[Federal Register Volume 75, Number 86 (Wednesday, May 5, 2010)]
[Rules and Regulations]
[Pages 24450-24470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-10658]



[[Page 24450]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Part 149

RIN 0991-AB64


Early Retiree Reinsurance Program

AGENCY: Office of the Secretary, HHS.

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period (IFC) implements 
the Early Retiree Reinsurance Program, which was established by section 
1102 of the Patient Protection and Affordable Care Act (the Affordable 
Care Act). The Congress appropriated funding of $5 billion for the 
temporary program. Section 1102(a)(1) requires the Secretary to 
establish this temporary program not later than 90 days after enactment 
of the statute, which is June 21, 2010. The program ends no later than 
January 1, 2014. The program provides reimbursement to participating 
employment-based plans for a portion of the cost of health benefits for 
early retirees and their spouses, surviving spouses and dependents. The 
Secretary will reimburse plans for certain claims between $15,000 and 
$90,000 (with those amounts being indexed for plan years starting on or 
after October 1, 2011). The purpose of the reimbursement is to make 
health benefits more affordable for plan participants and sponsors so 
that health benefits are accessible to more Americans than they would 
otherwise be without this program.

DATES: Effective Date: These regulations are effective on June 1, 2010.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
EST on June 4, 2010.

ADDRESSES: In commenting, please refer to file code DHHS-9996-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed).
    <bullet> Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions on 
the home page.
    <bullet> By regular mail. You may mail written comments to the 
following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: DHHS-9996-IFC, P.O. 
Box 8014, Baltimore, MD 21244-8014.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    <bullet> By express or overnight mail. You may send written 
comments to the following address only: Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Attention: DHHS-
9996-IFC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 
21244-1850.
    <bullet> By hand or courier. If you prefer, you may deliver (by 
hand or courier) your written comments before the close of the comment 
period to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: James Slade, (410) 786-1073, for 
information regarding the Purpose and Basis, Requirements for Eligible 
Employment-Based Plans, Use of Reimbursement Amounts, Appeals, and 
Disclosure of Data Inaccuracies.
    David Mlawsky, (410) 786-6851, for information regarding the 
Definitions, Reinsurance Amounts, Reimbursement Methods, Including 
Provision of Necessary Information, and Change of Ownership 
Requirements.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments. All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all electronic comments received before the close of the comment 
period on the following public Web site as soon as possible after they 
have been received: http://www.regulations.gov. Follow the search 
instructions on that Web site to view public comments.
    Comments received timely will be available for public inspection as 
they are received, generally beginning approximately 3 weeks after 
publication of a document, at Room 445-G, Department of Health and 
Human Services, Hubert H. Humphrey Building, 200 Independence Avenue, 
SW., Washington, DC 20201, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, call 
1-800-743-3951.

I. Background

A. Overview of the Early Retiree Reinsurance Program Enacted as Part of 
the Patient Protection and Affordable Care Act

    On March 21, 2010, the Congress passed the Patient Protection and 
Affordable Care Act (the Affordable Care Act) (Pub. L. 111-148), which 
was signed into law on March 23, 2010. Included in this health 
insurance reform law is a provision that establishes the temporary 
Early Retiree Reinsurance Program. This provision addresses the recent 
erosion in the number of employers providing health coverage to early 
retirees. People in the early retiree age group often face difficulties 
obtaining insurance in the individual market because of advanced age or 
chronic conditions that make coverage unaffordable and inaccessible. 
The Early Retiree Reinsurance Program provides needed financial help 
for employer-based plans to continue to provide valuable coverage to 
plan participants, and provides financial relief to plan participants.
    The Early Retiree Reinsurance Program provides reimbursement to 
participating sponsors for a portion of the costs of providing health 
coverage to early retirees (and eligible spouses, surviving spouses, 
and dependents of such retirees). Section 1102(a)(2)(B) of

[[Page 24451]]

the Affordable Care Act defines ``employment-based plan'' to include a 
group benefits plan providing health benefits that is maintained by 
private employers, State or local governments, employee organizations, 
voluntary employees' beneficiary association, a committee or board of 
individuals appointed to administer such plan, or a multiemployer plan 
(as defined by Employee Retirement Income Security Act or ERISA). 
Section 1102 does not differentiate between health benefits provided by 
self-funded plans or through the purchase of insurance.
    Section 1102(a)(1) requires the Secretary of HHS (the Secretary) to 
establish the program within 90 days of enactment of the law, which is 
June 21, 2010. We expect this program to be established by June 1, 
2010. By law, the program will expire on January 1, 2014. Funding for 
the program is limited to $5 billion.

II. Provisions of the Interim Final Rule

    This regulation establishes 45 CFR part 149, ``Requirements for the 
Early Retiree Reinsurance Program.'' This part implements section 1102 
of the Affordable Care Act, which requires the Secretary to provide 
reimbursement to sponsors with certified plans for a portion of the 
cost of health benefits for early retirees and their spouses, surviving 
spouses and dependents, provided funds remain available. In part 149, 
we established new subparts A through H. These new subparts set forth 
the framework for implementing the Early Retiree Reinsurance Program 
effective June 1, 2010 through January 1, 2014. We are implementing the 
statutory requirements of the program as follows:

A. General Provisions (Subpart A)

1. Purpose and Basis (Sec.  149.1)
    In this section, we provide the statutory authority for 
promulgating the regulation.
2. Definitions (Sec.  149.2)
    Section 1102(a) of the Affordable Care Act (also referred to as the 
``statute'') provides definitions for three specific terms. One of 
these terms is the term ``employment-based plan'', which the statute 
defines as a ``group benefits plan providing health benefits'' that 
satisfies certain conditions. The statute at section 1102(a)(1) also 
specifies that under the program, the Secretary shall provide 
reimbursement to participating employment-based plans. However, a plan 
typically constitutes merely an arrangement to provide benefits, as 
opposed to a discrete entity to which payments can be directly made or 
sent. Thus, the regulation interprets this provision to require 
reimbursement under the program to a ``sponsor,'' and defines sponsor 
as that term is defined in regulations promulgated for the Retiree Drug 
Subsidy (RDS) Program at 42 CFR 423.882. That definition defines 
sponsor as a plan sponsor as defined in section 3(16)(B) of ERISA, 29 
U.S.C. 1002(16)(B), except that, in the case of a plan maintained 
jointly by one employer and an employee organization and for which the 
employer is the primary source of financing, the term means the 
employer. By defining the term sponsor in the regulation, and by 
specifying that sponsors are the entities that apply for and get 
reimbursed under the program, we believe we are achieving two important 
objectives: (1) We are ensuring that program reimbursements can be made 
to actual existing entities, and (2) We are promoting consistency with 
the RDS Program. This second objective is critical, as we believe that 
many of the entities that will apply for the Early Retiree Reinsurance 
Program are entities that participate in the RDS Program, as these two 
programs have many similarities. Thus, the common use of terms across 
the two programs will minimize confusion, and we believe will help to 
maximize program participation.
    Although we drafted the regulation to specify that a sponsor is the 
entity that would be directly paid under the program, there is still a 
need to use the term ``employment-based plan'' in the regulation. This 
is because the statute envisions that the entity receiving 
reimbursement have a benefits arrangement (that is, a plan) in place 
that satisfies certain criteria (for example, implements programs and 
procedures to generate cost-savings with respect to participants with 
chronic and high-cost conditions.) The statute provides a definition of 
``employment-based plan'' as constituting a ``group benefits plan'' 
that has certain characteristics. Those characteristics (for example, 
must be maintained by one or more employers, can include a 
multiemployer plan as defined in section 3(37) of ERISA) borrow 
components of the ERISA definition of a ``group health plan''. For that 
reason, we define ``employment-based plan'' as meaning a ``group health 
plan'' as defined in the RDS regulations at 42 CFR 423.882 that 
provides health benefits to early retirees, but excludes Federal 
governmental plans. (Unlike the RDS statutory provisions, the Early 
Retiree Reinsurance Program's statutory provisions do not expressly 
include Federal plans). The RDS regulatory definition of ``group health 
plan'' largely tracks the ERISA definition. For reasons previously 
stated, we believe it is beneficial to use the same or similar 
terminology, and have the same or similar requirements for the RDS 
Program and the Early Retiree Reinsurance Program, when appropriate. 
Because the RDS program requires a sponsor to have a benefits 
arrangement that constitutes a group health plan, we believe the 
benefits arrangement must be in place for purposes of the Early Retiree 
Reinsurance Program (that is, an employment-based plan), should also be 
a group health plan (that is, an employment-based plan, defined 
generally as group health plan). Generally, the regulation uses the 
term ``sponsor'' when referring to the entity that applies for and 
receives reimbursement under the program, and uses the term 
``employment-based plan'' when discussing the health benefits 
arrangement the sponsor must offer.
    In addition to introducing the definition of ``sponsor'', the 
regulation also defines other terms that are not defined in the 
statute, including the term ``authorized representative.'' We define 
this term to mean an individual with legal authority to sign and bind a 
sponsor to the terms of a contract or agreement. This term is important 
in the regulatory provision relating to the program application and the 
plan sponsor agreement. The regulation requires an authorized 
representative to sign a plan sponsor agreement as part of the program 
application.
    We use the term ``benefit option'' in the regulation when 
discussing the fact that there is only one cost threshold and cost 
limit per early retiree per plan, regardless of how many benefit 
options within that plan the early retiree is enrolled in, in a given 
plan year. We define ``benefit option'' as a particular benefit design, 
category of benefits, or cost-sharing arrangement offered within an 
employment-based plan.
    The statute at section 1102(b) requires that an employment-based 
plan be certified by the Secretary, and submit an application for the 
program, before the plan can participate in the program. As stated 
above, under this regulation, the entity that participates in (that is, 
applies for) the program, is the plan sponsor. We will not approve an 
application unless the sponsor, and the employment-based plan, meet 
their respective requirements under the statute and the regulation. 
Therefore, we define the term ``certified'' as meaning that the sponsor 
and its employment-

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based plan or plans meet the requirements of this part and the 
sponsor's application to participate in the program has been approved 
by the Secretary. All elements of this requirement must be satisfied 
before a sponsor can participate in the program.
    The statute at section 1102(b)(2) requires employment-based plans 
to have programs and procedures in place to generate cost savings for 
participants with chronic and high-cost conditions. We define the term 
``chronic and high-cost condition'' to mean a condition for which 
$15,000 or more in health benefit claims are likely to be incurred 
during a plan year by any one participant. Sponsors participating in 
this program are likely to be sponsors that have offered the applicable 
plan in previous years. Sponsors, therefore, will recognize which 
conditions are likely to result in $15,000 in claims in a plan year for 
one participant. While we expect that the employment-based plans will 
have programs and procedures in place that have generated or have the 
potential to generate savings for participants with these conditions, 
which may vary across plans, geographic regions and due to other 
factors, we do not expect plans to have programs and procedures in 
place for all conditions for which claims are likely to exceed $15,000 
in a plan year for a plan participant. To require that plans have 
programs and procedures in place to address all chronic and high-cost 
conditions could exclude many sponsors from participating in the 
program and could be overly restrictive. We expect sponsors to take a 
reasonable approach when identifying such conditions and selecting 
programs and procedures to lower the cost of care, as well as improve 
the quality of care, for such conditions.
    We define ``claim'' or ``medical claim'' in order to lay out in 
more detail what is required on the claim to be reimbursed under this 
program, and to note that the terms ``claim'' or ``medical claim'' 
include medical, surgical, hospital, prescription drug and other types 
of claims as determined by the Secretary. The statute at section 
1102(a)(2)(A) defines ``health benefits'' as medical, surgical, 
hospital, prescription drug, and such other benefits as shall be 
determined by the Secretary whether self-funded, or delivered through 
the purchase of insurance or otherwise. The regulatory definition of 
``health benefit'' clarifies that such benefits include benefits for 
the diagnosis, cure, mitigation, or prevention of physical or mental 
disease or condition with respect to any structure or function of the 
body. (As discussed below, health benefits do not include benefits 
specified at 45 CFR 146.145(c)(2) through (4)). Therefore, per the 
Secretary's authority to determine benefits for which claims may be 
submitted, the terms ``claim'' or ``medical claim'' include claims for 
the benefits set out in the definition of ``health benefit.'' This list 
of benefits, for which the Secretary has the authority to determine are 
appropriate under the program, is not exhaustive.
    The statute at section 1102(a)(2)(C) defines ``early retirees'' as 
individuals who are age 55 and older but are not eligible for coverage 
under Medicare, and who are not active employees of an employer 
maintaining, or currently contributing to, the employment-based plan or 
of any employer that has made substantial contributions to fund such 
plan. We have incorporated this definition into the regulation, and we 
clarified that spouses, surviving spouses, and dependents are also 
included in the definition of early retiree. This definition 
accommodates the language in section 1102(a)(1) of the statute, which 
states that reimbursement under the program is made to cover a portion 
of the costs of providing health coverage to early retirees and to the 
eligible spouses, surviving spouses, and dependents of such retirees. 
This definition accommodates the language in section 1102(a)(1) in such 
a way that reimbursement can be made under the program for the health 
benefit costs of eligible spouses, surviving spouses, and dependents of 
such retirees, even if they are under the age of 55, and/or are 
eligible for Medicare. We believe the statute can reasonably be 
interpreted to provide reimbursement for the health benefit costs of 
such individuals. This interpretation will provide additional 
assistance to sponsors, which will encourage them to continue to offer 
coverage to the spouses, surviving spouses, and dependents of early 
retirees.
    The regulatory definition of early retiree also clarifies that the 
determination of whether an individual is not an active employee is 
made by the sponsor in accordance with the rules of its plan. However, 
an individual is presumed to be an active employee if, under the 
Medicare Secondary Payer (MSP) rules in 42 CFR 411.104 and related 
Centers for Medicare & Medicaid Services' (CMS) guidance, the person is 
considered to be receiving coverage by reason of current employment 
status. The presumption would apply whether or not the MSP rules 
actually apply to the sponsor. We also clarify that a sponsor may treat 
a person receiving coverage under its employment-based plan as a 
dependent in accordance with the rules of its plan, regardless of 
whether that person constitutes a dependent for Federal or state tax 
purposes. These two clarifications are also found in the RDS regulation 
in the definition of ``qualifying covered retiree,'' under which, as 
that term implies, an individual must be a retiree. As previously 
stated, we believe that regulatory terminology and concepts should be 
the same or similar between the RDS Program and the Early Retiree 
Reinsurance Program when appropriate, and we believe it is appropriate 
when determining whether an individual is a retiree under each program. 
Finally, in the regulatory definition of ``early retiree,'' we also 
clarify that for purposes of this definition, the phrase ``an employer 
maintaining or currently contributing to the employment-based plan or 
any employer that has made substantial contributions to fund such 
plan,'' which is also found in the statutory definition of ``early 
retiree,'' means a plan sponsor. Under ERISA (and the RDS Program 
regulation), a plan sponsor is an entity (such as an employer) that 
establishes or maintains a group health plan. Thus, because this part 
of the statutory definition of early retiree in the Affordable Care Act 
speaks to the relationship between the sponsor (for example, the 
employer) and the employment-based plan, we believe this clarification 
is appropriate.
    Section 149.610 of this regulation permits the Secretary to reopen 
and revise a reimbursement determination upon the Secretary's own 
motion or upon the request of a sponsor within 1 year of the 
reimbursement determination for any reason, within 4 years of the 
reimbursement determination for good cause, or at any time in instances 
of fraud or similar fault. These three standards are the same 
regulatory standards that apply with respect to CMS' ability to reopen 
or revise an initial or reconsidered determination under the RDS 
Program, at 42 CFR 423.890(d). The RDS regulatory provision provides 
examples of what constitutes ``good cause,'' and again, because of the 
similarity between that program and the Early Retiree Reinsurance 
Program, we believe those examples would be appropriate for the latter. 
Therefore, similar to the RDS regulation, this regulation provides the 
following examples of good cause: (1) New and material evidence exists 
that was not readily available at the time the reimbursement 
determination was made, (2) A clerical error in the computation of the 
reimbursement determination was made, or (3) The

