Federal Register, Volume 85 Issue 234 (Friday, December 4, 2020)

[Federal Register Volume 85, Number 234 (Friday, December 4, 2020)]
[Proposed Rules]
[Pages 78572-78682]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26534]

[[Page 78571]]

Vol. 85

Friday,

No. 234

December 4, 2020

Part IV

Department of the Treasury

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31 CFR Part 33

Department of Health and Human Services

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45 CFR Parts 147, 150, 153, et al.

Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2022 and Pharmacy Benefit Manager Standards;
Updates To State Innovation Waiver (Section 1332 Waiver) Implementing
Regulations; Proposed Rule

Federal Register / Vol. 85 , No. 234 / Friday, December 4, 2020 /
Proposed Rules

[[Page 78572]]

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DEPARTMENT OF THE TREASURY

31 CFR Part 33

RIN 1505-AC72

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 147, 150, 153, 155, 156, 158, and 184

[CMS-9914-P]
RIN 0938-AU18

Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2022 and Pharmacy Benefit Manager Standards;
Updates To State Innovation Waiver (Section 1332 Waiver) Implementing
Regulations

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health & Human Services (HHS), Department of the Treasury.

ACTION: Proposed rule.

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SUMMARY: This proposed rule sets forth payment parameters and
provisions related to the risk adjustment program; cost-sharing
parameters and cost-sharing reductions; and user fees for Federally-
facilitated Exchanges and State-based Exchanges on the Federal
platform. It includes proposed changes related to special enrollment
periods; Navigator program standards; direct enrollment entities; the
administrative appeals processes with respect to health insurance
issuers and non-federal governmental group health plans; the medical
loss ratio program; acceptance of payments by issuers of individual
market Qualified Health Plans; and other related topics. It proposes
clarifications to the regulation imposing network adequacy standards
with regard to Qualified Health Plans that do not use provider
networks. It proposes changes to the regulation requiring the reporting
of certain prescription drug information by qualified health plans or
their pharmacy benefit managers. It also proposes a new direct
enrollment option for Federally-facilitated Exchanges and State
Exchanges. This proposed rule also proposes changes related to section
1332 State Innovation Waivers.

DATES: To be assured consideration, comments must be received at one of
the addresses provided below, no later than 5 p.m. on December 30,
2020.

ADDRESSES: In commenting, please refer to file code CMS-9914-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-9914-P, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9914-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
Usree Bandyopadhyay, (410) 786-6650, Grace Bristol, (410) 786-8437,
Kiahana Brooks, (301) 492-5229, or Ken Buerger, (410) 786-1190, for
general information.
Cam Clemmons, (206) 615-2338, for matters related to health
insurance reform requirements for the group and individual insurance
markets and administrative appeals for health insurance issuers and
non-federal governmental group health plans.
Allison Yadsko, (410) 786-1740, for matters related to risk
adjustment.
Aaron Franz, (410) 786- 8027, for matters related to user fees.
Isadora Gil, (410) 786-4532, or Colleen Gravens, (301) 492-4107,
for matters related to EDGE discrepancies.
Joshua Paul, (301) 492-4347, Renee O'Neill, (410) 786-8821, or
Ruthanne Romero, (410) 786-8757, for matters related to risk adjustment
data validation.
Dan Brown, (434) 995-5886, for matters related to web-brokers or
direct enrollment, other than the direct enrollment option for
Federally-facilitated and State Exchanges.
Robert Yates, (301) 492-5151, for matters related to the direct
enrollment option for Federally-facilitated and State Exchanges.
Emily Ames, (301) 492-4246, for matters related to termination
notices.
Marisa Beatley, (301) 492-4307, for matters related to employer-
sponsored coverage verification.
Carolyn Kraemer, (301) 492-4197, for matters related to special
enrollment periods for Exchange enrollment under part 155.
Katherine Bentley, (301) 492-5209, for matters related to special
enrollment period verification.
Ken Buerger, (410) 786-1190, for matters related to EHB-benchmark
plans, defrayal of state-required benefits, network adequacy standards,
and PBM transparency reporting requirements.
Joshua Paul, (301) 492-4347, for matters related to the premium
adjustment percentage.
Adrianne Carter, (303) 844-5810, or Amber Bellsdale, (301) 492-
4411, for matters related to disputes under 45 CFR 156.1210.
Leigha Basini, (301) 492-4380, for matters related to acceptance of
payments by QHP issuers.
Nidhi Singh Shah, (301) 492-5110, for matters related to the
Quality Rating System and the Qualified Health Plan Enrollee Experience
Survey.
Alper Ozinal, (301) 492-4178, for matters related to financial
program audits and civil money penalties.
Adrianne Patterson, 410-786-0696, for matters related to netting of
payments under 45 CFR 156.1215 and administrative appeals under 45 CFR
156.1220.
Christina Whitefield, (301) 492-4172, for matters related to the
MLR program.
Lina Rashid, (443) 902-2823, Michelle Koltov, (301) 492-4225, or
Kimberly Koch, (202) 622-0854 for matters related to State Innovation
Waivers.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to
view public comments.

Table of Contents

I. Executive Summary
II. Background
A. Legislative and Regulatory Overview
B. Stakeholder Consultation and Input
C. Structure of Proposed Rule
III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2022
A. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
B. Part 150--CMS Enforcement in Group and Individual Markets

[[Page 78573]]

C. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
E. Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
F. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
G. Part 184--Pharmacy Benefit Manager Standards Under the
Affordable Care Act
IV. Provisions of the Proposed Rule for State Innovation Waivers
A. 31 CFR Part 33 and 45 CFR Part 155--State Innovation Waivers
V. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding State Flexibility for Risk Adjustment
C. ICRs Regarding Submission of Adjusted Premium Amounts for
Risk Adjustment
D. ICRs Regarding Direct Enrollment Agents and Brokers
E. ICRs Regarding Prescription Drug Distribution and Cost
Reporting by QHP Issuers and PBMs
F. ICRs Regarding Medical Loss Ratio
G. ICRs Regarding State Innovation Waivers
H. Summary of Annual Burden Estimates for Proposed Requirements
I. Submission of PRA Related Comments
VI. Response to Comments
VII. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice Provisions and
Accounting Table
D. Regulatory Alternatives Considered
E. Regulatory Flexibility Act
F. Unfunded Mandates
G. Federalism
H. Congressional Review Act
I. Reducing Regulation and Controlling Regulatory Costs

I. Executive Summary

American Health Benefit Exchanges, or ``Exchanges,'' are entities
established under the Patient Protection and Affordable Care Act
(PPACA) \1\ through which qualified individuals and qualified employers
can purchase health insurance coverage in qualified health plans
(QHPs). Many individuals who enroll in QHPs through individual market
Exchanges are eligible to receive a premium tax credit (PTC) to reduce
their costs for health insurance premiums and to receive reductions in
required cost-sharing payments to reduce out-of-pocket expenses for
health care services. The PPACA also established the risk adjustment
program, which is intended to increase the workability of the PPACA
regulatory changes in the individual and small group markets, both on-
and off-Exchange.
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\1\ The PPACA (Pub. L. 111-148) was enacted on March 23, 2010.
The Health Care and Education Reconciliation Act of 2010 (Pub. L.
111-152), which amended and revised several provisions of the PPACA,
was enacted on March 30, 2010. In this proposed rule, we refer to
the two statutes collectively as the ``Patient Protection and
Affordable Care Act'' or ``PPACA''.
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On January 20, 2017, the President issued an Executive Order which
stated that, to the maximum extent permitted by law, the Secretary of
HHS and heads of all other executive departments and agencies with
authorities and responsibilities under the PPACA should exercise all
authority and discretion available to them to waive, defer, grant
exemptions from, or delay the implementation of any provision or
requirement of the PPACA that would impose a fiscal burden on any state
or a cost, fee, tax, penalty, or regulatory burden on individuals,
families, health care providers, health insurers, patients, recipients
of health care services, purchasers of health insurance, or makers of
medical devices, products, or medications. In this proposed rule,
within the limitations of current law, we propose to reduce fiscal and
regulatory burdens across different program areas and to provide
stakeholders with greater flexibility.
In previous rulemakings, we established provisions and parameters
to implement many PPACA requirements and programs. In this proposed
rule, we propose to amend some of these provisions and parameters, with
a focus on maintaining a stable regulatory environment. These proposed
changes would provide issuers with greater predictability for upcoming
plan years, while simultaneously enhancing the role of states in these
programs. The proposals would also provide states with additional
flexibilities, reduce unnecessary regulatory burdens on stakeholders,
empower consumers, ensure program integrity, and improve affordability.
Risk adjustment continues to be a core program in the individual
and small group markets both on and off Exchanges, and some of the
major proposals in this rule include proposed recalibrated parameters
for the HHS-operated risk adjustment methodology. We also propose
changes to the risk adjustment models to include a two-stage
specification in the adult and child models, add severity and
transplant indicators interacted with hierarchical condition category
(HCC) counts factors to the adult and child models, and modify the
enrollment duration factors in the adult models. Additionally, we
propose to allow states to request multi-year state risk adjustment
transfer reductions of up to 3 years, as well as clarifications to the
process for HHS to audit and conduct compliance reviews of issuers of
risk adjustment covered plans and reinsurance-eligible plans.
As we do every year in the HHS notice of benefit and payment
parameters, we propose updated parameters applicable in the individual
and small group markets. We propose the 2022 benefit year user fee
rates for issuers offering plans through the Exchanges using the
Federal platform. We propose lowering the Federally-facilitated
Exchange (FFE) and State-based Exchange on the Federal platform (SBE-
FP) user fees rates to 2.25 and 1.75 percent of total monthly premiums,
respectively, in order to reflect enrollment, premium and HHS contract
estimates for the 2022 plan year. We also propose user fee rates of 1.5
percent of total monthly premiums for FFE and SBE-FP states that elect
the proposed direct enrollment option discussed later in the preamble.
In addition, we propose the 2022 benefit year premium adjustment
percentage, required contribution percentage, and maximum annual
limitations on cost sharing, including those for cost-sharing reduction
(CSR) plan variations. These updates, required by law, will raise the
annual limit on cost sharing for 2022 relative to the annual limit on
cost sharing for 2021, thereby increasing cost sharing and out-of-
pocket spending for consumers who will incur total costs close to the
annual cost-sharing limit in the 2022 benefit year. For the 2023
benefit year and beyond, we also propose to publish these parameters in
guidance annually, and if not in guidance, in the annual notice of
benefit and payment parameters. Additionally, we propose clarifications
to the process under which HHS audits QHP issuers related to advance
payments of the premium tax credit (APTC), CSRs, and user fees.
We propose changes to the information that FFE-registered web-
brokers are required to display on their websites. In addition, we
propose amendments to codify more detail describing the operational
readiness reviews that must be successfully completed as a prerequisite
to a web-broker's non-Exchange website being approved for use by
consumers to complete an Exchange eligibility application or a QHP
selection. We similarly propose to add additional detail about the
operational readiness reviews applicable to direct enrollment entities.
Stable and affordable Exchanges with healthy risk pools are
necessary for

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ensuring consumers maintain stable access to health insurance options.
In order to minimize the potential for adverse selection in the
Exchanges, we are sharing our future plans for rulemaking under which
we will propose requirements related to Exchange verifications of
whether applicants for QHP coverage with APTC or CSR have access to
employer sponsored coverage that is affordable and offers minimum
value. Until we engage in future rulemaking, we propose to extend our
current enforcement posture under which Exchanges may exercise
flexibility not to implement risk-based employer sponsored coverage
verification and to remove the requirement that Exchanges select a
statistically random sample of applicants when no electronic data
sources are available.
We propose new rules related to special enrollment periods. In
addition, we propose to require Exchanges to conduct special enrollment
period verification for at least 75 percent of new enrollments through
special enrollment periods granted to consumers not already enrolled in
coverage through the applicable Exchange.
We also propose minor procedural changes to provisions regarding
administrative hearings in parts 150 and 156 to align with the
Departmental Appeals Board's current practices for administrative
hearings to appeal civil money penalties (CMPs).
We propose to release additional data from the QHP Enrollee
Experience Survey (QHP Enrollee Survey). We also solicit comments on
potential changes to the framework for the Quality Rating System (QRS)
to support alignment with other CMS quality reporting programs and to
further balance the individual survey and clinical quality measures on
the overall quality scores. We are considering ways to modify the
hierarchical structure for the QRS, which is how the measures are
organized together for maximum simplicity and understanding of the
quality rating information provided by the QRS.
We propose revisions to the regulations requiring the collection of
certain prescription drug data from QHP issuers, and propose to
implement a requirement for the reporting of this data from pharmacy
benefit managers (PBMs) when a QHP issuer contracts with a PBM to
administer its prescription drug benefit.
We propose to further regulate the standards related to QHP
issuers' acceptance of payments for premiums and cost sharing. We also
propose to make clarifications to the network adequacy rules to reflect
that Sec. 156.230 does not apply to indemnity plans seeking QHP
certification.
We propose to establish a new direct enrollment option under which
a State Exchange, State-based Exchange on the Federal platform or an
FFE state (through an agreement with HHS) can leverage the potential of
direct enrollment to offer consumers an enhanced QHP shopping
experience. Under this option, instead of operating a centralized
enrollment website, states could use direct enrollment technology to
establish direct pathways to QHP issuers and web-brokers, through which
consumers would apply for and enroll in a QHP and receive a
determination of eligibility for APTC and CSRs.
We propose to establish the definition of prescription drug rebates
and other price concessions that issuers must deduct from incurred
claims for medical loss ratio (MLR) reporting and rebate calculation
purposes. We additionally propose to explicitly allow issuers the
option to prepay a portion or all of the estimated MLR rebate for a
given MLR reporting year in advance of the deadlines set forth in
Sec. Sec. 158.240(e) and 158.241(a)(2) and the filing of the MLR
Annual Reporting Form, and propose to establish a safe harbor allowing
such issuers, under certain conditions, to defer the payment of any
remaining rebates owed after prepayment until the following MLR
reporting year. We also propose to allow issuers to provide MLR rebates
in the form of a premium credit prior to the date that the rules
currently provide. Lastly, we propose to clarify MLR reporting and
rebate requirements for issuers that choose to offer temporary premium
credits during a public health emergency (PHE) declared by the
Secretary of HHS in the 2021 benefit year and beyond, when such credits
are permitted by HHS.
In this proposed rule, the Secretaries of HHS and the Department of
the Treasury propose to reference and incorporate specific guidance
published in the Federal Register in order to give states certainty
regarding the requirements to receive and maintain approval by the
Departments for State Innovation Waivers under section 1332 of the
PPACA.

II. Background

A. Legislative and Regulatory Overview

Title I of the Health Insurance Portability and Accountability Act
of 1996 (HIPAA) added a new title XXVII to the Public Health Service
Act (PHS Act) to establish various reforms to the group and individual
health insurance markets.
These provisions of the PHS Act were later augmented by other laws,
including the PPACA. Subtitles A and C of title I of the PPACA
reorganized, amended, and added to the provisions of part A of title
XXVII of the PHS Act relating to group health plans \2\ and health
insurance issuers in the group and individual markets. The term ``group
health plan'' includes both insured and self-insured group health
plans.
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\2\ The term ``group health plan'' is used in title XXVII of the
PHS Act and is distinct from the term ``health plan'' as used in
other provisions of title I of PPACA. The term ``health plan'' does
not include self-insured group health plans.
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Section 2702 of the PHS Act, as added by the PPACA, establishes
requirements for guaranteed availability of coverage in the group and
individual markets, including qualifying events that trigger special
enrollment periods under section 2702(b) of the PHS Act.\3\
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\3\ Before enactment of the PPACA, HIPAA amended the PHS Act
(formerly section 2711) to generally require guaranteed availability
of coverage for employers in the small group market.
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Section 2718 of the PHS Act, as added by the PPACA, generally
requires health insurance issuers to submit an annual MLR report to
HHS, and provide rebates to enrollees if the issuers do not achieve
specified MLR thresholds.
Section 2723(b) of the PHS Act authorizes the Secretary to impose
CMPs as a means of enforcing the individual and group insurance market
requirements contained in Part A of title XXVII of the PHS Act with
respect to health insurance issuers when a state does not have
authority to enforce or fails to substantially enforce these provisions
and with respect to group health plans that are non-federal
governmental plans.
Section 1301(a)(1)(B) of the PPACA directs all issuers of QHPs to
cover the Essential Health Benefit (EHB) package described in section
1302(a) of the PPACA, including coverage of the services described in
section 1302(b) of the PPACA, adherence to the cost-sharing limits
described in section 1302(c) of the PPACA, and meeting the actuarial
value (AV) levels established in section 1302(d) of the PPACA. Section
2707(a) of the PHS Act, which is effective for plan or policy years
beginning on or after January 1, 2014, extends the requirement to cover
the EHB package to non-grandfathered individual and small group health
insurance coverage, irrespective of whether such coverage is offered
through an Exchange. In addition, section 2707(b) of the PHS Act
directs

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non-grandfathered group health plans to ensure that cost sharing under
the plan does not exceed the limitations described in sections
1302(c)(1) of the PPACA.
Section 1302 of the PPACA provides for the establishment of an EHB
package that includes coverage of EHBs (as defined by the Secretary),
cost-sharing limits, and AV requirements. Section 1302(b) of the PPACA
directs that EHBs be equal in scope to the benefits provided under a
typical employer plan, and that they cover at least the following 10
general categories: Ambulatory patient services; emergency services;
hospitalization; maternity and newborn care; mental health and
substance use disorder services, including behavioral health treatment;
prescription drugs; rehabilitative and habilitative services and
devices; laboratory services; preventive and wellness services and
chronic disease management; and pediatric services, including oral and
vision care.
To set cost-sharing limits, section 1302(c)(4) of the PPACA directs
the Secretary to determine an annual premium adjustment percentage, a
measure of premium growth that is used to set the rate of increase for
three parameters: (1) The maximum annual limitation on cost sharing
(section 1302(c)(1) of the PPACA); (2) the required contribution
percentage used to determine whether an individual can afford minimum
essential coverage (MEC) (section 5000A of the Internal Revenue Code of
1986 (the Code), as enacted by section 1501 of the PPACA); and (3) the
employer shared responsibility payment amounts (section 4980H of the
Code, as enacted by section 1513 of the PPACA).
Section 1302(d) of the PPACA describes the various levels of
coverage based on their AV. Consistent with section 1302(d)(2)(A) of
the PPACA, AV is calculated based on the provision of EHB to a standard
population. Section 1302(d)(3) of the PPACA directs the Secretary to
develop guidelines that allow for de minimis variation in AV
calculations.
Sections 1311(b) and 1321(b) of the PPACA provide that each state
has the opportunity to establish an individual market Exchange that
facilitates the purchase of insurance coverage by qualified individuals
through QHPs and meets other standards specified in the PPACA. Section
1321(c)(1) of the PPACA directs the Secretary to establish and operate
such Exchange within states that do not elect to establish an Exchange
or, as determined by the Secretary on or before January 1, 2013, will
not have an Exchange operable by January 1, 2014.
Section 1311(c)(1) of the PPACA provides the Secretary the
authority to issue regulations to establish criteria for the
certification of QHPs, including network adequacy standards at section
1311(c)(1)(B) of the PPACA. Section 1311(d) of the PPACA describes the
minimum functions of an Exchange. Section 1311(e)(1) of the PPACA
grants the Exchange the authority to certify a health plan as a QHP if
the health plan meets the Secretary's requirements for certification
issued under section 1311(c)(1) of the PPACA, and the Exchange
determines that making the plan available through the Exchange is in
the interests of qualified individuals and qualified employers in the
state. Section 1311(c)(6)(C) of the PPACA establishes special
enrollment periods and section 1311(c)(6)(D) of the PPACA establishes
the monthly enrollment period for Indians, as defined by section 4 of
the Indian Health Care Improvement Act.\4\
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\4\ The Indian Health Care Improvement Act (IHCIA), the
cornerstone legal authority for the provision of health care to
American Indians and Alaska Natives, was made permanent when
President Obama signed the bill on March 23, 2010, as part of the
PPACA.
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Section 1311(c)(3) of the PPACA directs the Secretary to develop a
system to rate QHPs offered through an Exchange, based on relative
quality and price. Section 1311(c)(4) of the PPACA requires the
Secretary to establish an enrollee satisfaction survey that evaluates
the level of enrollee satisfaction of members with QHPs offered through
an Exchange, for each QHP with more than 500 enrollees in the prior
year. Further, sections 1311(c)(3) and 1311(c)(4) of the PPACA require
Exchanges to provide this quality rating information \5\ to individuals
and employers on the Exchange's website.
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\5\ The term ``quality rating information'' includes the QRS
scores and ratings and the results of the enrollee satisfaction
survey (which is also known as the ``Qualified Health Plan (QHP)
Enrollee Experience Survey'').
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Section 1312(c) of the PPACA generally requires a health insurance
issuer to consider all enrollees in all health plans (except
grandfathered health plans) offered by such issuer to be members of a
single risk pool for each of its individual and small group markets.
States have the option to merge the individual and small group market
risk pools under section 1312(c)(3) of the PPACA.
Section 1312(e) of the PPACA directs the Secretary to establish
procedures under which a state may permit agents and brokers to enroll
qualified individuals and qualified employers in QHPs through an
Exchange and to assist individuals in applying for financial assistance
for QHPs sold through an Exchange.
Sections 1313 and 1321 of the PPACA provide the Secretary with the
authority to oversee the financial integrity of State Exchanges, their
compliance with HHS standards, and the efficient and non-discriminatory
administration of State Exchange activities. Section 1321 of the PPACA
provides for state flexibility in the operation and enforcement of
Exchanges and related requirements.
Section 1321(a) of the PPACA provides broad authority for the
Secretary to establish standards and regulations to implement the
statutory requirements related to Exchanges, QHPs and other components
of title I of the PPACA. Section 1321(a)(1) of the PPACA directs the
Secretary to issue regulations that set standards for meeting the
requirements of title I of the PPACA for, among other things, the
establishment and operation of Exchanges. When operating an FFE under
section 1321(c)(1) of the PPACA, HHS has the authority under sections
1321(c)(1) and 1311(d)(5)(A) of the PPACA to collect and spend user
fees. Office of Management and Budget (OMB) Circular A-25 establishes
federal policy regarding user fees and specifies that a user charge
will be assessed against each identifiable recipient for special
benefits derived from federal activities beyond those received by the
general public.
Section 1321(c)(2) of the PPACA provides that the provisions of
section 2723(b) of the PHS Act shall apply to the enforcement of the
Federal Exchange standards and authorizes the Secretary to enforce the
Exchange standards using CMPs on the same basis as detailed in section
2723(b) of the PHS Act.
Section 1321(d) of the PPACA provides that nothing in title I of
the PPACA must be construed to preempt any state law that does not
prevent the application of title I of the PPACA. Section 1311(k) of the
PPACA specifies that Exchanges may not establish rules that conflict
with or prevent the application of regulations issued by the Secretary.
Section 1332 of the PPACA provides the Secretary of HHS and the
Secretary of the Treasury (collectively, the Secretaries) with the
discretion to approve a state's proposal to waive specific provisions
of the PPACA, provided the state's section 1332 waiver plan meets
certain requirements. The Department of Health and Human Services and
the Department of the

[[Page 78576]]

Treasury (collectively, the Departments) finalized implementing
regulations on February 27, 2012 (76 FR 13553) and published detailed
guidance on the Department's application of section 1332 to proposed
state waivers on October 24, 2018 (83 FR 53575).
Section 1343 of the PPACA establishes a permanent risk adjustment
program to provide payments to health insurance issuers that attract
higher-than-average risk populations, such as those with chronic
conditions, funded by payments from those that attract lower-than-
average risk populations, thereby reducing incentives for issuers to
avoid higher-risk enrollees.
Section 1402 of the PPACA provides for, among other things,
reductions in cost sharing for EHB for qualified low- and moderate-
income enrollees in silver level QHPs offered through the individual
market Exchanges. This section also provides for reductions in cost
sharing for American Indians enrolled in QHPs at any metal level.
Section 1411(c) of the PPACA requires the Secretary to submit
certain information provided by applicants under section 1411(b) of the
PPACA to other federal officials for verification, including income and
family size information to the Secretary of the Treasury.
Section 1411(d) of the PPACA provides that the Secretary must
verify the accuracy of information provided by applicants under section
1411(b) of the PPACA for which section 1411(c) of the PPACA does not
prescribe a specific verification procedure, in such manner as the
Secretary determines appropriate.
Section 1411(f) of the PPACA requires the Secretary, in
consultation with the Secretary of the Treasury, the Secretary of
Homeland Security, and the Commissioner of Social Security, to
establish procedures for hearing and making decisions governing appeals
of Exchange eligibility determinations.
Section 1411(f)(1)(B) of the PPACA requires the Secretary to
establish procedures to redetermine eligibility on a periodic basis, in
appropriate circumstances, including eligibility to purchase a QHP
through the Exchange and for APTC and CSRs.
Section 1411(g) of the PPACA allows the use or disclosure of
applicant information only for the limited purposes of, and to the
extent necessary to, ensure the efficient operation of the Exchange,
including by verifying eligibility to enroll through the Exchange and
for APTC and CSRs.
Section 5000A of the Code, as added by section 1501(b) of the
PPACA, requires individuals to have MEC for each month, qualify for an
exemption, or make an individual shared responsibility payment. Under
the Tax Cuts and Jobs Act (Pub. L. 115-97, December 22, 2017) the
individual shared responsibility payment has been reduced to $0,
effective for months beginning after December 31, 2018. Notwithstanding
that reduction, certain exemptions are still relevant to determine
whether individuals age 30 and above qualify to enroll in catastrophic
coverage under 45 CFR 155.305(h) or 45 CFR 156.155.
Section 1150A(a) of the Social Security Act (the Act) requires a
health benefits plan or PBM that manages prescription drug coverage
under a contract with a QHP issuer to provide certain prescription drug
information to the Secretary at such times, and in such form and
manner, as the Secretary shall specify. HHS will limit disclosure of
the information disclosed by a health benefits plan or PBM under this
section as required by section 1150A of the Act and may only disclose
the information in a form which does not disclose the identity of a
specific PBM or plan, or prices charged for specific drugs, except that
for limited purposes, HHS may disclose the information to states to
carry out section 1311 of the PPACA. An issuer or PBM that fails to
provide the information on a timely basis or that knowingly provides
false information may be subject to a civil monetary penalty under
section 1927(b)(3)(C) of the Act in the same manner as such provisions
apply to a manufacturer with an agreement under that section.
1. Premium Stabilization Programs \6\
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\6\ The term ``premium stabilization programs'' refers to the
risk adjustment, risk corridors, and reinsurance programs
established by the PPACA. See 42 U.S.C. 18061, 18062, and 18063.
---------------------------------------------------------------------------

In the July 15, 2011 Federal Register (76 FR 41929), we published a
proposed rule outlining the framework for the premium stabilization
programs. We implemented the premium stabilization programs in a final
rule published in the March 23, 2012 Federal Register (77 FR 17219)
(Premium Stabilization Rule). In the December 7, 2012 Federal Register
(77 FR 73117), we published a proposed rule outlining the benefit and
payment parameters for the 2014 benefit year to expand the provisions
related to the premium stabilization programs and set forth payment
parameters in those programs (proposed 2014 Payment Notice). We
published the 2014 Payment Notice final rule in the March 11, 2013
Federal Register (78 FR 15409). In the June 19, 2013 Federal Register
(78 FR 37032), we proposed a modification to the HHS-operated
methodology related to community rating states. In the October 30, 2013
Federal Register (78 FR 65046), we finalized the proposed modification
to the HHS-operated methodology related to community rating states. We
published a correcting amendment to the 2014 Payment Notice final rule
in the November 6, 2013 Federal Register (78 FR 66653) to address how
an enrollee's age for the risk score calculation would be determined
under the HHS-operated risk adjustment methodology.
In the December 2, 2013 Federal Register (78 FR 72321), we
published a proposed rule outlining the benefit and payment parameters
for the 2015 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2015 Payment Notice). We published the 2015 Payment Notice
final rule in the March 11, 2014 Federal Register (79 FR 13743). In the
May 27, 2014 Federal Register (79 FR 30240), the 2015 fiscal year
sequestration rate for the risk adjustment program was announced.
In the November 26, 2014 Federal Register (79 FR 70673), we
published a proposed rule outlining the benefit and payment parameters
for the 2016 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2016 Payment Notice). We published the 2016 Payment Notice
final rule in the February 27, 2015 Federal Register (80 FR 10749).
In the December 2, 2015 Federal Register (80 FR 75487), we
published a proposed rule outlining the benefit and payment parameters
for the 2017 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2017 Payment Notice). We published the 2017 Payment Notice
final rule in the March 8, 2016 Federal Register (81 FR 12203).
In the September 6, 2016 Federal Register (81 FR 61455), we
published a proposed rule outlining the benefit and payment parameters
for the 2018 benefit year and to further promote stable premiums in the
individual and small group markets. We proposed updates to the risk
adjustment methodology, new policies around the use of external data
for recalibration of our risk adjustment models, and amendments to the
HHS-RADV process (proposed 2018 Payment Notice). We published the 2018

[[Page 78577]]

Payment Notice final rule in the December 22, 2016 Federal Register (81
FR 94058).
In the November 2, 2017 Federal Register (82 FR 51042), we
published a proposed rule outlining the benefit and payment parameters
for the 2019 benefit year, and to further promote stable premiums in
the individual and small group markets. We proposed updates to the risk
adjustment methodology and amendments to the HHS-RADV process (proposed
2019 Payment Notice). We published the 2019 Payment Notice final rule
in the April 17, 2018 Federal Register (83 FR 16930). We published a
correction to the 2019 risk adjustment coefficients in the 2019 Payment
Notice final rule in the May 11, 2018 Federal Register (83 FR 21925).
On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i), we updated
the 2019 benefit year final risk adjustment model coefficients to
reflect an additional recalibration related to an update to the 2016
enrollee-level External Data Gathering Environment (EDGE) dataset.\7\
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\7\ ``Updated 2019 Benefit Year Final HHS Risk Adjustment Model
Coefficients,'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.
---------------------------------------------------------------------------

In the July 30, 2018 Federal Register (83 FR 36456), we published a
final rule that adopted the 2017 benefit year risk adjustment
methodology as established in the final rules published in the March
23, 2012 Federal Register (77 FR 17220 through 17252) and in the March
8, 2016 Federal Register (81 FR 12204 through 12352). This final rule
set forth additional explanation of the rationale supporting use of
statewide average premium in the HHS-operated risk adjustment state
payment transfer formula for the 2017 benefit year, including the
reasons why the program is operated in a budget-neutral manner. This
final rule permitted HHS to resume 2017 benefit year risk adjustment
payments and charges. HHS also provided guidance as to the operation of
the HHS-operated risk adjustment program for the 2017 benefit year in
light of publication of this final rule.\8\
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\8\ ``Update on the HHS-operated Risk Adjustment Program for the
2017 Benefit Year,'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf.
---------------------------------------------------------------------------

In the August 10, 2018 Federal Register (83 FR 39644), we published
a proposed rule seeking comment on adopting the 2018 benefit year risk
adjustment methodology in the final rules published in the March 23,
2012 Federal Register (77 FR 17219) and in the December 22, 2016
Federal Register (81 FR 94058). The proposed rule set forth additional
explanation of the rationale supporting use of statewide average
premium in the HHS-operated risk adjustment state payment transfer
formula for the 2018 benefit year, including the reasons why the
program is operated in a budget-neutral manner. In the December 10,
2018 Federal Register (83 FR 63419), we issued a final rule adopting
the 2018 benefit year HHS-operated risk adjustment methodology as
established in the final rules published in the March 23, 2012 Federal
Register (77 FR 17219) and the December 22, 2016 Federal Register (81
FR 94058). This final rule sets forth additional explanation of the
rationale supporting use of statewide average premium in the HHS-
operated risk adjustment state payment transfer formula for the 2018
benefit year, including the reasons why the program is operated in a
budget-neutral manner.
In the January 24, 2019 Federal Register (84 FR 227), we published
a proposed rule outlining updates to the calibration of the risk
adjustment methodology, the use of EDGE data for research purposes, and
updates to HHS-RADV audits. We published the 2020 Payment Notice final
rule in the April 25, 2019 Federal Register (84 FR 17454).
In the February 6, 2020 Federal Register (85 FR 7088), we published
a proposed rule that included updates to the in the risk adjustment
models' HCCs and a modification HHS-RADV error rate calculation
methodology. We published the 2021 Payment Notice final rule in the May
14, 2020 Federal Register (85 FR 29164).
In the June 2, 2020 Federal Register (85 FR 33595), we published a
proposed rule that proposed updates to various aspects of the HHS-RADV
methodologies and processes. These updates included revisions to the
HCC failure rate grouping algorithm, the introduction of a sliding
scale adjustment in HHS-RADV error rate calculation, the introduction
of a constraint on risk score adjustments for low-side failure rate
outliers, and the transition from the prospective application of HHS-
RADV adjustments to an application of HHS-RADV results to risk scores
from the same benefit year as that being audited.
In the September 2, 2020 Federal Register (85 FR 54820), HHS issued
an interim final rule containing certain policy and regulatory
revisions in response to the COVID-19 PHE, wherein we set forth risk
adjustment reporting requirements for issuers offering temporary
premium credits in the 2020 benefit year (interim final rule on COVID-
19).
2. Program Integrity
In the June 19, 2013 Federal Register (78 FR 37031), we published a
proposed rule that proposed certain program integrity standards related
to Exchanges and the premium stabilization programs (proposed Program
Integrity Rule). The provisions of that proposed rule were finalized in
two rules, the ``first Program Integrity Rule'' published in the August
30, 2013 Federal Register (78 FR 54069) and the ``second Program
Integrity Rule'' published in the October 30, 2013 Federal Register (78
FR 65045). In the December 27, 2019 Federal Register (84 FR 71674), we
published a final rule that revised standards relating to oversight of
Exchanges established by states and periodic data matching frequency.
3. Market Rules
An interim final rule relating to the HIPAA health insurance
reforms was published in the April 8, 1997 Federal Register (62 FR
16894). A proposed rule relating to PPACA health insurance market
reforms that became effective in 2014 was published in the November 26,
2012 Federal Register (77 FR 70584). A final rule implementing those
provisions was published in the February 27, 2013 Federal Register (78
FR 13406) (2014 Market Rules).
A proposed rule relating to Exchanges and Insurance Market
Standards for 2015 and beyond was published in the March 21, 2014
Federal Register (79 FR 15808) (2015 Market Standards Proposed Rule). A
final rule implementing the Exchange and Insurance Market Standards for
2015 and Beyond was published in the May 27, 2014 Federal Register (79
FR 30240) (2015 Market Standards Rule). The 2018 Payment Notice final
rule in the December 22, 2016 Federal Register (81 FR 94058) provided
additional guidance on guaranteed availability and guaranteed
renewability. In the Market Stabilization final rule that was published
in the April 18, 2017 Federal Register (82 FR 18346), we released
further guidance related to guaranteed availability. In the 2019
Payment Notice final rule in the April 17, 2018 Federal Register (83 FR
17058), we clarified that certain exceptions to the special enrollment
periods only apply with respect to coverage offered outside of the
Exchange in the individual market.

[[Page 78578]]

4. Administrative Appeals Process Related to Federal Enforcement in
Group and Individual Health Insurance Markets and Non-Federal
Governmental Group Health Plans
On April 8, 1997 an interim final rule with comment period was
published in the Federal Register (62 FR 16894) that implemented the
HIPAA health insurance reforms by adding 45 CFR parts 144, 146, and
148. Included in those regulations were enforcement provisions. In the
June 10, 1997 Federal Register (62 FR 31669), we published technical
corrections to these interim final rules. After gaining some experience
with direct federal enforcement in some states, we determined that it
was necessary to provide more detail on the procedures that will be
used to enforce HIPAA when a state does not do so. On August 20, 1999,
an interim final rule with comment period was published in the Federal
Register (64 FR 45786) that provided more detail on the procedures for
enforcing title XXVII of the PHS Act, as added by HIPAA, and as amended
by the Mental Health Parity Act of 1996 (Pub. L. 104-204, September 26,
1996), the Newborns' and Mothers' Health Protection Act of 1996 (Pub.
L. 104-204, September 26, 1996), and the Women's Health and Cancer
Rights Act of 1998 (Pub. L. 105-277, October 21, 1998), when a state
does not enforce such laws. We published a final rule on November 25,
2005 in the Federal Register (70 FR 71020) that finalized this interim
final rule, and made non-substantive amendments to the regulations
detailing procedures for enforcing title XXVII of the PHS Act.
5. Exchanges
We published a request for comment relating to Exchanges in the
August 3, 2010 Federal Register (75 FR 45584). We issued initial
guidance to states on Exchanges on November 18, 2010. In the July 15,
2011 Federal Register (76 FR 41865), we published a proposed rule with
proposals to implement components of the Exchanges, and a rule in the
August 17, 2011 Federal Register (76 FR 51201) regarding Exchange
functions in the individual market and Small Business Health Options
Program (SHOP), eligibility determinations, and Exchange standards for
employers. A final rule implementing components of the Exchanges and
setting forth standards for eligibility for Exchanges was published in
the March 27, 2012 Federal Register (77 FR 18309) (Exchange
Establishment Rule).
In the 2014 Payment Notice and in the Amendments to the HHS Notice
of Benefit and Payment Parameters for 2014 interim final rule,
published in the March 11, 2013 Federal Register (78 FR 15541), we set
forth standards related to Exchange user fees. We established an
adjustment to the FFE user fee in the Coverage of Certain Preventive
Services under the Affordable Care Act final rule, published in the
July 2, 2013 Federal Register (78 FR 39869) (Preventive Services Rule).
In the May 11, 2016 Federal Register (81 FR 29146), we published an
interim final rule with amendments to the parameters of certain special
enrollment periods (2016 Interim Final Rule). We finalized these in the
2018 Payment Notice final rule, published in the December 22, 2016
Federal Register (81 FR 94058). In the March 8, 2016 Federal Register
(81 FR 12203), the final 2017 Payment Notice codified State Exchanges
on the Federal platform along with relevant requirements. In the April
18, 2017 Market Stabilization final rule Federal Register (82 FR
18346), we amended standards relating to special enrollment periods and
QHP certification. In the 2019 Payment Notice final rule, published in
the April 17, 2018 Federal Register (83 FR 16930), we modified
parameters around certain special enrollment periods. In the April 25,
2019 Federal Register (84 FR 17454), the final 2020 Payment Notice
established a new special enrollment period. In the May 14, 2020
Federal Register (85 FR 29204), the 2021 Payment Notice final rule made
certain changes to plan category limitations and special enrollment
period coverage effective date rules, allowed individuals provided a
non-calendar year qualified small employer health reimbursement
arrangement (QSEHRA) to qualify for an existing special enrollment
period, and discussed plans for future rulemaking for employer-
sponsored coverage verification and non-enforcement discretion for
Exchanges that do not conduct random sampling until plan year 2021.
6. Essential Health Benefits
On December 16, 2011, HHS released a bulletin \9\ that outlined an
intended regulatory approach for defining EHB, including a benchmark-
based framework. A proposed rule relating to EHBs was published in the
November 26, 2012 Federal Register (77 FR 70643). We established
requirements relating to EHBs in the Standards Related to Essential
Health Benefits, Actuarial Value, and Accreditation Final Rule, which
was published in the February 25, 2013 Federal Register (78 FR 12833)
(EHB Rule). In the 2019 Payment Notice, published in the April 17, 2018
Federal Register (83 FR 16930), we added Sec. 156.111 to provide
states with additional options from which to select an EHB-benchmark
plan for plan years 2020 and beyond.
---------------------------------------------------------------------------

\9\ ``Essential Health Benefits Bulletin,'' December 16, 2011.
Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
---------------------------------------------------------------------------

The 2015 Payment Notice final rule, established a methodology for
estimating the average per capita premium for purposes of calculating
the premium adjustment percentage. Beginning with the 2015 benefit
year, the premium adjustment percentage was calculated based on the
estimates and projections of average per enrollee employer-sponsored
insurance premiums from the National Health Expenditure Accounts
(NHEA), which are calculated by the CMS Office of the Actuary. In the
2020 Payment Notice final rule, we amended the methodology for
calculating the premium adjustment percentage by estimating per capita
insurance premiums as private health insurance premiums, minus premiums
paid for Medigap insurance and property and casualty insurance, divided
by the unrounded number of unique private health insurance enrollees,
excluding all Medigap enrollees. Additionally, in response to public
comments to the proposed 2021 Payment Notice, the 2021 Payment Notice
final rule included a policy stating that we will finalize payment
parameters that depend on NHEA data, including the premium adjustment
percentage, based on the data that are available as of the publication
of the proposed rule for that benefit year, even if NHEA data are
updated between the proposed and final rules.
In a proposed rule published in the July 15, 2020 Federal Register
(85 FR 42782), HHS, along with the Departments of Labor and the
Treasury, proposed using the premium adjustment percentage as one
alternative in setting the parameters for permissible increases in
fixed-amount cost-sharing requirements for grandfathered group health
plans.
7. Medical Loss Ratio (MLR)
We published a request for comment on section 2718 of the PHS Act
in the April 14, 2010 Federal Register (75 FR 19297), and published an
interim final rule with a 60-day comment period relating to the MLR
program on December 1, 2010 (75 FR 74863). A final rule with a 30-day
comment period was

[[Page 78579]]

published in the December 7, 2011 Federal Register (76 FR 76573). An
interim final rule with a 60-day comment period was published in the
December 7, 2011 Federal Register (76 FR 76595). A final rule was
published in the Federal Register on May 16, 2012 (77 FR 28790). The
MLR program requirements were amended in final rules published in the
March 11, 2014 Federal Register (79 FR 13743), the May 27, 2014 Federal
Register (79 FR 30339), the February 27, 2015 Federal Register (80 FR
10749), the March 8, 2016 Federal Register (81 FR 12203), the December
22, 2016 Federal Register (81 FR 94183), the April 17, 2018 Federal
Register (83 FR 16930), the May 14, 2020 Federal Register (85 FR 29164)
and an interim final rule was published in the September 2, 2020
Federal Register (85 FR 54820).
8. Quality Rating System and Enrollee Satisfaction Survey
The overall framework and elements of the rating methodology for
the QRS were published in the November 19, 2013 Federal Register (78 FR
69418). Consistent with statutory provisions, in May 2014, HHS issued
regulations at Sec. Sec. 155.1400 and 155.1405 to establish the QRS
and the QHP Enrollee Experience Survey display requirements for
Exchanges and has worked towards requiring nationwide the prominent
display of quality rating information on Exchange websites.\10\ As a
condition of certification and participation in the Exchanges, HHS
requires that QHP issuers submit QRS clinical measure data and QHP
Enrollee Survey response data for their respective QHPs offered through
an Exchange in accordance with HHS guidance, which has been issued
annually for each forthcoming plan year.\11\
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\10\ Patient Protection and Affordable Care Act; Exchange and
Insurance Market Standards for 2015 and Beyond, Final Rule, 79 FR
30240 at 30352 (May 27, 2014). Also see the ``CMS Bulletin on
display of QRS star ratings and Qualified Health Plan (QHP) Enrollee
Survey results for QHPs offered through Exchanges,'' August 15,
2019. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QualityRatingInformationBulletinforPlanYear2020.pdf.
\11\ See, for example, ``Center for Clinical Standards &
Quality, CMS, The Quality Rating System and Qualified Health Plan
Enrollee Experience Survey: Technical Guidance for 2021,'' September
2020. Available at https://www.cms.gov/files/document/quality-rating-system-and-qualified-health-plan-enrollee-experience-survey-technical-guidance-2021.pdf.
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9. State Innovation Waivers
Section 1332(a)(4)(B) of the PPACA requires the Secretaries to
issue regulations regarding procedures for State Innovation Waivers. On
March 14, 2011, the Departments published the ``Application, Review,
and Reporting Process for Waivers for State Innovation'' proposed rule
\12\ in the Federal Register (76 FR 13553) to implement section
1332(a)(4)(B) of the PPACA. On February 27, 2012, the Departments
published the ``Application, Review, and Reporting Process for Waivers
for State Innovation'' final rule \13\ in the Federal Register (77 FR
11700) (hereinafter referred to as the ``2012 Final Rule''). On October
24, 2018, the Departments issued the ``State Relief and Empowerment
Waivers'' guidance \14\ in the Federal Register (83 FR 53575)
(hereinafter referred to as the ``2018 Guidance''), which superseded
the previous guidance \15\ published on December 16, 2015 in the
Federal Register (80 FR 78131) and provided additional information
about the requirements that states must meet for waiver proposals, the
Secretaries' application review procedures, pass-through funding
determinations, certain analytical requirements, and operational
considerations. On November 6, 2020, the Departments issued an interim
final rule \16\ in the Federal Register (85 FR 71142), which revises
regulations to set forth flexibilities in the public notice
requirements and post-award public participation requirements for State
Innovation Waivers under section 1332 of the PPACA during the COVID-19
PHE.
---------------------------------------------------------------------------

\12\ https://www.govinfo.gov/content/pkg/FR-2011-03-14/pdf/2011-5583.pdf.
\13\ https://www.govinfo.gov/content/pkg/FR-2012-02-27/pdf/2012-4395.pdf.
\14\ https://www.govinfo.gov/content/pkg/FR-2018-10-24/pdf/2018-23182.pdf.
\15\ https://www.govinfo.gov/content/pkg/FR-2015-12-16/pdf/2015-31563.pdf.
\16\ https://www.federalregister.gov/documents/2020/11/06/2020-24332/additional-policy-and-regulatory-revisions-in-response-to-the-covid-19-public-health-emergency.
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B. Stakeholder Consultation and Input

HHS has consulted with stakeholders on policies related to the
operation of Exchanges and the risk adjustment and HHS-RADV programs.
We have held a number of listening sessions with consumers, providers,
employers, health plans, advocacy groups and the actuarial community to
gather public input. We have solicited input from state representatives
on numerous topics, particularly risk adjustment and the direct
enrollment option for FFEs and State Exchanges.
We consulted with stakeholders through regular meetings with the
National Association of Insurance Commissioners (NAIC), regular contact
with states, and health insurance issuers, trade groups, consumer
advocates, employers, and other interested parties. We considered all
public input we received as we developed the policies in this proposed
rule.

C. Structure of Proposed Rule

The regulations outlined in this proposed rule would be codified in
45 CFR parts 147, 150, 153, 155, 156, 158, and 184. In addition, the
regulations outlined in this proposed rule governing State Innovation
Waivers under section 1332 of the PPACA at 45 CFR part 155 subpart N
would also be codified in 31 CFR part 33.
The proposed changes to 45 CFR part 147 would make technical and
conforming amendments regarding limited and special enrollment periods
in the individual market.
The proposed changes to 45 CFR part 150 would make minor procedural
changes to the requirements for administrative appeals of CMPs by
health insurance issuers and non-federal governmental group health
plans to align with current practices for the Departmental Appeals
Board. We propose to make parallel changes to the requirements for
administrative appeals of CMPs by QHP issuers under 45 CFR part 156,
subpart J.
The proposed changes to 45 CFR part 153 would recalibrate the HHS
risk adjustment models consistent with the approach outlined in the
2020 Payment Notice to transition away from the use of
MarketScan[supreg] data. However, we propose to use the enrollee-level
EDGE data from 2016, 2017 and 2018, the same data used for the 2021
model recalibration. We also propose changes to the HHS risk adjustment
models to include a two-stage specification in the adult and child
models, add severity and transplant indicators interacted with HCC
counts factors in the adult and child models, and modify the enrollment
duration factors in the adult models. In addition, we propose to
clarify risk adjustment reporting requirements for issuers that choose
to offer premium credits, if permitted by HHS for future benefit years.
In order to provide greater market predictability, we propose to allow
states to request a reduction of risk adjustment transfers for multiple
years and set forth the request from Alabama to reduce risk adjustment
transfers for the 2022 benefit year. Additionally, we propose
clarifications to the process for HHS to audit issuers of risk
adjustment covered plans and reinsurance-eligible plans and also
propose to establish authority for HHS to conduct compliance reviews of
these issuers. The proposals in part 153

[[Page 78580]]

also relate to the risk adjustment user fee for the 2022 benefit year.
We also propose to revise the schedule for the collection of HHS-RADV
charges and disbursement of payments such that these charges and
disbursements will occur in the same calendar year in which HHS-RADV
results are released. Finally, the proposals regarding part 153 include
a proposal to shorten the discrepancy reporting windows for HHS-RADV,
update the applicable regulations regarding when second validation
audit (SVA) findings can be disputed or appealed, expand the conflict
of interest standard for IVA Entities, and codify two previously
established exemptions from the requirement to participate in HHS-RADV.
We propose to amend the definition of direct enrollment technology
provider and add a definition of QHP issuer direct enrollment
technology provider in part 155 to recognize that QHP issuers may also
use QHP issuer direct enrollment technology providers to facilitate
participation in direct enrollment under Sec. Sec. 155.221 and
156.1230, and make conforming amendments to the definition of web-
broker. We also propose changes to web-broker website display
requirements, and propose to codify more specific operational readiness
review requirements for web-brokers and direct enrollment entities. In
addition, we propose allowing Navigators and certified application
counselors (CACs) to assist consumers with applying for eligibility for
insurance affordability programs and QHP enrollment through web-broker
non-Exchange websites under certain circumstances. We also propose to
amend the marketing and display requirements for direct enrollment
entities.
We also propose to establish a new direct enrollment option for
State Exchanges, SBE-FPs and FFE states to use direct enrollment
technology and non-Exchange websites developed by approved web brokers,
issuers and other direct enrollment partners to enroll qualified
individuals in QHPs offered through the Exchange.
We also propose several amendments to special enrollment period
policy. Specifically, we propose: To add a new flexibility to allow
current Exchange enrollees and their dependents to change to a QHP of a
lower metal level if they qualify for a special enrollment period due
to becoming newly ineligible for APTC; to allow a qualified individual,
enrollee, or dependent who did not receive timely notice of a
triggering event and otherwise was reasonably unaware that a triggering
event occurred to select a plan within 60 days of the date that he or
she knew, or reasonably should have known, of the occurrence of the
triggering event; and to clarify that a special enrollment period is
triggered when a qualified individual or his or her dependent is
enrolled in COBRA continuation coverage, and the employer contributions
for such coverage completely cease. We also propose to require
Exchanges to verify eligibility for at least 75 percent of special
enrollments for consumers newly enrolling in Exchange coverage.
As we do every year in the annual HHS notice of benefit and payment
parameters, we propose to update the required contribution percentage,
the maximum annual limitation on cost sharing, and the reduced maximum
annual limitation on cost sharing based on the premium adjustment
percentage. Additionally, we propose to amend part 156 to establish
that for the 2023 benefit year and beyond, we will publish the annual
updates to the premium adjustment percentage, maximum annual limitation
on cost sharing, reduced maximum annual limitation on cost sharing and
required contribution percentage in guidance in January of the benefit
year prior to the applicable benefit year, rather than in the
applicable benefit year's annual HHS notice of benefit and payment
parameters, as long as no change to the methodologies to calculate
these amounts are proposed. We also propose a methodology for analyzing
the impact of preliminary values of the reduced annual maximum
limitations on cost sharing on the AVs of silver plan variations.
Additionally, we propose clarifications to the process for HHS to audit
QHP issuers related to APTC, CSRs, and user fees and propose to
establish authority for HHS to conduct compliance reviews to ensure
compliance with Federal APTC, CSRs, and user fee standards. We propose
to update the user fee rates for the 2022 benefit year for all issuers
participating on the Exchanges using the Federal platform. We also
propose modifications to the regulations addressing network adequacy
standards for non-network plans and payments accepted by QHP issuers.
Finally, we propose to require QHP issuers to accept premium payments
made on behalf of an enrollee from an individual coverage health
reimbursement arrangement (individual coverage HRA) or QSEHRA.
The proposed changes to part 158 would establish the definition of
prescription drug rebates and other price concessions that issuers must
deduct from incurred claims for MLR reporting and rebate calculation
purposes. The proposed changes to part 158 would also explicitly allow
issuers the option to prepay a portion or all of the estimated MLR
rebate for a given MLR reporting year in advance of the deadlines set
forth in Sec. Sec. 158.240(e) and 158.241(a)(2) and filing the MLR
Annual Reporting Form, and establish a safe harbor allowing such
issuers, under certain conditions, to defer the payment of rebates
remaining after prepayment until the following MLR reporting year. In
addition, the proposed changes to part 158 would allow issuers to
provide MLR rebates in the form of a premium credit prior to the date
that the rules currently provide. Lastly, we propose to clarify MLR
reporting and rebate requirements for issuers that choose to offer
temporary premium credits during a PHE declared by the Secretary of HHS
in the 2021 benefit year and beyond when such credits are permitted by
HHS.
The proposed addition of part 184 would require PBMs under contract
with an issuer of QHPs to report prescription drug data required by
section 1150A of the Act.
The proposed changes in 31 CFR part 33 and 45 CFR part 155 related
to State Innovation Waivers would reference and incorporate the
existing 2018 Guidance into regulations in order to give states
certainty regarding the requirements to receive and maintain approval
by the Departments.

III. Provisions of the Proposed HHS Notice of Benefit and Payment
Parameters for 2022--Department of Health and Human Services

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

1. Guaranteed Availability of Coverage (Sec. 147.104)
Section 147.104(b)(2) incorporates by reference certain Exchange
special enrollment periods described in Sec. 155.420, making those
special enrollment periods applicable to non-grandfathered coverage
offered in the individual market through or outside of an Exchange. We
propose amendments to Sec. 147.104(b)(2) to clarify that paragraph
(b)(2)(ii) does not apply to references in Sec. 155.420(d)(4)
(relating to errors of the Exchange), and to make a conforming
amendment consistent with the proposal in Sec. 155.420(c)(5) relating
to special enrollment period availability for individuals who do not
receive timely notice of a triggering event.
Section 155.420(d)(4) establishes an Exchange special enrollment
period for a qualified individual or their

[[Page 78581]]

dependent if their enrollment or non-enrollment in a QHP is
unintentional, inadvertent, or erroneous and is the result of the
error, misrepresentation, misconduct, or inaction of an officer,
employee, or agent of the Exchange or HHS, its instrumentalities, or a
non-Exchange entity providing enrollment assistance or conducting
enrollment activities. Section 147.104(b)(2)(ii) states that, when
determining the application of a special enrollment period for
individual market coverage offered outside the Exchange, a reference in
Sec. 155.420 to a ``QHP'' is deemed to refer to a plan, a reference to
``the Exchange'' is deemed to refer to the applicable state authority,
and a reference to a ``qualified individual'' is deemed to refer to an
individual in the individual market.
However, this paragraph was not intended to apply to Sec.
155.420(d)(4), which is specific to errors of the Exchange, not the
applicable state authority. It would be inappropriate for the
triggering event in this case to apply to errors of the applicable
state authority because the state does not perform the same functions
as the Exchange. For example, the state authority does not perform an
enrollment function. Thus, basing the triggering event on errors of the
state is inappropriate and could create different special enrollment
periods in the individual market on and off of the Exchange.
Therefore, we propose to clarify that Sec. 147.104(b)(2)(ii) does
not apply to references in Sec. 155.420(d)(4). As a result, issuers
offering health insurance coverage in the individual market must
provide a limited open enrollment period under the same circumstances
as described in Sec. 155.420(d)(4).
In addition, we propose a conforming amendment to Sec.
147.104(b)(4)(ii), consistent with the proposal in Sec. 155.420(c)(5),
to establish that if an individual did not receive timely notice of a
triggering event described in paragraph (b)(2) or (3) of Sec. 147.104,
and otherwise was reasonably unaware that such a triggering event
occurred, an issuer of non-grandfathered coverage in the individual
market, whether inside or outside an Exchange, must assign the date the
individual knew, or reasonably should have known, of the occurrence of
the triggering event as the date of the triggering event for a special
enrollment period. Consistent with Sec. Sec. 147.104(b)(5) and
155.420(b), this proposal would allow the individual or dependent to
choose the earliest effective date that would have been available if he
or she had received timely notice of the triggering event or another
effective date that would otherwise be available pursuant to Sec.
155.420(b). We solicit comments on this approach. We note that this
rule would not apply for special enrollment periods in the group
market, and seek comment on whether we should exclude the reference to
the triggering events in Sec. 147.104(b)(3) in the amended Sec.
147.104(b)(4)(ii) in order to retain alignment of the individual and
group market special enrollment periods required under Sec.
147.104(b)(3).

B. Part 150--CMS Enforcement in Group and Individual Markets

1. Technical Corrections
Part 150 sets forth our enforcement processes for all the
requirements of title XXVII of the PHS Act with respect to health
insurance issuers and non-federal governmental group health plans. This
proposed rule would make technical corrections to multiple sections of
part 150. Specifically, we propose removing all references to ``HIPAA''
and replacing them with ``PHS Act'' to clarify that the part 150
processes are used for enforcing not only the requirements emanating
from HIPAA, but also the PPACA and other legislation enacted subsequent
to HIPAA. These proposed wording changes were made in the February 27,
2013 Federal Register final rule entitled ``Patient Protection and
Affordable Care Act; Health Insurance Market Rules; Rate Review'' (78
FR 13406). However, because of an oversight, some references were not
updated at that time. In this rule, we propose this change to the
definition of ``Complaint'' in Sec. 150.103; the introductory text to
Sec. 150.303(a), as well as to Sec. Sec. 150.205(e)(2); 150.213(b);
150.305(a)(1), (a)(2), (b)(1) and (c)(1); 150.311(g) and 150.313(b).
2. Administrative Hearings
Additionally, we propose certain procedural changes to part 150
sections regarding administrative hearings. These proposed changes are
intended to align with the Departmental Appeals Board's current
practices for administrative hearings to appeal CMPs. Specifically, we
propose changes that would remove requirements to file submissions in
triplicate and instead require electronic filing. This change is
reflected in the proposed amendments to the definition of ``Filing
date'' in Sec. 150.401, to the introductory text in Sec. 150.427(a),
and to the service of submission requirements captured in Sec.
150.427(b). We also propose amendments to several provisions in part
150 to allow for the option of video conferencing as a form of
administrative hearing in part 150 in addition to the forms already
allowed. To capture this flexibility, we propose amendments to the
definition of ``Hearing'' in Sec. 150.401 and to the requirements
outlined in Sec. 150.419(a) related to the forms for the hearing,
Sec. 150.441(e) related to prehearing conferences, and Sec.
150.447(a) related to the record of the hearing. Finally, we propose to
update Sec. 150.431 to allow the Administrative Law Judge (ALJ) to
communicate the next steps for a hearing in either the acknowledgement
of a request for hearing or on a later date. We propose parallel
amendments to the administrative hearings requirements under subpart J
of part 156. We seek comment on these proposals.

C. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment

In subparts A, B, D, G, and H of part 153, we established standards
for the administration of the risk adjustment program. The risk
adjustment program is a permanent program created by section 1343 of
the PPACA that transfers funds from lower-than-average risk, risk
adjustment covered plans to higher-than-average risk, risk adjustment
covered plans in the individual and small group markets (including
merged markets), inside and outside the Exchanges.\17\ In accordance
with Sec. 153.310(a), a state that is approved or conditionally
approved by the Secretary to operate an Exchange may establish a risk
adjustment program, or have HHS do so on its behalf.\18\ We did not
receive any requests from states to operate risk adjustment for the
2022 benefit year; therefore, HHS will operate risk adjustment in every
state and the District of Columbia for the 2022 benefit year.
---------------------------------------------------------------------------

\17\ 42 U.S.C. 18063.
\18\ Also see 42 U.S.C. 18041(c)(1).
---------------------------------------------------------------------------

We propose changes in this rule to the identification of the 3
benefit years of enrollee-level EDGE data that would be used for
purposes of the annual recalibration of the risk adjustment models. We
also propose modeling updates to improve the models' predictive power
for certain subgroups of enrollees, as well as proposed changes to the
enrollment duration factors for the adult models, and we propose to
continue a pricing adjustment related to the Hepatitis C drugs. We
propose to allow states to submit multi-year requests for reductions to
transfer calculations under the state payment transfer formula and we
outline the 2022 benefit year reduction request submitted by Alabama.
Additionally, we propose to clarify risk adjustment reporting
requirements for issuers that choose to

[[Page 78582]]

offer premium credits, if permitted by HHS for future benefit years. We
propose the risk adjustment user fee for the 2022 benefit year and
propose to codify in regulation the previously established exemptions
from HHS-RADV requirements for issuers with only small group market
carryover coverage in the benefit year being audited and for sole
issuers in a state market risk pool during the benefit year being
audited. We also propose to revise the schedule for the collection of
HHS-RADV charges and disbursement of payments such that these charges
and disbursements will occur in the same calendar year in which HHS-
RADV results are released. Finally, we propose to shorten the
discrepancy reporting windows during HHS-RADV, clarify and expand the
conflict of interest standards that will be applied to initial
validation audit (IVA) entities, and update the risk adjustment
regulations to more clearly reflect the limitations on the ability to
dispute or appeal SVA findings.
1. HHS Risk Adjustment (Sec. 153.320)
The HHS risk adjustment models predict plan liability for an
average enrollee based on that person's age, sex, and diagnoses (also
referred to as hierarchical condition categories (HCCs)), producing a
risk score. The HHS risk adjustment methodology utilizes separate
models for adults, children, and infants to account for clinical and
cost differences in each age group. In the adult and child models, the
relative risk assigned to an individual's age, sex, and diagnoses are
added together to produce an individual risk score. Additionally, to
calculate enrollee risk scores in the adult models, we added enrollment
duration factors beginning with the 2017 benefit year, and prescription
drug categories (RXCs) beginning with the 2018 benefit year.\19\ Infant
risk scores are determined by inclusion in one of 25 mutually exclusive
groups, based on the infant's maturity and the severity of diagnoses.
If applicable, the risk score for adults, children, or infants is
multiplied by a CSR adjustment that accounts for differences in induced
demand at various levels of cost sharing.
---------------------------------------------------------------------------

\19\ For the 2018 benefit year, there were 12 RXCs, but starting
with the 2019 benefit year, the two severity-only RXCs were removed
from the adult risk adjustment models. See, for example, 83 FR
16941.
---------------------------------------------------------------------------

The enrollment-weighted average risk score of all enrollees in a
particular risk adjustment covered plan (also referred to as the plan
liability risk score) within a geographic rating area is one of the
inputs into the risk adjustment state payment transfer formula, which
determines the state transfer payment or charge that an issuer will
receive or be required to pay for that plan for the applicable state
market risk pool. Thus, the HHS risk adjustment models predict average
group costs to account for risk across plans, in keeping with the
Actuarial Standards Board's Actuarial Standards of Practice for risk
classification.
a. Updates to Data Used for Risk Adjustment Model Recalibration
Consistent with the approach outlined in the 2020 Payment Notice to
no longer rely upon MarketScan[supreg] data \20\ for recalibrating the
risk adjustment models, we propose to continue to recalibrate the risk
adjustment models for the 2022 benefit year using only enrollee-level
EDGE data. However, rather than using 2017, 2018 and 2019 enrollee-
level EDGE data, we propose to use the 2016, 2017, and 2018 enrollee-
level EDGE data (the same years' data used to recalibrate the 2021 risk
adjustment models) to recalibrate the risk adjustment models for the
2022 benefit year. We also propose to continue to use blended, or
averaged, coefficients from the 3 years of separately solved models for
the 2022 benefit year model recalibration.
---------------------------------------------------------------------------

\20\ 84 FR 17463 through 17466.
---------------------------------------------------------------------------

Previously, we used the 3 most recent years of MarketScan[supreg]
data available to recalibrate the 2016, 2017, and 2018 benefit year
risk adjustment models. Then, starting with the 2019 benefit year, we
began transitioning from using the MarketScan[supreg] data to using the
enrollee-level EDGE data to recalibrate the risk adjustment models. The
2021 benefit year was the first year that we recalibrated the risk
adjustment models using 3 years of enrollee-level EDGE data.\21\
Specifically, for the 2021 benefit year, we used the 2016, 2017, and
2018 benefit years of enrollee-level EDGE data to recalibrate the risk
adjustment models. During prior recalibrations, we implemented an
approach that used blended, or averaged, coefficients from 3 years of
separately solved models to provide stability for the risk adjustment
coefficients year-to-year, while reflecting the most recent years'
claims experience available. In some prior years, this approach
resulted in reliance on data that could not be incorporated into the
coefficients until after the publication of the applicable benefit
year's Payment Notice, because the associated data was not available in
time to incorporate into the models in time for publication in the
Payment Notice.\22\ For example, due to the timing of the proposed 2021
Payment Notice, we were unable to incorporate the 2018 benefit year
enrollee-level EDGE data into the proposed coefficients in the proposed
2021 Payment Notice, and instead included draft coefficients in the
proposed rule reflecting only 2016 and 2017 benefit years' enrollee-
level EDGE data.\23\ We were also unable to incorporate the 2018
benefit year enrollee-level EDGE data in the final coefficients in the
2021 Payment Notice; therefore, consistent with Sec. 153.320(b)(1)(i),
we released the final 2021 benefit year coefficients in guidance after
publication of the 2021 Payment Notice.\24\ We followed a similar
approach in other benefit years when we were unable to incorporate the
most recent year of available data in the applicable benefit year's
Payment Notice.\25\
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\21\ 85 FR 29173 through 29175.
\22\ See, for example, the 2018 Payment Notice final rule, 81 FR
94058; and the 2021 Payment Notice final rule, 85 FR 29173 through
29175.
\23\ See 85 FR 7097 through 7098 and 7104 through 7112.
\24\ See 85 FR 29173 through 29175. Also see https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
\25\ See, for example, the 2018 Payment Notice rule, 81 FR
94084. Also see https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/2018-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.
---------------------------------------------------------------------------

Some commenters to the proposed 2021 Payment Notice expressed
concern about when the final blended coefficients would be available,
asking that final coefficients be made available earlier. Having the
risk adjustment coefficients for the upcoming benefit year available
earlier allows issuers more time to incorporate this information when
pricing their plans for the upcoming benefit year. Commenters offered
suggestions for ways HHS could propose coefficients using all of the
data years that HHS would use for the final coefficients. Stakeholders
submitted similar comments in prior years when the final coefficients
were released in guidance after publication of the applicable benefit
year's Payment Notice.\26\ We have continued to consider these comments
and, in this rulemaking, we propose to change our approach for
identifying the 3 most recent years of enrollee-level EDGE data that
would be used to recalibrate the risk adjustment models. Previously, we
used the three most recent years of data that are available in time for
publication in the final rule or soon thereafter in guidance. However,
beginning with the 2022 benefit year, we are proposing to

[[Page 78583]]

use the 3 most recent consecutive years of enrollee-level EDGE data
that are available in time for incorporating the data in the draft
recalibrated coefficients published in the proposed rule and we propose
to not update the coefficients between the proposed and final rules if
an additional year of enrollee-level EDGE data becomes available for
incorporation. The purpose of this proposed change is to respond to
stakeholders' request to provide the proposed coefficients in the
proposed rule while continuing to use the 3 most recent consecutive
years of enrollee-level EDGE data available to recalibrate the risk
adjustment models. We believe this approach promotes stability and
avoids the delays in publication of the coefficients while continuing
to develop blended, or averaged, coefficients from the 3 years of
separately solved models for model recalibration. This proposed
approach also would continue to use actual data from issuers'
individual and small group (or merged) market populations, as well as
maintain year-to-year stability in risk scores as the recalibration
would continue to use at least two years of enrollee-level EDGE data
that were used in the previous year's models.\27\
---------------------------------------------------------------------------

\26\ See, for example, 81 FR 94084 through 94085.
\27\ As detailed earlier, the 2022 benefit year recalibration
would rely on the same 3 years of enrollee-level EDGE data that were
used in the 2021 benefit year. For the 2023 benefit year and beyond,
the recalibration would rely on 2 years of the enrollee-level data
that were used in the prior year.
---------------------------------------------------------------------------

For these reasons, we propose to use 2016, 2017, and 2018 benefit
years' enrollee-level EDGE data for the 2022 benefit year model
recalibration. We seek comment on our proposal to determine
coefficients for the 2022 benefit year based on a blend of separately
solved coefficients from the 2016, 2017, and 2018 benefit years'
enrollee-level EDGE data and our proposed approach to identify the 3
most recent years of data available for the annual recalibration of the
risk adjustment models moving forward. Additionally, we seek comment on
whether we should instead maintain the approach that would use the
2017, 2018, and 2019 benefit years' data to recalibrate the risk
adjustment models for the 2022 benefit year.
The draft coefficients listed below in Tables 1 through 6 reflect
the use of 2016, 2017, and 2018 benefit year enrollee-level EDGE data,
as well as other risk adjustment model updates proposed in this
proposed rule (including changes to the model specifications, changes
to the enrollment duration factors and the pricing adjustment to
Hepatitis C drugs). However, we note that the coefficients could change
if the proposed recalibration policies, or other proposed modeling
parameters, are not finalized or are modified in response to comments.
In addition, consistent with Sec. 153.320(b)(1)(i), if we are unable
to finalize the final coefficients in time for the final rule, we would
publish the final coefficients for the 2022 benefit year in guidance
soon after the publication of the final rule.
b. Risk Adjustment Model Updates
Beginning with the 2022 benefit year, we are proposing two modeling
updates to the risk adjustment models. These proposed updates include
changes to the model specifications for the adult and child models and
to the enrollment duration factors in the adult models to improve the
models' prediction. We are also proposing to continue the market
pricing adjustment for the Hepatitis C drugs that has been in place
since the 2020 benefit year.
(1) Changes to the Model Specifications
Beginning with the 2022 benefit year, we are proposing to modify
the adult and child models specifications to improve prediction for
enrollees at both the low and highest ends of expected expenditures.
The current HHS-HCC models are estimated by a weighted least squares
regression.\28\ The dependent variable is annualized simulated plan
liability expenditures, and the weight is the person-specific sample
eligibility fraction. The effective outcome is that the models predict
per member per month (PMPM) expenditures.
---------------------------------------------------------------------------

\28\ See, for example, 78 FR 15420 and Section 3.7 of the
``March 31, 2016 HHS-Operated Risk Adjustment Methodology Meeting
Discussion Paper,'' March 24, 2016. Available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf.
---------------------------------------------------------------------------

As described in the 2021 Payment Notice, the current HHS-HCC
models, which are linear models, modestly underpredict plan liability
for enrollees without HCCs (enrollees with low expected expenditures)
and modestly underpredict plan liability for enrollees with the highest
HCC counts.\29\ In the 2021 Payment Notice, we described options that
we were considering to address these issues, such as adding a non-
linear term or HCC counts terms to the risk adjustment models.\30\ For
the non-linear model option, we considered adding a coefficient-
weighted sum of payment HCCs raised to a power that could be
interpreted as a measure of overall disease burden. For the HCC counts
model option, we considered adding eight indicator variables
corresponding to 1 to 8-or-more payment HCCs, similar to the CMS-HCC
risk adjustment counts models used for Medicare Advantage.\31\ We have
further evaluated the performance of these options, their potential for
improved prediction, and considered other alternatives to improve the
HHS risk adjustment models' prediction.
---------------------------------------------------------------------------

\29\ 85 FR 29188 and 29189.
\30\ Ibid.
\31\ ``Advance Notice of Methodological Changes for Calendar
Year (CY) 2020 for the Medicare Advantage (MA) CMS-HCC Risk
Adjustment Model,'' December 20, 2018. Available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2020Part1.pdf.
---------------------------------------------------------------------------

Our initial analyses showed that the non-linear and HCC counts
models would yield considerable gains in predictive accuracy in the
adult models across several groups when compared to the current linear
models.\32\ We tested both the count and non-linear models' impact on
the adult silver risk adjustment models and found that the enrollees in
the lowest cost deciles had better predictive ratios under either the
HCC counts or non-linear model specification than under the current
linear model specification. However, both models had shortcomings that
prompted us to consider alternate model options. For the HCC counts
model, we were concerned that the presence of counts across all HCCs
may promote gaming in coding practices. We explored ways to assure
modeling convergence across all metals and data years, and found that
the non-linear models did not consistently converge in all testing
scenarios, and that convergence could not reliably be assured without
constraining model factors and revising those techniques with each
metal and data year model run. Therefore, we continued to explore
additional types of model specifications refinements that could balance
the goals of improving the models' prediction with mitigating modeling
complexity and gaming concerns. Specifically, as described later in
this section, we explored a two-stage specification with additional
weighting in the second stage based on the inverse capped prediction
from the first stage (``two-stage specification''), a specification
with HCC counts included for a small number of severe and transplant
HCCs (``interacted HCC counts factors''), and an approach combining the
two-stage specification with the interacted HCC counts factors.
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\32\ 85 FR 7101 through 7104.
---------------------------------------------------------------------------

For the two-stage specification, we explored calibrating the adult
and child models in two stages: In the first-stage

[[Page 78584]]

estimation, the model coefficients would be estimated using the current
model specifications; and in the second stage, we would re-estimate the
model weighted by the reciprocal of the predicted values of relative
expenditures from the first step estimation with the same model
specification.\33\ The first stage of the weighted estimation method
involves a linear regression (weighted by the person-specific
eligibility fraction of the number of months enrolled divided by 12) of
simulated plan liability on age-sex factors, payment HCC factors, the
enrollment duration factors,\34\ and RXCs for the adult models. For the
child models, the first stage of the weighted estimation method
involves a linear regression of simulated plan liability on age-sex
factors and payment HCC factors. The second stage involves using the
reciprocal of first-stage predictions as weights for a second linear
regression.\35\ To stabilize the weights for the second stage
estimation, we imposed lower and upper bound caps on the first-stage
predictions at the 2.5th and 97.5th percentiles in the adult models,
and the 2.5th and 99.5th percentiles in the child models. We tested
various caps for the weights based on the distribution of costs, and
found these lower and upper bound caps achieved better prediction on
average. This approach has the material effect of weighting the
healthier enrollees, who represent a majority of enrollees in the
individual and small group (including merged) markets but who are
underpredicted by the current models, more heavily so that the
statistical model predicts their expenditures more accurately. On the
other hand, this approach systematically underweights, and therefore
underpredicts, very expensive enrollees. However, the capped weighting
approach mitigated the potential to underpredict at the high end for
expensive enrollees, as well as any possible low-end overprediction. In
our consideration of this option, we tested various weights, including
reciprocals of square root of prediction, log of prediction, and
residuals from first step estimation, but the reciprocal of the capped
predictions resulted in better predictive ratios for low-cost enrollees
compared to any of these alternative weighting functions.
---------------------------------------------------------------------------

\33\ This weighted approach is similar to the weighted least
squares approach with the weight equal to the reciprocal of the
estimated variance that is often used to correct for
heteroskedasticity. However, in our proposed approach, we would use
the reciprocal of predictions from the first step as weights to
correct for underprediction of low-valued coefficients.
\34\ We are proposing to modify the enrollment duration factors
in the adult models, as described elsewhere in this proposed rule.
\35\ Under the two-stage specification and interacted HCC counts
model proposal described later in this section, we are proposing to
replace the severity illness indicators in the adult risk adjustment
models with the interacted HCC counts.
---------------------------------------------------------------------------

We also explored how the addition of severe and transplant
indicators interacted with HCC counts, wherein an indicator flagging
the presence of at least one severe or transplant payment HCC is being
interacted with counts of the enrollee's payment HCCs.\36\ The goals
for this approach were to: (1) Address the non-linearity in costs
between enrollees with no or very low costs and enrollees with high
costs; (2) empirically incorporate the cost impact of multiple complex
diseases; and (3) mitigate the gaming concerns with the HCC counts
model. We tested different types of severity and transplant indicators
interacted with HCC counts with the goal of improving prediction for
enrollees with the highest costs and multiple HCCs to counter balance
the reciprocal prediction weights that relatively underpredicted costs
for these enrollees. For this approach, we assessed the HCCs for
enrollees with extremely high costs, and HCCs that were being
underpredicted in the current risk adjustment models. We found that
many of the HCCs that were flagged as being underpredicted were those
HCCs in the severe illness indicators, the transplant HCCs, and other
HCCs related to severity of disease; therefore, we considered dropping
the current severity illness indicators in the adult models and
replacing them with severity and transplant indicators interacted with
HCC counts factors in the adult and child models. Table 3 lists the
HCCs that were selected for the severity and transplant indicators for
the adult and child models for purposes of exploring this option. The
severity and transplant indicators were then interacted with HCC counts
factors, which are described below.
---------------------------------------------------------------------------

\36\ For HCCs in a group, the group is counted at most once.
These groups of HCCs in the risk adjustment models are typically
detailed in the Tables 6 and 7 of the HHS-Developed Risk Adjustment
Model Algorithm ``Do It Yourself (DIY)'' Software.
---------------------------------------------------------------------------

The purpose of adding severity and transplant indicators interacted
with HCC counts factors is to account for the fact that costs of
certain HCCs rise significantly when they occur with multiple other
HCCs. However, in order to mitigate the incentive to upcode multiple
HCCs, we only increased incremental risk scores in the presence of at
least one of the selected HCCs in the severity or transplant indicator
groups in Table 3. That is, an enrollee must have at least one HCC in
the ``severity'' or ``transplant'' indicator groups in Table 3 to
receive the interacted HCC counts coefficient toward their risk score.
Under this approach, when an enrollee has a severity indicator HCC
in Table 3, the enrollee's risk score includes the sum of: (1) Severity
HCC variable coefficient; \37\ and (2) applicable severity HCC counts
variable coefficient. The HCC counts factors, which indicate the counts
of all payment HCCs for an enrollee with at least one HCC, interacted
with the severity indicator in Table 3, range from one, two, to 10+
payment HCCs (1, 2, . . . , 10+) for the adult models, and from one,
two, to 5, then 6 or 7, and 8+ payment HCCs for the child models. To
implement the severity indicator HCC counts factors and further explore
this option, we removed the current severe illness indicators in the
adult models, and added severity indicator interacted HCC counts
variables for the adult and child models.
---------------------------------------------------------------------------

\37\ This is in addition to the HCC coefficients for any other
HCCs that the enrollee has, as well other risk adjustment factors
that the enrollee has (such as demographic factors). If an enrollee
has no severe HCCs the severe count interaction term coefficients
are not applicable.
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For the transplant-related HCCs within the severity indicator HCC
counts in Table 3,\38\ we found separating out transplant HCCs into
their own additional indicator to interact HCC counts factors improved
prediction for these high-cost enrollees. Therefore, for the transplant
HCCs, we created a separate transplant indicator to interact with
payment HCC counts of 4, 5, 6, 7, or 8+ for the adult models, and a
single indicator variable of payment HCC counts of 4+ for the child
models. For example, an adult enrollee with a transplant HCC 34 ``Liver
Transplant Status/Complications'' in the transplant indicator group and
three other payment HCCs received the following factors toward their
risk score in the adult models: (1) The four coefficients for their
individual HCCs (the three non-transplant HCCs and the HCC 34
transplant HCC coefficient), (2) severity interacted HCC counts of 4
coefficient, and (3) transplant interacted HCC

[[Page 78585]]

counts of 4 coefficient.\39\ The child model operated similarly. For a
child enrollee with a transplant HCC in the transplant indicator group
and three other payment HCCs, the following was used to calculate the
enrollee's risk score: (1) Coefficients for all four HCCs, (including
the transplant HCC coefficient), (2) severity interacted HCC counts of
4 coefficient, and (3) transplant interacted HCC counts of 4
coefficient.
---------------------------------------------------------------------------

\38\ We note that one transplant HCC (HCC 18 Pancreas
Transplant) is not included on the list in Table 3. HCC 18 has a
much lower coefficient than any of the other transplant HCCs in the
adult models and was not underpredicted by the models. Therefore, we
propose to exclude it from the list in Table 3 and solicit comments
on the proposed treatment of HCC 18.
\39\ This is in addition to other risk adjustment factors that
the enrollee has (such as demographic factors).
---------------------------------------------------------------------------

As an alternative, we explored interacting the HCC counts factors
with each selected severity and transplant HCC, but found it was
sufficient to interact the HCC counts factors with a variable
indicating the presence of at least one of the selected HCCs in each
group to improve prediction for enrollees with these HCCs. We also
explored different combinations of HCC counts to identify the counts
factors for both indicator groups in the adult and child models that
provided the best balance of reasonable sample sizes and relative cost
differences between each counts factor. More specifically, in the adult
models, we found that starting with 4+ HCCs for the transplant
interacted factors improved predictions of enrollees at the very high
end in terms of risk and cost and ending at 8+ HCCs instead of 10+ HCCs
addressed the small sample sizes of enrollees with a transplant and 9
or more payment HCCs. For the child models, we found having one
variable for 4+ payment HCCs provided more stable estimates given the
smaller sample sizes for children than those for adults.
Lastly, we tested combining these specifications into an
alternative approach that incorporated both the two-stage specification
and the severity and transplant indicators interacted HCC counts
factors described above. We found this combined approach generally
improved prediction for enrollees at both the low and highest ends of
expected expenditures. Specifically, even though we found that the age-
sex factors and some HCCs might have slightly worse predictive ratios
under the proposed combined approach than the current linear models, we
found that this combined approach improves predictive ratios in
comparison to the current models in each decile of predicted plan
liability. We also found that this combined approach improves R-squared
in comparison to the current model and that even though the
coefficients for the model factors that are most impacted by the
combined approach (the age-sex factors and the severe and transplant
HCCs) are changing under the 2022 benefit year models compared to the
2021 benefit year models, the average enrollee's adult risk score in
the recalibration sample in the silver metal level is only increasing
slightly between 2021 benefit year models to 2022 benefit year models.
Therefore, we propose to modify the HHS risk adjustment model
specifications for the adult and child models by combining a two-stage
specification and adding interacted HCC counts factors. For the two-
stage specification, we propose calibrating the adult and child models
in two stages. The first stage of the weighted estimation method would
involve a linear regression of simulated plan liability on age-sex
factors and payment HCC factors for the adult and child models, with
the addition of the enrollment duration and RXCs factors for the adult
models. The second stage would use the reciprocal of prediction as
weights from the first step as a second stage linear regression. To
stabilize the weights from the first stage predictions, we propose
lower and upper bound caps on the predictions at the 2.5th and 97.5th
percentiles in the adult models and the 2.5th and 99.5th percentiles in
the child models. This two-stage specification would be combined with
the severity and transplant indicators from the interacted HCC counts
factors. For the severity indicator group, we propose to add separate
count factors for one to 10+ payment HCCs counts factors (1, 2, . . . ,
10+) for the adult models and one to 5, 6 or 7, and 8+ payment HCCs (1,
2, . . . 5, 6 or 7, 8+) for the child models. The HCCs that flag the
severity indicator are listed in Table 3. For the transplant HCCs, we
propose to incorporate variables for 4 to 8+ payment HCCs (4, 5, 6, 7,
8+) for the adult models and one variable for 4+ payment HCCs for the
child models. All variables, including the severity and transplant
indicators interacted in the interacted HCC counts factors, would be
included in both stages of the regressions. We propose to incorporate
these model specification updates beginning with the 2022 benefit year
HHS risk adjustment adult and child models. We also propose to remove
the current severity illness indicators in the adult models beginning
with the 2022 benefit year.
The coefficients presented in Tables 1 and 2 incorporate these
proposed changes and Table 3 provides the list of severity and
transplant HCCs that apply for the interacted HCC counts factors. We
seek comment on these proposals, including on the HCCs selected for
flagging as severity and transplant indicators listed in Table 3 such
as whether we should include HCC 18 Pancreas Transplant in the
transplant indicator group, and the alternatives described above. We
also request comment on whether we should pursue both the interacted
HCC counts factors and the two-stage specification beginning with the
2022 benefit year (as proposed), if we should implement one of the two
approaches beginning with the 2022 benefit year (and if so, which one),
or if we should wait to implement the proposed changes that combines
the proposed model specification updates until the 2023 benefit year.
c. Changes to the Enrollment Duration Factors
In this rule, we propose changes to the enrollment duration factors
in the adult risk adjustment models to improve the prediction for
partial year enrollees with HCCs. As described in the proposed 2021
Payment Notice, we have been considering potential adjustments to the
enrollment duration factors and previously analyzed the current factors
using the 2016 and 2017 enrollee-level EDGE data.\40\ We explored
heterogeneity (variations) of costs for partial year enrollees in the
presence of certain diagnosis codes, by market (individual or small
group),\41\ and under various enrollment circumstances, such as
enrollment beginning later in the year or ending before the end of the
year. Our preliminary analysis of 2017 enrollee-level EDGE data found
that the current enrollment duration factors are driven by enrollees
with HCCs. That is, partial year enrollees with HCCs had higher PMPM
expenditures on average as compared to full year enrollees with HCCs.
On the other hand, partial year enrollees without HCCs were not
significantly different in PMPM expenditures compared to full year
enrollees without HCCs. In the 2021 Payment Notice, we also explained
that our preliminary analysis found that, in comparison to the effect
of the presence of HCCs on enrollment duration factors, enrollment
timing (for example, enrollment at the beginning of the year compared
to enrollment after open enrollment period, or drop in enrollment
before the end of the year) did not appear to affect PMPM expenditures
on average. While we did not make changes to the enrollment

[[Page 78586]]

duration factors in the 2021 Payment Notice, we stated that we were
considering eliminating the monthly enrollment duration factors up to
11 months and replacing them with monthly enrollment duration factors
up to 6 months for enrollees with HCCs. We also stated that we intended
to review the trends observed in our preliminary analysis using an
additional year's data before proposing changes.
---------------------------------------------------------------------------

\40\ See 85 FR 7103 and 7104.
\41\ In the enrollee-level EDGE data, merged market enrollees
are assigned to the individual or small group market indicator based
on their plan.
---------------------------------------------------------------------------

Since the publication of the 2021 Payment Notice, we have
reassessed enrollment duration factors for adults using the 2018
benefit year enrollee-level EDGE data. The additional data year's
findings were consistent with our prior finding that partial year
enrollees without HCCs do not have PMPM expenditures that are
significantly different compared to full year enrollees without HCCs.
We also found that the current enrollment duration factors underpredict
plan liability for partial year adult enrollees with HCCs, and
overpredict plan liability for partial year adult enrollees without
HCCs. Therefore, beginning with the 2022 benefit year, we are proposing
to remove the current 11 enrollment duration factors of up to 11 months
for all enrollees in the adult models, and add new monthly enrollment
duration factors of up to 6 months to the adult models that would only
apply for enrollees with payment HCCs. If finalized as proposed, this
would mean there would be no enrollment duration factors for adult
enrollees without payment HCCs starting with the 2022 benefit year
adult models. As part of this analysis, we also considered adoption of
enrollment duration factors by market, but we did not find a meaningful
distinction in relative costs between markets on average once we
implemented the proposed enrollment duration factors of up to 6 months
for adult enrollees with payment HCCs. Therefore, we are not proposing
enrollment duration factors for the adult models by market type at this
time. We are also proposing to continue to incorporate enrollment
duration factors only in the adult models.\42\ We solicit comment on
the proposed changes to the enrollment duration factors for the adult
models. We also seek comment on whether we should implement these model
changes starting with the 2022 benefit year, whether we should delay
implementation until the 2023 benefit year, or whether we should create
the enrollment duration factors for different lengths, such as up to 9
months of enrollment, instead of up to 6 months, as proposed.
---------------------------------------------------------------------------

\42\ As explained in the 2021 Payment Notice proposed rule, we
found that partial year enrollees in the child models did not have
the same risk differences as partial year enrollees in the adult
models and they tended to have similar risk to full year enrollees
in the child models. In the infant models, we found that partial
year infants had higher expenditures on average compared to their
full year counterparts; however, the incorporation of enrollment
duration factors created interaction issues with the current
severity and maturity factors and did not have a meaningful impact
on the general predictive accuracy of the infant models. See 85 FR
7103 and 7104.
---------------------------------------------------------------------------

d. Pricing Adjustment for the Hepatitis C Drugs
For the 2022 benefit year models, we propose to continue applying
the market pricing adjustment to the plan liability associated with
Hepatitis C drugs that has been in place beginning with the 2020
benefit year final risk adjustment models.\43\ We continue to believe
this market pricing adjustment is necessary to account for the
significant pricing changes associated with the introduction of new and
generic Hepatitis C drugs between the data years used for recalibrating
the models and the applicable recalibration benefit year. We also
continue to be cognizant that issuers might seek to influence provider
prescribing patterns if a drug claim can trigger a large increase in an
enrollee's risk score that is higher than the actual plan liability of
the drug claim, and therefore, make the risk adjustment transfer
results more favorable for the issuer. We previously stated that we
intended to reassess this pricing adjustment with future benefit years'
enrollee-level EDGE data.\44\ We remain committed to doing so. However,
we are proposing to use the same 3 years of enrollee-level EDGE data
for the 2022 benefit year model recalibration as those used for the
2021 benefit year. Therefore, we propose to continue making the market
pricing adjustment to the plan liability associated with Hepatitis C
drugs to reflect future market pricing prior to solving for
coefficients for the 2022 benefit year models.\45\ We intend to
reassess this pricing adjustment in future recalibrations with
additional years of enrollee-level EDGE data. We seek comment on this
proposal.
---------------------------------------------------------------------------

\43\ 84 FR 17463 through 17466.
\44\ 85 FR 29185.
\45\ The Hepatitis C drugs market pricing adjustment to plan
liability is applied for all enrollees taking Hepatitis C drugs in
the data used for recalibration.
---------------------------------------------------------------------------

e. List of Factors To Be Employed in the Risk Adjustment Models (Sec.
153.320)
The proposed 2022 benefit year risk adjustment model factors
resulting from the equally weighted (averaged) blended factors from
separately solved models using the 2016, 2017, and 2018 enrollee-level
EDGE data, including all of the proposed model changes detailed above,
are shown in Tables 1 through 6. The adult, child, and infant models
have been truncated to account for the high-cost risk pool payment
parameters by removing 60 percent of costs above the $1 million
threshold.\46\ Table 1 contains factors for each adult model, including
the age-sex, HCCs, RXCs, RXC-HCC interactions, interacted HCC counts,
and enrollment duration coefficients. Table 2 contains the factors for
each child model. Table 3 lists the HHS-HCCs in the proposed severity
and transplant indicator flags selected for the interacted HCC counts
factors that would apply to the adult and child models beginning with
the 2022 benefit year. Table 4 contains the factors for each infant
model. Tables 5 and 6 contain the HCCs included in the infant models'
maturity and severity categories, respectively.
---------------------------------------------------------------------------

\46\ As detailed below, we are not proposing changes to the
high-cost risk pool parameters for the 2022 benefit year. Therefore,
as proposed, we would maintain the $1 million threshold and 60
percent coinsurance rate.

