we proposed an HHS risk adjustment 

user fee of $0.18 PMPM for the 2026 

benefit year. We sought comment on the 

proposed HHS risk adjustment user fee 

for the 2026 benefit year. 

After consideration of comments and 

updating our projections based on the 

most recent available data, which 

impacted our enrollment estimates, we 

are finalizing a risk adjustment user fee 

rate of $0.20 PMPM for the 2026 benefit 

year. We summarize and respond to 

public comments received on the 

proposed 2026 benefit year risk 

adjustment user fee rate below. 

Comment: Several commenters 

supported the proposed 2026 benefit 

year risk adjustment user fee rate but 

noted that the user fee rate may require 

modification if enhanced premium tax 

credit (PTC) subsidies are not extended 

into the 2026 benefit year. A few 

commenters requested more information 

on the assumptions we made if 

enhanced PTC subsidies expire or are 

extended. 

Response: We are finalizing an HHS 

risk adjustment user fee rate for the 

2026 benefit year of $0.20 PMPM. We 

proposed a risk adjustment user fee rate 

of $0.18 PMPM for the 2026 benefit year 

based on our estimates at the time in the 

proposed rule (89 FR 82348), and we 

explained that we may modify the risk 

adjustment user fee rate in the final rule 

if there were events resulting in larger 

than expected enrollment growth or 

some other deviation from our 

expectations of current conditions that 

would significantly change our 

estimates around costs, enrollment 

projections or the finalization of the 

proposed risk adjustment policies 

between the proposed and final rule. 

The final 2026 benefit year risk 

adjustment user fee rate adopted in this 

final rule assumes that, consistent with 

current law, the enhanced PTC 

subsidies will expire at the end of 2025. 

Though we project a similar budget to 

operate the HHS-operated risk 

adjustment program, the final user fee 

rate reflects updates to enrollment 

projections in individual, small group, 

and merged market risk pools based on 

the latest data available that was not 

available at the time of the proposed 

rule, such as PY 2025 open enrollment 

data 99 and estimated health insurance 

coverage changes 100 due to the 

expiration of enhanced PTC subsidies. 

We explained the assumptions used 

when determining the risk adjustment 

user fee in the 2026 Payment Notice 

proposed rule (89 FR 82349). 

As we noted in the proposed rule (89 

FR 82348), similar to prior benefit years, 

we projected risk adjustment enrollment 

scenarios for the 2026 benefit year, 

considered the impact of the expiration 

of the enhanced PTC subsidies 

established in section 9661 of the ARP 

and extended in section 12001 of the 

IRA through the 2025 benefit year on 

enrollment in the individual, small 

group, and merged market risk pools for 

the 2026 benefit year of risk adjustment, 

and used those estimates to calculate 

the proposed 2026 benefit year HHS risk 

adjustment user fee rate. While our 

updated projections show a decrease in 

enrollment in risk adjustment covered 

plans in States where the HHS-operated 

risk adjustment program will apply in 

the 2026 benefit year, we continue to 

estimate that the total costs for HHS to 

operate the risk adjustment program on 

behalf of States within the 2026 benefit 

year will be approximately $65 million. 

Therefore, we are finalizing a risk 

adjustment user fee rate for benefit year 

2026 of $0.20 PMPM to ensure adequate 

funding for the HHS-operated risk 

adjustment program. 

6. Risk Adjustment Data Validation 

Requirements When HHS Operates Risk 

Adjustment (HHS–RADV) (§§ 153.350 

and 153.630) 

HHS conducts risk adjustment data 

validation under §§ 153.350 and 153.630 

in any State where HHS is responsible 

for operating the risk adjustment 

program.101 The purpose of risk 

adjustment data validation is to ensure 

issuers are providing accurate highquality information to HHS, which is 

crucial for the proper functioning of the 

HHS-operated risk adjustment program. 

HHS–RADV also ensures that risk 

adjustment transfers calculated under 

the State payment transfer formula 

reflect verifiable actuarial risk 

differences among issuers, rather than 

risk score calculations that are based on 

poor quality data, thereby helping to 

ensure that the HHS-operated risk 

adjustment program assesses charges to 


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102As explained in the proposed rule, adult 

enrollees with only RXCs do not have any HCCs, 

and therefore would be excluded from IVA 

sampling under this policy. See 89 FR 82308 at 

82351. 

103Neyman allocation is a method to allocate 

samples to strata based on the strata variances. A 

Neyman allocation scheme provides the most 

precision for estimating a population mean given a 

fixed total sample size. See http://

methods.sagepub.com/reference/encyclopedia-ofsurvey-research-methods/n324.xml. 

104Activities related to the 2025 benefit year of 

HHS–RADV will generally begin in Spring 2026, 

when issuers can start selecting their IVA entity, 

and IVA entities can start electing to participate in 

HHS–RADV for the 2025 benefit year. Changes to 

the IVA sampling methodology need to be finalized 

before HHS–RADV activities begin; therefore, we 

proposed these IVA sampling changes begin with 

2025 benefit year HHS–RADV due to the timing of 

this rulemaking. For the most recently published 

annual HHS–RADV timeline, see the 2023 Benefit 

Year HHS–RADV Activities Timeline. https://

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

Timeline_5CR_072424.pdf. We note that there were 

delays in the 2023 Benefit Year HHS–RADV 

Activities Timeline in recognition of issuers facing 

challenges related to EDGE server operations after 

the Change Healthcare Cybersecurity Incident. 

105See 88 FR 25790 through 88 FR 25798. 106 In the initial years of HHS–RADV, we 

constrained the ‘‘10th stratum’’ of the IVA sample— 

that is, enrollees without HCCs selected for the IVA 

sample—to be one-third of the sampled IVA 

enrollees. In the 2020 Payment Notice, we finalized 

the extension of the Neyman allocation sampling 

methodology to the 10th stratum to improve sample 

precision and permit for a larger portion of the 

sample to be allocated to the HCC strata. See 84 FR 

17494 through 17495. 

issuers with plans with lower-thanaverage actuarial risk while making 

payments to issuers with plans with 

higher-than-average actuarial risk. HHS– 

RADV consists of an initial validation 

audit (IVA) and a second validation 

audit (SVA). 

a. Initial Validation Audit (IVA) 

Sampling Methodology—Enrollees 

Without HCCs, Finite Population 

Correction, and Neyman Allocation 

(§ 153.630(b)) 

To better align the IVA sampling 

methodology with the HHS–RADV error 

estimation methodology that estimates 

HCC error rates and to improve overall 

sampling precision, in the HHS Notice 

of Benefit and Payment Parameters for 

2026 proposed rule (89 FR 82308, 

82349), we proposed to exclude 

enrollees without HCCs 102 from IVA 

sampling, to remove the FPC, and to 

replace the source of the Neyman 

allocation 103 data used for IVA 

sampling purposes with 3 years of 

available HHS–RADV data beginning 

with benefit year 2025 HHS–RADV.104

For a discussion of the background of 

the HHS–RADV IVA sampling 

methodology and the proposed changes 

to the IVA sampling methodology, see 

the proposed rule (89 FR 82308, 82349). 

We summarize and respond to public 

comments on each of these three IVA 

sampling methodology changes below. 

1. Proposal To Exclude Enrollees 

Without HCCs From IVA Sampling 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82351), we proposed 

to modify IVA sampling to exclude 

stratum 10 enrollees, which would 

exclude enrollees that do not have HCCs 

nor RXCs, and adult enrollees in strata 

1 through 3 that have RXCs only, from 

IVA sampling beginning with benefit 

year 2025 HHS–RADV. For a full 

discussion of the proposed changes to 

exclude enrollees without HCCs from 

the HHS–RADV IVA sampling 

methodology, see the proposed rule (89 

FR 82308, 82351). We sought comment 

on this proposal to exclude enrollees 

without HCCs from IVA sampling. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy as proposed. We 

summarize and respond to public 

comments received on the proposal to 

exclude enrollees without HCCs from 

IVA sampling beginning with benefit 

year 2025 HHS–RADV below. 

Comment: Many commenters 

supported the proposal to exclude 

enrollees without HCCs from IVA 

sampling with several of these 

commenters suggesting that the 

proposal would enhance the accuracy of 

HHS–RADV. A few commenters agreed 

that excluding enrollees without HCCs 

would ensure that the IVA sample 

reflects enrollees who most directly 

impact risk scores and HHS–RADV error 

rates, and one commenter suggested that 

including only enrollees with HCCs in 

the IVA sample would streamline the 

IVA validation and medical record 

retrieval processes, making the IVA less 

resource intensive. 

Other commenters agreed that 

excluding enrollees without HCCs 

would better align the IVA sampling 

methodology with the HHS–RADV error 

estimation methodology and the 

policies finalized in the 2024 Payment 

Notice to discontinue the use of the 

lifelong permanent condition (LLPC) list 

and non-EDGE claims in HHS–RADV. 

One commenter noted concern that 

stratum 10 enrollees were included 

under the current IVA sampling 

methodology and suggested that these 

enrollees have no variance of error and 

therefore cannot have Neyman 

allocation-calculated sample sizes. 

Response: We are finalizing the 

exclusion of enrollees without HCCs 

from IVA sampling, which excludes 

stratum 10 enrollees that do not have 

HCCs nor RXCs and adult enrollees in 

strata 1 through 3 that have RXCs only, 

beginning with benefit year 2025 HHS– 

RADV as proposed. We agree with 

commenters that finalizing this change, 

in combination with the other IVA and 

SVA methodological changes finalized 

in this rule, will improve the accuracy 

of HHS–RADV results. Moreover, 

finalizing the exclusion of enrollees 

without HCCs will better align our IVA 

sampling methodology with the error 

estimation methodology established in 

the 2019 Payment Notice, which 

calculates HCC-associated error rates 

and applies these error rates to the HCCrelated portion of issuers’ plan liability 

risk scores. Finalizing this policy will 

also better align our IVA sampling 

methodology with the HHS–RADV 

policies finalized in the 2024 Payment 

Notice to discontinue the LLPC list and 

no longer allow non-EDGE claims 

beginning with the 2022 benefit year of 

HHS–RADV, which emphasize HHS– 

RADV’s focus on validating enrollee 

HCCs on EDGE.105 We also agree with 

commenters that excluding enrollees 

without HCCs will ensure that issuers, 

IVA Entities, and the SVA Entity (as 

applicable) focus audit resources on 

enrollees who have a more direct impact 

on Super HCC failure rates, issuers’ 

group failure rates, and issuers’ error 

rates in HHS–RADV. 

We disagree with commenters’ 

concerns about stratum 10 enrollees 

being included under the current IVA 

sampling methodology as stratum 10 

enrollees have stratum sample sizes 

calculated with the Neyman allocation 

in the current HHS–RADV IVA 

sampling methodology.106 The current 

methodology assumes that the variance 

of net risk score error for stratum 10 

used in the Neyman allocation is equal 

to the variance of net risk score error for 

the low-risk strata, which is a non-zero 

variance. Moreover, if we were to 

remove this assumption, it would still 

be possible to calculate a non-zero 

variance of net risk score errors for these 

stratum 10 enrollees because net risk 

score error is measured as the difference 

between the enrollee’s calculated risk 

score using the HCCs validated during 

audit and the enrollee’s calculated risk 

score using HCCs on EDGE. Therefore, 

the proposed change to exclude 

enrollees in stratum 10 was not driven 

by being unable to calculate stratum 

10’s variance of net risk score error or 

sample size. Rather, the change was 

driven by the desire to continue to make 

incremental improvements to the HHSoperated risk adjustment program, 

including HHS–RADV, and make IVA 

sampling more targeted and efficient. As 

previously noted, this change also better 


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107See 88 FR 25790 through 88 FR 25798. 

108See, for example, Section 2.3 of the Potential 

Updates to HHS–HCCs for the HHS-operated Risk 

Adjustment Program White Paper (June 17, 2019) 

available at: https://www.cms.gov/CCIIO/Resources/ 

Regulations-and-Guidance/Downloads/PotentialUpdates-to-HHS-HCCs-HHS-operated-RiskAdjustment-Program.pdf. Note that ‘‘HCC Group 

constraints’’ is synonymous with ‘‘HCC coefficient 

estimation groups.’’ 

109The 2020 HHS–RADV Amendments Rule 

finalized a policy to ensure that HCCs that share a 

coefficient estimation group used in the risk 

adjustment models are sorted into the same failure 

rate groups by first aggregating any HCCs that share 

a coefficient estimation group into Super HCCs 

before applying the HHS–RADV failure rate group 

sorting algorithm beginning with benefit year 2019 

HHS–RADV. See 85 FR 76984 through 76989. The 

2023 Payment Notice finalized to extend the 

application of Super HCCs to also apply to 

coefficient estimation groups throughout the HHS– 

RADV error rate calculation beginning with benefit 

year 2021 HHS–RADV. See 2023 Payment Notice, 

87 FR 27208, 27253 through 27256. 

aligns the IVA sampling methodology 

with the error estimation methodology 

and the policies finalized in the 2024 

Payment Notice to discontinue the use 

of the LLPC list and no longer allow 

non-EDGE claims in HHS–RADV.107

Comment: Some commenters that 

supported the proposal to exclude 

enrollees without HCCs from the IVA 

sampling methodology suggested that 

HHS should not include enrollees 

without HCCs in IVA sampling because 

audits should investigate whether 

issuers are overstating sickness in their 

population and enrollees without HCCs 

do not have sickness reflected in their 

risk adjustment risk scores. Another 

commenter suggested that including 

enrollees without HCCs in the IVA 

sample advantages lower-risk issuers 

that have more enrollees without HCCs 

and will face less administrative burden 

in the medical record retrieval and 

review process. This commenter 

expressed concerns that these lower-risk 

issuers get more opportunities for HCCs 

to be found while also getting fewer 

opportunities to fail to validate HCCs 

under the current methodology, which 

could limit HHS–RADV’s ability to 

identify lower-risk issuers that are 

engaging in upcoding and therefore 

undermine the accuracy of HHS–RADV 

adjustments to risk adjustment State 

transfers. Another commenter similarly 

suggested that the proposal to exclude 

enrollees without HCCs from IVA 

sampling would help prevent upcoding. 

Response: The purpose of HHS– 

RADV is to ensure that issuers are 

submitting accurate, high-quality 

information to their EDGE servers to be 

used in the risk adjustment State 

transfer calculations. We recognize that 

lower-risk issuers may face less 

administrative burden than higher-risk 

issuers when performing HHS–RADV 

under the current IVA sampling 

methodology if these issuers have more 

enrollees without HCCs, and therefore 

more enrollees without medical records 

proportionately affecting the Neyman 

allocation and stratum 10’s sample size. 

However, lower-risk issuers may 

continue to have less burden than 

higher-risk issuers under the revised 

IVA sampling methodology finalized in 

this rule that excludes enrollees without 

HCCs. This is because the Neyman 

allocation will continue to calculate the 

optimal number to be sampled from 

each stratum, proportional to each 

stratum’s contribution to the total 

standard deviation of risk score error in 

the issuer’s population. Each stratum’s 

contribution to the total standard 

deviation of risk score error in the 

issuer’s population is determined by the 

stratum’s population size, mean risk 

score, and variance of net risk score 

error. Therefore, compared to lower-risk 

issuers, higher-risk issuers may still 

have relatively more enrollees selected 

for higher-risk strata if the higher-risk 

strata contribute relatively more to the 

total standard deviation of risk score 

error in the issuer’s population. 

Conversely, lower-risk issuers may still 

have relatively more enrollees in their 

IVA samples from lower-risk strata with 

less HCCs to validate or medical records 

to review if the lower-risk strata 

contribute relatively more to the total 

standard deviation of risk score error in 

the issuer’s population, and therefore 

would experience a lower burden than 

higher-risk issuers with respect to 

medical record retrieval and review. As 

we explain in more detail later in this 

final rule, we estimate that issuer 

burden will decrease on average across 

all issuers as a result of the finalized 

changes to the IVA sampling 

methodology. 

In addition, we agree that excluding 

enrollees without HCCs from the IVA 

sampling methodology will further 

ensure that issuers are submitting 

accurate, high-quality information to 

their EDGE servers to be used in the risk 

adjustment State transfer calculations 

and disincentivize inaccurate coding 

practices, such as upcoding. However, 

we note that we have not seen 

conclusive evidence of upcoding on 

EDGE. We also believe that the HHS– 

RADV program serves as a safeguard 

against upcoding by auditing the 

issuer’s EDGE data and reviewing the 

supporting medical records to validate 

enrollee health status. In addition, we 

note that there are risk adjustment 

model specifications to mitigate the 

potential for upcoding, such as the HCC 

coefficient estimation groups, which 

reduce risk score additivity within 

disease groups and limit the sensitivity 

of the risk adjustment models to 

upcoding,108 and we have developed 

HHS–RADV’s error estimation 

methodology to appropriately account 

for these model specifications (such as., 

the HCC coefficient estimation 

groups).109

Comment: Several commenters 

opposed the proposal to exclude 

enrollees without HCCs from IVA 

sampling and some commenters 

disagreed with or questioned whether 

the proposal would improve the 

accuracy of HHS–RADV results. Some 

of these commenters noted that 

enrollees without HCCs may be undercoded and HHS–RADV should validate 

appropriate coding by issuers for all 

diagnoses—including diagnoses that 

were not originally submitted to issuers’ 

EDGE servers or supplemental files or 

HCCs that were not on EDGE—in the 

sampled enrollees’ medical records to 

appropriately adjust issuers’ risk scores. 

A few commenters suggested that the 

accurate assessment of a plan’s risk 

score depends on sampling from the 

issuer’s full population during HHS– 

RADV. One of these commenters noted 

that many enrollees in issuers’ 

populations have no documented HCCs 

and noted concern that removing 

enrollees without HCCs would lead to 

greater volatility or even increase the 

number of outlier issuers. One 

commenter expressed concern that 

HHS–RADV was only validating HCCs 

and excluding other components of the 

risk score, such as RXCs, from 

validation. Another commenter 

suggested that removing enrollees 

without HCCs from HHS–RADV could 

encourage upcoding and inaccurate risk 

adjustment coding because issuers 

would not be able to get failure rate 

credit for diagnoses identified in HHS– 

RADV but unreported on EDGE. This 

commenter also suggested that HHS– 

RADV encourages coding to the 

industry average rather than coding 

with accuracy and noted that if issuers 

engage in upcoding at similar rates, 

industry failure rates will increase, 

coding accuracy will decrease, but 

HHS–RADV results could remain the 

same. Other commenters who opposed 

the proposal suggested that excluding 

enrollees without HCCs from the IVA 

sample could unfairly penalize or 

reward plans based on the risk profile 

of their high-cost patients and may be 

short-sighted, as HHS–RADV should 

help ensure that the actuarial risk and 

risk scores for both high-risk and lowrisk plans are appropriately calculated 


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110As explained in 45 CFR 153.730, issuers of 

risk adjustment covered plans must submit data to 

be considered for risk adjustment payments and 

charges for the applicable benefit year by April 30 

of the year following the applicable benefit year or, 

if such date is not a business day, the next 

applicable business day. 

111 Issuers of risk adjustment covered plans 

remain responsible for ensuring the completeness 

and accuracy of the data submitted to their 

respective EDGE servers by the data submission 

deadline. CMS does not permit issuers to submit 

additional data or correct data already submitted to 

their EDGE servers after the applicable benefit 

year’s data submission deadline. 

112 In the 2020 Payment Notice, we finalized 

piloting the incorporation of RXCs into the HHS– 

RADV process in the 2018 benefit year, which was 

the first year that RXCs were incorporated into the 

risk adjustment models. We also finalized 

incorporating RXC validation into HHS–RADV as a 

method of discovering materially incorrect EDGE 

server data submissions in a manner similar to how 

we address demographic, and enrollment errors 

discovered during HHS–RADV beginning with the 

2019 benefit year. See 84 FR 17501. We later 

extended the pilot years of incorporating RXCs into 

HHS–RADV to the 2019 and 2020 benefit years of 

HHS–RADV to increase consistency between the 

operations of these benefit years’ HHS–RADV and 

facilitate the combination of the HHS–RADV 

adjustments for these benefit years as we 

transitioned to a concurrent application of HHS– 

RADV results. See 85 FR 77002 through 77005. 

113We also note that the 2020 HHS–RADV 

Amendments Rule adopted a negative failure rate 

constraint to mitigate the impact of adjustments that 

result from outlier issuers with negative failure 

rates that are driven by newly identified Super 

HCCs (rather than by high validation rates) 

beginning with 2019 benefit year HHS–RADV. See 

85 FR 76994 through 76998. The 2023 Payment 

Notice expanded the application of the negative 

failure rate constraint to constrain the failure rate 

of any failure rate group in which an issuer is a 

negative failure rate outlier to zero when calculating 

the group adjustment factor, regardless of whether 

the outlier issuer has a negative or positive error 

rate, beginning with 2021 benefit year HHS–RADV. 

See 87 FR 27255 through 27256. 

and reflected in risk adjustment State 

transfers. 

Response: As explained in the 

proposed rule (89 FR 82308, 82351), we 

anticipate that excluding enrollees 

without HCCs from IVA sampling will 

improve the precision of issuers’ group 

failure rates for any given sample size 

by increasing the number of 

observations used to make statistical 

inferences. The precision of group 

failure rates is important as we identify 

outliers in HHS–RADV based on 

whether their group failure rates are 

statistically different from the national 

benchmarks. As previously noted, the 

purpose of HHS–RADV is to ensure that 

issuers are submitting accurate, highquality information to their EDGE 

servers as that data is used to calculate 

risk adjustment State transfers. While it 

is possible that enrollees without HCCs 

may be missing diagnoses, issuers are 

responsible for submitting data to EDGE 

in accordance with the EDGE Server 

Business Rules for the applicable benefit 

year by the established deadline.110 111

The validation of HCCs in HHS–RADV 

aligns with the policies in the EDGE 

Server Business Rules stating that a risk 

adjustment eligible diagnosis must be 

supported by appropriate medical 

record documentation and linked to a 

risk adjustment eligible claim accepted 

by the issuer’s EDGE server to validate 

an HCC in HHS–RADV. Since we 

finalized discontinuing the use of the 

LLPC list and non-EDGE claims 

beginning with 2022 benefit year HHS– 

RADV, IVA and SVA Entities cannot 

abstract diagnoses that are not linked to 

an accepted risk adjustment eligible 

claim on issuers’ EDGE servers. 

Therefore, it is unlikely that HHS– 

RADV would identify any missing HCCs 

for enrollees without HCCs if these 

enrollees remained in the IVA sample. 

Furthermore, we clarify that the changes 

finalized to the IVA sampling 

methodology in this rule will not affect 

the review of demographic and 

enrollment information, as we will 

continue to validate demographic and 

enrollment information for a subsample 

of up to 50 enrollees from the IVA 

sample, or RXC review, as the HHS– 

RADV requires review of RXCs for all 

adult enrollees in the IVA sample with 

at least one RXC, and we continue to 

assume that a review will be performed 

on approximately 50 RXCs per issuer.112

As explained in the proposed rule (89 

FR 82308, 82351), an analysis of 

available enrollee-level EDGE data from 

benefit years 2019 through 2022 shows 

that on average less than 12 percent of 

an issuer’s adult enrollee population 

with RXCs has no HCCs. Therefore, the 

vast majority of adult enrollees with 

RXCs also have HCCs and will therefore 

still be captured in strata 1 through 3 in 

the IVA sample and eligible for 

inclusion in the HHS–RADV RXC 

validation. 

Under the finalized methodology, any 

enrollees inappropriately coded with 

diagnoses that map to payment HCCs 

would fall within the population of 

enrollees with HCCs and may be 

selected in the IVA sample. Therefore, 

we believe this policy ensures that 

HHS–RADV remains focused on 

ensuring issuers submit accurate, highquality information to their EDGE 

servers to be used in the risk adjustment 

State transfer calculations and further 

disincentivizes inaccurate coding 

practices, such as upcoding. However, 

as previously noted, we have not seen 

conclusive evidence of upcoding on 

EDGE and believe that the HHS–RADV 

program serves as a safeguard against 

upcoding by auditing the issuer’s EDGE 

data and reviewing the supporting 

medical records to validate enrollee 

health status. In addition, while we 

acknowledge that issuers are compared 

to industry coding averages when 

comparing issuer group failure rates to 

national benchmarks, issuers with 

statistically significant group failure 

rates that are below these national 

benchmarks may receive negative group 

adjustment factors to calculate IVA 

sampled enrollees’ adjusted risk scores 

in error estimation and may be assigned 

negative error rates such that their more 

accurate coding practices are reflected 

in their HHS–RADV results.113 We 

therefore continue to believe that the 

HHS–RADV program encourages 

accurate coding in issuer EDGE data. In 

addition, we also believe that some 

variation and error should be expected 

in the compilation of data for risk 

scores, because providers’ 

documentation of enrollee health status 

varies across provider types and groups, 

so it may not be reasonable to assume 

that issuers can achieve group failure 

rates equal to zero. As such, the primary 

purpose of identifying statistically 

meaningful differences between issuers’ 

group failure rates and national 

benchmarks in HHS–RADV is to avoid 

the unwarranted application of risk 

score adjustments. 

We also disagree that excluding 

enrollees without HCCs from the IVA 

sampling methodology would lead to 

unfair HHS–RADV results based on the 

risk profile of issuers’ high-cost patients 

as enrollees with HCCs in the issuerspecific low-risk and medium-risk strata 

will continue to be sampled and 

included in the IVA. Moreover, we 

anticipate that the average proportion of 

issuers’ IVA samples from low-risk 

strata will generally increase from 

finalizing the policy to use HHS–RADV 

data rather than MA–RADV data as the 

source for the Neyman allocation for 

IVA sampling. 

Finally, we note that the refinements 

to the IVA sampling methodology, 

including the policy to exclude 

enrollees without HCCs, further advance 

program integrity goals of validating the 

actuarial risk of enrollees in risk 

adjustment covered plans to ensure that 

the HHS-operated risk adjustment 

program accurately assesses charges to 

issuers with plans with lower-thanaverage actuarial risk while making 

payments to issuers with plans with 

higher-than-average actuarial risk. We 

therefore believe that HHS–RADV will 

continue to help ensure that the risk 

scores and risk adjustment State 

transfers for issuers of high-risk and 

low-risk plans are calculated consistent 

with the established methodology and 


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114See Section 13.3.1.3.3 Calculate Error Rates of 

the BY23 HHS–RADV Protocols available at https:// 

regtap.cms.gov/uploads/library/HHS-RADV_2023_

Benefit_Year_Protocols_v1_5CR_060424.pdf. 

115See the Notice of Benefit and Payment 

Parameters for 2019; Final Rule, 83 FR 16930 at 

16961–16965 (April 17, 2018) (2019 Payment 

Notice). 

116See the Amendments to the HHS-Operated 

Risk Adjustment Data Validation (HHS–RADV) 

Under the Patient Protection and Affordable Care 

Act’s HHS-Operated Risk Adjustment Program; 

Final Rule; 85 FR 76979 at 76998–77001 (December 

1, 2020) (2020 HHS–RADV Amendments Rule). 

117See Section 13.3.1.3.3 Calculate Error Rates of 

the BY23 HHS–RADV Protocols available at https:// 

regtap.cms.gov/uploads/library/HHS-RADV_2023_

Benefit_Year_Protocols_v1_5CR_060424.pdf. 118Error estimation for 2025 benefit year HHS– 

RADV is anticipated to begin in Spring 2027 after 

IVA and SVA Entities submit audit findings for the 

2025 benefit year. 

119For more details on RXC validation, see 

Section 10.4 Validation of the BY23 HHS–RADV 

Protocols available at https://regtap.cms.gov/ 

uploads/library/HHS-RADV_2023_Benefit_Year_

Protocols_v1_5CR_060424.pdf. 

requirements based on the data made 

available to HHS by the applicable 

benefit year’s deadline. 

Comment: A few commenters 

requested clarification on how this 

change would impact the error rate 

calculation. One of these commenters 

requested HHS further investigate the 

impact of this policy as the commenters 

believed the impact would vary across 

issuers depending on the proportion of 

their enrollee population with HCCs. 

This commenter requested HHS apply 

the error rate such that only the plan 

liability risk score associated with 

enrollees with HCCs, and not with the 

total enrollee population, would be 

adjusted. 

Response: Excluding enrollees 

without HCCs from the IVA sampling 

methodology does not impact the 

formula used to calculate issuers’ HCCassociated error rates during error 

estimation. As described in the HHS– 

RADV protocols, HHS estimates an 

issuer’s HCC-associated error rate using 

sampled enrollees’ adjusted HCCassociated risk scores and HCCassociated EDGE risk scores.114

Although enrollees without HCCs are 

currently included in issuers’ audit 

samples, these enrollees have HCCassociated EDGE risk scores equal to 

zero and cannot have adjusted HCCassociated risk scores. Therefore, 

enrollees without HCCs are already 

excluded from the calculation of the 

HCC-associated error rate, which was 

explained as one of the reasons for 

implementing this IVA sampling change 

in the proposed rule (89 FR 82351). 

However, we also note that excluding 

enrollees without HCCs from IVA 

sampling will have an impact on the 

steps in the error estimation 

methodology during which HCCassociated error rates are applied to 

adjust issuers’ plan liability risk scores. 

Under the current error estimation 

methodology finalized in the 2019 

Payment Notice 115 and the 2020 HHS– 

RADV Amendments Rule,116 and as 

described in the HHS–RADV 

Protocols,117 the HCC-associated error 

rate, which only describes the 

proportion of the HCC-related 

components of the risk score that are 

believed to be in error, is scaled to apply 

only to the HCC portion of an issuer’s 

total plan liability risk score, which 

includes non-HCC and HCC 

components. To accomplish this, HHS 

uses the issuer’s audit sample, which 

includes enrollees with and without 

HCCs under the current IVA sampling 

methodology, to calculate an HCCassociated PLRS weight and estimate 

how much of the issuer’s plan liability 

risk score is HCC-related in the issuer 

population. Therefore, removing 

enrollees without HCCs from IVA 

sampling beginning with 2025 benefit 

year HHS–RADV implies that issuers’ 

audit samples can no longer be used to 

calculate the appropriate HCCassociated PLRS weight according to the 

existing formula. As such, before 2025 

benefit year HHS–RADV error 

estimation begins,118 we intend to 

continue to consider the impact of the 

IVA sampling methodology changes in 

this rule on the HHS–RADV error 

estimation methodology and will seek 

comments from interested parties on 

potential modifications to the 

intermediate steps in the error 

estimation methodology to ensure that 

the HCC-associated error rate continues 

to apply to only the proportion of the 

total plan liability risk score that is 

associated with HCC-components of 

EDGE risk scores. 

Comment: One commenter requested 

that HHS allot additional time for 

issuers to complete HHS–RADV, as 

excluding enrollees without HCCs from 

the IVA sample will require issuers to 

validate more HCCs and RXCs, 

impacting operational resources and 

capacity. 

Response: We do not anticipate that 

excluding enrollees without HCCs from 

IVA sampling will prevent issuers from 

meeting the current timeline associated 

with HHS–RADV activities. Issuers have 

complied with the timeline for HHS– 

RADV activities under the current IVA 

sampling methodology and should be 

able to maintain compliance under the 

finalized IVA sampling methodology 

where issuer burden is estimated to 

decrease on average. As discussed in the 

proposed rule, under the revised IVA 

sampling methodology, we estimate that 

issuers will have to submit 

approximately 2 medical records per 

enrollee in the IVA sample for IVA 

review, which is a decrease from the 

current burden estimates under the 

existing IVA sampling methodology of 5 

medical record requests per enrollee in 

the IVA sample. In addition, as 

explained in the Collection of 

Information section of this rule, we do 

not anticipate that these changes will 

affect RXC review, as HHS–RADV 

requires review of RXCs for all adult 

enrollees in the IVA sample with at least 

one RXC, and we continue to assume 

that a review will be performed on 

approximately 50 RXCs per issuer.119

2. Proposal To Remove the Finite 

Population Correction (FPC) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82351), we proposed 

to remove the FPC from the IVA 

sampling methodology such that, with 

the exclusion of enrollees without HCCs 

from IVA sampling, all issuers with at 

least 200 enrollees with HCCs in their 

enrollee population would have an IVA 

sample size of 200. Under this proposal, 

all issuers with fewer than 200 enrollees 

with HCCs would have an IVA sample 

size equal to their population of 

enrollees with HCCs. See the proposed 

rule (89 FR 82308, 82351) for a full 

discussion of the proposal to remove the 

FPC from the IVA sampling 

methodology. 

As noted in the proposed rule (89 FR 

82308, 82352), by including more 

enrollees with HCCs in these smaller 

issuers’ IVA samples, we would 

increase these issuers’ probability of 

meeting the 30 Super HCC constraint 

and improve the precision of group 

failure rates during error estimation, as 

well as improve the precision of net risk 

score error as discussed below. In 

addition, for small issuers that meet the 

30 Super HCC threshold, this proposal 

would further allow these issuers’ risk 

scores to be appropriately adjusted if 

they are identified as outliers, and it 

would allow them to gain additional 

insights from a richer set of data 

elements reported in their HHS–RADV 

results to improve coding practices and 

EDGE data submission procedures (as 

applicable). For these reasons, we 

proposed to remove the FPC beginning 

with 2025 benefit year HHS–RADV. 

We sought comment on the proposal 

to remove the FPC from the IVA 

sampling methodology. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 


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120Beginning with the 2022 benefit year of HHS– 

RADV, the materiality threshold under 

§ 153.630(g)(2) was defined as 30,000 total BMMs 

Statewide, calculated by combining an issuer’s 

enrollment in the individual non-catastrophic, 

catastrophic, small group, and merged markets (as 

applicable), in the benefit year being audited. See 

the 2024 Payment Notice, 88 FR 25740, 25788 

through 25790. 

121See § 153.630(g)(1) and (2). Also see 81 FR 

94058 at 94104, 83 FR 16930, 16966, and 84 FR 

17454, 17508. 

122An issuer who meets the criteria and is 

exempt from the IVA requirements for a benefit year 

of HHS–RADV under the materiality threshold for 

random and targeted sampling may be required to 

make their records available for review and comply 

with an audit by the Federal Government under 

§ 153.620. 

123 45 CFR 153.630(g)(1). 

124See the 2020 Payment Notice, 84 FR 17508 

through 17511. Also see the 2019 Payment Notice, 

83 FR 16966 through 19697, and the 2018 Payment 

Notice, 81 FR 94104 through 94105. 

125See the 2020 Payment Notice, 84 FR 17510. 

Also see the 2018 Payment Notice, 81 FR 94104 

through 94105, and the 2019 Payment Notice, 83 FR 

16966 through 19697. 

126See the 2019 Payment Notice, 83 FR 16966. 

Also see the 2020 Payment Notice, 84 FR 17508. 

127These very small issuers who are eligible for 

the exemption under § 153.630(g)(1) are also not 

subject to random sampling under the materiality 

threshold, and therefore would continue to not be 

subject to the requirement to hire an IVA Entity or 

submit IVA results for that benefit year. See the 

2020 Payment Notice, 84 FR 17508. Issuers who 

qualify for this exemption are not subject to 

enforcement action for noncompliance with HHS– 

RADV requirements and are not assessed the 

default data validation charge under 

§ 153.630(b)(10) for the applicable benefit year. 

128Under the outlier identification policy 

finalized in the 2021 Payment Notice, when HCCs 

were the unit of analysis of failure rates, an issuer 

could not be identified as an outlier in any failure 

rate group in which that issuer had fewer than 30 

Super HCCs. See 85 FR 29196 through 29198. In the 

2023 Payment Notice, when the unit of analysis of 

failure rates was altered to de-duplicated Super 

HCCs, we finalized the policy to not consider an 

issuer as an outlier in any failure rate group in 

which that issuer has fewer than 30 de-duplicated 

EDGE Super HCCs. Issuers with fewer than 30 deduplicated EDGE Super HCCs in a failure rate group 

may still be considered an outlier in other failure 

rate groups in which they have 30 or more deduplicated EDGE Super HCCs. See 87 FR 27254. 

responses to comments, we are 

finalizing this proposal as proposed. We 

summarize and respond to public 

comments received on the proposal to 

remove the FPC from the IVA sampling 

methodology beginning with 2025 

benefit year HHS–RADV below. 

Comment: Many commenters 

supported the proposal to remove the 

FPC from IVA sampling. Several of 

these commenters suggested that this 

proposal would contribute to improving 

sampling precision and the accuracy 

and integrity of HHS–RADV. 

A few commenters were opposed the 

proposal to remove the FPC. One of 

these commenters expressed concern 

that the combined impact of this policy 

and the policy to exclude enrollees 

without HCCs from IVA sampling 

would significantly disadvantage 

smaller issuers. This commenter noted 

that smaller issuers are already 

burdened by a significantly higher per 

member per month audit cost than 

larger issuers and stated that these 

changes would not apply the same audit 

standard equitably and consistently 

across issuers. This commenter 

suggested that a smaller issuer with a 

total population of 600 enrollees with 

HCCs could end up with 33 percent of 

their enrollee population with HCCs 

sampled for audit by sampling 200 

enrollees whereas a larger issuer in the 

same market might have a total 

population of 37,000 enrollees with 

HCCs and end up with less than 1 

percent of their enrollee population of 

HCCs sampled for audit. Another 

commenter noted that the proposal 

would likely burden smaller issuers that 

currently have modified IVA sample 

sizes less than 200 enrollees by 

increasing the number of sampled 

enrollees and medical records. 

Response: We are finalizing the 

proposal to remove the FPC from IVA 

sampling as proposed and anticipate 

that this policy will improve the 

precision of net risk score error and 

group failure rates. We disagree that the 

removal of the FPC, combined with the 

finalization of the proposals to exclude 

enrollees without HCCs from IVA 

sampling and replace the source of the 

Neyman allocation data, will 

disadvantage smaller issuers over larger 

issuers. While we recognize that smaller 

issuers incur costs to hire an IVA Entity 

and undergo the HHS–RADV, there are 

other HHS–RADV provisions intended 

to limit administrative and cost burden 

on small issuers. Specifically, at 

§ 153.630(g)(1) and (2), we established 

exemptions from HHS–RADV for issuers 

with 500 or fewer billable member 

months (BMMs) Statewide and we 

established random and targeted 

sampling for issuers at or below a 

materiality threshold 120 for the benefit 

year being audited.121 For issuers at or 

below the HHS–RADV materiality 

threshold, which is set at 30,000 total 

BMMs Statewide, these costs are only 

realized for the benefits years that the 

smaller issuer is selected for HHS– 

RADV, which is approximately once 

every 3 years (barring any risk-based 

triggers that would warrant more 

frequent audits) under the materiality 

threshold provision at 

§ 153.630(g)(2).122 Under the very small 

issuer exemption at § 153.630(g)(1), an 

issuer that has 500 or fewer BMMs of 

enrollment in the individual, small 

group, and merged market (as appliable) 

for the applicable benefit year, 

calculated on a Statewide basis, and 

elects to establish and submit data to an 

EDGE server is not subject to the 

requirement to hire an IVA Entity or 

submit IVA audits for that benefit 

year.123

To further explain, we adopted these 

policies in response to concerns 

regarding the regulatory burden and 

costs associated with HHS–RADV, 

particularly for smaller issuers. For 

example, we explained in prior 

rulemakings that HHS was adopting a 

materiality threshold for HHS–RADV to 

ease the burden of annual audit 

requirements for small issuers of risk 

adjustment covered plans.124 We further 

explained that we believed this 

provision was appropriate because the 

fixed costs associated with hiring an 

IVA Entity and conducting the audit 

may be disproportionately high for 

smaller issuers, and may even constitute 

a large portion of their administrative 

costs.125 Also, we estimated that issuers 

of risk adjustment covered plans at or 

below this threshold would represent 

less than 1.5 percent of enrollment in 

risk adjustment covered plans 

nationally, so the effect of the provision 

on HHS–RADV would not be material. 

We similarly explained that exempting 

very small issuers under § 153.630(g)(1) 

is appropriate because they will have a 

disproportionally high operational 

burden for compliance with HHS– 

RADV.126 127 These provisions remain 

applicable. 

In addition, we believe the removal of 

the FPC will benefit smaller issuers by 

giving them a better opportunity to 

increase the count of Super HCCs 

reviewed in HHS–RADV and gain 

additional insights from more 

informative HHS–RADV results to 

improve coding practices and EDGE 

data submission procedures. As 

explained in the proposed rule, we 

found in recent years of HHS–RADV 

results that issuers with IVA sample 

sizes less than 200 enrollees are less 

likely to meet the 30 Super HCC 

constraint for outlier identification in a 

failure rate group. This constraint was 

first established in the 2021 Payment 

Notice 128 as standard statistical practice 

states that sample sizes below 30 

observations could result in violations 

of the assumptions of statistical testing 

or lead to the detection of more 

apparent outliers than would be 

desirable. Because the requirements to 

participate in HHS–RADV do not 

depend on issuers’ count of Super 

HCCs, issuers selected for HHS–RADV 

may incur the costs to participate 

without having sufficient Super HCCs to 

make statistical inferences. By 

increasing the count of Super HCCs, we 


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129 45 CFR 153.630(g)(2). 

130Beginning with the 2022 benefit year of HHS– 

RADV, the materiality threshold under 

§ 153.630(g)(2) is defined as 30,000 total BMMs 

Statewide, calculated by combining an issuer’s 

enrollment in the individual non-catastrophic, 

catastrophic, small group, and merged markets (as 

applicable), in the benefit year being audited. See 

the 2024 Payment Notice, 88 FR 25740, 25788 

through 25790. 

131A new benefit year of HHS–RADV activities 

generally begins in the spring the year following the 

applicable benefit year when issuers can start 

selecting their IVA entity and IVA entities can start 

electing to participate in HHS–RADV for that 

benefit year. See, for example, the 2023 Benefit Year 

HHS–RADV Activities Timeline. https://

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

Timeline_5CR_072424.pdf. We note that there were 

delays in the 2023 Benefit Year HHS–RADV 

Activities Timeline in recognition of issuers facing 

challenges related to EDGE server operations after 

the Change Healthcare Cybersecurity Incident. 

132As an example, finalizing this policy as 

proposed, we anticipate using HHS–RADV data 

from benefit years 2021, 2022 and 2023 for the 

Neyman allocation for benefit year 2025 HHS– 

RADV. 

increase the precision of the group 

failure rates that are used to determine 

national benchmarks and the probability 

that issuers will be able to meaningfully 

compare their calculated group failure 

rates to the national benchmarks. More 

specifically, as noted in the proposed 

rule (89 FR 82308, 82352) we estimate 

that any issuers receiving the FPC under 

the current methodology and whose IVA 

sample sizes would increase under the 

finalized IVA sampling methodology 

would see a 35 percent increase in 

Super HCC count in their IVA samples 

and a 26 percent increase in group 

failure rate precision on average across 

all three failure rate groups. 

We also recognize that because IVA 

sample sizes are limited to 200 

enrollees, larger issuers will inherently 

have smaller proportions of their 

populations subject to audit, but we 

disagree that this creates an unequal 

application of audit standards across 

issuers. Given the variance in issuer size 

across issuers of risk adjustment 

covered plans, it would not be possible 

to audit equal proportions of issuers’ 

populations. The IVA sampling 

methodology recognizes this by using 

the Neyman allocation to optimally 

allocate each issuer’s IVA sample across 

strata. In addition, while it is possible 

that a smaller issuer may be burdened 

by an increased number of sampled 

enrollees under the finalized policy to 

remove the FPC, we estimate a decrease 

in aggregate issuer burden across all 

issuers as the total estimated number of 

medical records reviewed per sampled 

enrollee will decrease, and we note that 

sample size will not increase for all 

issuers currently subject to the FPC as 

some of these issuers have a smaller 

population of enrollees with HCCs than 

their previously assigned modified IVA 

sample sizes that included enrollees 

without HCCs. For example, an issuer 

with a total enrollee population of 1,000 

would be assigned a sample size of 160 

enrollees under the current 

methodology and using the FPC 

formula. If this issuer only has a 

population of 100 enrollees with HCCs, 

then, under the methodology being 

finalized in this rule, the issuer’s IVA 

sample size would decrease to 100 

enrollees. In addition, we anticipate that 

the vast majority of issuers who would 

see increased IVA sample sizes after the 

removal of the FPC are at or below the 

materiality threshold for random and 

targeted sampling and would therefore 

only be selected for audit approximately 

once every 3 benefit years (barring any 

risk-based triggers based on experience 

that will warrant more frequent 

audits).129 130 Therefore, we believe that 

the benefits a smaller issuer gains from 

increased group failure rate precision, as 

described above, outweigh potential 

increases in IVA sample size. 

3. Proposal To Source the IVA Sampling 

Neyman Allocation With HHS–RADV 

Data 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82352), we also 

proposed to change the current IVA 

sampling methodology to replace the 

source of the Neyman allocation data 

with HHS–RADV data to determine IVA 

sample strata allocation. To do this, we 

proposed to no longer use MA–RADV 

data to calculate the standard deviation 

of risk score error(Si,h) for use in the 

Neyman allocation and instead use a 3- 

year rolling-window of available HHS– 

RADV data beginning with 2025 benefit 

year HHS–RADV. 

As noted in the proposed rule, under 

this proposal, for a given benefit year of 

HHS–RADV, we would use the 3 most 

recent consecutive years of HHS–RADV 

data with results that have been released 

before that benefit year’s HHS–RADV 

activities begin as the source data for the 

Neyman allocation and would continue 

to combine enrollees in each stratum 

across all issuers to create a national 

variance of net risk score error to 

calculate the standard deviation of risk 

score error (Si,h).131 132 We proposed to 

continue calculating Si,h with a national 

variance of net risk score error, but to 

use a 3-year rolling window of HHS– 

RADV data rather than the MA–RADV 

data as the source data for the Neyman 

allocation. Under the proposed 

approach, we would re-calculate Si,h

during each benefit year of HHS–RADV 

to use the 3 most recent consecutive 

years of HHS–RADV data with results 

that have been released before each 

benefit year’s HHS–RADV activities 

begin. In the context of HHS–RADV, a 

3-year rolling window would capture 

population changes that occur over time 

while promoting stability in the 

estimates of Si,h in HHS–RADV year 

over year. 

In the proposed rule (89 FR 82353), 

we noted that the proposal to use HHS– 

RADV data rather than the MA–RADV 

data as the source data for the Neyman 

allocation would decrease burden on 

issuers and IVA Entities. More 

specifically, our analysis found that the 

MA–RADV data yields considerably 

different sample sizes for each stratum 

than the HHS–RADV data, and that 

using the HHS–RADV data rather than 

the MA–RADV data is likely to increase 

the proportion of the sample in the 

lower-risk groups and decrease the 

proportion of the sample in the highrisk group. The estimated change in 

sampled enrollees means that, under 

this proposal, issuers would have 

relatively fewer medical records to 

review because of the increase in the 

proportion of sampled enrollees in the 

lower-risk strata and the decrease in the 

proportion of enrollees in higher-risk 

strata. To further explain, this decrease 

in estimated medical record review 

would occur because higher-risk 

enrollees tend to have relatively more 

medical records to review than lowerrisk enrollees. Issuers and their IVA 

Entities spend time and resources on 

retrieving, reviewing, and submitting 

medical records and documentation for 

HHS–RADV, so the estimated decrease 

in the average number of medical 

records reviewed per enrollee in the 

IVA sample that our analysis found 

would result from replacing MA–RADV 

data with HHS–RADV data is expected 

to lead to a decrease in issuer burden. 

We further address the estimated 

aggregate burden impact of all IVA 

sampling policies being finalized in 

section III.B.6.a.4 below and the 

Collection of Information section of this 

rule. 

We sought comment on the proposal 

to replace the source of the Neyman 

allocation data for IVA sampling source 

with HHS–RADV data. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this proposal as proposed. We 

summarize and respond to public 

comments received on the proposal to 

replace the MA–RADV data used in the 

Neyman allocation for IVA sampling 

purposes with HHS–RADV data below. 


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133Activities related to the 2025 benefit year of 

HHS–RADV will generally begin in Spring 2026, 

when issuers can start selecting their IVA entity, 

and IVA entities can start electing to participate in 

HHS–RADV for the 2025 benefit year. For the most 

recently published annual HHS–RADV timeline, 

see the 2023 Benefit Year HHS–RADV Activities 

Timeline. https://regtap.cms.gov/uploads/library/ 

2023_RADV_Timeline_5CR_072424.pdf. Note that 

there were delays in the 2023 Benefit Year HHS– 

RADV Activities Timeline in recognition of the 

challenges some issuers were facing related to 

EDGE server operations after the Change Healthcare 

Cybersecurity Incident. 

134See Chapter 2: HHS–RADV Initial Validation 

Audit (IVA) Sampling of the HHS Risk Adjustment 

Data Validation (HHS–RADV) White Paper 

(December 6, 2019). 

135As noted above, we are also finalizing the 

proposal to exclude enrollees without HCCs from 

IVA sampling. 

Comment: Many commenters 

supported the proposal to replace the 

MA–RADV data used in the Neyman 

allocation for IVA sampling purposes 

with HHS–RADV data and suggested 

that the proposal would improve 

sampling precision or the accuracy of 

HHS–RADV. A few commenters agreed 

that using the HHS–RADV data for this 

purpose would lead to the stratum 

allocation shifts described in the 

proposed rule and suggested that the 

MA–RADV data may lead to 

oversampling enrollees from the highrisk score groups relative to other 

groups. One of these commenters stated 

that the shift to lower-risk strata will be 

more reflective of the true population 

and another commenter noted that this 

shift may reduce administrative burden 

for issuers with a greater volume of 

HCCs to validate in their IVA samples. 

One commenter suggested that this shift 

may incentivize issuers to focus chart 

reviews on enrollees with lower risk 

scores but also recognized that the 

timing of HHS–RADV may make it 

difficult for issuers to determine 

whether these are effective strategies for 

chart reviews. One commenter 

expressed general opposition to the 

proposal to replace the MA–RADV data 

with HHS–RADV data in the Neyman 

allocation for IVA sampling. 

Response: We agree with commenters 

that replacing the MA–RADV data used 

to calculate the standard deviation of 

risk score error (Si,h) in the Neyman 

allocation for IVA sampling with HHS– 

RADV data would increase sampling 

precision, and we are finalizing this 

change as proposed beginning with 

2025 benefit year HHS–RADV. Under 

this new approach, for a given benefit 

year of HHS–RADV, we will use the 3 

most recent consecutive years of HHS– 

RADV data with results that have been 

released before that benefit year’s HHS– 

RADV activities begin to calculate a 

national variance of net risk score error 

and issuer’s standard deviation of risk 

score error in the Neyman allocation for 

IVA sampling purposes. For example, 

for 2025 benefit year HHS–RADV 

sampling, we anticipate using the 2021, 

2022 and 2023 benefit years of HHS– 

RADV data for this purpose as they 

would represent the 3 most recent 

consecutive years of HHS–RADV whose 

results would be released before that 

benefit year’s HHS–RADV activities 

began.133

As explained in the proposed rule (89 

FR 82308, 82350), we initially chose to 

use MA–RADV data when calculating a 

national variance of net risk score error 

and issuers’ standard deviation of risk 

score error because HHS–RADV data 

was not available and the MA–RADV 

program utilizes a similar HCC-based 

methodology. We reconsidered the use 

of MA–RADV data in the IVA sampling 

methodology in the 2019 HHS–RADV 

White Paper, but we only had data from 

1 year of non-pilot HHS–RADV at the 

time, and we determined that we would 

need to gather more data from future 

years of HHS–RADV to perform further 

analysis.134 Now, as noted in the 

proposed rule, we have several years of 

HHS–RADV data and our recent 

analysis found that the MA–RADV data 

yields considerably different sample 

sizes for each stratum than the HHS– 

RADV data and using the HHS–RADV 

data would better capture the true 

variance in net risk score error in the 

risk adjustment population. The HHS– 

RADV data supports sampling low-risk 

strata more intensely than the MA– 

RADV data because the HHS–RADV 

data estimates a greater variance for 

these groups than the MA–RADV data, 

so a relatively smaller proportion of the 

IVA sample will be assigned to the 

higher-risk strata. Consequentially, we 

anticipate this change to the source data 

used for the Neyman allocation for IVA 

sampling would result in relatively 

fewer HCCs to validate and medical 

records to review per enrollee during 

the IVA for all issuers, on average. We 

also note that while the Neyman 

allocation optimizes strata sample size 

by sampling strata with greater variance 

more intensely, the number of enrollees 

sampled from each stratum also 

depends on each stratum’s relative size 

in the issuer’s population. Enrollees will 

continue to be sampled from low, 

medium and high-risk strata as we 

calculate non-zero national variances of 

net risk score error for strata 1–9.135

Therefore, issuers should continue to 

focus on the appropriate coding of all 

enrollees regardless of enrollee risk 

score as the purpose of HHS–RADV is 

to ensure that issuers are providing 

accurate, high-quality information to 

their EDGE servers to be used in the risk 

adjustment State transfer calculations. 

While HHS sets the standards for HHS– 

RADV and validates IVA results through 

the SVA, issuers have different 

structures, systems and contracts with 

their IVA Entities which may determine 

how they prioritize chart retrievals and 

reviews. 

Comment: A few commenters 

expressed concerns with difficulty 

retrieving documentation to validate 

newborn birthweight and noted that this 

may impact calculating the variance of 

net risk score error for infant strata in 

HHS–RADV. One of these commenters 

requested HHS to exclude the newborn 

birthweight HCCs when calculating the 

variance of error for infant strata. 

Response: While we recognize 

commenters’ concerns with retrieving 

documentation to validate newborn 

birthweight, issuers are required to have 

the appropriate documentation to 

substantiate any risk adjustment eligible 

diagnoses submitted to EDGE. 

Moreover, we disagree with excluding 

the newborn birthweight HCCs when 

calculating the variance of infant strata. 

The average number of infant enrollees 

selected in the IVA sample is relatively 

low and excluding birthweight HCCs 

could artificially reduce the variance in 

the infant low, medium and high-risk 

strata, which in turn would further 

reduce the representation of infant 

enrollees in the IVA sample. We believe 

that using HHS–RADV data to derive 

stratum variance without excluding any 

HCCs will ensure that issuers’ IVA 

sample sizes best reflect the relevant 

risk adjustment population. We 

therefore decline to exclude the 

newborn birthweight HCCs when 

calculating the variance of error for 

infant strata. 

Comment: One commenter who 

supported the general proposal to no 

longer use MA–RADV data and begin 

using HHS–RADV data opposed using a 

3-year rolling average and requested 

HHS instead use the most recent year of 

HHS–RADV data. This commenter 

suggested that HHS–RADV policy goals 

should not aim to make HHS–RADV 

audits predictable year-to-year and 

using the most recent year of HHS– 

RADV data available would help 

identify any evolving data integrity 

issues before they lead to competitive 

disequilibrium. This commenter also 

stated that continuing to use the MA– 

RADV data in the Neyman allocation 

may reduce transfer accuracy and 

requested HHS to recalibrate IVA 

sampling using the HHS–RADV data as 

soon as possible rather than waiting to 

the 2025 benefit year of HHS–RADV. 


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136The HHS–RADV protocols include an estimate 

for the stratum variance calculated from MA–RADV 

data and used in the Neyman allocation. See, for 

example, Section 8.3.3 Validating the IVA Sample 

Generated by CMS in the 2023 Benefit Year HHS– 

RADV Protocols. 

137The precision of net risk score error reflects 

the ability of the IVA sampling methodology to 

consistently estimate the percent difference 

between enrollees’ audit risk scores and EDGE risk 

scores. We provided details on how the 10 percent 

sampling target was derived in the proposed rule. 

See 89 FR 82349 through 82350. 

Response: We are finalizing the 

proposal to replace MA–RADV data as 

the source data for the Neyman 

allocation for IVA sampling and use of 

the 3 most recent consecutive years of 

HHS–RADV data with results that have 

been released before that benefit year’s 

HHS–RADV activities to calculate the 

standard deviation of risk score error ) 

in the Neyman allocation starting with 

the 2025 benefit year of HHS–RADV. As 

explained in the proposed rule (89 FR 

82308, 82353), the purpose of using 3 

years of HHS–RADV data is to capture 

population changes that occur over time 

while promoting stability in the 

estimates of the standard deviation of 

risk score error in HHS–RADV year over 

year and to ensure that all issuers, 

including smaller issuers that are at or 

below the materiality threshold at 

§ 153.630(g)(2) that are generally subject 

to HHS–RADV approximately once 

every 3 years, are captured when 

estimating strata variance. The 3-year 

rolling average for sample design is not 

intended to make HHS–RADV 

predictable. Furthermore, using a 

rolling-window of the 3 most recent 

consecutive years of HHS–RADV data 

means that the set of 3 years informing 

the calculation of stratum variance 

would change from one benefit year of 

HHS–RADV to the next. Predicting 

these annually calculated stratum 

variance values years in advance would 

be more difficult under the finalized 

methodology than the current 

methodology, which relies on a static 

year of MA–RADV data to estimate the 

variance of net risk score error.136 In 

addition, the stratum variance would 

continue to be calculated at a national 

level, so the impact of any one issuer’s 

behavior on stratum variance is limited. 

Moreover, using this 3-year rollingwindow should capture any new trends 

in variance that could reflect data 

integrity issues without immediately 

abandoning the trends in variance 

observed in the recent past. 

While we anticipate the transition to 

HHS–RADV data in the Neyman 

allocation to better reflect the relevant 

risk adjustment population, we disagree 

with concerns that continuing to use the 

MA–RADV data before the 2025 benefit 

year of HHS–RADV will reduce transfer 

accuracy. Our analysis of the current 

HHS–RADV methodology supports 

acceptable levels of error rate precision, 

and we are finalizing improvements to 

the IVA sampling methodology in this 

final rule to further our program 

integrity goals of validating the actuarial 

risk of enrollees in risk adjustment 

covered plans to ensure that the HHSoperated risk adjustment program 

accurately assess charges to issuers with 

plans with lower-than-average actuarial 

risk while making payments to issuers 

with plans with higher-than-average 

actuarial risk. In addition, the finalized 

changes to use HHS–RADV data in the 

Neyman allocation for IVA sampling 

will require sufficient lead time for HHS 

to derive coding changes to calculate the 

national variance of net risk score error 

for each stratum and issuers’ standard 

deviations of risk score error for each 

stratum, which are used as an input to 

the Neyman allocation formula, and to 

perform testing and quality reviews of 

the calculations. In addition, as we 

explained in the proposed rule (89 FR 

82406), we considered implementing 

the change to use HHS–RADV data in 

the Neyman allocation without the other 

proposed IVA sampling modifications, 

and we found that making these 

modifications in combination would 

lead to greater improvements in 

sampling precision and would allow 

more than 95 percent of issuers to pass 

the 10 percent sampling precision target 

at a two-sided 95 percent confidence 

level. Therefore, we need sufficient lead 

time to build all changes to the IVA 

sampling methodology finalized in this 

rule before issuers’ IVA samples can be 

generated under the methodology 

finalized in this rule. There would be 

insufficient time to complete these tasks 

and implement this change to generate 

2024 benefit year IVA samples as 2024 

benefit year HHS–RADV activities will 

generally begin in early 2025. We 

therefore are finalizing the proposed 

applicability date and will implement 

this change beginning with the 2025 

benefit year HHS–RADV. 

4. Impact of IVA Sampling Proposals 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82353) we noted that 

in preparation for these proposed 

changes to HHS–RADV IVA sampling, 

HHS conducted several analyses to 

evaluate the impact of these proposals. 

Our analyses revealed that the proposed 

modifications to switch data for the 

Neyman allocation to use the 3 most 

recent consecutive years of HHS–RADV 

data with results that have been released 

before HHS–RADV activities begin for 

the given benefit year, combined with 

the proposals to remove enrollees 

without HCCs from IVA sampling and to 

remove the FPC from the IVA sampling 

methodology, would improve our ability 

to reach the 10 percent sampling 

precision target for net risk score error 

for a greater proportion of issuers in 

HHS–RADV.137 More specifically, when 

we evaluated the proposed IVA 

sampling methodology reflecting the 

changes outlined in the proposed rule, 

which excludes enrollees without HCCs, 

removes the FPC, and replaces the MA– 

RADV data with available HHS–RADV 

data as the source data for the Neyman 

allocation, using HHS–RADV data from 

the 2022 benefit year, we found that 

more than 99 percent of issuers met the 

10 percent sampling precision target for 

net risk score error at a two-sided 95 

percent confidence level. 

Our analyses also focused on the 

impact of the policies on group failure 

rate precision. Under the proposed 

changes to the IVA sampling 

methodology in the proposed rule, our 

analysis found that approximately 91 

percent of all issuers in HHS–RADV 

would meet the 10 percent group failure 

rate precision in all three Super HCC 

groups. Moreover, approximately 87 

percent of issuers with IVA sample sizes 

less than 200 would also meet the 10 

percent group failure rate precision 

target in all three Super HCC groups. 

In addition, we anticipated that the 

proposed changes to the IVA sampling 

methodology in the proposed rule 

would result in an overall decrease in 

the number of medical records reviewed 

by IVA Entities. Although every enrollee 

sampled for the IVA would have HCCs, 

the proportion of enrollees sampled 

from strata 1 through 9 would change 

such that enrollees that generally have 

more medical records are sampled less 

intensely due to the replacement of 

MA–RADV data with HHS–RADV data 

for the Neyman allocation. As 

mentioned in the proposed rule, the 

median sample proportion of high-risk 

adult enrollees, who have more medical 

records to review on average, could 

decrease from 39 percent of the sample 

to 19 percent under the updated IVA 

sampling methodology reflecting the 

proposed changes in the proposed rule. 

We described our estimates of the 

proposed methodology on issuer burden 

in more detail in the Collection of 

Information section of the proposed 

rule. 

As noted in the proposed rule (89 FR 

82308, 82354), removing enrollees 

without HCCs and the FPC, and 

updating the source of the IVA sampling 

Neyman allocation data to use HHS– 


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138See, for example, the EDGE Server Business 

Rules (ESBR) Version 25.0 (December 2024) 

available at https://regtap.cms.gov/uploads/library/ 

DDC-ESBR-v25-5CR-120624.pdf. 

139See CMS. (2021). HHS-Operated Risk 

Adjustment Technical Paper on Possible Model 

Changes. Section 1.2.1 (Principles of Risk 

Adjustment). https://www.cms.gov/files/document/ 

2021-ra-technical-paper.pdf. 

RADV data, leads to an IVA sample that 

improves sampling precision while 

decreasing burden on issuers and IVA 

Entities on average. Therefore, we 

proposed to exclude enrollees without 

HCCs from IVA sampling such that each 

enrollee in an issuer’s IVA sample must 

have at least one HCC, remove the FPC, 

and change the source of the Neyman 

allocation data used to calculate the 

standard deviation of risk score error 

from MA–RADV data to the 3 most 

recent consecutive years of HHS–RADV 

data with results that have been released 

before HHS–RADV activities for the 

benefit year begin. 

We sought comment on the estimated 

impact of all proposed changes to the 

IVA sampling methodology. After 

consideration of comments and for the 

reasons outlined in the proposed rule 

and this final rule, including our 

responses to comments below and on 

the proposals to exclude enrollees 

without HCCs from IVA sampling, 

remove the FPC from the IVA sampling 

methodology, and replace the source of 

data in the Neyman allocation from 

MA–RADV data with HHS–RADV data, 

we are finalizing all proposed IVA 

sampling policies as proposed. We 

summarize and respond to public 

comments received on the estimated 

impact of these proposals below. 

Comment: Several commenters 

suggested that the three proposed 

changes to the IVA sampling 

methodology would improve the overall 

accuracy and precision of HHS–RADV 

results. In addition, several commenters 

agreed that all proposed changes to the 

IVA sampling methodology would 

improve sampling and group failure rate 

precision. One of these commenters 

suggested that finalizing the proposed 

changes would provide a more accurate 

and inclusive threshold for outlier 

identification. Another commenter 

suggested that the IVA sampling 

proposals would improve the 

predictability of HHS–RADV. 

Response: We appreciate these 

comments in support of the three 

proposed changes to the IVA sampling 

methodology and are finalizing all of 

these proposed changes as proposed to 

align sampling with the error estimation 

methodology and improve sampling 

precision. We anticipate that the 

changes will also improve the precision 

of group failure rates, the national 

benchmarks used to determine outlier 

status in each failure rate group, the net 

risk score error calculations, and will 

therefore improve the precision of HHS– 

RADV results used to adjust risk 

adjustment State transfers. Improving 

the precision of the IVA sampling 

methodology with the adoption of the 

changes finalized in this rule will also 

further promote the overall integrity of 

HHS–RADV and confidence in the HHSoperated risk adjustment program. 

Comment: One commenter agreed 

with HHS’ assessment that issuer and 

IVA Entity burden would decrease as a 

result of the proposed changes to the 

IVA sampling methodology. However, a 

few commenters questioned HHS’ 

assessment of burden associated with 

the proposed changes. One of these 

commenters suggested that the 

proposals would unnecessarily increase 

the administrative burden for issuers 

and another commenter suggested that 

there would be a significant burden 

increase associated with collecting more 

records from enrollees in lower-risk 

strata as these enrollees will likely be 

more heavily sampled if the proposed 

changes are finalized. This commenter 

noted that enrollees in lower-risk strata 

are more likely to see providers who do 

not provide issuers with direct access to 

medical records, which could make it 

more burdensome for issuers to retrieve 

medical records for these enrollees, 

especially for smaller issuers. Another 

commenter noted concern that 

compliance with the added HHS–RADV 

audit requirements could place a greater 

burden on smaller issuers without 

clarity on how these proposed changes 

would help patients. One commenter 

urged HHS to monitor the impact of 

these changes on burden and consider 

future changes if there is an undesired 

impact on HHS–RADV adjustments to 

risk adjustment State transfers. 

Response: As noted in the proposed 

rule, we estimate that the impact of 

finalizing all proposed modifications to 

the IVA sampling methodology will 

decrease issuer burden on average. 

Although every enrollee sampled for the 

IVA would have HCCs, the proportion 

of enrollees sampled from strata 1 

through 9 would change such that 

enrollees with more medical records are 

sampled less intensely, and we estimate 

this would lead to an average decrease 

in the number of HCCs and medical 

records reviewed per enrollee. We 

recognize the commenter’s concern that 

some providers for enrollees from 

lower-risk strata may provide issuers 

with less direct access to medical 

records, but we note that enrollees in 

lower risk strata are enrollees with 

fewer HCCs or relatively lower-risk 

HCCs, for whom issuers should be able 

to provide supporting medical records 

for risk adjustment eligible diagnoses 

submitted to EDGE as required by the 

EDGE Server Business Rules.138 The 

principles for including an HCC in the 

risk adjustment models require that 

each HCC represents a well-specified, 

clinically significant, chronic or 

systematic medical condition, and 

therefore, any enrollees with HCCs, 

regardless of if they are in a lower-risk 

stratum or higher risk stratum, have 

conditions that should have supporting 

medical records.139 Furthermore, if it is 

more burdensome to retrieve medical 

records for enrollees from lower-risk 

strata, any increase in burden from 

retrieving these medical records would 

be offset, at least in part, by the decrease 

in burden from retrieving fewer medical 

records for enrollees from higher-risk 

strata. We also note that enrollees from 

low, medium, and high-risk strata will 

continue to be sampled for the IVA and 

the actual number of enrollees sampled 

from each stratum will depend on that 

stratum’s contribution to the total 

standard deviation of net risk score error 

in the issuer’s population. 

In addition, we estimate that smaller 

issuers whose IVA sample sizes may 

increase under the IVA sampling 

methodology finalized in this rule are 

also likely to see the greatest increases 

in Super HCC counts and group failure 

rate precision on average across all three 

failure rate groups. Overall, this 

contributes to more precise HHS–RADV 

results and ensures that risk adjustment 

State transfers reflect verifiable actuarial 

risk differences between issuers. 

Moreover, as explained in section 

III.3.B.6.a.2 above, we anticipate that the 

vast majority of issuers who would see 

increased IVA sample sizes after the 

removal of the FPC are at or below the 

materiality threshold for random and 

targeted sampling and would only be 

selected for audit approximately once 

every 3 benefit years (barring any riskbased triggers based on experience that 

will warrant more frequent audits). 

Therefore, we believe that the benefits a 

smaller issuer gains from increased 

group failure rate precision and the 

estimated overall average decrease in 

the number of HCCs and medical 

records reviewed per enrollee outweigh 

any potential increases in IVA sample 

size. We also clarify that HHS–RADV 

does not directly impact patients. The 

HHS–RADV program helps ensure the 

integrity of data used in the HHSoperated risk adjustment program to 

calculate risk adjustment State transfers. 

The risk adjustment program helps 


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140These changes to the SVA framework do not 

impact or change issuer or IVA Entity obligations 

or requirements; therefore, we proposed to 

implement the proposed changes to the SVA 

pairwise means test starting with the 2024 benefit 

year HHS–RADV. Activities related to the 2024 

benefit year of HHS–RADV will generally begin in 

March 2025, when issuers can start selecting their 

IVA entity, and IVA entities can start electing to 

participate in HHS–RADV for the 2024 benefit year. 

The SVA typically starts the January 2 years after 

the applicable benefit year (January 2026 for the 

2024 benefit year of HHS–RADV) once issuers’ IVA 

results have been submitted. See HHS. (2024, 

March 27). For the most recently published annual 

HHS–RADV timeline, see the 2023 Benefit Year 

HHS–RADV Activities Timeline. https://

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

Timeline_5CR_072424.pdf. We note that there were 

delays in the 2023 Benefit Year HHS–RADV 

Activities Timeline in recognition of the challenges 

some issuers were facing related to EDGE server 

operations after the Change Healthcare 

Cybersecurity Incident. 

141As explained in the proposed rule, ‘‘false 

negatives’’ are a detection error that occurs when 

there are significant differences between IVA and 

SVA results, but the statistical test does not identify 

a statistically significant difference between IVA 

and SVA enrollee risk scores. The conventional 

minimum power desired for most research settings 

is 80 percent, which implies a false negative rate 

of 20 percent. See Cohen, Jacob (1988). Statistical 

Power Analysis for the Behavioral Sciences. 

Routledge. ISBN 978–1–134–74270–7. pp. 25–27. 

stabilize premiums across the 

individual, merged, and small group 

markets, and thereby helps provide 

consumers with affordable health 

insurance coverage options. As with any 

finalized modifications to HHS–RADV, 

we will monitor the implementation 

and impact of these policies. While 

these changes to the IVA sampling 

methodology could affect the 

adjustments to risk adjustment State 

transfers for an individual issuer, we 

anticipate that any changes to HHS– 

RADV adjustments will reflect more 

accurate actuarial risk differences 

between issuers. 

Comment: One commenter requested 

HHS to apply the proposed IVA 

sampling methodology changes to the 

2024 benefit year of HHS–RADV and 

stated that waiting to implement these 

changes until the 2025 benefit year 

would allow issuers to adjust their 

strategies in advance of the audit which 

would undermine the impact of the 

audit on data integrity. This commenter 

also suggested that the typical one-year 

delay between the year in which HHS– 

RADV changes are proposed and the 

applicable benefit year of HHS–RADV 

should not apply as HHS–RADV 

adjustments are not relevant to rate 

setting. 

Response: We proposed the IVA 

sampling methodology changes to apply 

beginning with the 2025 benefit year of 

HHS–RADV to reflect the timeline for 

HHS–RADV activities and the 

anticipated time needed to test and 

implement these changes. We disagree 

that waiting to implement these changes 

beginning with 2025 benefit year HHS– 

RADV would undermine the impact of 

the audit on data integrity. While 

issuers and their IVA Entities may vary 

in how they choose to approach changes 

to HHS–RADV, we believe these 

policies maintain HHS–RADV’s focus 

on ensuring issuers submit accurate, 

high-quality information to their EDGE 

servers to be used in the risk adjustment 

State transfer calculations. We also 

clarify that we are not delaying the 

implementation of these policies to 

benefit year 2025 because of issuers’ 

timelines for rate setting. Rather, the 

finalized changes to exclude enrollees 

without HCCs and use HHS–RADV data 

in the Neyman allocation for IVA 

sampling will require sufficient lead 

time for HHS to derive coding changes 

to generate samples from EDGE server 

data that exclude enrollees without 

HCCs and coding changes to calculate 

the national variance of net risk score 

error for each stratum and issuers’ 

standard deviations of risk score error 

for each stratum, which are used as 

inputs to the Neyman allocation 

formula. These IVA sampling changes 

will also require HHS to update the 

Audit Tool and perform testing before 

issuers’ IVA samples can be generated 

under the IVA sampling methodology 

finalized in this rule. In addition, as we 

explained in Section III.B.6.a.3 above, 

we found that making the IVA sampling 

modifications to exclude enrollees 

without HCCs, remove the FPC, and 

replace the MA–RADV data used in the 

Neyman allocation in unison would 

lead to greater improvements in 

sampling precision. Therefore, we need 

sufficient lead time to build all changes 

to the IVA sampling methodology 

finalized in this rule before issuers’ IVA 

samples can be generated under the 

methodology finalized in this rule. 

There would be insufficient time to 

complete these tasks and implement 

these changes to generate 2024 benefit 

year IVA samples as 2024 benefit year 

HHS–RADV activities will generally 

begin in early 2025. We therefore are 

finalizing the proposed applicability 

date and will implement this change 

beginning with the 2025 benefit year 

HHS–RADV. 

b. Second Validation Audit (SVA) 

Pairwise Means Test (§ 153.630(c)) 

To improve the sensitivity of the SVA 

pairwise means test, in the HHS Notice 

of Benefit and Payment Parameters for 

2026 proposed rule (89 FR 82308, 

82354), we proposed to modify the test, 

which currently uses a paired sample ttest methodology, to use a bootstrapping 

methodology, and to increase the initial 

SVA subsample size from 12 enrollees 

to 24 enrollees beginning with 2024 

benefit year HHS–RADV.140

As noted in the proposed rule (89 FR 

82354), based on our experience 

operating HHS–RADV for the past 

several benefit years, we have 

reassessed the sensitivity of our 

pairwise means testing procedure, 

meaning the ability of the statistical test 

to identify statistically significant 

differences between IVA and SVA risk 

scores when they exist, to see whether 

changes are needed. Based on our 

reassessment, we noted that we believe 

the pairwise means testing procedure 

should be modified to use a 90 percent 

bootstrapped confidence interval, rather 

than a t-test with a 95 percent 

confidence interval, and to increase the 

initial SVA subsample level from 12 

enrollees to 24 enrollees beginning with 

2024 benefit year HHS–RADV to 

improve the sensitivity of the pairwise 

means test, improve the false negative 

rate and promote the integrity of HHS– 

RADV.141 For a full discussion of the 

proposed changes to the SVA pairwise 

means test, see the proposed rule (89 FR 

82308, 82354). 

