Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2025; Updating Section 1332 Waiver Public Notice Procedures; Medicaid; Consumer Operated and Oriented Plan (CO-OP) Program; and Basic Health Program

Federal RegisterNov 24, 2023

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DEPARTMENT OF THE TREASURY

31 CFR Part 33

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 435 and 600

Office of the Secretary

45 CFR Parts 153, 155, and 156

[CMS-9895-P]

RIN 0938-AV22

Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2025; Updating Section 1332 Waiver Public Notice Procedures; Medicaid; Consumer Operated and Oriented Plan (CO-OP) Program; and Basic Health Program

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This proposed rule includes payment parameters and provisions related to the HHS-operated risk adjustment program, as well as 2025 user fee rates for issuers offering qualified health plans (QHPs) through Federally-facilitated Exchanges (FFEs) and State-based Exchanges on the Federal platform (SBE-FPs). This proposed rule also includes proposed requirements related to the auto re-enrollment hierarchy; essential health benefits; failure to file and reconcile; non-standardized plan option limits and an exceptions process; standardized plan options; special enrollment periods (SEPs); direct enrollment (DE) entities; Insurance Affordability Program enrollment eligibility verification process; requirements for agents, brokers, web-brokers, and DE entities assisting Exchange consumers; network adequacy; public notice procedures for section 1332 waivers; prescription drug benefits; updates to the Consumer Operated and Oriented Plan (CO-OP) Program; State flexibility on the financial methodology used for Medicaid eligibility determinations for non-modified adjusted gross income (MAGI) populations; and State flexibility on the effective date of coverage in the Basic Health Program (BHP). A summary of this proposed rule may be found at

https://www.regulations.gov/.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, by January 8, 2024.

ADDRESSES:

In commenting, please refer to file code CMS-9895-P.

Comments, including mass comment submissions, must be submitted in one of the following three ways (please choose only one of the ways listed):

Electronically.

You may submit electronic comments on this regulation to

http://www.regulations.gov.

Follow the “Submit a comment” instructions.

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-9895-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.

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-9895-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:

Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace Bristol, (410) 786-8437, for general information.

Joshua Paul, (301) 492-4347, Jackie Wilson, (301) 492-4286, or John Barfield, (301) 492-4433, for matters related to HHS-operated risk adjustment.

John Barfield, (301) 492-4433, or Leanne Scott, (410) 786-1045, for matters related to user fees.

Brian Gubin, (410) 786-1659, for matters related to agent, broker, and web-broker guidelines.

Marisa Beatley, (301) 492-4307, for matters related to the verification process related to eligibility for insurance affordability programs and current sources of income.

Carolyn Kraemer, (301) 492-4197, for matters related to auto re-enrollment in the Exchanges.

Nicholas Eckart, (301) 492-4452, for matters related to enrollment of qualified individuals into QHPs and termination of Exchange enrollment or coverage for qualified individuals.

Hollynd Boyden, (667) 414-0105, for matters related to the monthly 150 percent Federal poverty level special enrollment period.

Alexandra Gribbin, (667) 290-9977, for matters related to dental coverage.

Nikolas Berkobien, (667) 290-9903, for matters related to standardized plan options and non-standardized plan option limits.

LeAnn Brodhead, (667) 290-8805, for matters related to the essential health benefits prescription drug benefit.

Carolyn Sabini, (667) 290-9750, for matters related to the essential health benefits benchmark plan policy.

Agata Pelka, (667) 290-9979, for matters related to mandates in addition to the essential health benefits.

Emily Martin, (301) 492-4423, or Deborah Hunter, (443) 386-3651, for matters related to network adequacy and ECPs.

Shilpa Gogna, (301) 492-4257, or Jenny Chen, (301) 492-5156, for matters related to approval of a State Exchange and State Exchange Blueprint requirements.

Lina Rashid, (443) 902-2823, or Kimberly Koch (202) 381-6934, for matters related to section 1332 waivers.

Jacquelyn Rudich, (301) 492-5211, for matters related to netting of payments.

Kevin Kendrick, (301) 509-6612, for matters related to the CO-OP program.

Carrie Grubert, (410) 786-8319, for matters related to the Basic Health Program (BHP) provision.

Gene Coffey, (410) 786-2234, for matters related to Medicaid eligibility.

Arshdeep Dhanoa, (301) 492-4400, for matters related to incarceration verification for QHP eligibility and periodic data matching for dual and deceased enrollees.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary

II. Background

A. Legislative and Regulatory Overview

B. Summary of Major Provisions

III. Provisions of the Proposed Regulations

A. 31 CFR Part 33 and 45 CFR Part 155—Section 1332 Waivers

B. 42 CFR Parts 435 and 600—Medicaid Eligibility for the States, District of Columbia, the Northern Mariana Islands and American Samoa, and Administrative Practice and Procedure, Health Care, Health insurance, Intergovernmental Relations, Penalties, Reporting and Recordkeeping Requirements.

C. 45 CFR Part 153—Standards Related to Reinsurance, Risk Corridors, and HHS Risk Adjustment

D. 45 CFR Part 155—Exchange Establishment Standards and Other Related Standards Under the Affordable Care Act

E. 45 CFR Part 156—Health Insurance Issuer Standards Under the Affordable Care Act, Including Standards Related to Exchanges

IV. Collection of Information Requirements

A. Wage Estimates

B. ICRs Regarding Proposed Amendments to Normal Public Notice Requirements (31 CFR 33.112, 31 CFR 33.120 and 45 CFR Part 155.1312, and 45 CFR 155.1320)

C. ICRs Regarding Basic Health Program Regulations (42 CFR 600.320)

D. ICRs Regarding Election To Operate an Exchange After 2014 (45 CFR 155.106)

E. ICRs Regarding Adding and Amending Language To Ensure Web-Brokers Operating in State Exchanges Meet Certain Requirements Applicable in the FFEs and SBE-FPs (45 CFR 155.220)