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evidence that was considered in making the reimbursement determination 
clearly shows on its face that an error was made. For example, if a 
sponsor receives a post-point-of-sale price concession that was not 
known at the time a reimbursement determination was made, good cause 
may be found and the reimbursement determination may be reopened and 
revised.
    The statute at section 1102(a)(2)(A) defines ``health benefits'' as 
medical, surgical, hospital, prescription drug, and such other benefits 
as shall be determined by the Secretary, whether self-funded, or 
delivered through the purchase of insurance or otherwise. We clarify in 
the regulatory definition that such benefits include benefits for the 
diagnosis, cure, mitigation, or prevention of physical or mental 
disease or condition with respect to any structure or function of the 
body. This is not an exhaustive list. We also specify that health 
benefits do not include certain benefits designated as excepted 
benefits under the regulations implementing the health insurance 
portability provisions of the Health Insurance Portability and 
Accountability Act (HIPAA). Those provisions impose certain 
requirements on group health plans and group health insurance issuers, 
but do not apply those requirements to certain arrangements that 
typically are not part of a major medical plan (that is, excepted 
benefits). For example, long-term care benefits are excepted benefits. 
In the context of the Early Retiree Reinsurance Program, we do not 
believe it would be appropriate to consider health benefits as 
including benefits provided under such arrangements, as we believe the 
best read of the statutory phrase ``medical, surgical, hospital, [and] 
prescription drug'' means such major medical benefits.
    In order to aid stakeholders in understanding when the Secretary 
will make reimbursement to a sponsor, we define the term ``incurred'' 
to mean the point in time when the sponsor, health insurance issuer, 
group health plan or plan participant, or a combination of these or 
similar stakeholders, become responsible for payment of the claim. In 
short, the Secretary will not pay a sponsor until a claim has been 
incurred and paid, as the statute at section 1102(c)(1)(B) specifies 
that claims ``shall be based on the actual amount expended.''
    We define a ``negotiated price concession'' as any direct or 
indirect remuneration that would serve to decrease the costs incurred 
under the employment-based plan. We set out examples of what negotiated 
price concessions are, which include discounts, rebates, coupons, and 
goods in kind. The list at Sec.  149.2, ``Definitions,'' describing 
what may constitute a negotiated price concession is not an exhaustive 
list.
    Because the statute does not use the terms ``early retiree'' and 
``plan participant'' interchangeably, we define the term ``plan 
participant'' to include all enrollees in a plan, including an early 
and other retiree, an early and other retiree's spouse, surviving 
spouse, and dependent, and an active employee and an active employee's 
spouse and dependent.
    The statute at section 1102(c)(1)(B) specifies that claims 
submitted under the program ``shall be based on the actual amount 
expended by the participating employment-based plan involved within the 
plan year'' for the health benefits provided to early retirees and 
eligible spouses, surviving spouses, and dependents. This regulation 
includes a definition of plan year, and defines plan year as the year 
that is designated as the plan year in the plan document of an 
employment-based plan, except that if the plan document does not 
designate a plan year, if the plan year is not a 12-month plan year, or 
if there is no plan document, the plan year is: (1) The deductible or 
limit year used under the plan, (2) the policy year, if the plan does 
not impose deductibles or limits on a 12-month basis: (3) the sponsor's 
taxable year, if the plan does not impose deductibles or limits on a 
12-month basis, and either the plan is not insured or the insurance 
policy is not renewed on a 12-month basis, or (4) the calendar year, in 
any other case. We define this term in such a way to give deference to 
the plan year the sponsor has already established for other purposes. 
However, we balance that deference with our belief that the intent of 
the statute is to calculate reimbursement amounts, and to apply the 
cost threshold and cost limit, to periods of time that are 12 months in 
duration. We believe most sponsors' plan years are in fact 12 months in 
duration.
    The term ``post point-of-sale negotiated price concession'' is 
defined because not all negotiated price concessions occur at or before 
the point of sale. The statute requires negotiated price concessions to 
be excluded from the calculation of reimbursement, which causes 
reimbursement to be based on the actual amounts paid, not an inflated 
amount that may not reflect a price concession. When post point-of-sale 
negotiated price concessions occur they may cause data submitted for 
reimbursement to become inaccurate, resulting in ultimately, an 
inaccurate reimbursement. Once these price concessions are accounted 
for, a sponsor's reimbursement determination may be reopened and 
revised.
    For purposes of brevity, we defined the term ``program'' to mean 
the Early Retiree Reinsurance Program.
    We define the term ``Secretary'' to mean the Secretary of the 
Department of Health & Human Services or the Secretary's designee. We 
include the Secretary's designee in the definition because the 
Secretary will not actually be performing the tasks set out in this 
regulation, but will designate an individual or entity to act on the 
Secretary's behalf.
    The term ``sponsor agreement'' is based on the definition of the 
term in the RDS regulation. The sponsor agreement is basically used to 
ensure that the sponsor and Department are bound to comply with the 
details of the program that appear in the regulation and in other 
guidance, and to address any other points that must be addressed in 
order to implement this program.

B. Requirements for Eligible Employment-Based Plans (Subpart B)

1. General Requirement (Sec.  149.30)
    In this section, we provide the requirements that allow a sponsor 
to be eligible to participate in the Early Retiree Reinsurance Program.
2. Requirements to Participate (Sec.  149.35)
    Section 1102(b)(2)(A) of the Affordable Care Act requires that an 
employment-based plan implement programs and procedures to generate 
cost-savings with respect to participants with chronic and high-cost 
conditions. We interpret this to mean that a plan must have in place 
programs and procedures that have generated or have the potential to 
generate cost-savings for these participants in order to participate in 
the Early Retiree Reinsurance Program, not necessarily that the sponsor 
has to ensure that new programs and procedures are put in place just to 
participate in this program.
    Proper management and treatment of chronic and high-cost conditions 
may be promoted by generating cost-savings for plan participants with 
these conditions because plan participants may be more apt to seek out 
proper and timely treatment and management before a condition becomes 
critical if treatment and management are financially manageable. As an 
example of a program and procedure to generate cost savings for a 
participant with a chronic condition, a sponsor may determine that 
diabetes, if not managed

[[Page 24454]]

properly, is likely to lead to claims in excess of $15,000 for a plan 
year for one plan participant. The sponsor may ensure implementation of 
a diabetes management program that includes aggressive monitoring and 
behavioral counseling to prevent complications and unnecessary 
hospitalization. With respect to generating cost savings for a high-
cost condition, a sponsor may determine that cancer is a high-cost 
condition for which it should generate cost savings. The sponsor may 
ensure that its plan covers all or a large portion of the participant's 
coinsurances or copayments, and/or it could eliminate or reduce the 
plan's deductible for treatment and visits related to the condition. 
Sponsors may choose other chronic and high-cost conditions to address, 
but upon audit the sponsor must be able to demonstrate that its 
programs and procedures have generated or had the potential to generate 
cost savings, consistent with the representations the sponsor made in 
its program application.
    We considered various options of how best to implement this 
provision and developed several options. The first option was to 
further identify which specific conditions meet the chronic condition 
definition and which specific conditions meet the high-cost condition 
definition and identify these specific conditions in sub-regulatory 
guidance to be issued at the time of, or immediately after, the 
issuance of this regulation. Issues that arose with this option 
consisted of:
    (1) How best to define the terms ``chronic and high-cost 
conditions'', which would likely involve a significant amount of data 
analysis. Chronic and high-cost conditions can vary significantly 
across geographic regions, age ranges, and due to other factors. We do 
not think that specifying the chronic and high-cost conditions to be 
addressed could effectively occur within the 90 days allowed for 
establishment of this program; and
    (2) Our belief that the Congress intends this to be an inclusive 
program, not a program that excludes potential sponsors merely because 
they did not develop programs to address the specific conditions we 
might identify in our guidance. Had the Congress narrowly defined the 
types of plans for which sponsors might be reimbursed, we might have 
thought that this program is not an inclusive program. Instead Congress 
defined the term ``employment-based plan'' broadly in the statute at 
section 1102 (a)(2)(B). It defines the term as a ``group benefits plan 
providing health benefits'' as a plan that ``is * * * maintained by one 
or more current or former employers (including without limitation any 
State or local government or political subdivision thereof), employee 
organization, a voluntary employees' beneficiary association, or a 
committee or board of individuals appointed to administer such plan; or 
* * * a multiemployer plan * * * '' Therefore the scope of sponsors 
eligible to receive this reimbursement is extremely broad, which shows 
intent on behalf of Congress to be inclusive.
    The inclusive nature of the program is particularly important 
because this program will involve plans with plan years that began 
before the effective date of the program, as will be discussed below. 
This means that a plan may not have a program in place to address 
certain chronic and high-cost conditions that we may have identified 
after the plan year has started, which would then exclude the sponsor 
from participation in the program. In such cases, sponsors would, in 
effect, be penalized if we identified specific conditions. As stated 
above, chronic and high-cost conditions can vary significantly across 
geographic regions, age ranges, and due to other factors, so we expect 
that sponsors might focus cost-saving programs and procedures on 
conditions that effect enrollees in their plan or plans. Our intent is 
that the regulation takes into account these differences.
    The approach we decided to take was to define the term ``chronic 
and high-cost condition'' as specified in Sec.  149.2--Definitions. 
``Chronic and high-cost condition'' means a condition for which $15,000 
or more in applicable claims are likely to be incurred during a plan 
year by one participant. Therefore, a sponsor must have programs and 
procedures in place that generate or have the potential to generate 
cost savings for plan participants with conditions that are likely to 
generate $15,000 in claims for a plan year, in order to participate in 
this program. We do not require that a sponsor have programs and 
procedures in place to address all conditions that may result in claims 
exceeding $15,000 for one participant in a plan year. The sponsor must 
take a reasonable approach to identifying which conditions it must 
address. We believe this is a reasonable interpretation of the statute 
because it will promote cost savings for participants with chronic and 
high-cost conditions, but due to the approaches' flexibility (that is, 
the fact that sponsors may choose programs and procedures that meet 
this requirement that are applicable to their enrollees) will serve to 
allow as many of the types of sponsors referenced in the definition of 
``employment-based plan'' as possible to become certified to 
participate in the program. Of course, this requirement does not 
supersede requirements in other Federal laws that may apply to programs 
and procedures for chronic and high-cost conditions, such as the 
Americans with Disabilities Act.
    In order to administer this program and to audit the program as 
required by section 1102(d), we are requiring the sponsor to make 
records available for these purposes. For example, when a sponsor is 
audited, the auditors may request a copy of the sponsor's (or the 
sponsor's health insurance issuer or group health plan's, as 
applicable) policies and procedures to detect fraud, waste and abuse, 
and data to substantiate the effectiveness of the policies and 
procedures. Under this provision, the sponsor is required to ensure 
that the applicable policies and procedures are produced.
    We also require that the sponsor have a written agreement with its 
health insurance issuer (as defined in 45 CFR 160.103) or employment-
based plan (as defined in 45 CFR 149.2), as applicable, requiring the 
health insurance issuer or employment-based plan to disclose 
information on behalf of the sponsor to the Secretary. This requirement 
in part exists to accommodate the HIPAA Privacy Rule at 45 CFR part 160 
and subparts A and E of part 164 (``Privacy Rule''). This rule applies 
to ``covered entities,'' which include group health plans (that is, 
employment-based plans) and health insurance issuers, as defined in 45 
CFR 160.103. Third party administrators would be business associates, 
as defined in 45 CFR 160.103, of group health plans. Sponsors would not 
become covered entities by sponsoring a plan. Sponsors typically do not 
perform administrative activities for their group health plans and 
therefore do not have access to the claims information or similar 
protected health information (PHI) we require in this regulation to 
support program reimbursement. Much of the data that we would need to 
support program reimbursements, as outlined above, would be PHI held by 
group health plans, health insurance issuers, or third party 
administrators on behalf of group health plans. The requirement for 
health insurance issuers and employment-based plans to disclose 
information to the Secretary encompasses information created or held by 
Business Associates on behalf of the health insurance issuer or group 
health plan.
    We believe that we have the authority to require the disclosure of 
the PHI in accordance with section 1102(c)(1)(A), which states that a 
participating plan ``shall submit claims for reimbursement