Table 1--Proposed Adult Risk Adjustment Model Factors for 2022 Benefit Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic
--------------------------------------------------------------------------------------------------------------------------------------------------------
Demographic Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Age 21-24, Male.............. 0.179 0.134 0.098 0.070 0.068
Age 25-29, Male.............. 0.184 0.138 0.102 0.074 0.073
Age 30-34, Male.............. 0.214 0.162 0.120 0.087 0.085
Age 35-39, Male.............. 0.248 0.188 0.140 0.100 0.097
Age 40-44, Male.............. 0.277 0.213 0.159 0.114 0.111
Age 45-49, Male.............. 0.310 0.240 0.182 0.131 0.128
Age 50-54, Male.............. 0.393 0.316 0.249 0.191 0.188

[[Page 78587]]

Age 55-59, Male.............. 0.446 0.359 0.285 0.221 0.217
Age 60-64, Male.............. 0.524 0.427 0.343 0.270 0.265
Age 21-24, Female............ 0.292 0.223 0.167 0.125 0.123
Age 25-29, Female............ 0.319 0.244 0.183 0.138 0.136
Age 30-34, Female............ 0.375 0.290 0.221 0.165 0.162
Age 35-39, Female............ 0.428 0.336 0.258 0.194 0.190
Age 40-44, Female............ 0.484 0.383 0.297 0.223 0.218
Age 45-49, Female............ 0.507 0.401 0.309 0.229 0.225
Age 50-54, Female............ 0.565 0.459 0.364 0.281 0.276
Age 55-59, Female............ 0.569 0.461 0.366 0.283 0.278
Age 60-64, Female............ 0.616 0.505 0.405 0.320 0.315
--------------------------------------------------------------------------------------------------------------------------------------------------------
Diagnosis Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
HCC001................................... HIV/AIDS..................... 1.372 1.241 1.148 1.066 1.062
HCC002................................... Septicemia, Sepsis, Systemic 9.748 9.526 9.394 9.265 9.261
Inflammatory Response
Syndrome/Shock.
HCC003................................... Central Nervous System 8.571 8.427 8.323 8.202 8.195
Infections, Except Viral
Meningitis.
HCC004................................... Viral or Unspecified 8.571 8.427 8.323 8.202 8.195
Meningitis.
HCC006................................... Opportunistic Infections..... 8.171 8.081 7.987 7.849 7.840
HCC008................................... Metastatic Cancer............ 24.079 23.695 23.536 23.460 23.461
HCC009................................... Lung, Brain, and Other Severe 14.384 14.117 13.991 13.897 13.896
Cancers, Including Pediatric
Acute Lymphoid Leukemia.
HCC010................................... Non-Hodgkin Lymphomas and 5.887 5.722 5.626 5.532 5.528
Other Cancers and Tumors.
HCC011................................... Colorectal, Breast (Age <50), 3.865 3.677 3.547 3.410 3.404
Kidney, and Other Cancers.
HCC012................................... Breast (Age 50+) and Prostate 2.559 2.414 2.305 2.185 2.180
Cancer, Benign/Uncertain
Brain Tumors, and Other
Cancers and Tumors.
HCC013................................... Thyroid Cancer, Melanoma, 1.134 1.018 0.893 0.744 0.735
Neurofibromatosis, and Other
Cancers and Tumors.
HCC018................................... Pancreas Transplant Status... 0.875 0.813 0.806 1.044 1.021
HCC019................................... Diabetes with Acute 0.385 0.323 0.262 0.202 0.198
Complications.
HCC020................................... Diabetes with Chronic 0.385 0.323 0.262 0.202 0.198
Complications.
HCC021................................... Diabetes without Complication 0.385 0.323 0.262 0.202 0.198
HCC022................................... Type 1 Diabetes Mellitus, add- 0.311 0.276 0.242 0.173 0.169
on to Diabetes HCCs 19-21.
HCC023................................... Protein-Calorie Malnutrition. 10.875 10.752 10.670 10.587 10.582
HCC026................................... Mucopolysaccharidosis........ 28.668 28.458 28.362 28.308 28.309
HCC027................................... Lipidoses and Glycogenosis... 28.668 28.458 28.362 28.308 28.309
HCC029................................... Amyloidosis, Porphyria, and 7.531 7.405 7.319 7.244 7.242
Other Metabolic Disorders.
HCC030................................... Adrenal, Pituitary, and Other 1.328 1.224 1.125 1.007 1.001
Significant Endocrine
Disorders.
HCC034................................... Liver Transplant Status/ 8.038 7.973 7.884 7.864 7.853
Complications.
HCC035_1 \47\............................ Acute Liver Failure/Disease, 7.063 6.914 6.849 6.800 6.798
Including Neonatal Hepatitis.
HCC035_2................................. Chronic Liver Failure/End- 2.906 2.734 2.630 2.520 2.516
Stage Liver Disorders.
HCC036................................... Cirrhosis of Liver........... 1.283 1.180 1.078 0.946 0.938
HCC037_1................................. Chronic Viral Hepatitis C.... 0.830 0.731 0.637 0.529 0.523
HCC037_2................................. Chronic Hepatitis, Except 0.830 0.731 0.637 0.529 0.523
Chronic Viral Hepatitis C.
HCC041................................... Intestine Transplant Status/ 23.291 23.157 23.033 22.817 22.812
Complications.
HCC042................................... Peritonitis/Gastrointestinal 11.657 11.449 11.339 11.253 11.250
Perforation/Necrotizing
Enterocolitis.
HCC045................................... Intestinal Obstruction....... 4.859 4.672 4.585 4.484 4.482
HCC046................................... Chronic Pancreatitis......... 3.262 3.088 3.000 2.913 2.912
HCC047................................... Acute Pancreatitis........... 2.933 2.727 2.593 2.418 2.412
HCC048................................... Inflammatory Bowel Disease... 0.820 0.731 0.626 0.488 0.479
HCC054................................... Necrotizing Fasciitis........ 8.872 8.708 8.632 8.596 8.595
HCC055................................... Bone/Joint/Muscle Infections/ 4.708 4.536 4.467 4.432 4.432
Necrosis.
HCC056................................... Rheumatoid Arthritis and 1.340 1.230 1.121 1.001 0.994
Specified Autoimmune
Disorders.
HCC057................................... Systemic Lupus Erythematosus 0.878 0.782 0.664 0.514 0.505
and Other Autoimmune
Disorders.
HCC061................................... Osteogenesis Imperfecta and 2.463 2.304 2.185 2.051 2.044
Other Osteodystrophies.
HCC062................................... Congenital/Developmental 2.463 2.304 2.185 2.051 2.044
Skeletal and Connective
Tissue Disorders.
HCC063................................... Cleft Lip/Cleft Palate....... 1.676 1.544 1.437 1.309 1.303
HCC066................................... Hemophilia................... 69.981 69.651 69.503 69.435 69.435
HCC067................................... Myelodysplastic Syndromes and 13.285 13.162 13.096 13.039 13.036
Myelofibrosis.
HCC068................................... Aplastic Anemia.............. 13.285 13.162 13.096 13.039 13.036
HCC069................................... Acquired Hemolytic Anemia, 13.285 13.162 13.096 13.039 13.036
Including Hemolytic Disease
of Newborn.
HCC070................................... Sickle Cell Anemia (Hb-SS)... 2.395 2.283 2.191 2.082 2.077
HCC071................................... Beta Thalassemia Major....... 2.395 2.283 2.191 2.082 2.077
HCC073................................... Combined and Other Severe 4.039 3.936 3.888 3.840 3.839
Immunodeficiencies.
HCC074................................... Disorders of the Immune 4.039 3.936 3.888 3.840 3.839
Mechanism.
HCC075................................... Coagulation Defects and Other 1.763 1.672 1.594 1.499 1.495
Specified Hematological
Disorders.

[[Page 78588]]

HCC081................................... Drug Use with Psychotic 2.438 2.264 2.108 1.897 1.885
Complications.
HCC082................................... Drug Use Disorder, Moderate/ 2.438 2.264 2.108 1.897 1.885
Severe, or Drug Use with Non-
Psychotic Complications.
HCC083................................... Alcohol Use with Psychotic 1.296 1.171 1.057 0.911 0.903
Complications.
HCC084................................... Alcohol Use Disorder, 1.296 1.171 1.057 0.911 0.903
Moderate/Severe, or Alcohol
Use with Specified Non-
Psychotic Complications.
HCC087_1................................. Schizophrenia................ 2.445 2.260 2.121 1.961 1.954
HCC087_2................................. Delusional and Other 2.372 2.199 2.067 1.894 1.886
Specified Psychotic
Disorders, Unspecified
Psychosis.
HCC088................................... Major Depressive Disorder, 1.271 1.141 1.008 0.838 0.829
Severe, and Bipolar
Disorders.
HCC090................................... Personality Disorders........ 0.856 0.742 0.606 0.446 0.435
HCC094................................... Anorexia/Bulimia Nervosa..... 2.223 2.099 1.993 1.875 1.869
HCC096................................... Prader-Willi, Patau, Edwards, 8.930 8.904 8.869 8.785 8.778
and Autosomal Deletion
Syndromes.
HCC097................................... Down Syndrome, Fragile X, 1.051 0.965 0.880 0.783 0.777
Other Chromosomal Anomalies,
and Congenital Malformation
Syndromes.
HCC102................................... Autistic Disorder............ 0.974 0.865 0.741 0.602 0.593
HCC103................................... Pervasive Developmental 0.856 0.742 0.606 0.446 0.435
Disorders, Except Autistic
Disorder.
HCC106................................... Traumatic Complete Lesion 10.321 10.159 10.050 9.940 9.936
Cervical Spinal Cord.
HCC107................................... Quadriplegia................. 10.321 10.159 10.050 9.940 9.936
HCC108................................... Traumatic Complete Lesion 7.300 7.190 7.148 7.079 7.076
Dorsal Spinal Cord.
HCC109................................... Paraplegia................... 7.300 7.190 7.148 7.079 7.076
HCC110................................... Spinal Cord Disorders/ 5.109 4.928 4.832 4.737 4.734
Injuries.
HCC111................................... Amyotrophic Lateral Sclerosis 3.983 3.791 3.637 3.454 3.445
and Other Anterior Horn Cell
Disease.
HCC112................................... Quadriplegic Cerebral Palsy.. 2.457 2.306 2.196 2.073 2.070
HCC113................................... Cerebral Palsy, Except 0.911 0.825 0.739 0.628 0.621
Quadriplegic.
HCC114................................... Spina Bifida and Other Brain/ 1.633 1.516 1.406 1.273 1.266
Spinal/Nervous System
Congenital Anomalies.
HCC115................................... Myasthenia Gravis/Myoneural 5.117 5.042 5.019 4.999 4.999
Disorders and Guillain-Barre
Syndrome/Inflammatory and
Toxic Neuropathy.
HCC117................................... Muscular Dystrophy........... 1.717 1.593 1.473 1.307 1.298
HCC118................................... Multiple Sclerosis........... 3.304 3.144 3.019 2.877 2.870
HCC119................................... Parkinson's, Huntington's, 1.717 1.593 1.473 1.307 1.298
and Spinocerebellar Disease,
and Other Neurodegenerative
Disorders.
HCC120................................... Seizure Disorders and 1.262 1.142 1.028 0.887 0.879
Convulsions.
HCC121................................... Hydrocephalus................ 10.147 10.050 9.987 9.914 9.910
HCC122................................... Coma, Brain Compression/ 10.005 9.852 9.745 9.624 9.618
Anoxic Damage.
HCC123................................... Narcolepsy and Cataplexy..... 5.856 5.690 5.554 5.405 5.397
HCC125................................... Respirator Dependence/ 21.425 21.213 21.080 20.954 20.949
Tracheostomy Status.
HCC126................................... Respiratory Arrest........... 8.941 8.754 8.635 8.523 8.520
HCC127................................... Cardio-Respiratory Failure 8.941 8.754 8.635 8.523 8.520
and Shock, Including
Respiratory Distress
Syndromes.
HCC128................................... Heart Assistive Device/ 21.035 20.838 20.709 20.586 20.580
Artificial Heart.
HCC129................................... Heart Transplant Status/ 21.035 20.838 20.709 20.586 20.580
Complications.
HCC130................................... Heart Failure................ 2.046 1.947 1.874 1.792 1.788
HCC131................................... Acute Myocardial Infarction.. 6.142 5.902 5.813 5.777 5.781
HCC132................................... Unstable Angina and Other 4.704 4.470 4.361 4.250 4.250
Acute Ischemic Heart Disease.
HCC135................................... Heart Infection/Inflammation, 8.866 8.749 8.645 8.507 8.499
Except Rheumatic.
HCC137................................... Hypoplastic Left Heart 1.910 1.809 1.715 1.613 1.608
Syndrome and Other Severe
Congenital Heart Disorders.
HCC138................................... Major Congenital Heart/ 1.910 1.809 1.715 1.613 1.608
Circulatory Disorders.
HCC139................................... Atrial and Ventricular Septal 1.910 1.809 1.715 1.613 1.608
Defects, Patent Ductus
Arteriosus, and Other
Congenital Heart/Circulatory
Disorders.
HCC142................................... Specified Heart Arrhythmias.. 1.838 1.717 1.608 1.473 1.469
HCC145................................... Intracranial Hemorrhage...... 11.065 10.884 10.774 10.662 10.658
HCC146................................... Ischemic or Unspecified 1.590 1.463 1.368 1.236 1.231
Stroke.
HCC149................................... Cerebral Aneurysm and 2.570 2.429 2.321 2.184 2.178
Arteriovenous Malformation.
HCC150................................... Hemiplegia/Hemiparesis....... 3.409 3.301 3.271 3.263 3.266
HCC151................................... Monoplegia, Other Paralytic 2.405 2.286 2.199 2.086 2.081
Syndromes.
HCC153................................... Atherosclerosis of the 7.875 7.759 7.732 7.746 7.750
Extremities with Ulceration
or Gangrene.
HCC154................................... Vascular Disease with 5.620 5.504 5.463 5.427 5.427
Complications.
HCC156................................... Pulmonary Embolism and Deep 7.977 7.859 7.751 7.617 7.608
Vein Thrombosis.
HCC158................................... Lung Transplant Status/ 12.435 12.247 12.124 12.008 11.999
Complications.
HCC159................................... Cystic Fibrosis.............. 5.177 5.040 4.976 4.910 4.908
HCC160................................... Chronic Obstructive Pulmonary 0.824 0.726 0.617 0.488 0.481
Disease, Including
Bronchiectasis.
HCC161_1................................. Severe Asthma................ 0.824 0.726 0.617 0.488 0.481
HCC161_2................................. Asthma, Except Severe........ 0.824 0.726 0.617 0.488 0.481
HCC162................................... Fibrosis of Lung and Other 1.742 1.631 1.532 1.403 1.396
Lung Disorders.
HCC163................................... Aspiration and Specified 7.455 7.417 7.378 7.350 7.349
Bacterial Pneumonias and
Other Severe Lung Infections.

[[Page 78589]]

HCC174................................... Exudative Macular 1.438 1.298 1.167 0.991 0.982
Degeneration.
HCC183................................... Kidney Transplant Status/ 8.681 8.609 8.503 8.269 8.263
Complications.
HCC184................................... End Stage Renal Disease...... 22.696 22.390 22.310 22.358 22.400
HCC187................................... Chronic Kidney Disease, Stage 0.863 0.794 0.736 0.668 0.665
5.
HCC188................................... Chronic Kidney Disease, 0.863 0.794 0.736 0.668 0.665
Severe (Stage 4).
HCC203................................... Ectopic and Molar Pregnancy.. 2.155 1.952 1.753 1.433 1.416
HCC204................................... Miscarriage with 0.924 0.813 0.657 0.430 0.413
Complications.
HCC205................................... Miscarriage with No or Minor 0.924 0.813 0.657 0.430 0.413
Complications.
HCC207................................... Pregnancy with Delivery with 4.064 3.783 3.551 3.135 3.118
Major Complications.
HCC208................................... Pregnancy with Delivery with 4.064 3.783 3.551 3.135 3.118
Complications.
HCC209................................... Pregnancy with Delivery with 2.847 2.639 2.414 1.955 1.928
No or Minor Complications.
HCC210................................... (Ongoing) Pregnancy without 1.280 1.141 0.959 0.726 0.711
Delivery with Major
Complications.
HCC211................................... (Ongoing) Pregnancy without 0.879 0.766 0.607 0.438 0.427
Delivery with Complications.
HCC212................................... (Ongoing) Pregnancy without 0.352 0.280 0.190 0.123 0.119
Delivery with No or Minor
Complications.
HCC217................................... Chronic Ulcer of Skin, Except 1.533 1.420 1.330 1.220 1.215
Pressure.
HCC218................................... Extensive Third Degree Burns. 23.966 23.738 23.617 23.538 23.536
HCC219................................... Major Skin Burn or Condition. 2.364 2.241 2.145 2.041 2.036
HCC223................................... Severe Head Injury........... 17.030 16.895 16.771 16.632 16.624
HCC226................................... Hip and Pelvic Fractures..... 8.337 8.132 8.048 7.995 7.996
HCC228................................... Vertebral Fractures without 4.358 4.194 4.090 3.962 3.956
Spinal Cord Injury.
HCC234................................... Traumatic Amputations and 4.952 4.795 4.736 4.696 4.697
Amputation Complications.
HCC251................................... Stem Cell, Including Bone 22.648 22.602 22.510 22.387 22.377
Marrow, Transplant Status/
Complications.
HCC253................................... Artificial Openings for 6.513 6.413 6.376 6.352 6.352
Feeding or Elimination.
HCC254................................... Amputation Status, Upper Limb 1.806 1.671 1.574 1.456 1.451
or Lower Limb.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Interacted HCC Counts Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Severe illness, 1 payment HCC -6.091 -6.125 -6.181 -6.267 -6.271
Severe illness, 2 payment -5.758 -5.804 -5.824 -5.883 -5.886
HCCs.
Severe illness, 3 payment -4.600 -4.607 -4.526 -4.404 -4.393
HCCs.
Severe illness, 4 payment -3.648 -3.586 -3.415 -3.138 -3.118
HCCs.
Severe illness, 5 payment -2.965 -2.815 -2.554 -2.137 -2.110
HCCs.
Severe illness, 6 payment -2.718 -2.456 -2.103 -1.561 -1.528
HCCs.
Severe illness, 7 payment -1.848 -1.445 -0.987 -0.319 -0.281
HCCs.
Severe illness, 8 payment -1.328 -0.842 -0.328 0.405 0.446
HCCs.
Severe illness, 9 payment 0.191 0.836 1.458 2.310 2.355
HCCs.
Severe illness, 10 or more 8.579 9.578 10.431 11.526 11.579
payment HCCs.
Transplant severe illness, 4 3.559 3.502 3.483 3.483 3.487
payment HCCs.
Transplant severe illness, 5 7.420 7.365 7.353 7.363 7.368
payment HCCs.
Transplant severe illness, 6 12.674 12.625 12.622 12.645 12.652
payment HCCs.
Transplant severe illness, 7 18.766 18.696 18.688 18.707 18.715
payment HCCs.
Transplant severe illness, 8 33.796 33.788 33.829 33.905 33.916
or more payment HCCs.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Enrollment Duration Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Enrolled for 1 month, at 9.287 7.981 6.876 5.547 5.462
least one payment HCC.
Enrolled for 2 months, at 3.618 2.896 2.336 1.799 1.768
least one payment HCC.
Enrolled for 3 months, at 2.088 1.641 1.282 0.965 0.947
least one payment HCC.
Enrolled for 4 months, at 1.105 0.816 0.572 0.376 0.366
least one payment HCC.
Enrolled for 5 months, at 0.770 0.563 0.380 0.235 0.226
least one payment HCC.
Enrolled for 6 months, at 0.499 0.351 0.215 0.123 0.120
least one payment HCC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prescription Drug Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
RXC 01................................... Anti-HIV Agents.............. 8.499 7.914 7.511 7.007 6.990
RXC 02................................... Anti-Hepatitis C (HCV) 6.593 6.146 5.958 5.830 5.835
Agents, Direct Acting Agents.
RXC 03................................... Antiarrhythmics.............. 0.117 0.107 0.103 0.069 0.050
RXC 04................................... Phosphate Binders............ 2.009 2.016 2.007 1.953 1.880
RXC 05................................... Inflammatory Bowel Disease 1.519 1.374 1.206 0.941 0.924
Agents.
RXC 06................................... Insulin...................... 1.227 1.005 0.762 0.500 0.483
RXC 07................................... Anti-Diabetic Agents, Except 0.671 0.570 0.463 0.346 0.339
Insulin and Metformin Only.
RXC 08................................... Multiple Sclerosis Agents.... 23.184 22.318 21.874 21.467 21.466
RXC 09................................... Immune Suppressants and 12.774 12.347 12.139 11.992 11.988
Immunomodulators.
RXC 10................................... Cystic Fibrosis Agents....... 17.803 17.474 17.358 17.299 17.304
RXC 01 x HCC001.......................... Additional effect for 2.316 2.503 2.790 3.284 3.310
enrollees with RXC 01 and
HCC 001.
RXC 02 x HCC 37_1, 36_035_s_34........... Additional effect for -0.678 -0.555 -0.433 -0.264 -0.256
enrollees with RXC 02 and
(HCC 037_1 or 036 or 035_2
or 035_1 or 034).
RXC_03_x_HCC142.......................... Additional effect for 0.000 0.000 0.000 0.000 0.000
enrollees with RXC 03 and
HCC 142.
RXC_04_x_HCC184_183_187_188.............. Additional effect for 0.000 0.000 0.000 0.000 0.000
enrollees with RXC 04 and
(HCC 184 or 183 or 187 or
188).

[[Page 78590]]

RXC_05_x_HCC048_041...................... Additional effect for -0.381 -0.341 -0.282 -0.235 -0.231
enrollees with RXC 05 and
(HCC 048 or 041).
RXC_06_x_HCC018_019_020_021.............. Additional effect for 0.560 0.647 0.761 0.781 0.784
enrollees with RXC 06 and
(HCC 018 or 019 or 020 or
021).
RXC_07_x_HCC018_019_020_021.............. Additional effect for -0.204 -0.151 -0.117 -0.134 -0.136
enrollees with RXC 07 and
(HCC 018 or 019 or 020 or
021).
RXC_08_x_HCC118.......................... Additional effect for -0.539 -0.056 0.316 0.813 0.827
enrollees with RXC 08 and
HCC 118.
RXC_09_x_HCC056_057_and_048_041.......... Additional effect for 0.693 0.764 0.827 0.909 0.915
enrollees with RXC 09 and
(HCC 048 or 041) and (HCC
056 or 057).
RXC_09_x_HCC056.......................... Additional effect for 0.757 0.824 0.959 1.153 1.166
enrollees with RXC 09 and
HCC 056.
RXC_09_x_HCC057.......................... Additional effect for -0.878 -0.782 -0.664 -0.514 -0.505
enrollees with RXC 09 and
HCC 057.
RXC_09_x_HCC048_041...................... Additional effect for 3.331 3.335 3.439 3.648 3.664
enrollees with RXC 09 and
(HCC 048 or 041).
RXC_10_x_HCC159_158...................... Additional effect for 46.175 46.175 46.180 46.278 46.282
enrollees with RXC 10 and
(HCC 159 or 158).
--------------------------------------------------------------------------------------------------------------------------------------------------------

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

\47\ HCC numbers that appear with an underscore in this document
will appear without the underscore in the DIY software. For example,
HCC 35_1 in this table will appear as HCC 351 in the DIY software.

Table 2--Proposed Child Risk Adjustment Model Factors for 2022 Benefit Year
----------------------------------------------------------------------------------------------------------------
Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male................... 0.267 0.201 0.153 0.116 0.113
Age 5-9, Male................... 0.192 0.135 0.097 0.070 0.068
Age 10-14, Male................. 0.223 0.164 0.120 0.093 0.091
Age 15-20, Male................. 0.271 0.208 0.156 0.117 0.115
Age 2-4, Female................. 0.221 0.163 0.126 0.100 0.098
Age 5-9, Female................. 0.163 0.112 0.080 0.060 0.058
Age 10-14, Female............... 0.212 0.155 0.116 0.091 0.089
Age 15-20, Female............... 0.336 0.258 0.195 0.147 0.144
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................ 5.961 5.577 5.357 5.139 5.133
Septicemia, Sepsis, Systemic 16.453 16.237 16.111 15.962 15.955
Inflammatory Response Syndrome/
Shock..........................
Central Nervous System 14.787 14.627 14.548 14.496 14.493
Infections, Except Viral
Meningitis.....................
Viral or Unspecified Meningitis. 12.890 12.778 12.672 12.532 12.528
Opportunistic Infections........ 18.089 18.031 17.967 17.889 17.881
Metastatic Cancer............... 33.956 33.679 33.535 33.432 33.430
Lung, Brain, and Other Severe 9.363 9.131 8.985 8.839 8.833
Cancers, Including Pediatric
Acute Lymphoid Leukemia........
Non-Hodgkin Lymphomas and Other 7.171 6.961 6.817 6.657 6.649
Cancers and Tumors.............
Colorectal, Breast (Age <50), 3.764 3.582 3.413 3.207 3.192
Kidney, and Other Cancers......
Breast (Age 50+) and Prostate 3.764 3.582 3.413 3.207 3.192
Cancer, Benign/Uncertain Brain
Tumors, and Other Cancers and
Tumors.........................
Thyroid Cancer, Melanoma, 1.098 0.968 0.841 0.678 0.675
Neurofibromatosis, and Other
Cancers and Tumors.............
Pancreas Transplant Status...... 14.723 14.594 14.579 14.489 14.535
Diabetes with Acute 2.527 2.261 2.012 1.649 1.685
Complications..................
Diabetes with Chronic 2.527 2.261 2.012 1.649 1.685
Complications..................
Diabetes without Complication... 2.527 2.261 2.012 1.649 1.685
Protein-Calorie Malnutrition.... 18.838 18.721 18.666 18.639 18.634
Mucopolysaccharidosis........... 39.199 38.932 38.800 38.702 38.699
Lipidoses and Glycogenosis...... 39.199 38.932 38.800 38.702 38.699
Congenital Metabolic Disorders, 5.406 5.282 5.186 5.086 5.081
Not Elsewhere Classified.......
Amyloidosis, Porphyria, and 5.406 5.282 5.186 5.086 5.081
Other Metabolic Disorders......
Adrenal, Pituitary, and Other 6.355 6.124 5.993 5.896 5.892
Significant Endocrine Disorders
Liver Transplant Status/ 14.723 14.594 14.579 14.489 14.535
Complications..................
Acute Liver Failure/Disease, 11.829 11.676 11.608 11.560 11.558
Including Neonatal Hepatitis...
Chronic Liver Failure/End-Stage 11.044 10.886 10.801 10.710 10.707
Liver Disorders................
Cirrhosis of Liver.............. 3.402 3.311 3.228 3.084 3.080
Chronic Viral Hepatitis C....... 2.086 1.923 1.815 1.753 1.754

[[Page 78591]]

Chronic Hepatitis, Except 0.755 0.637 0.542 0.431 0.422
Chronic Viral Hepatitis C......
Intestine Transplant Status/ 16.105 16.018 15.984 15.983 15.990
Complications..................
Peritonitis/Gastrointestinal 18.426 18.175 18.075 18.044 18.045
Perforation/Necrotizing
Enterocolitis..................
Intestinal Obstruction.......... 3.900 3.703 3.548 3.358 3.348
Chronic Pancreatitis............ 10.399 10.199 10.109 10.054 10.048
Acute Pancreatitis.............. 5.156 4.921 4.757 4.537 4.524
Inflammatory Bowel Disease...... 9.409 9.061 8.862 8.668 8.661
Necrotizing Fasciitis........... 3.086 2.881 2.730 2.580 2.572
Bone/Joint/Muscle Infections/ 3.086 2.881 2.730 2.580 2.572
Necrosis.......................
Rheumatoid Arthritis and 4.935 4.699 4.541 4.399 4.393
Specified Autoimmune Disorders.
Systemic Lupus Erythematosus and 1.271 1.141 1.004 0.853 0.841
Other Autoimmune Disorders.....
Osteogenesis Imperfecta and 1.247 1.140 1.045 0.942 0.936
Other Osteodystrophies.........
Congenital/Developmental 1.247 1.140 1.045 0.942 0.936
Skeletal and Connective Tissue
Disorders......................
Cleft Lip/Cleft Palate.......... 1.394 1.228 1.039 0.852 0.840
Hemophilia...................... 71.996 71.523 71.295 71.146 71.145
Myelodysplastic Syndromes and 13.679 13.505 13.401 13.301 13.296
Myelofibrosis..................
Aplastic Anemia................. 13.679 13.505 13.401 13.301 13.296
Acquired Hemolytic Anemia, 13.679 13.505 13.401 13.301 13.296
Including Hemolytic Disease of
Newborn........................
Sickle Cell Anemia (Hb-SS)...... 5.557 5.356 5.213 5.061 5.056
Beta Thalassemia Major.......... 5.557 5.356 5.213 5.061 5.056
Combined and Other Severe 4.311 4.157 4.042 3.914 3.904
Immunodeficiencies.............
Disorders of the Immune 4.311 4.157 4.042 3.914 3.904
Mechanism......................
Coagulation Defects and Other 3.342 3.212 3.096 2.963 2.955
Specified Hematological
Disorders......................
Drug Use with Psychotic 2.473 2.289 2.136 1.945 1.934
Complications..................
Drug Use Disorder, Moderate/ 2.473 2.289 2.136 1.945 1.934
Severe, or Drug Use with Non-
Psychotic Complications........
Alcohol Use with Psychotic 1.387 1.245 1.107 0.925 0.913
Complications..................
Alcohol Use Disorder, Moderate/ 1.387 1.245 1.107 0.925 0.913
Severe, or Alcohol Use with
Specified Non-Psychotic
Complications..................
Schizophrenia................... 4.545 4.264 4.068 3.841 3.830
Delusional and Other Specified 3.056 2.824 2.627 2.376 2.362
Psychotic Disorders,
Unspecified Psychosis..........
Major Depressive Disorder, 2.587 2.379 2.188 1.947 1.935
Severe, and Bipolar Disorders..
Personality Disorders........... 0.612 0.515 0.397 0.272 0.265
Anorexia/Bulimia Nervosa........ 2.511 2.348 2.211 2.071 2.063
Prader-Willi, Patau, Edwards, 12.839 12.760 12.707 12.664 12.658
and Autosomal Deletion
Syndromes......................
Down Syndrome, Fragile X, Other 1.547 1.401 1.266 1.082 1.063
Chromosomal Anomalies, and
Congenital Malformation
Syndromes......................
Autistic Disorder............... 2.587 2.379 2.188 1.947 1.935
Pervasive Developmental 0.612 0.515 0.404 0.304 0.299
Disorders, Except Autistic
Disorder.......................
Traumatic Complete Lesion 9.556 9.348 9.228 9.121 9.119
Cervical Spinal Cord...........
Quadriplegia.................... 9.556 9.348 9.228 9.121 9.119
Traumatic Complete Lesion Dorsal 8.665 8.452 8.339 8.216 8.212
Spinal Cord....................
Paraplegia...................... 8.665 8.452 8.339 8.216 8.212
Spinal Cord Disorders/Injuries.. 3.428 3.241 3.094 2.912 2.898
Amyotrophic Lateral Sclerosis 32.864 32.642 32.500 32.372 32.367
and Other Anterior Horn Cell
Disease........................
Quadriplegic Cerebral Palsy..... 3.270 3.108 3.041 3.010 3.014
Cerebral Palsy, Except 1.319 1.156 1.018 0.836 0.823
Quadriplegic...................
Spina Bifida and Other Brain/ 1.890 1.769 1.676 1.566 1.559
Spinal/Nervous System
Congenital Anomalies...........
Myasthenia Gravis/Myoneural 9.947 9.789 9.713 9.665 9.664
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy.....................
Muscular Dystrophy.............. 4.361 4.165 3.981 3.767 3.751
Multiple Sclerosis.............. 12.642 12.278 12.119 12.017 12.015
Parkinson's, Huntington's, and 4.361 4.165 3.981 3.767 3.751
Spinocerebellar Disease, and
Other Neurodegenerative
Disorders......................
Seizure Disorders and 1.619 1.477 1.313 1.130 1.119
Convulsions....................
Hydrocephalus................... 12.782 12.747 12.714 12.712 12.717
Coma, Brain Compression/Anoxic 12.827 12.750 12.666 12.598 12.595
Damage.........................
Narcolepsy and Cataplexy........ 5.101 4.922 4.761 4.563 4.549
Respirator Dependence/ 30.364 30.125 30.016 29.935 29.930
Tracheostomy Status............
Respiratory Arrest.............. 15.552 15.311 15.186 15.055 15.047
Cardio-Respiratory Failure and 15.552 15.311 15.186 15.055 15.047
Shock, Including Respiratory
Distress Syndromes.............

[[Page 78592]]

Heart Assistive Device/ 16.105 16.018 15.984 15.983 15.990
Artificial Heart...............
Heart Transplant Status/ 16.105 16.018 15.984 15.983 15.990
Complications..................
Heart Failure................... 4.636 4.513 4.419 4.297 4.290
Acute Myocardial Infarction..... 1.745 1.578 1.435 1.332 1.336
Unstable Angina and Other Acute 1.745 1.578 1.435 1.332 1.336
Ischemic Heart Disease.........
Heart Infection/Inflammation, 15.639 15.486 15.366 15.212 15.200
Except Rheumatic...............
Hypoplastic Left Heart Syndrome 3.058 2.842 2.650 2.438 2.418
and Other Severe Congenital
Heart Disorders................
Major Congenital Heart/ 0.999 0.865 0.721 0.605 0.596
Circulatory Disorders..........
Atrial and Ventricular Septal 0.747 0.646 0.546 0.467 0.461
Defects, Patent Ductus
Arteriosus, and Other
Congenital Heart/Circulatory
Disorders......................
Specified Heart Arrhythmias..... 2.745 2.562 2.384 2.227 2.217
Intracranial Hemorrhage......... 14.578 14.462 14.366 14.264 14.261
Ischemic or Unspecified Stroke.. 1.440 1.361 1.277 1.198 1.197
Cerebral Aneurysm and 2.668 2.517 2.365 2.101 2.085
Arteriovenous Malformation.....
Hemiplegia/Hemiparesis.......... 4.576 4.442 4.359 4.245 4.236
Monoplegia, Other Paralytic 3.018 2.871 2.758 2.618 2.610
Syndromes......................
Atherosclerosis of the 11.183 10.985 10.861 10.737 10.734
Extremities with Ulceration or
Gangrene.......................
Vascular Disease with 6.308 6.163 6.068 5.980 5.976
Complications..................
Pulmonary Embolism and Deep Vein 20.304 20.162 20.087 20.027 20.021
Thrombosis.....................
Lung Transplant Status/ 16.105 16.018 15.984 15.983 15.990
Complications..................
Cystic Fibrosis................. 48.367 47.908 47.701 47.590 47.584
Chronic Obstructive Pulmonary 2.003 1.844 1.699 1.518 1.508
Disease, Including
Bronchiectasis.................
Severe Asthma................... 1.185 1.018 0.827 0.633 0.622
Asthma, Except Severe........... 0.382 0.297 0.203 0.123 0.119
Fibrosis of Lung and Other Lung 1.185 1.018 0.827 0.633 0.622
Disorders......................
Aspiration and Specified 12.351 12.306 12.275 12.298 12.298
Bacterial Pneumonias and Other
Severe Lung Infections.........
Kidney Transplant Status/ 14.723 14.594 14.579 14.489 14.535
Complications..................
End Stage Renal Disease......... 37.215 37.008 36.936 36.933 36.936
Chronic Kidney Disease, Stage 5. 3.859 3.728 3.618 3.482 3.475
Chronic Kidney Disease, Severe 3.859 3.728 3.618 3.482 3.475
(Stage 4)......................
Ectopic and Molar Pregnancy..... 2.067 1.842 1.626 1.295 1.279
Miscarriage with Complications.. 0.912 0.778 0.597 0.346 0.329
Miscarriage with No or Minor 0.912 0.778 0.597 0.346 0.329
Complications..................
Pregnancy with Delivery with 3.751 3.463 3.195 2.691 2.661
Major Complications............
Pregnancy with Delivery with 3.751 3.463 3.195 2.691 2.661
Complications..................
Pregnancy with Delivery with No 2.650 2.428 2.165 1.661 1.624
or Minor Complications.........
(Ongoing) Pregnancy without 0.977 0.822 0.619 0.388 0.374
Delivery with Major
Complications..................
(Ongoing) Pregnancy without 0.977 0.822 0.619 0.388 0.374
Delivery with Complications....
(Ongoing) Pregnancy without 0.485 0.378 0.252 0.147 0.142
Delivery with No or Minor
Complications..................
Chronic Ulcer of Skin, Except 1.504 1.383 1.263 1.141 1.135
Pressure.......................
Extensive Third Degree Burns.... 20.205 19.995 19.885 19.821 19.818
Major Skin Burn or Condition.... 1.867 1.723 1.600 1.455 1.447
Severe Head Injury.............. 20.205 19.995 19.885 19.821 19.818
Hip and Pelvic Fractures........ 3.665 3.439 3.263 3.101 3.095
Vertebral Fractures without 3.353 3.148 2.963 2.739 2.726
Spinal Cord Injury.............
Traumatic Amputations and 3.936 3.723 3.565 3.352 3.338
Amputation Complications.......
Stem Cell, Including Bone 16.105 16.018 15.984 15.983 15.990
Marrow, Transplant Status/
Complications..................
Artificial Openings for Feeding 7.197 7.036 6.985 6.947 6.949
or Elimination.................
Amputation Status, Upper Limb or 3.936 3.723 3.565 3.352 3.338
Lower Limb.....................
----------------------------------------------------------------------------------------------------------------
Interacted HCC Counts Factors
----------------------------------------------------------------------------------------------------------------
Severe illness, 1 payment HCC... -11.292 -11.358 -11.441 -11.583 -11.595
Severe illness, 2 payment HCCs.. -11.146 -11.138 -11.169 -11.269 -11.257
Severe illness, 3 payment HCCs.. -9.366 -9.392 -9.391 -9.345 -9.341
Severe illness, 4 payment HCCs.. -8.988 -8.982 -8.891 -8.710 -8.694
Severe illness, 5 payment HCCs.. -7.182 -7.013 -6.744 -6.377 -6.349
Severe illness, 6 or 7 payment -1.583 -1.238 -0.827 -0.285 -0.249
HCCs...........................
Severe illness, 8 or more 18.271 19.100 19.861 20.772 20.830
payment HCCs...................
Transplant severe illness, 4 or 17.085 17.121 17.096 17.068 17.040
more payment HCCs..............
----------------------------------------------------------------------------------------------------------------

[[Page 78593]]

Table 3--HCCs Selected for the Proposed HCC Interacted Counts Variables
for the Adult and Child Models Beginning With the 2022 Benefit Year
------------------------------------------------------------------------
Severity illness Transplant
Payment HCC indicator indicator \48\
------------------------------------------------------------------------
HCC 2 Septicemia, Sepsis, Systemic X ...............
Inflammatory Response Syndrome/
Shock............................
HCC 3 Central Nervous System X ...............
Infections, Except Viral
Meningitis.......................
HCC 4 Viral or Unspecified X ...............
Meningitis.......................
HCC 6 Opportunistic Infections.... X ...............
HCC 23 Protein-Calorie X ...............
Malnutrition.....................
HCC 34 Liver Transplant Status/ X X
Complications....................
HCC 41 Intestine Transplant Status/ X X
Complications....................
HCC 42 Peritonitis/ X ...............
Gastrointestinal Perforation/
Necrotizing Enterocolitis........
HCC 96 Prader-Willi, Patau, X ...............
Edwards, and Autosomal Deletion
Syndromes........................
HCC 121 Hydrocephalus............. X ...............
HCC 122 Coma, Brain Compression/ X ...............
Anoxic Damage....................
HCC 125 Respirator Dependence/ X ...............
Tracheostomy Status..............
HCC 135 Heart Infection/ X ...............
Inflammation, Except Rheumatic...
HCC 145 Intracranial Hemorrhage... X ...............
HCC 156 Pulmonary Embolism and X ...............
Deep Vein Thrombosis.............
HCC 158 Lung Transplant Status/ X X
Complications....................
HCC 163 Aspiration and Specified X ...............
Bacterial Pneumonias and Other
Severe Lung Infections...........
HCC 183 Kidney Transplant Status/ X X
Complications....................
HCC 218 Extensive Third Degree X ...............
Burns............................
HCC 223 Severe Head Injury........ X ...............
HCC 251 Stem Cell, Including Bone X X
Marrow, Transplant Status/
Complications....................
G13 (Includes HCC 126 Respiratory X ...............
Arrest and HCC 127 Cardio-
Respiratory Failure and Shock,
Including Respiratory Distress
Syndromes).......................
G14 (Includes HCC 128 Heart X X
Assistive Device/Artificial Heart
and HCC 129 Heart Transplant
Status/Complications)............
------------------------------------------------------------------------

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

\48\ We note that one transplant HCC (HCC 18 Pancreas
Transplant) is not included on this list. HCC 18 had a much lower
coefficient than any of the other transplant HCCs in the adult
models and was not underpredicted by the models. However, we are
considering whether we should add HCC 18 to the interacted HCC
counts model specifications.

Table 4--Proposed Infant Risk Adjustment Model Factors for 2022 Benefit Year
----------------------------------------------------------------------------------------------------------------
Group Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity 228.512 227.071 226.378 225.986 225.985
Level 5 (Highest)..............
Extremely Immature * Severity 143.939 142.392 141.573 140.987 140.976
Level 4........................
Extremely Immature * Severity 32.833 31.691 31.019 30.471 30.451
Level 3........................
Extremely Immature * Severity 32.833 31.691 31.019 30.471 30.451
Level 2........................
Extremely Immature * Severity 32.833 31.691 31.019 30.471 30.451
Level 1 (Lowest)...............
Immature * Severity Level 5 132.085 130.648 129.935 129.486 129.480
(Highest)......................
Immature * Severity Level 4..... 69.277 67.949 67.232 66.691 66.675
Immature * Severity Level 3..... 32.833 31.691 31.019 30.471 30.451
Immature * Severity Level 2..... 28.029 26.918 26.246 25.672 25.650
Immature * Severity Level 1 25.390 24.329 23.673 23.095 23.072
(Lowest).......................
Premature/Multiples * Severity 109.526 108.295 107.661 107.236 107.227
Level 5 (Highest)..............
Premature/Multiples * Severity 28.669 27.553 26.884 26.312 26.294
Level 4........................
Premature/Multiples * Severity 14.196 13.345 12.721 12.054 12.022
Level 3........................
Premature/Multiples * Severity 8.093 7.463 6.897 6.212 6.173
Level 2........................
Premature/Multiples * Severity 5.774 5.254 4.759 4.243 4.214
Level 1 (Lowest)...............
Term * Severity Level 5 82.605 81.544 80.955 80.511 80.498
(Highest)......................
Term * Severity Level 4......... 15.976 15.156 14.564 13.941 13.916
Term * Severity Level 3......... 6.071 5.541 5.020 4.437 4.404
Term * Severity Level 2......... 3.634 3.194 2.696 2.144 2.111
Term * Severity Level 1 (Lowest) 1.853 1.534 1.163 0.917 0.905
Age 1 * Severity Level 5 63.472 62.803 62.434 62.174 62.167
(Highest)......................
Age 1 * Severity Level 4........ 12.474 12.010 11.689 11.375 11.362
Age 1 * Severity Level 3........ 3.139 2.867 2.637 2.419 2.408
Age 1 * Severity Level 2........ 1.980 1.751 1.529 1.304 1.291
Age 1 * Severity Level 1 0.573 0.496 0.442 0.403 0.401
(Lowest).......................
Age 0 Male...................... 0.608 0.566 0.525 0.459 0.455
Age 1 Male...................... 0.106 0.090 0.072 0.051 0.050
----------------------------------------------------------------------------------------------------------------

[[Page 78594]]

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

Table 6--HHS HCCs Included in Infant Model Severity Categories
------------------------------------------------------------------------
Severity category HCC/Description
------------------------------------------------------------------------
Severity Level 5 (Highest)........ Metastatic Cancer.
Severity Level 5.................. Pancreas Transplant Status.
Severity Level 5.................. Liver Transplant Status/
Complications.
Severity Level 5.................. Intestine Transplant Status/
Complications.
Severity Level 5.................. Peritonitis/Gastrointestinal
Perforation/Necrotizing
Enterocolitis.
Severity Level 5.................. Respirator Dependence/Tracheostomy
Status.
Severity Level 5.................. Heart Assistive Device/Artificial
Heart.
Severity Level 5.................. Heart Transplant Status/
Complications.
Severity Level 5.................. Heart Failure.
Severity Level 5.................. Hypoplastic Left Heart Syndrome and
Other Severe Congenital Heart
Disorders.
Severity Level 5.................. Lung Transplant Status/
Complications.
Severity Level 5.................. Kidney Transplant Status/
Complications.
Severity Level 5.................. End Stage Renal Disease.
Severity Level 5.................. Stem Cell, Including Bone Marrow,
Transplant Status/Complications.
Severity Level 4.................. Septicemia, Sepsis, Systemic
Inflammatory Response Syndrome/
Shock.
Severity Level 4.................. Lung, Brain, and Other Severe
Cancers, Including Pediatric Acute
Lymphoid Leukemia.
Severity Level 4.................. Mucopolysaccharidosis.
Severity Level 4.................. Adrenal, Pituitary, and Other
Significant Endocrine Disorders.
Severity Level 4.................. Acute Liver Failure/Disease,
Including Neonatal Hepatitis.
Severity Level 4.................. Chronic Liver Failure/End-Stage
Liver Disorders.
Severity Level 4.................. Major Congenital Anomalies of
Diaphragm, Abdominal Wall, and
Esophagus, Age <2.
Severity Level 4.................. Myelodysplastic Syndromes and
Myelofibrosis.
Severity Level 4.................. Aplastic Anemia.
Severity Level 4.................. Combined and Other Severe
Immunodeficiencies.
Severity Level 4.................. Traumatic Complete Lesion Cervical
Spinal Cord.
Severity Level 4.................. Quadriplegia.
Severity Level 4.................. Amyotrophic Lateral Sclerosis and
Other Anterior Horn Cell Disease.
Severity Level 4.................. Quadriplegic Cerebral Palsy.
Severity Level 4.................. Myasthenia Gravis/Myoneural
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy.
Severity Level 4.................. Coma, Brain Compression/Anoxic
Damage.
Severity Level 4.................. Respiratory Arrest.
Severity Level 4.................. Cardio-Respiratory Failure and
Shock, Including Respiratory
Distress Syndromes.
Severity Level 4.................. Acute Myocardial Infarction.
Severity Level 4.................. Heart Infection/Inflammation, Except
Rheumatic.
Severity Level 4.................. Major Congenital Heart/Circulatory
Disorders.
Severity Level 4.................. Intracranial Hemorrhage.
Severity Level 4.................. Ischemic or Unspecified Stroke.
Severity Level 4.................. Vascular Disease with Complications.
Severity Level 4.................. Pulmonary Embolism and Deep Vein
Thrombosis.
Severity Level 4.................. Aspiration and Specified Bacterial
Pneumonias and Other Severe Lung
Infections.
Severity Level 4.................. Chronic Kidney Disease, Stage 5.
Severity Level 4.................. Artificial Openings for Feeding or
Elimination.
Severity Level 3.................. HIV/AIDS.
Severity Level 3.................. Central Nervous System Infections,
Except Viral Meningitis.
Severity Level 3.................. Opportunistic Infections.
Severity Level 3.................. Non-Hodgkin Lymphomas and Other
Cancers and Tumors.
Severity Level 3.................. Colorectal, Breast (Age < 50),
Kidney and Other Cancers.
Severity Level 3.................. Breast (Age 50+) and Prostate
Cancer, Benign/Uncertain Brain
Tumors, and Other Cancers and
Tumors.
Severity Level 3.................. Lipidoses and Glycogenosis.
Severity Level 3.................. Intestinal Obstruction.
Severity Level 3.................. Necrotizing Fasciitis.
Severity Level 3.................. Bone/Joint/Muscle Infections/
Necrosis.
Severity Level 3.................. Osteogenesis Imperfecta and Other
Osteodystrophies.
Severity Level 3.................. Cleft Lip/Cleft Palate.
Severity Level 3.................. Hemophilia.
Severity Level 3.................. Disorders of the Immune Mechanism.
Severity Level 3.................. Coagulation Defects and Other
Specified Hematological Disorders.

[[Page 78595]]

Severity Level 3.................. Drug Use with Psychotic
Complications.
Severity Level 3.................. Drug Use Disorder, Moderate/Severe,
or Drug Use with Non-Psychotic
Complications.
Severity Level 3.................. Alcohol Use with Psychotic
Complications.
Severity Level 3.................. Alcohol Use Disorder, Moderate/
Severe, or Alcohol Use with
Specified Non-Psychotic
Complications.
Severity Level 3.................. Prader-Willi, Patau, Edwards, and
Autosomal Deletion Syndromes.
Severity Level 3.................. Traumatic Complete Lesion Dorsal
Spinal Cord.
Severity Level 3.................. Paraplegia.
Severity Level 3.................. Spinal Cord Disorders/Injuries.
Severity Level 3.................. Cerebral Palsy, Except Quadriplegic.
Severity Level 3.................. Spina Bifida and Other Brain/Spinal/
Nervous System Congenital
Anomalies.
Severity Level 3.................. Muscular Dystrophy.
Severity Level 3.................. Parkinson's, Huntington's, and
Spinocerebellar Disease, and Other
Neurodegenerative Disorders.
Severity Level 3.................. Hydrocephalus.
Severity Level 3.................. Unstable Angina and Other Acute
Ischemic Heart Disease.
Severity Level 3.................. Atrial and Ventricular Septal
Defects, Patent Ductus Arteriosus,
and Other Congenital Heart/
Circulatory Disorders.
Severity Level 3.................. Specified Heart Arrhythmias.
Severity Level 3.................. Cerebral Aneurysm and Arteriovenous
Malformation.
Severity Level 3.................. Hemiplegia/Hemiparesis.
Severity Level 3.................. Cystic Fibrosis.
Severity Level 3.................. Extensive Third Degree Burns.
Severity Level 3.................. Severe Head Injury.
Severity Level 3.................. Hip and Pelvic Fractures.
Severity Level 3.................. Vertebral Fractures without Spinal
Cord Injury.
Severity Level 2.................. Viral or Unspecified Meningitis.
Severity Level 2.................. Thyroid Cancer, Melanoma,
Neurofibromatosis, and Other
Cancers and Tumors.
Severity Level 2.................. Diabetes with Acute Complications.
Severity Level 2.................. Diabetes with Chronic Complications.
Severity Level 2.................. Diabetes without Complication.
Severity Level 2.................. Protein-Calorie Malnutrition.
Severity Level 2.................. Congenital Metabolic Disorders, Not
Elsewhere Classified.
Severity Level 2.................. Amyloidosis, Porphyria, and Other
Metabolic Disorders.
Severity Level 2.................. Cirrhosis of Liver.
Severity Level 2.................. Chronic Pancreatitis.
Severity Level 2.................. Acute Pancreatitis.
Severity Level 2.................. Inflammatory Bowel Disease.
Severity Level 2.................. Rheumatoid Arthritis and Specified
Autoimmune Disorders.
Severity Level 2.................. Systemic Lupus Erythematosus and
Other Autoimmune Disorders.
Severity Level 2.................. Congenital/Developmental Skeletal
and Connective Tissue Disorders.
Severity Level 2.................. Acquired Hemolytic Anemia, Including
Hemolytic Disease of Newborn.
Severity Level 2.................. Sickle Cell Anemia (Hb-SS).
Severity Level 2.................. Down Syndrome, Fragile X, Other
Chromosomal Anomalies, and
Congenital Malformation Syndromes.
Severity Level 2.................. Seizure Disorders and Convulsions.
Severity Level 2.................. Monoplegia, Other Paralytic
Syndromes.
Severity Level 2.................. Atherosclerosis of the Extremities
with Ulceration or Gangrene.
Severity Level 2.................. Chronic Obstructive Pulmonary
Disease, Including Bronchiectasis.
Severity Level 2.................. Severe Asthma.
Severity Level 2.................. Fibrosis of Lung and Other Lung
Disorders.
Severity Level 2.................. Chronic Kidney Disease, Severe
(Stage 4).
Severity Level 2.................. Chronic Ulcer of Skin, Except
Pressure.
Severity Level 2.................. Major Skin Burn or Condition.
Severity Level 1 (Lowest)......... Chronic Viral Hepatitis C.
Severity Level 1.................. Chronic Hepatitis, Except Chronic
Viral Hepatitis C.
Severity Level 1.................. Beta Thalassemia Major.
Severity Level 1.................. Autistic Disorder.
Severity Level 1.................. Pervasive Developmental Disorders,
Except Autistic Disorder.
Severity Level 1.................. Multiple Sclerosis.
Severity Level 1.................. Asthma, Except Severe.
Severity Level 1.................. Traumatic Amputations and Amputation
Complications.
Severity Level 1.................. Amputation Status, Upper Limb or
Lower Limb.
------------------------------------------------------------------------

f. Cost-Sharing Reduction Adjustments
We propose to continue including an adjustment for the receipt of
CSRs in the risk adjustment models to account for increased plan
liability due to increased utilization of health care services by
enrollees receiving CSRs in all 50 states and the District of Columbia.
For the 2022 benefit year, to maintain stability and certainty for
issuers, we are proposing to maintain the CSR factors finalized in the
2019, 2020, and 2021 Payment Notices.\49\ See Table 7.
---------------------------------------------------------------------------

\49\ See 83 FR 16930 at 16953; 84 FR 17454 at 17478 through
17479; and 85 FR 29164 at 29190.

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

[[Page 78596]]

Consistent with the approach finalized in the 2017 Payment
Notice,\50\ we propose to continue to use a CSR adjustment factor of
1.12 for all Massachusetts wrap-around plans in the risk adjustment
plan liability risk score calculation, as all of Massachusetts' cost-
sharing plan variations have AVs above 94 percent.
---------------------------------------------------------------------------

\50\ See 81 FR 12203 at 12228.
---------------------------------------------------------------------------

We seek comment on these proposals.

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

g. Model Performance Statistics
To evaluate risk adjustment model performance, we examined each
model's R-squared statistic and predictive ratios. The R-squared
statistic, which calculates the percentage of individual variation
explained by a model, measures the predictive accuracy of the model
overall. The predictive ratio for each of the HHS risk adjustment
models is the ratio of the weighted mean predicted plan liability for
the model sample population to the weighted mean actual plan liability
for the model sample population. The predictive ratio represents how
well the model does on average at predicting plan liability for that
subpopulation.
A subpopulation that is predicted perfectly would have a predictive
ratio of 1.0. For each of the HHS risk adjustment models, the R-squared
statistic and the predictive ratios are in the range of published
estimates for concurrent risk adjustment models.\51\ We note that the
proposed model specification updates generally demonstrate improvements
in R-squared as well as predictive ratios. Because we propose to blend
the coefficients from separately solved models based on the 2016, 2017,
and 2018 benefit years' enrollee-level EDGE data, we are publishing the
R-squared statistic for each model separately to verify their
statistical validity. The R-squared statistic for each model is shown
in Table 8.
---------------------------------------------------------------------------

\51\ Hileman, Geof and Spenser Steele. ``Accuracy of Claims-
Based Risk Scoring Models.'' Society of Actuaries. October 2016.

Table 8--R-Squared Statistic for Proposed HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
R-Squared Statistic
-----------------------------------------------------------------------------------------------------------------
2016 Enrollee- 2017 Enrollee- 2018 Enrollee-
Models level EDGE level EDGE level EDGE
data data data
----------------------------------------------------------------------------------------------------------------
Platinum Adult.................................................. 0.4488 0.4465 0.4319
Gold Adult...................................................... 0.4439 0.4412 0.4265
Silver Adult.................................................... 0.4406 0.4376 0.4227
Bronze Adult.................................................... 0.4367 0.4335 0.4182
Catastrophic Adult.............................................. 0.4364 0.4332 0.4179
Platinum Child.................................................. 0.3375 0.3517 0.3535
Gold Child...................................................... 0.3348 0.3488 0.3506
Silver Child.................................................... 0.3325 0.3463 0.3481
Bronze Child.................................................... 0.3294 0.3432 0.3449
Catastrophic Child.............................................. 0.3292 0.3430 0.3447
Platinum Infant................................................. 0.3268 0.3272 0.2888
Gold Infant..................................................... 0.3238 0.3242 0.2855
Silver Infant................................................... 0.3218 0.3220 0.2833
Bronze Infant................................................... 0.3195 0.3197 0.2810

[[Page 78597]]

Catastrophic Infant............................................. 0.3194 0.3196 0.2809
----------------------------------------------------------------------------------------------------------------

h. Calculation of Plan Average Premium and State Average Premium
Requirements for Extending Future Premium Credits (Sec. 153.320)
On August 4, 2020, HHS adopted temporary policies of relaxed
enforcement for the premium rules set forth at 45 CFR 147.102,
155.200(f)(4), 155.400(e) and (g), 155.706(b)(6)(1)(A), 156.80(d),
156.210(a), and 156.286(a)(2) through (4) to allow issuers in the
individual and small group markets the flexibility, when consistent
with state law, to temporarily offer premium credits for 2020
coverage.\52\ HHS provided this flexibility with the intent of
supporting continuity of coverage for individuals, families, and small
employers who may struggle to pay premiums because of illness or loss
of incomes or revenue resulting from the COVID-19 PHE.
---------------------------------------------------------------------------

\52\ ``Temporary Policy on 2020 Premium Credits Associated with
the COVID-19 Public Health Emergency,'' August 4, 2020. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
---------------------------------------------------------------------------

In prior rulemaking,\53\ CMS finalized the calculation of plan
average premium in the risk adjustment state payment transfer formula
as equal to the actual premiums charged to plan enrollees, weighted by
the number of months enrolled, and finalized the calculation of the
state average premium as equal to the average of individual plan
average premiums, weighted by each plan's share of statewide enrollment
in the risk pool market, based on billable member months. In the
interim final rule on COVID-19, HHS set forth risk adjustment reporting
requirements for issuers offering temporary premium credits in the 2020
benefit year. In this rule, we propose how HHS would treat temporary
premium credits provided for purposes of applying the state payment
transfer formula for the 2021 benefit year and beyond should HHS adopt
a similar relaxed enforcement stance and permit such temporary premium
credits in future benefit years during a PHE declared by the Secretary
of HHS (declared PHE).\54\ For states where issuers of risk adjustment
covered plans provide temporary premium credits when permitted by HHS,
the plan average premium and statewide average premium used in the
state payment transfer formula would be calculated using issuers'
adjusted premium amounts. Thus, the actual premiums billed to plan
enrollees would be the amounts used in the calculations under the state
payment transfer formula. This is consistent with the general approach
adopted in the interim final rule on COVID-19 for temporary premium
credits in the 2020 benefit year.
---------------------------------------------------------------------------

\53\ 2014 Payment Notice final rule, 78 FR 15409. Also see the
2020 Payment Notice final rule, 84 FR 17454.
\54\ The Secretary of the Department of HHS may, under section
319 of the PHS Act determine that: (a) A disease or disorder
presents a public health emergency; or (b) that a public health
emergency, including significant outbreaks of infectious disease or
bioterrorist attacks, otherwise exists.
---------------------------------------------------------------------------

We further propose that HHS would use adjusted plan premiums for
all enrollees to whom the issuer has actually provided premium credits
as a reduction to the applicable benefit year premiums, when
calculating transfers under the state payment transfer formula for the
2022 benefit year and beyond. This approach would also extend to the
calculation of transfers under the state payment transfer formula in
states that receive approval for a request to reduce transfers under
Sec. 153.320(d)--that is, the lower actual premiums for which plan
enrollees would be responsible would be the amounts used in the
calculations under the state payment transfer formula to reflect these
temporary premium credits. As such, if an issuer in a state with an
approved 50 percent small group market reduction request for a given
benefit year chooses to provide temporary premium credits, the state
average premium will decrease, and HHS would apply the 50 percent
transfer reduction to the lower PMPM payment or charge transfer amount
calculated under the state payment transfer formula for that state's
small group market for that benefit year. As detailed further later in
this preamble, we also propose that issuers providing these temporary
premium credits must report the lower, actual premium amounts billed to
plan enrollees to their respective EDGE servers. We believe that the
applicable definitions of plan average premium and state average
premium retain the meaning previously finalized by reflecting the
actual monthly premium billed to enrollees. This proposal builds on
lessons learned from the COVID-19 PHE and would establish a framework
to recognize premium credits as a reduction in premium for purposes of
the HHS-operated risk adjustment program in order to align risk
adjustment charges and payments under the state payment transfer
formula with flexibilities HHS may provide to issuers and states in
future benefit years. This proposal would not change any other aspect
of the state payment transfer formula or the method for calculating
payments and charges under the HHS risk adjustment methodology
(inclusive of the state payment transfer formula and high-cost risk
pool parameters).
2. Overview of the HHS Risk Adjustment Methodology (Sec. 153.320)
We propose to continue to use the HHS state payment transfer
formula that was finalized in the 2021 Payment Notice.\55\ Although the
proposed HHS state payment transfer formula for the 2022 benefit year
is unchanged from what was finalized for the previous benefit year, we
are republishing it in this proposed rule. Additionally, we are
republishing the description of the administrative cost reduction to
the statewide average premium and high-cost risk pool factors, although
these factors and terms also remain unchanged in this proposed
rule.\56\ We also propose to apply this state payment transfer formula,
including the administrative cost reduction, for the 2022 benefit year
and beyond, unless changed through notice-and-comment rulemaking. If
this policy is finalized as proposed, we would no longer republish
these formulas in future annual HHS notice of benefit and payment
parameter rules unless changes are being proposed. To align with this
proposal, we propose to update Sec. 153.320(c) to replace the current
language that refers

[[Page 78598]]

to HHS specifying the applicable Federally certified risk adjustment
methodology in the annual HHS notice of benefit and payment parameters
for the applicable year to instead require HHS to specify the
applicable Federally certified risk adjustment methodology in notice
and comment rulemaking that is published in advance of the applicable
benefit year.
---------------------------------------------------------------------------

\55\ 84 FR 17454 at 17480 and 17485; and 85 FR 29164 at 29191.
\56\ Ibid.
---------------------------------------------------------------------------

We previously defined the calculation of plan average actuarial
risk and the calculation of payments and charges in the Premium
Stabilization Rule.\57\ In the 2014 Payment Notice, we combined those
concepts into a risk adjustment state payment transfer formula.\58\
This formula generally calculates the difference between the revenues
required by a plan, based on the health risk of the plan's enrollees,
and the revenues that the plan can generate for those enrollees. These
differences are then compared across plans in the state market risk
pool and converted to a dollar amount via a cost scaling factor. In the
absence of additional funding, we established, through notice and
comment rulemaking,\59\ the HHS-operated risk adjustment program as a
budget-neutral program to provide certainty to issuers regarding risk
adjustment payments and charges, which allows issuers to set rates
based on those expectations. In light of the budget-neutral framework,
HHS uses statewide average premium as the cost-scaling factor in the
state payment transfer formula under the HHS-operated risk adjustment
methodology, rather than a different parameter, such as each plan's own
premium, which would not have automatically achieved equality between
risk adjustment payments and charges in each benefit year.\60\
---------------------------------------------------------------------------

\57\ 77 FR 17220 at 17246.
\58\ The state payment transfer formula refers to the part of
the HHS risk adjustment methodology that calculates payments and
charges at the state market risk pool level prior to the calculation
of the high-cost risk pool payment and charge terms that apply
beginning with the 2018 benefit year.
\59\ For example, see Standards Related to Reinsurance, Risk
Corridors, and Risk Adjustment, Proposed Rule, 76 FR 41938 (July 15,
2011); Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment, Final Rule, 77 FR 17232 (March 23, 2012); and the 2014
Payment Notice, Final Rule, 78 FR 15441 (March 11, 2013). Also see
the 2018 Payment Notice, Final Rule, 81 FR 94058 (December 22,
2016); and the 2019 Payment Notice, Final Rule, 83 FR 16930 (April
17, 2018). Also see the Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program Under the Patient
Protection and Affordable Care Act for the 2017 Benefit Year, Final
Rule, 83 FR 36456 (July 30, 2018) and the Patient Protection and
Affordable Care Act; and Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program for the 2018 Benefit Year
Final Rule, 83 FR 63419 (December 10, 2018).
\60\ See the 2020 Payment Notice final rule for further details
on why statewide average premium is the cost-scaling factor in the
state payment transfer formula. See 84 FR 17454 at 17480 through
17484.
---------------------------------------------------------------------------

Risk adjustment transfers (total payments and charges, including
high-cost risk pool payments and charges) are calculated after issuers
have completed their risk adjustment EDGE data submissions for the
applicable benefit year. Transfers (payments and charges) under the
state payment transfer formula are calculated as the difference between
the plan premium estimate reflecting risk selection and the plan
premium estimate not reflecting risk selection. The state payment
transfer calculation that is part of the HHS risk adjustment
methodology follows the formula:
[GRAPHIC] [TIFF OMITTED] TP04DE20.022

Where:

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

The denominators are summed across all risk adjustment covered
plans in the risk pool in the market in the state.
The difference between the two premium estimates in the state
payment transfer formula determines whether a plan pays a risk
adjustment charge or receives a risk adjustment payment. The value of
the plan average risk score by itself does not determine whether a plan
would be assessed a charge or receive a payment--even if the risk score
is greater than 1.0, it is possible that the plan would be assessed a
charge if the premium compensation that the plan may receive through
its rating (as measured through the combination of metal level AV,
allowable rating factor, induced demand factor, and geographic cost
factor) exceeds the plan's predicted liability associated with risk
selection. Risk adjustment transfers under the state payment transfer
formula are calculated at the risk pool level, and catastrophic plans
are treated as a separate risk pool for purposes of the risk adjustment
state payment transfer calculations.\61\ This resulting PMPM plan
payment or charge is multiplied by the number of billable member months
to determine the plan payment or charge based on plan liability risk
scores for a plan's geographic rating area for the risk pool market
within the state. The payment or charge under the state payment
transfer formula is thus calculated to balance the state market risk
pool in question.
---------------------------------------------------------------------------

\61\ As detailed elsewhere in this proposed rule, catastrophic
plans are considered part of the individual market for purposes of
the national high-cost risk pool payment and charge calculations.
---------------------------------------------------------------------------

We previously defined the cost scaling factor, or the statewide
average premium term, as the sum of the average premium per member
month of each plan i (Pi) multiplied by plan i's share of statewide
enrollment in the market risk pool (si). The statewide average premium
will be adjusted to remove a portion of the administrative costs that
do not vary with claims (14 percent) as follows:

PS = ([Sigma]i (si [middot] Pi)) * (1 - 0.14) = ([Sigma]i (si [middot]
Pi)) * 0.86

Where:

si = plan i's share of statewide enrollment in the market in the
risk pool;
Pi = average premium per member month of plan i.

We previously adopted a 14 percent administrative cost reduction to
the statewide average premium \62\ and propose maintaining it for the
2022 benefit year and beyond, unless amended through notice-and-comment
rulemaking.
---------------------------------------------------------------------------

\62\ See 84 FR 17454 at 17486.
---------------------------------------------------------------------------

To account for costs associated with exceptionally high-risk
enrollees, we previously added a high-cost risk pool adjustment to the
HHS risk adjustment transfer methodology. As finalized in the 2020
Payment Notice,\63\ we intend to maintain the high-cost risk pool
parameters with a threshold of $1 million and a coinsurance rate of 60
percent for benefit years 2020 and onward, unless amended through
notice-and-comment rulemaking. We are not proposing any changes to the
high-cost risk pool parameters as part of this proposed rule;
therefore, we would maintain the threshold of $1 million

[[Page 78599]]

and coinsurance rate of 60 percent for the 2022 benefit year.
---------------------------------------------------------------------------

\63\ 84 FR 17466 through 17468.
---------------------------------------------------------------------------

The high-cost risk pool adjustment amount is added to the state
payment transfer formula to account for: (1) The payment term,
representing the portion of costs above the threshold reimbursed to the
issuer for high-cost risk pool payments (HRPi), if applicable; and (2)
the charge term, representing a percentage of premium adjustment, which
is the product of the high-cost risk pool adjustment factor (HRPCm) for
the respective national high-cost risk pool m (one for the individual
market, including catastrophic, non-catastrophic and merged market
plans, and another for the small group market), and the plan's total
premiums (TPi). For this calculation, we use a percent of premium
adjustment factor that is applied to each plan's total premium amount.
The total plan transfers for a given benefit year are calculated as
the product of the plan's PMPM transfer amount (Ti) multiplied by the
plan's billable member months (Mi), plus the high-cost risk pool
adjustments. The total plan transfer (payment or charge) amounts under
the HHS risk adjustment payment transfer formula are calculated as
follows:

Total transferi = (Ti [middot] Mi) + HRPi - (HRPCm [middot] TPi)

Where:

Total Transferi = Plan i's total HHS risk adjustment program
transfer amount;
Ti = Plan i's PMPM transfer amount based on the state transfer
calculation;
Mi = Plan i's billable member months;
HRPi = Plan i's total high-cost risk pool payment;
HRPCm = High-cost risk pool percent of premium adjustment factor for
the respective national high-cost risk pool m; and
TPi = Plan i's total premium amounts.