As we explained in the proposed rule 

(89 FR 82308, 82355), at a given SVA 

subsample level, the proposed pairwise 

bootstrapping methodology would 

perform 10,000 iterations of resampling 

with replacement from the enrollees in 

the issuer’s SVA subsample at that level. 

The average difference between 

enrollees’ IVA and SVA risk scores 

would be calculated for each resample 

to build an issuer-specific confidence 

interval for statistical testing of 

enrollee’s IVA and SVA risk scores. Like 

the current pairwise means test, if the 

bootstrapped confidence interval 

contains zero, the bootstrapping 

procedure would show non-significant 

differences between IVA and SVA risk 

scores, and the issuer would pass 

pairwise means testing at that SVA 

subsample level and IVA results would 

be used in error estimation. If the 

bootstrapped confidence interval does 

not include zero, the differences 

between IVA and SVA risk scores 

identified would be statistically 

significant, and the issuer would fail 

pairwise means testing at that SVA 

subsample level. In these circumstances, 

the SVA subsample would be expanded 

and the pairwise means test conducted 

at that new SVA subsample level. If the 

issuer continues to fail the pairwise 

means test at the SVA 100-level, a 

precision analysis would be performed 

to determine whether the SVA audit 

results from the SVA 100 subsample can 


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142See Section 11.6.2 Pairwise Means Test to 

Determine Accepted Results (IVA vs. SVA) of the 

2023 Benefit Year PPACA HHS Risk Adjustment 

Data Validation (HHS–RADV) Protocols (June 4, 

2024) available at https://regtap.cms.gov/uploads/ 

library/HHS-RADV_2023_Benefit_Year_Protocols_

v1_5CR_060424.pdf. 

143As explained in the proposed rule (89 FR 

82308, 82354), all issuers are subject to the same 

SVA subsample sizes, but the maximum SVA 

subsample for pairwise testing is one half of the 

issuer’s IVA sample size. Under the IVA policies 

finalized in this rule beginning with benefit year 

2025 HHS–RADV, issuers with less than 200 

enrollees with HCCs would continue to follow the 

standard SVA subsample sizes with a maximum 

SVA subsample size for pairwise testing equal to 

one half of the issuer’s IVA sample size. If the issuer 

fails at the maximum SVA subsample size for 

pairwise testing, a precision analysis is performed 

to determine whether the SVA audit results from 

that maximum SVA subsample size can be used in 

error estimation or if the SVA sample needs to 

expand to the full IVA sample. 

be used in error estimation or if the SVA 

sample needs to expand to the full IVA 

sample of 200 enrollees with the SVA 

200 results used in error 

estimation.142 143 We sought comment 

on the proposal to modify the SVA 

pairwise means testing procedure to use 

a bootstrapped 90 percent confidence 

interval and to increase the initial SVA 

subsample size from 12 enrollees to 24 

enrollees beginning with 2024 benefit 

year HHS–RADV. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing the modification to the SVA 

pairwise means test to use a 

bootstrapped 90 percent confidence 

interval and to increase the initial SVA 

subsample size to 24 enrollees 

beginning with the 2024 benefit year 

HHS–RADV as proposed. We 

summarize and respond to public 

comments received on modifying the 

SVA pairwise means testing procedure 

and increasing the SVA sample size 

below. 

Comment: Several commenters 

supported the proposal to modify the 

SVA pairwise means test to use a 

bootstrapping methodology and to 

increase the initial SVA subsample size 

from 12 enrollees to 24 enrollees. Two 

commenters suggested these 

modifications would improve the 

accuracy and precision of HHS–RADV 

results. One of these commenters stated 

that the modelling assumptions under 

the proposed methodology would 

produce more accurate statistics when 

the underlying distribution is unknown. 

This commenter also recognized the 

effort to balance false negatives and 

false positives to increase the overall 

integrity of HHS–RADV. 

Response: We agree with the 

comments in support of this proposal 

and are finalizing the proposal to 

modify the SVA pairwise means testing 

procedure to use a bootstrapped 90 

percent confidence interval and to 

increase the initial SVA subsample size 

from 12 enrollees to 24 enrollees 

beginning with 2024 benefit year HHS– 

RADV to improve the sensitivity of the 

SVA pairwise means test, reduce the 

false negative rate, and further promote 

the overall integrity of HHS–RADV. We 

agree that building confidence intervals 

using bootstrapping rather than tintervals is better suited for the SVA 

pairwise means test as issuers’ 

population distribution of IVA and SVA 

risk score differences is unknown when 

conducting the test at any SVA 

subsample level. As noted in the 

proposed rule (89 FR 82308, 82355), 

there is a tradeoff between decreasing 

the false negative rate and the false 

positive rate when reducing the size of 

the confidence interval from 95 percent 

to 90 percent, but we believe that the 

benefits in achieving an acceptable rate 

of false negatives outweighs the 

potential impacts for any increase in the 

false positive rate. This is because the 

SVA methodology provides the 

opportunity for false positives to be 

addressed at a later stage of the SVA 

review process as an issuer failing the 

SVA pairwise at a given subsample size 

results in an incremental increase in 

that issuer’s SVA subsample size for 

further review by the SVA Entity 

whereas false negatives result in the 

issuer passing the SVA pairwise test at 

the subsample size where no significant 

differences are detected between IVA 

and SVA results. 

Comment: Some commenters opposed 

the proposed changes to the SVA 

pairwise means test. One commenter 

noted that the current SVA methodology 

has provided consistent results and 

noted concern that changing the 

methodology would create 

unpredictability in HHS–RADV. 

Another commenter stated that they 

could not appropriately evaluate the 

impact of the proposed changes because 

issuers and IVA entities have little 

transparency into SVA outcomes 

because issuers who pass pairwise do 

not receive SVA results. A few 

commenters also urged HHS to provide 

more transparency by releasing SVA 

results to issuers and their IVA entities 

when there is sufficient agreement 

between the IVA and SVA in the SVA 

pairwise means test. One of these 

commenters suggested that the current 

process prevents IVA entities from 

evaluating their own coding practices 

and specifically requested that HHS 

release calculated z-scores with SVA 

results so that issuers can understand 

where coding differences occurred that 

triggered additional levels of SVA 

review. A few commenters requested 

that HHS and interested parties take 

additional time to evaluate the impact of 

the IVA sampling methodology changes 

before pursuing changes to the SVA 

pairwise means testing procedure and 

sample size approach. 

Response: We are finalizing the 

modifications to the SVA pairwise 

means test to use a bootstrapped 90 

percent confidence interval and to 

increase the SVA subsample size from 

12 to 24 enrollees beginning with 

benefit year 2024 HHS–RADV as 

proposed. In the proposed rule (89 FR 

82355), we recognized that the 

increased sensitivity of the 

bootstrapping methodology could result 

in more issuers being expanded to larger 

SVA subsample sizes during pairwise 

means testing. However, issuers with 

IVA entities that continue to code 

according to the relevant coding 

guidelines and validate HCCs in 

accordance with the EDGE Server 

Business Rules and for whom the 

current pairwise test correctly identifies 

no significant differences between IVA 

and SVA results should continue to pass 

pairwise testing under the modified 

pairwise testing procedure and SVA 

subsample size approach finalized in 

this rule. We encourage all issuers to 

coordinate with their IVA Entities to 

study and learn from their HHS–RADV 

results and experience. In particular, 

issuers that fail pairwise testing should 

work with their IVA entities to review 

the IVA diagnosis abstraction and 

identify differences from SVA results. 

Thus, we also disagree that issuers 

and IVA entities have insufficient 

transparency into SVA outcomes to 

evaluate the impact of the proposed 

changes to the SVA pairwise testing 

procedure or their own coding practices. 

In the proposed rule (89 FR 82308, 

82355), we explained the impact of the 

proposed modifications to increase the 

initial SVA subsample size to 24 

enrollees and use a bootstrapped 90 

percent confidence interval on the false 

negative rate, false positive rate and the 

overall sensitivity of the pairwise means 

test, and we sought comment on these 

proposals. In addition, we disagree that 

issuers have insufficient transparency 

into SVA outcomes. HHS does not 

provide SVA results to issuers or IVA 

entities that pass pairwise testing 

because passing signifies that the SVA 

findings do not significantly differ from 

IVA findings and that the IVA findings, 

which issuers review and sign off on, 

can be used during error estimation as 

issuers’ final accepted audit results. 


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144See, for example, Table 1 of the 2022 Benefit 

Year HHS–RADV Results Memo (May 14, 2024) 

available at https://www.cms.gov/files/document/ 

by22-hhs-radv-results-memo-appendix-pdf.pdf. 

145For more information on the paired t-test, see 

Section 11.6.2 Pairwise Means Test to Determine 

Accepted Results (IVA vs. SVA) of the 2023 Benefit 

Year PPACA HHS Risk Adjustment Data Validation 

(HHS–RADV) Protocols (June 4, 2024) available at 

https://regtap.cms.gov/uploads/library/HHSRADV_2023_Benefit_Year_Protocols_v1_5CR_

060424.pdf. 

146As explained above, the pairwise 

bootstrapping methodology would perform 10,000 

iterations of resampling with replacement from the 

enrollees in the issuer’s SVA subsample at that 

level. The average difference between enrollees’ 

IVA and SVA risk scores would be calculated for 

each resample to build an issuer-specific 

confidence interval for statistical testing of 

enrollee’s IVA and SVA risk scores. If the 

bootstrapped confidence interval contains zero, the 

issuer would pass pairwise means testing at that 

SVA subsample level. If the bootstrapped 

confidence interval does not include zero, the 

issuer would fail pairwise means testing at that 

SVA subsample level. More detail on the pairwise 

bootstrapping methodology will be provided in the 

applicable benefit year’s HHS–RADV protocols. 

147The rate of improvement in the false negative 

rate and how this is attributed to the initial SVA 

subsample size or the statistical methodology 

differs depending on the effect size, or the 

magnitude of the true difference between IVA and 

SVA results. For these estimates, we use the 

Cohen’s D effect size measure and assume a small 

effect size. See Cohen, Jacob (1988). Statistical 

Power Analysis for the Behavioral Sciences. 

Routledge. ISBN 978–1–134–74270–7. pp 25–27. 

148For purposes of this proposal, rerunning HHS– 

RADV results involves recalculating all national 

program benchmarks and issuers’ error rate results, 

reissuing issuers’ error rate results, conducting 

discrepancy reporting and appeal windows for the 

reissued results, applying the reissued error rates to 

the applicable benefit year’s State transfers, and 

invoicing, collecting, and distributing any 

additional changes to the HHS–RADV adjustments 

to State transfers. 

Issuers and IVA Entities that pass 

pairwise testing and do not receive an 

SVA findings report are still able to 

review key SVA findings, such as the 

most commonly miscoded HCCs for 

SVA reviewed sampled enrollees, from 

each benefit year of HHS–RADV in the 

results memo.144 Issuers that do not 

pass pairwise testing receive SVA 

findings reports that include details on 

the enrollee-level HCCs that differed 

between IVA and SVA review. 

Lastly, we note that in finalizing these 

changes to the SVA processes, we 

recognize that the paired t-test with a 95 

percent confidence interval has been 

consistently used as the SVA pairwise 

testing procedure since we started 

conducting HHS–RADV, but we also 

note that the consistency or 

predictability of an issuer’s SVA 

pairwise means test results from one 

benefit year to the next is not indicative 

of the effectiveness of the methodology. 

The SVA pairwise means test is 

intended to identify whether significant 

differences exist between an issuer’s 

IVA and SVA results in a given benefit 

year of HHS–RADV and to determine 

which audit results should be used for 

that year’s error estimation. We also 

further clarify that HHS does not 

calculate z-scores during the current 

SVA pairwise testing methodology as 

the current statistical test is a paired ttest.145 HHS will not calculate z-scores 

under the finalized SVA pairwise 

testing methodology beginning with 

benefit year 2024 HHS–RADV as this 

statistical test will build bootstrapped 

confidence intervals.146

For these reasons, we disagree with 

delaying the finalization of changes to 

the SVA methodology after the finalized 

changes to the IVA methodology take 

place as the changes to the SVA 

methodology are intended to improve 

the sensitivity of the pairwise means 

test and the finalized changes to the IVA 

methodology are specific to IVA 

sampling and do not address the 

pairwise means test. 

Comment: One commenter inquired 

about how the estimated costs and 

estimated improvement in the false 

negative rate were attributed to 

modifying the SVA subsample size as 

opposed to modifying the pairwise 

means testing procedure. This 

commenter noted concern that 

bootstrapping would not address 

underlying issues associated with 

smaller sample sizes or could create a 

false sense of precision at smaller 

sample sizes and stated that the current 

t-test is better suited to handle small 

sample size uncertainty. However, this 

commenter also suggested that 

bootstrapping may be appropriate if 

CMS observes that the rate of false 

negatives reliably decreases when 

switching from the t-test to 

bootstrapping and keeping the 

confidence interval and sample size 

constant. 

Response: We estimate that 

approximately 20 percent of the 

estimated improvement in the false 

negative rate will be attributable to 

modifying the initial SVA subsample 

size to 24 enrollees and approximately 

80 percent will be attributable to 

modifying to pairwise means test to a 

bootstrapped 90 percent confidence 

interval.147 We also estimate that 

approximately 33 percent of the costs 

associated with making these changes in 

2024 benefit year HHS–RADV will be 

attributed to transitioning from the 

current t-test pairwise means testing 

procedure to the bootstrapped 

procedure and coding the changes to 

test and execute the bootstrapping 

methodology, and the remaining costs 

will be attributed to increasing the 

initial SVA subsample size to 24 

enrollees. 

We are not concerned with a false 

sense of precision at smaller sample 

sizes because we are increasing the 

initial SVA subsample size from 12 to 

24 enrollees and our analysis comparing 

the updated SVA pairwise means test to 

the current test indicates a lower 

incidence of false negatives at smaller 

sample sizes. Moreover, if there is an 

increase in false positives at smaller 

sample sizes, the incremental review 

structure of the SVA allows the 

opportunity for those false positives to 

be corrected and for issuers to pass SVA 

pairwise testing at larger sample sizes 

such that their IVA results could be 

used for error estimation. 

c. HHS–RADV Materiality Threshold for 

Rerunning HHS–RADV Results 

(§ 156.1220(a)(2)) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82356), we proposed 

to amend § 156.1220(a) to codify a new 

materiality threshold for HHS–RADV 

appeals, hereafter referred to as the 

materiality threshold for rerunning 

HHS–RADV results.148 We proposed to 

amend § 156.1220 to add a new 

paragraph (a)(2)(i) to provide that HHS 

would rerun HHS–RADV results in 

response to a successful appeal when 

the impact to the issuer who submitted 

the appeal (that is, the filer’s) HHS– 

RADV adjustments to State transfers is 

greater than or equal to $10,000. We are 

finalizing these amendments as 

proposed; the discussion of comments 

pertaining to this proposal are below in 

part 156 (§ 156.1220). 

C. Part 155—Exchange Establishment 

Standards and Other Related Standards 

1. Solicitation of Comments—Navigator, 

Non-Navigator Assistance Personnel, 

and Certified Application Counselor 

Program Standards (§§ 155.210, 155.215, 

and 155.225) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82356), we solicited 

comment regarding how assisters who 

perform their assister duties in a 

hospital and hospital system may, 

within the bounds of the statute, refer 

consumers to programs designed to 

reduce medical debt. We thank 

commenters for their feedback and will 

take comments into consideration in 

future rulemaking. 


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149For purposes of this policy, ‘‘agency-level’’ 

misconduct or noncompliance refers to misconduct 

or noncompliance with HHS Exchange standards 

and requirements under § 155.220 associated with 

an eligibility application or enrollment transaction 

that lists an agency’s National Producer Number 

(NPN) or that the agency was involved in or 

facilitated the submission of, or misconduct or 

noncompliance with HHS Exchange standards and 

requirements under § 155.220 that involves the 

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

or is otherwise involved in. 

150The term also includes an agent or broker 

direct enrollment technology provider. See 

§ 155.20. 

151 45 CFR 155.220(c)(5). 

152We notify State Departments of Insurance 

when we suspend or terminate the Exchange 

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

under § 155.220(g), per § 155.220(g)(6). We also 

maintain and publish the Agent and Broker 

Federally-facilitated Marketplace (FFM) 

Registration Termination List, which allows QHP 

issuers, consumers, and other interested parties to 

search for NPNs associated with agents, brokers, 

and web-brokers whose Exchange Agreement(s) 

have been terminated or suspended. See https://

data.healthcare.gov/ab-suspension-andtermination-list. 

153 45 CFR 155.220(g)(1). 

154 45 CFR 155.220(g)(3)(ii). 

155 45 CFR 155.220(g)(5). 

156 45 CFR 155.220(k)(1)(i). 

157 45 CFR 155.220(k)(1)(ii). 

158 45 CFR 155.220(k)(3). HHS also authority to 

temporarily suspend the ability of a web-broker to 

make its non-Exchange website available to transact 

information with HHS, if HHS discovers a security 

and privacy incident or breach, for the period in 

which HHS begins to conduct an investigation and 

until the incident or breach is remedied to HHS’ 

satisfaction. See 45 CFR 155.220(c)(4)(ii). 

159As detailed in III.C.2.b. of this rule, we are 

finalizing the proposal to amend § 155.220(k)(3) 

such that an agent’s or broker’s ability to transact 

information with the Exchange in instances in 

which HHS discovers circumstances that pose 

unacceptable risk to the accuracy of the Exchange’s 

eligibility determinations, Exchange operations, 

applicants, or enrollees, or Exchange information 

technology systems, including but not limited to 

risk related to noncompliance with the standards of 

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

privacy and security standards at § 155.260, until 

the circumstances of the incident, breach, or 

noncompliance are remedied or sufficiently 

mitigated to HHS’ satisfaction. 

160Open Enrollment Survey, conducted between 

January 29, 2024, and February 14, 2024. 

161Based on the PY 2024 enrollment total of 16 

million consumers. 

2. Ability of States To Permit Agents 

and Brokers and Web-Brokers To Assist 

Qualified Individuals, Qualified 

Employers, or Qualified Employees 

Enrolling in QHPs (§ 155.220) 

a. Engaging in Compliance Reviews and 

Taking Enforcement Actions Against 

Lead Agents for Insurance Agencies 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82357), we addressed our 

authority under § 155.220 to address 

misconduct or noncompliance occurring 

at an agency-level,149 by undertaking 

compliance reviews of and enforcement 

action against an insurance agency’s 

(agency’s) lead agent(s), and discussed 

how we propose to utilize this authority 

to hold agencies accountable for 

misconduct or noncompliance with 

applicable HHS Exchange standards and 

requirements under § 155.220. We noted 

that the term lead agent generally refers 

to any person who registers or maintains 

a business within a State and/or any 

person who registers a business NPN 

with the Exchange, who typically is an 

executive or person with a leadership 

role within an agency. 

Section 155.220 currently applies to 

an agent, broker, or web-broker that 

assists with or facilitates enrollment of 

qualified individuals, qualified 

employers, or qualified employees in a 

QHP in a manner that constitutes 

enrollment through the Exchange or 

assists individuals in applying for APTC 

and CSRs for coverage offered through 

an Exchange. ‘‘Web-broker’’ is defined 

in § 155.20 as an individual agent or 

broker, group of agents or brokers, or 

business entity registered with an 

Exchange under § 155.220(d)(1) that 

develops and hosts a non-Exchange 

website that interfaces with an 

Exchange to assist consumers with 

direct enrollment in QHPs offered 

through the Exchange as described in 

§ 155.220(c)(3) or § 155.221.150 Section 

155.20 defines ‘‘agent or broker’’ as a 

person or entity licensed by the State as 

an agent, broker or insurance producer. 

In the proposed rule (89 FR 82357), 

we did not propose amendments to our 

existing regulations to codify our 

approach to hold agencies, through their 

lead agents, accountable for misconduct 

or noncompliance with applicable 

standards and requirements in § 155.220 

because they can reasonably be 

interpreted to apply to agencies that are 

involved in Exchange enrollment 

transactions, since agencies are entities 

licensed by a State as an agent, broker, 

or insurance producer. As such, 

agencies fall under the current 

definitions of ‘‘agent or broker’’ and 

‘‘web-broker’’ under § 155.20. 

We proposed to rely on the same 

authorities under § 155.220 to address 

misconduct or noncompliance occurring 

at an agency-level, by undertaking 

compliance reviews of and enforcement 

action against an insurance agency’s 

lead agent(s). These authorities subject 

agents, brokers, and web-brokers to 

compliance reviews and enforcement 

actions under § 155.220, which allow 

HHS to periodically monitor and audit 

an agent, broker, or web-broker to assess 

their compliance with the applicable 

requirements of § 155.220.151 This 

means that agencies, through their lead 

agents, would also be subject to section 

155.220(g), which sets forth standards 

for suspension and termination of an 

agent’s, broker’s, or web-broker’s 

Exchange Agreements for cause, which 

ends their participation in the FFEs.152

These enforcement actions may be taken 

in three situations: (1) for specific 

findings or patterns of 

noncompliance,153 (2) failure to 

maintain proper licensure in all States 

where the agent, broker, or web-broker 

is assisting consumers,154 and (3) for 

engaging in fraud or abusive conduct.155

Likewise, through their lead agents, 

agencies would be subject to section 

155.220(k), which sets forth penalties 

other than suspension or termination of 

the agent’s, broker’s, or web-broker’s 

Exchange Agreements for the current 

plan year. If an agent, broker, or webbroker fails to comply with the 

requirements of § 155.220, HHS may 

deny an agent, broker, or web-broker the 

right to enter into Exchange Agreements 

in future years 156 or impose a civil 

money penalty as described in 

§ 155.285.157

Lastly, HHS may immediately impose 

a system suspension against an agent or 

broker if HHS discovers circumstances 

that pose unacceptable risk to Exchange 

operations or Exchange information 

technology systems.158 159 We explained 

that under this proposal agencies, 

through their lead agents, would be 

subject to these enforcement actions too. 

The NPN is a unique identifier for an 

agent, broker, web-broker, or agency that 

the National Association of Insurance 

Commissioners assigns during the State 

licensing application process. The NPN 

can be recorded as part of the 

consumer’s Exchange eligibility 

application and is used to track which 

individual agents, brokers, or webbrokers and agencies assisted Exchange 

consumers. QHP issuers use the NPN to 

identify the agent, broker, web-broker, 

or agency for compensation purposes. 

Either the NPN of the individual agent, 

broker, or web-broker assisting the 

consumer, or the business NPN of the 

agency, may be listed on the consumer’s 

eligibility application submitted to an 

FFE or SBE–FP. In the most recent Open 

Enrollment survey, approximately 4 

percent of respondents attested to using 

a business NPN for all their 

enrollments.160 That means at least 

640,000 enrollments 161 contained an 

NPN that did not belong to an 

individual agent, broker, or web-broker. 

The NPN, when provided, is a key 

identifying element in any compliance 

review under § 155.220(c)(5) or 

enforcement action by HHS under 


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162Sections 155.220(g)(3)(ii) and (l) allow HHS to 

immediately terminate the Exchange Agreements of 

an agent, broker, or web-broker for cause if they fail 

to maintain the appropriate license under State law 

as an agent, broker, or insurance producer in every 

State they actively assist consumers with applying 

for APTC or CSRs or with enrolling in QHPs 

through the Exchanges. 

163 In this context, ‘‘downline agents’’ refers to 

agents, brokers, and web-brokers who are working 

for, or with, a lead agent against whom we take an 

enforcement action, and who may be impacted by 

that compliance action. 

164Such disruptions may include forcing an 

agent, broker, or web-broker to change agencies if 

the agency stopped working on the Exchanges due 

to a compliance action, or requiring an agent, 

broker, or web-broker to use their NPN on instead 

of an agency’s NPN when actively assisting 

Exchange consumers with enrollment. 

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

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

Under the approach described in the 

proposed rule (89 FR 82358), when 

information suggests there is agencylevel misconduct or noncompliance, an 

investigation or compliance review 

would occur, and enforcement action 

may be taken. Any such compliance 

review, or enforcement action would be 

directed at the agency’s lead agent(s), 

and any other agent, broker, or webbroker who is discovered to be involved 

in the misconduct or noncompliant 

activity. When the misconduct or 

noncompliant activity is occurring at 

the agency-level, as stated in the 

proposed rule (89 FR 82358), we believe 

it is appropriate for the lead agents to be 

subject to the compliance review, or 

enforcement action, in addition to the 

agents, brokers, or web-brokers working 

at or for an agency that may have been 

involved in the misconduct or 

noncompliant activity, as those lead 

agents are the individuals responsible 

for directing and/or overseeing their 

employees’ and contractors’ behavior 

and activity. Engaging in compliance 

reviews and taking enforcement actions 

against lead agents in these 

circumstances would ensure that the 

individuals who are directing and/or 

overseeing the misconduct or 

noncompliance are held accountable. 

We sought comment on these 

proposals. In particular, we solicited 

comments from States as to the specific 

or unique characteristics of their agency 

oversight policies and procedures, 

including how they define or describe 

the term ‘‘lead agent,’’ or whatever term 

of art each State uses to capture the 

same individuals who would fall under 

our definition of ‘‘lead agent’’ in this 

preamble, as well as suggestions from 

States for ways to enhance collaboration 

and alignment of our oversight and 

enforcement of agencies that assist 

consumers applying for and enrolling in 

QHPs through the FFEs and SBE–FPs. 

We also solicited comments from 

Classic DE and EDE partners, issuers, 

and other interested parties regarding 

whether we should consider an agent, 

broker, or web-broker that allows their 

NPN to be used by other agents, brokers, 

or web-brokers to be a lead agent and 

potentially held responsible for 

misconduct or noncompliant behavior 

or activities committed by another 

agent, broker, or web-broker using their 

NPN. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this approach as proposed. 

We summarize and respond to public 

comments received on the proposed 

approach to address misconduct or 

noncompliance occurring at an agencylevel by undertaking compliance 

reviews of and enforcement action 

against agencies through their lead 

agents below. 

Comment: Many commenters stated 

this change would protect consumers 

from noncompliant and fraudulent 

behavior and support the integrity of the 

Exchange. 

Response: We agree with commenters 

that this change will better protect 

consumers and support the integrity of 

the Exchange. This change will allow 

HHS to undertake targeted actions— 

compliance reviews and enforcement 

actions—against lead agents to address 

misconduct or noncompliance occurring 

at an agency-level. Engaging in 

compliance reviews and taking 

enforcement actions against lead agents 

in these circumstances will ensure that 

the individuals who are directing and/ 

or overseeing the misconduct or 

noncompliance are held accountable. 

This, in turn, will help protect 

consumers on the FFEs and SBE–FPs 

(Exchanges), reduce fraud and other 

misconduct and noncompliance on the 

Exchanges, and improve public trust in 

the Exchanges as a whole. 

Comment: We received one comment 

noting that a single complaint of 

potential fraud or misconduct by an 

agent, broker, or web-broker should be 

enough to trigger an investigation. 

Response: We agree with the 

commenter in that, depending on the 

nature of and facts underlying a 

complaint, one complaint of misconduct 

or noncompliance by an agent, broker, 

or web-broker could be enough to 

warrant an investigation and possible 

enforcement action under our existing 

authorities at § 155.220. We have also 

had conversations with interested 

parties, including State Departments of 

Insurance (DOIs), that share that view. 

We currently investigate and may take 

enforcement actions in situations where 

there was only a single complaint of 

misconduct or noncompliance by an 

individual agent, broker, or web-broker. 

For example, we use our authority 

under § 155.220(g)(3)(ii) to terminate the 

Exchange Agreements of agents, brokers, 

and web-brokers where there has only 

been one licensure complaint directed 

at them.162

We note that our proposal in the 

proposed rule concerned when we 

would engage in compliance reviews 

and take enforcement actions against 

lead agents for agency-level misconduct 

and noncompliance, as well as any 

other individual agents, brokers, and 

web-brokers involved in that agencylevel misconduct and noncompliance. 

We refer readers to discussion in the 

proposed rule (89 FR 82358 through 

82360) for a more detailed explanation 

of how we determine whether to engage 

in compliance reviews and take 

enforcement actions in these 

circumstances. 

Comment: One commenter expressed 

concern about taking enforcement 

actions against lead agents and the 

implications this would have on 

downline agents, including downline 

agents’ ability to receive commissions 

and complete enrollments. These 

commenters requested that CMS only 

engage in enforcement actions against 

lead agents when CMS is sure they were 

involved in the agency-level misconduct 

or noncompliance. 

Response: We are mindful of the 

impact that enforcement actions under 

this proposal may have on an agency’s 

downline agents.163 We understand that 

there are different structures and 

relationships between agencies and 

their downline agents, brokers, and 

web-brokers, including single-level call 

centers, multi-level call centers, as well 

as agents, brokers, and web-brokers who 

work for multiple agencies, and that 

investigating and taking an enforcement 

action against a lead agent may disrupt 

some of these relationships.164 Our goal 

is not to disrupt these structures, but we 

understand there may be impact on 

downline agents, brokers, and webbrokers, including single-level call 

centers, multi-level call centers, as well 

as agents, brokers, and web-brokers who 

work for multiple agencies, while we 

investigate and potentially suspend and 

terminate the Exchange Agreements of 

lead agents engaged in agency-level 

misconduct or noncompliance. 

However, as we explained in the 

proposed rule (89 FR 82357), we believe 

this enforcement framework is 

necessary to protect the integrity of the 

Exchanges, as well as to protect 


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consumers from agency-level 

misconduct that threatens their PII, 

Exchange coverage, and trust in the 

Exchanges and the many compliant 

agents, brokers, and web-brokers who 

operate on them. 

In addition, we note that even if we 

took enforcement action against an 

agency’s lead agent(s) and terminated 

their Exchange Agreements, agents, 

brokers, and web-brokers employed by 

that lead agent’s agency would still be 

able to assist consumers with Exchange 

enrollment using their own NPNs or 

their agency’s NPN, assuming the 

licenses associated with those NPNs 

have not been suspended or revoked. 

We appreciate the commenter’s 

suggestion that we only take 

enforcement actions against lead agents 

when we are certain they were involved 

in the agency-level misconduct or 

noncompliance at issue. Under the 

approach we are finalizing, we will take 

enforcement action against a lead agent 

when we determine that the lead agent 

was involved in the misconduct or 

noncompliance at issue—whether by 

directing, overseeing, or otherwise 

participating in it. In addition, we will 

take enforcement action against a lead 

agent when we determine that there was 

agency-level endorsement of or 

involvement in the misconduct or 

noncompliance issue. We refer readers 

to the proposed rule (89 FR 82357) for 

discussion about why we believe it is 

appropriate to do so. In either case, we 

will only consider taking enforcement 

action against a lead agent when we 

have discovered information or 

evidence that indicates the lead agent’s 

involvement in the misconduct or 

noncompliant behavior or activity at 

issue. 

We will not permit a lead agent to 

engage in agency-level misconduct or 

noncompliant behavior or activity 

merely because there are downline 

agents or entities that may be impacted 

by their Exchange Agreement 

suspension or termination or other 

enforcement action against them. Doing 

so would run counter to the consumer 

protection and program integrity goals 

that underlie many of our agent, broker, 

and web-broker enforcement policies, 

including under § 155.220(g) and (k) in 

particular. See for example, the 2017 

Payment Notice (81 FR 12259), which 

codified our ability to suspend and 

terminate an agent, broker, or webbroker’s Exchange Agreements under 

§ 155.220(g)(5)(i) ‘‘in cases involving 

potential fraud or abusive conduct,’’ and 

the 2020 Payment Notice (84 FR 17553), 

which codified our authority to systemsuspend agents and brokers in instances 

where ‘‘. . . there is a need to take 

immediate action to protect sensitive 

consumer data or Exchange systems and 

operations’’ under § 155.220(k)(3). 

Similar to this proposal, we finalized 

these policies to protect consumers, 

their PII, and the integrity of the 

Exchanges. 

Comment: A commenter 

recommended that CMS consider the 

volume of consumer complaints 

submitted to CMS about an agency 

relative to the volume of Exchange 

consumer enrollments that the agency is 

associated with before taking 

enforcement action against the agency’s 

lead agent. 

Response: We appreciate commenter’s 

input. Under our approach, we will 

consider the volume and subject matter 

of consumer complaint(s) and other 

complaints that name or are directed at 

a lead agent as we determine whether to 

engage in enforcement action against or 

a compliance review of the lead agent. 

In particular, complaints that name an 

agency’s lead agent(s), especially for 

unauthorized enrollments or other 

potentially fraudulent or noncompliant 

activity, could trigger a compliance 

review or enforcement action against the 

lead agent(s), as they could indicate 

agency endorsement of or involvement 

in misconduct or noncompliant 

behavior or activities, including 

inaction by the agency to try to curb the 

misconduct or noncompliant behavior 

or activities. We will also look to see if 

complaints against a lead agent are 

similar to complaints received against 

the agency’s other agents, brokers, or 

web-brokers, which could indicate 

agency-level endorsement of or 

involvement in the misconduct or 

noncompliant behavior or activities. We 

refer readers to the proposed rule (89 FR 

82357) for further discussion on the 

criteria we will consider as we 

determine whether to initiate a 

compliance review of or enforcement 

action against a lead agent and why we 

believe these criteria are appropriate. 

With respect to considering the 

volume of complaints submitted against 

an agency relative to the volume of 

Exchange consumer enrollments the 

agency is associated with prior to 

investigating and taking compliance 

action against a lead agent, we decline 

to adopt this approach at this time. We 

currently investigate and take 

enforcement actions in situations where 

there was only a single complaint made 

about an agency or its agents, brokers, 

and web-brokers, including agencies 

associated with relatively few Exchange 

enrollments. We have consistently 

found that many of these cases involve 

serious risks to Exchange consumer 

coverage and PII and the integrity of the 

Exchange that require immediate action 

by CMS. We note that ignoring 

complaints against an agency because 

the volume of complaints is small 

relative to the agency’s total book of 

business would be a disservice to 

consumers and not achieve our program 

integrity goals of promoting a safe and 

secure Exchange and reducing fraud and 

abuse. However, as we develop 

experience implementing this 

enforcement framework, we will further 

consider the commenter’s 

recommendation in future rulemaking 

as applicable. 

Comment: Some commenters 

expressed concern that we are no longer 

allowing agents, brokers, and webbrokers to assist consumers with 

enrolling in Exchange coverage and are 

allowing unlicensed persons to enroll 

consumers in Exchange coverage. These 

commenters were also concerned that 

we are eliminating the ability of an 

agent, broker, or web-broker to assist 

consumers with enrollment face-to-face. 

Commenters noted that agents, brokers, 

and web-brokers play a crucial role in 

helping consumers enroll in Exchange 

coverage and answering complicated 

health insurance questions consumers 

may have. 

Response: We agree with commenters 

that agents, brokers, and web-brokers 

play a crucial role in helping to enroll 

consumers in Exchange coverage. 

Agents, brokers, and web-brokers guide 

consumers through the Exchange 

enrollment process, answer questions, 

and build personal relationships with 

consumers along the way. Accordingly, 

as we explain earlier in this final rule, 

our approach with respect to 

compliance review and enforcement 

actions against agencies through their 

lead agents will not limit the ability of 

an agent, broker, or web-broker to assist 

consumers with enrolling in Exchange 

coverage, including face-to-face whether 

through a DE pathway or the ‘‘Exchange 

Pathway’’ (whereby an agent, broker, or 

web-broker sits ‘‘side-by-side’’ to assist 

the consumer with enrollment using the 

HealthCare.gov website). 

Instead, this approach clarifies that 

our current standards and requirements 

in § 155.220 can reasonably be 

interpreted to apply to agencies that are 

involved in Exchange enrollment 

transactions, since these agencies are 

entities licensed by the State as an 

agent, broker, or insurance producer and 

fall under the current definitions of 

‘‘agent or broker’’ and ‘‘web-broker’’ in 

§ 155.20. Addressing these issues in this 

rulemaking also clarifies and provides 

notice to interested parties that we will 

rely on those same authorities under 

§ 155.220 to address misconduct or 


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165This framework will not directly impact the 

existing abilities of issuer and direct enrollment 

entity application assisters to assist individuals in 

the individual market with applying for a 

determination or redetermination of eligibility for 

coverage through the Exchange or for insurance 

affordability programs. See 45 CFR 155.20. Those 

assisters remain subject to regulatory requirements 

at §§ 155.221(d) and 155.415(b). See also Patient 

Protection and Affordable Care Act; Program 

Integrity: Exchange, SHOP, and Eligibility Appeals 

final rule (78 FR 54074 through 54075, 54086 

through 54087, and 54125 through 54126); and 

2020 Payment Notice (84 FR 17525 through 17526). 

166We did not propose to add a reference to webbrokers in § 155.220(k)(3) as part of these 

amendments because as DE entities, web-brokers 

are subject to the system suspension authority at 

§ 155.221(e). See § 155.221(a)(2). As amended in 

this final rule, § 155.220(k)(3) will be similar to the 

authority captured at § 155.221(e) that applies to DE 

entities and permits HHS to immediately suspend 

the DE entity’s ability to transact information with 

the Exchange if HHS discovers circumstances that 

pose unacceptable risk to the accuracy of the 

Exchange’s eligibility determinations, Exchange 

operations, or Exchange information technology 

systems until the incident or breach is remedied or 

sufficiently mitigated to HHS’ satisfaction. 

167Section 155.220(d)(3) requires agents, brokers, 

and web-brokers to enter into a Privacy and 

Security Agreement pursuant to which they agree 

to comply with Exchange privacy and security 

standards adopted consistent with § 155.260. There 

are two Privacy and Security Agreements between 

CMS and the agent, broker, and web-broker for FFEs 

and SBE–FPs: (1) one is for the individual market 

FFEs and SBE–FPs, and (2) one is for the FF–SHOPs 

and SBE–FP–SHOPs. 

168When consumers call the Marketplace Call 

Center to report unauthorized enrollments, we 

resolve their complaints through a combination of 

the following: (1) we review the complaint to verify 

that the consumer’s plan switch was unauthorized 

and identify the plan that the consumer wants to 

be enrolled in; (2) we instruct the issuer offering the 

plan the consumer wants to be enrolled in to 

reinstate the consumer’s enrollment in that plan as 

if it had not been terminated. The issuer is 

instructed to cover all eligible claims incurred and 

accumulate all cost sharing toward applicable 

deductibles and annual limits on cost sharing; and/ 

or (3) consumers receive information via an IRS 

Form 1095–A that is generated by HHS and which 

the enrollee may send to the IRS to prevent adverse 

tax implications as a result of the unauthorized plan 

switch activity. 

noncompliance occurring at an agencylevel by undertaking compliance 

reviews of and enforcement actions 

against an insurance agency’s lead 

agent(s). 

Similarly, this approach will not 

allow unlicensed persons to enroll 

consumers in Exchange coverage. 

Consistent with § 155.220(a) and the 

definitions of ‘‘agent or broker’’ and 

‘‘web-broker’’ in § 155.20, agents, 

brokers, and web-brokers can assist 

consumers with enrolling in Exchange 

coverage in a manner that constitutes 

enrollment through the Exchange only if 

they are properly licensed in any State 

they are conducting business as an 

agent, broker, or insurance producer. 

Likewise, consistent with the definition 

of ‘‘web-broker’’ in § 155.20 and 

§ 155.221(a)(2), web-brokers who are 

agents or brokers can only assist 

consumers with direct enrollment if 

they are properly licensed in any State 

they are conducting business as an 

agent, broker, or insurance producer in 

and meet the applicable requirements of 

§§ 155.220 and 155.221.165 We will 

continue to monitor consumer 

enrollments on the Exchange to ensure 

that agents, brokers, and web-brokers 

who assist consumers with enrollment 

in Exchange coverage are properly 

licensed, and we will continue to 

leverage our authority under 

§ 155.220(g)(3)(ii) to promptly terminate 

the Exchange Agreements of any such 

unlicensed individuals. 

Comment: A commenter requested 

CMS expand the definition of ‘‘lead 

agent’’ to include any agent, broker or 

web-broker who willingly allows 

another agent, broker, or web-broker to 

use their NPN. 

Response: We appreciate receiving 

this comment but have elected not to 

expand our proposed definition of ‘‘lead 

agent’’ to include agents, brokers, and 

web-brokers who allow another agent, 

broker, or web-broker to use their NPN 

at this time. 

The definition of lead agent we are 

finalizing in this rule includes persons 

who register and/or maintains a 

business with a State and/or any person 

who registers a business NPN with the 

Exchanges. We developed this 

definition to identify agents, brokers, 

and web-brokers at an agency who are 

typically an executive or in a leadership 

role. We believe expanding the 

definition of lead agent as the 

commenter suggests will expand the 

pool of potential lead agents subject to 

compliance reviews and enforcement 

actions under this framework too 

greatly; we have observed that it is 

common for agents, brokers, and webbrokers to allow other agents, brokers, 

and web-brokers at their agencies to use 

their NPNs, such as where multiple 

agents, brokers, and web-brokers 

actively assist a consumer but use the 

NPN of the writing agent (one of the 

aforementioned agents, brokers, or webbrokers) on the eligibility application. 

Potentially subjecting such a high 

volume of lead agents to compliance 

reviews or enforcement actions to 

address agency-level misconduct or 

noncompliance may unduly interfere 

with agency operations and the ability 

of compliant agents, brokers, and webbrokers to assist consumers with 

Exchange enrollment, which would run 

counter to our goals of consumer 

protection and encouraging Exchange 

enrollment. 

b. System Suspension Authority 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82360), we proposed to 

amend § 155.220(k)(3), which currently 

outlines our authority to immediately 

suspend an agent’s or broker’s ability to 

transact information with the Exchange 

if we discover circumstances that pose 

unacceptable risk to Exchange 

operations or Exchange information 

technology systems until the incident or 

breach is remedied or sufficiently 

mitigated to HHS’ satisfaction.166

Specifically, we proposed to add 

language to reflect that § 155.220(k)(3) 

system suspensions may be imposed in 

instances in which we discover 

circumstances that pose unacceptable 

risk to the accuracy of the Exchange’s 

eligibility determinations, Exchange 

operations, applicants, or enrollees, or 

Exchange information technology 

systems, including but not limited to 

risk related to noncompliance with the 

standards of conduct under 

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

privacy and security standards at 

§ 155.260,167 168 until the circumstances 

of the incident, breach, or 

noncompliance are remedied or 

sufficiently mitigated to HHS’ 

satisfaction. As stated in the proposed 

rule (89 FR 82360), we believe these 

amendments are necessary and 

appropriate Exchange program integrity 

measures to support the efficient 

administration of Exchange activities, 

reduce fraud and abuse, and protect 

Exchange applicant or enrollee’s PII. We 

also explained in the proposed rule (89 

FR 82361) that we were pursuing these 

amendments in the interest of 

transparency regarding when HHS may 

invoke this authority. 

In the proposed rule (89 FR 82360), 

we stated that we continuously monitor 

for behaviors or activities related to 

Exchange operations or access to 

Exchange systems and Exchange 

enrollee or applicant PII that we believe, 

based on our experience overseeing 

agents and brokers on the FFEs and 

SBE–FPs, may be indicative of 

misconduct or noncompliance with 

applicable HHS Exchange standards or 

requirements. Our experience 

overseeing agents and brokers on the 

FFEs and SBE–FPs includes past 

completed agent, broker, and webbroker investigations and enforcement 

actions, and observations of behavior by 

agents and brokers that may not comply 

with the standards of conduct at 

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

privacy and security standards at 

§ 155.260 and that could endanger the 

accuracy of Exchange eligibility 


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169CMS. (2024, July 19). CMS Statement on 

System Changes to Stop Unauthorized Agent and 

Broker Marketplace Activity. https://www.cms.gov/ 

newsroom/press-releases/cms-statement-systemchanges-stop-unauthorized-agent-and-brokermarketplace-activity. 

170When consumers call the Marketplace Call 

Center to report unauthorized enrollments, we 

resolve their complaints through a combination of 

the following: (1) we review the complaint to verify 

that the consumer’s plan switch was unauthorized 

and identify the plan that the consumer wants to 

be enrolled in; (2) we instruct the issuer offering the 

plan the consumer wants to be enrolled in to 

reinstate the consumer’s enrollment in that plan as 

if it had not been terminated. The insurer is 

instructed to cover all eligible claims incurred and 

accumulate all cost sharing toward applicable 

deductibles and annual limits on cost sharing; and/ 

or (3) consumers receive information via an 

updated IRS Form 1095–A that is generated by HHS 

and which the enrollee may send to the IRS to 

prevent adverse tax implications as a result of the 

unauthorized plan switch activity. 

171We did not propose to add a reference to webbrokers as part of the amendments to § 155.220(k)(3) 

because web-brokers are subject to the system 

suspension authority at § 155.221(e) applicable to 

DE entities. See § 155.221(a)(2). 

determinations, applicant or enrollee 

PII, or Exchange operations or systems 

in a number of ways. 

Consistent with the existing 

framework, in circumstances where we 

would impose a system suspension 

under the proposed amendments to 

§ 155.220(k)(3), in the proposed rule, we 

explained that we would notify the 

agent or broker of the suspension and 

they would have an opportunity to 

submit evidence and information or to 

demonstrate that the circumstances of 

the incident, breach, or noncompliance 

are remedied or sufficiently mitigated to 

HHS’ satisfaction to warrant lifting the 

suspension to reinstate their system 

access. We further noted that we would 

review such evidence and information 

submitted by the agent or broker to 

determine if the circumstances of the 

incident, breach, or noncompliance are 

remedied or sufficiently mitigated to 

warrant lifting the suspension to 

reinstate their system access. For 

example, we anticipate receiving 

documentation of consumer consent 

and/or review and confirmation of the 

accuracy of the Exchange eligibility 

application information and assessing 

whether the documentation complies 

with § 155.220(j)(2)(ii) and (iii) for 

consumers cited in the suspension 

notice from agents and brokers whose 

system access we would suspend under 

§ 155.220(k)(3). If such evidence or 

information remedies or sufficiently 

mitigates the incident, breach, or 

noncompliance to our satisfaction, we 

explained that we would lift the 

suspension and reinstate Exchange 

system access for the agent or broker. 

In cases where such evidence and 

information does not remedy or 

sufficiently mitigate the circumstances 

of the incident, breach or 

noncompliance to HHS’ satisfaction 

(including situations where there is no 

response from the agent or broker), we 

explained that we would not lift the 

suspension under § 155.220(k)(3) to 

reinstate the agent’s or broker’s system 

access and would pursue a suspension 

or termination of the agent’s or broker’s 

Exchange Agreements under 

§ 155.220(g). We also noted that agents 

and brokers whose ability to transact 

information with the Exchange is 

suspended under § 155.220(k)(3) remain 

registered with the FFEs and are 

authorized to assist consumers using the 

Exchange (or side-by-side) pathway and 

the Marketplace Call Center, unless and 

until their Exchange Agreements are 

suspended or terminated under 

§ 155.220(f) or (g). 

We stated in the proposed rule (89 FR 

82362) that we are pursuing these 

amendments at this time in light of 

recent increases in behavior and activity 

by agents and brokers that indicate 

potential violations of § 155.220(j)(2)(i), 

(ii) or (iii) or the privacy and security 

standards at § 155.260 and endangers 

applicant or enrollee PII or Exchange 

program integrity in a manner that poses 

unacceptable risk to the accuracy of 

Exchange eligibility determinations, 

Exchange operations, applicants, 

enrollees, or Exchange information 

technology systems. 

At the beginning of PY 2024 Open 

Enrollment, we saw an increase in 

complaints from enrollees, applicants, 

and other individuals and entities to the 

Agent/Broker Help Desk regarding 

enrollments submitted without enrollee 

or applicant consent, enrollee or 

applicant eligibility applications 

submitted with incorrect information 

and without enrollee or applicant 

review or confirmation of the eligibility 

application information, and changes to 

enrollee or applicant eligibility 

applications made without enrollee or 

applicant consent. These complaints 

continued to be submitted at a high 

volume until we implemented system 

changes targeted at preventing these 

issues.169 A significant portion of these 

complaints have involved unauthorized 

changes to the plans in which enrollees 

or applicants were enrolled, impacting 

the ability of enrollees or applicants to 

utilize their desired coverage and access 

care.170

Unauthorized plan changes may harm 

enrollees or applicants by removing 

them from their selected plan and 

placing them in another plan that may 

not provide coverage that meets their 

needs (for example, different plans can 

have different formularies and provider 

networks). Unauthorized enrollments 

can also involve situations where 

individuals are enrolled in an Exchange 

plan without having an existing 

Exchange plan. Being enrolled in an 

Exchange plan, including in the case of 

an unauthorized enrollment, may 

impact a consumer’s future ability to 

enroll in health insurance through the 

Exchange or enroll in Medicare or 

Medicaid, as a consumer generally may 

not enroll in more than one plan 

simultaneously. Unauthorized 

enrollments may also create premium 

costs for the consumer if the 

unauthorized enrollment is in a nonzero-dollar premium plan. 

Unauthorized plan changes and 

enrollments cost the consumer time to 

learn about and resolve the discrepancy 

and either (1) unenroll from a plan they 

did not want, or (2) change the plan to 

one that better meets their needs. 

Additionally, submission of eligibility 

applications with inaccurate enrollee or 

applicant data, such as an incorrect 

income, may cause harm by providing 

the enrollee or applicant with an 

incorrect APTC amount. For example, 

an incorrect APTC amount can result in 

a consumer erroneously receiving a 

zero-dollar monthly premium. Because 

the consumer does not receive monthly 

billing notifications due to the zerodollar premiums, they may not know 

they were enrolled or that their 

eligibility application information was 

incorrect. However, once the consumer 

files their taxes, a reconciliation may 

reveal that the consumer must repay the 

incorrect APTC amount they were 

receiving. By their nature, these 

unauthorized enrollments and plan 

changes, as well as inaccurate eligibility 

application information submissions, 

also involve the misuse of enrollee or 

applicant PII, and they threaten the 

efficient administration of the Exchange 

and the accuracy of Exchange eligibility 

determinations. 

Our experience monitoring 

compliance with the new requirements 

in § 155.220(j)(2)(i), (ii), and (iii) has 

also shown that some agents, brokers, 

and web-brokers 171 are engaging in 

misconduct or noncompliant behavior 

or activities. For example, their 

consumer consent and eligibility 

application information review 

documentation often lacks the required 

content specified in § 155.220(j)(2)(ii) or 

(iii) that demonstrates the applicant or 

enrollee has taken an action to provide 

consent or confirm the accuracy of the 

eligibility application information prior 

to submission to the Exchange. For 

example, we have seen consent 

documentation that solely lists numbers 


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172A typed name using a cursive script, alone, 

makes it impossible for HHS to determine if the 

consumer, or their authorized representative, 

provided consent and typed the signature. In these 

situations, supplemental documentation is required 

for CMS to assess compliance with the consent 

requirements of § 155.220(j)(2)(iii). 

173Consistent with § 155.220(d), there are 

currently three Exchange Agreements with CMS 

that extend to agents or brokers assisting consumers 

in the FFEs and SBE–FPs: (1) the Agent Broker 

General Agreement for Individual Market FFEs and 

SBE–FPs, (2) the Agent Broker Privacy and Security 

Agreement for Individual Market FFEs and SBE– 

FPs, and (3) the Agent Broker SHOP Privacy and 

Security Agreement. Web-brokers assisting 

consumers in the FFEs and SBE–FPs are required 

to sign the Web-broker General Agreement, and 

web-brokers who are primary Enhanced Direct 

Enrollment (EDE) entities that assist consumers in 

the FFEs and SBE–FPs are required to sign the EDE 

Business Agreement and the Interconnection 

Security Agreement. In addition, each individual 

agent or broker who wishes to include the business 

entity NPN on Exchange eligibility applications 

must also complete the annual registration process, 

take the required trainings, and sign the applicable 

Exchange Agreements with CMS for the applicable 

plan year using their individual NPN. 

174 In this pathway, registered agents and brokers 

help a consumer obtain an eligibility determination 

and select a plan directly on HealthCare.gov. The 

consumer creates an account, logs in to the 

HealthCare.gov website with a consumer account, 

and ‘‘drives’’ the process; the agent or broker does 

not log in to HealthCare.gov. Generally, the 

Exchange Pathway requires the agent or broker to 

be sitting side-by-side with the consumer because 

the consumer must sign in to HealthCare.gov 

without sharing their log-in credentials with the 

agent or broker. 175See § 155.220(g)(4) and (5)(iii). 

that the agent, broker, or web-broker 

claims tie back to the consumer’s IP 

address, which we cannot verify and 

does not meet the consent 

documentation requirements of 

§ 155.220(j)(2)(iii). Additionally, we 

have received consent documentation 

that is merely a name, typed using a 

cursive script, with no indication or 

evidence demonstrating the consumer 

took an action to confirm their consent 

to the assistance provided by the agent, 

broker, or web-broker, such as a text 

message response, email response, or 

signature.172 The proposed amendments 

to § 155.220(k)(3) to permit immediate 

system suspensions would support 

HHS’ efforts to take immediate action to 

prevent further enrollee, applicant, 

Exchange operational, Exchange 

information technology, or Exchange 

program integrity harm caused by agents 

and brokers engaged in these types of 

misconduct or noncompliant behaviors 

or activities. 

Though, as stated in the proposed rule 

(89 FR 82362), we believe our current 

authority in § 155.220(k)(3) allows HHS 

to implement system suspensions 

broadly based on circumstances that 

pose unacceptable risk to Exchange 

operations or Exchange information 

technology systems, in light of the 

increasing complaints about 

unauthorized enrollments, we proposed 

amendments to § 155.220(k)(3) to 

increase transparency concerning the 

reach and application of system 

suspensions and capture in regulation 

when HHS may invoke this authority. 

These proposed amendments would 

allow HHS to immediately respond to 

circumstances discovered by HHS that 

pose unacceptable risks to the accuracy 

of Exchange eligibility determinations, 

Exchange operations, applicants, or 

enrollees, or Exchange information 

technology systems. They would also 

provide agents and brokers with an 

increased understanding of our 

approach to implement system 

suspensions. The proposed amendments 

would also better encapsulate the 

original intent of the § 155.220(k)(3) 

suspension authority, which included 

protecting against unacceptable risk to 

consumer Exchange data. 

We noted in the proposed rule (89 FR 

82363) that the types of misconduct or 

noncompliant behaviors or activities 

that could lead to a system suspension 

under § 155.220(k)(3) could also lead to 

an enforcement action under 

§ 155.220(g). However, there are 

important distinctions between these 

authorities. For example, system 

suspensions under § 155.220(k)(3) allow 

HHS to immediately suspend an agent 

or broker’s system access. These system 

suspensions differ from agreement 

suspensions or terminations under 

§ 155.220(g) because system 

suspensions do not suspend or 

terminate the agent’s or broker’s 

Exchange Agreement(s).173 Rather, 

system suspensions prevent agents or 

brokers from submitting Exchange 

applications and enrollments through 

the Direct Enrollment Pathways, 

whether Classic DE or EDE. However, 

while a system suspension is in place, 

the agent or broker remains registered 

with the FFEs, unless and until their 

Exchange Agreements are suspended or 

terminated under § 155.220(f) or (g). As 

such, a system suspension does not 

prohibit the agent or broker from 

assisting FFE and SBE–FP enrollees or 

applicants via the Marketplace Call 

Center on a three-way call with the 

enrollees or applicants or side-by-side 

with an enrollee or applicant on 

HealthCare.gov (also known as the 

‘‘Exchange Pathway’’).174 In cases where 

there is imminent danger to applicants’ 

or enrollees’ PII or to Exchange program 

integrity in such a manner that poses 

unacceptable risk to the accuracy of 

Exchange eligibility determinations, 

Exchange operations, applicants, or 

enrollees, or Exchange information 

technology systems from the 

misconduct or noncompliant behaviors 

or activities of agents or brokers, system 

suspensions under the proposed 

amendments to § 155.220(k)(3) would 

provide a more immediate action to 

protect applicants’ or enrollees’ PII and 

the efficient administration of the 

Exchange, as well as reduce potential 

fraud, abuse, and consumer harm. 

In contrast, an enforcement action 

under § 155.220(g) to suspend or 

terminate an agent’s, broker’s, or webbroker’s Exchange Agreement(s) results 

in the agent, broker, or web-broker no 

longer being registered with the FFEs.175

When an agent’s, broker’s, or webbroker’s Exchange Agreements are 

suspended, or following the termination 

of the agent’s, broker’s, or web-broker’s 

Exchange Agreements, the agent, broker, 

or web-broker is also no longer 

permitted to assist with or facilitate 

enrollment of qualified individuals, 

qualified employers, or qualified 

employees in coverage in a manner that 

constitutes enrollment through an FFE 

or SBE–FP, or assist individuals in 

applying for APTC and CSRs for QHPs. 

As such, these agents, brokers, and webbrokers cannot submit Exchange 

applications and enrollments through 

any of the available pathways—through 

Classic DE, EDE, the Marketplace Call 

Center, and/or through the Exchange 

pathway. 

Though we would only initiate 

system suspensions under 

§ 155.220(k)(3) against agents and 

brokers based on data or other 

information that suggest noncompliance 

or misconduct, we stated in the 

proposed rule (89 FR 82363) that we 

recognize that data or other information 

could suggest there is noncompliance or 

misconduct by a compliant agent or 

broker. For example, in some instances, 

this could occur if an agent or broker 

works largely or exclusively with a 

specific group of consumers, including 

those who live in low-income 

communities, communities where life 

changes necessitating eligibility 

application changes may be more 

common, or communities where some 

consumers may not have Social Security 

Numbers (SSNs) but are nonetheless 

eligible for Exchange coverage. 

Consistent with the existing framework, 

when pursuing system suspensions, 

agents and brokers would be notified of 

the system suspension and would have 

an opportunity to submit evidence or 

other information (such as 

documentation of consumer consent, or 

documentation demonstrating consumer 

review and confirmation of the accuracy 

of the eligibility application information 


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176Also see the 2020 Payment Notice proposed 

rule, 84 FR 272. 

177 Ibid. 

178Complaints may be submitted to the 

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

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

179See 45 CFR 155.220(j)(2)(vi). 

that was created before the application 

was submitted to the Exchange that is 

compliant with § 155.220(j)(2)(ii) and 

(iii)) to demonstrate that the 

circumstances of the incident, breach, or 

noncompliance concerns are remedied 

or sufficiently mitigated to HHS’ 

satisfaction to merit reinstatement of 

their system access. We noted that 

where there is clear evidence of 

compliance, compliant agents and 

brokers would be able to quickly 

respond to or otherwise remediate the 

risks identified by HHS that led to the 

system suspension under § 155.220(k)(3) 

such that their system access could be 

reinstated more swiftly than the lifting 

of a suspension or reinstatement of an 

agent’s or broker’s Exchange 

Agreement(s) following an enforcement 

action under § 155.220(g). 

We sought comment on this proposal. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing the amendments to the system 

suspension authority under 

§ 155.220(k)(3) as proposed. We 

summarize and respond to public 

comments received on these proposed 

amendments below. 

Comment: Many commenters 

supported expanding § 155.220(k)(3) as 

it would reduce noncompliant behavior 

and protect consumers. 

Response: We agree with commenters 

who supported these proposed 

amendments and agree it would help 

reduce noncompliant behavior and 

protect consumers. As we explained in 

the 2020 Payment Notice (84 FR 

17517),176 to promote information 

technology system security in the FFEs 

and SBE–FPs, including the protection 

of consumer data, we codified 

§ 155.220(k)(3) to capture HHS’ 

authority to immediately suspend an 

agent’s or broker’s ability to transact 

information with the Exchange if HHS 

discovers circumstances that pose 

unacceptable risk to Exchange 

operations or Exchange information 

technology systems until the incident or 

breach is remedied or sufficiently 

mitigated to HHS’ satisfaction. We 

explained this provision was necessary 

and appropriate to ensure that HHS can 

take immediate action to stop 

unacceptable risks to Exchange 

operations or systems posed by agents 

and brokers, as well as take immediate 

action to protect sensitive consumer 

data.177 Finalizing the proposed 

amendments to the system suspension 

authority in this final rule at 

§ 155.220(k)(3) more closely aligns with 

this original intent and will better allow 

us to implement system suspensions in 

situations that pose unacceptable risk to 

consumer PII. The amendments to 

§ 155.220(k)(3), which we are finalizing 

in this rule, will also allow HHS to 

impose a system freeze suspension in 

situations where there is noncompliance 

with the standards of conduct under 

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

privacy and security standards under 

§ 155.260, as well as when there is risk 

to the accuracy of Exchange eligibility 

determinations, operations, 

applications, enrollees, or information 

technology systems. Each of these 

different situations may cause consumer 

harm, impact the efficient 

administration of Exchange activities, 

and reduce public trust in the Exchange 

itself. 

Comment: Some commenters 

suggested we consider changing the data 

metrics and analytics used to engage in 

system suspensions under 

§ 155.220(k)(3), be more transparent in 

the process, and resolve these 

suspensions more quickly. Commenters 

also expressed concern about the impact 

our data metrics may have on minority 

groups and minority agents and brokers, 

citing potential equity issues and biases 

in the system. 

Response: As explained in the 

proposed rule (89 FR 82361), we 

continuously monitor for behaviors or 

activities related to Exchange operations 

or access to Exchange systems and 

enrollee or applicant PII that we believe, 

based on our experience overseeing 

agents and brokers on the FFEs and 

SBE–FPs, may be indicative of 

misconduct or noncompliance with 

applicable HHS Exchange standards or 

requirements. In the interest of 

transparency, we also shared a nonexhaustive list of data that we currently 

use to monitor and identify behaviors or 

activities that may be indicative of 

misconduct or noncompliance with 

applicable HHS Exchange standards or 

requirements, which includes: (1) the 

number of Exchange transactions 

submitted to the FFEs or SBE–FPs to 

change enrollee or applicant eligibility 

application information or plan 

selections, (2) the volume of 

unsuccessful person search activities, 

(3) the number of submitted eligibility 

applications with missing SSNs, (4) the 

number of enrollments submitted 

within a specified time-frame, and (5) 

the volume of submitted eligibility 

applications with NPN changes. We also 

review and consider complaints from 

enrollees, applicants, and other 

individuals or entities concerning agent 

and broker activities.178 While none of 

these items alone may ultimately 

indicate misconduct or noncompliant 

behavior or activities, each represents a 

piece of evidence that we currently 

utilize to identify behaviors or activities 

that may be indicative of misconduct or 

noncompliance and help decide 

whether a system suspension or other 

enforcement action is warranted in a 

particular circumstance. Furthermore, 

our history of investigations has 

revealed these data points are good 

indicators of noncompliant behavior 

and circumstances that pose 

unacceptable risk to Exchange 

operations or Exchange information 

technology systems. For example, a high 

volume of submissions made during a 

short timeframe is sometimes the result 

of scripting or automation, which is 

prohibited by regulation unless 

approved in advance by CMS.179

Allowing agents or brokers to utilize 

scripting or automation may cause risk 

to the Exchange information technology 

systems. Unauthorized activity may 

cause the system to lag or present 

security risks to consumer PII. These 

same data points also offer good 

indicators of noncompliant behavior 

and circumstances that pose 

unacceptable risks to the accuracy of 

Exchange eligibility determinations, as 

well as Exchange applicants or 

enrollees. For example, a high volume 

of submissions made during a short 

timeframe may indicate unauthorized 

enrollments because it is not feasible to 

discuss this volume of enrollments with 

that many consumers during this period 

of time. This could lead to unauthorized 

enrollments for consumers or cause the 

consumer to incur future tax liabilities 

due to incorrect eligibility 

determinations and an incorrect APTC 

being applied to their application and 

enrollment. While the specific data 

points used would evolve over time in 

response to changes in the behaviors 

and activities that create circumstances 

that pose unacceptable risk to Exchange 

consumers, Exchange operations, and 

Exchange systems, we continue to 

believe that use of these types of data 

metrics and analytics are necessary and 

appropriate to protect consumers, 

reduce fraud and abuse, and support the 

efficient administration of Exchange 

activities. 

Our experience monitoring and 

investigating agent and broker 

noncompliance on the Exchanges that 

use the Federal platform has shown that 


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180Section 155.220(d)(3) requires agents, brokers, 

and web-brokers to enter into a Privacy and 

Security Agreement pursuant to which they agree 

to comply with Exchange privacy and security 

standards adopted consistent with § 155.260. There 

are two Privacy and Security Agreements between 

CMS and the agent, broker, and web-broker for FFEs 

and SBE–FPs: (1) one is for the individual market 

FFEs and SBE–FPs, and (2) one is for the FF–SHOPs 

and SBE–FP–SHOPs. 

181When consumers call the Marketplace Call 

Center to report unauthorized enrollments, we 

resolve their complaints through a combination of 

the following: (1) we review the complaint to verify 

that the consumer’s plan switch was unauthorized 

and identify the plan that the consumer wants to 

be enrolled in; (2) we instruct the issuer offering the 

plan the consumer wants to be enrolled in to 

reinstate the consumer’s enrollment in that plan as 

if it had not been terminated. The issuer is 

instructed to cover all eligible claims incurred and 

accumulate all cost sharing toward applicable 

deductibles and annual limits on cost sharing; and/ 

or (3) consumers receive updated information via 

an IRS Form1095–A that is generated by HHS and 

which the enrollee may send to the IRS to prevent 

adverse tax implications as a result of the 

unauthorized plan switch activity. 

minority or disadvantaged groups are 

more likely to be targeted by agents and 

brokers engaged in misconduct or 

noncompliant activities, including in 

circumstances that pose unacceptable 

risk to the accuracy of the Exchange’s 

eligibility determinations, Exchange 

operations, applicants, or enrollees, or 

Exchange information technology 

systems. For example, noncompliant 

agents and brokers may target a 

population segment that does not speak 

English as a first language and use this 

language barrier to their advantage. This 

inevitably can lead to system 

suspensions against agents and brokers 

working with these groups. 

We further note that we strive to 

resolve all system suspensions under 

§ 155.220(k)(3) in a timely manner and 

are committed to expeditiously 

reviewing the response and information 

provided by agents and brokers to 

demonstrate compliance or explain the 

remedial or mitigation steps taken to 

address the circumstances identified by 

HHS that pose unacceptable risks. When 

a system suspension is imposed under 

§ 155.220(k)(3), the agent or broker 

receives a notification outlining the 

circumstances and reasons for the 

system suspension, as well as offering 

details on how they may submit a 

response to remedy or mitigate the 

identified concerns. As with the existing 

framework, when pursuing system 

suspensions under § 155.220(k)(3), as 

amended, we would continue to notify 

an agent or broker if a system 

suspension is imposed and the notice 

would include information on the 

circumstances and reasons for the 

system suspension, as well as their 

opportunity to submit evidence or other 

information to remedy or mitigate the 

circumstances of the incident, breach, or 

noncompliance concerns. The agent or 

broker may then submit evidence and 

information (such as, for example, 

documentation of consumer consent 

and documentation of consumer review 

and confirmation of the eligibility 

application information that is 

compliant with § 155.220(j)(2)(ii) and 

(iii)) to HHS to show that the incident, 

breach, or noncompliance is remedied 

or sufficiently mitigated such that 

reinstatement of system access is 

warranted. 

In addition, we expect that compliant 

agents and brokers would be able to 

quickly respond and provide 

compelling evidence that demonstrates 

compliance or otherwise offer 

information on remedial or mitigation 

steps that address the circumstances 

identified by HHS that pose the 

unacceptable risks that led to the system 

suspension under § 155.220(k)(3) such 

that their system access would be 

reinstated swiftly and the length of the 

system freeze suspension would be 

relatively short. We also encourage the 

timely submission of a response with 

evidence demonstrating compliance or 

offering information on the remedial or 

mitigation steps taken to address the 

circumstances identified by HHS that 

pose the unacceptable risks to help limit 

the length of the suspension period. We 

also remind readers that, as detailed 

above, system suspensions under 

§ 155.220(k)(3) only restrict an agent’s or 

broker’s access to the Classic DE and 

EDE pathways and the system 

suspended agent or broker may still 

help enroll consumers in Exchange 

coverage using the Marketplace Call 

Center on a three-way call with the 

enrollees or applicants, or side-by-side 

with an enrollee or applicant on 

HealthCare.gov. 

After consideration of comments, we 

are finalizing these amendments as 

proposed. We continue to believe that 

system suspensions under 

§ 155.220(k)(3) are a necessary and 

appropriate program integrity measure 

that strikes the appropriate balance 

among the competing interests. Under 

this framework, the agent or broker has 

an opportunity to respond and can 

continue to assist FFE and SBE–FP 

consumers with the submission of 

Exchange applications and enrollments 

during the suspension period, and HHS 

has the ability to take immediate action 

to address circumstances that pose 

unacceptable risks to the accuracy of the 

Exchange’s eligibility determinations, 

Exchange operations, applicants, or 

enrollees, or Exchange information 

technology systems. This oversight and 

enforcement provision will be used to 

stop further FFE and SBE–FP 

enrollments through the Classic DE and 

EDE pathways to protect consumers and 

their data, as well as Exchange 

operations and systems. 

Comment: Commenters suggested we 

allow agents and brokers to provide 

evidence prior to initiating system 

suspensions. 

Response: We did not propose and 

decline to adopt changes to our system 

suspension process to allow an agent or 

broker to provide evidence prior to 

imposing a system suspension under 

§ 155.220(k)(3) as that would defeat the 

purpose of this temporary enforcement 

measure that provides HHS the ability 

to immediately respond to 

circumstances HHS discovers that pose 

unacceptable risk to the accuracy of the 

Exchange’s eligibility determinations, 

Exchange operations, applicants, or 

enrollees, or Exchange information 

technology systems. 

As previously explained, the original 

intent behind § 155.220(k)(3) was to 

promote Exchange information 

technology system security and protect 

consumer data. The proposed 

amendments, which we are finalizing in 

this rule as proposed, help further 

achieve these goals by allowing system 

suspensions to be immediately 

implemented when we discover 

circumstances that pose unacceptable 

risk to the accuracy of the Exchange’s 

eligibility determinations, Exchange 

operations, applicants, or enrollees, or 

Exchange information technology 

systems, including but not limited to 

risk related to noncompliance with the 

standards of conduct under 

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

privacy and security standards at 

§ 155.260.180 181

Offering an opportunity to provide 

evidence prior to a system suspension 

being implemented would leave 

consumers and the Exchanges that use 

the Federal platform vulnerable in 

situations where HHS has identified 

circumstances that pose unacceptable 

risk to consumers and the Exchanges 

that use the Federal platform. System 

suspensions under § 155.220(k)(3) allow 

HHS to immediately suspend an agent’s 

or broker’s system access and prevents 

the agent or broker from utilizing the 

Classic DE or EDE pathways to assist 

with FFE and SBE–FP applications and 

enrollments. As previously explained, 

this program integrity measure offers an 

enforcement tool that permits HHS to 

immediately respond to circumstances 

HHS identifies that pose unacceptable 

risks as soon as they are discovered. 

While the option to assist FFE and SBE– 

FP consumers to apply for or enroll in 

Exchange coverage using the 


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182The agent broker help desk email is: 

FFMProducer-AssisterHelpDesk@cms.hhs.gov. 

Marketplace Call Center or 

HealthCare.gov would continue to be 

available to system suspended agents 

and brokers, these enrollment avenues 

have additional safeguards against 

misconduct and noncompliant behavior 

and activities, as the Marketplace Call 

Center requires the consumer to be on 

the call with the agent or broker and the 

agent or broker would need to be sitting 

with the consumer when using the 

Exchange pathway. 

We believe our system suspension 

process is efficient, provides sufficient 

due process to the system suspended 

agent or broker, and strikes the 

appropriate balance by allowing the 

agent or broker to continue to assist FFE 

and SBE–FP consumers with the 

submission of Exchange applications 

and enrollments during the suspension 

period while also providing HHS 

authority to take immediate action to 

address circumstances HHS identifies 

that pose unacceptable risks to 

consumers and the Exchanges that use 

the Federal platform until the 

circumstances of the breach, incident, or 

noncompliance are remedied or 

sufficiently mitigated to HHS’ 

satisfaction. When a suspension under 

§ 155.220(k)(3) is imposed, the agent or 

broker will receive a notice informing 

them of the suspension and providing 

information on the circumstances and 

reasons for the suspension, as well as 

the process for submitting evidence or 

other information to show that the 

circumstances of the incident, breach, or 

noncompliance concerns are remedied 

or sufficiently mitigated such that 

reinstatement of their system access is 

warranted. Our system suspension 

process is designed to be a narrowly 

tailored and temporary enforcement 

approach that stops further FFE and 

SBE–FP enrollments through the Classic 

DE and EDE pathways during the 

suspension period to protect consumers 

and their data, as well as Exchange 

operations and systems. 

Comment: One commenter expressed 

concern that system suspensions are not 

a good enforcement method. The 

commenter explained that system 

suspending an innocent agent or broker 

would cause them harm even though 

enrollments are permissible using 

HealthCare.gov or by calling the 

Marketplace Call Center. The 

commenter further explained their 

concern was that it is more burdensome 

to work through these alternative 

enrollment channels. 

Response: We recognize that working 

with a consumer using HealthCare.gov 

or by calling the Marketplace Call 

Center may require more coordination, 

time, and effort than the Classic DE and 

EDE pathways, however, we continue to 

believe this trade-off is necessary and 

appropriate in the context of system 

suspensions. Section 155.220(k)(3) is 

designed as a narrowly tailored and 

temporary enforcement approach that 

allows HHS in certain circumstances to 

take immediate action and stop further 

FFE and SBE–FP enrollments through 

the Classic DE and EDE pathways 

during the suspension period to protect 

consumers and their data, as well as 

Exchange operations and systems, until 

such time that the circumstances of the 

incident, breach, or noncompliance are 

remedied or sufficiently mitigated to 

HHS’ satisfaction. We continue to 

believe it is an important program 

integrity and consumer protection 

measure that strikes the appropriate 

balance between the agent’s and 

broker’s interests and desire to continue 

working with FFE and SBE–FP 

consumers, and HHS’ interests in 

reducing fraud and abuse, protecting 

Exchange consumers and their data, and 

promoting Exchange information 

technology system security. In addition, 

as noted above, we expect that 

compliant agents and brokers would be 

able to quickly respond and provide 

compelling evidence that demonstrates 

compliance or offers information on 

how they addressed the circumstances 

identified by HHS that pose 

unacceptable risks that led to the system 

suspension under § 155.220(k)(3) such 

that their system access would be 

reinstated swiftly and the length of the 

system freeze suspension would be 

relatively short. 