F. ICRs Regarding Establishing Requirements for DE Entities Mandating HealthCare.gov Changes To Be Reflected on DE Entity Non-Exchange Websites Within a Notice Period Set by HHS (45 CFR 155.221(b)(6))

G. ICRs Regarding Adding and Amending Language To Ensure DE Entities Operating in State Exchanges Meet Certain Standards Applicable in the FFEs and SBE-FPs (45 CFR 155.221)

H. ICRs Regarding Failure To File and Reconcile Process (45 CFR 155.305(f)(4))

I. ICRs Regarding Verification Process Related to Eligibility for Enrollment in a QHP Through the Exchange (45 CFR 155.315(e))

K. ICRs Regarding Eligibility Redetermination During a Benefit Year (45 CFR 155.330(d))

L. ICRs Regarding Establishment of Exchange Network Adequacy Standards (45 CFR 155.1050)

M. ICRs Regarding the State Selection of EHB-Benchmark Plans for Plan Years Beginning on or After January 1, 2027 (45 CFR 156.111)

N. ICRs Regarding Non-Standardized Plan Option Limits (45 CFR 156.202)

O. Summary of Annual Burden Estimates for Proposed Requirements

P. Submission of PRA-Related Comments

V. Response to Comments

VI. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

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

D. Regulatory Alternatives Considered

E. Regulatory Flexibility Act (RFA)

F. Unfunded Mandates Reform Act (UMRA)

G. Federalism

I. Executive Summary

We propose changes to the provisions and parameters implemented through prior rulemaking to implement the Patient Protection and Affordable Care Act (ACA).

These proposals are published under the authority granted to the Secretary by the ACA and the Public Health Service (PHS) Act.

In this proposed rule, we propose changes related to some of the ACA provisions and parameters we previously implemented and propose to implement new provisions. We also propose a change to Medicaid financial eligibility provisions to provide States with greater flexibility to extend Medicaid eligibility to specific populations based on the State's circumstances. Our goal with these proposals is providing quality, affordable coverage to consumers while minimizing administrative burden and ensuring program integrity. The changes proposed in this rule are also intended to help advance health equity and mitigate health disparities.

The Patient Protection and Affordable Care Act (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 Patient Protection and Affordable Care Act, was enacted on March 30, 2010. In this rulemaking, the two statutes are referred to collectively as the “Patient Protection and Affordable Care Act,” “Affordable Care Act,” or “ACA.”

See sections 1311, 1312, 1313, 1321, 1332, and 1343 of the ACA and section 2792 of the PHS Act.

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 ACA.

Subtitles A and C of title I of the ACA reorganized, amended, and added to the provisions of part A of title XXVII of the PHS Act relating to group health plans and health insurance issuers in the group and individual markets. The term “group health plan” includes both insured and self-insured group health plans.

Section 2702 of the PHS Act, as added by the ACA, establishes requirements for guaranteed availability of coverage in the group and individual markets.

Section 1301(a)(1)(B) of the ACA directs all issuers of qualified health plans (QHPs) to cover the essential health benefit (EHB) package described in section 1302(a) of the ACA, including coverage of the services described in section 1302(b) of the ACA, adherence to the cost-sharing limits described in section 1302(c) of the ACA, and meeting the Actuarial Value (AV) levels established in section 1302(d) of the ACA. Section 2707(a) of the PHS Act, which is effective for plan or policy years beginning on or after January 1, 2014, extends the requirement to cover the EHB package to non-grandfathered individual and small group health insurance coverage, irrespective of whether such coverage is offered through an Exchange. In addition, section 2707(b) of the PHS Act directs non-grandfathered group health plans to ensure that cost sharing under the plan does not exceed the limitations described in section 1302(c)(1) of the ACA.

Section 1302 of the ACA provides for the establishment of an EHB package that includes coverage of EHBs (as defined by the Secretary of HHS), cost-sharing limits, and AV requirements. The law directs that EHBs be equal in scope to the benefits provided under a typical employer plan, and that they cover at least the following 10 general categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. Section 1302(d) of the ACA describes the various levels of coverage based on AV. Consistent with section 1302(d)(2)(A) of the ACA, AV is calculated based on the provision of EHB to a standard population. Section 1302(d)(3) of the ACA directs the Secretary of HHS to develop guidelines that allow for de minimis variation in AV calculations. Sections 1302(b)(4)(A) through (D) of the ACA establish that the Secretary must define EHB in a manner that: (1) reflects appropriate balance among the 10 categories; (2) is not designed in such a way as to discriminate based on age, disability, or expected length of life; (3) takes into account the health care needs of diverse segments of the population; and (4) does not allow denials of EHBs based on age, life expectancy, disability, degree of medical dependency, or quality of life.

Section 1311(c) of the ACA provides the Secretary the authority to issue regulations to establish criteria for the certification of QHPs. Section 1311(c)(1)(B) of the ACA requires, among the criteria for certification that the Secretary must establish by regulation, that QHPs ensure a sufficient choice of providers. Section 1311(e)(1) of the ACA grants the Exchange the authority to certify a health plan as a QHP if the health plan meets the Secretary's requirements for certification issued under section 1311(c) of the ACA, and the Exchange determines that making the plan available through the Exchange is in the interests of qualified individuals and qualified employers in the State. Section 1311(c)(6)(C) of the ACA directs the Secretary of HHS to require an Exchange

to provide for special enrollment periods and section 1311(c)(6)(D) of the ACA directs the Secretary of HHS to require an Exchange to provide for a monthly enrollment period for Indians, as defined by section 4 of the Indian Health Care Improvement Act.

Section 1311(d)(3)(B) of the ACA permits a State, at its option, to require QHPs to cover benefits in addition to EHB. This section also requires a State to make payments, either to the individual enrollee or to the issuer on behalf of the enrollee, to defray the cost of these additional State-required benefits.