We seek comment on the proposed HHS risk adjustment methodology for the
2022 benefit year and beyond, unless changed through notice-and-comment
rulemaking.
3. State Flexibility Requests (Sec. 153.320(d))
In the 2019 Payment Notice, we provided states the flexibility to
request a reduction to the otherwise applicable risk adjustment state
transfers calculated by HHS under the state payment transfer formula,
which is calibrated on a national dataset, for the state's individual
(catastrophic or non-catastrophic risk pools), small group, or merged
markets by up to 50 percent to more precisely account for differences
in actuarial risk in the applicable state's markets.\64\ We finalized
that any requests received would be published in the applicable benefit
year's proposed HHS notice of benefit and payment parameters, and the
supporting evidence provided by the state in support of its request
would be made available for public comment.\65\
---------------------------------------------------------------------------

\64\ 83 FR 16955 through 16960.
\65\ 45 CFR 153.320(d)(3).
---------------------------------------------------------------------------

If the state requests that HHS not make publicly available certain
supporting evidence and analysis because it contains trade secrets or
confidential commercial or financial information within the meaning of
the HHS Freedom of Information Act (FOIA) regulations at 45 CFR
5.31(d), HHS will only make available on the CMS website the supporting
evidence submitted by the state that is not a trade secret or
confidential commercial or financial information by posting a redacted
version of the state's supporting evidence.\66\ In accordance with
Sec. 153.320(d)(2), beginning with the 2020 benefit year, states must
submit such requests with the supporting evidence and analysis outlined
under Sec. 153.320(d)(1) by August 1st of the calendar year that is 2
calendar years prior to the beginning of the applicable benefit year.
If approved by HHS, state reduction requests will be applied to the
plan PMPM payment or charge state payment transfer amount (Ti in the
state payment transfer formula above). For the 2020 and 2021 benefit
years, the state of Alabama submitted a 50 percent risk adjustment
transfer reduction request for its small group market and HHS approved
both requests.\67\
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\66\ See 45 CFR 153.320(d)(3).
\67\ See 84 FR 17484 through 17485 and 85 FR 29193 through
29194.
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a. Requests To Reduce Risk Adjustment Transfers for the 2022 Benefit
Year
For the 2022 benefit year, HHS received a request to reduce risk
adjustment state transfers for the Alabama individual and small group
markets \68\ by 50 percent.\69\ Alabama's request states that the
presence of a dominant carrier in the individual and small group
markets precludes the HHS-operated risk adjustment program from working
as precisely as it would with a more balanced distribution of market
share. The state regulators stated that their review of the risk
adjustment payment issuers' financial data suggested that any premium
increase resulting from a reduction to risk adjustment payments of 50
percent in the individual and small group markets for the 2022 benefit
year would not exceed 1 percent, the de minimis premium increase
threshold set forth in Sec. 153.320(d)(1)(iii) and (d)(4)(i)(B). We
seek comment on this request to reduce risk adjustment state transfers
in the Alabama individual and small group markets by 50 percent for the
2022 benefit year. The request and additional documentation submitted
by Alabama is posted under the ``State Flexibility Requests'' heading
at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/index.html.
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\68\ Alabama's individual market request is for a 50 percent
reduction to risk adjustment transfers for its individual market
non-catastrophic and catastrophic risk pools.
\69\ Due to the COVID-19 PHE, we permitted states seeking to
request a reduction in risk adjustment transfers for the 2022
benefit year an extension until September 1, 2020 to submit such
request.
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b. Multi-Year State Flexibility Requests
We propose several amendments to Sec. 153.320(d) to allow states
to request a reduction to otherwise applicable risk adjustment state
transfers calculated under the HHS-operated risk adjustment methodology
for up to 3 years, beginning with the 2023 benefit year. Under current
policy, states seeking to reduce risk adjustment state transfers in one
or more of their market risk pools must submit a request to HHS each
year describing the nature of their request and providing supporting
documentation. HHS then reviews the request, sets forth the request in
the applicable benefit year's HHS notice of benefit and payment
parameters, and approves or denies it based on the evidence and
analysis provided by the state in the request and the comments received
to the applicable benefit year's proposed HHS notice of benefit and
payment parameters. Pursuant to Sec. 153.320(d)(1), states must submit
this request annually, and HHS publishes state requests in the
applicable benefit year's proposed and final annual HHS notice of
benefit and payment parameters. Stakeholders have requested that HHS
allow states to request multi-year risk adjustment flexibility
reductions. We have continued to consider these comments and the
potential benefits that multi-year requests could provide. HHS believes
that there may be potential for multi-year risk adjustment flexibility
requests to promote greater predictability and stability in state
markets, as issuers would be able to consider the impact of a reduction
to risk adjustment state transfers for their decisions on rating and
participation in a state market beyond the upcoming benefit year, and
the reduction in burden to states to complete this process annually. We
note, however, that a potential increase in predictability and

[[Page 78600]]

stability assumes that the request remains in effect for longer than 1
year.
In recognition of those comments, we propose to provide the
flexibility for states to request a reduction to otherwise applicable
risk adjustment state transfers calculated under the HHS-operated risk
adjustment methodology's state payment transfer formula for up to 3
years beginning with the 2023 benefit year. At Sec. 153.320, we
propose to redesignate current paragraph (d)(2) as paragraph (d)(3) and
create a new proposed paragraph (d)(2) to capture the ability for
states to request a multi-year reduction in risk adjustment state
transfers. Consistent with the existing requirements captured in Sec.
153.320(d)(1)(i) through (iii), states making single or multi-year
requests would be required to submit evidence and analysis as
applicable that demonstrate the following for all years to which the
request would apply: (1) State-specific factors that warrant an
adjustment to more precisely account for differences in actuarial risk
in the state market risk pool; (2) the percentage reductions to risk
adjustment state transfers; and (3) a justification for the requested
reduction in risk adjustment state transfers, or evidence demonstrating
that the requested state transfer reduction would have de minimis
impact on premiums, such that any necessary premium increase for
issuers likely to receive reduced payments as a result of the requested
reduction to risk adjustment state transfers would not exceed 1 percent
for each year for which they are requesting a reduction to risk
adjustment state transfers. This requirement for multi-year requests
would be captured in new proposed Sec. 153.320(d)(2)(i)(A).
Additionally, for multi-year requests, the state would be required to
confirm that it does not anticipate any significant changes to the
impacted state market risk pools (for example, a material change in
issuer participation in the insurance market, or significant changes in
issuer market share or enrollment) for the benefit years included in
its multi-year request. We propose to capture the new confirmation
requirement applicable to multi-year requests at the new proposed Sec.
153.320(d)(2)(i)(B).
As part of the new framework to permit multi-year requests, at
Sec. 153.320, we also propose to redesignate current paragraph (d)(4)
as paragraph (d)(5) and to amend the reference in redesignated
paragraph (d)(5)(i) to refer to redesignated paragraph (d)(5)(ii) and
new proposed paragraph (d)(5)(iii). This new proposed paragraph would
add language to provide HHS with authority to approve a shorter
duration than that requested by the state if the supporting evidence
and analysis provided by the state do not support the requested
duration. This is similar to the existing authority in redesignated
paragraph (d)(5)(ii) for HHS to approve a reduction amount that is
lower than the amount requested by the state if the supporting evidence
and analysis do not fully support the requested reduction amount. We
believe this language is necessary and appropriate as it remains
unclear if a state would have all of the necessary information to
support a multi-year request at the time of initial application. Rather
than adopt an approach that requires HHS to either approve all of the
years requested by the state or none of them, the new proposed
paragraph (d)(5)(iii) provides flexibility for HHS to approve the
reduction for those years for which the supporting evidence and
analysis support the requested reduction. We clarify that, if adopted
as proposed, nothing in this new framework would prevent a state whose
multi-year request was approved for a shorter duration to pursue a new,
separate state flexibility request for the applicable benefit years
that were not supported in the state's initial reduction request.
Recognizing that market conditions can change from one year to the
next, we propose to reserve the right to require states with approved
multi-year reduction requests to submit supplemental evidence in any
subsequent year of the request after its initial approval, in the
timeframe, form, and manner specified by HHS, when circumstances
warrant. For example, after we have approved a multi-year request, if
we become aware of an anticipated change in the state market risk pool
to which the request applies (for example, new entrants or significant
shifts in enrollment), we would ask the state to submit supplemental
evidence demonstrating that it anticipates the applicable requirements
regarding the impact of the reduction will still be met in the
subsequent benefit years of the request. We would require the state to
respond to our request for supplemental evidence within 30 calendar
days of our request, and we would make such a request no later than
February of the benefit year prior to the applicable benefit year
(thus, we would request supplemental evidence from the state by
February 2023 for the 2024 benefit year). We propose to create a new
proposed Sec. 153.320(d)(5)(iv) to capture this authority and to make
a parallel amendment to add a new proposed paragraph (d)(2)(i)(C) to
capture the state's obligation to respond to such requests. Codifying
the ability for HHS to request that the state submit additional
supplemental evidence after an initial approval of a multi-year state
flexibility request is intended to address situations where a state may
need to justify the continued application of the state flexibility
request in the event that HHS projects a significant change in state
market risk pool conditions during the term of the approved multi-year
request based on review of newly available information or data.
HHS also proposes to retain the ability to terminate or modify the
request during any one of the subsequent years of an approved multi-
year request if additional data or new information does not support the
continuation of the state's reduction request as written and the state
has not provided sufficient supplemental evidence to rebut such data or
information. HHS would inform the state department of insurance (DOI)
of the termination or modification of its reduction request, require
the state DOI to notify the impacted issuers within 15 calendar days of
HHS's notice to the state, and publish information on the early
termination or modification of a state's multi-year request on the CMS
website \70\ no later than March of the year preceding the applicable
benefit year, or 30 days after receipt of information requested under
new proposed Sec. 153.320(d)(5)(iv), whichever is later. We propose to
add paragraph (d)(5)(v) to capture HHS's authority to terminate or
modify a previously approved multi-year request in these circumstances.
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\70\ Terminations of or modifications to state risk adjustment
flexibility requests would be posted under the ``Risk Adjustment
State Flexibility Requests'' heading on the CMS website at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
---------------------------------------------------------------------------

In addition, we propose to permit a state to withdraw its request
before its natural expiration by notifying HHS of its requested
withdrawal. A state would need to notify HHS of its intent to withdraw
its request, in the form and manner specified by HHS, 60 calendar days
prior to the state's deadline for rate setting for the applicable
benefit year. HHS would require the state DOI to notify the impacted
issuers at least 45 calendar days prior to the state's deadline for
rate setting for the applicable benefit year, and would publish the
information on the state's withdrawal request on the CMS website.\71\
We propose to add

[[Page 78601]]

Sec. 153.320(d)(2)(ii) to capture the requirements related to a state
withdrawal of its approved multi-year reduction request prior to the
natural expiration of the request.
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\71\ State withdrawals of risk adjustment flexibility requests
would be posted under the ``Risk Adjustment State Flexibility
Requests'' heading on the CMS website at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
---------------------------------------------------------------------------

We also propose to redesignate paragraph (d)(3) as paragraph (d)(4)
and amend it to reflect that, beginning for the 2023 benefit year, all
multi-year reduction requests would be published in the annual HHS
notice of benefit and payment parameters that corresponds to the first
year of the state's request (for example, a multi-year request
applicable for the 2023 through 2025 benefit years would be published
in the 2023 Payment Notice proposed rule). As noted above, we propose
to publish information on any early terminations or modifications by
HHS or state withdrawals of approved state multi-year reduction
requests on the CMS website.
We seek comment on all aspects of the proposed framework to permit
states to pursue multi-year state flexibility reduction requests under
Sec. 153.320(d) for up to 3 years, including the additional components
that would apply to such requests, the timeframe for states to respond
to HHS requests for supplemental data and evidence pertaining to multi-
year reduction requests, and the proposal to only publish and solicit
comments on multi-year reduction requests in the annual HHS notice of
benefit and payment parameters that corresponds to the first year in
which the flexibility is being requested.
4. Audits and Compliance Reviews of Issuers of Reinsurance-Eligible
Plans (Sec. 153.410(d)) and Audits and Compliance Reviews of Issuers
of Risk Adjustment Covered Plans (Sec. 153.620(c))
a. Audits and Compliance Reviews of Issuers of Reinsurance-Eligible
Plans (Sec. 153.410(d))
HHS recently completed the 2014 benefit year audits of a sample of
issuers of PPACA transitional reinsurance-eligible plans. During this
process, HHS encountered significant challenges that impeded its
ability to efficiently administer and complete the audits. More
specifically, HHS experienced difficulties receiving requested audit
data and materials in a timely fashion from some issuers, and had
difficulty obtaining data from these issuers in a format that was
usable by HHS. HHS is of the view that codifying additional audit
requirements and parameters is an appropriate and necessary measure to
ensure that 2015 and 2016 benefit year audits of PPACA transitional
reinsurance-eligible plans appropriately function to protect the
integrity of our programs.
We propose several amendments to Sec. 153.410(d) to provide more
clarity around the audit requirements for issuers of reinsurance-
eligible plans. The proposed amendments explain the audit process,
including what it means to properly comply with an audit and the
consequences for failing to comply with audit requirements. We also
propose to expand the oversight tools available to HHS to also provide
authority for HHS to conduct compliance reviews of issuers of
reinsurance-eligible plans to assess compliance with the applicable
requirements of subparts E and H of part 153. These proposed HHS
compliance reviews would follow the standards set forth for compliance
review of QHP issuers participating in FFEs established in 45 CFR
156.715. However, compliance reviews under this section would only be
conducted in connection with confirming reinsurance-eligible plans'
compliance with the standards related to reinsurance payments in
subparts E and H of part 153. A compliance review may be targeted at a
specific potential error and conducted on an ad hoc basis.\72\ For
example, HHS may require an issuer to submit data pertaining to a
specific data submission (for example, capitated claims). Unlike the
compliance review authority established in Sec. 156.715, which is
limited to QHP issuers participating in FFEs, the compliance review
authority we propose to codify in the amendments to Sec. 153.410(d)
would apply to all issuers of reinsurance-eligible plans. We believe
this flexibility is necessary and appropriate to provide a mechanism
for HHS to address situations in which a systematic error or issue is
identified during the random and targeted auditing of issuers of
reinsurance-eligible plans, and HHS suspects similarly situated issuers
may have experienced the same systematic error or issue, but were not
selected for audit in the year in question.
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\72\ For further details, please see 78 FR 65100.
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Specifically, we propose to rename Sec. 153.410(d) to ``Audits and
Compliance Reviews'' in order to clarify that the authority described
in this section would apply to audits and the proposed HHS compliance
reviews to evaluate issuers of reinsurance-eligible plans' compliance
with the applicable requirements in subparts E and H of part 153. We
similarly propose to update the introductory language in Sec.
153.410(d) to incorporate a reference to HHS compliance reviews and to
note that we would conduct these compliance reviews consistent with the
standards set forth in Sec. 156.715.
We also propose to amend the existing introductory language in
Sec. 153.410(d) to remove the last sentence that discusses audit
results and the accompanying requirements that an issuer must follow if
an audit results in a finding of material weakness or significant
deficiency. Additionally, as detailed further below, we propose to
replace this with a new proposed framework that captures more details
on the audit process and requirements for reinsurance-eligible plans.
As amended, the introductory language at Sec. 153.410(d) would reflect
the authority for HHS, or its designee, to audit or conduct a
compliance review of an issuer of a reinsurance-eligible plan to assess
its compliance with the applicable requirements of subparts E and H of
part 153. We also propose to move the existing introductory language in
paragraph (d) requiring an issuer to ensure its relevant contractors,
subcontractors, and agents cooperate with audits to a new proposed
section, as detailed further below.
Also at Sec. 153.410, we propose to add new paragraph (d)(1) to
establish notice and conference requirements for these audits. The
introductory language in proposed new paragraph (d)(1) reflects that
HHS would provide at least 15 calendar days advance notice of its
intent to conduct an audit of an issuer of a reinsurance-eligible plan.
In proposed new paragraph (d)(1)(i), we propose to codify that all
audits under this section would include an entrance conference at which
the scope of the audit would be presented and an exit conference at
which the initial audit findings would be discussed.
Further, we propose to amend Sec. 153.410(d) to add a new
paragraph (d)(2) to capture the requirements issuers must meet to
comply with an audit under this section. Under the proposed paragraph
(d)(2)(i), we propose to capture the requirement that currently appears
in the introductory text of paragraph (d) for the issuer to ensure that
its relevant contractors, subcontractors, and agents cooperate with any
audit or compliance review under this section and also propose to
expand it to similarly require the issuer to ensure its relevant
employees, downstream entities and delegated entities also cooperate
with any audit or compliance review under this section. In new proposed
paragraph (d)(2)(ii), we propose to require issuers to submit complete
and accurate data to HHS or

[[Page 78602]]

its designees that is necessary to complete the audit. Specifically,
such data would need to support the appropriateness and accuracy of the
reinsurance payments under review as part of the audit. For example,
HHS may request that issuers of reinsurance-eligible plans provide
enrollment and claims files, plan reference data, and associated
enrollee data sufficient to show that reinsurance payments received
were appropriate. HHS encountered significant challenges in the 2014
benefit year audits when some issuers submitted data in a format that
was not readable by HHS or its systems. To address this issue, we
propose in new paragraph (d)(2)(ii) that issuers must submit audit data
in the format and manner specified by HHS no later than 30 calendar
days after the initial deadline communicated and established by HHS at
the entrance conference described in proposed paragraph (d)(1)(i). For
example, HHS may require issuers to submit the requested audit data via
Electronic File Transfer. Additionally, under proposed paragraph
(d)(2)(iii), HHS proposes to require that issuers respond to any audit
notices, letters, request, and inquiries, including requests for
supplemental or supporting information, no later than 15 calendar days
after the date of the notice, letter, request, or inquiry. We believe
that the proposed requirements in paragraph (d)(2) are necessary and
appropriate to ensure the timely completion of audits and to prevent
waste that results from repeated, fruitless attempts by HHS to obtain
data.
Recognizing that there may be situations that warrant an extension
of the timeframes under Sec. 153.410(d)(2)(ii) or (iii), as
applicable, we propose to also add a new paragraph (d)(2)(iv) to
establish a process for issuers to request an extension for good cause.
To request an extension, we propose to require the issuer to submit a
written request to HHS within the applicable timeframe established in
paragraphs (d)(2)(ii) or (iii). The written request would have to
detail the reasons for the extension request and good cause in support
of the request. For example, good cause may include an inability to
produce information in light of unforeseen emergencies, natural
disasters, or a lack of resources due to a PHE. If the extension is
granted, the issuer must respond within the timeframe specified in HHS'
notice granting the extension of time.
Under Sec. 153.410(d)(3), HHS proposes that it would share its
preliminary audit findings with the issuer, and further proposes that
the issuer would then have 30 calendar days to respond to such findings
in the format and manner specified by HHS. HHS would describe the
process, format, and manner by which an issuer can dispute the
preliminary findings in the preliminary audit report sent to the
issuer. For example, if the issuer disagrees with the findings set
forth in the preliminary audit report, HHS would require the issuer to
respond to such findings by submitting written explanations that detail
its dispute(s) or additional rebuttal information via Electronic File
Transfer. Additionally, we propose under paragraph (d)(3)(i) that if
the issuer does not dispute or otherwise respond to the preliminary
findings within 30 calendar days, the audit findings would become
final. We propose in new paragraph (d)(3)(ii) that if the issuer timely
responds and disputes any audit finding within 30 calendar days, HHS
would review and consider such response and finalize the audit findings
after such review. HHS would provide contact and other information
necessary for an issuer to respond to the preliminary audit findings in
the preliminary audit report sent to the issuer.
HHS proposes to add a new paragraph Sec. 153.410(d)(4) to capture
the process and requirements related to final audit findings and
reports. If an audit results in the inclusion of a finding in the final
audit report, the issuer must comply with the actions set forth in the
final audit report in the manner and timeframe established by HHS. We
note that the actions set forth in the final audit report could require
an issuer to return reinsurance payments. We maintain the regulatory
requirements related to corrective action plans for reinsurance audits
that currently appear in paragraph (d) in new proposed paragraph
(d)(4), which states that (1) the issuer must provide a written
corrective action plan to HHS for approval within 30 calendar days of
the issuance of the final audit report; (2) the issuer must implement
the corrective action plan; and (3) the issuer must provide HHS with
written documentation demonstrating the adoption and completion of the
required corrective actions.
Lastly, if an issuer fails to comply with the audit requirements
set forth in proposed Sec. 153.410(d), HHS proposes in paragraph
(d)(5)(i) that HHS would notify the issuer of reinsurance payments
received that the issuer has not adequately substantiated, and under
new proposed paragraph (d)(5)(ii), HHS would notify the issuer that HHS
may recoup any payments identified as not adequately substantiated if
the reinsurance debt is not paid. Therefore, the continued failure to
comply with the audit requirements and provide the necessary
information to substantiate the payments made could result in HHS
recouping up to 100 percent of the reinsurance payments made to an
issuer for the applicable benefit year(s) that are the subject of the
audit if the reinsurance debt is not paid.
Reinsurance payment amounts recovered by HHS as a result of an
audit under Sec. 153.410(d) would be allocated, on a pro rata basis,
as further payments to the U.S. Treasury under section
1341(b)(3)(B)(iv) of the PPACA and further reimbursement of
administrative expenses related to operating the reinsurance program
under section 1341(b)(3)(B)(ii) of the PPACA.\73\
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\73\ See the Patient Protection and Affordable Care Act;
Exchange and Insurance Market Standards for 2015 and Beyond, Final
Rule, 79 FR 30240 at 30257 through 30259 (May 27, 2014).
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We seek comment on these proposals, including HHS's clarification
of its compliance review authority, the proposed timeframes for issuers
to respond to audit notices, reports, inquiries, and requests for
supplemental information, and the process for issuers to request an
extension to respond to such requests.
b. Audits and Compliance Reviews of Issuers of Risk Adjustment Covered
Plans (Sec. 153.620(c))
Although currently HHS primarily uses the HHS-RADV process to audit
issuers of risk adjustment covered plans, Sec. 153.620(c) provides HHS
with the authority to conduct audits of issuers of risk adjustment-
covered plans outside of the HHS-RADV process. HHS intends to begin
audits of issuers of risk adjustment covered plans to ensure the proper
payment of high-cost risk pool payments and confirm compliance with
applicable requirements. As such, similar to the proposals related to
audits and compliance reviews of issuers of reinsurance-eligible plans
and learning from our experience with those 2014 benefit year audits,
we propose to provide more clarity around the audit requirements for
issuers of risk adjustment covered plans. These proposals seek to
explain the audit process, including what it means to properly comply
with an audit and the consequences for failing to comply with such
requirements.
We also propose to expand the oversight tools available to HHS
beyond traditional audits to also provide authority for HHS to conduct
compliance reviews of risk adjustment covered plans to assess
compliance with the applicable requirements of subparts

[[Page 78603]]

G and H of part 153. These proposed HHS compliance reviews would follow
the standards set forth for compliance review of QHP issuers
participating in FFEs established in 45 CFR 156.715. However,
compliance reviews under this section would only be conducted in
connection with confirming risk adjustment covered plans' compliance
with the applicable requirements related to the risk adjustment program
in subparts G and H of part 153. A compliance review may be targeted at
a specific potential error and conducted on an ad hoc basis.\74\ For
example, HHS may require an issuer to submit data pertaining to a
specific data submission (for example, capitated claims). Unlike the
compliance review authority established in Sec. 156.715, which is
limited to QHP issuers participating in FFEs, the compliance review
authority we propose to codify in the amendments to Sec. 153.620(c)
would apply to all issuers of risk adjustment covered plans. We believe
this flexibility is necessary and appropriate to provide a mechanism
for HHS to address situations in which a systematic error or issue is
identified during the random and targeted auditing of a sample of
issuers of risk adjustment covered plans, and HHS suspects similarly
situated issuers may have experienced the same systematic error or
issue but were not selected for audit in the year in question. As noted
above, at this time, we anticipate focusing our audit and compliance
review activities under Sec. 153.620(c) on ensuring compliance with
requirements applicable to the high-cost risk pool payments under the
HHS risk adjustment methodology.
---------------------------------------------------------------------------

\74\ For further details, please see 78 FR 65100.
---------------------------------------------------------------------------

Specifically, we propose to rename Sec. 153.620(c) to ``Audits and
Compliance Reviews'' in order to clarify that the authority described
in this section would apply to audits and the proposed HHS compliance
reviews to evaluate risk adjustment covered plans' compliance with the
applicable requirements in subparts G and H of part 153. We similarly
propose to update the introductory language in paragraph (c) to
incorporate a reference to HHS compliance reviews and to note that we
would conduct these compliance reviews consistent with the standards
set forth in 45 CFR 156.715.
We also propose to amend the existing introductory language in
Sec. 153.620(c) to remove the last sentence that discusses audit
results and the accompanying requirements that an issuer must follow if
an audit results in a finding of material weakness or significant
deficiency. As detailed further below, we propose to replace this with
a new proposed framework that captures more details on the audit
process and requirements for risk adjustment covered plans. As amended,
the introductory language at paragraph (c) would reflect the authority
for HHS or its designee to audit or conduct a compliance review of an
issuer of a risk adjustment covered plan to assess its compliance with
the applicable requirements of subparts G and H of part 153. We also
propose to move the existing introductory language in paragraph (c)
requiring an issuer to ensure its relevant contractors, subcontractors,
and agents cooperate with audits to a new proposed section, as detailed
further below.
We propose to add new paragraph (c)(1) to establish notice and
conference requirements for these audits. The introductory language in
proposed new paragraph (c)(1) reflects that HHS would provide at least
15 calendar days advance notice of its intent to conduct an audit of an
issuer of a risk adjustment covered plan. In new proposed paragraph
(c)(1)(i), we propose to codify that all audits under this section
would include an entrance conference at which the scope of the audit
would be presented and an exit conference at which the initial audit
findings would be discussed.
Further, HHS proposes to amend Sec. 153.620(c) to add paragraph
(c)(2) to capture the requirements issuers must meet to comply with an
audit under this section. Under the proposed paragraph (c)(2)(i), we
propose to capture the requirement that currently appears in the
introductory text of paragraph (c) for the issuer to ensure that its
relevant agents, contractors, and subcontractors cooperate with any
audit or compliance review under this section and also propose to
expand it to similarly require the issuer to ensure its relevant
employees, downstream entities and delegated entities also cooperate
with any audit or compliance review under this section. In new proposed
paragraph (c)(2)(ii), we propose to require issuers to submit complete
and accurate data to HHS or its designees that is necessary to complete
the audit. Specifically, such data would need to support the
appropriateness and accuracy of the risk adjustment transfers
(including high-cost risk pool payments and charges) under review as
part of the audit. For example, HHS may request that issuers of risk
adjustment covered plans provide enrollment and claims files and plan
reference data and associated enrollee data.
In new paragraph (c)(2)(ii), we propose that issuers must submit
audit data, in the format and manner specified by HHS, no later than 30
calendar days after the initial deadline communicated and established
by HHS at the entrance conference described in proposed paragraph
(c)(1)(i). For example, HHS may require issuers to submit the requested
audit data via Electronic File Transfer. Additionally, under proposed
paragraph (c)(2)(iii), HHS proposes to require that issuers respond to
any audit notices, letters, and inquires, including requests for
supplemental or supporting information, no later than 15 calendar days
after the date of the notice, letter, request, or inquiry. We believe
that the proposed requirements in paragraph (c)(2) are necessary and
appropriate to ensure the timely completion of audits and to prevent
waste that results from repeated, fruitless attempts by HHS to obtain
necessary data.
Recognizing that there may be situations that warrant an extension
of the timeframes under Sec. 153.620(c)(2)(ii) or (iii), as
applicable, we propose to also add a new paragraph (c)(2)(iv) to
establish a process for issuers to request an extension for good cause.
To request an extension, we propose to require the issuer to submit a
written request to HHS within the applicable timeframe established in
paragraph (c)(2)(ii) or (iii). The written request would have to detail
the reasons for the extension request and the good cause in support of
the request. For example, good cause may include an inability to
produce information in light of unforeseen emergencies, natural
disasters, or a lack of resources due to a PHE. If the extension is
granted, the issuer must respond within the timeframe specified in HHS'
notice granting the extension of time.
Under Sec. 153.620(c)(3), HHS proposes that it would share its
preliminary audit findings with the issuer, and further proposes that
the issuer would then have 30 calendar days to respond to such findings
in the format and manner specified by HHS. HHS would describe the
process, format, and manner by which an issuer can dispute the
preliminary findings in the preliminary audit report sent to the
issuer. For example, if the issuer disagrees with the findings set
forth in the preliminary audit report, HHS would require the issuer to
respond to such findings by submitting written explanations that detail
its dispute(s) or additional rebuttal information via Electronic File
Transfer. Additionally, we propose under paragraph (c)(3)(i) that if
the issuer does not dispute or otherwise respond to the preliminary
findings

[[Page 78604]]

within 30 calendar days, the audit findings would become final. We
propose under paragraph (c)(3)(ii) that if the issuer timely responds
and disputes any audit finding within 30 calendar days, HHS would
review and consider such response and finalize the audit findings after
such review. HHS would provide contact and other information necessary
for an issuer to respond to the preliminary audit findings in the
preliminary audit report sent to the issuer.
HHS proposes to add a new Sec. 153.620(c)(4) to capture the
process and requirements related to final audit findings and reports.
If an audit results in the inclusion of a finding in the final audit
report, the issuer must comply with the actions set forth in the final
audit report in the manner and timeframe established by HHS. We note
that the actions set forth in the final audit reports could require an
issuer to return risk adjustment (including high-cost risk pool)
payments, or pay increased risk adjustment (including high-cost risk
pool) charges. We maintain the regulatory requirements for corrective
action plans for risk adjustment (including high-cost risk pool) audits
that currently appear in Sec. 153.620(c) in new proposed paragraph
(c)(4), which states that (1) the issuer must provide a written
corrective action plan to HHS for approval within 30 calendar days of
the issuance of the final audit report; (2) the issuer must implement
the corrective action plan; and (3) the issuer must provide HHS with
written documentation demonstrating the adoption and completion of the
required corrective actions.
Lastly, if an issuer fails to comply with the audit requirements
set forth in proposed Sec. 153.620(c)(2) HHS proposes in paragraph
(c)(5)(i) that HHS would notify the issuer of payments received that
the issuer has not adequately substantiated, and in new proposed
paragraph (c)(5)(ii), HHS would notify the issuer that HHS may recoup
any payments identified as not adequately substantiated. Therefore, the
continued failure to comply with the audit requirements and provide the
necessary information to substantiate the transfer amounts under review
could result in HHS recouping up to 100 percent of the risk adjustment
(including high-cost risk pool) payments, or increased risk adjustment
(including high-cost risk pool) charges, made to an issuer for the
applicable benefit year(s) that are the subject of the audit.
We note that any risk adjustment payments or charges recovered by
HHS during an audit of a risk adjustment covered plan would be paid on
a pro rata basis similar to the process for risk adjustment default
charge allocations to the other issuers participating in the applicable
state market risk pool in the applicable benefit year.\75\ We note that
any high-cost risk pool payments or charges recovered by HHS during an
audit of a risk adjustment covered plan would be paid on a pro rata
basis to other issuers in the relevant national market in the form of a
reduced high-cost risk pool charge in the applicable benefit year. HHS
would not, however, re-run or otherwise recalculate transfers for the
applicable benefit year if monies are recouped as a result of an audit
under Sec. 153.620(c).
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\75\ See the 2016 Payment Notice final rule, 80 FR 10780-10781.
---------------------------------------------------------------------------

We seek comment on these proposals, including HHS's clarification
of its compliance review authority, the proposed timeframes for issuers
to respond to audit notices, reports, and requests for supplemental
information, and the process for issuers to request an extension to
respond to such requests.
5. EDGE Discrepancy Materiality Threshold
As stated in Sec. 153.710(a) through (c), an issuer of a risk
adjustment covered plan must provide to HHS, through their EDGE
server,\76\ access to enrollee-level plan enrollment data, enrollee
claims data, and enrollee encounter data as specified by HHS for a
benefit year. Consistent with Sec. 153.730, to be considered for risk
adjustment payments and charges, issuers of risk adjustment covered
plans must submit their respective EDGE data by April 30 of the year
following the applicable benefit year. At the end of the EDGE data
submission process, HHS issues final EDGE server reports \77\ which
reflect an issuer's data that was successfully submitted by the data
submission deadline. Within 15 calendar days of the date of these final
EDGE server reports, the issuer must confirm to HHS that the
information in the final EDGE server reports accurately reflect the
data to which the issuer has provided access to HHS through its EDGE
server for the applicable benefit year by submitting an attestation; or
the issuer must describe to HHS any discrepancies it identifies in the
final EDGE server reports.
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\76\ This is also known as the dedicated distributed data
collection environment.
\77\ These reports are: Enrollee (Without) Claims Summary (ECS),
Enrollee (Without) Claims Detail (ECD), Frequency Report by Data
Element for Medical Accepted Files (FDEMAF), Frequency Report by
Data Element for Pharmacy Accepted Files (FDEPAF), Frequency Report
by Data Element for Supplemental Accepted Files (FDESAF), Frequency
Report by Data Element for Enrollment Accepted Files (FDEEAF), Claim
and Enrollee Frequency Report (CEFR), High Cost Risk Pool Summary
(HCRPS), High Cost Risk Pool Detail Enrollee (HCRPDE), Risk
Adjustment Claims Selection Summary (RACSS), Risk Adjustment Claims
Selection Detail (RACSD), Risk Adjustment Transfer Elements Extract
(RATEE), Risk Adjustment Risk Score Summary (RARSS), Risk Adjustment
Risk Score Detail (RARSD), Risk Adjustment Data Validation
Population Summary (RADVPS), Risk Adjustment Payment Hierarchical
Condition Category Enrollee (RAPHCCER), Risk Adjustment User Fee
(RAUF).
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HHS reviews all reported EDGE discrepancies to evaluate the
implications of each incorrect data submission for risk adjustment
transfers and risk adjustment data validation. For risk adjustment
transfers calculated under the state payment transfer formula, HHS
evaluates whether the reported EDGE discrepancy is material and has a
process to address incorrect EDGE data submissions that have a material
impact on risk adjustment transfers for a state market risk pool.\78\
\79\ Currently, HHS uses the same materiality threshold for
reconsideration requests set forth in Sec. 156.1220(a)(2) for
determining whether the EDGE discrepancy has a material impact on the
risk adjustment transfers calculated under the state payment transfer
formula. Consequently, the reported EDGE discrepancy is considered
material if the amount in dispute is equal to or exceeds the lower of
either $10,000 or one percent of the total estimated transfers in the
applicable state market risk pool. After analyzing reported EDGE
discrepancies in prior benefit years, we propose to codify a
materiality threshold for EDGE discrepancies and also propose to
establish a higher materiality threshold for EDGE discrepancies. More
specifically, we propose the following materiality threshold for EDGE
discrepancies: The amount in dispute must equal or exceed $100,000 or
one percent of the total estimated transfer amount in the applicable
state market risk pool, whichever is less.\80\ Where an identified
material EDGE discrepancy negatively affects the issuer without having
a negative effect on other issuers within the state market risk pool,
issuers

[[Page 78605]]

would be required to adhere to the initial data submission and accept
the consequences of the data submission, even when the monetary impact
of the inaccuracy on the issuer submitting incorrect data is
potentially substantial. Therefore, HHS would generally only take
action on material discrepancies that harm other issuers in the same
state market risk pool.\81\
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\78\ See, for example, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2019-QQ-Guidance.pdf. Also
see 83 FR 16970 through 16971.
\79\ HHS may also take action on reported material EDGE
discrepancy if the discrepancy involved a processing error by HHS,
HHS's incorrect application of the relevant methodology, or a HHS
mathematical error, consistent with the bases upon which an issuer
may request reconsideration under Sec. 156.1220.
\80\ We are not proposing any changes to the materiality
threshold for reconsideration requests in Sec. 156.1220(a)(2).
\81\ Consistent with the current process, HHS may also take
action on reported material EDGE discrepancies if the discrepancy
involved a processing error by HHS, HHS's incorrect application of
the relevant methodology, or a HHS mathematical error, consistent
with the bases upon which an issuer may request reconsideration
under Sec. 156.1220.
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We propose to amend Sec. 153.710, by creating new paragraph (e)
and redesignating paragraphs (e), (f) and (g), as (f), (g) and (h)
respectively, to capture the proposed EDGE discrepancy materiality
threshold and propose to apply it beginning with the 2020 benefit
year.\82\ We believe this increased materiality threshold will reduce
burden on issuers having to submit additional data to HHS when a
discrepancy is determined to be potentially material and allow more
certainty and stability for risk adjustment transfers. If a reported
EDGE discrepancy is determined to not meet the materiality threshold,
HHS would take no action on the discrepancy and the issuer's data
submission would remain as submitted by the data submission deadline
for the applicable benefit year.
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\82\ The deadline for submission of 2020 benefit year risk
adjustment data is April 30, 2021. See 45 CFR 153.730. As such, the
EDGE discrepancy reporting process for the 2020 benefit year will
not begin until May 2021.
---------------------------------------------------------------------------

While HHS generally only takes action on reported material EDGE
discrepancies that are determined to harm other issuers, issuers must
continue to report and describe any identified EDGE discrepancy to HHS
in a format specified by HHS for each benefit year. Issuers must report
all data discrepancies in order to permit HHS to determine whether such
an error is material and actionable and to evaluate the impact on other
issuers in the state market risk pool. We seek comment on this
proposal.
6. Risk Adjustment User Fee for 2022 Benefit Year (Sec. 153.610(f))
If a state is not approved to operate, or chooses to forgo
operating, its own risk adjustment program, HHS will operate risk
adjustment on its behalf. As noted previously in this proposed rule,
for the 2022 benefit year, HHS will be operating the risk adjustment
program in every state and the District of Columbia. As described in
the 2014 Payment Notice, HHS's operation of risk adjustment on behalf
of states is funded through a risk adjustment user fee.\83\ Section
153.610(f)(2) provides that, where HHS operates a risk adjustment
program on behalf of a state, an issuer of a risk adjustment covered
plan must remit a user fee to HHS equal to the product of its monthly
billable member enrollment in the plan and the PMPM risk adjustment
user fee specified in the annual HHS notice of benefit and payment
parameters for the applicable benefit year.
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\83\ 78 FR 15416 through 15417.
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OMB Circular No. A-25 established federal policy regarding user
fees, and specifies that a user charge will be assessed against each
identifiable recipient for special benefits derived from federal
activities beyond those received by the general public. The risk
adjustment program will provide special benefits as defined in section
6(a)(1)(B) of Circular No. A-25 to issuers of risk adjustment covered
plans because it mitigates the financial instability associated with
potential adverse risk selection. The risk adjustment program also
contributes to consumer confidence in the health insurance industry by
helping to stabilize premiums across the individual, merged, and small
group markets.
In the 2021 Payment Notice, we calculated the federal
administrative expenses of operating the risk adjustment program for
the 2021 benefit year to result in a risk adjustment user fee rate of
$0.25 PMPM based on our estimated costs for risk adjustment operations
and estimated billable member months for individuals enrolled in risk
adjustment covered plans. For the 2022 benefit year, we propose to use
the same methodology to estimate our administrative expenses to operate
the program. These costs cover development of the model and
methodology, collections, payments, account management, data
collection, data validation, program integrity and audit functions,
operational and fraud analytics, stakeholder training, operational
support, and administrative and personnel costs dedicated to risk
adjustment program activities. To calculate the user fee, we divided
HHS's projected total costs for administering the risk adjustment
programs on behalf of states by the expected number of billable member
months in risk adjustment covered plans in states where the HHS-
operated risk adjustment program will apply in the 2022 benefit year.
We estimate that the total cost for HHS to operate the risk
adjustment program on behalf of states for the 2022 benefit year will
be approximately $60 million, and the risk adjustment user fee would be
$0.25 PMPM. The risk adjustment user fee costs for the 2022 benefit
year are expected to remain steady from the prior 2021 benefit year
estimates. However, we project a small decline in billable member
months in the individual and small group markets overall in the 2022
benefit year based on the declines observed in the 2019 benefit year.
We seek comment on the proposed risk adjustment user fee for the 2022
benefit year. We will continue to examine the costs and enrollment
projections for the 2022 benefit year, particularly as we receive more
information on the impact of the coronavirus disease 2019 (COVID-19)
PHE, and propose to incorporate any such newly available data to update
the final 2022 benefit year risk adjustment user fee rate that we would
announce in the final rule. We seek comment on these estimates and the
use of any newly available data to update the estimates to reflect any
emerging cost or enrollment trends for the final 2022 benefit year user
fee.
7. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (HHS-RADV) (Sec. 153.630)
To ensure the integrity of the HHS-operated risk adjustment
program, HHS conducts risk adjustment data validation (HHS-RADV) under
Sec. Sec. 153.350 and 153.630 in any state where HHS is operating risk
adjustment on a state's behalf. The purpose of HHS-RADV is to ensure
issuers are providing accurate and complete risk adjustment data to
HHS, which is crucial to the purpose and proper functioning of the HHS-
operated risk adjustment program. HHS-RADV also ensures that risk
adjustment transfers reflect verifiable actuarial risk differences
among issuers, rather than risk score calculations that are based on
poor data quality, thereby helping to ensure that the HHS-operated risk
adjustment program assess charges to issuers with plans with lower-
than-average actuarial risk while making payments to issuer with plans
with higher-than-average actuarial risk. HHS-RADV consists of an
initial validation audit and a second validation audit.\84\ Under Sec.
153.630, each issuer of a risk adjustment covered plan must engage an
independent initial validation audit entity. The issuer provides
demographic, enrollment, and medical record documentation for a sample
of

[[Page 78606]]

enrollees selected by HHS to the issuer's initial validation auditor
for data validation. Each issuer's initial validation audit is followed
by a second validation audit, which is conducted by an entity HHS
retains to verify the accuracy of the findings of the initial
validation audit.
---------------------------------------------------------------------------

\84\ 45 CFR 153.630(a) through (c).
---------------------------------------------------------------------------

a. Exemptions From HHS-RADV (Sec. 153.630(g))
In 2020 Payment Notice, we codified several exemptions from the
HHS-RADV requirements. In this rule, we propose to codify the
previously established exemption \85\ for issuers who only offer small-
group carryover coverage in the state during the benefit year being
audited at new proposed Sec. 153.630(g)(4). As we discussed in the
2020 Payment Notice, under this policy, a small group market issuer
with off-calendar year coverage who exits the market but has only
carry-over coverage that ends in the next benefit year (that is, carry-
over of run out claims for individuals enrolled in the previous benefit
year, with no new coverage being offered or sold in the state) would be
considered an exiting issuer and would be exempt from HHS-RADV for the
benefit year with the carry-over coverage.\86\
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\85\ 84 FR 17503 through 17504.
\86\ Ibid.
---------------------------------------------------------------------------

We also propose to codify the previously established exemption \87\
for issuers who are the sole issuer in a state market risk pool during
the benefit year that is being audited at new proposed Sec.
153.630(g)(5). As we discussed in the 2020 Payment Notice, for single
issuer market risk pool(s), there are no risk adjustment transfers
calculated under the state payment transfer formula and thus, no
payment or financial accountability to other issuers for that risk
pool.\88\ As such, a sole issuer in a state market risk pool is not
required to participate in the HHS-operated risk adjustment program
(except for purposes of high-cost risk pool payments and charges) for
that state market risk pool. However, if the sole issuer was
participating in multiple risk pools in the state during the year that
is being audited, that issuer will be subject to HHS-RADV for those
risk pools with other issuers that had risk adjustment transfers
calculated under the state payment transfer formula.
---------------------------------------------------------------------------

\87\ 84 FR 17504.
\88\ Ibid.
---------------------------------------------------------------------------

These exemptions do not introduce new policies; instead, the
proposed amendments to Sec. 153.630(g) are simply to codify these
previously established exemptions in regulation. We also clarify that
any issuer that qualifies for the small group carryover coverage
exemption in new proposed paragraph (g)(4) would not have its risk
score and its associated risk adjustment transfers adjusted due to its
own risk score error rate, as the issuer would not have participated in
HHS-RADV for the benefit year in which it only offered the small group
carryover coverage. However, that issuer's risk score and resulting
risk adjustment transfers could be subject to HHS-RADV adjustments if
other issuers in that state market risk pool were outliers and received
HHS-RADV risk score error rates for that benefit year.
We solicit comments on these proposals.
b. IVA Requirements (Sec. 153.630(b)(3))
In accordance with Sec. 153.630(b)(3), an issuer must ensure that
its IVA Entity is reasonably free of conflicts of interest, such that
it is able to conduct the IVA in an impartial manner and its
impartiality is not reasonably open to question. In prior rulemaking,
we explained that to meet this standard, the IVA Entity, among other
things, may not have had a role in establishing any relevant internal
controls of the issuer related to the risk adjustment data validation
process when HHS is operating risk adjustment on behalf of a state, or
serve in any capacity as an advisor to the issuer regarding the
IVA.\89\ In this proposed rule, we propose to amend this standard and
clarify that in order to demonstrate that the IVA Entity is reasonably
free of conflicts, the IVA Entity must also not have or previously have
had a role in establishing any relevant internal controls of the issuer
related to risk adjustment or the EDGE server data submission process
for the applicable benefit year for which the IVA Entity is performing
the IVA on behalf of the issuer. Additionally, the IVA Entity must also
not have served in any capacity as an advisor to the issuer regarding
the risk adjustment or EDGE server data submission for the applicable
benefit year. For example, the IVA Entity cannot serve as the issuer's
third party administrator (TPA) for purposes of the EDGE data
submission for HHS-operated risk adjustment in the 2020 benefit year
and serve as the IVA Entity for that issuer for the 2020 benefit year.
We are proposing these changes because HHS is concerned about conflicts
of interest that could arise if the same entity assists or completes
the EDGE data submissions for an issuer for an applicable benefit year,
and then also serves as the IVA Entity auditing the submission of that
data in HHS-RADV. This proposal is in addition to the requirements set
forth in 2014 and 2015 Payment Notices.\90\ We seek comment on this
proposal.
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\89\ See 79 FR 13758.
\90\ The 2014 Payment Notice final rule required that that
issuers ensure that IVA Entities are reasonably capable of
performing the audit, the audit is completed, the auditor is free
from conflicts of interest, and the auditor submits information
regarding the IVA to HHS in the manner and timeframe specified by
HHS. 78 FR 15410 at 15437. The 2015 Payment Notice final rule
established standards and guidelines regarding the qualifications of
the IVA Entity, including further details on the conflict of
interest standards. 79 FR 13744 at 13758-13759.
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c. HHS-RADV Administrative Appeals
In the 2015 Payment Notice, we established a three-level
administrative appeals process for issuers to seek reconsideration of
amounts under certain PPACA programs, including the calculation of risk
adjustment charges, payments and user fees.\91\ In the 2018 Payment
Notice final rule, we extended this three-level administrative appeal
process to permit issuers to dispute the findings of a second
validation audit with respect to the 2016 benefit year HHS-RADV and
beyond.\92\ Issuers are not permitted to use the discrepancy reporting
or administrative appeal processes under Sec. Sec. 153.630(d)(2) and
156.1220, respectively, to contest the IVA findings, because HHS does
not conduct the IVA or produce those results.\93\ Instead, issuers
should review their IVA findings and discuss any concerns with its IVA
Entity prior to attesting to and submitting those results to HHS.\94\
The existing regulation at Sec. 153.630(d)(2) captures this policy. In
this rule, we propose conforming amendments to paragraph (d)(3) to
similarly add ``if applicable'' to the reference to an issuer's ability
to appeal the findings of the second validation audit to ensure these
regulatory provisions also appropriately capture this limitation.\95\
As explained in the 2020 Payment Notice, only those issuers who have
insufficient pairwise agreement between the IVA and second validation
audit will receive a Second Validation Audit Findings Report and
therefore have the right to appeal the

[[Page 78607]]

second validation audit findings.\96\ We seek comment on these proposed
amendments.
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\91\ 78 FR 13818 through 13820.
\92\ 81 FR 94106.
\93\ Ibid.
\94\ See, for example, Sections 9.1, 9.5 and 9.7 of the ``2017
Benefit Year Protocols PPACA HHS Risk Adjustment Data Validation,
Version 2.0,'' August 10, 2018.
\95\ As detailed further below, we propose similar conforming
amendments to the references to an issuer's ability to appeal the
findings of the second validation audit in 45 CFR 156.1220(a)(1) and
(a)(3).
\96\ 84 FR 17495.
---------------------------------------------------------------------------

d. Timeline for Collection of HHS-RADV Payments and Charges
In the 2020 Payment Notice,\97\ we finalized an updated timeline
for the publication, collection, and distribution of HHS-RADV
adjustments to transfers. This timeline allowed issuers to report HHS-
RADV adjustments in a later MLR reporting year and to consider, in
accordance with any guidance from the state DOIs, these adjustments in
rate setting during a later benefit year (specifically, the year in
which the HHS-RADV adjustments are collected and paid). Beginning with
2019 benefit year HHS-RADV, we propose to revert to the previous
schedule \98\ for the collection of HHS-RADV charges and disbursement
of payments in the calendar year in which HHS-RADV results are released
(for example, collection and disbursement of 2021 benefit year HHS-RADV
adjustments would begin in summer or fall of 2023).
---------------------------------------------------------------------------

\97\ 84 FR 17506 through 17507.
\98\ See 79 FR 13768 and 13769. Also see, for example, Table 3
in the document entitled ``Proposed Key Dates for Calendar Year
2019: Qualified Health Plan (QHP) Certification in the Federally-
facilitated Exchanges (FFEs); Rate Review; and Risk Adjustment.''
Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Key-Dates-Table-for-CY2019.pdf.
---------------------------------------------------------------------------

HHS publishes the final summary report of risk adjustment transfers
(without HHS-RADV adjustments) and information on risk adjustment
default charges for the applicable benefit year in the summer of the
year after the applicable benefit year (typically June 30th of the year
after the applicable benefit year), and issuers report those risk
adjustment amounts in their MLR reports by July 31st of the year after
the applicable benefit year.\99\ Payment and collection of these risk
adjustment transfer and default charge amounts generally occurs in
August and September of the year after the applicable benefit year. HHS
separately reports the HHS-RADV adjustments and information on default
data validation charges for the applicable benefit year approximately
one year after the final summary report of risk adjustment transfers
for that benefit year is published (typically 2 years after the
applicable benefit year in August).\100\
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\99\ The one exception is for the rare circumstances that HHS is
unable to collect full risk adjustment charges in a state market
risk pool or high-cost risk pool charges in a national market risk
pool. In such situations, issuers receiving lesser payments can
reflect the reductions in their MLR reports.
\100\ HHS-RADV adjustments for the 2019 benefit year will be
published under a different timeline due to the COVID-19-related
delay in HHS-RADV activities for the 2019 benefit year. See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
---------------------------------------------------------------------------

Under the current HHS-RADV timeline, HHS begins collection and
disbursement of HHS-RADV adjustments and default data validation
charges and allocations 2 years after announcing the HHS-RADV
adjustments (for example, collection and disbursement of 2017 benefit
year HHS-RADV adjustments will begin in 2021).\101\ For MLR reporting
purposes, under the current approach finalized in the 2020 Payment
Notice, issuers will reflect the HHS-RADV adjustment amounts and
default data validation charges and allocations in the MLR reporting
year in which collections and payments of those amounts occur. Subject
to approval by state DOIs, issuers are also permitted to reflect these
amounts in rate setting for the same benefit year in which those
amounts are paid or collected. For example, 2017 benefit year HHS-RADV
adjustments and default data validation charges and allocations were
announced in August 2019 and issuers will report these amounts in the
2021 MLR reporting year (MLR reports filed in 2022), the same year that
the adjustments and default data validation charges will be collected
and paid. Additionally, subject to permission by state DOIs, issuers
were permitted to account for the impacts of those 2017 benefit year
HHS-RADV adjustments in rate setting for the 2021 benefit year.
---------------------------------------------------------------------------

\101\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/BY2017-HHSRADV-Adjustments-to-RA-Transfers-Summary-Report.pdf.
---------------------------------------------------------------------------

The current timeline was intended to address stakeholder concerns
regarding the predictability of HHS-RADV adjustments, especially for
the initial payment year. However, since the publication of the 2020
Payment Notice, we have received feedback stating that the extended
timeline has not provided the increased flexibility intended by the
policy and instead has introduced undue complexity. Specifically,
stakeholders have expressed concern that this policy conflicts with
state requirements for financial accounting, and can negatively impact
their MLR rebate position, particularly if the issuer experiences
substantial changes in enrollment over the 3-year MLR calculation
period.\102\
---------------------------------------------------------------------------

\102\ Issuer MLRs are calculated using a three-year average. See
section 2718(b)(1)(B)(ii) of the PHS Act and 45 CFR 158.220(b).
---------------------------------------------------------------------------

Although the operational timelines of the risk adjustment program
and the nature of HHS-RADV causes HHS-RADV results to always be at
least a year behind the associated risk adjustment transfers report, we
have continued to consider these issues. We adopted the current
timeline to provide issuers (and states) with more options on how and
when to account for the financial impacts from HHS-RADV. However, as
noted above, stakeholder feedback has indicated that the approach did
not achieve its policy goal and instead introduced unnecessary
complexity. In this rule, we therefore propose to revert to the
previous schedule for collection and disbursement of HHS-RADV
adjustments and default data validation charges and begin such
activities in the summer or fall of the calendar year in which HHS-RADV
results are released. For example, collection of 2021 benefit year HHS-
RADV adjustments and default data validation charges and disbursement
of such amounts would begin in summer or fall of 2023. In support of
the new proposed timeline for collection and disbursement of HHS-RADV
adjustments and default data validation charges, HHS would need to
release the applicable benefit year's report on HHS-RADV adjustments
and default data validation charges earlier in the year so the amounts
are available for issuers to use for MLR reporting purposes. We
therefore also propose to release the applicable benefit year's HHS-
RADV summary report no later than early summer, and require issuers to
report those amounts in the MLR reports submitted by July 31st of the
same calendar year in which the results are released. For example, as
proposed, the summary report on 2021 benefit year HHS-RADV adjustments
and default data validation charges and allocations would be released
no later than early summer 2023, and issuers would be instructed to
report these amounts in the 2022 MLR reporting year (MLR reports that
include 2022 benefit year data that are submitted by July 31, 2023). We
would then collect and disburse HHS-RADV adjustments and default data
validation charges and allocations in summer or fall of the calendar
year in which HHS-RADV results are released (for example, collection
and disbursement of 2021 benefit year HHS-RADV adjustments and default
data validation charges would begin in summer or fall of 2023). We note
the Unified Rate Review Template (URRT) instructions currently permit
issuers and states to consider HHS-RADV impacts in rates for the year

[[Page 78608]]

when these amounts will be collected and disbursed, however if this
proposal is finalized, we would remove this flexibility from the URRT
instructions.
The new proposed timeline would help mitigate concerns regarding
the incongruity with state financial accounting requirements, as well
as potential undue impacts of HHS-RADV adjustments on MLR rebate
liability, which could result from the HHS-RADV adjustments being
reported outside the 3-year MLR aggregation window and thus potentially
distorting the MLR experience of the benefit year to which HHS-RADV
adjustments apply. This change may also help mitigate the impact of any
substantial changes in enrollment between benefit years.
We propose to begin this policy with the collection and
disbursement of HHS-RADV adjustments and default data validation
charges for the 2019 benefit year. However, due to the delay in the
2019 benefit year HHS-RADV,\103\ the timing of collections and
disbursements is different for the 2019 benefit year. If finalized as
proposed, HHS would publish the 2019 benefit year HHS-RADV Summary
Report in early summer of 2022. HHS will also publish the 2020 benefit
year HHS-RADV Summary report in early summer of 2022.\104\ Issuers
would be required to include any payments and charges reflected on
these reports, along with risk adjustment transfers for the 2021
benefit year, in their 2021 MLR reports, which must be filed by July
31, 2022. Finally, HHS would begin collecting both 2019 \105\ and 2020
HHS-RADV adjustments to transfers for non-exiting issuers along with
any default data validation charges imposed for these two benefit years
and disbursing related payments in late summer or early fall of 2022.
Issuers would be required to report the 2019 and 2020 benefit year HHS-
RADV adjustments to transfers in their MLR reports for the 2021 MLR
reporting year (MLR reports that include 2021 benefit year data that
are submitted by July 31, 2022). We seek comment on this proposal and
whether any consideration should be made in the transition to this
policy to account for 2017 and 2018 benefit year HHS-RADV collection
and disbursement of payments and charges (under the current timeline)
also occurring in 2021 and 2022.
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\103\ HHS-RADV adjustments for the 2019 benefit year will be
published under a different timeline due to the COVID-19-related
delay in HHS-RADV activities for the 2019 benefit year. See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
\104\ In the proposed 2020 HHS-RADV Amendments Rule (85 FR
33595), we proposed a transition from the prospective application of
HHS-RADV adjustments to a concurrent application beginning with 2020
benefit year HHS-RADV. In that proposed rule, we also solicited
comment on an alternative timeline for the transition beginning with
2019 benefit year HHS-RADV. We believe that either of these
timelines to transition to a concurrent application of HHS-RADV
results is compatible with the proposal in this rule to change the
timing of HHS-RADV collections and disbursements.
\105\ See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
---------------------------------------------------------------------------

e. Second Validation Audit and Error Rate Discrepancy Reporting Windows
Under Sec. 153.630(d)(2), issuers have 30 calendar days to confirm
the findings of the SVA (if applicable) or the calculation of the risk
score error rate, or file a discrepancy report, in the manner set forth
by HHS, to dispute the foregoing. As explained in the 2020 Payment
Notice, only those issuers who have insufficient pairwise agreement
between the IVA and SVA receive SVA findings.\106\ We propose to amend
paragraph (d)(2) to shorten the window to confirm the findings of the
SVA (if applicable) or the calculation of the risk score error rate, or
file a discrepancy, to within 15 calendar days of the notification by
HHS, beginning with the 2020 benefit year HHS-RADV. The proposed
shorter discrepancy reporting timeframes are intended to ensure that we
can resolve as many issues as possible in advance of publication of the
Summary Report of Risk Adjustment Data Validation Adjustments to Risk
Adjustment Transfers for the applicable benefit year. Based on the
first 2 payment years of HHS-RADV, HHS believes that this shortened
window would not be overly burdensome to issuers, and that any
disadvantages of this shortened window would be outweighed by the
benefits of timely resolution of as many discrepancies as possible
prior to the release of the Summary Report of Risk Adjustment Data
Validation Adjustments to Risk Adjustment Transfers for the applicable
benefit year. We further note that a 15 calendar day discrepancy
reporting window is consistent with the IVA sample and EDGE discrepancy
reporting windows at Sec. Sec. 153.630(d)(1) and 153.710(d),
respectively. We proposed shortening the discrepancy window in the 2020
Payment Notice, but did not finalize the proposal in response to
comments suggesting that we revisit this proposal once we had completed
a payment year of HHS-RADV.
---------------------------------------------------------------------------

\106\ 84 FR 17495.
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We seek comment on the proposed shortened discrepancy windows under
proposed Sec. 153.630(d)(2).
8. Risk Adjustment Data Reporting Requirements for Future Premium
Credits (Sec. 153.710)
As detailed earlier in this preamble, on September 2, 2020, HHS
issued an interim final rule on COVID-19 wherein we set forth risk
adjustment reporting requirements for issuers offering temporary
premium credits in the 2020 benefit year to align with the relaxed
enforcement policy announced in guidance.\107\ For the 2021 benefit
year and beyond, we propose to permanently adopt these risk adjustment
reporting requirements for all health insurance issuers in the
individual and small group markets who elect to offer premium credits
during a PHE declared by the Secretary of HHS (declared PHE) \108\ if
the premium credits are permitted by HHS in future benefit years.
Specifically, we propose that issuers of risk adjustment covered plans
that provide temporary premium credits when permitted by HHS in future
benefit years must report to their EDGE servers adjusted plan premiums
that reflect actual premiums billed to enrollees, taking the premium
credits into account as a reduction in premiums. Elsewhere in this
proposed rule, we also propose to clarify that HHS's calculation of
risk adjustment payment and charges for the 2021 benefit year and
beyond under the state payment transfer formula would be calculated
using the statewide average premium that reflects actual premiums
billed, taking into account any temporary premium credits provided as a
reduction in premium for the applicable months of coverage when
permitted by HHS in future benefit years.
---------------------------------------------------------------------------

\107\ See, for example, ``Temporary Policy on 2020 Premium
Credits Associated with the COVID-19 Public Health Emergency,''
August 4, 2020. Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
\108\ The Secretary of the Department of HHS may, under section
319 of the PHS Act determine that: (a) A disease or disorder
presents a public health emergency; or (b) that a public health
emergency, including significant outbreaks of infectious disease or
bioterrorist attacks, otherwise exists.
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As noted in the September, 2020 interim final rule on COVID-19, we
believe that these requirements are necessary and appropriate because
if HHS permitted issuers that provided premium credits to submit
unadjusted premiums for the purposes of calculating risk adjustment,
distortions could occur that financially impact individual issuers. For
example, absent the requirement that issuers that offer premium credits
report the adjusted, lower premium amount for risk

[[Page 78609]]

adjustment purposes, an issuer with a large market share with higher-
than-average risk enrollees that provides temporary premium credits
would inflate the statewide average premium by submitting the higher,
unadjusted premium amount, thereby increasing its risk adjustment
payment. In such a scenario, a smaller issuer in the same state market
risk pool that owes a risk adjustment charge, and also provides premium
credits to enrollees, would pay a risk adjustment charge that is
relatively higher than it would have been if it were calculated based
on a statewide average that reflected the actual, reduced premium
charged to enrollees by issuers in the state market risk pool.
Therefore, we believe that requiring issuers that offer temporary
premium credits, when permitted by HHS, to accurately report to the
EDGE server the adjusted, lower premium amounts actually charged to
enrollees is most consistent with existing risk adjustment program
requirements and mitigates the distortions that would occur if issuers
that offer these temporary premium credits did not report the actual
amounts charged to enrollees, while not imposing additional financial
burdens on issuers, as compared to an approach that would permit
issuers to report unadjusted premium amounts. We request comment on
this proposal.

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

1. Definitions (Sec. 155.20)
a. Definitions of QHP Issuer Direct Enrollment Technology Provider and
Agent or Broker Direct Enrollment Technology Provider
We propose to amend Sec. 155.20 to add a definition of QHP issuer
direct enrollment technology provider, which we propose to mean a
business entity that provides technology services or provides access to
an information technology platform to QHP issuers to facilitate
participation in direct enrollment under Sec. Sec. 155.221 and
156.1230. We also propose that this definition of QHP issuer direct
enrollment technology provider explicitly acknowledge that a web-broker
may also provide services to QHP issuers as a QHP issuer direct
enrollment technology provider to clarify that being a web-broker does
not preclude that entity from providing technology services or an
information technology platform to QHP issuers to facilitate QHP
issuers' participation in direct enrollment. In addition, we propose to
modify the current definition of direct enrollment technology provider
in Sec. 155.20 to distinguish it from the new proposed definition of
QHP issuer direct enrollment technology provider by renaming the term
agent or broker direct enrollment technology provider. We propose these
new and modified definitions to capture the full array of potential
arrangements between technology companies and entities seeking to use
the direct enrollment pathways to facilitate enrollments in QHPs
offered in an FFE or SBE-FP in a manner that constitutes enrollment in
the Exchange. To align with these proposed new and modified
definitions, we further propose to modify the definition of web-broker
to replace the current last sentence, which states that the term
includes a direct enrollment technology provider, to instead indicate a
web-broker includes an agent or broker direct enrollment technology
provider.
In the 2020 Payment Notice, we amended Sec. 155.20 to define
``direct enrollment technology provider'' to mean ``a type of web-
broker business entity that is not a licensed agent, broker, or
producer under [s]tate law and has been engaged or created by, or is
owned by an agent or broker, to provide technology services to
facilitate participation in direct enrollment under Sec. Sec.
155.220(c)(3) and 155.221.'' \109\ This definition captures instances
in which an individual agent or broker, a group of agents or brokers,
or an agent or broker business entity, engages the services of or
creates a technology company that is not licensed as an agent, broker,
or producer to assist with the development and maintenance of a non-
Exchange website that interfaces with an Exchange to assist consumers
with direct enrollment in QHPs offered through the Exchanges as
described in Sec. Sec. 155.220(c)(3) and 155.221. When the technology
company is not itself licensed as an insurance agency or brokerage, the
current framework establishes that these technology companies are a
type of web-broker that must comply with applicable web-broker
requirements under Sec. Sec. 155.220 and 155.221, unless indicated
otherwise.\110\
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\109\ See Patient Protection and Affordable Care Act; HHS Notice
of Benefit and Payment Parameters; Final rule, 84 FR 17454 at 17562
(April 25, 2019).
\110\ For example, Sec. 155.220(d)(2) exempts direct enrollment
technology providers from the training requirement that is part of
the annual FFE registration process for agents and brokers.
---------------------------------------------------------------------------

As the FFE direct enrollment program has evolved, particularly with
the introduction and increased utilization of the enhanced direct
enrollment (EDE) pathway, the technical requirements and expertise
needed to participate in direct enrollment have become substantially
more complex. As a result, technology companies are increasingly relied
upon to develop, host, manage, and customize the technical platforms
that underpin direct enrollment entity non-Exchange websites.
Technology companies have emerged to support the participation of QHP
issuers in direct enrollment, as well as agents, brokers, and web-
brokers. In the context of EDE, some of these technology companies
build technical platforms prior to finalizing contractual relationships
with agents, brokers, web-brokers, or QHP issuers and some of these
technology companies provide platforms that are used to host direct
enrollment websites for both QHP issuers and agents, brokers, or web-
brokers. Under the current framework, the technology company is itself
a web-broker and often provides direct enrollment services under its
own branding while also wanting to offer its technology platform and
accompanying services to other agents, brokers, web-brokers, or QHP
issuers to facilitate their respective participation in direct
enrollment. As part of the services it provides as a technology
company, it may offer customized direct enrollment websites that
leverage its technical platform to other entities that allows for
additional systems or functionality or the use of the other entity's
branding. Because the current regulatory definition does not include a
reference to QHP issuers, questions have arisen regarding the ability
and accompanying requirements for QHP issuers to engage such entities
to assist with the development and hosting of a non-Exchange website to
facilitate the QHP issuer's participation in direct enrollment. For
these reasons we propose to create a new definition of QHP issuer
direct enrollment technology provider and update the definitions of
direct enrollment technology provider and web-broker as described
above, to clarify that QHP issuers can also engage the services of
these technology companies and better align with the evolving business
models of entities involved in the FFE direct enrollment program. We
also propose to include language in the new definition of QHP issuer
direct enrollment technology provider to clarify that when such
entities partner with QHP issuers, they are downstream or delegated
entities of the QHP issuer. This is similar to the approach adopted in
Sec. 155.221(e) for third-party auditors hired by QHP issuers or web-
brokers to perform operational readiness audits. By

[[Page 78610]]

including this language, we intend to clarify and ensure that these QHP
issuer direct enrollment technology providers would be subject to HHS
oversight as the delegated or downstream entity of the QHP issuer, and
the QHP issuer would be responsible for compliance with all applicable
requirements. This approach is also intended to clarify that when
providing its technology services and support, or providing access to
an information technology platform, to a QHP issuer, QHP issuer direct
enrollment technology providers would be subject to the rules
applicable to the QHP issuer with whom they are partnering to the
extent they are performing activities on behalf of the QHP issuer
implicating those rules. For example, if a QHP issuer direct enrollment
technology provider is assisting with the development of a non-Exchange
website for a QHP issuer, the QHP issuer display requirements captured
at Sec. 156.1230(a)(1)(ii) would apply.
We seek comment on this proposal.
b. Definition of Exchanges
Since 2013, qualified individuals and qualified employers have been
able to purchase QHPs--private health insurance that has been certified
as meeting certain standards--through competitive marketplaces called
Exchanges or Health Insurance Marketplaces. 45 CFR 155.20 defines an
Exchange as a governmental agency or non-profit entity that meets the
applicable standards of part 155 and makes QHPs available to qualified
individuals and/or qualified employers. In this proposed rule, the word
``Exchanges'' collectively refers to, but is not limited to, the
following models of Exchange: State Exchanges, also called State-based
Exchanges (SBEs); Federally-facilitated Exchanges (FFEs); State-based
Exchanges on the Federal platform (SBE-FPs); and the new proposed
Direct Enrollment (DE) Exchanges (FFE-DEs, SBE-FP-DEs, or SBE-DEs).
When we refer to ``the Exchange(s)'' and ``an Exchange,'' we are
referring to Exchanges established and operated by a state (including a
regional Exchange or subsidiary exchange) or by HHS.
2. Consumer Assistance Tools and Programs of an Exchange (Sec.
155.205)
To continue our efforts to standardize regulatory references to
web-brokers, we propose to replace all references in Sec. 155.205(c)
to ``an agent or broker subject to Sec. 155.220(c)(3)(i)'' with the
term ``web-broker.'' In the 2020 Payment Notice, we amended Sec.
155.20 to define the term ``web-broker'' \111\ to mean an individual
agent or broker, a group of agents or brokers, or an agent or broker
business entity, that is registered with an Exchange under Sec.
155.220(d)(1) and develops and hosts a non-Exchange website that
interfaces with an Exchange to assist consumers with the selection of
and enrollment in QHPs offered through the Exchange (a process referred
to as direct enrollment). We also amended Sec. Sec. 155.220 and
155.221 to incorporate the term web-broker as newly defined, where
applicable. However, at the time we overlooked the fact that Sec.
155.205(c) also contains several of these general references to agents
and brokers subject to Sec. 155.220(c)(3)(i) that should have been
updated as part of this earlier effort to use the term web-broker as
newly defined. Such references appear in Sec. 155.205 paragraphs
(c)(2)(i)(B), (c)(2)(iii)(B), (c)(2)(iv) introductory text, and
(c)(2)(iv)(C). To avoid confusion and correct this oversight, we
propose to standardize regulatory references to web-brokers by
replacing all references in Sec. 155.205(c) to ``an agent or broker
subject to Sec. 155.220(c)(3)(i)'' with the term ``web-broker.'' We
seek comment on this proposal.
---------------------------------------------------------------------------

\111\ See 84 FR 17563.
---------------------------------------------------------------------------

In addition, we propose to revise a requirement related to website
content translations for QHP issuers and web-brokers participating in
the FFE EDE program that are subject to Sec. Sec. 155.205(c)(2)(iv)(B)
and 155.205(c)(2)(iv)(C) respectively. Currently under Sec. Sec.
155.205(c)(2)(iv)(B) and (C), QHP issuers and web-brokers are required
to translate website content into any non-English language that is
spoken by a limited English proficient (LEP) population that makes up
10 percent or more of the total population of the relevant state. Web-
brokers are currently required to translate website content within one
year of registering with the Exchange, while QHP issuers are currently
required to translate website content beginning no later than the first
day of the individual market open enrollment period for the 2017
benefit year.
In this proposed rule, we propose to allow QHP issuers and web-
brokers participating in the FFE EDE program additional time to come
into compliance with the website content translation requirements.
Specifically, we propose that a QHP issuer or web-broker participating
in the FFE EDE program would have 12 months from the date the QHP
issuer or web-broker begins operating its FFE-approved EDE website in
the relevant state to comply with website content translation
requirements under Sec. Sec. 155.205(c)(2)(iv)(B) and (C) for website
content added to their websites as a condition of participation in the
FFE EDE program. We note this proposed flexibility would not absolve
QHP issuers and web-brokers from complying with website content
translation requirements under paragraphs (c)(2)(iv)(B) and (C) that is
unrelated to their participation in the FFE EDE program within the
applicable timeframes.\112\ For example, a QHP issuer's or web-broker's
implementation of the Exchange eligibility application on its website
for purposes of participation in the FFE EDE program would be
considered content added to its website to participate in the FFE EDE
program and would be afforded the additional time for translation into
applicable languages. However, QHP issuer website content that was not
added to participate in the FFE EDE program and that is subject to the
paragraph (c)(2)(iv)(C) requirements, such as Summaries of Benefits and
Coverage or provider directories, would not be afforded additional time
for translation into applicable languages. Similarly, website content
related to a web-broker's participation in Classic DE that is subject
to the paragraph (c)(2)(iv)(C) requirements, such as plan selection
pages displaying QHPs, would not be afforded additional time for
translation into applicable languages beyond the one year after the
web-broker has been registered with the Exchange.
---------------------------------------------------------------------------

\112\ See also ``Guidance and Population Data for Exchange,
Qualified Health Plan Issuers, and Web-Brokers to Ensure Meaningful
Access by Limited-English Proficient Speakers Under 45 CFR
155.205(c) and Sec. 156.250,'' March 30, 2016. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Language-access-guidance.pdf.
---------------------------------------------------------------------------

This proposed change does not alter the additional accessibility
requirements QHP issuers and web-brokers must comply with under
paragraphs (c)(2)(i), (ii), and (iii). This includes oral
interpretation services, including telephonic interpreter services in
at least 150 languages, written translations, and applicable tagline
requirements for website content and documents critical for obtaining
health insurance coverage or access to health care services through a
QHP for qualified individuals, applicants, qualified employers,
qualified employees, or enrollees. These obligations on QHP issuers and
web-brokers would continue to protect individuals with LEP and assure
that these entities are taking the necessary

[[Page 78611]]

steps to provide meaningful access to LEP individuals, as required
under title VI and the non-discrimination provisions contained in
section 1557 of the PPACA.
In addition, this proposed revision also would not extend to QHP
issuers and web-brokers approved to participate in a state that elects
to use a direct enrollment option as proposed in Sec. 155.221(j) of
this rule. Under this proposed rule, QHP issuers and web-brokers that
participate in a state that elects to implement the direct enrollment
option as proposed in paragraph (j) of this rule would not be afforded
the flexibility to delay website translations as otherwise permitted
under Sec. 155.205(c)(2)(iv)(C), with or without the proposed
revisions in this rule. Thus, website content that is intended for
consumers, qualified individuals, applicants, or enrollees on an
enrollment website maintained by a web-broker or QHP issuer within a
relevant state pursuant to new proposed Sec. 155.221(j) must be
translated into any non-English language that is spoken by a LEP
population that makes up 10 percent or more of the total population of
the relevant state, as soon as the web-broker or QHP issuer begins
operating in that state.
We believe that providing QHP issuers and web-brokers participating
in the FFE EDE program with additional time to come into compliance
with the website content translation requirement for the website
content added to their websites to participate in the FFE EDE program
is warranted given the significant resources associated with entering a
new state market and obtaining approval to participate in the FFE EDE
program generally as well as the significant cost of third-party EDE
audit requirements. Given these considerations, we believe that this
proposed revision will provide an incentive for such entities to enter
markets where there is a significant number of LEP individuals, while
also ensuring that website content is accessible for individuals with
LEP within a reasonable period of time. We are of the view that this
flexibility will enable interested QHP issuers and web-brokers
participating in the FFE EDE program to test markets before incurring
significant additional translation costs. We are also of the view that
this proposal would enable smaller QHP issuers and web-brokers to
compete more effectively in state markets. In addition, lessening the
burden on QHP issuers and web-brokers participating in the FFE EDE
program should encourage entities that are interested in entering
markets with large numbers of LEP individuals to focus on enhancing and
tailoring services to meet the needs of consumers, qualified
individuals, applicants, qualified employers, qualified employees, or
enrollees. We believe this proposed change that would provide
additional time for such entities to come into compliance with website
content translation requirements will allow them more flexibility and
time to assess the viability of a market prior to committing
substantial resources to completing translations of website content
added to their websites as a condition of participation in the FFE EDE
program. The proposal could thereby ease entry of QHP issuers and web-
brokers into relevant states, and allow costs associated with
translation services and the related third-party audit to be spread out
over time.
We seek comment on whether this added flexibility for QHP issuers
and web-brokers participating in the FFE EDE program in relevant states
could impact accessibility to Exchange coverage for LEP communities, or
otherwise negatively impact the operation of and consumer access to
Exchanges. In addition, we seek comment from QHP issuers and web-
brokers as to whether this proposed change would foster investment in
states where there is a significant LEP community and provide
additional incentives for such entities to expand into relevant states.
We would particularly like to hear from smaller QHP issuers and web-
brokers as to whether the proposed flexibility provides sufficient time
to encourage entry into states that meet the 10 percent LEP population
threshold. Lastly, we seek comment from assisters about any impacts
this proposed change would have on their ability to work with web-
brokers and use EDE websites as proposed in Sec. 155.220(c)(3)(iii) in
this proposed rule when assisting members of the LEP community with
Exchange enrollment.
3. Navigator Program Standards (Sec. 155.210)
Sections 1311(d)(4)(K) and 1311(i) of the PPACA require the
Secretary to establish a Navigator program under which HHS awards
grants to entities to conduct public education activities to raise
awareness of the availability of QHPs, distribute fair and impartial
information concerning enrollment in QHPs and the availability of APTC
and CSRs, and facilitate enrollment in QHPs; provide referrals to any
applicable office of health insurance consumer assistance or health
insurance ombudsman established under section 2793 of the PHS Act, or
any other appropriate state agency or agencies for any enrollee with a
grievance, complaint, or question regarding their health plan,
coverage, or a determination under such plan or coverage; and provide
information in a manner that is culturally and linguistically
appropriate to the needs of the population being served by the
Exchange. The statute also requires the Secretary, in collaboration
with states, to develop standards to ensure that information made
available by Navigators is fair, accurate, and impartial. We have
implemented the statutorily required Navigator duties through
regulations at Sec. Sec. 155.210 (for all Exchanges) and 155.215 (for
Navigators in FFEs). Certified Application Counselors (CACs) duties
have been implemented through regulations at Sec. 155.225.
We propose allowing, but not requiring, Navigators and CACs in FFEs
and SBE-FPs to use web-broker non-Exchange websites to assist consumers
with applying for insurance affordability programs and QHP enrollment
under certain circumstances and to the extent permitted by state law.
For a discussion of the proposal to allow Navigators and CACs to use
web-broker non-Exchange websites to assist consumers with applying for
insurance affordability programs and QHP enrollment, please see the
preamble to Sec. 155.220.
4. Ability of States To Permit Agents and Brokers To Assist Qualified
Individuals, Qualified Employers, or Qualified Employees Enrolling in
QHPs (Sec. 155.220)
a. Navigator and Certified Application Counselor Use of Web-broker
Websites
In the 2020 Payment Notice, we proposed, but did not finalize, a
modification of our policy that prohibits Navigators and CACs (together
referred to here as ``assisters'') from using web-broker websites to
assist with QHP selection and enrollment.\113\ At the time, adoption of
EDE functionality by web-brokers was still limited, and we decided to
focus on the implementation and oversight of the EDE pathway before
revisiting the current policy regarding assister use of web-broker
websites. Since then, EDE functionality has become more user-friendly
and increasingly more consumers are using the EDE pathway to enroll in
Exchange coverage. Some stakeholders have continued to express interest
in allowing for the use of web-broker non-Exchange websites by
assisters to broaden the range of consumers these

[[Page 78612]]

websites serve, to improve the consumer shopping and enrollment
experience, and to leverage assisters' expertise in navigating more
complex enrollment cases. For these reasons, we are revisiting these
issues and propose to modify the current policy that prohibits
assisters from using web-broker websites to assist with QHP selection
and enrollment.
---------------------------------------------------------------------------

\113\ See 84 FR 17515 through 17521.
---------------------------------------------------------------------------

Our proposal would permit, but not require, assisters in FFEs and
SBE-FPs to use web-broker non-Exchange websites to assist consumers
with QHP selection and enrollment, provided the non-Exchange website
meets certain conditions. The conditions we propose to require for
these types of arrangements are designed to ensure that assisters are
able to use web-broker non-Exchange websites while still meeting their
statutory and regulatory obligations to provide fair, accurate, and
impartial information and assistance to consumers, and that each web-
broker's website captures and transmits assister data to the Exchange
to facilitate HHS oversight of the entities using the EDE pathway. To
promote state flexibility and autonomy, we propose to provide states
with a State Exchange that does not rely on HealthCare.gov the
discretion to permit their assisters to use web-broker non-Exchange
websites. Alternatively, states with a State Exchange may instead
choose to preserve the prohibition on assister use of web-broker
websites.
Direct enrollment is a mechanism for approved third parties to
assist consumers with QHP plan selection and enrollment through a non-
Exchange website in a manner considered to be through the Exchange.
Web-brokers are one of the entities eligible to become a direct
enrollment entity. There are currently two direct enrollment pathways
available in states with FFEs and SBE-FPs--Classic Direct Enrollment
(Classic DE) and EDE. Classic DE is the original version of direct
enrollment, which utilizes a `double redirect' from a direct enrollment
entity's non-Exchange website to HealthCare.gov where the eligibility
application is submitted and an eligibility determination is made by
the Exchange, and then back to the direct enrollment entity's non-
Exchange website for QHP shopping and plan selection consistent with
applicable requirements in Sec. Sec. 155.220(c)(3)(i), 155.221,
156.265 and/or 156.1230(b). EDE is the version of direct enrollment
which allows consumers to complete all steps in the application,
eligibility and enrollment processes on the direct enrollment entity's
non-Exchange website consistent with applicable requirements in Sec.
155.220(c)(3)(ii), 155.221, 156.265 and/or 156.1230(b). EDE uses
application programming interfaces (APIs) that are made available,
owned, and maintained by CMS to transfer data between HealthCare.gov
and the direct enrollment entity's non-Exchange website.
Web-brokers have developed innovative tools to support consumers
shopping for QHP coverage through their non-Exchange websites for both
Classic DE and EDE that assisters and the consumers they assist may
find helpful when shopping for and enrolling in QHPs offered through
Exchanges. In addition, some web-brokers have expressed interest in
leveraging assisters' expertise in navigating more complex enrollment
cases to provide additional support to the consumers they serve. At the
same time, assisters have expressed a desire to obtain access to an
improved consumer experience by leveraging innovative and unique
consumer assistance tools and display features many web-brokers have
developed for Classic DE and EDE. Additionally, some assisters have
expressed a desire to have access to real-time information on the
status of submitted applications and enrollments that is available
through current EDE platform web portals to more effectively assist
consumers. Although we are not proposing to require web-brokers to
develop such web portals, we recognize that some web-brokers may
consider developing web portals to enable assisters, with the consent
of the consumer, to gain easy access to real-time information for each
of the consumers they assist using a web-broker's non-Exchange website.
Where a web-broker's non-Exchange website meets applicable
requirements, we want to encourage this type of innovation to improve
the experience for assisters and the consumers they assist with
shopping for and enrolling in QHPs offered through an Exchange.
The implementation of EDE by a growing number of web-brokers has
presented consumers with an additional method of applying for insurance
affordability programs and selecting and enrolling in QHPs offered
through Exchanges. We believe this additional enrollment pathway option
should also be available to all FFE and SBE-FP assisters who provide
application and enrollment assistance, when permitted under state law,
provided there are safeguards in place to ensure that the information
and help the assisters provide remains fair, accurate, and impartial.
While we anticipate assisters and web-brokers would be most interested
in exploring this flexibility for EDE, we believe assisters should also
have the option to use the innovative and unique consumer-assistance
tools and display features many web-brokers have developed to
facilitate selection of QHPs offered through FFEs and SBE-FPs through
Classic DE. We therefore clarify that this proposal, if finalized,
would permit assisters in FFE and SBE-FP states to use a web-broker's
non-Exchange website for Classic DE and EDE if applicable requirements
are met and such arrangements are otherwise permitted under state law.
As noted above, under this proposal, states with State Exchanges that
do not use HealthCare.gov would also retain discretion to adopt a
similar approach for assisters to permit the use of non-Exchange
websites, or these states could maintain the current prohibition on the
use of such websites by assisters.
We also anticipate that allowing FFE and SBE-FP assisters to use
web-broker non-Exchange websites to enroll consumers in QHPs will
encourage collaboration between assisters and web-brokers that will
benefit consumers by providing them with the most appropriate support
at each stage of the Exchange application, QHP selection, and QHP
enrollment processes. We believe that it is essential for assisters to
evolve by collaborating with new partners to better accomplish the
shared goals of educating consumers and helping them to enroll in QHPs
offered through Exchanges that best fit their needs. We further believe
this proposal will empower assisters to use tools that may be available
outside of the HealthCare.gov platform that can best help assisters to
serve their consumers and expand their reach and impact.
While we believe consumers working with assisters should have
access to additional options for selection of and enrollment in QHPs
offered through Exchanges that may be available through web-broker non-
Exchange websites, we believe it is necessary to put safeguards in
place to ensure assisters working with consumers using these sites
continue to comply with the statutory and regulatory standards
governing their role and duties. Sections 1311(i)(3)(B) and (i)(5) of
the PPACA and their implementing regulation at Sec. 155.210(e)(2)
require Navigators to provide fair, accurate, and impartial information
to consumers in connection with their role. A similar requirement
applies to CACs under Sec. 155.225(c)(1). Under Sec. 155.210(d),
Navigators are also prohibited from being a health insurance issuer or
issuer of stop loss insurance; a subsidiary of a health insurance
issuer or issuer of stop loss