[[Page 24455]]

to the Secretary which shall contain documentation of the actual costs 
of the items and services for which each claim is being submitted.'' 
Additionally, section 1102(d) requires the Secretary to conduct audits 
of claims data submitted by, or on behalf of, sponsors participating in 
the program, to ensure that such plans are in compliance with the 
statute, and this simply cannot be done without mandating disclosure of 
PHI. Thus, covered entities can comply with the mandate (without first 
obtaining specific authorization from individuals) pursuant to ``the 
required by law'' provisions of the Privacy Rule (45 CFR 164.512(a)).
    As noted above, typically group health plans and health insurance 
issuers or third party administrators acting on behalf of group health 
plans, have PHI that the Secretary requires for the submission of 
claims data for reimbursement under the program pursuant to the 
regulations. In these situations, it may be unlawful, under the Privacy 
Rule, for PHI to be shared with the sponsors. This regulation does not 
authorize disclosure of PHI to sponsors. Therefore, for purposes of 
this subpart, the sponsor must have a written agreement with the group 
health plan (that is, the employment-based plan) or health insurance 
issuer, as applicable, regarding disclosure of records, and the plan or 
issuer must disclose to us, on the sponsor's behalf, the information, 
data, documents, and records necessary for the sponsor to comply with 
this program, part, and guidance, at a time and in a manner specified 
by the Secretary. Sponsors of self-funded plans with legal access to 
such data will be able to either provide this data to us themselves or 
have a group health plan or insurer provide the data to us on their 
behalf.
    Section 1102 (c)(6) of the Affordable Care Act requires the 
Secretary to establish procedures to protect against fraud, waste and 
abuse. In order to implement this provision, the Secretary will, for 
example, check the exclusions lists developed by the HHS' Office of the 
Inspector General and the U.S. General Services Administration before 
allowing an entity to participate, or play a role, in the program, and 
will take other steps such as verifying the identities of the early 
retirees for whom claims are being submitted. The Secretary may also 
verify the identities of the individuals associated with the sponsor 
and health insurance issuer, or group health plan, as applicable, and 
will examine claims before reimbursement is made, to ensure, among 
other things, that instances of fraud, waste and abuse are minimized. 
Furthermore, the Secretary will perform audits per section 1102(d) of 
the Affordable Care Act. To aid the Secretary in detecting and reducing 
fraud, waste and abuse, we are requiring that sponsors ensure that 
there are policies and procedures in place to detect and reduce fraud, 
waste and abuse. While the policies and procedures may be maintained by 
the sponsor's health insurance issuer or group health plan, the sponsor 
will have to attest that these policies and procedures are in place in 
the application. The sponsor must comply with requests from the 
Secretary to produce the policies and procedures and any documents or 
data to substantiate the implementation, and the effectiveness, of the 
procedures. We believe we meet the requirements of the statute by 
taking actions to detect and reduce fraud, waste, and abuse, by 
requiring sponsors to have such policies and procedures in place, and 
by requiring a sponsor to produce the policies and procedures upon 
request (such as for the purposes of an audit). If it is found that a 
sponsor committed fraud, waste or abuse, or allowed fraud, waste, and 
abuse to occur under its plan or plans, the Secretary may recoup from 
the sponsor some or all of the reimbursements paid under the program, 
and/or may revoke a sponsor's certification to participate in the 
program. Of course, there are other laws relating to fraud, waste, and 
abuse, with which sponsors and their health insurance issuers or group 
health plans must comply.
3. Application (Sec.  149.40)
    Section 1102(b)(1)(B) requires the sponsor to submit ``an 
application for participation in the program, at such time, in such 
manner, and containing such information as the Secretary shall 
require.'' In order to implement this provision, a sponsor must submit 
one application per plan, and identify the plan year cycle for which 
the sponsor is applying (that is, starting month and day, and ending 
month and day; no year is required). One application must be filed for 
each plan. Filing a different application for each plan will aid in 
tracking the plan as this program progresses to ensure proper 
reimbursement and compliance with program requirements.
    In order to verify the accuracy of the information contained in the 
application, the application will have to be signed by an authorized 
representative of the applicant and the authorized representative will 
have to certify that the information contained in the application is 
true and accurate to the best of the authorized representative's 
knowledge and belief, among other certifications. We use the term 
applicant in this section to refer to any sponsor that has filed an 
application that has not yet been certified under the program. The term 
applicant is used to clarify that the applicant is not entitled to the 
privileges of a certified sponsor, such as the ability to submit a 
reimbursement request or appeal a reimbursement determination. Before a 
sponsor may submit claims and make a reimbursement request, the 
sponsor's application must be approved by the Secretary. Applications 
will be processed in the order in which they are received. Because 
funding for this program is limited, we expect more requests for 
reimbursement than there are funds to pay the requests. Therefore we 
expect an applicant to perform its due diligence when applying, which 
should result in the submission of a complete application upon the 
first submission. Because it is important that applicants submit 
complete applications the first time, we will be providing assistance. 
If an application is incomplete, it will be denied and the applicant 
will have to submit a new application, which will be processed based on 
when the new application is received. If we were to allow an applicant 
to cure defects in the application, it would likely result in an 
extended application process, which would hinder the efficient 
implementation of this program. We must be prepared to exercise our 
authority under section 1102(f) to stop accepting applications based on 
the availability of the $5 billion appropriated for the program. It is 
therefore of paramount importance to applicants that they submit 
complete applications upon their first submission, otherwise there may 
not be an opportunity to submit a new and complete application.
    An application for a given plan does not have to be submitted each 
year. To require a separate application for a plan each year would only 
complicate the process and would place unneeded burden on applicants 
and the Secretary. The application will request the plan year cycles 
(that is, the start month and day and the end month and day; no year 
required), which for our purposes will provide the information we need 
to calculate reimbursement based on reimbursement requests. We do not 
think that an annual application approval is required. Once a plan is 
certified, the application approved, and the sponsor continues to meet 
the requirements of the statute, this part,

[[Page 24456]]

and applicable guidance, the plan and sponsor will continue to be 
certified and the application approved.
    We set out in Sec.  149.40 what we believe we will need in order to 
approve an application. The application must include the applicant's 
Tax Identification Number, the applicant's name and address, and 
contact information for the applicant. To ensure compliance with the 
requirements of the statute, an applicant must provide a summary in its 
application of how it will use the reimbursement to meet the 
requirements of the program, including how it will use the 
reimbursement to reduce plan participant or sponsor costs, or any 
combination of these costs, and its plans to implement programs and 
procedures to generate savings for plan participants with chronic and 
high-cost conditions. Because the statute requires that the funds 
dispersed under this program not be used as general revenue, we are 
requiring sponsors to maintain the level of effort in contributing to 
support their applicable plan or plans. Otherwise, sponsors might 
circumvent the prohibition on using the program funds as general 
revenue by using, dollar for dollar, sponsors' funds not otherwise used 
for health benefits due to the program reimbursement, as general 
revenue. We expect that sponsors will use the reimbursement to pay for 
increases in, for example, the sponsor's premium, or increases in other 
health benefit costs (or to reduce plan participants' costs). Therefore 
the sponsor's summary of how it will use the program's reimbursement 
must also explain how the reimbursement will be applied to maintain the 
sponsor's level of effort in contributing to support the applicable 
plan. We do not expect a sponsor to explain every detail of their 
programs and procedures and use of program funds but to give us an idea 
of how it will meet these requirements. We understand that these 
submissions may vary because applicants' situations with respect to 
their plans may vary widely. For example, reimbursements received in 
the first year that a sponsor participates may be applied the second 
year of participation because many plans will have already been 
negotiated, agreed to, and implemented upon the effective date of this 
regulation. Other sponsors may have more flexibility to use these 
reimbursements immediately to lower costs.
    We will also require applicants to project their reimbursement 
amounts for the first two plan-year cycles in the application so that 
we can project total reimbursement amounts. To help us with our funding 
projections, we will need sponsors to identify specific projected 
reimbursement amounts for each of the two plan-year cycles. This 
assessment will help us determine if and when we should stop accepting 
applications due to funding limitations. We will also require 
applicants to identify all benefit options under the employment-based 
plan that any early retiree, for whom the applicant may receive program 
reimbursement, may be claimed. This is necessary for us to track where 
funds are being spent and to otherwise manage the program. We will also 
require sponsors to attest that there are fraud, waste and abuse 
policies and procedures in place.
    As is required in the RDS program, as a condition of participation, 
the sponsor will be required to sign a plan sponsor agreement, which 
will include certain assurances made by the sponsor. Included in this 
agreement will be a provision stating that reimbursement is based on 
information and data submitted by the sponsor and if the information 
and data are found to be inaccurate, incomplete or otherwise incorrect, 
the Secretary may reopen and revise a reimbursement determination, 
including recouping reimbursement from the sponsor. The sponsor will be 
required to specifically agree to comply with the terms and conditions 
for participation in the program, and acknowledge that information in 
the application is being provided for the purpose of obtaining federal 
funds. This list of application requirements is not exhaustive. Due to 
the compressed timeline for implementing this program, we may need to 
request additional information in the application.
    Finally, we allow the Secretary to reopen a determination under 
which an application had been approved or denied so that if it is later 
determined that a sponsor committed fraud or otherwise was untruthful 
in the application, the Secretary can revisit the determination.
4. Consequences of Non-Compliance, Fraud or Similar Fault (Sec.  
149.41)
    To clarify the actions the Secretary may take in instances when 
non-compliance, fraud, waste, and abuse, or similar fault are found, we 
include a regulation that states that failure to comply with the 
requirements of this part, or if fraud, waste, and abuse, or similar 
fault are found, the Secretary may recoup or withhold funds, terminate 
or deny an application, or take any combination of these actions. We 
include termination of an application because, depending upon the 
specific situation involved, if it is found that a sponsor committed 
fraud or otherwise was untruthful in the application, the determination 
to approve an application can be revised under Sec.  149.40. We believe 
it is important to set out what actions the Secretary may take so that 
sponsors are aware of the ramifications of non-compliance, fraud, waste 
and abuse, or similar fault. This regulation does not, of course, 
supersede other Federal laws or consequences of non-compliance fraud, 
waste and abuse, or similar fault.
5. Funding Limitation (Sec.  149.45)
    Section 1102(f) authorizes the Secretary to stop accepting 
applications based on the availability of funds. We clarify that a 
reimbursement request made on behalf of a certified plan may also be 
denied, in whole or in part, due to limitation of funds. Determinations 
based on funding limitations are final, binding and cannot be appealed, 
because any appeal, even if a sponsor is successful, would not result 
in reimbursement to a sponsor. Once the program funds are exhausted 
there will be no funds to reimburse a sponsor that may have been 
successful upon appeal.

C. Reinsurance Amounts (Subpart C)

1. Amount of Reimbursement (Sec.  149.100)
    The statute at section 1102(c) requires the Secretary, upon receipt 
of a valid claim for health benefits, to make reimbursement in an 
amount of 80 percent of the portion of the health benefit costs (net of 
negotiated price concessions) attributable to the claims that exceed 
$15,000, but are below $90,000. We interpret the statute to mean that 
cumulative health benefits incurred in a given plan year and paid for a 
given early retiree, as defined in Sec.  149.2, that fall between those 
amounts will receive reimbursement, rather than reimbursement being 
made only for discrete health benefit items or services whose 
reimbursement total falls between those amounts. This interpretation 
will get much needed program funds to plan sponsors more quickly. The 
statute also specifies that in determining the amount of claims, the 
costs paid by the early retiree (or his or her spouse, surviving 
spouse, or dependent) in the form of deductibles, copayments, or 
coinsurance shall be included in the amounts paid by the participating 
employment-based plan. As an initial matter, we clarify in the 
regulation that reimbursement will be made under the program only for 
claims that are incurred during the applicable plan year, and paid.
    The regulation refers to the $15,000 lower limit and the $90,000 
ceiling as

[[Page 24457]]

the ``cost threshold'' and ``cost limit'', respectively, and indicates 
that reimbursement under the program is calculated by first determining 
the costs for health benefits net of negotiated price concessions, 
within the applicable plan year for each early retiree, and then 
subtracting amounts below the cost threshold and above the cost limit 
within the applicable plan year for each early retiree. We also clarify 
that for purposes of determining the amounts below the cost threshold 
and above the cost limit for any given early retiree, all costs for 
health benefits paid by the plan or by the early retiree for all 
benefit options the early retiree is enrolled in with respect to a 
given certified employment-based plan for a given plan year, will be 
combined. We make this clarification because the statute, at section 
1102(c)(3), specifies that ``a claim submitted by a participating 
employment-based plan shall not be less than $15,000 nor greater than 
$90,000'' (emphasis added). For example, an early retiree is 
simultaneously enrolled in two different benefit options within one 
group health plan--Option 1 as a retiree, and Option 2 as a spouse of a 
retiree. For purposes of determining when the early retiree satisfies 
the cost threshold, all claims incurred and paid for that early retiree 
by both benefit options within the applicable plan year, will be 
counted. The claims for that early retiree under each benefit option 
will not be separately counted. For purposes of determining if and when 
the early enrollee has satisfied the cost limit, the same principle 
applies. In other words, within one employment-based plan for a given 
plan year, there is one threshold limit, and one cost limit, per early 
retiree.
    We also indicate that the reimbursement formula specified in the 
regulation applies to insured plans as well as self-funded plans, and 
that with respect to insured plans, costs for health benefits means 
costs the insurer and the early retiree pay for health benefits net of 
negotiated price concessions the insurer receives for health benefits. 
Thus, for insured plans, the amount of premium the sponsor pays (and 
the amount of premium contribution the early retiree pays) is 
irrelevant for purposes of calculating reimbursement under the program. 
We believe this is the correct interpretation because section 
1102(c)(1)(A) states that claims for reimbursement must ``contain 
documentation of actual costs of items and services * * *.'' Premiums 
are not costs for items and services.
2. Transition (Sec.  149.105)
    The program becomes effective June 1, 2010. We carefully considered 
whether to allow sponsors to participate in the program for plan years 
that ended before the program's effective date, but decided that such 
an approach would seem inconsistent with the program's effective date. 
We also considered whether to permit sponsors to participate only for 
plan years that start on or after the program's effective date, but 
decided that such an approach would arbitrarily favor sponsors with 
plan years that start soon after June 1, 2010. Therefore, we decided to 
allow sponsors to apply for plan years that start before June 1, 2010, 
provided they end after that date (for example, calendar year 2010 
plans).\1\ This raised the question of how claims incurred during such 
a plan year, but before June 1, 2010, would be dealt with under the 
program. Under one approach considered, any such claims would count 
toward the cost threshold, and any such claims exceeding the threshold, 
but below the cost limit, would be eligible for program reimbursement. 
We did not adopt that approach, as it arguably would unfairly favor 
sponsors with plan years that started significantly before the 
program's effective date, especially in light of the program's limited 
funding.
---------------------------------------------------------------------------