Section 1312(c) of the ACA generally requires a health insurance issuer to consider all enrollees in all health plans (except grandfathered health plans) offered by such issuer to be members of a single risk pool for each of its individual and small group markets. States have the option to merge the individual and small group market risk pools under section 1312(c)(3) of the ACA.

Section 1312(e) of the ACA provides the Secretary with the authority to establish procedures under which a State may allow agents or brokers to (1) enroll qualified individuals and qualified employers in QHPs offered through Exchanges and (2) assist individuals in applying for advance payments of the premium tax credit (APTC) and cost-sharing reductions (CSRs) for QHPs sold through an Exchange.

Section 1312(f)(1)(B) of the ACA provides that an individual shall not be treated as a qualified individual for enrollment in a QHP if, at the time of enrollment, the individual is incarcerated, other than incarceration pending the disposition of charges.

Sections 1313 and 1321 of the ACA provide the Secretary with the authority to oversee the financial integrity of State Exchanges, their compliance with HHS standards, and the efficient and non-discriminatory administration of State Exchange activities. Section 1313(a)(5)(A) of the ACA provides the Secretary with the authority to implement any measure or procedure that the Secretary determines is appropriate to reduce fraud and abuse in the administration of the Exchanges. Section 1321 of the ACA provides for State flexibility in the operation and enforcement of Exchanges and related requirements.

Section 1321(a) of the ACA provides broad authority for the Secretary to establish standards and regulations to implement the statutory requirements related to Exchanges, QHPs and other components of title I of the ACA, including such other requirements as the Secretary determines appropriate. When operating an FFE under section 1321(c)(1) of the ACA, HHS has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of the ACA to collect and spend user fees. Office of Management and Budget (OMB) Circular A-25 Revised establishes Federal policy regarding user fees and specifies that a user charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the public.

Section 1321(d) of the ACA provides that nothing in title I of the ACA must be construed to preempt any State law that does not prevent the application of title I of the ACA. Section 1311(k) of the ACA specifies that Exchanges may not establish rules that conflict with or prevent the application of regulations issued by the Secretary.

Section 1322 of the ACA establishes the Consumer Operated and Oriented Plan (CO-OP) program, which is a loan program that funds the establishment of private, non-profit, consumer-operated, consumer-oriented health plan issuers of QHPs. The ACA requires, among other requirements, that substantially all of a CO-OP's activities consist of issuing QHPs in the individual and small group markets, and that a CO-OP be governed by a board of directors where a majority is elected by members covered by policies issued by the CO-OP.

Section 1331 of the ACA provides States with the option to operate a Basic Health Program (BHP).

Section 1332 of the ACA 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 ACA, provided the State's section 1332 waiver plan meets certain requirements. Section 1332(a)(4)(B) of the ACA requires the Secretaries to issue regulations regarding procedures for the application and approval of section 1332 waivers.

Section 1343 of the ACA establishes a permanent risk adjustment program to provide payments to health insurance issuers that attract higher-than-average risk populations, such as those with chronic conditions, funded by charges collected from those issuers that attract lower-than-average risk populations, thereby reducing incentives for issuers to avoid higher-risk enrollees. Section 1343(b) of the ACA provides that the Secretary, in consultation with States, shall establish criteria and methods to be used in carrying out the risk adjustment activities under this section. Consistent with section 1321(c) of the ACA, the Secretary is responsible for operating the HHS risk adjustment program in any State that fails to do so.

In the 2014 through 2016 benefit years, HHS operated the risk adjustment program in every State and the District of Columbia, except Massachusetts. Beginning with the 2017 benefit year, HHS has operated the risk adjustment program in all 50 States and the District of Columbia.

Section 1401(a) of the ACA added section 36B to the Internal Revenue Code (the Code), which, among other things, requires that a taxpayer reconcile APTC for a year of coverage with the amount of the premium tax credit (PTC) the taxpayer is allowed for the year.

Section 1402 of the ACA provides for, among other things, reductions in cost sharing for EHB for qualified low- and moderate-income enrollees in silver level QHPs offered through the individual market Exchanges. This section also provides for reductions in cost sharing for Indians enrolled in QHPs at any metal level.

Section 1411(c) of the ACA requires the Secretary to submit certain information provided by applicants under section 1411(b) of the ACA to other Federal officials for verification, including income and family size information to the Secretary of the Treasury. Section 1411(d) of the ACA provides that the Secretary must verify the accuracy of information provided by applicants under section 1411(b) of the ACA, for which section 1411(c) of the ACA does not prescribe a specific verification procedure, in such manner as the Secretary determines appropriate.

Section 1411(f) of the ACA requires the Secretary, in consultation with the Treasury and Homeland Security Department Secretaries and the Commissioner of Social Security, to establish procedures for hearing and making decisions governing appeals of Exchange eligibility determinations. Section 1411(f)(1)(B) of the ACA requires the Secretary to establish procedures to redetermine eligibility on a periodic basis, in appropriate circumstances, including eligibility to purchase a QHP through the Exchange and for APTC and CSRs.

Section 1411(g) of the ACA allows the use of applicant information only for the limited purpose of, and to the extent necessary for ensuring the efficient operation of the Exchange, including by verifying eligibility to enroll through the Exchange and for APTC and CSRs, and limits the disclosure of such information.

Section 1413 of the ACA directs the Secretary to establish, subject to minimum requirements, a streamlined enrollment process for enrollment in

QHPs and all insurance affordability programs.

Section 5000A of the Code, as added by section 1501(b) of the ACA, requires individuals to have minimum essential coverage (MEC) for each month, qualify for an exemption, or make an individual shared responsibility payment. Under the Tax Cuts and Jobs Act, which was enacted on December 22, 2017, the individual shared responsibility payment is reduced to $0, effective for months beginning after December 31, 2018. Notwithstanding that reduction, certain exemptions are still relevant to determine whether individuals aged 30 and above qualify to enroll in catastrophic coverage under §§ 155.305(h) and 156.155(a)(5).