[[Page 78613]]

insurance; or an association that includes members of, or lobbies on
behalf of, the insurance industry; or receiving any consideration
directly or indirectly from any health insurance issuer or issuer of
stop loss insurance in connection with the enrollment of any qualified
individuals or employees in a QHP or a non-QHP. Finally, under
Sec. Sec. 155.210(b)(1) and (c)(1)(iv) (for all Navigators) and
155.215(a) (for Navigators in FFEs), Navigators must be free from any
prohibited conflicts of interest. Similarly, CACs are prohibited under
Sec. 155.225(g)(2) from receiving any consideration directly or
indirectly from any health insurance issuer or issuer of stop loss
insurance in connection with the enrollment of any individuals in a QHP
or non-QHP, and are required under Sec. 155.225(d)(2) to disclose any
relationships they or their sponsoring agencies have with QHPs or
insurance affordability programs, or other potential conflicts of
interest. These rules help ensure that assisters remain free from any
influence that might interfere with their duty to provide consumers
with the fair, accurate, and impartial information they need to make
informed plan choices, while not influencing a consumer's ultimate QHP
selection.
We previously interpreted the requirement to provide fair,
accurate, and impartial information to mean that assisters are
prohibited from using a web-broker's non-Exchange website to provide
QHP shopping, application, and enrollment assistance, unless the
assister is using it as a reference tool to supplement the information
available on HealthCare.gov.\114\ This approach was adopted due to
concerns that web-brokers are not required to provide fair, accurate,
and impartial information, and are not prohibited from recommending
specific products, including QHPs, to their clients. Therefore, we
concluded that assisters would be unable to use a web-broker website
consistent with their duty to provide fair, accurate, and impartial
information. Since then, we have expanded the requirements applicable
to agents and brokers (including web-brokers) facilitating enrollment
of qualified individuals, qualified employers, or qualified employees
in QHPs offered through the FFEs and SBE-FPs, including web-brokers
that host non-Exchange websites. This includes FFE standards of conduct
that apply to agents, brokers, and web-brokers participating in Classic
DE and EDE, as well as those who use the HealthCare.gov website when
assisting Exchange consumers. For example, agents and brokers
(including web-brokers) must provide consumers with correct
information, without omission of material fact, regarding the
Exchanges, QHPs offered through the FFEs or SBE-FPs, and insurance
affordability programs.\115\ In addition, agents and brokers (including
web-brokers) must refrain from marketing or conduct that is misleading
(including by having a direct enrollment website that HHS determines
could mislead a consumer into believing they are visiting
HealthCare.gov), coercive, or discriminatory.\116\ Finally, the web-
broker's non-Exchange website must provide consumers with the ability
to view all QHPs offered through the Exchange, not provide financial
incentives such as rebates or giveaways, and not display QHP
recommendations based on compensation the web-broker receives from QHP
issuers.\117\ We believe that the combination of these requirements can
be relied upon to ensure that assisters are continuing to meet their
statutory and regulatory obligations to provide fair, accurate, and
impartial information and assistance to consumers when assisting them
with selection and enrollment in QHPs offered through the FFEs when
using a web-broker's non-Exchange website.
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\114\ See 79 FR 30239.
\115\ 45 CFR 155.220(j)(2)(i) and (l).
\116\ Id.
\117\ See 45 CFR 155.220(c)(3)(i)(B), (C), and (L) (extending
these requirements to Classic DE) and 155.220(c)(3)(ii)(A)
(extending these requirements to EDE).
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We are proposing several amendments to Sec. 155.220 to capture the
flexibility for assisters in FFE and SBE-FP states to use web-broker
non-Exchange websites to assist consumers. As noted previously in this
proposed rule, this proposed flexibility would extend to both Classic
DE and EDE options that web-brokers may offer to assist consumers in
FFE and SBE-FP states. First, we propose at paragraph (c)(3)(iii)(A)
for web-broker websites to display all QHP data provided by the
Exchange, consistent with the requirements of Sec. 155.205(b)(1) and
(c), for such websites to be eligible for use by assisters when
otherwise permitted under state law. We note that web-brokers may
obtain all QHP information they would be required to display in FFEs
and SBE-FPs for assisters to be permitted to use their websites by
integrating with the FFEs' Marketplace API.
For web-brokers operating in FFE and SBE-FP states, we propose an
optional annual certification process at new proposed paragraph
(c)(3)(iii)(B) under which a web-broker could be certified by the
Exchange by attesting to its compliance with the requirements proposed
in Sec. 155.220(c)(3)(iii)(A). We propose that the optional annual
certification process would be integrated into the existing annual web-
broker registration process, or could occur during another time of
year. We propose to maintain a public list of approved web-brokers in
FFEs or SBE-FPs and may add to that list information about whether a
web-broker is certified, so that assisters may more easily identify
web-broker websites they may seek to use in FFE and SBE-FP states, when
such arrangements are permitted under state law.
The proposed amendments to Sec. 155.220(c)(3)(iii)(A) also provide
that if a web-broker non-Exchange website does not facilitate
enrollment in all available QHPs in the state, it would be required to
identify for consumers the QHPs, if any, for which the web-broker
website does not facilitate enrollment by prominently displaying a
standardized disclaimer provided by the Exchange, and in a form and
manner specified by the Exchange. The disclaimer would state that the
consumer can enroll in such QHPs through the Exchange-operated website,
and would display a link to the Exchange website. We anticipate issuing
further guidance on the form and manner in which the disclaimer should
be displayed to ensure that it is clearly associated with any QHPs for
which the web-broker does not facilitate enrollment. We are considering
whether the disclaimer or a link to the disclaimer should replace the
link or other mechanism the web-broker would otherwise display to allow
a consumer to proceed with selecting and enrolling in a QHP, or whether
the disclaimer should be displayed in some other fashion. We invite
comments on what requirements should be adopted in reference to how
this disclaimer should be displayed on a web-broker's non-Exchange
website.
We note assisters, as part of providing information that is fair,
accurate, and impartial, are prohibited from steering consumers to
choose particular plans or recommend enrollment in any plan. With this
general framework in mind, we encourage web-brokers who elect to make
their non-Exchange websites available to assisters to consider
developing innovative consumer assistance tools that could be used by
assisters and the consumers they serve, including those related to
displaying QHPs that are based on consumer preferences or based on
algorithms that take into account unique consumer characteristics (for
example, consumer's age, zip code, or family composition), but that are
not based on compensation

[[Page 78614]]

that the web-broker may receive from QHP issuers. Consistent with the
existing prohibition in Sec. 155.220(c)(3)(i)(L), if a web-broker
makes its non-Exchange website available to assisters, the website may
not display QHP recommendations based on compensation the web-broker
receives from QHP issuers.\118\ Under our proposal, all of the other
requirements outlined in Sec. Sec. 155.220 and 155.221 that otherwise
apply to web-broker non-Exchange websites would continue to apply to
such websites when used by assisters. For example, a web-broker non-
Exchange website made available to assisters would be required to
refrain from marketing or conduct that is misleading (including by
having a direct enrollment website that HHS determines could mislead a
consumer into believing they are visiting HealthCare.gov), coercive, or
discriminatory. In addition, the web-broker non-Exchange website would
have to provide correct information, without omission of material fact,
regarding the Exchanges, QHPs offered through the FFEs or SBE-FPs, and
insurance affordability programs. We note that the proposed addition of
Sec. 155.220(n)(1) described in the preamble below that proposes to
create flexibility for web-broker non-Exchange websites to display
limited QHP details in certain circumstances and subject to certain
requirements would not extend to web-broker non-Exchange websites used
by assisters, which is why proposed Sec. 155.220(c)(3)(iii)(A) begins
with ``[n]otwithstanding paragraph (n)(1) of this section.''
---------------------------------------------------------------------------

\118\ See 45 CFR 155.220(c)(3)(i)(L).
---------------------------------------------------------------------------

We still believe that, for assisters to be permitted to use a web-
broker's non-Exchange website, there would need to be a mechanism to
capture information about assisters assisting consumers with Exchange
applications or QHP enrollment on the non-Exchange website and that
would transmit that data to the Exchange. For example, the web-broker
would need to capture and transmit assister unique ID numbers to
HealthCare.gov. This information is necessary to facilitate HHS
oversight of the direct enrollment program and these details are
collected for agents and brokers that use web-broker non-Exchange
websites. In FFEs and SBE-FPs, web-brokers that offer their non-
Exchange websites for use with Classic DE include the redirect to
HealthCare.gov for consumers to complete the eligibility application,
and the eligibility application on HealthCare.gov includes fields to
capture this information and would therefore comply with such a
requirement. For web-brokers participating in FFEs and SBE-FPs that
offer their non-Exchange website for use with EDE, as indicated in
operational guidance, specifically the EDE User Interface Question
Companion Guide, the eligibility application hosted on the web-broker
non-Exchange website must contain the same fields to capture
information that are included in the application on HealthCare.gov. We
do not believe a regulatory change is needed to capture this
requirement, but clarify that we would interpret the existing
requirements for an eligibility application hosted on the web-broker's
non-Exchange website to capture the information included on the
HealthCare.gov application to mandate that web-brokers that offer their
non-Exchange website for use by assisters must have a mechanism to
capture identifying information about assisters assisting consumers
with Exchange applications or QHP enrollment and must transmit such
information to the Exchange.
Nothing we are proposing is intended to change the prohibition at
Sec. 155.210(d)(4) on Navigators receiving any consideration, in cash,
or in kind, directly or indirectly, from any health insurance issuer or
issuer of stop loss insurance in connection with enrollment of any
qualified individuals or qualified employees in a QHP or non-QHP, or on
the parallel prohibition on CACs receiving any consideration directly
or indirectly from any health insurance issuer or issuers of stop-loss
insurance at Sec. 155.225(g)(2). Therefore, if the proposed changes
outlined above are implemented, all assisters using web-broker non-
Exchange websites in FFE and SBE-FP states would continue to be
prohibited from receiving compensation related to the enrollment
assistance they provide.
We seek comment on all of these proposals.
b. QHP Information Display on Web-Broker Websites
We propose to provide flexibility to web-brokers regarding the
information they are required to display on their non-Exchange websites
for QHPs in certain circumstances. Currently, Sec. 155.220(c)(3)(i)(A)
requires that a web-broker non-Exchange website must disclose and
display all QHP information provided by the Exchange or directly by QHP
issuers consistent with the requirements of Sec. 155.205(b)(1) and
(c). To the extent that not all information required under Sec.
155.205(b)(1) is displayed for a QHP, a web-broker must prominently
display a standardized disclaimer provided by HHS stating that
information required under Sec. 155.205(b)(1) for the QHP is available
on the Exchange website, and provide a link to the Exchange website.
Section 155.220(c)(i)(D) similarly currently requires web-brokers to
display all QHP data provided by an Exchange on its non-Exchange
website used to participate in the FFE direct enrollment program
(whether Classic DE or EDE). These display requirements have evolved
over time as the Exchanges have matured. For example, in the early
years of Exchange operations, we released a data file with limited QHP
details (the QHP limited file) that provided web-brokers with a basic
set of QHP data that could be used to satisfy the display requirement.
In adopting this approach, we recognized that the Exchange may not have
been able to provide web-brokers with certain data elements necessary
to meet the Sec. 155.205(b)(1) requirements, such as premium
information, due to confidentiality requirements, web-broker
appointments with QHP issuers, and state law. We also recognized some
of the data elements, such as quality rating information, were not
going to be available in the initial years of the Exchanges'
operation.\119\ Display of these data elements from the QHP limited
file data, in combination with a standardized disclaimer (the plan
detail disclaimer), became the de facto minimum required to satisfy the
web-broker's obligation to display QHP information on its non-Exchange
website.
---------------------------------------------------------------------------

\119\ See Patient Protection and Affordable Care Act; Program
Integrity: Exchange, SHOP, and Eligibility Appeals; Final Rule, 78
FR 54069 at 54134 (August 30, 2013).
---------------------------------------------------------------------------

In new proposed Sec. 155.220(n), we propose to establish an
exception to the web-broker display requirements captured at paragraphs
(c)(3)(i)(A) and (D). We propose to revise paragraph (c)(3)(i)(A) to
require a web-broker non-Exchange website to disclose and display all
QHP information provided by the Exchange or directly by QHP issuers
consistent with the requirements of Sec. 155.205(b)(1) and (c), except
as permitted under Sec. 155.220(n). We propose a similar revision to
Sec. 155.220(c)(3)(i)(D). At new proposed paragraph (n), we propose
certain flexibilities regarding display of QHP information if a web-
broker's non-Exchange website does not support enrollment in a QHP,
except in cases where the web-broker's website is intended to be
available for use by assisters consistent with proposed paragraph
(c)(3)(iii)(A). In that case, the

[[Page 78615]]

flexibility at new proposed paragraph (n) would not be available. A
web-broker's non-Exchange website may not support enrollment in a QHP
if the web-broker does not have an appointment with a QHP issuer and
therefore is not permitted under state law to enroll consumers in the
coverage offered by that QHP issuer. In such circumstances, we propose
that the web-broker's non-Exchange website would not be required to
provide all the information identified under Sec. 155.205(b)(1).
Instead, web-brokers would be required to display the following
limited, minimum information for such QHPs: Issuer marketing name, plan
marketing name, plan type, metal level, and premium and cost-sharing
information. To take advantage of this new proposed flexibility, we
also propose that the web-broker's non-Exchange website would be
required to identify to consumers the QHPs, if any, for which the web-
broker's website does not facilitate enrollment by prominently
displaying the plan detail disclaimer provided by the Exchange. The
plan detail disclaimer explains that the consumer can get more
information about such QHPs on the Exchange website, and includes a
link to the Exchange website. We believe this proposal strikes an
appropriate balance by recognizing that web-brokers may not be
permitted to assist with enrollments in QHPs for which they do not have
an appointment while still providing key information about all QHPs on
web-broker non-Exchange websites to allow consumers to window shop and
identify whether they may want to explore other QHP options. It also
would minimize burdens for web-brokers by not requiring them to build
functionality and processes to display all of the required comparative
information listed in Sec. 155.205(b)(1) for those QHPs for which they
do not have an appointment to sell.
To more closely align the plan detail disclaimer text \120\ with
the intent of this proposal, we plan to issue further guidance revising
the text of the disclaimer so that it can be clearly associated with
any QHPs for which the web-broker website does not facilitate
enrollment. For example, the current disclaimer text states, in
relevant part, the web-broker ``isn't able to display all required plan
information about this Qualified Health Plan at this time.'' We are
considering modifying this text so that it states, in relevant part,
the web-broker ``doesn't display all plan information about, and
doesn't facilitate enrollment in, this Qualified Health Plan at this
time.''
---------------------------------------------------------------------------

\120\ The current plan detail disclaimer states: ``[Name of
Company] isn't able to display all required plan information about
this Qualified Health Plan at this time. To get more information
about this Qualified Health Plan, visit the Health Insurance
Marketplace[supreg] website at HealthCare.gov.'' See also Section
5.3.2 of the ``Federally-Facilitated Exchanges (FFEs) and Federally-
Facilitated Small Business Health Options Program (FF-SHOP)
Enrollment Manual.'' Available at https://www.regtap.info/uploads/library/ENR_FFEFFSHOPEnrollmentManual2020_5CR_090220.pdf.
---------------------------------------------------------------------------

We invite comments on the proposed required limited, minimum QHP
details that must be displayed for those QHPs that the web-broker does
not facilitate enrollment in through its non-Exchange website and the
proposed edits to the plan detail disclaimer text. We also seek comment
on whether to require display of any additional elements identified
under Sec. 155.205(b)(1) among the limited, minimum information, such
as summaries of benefits and coverage.\121\
---------------------------------------------------------------------------

\121\ Section 155.205(b)(1) references the following comparative
QHP information: Premium and cost-sharing information, the summary
of benefits and coverage, metal level, results of enrollee
satisfaction surveys, quality ratings, medical loss ratio
information, transparency of coverage measures, and the provider
directory.
---------------------------------------------------------------------------

c. Web-Broker Operational Readiness Review Requirements
We propose amendments to further clarify the operational readiness
requirements applicable to web-brokers by adding a new proposed Sec.
155.220(c)(6). In the 2018 Payment Notice final rule, we adopted rules
to require web-brokers to demonstrate operational readiness, including
compliance with applicable privacy and security requirements, prior to
participating in the FFE direct enrollment program.\122\ Our intent in
codifying this requirement was to build on the onboarding and testing
processes for a web-broker to be approved to use the direct enrollment
pathways. We noted the expectation that additional operational
readiness requirements would be established specific to EDE to account
for the additional functionality associated with that pathway.\123\ At
the same time, we established similar requirements for QHP issuers to
demonstrate operational readiness and compliance with applicable
requirements prior to their use of the direct enrollment pathway.\124\
In the 2020 Payment Notice, we consolidated these similar requirements
from their prior locations at Sec. Sec. 155.220(c)(3)(i)(K) and
156.1230(b)(2) into Sec. 155.221(b)(4) as part of our effort to
streamline requirements applicable to all direct enrollment
entities.\125\ In this rule, we propose to create a new proposed Sec.
155.220(c)(6) to capture operational readiness requirements applicable
to web-brokers that host non-Exchange websites to complete QHP
selection or the Exchange eligibility application. In proposed
paragraph (c)(6), we propose to include introductory language that
reflects the requirement for a web-broker to demonstrate operational
readiness and compliance with applicable requirements prior to the web-
broker's non-Exchange website being used to complete an Exchange
eligibility application or a QHP selection, which may include
submission or completion, in a form and manner specified by HHS, of
certain information or testing processes. As reflected in proposed
paragraphs (c)(6)(i) through (v), HHS may request a web-broker submit a
number of artifacts or documents or complete certain testing processes
to demonstrate the operational readiness of its non-Exchange website.
The required documentation may include operational data including
licensure information, points of contact, and third-party
relationships; security and privacy assessment documentation, including
penetration testing results, security and privacy assessment reports,
vulnerability scan results, plans of action and milestones, and system
security and privacy plans; and an agreement between the web-broker and
HHS documenting the requirements for participating in the applicable
direct enrollment program. The required testing processes may include
enrollment testing, prior to approval or at the time of renewal, and
website reviews performed by HHS to evaluate prospective web-brokers'
compliance with applicable website display requirements prior to
approval. To facilitate testing, prospective and approved web-brokers
will have to maintain and provide access to testing environments that
reflect their prospective or actual production environments. We are
proposing these amendments to codify in regulation existing program
requirements that apply to web-brokers that participate in the FFE
direct enrollment program and are captured in the agreements executed
with participating web-broker direct enrollment entities and related
technical guidance.\126\ We are not proposing to

[[Page 78616]]

extend the same requirements to QHP issuers participating in the FFE
direct enrollment program, because QHP issuers, as HIPAA-covered
entities, are subject to longstanding federal requirements and
oversight related to the protection of PII and PHI that are not
necessarily applicable to web-brokers. With HIPAA privacy and security
regulations and oversight in place and applicable to QHP issuers, HHS
has adopted a risk acceptance approach for QHP issuers allowing them to
participate in the FFE direct enrollment program, in some cases,
without imposing certain requirements that are in place for web-
brokers. In addition, QHP issuers are subject to more extensive
oversight by state regulators than web-brokers.
---------------------------------------------------------------------------

\122\ See 81 FR 94176.
\123\ See 81 FR 94120.
\124\ See 81 FR 94152.
\125\ See 84 FR 17524.
\126\ See, for example, ``Updated Web-broker Direct Enrollment
Program Participation Minimum Requirements,'' May 21, 2020.
Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2020-WB-Program-Guidance-052120-Final.pdf.
---------------------------------------------------------------------------

We seek comment on this proposal.
5. Standards for Direct Enrollment Entities and for Third Parties To
Perform Audits of Direct Enrollment Entities (Sec. 155.221)
a. Direct Enrollment Entity Plan Display Requirements
We propose to revise Sec. 155.221(b)(1) to clarify the
requirements that apply when direct enrollment entities want to display
and market QHPs \127\ and non-QHPs. We propose that in such
circumstances, the web-broker or QHP issuer must display and market
QHPs offered through the Exchange, individual health insurance coverage
as defined in Sec. 144.103 offered outside the Exchange (including
QHPs and non-QHPs other than excepted benefits), and all other
products, such as excepted benefits, on at least three separate website
pages, with certain proposed exceptions described below.
---------------------------------------------------------------------------

\127\ As detailed in prior rulemaking, with some limited
exceptions, stand-alone dental plans certified for sale on an
Exchange are considered a type of QHP. See 77 FR 18315. CMS expects
direct enrollment entities to follow the same requirements for
stand-alone dental plan QHPs as for medical QHPs, including the
applicable display and marketing requirements captured in Sec. Sec.
155.220, 155.221 and 156.1230, except as proposed at new Sec.
155.221(c)(2) in the context of off-Exchange stand-alone dental plan
shopping.
---------------------------------------------------------------------------

In the 2020 Payment Notice, we amended Sec. 155.221(b)(1) to
require direct enrollment entities to display and market QHPs and non-
QHPs on separate website pages on their respective non-Exchange
websites.\128\ We explained that this proposal was intended to balance
the goals of minimizing consumer confusion about distinct products with
substantially different characteristics, and providing direct
enrollment entities marketing flexibility and opportunities for
innovation.\129\ Similarly, we amended paragraph (b)(3) to require
direct enrollment entities to limit the marketing of non-QHPs during
the Exchange eligibility application and QHP selection process in a
manner that will minimize the likelihood that consumers will be
confused as to what products are available through the Exchange and
what products are not.\130\ Under the existing display standards
captured at paragraphs (b)(1) and (3), direct enrollment entities are
required to offer an Exchange eligibility application and QHP selection
process that is free from advertisements or information about non-QHPs
and sponsored links promoting health insurance related products.
However, under the current framework, it is permissible for a direct
enrollment entity to market or display non-QHP health plans and other
off-Exchange products in a section of the entity's website that is
separate from the QHP web pages if the entity otherwise complies with
the applicable requirements. We explained in the 2020 Payment Notice
that we believe marketing some products in conjunction with QHPs may
cause consumer confusion, especially as it relates to the availability
of financial assistance for QHPs purchased through the Exchanges.\131\
We acknowledged at that time that we may need to update these standards
as new products come to market and as technologies evolve that can
assist with differentiating between QHPs offered through the Exchange
and other products consumers may be interested in. We also noted our
belief that the convenience of being able to purchase additional
products as part of a single shopping experience outweighs potential
consumer confusion, if proper safeguards are in place.\132\
---------------------------------------------------------------------------

\128\ See 84 FR 17523 and 17524.
\129\ See 84 FR 17523.
\130\ Id.
\131\ Id.
\132\ Id.
---------------------------------------------------------------------------

We propose to amend paragraph (b)(1) to refine the previously
adopted policy, consistent with the original intent of minimizing
consumer confusion about distinct products with substantially different
characteristics, while providing direct enrollment entities with more
marketing flexibility and opportunities for innovation. QHPs are
required to be offered on- and off-Exchange under the guaranteed
availability requirements at Sec. 147.104. The current framework
allows for direct enrollment entities to display on- and off-Exchange
QHPs on the same website pages, as long as the direct enrollment
entity's website makes clear that APTC and CSRs are only available for
QHPs offered through the Exchange.\133\ We have observed various
attempts by direct enrollment entities to distinguish between on- and
off-Exchange QHPs displayed on the same website pages, but believe that
even good faith efforts to inform consumers about this distinction have
the potential to cause confusion about which QHP a consumer should
select if APTC-eligible when two instances of otherwise identical plans
(that is, the on- and off-Exchange versions of the QHP) are displayed
on a single website page, but only one is available with APTC. In
addition, paragraph (b)(1) currently prohibits the display of off-
Exchange QHPs on the same website pages as comparable non-QHP
individual health insurance coverage. This creates a segmented off-
Exchange plan shopping experience on direct enrollment entity websites
that does not allow consumers to easily comparison shop among
comparable major medical health insurance products. As described
further below, the recent introduction of individual coverage HRAs
increases the importance of individual health insurance coverage
offered outside of the Exchange for employees whose employers offer
such arrangements and also offer the opportunity to make salary
reduction contributions through a cafeteria plan under section 125 of
the Code, and this is part of the reason we are considering amending
the current display requirements for direct enrollment entities.
---------------------------------------------------------------------------

\133\ See, for example, 45 CFR 155.220(j)(2)(i) and
156.1230(a)(1)(iii).
---------------------------------------------------------------------------

We propose to revise Sec. 155.221(b)(1) to require that direct
enrollment entities display and market QHPs offered through the
Exchange, individual health insurance coverage as defined in Sec.
144.103 offered outside the Exchange (including QHPs and non-QHPs other
than excepted benefits), and all other products, such as excepted
benefits, on at least three separate website pages, with certain
exceptions. Requiring that these three categories of products be
displayed and marketed on separate website pages provides a more
precise delineation between the three categories of products with
substantially different characteristics, either in the way they can be
purchased or the types of benefits they offer, while still allowing
substantial flexibility in website design to facilitate the consumer's
shopping experience. We propose the first product category, QHPs
offered through the Exchange, must be isolated from the other
categories of products to distinguish for consumers the products for
which APTC and CSRs are available

[[Page 78617]]

(if eligible). We propose the second product category, individual
health insurance coverage offered outside the Exchange (including QHPs
and non-QHPs other than excepted benefits), must be similarly
distinguished from other products, because those plans represent major
medical coverage that is subject to the same PPACA market-wide
requirements as QHPs offered through the Exchange, but that is not
available with APTC and CSRs. Therefore, distinguishing between these
two categories of products by requiring that they be displayed and
marketed on separate website pages will allow consumers to more easily
shop for comparable major medical insurance subject to PPACA market-
wide rules while maintaining the clear distinction between plans for
which APTC and CSRs are and are not available. We propose that the
third product category, which encompasses types of products not in the
first two categories, including excepted benefits, must be displayed
and marketed on one or more website pages separate from the website
pages used for displaying and marketing the first two categories of
products to assist consumers in distinguishing them from major medical
plans. The range of products in the third category are not subject to
PPACA market-wide rules and APTC and CSRs are not available with such
products, and therefore they are substantially different from the plans
that fall into the first two categories.
We also propose to amend Sec. 155.221(b)(3) to include clarifying
edits and to include the same exceptions detailed below as we are
proposing for paragraph (b)(1). We propose to revise paragraph (b)(3)
to limit marketing of non-QHPs during the Exchange eligibility
application and QHP selection process in a manner that minimizes the
likelihood that consumers will be confused as to which products and
plans are available through the Exchange and which products and plans
are not, except as permitted under new proposed paragraph (c)(1). This
proposal removes a redundant reference to ``plan'' that was included
after ``QHP,'' and adds references to ``plans'' after the references to
``products'' to use consistent language throughout paragraphs (b)(1)
and (3). We are proposing the same exceptions for paragraph (b)(3) to
align with the proposed changes to paragraph (b)(1) to clarify that
displaying QHPs and non-QHPs on the same website page, as would be
permitted under the proposed exceptions in certain circumstances, would
not constitute a violation of paragraphs (b)(1) or (3).
We propose certain exceptions in new Sec. 155.221(c) to the
proposed updates to paragraphs (b)(1) and (3), because we recognize
that, in some limited scenarios, consumers may be best served by being
able to directly and easily compare plans offered on- and off-Exchange.
As of January 1, 2020, employers may offer employees an individual
coverage HRA (health reimbursement arrangement) instead of offering
traditional group health coverage.\134\ An individual coverage HRA may
reimburse employees for medical expenses, including monthly health
insurance premiums. To use the individual coverage HRA, an employee
(and any eligible household members) must enroll in individual health
insurance coverage, other than excepted benefits, or Medicare parts A
and B or C. To satisfy this requirement, employees (and any eligible
household members) can enroll in individual health insurance coverage
through the Exchange or outside the Exchange. An employee and any
household members offered an individual coverage HRA will be ineligible
for APTC if the individual coverage HRA is affordable or if the
employee and household members accept the individual coverage HRA even
if it is unaffordable. If an employee and any household members offered
an individual coverage HRA that is unaffordable decline the individual
coverage HRA benefit, they may qualify for APTC (if otherwise eligible)
if they enroll in a QHP through the Exchange. Some employees who are
offered an individual coverage HRA may also be eligible, through a
cafeteria plan under section 125 of the Code, to pay a portion of their
health insurance premiums through tax-preferred salary reduction
contributions. This type of cafeteria plan benefit may only be used in
combination with off-Exchange individual health insurance coverage.
Employers have flexibility to offer an employee both the individual
coverage HRA and the cafeteria plan benefit instead of providing
traditional tax-preferred group health coverage. However, employers may
not offer employees a choice of an individual coverage HRA or
traditional group health coverage.
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\134\ See Health Reimbursement Arrangements and Other Account-
Based Group Health Plans; Final rule, 84 FR 28888 (June 20, 2019).
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Consumers shopping and enrolling in coverage through direct
enrollment entity websites may therefore wish to see and consider
additional non-QHP individual health insurance coverage (other than
excepted benefits) options that are only available off-Exchange. We
also believe consumers may find it difficult to determine their best
option, especially when they are part of a tax household with members
that may have varying eligibility for APTC, CSRs, Medicaid, CHIP,
individual coverage HRAs, and cafeteria plans. For this reason, we
propose to provide an exception to the new proposed display standards
in Sec. 155.221(b)(1) and (b)(3) to support the development of
innovative and consumer-friendly plan comparison tools by direct
enrollment entities to assist consumers in making the best choices for
themselves and their families in these complex situations.
In proposed new paragraph (c)(1), we propose to allow direct
enrollment entities to display and market QHPs offered through the
Exchange and individual health insurance coverage offered outside the
Exchange (including QHPs and non-QHPs other than excepted benefits) on
the same website pages when assisting individuals who have
communicated, within the website user interface or by communicating to
an agent or broker assisting them, they have received an offer of an
individual coverage HRA, as a standalone benefit or in addition to an
offer of an arrangement under which the individual may pay the portion
of the premium for individual health insurance coverage that is not
covered by an individual coverage HRA using a salary reduction
arrangement under a cafeteria plan, so long as certain conditions are
met. As reflected in the new proposed Sec. 155.221(c)(1), the
conditions we propose to adopt include clearly distinguishing between
the QHPs offered through the Exchange and the individual health
insurance coverage offered outside the Exchange (including QHPs and
non-QHPs other than excepted benefits), and prominently communicating
that APTC and CSRs are available only for QHPs purchased through the
Exchange, that APTC is not available to an individual who accepts an
offer of an individual coverage HRA or who opts out of an affordable
individual coverage HRA, and that a salary reduction arrangement under
a cafeteria plan may only be used toward the cost of premiums for plans
purchased outside the Exchange.
In addition, we wish to reduce incentives that may lead to routing
consumer households to off-Exchange plan shopping experiences based on
overly simplistic factors such as a single member of a multi-member
household having an individual coverage HRA and a cafeteria plan offer.
Instead we seek to encourage direct enrollment entities to

[[Page 78618]]

develop blended plan selection user interfaces that incorporate on- and
off-Exchange plan options when assisting consumers who have
communicated receipt of an offer of an individual coverage HRA while
incorporating the proposed conditions that are designed to minimize the
chance for consumer confusion about the differences between the
different coverage options. For example, a direct enrollment entity
exercising the flexibility under the proposed exception in Sec.
155.221(c)(1) could clearly distinguish between on- and off-Exchange
plan options by using frames, columns, different color schemes,
prominent headings, icons, help text, and other visual aids to increase
the chance that consumers are aware of the distinctions between the
plan options. We emphasize the proposal's intent is for distinguishing
and clarifying user interface elements to be clear, prominent, and
difficult to ignore, and therefore the use of an obscure disclaimer in
small text at the bottom of the page or behind a link would not be
sufficient, for example. We note that in addition to the safeguards
proposed in this rule, direct enrollment entities in the FFEs are
subject to standards of conduct that require they provide consumers
with correct information, without omission of material fact, regarding
QHPs and insurance affordability programs, and refrain from marketing
or conduct that is misleading.\135\ We solicit comment on these
proposals, as well as comments on alternative approaches through which
direct enrollment entities may assist consumers with individual
coverage enrollment when they have an offer of an individual coverage
HRA.
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\135\ See 45 CFR 155.220(j)(2)(i), applicable to web-brokers,
and 156.1230(b)(2), applicable to QHP issuers participating in
direct enrollment. Also see ``Guidance Regarding website Display for
Direct Enrollment (DE) Entities Assisting Consumers in States with
Federally-facilitated Exchanges (FFEs) and State-based Exchanges on
the Federal Platform (SBE-FPs).'' Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/DE-Entity-Standards-of-Conduct-website-Display.pdf.
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We propose an additional exception to Sec. 155.221(b)(1) at
proposed paragraph (c)(2) to allow direct enrollment entities to
display and market stand-alone dental plans certified by an Exchange
but offered outside the Exchange and non-certified stand-alone dental
plans on the same off-Exchange dental plan shopping website pages.
Stand-alone dental plans certified by an Exchange and non-certified
stand-alone dental plans should be largely comparable products among
which consumers looking for dental coverage off-Exchange may wish to
comparison shop. Since the proposed change at paragraph (b)(1) to allow
display of all individual health insurance coverage offered outside the
Exchange on the same website pages (including QHPs and non-QHPs other
than excepted benefits) excludes stand-alone dental plans (since stand-
alone dental plans are excepted benefits), we propose this additional
exception to allow direct enrollment entities to provide a consumer-
friendly off-Exchange stand-alone dental plan shopping experience where
consumers can compare the full range of stand-alone dental plans on a
single website page.
We propose conforming amendments to redesignate paragraphs (c)
through (h) in Sec. 155.221 as paragraphs (d) through (i) and related
updates to internal cross references. As detailed below, we also
propose certain amendments to the direct enrollment entity operational
readiness review requirements in Sec. 155.221(b)(4).
We request comment on these proposals.
b. Direct Enrollment Entity Operational Readiness Review Requirements
We propose to revise Sec. 155.221(b)(4) to add additional detail
on the operational readiness requirements for direct enrollment
entities. Similar to the proposed web-broker operational readiness
requirement at new proposed Sec. 155.220(c)(6), we are proposing these
amendments to codify in Sec. 155.221(b)(4) more details about the
existing program requirements that apply to direct enrollment entities
and are captured in the agreements executed with participating web-
broker and QHP issuer direct enrollment entities. We note that these
proposed requirements are in addition to the operational readiness
requirements for web-brokers at new proposed Sec. 155.220(c)(6),
although web-brokers may not be required to submit the documentation
required under this proposal to revise Sec. 155.221(b)(4) or they may
be permitted to use the same documentation to satisfy the requirements
of both operational readiness reviews depending on the specific
circumstances of their participation in the direct enrollment program
and the source and type of documentation. For example, a web-broker
seeking to participate only in the Classic DE program would only be
required to meet the operational readiness requirements at new proposed
Sec. 155.220(c)(6), whereas a web-broker seeking to participate in the
EDE program may be permitted to use its third-party security and
privacy audit documentation for EDE to satisfy the security and privacy
audit documentation requirements of Sec. Sec. 155.220(c)(6) and
155.221(b)(4) assuming the Classic DE and EDE systems and functionality
were hosted in the same environments subject to the third-party audit.
In paragraph (b)(4), we propose to continue to require a direct
enrollment entity to demonstrate operational readiness and compliance
with applicable requirements prior to the direct enrollment entity's
website being used to complete an Exchange eligibility application or a
QHP selection. We add new proposed paragraphs (b)(4)(i) through (v) to
reflect that direct enrollment entities may need to submit or complete,
in the form and manner specified by HHS, a number of artifacts,
documentation, or various testing or training processes. The
documentation may include business audit documentation, including:
Notices of intent to participate including auditor information;
documentation packages including privacy questionnaires, privacy policy
statements, and terms of service; and business audit reports including
testing results. The required documentation may also include security
and privacy audit documentation including: Interconnection security
agreements; security and privacy controls assessment test plans;
security and privacy assessment reports; plans of action and
milestones; privacy impact assessments; system security and privacy
plans; incident response plans; and vulnerability scan results.
Submission of agreements between the direct enrollment entity and HHS
documenting the requirements for participating in the applicable direct
enrollment program may also be required. Required testing may include
eligibility application audits performed by HHS. The direct enrollment
entity may also be required to complete online training modules
developed by HHS related to the requirements to participate in the
direct enrollment program.
We request comment on this proposal.
c. FFE, SBE-FP, and State Exchange Direct Enrollment Options
While CMS has taken a number of actions to reduce the burden on
states in establishing State Exchanges, CMS wishes to maximize
flexibility for all states to oversee their own healthcare markets and
to address unique market dynamics in each state. As explained in the
Exchange Establishment Rule, we recognize that states are best equipped
to adapt the minimum Exchange functions to their local markets and the

[[Page 78619]]

unique needs of their residents.\136\ In addition, CMS recognizes that
for decades, issuers, licensed agents and brokers, and web brokers have
been engaging directly with consumers in offering health insurance and
assisting consumers in selecting, enrolling in, and managing their
coverage. In light of the success of the FFEs' classic direct
enrollment and EDE pathways, which permit approved issuers and web
brokers to facilitate enrollment in QHPs offered through the FFEs and
SBE-FPs using non-Exchange websites, CMS is proposing to provide
additional options for states that wish to promote more flexible and
lower cost private-sector approaches for assisting consumers with
shopping and enrolling in QHP coverage offered through Exchanges. We
believe that this proposal also would allow states to continue to more
effectively exercise their traditional oversight authority over health
insurance markets, while enhancing the consumer experience, increasing
competition, and lowering costs.
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\136\ See, for example, 77 FR at 18313.
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To date, Exchange application and enrollment activities have been
supported through Exchange-operated websites. One of the primary
advantages of this design is that consumers can access one-stop
shopping for all QHPs offered through an Exchange and can access
relevant details on such plans in a standardized format. Before
Exchanges existed, consumers shopping for individual market health
insurance who tried to search for this information would have to
contact multiple issuers or visit multiple websites, and the
information would often be presented inconsistently, preventing true
apples-to-apples comparison shopping. Exchange-run application and
enrollment websites also help to manage churn between private health
insurance coverage and public programs such as Medicaid and CHIP by
offering connections to those public programs for individuals who may
qualify for participation.
While Exchange-operated application and enrollment websites have
undoubtedly helped many consumers shop for and compare plans, they also
present some significant potential disadvantages given historical and
current implementation. First, it can be costly and burdensome to
create and operate Exchanges, including not only the cost of designing
and maintaining a complex website, but also the burden of staffing and
operation of call centers that must be scaled up during each annual
Open Enrollment Period (OEP), and then scaled down during lower-traffic
periods. Second, the design of Exchange-operated websites also tends to
result in choke points when a large number of consumers use the same
website at the same time to shop for and enroll in coverage. For
example, on high traffic days near the end of the annual OEP, some
consumers trying to access HealthCare.gov have been redirected to the
FFE call center or told to come back to the website at a later time to
complete their enrollment due to volume, resulting in missed enrollment
opportunities for some consumers. We have experienced issues with
consumer facing (front-end) functions inhibiting consumer access to
enrollment on HealthCare.gov while consumers are still able to shop for
coverage through EDE and DE partners that rely on federal supporting
functions (back-end), such as the processing of data matching and
special enrollment period verification documentation, casework, and
eligibility appeals. Although we recognize that without robust
competition among EDE and DE partners, an EDE or DE partner's website
may experience similar choke points due to high consumer traffic,
state's flexibility to partner with more than one DE or EDE entity
mitigates this risk.
Third, we believe it is inherently difficult for Exchanges to keep
up with the rapid pace of innovation in e-commerce and the ever-
evolving preferences of online shoppers, who are accustomed to shopping
for the products they buy in a manner that is not only tailored to
their specific needs, but is also aesthetically appealing and
constantly refreshed. Federal contracting rules, for example, may limit
the government's ability to frequently refresh and update the consumer
experience. Finally, we have heard criticisms from some stakeholders
that the Exchange-operated application and enrollment website model
competes directly with and may crowd out market players such as web
brokers, licensed agents and brokers, and issuers, dampening commercial
investments in outreach and marketing by these market players to reach
new consumers.
We believe that both the FFE's classic direct enrollment and EDE
pathways have promoted innovation and competition in states using the
HealthCare.gov platform and have ultimately lead to better experiences
for consumers in these states. Direct enrollment, which has been in
operation since the launch of the Exchange in 2013, and enhanced direct
enrollment, which has been in operation since 2018, together are
responsible for one-third of FFE enrollments. Today, the Healthcare.gov
application and enrollment website and approved private sector non-
Exchange websites operate side-by-side to enroll consumers in
individual market QHPs offered through the FFEs and SBE-FPs. Like
Exchange-operated websites, non-Exchange websites operated by direct
enrollment partners in these states are required to provide
standardized comparative information to assist consumers shopping for
coverage.\137\ Unlike FFE and SBE-FP application and enrollment
websites, private sector entities, including those who participate in
the FFE's classic and EDE pathways, are also able to provide assistance
with a broader array of plan options, including both on- and off-
Exchange plan options and ancillary products. This is an important
feature for many consumers who do not qualify for PTCs due to their
income, employees with an offer of an affordable individual coverage
HRA, as well as employees offered both an individual coverage HRA and a
cafeteria plan because the Code specifically prohibits using salary
reduction contributions under a cafeteria plan to purchase on-Exchange
coverage.\138\ Finally, the FFE's EDE pathway helps to reduce costs to
the federal government by enrolling many consumers without touching the
FFEs' application intake and enrollment resources (for example, the
Marketplace call center and the HealthCare.gov website).
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\137\ See, for example, 45 CFR 155.220(c)(3)(i)(A) (for web-
brokers) and 156.1230(a)(1)(ii) (for QHP issuers).
\138\ As detailed above there is a growing cohort of consumers
who may be interested in off-Exchange coverage options.
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To build on the success of the FFE's classic direct enrollment and
EDE pathways for FFE and SBE-FP states that use HealthCare.gov, and to
offer additional flexibility to all states, we are proposing a new
opportunity for states to adapt the minimum Exchange functions to their
local markets and leverage the benefits of direct enrollment to enhance
the consumer experience through a private sector-focused consumer
engagement and enrollment strategy. We propose to add Sec. 155.221(j)
to establish a process for states to elect a new Exchange Direct
Enrollment (DE) option in which a state can request to allow private
sector entities (including QHP issuers, web-brokers, agents and
brokers) to operate enrollment pathways through which consumers can
apply, receive an eligibility determination from the Exchange, and
purchase an individual market QHP offered through the Exchange with
APTC and CSRs, if otherwise eligible.

[[Page 78620]]

As outlined in proposed Sec. 155.221(j), subject to HHS approval,
a state may elect for its Exchange to engage one or more entities
described in paragraph (a) \139\ to facilitate QHP enrollments through
the Exchange. Under this option, similar to the current FFE direct
enrollment program, the approved direct enrollment entities would
enroll qualified individuals in a QHP in a manner that constitutes
enrollment through the Exchange \140\ and would also assist individuals
in applying for and receiving eligibility determinations from the
Exchange for APTC and cost-sharing for QHPs offered through the
Exchange. New proposed Sec. 155.221(j)(1) outlines proposed
requirements that would apply to State Exchanges that do not rely on
the federal eligibility and enrollment platform that want to pursue the
SBE-DE option. New proposed paragraph (j)(2) outlines proposed
requirements that would apply to states with an FFE or SBE-FP \141\
that want to pursue the FFE-DE or SBE-FP-DE option. We propose that,
subject to HHS approval, the SBE-DE option may be implemented in states
with a State Exchange starting in plan year 2022. We propose that,
subject to HHS approval, the FFE-DE and SBE-FP-DE option may be
implemented in states with an FFE or SBE-FP starting in plan year 2023.
---------------------------------------------------------------------------

\139\ Section 155.221(a) identifies QHP issuers and web-brokers
as eligible direct enrollment entities.
\140\ Section 1401(a) of the PPACA added new section 36B to the
Code, which provides for PTCs for eligible individuals, while
section 1402 of the PPACA provides for CSRs for eligible
individuals. For individuals to be eligible to receive PTCs, among
other requirements, the PPACA requires that individuals be enrolled
in a QHP through an Exchange. CMS has interpreted this statutory
language to allow a QHP issuer to enroll an applicant who initiates
enrollment directly with the QHP issuer. See Sec. 156.1230, whereby
individuals enrolling directly on the site of a QHP issuer are
considered enrolled ``through an Exchange'' so long as the issuer
meets applicable requirements. We adopted a similar approach to
allow a web broker to enroll an applicant who seeks to enroll
through the web broker's website. See Sec. 155.220(a)(2) and (c),
whereby individuals enrolling directly through the site of a web
broker are considered enrolled ``through an Exchange'' so long as
the web broker meets applicable requirements.
\141\ As detailed further below, states with an SBE-FP can
request to pursue the DE option as an SBE-FP-DE. If a state that
currently operates an SBE-FP is interested in transitioning to a
full State Exchange that implements this DE option, it would need to
update its Blueprint accordingly, and meet statutory and regulatory
requirements to become a State Exchange implementing the DE option
(an SBE-DE). Such requirements include operating its own eligibility
and enrollment platform rather than relying on the federal platform.
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Under each of the Exchange DE options, states would be able to
request to adopt a private sector-based enrollment approach as an
alternative to the Exchanges' consumer-facing enrollment website (for
example, HealthCare.gov for the FFEs). This less centralized, private
sector-focused approach for enrollment would transition to websites
operated by approved partners to serve as the online platform(s)
through which consumers apply for and enroll in individual market QHPs
offered through the Exchange in their state, as well as apply for and
receive determinations of APTC and CSR eligibility for QHP coverage
offered through the Exchange. An Exchange would implement a direct
enrollment pathway (or pathways) with secure connections between its
back-end eligibility system and the systems of approved issuers, web
brokers, or agents and brokers that enable consumers to complete the
single streamlined eligibility application as described in Sec.
155.405, receive an eligibility determination from the Exchange, select
a plan and enroll in a QHP, with or without APTC and CSRs (if otherwise
eligible). Exchanges would continue to be responsible for meeting, and
ensuring its approved direct enrollment partners meet, all applicable
statutory and regulatory requirements governing application for and
enrollment in QHPs. Under these DE options, the Exchange would also
remain the entity responsible for making eligibility determinations,
conducting required verifications of consumer application information,
and determining whether an applicant is eligible for QHPs, APTCs, and
CSRs. The Exchange would also continue to be responsible for sharing
this information with CMS, which will continue to issue the applicable
APTC to carriers on behalf of qualified individuals, and to the IRS,
which will continue to administer the reconciliation of APTC on
individual tax returns. Consistent with section 1311(d)(4)(F) of the
PPACA and 45 CFR 155.302, under these DE options the Exchange would
also continue to be responsible for conducting assessments or
determinations of eligibility for Medicaid and CHIP, and refer such
individuals to the appropriate state Medicaid agency for enrollment in
such program(s).\142\
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\142\ Section 1311(d)(4)(F) requires Exchanges to inform
individuals of eligibility requirements for Medicaid, CHIP, or any
applicable State or local public programs and, if through screening
of the application the Exchange determines such individuals are
eligible for any such program and refer such individuals to the
appropriate state Medicaid agency for enrollment in such program(s).
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In proposing these options for states, we note that the applicable
statutory provisions do not require either the federal government or
states to operate an enrollment website. Rather, the PPACA provides
that an Exchange must, at a minimum, certify plans as QHPs and make
QHPs available to consumers, and facilitate the purchase of QHPs. An
Exchange can continue to meet these obligations and the minimum
functions outlined in the statute without operating a singular
consumer-facing enrollment website. In the context of operating an
internet website, we interpret the statutory language at section
1311(c)(5) and (d)(4)(C) of PPACA to require the Exchange provide
consumers with the ability to view comparative information on QHP
options but that the Exchange may direct consumers to other entities or
resources for purposes of submitting applications for and enrolling in
QHPs, with APTC and CSRs, if otherwise eligible. Exchanges in states
that elect to pursue this new option would be required to continue to
grant exemption certifications under section 1311(d)(4)(H) of the
PPACA, as applicable; make available an electronic calculator
consistent with section 1311(d)(4)(G) of the PPACA; establish a
Navigator program as required under section 1311(d)(4)(K) of the PPACA;
and provide for the operation of a toll-free telephone hotline under
section 1311(d)(4)(B) of the PPACA.
For the FFE-DE, SBE-FP-DE, and SBE-DE options, the Exchange would
make available both a basic website listing basic QHP information for
comparison and a listing, with links, to approved partner websites for
consumer shopping, plan selection, and enrollment activities.
Consistent with section 1311(d)(4)(E) of the PPACA, the comparative
plan information presented on the Exchange website would need to
continue to utilize a standardized format, including the use of the
uniform summary of benefits and coverage outline of coverage
established under section 2715 of the PHS Act.\143\ The standardized
comparative information displayed on Exchange websites must also
continue to include the quality ratings assigned to each QHP offered
through the Exchange.\144\ Through private sector partners such as web-
brokers and issuers, states may pursue alternatives to HealthCare.gov
or other centralized, state-operated Exchange enrollment websites to
enhance the consumer experience and provide additional incentives for
insurers and licensed agents and brokers to conduct marketing and
outreach to enroll more consumers in coverage. While states may
consider creating enhanced

[[Page 78621]]

commission structures or providing other market-based incentives, we
also recognize the inherent incentive to issuers, web brokers, and
agents and brokers that will result from removing what some
stakeholders view as a dominant public-sector competitor, making them
the primary channels through which individuals shop for and enroll in
individual market QHPs in that state. We further recognize that
consumers who apply and enroll through a direct enrollment pathway will
have the benefit of assistance from a state-licensed agent or broker if
they so choose. These agents and brokers will have been recognized by
the relevant state as possessing the specialized expertise necessary to
help consumers choose between health insurance options. We propose
three options for states to pursue the new Exchange DE option as
described more fully below. We also note that the proposed new
flexibilities in Sec. Sec. 155.205(c)(2)(iv)(B) and (C), as well as in
Sec. 155.220(n), would need to be coordinated and considered as part
of a state's request to transition to the applicable Direct Enrollment
option to determine to what extent these flexibilities may be made
available to web-brokers approved to begin operating in an SBE-DE, FFE-
DE, or SBE-FP-DE states, as proposed in Sec. 155.221(j). For example,
per requirements imposed through the Exchange Blueprint,\145\ any State
Exchange interested in pursuing this option would need to show that
there would be at least one website available in the State that
satisfies all accessibility requirements under Sec. 155.205(c). Such
website could be the State Exchange's consumer-facing website, or a
website operated by a State Exchange-approved direct enrollment entity.
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\143\ See 45 CFR 155.205(b).
\144\ See section 1311(d)(5)(D) of the PPACA and 45 CFR
155.205(b). Also see sections 1311(c)(3) and (c)(4) of the PPACA and
45 CFR 155.1400 and 1405.
\145\ See Blueprint for Approval of State-based Health Insurance
Exchanges for Coverage Years Beginning on or after 2019, available
at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/CMS-Blueprint-Application.pdf.
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(1) Federally-Facilitated Exchange Direct Enrollment (FFE-DE) and State
Exchange on the Federal Platform Direct Enrollment (SBE-FP-DE) Options
We propose an option for any FFE or SBE-FP state to request the use
of direct enrollment as the enrollment avenue through which individual
market consumers and qualified individuals can shop for and purchase a
QHP offered through the Exchange in the state and apply and receive
determinations of eligibility for APTC and CSRs. While SBE-FP states
have the authority and responsibility for certifying QHPs and
performing consumer outreach and assistance activities, because they
rely on the HealthCare.gov eligibility and enrollment platform and
website, in this respect they are more similar to the FFE-DE model than
the SBE-DE model. In addition, the current FFE direct enrollment
program and accompanying requirements also apply in SBE-FP states.\146\
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\146\ See, for example, 45 CFR 155.220(l) and 155.221(h).
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Under the proposed FFE-DE and SBE-FP-DE options, HealthCare.gov
would continue to provide the same standardized comparative information
on QHP options that is available today. CMS also would post and
maintain an up-to-date list on HealthCare.gov of approved direct
enrollment partners operating in the state. As such, consumers would
still be able to view comparative information on HealthCare.gov for all
QHP options available in their area and would also be able to access
information to connect with approved direct enrollment partners in that
state. Additionally, in the event that any approved direct enrollment
partner does not have the technical capability to handle a consumer
application, HealthCare.gov would process that application.
By leveraging private sector entities and directing consumers to
approved direct enrollment partners, the vast majority of consumer
traffic would flow to direct enrollment partners, leaving the
HealthCare.gov structure in place primarily to provide the supporting
functions that it does today, like the processing of data matching and
special enrollment period verification documentation, casework, and
eligibility appeals.
As noted above, the Exchange would remain the entity responsible
for making eligibility determinations and validating if an applicant is
eligible for QHPs, APTCs and CSRs. The Exchange would also continue to
issue the applicable APTC to carriers on behalf of qualified
individuals and would share the relevant information with the IRS to
facilitate the IRS' reconciliation of APTC on individual tax returns.
Under this option, given that an FFE-DE state or SBE-FP-DE state would
use one or more participating, federally-approved DE and EDE partners,
at a minimum, the FFE privacy and security standards \147\ and the FFE
direct enrollment requirements \148\ would continue to apply.
---------------------------------------------------------------------------

\147\ See 45 CFR 155.260, et. seq.
\148\ See 45 CFR 155.220, 155.221, and 156.1230.
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As outlined in new proposed Sec. 155.221(j)(2), a state with an
FFE or SBE-FP may request to pursue the FFE-DE or SBE-FP-DE option, as
applicable. As outlined in this new proposed regulation, pursuant to a
request from the state, HHS may partner with the requesting state to
implement the direct enrollment option described in paragraph (j)(1).
The FFE or SBE-FP must meet all applicable federal statutory and
regulatory requirements for the operation of an Exchange, including
maintaining the single, streamlined application required under Sec.
155.405. In order to obtain HHS approval to implement this option, the
state must coordinate with HHS on an implementation plan and timeline
that allows for a transition period, developed at the discretion of HHS
in consultation with the state, necessary to operationalize the
required changes to implement this option. We propose to codify these
new requirements at paragraph (j)(2)(i). Additionally, we propose to
codify requirements at paragraph (j)(2)(ii), whereby the state must
execute a federal agreement with HHS that includes the terms and
conditions for the arrangement and which defines the division of
responsibilities between HHS and the state. Further, in order to obtain
HHS approval to implement the FFE-DE or SBE-FP-DE option, the state
must agree to procedures developed by HHS for the collection and
remittance of the monthly user fee described in Sec. 156.50(c) in
support of the responsibilities undertaken by the state and HHS. We
propose to codify this new requirement at Sec. 155.221(j)(2)(iii).
Finally, we propose that the state would be required to perform and
cooperate with activities established by HHS related to oversight and
financial integrity requirements in accordance with section 1313 of the
PPACA, including complying with reporting and compliance activities
required by HHS and described in the Federal agreement entered into
pursuant to paragraph (j)(2)(ii). We propose to codify this new
requirement at paragraph (j)(2)(iv).
We request comment on all aspects of this proposal, including any
comments related to timing, governance, and any other considerations
needed to effectively operationalize this proposed option.
(2) State Exchange Direct Enrollment Option (SBE-DE)
Under the SBE-DE option, a state with a State Exchange that does
not rely on the federal eligibility and enrollment platform can also
elect the Exchange Direct Enrollment option to engage approved private-
sector entities as the pathway for consumers in their state to apply
for, and enroll in, QHPs offered

[[Page 78622]]

through the Exchange. Under this proposed option, the State Exchange
would remain responsible for continuing to operate its eligibility
platform and make eligibility determinations for consumers applying for
APTC, CSRs and enrollment in QHPs offered through the Exchange.
However, this new option would permit multiple private entities, such
as a combination of web-brokers and issuers, to provide the consumer-
facing resources for consumers to apply for and enroll in individual
market coverage offered through the Exchange. State Exchanges that
pursue this option could thereby leverage direct enrollment technology
and direct consumers to approved partner non-Exchange websites to apply
for APTC and CSRs, as well as select and enroll in a QHP offered
through the Exchange (if otherwise eligible). In the event that no
direct enrollment partner in the state has the technical capability to
handle any consumer's application, the State Exchange would need to
have the capability to process that application through its own
consumer-facing website.
As outlined in new proposed Sec. 155.221(j)(1), a state with a
State Exchange that does not rely on the federal eligibility and
enrollment platform may request approval to pursue the SBE-DE option
and must submit a revised Exchange Blueprint in accordance with Sec.
155.105(e) to do so.\149\ As outlined in this new proposed regulation,
the State Exchange must meet all other applicable federal statutory and
regulatory requirements for the operation of an Exchange, including
maintaining the single, streamlined application as described in Sec.
155.405. Following submission of the revised Blueprint, HHS would have
up to a total of 90 days \150\ to review this revised submission and
render a decision as to approval. We propose to codify the new
requirement at Sec. 155.221(j)(2)(ii) that, in order to obtain HHS
approval, the state would need to provide HHS an implementation plan
and timeline that details the key activities, milestones, and
communication and outreach strategy to support the transition of
enrollment operations to direct enrollment entities. States that want
to pursue the SBE-DE option should coordinate with HHS early in the
development process and would be encouraged to provide the
implementation plan, timeline and outreach strategy in advance of the
formal submission of the state's revised Exchange Blueprint.
Additionally, in accordance with Sec. 155.105(c)(2) and the new
requirement proposed at Sec. 155.221(j)(1)(ii), a transitioning SBE-DE
would need to demonstrate to HHS operational readiness for the State
Exchange and its proposed direct enrollment entities to enroll
qualified individuals in a QHP in a manner that constitutes enrollment
through the Exchange and to enable individuals to apply for APTC and
cost sharing for QHPs.
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\149\ This approach is consistent with the framework established
in prior rulemakings that require a state to notify HHS and receive
written approval from HHS before significant changes are made to the
Exchange Blueprint. See, for example, 77 FR at 18316. Significant
changes could include altering a key function of Exchange operations
or other changes to the Exchange Blueprint that would have an impact
on the operation of the Exchange. This includes, but is not limited
to the process for enrollment in a QHP. See, for example, 76 FR at
41871.
\150\ As detailed in Sec. 155.105(e), HHS generally has 60 days
after receipt of a completed request to complete its review of a
significant change to an Exchange Blueprint and, for good cause, may
extend the review period by an additional 30 days up to a total of
90 days.
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While we propose that SBE-DEs would retain the flexibility to
determine their own business controls, as well as to decide the state-
specific requirements and mechanisms for approval and oversight of
direct enrollment entities operating in the state, we would encourage
SBE-DEs to generally review and adopt processes and standards similar
to the existing federal direct enrollment and EDE framework, as laid
out at 45 CFR 155.220, 155.221, 156.1230, and in subregulatory
guidance.\151\ Moreover, we propose to codify a new requirement at
Sec. 155.221(j)(1)(iii) whereby SBE-DEs are obligated to ensure that a
minimum of one approved direct enrollment entity approved by the state
meets the minimum federal requirements for HHS approval to participate
in the FFE federal direct enrollment programs, including requirements
at 45 CFR 155.220 and 155.221. In particular, it is critical that the
SBE-DE ensure at least one approved web-broker direct enrollment
partner or other approved direct enrollment entity meets requirements
that align with the FFE standards under 45 CFR 155.220(c)(3)(i)(A) and
(D) \152\ to ensure consumers have at least one option through which to
view and access enrollment to all available QHPs in the state. It is
also critical that the SBE-DE ensure at least one direct enrollment
partner meets accessibility requirements under 45 CFR 155.205(c). If no
direct enrollment in the SBE-DE states meets these requirements, the
state would need to continue to operate its own Exchange website to
ensure there is one enrollment pathway in the state that does. To
assist states in meeting requirements for the SBE-DE option, we note
that states would have the flexibility to partner with an existing,
HHS-approved web-broker direct enrollment partner as a starting point
to develop their own direct enrollment programs, as they are already
fully-compliant with applicable federal requirements to participate in
the FFE program.
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\151\ See generally CMS guidance for becoming a web-broker in
the FFEs, available at: https://www.cms.gov/CCIIO/Programs-and-Initiatives/HealthInsurance-Marketplaces/Downloads/Processes-Becoming-Web-broker.pdf.
\152\ As noted above, the proposed new flexibilities in
Sec. Sec. 155.205(c)(2)(iv)(B) and (C), as well as in Sec.
155.220(n), would need to be coordinated and considered as part of a
state's request to transition to the applicable Direct Enrollment
option. In addition to ensuring there is at least one website
available in the State that satisfies all accessibility requirements
under Sec. 155.205(c), we propose there must also be at least one
website available in the State through which consumers can view and
enroll in all available QHPs in the state.
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We request comment on all aspects of this proposal, including any
comments related to timing, governance, and any other considerations
needed to effectively operationalize this option.
6. Certified Applications Counselors (Sec. 155.225)
We propose to allow, but not require, certified application
counselors to assist consumers with applying for eligibility for
insurance affordability programs an QHP enrollment through web-broker
websites under certain circumstances. For a discussion of the
provisions of this proposal, please see the preamble for Sec. 155.220.
7. Verification Process Related to Eligibility for Insurance
Affordability Programs (Sec. 155.320)
Strengthening program integrity with respect to subsidy payments in
the individual market continues to be a top priority. Currently,
Exchanges must verify whether an applicant is eligible for or enrolled
in an eligible employer sponsored plan for the benefit year for which
coverage and premium assistance (APTC or CSR) are requested using
available data sources, if applicable, as described in Sec.
155.320(d)(2). For any coverage year that an Exchange does not
reasonably expect to obtain sufficient verification data as described
in paragraph (d)(2)(i) through (iii), an alternate procedure applies.
Specifically, Exchanges must select a statistically significant random
sample of applicants and meet the requirements under paragraph
(d)(4)(i). For benefit years 2016 through 2019, Exchanges also could
use an alternative process

[[Page 78623]]

approved by HHS. We are continuing to explore a new alternative
approach to replace the current procedures in paragraph (d)(4)(i),
under which an Exchange may design its verification process to confirm
that qualified individuals are not eligible for or enrolled in an
eligible employer sponsored plan, disqualifying them from receiving
APTC or CSRs.
HHS's experience conducting random sampling revealed that employer
response rates to HHS's request for information were low. The manual
verification process described in Sec. 155.320(d)(4)(i) requires
significant resources and government funds, and the value of the
results ultimately does not appear to outweigh the costs of conducting
the work because only a small percentage of sample enrollees have been
determined by HHS to have received APTC or CSRs inappropriately. We
believe an approach to verifying an applicant's attestation regarding
access to eligible employer sponsored coverage should be rigorous,
while posing the least amount of burden on states, employers,
consumers, and taxpayers. Based on our experiences with random sampling
methodology under paragraph (d)(4)(i), HHS is of the view that this
methodology may not be the best approach for all Exchanges to assess
the associated risk for inappropriate payment of APTC and CSRs. As
such, in 2019, HHS conducted a study to (1) determine the unique
characteristics of the population with offers of employer-sponsored
coverage that meets minimum value and affordability standards, (2)
compare premium and out-of-pocket costs for consumers enrolled in
affordable employer-sponsored coverage to Exchange coverage, and (3)
identify the incentives, if any, that drive consumers to enroll in
Exchange coverage rather than coverage offered through their current
employer. We are still evaluating the results of this study to ensure
the best verification process to ensure that consumers with offers of
affordable coverage that meets affordability and minimum value
standards through their employer are identified and do not receive APTC
or CSRs inappropriately. HHS will consider changes to the verification
process outlined under paragraph (d)(4) as part of future rulemaking.
As HHS continues to explore the best options for verification of
employer sponsored coverage, we will continue to refrain from taking
enforcement action against Exchanges that do not perform random
sampling as required by paragraph (d)(4) and will extend this non-
enforcement posture from plan year 2021 through plan year 2022.
8. Special Enrollment Periods (Sec. 155.420)
a. Exchange Enrollees Newly Ineligible for APTC
We are proposing to add new flexibility to allow current Exchange
enrollees and their dependents to enroll in a new QHP of a lower metal
level \153\ if they qualify for a special enrollment period due to
becoming newly ineligible for APTC. In 2017, the Marketplace
Stabilization Rule addressed concerns that Exchange enrollees were
utilizing special enrollment periods to change plan metal levels based
on ongoing health needs during the coverage year, negatively affecting
the individual market risk pool. The Market Stabilization Rule set
forth requirements at Sec. 155.420(a)(4) to limit Exchange enrollees'
ability to change to a QHP of a different metal level when they qualify
for, or when a dependent(s) newly enrolls in Exchange coverage through,
most types of special enrollment periods.\154\
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\153\ Section 1302(d) of the PPACA describes the various metal
levels of coverage based on AV, and section 2707(a) of the PHS Act
directs health insurance issuers that offer non-grandfathered health
insurance coverage in the individual or small group market to ensure
that such coverage includes the EHB package, which includes the
requirement to offer coverage at the metal levels of coverage
described in section 1302(d) of the PPACA. Consumer-facing
HealthCare.gov content explains that metal levels serve as an
indicator of ``how you and your plan split the costs of your health
care,'' noting that lower levels such as bronze plans have lower
monthly premiums but higher out of pocket costs, while higher levels
such as gold plans have higher monthly premiums but lower out of
pocket costs. See https://www.healthcare.gov/choose-a-plan/plans-categories/.
\154\ These limitations do not apply to enrollees who qualify
for certain types of special enrollment periods, including those
under Sec. 155.420(d)(4), (8), (9), (10), (12), and (14). While
special enrollment periods under paragraphs (d)(2)(i) and (d)(6)(i)
and (ii) are excepted from Sec. 155.420(a)(4)(iii), Sec.
155.420(a)(4)(i) and (ii) apply other plan category limitations to
them. See also the proposals about applicability of plan category
limitations to certain special enrollment periods in this section of
this preamble.
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Generally, Sec. 155.420(a)(4) provides that enrollees who newly
add a household member through most types of special enrollment periods
may add the household member to their current QHP or enroll them in a
separate QHP,\155\ and that if an enrollee qualifies for certain
special enrollment periods, the Exchange must allow the enrollee and
his or her dependents to change to another QHP within the same level of
coverage (or one metal level higher or lower, if no such QHP is
available), as outlined in Sec. 156.140(b). However, these rules
include certain flexibilities to permit enrollees to change metal
levels through a special enrollment period related to a change in
financial assistance for coverage through the Exchange. For example,
Sec. 155.420(a)(4)(ii)(A) provides that if an enrollee and his or her
dependents become newly eligible for CSRs in accordance with paragraph
(d)(6)(i) or (ii) of this section and are not enrolled in a silver-
level QHP, the Exchange must allow them to change to a silver-level QHP
if they elect to change their QHP enrollment to ensure that they can
access this new benefit.
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\155\ Section 155.420(a)(4)(i), (a)(4)(iii)(B), and
(a)(4)(iii)(C) also provide that alternatively, if the QHP's
business rules do not allow the dependent to enroll, the Exchange
must allow the enrollee and his or her dependents to change to
another QHP within the same level of coverage (or one metal level
higher or lower, if no such QHP is available), as outlined in Sec.
156.140(b).
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We propose to add a new flexibility at Sec. 155.420(a)(4)(ii)(C)
to allow enrollees and their dependents who become newly ineligible for
APTC in accordance with paragraph (d)(6)(i) or (ii) of this section to
enroll in a QHP of a lower metal level. Under this proposal, these
special enrollment periods in paragraph (d)(6)(i) and (ii) for becoming
newly ineligible for APTC would be addressed in paragraph
(a)(4)(ii)(C), and so they will no longer be subject to the separate
rules in paragraph (a)(4)(iii). Therefore, we further propose to revise
paragraph (a)(4)(iii) to include them in the list of triggering events
excepted from the limitations at paragraph (a)(4)(iii). This proposal
may help impacted enrollees' ability to maintain continuous coverage
for themselves and for their dependents in spite of a potentially
significant change to their out of pocket costs. For example, an
enrollee with a gold-level QHP who loses eligibility for APTC and sees
an increase to his or her monthly premium payment could change to a
bronze-level plan, or to catastrophic coverage if they are otherwise
eligible.
This proposed change is similar to other recent amendments that we
have made to the regulations at Sec. 155.420(a)(4). For example, in
response to concerns from HHS Navigators, other enrollment assisters,
and agents and brokers based on their experiences with consumers who,
upon losing eligibility for CSRs, could not afford cost sharing for
their current silver-level QHP, In the May 14, 2020 Federal Register
(85 FR 29204), the 2021 Payment Notice final rule amended paragraph
(a)(4)(ii) to permit enrollees and their dependents who are enrolled in
a silver-level QHP and who become newly ineligible for CSRs in
accordance with paragraph (d)(6)(i) or (ii) to change to a QHP one
metal level higher or lower than silver, beginning January 2022.

[[Page 78624]]

We are proposing this new flexibility because in recent months, we
have also heard concerns from agents and brokers that some consumers
who qualify for the special enrollment period in accordance with Sec.
155.420(d)(6)(i) or (ii) because they lose eligibility for APTC based
on an income increase may lose a significant amount of financial
assistance without having gained enough income to continue to afford
the coverage they selected when APTC was available to them. For
example, consider a qualified individual who estimates an annual
household income of $49,000 per year and enrolls in a gold plan during
open enrollment with a $1,100 per month ($13,200 per year) premium and
monthly APTC of $600. This qualified individual could experience an
income increase of less than $2,000, lose APTC based on an income of
more than 400 percent FPL, and be required to pay over $7,000 more
annually for their current plan.\156\ While this individual would
qualify for a special enrollment period due to a loss of eligibility
for APTC per paragraph (d)(6)(i), they would not be able to change from
a gold plan to a silver or bronze plan (or to a catastrophic plan, if
they were eligible) in order to pay a lower monthly premium, because
paragraph (a)(4)(iii)(A) provides that these enrollees may only change
to another QHP within their current plan's metal level.
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\156\ 26 CFR 1.36B-2(b)(1) provides that to be eligible for a
PTC, the taxpayer's household income must be at least 100 percent
but not more than 400 percent of the FPL for the taxpayer's family
size for the taxable year. Per the HHS Poverty Guidelines for 2020,
400 percent of the FPL for 2020 for an individual in the contiguous
48 states and DC is $51,040.
---------------------------------------------------------------------------

Enrollees can also lose eligibility for APTC due to a change in
household size, without experiencing any change in income. For example,
assume a Virginia family of two parents and a 20-year old child, who
has no income and is not a full-time student, applies during open
enrollment in 2020 and qualifies for APTC based on a projected 2021
household income of $75,000, an amount less than 400 percent of the FPL
for a household of three ($86,880 in the contiguous 48 states and
DC).\157\ During 2021 the child becomes employed and by May 2021 has
earned enough income so that the parents will not be permitted to claim
the child as a tax dependent for 2021. As a result, the family's
household size for 2021 will be two instead of three as projected
during open enrollment, resulting in the family's $75,000 household
income falling above 400 percent of the FPL for a household of two
($68,960 in the contiguous 48 states and DC). Because those whose
household income exceeds 400 percent of the FPL are ineligible for
APTC, the reduction in the parents' household size due to not being
permitted to claim their child as a tax dependent results in the
parents' loss of APTC eligibility mid-year, and outside the annual open
enrollment period.
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\157\ These examples use 2020 FPL information to determine APTC
eligibility for 2021 because, per 26 CFR 1.36B-1(h), the FPL for
computing the PTC for a taxable year is the FPL in effect on the
first day of the initial or annual open enrollment period preceding
that taxable year. For example, the Assistant Secretary for Planning
and Evaluation (ASPE) released 2020 FPL information in January of
2020, and so 2020 FPL information applies during the 2020 open
enrollment period for 2021 coverage.
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Loss of APTC based on not being permitted to claim as a tax
dependent an individual projected at open enrollment to be a tax
dependent (loss of a projected tax dependent) is likely a less common
challenge, because loss of a projected tax dependent who was previously
enrolled in the same plan as other household members may also result in
a lower premium for remaining household members. However, in some cases
the decrease in premium may not be enough to make up for the loss of
APTC.
In many cases, individuals enrolling in Exchange coverage during
open enrollment will not anticipate experiencing a situation in the
middle of the plan year like those described above. Even if they are
aware that they could have a small increase in household income or lose
a projected tax dependent, they may not realize that these changes
could make them newly ineligible for APTC. Furthermore, sometimes these
changes are not foreseeable. Additionally, it is reasonable for
individuals who complete an application and then shop for coverage on
HealthCare.gov to select a QHP based on premiums that are reduced by
the APTC amount for which they are eligible at the time of plan
selection, particularly if they do not realize that their financial
assistance could change based on loss of a projected tax dependent or a
small household income change during the coming year.
In addition to allowing enrollees to change to a plan with a lower
premium based on losing a potentially significant amount of financial
assistance due to a relatively small change in income or a change in
household size, we also note that this proposal is necessary to protect
consumers from gaps in coverage due to unaffordability because price
differences between QHPs of different metal levels can be significant.
For example, in states using the federal enrollment platform, on
average silver plan premiums are 34 percent more expensive than bronze
plan premiums, and gold plan premiums are 14 percent more expensive
than silver plan premiums.\158\ Our analysis suggests similar
differences in State Exchanges, but we invite comment on whether this
is the case and how it impacts current Exchange enrollees.
---------------------------------------------------------------------------

\158\ Calculated based on information in the ``Plan Year 2020
Qualified Health Plan Choice and Premiums in HealthCare.gov States''
report. Available at: https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/2020QHPPremiumsChoiceReport.pdf.
---------------------------------------------------------------------------

While this proposal is designed to provide Exchange enrollees who
lose APTC with the chance to select lower-cost coverage, we recognize
that changing to a new QHP mid-plan year may cause enrollees to incur
additional out of pocket costs as a new QHP selection typically resets
the deductible and other accumulators. We believe that Exchange
enrollees who lose APTC eligibility are best able to weigh the trade-
off between reset accumulators or maintaining an affordable monthly
premium. Enrollees who qualify to make a new plan selection for an
applicable special enrollment period already must consider this
question. However, we request comment on whether this proposal would
increase the risk that consumers will change plans without taking into
account potential disadvantages, and on strategies to help mitigate
this risk, such as consumer education.
Finally, we acknowledge that enrollees may lose APTC eligibility
and qualify for a special enrollment period due to their APTC loss for
a reason other than a change in household income or tax family size.
For example, a currently-enrolled individual or household could lose
APTC and qualify for the related special enrollment period due to an
expired inconsistency regarding projected annual household income, or
because the Exchange has information that they are eligible for or
enrolled in other qualifying coverage that is considered MEC such as
most Medicaid coverage, CHIP, or the Basic Health Program (BHP),
through the periodic data matching process described in Sec.
155.330(d), and therefore are ineligible for APTC. When consumers lose
eligibility for APTC for these reasons, we encourage them to confirm
whether the Exchange has correctly terminated their eligibility for
APTC. If not, consumers' best option may be to correct the Exchange's
records related to the issue that resulted in their APTC loss; for
example, they could provide documentary evidence to the Exchange of
their projected annual

[[Page 78625]]

household income that they attested to on their application and upon
which their APTC amount was based, or return to their application and
attest that they do not have other qualifying coverage such as
Medicare, Medicaid/CHIP, or the BHP, if applicable. While HHS performs
extensive outreach to ensure that consumers understand and can act on
these options, some enrollees in this situation may choose to use their
special enrollment period due to APTC loss to enroll in a plan of a
lower metal level either instead of or in addition to addressing the
issue that caused them to lose APTC. We seek comment on whether
stakeholders have concerns with this possibility, and on how HHS can
help ensure that enrollees who lose eligibility for APTC because of
failure to provide information to the Exchange to confirm their APTC
eligibility can understand and take action on steps needed to do so,
even if they also have the flexibility to change to a plan of a lower
metal level. Relatedly, we seek comment on whether Exchanges should
limit the flexibility proposed in this rule only to enrollees who
qualify for a special enrollment period because they lost APTC
eligibility due to a change in household income or tax family size, and
continue to apply the current rule at 155.420(a)(4)(iii)(A) to
enrollees who qualify for a special enrollment period because they lost
APTC for any other reason. We also seek comment on whether such a
policy would impose significant additional burdens on Exchanges.
HHS believes that this proposal is unlikely to result in adverse
selection, and may improve the risk pool by supporting continued health
insurance enrollment by healthy individuals who would be forced to end
coverage in response to an increase in premium. However, we request
comment on whether there are concerns with permitting newly
unsubsidized enrollees to change to any plan of a lower metal level to
help them maintain coverage (for example, permitting an individual to
change from a gold plan to a bronze plan), or whether we should instead
only permit an enrollee to change to a plan one metal level lower than
their current QHP. We also request comment from issuers on whether
there are concerns about impacts such as experiencing a decrease in
premium receipt from enrollees who opt to change to a lower-cost plan,
or whether they view adverse selection as a possibility. We request
comment from Exchanges, in particular, on implementation burden
associated with this change to current plan category limitations rules,
including on whether we should instead, in order to reduce this burden,
permit current enrollees and currently enrolled dependents who qualify
for this SEP to change to a plan of any metal level--that is, simply
exempt the special enrollment periods at Sec. 155.420(d)(6)(i) and
(ii) due to becoming newly ineligible for APTC from plan category
limitations altogether. We also request comment from all stakeholders,
including those who have or represent individuals with preexisting
conditions, on whether such a change would significantly increase risk
for adverse selection.
Finally, we also considered whether to propose additional
flexibility to allow enrollees and their dependents who become newly
eligible for APTC in accordance with paragraph (d)(6)(i) or (ii) to
change to a QHP of a higher metal level. While we recognize becoming
newly eligible for APTC may increase the affordability of higher metal
level plans for some individuals, we believe including this flexibility
would largely exempt the special enrollment periods at paragraph
(d)(6)(i) and (ii) from the rules at 155.420(A)(4)(iii), imposing risks
of adverse selection for Exchanges by permitting individuals to change
coverage levels in response to health status changes. Furthermore,
while we believe the proposed flexibilities for individuals who become
newly ineligible for APTC are needed in order to promote continuous
coverage for individuals who can no longer afford their original plan
choice, no similar affordability and continuous coverage concerns exist
for enrolled consumers who gain APTC during the coverage year.
Accordingly, at this time we are not proposing additional plan
flexibility for enrollees who become newly eligible for APTC. We invite
comment on whether we should consider additional flexibilities for this
population in the future and the anticipated impact of such a policy.
We seek comment on these proposals.
b. Special Enrollment Periods--Untimely Notice of Triggering Event
We propose to allow a qualified individual, enrollee, or dependent
who did not receive timely notice of a triggering event and was
otherwise reasonably unaware that a triggering event occurred to select
a new plan within 60 days of the date that he or she knew, or
reasonably should have known, of the occurrence of the triggering
event. We also propose to allow such persons to choose the earliest
effective date that would have been available if he or she had received
timely notice of the triggering event. Finally, we propose conforming
amendments to Sec. 147.104(b)(2)(ii) so that these proposals would
also apply to off-Exchange individual market health coverage.
In accordance with Sec. 155.410(a)(2), an Exchange may only allow
qualified individuals and enrollees to enroll in coverage during the
annual open enrollment period as specified in Sec. 155.410(e), and
during special enrollment periods as specified in Sec. 155.420. An
Exchange must allow a qualified individual or enrollee to enroll in or
change from one QHP to another if one of the triggering events
described in Sec. 155.420(d) occurs. Furthermore, under Sec.
155.420(c)(1), a qualified individual or enrollee generally has until
60 days after the date of the triggering event to select a QHP. Section
155.420(c)(2) and (3), provide exceptions to this general rule under
which a qualified individual or enrollee may enroll prior to the date
of a triggering event. Section 155.420(c)(4) provides a final exception
under which a qualified individual or enrollee may have less than 60
days to enroll. Coverage effective dates are outlined in Sec.
155.420(b) and vary depending on the SEP triggering event, but in all
cases are either on or after the date of the triggering event.
Because the time period during which a qualified individual may
enroll through a special enrollment period is determined by the
triggering event, a qualified individual who does not know the
triggering event has occurred may not have sufficient time to enroll in
coverage. Generally, the triggering events described in Sec.
155.420(d) and related plan selection timelines under Sec. 155.420(c)
are premised on the assumption that an individual will become aware of
a triggering event in time to make a plan selection within the time
allotted under Sec. 155.420(c). For example, the rules anticipate that
qualified individuals or enrollees will receive timely notice of the
day they will lose employer-sponsored coverage or the day they will
gain a dependent such that 60 days is ample time for the individual to
apply for enrollment through an applicable special enrollment period
and select a plan. However, our experience operating the Federal
Exchange has shown that there are circumstances in which an individual
reasonably may not be aware of an event that triggers special
enrollment period eligibility until after the triggering event has
occurred. This proposal would allow a qualified individual, enrollee,
or dependent who did not receive timely notice of a triggering event or
was otherwise

