`[Federal Register Volume 90, Number 9 (Wednesday, January 15, 2025)]
[Rules and Regulations]
[Pages 4424-4542]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-00640]



[[Page 4423]]

Vol. 90

Wednesday,

No. 9

January 15, 2025

Part X





Department of Health and Human Services





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





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

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

[[Page 4424]]


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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.

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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 HHS-operated risk adjustment 
program and the 2026 benefit year user fee rates for issuers offering 
qualified health plans (QHPs) through Federally-facilitated Exchanges 
(FFEs) and State-based Exchanges on the Federal platform (SBE-FPs). 
This 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, summary-
level 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 
(Sec.  153.630(b))
    C. ICRs Regarding Engaging in Compliance Reviews and Taking 
Enforcement Actions Against Lead Agents for Insurance Agencies 
(Sec.  155.220)
    D. ICRs Regarding Agent and Broker System Suspension Authority 
(Sec.  155.220(k))
    E. ICRs Regarding Updating the Model Consent Form (Sec.  
155.220)
    F. ICRs Regarding Notification of 2-Year Failure To File and 
Reconcile Population (Sec.  155.305)
    G. ICRs Regarding General Program Integrity and Oversight 
Requirements (Sec.  155.1200)
    H. ICRs Regarding Essential Community Provider Certification 
Reviews (Sec.  156.235)
    I. ICRs Regarding Quality Improvement Strategy Information 
(Sec.  156.1130)
    J. ICRs Regarding Medical Loss Ratio (Sec. Sec.  158.103, 
158.140, 158.240)
    K. Summary of Annual Burden Estimates for 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

[[Page 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.
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    \1\ The 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.''
    \2\ See sections 1301, 1302, 1311, 1312, 1313, 1321, 1331, and 
1343 of the ACA and sections 2718 and 2792 of the PHS Act.
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II. Background

A. Legislative and Regulatory Overview

    Title I of the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA) added a new title XXVII to the PHS Act to establish 
various reforms to the group and individual health insurance markets. 
These provisions of the PHS Act were later augmented by other laws, 
including the ACA. Subtitles A and C of title I of the ACA reorganized, 
amended, and added to the provisions of part A of title XXVII of the 
PHS Act relating to group health plans and health insurance issuers in 
the group and individual markets. The term ``group health plan'' 
includes both insured and self-insured group health plans.
    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), cost-sharing limits, and AV requirements. The law directs that 
EHBs be equal in scope to the benefits provided under a typical 
employer plan, and that they cover at least the following 10 general 
categories: ambulatory patient services; emergency services; 
hospitalization; maternity and newborn care; mental health and 
substance use disorder services, including behavioral health treatment; 
prescription drugs; rehabilitative and habilitative services and 
devices; laboratory services; preventive and wellness services and 
chronic disease management; and pediatric services, including oral and 
vision care.
    Sections 1302(b)(4)(A) through (D) of the ACA establish that the 
Secretary must define EHB in a manner that: (1) reflects appropriate 
balance among the 10 categories; (2) is not designed in such a way as 
to discriminate based on age, disability, or expected length of life; 
(3) takes into account the health care needs of diverse segments of the 
population; and (4) does not allow denials of EHBs based on age, life 
expectancy, disability, degree of medical dependency, or quality of 
life.
    Section 1302(d) of the ACA describes the various levels of coverage 
based on AV. Consistent with section 1302(d)(2)(A) of the ACA, AV is 
calculated based on the provision of EHB to a standard population. 
Section 1302(d)(3) of the ACA directs the Secretary of HHS to develop 
guidelines that allow for de minimis variation in AV calculations.
    Section 1311(c) of the ACA provides the Secretary the authority to 
issue regulations to establish criteria for the certification of QHPs. 
Section 1311(c)(1)(B) of the ACA requires, among the criteria for 
certification that the Secretary must establish by regulation, that 
QHPs ensure a sufficient choice of providers. Section 1311(d)(4)(A) of 
the ACA requires the Exchange to implement procedures for the 
certification, recertification, and decertification of health plans as 
QHPs, consistent with guidelines developed by the Secretary under 
section 1311(c) of the ACA. Section 1311(e)(1) of the ACA grants the 
Exchange the authority to certify a health plan as a QHP if the health 
plan meets the Secretary's requirements for certification issued under 
section 1311(c) of the ACA, and the Exchange determines that making the 
plan available through the Exchange is in the interests of qualified 
individuals and qualified employers in the State. Section 1311(c)(6)(C) 
of the ACA directs the Secretary of HHS to 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 non-discriminatory 
administration of State Exchange activities. Section 1313(a)(5)(A) of 
the ACA provides the Secretary with the authority to implement any 
measure or procedure that the Secretary determines is appropriate to 
reduce fraud and abuse in the administration of the Exchanges. Section 
1321 of the ACA provides for State flexibility in the operation and 
enforcement of Exchanges and related requirements.
    Section 1321(a) of the ACA provides broad authority for the 
Secretary to establish standards and regulations to implement the 
statutory requirements related to Exchanges, QHPs and other components 
of title I of the ACA,

[[Page 4426]]

including such other requirements as the Secretary determines 
appropriate. When operating an FFE under section 1321(c)(1) of the ACA, 
HHS has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of 
the ACA to collect and spend user fees. Office of Management and Budget 
(OMB) Circular A-25 Revised establishes Federal policy regarding user 
fees and specifies that a user charge will be assessed against each 
identifiable recipient for special benefits derived from Federal 
activities beyond those received by the public.
    Section 1321(d) of the ACA provides that nothing in title I of the 
ACA must be construed to preempt any State law that does not prevent 
the application of title I of the ACA. Section 1311(k) of the ACA 
specifies that Exchanges may not establish rules that conflict with or 
prevent the application of regulations issued by the Secretary.
    Section 1331 of the ACA provides States with an option to establish 
a Basic Health Program (BHP). In the States that elect to operate a 
BHP, the BHP makes affordable health benefits coverage available for 
individuals under age 65 with household incomes between 133 percent and 
200 percent of the Federal poverty level (FPL) who are not otherwise 
eligible for Medicaid, the Children's Health Insurance Program (CHIP), 
or affordable employer-sponsored coverage, or for individuals whose 
income is equal to or below 200 percent of FPL but are lawfully present 
non-citizens ineligible for Medicaid. For those States that have 
expanded Medicaid coverage under section 1902(a)(10)(A)(i)(VIII) of the 
Social Security Act (the Act), the lower income threshold for BHP 
eligibility is effectively 138 percent of the FPL due to the 
application of a required 5 percent income disregard in determining the 
upper limits of Medicaid income eligibility (section 1902(e)(14)(I) of 
the Act).
    Section 1343 of the ACA establishes a permanent risk adjustment 
program to provide payments to health insurance issuers that attract 
higher-than-average risk populations, such as those with chronic 
conditions, funded by charges collected from those issuers that attract 
lower-than-average risk populations, thereby reducing incentives for 
issuers to avoid higher-risk enrollees. Section 1343(b) of the ACA 
provides that the Secretary, in consultation with States, shall 
establish criteria and methods to be used in carrying out the risk 
adjustment activities under this section. Consistent with section 
1321(c) of the ACA, the Secretary is responsible for operating the HHS 
risk adjustment program in any State that fails to do so.\3\
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    \3\ In the 2014 through 2016 benefit years, HHS operated the 
risk adjustment program in every State and the District of Columbia, 
except Massachusetts. Beginning with the 2017 benefit year, HHS has 
operated the risk adjustment program in all 50 States and the 
District of Columbia.
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    Section 1401(a) of the ACA added section 36B to the Internal 
Revenue Code (the Code), which, among other things, requires that a 
taxpayer reconcile APTC for a year of coverage with the amount of the 
premium tax credit (PTC) the taxpayer is allowed for the year.
    Section 1402 of the ACA provides for, among other things, 
reductions in cost sharing for EHB for qualified low- and moderate-
income enrollees in silver level QHPs offered through the individual 
market Exchanges. This section also provides for reductions in cost 
sharing for Indians enrolled in QHPs at any metal level.
    Section 1411(f) of the ACA requires the Secretary, in consultation 
with the Secretary of the Treasury and the Secretary of Homeland 
Security, and the Commissioner of Social Security, to establish 
procedures for hearing and making decisions governing appeals of 
Exchange eligibility determinations. Section 1411(f)(1)(B) of the ACA 
requires the Secretary to establish procedures to redetermine 
eligibility on a periodic basis, in appropriate circumstances, 
including eligibility to purchase a QHP through the Exchange and for 
APTC and CSRs.
    Section 1411(g) of the ACA allows the use of applicant information 
only for the limited purpose of, and to the extent necessary for, 
ensuring the efficient operation of the Exchange, including by 
verifying eligibility to enroll through the Exchange and for APTC and 
CSRs, and limits the disclosure of such information.
    Section 1413 of the ACA directs the Secretary to establish, subject 
to minimum requirements, a streamlined enrollment process for 
enrollment in QHPs and all insurance affordability programs.
    Section 5000A of the Code, as added by section 1501(b) of the ACA, 
requires individuals to have minimum essential coverage (MEC) for each 
month, qualify for an exemption, or make an individual shared 
responsibility payment. Under the Tax Cuts and Jobs Act, which was 
enacted on December 22, 2017, the individual shared responsibility 
payment is reduced to $0, effective for months beginning after December 
31, 2018. Notwithstanding that reduction, certain exemptions are still 
relevant to determine whether individuals aged 30 and above qualify to 
enroll in catastrophic coverage under Sec. Sec.  155.305(h) and 
156.155(a)(5).
    Section 1902(r)(2)(A) of the Act permits States to apply less 
restrictive methodologies than cash assistance program methodologies in 
determining eligibility for certain eligibility groups.
1. Premium Stabilization Programs
    The premium stabilization programs refer to the risk adjustment, 
risk corridors, and reinsurance programs established by the ACA.\4\ For 
past rulemaking, we refer readers to the following rules:
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    \4\ See section 1341 of the ACA (transitional reinsurance 
program), section 1342 of the ACA (risk corridors program), and 
section 1343 of the ACA (risk adjustment program).
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     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

[[Page 4427]]

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\
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    \5\ CMS. (2018). Updated 2019 Benefit Year Final HHS Risk 
Adjustment Model Coefficients. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.
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     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 Sec.  153.320(b)(1)(i), 
we issued the 2021 Benefit Year Final HHS Risk Adjustment Model 
Coefficients on the CCIIO website.\6\
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    \6\ CMS. (2020). Final 2021 Benefit Year Final HHS Risk 
Adjustment Model Coefficients. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
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     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 Sec.  153.320(b)(1)(i), 
we released Updated 2022 Benefit Year Final HHS Risk Adjustment Model 
Coefficients on the CCIIO website, announcing some minor revisions to 
the 2022 benefit year final HHS risk adjustment adult model 
coefficients.\7\
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    \7\ CMS. (2021). 2022 Benefit Year Final HHS Risk Adjustment 
Model Coefficients. https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf.
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     In the May 6, 2022 Federal Register (87 FR 27208) (2023 
Payment Notice), we finalized revisions related to the HHS-operated 
risk adjustment program, including the benefit and payment parameters 
for the 2023 benefit year, HHS risk adjustment model recalibration, and 
policies related to the collection and extraction of enrollee-level 
EDGE data. We also finalized the adoption of the interacted HCC count 
specification for the adult and child models, along with modified 
enrollment duration factors for the adult models, beginning with the 
2023 benefit year.\8\

[[Page 4428]]

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.
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    \8\ CMS (2022). 2023 Benefit Year Final HHS Risk Adjustment 
Model Coefficients. https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf.
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     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 Sec.  156.235, with revisions in the 2017 Payment Notice in 
the March 8, 2016 Federal Register (81 FR 12203) and the 2018 Payment 
Notice in the December 22, 2016 Federal Register (81 FR 94058).
    In the 2018 Payment Notice, issued in the December 22, 2016 Federal 
Register (81 FR 94058), we set forth the standards for the request for 
reconsideration of denial of certification specific to the FFEs at 
Sec.  155.1090.
    In an interim final rule, issued in the May 11, 2016 Federal 
Register (81 FR 29146), we made amendments to the parameters of certain 
special enrollment periods (2016 Interim Final Rule). We finalized 
these in the 2018 Payment Notice, issued in the December 22, 2016 
Federal Register (81 FR 94058).
    In the Market Stabilization final rule, issued in the April 18, 
2017 Federal Register (82 FR 18346), we amended standards relating to 
special enrollment periods and QHP certification. In the 2019 Payment 
Notice, issued in the April 17, 2018 Federal Register (83 FR 16930), we 
modified parameters around certain special enrollment periods. In the 
April 25, 2019 Federal Register (84 FR 17454), the 2020 Payment Notice

[[Page 4429]]

established a new special enrollment period.
    In the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment 
Notice), we finalized revisions to the parameters of special enrollment 
periods and the quality rating information display standards for State 
Exchanges and amended the periodic data matching requirements.
    In the January 19, 2021 Federal Register (86 FR 6138) (part 1 of 
the 2022 Payment Notice), we finalized only a subset of the proposals 
in the 2022 Payment Notice proposed rule. In the May 5, 2021 Federal 
Register (86 FR 24140), we issued part 2 of the 2022 Payment Notice. In 
part 3 of the 2022 Payment Notice, issued in the September 27, 2021 
Federal Register (86 FR 53412), in conjunction with the Department of 
the Treasury, we finalized amendments to certain policies in part 1 of 
the 2022 Payment Notice.
    In the May 6, 2022 Federal Register (87 FR 27208), we finalized 
changes to maintain the user fee rate for issuers offering plans 
through the FFEs and maintain the user fee rate for issuers offering 
plans through the SBE-FPs for the 2023 benefit year. We also finalized 
various policies to address certain agent, broker, and web-broker 
practices and conduct. We also finalized updates to the requirement 
that all Exchanges conduct special enrollment period verifications.
    In the 2024 Payment Notice, issued in the April 27, 2023 Federal 
Register (88 FR 25740), we revised Exchange Blueprint approval 
timelines, lowered the user fee rate for QHPs in the FFEs and SBE-FPs, 
and amended re-enrollment hierarchies for enrollees. We also finalized 
policies to update FFE and SBE-FP standardized plan options; 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 door-to-door assisters to solicit 
consumers. To ensure provider network adequacy, we finalized provider 
network and ECP policies for QHPs. We revised the failure to file and 
reconcile process to ensure enrollees would not lose APTC eligibility 
until they or their tax filer failed to file their Federal income taxes 
and reconcile APTC for 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 web-brokers and direct enrollment entities. In 
addition, we required State Exchanges and State Medicaid agencies to 
remit payment to HHS for their use of certain income data, amended re-
enrollment hierarchies for enrollees enrolled in catastrophic coverage, 
revised the parameters around a State Exchange adopting an alternative 
open enrollment period, and extended the availability of a special 
enrollment period for APTC-eligible qualified individuals with a 
projected annual household income no greater than 150 percent of the 
Federal Poverty Level (FPL). To ensure provider network adequacy in 
State Exchanges and SBE-FPs, we finalized provider network adequacy 
policies applicable to such Exchanges for PY 2026 and subsequent plan 
years. We also further lowered the user fee rate for QHPs in the FFEs 
and SBE-FPs. In addition, we finalized the policy to maintain FFE and 
SBE-FP standardized plan option metal levels from the 2024 Payment 
Notice and finalized an exceptions process to the limitation on non-
standardized plan options in FFEs and SBE-FPs. We also finalized the 
requirement for Exchanges to provide notification to enrollees or their 
tax filers who have failed to file their Federal income taxes and 
reconcile APTC for 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 Sec.  
156.135(a) that AV is generally to be calculated using the AV 
Calculator developed and made available by HHS for a given benefit 
year. In the 2015 Payment Notice (79 FR 13743), we established at Sec.  
156.135(g) provisions for updating the AV Calculator in future plan 
years. In the 2017 Payment Notice (81 FR 12349), we amended the 
provisions at Sec.  156.135(g) to allow for additional flexibility in 
our approach and options for updating of the AV Calculator.
    In the 2025 Payment Notice, issued in the April 15, 2024 Federal 
Register (89 FR 26218), we revised Sec.  155.170(a) to codify that 
benefits covered in a State's EHB-benchmark plan are not considered in 
addition to EHB, even if they had been required by State action taking 
place after December 31, 2011, other than for purposes of compliance 
with Federal requirements. We finalized three revisions to the 
standards for State selection of EHB-benchmark plans for benefit years 
beginning on or after January 1, 2026: we revised the typicality 
standard at Sec.  156.111 for States to demonstrate that their new EHB-
benchmark plan provides a scope of benefits that is equal to that of a 
typical employer plan in the State and removed the generosity standard; 
removed the requirement for States to submit a formulary drug list as 
part of their application unless they are changing their prescription 
drug EHBs; and consolidated the options for States to change their EHB-
benchmark plans. We also removed the regulatory prohibition at Sec.  
156.115(d) on issuers from including routine non-pediatric dental 
services as an EHB beginning with PY 2027.
    In addition, we revised Sec.  156.122 to codify that prescription 
drugs in excess of those covered by a State's EHB-benchmark plan are 
considered EHB. We also stated that 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 EHB-benchmark plan as 
EHB for purposes of the prohibition of lifetime and annual limits and 
the annual limitation on cost sharing, which would further strengthen 
the consumer protections in the ACA.
6. Medical Loss Ratio (MLR)
    We requested comment on section 2718 of the PHS Act in the April 
14, 2010 Federal Register (75 FR 19297)

[[Page 4430]]