Comment: A few commenters 

expressed concern that allowing a 

noncompliant agent or broker to 

continue to assist FFE and SBE–FP 

consumers submit application and 

enrollments during the suspension 

period allows them to continue 

committing further misconduct or 

noncompliant behavior or activity using 

the Marketplace Call Center. 

Response: We believe the system 

suspension framework under 

§ 155.220(k)(3), which allows HHS to 

take immediate action in response to 

circumstances HHS identifies that pose 

unacceptable risk to the accuracy of the 

Exchange’s eligibility determinations, 

Exchange operations, applicants, or 

enrollees, or Exchange information 

technology systems, is a necessary and 

appropriate program integrity approach 

that strikes the appropriate balance 

between the different interests involved. 

It is designed as a narrowly tailored and 

temporary enforcement approach that 

stops further FFE and SBE–FP 

enrollments through the Classic DE and 

EDE pathways during the suspension 

period to protect consumers and their 

data, as well as Exchange operations 

and systems, until such time that the 

circumstances of the incident, breach, or 

noncompliance are remedied or 

sufficiently mitigated to HHS’ 

satisfaction. While the option to assist 

FFE and SBE–FP consumers to apply for 

or enroll in Exchange coverage using the 

Marketplace Call Center or the Exchange 

pathway remains available to system 

suspended agents and brokers, these 

enrollment avenues have additional 

safeguards against misconduct and 

noncompliant behavior and activities. 

For example, the Marketplace Call 

Center requires the consumer to be on 

the call for the agent or broker to be able 

to assist the consumer with the 

Exchange application or enrollment. 

Similarly, the Exchange pathway 

requires the agent or broker to be 

working side-by-side with the consumer 

to assist with an Exchange application 

or enrollment. These enrollment 

avenues therefore do not pose the same 

risks to consumers and their data, the 

accuracy of the Exchange eligibility 

determinations, or Exchange operations 

and systems. 

Comment: Several commenters stated 

we need to protect agents who report 

noncompliant behavior from being 

suspended themselves. 

Response: We encourage any agent, 

broker, agency, or other entity to report 

fraud, abuse, and noncompliant 

behavior or activities that occurs with 

respect to applications or enrollments to 

HealthCare.gov Exchanges to the Agent 

and Broker Help Desk, as well as their 

State DOI, or its equivalent.182 We take 

tips seriously and investigate claims of 

fraud, abuse, and noncompliant 

behavior or activities involving the 

HealthCare.gov Exchanges. We affirm 

that we do not engage in compliance 

actions against individuals for 

submitting such reports. 

Comment: Some commenters stated 

we should leave all oversight and 

enforcement of agents and brokers to 

States and QHP issuers unless we have 

clear authority from Congress to 

conduct such oversight and 

enforcement. 

Response: The proposed amendments 

to § 155.220(k)(3) that we are finalizing 

in this rule pertains to an agent’s or 

broker’s ability to use the Classic DE 

and EDE pathways to assist consumers 

with enrollments through the FFEs and 

SBE–FPs. These proposed amendments 

are rooted in the authority provided to 

HHS under the ACA, including section 

1312(e), which provides HHS the 


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183 45 CFR 155.220(g)(6). 

184The Suspension and Termination List can be 

found here: https://data.healthcare.gov/absuspension-and-termination-list. 

authority to establish procedures under 

which a State may allow agents or 

brokers to (1) enroll qualified 

individuals and qualified employers in 

QHPs offered through Exchanges and (2) 

assist individuals in applying for APTC 

and CSRs for QHPs sold through an 

Exchange. This enforcement tool and 

regulatory provision is also authorized 

by section 1313(a)(5)(A) of the ACA, 

which provides the Secretary with the 

authority to implement any measure or 

procedure that the Secretary determines 

is appropriate to reduce fraud and abuse 

in the administration of the Exchanges, 

and section 1321(a) of the ACA, which 

provides the Secretary authority to 

establish standards and regulations to 

implement the statutory requirements 

related to Exchanges, QHPs and other 

components of title I of the ACA, 

including such other requirements as 

the Secretary determines appropriate. 

As previously detailed, we continue to 

believe the system suspension 

framework in § 155.220(k)(3), including 

the amendments finalized in this rule, is 

a necessary and appropriate program 

integrity measure for HHS to adopt and 

apply in Exchanges that use the Federal 

platform. It strikes the appropriate 

balance between the different interests 

involved and is narrowly tailored to 

protect consumers and their data, as 

well as Exchange operations and 

systems, until such time that the 

circumstances of the incident, breach, or 

noncompliance are remedied or 

sufficiently mitigated to HHS’ 

satisfaction. We affirm that it does not 

otherwise interfere with State authority 

to oversee or monitor compliance and 

take enforcement actions with respect to 

agents and brokers who are licensed to 

do business in their jurisdiction. 

However, HHS is responsible for 

protecting Exchange consumers and 

promoting Exchange information 

technology system security, which 

extends to ensuring compliance with 

applicable HHS Exchange standard and 

requirements by agents and brokers 

participating in the FFEs and SBE–FPs. 

We therefore generally disagree with the 

comments suggesting that we should 

leave all oversight and enforcement of 

agents and brokers to the States, but we 

intend to continue to conduct our 

investigations and enforcement related 

to the conduct of agents and brokers 

with respect to applications and 

enrollments submitted to the FFEs and 

SBE–FPs in coordination with States. 

In response to the comment about 

QHP issuer responsibility with respect 

to their affiliated agents and brokers, we 

affirm that, consistent with § 156.340, 

each QHP issuer maintains 

responsibility for its compliance and the 

compliance of any of its delegated or 

downstream entities with all applicable 

Federal standards related to the 

Exchanges. For QHP issuers 

participating in Exchanges that use the 

Federal platform, this includes being 

responsible for their downstream and 

delegated entities’ compliance with the 

standards of § 155.220. Section 

156.430(b)(5) also makes it clear that 

downstream and delegated entity are 

obligated to maintain Exchange-related 

records and comply with the relevant 

Exchange authority’s demand to receive 

the entity’s books, contracts, computers 

or other electronic systems relating to 

the QHP issuer’s obligations in 

accordance with applicable Federal 

Exchange standards. Similar to our 

approach with the States, we intend to 

continue to coordinate with QHP issuers 

participating in Exchanges and share 

information, as appropriate, regarding 

our agent and broker enforcement and 

oversight activities. 

Comment: Some commenters 

recommended that we should report 

system suspensions to State DOIs, QHP 

issuers, and the public. Commenters 

also recommended mandating that 

agents and brokers who are system 

suspended disclose this to consumers 

they are working with. 

Response: We appreciate these 

comments and are committed to 

coordinating with the States and QHP 

issuers with respect to enforcement and 

oversight of agents and brokers, as well 

as sharing information with the public 

about these activities, as appropriate. 

Our regulations currently require HHS 

to notify to the State DOIs or equivalent 

State licensing authorities in cases of 

Exchange agreements suspensions or 

terminations under § 155.220(g).183

Information on the status of an agent or 

broker’s registration and Exchange 

Agreements is also made available to the 

public, updated on a monthly basis, and 

may be used or disclosed for certain 

limited purposes.184 Our regulatory 

framework, however, does not currently 

provide for the sharing of information 

on system suspensions under 

§ 155.220(k)(3).We further note that we 

currently work closely with State DOIs 

to coordinate our enforcement activities 

when we identify an agent’s or broker’s 

behavior or activities that poses 

unacceptable risk to the accuracy of the 

Exchange’s eligibility determinations, 

Exchange operations, applicants or 

enrollees, or Exchange information 

technology systems. Furthermore, if the 

agent or broker does not respond to our 

outreach or their response does not 

sufficiently mitigate the circumstances 

that led to the system suspension, we 

would likely move to terminate or 

suspend the agent’s or broker’s 

Agreements under § 155.220(g)(1) or 

(g)(5), respectively. If the issue is not 

resolved to HHS’ satisfaction after 

sending the notice of intent to terminate 

under § 155.220(g)(1), or at the time we 

send the Exchange Agreement 

suspension or termination notice under 

§ 155.220(g)(5), we would notify the 

State DOIs or other equivalent State 

licensing authorities as required by 

§ 155.220(g)(6). 

We respectfully disagree with 

commenters who believe agents or 

brokers who are system suspended 

should be required to disclose this fact 

to consumers. Requiring such disclosure 

at this point in the process may confuse 

consumers or cause unwarranted 

concerns. By system suspending the 

agent or broker, we have helped reduce 

the risk of noncompliant behavior by 

requiring the agent or broker to assist 

consumers working side-by-side 

through the consumer pathway on 

HealthCare.gov or via a three-way call 

with the Marketplace call center. We 

believe restricting access to the Classic 

DE and EDE pathways during the 

suspension period mitigates the concern 

sufficiently while we investigate the 

circumstances that led to the system 

suspension. Since these agents and 

brokers are still permitted to assist 

consumers with enrolling in coverage 

through the FFEs and SBE–FPs through 

the consumer pathway on 

HealthCare.gov and a three-way call 

with the Marketplace call center, it 

would be confusing for consumers to be 

notified about the system suspension. 

Furthermore, if the agent or broker does 

not respond to our outreach or their 

response does not sufficiently mitigate 

the circumstances that led to the system 

suspension, we would likely move to 

terminate or suspend the agent’s or 

broker’s Exchange Agreements under 

§ 155.220(g)(1) or (g)(5), respectively. If 

the issue is not resolved to HHS’ 

satisfaction after sending the notice of 

intent to terminate under 

§ 155.220(g)(1), or at the time we send 

the Exchange Agreement suspension or 

termination notice under 

§ 155.220(g)(5), we would notify the 

State DOIs or other equivalent State 

licensing authorities as required by 

§ 155.220(g)(6). 

Comment: We received comments 

stating that when an agent is system 

suspended under § 155.220(k)(3), we 


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185 In the 2025 Payment Notice, we finalized the 

extension of certain HHS minimum standards 

governing web-broker and DE entities across all 

Exchanges to newly apply them to State Exchanges 

that do not use the Federal platform. See 89 FR 

26276 through 26298. The framework adopted in 

the 2025 Payment Notice also provided State 

Exchanges with continued flexibility and discretion 

to decide whether and how to structure their 

respective web-broker and direct enrollment 

programs. Ibid. It also affirmed the State Exchange’s 

role with respect to oversight and enforcement with 

respect to the entities it permits to assist its 

consumers, and HHS’ role overseeing the 

Exchange’s compliance with the applicable Federal 

requirements. See 89 FR 26276 through 26298. 

186CMS. (2022, December 14). CMS model 

consent form for Marketplace Agents and Brokers. 

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

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

187 45 CFR 155.220(j)(2)(iii). 

188See § 155.220(j)(2)(ii). 

189CMS. (2022, December 14). CMS model 

consent form for Marketplace Agents and Brokers. 

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

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

should ensure they are unable to utilize 

State Exchanges. 

Response: We appreciate these 

comments and generally encourage 

State Exchanges that elect to operate a 

DE program, as part of their oversight of 

the agents and brokers assisting 

consumers in their respective States 

apply for and enroll in coverage in a 

manner that constitutes enrollment 

through their Exchange, to adopt a 

system suspension framework similar to 

§ 155.220(k)(3). It is one of the 

important features of HHS’ oversight of 

agents and brokers participating in the 

FFEs and SBE–FPs that protects 

consumers data, safeguards Exchange 

operations and systems, and helps 

reduce fraud and abuse. When HHS 

imposes a system suspension under 

§ 155.220(k)(3), a system suspended 

agent or broker is unable to utilize the 

Classic DE or EDE pathways available in 

FFE and SBE–FP States to enroll 

consumers in coverage in a manner that 

constitutes enrollment through the 

Exchange. State Exchanges that do not 

use the Federal platform utilize their 

own systems and are responsible for 

overseeing and ensuring compliance by 

the agents and brokers assisting 

Exchange consumers in their State, 

including participation in any DE 

program the State Exchange elects to 

establish.185 We therefore did not 

propose and are not finalizing the 

extension of the system suspension 

framework under § 155.220(k)(3) to 

State Exchanges that do not use the 

Federal platform; however, we continue 

to encourage adoption of a similar 

framework if a State Exchanges that 

does not use the Federal platform elects 

to establish a DE program. 

Comment: Some commenters 

expressed concern that suspensions may 

prevent them from being paid 

commissions and that we should keep 

any withheld commissions in a trust 

that would be payable to the agent or 

broker upon the suspension being lifted. 

Response: We appreciate these 

comments and generally note that the 

system suspensions implemented under 

§ 155.220(k)(3) do not result in the 

suspension or termination of the agent’s 

or broker’s Exchange Agreements. As 

such, a system suspension by HHS 

under § 155.220(k)(3) should not have 

an impact on the agent’s or broker’s 

ability to receive commissions for FFE 

and SBE–FP enrollments. In addition, 

HHS does not set compensation levels 

or pay commissions to agents or brokers 

for assistance provided to Exchange 

consumers. Agents and brokers who 

participate in the Exchanges receive 

compensation directly from the QHP 

issuers they are affiliated with in 

accordance with their agreements with 

those issuers and any applicable Statespecific requirements. Agents and 

brokers should work directly with their 

QHP issuers to resolve any questions or 

concerns with respect to commissions 

or other compensation they believe they 

are owed. We did not propose and 

decline to adopt an approach whereby 

we would start collecting and holding in 

trust commissions withheld by QHP 

issuers. 

c. Model Consent Form Updates 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82363), we proposed to 

modify the model consent form that was 

created as part of the 2024 Payment 

Notice (88 FR 25809 through 25811).186

Our proposed modifications included 

updating the model consent form to 

include a section for documentation of 

consumer review and confirmation of 

the accuracy of their Exchange 

eligibility application information under 

§ 155.220(j)(2)(ii)(A)(1)–(2), as well as 

scripts agents, brokers, and web-brokers 

could use when meeting the 

requirements codified at 

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

(C) via an audio recording. 

Agents, brokers, and web-brokers are 

required to obtain consumer consent 

prior to assisting with and facilitating 

enrollment in coverage through FFEs 

and SBE–FPs or assisting an individual 

with applying for APTC and CSRs for 

QHPs. Until we finalized new 

requirements related to consumer 

consent in the 2024 Payment Notice, 

there was no mandate to document the 

receipt of consent of the consumer or 

their authorized representative, or to 

maintain such documentation. The 

absence of a consent documentation 

requirement led to disputes between 

consumers and agents, brokers, and 

web-brokers that were difficult for us to 

adjudicate because neither party had 

documentary proof of consent. In the 

2024 Payment Notice (88 FR 25809 

through 25811), we finalized regulations 

requiring receipt of consent of the 

consumer or their authorized 

representative to be documented.187

Under these regulations, the consent 

documentation must contain certain 

minimum elements as enumerated in 

§ 155.220(j)(2)(iii)(B) and must be 

retained by the assisting agent, broker, 

or web-broker for a minimum of 10 

years and produced to HHS upon 

request in response to monitoring, audit, 

and enforcement activities pursuant to 

§ 155.220(j)(2)(iii)(C). Our goal in 

codifying these consent documentation 

requirements was to minimize the risk 

of fraudulent activities, such as 

unauthorized enrollments, and help us 

resolve disputes and adjudicate claims 

related to the provision of consumer 

consent. 

We also finalized regulations in the 

2024 Payment Notice (88 FR 25804 

through 25809) requiring agents, 

brokers, and web-brokers assisting with 

and facilitating enrollment in coverage 

through FFEs and SBE–FPs or assisting 

an individual with applying for APTC 

and CSRs for QHPs to document that 

eligibility application information has 

been reviewed by and confirmed to be 

accurate by the consumer or their 

authorized representative prior to 

application submission.188 Under these 

regulations, this documentation must 

contain certain minimum elements as 

enumerated in § 155.220(j)(2)(ii)(A)(1) 

and must be retained by the assisting 

agent, broker, or web-broker for a 

minimum of 10 years and produced to 

HHS upon request in response to 

monitoring, audit, and enforcement 

activities pursuant to 

§ 155.220(j)(2)(ii)(A)(2). Our goal in 

codifying these requirements was to 

minimize the risk of fraudulent 

activities, such as providing false 

information to the Exchange, help us 

resolve disputes and DMIs and 

adjudicate claims related to inaccurate 

eligibility information on submitted 

applications, and ensure consumers 

receive accurate eligibility 

determinations and do not receive 

incorrect APTC determinations, which 

may result in consumers owing money 

during tax reconciliation. 

The model consent form 189 created 

and provided to agents, brokers, and 


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web-brokers on June 30, 2023, has been 

used by agents, brokers, and webbrokers, either as is or as a starting point 

for creating their own consent 

documentation. However, no model 

consent form was created for agents, 

brokers, and web-brokers to use to meet 

the documentation of consumer review 

and confirmation of the accuracy of the 

eligibility application information 

requirements enumerated in 

§ 155.220(j)(2)(ii)(A)(1). Since the 2024 

Payment Notice requirements went into 

effect, agents, brokers, and web-brokers 

have asked us to provide a model 

documentation that they could use to 

meet these requirements under 

§ 155.220(j)(2)(ii). In the proposed rule, 

(89 FR 82364), we proposed to update 

the model consent form to include a 

section for documentation of consumer 

review and confirmation of the accuracy 

of their Exchange eligibility application 

information in response to these 

requests. This addition to the model 

consent form is meant to provide clarity 

to agents, brokers, and web-brokers on 

how to meet the regulatory requirements 

under § 155.220(j)(2)(ii) and help them 

comply with this regulation by 

providing a standardized form they may 

use to do so. Furthermore, we stated in 

the proposed rule (89 FR 82364) that we 

believe providing a clearly written 

model consent form would provide 

more consumer clarity and assurance 

that the agent, broker, or web-broker 

they are working with is complying 

with § 155.220(j)(2)(ii). 

Because the requirements of 

§ 155.220(j)(2)(ii)(A) and (j)(2)(iii) can be 

met via an audio recording, we also 

proposed (89 FR 82364) to create 

appendices to the model consent form 

that would contain scripts agents, 

brokers, and web-brokers may use to 

document compliance with these 

requirements via an audio recording. 

We stated in the proposed rule (89 FR 

82364) that our goal is to provide agents, 

brokers, and web-brokers who assist 

consumers verbally with guidance on 

meeting the consent and eligibility 

application review documentation 

requirements contained in 

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

respectively, similar to how the current 

model consent form helps agents, 

brokers, and web-brokers documenting 

consent via a physical document with 

handwritten signatures demonstrate 

compliance with the new consent 

documentation requirements. 

In the proposed rule (89 FR 82364), 

we stated that the proposed scripts, to 

the extent they are utilized by agents, 

brokers, and web-brokers, would help 

ensure agents, brokers, and web-brokers 

are following the regulatory 

requirements when enrolling 

consumers. We further stated that we 

believe this would reduce consumer 

harm by reducing unauthorized 

enrollments, which can result in 

financial harm if a consumer receives an 

improper APTC amount upon 

enrollment. We also stated that we 

believe this proposal would clarify and 

simplify how regulated entities can 

meet regulatory requirements. The 

proposal did not involve any revisions 

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

through (C). Lastly, we stated that if 

finalized as proposed, it would not be 

mandatory for agents, brokers, or webbrokers to use the amended model 

consent form or new scripts to comply 

with the requirements set forth in 

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

through (C). 

We sought comment on these 

proposals. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing the modifications to the 

model consent form as proposed. We 

summarize and respond to public 

comments received on the modifications 

to the model consent form below. 

Comment: Some commenters 

supported updating the model consent 

form, stating this would provide clarity 

to agents, brokers, and web-brokers, and 

help ensure consumers’ enrollment 

applications include correct 

information. 

Response: We agree with commenters 

that these updates will provide more 

clarity and assurance to agents, brokers, 

web-brokers, and agencies on how to 

meet the applicable regulatory 

requirements and more consumer clarity 

and assurance that the agent, broker, or 

web-broker they are working with is 

complying with the applicable 

regulatory requirements. 

Comment: Some commenters stated 

that we should not mandate audio 

recording of enrollments and should not 

require agents, brokers, or web-brokers 

to use our scripts as this would be 

especially burdensome to smaller 

agents, brokers, web-brokers, or 

agencies. 

Response: While agents, brokers, and 

web-brokers can meet the requirements 

of § 155.220(j)(2)(ii)(A) and (j)(2)(iii) via 

an audio recording, this is just one type 

of documentation that is considered to 

be acceptable under these sections, and 

there is no mandate that an audio 

recording be used to meet these 

requirements. Agents, brokers, and webbrokers may use any method they wish 

to meet the consent documentation 

requirement and review and 

confirmation of the accuracy of 

eligibility application information 

requirement, provided the minimum 

information required by the regulations 

is captured in this documentation and 

the documentation can be maintained 

for a minimum of 10 years and 

produced to CMS upon request. In 

addition, as noted in the proposed rule 

(89 FR 82364), it would not be 

mandatory for agents, brokers, or webbrokers to use the amended model 

consent form or new scripts to comply 

with the requirements set forth in 

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

through (C). 

Comment: A commenter requested 

clarification on whether the updated 

model consent form, if finalized, would 

invalidate consumer consent obtained 

and documented using the previous 

model consent form. 

Response: If an agent, broker, or webbroker obtained consumer consent using 

the previously released model consent 

form, the consent and the 

documentation of such consent would 

still be valid if the consent 

documentation complies with the 

regulatory requirements at 

§ 155.220(j)(2)(iii) and the consent has 

not expired or been rescinded. 

3. Requirement for Notification of Tax 

Filers and Consumers Who Have Failed 

To File and Reconcile APTC for 2 

Consecutive Tax Years (§ 155.305) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (88 FR 82308 through 82411), we 

proposed changes and updates to the 

failure to file and reconcile (FTR) 

process at § 155.305(f)(4). Specifically, 

we proposed that all Exchanges, 

including State Exchanges, would be 

required to send notices to tax filers or 

their enrollees for the second, 

consecutive tax year in which they or 

their tax filer failed to reconcile APTC. 

This notice, when sent to the tax filer, 

would serve as an additional warning to 

inform and educate tax filers that they 

need to file their Federal income taxes 

and reconcile their APTC or risk being 

determined ineligible for APTC if they 

fail to file and reconcile for a second 

consecutive tax year. The notice, when 

sent to enrollees, would indicate the 

importance of filing Federal income 

taxes and reconciling APTC on Form 

8962 in order to remain eligible for 

APTC, without disclosing tax 

information about an individual tax 

filer. We are finalizing this policy as 

proposed. 

As part of the 2024 Payment Notice 

(88 FR 25814 through 25816), we 

changed the FTR process such that an 

Exchange may only determine enrollees 


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ineligible for APTC due to their FTR 

status after a tax filer (or a tax filer’s 

spouse, if married) has failed to file a 

Federal income tax return and reconcile 

their APTC for 2 consecutive years 

(specifically, years for which tax data 

will be utilized for verification of 

household income and family size). In 

the 2025 Payment Notice (89 FR 26218 

through 26426), we imposed a 

requirement for Exchanges to send 

direct or indirect notices for the first 

year in which the tax filer was 

determined to have failed to file and 

reconcile. A direct notice to the tax filer 

provides a warning to inform and 

educate the tax filer that they need to 

file and reconcile, or risk being 

determined ineligible for APTC if they 

fail to file and reconcile for a second 

consecutive tax year. An indirect notice, 

also sometimes referred to as a 

‘‘combined notice,’’ contains general, 

broad language regarding FTR that 

complies with the prohibition on 

sending Federal tax information (FTI) in 

circumstances where the household 

contact or enrollee is not the tax filer. 

However, in the 2025 Payment Notice, 

we did not impose a requirement for 

Exchanges to send a direct or indirect 

notice enrollees or their tax filer about 

the second consecutive year that the 

applicable tax filer failed to file and 

reconcile. In the HHS Notice of Benefit 

and Payment Parameters for 2026 

proposed rule (89 FR 82364), we 

proposed to revise § 155.305(f)(4) to 

require Exchanges to send a direct or 

indirect notice to enrollees or their tax 

filer who have not filed their Federal 

income tax return and reconciled their 

APTC for 2 consecutive tax years. 

Under the policy finalized in this 

rule, Exchanges on the Federal platform 

will continue to send notices to 

enrollees or their tax filers for the 

second consecutive tax year in which 

the tax filer has failed to reconcile 

APTC. State Exchanges that operate 

their own eligibility and enrollment 

platforms will be required to send either 

one of these notices and may send an 

indirect notice to the tax filer if desired. 

Our policy to codify this practice for 

Exchanges on the Federal platform and 

require State Exchanges to notify either 

an enrollee or their tax filer as described 

above, ensures that tax filers who have 

been determined to have FTR status for 

2 consecutive tax years are adequately 

educated on the file and reconcile 

requirement, and have ample 

opportunity to file their Federal taxes 

and reconcile APTC before they lose 

APTC. This policy supports compliance 

with the filing and reconciling 

requirement under section 36B(f) of the 

Code and its implementing regulations 

at 26 CFR 1.36B–4(a)(1)(i) and 

(a)(1)(ii)(A), minimizes the potential for 

APTC recipients to incur large tax 

liabilities over time, and supports 

eligible enrollees’ continuous 

enrollment in Exchange coverage with 

APTC by avoiding situations where 

enrollees become uninsured when their 

APTC is terminated because they were 

unaware of the requirement to file and 

reconcile. Additionally, this policy 

better aligns State Exchanges’ FTR 

processes with that of the Exchanges on 

the Federal platform by ensuring that 

consumers will receive at least one FTR 

notice per year before being found 

ineligible for APTC. We sought 

comment on this proposal. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and our responses to comments, we 

are finalizing this provision as proposed 

at § 155.305(f)(4)(ii) to require all 

Exchanges to send direct notices to a tax 

filer alerting them of their FTR status, or 

to send informative indirect notices that 

do not contain FTI either to the enrollee 

or their tax filer, if through the income 

verification processes described in 

§ 155.320, they have been found to have 

failed to reconcile their APTC for 2 

consecutive tax years. Section 

155.305(f)(4)(ii)(A) describes the 

requirements for sending the direct 

notice to the tax filer, including that 

Exchanges must send the notice 

consistent with the standards applicable 

to the protection of FTI. Section 

155.305(f)(4)(ii)(B) describes the 

requirements for sending the indirect 

notice, which must not convey FTI. We 

summarize and respond to public 

comments received on the proposed 

policy below. 

Comment: The majority of 

commenters supported the proposal 

requiring an Exchange to notify 

enrollees and their tax filers of their 

FTR status when they are identified as 

having failed to reconcile for 2 

consecutive tax years. Several of these 

commenters cited its positive impact on 

continuity of coverage for consumers 

enrolled in Exchange coverage. 

Response: We agree with commenters 

that the proposed FTR policy will have 

a positive impact on enrollee retention 

of APTC and Exchange coverage by 

ensuring enrollees and their tax filers 

are informed of the tax reconciliation 

requirement or of a potential FTR status. 

Comment: A few commenters 

opposed the proposal requiring 

Exchanges to send FTR notices to 

enrollees who have a 2-year FTR status. 

These commenters believe that it is not 

the role of Exchanges, but rather of the 

Internal Revenue Service (IRS), to 

conduct FTR because the IRS has the 

ability to send direct notices that more 

specifically address a tax filer’s FTR 

status. These commenters stated that 

indirect notices are less effective 

because they cannot disclose FTI. 

Response: We disagree with 

commenters that the IRS is the correct 

agency to provide FTR notifications. 

Exchanges are well-suited to send FTR 

notices because they already send a 

variety of notices about Exchange 

coverage to QHP enrollees, both through 

mail and Exchange portals, including 

direct and indirect notices to enrollees 

or their tax filer who have failed to file 

and reconcile for 1 tax year. These 

notices sent by the Exchange have 

proven effective, as, historically, the 

majority of consumers identified in the 

failure to file and reconcile process have 

successfully filed and reconciled to 

prevent the loss of their APTC. State 

Exchanges are afforded the flexibility to 

choose to send direct notices in certain 

situations, but also can choose to send 

indirect notices in situations where 

sending a direct notice that protects FTI 

is not feasible. 

Comment: A few commenters 

supported the proposal but stated that 

the FTR process overall is flawed, 

overly punitive to consumers by 

removing APTC, and a threat to 

continuity of coverage. They also stated 

that the IRS already has the adequate tax 

enforcement tools and, as such, these 

commenters recommended repealing 

the FTR process entirely. 

Response: We acknowledge the 

concerns that commenters have raised 

that FTR is overly punitive to 

consumers. However, the changes that 

HHS has implemented in this rule, as 

well as the changes finalized in the 2024 

Payment Notice and the 2025 Payment 

Notice, properly balance consumer 

protections and program integrity 

protections. Therefore, we maintain that 

we should continue to improve the FTR 

process rather than repeal FTR entirely. 

Comment: A few commenters stated 

that HHS should fully repeal FTR 

processes because there is no statutory 

authority for it. 

Response: We disagree with 

commenters that there is no statutory 

authority for Exchanges to conduct FTR. 

Consumers who receive APTC are 

required to file income taxes pursuant to 

§ 6011(a) of the Code and regulations 

prescribed by the Secretary of Treasury. 

Section 36B(f) of the Code requires 

taxpayers to reconcile their APTC under 

section 1412 of the ACA with their PTC 

allowed under section 36B of the Code. 

FTR regulations, implemented pursuant 

to the Secretary’s general rulemaking 

authority under section 1321(a) of the 


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190CMS. (2024, Aug. 14). Reporting and 

Reviewing Data Inaccuracy Reports in State-based 

Exchanges (SBE) Frequently Asked Questions 

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

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

191OMB Control No: 0938–1312 and 0938–1341. 

192CMS. (2024, Aug. 14). Reporting and 

Reviewing Data Inaccuracy Reports in State-based 

Exchanges (SBE) Frequently Asked Questions 

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

downloads/faqs-SBE-reporting-enrollment-datainaccuracies.pdf. 193OMB Control No: 0938–1312 and 0938–1341. 

ACA, facilitate compliance with those 

requirements. 

Comment: A few commenters stated 

that requiring Exchanges to provide a 

direct FTR notification to their 

consumers would be overly 

burdensome. 

Response: We understand the concern 

raised by commenters regarding 

increased burden for Exchanges to 

provide these FTR notifications. 

However, States have flexibility under 

§ 155.305(f)(4)(ii)(B) to provide either a 

direct notice that discloses FTI or an 

indirect notice that does not disclose 

FTI to their consumers, and we are not 

requiring Exchanges to provide direct 

notices in this final rule. 

Comment: One commenter requested 

that HHS provide technical guidance on 

developing indirect notices for 

Exchanges that do not want to store any 

FTI. In addition, the commenter also 

requested HHS to consider a phased 

implementation approach that accounts 

for varying State capabilities and 

resources. 

Response: We are allowing Exchanges 

to choose whether they want to send 

direct or indirect notices and have 

provided Exchanges with technical 

guidance and sample notice for both 

types of notices. These are available at 

https://www.cms.gov/marketplace/inperson-assisters/applications-formsnotices/notices. Additionally, 

Exchanges have experience sending 

direct and indirect notices for 

consumers whose tax filer has failed to 

file and reconcile APTC for 1 tax year, 

so they should have the capability to 

send notices as required in this final 

rule. For these reasons, we have 

provided sufficient time for Exchanges 

to implement the notice required 

described in this final rule and will not 

be providing a phased implementation. 

4. Timeliness Standard for State 

Exchanges To Review and Resolve 

Enrollment Data Inaccuracies 

§ 155.400(d)(1) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82365 through 

82366), we proposed to add 

§ 155.400(d)(1) to codify HHS 

guidance 190 that, within 60 calendar 

days after a State Exchange receives a 

data inaccuracy from an issuer operating 

in an State Exchange (hereinafter 

referred to as ‘‘State Exchange issuer’’) 

that includes a description of an 

inaccuracy that meets the requirements 

at § 156.1210(a)–(c) and all the 

information that the State Exchange 

requires or requests to properly assess 

the inaccuracy, the State Exchange must 

review and resolve the State Exchange 

issuer’s enrollment data inaccuracies 

and submit to HHS a description of the 

resolution of any inaccuracies described 

by the State Exchange issuer that the 

State Exchange confirms to be 

inaccuracies in a format and manner 

specified by HHS.191

In the proposed rule, we explained 

that, under existing rules, the State 

Exchange issuer must work with its 

State Exchange to ensure resolution of 

any inaccuracy impacting APTC 

payment. If a State Exchange issuer is 

directed by its State Exchange to submit 

inaccuracies directly to HHS, the State 

Exchange issuer should follow those 

submission instructions, but any 

information HHS shares in response to 

the submission is informational. If the 

inaccuracy remains unresolved, the 

State Exchange issuer must follow up 

with its State Exchange to identify and 

rectify the reason for non-resolution. In 

accordance with § 155.400(b), a State 

Exchange must submit all enrollment 

data that HHS then uses to calculate 

APTC payments to State Exchange 

issuers. Therefore, in instances when a 

State Exchange does not address State 

Exchange issuer data inaccuracies in a 

timely manner, HHS cannot directly 

assist the State Exchange issuer in 

addressing these data inaccuracies. 

In accordance with this policy, the 

proposed rule (89 FR 82308, 82365 

through 82366) proposed to codify the 

guidance titled Reporting and Reviewing 

Data Inaccuracy Reports in State-based 

Exchanges (SBE) Frequently Asked 

Questions (FAQs). This guidance directs 

State Exchanges to review descriptions 

of data inaccuracies submitted by State 

Exchange issuers, resolve them, and 

submit to HHS a description of the 

resolution of the inaccuracies when the 

State Exchange issuer submits a 

description of a data inaccuracy within 

the 90-calendar day deadline, or 

reasonably after the 90-calendar day 

deadline but before the 3-year deadline 

pursuant to § 156.1210(b) and (c).192

The guidance directs State Exchanges to 

submit the resolution of these 

inaccuracies to HHS via the State Based 

Marketplace Inbound File (SBMI) 

within 60 calendar days after receiving 

from a State Exchange issuer a 

description of a data inaccuracy that 

includes all the information that the 

State Exchange requires or requests to 

properly assess the inaccuracy. 

We stated in the proposed rule (89 FR 

82308, 82365 through 82366) that this 

proposed timeline for resolution of 

enrollment data inaccuracies would 

require State Exchanges to timely 

review and resolve enrollment data 

inaccuracies; clarify the resolution 

process for State Exchange issuers; and 

ensure the accurate payment of APTCs, 

as enrollment data is the basis of APTC 

payments to State Exchange issuers in 

the automated policy-based payments 

(PBP) system. We will monitor State 

Exchanges’ efforts to implement the 

policy and continue to consider whether 

modifying the State-based Marketplace 

Annual Reporting Tool (SMART) to 

have State Exchanges outline their 

process for timely resolving data 

inaccuracies in accordance with the 

requirement may be appropriate for 

tracking State Exchanges’ efforts to meet 

the 60-calendar day requirement for 

submission inaccuracies to HHS. 

We sought comments on this 

proposal. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy as proposed. We 

summarize and respond to public 

comments received on the codification 

that, within 60 calendar days after a 

State Exchange receives a data 

inaccuracy from a State Exchange issuer 

that includes a description of an 

inaccuracy that meets the requirements 

at § 156.1210(a)–(c) and all the 

information that the State Exchange 

requires or requests to properly assess 

the inaccuracy, the State Exchange must 

review and resolve the State Exchange 

issuer’s enrollment data inaccuracies 

and submit to HHS a description of the 

resolution of any inaccuracies described 

by the State Exchange issuer that the 

State Exchange confirms to be 

inaccuracies in a format and manner 

specified by HHS.193

Comment: Some commenters 

supported the proposal, noting that 

enrollment inaccuracies impact 

consumers, and ensuring timely 

resolution of data inaccuracies will 

minimize impacts on consumers’ APTC 

payments. Other commenters opposed 

the policy, expressing various 

operational and financial concerns for 

State Exchanges. These concerns 


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194CMS. (2024, Aug. 14). Reporting and 

Reviewing Data Inaccuracy Reports in State-based 

Exchanges (SBE) Frequently Asked Questions 

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

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

195 Id. 

196 Id. 

197 Id. 

198 45 CFR 156.1210(a). 

199 45 CFR 156.1210(c). 

included: system restrictions and 

limitations; limited resources; the 

anticipated need to divert staff from 

essential functions like outreach, 

enrollment assistance, and plan 

certification; being held accountable for 

a timeframe based on required actions 

by issuers, which are outside of State 

Exchanges’ direct control; increased risk 

of errors or incomplete reviews in 

resolving disputes resulting from rushed 

decision-making to meet the 60-calendar 

day requirement; and other unforeseen 

circumstances. Some commenters 

requested that this regulation be 

effective no earlier than PY 2026 and 

the 60-calendar day window restart 

when State Exchanges need additional 

information from issuers to resolve 

inaccuracies. Some commenters 

suggested that HHS allow extensions 

and in doing so sought clarification on 

the difference between responding to 

versus resolving data inaccuracies. 

Response: We acknowledge 

commenters’ concerns regarding 

operational and financial burdens such 

as system, human capital, procedural 

constraints, and other unforeseen 

circumstances. However, we do not 

believe codifying a timeliness standard 

represents a significant increase in 

operational and financial burden given 

this policy aligns with existing 

guidance 194 and, as stated in the 

proposed rule (89 FR 82365 through 

82366), builds on the existing 

requirement at § 155.400(d) that a State 

Exchange must reconcile enrollment 

information with issuers and HHS no 

less than on a monthly basis. Further, 

because State Exchanges provide the 

enrollment data that HHS uses as the 

basis of APTC payments to State 

Exchange issuers, timely and accurate 

resolution between State Exchanges and 

State Exchange issuers is necessary for 

accurate payment of Federal dollars. 

This policy also provides certainty for 

State Exchange issuers by providing a 

timeline for State Exchanges to act upon 

enrollment data inaccuracies submitted 

to the State Exchange by a State 

Exchange issuer that meets the 

requirements at § 156.1210(a)–(c). As 

such, we believe that any potential 

operational or financial burden faced by 

State Exchanges is outweighed by the 

benefits of ensuring more timely and 

more accurate APTC payments, and for 

these same reasons, we are finalizing 

this policy to be effective as of the 

effective date of this final rule. 

Further, we are clarifying in this rule 

that there are generally no exceptions to 

the 60-calendar day window for State 

Exchanges to review, resolve, and 

submit data inaccuracies to HHS. 

However, as described in the proposed 

rule (89 FR 82365 through 82366) and 

in the guidance,195 the 60-calendar day 

window begins after the receipt of a 

complete inaccuracy submission from a 

State Exchange issuer that includes all 

the information that a State Exchange 

requires or requests to properly assess 

the amount of APTC paid to the 

issuer.196 If a State Exchange requires 

additional information needed to 

address the APTC payment or 

enrollment data inaccuracy after a State 

Exchange issuer reports the inaccuracy 

to the State Exchange or HHS (as 

required by the State Exchanges), the 

State Exchange may respond to the State 

Exchange issuer to request that 

information. The 60-calendar day 

window to review, resolve, and submit 

the data inaccuracy to HHS would start 

only after the State Exchange receives 

all necessary information. Resolving 

inaccuracies, as opposed to responding 

to inaccuracies, includes taking any 

warranted action to address the 

inaccuracy and submit to HHS as 

described in the guidance.197 Because 

the 60-calendar day time period does 

not begin until the State Exchange has 

all the information it needs (that is, a 

complete inaccuracy submission), we 

have not identified any situations that 

warrant an extension of this deadline. 

Comment: Some commenters sought 

clarification regarding the separate 90- 

calendar days for issuers to report 

inaccuracies and the 60-calendar day 

requirement in this rule for State 

Exchanges to address disputes. 

Response: We clarify that these are 

two separate time frames. State 

Exchange issuers must submit 

enrollment data and APTC payment 

inaccuracies to the State Exchange or 

HHS (as required by the State 

Exchanges) within 90 calendar days 

after the date HHS sends a payment and 

collections report to State Exchanges 

and State Exchange issuers 198 or, in 

limited circumstances, within 15 

calendar days of identifying the 

inaccuracy, within the 3-year period 

beginning at the end of the plan year to 

which the inaccuracy relates.199 This 

timeframe is unaffected by this final 

rule. The policy being finalized in this 

rule requires State Exchanges to review 

and resolve data inaccuracies and send 

them to HHS within 60 calendar days 

after receipt of a complete inaccuracy 

submission from a State Exchange 

issuer. HHS reiterates the 90-calendar 

day window applies to issuers and the 

60-calendar day window applies to 

State Exchanges. 

5. Establishment of Optional FixedDollar Premium Payment Threshold and 

Total Premium Threshold (§ 155.400(g)) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82366), we proposed to 

codify a provision related to the 

premium payment threshold policies 

under § 155.400(g) that would allow 

additional issuer flexibility to decide 

when amounts collected from an 

enrollee would be considered to satisfy 

their obligation to pay the enrolleeresponsible portion of the premium for 

certain purposes. Specifically, this 

would provide issuers with additional 

flexibility to not place an enrollee in a 

grace period for failure to pay the full 

amount of their portion of premiums 

due, and to not terminate enrollment 

through the Exchange after the 

applicable grace period ends without 

outstanding premiums being paid in 

full. We stated in the proposed rule (89 

FR 82366) that this proposal would 

reduce the number of coverage 

terminations for enrollees who owe only 

a small amount of premium within the 

threshold. Specifically, we proposed 

that issuers be permitted to set a fixeddollar threshold of $5 or less, which 

would be adjusted for inflation by 

annual agency guidance. In the 

proposed rule (89 FR 82366), we stated 

that we were also considering 

permitting issuers to adopt a threshold 

that is based on the gross premium 

owed by the enrollee, rather than net 

premium. We also proposed to modify 

the threshold of the existing premium 

payment threshold policy at 

§ 155.400(g) from a reasonable amount 

to 95% for clarity. We further proposed 

to allow issuers to adopt only one of the 

three thresholds. Finally, we proposed 

to limit application of the fixed-dollar 

premium payment threshold and gross 

premium-payment threshold to 

payments made after coverage is 

effectuated, so that it could not apply to 

the binder payment. Based on 

comments received, we are finalizing 

this policy with the following 

modifications: we are increasing the 

fixed-dollar threshold to $10, adjusted 

annually for inflation, from $5 as 

proposed; decreasing the gross premium 

percentage-based threshold to 98 


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4476 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

200See CMS. (2024, Aug. 19). Federally-facilitated 

Exchange (FFE) Enrollment Manual. Section 6.2, 

pp. 92–94. https://www.cms.gov/files/document/ffeenrollment-manual-2024-5cr-082024.pdf. 

201 2017 Payment Notice, 81 FR 12203, 12272. 

202See CMS. (n.d.). National health expenditure 

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

percent, from 99 percent as proposed; 

and allowing issuers to select a fixeddollar threshold in tandem with one of 

the two percentage-based thresholds. 

Currently, issuers have the option 

under § 155.400(g) to adopt a 

percentage-based premium payment 

threshold which allows issuers to 

effectuate coverage in accordance with 

binder payment rules at § 155.400(e) for 

enrollees who pay an amount of the 

enrollee-responsible portion of the 

premium that is less than 100 percent 

but within the threshold, provided that 

the level is reasonable and that the level 

and the policy are applied in a uniform 

manner to all enrollees (we have 

historically recommended a percentage 

equal to or greater than 95 percent).200

This permits an issuer to avoid 

triggering a grace period for nonpayment under § 156.270(d) or a grace 

period under State rules, and to avoid 

terminating enrollment for non-payment 

of premiums. Under this policy, if the 

total amount of premium owed by an 

enrollee (including aggregate amounts 

over multiple months) exceeds the 

threshold set by the issuer, the issuer is 

required to place the enrollee in a grace 

period: either the grace period for 

enrollees receiving APTC described at 

§ 156.270(d), or a grace period under 

State authority, as applicable. Any 

amount that is unpaid but within the 

reasonable premium payment threshold 

established by an issuer remains an 

amount owed by the enrollee and 

cannot be forgiven by the issuer.201

In the 2017 Payment Notice (81 FR 

12271 through 12272), in which HHS 

established the option for issuers to 

implement a percentage-based premium 

payment threshold, we received a 

comment requesting that issuers be 

allowed to establish a flat dollar amount 

threshold. At that time, we stated that 

we did not consider implementing such 

a threshold because there may be cases 

in which even a low flat dollar amount 

may represent a large percentage of an 

enrollee’s portion of the premium less 

APTC (81 FR 12272). 

However, after implementation of the 

percentage-based threshold, we have 

realized that the percentage-based 

premium threshold policy does not 

always adequately enable enrollees who 

owe small amounts of premium to avoid 

triggering a grace period or termination 

of enrollment through the Exchange. For 

example, an enrollee whose portion of 

the premium was $1 after APTC, and 

who failed to make a premium payment, 

would be placed into a grace period 

even if the issuer had adopted a 95 

percent payment threshold, despite 

being delinquent by only $1. In an 

analysis of Exchange data for PY 2023, 

we found that there were 81,383 total 

policies terminated for non-payment in 

which $5 or less was owed by the 

enrollee, representing approximately 5.4 

percent of the total number of policies 

terminated for non-payment that year. 

In addition, 102,728 policies in which 

enrollees owed premiums of $5.01 to 

$10 were terminated for non-payment, 

representing approximately 6.84 percent 

of the total number of policies 

terminated for non-payment. Even 

though $5 may represent a large 

percentage of an enrollee’s portion of 

the premium less APTC, we stated in 

the proposed rule (89 FR 82367) that we 

believe that triggering a grace period or 

terminating enrollment through the 

Exchange is too severe a consequence 

for non-payment of such limited dollar 

amounts. 

In the proposed rule (89 FR 82367), 

we noted our concern about situations 

in which an issuer would be willing to 

avoid termination of enrollment through 

the Exchange if the enrollee owed only 

small amounts of premium but are 

prevented from doing so by the lack of 

flexibility in the current regulation. In 

addition, many of the enrollees who 

enter a grace period because they owe 

de minimis amounts of premium are 

likely low or moderate-income enrollees 

and thus might be especially hurt by 

disruptions in coverage. We stated in 

the proposed rule (89 FR 82367) that we 

recognize that issuers have historically 

implemented various premium payment 

thresholds, and we believe there is 

value in providing flexibility to issuers 

regarding whether to adopt a fixeddollar payment threshold and the 

amount of the threshold. 

We thus proposed to modify 

§ 155.400(g) to allow issuers to adopt a 

fixed-dollar premium payment 

threshold of $5 or less, adjusted for 

inflation by annual agency guidance, 

under which they could provide 

additional flexibility to enrollees who 

fail to pay the full amount of their 

portion of premium owed. We proposed 

to limit the fixed-dollar premium 

threshold to $5 or less because, unlike 

the current percentage-based threshold, 

a fixed-dollar threshold would allow 

enrollees, in some cases, to pay $0 in 

premium without the issuer triggering a 

grace period or terminating enrollment 

through the Exchange. Such a limit 

would ensure that enrollees who owe 

large amounts of premium do not 

remain enrolled in coverage through the 

Exchange and would serve to limit the 

number of times an enrollee may fail to 

pay premium and avoid triggering a 

grace period or termination of 

enrollment through the Exchange. As 

we stated in the proposed rule (89 FR 

82367), we believe that a limit of $5 is 

sufficiently large to enable issuers to 

allow enrollees who owe de minimis 

amounts of premium to remain enrolled, 

while ensuring that enrollees do not 

accumulate excessive amounts of 

premium owed prior to triggering a 

grace period or termination of 

enrollment through the Exchange. We 

also stated that we recognize that this 

amount might be lower than the 

threshold enrollees might be afforded 

under a percentage-based threshold. 

However, we also stated that we 

recognize that within a percentagebased threshold, the enrollee must pay 

a certain amount of their premium to 

avoid triggering a grace period or 

termination of enrollment through the 

Exchange, whereas with a fixed-dollar 

threshold, an enrollee may not have 

paid any other amount than the binder 

payment. Other factors such as the 

amount the enrollee has paid for their 

premium to date is not considered when 

applying the fixed-dollar payment 

threshold. We requested comment on 

whether this is a reasonable limit for the 

fixed-dollar threshold, or whether an 

alternative amount (such as $10) would 

be more appropriate and in line with 

our goal of enabling enrollees who owe 

small amounts of premiums, while 

avoiding excessive accumulation of 

premium debt, to avoid triggering a 

grace period or termination of 

enrollment through the Exchange. In the 

proposed rule (89 FR 82367), we stated 

that if adopted, we would publish 

annual updates through subregulatory 

guidance to this $5 limit to adjust for 

inflation, using the National Health 

Expenditure Forecast published 

annually by CMS’ Office of the 

Actuary.202

Issuers that adopt such a policy could 

permit enrollees who owe less than the 

specified amount of premium to avoid 

triggering a grace period and 

termination of enrollment through the 

Exchange. However, we proposed to 

limit application of this threshold to 

premium payments made after coverage 

is effectuated, so that it could not apply 

to the binder payment. Issuers have the 

option under the current percentage 

threshold policy at § 155.400(g)(1) of 

applying a percentage-based threshold 


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203See CMS (2024). Effectuated Enrollment: Early 

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

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

to the binder payment, but under that 

policy, enrollees are required to pay 

some amount of premium, even if it less 

than the total. By contrast, under a 

fixed-dollar premium payment 

threshold, enrollees could have their 

coverage effectuated without making 

any payment if their portion of the 

binder payment is under the threshold 

amount. Due to concerns about program 

integrity, we stated in the proposed rule 

(89 FR 82367) that we believe it is 

important to ensure that, when a binder 

payment is required, enrollees must 

always pay some amount of premium to 

effectuate coverage as an important 

signal that the coverage is desired by the 

enrollee. In addition, as under the 

current policy (81 FR 12272), any 

amount that is unpaid but within the 

reasonable premium payment threshold 

established by an issuer remains an 

amount owed by the enrollee and 

cannot be forgiven by the issuer. This 

remains true whether the premium 

payment threshold is utilized for any of 

the following payments: binder 

payments, regularly billed payments, or 

amounts owed by an enrollee while in 

a grace period. 

To illustrate how a fixed-dollar 

premium threshold would work, we 

provided the following example in the 

proposed rule (82368): 

Example 1: During the annual Open 

Enrollment Period, a consumer selects a 

QHP with a total monthly premium 

amount of $300, and the consumer is 

determined eligible for $299 in APTC 

and elects to receive the entire amount. 

The consumer’s enrollee-responsible 

portion of premium will thus be $1. The 

QHP issuer has adopted a fixed-dollar 

premium payment threshold policy 

under which it will not terminate 

enrollment of enrollees who owe $5 or 

less of the enrollee-responsible portion 

of premium. The issuer has set a binder 

payment deadline of January 30, and the 

consumer sends the binder payment of 

$1 ahead of the deadline and effectuates 

coverage effective January 1. 

Subsequently, the consumer does not 

make a payment for February, March, 

April, May, or June, and, as a result, the 

enrollee owes $5 in outstanding 

premiums. Because the issuer has 

adopted a $5 premium payment 

threshold, the issuer would not put the 

consumer into a grace period, since the 

total amount owed does not exceed $5. 

However, the issuer would not be 

permitted to write off the $5 owed, and 

if the consumer does not pay the 

premium for July in full, the issuer must 

put the consumer into a 3-month grace 

period since the total amount of 

premium owed would exceed the 

threshold set by the issuer. However, if 

within the grace period the consumer 

paid the full amount owed or a portion 

of the full amount owed that brings the 

amount owed under $5, the issuer could 

terminate the grace period without 

terminating enrollment through the 

Exchange. 

Finally, under the current percentagebased threshold policy, the percentage 

is calculated based on the percentage 

paid of the enrollee’s portion of the 

premium (that is, the total premium 

minus any APTC). In the proposed rule 

(89 FR 82368), we stated that we were 

considering whether to further amend 

§ 155.400(g) to also permit issuers to set 

a threshold that is a percentage of the 

policy’s total premium and not just the 

enrollee’s portion of premium, thus 

allowing APTC paid on the consumer’s 

behalf to count toward the threshold. 

In the 2017 Payment Notice (81 FR 

12271 through 12272), we established 

the option for issuers to adopt a 

premium payment threshold based on 

net premium owed by the enrollee. At 

that time, we did not consider 

establishing a threshold based on gross 

premium, nor have we done so since 

then. We stated in the proposed rule (89 

FR 82368) that we now recognize that 

this option may provide issuers with an 

alternative method of keeping 

consumers enrolled in coverage that 

issuers may prefer, either because it is 

simpler to implement or because it is 

percentage-based and therefore more 

similar to the premium payment 

threshold that is currently allowed 

under § 155.400(g). 

Establishing an option for issuers to 

adopt a percentage threshold based on 

gross premium owed by the enrollee 

with APTC counting toward the 

threshold would, in some cases, allow 

enrollees to remain enrolled in coverage 

or avoid triggering a grace period or 

termination of enrollment through the 

Exchange for owing small amounts of 

the enrollee-responsible portion of the 

premium. For example, an enrollee 

whose gross premium was $600, and 

was receiving $595 in APTC, could 

avoid triggering a grace period or 

termination of enrollment through the 

Exchange or termination of coverage 

even without paying the $5 enrolleeresponsible portion of the premium if 

the issuer had adopted a 99 percent 

premium threshold based on gross 

premium because 99 percent of the 

gross premium ($594) would have been 

paid on the enrollee’s behalf in the form 

of APTC. With the current 95 percent 

threshold based on net premium, by 

contrast, the enrollee would be required 

to pay at least $4.75 to avoid triggering 

a grace period or termination of 

enrollment through the Exchange. While 

historically we have not defined a 

specific threshold for the premium 

threshold based on net premium, we 

stated in the proposed rule (89 FR 

82368) that we would implement a 

threshold for the premium threshold 

based on gross premium that is 99 

percent or more of the gross premium. 

We stated that we believe the gross 

premium threshold should be higher 

than the net premium threshold to avoid 

the enrollee accumulating a much larger 

amount of premium debt, and to keep to 

a similar de minimis amount of 

premium owed as the net premium 

percentage-based and fixed-dollar 

thresholds allow. Because this threshold 

would also, in some circumstances, 

allow enrollees to temporarily avoid 

paying any premium, we also proposed 

to limit application of this threshold to 

premium payments made after coverage 

is effectuated, so that it could not apply 

to the binder payment (due to 

operational and program integrity 

concerns, as discussed earlier in this 

section). 

A percentage threshold based on gross 

premium may be simpler to implement, 

since it is similar to the type of 

threshold issuers are already allowed to 

adopt. However, in the proposed rule 

(89 FR 82368), we stated that we 

recognize that there may also be 

drawbacks to this approach, including 

that enrollees could accumulate more 

than $5 in premium debt, which the 

enrollee would continue to owe even if 

coverage were eventually terminated 

due to non-payment of premiums. Based 

on our experience with the current, net 

premium-based payment threshold, we 

stated that we do not believe this would 

result in significant premium debts 

accumulated by enrollees, since we 

would be limiting the gross percentagebased threshold to be 99 percent or 

more of the gross premium. We further 

stated that we recognize that a gross 

premium amount higher than the 

average gross premium (which was 

$604.78 in February 2023) 203 might 

allow enrollees to accrue more than the 

$5 debt that could be accrued under the 

fixed-dollar threshold, but this is true 

under the existing net premium 

payment threshold as well. We also 

noted in the proposed rule (89 FR 

82368) that issuers are prohibited from 

attributing premiums owed to prior 

debts and not to binder payments, and 

thus issuers may not refuse to enroll 

enrollees in coverage based on failure to 


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4478 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

pay their binder payment by attributing 

binder payments to prior debts. 

To illustrate how a premium 

threshold based on gross premium 

would work, we provided the following 

example in the proposed rule (89 FR 

82368): 

Example 2: During the annual Open 

Enrollment Period, a consumer selects a 

QHP with a total monthly premium 

amount of $500, and the consumer is 

determined eligible for $495 in APTC 

and elects to receive the entire amount. 

The consumer’s enrollee-responsible 

portion of premium will thus be $5. The 

QHP issuer has adopted a percentagebased premium payment threshold 

policy under which it will not trigger a 

grace period or termination of 

enrollment through the Exchange for 

enrollees who pay at least 99 percent of 

gross premium (including payments of 

APTC made on the enrollee’s behalf), 

which here would be $5. The issuer has 

set a binder payment deadline of 

January 30, and the consumer sends the 

binder payment of $5 ahead of the 

deadline and effectuates coverage 

effective January 1. Subsequently, the 

consumer pays $1 in February and owes 

$4 in past due premium; because the 

consumer’s payment is within the 99 

percent threshold established by the 

issuer, the issuer would not place the 

enrollee in a grace period. The following 

month, the consumer does not pay any 

premium, and now owes $9 in past due 

premium. Since the $9 now owed after 

application of the $495 APTC paid on 

the consumer’s behalf for March 

represents more than 1 percent of the 

$500 gross premium, the issuer must 

put the consumer into a 3-month grace 

period starting March 1. The issuer 

would not be permitted to write off the 

$9 owed, and the consumer must pay all 

outstanding premium owed before the 

end of the grace period (May 31) to 

avoid exhaustion of the grace period 

and remain enrolled in coverage. 

We sought comments on this 

proposal. Specifically, we requested 

comment on whether a fixed-dollar 

threshold, as proposed, or a percentage 

threshold based on gross premium, 

would better meet our goal of providing 

flexibility to issuers to allow enrollees 

to avoid triggering a grace period or 

termination of enrollment through the 

Exchange for owing small amounts of 

premium. 

We also proposed changing the 

premium payment threshold based on 

net premium owed by the enrollee from 

being a ‘‘reasonable’’ standard to a 

specifically defined threshold of 95 

percent or higher of the net premium. 

We stated in the proposed rule (89 FR 

82369) that we believe this would 

provide clarity for issuers and 

Exchanges. 

We also proposed limiting issuers to 

utilize one premium payment threshold, 

such that a fixed-dollar threshold 

cannot be adopted and utilized in 

tandem with a percentage-based policy, 

either net or gross. We stated in the 

proposed rule (89 FR 82369) that we 

believe that limiting this flexibility 

would allow issuers to choose and 

apply the threshold that works best for 

their payment operations but prevents 

complex situations that may arise from 

allowing multiple thresholds to be used 

simultaneously. We sought comment on 

whether we should allow issuers to 

adopt both a fixed-dollar and 

percentage-based threshold and 

requested commenters to consider the 

administrative feasibility of applying 

both thresholds, and how such a policy 

could be applied uniformly and 

consistently across enrollees. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy with the following 

modifications: we are increasing the 

fixed-dollar threshold to $10, lowering 

the gross premium percentage-based 

threshold to 98 percent, and allowing 

issuers to select multiple thresholds: a 

fixed-dollar threshold in tandem with 

one of the two percentage-based 

thresholds. We summarize and respond 

to public comments received on the 

proposed premium payment thresholds 

below. 

Comment: Many commenters 

supported the proposal overall and 

stated that providing additional 

flexibilities to issuers would allow 

consumers who owe small premium 

amounts, especially those with lower 

incomes, to keep their coverage and 

prevent disruptions in care. 

Response: We agree that the 

additional flexibilities would allow 

issuers to implement a premium 

payment threshold that meets the needs 

of their enrollees and allow enrollees to 

maintain their coverage when they owe 

minimal premium. 

Comment: The majority of 

commenters supported the premium 

payment threshold but recommended 

that the fixed-dollar threshold be 

increased from the proposed $5 limit. 

Most recommended that it be increased 

to $10 and stated that the proposed $5 

limit would be too low to afford 

consumers the desired protection from 

triggering a grace period or termination 

over a minor payment issue. One 

commenter stated that $10 was less than 

2 percent of the average premium in 

their State, which operates a State 

Exchange, and that carriers in their State 

had higher fixed-dollar thresholds for 

non-Exchange plans. One commenter, 

an issuer, stated that a fixed-dollar 

threshold of $5 was too low as it 

translated to approximately 99.9 percent 

of their premiums, which they stated is 

a very high bar for underpayments. 

Response: We agree with commenters 

that a fixed-dollar threshold of $10, 

adjusted for inflation by annual agency 

guidance, would provide more 

protection to consumers who owe small 

amounts of premium. We also note that 

$10 would represent less than 2 percent 

of the average monthly premium across 

all Exchanges. Based on FFE data from 

PY 2023, 102,728 policies in which 

enrollees owed premiums of $5.01 to 

$10 were terminated for non-payment, 

representing approximately 6.84 percent 

of the total number of policies 

terminated for non-payment. Increasing 

the maximum fixed-dollar threshold to 

$10 would allow more consumers to 

avoid termination of their coverage, 

while ensuring that most enrollees will 

still be required to pay the majority of 

their premium to maintain coverage. 

While we maintain that the fixed-dollar 

threshold should remain at a de minimis 

amount to prevent enrollees from 

accruing too much debt, based on 

comments received, we believe that the 

additional $5 an enrollee could accrue 

would not place them in substantially 

more debt. 

Comment: Many commenters stated 

that the fixed-dollar threshold and gross 

premium percentage-based thresholds 

should also apply to the binder 

payment. Some commenters stated that 

expanding the proposal in this way 

would allow issuers to maintain 

enrollment for consumers, many of 

whom are living paycheck to paycheck. 

One commenter stated that applying the 

proposed policy to binder payments was 

unlikely to have a meaningful effect on 

the number of fraudulent enrollments: 

many plans already have a $0 premium 

for consumers at certain income levels, 

and a broker willing to engage in fraud 

could simply choose a plan and 

fabricate an income estimate to get a $0 

enrollment. Another commenter 

suggested that the fixed-dollar and gross 

premium payment thresholds should be 

applied to the binder payment, but only 

for policies with an enrollee responsible 

amount, which would help maintain 

effectuation rates. Finally, one 

commenter supported our proposal to 

not apply the fixed-dollar and gross 

premium percentage-based thresholds to 

the binder payment and stated that 

enrollees should continue to be required 

to pay a premium to effectuate coverage. 


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204See CMS (2024). CMS Update on Actions to 

Prevent Unauthorized Agent and Broker 

Marketplace Activity. https://www.cms.gov/ 

newsroom/press-releases/cms-statement-systemchanges-stop-unauthorized-agent-and-brokermarketplace-activity. See also the revisions in this 

final rule to § 155.220, ‘‘Ability of States to Permit 

Agents and Brokers and Web-Brokers to Assist 

Qualified Individuals, Qualified Employers, or 

Qualified Employees Enrolling in QHPs.’’ 

Response: While we understand that 

some enrollees will have a difficult time 

paying the binder payment, we believe 

that when a premium is required, it is 

best practice to require consumers to 

pay some portion of it to indicate their 

desire to effectuate coverage to promote 

the integrity of the Exchanges and to 

reduce the potential for fraud and abuse. 

This policy may also minimize the 

opportunities for agents, brokers, and 

web-brokers to enroll consumers in an 

Exchange plan without their consent 

because all consumers who owe a 

premium would be required to pay 

some of their binder payment if the 

issuer adopted a net premium 

percentage-based threshold, or all of 

their binder payment if the issuer 

adopted a fixed-dollar or gross premium 

percentage-based threshold in order to 

effectuate coverage. We have found that 

some agents, brokers, and web brokers 

may target consumers who do not have 

to make a binder payment because it is 

harder for those consumers to detect the 

unauthorized enrollment when they do 

not have to pay to effectuate coverage. 

Given the pattern of unauthorized 

enrollments and our efforts to curb 

them,204 we think it is prudent to 

further protect consumers and the 

Exchanges by making it harder for 

agents, brokers, and web-brokers to 

enroll consumers in Exchange coverage 

without their consent, to the extent 

possible. As such, at this time we are 

finalizing that the binder payment will 

be excluded from the fixed-dollar and 

gross premium-based thresholds. 

Comment: Some commenters stated 

that issuers should be able to apply 

more than one threshold to improve 

continuity of coverage, as long as the 

issuer applied both thresholds 

consistently and in a nondiscriminatory manner. Commenters 

also disagreed that allowing issuers to 

implement more than one threshold 

would introduce too much complexity 

for both issuers and consumers. 

Commenters stated that if an issuer was 

concerned about the complexity of 

implementing two thresholds, they have 

the option to only apply one threshold, 

or none at all. Lastly, some commenters 

noted that while consumers may be 

confused about the existence of multiple 

thresholds, the benefit of avoiding being 

put into a grace period would outweigh 

any potential confusion. 

Response: We agree that allowing 

issuers to apply multiple thresholds 

would allow more consumers to avoid 

being placed into a grace period and 

thereby avoid termination of their 

coverage for owing nominal amounts of 

premium, which would increase the 

effectiveness of the proposed policy. We 

also agree that if an issuer is concerned 

about the complexity of implementing 

multiple thresholds, they have the 

option to only implement one threshold 

or none at all. As such, we are finalizing 

the option for issuers to implement 

multiple thresholds: a fixed-dollar 

threshold and either the net premium or 

gross premium percentage-based 

threshold. We would limit an issuer to 

only applying one of the percentagebased thresholds to ensure that the 

implementation and application of the 

premium payment threshold does not 

become too operationally complex for 

issuers and for CMS in reviewing audits 

of premium payment activity. To 

illustrate how a fixed-dollar and 

percentage-based threshold might be 

implemented, we are providing the 

following example: During the annual 

Open Enrollment Period, a consumer 

selects a QHP with a total monthly 

premium amount of $200. The 

consumer is determined ineligible for 

APTC and thus responsible for paying 

the full amount of the premium. The 

QHP issuer has adopted both a fixeddollar premium payment threshold 

policy, under which it will not 

terminate coverage of enrollees who 

owe $8 or less of the enrolleeresponsible portion of premium, and a 

net premium percentage-based 

threshold policy, under which it will 

not terminate coverage of enrollees who 

pay at least 95 percent of the enrolleeresponsible portion of the premium. The 

issuer has set a binder payment 

deadline of January 30, and the 

consumer sends the binder payment of 

$200 ahead of the deadline and 

effectuates coverage effective January 1. 

Subsequently, the consumer makes a 

payment of $190 for February’s 

premium, only 95 percent of the total 

amount owed. Although the remainder 

of the amount owed, $10, is above the 

issuer’s fixed-dollar premium payment 

threshold of $8, it falls within the 

percentage-based threshold of 95 

percent set by the issuer, and thus the 

enrollee’s coverage would not be 

terminated. If the enrollee makes 

another payment of $190 for March’s 

premium, the issuer would then 

terminate coverage, subject to a State’s 

grace period if applicable, because the 

premium owed would exceed both the 

95 percent and $8 thresholds. 

Comment: Some issuers, while 

supportive of the premium payment 

threshold proposal, specifically opposed 

the gross premium percentage-based 

threshold and stated that it could be 

confusing for consumers who likely 

consider the premium payment to be the 

individual responsibility amount, rather 

than the premium amount owed before 

the application of APTC. One 

commenter stated that more time was 

needed to review the gross premium 

percentage-based threshold. 

Response: While we agree that most 

consumers likely consider the net 

premium (their portion of the premium 

after APTC) to be their premium 

amount, we encourage issuers who 

adopt the gross premium percentagebased threshold to include the full 

premium amount and the applied APTC 

on member invoices so that the enrollee 

is made aware of the gross premium 

amount and whether they have paid 

enough of their portion due to avoid 

being placed into a grace period. 

Because establishment of a premium 

payment threshold is optional, issuers 

that are concerned about 

implementation of a gross premium 

percentage-based threshold could wait 

or opt not to implement one. 

Comment: A few commenters 

opposed the premium payment 

threshold policy entirely. One 

commenter was concerned that 

implementation of the proposal may 

lead to unintended consequences, 

particularly if the threshold is set by the 

issuer, such as issuers undermining the 

rate review process and providing an 

incentive for issuers to take more credit 

risks and incorporate the additional 

costs into premiums. The commenter 

was also concerned that the fixed-dollar 

threshold could incentivize fraudulent 

activity directed at the most flexible 

premium payment threshold policies, 

and that a flexible threshold would also 

lead to brokers leveraging these unique 

carrier-specific policies as a marketing 

lever. One commenter was concerned 

that the proposal would modify the 

grace period because consumers would 

be allowed to continue coverage without 

making any of their premium payments, 

which the commenter stated would 

extend grace period coverage. 

Additionally, the commenter stated this 

would lead to a costly tax bill for 

consumers who expected their coverage 

to terminate for non-payment. 

Response: We disagree that the 

additional flexibilities provided in the 

premium payment threshold proposal 

might drive issuers to take additional 

credit risks since all of the premium 


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4480 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

205CMS. (2024, Aug. 19). Federally-facilitated 

Exchange (FFE) Enrollment Manual. Section 6.2, 

pp. 92–94. https://www.cms.gov/files/document/ffeenrollment-manual-2024-5cr-082024.pdf. 

payment thresholds allow enrollees to 

owe a de minimis amount of debt. In 

addition, issuers that do not want to 

take on the risk associated with 

adopting a premium payment threshold 

would not have to, since the policy is 

optional. We also disagree that any 

premium payment threshold policy set 

by an issuer would undermine the rate 

review process, because there is already 

a current existing net premium 

percentage-based threshold which is 

optional for issuers to implement and 

must currently be set at a reasonable de 

minimis level, and which has not, to our 

knowledge, impacted the rate review 

process. We also disagree that the fixeddollar threshold would incentivize 

fraudulent activity directed at the most 

flexible premium payment threshold 

policies and that a flexible threshold 

would lead to agents, brokers, or webbrokers leveraging these unique carrierspecific policies as a marketing lever. 

The commenter seems to suggest that 

agents, brokers, or web-brokers would 

be incentivized to enroll consumers in 

an Exchange plan with a generous 

premium policy threshold(s) to secure a 

commission. However, we are not 

convinced that consumers would be 

persuaded to enroll in an Exchange 

plan, or to enroll in a specific Exchange 

plan over another, because of a de 

minimis premium payment threshold, 

especially when any unpaid amounts 

remain a debt owed to the issuer. If the 

commenter is suggesting that an agent, 

broker, or web-broker might pay a 

binder payment on a consumer’s behalf 

in order to secure an unauthorized 

enrollment, we note that the fixed-dollar 

and gross premium percentage-based 

thresholds will not apply to the binder 

payment, and that the current net 

percentage-based threshold, which does 

apply to the binder payment, has not, to 

our knowledge, induced unauthorized 

enrollments. With regard to the 

comment that the proposal would 

modify the grace period, we clarify that 

the premium payment threshold, which 

already exists as the net premium 

percentage-based threshold, would not 

extend the grace period. Per 

§ 156.270(g), and issuer guidance, a 

consumer must pay the full amount due 

once they are placed into the grace 

period, and the grace period does not 

reset if partial payments are made. 

Comment: Some commenters 

recommended a lower threshold for the 

gross premium percentage-based 

threshold. 

Response: We agree that the gross 

premium percentage-based threshold 

should be lowered, and as such, we are 

finalizing a 98 percent or above 

threshold for the gross premium 

percentage-based threshold. Since we 

are also increasing the fixed-dollar 

threshold to $10, which is almost 2 

percent of the average premium in the 

FFE, increasing the allowed gross 

premium percentage-based threshold 

would allow more consistency to the 

definition of a de minimis amount, 

though we note that any percentagebased threshold may be higher than $10 

if the gross premium is higher than the 

average premium. 

Comment: Several commenters stated 

that CMS should establish clear 

guidelines for issuers on how the 

premium payment threshold should be 

implemented uniformly across all plans. 

Response: Issuers that select any 

threshold must apply it in the same 

manner to all enrollees in a plan. For 

example, an issuer may not impose a 

$10 threshold for some enrollees and a 

$5 threshold for others, even though 

both thresholds would be within the 

permitted fixed-dollar threshold of $10. 

We note that we already provide 

guidelines for implementing the current 

net premium percentage-based 

threshold through the FFE Enrollment 

Manual and will also do so for the fixeddollar and gross premium percentagebased thresholds in the same manner in 

a future revision of the FFE Enrollment 

Manual.205

Comment: Some commenters 

requested clarification on whether State 

Exchanges would be limited to 

permitting only the premium payment 

threshold options specifically described 

in the proposed regulation, or whether 

State Exchanges have the authority to 

permit issuers in their State to offer 

additional flexibility. 

Response: State Exchanges have the 

option to permit their issuers to 

implement only the flexibilities 

available after finalization of this rule. 

Similar to the current premium payment 

rules, State Exchanges would not be 

permitted to provide additional 

flexibility. Consistent with the current 

rules on premium payment thresholds, 

the FFE and SBE–FPs will provide the 

flexibilities specified in the regulation. 

6. General Eligibility Appeals 

Requirements (§ 155.505) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82369), we proposed 

revising § 155.505(b) to codify an option 

for application filers to file appeals on 

behalf of applicants and enrollees on the 

application filer’s Exchange application. 

The Exchanges on the Federal 

platform allow application filers as 

defined under § 155.20 to file 

applications on behalf of an applicant. 

However, the appeals regulation at 

§ 155.505(b) states that only applicants 

and enrollees may submit appeal 

requests to the HHS appeals entity or a 

State Exchange appeals entity. Appeal 

requests submitted online to the HHS 

appeals entity are linked to a 

consumer’s HealthCare.gov account, 

which is controlled by the application 

filer. Thus, an application filer who has 

authority to apply for coverage through 

HealthCare.gov on behalf of an 

applicant under § 155.20, does not have 

parallel authority under § 155.505(b) to 

appeal a contested eligibility 

determination on behalf of that 

applicant through the same 

HealthCare.gov account. 

In the proposed rule (89 FR 82369), 

we stated that this limitation under 

§ 155.505(b) puts a burden on 

consumers, as appeals filed by 

application filers who are neither an 

applicant or enrollee are considered 

invalid based on lack of standing, 

requiring either that the applicant or 

enrollee resubmit their appeal or that 

they designate the application filer as an 

authorized representative in writing. 

These extra steps not only add 

unnecessary complications for the 

applicant or enrollee, but also serve to 

delay an appeal resolution that may 

grant or restore QHP coverage and 

financial assistance. 

The proposed change would allow 

application filers to file appeals through 

the HHS appeals entity or a State 

Exchange appeals entity on behalf of 

applicants and enrollees on their 

Exchange application, streamlining the 

appeals process and ensuring 

operational consistency throughout the 

application and appeals processes. In 

the proposed rule (89 FR 82369), we 

stated that we did not anticipate that 

this would impose any additional 

substantial burden on any Exchanges, 

including State Exchanges that operate 

their own platform, as this should not 

materially increase the number of 

appeals filed, or add complexity to 

appeals processes. 