    \1\ Sponsors can also apply for plan years that start after June 
1, 2010.
---------------------------------------------------------------------------

    We decided upon the following approach. For claims incurred before 
June 1, 2010, the amount of such claims up to $15,000 count toward the 
cost threshold and the cost limit. The amount of claims incurred before 
June 1, 2010 that exceed $15,000 are not eligible for reimbursement and 
do not count toward the cost limit. The reinsurance amount to be paid 
is based solely on claims incurred on and after June 1, 2010, and that 
fall between the cost threshold and cost limit for the plan year. As an 
example, for a plan with a plan year that began July 1, 2009, with an 
end date of June 30, 2010, with an early retiree for which it has spent 
$120,000 in health benefit claims before June 1, 2010, and it then 
spends another $30,000 in health benefit claims on the early retiree 
between June 1, 2010 and June 30, 2010, the sponsor would receive 
credit for $15,000 in claims incurred before June 1 and receive 
reimbursement of 80 percent of the $30,000 (for the claims incurred 
after June 1, 2010), or $24,000. We believe this is a reasonable 
approach because it provides as much relief as possible as soon as 
possible to sponsors, while giving meaning to the effective date of the 
program. A sponsor should therefore not submit claims above the $15,000 
cost threshold that were incurred before June 1, 2010, for 
reimbursement, as submission of such claims is outside the scope of the 
regulation. Also, to submit these claims for reimbursement will make 
the reimbursement process more complex than it needs to be.
3. Negotiated Price Concessions (Sec.  149.110) and Cost Threshold and 
Cost Limit (Sec.  149.115)
    Section 1102(c)(1)(B) states that any negotiated price concessions 
obtained by an employment-based plan with respect to a health benefit 
must be reflected in claims submitted for program reimbursement. We 
recognize that sponsors and insurers sometimes do not receive certain 
negotiated price concessions until after payment is made, and in many 
cases, after the plan year during which the claim is incurred and paid, 
has ended. For example, this is typically the case with prescription 
drug rebates. Thus, we specify in the regulation that sponsors must 
disclose such ``post-point-of-sale'' negotiated price concessions, in a 
form and manner to be specified by the Secretary. We expect to specify 
the form and manner of such disclosures in future guidance. This will 
ensure that sponsors ultimately submit accurate claims data, and thus 
ultimately receive accurate reimbursement.
    Finally, the statute indicates that the $15,000 and $90,000 figures 
shall be adjusted each fiscal year based on the percentage increase in 
the Medical Care Component of the Consumer Price Index for all urban 
consumers (rounded to the nearest multiple of $1,000) for the year 
involved. We specify in the regulations that for plan years starting on 
or after October 1, 2011, the figures will be so adjusted.

D. Use of Reimbursements (Subpart D)

Use of Reimbursements (Sec.  149.200)
    Section 1102(c)(4) requires that the reimbursement ``shall be used 
to lower costs for the plan. Such payments may be used to reduce 
premium costs for an entity'' receiving a reimbursement or to reduce 
premium contributions, co-payments, deductibles, co-insurance, or other 
out-of-pocket costs for plan participants. We encourage sponsors to use 
their reimbursement under the program for both of the following 
purposes: (1) To reduce the sponsor's health benefit premiums or health 
benefit costs, and (2) To reduce health benefit premium contributions, 
co-payments, deductibles, coinsurance, or

[[Page 24458]]

other out-of-pocket costs, or any combination of these costs, for plan 
participants. We expect that sponsors will continue to provide at least 
the same level of contribution to support the applicable plan, as it 
did before this program. For example, for a sponsor that pays a premium 
to an insurer, if the premium increases, program funds may be used to 
pay the sponsor's share of the premium increase from year to year, 
which reduces the sponsor's premium costs. Section 1102(c)(4) sets 
forth the requirements for use of reimbursements under this section and 
envisions a role for the Secretary in developing a mechanism to monitor 
the appropriate use of such reimbursements. Additional information 
about this mechanism will be disseminated as it is developed.
    The statute does not appear to use the terms ``early retiree'' and 
``plan participants'' interchangeably. Therefore, we interpret this 
provision to mean that a sponsor may only receive program funds for 
claims of early retirees or their spouses, surviving spouses or 
dependents, but the funds may be used to lower health benefit costs for 
all participants in the plan, including retirees, and their spouses and 
dependents, and active employees and their spouses and dependents. At 
Sec.  149.200 (b), we clarify the statutory prohibition on using the 
funds as general revenue of the sponsor.

E. Reimbursement Methods (Subpart E)

1. General Reimbursement Rules (Sec.  149.300), Timing (Sec.  149.310), 
Reimbursement Conditioned Upon Available Funds (Sec.  149.315), 
Universe of Claims That Must Be Submitted (Sec.  149.320), Requirements 
for Eligibility of Claims (Sec.  149.325), and Content of Claims (Sec.  
149.330)
    Section 1102(c)(1) of the Affordable Care Act states that a 
participating employment-based plan shall submit claims for 
reimbursement to the Secretary which shall contain documentation of the 
actual costs of the items and services for which each claim is being 
submitted. As noted above, we define ``claim'' as documentation 
specifying the health benefit provided, the provider or supplier, the 
incurred date, the individual for whom the health benefit was provided, 
the date and amount of payment net any known negotiated price 
concessions, and the employment-based plan and benefit option under 
which the health benefit was provided. The terms ``claim'' or ``medical 
claim'' include medical, surgical, hospital, prescription drug and 
other such claims as determined by the Secretary. We clarify in the 
regulation that claims for benefits for the diagnosis, cure, 
mitigation, or prevention of physical or mental disease or condition 
with respect to any structure or function of the body, may be filed. 
This clarification is not an exhaustive list of claims that the 
Secretary may determine are appropriate.
    The regulation also specifies that claims cannot be submitted for a 
given plan year until the application that is associated with the claim 
and that references the applicable plan year cycle has been approved. 
With respect to a given early retiree, claims cannot be submitted until 
the early retiree's total paid costs for health benefits incurred for 
the plan year exceed the applicable cost threshold. Once that threshold 
has been reached, claims can be submitted, but they must include all 
claims below the applicable cost threshold for the plan year in order 
to verify that the cost threshold has been met. Claims must be 
submitted based on the amounts actually paid, which may include the 
amounts paid by the early retiree. Once the cumulative claims of an 
early retiree, as defined in Sec.  149.2, exceed $90,000 for a plan 
year, a sponsor should not submit claims above this claims limit for 
that early retiree because no reimbursement will be paid on these 
claims.
2. Documentation of the Actual Cost of Medical Claims Involved (Sec.  
149.335), Rule for Insured Plans (Sec.  149.340), and Use of 
Information Provided (Sec.  149.345)
    All claims submissions must include a list of early retirees for 
whom claims are being submitted. Both the documentation of actual costs 
of claims and the list of early retirees must be submitted in a form 
and manner to be specified by the Secretary. Claims submissions will be 
processed on a first-in, first-out basis until program funding is 
expended.
    We also specify that with respect to insured plans, the claims and 
the list of early retirees can be submitted directly to the Secretary 
by the insurer.
    In order for a sponsor to receive credit for the cost-sharing 
amounts paid by the early retiree or the early retiree's spouse, 
surviving spouse or dependent, the sponsor must provide prima facie 
evidence that the early retiree or the early retiree's spouse, 
surviving spouse or dependent, paid his or her portion of the costs. 
Such evidence may include an actual payment receipt. If a sponsor 
cannot provide prima facie evidence, it may receive credit under the 
program only for the portion of the claim the sponsor actually paid.
    There may be instances when a sponsor contracts with, for example, 
a staff-model health maintenance organization, that either has its own 
provider(s) on-staff or pays providers a capitated payment to care for 
plan participants. In these instances, claims might not ordinarily be 
produced. However, in order for the Secretary to calculate 
reimbursement under this program for such sponsors, the sponsor will be 
required to ensure that the insurer submit the information required in 
a claim as specified in Sec.  149.330 and Sec.  149. 335. The 
information submitted by the insurer must be reasonable in light of the 
specific market that the insurer is serving.
3. Maintenance of Records (Sec.  149.350)
    The regulations also specify how the Secretary may use the 
information collected for purposes of the program, and the records 
maintenance requirements that apply to the sponsor. The specified 
records must be maintained for 6 years after the expiration of the plan 
year in which the costs were incurred, or longer if otherwise required 
by law. The sponsor must require its health insurance issuer or 
employment-based health plan, as applicable, to maintain and produce 
upon request records to satisfy the maintenance of records 
requirements.

F. Appeals (Subpart F)

1. Appeals (Sec.  149.500)
    Section 1102(c)(6) of the Affordable Care Act requires the 
Secretary to establish an appeals process to permit sponsors to appeal 
a determination made by the Secretary with respect to claims submitted 
under the program. Due to the limited funding and temporary nature of 
the program, we have established a one-step appeal process. A sponsor 
may appeal directly to the Secretary within 15 calendar days of receipt 
of the determination at issue. Section 149.500 sets out what we 
consider to be an adverse reimbursement determination, which is a 
determination relating to the amount of reimbursement paid under the 
program.
2. Content of Request for Appeal (Sec.  149.510)
    The request for appeal must specify the findings or issues with 
which the sponsor disagrees and the reasons for the disagreements. The 
request for appeal may include supporting documentary evidence the 
sponsor wishes the Secretary to consider. Essentially the sponsor must 
provide the Secretary with its issues and arguments and any supporting 
documentation that it has to support its

[[Page 24459]]

arguments. The Secretary may accept subsequent supporting documentation 
if, for example, the sponsor did not have time during the 15-day window 
to perform a comprehensive data analysis of the issue. It would be 
helpful in the request for appeal if the sponsor notes that further 
information will be provided to support the request for appeal and a 
date by which the information will be received by the Secretary.
3. Review of Appeals (Sec.  149.520)
    The regulation sets out generally the process the Secretary will 
use when reviewing the appeal and clarifies that the Secretary's 
decision will be final and binding, unless fraud or similar fault are 
involved. The Secretary will not accept oral argument or oral 
testimony, either in person or on the telephone.
    If all or part of a reimbursement request is denied based on the 
unavailability of funds, the sponsor may not appeal because an appeal 
would serve no purpose. If funds are exhausted, there will be no funds 
to reimburse a sponsor if it is found that the sponsor should otherwise 
be eligible for reimbursement. Allowing an appeal when funds are 
exhausted only serves to add burden to sponsors that have received an 
adverse determination, because, if we allow such an appeal, an 
aggrieved sponsor may feel that it must appeal in order to exhaust its 
remedies and to protect its interests. Once the funds for the program 
are exhausted, there is no interest for the sponsor to protect because 
there will be no chance of reimbursement, even upon a successful 
appeal. It will also serve to increase the Secretary's burden because 
the Secretary will have to process and respond to each of these 
appeals, when there would be no possibility of a reimbursement 
adjustment in favor of the sponsor.
    The Secretary will inform the sponsor and the applicable HHS 
designee of the Secretary's decision. Because time is of the essence 
with respect to funding, we do not specify how the Secretary will 
inform these stakeholders of the decision because it may be in writing, 
via electronic means or orally. The response process will be further 
reviewed to ensure that stakeholders receive appropriate notice of a 
decision. Of course, we do specify that if the sponsor requests a 
written response, the Secretary will provide a written response.

G. Disclosure of Data Inaccuracies (Subpart G)

1. Sponsor's Duty To Report Data Inaccuracies (Sec.  149.600)
    Claims submitted for reimbursement may change after the 15-day 
appeal-request period has expired. For example, if a provider reverses 
a claim after the appeal-request period has expired, data would need to 
be updated to reflect the reversal. However, in order to make accurate 
reimbursements (reopen and revise reimbursement determinations that 
have already been made), sponsors are required to submit accurate data 
for reimbursement purposes. We understand that claims may be reversed 
or otherwise altered and that data that was accurate when submitted for 
reimbursement under the program may become inaccurate. Furthermore, 
reimbursement under this program is based on claims that are net of 
negotiated price concessions. Because negotiated price concessions 
include post-point-of-sale price concessions, data submitted for 
reimbursement may become inaccurate once the price concessions are 
finalized for a given plan year.
    We do not believe it is necessary to require a sponsor to submit a 
formal appeal under Sec.  149.500 to the Secretary merely because data 
changes due to the natural course of business. Also, we realize that 
certain changes in data due to the normal course of business might not 
become evident to a sponsor within 15 days after a reimbursement 
determination. Therefore, we are establishing a process that will give 
sponsors the ability to update us on any data inaccuracies and will 
allow us to reopen and revise a reimbursement determination as 
necessary, based on the updated data. We believe this would be the most 
efficient way to administer this program, particularly because of the 
limited nature of the program funds and the uncertain length of time 
that an appeal to the Secretary may involve.
2. Secretary's Authority To Reopen and Revise Reimbursement 
Determination Amounts (Sec.  149.610)
    While the details of this process will be developed in sub-
regulatory guidance, we state that the Secretary may reopen and revise 
a reimbursement determination upon its own motion or upon the request 
of a sponsor, within 1 year of a reimbursement determination, for any 
reason, within 4 years of a reimbursement determination for good cause, 
or at any time in instances fraud or similar fault. We define the term 
``good cause'' in Sec.  149.2, and discuss in the regulation what we 
believe is not good cause for revising the reimbursement. This 
regulation tracks the language in the RDS and Part D reconciliation 
reopening regulations at Sec.  423.890 and Sec.  423.346, respectively.
    We specify in this section that the Secretary may reopen and revise 
a reimbursement determination on the Secretary's own motion. If the 
Secretary becomes aware that a reimbursement determination was made 
based upon inaccurate data, this will allow the Secretary to reopen and 
revise the reimbursement determination without the sponsor having to 
make a request. Reimbursement determinations may be reopened and 
revised to pay out more funds to a sponsor assuming such funds exist or 
to recoup funds that were already paid, or to withhold funds from a 
future reimbursement to offset a sponsor's liability.