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 Sec.  155.200(d) to direct Exchanges to 
evaluate quality improvement strategies, and Sec.  156.200(b) to direct 
QHP issuers to implement and report on a quality improvement strategy 
or strategies consistent with section 1311(g) standards as QHP 
certification criteria for participation in an Exchange. In the 2016 
Payment Notice, issued in the February 27, 2015 Federal Register (80 FR 
10749), we finalized regulations at Sec.  156.1130 to establish 
standards and the associated timeframe for QHP issuers to submit the 
necessary information to implement quality improvement strategy 
standards for QHPs offered through an Exchange.
8. Basic Health Program
    In the March 12, 2014, Federal Register (79 FR 14111), we issued a 
final rule entitled the ``Basic Health Program: State Administration of 
Basic Health Programs; Eligibility and Enrollment in Standard Health 
Plans; Essential Health Benefits in Standard Health Plans; Performance 
Standards for Basic Health Programs; Premium and Cost Sharing for Basic 
Health Programs; Federal Funding Process; Trust Fund and Financial 
Integrity'' (hereinafter referred to as the BHP final rule) 
implementing section 1331 of the ACA, which governs the establishment 
of BHPs. The BHP final rule established the standards for State and 
Federal administration of BHPs, including provisions regarding 
eligibility and enrollment, benefits, cost-sharing requirements and 
oversight activities. In the BHP final rule, we specified that the BHP 
Payment Notice process would include the annual publication of both a 
proposed and final BHP payment methodology.
    On October 11, 2017, the Attorney General of the United States 
provided HHS and the Department of the Treasury (the Departments) with 
a legal opinion \9\ indicating that the permanent appropriation at 31 
U.S.C. 1324, from which the Departments had historically drawn funds to 
make CSR payments, cannot be used to fund CSR payments to insurers. In 
light of this opinion--and in the absence of any other appropriation 
that could be used to fund CSR payments--HHS directed CMS to 
discontinue CSR payments to issuers until Congress provides for an 
appropriation. As a result of this opinion, CMS discontinued CSR 
payments to issuers in the States operating a BHP (that is, New York 
and Minnesota). The States then sued the Secretary for declaratory and 
injunctive relief in the United States District Court for the Southern 
District of New York.\10\ On May 2, 2018, the parties filed a 
stipulation requesting a stay of the litigation so that HHS could issue 
an administrative order revising the 2018 BHP payment methodology. 
After consideration of the States' comments on the administrative order 
revising the payment methodology, we issued a Final Administrative 
Order on August 24, 2018 (Final Administrative Order) setting forth the 
payment methodology that would apply to the 2018 BHP program year.
---------------------------------------------------------------------------

    \9\ Sessions, J. (2017, Oct. 11). Legal Opinion Re: Payments to 
Issuers for Cost Sharing Reductions (CSRs). Office of the Attorney 
General. https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
    \10\ See 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).
---------------------------------------------------------------------------

    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.
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    \11\ BHP program year means a calendar year for which a standard 
health plan provides coverage for BHP enrollees. See 42 CFR 600.5.
    \12\ ``Metal tiers'' refer to the different actuarial value plan 
levels offered on the Exchanges. Bronze-level plans generally must 
provide 60 percent actuarial value; silver-level 70 percent 
actuarial value; gold-level 80 percent actuarial value; and 
platinum-level 90 percent actuarial value. See 45 CFR 156.140.
---------------------------------------------------------------------------

    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

[[Page 4431]]

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 HHS-operated risk adjustment program 
will sequester payments made from fiscal year 2025 resources (that is, 
funds collected during the 2025 fiscal year) at a rate of 5.7 percent.
---------------------------------------------------------------------------

    \13\ OMB. (2024). OMB Report to the Congress on the BBEDCA 251A 
Sequestration for Fiscal Year 2025. https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf.
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    We 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 Sec.  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 Sec.  155.220(k)(3) to reflect our 
authority to suspend an agent's or broker's ability to transact 
information with the Exchange in instances where HHS discovers 
circumstances that pose unacceptable risk to accuracy of Exchange 
eligibility determinations, Exchange operations, applicants, or 
enrollees, or Exchange information technology systems, including but 
not limited to risk related to noncompliance with the standards of 
conduct under Sec.  155.220(j)(2)(i), (ii) or (iii) and the privacy and 
security standards under Sec.  155.260, until the circumstances of the 
incident, breach, or noncompliance are remedied or sufficiently 
mitigated to HHS' satisfaction.
    We 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.
---------------------------------------------------------------------------

    \14\ CMS. (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-and-brokers.pdf.
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    We are finalizing, in connection with the failure to file and 
reconcile process at Sec.  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 Sec.  155.400(d)(1) to codify 
HHS' guidance that requires that, within 60 calendar days after a State 
Exchange receives a data inaccuracy from an issuer operating in an 
State Exchange that includes a description of an inaccuracy that meets 
the requirements at Sec.  156.1210(a) 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\
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    \15\ OMB Control No: 0938-1312 and 0938-1341.
---------------------------------------------------------------------------

    We are finalizing a provision at Sec.  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

[[Page 4432]]

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 Sec.  155.505(b) to codify an 
option for application filers as defined under Sec.  155.20 to file 
appeals on behalf of applicants and enrollees on the application 
filer's Exchange application.
    We are finalizing amendments at Sec.  155.1000 to state explicitly 
that an Exchange may deny certification to any plan that does not meet 
the general certification criteria at Sec.  155.1000(c). We also 
finalize amending Sec.  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 Sec.  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.
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    \16\ ARP, 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.
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    We are finalizing amendments to Sec.  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 Sec.  156.201 to 
require issuers that offer multiple standardized plan options within 
the same product network type, metal level, and service area to 
meaningfully differentiate these plans from one another in terms of 
included benefits, provider networks, included prescription drugs, or a 
combination of some or all these factors.
    We are finalizing amendments at Sec.  156.202(b) and (d) to 
properly reflect the flexibility that issuers have been operationally 
permitted since these requirements were introduced to vary the 
inclusion of the distinct adult dental benefit coverage, pediatric 
dental benefit coverage, and adult vision benefit coverage categories 
under the non-standardized plan option limit in accordance with Sec.  
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 Sec.  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 Sec.  158.140(b)(4)(ii) to allow 
qualifying issuers to not adjust incurred claims by the net payments or 
receipts related to the risk adjustment program for MLR reporting and 
rebate calculation purposes beginning with the 2026 MLR reporting year 
(MLR reports due in 2027), 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 Sec.  158.103 to add a definition of ``qualifying 
issuer,'' with certain clarifications.
    We also are finalizing amendments to Sec.  158.240(c) to add an 
illustrative example of how qualifying issuers that opt to apply risk 
adjustment transfer amounts as described in Sec.  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

[[Page 4433]]

adjustment transfer amounts as described in Sec.  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.
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    \17\ https://www.medicaid.gov/sites/default/files/2019-11/final-admin-order-2018-revised-payment-methodology.pdf.
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    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.
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    \18\ Some examples of outliers or unreasonable adjustments 
include (but are not limited to) values over 100 percent (implying 
the premiums doubled or more because of the adjustment), values more 
than double the otherwise highest adjustment, or non-numerical 
entries.
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    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

[[Page 4434]]

median adjustment. The PAF for each BHP State equaled one plus the 
nationwide median adjustment divided by one plus the State median 
---------------------------------------------------------------------------
adjustment for the BHP State. In other words,

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

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

    \19\ See the Federal Funding Methodology for Program Year 2023 
and Changes to the Basic Health Program Payment Notice Process at 87 
FR 77722, 77731, 77737.
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    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.
---------------------------------------------------------------------------

    \20\ Id. at 77731-32.
---------------------------------------------------------------------------

    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:
---------------------------------------------------------------------------

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

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

[[Page 4435]]

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.
---------------------------------------------------------------------------

    \22\ CMS. (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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \23\ Section 1331(d)(3)(A)(ii) of the PHS Act.
---------------------------------------------------------------------------

    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.

[[Page 4436]]

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

    In subparts A, B, D, G, and H of part 153, we established standards 
for the administration of the risk adjustment program. The risk 
adjustment program is a permanent program created by section 1343 of 
the ACA that transfers funds from issuers of lower-than-average risk, 
risk adjustment covered plans to issuers of higher-than-average risk, 
risk adjustment covered plans in the individual, small group markets, 
or merged markets, inside and outside the Exchanges. In accordance with 
Sec.  153.310(a), a State that is approved or conditionally approved by 
the Secretary to operate an Exchange may establish a risk adjustment 
program or have HHS do so on its behalf.\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.
---------------------------------------------------------------------------

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

1. Sequestration
    In accordance with the OMB Report to Congress on the Joint 
Committee Reductions for Fiscal Year 2025, the HHS-operated risk 
adjustment program is subject to the fiscal year 2025 
sequestration.\25\ The Federal Government's 2025 fiscal year began on 
October 1, 2024. Therefore, the HHS-operated 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).
---------------------------------------------------------------------------

    \25\ OMB. (2024). OMB Report to the Congress on the BBEDCA 251A 
Sequestration for Fiscal Year 2025. https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf.
---------------------------------------------------------------------------

    HHS, in coordination with OMB, has determined that, under section 
256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of 
1985 (BBEDCA),\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.
---------------------------------------------------------------------------

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

    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\
---------------------------------------------------------------------------

    \27\ Public Law 117-58, 135 Stat. 429 (2021).
    \28\ 2 U.S.C. 901a.
---------------------------------------------------------------------------

    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 (Sec.  153.320)
    The HHS risk adjustment models predict plan liability for an 
average enrollee based on that person's age, sex, and diagnoses (also 
referred to as 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\
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    \29\ The State payment transfer formula refers to part of the 
Federally certified risk adjustment methodology that applies in 
States where HHS is responsible for operating the program. The 
formula calculates payments and charges at the State market risk 
pool level (prior to the calculation of the high-cost risk pool 
payment and charge terms that apply beginning with the 2018 benefit 
year). See, for example, 81 FR 94080.
    \30\ For 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.
    \31\ For the 2018 benefit year, there were 12 RXCs, but starting 
with the 2019 benefit year, the two severity-only RXCs were removed 
from the adult models. See, for example, 83 FR 16941.
    \32\ See 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.
    \33\ See 87 FR 27224-28. Also see Table 6 in the proposed rule.
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    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 
enrollment-weighted average risk score of all enrollees in a particular 
risk adjustment covered plan (also referred to as the plan liability 
risk score (PLRS)) within a geographic rating area is one of the inputs 
into the State payment transfer formula, which determines the State 
transfer payment or charge that an issuer will receive or be required 
to pay for that plan for the applicable State market risk pool for a 
given benefit year. Thus, the HHS risk adjustment models predict 
average group costs to account for risk across plans, in keeping with 
the Actuarial Standards Board's Actuarial Standards of Practice for 
risk classification.
a. Data for HHS Risk Adjustment Model Recalibration for the 2026 
Benefit Year
    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 enrollee-level 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

[[Page 4437]]

comment on the proposal to determine 2026 benefit year coefficients for 
the HHS risk adjustment models based on a blend of separately solved 
coefficients from the 2020, 2021, and 2022 enrollee-level EDGE data.
---------------------------------------------------------------------------

    \34\ See 89 FR 82308, 82320-21.
    \35\ As described in the 2016 Risk Adjustment White Paper 
(https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf) and the 2017 
Payment Notice (81 FR 12218), we subdivide expenditures into 
traditional drugs, specialty drugs, medical services, and preventive 
services and determine trend factors separately for each category of 
expenditure. In determining these trend factors, we consult our 
actuarial experts, review relevant Unified Rate Review Template 
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.
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    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 Sec.  
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 enrollee-
level 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.
---------------------------------------------------------------------------

    \36\ Since 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.
    \40\ This analysis included assessing how the 2020 benefit year 
enrollee-level EDGE recalibration data compares to 2019 benefit year 
enrollee-level EDGE recalibration data.
    \41\ See the 2025 Payment Notice Final Rule, 89 FR 26218, 26236-
37.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \42\ 89 FR 82308, 82347.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \43\ See 89 FR 82308, 82347.
    \44\ See 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.
---------------------------------------------------------------------------

    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

[[Page 4438]]

responsible for a decrease in model R-squared 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.
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    \45\ HHS was unable to incorporate an analysis of new enrollees 
for the 2019 benefit year of enrollee-level of EDGE data at the time 
of the analysis of R-squared changes. As such, R-squared changes for 
new enrollees only considered the difference between 2020 benefit 
year and 2022 benefit year R-squared values.
    \46\ Ibid.
---------------------------------------------------------------------------

    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 R-squared 
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) pre-exposure 
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 Sec.  
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.
---------------------------------------------------------------------------

    \47\ See, supra, notes 22-24, and 26.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \48\ For discussion relating to the Hepatitis C Pricing 
Adjustment for previous benefit years, see, for example, 89 FR 
26218, 26237-38.
    \49\ See 81 FR 12204, 12218-19.
    \50\ The Hepatitis C drugs market pricing adjustment to plan 
liability is applied for all enrollees taking Hepatitis C drugs in 
the data used for recalibration.
    \51\ See Milligan, J. (2018). A perspective from our CEO: Gilead 
Subsidiary to Launch Authorized Generics to Treat HCV. Gilead. 
https://www.gilead.com/news-and-press/company-statements/authorized-generics-for-hcv. See also AbbVie. (2017). AbbVie Receives U.S. FDA 
Approval of MAVYRETTM (glecaprevir/pibrentasvir) for the Treatment 
of Chronic Hepatitis C in All Major Genotypes (GT 1-6) in as Short 
as 8 Weeks. Abbvie. https://news.abbvie.com/news/abbvie-receives-us-fda-approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-6-in-as-short-as-8-weeks.htm. See also Silseth, S., & Shaw, H. (2021). Analysis of 
prescription drugs for the treatment of hepatitis C in the United 
States [White paper]. Milliman. https://www.milliman.com/-/media/milliman/pdfs/2021-articles/6-11-21-analysis-prescription-drugs-treatment-hepatitis-c-us.ashx.
    \52\ See 89 FR 82308, 82321-23.
---------------------------------------------------------------------------

    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

[[Page 4439]]

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.
---------------------------------------------------------------------------

    \53\ See 86 FR 24140, 24163.
    \54\ See 89 FR 26218, 26247-48.
---------------------------------------------------------------------------

    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 Sec.  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 high-cost risk pool payments if claims for that enrollee are 
over $1 million.\57\
---------------------------------------------------------------------------

    \55\ Ibid.
    \56\ See https://www.fda.gov/news-events/press-announcements/fda-approves-first-gene-therapies-treat-patients-sickle-cell-disease.
    \57\ For 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/.
---------------------------------------------------------------------------

    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 enrollee-level 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.
---------------------------------------------------------------------------

    \58\ As 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.
---------------------------------------------------------------------------

    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

[[Page 4440]]

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\
---------------------------------------------------------------------------

    \59\ See 81 FR 12218. See also the 2016 Risk Adjustment White 
Paper, available at: https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf.
    \60\ See, for example, ``How much is health spending expected to 
grow?'' by the Peterson-Kaiser Family Foundation, available at 
https://www.healthsystemtracker.org/chart-collection/how-much-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/health-industries/library/assets/pwc-behind-the-numbers-2024.pdf. See also ``MBB 
Health Trends 2024'' by MercerMarsh Benefits, available at https://www.marsh.com/na/services/employee-health-benefits/insights/health-trends-report.html.
    \61\ See 88 FR 25740, 25754-55.
    \62\ For 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/2023partdbiddinginstructions.pdf) will be used to divide 
prescription drug claims into traditional versus specialty drugs for 
2023 enrollee-level EDGE data when they become available.
---------------------------------------------------------------------------

    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 Sec.  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) 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. 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\
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    \63\ See 85 FR 28164, 29185-87.
    \64\ For example, colonoscopies typically require a combination 
of several services between the drugs needed for the colonoscopy and 
the professional and institutional claims for the visit and 
procedure itself. Likewise, contraception coverage often requires a 
doctor's visit to obtain a prescription for the contraception.
    \65\ See 86 FR 24140, 24164.
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    However, as a part of our commitment to consider ways to 
continually improve the HHS risk adjustment models, we continued to 
monitor and assess different ways to 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 enrollee-level 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.
---------------------------------------------------------------------------

    \66\ Prior to the 2021 Benefit Year, Plan ID and Rating Area 
were not included as part of the enrollee-level data extracted from 
issuers' EDGE data submissions. As finalized in the 2023 Payment 
Notice (87 FR 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.
---------------------------------------------------------------------------

    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,

[[Page 4441]]

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.
---------------------------------------------------------------------------

    \67\ As discussed later in this section, it may be appropriate 
to remove generic drugs to ensure homogeneity of costs within a PrEP 
ACF.
---------------------------------------------------------------------------

    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.
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    \68\ For example, we believe there are likely substantial 
rebates for Descovy that are not captured in issuers' EDGE data 
submissions. See, for example, Dickson, S., Gabriel, N., and 
Hernandez, I. Estimated changes in price discounts for tenofovir-
inclusive HIV treatments following introduction of tenofovir 
alafenamide. AIDS. 2022 Dec 1;36(15):2225-2227. doi: 10.1097/
QAD.0000000000003401. See, also, Krakower, D. and Marcus, J.L. 
Commercial Determinants of Access to HIV Preexposure Prophylaxis. 
JAMA Network Open. 2023;6(11):e2342759. doi: 10.1001/
jamanetworkopen.2023.42759. See, also, McManus, K.A., et al. 
Geographic Variation in Qualified Health Plan Coverage and Prior 
Authorization Requirements for HIV Preexposure Prophylaxis. JAMA 
Network Open. 2023;6(11):e2342781. doi: 10.1001/
jamanetworkopen.2023.42781.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \69\ See, supra, note 53.
    \70\ We 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).
---------------------------------------------------------------------------

    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

[[Page 4442]]

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.
---------------------------------------------------------------------------

    \71\ See 89 FR 82308, 82324-31.
    \72\ See 81 FR 94058, 94074-80. See also the 2016 HHS Risk 
Adjustment White Paper. Available at https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf.
    \73\ Ibid. See also the March 31, 2016, HHS-Operated Risk 
Adjustment Methodology Meeting Questions & Answers. June 8, 2016. 
Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf.
---------------------------------------------------------------------------

    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 higher-than-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.
---------------------------------------------------------------------------

    \74\ See 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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \75\ See 89 FR 82308, 82325-27.
    \76\ See 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-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf) and the 2021 RA 
Technical Paper (available at: https://www.cms.gov/files/document/2021-ra-technical-paper.pdf).
    \77\ See the 2018 Payment Notice Proposed Rule (81 FR 61456, 
61470-71) and the 2018 Payment Notice Final Rule (81 FR 94058, 
94075-80).
---------------------------------------------------------------------------

    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 (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.