[[Page 78626]]

reasonably unaware that a triggering event occurred, to qualify for an
applicable special enrollment period and select a new plan within 60
days of the date that he or she knew, or reasonably should have known,
of the occurrence of the triggering event. This proposal will also
allow the qualified individual, enrollee, or dependent to choose the
earliest effective date that would have been available if he or she had
received timely notice of the triggering event.
For example, an employer fails to pay its share of premium for an
insured employer-sponsored health plan and enters a grace period
beginning April 1st, which will expire on May 31st. Because the
employer intends to satisfy its premium liability before the end of the
grace period, the employer does not notify participants and
beneficiaries in the plan of the non-payment or the risk of termination
of its employer-sponsored coverage retroactive to April 1st. The
employer is unable to timely satisfy the premium debt, and the issuer
of the employer-sponsored health coverage terminates coverage for the
participants and beneficiaries retroactively to April 1st. Neither the
employer nor the issuer of the employer-sponsored health plan notify
the participants and beneficiaries of the beginning of the grace period
or that coverage would be terminated as of April 1st. On July 10th, the
participants and beneficiaries first receive notice from the issuer
that their coverage terminated as of April 1st. In accordance with the
circumstances described in 26 CFR 54.9801-6(a)(3)(i), due to the
employer's failure to timely pay premiums, the participants and
beneficiaries of the employer-sponsored health plan lost eligibility
for the coverage and are eligible for the special enrollment period
provided in Sec. 155.420(d)(1)(i). Per paragraph (d)(1)(i), the
triggering event for special enrollment periods due to loss of MEC is
the last day the consumer would have coverage under his or her previous
plan or coverage. But in this scenario, affected participants and
beneficiaries, through no fault of their own, were not aware of their
loss of MEC until more than 60 days following the last day they had
coverage. Thus, without the measure we propose here, the participants
and beneficiaries in this example would not be able to use the special
enrollment period at paragraph (d)(1)(i), because more than 60 days had
passed since the relevant triggering event without their having
selected a new plan. Some participants and beneficiaries of employer-
sponsored health plans experienced similar circumstances during the
COVID-19 PHE and sought individual health insurance coverage through
the FFEs, exposing a perceived gap in current special enrollment period
rules.
Another circumstance in which an individual may not be aware that a
triggering event occurred involves technical errors that block an
individual from enrolling in coverage through an Exchange. Section
155.420(d)(4) specifies that an individual is eligible for a special
enrollment period if, among other things, their erroneous non-
enrollment in a QHP was due to an error on the part of the Exchange or
one of its agents. In this case, the error itself is the triggering
event, and the date it occurs serves as the beginning of the special
enrollment period. However, as in the case of the loss of employer-
sponsored coverage discussed above, an individual may not be aware that
an error has occurred. In some cases, the Exchange may not be aware
that a technical error has occurred which prevented individuals from
enrolling until a subsequent investigation is conducted. This process
may take several weeks, during which time an impacted individual may
not be aware that they were unable to enroll due to an error and
therefore qualify for a special enrollment period. There may even be
cases in which an Exchange does not identify the issue and the impacted
population and notify them until more than 60 days after the triggering
event occurred.
We propose to amend Sec. 155.420 by adding paragraph (c)(5) to
specifically provide that if a qualified individual, enrollee, or
dependent does not receive timely notice of an event that triggers
eligibility for a special enrollment period under this section, and
otherwise was reasonably unaware that a triggering event occurred, the
Exchange must allow them to select a new plan within 60 days of the
date that they knew, or reasonably should have known, of the occurrence
of the triggering event. Additionally, we propose to add paragraph
(b)(5) to clarify that when a qualified individual, enrollee, or
dependent did not receive timely notice of an event that triggers
eligibility for a special enrollment period, the Exchange must allow
the such persons the option to choose the earliest coverage effective
date for the triggering event under paragraph (b) that would have been
available if they had received timely notice of the triggering event.
In addition, we propose that the Exchange must also provide the
qualified individual, enrollee or dependent the option to choose the
effective date that would otherwise be available pursuant to the other
provisions in paragraph (b).
Lastly, we propose a conforming edit to Sec. 147.104(b)(2) that
would incorporate these amendments by reference in the regulations
governing special enrollment periods for off-Exchange coverage, so that
these proposed special enrollment rules would apply to issuers of non-
grandfathered coverage in the individual market, both on- and off-
Exchange. We also separately propose a change Sec. 147.104(b)(2)(ii)
to clarify how the special enrollment period in Sec. 155.420(d)(4)
applies off-Exchange. This change is discussed in further detail in the
preamble to part 147.
We seek comment on these proposals.
c. Cessation of Employer Contributions to COBRA as Special Enrollment
Period Trigger
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
\159\ (Pub. L. 99-272, April 7, 1986) provides for a temporary
continuation of group health coverage following, among other
circumstances, employees' separation from an employer, for reasons
other than gross misconduct, in instances where such separation would
otherwise cause termination of coverage. Although employees who elect
to receive COBRA continuation coverage may be required by their former
employer to pay their former employer's share of the premiums as well
as their own,\160\ such employers will sometimes pay all or a portion
of their former employee's premium for part or all of the COBRA
coverage period.
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\159\ https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
\160\ Individuals electing COBRA may also be required by their
former employer to pay a 2 percent administrative fee. See https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
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In accordance with the policy currently in place on the Exchanges
using the Federal platform, we propose to amend Sec. 155.420(d)(1) to
state that the complete cessation of employer contributions for COBRA
continuation coverage serves as a triggering event for special
enrollment period eligibility.\161\

[[Page 78627]]

The triggering event would occur as of the last day of the period for
which COBRA continuation coverage was paid for, in whole or in part, by
the employer. Exchange regulations at paragraph (d)(1)(i) provide that
when a qualified individual or his or her dependent loses MEC as
defined by Sec. 155.20 they gain eligibility for a special enrollment
period, during which they can enroll in a QHP. Paragraph (e) states
that loss of MEC as described in paragraph (d)(1) includes the
circumstances listed at 26 CFR 54.9801-6(a)(3)(i) through (iii). These
provisions describe conditions under which someone may qualify for a
special enrollment period for group health plan coverage, including
paragraphs (a)(3)(i), ``Loss of eligibility for coverage,'' and
(a)(3)(iii), ``exhaustion of COBRA continuation coverage.''
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\161\ Because employers are not required to charge a 2 percent
administrative fee to individuals who elect COBRA, we do not include
this fee in the definition of ``employer contributions.'' For
purposes of this section, if an individual enrolled in COBRA
continuation coverage without employer contributions (so that the
individual was responsible for 100 percent of the premiums) but was
not required to pay a 2 percent administrative fee, this would not
be considered an employer contribution for the purposes of the
proposed special enrollment period.
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In implementing special enrollment periods for Exchanges using the
Federal platform, HHS has provided a loss of MEC special enrollment
period under Sec. 155.420(d)(1)(i) for individuals whose COBRA costs
change because their former employer completely ceases contributions
and as a result they must pay the full cost of premiums. However, loss
of coverage based on complete cessation of employer contributions for
COBRA coverage might not have been treated as a triggering event by
issuers of individual coverage off-Exchange or by State Exchanges. HHS
believes it is important that individuals have access to a special
enrollment period in the individual market when their former employer
completely ceases contributions to COBRA continuation coverage, because
the cost of COBRA continuation coverage premiums are substantial,
rendering this type of coverage unaffordable for many people to whom it
would be available.\162\ Ensuring that this special enrollment period
is widely available would help promote continuity of coverage for those
who could not maintain their COBRA continuation coverage without
employer subsidies. HHS therefore seeks to make this special enrollment
period available throughout the individual market.
---------------------------------------------------------------------------

\162\ https://www.kff.org/private-insurance/issue-brief/key-issues-related-to-cobra-subsidies/.
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Therefore, we propose to amend Sec. 155.420 by adding paragraph
(d)(1)(v) stating that a special enrollment period is triggered when a
qualified individual or his or her dependent is enrolled in COBRA
continuation coverage for which an employer is paying all or part of
the premiums, and the employer completely ceases its contributions.
Similar to the special enrollment period for termination of employer
contributions to employer-sponsored coverage at 26 CFR 54.9801-
6(a)(3)(ii), the triggering event would occur as of the last day of the
period for which COBRA continuation coverage is paid for, in part or in
full, by an employer. We also propose to make conforming changes to the
preceding paragraphs to reflect the addition of this new paragraph.
Furthermore, since complete cessation of employer contributions toward
employer-sponsored continuation coverage under state mini-COBRA laws
\163\ serves as a special enrollment period triggering event under 26
CFR 54.9801-6(a)(3)(ii), which is incorporated by Sec. 155.420(e), we
propose to include in paragraph (v) a reference to this regulation for
purposes of clarity. These changes would make explicit HHS's current
policy with regard to the Exchanges using the Federal platform, and
would ensure that individual market policies sold off-Exchange and
through State Exchanges align with it. In addition, amending paragraph
(d)(1) to explicitly include complete cessation of employer
contributions to COBRA continuation coverage as a special enrollment
period triggering event would mitigate confusion among employers and
employees, as well as other stakeholders, about their options regarding
COBRA continuation coverage and special enrollment period eligibility.
---------------------------------------------------------------------------

\163\ https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-consumer.pdf.
---------------------------------------------------------------------------

As with other special enrollment periods described in Sec.
155.420(d)(1), in the Exchanges, this special enrollment period would
be subject to the provisions in paragraph (a)(4)(iii)(B) and (C), which
allow dependents and non-dependent qualified individuals who qualify
for a special enrollment period to be added to the QHP of a household
member who is already enrolled in Exchange coverage, or to enroll
separately in a plan of any metal level. We also propose that the
Exchange must provide the qualified individual, enrollee, or dependent
the effective date that would otherwise be available pursuant to the
other provisions at paragraph (b)(2)(iv). In accordance with paragraph
(c)(2), an individual eligible for this special enrollment period would
have 60 days before or after the triggering event (in this case, the
last day for which the qualified individual or dependent has COBRA
continuation coverage to which an employer is contributing) to select a
QHP. We propose that this special enrollment period, which would be
incorporated by reference in the guaranteed availability regulations at
Sec. 147.104(b)(2), apply with respect to individual health insurance
coverage offered through and outside of an Exchange.
To help clarify the circumstances that would trigger the proposed
special enrollment period, we include the following examples:
Example 1: An individual is laid off from a job in June, and
enrolls in COBRA continuation coverage for which the employer pays 100
percent of the premiums (the employer does not require payment of a 2
percent administrative fee). On September 3rd of that year, the
employer informs the individual that it is completely terminating
contributions to the individual's COBRA continuation coverage as of
September 30th, and beginning on October 1st, the individual will be
responsible for 100 percent of the COBRA continuation coverage
premiums. As a result, the individual decides to end COBRA coverage on
October 1st. Because September 30th is the last day for which the
individual had COBRA continuation coverage for which the employer was
contributing, the individual has 60 days before and after this date (in
this case, between August 1st and November 29th) to select an
individual market plan through a special enrollment period.
Example 2: Same scenario as in the first example, except that the
employer was paying only 25 percent of the COBRA continuation coverage
premiums before the employer completely terminated contributions. The
individual decides to maintain COBRA continuation coverage despite the
loss of employer contributions. Even though the individual retained
COBRA continuation coverage, the individual is still eligible to select
a QHP through a special enrollment period from August 1st to November
29th, 60 days before or after the last day on which the individual had
COBRA continuation coverage with employer contributions.
In addition to this proposal, HHS is also considering addressing
situations in which an employer reduces, but does not completely cease,
its contributions for COBRA continuation coverage. In particular, we
are considering adding to proposed paragraph Sec. 155.420(d)(1)(v) a
provision that a reduction of employer contributions for COBRA
continuation coverage would also serve as a special enrollment period
trigger. The triggering event would occur the last day on which an
individual has COBRA continuation coverage that was subsidized at the
higher amount. Reduction of employer contributions to COBRA
continuation coverage has not

[[Page 78628]]

previously been treated as a triggering event for purposes of the loss
of MEC special enrollment period under paragraph (d)(1)(i). However,
HHS believes it is important to address this scenario as a way of
promoting continuity of coverage for those who would not be able to
maintain their COBRA continuation coverage with a reduced employer
contribution. A similar special enrollment period for reduction of
employer contributions to employer-sponsored coverage is not currently
provided for under the provisions at 26 CFR 54.9801-6(a)(3)(i) through
(iii). However, HHS believes it is important to provide a special
enrollment period for reductions in employer contributions toward COBRA
coverage because there are differences between employer-sponsored
coverage and COBRA, such as the fact that COBRA continuation coverage
is not subject to an affordability test under 26 CFR 1.36B-2(c)(3)(v)
for purposes of determining potential eligibility for APTC and/or CSR,
and the fact that individuals must generally pay more for COBRA
continuation coverage than for employer-sponsored coverage.
Because this situation is not addressed in regulation or by HHS
policy, we seek comment on whether stakeholders believe it would be
helpful to codify such a special enrollment period if an employer
reduces, but does not completely cease, its contributions to COBRA
continuation coverage. In addition, we seek comment on whether HHS
should also adopt a threshold for the level of reduction of employer
contributions for COBRA continuation coverage that should trigger a
special enrollment period.
We seek comment on this proposal.
d. Special Enrollment Period Verification
In 2017, the HHS Market Stabilization Rule preamble explained that
HHS would implement pre-enrollment verification of eligibility for
certain special enrollment periods in all FFEs and SBE-FPs and
encouraged states to do the same in State Exchanges. Special enrollment
period verification has addressed concerns that allowing individuals to
enroll in coverage through a special enrollment period without
electronic or document-based verification could negatively affect the
individual market risk pool by allowing individuals to newly enroll in
coverage based on health needs during the coverage year as opposed to
enrolling during open enrollment and maintaining coverage for a full
year.\164\
---------------------------------------------------------------------------

\164\ 82 FR at 18356.
---------------------------------------------------------------------------

Since 2017, Exchanges using the federal platform have implemented
pre-enrollment special enrollment period verification for special
enrollment period types commonly used by consumers to enroll in
coverage. Consumers who are not already enrolled through the Exchange
and who apply for coverage through a special enrollment period type
that requires pre-enrollment verification by the Exchange must have
their eligibility electronically verified using available data sources,
or they must submit supporting documentation to verify their
eligibility for the special enrollment period before their enrollment
can become effective. As stated in the HHS Marketplace Stabilization
Rule, special enrollment period verification is only conducted for new
enrollees due to the potential for additional burden on issuers and
confusion for consumers if required for existing enrollees.
In implementing pre-enrollment verifications for special enrollment
periods in the Market Stabilization Rule, HHS did not establish a
regulatory requirement that all Exchanges conduct special enrollment
period verifications, in order to allow State Exchanges with
flexibility to adopt policies that fit the needs of their state.\165\
Currently, all State Exchanges now conduct either pre- or post-
enrollment verification of at least one special enrollment type, and
most State Exchanges have implemented a process to verify the vast
majority of special enrollment periods requested by consumers.
---------------------------------------------------------------------------

\165\ 82 FR at 18356.
---------------------------------------------------------------------------

Therefore, we propose to amend Sec. 155.420 to add paragraph (f)
to require all Exchanges to conduct eligibility verification for
special enrollment periods. Specifically, we propose to require that
Exchanges conduct special enrollment period verification for at least
75 percent of new enrollments through special enrollment periods for
consumers not already enrolled in coverage through the applicable
Exchange. We are proposing that Exchanges must verify at least 75
percent of new enrollments through special enrollment periods based on
the current implementation of special enrollment period verification by
Exchanges. If the Exchange is unable to verify the consumer's
eligibility for enrollment through the special enrollment period, then
the consumer is not eligible for enrollment through the Exchange, and
enrollment through the Exchange may be terminated in accordance with 45
CFR 155.430(b)(2)(i). If an Exchange opts to pend a plan selection
prior to enrollment, and the Exchange cannot verify eligibility for the
special enrollment period, then the consumer will be found ineligible
for the special enrollment period, and the plan selection will not
result in an enrollment. The determination of how many enrollments
would constitute 75 percent would be required to be based on special
enrollment period enrollment. This would provide Exchanges with
implementation flexibility so they can continue to decide which special
enrollment types to verify and the best way to conduct that
verification. Exchanges will not be required to verify eligibility for
all special enrollment periods, since the cost to verify eligibility
for special enrollment period triggering events with very low volumes
could be greater than the benefit of verifying eligibility for them.
We also continue the flexibility that State Exchanges currently
have to design eligibility verification processes that are appropriate
for their market and Exchange consumers, such that State Exchanges may
have such flexibility in their approaches for meeting the requirement
proposed at Sec. 155.420(f) to verify eligibility for a special
enrollment period. Specifically, under Sec. 155.315(h), State
Exchanges have the flexibility to propose alternative methods for
conducting required verifications to determine eligibility for
enrollment in a QHP under subpart D, such that the alternative methods
proposed reduce the administrative costs and burdens on individuals
while maintaining accuracy and minimizing delay. We propose to use the
existing authority at Sec. 155.315(h) to allow State Exchanges to
request HHS approval for use of alternative processes for verifying
eligibility for special enrollment periods as part of determining
eligibility for special enrollment periods under Sec. 155.305(b). This
would allow, for instance, the smaller State Exchanges that have
administrative burden and cost concerns the option to coordinate with
HHS to devise and agree upon the best approach for special enrollment
period verification for their specific population. We recognize that
State Exchanges may vary in their approach and technical capabilities
relating to verification of special enrollment periods and may need
additional time to implement this requirement. Therefore, we are
proposing to allow Exchanges until plan year 2024 to implement special
enrollment period verification.
We seek comment on these proposals. With respect to Special
Enrollment Period Verification, we seek comment

[[Page 78629]]

from States about the 75 percent verification threshold and whether it
should be based on past year or current year special enrollment period
enrollments, understanding that unforeseen events may occur that may
drive up or down enrollments from year-to-year.
9. Required Contribution Percentage (Sec. 155.605(d)(2))
HHS calculates the required contribution percentage for each
benefit year using the most recent projections and estimates of premium
growth and income growth over the period from 2013 to the preceding
calendar year. Accordingly, we propose the required contribution
percentage for the 2022 benefit year, calculated using income and
premium growth data for the 2013 and 2021 calendar years.
Under section 5000A of the Code, an individual must have MEC for
each month, qualify for an exemption, or make an individual shared
responsibility payment. Under Sec. 155.605(d)(2), an individual is
exempt from the requirement to have MEC if the amount that he or she
would be required to pay for MEC (the required contribution) exceeds a
particular percentage (the required contribution percentage) of his or
her projected household income for a year. Although the Tax Cuts and
Jobs Act reduced the individual shared responsibility payment to $0 for
months beginning after December 31, 2018, the required contribution
percentage is still used to determine whether individuals above the age
of 30 qualify for an affordability exemption that would enable them to
enroll in catastrophic coverage under Sec. 155.305(h).
The initial 2014 required contribution percentage under section
5000A of the Code was 8 percent. For plan years after 2014, section
5000A(e)(1)(D) of the Code and Treasury regulations at 26 CFR 1.5000A-
3(e)(2)(ii) provide that the required contribution percentage is the
percentage determined by the Secretary of HHS that reflects the excess
of the rate of premium growth between the preceding calendar year and
2013, over the rate of income growth for that period. The excess of the
rate of premium growth over the rate of income growth is also used for
determining the applicable percentage in section 36B(b)(3)(A) of the
Code and the required contribution percentage in section 36B(c)(2)(C)
of the Code.
As discussed elsewhere in this rule, we are proposing as the
measure for premium growth the 2022 premium adjustment percentage of
1.4409174688 (or an increase of about 44.1 percent over the period from
2013 to 2021). This reflects an increase of about 6.4 percent over the
2021 premium adjustment percentage (1.4409174688/1.3542376277).
As the measure of income growth for a calendar year, we established
in the 2017 Payment Notice that we would use per capita personal income
(PI). Under the approach finalized in the 2017 Payment Notice, using
the National Health Expenditure Accounts (NHEA) data, the rate of
income growth for 2021 is the percentage (if any) by which the most
recent projection of per capita PI for the preceding calendar year
($61,156 for 2021) exceeds per capita PI for 2013 ($44,948), carried
out to ten significant digits. The ratio of per capita PI for 2021 over
the per capita PI for 2013 is estimated to be 1.3605944647 (that is,
per capita income growth of about 36.1 percent).\166\ This rate of
income growth between 2013 and 2021 reflects an increase of
approximately 3.9 percent over the rate of income growth for 2013 to
2020 (1.3605944647/1.3094029651) that was used in the 2021 Payment
Notice. Per capita PI includes government transfers, which refers to
benefits individuals receive from federal, state, and local governments
(for example, Social Security, Medicare, unemployment insurance,
workers' compensation, etc.).\167\
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\166\ The 2013 and 2021 per capita personal income figures used
for this calculation reflect the latest NHEA data, published on
March 24, 2020. The series used in the determinations of the
adjustment percentages can be found in Tables 1 and 17 on the CMS
website, which can be accessed by clicking the ``NHE Projections
2019-2028--Tables'' link located in the Downloads section at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. A detailed description of the
NHE projection methodology is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
\167\ U.S. Department of Commerce Bureau of Economic Analysis
(BEA) Table 3.12 Government Social Benefits. Available at https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&categories=survey&nipa_table_list=110.
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Thus, using the 2022 premium adjustment percentage proposed in this
rule, the excess of the rate of premium growth over the rate of income
growth for 2013 to 2021 would be 1.4409174688 /1.3605944647, or
1.0590352278. This would result in a proposed required contribution
percentage for 2021 of 8.00x1.0590352278 or 8.47 percent, when rounded
to the nearest one-hundredth of one percent, an increase of 0.20
percentage points from 2020 (8.47228-8.27392).
Finally, beginning with the 2023 benefit year, we are proposing to
publish the required contribution percentage, along with the premium
adjustment percentage and the annual cost-sharing limitation
parameters, in guidance separate from the annual notice of benefit and
payment parameters. For a discussion of the provisions of this
proposal, please see the preamble for Publication of the Premium
Adjustment Percentage, Maximum Annual Limitation on Cost Sharing,
Reduced Maximum Annual Limitation on Cost Sharing, and Required
Contribution Percentage (Sec. 156.130).
We seek comment on these proposals.
10. Excluding the Special Enrollment Period Trigger in Sec.
155.420(d)(1)(v) From Applying to SHOP Plans (Sec. 155.726)
Special enrollment periods due to cessation of employer
contributions to COBRA continuation coverage are generally not
available in the group insurance market. Therefore, in order to
maintain consistency between SHOP and the rest of the group insurance
market, we propose to amend Sec. 155.726(c)(2)(i) to exclude the
special enrollment period trigger in proposed paragraph Sec.
155.420(d)(1)(v) from applying to SHOP plans. For a discussion of the
provisions of this proposal, please see the preamble for Sec. 155.420.
We seek comment on this proposal.

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

1. User Fee Rates for the 2022 Benefit Year (Sec. 156.50)
a. FFE and SBE-FP User Fee Rates for the 2022 Benefit Year (Sec.
156.50(c))
Section 1311(d)(5)(A) of the PPACA requires states to ensure that
Exchanges are self-sustaining, which may include the state allowing an
Exchange to charge assessments or user fees on participating health
insurance issuers as a means of generating funding to support its
operations. If a state does not elect to operate an Exchange or does
not have an approved Exchange, section 1321(c)(1) of the PPACA directs
HHS to operate an Exchange within the state. Accordingly, in Sec.
156.50(c), we specify that a participating issuer offering a plan
through an FFE or SBE-FP must remit a user fee to HHS each month that
is equal to the product of the annual user fee rate specified in the
annual HHS notice of benefit and payment parameters for FFEs and SBE-
FPs for the applicable benefit year and the monthly premium charged by
the issuer for each policy where enrollment is

[[Page 78630]]

through an FFE or SBE-FP. In addition, OMB Circular No. A-25
establishes federal policy regarding the assessment of user charges
under other statutes and applies to the extent permitted by law.
Furthermore, OMB Circular A-25 specifically provides that a user fee
charge will be assessed against each identifiable recipient of special
benefits derived from federal activities beyond those received by the
general public. Activities performed by the federal government that do
not provide issuers participating in an FFE with a special benefit are
not covered by this user fee. As in benefit years 2014 through 2021,
issuers seeking to participate in an FFE in the 2022 benefit year will
receive two special benefits not available to the general public: (1)
The certification of their plans as QHPs; and (2) the ability to sell
health insurance coverage through an FFE to individuals determined
eligible for enrollment in a QHP.
For the 2022 benefit year, issuers participating in an FFE will
receive special benefits from the following federal activities:
Provision of consumer assistance tools;
Consumer outreach and education;
Management of a Navigator program;
Regulation of agents and brokers;
Eligibility determinations;
Enrollment processes; and
Certification processes for QHPs (including ongoing
compliance verification, recertification, and decertification).
Activities through which FFE issuers receive a special benefit also
include the Health Insurance and Oversight System (HIOS) and
Multidimensional Insurance Data Analytics System (MIDAS) platforms,
which are partially funded by Exchange user fees. Based on estimated
costs, enrollment (including anticipated establishment of state
Exchanges in certain states in which FFEs currently are operating), and
premiums for the 2021 plan year, we propose a 2022 user fee rate for
all participating FFE issuers at 2.25 percent of total monthly
premiums. This proposed user fee rate reflects our estimates for the
2022 benefit year of costs for operating the Federal Exchanges,
premiums, enrollment, and transitions in Exchange models (from the FFE
and SBE-FP models to either the SBE-FP, FFE-DE or State Exchange models
(state transitions). The proposed FFE user fee rates are lower than the
3.0 percent FFE user fee rate that we established for benefit years
2020 and 2021, and the 3.5 percent FFE user fee rate that we
established for benefit years 2014 through 2019. After accounting for
the impact of the lower user fee rate, we estimate that we would have
sufficient funding available to fully fund user-fee eligible Exchange
activities. We seek comment on this proposed 2022 FFE user fee rate.
As previously discussed, OMB Circular No. A-25 establishes federal
policy regarding user fees, and specifies that a user charge will be
assessed against each identifiable recipient for special benefits
derived from federal activities beyond those received by the general
public. SBE-FPs enter into a federal platform agreement with HHS to
leverage the systems established for the FFEs to perform certain
Exchange functions, and to enhance efficiency and coordination between
state and federal programs. Accordingly, in Sec. 156.50(c)(2), we
specify that an issuer offering a plan through an SBE-FP must remit a
user fee to HHS, in the timeframe and manner established by HHS, equal
to the product of the monthly user fee rate specified in the annual HHS
notice of benefit and payment parameters for the applicable benefit
year, unless the SBE-FP and HHS agree on an alternative mechanism to
collect the funds from the SBE-FP or state.
The benefits provided to SBE-FP issuers by the federal government
include use of the Federal Exchange information technology platform and
call center infrastructure used to support eligibility determinations
for enrollment in QHPs and other applicable state health subsidy
programs as defined at section 1413(e) of the PPACA, and QHP enrollment
functions under Sec. 155.400. The user fee rate for SBE-FPs is
calculated based on the proportion of FFE costs that are associated
with the FFE information technology infrastructure, the consumer call
center infrastructure, and eligibility and enrollment services, and
allocating a share of those costs to issuers in the relevant SBE-FPs.
Based on this methodology, we propose to charge issuers offering QHPs
through an SBE-FP a user fee rate of 1.75 percent of the monthly
premium charged by the issuer for each policy under plans offered
through an SBE-FP. This proposed rate is lower than the 2.5 percent
user fee rate that we had established for benefit year 2021. The lower
proposed user fee rate for SBE-FP issuers for the 2022 benefit year
reflects our estimates of costs for operating the Federal Exchanges,
premiums, enrollment, as well as state Exchange transitions for the
2022 benefit year, and the costs associated with performing these
services that benefit SBE-FP issuers. We seek comment on the proposed
2022 SBE-FP user fee rate.
b. FFE-DE and SBE-FP-DE User Fee Rates for the 2023 Benefit Year (Sec.
156.50(c)(3))
Elsewhere in this proposed rule, we propose to allow states served
by an FFE or SBE-FP to implement the proposed direct enrollment option
under Sec. 155.221(j) beginning with plan year 2023, under which one
or more private direct enrollment entities approved by the FFE would
operate websites through which consumers may apply for and enroll in a
QHP, with or without APTC or CSR (if otherwise eligible). Under the
proposed FFE-DE or SBE-FP options, QHP issuers offering plans through
the Exchange would receive some of the benefits of the Federal
Exchange, however, some consumer outreach, education, and support
activities would be provided by the state or through the Federal
Exchange.\168\
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\168\ See above for more information on the proposed direct
enrollment option under Sec. 155.221(j).
---------------------------------------------------------------------------

As previously discussed, OMB Circular No. A-25 establishes federal
policy regarding user fees, and specifies that a user charge will be
assessed against each identifiable recipient for special benefits
derived from federal activities beyond those received by the general
public. As such, we propose in new Sec. 156.50(c)(3) to charge issuers
offering QHPs through an FFE-DE or an SBE-FP-DE a user fee for the
services and benefits provided to those issuers by HHS as the
administrator of the Federal Exchange. We propose to charge issuers
offering QHPs through an FFE-DE or SBE-FP-DE a user fee rate calculated
based on the proportion of FFE user fee eligible costs incurred by HHS
that are associated with implementation and operation of the FFE-DE or
SBE-FP-DE. We assume that the use of Federal Exchange services will be
less for FFE-DE and SBE-FP-DE states in 2023 and beyond than for FFE
and SBE-FP states during the same time period. Therefore, to provide
some certainty for states that consider a transition to a proposed FFE-
DE or SBE-FP-DE, we propose a 2023 user fee rate of 1.5 percent of the
monthly premium charged by the issuer for each policy under plans
offered through an FFE-DE or SBE-FP-DE in plan year 2023. Under the DE
option, the Exchange would no longer be providing many of the consumer
facing enrollment-related activities that are currently being performed
through the Federal platform, or such activities would be substantially
reduced. For

[[Page 78631]]

example, the use of the Marketplace call center and HealthCare.gov
website will be substantially diminished. Because of the role of the
state in operating SBE-FPs, the value to issuers and the associated
costs of operating these functions in FFEs is typically higher. The
reduction of these functions and costs therefore is reflected by a
larger proposed reduction in the user fee rate for issuers in FFE-DEs
from the rate applicable in FFEs (from 2.25 percent to 1.5 percent)
than the reduction in the user fee rate for issuers in SBE-FP-DEs from
the rate applicable in SBE-FPs (from 1.75 percent to 1.5 percent),
resulting in the same proposed user fee rate for these new Exchange
options. We seek comment on the FFE-DE or SBE-FP-DE user fee rate,
including whether the rate should be state-specific or higher or lower
depending on whether the Exchange is a FFE-DE or SBE-FP-DE and the
specific services HHS will provide, as outlined in the Federal
agreement required under new proposed Sec. 155.221(j)(2)(ii). We will
continue to examine costs, enrollment, premium, and state transition
estimates for the issuers offering QHPs on the Exchanges using the
Federal platform for the 2022 benefit year as we finalize the FFE and
SBE-FP user fee rates (including the proposed rates for the new
proposed FFE-DE and SBE-FP-DE options for the 2023 benefit year). We
seek comment on these proposals.
c. State User Fee Collection Administration (Sec. 156.50(c)(2))
We also propose to eliminate the state user fee collection
flexibility that HHS had previously offered to states in the 2017
Payment Notice. We propose that HHS would not collect an additional
user fee, if a state so requests, from issuers at a rate specified by
the state to cover costs incurred by the state for the functions the
state retains. HHS previously provided this flexibility to states in
order to help reduce the administrative burden on states of collecting
additional user fees. However, our subsequent internal analysis
demonstrated that the process of collecting the state portion of the
user fee and remitting it to the state, would increase the operational
burden and cost incurred by HHS. Therefore, we are amending Sec.
156.50(c)(2) to remove this alternate user fee collection mechanism. We
note that this proposal does not change the ability of an SBE-FP to
request that HHS collect from the SBE-FP state regulatory entity the
total amount that would result from the percent of monthly premiums
charged for enrollment through the federal platform, instead of HHS
collecting the fee directly from SBE-FP issuers.
d. Eligibility for User Fee Adjustments for Issuers Participating
Through SBE-FPs (Sec. 156.50(d))
We are proposing to amend Sec. 156.50(d) to clarify that issuers
participating through SBE-FPs are eligible to receive adjustments to
their federal user fee amounts that reflect the value of contraceptive
claims they have reimbursed to third-party administrators (TPAs) that
have provided contraceptive coverage on behalf of an eligible employer.
In the final rules ``Coverage of Certain Preventative Services Under
the Affordable Care Act,'' \169\ these relationships were established
as a method of both providing contraceptives for women and
accommodating the religious beliefs of employers. In the 2017 Payment
Notice,\170\ we allowed State Exchanges to enter into agreements to
rely on the Federal platform for certain Exchange functions to enhance
efficiency and coordination between the state and federal programs, and
to leverage the systems established by the FFEs to perform certain
Exchange functions. Although we recognized that issuers participating
in these types of Exchanges were subject to a federal user fee, Sec.
156.50(d) was not amended to reflect the SBE-FP Exchange model. As
such, in this rule, we propose to amend Sec. 156.50(d) to explicitly
include the issuers offering QHPs through SBE-FPs. We also propose to
make conforming changes throughout the regulation text at Sec.
156.50(d) to reflect the user fees applicable to FFEs and SBEs that
adopt the DE option, as further discussed elsewhere in this rulemaking.
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\169\ 78 FR 39870 (July 2, 2013); 80 FR 41318 (July 14, 2015).
\170\ 81 FR 12203 at 12293 (March 8, 2016).
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We seek comment on these proposals.
e. Request for Comments on Alternatives to Exchange User Fees (Sec.
156.50)
In the 2021 Payment Notice proposed rule we solicited comment on
whether to lower the user fee rates in the final rule and any
information that might inform future changes to the user fee rate. One
commenter questioned the basis of the user fee, stating that the
Exchanges do not provide a special benefit to issuers. The commenter
asserted that there is no competitive advantage to being on the
Exchanges, the existence of the Exchanges are mandated by law, and the
benefits associated with user fees all flow to consumers, and not the
issuers who pay them.
While the 2021 Payment Notice comment solicitation focused on the
rate of the user fee, we appreciate the commenter's concerns regarding
the justification for the user fee. Even when government policies seem
well established--HHS is in its seventh year applying the Exchange user
fee to issuers--it is always helpful to periodically step back and
reassess whether a particular policy is still an effective and proper
approach, and whether there are better alternatives.
We recognize the Exchanges serve a public purpose defined by the
PPACA to facilitate the purchase of QHPs, determine eligibility for
insurance affordability programs, and assist in enforcing the
individual and employer shared responsibility provisions. The Exchanges
also provide special benefits to issuers, including regulatory services
and sales services similar to the services provided by agents and
brokers. Whether or not the current balance of funding sources is
appropriate based on the portion of activities that support a public
purpose compared to a special benefit to issuers presents an important
question.
In addition, we recognize the application of the Exchange user fee
raises important fairness questions regarding who ultimately pays the
fee and how much they pay. Issuers directly pass Exchange user fees on
to their enrollees in the form of higher premiums, which issuers
specifically document in their rate filings to justify their rates.
Therefore, the people who effectively pay the Exchange user fee are
largely limited to (1) people who pay the full premium without the
benefit of PTCs subsidies and (2) federal taxpayers who tend to fully
fund the marginal increase in premiums due to the user fee for people
who receive PTC subsidies. The fact that single risk pool regulations
under 45 CFR 156.80(d)(1)(ii) require the index rate to be adjusted on
a market-wide basis based on Exchange user fees means that enrollees
who purchase coverage outside the Exchange from a QHP issuer must pay
higher premiums to support the Exchange. In addition, we recognize
average premiums vary substantially across states and rating regions--
varying from a statewide average of $389 to $942 in 2019 \171\--which
is largely due to variations in claims experience. As a result, the per
enrollee user fee can vary substantially

[[Page 78632]]

based on factors that are not related to the cost of operating the
Exchanges.
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\171\ ``Early 2020 Effectuated Enrollment Snapshot,'' July 23,
2020. Available at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Early-2020-2019-Effectuated-Enrollment-Report.pdf.
---------------------------------------------------------------------------

Because the Exchange user fee is specifically included in premium
as a component of the index rate under 45 CFR 156.80(d)(1)(ii), we also
recognize the fee raises important fairness questions regarding the
treatment of commissions for agents and brokers in the MLR calculation.
As noted previously, the Exchange provides sales services similar to
the services provided by agents and brokers. Yet the cost of these
services are treated completely differently within the MLR calculation.
Exchange sales services are considered part of the premium, which helps
the issuer meet the MLR requirement. Conversely, agent and broker
commissions are treated as administrative costs, which counts against
the issuer meeting the MLR requirement. As a result, the user fee
combined with the method for calculating the MLR may give the Exchange
a competitive advantage over agents and brokers.
Recognizing these concerns with the Exchange user fee, we are
considering and seek comment on both the appropriateness of an
alternative revenue source and the type of an alternate revenue source
to ensure Exchanges can cover the costs of the Exchange in an
effective, appropriate, and fair manner. While these comments would not
change the funding source of Exchange related functions in this rule,
the comments submitted in response to this solicitation may be used for
further proposals.
2. State Selection of EHB-Benchmark Plan for Plan Years Beginning on or
After January 1, 2020 (Sec. 156.111)
a. Annual Reporting of State-Required Benefits
In the 2021 Payment Notice, we amended Sec. 156.111(d) and added
paragraph (f) to require states to annually notify HHS in a form and
manner specified by HHS, and by a date determined by HHS, of any state-
required benefits applicable to QHPs in the individual and/or small
group market that are considered to be ``in addition to EHB'' in
accordance with Sec. 155.170(a)(3).
At Sec. 156.111(f), we also required states to identify which
state-required benefits are not in addition to EHB and do not require
defrayal in accordance with Sec. 155.170, and provide the basis for
the state's determination. Under this requirement, a state's submission
must describe all benefits requirements under state mandates applicable
to QHPs in the individual or small group market that were imposed on or
before December 31, 2011, and that were not withdrawn or otherwise no
longer effective before December 31, 2011, as well as all benefits
requirements under state mandates that were imposed any time after
December 31, 2011, applicable to the individual or small group market.
The state's report is also required to describe whether any of the
state benefit requirements in the report were amended or repealed after
December 31, 2011. Information in the state's report is required to be
accurate as of the day that is at least 60 days prior to the annual
reporting submission deadline set by HHS.
We also finalized Sec. 156.111(d)(2) to specify that if the state
does not notify HHS of its required benefits considered to be in
addition to EHB by the annual reporting submission deadline, or does
not do so in the form and manner specified by HHS, HHS will identify
which benefits are in addition to EHB for the state for the applicable
plan year. HHS's identification of which benefits are in addition to
EHB will become part of the definition of EHB for the applicable state
for the applicable plan year.
In the 2021 Payment Notice, we finalized that the annual reporting
of state-required benefits would begin in plan year 2021 and set a July
1, 2021 deadline for states to submit to HHS their first complete
reporting package. We now propose July 1, 2022 as the deadline for
states to submit to HHS the complete reporting package for the second
year of reporting. This would mean that states would notify HHS in the
manner specified by HHS by July 1, 2022, of any benefits in addition to
EHB that QHPs are required to cover in plan year 2022 or after plan
year 2022 by state action taken by May 2, 2022 (60 days prior to the
annual submission deadline). As part of this reporting, states must
also identify which state-required benefits are not in addition to EHB
and do not require defrayal in accordance with Sec. 155.170, and
provide the basis for the state's determination, by the July 1, 2022
reporting submission deadline.
The first reporting cycle was intended to set the baseline list of
state-required benefits applicable to QHPs in the individual and/or
small group market. For each subsequent annual reporting cycle
thereafter, the state is only required to update the content in its
report to add any new benefit requirements and to indicate whether
benefit requirements previously reported to HHS have been amended or
repealed. If a state has not imposed, amended, or repealed any state
benefit requirements since the prior year's reporting deadline, the
state is still required to report to HHS that there have been no
changes to state-required benefits since the previous reporting cycle.
In such a scenario, the state should submit the same reporting package
as the previous reporting cycle and affirmatively indicate to HHS that
there have been no changes.
b. States' EHB-Benchmark Plan Options
In the 2019 Payment Notice, we stated that we believe states should
have additional choices with respect to benefits and affordable
coverage. Therefore, we finalized options for states to select new EHB-
benchmark plans starting with the 2020 plan year. Under Sec.
156.111(a), a state may modify its EHB-benchmark plan by: (1) Selecting
the EHB-benchmark plan that another state used for the 2017 plan year;
(2) replacing one or more EHB categories of benefits in its EHB-
benchmark plan used for the 2017 plan year with the same categories of
benefits from another state's EHB-benchmark plan used for the 2017 plan
year; or (3) otherwise selecting a set of benefits that would become
the state's EHB-benchmark plan.
The 2019 Payment Notice stated that we would propose EHB-benchmark
plan submission deadlines in the HHS annual Notice of Benefit and
Payment Parameters. Accordingly, we propose May 6, 2022, as the
deadline for states to submit the required documents for the state's
EHB-benchmark plan selection for the 2023 plan year. We emphasize that
this deadline would be firm, and that states should optimally have one
of their points of contact who has been predesignated to use the EHB
Plan Management Community reach out to us using the EHB Plan Management
Community well in advance of the deadline with any questions. Although
not a requirement, we recommend states submit applications at least 30
days prior to the submission deadline to ensure completion of their
documents by the proposed deadline. We also remind states that they
must complete the required public comment period and submit a complete
application by the deadline. We seek comment on the proposed deadline.
In the 2019 Payment Notice, we also finalized flexibility through
which states may opt to permit issuers to substitute benefits between
EHB categories. In the preamble to that rule, we stated that the
deadline applicable to state selection of a new benchmark plan would
also apply to this state opt-in process. Therefore, we also propose May
6, 2022, as the deadline for states to

[[Page 78633]]

notify HHS that they wish to permit between-category substitution for
the 2023 plan year. States wishing to make such an election must do so
via the EHB Plan Management Community. We seek comment on the proposed
deadline.
3. Premium Adjustment Percentage (Sec. 156.130)(e))
We propose the 2022 benefit year annual premium adjustment
percentage using the most recent estimates and projections of per
enrollee premiums for private health insurance (excluding Medigap and
property and casualty insurance) from the NHEA, which are calculated by
CMS' Office of the Actuary. For the 2022 benefit year, the premium
adjustment percentage will represent the percentage by which this
measure for 2021 exceeds that for 2013.
Section 1302(c)(4) of the PPACA directs the Secretary to determine
an annual premium adjustment percentage, a measure of premium growth
that is used to set three other parameters detailed in the PPACA: (1)
The maximum annual limitation on cost sharing (defined at Sec.
156.130(a)); (2) the required contribution percentage used to determine
eligibility for certain exemptions under section 5000A of the Code
(defined at Sec. 155.605(d)(2)); and (3) the employer shared
responsibility payment amounts under section 4980H(a) and (b) of the
Code (see section 4980H(c)(5) of the Code). Section 1302(c)(4) of the
PPACA and Sec. 156.130(e) provide that the premium adjustment
percentage is the percentage (if any) by which the average per capita
premium for health insurance coverage for the preceding calendar year
exceeds such average per capita premium for health insurance for 2013,
and the regulations provide that this percentage will be published in
the annual HHS notice of benefit and payment parameters.
The 2015 Payment Notice final rule \172\ and 2015 Market Standards
Rule \173\ established a methodology for estimating the average per
capita premium for purposes of calculating the premium adjustment
percentage for the 2015 benefit year and beyond. The 2020 Payment
Notice final rule \174\ established that we will calculate the average
per capita premium as private health insurance premiums minus premiums
paid for Medicare supplement (Medigap) insurance and property and
casualty insurance, divided by the unrounded number of unique private
health insurance enrollees, excluding all Medigap enrollees.
Additionally, as finalized in the 2021 Payment Notice final rule,\175\
we will finalize the premium adjustment percentage and related
parameters for the 2022 benefit year using the NHEA data available at
the time of this proposed rule for the 2022 benefit year.
---------------------------------------------------------------------------

\172\ 79 FR 13743.
\173\ 79 FR 30240.
\174\ 84 FR 17454.
\175\ See 85 FR 29228.
---------------------------------------------------------------------------

As such, we propose that the premium adjustment percentage for 2022
be the percentage (if any) by which the most recent NHEA projection of
per enrollee premiums for private health insurance (excluding Medigap
and property and casualty insurance) for 2021 ($7,036) exceeds the most
recent NHEA estimate of per enrollee premiums for private health
insurance (excluding Medigap and property and casualty insurance) for
2013 ($4,883).\176\ Using this formula, the proposed premium adjustment
percentage for the 2022 benefit year is 1.4409174688 ($7,036/$4,883),
which represents an increase in private health insurance (excluding
Medigap and property and casualty insurance) premiums of approximately
44.1 percent over the period from 2013 to 2021.
---------------------------------------------------------------------------

\176\ The 2013 and 2021 per enrollee premiums for private health
insurance (excluding Medigap and property and casualty insurance)
figures used for this calculation reflect the latest NHEA data. The
series used in the determinations of the adjustment percentages can
be found in Table 17 on the CMS website, which can be accessed by
clicking the ``NHE Projections 2019-2028--Tables'' link located in
the Downloads section at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. A
detailed description of the NHE projection methodology is available
at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
---------------------------------------------------------------------------

Based on the proposed 2022 premium adjustment percentage, we
propose the following cost-sharing parameters for benefit year 2022.
a. Maximum Annual Limitation on Cost Sharing for Plan Year 2022
We propose to increase the maximum annual limitation on cost
sharing for the 2022 benefit year based on the proposed value
calculated for the premium adjustment percentage for the 2022 benefit
year. As finalized in the EHB final rule \177\ at Sec. 156.130(a)(2),
for the 2022 calendar year, cost sharing for self-only coverage may not
exceed the dollar limit for calendar year 2014 increased by an amount
equal to the product of that amount and the premium adjustment
percentage for 2022. For other than self-only coverage, the limit is
twice the dollar limit for self-only coverage. Under Sec. 156.130(d),
these amounts must be rounded down to the next lowest multiple of $50.
---------------------------------------------------------------------------

\177\ See 78 FR 12847 through 12848.
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Using the premium adjustment percentage of 1.4409174688 for 2022 as
proposed above, and the 2014 maximum annual limitation on cost sharing
of $6,350 for self-only coverage, which was published by the IRS on May
2, 2013,\178\ we propose that the 2022 benefit year maximum annual
limitation on cost sharing would be $9,100 for self-only coverage and
$18,200 for other than self-only coverage. This represents an
approximately 6.4 percent increase above the 2021 parameters of $8,550
for self-only coverage and $17,100 for other than self-only coverage.
We seek comment on these proposals.
---------------------------------------------------------------------------

\178\ See Revenue Procedure 2013-25, 2013-21 IRB 1110. http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------

b. Reduced Maximum Annual Limitation on Cost Sharing (Sec. 156.130)
We propose for the 2022 benefit year and beyond, unless changed
through notice-and-comment rulemaking, to use the reductions in the
maximum annual limitation on cost sharing for cost-sharing plan
variations determined by the methodology we established beginning with
the 2014 benefit year, as further described later in this section of
the preamble.
Sections 1402(a) through (c) of the PPACA direct issuers to reduce
cost sharing for EHBs for eligible individuals enrolled in a silver-
level QHP. In the 2014 Payment Notice, we established standards related
to the provision of these CSRs. Specifically, in part 156 subpart E, we
specified that QHP issuers must provide CSRs by developing plan
variations, which are separate cost-sharing structures for each
eligibility category that change how the cost sharing required under
the QHP is to be shared between the enrollee and the federal
government. At Sec. 156.420(a), we detailed the structure of these
plan variations and specified that QHP issuers must ensure that each
silver-plan variation has an annual limitation on cost sharing no
greater than the applicable reduced maximum annual limitation on cost
sharing specified in the annual HHS notice of benefit and payment
parameters. Although the amount of the reduction in the maximum annual
limitation on cost sharing is specified in section 1402(c)(1)(A) of the
PPACA, section 1402(c)(1)(B)(ii) of the PPACA states that the Secretary
may adjust the cost-sharing limits to ensure that the resulting limits
do not cause the AV of the health plans to exceed the levels specified
in section 1402(c)(1)(B)(i) of the PPACA (that is, 73 percent, 87

[[Page 78634]]

percent, or 94 percent, depending on the income of the enrollee).
As we propose above, the 2022 maximum annual limitation on cost
sharing would be $9,100 for self-only coverage and $18,200 for other
than self-only coverage. We analyzed the effect on AV of the reductions
in the maximum annual limitation on cost sharing described in the
statute to determine whether to adjust the reductions so that the AV of
a silver plan variation will not exceed the AV specified in the
statute. Below, we describe our analysis for the 2022 plan year and our
proposed results.
Consistent with our analysis for the 2014 through 2021 benefit
years' reduced maximum annual limitation on cost sharing, we developed
three test silver level QHPs, and analyzed the impact on AV of the
reductions described in the PPACA to the proposed estimated 2022
maximum annual limitation on cost sharing for self-only coverage
($9,100). The test plan designs are based on data collected for 2021
plan year QHP certification to ensure that they represent a range of
plan designs that we expect issuers to offer at the silver level of
coverage through the Exchanges. For 2022, the test silver level QHPs
included a PPO with typical cost-sharing structure ($9,100 annual
limitation on cost sharing, $2,775 deductible, and 20 percent in-
network coinsurance rate); a PPO with a lower annual limitation on cost
sharing ($7,400 annual limitation on cost sharing, $3,050 deductible,
and 20 percent in-network coinsurance rate); and an HMO ($9,100 annual
limitation on cost sharing, $4,800 deductible, 20 percent in-network
coinsurance rate, and the following services with copayments that are
not subject to the deductible or coinsurance: $500 inpatient stay per
day, $500 emergency department visit, $30 primary care office visit,
and $55 specialist office visit). All three test QHPs meet the AV
requirements for silver level health plans.
We then entered these test plans into a draft version of the 2022
benefit year AV Calculator \179\ and observed how the reductions in the
maximum annual limitation on cost sharing specified in the PPACA
affected the AVs of the plans. As with prior years, we found that the
reduction in the maximum annual limitation on cost sharing specified in
the PPACA for enrollees with a household income between 100 and 150
percent of FPL (\2/3\ reduction in the maximum annual limitation on
cost sharing), and 150 and 200 percent of FPL (\2/3\ reduction), would
not cause the AV of any of the model QHPs to exceed the statutorily
specified AV levels (94 and 87 percent, respectively).
---------------------------------------------------------------------------

\179\ Available at https://www.cms.gov/cciio/resources/regulations-and-guidance/index.
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However, as with prior years, we continue to find that the
reduction in the maximum annual limitation on cost sharing specified in
the PPACA for enrollees with a household income between 200 and 250
percent of FPL (\1/2\ reduction), would cause the AVs of two of the
test QHPs to exceed the specified AV level of 73 percent. Furthermore,
as with prior years, for individuals with household incomes of 250 to
400 percent of FPL, without any change in other forms of cost sharing,
the statutory reductions in the maximum annual limitation on cost
sharing would cause an increase in AV that exceeds the maximum 70
percent level in the statute.
Beginning with the 2023 benefit year, we are proposing to publish
the required contribution percentage, along with the premium adjustment
percentage and the annual cost-sharing limitation parameters, in
guidance. For additional discussion of the provisions of this proposal,
please see the preamble for Publication of the Premium Adjustment
Percentage, Maximum Annual Limitation on Cost Sharing, Reduced Maximum
Annual Limitation on Cost Sharing, and Required Contribution Percentage
(Sec. 156.130).
The calculation of the reduced maximum annual limitation on cost
sharing has remained consistent since the 2014 Payment Notice due to
year-over-year consistency of the results of our analysis regarding the
effects of the reduced maximum annual limitation on cost sharing on the
AV of silver plan variations. Therefore, as a result of the apparent
stability of those results, and consistent with prior Payment Notices,
we propose to continue to use the maximum annual limitation on cost
sharing reductions of \2/3\ for enrollees with a household income
between 100 and 200 percent of FPL, \1/5\ for enrollees with a
household income between 200 and 250 percent of FPL, and no reduction
for individuals with household incomes of 250 to 400 percent of FPL for
the 2022 benefit year and beyond. We would continue to review the
effects of these reductions annually, and should we determine that this
approach should be changed to better reflect the statutorily specified
AVs for silver plan variations, we would propose to change these
reductions through notice and comment rulemaking.
Specifically, we propose to continue to use the methodology
described above for analyzing the effects of the reduced maximum annual
limitation on cost sharing on the AV of silver plan variations to
verify that the reductions do not result in unacceptably high AVs
before we publish these values in guidance for a given benefit year.
Subsequently, if a future analysis using this methodology supports a
modification to the reduced maximum annual limitation for any of the
household income bands for a future benefit year, we would propose
those modifications to the reduced maximum annual limitations through
notice-and-comment rulemaking, as appropriate.
We note that selecting a reduction for the maximum annual
limitation on cost sharing that is less than the reduction specified in
the statute would not reduce the benefit afforded to enrollees in the
aggregate because QHP issuers are required to further reduce their
annual limitation on cost sharing, or reduce other types of cost
sharing, if the required reduction does not result in the AV of the QHP
meeting the specified level.
We seek comment on this analysis and the proposed reductions in the
maximum annual limitation on cost sharing calculation methodology for
the 2022 benefit year and beyond. We also seek comment on the proposed
reduced annual limitations on cost sharing for the 2022 benefit year
(Table 9).
We note that for 2022, as described in Sec. 156.135(d), states are
permitted to request HHS's approval for state-specific datasets for use
as the standard population to calculate AV. No state submitted a
dataset by the September 1, 2020 deadline.

[[Page 78635]]

Table 9--Reductions in Maximum Annual Limitation on Cost Sharing for
2022
------------------------------------------------------------------------
Reduced maximum
Reduced maximum annual limitation
annual limitation on cost sharing
Eligibility category on cost sharing for other than
for self-only self-only coverage
coverage for 2020 for 2020
------------------------------------------------------------------------
Individuals eligible for CSRs $3,000 $6,000
under Sec. 155.305(g)(2)(i)
(100-150 percent of FPL).....
Individuals eligible for CSRs 3,000 6,000
under Sec.
155.305(g)(2)(ii) (151-200
percent of FPL)..............
Individuals eligible for CSRs 7,250 14,500
under Sec.
155.305(g)(2)(iii) (201-250
percent of FPL)..............
------------------------------------------------------------------------

c. Publication of the Premium Adjustment Percentage, Maximum Annual
Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost
Sharing, and Required Contribution Percentage (Sec. 156.130)
Since the 2014 benefit year, HHS has published the premium
adjustment percentage, maximum annual limitation on cost sharing,
reduced maximum annual limitation on cost sharing, and required
contribution percentage parameters through notice-and-comment
rulemaking. Beginning with the 2023 benefit year, we propose to publish
these parameters in guidance by January of the year preceding the
applicable benefit year, unless HHS is changing the methodology for
calculating the parameters, in which case, we would do so through
notice-and-comment rulemaking. We additionally propose to publish in
guidance the premium adjustment percentage and related parameters using
the most recent NHEA income and premium data that is available at the
time these values are published in guidance or, if HHS is changing the
methodology for calculating these parameters, at the time these values
are proposed in notice-and-comment rulemaking. Publication of these
parameters prior to the release of updates to the NHEA data, which
typically (but not always) occurs in February or March, is consistent
with the 2021 Payment Notice policy to finalize the premium adjustment
percentage, maximum limitation on cost sharing, reduced maximum
limitation on cost sharing, and required contribution percentage using
NHEA data that would be available at the time that the proposed rule
would have been published.
In the EHB final rule,\180\ HHS established at Sec. 156.130(e)
that HHS will publish the annual premium adjustment percentage in the
annual HHS notice of benefit and payment parameters. Additionally, in
the 2014 Payment Notice final rule,\181\ HHS established at Sec.
156.420(a)(1)(i), (2)(i), and (3)(i), that the reduced annual
limitations on cost sharing would be published in the applicable
benefit year's annual HHS notice of benefit and payment parameters. Due
to the timing of publication of the annual HHS notice of benefit and
payment parameters final rule in past years, stakeholders have
suggested that when HHS is not changing the calculation methodology for
these parameters, HHS should publish earlier the premium adjustment
percentage, maximum limitation on cost sharing, reduced maximum
limitation on cost sharing, and required contribution percentage. These
stakeholders assert that an earlier publication would allow issuers to
incorporate these parameters for rate setting and the submission of QHP
benefit templates earlier than would be possible if the parameters were
published in the applicable benefit year's notice of benefit and
payment parameters.
---------------------------------------------------------------------------

\180\ 78 FR 12834 through 12833.
\181\ 78 FR 15409.
---------------------------------------------------------------------------

In addition, because the methodologies used to calculate the
premium adjustment percentage, required contribution percentage, and
maximum annual limitation on cost sharing have been previously
established through rulemaking, the calculation of these amounts is a
function of entering the applicable figures into the established
equations, and therefore, does not require rulemaking to establish.
Additionally, the calculation of the reduced maximum annual limitation
on cost sharing has remained consistent since the 2014 Payment Notice
final rule. Therefore, as discussed earlier in this proposed rule, we
have proposed the reductions to the maximum annual limitation on cost
sharing as well as the methodology for determining whether these
reductions raise plan AVs above acceptable levels for the 2022 benefit
year and beyond.
With these methodologies in place, beginning with the 2023 benefit
year, we propose to amend Sec. Sec. 156.130(e) and 156.420(a) to
reflect that we would publish the premium adjustment percentage, along
with the maximum annual limitation on cost sharing, the reduced maximum
annual limitation on cost sharing, and the required contribution
percentage in guidance by January of the year preceding the applicable
benefit year (for example, the 2023 premium adjustment percentage would
be published in guidance no later than January 2022), unless HHS is
amending the methodology to calculate these parameters, in which case
HHS would amend the methodology and publish the parameters through
notice-and-comment rulemaking.
We believe that publishing the final premium adjustment percentage
and associated final parameters in guidance annually instead of through
notice-and-comment rulemaking is consistent with our efforts to provide
information to stakeholders in a timely manner.
We seek comment on these proposals.
4. Network Adequacy Standards (Sec. 156.230)
45 CFR 156.230, which implements section 1311(c)(1)(B) of the
PPACA, describes the network adequacy standards for QHP issuers that
use a provider network. We have received questions regarding whether
the requirements at Sec. 156.230 apply to a plan that does not use a
provider network, such as an indemnity plan, and does not vary benefits
based on whether enrollees receive services from an in-network or out-
of-network provider.
Nothing in the PPACA requires a QHP issuer to use a provider
network. Accordingly, a QHP issuer may choose to design a QHP that does
not use a provider network, and to provide equal benefits for covered
services without regard to whether the issuer has a network
participation agreement with the provider that furnishes the covered
services. Section 156.230 does not impose any network adequacy
certification requirement for QHPs that do not use a provider network,
and has not since the inception of the Exchanges. To address any
ambiguity in this section, we propose to codify this

[[Page 78636]]

longstanding interpretation at paragraph (f) to provide that a plan
that does not vary benefits based on whether the issuer has a network
participation agreement with the provider that furnishes the covered
services toned not comply with the network adequacy standards at
paragraphs (a) through (e) in order to be certified as a QHP. This
proposal would simply clarify existing QHP requirements and would not
change or add any additional QHP certification requirement.
We invite comment on this proposal.
5. Termination of Coverage or Enrollment for Qualified Individuals
(Sec. 156.270)
In the 2021 Payment Notice, CMS finalized a requirement that under
Sec. 156.270(b)(1), QHP issuers must send termination notices with
effective dates and reason for the termination to enrollees for all
termination events. We finalized this as proposed, noting that all
commenters who weighed in on this topic supported our proposal. This
policy became effective July 13, 2020. We are not proposing any changes
to paragraph (b)(1) beyond what we finalized in the 2021 Payment Notice
for the reasons discussed below.
In finalizing this rule, CMS inadvertently omitted discussion of
two comments opposing the proposal. These comments raised concerns
about unnecessary additional administrative costs and IT builds, and
noted that a termination notice could be confusing in certain
scenarios--for example, if the enrollee switches between QHPs offered
by the same issuer, a termination notice from their issuer could cause
confusion. These commenters proposed instead that Exchanges should be
required to clearly convey the eligibility termination reason and
effective date in the Exchange's own eligibility notices, consistent
with the data conveyed to issuers on 834 termination transactions.
We are sensitive to commenters' concerns that issuers need
sufficient time to build IT systems to implement this policy. In
response, CMS issued guidance allowing issuers using the federal
platform enforcement discretion until February 1, 2021 to implement the
new termination notice requirement.\182\
---------------------------------------------------------------------------

\182\ ``Enforcement Safe Harbor for Qualified Health Plan
Termination Notices During the 2019 Benefit Year,'' August 26, 2020.
Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Termination-Notices-Enforcement-Discretion.pdf.
---------------------------------------------------------------------------

However, the comments in opposition of the proposal do not change
CMS's policy goals underlying our decision to finalize the rule as
proposed. FFEs do not send termination notices for any termination
scenario other than citizenship data-matching issue expirations and
terminations associated with Medicare PDM when the enrollee has elected
at plan selection to terminate Exchange coverage when found dually
enrolled. The FFEs also do not send termination notices in enrollee-
initiated terminations which must be requested at the Exchange.
Similarly, the FFEs do not send termination notices when an enrollee
switches QHPs within the same issuer. This is all appropriate, because
the issuer is the primary communicator to the enrollee about their
coverage. We still believe that termination notices would be helpful in
these scenarios, even in plan selection changes, because an enrollee
switching QHPs could have their premium, cost sharing, and provider
network affected. As one of the comments in support of our proposal
noted, it is important for the enrollee to have in writing the actual
termination date for their records, in case of miscommunication with
the issuers about the preferred date or to later dispute an inaccurate
Form 1095-A. Another commenter agreed that issuers should send
termination notices during voluntary terminations associated with
Medicare PDM as it would help the enrollee confidently transition to
Medicare.
Complaints about terminations are one of the largest sources of
casework. More consistent communication is part of the solution. We
believe consumers should be notified of these changes, even if they
initiated them so that enrollees have a record that the issuer
completed the request. Issuers are the proper messenger of termination
noticing for many reasons. For example, Exchange issuers historically
are the senders of termination notices, and some issuers acknowledge in
their comments that they already do send termination notices in all
scenarios. Furthermore, the issuer has record of the termination date
needed for the termination notice before the Exchange in some cases,
such as some retroactive termination requests handled through casework,
and State Exchange issuer terminations described in Sec.
155.430(d)(iv). Indeed, one reason we proposed regulating in this area
is that we were receiving detailed questions from issuers about which
termination scenarios required issuer notices; we believe requiring
issuer termination notices for all scenarios in the long run makes the
requirement simpler.
Therefore, we are not proposing any changes to Sec. 156.270(b)(1)
beyond what we finalized in the 2021 Payment Notice.
6. Prescription Drug Distribution and Cost Reporting by QHP Issuers
(Sec. 156.295)
Section 6005 of the PPACA added section 1150A(a)(2) of the Act to
require a PBM under a contract with a Medicare Part D plan sponsor or
Medicare Advantage plan that offers a Medicare Part D plan, or with a
QHP offered through an Exchange established by a state under section
1311 of the PPACA \183\ to provide certain prescription drug
information to the Secretary, at such times, and in such form and
manner, as the Secretary shall specify. Section 1150A(b) of the Act
addresses the information that a QHP issuer or their PBM must
report.\184\ Section 1150A(c) of the Act requires the information
reported to be kept confidential and not to be disclosed by the
Secretary or by a plan receiving the information, except that the
Secretary may disclose the information in a form which does not
disclose the identity of a specific PBM, plan, or prices charged for
drugs for certain purposes.\185\
---------------------------------------------------------------------------

\183\ This includes an FFE, as a Federal Exchange may be
considered an Exchange established under section 1311 of the PPACA.
King v. Burwell, 576 U.S. 988 (2015).
\184\ This information is: The percentage of all prescriptions
that were provided through retail pharmacies compared to mail order
pharmacies, and the percentage of prescriptions for which a generic
drug was available and dispensed (generic dispensing rate), by
pharmacy type (which includes an independent pharmacy, chain
pharmacy, supermarket pharmacy, or mass merchandiser pharmacy that
is licensed as a pharmacy by the state and that dispenses medication
to the general public), that is paid by the health benefits plan or
PBM under the contract; the aggregate amount, and the type of
rebates, discounts, or price concessions (excluding bona fide
service fees, which include but are not limited to distribution
service fees, inventory management fees, product stocking
allowances, and fees associated with administrative services
agreements and patient care programs (such as medication compliance
programs and patient education programs)) that the PBM negotiates
that are attributable to patient utilization under the plan, and the
aggregate amount of the rebates, discounts, or price concessions
that are passed through to the plan sponsor, and the total number of
prescriptions that were dispensed; and, the aggregate amount of the
difference between the amount the health benefits plan pays the PBM
and the amount that the PBM pays retail pharmacies, and mail order
pharmacies, and the total number of prescriptions that were
dispensed.
\185\ The purposes are: As the Secretary determines to be
necessary to carry out Section 1150A or part D of title XVIII; to
permit the Comptroller General to review the information provided;
to permit the Director of the Congressional Budget Office to review
the information provided; and, to States to carry out section 1311
of the PPACA.
---------------------------------------------------------------------------

In the 2012 Exchange Final Rule, we codified the requirements
contained in section 1150A of the Act with regard to QHPs at Sec.
156.295. In that rule, we interpreted section 1150A of the Act to
require QHP issuers to report the information described in section

[[Page 78637]]

1150A(b) of the Act and did not specify the responsibilities of PBMs
that contract with QHP issuers to report this information. On January
28, 2020 \186\ and on September 11, 2020,\187\ we published notices in
the Federal Register and solicited public comment on collection of
information requirements detailing the proposed collection envisioned
by section 1150A of the Act to HHS.\188\
---------------------------------------------------------------------------

\186\ 85 FR 4993 through 4994.
\187\ 85 FR 56227 through 56229.
\188\ Pharmacy Benefit Manager Transparency. CMS-10725.
Available at https://www.cms.gov/regulations-and-guidancelegislationpaperworkreductionactof1995pra-listing/cms-10725.
---------------------------------------------------------------------------

a. QHP Issuer Responsibilities
Elsewhere in this rule, we propose to add new part 184 to address
the responsibilities of PBMs under the PPACA and to add Sec. 184.50 to
codify in regulation the statutory requirement that PBMs that are under
contract with an issuer of one or more QHPs report the data required by
section 1150A of the Act. Accordingly, we propose to revise Sec.
156.295(a) to state that where a QHP issuer does not contract with a
PBM to administer the prescription drug benefit for QHPs, the QHP
issuer will report the data required by section 1150A of the Act to
HHS. We propose corresponding revisions throughout Sec. 156.295 to
remove the applicability of the reporting requirement for PBMs under
this section and propose revising the title to ``Prescription drug
distribution and cost reporting by QHP issuers''.
As explained in the preamble at Sec. 184.50, we acknowledge that
section 1150A places responsibility on both the QHP issuer and their
PBMs to report this prescription drug data. Generally, where a QHP
issuer contracts with a PBM, the PBM is more likely to be the source of
the data that must be reported. Therefore, to reduce overall burden,
rather than requiring the QHP issuer to serve as a conduit between its
PBM and HHS, or unnecessarily requiring both the PBM and the QHP issuer
to submit duplicated data, we propose to implement section 1150A to
make QHP issuers responsible for reporting this data directly to the
Secretary only when the QHP issuer does not contract with a PBM to
administer the prescription drug benefit for their QHPs. Where a QHP
contracts with a PBM, the PBM is responsible for reporting data to the
Secretary as required by Sec. 184.50.
Although we are unaware of any QHP issuer that does not currently
utilize a PBM, we believe that, together, the proposals to revise Sec.
156.295 and to add Sec. 184.50 would ensure the collection of data
required by section 1150A of the Act in all circumstances, including
when a QHP issuer does not use a PBM to administer its prescription
drug benefit. Retaining the requirement for QHP issuers to report data
at Sec. 156.295 when they do not contract with a PBM would ensure that
the data is consistently collected every plan year.
We also propose to remove Sec. 156.295(a)(3) to remove the
requirement for QHP issuers to report spread pricing amounts when the
QHP issuer does not contract with a PBM to administer the prescription
drug benefit for their QHPs. Spread pricing amounts are only present
where a PBM acts as an intermediary between the QHP issuer and a drug
manufacturer. If a QHP issuer does not contract with a PBM, no such
intermediary exists and it is not possible for QHP issuers to report
this data.
We seek comment on these proposals.
b. Reporting of Data by Pharmacy Type
Section 1150A(b)(1) of the Act requires the Secretary to collect
certain QHP prescription drug data \189\ by pharmacy type (which
includes an independent pharmacy, chain pharmacy, supermarket pharmacy,
or mass merchandiser pharmacy that is licensed as a pharmacy by the
state and that dispenses medication to the general public). This
requirement was previously codified at Sec. 156.295(a)(1). In the
Medicare Program; Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for Contract Year 2013 and Other
Changes final rule, we recognized that it is not currently possible to
report such data by pharmacy type because pharmacy type is not a
standard classification currently captured in industry databases or
files.\190\ We understand that these types continue not to be standard
classifications currently captured in industry databases or files, as
indicated by comments submitted in response to the January 28, 2020
notice in the Federal Register soliciting public comment on the
collection of information requirements of this collection.\191\ To
reduce the burden of this collection, we propose to revise Sec.
156.295(a)(1) to remove the requirement to report the data described at
section 1150A(b)(1) of the Act by pharmacy type. We intend to collect
this information at a time when this requirement would impose
reasonable burden. We seek comment on ways that we may collect the data
by pharmacy type without creating unreasonable burden and any existing
definitions that may exist that could be leveraged for this purpose. We
also seek comment on the time and costs required for PBMs to begin
reporting by pharmacy type, if definitions were finalized.
---------------------------------------------------------------------------

\189\ Section 1150A(b)(1) requires the reporting of the
percentage of all prescriptions that were provided through retail
pharmacies compared to mail order pharmacies, and the percentage of
prescriptions for which a generic drug was available and dispensed.
\190\ See 77 FR 22072 at 22093.
\191\ See 85 FR 4993 through 4994.
---------------------------------------------------------------------------

7. Oversight of the Administration of the Advance Payments of the
Premium Tax Credit, Cost-Sharing Reductions, and User Fee Programs
(Sec. 156.480)
a. Application of Requirements to Issuers in State Exchanges and SBE-
FPs
In the second Program Integrity Rule, we finalized general
provisions related to the oversight of QHP issuers in relation to APTC
and CSRs.\192\ We explained that since APTC and CSR payments are
federal funds which pass from HHS directly to QHP issuers, it is
necessary for HHS to oversee QHP issuer compliance in these areas,
regardless of whether the QHP is offered through a State Exchange or an
FFE. As such, to effectively oversee the payment of APTC and CSRs by
QHP issuers, HHS established standards in part 156, subpart E for QHP
issuers participating in FFEs and State Exchanges. We also noted that
in states with State Exchanges, the state would have primary
enforcement authority over QHP issuers participating in the state's
individual market exchange that were not in compliance with the
standards set forth in part 156, subpart E.\193\ However, if the State
Exchange does not enforce such standards, HHS would enforce compliance
with these requirements, including the imposition of CMPs on QHP
issuers participating in State Exchanges using the same standards and
processes for QHP issuers participating in FFEs set forth in part 156,
subpart I.\194\ In the second Program Integrity Rule, we also finalized
general provisions that require issuers offering QHPs in an FFE
maintain all documents and records and other evidence of accounting
procedures and practices, which are critical for HHS to conduct
activities necessary to safeguard the financial and programmatic
integrity of the FFEs.\195\ As finalized in 45 CFR 156.705(a)(1), this
includes the authority for HHS to include periodic auditing of the QHP
issuer's financial records related to the participation in an FFE. To
date, we have leveraged this

[[Page 78638]]

authority to conduct user fee audits of QHP issuers participating in an
FFE.
---------------------------------------------------------------------------

\192\ See 78 FR 65077 and 65078.
\193\ See the proposed Program Integrity Rule, 78 FR 37058. Also
see 78 FR at 65077 and 65078.
\194\ Ibid.
\195\ See 78 FR 65078 and 65079.
---------------------------------------------------------------------------

In this rulemaking, we propose amendments to consolidate HHS audit
authority regarding APTC, CSR, and user fee audits by expanding the
audit authority under Sec. 156.480(c) to also capture user fees audits
by HHS, or its designee, of QHP issuers participating in an FFE.
Additionally, as part of determining whether APTC and CSR amounts were
properly paid to issuers, and whether user fee amounts were properly
collected, HHS regularly identifies discrepancies in issuer records
caused by issuer non-compliance with other applicable Exchange
operational standards. Examples include failure to correctly effectuate
or terminate coverage, or to correctly calculate premiums. In addition,
we propose to apply the same framework to QHP issuers participating in
SBE-FP states. As such, QHP issuers in SBE-FP states would be required
to comply with HHS audits under Sec. 156.480(c) to confirm compliance
with the applicable standards established in part 156, subpart E for
APTC and CSRs and Sec. 156.50 for user fees.
We further propose that in situations where the state fails to
substantially enforce such standards, HHS would enforce compliance,
including imposing CMPs using the same standards set forth in part 156,
subpart I. Based on our experience conducting audits of APTC, CSRs, and
user fees, we also propose several amendments to Sec. 156.480(c) to
ensure we can effectively oversee the payment of these amounts by QHP
issuers, regardless of Exchange type (for example, FFE, State Exchange,
or SBE-FP).
As detailed below, to further support our program integrity efforts
in these areas, we propose to amend Sec. 156.480(c) to codify
additional details regarding HHS audits and to capture authority for
HHS to conduct compliance reviews of QHP issuer compliance with the
applicable Federal APTC, CSR, and user fee standards,\196\ including
the consequences for the failure to comply with an audit. In addition,
we propose amendments to Sec. Sec. 156.800 and 156.805 to set forth
the framework for HHS enforcement of the applicable Federal APTC, CSR,
and user fee standards in situations where state authorities fail to
substantially enforce those standards with respect to the QHP issuers
participating in State Exchanges and SBE-FPs.
---------------------------------------------------------------------------

\196\ The applicable Federal standards for APTC and CSRs are
found in part 156, subpart E, which apply to QHP issuers
participating in all Exchanges types (FFEs, State Exchanges and SBE-
FPs). The applicable Federal standards for user fees are found in 45
CFR 156.50, which apply to QHP issuers in FFEs and SBE-FPs.
---------------------------------------------------------------------------

We seek comment on these proposals, including with respect to how
HHS could coordinate with State Exchanges, SBE-FPs, and state
authorities to address non-compliance by QHP issuers with applicable
Federal APTC, CSRs, and user fee standards. We seek comment on ways to
balance enforcement by State Exchanges and SBE-FPs and the protection
and oversight of federal funds by HHS.
b. Audits and Compliance Reviews of APTC, CSRs, and User Fees (Sec.
156.480(c))
In prior rulemaking, we codified authority for HHS to audit an
issuer that offers a QHP in the individual market through an Exchange
to assess compliance with the requirements of part 156, subpart E.\197\
We also previously codified general authority for HHS to periodically
audit a QHP issuer's financial records related to its participation in
an FFE.\198\ Recently, HHS completed the audits for the 2014 benefit
year CSR payments. During these audits, HHS encountered challenges
working with some issuers. Specifically, HHS experienced difficulties
receiving requested audit data and materials in a timely fashion and
receiving data in a format that is readily usable for purposes of
conducting the audit. As such, similar to the proposals related to
audits of issuers of reinsurance-eligible plans and risk adjustment
covered plans discussed earlier in this proposed rule, we propose to
amend Sec. 156.480(c) to provide more clarity around the issuer
requirements for APTC and CSR audits. The proposed amendments codify
more details about the audit process and clarify issuer obligations
with respect to these audits, including what it means to comply with an
audit and the consequences for failing to comply with such
requirements. Additionally, we propose to amend Sec. 156.480(c) to
also capture and clarify HHS's ability to audit FFE and SBE-FP user
fees. As such we proposed to rename Sec. 156.480, ``Oversight of the
Administration of the Advance Payments of the Premium Tax Credit, Cost-
sharing Reductions, and User Fee Programs.'' HHS currently reviews
compliance with applicable Federal user fee standards when conducting
APTC audits because the same data is used for both purposes; as such,
there will be minimal increased burden as a result from this
codification.
---------------------------------------------------------------------------

\197\ 78 FR 65077 and 65078.
\198\ See 45 CFR 156.705(a)(1). Also see 78 FR 65078 and 65079.
---------------------------------------------------------------------------

We also propose several amendments to Sec. 156.480(c) to expand
the oversight tools available to HHS beyond traditional audits to also
provide authority for HHS to conduct compliance reviews of QHP issuers
to assess compliance with the applicable Federal APTC, CSR, and user
fee standards. These proposed HHS compliance reviews would follow the
standards set forth for compliance review of QHP issuers participating
in FFEs established in 45 CFR 156.715. However, compliance reviews
under this section would be conducted to confirm QHP issuer compliance
with the APTC, CSR, and user fee standards in subpart E of part 156 and
45 CFR 156.50 for user fees, as applicable, and they would generally
extend to QHP issuers participating in all Exchanges.\199\ A compliance
review may be targeted at a specific potential error and conducted on
an ad hoc basis.\200\ For example, HHS may require an issuer to submit
data pertaining to specific data submissions. We believe this
flexibility is necessary and appropriate to provide HHS a mechanism to
address situations in which a systematic error or issue is identified
during the random and targeted auditing of a sample of QHP issuers, and
HHS suspects similarly situated issuers may have experienced the same
systematic error or issue but were not selected for audit in the year
in question. We intend to continue our collaborative oversight approach
and coordinate with State Exchanges and SBE-FPs to ensure QHP issuer
compliance with the applicable standards in part 156, subpart E and 45
CFR 156.50.
---------------------------------------------------------------------------

\199\ HHS does not intend to conduct user fee compliance reviews
of QHP issuers participating in State Exchanges that do not rely on
the Federal platform. Such reviews would be limited to QHP issuers
participating in FFE and SBE-FP states.
\200\ See 78 FR 65100.
---------------------------------------------------------------------------

First, we propose to rename Sec. 156.480(c) to ``Audits and
Compliance Reviews'' in order to clarify that the authority described
in this section would apply to audits and the proposed HHS compliance
reviews to evaluate QHP issuer compliance with the applicable Federal
APTC, CSR, and user fee standards. We similarly propose to update the
introductory language in Sec. 156.480(c) to incorporate a reference to
HHS compliance reviews. As amended, Sec. 156.480(c) would provide that
HHS or its designee may audit and perform compliance reviews to assess
whether an issuer that offers a QHP in the individual market through an
Exchange is in compliance with the applicable

[[Page 78639]]

requirements of subpart E, part 156, and 45 CFR 156.50. We propose to
capture in a new sentence in the amended Sec. 156.480(c) that HHS
would conduct these compliance reviews consistent with the standards
set forth in 45 CFR 156.715. As detailed earlier in this preamble,
these oversight tools would be available to HHS to evaluate compliance
by QHP issuers participating in all Exchanges with the applicable
Federal APTC, CSR, and user fee standards.
Second, we propose to add new Sec. 156.480(c)(1) to establish
notice and conference requirements for these audits. Proposed new
paragraph (c)(1) states that HHS would provide at least 15 calendar
days advance notice of its intent to conduct an audit of an QHP issuer
under Sec. 156.480(c). Under proposed paragraph (c)(1)(i), HHS
proposes to codify that all audits would include an entrance conference
at which the scope of the audit would be presented and an exit
conference at which the initial audit findings would be discussed.
Third, HHS proposes to add new paragraph (c)(2) to capture the
requirements issuers must meet to comply with an audit under this
section. Under the proposed paragraph (c)(2)(i), we propose to require
the issuer to ensure that its relevant employees, agents, contractors,
subcontractors, downstream entities, and delegated entities cooperate
with any audit or compliance review under this section. In new proposed
paragraph (c)(2)(ii), we propose to require issuers to submit complete
and accurate data to HHS or its designees that is necessary to complete
the audit, in the format and manner specified by HHS, no later than 30
calendar days after the initial deadline communicated and established
by HHS at the entrance conference described in proposed paragraph
(c)(1)(i). For example, for CSR audits, HHS may request that QHP
issuers provide a re-adjudicated claims data extract for the selected
sample of policies to verify accuracy of the re-adjudication process
and reported amounts (this would include verification of all elements
necessary to perform accurate re-adjudication) and data extract
containing incurred claims for the selected sample of policies to
verify accuracy of actual amount the enrollee(s) paid for EHBs via an
Electronic File Transfer. As another example, for APTC audits, issuers
may be asked to provide data to validate and support APTC payments
received for the applicable benefit year.
Fourth, under proposed Sec. 156.480(c)(2)(iii), HHS proposes to
require that issuers respond to any audit notices, letters, and
inquires, including requests for supplemental or supporting
information, no later than 15 calendar days after the date of the
notice, letter, request, or inquiry. We believe that the proposed
requirements in paragraph (c)(2) are necessary and appropriate to
ensure the timely completion of audits and to protect the integrity of
the APTC, CSR, and user fee programs and the payments made thereunder.
Fifth, recognizing that there may be situations that warrant an
extension of the timeframes under paragraph (c)(2)(ii) or (iii), as
applicable, we propose to also add a new paragraph (c)(2)(iv) to
establish a process for an issuer to request an extension. To request
an extension, we propose to require the issuer to submit a written
request to HHS within the applicable timeframe established in paragraph
(c)(2)(ii) or (iii). The written request would have to detail the
reasons for the extension request and the good cause in support of the
request. For example, good cause may include an inability to produce
information in light of unforeseen emergencies, natural disasters, or a
lack of resources due to a PHE. If the extension is granted, the issuer
must respond within the timeframe specified in HHS' notice granting the
extension of time.
Sixth, under Sec. 156.480(c)(3), HHS proposes that it would share
its preliminary audit findings with the issuer, and further proposes
that the issuer would then have 30 calendar days to respond to such
findings in the format and manner as specified by HHS. HHS would
describe the process, format, and manner by which an issuer can dispute
the preliminary audit findings in the preliminary audit report sent to
the issuer. For example, if the issuer disagrees with the findings set
forth in the preliminary audit report, HHS would require the issuer to
respond to such findings by submitting written explanations that detail
its dispute(s) or additional rebuttal information via Electronic File
Transfer. HHS proposes under paragraph (c)(3)(i) that if the issuer
does not dispute or otherwise respond to the preliminary findings
within 30 calendar days, the audit findings would become final. In new
proposed paragraph (c)(3)(ii), if the issuer timely responds and
disputes the preliminary audit findings within 30 calendar days, HHS
would review and consider such response and finalize the audit findings
after such review. HHS would provide contact and other information
necessary for an issuer to respond to the preliminary audit findings in
the preliminary audit report sent to the issuer.
Seventh, HHS proposes to add a new section at Sec. 156.480(c)(4)
to capture the process and requirements related to final audit findings
and reports. If an audit results in the inclusion of a finding in the
final audit report, the issuer must comply with the actions set forth
in the final audit report in the manner and timeframe established by
HHS. We note that the actions set forth in the final audit report could
require an issuer to return APTC or CSRs or make additional user fee
payments. HHS further proposes that (1) the issuer must provide a
written corrective action plan to HHS for approval within 30 calendar
days of the issuance of the final audit report; (2) the issuer must
implement the corrective action plan; and (3) the issuer must provide
HHS with written documentation demonstrating the adoption and
completion of the required corrective actions.
If an issuer fails to comply with the audit requirements set forth
in new proposed Sec. 156.480(c), HHS proposes in paragraph (c)(5)(i)
that HHS would notify the issuer of payments received that the issuer
has not adequately substantiated, and in new proposed paragraph
(c)(5)(ii), HHS would notify the issuer that HHS may recoup any
payments identified as not adequately substantiated if the APTC, CSR,
or user fee debt is not paid. Therefore, the continued failure to
respond to or cooperate with an audit under paragraph (c) and provide
the necessary information to substantiate the payments made could
result in HHS recouping up to 100 percent of the APTC or CSR payments
made to an issuer for the benefit year(s) that are the subject of the
audit if the APTC,CSR, or user fee debt is not paid.
APTC and CSR amounts recovered by HHS as a result of an audit under
Sec. 156.480(c) would be paid to the U.S. Treasury. User fee amounts
recovered by HHS as a result of an audit under paragraph (c) would be
paid to the ACA Marketplace user fee program collection account.
Lastly, HHS proposes to add a new paragraph (c)(6) to Sec. 156.480
to codify HHS' ability to enforce the applicable Federal APTC, CSR, and
user fee standards if a State Exchange or SBE-FP is not enforcing or
fails to substantially enforce one or more of these requirements. In
instances where HHS enforces compliance with the applicable APTC, CSR,
and user fee standards with respect to QHP issuers participating in
State Exchanges or SBE-FPs, HHS would use the same standards and
processes as outlined in Sec. Sec. 156.805 and