We sought comment on this proposal. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy as proposed. We 

summarize and respond to public 

comments received on the proposed 

policy to allow application filers to file 

appeals on behalf of applicants and 

enrollees below. 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4481 

206Section 1311(c)(1)(B) of the ACA and 

§ 155.1000(c)(2) further provide that an Exchange 

may not exclude a health plan (i) on the basis that 

such plan is a fee-for-service plan, (ii) through the 

imposition of premium price controls, or (iii) on the 

basis that the plan provides treatments necessary to 

prevent patients’ deaths in circumstances the 

Exchange determines are inappropriate or too 

costly. 

Comment: The majority of 

commenters supported allowing 

application filers to file appeals on 

behalf of applicants and enrollees on the 

application filer’s Exchange application. 

Several commenters noted that 

application filers have the authority to 

apply for coverage in the Exchange on 

behalf of applicants and that this change 

ensures operational consistency 

throughout the application and appeals 

process while reducing burden on 

appellants. One commenter noted that 

the change will particularly help reduce 

the burden on those appellants with 

disabilities and limited English 

proficiency who rely on household 

members to assist them. A few 

commenters stated that health center 

staff are already knowledgeable in 

navigating HealthCare.gov and the 

appeals process, and that this proposed 

change would benefit the patients they 

serve. Lastly, one commenter noted that 

the proposed regulation would support 

continuous health insurance coverage 

and prevent unnecessary gaps in 

coverage by removing administrative 

hurdles faced by applicants and 

enrollees. 

Response: We agree that this change 

ensures operational consistency 

throughout the application and appeals 

process while reducing burden on 

consumers. 

Comment: One commenter suggested 

that CMS clarify that the regulation 

applies only to FFEs, noting that if a 

consumer needs assistance filing an 

appeal with a State Exchange appeals 

entity, the appeal form provides a space 

in which the consumer can appoint an 

authorized representative. The 

commenter stated that allowing 

application filers to file appeals rather 

than attempting to resolve the appeal 

through customer support pathways 

may increase the number of appeals 

filed for issues that could be resolved 

without an appeal. The commenter also 

stated that appeals may be delayed in 

the State Exchange system if the system 

does not recognize application filer 

data. 

Response: We clarify that the change 

to § 155.505(b) applies to State 

Exchanges as well. We agree that it is 

important to not make a change that 

may unnecessarily delay the appeals 

process for a consumer. However, we 

believe that the current process 

requiring the consumer to designate the 

application filer as an authorized 

representative in writing creates a 

burden that potentially delays 

adjudicating and resolving an appeal. 

We appreciate that a State Exchange 

may need to make adjustments to 

accommodate application filers, 

however we expect these adjustments to 

be minimal and ultimately in the best 

interest of the consumer and the 

efficiency of the appeals process. 

Finally, we acknowledge that State 

Exchanges may have multiple paths to 

resolve eligibility determination issues, 

but we note that this change should not 

hinder consumers’ use of those 

alternative paths or incentivize 

consumers to pursue a formal appeal 

over an informal resolution. 

Comment: One commenter suggested 

CMS include additional appeal consent 

language confirming that the applicant 

gives consent to have the application 

filer file an appeal on their behalf. The 

commenter noted concern that 

application filers may file appeals on 

behalf of applicants that do not wish to 

appeal. 

Response: We acknowledge the 

concern that an application filer may 

file an appeal on behalf of an applicant 

who does not wish to appeal. However, 

Exchanges allow application filers, as 

defined under § 155.20, to file 

applications on an applicant’s behalf 

and therefore it is consistent to allow an 

application filer to appeal an eligibility 

determination related to such 

application on the applicant’s behalf. 

While there is a low risk that an 

application filer may submit an 

application for coverage or appeal the 

eligibility determination created in 

response to that application without the 

consumer’s consent, the application and 

appeal request are both submitted under 

penalty of perjury to guard against any 

misuse of authority. We further believe 

that the benefit created for both the 

application filer and consumer in 

streamlining these processes and 

providing operational consistency 

outweighs such a risk. 

Comment: One commenter suggested 

that CMS provide guidance on the scope 

and role of the application filer after 

filing an appeal and that CMS explore 

the ramifications of this change further 

before making it. 

Response: As per the proposed 

regulation, the application filer would 

have the same standing to file an appeal 

and participate in the adjudicatory 

process as an applicant or enrollee. We 

have considered, but have not 

identified, any unintended 

consequences of this policy. 

Comment: One commenter suggested 

that CMS expand the language to allow 

agents and brokers to file appeals on 

behalf of consumers, stating it would be 

consistent with other actions they 

perform. 

Response: We clarify that an agent, 

broker, or web-broker would have 

authority to file an appeal on behalf of 

a consumer if the agent, broker, or webbroker has been designated as an 

authorized representative by the 

consumer (or if the agent, broker, or 

web-broker is acting in their personal 

capacity and otherwise meets the 

definition of application filer). Given 

our efforts to address misconduct and 

noncompliance by agents, brokers, and 

web-brokers, as described in more detail 

in section III.C.2. of this final rule, we 

decline to further extend the authority 

for agents, brokers, and web-brokers to 

file consumer appeals. 

7. Certification Standards for QHPs 

(§ 155.1000) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82369), we proposed to 

amend § 155.1000 by adding a new 

paragraph (e) stating that an Exchange 

may deny certification of any health 

plan as a QHP that does not meet the 

general certification criteria at 

§ 155.1000(c). 

Section 1311(e)(1) of the ACA grants 

an Exchange the authority to certify a 

health plan as a QHP if the health plan 

meets the requirements for certification 

promulgated by the Secretary under 

section 1311(c)(1) of the ACA, and the 

Exchange determines that making the 

plan available through the Exchange is 

in the interests of qualified individuals 

and qualified employers in the State.206

In the Exchange Establishment Rule (77 

FR 18310, 18404 through 18405), we 

codified the responsibilities of an 

Exchange to certify QHPs at § 155.1000 

and, § 155.1000(b), required Exchanges 

to only offer health plans which have in 

effect a certification issued or are 

recognized as health plans deemed 

certified for participation in an 

Exchange as a QHP. In that final rule, 

we also codified general certification 

criteria, consistent with section 

1311(e)(1)(A) and (B) of the ACA, at 

§ 155.1000(c): an Exchange may certify 

a plan as a QHP if: (1) the health 

insurance issuer provides evidence 

during the certification process that it 

complies with the applicable minimum 

certification requirements outlined in 

subpart C, part 156 of our regulations; 

and (2) the Exchange determines that 

making the health plan available 

through the Exchange is in the interest 


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4482 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

207 In that rule, we outlined a number of nonexhaustive strategies an Exchange may employ to 

determine whether the offering of a health plan is 

in the interest of qualified individuals and qualified 

employers (77 FR 18406). 

208See the discussion in the 2017 Payment Notice 

(81 FR 12289) for more information on HHS’ 

approach for the denial of certification on the FFEs 

(stating ‘‘HHS expects to continue to certify the vast 

majority of plans that meet certification standards. 

HHS will focus denials of certification in the FFEs 

based on the ‘interest of the qualified individuals 

and qualified employers’ standard on cases 

involving the integrity of the FFEs and the plans 

offered through them.’’) 

of qualified individuals and qualified 

employers.207

However, an Exchange’s authority to 

deny certification is not explicitly 

referenced in 45 CFR part 155. Several 

regulations, including §§ 155.1000(c) 

and 155.1090, illustrate that an 

Exchange may deny certification of a 

health plan that does not meet the 

requirements of § 155.1000(c). 

Moreover, a plain reading of section 

1311(e)(1) of the ACA makes clear that 

an Exchange, as the entity statutorily 

responsible for determining whether a 

plan meets the minimum QHP 

certification standards, has the implied 

authority to deny certification of plans 

that do not meet these standards. Any 

contrary read of section 1311(e)(1) of the 

ACA would mean that an Exchange 

does not have any statutory authority to 

take any action for plans that do not 

meet minimum certification standards, 

which is not a reasonable result and 

would be contrary to congressional 

intent. 

We sought in the proposed rule (89 

FR 82369) to revise our regulations so 

that they more fully and accurately 

reflect the discretion that Exchanges 

have to deny certification of any plan 

that does not meet the general 

certification criteria at § 155.1000(c). 

Accordingly, we proposed to use the 

authorities under section 1311(c) of the 

ACA (which gives HHS the authority to 

establish criteria for the certification of 

health plans as QHPs), section 

1311(d)(4)(A) (which provides that 

Exchanges shall implement procedures 

for the certification, recertification, and 

decertification of QHPs consistent with 

the guidelines HHS develops under 

section 1311(c)), and section 

1321(a)(1)(B) (which provides HHS with 

broad rulemaking authority to issue 

regulations setting standards for meeting 

the requirements under title I of the 

ACA (which includes section 1311) for 

the establishment and operation of 

Exchanges and the offering of QHPs 

through the Exchanges) to add new 

paragraph (e) to § 155.1000 to formalize 

the implicit authority that an Exchange, 

including State Exchanges and SBE– 

FPs, may deny certification to any plan 

that does not meet the general 

certification criteria at § 155.1000(c). We 

proposed that an Exchange may deny 

certification if the issuer does not 

provide evidence during the 

certification process in § 155.1010 that it 

complies with the minimum 

certification requirements (under 

§ 155.1000(c)(1)), or if the Exchange 

determines that making the health plan 

available is not in the interest of the 

qualified individuals and qualified 

employers (under § 155.1000(c)(2)). 

In the proposed rule (89 FR 82370), 

we stated that we were not proposing to 

require Exchanges, including State 

Exchanges and SBE–FPs, to implement 

any specific procedures or processes for 

the denial of a QHP certification 

application. We stated that we did not 

intend for this proposal to amend the 

existing, implied authority of an 

Exchange to deny certification. We 

stated that we only intended this 

proposal to make that authority more 

explicit in our regulations, which would 

provide greater certainty to Exchanges, 

issuers, and consumers on an 

Exchange’s role, which we expected 

would only improve the efficiency of 

the Exchanges. 

We sought comment on this proposal. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy as proposed. We 

summarize and respond to public 

comments received on the proposal to 

amend § 155.1000 below. 

Comment: We received a small 

number of comments on the proposal, 

with most commenters supporting and 

agreeing with HHS that the proposal is 

consistent with the text of the ACA and 

that it provides a clear articulation of an 

Exchange’s existing authority. These 

commenters noted the proposal is 

imperative to ensuring that plans that 

do not meet the certification criteria at 

§ 155.1000(c) are denied certification. 

Response: We appreciate these 

commenters’ support of the proposal 

and of the rationale that we provided in 

the proposed rule. 

Comment: One commenter opposed 

the proposal as unnecessary, stating the 

current regulations provide no 

uncertainty with respect to an 

Exchange’s authority to not certify plans 

that do not meet the certification criteria 

at § 155.1000(c). This commenter 

maintains that HHS should not expand 

certification regulations without due 

cause and, in this case, current 

regulations have served all Exchanges 

well in providing authority to certify or 

not certify plans as QHPs. Finally, this 

commenter stated that the proposed 

regulatory text providing that an 

Exchange may deny certification ‘‘if the 

Exchange determines that making the 

health plan available is not in the 

interest of the qualified individuals and 

qualified employers’’ introduces 

subjectivity and therefore ambiguity for 

certification denial that does not 

currently exist in QHP certification 

criteria. 

Response: We appreciate this 

commenter’s position that the current 

regulatory text already encompasses the 

implied authority of an Exchange to 

deny certification of any plan that does 

not meet the general certification 

criteria at § 155.1000(c). To HHS’ 

knowledge, no Exchanges have 

interpreted § 155.1000(c) to preclude 

them from denying certification to plans 

that do not meet the general certification 

criteria. The proposed rule (89 FR 

82369) explained that this proposal is 

intended to codify an Exchange’s 

existing and implicit certification denial 

authority. This revision is not without 

due cause, as it provides a reader of this 

regulatory text, including Exchanges, 

issuers, and consumers, greater certainty 

with respect to an Exchange’s role, 

which we continue to expect will only 

improve the efficiency of the Exchanges. 

In addition, we disagree with this 

commenter’s characterization that the 

proposal introduces subjectivity that 

does not currently exist in the QHP 

certification criteria with reference to 

the ‘‘interest standard.’’ This proposal 

did not seek to revise the QHP 

certification criteria at § 155.1000(c), 

which include a determination by the 

Exchange that making the health plan 

available is in the interest of the 

qualified individuals and qualified 

employers. Given this, we do not expect 

any change in an Exchange’s approach 

in assessing whether plans meet 

certification criteria, including for States 

with an FFE.208

8. Request for the Reconsideration of 

Denial of Certification Specific to the 

FFEs (§ 155.1090) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82370), we proposed to 

amend § 155.1090 to revise the 

standards for an issuer to request the 

reconsideration of denial of certification 

as a QHP specific to the FFEs. 

Section 1311(e)(1) of the ACA grants 

an Exchange the authority to certify a 

health plan as a QHP if the health plan 

meets the requirements for certification 

promulgated by the Secretary under 

section 1311(c)(1) of the ACA, and the 

Exchange determines that making the 

plan available through the Exchange is 


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209Section 1311(c)(1)(B) of the ACA and 

§ 155.1000(c)(2) further provide that an Exchange 

may not exclude a health plan (i) on the basis that 

such plan is a fee-for-service plan, (ii) through the 

imposition of premium price controls, or (iii) on the 

basis that the plan provides treatments necessary to 

prevent patients’ deaths in circumstances the 

Exchange determines are inappropriate or too 

costly. 

210See § 155.1000(c)(1): ‘‘The health insurance 

issuer provides evidence during the certification 

process in § 155.1010 that it complies with the 

minimum certification requirements outlined in 

subpart C of part 156, as applicable.’’ 

in the interests of qualified individuals 

and qualified employers in the State.209

In the 2018 Payment Notice (81 FR 

94137), we finalized § 155.1090 to allow 

an issuer to request the reconsideration 

of a denial of certification of a plan as 

a QHP for sale through an FFE. 

HHS, as operator of the FFEs, is 

responsible for ensuring that health 

plans offered through the FFEs meet all 

Federal requirements for certification as 

QHPs under § 155.1000(c). Starting with 

PY 2014, HHS has certified numerous 

health plans as QHPs on the FFEs. 

During this time, HHS has also 

determined that a small number of 

applications submitted by issuers for the 

certification of health plans as QHPs on 

the FFEs did not meet minimum 

certification criteria under 

§ 155.1000(c), and HHS denied 

certification to these plans. Some of 

these issuers submitted reconsideration 

requests to HHS under § 155.1090(a)(1). 

HHS ultimately sustained its denial 

determinations for these issuers’ 

certification applications upon 

reconsideration review. 

Based on our experience reviewing 

these certification application 

reconsideration requests, we stated in 

the proposed rule (89 FR 82370) that we 

believe that it would be appropriate to 

amend § 155.1090 to codify more 

structure for the FFEs’ process for 

conducting a reconsideration of denial 

of certification. Accordingly, we 

proposed to use the authorities under 

section 1311(c) of the ACA (which gives 

HHS the authority to establish criteria 

for the certification of health plans as 

QHPs), section 1311(d)(4)(A) (which 

provides that Exchanges shall 

implement procedures for the 

certification, recertification, and 

decertification of QHPs consistent with 

the guidelines HHS develops under 

section 1311(c)), and section 

1321(a)(1)(B) (which provides HHS with 

broad rulemaking authority to issue 

regulations setting standards for meeting 

the requirements under title I of the 

ACA (which includes section 1311) for 

the establishment and operation of 

Exchanges and the offering of QHPs 

through the Exchanges) to require that 

an issuer’s reconsideration request meet 

a specified burden of proof. Specifically, 

we proposed revising § 155.1090(a)(2) to 

state that the burden is on an issuer that 

is denied certification to provide 

evidence that HHS’ determination that 

the plan does not meet the certification 

criteria at § 155.1000(c) was in error. 

As we stated in the Exchange 

Establishment Rule (76 FR 41891), 

offering only QHPs through an 

Exchange assures consumers that the 

coverage options presented through the 

Exchange meet certain minimum 

Federal standards. Given the voluntary 

nature of QHP certification, the FFEs 

utilize a process for QHP certification 

whereby the burden of proof is on 

issuers to provide sufficient evidence 

that they comply with those minimum 

Federal standards to obtain 

certification.210 Consistent with this 

general approach towards QHP 

certification, we stated in the proposed 

rule (89 FR 82370) that we believe it is 

appropriate to propose formalizing that 

the burden of proof involved in a 

reconsideration request is also on 

issuers. Under this proposal, we stated 

that an issuer that is denied certification 

on an FFE would be responsible for 

submitting a request to HHS, as operator 

of the FFEs, for reconsideration of a 

denial determination. 

In the proposed rule, we also 

proposed to revise § 155.1090(a)(2) to 

require that, as part of a reconsideration 

request, an issuer would be required to 

submit clear and convincing evidence 

that HHS’ determination that the plan 

does not meet the general certification 

criteria at § 155.1000(c) was in error. We 

noted in the 2017 Payment Notice (81 

FR 12289) that HHS expects to certify 

the vast majority of plans that meet the 

certification standards. To maximize 

this amount of time for health plans to 

prepare, submit, and revise QHP 

applications to the FFEs, HHS provides 

as much time as it can for issuers to 

demonstrate that they comply with the 

certification standards. In the proposed 

rule, we explained that the FFE’s QHP 

certification timeline provides at least 

three opportunities for issuers to submit 

application materials to demonstrate 

that it meets minimum certification 

standards for a given plan year (four 

opportunities, if the issuer avails itself 

of an optional early bird submission). 

As such, by the time it issues a denial 

of certification, HHS will have typically 

already received substantial factual 

information from the issuer over the 

period of several months upon which it 

will have based its denial 

determination. It is unlikely that any 

additional evidence that the issuer 

would seek to provide upon 

reconsideration request that they had 

not already provided during the three or 

four rounds of application submissions 

would meaningfully weigh in favor of 

certification unless it clearly and 

convincingly establishes that HHS’ 

determination that the plan does not 

meet the general certification criteria at 

§ 155.1000(c) was in error. 

In the proposed rule (89 FR 82370), 

we stated that under this proposal, we 

would expect evidence to be clear and 

convincing that HHS’ determination 

was in error if the issuer demonstrates 

that HHS clearly misunderstood or 

misinterpreted facts or data already 

provided by the issuer in previously 

submitted application materials (such as 

network adequacy calculation errors). 

We stated that we would not expect 

evidence to be clear and convincing in 

this regard if it is substantially based on 

new information (such as the inclusion 

of new ECPs that the issuer did not 

include in previously submitted 

application materials) or is comprised of 

disputes of HHS’ authority to ensure 

compliance with certification standards 

(such as a determination that making 

the plan available is not in the interest 

of the qualified individuals and 

qualified employers, under section 

1311(e)(1)(B) of the ACA and 

§ 155.1000(c)(2)) that would require 

HHS to perform de novo analysis before 

open enrollment. 

Finally, we proposed to revise the 

title of § 155.1090 to state, ‘‘Request for 

the reconsideration of a denial of 

certification’’ and the subtitle of 

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

reconsideration of a denial of 

certification specific to a Federallyfacilitated Exchange.’’ 

We sought comment on this proposal. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy as proposed. We 

summarize and respond to public 

comments received on the proposal to 

revise the standards for an issuer to 

request reconsideration of denial of 

certification as a QHP specific to the 

FFEs below. 

Comment: We received a small 

number of comments on this proposal. 

Most commenters were in support, 

agreeing that the burden should be on 

the issuer receiving a denial of 

certification to provide HHS with ‘‘clear 

and convincing’’ evidence that its 

determination was in error. 

Response: We are appreciative of 

these commenters’ support of the 

proposal and of the rationale that we 

provided in the proposed rule. 


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211See, for example, https://

www.qhpcertification.cms.gov/s/QHP. 

212The proposed rule (89 FR 82370) explained 

that issuers have four opportunities (instead of 

three) to submit certification application materials 

to demonstrate that their plan meets minimum 

certification standards if the issuer avails itself of 

an optional early bird submission opportunity. HHS 

is planning to enhance the application submission 

process in order to provide more contemporaneous 

results to issuers as soon as they submit their 

applications. As a result, HHS no longer intends to 

offer an early bird submission deadline in the 

certification process for PY 2026 or future plan 

years. 

213State-based Marketplace Annual Reporting 

Tool (SMART). OMB Control Number: 0938–1244. 

https://www.hhs.gov/guidance/sites/default/files/ 

hhs-guidance-documents/smart_2017_5.pdf. 

214OMB Control Number: 0938–1119. 

215See, for example, CMS. (2024, March 22). 2024 

Marketplace Open Enrollment Period Public Use 

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

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

Comment: One commenter opposed 

the proposal due to the complexity of 

the QHP certification process and 

requirements and stated consumers are 

best served from increased issuer 

participation, and therefore, HHS 

should create more lenient certification 

standards to allow for the certification 

of plans with more innovative benefit 

designs. 

Response: We agree with this 

commenter that increased issuer 

participation and innovation on the 

Exchanges serves consumers generally. 

However, the certification criteria are 

minimum requirements established by 

the ACA and CMS regulations for a plan 

to be offered on an Exchange, and 

innovation is not a substitute for 

compliance with these minimum 

requirements. Permitting issuers to offer 

Exchange plans that do not meet those 

requirements would run counter to our 

goal of ensuring that all QHPs provide 

essential health benefits, maintain 

reasonable cost-sharing limits, include 

adequate provider networks, and meet 

other requirements that help ensure 

Exchange consumers have access to a 

range of quality, affordable plans 

meeting their health needs. 

With respect to the commenter’s point 

that the QHP certification process is 

complex, the proposed rule noted that, 

in addition to providing robust 

technical guidance to issuers,211 HHS 

provides as much time as it can for 

issuers to demonstrate that they comply 

with the certification standards. For 

example, HHS provides issuers with 

three separate opportunities to submit 

certification application materials to 

demonstrate that their plan meets 

minimum certification standards for a 

given plan year.212 These opportunities 

have proven more than sufficient for 

issuers to demonstrate compliance with 

minimum certification requirements 

while still having the ability to 

innovate, as only a small number of 

issuers have been denied certification of 

all of the plans they submitted for 

certification on the FFEs since 2014. 

The denial of certification of a small 

fraction of plans that HHS has certified 

since 2014 has not had a material 

negative impact on consumers, as they 

had many other QHP options on the 

impacted FFEs to choose from that 

offered benefits comparable to the plans 

that were not certified. 

9. General Program Integrity and 

Oversight Requirements (§ 155.1200) 

We currently collect certain 

information and data from State 

Exchanges and SBE–FPs under 

§ 155.1200 to monitor their performance 

and compliance. In the HHS Notice of 

Benefit and Payment Parameters for 

2026 proposed rule (89 FR 82369), we 

proposed under our authority under 

section 1321(a)(1)(D) of the ACA to 

promulgate appropriate requirements 

related to Exchanges, to also use this 

information and data to increase 

transparency into State Exchange 

operations and to promote program 

improvements. 

Under § 155.1200, State Exchanges 

must report to HHS on certain 

Exchange-related activities and 

performance monitoring data. State 

Exchanges must also engage an 

independent qualified auditing entity 

which follows generally accepted 

government auditing standards 

(GAGAS) to annually compile a 

financial statement and conduct a 

financial audit and a programmatic 

audit. 

To meet these requirements, under 

section 1313(a)(1) of the ACA, State 

Exchanges and SBE–FPs are required to 

submit a State Marketplace Annual 

Reporting Tool (SMART) to CMS, which 

CMS uses to monitor and evaluate State 

Exchange compliance with Exchange 

requirements under Title I of the 

ACA.213 Through the SMART, State 

Exchanges and SBE–FPs attest to 

compliance with specific regulations, 

provide supporting documentation 

including, if applicable, a 

redetermination plan for the upcoming 

plan year, an oversight and monitoring 

plan with fraud, waste, and abuse 

policies and procedures, 

nondiscrimination policies and 

standards, and an operating budget with 

a financial statement. Additionally, the 

Exchanges submit the financial and 

programmatic audits with corrective 

action plans for any identified audit or 

findings. Following review, we provide 

State Exchanges and SBE–FPs with a 

SMART summary letter based on the 

observations and action items identified 

and monitor State Exchange completion 

of any open findings. 

State Exchanges that operate their 

own eligibility and enrollment platform 

also report enrollment and Exchange 

activity data to CMS weekly during 

Open Enrollment and twice a year 

outside of Open Enrollment.214 We 

publish Exchange Open Enrollment data 

annually.215 We utilize the 

programmatic data received from State 

Exchanges to identify program risks and 

provide technical assistance to State 

Exchanges on corrective actions or 

strategies to mitigate risks, as well as to 

inform the development of new or 

updated policies as part of our annual 

rule-making processes to address known 

risks. 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule we explained our intention to use 

the information and data that State 

Exchanges and Exchanges on the 

Federal platform (SBE–FPs) submit to 

HHS under § 155.1200 to increase 

transparency into State Exchanges and 

to promote program improvements. 

Specifically, we described our plan to 

publicly release the State Exchange and 

SBE–FP annual State Marketplace 

Annual Reporting Tool (SMART) 

submitted to CMS annually and to 

expand on current Open Enrollment 

data reporting by publishing additional 

metrics on State Exchange operations 

and functionality that we currently 

collect from State Exchanges but do not 

currently report to external audiences. 

We also stated our intention that any 

public reporting of State Exchange 

operations and functionality would 

include the public release of comparable 

metrics for the FFE and SBE–FPs. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy with a 

modification. Commenters expressed 

support for increased transparency in 

Exchanges and agreement that any data 

released should include comparable 

data from the Exchanges on the Federal 

platform. State Exchange commenters 

raised challenges with posting the 

SMARTs since they contain non-public 

operational and business processes 

employed by Exchanges to maintain 

program integrity and combat fraud, 

such as procedures used for verifying 

consumer information. State Exchange 


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216ARP, Public Law 117–2, 135 Stat. 4 (2021). 

These enhanced subsidies were extended under the 

IRA, Public Law 117–169, 136 Stat. 1818 (2022) and 

are scheduled to expire after the 2025 calendar year. 

commenters described the value the 

SMARTs provide as an oversight tool 

through which they are held to meeting 

Federal Exchange requirements but also 

receive technical assistance. They were 

concerned that restricting their 

responses to protect the release of 

sensitive operational issues would 

devalue the SMARTs and limit its 

effectiveness as an oversight 

mechanism. Commenters also 

questioned the value of indiscriminately 

releasing data in the format of 

individual SMARTs and instead 

encouraged us to identify standard 

metrics that could be presented to 

meaningfully compare across all 

Exchanges. 

After further consideration, we will 

not release the SMARTs. Commenters 

raised valid concerns and we do not 

want to inadvertently expose Exchange 

system operations that could be 

susceptible to misuse or to constrain the 

efficacy of the SMARTs. We also 

recognize that there may be better ways 

to provide Exchange data than posting 

individual reports. For that reason, as 

proposed, we intend to expand our 

current Open Enrollment data reporting 

by publishing additional metrics on 

State Exchange operations and 

functionality. We intend, as resources 

permit, to proceed with preparing for 

the release of additional customer 

service data elements already described. 

Specifically, we will, at a minimum, 

publish the following data elements that 

we currently collect from State 

Exchanges but do not currently report to 

external audiences: 

• Exchange actual expenditures on 

consumer marketing, education, and 

outreach for the most recent fiscal year 

available, 

• Exchange actual expenditures on 

Navigator program, total allocation and 

per grantee, 

• Exchange call center metrics during 

Open Enrollment: 

++ Total number of incoming calls 

received by the call center. 

++ The average wait time for each 

incoming call to the call center. 

++ The number of incoming calls 

terminated while waiting to speak to a 

call center representative. 

++ The average amount of time spent 

by call center representative on each 

individual call. 

• Exchange website (eligibility and 

enrollment application and/or 

consumer) visitors during Open 

Enrollment: 

++ Number of website and mobile 

application visits. 

++ Number of unique visitors 

requesting the website and mobile 

application. 

We will work with States in advance 

to evaluate the metric definitions and 

methodologies and provide technical 

assistance prior to publishing this data. 

We reaffirm that we will also publish 

reasonably comparable customer 

metrics from Exchanges on the Federal 

platform if data is available. This data 

will be released publicly by CMS. 

We summarize and respond to public 

comments received on the proposed 

public release of Exchange data below. 

Comment: Generally, all commenters 

supported increased transparency of 

Exchange operations; however, several 

commenters expressed concerns about 

the scope and breadth of the 

information to be published. 

Specifically, several State Exchanges 

cited concerns over potential fraud or 

security risks if certain operational data, 

particularly the information that is 

collected in the SMARTs, is made 

public. 

Response: We agree that increased 

transparency is necessary to monitor the 

performance of Exchanges and promote 

program improvements. However, 

because of these concerns raised by 

State Exchanges, we will not be 

releasing the SMARTs. 

Comment: Commenters were split on 

what data should or should not be 

included and how the data should be 

presented. Several commenters believed 

the data State Exchanges currently make 

public is sufficient for current oversight 

requirements. Many commenters, 

however, recommended identifying 

standard metrics across both State 

Exchanges and the Exchanges on the 

Federal platform to meaningfully 

compare across all Exchanges rather 

than indiscriminately releasing data we 

currently collect, and that any State 

Exchange information or data released 

should include comparable FFE data 

from Exchanges on the Federal platform. 

Many commenters recommended 

specific metrics that they would like to 

see reported by State Exchanges and the 

Exchanges on the Federal platform. A 

few commenters recommended ways 

CMS could display data including 

creating a centralized reporting website; 

developing an Exchange performance 

measurement tool to assess Exchange 

quality and consumer experience; 

working with interested parties to 

identify set metrics and publish a joint 

State Exchange/Exchanges on the 

Federal platform data report; and adding 

data elements to the current PUF files. 

Response: We recognize that 

regulations exist requiring State 

Exchanges to make certain data public 

and that some State Exchanges offer 

data above and beyond the regulatory 

requirements in various formats. We 

believe, however, that releasing 

additional data metrics will increase the 

public’s understanding of State 

Exchanges and provide more 

transparency into our compliance 

activities. We also appreciate the 

recommendations on what specific data 

metrics could be identified, and how we 

should present data to the public. We 

will take these recommendations into 

consideration when it is time to publish 

data in the future. Initially, we intend to 

post most data through public 

communication channels to be 

determined by CMS. We intend to 

release the metrics originally proposed, 

if data from the Exchanges on the 

Federal platform is also available, and 

we will work with States through 

technical assistance to further identify 

and refine the additional metrics for 

public reporting that will be released for 

both State Exchanges and Exchanges on 

the Federal platform. 

D. Part 156—Health Insurance Issuer 

Standards Under the Affordable Care 

Act, Including Standards Related to 

Exchanges 

1. Solicitation of Comments—Reducing 

the Risk That Issuer Insolvencies Pose to 

the Integrity of the FFEs 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82371), we solicited 

comments on methods that HHS, as 

operator of the FFEs, could potentially 

employ, in partnership with State 

regulators, to reduce the risk that issuer 

insolvencies pose to the integrity of the 

FFEs. We will take comments received 

into consideration in future rulemaking. 

2. FFE and SBE–FP User Fee Rates for 

the 2026 Benefit Year (§ 156.50) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82373), we proposed 

an FFE user fee rate of 2.5 percent of 

total monthly premiums and an SBE–FP 

user fee rate of 2.0 percent of total 

monthly premiums for the 2026 benefit 

year. We also proposed a 2026 benefit 

year FFE user fee rate range between 1.8 

and 2.2 percent of total monthly 

premiums and an SBE–FP user fee rate 

range between 1.4 and 1.8 percent of 

total monthly premiums, with each of 

these ranges to be set at a single rate in 

this final rule, if the enhanced PTC 

subsidies at the level currently 

enacted 216 or at a higher level are 

extended through the 2026 benefit year 

by March 31, 2025. We sought comment 


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217See OMB. (n.d.) Circular No. A–25 Revised. 

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

2017/11/Circular-025.pdf. 

on whether March 31, 2025 would 

provide sufficient time and whether we 

should select an earlier or later date. 

Section 1311(d)(5)(A) of the ACA 

permits an Exchange to charge 

assessments or user fees on participating 

health insurance issuers as a means of 

generating funding to support its 

operations. If a State does not elect to 

operate an Exchange or does not have an 

approved Exchange, section 1321(c)(1) 

of the ACA directs HHS to operate an 

Exchange within the State. Accordingly, 

in § 156.50(c), we provide that a 

participating issuer offering a plan 

through an FFE or SBE–FP must remit 

a user fee to HHS each month that is 

equal to the product of the annual user 

fee rate specified in the annual HHS 

notice of benefit and payment 

parameters for FFEs and SBE–FPs for 

the applicable benefit year and the 

monthly premium charged by the issuer 

for each policy where enrollment is 

through an FFE or SBE–FP. OMB 

Circular A–25 established Federal 

policy regarding user fees and what the 

fees can be used for.217 OMB Circular 

A–25 provides that a user fee charge 

will be assessed against each 

identifiable recipient of special benefits 

derived from Federal activities beyond 

those received by the general public. 

a. FFE User Fee Rates for the 2026 

Benefit Year 

Section 156.50(c)(1) provides that, to 

support the functions of FFEs, an issuer 

offering a plan through an FFE must 

remit a user fee to HHS, in the 

timeframe and manner established by 

HHS, equal to the product of the 

monthly user fee rate specified in the 

annual HHS notice of benefit and 

payment parameters for the applicable 

benefit year and the monthly premium 

charged by the issuer for each policy 

where enrollment is through an FFE. As 

in benefit years 2014 through 2025, 

issuers seeking to participate in an FFE 

in the 2026 benefit year will receive two 

special benefits not available to issuers 

offering plans in State Exchanges: (1) 

the certification of their plans as QHPs; 

and (2) the ability to sell health 

insurance coverage through an FFE to 

individuals determined eligible for 

enrollment in a QHP. For the 2026 

benefit year, issuers participating in an 

FFE will receive special benefits from 

the following Federal activities: 

• Provision of consumer assistance 

tools; 

• Consumer outreach and education; 

• Management of a Navigator 

program; 

• Regulation of agents and brokers; 

• Eligibility determinations; 

• Enrollment processes; and 

• Certification processes for QHPs 

(including ongoing compliance 

verification, recertification, and 

decertification). 

Activities performed by the Federal 

Government that do not provide issuers 

participating in an FFE with a special 

benefit are not covered by the FFE user 

fee. 

As discussed in detail in the proposed 

rule (89 FR 82373 through 82375), the 

proposed user fee rate reflected our 

estimates for the 2026 benefit year of 

costs for operating the FFEs, premiums, 

enrollment, and transitions in Exchange 

models from the FFE and SBE–FP 

models to either the SBE–FP or State 

Exchange models. We proposed a 2026 

benefit year FFE user fee rate of 2.5 

percent of total monthly premiums, 

which is greater than the 2025 benefit 

year fee rate of 1.5 percent of total 

monthly premiums. We noted that if 

any events occurred between the 

proposed rule and the final rule that 

significantly changed our estimated 

costs to operate the FFEs or the Federal 

platform or our projections of premiums 

or enrollment, we may finalize FFE and 

SBE–FP user fee rates that differ from 

the proposed rates to reflect those 

changes. 

In addition to proposing a FFE user 

fee rate that assumed the expiration of 

enhanced PTC subsidies, we proposed a 

2026 benefit year FFE user fee rate range 

between 1.8 and 2.2 percent of total 

monthly premiums, to be set at a single 

rate in this final rule, if the current level 

or a higher level of enhanced PTC 

subsidies is extended through the 2026 

benefit year by March 31, 2025. We 

sought comment on the proposed 2026 

benefit year FFE user fee rate of 2.5 

percent of total monthly premiums and 

the alternative proposed 2026 benefit 

year FFE user fee rate range between 1.8 

and 2.2 percent of total monthly 

premiums. 

We refer readers to the proposed rule 

(89 FR 82373 through 82376) for further 

discussion of the proposed 2026 benefit 

year FFE user fee rate and the 

alternative proposed 2026 benefit year 

FFE user fee rate range, including the 

factors considered in developing the 

proposed user fee rates and the rationale 

for our proposals. 

b. SBE–FP User Fee Rates for the 2026 

Benefit Year 

Section 156.50(c)(2) requires that an 

issuer offering a plan through an SBE– 

FP must remit a user fee to HHS, in the 

timeframe and manner established by 

HHS, equal to the product of the 

monthly user fee rate specified in the 

annual HHS notice of benefit and 

payment parameters for the applicable 

benefit year and the monthly premium 

charged by the issuer for each policy 

where enrollment is through an SBE– 

FP. SBE–FPs enter into a Federal 

platform agreement with HHS to 

leverage the systems established for the 

FFEs to perform certain Exchange 

functions and enhance efficiency and 

coordination between State and Federal 

programs. The benefits provided to 

issuers in SBE–FPs by the Federal 

Government include use of the FFE 

information technology and call center 

infrastructure used in connection with 

eligibility determinations for enrollment 

in QHPs and other applicable State 

health subsidy programs, as defined at 

section 1413(e) of the ACA, and QHP 

enrollment functions under 45 CFR part 

155, subpart E. The user fee rate for 

SBE–FPs is calculated based on the 

proportion of total FFE costs associated 

with Federal activities that provide 

these benefits to the SBE–FP issuers. 

To calculate the proposed SBE–FP 

rates for the 2026 benefit year, we used 

the same assumptions related to 

contract costs, enrollment, and 

premiums as we used for the proposed 

FFE user fee rates. Based on this 

methodology, we proposed a 2026 

benefit year SBE–FP user fee rate of 2.0 

percent of total monthly premiums, 

which is greater than the user fee rate 

of 1.2 percent of total monthly 

premiums that we established for the 

2025 benefit year. As discussed in the 

proposed rule (89 FR 82373 through 

82376), we also proposed an alternative 

SBE–FP user fee range between 1.4 

percent and 1.8 percent of total monthly 

premiums, to be set at a single rate in 

this final rule, if the current level or a 

higher level of enhanced PTC subsidies 

is extended through the 2026 benefit 

year by March 31, 2025. We sought 

comment on the proposed 2026 benefit 

year SBE–FP user fee rate of 2.0 percent 

of total monthly premiums and the 

alternative proposed 2026 benefit year 

SBE–FP user fee rate range between 1.4 

percent and 1.8 percent of total monthly 

premiums. 

We refer readers to the proposed rule 

(89 FR 82373 through 82376) for further 

discussion of the proposed 2026 benefit 

year SBE–FP user fee rate and the 

alternative proposed 2026 benefit year 

SBE–FP user fee rate range, including 

the factors considered in developing the 

proposed user fee rates and the rationale 

for our proposals. 

We are finalizing two sets of FFE and 

SBE–FP user fee rates accounting for the 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4487 

218ARP, Public Law 117–2 (2021). These 

enhanced subsidies were extended under the IRA, 

Public Law 117–169 (2022) and are scheduled to 

expire after the 2025 calendar year. 

219ARP, Public Law 117–2 (2021). These 

enhanced subsidies were extended under the IRA, 

Public Law 117–169 (2022) and are scheduled to 

expire after the 2025 calendar year. 

220As described in the proposed rule (89 FR 

82373 through 82376), user fee rates are based, in 

part, on projected enrollment during the 2025 open 

enrollment period and may change between the 

publication of the proposed rule and final rule. At 

the time of this final rule, more data is available 

about the 2025 open enrollment period and about 

the projected 2025 open enrollment numbers to 

determine user fee rates than we had for the 

proposed rule. Thus, after accounting for updated 

open enrollment data, we have finalized single FFE 

and SBE–FP user fee rates within the proposed 

ranges if enhanced PTC subsidies are extended at 

the level currently enacted or at a higher level and 

finalized the proposed FFE and SBE–FP user fee 

rates if enhanced PTC subsidies expire as enacted. 

See Marketplace 2025 Open Enrollment Period 

Report National Snapshot, as of December 4, 2024: 

https://www.cms.gov/newsroom/fact-sheets/ 

marketplace-2025-open-enrollment-period-reportnational-snapshot-0. 

expiration and extension of enhanced 

PTC subsidies. If enhanced PTC 

subsidies expire as currently set forth in 

the IRA,218 we are finalizing as 

proposed the 2026 benefit year user fee 

rate for all issuers offering QHPs 

through an FFE to be 2.5 percent of the 

monthly premium charged by the issuer 

for each policy under FFE plans, and 

the 2026 benefit year user fee rate for all 

issuers offering QHPs through an SBE– 

FP to be 2.0 percent of the monthly 

premium charged by the issuer for each 

policy under SBE–FP plans. If enhanced 

PTC subsidies at the level currently 

enacted 219 or at a higher level, are 

extended through the 2026 benefit year 

by July 31, 2025, we are finalizing an 

alternative set of 2026 benefit year FFE 

and SBE–FP user fee rates of 2.2 percent 

and 1.8 percent of total monthly 

premiums, respectively, which are both 

within the range set forth in the final 

rule. Both sets of user fee rates have 

been finalized after consideration of 

comments, and for the reasons outlined 

in the proposed rule and this final rule, 

including our responses to comments. 

The finalized, alternative user fee rates 

were informed by updates to our 

projected enrollment 220 and premium 

growth estimates based on the most 

recent data (along with our latest budget 

projections). Additionally, after 

consideration of the comments, we are 

finalizing July 31, 2025, as the date by 

which the enhanced subsidies must be 

extended in order to trigger the alternate 

user fees, instead March 31, 2025, as 

proposed. 

We summarize and respond to public 

comments received on the proposed 

2026 benefit year FFE and SBE–FP user 

fee rates below. 

Comment: Most commenters 

supported the 2026 benefit year user fee 

rates, with several of these commenters 

supporting user fee rates that adequately 

fund Federal programs. Some 

commenters supported maintaining the 

2025 user fee rates or lowering the 

proposed 2026 user fee rates. These 

commenters stated that a higher user fee 

rate could lead to increased premiums 

and affect competitiveness of Exchange 

plans compared to off-Exchange plans, 

thereby impacting the affordability of 

health insurance. 

Many commenters also expressed 

concern about the impact of the 

expiration of enhanced PTC subsidies 

on user fees and Exchange enrollment, 

as well as specifically how the 

expiration may impact enrollment 

projections or other factors used to 

determine 2026 benefit year user fee 

rates. One commenter stated that the 

proposed 2026 benefit year user fee 

rates may be lower than required to 

sufficiently fund costs if enrollment 

declines more than expected as a result 

of the expiration of enhanced PTC 

subsidies. 

Response: We are finalizing the 2026 

benefit year FFE and SBE–FP user fee 

rates as proposed. While we 

acknowledge that FFE and SBE–FP user 

fee rates impact the costs of plans 

offered in the FFEs and SBE–FPs, and 

by extension may impact premiums, we 

continue to calculate and set these FFE 

and SBE–FP user fee rates annually in 

a manner that ensures sufficient funding 

for operations of the FFEs and SBE–FPs. 

We recognize commenters’ concerns 

about the expiration of enhanced PTC 

subsidies, and in the proposed rule (89 

FR 82373 through 82376), we noted the 

uncertainty around the expiration or 

extension of these enhanced subsidies 

and the potential impact on enrollment 

and premium growth in the Exchanges. 

In the proposed rule (89 FR 82375), we 

explained that if enhanced PTC 

subsidies expire, we project that the 

total enrollment through FFEs and SBE– 

FPs would decrease, and in turn, issuers 

would likely rate for the uncertainty 

associated with the expected decreased 

enrollment in the risk pool and 

increased premiums for 2026. We 

maintain this projection, and anticipate 

a decrease in enrollment beginning in 

2026, which may exert upward pressure 

on premiums. Despite this uncertainty, 

we must set user fee rates that will allow 

us to sufficiently fund and operate the 

FFEs and the Federal platform based on 

the latest budget projections. Our data 

suggests that the user fees being 

finalized in this rule—which account 

for the possibility that enhanced PTC 

subsidies may expire or be extended— 

would do so. 

Comment: Commenters had mixed 

opinions regarding the proposed March 

31, 2025 deadline to apply a set of 

alternative user fee rates if enhanced 

PTC subsidies are extended. Some of 

these commenters wanted final user fee 

rates to be known by or before March 

31, 2025 to allow sufficient time for 

issuers to set premiums and comply 

with State and Federal filing deadlines. 

Other commenters suggested the 

deadline could be later than March 31, 

2025, as all States do not need to submit 

2026 benefit year rate filings until 

August 2025. One commenter suggested 

that HHS should put the user fee rates 

in guidance or allow for multiple rate 

filing submissions. 

Response: After considering 

comments, we are finalizing a revised 

deadline of July 31, 2025, for 

determining whether the alternative FFE 

and SBE–FP user fee rates will apply. 

The alternative 2026 benefit year user 

fee rates finalized in this rule will only 

take effect if enhanced PTC subsidies 

are extended through the 2026 benefit 

year at the current level or a higher level 

by July 31, 2025. While we proposed a 

March 31, 2025, deadline to provide 

issuers sufficient time to request rates 

and States sufficient time to review rate 

requests, we agree with commenters that 

the proposed March 31, 2025 deadline 

could be later, as issuers can submit 

changes to their benefit year 2026 QHP 

Applications, including updated rate 

data in the Rates Table Template of an 

issuer’s QHP Application, as late as 

August 13. In finalizing the July 31, 

2025, deadline, we recognize that many 

States allow issuers to file multiple rate 

filings to justify proposed rate increases 

depending on the uncertainty of factors 

applicable to the filing under review. In 

addition, we have previously provided 

flexibility on filing deadlines to allow 

States to account for rating changes in 

response to uncertain circumstances. 

For example, when issuers of silverlevel QHPs were facing increased 

liability for enrollees in cost-sharing 

reduction plan variations after HHS 

stopped making cost-sharing reduction 

payments to issuers, we accounted for 

this change in single risk pool rate 

setting by extending the issuer filing 

deadline for QHPs and non-QHPs. 

Similarly, to provide the latest possible 

deadline that would allow issuers 

sufficient time to account for the 

uncertainty surrounding the expiration 

of enhanced PTC subsidies and allow 

issuers and States to set and approve 

rates under the existing filing deadlines, 

we are finalizing this revised July 31, 

2025, deadline to establish the 


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4488 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

221See discussion in the proposed rule of the 

history of CSR payments to QHP issuers (89 FR 

82376). As discussed in the proposed rule, on 

October 11, 2017, the Attorney General of the 

United States provided HHS and the Department of 

the Treasury with a legal opinion indicating that the 

permanent appropriation at 31 U.S.C. 1324 could 

not be used to fund CSR payments to issuers. 

222Rating practices to increase premiums to offset 

amounts of unpaid CSRs are referred to as ‘‘silver 

loading’’ (if premiums are increased on silver-level 

plans only), ‘‘broad loading’’ (if premiums are 

increased on all plans in the relevant State market, 

not just silver-level plans), or ‘‘CSR loading’’ 

generally. For purposes of this preamble, we use the 

term ‘‘CSR loading’’ to refer to any rating practices 

to increase premiums to offset amounts of unpaid 

CSRs. 

223Uccello, CE, American Academy of Actuaries, 

‘‘Considerations for Calculating Cost-Sharing 

Reduction Load Factors,’’ Society of Actuaries 

Virtual Health Meeting Session 3C, available at 

https://www.actuary.org/sites/default/files/2023-07/ 

2023_SOA_Session_3C_Uccello.pdf. 

224See, CMS. (2018, Aug. 3). Center for Consumer 

Information & Insurance Oversight, Insurance 

Standards Bulletin Series—Information, Offering of 

plans that are not QHPs without CSR ‘‘loading,’’ 

https://www.cms.gov/cciio/resources/regulationsand-guidance/downloads/offering-plans-not-qhpswithout-csr-loading.pdf. 

alternative user fee rates. We believe 

this deadline will also help reduce 

uncertainty, and by extension any 

upward pressure on premiums, and 

help ensure that we do not impose 

higher user fees than necessary to fund 

the operations of the FFEs and the 

Federal platform. 

Comment: A few commenters 

suggested that HHS should adopt a 

PMPM user fee structure, stating that 

administrative costs do not track with 

premium changes and a PMPM user fee 

would avoid higher fee amounts based 

solely on premium increases. 

Response: We did not propose any 

changes to the user fee structure; as 

such, the user fee rates will continue to 

be set as a percent of the premium. We 

note that we propose and finalize user 

fee rates each benefit year and can 

adjust the user fee rates to avoid higher 

fee amounts based solely on premium 

increases. However, we will continue to 

engage with interested parties regarding 

how the FFE and SBE–FP user fee 

policies can best support consumer 

access to affordable, quality health 

insurance coverage through the 

Exchanges that use the Federal platform. 

Comment: One commenter requested 

increased transparency on user fees and 

wanted additional information on how 

user fee collections support HHS’ policy 

goals for the Exchanges. The same 

commenter requested enumerated costs 

of providing Federal eligibility and 

enrollment platform service and 

infrastructure to each State. 

Response: HHS collects user fees in 

accordance with Section 1311(d)(5)(A) 

of the ACA which permits an Exchange 

to charge assessments or user fees on 

participating health insurance issuers as 

a means of generating funding to 

support its operations. Therefore, our 

goal in collecting user fees is to collect 

user fees at a rate that will allow us to 

sustain the operations of the FFEs and 

SBE–FPs. In the proposed rule (89 FR 

82373 through 82376, 82402), we 

provided information on the 

assumptions used to calculate the 2026 

benefit year user fee rates. 

3. CSR Loading (§ 156.80) 

In response to the termination of CSR 

payments to issuers in 2017,221 State 

DOIs generally permitted or instructed 

their issuers to increase premiums only, 

or primarily, on silver-level QHPs, to 

compensate for the cost of offering 

CSRs, since the vast majority of eligible 

enrollees receiving CSRs are enrolled in 

silver plans. The proposed rule (89 FR 

82376) reiterated that practices to 

increase premiums to offset amounts of 

unpaid CSRs 222 that are permitted by 

State regulators are permissible under 

Federal law to the extent that they are 

reasonable and actuarially justified. We 

further stated that we were considering 

codifying this by amending the single 

risk pool regulations at § 156.80(d)(2)(i) 

to state that the plan-specific factors by 

which issuers may adjust the marketwide index rate include adjustments 

that reflect the costs associated with 

providing CSRs to the eligible enrollee 

population, to the extent that such 

adjustments are reasonable and 

actuarially justified. We sought 

comment on whether and how to codify 

this policy at § 156.80. We refer readers 

to the proposed rule (89 FR 82376 

through 82377) for a detailed 

discussion, including the history of CSR 

payments to QHP issuers. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing amendments to 

§ 156.80(d)(2)(i) to specify that the 

actuarially justified plan-specific factors 

by which an issuer may vary premium 

rates for a particular plan from its 

market-wide index rate include the 

actuarial value and cost-sharing design 

of the plan, including, if permitted by 

the applicable State authority, 

accounting for CSR amounts provided to 

eligible enrollees under § 156.410, 

provided the issuer does not otherwise 

receive reimbursement for such 

amounts. We summarize and respond 

below to public comments received on 

the amendments considered in the 

proposed rule. 

Comment: Most commenters generally 

supported amending § 156.80(d)(2)(i) to 

explicitly note that plan-specific 

adjustments to the market-wide index 

rate that account for CSR loading, as 

permitted by State regulators, are 

permissible, stating that codifying this 

would promote market stability and 

provide greater clarity for issuers. One 

commenter supported the continuation 

of the practice of CSR loading but noted 

that codifying the allowability of this 

practice in regulation may not be 

necessary, as it is not altering the 

position that CMS has already provided 

in written guidance. In contrast, one 

commenter opposed codifying language 

regarding the practice of CSR loading in 

§ 156.80(d)(2)(i), stating that CSR 

loading is a temporary measure that 

creates significant market distortions 

and increases Federal PTC spending. 

Response: We agree with commenters 

that supported codifying language 

specifying in § 156.80(d)(2)(i) that CSR 

loading is permissible under Federal 

premium rating requirements. We agree 

that the practice of CSR loading has 

helped to promote market stability, as 

evidenced by the adoption of CSR 

loading in most States.223 While we 

understand that many States intended to 

permit loading practices that 

specifically reimburse issuers for 

unpaid CSRs, we recognize that CSR 

loading practices vary and may not be 

critical to promoting market stability 

under all market conditions. For this 

reason, we have consistently deferred to 

States, as the traditional regulators of 

insurance and rating practices, to 

provide issuers with pricing guidance 

on how to account for unpaid CSRs in 

an actuarially-justified manner. This 

codification does not change our 

deference to States. 

States have provided guidance to 

issuers absent express language in 

§ 156.80(d)(2) for years. We have 

concluded that it is appropriate to 

codify language regarding CSR loading 

in regulatory text because such 

amendments will provide greater 

clarity. Since the cessation of CSR 

payments in 2017, States and issuers 

have requested that we clarify how the 

single risk pool rules at § 156.80 apply 

with regard to CSR loading. We released 

guidance responsive to such requests in 

2018 224 and have consistently repeated 

that the ACA permits States’ rating 

practices for CSR loading, as long as the 

resulting rate adjustments are 

actuarially justifiable pursuant to 

§ 156.80. Because we continue to 

receive questions about permissible CSR 

loading practices, we have determined it 

is appropriate to codify that CSR 

loading is permitted under Federal 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4489 

225Nothing in this final rule requires a State to 

allow CSR loading. 

226State authority to maintain an Effective Rate 

Review Program, including establishing rating rules 

for their markets, is codified in 45 CFR 154.210(b), 

154.225(b) and 154.301. 

227Uccello, CE, American Academy of Actuaries, 

‘‘Considerations for Calculating Cost-Sharing 

Reduction Load Factors,’’ Society of Actuaries 

Virtual Health Meeting Session 3C, available at 

https://www.actuary.org/sites/default/files/2023-07/ 

2023_SOA_Session_3C_Uccello.pdf. 

rules, provided any such adjustments 

are actuarially justified and the issuer 

does not otherwise receive 

reimbursement for such amounts. 

We also recognize that CSR loading 

leads to higher PTCs and other pricing 

impacts that can alter how markets 

function. However, in light of the 

continued absence of Congressional 

action to fund CSRs, CSR loading 

continues to promote market stability, 

and we are codifying Federal policy that 

permits such premium rating under 

Federal premium rating requirements. 

Comment: Some commenters 

encouraged CMS to affirm deference to 

State regulators to determine if and how 

CSR loading practices exist in their 

State, and other commenters, while 

supporting amendments to 

§ 156.80(d)(2)(i), recommended against 

adoption of any further requirements on 

State approaches to CSR loading. 

Several commenters that supported 

amending § 156.80 encouraged HHS to 

avoid language that may, inadvertently 

or otherwise, limit State flexibilities, 

roll back State progress in pursuing 

innovative solutions, or undermine 

State methodologies to lower the cost of 

care. One commenter was concerned 

that a strict interpretation of the changes 

discussed in the proposed rule may 

require States to make significant 

changes to their strategic health policy 

initiatives related to CSR loading, which 

may have a destabilizing impact on the 

individual market. That commenter 

sought clarification regarding whether 

HHS intends to impose a test of 

reasonableness or actuarial justification 

that may override existing CSR loading 

practices permitted by States. Another 

commenter requested that CMS amend 

regulations to recognize the existing 

authority of States to establish rating 

rules for their markets. One commenter, 

who appears to have interpreted the 

discussion in the proposed rule to 

suggest that HHS was considering 

codifying a requirement that issuers use 

CSR loading when setting rates,225

noted concern that codifying the 

practice of CSR loading in Federal 

regulation would undermine State 

authority to regulate insurance and 

stated that unfunded CSRs should be 

addressed through a Congressional 

appropriation, not regulatory 

codification of a workaround. 

Response: Recognizing States’ 

traditional role in regulating insurance 

and rating practices, this final rule 

codifies longstanding statements that, in 

light of the continued absence of 

Congressional action to fund CSRs and 

given States’ well-established role as the 

primary regulators of insurance, the 

ACA permits States’ rating practices for 

CSR loading, as long as the resulting 

rate adjustments are actuarially 

justifiable and otherwise comply with 

the requirements in § 156.80. The final 

rule codifies this deference to State 

regulators to determine if and how CSR 

loading practices exist in their State by 

permitting CSR loading ‘‘if permitted by 

the applicable State authority (as 

defined in § 144.103 of this 

subchapter).’’ 

States may determine how to 

implement CSR loading in their State. 

However, there is no requirement for 

States to do so. Likewise, in those States 

that have an Effective Rate Review 

Program,226 the State has the 

responsibility to determine whether an 

issuer’s adjustments to the market-wide 

index rate for plan-specific factors 

(including accounting for CSR amounts) 

are actuarially justified. 

Comment: Many commenters that 

supported the regulatory codification 

made recommendations regarding 

amendatory language in 

§ 156.80(d)(2)(i). For example, some 

commenters suggested adding 

‘‘including cost-sharing reductions 

under subpart E of this part 156 if not 

paid for under § 156.430,’’ while 

another commenter suggested adding 

‘‘including adjustments for CSRs if not 

otherwise reimbursed.’’ One 

commenter, noting that HHS uses both 

‘‘CSR loading’’ and ‘‘actuarial loading’’ 

to describe the premium loads arising 

due to the lack of Federal funding for 

CSRs, suggested that the term ‘‘CSR 

loading’’ is more appropriate because it 

is more specific. The commenter noted 

that ‘‘actuarial loading’’ could refer to a 

broader range of premium loads, 

including those related to new benefits 

or administrative expenses. Another 

commenter that supported the 

regulatory codification noted that 

current requirements for plan-level 

adjustments in § 156.80(d) require all 

such adjustments to be ‘‘actuarially 

justified,’’ but not ‘‘reasonable,’’ and 

therefore, urged HHS to define 

‘‘reasonable’’ if included in 

amendments to § 156.80(d). 

Response: Section 156.80(d)(2)(i) 

provides that an issuer may vary 

premium rates for a particular plan from 

its market-wide index rate for a relevant 

State market based on the actuarial 

value and cost-sharing design of the 

plan. We are finalizing amendments to 

§ 156.80(d)(2)(i) specifying that 

adjustments related to the actuarial 

value and cost-sharing design of the 

plan may include, if permitted by the 

applicable State authority (as defined in 

§ 144.103 of this subchapter), 

accounting for CSR amounts provided to 

eligible enrollees under § 156.410, 

provided the issuer does not otherwise 

receive reimbursement for such 

amounts. We note that these 

amendments do not use the shorthand 

terms ‘‘CSR loading,’’ ‘‘silver loading’’ 

or ‘‘actuarial loading.’’ With respect to 

the comments regarding the use of the 

term ‘‘reasonable’’ in regulatory text, 

§ 156.80(d) requires all permitted planlevel adjustments to be ‘‘actuarially 

justified’’ and does not apply a separate 

‘‘reasonableness’’ standard to permitted 

plan-level adjustments. We therefore 

have not included the word 

‘‘reasonable’’ in the amendments to 

§ 156.80(d)(2)(i). We note that States 

with an Effective Rate Review Program 

or CMS will continue to review rates to 

determine whether rate increases 

subject to review are unreasonable, 

pursuant to section 2794 of the PHS Act 

and 45 CFR part 154. 

Comment: One commenter noted 

concern that the discussion in the 

preamble of the proposed rule could be 

read to require the portion of silver 

premiums associated with CSRs to be 

experience-rated. The commenter 

therefore requested that HHS clarify that 

however a State approaches CSR 

loading, metal-level pricing must meet 

single risk pool requirements, and rates 

for individual plans must be set using 

methods that are actuarially justified. 

Response: Section 156.80(d)(2)(i), as 

amended, does not require States or 

issuers to follow a specific methodology 

when accounting for unpaid CSRs, so 

long as any such adjustments are 

actuarially justified. When we issued 

guidance regarding CSR loading in 

2018, we confirmed that, under Federal 

law, States may allow or require their 

issuers to apply a premium load that 

would cover the cost of amounts of 

unpaid CSRs. We recognize that States 

have directed or permitted issuers to 

adjust rates to reflect unreimbursed 

CSRs using a range of methodologies.227

Comment: Some commenters 

recommended actions HHS should take 

in recognition of the absence of an 

appropriation to pay CSRs, the existence 

of the practice of CSR loading, and the 

attendant impact of CSR loading on the 


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4490 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

228Pediatric dental benefits are an EHB. 

Beginning in PY 2027, States can choose to make 

adult dental care an EHB when updating their EHBbenchmark plan. In States that update their EHBbenchmark plan to include adult dental care, it will 

be an EHB and therefore APTC can go towards that 

benefit. APTCs cannot go toward adult dental SADP 

premiums at this time. 

229Available at https://www.cms.gov/files/ 

document/2026-papi-parameters-guidance-2024- 

10-08.pdf. 

level of APTC paid. For example, one 

commenter recommended further 

action, such as the authorization of a 

pooled CSR fund, to address market 

distortions. A few commenters 

recommended further consideration of 

how silver loading interacts with risk 

adjustment, including potential 

modifications to the risk adjustment 

State payment transfer formula to 

account for the impact of CSR loading. 

One commenter noted that CSR loading 

will result in higher APTCs and 

requested that CMS allow consumers to 

apply such higher APTC amounts 

toward adult and pediatric dental care 

when included in silver-level QHPs as 

well as premiums for stand-alone dental 

plans (SADPs). 

Response: We appreciate commenters’ 

recommendations. We lack a specific 

appropriation to create a pooled CSR 

fund to address market distortions as 

one commenter recommended. 

We recognize that the HHS-operated 

risk adjustment program serves as an 

important market stabilizing tool, but 

we did not propose and are not adopting 

in this final rule any changes to the risk 

adjustment State payment transfer 

formula that applies in States where 

HHS is responsible for operating the 

program to account for the impact of 

CSR loading. Instead, we are continuing 

to study these issues and their impact 

on HHS-operated risk adjustment to 

consider whether potential updates are 

needed to risk adjustment, including 

changes to the State payment transfer 

formula and the CSR adjustment factors 

discussed in section III.B.2.e of this final 

rule. If any updates are needed, we 

would propose them through noticeand-comment rulemaking. 

With respect to the comment 

regarding permitting consumers to use 

excess APTC to pay for dental benefits, 

this is permitted to the extent that 

dental care is an EHB.228

Comment: A few commenters 

requested that issuers no longer be 

required to notify the Secretary of any 

reduced CSR amounts for QHPs. 

Response: In accordance with 

§ 156.430(d), in the absence of an 

appropriation for HHS to make advance 

CSR payments to issuers, the 

submission of CSR data under § 156.430 

is optional. 

4. Publication of the 2026 Premium 

Adjustment Percentage, Maximum 

Annual Limitation on Cost Sharing, 

Reduced Maximum Annual Limitation 

on Cost Sharing, and Required 

Contribution Percentage in Guidance 

(§ 156.130(e)) 

As established in part 2 of the 2022 

Payment Notice (86 FR 24238), for 

benefit years in which we are not 

making changes to the methodology to 

calculate the premium adjustment 

percentage, the required contribution 

percentage, and maximum annual 

limitations on cost sharing and reduced 

maximum annual limitation on cost 

sharing, we will publish these 

parameters in guidance annually 

starting with the 2023 benefit year. 

Therefore, because we did not propose 

to change the methodology for 

calculating these parameters for the 

2026 benefit year, these parameters are 

not included in this rulemaking. 

Instead, on October 8, 2024, we 

published these 2026 benefit year 

parameters 229 in guidance in 

accordance with our 2022 Payment 

Notice regulations. 

5. AV Calculation for Determining Level 

of Coverage (§ 156.135) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82377), we stated 

that we intend to revise the method for 

updating the AV Calculator, starting 

with the 2026 AV Calculator. 

Section 2707(a) of the PHS Act and 

section 1302 of the ACA direct issuers 

of non-grandfathered individual and 

small group health insurance coverage, 

including QHPs, to ensure that plans 

meet a level of coverage, or metal tier, 

specified in section 1302(d)(1) of the 

ACA. Each level of coverage 

corresponds to an AV calculated based 

on the cost-sharing features of the plan. 

On February 25, 2013, HHS published 

the EHB Rule (78 FR 12834), 

implementing section 1302(d) of the 

ACA, which requires at subsection 

(d)(2)(A) that, to determine the level of 

coverage for a given metal tier, the 

calculation of AV be based upon the 

provision of EHB to a standard 

population. Section 156.135(a), as 

finalized in the EHB Rule, provides that 

an issuer must use the AV Calculator 

developed and made available by HHS 

for the given benefit year to calculate 

the AV of a health plan, subject to the 

exception in paragraph (b). 

In the 2015 Payment Notice (79 FR 

13744), we established at § 156.135(g) 

provisions for updating the AV 

Calculator in future plan years. We 

stated in the preamble of the 2015 

Payment Notice that we intend to 

release a draft version of the AV 

Calculator and AV Calculator 

Methodology through guidance for 

public comment each plan year before 

releasing the final version. In that same 

rule, we noted that interested parties 

could submit feedback on changes to the 

AV Calculator, and that we would 

consult as needed with the American 

Academy of Actuaries and the National 

Association of Insurance Commissioners 

on changes to the AV Calculator. 

In the 2017 Payment Notice (81 FR 

12204), we reiterated this approach and 

amended § 156.135(g) to allow for 

additional flexibility in our approach 

and options for updating the AV 

Calculator each year, which include 

trend factor updates, algorithms 

changes, user interface changes, updates 

to the claims data and demographic 

distribution being used in the AV 

Calculator, and an update to the AV 

Calculator’s annual limitation on cost 

sharing. We also stated that we intend 

to release the final AV Calculator for a 

respective plan year no later than the 

end of the first quarter of the preceding 

plan year. 

Since this time, we have largely 

fulfilled this intention. However, we 

have received feedback that we should 

strive to release the final version of the 

AV Calculator even sooner, in 

anticipation of State filing deadlines. 

SBE–FPs have also provided feedback 

explaining that they could benefit from 

an earlier release of the final version of 

the AV Calculator to design 

standardized plan options that satisfy 

the AV de minimis ranges. We stated in 

the proposed rule that we believe these 

requests are reasonable and that we can 

accommodate them in most years when 

there are no material changes between 

the draft and final versions of an AV 

Calculator for a respective plan year. 

Therefore, in the proposed rule (89 FR 

82377), we stated that we intend to 

revise the current method whereby we 

release a draft version of the AV 

Calculator for a respective plan year 

through guidance for public comment 

and then release the final version of the 

AV Calculator for that plan year no later 

than the end of the first quarter of the 

preceding plan year after considering 

any comments received. We stated that 

we intend to only release the single, 

final version of the AV Calculator for a 

respective plan year. We noted that 

under this approach, we would still 

solicit public comments on the AV 

Calculator for a plan year generally, but 

we would only plan to incorporate this 


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feedback into the development and 

release of the following plan year’s AV 

Calculator, rather than to specifically 

inform the potential revision of the final 

version of the upcoming plan year’s AV 

Calculator. We noted that this approach 

would allow us to release the final AV 

Calculator sooner and that we 

anticipated issuers would have the final 

version of the AV Calculator 3 to 6 

months sooner than the end of the first 

quarter of the preceding plan year. 

We also noted that this approach 

would not sacrifice the quality of the 

AV Calculator. We stated that the 

stability and functionality of the AV 

Calculator has improved every year, and 

that we believe there are diminishing 

returns to receiving public comments on 

specific versions of it at this time. We 

noted that this is particularly evident 

given that we receive fewer than 10 

comments on average each year on the 

draft AV Calculator. In addition, we 

noted that since the first AV Calculator 

was released for PY 2014, we have never 

made substantive changes in a final 

version of the AV Calculator for a plan 

year based on comments received on the 

draft version for that plan year, though 

this feedback is valuable to us and 

informs our decisions to update the AV 

Calculator in subsequent plan years. We 

added that this decision to not make 

substantive changes to the final version 

of the AV Calculator is also partly 

influenced by the limited timeframe we 

would have to make substantive 

changes to the final AV Calculator. 

Thus, changes from the draft to the 

final version of the AV Calculator have 

historically only included nonsubstantive amendments to correct and 

clarify language in the AV Calculator 

Methodology or to add frequently asked 

questions to the AV Calculator User 

Guide. We stated that since these 

changes have historically been so minor, 

we believe the time delay required to 

effectuate those changes and release the 

final AV Calculator by the end of the 

first quarter of the preceding plan year 

is less valuable to issuers than releasing 

the final version sooner. We noted that 

under this approach, we would leave 

open the rare possibility that we could 

reissue another final version of the AV 

Calculator for a plan year if we discover 

the AV Calculator contains an error that 

materially impacts the functionality or 

accuracy of that version of the AV 

Calculator. We noted that although this 

has never happened to date, under the 

current framework of releasing both a 

draft and final version of the AV 

Calculator, if we had discovered a 

material error in the final version, we 

also would have reissued a corrected, 

final version. 

We also noted that under this 

approach, we would still seek public 

comment on the AV Calculator for a 

plan year generally and would still 

consult with the American Academy of 

Actuaries, as well as the National 

Association of Insurance 

Commissioners. We further stated that 

we would consider this feedback for 

incorporation into the following year’s 

AV Calculator. 

In addition, we stated that to 

maximize the benefits of this approach, 

we intended to make this change 

effective starting with the release of the 

2026 AV Calculator. We noted that we 

believe there would be minimal effect in 

effectuating this change with the 2026 

AV Calculator because we intend to 

base the 2026 AV Calculator 

substantially on the final 2025 AV 

Calculator, and do not plan to make any 

material changes to it. 

We sought comment on this approach. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this approach to release only 

the single, final version of the AV 

Calculator for a respective plan year. We 

summarize and respond to public 

comments received on this approach 

below. 

Comment: Many commenters 

supported the approach to release only 

the single, final version of the AV 

Calculator for a respective plan year. 

These commenters noted that an earlier 

release of the final AV Calculator 

provides States and issuers with 

additional time to prepare plan designs 

ahead of rate and form filing deadlines. 

Several commenters mentioned that this 

earlier release will give Exchanges more 

time to finalize their State-specific 

standardized plan designs. A few 

commenters also noted that this revised 

approach is more efficient and reduces 

duplicative work and administrative 

burden for issuers. 

Some commenters provided feedback 

on the timing of the release of the final 

AV Calculator. One commenter 

requested that the final AV Calculator 

be released in October in future years, 

on a similar timeline to this year. Other 

commenters requested that the final AV 

Calculator be released no later than 13 

or 14 months before the applicable plan 

year, while several commenters 

requested that the AV Calculator be 

released as early as possible. Lastly, a 

commenter requested we clarify that 

once the final version of the AV 

Calculator is released, issuers and States 

will have certainty that it is the final 

version. 

Response: We agree with commenters 

that finalizing this revised approach for 

releasing the AV Calculator will create 

efficiencies and reduce administrative 

burden for issuers, States, and 

Exchanges. 

While we cannot commit to specific 

timeframes for the release of future final 

AV Calculators, we stated in the 

proposed rule (89 FR 82377) that we 

expect to release the final version of the 

AV Calculator 3 to 6 months sooner 

than when we have historically 

published the final AV Calculator for 

the forthcoming plan year. In 

connection with this rule, we released 

the final 2026 AV Calculator on October 

16, 2024, more than 14 months before 

the plans that use it would become 

effective. 

Once we release the final version of 

the AV Calculator for a particular plan 

year, issuers, States, and Exchanges can 

expect that, except in rare 

circumstances, we would not thereafter 

release a subsequent version of the AV 

Calculator for that plan year. As stated 

in the proposed rule (89 FR 82377 

through 82378), we leave open the rare 

possibility that we could reissue another 

final version of the AV Calculator for a 

plan year if we discover the AV 

Calculator contains an error that 

materially impacts the functionality or 

accuracy of that version of the AV 

Calculator. However, this has never 

happened to date. Under the current 

framework of releasing both a draft and 

final version of the AV Calculator, if we 

had discovered a material error in the 

final version, we also would have 

reissued a corrected, final version, so 

this revised approach is in line with 

precedent. 

Comment: A few commenters 

suggested that we could achieve the 

same goal of releasing the final version 

of the AV Calculator sooner by releasing 

the draft version earlier as well. One 

commenter specifically requested that 

the draft AV Calculator be released in 

the spring, while two others requested 

that the draft AV Calculator generally be 

released earlier to provide even more 

time to analyze changes to that plan 

year’s AV Calculator. 

Response: Releasing a draft version of 

the AV Calculator in the spring is not 

technically possible. As discussed in the 

2015 Payment Notice (79 FR 13811), 

certain updates to the AV Calculator are 

dependent on the timeline of 

availability of the necessary data 

elements. These data elements are 

unavailable in the spring for the plan 

year 2 years in the future (for example, 

spring 2024 for PY 2026). This includes 

the trend factors based on data collected 

through the Unified Rate Review 


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Templates and the maximum annual 

limitation on cost sharing, published 

annually in the PAPI parameters 

guidance. Both these data elements are 

unavailable until late summer or early 

fall. So, we cannot release the draft AV 

Calculator in the spring or even the 

summer. The earliest we could release 

a draft AV Calculator is in the fall as we 

have in previous years. It is not 

technically possible for us to receive 

and analyze this data, incorporate it into 

the next build of the AV Calculator, 

perform quality assurance, release a 

draft version, solicit public feedback, 

and make revisions to the final AV 

Calculator based on that feedback and 

still release a final version 13 or 14 

months before the plans that use it 

would become effective. 

Comment: Many commenters noted 

the ongoing importance of collecting 

and incorporating public feedback on 

the AV Calculator, despite no longer 

releasing the draft version. A few 

commenters agreed with our rationale to 

condense this process since we have 

received fewer than 10 comments on 

average each year on the draft AV 

Calculator and agreed that eliminating 

the draft version to release the final 

version earlier is an acceptable tradeoff 

to gain access to the final AV Calculator 

earlier. 

Several commenters provided 

feedback on the process to collect input 

on the AV Calculator. One commenter 

noted that this change will allow issuers 

to provide feedback throughout the year. 

Conversely, several commenters 

requested that HHS establish a formal 

AV Calculator comment period that 

does not overlap with the Payment 

Notice comment period. The 

commenters stated that establishing a 

comment period would ensure that we 

receive input from all interested parties 

before starting work on the next year’s 

AV Calculator, and creating a comment 

period distinct from the Payment Notice 

comment period would give interested 

parties more time to thoughtfully 

prepare feedback. In addition, one 

commenter distinguished between 

minor updates to the AV Calculator, 

such as updating the maximum out-ofpocket limits, that may not necessitate 

a formal comment period, versus more 

material changes when a comment and 

response period would be more 

appropriate. 