H. Change of Ownership Requirements (Subpart H)

1. Change of Ownership Requirements (Sec.  149.700)
    We include in this regulation requirements for a sponsor to provide 
the Secretary with advance notice of any change of ownership of the 
sponsor. Complying with this requirement is critically important, as it 
helps to ensure that program reimbursement is being made only to 
legitimate entities, and only to such entities that are actually 
complying with the requirements of the program. The requirements mirror 
the change of ownership requirements that are found in the RDS 
regulation, which we believe are appropriate for the Early Retiree 
Reinsurance Program, in light of the fact that we expect many sponsors 
to participate in both programs. Complying with the change of ownership 
requirements is especially critical with respect to the Early Retiree 
Reinsurance Program, in light of the program's limited funding.
    The regulations define a change of ownership as any of the 
following:
    (1) The removal, addition, or substitution of a partner, unless the 
partners expressly agree otherwise as permitted by applicable state 
law.
    (2) Transfer of all or substantially all of the assets of the 
sponsor to another party.
    (3) The merger of the sponsor's corporation into another 
corporation or the consolidation of the sponsor's organization with one 
or more other corporations, resulting in a new corporate body.
    Transfer of corporate stock or the merger of another corporation 
into the sponsor's corporation, with the sponsor

[[Page 24460]]

surviving, does not ordinarily constitute change of ownership.
    A sponsor that has a sponsor agreement in effect and is considering 
or negotiating a change in ownership must notify the Secretary at least 
60 days before the anticipated effective date of the change. When there 
is a change of ownership that results in a transfer of the liability 
for health benefit costs, the existing sponsor agreement is 
automatically assigned to the new owner. This requirement is necessary 
because there may be obligations under the plan sponsor agreement that 
do not surface until some time after the change of ownership. The 
Secretary must ensure that there is a party to the plan sponsor 
agreement that can satisfy those obligations, which may include the 
return of program reimbursement. The new owner to whom a sponsor 
agreement is assigned is subject to all applicable statutes, 
regulations, and guidance, and to the terms and conditions of the 
sponsor agreement. Failure to notify the Secretary at least 60 days 
before the anticipated effective date of the change may result in the 
Secretary recovering funds paid under the program.

III. Waiver of Proposed Rulemaking and Delay in Effective Date

A. Waiver of Notice-and-Comment Procedure

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and 
substances of the proposed rule or a description of the subjects and 
issues involved. This procedure can be waived under section 
553(b)(3)(B) of the Administrative Procedure Act, however, if an agency 
finds good cause that notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued. Below, we 
discuss our reasons for the waiver of notice-and-comment procedure.
    Section 1102(a)(1) of the Affordable Care Act requires the 
Secretary, not later than 90 days after enactment of the Act, to 
establish a temporary Early Retiree Reinsurance Program. The Affordable 
Care Act was enacted on March 23, 2010, which means that the Secretary 
must implement the Early Retiree Reinsurance Program by June 21, 2010. 
We believe this is insufficient time for notice-and-comment rulemaking. 
The 90 days Congress specified does not allow for development of the 
rule, a meaningful public comment period, and agency analysis of, and 
response to, those comments before this rule can be made final. 
Moreover, we need to actually establish a temporary Early Retiree 
Reinsurance Program--not simply issue this interim final rule--by June 
1, 2010, in order to align the effective date of the program with some 
sponsors' plan year start dates and to simplify accounting for sponsors 
and the Secretary, as is discussed below. We must finalize this rule in 
order to take the multiple other steps necessary to establish the 
program. Within the time frame contemplated in the statute, we need to 
have regulations effective in time for applicants to be able to review 
them and begin to put together their information so that they can apply 
(once the application process is finalized). The application process 
cannot be finalized until the regulations are close to being finalized 
in this Interim Final Rule. Furthermore, the Secretary needs to have 
established the rules by which she is going to implement this program 
so that she can move forward with actually administering it, which 
includes contracting with a contractor to aid with administering the 
program. The regulations have to be close to finalized before the 
Secretary can draft a comprehensive scope of work for the contract that 
will be issued to aid the Secretary with administering this program.
    Therefore, we find good cause to waive the notice of proposed 
rulemaking and to issue this final rule on an interim basis without 
prior comment. While we are not providing prior comment, we are 
providing a 30-day public comment period.

B. Waiver of Delay of Effective Date

    In addition, section 553(d) of the APA ordinarily requires that a 
regulation be effective no earlier than 30 days after publication. 
Under section 553(d)(3) this requirement can be waived for good cause.
    As explained above, Section 1102(a)(1) of the Affordable Care Act 
requires the Secretary to establish the Early Retiree Reinsurance 
Program by June 21, 2010. In order to better align the effective date 
of some sponsors' plan and/or fiscal years with the effective date of 
the program, to allow sponsors to be credited for claims starting at 
the beginning of a month in order to simplify accounting for sponsors 
and the Secretary, and to allow sponsors to be credited for claims 
incurred before June 21, 2010, we need to actually establish the 
program--not simply issue this Interim Final Rule--by June 1, 2010, as 
opposed to June 21, 2010. As a result, we find good cause to waive the 
30-day delay in effective date that would otherwise apply under section 
553(d) of the Administrative Procedure Act (APA) for this rule 
implementing the Early Retiree Reinsurance Program. This Interim Final 
Rule will become effective on June 1, 2010.
    In addition, 5 U.S.C. 801 generally requires that agencies submit 
major rules to the Congress 60 days before the rules are scheduled to 
become effective. This delay does not apply, however, when there has 
been a finding of good cause for waiver of prior notice and comment as 
set forth above.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
    <bullet> The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    <bullet> The accuracy of our estimate of the information collection 
burden.
    <bullet> The quality, utility, and clarity of the information to be 
collected.
    <bullet> Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs).

A. ICRs Regarding Requirements To Participate (Sec.  149.35)

    Section 149.35(b)(1) requires plan sponsors to make available 
documentation, data, and other information related to this part and any 
other records specified by the Secretary, as stated in Sec.  149.350. 
The burden associated with this requirement is detailed in our 
discussion of Sec.  149.350.
    Section 149.35(b)(2) states that a plan sponsor must have a written 
agreement with its health insurance issuer (as defined in 45 CFR 
160.103) or employment-based plan (as applicable) regarding disclosure 
of information, data, documents, and records to the Secretary, and the 
health insurance issuer or employment-based plan must

[[Page 24461]]

disclose to the Secretary, on behalf of the sponsor, the information 
necessary for the sponsor to comply with the program, this part, and 
program guidance. The burden associated with this requirement is the 
time and effort necessary for a plan sponsor to develop, sign, and 
maintain the aforementioned written agreement with its health insurance 
issuer or employment-based plan. We estimate that it will take 1 hour 
to develop, sign, and maintain one such written agreement. We also 
estimate that each plan sponsor on average will need to maintain and 
sign 3 such agreements. Using the RDS Program as a baseline, we 
estimate that 4,500 Early Retiree Reinsurance Program plan sponsors 
must comply with this requirement. The estimated annual burden 
associated with this requirement is 13,500 hours. The estimate cost of 
compliance with this requirement is $1,005,885, for the first year of 
the program. For the subsequent four years, we estimate that roughly 
one-quarter of the 4,500 sponsors (1,125) will contract with one 
different entity each year to disclose information, data, etc., to the 
Secretary. For each of those years, the estimated cost of compliance 
with this requirement is $83,824.
    Section 149.35(b)(3) requires plan sponsors to have procedures to 
protect against fraud, waste and abuse under this program, and must 
comply timely with requests from the Secretary to produce the 
procedures and any documents or data to substantiate the implementation 
of the procedures and their effectiveness. Additionally, Sec.  
149.35(b)(5) requires plan sponsors to comply timely with requests from 
the Secretary to produce the procedures and any documents or data to 
substantiate the implementation of the procedures and their 
effectiveness. The burden associated with the requirements in Sec.  
149.35(b)(3) is the time and effort necessary to develop, implement, 
and maintain procedures to protect against fraud, waste and abuse under 
this program. There is also burden associated with producing the 
procedures and any supporting documentation up request by the 
Secretary. We estimate that it will take 20 hours for each plan sponsor 
or designee to develop, implement and maintain one set of such policies 
and procedures. We also estimate that with respect to each plan 
sponsor, an average of three separate sets of policies and procedures 
will have to be developed, implemented and maintained, to account for 
the fact that many sponsors will have multiple benefit options, each 
using a different entity that is submitting claims to the program on 
their behalf. However, we estimate that one-third of the 4,500 expected 
plan sponsors will be contracting with entities that submit claims to 
the program that already have fraud, waste and abuse programs and 
procedures in place. Therefore, we estimate that 3,000 plan sponsors 
will have to newly develop, implement, and maintain such program and 
procedures. The estimated annual burden for these requirements is 20 
hours per set of fraud, waste and abuse procedures. The estimated cost 
associated with this requirement is $9,982,800 for the first year of 
the program. For the subsequent four years of the program, we estimate 
that roughly one quarter of the estimated 4,500 sponsors (roughly 
1,125) will contract with one new entity each year, to submit claims to 
the program on the sponsor's behalf. For each of those years, the 
estimated annual burden associated with this burden is 1,125 sponsors 
multiplied by 20 hours, or 22,500 hours, with estimated costs equal to 
$1,247,850.
    Section 149.35(b)(4) also requires plan sponsors to submit an 
application to the Secretary in the manner, and at the time, required 
by the Secretary, as specified in Sec.  149.40. The burden associated 
with this requirement is detailed in our discussion of Sec.  149.40.

B. ICRs Regarding Application (Sec.  149.40)

    Section 149.40 discusses the application process for the early 
retiree reinsurance program. As stated in Sec.  149.40(a) requires an 
applicant to submit an application to participate in this program to 
the Secretary, which is signed by an authorized representative of the 
applicant who certifies that the information contained in the 
application is true and accurate to the best of the authorized 
representative's knowledge and belief. Section 149.40(e) states that an 
applicant must submit an application for each plan for which it will 
submit a reimbursement request. Furthermore, as part of the application 
process, every application must be accompanied by the information 
listed in Sec.  149.40(f).
    The burden associated with the requirements in this section is the 
time and effort necessary for a plan sponsor or its designee to 
complete an application for each plan for which it will submit a 
reimbursement request. In addition, there is burden associated with 
compiling and submitting the required ancillary information listed in 
Sec.  149.40(f). We estimate that the program will receive an average 
of 1 application each, from 4,500 plan sponsors or their designees. We 
further estimate that it will take 35 hours for a plan sponsor or 
designee to complete one application package. The total estimated 
annual burden associated with this requirement is 157,500 hours. The 
total estimated annual cost associated with this requirement is 
$8,820,675. This is a one-time burden, as sponsors are not required to 
submit a new application for each plan year.

C. ICRs Regarding Documentation of Actual Costs of Medical Claims 
Involved (Sec.  149.335)

    Section Sec.  149.335 requires that sponsors must submit claims, 
with each submission consisting of a list of early retirees for whom 
claims are being submitted, and documentation of the actual costs of 
the items and services for each claim being submitted. These material 
must be submitted in a form and manner specified by the Secretary. 
Additionally, in order for a sponsor to receive reimbursement for the 
portion of a claim that an early retiree paid, the sponsor must submit 
prima facie evidence that the early enrollee paid his or her portion of 
the claim. The burden associated with the requirements in this section 
is the time and effort necessary for sponsors to assemble and submit 
the aforementioned information. We estimate that it will take each 
sponsor an average of 45 hours to comply with these requirements, with 
the number of hours varying based upon the number of early retirees for 
whom claims are submitted, the number of claims, the technology used to 
generate the required information, etc. We estimate that each of the 
4,500 participating sponsors will make two submissions annually. The 
total estimated annual burden associated with this requirement is 
405,000 hours. The total estimated annual cost associated with these 
requirements is $15,758,550.

D. ICRs Regarding Maintenance of Records (Sec.  149.350)

    Section 149.350(a) requires the sponsor of the certified plan (or a 
subcontractor, as applicable) must maintain and furnish to the 
Secretary, or its designee, upon request the records as specified in 
Sec.  149.350(b). The records must be maintained for 6 years after the 
expiration of the plan year in which the costs were incurred, or longer 
if otherwise required by law. Similarly, as required by Sec.  
149.350(d), the sponsor must require its health insurance issuer or 
employment-based plan, as applicable, to maintain and produce upon 
request records to satisfy subparagraph (c) of this regulation. The

[[Page 24462]]

burden associated with the requirements in this section is the time and 
effort necessary to retain the specified records. We estimate that each 
of the estimated 4,500 sponsors will require 6 hours to retain the 
records. The total estimated annual burden associated with this 
requirement is 27,000 hours. The total estimated annual cost associated 
with this requirement is $1,050,570.

E. ICRs Regarding Appeals (Sec.  149.500 and Sec.  149.510)

    Section 149.500(d) states that if a sponsor appeals an adverse 
reimbursement determination, the sponsor must submit the appeal in 
writing to the Secretary within 15 days of receipt of the 
determination. Section 149.510 requires a request for appeal to specify 
the findings or issues with which the sponsor disagrees and the reasons 
for the disagreements. In addition, the request for appeal may include 
supporting documentary evidence the sponsor wishes the Secretary to 
consider. The burden associated with the aforementioned requirements is 
the time and effort necessary for a sponsor to draft and submit an 
appeal, including supporting documentation. While this requirement is 
subject to the PRA, we believe the associated burden is exempt under 5 
CFR 1320.4. In this case, the information associated with an appeal 
would be collected subsequent to an administrative action, that is, an 
adverse reimbursement determination or an application denial.

F. ICRs Regarding Sponsor's Duty To Report Data Inaccuracies (Sec.  
149.600)

    Section 149.600 requires a sponsor to disclose any data 
inaccuracies on which a reimbursement request has been made, including 
inaccurate claims data and negotiated price concessions, in a manner 
and at a time specified by the Secretary in guidance. The burden 
associated with this requirement is the time and effort necessary for a 
sponsor to comply with the reporting requirement. We estimate that 
1,500 sponsors annually will be subject to this requirement, and that 
burden associated with this requirement is 32 hours per sponsor (two 
disclosures per year per sponsor, each disclosure having an estimated 
burden of 16 hours). The estimated annual burden associated with this 
requirement is 48,000 hours. The total estimated annual cost associated 
with this burden is $1,867,680.