[[Page 4443]]

    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.
---------------------------------------------------------------------------

    \78\ See https://www.cms.gov/files/document/faqs-implementation-part-68.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \79\ See, 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.
    \80\ See the EDGE Server Business Rules, Version 25 (December 
2024). Available at: https://regtap.cms.gov/reg_librarye.php?i=3765.
---------------------------------------------------------------------------

    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.

[[Page 4444]]

    One commenter suggested that if the ACF for PrEP is added to the 
HHS risk adjustment child models, RXC 1 (Anti-HIV 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).
---------------------------------------------------------------------------

    \81\ This 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \82\ For 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/ra-march-31-white-paper-032416.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \83\ See 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \85\ Ibid.
---------------------------------------------------------------------------

    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

[[Page 4445]]

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 Sec.  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 
(Sec.  153.320)
    Consistent with Sec.  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.
---------------------------------------------------------------------------

    \86\ See 45 CFR 153.320(b)(1)(i).
    \87\ For 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-model-coefficients.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-model-
coefficients.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-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf.
---------------------------------------------------------------------------

    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

[[Page 4446]]

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.
---------------------------------------------------------------------------

    \88\ See 89 FR 26218, 26248-49.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \89\ See https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \90\ 87 FR 27208, 27221-30.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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-technical-paper.pdf.
---------------------------------------------------------------------------

    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-and-comment 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.
---------------------------------------------------------------------------

    \93\ For 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-diy-instructions-09062024.pdf.
---------------------------------------------------------------------------

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

[[Page 4447]]

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 notice-and-comment 
rulemaking.
---------------------------------------------------------------------------

    \94\ See 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \95\ See CSR adjustment factors finalized in the 2025 Payment 
Notice at 89 FR 26252 through 26254.
---------------------------------------------------------------------------

    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 wrap-around 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 State-specific 
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 State-specific 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.
---------------------------------------------------------------------------

    \96\ 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.
---------------------------------------------------------------------------

    We received one comment noting the decreases in the risk adjustment 
model R-squared values for the 2022 enrollee-level 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-and-comment 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\
---------------------------------------------------------------------------

    \97\ See 81 FR 94058, 94081. See also 84 FR 17454, 17467.
---------------------------------------------------------------------------

    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

[[Page 4448]]

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 (Sec.  
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 HHS-operated risk adjustment program activities. To 
calculate the risk adjustment user fee, we divided HHS' projected total 
costs for administering the program on behalf of States by the expected 
number of BMMs in risk adjustment covered plans in States where the 
HHS-operated risk adjustment program will apply in the 2026 benefit 
year.\98\
---------------------------------------------------------------------------

    \98\ 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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    \99\ 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-report-national-snapshot-0.
    \100\ See CBO June 2024 projections of health insurance coverage 
via https://www.cbo.gov/system/files/2024-06/51298-2024-06-healthinsurance.pdf.
---------------------------------------------------------------------------

    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) (Sec. Sec.  153.350 and 153.630)
    HHS conducts risk adjustment data validation under Sec. Sec.  
153.350 and 153.630 in any State where HHS is responsible for operating 
the risk adjustment program.\101\ The purpose of risk adjustment data 
validation is to ensure issuers are providing accurate high-quality 
information to HHS, which is crucial for the proper functioning of the 
HHS-operated risk adjustment program. HHS-RADV also ensures that risk 
adjustment transfers calculated under the State payment transfer 
formula reflect verifiable actuarial risk differences among issuers, 
rather than risk score calculations that are based on poor quality 
data, thereby helping to ensure that the HHS-operated risk adjustment 
program assesses charges to

[[Page 4449]]

issuers with plans with lower-than-average actuarial risk while making 
payments to issuers with plans with higher-than-average actuarial risk. 
HHS-RADV consists of an initial validation audit (IVA) and a second 
validation audit (SVA).
---------------------------------------------------------------------------

    \101\ Since the 2017 benefit year, HHS has operated the risk 
adjustment program in all 50 States and the District of Columbia.
---------------------------------------------------------------------------

a. Initial Validation Audit (IVA) Sampling Methodology--Enrollees 
Without HCCs, Finite Population Correction, and Neyman Allocation 
(Sec.  153.630(b))
    To better align the IVA sampling methodology with the HHS-RADV 
error estimation methodology that estimates 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\
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    \102\ As 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.
    \103\ Neyman allocation is a method to allocate samples to 
strata based on the strata variances. A Neyman allocation scheme 
provides the most precision for estimating a population mean given a 
fixed total sample size. See http://methods.sagepub.com/reference/encyclopedia-of-survey-research-methods/n324.xml.
    \104\ Activities related to the 2025 benefit year of HHS-RADV 
will generally begin in Spring 2026, when issuers can start 
selecting their IVA entity, and IVA entities can start electing to 
participate in HHS-RADV for the 2025 benefit year. Changes to the 
IVA sampling methodology need to be finalized before HHS-RADV 
activities begin; therefore, we 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.
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    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 HCC-related 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.
---------------------------------------------------------------------------

    \105\ See 88 FR 25790 through 88 FR 25798.
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    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 HHS-operated risk adjustment program, 
including HHS-RADV, and make IVA sampling more targeted and efficient. 
As previously noted, this change also better

[[Page 4450]]

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\
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    \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.
    \107\ See 88 FR 25790 through 88 FR 25798.
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    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\
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    \108\ See, 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/Potential-Updates-to-HHS-HCCs-HHS-operated-Risk-Adjustment-Program.pdf. Note that ``HCC Group 
constraints'' is synonymous with ``HCC coefficient estimation 
groups.''
    \109\ The 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.
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    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 under-coded 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 low-risk plans are appropriately calculated

[[Page 4451]]

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, high-quality 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.
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    \110\ As 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.
---------------------------------------------------------------------------

    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, high-quality 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.
---------------------------------------------------------------------------

    \113\ We 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.
---------------------------------------------------------------------------

    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 issuer-specific 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-than-average 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

[[Page 4452]]

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' HCC-
associated 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 HCC-associated risk scores and HCC-
associated EDGE risk scores.\114\ Although enrollees without HCCs are 
currently included in issuers' audit samples, these enrollees have HCC-
associated EDGE risk scores equal to zero and cannot have adjusted HCC-
associated 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).
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    \114\ See 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.
---------------------------------------------------------------------------

    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 HCC-associated 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 HCC-
associated 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 HCC-associated 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.
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    \115\ See the Notice of Benefit and Payment Parameters for 2019; 
Final Rule, 83 FR 16930 at 16961-16965 (April 17, 2018) (2019 
Payment Notice).
    \116\ See 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).
    \117\ See 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.
    \118\ Error 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.
---------------------------------------------------------------------------

    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\
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    \119\ For 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.
---------------------------------------------------------------------------

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

[[Page 4453]]

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 Sec.  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 Sec.  153.630(g)(2).\122\ Under the very small issuer 
exemption at Sec.  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\
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    \120\ Beginning with the 2022 benefit year of HHS-RADV, the 
materiality threshold under Sec.  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.
    \121\ See Sec.  153.630(g)(1) and (2). Also see 81 FR 94058 at 
94104, 83 FR 16930, 16966, and 84 FR 17454, 17508.
    \122\ An 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 Sec.  153.620.
    \123\ 45 CFR 153.630(g)(1).
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    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 Sec.  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.
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    \124\ See 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.
    \125\ See 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.
    \126\ See the 2019 Payment Notice, 83 FR 16966. Also see the 
2020 Payment Notice, 84 FR 17508.
    \127\ These very small issuers who are eligible for the 
exemption under Sec.  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 Sec.  153.630(b)(10) for the applicable benefit year.
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    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

[[Page 4454]]

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.
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    \128\ Under the outlier identification policy finalized in the 
2021 Payment Notice, when HCCs were the unit of analysis of failure 
rates, an issuer could not be identified as an outlier in any 
failure rate group in which that issuer had fewer than 30 Super 
HCCs. See 85 FR 29196 through 29198. In the 2023 Payment Notice, 
when the unit of analysis of failure rates was altered to de-
duplicated Super HCCs, we finalized the policy to not consider an 
issuer as an outlier in any failure rate group in which that issuer 
has fewer than 30 de-duplicated EDGE Super HCCs. Issuers with fewer 
than 30 de-duplicated EDGE Super HCCs in a failure rate group may 
still be considered an outlier in other failure rate groups in which 
they have 30 or more de-duplicated EDGE Super HCCs. See 87 FR 27254.
---------------------------------------------------------------------------

    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.
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    \129\ 45 CFR 153.630(g)(2).
    \130\ Beginning with the 2022 benefit year of HHS-RADV, the 
materiality threshold under Sec.  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.
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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.
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    \131\ A new benefit year of HHS-RADV activities generally begins 
in the spring the year following the applicable benefit year when 
issuers can start selecting their IVA entity and IVA entities can 
start electing to participate in HHS-RADV for that benefit year. 
See, for example, the 2023 Benefit Year HHS-RADV Activities 
Timeline. 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.
    \132\ As 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.
---------------------------------------------------------------------------

    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 high-risk 
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 lower-risk 
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.

[[Page 4455]]

    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 high-risk 
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\
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    \133\ Activities related to the 2025 benefit year of HHS-RADV 
will generally begin in Spring 2026, when issuers can start 
selecting their IVA entity, and IVA entities can start electing to 
participate in HHS-RADV for the 2025 benefit year. 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.
---------------------------------------------------------------------------

    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.
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    \134\ See Chapter 2: HHS-RADV Initial Validation Audit (IVA) 
Sampling of the HHS Risk Adjustment Data Validation (HHS-RADV) White 
Paper (December 6, 2019).
    \135\ As noted above, we are also finalizing the proposal to 
exclude enrollees without HCCs from IVA sampling.
---------------------------------------------------------------------------

    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.

[[Page 4456]]

    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 Sec.  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 
rolling-window 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.
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    \136\ The 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.
---------------------------------------------------------------------------

    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 HHS-operated 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.
---------------------------------------------------------------------------

    \137\ The precision of net risk score error reflects the ability 
of the IVA sampling methodology to consistently estimate the percent 
difference between enrollees' audit risk scores and EDGE risk 
scores. We provided details on how the 10 percent sampling target 
was derived in the proposed rule. See 89 FR 82349 through 82350.
---------------------------------------------------------------------------

    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-

[[Page 4457]]

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 HHS-operated 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.
---------------------------------------------------------------------------

    \138\ See, 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.
    \139\ See CMS. (2021). HHS-Operated Risk Adjustment Technical 
Paper on Possible Model Changes. Section 1.2.1 (Principles of Risk 
Adjustment). https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
---------------------------------------------------------------------------

    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 risk-based 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 HHS-operated risk adjustment 
program to calculate risk adjustment State transfers. The risk 
adjustment program helps

[[Page 4458]]

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 (Sec.  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 t-test methodology, to use a bootstrapping methodology, 
and to increase the initial SVA subsample size from 12 enrollees to 24 
enrollees beginning with 2024 benefit year HHS-RADV.\140\
---------------------------------------------------------------------------

    \140\ These 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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    \141\ As 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.
---------------------------------------------------------------------------

    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

[[Page 4459]]

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.
---------------------------------------------------------------------------

    \142\ See Section 11.6.2 Pairwise Means Test to Determine 
Accepted Results (IVA vs. SVA) of the 2023 Benefit Year PPACA HHS 
Risk Adjustment Data Validation (HHS-RADV) Protocols (June 4, 2024) 
available at https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
    \143\ As 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.
---------------------------------------------------------------------------

    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 t-
intervals 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.

[[Page 4460]]

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.
---------------------------------------------------------------------------

    \144\ See, 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.
---------------------------------------------------------------------------

    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 t-test.\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\
---------------------------------------------------------------------------

    \145\ For 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/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf.
    \146\ As 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \147\ The 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.
---------------------------------------------------------------------------

    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 (Sec.  
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 Sec.  
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 Sec.  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 (Sec.  156.1220).
---------------------------------------------------------------------------

    \148\ For purposes of this proposal, rerunning HHS-RADV results 
involves recalculating all national program benchmarks and issuers' 
error rate results, reissuing issuers' error rate results, 
conducting discrepancy reporting and appeal windows for the reissued 
results, applying the reissued error rates to the applicable benefit 
year's State transfers, and invoicing, collecting, and distributing 
any additional changes to the HHS-RADV adjustments to State 
transfers.
---------------------------------------------------------------------------

C. Part 155--Exchange Establishment Standards and Other Related 
Standards

1. Solicitation of Comments--Navigator, Non-Navigator Assistance 
Personnel, and Certified Application Counselor Program Standards 
(Sec. Sec.  155.210, 155.215, and 155.225)
    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.

[[Page 4461]]

2. Ability of States To Permit Agents and Brokers and Web-Brokers To 
Assist Qualified Individuals, Qualified Employers, or Qualified 
Employees Enrolling in QHPs (Sec.  155.220)
a. Engaging in Compliance Reviews and Taking Enforcement Actions 
Against Lead Agents for Insurance Agencies
    In the HHS Notice of Benefit and Payment Parameters for 2026 
proposed rule (89 FR 82357), we addressed our authority under Sec.  
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 Sec.  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.
---------------------------------------------------------------------------

    \149\ For purposes of this policy, ``agency-level'' misconduct 
or noncompliance refers to misconduct or noncompliance with HHS 
Exchange standards and requirements under Sec.  155.220 associated 
with an eligibility application or enrollment transaction that lists 
an agency's 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 
Sec.  155.220 that involves the agency's lead agent(s) or that the 
agency endorsed or is otherwise involved in.
---------------------------------------------------------------------------

    Section 155.220 currently applies to an agent, broker, or web-
broker that assists with or facilitates enrollment of qualified 
individuals, qualified employers, or qualified employees in a QHP in a 
manner that constitutes enrollment through the Exchange or assists 
individuals in applying for APTC and CSRs for coverage offered through 
an Exchange. ``Web-broker'' is defined in Sec.  155.20 as an individual 
agent or broker, group of agents or brokers, or business entity 
registered with an Exchange under Sec.  155.220(d)(1) that develops and 
hosts a non-Exchange website that interfaces with an Exchange to assist 
consumers with direct enrollment in QHPs offered through the Exchange 
as described in Sec.  155.220(c)(3) or Sec.  155.221.\150\ Section 
155.20 defines ``agent or broker'' as a person or entity licensed by 
the State as an agent, broker or insurance producer.
---------------------------------------------------------------------------

    \150\ The term also includes an agent or broker direct 
enrollment technology provider. See Sec.  155.20.
---------------------------------------------------------------------------

    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 Sec.  155.220 because 
they can reasonably be interpreted to apply to agencies that are 
involved in Exchange enrollment transactions, since agencies are 
entities licensed by 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 Sec.  155.20.
    We proposed to rely on the same authorities under Sec.  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 Sec.  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 Sec.  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 
web-broker fails to comply with the requirements of Sec.  155.220, HHS 
may deny an agent, broker, or web-broker the right to enter into 
Exchange Agreements in future years \156\ or impose a civil money 
penalty as described in Sec.  155.285.\157\
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    \151\ 45 CFR 155.220(c)(5).
    \152\ We notify State Departments of Insurance when we suspend 
or terminate the Exchange Agreement(s) of an agent, broker, or web-
broker under Sec.  155.220(g), per Sec.  155.220(g)(6). We also 
maintain and publish the Agent and Broker Federally-facilitated 
Marketplace (FFM) Registration Termination List, which allows QHP 
issuers, consumers, and other interested parties to search for NPNs 
associated with agents, brokers, and web-brokers whose Exchange 
Agreement(s) have been terminated or suspended. See https://data.healthcare.gov/ab-suspension-and-termination-list.
    \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).
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    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.
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    \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).
    \159\ As detailed in III.C.2.b. of this rule, we are finalizing 
the proposal to amend Sec.  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 
Sec.  155.220(j)(2)(i), (ii) or (iii) or the privacy and security 
standards at Sec.  155.260, until the circumstances of the incident, 
breach, or noncompliance are remedied or sufficiently mitigated to 
HHS' satisfaction.
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    The NPN is a unique identifier for an agent, broker, web-broker, or 
agency that the National Association of Insurance Commissioners assigns 
during the State licensing application process. The NPN can be recorded 
as part of the consumer's Exchange eligibility application and is used 
to track which individual agents, brokers, or web-brokers and agencies 
assisted Exchange consumers. QHP issuers use the NPN to identify the 
agent, broker, web-broker, or agency for compensation purposes. Either 
the NPN of the individual agent, broker, or web-broker assisting the 
consumer, or the business NPN of the agency, may be listed on the 
consumer's eligibility application submitted to an FFE or SBE-FP. In 
the most recent Open Enrollment survey, approximately 4 percent of 
respondents attested to using a business NPN for all their 
enrollments.\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 Sec.  155.220(c)(5) or enforcement action by 
HHS under

[[Page 4462]]

Sec.  155.220(c)(4)(ii), (g)(1), (g)(3)(ii), (g)(5), (k)(1)(i), 
(k)(1)(ii), and (k)(3).
---------------------------------------------------------------------------

    \160\ Open Enrollment Survey, conducted between January 29, 
2024, and February 14, 2024.
    \161\ Based on the PY 2024 enrollment total of 16 million 
consumers.
---------------------------------------------------------------------------

    Under the approach described in the proposed rule (89 FR 82358), 
when information suggests there is agency-level misconduct or 
noncompliance, an investigation or compliance review would occur, and 
enforcement action may be taken. Any such compliance review, or 
enforcement action would be directed at the agency's lead agent(s), and 
any other agent, broker, or web-broker who is discovered to be involved 
in the misconduct or noncompliant activity. When the misconduct or 
noncompliant activity is occurring at the agency-level, 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 agency-level 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 Sec.  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 Sec.  
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\
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    \162\ Sections 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.
---------------------------------------------------------------------------