Section 1902(r)(2)(A) of the Social Security Act (the Act), which permits States to apply less restrictive methodologies than cash assistance program methodologies in determining eligibility for certain eligibility groups.

1. Premium Stabilization Programs

The premium stabilization programs refer to the HHS risk adjustment, risk corridors, and reinsurance programs established by the ACA.

For past rulemaking, we refer readers to the following rules:

See ACA section 1341 (transitional reinsurance program), ACA section 1342 (risk corridors program), and ACA section 1343 (HHS risk adjustment program).

• In the March 23, 2012

Federal Register

(77 FR 17219) (Premium Stabilization Rule), we implemented the premium stabilization programs.

• In the March 11, 2013

Federal Register

(78 FR 15409) (2014 Payment Notice), we finalized the benefit and payment parameters for the 2014 benefit year to expand the provisions related to the premium stabilization programs and set forth payment parameters in those programs.

• In the October 30, 2013

Federal Register

(78 FR 65046), we finalized the modification to the HHS risk adjustment methodology related to community rating States.

• In the November 6, 2013

Federal Register

(78 FR 66653), we published a correcting amendment to the 2014 Payment Notice to address how an enrollee's age for the risk score calculation would be determined under the HHS risk adjustment methodology.

• In the March 11, 2014

Federal Register

(79 FR 13743) (2015 Payment Notice), we finalized the benefit and payment parameters for the 2015 benefit year to expand the provisions related to the premium stabilization programs, set forth certain oversight provisions, and establish payment parameters in those programs.

• In the May 27, 2014

Federal Register

(79 FR 30240), we announced the 2015 fiscal year sequestration rate for the HHS-operated risk adjustment program.

• In the February 27, 2015

Federal Register

(80 FR 10749) (2016 Payment Notice), we finalized the benefit and payment parameters for the 2016 benefit year to expand the provisions related to the premium stabilization programs, set forth certain oversight provisions, and establish the payment parameters in those programs.

• In the March 8, 2016

Federal Register

(81 FR 12203) (2017 Payment Notice), we finalized the benefit and payment parameters for the 2017 benefit year to expand the provisions related to the premium stabilization programs, set forth certain oversight provisions, and establish the payment parameters in those programs.

• In the December 22, 2016

Federal Register

(81 FR 94058) (2018 Payment Notice), we finalized the benefit and payment parameters for the 2018 benefit year, added the high-cost risk pool parameters to the HHS risk adjustment methodology, incorporated prescription drug factors in the adult models, established enrollment duration factors for the adult models, and finalized policies related to the collection and use of enrollee-level External Data Gathering Environment (EDGE) data.

• In the April 17, 2018

Federal Register

(83 FR 16930) (2019 Payment Notice), we finalized the benefit and payment parameters for the 2019 benefit year, created the State flexibility framework permitting States to request a reduction in risk adjustment State transfers calculated by HHS, and adopted a new error rate methodology for HHS-RADV adjustments to transfers.

• In the May 11, 2018

Federal Register

(83 FR 21925), we published a correction to the 2019 HHS risk adjustment coefficients in the 2019 Payment Notice.

• On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i), we updated the 2019 benefit year final HHS risk adjustment model coefficients to reflect an additional recalibration related to an update to the 2016 enrollee-level EDGE data set.

CMS. (2018, July 27).

Updated 2019 Benefit Year Final HHS Risk Adjustment Model Coefficients. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.

• In the July 30, 2018

Federal Register

(83 FR 36456), we adopted the 2017 benefit year HHS risk adjustment methodology as established in the final rules published in the March 23, 2012 (77 FR 17220 through 17252) and March 8, 2016 (81 FR 12204 through 12352) editions of the

Federal Register

. The final rule set forth an additional explanation of the rationale supporting the use of Statewide average premium in the State payment transfer formula for the 2017 benefit year, including the reasons why the program is operated by HHS in a budget-neutral manner. The final rule also permitted HHS to resume 2017 benefit year HHS risk adjustment payments and charges. HHS also provided guidance as to the operation of the HHS-operated risk adjustment program for the 2017 benefit year in light of the publication of the final rule.

• In the December 10, 2018

Federal Register

(83 FR 63419), we adopted the 2018 benefit year HHS risk adjustment methodology as established in the final rules published in the March 23, 2012 (77 FR 17219) and the December 22, 2016 (81 FR 94058) editions of the

Federal Register

. In the rule, we set forth an additional explanation of the rationale supporting the use of Statewide average premium in the State payment transfer formula for the 2018 benefit year, including the reasons why the program is operated by HHS in a budget-neutral manner.

• In the April 25, 2019

Federal Register

(84 FR 17454) (2020 Payment Notice), we finalized the benefit and payment parameters for the 2020 benefit year, as well as the policies related to making the enrollee-level EDGE data available as a limited data set for research purposes and expanding the HHS uses of the enrollee-level EDGE data, approval of the request from Alabama to reduce HHS risk adjustment transfers by 50 percent in the small group market for the 2020 benefit year, and updates to HHS-RADV program requirements.

• On May 12, 2020, consistent with § 153.320(b)(1)(i), we published the 2021 Benefit Year Final HHS Risk Adjustment Model Coefficients on the CCIIO website.

CMS. (2020, May 12).

Final 2021 Benefit Year Final HHS Risk Adjustment Model Coefficients.https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf.

• In the May 14, 2020

Federal Register

(85 FR 29164) (2021 Payment Notice), we finalized the benefit and payment parameters for the 2021 benefit year, as well as adopted updates to the HHS risk adjustment models' hierarchical condition categories (HCCs) to transition to ICD-10 codes, approved the request from Alabama to reduce HHS risk adjustment transfers by 50

percent in the small group market for the 2021 benefit year, and modified the outlier identification process under the HHS-RADV program.