G. ICRs Regarding Change of Ownership Requirements (Sec.  149.700)

    Section 149.700(c) requires a sponsor that has a sponsor agreement 
in effect under this part and is considering or negotiating a change in 
ownership to notify the Secretary at least 60 days before the 
anticipated effective date of the change. The burden associated with 
the requirement is the time and effort necessary for a sponsor to 
comply with the reporting requirement. Based on our experience with the 
RDS Program, we estimate that it will take each sponsor an average of 1 
hour to comply with these requirements, and that 50 sponsors per year 
will be subject to this requirement. The total estimated annual burden 
associated with this requirement is 50 hours. The total estimated 
annual cost associated with these requirements is $2,773.
    All of the information collection requirements containing burden 
were submitted to the Office of Management and Budget (OMB) for 
emergency review and approval as part of a single information 
collection request (ICR). As part of the emergency review and approval 
process, OMB waived the notification requirements. The ICR was approved 
under OMB control number 0938-1087 with an expiration date of October 
31, 2010. However, we are still seeking public comments on the 
information collection requirements discussed in this interim final 
rule with comment. All comments will be considered as we continue to 
develop the ICR as we must resubmit the ICR to obtain a standard 3-year 
approval.

                                                   Table 1--Annual Recordkeeping and Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   Total
                                     OMB Control                              Time per      Total        Hourly    Total labor    capital/    Total cost
         Regulation section              No.      Respondents   Responses     response      burden     labor cost    cost ($)   maintenance      ($)
                                                                              (hours)      (hours)        ($)                     cost ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   149.35(b)(2)................    0938-1087        4,500       13,500            1       13,500        74.51    1,005,885            0    1,005,885
                                     ...........        1,125        1,125            1        1,125        74.51       83,824            0       83,824
Sec.   149.35(b)(3)................    0938-1087        3,000        9,000           20      180,000        55.46    9,982,800            0    9,982,800
                                     ...........        1,125        1,125           20       22,500        55.46    1,247,850            0    1,247,850
Sec.   149.40......................    0938-1087        4,500        4,500           35      157,500           **    8,820,675            0    8,820,675
Sec.   149.335.....................    0938-1087        4,500        9,000           45      405,000        38.91   15,758,550            0   15,758,550
Sec.   149.350.....................    0938-1087        4,500        4,500            6       27,000        38.91    1,050,570            0    1,050,570
Sec.   149.600.....................    0938-1087        1,500        3,000           16       48,000        38.91    1,867,680            0    1,867,680
Sec.   149.700(c)..................    0938-1087           50           50            1           50        55.46        2,773            0        2,773
                                    --------------------------------------------------------------------------------------------------------------------
    Total..........................  ...........       11,300       45,800  ...........      854,675  ...........  ...........  ...........   39,820,607
--------------------------------------------------------------------------------------------------------------------------------------------------------
**$74.51 per hour for 1 hour per response, $55.46 per hour for 34 hours per response.

    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attn: CMS Desk Officer, CMS-
9996-IFC, fax (202) 395-6974, or via email <a href="/cdn-cgi/l/email-protection#d59a9c87948aa6a0b7b8bca6a6bcbabb95bab8b7fbb0baa5fbb2baa3"><span class="__cf_email__" data-cfemail="7837312a39270b0d1a15110b0b1117163817151a561d1708561f170e">[email protected]</span></a>.

V. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

VI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), 
section 1102(b) of the Social Security Act, section 202 of the Unfunded

[[Page 24463]]

Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on 
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 
804(2)).
    Executive Order 12866 directs 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). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any 1 year). This rule 
will be economically significant because it sets out the requirements 
that sponsors will need to meet in order to participate in the Early 
Retiree Reinsurance Program and obtain a portion of the $5 billion the 
Congress appropriated for this program. While a small portion of the 
funds will be used to administer the program, the remainder of the $5 
billion will be paid to eligible sponsors over the life of the program, 
resulting in economically significant net positive transfers to 
sponsors. We believe that the costs imposed on sponsors that want to 
receive the early retiree reimbursement will not be significant 
relative to the payments received. The costs will consist of staff or 
contractor time to complete the application to participate, to file 
claims for reimbursement, and to comply with program requirements such 
as any requests related to an audit, as well as any supplies necessary 
to perform these tasks summarized in Table 1 above. As a result this 
rulemaking is ``economically significant'' as measured by the $100 
million threshold, and hence also a major rule under the Congressional 
Review Act. Accordingly, we have prepared a regulatory impact analysis 
that to the best of our ability presents the costs and benefits of the 
rulemaking.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses, if a rule has a significant impact on a 
substantial number of small entities. According to the Kaiser Family 
Foundation and Health Research & Educational Trust's 2009 Employer 
Health Benefits Survey, 5 percent of surveyed businesses with 3 to 199 
workers offered retiree health benefits. See pg. 166 of the Survey. 
http://ehbs.kff.org/pdf/2009/7936.pdf. It is unclear how many offered 
health benefits to early retirees, but since there were about 3.3 
million such firms (page 15 of the survey), even if only 5 percent 
provided such benefits, over 150,000 such firms would be eligible for 
the program. However, we estimate that the number of sponsors that will 
actually participate in the Early Retiree Reinsurance Program, will be 
similar to the number that participate in the Retiree Drug Subsidy 
Program. For purposes of the RFA, we estimate that 5 percent of 
sponsors are small entities as that term is used in the RFA (including 
small businesses, nonprofit organizations, and small governmental 
jurisdictions). Ultimately, the number of small businesses affected 
will depend upon how many small businesses apply for the reimbursement, 
which we do not currently know. What we do know is that we have made, 
and will make, the application and claims submission processes as 
simple as possible, while still protecting the integrity of the 
program. Therefore, if small businesses want to participate, they may 
do so.
    Turning to small business providers, 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 $7.0 million to $34.5 million in any 1 
year). While this rule does not directly impact providers (unless they 
apply to be sponsors), it does increase access to health insurance, 
which may then cause more individuals to be able to afford health care 
and therefore be able to utilize providers' services and products more 
often. Therefore, health care providers may see an increase in patients 
and may not be required to deliver health care free of charge or at 
reduced rates in as many instances as they may currently do.
    Because much of the effect on health care providers depends upon 
where plan participants choose to receive these services, which must be 
from a provider that accepts the plan participant's coverage, the term 
``health care provider'' is likely to include health care entities 
operated by small governmental entities such as counties or towns. 
Small governmental health care entities may include county hospitals, 
clinics or other such entities. Regardless of the entity, we expect a 
positive effect on these entities. For purposes of the RFA, a 
significant number of health care providers indirectly affected by the 
program are considered small businesses according to the SBA's size 
standards with total revenues of $7 million to $34.5 million or less in 
any 1 year and an undetermined percent are nonprofit organizations. 
Individuals and States are not included in the definition of a small 
entity. Uncertainty arises because we do not know how many small 
businesses or other small entities will apply to participate in the 
Early Retiree Reinsurance Program, nor do we know how the increased 
access to health insurance will affect small businesses that provide 
health care services and products to the participants affected by the 
program. We believe, however, that this interim final rule will have a 
significant positive economic effect on a substantial number of small 
businesses. The HHS interpretation of the Regulatory Flexibility Act 
has historically been that it does not trigger a regulatory flexibility 
analysis as a result of positive economic impacts (the statute requires 
that economic impacts be minimized, which makes no sense when applied 
to positive effects). The Department nonetheless usually prepares a 
voluntary regulatory flexibility analysis in such circumstances. In 
addition, because a regulatory flexibility analysis is only required 
for rules for which an NPRM must be prepared, there is an additional 
exemption that applies to this rule. Accordingly, we conclude that a 
regulatory flexibility analysis is not required. Nonetheless, we 
believe that this regulatory impact section, together with the 
remainder of the preamble, constitutes a voluntary analysis that meets 
the requirements that would otherwise be applicable.
    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. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. We do not believe this 
rule will have a significant impact on the operations of a substantial 
number of small rural hospitals because the increased access to health 
insurance, while positively affecting small rural hospitals' ability to 
collect payment for services rendered to plan participants affected by 
the program, will be unlikely to increase revenues in an economically 
significant amount. Therefore, the Secretary has determined that this 
interim final rule will not have a significant impact on the operations 
of a substantial number of small rural hospitals. In addition, such an 
analysis is not required when an NPRM is not required, as in this case.
    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 required spending in any 1 year of $100

[[Page 24464]]

million in 1995 dollars, updated annually for inflation. In 2010, that 
threshold is approximately $135 million. This rule does not mandate any 
spending by State, local, or tribal governments in the aggregate, or by 
the private sector. In fact, participation in the program is voluntary 
and for all sponsors participating, we expect in the aggregate that 
sponsors will receive $5 billion in reimbursement, less administrative 
costs.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This rule will not have a substantial direct effect on 
State or local governments, preempt State laws, or otherwise have a 
Federalism implication.

B. Need for Regulatory Action

    As previously discussed, the Affordable Care Act, includes this 
provision that establishes the temporary Early Retiree Reinsurance 
Program. Section 1102(a)(1) requires the Secretary to establish the 
program within 90 days of enactment of the law, which is June 21, 2010. 
This interim final rule is necessary to implement this program by the 
statutory deadline. The program is designed to assist people in the 
early retiree age group who often face difficulties obtaining insurance 
in the individual market because of advanced age or chronic conditions 
that make coverage unaffordable and inaccessible. The Early Retiree 
Reinsurance Program will provide financial help for employer-based 
plans to continue to provide coverage to plan participants, and 
provides financial relief to plan participants.

C. Anticipated Effects

1. Effects on Plan Sponsors
    This rule will positively affect employers and employee 
organizations that self-fund health benefits or pay premiums to insure 
their early retirees' health benefits. The amount of the effects 
depends upon the sponsors' determination of the use of the 
reimbursement. Thus the positive effect will range from negligible if 
they use the reimbursement almost exclusively for plan participants' 
costs to just under $5 billion, minus the administrative costs of this 
program if they maximize the amount of reimbursement used to lower plan 
costs.
2. Effects on Plan Participants
    We believe that this rule will have a positive effect on plan 
participants. We believe that the program will encourage sponsors to 
maintain coverage that they might not otherwise maintain, and will 
lower health benefit costs for plan participants and sponsors. With 
access to insurance, we believe, that plan participants will access 
health care as needed, instead of delaying a health care encounter 
until the condition progresses to a point when an encounter is 
unavoidable (and then more severe and expensive). Furthermore, we 
believe plan participants will not incur as much debt due to health 
care costs. The amount of the effects depends upon the sponsors' 
determination of the use of the reimbursement. Thus, the positive 
effect will range from moderate if sponsors use almost all of the 
reimbursement for sponsors' costs (in this case, the lower costs to the 
sponsor encourages continued provision of retiree coverage, which is of 
benefit to the retiree) to nearly $5 billion, minus administrative 
costs, if sponsors use the reimbursement almost exclusively to lower 
plan participants' costs.
3. Effects on Other Providers
    We expect this rule to have an indirect positive effect on 
providers because more individuals will have access to health 
insurance, which will cause these individuals to seek health care when 
needed, as may not be the case currently, and health care providers 
will be able to receive payment for services provided. It is a two-fold 
benefit. Providers may have more patients and more of the patients will 
be able to pay for the services or products provided, whether directly 
(for example, co-insurance or co-payment) or via their insurance.
4. Effects on the Medicare and Medicaid Programs
    This rule does not impose any consequential costs on Medicare or 
Medicaid. While sponsors may only submit claims for reimbursement for 
early retirees and early retirees' spouses, surviving spouses or 
dependents, the reimbursements paid to a sponsor must be used to lower 
costs for all plan participants, which may include enrollees who also 
have Medicare coverage. Other than increased utilization of health care 
services or products for plan participants that are covered by a 
certified plan, we do not expect any notable impact on Medicare. We 
expect the impact due to increased utilization to be minimal.
    This rule may in fact lessen the number of individuals on Medicaid, 
or slow any growth in numbers of individuals eligible for Medicaid, 
because sponsors that are considering dropping health insurance for 
early retirees or plan participants may decide otherwise, once the 
sponsor becomes eligible for the program. Furthermore, it is possible 
that employers may decide to offer health insurance to early retirees 
because of the program.

D. Alternatives Considered

    With respect to implementing this program, there is no alternative. 
The Congress requires that the program be in effect not later than 90 
days after the enactment of the bill. The statute was enacted March 23, 
2010. With respect to the application process, we considered numerous 
requirements as to what we would need in order to protect the integrity 
of the program, but ultimately settled on the requirements in the 
regulation. We had originally considered requiring an attestation from 
a qualified actuary, certifying that the sponsor's estimate of 
projected costs is reasonable. We decided against this requirement 
because the projection was merely for the purpose of letting us know if 
and when we should stop taking applications. Weighing the expense of 
requiring a sponsor to pay an actuary to make the certification against 
the benefit the certification would provide, we decided not to require 
this because we want this program to be as inclusive as possible.
    We also considered how best to implement the provision relating to 
participants with chronic and high-cost conditions. We considered 
identifying specific conditions in sub-regulatory guidance but decided 
that such a policy would ultimately work against the goals of the 
program because we would not be able to do a comprehensive analysis to 
identify them in the time allotted to implement this program. 
Furthermore, because many sponsors' plans were initiated before the 
effective date of the statute and any guidance we may have developed, 
sponsors that covered what they think are chronic and high-cost 
conditions, but which we did not identify as such, would have been 
penalized. Because this is supposed to be an inclusive program, we 
defined the term ``chronic and high-cost conditions'' to be any 
condition for which the plan is likely to incur health benefits costs 
of at least $15,000 for any one plan participant in a plan year. If a 
sponsor has programs and procedures that have generated or have the 
potential to generate cost savings in place to address

[[Page 24465]]

any such conditions, it will meet the requirement.
    Ultimately, the approach we took in these regulations is intended 
to balance the need to protect the integrity of the program with the 
inclusive nature of the program.

E. Accounting Statement and Table

    Whenever a rule is considered an economically significant rule 
under Executive Order 12866, we are required to develop an Accounting 
Statement. We have prepared an accounting statement below (Table 2) 
showing the classification of the expenditures associated with the 
provisions of this interim final rule.
    The terminology from this table may be interpreted as follows:
    1. Annualized--means to determine cost/benefits on a yearly basis 
as opposed to quarterly. This would include both start-up and ongoing 
costs amortized over the number of years used in the RIA. Due to the 
uncertainty in estimating these costs/benefits we have estimated the 
amortization equally over the 4 years 2010 through 2013.
    2. Monetized--means to develop quantitative estimates and convert 
them to dollar amounts, if possible.
    3. Qualitative Benefits and Costs--means to categorize or rank the 
qualitative effects in terms of their importance (for example, 
certainty, likely magnitude, and reversibility).
    4. Effects--means the effects on Medicare/Medicaid program, 
beneficiaries, and health care facilities, taken from the impact 
analysis. (We note that regulations with annual costs that are less 
than one billion dollars are likely to have a minimal effect on 
economic growth.)
    5. All quantitative estimates must be presented as discounted flows 
using 3 percent and 7 percent factors.