    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 
agency-level 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 web-brokers, 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

[[Page 4463]]

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.
---------------------------------------------------------------------------

    \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.
    \164\ Such 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.
---------------------------------------------------------------------------

    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 Sec.  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 web-broker's Exchange Agreements under Sec.  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 system-
suspend 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 Sec.  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 web-brokers 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 Sec.  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 Sec.  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 Sec.  155.220 
to address misconduct or

[[Page 4464]]

noncompliance occurring at an agency-level 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 Sec.  155.220(a) 
and the definitions of ``agent or broker'' and ``web-broker'' in Sec.  
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 
Sec.  155.20 and Sec.  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 Sec. Sec.  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 Sec.  155.220(g)(3)(ii) to promptly 
terminate the Exchange Agreements of any such unlicensed individuals.
---------------------------------------------------------------------------

    \165\ This 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 Sec. Sec.  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).
---------------------------------------------------------------------------

    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 
web-brokers 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 web-brokers) 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 
web-brokers 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 Sec.  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 Sec.  155.220(k)(3) system suspensions may be imposed in instances 
in which we discover circumstances that pose unacceptable risk to the 
accuracy of the Exchange's eligibility determinations, Exchange 
operations, applicants, or enrollees, or Exchange information 
technology systems, including but not limited to risk related to 
noncompliance with the standards of conduct under Sec.  
155.220(j)(2)(i), (ii) or (iii) or the privacy and security standards 
at Sec.  155.260,\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.
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    \166\ We did not propose to add a reference to web-brokers in 
Sec.  155.220(k)(3) as part of these amendments because as DE 
entities, web-brokers are subject to the system suspension authority 
at Sec.  155.221(e). See Sec.  155.221(a)(2). As amended in this 
final rule, Sec.  155.220(k)(3) will be similar to the authority 
captured at Sec.  155.221(e) that applies to DE entities and permits 
HHS to immediately suspend the DE entity's ability to transact 
information with the Exchange if HHS discovers circumstances that 
pose unacceptable risk to the accuracy of the Exchange's eligibility 
determinations, Exchange operations, or Exchange information 
technology systems until the incident or breach is remedied or 
sufficiently mitigated to HHS' satisfaction.
    \167\ Section 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 Sec.  155.260. There are two 
Privacy and Security Agreements between CMS and the agent, broker, 
and web-broker for FFEs and SBE-FPs: (1) one is for the individual 
market FFEs and SBE-FPs, and (2) one is for the FF-SHOPs and SBE-FP-
SHOPs.
    \168\ When consumers call the Marketplace Call Center to report 
unauthorized enrollments, we resolve their complaints through a 
combination of the following: (1) we review the complaint to verify 
that the consumer's plan switch was unauthorized and identify the 
plan that the consumer wants to be enrolled in; (2) we instruct the 
issuer offering the plan the consumer wants to be enrolled in to 
reinstate the consumer's enrollment in that plan as if it had not 
been terminated. The 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.
---------------------------------------------------------------------------

    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 web-broker investigations and enforcement 
actions, and observations of behavior by agents and brokers that may 
not comply with the standards of conduct at Sec.  155.220(j)(2)(i), 
(ii) or (iii) or the privacy and security standards at Sec.  155.260 
and that could endanger the accuracy of Exchange eligibility

[[Page 4465]]

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 Sec.  
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 Sec.  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 Sec.  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 Sec.  155.220(k)(3) to reinstate the agent's 
or broker's system access and would pursue a suspension or termination 
of the agent's or broker's Exchange Agreements under Sec.  155.220(g). 
We also noted that agents and brokers whose ability to transact 
information with the Exchange is suspended under Sec.  155.220(k)(3) 
remain registered with the FFEs and are authorized to assist consumers 
using the Exchange (or side-by-side) pathway and the Marketplace Call 
Center, unless and until their Exchange Agreements are suspended or 
terminated under Sec.  155.220(f) or (g).
    We 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 Sec.  155.220(j)(2)(i), (ii) or (iii) or the privacy and security 
standards at Sec.  155.260 and endangers applicant or enrollee PII or 
Exchange program integrity in a manner that poses unacceptable risk to 
the accuracy of Exchange eligibility determinations, Exchange 
operations, applicants, 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\
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    \169\ CMS. (2024, July 19). CMS Statement on System Changes to 
Stop Unauthorized Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-statement-system-changes-stop-unauthorized-agent-and-broker-marketplace-activity.
    \170\ When consumers call the Marketplace Call Center to report 
unauthorized enrollments, we resolve their complaints through a 
combination of the following: (1) we review the complaint to verify 
that the consumer's plan switch was unauthorized and identify the 
plan that the consumer wants to be enrolled in; (2) we instruct the 
issuer offering the plan the consumer wants to be enrolled in to 
reinstate the consumer's enrollment in that plan as if it had not 
been terminated. The insurer is instructed to cover all eligible 
claims incurred and accumulate all cost sharing toward applicable 
deductibles and annual limits on cost sharing; and/or (3) consumers 
receive 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.
---------------------------------------------------------------------------

    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 non-zero-
dollar premium plan. Unauthorized plan changes and enrollments cost the 
consumer time to learn about and resolve the discrepancy and either (1) 
unenroll from a plan they did not want, or (2) change the plan to one 
that better meets their needs.
    Additionally, submission of eligibility applications with 
inaccurate enrollee or applicant data, such as an incorrect income, may 
cause harm by providing the enrollee or applicant with an incorrect 
APTC amount. 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 
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.
    Our experience monitoring compliance with the new requirements in 
Sec.  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 Sec.  155.220(j)(2)(ii) 
or (iii) that demonstrates the applicant or enrollee has taken an 
action to provide consent or confirm the accuracy of the eligibility 
application information prior to submission to the Exchange. For 
example, we have seen consent documentation that solely lists numbers

[[Page 4466]]

that the agent, broker, or web-broker claims tie back to the consumer's 
IP address, which we cannot verify and does not meet the consent 
documentation requirements of Sec.  155.220(j)(2)(iii). Additionally, 
we have received consent documentation that is merely a name, typed 
using a cursive script, with no indication 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 
Sec.  155.220(k)(3) to permit immediate system suspensions would 
support HHS' efforts to take immediate action to prevent further 
enrollee, applicant, Exchange operational, Exchange information 
technology, or Exchange program integrity harm caused by agents and 
brokers engaged in these types of misconduct or noncompliant behaviors 
or activities.
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    \171\ We did not propose to add a reference to web-brokers as 
part of the amendments to Sec.  155.220(k)(3) because web-brokers 
are subject to the system suspension authority at Sec.  155.221(e) 
applicable to DE entities. See Sec.  155.221(a)(2).
    \172\ A 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 Sec.  
155.220(j)(2)(iii).
---------------------------------------------------------------------------

    Though, as stated in the proposed rule (89 FR 82362), we believe 
our current authority in Sec.  155.220(k)(3) allows HHS to implement 
system suspensions broadly based on circumstances that pose 
unacceptable risk to Exchange operations or Exchange information 
technology systems, in light of the increasing complaints about 
unauthorized enrollments, we proposed amendments to Sec.  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 Sec.  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 Sec.  155.220(k)(3) could also lead to an 
enforcement action under Sec.  155.220(g). However, there are important 
distinctions between these authorities. For example, system suspensions 
under Sec.  155.220(k)(3) allow HHS to immediately suspend an agent or 
broker's system access. These system suspensions differ from agreement 
suspensions or terminations under Sec.  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 Sec.  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 Sec.  
155.220(k)(3) would provide a more immediate action to protect 
applicants' or enrollees' PII and the efficient administration of the 
Exchange, as well as reduce potential fraud, abuse, and consumer harm.
---------------------------------------------------------------------------

    \173\ Consistent with Sec.  155.220(d), there are currently 
three Exchange Agreements with CMS that extend to agents or brokers 
assisting consumers in the FFEs and SBE-FPs: (1) the Agent Broker 
General Agreement for Individual Market FFEs and SBE-FPs, (2) the 
Agent Broker Privacy and Security Agreement for Individual Market 
FFEs and SBE-FPs, and (3) the Agent Broker SHOP Privacy and Security 
Agreement. Web-brokers assisting consumers in the FFEs and SBE-FPs 
are required to sign the Web-broker General Agreement, and web-
brokers who are primary Enhanced Direct Enrollment (EDE) entities 
that assist consumers in the FFEs and SBE-FPs are required to sign 
the EDE Business Agreement and the Interconnection Security 
Agreement. In addition, each individual agent or broker who wishes 
to include the business entity NPN on Exchange eligibility 
applications must also complete the annual registration process, 
take the required trainings, and sign the applicable Exchange 
Agreements with CMS for the applicable plan year using their 
individual NPN.
    \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.
---------------------------------------------------------------------------

    In contrast, an enforcement action under Sec.  155.220(g) to 
suspend or terminate an agent's, broker's, or web-broker's Exchange 
Agreement(s) results in the agent, broker, or web-broker no longer 
being registered with the FFEs.\175\ When an agent's, broker's, or web-
broker's Exchange Agreements are suspended, or following the 
termination of the agent's, broker's, or web-broker's Exchange 
Agreements, the agent, broker, or web-broker is also no longer 
permitted to assist with or facilitate enrollment of qualified 
individuals, qualified employers, or qualified employees in coverage in 
a manner that constitutes enrollment through an FFE or SBE-FP, or 
assist individuals in applying for APTC and CSRs for QHPs. As such, 
these agents, brokers, and web-brokers cannot submit Exchange 
applications and enrollments through any of the available pathways--
through Classic DE, EDE, the Marketplace Call Center, and/or through 
the Exchange pathway.
---------------------------------------------------------------------------

    \175\ See Sec.  155.220(g)(4) and (5)(iii).
---------------------------------------------------------------------------

    Though we would only initiate system suspensions under Sec.  
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

[[Page 4467]]

that was created before the application was submitted to the Exchange 
that is compliant with Sec.  155.220(j)(2)(ii) and (iii)) to 
demonstrate that the circumstances of the incident, breach, or 
noncompliance concerns are 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 Sec.  
155.220(k)(3) such that their system access could be reinstated more 
swiftly than the lifting of a suspension or reinstatement of an agent's 
or broker's Exchange Agreement(s) following an enforcement action under 
Sec.  155.220(g).
    We 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 Sec.  155.220(k)(3) as proposed. We summarize and respond to 
public comments received on these proposed amendments below.
    Comment: Many commenters supported expanding Sec.  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 Sec.  155.220(k)(3) to capture HHS' authority to immediately 
suspend an agent's or broker's ability to transact information with the 
Exchange if HHS discovers circumstances that pose unacceptable risk to 
Exchange operations or Exchange information technology systems until 
the incident or breach is remedied or sufficiently mitigated to HHS' 
satisfaction. 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 Sec.  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 Sec.  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 Sec.  155.220(j)(2)(i), (ii), or (iii) and the privacy and 
security standards under Sec.  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.
---------------------------------------------------------------------------

    \176\ Also see the 2020 Payment Notice proposed rule, 84 FR 272.
    \177\ Ibid.
---------------------------------------------------------------------------

    Comment: Some commenters suggested we consider changing the data 
metrics and analytics used to engage in system suspensions under Sec.  
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 non-exhaustive 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.
---------------------------------------------------------------------------

    \178\ Complaints may be submitted to the Marketplace Call 
Center. See https://www.cms.gov/files/document/agent/broker-help-desks.pdf.
    \179\ See 45 CFR 155.220(j)(2)(vi).
---------------------------------------------------------------------------

    Our experience monitoring and investigating agent and broker 
noncompliance on the Exchanges that use the Federal platform has shown 
that

[[Page 4468]]

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 Sec.  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 
Sec.  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 Sec.  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 Sec.  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 
Sec.  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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  
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 Sec.  155.220(j)(2)(i), (ii) or (iii) or the 
privacy and security standards at Sec.  155.260.\180\ \181\
---------------------------------------------------------------------------

    \180\ Section 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 Sec.  155.260. There are two 
Privacy and Security Agreements between CMS and the agent, broker, 
and web-broker for FFEs and SBE-FPs: (1) one is for the individual 
market FFEs and SBE-FPs, and (2) one is for the FF-SHOPs and SBE-FP-
SHOPs.
    \181\ When consumers call the Marketplace Call Center to report 
unauthorized enrollments, we resolve their complaints through a 
combination of the following: (1) we review the complaint to verify 
that the consumer's plan switch was unauthorized and identify the 
plan that the consumer wants to be enrolled in; (2) we instruct the 
issuer offering the plan the consumer wants to be enrolled in to 
reinstate the consumer's enrollment in that plan as if it had not 
been terminated. The 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.
---------------------------------------------------------------------------

    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 
Sec.  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

[[Page 4469]]

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 Sec.  
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 Sec.  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 Sec.  
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.
---------------------------------------------------------------------------

    \182\ The agent broker help desk email is: [email protected].
---------------------------------------------------------------------------

    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 Sec.  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

[[Page 4470]]

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 
Sec.  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 Sec.  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 Sec.  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 Sec.  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 Sec.  
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 Sec.  
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 
Sec.  155.220(g)(1), or at the time we send the Exchange Agreement 
suspension or termination notice under Sec.  155.220(g)(5), we would 
notify the State DOIs or other equivalent State licensing authorities 
as required by Sec.  155.220(g)(6).
---------------------------------------------------------------------------

    \183\ 45 CFR 155.220(g)(6).
    \184\ The Suspension and Termination List can be found here: 
https://data.healthcare.gov/ab-suspension-and-termination-list.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  155.220(g)(1), or 
at the time we send the Exchange Agreement suspension or termination 
notice under Sec.  155.220(g)(5), we would notify the State DOIs or 
other equivalent State licensing authorities as required by Sec.  
155.220(g)(6).
    Comment: We received comments stating that when an agent is system 
suspended under Sec.  155.220(k)(3), we

[[Page 4471]]

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 Sec.  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 Sec.  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 
Sec.  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.
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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.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  
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 State-
specific 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 Sec.  155.220(j)(2)(ii)(A)(1)-(2), as 
well as scripts agents, brokers, and web-brokers could use when meeting 
the requirements codified at Sec.  155.220(j)(2)(ii)(A) and 
(j)(2)(iii)(A)-(C) via an audio recording.
---------------------------------------------------------------------------

    \186\ CMS. (2022, December 14). CMS model consent form for 
Marketplace Agents and Brokers. PRA package (CMS-10840, OMB 0938-
1438). https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf.
---------------------------------------------------------------------------

    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 Sec.  155.220(j)(2)(iii)(B) and must be 
retained by the assisting agent, broker, or web-broker for a minimum of 
10 years and produced to HHS upon request in response to monitoring, 
audit, and enforcement activities pursuant to Sec.  
155.220(j)(2)(iii)(C). Our goal in codifying these consent 
documentation requirements was to minimize the risk of fraudulent 
activities, such as unauthorized enrollments, and help us resolve 
disputes and adjudicate claims related to the provision of consumer 
consent.
---------------------------------------------------------------------------

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

    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 Sec.  155.220(j)(2)(ii)(A)(1) and must be 
retained by the assisting agent, broker, or web-broker for a minimum of 
10 years and produced to HHS upon request in response to monitoring, 
audit, and enforcement activities pursuant to Sec.  
155.220(j)(2)(ii)(A)(2). Our goal in codifying these requirements was 
to minimize the risk of fraudulent activities, such as providing false 
information to the Exchange, help us resolve disputes and DMIs and 
adjudicate claims related to inaccurate eligibility information on 
submitted applications, and ensure consumers receive accurate 
eligibility determinations and do not receive incorrect APTC 
determinations, which may result in consumers owing money during tax 
reconciliation.
---------------------------------------------------------------------------

    \188\ See Sec.  155.220(j)(2)(ii).
---------------------------------------------------------------------------

    The model consent form \189\ created and provided to agents, 
brokers, and

[[Page 4472]]

web-brokers on June 30, 2023, has been used by agents, brokers, and 
web-brokers, either as is or as a starting point for creating their own 
consent documentation. However, no model consent form was created for 
agents, brokers, and web-brokers to use to meet the documentation of 
consumer review and confirmation of the accuracy of the eligibility 
application information requirements enumerated in Sec.  
155.220(j)(2)(ii)(A)(1). Since the 2024 Payment Notice requirements 
went into effect, agents, brokers, and web-brokers have asked us to 
provide a model documentation that they could use to meet these 
requirements under Sec.  155.220(j)(2)(ii). 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 Sec.  155.220(j)(2)(ii) and help 
them comply with this regulation by providing a standardized form they 
may use to do so. Furthermore, we 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 Sec.  
155.220(j)(2)(ii).
---------------------------------------------------------------------------

    \189\ CMS. (2022, December 14). CMS model consent form for 
Marketplace Agents and Brokers. PRA package (CMS-10840, OMB 0938-
1438). https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf.
---------------------------------------------------------------------------

    Because the requirements of Sec.  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 Sec.  155.220(j)(2)(iii) and (j)(2)(ii)(A), 
respectively, similar to how the current model consent form helps 
agents, brokers, and web-brokers documenting consent via a physical 
document with handwritten signatures demonstrate compliance with the 
new consent documentation requirements.
    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 Sec.  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 web-brokers 
to use the amended model consent form or new scripts to comply with the 
requirements set forth in Sec.  155.220(j)(2)(ii)(A) and (j)(2)(iii)(A) 
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 Sec.  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 web-brokers 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 web-brokers to use the amended model consent form or new 
scripts to comply with the requirements set forth in Sec.  
155.220(j)(2)(ii)(A) and (j)(2)(iii)(A) 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 web-broker 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 
Sec.  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 (Sec.  
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 Sec.  
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

[[Page 4473]]

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 Sec.  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 Sec.  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 Sec.  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 Sec.  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

[[Page 4474]]