Response: Public feedback on the AV 

Calculator is essential to its accuracy 

and functionality. Under this revised 

approach, we will still solicit public 

comments on the AV Calculator but will 

only seek to incorporate this feedback 

into the development and release of the 

following plan year’s AV Calculator, 

rather than into the development of the 

same plan year’s AV Calculator. As we 

noted in the proposed rule (89 FR 

82379), this revised approach is justified 

given that the stability and functionality 

of the AV Calculator has improved 

every year, and we believe there are 

diminishing returns to receiving public 

comments on a draft version for 

incorporation into a final version for a 

particular plan year. We also noted that 

we receive fewer than 10 comments on 

average each year on the draft AV 

Calculator. We agree that collecting and 

incorporating public feedback on the 

AV Calculator is valuable, and we 

encourage and welcome feedback from 

all interested parties on the 2026 final 

AV Calculator and future final AV 

Calculators. 

Given this revised approach, we do 

not believe it is necessary to set a 

specific deadline by which public 

comments on a particular version of the 

AV Calculator must be submitted, so we 

will accept public comments on a 

continuous rolling basis until the 

following plan year’s AV Calculator is 

released. Without a specific deadline, 

interested parties can review the final 

AV Calculator without a timing 

constraint or competing priorities, such 

as reviewing and commenting on that 

year’s Payment Notice. 

Comment: Some commenters noted 

significant concerns with eliminating 

the draft version of the AV Calculator as 

a mechanism to solicit feedback. Several 

of these commenters urged CMS to 

continue a formal process to solicit 

feedback on the AV Calculator. A few 

commenters opposed our 

implementation of this approach for the 

2026 AV Calculator, stating it was 

inappropriate to go forward with this 

approach without first seeking public 

comment. Another commenter stated 

that this approach introduces a 

dangerous precedent if applied to other 

guidance. 

One commenter stated that reviewing 

the draft version of the AV Calculator is 

the only opportunity to provide 

feedback. This commenter stated that 

the receipt of a small number of 

comments in prior years does not justify 

doing away with the draft version of the 

AV Calculator and that we ignored the 

comments on the draft version in prior 

years. This commenter also found the 

process of accepting rolling comments 

impractical and pointed out that the 

2026 AV Calculator did not provide 

instructions on how to submit 

comments. 

Response: We reiterate our 

commitment to collecting feedback from 

all interested parties on the AV 

Calculator. In fact, we adopted this 

revised approach directly in response to 

consistent feedback we have received 

over the years to provide issuers, States, 

and Exchanges with access to the AV 

Calculator sooner. Releasing only the 

final version of the AV Calculator 

fulfills this request without jeopardizing 

its accuracy or functionality. 

We believe it is reasonable to move 

forward with this revised approach for 

the final 2026 AV Calculator given the 

AV Calculator’s stability over the last 

few years. Considering the many 

process improvements in recent years, 

including the switch to the masked 

enrollee-level EDGE data starting with 

the 2025 AV Calculator and other 

changes to make the standard 

population more representative of the 

individual and small group markets, the 

AV Calculator has improved every year, 

so we believe it has achieved a mature 

state. Given this stability, the benefit of 

releasing a draft version of the AV 

Calculator no longer outweighs the 

corresponding delay to release the final 

AV Calculator after the draft version. 

Although we will no longer receive 

feedback on a draft version to 

incorporate into the final AV Calculator, 

the same process to submit feedback on 

the AV Calculator remains available 

throughout the year. Since this process 

is the same as previous years when we 

have collected feedback on the AV 

Calculator, but without a specific 

deadline to submit comments, we 

disagree that accepting comments on the 

final AV Calculator on a rolling basis is 

impractical. 

We disagree that it was inappropriate 

to move forward with this revised 

approach before seeking public 

comment, since this revised approach 

was in response to numerous public 

comments that we have received in the 

past. We also disagree that this revised 

approach introduces a dangerous 

precedent of no longer seeking public 

comment on draft versions of guidance. 

As stated, we revised the approach to 

release only a final version of the AV 

Calculator in response to specific 

feedback on the timing of the release of 

the AV Calculator, and as such, we 

clarify that this revised approach 

applies only to the AV Calculator and to 

no other guidance. 

In addition, as we noted in the 

proposed rule (89 FR 82379), we believe 

there will be minimal effect in 

effectuating this change with the 2026 

AV Calculator because we based the 

2026 AV Calculator substantially on the 

final 2025 AV Calculator, and did not 

make any material changes to it. 

We note that the 2026 AV Calculator 

Methodology erroneously omitted a 

contact method for interested parties to 


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submit comments on the final 2026 AV 

Calculator, but all prior draft AV 

Calculators have included the same 

contact information, which has 

remained available. We apologize for 

this oversight. Interested parties may 

submit comments to HHS via email at 

PMPolicy@cms.hhs.gov. 

Comment: A few commenters 

mentioned other ideas for soliciting 

feedback on the AV Calculator, such as 

forming an advisory work group, 

seeking input from Navigators, 

community-based organizations, 

regulators, and patients, publishing a 

white paper and/or hosting a webinar, 

and reporting on how we incorporate 

feedback into future versions of the AV 

Calculator. 

Response: We again emphasize that 

feedback on the AV Calculator from all 

interested parties is essential. We 

appreciate the commenters’ suggestions 

on other strategies to solicit feedback on 

the AV Calculator. We note that we 

already share updates and invite 

discussion on the AV Calculator at 

several venues, including at an annual 

webinar hosted for issuers and at the 

annual American Academy of Actuaries 

meeting. We will continue to do so, as 

well as explore other avenues and 

meetings throughout the year to engage 

with interested parties. However, a 

white paper explaining changes to the 

AV Calculator would be duplicative of 

the AV Calculator Methodology already 

published. The AV Calculator 

Methodology describes in detail all 

changes to that year’s AV Calculator, as 

well as changes that were considered 

but not made. We will continue to use 

the AV Calculator Methodology 

document to describe such changes and 

considerations. 

Comment: Some commenters opposed 

the proposed approach, stating that 

eliminating the draft version of the AV 

Calculator would not provide enough 

time to prepare plan designs. They 

stated that having earlier access to the 

draft version of the AV Calculator 

enabled them to plan ahead, and 

eliminating the draft version would 

make it difficult to meet key deadlines. 

Response: These commenters 

misunderstood the primary goal of this 

revised approach. We want to clarify 

that this revised approach will not 

shorten the time that users have access 

to the AV Calculator. Rather, the revised 

approach will enable earlier access to 

the final AV Calculator. It is our 

understanding that having the final AV 

Calculator 3 to 6 months sooner than we 

have historically released it will only 

benefit plan design preparation. 

Comment: Several commenters 

provided technical feedback on the 2026 

final AV Calculator. 

Response: We thank commenters for 

providing this feedback on the 2026 

final AV Calculator. We have noted this 

feedback and will consider it in the 

development of the 2027 AV Calculator. 

6. Standardized Plan Options 

(§ 156.201) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82378), we proposed 

to exercise our authority under sections 

1311(c)(1) and 1321(a)(1)(B) of the ACA 

to make minor updates to the 

standardized plan options for PY 2026. 

We also proposed to amend § 156.201 

by adding paragraph (c) to provide that 

an issuer that offers multiple 

standardized plan options within the 

same product network type, metal level, 

and service area must meaningfully 

differentiate these plans from one 

another in terms of included benefits, 

provider networks, and/or formularies. 

In the proposed rule (89 FR 82378), 

we proposed minor updates to the plan 

designs for PY 2026 to ensure these 

plans continue to have AVs within the 

permissible de minimis range for each 

metal level. We proposed to otherwise 

generally maintain continuity regarding 

the approach to standardized plan 

options finalized in the 2023, 2024, and 

2025 Payment Notices. Our proposed 

updates to plan designs for PY 2026 

were detailed in Tables 11 and 12 in the 

proposed rule. 

We proposed to maintain this high 

degree of continuity in standardized 

plan options for several reasons. We 

stated that primarily, we believe 

maintaining a high degree of continuity 

will reduce the risk of disruption for all 

involved interested parties, including 

issuers, agents, brokers, States, and 

consumers. We further stated that we 

continue to believe that making major 

departures from the standardized plan 

option designs finalized in the 2023, 

2024, and 2025 Payment Notices could 

result in significant changes that may 

create undue burden for interested 

parties. 

We refer readers to the proposed rule 

(89 FR 82378 through 82382) for further 

discussion of the background and 

rationale regarding our proposed 

approach to standardized plan options, 

and to the preambles of the 2023, 2024, 

and 2025 Payment Notices discussing 

§ 156.201 (87 FR 27310 through 27322, 

88 FR 25847 through 25855, and 89 FR 

26357 through 26362, respectively) for a 

detailed discussion regarding the 

approaches to standardized plan options 

finalized in those Payment Notices. 

In addition, we proposed a 

meaningful difference standard for PY 

2026 and subsequent plan years at 

§ 156.201(c) because several issuers in 

recent years have offered 

indistinguishable standardized plan 

options, and we believe issuers may 

continue to do so in future plan years 

partly because the number of nonstandardized plan options that issuers 

can offer is limited in accordance with 

§ 156.202(b). We stated that we do not 

believe it benefits consumers for issuers 

to offer identical standardized plan 

options, or standardized plan options 

that do not differ in meaningful ways, 

within the same product network type, 

metal level, and service area. In 

addition, we noted that permitting 

issuers to offer identical standardized 

plan options or standardized plan 

options that do not differ in meaningful 

ways runs counter to our goals of 

enhancing the consumer experience, 

increasing consumer understanding, 

and simplifying the plan selection 

process. We also stated that allowing 

issuers to offer duplicative standardized 

plan options could cause significant 

consumer confusion and unnecessary 

plan proliferation if the trend continues 

unabated. 

As such, we stated that under this 

proposal, although issuers would 

continue to be permitted to offer 

multiple standardized plan options 

within the same product network type, 

metal level, and service area, these 

standardized plan options would be 

required to have meaningfully different 

benefit coverage, provider networks, 

and/or formularies. For the purposes of 

the proposed standard, for PY 2026 and 

subsequent plan years, we stated that 

we would consider a standardized plan 

option with a different product, 

provider network, and/or formulary ID 

to be meaningfully different, similar to 

the version of the standard from the 

2017 Payment Notice (81 FR 12312 and 

12331). 

In the proposed rule (89 FR 82380), 

we stated that if an issuer submitted two 

standardized plan options within the 

same product network type, metal level, 

and service area both with the same 

product, provider network, and 

formulary IDs, we would not certify 

both of these plans. We explained that 

we anticipated we would seek feedback 

from the issuer regarding which plan to 

certify, assuming the issuer meets all 

other certification requirements. We 

also noted that for the purposes of the 

proposed standard, we would not 

consider differences in plan variant 

marketing names, the availability of 

different language access features, or the 

administration of the plan by different 


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vendors in determining whether two or 

more standardized plan options are 

meaningfully different, similar to the 

version of the standard from the 2017 

Payment Notice. 

We further stated that if this policy 

were finalized as proposed, we would 

monitor whether issuers are seeking 

certification of plans that technically 

meet this standard but are nearly 

identical. We noted that if we 

determined that issuers were attempting 

to circumvent this standard in this 

manner, we would consider proposing 

in future rulemaking a version of this 

meaningful difference standard that 

would require greater variation among 

plans beyond product, provider 

network, and/or formulary IDs. We 

noted that we were not proposing such 

a standard for PY 2026 and subsequent 

plan years at that time because, 

assuming issuers do not attempt to 

circumvent this standard as noted 

above, we believe that the proposed 

policy would likely be sufficient to 

ensure that issuers’ standardized plan 

options continue to support our goals of 

enhancing the consumer experience, 

increasing consumer understanding, 

and simplifying the plan selection 

process. 

We refer readers to the proposed rule 

(89 FR 82378 through 82380) for further 

discussion of the background and 

rationale regarding our proposal to 

require an issuer that offers multiple 

standardized plan options within the 

same product network type, metal level, 

and service area to meaningfully 

differentiate these plans from one 

another in terms of included benefits, 

provider networks, and/or formularies. 

We sought comment on our proposed 

approach to standardized plan options 

for PY 2026, including amending 

§ 156.201 to add paragraph (c). 

BILLING CODE 4120–01–P 


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TABLE 1: 2026 Standardized Plan Options Set One (For All FFE and SBE-FP Issuers, 

Excluding Issuers in Delaware, Louisiana, and Oregon) 

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

Actuarial Value 64.12% 70.01% 73.07% 87.04% 94.11% 78.04% 88.03% 

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

Annual Limitation on Cost $10,000 $8,900 $7,400 $3,300 $2,200 $8,200 $5,200 

Sharing 

Emergency Room Services 50% 40% 40% 30% 25%* 25% $100* 

Inpatient Hospital Services 50% 40% 40% 30% 25%* 25% $350* 

(Including Mental Health & 

Substance Use Disorder) 

Primarv Care Visit $50* $40* $40* $20* $0* $30* $10* 

Urgent Care $75* $60* $60* $30* $5* $45* $15* 

Specialist Visit $100* $80* $80* $40* $10* $60* $20* 

Mental Health & Substance $50* $40* $40* $20* $0* $30* $10* 

Use Disorder Outpatient 

Office Visit 

Imaging (CT/PET Scans, 50% 40% 40% 30% 25%* 25% $100* 

MRis) 

Speech Therapy $50* $40* $40* $20* $0* $30* $10* 

Occupational, Physical $50* $40* $40* $20* $0* $30* $10* 

Therapy 

Laboratorv Services 50% 40% 40% 30% 25%* 25% $30* 

X-rays/Diaf!Ilostic Imaging 50% 40% 40% 30% 25%* 25% $30* 

Skilled Nursing Facilitv 50% 40% 40% 30% 25%* 25% $150* 

Outpatient Facility Fee 50% 40% 40% 30% 25%* 25% $150* 

(Ambulatory Surgery 

Center) 

Outpatient Surgery 50% 40% 40% 30% 25%* 25% $150* 

Physician & Services 

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

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

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

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

*Benefit category not subject to the deductible. 
Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4495 

BILLING CODE 4120–01–C 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing our proposed approach with 

respect to standardized plan options, 

with several modifications to both sets 

of plan designs at the expanded bronze 

metal level. 

In particular, for both sets of plan 

designs at the expanded bronze metal 

level, we reduced the coinsurance rate 

for all benefit categories that had 

coinsurance subject to the deductible as 

the form of cost sharing from 60 percent 

to 50 percent. We also reduced the 

copayments exempt from the deductible 

for the primary care visit benefit 

category from $60 to $50; for the urgent 

care benefit category from $90 to $75; 

for the specialist visit benefit category 

from $120 to $100; for the mental health 

and substance use disorder outpatient 

office visit benefit category from $60 to 

$50; for the speech therapy benefit 

category from $60 to $50; and for the 

occupational and physical therapy 

benefit category from $60 to $50. To 

counterbalance this subsequent increase 

in AV, we increased the annual 

limitation on cost sharing value from 

$9,200 to $10,000. Altogether, these 

modifications resulted in a reduction in 

AV from 64.42 percent in the proposed 

plan designs to 64.12 percent in the 

plan designs finalized in this rule. 

We made these modifications 

primarily to maintain continuity in plan 

designs, to minimize the risk of 

coverage disruption and unexpected 

financial costs for consumers already 

enrolled in these plans, and to allow 

issuers to design standardized plans in 

a manner that conforms to State laws. 

We are otherwise finalizing the plan 

designs as proposed. There were no 

other modifications to any of the other 

benefit categories in either set of plan 

designs at the expanded bronze metal 

level. There were similarly no 

modifications to either set of plan 

designs at any of the other metal levels. 

Our finalized plan designs for PY 2026 

are detailed in Tables 1 and 2 of this 

final rule. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are also 

finalizing, with minor modification, our 

proposal that an issuer that offers 

multiple standardized plan options 


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TABLE 2: 2026 Standardized Plan Options Set Two (For Issuers in Delaware and 

Louisiana) 

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

Actuarial Value 64.12% 70.01% 73.09% 87.07% 94.09% 78.02% 88.01% 

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

Annual Limitation on Cost $10,000 $8,900 $7,400 $3,300 $2,400 $8,300 $5,300 

Sharing 

Emergency Room Services 50% 40% 40% 30% 25%* 25% $100* 

Inpatient Hospital Services 50% 40% 40% 30% 25%* 25% $350* 

(Including Mental Health 

& Substance Use Disorder) 

Primarv Care Visit $50* $40* $40* $20* $0* $30* $10* 

Urgent Care $75* $60* $60* $30* $5* $45* $15* 

Specialist Visit $100* $80* $80* $40* $10* $60* $20* 

Mental Health & $50* $40* $40* $20* $0* $30* $10* 

Substance Use Disorder 

Outpatient Office Visit 

Imaging (CT/PET Scans, 50% 40% 40% 30% 25%* 25% $100* 

MRis) 

Speech Therapy $50* $40* $40* $20* $0* $30* $10* 

Occupational, Physical $50* $40* $40* $20* $0* $30* $10* 

Therapy 

Laboratory Services 50% 40% 40% 30% 25%* 25% $30* 

X-rays/Diagnostic Imaging 50% 40% 40% 30% 25%* 25% $30* 

Skilled Nursing Facility 50% 40% 40% 30% 25%* 25% $150* 

Outpatient Facility Fee 50% 40% 40% 30% 25%* 25% $150* 

(Ambulatory Surgery 

Center) 

Outpatient Surgery 50% 40% 40% 30% 25%* 25% $150* 

Physician & Services 

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

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

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

Drugs 

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

*Benefit category not subject to the deductible. 
4496 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

within the same product network type, 

metal level, and service area must 

meaningfully differentiate these plans 

from one another in terms of included 

benefits, provider networks, and/or 

formularies. 

In particular, we modified the 

language at § 156.201(c) to state that an 

issuer that offers multiple standardized 

plan options within the same product 

network type, metal level, and service 

area must meaningfully differentiate 

these plans from one another in terms 

of included benefits, provider networks, 

included prescription drugs, or a 

combination of some or all these factors. 

For the purposes of this standard, a 

standardized plan option with a 

different product ID, provider network 

ID, drug list ID, or some combination of 

or all these factors, will be considered 

meaningfully different. 

We modified the portion of the 

proposed standard stating that a 

difference in formularies (which is 

defined as a difference in formulary IDs) 

would constitute a meaningful 

difference to instead state that a 

difference in included prescription 

drugs (which is defined as a difference 

in drug list IDs) would constitute a 

meaningful difference. We made this 

modification to ensure that minor 

differences in prescription drug cost 

sharing (which would be reflected by 

differences in formulary IDs) would not 

constitute a meaningful difference 

under this framework, consistent with 

our goal of ensuring that standardized 

plan options differ in meaningful ways. 

This is similar to how differences in 

included benefits (which is defined as a 

difference in product IDs) would 

constitute a meaningful difference, but 

differences in the cost sharing for those 

medical benefits would not. 

Additionally, we made this 

modification to further clarify the 

flexibility that issuers are permitted. 

We summarize and respond to public 

comments received on the proposed 

approach to standardized plan options 

below. 

Comment: Many commenters 

supported continuing to require FFE 

and SBE–FP QHP issuers to offer 

standardized plan options. Some of 

these commenters described 

standardized plan options as helping to 

reduce consumer confusion by 

simplifying the plan selection process 

and by allowing consumers to draw 

meaningful comparisons between plan 

options more easily. Many commenters 

noted that consumers continue to risk 

experiencing plan choice overload as 

they navigate the plan selection process 

and that standardized plan options 

continue to play an important role in 

reducing the number of variables that 

consumers need to compare as part of 

the selection process. Other comments 

encouraged CMS to make further 

improvements to the HealthCare.gov 

shopping experience by refining tools 

that help consumers navigate and 

manage plan choices more easily, 

including by enhancing the differential 

display of standardized plan options. 

Some commenters also requested that 

CMS create a pathway for issuers to 

submit both English and Spanish 

marketing plan variant names for all 

plans to enhance accessibility for 

Spanish-speaking consumers using 

CuidadoDeSalud.gov. 

Many commenters supported our 

approach to the design of these 

standardized plan options for PY 2026. 

Specifically, commenters supported 

taking a consistent approach to the 

design of standardized plan options and 

only making minor adjustments to 

ensure the plans continue to have AVs 

within the permissible de minimis 

ranges at each metal level, particularly 

because of the consistency this provides 

enrollees for anticipating their health 

care costs. Conversely, a few 

commenters opposed continuing to 

require issuers to offer standardized 

plan options. These commenters noted 

that continuing to subject issuers to 

these requirements reduces consumer 

choice and makes it harder for 

consumers to find plan options that best 

meet their individual health care needs. 

Response: We agree that standardized 

plan options continue to serve as one 

important facet of our multifaceted 

strategy of reducing the rate of plan 

proliferation, the risk of plan choice 

overload, and the frequency of 

suboptimal plan selection. We are also 

engaged in ongoing work to improve 

consumers’ decision-making through 

enhancing choice architecture and the 

user experience on HealthCare.gov, and 

we will consider additional ways to do 

so in the future. 

For the comments requesting that we 

create a pathway for issuers to submit 

both English and Spanish marketing 

plan variant names for all plans to 

enhance accessibility for Spanishspeaking consumers using 

CuidadoDeSalud.gov, we note that we 

are currently working on modifications 

to HealthCare.gov to improve the user 

experience, including with respect to 

language accessibility. We also note that 

we will consider revising the 

submission website to allow issuers to 

submit plan variant marketing names in 

Spanish or other languages in future 

plan years. For the purposes of the 

meaningful difference standard that we 

are finalizing in this rule for PY 2026 

and subsequent plan years, we reiterate 

our explanation in the proposed rule (89 

FR 82380) that we would not consider 

differences in plan variant marketing 

names, the availability of different 

language access features, or the 

administration of the plan by different 

vendors in determining whether two or 

more standardized plan options are 

meaningfully different. 

We agree that maintaining a high 

degree of continuity in our standardized 

plan options from year to year is 

desirable for several reasons. 

Specifically, we agree that having 

consistent year-to-year plan designs 

allows consumers enrolled in these 

plans to become better acquainted with 

these plans, increasing both consumer 

understanding and financial certainty. 

We also agree that drastically modifying 

the plan designs from year to year could 

potentially result in avoidable financial 

harm if the cost sharing for benefits that 

consumers depend upon increases 

unexpectedly, which could also result 

in consumers forgoing obtaining 

medical care. Although we believe that, 

today, the benefits that may arise from 

making major modifications to these 

plan designs are outweighed by the risk 

that doing so could result in undue 

burden for issuers and consumers, we 

may consider making major 

modifications to the design of these 

standardized plan options in future 

rulemakings if this assessment changes. 

We disagree that continuing to require 

issuers in the FFEs and SBE–FPs to offer 

standardized plan options makes it 

harder for consumers to access plans 

that meet their unique health needs, 

even with the additional requirement 

we are finalizing in this rule for 

meaningfully differentiating 

standardized plan options when an 

issuer chooses to offer multiple 

standardized plan options within the 

same product network type, metal level, 

and service area. We note that, as 

clarified in section III.E.7 of this rule, 

issuers are permitted to offer two nonstandardized plan options per product 

network type, metal level (excluding 

catastrophic plans), inclusion of adult 

dental benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage, and service area, as 

well as additional non-standardized 

plan options per product network type, 

metal level, inclusion of adult dental 

benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage, and service area, so 

long as these additional plans 

substantially benefit consumers with 

chronic and high-cost conditions and 

meet the other criteria for the exceptions 

process under § 156.202(d) and (e). 


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As we explained in the 2025 Payment 

Notice (89 FR 26367), we believe the 

fact that issuers continue to be 

permitted to offer these nonstandardized plan options ensures that 

consumers will continue to have access 

to a sufficiently broad range of plan 

designs that meet their diverse needs 

and that issuers can continue to offer 

innovative plan designs. We further 

believe that continuing to require 

issuers to offer standardized plan 

options, as well as reducing the nonstandardized plan option limit and 

implementing the exceptions process for 

this limit (as discussed in section III.E.7. 

of this rule), strikes an appropriate 

balance between limiting the risk of 

plan choice overload while 

simultaneously continuing to permit 

issuers a sufficient degree of flexibility 

to offer innovative plan designs. 

Comment: Many commenters 

expressed support for various features of 

the proposed plan designs. In particular, 

commenters supported standardized 

plan options for improving affordability 

by providing greater access to predeductible coverage and requiring 

copayments instead of coinsurance rates 

for certain benefit categories. 

Commenters also noted that the use of 

copayments and pre-deductible 

coverage in standardized plan options 

promotes predictable and affordable 

cost sharing for essential care, thereby 

reducing barriers and enhancing access 

for these services. 

However, some commenters 

recommended further reducing 

enrollees’ out-of-pocket costs, such as 

by exempting additional drug tiers from 

the deductible, or by capping monthly 

out-of-pocket costs for particular 

prescription drugs. Several commenters 

recommended lowering the coinsurance 

rate for both sets of plan designs at the 

expanded bronze metal level from 60 

percent to 50 percent in order to allow 

issuers to design plans compliant with 

State laws that prohibit coinsurance 

rates over 50 percent. Another 

commenter recommended including 

health savings account (HSA)-compliant 

high-deductible health plan (HDHP) 

designs in both sets of standardized 

plan options. 

Response: We appreciate commenters’ 

support for various features of the 

proposed plan designs. We acknowledge 

that a high annual limitation on cost 

sharing values, high deductibles, and 

limited pre-deductible coverage can 

sometimes act as barriers that prevent 

consumers, including those with 

chronic and high-cost conditions, from 

obtaining the health care they need. We 

also acknowledge that coinsurance 

rates, as well as subjecting particular 

benefit categories and prescription drug 

tiers to the deductible, can potentially 

increase consumer uncertainty 

regarding how much particular items 

and services may cost. 

However, due to AV constraints 

arising from the permissible de minimis 

range restriction for each metal level in 

accordance with § 156.140(c)(2), we are 

unable to substantially lower the annual 

limitation on cost sharing or deductible 

values, expand pre-deductible coverage 

to include additional benefit categories, 

or include copayments as the form of 

cost sharing for a broader range of 

benefit categories without a 

corresponding increase in the AV of 

each plan. Making some combination of 

these modifications would increase the 

generosity of these plans, potentially to 

the point of each plan’s AV exceeding 

the permissible de minimis range for its 

respective metal level. Furthermore, 

even if making some combination of 

these changes would result in an AV 

within the permissible de minimis range 

for each metal level, there would still be 

a corresponding increase in premiums 

that would render these plans costlier 

for consumers and potentially 

uncompetitive. 

We further note that although it may 

be possible to make some combination 

of these modifications to these plan 

designs while maintaining an AV near 

the floor of the de minimis range for 

each metal level, doing so would require 

a corresponding increase in cost sharing 

for other benefits or subjecting 

additional benefits to the deductible to 

offset this increase in generosity. Since 

the benefits that we have exempted from 

the deductible as well as the benefits for 

which we have reduced cost sharing in 

the standardized plan options finalized 

in this rule are some of the most 

frequently utilized benefits, we believe 

that the disadvantages of subjecting 

these benefits to the deductible or 

increasing the cost sharing for these 

benefits would outweigh the benefit that 

may arise from exempting other benefits 

from the deductible or reducing cost 

sharing for other benefits. The 

disadvantages include the risk that these 

plans would become uncompetitive and 

that consumers would forego obtaining 

medical services covered by these 

frequently utilized benefits which 

would be newly subject to the 

deductible or have increased cost 

sharing. 

We also note that we are not 

standardizing the cost sharing for 

additional benefit categories beyond 

those already included in these plan 

designs since EHB-benchmark plans 

vary significantly by State, and we do 

not wish to standardize the cost sharing 

for benefits that issuers may not be 

required to offer in particular States. 

However, we agree with commenters 

who recommended reducing the 

expanded bronze plan coinsurance rate 

from 60 percent in both sets of plan 

designs, as proposed, to 50 percent in 

order to allow issuers to design plans in 

a manner that conforms with State laws 

and to maintain continuity with plan 

designs from previous years. Requiring 

issuers to offer standardized plan 

options that fail to conform with State 

laws may inadvertently lead issuers to 

become subject to State enforcement 

and other legal actions, which could 

endanger their licensure and ability to 

continue offering QHPs, and cause 

coverage disruptions for consumers 

enrolled in noncompliant standardized 

plan options that are terminated during 

the plan year. Accordingly, we have 

finalized coinsurance rates of 50 percent 

for all benefit categories subject to a 

coinsurance rate in the expanded bronze 

plan design in both sets of plan designs. 

In addition to modifying the default 

coinsurance rates for both sets of plan 

designs at the expanded bronze metal 

level, we also reduced the copayments 

exempt from the deductible for the 

primary care visit benefit category from 

$60 to $50; for the urgent care benefit 

category from $90 to $75; for the 

specialist visit benefit category from 

$120 to $100; for the mental health and 

substance use disorder outpatient office 

visit benefit category from $60 to $50; 

for the speech therapy benefit category 

from $60 to $50; and for the 

occupational and physical therapy 

benefit category from $60 to $50. To 

counterbalance this subsequent increase 

in AV and help ensure both sets of plan 

designs at the expanded bronze metal 

level have AVs within the permissible 

de minimis range for that level, we 

increased the annual limitation on cost 

sharing value from $9,200 to $10,000. 

Altogether, these modifications resulted 

in a reduction in AV from 64.42 percent 

in the proposed plan designs to 64.12 

percent in the plan designs finalized in 

this rule. 

We made these changes primarily to 

maintain consistent year-to-year plan 

designs, which allows enrollees to 

become better acquainted with these 

plans, increasing both consumer 

understanding and financial certainty, 

similar to our approach in previous 

years and consistent with the goals 

outlined in the proposed rule (89 FR 

82379), to minimize the risk of coverage 

disruption for consumers already 

enrolled in these plans, and to allow 

issuers to design standardized plans in 

a manner that conforms to State laws. 


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Finally, we note that we have not 

included an HSA-eligible HDHP in 

these sets of plan designs due to 

decreased enrollment in these plans in 

the last several plan years, which 

suggests they may be less competitive 

and in-demand than traditional health 

insurance plans. We thus declined to 

include HSA-eligible HDHPs in these 

sets of plan designs because, as we 

explained when we reintroduced 

standardized plan options in the 2023 

Payment Notice (87 FR 27319), our 

approach is to design standardized plan 

options that reflect the most popular 

QHPs offered through the Exchanges. 

We also declined to include an HSAeligible HDHP in these sets of plan 

designs because we have not included 

these types of plans in the sets of 

standardized plan options for PY 2023, 

PY 2024, or PY 2025, and we want to 

maintain a high degree of continuity 

with the standardized plan option 

policies and designs finalized in the 

2023, 2024 and 2025 Payment Notices. 

However, we note that QHP issuers in 

the FFEs and SBE–FPs continue to be 

permitted to offer HSA-eligible HDHPs 

as non-standardized plan options, if so 

desired. 

Comment: Many commenters 

supported the proposal to allow QHP 

issuers to offer more than one 

standardized plan option within the 

same product network type, metal level, 

and service area if the plans conform to 

the proposed meaningful difference 

standard. These commenters 

appreciated the effort to reduce 

duplicative plan offerings and to help 

consumers better understand included 

benefits, provider networks, and 

included prescription drugs when 

making plan selections and 

comparisons. They described the 

adoption of the meaningful difference 

standard as a critical step toward 

simplifying plan selection, preventing 

confusion, and promoting better 

consumer decision-making. 

Commenters noted that the adoption of 

the meaningful difference standard 

aligns with the broader aims of 

standardized plan options—reducing 

the number and complexity of the 

variables that consumers must consider 

when comparing plans. 

Some commenters noted their 

approval of relying on product, provider 

network, and formulary IDs to 

determine whether standardized plan 

options are meaningfully different, 

while other commenters noted concern 

that the proposed standard would not be 

strict enough to reduce the risk of 

issuers offering duplicative 

standardized plan options. One such 

commenter recommended that CMS 

consider requiring a particular 

quantitative difference between the 

standardized plan options’ provider 

networks and formularies to ensure 

plans are meaningfully different from 

one another. Many commenters 

similarly recommended making the 

meaningful difference requirement more 

stringent by reducing the number of 

factors that would qualify a plan as 

meaningfully different. Several 

commenters recommended applying the 

meaningful difference standard to the 

non-standardized plan options instead 

of standardized plan options. Some 

commenters encouraged CMS to 

monitor whether allowing issuers to 

offer multiple standardized plan options 

in the same service area would result in 

unnecessary complexity for consumers 

shopping for health plans. 

Response: We agree that requiring 

issuers to meaningfully differentiate 

between multiple standardized plans 

within the same product network type, 

metal level, and service area will 

improve the consumer experience by 

increasing consumer understanding, 

simplifying the plan selection process, 

and limiting unnecessary plan 

proliferation. We share commenters’ 

concerns about consumer confusion 

when comparing identical-appearing 

standardized plan options, and, as we 

explained in the proposed rule (89 FR 

82380), we will monitor whether issuers 

are seeking certification of standardized 

plans that technically meet the 

meaningful difference standard but are 

nearly identical. 

We note that, in this final rule, we are 

finalizing a modification to our 

proposed meaningful difference 

standard. Instead of providing that a 

difference in formularies (which is 

defined as a difference in formulary IDs) 

would constitute a meaningful 

difference, we are finalizing that a 

difference in included prescription 

drugs (which is defined as a difference 

in drug list IDs) will constitute a 

meaningful difference. We made this 

modification to ensure that minor 

differences in prescription drug cost 

sharing (which would be reflected by 

differences in formulary IDs) would not 

constitute a meaningful difference. This 

is similar to how differences in included 

benefits (which is defined as a 

difference in product IDs) would 

constitute a meaningful difference, but 

differences in the cost sharing for those 

medical benefits would not. 

If we determine that issuers are 

attempting to circumvent this standard, 

or that it is otherwise not strict enough, 

we will consider proposing in future 

rulemaking a version of this meaningful 

difference standard that would require 

greater variation among plans beyond 

product ID, provider network ID, drug 

list ID, or a combination of some or all 

these factors. We did not propose such 

a standard for PY 2026 and subsequent 

plan years in the proposed rule because, 

assuming issuers do not attempt to 

circumvent this standard as noted 

above, we believe that this proposed 

policy would likely be sufficient to 

ensure that issuers’ standardized plan 

offerings support our goals of enhancing 

the consumer experience, increasing 

consumer understanding, and 

simplifying the plan selection process. 

We will monitor whether the standard 

we are finalizing in this rule effectively 

enhances the consumer experience, 

reduces plan proliferation, and 

encourages plan diversity in the 

individual market. 

We appreciated comments that shared 

specific recommendations about how to 

craft this standard in a manner that 

would ensure that the standardized plan 

options offered under this standard 

yield meaningfully different plan design 

features for consumers—such as by 

requiring particular quantitative 

differences in provider networks or 

formularies. Again, if we determine that 

the standardized plan options that 

issuers are offering within the same 

product network type, metal level, and 

service area that have different product 

IDs, provider network IDs, drug list IDs, 

or a combination of some or all these 

factors, fail to yield meaningful and 

distinguishable differences in plans for 

consumers, we may consider proposing 

a quantitative version of the standard in 

a future plan year. 

Comment: Several commenters 

requested clarification on how issuers 

could vary benefit coverage in 

standardized plan options within the 

same product network type, metal level, 

and service area under this proposed 

standard. Several commenters 

recommended relaxing this standard, 

such as by allowing plans to be 

considered meaningfully different based 

on differences in cost sharing for nonstandardized benefit categories or 

differences in tiered provider networks 

(in addition to differences in product, 

provider network, and drug list IDs)— 

similar to the previous meaningful 

difference standard finalized in the 2018 

Payment Notice. Another commenter 

recommended providing issuers with 

the opportunity to make their case for 

how two proposed, seemingly 

indistinguishable standardized plan 

options meaningfully differ from one 

another before CMS decides whether to 

not certify one of these plans (assuming 

the issuer meets all other certification 

requirements). 


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A few commenters opposed allowing 

issuers to offer multiple standardized 

plan options within the same product 

network type, metal level, and service 

area—regardless of whether they are 

deemed to be meaningfully different— 

primarily due to concerns regarding 

plan proliferation. These commenters 

explained that permitting issuers to 

offer multiple standardized plan options 

within the same product network type, 

metal level, and service area but with 

different included benefit coverage, 

provider networks, or included 

prescription drugs could cause 

confusion for consumers—since these 

standardized plan options would not be 

standardized in every regard. 

Response: In response to the 

commenters who requested clarification 

regarding how standardized plan 

options can vary benefit coverage 

outside of the benefit categories with 

standardized cost sharing in order to 

satisfy the requirements of this 

standard, we note that issuers may 

differentiate their standardized plan 

options from one another by varying the 

included benefit coverage, such as nonEHBs, or in how the plan covers EHB, 

consistent with the EHB requirements in 

the applicable State. For example, when 

reviewing if two standardized plan 

options within the same product 

network type, metal level, and service 

area are meaningfully different, we will 

consider the plans to be meaningfully 

different from one another if they do not 

share the same product ID. 

However, we note that varying nonstandardized benefit category cost 

sharing parameters (such as for those 

benefit categories that do not have 

standardized cost sharing parameters 

specified in Tables 1 and 2 of this rule) 

would not constitute a meaningful 

difference for the purpose of this 

standard. This is because we do not 

believe that minute differences in cost 

sharing (such as a $5 difference in the 

copayment amount for a relatively 

infrequently utilized benefit) would 

provide a meaningful or discernible 

difference for consumers. The same is 

true for minor differences in cost 

sharing for prescription drugs (which 

would be reflected in differences in 

formulary IDs)—which is why we 

modified the standard we are finalizing 

to instead state that differences in 

included prescription drugs (which is 

defined as differences in drug list IDs) 

would constitute a meaningful 

difference. 

Furthermore, permitting issuers to 

vary standardized plan options in this 

regard could increase the risk of 

circumvention of the standard (such as 

by permitting issuers to offer one 

standardized plan option with a $20 

copayment for an infrequently utilized 

benefit, another with a $15 copayment 

for the same benefit, and another with 

a $10 copayment for the same benefit)— 

within the same product network type, 

metal level, and service area and with 

the same product, provider network, 

and drug list ID. Such an approach 

would exacerbate the risk of plan 

proliferation and choice overload. 

In response to commenters who 

recommended that we allow 

standardized plan options to be 

considered meaningfully different based 

on tiered provider networks, similar to 

our stance when we reintroduced the 

requirement for issuers to offer 

standardized plan options in the 2023 

Payment Notice (87 FR 27311), we 

reiterate that we continue to design 

these standardized plan options to be 

similar to the most popular QHPs in 

FFEs and SBE–FPs in terms of cost 

sharing parameters, annual limitation 

on cost sharing values, and deductibles 

in order to ensure these plans are 

similar to plans that most consumers are 

already currently enrolled in, thereby 

reducing the risk of disruption for both 

consumers and issuers. 

Given that most consumers continue 

to not be enrolled in plans with tiered 

provider networks, we believe that 

permitting issuers to offer standardized 

plan options with tiered provider 

networks under this standard would 

unnecessarily increase the risk of plan 

proliferation for consumers. Permitting 

issuers to offer standardized plan 

options with tiered provider networks 

would also mark a departure from our 

aim of maintaining continuity in plan 

designs from year to year, since we have 

not designed such plans as standardized 

plans to date. Adopting such an 

approach would also increase the 

number of factors that consumers must 

consider when selecting a plan—which 

runs counter to our goal of simplifying 

the plan selection process to reduce the 

risks of consumer confusion and plan 

choice overload. We also note that 

issuers are permitted to offer nonstandardized plan options with tiered 

provider networks, if they so desire. 

In response to the commenter who 

recommended that we provide issuers 

with an opportunity to make their case 

that their two proposed, seemingly 

indistinguishable standardized plan 

options are meaningfully different from 

one another before deciding not to 

certify one, we refer the commenter to 

discussion on this point in the proposed 

rule (89 FR 82380). In particular, in the 

proposed rule, we explained that, if an 

issuer submitted two standardized plan 

options within the same product 

network type, metal level, and service 

area, both with the same product, 

provider network, and formulary IDs, 

we would not certify both of these 

plans. We explained that before 

deciding which plan to certify, 

assuming the issuer meets all other 

certification requirements, we would 

seek feedback from the issuer regarding 

which plan to certify. Under the 

standard finalized in this rule, we will 

consider the issuer’s explanation of how 

the plans differ based on their benefit 

coverage, provider networks, included 

prescription drugs, or a combination of 

some or all these factors, as part of this 

process. 

We appreciate the concern of 

commenters who opposed allowing 

multiple standardized plan options 

within the same product network type, 

metal level, and service area due to this 

approach increasing the risk of plan 

proliferation. We acknowledge that this 

standard could permit issuers to offer 

multiple standardized plan options 

where consumers struggle to discern 

how the plans differ. However, as we 

explained in the proposed rule (89 FR 

82380), we believe this is unlikely, and 

we will monitor whether issuers seek 

certification of standardized plan 

options that technically meet the 

meaningful difference standard but are 

nearly identical. 

Further, if we determine that issuers 

are attempting to circumvent this 

standard in this manner, we will 

consider proposing in future rulemaking 

a version of this meaningful difference 

standard that would require greater 

variation between plans beyond 

requiring differences in product, 

provider network, and drug list IDs. As 

we explained in the proposed rule (89 

FR 82380), we did not propose such a 

standard for PY 2026 and subsequent 

plan years because, assuming issuers do 

not attempt to circumvent this standard 

as noted above, we believe that the 

proposed policy would likely be 

sufficient to ensure that issuers’ 

standardized plan options support our 

goals of enhancing the consumer 

experience, increasing consumer 

understanding, and simplifying the plan 

selection process. 

Finally, we acknowledge the concern 

that allowing standardized plan options 

to have varied benefit coverage, 

provider networks, and included 

prescription drugs could potentially 

increase the risk of consumer 

confusion—since these standardized 

plan options would not be standardized 

in every regard. However, we note that 

that we wish to permit issuers a 

sufficient degree of flexibility to design 

plans that accommodate a broad and 


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diverse range of unique health care 

needs, which we do by permitting 

issuers to offer a range of standardized 

plan options, subject to the meaningful 

difference standard, as well as nonstandardized plan options. 

The benefit categories that we 

standardize within these plans are the 

most frequently utilized—and they are 

all required to be offered by QHP issuers 

as EHB. We do not wish to standardize 

the cost sharing for every possible 

benefit category within these plans 

since there are benefit categories that are 

less frequently utilized—as well as 

benefit categories that may not be 

required to be offered as EHB in 

particular States—and we do not wish 

to give the impression that such benefit 

coverage must be included in these 

plans even if they are not EHB in 

particular States. We further believe the 

standard we are finalizing in this rule 

will ensure that issuers that offer 

multiple standardized plan options 

within a product network type, metal 

level, and service area will yield 

meaningful differences in coverage for 

consumers while still providing a 

sufficient degree of standardization and 

minimizing the risk of consumer 

confusion. At the same time, we want to 

take steps to simplify and streamline the 

plan selection process for consumers, 

which, for the reasons explained in this 

final rule and in the proposed rule, we 

believe this policy does. 

Altogether, we believe that requiring 

issuers to offer these standardized plan 

options, reintroducing this meaningful 

difference standard, limiting the number 

of non-standardized plan options that 

issuers can offer, and permitting 

exceptions to the non-standardized plan 

option limit for plans that have specific 

design features that would substantially 

benefit consumers with chronic and 

high-cost conditions strikes an 

appropriate balance between allowing 

issuers to innovate in plan designs, 

maintaining a sufficient degree of choice 

for consumers, and simplifying and 

streamlining the plan selection process 

to reduce the risk of choice overload. 

7. Non-Standardized Plan Option Limits 

(§ 156.202) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82382), we proposed 

to exercise our authority under sections 

1311(c)(1) and 1321(a)(1)(B) of the ACA 

to amend § 156.202(b) and (d) to 

properly reflect the flexibility that 

issuers have operationally been 

permitted since the introduction of nonstandardized plan option limits to vary 

the inclusion of distinct adult dental 

benefit coverage, pediatric dental 

benefit coverage, and/or adult vision 

benefit coverage categories under the 

non-standardized plan option limit in 

accordance with § 156.202(c)(1) through 

(3). 

Section 1311(c)(1) of the ACA directs 

the Secretary to establish criteria for the 

certification of health plans as QHPs. 

Section 1321(a)(1)(B) of the ACA directs 

the Secretary to issue regulations that 

set standards for meeting the 

requirements of title I of the ACA, 

which includes section 1311, for, among 

other things, the offering of QHPs 

through such Exchanges. 

In the 2024 Payment Notice (88 FR 

25855 through 25865), we finalized 

requirements under § 156.202(a) and (b) 

limiting the number of nonstandardized plan options that issuers of 

QHPs can offer through Exchanges on 

the Federal platform (including SBE– 

FPs) to four non-standardized plan 

options per product network type (as 

described in the definition of ‘‘product’’ 

at § 144.103), metal level (excluding 

catastrophic plans), inclusion of dental 

and/or vision benefit coverage, and 

service area for PY 2024, and two nonstandardized plan options for PY 2025 

and subsequent years. 

In the 2025 Payment Notice (89 FR 

26362 through 26375), we finalized an 

exceptions process under § 156.202(d) 

and (e) permitting FFE and SBE–FP 

issuers to offer more than two nonstandardized plan options per product 

network type, metal level, inclusion of 

dental and/or vision benefit coverage, 

and service area for PY 2025 and 

subsequent plan years, if issuers 

demonstrate that these additional nonstandardized plans offered beyond the 

limit at § 156.202(b) have specific 

design features that would substantially 

benefit consumers with chronic and 

high-cost conditions and meet certain 

other requirements. 

In the 2025 Payment Notice (88 FR 

26365 through 26366), we also clarified 

that the example included in the 2024 

Payment Notice that illustrated issuers’ 

flexibility to vary the inclusion of dental 

and/or vision benefit coverage in 

accordance with § 156.202(c) under the 

non-standardized plan option limits at 

§ 156.202(a) and (b) failed to properly 

distinguish between the adult and 

pediatric dental benefit coverage 

categories. 

In particular, in the 2024 Payment 

Notice (88 FR 25858), we stated that for 

PY 2025, for example, an issuer would 

be permitted to offer two nonstandardized gold HMOs with no 

additional dental or vision benefit 

coverage, two non-standardized gold 

HMOs with additional dental benefit 

coverage, two non-standardized gold 

HMOs with additional vision benefit 

coverage, and two non-standardized 

gold HMOs with additional dental and 

vision benefit coverage, as well as two 

non-standardized gold PPOs with no 

additional dental or vision benefit 

coverage, two non-standardized gold 

PPOs with additional dental benefit 

coverage, two non-standardized gold 

PPOs with additional vision benefit 

coverage, and two non-standardized 

gold PPOs with additional dental and 

vision benefit coverage, in the same 

service area. 

However, in the 2025 Payment Notice, 

we clarified that in PY 2024, issuers had 

the ability to vary the inclusion of 

dental and/or vision benefit coverage 

(including varying the inclusion of the 

distinct adult and pediatric dental 

benefit coverage categories), such that 

issuers could offer plans in the manner 

reflected in Table 3, instead of in the 

more limited manner reflected in the 

incomplete example in the 2024 

Payment Notice. 

In the 2025 Payment Notice, we 

affirmed that issuers continued to retain 

this flexibility for PY 2025 and 

subsequent years. We thus noted that 

under the non-standardized plan option 

limit of two for PY 2025 and subsequent 

years, if an issuer desired to offer the 

theoretical maximum number of nonstandardized plans, and if that issuer 

varied the inclusion of adult dental 

benefit coverage, pediatric dental 

benefit coverage, and/or adult vision 

benefit coverage in these plans in 

accordance with the flexibility provided 

for at § 156.202(c)(1) through (3), that 

issuer could offer a theoretical 

maximum of 16 plans in a given product 

network type, metal level, and service 

area in the manner demonstrated in 

Table 3. Furthermore, we noted that if 

an issuer offered QHPs with two 

product network types (for example, 

HMO and PPO), that issuer could offer 

a theoretical maximum of 32 plans in a 

given metal level and service area in the 

manner demonstrated in Table 3. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

In the proposed rule, we proposed to 

amend the regulation text at 

§ 156.202(b) and (d) to properly reflect 

the flexibility that issuers have been 

operationally permitted since we 

introduced non-standardized plan 

option limits to vary the inclusion of the 

distinct adult dental benefit coverage, 

pediatric dental benefit coverage, and/or 

adult vision benefit coverage under the 

non-standardized plan option limit at 

§ 156.202(b) in accordance with 

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

and subsequent plan years. 

In particular, we proposed to amend 

§ 156.202(b) to properly distinguish 

between adult dental benefit coverage at 

§ 156.202(c)(1) and pediatric dental 

benefit coverage at § 156.202(c)(2), such 

that an issuer offering QHPs in an FFE 

or SBE–FP, for PY 2025 and subsequent 

plan years, is limited to offering two 

non-standardized plan options per 

product network type, as the term is 

described in the definition of ‘‘product’’ 

at § 144.103 of this subchapter, metal 

level (excluding catastrophic plans), and 

inclusion of adult dental benefit 

coverage, pediatric dental benefit 

coverage, and/or adult vision benefit 

coverage (as defined in paragraphs (c)(1) 

through (3) of § 156.202), in any service 

area. 

Consistent with our proposed 

amendment of § 156.202(b), we further 

proposed a conforming amendment to 

§ 156.202(d) to provide that, for PY 2025 

and subsequent plan years, an issuer 

may offer additional non-standardized 

plan options for each product network 

type, metal level, inclusion of adult 

dental benefit coverage, pediatric dental 

benefit coverage, and/or adult vision 

benefit coverage (as defined in 

paragraphs (c)(1) through (3) of 

§ 156.202), and service area if it 

demonstrates that these additional 

plans’ cost sharing for benefits 

pertaining to the treatment of chronic 

and high-cost conditions (including 

benefits in the form of prescription 

drugs, if pertaining to the treatment of 

the condition(s)) is at least 25 percent 

lower, as applied without restriction in 

scope throughout the plan year, than the 

cost sharing for the same corresponding 

benefits in the issuer’s other nonstandardized plan option offerings in 

the same product network type, metal 

level, inclusion of adult dental benefit 

coverage, pediatric dental benefit 

coverage, and/or adult vision benefit 

coverage, and service area. 


lotter on DSK11XQN23PROD with RULES5ER15JA25.055</GPH>

TABLE 3: Issuer Flexibility Under the Non-Standardized Plan Option Limit of Two 

for PY 2025 and Subsequent Years 

Plan 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

22 

23 

24 

25 

26 

27 

28 

29 

30 

31 

32 

Adult Pediatric Adult 

Dental Dental Vision 
4502 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

230CMS. (2024, April 10). 2025 Final Letter to 

Issuers in the Federally-facilitated Exchanges. 

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

231Antonin Scalia & Bryan A. Garner, Reading 

Law: The Interpretation of Legal Texts 125 (2012) 

(collecting ‘‘experts’’ that ‘‘warn against’’ use of the 

‘‘hybrid’’ and/or); Kenneth A. Adams, Know Your 

Enemy: Sources of Uncertain Meaning in Contracts, 

Mich. B.J. 40, 42 (Oct. 2016) (discussing the 

‘‘ambiguity of the part versus the whole’’ presented 

by the words ‘‘and’’ and ‘‘or’’). 

In the proposed rule, we stated that 

we proposed these modifications to 

align the regulation text of § 156.202(b) 

and (d) with the existing flexibility that 

issuers have been operationally 

permitted since the non-standardized 

plan option limit was introduced in the 

2024 Payment Notice.230

We sought comment on these 

proposed modifications. After 

consideration of comments, and for the 

reasons outlined in the proposed rule 

and in this final rule, including our 

responses to comments, we are 

finalizing these provisions as proposed, 

with one minor modification. In 

particular, we are modifying the 

language at both § 156.202(b) and (d) to 

state that issuers may vary the inclusion 

of adult dental benefit coverage, 

pediatric dental benefit coverage, and 

adult vision benefit coverage, instead of 

adult dental benefit coverage, pediatric 

dental benefit coverage, and/or adult 

vision benefit coverage—to enhance 

clarity and minimize risk of 

confusion.231 We summarize and 

respond below to public comments 

received on the proposed modifications 

to § 156.202(b) and (d). 

Comment: Several commenters 

supported the modifications to clarify 

the permissibility of varying the 

inclusion of the distinct adult dental 

benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage categories under the 

non-standardized plan option limit and 

the associated exceptions process. These 

commenters stated that clarifying that 

flexibility would ensure that issuers 

have a clearer understanding of the 

operational parameters of the existing 

non-standardized plan option limit and 

exceptions process and establish more 

uniform market rules for all issuers in 

FFE and SBE–FP States that are subject 

to the policy. 

Many commenters expressed general 

support for continuing to limit the 

number of non-standardized plan 

options that issuers can offer. These 

commenters noted that in recent years, 

consumers have been confronted with 

too many health plan choices and thus 

may be more likely to make suboptimal 

plan selections. In some instances, 

commenters noted that consumers run 

the risk of forgoing enrollment 

altogether in instances where they 

cannot easily identify a plan that meets 

their needs due to choice overload. 

Several of these commenters also noted 

the chilling effect that choice overload 

can have on consumers with chronic 

and high-cost conditions or other 

significant health care demands. 

Similarly, several commenters 

expressed general support for 

continuing to allow issuers to offer 

additional non-standardized plan 

options under the exceptions process so 

that they can provide targeted coverage 

specifically for populations with 

chronic and high-cost conditions. 

Commenters noted that permitting 

issuers to offer these additional nonstandardized plan options continues to 

support health equity and allows for 

more targeted innovation by issuers, 

while still simultaneously achieving the 

reduction in plan proliferation HHS has 

sought. Many of these commenters 

noted that individuals with chronic and 

high-cost conditions are especially price 

sensitive, and that these individuals 

often encounter significantly higher outof-pocket costs associated with the 

higher rates of utilization of the benefits 

required to treat these conditions. 

Response: We agree that clarifying 

how the non-standardized plan option 

limit and exceptions process are 

operationalized enhances issuer 

understanding of the policy. We 

reiterate that we are not permitting 

issuers a novel flexibility to vary the 

inclusion of the distinct adult dental 

benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage categories—nor are we 

permitting a novel flexibility in the 

exceptions process with the conforming 

modification to the regulation text 

language. Instead, we are amending 

§ 156.202(b) and (d) to clarify the 

flexibility that issuers have been 

operationally permitted since we 

implemented the non-standardized plan 

option limit in PY 2024, as we 

explained in greater detail in the 2025 

Payment Notice (89 FR 26365 through 

26366). Thus, in PY 2026 and 

subsequent plan years, issuers will 

continue to retain that same flexibility. 

We also agree that providing 

additional clarity in our regulations 

helps to educate issuers about their 

existing options for designing their 

product and plan offerings within and— 

when justified—above the nonstandardized plan option limit. 

Ensuring issuers understand their nonstandardized plan design flexibility may 

encourage more coverage of vision and 

dental benefits by non-standardized 

plans and more uniform plan offerings 

by issuers across States. 

We also agree that the number of plan 

choices available to consumers 

continues to complicate the plan 

selection process, and that plan 

proliferation and the risk of plan choice 

overload persist. We further agree that 

this increased risk of plan choice 

overload also increases the risk of 

suboptimal plan selection and 

unexpected financial harm for those 

least able to afford it. Thus, we agree 

that continuing to limit the number of 

non-standardized plan options that 

issuers can offer in conjunction with 

permitting issuers to offer additional 

non-standardized plan options that 

facilitate the treatment of chronic and 

high-cost conditions under the 

exceptions process continues to reduce 

plan proliferation and the risk of choice 

overload while simultaneously 

permitting issuers a sufficient degree of 

flexibility to innovate. 

We continue to recognize the 

advantages that innovation imparts 

upon consumers by supporting the 

ability of QHP issuers to offer them a 

diverse range of plan offerings from 

which to select. We also continue to 

believe that excepted non-standardized 

plans that reduce cost sharing for 

benefits pertaining to the treatment of 

chronic and high-cost conditions can 

significantly reduce the out-of-pocket 

costs for consumers with these 

conditions experience and ultimately 

increase treatment adherence and 

improve health outcomes. 

Comment: Some commenters opposed 

continuing to limit the number of nonstandardized plan options that issuers 

can offer. Some commenters suggested 

that the market conditions that may 

necessitate a restriction on the number 

of non-standardized plan options may 

not apply uniformly across all States. 

These commenters explained that States 

differ in their rates of issuer 

participation and the unique needs of 

each State’s population, among other 

factors. 

Several of these commenters further 

suggested that that individual FFE and 

SBE–FP States themselves should be 

given the ability to exercise discretion 

on how best to address issues of plan 

proliferation and choice overload. Some 

of these commenters suggested that 

States could then choose how best to 

structure a non-standardized plan 

option limit or pursue an alternative 

approach altogether. One commenter 

suggested that all SBE–FP States should 

be exempted from the non-standardized 

plan option limit. Another commenter 

suggested allowing SBE–FP States to 

seek blanket exceptions for individual 


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issuers in their State to be exempted 

from the non-standardized plan option 

limit. 

Some commenters opposed allowing 

issuers to offer excepted plans beyond 

the non-standardized plan option limit, 

citing concerns that additional 

exceptions could exacerbate the risk of 

plan choice overload and suboptimal 

plan selection. These commenters noted 

that the intent of the non-standardized 

plan option limit is to mitigate the risk 

of uncontrolled plan proliferation that 

leads to consumer confusion, and that to 

permit each issuer the opportunity to 

receive exceptions to the numerical 

limit counteracts this intent. 

Response: We reiterate that we did 

not propose and are not finalizing any 

changes to the applicability of the nonstandardized plan option limit or 

exceptions process under § 156.202(b) 

and (d). Instead, we are only making 

modifications to those regulations to 

more clearly align their text with the 

flexibility that issuers have been 

operationally permitted since we 

implemented the non-standardized plan 

option limit. As we previously noted in 

the 2024 Payment Notice (88 FR 25856 

and 25864), we continue to believe it is 

appropriate to apply the nonstandardized plan option limit equally 

to issuers in FFE and SBE–FP States 

given their shared platform. We also 

reiterate that States with SBE–FPs that 

do not wish to be subject to these 

requirements may investigate the 

feasibility of transitioning to a State 

Exchange. We continue to believe the 

financial and operational burden to 

HHS outweighs the benefit of changing 

the platform to permit distinction on 

this policy between FFEs and SBE–FPs. 

We also acknowledge that different 

States and counties have differing rates 

of issuer participation, and thus, 

differing numbers of available plans. We 

still believe the limit of two nonstandardized plan options and the 

permissible exceptions strike an 

appropriate balance in reducing the risk 

of plan choice overload and preserving 

a sufficient degree of consumer choice, 

even for consumers in counties with 

lower rates of issuer participation. For a 

more detailed example of the number of 

plan choices that we described as a 

likely scenario for consumers who have 

access to one QHP issuer where they 

live, we refer readers to the 2024 

Payment Notice (88 FR 25862 through 

258623). Except for the modifications 

we are making in this final rule, we are 

maintaining the non-standardized plan 

option limit and accompanying 

exceptions process and the applicability 

of these requirements as previously 

finalized. 

We also recognize the potential 

concerns associated with an 

uncontrolled exceptions process. 

However, as we explained in the 2025 

Payment Notice (89 FR 26363 through 

26364), we did not set a numerical limit 

on the permitted exceptions per issuer, 

product network type, metal level, 

inclusion of dental and vision benefit 

coverage, and service area (for example, 

allowing exceptions for only two such 

plans) to ensure that issuers are not 

restricted in the number of innovative 

plans they can offer. We noted that this 

approach would help ensure that a 

greater portion of consumers with 

chronic and high-cost conditions have 

access to plans that reduce barriers to 

access to care for services critical to the 

treatment of their conditions. 

We continue to believe the exceptions 

process finalized in the 2025 Payment 

Notice (alongside the modification we 

are finalizing in this rule to clarify the 

flexibility associated with varying the 

inclusion of adult dental benefit 

coverage, pediatric dental benefit 

coverage, and adult vision benefit 

coverage) that limits issuers to one 

exception per chronic and high-cost 

condition in each product network type, 

metal level, inclusion of adult dental 

benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage, and service area 

sufficiently mitigates the risk of 

contributing to choice overload. 

Furthermore, similar to what we 

explained in the 2025 Payment Notice 

(89 FR 26364), although issuers are not 

limited in the total number of 

exceptions they may be granted from the 

non-standardized plan option limit 

(provided all such exceptions meet the 

criteria at § 156.202), we continue to 

anticipate that most issuers would 

determine that the burden of creating 

and certifying additional nonstandardized plan options intended to 

benefit a comparatively small 

population of consumers would 

outweigh the benefit of doing so. In PY 

2025, we certified only 120 plans as 

excepted plans, and we do not expect 

that those plans’ availability on 

HealthCare.gov will create a colorable 

risk of plan proliferation or choice 

overload. 

Additionally, we continue to believe 

that limiting the total number of 

excepted non-standardized plan options 

issuers can offer could harm consumers 

who have a comparatively less common 

chronic and high-cost condition that 

issuers may choose to not target with 

this exceptions process, which would 

hinder efforts to advance health equity. 

Comment: Several commenters noted 

general support for the existing 

flexibility, clarified in the proposed 

rule, that issuers are permitted to offer 

additional plans within the nonstandardized plan option limit by 

varying the inclusion of adult dental 

benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage. These commenters 

noted that the flexibility allows issuers 

the opportunity to design a sufficient 

number of plan offerings that cater to 

the individualized needs of consumers 

on the Exchange while maintaining 

guardrails on the rate of plan 

proliferation. 

Some commenters also noted specific 

support for the benefit coverage 

categories that are subject to the existing 

flexibility afforded to issuers under the 

non-standardized plan option limit, 

namely adult dental benefit coverage, 

pediatric dental benefit coverage, and 

adult vision benefit coverage. These 

commenters further noted that ensuring 

that issuers’ plan offerings include a 

variety of these dental and vision 

benefits encourages consumer access to 

these services and ensures that these 

services are integrated into the 

marketplace in a way that benefits both 

consumers and issuers. 

Conversely, several commenters 

opposed the existing flexibility allowing 

issuers to offer non-standardized plans 

beyond the plan limit by varying the 

inclusion of adult dental benefit 

coverage, pediatric dental benefit 

coverage, and adult vision benefit 

coverage. Some commenters cited 

concerns that the flexibility to offer nonstandardized plans beyond the plan 

limit by varying the inclusion of adult 

dental benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage could result in 

additional plan proliferation and 

ultimately exacerbate existing concerns 

with plan choice overload. One 

commenter noted that the existence of 

plans with variations solely based on 

dental or vision benefit coverage could 

complicate plan selection and the 

consumer shopping experience. 

Response: We reiterate that the 

flexibility afforded to issuers to offer 

non-standardized plans within the plan 

limit by varying the inclusion of adult 

dental benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage has been operationally 

permitted since the non-standardized 

plan option limit was introduced in the 

2024 Payment Notice. In this final rule, 

we are maintaining continuity across all 

operational requirements associated 

with the non-standardized plan option 

limit for PY 2026, including that we are 

only finalizing modifications to align 


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4504 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

the regulation text of § 156.202(b) and 

(d) with that existing flexibility. 

We agree that the flexibility given to 

issuers to offer non-standardized plan 

options within the plan limit by varying 

the inclusion of adult dental benefit 

coverage, pediatric dental benefit 

coverage, and adult vision benefit 

coverage affords them the opportunity 

to design their non-standardized plan 

options enough to cater to the 

individualized needs of consumers 

while keeping the overall number of 

plans low. 

In the 2024 Payment Notice (88 FR 

25862), we expressed our belief that this 

combination of limiting issuers’ nonstandardized plan options and allowing 

flexibility to vary adult dental benefit 

coverage, pediatric dental benefit 

coverage, and adult vision benefit 

coverage within non-standardized plans 

within the limit strikes a sufficient 

balance between minimizing the extent 

of plan proliferation and maximizing 

choice of plans among distinguishable 

plan options. 

We also agree that the vision and 

dental benefits are appropriate for 

distinguishing among non-standardized 

plan options within the existing 

flexibility offered under the nonstandardized plan option limit opposed 

to other additional benefits. As 

previously noted in the 2024 Payment 

Notice (88 FR 25959), issuers have 

frequently offered dental and vision as 

additional benefits in otherwise 

identical plan options. Furthermore, 

when two plans are offered by the same 

issuer in the product network type, 

metal level, and service area with 

different product IDs, the plans are most 

often distinguished by their coverage of 

vision or dental benefits. 

We share commenters’ concerns about 

the negative consumer impact of plan 

proliferation. However, we note that 

nothing compels issuers to offer nearly 

identical plans that vary solely by the 

plans’ coverage of vision and dental 

benefits. In our experience, we have 

found that issuers often choose to offer 

non-standardized plan options that vary 

in terms of more parameters (such as the 

plans’ formularies or provider networks, 

among other factors)—in addition to the 

inclusion of dental and vision benefit 

coverage—within the limit of two nonstandardized plan options per product 

network type, metal level, inclusion of 

adult dental benefit coverage, pediatric 

dental benefit coverage, and adult vision 

benefit coverage, and service area. 

We disagree with commenters who 

suggested that the flexibility permitting 

issuers to vary the inclusion of adult 

dental benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage would result in issuers 

offering virtually indistinguishable 

plans that may confuse consumers and 

render them unable to make meaningful 

comparisons when attempting to select 

a plan that best meets their needs. This 

is because the inclusion of dental and 

vision benefit coverage represents 

meaningful coverage variations for 

consumers. 

Comment: Several commenters 

suggested other modifications to the 

non-standardized plan option limit. 

Some commenters recommended 

expanding the criteria considered under 

the limit beyond those already included 

under § 156.202(b) to further relax the 

standard and allow issuers to vary plans 

along a greater number of parameters. 

Some commenters suggested adopting a 

meaningful difference standard for nonstandardized plan options in 

conjunction with the non-standardized 

plan option limit to ensure that any two 

plans are not duplicative across all plan 

parameters, taking into account 

differences such as differences in 

product packages, differences in cost 

sharing (including whether particular 

services are available pre-deductible), 

differences in provider network (such as 

if there is a reasonable difference in the 

size of each plan’s network), differences 

in provider network ID, differences in 

product network type, and differences 

in whether a plan is an HSA-eligible 

HDHP. 

Response: Similar to our stance in the 

2024 Payment Notice (88 FR 25863), we 

continue to believe that the current 

structure of the non-standardized plan 

option limit (as well as the criteria 

currently considered under the limit) 

strikes an appropriate balance that 

allows for issuers to innovate across a 

sufficiently broad number of plan 

attributes (including but not limited to 

provider network, benefit coverage, and 

benefit cost sharing) while further 

preventing the likelihood of unabated 

plan proliferation and plan choice 

overload. Furthermore, similar to our 

stance in the 2024 Payment Notice (88 

FR 25864), we continue to believe that 

directly limiting the number of nonstandardized plan options issuers can 

offer under the non-standardized plan 

option limit is a more effective 

mechanism than applying a meaningful 

difference standard at this particular 

time to reduce plan proliferation and 

the risk of plan choice overload. 

We note that the current structure of 

the non-standardized plan option limit 

does not restrict issuers’ ability to 

innovate by differentiating plans on the 

basis of parameters that are not 

explicitly identified in the limit—which 

allows issuers to vary non-standardized 

plan options’ included benefit coverage, 

cost sharing parameters, and provider 

networks, among other factors, while 

still complying with the limit. 

Additionally, we note that the harm of 

identical or near-identical plans to the 

consumer experience is particularly 

salient for standardized plan options 

since there is no limit on the maximum 

allowable number of standardized plan 

options that an issuer can offer. 

However, we believe this harm is 

sufficiently mitigated for nonstandardized plan options due to the 

existence of the non-standardized plan 

option limit. This is because under the 

limit, issuers are incentivized to offer 

plans with meaningful differences to 

consumers to attract a broader portion of 

the market. Offering duplicative plans 

under the non-standardized plan option 

limit would result in an issuer targeting 

the same market segments with two 

different plans. 

As we explained in the preceding 

section addressing standardized plan 

options, we will monitor whether 

issuers seek certification of nearly 

identical plans, including by assessing 

whether there are plans that would 

appear identical to consumers shopping 

on HealthCare.gov. If we observe this 

kind of plan proliferation, we may 

consider proposing stricter standards in 

future rulemaking. 

Comment: Several commenters also 

suggested modifications to the current 

exceptions process. They suggested 

considering additional metrics beyond 

cost sharing on which issuers might 

choose to innovate as grounds for 

granting an exception, such as 

deductibles, additional benefit coverage, 

provider networks, formularies, 

telehealth availability, or HSAeligibility. 

Response: While we agree that 

different benefit packages, deductibles, 

provider networks, formularies, the 

inclusion of telehealth services, and 

HSA-eligibility are all important factors 

that pertain to the treatment of chronic 

and high-cost conditions, we maintain 

that restricting eligibility for this 

exceptions process based solely on a 

reduction in cost sharing for benefits 

pertaining to the treatment of chronic 

and high-cost conditions is the most 

appropriate approach. We continue to 

believe that the inclusion of any 

additional factors, including the 

aforementioned factors and HSAeligibility, may compromise how 

precisely tailored the current standard is 

in ensuring that excepted plans indeed 

target the unique health care needs of 

consumers with high-cost and chronic 

conditions. As we explained in the 2025 

Payment Notice (89 FR 26371), one of 


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232Twelve FFEs operate in States performing plan 

management functions: Delaware, Hawaii, Iowa, 

Kansas, Michigan, Montana, Nebraska, New 

Hampshire, Ohio, South Dakota, Utah, and West 

Virginia. 

233Systems for Electronic Rates & Forms Filing 

(SERFF) is a portal utilized by States for form 

submittal, document management, and review. 

234HIOS MPMS is a web application where users 

can validate plan data as well as submit their QHPs 

and SADPs to CMS for annual review and 

certification. 

235OMB Control Number 0938–1415: Essential 

Community Provider-Network Adequacy (ECP/NA) 

Data Collection to Support QHP Certification 

(CMS–10803). 

236For PY 2025 there were 13 FFEs that operate 

in States performing plan management functions: 

Delaware, Hawaii, Illinois, Iowa, Kansas, Michigan, 

Montana, Nebraska, New Hampshire, Ohio, South 

Dakota, Utah, and West Virginia. 

our goals with the exceptions process is 

to ensure that excepted plans 

substantially benefit consumers with 

chronic and high-cost conditions. 

Specifically, considering these 

additional criteria in determining 

eligibility for an exception may allow 

issuers to offer excepted plans that only 

slightly vary included provider 

networks, formularies, deductible 

amounts, the inclusion of telehealth 

services, HSA-eligibility, or additional 

benefits unrelated to the unique health 

care needs of consumers with high-cost 

and chronic conditions. This could 

result in excepted plans differing 

slightly but failing to provide 

meaningfully different coverage 

between excepted plans or failing to 

provide coverage that is tailored to meet 

the health care needs of consumers with 

high-cost and chronic conditions. We 

maintain that including one different 

provider in a plan’s network, for 

example, should not result in that plan 

being permitted an exception on that 

basis alone. 

We reiterate that such an approach 

would weigh against our goals of 

reducing plan proliferation, choice 

overload, and consumer confusion. We 

refer readers to the 2025 Payment Notice 

(89 FR 26368) for additional discussion 

about why we believe that restricting 

eligibility for this exceptions process 

based solely on a reduction in cost 

sharing for benefits pertaining to the 

treatment of chronic and high-cost 

conditions remains the most appropriate 

approach. 

8. Essential Community Provider 

Reviews for States Performing Plan 

Management (§ 156.235) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82385), we proposed, 

under § 156.235, to conduct Essential 

Community Provider (ECP) certification 

reviews of plans for which issuers 

submit QHP certification applications in 

FFEs in States performing plan 

management functions effective 

beginning in PY 2026.232

Section 1311(c)(1)(C) of the ACA 

directs HHS to establish by regulation 

certification criteria for QHPs, including 

criteria that require QHPs to include 

within health insurance plan networks 

those ECPs, where available, that serve 

predominately low-income, medicallyunderserved individuals. Federal ECP 

standards were first detailed in the 

Exchange Establishment Rule (77 FR 

18310) and codified at § 156.235. ECP 

certification reviews under § 156.235 

ensure medical QHP and stand-alone 

dental plan (SADP) issuers include in 

their provider networks a sufficient 

number and geographic distribution of 

ECPs, where available. 

HHS has relied on State ECP 

certification reviews for the certification 

of QHPs in FFEs in States that perform 

plan management functions since PY 

2015 due to system limitations in the 

Systems for Electronic Rates & Forms 

Filing (SERFF),233 which does not have 

unique network and service area IDs 

reliably associated with issuers’ ECP 

data. From PY 2015 to PY 2024, prior 

to HHS’ implementation of the user 

interface logic for ECPs in the Health 

Insurance Oversight System (HIOS) 

Marketplace Plan Management System 

(MPMS),234 HHS received ECP data via 

the ECP/Network Adequacy (NA) 

Template 235 and SERFF. The ECP/NA 

Template was an Excel template created 

by HHS to provide to FFE issuers for 

collection and submission of both ECP 

and NA data. While issuers in FFE 

States would submit the ECP/NA 

Template with ECP data to HHS 

directly, issuers in FFEs in States 

performing plan management functions 

would not use the ECP/NA Template, 

but rather submit the ECP data to 

SERFF.236 Since there was no reliable 

mechanism for HHS to convert ECP data 

received from SERFF back into the ECP/ 

NA Template for review and analysis of 

the data, HHS could not conduct ECP 

reviews for issuers in FFEs in States 

performing plan management functions 

and therefore relied on States to perform 

those ECP certification reviews. In the 

SERFF data, each plan has its own ECP 

template with its own set of ECPs and 

networks. The SERFF data does not 

allow HHS to conduct accurate ECP 

evaluations of each issuer’s networks 

because multiple networks can share the 

same sequence of numbers (sometimes 

referred to as ‘‘sequence numbers’’) 

within the SERFF data, making them 

indistinguishable from each other in the 

issuer’s SERFF binder. For example, 

since network IDs are not required to be 

unique across binders, an issuer may 

have a multiple network ID 001; then 

when SERFF data is transferred to HHS, 

it is not possible to distinguish if 

‘‘Network 001’’ is applied to the issuer’s 

individual market QHPs or small 

business health option program (SHOP) 

SADPs. Initially, HHS designed a 

workaround to merge the SERFF issuer 

templates across each plan and remove 

duplicate entries to allow HHS to 

conduct the review at the plan level; but 

this workaround still did not allow for 

independent evaluation of each issuer’s 

provider networks that share the same 

sequence number or network IDs. 