                                                              Table 2--Accounting Statement
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            Period      Source citation (RIA, preamble,
             Category                  Primary estimate         Year dollars          Discount rate         covered                  etc.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        BENEFITS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized monetized benefits (in   Not estimated........
 millions of dollars per year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          COSTS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized monetized costs (in      39.8.................  2010.................  7%...................     2010-2013  Paperwork Reduction Act Burden in
 millions of dollars per year).                                                                                         Preamble.
                                   ---------------------------------------------------------------------
                                    39.8.................  2010.................  3%...................  ............
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        TRANSFERS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized monetized transfers:     $1,250...............  2010.................  7%...................     2010-2013  Statute.
 ``on budget'' (in millions of
 dollars per year).
                                    $1,250...............  2010.................  3%...................  ............
From whom to whom?................  From the Federal       From the Federal       From the Federal       ............
                                     Government to          Government to          Government to
                                     eligible sponsors      eligible sponsors      eligible sponsors
                                     and for                and for                and for
                                     administration of      administration of      administration of
                                     the program            the program            the program
                                     including to           including to           including to
                                     contractors.           contractors.           contractors.
--------------------------------------------------------------------------------------------------------------------------------------------------------
             Category                                                    Effects                                       *Source Citation
                                                                                                                       (RIA, preamble, etc.).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Effects on State, local, and/or     Positive, but          .....................  .....................  ............  RIA.
 tribal governments.                 currently unable to
                                     be determined.
Effects on small businesses.......  Positive, but          .....................  .....................  ............  RIA.
                                     currently unable to
                                     be determined.
--------------------------------------------------------------------------------------------------------------------------------------------------------

E. Conclusion

    We used statistics from the RDS Program as a model because it has 
similar characteristics to the characteristics of this new Early 
Retiree Reinsurance Program, and, based on this model, we expect that 
approximately 4,500 sponsors will apply to participate in the Early 
Retiree Reinsurance Program. Of those sponsors, we expect approximately 
3,000 will be private entities and 1,500 will be State and local 
governments. Alternatively, the number of applicants could be 
substantially higher if small or other employers participate in this 
program in higher numbers than they did in the Retiree Drug Subsidy 
Program. Regardless, total spending cannot exceed the $5 billion 
appropriated for this program over the four-year period. While some of 
the funds allotted for the program are required to be used to implement 
the program, we anticipate an overall positive transfer of $5 billion 
to eligible sponsors (and indirectly a portion of those funds will be 
transferred for the benefit of plan participants), less administrative 
costs. The analysis above, together with the remainder of this 
preamble, provides a regulatory impact analysis and meets the

[[Page 24466]]

requirements for a Final Regulatory Flexibility Analysis.
    In accordance with the provisions of Executive Order 12866 the 
Office of Management and Budget reviewed this regulation.

List of Subjects in 45 CFR Part 149

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

0
For the reasons set forth in the preamble, the Department of Health and 
Human Services amends 45 CFR subtitle A, subchapter B, by adding a new 
part 149 to read as follows:

PART 149--REQUIREMENTS FOR THE EARLY RETIREE REINSURANCE PROGRAM

Subpart A--General Provisions
Sec.
149.1 Purpose and basis.
149.2 Definitions.
Subpart B--Requirements for Eligible Employment-based Plans
149.30 General requirements.
149.35 Requirements to participate.
149.40 Application.
149.41 Consequences of Non-Compliance, Fraud, or Similar Fault
149.45 Funding limitation.
Subpart C--Reinsurance Amounts
149.100 Amount of reimbursement.
149.105 Transition provision.
149.110 Negotiated price concessions.
149.115 Cost threshold and cost limit.
Subpart D--Use of Reimbursements
149.200 Use of reimbursements.
Subpart E--Reimbursement Methods
149.300 General reimbursement rules.
149.310 Timing.
149.315 Reimbursement conditioned upon available funds.
149.320 Universe of claims that must be submitted.
149.325 Requirements for eligibility of claims.
149.330 Content of claims.
149.335 Documentation of costs of actual claims involved.
149.340 Rule for insured plans.
149.345 Use of information provided.
149.350 Maintenance of records.
Subpart F--Appeals
149.500 Appeals.
149.510 Content of request for appeal.
149.520 Review of appeals.
Subpart G--Disclosure of Inaccurate Data
149.600 Sponsor's duty to report data inaccuracies.
149.610 Secretary's authority to reopen and revise reimbursement 
determination amounts.
Subpart H--Change of Ownership Requirements
149.700 Change of ownership requirements.

    Authority:  Section 1102 of the Patient Protection and 
Affordable Care Act (Pub. L. 111-148).

Subpart A--General Provisions


Sec.  149.1  Purpose and basis.

    This part implements the Early Retiree Reinsurance Program, as 
required by section 1102 of the Patient Protection and Affordable Care 
Act (Pub. L. 111-148).


Sec.  149.2  Definitions.

    For purposes of this part, the following definitions apply:
    Authorized representative means an individual with legal authority 
to sign and bind a sponsor to the terms of a contract or agreement.
    Benefit option means a particular benefit design, category of 
benefits, or cost-sharing arrangement offered within an employment-
based plan.
    Certified means that the sponsor and its employment-based plan or 
plans meet the requirements of this part and the sponsor's application 
to participate in the program has been approved by the Secretary.
    Chronic and high-cost condition means a condition for which $15,000 
or more in health benefit claims are likely to be incurred during a 
plan year by one plan participant.
    Claim or medical claim means documentation, in a form and manner to 
be specified by the Secretary, indicating the health benefit provided, 
the provider or supplier, the incurred date, the individual for whom 
the health benefit was provided, the date and amount of payment net any 
known negotiated price concessions, and the employment-based plan and 
benefit option under which the health benefit was provided. The terms 
claim or medical claim include medical, surgical, hospital, 
prescription drug and other such claims as determined by the Secretary.
    Early retiree means a plan participant who is age 55 and older who 
is enrolled for health benefits in a certified employment-based plan, 
who is not eligible for coverage under title XVIII of the Act, and who 
is not an active employee of an employer maintaining, or currently 
contributing to, the employment-based plan or of any employer that has 
made substantial contributions to fund such plan. In this part, the 
term early retiree also includes the enrolled spouse, surviving spouse, 
and dependents of such individuals. The determination of whether an 
individual is not an active employee is made by the sponsor in 
accordance with the rules of its plan. For purposes of this subpart, 
however, an individual is presumed to be an active employee if, under 
the Medicare Secondary Payer rules in 42 CFR 411.104 and related 
guidance published by the Centers for Medicare & Medicaid Services, the 
person is considered to be receiving coverage by reason of current 
employment status. This presumption applies whether or not the Medicare 
Secondary Payer rules actually apply to the sponsor. For this purpose, 
a sponsor may also treat a person receiving coverage under its 
employment-based plan as a dependent in accordance with the rules of 
its plan, regardless of whether that individual is considered a 
dependent for Federal or state tax purposes. For purposes of this 
definition of early retiree, an employer maintaining, or currently 
contributing to, the employment-based plan or any employer that has 
made substantial contributions to fund such plan, means a plan sponsor 
(as defined in this section).
    Employment-based plan means a group health plan as defined in this 
section of the regulation.
    Good cause means:
    (1) New and material evidence exists that was not readily available 
at the time the reimbursement determination was made;
    (2) A clerical error in the computation of the reimbursement 
determination was made by the Secretary; or
    (3) The evidence that was considered in making the reimbursement 
determination clearly shows on its face that an error was made.
    Group health plan means group health plan as defined in 42 CFR 
423.882 that provides health benefits to early retirees, but excludes 
Federal governmental plans.
    Health benefits means medical, surgical, hospital, prescription 
drug, and other benefits that may be specified by the Secretary, 
whether self-funded or delivered through the purchase of health 
insurance or otherwise. Such benefits include benefits for the 
diagnosis, cure, mitigation, or prevention of physical or mental 
disease or condition with respect to any structure or function of the 
body. Health benefits do not include benefits specified at 45 CFR 
146.145(c)(2) through (4).
    Incurred means the point in time when the sponsor, health insurance 
issuer (as defined in 45 CFR 160.103), employment-based plan, plan 
participant, or a combination of these or

[[Page 24467]]

similar stakeholders, become responsible for payment of the claim.
    Negotiated price concession means any direct or indirect 
remuneration (including discounts, direct or indirect subsidies, charge 
backs or rebates, cash discounts, free goods contingent on a purchase 
agreement, up-front payments, coupons, goods in kind, free or reduced-
price services, grants, or other price concessions or similar benefits) 
offered to some or all purchasers, which may include a sponsor, a 
health insurance issuer, or an employment-based plan) that would serve 
to decrease the costs incurred under the employment-based plan.
    Plan participant means anyone enrolled in an applicable plan 
including an early retiree, as defined in this section, a retiree, a 
retiree's spouse and dependent, an active employee and an active 
employee's spouse and dependent.
    Plan year means the year that is designated as the plan year in the 
plan document of an employment-based plan, except that if the plan 
document does not designate a plan year, if the plan year is not a 12-
month plan year, or if there is no plan document, the plan year is:
    (1) The deductible or limit year used under the plan;
    (2) The policy year, if the plan does not impose deductibles or 
limits on a 12-month basis;
    (3) The sponsor's taxable year, If the plan does not impose 
deductibles or limits on a 12-month basis, and either the plan is not 
insured or the insurance policy is not renewed on a 12-month basis, or;
    (4) The calendar year, in any other case.
    Post point-of-sale negotiated price concession means any negotiated 
price concession that an employment-based plan or insurer receives with 
respect to a given health benefit, after making payment for that health 
benefit.
    Program means the Early Retiree Reinsurance Program established in 
section 1102 of the Patient Protection and Affordable Care Act.
    Secretary means the Secretary of the United States Department of 
Health & Human Services or the Secretary's designee.
    Sponsor means a plan sponsor as defined in section 3(16)(B) of the 
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 
1002(16)(B), except that in the case of a plan maintained jointly by 
one employer and an employee organization and for which the employer is 
the primary source of financing, the term means the employer.
    Sponsor agreement means an agreement between the sponsor and the 
United States Department of Health & Human Services, or its designee, 
which is made to comply with the provisions of this part.

Subpart B--Requirements for Eligible Employment-Based Plans


Sec.  149.30  General requirements.

    A sponsor is eligible to participate in the program if it meets the 
requirements of section 1102 of the Patient Protection and Affordable 
Care Act, this part, and guidance developed by the Secretary.


Sec.  149.35  Requirements to participate.

    (a) A sponsor's employment-based plan must--
    (1) Be certified by the Secretary.
    (2) Include programs and procedures that have generated or have the 
potential to generate cost-savings with respect to plan participants 
with chronic and high-cost conditions.
    (b) A sponsor must--
    (1) Make available information, data, documents, and records as 
specified in Sec.  149.350.
    (2) Have a written agreement with its health insurance issuer (as 
defined in 45 CFR 160.103) or employment-based plan (as applicable) 
regarding disclosure of information, data, documents, and records, to 
the Secretary, and the health insurance issuer or employment-based plan 
must disclose to the Secretary, on behalf of the sponsor, at a time and 
in a manner specified by the Secretary in guidance, the information, 
data, documents and records necessary for the sponsor to comply with 
the program, this part, and program guidance.
    (3) Ensure that policies and procedures to protect against fraud, 
waste and abuse under this program are in place, and must comply timely 
with requests from the Secretary to produce the policies and procedures 
and any documents or data to substantiate the implementation of the 
policies and procedures and their effectiveness.
    (4) Submit an application to the Secretary in the manner, and at 
the time, required by the Secretary as specified in Sec.  149.40.


Sec.  149.40  Application.

    (a) The applicant must submit an application to participate in this 
program to the Secretary, which is signed by an authorized 
representative of the applicant who certifies that the information 
contained in the application is true and accurate to the best of the 
authorized representative's knowledge and belief.
    (b) Applications will be processed in the order in which they are 
received.
    (c) An application that fails to meet all the requirements of this 
part will be denied and the applicant must submit another application 
if it wishes to participate in the program. The new application will be 
processed based on when the new submission is received.
    (d) An applicant need not submit a separate application for each 
plan year but must identify in its application the plan year start and 
end date cycle (starting month and day, and ending month and day) for 
which it is applying.
    (e) An applicant must submit an application for each plan for which 
it will submit a reimbursement request.
    (f) In connection with each application the applicant must submit 
the following:
    (1) Applicant's Tax Identification Number.
    (2) Applicant's name and address.
    (3) Contact name, telephone number and email address.
    (4) Plan sponsor agreement signed by an authorized representative, 
which includes--
    (i) An assurance that the sponsor has a written agreement with its 
health insurance issuer (as defined in 45 CFR 160.103) or employment-
based plan, as applicable, regarding disclosure of information to the 
Secretary, and the health insurance issuer or employment-based plan 
must disclose to the Secretary, on behalf of the sponsor, at a time and 
in a manner specified by the Secretary in guidance, information, data, 
documents, and records necessary for the sponsor to comply with the 
requirements of the program.
    (ii) An acknowledgment that the information in the application is 
being provided to obtain Federal funds, and that all subcontractors 
acknowledge that information provided in connection with a subcontract 
is used for purposes of obtaining Federal funds.
    (iii) An attestation that policies and procedures are in place to 
detect and reduce fraud, waste, and abuse, and that the sponsor will 
produce the policies and procedures, and necessary information, records 
and data, upon request by the Secretary, to substantiate existence of 
the policies and procedures and their effectiveness.
    (iv) Other terms and conditions required by the Secretary.
    (5) A summary indicating how the applicant will use any 
reimbursement received under the program to meet the requirements of 
the program, including:
    (i) How the reimbursement will be used to reduce premium 
contributions, co-payments, deductibles, coinsurance, or other out-of-
pocket costs for plan

[[Page 24468]]

participants, to reduce health benefit or health benefit premium costs 
for the sponsor, or to reduce any combination of these costs;
    (ii) What procedures or programs the sponsor has in place that have 
generated or have the potential to generate cost savings with respect 
to plan participants with chronic and high-cost conditions; and
    (iii) How the sponsor will use the reimbursement to maintain its 
level of contribution to the applicable plan.
    (6) Projected amount of reimbursement to be received under the 
program for the first two plan year cycles with specific amounts for 
each of the two cycles.
    (7) A list of all benefit options under the employment-based plan 
that any early retiree for whom the sponsor receives program 
reimbursement may be claimed.
    (8) Any other information the Secretary requires.
    (g) An application must be approved, and the plan and the sponsor 
certified, by the Secretary before a sponsor may request reimbursement 
under the program.
    (h) The Secretary may reopen a determination under which an 
application had been approved or denied:
    (1) Within 1 year of the determination for any reason;
    (2) Within 4 years of the determination if the evidence that was 
considered in making the determination shows on its face that an error 
was made; or
    (3) At any time in instances of fraud or similar fault.