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 Sec.  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/in-person-assisters/applications-forms-notices/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 Sec.  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 
Sec.  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 Sec.  156.1210(a)-(c) and all the 
information that the State Exchange requires or requests to properly 
assess the inaccuracy, the State Exchange must review and resolve the 
State Exchange issuer's enrollment data inaccuracies and submit to HHS 
a description of the resolution of any inaccuracies described by the 
State Exchange issuer that the State Exchange confirms to be 
inaccuracies in a format and manner specified by HHS.\191\
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    \190\ CMS. (2024, Aug. 14). Reporting and Reviewing Data 
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked 
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
    \191\ OMB Control No: 0938-1312 and 0938-1341.
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    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 Sec.  155.400(b), a State Exchange must submit all 
enrollment data that HHS then uses to calculate APTC payments to State 
Exchange issuers. Therefore, in instances when a State Exchange does 
not 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 Sec.  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.
---------------------------------------------------------------------------

    \192\ CMS. (2024, Aug. 14). Reporting and Reviewing Data 
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked 
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
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    We 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 Sec.  156.1210(a)-(c) and all the information that 
the State Exchange requires or requests to properly assess the 
inaccuracy, the State Exchange must review and resolve the State 
Exchange issuer's enrollment data inaccuracies and submit to HHS a 
description of the resolution of any inaccuracies described by the 
State Exchange issuer that the State Exchange confirms to be 
inaccuracies in a format and manner specified by HHS.\193\
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    \193\ OMB Control No: 0938-1312 and 0938-1341.
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    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

[[Page 4475]]

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 Sec.  
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 Sec.  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.
---------------------------------------------------------------------------

    \194\ CMS. (2024, Aug. 14). Reporting and Reviewing Data 
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked 
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \195\ Id.
    \196\ Id.
    \197\ Id.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \198\ 45 CFR 156.1210(a).
    \199\ 45 CFR 156.1210(c).
---------------------------------------------------------------------------

5. Establishment of Optional Fixed-Dollar Premium Payment Threshold and 
Total Premium Threshold (Sec.  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 Sec.  155.400(g) that 
would allow additional issuer flexibility to decide when amounts 
collected from an enrollee would be considered to satisfy their 
obligation to pay the enrollee-responsible portion of the premium for 
certain purposes. Specifically, this would provide issuers with 
additional flexibility to not place an enrollee in a grace period for 
failure to pay the full amount of their portion of premiums due, and to 
not terminate enrollment through the Exchange after the applicable 
grace period ends without outstanding premiums being paid in full. 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 fixed-dollar 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 Sec.  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

[[Page 4476]]

percent, from 99 percent as proposed; and allowing issuers to select a 
fixed-dollar threshold in tandem with one of the two percentage-based 
thresholds.
    Currently, issuers have the option under Sec.  155.400(g) to adopt 
a percentage-based premium payment threshold which allows issuers to 
effectuate coverage in accordance with binder payment rules at Sec.  
155.400(e) for enrollees who pay an amount of the enrollee-responsible 
portion of the premium that is less than 100 percent but within the 
threshold, 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 non-payment under Sec.  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 Sec.  156.270(d), or a grace period under 
State authority, as applicable. Any amount that is unpaid but within 
the reasonable premium payment threshold established by an issuer 
remains an amount owed by the enrollee and cannot be forgiven by the 
issuer.\201\
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    \200\ See CMS. (2024, Aug. 19). Federally-facilitated Exchange 
(FFE) Enrollment Manual. Section 6.2, pp. 92-94. https://www.cms.gov/files/document/ffe-enrollment-manual-2024-5cr-082024.pdf.
    \201\ 2017 Payment Notice, 81 FR 12203, 12272.
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    In the 2017 Payment Notice (81 FR 12271 through 12272), in which 
HHS established the option for issuers to implement a percentage-based 
premium payment threshold, we received a comment requesting that 
issuers be allowed to establish a flat dollar amount threshold. At that 
time, we stated that we did not consider implementing such a threshold 
because there may be cases in which even a low flat dollar amount may 
represent a large percentage of an enrollee's portion of the premium 
less APTC (81 FR 12272).
    However, after implementation of the percentage-based threshold, we 
have realized that the percentage-based premium threshold policy does 
not always adequately enable enrollees who owe small amounts of premium 
to avoid triggering a grace period or termination of enrollment through 
the Exchange. For example, an enrollee whose 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 fixed-
dollar payment threshold and the amount of the threshold.
    We thus proposed to modify Sec.  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 percentage-based threshold, the 
enrollee must pay a certain amount of their premium to avoid triggering 
a grace period or termination of enrollment through the Exchange, 
whereas with a fixed-dollar threshold, an enrollee may not have paid 
any other amount than the binder payment. Other factors such as the 
amount the enrollee has paid for their premium to date is not 
considered when applying the fixed-dollar payment threshold. We 
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\
---------------------------------------------------------------------------

    \202\ See CMS. (n.d.). National health expenditure data--
Projected. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/projected.
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    Issuers that adopt such a policy could permit enrollees who owe 
less than the specified amount of premium to avoid triggering a grace 
period and termination of enrollment through the Exchange. However, we 
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 Sec.  155.400(g)(1) of applying a percentage-based 
threshold

[[Page 4477]]

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 percentage-based threshold policy, the 
percentage is calculated based on the percentage paid of the enrollee's 
portion of the premium (that is, the total premium minus any APTC). In 
the proposed rule (89 FR 82368), we stated that we were considering 
whether to further amend Sec.  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 Sec.  
155.400(g).
    Establishing an option for issuers to adopt a percentage threshold 
based on gross premium owed by the enrollee with APTC counting toward 
the threshold would, in some cases, allow enrollees to remain enrolled 
in coverage or avoid triggering a grace period or termination of 
enrollment through the Exchange for owing small amounts of the 
enrollee-responsible portion of the premium. For example, an enrollee 
whose gross premium was $600, and was receiving $595 in APTC, could 
avoid triggering a grace period or termination of enrollment through 
the Exchange or termination of coverage even without paying the $5 
enrollee-responsible portion of the premium if the issuer had adopted a 
99 percent premium threshold based on gross premium because 99 percent 
of the gross premium ($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 
percentage-based 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

[[Page 4478]]

pay their binder payment by attributing binder payments to prior debts.
---------------------------------------------------------------------------

    \203\ See CMS (2024). Effectuated Enrollment: Early 2024 
Snapshot and Full Year 2023 Average. https://www.cms.gov/files/document/early-2024-and-full-year-2023-effectuated-enrollment-report.pdf.
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    To illustrate how a premium threshold based on gross premium would 
work, 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 percentage-based 
premium payment threshold policy under which it will not trigger a 
grace period or termination of enrollment through the Exchange for 
enrollees who pay at least 99 percent of gross premium (including 
payments of APTC made on the enrollee's behalf), which here would be 
$5. The issuer has set a binder payment deadline of January 30, and the 
consumer sends the binder payment of $5 ahead of the deadline and 
effectuates coverage effective January 1. Subsequently, the consumer 
pays $1 in February and owes $4 in past due premium; because the 
consumer's payment is within the 99 percent threshold established by 
the issuer, the issuer would not place the enrollee in a grace period. 
The following month, the consumer does not pay any premium, and now 
owes $9 in past due premium. Since the $9 now owed after application of 
the $495 APTC paid on the consumer's behalf for March represents more 
than 1 percent of the $500 gross premium, the issuer must put the 
consumer into a 3-month grace period starting March 1. The issuer would 
not be permitted to write off the $9 owed, and the consumer must pay 
all outstanding premium owed before the end of the grace period (May 
31) to avoid exhaustion of the grace period and remain enrolled in 
coverage.
    We 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.

[[Page 4479]]

    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.
---------------------------------------------------------------------------

    \204\ See CMS (2024). CMS Update on Actions to Prevent 
Unauthorized Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-statement-system-changes-stop-unauthorized-agent-and-broker-marketplace-activity. See also 
the revisions in this final rule to Sec.  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.''
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    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 non-
discriminatory 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 percentage-based 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 fixed-dollar premium payment threshold policy, under 
which it will not terminate coverage of enrollees who owe $8 or less of 
the enrollee-responsible 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 enrollee-
responsible 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 
percentage-based 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

[[Page 4480]]

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 fixed-dollar 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 web-brokers 
leveraging these unique carrier-specific 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 Sec.  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 percentage-based 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 
fixed-dollar and gross premium percentage-based thresholds in the same 
manner in a future revision of the FFE Enrollment Manual.\205\
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    \205\ CMS. (2024, Aug. 19). Federally-facilitated Exchange (FFE) 
Enrollment Manual. Section 6.2, pp. 92-94. https://www.cms.gov/files/document/ffe-enrollment-manual-2024-5cr-082024.pdf.
---------------------------------------------------------------------------

    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 (Sec.  155.505)
    In the HHS Notice of Benefit and Payment Parameters for 2026 
proposed rule (89 FR 82369), we proposed revising Sec.  155.505(b) to 
codify an option for application filers to file appeals on behalf of 
applicants and enrollees on the application filer's Exchange 
application.
    The Exchanges on the Federal platform allow application filers as 
defined under Sec.  155.20 to file applications on behalf of an 
applicant. However, the appeals regulation at Sec.  155.505(b) states 
that only applicants and enrollees may submit appeal requests to the 
HHS appeals entity or a State Exchange appeals entity. Appeal requests 
submitted online to the HHS appeals entity are linked to a consumer's 
HealthCare.gov account, which is controlled by the application filer. 
Thus, an application filer who has authority to apply for coverage 
through HealthCare.gov on behalf of an applicant under Sec.  155.20, 
does not have parallel authority under Sec.  155.505(b) to appeal a 
contested eligibility determination on behalf of that applicant through 
the same HealthCare.gov account.
    In the proposed rule (89 FR 82369), we stated that this limitation 
under Sec.  155.505(b) puts a burden on consumers, as appeals filed by 
application filers who are neither an applicant or enrollee are 
considered invalid based on lack of standing, requiring either that the 
applicant or enrollee resubmit their appeal or that they designate the 
application filer as an authorized representative in writing. These 
extra steps not only add unnecessary complications for the applicant or 
enrollee, but also serve to delay an appeal resolution that may grant 
or restore QHP coverage and financial assistance.
    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.

[[Page 4481]]

    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 Sec.  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 Sec.  
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 web-broker 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 (Sec.  155.1000)
    In the HHS Notice of Benefit and Payment Parameters for 2026 
proposed rule (89 FR 82369), we proposed to amend Sec.  155.1000 by 
adding a new paragraph (e) stating that an Exchange may deny 
certification of any health plan as a QHP that does not meet the 
general certification criteria at Sec.  155.1000(c).
    Section 1311(e)(1) of the ACA grants an Exchange the authority to 
certify a health plan as a QHP if the health plan meets the 
requirements for certification promulgated by the Secretary under 
section 1311(c)(1) of the ACA, and the Exchange determines that making 
the plan available through the Exchange is in the interests of 
qualified individuals and qualified employers in the State.\206\ In the 
Exchange Establishment Rule (77 FR 18310, 18404 through 18405), we 
codified the responsibilities of an Exchange to certify QHPs at Sec.  
155.1000 and, Sec.  155.1000(b), required Exchanges to only offer 
health plans which have in effect a certification issued or are 
recognized as health plans deemed certified for participation in an 
Exchange as a QHP. In that final rule, we also codified general 
certification criteria, consistent with section 1311(e)(1)(A) and (B) 
of the ACA, at Sec.  155.1000(c): an Exchange may certify a plan as a 
QHP if: (1) the health insurance issuer provides evidence during the 
certification process that it complies with the applicable minimum 
certification requirements outlined in subpart C, part 156 of our 
regulations; and (2) the Exchange determines that making the health 
plan available through the Exchange is in the interest

[[Page 4482]]

of qualified individuals and qualified employers.\207\
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    \206\ Section 1311(c)(1)(B) of the ACA and Sec.  155.1000(c)(2) 
further provide that an Exchange may not exclude a health plan (i) 
on the basis that such plan is a fee-for-service plan, (ii) through 
the imposition of premium price controls, or (iii) on the basis that 
the plan provides treatments necessary to prevent patients' deaths 
in circumstances the Exchange determines are inappropriate or too 
costly.
    \207\ In that rule, we outlined a number of non-exhaustive 
strategies an Exchange may employ to determine whether the offering 
of a health plan is in the interest of qualified individuals and 
qualified employers (77 FR 18406).
---------------------------------------------------------------------------

    However, an Exchange's authority to deny certification is not 
explicitly referenced in 45 CFR part 155. Several regulations, 
including Sec. Sec.  155.1000(c) and 155.1090, illustrate that an 
Exchange may deny certification of a health plan that does not meet the 
requirements of Sec.  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 Sec.  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 Sec.  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 Sec.  155.1000(c). We proposed that an 
Exchange may deny certification if the issuer does not provide evidence 
during the certification process in Sec.  155.1010 that it complies 
with the minimum certification requirements (under Sec.  
155.1000(c)(1)), or if the Exchange determines that making the health 
plan available is not in the interest of the qualified individuals and 
qualified employers (under Sec.  155.1000(c)(2)).
    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 Sec.  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 Sec.  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 Sec.  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 Sec.  155.1000(c). To HHS' knowledge, 
no Exchanges have interpreted Sec.  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 Sec.  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\
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    \208\ See 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.'')
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8. Request for the Reconsideration of Denial of Certification Specific 
to the FFEs (Sec.  155.1090)
    In the HHS Notice of Benefit and Payment Parameters for 2026 
proposed rule (89 FR 82370), we proposed to amend Sec.  155.1090 to 
revise the standards for an issuer to request the reconsideration of 
denial of certification as a QHP specific to the FFEs.
    Section 1311(e)(1) of the ACA grants an Exchange the authority to 
certify a health plan as a QHP if the health plan meets the 
requirements for certification promulgated by the Secretary under 
section 1311(c)(1) of the ACA, and the Exchange determines that making 
the plan available through the Exchange is

[[Page 4483]]

in the interests of qualified individuals and qualified employers in 
the State.\209\ In the 2018 Payment Notice (81 FR 94137), we finalized 
Sec.  155.1090 to allow an issuer to request the reconsideration of a 
denial of certification of a plan as a QHP for sale through an FFE.
---------------------------------------------------------------------------

    \209\ Section 1311(c)(1)(B) of the ACA and Sec.  155.1000(c)(2) 
further provide that an Exchange may not exclude a health plan (i) 
on the basis that such plan is a fee-for-service plan, (ii) through 
the imposition of premium price controls, or (iii) on the basis that 
the plan provides treatments necessary to prevent patients' deaths 
in circumstances the Exchange determines are inappropriate or too 
costly.
---------------------------------------------------------------------------

    HHS, as operator of the FFEs, is responsible for ensuring that 
health plans offered through the FFEs meet all Federal requirements for 
certification as QHPs under Sec.  155.1000(c). Starting with 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 Sec.  
155.1000(c), and HHS denied certification to these plans. Some of these 
issuers submitted reconsideration requests to HHS under Sec.  
155.1090(a)(1). HHS ultimately sustained its denial determinations for 
these issuers' certification applications upon reconsideration review.
    Based on our experience reviewing these certification application 
reconsideration requests, we stated in the proposed rule (89 FR 82370) 
that we believe that it would be appropriate to amend Sec.  155.1090 to 
codify more structure for the FFEs' process for conducting a 
reconsideration of denial of certification. Accordingly, we 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 Sec.  155.1090(a)(2) to state that the burden is 
on an issuer that is denied certification to provide evidence that HHS' 
determination that the plan does not meet the certification criteria at 
Sec.  155.1000(c) was in error.
    As we stated in the Exchange Establishment Rule (76 FR 41891), 
offering only QHPs through an Exchange assures consumers that the 
coverage options presented through the Exchange meet certain minimum 
Federal standards. Given the voluntary nature of QHP certification, the 
FFEs utilize a process for QHP certification whereby the burden of 
proof is on issuers to provide sufficient evidence that they comply 
with those minimum Federal standards to obtain certification.\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.
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    \210\ See Sec.  155.1000(c)(1): ``The health insurance issuer 
provides evidence during the certification process in Sec.  155.1010 
that it complies with the minimum certification requirements 
outlined in subpart C of part 156, as applicable.''
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    In the proposed rule, we also proposed to revise Sec.  
155.1090(a)(2) to require that, as part of a reconsideration request, 
an issuer would be required to submit clear and convincing evidence 
that HHS' determination that the plan does not meet the general 
certification criteria at Sec.  155.1000(c) was in error. We 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 Sec.  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 Sec.  155.1000(c)(2)) that would require HHS to perform de novo 
analysis before open enrollment.
    Finally, we proposed to revise the title of Sec.  155.1090 to 
state, ``Request for the reconsideration of a denial of certification'' 
and the subtitle of Sec.  155.1090(a) to state, ``Request for the 
reconsideration of a denial of certification specific to a Federally-
facilitated Exchange.''
    We 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.