[[Page 78640]]

156.806 for QHP issuers participating in an FFE with respect to the
imposition of CMPs. This would include the proposed extension of the
process outlined in Sec. 156.901, et seq. for the QHP issuer to appeal
the imposition of CMPs. For a discussion of the framework and proposed
accompanying penalties for non-compliance in situations where HHS is
responsible for enforcement of these requirements, see the below
discussion of proposed changes to Sec. Sec. 156.800 and Sec. 156.805.
We seek comment on these proposals, including HHS's clarification
of its compliance review authority, the proposed timeframes and
processes for issuers to respond to audit notices and requests for
information and for issuers to request extensions of those timeframes,
and the proposals related to HHS's authority to enforce compliance with
the above requirements if a State Exchange or SBE-FP is not enforcing
or fails to substantially enforce one or more of these requirements.
8. Subpart I--Enforcement Remedies in Federally-Facilitated Exchanges;
Available Remedies Scope (Sec. 156.800)
In this proposed rule, we propose to rename Subpart I to
``Enforcement Remedies in the Exchanges,'' and to make other amendments
to clarify that HHS has the ability to impose CMPs when it is enforcing
the applicable federal requirements in part 156, subpart E and 45 CFR
156.50 for user fees, regardless of whether the Exchange is established
and operated by a state (including a regional Exchange or subsidiary
exchange) or by HHS.\201\ As explained in prior rulemaking, in states
where there is a State Exchange or SBE-FP, the State Exchange or SBE-FP
has primary enforcement authority over QHP issuers participating in the
Exchange and ensuring compliance with the applicable Federal APTC, CSR,
and user fee standards.\202\ However, consistent with the framework
established in section 1321(c)(2) of the PPACA, HHS has authority to
step in to enforce requirements related to the operation of Exchanges
and the offering of QHPs through Exchanges if a state fails to do
so.^{203 204} As such, in the case of a determination by the
Secretary that a State Exchange or SBE-FP has failed to enforce or
substantially enforce a federal requirement (or requirements) related
to QHP issuer participation in the individual market Exchange, HHS has
authority to step in and enforce QHP issuer compliance with the
requirement(s).
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\201\ Exchange models include State Exchanges, SBE-FPs, and
FFEs. HHS does not intend to use this authority to impose CMPs
related to user fee standards applicable to QHP issuer participating
in State Exchanges.
\202\ See the proposed Program Integrity Rule, 78 FR 37058. Also
see 78 FR 65077 and 65078.
\203\ Ibid.
\204\ Section 1321(c)(2) of the PPACA provides that the
enforcement framework established in section 2736(b), which was
renumbered 2723(b), of the PHS Act shall apply to the enforcement of
requirements established in section 1321(a)(1).
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Through its cross-reference to section 2723(b) of PHS Act, section
1321(c)(2) of the PPACA authorizes the Secretary to impose CMPs for
non-compliance with applicable federal Exchange requirements. In this
proposed rule, we propose to codify HHS authority to impose CMPs for
non-compliance by QHP issuers that participate or have participated in
a State Exchange or SBE-FP in situations where HHS steps in to enforce
certain requirements. Specifically, this proposal is focused on
ensuring compliance with the standards for APTC, CSR payments, and user
fees captured in part 156, subpart E and 45 CFR 156.50. Under this
proposal, we would apply the bases and follow the processes for
imposing CMPs as set forth in Sec. 156.805, would send a notice of
non-compliance as set forth in Sec. 156.806, and would extend the
administrative review and appeal process set forth in Sec. 156.901, et
seq. to provide a forum for QHP issuers in State Exchanges and SBE-FPs
to appeal the imposition of CMPs by HHS. We are not proposing to extend
the authority to decertify a QHP under Sec. 156.800(a)(2) for non-
compliance by QHP issuers in State Exchanges or SBE-FPs; QHP de-
certification in State Exchanges or SBE-FPs would remain an available
enforcement tool for the applicable Exchange. This proposal is not
intended to duplicate state enforcement efforts, as HHS generally
depends on State Exchanges and SBE-FPs to enforce federal requirements
applicable to QHPs and QHP issuers participating in the state's
individual market Exchange. The proposed amendments are instead
intended to establish an enforcement framework to capture situations
where HHS is responsible for enforcement if a State Exchange or SBE-FP
fails to do so and is focused on the Federal APTC, CSR, and user fee
requirements in order to protect federal funds.
We expect that states that established a State Exchange or SBE-FP
will enforce all applicable federal requirements applicable to QHPs and
QHP issuers participating in Exchanges, including the applicable APTC,
CSR, and user fee standards captured in part 156, subpart E and 45 CFR
156.50. However, to address situations where a State Exchange or SBE-FP
fails to enforce these federal Exchange requirements, consistent with
the framework established in section 2723(b) of the PHS Act, we propose
that if HHS determines that a State Exchange or SBE-FP lacks authority
or has otherwise failed to substantially enforce the requirements
captured in part 156, subpart E or 45 CFR 156.50, HHS would step in to
enforce these requirements with respect to QHP issuers participating in
the State Exchange or SBE-FP. Once this determination is made, HHS
would become responsible for enforcement and would take appropriate
action to ensure QHP issuer compliance with the applicable
requirement(s),\205\ and may impose CMPs, if appropriate. To more
clearly capture HHS's authority to impose CMPs in these situations, we
proposed to amend the introductory sentence to Sec. 156.800(a) to
replace the current references to the ``Federally-facilitated
Exchange'' with references to ``an Exchange.'' We also propose to amend
Sec. 156.800(b) to remove the word ``only'' from the sentence
describing the scope of HHS sanctions with respect to QHP issuers
participating in FFEs and to add a new second sentence that affirms HHS
authority to impose CMPs for non-compliance with the applicable
requirements in part 156, subpart E and 45 CFR 156.50 by QHP issuers
participating in State Exchanges and SBE-FPs.
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\205\ As detailed earlier, when HHS is responsible for
enforcement of these Exchange requirements, we also propose to
extend authority for HHS to pursue a compliance review under
Sec. Sec. 156.480(c) and 156.715 to evaluate compliance with
federal APTC, CSR, and user fee requirements by a QHP issuer
participating in a State Exchange or SBE-FP.
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We intend to continue our collaborative enforcement approach and
would coordinate our actions with state efforts to avoid duplication
and to streamline oversight of the administration of APTC, CSRs, and
user fees. We solicit comments for how HHS can collaborate with State
Exchanges, SBE-FPs, and state authorities to proactively address non-
compliance with applicable federal requirements and share compliance
tools regarding CSRs, APTC and user fees.
9. Bases and Process for Imposing Civil Money Penalties in Federally-
Facilitated Exchanges (Sec. 156.805)
We also propose to amend Sec. 156.805 to more clearly reflect
HHS's authority to impose CMPs due to non-compliance with respect to
the applicable Federal APTC, CSR, and user fee standards against a QHP
issuer participating in a State Exchange or SBE-FP. Under this
proposal, we would use the same bases and process currently captured in

[[Page 78641]]

Sec. 156.805 for imposing CMPs on QHP issuers participating in an FFE.
More specifically, in Sec. 156.805, we propose renaming this section
to ``Bases and process for imposing CMPs in the Exchanges,'' and also
propose to amend the introductory language in Sec. 156.805(a) to use
the words ``an Exchange,'' instead of ``Federally-facilitated
Exchange,'' to more clearly capture HHS's authority to impose CMPs on
QHP issuers participating in State Exchanges and SBE-FPs who fail to
comply with the applicable requirements in part 156, subpart E or Sec.
156.50 in situations where HHS is responsible for enforcement. We
similarly propose to modify Sec. 156.805(a)(5)(i) where the reference
to ``HHS'' currently appears to also incorporate a reference to ``an
Exchange'' to clarify that all QHP issuers must avoid intentionally or
recklessly misrepresenting or falsifying APTC, CSR, and user fee
information to both HHS and Exchanges, regardless of whether HHS or a
state operates the Exchange. We propose this amendment to clarify that
HHS has authority to impose CMPs against QHP issuers participating in
State Exchanges and SBE-FPs who misrepresent or falsify APTC, CSR, and
user fee information provided to HHS in situations where HHS is
responsible for enforcement of the requirements in part 156, subpart E
or Sec. 156.50, including when HHS is performing an audit or
compliance review under Sec. 156.480(c). If HHS seeks to use this
authority to impose CMPs against a QHP issuer participating in a State
Exchange or SBE-FP, we propose the issuer would have the opportunity to
appeal the CMPs following the existing framework for administrative
hearings in Sec. 156.901, et seq.
Finally, we propose to add a new paragraph (f) to Sec. 156.805 to
capture in this regulation details on the circumstances requiring HHS
enforcement of the applicable requirements in part 156, subpart E and
Sec. 156.50. Consistent with the framework established in section 2723
of the PHS Act and section 1321(c) of the PPACA, we propose in new
Sec. 156.805(f)(1) that HHS's authority to enforce in these situations
would be limited to situations where the State Exchange or SBE-FP
notifies HHS that it is not enforcing these requirements or if HHS
makes a determination using the process set forth at 45 CFR 150.201, et
seq. that a State Exchange or SBE-FP is failing to substantially
enforce these requirements.\206\ In new proposed Sec. 156.805(f)(2),
we affirm that when HHS is responsible for enforcement in these
circumstances, HHS may impose CMPs on an issuer in the State Exchange
or SBE-FP, in accordance with the bases and process set forth in this
section. As noted above, this includes the ability for a QHP issuer in
a State Exchange or SBE-FP to appeal the imposition of CMPs by HHS
following the existing framework for administrative hearings in Sec.
156.901, et seq.
---------------------------------------------------------------------------

\206\ See, for example, 45 CFR 150.203.
---------------------------------------------------------------------------

We propose that HHS would apply the same process HHS uses to
determine when a state is failing to substantially enforce PHS Act
requirements in determining whether a State Exchange or SBE-FP is
substantially enforcing the applicable Federal APTC, CSR, and user fee
standards. More specifically, we propose that if an audit of a QHP
issuer in a State Exchange or SBE-FP demonstrates the State Exchange or
SBE-FP's failure to enforce the applicable Federal APTC, CSR, and user
fee standards, HHS would investigate the State Exchange or SBE-FP's
enforcement and follow the process set forth in 45 CFR 150.207 if
necessary. We propose that if HHS receives or obtains information
(including information discovered through an audit) that a State
Exchange or SBE-FP may not be enforcing the applicable requirements in
part 156, subpart E, or Sec. 156.50, HHS may initiate the process
described in 45 CFR 150.207 to determine whether the State Exchange or
SBE-FP is failing to substantially enforce these requirements.
Mirroring the process set forth in 45 CFR 150.207 for making
determinations regarding substantial enforcement of PHS Act
requirements, HHS would follow the procedures in Sec. Sec. 150.209
through 150.219 to determine if a State Exchange or SBE-FP is failing
to enforce one or more of the applicable requirements in part 156,
subpart E or 45 CFR 156.50. If HHS believes there is a reasonable
question whether there has been a failure to enforce one or more of the
applicable requirements in part 156, subpart E or 45 CFR 156.50, HHS
would send a notice, as described in 45 CFR 150.213, identifying the
applicable requirement(s) that allegedly have not been substantially
enforced to the proper State Exchange or SBE-FP officials using the
process outlined in 45 CFR 150.211. We propose that, following the
process described in 45 CFR 150.215, HHS may extend, for good cause,
the time the State Exchange or SBE-FP has for responding to the notice,
such as if there is an agreement between HHS and the State Exchange or
SBE-FP that there should be a public hearing on the State Exchange or
SBE-FP's enforcement, or evidence that the State Exchange or SBE-FP is
undertaking expedited enforcement activities. Using the process
described in 45 CFR 150.217, if at the end of the extension period HHS
determines that the State Exchange or SBE-FP has not established to
HHS's satisfaction that it is enforcing the applicable requirement(s),
we propose that HHS would consult with the appropriate State Exchange
or SBE-FP officials, notify the State Exchange or SBE-FP of its
preliminary determination that the State Exchange or SBE-FP has failed
to substantially enforce the requirement(s) and that the failure is
continuing, and permit the State Exchange or SBE-FP a reasonable
opportunity to show evidence of substantial enforcement. If, after
providing notice and a reasonable opportunity for the State Exchange or
SBE-FP to show that it has corrected any failure to substantially
enforce, HHS finds that the failure to substantially enforce has not
been corrected, HHS would notify the State Exchange or SBE-FP of its
final determination using the process described in 45 CFR 150.219.
Therefore, we propose that after a determination that a State Exchange
or SBE-FP is not or cannot substantially enforce the applicable
requirements in part 156, subpart E or Sec. 156.50, HHS could impose
CMPs on issuers in the State Exchange or SBE-FP if there is cause for
such imposition. HHS would also provide a notice of non-compliance,
consistent with Sec. 156.806, to QHP issuers in State Exchanges or
SBE-FPs prior to imposing CMPs.
We seek to work collaboratively with State Exchanges, SBE-FPs, and
state authorities for any topics of mutual concern and oversight
activities where possible. We also seek comment to this proposal and
ways in which HHS and state authorities can efficiently and effectively
enforce federal standards related to APTC, CSRs, and user fees.
We also propose that if the changes made to the above Sec. 156.800
and to Sec. 156.805 are finalized as proposed, we would also apply
Sec. 156.903 such that an administrative law judge's authority also
extends to CMPs imposed against QHP issuers in State Exchanges and SBE-
FPs under Sec. 156.805. Specifically, we propose to amend Sec.
156.903(a) to extend the authority to State Exchanges and SBE-FPs so
that the ALJ has the authority, including all the authority conferred
by the Administrative Procedure Act, to adopt whatever procedures may
be necessary or proper to carry out in an efficient and effective
manner the ALJ's duty to provide a fair and impartial hearing on the
record and

[[Page 78642]]

to issue an initial decision concerning the imposition of a CMP on a
QHP offered in a FFE, State Exchange, or SBE-FP.
10. Subpart J--Administrative Review of QHP Issuer Sanctions
(Sec. Sec. 156.901, 156.927, 156.931, 156.947)
We propose to change the title to subpart J, removing the reference
to ``in Federally-Facilitated Exchanges'' to make clear it applies to
QHPs participating in any Exchange type to align with accompanying
proposed changes outlined above to Sec. Sec. 156.800 and 156.805. We
also propose several procedural changes to provisions in subpart J of
part 156 related to administrative hearings consistent with the
amendments discussed in the preamble to part 150. These proposed
changes are intended to align with the Departmental Appeals Board's
current practices for administrative hearings to appeal CMPs.
Specifically, we propose changes that would remove requirements to file
submissions in triplicate and instead require electronic filing. This
change is reflected in the proposed amendments to the definition of
``Filing date'' in Sec. 156.901, to the introductory text in Sec.
156.927(a), and to the service of submission requirements captured in
paragraph (b). We also propose to allow for the option of video
conferencing as a form of administrative hearing by amending the
definition of ``Hearing'' in Sec. 156.901 and to the requirements
outlined in Sec. 156.919(a) related to the forms for the hearing,
Sec. 156.941(e) related to prehearing conferences, and Sec.
156.947(a) related to the record of the hearing. Finally, we propose to
update Sec. 156.947 to allow the ALJ to communicate the next steps for
a hearing in either the acknowledgement of a request for hearing or on
a later date. We seek comment on these proposals.
11. Quality Rating System (Sec. 156.1120) and Enrollee Satisfaction
Survey System (Sec. 156.1125)
Section 1311(c)(3) of the PPACA directs the Secretary of HHS to
develop a quality rating for each QHP offered through an Exchange,
based on quality and price. Section 1311(c)(4) of the PPACA directs the
Secretary to establish an enrollee satisfaction survey that will assess
enrollee satisfaction with each QHP offered through the Exchanges with
more than 500 enrollees in the prior year.
Based on this authority, HHS finalized rules in May 2014 to
establish standards and requirements related to QHP issuer data
collection and public reporting of quality rating information in every
Exchange.\207\ To balance HHS's strategic goals of empowering consumers
through data, minimizing cost and burden on QHP issuers, and supporting
state flexibility, HHS developed a phased-in approach to establishing
quality standards for Exchanges and QHP issuers, collecting and
reporting quality measure data, and displaying quality rating
information across the Exchanges. Since 2015, we have collected
clinical quality measure data and enrollee experience survey measure
data and generated quality ratings to provide reliable, meaningful
information about QHP quality performance data across Exchanges. In
addition, since 2016, select states \208\ with FFEs and State Exchanges
have displayed QHP quality rating information as a tool for consumer
decision-making while shopping for health insurance coverage in an
Exchange. Beginning with the open enrollment period for plan year 2020,
CMS displayed the QHP quality rating information for all Exchanges that
used the HealthCare.gov platform, including the FFEs and SBE-FPs. State
Exchanges that operated their own eligibility and enrollment platform
were similarly required to display QHP quality ratings beginning with
the open enrollment period for plan year 2020, but had some flexibility
to customize the display of the QHP quality rating information.\209\
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\207\ See 79 FR 30240 at 30352. Also see 45 CFR 155.1400,
155.1405, 156.1120 and 156.1125.
\208\ Prior to the PY2020 nationwide display of quality rating
information, states that displayed QHP quality rating information
included California, Colorado, Connecticut, Maryland, Michigan,
Montana, New Hampshire, New York, Rhode Island, Virginia,
Washington, and Wisconsin.
\209\ ``CMS Bulletin on display of Quality Rating System (QRS)
star ratings and Qualified Health Plan (QHP) Enrollee Survey results
for QHPs offered through Exchanges (often called the Health
Insurance Marketplace),'' August 15, 2019. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QualityRatingInformationBulletinforPlanYear2020.pdf.
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Through valuable feedback from the QRS and QHP Enrollee Survey Call
Letter process and continued engagement with health plan issuer
organizations, healthcare quality measurement experts, state
representatives, consumer advocates and other stakeholders, we continue
to learn about populations buying insurance coverage across the
Exchanges and about areas of improvement for these programs. We also
continue to assess potential refinements to the QRS rating methodology
and the QHP Enrollee Survey to prioritize strategies to improve value
for consumers and to reduce the burden of quality reporting.
As part of the 2020 QRS and QHP Enrollee Survey Call Letter
process, we received many comments requesting that we remove levels of
the QRS hierarchy to help streamline and improve consumer understanding
of the quality rating information. While we are not proposing
amendments to the QRS or to the QHP Enrollee Survey as part of this
rulemaking, we seek comment on the removal of one or more levels of the
QRS hierarchy, which is a key element of the QRS framework that
establishes how quality measures are organized for scoring, rating and
reporting purposes. We previously described the general overall
framework for the QRS, including details on the hierarchical structure
of the measure set and the elements of the QRS rating methodology.\210\
Currently, the QRS measures are organized into composites, domains, and
summary indicators that serve as a foundation for the rating
methodology and scores are calculated at every level of the hierarchy
using specific scoring and standardization rules, as described in the
annual QRS and QHP Enrollee Survey Technical Guidance.\211\ We believe
that a simplified QRS hierarchy will support alignment with other CMS
quality reporting programs and help the overall quality score be more
reflective of the performance of individual survey and clinical quality
measures within the QRS. For example, the Medicare Star Ratings
framework consists of measures, domains, summary ratings and an overall
rating.\212\ In addition, we believe a simplified hierarchy, in
combination with additional methodology modifications we are
considering (for example, explicit weights at the measure level) will
help stabilize ratings across years.\213\ We seek comment specifically
on which level or levels of the QRS hierarchy should be removed (for
example, the composite level or the domain level).
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\210\ See, for example, 78 FR 69418.
\211\ ``The Quality Rating System and Qualified Health Plan
Enrollee Experience Survey: Technical Guidance for 2021,'' September
2020. Available at https://www.cms.gov/files/document/quality-rating-system-and-qualified-health-plan-enrollee-experience-survey-technical-guidance-2021.pdf.
\212\ ``Medicare 2019 Part C & D Star Rating Technical Notes,''
October 10, 2019. Available at https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Star-Ratings-Technical-Notes-Oct-10-2019.pdf.
\213\ CMS anticipates continuing to propose methodology
refinements to the QRS and QHP Enrollee Survey through the Call
Letter process.
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In addition, to further support transparency of QHP quality data
and to empower stakeholders including consumers, states, issuers and
researchers with valuable information

[[Page 78643]]

related to enrollee experience with QHPs, we propose to make the full
QHP Enrollee Survey results publicly available in an annual Public Use
File (PUF). Currently, we post on HealthCare.gov some enrollee
experience results in the form of a quality rating for Member
Experience and Plan Administration that make up part of the overall
rating for QHPs.\214\ The Member Experience rating is based on a select
number of survey measures from the QHP Enrollee Survey. The Plan
Administration rating is based on a select number of survey measures
and clinical quality measures. To promote transparency of data to the
public, we already post QRS PUFs every year for QHP issuers operating
in all Exchange types that were eligible to receive quality ratings. As
we stated in the Exchange and Insurance Market Standards for 2015 and
Beyond Final Rule, we have been considering different ways to make QHP
quality data, including QHP Enrollee Survey results, publicly available
and accessible to researchers, consumer groups, states and other
entities.\215\ Similar to the QRS PUFs, we propose to post a QHP
Enrollee Survey PUF annually, beginning with the 2021 QHP Enrollee
Survey results and during the 2022 open enrollment period, that would
include the score and proportion of responses (for example, the
percentage of respondents answering ``Never'' or ``Sometimes'') for
every survey question and composite as well as demographic information
such as employment status, race and ethnicity, and age at the reporting
unit and national level to facilitate data transparency.
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\214\ A rating for Medical Care is the other component of the
overall rating.
\215\ 79 FR at 30311.
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We solicit comment on this proposal.
12. Dispute of HHS Payment and Collections Reports (Sec. 156.1210)
In the 2014 Payment Notice, we established provisions related to
the confirmation and dispute of payment and collection reports. These
policies were finalized under the assumption that all issuers that
receive APTCs would generally be able to provide these confirmations or
disputes automatically to HHS. However, HHS has found that many issuers
prefer to research payment errors and use enrollment reconciliation and
disputes to update their enrollment and payment data, and may be unable
to complete this research and provide confirmation or dispute of their
payment and collection reports within 15 days, the timeline established
by the 2014 Payment Notice.
In the 2021 Payment Notice, we amended Sec. 156.1210(a) to
lengthen the time to report payment inaccuracies from 15 days to 90
days to allow all issuers who receive APTCs more time to research,
report, and correct inaccuracies through other channels. The longer
timeframe also allows for the processing of reconciliation updates,
which may resolve potential disputes. Additionally, at Sec. 156.1210,
we removed the requirement at paragraph (a) that issuers actively
confirm payment accuracy to HHS each month, as well as the language in
paragraph (b) regarding late filed inaccuracies. Instead, we amended
paragraph (b) to require an annual confirmation from issuers that the
amounts identified in the most recent payment and collections report
for the coverage year accurately reflect applicable payments owed by
the issuer to the federal government and the payments owed to the
issuer by the federal government, or that the issuer has disputed any
identified inaccuracies, after the end of each payment year, in a form
and manner specified by HHS.
Since finalizing these changes, HHS's experience has shown that
some data inaccuracies reasonably will be identified after the 90-day
reporting window. For example, issuers might receive notification of an
Exchange Eligibility Appeals adjudication after the 90-day submission
window. Additionally, some issuers are directed to update their
enrollment and payment data after an HHS data review or audit which may
occur after this 90-day window. In such instances it is in the interest
of HHS, issuers, and enrollees to accept the late reporting of data
inaccuracies. As such, we propose to amend Sec. 156.1210 by
redesignating current Sec. 156.1210(b) to Sec. 156.1210(d) and adding
new Sec. 156.1210(b) to establish a process for issuers to report
enrollment or payment data changes in these situations.
We clarify that this proposed flexibility does not reduce an
issuer's obligation to make a good faith effort to identify and
promptly report discrepancies within the 90-day reporting window
established under Sec. 156.1210(a). Issuers can demonstrate good faith
by sending regular and accurate enrollment reconciliation files and
timely enrollment disputes throughout the applicable enrollment
calendar year, making timely and regular changes to enrollment
reconciliation and dispute files to correct past errors, and by
reaching out to HHS and responding timely to HHS outreach to address
any issues identified. With respect to inaccuracies identified after
the end of the applicable 90-day period, we propose to work with the
issuer to resolve the inaccuracy if the issuer promptly notifies HHS,
in a form and manner specified by HHS, no later than 15 days after
identifying the inaccuracy. The failure to identify the inaccuracy in a
timely manner in these situations must not have been due to the
issuer's misconduct or negligence. For example, issuers must regularly
submit quality monthly enrollment reconciliation files as required
under Sec. 156.265(f), and should regularly review monthly enrollment
reconciliation files so that disputes are submitted in the 90-day
reporting window. Disputes submitted after the expiration of the
reporting window as a result of an issuer's failure to conduct these
activities in a timely manner would not satisfy the good faith
standard. We propose to codify these criteria at new proposed Sec.
156.1210(b)(1) and (2).
Additionally, we propose to add paragraph (c) to allow the
reporting of data inaccuracies after the 90-day period up to 3 years
following the end of the plan year to which the inaccuracy relates or
the date of the completion of the HHS audit process for such plan year,
whichever is later. We believe this deadline will provide issuers with
enough time to report any data inaccuracies discovered after the 90-day
submission window, while providing a reasonable end date by which HHS,
issuer and other stakeholders can consider the records for a particular
benefit year closed.
We note that, pursuant to section 1313(a)(6) of the PPACA,
``[p]ayments made by, through, or in connection with an Exchange are
subject to the False Claims Act (31 U.S.C. 3729 et seq.) if those
payments include any Federal funds.'' As such if an issuer has an
obligation to pay back APTCs, the issuer could be liable under the
False Claims Act for knowingly and improperly avoiding the obligation
to pay. We propose to codify in Sec. 156.1210(c)(3), that, if a
payment error is discovered after the 3-year or end of audit reporting
deadline, the issuer is obligated to notify HHS and repay any
overpayment. However, HHS will not pay the issuer after the 3-year or
end of audit reporting deadline for any underpayments discovered.
We further clarify that the requirements of Sec. 156.1210 apply to
all issuers who receive APTCs, including issuers in State Exchanges. We
seek comment on all aspects of this proposal, including its impact on
the State

[[Page 78644]]

Exchanges' ability to resolve disputes and report payment adjustments
to HHS in this timeframe.
We solicit comment on these proposals.
13. Payment and Collection Processes (Sec. 156.1215)
In the 2015 Payment Notice, HHS established a monthly payment and
collections cycle for insurance affordability programs, user fees, and
premium stabilization programs. As discussed above, we propose to
eliminate state user fee collection flexibility that HHS had previously
offered to states in 2017 Payment Notice, and propose to conforming
amendments to remove the reference to ``State'' governments from
paragraph (b). We seek comment on this proposal.
14. Administrative Appeals (Sec. 156.1220)
As detailed earlier in this preamble, we previously established a
three-level administrative appeals process for issuers to seek
reconsideration of amounts under certain PPACA programs, including the
calculation of risk adjustment charges, payments and user fees. This
process also applies to issuer disputes of the findings of a second
validation audit (if applicable) as a result of HHS-RADV for the 2016
benefit year and beyond.\216\ As explained in the 2020 Payment Notice,
only those issuers who have insufficient pairwise agreement between the
initial validation audit and second validation audit will receive a
Second Validation Audit Findings Report and therefore have the right to
appeal the second validation audit findings. In this rule, we propose
to amend Sec. 156.1220(a)(1)(vii) to add ``if applicable'' when
discussing an issuer's ability to appeal the findings of the second
validation audit to more clearly capture this limitation as part of the
regulation, consistent with the existing language at Sec.
153.630(d)(2) and the previously finalized policy. We propose a similar
amendment in this rule to Sec. 153.630(d)(3).
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\216\ See 45 CFR 156.1220(a)(1)(vii).
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We also propose amendments to Sec. 156.1220(a)(3) to clarify that
the 30-calendar day timeframe to file a request for reconsideration of
second validation audit findings (if applicable) or the risk score
error rate calculation would be 30 calendar days from the applicable
benefit year's Summary Report of Benefit Year Risk Adjustment Data
Validation Adjustments to Risk Adjustment Transfers. To capture this
clarification, we propose to create a new proposed Sec.
156.1220(a)(3)(ii) to specify the timeframe for filing a request for
reconsideration for a risk adjustment payment or charge, including an
assessment of risk adjustment user fees. This new proposed regulatory
provision maintains the language that establishes a 30 calendar day
window for these appeals that begin on the date of notification under
Sec. 153.310(e). We also propose to create a new proposed Sec.
156.1220(a)(3)(iii) to separately address the timeframe for filing a
request for reconsideration of second validation audit findings or the
risk score error rate calculation and to add the phrase ``if
applicable'' to more clearly capture the limitation on the ability to
appeal second validation audit findings. To accommodate these two new
proposed paragraphs, we also propose to amend Sec. 156.1220 to
redesignate paragraphs (a)(3)(iii) through (vi) as (a)(3)(iv) through
(vii), respectively. We seek comment on these proposals.
15. Enrollment Process for Qualified Individuals (Sec. 156.1240)
Under Sec. 156.1240(a), QHP issuers are required to accept a
variety of payment methods so that individuals without a bank account
or a credit card will have readily available options for making monthly
premium payments. Specifically, paragraph (a)(1) requires QHP issuers
to follow the premium payment process established by an Exchange in
accordance with Sec. 155.240. Paragraph (a)(2) requires QHP issuers to
accept for all payments in the individual market, at a minimum, paper
checks, cashier's checks, money orders, EFT, and all general-purpose
pre-paid debit cards as methods of payment and present all payment
method options equally for a consumer to select their preferred payment
method. We propose to add new paragraph (a)(3) to require individual
market QHP issuers to also accept payments on behalf of an enrollee
from an individual coverage HRA or QSEHRA.
We have received questions indicating that there is some confusion
over whether issuers must accept payments on behalf of an enrollee from
an individual coverage HRA or QSEHRA. Individual coverage HRAs are a
new type of health reimbursement arrangement that employers may offer
to employees as of January 1, 2020. \217\ In general, employers may
offer individual coverage HRAs to their employees as a means of
providing tax-advantaged reimbursements for medical care expenses,
including premiums for individual health insurance coverage that they
purchase for themselves and their families. QSEHRAs are another new
type of HRA, established by the 21st Century Cures Act, enacted
December 13, 2016, that qualified small employers can provide to their
employees.\218\ As explained in the final rule that adopted
implementing regulations for individual coverage HRAs, certain aspects
of which apply to QSEHRAs (final HRA rule),\219\ reimbursement may
include employee-initiated payments made through use of financial
instruments, such as pre-paid debit cards, as well as direct payments,
individual or aggregate, by the employer, employee organization, or
other plan sponsor to the health insurance issuer.\220\
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\217\ See 84 FR 28888.
\218\ Public Law 114-255 (Dec. 13, 2016).
\219\ 84 FR 28888 (June 20, 2019).
\220\ See 84 FR at 28950-51 (``[E]mployer funds paid from an HRA
go directly to a participant or a health insurance issuer because
the economic substance of the transaction is the same--that is, the
funds are being used to discharge an employee's premium payment
obligations.'')
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Consistent with the final HRA rule, we propose to add a new Sec.
156.1240(a)(3) to require issuers offering individual market QHPs to
accept payments of premiums that are received directly from an
individual coverage HRA or QSEHRA that are made on behalf of an
enrollee who is covered by the individual coverage HRA or QSEHRA. We
propose that QHP issuers would be required to accept such payment when
they are made using a method of payment described in Sec.
156.1240(a)(2). We recognize some individual coverage HRAs and QSEHRAs
prefer to make aggregate payments on behalf of multiple employees to a
QHP issuer. We encourage QHP issuers to work with employers and
administrators of individual coverage HRAs and QSEHRAs to facilitate
this method of payment, as we believe this approach can ease
administration of individual coverage HRAs and QSEHRAs. However, we are
not proposing to require QHP issuers to accept payments from individual
coverage HRAs or QSEHRAs when made using a form of payment that is not
described in Sec. 156.1240(a)(2). This proposal would help ensure that
individual coverage HRAs or QSEHRAs operate as intended, and would
address potential stakeholder confusion regarding whether QHP issuers
must accept payments made from individual coverage HRAs or QSEHRAs.

[[Page 78645]]

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

1. Definitions (Sec. 158.103)
To ensure program integrity, we propose to amend Sec. 158.103 to
establish the definition of prescription drug rebates and other price
concessions that are deducted from incurred claims for MLR reporting
and rebate calculation purposes.
Section 2718(a) of the PHS Act requires health insurance issuers
to, for MLR purposes, separately report the percentage of premium
revenue (after certain adjustments) expended on reimbursement for
clinical services provided to enrollees under such coverage, on
activities that improve health care quality, and on non-claims
(administrative) costs. Section 158.140 sets forth the MLR reporting
requirements related to the reimbursement for clinical services
provided to enrollees, including a requirement that issuers must deduct
from incurred claims prescription drug rebates received by the issuer.
In the May 14, 2020 Federal Register (85 FR 29164), we finalized
amendments to the MLR rules at Sec. 158.140(b)(1)(i) to require
issuers to deduct from MLR incurred claims not only prescription drug
rebates received by the issuer, but also any price concessions received
and retained by the issuer and any prescription drug rebates and other
price concessions received and retained by a PBM or other entity
providing pharmacy benefit management services to the issuer. The
applicability date for that amendment is the 2022 MLR reporting year
(MLR reports filed in 2023).
During the regulatory process, we received numerous comments
requesting HHS to codify and align the definition of prescription drug
rebates and other price concessions that are reported by issuers for
MLR purposes with the definition in section 1150A of the Act, as added
by the PPACA,\221\ which requires QHP issuers and PBMs to report
certain prescription drug benefit information to HHS. The reference to
rebates, discounts, and price concessions in section 1150A(b)(2) of the
Act excludes bona fide service fees paid to PBMs by drug manufacturers
or issuers. Under section 1150A of the Act, bona fide service fees are
fees negotiated by PBMs that include but are not limited to
``distribution service fees, inventory management fees, product
stocking allowances, and fees associated with administrative services
agreements and patient care programs (such as medication compliance
programs and patient education programs).'' Section 156.295,
implementing section 1150A of the Act, defines bona fide services fees
as ``fees paid by a manufacturer to an entity that represent fair
market value for a bona fide, itemized service actually performed on
behalf of the manufacturer that the manufacturer would otherwise
perform (or contract for) in the absence of the service arrangement,
and that are not passed on in whole or in part to a client or customer
of an entity, whether or not the entity takes title to the drug.''
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\221\ The requirements of section 1150A with respect to QHP
issuers are codified at Sec. 156.295. In this proposed rule, we
propose to amend that regulation and to codify the requirements with
respect to PBMs at a new 45 CFR part 184.
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In light of these comments and the delayed applicability date of
the amendment to Sec. 158.140(b)(1)(i), we did not finalize a
definition of ``prescription drug rebates'' or ``price concession'' in
that rulemaking. Rather, we indicated that we would consider codifying
the definition of prescription drug rebates and other price concessions
through separate rulemaking in advance of the applicability date for
these new reporting requirements.
We propose to amend Sec. 158.103 to add a definition of
prescription drug rebates and other price concessions that issuers must
deduct from incurred claims for MLR reporting and rebate calculation
purposes pursuant to Sec. 158.140(b)(1)(i). We believe that codifying
and clarifying the definition of prescription drug rebates and other
price concessions will allow issuers to more accurately report the
costs associated with enrollees' prescription drug utilization for
purposes of the MLR calculation. This approach would also promote
consistency in reporting across issuers. Therefore, we propose to amend
the MLR rules to add the definition for prescription drug rebates and
other price concessions to Sec. 158.103 and to clarify that this term
excludes bona fide service fees, consistent with how such fees are
described in Sec. 156.295. We propose that this provision become
applicable beginning with the 2022 MLR reporting year (MLR reports
filed in 2023), which aligns with the applicability date of the
amendment to Sec. 158.140(b)(1)(i) and should provide issuers with
adequate time to adjust contracts with entities providing pharmacy
benefit management services to provide transparency regarding
prescription drug rebates and other price concessions they receive from
drug manufacturers.
We seek comment on this proposal.
2. Premium Revenue (Sec. 158.130)
Section 2718(a) of the PHS Act requires health insurance issuers to
submit an annual report to the Secretary that details the percentage of
premium revenue (after certain adjustments) expended on reimbursement
for clinical services provided to enrollees under health insurance
coverage and on activities that improve healthcare quality. Section
158.130 specifies the reporting requirements with regard to earned
premium, which must include all monies paid by a policyholder or
subscriber as a condition of receiving coverage from the issuer, with
certain adjustments.
In the August 4, 2020 guidance, Temporary Policy on 2020 Premium
Credits Associated with the COVID-19 PHE, CMS adopted a temporary
policy of relaxed enforcement to allow issuers in the individual and
small group markets the flexibility, when consistent with state law, to
temporarily offer premium credits for 2020 coverage to support
continuity of coverage for individuals, families and small employers
who may struggle to pay premiums because of illness or loss of incomes
or revenue resulting from the COVID-19 PHE.\222\ On September 2, 2020,
HHS issued an interim final rule on COVID-19 wherein we set forth MLR
data reporting and rebate requirements for issuers offering temporary
premium credits for 2020 coverage.\223\ For the 2021 MLR reporting year
\224\ and beyond, we propose to adopt these MLR data reporting and
rebate requirements for all health insurance issuers in the individual
and small group markets \225\ who elect to offer temporary premium
credits during a PHE declared by the Secretary of HHS (declared PHE) in
situations in which HHS issues guidance announcing its adoption of a

[[Page 78646]]

similar temporary policy of relaxed enforcement to allow such issuers
to offer temporary premium credits during the declared PHE.\226\
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\222\ ``Temporary Policy on 2020 Premium Credits Associated with
the COVID-19 Public Health Emergency,'' August 4, 2020. Available at
https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Premium-Credit-Guidance.pdf.
\223\ 85 FR 54820 (Sept. 2, 2020).
\224\ The MLR reporting year means a calendar year during which
group or individual health insurance coverage is provided by an
issuer. See 45 CFR 158.103. The 2021 MLR reporting year refers to
the MLR reports that issuers must submit for the 2021 benefit year
by July 31, 2022. See 45 CFR 158.110(b).
\225\ While this proposed rule, the interim final rule on COVID-
19 and the August 4, 2020 guidance focus on the individual and small
group markets, to remove the barriers in support of issuers offering
these premium credits to enrollees impacted by a PHE declared by the
Secretary of HHS, we note that issuers in the large group market may
also, when consistent with state law, offer temporary premium
credits and should similarly report the lower, adjusted amount that
accounts for the premium credits for MLR purposes.
\226\ The Secretary of HHS may, under section 319 of the PHS
Act, determine that: (a) A disease or disorder presents a public
health emergency; or (b) that a public health emergency, including
significant outbreaks of infectious disease or bioterrorist attacks,
otherwise exists.
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We propose that for purposes of Sec. 158.130, issuers must account
for temporary premium credits provided to enrollees during a declared
PHE as reductions in earned premium for the applicable MLR reporting
years, consistent with any technical guidance set forth in the
applicable year's MLR Annual Reporting Form Instructions,\227\ when
such credits are permitted by HHS. Specifically, as clarified in the
interim final rule on COVID-19, we propose that the amount of temporary
premium credits \228\ would constitute neither collected premium nor
due and unpaid premium described in the MLR Annual Reporting Form
Instructions for purposes of reporting written premium (which is a
component of earned premium). Consequently, under this proposal,
issuers who offer temporary premium credits during a declared PHE would
report as earned premium for MLR and rebate calculation purposes the
actual, reduced premium paid when such credits are permitted by HHS.
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\227\ Available at https://www.cms.gov/cciio/Resources/Forms-Reports-and-OtherResources/index#Medical_Loss_Ratio.
\228\ MLR rebates provided in the form of premium credits are
different than the temporary premium credits such as those outlined
in the August 4, 2020 guidance issued by CMS. When MLR rebates are
provided in the form of premium credits, issuers must continue to
report the full amount of earned premium and may not reduce it by
the amount of MLR rebates provided in form of premium credits, as
required by Sec. 158.130(b)(3).
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We request comment on this proposal.
3. Rebating Premium if the Applicable Medical Loss Ratio Standard Is
Not Met (Sec. 158.240)
Section 2718(b) of the PHS Act, and the implementing regulations at
Sec. Sec. 158.210 and 158.240, require an issuer to provide an annual
rebate to enrollees, on a pro rata basis, if the ratio of the amount of
premium revenue expended by the issuer on reimbursement for clinical
services provided to enrollees under the health insurance coverage and
for activities that improve health care quality to the total amount of
premium revenue (excluding federal and state taxes and licensing or
regulatory fees) is less than 80 percent in the individual and small
group markets and 85 percent in the large group market. In order to
determine whether its MLR met the applicable standard, Sec. 158.110(b)
requires an issuer to submit to CMS, by July 31 of the year following
the end of the MLR reporting year, an MLR Annual Reporting Form
concerning premium revenue and expenses related to the group and
individual health insurance coverage that it issued.
Section 158.241 permits an issuer to provide MLR rebates in the
form of a premium credit, lump-sum check, or, if an enrollee paid the
premium using a credit card or direct debit, by lump-sum reimbursement
to the account used to pay the premium. Issuers that choose to provide
a rebate via a lump-sum check or lump-sum reimbursement to the account
used to pay the premium must issue the rebate no later than September
30 following the end of the MLR reporting year pursuant to Sec.
158.240(e). Issuers that elect to provide rebates in the form of a
premium credit must apply the rebate to the first month's premium that
is due on or after September 30 following the MLR reporting year
pursuant to Sec. 158.241(a)(2). This section also requires that when
the rebate is provided in the form of a premium credit and the total
amount of the rebate owed exceeds the premium due for October, any
excess rebate amount must be applied to succeeding premium payments
until the full amount of the rebate has been credited. Pursuant to
Sec. 158.240(f), an issuer that fails to pay a rebate owed to an
enrollee in accordance with the applicable timeframes established in
Sec. Sec. 158.240(e) and 158.241(a)(2) is required to pay the enrollee
the required rebate plus interest, at ten percent annually, accruing
from the date payment was due.
On June 12, 2020, we announced a temporary policy of relaxed
enforcement to allow issuers to prepay to enrollees a portion or all of
the estimated MLR rebate for the 2019 MLR reporting year in the form of
a premium credit, to the extent consistent with state law or other
applicable state authority, in order to support continuity of coverage
for enrollees who may struggle to pay premiums because of illness or
loss of income resulting from the COVID-19 PHE.\229\ This temporary
policy of relaxed enforcement was limited to issuers that choose to
prepay a portion or all of their estimated 2019 MLR rebate in the form
of a premium credit, as the current rules do not prohibit issuers
paying rebates in the form of a lump-sum check or lump-sum
reimbursement to the account used to pay the premium from prepaying a
portion or all of their rebates as long as the full rebate amount owed
to an enrollee is paid to that enrollee no later than September 30
following the end of the MLR reporting year.\230\
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\229\ ``Temporary Period of Relaxed Enforcement for Submitting
the 2019 MLR Annual Reporting Form and Issuing MLR Rebates in
Response to the Coronavirus Disease 2019 (COVID-19) Public Health
Emergency.'' (June 12, 2020). Available at https://www.cms.gov/files/document/Issuing-2019-MLR-Rebates-in-Response-to-COVID-19.pdf.
\230\ 45 CFR 158.240(e).
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Given the benefits experienced by enrollees in light of this
temporary policy of relaxed enforcement during the COVID-19 PHE and our
desire to continue to provide this flexibility for future years, we
propose to amend Sec. 158.240 by adding paragraph (g), which would
explicitly allow issuers to prepay a portion or all of their estimated
rebates to enrollees for any MLR reporting year regardless of the form
in which they are paid. We believe that enrollees would generally
benefit from the ability to receive estimated rebates earlier than
contemplated by the timelines currently codified in Sec. Sec.
158.240(e) and 158.241(a)(2) and prior to issuers submitting their MLR
Annual Reporting Forms pursuant to Sec. 158.110(b). We also propose to
require that issuers that choose to prepay a portion or all of their
estimated rebates do so for all eligible enrollees in a given state and
market in a non-discriminatory manner.
In addition, under the current rules, an issuer that prepays a
portion or all of its estimated rebate in the form of a lump-sum check,
or if an enrollee paid the premium using a credit card or direct debit,
by lump-sum reimbursement to the account used to pay the premium, and
subsequently determines that such prepayment is less than the total
rebate owed to an enrollee would have to incur the costs of disbursing
rebates twice: First to disburse the prepaid rebate amount, and again
to disburse the remaining rebate amount by the deadlines set forth in
Sec. Sec. 158.240(e) and 158.241(a)(2). To reduce the regulatory
burden on issuers and incentivize issuers to deliver rebates to
enrollees sooner, we propose to add to the proposed new Sec.
158.240(g) a safe harbor under which an issuer that prepays at least 95
percent of the total rebate owed to enrollees in a given state and
market for a given MLR reporting year by the MLR rebate payment
deadlines set forth in Sec. Sec. 158.240(e) and 158.241(a)(2) may,
without penalty or late payment interest under Sec. 158.240(f), defer
the payment of any remaining rebate owed to enrollees in that state and
market until the MLR rebate payment deadlines set forth in

[[Page 78647]]

Sec. Sec. 158.240(e) and 158.241(a)(2) for the following MLR reporting
year. This would enable such an issuer to maintain a single rebate
disbursement cycle per year. Furthermore, the issuer would be able to
combine payment of rebates remaining after prepayment with the rebates
for the following MLR reporting year for enrollees who are enrolled
with the issuer during both years. Enrollees who are no longer enrolled
with the issuer the following year would receive only the rebates
remaining after prepayment, but the issuer would still benefit by
disbursing these amounts as part of the issuer's regular rebate
disbursement process in the following year. At the same time, the
proposed safe harbor would ensure that enrollees continue to receive
most of the rebate within the regular timeframe, as issuers that prepay
less than 95 percent of the total rebate owed to enrollees for a given
MLR reporting year would continue to be required to provide the
enrollees with the remaining portion of the rebate owed in accordance
with the timeframes set forth in Sec. Sec. 158.240(e) and
158.241(a)(2) for the current MLR reporting year. To further ensure
that enrollees do not regularly receive reduced rebates as a result of
prepayments, we also propose that under this safe harbor, the rebate
amount remaining after prepayment would not be treated as de minimis,
regardless of how small the remaining amount is. That is, the de
minimis provisions in Sec. 158.243 continue to apply only if the total
rebate (the sum of the prepaid amount and any amount remaining after
prepayment) owed to an enrollee for a given MLR reporting year is below
the applicable threshold.
We note that Sec. 158.250 requires issuers to provide a notice of
rebates at the time any rebate is provided, which includes both rebate
prepayments and payments of rebates remaining after prepayment. We
intend to modify the ICRs approved under OMB Control Number 0938-1164
to add modified standard notices that can be used by issuers that elect
to prepay rebates under the proposed new Sec. 158.240(g). We also
intend to revise the MLR Annual Reporting Form Instructions to clarify
that an issuer that prepays a portion or all of its estimated rebate
and subsequently determines that the amount of such prepayment is more
than the total rebate owed to an enrollee for that MLR reporting year
and that does not recoup the overpayment from the enrollee, may include
the overpayment in its rebate payments reported for purposes of
calculating the optional limit on the payable rebates under Sec.
158.240(d). We additionally intend to revise the MLR Annual Reporting
Form Instructions to clarify how issuers that prepay estimated rebates
must report such prepayments.
We propose that this amendment to create new Sec. 158.240(g) would
be applicable beginning with the 2020 MLR reporting year (MLR reports
filed in 2021). We seek comment on this proposal, including the
proposed applicability date.
4. Form of Rebate (Sec. 158.241)
As discussed in the prior section of this preamble, Sec. 158.241
permits an issuer to provide MLR rebates in the form of a premium
credit, lump-sum check, or, if an enrollee paid the premium using a
credit card or direct debit, by lump-sum reimbursement to the account
used to pay the premium. Under Sec. 158.240(e), issuers that choose to
provide a rebate via a lump-sum check or lump-sum reimbursement to the
account used to pay the premium must issue the rebate no later than
September 30 following the end of the MLR reporting year. In contrast,
Sec. 158.241(a)(2) provides that issuers that elect to provide rebates
in the form of a premium credit must apply the rebate to the first
month's premium that is due on or after September 30 following the MLR
reporting year, and that when the rebate is provided in the form of a
premium credit and the total amount of the rebate owed exceeds the
premium due in October, any excess rebate amount must be applied to
succeeding premium payments until the full amount of the rebate has
been credited.
Given the proposed addition of Sec. 158.240(g) discussed in the
prior section, the fact that an issuer may wish to provide rebates in
the form of a premium credit earlier than October, and the desire to
reduce the regulatory burden and enable enrollees to receive the
benefit of rebates sooner, we propose to amend Sec. 158.241(a)(2) to
allow issuers to provide rebates in the form of a premium credit prior
to the date that the rules currently provide. Specifically, we propose
to amend Sec. 158.241(a)(2) to specify that when provided in the form
of premium credits, rebates must be applied to premium that is due no
later than October 30 following the MLR reporting year. We propose that
this amendment would be applicable beginning with the 2020 MLR
reporting year (MLR reports due in 2021).
We seek comment on this proposal, including on the proposed
applicability date.

G. Part 184--Pharmacy Benefit Manager Standards Under the Affordable
Care Act

1. Prescription Drug Distribution and Cost Reporting by Pharmacy
Benefit Managers (Sec. Sec. 184.10 and 184.50)
PBMs are third-party administrators that manage the prescription
drug benefit for a contracted entity.\231\ This administration
typically involves processing claims, maintaining drug formularies,
contracting with pharmacies for reimbursement for drugs dispensed, and
negotiating prices with drug manufacturers.\232\
---------------------------------------------------------------------------

\231\ PBMs contract with a variety of health plans, including,
but not limited to, individual and small group health plans, large
group and self-insured plans, and Medicare Part D drug plans. In
this section, we only reference PBMs that contract with a health
insurance company to administer the prescription drug benefit for
QHPs.
\232\ ``Pharmacy Benefit Managers,'' Health Affairs Health
Policy Brief, September 14, 2017. Available at https://www.healthaffairs.org/do/10.1377/hpb20171409.000178/full/.
---------------------------------------------------------------------------

The role of PBMs in the prescription drug landscape, including any
impact on the rising cost of prescription drugs, is not well
understood.\233\ For example, PBMs generate revenue, in part, by
retaining the difference between the amount paid by the health plan for
prescription drugs and the amount the PBM reimburses pharmacies, a
practice commonly referred to as ``spread pricing.'' While estimates
report the increasing prevalence of spread pricing in private health
insurance plans, \234\ detailed data on the practice has generally not
been collected by plans or by any state or federal regulatory body.
---------------------------------------------------------------------------

\233\ Elizabeth Seeley and Aaron S. Kesselheim. ``Pharmacy
Benefit Managers: Practices, Controversies, and What Lies Ahead,''
Commonwealth Fund, March 2019. Available at https://doi.org/10.26099/n60j-0886.
\234\ See ``The Prescription Drug Landscape, Explored.''
Available at https://www.pewtrusts.org/-/media/assets/2019/03/the_prescription_drug_landscape-explored.pdf.
---------------------------------------------------------------------------

We propose to add part 184 to 45 CFR subchapter E to codify in
regulation the statutory requirement that PBMs under contract with QHP
issuers report the data described at section 1150A(b) of the Act to the
Secretary and to each QHP for which the PBM administers the
prescription drug benefit.
At proposed Sec. 184.10(a)(1), we explain that new part 184 is
based on section 1150A of the Act. At proposed Sec. 184.10(b), we
propose that the scope of new part 184 establishes standards for PBMs
that administer prescription drug benefits for health insurance issuers
which offer QHPs with respect to the offering of such plans. We also
propose definitions for part 184 at new Sec. 184.20. Except for the
definition of pharmacy

[[Page 78648]]

benefit manager, these proposed definitions would codify terms already
in use in parts 144 and 155 of subchapter B of subtitle A of title 45
of the Code of Federal Regulations.
As part of the PPACA, Congress passed section 6005, which added
section 1150A to the Act, requiring a PBM under a contract with a QHP
offered through an Exchange established by a state under section 1311
of the PPACA \235\ to provide certain prescription drug information to
the QHP and to Secretary at such times, and in such form and manner, as
the Secretary shall specify. Section 1150A(b) of the Act addresses the
information that a QHP issuer and their PBM must report. Section
1150A(c) of the Act requires the Secretary to keep the information
reported confidential and specifies that the information may not be
disclosed by the Secretary or by a plan receiving the information,
except that the Secretary may disclose the information in a form which
does not disclose the identity of a specific PBM, plan, or prices
charged for drugs for certain purposes.\236\
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\235\ This includes an FFE, as a Federal Exchange may be
considered an Exchange established under section 1311 of the PPACA.
King v. Burwell, 576 U.S. 988 (2015).
\236\ As noted earlier in this preamble, the purposes are: As
the Secretary determines to be necessary to carry out Section 1150A
or part D of title XVIII; to permit the Comptroller General to
review the information provided; to permit the Director of the
Congressional Budget Office to review the information provided; and,
to States to carry out section 1311 of the PPACA.
---------------------------------------------------------------------------

In the 2012 Exchange Final Rule, we codified the requirements of
section 1150A of the Act, as it applies to QHPs, at Sec. 156.295.\237\
On January 1, 2020 \238\ and on September 11, 2020 \239\, we published
Federal Register notices and solicited public comment on collection of
information requirements detailing the proposed collection envisioned
by section 1150A of the Act, as referenced earlier. As noted earlier in
this preamble, we propose to revise Sec. 156.295 to state that where a
QHP issuer does not contract with a PBM to administer the prescription
drug benefit for QHPs, the QHP issuer will report the data required by
section 1150A of the Act to HHS.
---------------------------------------------------------------------------

\237\ Section 1150A(a)(1) also authorizes the collection of data
from PBMs that manage prescription drug coverage under contract with
a Prescription Drug Plan sponsor of a prescription drug plan or a
Medicare Advantage organization offering a Medicare Advantage
prescription drug plan.
\238\ 85 FR 4993 through 4994.
\239\ 85 FR 56227 through 56229.
---------------------------------------------------------------------------

We propose to add Sec. 184.50(a) to state that where a PBM
contracts with an issuer of QHPs to administer the prescription drug
benefit for their QHPs, the PBM is required to report the data required
by section 1150A(b) of the Act to the QHP and to the Secretary, at such
times, and in such form and manner, as the Secretary shall specify.
While we acknowledge that this section applies to both the QHP issuer
and their PBMs to report this data, we propose to implement section
1150A to require PBMs to report this data directly to the Secretary,
and only to require the QHP issuer to report the data only when the QHP
issuer does not contract with a PBM to administer the prescription drug
benefit for their QHPs, as further discussed in the preamble to Sec.
156.295 in this proposed rule.
We propose to add Sec. 184.50(a)(1) through (3) to require these
PBMs to report the data described at section 1150A(b) of the Act to the
Secretary. The data proposed to be collected, as required by section
1150A, are: The percentage of all prescriptions that were provided
through retail pharmacies compared to mail order pharmacies, and the
percentage of prescriptions for which a generic drug was available and
dispensed (generic dispensing rate), that is paid by the health
benefits plan or PBM under the contract; \240\ the aggregate amount,
and the type of rebates, discounts, or price concessions (excluding
bona fide service fees, which include but are not limited to
distribution service fees, inventory management fees, product stocking
allowances, and fees associated with administrative services agreements
and patient care programs (such as medication compliance programs and
patient education programs \241\) that the PBM negotiates that are
attributable to patient utilization under the plan, and the aggregate
amount of the rebates, discounts, or price concessions that are passed
through to the plan sponsor, and the total number of prescriptions that
were dispensed; and the aggregate amount of the difference between the
amount the health benefits plan pays the PBM and the amount that the
PBM pays retail pharmacies (spread pricing), and mail order pharmacies,
and the total number of prescriptions that were dispensed.
---------------------------------------------------------------------------

\240\ As stated above in the preamble for Sec. 156.295, section
1150A(b)(1) requires the Secretary to collect data by pharmacy type.
However, we are aware that it is not currently possible to report
such data by pharmacy type because pharmacy type is a not standard
classification currently captured in industry databases or files. To
reduce burden, we are not proposing to collect data by pharmacy type
at this time. We intend to collect this information at a time when
the imposition of such a requirement would pose reasonable burden.
We seek comment on ways that we may impose the collection of data by
pharmacy type in the future without imposing unreasonable burden on
the industry.
\241\ This definition of bona fide service fees was finalized at
Sec. 156.295 in the 2012 Exchange Final Rule at 77 FR 18432. There,
we finalized this definition to align with the definition of bona
fide service fees finalized in the Medicare Program; Changes to the
Medicare Advantage and the Medicare Prescription Drug Benefit
Programs for Contract Year 2013 and Other Changes final rule. See 77
FR 22072 at 22093.
---------------------------------------------------------------------------

At new Sec. 184.50(b) and (c), we also propose to codify the
confidentiality and penalty provisions that appear at Sec. 1150A(c)
and (d) to PBMs which administer the prescription drug benefits for QHP
issuers.
We seek comment on these proposals.

IV. Provisions of the Proposed Rule for State Innovation Waivers--
Department of Health and Human Services and Department of the Treasury

A. 31 CFR Part 33 and 45 CFR Part 155--State Innovation Waivers

1. Section 1332 Application Procedures (31 CFR 33.108 and 45 CFR
155.1308), Monitoring and Compliance (31 CFR 33.120 and 45 CFR
155.1320), and Periodic Evaluation Requirements (31 CFR 33.128 and 45
CFR 155.1328)
Section 1332 of the PPACA permits states to apply for a State
Innovation Waiver (also referred to as a section 1332 waiver or State
Relief and Empowerment Waiver) to pursue innovative strategies for
providing their residents with access to higher value, more affordable
health coverage. The overarching goal of section 1332 waivers is to
give all Americans the opportunity to obtain high value and affordable
health coverage regardless of income, geography, age, sex, or health
status, while simultaneously empowering states to develop health
coverage strategies that best meet the needs of their residents. In
this proposed rule, the Departments seek to provide states with
consistency and predictability by codifying the Departments' long-
standing policy published in the Federal Register in 2018, regarding
how the Departments will apply section 1332 of the PPACA to determine
whether applications for section 1332 waivers will be approved.
Under section 1332 of the PPACA, the Secretaries may exercise their
discretion to approve a request for a section 1332 waiver only if the
Secretaries determine that the proposal for the section 1332 waiver
meets the following four requirements (referred to as the statutory
guardrails): (1) The proposal will provide coverage that is at least as
comprehensive as coverage defined in PPACA section 1302(b) and offered
through Exchanges established by title I of PPACA, as certified by the
Office of

[[Page 78649]]

the Actuary of CMS, based on sufficient data from the state and from
comparable states about their experience with programs created by the
PPACA and the provisions of the PPACA that would be waived; (2) the
proposal will provide coverage and cost-sharing protections against
excessive out-of-pocket spending that are at least as affordable for
the state's residents as would be provided under title I of PPACA; (3)
the proposal will provide coverage to at least a comparable number of
the state's residents as would be provided under title I of PPACA; and
(4) the proposal will not increase the federal deficit. The Secretaries
retain their discretionary authority under section 1332 to deny waivers
when appropriate given consideration of the application as a whole,
even if an application meets the four statutory guardrails.
The Departments are also responsible under section 1332 of the
PPACA for monitoring a waiver's compliance with the statutory
guardrails and for conducting evaluations to determine the impact of
the waiver. Specifically, section 1332 of the PPACA requires that the
Secretaries provide for and conduct periodic evaluations of approved
section 1332 waivers. The Secretaries must also provide for a process
under which states with approved waivers must submit periodic reports
concerning the implementation of the state's waiver program.
In October 2018, the Departments issued the 2018 Guidance,\242\
which provides additional guidance for states that wish to submit
section 1332 waiver proposals regarding the Secretaries' application
review procedures, pass-through funding determinations, certain
analytical requirements, and operational considerations. The 2018
Guidance also includes information regarding how the Departments will
apply the section 1332 statutory guardrails to evaluate whether a
waiver is approvable. Section 1332 of the PPACA and the 2018 Guidance
empower states to address problems with their individual insurance
markets and increase coverage options for their residents, and to
encourage states to evaluate and adopt innovative strategies to reduce
future overall health care spending. Together, the statutory guardrails
and the 2018 Guidance provide states a reliable roadmap to follow in
designing section 1332 waiver programs that will promote a stable
health insurance market that offers more choice and affordability to
state residents.
---------------------------------------------------------------------------

\242\ 83 FR 53575 (Oct. 24, 2018).
---------------------------------------------------------------------------

In this proposed rule, the Departments seek to provide certainty to
states that the requirements and expectations of the section 1332
program will not change abruptly, or without notice to states and the
public and an opportunity to comment, during a period in which states
are doing the work to prepare a section 1332 waiver proposal that would
satisfy the statutory guardrails or during a state's approved waiver
period. Specifically, the Departments propose to incorporate the 2018
Guidance in full in the regulations governing section 1332 waiver
application procedures, monitoring and compliance, and periodic
evaluation requirements. The Departments are of the view that this
proposal would give states greater certainty regarding how the
Departments will apply section 1332's statutory guardrails when
determining whether a state's waiver proposal can receive approval by
the Departments and remain in compliance.
31 CFR 33.108 and 45 CFR 155.1308 specify the application
procedures a section 1332 waiver proposal must meet to be approved by
the Secretaries. Under these regulations, an application for initial
approval of a section 1332 waiver will not be considered complete
unless the application complies with the application procedures under
31 CFR 33.108(f) and 45 CFR 155.1308(f), including written evidence of
the state's compliance with the public notice requirements set forth in
31 CFR 33.112 and 45 CFR 155.1312. Furthermore, an application must
provide a comprehensive description of the enacted state legislation
and program to implement a plan meeting the requirements for a waiver
under section 1332; a copy of the enacted state legislation authorizing
such waiver request; a list of the provisions of law that the state
seeks to waive including a brief description of the reason for the
specific request; and the analyses, actuarial certifications, data,
assumptions, targets and other information sufficient to provide the
Secretaries with the necessary data to determine that the state's
proposed waiver meets the statutory guardrails. The 2018 Guidance
provides supplementary information about the requirements that must be
met for the approval of a State Innovation Waiver, the Secretaries'
application review procedures, the calculation of pass-through funding,
certain analytical requirements, and operational considerations. The
2018 Guidance also describes ways in which a section 1332 state plan
may meet section 1332 requirements in order to be eligible to be
approved by the Secretaries, clarifying the adjustments the Secretaries
may make to maintain federal deficit neutrality, and allowing for
states to use existing legislative authority to authorize section 1332
waivers in certain scenarios. The Departments are of the view that
using consistent application requirements will encourage more states to
pursue waivers without the worry that some of the rules may change
after they have submitted a waiver application. Furthermore, by
referencing and incorporating the full guidance into regulations, this
proposal would allow states to plan for future waiver applications. The
Departments are of the view that this proposal will provide certainty
to states as they invest significant state resources towards submission
of a section 1332 waiver and implementation of a section 1332 waiver,
particularly waivers that require multiyear preparation.
This proposed rule proposes to incorporate the 2018 Guidance in
full in the Departments' monitoring and compliance regulations at 31
CFR 155.1320 and 45 CFR 155.1320. Specifically, under the current
requirements the Secretaries reserve the right to suspend or terminate
a waiver, in whole or in part, any time before the date of expiration,
if the Secretaries determine that the state materially failed to comply
with the terms and conditions of the waiver. The Departments will
review and, when appropriate, investigate documented complaints that
the state is failing to materially comply with requirements specified
in the approved waiver and the specific terms and conditions (STCs) for
the approval of the waiver signed by the Departments and the state. In
addition, the Departments will promptly share with the state any
complaint that they may receive and will notify the state of any
applicable monitoring and compliance issues. Additionally, states with
approved section 1332 waivers must comply with all applicable federal
laws and regulations (unless specifically waived) and must come into
compliance with any changes in federal law or regulations affecting
section 1332 waivers. The Departments are of the view that this
proposal to incorporate the full 2018 Guidance in the monitoring and
compliance requirements will provide certainty regarding how the
Departments will evaluate and review section 1332 waiver programs, as
states submit information concerning the implementation of the waiver
program.
This proposed rule also proposes to incorporate the 2018 Guidance
in full in the periodic evaluation requirements regulations at 31 CFR
33.128 and 45 CFR 155.1328. Under current

[[Page 78650]]

requirements, the Departments are responsible for evaluating the waiver
using federal data, information reported by states, and the waiver
application itself to ensure that the Departments can exercise
appropriate oversight of the approved waiver. Per 31 CFR 33.120(f) and
45 CFR 155.1320(f), the state must fully cooperate with the Departments
or an independent evaluator selected by the Departments in consultation
with the state, to undertake an independent evaluation of any component
of the section 1332 waiver. As part of this required cooperation, the
state must submit all requested data and information to the Departments
or the independent evaluator. The state generally must meet the
statutory requirements in each year that the waiver is in effect, as
such the primary focus of the periodic evaluations will be the four
statutory guardrails. However, the Departments will consider the
longer-term impacts of a state's proposal. The Departments are of the
view that this proposal to incorporate the full 2018 Guidance in the
periodic evaluation requirements will provide certainty regarding how
the Departments will evaluate whether a section 1332 waiver may
maintain its approval by the Departments. The Departments also believe
that this proposal will also help states to anticipate the data that
will be most relevant and helpful to the Departments' analyses of a
state's compliance with the specific terms and conditions approved by
the Departments.
As such, the Departments specifically propose to revise the
language in 31 CFR 33.108(f)(3)(iv), 31 CFR 33.120(a)(1), 31 CFR
33.128(a), 45 CFR 155.1308(f)(3)(iv), 45 CFR 155.1320(a)(1), and 45 CFR
155.1328(a) to incorporate the 2018 Guidance in full. The Departments
are of the view that the increased certainty that would result from
incorporating the full 2018 Guidance as proposed into the section 1332
implementing regulations will allow states to have greater confidence
that the significant time and monetary investments necessary to plan
for and submit a section 1332 waiver application will not result in
wasted resources and taxpayer dollars. The Departments are also of the
view that this proposed rule will help to increase state innovation,
which could lead to more affordable health coverage for individuals and
families in states that implement a section 1332 waiver program. The
Departments seek comment on these proposals.

V. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995 (PRA), we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. This
proposed rule contains information collection requirements (ICRs) that
are subject to review by OMB. A description of these provisions is
given in the following paragraphs with an estimate of the annual
burden, summarized in Table 11. To fairly evaluate whether an
information collection should be approved by OMB, section 3506(c)(2)(A)
of the PRA requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of the required issues
under section 3506(c)(2)(A) of the PRA for the following ICRs.

A. Wage Estimates

To derive wage estimates, we generally used data from the Bureau of
Labor Statistics to derive average labor costs (including a 100 percent
increase for fringe benefits and overhead) for estimating the burden
associated with the ICRs.\243\ Table 10 in this proposed rule presents
the mean hourly wage, the cost of fringe benefits and overhead, and the
adjusted hourly wage.
---------------------------------------------------------------------------

\243\ See May 2019 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates. Available at https://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------

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

Table 10--Adjusted Hourly Wages Used in Burden Estimates
----------------------------------------------------------------------------------------------------------------
Fringe
Occupational Mean hourly benefits and Adjusted
Occupation title code wage ($/hr.) overhead ($/ hourly wage ($/
hr.) hr.)
----------------------------------------------------------------------------------------------------------------
Compliance Officer.............................. 13-1041 $35.03 $35.03 $70.06
Pharmacy Technician............................. 29-2052 16.95 16.95 33.90
Secretaries and Administrative Assistants....... 43-6014 18.84 18.84 37.68
Billing and Posting Clerks...................... 43-3021 19.53 19.53 39.06
Chief Executives................................ 11-1011 93.20 93.20 186.40
Business Operations Specialist.................. 13-1198 38.57 38.57 77.14
Computer System Analyst......................... 15-1121 46.23 46.23 92.46
Computer Programmer............................. 15-1251 44.53 44.53 89.06
Computer and Information Systems Manager........ 11-3021 75.19 75.19 150.38
General and Operations Manager.................. 11-1021 59.15 59.15 118.30
Auditor......................................... 13-2011 38.23 38.23 76.46
----------------------------------------------------------------------------------------------------------------

B. ICRs Regarding State Flexibility for Risk Adjustment (Sec. 153.320)

We are proposing to allow state regulators to request a reduction
in the calculation of risk adjustment transfers under the state payment
transfer formula under Sec. 153.320(d) for up to 3 years, beginning
for the 2023 benefit year. HHS would require any state that intends to
request multi-year flexibility to submit its request by August 1st of
the calendar year that is 2 calendar

[[Page 78651]]

years prior to the beginning of the first benefit year of its request.
HHS would reserve the right to require states with approved multi-year
reduction requests to submit supplemental evidence in any subsequent
year of the request after its initial approval, in the timeframe, form,
and manner specified by HHS, and would also reserve the right to
terminate or modify an approved multi-year reduction request prior to
its natural expiration. We propose to permit states with approved
multi-year requests to withdraw their respective request before its
natural expiration by notifying HHS of its requested withdrawal. We
also propose to require states to inform impacted issuers of any early
termination, modification, or withdrawal of a multi-year reduction
request. We expect that fewer than 10 states would make these requests
annually. Therefore, we believe that this collection is exempt from the
PRA under 44 U.S.C. 3502(3)(A)(i).

C. ICRs Regarding Submission of Adjusted Premium Amounts for Risk
Adjustment

45 CFR 153.610 and 153.710 provide that issuers of a risk
adjustment covered plan must provide HHS with access to risk adjustment
data through a dedicated distributed data environment (EDGE server), in
a manner and timeframe specified by HHS. We clarify that, for purposes
of risk adjustment data submissions in the 2021 benefit year and beyond
when a declared PHE is in effect and HHS permits these premium credits,
issuers that choose to provide premium credits must submit the adjusted
(that is, lower) plan premiums for those months, instead of the
unadjusted plan premiums. HHS would require issuers to submit adjusted
plan premiums to their EDGE servers for all enrollees whom the issuer
has actually provided premium credits as a reduction to the
corresponding benefit year premiums. We do not believe that issuers who
elect to provide these premium credits will incur additional
operational burden associated with EDGE server data submissions as a
result of these requirements because we expect issuers' premium
reporting systems will already be configured to enable issuers to
upload the billable premiums actually charged to enrollees for the
applicable benefit year to the EDGE server. Additionally, the current
EDGE server operational guidance for the risk adjustment program allows
issuers to submit billable premium changes so there will be no changes
to the data submission rules. The burden related to this information
collection is currently approved under OMB control number 0938-1155
(Standards Related to Reinsurance, Risk Corridors, Risk Adjustment, and
Payment Appeals). The information collection request expires on
February 23, 2021.

D. ICRs Regarding Direct Enrollment (Sec. Sec. 155.220 and 155.221)

At Sec. 155.220(c)(3)(iii), we are proposing to require web-
brokers' non-Exchange websites to display all QHP data provided by the
Exchange, consistent with the requirements of Sec. 155.205(b)(1) and
(c), including a standardized disclaimer provided by the Exchange if
the web-broker non-Exchange website does not facilitate enrollment in
all QHPs offered through the Exchange, before assisters would be
permitted to use the web-broker non-Exchange websites to assist
consumers with applying for insurance affordability programs and QHP
enrollment. The Exchange would provide the exact text for this
disclaimer and the language would not need to be customized.
At Sec. 155.220(c)(6), we propose a web-broker must demonstrate
operational readiness and compliance with applicable requirements prior
to the web-broker's non-Exchange website being used to complete an
Exchange eligibility application or a QHP selection, which may include
submission of a number of artifacts of documentation or completion of
certain testing processes. The required documentation may include
operational data including licensure information, points of contact,
and third-party relationships; security and privacy assessment
documentation, including penetration testing results, security and
privacy assessment reports, vulnerability scan results, plans of action
and milestones, and system security and privacy plans; and an agreement
between the web-broker and HHS documenting the requirements for
participating in the applicable direct enrollment program. We estimate
that it would take up to 2 hours for a Business Operations Specialist
(at an hourly cost of $77.14) to complete and submit the required
operational data and web-broker agreement to HHS each year. We estimate
that it would take up to 17 hours for a Business Operations Specialist
(at an hourly cost of $77.14) to complete and submit the required
security and privacy assessment documentation to HHS. The total burden
for each web-broker would be approximately 19 hours, with an equivalent
cost of approximately $1,466. Based on current web-broker participation
and potential market size, we estimate that 30 web-brokers would
participate. We estimate that these data collections would have an
annual burden of 570 hours with a cost of approximately $43,970.
We propose to add additional detail to the operational readiness
requirement in Sec. 155.221(b)(4) to incorporate requirements for
direct enrollment entities seeking approval to use the EDE pathway. In
proposed Sec. 155.221(b)(4), we propose a direct enrollment entity
must demonstrate operational readiness and compliance with applicable
requirements prior to the direct enrollment entity's website being used
to complete an Exchange eligibility application or a QHP selection,
which may include submission of a number of artifacts of documentation
or completion of various testing or training processes. The required
documentation could include business audit documentation including:
Notices of intent to participate including auditor information;
documentation packages including privacy questionnaires, privacy policy
statements, and terms of service; and business audit reports including
testing results. The required documentation could also include security
and privacy audit documentation including: Interconnection security
agreements; security and privacy controls assessment test plans;
security and privacy assessment reports; plans of action and
milestones; privacy impact assessments; system security and privacy
plans; incident response plans; vulnerability scan results; and an
agreement between the direct enrollment entity and HHS documenting the
requirements for participating in the applicable direct enrollment
program. We estimate that for each direct enrollment entity it would
take up to 9 hours for a Business Operations Specialist (at an hourly
cost of $77.14) to complete and submit a typical documentation package
and related information to HHS each year. Based on current EDE
participation and potential market size, we estimate that 77 EDE
entities would participate in a manner such that they would be required
to submit this type of information, and therefore, this data collection
would have an annual burden of 693 hours with an annual cost of
approximately $53,458. In addition, we estimate that it would take up
to 72 hours for an Auditor (at an hourly cost of $76.46) to complete
and submit a business requirements audit package for a direct
enrollment entity, including audit report and testing results, to HHS.
Based on current EDE participation and

[[Page 78652]]

potential market size, we estimate that four EDE entities would
participate, and therefore this data collection would have an annual
burden of 288 hours with a cost of approximately $22,020. We also
estimate that it would take up to 122 hours for an Auditor (at an
hourly cost of $76.46) to complete and submit a security and privacy
audit package for a direct enrollment entity to HHS each year. Based on
current EDE participation and potential market size, we estimate that
14 EDE entities would participate, and therefore this data collection
would have an annual burden of 1,708 hours with a cost of approximately
$130,594.

E. ICRs Regarding Prescription Drug Distribution and Cost Reporting by
QHP Issuers (Sec. 156.295) and PBMs (Sec. 184.50)

We propose to revise Sec. 156.295 and add Sec. 184.50 to require
QHP issuers or PBMs that contract with QHP issuers to report the data
envisioned by section 1150A. We have not previously collected this
data; therefore, the burden associated with these proposals would
reflect the imposition of the burden for a new collection, and not
merely the burden created by changes to existing regulatory text. On
January 1, 2020 \244\ and on September 11, 2020,\245\ we published
notices in the Federal Register and solicited public comment on the
burden related to these ICRs. Here, we replicate the discussion
regarding burden from the information collection published in September
2020 and solicit a third round of public comment on the burden
associated with this collection.
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\244\ 85 FR 4993 through 4994.
\245\ 85 FR 56227 through 56229.
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The burden associated with this collection is attributed to QHP
issuers and PBMs, and the burden estimates were developed based on our
previous experience with QHP information reporting activities. We are
unaware of any QHP issuer that does not contract with a PBM to
administer their prescription drug benefit. While we invite comment on
whether any QHP issuer does not use a PBM, we do not currently estimate
any burden for a QHP issuer to submit data directly. The following
burden estimate reflects our expectation that all data would be
submitted by PBMs.
Across all 50 states and the District of Columbia, we estimate
approximately 40 PBMs would be subject to the reporting requirement. We
further estimate that these PBMs, taken as a whole, annually contract
with approximately 275 QHP issuers to administer the prescription drug
benefit for their QHPs. We estimate that the 275 QHP issuers offer
7,000 total QHPs annually or 25.4 QHPs per QHP issuer. Thus, we
estimate that each of the 40 PBMs would report data for 175 QHPs on
average each year. We understand that some of these PBMs would contract
with more QHP issuers than others, and as such, the reporting
requirement would vary per PBM. We seek comment on the number of PBMs
and the number of QHPs estimated.
Each PBM that administers pharmacy benefits for a QHP issuer would
be required to complete a web form and a data collection instrument.
The web form would collect data aggregated at the QHP issuer level for
all plans and products offered by the QHP issuer combined. The web form
would also require the reporting of an allocation methodology that is
selected by the PBM to allocate data, where necessary. We would expect
submitters to maintain internal documentation of the allocation
methodologies chosen, as CMS may need to follow-up with the submitter
to better understand the methodology.
PBMs would prepare and submit one data collection instrument per
QHP issuer by Health Insurance Oversight System (HIOS) ID. Each data
collection instrument would contain information regarding each plan the
issuer offers. We estimate that an average PBM would report information
for 5,200 NDCs for each QHP. The reports must include the data for all
of the plans that the QHP issuer offered in their QHPs in the
applicable plan year, even if they have no data to report for that plan
year.
Each submitter would also be required to complete an attestation
which confirms the data submitted is accurate, complete, and truthful.
We estimate that 40 PBMs would submit data for this reporting
requirement, each submitting data for 175 QHPs on average. For each
PBM, we estimate that it would take compliance officers approximately
570 hours (for an annual cost of approximately $39,934 at a rate of
$70.06 per hour), pharmacy technician 350 hours (for an annual cost of
$11,865 at a rate of $33.90 per hour), secretaries and administrative
assistants 175 hours (for an annual cost of $6,594 at a rate of $37.68
per hour), and billing and posting clerks 175 hours (for an annual cost
of approximately $6,836 at a rate of $39.06 per hour) to prepare and
submit the information and 8 hours for a chief executive (for an annual
cost of approximately $1,491.20 at a rate of $186.40 per hour) to
review the information and complete the attestation. In total, we
estimate it will take a PBM approximately 1,278 hours to respond to
this reporting requirement each year on average, for a total annual
cost of approximately $66,719 per PBM to report data. This estimate
will vary by PBM, since each PBM will report for a different number of
plans, depending on the number of QHPs offered by a particular QHP
issuer. Thus, we estimate the total annual burden for all 40 PBMs
combined to be approximately 51,120 hours or $2,668,796.
We estimate that PBMs would incur burden to complete a one-time
technical build to implement the changes necessary for this collection,
which would involve activities such as planning, assessment, budgeting,
contracting, and reconfiguring systems to generate data extracts that
conform to this collection's requirements. We assume that this one-time
burden would be incurred primarily in 2021. We estimate that, for each
PBM, on average, it would take project management specialists and
project management specialists and business operations specialists 500
hours (at $77.51 per hour), computer system analysts 1,300 hours (at
$92.46 per hour), computer programmers 2,080 hours (at $89.06 per
hour), computer and information systems managers 40 hours (at $150.38
per hour) and general and operations managers 50 hours (at $118.30 per
hour) to complete this task. The total one-time burden for a PBM would
be approximately 3,970 hours on average, with an equivalent cost of
approximately $356,128. For all 40 PBMs, the total one-time burden
would be 158,800 hours for a total cost of approximately $14.2 million.
For all 40 PBMs, the average annual burden in 2021-2023 incurred for
implementation and reporting would be approximately 87,013 hours with
an average annual cost of approximately $6.5 million.
We estimate that 275 QHP issuers would need to identify for the
PBMs each year which plans are QHPs. For each QHP issuer, we estimate
that it would take secretaries and administrative assistants 7 hours
(for an annual burden of $263.76 at a rate of $37.68 per hour) to
identify, on average, approximately 25 QHPs offered by a QHP issuer.
This estimate will vary by QHP issuer, since each QHP issuer would
identify a different number of QHPs, depending on the number of QHPs
offered by a particular QHP issuer. Thus, we estimate the total annual
burden for all 275 QHP issuers combined to be 1,925 hours or
approximately $72,534.

F. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.103, 158.130,
158.240, 158.241)

We propose to amend Sec. 158.103 to establish the definition of
prescription

[[Page 78653]]

drug rebates and other price concessions that issuers must deduct from
incurred claims for MLR reporting and rebate calculation purposes
pursuant to Sec. 158.140(b)(1)(i). We propose that issuers that elect
to provide temporary premium credits to consumers during a PHE declared
by the Secretary of HHS in the 2021 benefit year and beyond must
account for these credits as reductions to premium for the applicable
months when reporting earned premium for the applicable MLR reporting
year. We also propose to add a new Sec. 158.240(g) to explicitly allow
issuers to prepay a portion or all of their estimated MLR rebates to
enrollees for a given MLR reporting year, and to establish a safe
harbor allowing such issuers, under certain conditions, to defer the
payment of rebates remaining after prepayment until the following MLR
reporting year. In addition, we propose to amend Sec. 158.241(a)(2) to
allow issuers to provide MLR rebates in the form of a premium credit
prior to the date that the rules currently provide. Finally, we propose
to clarify MLR reporting and rebate requirements for issuers that
choose to offer temporary premium credits during a PHE declared by the
Secretary of HHS in the 2021 benefit year and beyond when such credits
are permitted by HHS. We anticipate that implementing these provisions
would require minor changes to the MLR Annual Reporting Form, but would
not significantly increase the associated burden. The burden related to
this information collection is currently approved under OMB control
number 0938-1164 (Medical Loss Ratio Annual Reports, MLR Notices, and
Recordkeeping Requirements (CMS-10418)). The control number is
currently set to expire on October 31, 2020. A revised collection of
information seeking OMB approval for an additional 3 years is currently
under review by OMB.

G. ICRs Regarding State Innovation Waivers (31 CFR 33.108, 45 CFR
155.1308, 31 CFR 33.120, 45 CFR 155.1320, 31 CFR 33.128 and 45 CFR
155.1328

In this proposed rule, the Departments propose to reference and
incorporate the existing 2018 Guidance in full into the section 1332
waiver implementing regulations in order to give states certainty
regarding the requirements to receive and maintain approval of a
section 1332 waiver by the Departments. This rule does not propose to
alter any of the requirements related to state innovation waiver
applications, compliance and monitoring, or evaluation in a way that
would create any additional costs or burdens for states seeking waiver
approval or those states with approved waiver plans. The Departments
anticipate that implementing these provisions would not significantly
change the associated burden. The burden related to this information
collection (Review and Approval Process for Waivers for State
Innovation (CMS-10383)) is currently under review by OMB.

H. ICRs Regarding Special Enrollment Period Verification (Sec.
155.420)

State Exchanges provide periodic reporting of Exchange enrollment
data to CMS, including enrollments through SEPs by type, under OMB
0938-1119. We anticipate this PRA would cover the collection of this
information. We will separately notice updates to this PRA package, if
any, associated with this proposal.

I. Summary of Annual Burden Estimates for Proposed Requirements

Table 11--Proposed Annual Recordkeeping and Reporting Requirements
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Burden per
Regulation section(s) OMB control number Number of Number of response Total annual Labor cost of Total cost ($)
respondents responses (hours) burden (hours) reporting ($)
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Sec. 155.220(c)(6).............. 0938-NEW............ 30 30 19 570 $43,970 $43,970
Sec. 155.221(b)(4).............. 0938-NEW............ 77 77 9 693 53,458 53,458
Sec. 155.221(b)(4)--Business 0938-NEW............ 4 4 72 288 22,020 22,020
Requirements Audit.
Sec. 155.221(b)(4)--Security and 0938-NEW............ 14 14 122 1,708 130,594 130,594
Privacy Audit.
156.295 & 184.50 (PBM Burden)..... 0938-NEW............ 40 40 2,175 87,013 6,527,571 6,527,571
156.295 & 184.50 (QHP Issuer 0938-NEW............ 275 275 7 1,925 72,534 72,534
Burden).
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Total......................... .................... 440 440 .............. 92,197 6,850,147 6,850,147
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Note: There are no capital/maintenance costs associated with the ICRs contained in this rule; therefore, we have removed the associated column from
Table 11.

J. Submission of PRA-Related Comments

We have submitted a copy of this proposed rule to OMB for its
review of the rule's information collection and recordkeeping
requirements. These requirements are not effective until they have been
approved by the OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed above, please visit CMS's
website at www.cms.hhs.gov/PaperworkReductionActof1995, or call the
Reports Clearance Office at 410-786-1326.
We invite public comments on these potential ICRs. If you wish to
comment, please submit your comments electronically as specified in the
ADDRESSES section of this proposed rule and identify the rule (CMS-
9914-P), the ICR's CFR citation, CMS ID number, and OMB control number.
ICR-related comments are due February 2, 2021.

VI. 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 proposed
rule, and, when we proceed with a subsequent document, we will respond
to the comments in the preamble to that document.

VII. Regulatory Impact Analysis

A. Statement of Need

This rule proposes standards related to the risk adjustment program
for the 2022 benefit year and beyond. Additionally, this rule proposes
the premium adjustment percentage and associated parameters and FFE and
SBE-FP user fees for the 2022 benefit year. It also includes proposed
changes related to special enrollment periods; Navigator program
standards; direct enrollment entities; and the administrative appeals
process with

[[Page 78654]]

respect to health insurance issuers and non-federal governmental group
health plans; and the medical loss ratio program. It also proposes
changes to the regulation to require the reporting of certain
prescription drug information for QHPs or their PBM. In addition, it
proposes to create a new direct enrollment option for State Exchanges
and FFE states. In addition, relating to State Innovation Waivers, it
proposes to reference and incorporate sections of the 2018 Guidance
into the section 1332 waiver implementing regulations in order to give
states certainty regarding the requirements to receive and maintain
approval of a section 1332 waiver by the Departments.

B. Overall Impact

We have examined the impacts of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993),
Executive Order 13563 on Improving Regulation and Regulatory Review
(January 18, 2011), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354), section 202 of the Unfunded Mandates Reform Act
of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), the Congressional Review Act (5 U.S.C.
804(2)), and Executive Order 13771 on Reducing Regulation and
Controlling Regulatory Costs (January 30, 2017).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. A regulatory impact analysis (RIA) must be prepared for
rules with economically significant effects ($100 million or more in
any one year).
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a rule:
(1) Having an annual effect on the economy of $100 million or more in
any one year, or adversely and materially affecting a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or state, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order. A RIA
must be prepared for major rules with economically significant effects
($100 million or more in any one year), and a ``significant''
regulatory action is subject to review by OMB. HHS has concluded that
this rule is likely to have economic impacts of $100 million or more in
at least one year, and therefore, meets the definition of ``significant
rule'' under Executive Order 12866. Therefore, HHS has provided an
assessment of the potential costs, benefits, and transfers associated
with this rule. In accordance with the provisions of Executive Order
12866, this regulation was reviewed by OMB.
The provisions in this proposed rule aim to ensure that consumers
continue to have access to affordable coverage and health care, and
that states have flexibility and control over their insurance markets.
They would reduce regulatory burden, reduce administrative costs for
issuers, web-brokers and direct enrollment entities, and states, ensure
greater market stability, increase transparency and availability of QHP
survey data, and increase transparency on the impact of PBMs on the
cost of prescription drugs for QHPs. Through the reduction in financial
uncertainty for issuers and increased affordability for consumers,
these proposed provisions are expected to increase access to affordable
health coverage.
Affected entities, such as Exchanges, issuers and FFE Classic
Direct Enrollment and Enhanced Direct Enrollment partners, would incur
costs to implement new special enrollment period requirements; State
Exchanges would incur costs to implement and operationalize special
enrollment period verification; and web-brokers and direct enrollment
entities would incur costs to comply with operational readiness
demonstration requirements. QHP issuers and PBMs would incur costs to
implement and operationalize drug data reporting. In accordance with
Executive Order 12866, HHS believes that the benefits of this
regulatory action justify the costs.

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

In accordance with OMB Circular A-4, Table 12 depicts an accounting
statement summarizing HHS's assessment of the benefits, costs, and
transfers associated with this regulatory action.
This proposed rule implements standards for programs that will have
numerous effects, including allowing consumers to have continued access
to coverage and health care, and stabilizing premiums in the individual
and small group health insurance markets and in an Exchange. We are
unable to quantify all benefits and costs of this proposed rule. The
effects in Table 12 reflect qualitative impacts and estimated direct
monetary costs and transfers resulting from the provisions of this
proposed rule for health insurance issuers and consumers. The annual
monetized transfers described in Table 12 include changes to costs
associated with the risk adjustment user fee paid to HHS by issuers.
We are proposing the risk adjustment user fee of $0.25 PMPM for the
2022 benefit year to operate the risk adjustment program on behalf of
states,\246\ which we estimate to cost approximately $60 million in
benefit year 2022. We expect risk adjustment user fee transfers from
issuers to the federal government to remain steady at $60 million, the
same as those estimated for the 2021 benefit year.
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\246\ As noted earlier in this proposed rule, no state has
elected to operate the risk adjustment program for the 2021 benefit
year; therefore, HHS will operate the program for all 50 states and
the District of Columbia.
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For 2022, we are considering two additional proposals. First, we
are proposing to reduce the FFE user fee rate from 3.0 percent of total
premiums charged to 2.25 percent of total premiums charged, and we
propose to reduce the SBE-FP user fee rate from 2.5 percent of total
premiums charged to 1.75 percent of total premiums charged. For the
2023 benefit year, we propose FFE-DE and SBE-FP-DE user fee rate of 1.5
percent of total premiums charged. While our current budget estimates
may change in the future, we believe that it is important to keep the
user fee in all markets at the lowest level possible to cover the costs
of the Exchanges to keep premiums low for consumers and issuers. We
expect transfers from the issuers to federal government to be reduced
by approximately $270 million in 2022 and by approximately $400 million
in 2023 due to changes in user fee rates and state transitions;
transitions from FFE or SBE-FP to State Exchange, SBE-FP, or FFE-DE are
included in the reduction in user fee

[[Page 78655]]

transfers from issuers to federal government.

Table 12--Accounting Statement
------------------------------------------------------------------------

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Benefits:
------------------------------------------------------------------------
Qualitative:
Continued access to coverage and heath care due to new
special enrollment periods.
Greater market stability resulting from updates to the risk
adjustment methodology.
Strengthened program integrity related to the proposal to
require Exchanges to conduct special enrollment period
verification.
Increased probability that consumers are able to maintain
continuous coverage as a result of receiving MLR rebates sooner.
Increased transparency on the impact of PBMs on the cost of
prescription drugs for QHPs.
Increased certainty for states regarding the application
and ongoing approval process for section 1332 waiver applications,
leading to increase in state innovation.
------------------------------------------------------------------------

Estimate Discount rate Period
Costs (million) Year dollar (percent) covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)................... $7.02 2020 7 2021-2025
6.88 2020 3 2021-2025
----------------------------------------------------------------------------------------------------------------
Quantitative:
Costs incurred by web-brokers and direct enrollment entities to comply with requirements related to
demonstration of operational readiness and compliance with applicable requirements; and by issuers and PBMs
to implement and operationalize drug data reporting, as detailed in the Collection of Information
Requirements section, estimated to be approximately $14.5 million in 2021 and approximately $3 million 2022
onwards....................................................................................................
Reduction in potential costs for states submitting multi-year state flexibility requests estimated
to be approximately $22,000 over 3 years, starting with request submissions in 2021........................
Costs incurred by issuers of risk adjustment covered plans for audits, audits of issuers of
reinsurance eligible plans, and audits of APTC, CSR, and user fee programs, estimated to be approximately
$2 million on average annually in 2021-2025................................................................
Costs incurred by State Exchanges to implement and operationalize special enrollment period
verification, estimated to be one-time costs of approximately $108 million incurred over 2021-23 and
ongoing annual costs of approximately $1.4 million in 2024 and 2025........................................
Reduction in potential costs to Exchanges since they would not be required to conduct random
sampling as a verification process for enrollment in or eligibility for employer-based insurance when the
Exchange reasonably expects that it will not obtain sufficient verification data, estimated to be savings
of $113 million in 2022....................................................................................
Regulatory familiarization costs of approximately $27,000 in 2020..................................
----------------------------------------------------------------------------------------------------------------
Qualitative:
Increased costs due to increases in providing medical services (if health insurance enrollment
increases).................................................................................................
----------------------------------------------------------------------------------------------------------------

Estimate Discount rate Period
Transfers (million) Year dollar (percent) covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)................... -$280.5 2020 7 2021-2025
-287.8 2020 3 2021-2025
----------------------------------------------------------------------------------------------------------------
Quantitative:
Reduction in transfers from the issuers to federal government by approximately $270 million in 2022
and approximately $400 million 2023 onwards due to changes in user fee rates and state transitions,
including the proposed availability of FFE-DE and SBE-FP DE options to issuers and states beginning with
the 2023 benefit year......................................................................................
Transfers to the federal government from FFE states that are transitioning to, or intend to
transition to, being State Exchanges, for conducting special enrollment verification, estimated to be
approximately $1.75 million annually in 2024 and 2025......................................................
----------------------------------------------------------------------------------------------------------------

This RIA expands upon the impact analyses of previous rules and
utilizes the Congressional Budget Office's (CBO) analysis of the
PPACA's impact on federal spending, revenue collection, and insurance
enrollment. The PPACA ends the transitional reinsurance program and
temporary risk corridors program after the benefit year 2016.
Therefore, the costs associated with those programs are not included in
Table 12 or 13. Table 13 summarizes the effects of the risk adjustment
program on the federal budget from fiscal years 2022 through 2026, with
the additional, societal effects of this proposed rule discussed in
this RIA. We do not expect the provisions of this proposed rule to
significantly alter CBO's estimates of the budget impact of the premium
stabilization programs that are described in Table 13.
In addition to utilizing CBO projections, HHS conducted an internal
analysis of the effects of its regulations on enrollment and premiums.
These analyses exclude any potential effects from states electing to
use the FFE-DE or SBE-FP-DE models. Based on these internal analyses,
we anticipate that the quantitative effects of the provisions proposed
in this rule are consistent with our previous estimates in the 2021
Payment Notice for the impacts associated with the APTCs, the premium
stabilization programs, and FFE user fee requirements.
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\247\ Reinsurance collections ended in FY 2018 and outlays in
subsequent years reflect remaining payments, refunds, and allowable
activities.

Table 13--Estimated Federal Government Outlays and Receipts for the Risk Adjustment and Reinsurance Programs from Fiscal Year 2022-2026, in billions of
dollars \247\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year 2022 2023 2024 2025 2026 2022-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
Risk Adjustment and Reinsurance Program Payments........ 6 6 7 7 8 34

[[Page 78656]]

Risk Adjustment and Reinsurance Program Collections..... 6 6 7 7 8 34
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over time.
Source: Congressional Budget Office. Net Federal Subsidies Associated With Health Insurance Coverage, 2020 to 2030. March 6, 2020. Available at https://www.cbo.gov/system/files/2020-03/51298-2020-03-healthinsurance.pdf.

1. Health Insurance Reform Requirements for the Group and Individual
Health Insurance Markets (Sec. 147.104)
The proposed revision to Sec. 147.104(b)(4)(ii) would allow an
individual or dependent who did not receive timely notice of a
triggering event and otherwise was reasonably unaware that a triggering
event occurred to use the date the individual knew, or reasonably
should have known, of the occurrence of the triggering event as the
date of the triggering event for a special enrollment period to enroll
in individual market coverage through or outside of an Exchange. This
would enable consumers to maintain continued access to coverage and
health care.
2. CMS Enforcement in Group and Individual Markets (Part 150)
We propose to remove the requirement to file submissions to the
Departmental Appeals Board in triplicate and instead require electronic
filing. Based on our experience, such filings are infrequent, and this
proposed change would not have a significant impact. An entity filing a
submission would experience a small reduction in costs related to
printing and mailing the submission.
3. Risk Adjustment (Part 153)
The risk adjustment program is a permanent program created by
section 1343 of the PPACA that collects charges from issuers with
lower-than-average risk populations and uses those funds to make
payments to issuers with higher-than-average risk populations in the
individual, small group, and merged markets (as applicable), inside and
outside the Exchanges. We established standards for the administration
of the risk adjustment program in subparts A, B, D, G, and H of part
153. If a state is not approved to operate, or chooses to forgo
operating its own risk adjustment program, HHS will operate risk
adjustment on its behalf. For the 2022 benefit year, HHS will operate a
risk adjustment program in every state and the District of Columbia. As
described in the 2014 Payment Notice, HHS's operation of risk
adjustment on behalf of states is funded through a risk adjustment user
fee. For the 2022 benefit year, we have used the same methodology that
we finalized in the 2020 Payment Notice to estimate our administrative
expenses to operate the program. Risk adjustment user fee costs for the
2022 benefit year are expected to remain steady from the prior 2021
benefit year estimates of approximately $60 million. We estimate that
the total cost for HHS to operate the risk adjustment program on behalf
of states and the District of Columbia for 2022 will be approximately
$60 million, and the risk adjustment user fee will be $0.25 PMPM.
Because of the increase in costs estimated for the 2022 benefit year,
we expect the final risk adjustment user fee for the 2022 benefit year
to neither increase or decrease transfers from issuers of risk
adjustment covered plans to the federal government.
Additionally, for the risk adjustment factors, we proposed to
recalibrate the HHS risk adjustment models for the 2022 benefit year by
using the 2016, 2017 and 2018 enrollee-level EDGE data, the same data
used for the 2021 benefit year. We adopted an approach of using the 3
most recent years of available enrollee-level EDGE data for
recalibration of the risk adjustment models for the 2021 benefit year
and beyond. We believe that the approach of blending (or averaging) 3
years of separately solved coefficients will provide stability within
the risk adjustment program and minimize volatility in changes to risk
scores from the 2021 benefit year to the 2022 benefit year. We also
propose, for the 2022 benefit year, to make model specification changes
to the risk adjustment models to add a two-stage specification and
interacted HCC counts factors to the adult and child risk adjustment
models, to revise the enrollment duration factors for the adults models
and to continue a pricing adjustment for Hepatitis C drugs for all
three models (adult, child and infant). Overall, these proposed changes
would make limited changes to the number and type of risk adjustment
model factors; therefore, we do not expect these changes to impact
issuer burden beyond the current burden for the risk adjustment
program.
We propose that issuers that choose to offer premium credits to
consumers during a declared PHE, when HHS permits such credits, must
report the adjusted plan premium amount, taking into account the
credits provided to consumers as a reduction to premiums for the
applicable months for risk adjustment data submissions for the 2021
benefit year and beyond. We do not believe that the clarifications
regarding risk adjustment reporting in this proposal would impose
additional administrative burden on health insurance issuers beyond the
effort already required to submit data to HHS for the purposes of
operating risk adjustment, as previously estimated in the interim final
rule on COVID-19 (85 FR 54820).
In the 2021 Payment Notice, HHS finalized the risk adjustment state
payment transfer formula under the HHS risk adjustment methodology for
the 2021 benefit year, and reaffirmed that HHS will continue to operate
the risk adjustment program in a budget neutral manner. We propose to
maintain the same methodology and continue to operate risk adjustment
in a budget neutral manner for the 2022 benefit year and beyond, unless
changed through notice with comment rulemaking. Therefore, there is no
net aggregate financial impact on health insurance issuers or the
federal government as a result of the risk adjustment provisions with
respect to the premium credit related proposals. However, while risk
adjustment transfers are net neutral in aggregate, we recognize that
individual issuers may be financially impacted by reduced transfers
(either lower risk adjustment payments or lower risk adjustment
charges) if any issuer in the issuer's state market risk pool provides
premium credits to enrollees. The extent of this impact will vary based
on the number of issuers in a state market risk pool that elect to
provide the temporary premium credits during a declared PHE, the amount
of these premium credits provided, as well as the market share of

[[Page 78657]]

the issuers that provide these premium credits.
We do not believe that the impact of this proposal will vary from
what was previously estimated in the interim final rule on COVID-19 (85
FR 54820). Similar to our analysis of regulatory impacts in the interim
final rule on COVID-19, we recognize the potential for financial
impacts for individual issuers as a result of the clarifications in
this proposal. We believe that if HHS permitted issuers that provided
premium credits to submit unadjusted premiums for the purposes of
calculating risk adjustment, distortions could occur which could also
financially impact individual issuers. For example, absent the
requirement that issuers that offer premium credits report the
adjusted, lower premium amount for risk adjustment purposes, an issuer
with a large market share with higher-than-average risk enrollees that
provides temporary premium credits would inflate the statewide average
premium by submitting the higher, unadjusted premium amount, thereby
increasing its risk adjustment payment. In such a scenario, a smaller
issuer in the same state market risk pool that owes a risk adjustment
charge, and also provides premium credits to enrollees, would pay a
risk adjustment charge that is relatively higher than it would have
been if it were calculated based on a statewide average that reflected
the actual, reduced premium charged to enrollees by issuers in the
state market risk pool.
For all of these reasons, we believe that requiring issuers that
offer temporary premium credits for 2021 and future benefit years'
coverage to accurately report to the EDGE server the adjusted, lower
premium amounts actually charged to enrollees is most consistent with
existing risk adjustment program requirements. We also believe this
requirement would mitigate the distortions that would occur if issuers
that offer these temporary premium credits did not report the actual
amounts charged to enrollees, while avoiding additional financial
burden on issuers, as compared to an approach that would permit issuers
to report unadjusted premium amounts.
Beginning for the 2023 benefit year, we are proposing to allow
state regulators to request a reduction in the calculation of risk
adjustment transfers under the state payment transfer formula for up to
3 years. HHS would reserve the right to require states with approved
multi-year reduction requests to submit supplemental evidence in any
subsequent year of the request after its initial approval, in the
timeframe, form, and manner specified by HHS, and HHS would also
reserve the right to terminate or modify an approved multi-year request
prior to its natural expiration. We are also proposing to permit states
with approved multi-year requests to withdraw their respective request
before its natural expiration by notifying HHS of its requested
withdrawal. HHS would require states to inform impacted issuers of any
termination, modification, or withdrawal of an approved multi-year
reduction request.
Allowing multi-year state flexibility requests would lead to a
reduction in burden associated with this requirement for states who
elect to submit such requests. In the 2019 Payment Notice, we estimated
that it would take a business operations specialist 32 hours to prepare
an annual state flexibility request and 16 hours for a senior manager
to review the request and transmit it electronically to HHS, for a
total burden of 48 hours. The total burden over 3 years would be 144
hours. For states submitting multi-year requests, we estimate that it
would take a business operations specialist 64 hours (at a rate of
$77.14 per hour) to prepare the request and 32 hours for a senior
manager (at a rate of $118.30 per hour) to review the request and
transmit it electronically to HHS. We estimate that each state seeking
a multi-year reduction request would incur a total burden of 96 hours
at a cost of approximately $8,723 to comply with this reporting
requirement (64 hours for the business operations specialist and 32
hours for the senior manager). If HHS requests supplemental evidence
from a state to support the continued application of its request, we
estimate that the state would incur a cost of approximately $1,090 (8
hours for the business operations specialist at an hourly wage of
$77.14 and 4 hour for the senior manager at an hourly wage of $118.30).
We estimate that a state withdrawal of a previously submitted request
would impose minimal additional cost of approximately $118 on the state
associated with a senior official from the State Department of
Insurance submitting a withdrawal request to HHS and informing impacted
issuers of the withdrawal (equivalent to 1 hour for a senior manager at
an hourly wage rate of $118.30). Each state that submits a multi-year
request would experience a cost reduction of approximately $4,361 over
a period of 3 years (our estimate of a state's cost savings would be
reduced to approximately $3,271 if HHS requests supplemental evidence
from the state one time over a period of 3 years). Although we are
unable to precisely estimate the number of states that would make these
requests, we expect that no more than 5 states would make these
requests annually.\248\ For 5 states, the total reduction in burden
would be 240 hours with a cost reduction of approximately $21,806 (less
if HHS requests supplemental evidence). We seek comment on this
estimated burden reduction.
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\248\ To date, only one state (Alabama) has pursued this
flexibility.
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We are proposing to provide more clarity regarding audits and
compliance reviews of issuers of risk adjustment covered plans through
proposed amendments to Sec. 153.620(c). Issuers being audited under
the risk adjustment program would be required to comply with audit
requirements including participating in entrance and exit conferences,
submitting complete and accurate data to HHS in a timely manner, and
providing responses to additional requests for information from HHS and
to preliminary audit reports in a timely manner. We are also proposing
to codify our authority to recoup risk adjustment (including high-cost
risk pool) payments if they are not adequately substantiated by the
data and information submitted by issuers during the course of the
audit.
We anticipate that compliance with risk adjustment program
(including high-cost risk pool) audits would take 120 hours by a
business operations specialist (at a rate of $77.14 per hour), 40 hours
by a computer systems analyst (at a rate of $92.46 per hour), and 20
hours by a compliance officer (at a rate of $70.06 per hour) per issuer
per benefit year. The cost per issuer would be approximately $14,356.
While the number of issuers participating in the risk adjustment
program varies per benefit year, (for example, there were 751 issuers
participating in the risk adjustment program for the 2016 benefit
year), HHS only intends to audit a small percentage of these issuers,
roughly 30-60 issuers per benefit year. Depending on the number of
issuers audited each year, the total cost to issuers being audited
would be between $430,692 and $861,384, with an average annual cost of
approximately $646,038.
We are proposing to increase the materiality threshold for EDGE
discrepancies, beginning in the 2020 benefit year, so that HHS may only
take action if the amount in dispute is equal to or exceeds $100,000 or
one percent of the total estimated transfer amount in the applicable
state market risk pool, whichever is less. As a result of this
proposal, some discrepant issuers

[[Page 78658]]

would no longer be charged for their EDGE data error. In addition,
issuers in the same state market risk pool as the discrepant issuer
would not receive positive adjustments to their risk adjustment
transfers. This is because HHS's process for addressing material EDGE
data discrepancies is to recalculate the dollar value of any difference
in risk adjustment transfers, charge the discrepant issuer for the
difference, and compensate the issuers who were harmed by the amount of
that calculation in order or balance the market. Based on analysis of
discrepancies from prior years' data, payments to these issuers are
occasionally as low as $1.00 and typically represent a fraction of one
percent of the issuer's overall transfers in the state market risk pool
for the applicable benefit year. We anticipate that the proposal would
have a minimal impact on regulatory burden. There might be a slight
reduction in administrative burden to some issuers who currently
report, and receive adjustments for, EDGE discrepancies that are less
than a fraction of total state market risk pool transfers.
4. Audits of Reinsurance-Eligible Plans (Sec. 153.410(d))
We are proposing to provide more clarity regarding audits and
compliance reviews of reinsurance-eligible plans through proposed
amendments to Sec. 153.410(d). Issuers being audited under the
reinsurance program would be required to comply with audit requirements
including participating in entrance and exit conferences, submitting
complete and accurate data to HHS in a timely manner, and providing
responses to additional requests for information from HHS and to
preliminary audit reports in a timely manner. We are also proposing to
codify our authority to recoup reinsurance payments if they are not
adequately substantiated by the data and information submitted by
issuers during the course of the audit.
We anticipate that compliance with reinsurance program audits would
take 120 hours by a business operations specialist (at a rate of $77.14
per hour), 40 hours by a computer systems analyst (at a rate of $92.46
per hour), and 20 hours by a compliance officer (at a rate of $70.06
per hour) per issuer per benefit year. The cost per issuer would be
approximately $14,356. There were 557 issuers participating in the
reinsurance program for the 2015 and 496 issuers participating in the
reinsurance program audits for the 2016 benefit year; however, HHS
would only audit a small percentage of these issuers, roughly 30-60
issuers per benefit year. Depending on the number of issuers audited
each year, the total cost to issuers being audited would be between
$430,692 and $861,384, with an average annual cost of approximately
$646,038.
5. Risk Adjustment Data Validation (Sec. 153.630(g))
In this proposed rule, we are proposing to codify two previously-
established exemptions from HHS-RADV under Sec. 153.630(g). These
exemptions apply when the issuer only has small group carryover
coverage for the applicable benefit year or when an issuer is in the
sole issuer in the state market risk pool for the applicable benefit
year (and did not participate in another risk pool with other issuers
for that benefit year). Under these exemptions, these issuers are not
be required to complete HHS-RADV for the given benefit year, and
therefore, they would have a decreased administrative burden. However,
given that these exemptions are limited to issuers exiting all markets
in a state and issuers who are sole issuers in all markets in a state,
we estimate that 13 issuers would be exempt from HHS-RADV for a given
benefit year under these exemptions. We further note that these
exemptions are not establishing new exemptions; instead, the proposed
amendments to Sec. 153.630(g) would simply further codify existing
policies.
We also propose to change the HHS-RADV collections timeline from
the timeline finalized in the 2020 Payment Notice in response to
stakeholder feedback. Under the proposed timeline, we would implement
the collection of HHS-RADV charges and disbursement of payments in the
calendar year in which HHS-RADV results are released. We do not believe
this proposal would change the administrative burden previously
estimated as we understand that the majority of states and issuers
follow a timeline that aligns more closely with the one proposed in
this rulemaking and few pursued the flexibility provided under the
timeline finalized in the 2020 Payment Notice.
6. Direct Enrollment (Sec. Sec. 155.205, 155.220, and 155.221)
a. Enhanced Direct Enrollment Website Translations
We propose to allow QHP issuers and web-brokers participating in
the FFE EDE program additional time to come into compliance with the
website content translation requirements in Sec. Sec.
155.205(c)(2)(iv)(B) and (C) for the website content added to their
websites to participate in the FFE EDE program. Specifically, we
propose for a QHP issuer or web-broker participating in the FFE EDE
program to have 12 months from the date the QHP issuer or web-broker
begins operating its EDE website in the relevant state to translate
website content added to their websites to participate in the FFE EDE
program according to the requirements in Sec. Sec.
155.205(c)(2)(iv)(B) and (C). This would not absolve QHP issuers and
web-brokers from translating website content subject to the
requirements in Sec. Sec. 155.205(c)(2)(iv)(B) and (C) \249\ that is
unrelated to their participation in the FFE EDE program. For example, a
QHP issuer's or web-broker's implementation of the Exchange eligibility
application on its website for purposes of participation in the FFE EDE
program would be considered content added to its website to participate
in the FFE EDE program and would be afforded the additional time for
translation into applicable languages. However, QHP issuer website
content subject to the Sec. 155.205(c)(2)(iv)(C) requirements, such as
Summaries of Benefits and Coverage or provider directories, would not
be afforded additional time for translation into applicable languages.
Similarly, website content related to a web-broker's participation in
Classic DE that is subject to the Sec. 155.205(c)(2)(iv)(C)
requirements, such as plan selection pages displaying QHPs, would not
be afforded additional time for translation into applicable languages
beyond the one year after the web-broker has been registered with the
Exchange. We believe that providing QHP issuers and web-brokers
participating in the EDE program with additional time to come into
compliance with the website content translation requirement for the
website content added to their websites to participate in the FFE EDE
program would be warranted given the significant resources associated
with obtaining approval to participate in the FFE EDE program
generally. Given the significant cost of third-party EDE audit
requirements, providing additional time to QHP issuers and web-brokers
participating in the FFE EDE program to complete website translations
of website content added to their websites to participate in the FFE
EDE program would provide an incentive for such entities to enter
markets where there is

[[Page 78659]]

a significant number of LEP individuals, while also ensuring that
website content would be accessible for individuals with LEP within a
reasonable period of time. We are of the view that this flexibility
would enable interested QHP issuers and web-brokers participating in
the EDE program to test the market before incurring additional
translation costs, which would enable smaller QHP issuers and web-
broker entities to compete more effectively. Therefore, affording this
additional time for translation of EDE-specific website content should
reduce the burden on QHP issuers and web-brokers, at least for their
first year of operations as an EDE entity in a state where the
Sec. Sec. 155.205(c)(2)(iv)(B) and (C) requirements apply.
---------------------------------------------------------------------------

\249\ See ``Guidance and Population Data for Exchange, Qualified
Health Plan Issuers, and Web-Brokers to Ensure Meaningful Access by
Limited-English Proficient Speakers Under 45 CFR 155.205(c) and
156.250,'' March 30, 2016. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Language-access-guidance.pdf.
---------------------------------------------------------------------------

b. Navigator and Certified Application Counselor Use of Web-Broker
Websites
We propose to permit, but not require, assisters in FFEs and SBE-
FPs to use web-broker non-Exchange websites to assist consumers with
QHP selection and enrollment, provided the non-Exchange website meets
certain conditions and to the extent permitted by state law. Web-
brokers have developed innovative tools to support consumers shopping
for QHP coverage through their non-Exchange websites for both Classic
DE and EDE that assisters and the consumers they assist may find
helpful when shopping for and enrolling in QHPs offered through
Exchanges. In addition, some web-brokers have expressed interest in
leveraging assisters' expertise in navigating more complex enrollment
cases to provide additional support to the consumers they serve. At the
same time, assisters have expressed a desire to obtain access to an
improved consumer experience by leveraging innovative and unique
consumer assistance tools and display features many web-brokers have
developed for Classic DE and EDE. Additionally, some assisters have
expressed a desire to have access to real-time information on the
status of submitted applications and enrollments that is available
through EDE to more effectively assist consumers. Although we are not
proposing to require web-brokers develop assister portals for their
non-Exchange websites, we recognize that some web-brokers may consider
developing such portals to enable assisters to gain easy access to
real-time information for each of the consumers they assist using the
web-broker's non-Exchange website, similar to portals some web-brokers
have already developed for affiliated agents and brokers who have
entered into arrangements to access the web-broker's non-Exchange
website. If the web-broker's non-Exchange website meets applicable
requirements, we want to encourage this type of innovation to improve
the experience for assisters and the consumers they assist with
shopping for and enrolling in QHPs offered through an Exchange.
We are proposing several amendments to Sec. 155.220 to capture new
flexibility for assisters in FFE and SBE-FP states to use web-broker
non-Exchange websites to assist consumers with applying for insurance
affordability programs and QHP enrollment under certain circumstances
and to the extent permitted by state law. This proposed flexibility
would extend to both Classic DE and EDE websites that web-brokers may
offer to assist consumers in FFE and SBE-FP states. We propose new
Sec. 155.220(c)(3)(iii)(A) to require web-broker websites to display
all QHP data provided by the Exchange, consistent with the requirements
of Sec. 155.205(b)(1) and (c), for such websites to be eligible for
use by assisters when otherwise permitted under state law. We note that
web-brokers may obtain all QHP information they would be required to
display in FFEs and SBE-FPs for assisters to be permitted to use their
websites by integrating with the FFEs' Marketplace API. For FFEs and
SBE-FPs, we are considering adoption of an optional annual
certification process for web-brokers that would be integrated into the
existing annual web-broker registration process, or could occur during
another time of year, during which a web-broker could be certified by
the Exchange by attesting to its compliance with the requirements
proposed in Sec. 155.220(c)(3)(iii)(A). We propose to capture this
optional annual certification process at new proposed Sec.
155.220(c)(3)(iii)(B). We are also considering maintaining a public
list of certified web-brokers in FFEs or SBE-FPs, so that assisters
would be able to more easily identify web-broker websites they might
seek to use in FFEs and SBE-FPs, when such arrangements are permitted
under state law. The proposed amendments to Sec. 155.220(c)(3)(iii)(A)
would also provide that if a web-broker website does not facilitate
enrollment in all QHPs it would be required to identify to consumers
the QHPs, if any, for which the web-broker website does not facilitate
enrollment by prominently displaying a standardized disclaimer provided
by the Exchange, in a form and manner specified by the Exchange,
stating that the consumer can enroll in such QHPs through the Exchange
website, and display a link to the Exchange website. We anticipate
issuing further guidance on the form and manner in which the disclaimer
should be displayed so that it would be clearly associated with any
QHPs for which the web-broker does not facilitate enrollment. We are
considering whether the disclaimer or a link to the disclaimer should
replace the link or other mechanism the web-broker would otherwise
display to allow a consumer to proceed with selecting and enrolling in
a QHP, or whether the disclaimer should be displayed in some other
fashion. This proposal would not require a web-broker to modify its
website unless it wishes for assisters to be able to use its website.
If a web-broker chooses to leverage this flexibility, there may or may
not be an associated burden. For example, some web-brokers are already
displaying all QHP data provided by the Exchange, consistent with the
requirements of Sec. 155.205(b)(1), and may already facilitate
enrollment in all QHPs. For such web-brokers, there would be no website
modifications required to add QHP information or to display a
disclaimer and therefore assisters would be permitted to use those web-
broker websites if this policy were finalized with no actions required
by the web-broker. In other cases, web-brokers might need to update
their websites to add QHP information consistent with the requirements
of Sec. 155.205(b)(1), or might need to add a disclaimer if the web-
broker does not facilitate enrollment in all QHPs to identify to
consumers the QHPs for which the web-broker website does not facilitate
enrollment. In general, we expect this proposal would add little to no
new burden for existing web-brokers, because the web-brokers most
likely to take advantage of this flexibility are probably those that
already have websites that meet the requirements proposed at new Sec.
155.220(c)(3)(iii) or can meet those requirements with minimal updates
to their websites.
c. QHP Information Display on Web-Broker Websites
We propose to provide flexibility to web-brokers regarding the
information they are required to display on their non-Exchange websites
for QHPs in certain circumstances. In new proposed Sec. 155.220(n), we
propose to establish an exception to the web-broker display
requirements captured at Sec. 155.220(c)(3)(i)(A) and (c)(3)(i)(D). At
new proposed Sec. 155.220(n), we propose certain flexibilities
regarding display of QHP information if a web-broker's non-

[[Page 78660]]

Exchange website does not support enrollment in a QHP. This situation
could occur if the web-broker does not have an appointment with a QHP
issuer and therefore is not permitted under state law to enroll
consumers in the coverage offered by that QHP issuer. In such
circumstances, we propose that the web-broker's non-Exchange website
would not be required to provide all the information identified under
Sec. 155.205(b)(1). Instead, web-brokers would be required to display
the following limited, minimum information for such QHPs: Issuer
marketing name, plan marketing name, plan type, metal level, and
premium and cost-sharing information. To take advantage of this new
proposed exception, we also propose that the web-broker's non-Exchange
website would be required to identify to consumers the QHPs, if any,
for which the web-broker's website does not facilitate enrollment by
prominently displaying the plan detail disclaimer provided by the
Exchange. The plan detail disclaimer explains that the consumer can get
more information about such QHPs on the Exchange website, and includes
a link to the Exchange website. To more closely align the plan detail
disclaimer text \250\ with the intent of this proposal, we would issue
further guidance slightly revising the text of the disclaimer. For
example, the current disclaimer text states, in relevant part, the web-
broker ``isn't able to display all required plan information about this
Qualified Health Plan at this time.'' We would modify that text so that
it states, in relevant part, the web-broker ``doesn't display all plan
information about, and does not facilitate enrollment in, this
Qualified Health Plan at this time.'' We believe this proposal strikes
an appropriate balance by recognizing that web-brokers may not be
permitted to assist with enrollments in QHPs for which they do not have
an appointment while still providing key information about all QHPs on
web-broker non-Exchange websites to allow consumers to window shop and
identify whether they may want to explore other QHP options. It also
would minimize burdens for web-brokers by not requiring them to build
functionality and processes to display all of the required comparative
information listed in Sec. 155.205(b)(1) for those QHPs for which they
do not have an appointment to sell. We believe the burden associated
with this proposal would be very limited as it would largely align with
our historical enforcement approach and guidance. Web-brokers that are
not displaying all the QHP information required under Sec.
155.205(b)(1) are already displaying the plan detail disclaimer, a link
to the Exchange website, and the following limited details: Issuer
marketing name, plan marketing name, plan type, and metal level. The
one new requirement that this proposal would impose is the display of
premium and cost-sharing information for all QHPs. However, premium and
cost-sharing information is and has been available through the Exchange
public use files and the Marketplace API for some time now, and web-
brokers are familiar with those data sources to populate their websites
with other QHP information. Furthermore, premium and cost-sharing
information is data web-brokers already incorporate for at least some
QHPs displayed on their websites. Incorporating premium and cost-
sharing information for all QHPs displayed on their websites would
require a minimal level of effort.
---------------------------------------------------------------------------

\250\ See Section 5.3.2 of the ``Federally-Facilitated Exchanges
(FFEs) and Federally-Facilitated Small Business Health Options
Program (FF-SHOP) Enrollment Manual.'' Available at https://www.regtap.info/uploads/library/ENR_FFEFFSHOPEnrollmentManual2020_5CR_090220.pdf.
---------------------------------------------------------------------------

d. Web-Broker and Direct Enrollment Entity Operational Readiness Review
Requirements
At Sec. 155.220(c)(6), we propose a web-broker must demonstrate
operational readiness and compliance with applicable requirements prior
to the web-broker's website being used to complete an Exchange
eligibility application or a QHP selection. As reflected in proposed
Sec. 155.220(c)(6)(i) through (iv), HHS may request a web-broker
submit a number of artifacts or documents or complete certain testing
processes to demonstrate the operational readiness of its non-Exchange
website. The required documentation might include operational data
including licensure information, points of contact, and third-party
relationships; security and privacy assessment documentation, including
penetration testing results, security and privacy assessment reports,
vulnerability scan results, plans of action and milestones, and system
security and privacy plans; and an agreement between the web-broker and
HHS documenting the requirements for participating in the applicable
direct enrollment program. The required testing processes might include
enrollment testing, prior to approval or at the time of renewal, and
website reviews performed by HHS to evaluate prospective web-brokers'
compliance with applicable website display requirements prior to
approval. To facilitate testing, prospective and approved web-brokers
will have to maintain and provide access to testing environments that
reflect their prospective or actual production environments. We are
proposing these amendments to codify in regulation existing program
requirements that apply to web-brokers that participate in the FFE
direct enrollment program and are captured in the agreements executed
with participating web-broker direct enrollment entities and related
technical guidance.\251\ Some of these requirements, such as the
collection of operational data, have effectively existed for many
years, and so they would impose little to no new burden. The collection
of security and privacy assessment documentation would be a new
requirement, although historically the web-broker agreement has
required web-brokers to attest to the implementation and assessment of
privacy and security controls. As a result, web-brokers should have
historically completed any technical implementation of the controls and
should be familiar with assessment of those controls. Completion of
enrollment testing would also be a new requirement, but use of the
direct enrollment pathway inherently requires a web-broker's platform
to be capable of processing enrollments. Therefore, the burden of
testing that functionality would be very limited. Website reviews have
been conducted historically and are performed by HHS, so there would be
no burden to web-brokers associated with the completion of those
reviews. The burden related to these proposed requirements is discussed
in the Collection of Information Requirements section above.
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\251\ See, for example, ``Updated Web-broker Direct Enrollment
Program Participation Minimum Requirements,'' May 21, 2020.
Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2020-WB-Program-Guidance-052120-Final.pdf.
---------------------------------------------------------------------------

We propose to revise Sec. 155.221(b)(4) to add additional detail
on the operational readiness requirements for direct enrollment
entities. Similar to the proposed web-broker operational readiness
requirement at new proposed Sec. 155.220(c)(6), we are proposing these
amendments to codify in Sec. 155.221(b)(4) more details about the
existing program requirements that apply to direct enrollment entities
and are captured in the agreements executed with participating web-
broker and QHP issuer direct enrollment entities. We note that these
proposed requirements are in addition to the operational readiness
requirements at new proposed Sec. 155.220(c)(6) for web-brokers,

[[Page 78661]]

although web-brokers may not be required to submit the documentation
required under this proposal to revise Sec. 155.221(b)(4) or they may
be permitted to use the same documentation to satisfy the requirements
of both operational readiness reviews depending on the specific
circumstances of their participation in direct enrollment programs and
the source and type of documentation.
In paragraph (b)(4), we propose to continue to require a direct
enrollment entity to demonstrate operational readiness and compliance
with applicable requirements prior to the direct enrollment entity's
website being used to complete an Exchange eligibility application or a
QHP selection. We add new proposed paragraphs (b)(4)(i) through (v) to
reflect that direct enrollment entities may need to submit or complete,
in the form and manner specified by HHS, a number of artifacts of
documentation or various testing or training processes. The
documentation may include business audit documentation including:
Notices of intent to participate including auditor information;
documentation packages including privacy questionnaires, privacy policy
statements, and terms of service; and business audit reports including
testing results. The required documentation may also include security
and privacy audit documentation including: Interconnection security
agreements; security and privacy controls assessment test plans;
security and privacy assessment reports; plans of action and
milestones; privacy impact assessments; system security and privacy
plans; incident response plans; and vulnerability scan results.
Submission of agreements between the direct enrollment entity and HHS
documenting the requirements for participating in the applicable direct
enrollment program may also be required. Required testing may include
eligibility application audits performed by HHS. The direct enrollment
entity may also be required to complete online training modules
developed by HHS related to the requirements to participate in direct
enrollment programs. We expect minimal new burden associated with this
proposal as these requirements have historically been established
through agreements EDE entities have executed with HHS, and therefore
entities have completed these tasks in the past to be able to use the
EDE pathway. The burden related to these proposed requirements is
discussed in the Collection of Information Requirements section above.
e. Direct Enrollment Entity Plan Display Requirements
We also propose to revise Sec. 155.221(b)(1) to require that
direct enrollment entities display and market QHPs offered through the
Exchange, individual health insurance coverage as defined in Sec.
144.103 offered outside the Exchange (including QHPs and non-QHPs other
than excepted benefits), and all other products, such as excepted
benefits, on at least three separate website pages, with certain
exceptions. This proposal would constitute a revision of a policy
adopted in 2019. We anticipate this policy would provide increased
flexibility and believe many direct enrollment entity websites are
already designed in a manner largely consistent with this proposal, and
therefore the burden associated with it would be minimal.
f. New Exchange Direct Enrollment (DE) Options
We also propose to add Sec. 155.221(j) establish a new Exchange
direct enrollment (DE) option, beginning with PY 2022, in which states
could use direct enrollment technology to transition to private sector-
focused enrollment pathways operated by QHP issuers, web brokers, and
agents and brokers instead of a centralized front-facing eligibility
and enrollment website operated by the Exchange. State Exchanges, as
well as SBE-FP, and FFE states could elect to implement the DE option.
The impact of the new Exchange DE option will depend on the specific
Exchange model and the number of states that take advantage of the new
option. The FFEs' current direct enrollment program (classic and EDE)
generally reduce operational costs to the federal government while
alleviating certain burdens on consumers.
This proposal may have varied impacts on consumers, and we are
interested in public comments that would better help us to understand
how the DE option, and an increase in the number of potential websites
maintained by brokers through which consumers could shop for QHP
coverage, might impact consumers and consumer behavior with respect to
QHP enrollment. We also note that any operational cost increases or
savings for implementation of the DE option could, in turn, affect an
SBE's user fee and consumer premium costs.
Under the FFE-DE and SBE-FP-DE, CMS would be providing back end
eligibility services, notice and tax form generation, the processing of
data matching and special enrollment verification issues, eligibility
appeals, casework, advanced customer service, enrollment
reconciliation, IRS reporting, and an alternate/backup consumer-facing
process (as we do today). In addition, the HealthCare.gov website would
continue to provide standardized comparative information for QHPs
offered on the Exchange.
At this time, we do not anticipate that any of the 15 current SBEs
would implement the DE option, as they have to date not implemented the
same direct enrollment interfaces with web brokers or other direct
enrollment entities as the FFE. However, current SBEs that elect to
apply for approval to implement the DE option would be responsible for
meeting certain requirements for approval, in particular revising their
Exchange Blueprint (Blueprint) under new proposed Sec. 155.221(j)(1).
We believe that any costs of revising the Blueprint would be nominal,
as this process involves logging electronically into a CMS web
interface that serves as the repository for all states' Blueprints to
input additional information on updated processes and controls to
manage the new DE program. However, we seek comment on the burden
associated with this activity and note that the Blueprint is currently
approved under the PRA under OMB Control Number 0938-1172.
For states seeking to transition to a SBE for future plan years in
order to utilize the new Exchange DE option, we anticipate that start-
up costs would be similar to those associated with recent transitions
to the SBE model, including any costs associated with the completion of
the Blueprint. SBEs would complete the Blueprint in the same manner and
would be required to meet all required minimum functions of an
Exchange. In terms of implementation costs, these states could realize
savings by virtue of not having to build the consumer-facing website to
handle the consumer traffic that it would handle if it were the single
point of enrollment, instead relying on direct enrollment entities to
provide the majority or all of the enrollment functionality. However,
those may be relatively lower costs than the costs associated with
building the back-end Exchange eligibility platform to complete
eligibility determinations, along with the applicable connections
required to the Federal Data Services Hub for performing eligibility
verifications, as well as connections to the respective state Medicaid
agency for coordinating Medicaid and CHIP eligibility determinations.
Based on recent state transitions to the SBE

[[Page 78662]]

model, the design, development, and implementation costs for an
Exchange depend on a number of factors. Recent design, development, and
implementation costs have ranged from $4 million for a smaller state,
to almost $24 million for a larger state. As no SBE to date has
implemented direct enrollment, however, we are not able to provide
accurate cost estimates in this regard. States may also be able to use
existing federal DE partners who are fully compliant with federal
operational requirements to provide administrative savings. Any
operational cost increases or savings could, in turn, affect an SBE's
user fee and premium costs.
We do anticipate that an SBE electing the Exchange DE option would
have increased operational costs for monitoring and oversight of the DE
entities, as well as for maintaining and managing the individual
interfaces and transactions with each DE entity. However, any savings
achieved through a decrease in call center volume or other consumer
supports due to DE partners assisting consumers with enrollment would
offset any increased operational supports. Any operational savings
could, in turn, affect an SBE's user fee.
We also anticipate that the DE option could have impacts on web-
brokers and issuers. With respect to web brokers, costs may be incurred
if there are new entrants to the DE market or if existing DE
participants expand into new markets. We presume that web brokers will
rationally only enter the market or expand into new markets if it the
benefits exceed the costs. Web brokers may enter into fee-based
arrangements with issuers, or possibly new economic or legal
arrangements with states, that help to offset the costs of the DE
services provided. Web brokers may also assume costs associated with
the optional certification process. Issuers will be impacted by
adjustments in user fees, and may have an incentive to promote direct
enrollment if user fees are lower under the DE option, and those
savings exceed the new costs of arrangements with web brokers. Issuers
may also be impacted if the DE option leads to shifts in consumer
enrollment patterns, such as movement from a QHP offered by one issuer
to a QHP offered by another issuer.
We also do not anticipate that HHS will have any increased costs
associated with monitoring and oversight of the SBE-DEs. We note that
changes in premiums may have downstream impacts on federal payments of
PTCs.
We seek comment on this proposal, including any additional
consumer, state and SBE, HHS, issuer, web-broker, or other costs,
benefits or transfers that should be considered. We also seek data and
information that would help us to quantify the potential impacts
associated with this proposal.
7. Verification Process Related to Eligibility for Insurance
Affordability Programs (Sec. 155.320)
As discussed previously in the preamble, as for benefit years 2020
and 2021, we will not take enforcement action against Exchanges that do
not perform random sampling as required by Sec. 155.320(d)(4) for
benefit year 2022, and we propose to amend Sec. 155.320(d)(4) to
reflect that the requirement will not be applied in plan years 2021 and
2022. HHS's experience conducting random sampling revealed that
employer response rates to HHS's request for information were low. The
manual verification process described in paragraph (d)(4)(i) requires
significant resources and government funds, and the value of the
results ultimately does not appear to outweigh the costs of conducting
the work because only a small percentage of sample enrollees have been
determined by HHS to have received APTC/CSRs inappropriately. We
estimate the annual costs to conduct sampling on a statistically
significant sample size of approximately 1 million cases to be
approximately $6 million to $8 million for the Exchanges using the
Federal platform and State Exchanges that operate their own eligibility
and enrollment platforms. This estimate includes operational activities
such as noticing, inbound and outbound calls to the Marketplace call
center, and adjudicating consumer appeals. We estimate that the total
annual cost for the Exchanges using the Federal platform and the 15
State Exchanges operating their own eligibility and enrollment platform
in 2022 would be $113 million. Relieving Exchanges of the requirement
to conduct sampling for benefit year 2022 would therefore result in
total savings of approximately $113 million. We seek comment on this
estimate.
8. Special Enrollment Periods (Sec. 155.420)
a. Exchange Enrollees Newly Ineligible for APTC
We propose to add a new paragraph at Sec. 155.420(a)(4)(ii)(C) to
allow Exchange enrollees and their dependents who become newly
ineligible for APTC in accordance with paragraph (d)(6)(i) or (ii) of
this section to enroll in a QHP of a lower metal level. We anticipate
that this proposal would help impacted enrollees' ability to maintain
continuous coverage for themselves and for their dependents in spite of
losing a potentially significant amount of financial assistance to help
them purchase coverage. For example, an enrollee impacted by an
increase to his or her monthly premium payment could change to a
bronze-level plan, or to catastrophic coverage if they are otherwise
eligible. Relatedly, this proposal may benefit the individual market
risk pool by encouraging healthy individuals to maintain continuous
coverage. Currently, an enrollee who loses APTC eligibility has only
two choices: Paying the full premium or terminating his or her
coverage. Healthy individuals who lose APTC may be more likely to
terminate coverage due to increased premium liability, while enrollees
who have one or more medical conditions will be incentivized to
maintain coverage in spite of the additional expense. This proposal
would serve to facilitate continuous coverage of healthy individuals by
giving them the ability to enroll in a new plan with a lower premium,
thereby supporting a healthier risk pool.
Regardless, we believe that this change would not have a negative
impact on the individual market risk pool, because most applicable
enrollees would be seeking to change coverage based on financial rather
than health needs. However, as discussed earlier in the preamble, we
seek comment on whether there are concerns about adverse selection risk
with permitting newly unsubsidized enrollees to change to any plan of a
lower metal level to help them maintain coverage (for example,
permitting an individual to change from a gold plan to a bronze plan),
or whether this risk would be significantly lower if we only permit an
enrollee to change to a plan one metal level lower than their current
QHP. We also request comment from issuers on whether there are concerns
about impacts such as experiencing a decrease in premium receipts from
enrollees who opt to change to a lower-cost plan, or whether they view
adverse selection as a possibility. As discussed in more detail earlier
in the preamble, we also acknowledge that enrollees may lose APTC
eligibility and qualify for a special enrollment period due to their
APTC loss for a reason other than a change in household income or tax
family size. We seek comment on whether stakeholders have concerns with
this possibility, as well as on how HHS can help ensure that enrollees
who lose APTC because of failure to provide information to the Exchange
to confirm their APTC eligibility can understand and take action on
steps needed to do

[[Page 78663]]

so, even if they also have the flexibility to change to a plan of a
lower metal level.
We recognize, as further discussed in preamble, that changing to a
new QHP mid-plan year may cause enrollees to incur additional out of
pocket costs, as a new QHP selection typically resets the enrollee's
deductible and other accumulators. We believe that Exchange enrollees
who lose APTC eligibility are best able to weigh the trade-off between
reset accumulators and maintaining an affordable monthly premium, and
losing coverage altogether. Enrollees who qualify to make a new plan
selection for an applicable special enrollment period already must
consider this question. However, we request comment on whether this
proposal would increase the risk that consumers will change plans
without taking into account potential disadvantages, and on strategies
to help mitigate this risk, such as consumer education.
Additionally, this proposal would impose a cost to Exchanges that
have implemented plan category limitations, because it would require
the use of financial and staff or contractor resources to make a change
to application and plan selection system logic to permit applicable
enrollees and dependents to change to a lower metal level plan after
having previously restricted them to plans of their current metal
level. Therefore, we solicit comments on the extent to which Exchanges
would experience burden due to this proposed change, and we also seek
comment on whether we should exempt the special enrollment periods at
Sec. 155.420(d)(6)(i) and (ii) due to becoming newly ineligible for
APTC from plan category limitations altogether to help to mitigate this
burden, or whether such a change would significantly increase risk for
adverse selection.
Finally, because it represents a change to current system logic,
this proposal might impose some burden on FFE Direct Enrollment and
Enhanced Direct Enrollment partners. We solicit comment on this matter,
as well as more generally, on the impact this proposal.
b. Special Enrollment Period--Untimely Notice of Triggering Event
We anticipate that the proposed amendments related to qualified
individuals who do not receive timely notice of a triggering event and
otherwise are reasonably unaware that a triggering event occurred would
provide certain consumers a pathway to maintain continuous coverage,
which would have an overall positive impact on the risk pool and would
benefit consumers. Consumers would benefit from being able to maintain
continued access to coverage and health care. We recognize the
possibility of some minor adverse selection risk given that consumers
with known health issues may be more likely to request a retroactive
effective date than healthy consumers. However, we expect this risk to
be very limited as the proposal only permits individuals to request a
retroactive effective date if they did not receive timely notice of a
triggering event, and we do not expect this to happen very often.
We expect that Exchanges and Direct Enrollment partners might incur
minor costs to update consumer messaging and processes to administer
this proposal. State Exchanges that currently do not have this policy
and issuers offering off-Exchange plans would incur minor costs to
implement this proposal. We seek comment on this proposal, including
any costs, benefits or burdens associated with this proposal.
c. Cessation of Employer Contributions to COBRA as Special Enrollment
Period Trigger
We anticipate that the proposed amendments regarding special
enrollment period eligibility for qualified individuals whose employers
completely cease payment of their portion of COBRA continuation
coverage premiums would provide clarity regarding a policy that has
been operationalized on HealthCare.gov. We believe that these
amendments would benefit direct enrollment partners and employers by
providing clarity regarding special enrollment period eligibility. In
addition, consumers who would have otherwise lost coverage due to an
increase in the cost of their COBRA continuation coverage would benefit
from continuity of coverage and access to healthcare.
Because this special enrollment period has already been available
to individuals enrolling in a QHP on HealthCare.gov, we do not
anticipate that these amendments would have any negative impact on the
risk pool, nor would they increase costs for direct enrollment partners
or HealthCare.gov. However, we do anticipate that State Exchanges that
do not have this policy, as well as issuers who operate off-Exchange
plans, would incur costs to implement this proposal. We seek comment on
this proposal, including any associated costs, benefits or burdens.
d. Special Enrollment Period Verification (Sec. 155.420)
We do not anticipate that revisions to Sec. 155.420 would impose
regulatory burden or costs on the Exchanges using the federal platform.
We anticipate that this proposal would have a positive impact on
program integrity by verifying eligibility for special enrollment
periods. Increasing program integrity through this proposal could
contribute to keeping premiums low and therefore, protect taxpayer
dollars. However, FFE, SBE-FPs, and most State Exchanges already
conduct special enrollment period verification in accordance with this
proposal, so premium impact would likely be very minimal.
We anticipate this proposal would moderately increase regulatory
burden on existing State Exchanges, along with FFE and SBE-FP states
currently transitioning to establishing State Exchanges, that do not
currently conduct special enrollment period verification for at least
75 percent of enrollments for newly enrolling consumers enrolling
through special enrollment periods. A majority of State Exchanges
currently conduct SEP verification for the same SEP types for which the
FFEs currently conduct SEP verifications, with some State Exchanges
conducting SEP verifications for additional SEP types, while 4 State
Exchanges currently conduct SEP verifications for only one type of SEP.
Those 4 State Exchanges include those in the District of Columbia,
Maryland, Rhode Island, and Vermont. State Exchanges bear the full cost
of the SEP verification activities they conduct. All the State
Exchanges that currently conduct SEP verifications in the same manner
as the FFEs do are verifying 75 percent or more of their respective SEP
enrollments. This includes the State Exchanges with the highest SEP
enrollment volume, such as the California and New York Exchanges. For
the 4 State Exchanges that conduct SEP verifications for only one type
of SEP, that SEP type consistently represents about 60 percent of all
SEP enrollments across each of these four State Exchanges.
Based on the implementation of pre-enrollment special enrollment
period verification in the Exchanges using the federal platform, we
estimate that the overall one-time cost of implementing pre- or post-
enrollment SEP verification by an Exchange would be approximately $12
million. Therefore, we estimate that the total cost for the 4 existing
State Exchanges that currently do not conduct special enrollment period
verification for at least 75 percent of enrollments for

[[Page 78664]]

newly enrolling consumers enrolling through special enrollment periods
would be $48 million in order to comply with this new requirement for
PY 2024. Additionally, there would be costs for at least 1 FFE state
and 4 SBE-FP states that are transitioning to, or have notified us that
they intend to transition to, establishing State Exchanges on or after
the 2021 plan year to implement this new requirement. We estimate that
total implementation costs for these 5 states would be $60 million.
Including both categories of State Exchanges, total costs for State
Exchanges to implement this new requirement are estimated to be $108
million. We assume these costs will be incurred in the years 2021-2023.
There also would be an increase in ongoing costs for 5 existing
State Exchanges due to an increase in the number of special enrollment
period enrollments for which they must conduct verification. We
estimate that the total increase in ongoing costs for these 5 existing
State Exchanges to comply with this requirement would be $2.8 million
for 2024 and 2025. We estimate that the Exchanges using the federal
platform would not incur any increase in costs to comply with this
requirement. In addition, the 1 FFE state and 4 SBE-FP states that are
transitioning to, or have informed us that they intend to transition
to, establishing State Exchanges, would incur costs to comply with this
requirement instead of the FFEs, estimated to be $3.5 million for 2024
and 2025, which would result in a transfer from the State Exchanges to
the FFEs. We do not anticipate this proposal would increase regulatory
burden or costs on issuers.
9. FFE and SBE-FP User Fees (Sec. 156.50)
We are proposing a lower FFE user fee rate of 2.25 percent for the
2022 benefit year, which is lower than the 3.0 percent FFE user fee
rate finalized for 2021 benefit year. We also propose to lower the SBE-
FP user fee rate to 1.75 percent for the 2022 benefit year from the 2.5
percent SBE-FP user fee rate we finalized for the 2021 benefit year. We
are proposing a FFE-DE and SBE-FP-DE user fee rate of 1.5 percent for
the 2023 benefit year. Subject to HHS approval, states could elect to
use the FFE-DE or SBE-FP-DE options. Based on our estimated costs,
enrollment (including anticipated transitions of states from the FFE
and SBE-FP models to either the SBE-FP or State Exchange models),
premiums for the 2021 and 2022 benefit years, and proposed user fee
rates, we are estimating FFE and SBE-FP user fee transfers from issuers
to the federal government would be lower by $270 million compared to
those estimated for the prior benefit year. Costs could be shifted to
approve direct enrollment partners (including QHP issuers) that states
elect to use, so there may not actually be any cost savings on the part
of issuers in states that elect the FFE-DE or SBE-FP-DE options. As
such, there might not be an incentive for issuers in states that have
elected the FFE-DE or SBE-FP DE option to adopt these models solely as
a result of the lower user fee rate. While there would be reduced
transfers to the federal government in states that elect the FFE-DE or
SBE-FP-DE options, we expect that available user fee collections from
current and prior years would be sufficient to fund Exchange operations
through 2023 at the proposed 2023 benefit year user fee rates. We
expect that the proposed adoption of the FFE-DE and SBE-FP-DE user fee
rates and the proposed decreases in the FFE and SBE-FP user fee rate
would reduce transfers to the federal government by $400 million in
2023.
10. Provisions Related to Cost Sharing (Sec. 156.130)
The PPACA provides for the reduction or elimination of cost sharing
for certain eligible individuals enrolled in QHPs offered through the
Exchanges. This assistance is intended to help many low- and moderate-
income individuals and families obtain health insurance. We set forth
in this proposed rule the reductions in the maximum annual limitation
on cost sharing for silver plan variations for the 2022 benefit year.
Consistent with our analysis in previous Payment Notices, we developed
three model silver level QHPs and analyzed the impact on their AVs of
the reductions described in the PPACA to the estimated 2022 maximum
annual limitation on cost sharing for self only coverage of $9,100. We
do not believe the proposed changes to the maximum annual limitation on
cost sharing or the reductions in this parameter for silver plan
variations would result in a significant economic impact.
Furthermore, we propose the premium adjustment percentage for the
2022 benefit year. Section 156.130(e) provides that the premium
adjustment percentage is the percentage (if any) by which the average
per capita premium for health insurance coverage for the preceding
calendar year exceeds such average per capita premium for health
insurance for 2013. The annual premium adjustment percentage sets the
rate of increase for three parameters detailed in the PPACA: The annual
limitation on cost sharing (defined at Sec. 156.130(a)), the required
contribution percentage used to determine eligibility for certain
exemptions under section 5000A of the Code, and the assessable payments
under sections 4980H(a) and 4980H(b) of the Code. We believe that the
premium adjustment percentage of 1.4409174688 based on average per
enrollee private health insurance premiums (excluding Medigap and
property and casualty insurance) is well within the parameters used in
the modeling of the PPACA, and we do not expect that these proposed
updated values would alter CBO's May 2020 baseline projections.
We also propose that beginning with the 2023 benefit year, we would
publish the premium adjustment percentage, maximum annual limitation on
cost sharing, reduced maximum annual limitations on cost sharing, and
required contribution percentage in guidance in January of the calendar
year preceding the benefit year to which the parameters are applicable,
unless HHS is changing the methodology in which case we would do so
through the applicable HHS notice of benefit and payment parameters.
This proposal affects only the timing and method by which these
parameters are released and would provide issuers with additional time
for plan design and rate setting.
11. Prescription Drug Distribution and Cost Reporting by QHP Issuers
(Sec. 156.295) and PBMs (Sec. 184.50)
As part of the PPACA, Congress passed section 6005, which added
section 1150A to the Act, requiring a PBM under a contract with a QHP
offered through an Exchange established by a state under section 1311
of the PPACA \252\ to provide certain prescription drug information to
the QHP and to Secretary at such times, and in such form and manner, as
the Secretary shall specify. Section 1150A(b) of the Act addresses the
information that a QHP issuer and their PBM must report. Section
1150A(c) of the Act requires the Secretary to keep the information
reported confidential and specifies that the information may not be
disclosed by the Secretary or by a plan receiving the information,
except that the Secretary may disclose the information in a form which
does not disclose the identity of a specific PBM, plan, or prices
charged for drugs for certain purposes.\253\
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\252\ This includes an FFE, as a Federal Exchange may be
considered an Exchange established under section 1311 of the PPACA.
King v. Burwell, 576 U.S. 988 (2015).
\253\ The purposes are: As the Secretary determines to be
necessary to carry out section 1150A or part D of title XVIII; to
permit the Comptroller General to review the information provided;
to permit the Director of the Congressional Budget Office to review
the information provided; and, to States to carry out section 1311
of the PPACA.

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[[Page 78665]]

On January 1, 2020 \254\ and on September 11, 2020,\255\ we
published notices in the Federal Register and solicited public comment
on the burden related to the collection of information required by
section 1150A of the Act. In those information collections and in this
proposed rule, we fulfill this statutory requirement with the goal of
imposing the least amount of burden possible while collecting data that
would be usable to ensure increased transparency on prescription drug
coverage in QHPs.
---------------------------------------------------------------------------

\254\ 85 FR 4993 through 4994.
\255\ 85 FR 56227 through 56229.
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For example, to reduce overall burden, we seek to collect data
directly from PBMs that contract with QHPs directly, rather than
require QHP issuers to serve as a go-between their PBM and CMS.\256\
This approach would reduce overall burden on QHP issuers and would
place the onus to report data on those entities that QHP issuers have
already entrusted to oversee and manage their prescription drug line of
business.
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\256\ Under this interpretation, QHP issuers would be required
to report data directly to CMS only when the QHP issuer does not
contract with a PBM to administer their drug benefit. As we
explained in the notices in the Federal Register and in this
proposed rule, we are not aware of any QHP issuer which does not
contract with a PBM to administer its drug benefit. Thus, we believe
that there is no associated burden or regulatory impact for QHP
issuers that do not contract with a PBM.
---------------------------------------------------------------------------

These information collections also explained how we utilize the
reporting paradigm currently used by CMS' Direct and Indirect
Remuneration (DIR) reporting requirement which collects, in part, the
data required by section 1150A(a)(1) of the Act from Prescription Drug
Plan sponsors of a prescription drug plan and Medicare Advantage
organizations offering a Medicare Advantage Prescription Drug Plan
under part D of title XVII. We noted our intention to utilize the DIR
reporting mechanisms only to the extent authorized solely by section
1150A(a)(2), explaining our understanding that DIR reporting is not
authorized by section 1150A alone.\257\ Usage of these existing CMS
reporting paradigms ensures minimal impact of a new data collection on
QHP issuers and PBMs, given the longstanding industry use of the DIR
reporting mechanism. The payer community is familiar with fulfilling
the DIR reporting requirement. Therefore, we believe replicating that
collection to the greatest degree would enable reporters to implement
this data collection with minimal relative burden.
---------------------------------------------------------------------------

\257\ Except for PBM spread amount aggregated to the plan
benefit package level, section 1150A imposes no additional reporting
requirements for entities subject to DIR reporting. See 77 FR 22094.
---------------------------------------------------------------------------

12. Audits of APTCs, CSRs, and User Fees (Sec. 156.480(c))
We are proposing to provide more clarity around the APTC, CSR, and
user fee program audits and to establish authority for HHS to conduct
compliance reviews to assess compliance with Federal APTC, CSR, and
user fee standards through proposed amendments to Sec. 156.480(c).
Issuers being audited under the APTC, CSR, and user fee programs would
be required to comply with audit requirements including participating
in entrance and exit conferences, submitting complete and accurate data
to HHS in a timely manner, and providing responses to additional
requests for information from HHS and to preliminary audit reports in a
timely manner. We are also proposing to codify our authority to recoup
APTC, CSR payments, and user fee overpayments if they are not
adequately substantiated by the data and information submitted by
issuers during the course of the audit.
We anticipate that compliance with APTC, CSR, and user fee program
audits would take 120 hours by a business operations specialist (at a
rate of $77.14 per hour), 40 hours by a computer systems analyst (at a
rate of $92.46 per hour), and 20 hours by a compliance officer (at a
rate of $70.06 per hour) per issuer per benefit year. The cost per
issuer would be approximately $14,356. While the number of QHP issuers
participating in the APTC, CSR, and user fee programs vary per benefit
year (for example, there were 561 QHP issuers participating in the
programs for the 2019 benefit year), HHS only intends to audit a small
percentage of these issuers, roughly 30-60 issuers per benefit year.
Depending on the number of issuers audited each year, the total cost to
issuers being audited would be between $430,692 and $861,384, with an
average annual cost of approximately $646,038.
13. Quality Rating System (Sec. 156.1120) and Enrollee Satisfaction
Survey System (Sec. 156.1125)
In this proposed rule, we seek comment on removing one or more
levels of the QRS hierarchy, which is a key element of the QRS
framework that establishes how quality measures are organized for
scoring, rating and reporting purposes. We also propose to make the
full QHP Enrollee Survey results publicly available in an annual PUF.
We anticipate that both changes would benefit consumers and QHP issuers
by increasing transparency and availability of QHP survey data through
publication of a nationwide PUF, and simplifying the QRS scoring
hierarchy to improve understanding of QRS quality rating information
and alignment with other CMS quality reporting programs. Neither
refinement would alter the data collection and reporting requirements
for the QRS and QHP Enrollee Survey because QHP issuers are already
required to report all data needed to support a QHP Enrollee Survey PUF
and simplified QRS hierarchy. Therefore, these proposed refinements
would create no additional cost or burden for QHP issuers.
14. Medical Loss Ratio (Sec. Sec. 158.103, 158.130, 158.240, and
158.241)
In this proposed rule, we propose to amend Sec. 158.103 to
establish the definition of prescription drug rebates and other price
concessions that issuers must deduct from incurred claims for MLR
reporting and rebate calculation purposes pursuant to Sec.
158.140(b)(1)(i). We do not expect this proposed clarification to
change the result of the regulatory impact analysis previously
conducted for the HHS Notice of Benefit and Payment Parameters for 2021
with respect to the requirement that issuers deduct from MLR incurred
claims not only prescription drug rebates received by the issuer, but
also any price concessions received and retained by the issuer and any
prescription drug rebates and other price concessions received and
retained by a PBM or other entity providing pharmacy benefit management
services to the issuer.
We also propose that issuers that choose to provide temporary
premium credits to consumers during a declared PHE in 2021 and beyond
when permitted by HHS must account for these credits as reductions to
premium for the applicable months when reporting earned premium for the
applicable MLR reporting year. Although we do not know how many states
will permit issuers to provide temporary credits to reduce premiums or
how many issuers will elect to do so, for purposes of this analysis, we
previously estimated in the interim final rule on COVID-19 (85 FR
54820) that approximately 40 percent of issuers offering individual,
small group or merged market health insurance coverage will provide
these premium credits to reduce the premiums charged to enrollees to
support continuity of coverage during the PHE for COVID-19. We do not
estimate a change to the cost or burden previously estimated in that
final rule, and anticipate that that regulatory impact estimate would

[[Page 78666]]

extend to 2021 and beyond, if the provisions in this proposed rule are
adopted and there are declared PHEs in the future. Although we do not
know the number of issuers that would provide these temporary credits
or the amount of premium credits that issuers may elect to provide, for
purposes of this estimate we assume that such premium credits would on
average constitute approximately 8 percent of total annual premium
(equivalent to one month of premium), as previously estimated in the
final rule. Because the MLR calculation uses three consecutive years of
data, there may be additional rebate decreases in subsequent years,
although the impact on rebates might be smaller as issuers would likely
account for the premium relief provided to enrollees through these
premiums credits at the time they develop premium rates for the 2022
benefit year and other future benefit years.
We also propose to add a new Sec. 158.240(g) to explicitly allow
issuers to prepay a portion or all of their estimated MLR rebates to
enrollees for a given MLR reporting year, and to establish a safe
harbor allowing such issuers, under certain conditions, to defer the
payment of rebates remaining after prepayment until the following MLR
reporting year. We additionally propose to amend Sec. 158.241(a) to
allow issuers to provide rebates in form of a premium credit prior to
the date that the rules currently provide. We do not expect these
proposals to have a significant quantitative impact as they would not
change the rebate amounts provided by issuers to enrollees. Since it is
easiest and most cost-effective for issuers to conduct rebate
disbursement activities all at once, the additional rebates would
generally be paid during the following year's disbursement cycle--that
is, if 95 percent of rebates for 2020 was prepaid during Jan-July 2021,
the remainder would be paid no later than Sept. 2022 (possibly earlier
in 2022 if the issuer decides to prepay again). However, we note that
there may be some increased administrative burden on issuers who owe
rebates remaining after prepayment associated with good faith efforts
to locate enrollees, if any, with whom they no longer have a direct
economic relationship.
15. State Innovation Waivers
In this proposed rule, we propose to reference and incorporate the
existing 2018 Guidance in full into the section 1332 waiver
implementing regulations in order to give states certainty regarding
the requirements to receive and maintain approval of a section 1332
waiver by the Departments. This rule does not propose to alter any of
the requirements related to state innovation waiver applications,
compliance and monitoring, nor evaluation in a way that would create
any additional cost or burden for states seeking waiver approval or
those states with approved waiver plans. The Departments are of the
view that the increased certainty regarding the application
requirements would allow states to have greater confidence that the
significant time and monetary investments necessary to plan for and
submit a section 1332 waiver application would not result in wasted
resources and taxpayer dollars. This could help to increase state
innovation, which in turn could lead to more affordable health coverage
for individuals and families in states that consider implementing a
section 1332 waiver program.
16. Regulatory Review Costs
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this proposed rule, we
should estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the rule, we assume that the total number of unique
commenters on last year's proposed rule will be the number of reviewers
of this proposed rule. We acknowledge that this assumption may
understate or overstate the costs of reviewing this rule. It is
possible that not all commenters reviewed last year's rule in detail,
and it is also possible that some reviewers chose not to comment on the
proposed rule. For these reasons we thought that the number of past
commenters would be a fair estimate of the number of reviewers of this
rule. We welcome any comments on the approach in estimating the number
of entities which will review this proposed rule.
We are required to issue a substantial portion of this rule each
year under our regulations and we estimate that approximately half of
the remaining provisions would cause additional regulatory review
burden that stakeholders do not already anticipate. We also recognize
that different types of entities are in many cases affected by mutually
exclusive sections of this proposed rule, and therefore, for the
purposes of our estimate we assume that each reviewer reads
approximately 50 percent of the rule, excluding the portion of the rule
that we are required to issue each year.
Using the wage information from the BLS for medical and health
service managers (Code 11-9111), we estimate that the cost of reviewing
this rule is $110.74 per hour, including overhead and fringe
benefits.\258\ Assuming an average reading speed, we estimate that it
would take approximately 1 hours for the staff to review the relevant
portions of this proposed rule that causes unanticipated burden. We
assume that 245 entities will review this proposed rule. For each
entity that reviews the rule, the estimated cost is approximately
$110.74. Therefore, we estimate that the total cost of reviewing this
regulation is approximately $27,131 ($110.74 x 245 reviewers).
---------------------------------------------------------------------------

\258\ https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

D. Regulatory Alternatives Considered

In developing the policies contained in this proposed rule, we
considered numerous alternatives to the presented proposals. Below we
discuss the key regulatory alternatives that we considered.
Under part 153 of this proposed rule, we propose to recalibrate the
risk adjustment models for the 2022 benefit year using 2016, 2017, and
2018 enrollee-level EDGE data. The purpose of using these data years is
to ensure that the applicable benefit year's risk adjustment model
coefficients can always be included in the applicable proposed and
final HHS notice of benefit and payment parameters. As part of our
consideration of recalibration of the risk adjustment models for the
2022 benefit year, we also considered proposing to recalibrate the risk
adjustment models using the 2017, 2018, and 2019 benefit year enrollee-
level EDGE data. If we had proposed that approach, we would not have
been able to provide the proposed coefficients in this proposed rule
and would have had to display draft coefficients only reflective of the
2017 and 2018 benefit years of enrollee-level EDGE data.
We also considered alternatives to the proposed model specification
and revised enrollment duration factors to the risk adjustment models
beginning with the 2022 benefit year. For example, we initially
considered adding a non-linear term or HCC counts terms for all
enrollees to the adult and child risk adjustment models. As described
earlier in this proposed rule, we had convergence issues with the non-
linear model specifications and concerns that the HCC counts terms
approach posed significant gaming concerns.
In addition to the non-linear and HCC counts model specifications,
we also considered alternatives to the two-stage specification and HCC
interacted counts

[[Page 78667]]

model. Specifically, we tested various alternative caps for the weights
based on the distribution of costs, but found the proposed caps
resulted in better prediction on average. For the prediction weights,
we tested various alternative forms of weights, including reciprocals
of square root of prediction, log of prediction, and residuals from
first step estimation, but the reciprocal of the capped predictions
resulted in better predictive ratios for low-cost enrollees compared to
any of the other weights.
For the interacted HCC counts factors, we tested several HCCs and
considered adding and removing certain HCCs from the proposed list in
Table 3. We choose the list of HCCs in Table 3 because including these
HCCs most improved prediction for enrollees with the highest costs,
multiple HCCs, and with these specific HCCs. For the HCC interacted
counts, we also considered various alternatives to structure the
interacted HCC counts, such as applying individual interacted HCC
counts factors (between 1-10 based on the number of HCCs an enrollee
has) to each of the selected HCCs included in the models (instead of
combining all of the selected HCCs into two severe and transplant
indicator groups). We choose the proposed model specifications because
it would add fewer additional factors to the models without sacrificing
any significant predictive accuracy.
For the enrollment duration factors in the adult risk adjustment
models, we propose to replace the enrollment duration factors with
monthly duration factors of up to 6 months for those with HCCs. The
purpose of this proposed change is to address the underprediction of
plan liability for adults with HCCs. As part of this assessment, we
considered whether enrollment duration factors by market type may be
warranted. However, we did not find a major distinction in market-
specific incremental monthly enrollment duration factor risk scores
after isolating the enrollment duration factors to enrollees with HCCs.
We considered including a requirement for states to submit and be
approved for a State Innovation Waiver under section 1332 of the PPACA
as part of the proposed Exchange DE options. However, nothing under the
plain terms of section 1311(d)(4) the PPACA governing the functions of
an Exchange requires an Exchange to host a single, consumer-facing
website to receive applications or support plan shopping and
selection.\259\ Thus we concluded that there is no requirement in the
PPACA that must be waived to allow a state to implement the DE option,
and requiring states to expend taxpayer dollars to file a waiver
application would be unnecessary and unduly burdensome.
---------------------------------------------------------------------------

\259\ Section 1311(d)(4)(C) of the PPACA requires only that
``[a]n Exchange shall, at a minimum . . . maintain an internet
website through which enrollees and prospective enrollees of
qualified health plans may obtain standardized comparative
information on such plans . . . .''
---------------------------------------------------------------------------

We considered taking no action regarding our proposal to add a new
Sec. 155.420(a)(4)(iii)(C) in order to allow enrollees and their
dependents to enroll in a new QHP of a lower metal level \260\ if they
qualify for a special enrollment period due to becoming newly
ineligible for APTC. However, based on questions and concerns from
agents and brokers, the current policy prevents some enrollees from
maintaining continuous coverage because they lose a significant amount
of financial assistance that would help them purchase coverage, and
cannot enroll in a new, less costly QHP of a lower metal level. HHS
believes this proposal is unlikely to result in adverse selection, and
may improve the risk pool by supporting continued health insurance
enrollment by healthy individuals who would be forced to end coverage
in response to an increase in premium.
---------------------------------------------------------------------------

\260\ Section 1302(d) of the PPACA describes the various metal
levels of coverage based on AV, and section 2707(a) of the PHS Act
directs health insurance issuers that offer non-grandfathered health
insurance coverage in the individual or small group market to ensure
that such coverage includes the EHB package, which includes the
requirement to offer coverage at the metal levels of coverage
described in section 1302(d) of the PPACA. Consumer-facing
HealthCare.gov content explains that metal levels serve as an
indicator of ``how you and your plan split the costs of your health
care,'' noting that lower levels like bronze plans have lower
monthly premiums but higher out of pocket costs when consumers
access care, while higher levels like gold have higher monthly
premiums but lower out of pocket costs to access care--see https://www.healthcare.gov/choose-a-plan/plans-categories/.
---------------------------------------------------------------------------

We also considered whether to propose additional flexibility to
allow enrollees and their dependents who become newly eligible for APTC
in accordance with section 155.420(d)(6)(i) or (ii) to enroll in a QHP
of a higher metal level, because we recognize becoming newly eligible
for APTC may increase the affordability of higher metal level plans for
some individuals. However, we believe including this flexibility would
largely exempt the special enrollment periods at paragraph (d)(6)(i)
and (ii) from the rules at 155.420(a)(4)(iii), imposing risks of
adverse selection by permitting individuals to change coverage levels
in response to health status changes. Furthermore, while we believe the
proposed flexibilities for individuals who become newly ineligible for
APTC are needed in order to promote continuous coverage for individuals
who can no longer afford their original plan choice, no similar
affordability and continuous coverage concerns exist for enrolled
consumers who gain APTC eligibility during the coverage year.
Accordingly, at this time we are not proposing additional plan
flexibility for enrollees who become newly eligible for APTC.
We considered taking no action regarding our proposal to add a new
Sec. 155.420(c)(5) to allow a qualified individual, dependent or
enrollee that did not receive timely notice of a triggering event or
was otherwise reasonably unaware that a triggering event described in
Sec. 155.420(d) occurred to select a new plan within 60 days of the
date he or she knew, or reasonably should have known, of the occurrence
of the triggering event. However, in some circumstances this would
result in consumers, through no fault of their own, being unable to
access a special enrollment period for which they were eligible.
Additionally, we considered not adding new Sec. 155.420(b)(5) to
provide a qualified individual, dependent, or enrollee described in new
Sec. 155.420(c)(5) with the option for a retroactive effective date.
Failing to provide the option for a retroactive effective date would
necessarily result in a gap in coverage, and therefore hinder a
consumer's ability to maintain continuous coverage.
We also considered limiting the applicability of the proposal to
add a new Sec. 155.420(c)(5) to a qualified individual, enrollee, or
dependent who does not receive notice or become reasonably aware of the
occurrence of a triggering event until more than 15 days after the
triggering event. However, failing to apply the new Sec. 155.420(c)(5)
to qualified individuals, enrollees, or dependents who receive notice
or become reasonably aware of the occurrence of a triggering event 15
days or less after the triggering event and eliminating the option for
a retroactive effective date for those individuals would result in a
gap in coverage for such individuals and hinder their ability to
maintain continuous coverage.
We considered taking no action regarding our proposal to add new
paragraph (v) to Sec. 155.420(d)(1) to specify that complete cessation
of employer contributions to COBRA continuation coverage is a special
enrollment period triggering event. However, codifying this policy in
regulation provides transparency to a long-standing interpretation of
the FFEs

[[Page 78668]]

and SBE-FPs. Additionally, codifying this policy in regulation ensures
alignment across all Exchanges and in the off-Exchange individual
market.
We considered several alternatives to requiring that all Exchanges
conduct special enrollment period verification for at least 75 percent
of new enrollments through special enrollment periods for consumers not
already enrolled in coverage through the applicable Exchange, including
designating specific special enrollment period types, like Loss of
Minimum Essential Coverage, that must be verified. We concluded that
designating a percentage of special enrollment period enrollments that
must be verified would provide Exchanges with implementation
flexibility to decide the best way to conduct special enrollment period
verification based on Exchange type, population characteristics, and
trends. We also considered the impact of not proposing the revision
requiring special enrollment period verification, but concluded that
the proposed revision would have an overall positive impact on program
integrity by reducing the risk of ineligible consumers enrolling in
Exchange coverage through a special enrollment period.
For our proposals to revise Sec. 156.295 and add Sec. 184.50 to
require certain prescription drug reporting, we considered, but did not
yet require, the reporting of data described in section 1150A(b)(1)
broken down by pharmacy type (which includes an independent pharmacy,
chain pharmacy, supermarket pharmacy, or mass merchandiser pharmacy
that is licensed as a pharmacy by the state and that dispenses
medication to the general public). As mentioned above, we are aware
that it is not currently possible to report such data by pharmacy type
because pharmacy type is not a standard classification currently
captured in industry databases or files. While we believe the
imposition of this level of reporting would impose unreasonable burden
at this time, we intend to begin collecting this information in the
future.