Sec.  149.41  Consequences of Non-Compliance, Fraud, or Similar Fault.

    Upon failure to comply with the requirements of this part, or if 
fraud, waste, and abuse, or similar fault are found, the Secretary may 
recoup or withhold funds, terminate or deny a sponsor's application, or 
take a combination of these actions.


Sec.  149.45  Funding limitation.

    (a) Based on the projected or actual availability of program 
funding, the Secretary may deny applications that otherwise meet the 
requirements of this part, and if an application is approved, may deny 
all or part of a sponsor's reimbursement request.
    (b) The Secretary's decision to stop accepting applications or 
satisfying reimbursement requests based on the availability of funding 
is final and binding, and is not appealable.

Subpart C--Reinsurance Amounts


Sec.  149.100  Amount of reimbursement.

    (a) For each early retiree enrolled in a certified plan in a plan 
year, the sponsor receives reimbursement in the amount of 80 percent of 
the costs for health benefits (net of negotiated price concessions for 
health benefits) for claims incurred during the plan year that are 
attributed to health benefits costs between the cost threshold and cost 
limit, and that are paid by the employment-based plan or by the insurer 
(if an insured plan), and by the early retiree.
    (b) Costs are considered paid by an early retiree, if paid by that 
individual or another person on behalf of the early retiree, and the 
early retiree (or person paying on behalf of the early retiree) is not 
reimbursed through insurance or otherwise, or other third party payment 
arrangement.
    (c) Reimbursement is calculated by first determining the costs for 
health benefits net of negotiated price concessions, within the 
applicable plan year for each early retiree, and then subtracting 
amounts below the cost threshold and above the cost limit within the 
applicable plan year for each such individual.
    (d) For purposes of determining amounts below the cost threshold 
and above the cost limit for any given early retiree, all costs for 
health benefits paid by the employment-based plan (or by the insurer, 
if applicable), or by or on behalf of, an early retiree, for all 
benefit options the early retiree is enrolled in with respect to a 
given certified employment-based plan for a given plan year, will be 
combined. For each early retiree enrolled in an employment-based plan, 
there is only one cost threshold and one cost limit per plan year 
regardless of the number of benefit options the early retiree is 
enrolled in during that plan year.


Sec.  149.105  Transition provision.

    For a certified plan that has a plan year that begins before June 
1, 2010 and ends on any date thereafter, the reinsurance amount for the 
plan year must be determined as follows:
    (a) With respect to claims incurred before June 1, 2010, the amount 
of such claims up to $15,000 count toward the cost threshold and the 
cost limit. The amount of claims incurred before June 1, 2010 that 
exceed $15,000 are not eligible for reimbursement and do not count 
toward the cost limit.
    (b) The reinsurance amount to be paid is based only on claims 
incurred on and after June 1, 2010, that fall between the cost 
threshold and cost limit for the plan year.


Sec.  149.110  Negotiated price concessions.

    (a) The amount of negotiated price concessions that will be taken 
into account in determining the reinsurance amount will reflect 
negotiated price concessions that have already been subtracted from the 
amount the employment-based plan or insurer paid for the cost of health 
benefits and the amount of post-point-of-sale negotiated price 
concessions received.
    (b) At a time specified by the Secretary, sponsors are required to 
disclose the amount of post-point-of-sale price concessions that were 
received but not accounted for in their submitted claims.


Sec.  149.115  Cost threshold and cost limit.

    The following cost threshold and cost limits apply individually, to 
each early retiree as defined in Sec.  149.2:
    (a) The cost threshold is equal to $15,000 for plan years that 
start on any date before October 1, 2011.
    (b) The cost limit is equal to $90,000 for plan years that start on 
any date before October 1, 2011.
    (c) The cost threshold and cost limit specified in paragraphs (a) 
and (b) of this section, for plan years that start on or after October 
1, 2011, will be adjusted each fiscal year based on the percentage 
increase in the Medical Care Component of the Consumer Price Index for 
all urban consumers (rounded to the nearest multiple of $1,000) for the 
year involved.

Subpart D--Use of Reimbursements


Sec.  149.200  Use of reimbursements.

    (a) A sponsor must use the proceeds under this program:
    (1) To reduce the sponsor's health benefit premiums or health 
benefit costs,
    (2) To reduce health benefit premium contributions, copayments, 
deductibles, coinsurance, or other out-of-pocket costs, or any 
combination of these costs, for plan participants, or
    (3) To reduce any combination of the costs in (a)(1) and (a)(2) of 
this section.
    (b) Proceeds under this program must not be used as general revenue 
for the sponsor.

Subpart E--Reimbursement Methods


Sec.  149.300  General reimbursement rules.

    Reimbursement under this program is conditioned on provision of 
accurate information by the sponsor or its designee. The information 
must be submitted, in a form and manner and at the times provided in 
this subpart and

[[Page 24469]]

other guidance specified by the Secretary. A sponsor must provide the 
information specified in section Sec.  149.335.


Sec.  149.310  Timing.

    (a) An employment-based plan and a sponsor must be certified by the 
Secretary before claims can be submitted and a reimbursement request 
may be made. Reimbursement will be made with respect to submitted 
claims for health benefits at a time and in a manner to be specified by 
the Secretary, after the sponsor or its designee submits the claims to 
the Secretary. Claims must satisfy the requirements of this subpart in 
order to be eligible for reimbursement.
    (b) Claims for health benefits may be submitted for a given plan 
year only upon the approval of an application that references that plan 
year cycle. Claims for an early retiree for a plan year cannot be 
submitted until the total paid costs for health benefits for that early 
retiree incurred for that plan year exceed the applicable cost 
threshold.
    (c) For employment-based plans for which a provider in the normal 
course of business does not produce a claim, such as a staff-model 
health maintenance organization, the information required in a claim 
must be produced and provided to the Secretary, as set out in this 
regulation and applicable guidance.


Sec.  149.315  Reimbursement conditioned upon available funds.

    Notwithstanding a sponsor's compliance with this part, 
reimbursement is conditioned upon the availability of program funds.


Sec.  149.320  Universe of claims that must be submitted.

    (a) Claims submitted for an early retiree, as defined in Sec.  
149.2, must include claims below the applicable cost threshold for the 
plan year.
    (b) Claims must not be submitted until claims are submitted for 
amounts that exceed the applicable cost threshold for the plan year for 
the early retiree.
    (c) Sponsors must not submit claims for health benefits for an 
early retiree to the extent the sponsor has already submitted claims 
for the early retiree that total more than the applicable cost limit 
for the applicable plan year.


Sec.  149.325  Requirements for eligibility of claims.

    A claim may be submitted only if it represents costs for health 
benefits for an early retiree, as defined in Sec.  149.2, has been 
incurred during the applicable plan year, and has been paid.


Sec.  149.330  Content of claims.

    Each claim on its face must include the information specified in, 
and meet, the definition of claim or medical claim found at Sec.  
149.2.


Sec.  149.335  Documentation of costs of actual claims involved.

    (a) A submission of claims consists of a list of early retirees for 
whom claims are being submitted, and documentation of the actual costs 
of the items and services for claims being submitted, in a form and 
manner specified by the Secretary.
    (b) In order for a sponsor to receive reimbursement for the portion 
of a claim that an early retiree paid, the sponsor must submit prima 
facie evidence that the early enrollee paid his or her portion of the 
claim.


Sec.  149.340  Rule for insured plans.

    With respect to insured plans, the claims and data specified in the 
subpart may be submitted directly to the Secretary by the insurer.


Sec.  149.345  Use of information provided.

    The Secretary may use data and information collected under this 
section only for the purpose of, and to the extent necessary in, 
carrying out this part including, but not limited to, determining 
reimbursement and reimbursement-related oversight and program integrity 
activities, or as otherwise allowed by law. Nothing in this section 
limits the Office of the Inspector General's authority to fulfill the 
Inspector General's responsibilities in accordance with applicable 
Federal law.


Sec.  149.350  Maintenance of records.

    (a) The sponsor of the certified plan (or a subcontractor, as 
applicable) must maintain and furnish to the Secretary, upon request 
the records enumerated in paragraph (b) of this section. The records 
must be maintained for 6 years after the expiration of the plan year in 
which the costs were incurred, or longer if otherwise required by law.
    (b) The records that must be retained are as follows--
    (1) All documentation, data, and other information related to this 
part.
    (2) Any other records specified by the Secretary.
    (c) The Secretary may issue additional guidance addressing 
recordkeeping requirements, including (but not limited to) the use of 
electronic media.
    (d) The sponsor must require its health insurance issuer or 
employment-based plan, as applicable, to maintain and produce upon 
request records to satisfy subparagraph (a) of this regulation.
    (e) The sponsor is responsible for ensuring that the records are 
maintained and provided according to this subpart.

Subpart F--Appeals


Sec.  149.500  Appeals.

    (a) An adverse reimbursement determination is final and binding 
unless appealed pursuant to paragraph (e) of this section.
    (b) Except as provided in paragraph (c) of this section, a sponsor 
may request an appeal of an adverse reimbursement determination.
    (c) A sponsor may not appeal an adverse reimbursement determination 
if the denial is based on the unavailability of funds.
    (d) An adverse reimbursement determination is a determination 
constituting a complete or partial denial of a reimbursement request.
    (e) If a sponsor appeals an adverse reimbursement determination, 
the sponsor must submit the appeal in writing to the Secretary within 
15 calendar days of receipt of the determination pursuant to guidance 
issued by the Secretary.


Sec.  149.510  Content of request for appeal.

    The request for appeal must specify the findings or issues with 
which the sponsor disagrees and the reasons for the disagreements. The 
request for appeal may include supporting documentary evidence the 
sponsor wishes the Secretary to consider.


Sec.  149.520  Review of appeals.

    (a) In conducting review of the appeal, the Secretary reviews the 
appeal, the evidence and findings upon which the adverse reimbursement 
determination was made, and any other written evidence submitted by the 
sponsor or the Secretary's designee and will provide a ruling on the 
appeal request.
    (b) In conducting the review, the Secretary reviews the 
determination at issue, the evidence and findings upon which it was 
based, any written documents submitted to the Secretary by the sponsor 
and the Secretary's designee, and determines whether to uphold, reverse 
or modify the Secretary's initial reimbursement determination.
    (c) A decision by the Secretary under this provision is final and 
binding.
    (d) Regardless of the Secretary's decision, additional 
reimbursement is contingent upon the availability of funds at the time 
of the Secretary's determination.
    (e) The Secretary informs the sponsor and the applicable 
Secretary's designee

[[Page 24470]]

of the decision. The Secretary sends a written decision to the sponsor 
or the applicable Secretary's designee upon request.

Subpart G--Disclosure of Data Inaccuracies


Sec.  149.600  Sponsor's duty to report data inaccuracies.

    A sponsor is required to disclose any data inaccuracies upon which 
a reimbursement determination is made, including inaccurate claims data 
and negotiated price concessions, in a manner and at a time specified 
by the Secretary in guidance.


Sec.  149.610  Secretary's authority to reopen and revise a 
reimbursement determination.

    (a) The Secretary may reopen and revise a reimbursement 
determination upon the Secretary's own motion or upon the request of a 
sponsor:
    (1) Within 1 year of the reimbursement determination for any 
reason.
    (2) Within 4 years of a reimbursement determination for good cause.
    (3) At any time, in instances of fraud or similar fault.
    (b) For purposes of this section, the Secretary does not find good 
cause if the only reason for the revision is a change of legal 
interpretation or administrative ruling upon which the determination to 
reimburse was made.
    (c) A decision by the Secretary not to revise a reimbursement 
determination is final and binding (unless fraud or similar fault is 
found) and cannot be appealed.

Subpart H--Change of Ownership Requirements


Sec.  149.700  Change of ownership requirements.

    (a) Change of ownership consists of: (1) Partnership. The removal, 
addition, or substitution of a partner, unless the partners expressly 
agree otherwise as permitted by applicable state law.
    (2) Asset sale. Transfer of all or substantially all of the assets 
of the sponsor to another party.
    (3) Corporation. The merger of the sponsor's corporation into 
another corporation or the consolidation of the sponsor's organization 
with one or more other corporations, resulting in a new corporate body.
    (b) Change of ownership; exception. Transfer of corporate stock or 
the merger of another corporation into the sponsor's corporation, with 
the sponsor surviving, does not ordinarily constitute change of 
ownership.
    (c) Advance notice requirement. A sponsor that has a sponsor 
agreement in effect under this part and is considering or negotiating a 
change in ownership must notify the Secretary at least 60 days before 
the anticipated effective date of the change.
    (d) Assignment of agreement. When there is a change of ownership as 
specified in paragraph (a) of this section, and this results in a 
transfer of the liability for health benefits, the existing sponsor 
agreement is automatically assigned to the new owner.
    (e) Conditions that apply to assigned agreements. The new owner to 
whom a sponsor agreement is assigned is subject to all applicable 
statutes and regulations and to the terms and conditions of the sponsor 
agreement.
    (f) Failure to notify the Secretary at least 60 days before the 
anticipated effective date of the change may result in the Secretary 
recovering funds paid under this program.

    Dated: April 29, 2010.
Jay Angoff,
Director, Office of Consumer Information and Insurance Oversight.
    Dated: April 29, 2010
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-10658 Filed 5-4-10; 8:45 am]
BILLING CODE 4150-03-P


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