As we stated in the proposed rule (89 

FR 82385), as a result of HHS’ system 

design enhancements via MPMS, HHS 

is now able to collect ECP data directly 

from issuers in States performing plan 

management functions, enabling HHS to 

conduct ECP evaluations of each 

issuer’s network. Starting with 

certification reviews for PY 2025, all 

issuers seeking certification of plans as 

medical QHPs and SADPs in FFEs, 

including in States performing plan 

management functions, can now enter 

their ECP data in the HIOS MPMS using 

the ECP user interface. We noted that 

because ECP data can now be collected 

directly in MPMS from all issuers 

applying for certification of plans as 

QHPs in FFEs, including in States 

performing plan management functions, 

HHS will now be able to independently 

review the ECP data for such issuers. 

In addition, we noted that now, the 

MPMS ECP user interface also allows 

issuers in FFEs, including in States 

performing plan management functions, 

to validate data before submission to 

their States, improving data submission 

to the State as well as providing HHS 

with each issuer’s provider network. We 

stated that, therefore, HHS will now be 

able to assess validated ECP data, 

improving the accuracy and efficiency 

of the QHP certification process. 

We further noted that it was always 

HHS’ intent to implement operational 

capabilities that would allow for more 

efficient and accurate ECP reviews. As 

a result, we proposed to harness the 

flexibilities afforded by MPMS to 

conduct Federal ECP certification 

reviews of medical and dental plans for 

which issuers submit QHP certification 

applications in FFEs in States that 

perform plan management functions 

beginning with certification reviews for 

PY 2026. We stated that this proposal 

would allow HHS to review, evaluate, 

analyze, and compare provider 

networks across various FFE States. We 

added that HHS would also consider 

challenges FFE issuers face across 


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237https://login.serff.com/Appendix%20II.pdf. 

various provider networks and ECP 

categories, such as provider shortages or 

facility closures. As proposed, issuers 

applying for certification of plans as 

QHPs in FFEs, including in States 

performing plan management functions, 

would be evaluated against the same 

requirements and standards. We stated 

that FFE issuers in States with limited 

plan management staff or resources 

would be given the same ECP support, 

guidance, and monitoring of ECP 

deficiencies as other FFE issuers. 

We noted that this proposal would 

provide more consistent oversight of 

ECP data across all FFEs. We further 

noted that Federal ECP reviews would 

help ensure all medical QHP and SADP 

issuers applying for certification of 

plans as QHPs in FFEs, including in 

States performing plan management 

functions, include sufficient provider 

networks. We stated that this proposal 

would allow HHS to strengthen ECP 

data integrity in the FFEs by validating 

all ECP data before they are submitted 

and displayed on the FFEs, thereby 

supporting consumer access to vitally 

important medical and dental services 

and health equity for low-income and 

medically underserved consumers. 

We sought comment on this proposal. 

After consideration of comments and for 

the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy as proposed. We 

summarize and respond below to public 

comments received on the proposed 

policy to conduct ECP certification 

reviews of plans for which issuers 

submit QHP certification applications in 

FFEs in States performing plan 

management functions beginning in PY 

2026. 

Comment: Many commenters 

supported this proposal to conduct ECP 

certification reviews of plans submitted 

by QHP issuers in FFEs in States 

performing plan management functions, 

expressing that this proposal would 

allow greater consistency, improve data 

integrity, streamline data transfers that 

result in an overall operational 

improvement, and improve consumer 

access to ECPs. One commenter that 

supported this proposal asked that we 

extend this review to SADPs as these 

plans are also subject to the ECP 

requirement under the ACA. 

Response: We agree that conducting 

ECP certification reviews for QHPs, both 

medical QHPs and SADPs, in all FFEs, 

including in States performing plan 

management functions, would allow 

greater consistency, improve data 

integrity, and support consumer access 

to qualified ECPs. We clarify that QHPs 

include medical QHPs and SADPs, and 

ECP certification reviews include 

medical QHPs and SADPs for which 

issuers submit QHP certification 

applications in FFEs, including in States 

performing plan management functions. 

Comment: A few commenters 

opposed the proposal to expand Federal 

ECP review to certification applications 

submitted by issuers in FFE States 

performing plan management functions. 

These commenters stated that CMS does 

not have the authority to conduct these 

reviews as written in the Payment 

Notice. 

Response: Although we have relied on 

the State for ECP certification review of 

QHPs in FFEs in States that perform 

plan management functions since PY 

2015 due to system limitations in 

SERFF, these issuers are still applying 

for QHP certification in FFEs. We 

remind commenters that Section 

1311(c)(1)(C) of the ACA, part of Title I 

of the statute, directs HHS to establish 

by regulation certification criteria for 

QHPs, including criteria that require 

QHPs to include within health 

insurance plan networks those ECPs, 

where available, that serve 

predominately low-income, medicallyunderserved individuals. In addition, 

Section 1321(a)(1)(B) of the ACA directs 

the Secretary to issue regulations setting 

standards for meeting the requirements 

of Title I with respect to the offering of 

QHPs through the Exchanges. 

Comment: A few commenters 

submitted comments related to the use 

of MPMS for the purpose of providing 

ECP data to HHS via the ECP user 

interface. One of the commenters was 

confused by HHS’ explanation of the 

associated network ID and service area 

ID data within SERFF prior to MPMS 

and asked, ‘‘What is a ‘sequence’ 

number? Is it by a different name in the 

templates?’’ Another commenter 

expressed concern over the level of 

personal information required to be 

disclosed for the multifactor 

identification for MPMS registration for 

users and the administrative burden on 

issuers. Another commenter suggested 

HHS provide year-round access to the 

ECP user interface and encouraged HHS 

to continue to provide transparent 

communications regarding timeframes 

for ECP reviews in MPMS and the 

frequency of updates made to the ECP 

list in MPMS. 

Response: In response to the 

questions about sequence numbers, we 

clarify that the term ‘‘sequence 

numbers’’ was used to reference 

multiple provider networks that may 

share the same number sequence within 

SERFF data. Furthermore, we add that 

issuers in FFEs, including in States 

performing plan management functions, 

are not required to provide a unique 

sequence of numbers for their network 

IDs across SERFF binders. A SERFF 

binder submitted by an issuer contains 

a collection of various templates and 

plan data,237 and an issuer may have 

multiple binders in SERFF. However, 

since an issuer could submit multiple 

SERFF binders for different types of 

plans (e.g., SHOP SADPs, individual 

market medical QHPs, etc.) with 

potentially identical network IDs, this 

made it difficult for HHS to distinguish 

and evaluate how a network was 

applied to the issuer’s plan. We used a 

workaround to merge the SERFF data at 

a plan level, but this workaround still 

did not allow for independent 

evaluation of each issuer’s provider 

networks; therefore, we relied on States 

to certify ECP review results. Due to 

variations in ECP data transfers across 

SERFF submitting States, this network 

ID barrier to evaluating ECP data may 

not have applied to all SERFF 

submitting States. 

In response to concerns about MPMS’ 

registration requirements, we note that 

the implementation of the MPMS ECP 

user interface was the start of our efforts 

to drive innovation and tackle 

challenges during QHP certification. We 

continue to provide technical 

enhancements to help reduce burden on 

issuers while providing a secure 

environment to protect the sensitive 

data provided by MPMS users to HHS. 

By using HIOS to access a CMS system, 

MPMS, users are accessing a Federal 

Government information system which 

has system requirements that ensure 

only authorized/registered users can 

access protected information and 

systems through the CMS Enterprise 

Portal. New users are required to 

complete the Remote Identity Proofing 

process, which requires users to answer 

questions related to their personal 

information; as well as Multi-Factor 

Authentication (MFA), which requires 

users to provide more than one form of 

verification in order to access the CMS 

Enterprise Portal. Once an MFA device 

is registered for their account, users 

must use this device to log into the CMS 

Enterprise Portal. All users must 

complete this registration process, but 

we will continue to enhance our 

operational processes to minimize 

duplicative administrative steps for 

issuers. 

We appreciate the suggestion that we 

provide year-round access to the ECP 

user interface. At this time, the ECP user 

interface is available for QHP 

certification; but issuers can access the 

Final PY 2025 ECP List or the HHS 


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238Refer to OMB control number 0938–1286. 

239The CMS National Quality Strategy for Quality 

Improvement in Health Care available at http://

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

240 Id. 

241See, for example, Health Insurance Exchanges 

Quality Rating System (QRS) for Plan Year (PY) 

2024: Results at a Glance, available at https://

www.cms.gov/files/document/health-insuranceexchanges-qrs-program-plan-year-2024-resultsglance.pdf. 

242 Id. 

243Section 1701(a)(8) of the PHS Act, codified at 

42 U.S.C. 300u(a)(8), provides general authority to 

the Secretary of HHS to foster exchange of healthrelated information to consumers and others. 

Rolling Draft ECP List year-round to 

view the current list of available ECPs. 

We will continue to provide issuers 

with technical support and 

communication around QHP 

certification timeframes and provide the 

frequency of updates to the ECP list 

through our published guidance and 

other communications. 

9. Quality Improvement Strategy 

(§ 156.1130) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82385), we proposed 

to share aggregated, summary-level 

Quality Improvement Strategy (QIS) 

information publicly on an annual basis 

beginning on January 1, 2026, with 

information QHP issuers submit during 

the PY 2025 QHP Application Period. 

We did not propose any revisions to the 

regulation text to codify this proposal. 

Section 1311(c)(1)(E) of the ACA 

specifies that to be certified as a QHP for 

participation on an Exchange, each 

health plan must implement a QIS 

described in section 1311(g)(1) of the 

ACA. Section 1311(g)(1) of the ACA 

describes this strategy as a payment 

structure that provides increased 

reimbursement or other incentives for 

improving health outcomes of plan 

enrollees, and the implementation of 

activities to prevent hospital 

readmissions, improve patient safety 

and reduce medical errors, promote 

wellness and health, and reduce health 

and health care disparities. Section 

1311(g)(2) of the ACA requires the 

Secretary to develop guidelines 

associated with the QIS in consultation 

with health care quality experts and 

interested parties, including periodic 

reporting to the applicable Exchange of 

the activities that the plan has 

conducted to implement the QIS, as 

described in section 1311(g)(3) of the 

ACA. In the 2016 Payment Notice (80 

FR 10844 through 10845), we issued 

regulations at § 156.1130(a) and (c) to 

direct eligible QHP issuers to implement 

and report on their QIS for each QHP 

offered in an Exchange, and to submit 

data annually to evaluate compliance 

with the standards for a QIS in a manner 

and timeline specified by the Exchange, 

respectively.238 In addition, in the 

Exchange Establishment Rule (77 FR 

18324 and 18415), we finalized 

regulations at § 155.200(d) that direct 

Exchanges to evaluate each QIS, and 

§ 156.200(b)(5) that direct QHP issuers 

to implement and report on a QIS 

consistent with ACA section 1311(g) 

standards as QHP certification criteria 

for participation in an Exchange. 

The CMS National Quality 

Strategy,239 launched in 2022, builds on 

previous efforts to improve quality 

across the health care system. As we 

noted in the proposed rule (89 FR 

82386), we continue to use a variety of 

levers across the agency, including but 

not limited to quality measurement, 

public reporting, and quality 

improvement programs, to improve 

health care quality for all. One of the 

four priority areas of the CMS National 

Quality Strategy is to promote alignment 

and coordination across programs and 

care settings and to improve quality and 

health outcomes across the care 

journey.240 We stated that by developing 

aligned approaches across quality 

programs, we can improve coordination 

and comparisons across programs and 

across the continuum of care and build 

the evidence base for quality 

interventions to support identifying 

disparities in care. We noted that across 

Medicare, Medicaid, and Exchange 

quality programs and initiatives, we 

promote sharing health care quality 

information with consumers, providers, 

researchers and others using different 

methods, such as program experience 

reports. Specifically, for the Quality 

Rating System (QRS) program, we share 

a summary of quality ratings for each 

plan year in an annual Results at a 

Glance report.241 Additionally, we share 

information pertaining to both the QRS 

and QHP Enrollee Experience Survey 

programs with the public annually 

through the same report.242 We noted 

that our proposal to share aggregated, 

summary-level QIS information publicly 

is consistent with the goal of these 

Marketplace Quality Initiatives (MQIs) 

to share information publicly and is in 

alignment with agency efforts to drive 

innovation and advance quality 

improvement across the Exchanges. 

Since 2017, we have been collecting 

QIS information from QHP issuers on 

the FFEs. We stated in the proposed rule 

(89 FR 82386) that over the years, we 

have received feedback from issuers, 

States, and Technical Expert Panel 

(TEP) representatives about the benefits 

of sharing QIS data more broadly to 

promote transparency, improve 

engagement of best practices across QHP 

issuers, and provide consumers with 

useful information about quality 

improvement efforts by QHP issuers on 

the FFEs. Therefore, recognizing the 

general interest in this information, and 

consistent with the general authority set 

forth in section 1701(a)(8) of the PHS 

Act,243 we proposed to release annually, 

in a report format, the following 

aggregated, summary-level QHP issuer 

data: (1) value-based payment models 

used in QHPs offered by the issuer; (2) 

QIS topic area; (3) QIS market-based 

incentive types; (4) clinical areas 

addressed by QIS; (5) QIS activities; and 

(6) QRS measures used in QIS. We 

stated that we do not receive QIS data 

from State Exchanges or SBE–FPs and 

would not collect QIS data from State 

Exchanges or SBE–FPs or their 

respective issuers under this proposal. 

As such, we stated that the report would 

provide information on QIS programs 

adopted by issuers offering QHPs in the 

FFEs. 

We noted that we believe this 

proposal would promote transparency 

of data and drive innovation and quality 

improvement across Exchanges. We 

stated that sharing QIS data publicly 

would also strengthen alignment across 

CMS quality reporting and value-based 

incentive programs, including the MQI 

programs, and would encourage 

learning to inform best practices for 

quality improvement across Exchanges, 

QHP issuers, researchers, and health 

care quality communities. Additionally, 

we stated that we believe this proposal 

would increase accountability for QHP 

issuers through transparency of quality 

improvement goals, encourage State 

Exchanges to share QIS information 

from their State Exchange issuers 

publicly, and support HHS’ mission to 

achieve optimal health and well-being 

for all individuals. 

We acknowledged there may be 

concerns related to the potential sharing 

of proprietary and/or confidential 

information. However, we stated that we 

do not intend to share confidential or 

proprietary information from a QHP 

issuer and would only share QIS data 

that is de-identified and in summary 

and aggregate form. We further stated 

that we would maintain compliance 

with CMS privacy policies, and to 

address potential confidentiality 

concerns, we would carefully redact and 

omit confidential data when data are 

released aggregately and in a summary 

format. 


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We sought comment on this proposal. 

In particular, we sought comment on the 

types of QHP issuer QIS data to release 

in an annual report, on the proposed 

approach and timeline for release of a 

QIS summary report with aggregated 

QIS data, and other potential 

mechanisms to present QIS information 

publicly in a manner that is informative 

to issuers and consumers. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing this policy as proposed. We 

summarize and respond below to public 

comments received on our proposal to 

share aggregated, summary-level QIS 

information publicly on an annual basis 

beginning on January 1, 2026. 

Comment: Many commenters 

supported the proposal to release 

aggregated, summary-level QIS 

information publicly in a report format 

beginning in 2026. Specifically, these 

commenters noted support for releasing 

aggregated, summary-level QIS data and 

our goals of promoting transparency and 

encouraging learning to inform best 

practices for quality improvement 

across Exchanges, health plan issuers, 

researchers, and health care quality 

communities, which they stated will 

provide consumers with useful 

information about quality improvement 

efforts by QHP issuers on the FFEs. 

Response: We appreciate commenters’ 

support of the proposal to publicly 

share aggregated, summary-level QIS 

information annually in a report format. 

As noted in the proposed rule (89 FR 

82386), this policy is in alignment with 

the goal of the MQIs to share 

information publicly and is in 

alignment with agency efforts to drive 

innovation and advance quality 

improvement across Federal programs 

including Medicare, Medicaid as well as 

the Exchanges. 

Comment: Several commenters 

recommended we develop specific 

formats for data collection and reporting 

to ensure consistency, reliability of the 

data, and to reduce issuers’ reporting 

burden. Other commenters encouraged 

CMS to develop a uniform standardized 

reporting format sample for use by QHP 

issuers in both the FFEs and the State 

Exchanges, to allow QHP issuers 

operating in State Exchanges to submit 

their data for inclusion in the summarylevel QIS data CMS plans to share 

publicly. One commenter recommended 

we add demographic data to the 

aggregated, summary-level QHP issuer 

data we proposed to release annually, 

while another commenter suggested we 

add consensus-based entity endorsed 

measure information, if applicable. One 

commenter requested additional 

clarification with respect to what 

‘‘summary level data’’ includes. 

Response: We appreciate the feedback 

and suggestions regarding the format for 

QIS data collection and reporting. We 

intend to leverage data collected from 

QHP issuers in FFEs through the current 

QIS forms for the annual aggregated, 

summary-level QIS data and will 

consider opportunities to improve the 

consistency and reliability of data that 

is included in the aggregated, summarylevel QIS data that we will release 

publicly. This will not increase issuer 

burden since issuers are already 

submitting this information on their 

current QIS forms. Prior to release of the 

first annual public report of QIS data, 

we plan to seek feedback from our TEP 

and will provide definitions, a 

summary, and clarifications to existing 

data elements in the associated 

technical guidance documents. As we 

stated in the proposed rule (89 FR 

82386), we do not currently receive QIS 

data from State Exchanges or SBE–FPs 

and do not intend to collect QIS data 

from State Exchanges or SBE–FPs or 

their respective issuers under this 

proposal. We stated in the proposed rule 

(89 FR 82386) that over the years, we 

have received feedback from issuers, 

States, and TEP representatives about 

the benefits of sharing QIS data more 

broadly to promote transparency, and 

the types of data to release in an annual 

report to provide consumers with useful 

information about quality improvement 

efforts by QHP issuers on the FFEs. We 

will also consider and gain input from 

our TEP regarding adding demographic 

data and endorsement data, which refers 

to measure data that has been reviewed 

using a standard set of evaluation 

criteria by the Consensus-Based Entity. 

We clarify that we anticipate the 

summary-level QIS data we share 

publicly will be similar to the summarylevel data contained in the QRS Results 

at a Glance report. Summary-level QRS 

data includes high-level overviews of 

health plan quality information such as 

percent and number of reporting units 

that scored three stars or more in their 

overall rating. Summary-level QIS data 

may include the percent and number of 

reporting units that used a specific 

market-based incentive type, addressed 

a specific clinical topic area, or used a 

QRS measure(s). We believe sharing 

such data allows consumers, researchers 

and policymakers to assess key trends, 

performance, and comparisons across 

QHP issuers. 

Comment: A few commenters 

provided recommendations on specific 

approaches for release of an annual 

report with aggregated, summary-level 

QIS data. These commenters suggested 

we share a sample of an annual report 

for issuer review and feedback prior to 

the release of an official report, so that 

plans have an opportunity to review and 

comment to ensure QIS data is 

consistent across all plans, on which 

data points are made available to the 

public, and how the data will be 

presented and displayed. One 

commenter suggested that the publicly 

reported information be available in 

digital formats and physical formats to 

ensure access to information. 

Response: We appreciate commenters’ 

feedback, and consistent with section 

1311(g)(2) of the ACA, which requires 

consultation with experts in health care 

quality and interested parties, we intend 

to seek feedback on approaches for the 

public display of the aggregated, 

summary-level QIS data, including 

meeting with TEP representatives and 

engagement with interested parties. We 

will take the comments summarized 

above into consideration in doing so. 

Although we do not routinely publish 

MQI sample reports solely for issuer 

review and feedback, we intend to gain 

thorough input from interested parties 

including representatives from issuer 

organizations, State Exchanges, the 

health care quality community, and 

consumer advocates. We will adhere to 

our processes of utilizing the TEP and 

above-mentioned parties to seek 

feedback on the timing of the report 

being released, types of data for 

inclusion, and approaches to sharing the 

data. We will also request input from 

our TEP as to the feasibility of reporting 

the QIS data in physical and digital 

formats. 

Comment: A few commenters 

suggested that CMS allow for one full 

year of data collection prior to release of 

an annual report with aggregated, 

summary-level QIS data or limit the 

included data to a specific timeframe, to 

allow issuers to use information from 

the Healthcare Effectiveness Data and 

Information Set (HEDIS®) and any 

related QRS metrics in issuers’ 

reporting. A few commenters 

recommended that CMS limit its public 

reporting to the information included in 

the QIS implementation plans 

submitted in the first year because 

different health plans may be operating 

on different timelines, and this may lead 

to ambiguity if data on plan 

performance is combined for reporting 

purposes. One commenter 

recommended CMS delay the public 

release of aggregated, summary-level 

QIS data until 2027 and use the interim 

period to clarify reporting requirements 

and release more detail on what data 

will be released. These commenters 


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244For the purposes of this proposal, ‘‘appeals’’ 

refers to all three steps of the administrative appeals 

process as listed in § 156.1220, which includes the 

request for reconsideration, informal hearing, and 

review by the Administrator of CMS. 245For purposes of this proposal, rerunning HHS– 

RADV results involves recalculating all national 

program benchmarks and issuers’ error rate results, 

reissuing issuers’ error rate results, conducting 

discrepancy reporting and appeal windows for the 

reissued results, applying the reissued error rates to 

the applicable benefit year’s State transfers, and 

invoicing, collecting, and distributing any 

additional changes to the HHS–RADV adjustments 

to State transfers. 

stated that these steps will allow issuers 

to align their data submission processes 

with a standardized format fostering 

uniformity in the reporting of the data 

across issuers while avoiding 

duplication, and ensuring clear, 

consistent public information on QHP 

quality improvements. 

Response: We appreciate the feedback 

and note the timeline being finalized 

will allow for one full year of data 

collection prior to release of the first 

annual report. One full year of data 

collection will ensure that issuers can 

capture comprehensive and reliable 

information from relevant sources such 

as HEDIS® and QRS metrics. One full 

year of data collection also ensures that 

the data used for reporting reflects a 

complete cycle of care and 

improvements. With a year of data, 

issuers can compare their performance 

against industry standards, which can 

identify areas for improvement. With 

respect to the comment related to the 

use of data from the QIS 

Implementation Plan form, CMS will 

extract and aggregate a majority of data 

fields from the Implementation Plan 

form, and may supplement information 

from an issuer’s Modification Summary 

Supplement form, as needed. CMS may 

extract the performance measures from 

an issuer’s Modification Summary 

Supplement form if that issuer has 

modified their measures. We currently 

do not aggregate nor publicly report data 

collected via Progress Report forms due 

to the timing of QIS data collection, 

which may result in unvalidated data. 

We are finalizing in this rule that 

aggregated, summary-level QIS 

information will be shared publicly on 

an annual basis beginning on January 1, 

2026, with information QHP issuers 

submit during the PY 2025 QHP 

Application Period. We believe that 

January 1, 2026, is the appropriate time 

to begin sharing this QIS data publicly 

because, for the reasons stated above, 

we need one full year of data collection 

prior to the release of the annual report. 

QHP issuers have been submitting QIS 

data to HHS since 2017 and since that 

time, we have received feedback from 

issuers, States, and TEP representatives 

about the benefits of sharing QIS data 

more broadly. We intend to leverage 

data collected from issuers through 

current QIS reporting tools and believe 

that sharing the QIS data publicly 

beginning in 2026, instead of 2027, 

allows opportunities for interested 

parties to understand trends and 

potential issues by viewing interim data. 

Sharing interim data promotes 

transparency and helps foster trust even 

if the data is not yet complete. The 

collaborative approach from interested 

parties on review of the data can 

improve the quality of the final report. 

Additionally, regular data sharing can 

address quality improvement efforts 

where enhancements need to be made to 

processes throughout the year. 

Specifically, best practices in quality 

improvement activities across QHP 

issuers can be made apparent, 

improving engagement of QHP issuers 

to potentially refine approaches to their 

QIS, and provide consumers with useful 

information about quality improvement 

efforts by QHP issuers on the FFEs. We 

will continue to assess and enhance the 

public-facing report to help ensure that 

clear, consistent QIS information is 

being provided. Since we intend to use 

QIS information already submitted by 

QHP issuers on the FFEs through 

current, annual reporting tools, there 

would be no duplication of information. 

Comment: One commenter suggested 

we ensure plain language experts review 

the QIS information that is publicly 

displayed to make this data accessible to 

a wider audience, which will empower 

interested parties to make informed 

decisions. One commenter 

recommended that the data be 

published in a manner that is simplified 

for consumers to easily understand and 

in multiple languages. Another 

commenter suggested we comply with 

ADA accessibility standards when 

presenting data. One commenter 

suggested the report be housed on the 

QIS website instead of HealthCare.gov 

because it will be most meaningful to 

policymakers and researchers with 

expertise in quality work and valuebased care, and likely will be too much 

information and detail for a consumer. 

Another commenter recommended HHS 

disseminate publicly diverse sets of 

educational resources including 

webinars, fliers, and FAQs relevant to 

the aggregated, summary-level QIS data 

that will be publicly shared. 

Response: We will make efforts to 

incorporate plain language and ensure 

that the QIS information that will be 

publicly shared complies with ADA 

standards. We will also consider making 

MQI reports, including the annual QIS 

report, available in multiple languages 

and align them as consistently as 

possible with other quality initiatives. 

We acknowledge the recommendation 

to post the QIS report on the QIS 

website as well as the recommendation 

regarding dissemination of information 

relevant to the aggregated, summarylevel QIS information that will be 

publicly shared through various 

educational resources. As noted above, 

we intend to conduct activities to 

receive feedback for the public display 

of the information, including meeting 

with interested parties pursuant to 

section 1311(g) of the ACA. 

Comment: Several commenters noted 

concern regarding the confidentiality of 

the aggregated, summary-level QIS 

information that will be displayed 

publicly on an annual basis because of 

accidental data breaches. One 

commenter suggested that we include 

de-identified data to address 

information security and privacy 

concerns. 

Response: We acknowledged in the 

proposed rule (89 FR 82386) that there 

may be concerns related to the potential 

sharing of proprietary and/or 

confidential information. However, as 

we stated in the proposed rule, we do 

not intend to share confidential or 

proprietary information from a QHP 

issuer and will only share QIS data that 

is de-identified and in summary and 

aggregate form. We will maintain 

compliance with CMS privacy policies, 

and to address potential confidentiality 

concerns, we will carefully redact and 

omit confidential data when data are 

released aggregately and in a summary 

format. 

10. HHS–RADV Materiality Threshold 

for Rerunning HHS–RADV Results 

(§ 156.1220(a)(2)) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82386), we proposed 

to amend § 156.1220(a) to codify a new 

materiality threshold for HHS–RADV 

appeals,244 hereafter referred to as the 

materiality threshold for rerunning 

HHS–RADV results.245 We stated that 

this proposal would codify a standard 

for when HHS would take action to 

rerun HHS–RADV results and adjust 

HHS–RADV adjustments to State 

transfers in response to a successful 

appeal. We proposed to make 

amendments to § 156.1220 to add a new 

paragraph (a)(2)(i) to provide that HHS 

would rerun HHS–RADV results in 

response to an appeal when the impact 

to the filing issuer’s (that is, the issuer 

who submitted the appeal) HHS–RADV 

adjustments to State transfers is greater 

than or equal to $10,000, and we 


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246The appeal window for 2023 benefit year 

HHS–RADV is expected to open in July 2025, after 

the publication of the Summary Report of 2023 

Benefit Year HHS–RADV Adjustments to 2023 

Benefit Year Risk Adjustment Transfers, which is 

tentatively scheduled for release in July 2025. See 

the 2023 Benefit Year HHS–RADV Activities 

Timeline. https://regtap.cms.gov/uploads/library/ 

2023_RADV_Timeline_5CR_072424.pdf. Therefore, 

we proposed to adopt and apply the materiality 

threshold for rerunning HHS–RADV results in 

response to a successful appeal beginning with the 

2023 benefit year HHS–RADV. 

247The EDGE data discrepancies that can arise in 

States where the HHS-operated risk adjustment 

program applies have a more limited reach and only 

impact the State market risk pool with the 

discrepancy. 

248The impact of successful HHS–RADV requests 

for reconsideration or appeals on HHS–RADV 

results and HHS–RADV adjustments to risk 

adjustment State transfers on all participating 

issuers also differs from that of high-cost risk pool 

audits, discrepancies, and appeals. Any high-cost 

risk pool funds HHS recoups as a result of audits 

of risk adjustment covered plans, actionable 

discrepancies, or successful appeals are used to 

reduce high-cost risk pool charges for that national 

high-cost risk pool in the next applicable benefit 

year for which high-cost risk pool payments have 

not already been calculated. See the 2023 Payment 

Notice (87 FR 27253). 

249Please note that the risk adjustment 

discrepancy materiality threshold is the lesser of 

either $100,000 or 1% of State risk pool transfers. 

proposed to apply this new materiality 

threshold for rerunning HHS–RADV 

results beginning with the 2023 benefit 

year HHS–RADV.246

We noted that this materiality 

threshold would promote the stability of 

HHS–RADV and avoid considerable 

expenditures to rerun HHS–RADV 

results in situations where the filing 

issuer only accrues a very minor 

financial benefit (in this case defined as 

less than $10,000), if any, and where 

there is a non-material impact on State 

transfers in a State market risk pool. As 

we stated in the proposed rule (89 FR 

82387), we believe the adoption of this 

additional materiality threshold to 

codify a standard for when HHS would 

rerun HHS–RADV results is necessary 

and appropriate because HHS–RADV is 

unique in comparison to other ACA 

financial programs, such as APTC, 

where the outcome of a successful 

appeal only impacts the filing issuer 

because an issuer’s amount of APTC 

does not impact other issuers.247 We 

noted that instead, an HHS–RADV 

appeal has the potential to impact all 

issuers nationwide who participated in 

the applicable benefit year’s HHS– 

RADV.248

We refer readers to the proposed rule 

(89 FR 82386 through 82388) for further 

discussion of the background and 

rationale for this proposal. 

We solicited comments on the 

proposed materiality threshold for 

rerunning HHS–RADV results, 

including the proposed dollar amount 

for the materiality threshold and 

whether that dollar amount should be 

higher or lower or subject to an annual 

inflation adjustment amount, as well as 

the proposed applicability of this 

threshold beginning with 2023 benefit 

year HHS–RADV. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing, as proposed, the amendments 

to add § 156.1220(a)(2)(i) to codify a 

new materiality threshold for rerunning 

HHS–RADV results such that we will 

not rerun HHS–RADV results if the 

appeal’s financial impact on the filing 

issuer was less than $10,000, beginning 

with the 2023 benefit year of HHS– 

RADV. For purposes of this new 

materiality threshold, ‘‘appeals’’ refers 

to all three steps of the process in 

§ 156.1220, which includes the request 

for reconsideration, informal hearing, 

and review by the Administrator of 

CMS. We summarize and respond below 

to public comments received on the 

proposed materiality threshold for 

rerunning HHS–RADV results. 

Comment: A few commenters 

supported the proposal to codify a 

dollar threshold to specify when HHS 

would rerun HHS–RADV results based 

on a successful appeal. A few 

commenters noted that the proposal 

would improve predictability and 

ensure that adjustments to State 

transfers as the result of a successful 

HHS–RADV appeal are limited to 

situations with significant impacts on 

HHS–RADV adjustments to risk 

adjustment transfers. One commenter 

noted that the policy would limit the 

burden that rerunning HHS–RADV 

results has historically 

disproportionately placed on smaller 

issuers. 

Response: We agree with commenters 

that this new materiality threshold to 

rerun HHS–RADV results, which we are 

finalizing as proposed in this final rule, 

will ensure appeals are limited to 

situations with significant State transfer 

impacts. We also agree that this 

materiality threshold will improve 

predictability and limit the 

administrative burden associated with 

HHS–RADV, including for smaller 

issuers. 

Comment: A few commenters 

suggested that the proposed threshold of 

$10,000 was too low, with one 

suggesting an alternative threshold of 

$100,000. These commenters noted 

concern that a low threshold would 

result in HHS rerunning HHS–RADV 

results too frequently. Another 

commenter suggested that the threshold 

be set at a certain percentage of 

statewide average premium. 

Response: We are finalizing the 

proposed materiality threshold for 

rerunning HHS–RADV results in 

response to a successful appeal such 

that we will not rerun HHS–RADV 

results if the appeal’s financial impact 

on the filing issuer was less than 

$10,000. We are finalizing this $10,000 

threshold because the current 

materiality threshold applicable to risk 

adjustment discrepancies set forth in 

§ 153.710(e) is $100,000, and we have 

found based on our years of experience 

with HHS–RADV that the magnitude of 

HHS–RADV adjustments is generally at 

least one order of magnitude smaller 

than that of risk adjustment transfers 

calculated by HHS under the State 

payment transfer formula, as HHS– 

RADV adjustments are adjustments to 

the original risk adjustment State 

transfer amounts for a benefit year. For 

these reasons, we believe the proposed 

lower materiality threshold of $10,000 is 

roughly proportional to the risk 

adjustment discrepancy materiality 

threshold of $100,000.249 Therefore, we 

maintain that this is an appropriate 

materiality threshold for rerunning 

HHS–RADV results in response to a 

successful appeal. 

As for setting a materiality threshold 

based on a percentage of statewide 

average premium, we are concerned that 

this approach would be overly complex 

for the purposes of rerunning HHS– 

RADV results in response to a 

successful appeal as all issuers would 

be held to different dollar thresholds 

under the percentage of statewide 

average premium standard. While this 

would ensure a consistent proportional 

threshold by State market risk pool to 

account for the correlation of State 

transfers and statewide average 

premium, we note that it would likely 

advantage issuers whose risk adjustment 

State payments or charges were a larger 

percent of statewide average premium 

in meeting the materiality threshold and 

disadvantage issuers whose State 

transfers were a lower proportion of the 

statewide average premium. In this 

situation, two issuers with the same 

dollar impact could have their appeals 

treated differently based on different 

statewide average premiums. Use of a 

percentage of statewide average 

premium could also lead to more 

frequent re-running of national HHS– 

RADV results in response to a 

successful appeal, with associated 

burden but minimal impact on national 

results, based on appeals in smaller 

States with lower statewide average 

premium. Therefore, in the interest of 

ensuring that HHS–RADV appeals 


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measure the impact to HHS–RADV 

adjustments at a certain dollar 

threshold, we did not propose and 

decline to finalize a materiality 

threshold based on a percentage of 

statewide average premium at this time. 

Comment: One commenter noted that 

the proposed threshold may impact the 

accuracy of the HHS–RADV results if 

HHS identifies a methodological error 

and limits recalculation and reissuance 

of the HHS–RADV results only to 

situations where the filing issuer meets 

the proposed materiality threshold. This 

commenter requested HHS clarify that 

the Department would recalculate and 

reissue HHS–RADV results in response 

to a successful appeal when an HHS 

error impacting many or all issuers is 

identified, regardless of how the error 

was identified. 

Response: While we will not rerun 

HHS–RADV results in response to a 

successful appeal resulting in an impact 

of less than $10,000 to a filing issuer’s 

HHS–RADV adjustments to State 

transfers, the materiality threshold 

finalized in this rule does not prevent 

HHS from taking appropriate action, 

outside of an individual appeal, which 

could include recalculation and 

reissuance of HHS–RADV results for a 

given benefit year, as a result of an 

identified HHS methodological error. 

With the adoption of § 156.1220(a)(2)(i), 

we aim to balance the importance of 

having accurate HHS–RADV results 

with the administrative burden of 

rerunning HHS–RADV when the impact 

on the filing issuer’s HHS–RADV 

adjustments to transfers is not material. 

Comment: One commenter suggested 

that as an alternative to a materiality 

threshold, HHS could reduce the broad 

impact of HHS–RADV successful 

appeals by limiting the application of 

the result of a successful appeal to the 

State market risk pool in which the 

appeal is filed, or adopt a policy to not 

make changes to group failure rate 

classifications or bounds if appeals are 

submitted after HHS–RADV adjustments 

to State transfers for a given benefit year 

are posted. 

Response: We did not propose and are 

not finalizing the alternatives suggested 

by this commenter. We believe that the 

materiality threshold for determining 

when we will rerun HHS–RADV results 

in response to a successful appeal that 

we are finalizing in this final rule will 

best mitigate the administrative burden 

associated with re-running HHS–RADV 

results when there is a small financial 

impact both inside and outside of the 

State market risk pool in which the 

appeal was filed, and that the finalized 

materiality threshold to rerun HHS– 

RADV results ensures appeals are 

limited to situations with significant 

program impacts relative to the burdens 

incurred by issuers and HHS in 

rerunning HHS–RADV results. 

We disagree that we could limit the 

scope of an HHS–RADV appeal to the 

applicable State market risk pool. HHS– 

RADV appeals have national impacts in 

that successful appeals can affect and 

change the national confidence intervals 

and group failure rates used to calculate 

issuers’ error rates. This process cannot 

be disaggregated from the calculation of 

HHS–RADV adjustments, which applies 

issuers’ error rates to all plan level risk 

scores and recalculates risk adjustment 

transfers at the State market risk pool 

level. We also do not believe this 

approach would be methodologically 

justifiable as disaggregating the 

processes of recalculating error rates 

from the application of error rates for 

HHS–RADV adjustments to State market 

risk pool level risk adjustment transfers 

would imply using two different sets of 

HHS–RADV results for a single benefit 

year. 

We also do not agree with the 

comment that we should not make any 

changes to the group failure rates or 

confidence interval bounds in response 

to appeals submitted after the 

publication of the Summary Report of 

HHS–RADV Adjustments to Risk 

Adjustment State Transfers. First, all 

appeals occur after the publication of 

the Summary Report of HHS–RADV 

Adjustments to Risk Adjustment State 

Transfers. Second, this approach would 

not take into consideration the true 

impact of any successful appeal as 

appeals can result in necessary and 

methodologically justifiable updates to 

the group failure rates or confidence 

interval bounds. Lastly, due to the 

budget neutrality of risk adjustment 

transfers, a change to one issuer’s risk 

score error rate or HHS–RADV 

adjustment due to a successful appeal 

impacts all other issuers’ HHS–RADV 

adjustments in the filing issuer’s State 

market risk pool; therefore, we do not 

believe the suggested approach to 

develop a policy that ignores the impact 

of a successful appeal on group failure 

rates and confidence interval bounds is 

a reasonable option. 

E. Part 158—Issuer Use of Premium 

Revenue: Reporting and Rebate 

Requirements 

1. Definitions (§ 158.103) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82388), we proposed 

to amend § 158.103 by adding a 

definition of ‘‘qualifying issuer.’’ See 

subsection E.2 below for the discussion 

of this proposal. 

2. Reimbursement for Clinical Services 

Provided to Enrollees (§§ 158.140, 

158.240) 

In the HHS Notice of Benefit and 

Payment Parameters for 2026 proposed 

rule (89 FR 82308, 82388), we proposed 

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

qualifying issuers to not adjust incurred 

claims by the net payments or receipts 

related to the risk adjustment program 

for MLR reporting and rebate 

calculation purposes beginning with the 

2026 MLR reporting year (MLR reports 

due in 2027). We also proposed to 

amend § 158.240(c) to add an 

illustrative example of how qualifying 

issuers would calculate the amount of 

rebate owed to each enrollee to 

accurately reflect how such issuers 

would incorporate the net risk 

adjustment transfer amounts into the 

MLR and rebate calculations differently 

from other issuers, as well as to make 

a conforming amendment to clarify that 

the current illustrative example in 

paragraph (c)(2) would apply to issuers 

that are not qualifying issuers. 

Section 2718 of the PHS Act and the 

implementing regulations at 45 CFR part 

158 require health insurance issuers 

offering group or individual health 

insurance coverage to submit an annual 

report to the Secretary of HHS 

concerning their MLR and issue an 

annual rebate to enrollees if the issuer’s 

MLR is less than the applicable MLR 

standard established in sections 

2718(b)(1)(A)(i) and (ii) of the PHS Act. 

Under section 2718 of the PHS Act, an 

issuer’s MLR is defined as the ratio of 

(a) incurred claims and quality 

improvement activity expenses, to (b) 

premium revenue after subtracting taxes 

and licensing and regulatory fees and 

accounting for payments or receipts for 

risk adjustment, risk corridors, and 

reinsurance under sections 1341, 1342, 

and 1343 of the ACA. The statute also 

defines the total amount of an issuer’s 

annual rebate as an amount equal to the 

product of the amount by which the 

applicable MLR standard exceeds the 

issuer’s MLR, multiplied by the issuer’s 

premium revenue after subtracting taxes 

and licensing and regulatory fees and 

accounting for payments or receipts for 

risk adjustment, risk corridors, and 

reinsurance under sections 1341, 1342, 

and 1343 of the ACA. 

In contrast, section 1342(c) of the 

ACA provides that allowable costs shall 

be reduced by any risk adjustment 

payments in the numerator of the risk 


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250Section 1342 of the ACA and the 

implementing regulations at 45 CFR part 153 

established a temporary risk corridors program 

applicable to QHP issuers in the individual and 

small group (or merged) markets for the 2014, 2015, 

and 2016 benefit years. 

251The premium stabilization programs refer to 

the reinsurance, risk corridors, and risk adjustment 

programs established by the ACA. See section 1341 

of the ACA (transitional reinsurance program), 

section 1342 of the ACA (risk corridors program), 

and section 1343 of the ACA (risk adjustment 

program). 

corridors calculation.250 To preserve 

consistency between these two 

programs, we finalized an approach in 

the 2014 Payment Notice (78 FR 15504) 

that accounted for all premium 

stabilization program 251 amounts, other 

than reinsurance contribution fees, in a 

way that would not have a net impact 

on the adjusted earned premium 

revenue used in the calculation of the 

MLR denominator as defined in 

§ 158.130. Specifically, in the 2014 

Payment Notice, we noted that to 

account for premium stabilization 

program amounts as an adjustment to 

earned premium under § 158.130(b)(5), 

net risk adjustment program receipts, 

net risk corridors program receipts, and 

reinsurance program payments would 

be added to total premium and then 

subtracted from adjusted earned 

premium. Section 158.140(b)(4) also 

provided that premium stabilization 

amounts, other than reinsurance 

contribution fees, must adjust incurred 

claims in the numerator of the MLR 

calculation defined in § 158.221, in a 

manner similar to the adjustment of 

allowable costs in the risk corridors 

formula set forth in § 153.500. As stated 

in the 2014 Payment Notice, we found 

that this approach adhered to the 

statutory construct of the MLR formula 

in section 2718 of the PHS Act, which 

we believe provides flexibility as to 

whether to account for the effects of 

collections or receipts for the premium 

stabilization programs in determining 

revenue (the denominator) or costs (the 

numerator) of the MLR formula, while 

also aligning with the treatment of risk 

adjustment transfer amounts and 

reinsurance payments in the calculation 

of risk corridors payments and charges 

under section 1342 of the ACA. 

In the proposed rule (89 FR 82389), 

we noted that while many complex 

factors influence an issuer’s 

underwriting position, our internal 

analysis suggests that issuers with 

unusual business models characterized 

by ratios of risk adjustment payments to 

earned premium that are approximately 

50 percent or higher may owe 

disproportionately large MLR rebates 

that could impact solvency. We stated 

that in these circumstances, we believe 

that the way the current MLR 

methodology functions is misaligned 

with one of the primary statutory goals 

of the program, which is to ensure that 

consumers receive value for their 

premium dollars, as issuers with 

especially high-risk populations spend a 

significant proportion of their revenue 

paying medical claims and may 

nonetheless also owe rebates that make 

continued operation in their current 

markets untenable. Consistent with 

section 2718(c) of the PHS Act, the 

standardized methodologies for 

calculating an issuer’s MLR ‘‘shall be 

designed to take into account the special 

circumstances of smaller plans, different 

types of plans, and newer plans.’’ We 

stated that we believe modifying the 

treatment of risk adjustment transfer 

amounts in the MLR and rebate 

calculations for these issuers such that 

these amounts have a net impact on the 

MLR denominator rather than on MLR 

numerator would mitigate the solvency 

and stability concerns for this small 

subset of issuers that offer different 

types of plans with unique business 

models, namely the issuers that focus on 

underserved communities with 

significant rates of serious health 

conditions and that may 

disproportionately rely on risk 

adjustment payments, as opposed to 

premiums, for revenue. 

Therefore, we proposed to exercise 

our authority to account for the special 

circumstances of this small subset of 

issuers. Specifically, we proposed to 

amend § 158.103 to add a definition of 

‘‘qualifying issuer’’ to mean an issuer 

whose ratio of net payments related to 

the risk adjustment program under 

section 1343 of the ACA to earned 

premiums, prior to accounting for the 

net payments or receipts related to the 

risk adjustment, risk corridors, and 

reinsurance programs (as described in 

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

market, is greater than or equal to 50 

percent. We also proposed to modify 

§ 158.140(b)(4)(ii) to no longer apply net 

risk adjustment receipts as an 

adjustment to the incurred claims 

amount that is used to calculate the 

MLR numerator defined in § 158.221(b) 

for such qualifying issuers. We did not 

propose to make any changes to the 

definition of premium revenue in 

§ 158.130. 

We stated in the proposed rule (89 FR 

82390) that under this proposal, we 

would modify the calculation of the 

MLR denominator and rebates as 

described in the 2014 Payment Notice 

such that for qualifying issuers, earned 

premium would account for net risk 

adjustment receipts by simply adding 

these net receipts to total premium, 

without subsequently subtracting them 

from adjusted earned premium. We 

noted that the effect of the proposed 

changes would be to remove these 

offsetting adjustments (the addition and 

the subtraction that offset each other) to 

earned premium in the MLR 

denominator and rebate calculations, 

such that these qualifying issuers’ risk 

adjustment transfer amounts would 

have a net impact on the MLR 

denominator and rebate calculations in 

§ 158.221(c) and § 158.240(c), 

respectively. We also proposed to make 

a conforming amendment to 

§ 158.240(c) to clarify that the existing 

illustrative example in paragraph (c)(2) 

would apply to issuers that are not 

qualifying issuers, and to add an 

illustrative example in a new paragraph 

(c)(3) of how qualifying issuers would 

determine the amount of rebate owed to 

each enrollee, to accurately reflect how 

qualifying issuers would incorporate the 

net risk adjustment transfer amounts 

into the MLR and rebate calculations 

differently from other issuers. 

In summary, we proposed that for 

qualifying issuers, risk adjustment 

transfer amounts would be a net 

adjustment to the denominator, rather 

than the numerator, of the MLR 

calculation as follows: 

If (ra/p) > or = 50%; 

Adjusted MLR = [(i + q¥s + nc¥rc)/{(p 

+ s¥nc + rc)¥t¥f¥(s¥nc + 

rc)¥na + ra}] + c 

Where, 

i = incurred claims 

q = expenditures on quality improving 

activities 

p = earned premiums 

t = Federal and State taxes 

f = licensing and regulatory fees including 

transitional reinsurance contributions 

s = issuer’s transitional reinsurance receipts 

na = issuer’s risk adjustment related 

payments 

nc = issuer’s risk corridors related payments 

ra = issuer’s risk adjustment related receipts 

rc = issuer’s risk corridors related receipts 

c = credibility adjustment, if any 

For a qualifying issuer whose MLR 

falls below the minimum MLR standard 

in a State and market, we proposed to 

calculate the MLR rebate in § 158.240(c) 

as follows: 

If (ra/p) > or = 50%; 

Rebates = (m¥a) * [(p + s¥nc + 

rc)¥t¥f¥(s¥nc + rc)¥na + ra] 

Where, 

m = the applicable minimum MLR standard 

for a particular State and market 

a = issuer’s MLR for a particular State and 

market. 

We proposed that these amendments 

would be applicable beginning with the 

2026 MLR reporting year (MLR reports 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4513 

due in 2027), to enable issuers that are, 

or may be able to meet the definition of, 

a qualifying issuer to reflect the 

amendments in their premium rates. We 

requested comment on all aspects of the 

proposal, including the definition of 

‘‘qualifying issuer’’ and whether issuers 

should satisfy additional criteria to 

qualify for this flexibility, whether the 

proposed MLR and rebate 

methodologies would create any 

inappropriate incentives for issuers that 

are unable to accurately price their 

products or reduce administrative costs, 

as well as impacts to other issuers that 

are not ‘‘qualifying issuers’’ and 

potential market distortions that may 

arise if the proposed flexibility for MLR 

and rebate calculations is not extended 

to all issuers in applicable markets. 

We also considered an alternative 

approach that would modify the 

treatment of net risk adjustment transfer 

amounts such that these amounts would 

have a net impact on the MLR 

denominator and rebate calculations in 

§ 158.221(c) and § 158.240(c), 

respectively, instead of the MLR 

numerator defined in § 158.221(b), for 

all issuers subject to MLR requirements, 

rather than only for qualifying issuers. 

We noted that we did not propose this 

alternative approach as we believe that 

the more narrow, tailored proposal to 

provide this flexibility only for 

qualifying issuers is sufficient to 

maximize availability of coverage 

options while remaining consistent with 

the statutory objective of section 2718 of 

the PHS Act, which is to ensure that 

consumers receive value for their 

premium dollars. We stated that the 

more narrow, tailored proposal would 

also produce a smaller reduction in 

rebate payments to consumers than the 

alternative approach and would cause 

less disruption to the industry. We 

requested comment on all aspects of this 

alternative approach, including on ways 

that this alternative approach could 

potentially influence issuers’ rebate 

positions, plan composition, and pricing 

decisions, and potential impacts of this 

alternative approach on consumers. 

We refer readers to the proposed rule 

(89 FR 82388 through 82391) for further 

discussion of our proposal as well as the 

alternative approach we considered. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing our proposal, with 

modification, effective beginning with 

the 2026 MLR reporting year. First, we 

are finalizing our proposed amendment 

to § 158.103 to add a definition of 

‘‘qualifying issuer,’’ with a modification 

to clarify that the new definition of 

‘‘qualifying issuer’’ is based on an 

issuer’s 3-year aggregate ratio of net 

payments related to the risk adjustment 

program under section 1343 of the ACA 

to earned premiums as defined in 

§ 158.130, but prior to and excluding the 

adjustments in § 158.130(b)(5) that 

account for the net payments or receipts 

related to the risk adjustment, risk 

corridors, and reinsurance programs, in 

a relevant State and market. Second, we 

are finalizing our proposed amendment 

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

issuers to not adjust incurred claims by 

the net payments or receipts related to 

the risk adjustment program for MLR 

reporting and rebate calculation 

purposes, with a modification to specify 

that we are allowing qualifying issuers 

to modify the treatment of risk 

adjustment transfer amounts in the 

manner described above at their option, 

rather than making this change 

mandatory for qualifying issuers. 

Finally, we are finalizing our proposed 

amendments to § 158.240(c) to (1) add 

an illustrative example at § 158.240(c)(3) 

of how qualifying issuers that choose to 

apply risk adjustment transfer amounts 

as described in § 158.140(b)(4)(ii) would 

calculate the amount of rebate owed to 

each enrollee to accurately reflect how 

such issuers would incorporate the net 

risk adjustment transfer amounts into 

the MLR and rebate calculations 

differently from other issuers, with a 

modification to clarify that qualifying 

issuers ‘‘opt’’ to apply risk adjustment 

transfer amounts as described in 

§ 158.140(b)(4)(ii), and (2) to clarify that 

the current illustrative example in 

§ 158.240(c)(2) would apply to issuers 

that are not qualifying issuers or that are 

qualifying issuers that do not opt to 

apply risk adjustment transfer amounts 

as described in § 158.140(b)(4)(ii). We 

summarize and respond to public 

comments received on our proposal 

below. 

Comment: We received several 

comments of general support for the 

proposal. 

Response: We thank commenters for 

their support of the proposal. 

Comment: Several commenters 

supported the proposal’s applicability to 

only the narrow subset of qualifying 

issuers, on the basis that doing so would 

minimize any rebate reduction that 

would be a result of the proposal and 

would avoid harming issuers whose 

premium rates are relatively low in 

proportion to the coverage provided and 

that incur risk adjustment program 

payments. 

Response: We agree with these 

commenters and thank them for their 

support of the proposal. 

Comment: One commenter requested 

CMS to clarify whether, when 

determining if an issuer is a ‘‘qualifying 

issuer,’’ the issuer should use a single 

year, or 3-years’ aggregate ratio of net 

risk adjustment payments to earned 

premiums. Another commenter 

requested CMS to state more clearly and 

explicitly that the definition of 

‘‘qualifying issuer’’ is based on billed 

premium, rather than premium that 

reflects the impact of risk adjustment 

transfer amounts. 

Response: We confirm that the 

definition of ‘‘qualifying issuer’’ at 

§ 158.103 is based on an issuer’s 3-year 

aggregate ratio of net payments related 

to the risk adjustment program under 

section 1343 of the ACA to earned 

premiums as defined in § 158.130, but 

prior to and excluding the adjustments 

in § 158.130(b)(5) that account for the 

net payments or receipts related to the 

risk adjustment, risk corridors, and 

reinsurance programs, in a relevant 

State and market. We are modifying the 

proposed definition of ‘‘qualifying 

issuer’’ at § 158.103 accordingly. 

Comment: One commenter suggested 

that we allow all issuers that receive 

risk adjustment payments to reflect 

these amounts in the MLR denominator, 

while continuing to allow issuers that 

make risk adjustment payments (pay 

risk adjustment charges) to reflect these 

amounts in the MLR numerator. The 

commenter stated that they believe this 

approach eliminates any potential 

incentive to misprice premiums, is 

straightforward to implement, and is fair 

and equitable for all issuers, regardless 

of their share of claims from high- and 

low-risk enrollees. 

Response: We decline to adopt this 

commenter’s suggestion as the statute 

does not provide for a different means 

of accounting for risk adjustment 

payments and receipts in the MLR 

calculation. This approach is also 

inconsistent with generally accepted 

accounting principles that provide for a 

consistent accounting of transfers 

regardless of their direction. 

Additionally, the suggested approach 

would significantly reduce total net 

rebates to consumers without a 

justifiable benefit, contrary to the goals 

of the MLR program. 

Comment: One commenter 

recommended making the proposal 

optional for qualifying issuers. 

Response: We appreciate the 

comment and agree that qualifying 

issuers should have the option to elect 

whether to take advantage of modifying 

the treatment of risk adjustment 

program transfer amounts in their MLR 

and rebate calculations. Making the 

modification optional will allow issuers 


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4514 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

that are part of a holding company 

system, and that operate in many States 

and markets, to maintain the consistent 

MLR reporting practices that they have 

implemented across companies. Such 

companies might find having one 

reporting approach to be simpler than 

determining which issuers, and in 

which States and markets, in the 

holding company system are ‘‘qualifying 

issuers’’ and changing their MLR 

reporting process only for those issuers. 

Additionally, issuers that meet the 

definition of a ‘‘qualifying issuer’’ but 

do not owe MLR rebates may not want 

to change their established reporting 

processes when the change would not 

create any benefit for them. 

We are modifying the amendments to 

§ 158.140(b)(4)(ii) and § 158.240(c)(2) 

and (3) to give qualifying issuers the 

option to elect whether to take 

advantage of modifying the treatment of 

risk adjustment program transfer 

amounts in their MLR and rebate 

calculations. 

Comment: One commenter suggested 

that we add a maximum threshold of 

25,000 enrollees in order for an issuer 

to qualify as a qualifying issuer, to serve 

as a guardrail to ensure that the 

proposal targets the specific issuers 

whose risk adjustment payments exceed 

50 percent of their earned premium and 

does not cause unintended 

consequences for other issuers. 

Response: While we appreciate the 

commenter’s suggestion, we decline to 

adopt a maximum enrollment threshold 

of 25,000 enrollees, as we believe that 

it is possible for an issuer to have a 

unique business model and 

corresponding challenges targeted by 

this policy even if its enrollment 

exceeds 25,000. Based on our estimates 

that extremely few issuers would meet 

the definition of a qualifying issuer and 

also owe rebates, we do not believe that 

proposal, as finalized, is likely to cause 

unintended consequences for other 

issuers. 

Comment: A few commenters 

declined to offer support or opposition 

to the proposal, but pointed out the 

potential benefits of, as well as noted 

concerns with, the proposal. A few 

commenters requested that if CMS does 

finalize the proposal, that it carefully 

monitor the impact on the affected 

enrollees in underserved communities. 

These commenters noted that the 

proposal could potentially benefit 

enrollees with chronic conditions by 

stabilizing their issuers, reducing 

premium increases, and promoting 

consistent access to care. On the other 

hand, commenters noted that the 

proposal could result in lower rebates, 

and that limiting the proposal to only 

qualifying issuers could result in market 

imbalances and lead to higher costs or 

fewer coverage options. These 

commenters noted concern that the 

proposal could unintentionally 

incentivize issuers to reduce their costs 

by reducing benefit quality. 

Response: We appreciate the 

commenters’ perspectives and agree that 

the policy will have a number of 

beneficial impacts. We agree that the 

policy could benefit enrollees in 

underserved communities, particularly 

those with chronic conditions and those 

with lower incomes that are served by 

issuers that receive large risk adjustment 

payments in proportion to their 

revenue. We believe that allowing 

qualifying issuers the flexibility to 

account for risk adjustment transfers in 

the denominator of the MLR calculation 

will enable them to continue to serve 

these communities and provide 

continuity of care to enrollees. We 

intend to monitor the impact of the 

finalized policy to the extent resources 

are available. While we acknowledge 

commenters’ concern that the finalized 

policy could reduce rebates, we note 

that any rebate reduction is expected to 

come from issuers whose business 

models put them at risk of being 

financially unviable and unable to 

continue to provide coverage or pay any 

rebates, and thus any rebate reduction 

would be outweighed by the benefit to 

enrollees of being able to continue their 

current health coverage, or access higher 

quality health coverage that might not 

otherwise be available. We do not agree 

that the policy would incentivize 

issuers to reduce benefit quality, raise 

costs, or reduce coverage options as 

such coverage changes would not attract 

higher-risk enrollees for which the 

issuer would receive risk adjustment 

payment. For the reasons described in 

more detail in the response to the 

comment below, we also do not believe 

that the rule is likely to cause significant 

market imbalances or precipitate issuer 

insolvencies. However, we intend to 

monitor and analyze the impact of this 

provision after it is implemented for the 

2026 and later MLR reporting years to 

evaluate whether it operates as intended 

and continues to be appropriate. 

Comment: One commenter requested 

that CMS provide the number of 

impacted issuers as well as additional 

data on the impact of the proposal to 

enable interested parties to fully 

evaluate the proposal. 

Response: As noted in the Regulatory 

Impact Analysis section of this final 

rule, since the proposal as finalized is 

not mandatory for qualifying issuers, 

CMS cannot, at this time, provide the 

number of impacted issuers. However, 

based on 2023 MLR data, we estimate 

that fewer than half a dozen issuers 

would meet the new definition of 

‘‘qualifying issuer’’ and, if all of them 

choose to modify the treatment of risk 

adjustment transfer amounts in the 

manner described and finalized in this 

rule, would experience a total combined 

reduction in rebates of approximately 

$35 million, out of approximately 180 

issuers that owed approximately $946 

million in combined total rebates for 

2023. 

Comment: Several commenters 

opposed the proposal. The majority of 

these commenters advocated for the 

alternative approach described in the 

proposed rule that would apply the risk 

adjustment transfer amounts in a 

manner that has a net impact on the 

MLR denominator instead of numerator 

for all issuers, rather than only 

‘‘qualifying issuers.’’ In contrast, a few 

commenters who opposed the proposal 

stated that if CMS nevertheless did 

finalize the proposal, they would prefer 

the proposed narrow approach, rather 

than the alternative approach, as it 

would be less harmful. These 

commenters were particularly 

concerned with the potential negative 

impacts of the alternative approach on 

the lower-cost issuers that tend to offer 

more affordable plans designed to target 

low utilization, generally owe risk 

adjustment payments, and sometimes 

face solvency concerns of their own. 

One commenter opposed both the 

proposal and the alternative approach. 

Several commenters noted concern that 

the proposal would exacerbate pricing 

uncertainty and market distortion for 

non-qualifying issuers. One commenter 

stated that they were unable to 

conclusively determine whether risk 

adjustment should be reflected in the 

MLR numerator or denominator, while 

two commenters stated they consider 

payments or receipts related to the HHSoperated risk adjustment program to be 

more appropriate as an adjustment to 

premium rather than claims, as this 

would be consistent with both generally 

accepted accounting practices and State 

statutory accounting. 

Response: Given the wide range of 

views among commenters, including 

conflicting views regarding whether 

payments or receipts related to the risk 

adjustment program are generally more 

appropriate as an adjustment to 

premium in the MLR denominator or 

claims in the MLR numerator, we are 

declining to adopt the alternative 

approach described in the proposed rule 

and are finalizing the narrower proposal 

that applies the changes only to 

‘‘qualifying issuers,’’ rather than all 

issuers, with the modification discussed 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4515 

above to allow qualifying issuers to opt 

into taking advantage of modifying the 

treatment of risk adjustment transfer 

amounts in their MLR and rebate 

calculations. We agree with commenters 

who favored limiting this option to 

qualified issuers as a means of reducing 

the possibility of an adverse impact on 

issuers that owe risk adjustment charges 

and that may have lower administrative 

costs and premiums. Given the very 

small number of issuers that we 

estimate will meet the definition of a 

‘‘qualifying issuer’’ and also owe 

rebates, we believe that finalizing the 

narrower proposal will have minimal 

possibility of disrupting the market and 

exacerbating pricing uncertainty, and 

we share some commenters’ concerns 

regarding the potential negative impact 

of higher MLR rebates under the 

alternative approach on issuers that owe 

risk adjustment payments. 

Comment: Some commenters who 

opposed the proposal stated that the 

proposed 50 percent threshold to 

become a ‘‘qualifying issuer’’ is 

arbitrary, inequitable, and would create 

an unlevel playing field. These 

commenters stated that the proposal 

could incentivize issuers to set 

inadequate rates to meet the new 

definition of a qualifying issuer, and 

that if actual risk adjustment receipts 

were to be lower than expected, an 

issuer could face both inadequate 

premium and risk adjustment revenue, 

as well as have to pay higher than 

expected rebates, which could 

ultimately increase, rather than prevent, 

market instability and issuer 

insolvencies. 

Response: We acknowledge 

commenters’ concerns. However, we 

believe that this hypothetical scenario, 

under which an issuer that is close to 

the threshold of ‘‘qualifying issuer’’ and 

close to or under the MLR rebate 

threshold would purposely and 

significantly underprice, would greatly 

increase the risk of insolvency, and is 

therefore unlikely. Our analysis of 2023 

MLR data shows that fewer than half a 

dozen additional issuers have aggregate 

ratios of risk adjustment receipts to 

premium between 20 and 50 percent. 

Further, our analysis of 2023 MLR data 

also shows that very few issuers 

nationwide would currently meet the 

threshold to qualify as a ‘‘qualifying 

issuer’’ and also owe rebates, and thus 

it is unlikely that providing the option 

for these issuers to modify the treatment 

of risk adjustment transfer amounts in 

the manner described and finalized in 

this rule would cause significant or 

widespread market uncertainty, 

distortion, or instability that would 

outweigh the benefits of codifying this 

narrow flexibility for qualifying issuers 

that opt to utilize it. For the same 

reason, we disagree that the 50 percent 

threshold is arbitrary or would create an 

uneven playing field, as it was chosen 

to capture a small number of issuers that 

are clear outliers relative to the 

prevalent positioning in the industry, 

and whose risk adjustment transfer 

amounts and premium revenue indicate 

business models that are fundamentally 

different from those of most issuers. 

Comment: One commenter noted 

skepticism that the proposal validly 

asserts that risk adjustment 

overcompensates issuers whose 

premiums are below statewide average 

premium and that they should be 

entitled to retain that 

overcompensation. One commenter also 

noted that the proposal is unnecessary 

since any issuer whose risk adjustment 

program payments are large enough to 

result in it owing MLR rebates is being 

overcompensated by the risk adjustment 

program for its enrollees, depriving 

those enrollees of an MLR rebate. 

Response: The policy being finalized 

in this final rule is designed to target 

issuers that rely on risk adjustment 

receipts for revenue to such a 

disproportionate degree that it distorts 

the results of the MLR and rebate 

calculations, and that are consequently 

also unable to reduce enrollees’ 

premiums any further without 

jeopardizing solvency. Therefore, we do 

not agree that the policy would enable 

such issuers to be overcompensated or 

that it would improperly deprive their 

enrollees of the benefit of MLR rebates. 

Comment: A few commenters urged 

CMS to explore alternative vehicles 

other than MLR to address the stated 

policy concerns, such as addressing 

issues with the HHS-operated risk 

adjustment program or focusing on 

other policies that directly impact 

issuers’ long-term financial stability and 

actuarily sound pricing practices. 

Response: We appreciate the 

commenters’ suggestions. We have 

analyzed the HHS risk adjustment 

methodology in numerous white papers, 

have refined the HHS risk adjustment 

methodology as new data become 

available, and have finalized 

modifications and improvements to it as 

necessary, including in this final rule. 

However, the modifications we are 

finalizing in part 158 do not impact the 

HHS-operated risk adjustment program, 

and the comment regarding changes to 

the HHS-operated risk adjustment 

program to address issuers’ financial 

stability and pricing practices is out of 

scope of this proposal. As stated in the 

proposed rule, the change to the MLR 

and rebate calculations is intended to 

specifically address concerns that, for 

certain issuers with risk adjustment 

payments that are greater than half of 

their premium revenue, these 

calculations might require large rebate 

payments that impact solvency—a 

scenario that we believe is contrary to 

the goals of the MLR program. As such, 

we believe that finalizing the proposed 

change to the MLR and rebate 

calculations for qualifying issuers, at 

their option, is appropriate. 

Comment: One commenter supported 

making the proposal effective beginning 

with the 2026 MLR reporting year. 

Response: We thank the commenter 

for their support of the proposed 

effective date and are finalizing this 

proposal, with modification, effective 

beginning with the 2026 MLR reporting 

year. 

Comment: One commenter suggested 

CMS postpone finalizing the proposal to 

study its potential impact in greater 

depth and to receive additional 

feedback from interested parties. 

Response: While we appreciate the 

commenter’s suggestion, we decline to 

postpone finalizing the proposal. We 

received many detailed and thorough 

comments from interested parties that 

addressed the full spectrum of the 

potential benefits and drawbacks of the 

proposal, and that are sufficient to 

inform the decision to finalize the 

proposal. However, as noted above, we 

intend to monitor and analyze the 

impact of this policy after it is 

implemented for the 2026 and later 

MLR reporting years to evaluate 

whether it operates as intended and 

continues to be appropriate. 

Comment: One commenter urged 

CMS to investigate how issuers and 

PBMs are using vertically integrated 

systems to circumvent the intent of the 

MLR reporting and rebate rules by 

shifting profits from an issuer to an 

affiliated entity that is not subject to the 

MLR requirements, or inflating clinical 

reimbursement payments to affiliated 

providers. One commenter 

recommended that we change the 

definition of a ‘‘health plan’’ to include 

stand-alone dental coverage. 

Response: While we appreciate the 

commenters’ recommendations, these 

comments are out of scope of this 

proposal. 

F. Severability 

As demonstrated by the number of 

distinct programs addressed in this 

rulemaking and the structure of this 

final rule in addressing them 

independently, HHS generally intends 

this rule’s provisions to be severable 

from each other. For example, the final 

rule outlines payment parameters and 


lotter on DSK11XQN23PROD with RULES5
4516 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

252CMS, CMS Update on Actions to Prevent 

Unauthorized Agent and Broker Marketplace 

Activity, https://www.cms.gov/newsroom/pressreleases/cms-update-actions-prevent-unauthorizedagent-and-broker-marketplace-activity#:∼:text=

consumers%20who%20believe%20they%20may,

resolve%20any%20coverage%20

issues%20promptly. Oct. 17, 2024. 

provisions for the HHS-operated risk 

adjustment and risk adjustment data 

validation programs, 2026 user fee rates 

for issuers in these programs, and 

changes to the BHP payment 

calculations. It includes modifications 

to the initial and second validation 

audit processes that are part of the 

HHS–RADV program and addresses 

HHS’ authority to take enforcement 

action against lead agents at insurance 

agencies for violations of HHS’ 

Exchange standards and requirements. 

The rule also addresses certification 

standards, ECP reviews, public sharing 

of aggregated, summary-level QIS 

information on an annual basis, and 

revisions to the MLR reporting and 

rebate requirements for qualifying 

issuers that meet certain standards. It is 

HHS’ intent that if any provision of this 

final rule is held to be invalid or 

unenforceable by its terms, or as applied 

to any person or circumstance, the rule 

shall be construed so as to continue to 

give maximum effect as permitted by 

law. In the event a provision is found to 

be utterly invalid or unenforceable, HHS 

intends that that provision to be 

severable. 

IV. Waiver of Delay in Effective Date 

We ordinarily provide a minimum 60- 

day delay in the effective date of the 

provisions of a rule in accordance with 

the Administrative Procedure Act (APA) 

(5 U.S.C. 553(d)), which usually 

requires a 30-day delayed effective date, 

and the Congressional Review Act 

(CRA) (5 U.S.C. 801(a)(3)), which 

usually requires a 60-day delayed 

effective date for major rules. However, 

we can waive the APA and CRA delay 

in effective date requirements for good 

cause (5 U.S.C. 553(d)(3) waiver 

available when ‘‘provided by the agency 

for good cause found and published 

with the rule’’; 5 U.S.C. 808(2) (waiver 

available when ‘‘an agency for good 

cause finds (and incorporates the 

finding and a brief statement of reasons 

therefore in the rule issued that notice 

and public procedure thereon are 

impactable, unnecessary, or contrary to 

the public interest’’). The Secretary has 

determined that it is appropriate to 

issue this final rule effective 

immediately from the date this rule 

appears in the Federal Register. The 

provisions are necessary to address 

imminent threats to the health and 

safety of Exchange enrollees presented 

by unauthorized changes to a 

consumer’s health coverage. 

Prompt action is necessary to provide 

for certain critical changes to our 

monitoring of agents and brokers for 

2025 to protect consumers, insurers, and 

agents and brokers from non-compliant 

actors. Over the past year, HHS has 

observed inappropriate behavior by a 

small population of agents and brokers 

in the Exchanges that significantly 

impacts and endangers consumers. The 

non-compliant actions of these agents 

and brokers have placed the health and 

safety of consumers at risk, led to 

consumer financial harm, and 

undermined trust in the Exchanges and 

the healthcare system. 

HHS has observed enrollment 

practices where agents and brokers 

switch individuals’ plans without their 

consent or enroll them in a plan without 

their consent. This has led to dangerous 

gaps in coverage that kept consumers 

from obtaining medications for chronic 

conditions and placed at risk their 

ability to receive medically necessary 

procedures and services because of the 

disruption to their coverage. Making 

this final rule effectively immediately 

will help to mitigate the significant 

health and safety risk that consumers 

will go without necessary medical care 

and services due to gaps in coverage 

that are no fault of their own. 

As reported, from January to August 

of 2024 there were 90,863 unauthorized 

plan switches and 183,553 unauthorized 

enrollments attributed to agent and 

broker misconduct.252 Such actions not 

only harm consumers, but also place 

sensitive consumer information at risk, 

disrupting the integrity of the 

Exchanges. The oversight policies in 

this final rule are integral to combatting 

agent and broker misuse of sensitive 

consumer information. Privacy 

violations pose a significant risk, as 

unauthorized use or sharing of personal 

consumer information can lead to 

identity theft and other privacy 

breaches. In response to the proposed 

rule, interested parties requested speedy 

changes in oversight to protect 

consumers from noncompliant and 

fraudulent behavior to protect 

consumers and maintain the integrity of 

the Exchanges. 

Consumers also have faced financial 

harm after being inappropriately lured 

into a plan by misleading agent/broker 

advertisements that promise nonexistent cash benefits, as well as 

concerning behavior involving the use 

of high-pressure sales tactics. Such 

tactics have caused consumers to enroll 

in QHPs with no premium 

responsibility when they are already 

enrolled in Medicaid or employer 

sponsored coverage that qualifies as 

minimum essential coverage that 

disqualifies them from receiving APTCs 

to support QHP premium payments. 

This has exposed affected consumers to 

liability to repay APTCs once they 

discover they were enrolled in a plan 

without their knowledge or consent. 

Prompt action is also necessary to 

provide for certain critical changes to 

our programs for 2025—including a 

policy to allow issuers to voluntarily 

adopt multiple premium payment 

thresholds to support continuous 

coverage of consumers; an amendment 

to the medical loss ratio (MLR) 

calculation to account for risk 

adjustment; updates to user fees for 

issuers offering qualified health plans 

(QHPs) through an FFE or SBE–FP and 

those participating in the HHS–RADV 

program; amendments to adjust the 

premium adjustment factor (PAF) in the 

Basic Health Program (BHP); a 

clarification to the BHP payment 

methodology to address ambiguities 

when multiple second lowest cost silver 

plans exist in one county; risk 

adjustment data validation policies that 

remove enrollees without HCCs from 

the IVA sampling methodology and 

remove the finite population correction 

(FPC) factor; and timeliness standards 

for State Exchanges to review and 

resolve enrollment data inaccuracies. 

We seek an immediate effective date to 

allow issuers ample time to prepare for 

the 2025 plan year and help stabilize the 

Exchanges for issuers and consumers. 

We believe consumers’ confidence in 

the Exchanges is especially important 

this time of year when they are making 

enrollment decisions, with Open 

Enrollment in the individual market 

ongoing and the Medicare General 

Enrollment period about to begin on 

January 1. States, issuers, and other 

interested parties have also requested 

that this rule become effective earlier to 

establish rates for 2026 in a timely 

fashion. 

HHS has determined that 

implementation of these changes 

beginning early in 2025 is necessary to 

protect against imminent threats to the 

health and safety of Exchange 

applicants and enrollees, maintain 

robust participation on the Exchanges, 

and to encourage affordability of 

coverage for enrollees and the 

continuity of care that is supported by 

the continued availability of plans on 

the Exchanges. HHS has therefore found 

good cause to waive the APA’s and 

CRA’s delayed effective date 

requirements and determined that the 

rule will become effective immediately 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4517 

253See Department of Labor. (2024, April 3). 