E. Regulatory Flexibility Act

The Regulatory Flexibility Act, (5 U.S.C. 601, et seq.), requires
agencies to prepare an initial regulatory flexibility analysis to
describe the impact of the proposed rule on small entities, unless the
head of the agency can certify that the rule will not have a
significant economic impact on a substantial number of small entities.
The RFA generally defines a ``small entity'' as (1) a proprietary firm
meeting the size standards of the Small Business Administration (SBA),
(2) a not-for-profit organization that is not dominant in its field, or
(3) a small government jurisdiction with a population of less than
50,000. States and individuals are not included in the definition of
``small entity.'' HHS uses a change in revenues of more than 3 to 5
percent as its measure of significant economic impact on a substantial
number of small entities.
In this proposed rule, we propose standards for the risk adjustment
program, which are intended to stabilize premiums and reduce incentives
for issuers to avoid higher-risk enrollees. We believe that health
insurance issuers and group health plans would be classified under the
North American Industry Classification System code 524114 (Direct
Health and Medical Insurance Carriers). According to SBA size
standards, entities with average annual receipts of $41.5 million or
less would be considered small entities for these North American
Industry Classification System codes. Issuers could possibly be
classified in 621491 (HMO Medical Centers) and, if this is the case,
the SBA size standard would be $35 million or less.\261\ We believe
that few, if any, insurance companies underwriting comprehensive health
insurance policies (in contrast, for example, to travel insurance
policies or dental discount policies) fall below these size thresholds.
Based on data from MLR annual report \262\ submissions for the 2019 MLR
reporting year, approximately 77 out of 479 issuers of health insurance
coverage nationwide had total premium revenue of $41.5 million or less.
This estimate may overstate the actual number of small health insurance
companies that may be affected, since over 67 percent of these small
companies belong to larger holding groups, and many, if not all, of
these small companies are likely to have non-health lines of business
that will result in their revenues exceeding $41.5 million. Therefore,
we do not expect the proposed provisions of this rule to affect a
substantial number of small entities.
---------------------------------------------------------------------------

\261\ https://www.sba.gov/document/support--table-size-standards.
\262\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

In this proposed rule, we propose requiring certain QHP issuers or
their PBMs to report certain prescription drug information to CMS. We
are not aware of any QHP issuer or PBM that contracts with a QHP issuer
to administer their prescription drug benefit which would be considered
a ``small entity'' under the RFA.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule under title XVIII, title XIX, or
part B of title 42 of the Act may have a significant impact on the
operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the RFA. 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. While this rule is not
subject to section 1102 of the Act, we have determined that this
proposed rule would not affect small rural hospitals. Therefore, the
Secretary has determined that this rule would not have a significant
impact on the operations of a substantial number of small rural
hospitals.

F. Unfunded Mandates

Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a proposed rule that includes any
federal mandate that may result in expenditures in any one year by a
state, local, or Tribal governments, in the aggregate, or by the
private sector, of $100 million in 1995 dollars, updated annually for
inflation. Currently, that threshold is approximately $156 million.
Although we have not been able to quantify all costs, we expect the
combined impact on state, local, or Tribal governments and the private
sector to be below the threshold.

G. Federalism

Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a proposed rule that imposes
substantial direct costs on state and local governments, preempts state
law, or otherwise has federalism implications. In our view, while this
proposed rule would not impose substantial direct requirement costs on
state and local governments, this regulation has federalism
implications due to potential direct effects on the distribution of
power and responsibilities among the state and federal governments
relating to determining standards relating to health insurance that is
offered in the individual and small group markets.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have federalism
implications or limit the policy making discretion of the states, we
have engaged in efforts to consult with and work cooperatively with
affected states, including participating in conference calls with

[[Page 78669]]

and attending conferences of the NAIC, and consulting with state
insurance officials on an individual basis.
While developing this rule, we attempted to balance the states'
interests in regulating health insurance issuers with the need to
ensure market stability. By doing so, we complied with the requirements
of Executive Order 13132.
Because states have flexibility in designing their Exchange and
Exchange-related programs, state decisions will ultimately influence
both administrative expenses and overall premiums. States are not
required to establish an Exchange or risk adjustment program. For
states that elected previously to operate an Exchange, those states had
the opportunity to use funds under Exchange Planning and Establishment
Grants to fund the development of data. Accordingly, some of the
initial cost of creating programs was funded by Exchange Planning and
Establishment Grants. After establishment, Exchanges must be
financially self-sustaining, with revenue sources at the discretion of
the state. A user fee is assessed on issuers under all existing
Exchange models, including State Exchanges where the user fee is
assessed by the state, SBE-FPs, and the FFEs. We have solicited comment
on the proposed user fee rate of 1.5 percent of monthly premiums or
issuers in Exchanges that adopt the newly proposed FFE-DE and SBE-FP-DE
options.

H. Congressional Review Act

This proposed rule is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801, et seq.), which specifies that before a rule can
take effect, the federal agency promulgating the rule shall submit to
each House of the Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information,
and has been transmitted to the Congress and the Comptroller for
review. This proposed rule, if finalized as proposed, is expected to be
a ``major rule'' as that term is defined in 5 U.S.C. 804(2), because it
is likely to result in an annual effect on the economy of $100 million
or more.

I. Reducing Regulation and Controlling Regulatory Costs

Executive Order 13771, titled Reducing Regulation and Controlling
Regulatory Costs, was issued on January 30, 2017. Section 2(a) of
Executive Order 13771 requires an agency, unless prohibited by law, to
identify at least two existing regulations to be repealed when the
agency publicly proposes for notice and comment, or otherwise issues, a
new regulation. In furtherance of this requirement, section 2(c) of
Executive Order 13771 requires that the new incremental costs
associated with new regulations shall, to the extent permitted by law,
be offset by the elimination of existing costs associated with at least
two prior regulations.
This proposed rule, if finalized as proposed, is expected to be
E.O. 13771 regulatory action. We estimate costs of approximately $52.45
million in 2021, cost savings of approximately $72.08 million in 2022,
costs of approximately $40.92 in 2023 and annual costs of approximately
$6.32 million thereafter. Thus the annualized value of costs, as of
2016 and calculated over a perpetual time horizon with a 7 percent
discount rate, would be $4.65 million.

List of Subjects

31 CFR Part 33

Health care, Health insurance, Reporting and recordkeeping
requirements, Waivers for State Innovation.

45 CFR Part 147

Age discrimination, Citizenship and naturalization, Civil rights,
Health care, Health insurance, Individuals with disabilities,
Intergovernmental relations, Reporting and recordkeeping requirements,
Sex discrimination.

45 CFR Part 150

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

45 CFR Part 153

Administrative practice and procedure, Health care, Health
insurance, Health records, Intergovernmental relations, Organization
and functions (Government agencies), Reporting and recordkeeping
requirements.

45 CFR Part 155

Administrative practice and procedure, Advertising, Age
discrimination, Brokers, Civil rights, Citizenship and naturalization,
Conflict of interests, Consumer protection, Grant programs-health,
Grants administration, Health care, Health insurance, Health
maintenance organizations (HMO), Health records, Hospitals, Indians,
Individuals with disabilities, Intergovernmental relations, Loan
programs-health, Medicaid, Organization and functions (Government
agencies), Public assistance programs, Reporting and recordkeeping
requirements, Sex discrimination, State and local governments,
Technical assistance, Taxes, Women, Youth.

45 CFR Part 156

Administrative practice and procedure, Advertising, Advisory
committees, Age discrimination, Alaska, Brokers, Citizenship and
naturalization, Civil rights, Conflict of interests, Consumer
protection, Grant programs-health, Grants administration, Health care,
Health insurance, Health maintenance organization (HMO), Health
records, Hospitals, Indians, Individuals with disabilities,
Intergovernmental relations, Loan programs-health, Medicaid,
Organization and functions (Government agencies), Prescription drugs,
Public assistance programs, Reporting and recordkeeping requirements,
Sex discrimination, State and local governments, Sunshine Act,
Technical assistance, Women, Youth.

45 CFR Part 158

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

45 CFR Part 184

Administrative practice and procedure, Consumer protection, Health
care, Health insurance, Health maintenance organization (HMO),
Organization and functions (Government agencies), Prescription Drugs,
Reporting and recordkeeping requirements.

For the reasons set forth in the preamble, the Department of the
Treasury amends 31 CFR subtitle A as set forth below:

PART 33--WAIVERS FOR STATE INNOVATION

0
1. The authority citation for part 33 continues to read as follows:

Authority: Sec. 1332, Pub. L. 111-148, 124 Stat. 119.

0
2. Section 33.108 is amended by revising paragraph (f)(3)(iv)
introductory text to read as follows:

Sec. 33.108 Application procedures.

* * * * *
(f) * * *
(3) * * *
(iv) The analyses, actuarial certifications, data, assumptions,
analysis, targets and other information set forth in paragraph (f)(4)
of this section sufficient to provide the Secretary and the Secretary
of Health and Human Services, as applicable, with the necessary data to
determine

[[Page 78670]]

that the State's proposed waiver satisfies the general requirements for
approval under section 1332(b)(1) of the Affordable Care Act consistent
with guidance published by the Secretary and the Secretary of Health
and Human Services at 83 FR 53575 (Oct. 24, 2018):
* * * * *
0
3. Section 33.120 is amended by revising paragraph (a)(1) to read as
follows:

Sec. 33.120 Monitoring and compliance.

(a) * * * (1) Following the issuance of a final decision to approve
a section 1332 waiver by the Secretary and the Secretary of Health and
Human Services, as applicable, a State must comply with all applicable
Federal laws, regulations, and interpretive policy statements, as well
as guidance published by the Secretary and the Secretary of Health and
Human Services at 83 FR 53575 (Oct. 24, 2018), unless expressly waived.
A State must, within the timeframes specified in law, regulation,
policy or guidance, come into compliance with any changes in Federal
law, regulation, or policy affecting section 1332 waivers, unless the
provision being changed is expressly waived.
* * * * *
0
4. Section 33.128 is amended by revising paragraph (a) to read as
follows:

Sec. 33.128 Periodic evaluation requirements.

(a) The Secretary and the Secretary of Health and Human Services,
as applicable, shall periodically evaluate the implementation of a
program under a section 1332 waiver consistent with guidance published
by the Secretary and the Secretary of Health and Human Services,
including the State Relief and Empowerment Waivers guidance published
on October 24, 2018, as applicable, and any terms and conditions
governing the section 1332 waiver.
* * * * *
For the reasons set forth in the preamble, under the authority at 5
U.S.C. 301, the Department of Health and Human Services proposes to
amend 45 CFR subtitle A, subchapter B, as set forth below.

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

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

Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92, as amended.

0
6. Section 147.104 is amended by revising paragraphs (b)(2)(ii) and
(4)(ii) to read as follows:

Sec. 147.104 Guaranteed availability of coverage.

* * * * *
(b) * * *
(2) * * *
(ii) In applying this paragraph (b)(2), a reference in Sec.
155.420 (other than in Sec. Sec. 155.420(a)(5) and 155.420(d)(4)) of
this subchapter to a ``QHP'' is deemed to refer to a plan, a reference
to ``the Exchange'' is deemed to refer to the applicable State
authority, and a reference to a ``qualified individual'' is deemed to
refer to an individual in the individual market. For purposes of Sec.
155.420(d)(4) of this subchapter ``the Exchange'' is deemed to refer to
the Exchange or the health plan, as applicable.
* * * * *
(4) * * *
(ii) In the individual market, subject to Sec. 155.420(c)(5) of
this subchapter, individuals must be provided 60 calendar days after
the date of an event described in paragraph (b)(2) and (3) of this
section to elect coverage, as well as 60 calendar days before certain
triggering events as provided for in Sec. 155.420(c)(2) of this
subchapter.
* * * * *

PART 150--CMS ENFORCEMENT IN GROUP AND INDIVIDUAL INSURANCE MARKETS

0
7. The authority citation for part 150 continues to read as follows:

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

Sec. 150.103 [Amended]

0
8. In Sec. 150.103 amend the definition of ``Complaint'' by removing
the word ``HIPAA'' and adding in its place ``PHS Act''.

Sec. 150.205 [Amended]

0
9. In Sec. 150.205 amend paragraph (e)(2) by removing the word
``HIPAA'' and adding in its place ``PHS Act''.

Sec. 150.213 [Amended]

0
10. In Sec. 150.213 amend paragraph (b) by removing the word ``HIPAA''
and adding in its place ``PHS Act''.

Sec. 150.303 [Amended]

0
11. In Sec. 150.303 amend paragraph (a) introductory text by removing
the word ``HIPAA'' and adding in its place ``PHS Act''.

Sec. 150.305 [Amended]

0
12. In Sec. 150.305 amend paragraphs (a)(1), (a)(2), (b)(1), and
(c)(1) by removing the word ``HIPAA'' each time it appears and adding
in its place ``PHS Act''.

Sec. 150.311 [Amended]

0
13. In Sec. 150.311 amend paragraph (g) by removing the word ``HIPAA''
and adding in its place ``PHS Act''.

Sec. 150.313 [Amended]

0
14. In Sec. 150.313 amend paragraph (b) by removing the word
``HIPAA'' and adding in its place ``PHS Act''.
0
15. Amend Sec. 150.401 by revising the definitions of ``Filing date''
and ``Hearing'' to read as follows:

Sec. 150.401 Definitions.

* * * * *
Filing date means the date filed electronically.
Hearing includes a hearing on a written record as well as an in-
person, telephone, or video teleconference hearing.
* * * * *
0
16. Amend Sec. 150.419 by revising paragraph (a) to read as follows:

Sec. 150.419 Forms of hearing.

(a) All hearings before an ALJ are on the record. The ALJ may
receive argument or testimony in writing, in person, by telephone, or
by video teleconference. The ALJ may receive testimony by telephone
only if the ALJ determines that doing so is in the interest of justice
and economy and that no party will be unduly prejudiced. The ALJ may
require submission of a witness' direct testimony in writing only if
the witness is available for cross-examination.
* * * * *
0
17. Amend Sec. 150.427 by revising paragraph (a) introductory text
and paragraph (b) to read as follows:

Sec. 150.427 Form and service of submissions.

(a) Every submission filed with the ALJ must be filed
electronically and include:
* * * * *
(b) A party filing a submission with the ALJ must, at the time of
filing, serve a copy of such submission on the opposing party. An
intervenor filing a submission with the ALJ must, at the time of
filing, serve a copy of the submission on all parties. If a party is
represented by an attorney, service must be made on the attorney. An
electronically filed submission is considered served on all parties
using the electronic filing system.

[[Page 78671]]

0
18. Revise Sec. 150.431 to read as follows:

Sec. 150.431 Acknowledgment of request for hearing.

After receipt of the request for hearing, the ALJ assigned to the
case or someone acting on behalf of the ALJ will send a written notice
to the parties that acknowledges receipt of the request for hearing,
identifies the docket number assigned to the case, and provides
instructions for filing submissions and other general information
concerning procedures. The ALJ will set out the next steps in the case
either as part of the acknowledgement or on a later date.
0
19. Amend Sec. 150.441 by revising paragraph (e) to read as follows:

Sec. 150.441 Prehearing conferences.

* * * * *
(e) Establishing a schedule for an in-person, telephone, or video
teleconference hearing, including setting deadlines for the submission
of written direct testimony or for the written reports of experts.
* * * * *
0
20. Amend Sec. 150.447 by revising paragraph (a) to read as follows:

Sec. 150.447 The record.

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

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

Authority: 42 U.S.C. 18031, 18041, and 18061 through 18063.

0
22. Section 153.320 is amended by--
0
a. Revising paragraph (c);
0
b. Redesignating paragraphs (d)(2) through (d)(4) as paragraphs (d)(3)
through (d)(5), respectively;
0
c. Adding new paragraph (d)(2);
0
d. Revising newly designated paragraphs (d)(4) and (d)(5)(i); and
0
e. Adding paragraphs (d)(5)(iii) through (v).
The revisions and additions read as follows:

Sec. 153.320 Federally certified risk adjustment methodology.

* * * * *
(c) Use of methodology for States that do not operate a risk
adjustment program. HHS will specify in notice and comment rulemaking
by HHS in advance of the applicable benefit year, the Federally
certified risk adjustment methodology that will apply in States that do
not operate a risk adjustment program.
(d) * * *
* * * * *
(2) Beginning with the 2023 benefit year, States may request a
reduction to otherwise applicable risk adjustment transfers calculated
under the HHS-operated risk adjustment methodology for up to 3 years.
(i) A State making a multi-year request must:
(A) Submit evidence and analysis as set forth in paragraphs
(d)(1)(i) through (iii) of this section, as applicable, for all years
to which the request would apply.
(B) Include with its request a confirmation that it does not
anticipate any significant changes to the State market risk pool(s)
impacted by its request for the duration for which it is requesting a
reduction in risk adjustment transfers.
(C) Respond to HHS requests for supplemental evidence under
paragraph (d)(5)(iv) of this section, in the form, manner, and
timeframe specified by HHS.
(ii) A State may withdraw its multi-year state reduction request
prior to the natural expiration of the request by notifying HHS of its
intent to withdraw the request, in the form and manner specified by
HHS, 60 calendar days prior to the applicable benefit year's rate
setting deadline. The State must also notify its impacted issuers of
the withdrawal of its multi-year reduction request at least 45 calendar
days prior to the applicable benefit year's rate setting deadline.
* * * * *
(4) Publication of reduction requests. HHS will publish State
reduction requests in the applicable benefit year's HHS notice of
benefit and payment parameters and make the supporting evidence
available to the public for comment, except to the extent the State
requests HHS not publish certain supporting evidence because it
contains trade secrets or confidential commercial or financial
information as defined in HHS' Freedom of Information regulations under
45 CFR 5.31(d). HHS will publish any approved or denied State reduction
requests in the applicable benefit year's HHS notice of benefit and
payment parameters final rule. Beginning with the 2023 benefit year,
all multi-year State reduction requests will be published in the annual
HHS notice of benefit and payment parameters that correspond with the
first year in which the multi-year flexibility was requested.
(5) * * *
(i) Subject to paragraphs (d)(5)(ii) and (iii) of this section, HHS
will approve State reduction requests if HHS determines, based on the
review of the information submitted as part of the State's request,
along with other relevant factors, including the premium impact of the
transfer reduction for the State market risk pool, and other relevant
public comments:
* * * * *
(iii) For multi-year requests, HHS may approve a duration that is
shorter than what was requested by the State for a multi-year reduction
request if HHS determines that the supporting evidence and analysis do
not fully support the requested duration.
(iv) HHS may request supplemental evidence from a State with an
approved multi-year reduction request at any time after its initial
approval, in the form and manner specified by HHS.
(v) HHS retains the ability to terminate or modify a previously
approved multi-year reduction request at any time after its initial
approval if new additional data or information does not support the
continuation of the State's reduction request and the State has not
provided sufficient supplemental evidence to rebut such data or
information. If the request is terminated or modified by HHS, the State
must notify its impacted issuers of the termination or modification of
its multi-year reduction request within 15 calendar days of the state's
receipt of HHS's notice of termination or modification of its
previously approved reduction request.
0
23. Amend Sec. 153.410 by revising paragraph (d) to read as follows:

Sec. 153.410 Requests for reinsurance payment.

* * * * *
(d) Audits and Compliance Reviews. HHS or its designee may audit or
conduct a compliance review of an issuer of a reinsurance-eligible plan
to assess its compliance with the applicable requirements of this
subpart and subpart H of this part. Compliance reviews conducted under
this section will follow the standards set forth in Sec. 156.715 of
this subchapter.
(1) Notice of Audit. HHS will provide at least 15 calendar days
advance notice of its intent to conduct an audit of an issuer of a
reinsurance-eligible plan.
(i) Conferences. All audits will include an entrance conference at
which the scope of the audit will be presented

[[Page 78672]]

and an exit conference at which the initial audit findings will be
discussed.
(ii) [Reserved]
(2) Compliance with Audit Activities. To comply with an audit under
this section, the issuer must:
(i) Ensure that its relevant employees, agents, contractors,
subcontractors, downstream entities, and delegated entities cooperate
with any audit or compliance review under this section;
(ii) Submit complete and accurate data to HHS or its designees that
is necessary to complete the audit, in the format and manner specified
by HHS, no later than 30 calendar days after the initial audit response
deadline established by HHS at the entrance conference described in
paragraph (d)(1)(i) of this section for the applicable benefit year;
(iii) Respond to all audit notices, letters, and inquiries,
including requests for supplemental or supporting information, as
requested by HHS, no later than 15 calendar days after the date of the
notice, letter, request, or inquiry; and
(iv) In circumstances in which an issuer cannot provide the
requested data or response to HHS within the timeframes under paragraph
(d)(2)(ii) or (iii) of this section, as applicable, the issuer may make
a written request for an extension to HHS. The extension request must
be submitted within the timeframe established under paragraph
(d)(2)(ii) or (iii) of this section, as applicable, and must detail the
reason for the extension request and the good cause in support of the
request. If the extension is granted, the issuer must respond within
the timeframe specified in HHS's notice granting the extension of time.
(3) Preliminary Audit Findings. HHS will share its preliminary
audit findings with the issuer, who will then have 30 calendar days to
respond to such findings in the format and manner specified by HHS.
(i) If the issuer does not dispute or otherwise respond to the
preliminary findings, the audit findings will become final.
(ii) If the issuer responds and disputes the preliminary findings,
HHS will review and consider such response and finalize the audit
findings after such review.
(4) Final Audit Findings. If an audit results in the inclusion of a
finding in the final audit report, the issuer must comply with the
actions set forth in the final audit report in the manner and timeframe
established by HHS, and the issuer must complete all of the following:
(i) Within 30 calendar days of the issuance of the final audit
report, provide a written corrective action plan to HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written documentation of the corrective
actions once taken.
(5) Failure to Comply with Audit Activities. If an issuer fails to
comply with the audit activities set forth in this subsection in the
manner and timeframes specified by HHS:
(i) HHS will notify the issuer of reinsurance payments received
that the issuer has not adequately substantiated; and
(ii) HHS will notify the issuer that HHS may recoup any payments
identified in paragraph (5)(i) of this section if the reinsurance debt
is not paid.
0
24. Amend Sec. 153.620 by revising paragraph (c) to read as follows:

Sec. 153.620 Compliance with risk adjustment standards.

* * * * *
(c) Audits and Compliance Reviews. HHS or its designee may audit or
conduct a compliance review of an issuer of a risk adjustment covered
plan to assess its compliance with respect to the applicable
requirements in this subpart and subpart H of this part. Compliance
reviews conducted under this section will follow the standards set
forth in Sec. 156.715 of this subchapter.
(1) Notice of Audit. HHS will provide at least 15 calendar days
advance notice of its intent to conduct an audit of an issuer of a risk
adjustment covered plan.
(i) Conferences. All audits will include an entrance conference at
which the scope of the audit will be presented and an exit conference
at which the initial audit findings will be discussed.
(ii) [Reserved]
(2) Compliance with Audit Activities. To comply with an audit under
this section, the issuer must:
(i) Ensure that its relevant employees, agents, contractors,
subcontractors, downstream entities, and delegated entities cooperate
with any audit or compliance review under this section;
(ii) Submit complete and accurate data to HHS or its designees that
is necessary to complete the audit, in the format and manner specified
by HHS, no later than 30 calendar days after the initial audit response
deadline established by HHS at the audit entrance conference described
in paragraph (c)(1)(i) of this section for the applicable benefit year;
(iii) Respond to all audit notices, letters, and inquiries,
including requests for supplemental or supporting information, as
requested by HHS, no later than 15 calendar days after the date of the
notice, letter, request, or inquiry; and
(iv) In circumstances in which an issuer cannot provide the
requested data or response to HHS within the timeframes under
paragraphs (c)(2)(ii) or (iii) of this section, as applicable, the
issuer may make a written request for an extension to HHS. The
extension request must be submitted within the timeframe established
under paragraphs (c)(2)(ii) or (iii) of this section, as applicable,
and must detail the reason for the extension request and the good cause
in support of the request. If the extension is granted, the issuer must
respond within the timeframe specified in HHS's notice granting the
extension of time.
(3) Preliminary Audit Findings. HHS will share its preliminary
audit findings with the issuer, who will then have 30 calendar days to
respond to such findings in the format and manner specified by HHS.
(i) If the issuer does not dispute or otherwise respond to the
preliminary findings, the audit findings will become final.
(ii) If the issuer responds and disputes the preliminary findings,
HHS will review and consider such response and finalize the audit
findings after such review.
(4) Final Audit Findings. If an audit results in the inclusion of a
finding in the final audit report, the issuer must comply with the
actions set forth in the final audit report in the manner and timeframe
established by HHS, and the issuer must complete all of the following:
(i) Within 30 calendar days of the issuance of the final audit
report, provide a written corrective action plan to HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written documentation of the corrective
actions once taken.
(5) Failure to Comply with Audit Activities. If an issuer fails to
comply with the audit activities set forth in this subsection in the
manner and timeframes specified by HHS:
(i) HHS will notify the issuer of the risk adjustment (including
high-cost risk pool) payments that the issuer has not adequately
substantiated; and
(ii) HHS will notify the issuer that HHS may recoup any risk
adjustment (including high-cost risk pool) payments identified in
paragraph (c)(5)(i) of this section.
0
25. Section 153.630 is amended by--
0
a. Revising paragraphs (d)(2) and (3); and

[[Page 78673]]

0
b. Adding paragraphs (g)(4) and (5).
The revisions read as follows:

Sec. 153.630 Data validation requirements when HHS operates risk
adjustment.

* * * * *
(d) * * *
(2) Within 15 calendar days of the notification by HHS of the
findings of a second validation audit (if applicable) or the
calculation of a risk score error rate, in the manner set forth by HHS,
an issuer must confirm the findings of the second validation audit (if
applicable) or the calculation of the risk score error rate as a result
of risk adjustment data validation, or file a discrepancy report to
dispute the findings of a second validation audit (if applicable) or
the calculation of a risk score error rate as a result of risk
adjustment data validation.
(3) An issuer may appeal the findings of a second validation audit
(if applicable) or the calculation of a risk score error rate as result
of risk adjustment data validation, under the process set forth in
Sec. 156.1220 of this subchapter.
* * * * *
(g) * * *
(4) The issuer only offered small group market carryover coverage
during the benefit year that is being audited.
(5) The issuer was the sole issuer in the state market risk pool
during the benefit year that is being audited and did not participate
in any other market risk pools in the State during the benefit year
that is being audited.
0
26. Section 153.710 is amended--
0
a. By redesignating paragraphs (e) through (g), as paragraphs (f)
through (h), respectively; and
0
b. By adding a new paragraph (e); and
0
c. In newly redesignated paragraph (h) introductory text by removing
the reference ``paragraph (g)(3)'' and adding in its place the
reference ``paragraph (h)(3)''.
The addition reads as follows:

Sec. 153.710 Data requirements.

* * * * *
(e) Materiality Threshold. HHS will consider a discrepancy reported
under paragraph (d)(2) of this section to be material if the amount in
dispute is equal to or exceeds 1 percent of the applicable payment or
charge payable to or due from the issuer for the benefit year, or
$100,000, whichever is less.
* * * * *

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

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

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

0
28. Section 155.20 is amended by--
0
a. Adding the definitions of ``Agent or broker direct enrollment
technology provider'' and ``Qualified health plan issuer direct
enrollment technology provider'';
0
b. Revising the definitions of ``Web-broker''.
The additions and revision read as follows:

Sec. 155.20 Definitions.

* * * * *
Agent or broker direct enrollment technology provider means a type
of web-broker business entity that is not a licensed agent or broker
under State law and has been engaged or created by, or is owned by an
agent or broker, to provide technology services to facilitate
participation in direct enrollment under Sec. Sec. 155.220(c)(3) and
155.221.
* * * * *
Qualified health plan issuer direct enrollment technology provider
means a business entity that provides technology services or provides
access to an information technology platform to QHP issuers to
facilitate participation in direct enrollment under Sec. Sec. 155.221
or 156.1230, including a web-broker that provides services as a direct
enrollment technology provider to QHP issuers. A QHP issuer direct
enrollment technology provider that provides technology services or
provides access to an information technology platform to a QHP issuer
will be a downstream or delegated entity of the QHP issuer that
participates or applies to participate as a direct enrollment entity.
* * * * *
Web-broker means an individual agent or broker, group of agents or
brokers, or business entity registered with an Exchange under Sec.
155.220(d)(1) that develops and hosts a non-Exchange website that
interfaces with an Exchange to assist consumers with direct enrollment
in QHPs offered through the Exchange as described in Sec.
155.220(c)(3) or Sec. 155.221. The term also includes an agent or
broker direct enrollment technology provider.
0
29. Section 155.205 is amended by revising paragraphs (c)(2)(i)(B),
(c)(2)(iii)(B), (c)(2)(iv) introductory text, (c)(2)(iv)(B) and (C) to
read as follows:

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

* * * * *
(c) * * *
(2) * * *
(i) * * *
(B) For a web-broker, beginning November 1, 2015, or when such
entity has been registered with the Exchange for at least 1 year,
whichever is later, this standard also includes telephonic interpreter
services in at least 150 languages.
* * * * *
(iii) * * *
(B) For a web-broker, beginning when such entity has been
registered with the Exchange for at least 1 year, this standard also
includes taglines on website content and any document that is critical
for obtaining health insurance coverage or access to health care
services through a QHP for qualified individuals, applicants, qualified
employers, qualified employees, or enrollees. Website content or
documents are deemed to be critical for obtaining health insurance
coverage or access to health care services through a QHP if they are
required to be provided by law or regulation to a qualified individual,
applicant, qualified employer, qualified employee, or enrollee. Such
taglines must indicate the availability of language services in at
least the top 15 languages spoken by the limited English proficient
population of the relevant State or States, as determined in guidance
published by the Secretary. A web-broker that is licensed in and
serving multiple States may aggregate the limited English populations
in the States it serves to determine the top 15 languages required for
taglines. A web-broker may satisfy tagline requirements with respect to
website content if it posts a Web link prominently on its home page
that directs individuals to the full text of the taglines indicating
how individuals may obtain language assistance services, and if it also
includes taglines on any critical stand-alone document linked to or
embedded in the website.
(iv) For Exchanges, QHP issuers, and web-brokers, website
translations.
* * * * *
(B) For a QHP issuer, beginning no later than the first day of the
individual market open enrollment period for the 2017 benefit year, or,
in cases where a QHP issuer is participating in the enhanced direct
enrollment program, twelve (12) months from the date the QHP issuer
begins operating its enhanced direct enrollment website in the relevant
state for the website content that must be added to its website as a

[[Page 78674]]

condition of participation in the FFE enhanced direct enrollment
program. If the content of a website maintained by the QHP issuer is
critical for obtaining health insurance coverage or access to health
care services through a QHP within the meaning of Sec. 156.250 of this
subchapter, it must be translated into any non-English language that is
spoken by a limited English proficient population that reaches 10
percent or more of the population of the relevant State, as determined
in guidance published by the Secretary.
(C) For a web-broker, beginning on the first day of the individual
market open enrollment period for the 2017 benefit year, or when such
entity has been registered with the Exchange for at least one year,
whichever is later, or, in cases where a web-broker is participating in
the enhanced direct enrollment program, twelve (12) months from the
date the web-broker begins operating its enhanced direct enrollment
website in the relevant state for the website content added to its
website to participate in the FFE enhanced direct enrollment program,
content that is intended for qualified individuals, applicants,
qualified employers, qualified employees, or enrollees on a website
that is maintained by the web-broker must be translated into any non-
English language that is spoken by a limited English proficient
population that comprises 10 percent or more of the population of the
relevant State, as determined in guidance published by the Secretary,
except that when a web-broker operates in a State using a direct
enrollment model under Sec. 155.221(j) of this subpart, the web-broker
must translate website content consistent with this paragraph as soon
as it begins operations in the State.
* * * * *
0
30. Section 155.220 is amended by--
0
a. Revising paragraphs (c)(3)(i)(A) and (D);
0
b. Adding paragraph (c)(3)(iii); and
0
c. Adding paragraphs (c)(6) and (n).
The revisions and additions read as follows:

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

* * * * *
(c) * * *
(3) * * *
(i) * * *
(A) Disclose and display all QHP information provided by the
Exchange or directly by QHP issuers consistent with the requirements of
Sec. 155.205(b)(1) and (c), except as permitted under paragraph (n) of
this section;
* * * * *
(D) Display all QHP data provided by the Exchange, except as
permitted under paragraph (n) of this section;
* * * * *
(iii)(A) Notwithstanding paragraph (n)(1) of this section, when
permitted under State law, Navigators and certified application
counselors may use the website of a web-broker to assist an applicant
to enroll in a QHP offered through the Exchange, including to assist an
applicant to complete the Exchange eligibility application, if the
website displays all QHP data provided by the Exchange related to all
QHPs offered through the Exchange consistent with the requirements of
Sec. 155.205(b)(1) and (c). Navigators and certified application
counselors may use a web-broker website that does not facilitate
enrollment in all QHPs offered through the Exchange, so long as the
website identifies such QHPs to consumers by prominently displaying a
standardized disclaimer provided by the Exchange, and in the manner and
form specified by the Exchange, stating that enrollment in such QHPs
can be completed through the Exchange website and providing a link to
the Exchange website.
(B) A web-broker that makes its website available for use by
Navigators and certified application counselors, consistent with the
requirements in paragraph (c)(3)(iii)(A) of this section may complete
an annual certification process with the Exchange, in the manner and
form specified by the Exchange, by attesting to its compliance with the
requirements in paragraph (c)(3)(iii)(A) of this section.
* * * * *
(6) In addition to applicable requirements under Sec.
155.221(b)(4), a web-broker must demonstrate operational readiness and
compliance with applicable requirements prior to the web-broker's
internet website being used to complete an Exchange eligibility
application or a QHP selection, which may include submission or
completion, in the form and manner specified by HHS, of the following:
(i) Operational data including licensure information, points of
contact, and third-party relationships;
(ii) Enrollment testing, prior to approval or renewal;
(iii) Website reviews performed by HHS;
(iv) Security and privacy assessment documentation, including:
(A) Penetration testing results;
(B) Security and privacy assessment reports;
(C) Vulnerability scan results;
(D) Plans of action and milestones; and
(E) System security and privacy plans.
(v) Agreements between the web-broker and HHS.
* * * * *
(n) Exception. (1) Except in cases where the website of a web-
broker is intended to be available for use by Navigators and certified
application counselors consistent with paragraph (c)(3)(iii)(A) of this
section, if the website of a web-broker does not support enrollment in
a QHP offered through an Exchange, the web-broker is not required to
provide all of the standardized comparative information required under
Sec. 155.205(b)(1) for that QHP, but the web-broker's website must
instead:
(i) Prominently display a standardized disclaimer provided by HHS
stating that information required under Sec. 155.205(b)(1) for the QHP
is available on the Exchange website;
(ii) Provide a Web link to the Exchange website; and
(iii) Display the following minimum QHP information consistent with
the requirements of Sec. 155.205(c): Issuer marketing name, plan
marketing name, plan type, metal level, and premium and cost-sharing
information.
(2) [Reserved]
0
31. Section 155.221 is amended--
0
a. By revising paragraphs (b)(1), (3), and (4);
0
b. By redesignating paragraphs (c) through (h) as paragraphs (d)
through (i), respectively.
0
c. By adding paragraphs (c) and (j);
0
d. By revising newly redesignated paragraphs (g) introductory text,
(g)(6), (g)(7), and (h) by removing the reference to ``paragraph (e)''
and adding in its place a reference to ``paragraph (f)''; and
0
e. By adding paragraph (j).
The additions and revisions read as follows:

Sec. 155.221 Standards for direct enrollment entities and for third
parties to perform audits of direct enrollment entities.

* * * * *
(b) * * *
(1) Display and market QHPs offered through the Exchange,
individual health insurance coverage as defined in Sec. 144.103 of
this subchapter offered outside the Exchange (including QHPs and non-
QHPs other than excepted benefits), and any other products, such as
excepted benefits, on at least three separate website pages on its non-
Exchange website, except as permitted under paragraph (c) of this
section;
* * * * *
(3) Limit marketing of non-QHPs during the Exchange eligibility

[[Page 78675]]

application and QHP selection process in a manner that minimizes the
likelihood that consumers will be confused as to which products and
plans are available through the Exchange and which products and plans
are not, except as permitted under paragraph (c)(1) of this section;
(4) Demonstrate operational readiness and compliance with
applicable requirements prior to the direct enrollment entity's
internet website being used to complete an Exchange eligibility
application or a QHP selection, which may include submission or
completion, in the form and manner specified by HHS, of the following:
(i) Business audit documentation including:
(A) Notices of intent to participate including auditor information;
(B) Documentation packages including privacy questionnaires,
privacy policy statements, and terms of service; and
(C) Business audit reports including testing results.
(ii) Security and privacy audit documentation including:
(A) Interconnection security agreements;
(B) Security and privacy controls assessment test plans;
(C) Security and privacy assessment reports;
(D) Plans of action and milestones;
(E) Privacy impact assessments;
(F) System security and privacy plans;
(G) Incident response plans; and
(H) Vulnerability scan results.
(iii) Eligibility application audits performed by HHS;
(iv) Online training modules offered by HHS; and
(v) Agreements between the direct enrollment entity and HHS.
* * * * *
(c) Exceptions to direct enrollment entity display and marketing
requirement. For the Federally-facilitated Exchanges, a direct
enrollment entity may:
(1) Display and market QHPs offered through the Exchange and
individual health insurance coverage as defined in Sec. 144.103 of
this subchapter offered outside the Exchange (including QHPs and non-
QHPs other than excepted benefits) on the same website pages when
assisting individuals who have communicated receipt of an offer of an
individual coverage health reimbursement arrangement as described in
Sec. 146.123(c) of this subchapter, as a standalone benefit, or in
addition to an offer of an arrangement under which the individual may
pay the portion of the premium for individual health insurance coverage
that is not covered by an individual coverage health reimbursement
arrangement using a salary reduction arrangement pursuant to a
cafeteria plan under section 125 of the Internal Revenue Code, but must
clearly distinguish between the QHPs offered through the Exchange and
individual health insurance coverage offered outside the Exchange
(including QHPs and non-QHPs other than excepted benefits), and
prominently communicate that advance payments of the premium tax credit
and cost-sharing reductions are available only for QHPs purchased
through the Exchange, that advance payments of the premium tax credit
are not available to individuals who accept an offer of an individual
coverage health reimbursement arrangement or who opt out of an
individual coverage health reimbursement arrangement that is considered
affordable, and that a salary reduction arrangement under a cafeteria
plan may only be used toward the cost of premiums for plans purchased
outside the Exchange; and
(2) Display and market Exchange-certified stand-alone dental plans
offered outside the Exchange and non-certified stand-alone dental plans
on the same website pages.
* * * * *
(j) Process for States to elect the Exchange Direct Enrollment
Option. Subject to HHS approval, and in addition to or in lieu of the
Exchange in the State operating its own consumer-facing eligibility
application and enrollment website, a State may elect for the State
Exchange, State Exchange on the Federal platform, or Federally-
facilitated Exchange in the State to approve one or more enrollment
entities described in paragraph (a) of this section to make available a
non-Exchange online website to enroll qualified individuals in a QHP
offered through the Exchange in the State in a manner that constitutes
enrollment through the Exchange, as specified in paragraphs (j)(1) or
(2) of this section. Through these approved entities consumers in the
State apply for coverage using an eligibility verification and
enrollment application as described in Sec. 155.405, and receive
eligibility determinations from the Exchange for QHP enrollment,
advance payments of the premium tax credit and cost-sharing reductions,
as well as receive assessments or determinations from the Exchange for
Medicaid and CHIP eligibility in accordance with Sec. Sec. 155.302 and
155.405.
(1) Direct Enrollment Option for a State Exchange. A State may
receive approval, under Sec. Sec. 155.105(b) and 155.106(a), to
operate a State Exchange using the direct enrollment option described
in paragraph (j) of this section. The State Exchange must meet all
federal statutory and regulatory requirements for the operation of an
Exchange. An approved State Exchange that wishes to implement this
option must submit a revised Exchange Blueprint in accordance with
Sec. 155.105(e). In order to obtain approval for the State Exchange to
implement this option, the State must:
(i) Demonstrate to HHS operational readiness for the State Exchange
and its proposed direct enrollment entities to enroll qualified
individuals in a QHP in a manner that constitutes enrollment through
the Exchange and to enable individuals to apply for, and receive
eligibility determinations for QHP enrollment, advance payments of the
premium tax credit and cost-sharing reductions for QHPs from the
Exchange, as well as receive assessments or determinations of Medicaid
and CHIP eligibility from the Exchange as described in Sec. 155.302,
using the eligibility verification and enrollment application described
in Sec. 155.405;
(ii) Provide HHS an implementation plan and timeline that details
the key activities, milestones, and communication and outreach strategy
to support the transition of enrollment operations to direct enrollment
entities; and
(iii) Ensure that a minimum of one direct enrollment entity
approved by the State meets minimum federal requirements for HHS
approval to participate in the Federally-facilitated Exchange direct
enrollment program, including requirements at 45 CFR 155.220 and
155.221, and is capable of enrolling all consumers in the State,
including those who present complex eligibility scenarios. Where no
direct enrollment entity approved by the State meets such minimum
federal requirements or possesses the capability to enroll all
consumers in the State, the State must offer a consumer-facing website
that meets such requirements and possess such capability.
(2) Direct enrollment option for a State with a Federally-
facilitated Exchange or State Exchange on the Federal platform.
Pursuant to a request from a State, the Federally-facilitated Exchange
or a State Exchange on the Federal platform may partner with the
requesting State to implement the direct enrollment option described in
this paragraph (j). The Federally-facilitated Exchange or State-based
Exchange on

[[Page 78676]]

the Federal platform must meet all federal statutory and regulatory
requirements for the operation of an Exchange. In order to obtain
approval for the Federally-facilitated Exchange or State Exchange on
the Federal platform in a State to implement this option, a State must:
(i) Coordinate with HHS on an implementation plan and timeline that
allows for a transition period, developed at the discretion of HHS in
consultation with the State, necessary for the Federally-facilitated
Exchange to operationalize the necessary changes to implement this
option;
(ii) Execute a Federal agreement with HHS that includes the terms
and conditions for the arrangement and which defines the division of
responsibilities between HHS and the State;
(iii) Agree to procedures developed by HHS for the collection and
remittance of the monthly user fee described in Sec. 156.50(c) of this
subchapter; and
(iv) Perform and cooperate with activities established by HHS
related to oversight and financial integrity requirements in accordance
with section 1313 of the Affordable Care Act, including complying with
reporting and compliance activities required by HHS and described in
the Federal agreement.
0
32. Section 155.420 is amended by--
0
a. Revising paragraph (a)(4)(ii)(B);
0
b. Adding paragraph (a)(4)(ii)(C);
0
c. Revising paragraph (a)(4)(iii) introductory text;
0
d. Adding paragraphs (b)(5) and (c)(5);
0
e. Revising paragraphs (d)(1)(iii) and (iv);
0
f. Adding paragraph (d)(1)(v);
0
g. Adding paragraph (f).
The revisions and additions read as follows:

Sec. 155.420 Special enrollment periods.

(a) * * *
(4) * * *
(ii) * * *
(B) Beginning January 2022, if an enrollee and his or her
dependents become newly ineligible for cost-sharing reductions in
accordance with paragraph (d)(6)(i) or (ii) of this section and are
enrolled in a silver-level QHP, the Exchange must allow the enrollee
and his or her dependents to change to a QHP one metal level higher or
lower, if they elect to change their QHP enrollment; or
(C) If an enrollee and his or her dependents become newly
ineligible for advance payments of the premium tax credit in accordance
with paragraph (d)(6)(i) or (ii) of this section, the Exchange must
allow the enrollee and his or her dependents to change to a QHP of a
lower metal level, if they elect to change their QHP enrollment;
(iii) For the other triggering events specified in paragraph (d) of
this section, except for paragraphs (d)(2)(i), (d)(4), (d)(6)(i) and
(ii) of this section for becoming newly eligible or ineligible for CSRs
or newly ineligible for APTC, (d)(8), (9), (10) and (12) of this
section:
* * * * *
(b) * * *
(5) Option for earlier effective dates due to untimely notice of
triggering event. At the option of a qualified individual, enrollee or
dependent who is eligible to select a plan during a period provided for
under paragraph (c)(5) of this section, the Exchange must provide the
earliest effective date that would have been available under paragraph
(b) of this section, based on the applicable triggering event under
paragraph (d) of this section.
(c) * * *
(5) Availability for individuals who did not receive timely notice
of triggering events. If a qualified individual, enrollee, or dependent
did not receive timely notice of an event that triggers eligibility for
a special enrollment period under this section, and otherwise was
reasonably unaware that a triggering event described in paragraph (d)
of this section occurred, the Exchange must allow the qualified
individual, enrollee, or when applicable, his or her dependent to
select a new plan within 60 days of the date that he or she knew, or
reasonably should have known, of the occurrence of the triggering
event.
* * * * *
(d) * * *
(1) * * *
(iii) Loses pregnancy-related coverage described under section
1902(a)(10)(A)(i)(IV) and (a)(10)(A)(ii)(IX) of the Act (42 U.S.C.
1396a(a)(10)(A)(i)(IV), (a)(10)(A)(ii)(IX)) or loses access to health
care services through coverage provided to a pregnant woman's unborn
child, based on the definition of a child in 42 CFR 457.10. The date of
the loss of coverage is the last day the qualified individual would
have pregnancy-related coverage or access to health care services
through the unborn child coverage;
(iv) Loses medically needy coverage as described under section
1902(a)(10)(C) of the Act only once per calendar year. The date of the
loss of coverage is the last day the consumer would have medically
needy coverage; or
(v) Is enrolled in COBRA continuation coverage for which an
employer is paying all or part of the premiums and the employer
completely ceases its contributions to the qualified individual's or
dependent's COBRA continuation coverage. The triggering event is the
last day of the period for which COBRA continuation coverage is paid
for, in whole or in part, by an employer. (See 26 CFR 54.9801-
6(a)(3)(ii) for rules regarding termination of employer contributions
toward coverage other than COBRA continuation coverage, including
coverage under a similar State program.)
* * * * *
(f) Special enrollment period verification. Unless a request for
modification is granted in accordance with Sec. 155.315(h), an
Exchange must conduct verification of applicants' eligibility for
special enrollment periods under this section. An Exchange meets this
requirement if it verifies eligibility for a number of individuals
newly enrolling in Exchange coverage through special enrollment periods
that equals at least 75 percent of all special enrollment periods for
individuals newly enrolling in Exchange coverage. If the Exchange is
unable to verify eligibility for individuals newly enrolling in
Exchange coverage through a special enrollment period for which the
Exchange requires verification, then the individuals are not eligible
for enrollment through the Exchange. In accordance with Sec. 155.
505b(iii), individuals have the right to appeal the eligibility
determination.
0
33. Section 155.726 is amended by revising paragraph (c)(2)(i) to read
as follows:

Sec. 155.726 Enrollment periods under SHOP for plan years beginning
on or after January 1, 2018.

* * * * *
(c) * * *
(2) * * *
(i) Experiences an event described in Sec. 155.420(d)(1) (other
than paragraphs (d)(1)(ii) and (v)), or experiences an event described
in Sec. 155.420(d)(2), (4), (5), (7), (8), (9), (10), (11), or (12);
* * * * *
0
34. Section 155.1308 is amended by revising paragraph (f)(3)(iv)
introductory text to read as follows:

Sec. 155.1308 Application procedures.

[[Page 78677]]

necessary data to determine that the State's proposed waiver satisfies
the general requirements for approval under section 1332(b)(1) of the
Affordable Care Act consistent with guidance published by the Secretary
and the Secretary of the Treasury at 83 FR 53575 (Oct. 24, 2018):
* * * * *
0
35. Section 155.1320 is amended by revising paragraph (a)(1) to read as
follows:

Sec. 155.1320 Monitoring and compliance.

(a) * * * (1) Following the issuance of a final decision to approve
a section 1332 waiver by the Secretary and the Secretary of the
Treasury, as applicable, a State must comply with all applicable
Federal laws, regulations, and interpretive policy statements, as well
as guidance published by the Secretary and the Secretary of the
Treasury at 83 FR 53575 (Oct. 24, 2018), unless expressly waived. A
State must, within the timeframes specified in law, regulation, policy
or guidance, come into compliance with any changes in Federal law,
regulation, or policy affecting section 1332 waivers, unless the
provision being changed is expressly waived.
* * * * *
0
36. Section 155.1328 is amended by revising paragraph (a) to read as
follows:

Sec. 155.1328 Periodic evaluation requirements.

(a) The Secretary and the Secretary of the Treasury, as applicable,
shall periodically evaluate the implementation of a program under a
section 1332 waiver consistent with guidance published by the Secretary
and the Secretary of the Treasury, including the guidance published at
83 FR 53575 (Oct. 24, 2018), as applicable, and any terms and
conditions governing the section 1332 waiver.
* * * * *

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

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

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

0
38. Section 156.50 is amended by--
0
a. Revising the heading for paragraph (c);
0
b. Revising paragraph (c)(2);
0
c. Adding paragraph (c)(3);
0
d. Revising the heading for paragraph (d); and
0
e. Revising paragraphs (d)(1) introductory text, (d)(2) introductory
text, (d)(2)(i)(A), (B), (d)(2)(ii), (d)(2)(iii)(B), (d)(3)
introductory text, (d)(4) through (6), and (d)(7) introductory text;
The revisions and addition read as follows:

Sec. 156.50 Financial support.

* * * * *
(c) Requirement for Exchange user fees. * * *
(2) To support the functions of State-based Exchanges on the
Federal platform, unless the State-based Exchange and HHS agree on an
alternative mechanism to collect the funds, a participating issuer
offering a plan through a State-based Exchange on the Federal Exchange
platform for certain Exchange functions described in Sec. 155.200 of
this subchapter, as specified in a Federal platform agreement, must
remit a user fee to HHS, in the timeframe and manner established by
HHS, equal to the product of the sum of the monthly user fee rate
specified in the annual HHS notice of benefit and payment parameters
for State-Based Exchanges on the Federal platform for the applicable
benefit year, multiplied by the monthly premium charged by the issuer
for each policy under the plan where enrollment is through the State-
based Exchange on the Federal platform.
(3) A participating issuer offering a plan through an State-based
Exchange on the Federal platform that has adopted the Direct Enrollment
option or Federally-facilitated Exchange that has adopted the direct
enrollment option as described in Sec. 155.221(j) of this subchapter,
as specified in a Federal agreement with HHS, must remit a user fee to
HHS each month, in the timeframe and manner established by HHS, equal
to the product of the monthly user fee rate for the applicable benefit
year specified in an annual HHS notice of benefit and payment
parameters published in advance of the applicable benefit year and the
monthly premium charged by the issuer for each policy under the plan
where enrollment is through the State-based Exchange on the Federal
platform that has adopted the Direct Enrollment option or Federally-
facilitated Exchange that has adopted the direct enrollment option.
(d) Adjustment of Exchange user fees. (1) A participating issuer
offering a plan through a Federally-facilitated Exchange or State-based
Exchange on the Federal platform may qualify for an adjustment of the
Federally-facilitated Exchange user fee specified in paragraph (c)(1)
of this section, the State-based Exchange on the Federal platform user
fee specified in paragraph (c)(2) of this section, or the user fee
specified in paragraph (c)(3) of this section, applicable to issuers
participating in a State-based Exchange on the Federal platform or a
Federally-facilitated Exchange that has adopted the direct enrollment
option under Sec. 155.221(j) of this subchapter, the extent that the
participating issuer--
* * * * *
(2) For a participating issuer described in paragraph (d)(1) of
this section to receive an adjustment of a user fee under this
section--
(i) * * *
(A) Identifying information for the participating issuer and each
third party administrator that received a copy of the self-
certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR
2590.715-2713A(a)(4) with respect to which the participating issuer
seeks an adjustment of the user fee specified in paragraph (c)(1), (2),
or (3) of this section, as applicable, whether or not the participating
issuer was the entity that made the payments for contraceptive
services;
(B) Identifying information for each self-insured group health plan
with respect to which a copy of the self-certification referenced in 26
CFR 54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4) was received by
a third party administrator and with respect to which the participating
issuer seeks an adjustment of the user fee specified in paragraph
(c)(1), (2), or (3) of this section, as applicable; and
* * * * *
(ii) Each third party administrator that intends to seek an
adjustment on behalf of a participating issuer of the Federally-
facilitated Exchange user fee, the State-based Exchange on the Federal
platform user fee, or the user fee applicable to issuers participating
in a State-based Exchange on the Federal platform or a Federally-
facilitated Exchange that has adopted the direct enrollment option
Sec. 155.221(j) of this subchapter based on payments for contraceptive
services, must submit to HHS a notification of such intent, in a manner
specified by HHS, by the 60th calendar day following the date on which
the third party administrator receives the applicable copy of the self-
certification referenced in 26 CFR 54.9815-2713A(a)(4) or 29 CFR
2590.715-2713A(a)(4).
(iii) * * *
(B) Identifying information for each self-insured group health plan
with respect to which a copy of the self-certification referenced in 26
CFR

[[Page 78678]]

54.9815-2713A(a)(4) or 29 CFR 2590.715-2713A(a)(4) was received by the
third party administrator and with respect to which the participating
issuer seeks an adjustment of the user fee specified in paragraph
(c)(1), (2), or (3) of this section, as applicable;
* * * * *
(3) If the requirements set forth in paragraph (d)(2) of this
section are met, the participating issuer will be provided a reduction
in its obligation to pay the user fee specified in paragraph (c)(1),
(2), or (3) of this section, as applicable, equal in value to the sum
of the following:
* * * * *
(4) If the amount of the adjustment under paragraph (d)(3) of this
section is greater than the amount of the participating issuer's
obligation to pay the user fee specified in paragraph (c)(1), (2), or
(3) of this section, as applicable, in a particular month, the
participating issuer will be provided a credit in succeeding months in
the amount of the excess.
(5) Within 60 days of receipt of any adjustment of a user fee under
this section, a participating issuer must pay each third party
administrator with respect to which it received any portion of such
adjustment an amount that is no less than the portion of the adjustment
attributable to the total dollar amount of the payments for
contraceptive services submitted by the third party administrator, as
described in paragraph (d)(2)(iii)(D) of this section. No such payment
is required with respect to the allowance for administrative costs and
margin described in paragraph (d)(3)(ii) of this section. This
paragraph does not apply if the participating issuer made the payments
for contraceptive services on behalf of the third party administrator,
as described in paragraph (d)(1)(i) of this section, or is in the same
issuer group as the third party administrator.
(6) A participating issuer that receives an adjustment in the user
fee specified in paragraph (c)(1), (2), or (3) of this section for a
particular calendar year must maintain for 10 years following that
year, and make available upon request to HHS, the Office of the
Inspector General, the Comptroller General, and their designees,
documentation demonstrating that it timely paid each third party
administrator with respect to which it received any such adjustment any
amount required to be paid to the third party administrator under
paragraph (d)(5) of this section.
(7) A third party administrator of a plan with respect to which an
adjustment of the user fee specified in paragraph (c)(1), (2), or (3)
of this section is received under this section for a particular
calendar year must maintain for 10 years following that year, and make
available upon request to HHS, the Office of the Inspector General, the
Comptroller General, and their designees, all of the following
documentation:
* * * * *
0
39. Section 156.130 is amended by revising paragraph (e) to read as
follows:

Sec. 156.130 Cost-sharing requirements.

* * * * *
(e) Premium adjustment percentage. The premium adjustment
percentage is the percentage (if any) by which the average per capita
premium for health insurance coverage for the preceding calendar year
exceeds such average per capita premium for health insurance for 2013.
HHS will publish the annual premium adjustment percentage in guidance
in January of the calendar year preceding the benefit year for which
the premium adjustment percentage is applicable, unless HHS proposes
changes to the methodology, in which case, HHS will publish the annual
premium adjustment percentage in an annual HHS notice of benefit and
payment parameters or another appropriate rulemaking.
* * * * *
0
40. Section 156.230 is amended by adding paragraph (f) to read as
follows:

Sec. 156.230 Network adequacy standards.

* * * * *
(f) Paragraphs (a) through (e) of this section do not apply to a
plan for which an issuer seeks QHP certification or to any certified
QHP that does not use a provider network, meaning that the plan or QHP
does not condition or differentiate benefits based on whether the
issuer has a network participation agreement with the provider that
furnishes the covered services.
0
41. Section 156.295 is amended by--
0
a. Revising the section heading and paragraphs (a) introductory text,
(a)(1) and (a)(2) introductory text,
0
b. Removing paragraph (a)(3); and
0
c. Revising paragraph (b) introductory text.
The revisions read as follows:

Sec. 156.295 Prescription drug distribution and cost reporting by QHP
issuers.

(a) General requirement. In a form, manner, and at such times
specified by HHS, a QHP issuer that administers a prescription drug
benefit without the use of a pharmacy benefit manager must provide to
HHS the following information:
(1) The percentage of all prescriptions that were provided under
the QHP through retail pharmacies compared to mail order pharmacies,
and the percentage of prescriptions for which a generic drug was
available and dispensed compared to all drugs dispensed;
(2) The aggregate amount, and the type of rebates, discounts or
price concessions (excluding bona fide service fees) that the QHP
issuer negotiates that are attributable to patient utilization under
the QHP, and the aggregate amount of the rebates, discounts, or price
concessions that are passed through to the QHP issuer, and the total
number of prescriptions that were dispensed.
* * * * *
(b) Limitation on disclosure. Information disclosed by a QHP issuer
under this section shall not be disclosed by HHS, except that HHS may
disclose the information in a form which does not disclose the identity
of a specific QHP or prices charged for specific drugs, for the
following purposes:
* * * * *
0
42. Section 156.420 is amended by revising paragraphs (a)(1)(i),
(a)(2)(i) and (a)(3)(i) to read as follows:

Sec. 156.420 Plan variations.

(a) * * *
(1) * * *
(i) An annual limitation on cost sharing no greater than the
reduced maximum annual limitation on cost sharing specified in the
annual HHS guidance or notice of benefit and payment parameters for
such individuals, and
* * * * *
(2) * * *
(i) An annual limitation on cost sharing no greater than the
reduced maximum annual limitation on cost sharing specified in the
annual HHS guidance or notice of benefit and payment parameters for
such individuals, and
* * * * *
(3) * * *
(i) An annual limitation on cost sharing no greater than the
reduced maximum annual limitation on cost sharing specified in the
annual HHS guidance or notice of benefit and payment parameters for
such individuals, and
* * * * *
0
43. Section 156.480 is amended by revising the section heading and
paragraph (c) to read as follows:

[[Page 78679]]

Sec. 156.480 Oversight of the administration of the advance payments
of the premium tax credit, cost-sharing reductions, and user fee
programs.

* * * * *
(c) Audits and Compliance Reviews. HHS or its designee may audit or
conduct a compliance review of an issuer offering a QHP through an
Exchange to assess its compliance with the applicable requirements of
this subpart and 45 CFR 156.50. Compliance reviews conducted under this
section will follow the standards set forth in Sec. 156.715.
(1) Notice of Audit. HHS will provide at least 15 calendar days
advance notice of its intent to conduct an audit of an issuer under
this section.
(i) Conferences. All audits will include an entrance conference at
which the scope of the audit will be presented and an exit conference
at which the initial audit findings will be discussed.
(ii) [Reserved]
(2) Compliance with Audit Activities. To comply with an audit under
this section, the issuer must:
(i) Ensure that its relevant employees, agents, contractors,
subcontractors, downstream entities, and delegated entities cooperate
with any audit or compliance review under this section;
(ii) Submit complete and accurate data to HHS or its designees that
is necessary to complete the audit, in the format and manner specified
by HHS, no later than 30 calendar days after the initial audit response
deadline established by HHS at the entrance conference described under
paragraph (c)(1)(i) of this section for the applicable benefit year;
(iii) Respond to all audit notices, letters, and inquiries,
including requests for supplemental or supporting information, as
requested by HHS, no later than 15 calendar days after the date of the
notice, letter, request, or inquiry; and
(iv) In circumstances in which an issuer cannot provide the
requested data or response to HHS within the timeframes under paragraph
(c)(2)(ii) or (iii), as applicable, the issuer may make a written
request for an extension to HHS. The extension request must be
submitted within the timeframe established under paragraph (c)(2)(ii)
or (iii), as applicable, and must detail the reason for the extension
request and the good cause in support of the request. If the extension
is granted, the issuer must respond within the timeframe specified in
HHS's notice granting the extension of time.
(3) Preliminary Audit Findings. HHS will share its preliminary
audit findings with the issuer, who will then have 30 calendar days to
respond to such findings in the format and manner specified by HHS.
(i) If the issuer does not dispute or otherwise respond to the
preliminary findings, the audit findings will become final.
(ii) If the issuer responds and disputes the preliminary findings,
HHS will review and consider such response and finalize the audit
findings after such review.
(4) Final Audit Findings. If an audit results in the inclusion of a
finding in the final audit report, the issuer must comply with the
actions set forth in the final audit report in the manner and timeframe
established by HHS, and the issuer must complete all of the following:
(i) Within 30 calendar days of the issuance of the final audit or
compliance review report, provide a written corrective action plan to
HHS for approval.
(ii) Implement that plan.
(iii) Provide to HHS written documentation of the corrective
actions once taken.
(5) Failure to Comply with Audit Activities. If an issuer fails to
comply with the audit activities set forth in this section in the
manner and timeframes specified by HHS:
(i) HHS will notify the issuer of payments received under this
subpart that the issuer has not adequately substantiated; and
(ii) HHS will notify the issuer that HHS may recoup any payments
identified in paragraph (c)(5)(i) of this section if a premium tax
credit, cost-sharing reductions, and user fee program debt is not paid.
(6) Circumstances Requiring HHS Enforcement. If HHS determines that
the State Exchange or State-based Exchange on the Federal platform is
not enforcing or fails to substantially enforce the requirements of
this subpart or 45 CFR 156.50, then HHS may do so and may pursue the
imposition of civil money penalties as specified in Sec. 156.805 for
non-compliance by QHP issuers participating in the State Exchange or
State Exchange on the Federal platform.

Subpart I--Enforcement Remedies in the Exchanges

0
44. Subpart I is amended by revising the heading as set forth above.
0
45. Section 156.800 is amended by revising paragraphs (a) introductory
text, and (b) as follows:

Sec. 156.800 Available remedies; Scope.

(a) Kinds of sanctions. HHS may impose the following types of
sanctions on QHP issuers in an Exchange that are not in compliance with
Exchange standards applicable to issuers offering QHPs in an Exchange:
* * * * *
(b) Scope. Sanctions under subpart I are applicable for non-
compliance with QHP issuer participation standards and other standards
applicable to issuers offering QHPs in a Federally-facilitated
Exchange. Sanctions under paragraph (a)(1) of this section are also
applicable for non-compliance by QHP issuers participating in State
Exchanges and State-based Exchanges on the Federal platform when HHS is
responsible for enforcement of the requirements in subpart E of this
part and 45 CFR 156.50.
* * * * *
0
46. Section 156.805 is amended by--
0
a. Revising paragraphs (a) introductory text and (a)(5)(i); and
0
b. Adding paragraph (f) to read.
The revisions and addition read as follows:

Sec. 156.805 Bases and process for imposing civil money penalties in
Exchanges.

(a) Grounds for imposing civil money penalties. Civil money
penalties may be imposed on an issuer in an Exchange if, based on
credible evidence, HHS has reasonably determined that the issuer has
engaged in one or more of the following actions:
* * * * *
(5) * * *
(i) To HHS or an Exchange; or
* * * * *
(f) Circumstances requiring HHS enforcement in State Exchanges and
State-based Exchanges on the Federal platform.
(1) HHS will enforce the requirements of subpart E of this part and
45 CFR 156.50 if a State Exchange or State-based Exchange on the
Federal platform notifies HHS that it is not enforcing these
requirements or if HHS makes a determination using the process set
forth at 45 CFR 150.201 et seq. that a State Exchange or State-based
Exchange on the Federal platform is failing to substantially enforce
these requirements.
(2) If HHS is responsible under paragraph (f)(1) of this section
for enforcement of the requirements set forth in subpart E of this part
or 45 CFR 156.50, HHS may impose civil money penalties on an issuer in
a State Exchange or State-based Exchange on the Federal platform, in
accordance with the bases and process for imposing civil money
penalties set forth in this section.

[[Page 78680]]

Subpart J--Administrative Review of QHP Issuer Sanctions

0
47. Amend Subpart J by revising the heading to read as set forth above.
0
48. Section 156.901 is amended by revising the definitions of ``Filing
date'' and ``Hearing'' to read as follows.

Sec. 156.901 Definitions.

* * * * *
Filing date means the date filed electronically.
Hearing includes a hearing on a written record as well as an in-
person, telephone, or video teleconference hearing.
* * * * *
0
49. Section 156.903 is amended by revising paragraph (a) as follows:

Sec. 156.903 Scope of Administrative Law Judge's (ALJ) authority.

(a) The ALJ has the authority, including all of the authority
conferred by the Administrative Procedure Act (5 U.S.C. 554a), to adopt
whatever procedures may be necessary or proper to carry out in an
efficient and effective manner the ALJ's duty to provide a fair and
impartial hearing on the record and to issue an initial decision
concerning the imposition of a civil money penalty of a QHP offered in
a Federally-facilitated Exchange, State Exchange, and State-based
Exchange on the Federal platform, or the decertification of a QHP
offered in a Federally-facilitated Exchange.
* * * * *
0
50. Section 156.919 is amended by revising paragraph (a) to read as
follows:

Sec. 156.919 Forms of hearing.

(a) All hearings before an ALJ are on the record. The ALJ may
receive argument or testimony in writing, in person, by telephone, or
by video teleconference. The ALJ may receive testimony by telephone
only if the ALJ determines that doing so is in the interest of justice
and economy and that no party will be unduly prejudiced. The ALJ may
require submission of a witness' direct testimony in writing only if
the witness is available for cross-examination.
* * * * *
0
51. Section 156.927 is amended by revising paragraphs (a) introductory
text and (b) to read as follows:

Sec. 156.927 Form and service of submissions.

Sec. 156.931 Acknowledgement of request for hearing.

After receipt of the request for hearing, the ALJ assigned to the
case or someone acting on behalf of the ALJ will send a written notice
to the parties that acknowledges receipt of the request for hearing,
identifies the docket number assigned to the case, and provides
instructions for filing submissions and other general information
concerning procedures. The ALJ will set out the next steps in the case
either as part of the acknowledgement or on a later date.
0
53. Section 156.941 is amended by revising paragraph (e) to read as
follows:

Sec. 156.941 Prehearing conferences.

* * * * *
(e) Establishing a schedule for an in-person, telephone, or video
teleconference hearing, including setting deadlines for the submission
of written direct testimony or for the written reports of experts.
* * * * *
0
54. Section 156.947 is amended by revising paragraph (a) to read as
follows:

Sec. 156.947 The record.

(a) Any testimony that is taken in-person, by telephone, or by
video teleconference is recorded and transcribed. The ALJ may order
that other proceedings in a case, such as a prehearing conference or
oral argument of a motion, be recorded and transcribed.
* * * * *
0
55. Section 156.1210 is amended by--
0
a. Redesignating paragraph (b) as paragraph (d); and
0
b. Adding new paragraphs (b) and (c).
The additions read as follows:

Sec. 156.1210 Dispute submission.

* * * * *
(b) Inaccuracies identified after 90-day period. With respect to an
inaccuracy described under paragraph (a) of this section that is
identified and submitted to HHS by the issuer after the end of the 90-
day period described in such paragraph, HHS will consider and work with
the issuer to resolve the inaccuracy so long as--
(1) The issuer promptly notifies HHS upon identifying the
inaccuracy, but in no case later than 15 calendar days after
identifying the inaccuracy; and
(2) The failure to identify the inaccuracy and submit it to HHS in
a timely manner was not unreasonable or due to the issuer's misconduct
or negligence.
(c) Deadline for describing inaccuracies. To be eligible for
resolution under paragraph (b) of this section, an issuer must describe
all inaccuracies identified in a payment and collections report before
the later of--
(1) The end of the 3-year period beginning at the end of the plan
year to which the inaccuracy relates; or
(2) The date by which HHS notifies issuers that the HHS audit
process with respect to the plan year to which such inaccuracy relates
has been completed.
(3) If a payment error is discovered after the timeframes set forth
in paragraph (c)(1) and (2) of this section, the issuer must notify HHS
and repay any overpayments.
* * * * *
0
56. Section 156.1215 is amended by revising paragraph (b) to read as
follows:

Sec. 156.1215 Payment and collections processes.

* * * * *
(b) Netting of payments and charges for later years. As part of its
payment and collections process, HHS may net payments owed to issuers
and their affiliates operating under the same tax identification number
against amounts due to the Federal government from the issuers and
their affiliates under the same taxpayer identification number for
advance payments of the premium tax credit, advance payments of and
reconciliation of cost-sharing reductions, payment of Federally-
facilitated Exchange user fees, payment of State-based Exchanges
utilizing the Federal platform user fees, and risk adjustment,
reinsurance, and risk corridors payments and charges.
* * * * *
0
57. Section 156.1220 is amended by--
0
a. Revising paragraphs (a)(1)(vii) and (a)(3)(ii);
0
b. Redesignating paragraphs (a)(3)(iii) through (vi) as (a)(3)(iv)
through (vii), respectively; and
0
c. Adding new paragraph (a)(3)(iii).
The revision and addition reads as follows:

Sec. 156.1220 Administrative appeals.

(a) * * *
(1) * * *
(vii) The findings of a second validation audit as a result of risk

[[Page 78681]]

adjustment data validation (if applicable) with respect to risk
adjustment data for the 2016 benefit year and beyond; or
* * * * *
(3) * * *
(ii) For a risk adjustment payment or charge, including an
assessment of risk adjustment user fees, within 30 calendar days of the
date of the notification under Sec. 153.310(e) of this subchapter;
(iii) For the findings of a second validation audit (if
applicable), or the calculation of a risk score error rate as a result
of risk adjustment data validation, within 30 calendar days of
publication of the applicable benefit year's Summary Report of Benefit
Year Risk Adjustment Data Validation Adjustments to Risk Adjustment
Transfers;
* * * * *
0
58. Section 156.1240 is amended by adding paragraph (a)(3) to read as
follows:

Sec. 156.1240 Enrollment process for qualified individuals.

(a) * * *
(3) Issuers offering individual market QHPs must accept premium
payments for a QHP on behalf of an enrollee that are made from the
individual coverage HRA (as described in Sec. 146.123(b) of this
subchapter) or qualified small employer health reimbursement
arrangement (as described in section 9831(d)(2) of the Internal Revenue
Code of 1986, as amended) in which the enrollee is enrolled.
* * * * *

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

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

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

0
60. Section 158.103 is amended by adding the definition for
``Prescription drug rebates and other price concessions'' in
alphabetical order to read as follows:

Sec. 158.103 Definitions.

* * * * *
Prescription drug rebates and other price concessions means all
direct and indirect remuneration received or receivable by an issuer
and entities providing pharmacy benefit management services to the
issuer, related to the provision of a prescription drug covered by the
issuer, regardless from whom the remuneration is received (for example,
pharmaceutical manufacturer, wholesaler, retail pharmacy, vendor).
Direct and indirect remuneration includes discounts, 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, and excluding bona fide service
fees. Bona fide service fees mean fees paid by a drug manufacturer to
an entity providing pharmacy benefit management services to the issuer
that represent fair market value for a bona fide, itemized service
actually performed on behalf of the manufacturer that the manufacturer
would otherwise perform (or contract for) in the absence of the service
arrangement, and that are not passed on in whole or in part to a client
or customer of an entity, whether or not the entity takes title to the
drug.
* * * * *
0
61. Section 158.240 is amended by adding paragraph (g) to read as
follows:

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

* * * * *
(g) Rebate prepayment and safe harbor. An issuer may choose to pay
a portion or all of its estimated rebate amount for a given MLR
reporting year to enrollees in any form specified in Sec. 158.241
prior to the rebate payment deadlines set forth in Sec. Sec.
158.240(e) and 158.241(a)(2) and in advance of submitting the MLR
report required in Sec. 158.110 to the Secretary. Issuers that choose
to prepay a portion or all of their rebates must do so for all eligible
enrollees in a given state and market in a non-discriminatory manner.
If, after submitting the MLR report required in Sec. 158.110, an
issuer determines that its rebate prepayment amount in a given state
and market is at least 95 percent, but less than 100 percent, of the
total rebate amount owed for the applicable MLR reporting year to
enrollees in that state and market, the issuer may, without penalty or
late payment interest under paragraph (f) of this section, provide the
remaining rebate amount to those enrollees no later than the rebate
deadlines in Sec. Sec. 158.240(e) and 158.241(a)(2) applicable to the
following MLR reporting year. If the total rebate owed to an enrollee
for the MLR reporting year is above the de minimis threshold
established in Sec. 158.243(a), the issuer cannot treat the remaining
rebate owed to an enrollee after prepayment as de minimis, even if the
remaining rebate is below the de minimis threshold.
0
62. Section 158.241 is amended by revising paragraph (a)(2) to read as
follows:

Sec. 158.241 Form of rebate.

(a) * * *
(2) For each of the 2011, 2012, and 2013 MLR reporting years, any
rebate provided in the form of a premium credit must be provided by
applying the full amount due to the first month's premium that is due
on or after August 1 following the MLR reporting year. If the amount of
the rebate exceeds the premium due for August, then any overage shall
be applied to succeeding premium payments until the full amount of the
rebate has been credited. Beginning with the 2014 MLR reporting year,
any rebate provided in the form of a premium credit must be provided by
applying the full amount due to the first month's premium that is due
on or after September 30 following the MLR reporting year. If the
amount of the rebate exceeds the premium due for October, then any
overage shall be applied to succeeding premium payments until the full
amount of the rebate has been credited. Beginning with the 2020 MLR
reporting year, any rebate provided in the form of a premium credit
must be provided by applying the full amount due to the monthly premium
that is due no later than October 30 following the MLR reporting year.
If the amount of the rebate exceeds the monthly premium, then any
overage shall be applied to succeeding premium payments until the full
amount of the rebate has been credited.
* * * * *
0
63. Subchapter E as added in final rule published on November 27, 2019
(84 FR 65524) and effective on January 1, 2021 is amended by adding
part 184 to read as follows:

PART 184--PHARMACY BENEFIT MANAGER STANDARDS UNDER THE AFFORDABLE
CARE ACT

Sec.
184.10 Basis and scope.
184.20 Definitions.
184.50 Prescription drug distribution and cost reporting by pharmacy
benefit managers.

Authority: 42 U.S.C. 1302, 1320b-23.

Sec. 184.10 Basis and scope.

(a) Basis. (1) This part implements section 1150A, Pharmacy Benefit
Managers Transparency Requirements, of title XI of the Social Security
Act.
(2) [Reserved]
(b) Scope. This part establishes standards for Pharmacy Benefit
Managers that administer prescription

[[Page 78682]]

drug benefits for health insurance issuers that offer Qualified Health
Plans with respect to the offering of such plans.

Sec. 184.20 Definitions.

The following definitions apply to this part, unless the context
indicates otherwise:
Health insurance issuer has the meaning given to the term in Sec.
144.103 of this subtitle.
Plan year has the meaning given to the term in Sec. 156.20 of this
subchapter.
Qualified health plan has the meaning given to the term in Sec.
156.20 of this subchapter.
Qualified health plan issuer has the meaning given to the term in
Sec. 156.20 of this subchapter.

Sec. 184.50 Prescription drug distribution and cost reporting by
pharmacy benefit managers.

(a) General requirement. In a form, manner, and at such times
specified by HHS, any entity that provides pharmacy benefits management
services on behalf of a qualified health plan (QHP) issuer must provide
to HHS the following information:
(1) The percentage of all prescriptions that were provided under
the QHP through retail pharmacies compared to mail order pharmacies,
and the percentage of prescriptions for which a generic drug was
available and dispensed compared to all drugs dispensed;
(2) The aggregate amount, and the type of rebates, discounts or
price concessions (excluding bona fide service fees) that the pharmacy
benefits manager (PBM) negotiates that are attributable to patient
utilization under the QHP, and the aggregate amount of the rebates,
discounts, or price concessions that are passed through to the QHP
issuer, and the total number of prescriptions that were dispensed.
(i) Bona fide service fees means fees paid by a manufacturer to an
entity that represent fair market value for a bona fide, itemized
service actually performed on behalf of the manufacturer that the
manufacturer would otherwise perform (or contract for) in the absence
of the service arrangement, and that are not passed on in whole or in
part to a client or customer of an entity, whether or not the entity
takes title to the drug.
(ii) [Reserved]
(3) The aggregate amount of the difference between the amount the
QHP issuer pays its contracted PBM and the amounts that the PBM pays
retail pharmacies, and mail order pharmacies, and the total number of
prescriptions that were dispensed.
(b) Limitations on disclosure. Information disclosed by a PBM under
this section shall not be disclosed by HHS or by a QHP receiving the
information, except that HHS may disclose the information in a form
which does not disclose the identity of a specific PBM, QHP, or prices
charged for drugs, for the following purposes:
(1) As HHS determines to be necessary to carry out section 1150A or
part D of title XVIII of the Act;
(2) To permit the Comptroller General to review the information
provided;
(3) To permit the Director of the Congressional Budget Office to
review the information provided; or
(4) To States to carry out section 1311 of the Affordable Care Act.
(c) Penalties. A PBM that fails to report the information described
in paragraph (a) of this section to HHS on a timely basis or knowingly
provides false information will be subject to the provisions of section
1927(b)(3)(C) of the Act.

Dated: November 18, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: November 23, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
Dated: November 25, 2020.
David J. Kautter,
Assistant Secretary (Tax Policy), Department of the Treasury.
[FR Doc. 2020-26534 Filed 11-30-20; 5:30 pm]
BILLING CODE 4120-01-P