[[Page 4484]]

    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.
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    \211\ See, for example, https://www.qhpcertification.cms.gov/s/QHP.
    \212\ The 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.
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9. General Program Integrity and Oversight Requirements (Sec.  
155.1200)
    We currently collect certain information and data from State 
Exchanges and SBE-FPs under Sec.  155.1200 to monitor their performance 
and compliance. 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 Sec.  155.1200, State Exchanges must report to HHS on certain 
Exchange-related activities and performance monitoring data. State 
Exchanges must also engage an independent qualified auditing entity 
which follows generally accepted government auditing standards (GAGAS) 
to annually compile a financial statement and conduct a financial audit 
and a programmatic audit.
    To meet these requirements, under section 1313(a)(1) of the ACA, 
State Exchanges and SBE-FPs are required to submit a State Marketplace 
Annual Reporting Tool (SMART) to CMS, which CMS uses to monitor and 
evaluate State Exchange compliance with Exchange requirements under 
Title I of the ACA.\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.
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    \213\ State-based Marketplace Annual Reporting Tool (SMART). OMB 
Control Number: 0938-1244. https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/smart_2017_5.pdf.
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    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.
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    \214\ OMB Control Number: 0938-1119.
    \215\ See, for example, CMS. (2024, March 22). 2024 Marketplace 
Open Enrollment Period Public Use Files. https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2024-marketplace-open-enrollment-period-public-use-files.
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    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 Sec.  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

[[Page 4485]]

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 (Sec.  
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

[[Page 4486]]

on whether March 31, 2025 would provide sufficient time and whether we 
should select an earlier or later date.
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    \216\ ARP, 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.
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    Section 1311(d)(5)(A) of the ACA permits an Exchange to charge 
assessments or user fees on participating health insurance issuers as a 
means of generating funding to support its operations. If a State does 
not elect to operate an Exchange or does not have an approved Exchange, 
section 1321(c)(1) of the ACA directs HHS to operate an Exchange within 
the State. Accordingly, in Sec.  156.50(c), we 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.
---------------------------------------------------------------------------

    \217\ See OMB. (n.d.) Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.
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a. FFE User Fee Rates for the 2026 Benefit Year
    Section 156.50(c)(1) provides that, to support the functions of 
FFEs, an issuer 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

[[Page 4487]]

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.
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    \218\ ARP, Public Law 117-2 (2021). These enhanced subsidies 
were extended under the IRA, Public Law 117-169 (2022) and are 
scheduled to expire after the 2025 calendar year.
    \219\ ARP, Public Law 117-2 (2021). These enhanced subsidies 
were extended under the IRA, Public Law 117-169 (2022) and are 
scheduled to expire after the 2025 calendar year.
    \220\ As 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-report-national-snapshot-0.
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    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 silver-level 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

[[Page 4488]]

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 (Sec.  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 Sec.  156.80(d)(2)(i) to state that the plan-specific 
factors by which issuers may adjust the market-wide index rate include 
adjustments that reflect the costs associated with providing CSRs to 
the eligible enrollee population, to the extent that such adjustments 
are reasonable and actuarially justified. We sought comment on whether 
and how to codify this policy at Sec.  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.
---------------------------------------------------------------------------

    \221\ See 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.
    \222\ Rating 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.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  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 Sec.  
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 
Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \223\ Uccello, 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.
---------------------------------------------------------------------------

    States have provided guidance to issuers absent express language in 
Sec.  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 Sec.  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 Sec.  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

[[Page 4489]]

rules, provided any such adjustments are actuarially justified and the 
issuer does not otherwise receive reimbursement for such amounts.
---------------------------------------------------------------------------

    \224\ See, CMS. (2018, Aug. 3). Center for Consumer Information 
& Insurance Oversight, Insurance Standards Bulletin Series--
Information, Offering of plans that are not QHPs without CSR 
``loading,'' https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/offering-plans-not-qhps-without-csr-loading.pdf.
---------------------------------------------------------------------------

    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 Sec.  
156.80(d)(2)(i), recommended against adoption of any further 
requirements on State approaches to CSR loading. Several commenters 
that supported amending Sec.  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.
---------------------------------------------------------------------------

    \225\ Nothing in this final rule requires a State to allow CSR 
loading.
---------------------------------------------------------------------------

    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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \226\ State 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.
---------------------------------------------------------------------------

    Comment: Many commenters that supported the regulatory codification 
made recommendations regarding amendatory language in Sec.  
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 Sec.  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 Sec.  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 Sec.  
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 Sec.  
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 Sec.  144.103 of this 
subchapter), accounting for CSR amounts provided to eligible enrollees 
under Sec.  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, Sec.  156.80(d) requires 
all permitted plan-level 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 Sec.  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\
---------------------------------------------------------------------------

    \227\ Uccello, 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.
---------------------------------------------------------------------------

    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

[[Page 4490]]

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 notice-and-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\
---------------------------------------------------------------------------

    \228\ Pediatric dental benefits are an EHB. Beginning in PY 
2027, States can choose to make adult dental care an EHB when 
updating their EHB-benchmark plan. In States that update their EHB-
benchmark 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.
---------------------------------------------------------------------------

    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 Sec.  156.430(d), in the absence of an 
appropriation for HHS to make advance CSR payments to issuers, the 
submission of CSR data under Sec.  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 (Sec.  
156.130(e))
    As established in part 2 of the 2022 Payment Notice (86 FR 24238), 
for benefit years in which we are not making changes to the methodology 
to calculate the premium adjustment percentage, the required 
contribution percentage, and maximum annual limitations on cost sharing 
and reduced maximum annual limitation on cost sharing, we will publish 
these parameters in guidance annually starting with the 2023 benefit 
year. Therefore, because we 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.
---------------------------------------------------------------------------

    \229\ Available at https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
---------------------------------------------------------------------------

5. AV Calculation for Determining Level of Coverage (Sec.  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 Sec.  
156.135(g) provisions for updating the AV Calculator in future plan 
years. We stated in the preamble of the 2015 Payment Notice that we 
intend to release a draft version of the AV Calculator and AV 
Calculator Methodology through guidance for public comment each plan 
year before releasing the final version. In that same rule, we noted 
that interested parties could submit feedback on changes to the AV 
Calculator, and that we would consult as needed with the American 
Academy of Actuaries and the National Association of Insurance 
Commissioners on changes to the AV Calculator.
    In the 2017 Payment Notice (81 FR 12204), we reiterated this 
approach and amended Sec.  156.135(g) to allow for additional 
flexibility in our approach and options for updating the AV Calculator 
each year, which include trend factor updates, algorithms changes, user 
interface changes, updates to the claims data and demographic 
distribution being used in the AV Calculator, and an update to the AV 
Calculator's annual limitation on cost sharing. We also stated that we 
intend to release the final AV Calculator for a respective plan year no 
later than the end of the first quarter of the preceding plan year.
    Since this time, we have largely fulfilled this intention. However, 
we have received feedback that 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

[[Page 4491]]

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 non-substantive amendments 
to correct and clarify language in the AV Calculator Methodology or to 
add frequently asked questions to the AV Calculator User Guide. 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

[[Page 4492]]

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-of-pocket 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

[[Page 4493]]

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 [email protected].
    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 (Sec.  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 Sec.  156.201 by adding paragraph (c) to provide 
that an issuer that offers multiple standardized plan options within 
the same product network type, metal level, and service area must 
meaningfully differentiate these plans from one another in terms of 
included benefits, provider networks, and/or formularies.
    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 Sec.  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 Sec.  156.201(c) because several 
issuers in recent years have offered indistinguishable standardized 
plan options, and we believe issuers may continue to do so in future 
plan years partly because the number of non-standardized plan options 
that issuers can offer is limited in accordance with Sec.  156.202(b). 
We 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

[[Page 4494]]

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 Sec.  156.201 to add paragraph 
(c).
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR15JA25.053


[[Page 4495]]


[GRAPHIC] [TIFF OMITTED] TR15JA25.054

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

[[Page 4496]]

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 Sec.  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 Spanish-speaking 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 
non-standardized 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 
Sec.  156.202(d) and (e).

[[Page 4497]]

    As we explained in the 2025 Payment Notice (89 FR 26367), we 
believe the fact that issuers continue to be permitted to offer these 
non-standardized 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 non-
standardized 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 pre-deductible 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 Sec.  
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.

[[Page 4498]]

    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 HSA-
eligible 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 non-standardized 
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).

[[Page 4499]]

    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 non-EHBs, 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 non-standardized 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 non-standardized 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

[[Page 4500]]

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 non-standardized 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 (Sec.  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 Sec.  156.202(b) and (d) to properly reflect the flexibility that 
issuers have operationally been permitted since the introduction of 
non-standardized plan option limits to vary the inclusion of distinct 
adult dental benefit coverage, pediatric dental benefit coverage, and/
or adult vision benefit coverage categories under the non-standardized 
plan option limit in accordance with Sec.  156.202(c)(1) through (3).
    Section 1311(c)(1) of the ACA directs the Secretary to establish 
criteria for the certification of health plans as QHPs. Section 
1321(a)(1)(B) of the ACA directs the Secretary to issue regulations 
that set standards for meeting the requirements of title I of the ACA, 
which includes section 1311, for, among other things, the offering of 
QHPs through such Exchanges.
    In the 2024 Payment Notice (88 FR 25855 through 25865), we 
finalized requirements under Sec.  156.202(a) and (b) limiting the 
number of non-standardized plan options that issuers of QHPs can offer 
through Exchanges on the Federal platform (including SBE-FPs) to four 
non-standardized plan options per product network type (as described in 
the definition of ``product'' at Sec.  144.103), metal level (excluding 
catastrophic plans), inclusion of dental and/or vision benefit 
coverage, and service area for PY 2024, and two non-standardized plan 
options for PY 2025 and subsequent years.
    In the 2025 Payment Notice (89 FR 26362 through 26375), we 
finalized an exceptions process under Sec.  156.202(d) and (e) 
permitting FFE and SBE-FP issuers to offer more than two non-
standardized plan options per product network type, metal level, 
inclusion of dental and/or vision benefit coverage, and service area 
for PY 2025 and subsequent plan years, if issuers demonstrate that 
these additional non-standardized plans offered beyond the limit at 
Sec.  156.202(b) have specific design features that would substantially 
benefit consumers with chronic and high-cost conditions and meet 
certain other requirements.
    In the 2025 Payment Notice (88 FR 26365 through 26366), we also 
clarified that the example included in the 2024 Payment Notice that 
illustrated issuers' flexibility to vary the inclusion of dental and/or 
vision benefit coverage in accordance with Sec.  156.202(c) under the 
non-standardized plan option limits at Sec.  156.202(a) and (b) failed 
to properly distinguish between the adult and pediatric dental benefit 
coverage categories.
    In particular, in the 2024 Payment Notice (88 FR 25858), we stated 
that for PY 2025, for example, an issuer would be permitted to offer 
two non-standardized gold HMOs with no additional dental or vision 
benefit coverage, two non-standardized gold HMOs with additional dental 
benefit coverage, two non-standardized gold HMOs with additional vision 
benefit coverage, and two non-standardized gold HMOs with additional 
dental and vision benefit coverage, as well as two non-standardized 
gold PPOs with no additional dental or vision benefit coverage, two 
non-standardized gold PPOs with additional dental benefit coverage, two 
non-standardized gold PPOs with additional vision benefit coverage, and 
two non-standardized gold PPOs with additional dental and vision 
benefit coverage, in the same service area.
    However, in the 2025 Payment Notice, we clarified that in PY 2024, 
issuers had the ability to vary the inclusion of dental and/or vision 
benefit coverage (including varying the inclusion of the distinct adult 
and pediatric dental benefit coverage categories), such that issuers 
could offer plans in the manner reflected in Table 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 non-standardized plans, and if that issuer varied the 
inclusion of adult dental benefit coverage, pediatric dental benefit 
coverage, and/or adult vision benefit coverage in these plans in 
accordance with the flexibility provided for at Sec.  156.202(c)(1) 
through (3), that issuer could offer a theoretical maximum of 16 plans 
in a given product network type, metal level, and service area in the 
manner demonstrated in Table 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

[[Page 4501]]

[GRAPHIC] [TIFF OMITTED] TR15JA25.055

BILLING CODE 4120-01-C
    In the proposed rule, we proposed to amend the regulation text at 
Sec.  156.202(b) and (d) to properly reflect the flexibility that 
issuers have been operationally permitted since we introduced non-
standardized plan option limits to vary the inclusion of the distinct 
adult dental benefit coverage, pediatric dental benefit coverage, and/
or adult vision benefit coverage under the non-standardized plan option 
limit at Sec.  156.202(b) in accordance with Sec.  156.202(c)(1) 
through (3) for PY 2025 and subsequent plan years.
    In particular, we proposed to amend Sec.  156.202(b) to properly 
distinguish between adult dental benefit coverage at Sec.  
156.202(c)(1) and pediatric dental benefit coverage at Sec.  
156.202(c)(2), such that an issuer offering QHPs in an FFE or SBE-FP, 
for PY 2025 and subsequent plan years, is limited to offering two non-
standardized plan options per product network type, as the term is 
described in the definition of ``product'' at Sec.  144.103 of this 
subchapter, metal level (excluding catastrophic plans), and inclusion 
of adult dental benefit coverage, pediatric dental benefit coverage, 
and/or adult vision benefit coverage (as defined in paragraphs (c)(1) 
through (3) of Sec.  156.202), in any service area.
    Consistent with our proposed amendment of Sec.  156.202(b), we 
further proposed a conforming amendment to Sec.  156.202(d) to provide 
that, for PY 2025 and subsequent plan years, an issuer may offer 
additional non-standardized plan options for each product network type, 
metal level, inclusion of adult dental benefit coverage, pediatric 
dental benefit coverage, and/or adult vision benefit coverage (as 
defined in paragraphs (c)(1) through (3) of Sec.  156.202), and service 
area if it demonstrates that these additional plans' cost sharing for 
benefits pertaining to the treatment of chronic and high-cost 
conditions (including benefits in the form of prescription drugs, if 
pertaining to the treatment of the condition(s)) is at least 25 percent 
lower, as applied without restriction in scope throughout the plan 
year, than the cost sharing for the same corresponding benefits in the 
issuer's other non-standardized plan option offerings in the same 
product network type, metal level, inclusion of adult dental benefit 
coverage, pediatric dental benefit coverage, and/or adult vision 
benefit coverage, and service area.

[[Page 4502]]

    In the proposed rule, we stated that we proposed these 
modifications to align the regulation text of Sec.  156.202(b) and (d) 
with the existing flexibility that issuers have been operationally 
permitted since the non-standardized plan option limit was introduced 
in the 2024 Payment Notice.\230\
---------------------------------------------------------------------------

    \230\ CMS. (2024, April 10). 2025 Final Letter to Issuers in the 
Federally-facilitated Exchanges. https://www.cms.gov/files/document/2025-letter-issuers.pdf.
---------------------------------------------------------------------------

    We 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 
Sec.  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 Sec.  156.202(b) and (d).
---------------------------------------------------------------------------

    \231\ Antonin 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'').
---------------------------------------------------------------------------

    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 non-standardized 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 out-of-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 Sec.  
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 
non-standardized plan option limit. Ensuring issuers understand their 
non-standardized 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 
non-standardized 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

[[Page 4503]]

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 non-standardized 
plan option limit or exceptions process under Sec.  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 
non-standardized 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 non-standardized 
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 Sec.  
156.202), we continue to anticipate that most issuers would determine 
that the burden of creating and certifying additional non-standardized 
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 non-standardized 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 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 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

[[Page 4504]]

the regulation text of Sec.  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' non-standardized 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 non-standardized 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 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.
    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 Sec.  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 non-
standardized 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 
non-standardized 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 non-standardized 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 HSA-eligibility.
    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 HSA-eligibility, 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

[[Page 4505]]

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 (Sec.  156.235)
    In the HHS Notice of Benefit and Payment Parameters for 2026 
proposed rule (89 FR 82308, 82385), we proposed, under Sec.  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\
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    \232\ Twelve FFEs operate in States performing plan management 
functions: Delaware, Hawaii, Iowa, Kansas, Michigan, Montana, 
Nebraska, New Hampshire, Ohio, South Dakota, Utah, and West 
Virginia.
---------------------------------------------------------------------------

    Section 1311(c)(1)(C) of the ACA directs HHS to establish by 
regulation certification criteria for QHPs, including criteria that 
require QHPs to include within health insurance plan networks those 
ECPs, where available, that serve predominately low-income, medically-
underserved individuals. Federal ECP standards were first detailed in 
the Exchange Establishment Rule (77 FR 18310) and codified at Sec.  
156.235. ECP certification reviews under Sec.  156.235 ensure medical 
QHP and stand-alone dental plan (SADP) issuers include in their 
provider networks a sufficient number and geographic distribution of 
ECPs, where available.
    HHS has relied on State ECP certification reviews for the 
certification of QHPs in FFEs in States that perform plan management 
functions since PY 2015 due to system limitations in the Systems for 
Electronic Rates & Forms Filing (SERFF),\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.
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    \233\ Systems for Electronic Rates & Forms Filing (SERFF) is a 
portal utilized by States for form submittal, document management, 
and review.
    \234\ HIOS MPMS is a web application where users can validate 
plan data as well as submit their QHPs and SADPs to CMS for annual 
review and certification.
    \235\ OMB Control Number 0938-1415: Essential Community 
Provider-Network Adequacy (ECP/NA) Data Collection to Support QHP 
Certification (CMS-10803).
    \236\ For PY 2025 there were 13 FFEs that operate in States 
performing plan management functions: Delaware, Hawaii, Illinois, 
Iowa, Kansas, Michigan, Montana, Nebraska, New Hampshire, Ohio, 
South Dakota, Utah, and West Virginia.
---------------------------------------------------------------------------

    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

[[Page 4506]]

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, medically-underserved 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.
---------------------------------------------------------------------------

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

    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

[[Page 4507]]

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 (Sec.  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 Sec.  156.1130(a) and (c) to direct 
eligible QHP issuers to implement and report on their QIS for each QHP 
offered in an Exchange, and to submit data annually to evaluate 
compliance with the standards for a QIS in a manner and timeline 
specified by the Exchange, respectively.\238\ In addition, in the 
Exchange Establishment Rule (77 FR 18324 and 18415), we finalized 
regulations at Sec.  155.200(d) that direct Exchanges to evaluate each 
QIS, and Sec.  156.200(b)(5) that direct QHP issuers to implement and 
report on a QIS consistent with ACA section 1311(g) standards as QHP 
certification criteria for participation in an Exchange.
---------------------------------------------------------------------------

    \238\ Refer to OMB control number 0938-1286.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \239\ The CMS National Quality Strategy for Quality Improvement 
in Health Care available at http://www.cms.gov/medicare/quality/meaningful-measures-initiative/cms-quality-strategy.
    \240\ Id.
    \241\ See, for example, Health Insurance Exchanges Quality 
Rating System (QRS) for Plan Year (PY) 2024: Results at a Glance, 
available at https://www.cms.gov/files/document/health-insurance-exchanges-qrs-program-plan-year-2024-results-glance.pdf.
    \242\ Id.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \243\ Section 1701(a)(8) of the PHS Act, codified at 42 U.S.C. 
300u(a)(8), provides general authority to the Secretary of HHS to 
foster exchange of health-related information to consumers and 
others.
---------------------------------------------------------------------------

    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.