• In the December 1, 2020

Federal Register

(85 FR 76979) (Amendments to the HHS-Operated Risk Adjustment Data Validation Under the Patient Protection and Affordable Care Act's HHS-Operated Risk Adjustment Program (2020 HHS-RADV Amendments Rule)), we adopted the creation and application of Super HCCs in the sorting step that assigns HCCs to failure rate groups, finalized a sliding scale adjustment in HHS-RADV error rate calculation, and added a constraint for negative error rate outliers with a negative error rate. We also established a transition from the prospective application of HHS-RADV adjustments to apply HHS-RADV results to risk scores from the same benefit year as that being audited.

• In the September 2, 2020

Federal Register

(85 FR 54820), we issued an interim final rule containing certain policy and regulatory revisions in response to the COVID-19 public health emergency (PHE), wherein we set forth HHS risk adjustment reporting requirements for issuers offering temporary premium credits in the 2020 benefit year.

• In the May 5, 2021

Federal Register

(86 FR 24140) (part 2 of the 2022 Payment Notice), we finalized a subset of proposals from the 2022 Payment Notice proposed rule, including policy and regulatory revisions related to the HHS-operated risk adjustment program, finalization of the benefit and payment parameters for the 2022 benefit year, and approval of the request from Alabama to reduce HHS risk adjustment transfers by 50 percent in the individual and small group markets for the 2022 benefit year. In addition, this final rule established a revised schedule of collections for HHS-RADV and updated the provisions regulating second validation audit (SVA) and initial validation audit (IVA) entities.

• On July 19, 2021, consistent with § 153.320(b)(1)(i), we released Updated 2022 Benefit Year Final HHS Risk Adjustment Model Coefficients on the CCIIO website, announcing some minor revisions to the 2022 benefit year final HHS risk adjustment adult model coefficients.

See

CMS. (2021, July 19).

2022 Benefit Year Final HHS Risk Adjustment Model Coefficients. https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf.

• In the May 6, 2022

Federal Register

(87 FR 27208) (2023 Payment Notice), we finalized revisions related to the HHS-operated risk adjustment program, including the benefit and payment parameters for the 2023 benefit year, HHS risk adjustment model recalibration, and policies related to the collection and extraction of enrollee-level EDGE data. We also finalized the adoption of the interacted HCC count specification for the adult and child models, along with modified enrollment duration factors for the adult model models, beginning with the 2023 benefit year.

We also repealed the ability for States, other than prior participants, to request a reduction in HHS risk adjustment State transfers starting with the 2024 benefit year. In addition, we approved a 25 percent reduction to 2023 benefit year HHS risk adjustment transfers in Alabama's individual market and a 10 percent reduction to 2023 benefit year HHS risk adjustment transfers in Alabama's small group market. We also finalized further refinements to the HHS-RADV error rate calculation methodology beginning with the 2021 benefit year.

On May 6, 2022, we also published the

2023 Benefit Year Final HHS Risk Adjustment Model Coefficients

https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf.

• In the April 27, 2023

Federal Register

(88 FR 25740) (2024 Payment Notice), we finalized the benefit and payment parameters for the 2024 benefit year, amended the EDGE discrepancy materiality threshold and data collection requirements, and reduced the risk adjustment user fee. For the 2024 benefit year, we repealed the State flexibility policy, including for prior participant States, and approved 50 percent reductions to HHS risk adjustment transfers for Alabama's individual and small group markets. In addition, we finalized several refinements to HHS-RADV program requirements, such as shortening the window to confirm SVA findings or file a discrepancy report, changing the HHS-RADV materiality threshold for random and targeted sampling, and no longer exempting exiting issuers from adjustments to risk scores and HHS risk adjustment transfers when they are negative error rate outliers. We also announced the discontinuance of the Lifelong Permanent Condition List (LLPC) and Non-EDGE Claims (NEC) in HHS-RADV beginning with the 2022 benefit year.

2. Program Integrity

We have finalized program integrity standards related to the Exchanges and premium stabilization programs in two rules: the “first Program Integrity Rule” 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). We also refer readers to the 2019 Patient Protection and Affordable Care Act; Exchange Program Integrity final rule (2019 Program Integrity Rule) published in the December 27, 2019

Federal Register

(84 FR 71674).

In the April 27, 2023

Federal Register

(88 FR 25740) (2024 Payment Notice), we finalized a policy to implement improper payment pre-testing and assessment (IPPTA) requirements for State Exchanges to ensure adherence to the Payment Integrity Information Act of 2019. In addition, we finalized allowing additional time for HHS to review evidence submitted by agents and brokers to rebut allegations pertaining to Exchange agreement suspensions or terminations. We also introduced consent and eligibility documentation requirements for agents and brokers.

3. Market Rules

For past rulemaking related to the market rules, we refer readers to the following rules:

• In the April 8, 1997

Federal Register

(62 FR 16894), HHS, with the Department of Labor and Department of the Treasury, published an interim final rule relating to the HIPAA health insurance reforms. In the February 27, 2013

Federal Register

(78 FR 13406) (2014 Market Rules), we published the health insurance market rules.

• In the May 27, 2014

Federal Register

(79 FR 30240) (2015 Market Standards Rule), we published the exchange and insurance market standards for 2015 and beyond.

• In the December 22, 2016

Federal Register

(81 FR 94058), we provided additional guidance on guaranteed availability and guaranteed renewability.

• In the April 18, 2017

Federal Register

(82 FR 18346) (Market Stabilization final rule), we further interpreted the guaranteed availability provision.

• In the April 17, 2018

Federal Register

(83 FR 17058) (2019 Payment Notice), we clarified that certain exceptions to the special enrollment periods only apply to coverage offered outside of the Exchange in the individual market.