Bureau of Labor Statistics, Occupational 

Employment and Wage Statistics, May 2023 

Occupation Profiles. https://www.bls.gov/oes/ 

current/oes_stru.htm. 254 In the current IVA sampling methodology, a 

Finite Population Correction factor is used to 

calculate a target IVA sample size less than 200 

enrollees for issuers with less than 4,000 enrollees. 

on the date this rule appears in the 

Federal Register January 15, 2025. 

V. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995 (PRA), we are required to 

provide a 60-day notice in the Federal 

Register and solicit public comment 

before a collection of information 

requirement is submitted to the Office of 

Management and Budget (OMB) for 

review and approval. To fairly evaluate 

whether an information collection 

should be approved by OMB, section 

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

Reduction Act of 1995 requires that we 

solicit comments on the following 

issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of the agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We solicited public comment on each 

of these issues for the following sections 

of this document that contain 

information collection requirements 

(ICRs). The public comments and our 

responses appear in this section, and in 

the applicable ICR sections that follow. 

A. Wage Estimates 

To derive wage estimates, we 

generally use data from the Bureau of 

Labor Statistics to derive average labor 

costs (including a 100 percent increase 

for the cost of fringe benefits and 

overhead) for estimating the burden 

associated with the ICRs.253 Table 4 

presents the median hourly wage, the 

cost of fringe benefits and overhead, and 

the adjusted hourly wage. 

As indicated, employee hourly wage 

estimates have been adjusted by a factor 

of 100 percent. This is necessarily a 

rough adjustment, both because fringe 

benefits and overhead costs vary 

significantly across employers, and 

because methods of estimating these 

costs vary widely across studies. 

Nonetheless, there is no practical 

alternative, and we believe that 

doubling the hourly wage to estimate 

total cost is a reasonably accurate 

estimation method. 

B. ICRs Regarding the Initial Validation 

Audit (IVA) Sample—Enrollees Without 

HCCs, Removal of the FPC, and Neyman 

Allocation (§ 153.630(b)) 

Beginning with the 2025 benefit year 

of HHS–RADV, we are finalizing under 

§ 153.630(b) excluding enrollees 

without HCCs from the IVA sampling 

methodology, removing the FPC from 

IVA sampling,254 and replacing the 

source of the Neyman allocation data 

with the most recent 3 years of 

consecutive HHS–RADV data with 

results that have been released before 

HHS–RADV activities for the benefit 

year begin. Specifically, these 

amendments will exclude enrollees 

without HCCs (stratum 10 enrollees that 

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

from IVA sampling, remove the FPC 

such that issuers with 200 or more 

enrollees in strata 1 through 9 will have 

IVA sample sizes of 200 enrollees and 

issuers with less than 200 enrollees in 

strata 1 through 9 will have IVA sample 

sizes equal to their population of 

enrollees with HCCs, and change the 

source of the Neyman allocation data 

used to calculate the standard deviation 

of risk score error from MA–RADV data 

to HHS–RADV data. By removing 

enrollees without HCCs from IVA 

sampling, the Neyman allocation will 

only apply to enrollees with HCCs in 

strata 1 through 9 in the IVA sample. 

These amendments are intended to 

improve the validity of our IVA 

sampling assumptions and sampling 

precision and will decrease aggregate 

burden across all issuers when 

implemented in combination. As noted 

in section III.B.6.a of this final rule, the 

finalized changes to the IVA sampling 

methodology will result in increased 

sample sizes for some smaller issuers 

that are subject to the FPC and currently 

assigned modified IVA sample sizes less 

than 200 enrollees under the current 

methodology. However, sample size is 

not necessarily indicative of issuer 

burden in HHS–RADV, as the driving 

factor of burden is the number of 

enrollee medical records that must be 

retrieved and reviewed for the IVA 

sample. Overall, the amended IVA 

sampling methodology in this final rule 

alters the allocation of strata sample 

sizes within the IVA sample, ultimately 

resulting in relatively smaller 

proportions of enrollees from high-risk 

strata, who generally have more medical 

records to review, being selected for the 

IVA sample, on average. Consequently, 

with these amendments, the average 

number of medical records reviewed per 

enrollee in the IVA sample and the 

average number of medical records 

reviewed per issuer will decrease. 

The currently approved information 

collection (OMB Control Number 0938– 

1155) for conducting the IVA takes into 

account that the issuer must review the 

IVA sample and determine which 

enrollees will require medical records to 

validate their HCCs and details the 

processes the issuer must undertake to 

obtain medical records for their 

enrollees selected for the IVA sample. In 

the currently approved information 


lotter on DSK11XQN23PROD with RULES5ER15JA25.056</GPH>

TABLE 4: Adjusted Hourly Wages Used in Burden Estimates 

tion Technologists and 

ars 

29-9021 

13-1041 

30.28 30.28 

36.38 36.38 

60.56 

72.76 
4518 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

255OMB Control No: 0938–1155 (exp. April 30, 

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

PRAViewICR?ref_nbr=202308-0938-015. 

256A total of 605 issuers participated in the HHSoperated risk adjustment program for the 2023 

benefit year. However, some of these issuers are 

subject to exemptions from HHS–RADV under 45 

CFR 153.630(g) and would not submit IVA samples 

for HHS–RADV. For example, any issuers at or 

below the materiality threshold for random and 

targeted sampling only participate in HHS–RADV 

approximately once every 3 years. Therefore, we 

use 600 issuers as a conservative upper limit of the 

number of issuers that could participate in a given 

benefit year of HHS–RADV. See the Summary 

Report on Individual and Small Group Market Risk 

Adjustment Transfers for the 2023 Benefit Year 

(July 22, 2024) available at https://www.cms.gov/ 

cciio/programs-and-initiatives/premiumstabilization-programs/downloads/ra-reportby2023pdf. 

257This estimate is a decrease from the estimate 

of medical record requests per enrollee in the 

currently approved information collection because 

the finalized changes to the IVA sampling 

methodology in this rule will generally result in 

relatively fewer enrollees sampled from higher-risk 

strata, which are generally composed of enrollees 

with more medical records, thereby reducing our 

estimated number of medical records for review. 

collection, we estimate an upper limit of 

650 issuers submitting samples of 200 

enrollees for HHS–RADV for any given 

benefit year, five medical record 

requests per enrollee in the IVA sample 

size and three HCCs to be reviewed by 

a certified medical coder per enrollee 

with HCCs, which leads to an aggregate 

burden of conducting IVAs of 

approximately 1,663,729 hours and 

$116,963,821.255 Given the changes to 

the IVA sample under the policies in 

this final rule and recent HHS–RADV 

data, we estimate an upper limit of 600 

issuers submitting samples of 200 

enrollees for HHS–RADV for any given 

benefit year.256 We estimate an 

approximate average of two medical 

records reviewed and two HCCs 

reviewed per enrollee in the IVA sample 

under the revised IVA sampling 

methodology. 

For our monetary and hourly burden 

estimates, we are incorporating labor 

and wage costs from the most recent 

premium stabilization programs 

information collection, ‘‘Standards 

Related to Reinsurance, Risk Corridors, 

Risk Adjustment, and Payment 

Appeals’’ (OMB Control Number 0938– 

1155). Based on an analysis that applies 

the amendments to remove enrollees 

without HCCs from IVA sampling, 

remove the FPC, and use HHS–RADV 

data as the source for the Neyman 

allocation beginning with 2025 benefit 

year HHS–RADV, approximately 200 

enrollees in an issuer sample will 

require medical records to validate 

HCCs, with approximately two medical 

record requests per enrollee 

(approximately 400 medical record 

requests per issuer).257 We estimate it 

will take a business operations 

specialist (occupation title ‘‘Business 

Operations Specialists, All Other’’ at an 

hourly wage rate of $76.52) 

approximately 1 hour to complete, 

review, and conduct follow-up on each 

medical record request (20 minutes each 

to complete each medical record 

request, review the response to each 

medical record request, and to conduct 

further follow-up on each medical 

record request). For each issuer, we 

anticipate the burden will be 

approximately 400 hours at a cost of 

$30,608. For an estimated 600 issuers 

required to submit samples for HHS– 

RADV for any given benefit year, we 

anticipate that the aggregate burden of 

completing medical record reviews will 

be approximately 240,000 hours and 

$18,364,800. 

Based on a review of enrollee-level 

EDGE data for the 2017–2022 benefit 

years and the finalized changes to the 

IVA sampling methodology in this final 

rule, we have determined that for 

enrollees with HCCs, the average 

number of HCCs to be reviewed by a 

certified medical coder per enrollee will 

be approximately two HCCs. 

Additionally, based on HHS–RADV 

audit experience, we estimate that it 

may cost approximately $272.52 ($60.56 

per hour for 4.5 hours on average) for a 

certified medical coder to review the 

medical record documentation for one 

enrollee with roughly two HCCs. For 

200 enrollees with HCCs in an issuer’s 

IVA sample, the total cost to each issuer 

will be $54,504 (for 900 hours). In some 

cases, a secondary review by a senior 

certified medical coder (occupation title 

‘‘Health Information Technologists and 

Medical Registrars’’ at an hourly wage 

rate of $60.56 per hour) will be needed 

to re-review approximately one-third of 

the medical record documentation 

required during the first review. Thus, 

a senior certified medical coder will 

need to review medical documentation 

for the equivalent of approximately 66 

enrollees with HCCs in an issuer 

sample. We estimate that the total cost 

to each issuer will be approximately 

$17,986.32 ($60.56 per hour for 4.5 

hours per enrollee). For this review and 

secondary review, the total cost to each 

issuer will be approximately $72,490.32 

(1,197 total hours). 

These changes will not affect the 

review of demographic and enrollment 

information, as we will continue to 

validate demographic and enrollment 

information for a subsample of up to 50 

enrollees from the audit sample, or the 

RXC review, as the audit entity must 

review RXCs for all adult enrollees in 

the audit sample with at least one RXC, 

and we continue to assume that a 

review will be performed on 

approximately 50 RXCs per issuer. As 

such, we are only changing our burden 

estimates of demographic and 

enrollment or RXC review to use the 

most recent median hourly wage 

estimates. We estimate that it may cost 

approximately $20.19 per enrollee 

($60.56 per hour for 20 minutes) to 

validate demographic information for 50 

enrollees in each audit sample totaling 

$1,009.33 per issuer. Similarly, we 

estimate that RXC validation for 50 

enrollees will cost approximately $20.19 

per RXC ($60.56 per hour for 20 

minutes), totaling $1,009.33 per issuer. 

In addition, for each issuer, we expect 

it will require a compliance officer 

working 40 hours at $72.76 per hour, 

and two operations managers working a 

total of 80 hours at $97.38 per hour to 

make available to external medical 

coders associated with the IVA entity 

claims documents for review of 

demographic information and RXC 

review (120 hours at a combined cost of 

$10,701). 

For each issuer submitting audit 

findings for HHS–RADV in a given 

benefit year, the total burden for 

reporting, coding, and administration 

will be approximately 1,750.33 hours at 

a cost of $115,817.79 per issuer. For an 

estimated 600 issuers required to submit 

audit findings for HHS–RADV for any 

given benefit year, we anticipate that the 

aggregate burden of conducting IVAs 

will be approximately 1,050,200 hours 

and $69,490,672 beginning in 2025. 

This reflects an aggregate burden 

decrease of 613,529 hours and 

$47,473,149 from the existing aggregate 

burden estimate of approximately 

1,663,729 hours and $116,963,821. 

We sought comment on these 

assumptions. 

We did not receive any comments in 

response to the proposed burden 

estimates for this policy. We received 

comments on the general impacts of this 

policy on issuer and IVA Entity burden 

and respond to those comments in 

section III.B.6.a. and the Regulatory 

Impact Analysis section of this rule. For 

the reasons outlined in the proposed 

rule and this final rule, we are finalizing 

these estimates as proposed. 

C. ICRs Regarding Engaging in

Compliance Reviews and Taking

Enforcement Actions Against Lead

Agents for Insurance Agencies

(§ 155.220)

This finalized policy addresses HHS’

authority to engage in compliance 

reviews of and take enforcement action 

against lead agents of insurance 

agencies in both FFE and SBE–FP States 

for misconduct or noncompliant activity 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4519 

258This includes documentation of consumer 

review and confirmation of the accuracy of 

eligibility application information in compliance 

with 45 CFR 155.220(j)(2)(ii)(A)(2) and consumer 

consent documentation in compliance with 45 CFR 

155.220(j)(2)(iii)(c). 

259 5 CFR 1320.4(a)(2). 260 Id. 

at the agency level. We did not propose 

any amendments to our existing 

regulations as the current regulatory 

framework and definitions supports this 

approach. Furthermore, this finalized 

policy only envisions collecting agencylevel documentation, including, but not 

limited to, training manuals, onboarding 

material, and marketing materials, from 

lead agents, in addition to the existing 

documentation collection 258 for agents, 

brokers, or web-brokers, to investigate 

potential misconduct or noncompliant 

behavior or activities. Therefore, this 

collection will fall under 5 CFR 

1320.4(a)(2), stating collections of 

information ‘‘. . . during the conduct of 

an [. . .] investigation’’ are exceptions 

to the ICR requirements.259 The 

documentation that will be collected 

will solely relate to investigations of 

potential misconduct or noncompliant 

behavior or activities such that this 

exception will apply. 

We sought comment on these 

assumptions. 

We did not receive any public 

comments regarding this ICR, and the 

assumptions made. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

assumptions for this policy as proposed. 

D. ICRs Regarding Agent and Broker 

System Suspension Authority 

(§ 155.220(k)) 

We are finalizing an amendment to 

expand HHS’ authority to suspend 

system access for agents and brokers 

under § 155.220(k)(3) in instances in 

which we discover circumstances that 

pose unacceptable risk to the accuracy 

of the Exchange’s eligibility 

determinations, Exchange operations, 

applicants or enrollees, or Exchange 

information technology systems, 

including but not limited to risk related 

to noncompliance with the standards of 

conduct under § 155.220(j)(2)(i), (ii), or 

(iii) or the privacy and security 

standards at § 155.260, until the 

circumstances of the incident, breach, or 

noncompliance are remedied or 

sufficiently mitigated to HHS’ 

satisfaction. Since this amendment will 

entail providing an opportunity for 

agents and brokers to submit evidence 

and information to demonstrate that the 

circumstances of the incident, breach, or 

noncompliance have been remedied or 

sufficiently mitigated to HHS’ 

satisfaction, it will involve collecting 

documents from agents and brokers 

participating in the FFEs and SBE–FPs 

whose system access has been 

suspended. Depending on the 

circumstances leading to the system 

suspension, we anticipate receiving 

documentation of consumer consent 

and/or review and confirmation of the 

accuracy of the Exchange eligibility 

application information and assessing 

whether the documentation complies 

with § 155.220(j)(2)(ii) and (iii) for 

consumers cited in the suspension 

notice from agents and brokers we 

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

The system suspension authority in 

§ 155.220(k)(3) is part of HHS’ oversight 

and enforcement framework applicable 

to agents and brokers who participate in 

the FFEs and SBE–FPs. Therefore, this 

collection will fall under 5 CFR 

1320.4(a)(2), stating collections of 

information ‘‘. . . during the conduct of 

an [. . .] investigation’’ are exceptions 

to the ICR requirements.260 The 

documentation that will be collected 

will solely relate to investigations and 

responses to system suspensions, 

meaning this exception would apply. 

We sought comment on these 

assumptions. 

We did not receive any public 

comments regarding this ICR, and the 

assumptions made. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

assumptions for this policy as proposed. 

E. ICRs Regarding Updating the Model 

Consent Form (§ 155.220) 

We are finalizing amendments to the 

model consent form created as part of 

the 2024 Payment Notice (88 FR 25809 

through 25811). The existing model 

consent form only provides a template 

for meeting the consent documentation 

and retention requirements of 

§ 155.220(j)(2)(iii)(A)–(C). We are 

finalizing an update such that the model 

consent form will also include a 

template to meet the requirements 

under § 155.220(j)(2)(ii), which requires 

agents, brokers, and web-brokers to 

document that eligibility application 

information has been reviewed by and 

confirmed to be accurate by the 

consumer or their authorized 

representative prior to submission of the 

application to the FFE or SBE–FP. This 

amendment will only update the 

optional model consent form that was 

created as part of the 2024 Payment 

Notice and adopted on June 30, 2023. 

The 2024 Payment Notice (88 FR 25890 

through 25891) considered the 

additional time it would take the 

assisting agent, broker, or web-broker to 

process and submit each consumer’s 

eligibility application, and those 

assumptions remain valid and are 

unchanged. We believe these 

assumptions remain valid as none of the 

regulatory requirements established by 

the 2024 Payment Notice are being 

changed and no new requirements are 

being added with this amendment. 

Therefore, this finalized policy will not 

impart extra time or costs to the 

assisting agent, broker, or web-broker. 

Agents, brokers, and web-brokers are 

already required to meet the 

requirements of § 155.220(j)(2)(ii) and 

(iii), meaning the time required to gather 

the documentation required by the 2024 

Payment Notice is already a part of 

every agent’s, broker’s, and web-broker’s 

enrollment process. We do not believe 

the updated model consent form will 

impose any additional burden on 

agents, brokers, web-brokers, or 

consumers, because usage of this model 

consent form remains optional and this 

updated model consent form is simply 

intended to provide a useable example 

of how agents, brokers, web-brokers, 

and agencies may compliantly meet the 

documentation requirements already 

required by the 2024 Payment Notice. If 

agents, brokers, agencies, or web-brokers 

elect to use this form, we do not 

anticipate that the updated model 

consent form will take any longer to fill 

out than agent, broker, web-broker, or 

agency-created forms or other methods 

being already being utilized currently, 

as the requirements for documentation 

are not changing from the 

documentation requirements that 

agents, brokers, agencies, and webbrokers are already required to meet in 

their current agent, broker, web-broker, 

or agency-created forms or methods. 

The amended model consent form 

will also include scripts agents, brokers, 

and web-brokers can utilize to meet the 

consumer consent and eligibility 

application review requirements 

finalized in the 2024 Payment Notice 

when assisting consumers via an audio 

recording. The scripts will ensure 

agents, brokers, and web-brokers having 

verbal, recorded conversations with 

consumers discuss all the regulatory 

requirements with consumers. We do 

not anticipate these scripts will increase 

burden on any assisting agent, broker, 

web-broker, or consumer as no 

regulatory requirements have been 

changed. As agents, brokers, and webbrokers should already be complying 

with these requirements, no additional 

costs will be borne by the agent, broker, 

or web-broker if using the updated 

model consent form scripts. The scripts 

are merely meant to provide agents, 


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4520 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

brokers, and web-brokers with guidance 

and clarification on how the consent 

documentation and eligibility 

application review documentation 

requirements can be met when having a 

verbal, recorded conversation with a 

consumer. The scripts in the updated 

model consent form are not mandatory 

and are not intended to limit or 

otherwise impact the agent, broker, or 

web-broker’s ability to answer consumer 

questions about plan selection or other 

matters. 

Finally, there is no anticipated 

increase in documentation collection 

burden on HHS based on the updated 

model consent form. We currently 

request documentation of consumer 

consent and eligibility application 

review for compliance reviews and, 

assuming agents, brokers, and webbrokers use the updated model consent 

form, that will not meaningfully impact 

the documentation collection or review 

by HHS. 

The updated model consent form 

discussed in this section will be 

submitted for OMB review and approval 

in the amended PRA package (OMB 

Control No. 0938–1438/Expiration date: 

June 30, 2026). 

We sought comment on these 

assumptions. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing these assumptions for this 

policy as proposed. We summarize and 

respond to public comments received 

on the proposed assumptions below. 

Comment: Some commenters stated 

we should not mandate audio recording 

of enrollments and should not require 

agents, brokers, or web-brokers to use 

our scripts as this would be especially 

burdensome to smaller agents, brokers, 

web-brokers, or agencies. 

Response: While agents, brokers, and 

web-brokers can meet the requirements 

of § 155.220(j)(2)(ii)(A) and (j)(2)(iii) via 

an audio recording, this is just one type 

of documentation that is considered to 

be acceptable under these sections, and 

there is no mandate that an audio 

recording be used to meet these 

requirements. Agents, brokers, and webbrokers may use any method they wish 

to meet the consent documentation 

requirement and review and 

confirmation of the accuracy of 

eligibility application information 

requirement, provided the minimum 

information required by the regulations 

is captured in this documentation and 

the documentation can be maintained 

for a minimum of 10 years and 

produced to CMS upon request. In 

addition, as noted in the proposed rule 

(89 FR 82364), it would not be 

mandatory for agents, brokers, or webbrokers to use the amended model 

consent form or new scripts to comply 

with the requirements set forth in 

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

(C). 

Comment: Numerous commenters 

noted concern that this proposal would 

impose more burdens on agents, 

brokers, and web-brokers, especially 

smaller entities. Commenters stated that 

agents, brokers, and web-brokers would 

have less time to spend with each 

consumer, people would be deterred 

from enrolling, and agents and brokers 

would be deterred from participating in 

the Exchange. 

Response: We respectfully disagree 

with commenters that this proposal will 

require an agents, broker, or web-broker 

to spend more time with each 

consumer, that smaller agents or 

agencies will be impacted more 

severely, or that agents, brokers, webbrokers, or consumers will stop 

participating in the Exchange. 

The proposal to update the model 

consent form does not involve a 

regulatory change or add requirements 

to the current enrollment process. The 

proposal expands the model consent 

form to include means to meet 

requirements that were established in 

the 2024 Payment Notice, namely, the 

requirement to document the consumer 

reviewed and confirmed their eligibility 

application information. The proposal 

also provides scripts an agent, broker, or 

web-broker may utilize to meet these 

requirements, along with the consent 

documentation requirements, if working 

with a consumer via a spoken method. 

The requirements established in the 

2024 Payment Notice remain in effect 

and are unchanged. Therefore, we do 

not anticipate any new burden or 

impact to consumers’, agents’, brokers’, 

or web-brokers’ participation in the 

Exchange that will be associated with 

the updated model consent Form and 

use of this form will remain optional. 

F. ICRs Regarding Notification of 2-Year 

Failure To File and Reconcile 

Population (§ 155.305) 

We are finalizing an amendment to 

current regulation at § 155.305(f)(4) 

under which an Exchange needs to 

provide notification to either an enrollee 

or their tax filer (or both) who have been 

identified as having failed to file their 

Federal income taxes and reconcile their 

APTC after 2 consecutive tax years. This 

notification provides an additional 

opportunity to educate the enrollee or 

their tax filer of their responsibility to 

file their Federal income taxes and 

reconcile their APTC and that they are 

at risk for losing their eligibility for 

APTC. This finalized rule will ensure 

that State Exchanges will provide 

notifications, similar to how Exchanges 

on the Federal platform currently do, 

and that tax filers with a 2 year FTR 

status on State Exchanges receive 

adequate education on the requirement 

to file and reconcile. It will also impact 

State Exchanges’ FTR processing notices 

for PY 2026 and subsequent years, 

although HHS-published guidance has 

already recommended States implement 

noticing procedures for PY 2025 similar 

to what is being required in this final 

rule. We anticipate that the finalized 

amendment will not impact the 

information collection (OMB Control 

Number 0938–1207) burden for 

Exchanges because, in practice, the 

majority of Exchanges are already 

sending notifications to consumers who 

have been identified as at risk for losing 

APTC due to failing to file their Federal 

income taxes and reconcile their APTC 

for 2 consecutive years, as discussed in 

further detail in section VI.C.9 of this 

final rule and section V.C.9 the 

proposed rule. 

We sought comment on these 

assumptions. 

We did not receive any public 

comments regarding this ICR and the 

assumptions made. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

assumptions as proposed. 

G. ICRs Regarding General Program 

Integrity and Oversight Requirements 

(§ 155.1200) 

As discussed in the preamble of this 

final rule, we proposed to increase 

transparency into Exchange operations 

by publishing annual State Exchange 

and SBE–FP SMARTs, programmatic 

and financial audits, Blueprint 

applications, and additional data points 

in the Open Enrollment data reports. We 

are finalizing this proposal with a 

modification to not publish the 

SMARTs. We estimate that there will be 

no additional costs or burdens on 

Exchanges associated with this finalized 

policy since this data is already 

collected through the Blueprint 

application (OMB Control No.: 0938– 

1172), SMART (OMB Control No.: 

0938–1244), and Enrollment Metrics 

PRA packages (OMB Control No.: 0938– 

1119). 

We sought comment on these 

assumptions. 

We did not receive any public 

comments regarding this ICR and the 

assumptions made. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

assumptions as proposed. 


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261OMB Control No. 0938–1415: Essential 

Community Provider-Network Adequacy (ECP/NA) 

Data Collection to Support QHP Certification 

(CMS–10803). 

H. ICRs Regarding Essential Community 

Provider Certification Reviews 

(§ 156.235) 

The finalized policy to conduct ECP 

certification reviews of plans for which 

issuers submit QHP certification 

applications in FFEs in States 

performing plan management functions 

effective beginning in PY 2026 

continues our ECP data collection as 

permitted under the currently approved 

information collection (OMB Control 

No.: 0938–1187/Expiration date: June 

30, 2025). 

To satisfy the ECP requirement under 

§ 156.235, medical QHP and SADP 

issuers must complete and submit ECP 

data as part of their QHP application, in 

which they must list the names and 

geographic locations of ECPs with 

whom they have contracted to provide 

health care services to low-income, 

medically underserved individuals in 

their service areas. These issuers must 

contract with a certain percentage, as 

determined by HHS, of the available 

ECPs in the plan’s service area. This 

finalized policy will not significantly 

change the burden currently approved 

under OMB Control No. 0938–1415,261

because the ECP data collected remains 

the same. Only the format in which the 

ECP information is submitted will be 

different. As described in the preamble 

of this final rule, issuers in FFEs, 

including in States performing plan 

management functions, can now submit 

ECP data to HHS via MPMS. As a result 

of HHS system design enhancements via 

MPMS, HHS is now able to collect ECP 

data directly from issuers in FFEs in 

States performing plan management 

functions, enabling HHS to conduct 

independent ECP evaluations of each 

issuers’ network. 

We sought comment on these 

assumptions. 

We did not receive any public 

comments regarding this ICR and the 

assumptions made. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

assumptions as proposed. 

I. ICRs Regarding Quality Improvement 

Strategy Information (§ 156.1130) 

There is no information collection 

associated with this finalized policy and 

no changes were proposed to the QIS 

data collection requirements applicable 

to QHP issuers. QIS data collection from 

QHP issuers to the Exchange has been 

approved under OMB Control Number 

0938–1286. 

J. ICRs Regarding Medical Loss Ratio 

(§§ 158.103, 158.140, 158.240) 

We are finalizing adding a definition 

of ‘‘qualifying issuer’’ to § 158.103, with 

certain clarifications, amending 

§ 158.140(b)(4)(ii) to no longer adjust 

incurred claims by the net payments or 

receipts related to the risk adjustment 

program for MLR reporting and rebate 

calculation purposes for, and at the 

option of, qualifying issuers, making 

conforming amendments to the rebate 

calculation example in § 158.240(c)(2), 

and adding § 158.240(c)(3) to provide a 

rebate calculation example for 

qualifying issuers that choose to apply 

risk adjustment transfer amounts as 

described in § 158.140(b)(4)(ii). To the 

extent issuers currently report their risk 

adjustment transfer amounts on their 

Annual MLR Reporting Form(s), we do 

not expect there to be any impact on the 

reporting burden, as the affected issuers 

will continue to report the same risk 

adjustment transfer amounts but will 

include them on different lines of the 

MLR Annual Reporting Form. The 

burden related to this information 

collection is currently approved under 

OMB Control No.: 0938–1164. 

We sought comment on these 

assumptions. 

We did not receive any public 

comments regarding this ICR and the 

assumptions made. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

assumptions as proposed. 

K. Summary of Annual Burden 

Estimates for Finalized Requirements 

L. Submission of PRA-Related 

Comments 

We have submitted a copy of the final 

rule to OMB for its review of the rule’s 

information collection and 

recordkeeping requirements. These 

requirements are not effective until they 

have been approved by the OMB. 

To obtain copies of the supporting 

statement and any related forms for the 

finalized proposed collections discussed 

above, please visit CMS’ website at 

www.cms.hhs.gov/ 

PaperworkReductionActof1995, or call 

the Reports Clearance Office at 410– 

786–1326. 

VI. Regulatory Impact Analysis 

A. Statement of Need 

This final rule includes payment 

parameters and provisions related to the 

HHS-operated risk adjustment and risk 

adjustment data validation programs, as 

well as 2026 user fee rates for issuers 

offering QHPs through FFEs and SBE– 

FPs. This final rule also includes 

finalized requirements related to 

modifications to the calculation of the 

BHP payment, changes to the IVA 

sampling approach and SVA pairwise 

means test for HHS–RADV, as well as 

finalized compliance reviews of and 

enforcement action against lead agents, 

updates to the model consent form, and 

the authority for HHS to suspend agent 

and broker access to Exchange systems. 

Additionally, this rule includes 

finalized policies related to consumer 

notification requirements, standards for 

an issuer to request the reconsideration 

of denial of certification as a QHP 

specific to the FFEs, changes to the 

approach for conducting ECP 

certification reviews of plans for which 

issuers submit QHP certification 


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45CFR 

153.630 

TOTAL 

TABLE 5: Final Annual Recordkeeping and Reporting Requirements 

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

600 600 -613,529 -$47,473,149 -$47,473,149 
4522 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

262Office of the White House. (2023, April 6). 

Executive Order on Modernizing Regulatory Review. 

https://www.whitehouse.gov/briefing-room/ 

presidential-actions/2023/04/06/executive-orderon-modernizing-regulatory-review/. 

applications in FFEs in States 

performing plan management functions, 

and revisions to the MLR reporting and 

rebate requirements for qualifying 

issuers. Lastly, this final rule includes 

finalized amendments to specify that 

the actuarially justified plan-specific 

factors by which an issuer may vary 

premium rates for a particular plan from 

its market-wide adjusted index rate 

include the actuarial value and costsharing design of the plan, including, if 

permitted by the applicable State 

authority, accounting for CSR amounts 

provided to eligible enrollees under 

§ 156.410, provided the issuer does not 

otherwise receive reimbursement for 

such amounts. 

B. Overall Impact 

We have examined the impacts of this 

final rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), Executive Order 

14094 entitled ‘‘Modernizing Regulatory 

Review’’ (April 6, 2023), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354, 94 Stat. 1164), 

section 1102(b) of the Act, section 202 

of the Unfunded Mandates Reform Act 

of 1995 (March 22, 1995; Pub. L. 104– 

4, 109 Stat. 48), Executive Order 13132 

on Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 14094 262

amends section 3(f) of Executive Order 

12866 and defines a ‘‘significant 

regulatory action’’ as an action that is 

likely to result in a rule that may: (1) 

have an annual effect on the economy 

of $200 million or more (adjusted every 

3 years by the Administrator of OMB’s 

Office of Information and Regulatory 

Affairs (OIRA) for changes in gross 

domestic product), or adversely affect in 

a material way the economy, a sector of 

the economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local, territorial, or 

Tribal governments or communities; (2) 

create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; (3) 

materially alter the budgetary impacts of 

entitlements, grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise legal or 

policy issues for which centralized 

review would meaningfully further the 

President’s priorities or the principles 

set forth in the Executive Order, as 

specifically authorized in a timely 

manner by the Administrator of OIRA in 

each case. 

A regulatory impact analysis (RIA) 

must be prepared for significant rules. 

OMB’s OIRA has determined that this 

rulemaking is ‘‘significant’’ as measured 

by the $200 million threshold under 

section 3(f)(1). We have prepared an RIA 

that to the best of our ability presents 

the costs and benefits of the rulemaking. 

OMB has reviewed these regulations, 

and the Department has provided the 

following assessment of their impact. 

C. Impact Estimates of the Payment 

Notice Provisions and Accounting Table 

Consistent with OMB Circular A–4 

(available at https://

www.whitehouse.gov/wp-content/ 

uploads/2023/11/CircularA-4.pdf), we 

have prepared an accounting statement 

in Table 6 showing the classification of 

the impact associated with the 

provisions of this final rule. 

This final rule implements standards 

for programs that will have numerous 

effects, including providing consumers 

with access to affordable health 

insurance coverage, reducing the impact 

of adverse selection, and stabilizing 

premiums in the individual and small 

group health insurance markets and in 

Exchanges. We are unable to quantify all 

the benefits and costs of this final rule. 

The effects in Table 6 reflect qualitative 

assessment of impacts and estimated 

direct monetary costs and transfers 

resulting from the provisions of this 

final rule for health insurance issuers 

and consumers. The annual monetized 

transfers described in Table 7 include 

changes to costs associated with the risk 

adjustment user fee paid to HHS by 

issuers. 

BILLING CODE 4120–01–P 


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TABLE 6: Accounting Table 

Benefits: Estimate Year Dollar Discount Rate Period Covered 

Annualized Monetized $/ ear $39 million 2025 2 ercent 2025-2029 

Quantitative: 

• Cost savings of $47,473,149 annually for issuers for conducting IV As due to IV A sampling methodology 

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

ofHHS-RADV. 

• Total cost savings of$1,778,545.44 annually for the 12 FFE States currently performing plan management 

functions associated with reduced administrative burden as finalized since they will no longer be 

responsible for ECP data review. 

• Reduced Federal costs by approximately $75,000 per year associated with the HHS-RADV materiality 

threshold policy, as this policy will eliminate situations wherein HHS is required to reissue HHS-RADV 

results for all issuers when the im act is less than $10,000 be innin in 2025. 

Qualitative: 

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

health equity among this population due to the policy to incorporate PrEP in the HHS risk adjustment adult 

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

• Improved education of tax filers and enrollees regarding the new 2-tax year FTR requirements. 

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

ensuring accurate payment of APTCs by fmalizing HHS' timeliness standard for reporting enrollment data 

inaccuracies and for the State Exchange to resolve them. 

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

impacted by disruptions in coverage, associated with the policy to allow issuers to implement a fixed-dollar 

remium a ment threshold and a oss remium ercenta e-based a ment threshold. 
4524 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 


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• Streamlined appeals processes and improved operational consistency between Exchanges on the Federal 

platform and appeals entities as a result of the finalized policy to allow application filers to file appeals 

through the HHS appeals entity or a State Exchange appeals entity on behalf of applicants and enrollees on 

their Exchange application. 

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

Calculator earlier. 

• Increased transparency in Exchanges by publishing additional metrics on Exchange operations and 

functionality, including actual expenditures on consumer marketing, education, and outreach; actual 

expenditures on Navigator programs; call center metrics during Open Enrollment; and website visitors 

during Open Enrollment. 

Costs: Estimate Year Dollar Discount Rate Period Covered 

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

Quantitative: 

• Cost increase for the Federal Government associated with the HHS-RADV SVA medical record review of 

approximately $1.5 million annually due to initial SV A subsample size increase beginning with the 2024 

benefit year ofHHS-RADV. 

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

due to the finalized SV A pairwise means testing procedure resulting in more SV A subsamples being 

expanded for review beginning with the 2024 benefit year ofHHS-RADV. 

• One-time cost of$250,000 to the Federal Government for coding modifications to test and execute the 

HHS-RADV SVA pairwise means test bootstrapping methodology beginning with the 2024 benefit year of 

HHS-RADV. 

• Annual costs of $292,000 to the Federal Government to send initial direct FTR notices to the 2-tax year 

FTR population starting in benefit year 2025. 

• Annual costs of $92,400 to State Exchanges for FTR notices for the 2-tax year population. 

• Regulatory review costs of $3,336,300 for interested parties to review and analyze this final rule. 

Qualitative: 

• Not a significant increase in administrative burden or fmancial impact on the Federal Government for ECP 

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

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

infrastructure for the FFEs. 

Transfers: Estimates Year Dollar Discount Rate Period Covered 

Annualized Monetized ($/year) Low: $1.442 billion 2025 2 percent 2025-2029 

Annualized Monetized ($/year) High: $1.511 billion 2025 2 percent 2025-2029 

Quantitative: 

• Increase in risk adjustment user fee transfers from issuers to the Federal Government of $6.6 million 

annually beginning in 2026 associated with the fmalized risk adjustment user fee of$0.20 PMPM. 

• An estimated annual transfer of APTC of$817,571,843 from the Federal Government to enrollees whose 

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

fixed-dollar premium payment threshold and gross premium percentage-based payment threshold. 

• Increase in FFE and SBE-FP user fee transfers from issuers to the Federal Government of$732 million for 

benefit year 2026 compared to if the user fee rates from the prior benefit year were maintained in 2026. We 

estimate additional increases in FFE and SBE-FP user fee transfers from issuers to the Federal Government 

of$937 million in 2027, $958 million in 2028, and $997 million in 2029 if the fmalized 2026 user fee rates 

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

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

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

Government of $620 million in 2026, $854 million in 2027, $885 million in 2028, and $918 million in 

2029 if the alternate user fee rates were maintained in subsequent years. 

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

States performing plan management functions to the Federal Government in accordance with the policy for 

HHS to conduct ECP reviews for Exchanges in these States. 

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

of approximately $35 million annually beginning with the 2026 MLR reporting year associated with the 

policy to allow "qualifying issuers" to no longer adjust incurred claims by the net payments or receipts 

related to the risk adiustment program for MLR reporting and rebate calculation purposes. 
Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4525 

263Reinsurance collections ended in FY 2018 and 

outlays in subsequent years reflect remaining 

payments, refunds, and allowable activities. 

BILLING CODE 4120–01–C 

1. BHP Methodology Regarding the 

Value of the Premium Adjustment 

Factor (PAF) (42 CFR Part 600) 

The aggregate economic impact of the 

finalized changes to the BHP payment 

methodology is estimated to be $0 in 

transfers for calendar year 2026 and all 

subsequent years. For the purposes of 

this analysis, we have assumed that two 

States will operate BHPs in 2026 since 

currently only two States operate BHPs, 

and we do not assume any more States 

will do so. 

For the States currently operating 

BHPs, we do not anticipate these 

finalized changes to the payment 

methodology will affect future 

payments. We expect that these States 

will have fully implemented programs 

by 2026, and thus these changes will not 

change the value of the PAF used in the 

payment methodologies for these States 

in 2026 and beyond. If other States 

implement a BHP and do so on a partial 

basis, the finalized changes would be 

expected to reduce Federal BHP 

payments compared to what they would 

be under current law. The changes in 

payments would depend on the number 

of people enrolled in BHP in the State, 

the QHP premiums in the State, and the 

level of adjustments added to the 

premiums to account for the CSRs. 

We sought comment on these impacts 

and assumptions. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates as proposed. 

2. Incorporation of PrEP Affiliated Cost 

Factor (ACF) in the HHS Risk 

Adjustment Adult and Child Models 

(§ 153.320) 

We are finalizing the incorporation of 

PrEP into the HHS risk adjustment adult 

and child models as part of a new class 

of factors that reflect the costs 

associated with care that is not related 

to active medical conditions. This 

finalized class of factors, called the 

Affiliated Cost Factors (ACFs), which 

are detailed in the preamble discussion 

under 45 CFR part 153, will not result 

in any additional reporting burden for 

issuers. Because it will have some 

impact on risk adjustment State 

transfers, some issuers’ State transfers 

will be impacted, either in a positive or 

in a negative manner, consistent with 

the budget-neutral nature of the HHSoperated risk adjustment program. As 

HHS is responsible for operating the risk 

adjustment program in all 50 States and 

the District of Columbia, we do not 

expect these policies to place any 

additional burden on State 

governments. The finalized model 

specifications in this final rule result in 

limited changes to the number and type 

of risk adjustment model factors; 

therefore, we do not expect these 

changes to impact issuer burden beyond 

the current burden for the HHS-operated 

risk adjustment program. This change 

will help mitigate risk of adverse 

selection and issuers’ associated 

perverse incentives for coverage of PrEP 

users, resulting in increased health 

equity among this population. 

We sought comment on these impacts 

and assumptions. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

assumptions as proposed. 

3. Initial Validation Audit (IVA) 

Sampling Methodology Changes 

(§ 153.630(b)) 

We are finalizing several changes to 

the IVA sampling methodology. 

Beginning with the 2025 benefit year of 

HHS–RADV, we are finalizing under 

§ 153.630(b) excluding enrollees 

without HCCs (enrollees in stratum 10 

without HCCs nor RXCs and RXC-only 

enrollees in strata 1 through 3) from IVA 

sampling, removing the FPC such that 

issuers with 200 or more enrollees in 

strata 1 through 9 would have IVA 

sample sizes of 200 enrollees and 

issuers with less than 200 enrollees in 

strata 1 through 9 would have IVA 

sample sizes equal to their EDGE 

population of enrollees with HCCs, and 

changing the source of the Neyman 

allocation data used to calculate the 

standard deviation of risk score error 

from MA–RADV data to the 3 most 

recent consecutive years of HHS–RADV 

data with results that have been released 

before that benefit year’s HHS–RADV 

activities begin, beginning with benefit 

year 2025 HHS–RADV. 

Although issuers are already required 

to provide the IVA Entities with all 

documentation necessary to complete 

HHS–RADV, these finalized changes to 

the IVA sample will ensure all enrollees 

in the IVA sample have at least one HCC 

on EDGE and therefore will have 

associated medical records that will 

need to be submitted. In the Collection 

of Information section of this final rule, 

we estimate the aggregate decrease in 

administrative burden that will result 

from the finalized policies to modify the 

IVA sample as the average number of 

medical records reviewed per enrollee 

in the IVA sample and the average 

number of medical records reviewed per 

issuer will decrease. We estimate that 

the aggregate burden of conducting IVAs 

will be approximately 1,050,200 hours 

and $69,490,672 beginning with 2025 

benefit year HHS–RADV, which is an 

aggregate burden decrease of 613,529 


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TABLE 7: Estimated Federal Government Outlays and Receipts for the Risk Adjustment 

and Reinsurance Programs from Fiscal Year 2026-2030, in billions of dollars263 

Risk Adjustment and Reinsurance 

Pro am Pa ments 

Risk Adjustment and Reinsurance 

Pro am Collections 

9 

-10 -10 -10 

49 

-10 -10 -50 

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

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

Under Age 65: 2023 to 2033. Table A-2. September 2023. https://www.cbo.gov/system/jiles/2023-09/59273-

health-coverage.pdf 
4526 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

264For more details on RXC validation, see 

Section 10.4 Validation of the BY23 HHS–RADV 

Protocols available at: https://regtap.cms.gov/ 

uploads/library/HHS-RADV_2023_Benefit_Year_

Protocols_v1_5CR_060424.pdf. 

265 45 CFR 153.630(g)(2). 

266Beginning with the 2022 benefit year of HHS– 

RADV, the materiality threshold under 

§ 153.630(g)(2) is defined as 30,000 total billable 

member months Statewide, calculated by 

combining an issuer’s enrollment in the individual 

non-catastrophic, catastrophic, small group, and 

merged markets (as applicable), in the benefit year 

being audited. See the 2024 Payment Notice, 88 FR 

25740, 25788 through 25790. 

hours and $47,473,149 from the existing 

aggregate burden estimate of 

approximately 1,663,729 hours and 

$116,963,821. We believe that these 

finalized changes to the IVA sampling 

methodology will result in more precise 

HHS–RADV results which are used to 

adjust risk scores and associated risk 

adjustment State transfers. 

We sought comment on these impacts 

and assumptions. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing these impact estimates for this 

policy as proposed. We summarize and 

respond to public comments received 

on the proposed estimates below. 

Comment: A few commenters agreed 

that the proposed changes to the IVA 

sampling methodology would 

contribute to reduced administrative 

burden among issuers and IVA entities. 

One commenter specifically suggested 

that administrative burden could 

decrease for issuers with a greater 

volume of HCCs to validate in their IVA 

samples if the proposed changes to the 

IVA sampling methodology were 

finalized. However, a few commenters 

questioned HHS’ assessment of burden 

associated with the proposed changes to 

the IVA sampling methodology. Some 

commenters suggested that the 

proposals would increase administrative 

burden for issuers, specifically for 

smaller issuers or lower-risk issuers 

with more enrollees without HCCs in 

their population. One commenter 

suggested that issuers’ operational 

resources and capacity will be 

significantly impacted because issuers 

will have to perform more HCC and 

RXC validations under the proposed 

IVA sampling methodology. Another 

commenter noted that smaller issuers 

that currently have modified IVA 

sample sizes of fewer than 200 enrollees 

under the FPC factor would be 

burdened by increasing the number of 

sampled enrollees and medical records. 

Another commenter suggested that there 

would be a significant burden increase 

associated with collecting more records 

from enrollees in lower-risk strata as 

these enrollees are more likely to see 

providers who do not provide issuers 

with direct access to medical records, 

which could make it more burdensome 

for issuers to retrieve medical records 

for these enrollees, especially for 

smaller issuers. Another commenter 

suggested concern that compliance with 

the added HHS–RADV audit 

requirements could place a greater 

burden on smaller issuers without 

clarity on how these proposed changes 

would help patients. One commenter 

requested HHS to monitor the impact of 

these changes on burden and consider 

future changes if there is an untenable 

increase in burden or an undesired 

impact on HHS–RADV adjustments to 

risk adjustment transfers. 

Response: As explained in section 

III.B.6.a of this rule, we are finalizing 

the proposed changes to the IVA 

sampling methodology to exclude 

enrollees without HCCs, remove the 

FPC, and use the 3 most recent 

consecutive years of HHS–RADV data 

with results that have been released 

before that benefit year’s HHS–RADV 

activities begin to calculate the standard 

deviation of risk score error (Si,h) in the 

Neyman allocation as proposed to align 

sampling with the error estimation 

methodology and improve sampling 

precision. We anticipate that these 

changes will also improve the precision 

of group failure rates, the national 

benchmarks used to determine outlier 

status in each failure rate group, the net 

risk score error calculations, and will 

therefore improve the precision of HHS– 

RADV results used to adjust risk 

adjustment State transfers. Improving 

the precision of the IVA sampling 

methodology with the adoption of the 

changes finalized in this rule will also 

further promote the overall integrity of 

HHS–RADV and confidence in the HHSoperated risk adjustment program. 

As explained in the section III.B.6.a of 

this final rule, we anticipate a decrease 

in the aggregate average burden 

associated with conducting IVAs as the 

average number of medical records 

reviewed per enrollee in the IVA sample 

and the average total number of medical 

records reviewed per issuer will 

generally decrease. We disagree that all 

issuers will have to perform more HCC 

and RXC validations under the IVA 

sampling methodology finalized in this 

rule that incorporates all three of the 

proposed changes and, as described in 

the proposed rule and in section 

III.B.6.a of this final rule, we estimate an 

approximate average of two medical 

records reviewed and two HCCs 

reviewed per enrollee in the IVA sample 

under the revised IVA sampling 

methodology, which is a decrease from 

the previous burden estimates under the 

existing IVA sampling methodology of 

an approximate average of five medical 

record requests per enrollee in the IVA 

sample size and three HCCs to be 

reviewed by a certified medical coder 

per enrollees with HCCs. In addition, as 

explained in section III.B.6.a. and the 

Collection of Information section of this 

rule, we do not anticipate that these 

changes will affect RXC review, as 

HHS–RADV requires review of RXCs for 

all adult enrollees in the IVA sample 

with at least one RXC, and we continue 

to assume that a review will be 

performed on approximately 50 RXCs 

per issuer.264

We recognize that the IVA sampling 

methodology finalized in this rule will 

result in increased sample sizes for 

some smaller issuers that are currently 

subject to the FPC and assigned 

modified IVA sample sizes of fewer than 

200 enrollees under the current IVA 

sampling methodology. However, we 

note that sample size will not increase 

for all issuers currently subject to the 

FPC as some of these issuers have a 

smaller population of enrollees with 

HCCs than their previously assigned 

modified IVA sample sizes that 

included enrollees without HCCs. For 

example, an issuer with a total enrollee 

population of 1,000 would be assigned 

a sample size of 160 enrollees under the 

current methodology and using the FPC 

formula. If this issuer only has a 

population of 100 enrollees with HCCs, 

then, under the revised IVA sampling 

methodology being finalized in this 

rule, the issuer’s IVA sample size would 

decrease to 100 enrollees. In addition, 

based on an analysis of historical HHS– 

RADV data, we estimate that the vast 

majority of issuers who would see 

increased IVA sample sizes after the 

removal of the FPC are at or below the 

materiality threshold for random and 

targeted sampling and would therefore 

only be selected to participate in HHS– 

RADV approximately once every 3 

benefit years (barring any risk-based 

triggers based on experience that will 

warrant more frequent audits).265 266

We also recognize the commenter’s 

concern that some providers of enrollees 

from lower-risk strata may provide 

issuers with less direct access to 

medical records for enrollees from 

lower-risk strata, but we note that that 

enrollees in lower-risk strata are 

enrollees with fewer HCCs or relatively 

lower-risk HCCs, for whom issuers 

should be able to provide supporting 

medical records for risk adjustment 

eligible diagnoses submitted to EDGE as 

required by the EDGE Server Business 


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267See, for example, the EDGE Server Business 

Rules (ESBR) Version 25.0 (December 2024) 

available at: https://regtap.cms.gov/uploads/library/ 

DDC-ESBR-v25-5CR-120624.pdf. 

268See CMS. (2021). HHS-Operated Risk 

Adjustment Technical Paper on Possible Model 

Changes. Section 1.2.1 (Principles of Risk 

Adjustment). https://www.cms.gov/files/document/ 

2021-ra-technical-paper.pdf. 

269The rate of improvement in the false negative 

rate and how this is attributed to the initial SVA 

subsample size or the statistical methodology 

differs depending on the effect size, or the 

magnitude of the true difference between IVA and 

SVA results. For these estimates, we use the 

Cohen’s D effect size measure and assume a small 

effect size. See Cohen, Jacob (1988). Statistical 

Power Analysis for the Behavioral Sciences. 

Routledge. ISBN 978–1–134–74270–7. pp 25–27. 

Rules.267 The principles for including 

an HCC in the risk adjustment models 

require that each HCC represents a wellspecified, clinically significant, chronic 

or systematic medical condition, and 

therefore, any enrollees with HCCs, 

regardless of if they are in a lower-risk 

stratum or higher-risk stratum, have 

conditions that should have supporting 

medical records.268 Furthermore, if it is 

more burdensome to retrieve medical 

records for enrollees from lower-risk 

strata, any increase in burden from 

retrieving these medical records would 

be offset, at least in part, by the decrease 

in burden from retrieving fewer medical 

records for enrollees from higher-risk 

strata. We also note that enrollees from 

low, medium, and high-risk strata will 

continue to be sampled for the IVA and 

the actual number of enrollees sampled 

from each stratum will depend on that 

stratum’s contribution to the total 

standard deviation of net risk score error 

in the issuer’s population. 

Moreover, as explained in section 

III.B.6.a of this rule, we estimate that 

any smaller issuers receiving the FPC 

under the current methodology and 

whose IVA sample sizes would increase 

under the finalized IVA sampling 

methodology would see a 35 percent 

increase in Super HCC count in their 

IVA samples and a 26 percent increase 

in group failure rate precision on 

average across all three failure rate 

groups. Therefore, we believe that the 

benefits a smaller issuer gains from 

increased group failure rate precision 

and the estimated overall average 

decrease in the number of HCCs and 

medical records reviewed per enrollee 

outweigh any potential increases in IVA 

sample size. 

We also clarify that while HHS–RADV 

does not directly impact patients, HHS– 

RADV is an issuer audit that helps 

ensure the integrity of data used in the 

HHS-operated risk adjustment program 

to calculate risk adjustment State 

transfers. The risk adjustment program 

helps stabilize premiums across the 

individual, merged, and small group 

markets, and thereby helps provide 

consumers with affordable health 

insurance coverage options. 

HHS will continue to monitor the 

impact of the finalized changes to the 

IVA sampling methodology once 

implemented. While these changes to 

the IVA sampling methodology could 

affect the adjustments to risk adjustment 

State transfers for an individual issuer, 

we anticipate that any changes to HHS– 

RADV adjustments will reflect more 

accurate actuarial risk differences 

between issuers. 

4. Second Validation Audit (SVA) 

Pairwise Means Test (§ 153.630(c)) 

We are finalizing modifications to the 

pairwise means test to use a 90 percent 

confidence interval bootstrapping 

methodology and to increase the initial 

SVA subsample size from 12 enrollees 

to 24 enrollees beginning with 2024 

benefit year HHS–RADV. Because 

issuers are already required to provide 

the IVA and SVA Entities with all 

documentation necessary to complete 

the audits, the finalized changes to the 

pairwise means test that will increase 

the initial SVA subsample size to 24 

enrollees and transition to a 

bootstrapping methodology using a 90 

percent confidence interval will not 

directly increase burden on issuers. We 

believe that these changes will increase 

the burden and costs to the Federal 

Government of conducting the SVA. We 

estimate that increasing the initial SVA 

sample size from 12 to 24 enrollees will 

increase the annual costs of SVA 

medical review by approximately $1.5 

million and that transitioning from the 

current t-test pairwise means testing 

procedure to a bootstrapped procedure 

will increase the annual cost of SVA 

medical review by approximately 

$500,000 as more issuers will be 

expanded to larger SVA sample sizes 

under a more sensitive pairwise means 

testing procedure. In addition, there will 

be a one-time cost of approximately 

$250,000 to code these modifications to 

the existing SVA pairwise means test in 

the Audit Tool. Any increase in SVA 

costs will increase the costs to the 

Federal Government associated with 

HHS–RADV program activities, which 

are covered through the risk adjustment 

user fees that are charged to issuers. 

While issuers will indirectly cover these 

costs through the risk adjustment user 

fee, we do not anticipate that this policy 

alone will increase the risk adjustment 

user fee as the costs are relatively small 

compared to the entirety of the budget 

to operate the HHS-operated risk 

adjustment program. We believe that the 

benefits from improving the SVA 

process for validating the IVA results 

and determining the appropriate audit 

results to use in error estimation will 

outweigh the increased costs to the 

Federal Government and better ensure 

the integrity of the risk adjustment 

program. 

We sought comment on these impacts 

and assumptions. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing these impact estimates for this 

policy as proposed. We summarize and 

respond to public comments received 

on the proposed estimates below. 

Comment: One commenter requested 

how the estimate costs and estimated 

improvement in the false negative rate 

are attributed to modifying the SVA 

subsample size as opposed to modifying 

the statistical methodology. Another 

commenter stated that they could not 

appropriately evaluate the impact of the 

proposed changes because issuers and 

IVA entities have little transparency 

into SVA outcomes as issuers who pass 

pairwise do not receive SVA results. 

Response: As previously noted in 

section III.B.6.b of this rule, we estimate 

that approximately 20 percent of the 

estimated improvement in the false 

negative rate will be attributable to 

modifying the initial SVA subsample 

size to 24 enrollees and approximately 

80 percent will be attributable to 

modifying the pairwise means test to a 

bootstrapped 90 percent confidence 

interval.269 We also estimate that 

approximately 33 percent of the costs 

associated with making these changes in 

2024 benefit year HHS–RADV will be 

attributed to transitioning from the 

current t-test pairwise means testing 

procedure to the bootstrapped 

procedure and coding the changes to 

test and execute the bootstrapping 

methodology, and the remaining costs 

will be attributed to increasing the 

initial SVA subsample size to 24 

enrollees. 

We disagree that issuers and IVA 

entities have insufficient transparency 

into SVA outcomes to evaluate the 

impact of the proposed changes to the 

SVA pairwise testing procedure. In the 

proposed rule (89 FR 82308, 82355), we 

explained the impact of the proposed 

modifications to increase the initial 

SVA subsample size to 24 enrollees and 

use a bootstrapped 90 percent 

confidence interval on the false negative 

rate, false positive rate and the overall 

sensitivity of the pairwise means test, 

and we sought comment on these 

proposals. As explained in section 


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270See, for example, Table 1 of the 2022 Benefit 

Year HHS–RADV Results Memo (May 14, 2024) 

available at https://www.cms.gov/files/document/ 

by22-hhs-radv-results-memo-appendix-pdf. 

III.B.6.b of this final rule, we are 

finalizing the proposed modifications to 

the SVA pairwise means testing 

procedure beginning with 2024 benefit 

year HHS–RADV to improve the 

sensitivity of the SVA pairwise means 

test, reduce the false negative rate and 

promote the integrity of HHS–RADV. In 

addition, we disagree that issuers have 

insufficient transparency into SVA 

outcomes. HHS does not provide SVA 

results to issuers or IVA entities that 

pass pairwise testing because passing 

signifies that the SVA findings do not 

significantly differ from IVA findings 

and that the IVA findings, which issuers 

review and sign off on, can be used 

during error estimation as issuers’ final 

accepted audit results for that benefit 

year of HHS–RADV. Issuers and IVA 

Entities that pass pairwise testing and 

do not receive an SVA findings report 

are still able to review key SVA 

findings, such as the most commonly 

miscoded HCCs for SVA reviewed 

sampled enrollees, from each benefit 

year of HHS–RADV in the results 

memo.270 Issuers that do not pass 

pairwise testing receive SVA findings 

reports that include details on the 

enrollee-level HCCs that differed 

between IVA and SVA review. 

5. HHS Risk Adjustment User Fee for 

the 2026 Benefit Year (§ 153.610(f)) 

For the 2026 benefit year, HHS will 

operate risk adjustment in every State 

and the District of Columbia. As 

described in the 2014 Payment Notice 

(78 FR 15416 through 15417), HHS’ 

operation of risk adjustment under 

section 1343 of the ACA on behalf of 

States is funded through a risk 

adjustment user fee. For the 2026 

benefit year, we are finalizing using the 

same methodology to estimate our 

administrative expenses to operate the 

HHS risk adjustment program as was 

used in the 2025 Payment Notice (89 FR 

26218). 

We expect that the finalized risk 

adjustment user fee for the 2026 benefit 

year of $0.20 PMPM would increase the 

amount transferred from issuers of risk 

adjustment covered plans to the Federal 

Government by approximately $6.6 

million compared to maintaining the 

2025 benefit year risk adjustment user 

fee of $0.18 PMPM. We continue to 

estimate that the total costs for HHS to 

operate the risk adjustment program on 

behalf of all States and the District of 

Columbia within the 2026 calendar year 

will be approximately $65 million, 

roughly the same as the amount 

estimated for the 2025 calendar year, 

and are finalizing the risk adjustment 

user fee for the 2026 benefit year at 

$0.20 PMPM to sufficiently fund these 

costs. 

6. Engaging in Compliance Reviews and 

Taking Enforcement Actions Against 

Lead Agents for Insurance Agencies 

(§ 155.220) 

As discussed in the preamble to this 

final rule, we address our authority to 

investigate, engage in compliance 

reviews of, and take enforcement 

actions against lead agents of insurance 

agencies who are engaging in potential 

misconduct or noncompliant behavior 

or activities in FFE and SBE–FP States. 

This will better align our oversight and 

enforcement approach with how States 

regulate agencies. This will also ensure 

enhanced consumer protections from 

agency-level misconduct or 

noncompliance facilitated at the agency 

level, which similarly impacts 

consumers negatively as misconduct or 

noncompliance by individual agents, 

brokers, and web-brokers. This finalized 

policy is also designed to reduce 

consumer harm associated with 

unauthorized enrollments or bad-acting 

agents, brokers, or web-brokers entering 

incorrect income information on 

eligibility applications which may cause 

harm by providing the enrollee or 

applicant with an incorrect APTC 

amount. For example, an incorrect 

APTC amount can result in a consumer 

having a zero-dollar monthly premium. 

Because the consumer does not receive 

monthly billing notifications due to the 

zero-dollar premiums, they may not 

know they were enrolled or that their 

eligibility application information was 

incorrect. However, once the consumer 

files their taxes, a reconciliation may 

reveal that the consumer must repay the 

incorrect APTC amount they were 

receiving. By their nature, these 

unauthorized enrollments and plan 

changes, as well as inaccurate eligibility 

application information submissions, 

also involve the misuse of enrollee or 

applicant PII, and they threaten the 

efficient administration of the Exchange 

and the accuracy of Exchange eligibility 

determinations. 

This finalized policy is also designed 

to reduce consumer harm associated 

with unauthorized enrollments or 

unauthorized plan switches which can 

lead to the consumer receiving a DMI. 

Upon application submission, certain 

consumer data is checked against 

trusted data sources to ensure a match 

between what is in the application 

submission and the information HHS 

receives from the trusted data source(s). 

If the trusted data source does not have 

the consumer data or the data is 

inconsistent with the information 

provided on the application, a DMI is 

generated. A non-exhaustive list of 

DMIs include the Annual Income DMI, 

Citizenship/Immigration DMI, and 

American Indian/Alaskan Native Status 

DMI. Certain DMIs may lead to loss of 

Exchange coverage, including a 

Citizenship/Immigration DMI, which 

occurs when the consumer is unable to 

verify an eligible citizenship or lawful 

presence status. 

We sought comment on these impacts 

and assumptions. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing these impact estimates for this 

policy as proposed. We summarize and 

respond to public comments received 

on the proposed estimates below. 

Comment: We received comments 

that we should remove or limit the 150 

percent SEP and implement preenrollment SEP verification that are 

vulnerable to fraud, such as income. 

Response: While this comment 

touches on issues that potentially relate 

to noncompliant agents and brokers or 

fraudulent behavior, these comments 

are outside the scope of this proposal. 

Comment: We received comments 

stating this change would protect 

consumers from noncompliant and 

fraudulent behavior and maintain the 

integrity of the Exchange. 

Response: We agree with commenters 

that this change would better protect 

consumers. This change would allow 

HHS to take targeted action against lead 

agents found to be involved in 

noncompliant or fraudulent behavior. 

Removing noncompliant individuals 

and entities from the Exchanges that use 

the Federal platform reduces fraud and 

improves public trust of these 

Exchanges as a whole. We continue to 

encourage State Exchanges that do not 

use the Federal platform to adopt a 

similar enforcement approach to enable 

it to also take immediate action when 

circumstances that pose unacceptable 

risk to their Exchange operations. 

7. Agent and Broker System Suspension 

Authority (§ 155.220(k)) 

We believe the impact related to the 

finalized changes to § 155.220(k)(3) will 

be positive. These changes will allow 

HHS to take swift action for misconduct 

and noncompliance with existing 

standards and requirements by 

expanding the bases on which 

§ 155.220(k)(3) system suspensions may 

be implemented. This finalized policy 

will enhance consumer protection and 


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271Section 155.220(d)(3) requires agents and 

brokers to enter into a Privacy and Security 

Agreement pursuant to which they agree to comply 

with Exchange privacy and security standards 

adopted consistent with § 155.260. There are two 

Privacy and Security Agreements between CMS and 

the agent, broker, and web-broker for FFEs and 

SBE–FPs: (1) one is for the individual market FFEs 

and SBE–FPs, and (2) one is for the FF–SHOPs and 

SBE–FP–SHOPs. 

promote program integrity by allowing 

HHS to immediately suspend an agent’s 

or broker’s access to Exchange systems 

when HHS discovers circumstances that 

pose unacceptable risk to the accuracy 

of the Exchange’s eligibility 

determinations, Exchange operations, 

applicants, or enrollees, or Exchange 

information technology systems, 

including but not limited to risk related 

to noncompliance with the standards of 

conduct under § 155.220(j)(2)(i), (ii), or 

(iii) or the privacy and security 

standards at § 155.260, until the 

circumstances of the incident, breach, or 

noncompliance are remedied or 

sufficiently mitigated to HHS’ 

satisfaction. This will help reduce 

future consumer harm by allowing HHS 

to quickly suspend system access for 

agents or brokers who are engaged in 

misconduct or noncompliant behavior 

that impacts Exchange consumers, 

operations, and systems. This finalized 

policy will also increase transparency 

by informing agents and brokers of the 

full suite of HHS enforcement actions 

that may be leveraged in response to 

noncompliance or misconduct, which 

may help curb such activities and 

behaviors. We do not anticipate negative 

feedback from the entities impacted by 

this, such as agents and brokers, as these 

changes are meant to more quickly 

system suspend bad-acting agents and 

brokers. This will help build consumer 

trust in compliant agents and brokers 

who work with consumers on the FFEs 

and SBE–FPs. 

We sought comment on these impacts 

and assumptions. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing these impact estimates for this 

policy as proposed. We summarize and 

respond to public comments received 

on the proposed estimates below. 

Comment: Commenters suggested we 

allow agents and brokers to provide 

evidence to us prior to initiating system 

suspensions. 

Response: We do not agree with 

commenters that we should change our 

system suspension process to allow for 

agent or broker response prior to 

engaging in a system suspension. 

The purpose of § 155.220(k)(3) is to 

maintain the integrity of the Exchange 

and individual consumers. Adding 

language to allow system suspensions to 

be implemented when we discover 

circumstances that pose unacceptable 

risk to the accuracy of the Exchange’s 

eligibility determinations, Exchange 

operations, applicants or enrollees, or 

Exchange information technology 

systems, including but not limited to 

risk related to noncompliance with the 

standards of conduct under 

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

privacy and security standards at 

§ 155.260,271 helps achieve these goals. 

Providing an opportunity to provide 

evidence prior to a system suspension 

being implemented would leave 

consumers vulnerable to potential harm 

as the agent or broker would have full 

use of all avenues to enroll consumers. 

System suspensions allow HHS to 

‘‘immediately’’ prevent an agent or 

broker from utilizing the DE/EDE 

pathways, protecting consumers. The 

use of the word ‘‘immediate’’ in 

§ 155.220(k)(3) means this enforcement 

tool is intended to reduce risk of 

noncompliance as soon as it is 

discovered. Allowing an agent or broker 

to respond prior to implementing the 

system suspension would defeat the 

intention of the regulation. While the 

option to enroll using the call center or 

HealthCare.gov exists, these are safer 

options for the consumer as the call 

center requires the consumer to be on 

the call and the agent or broker would 

need to be sitting with the consumer if 

using HealthCare.gov. 

We believe our process allowing an 

agent or broker to respond to a system 

suspension is efficient and provides 

sufficient due process to the systemsuspended agent or broker. Agents or 

brokers may respond with exculpatory 

evidence immediately after receiving a 

system suspension, which would reduce 

the amount of time the system 

suspension is in place, provided the 

submitted evidence mitigates the 

situation to HHS’ satisfaction. 

Furthermore, we do not engage in 

compliance actions, such as system 

suspensions, without reviewing all the 

evidence at our disposal and 

determining there is a high likelihood 

the agent or broker has been engaging in 

noncompliant behavior. 

Comment: We received comments in 

support of expanding § 155.220(k)(3) as 

it would reduce noncompliant behavior 

and protect consumers. 

Response: We agree with commenters 

who supported this proposal and agree 

it would reduce noncompliant behavior 

and protect consumers. 

The original intent of § 155.220(k)(3) 

included protecting against 

unacceptable risk to consumer Exchange 

data. Clarifying this in regulatory text 

will allow us to implement system 

suspensions in situations involving 

consumer PII while making agents and 

brokers aware of this authority. We 

believe violations of the standards of 

conduct under 155.220(j)(2)(i), (ii), or 

(iii), risk to the accuracy of Exchange 

eligibility determinations, operations, 

applications, enrollees, or information 

technology systems all warrant system 

suspensions as each may cause 

consumer harm or reduce public trust in 

the Exchange itself. 

8. Updating the Model Consent Form 

(§ 155.220) 

We are finalizing an update to the 

model consent form to include a section 

for documentation of consumer review 

and confirmation of the accuracy of 

their Exchange eligibility application 

information under 

§ 155.220(j)(2)(ii)(A)(1)–(2), as well as 

scripts agents, brokers, and web-brokers 

could use when meeting the 

requirements codified at 

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

(C) via an audio recording. 

These finalized policies will update 

the optional model consent form that 

was created as part of the 2024 Payment 

Notice and adopted on June 18, 2023. 

The 2024 Payment Notice (88 FR 25890 

through 25892) considered the 

additional time it would take to process 

and submit each consumer’s eligibility 

application and those assumptions 

remain valid and are unchanged. We 

believe these assumptions remain valid 

because we are not changing the 

regulatory requirements established by 

the 2024 Payment Notice, we are not 

adding requirements with this finalized 

policy, and we are not making the use 

of the model consent form mandatory. 

The time required to gather the 

documentation required by the 2024 

Payment Notice requirements is already 

a part of every agent’s, broker’s, and 

web-broker’s enrollment process. We do 

not believe the updated model consent 

form will impose any additional burden 

on agents, brokers, web-brokers, or 

consumers. We do not anticipate that 

the updated model consent form will 

take any longer to fill out than agent, 

broker, web-broker, or agency-created 

forms already being utilized. The use of 

the updated model consent form will 

not be mandatory. Therefore, this 

finalized policy will not impart extra 

time or costs to the assisting agent or 

broker. 

This updated model consent form will 

provide agents, brokers, and webbrokers with clarity on how to meet the 

regulatory requirements under 

§ 155.220(j)(2)(ii) and help them comply 


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4530 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

272Available at https://sam.gov. 

with this regulation by providing a 

standardized form they may use to do 

so. Furthermore, we believe providing a 

clearly written model consent form will 

provide more consumer clarity and 

assurance that the agent, broker, or webbroker they are working with is 

complying with § 155.220(j)(2)(ii). The 

finalized scripts, to the extent they are 

utilized by agents, brokers, and webbrokers, will help ensure they are 

following the regulatory requirements 

when enrolling consumers. We believe 

this will reduce consumer harm by 

reducing unauthorized enrollments, 

which can result in financial harm if a 

consumer receives an improper APTC 

amount upon enrollment, and DMIs, 

which may lead to cancellation of 

coverage if the DMIs are not resolved in 

a timely manner. We also believe this 

finalized policy will clarify and simplify 

how regulated entities can meet 

regulatory requirements. 

We sought comment on these impacts 

and assumptions. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing these impact estimates for this 

policy as proposed. We summarize and 

respond to public comments received 

on the proposed estimates below. 

Comment: Some commenters stated 

we should not mandate audio recording 

of enrollments and should not require 

agents or brokers to use our scripts as 

this would be especially burdensome to 

smaller agents, brokers, web-brokers, or 

agencies. 

Response: While agents, brokers, and 

web-brokers can meet the requirements 

of § 155.220(j)(2)(ii)(A) and (j)(2)(iii) via 

an audio recording, this is just one type 

of documentation that is considered to 

be acceptable under these sections, and 

there is no mandate that an audio 

recording be used to meet these 

requirements. Agents, brokers, and webbrokers may use any method they wish 

to meet the consent documentation 

requirement and review and 

confirmation of the accuracy of 

eligibility application information 

requirement, provided the minimum 

information required by the regulations 

is captured in this documentation and 

the documentation can be maintained 

for a minimum of 10 years and 

produced to CMS upon request. 

Comment: Some commenters 

supported updating the model consent 

form, stating this would provide clarity 

to agents, brokers, and web-brokers, and 

help ensure consumers’ enrollment 

applications have correct information. 

Response: We agree with commenters 

that these updates will provide more 

clarity and assurance to agents, brokers, 

web-brokers, and agencies on how to 

meet the applicable regulatory 

requirements and more consumer clarity 

and assurance that the agent, broker, or 

web-broker they are working with is 

complying with the applicable 

regulatory requirements. 

9. Requirement for Notification of Tax 

Filers and Consumers Who Have Failed 

To File and Reconcile APTC for 2 

Consecutive Tax Years (§ 155.305) 

We anticipate a small financial impact 

related to our finalized updates to 

§ 155.305(f)(4)(i)(A)(1)–(2). Prior to 

pausing the FTR process during the 

COVID–19 PHE, Exchanges provided 

notice to enrollees or their tax filers (or 

both) who were identified as at risk of 

losing their APTC due to their failure to 

file their Federal income taxes and 

reconcile their APTC using Form 8962 

prior to the FTR Recheck process. The 

2025 Payment Notice (89 FR 26299) 

codified the requirement to send notices 

in the first tax year a tax filer was 

identified as having FTR status. The 

policy finalized in this rule will require 

sending either direct or indirect notices 

to tax filers or their enrollees when the 

tax filer is identified as having an FTR 

status for a second consecutive tax year, 

which we estimated in the 2024 

Payment Notice (88 FR 25902) to 

represent 20 percent of the total FTR 

population. We sought comments on 

these impacts and assumptions, 

including regarding additional costs, 

burdens, and benefits to issuers, 

consumers, and Exchanges. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates with the following 

modifications to our initial cost 

estimates for these new FTR notice 

requirements. 

Since the publication of the proposed 

rule, HHS has sent out FTR notices 

regarding APTC eligibility for the 2025 

coverage year to enrollees or their tax 

filers, and we wish to update our initial 

cost projections for this policy change. 

Due to increases in enrollment in 

Exchanges on the Federal platform, the 

volume of FTR notices sent to enrollees 

or their tax filers was higher than we 

originally estimated, which increased 

the cost of providing FTR direct notices 

to tax filers. The revised cost for 

Exchanges on the Federal platform to 

provide FTR direct notices that protect 

FTI to tax filers will be approximately 

$292,000 annually for fiscal years 2025 

through 2029, revised from $134,000 as 

proposed. These cost estimates may 

fluctuate in future years due to 

unknown factors, such as increases in 

the cost of postage and inflation in 

future years. We expect that the cost of 

providing notices would decrease in 

2026 and the subsequent years if the 

enhanced PTC subsidies provided by 

the Inflation Reduction Act are not 

extended past 2025 because consumers 

may terminate their Exchange coverage 

if they become ineligible for financial 

assistance. However, because it is 

currently unknown whether the 

enhanced PTC subsidies will expire or 

be extended, we have not factored this 

into our cost estimate. While HHS did 

not receive any comments related to our 

estimates regarding the cost of print 

notices for FTR, we would like to 

provide more context on why we are not 

providing more details regarding the 

contract pricing. We did not publish the 

cost per print notice because this is 

proprietary information. Furthermore, 

HHS will not publish specific future 

contract estimates in this final rule 

because the data underlying those 

estimates could undermine future 

contract procurements. For example, if 

HHS were to publish the projected 

future cost of the contracts used to 

provide print notifications, the Federal 

Government would be meaningfully 

disadvantaged in future contract 

negotiations related to Federal notice 

printing activities, as bidders would 

know how much HHS anticipates such 

a future contract is worth. Although 

current contract awards are published 

and publicly available,272 these award 

amounts do not necessarily reflect the 

future value of the contract, as there 

may be future changes in policy and 

operations and the scope of the work. 