[[Page 4508]]

    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 summary-level 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, summary-level 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 
summary-level 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[supreg]) 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

[[Page 4509]]

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[supreg] 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 value-based 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, summary-level 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 
(Sec.  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 Sec.  
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 Sec.  
156.1220 to add a new paragraph (a)(2)(i) to provide that HHS would 
rerun HHS-RADV results in response to an appeal when the impact to the 
filing issuer's (that is, the issuer who submitted the appeal) HHS-RADV 
adjustments to State transfers is greater than or equal to $10,000, and 
we

[[Page 4510]]

proposed to apply this new materiality threshold for rerunning HHS-RADV 
results beginning with the 2023 benefit year HHS-RADV.\246\
---------------------------------------------------------------------------

    \244\ For the purposes of this proposal, ``appeals'' refers to 
all three steps of the administrative appeals process as listed in 
Sec.  156.1220, which includes the request for reconsideration, 
informal hearing, and review by the Administrator of CMS.
    \245\ For purposes of this proposal, rerunning HHS-RADV results 
involves recalculating all national program benchmarks and issuers' 
error rate results, reissuing issuers' error rate results, 
conducting discrepancy reporting and appeal windows for the reissued 
results, applying the reissued error rates to the applicable benefit 
year's State transfers, and invoicing, collecting, and distributing 
any additional changes to the HHS-RADV adjustments to State 
transfers.
    \246\ The 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \247\ The EDGE data discrepancies that can arise in States where 
the HHS-operated risk adjustment program applies have a more limited 
reach and only impact the State market risk pool with the 
discrepancy.
    \248\ The impact of successful HHS-RADV requests for 
reconsideration or appeals on HHS-RADV results and HHS-RADV 
adjustments to risk adjustment State transfers on all participating 
issuers also differs from that of high-cost risk pool audits, 
discrepancies, and appeals. Any high-cost risk pool funds HHS 
recoups as a result of audits of risk adjustment covered plans, 
actionable discrepancies, or successful appeals are used to reduce 
high-cost risk pool charges for that national high-cost risk pool in 
the next applicable benefit year for which high-cost risk pool 
payments have not already been calculated. See the 2023 Payment 
Notice (87 FR 27253).
---------------------------------------------------------------------------

    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 Sec.  
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 Sec.  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 Sec.  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.
---------------------------------------------------------------------------

    \249\ Please note that the risk adjustment discrepancy 
materiality threshold is the lesser of either $100,000 or 1% of 
State risk pool transfers.
---------------------------------------------------------------------------

    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

[[Page 4511]]

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 Sec.  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 (Sec.  158.103)
    In the HHS Notice of Benefit and Payment Parameters for 2026 
proposed rule (89 FR 82308, 82388), we proposed to amend Sec.  158.103 
by adding a definition of ``qualifying issuer.'' See subsection E.2 
below for the discussion of this proposal.
2. Reimbursement for Clinical Services Provided to Enrollees 
(Sec. Sec.  158.140, 158.240)
    In the HHS Notice of Benefit and Payment Parameters for 2026 
proposed rule (89 FR 82308, 82388), we proposed to amend Sec.  
158.140(b)(4)(ii) to allow qualifying issuers to not adjust incurred 
claims by the net payments or receipts related to the risk adjustment 
program for MLR reporting and rebate calculation purposes beginning 
with the 2026 MLR reporting year (MLR reports due in 2027). We also 
proposed to amend Sec.  158.240(c) to add an illustrative example of 
how qualifying issuers would calculate the amount of rebate owed to 
each enrollee to accurately reflect how such issuers would incorporate 
the net risk adjustment transfer amounts into the MLR and rebate 
calculations differently from other issuers, as well as to make a 
conforming amendment to clarify that the current illustrative example 
in paragraph (c)(2) would apply to issuers that are not qualifying 
issuers.
    Section 2718 of the PHS Act and the implementing regulations at 45 
CFR part 158 require health insurance issuers offering group or 
individual health insurance coverage to submit an annual report to the 
Secretary of HHS concerning their MLR and issue an annual rebate to 
enrollees if the issuer's MLR is less than the applicable MLR standard 
established in sections 2718(b)(1)(A)(i) and (ii) of the PHS Act. Under 
section 2718 of the PHS Act, an issuer's MLR is defined as the ratio of 
(a) incurred claims and quality improvement activity expenses, to (b) 
premium revenue after subtracting taxes and licensing and regulatory 
fees and accounting for payments or receipts for risk adjustment, risk 
corridors, and reinsurance under sections 1341, 1342, and 1343 of the 
ACA. The statute also defines the total amount of an issuer's annual 
rebate as an amount equal to the product of the amount by which the 
applicable MLR standard exceeds the issuer's MLR, multiplied by the 
issuer's premium revenue after subtracting taxes and licensing and 
regulatory fees and accounting for payments or receipts for 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

[[Page 4512]]

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 Sec.  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 Sec.  158.130(b)(5), net risk adjustment program 
receipts, net risk corridors program receipts, and reinsurance program 
payments would be added to total premium and then subtracted from 
adjusted earned premium. Section 158.140(b)(4) also provided that 
premium stabilization amounts, other than reinsurance contribution 
fees, must adjust incurred claims in the numerator of the MLR 
calculation defined in Sec.  158.221, in a manner similar to the 
adjustment of allowable costs in the risk corridors formula set forth 
in Sec.  153.500. As stated in the 2014 Payment Notice, we found that 
this approach adhered to the statutory construct of the MLR formula in 
section 2718 of the PHS Act, which we believe provides flexibility as 
to whether to account for the effects of collections or receipts for 
the premium stabilization programs in determining revenue (the 
denominator) or costs (the numerator) of the MLR formula, while also 
aligning with the treatment of risk adjustment transfer amounts and 
reinsurance payments in the calculation of risk corridors payments and 
charges under section 1342 of the ACA.
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    \250\ Section 1342 of the ACA and the implementing regulations 
at 45 CFR part 153 established a temporary risk corridors program 
applicable to QHP issuers in the individual and small group (or 
merged) markets for the 2014, 2015, and 2016 benefit years.
    \251\ The premium stabilization programs refer to the 
reinsurance, risk corridors, and risk adjustment programs 
established by the ACA. See section 1341 of the ACA (transitional 
reinsurance program), section 1342 of the ACA (risk corridors 
program), and section 1343 of the ACA (risk adjustment program).
---------------------------------------------------------------------------

    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 Sec.  158.103 to add a definition of ``qualifying 
issuer'' to mean an issuer whose ratio of net payments related to the 
risk adjustment program under section 1343 of the ACA to earned 
premiums, prior to accounting for the net payments or receipts related 
to the risk adjustment, risk corridors, and reinsurance programs (as 
described in Sec.  158.130(b)(5)) in a relevant State and market, is 
greater than or equal to 50 percent. We also proposed to modify Sec.  
158.140(b)(4)(ii) to no longer apply net risk adjustment receipts as an 
adjustment to the incurred claims amount that is used to calculate the 
MLR numerator defined in Sec.  158.221(b) for such qualifying issuers. 
We did not propose to make any changes to the definition of premium 
revenue in Sec.  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 Sec.  158.221(c) and Sec.  
158.240(c), respectively. We also proposed to make a conforming 
amendment to Sec.  158.240(c) to clarify that the existing illustrative 
example in paragraph (c)(2) would apply to issuers that are not 
qualifying issuers, and to add an illustrative example in a new 
paragraph (c)(3) of how qualifying issuers would determine the amount 
of rebate owed to each enrollee, to accurately reflect how qualifying 
issuers would incorporate the net risk adjustment transfer amounts into 
the MLR and rebate calculations differently from other issuers.
    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{time} ] + c

Where,

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

    For a qualifying issuer whose MLR falls below the minimum MLR 
standard in a State and market, we proposed to calculate the MLR rebate 
in Sec.  158.240(c) as follows:
If (ra/p) > or = 50%;
Rebates = (m-a) * [(p + s-nc + rc)-t-f-(s-nc + rc)-na + ra]

Where,

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

    We proposed that these amendments would be applicable beginning 
with the 2026 MLR reporting year (MLR reports

[[Page 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 Sec.  158.221(c) and Sec.  158.240(c), respectively, 
instead of the MLR numerator defined in Sec.  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 Sec.  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 Sec.  158.130, but prior to 
and excluding the adjustments in Sec.  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 Sec.  
158.140(b)(4)(ii) to allow qualifying issuers to not adjust incurred 
claims by the net payments or receipts related to the risk adjustment 
program for MLR reporting and rebate calculation purposes, 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 Sec.  158.240(c) to (1) add an illustrative 
example at Sec.  158.240(c)(3) of how qualifying issuers that choose to 
apply risk adjustment transfer amounts as described in Sec.  
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 Sec.  158.140(b)(4)(ii), and (2) to 
clarify that the current illustrative example in Sec.  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 Sec.  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 Sec.  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 Sec.  158.130, but prior to 
and excluding the adjustments in Sec.  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 Sec.  
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

[[Page 4514]]

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 Sec.  158.140(b)(4)(ii) and 
Sec.  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 
HHS-operated 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

[[Page 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

[[Page 4516]]

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.
---------------------------------------------------------------------------

    \252\ CMS, CMS Update on Actions to Prevent Unauthorized Agent 
and Broker Marketplace Activity, https://www.cms.gov/newsroom/press-
releases/cms-update-actions-prevent-unauthorized-agent-and-broker-
marketplace-
activity#:~:text=consumers%20who%20believe%20they%20may,resolve%20any
%20coverage%20issues%20promptly. Oct. 17, 2024.
---------------------------------------------------------------------------

    Consumers also have faced financial harm after being 
inappropriately lured into a plan by misleading agent/broker 
advertisements that promise non-existent 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

[[Page 4517]]

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.
---------------------------------------------------------------------------

    \253\ See Department of Labor. (2024, April 3). Bureau of Labor 
Statistics, Occupational Employment and Wage Statistics, May 2023 
Occupation Profiles. https://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------

    As indicated, employee hourly wage estimates have been adjusted by 
a factor of 100 percent. This is necessarily a rough adjustment, both 
because fringe benefits and overhead costs vary significantly across 
employers, and because methods of estimating these costs vary widely 
across studies. Nonetheless, there is no practical alternative, and we 
believe that doubling the hourly wage to estimate total cost is a 
reasonably accurate estimation method.
[GRAPHIC] [TIFF OMITTED] TR15JA25.056

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

    Beginning with the 2025 benefit year of HHS-RADV, we are finalizing 
under Sec.  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 RXC-only 
enrollees in strata 1 through 3) from IVA sampling, remove the FPC such 
that issuers with 200 or more enrollees in strata 1 through 9 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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

[[Page 4518]]

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.
---------------------------------------------------------------------------

    \255\ OMB Control No: 0938-1155 (exp. April 30, 2025). https://www.reginfo.gov/public/do/PRAViewICR?ref_nbr=202308-0938-015.
    \256\ A total of 605 issuers participated in the HHS-operated 
risk adjustment program for the 2023 benefit year. However, some of 
these issuers are subject to exemptions from HHS-RADV under 45 CFR 
153.630(g) and would not submit IVA samples for HHS-RADV. For 
example, any issuers at or below the materiality threshold for 
random and targeted sampling only participate in HHS-RADV 
approximately once every 3 years. Therefore, we use 600 issuers as a 
conservative upper limit of the number of issuers that could 
participate in a given benefit year of HHS-RADV. See the Summary 
Report on Individual and Small Group Market Risk Adjustment 
Transfers for the 2023 Benefit Year (July 22, 2024) available at 
https://www.cms.gov/cciio/programs-and-initiatives/premium-stabilization-programs/downloads/ra-report-by2023pdf.
---------------------------------------------------------------------------

    For our monetary and hourly burden estimates, we are incorporating 
labor and wage costs from the most recent premium stabilization 
programs information collection, ``Standards Related to Reinsurance, 
Risk Corridors, Risk Adjustment, and Payment Appeals'' (OMB Control 
Number 0938-1155). 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.
---------------------------------------------------------------------------

    \257\ This 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.
---------------------------------------------------------------------------

    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 (Sec.  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

[[Page 4519]]

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 agency-level documentation, including, but not 
limited to, training manuals, onboarding material, and marketing 
materials, from lead agents, in addition to the existing documentation 
collection \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.
---------------------------------------------------------------------------

    \258\ This includes documentation of consumer review and 
confirmation of the accuracy of eligibility application information 
in compliance with 45 CFR 155.220(j)(2)(ii)(A)(2) and consumer 
consent documentation in compliance with 45 CFR 
155.220(j)(2)(iii)(c).
    \259\ 5 CFR 1320.4(a)(2).
---------------------------------------------------------------------------

    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 (Sec.  
155.220(k))

    We are finalizing an amendment to expand HHS' authority to suspend 
system access for agents and brokers under Sec.  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 Sec.  
155.220(j)(2)(i), (ii), or (iii) or the privacy and security standards 
at Sec.  155.260, until the circumstances of the incident, breach, or 
noncompliance are remedied or sufficiently mitigated to HHS' 
satisfaction. Since this 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 Sec.  155.220(j)(2)(ii) and (iii) for 
consumers cited in the suspension notice from agents and brokers we 
system suspend under Sec.  155.220(k)(3). The system suspension 
authority in Sec.  155.220(k)(3) is part of HHS' oversight and 
enforcement framework applicable to agents and brokers who participate 
in the FFEs and SBE-FPs. Therefore, this collection 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.
---------------------------------------------------------------------------

    \260\ Id.
---------------------------------------------------------------------------

    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 (Sec.  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 Sec.  
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 Sec.  155.220(j)(2)(ii), which requires agents, 
brokers, and web-brokers to document that eligibility application 
information has been reviewed by and confirmed to be accurate by the 
consumer or their authorized representative prior to submission of the 
application to the FFE or SBE-FP. This 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 Sec.  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 web-
brokers 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 web-brokers 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,

[[Page 4520]]

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 web-brokers 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 Sec.  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 web-brokers 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 web-brokers to use the amended model consent form or new 
scripts to comply with the requirements set forth in Sec.  
155.220(j)(2)(ii)(A) and (j)(2)(iii)(A)-(C).
    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, web-brokers, 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 (Sec.  155.305)

    We are finalizing an amendment to current regulation at Sec.  
155.305(f)(4) under which an Exchange needs to provide notification to 
either an enrollee or their tax filer (or both) who have been 
identified as having failed to file their Federal income taxes and 
reconcile their APTC after 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 
(Sec.  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.

[[Page 4521]]

H. ICRs Regarding Essential Community Provider Certification Reviews 
(Sec.  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 Sec.  156.235, medical QHP and 
SADP issuers must complete and submit ECP data as part of their QHP 
application, in which they must list the names and geographic locations 
of ECPs with whom they have contracted to provide health care services 
to low-income, medically underserved individuals in their service 
areas. These issuers must contract with a certain percentage, as 
determined by HHS, of the available ECPs in the plan's service area. 
This 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.
---------------------------------------------------------------------------

    \261\ OMB Control No. 0938-1415: Essential Community Provider-
Network Adequacy (ECP/NA) Data Collection to Support QHP 
Certification (CMS-10803).
---------------------------------------------------------------------------

    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 (Sec.  
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 (Sec. Sec.  158.103, 158.140, 
158.240)

    We are finalizing adding a definition of ``qualifying issuer'' to 
Sec.  158.103, with certain clarifications, amending Sec.  
158.140(b)(4)(ii) to no longer adjust incurred claims by the net 
payments or receipts related to the risk adjustment program for MLR 
reporting and rebate calculation purposes for, and at the option of, 
qualifying issuers, making conforming amendments to the rebate 
calculation example in Sec.  158.240(c)(2), and adding Sec.  
158.240(c)(3) to provide a rebate calculation example for qualifying 
issuers that choose to apply risk adjustment transfer amounts as 
described in Sec.  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
[GRAPHIC] [TIFF OMITTED] TR15JA25.057

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

[[Page 4522]]

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 cost-sharing design of the plan, including, if permitted by the 
applicable State authority, accounting for CSR amounts provided to 
eligible enrollees under Sec.  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.
---------------------------------------------------------------------------

    \262\ Office of the White House. (2023, April 6). Executive 
Order on Modernizing Regulatory Review. https://www.whitehouse.gov/briefing-room/presidential-actions/2023/04/06/executive-order-on-modernizing-regulatory-review/.
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    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.
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BILLING CODE 4120-01-C
1. BHP Methodology Regarding the Value of the Premium Adjustment Factor 
(PAF) (42 CFR Part 600)
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    \263\ Reinsurance collections ended in FY 2018 and outlays in 
subsequent years reflect remaining payments, refunds, and allowable 
activities.
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    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 (Sec.  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 HHS-operated risk adjustment program. 
As HHS is responsible for operating the risk adjustment program in all 
50 States and the District of Columbia, we do not expect these policies 
to place any additional burden on State governments. The 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 (Sec.  
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 Sec.  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

[[Page 4526]]

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 HHS-operated 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\
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    \264\ For 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.
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    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
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    \265\ 45 CFR 153.630(g)(2).
    \266\ Beginning with the 2022 benefit year of HHS-RADV, the 
materiality threshold under Sec.  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.
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    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

[[Page 4527]]

Rules.\267\ 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.\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.
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    \267\ See, 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.
    \268\ See CMS. (2021). HHS-Operated Risk Adjustment Technical 
Paper on Possible Model Changes. Section 1.2.1 (Principles of Risk 
Adjustment). https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
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    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 (Sec.  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.
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    \269\ The 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.
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    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

[[Page 4528]]

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.
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    \270\ See, 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.
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5. HHS Risk Adjustment User Fee for the 2026 Benefit Year (Sec.  
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 (Sec.  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 pre-enrollment 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 (Sec.  155.220(k))
    We believe the impact related to the finalized changes to Sec.  
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 Sec.  155.220(k)(3) 
system suspensions may be implemented. This finalized policy will 
enhance consumer protection and