• In the June 19, 2020

Federal Register

(85 FR 37160) (2020 section 1557 final rule), in which HHS discussed section 1557 of the ACA, HHS removed nondiscrimination protections based on gender identity and sexual orientation from the guaranteed availability regulation.

• In part 2 of the 2022 Payment Notice, in the May 5, 2021

Federal Register

(86 FR 24140), we made additional amendments to the guaranteed availability regulation regarding special enrollment periods and finalized new special enrollment periods related to untimely notice of triggering events, cessation of employer contributions or government subsidies to COBRA continuation coverage, and loss of APTC eligibility.

• In the September 27, 2021

Federal Register

(86 FR 53412) (part 3 of the 2022 Payment Notice), which was published by HHS and the Department of the Treasury, we finalized additional amendments to the guaranteed availability regulations regarding special enrollment periods.

• In the May 6, 2022

Federal Register

(87 FR 27208), we finalized a revision to our interpretation of the guaranteed availability requirement to prohibit issuers from applying a premium payment to an individual's or employer's past debt owed for coverage and refusing to effectuate enrollment in new coverage.

4. 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 March 27, 2012

Federal Register

(77 FR 18310) (Exchange Establishment Rule), we implemented the Affordable Insurance Exchanges (Exchanges), consistent with title I of the ACA, to provide competitive marketplaces for individuals and small employers to directly compare available private health insurance options on the basis of price, quality, and other factors. This included implementation of components of the Exchanges and standards for eligibility for Exchanges, as well as network adequacy and essential community provider (ECP) certification standards.

In the August 17, 2011,

Federal Register

(76 FR 51201) we published a proposed rule regarding eligibility determinations, including the regulatory requirement to verify incarceration status. In the March 27, 2012,

Federal Register

(77 FR 18309) we finalized the regulatory requirement to verify incarceration attestation using an approved electronic data source that is current and accurate, and when attestations are not reasonably compatible with information in an approved data source, to resolve the inconsistency.

In the 2014 Payment Notice and 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 2016 Payment Notice, we also set forth the ECP certification standard at § 156.235, with revisions in the 2017 Payment Notice in the March 8, 2016

Federal Register

(81 FR 12203) and the 2018 Payment Notice in the December 22, 2016

Federal Register

(81 FR 94058).

In an interim final rule, published in the May 11, 2016

Federal Register

(81 FR 29146), we made amendments to the parameters of certain special enrollment periods (2016 Interim Final Rule). We finalized these in the 2018 Payment Notice, published in the December 22, 2016

Federal Register

(81 FR 94058).

In the Market Stabilization final rule, published in the April 18, 2017

Federal Register

(82 FR 18346), we amended standards relating to special enrollment periods and QHP certification. In the 2019 Payment Notice, 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 2020 Payment Notice established a new special enrollment period.

We published the final rule in the May 14, 2020

Federal Register

(85 FR 29164) (2021 Payment Notice).

In the January 19, 2021

Federal Register

(86 FR 6138) (part 1 of the 2022 Payment Notice), we finalized only a subset of the proposals in the 2022 Payment Notice proposed rule. In the May 5, 2021

Federal Register

(86 FR 24140), we published part 2 of the 2022 Payment Notice. In the September 27, 2021

Federal Register

(86 FR 53412) (part 3 of the 2022 Payment Notice), in conjunction with the Department of the Treasury, we finalized amendments to certain policies in part 1 of the 2022 Payment Notice.

In the May 6, 2022

Federal Register

(87 FR 27208), we finalized changes to maintain the user fee rate for issuers offering plans through the FFEs and maintain the user fee rate for issuers offering plans through the SBE-FPs for the 2023 benefit year. We also finalized various policies to address certain agent, broker, and web-broker practices and conduct. We also finalized updates to the requirement that all Exchanges conduct special enrollment period verifications.

In the April 27, 2023

Federal Register

(88 FR 25740) (2024 Payment Notice), we revised Exchange Blueprint approval timelines, lowered the user rate fee for QHPs, and amended re-enrollment hierarchies for enrollees. We also finalized policies to update standardized plan options, reduce the risk of plan choice overload by limiting the number of non-standardized plan options that issuers can offer, and ensure correct QHP information. In addition, to prevent gaps in coverage, we amended coverage effective date rules, lengthened the special enrollment period from 60 to 90 days to those who lose Medicaid coverage, and prohibited QHPs on the Federal platform from mid-year coverage terminations for dependent children who reach the applicable maximum age. We also finalized policies on verifying consumer income and permitting door-to-door assisters to solicit consumers. To ensure provider network adequacy, we finalized provider network and ECP policies for QHPs.

5. Essential Health Benefits

We established requirements relating to EHBs in the Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation Final Rule, which was 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 § 156.111 to provide States with additional options from which to select an EHB-benchmark plan for plan year (PY) 2020 and subsequent plan years. In the 2023 Payment Notice, published in the May 6, 2022

Federal Register

(87 FR 27208), we revised § 156.111 to require States to notify HHS of the selection of a new EHB-benchmark plan by the first Wednesday in May of the year that is 2 years before the effective date of the new EHB-benchmark plan, otherwise the State's EHB-benchmark plan for the applicable plan year will be that State's EHB-benchmark plan applicable for the prior year. We displayed the Request for Information; Essential Health Benefits (EHB RFI), published in the December 2, 2022

Federal Register

(87 FR 74097) to solicit public comment on a variety of topics related to the coverage of benefits in health plans subject to the EHB requirements of the ACA.

6. State Innovation Waivers

In the March 14, 2011

Federal Register

(76 FR 13553), HHS and the Department of the Treasury (collectively, the Departments)

published the “Application, Review, and Reporting Process for Waivers for State Innovation” proposed rule to implement section 1332(a)(4)(B) of the ACA.