Our finalized regulations give 

flexibility to Exchanges to choose to 

send the required notices to enrollees or 

tax filers, or both. While most State 

Exchanges have noted a preference to 

provide indirect notices to their 

consumers, there is uncertainty about 

how State Exchanges would choose to 

provide notices to their enrollees (for 

example, mail or electronic) as well as 

the proportion of enrollees on State 

Exchanges who fail to file their Federal 

income taxes and reconcile their APTC 

for 2 consecutive tax years, and 

therefore we are unable to provide exact 

estimates of the cost of providing these 

notices. We believe that if State 

Exchanges chose to provide direct 

mailing notices, the approximate cost 

could be $0.84 per notice for FY 2025 

based on the cost for the Exchanges on 

the Federal platform to send an average 

notice and would likely grow with 


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273CMS. (2024, Aug. 14). Reporting and 

Reviewing Data Inaccuracy Reports in State-based 

Exchanges (SBE) Frequently Asked Questions 

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

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

274OMB Control No.: 0938–1312 and 0938–1341. 

275CMS. (2024, Aug. 14). Reporting and 

Reviewing Data Inaccuracy Reports in State-based 

Exchanges (SBE) Frequently Asked Questions 

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

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

276See CMS (2024) Effectuated Enrollment: Early 

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

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

postage and inflation costs in future 

years. We anticipate approximately 

110,000 total notices across State 

Exchanges based on updated FTR data 

from the Exchanges on the Federal 

platform, and so in total, the updated 

estimated cost to State Exchanges to 

send these notices will be 

approximately $92,400 yearly for fiscal 

years 2025 through 2029. However, we 

still believe this is likely an 

overestimate based on conversations 

with interested parties because many 

State Exchanges may prefer to provide 

indirect notices that can be emailed, 

which would substantially reduce costs 

to the State Exchanges. There could be 

some cost related to creation of the 

notice, but State Exchanges could also 

choose to use either the language that 

Exchanges on the Federal platform 

already use or the language previously 

used in FTR notices. 

10. Timeliness Standard for State 

Exchanges To Review and Resolve 

Enrollment Data Inaccuracies 

(§ 155.400(d)(1)) 

We are finalizing the addition of 

§ 155.400(d)(1) to codify HHS’ guidance 

document titled, Reporting and 

Reviewing Data Inaccuracy Reports in 

State-based Exchanges (SBE) Frequently 

Asked Questions (FAQs),273 which 

provides that, within 60 calendar days 

after a State Exchange receives a data 

inaccuracy from an issuer operating in 

an State Exchange (hereinafter referred 

to as ‘‘State Exchange issuer’’) that 

includes a description of an inaccuracy 

that meets the requirements at 

§ 156.1210(a)–(c) and all the information 

that the State Exchange requires or 

requests to properly assess the 

inaccuracy, the State Exchange must 

review and resolve the State Exchange 

issuers’ enrollment data inaccuracies 

and submit to HHS a description of the 

resolution of any inaccuracies described 

by the State Exchange issuer that the 

State Exchange confirms to be 

inaccuracies in a format and manner 

specified by HHS.274 This finalized 

policy aligns with existing guidance 275

and builds on the existing requirement 

at § 155.400(d) that a State Exchange 

must reconcile enrollment information 

with issuers and HHS no less than on 

a monthly basis. It also provides 

certainty for State Exchange issuers by 

providing a timeline for State Exchanges 

to act upon an enrollment data 

inaccuracy submitted to the State 

Exchange by a State Exchange issuer 

that meets the requirements at 

§ 156.1210(a)–(c). 

We do not believe that the finalized 

amendment will impose substantial 

additional costs to HHS, State 

Exchanges, or State Exchanges issuers 

beyond the costs that are already 

accounted for as part of the existing 

issuers’ enrollment data inaccuracies 

description process and existing State 

Exchange enrollment data reconciliation 

requirements. The existing process 

already requires State Exchange issuers 

to submit enrollment inaccuracies and 

the State Exchanges to resolve those 

inaccuracies and reconcile enrollment 

information with both State Exchange 

issuers and HHS on no less than a 

monthly basis. We have no reason to 

believe that codifying a timeliness 

standard will materially increase 

burden. 

Furthermore, this finalized policy to 

codify a timeliness standard for 

resolution of enrollment data 

inaccuracies will clarify to issuers in 

State Exchanges the process for timely 

reviewing and resolving enrollment data 

inaccuracies and will ensure the 

accurate and timely payment of APTCs 

as this enrollment data is the basis of 

APTC payments to State Exchange 

issuers in the automated PBP system. 

Therefore, we anticipate that this 

finalized policy will streamline the 

existing issuers’ enrollment data 

inaccuracies process and benefit 

consumers by ensuring accurate 

payment of APTCs. 

We sought comment on these impacts 

and assumptions. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates as proposed. 

11. Establishment of Optional FixedDollar Premium Payment Threshold and 

Total Premium Threshold (§ 155.400(g)) 

We anticipate that the finalized policy 

to allow issuers to implement a fixeddollar premium payment threshold, 

adjusted for inflation by annual agency 

guidance, will benefit enrollees who 

may otherwise have been unable to 

maintain enrollment due to owing de 

minimis amounts of premium. The 

finalized modification will likely be 

especially beneficial to enrollees who 

have low incomes, who might be 

disproportionately impacted by 

disruptions in coverage. In addition, we 

believe that issuers that choose to 

implement a fixed-dollar premium 

payment threshold will benefit by being 

able to continue enrollment for 

enrollees who owe small amounts of 

premium. We anticipate that there will 

be some costs associated with 

implementing a fixed-dollar threshold 

for those issuers that choose to do so, as 

well as State Exchanges that choose to 

allow issuers to do so. 

Since the finalized policy will be 

optional for issuers to adopt, and some 

may choose not to adopt a payment 

threshold at all, it is challenging to 

quantify the impact on APTC payments. 

In the proposed rule, assuming a fixeddollar threshold of $5 or less, based on 

PY 2023 counts of 79,612 QHP policies 

terminated for non-payment where the 

enrollee had a member responsibility 

amount of $0.01–$5.00, with an average 

monthly APTC of $604.78 per enrollee 

(for PY 2023), we estimated that this at 

most would result in $481,477,453.60 in 

APTC payments for 10 months that 

excludes the binder payment and first 

month of the grace period (for which the 

issuer already received APTC and 

would not have to return) that issuers 

would retain, rather than being returned 

to the Federal Government.276

We sought comment on these impacts 

and assumptions, including quantifying 

a lower limit, and whether there are 

additional costs for other interested 

parties that have not been considered 

here. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates with the following 

modifications: since we are finalizing a 

fixed-dollar threshold of $10 or less, 

based on PY2023 counts of 135,185 

QHP policies terminated for nonpayment where the enrollee had a 

member responsibility amount of $0.01– 

$10.00, with an average monthly APTC 

of $604.78 per enrollee (for PY 2023), 

we estimate that this at most will result 

in $817,571,843.00 in APTC payments 

for 10 months that excludes the binder 

payment and first month of the grace 

period (for which the issuer already 

received APTC and would not have to 

return) that issuers would retain, rather 

than being returned to the Federal 


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Government. This would allow such 

consumers to remain in coverage, rather 

than having their policy terminated and 

health care coverage terminated for 

owing de minimis amounts of premium. 

12. General Eligibility Appeals 

Requirements (§ 155.505) 

This finalized modification will allow 

application filers to file appeals through 

the HHS appeals entity or a State 

Exchange appeals entity on behalf of 

applicants and enrollees on their 

Exchange application, streamlining the 

appeals process and ensuring 

operational consistency between the 

Exchanges on the Federal platform and 

appeals entities. We do not anticipate 

any material financial impact related to 

our proposed change at § 155.505(b). 

We sought comment on these impacts 

and assumptions. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates as proposed. 

13. Amendments to Certification 

Standards for QHPs, Request for the 

Reconsideration of Denial of 

Certification, and Non-Certification and 

Decertification of QHPs (§§ 155.1000 

and 155.1090) 

We are finalizing an amendment to 

§ 155.1000 by codifying that an 

Exchange may deny certification to any 

plan that does not meet the general 

certification criteria at § 155.1000 and 

amending § 155.1090 with refinements 

to the standards for the request for the 

reconsideration of a denial of 

certification specific to the FFEs. We 

anticipate no appreciable changes in 

impact because of these modifications. 

We expect that the FFEs will deny 

certification to one or fewer certification 

applications on average each year, so we 

expect the number of affected entities to 

be small. In addition, the finalized 

revisions to §§ 155.1000 and 155.1090 

do not substantively alter the 

responsibilities of affected issuers or the 

content of reconsideration requests. As 

a result, there is no material impact on 

regulated entities because of these 

finalized policies. 

We sought comment on these impacts 

and assumptions. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates as proposed. 

14. General Program Integrity and 

Oversight Requirements (§ 155.1200) 

As part of § 155.1200, we proposed to 

increase transparency in Exchanges by 

publishing annual State Exchange and 

SBE-FP SMARTs, programmatic and 

financial audits, Blueprint applications, 

and additional data points in the Open 

Enrollment data reports. We are 

finalizing this proposal with a 

modification to not publish the 

SMARTs. We anticipate no appreciable 

change in impact with this finalized 

policy since this data is already 

collected through the Blueprint 

application (OMB Control Number: 

0938–1172), SMART (OMB Control 

Number: 0938–1244), and Enrollment 

Metrics PRA packages (OMB Control 

Number: 0938–1119). We expect that 

this policy will increase the public’s 

understanding of State Exchanges, 

promote program improvements, and 

better evaluate Exchange quality. 

We sought comment on these impacts 

and assumptions. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

assumptions as proposed. 

15. FFE and SBE-FP User Fee Rates for 

the 2026 Benefit Year (§ 156.50) 

We are finalizing an updated FFE user 

fee rate of 2.5 percent of monthly 

premiums for the 2026 benefit year, 

which is greater than the FFE user fee 

rate finalized in the 2025 Payment 

Notice (89 FR 26336 through 26338) of 

1.5 percent of total monthly premiums. 

We are also finalizing an SBE-FP user 

fee rate of 2.0 percent for the 2026 

benefit year, which is greater than the 

SBE-FP user fee rate finalized in the 

2025 Payment Notice of 1.2 percent of 

total monthly premiums. We are also 

finalizing an alternative FFE user fee 

rate of 2.2 percent of total monthly 

premiums and an alternative SBE-FP 

user fee rate of 1.8 percent of total 

monthly premiums, which would take 

effect if enhanced PTC subsidies were 

extended at their current level, or 

higher, by July 31, 2025. We recognize 

that the expiration of the enhanced PTC 

subsidies at the end of the 2025 benefit 

year creates a significant amount of 

uncertainty in the ACA markets and 

despite this uncertainty, we maintain 

that the amount collected under these 

user fee rates will adequately fund all 

user fee-eligible Exchange and Federal 

platform functions based on the latest 

budget estimates. 

We provided estimates of FFE and 

SBE-FP user fee transfers from issuers to 

the Federal Government in the proposed 

rule based on the proposed FFE and 

SBE-FP user fee rates of 2.5 and 2.0 

percent of total monthly premiums, 

respectively, and alternative FFE and 

SBE-FP user fee rate range between 1.8 

and 2.2 percent and between 1.4 and 1.8 

percent of total monthly premiums, 

respectively, and our projections of 

enrollment and premium growth at the 

time. We are finalizing the FFE and 

SBE-FP user fee rates of 2.5 and 2.0 

percent of total monthly premiums, 

respectively, as proposed and finalizing 

modified alternative FFE and SBE-FP 

user fee rates of 2.2 percent and 1.8 

percent of total monthly premiums, 

respectively. Therefore, we are updating 

our estimates of transfers from issuers to 

the Federal Government in this final 

rule as follows. 

We estimate an increase in FFE and 

SBE-FP user fee transfers from issuers to 

the Federal Government of $732 million 

for benefit year 2026 compared to if the 

user fee rates from the prior benefit year 

were maintained in 2026. We estimate 

additional increases in FFE and SBE-FP 

user fee transfers from issuers to the 

Federal Government of $937 million in 

2027, $958 million in 2028, and $997 

million in 2029 if the finalized 2026 

benefit year user fee rates were 

maintained in subsequent years. Under 

the alternate FFE and SBE-FP user fee 

rates, which reflect different enrollment 

assumptions, we estimate increases in 

FFE and SBE-FP user fee transfers 

compared to if the 2025 benefit year 

user fee rates were maintained for 2026 

and beyond from issuers to the Federal 

Government of $620 million in 2026, 

$854 million in 2027, $885 million in 

2028, and $918 million in 2029 if the 

alternate user fee rates were maintained 

in subsequent years. 

We anticipate that these finalized user 

fee rates, along with the impact of the 

expiration of the enhanced PTCs on 

enrollment in ACA markets, will exert 

upward pressure on premiums 

compared to the 2025 benefit year. 

However, we believe these user fee rate 

increases from the 2025 user fee rates 

are necessary to provide financial 

stability to the Exchanges on the Federal 

platform, ensure continuity of special 

benefits to issuers, and maintain access 

to QHPs for enrollees. We sought 

comment on the impacts and 

assumptions included in the proposed 

rule, and we responded to all comments 

received on the FFE and SBE-FP user 

fees in the preamble section titled FFE 

and SBE-FP User Fee Rates for the 2026 

Benefit Year (§ 156.50). After 

consideration of comments and for the 

reasons outlined in the proposed rule 

and this final rule, including our 


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responses to comments, we are 

finalizing the impact estimates for this 

policy as discussed in the preceding 

paragraphs. 

16. CSR Loading (§ 156.80) 

While we anticipate that codifying the 

permissibility of CSR loading will 

provide greater clarity and generally 

promote market stability, we do not 

expect that it will have a substantive 

economic impact, as it will continue to 

allow States’ existing actuarially 

justified practices of determining 

whether and how CSR loading occurs. 

17. Amendments to AV Calculator 

Update Methodology (§ 156.135) 

This approach to revise the method 

for updating the AV Calculator, starting 

with the 2026 AV Calculator, resulting 

in an earlier release of the final AV 

Calculator for a given plan year, will 

benefit both issuers and States. Issuers 

have previously provided feedback that 

HHS should strive to release the final 

version of the AV Calculator sooner, and 

this approach addresses such requests. 

An earlier release of the final AV 

Calculator benefits issuers by providing 

additional time to develop plan designs 

ahead of State filing deadlines. In 

addition, States could benefit from an 

earlier release of the final version of the 

AV Calculator to ensure their EHBbenchmark plans comply with EHB 

requirements, and States that design 

their own standardized plan options 

could benefit from an earlier release to 

ensure they satisfy the AV de minimis 

ranges. This approach will have no 

impact on consumers. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates as proposed. 

18. Standardized Plan Options 

(§ 156.201) 

We are finalizing updates to the 

standardized plan options for PY 2026 

to ensure these plans continue to have 

AVs within the permissible de minimis 

range for each metal level, and we are 

revising both sets of plan designs at the 

expanded bronze metal level to conform 

more closely to the corresponding plan 

designs for PY 2025. These 

modifications are discussed in detail in 

the § 156.201 of the preamble to this 

rule. We believe maintaining a high 

degree of continuity in the approach to 

standardized plan options year over 

year minimizes the risk of disruption for 

interested parties, including issuers, 

agents, brokers, States, and enrollees. 

We continue to believe that making 

major departures from the approach to 

standardized plan options set forth in 

the 2023, 2024, and 2025 Payment 

Notices could result in changes that may 

cause undue burden for interested 

parties. For example, if the standardized 

plan options vary significantly from 

year to year, those enrolled in these 

plans could experience unexpected 

financial harm if the cost sharing for 

services they rely upon differs 

substantially from the previous year. 

Ultimately, we believe consistency in 

standardized plan options is important 

to allow both issuers and enrollees to 

become accustomed to these plan 

designs. 

Thus, similar to the approach taken in 

the 2023, 2024, and 2025 Payment 

Notices, we are finalizing standardized 

plan options that continue to resemble 

the most popular QHP offerings that 

millions of consumers are already 

enrolled in. As such, these finalized 

standardized plan options are based on 

updated cost sharing and enrollment 

data to ensure that these plans continue 

to reflect the most popular offerings in 

the Exchanges. By finalizing an 

approach to standardized plan options 

similar to that taken in the 2023, 2024, 

and 2025 Payment Notices, issuers will 

continue to be able to utilize many 

existing benefit packages, networks, and 

formularies, including those paired with 

standardized plan options for PY 2025. 

Further, issuers will continue to not be 

required to extend plan offerings 

beyond their existing service areas. 

We do not anticipate that the 

modification we are finalizing at 

§ 156.201(c) that will require an issuer 

that offers multiple standardized plan 

options within the same product 

network type, metal level, and service 

area to meaningfully differentiate these 

plans from one another in terms of 

included benefits, networks, included 

prescription drugs, or a combination of 

some or all these factors, will have a 

significant impact on issuers. This is 

because most issuers have not offered 

multiple standardized plan options 

within the same product network type, 

metal level, and service area since these 

requirements were introduced in PY 

2023. In fact, current QHP certification 

submission data indicates that only 

three issuers offered multiple 

standardized plan options within the 

same product network type, metal level, 

and service area in PY 2025. 

However, we acknowledge that those 

issuers that do offer multiple 

standardized plan options in the same 

product network type, metal level, and 

service area will either have to modify 

certain offerings (such as by modifying 

included benefits, provider networks, 

included prescription drugs, or a 

combination of some or all these factors) 

or choose to discontinue certain plans to 

the extent they are not meaningfully 

different. That said, given that issuers 

will retain the discretion to choose 

between modifying or discontinuing 

plans, and given that making these 

modifications to plans are a routine part 

of the annual plan design process, we 

do not anticipate significant burden for 

affected issuers related to this proposed 

requirement. 

We sought comment on these impacts 

and assumptions. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates as proposed. 

19. Non-Standardized Plan Option 

Limits (§ 156.202) 

We are finalizing an amendment to 

§ 156.202(b) and (d) to properly reflect 

the flexibility that issuers have been 

operationally permitted since the 

introduction of these requirements to 

vary the inclusion of the distinct adult 

dental benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage categories under the 

non-standardized plan option limit at 

§ 156.202(b) in accordance with 

§ 156.202(c)(1) through (3). 

In particular, we are finalizing an 

amendment to § 156.202(b) to properly 

distinguish between adult dental benefit 

coverage at § 156.202(c)(1) and pediatric 

dental benefit coverage at 

§ 156.202(c)(2), such that an issuer 

offering QHPs in an FFE or SBE-FP, for 

PY 2025 and subsequent plan years, is 

limited to offering two non-standardized 

plan options per product network type, 

as the term is described in the definition 

of ‘‘product’’ at § 144.103 of this 

subchapter, metal level (excluding 

catastrophic plans), and inclusion of 

adult dental benefit coverage, pediatric 

dental benefit coverage, and adult vision 

benefit coverage (as defined in 

paragraphs (c)(1) through (3) of 

§ 156.202), in any service area. 

We are finalizing a similar conforming 

amendment to § 156.202(d), such that 

for PY 2025 and subsequent plan years, 

an issuer may offer additional nonstandardized plan options for each 

product network type, metal level, 

inclusion of adult dental benefit 

coverage, pediatric dental benefit 

coverage, and adult vision benefit 

coverage (as defined in paragraphs (c)(1) 

through (3) of § 156.202), and service 

area if it demonstrates that these 

additional plans’ cost sharing for 


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4534 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

277CMS. (2024, April 10). 2025 Final Letter to 

Issuers in the Federally-facilitated Exchanges. 

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

278Twelve FFEs operate in States performing plan 

management functions for PY 2026: Delaware, 

Hawaii, Iowa, Kansas, Michigan, Montana, 

Nebraska, New Hampshire, Ohio, South Dakota, 

Utah, and West Virginia. 

279Occupational Employment and Wage Statistics 

from the US Bureau of Labor Statistics for job code 

13–1041 Compliance Officer from https://

www.bls.gov/oes/current/oes131041.htm. 

280We estimated 485 hours for 4.2 full time 

equivalents similar to the administrative burden 

cost for the Federal Government as indicated in cost 

estimate of the Supporting Statement for 

Continuation of Data Collection to Support QHP 

Certification and other Financial Management and 

Exchange Operations OMB control number: 0938– 

1187. 

281A non-exhaustive list of available ECPs that 

primarily serve low-income and medically 

underserved populations which can be counted 

toward an issuer’s satisfaction of the ECP standard 

as part of the issuer’s QHP application. 

benefits pertaining to the treatment of 

chronic and high-cost conditions 

(including benefits in the form of 

prescription drugs, if pertaining to the 

treatment of the condition(s)) is at least 

25 percent lower, as applied without 

restriction in scope throughout the plan 

year, than the cost sharing for the same 

corresponding benefits in an issuer’s 

other non-standardized plan option 

offerings in the same product network 

type, metal level, inclusion of adult 

dental benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage, and service area. 

We are finalizing these modifications 

to align the regulation text with the 

existing flexibility that issuers have 

been operationally permitted since the 

non-standardized plan option limit was 

introduced in the 2024 Payment 

Notice.277 Given that issuers have had 

this flexibility since the nonstandardized plan option limit was first 

introduced PY 2024, we do not 

anticipate any impact on relevant 

interested parties. 

We sought comment on these impacts 

and assumptions. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates as proposed. 

20. Essential Community Provider 

Certification Review for States 

Performing Plan Management Functions 

(§ 156.235) 

This finalized policy to conduct ECP 

certification reviews of plans for which 

issuers submit QHP certification 

applications in FFEs in States 

performing plan management functions 

beginning in PY 2026 will not have a 

significant financial impact on the 

Federal Government. HHS continues to 

perform ECP certification reviews for 

plans in the FFEs, so the financial 

burden to conduct the certification 

reviews of plans for which issuers 

submit QHP certification applications in 

FFEs in States performing plan 

management functions using the 

existing data infrastructure is a marginal 

increase within the annual 

programming for QHP certifications. For 

PY 2025, HHS will use MPMS for ECP 

reviews for plans seeking QHP 

certification in FFEs, and HHS has all 

the necessary data infrastructure and 

operational processes to conduct 

reviews for States performing plan 

management functions for PY 2026 as 

finalized. While the Federal 

Government will undertake additional 

administrative work to review the ECP 

data from QHP certification applications 

submitted by issuers seeking 

certification of their plans as QHPs in 

FFEs in States performing plan 

management functions, the transfer of 

administrative impact from the State 

that had been performing these reviews 

to the Federal Government is marginal, 

as the Federal Government already has 

in place processes and procedures to 

conduct the ECP certification reviews. 

HHS will continue ECP QHP 

certification reviews in all other FFE 

States. 

This finalized policy will reduce the 

administrative burden for these States as 

they will no longer be responsible for 

ECP data review. We estimate a cost 

savings of $148,212.12 per State 

annually for each of the 12 FFE States 

performing plan management functions 

in PY 2026.278 This is calculated by 

taking the median hourly wage for a 

compliance officer of $36.38, according 

to the Occupational Employment and 

Wage Statistics,279 and adding 100 

percent fringe benefits to total $72.76. 

We estimate the operations and 

maintenance costs for the ECP QHP data 

collection and the QHP data collection 

support to equal 485 hours for 4.2 fulltime equivalents,280 totaling 

$148,212.12. The total cost across the 12 

FFE States performing plan management 

functions will be $1,778,545.44. This 

cost associated with ECP enforcement/ 

compliance reviews will be transferred 

from the States performing plan 

management functions to the Federal 

Government. We further estimate an 

annual cost of $8,155 associated with 

ECP compliance reviews that will be 

transferred from the States performing 

plan management functions to the 

Federal Government based on current 

contract costs. 

Further, this finalized policy should 

not lead to increased burden for issuers 

in the FFE in States performing plan 

management functions as they will still 

have to submit ECP data to HHS 

regardless of whether it is the State or 

HHS conducting the QHP certification 

review. In previous years, these issuers 

were required to submit ECP data to 

HHS via the SERFF binders, whereas 

these issuers are now required to submit 

their ECP data to HHS in MPMS 

beginning with the PY 2025 QHP 

application submission season, making 

it now possible for HHS to begin 

reviewing these ECP data going forward. 

In addition, this finalized policy will 

not financially impact providers on the 

HHS ECP list.281 There is no fee to be 

included in the HHS ECP list, and the 

administrative burden to complete the 

petition continues to be the same. The 

finalized policy will support consumer 

access to vitally important medical and 

dental services, enhancing health equity 

for low-income and medically 

underserved consumers. 

We sought comment on these impacts 

and assumptions. 

We did not receive any comments in 

response to the proposed impact 

estimates for this policy. For the reasons 

outlined in the proposed rule and this 

final rule, we are finalizing these 

estimates as proposed. 

21. HHS-RADV Materiality Threshold 

for Rerunning HHS-RADV Results 

(§ 156.1220(a)(2)) 

We are finalizing an amendment to 

§ 156.1220(a)(2) to codify a materiality 

threshold for when HHS will rerun 

HHS-RADV results in response to a 

successful HHS-RADV appeal. We 

believe that this amendment supports 

providing stability for issuers that 

participate in risk adjustment because it 

limits the potential for issuers to reopen 

their books for small changes to their 

State transfers because of a successful 

HHS-RADV appeal. This finalized 

policy will avoid situations where HHS 

is required to rerun HHS-RADV results 

and all issuers are required to reopen 

their books, when the impact for the 

filer of a successful HHS-RADV appeal 

is less than $10,000. Because this 

approach is limited to small dollar 

amounts, we do not believe that the 

finalized policy will materially impact 

issuers or their premiums and it will 

provide stability to issuers by limiting 

the situations where their books will 

need to be reopened. We believe that 

this finalized amendment, when 

applicable, will reduce Federal costs by 

an estimated $75,000 due to the 

estimated 575 hours of contractor work. 


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282U.S. Bureau of Labor Statistics. (2024, April 9). 

Occupational Employment and Wage Statistics. 

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

We also believe that this amendment, 

when applicable, will reduce Federal 

costs through a decrease in HHS staff 

work hours. These HHS staff are funded 

by the risk adjustment user fee, 

therefore there is no cost impact. 

Rerunning HHS-RADV results requires 

HHS to recalculate all national metrics, 

reissue all issuers’ error rate results, and 

then apply all of those revised error 

rates to State transfers for the applicable 

benefit year before going through the 

process to net, invoice, collect, and 

redistribute the changes to the HHSRADV adjustments to State transfers. 

We sought comment on these impacts 

and assumptions. 

After consideration of comments and 

for the reasons outlined in the proposed 

rule and this final rule, including our 

responses to comments, we are 

finalizing the impact estimates for this 

policy as proposed. We summarize and 

respond to public comments received 

on the proposed estimates below. 

Comment: One commenter noted that 

this policy would reduce the burden on 

smaller issuers, who are 

disproportionately impacted when 

HHS-RADV is rerun. 

Response: We agree with this 

commenter. This policy should provide 

stability to the HHS-operated risk 

adjustment markets by limiting the 

potential for HHS-RADV results to be 

rerun for a particular benefit year when 

the financial impact on the filer falls 

below the materiality threshold and 

thereby reduce burden on all issuers of 

risk adjustment covered plans, 

including smaller issuers, by reducing 

the situations where there are additional 

adjustments to the HHS-RADV 

adjustments to State transfers for any 

given benefit year. 

22. Medical Loss Ratio (§§ 158.103, 

158.140, 158.240) 

We are finalizing (1) the addition of 

a definition of ‘‘qualifying issuer’’ to 

§ 158.103 with a modification to clarify 

that the new definition of ‘‘qualifying 

issuer’’ is based on an issuer’s 3-year 

aggregate ratio of net payments related 

to the risk adjustment program under 

section 1343 of the ACA to earned 

premiums as defined in § 158.130, but 

prior to and excluding the adjustments 

in § 158.130(b)(5) that account for the 

net payments or receipts related to the 

risk adjustment, risk corridors, and 

reinsurance programs, in a relevant 

State and market, and (2) amending 

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

issuers, at their option, to not adjust 

incurred claims by the net payments or 

receipts related to the risk adjustment 

program for MLR reporting and rebate 

calculation purposes beginning with the 

2026 MLR reporting year. This rule also 

amends § 158.240(c) to add an 

illustrative example of how qualifying 

issuers that opt to apply risk adjustment 

transfer amounts as described in 

§ 158.140(b)(4)(ii) would determine the 

amount of rebate owed to each enrollee, 

and makes a conforming amendment to 

§ 158.240(c) to clarify that the current 

illustrative example in paragraph (c)(2) 

would apply to issuers that are not 

qualifying issuers and to qualifying 

issuers that do not choose to apply risk 

adjustment transfer amounts as 

described in § 158.140(b)(4)(ii). These 

finalized policies, which will extend 

only to qualifying issuers (that is, 

issuers whose aggregate ratio of net 

payments related to the risk adjustment 

program under section 1343 of the ACA 

to earned premiums as defined in 

§ 158.130, but prior to and excluding the 

adjustments in § 158.130(b)(5) that 

account for the net payments or receipts 

related to the risk adjustment, risk 

corridors, and reinsurance programs, 

based on 3 consecutive years of data in 

a relevant State and market, is greater 

than or equal to 50 percent), will result 

in transfers to such issuers from their 

enrollees in the form of lower rebates or 

higher premiums. Based on MLR data 

for 2023, these finalized policies will 

reduce rebates paid by issuers to 

consumers or increase premiums 

collected by issuers from consumers by 

a total of approximately $35 million per 

year. 

We sought comment on these impacts 

and assumptions. 

After consideration of comments and 

updated estimates based on the more 

recent 2023 MLR data, and for the 

reasons outlined in the proposed rule 

and this final rule, including our 

response to comments, we are finalizing 

these impact estimates. We summarize 

and respond to public comments 

received on the proposed estimates 

below. 

Comment: One commenter requested 

that we provide information regarding 

the number of issuers that will be 

impacted by the proposal to enable 

interested parties to evaluate whether it 

would in fact be a ‘‘small subset,’’ and 

the magnitude of the impact on MLR 

calculations. 

Response: Since the proposal as 

finalized is not mandatory for qualifying 

issuers, CMS cannot, at this time, 

provide the exact number of impacted 

issuers. However, based on 2023 MLR 

data, we estimate that fewer than half a 

dozen issuers would meet the new 

definition of ‘‘qualifying issuer’’ and, if 

all of them choose to apply risk 

adjustment transfer amounts as 

described and finalized in this rule, 

would experience a reduction in rebates 

in a combined total amount of 

approximately $35 million, out of 

approximately 180 issuers that owed 

approximately $946 million in 

combined total rebates. 

23. Regulatory Review Cost Estimation 

If regulations impose administrative 

costs on private entities, such as the 

time needed to read and interpret this 

final rule, we should estimate the cost 

associated with regulatory review. Due 

to the uncertainty involved with 

accurately quantifying the number of 

entities that will review the rule, we 

assume that a range of between the total 

number of unique commenters on the 

2026 Payment Notice proposed rule 

(266) and the total number of page 

views on the 2026 Payment Notice 

proposed rule (about 13,000) will 

include the actual number of reviewers 

of this final rule. We therefore use an 

average number of approximately 6,600 

reviewers of this final rule. We 

acknowledge that this assumption may 

understate or overstate the costs of 

reviewing this final rule. It is possible 

that not all commenters reviewed the 

proposed rule in detail, and it is also 

possible that some page viewers will not 

actually read the final rule. For these 

reasons, we believe that the 

approximate average of the number of 

commenters and number of page 

viewers on the proposed rule will be a 

fair estimate of the number of reviewers 

of this final rule. We sought comments 

on the approach in estimating the 

number of entities which will review 

the proposed rule and did not receive 

any such comments. 

We also recognize that different types 

of entities are in many cases affected by 

mutually exclusive sections of this final 

rule, and therefore, for the purposes of 

our estimate we assume that each 

reviewer reads approximately 55 

percent of the rule (an average of the 

range from 10 percent to 100 percent of 

the rule). We sought comments on this 

assumption and did not receive any 

such comments. 

Using the wage information from the 

BLS for medical and health service 

managers (Code 11–9111), we estimate 

that the cost of reviewing this final rule 

is $106.42 per hour, including overhead 

and fringe benefits.282 Assuming an 

average reading speed of 250 words per 

minute, we estimate that it will take 

approximately 4.75 hours for the staff to 

review 55 percent of this final rule. For 

each entity that reviews the rule, the 


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283As noted in the preamble of this final rule, a 

new benefit year of HHS-RADV activities generally 

begins in the spring when issuers can start selecting 

their IVA entity and IVA entities can start electing 

to participate in HHS-RADV for that benefit year. 

We would use data from the 3 most recent 

consecutive years of HHS-RADV where results have 

been released. For the most recently published 

annual HHS-RADV timeline, see the 2023 Benefit 

Year HHS-RADV Activities Timeline. https://

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

Timeline_5CR_072424.pdf. Note that there were 

delays in the 2023 Benefit Year HHS-RADV 

Activities Timeline in recognition of the challenges 

some issuers were facing related to EDGE server 

operations after the Change Healthcare 

Cybersecurity Incident. 

284As noted in the preamble of this final rule, 

enrollees without HCCs include stratum 10 

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

285As noted earlier in this preamble, this estimate 

is based on the combined impact of all finalized 

changes to the IVA sampling methodology. 

286A standard IVA sample size is 200 enrollees, 

and it applies to the majority of issuers of risk 

adjustment covered plans. CMS calculates a smaller 

IVA sample sizes for issuers for smaller populations 

by using a Finite Population Correction (FPC) 

factor. All issuers are subject to the same SVA 

subsample sizes, but the maximum SVA subsample 

for pairwise testing is one half of the issuer’s IVA 

sample size. As discussed in section II.B.5.a., we are 

finalizing changes to the IVA sampling 

methodology that will exclude enrollees without 

HCCs from IVA sampling and remove the FPC 

factor such that all IVA samples will consist of 200 

enrollees with HCCs or the issuer’s total EDGE 

population of enrollees with HCCs if they have less 

than 200 enrollees with HCCs beginning with the 

2025 benefit year of HHS-RADV. Under this policy, 

the SVA subsample size expansion for issuers with 

less than 200 enrollees with HCCs will continue to 

follow the standard SVA subsample sizes with a 

maximum SVA subsample for pairwise testing 

equal to one half of the issuer’s IVA sample size. 

If the issuer fails at the maximum SVA subsample 

size for pairwise testing, a precision analysis if 

performed to determine whether the SVA audit 

results from that maximum SVA subsample size can 

be used in error estimation or if the SVA sample 

needs to expand to the full IVA sample. 

estimated cost is $505.50 (4.75 hours × 

$106.42 per hour). Therefore, we 

estimate that the total cost of reviewing 

this regulation is approximately 

$3,336,300 ($505.50 per reviewer × 

6,600 reviewers). 

D. Regulatory Alternatives Considered 

We are finalizing under § 153.630(b) 

excluding enrollees without HCCs, 

removing the FPC, and changing the 

source of the Neyman allocation data 

used to calculate the standard deviation 

of risk score error from MA-RADV data 

to HHS-RADV data beginning with the 

2025 benefit year of HHS-RADV. 

The finalized IVA sampling 

methodology will use the most recent 3 

consecutive years of HHS-RADV data 

with results that have been released 

before that benefit year’s HHS-RADV 

activities begin to calculate a national 

variance of net risk score error to 

calculate each issuer’s standard 

deviation of risk score error used in the 

Neyman allocation formula, whereas the 

current IVA sampling methodology 

relies on MA-RADV data to calculate 

this national variance of net risk score 

error.283 When investigating the impact 

of switching the Neyman allocation data 

source to the most recent 3 consecutive 

years of HHS-RADV data with results 

that have been released before that 

benefit year’s HHS-RADV activities 

begin, we considered creating an issuerspecific variance of net risk score error 

to calculate each issuer’s standard 

deviation of risk score error used in the 

Neyman allocation formula. However, it 

would not be possible to calculate an 

issuer-specific variance of net risk score 

error for all issuers participating in a 

given benefit year of HHS-RADV as 

some issuers would not have 3 

consecutive years of HHS-RADV data. 

As explained in the proposed rule (89 

FR 82308, 82353), these issuers would 

have to rely on fewer years of HHSRADV data under an issuer-specific 

calculation, meaning significantly fewer 

data points compared to other issuers 

that participated in all years, which 

could result in large variations in IVA 

sample stratum size and increased 

uncertainty in HHS-RADV. Therefore, 

for this reason and the reasons noted in 

section III.B.6.a.3 of this final rule, we 

are finalizing continuing to calculate 

each issuer’s standard deviation of risk 

score error using a national variance of 

net risk score error, but to use a threeyear rolling window of HHS-RADV data 

rather than the MA-RADV data as the 

source data for the Neyman allocation. 

We considered proposing to replace 

the source of the Neyman allocation 

data while continuing to include 

enrollees without HCCs in IVA 

sampling and retaining the FPC.284

However, this would result in sampling 

a greater proportion of enrollees without 

HCCs, who do not have risk scores to 

adjust when calculating issuers’ error 

rates during HHS-RADV. In addition, 

keeping the FPC while excluding 

enrollees without HCCs from IVA 

sampling and replacing the source data 

for the Neyman allocation with 

available HHS-RADV data would lead to 

a dramatic increase in the number of 

issuers subject to the FPC and therefore 

decrease the total count of Super HCCs 

in issuers’ IVA samples. For example, 

we estimate that the average Super HCC 

count for issuers currently subject to the 

FPC would decrease by 26 percent by 

retaining the FPC, which would 

increase the proportion of issuers that 

fail to meet the 30 Super HCC constraint 

in HHS-RADV.285 In contrast, removing 

the FPC would increase the average 

Super HCC count for these same issuers 

by 30 percent, which would improve 

issuers’ probability of meeting the 30 

Super HCC constraint. Overall, our 

analyses found that making these 

modifications in combination will lead 

to the greater improvements in sampling 

precision and will allow more than 95 

percent of issuers to pass the 10 percent 

sampling precision target at a two-sided 

95 percent confidence level. 

We also considered only excluding 

stratum 10 enrollees from the IVA 

sampling methodology and retaining 

RXC-only enrollees in strata 1 through 

3. However, we believe removing all 

enrollees without HCCs (both stratum 

10 enrollees and RXC-only enrollees) is 

the preferred approach so issuers and 

IVA Entities are not spending resources 

on enrollees who do not have risk scores 

to adjust when calculating issuers’ error 

rates during HHS-RADV. In addition, 

our analysis revealed the greatest 

improvements in precision and greatest 

decreases in the average medical records 

reviewed per enrollee, and therefore the 

greatest decreases in issuer and IVA 

Entity burden, when excluding RXConly enrollees and stratum 10 enrollees 

from the IVA sampling methodology. 

As an alternative respect to the SVA 

pairwise means test proposal, we 

considered only changing the pairwise 

means testing procedure from the 95 

percent confidence interval paired t-test 

to the 90 percent confidence interval 

bootstrapped test without increasing the 

initial SVA subsample size to 24. 

However, our analysis found that 

maintaining an initial SVA subsample 

size of 12 under the bootstrapping 

methodology did not achieve an optimal 

target false negative rate of 

approximately 20 percent at various 

effect sizes. Therefore, we are finalizing 

a modification to the pairwise means 

test to use a 90 percent confidence 

interval bootstrapping methodology and 

to increase the initial SVA subsample 

size from 12 enrollees to 24 enrollees 

beginning with 2024 benefit year HHSRADV.286

We considered taking no action 

regarding the changes at 

§ 155.305(f)(4)(ii) and instead relying on 

the guidance released by CMS to inform 

Exchanges of noticing best practices as 

was previously done, but instead 

decided to codify this as a requirement 

to ensure that tax filers or their enrollees 

receive multiple educational notices 

regarding the requirement to file their 

Federal income taxes and reconcile their 

APTC. 

We considered taking no action 

regarding modifications to § 155.400(g) 

to allow issuers to adopt a fixed-dollar 

premium payment threshold or a gross 


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premium-based percentage payment 

threshold. However, the finalized policy 

will provide important flexibility to 

issuers that wish to allow enrollees who 

owe de minimis amounts of premium to 

maintain their enrollment. This 

flexibility is limited under current 

regulation, and as a result enrollees who 

owe small amounts of premium are 

sometimes unable to remain enrolled. 

We solicited feedback from interested 

parties on whether a fixed-dollar 

threshold, or a percentage threshold 

based on gross premium, would better 

meet our goal of providing flexibility to 

issuers to allow enrollees to avoid 

triggering a grace period and 

termination of enrollment through the 

Exchange for owing small amounts of 

premium. For the fixed-dollar premium 

payment threshold, we also considered 

whether to implement a $5 or $10 cap 

on the fixed-dollar threshold because 

while we believe the $5 cap is sufficient 

to help many enrollees avoid 

termination, CMS data on non-payment 

terminations also indicate that there are 

a considerable number of policies that 

were terminated in PY2023 with a 

member responsibility amount of $10 or 

less. We solicited feedback from 

interested parties to determine what the 

appropriate cap should be on the fixeddollar threshold and received comments 

supporting a $10 threshold, which we 

are finalizing in this rule. We also 

considered keeping the existing net 

premium-based threshold at a 

‘‘reasonable’’ limit, which we 

recommended to be 95 percent or 

higher, but we are finalizing specifically 

defining the threshold at 95 percent or 

higher, to provide clarity for issuers and 

Exchanges. We also considered whether 

it would be administratively feasible to 

allow issuers to adopt both a fixeddollar and percentage-based threshold 

but restricted issuers to choosing one 

threshold method. We solicited 

feedback from interested parties on 

whether we should allow this flexibility 

and received comments supporting this 

flexibility, which we are finalizing in 

this rule. 

For the 2026 benefit year FFE and 

SBE–FP user fees, we considered only 

proposing one FFE user fee rate and one 

SBE–FP user fee rate as we have done 

in previous years. However, we 

recognize that the expiration of the 

enhanced PTC subsidies at the end of 

the 2025 benefit year creates a 

significant amount of uncertainty in the 

ACA markets and despite this 

uncertainty, we maintain our interest in 

ensuring that we collect user fees at a 

rate that will allow us to sustain the 

operations of the FFEs. Therefore, we 

are finalizing two sets of user fee rates 

to account for both the expiration and 

extension of enhanced PTC subsidies. 

We are finalizing an updated FFE user 

fee rate of 2.5 percent of total monthly 

premiums and an SBE–FP user fee rate 

of 2.0 percent of total monthly 

premiums for the 2026 benefit year, 

which account for the expiration of 

enhanced PTC subsidies at the end of 

the 2025 benefit year. The 2026 benefit 

year FFE and SBE–FP user fee rates are 

greater than the FFE and SBE–FP user 

fee rates of 1.5 and 1.2 percent of total 

monthly premiums, respectively, that 

were finalized in the 2025 Payment 

Notice (89 FR 26336 through 26338). We 

are also finalizing an alternative FFE 

user fee rate of 2.2 percent of total 

monthly premiums and an alternative 

SBE–FP user fee rate of 1.8 percent of 

total monthly premiums for the 2026 

benefit year, which would take effect if 

enhanced PTC subsidies are extended at 

their current level, or at a higher level, 

by July 31, 2025. 

We considered taking no action on 

conducting ECP certification reviews of 

plans for which issuers submit QHP 

certification applications in FFEs in 

States performing plan management 

functions under § 156.235. Not 

conducting reviews as finalized would 

maintain current certification operations 

for issuers in FFE States that perform 

plan management functions and 

continue to provide States with the 

ability to use a similar approach to 

Federal ECP certification reviews of 

plans for which issuers submit QHP 

certification applications in FFEs. 

However, due to the implementation of 

the MPMS and enhancement of the ECP 

user interface, issuers seeking QHP 

certification in FFEs, including States 

performing plan management functions, 

can now submit ECP data to HHS for 

data integrity of the Federal platform 

regardless of whether it is the State or 

HHS conducting the review. 

We are finalizing an amendment 

§ 156.1220(a)(2) to codify when HHS 

will take action in response to a 

successful HHS–RADV appeal. We 

considered several ways to design the 

new materiality threshold to rerun 

HHS–RADV results. For example, we 

considered setting the second 

materiality threshold to rerun HHS– 

RADV results to include a percentage of 

HHS–RADV adjustments and applying a 

1 percent test to align with the EDGE 

materiality threshold in § 153.710(e). 

However, considering that the HHS– 

RADV adjustments to State risk 

adjustment transfer charges and State 

risk adjustment transfer payments are 

orders of magnitude smaller than those 

of the initial State risk adjustment 

transfer amounts, we were concerned 

that we would see situations where 1 

percent of the applicable payment or 

charge could be as little as $10 based on 

our experience running HHS–RADV for 

the past few years. Specifically, we 

believe that structuring the threshold, as 

finalized, to the financial impact of the 

filer and applying a threshold of equal 

to or greater than $10,000 amount will 

balance the need for ensuring that HHS– 

RADV results are accurate with the 

desire for ensuring that changes in 

HHS–RADV results actually have a 

meaningful financial impact. This 

finalized new materiality threshold to 

rerun HHS–RADV results takes into 

consideration the existing materiality 

threshold for filing a request for 

reconsideration, which applies to a 

number of different program appeals. To 

remain consistent with this existing 

threshold and recognizing that HHS– 

RADV adjustments are significantly 

smaller in magnitude than risk 

adjustment transfers, we believe that 

$10,000 is a reasonable threshold, but 

we solicited comment on this dollar 

amount and whether it should be higher 

or lower or whether we should consider 

including an inflation adjustment rate to 

this amount. This new finalized 

materiality threshold to rerun HHS– 

RADV results also considers the fact 

that it costs HHS approximately $75,000 

to rerun HHS–RADV and re-release 

results. Reducing the number of times 

HHS–RADV needs to be rerun and 

HHS–RADV adjustments need to be rereleased also helps maintain the 

stability of the market, as there are fewer 

instances of adjustments after the initial 

release of HHS–RADV adjustments. 

E. Regulatory Flexibility Act (RFA) 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, we 

estimate that small businesses, 

nonprofit organizations, and small 

governmental jurisdictions are small 

entities as that term is used in the RFA. 

The great majority of hospitals and most 

other health care providers and 

suppliers are small entities, either by 

being nonprofit organizations or by 

meeting the Small Business 

Administration (SBA) definition of a 

small business (having revenues of less 

than $8.0 million to $41.5 million in 

any 1 year). We do not anticipate that 

providers will be directly impacted by 

the provisions in this final rule. 

Individuals and States are not included 

in the definition of a small entity. The 

provisions in this final rule will affect 

Exchanges and QHP issuers. 


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287SBA. (n.d.). Table of size standards. https://

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

288CMS. (n.d.). Medical Loss Ratio Data and 

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

Resources/Data-Resources/mlr.html. 289 $35 million/475 issuers subject to the MLR 

requirements = approximately $73,684.21. 

290United States Census Bureau (2020, March). 

2017 SUSB Annual Data Tables by Establishment 

Industry, Data by Enterprise Receipt Size. https:// 

www.census.gov/data/tables/2020/econ/susb/2020- 

susb-annual.html. 

For purposes of the RFA, we believe 

that health insurance issuers will be 

classified under the NAICS code 524114 

(Direct Health and Medical Insurance 

Carriers). According to SBA size 

standards, entities with average annual 

receipts of $47 million or less would be 

considered small entities for these 

NAICS codes. Issuers could possibly be 

classified in 621491 (HMO Medical 

Centers) and, if this is the case, the SBA 

size standard will be $44.5 million or 

less.287 We believe that few, if any, 

insurance companies underwriting 

comprehensive health insurance 

policies (in contrast, for example, to 

travel insurance policies or dental 

discount policies) fall below these size 

thresholds. Based on data from MLR 

annual report submissions for the 2023 

MLR reporting year, approximately 82 

out of 475 issuers of health insurance 

coverage nationwide had total premium 

revenue of $47 million or less.288 This 

estimate may overstate the actual 

number of small health insurance 

issuers that may be affected, since over 

80 percent of these small issuers belong 

to larger holding groups, and many, if 

not all, of these small companies are 

likely to have non-health lines of 

business that will result in their 

revenues exceeding $47 million. 

Therefore, although it is likely that 

fewer than 82 issuers are considered 

small entities, for the purposes of this 

analysis, we assume 82 small issuers 

will be impacted by this final rule. 

The finalized policies that will result 

in an increased burden to small entities 

are described below. 

We are finalizing an update to the IVA 

sampling methodology, including the 

removal of enrollees without HCCs 

(including RXC-only enrollees), 

removing the FPC, and replacing the 

source of the Neyman allocation data 

with the most recent 3 years of 

consecutive HHS–RADV data with 

results that have been released before 

that benefit year’s HHS–RADV activities 

begin, beginning with benefit year 2025 

HHS–RADV. The total cost savings 

associated with this finalized policy 

will be approximately $79,121.92 per 

issuer audited per year. For more 

details, please refer to the Regulatory 

Impact Analysis section associated with 

this policy in this final rule. 

We are finalizing in this final rule 

amendments to add a definition of 

‘‘qualifying issuer’’ and to give such 

issuers an option to modify the 

treatment of payments or receipts 

related to the risk adjustment program 

for MLR reporting and rebate 

calculation purposes beginning with the 

2026 MLR reporting year. If every 

qualifying issuer chooses to take 

advantage of the option to modify the 

treatment of the payments or receipts 

related to the risk adjustment program 

for MLR reporting and rebate 

calculation purposes, then this finalized 

policy will reduce rebates paid by these 

issuers to consumers or increase 

premiums collected by these issuers 

from consumers by approximately $35 

million annually. The cost savings per 

issuer will therefore be approximately 

$73,684.21.289 For more details, please 

refer to the Regulatory Impact Analysis 

section associated with this policy in 

this final rule. 

Thus, the per-entity estimated annual 

cost savings for small issuers is 

$152,806.13, and the total estimated 

annual cost savings for small issuers is 

$13,294,133.31. See Tables 8 and 9. 

We sought comment on this analysis 

and sought information on the number 

of small issuers that may be affected by 

the provisions in these final rules. We 

did not receive any comments on this 

analysis and are therefore finalizing the 

estimates as proposed. 

As its measure of significant 

economic impact on a substantial 

number of small entities, HHS uses a 

change in revenue of more than 3 to 5 

percent. We do not believe that this 

threshold will be reached by the 

requirements in this final rule, given 

that the annual per-entity cost savings of 

$152,806.13 per small issuer represents 

approximately 0.07 percent of the 

average annual receipts for a small 

issuer.290 Therefore, the Secretary has 

certified that this final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For the purposes of section 

1102(b) of the Act, we define a small 

rural hospital as a hospital that is 

located outside of a metropolitan 

statistical area and has fewer than 100 

beds. While this final rule is not subject 

to section 1102 of the Act, we have 

determined that this final rule will not 

affect small rural hospitals. Therefore, 

the Secretary has certified that this final 


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TABLE 8: Detailed Annual Costs for Small Entities 

Description of Cost Annual Cost per Small Entity 

HHS-RADV IVA changes -$79, 121.92 

MLRchanges -$73,684.21 

Total -$152,806.13 

TABLE 9: Aggregate Annual Costs for Small Entities 

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

Entities Small Entities 

Issuer 87 -$152,806.13 -$13,294, 133.31 
Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4539 

rule will not have a significant impact 

on the operations of a substantial 

number of small rural hospitals. 

F. Unfunded Mandates Reform Act 

(UMRA) 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2024, that 

threshold is approximately $183 

million. Although we have not been 

able to quantify all costs, we expect that 

the combined impact on State, local, or 

Tribal governments and the private 

sector does not meet the UMRA 

definition of an unfunded mandate. 

G. Federalism 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it issues a proposed 

rule (and subsequent final rule) that 

imposes substantial direct requirement 

costs on State and local governments, 

preempts State law, or otherwise has 

Federalism implications. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have Federalism implications or limit 

the policy making discretion of the 

States, we have engaged in efforts to 

consult with and work cooperatively 

with affected States, including 

participating in conference calls with 

and attending conferences of the NAIC, 

and consulting with State insurance 

officials on an individual basis. 

While developing this final rule, we 

attempted to balance the States’ 

interests in regulating health insurance 

issuers with the need to ensure market 

stability. By doing so, we complied with 

the requirements of Executive Order 

13132. 

Because States have flexibility in 

designing their Exchange and Exchangerelated programs, State decisions will 

ultimately influence both administrative 

expenses and overall premiums. States 

are not required to establish an 

Exchange or risk adjustment program. 

For States that elected previously to 

operate an Exchange, those States had 

the opportunity to use funds under 

Exchange Planning and Establishment 

Grants to fund the development of data. 

Accordingly, some of the initial cost of 

creating programs was funded by 

Exchange Planning and Establishment 

Grants. After establishment, Exchanges 

must be financially self-sustaining, with 

revenue sources at the discretion of the 

State. Current State Exchanges charge 

user fees to issuers. 

In our view, while this final rule will 

not impose substantial direct 

requirement costs on State and local 

governments, this regulation has 

Federalism implications due to 

potential direct effects on the 

distribution of power and 

responsibilities among the State and 

Federal governments relating to 

determining standards relating to health 

insurance that is offered in the 

individual and small group markets. For 

example, the finalized policy to conduct 

ECP certification reviews of plans for 

issuers in FFEs in States performing 

plan management functions effective 

beginning in PY 2026 may have 

Federalism implications, given that 

HHS has not conducted Federal ECP 

certification reviews of plans in FFEs in 

States performing plan management 

functions since PY 2015. However, 

these Federalism implications may be 

balanced by enabling HHS to align 

standards in these States with Federal 

review standards, and thereby 

increasing consumer access in these 

States and improving efficiency of the 

QHP certification process. Additionally, 

we do not believe that the finalized 

amendment to codify the timeliness 

guidance for State Exchanges to review 

and resolve the State Exchange issuers 

enrollment data inaccuracies within 60 

calendar days will have significant 

Federalism implications because this 

finalized policy is merely codifying a 

timeline for an existing data submission 

requirement. Likewise, we do not 

believe that codifying the permissibility 

of CSR loading has significant 

Federalism implications because it 

continues to allow States to determine 

whether to allow and how to implement 

actuarially justified CSR loading in their 

State, as discussed in section III.D.3 of 

this preamble. 

H. Congressional Review Act 

Pursuant to Subtitle E of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (also known as the 

Congressional Review Act, 5 U.S.C 801 

et seq.), OIRA has determined that this 

rule meets the criteria set forth in 5 

U.S.C. 804(2). Therefore, this rule shall 

be submitted to each House of the 

Congress and to the Comptroller General 

as part of a report containing a copy of 

the rule along with other information 

specified in 5 U.S.C. 801(a)(1). Chiquita 

Brooks-LaSure, Administrator of the 

Centers for Medicare & Medicaid 

Services, approved this document on 

December 20, 2024. 

List of Subjects 

45 CFR Part 155 

Administrative practice and 

procedure, Advertising, Brokers, 

Conflict of interests, Consumer 

protection, Grants administration, Grant 

programs—health, Health care, Health 

insurance, Health maintenance 

organizations (HMO), Health records, 

Hospitals, Indians, Individuals with 

disabilities, Intergovernmental relations, 

Loan programs—health, Medicaid, 

Organization and functions 

(Government agencies), Public 

assistance programs, Reporting and 

recordkeeping requirements, Technical 

assistance, Women and youth. 

45 CFR Part 156 

Administrative practice and 

procedure, Advertising, Advisory 

committees, Brokers, Conflict of 

interests, Consumer protection, Grant 

programs—health, Grants 

administration, Health care, Health 

insurance, Health maintenance 

organization (HMO), Health records, 

Hospitals, Indians, Individuals with 

disabilities, Loan programs—health, 

Medicaid, Organization and functions 

(Government agencies), Public 

assistance programs, Reporting and 

recordkeeping requirements, State and 

local governments, Sunshine Act, 

Technical assistance, Women, and 

Youth. 

45 CFR Part 158 

Administrative practice and 

procedure, Claims, Health care, Health 

insurance, Penalties, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, under the authority at 5 

U.S.C. 301, the Department of Health 

and Human Services amends 45 CFR 

subtitle A, subchapter B, as set forth 

below. 

PART 155—EXCHANGE 

ESTABLISHMENT STANDARDS AND 

OTHER RELATED STANDARDS 

UNDER THE AFFORDABLE CARE ACT 

■ 1. The authority citation for part 155 

continues to read as follows: 

Authority: 42 U.S.C. 18021–18024, 18031– 

18033, 18041–18042, 18051, 18054, 18071, 

and 18081–18083. 

■ 2. Section 155.220 is amended by 

revising paragraph (k)(3) to read as 

follows: 


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4540 Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 

§ 155.220 Ability of States to permit 

agents, brokers, web-brokers, and agencies 

to assist qualified individuals, qualified 

employers, or qualified employees enrolling 

in QHPs. 

* * * * * 

(k) * * * 

(3) HHS may immediately suspend 

the agent’s or broker’s ability to transact 

information with the Exchange if HHS 

discovers circumstances that pose 

unacceptable risk to the accuracy of the 

Exchange’s eligibility determinations, 

Exchange operations, applicants, or 

enrollees, or Exchange information 

technology systems, including but not 

limited to risk related to noncompliance 

with the standards of conduct under 

paragraph (j)(2)(i), (ii), or (iii) of this 

section and the privacy and security 

standards under § 155.260, until the 

circumstances of the incident, breach, or 

noncompliance are remedied or 

sufficiently mitigated to HHS’ 

satisfaction. 

* * * * * 

■ 3. Section 155.305 is amended by 

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

follows: 

§ 155.305 Eligibility Standards. 

* * * * * 

(f) * * * 

(4) * * * 

(ii) If HHS notifies the Exchange as 

part of the process described in 

§ 155.320(c)(3) that APTC payments 

were made on behalf of either the tax 

filer or their spouse, if the tax filer is a 

married couple, for 2 consecutive tax 

years for which tax data would be 

utilized for verification of household 

income and family size in accordance 

with § 155.320(c)(1)(i), and the tax filer 

or the tax filer’s spouse did not comply 

with the requirement to file an income 

tax return for both years as required by 

26 U.S.C. 6011, 6012, and their 

implementing regulations and reconcile 

APTC for that period (‘‘file and 

reconcile’’), the Exchange must: 

(A) Send a direct notification to the 

tax filer, consistent with the standards 

applicable to the protection of Federal 

Tax Information, that explicitly informs 

the tax filer that the Exchange has 

determined that the tax filer or the tax 

filer’s spouse, if the tax filer is married, 

has failed to file their Federal income 

taxes and reconcile APTC, and educate 

the tax filer of the need to file and 

reconcile or risk being determined 

ineligible for APTC after 2 consecutive 

years of failing to file and reconcile; or 

(B) Send an indirect notification to 

either the tax filer or their enrollee, that 

informs the tax filer or enrollee that they 

may be at risk of being determined 

ineligible for APTC after 2 years of 

failing to file and reconcile. These 

notices must educate tax filers or their 

enrollees on the requirement to file and 

reconcile, while not directly stating that 

the Internal Revenue Service indicates 

the tax filer or the tax filer’s spouse, if 

the tax filer is married, has failed to file 

and reconcile. 

* * * * * 

■ 4. Section 155.400 is amended by 

adding paragraphs (d)(1) and (2) and 

revising paragraph (g) to read as follows: 

§ 155.400 Enrollment of qualified 

individuals into QHPs. 

* * * * * 

(d) * * * 

(1) Timeliness standard for State 

Exchanges to review, resolve, and report 

data inaccuracies submitted by a State 

Exchange issuer. Within 60 calendar 

days after a State Exchange receives a 

data inaccuracy from an issuer operating 

in the State Exchange that includes a 

description of a data inaccuracy in 

accordance with § 156.1210 and all the 

information that the State Exchange 

requires or requests to properly assess 

the inaccuracy, the State Exchange must 

review and resolve the State Exchange 

issuer’s data inaccuracies and submit to 

HHS a description of the resolution of 

the inaccuracies in a format and manner 

specified by HHS. 

(2) [Reserved] 

* * * * * 

(g) Premium payment threshold. 

Exchanges may, and the Federallyfacilitated Exchanges and State-Based 

Exchanges on the Federal platform will, 

allow issuers to implement a 

percentage-based premium payment 

threshold policy (which can be based on 

either the net premium after application 

of advance payments of the premium 

tax credit or gross premium) and/or a 

fixed-dollar premium payment 

threshold policy, provided that the 

threshold and policy is applied in a 

uniform manner to all applicants and 

enrollees. 

(1) Under a net premium percentagebased premium payment threshold 

policy, issuers can consider applicants 

or enrollees to have paid all amounts 

due for the following purposes, if the 

applicants or enrollees pay an amount 

sufficient to maintain a percentage of 

total premium paid out of the total 

premium owed equal to or greater than 

95 percent of the net monthly premium 

amount owed by the enrollees. If an 

applicant or enrollee satisfies the 

percentage-based premium payment 

threshold policy, the issuer may: 

(i) Effectuate an enrollment based on 

payment of the binder payment under 

paragraph (e) of this section. 

(ii) Avoid triggering a grace period for 

non-payment of premium, as described 

by § 156.270(d) of this subchapter or a 

grace period governed by State rules. 

(iii) Avoid terminating the enrollment 

for non-payment of premium as, 

described by §§ 156.270(g) of this 

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

(B). 

(2) Under a gross premium 

percentage-based premium payment 

threshold policy, issuers can consider 

enrollees to have paid all amounts due 

for the following purposes, if the 

enrollees pay an amount sufficient to 

maintain a percentage of the gross 

premium of the policy before the 

application of advance payments of the 

premium tax credit that is equal to or 

greater than 98 percent of the gross 

monthly premium owed by the 

enrollees. If an enrollee satisfies the 

gross premium percentage-based 

premium payment threshold policy, the 

issuer may: 

(i) Avoid triggering a grace period for 

non-payment of premium, as described 

by § 156.270(d) of this subchapter or a 

grace period governed by State rules. 

(ii) Avoid terminating the enrollment 

for non-payment of premium as, 

described by §§ 156.270(g) of this 

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

(B). 

(3) Under a fixed-dollar premium 

payment threshold policy, issuers can 

consider enrollees to have paid all 

amounts due for the following purposes, 

if the enrollees pay an amount that is 

less than the total premium owed, the 

unpaid remainder of which is equal to 

or less than a fixed-dollar amount of $10 

or less, adjusted for inflation, as 

prescribed by the issuer. If an enrollee 

satisfies the fixed-dollar premium 

payment threshold policy, the issuer 

may: 

(i) Avoid triggering a grace period for 

non-payment of premium, as described 

by § 156.270(d) of this subchapter or a 

grace period governed by State rules. 

(ii) Avoid terminating the enrollment 

for non-payment of premium as, 

described by §§ 156.270(g) of this 

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

(B). 

* * * * * 

■ 5. Section 155.505 is amended by 

revising paragraph (b) introductory text 

to read as follows: 

§ 155.505 General Eligibility Appeals 

Requirements. 

* * * * * 

(b) Right to appeal. An applicant, 

enrollee, or application filer must have 

the right to appeal: 

* * * * * 


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Federal Register / Vol. 90, No. 9 / Wednesday, January 15, 2025 / Rules and Regulations 4541 

■ 6. Section 155.1000 is amended by 

adding paragraph (e) to read as follows: 

§ 155.1000 Certification standards for 

QHPs. 

* * * * * 

(e) Denial of certification. The 

Exchange may deny certification to any 

plan that does not meet the general 

certification criteria under 

§ 155.1000(c). 

■ 7. Section 155.1090 is amended by 

revising the section heading, the 

paragraph (a) heading, and paragraphs 

(a)(2) and (3) to read as follows: 

§ 155.1090 Request for the reconsideration 

of a denial of certification. 

(a) Request for the reconsideration of 

a denial of certification specific to a 

Federally-facilitated Exchange— 

* * * * * 

(2) Form and manner of request. An 

issuer submitting a request for 

reconsideration under paragraph (a)(1) 

of this section must submit a written 

request for reconsideration to HHS, in 

the form and manner specified by HHS, 

within 7 calendar days of the date of the 

written notice of denial of certification. 

The issuer must include any and all 

documentation the issuer wishes to 

provide in support of its request with its 

request for reconsideration. The request 

for reconsideration must provide clear 

and convincing evidence that HHS’ 

determination that the plan does not 

meet the general certification criteria at 

§ 155.1000(c) was in error. 

(3) HHS reconsideration decision. 

HHS will review the reconsideration 

request to determine whether the 

issuer’s reconsideration request 

provided clear and convincing evidence 

that HHS’ determination that the plan 

does not meet the general certification 

criteria at § 155.1000(c) was in error. 

HHS will provide the issuer with a 

written notice of the reconsideration 

decision. The decision will constitute 

HHS’ final determination. 

* * * * * 

PART 156—HEALTH INSURANCE 

ISSUER STANDARDS UNDER THE 

AFFORDABLE CARE ACT, INCLUDING 

STANDARDS RELATED TO 

EXCHANGES 

■ 8. The authority citation for part 156 

continues to read as follows: 

Authority: 42 U.S.C. 18021–18024, 18031– 

18032, 18041–18042, 18044, 18054, 18061, 

18063, 18071, 18082, and 26 U.S.C. 36B. 

■ 9. Section 156.80 is amended by 

revising paragraph (d)(2)(i) to read as 

follows: 

§ 156.80 Single risk pool. 

* * * * * 

(d) * * * 

(2) * * * 

(i) The actuarial value and costsharing design of the plan, including, if 

permitted by the applicable State 

authority (as defined in § 144.103 of this 

subchapter), accounting for cost-sharing 

reduction amounts provided to eligible 

enrollees under § 156.410, provided the 

issuer does not otherwise receive 

reimbursement for such amounts. 

* * * * * 

■ 10. Section 156.201 is amended by 

adding paragraph (c) to read as follows: 

§ 156.201 Standardized plan options. 

* * * * * 

(c) For plan year 2026 and subsequent 

plan years, an issuer that offers multiple 

standardized plan options within the 

same product network type, metal level, 

and service area must meaningfully 

differentiate these plans from one 

another in terms of included benefits, 

provider networks, included 

prescription drugs, or a combination of 

some or all these factors. For the 

purposes of this standard, a 

standardized plan option with a 

different product ID, provider network 

ID, drug list ID, or a combination of 

some or all these factors, would be 

considered meaningfully different. 

■ 11. Section 156.202 is amended by 

revising paragraph (b) and paragraph (d) 

introductory text to read as follows: 

§ 156.202 Non-standardized plan option 

limits. 

* * * * * 

(b) For plan year 2025 and subsequent 

plan years, is limited to offering two 

non-standardized plan options per 

product network type, as the term is 

described in the definition of ‘‘product’’ 

at § 144.103 of this subchapter, metal 

level (excluding catastrophic plans), and 

inclusion of adult dental benefit 

coverage, pediatric dental benefit 

coverage, and adult vision benefit 

coverage (as defined in paragraphs (c)(1) 

through (3) of this section), in any 

service area. 

* * * * * 

(d) For plan year 2025 and subsequent 

plan years, an issuer may offer 

additional non-standardized plan 

options for each product network type, 

metal level, inclusion of adult dental 

benefit coverage, pediatric dental 

benefit coverage, and adult vision 

benefit coverage (as defined in 

paragraphs (c)(1) through (3) of this 

section), and service area if it 

demonstrates that these additional 

plans’ cost sharing for benefits 

pertaining to the treatment of chronic 

and high-cost conditions (including 

benefits in the form of prescription 

drugs, if pertaining to the treatment of 

the condition(s)) is at least 25 percent 

lower, as applied without restriction in 

scope throughout the plan year, than the 

cost sharing for the same corresponding 

benefits in the issuer’s other nonstandardized plan option offerings in 

the same product network type, metal 

level, inclusion of adult dental benefit 

coverage, pediatric dental benefit 

coverage, and adult vision benefit 

coverage, and service area. 

* * * * * 

■ 12. Section 156.1220 is amended by 

adding paragraphs (a)(2)(i) and (ii) to 

read as follows: 

§ 156.1220 Administrative appeals. 

(a) * * * 

(2) * * * 

(i) Notwithstanding paragraphs (a)(1) 

and (2) of this section, for appeals 

related to HHS–RADV under paragraphs 

(a)(1)(vii) and (viii) of this section, HHS 

will only take action to adjust risk 

adjustment State payments and charges 

for an issuer in response to an appeal 

decision when the impact of the 

decision to the filer’s HHS–RADV 

adjustments to risk adjustment State 

transfers is greater than or equal to 

$10,000. 

(ii) [Reserved] 

* * * * * 

PART 158—ISSUER USE OF PREMIUM 

REVENUE: REPORTING AND REBATE 

REQUIREMENTS 

■ 13. The authority citation for part 158 

continues to read as follows: 

Authority: 42 U.S.C. 300gg–18. 

■ 14. Section 158.103 is amended by 

adding a definition for ‘‘Qualifying 

issuer’’ in alphabetical order to read as 

follows: 

§ 158.103 Definitions. 

* * * * * 

Qualifying issuer means an issuer 

whose aggregate ratio of net payments 

related to the risk adjustment program 

under section 1343 of the Patient 

Protection and Affordable Care Act, 42 

U.S.C. 18063, to earned premiums as 

defined in § 158.130, but prior to and 

excluding the adjustments in 

§ 158.130(b)(5) that account for the net 

payments or receipts related to the risk 

adjustment, risk corridors, and 

reinsurance programs, based on three 

consecutive years of data in a relevant 

State and market, is greater than or 

equal to 50 percent. 

* * * * * 


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■ 15. Section 158.140 is amended by 

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

follows: 

§ 158.140 Reimbursement for clinical 

services provided to enrollees. 

* * * * * 

(b) * * * 

(4) * * * 

(ii) Beginning with the 2026 MLR 

reporting year, for qualifying issuers (as 

defined in § 158.103), at such issuers’ 

option, receipts related to the 

transitional reinsurance program and 

net payments or receipts related to the 

risk corridors program (calculated using 

an adjustment percentage, as described 

in § 153.500 of this subchapter, equal to 

zero percent) under sections 1341 and 

1342 of the Patient Protection and 

Affordable Care Act, 42 U.S.C. 18061, 

18062. For all other issuers, receipts 

related to the transitional reinsurance 

program and net payments or receipts 

related to the risk adjustment and risk 

corridors programs (calculated using an 

adjustment percentage, as described in 

§ 153.500 of this subchapter, equal to 

zero percent) under sections 1341, 1342, 

and 1343 of the Patient Protection and 

Affordable Care Act, 42 U.S.C. 18061, 

18062, 18063. 

* * * * * 

■ 16. Section 158.240 is amended by 

revising paragraph (c)(2) and adding 

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

§ 158.240 Rebating premium if the 

applicable medical loss ratio standard is 

not met. 

* * * * * 

(c) * * * 

(2) For example, an issuer must rebate 

a pro rata portion of premium revenue 

if it does not meet an 80 percent MLR 

for the individual market in a State that 

has not set a higher MLR. If an issuer 

has a 75 percent MLR for the coverage 

it offers in the individual market in a 

State that has not set a higher MLR, the 

issuer must rebate 5 percent of the 

premium paid by or on behalf of the 

enrollee for the MLR reporting year after 

subtracting a pro rata portion of taxes 

and fees and accounting for payments or 

receipts related to the reinsurance, risk 

adjustment and risk corridors programs 

(calculated using an adjustment 

percentage, as described in § 153.500 of 

this subchapter, equal to zero percent). 

If the issuer is not a qualifying issuer 

(defined in § 158.103), or is a qualifying 

issuer that does not opt to apply risk 

adjustment transfer amounts as 

described in § 158.140(b)(4)(ii), the 

issuer’s total earned premium for the 

MLR reporting year in the individual 

market in the State is $200,000, incurred 

claims are $121,250, the issuer received 

transitional reinsurance payments of 

$2,500, and made net payments related 

to risk adjustment and risk corridors of 

$20,000 (calculated using an adjustment 

percentage, as described in § 153.500 of 

this subchapter, equal to zero percent), 

then the issuer’s gross earned premium 

in the individual market in the State 

would be $200,000 plus $2,500 minus 

$20,000, for a total of $182,500. If the 

issuer’s Federal and State taxes and 

licensing and regulatory fees, including 

reinsurance contributions, that may be 

excluded from premium revenue as 

described in §§ 158.161(a), 

158.162(a)(1), and 158.162(b)(1), 

allocated to the individual market in the 

State are $15,000, and the net payments 

related to risk adjustment and risk 

corridors, reduced by reinsurance 

receipts, that must be accounted for in 

premium revenue as described in 

§§ 158.130(b)(5), 158.221, and 158.240, 

are $17,500 ($20,000 reduced by 

$2,500), then the issuer would subtract 

$15,000 and add $17,500 to gross 

premium revenue of $182,500, for a base 

of $185,000 in adjusted premium. The 

issuer would owe rebates of 5 percent of 

$185,000, or $9,250 in the individual 

market in the State. In this example, if 

an enrollee of the issuer in the 

individual market in the State paid 

$2,000 in premiums for the MLR 

reporting year, or 1/100 of the issuer’s 

total premium in that State market, then 

the enrollee would be entitled to 1/100 

of the total rebates owed by the issuer, 

or $92.50. 

(3) As another example, if an issuer is 

a qualifying issuer (defined in 

§ 158.103) that opts to apply risk 

adjustment transfer amounts as 

described in § 158.140(b)(4)(ii), the 

issuer’s total earned premium for the 

MLR reporting year in the individual 

market in the State is $90,000, incurred 

claims are $151,250, and the issuer 

received transitional reinsurance 

payments of $12,500 and net receipts 

related to risk adjustment of $110,000, 

then the issuer’s gross earned premium 

in the individual market in the State 

would be $90,000 plus $12,500, for a 

total of $102,500. If the qualifying 

issuer’s Federal and State taxes and 

licensing and regulatory fees, including 

reinsurance contributions, that may be 

excluded from premium revenue as 

described in §§ 158.161(a), 

158.162(a)(1), and 158.162(b)(1), 

allocated to the individual market in the 

State are $15,000, and the reinsurance 

payments that must be accounted for in 

premium revenue as described in 

§§ 158.130(b)(5), 158.221, and 158.240 

are $12,500, then the qualifying issuer 

would subtract $15,000 and $12,500 

from gross premium revenue of 

$102,500, for a subtotal of $75,000. The 

qualifying issuer would then add 

$110,000 in net receipts related to risk 

adjustment, for a base of $185,000 in 

adjusted premium. The qualifying issuer 

would owe rebates of 5 percent of 

$185,000, or $9,250 in the individual 

market in the State. In this example, if 

an enrollee of the issuer in the 

individual market in the State paid $900 

in premiums for the MLR reporting year, 

or 1/100 of the issuer’s total premium in 

that State market, then the enrollee 

would be entitled to 1/100 of the total 

rebates owed by the issuer, or $92.50. 

* * * * * 

Xavier Becerra, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2025–00640 Filed 1–13–25; 4:15 pm] 

BILLING CODE 4120–01–P 


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