[[Page 4529]]

promote program integrity by allowing HHS to immediately suspend an 
agent's or broker's access to Exchange systems when HHS discovers 
circumstances that pose unacceptable risk to the accuracy of the 
Exchange's eligibility determinations, Exchange operations, applicants, 
or enrollees, or Exchange information technology systems, including but 
not limited to risk related to noncompliance with the standards of 
conduct under Sec.  155.220(j)(2)(i), (ii), or (iii) or the privacy and 
security standards at Sec.  155.260, until the circumstances of the 
incident, breach, or noncompliance are remedied or sufficiently 
mitigated to HHS' satisfaction. This 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 Sec.  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 Sec.  
155.220(j)(2)(i), (ii) or (iii) or the privacy and security standards 
at Sec.  155.260,\271\ helps achieve these goals.
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    \271\ Section 155.220(d)(3) requires agents and brokers to enter 
into a Privacy and Security Agreement pursuant to which they agree 
to comply with Exchange privacy and security standards adopted 
consistent with Sec.  155.260. There are two Privacy and Security 
Agreements between CMS and the agent, broker, and web-broker for 
FFEs and SBE-FPs: (1) one is for the individual market FFEs and SBE-
FPs, and (2) one is for the FF-SHOPs and SBE-FP-SHOPs.
---------------------------------------------------------------------------

    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 
Sec.  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 system-suspended 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 Sec.  
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 Sec.  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 (Sec.  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 
Sec.  155.220(j)(2)(ii)(A)(1)-(2), as well as scripts agents, brokers, 
and web-brokers could use when meeting the requirements codified at 
Sec.  155.220(j)(2)(ii)(A) and (j)(2)(iii)(A)-(C) via an audio 
recording.
    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 
web-brokers with clarity on how to meet the regulatory requirements 
under Sec.  155.220(j)(2)(ii) and help them comply

[[Page 4530]]

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 web-broker they are working with is complying with 
Sec.  155.220(j)(2)(ii). The finalized scripts, to the extent they are 
utilized by agents, brokers, and web-brokers, 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 Sec.  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 web-brokers 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 (Sec.  
155.305)
    We anticipate a small financial impact related to our finalized 
updates to Sec.  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.
---------------------------------------------------------------------------

    \272\ Available at https://sam.gov.
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    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

[[Page 4531]]

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 (Sec.  155.400(d)(1))
    We are finalizing the addition of Sec.  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 Sec.  156.1210(a)-(c) and all the information that the 
State Exchange requires or requests to properly assess the inaccuracy, 
the State Exchange must review and resolve the State Exchange issuers' 
enrollment data inaccuracies and submit to HHS a description of the 
resolution of any inaccuracies described by the State Exchange issuer 
that the State Exchange confirms to be inaccuracies in a format and 
manner specified by HHS.\274\ This finalized policy aligns with 
existing guidance \275\ and builds on the existing requirement at Sec.  
155.400(d) that a State Exchange must reconcile enrollment information 
with issuers and HHS no less than on a monthly basis. It also provides 
certainty for State Exchange issuers by providing a timeline for State 
Exchanges to act upon an enrollment data inaccuracy submitted to the 
State Exchange by a State Exchange issuer that meets the requirements 
at Sec.  156.1210(a)-(c).
---------------------------------------------------------------------------

    \273\ CMS. (2024, Aug. 14). Reporting and Reviewing Data 
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked 
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
    \274\ OMB Control No.: 0938-1312 and 0938-1341.
    \275\ CMS. (2024, Aug. 14). Reporting and Reviewing Data 
Inaccuracy Reports in State-based Exchanges (SBE) Frequently Asked 
Questions (FAQs). https://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/downloads/faqs-SBE-reporting-enrollment-data-inaccuracies.pdf.
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    We do not believe that the 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 Fixed-Dollar Premium Payment Threshold 
and Total Premium Threshold (Sec.  155.400(g))
    We anticipate that the finalized policy to allow issuers to 
implement a fixed-dollar 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 fixed-dollar threshold of $5 or less, based on PY 2023 
counts of 79,612 QHP policies terminated for non-payment where the 
enrollee had a member 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\
---------------------------------------------------------------------------

    \276\ See CMS (2024) Effectuated Enrollment: Early 2024 Snapshot 
and Full Year 2023 Average. https://www.cms.gov/files/document/early-2024-and-full-year-2023-effectuated-enrollment-report.pdf.
---------------------------------------------------------------------------

    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 non-payment 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

[[Page 4532]]

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 (Sec.  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 Sec.  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 (Sec. Sec.  155.1000 and 155.1090)
    We are finalizing an amendment to Sec.  155.1000 by codifying that 
an Exchange may deny certification to any plan that does not meet the 
general certification criteria at Sec.  155.1000 and amending Sec.  
155.1090 with refinements to the standards for the request for the 
reconsideration of a denial of certification specific to the FFEs. We 
anticipate no appreciable changes in impact because of these 
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 Sec. Sec.  155.1000 and 155.1090 do not substantively 
alter the responsibilities of affected issuers or the content of 
reconsideration requests. As a result, there is no material impact on 
regulated entities because of these 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 (Sec.  
155.1200)
    As part of Sec.  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 (Sec.  
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 (Sec.  156.50). After consideration of 
comments and for the reasons outlined in the proposed rule and this 
final rule, including our

[[Page 4533]]

responses to comments, we are finalizing the impact estimates for this 
policy as discussed in the preceding paragraphs.
16. CSR Loading (Sec.  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 (Sec.  156.135)
    This approach to revise the method for updating the AV Calculator, 
starting with the 2026 AV Calculator, resulting in an earlier release 
of the final AV Calculator for a given plan year, 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 EHB-benchmark plans comply with EHB 
requirements, and States that design their own standardized plan 
options could benefit from an earlier release to ensure they satisfy 
the AV de minimis ranges. This approach 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 (Sec.  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 Sec.  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 
Sec.  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 (Sec.  156.202)
    We are finalizing an amendment to Sec.  156.202(b) and (d) to 
properly reflect the flexibility that issuers have been operationally 
permitted since the introduction of these requirements to vary the 
inclusion of the distinct adult dental benefit coverage, pediatric 
dental benefit coverage, and adult vision benefit coverage categories 
under the non-standardized plan option limit at Sec.  156.202(b) in 
accordance with Sec.  156.202(c)(1) through (3).
    In particular, we are finalizing an amendment to Sec.  156.202(b) 
to properly distinguish between adult dental benefit coverage at Sec.  
156.202(c)(1) and pediatric dental benefit coverage at Sec.  
156.202(c)(2), such that an issuer offering QHPs in an FFE or SBE-FP, 
for PY 2025 and subsequent plan years, is limited to offering two non-
standardized plan options per product network type, as the term is 
described in the definition of ``product'' at Sec.  144.103 of this 
subchapter, metal level (excluding catastrophic plans), and inclusion 
of adult dental benefit coverage, pediatric dental benefit coverage, 
and adult vision benefit coverage (as defined in paragraphs (c)(1) 
through (3) of Sec.  156.202), in any service area.
    We are finalizing a similar conforming amendment to Sec.  
156.202(d), such that for PY 2025 and subsequent plan years, an issuer 
may offer additional non-standardized plan options for each product 
network type, metal level, inclusion of adult dental benefit coverage, 
pediatric dental benefit coverage, and adult vision benefit coverage 
(as defined in paragraphs (c)(1) through (3) of Sec.  156.202), and 
service area if it demonstrates that these additional plans' cost 
sharing for

[[Page 4534]]

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 non-standardized plan option limit was first 
introduced PY 2024, we do not anticipate any impact on relevant 
interested parties.
---------------------------------------------------------------------------

    \277\ CMS. (2024, April 10). 2025 Final Letter to Issuers in the 
Federally-facilitated Exchanges. https://www.cms.gov/files/document/2025-letter-issuers.pdf.
---------------------------------------------------------------------------

    We 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 (Sec.  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 full-time 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.
---------------------------------------------------------------------------

    \278\ Twelve FFEs operate in States performing plan management 
functions for PY 2026: Delaware, Hawaii, Iowa, Kansas, Michigan, 
Montana, Nebraska, New Hampshire, Ohio, South Dakota, Utah, and West 
Virginia.
    \279\ Occupational Employment and Wage Statistics from the US 
Bureau of Labor Statistics for job code 13-1041 Compliance Officer 
from https://www.bls.gov/oes/current/oes131041.htm.
    \280\ We 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \281\ A non-exhaustive list of available ECPs that primarily 
serve low-income and medically underserved populations which can be 
counted toward an issuer's satisfaction of the ECP standard as part 
of the issuer's QHP application.
---------------------------------------------------------------------------

    We 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 
(Sec.  156.1220(a)(2))
    We are finalizing an amendment to Sec.  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.

[[Page 4535]]

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 HHS-RADV 
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 (Sec. Sec.  158.103, 158.140, 158.240)
    We are finalizing (1) the addition of a definition of ``qualifying 
issuer'' to Sec.  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 Sec.  
158.130, but prior to and excluding the adjustments in Sec.  
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 Sec.  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 Sec.  
158.240(c) to add an illustrative example of how qualifying issuers 
that opt to apply risk adjustment transfer amounts as described in 
Sec.  158.140(b)(4)(ii) would determine the amount of rebate owed to 
each enrollee, and makes a conforming amendment to Sec.  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 Sec.  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 Sec.  
158.130, but prior to and excluding the adjustments in Sec.  
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

[[Page 4536]]

estimated cost is $505.50 (4.75 hours x $106.42 per hour). Therefore, 
we estimate that the total cost of reviewing this regulation is 
approximately $3,336,300 ($505.50 per reviewer x 6,600 reviewers).
---------------------------------------------------------------------------

    \282\ U.S. Bureau of Labor Statistics. (2024, April 9). 
Occupational Employment and Wage Statistics. https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

D. Regulatory Alternatives Considered

    We are finalizing under Sec.  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 issuer-specific variance of 
net risk score error to calculate each issuer's standard deviation of 
risk score error used in the Neyman allocation formula. However, it 
would not be possible to calculate an issuer-specific variance of net 
risk score error for all issuers participating in a given benefit year 
of HHS-RADV as some issuers would not have 3 consecutive years of HHS-
RADV data. As explained in the proposed rule (89 FR 82308, 82353), 
these issuers would have to rely on fewer years of HHS-RADV data under 
an issuer-specific calculation, meaning significantly fewer data points 
compared to other issuers that participated in all years, which could 
result in large variations in IVA sample stratum size and increased 
uncertainty in HHS-RADV. Therefore, 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 
three-year rolling window of HHS-RADV data rather than the MA-RADV data 
as the source data for the Neyman allocation.
---------------------------------------------------------------------------

    \283\ As 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \284\ As noted in the preamble of this final rule, enrollees 
without HCCs include stratum 10 enrollees that do not have HCCs nor 
RXCs and RXC-only enrollees in strata 1 through 3.
    \285\ As noted earlier in this preamble, this estimate is based 
on the combined impact of all finalized changes to the IVA sampling 
methodology.
---------------------------------------------------------------------------

    We also considered only excluding stratum 10 enrollees from the IVA 
sampling methodology and retaining RXC-only enrollees in strata 1 
through 3. However, we believe removing all enrollees without HCCs 
(both stratum 10 enrollees and RXC-only enrollees) is the preferred 
approach so issuers and IVA Entities are not spending resources on 
enrollees who do not have risk scores to adjust when calculating 
issuers' error rates during HHS-RADV. In addition, our analysis 
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 RXC-
only enrollees and stratum 10 enrollees from the IVA sampling 
methodology.
    As an alternative respect to the SVA pairwise means test proposal, 
we considered only changing the pairwise means testing procedure from 
the 95 percent confidence interval paired t-test to the 90 percent 
confidence interval bootstrapped test without increasing the initial 
SVA subsample size to 24. However, our analysis found that maintaining 
an initial SVA subsample size of 12 under the bootstrapping methodology 
did not achieve an optimal target false negative rate of approximately 
20 percent at various effect sizes. Therefore, we are 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 HHS-RADV.\286\
---------------------------------------------------------------------------

    \286\ A standard IVA sample size is 200 enrollees, and it 
applies to the majority of issuers of risk adjustment covered plans. 
CMS calculates a smaller IVA sample sizes for issuers for smaller 
populations by using a Finite Population Correction (FPC) factor. 
All issuers are subject to the same SVA subsample sizes, but the 
maximum SVA subsample for pairwise testing is one half of the 
issuer's IVA sample size. As discussed in section II.B.5.a., we are 
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.
---------------------------------------------------------------------------

    We considered taking no action regarding the changes at Sec.  
155.305(f)(4)(ii) and instead relying on the guidance released by CMS 
to inform Exchanges of noticing best practices as was previously done, 
but instead decided to codify this as a requirement to ensure that tax 
filers or their enrollees receive multiple educational notices 
regarding the requirement to file their Federal income taxes and 
reconcile their APTC.
    We considered taking no action regarding modifications to Sec.  
155.400(g) to allow issuers to adopt a fixed-dollar premium payment 
threshold or a gross

[[Page 4537]]

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 fixed-dollar 
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 fixed-
dollar 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 Sec.  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 Sec.  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 Sec.  153.710(e). However, considering 
that the HHS-RADV adjustments to State risk adjustment transfer charges 
and State risk adjustment transfer payments are orders of magnitude 
smaller than those of the initial State risk adjustment transfer 
amounts, we were concerned that we would see situations where 1 percent 
of the applicable payment or charge could be as little as $10 based on 
our experience running HHS-RADV for the past few years. Specifically, 
we believe that structuring the threshold, as 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 re-released also 
helps maintain the stability of the market, as there are fewer 
instances of adjustments after the initial release of HHS-RADV 
adjustments.

E. Regulatory Flexibility Act (RFA)

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate that 
small businesses, nonprofit organizations, and small governmental 
jurisdictions are small entities as that term is used in the RFA. The 
great majority of hospitals and most other health care providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the Small Business Administration (SBA) definition of a 
small business (having revenues of less than $8.0 million to $41.5 
million in any 1 year). We do not anticipate that providers 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.

[[Page 4538]]

    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.
---------------------------------------------------------------------------

    \287\ SBA. (n.d.). Table of size standards. https://www.sba.gov/document/support--table-size-standards.
    \288\ CMS. (n.d.). Medical Loss Ratio Data and System Resources. 
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \289\ $35 million/475 issuers subject to the MLR requirements = 
approximately $73,684.21.
---------------------------------------------------------------------------

    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.
[GRAPHIC] [TIFF OMITTED] TR15JA25.061

[GRAPHIC] [TIFF OMITTED] TR15JA25.062

    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.
---------------------------------------------------------------------------

    \290\ United States Census Bureau (2020, March). 2017 SUSB 
Annual Data Tables by Establishment Industry, Data by Enterprise 
Receipt Size. https://www.census.gov/data/tables/2020/econ/susb/2020-susb-annual.html.
---------------------------------------------------------------------------

    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 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

[[Page 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 
Exchange-related programs, State decisions will ultimately influence 
both administrative expenses and overall premiums. States are not 
required to establish an Exchange or risk adjustment program. For 
States that elected previously to operate an Exchange, those States had 
the opportunity to use funds under Exchange Planning and Establishment 
Grants to fund the development of data. Accordingly, some of the 
initial cost of creating programs was funded by Exchange Planning and 
Establishment Grants. After establishment, Exchanges must be 
financially self-sustaining, with revenue sources at the discretion of 
the State. Current State Exchanges charge user fees to issuers.
    In our view, while this 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

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

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


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

[[Page 4540]]

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

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

0
3. Section 155.305 is amended by adding paragraph (f)(4)(ii) to read as 
follows:


Sec.  155.305  Eligibility Standards.

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

0
4. Section 155.400 is amended by adding paragraphs (d)(1) and (2) and 
revising paragraph (g) to read as follows:


Sec.  155.400  Enrollment of qualified individuals into QHPs.

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

0
5. Section 155.505 is amended by revising paragraph (b) introductory 
text to read as follows:


Sec.  155.505  General Eligibility Appeals Requirements.

* * * * *
    (b) Right to appeal. An applicant, enrollee, or application filer 
must have the right to appeal:
* * * * *

[[Page 4541]]


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


Sec.  155.1000  Certification standards for QHPs.

* * * * *
    (e) Denial of certification. The Exchange may deny certification to 
any plan that does not meet the general certification criteria under 
Sec.  155.1000(c).

0
7. Section 155.1090 is amended by revising the section heading, the 
paragraph (a) heading, and paragraphs (a)(2) and (3) to read as 
follows:


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

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

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

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

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


0
9. Section 156.80 is amended by revising paragraph (d)(2)(i) to read as 
follows:


Sec.  156.80  Single risk pool.

* * * * *
    (d) * * *
    (2) * * *
    (i) The actuarial value and cost-sharing design of the plan, 
including, if permitted by the applicable State authority (as defined 
in Sec.  144.103 of this subchapter), accounting for cost-sharing 
reduction amounts provided to eligible enrollees under Sec.  156.410, 
provided the issuer does not otherwise receive reimbursement for such 
amounts.
* * * * *

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


Sec.  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.

0
11. Section 156.202 is amended by revising paragraph (b) and paragraph 
(d) introductory text to read as follows:


Sec.  156.202  Non-standardized plan option limits.

* * * * *
    (b) For plan year 2025 and subsequent plan years, is limited to 
offering two non-standardized plan options per product network type, as 
the term is described in the definition of ``product'' at Sec.  144.103 
of this subchapter, metal level (excluding catastrophic plans), and 
inclusion of adult dental benefit coverage, pediatric dental benefit 
coverage, and 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 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.
* * * * *

0
12. Section 156.1220 is amended by adding paragraphs (a)(2)(i) and (ii) 
to read as follows:


Sec.  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

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

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


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


Sec.  158.103  Definitions.

* * * * *
    Qualifying issuer means an issuer whose 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 Sec.  158.130, but prior to and excluding 
the adjustments in Sec.  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.
* * * * *

[[Page 4542]]


0
15. Section 158.140 is amended by revising paragraph (b)(4)(ii) to read 
as follows:


Sec.  158.140  Reimbursement for clinical services provided to 
enrollees.

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

0
16. Section 158.240 is amended by revising paragraph (c)(2) and adding 
paragraph (c)(3) to read as follows:


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

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

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`