In the February 27, 2012

Federal Register

(77 FR 11700), the Departments published the “Application, Review, and Reporting Process for Waivers for State Innovation” final rule (2012 Final Rule).

In the October 24, 2018

Federal Register

(83 FR 53575), the Departments issued the 2018 Guidance, which superseded the previous guidance published in the December 16, 2015

Federal Register

(80 FR 78131) (2015 Guidance) and set forth requirements that States must meet for waivers, application review procedures, pass-through funding determinations, certain analytical requirements, and operational considerations.

In the November 6, 2020

Federal Register

(85 FR 71142), the Departments issued an interim final rule (November 2020 IFC), which set forth flexibilities for waivers under section 1332 during the COVID-19 Public Health Emergency.

In the December 4, 2020

Federal Register

(85 FR 78572), the Departments published the “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 (2022 Payment Notice proposed rule) which proposed to codify certain policies and interpretations of the 2018 Guidance.

In the January 19, 2021

Federal Register

(86 FR 6138), the Departments published the “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2022; Updates to State Innovation Waiver (Section 1332 Waiver) Implementing Regulations” final rule (part 1 of the 2022 Payment Notice) which codified many of the policies and interpretations of the 2018 Guidance.

In the September 27, 2021

Federal Register

(86 FR 53412), part 3 of the 2022 Payment Notice, the Departments published the “Patient Protection and Affordable Care Act; Updating Payment Parameters, Section 1332 Waiver Implementing Regulations, and Improving Health Insurance Markets for 2022 and Beyond” final rule, which superseded and rescinded the policies and interpretations outlined in the 2018 Guidance and repealed the previous codification of the interpretations of statutory guidelines in part 1 of the 2022 Payment Notice. The Departments also finalized flexibilities in the public notice requirements and post-award public participation requirements for section 1332 waivers under certain emergent situations and processes and procedures for amendments and extensions for approved waiver plans.

7. Consumer Operated and Oriented Plans (CO-OPs)

In the December 13, 2011

Federal Register

(76 FR 77392), we published the “Patient Protection and Affordable Care Act; Establishment of Consumer Operated and Oriented Plan (CO-OP) Program” final rule (2011 CO-OP Rule), which established the rules governing the CO-OP program to make loans to capitalize eligible prospective CO-OPs. In the May 11, 2016

Federal Register

(81 FR 29146), we amended several CO-OP standards related to governance requirements to provide greater flexibility, and to facilitate private market transactions that would assist efforts of CO-OPs to arrange access to new sources of needed capital.

8. Basic Health Program (BHP)

In the March 12, 2014,

Federal Register

(79 FR 14111), we published a final rule entitled “Basic Health Program: State Administration of Basic Health Programs; Eligibility and Enrollment in Standard Health Plans; Essential Health Benefits in Standard Health Plans; Performance Standards for Basic Health Programs; Premium and Cost Sharing for Basic Health Programs; Federal Funding Process; Trust Fund and Financial Integrity,” implementing section 1331 of the ACA, which governs the establishment of BHPs.

9. State Flexibility in the Use of Income and Resource Disregards in Medicaid Eligibility

In the January 19, 1993

Federal Register

(58 FR 4929), we published a final rule with comment period entitled “Medicaid Program; Eligibility and Coverage Requirements,” in which we prescribed, at 42 CFR 435.601, the financial methodologies State Medicaid agencies must apply in determining eligibility for Medicaid, with options to apply less restrictive income and resource methodologies for the eligibility groups specified in section 1902(r)(2) of the Act.

In the August 22, 1994

Federal Register

(59 FR 43052), we published a final rule entitled “Medicaid Program; Eligibility and Coverage Requirements,” in which we amended 42 CFR 435.601(f)(1) to delete cross-references to other regulatory provisions that had been removed from the CFR.

In the November 30, 2016

Federal Register

(81 FR 86456), we published a final rule entitled “Medicaid and Children's Health Insurance Programs: Eligibility Notices, Fair Hearing and Appeal Processes for Medicaid and Other Provisions Related to Eligibility and Enrollment for Medicaid and CHIP,” in which we amended 42 CFR 435.601(b) to confirm that its provisions govern only individuals who are excepted from application of modified adjusted gross income financial methodologies (MAGI) in accordance with 42 CFR 435.603(j) (relating to “Eligibility Groups for which MAGI-based methods do not apply”). We also established in 42 CFR 435.601(d)(1) the authority for States to apply less restrictive methodologies for medically needy individuals whose income eligibility is determined under 42 CFR 435.831(b)(1) (including medically needy individuals whose eligibility is determined under MAGI-based methodologies that comply with certain rules relating to the financial responsibility of relatives and other individuals described in 42 CFR 435.602).

B. Summary of Major Provisions

The regulations outlined in this proposed rule would be codified in 31 CFR part 33, 42 CFR parts 435 and 600, and 45 CFR parts 153, 155, and 156.

1. 31 CFR Part 33 and 45 CFR Part 155

This proposed rule would amend section 1332 Waivers for State Innovation (referred to throughout this proposed rule as section 1332 waivers) implementing regulations regarding State public notice and comment procedures. The Departments propose changes in 31 CFR part 33 and 45 CFR part 155 that would allow States the flexibility to hold a State public hearing or post-award forum in a virtual format (that is, one that uses telephonic, digital, and/or web-based platforms), or hybrid format (that is, one that provides for both in-person and virtual attendance), which would be considered as the equivalent of holding an in-person meeting. Specifically, the Departments propose changes to 31 CFR 33.112(c) and 45 CFR 155.1312(c) and 31 CFR 33.120(c) and 45 CFR 155.1320(c). The Departments propose that these changes go into effect upon finalization of this rule. Because these changes would relieve a regulatory restriction, the Departments anticipate that they would be made effective immediately upon publication of a final rule.

2. 42 CFR Part 435

We propose to amend 42 CFR 435.601(d) to remove paragraph (d)(4), which would provide States with greater flexibility to adopt income and/or resource disregards in determining Medicaid financial eligibility for individuals excepted from application of financial methodologies based on MAGI (“non-MAGI” methodologies). States are permitted to expand eligibility for individuals who are subject to non-MAGI methodologies by disregarding income and/or resources that would otherwise be required to be considered in the individual's eligibility determination. However, under current rules, States must apply such income and/or resource disregards to all individuals within each Medicaid eligibility group. Removing paragraph (d)(4) would allow States, when considering expanding eligibility for non-MAGI individuals, to target disregards at discrete members of individuals within an eligibility group.

3. 42 CFR Part 600

We propose to amend 42 CFR 600.320(c) to allow States a third option when choosing the effective date of eligibility for BHP applicants. Under current rules, States have the option to choose between following: either the Medicaid rules at 42 CFR 435.915 or the Exchange rules at 45 CFR 155.420(b)(1). We propose to add an option to the effective date of coverage rules that would allow States to start coverage on the first day of the month following the date of application.

4. 45 CFR Part 153

In accordance with the OMB Report to Congress on the Joint Committee Reductions for Fiscal Year 2024, the HHS-operated risk adjustment program is subject to the fiscal year 2024 sequestration.

Therefore, the HHS-operated risk adjustment program will be sequestered at a rate of 5.7 percent for payments made from fiscal year 2024 resources (that is, funds collected during the 2024 fiscal year).

OMB. (2023, March 13). OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2024.

https://www.whitehouse.gov/wp-content/uploads/2023/03/BBEDCA_Sequestration_Report_and_Letter_3-13-2024.pdf.

We propose to recalibrate the 2025 benefit year HHS risk adjustment models using the 2019, 2020, and 2021 benefit year enrollee-level EDGE data. For the 2025 benefit year, we propose to continue applying a market pricing adjustment to the plan liability associated with Hepatitis C drugs in the HHS risk adjustment models (see, for example, 84 FR 17463 through 17466). We propose a modification to the adjustment for the receipt of CSRs in the HHS risk adjustment models to improve predictive accuracy for the American Indian and Alaska Native (AI/AN) subpopulation who are enrolled in zero and limited cost-sharing plans and to retain the other CSR adjustment factors in the HHS risk adjustment models. We also propose a risk adjustment user fee for the 2025 benefit year of $0.20 per member per month (PMPM). Additionally, we propose that in certain cases we may require a corrective action plan to address an observation identified in an HHS risk adjustment audit.

5. 45 CFR Part 155

In part 155, we propose to amend § 155.105(b) to require that a State seeking to operate a State Exchange must first operate an SBE-FP for at least one plan year, including its open enrollment period. We believe this requirement would give States sufficient time to create, staff, and structure a State Exchange that could transition to operating its own platform and establish relationships with interested parties critical to a State Exchange's success in operating a Navigator and consumer outreach program, assuming plan management responsibilities, and communicating effectively with consumers to support enrollment and avoid health care coverage gaps.

We propose to revise § 155.106(a)(2) as it pertains to Exchange Blueprint requirements for States transitioning to a State Exchange. Specifically, we propose to add that we may require that a State submitting a Blueprint Application seeking to operate a State Exchange provide upon request, supplemental documentation to HHS detailing the State's implementation of its State Exchange functionality as laid out in the State Exchange Blueprint. This could include a State submitting detailed plans regarding its State Exchange consumer assistance programs and activities, such as information on its direct outreach plans. Further, we propose to require that a State applying to transition to a State Exchange must provide the public with a notice and copy of its State Exchange Blueprint Application, as well as conduct periodic public engagements whereby interested parties can learn about the status of a State's transition to a State Exchange and provide input on that transition.

We propose to amend § 155.170(a)(2) to codify that benefits covered in a State's EHB benchmark plan would not be considered in addition to EHB, even if they had been required by State action taking place after December 31, 2011, other than for purposes of compliance with Federal requirements. Under this proposal, there would be no obligation for the State to defray the cost of a State mandate enacted after December 31, 2011 that requires coverage of a benefit if that benefit is included in the State's EHB-benchmark plan. Benefits that are covered in a State's EHB-benchmark plan would not be considered in addition to EHB and would remain subject to the various rules applicable to the EHB, including the prohibition on discrimination in accordance with § 156.125, limitations on cost sharing in accordance with § 156.130, and restrictions on annual or lifetime dollar limits in accordance with § 147.126. We believe that this change would promote consumer protections and facilitate compliance with the defrayal requirement by making the identification of benefits in addition to EHB more intuitive.

At § 155.205(a), we propose to establish additional minimum standards for Exchange call center operations. Specifically, we propose to require that all Exchange call centers, other than those of SBE-FPs and Small Business Health Options Program (SHOP) Exchanges that do not provide for enrollment in SHOP coverage through an online SHOP enrollment platform, provide consumer access to a live call center representative during an Exchange's published hours of operation to assist with submitting their QHP application. We believe speaking to a live representative would help troubleshoot consumer QHP application issues, provide in real time an opportunity for a live representative to explain QHP application terminology to a consumer, provide a live representative to ensure the consumer provides the most correct information to the QHP application—alleviating unnecessary follow-up, and provide greater overall consumer satisfaction.

We propose to amend § 155.205(b)(4) to require that an Exchange operate a centralized eligibility and enrollment platform on the Exchange's website (or, for an SBE-FP, the Federal eligibility and enrollment platform) such that the Exchange allows for the submission of the single, streamlined application for enrollment in a QHP and insurance affordability programs through the Exchange's website and performs eligibility determinations for all consumers based on submissions of the single, streamlined application. Further, we propose to amend § 155.302(a)(1) to clarify that the Exchange, through the centralized eligibility and enrollment platform operated on the Exchange's

website (or, for an SBE-FP, the Federal eligibility and enrollment platform), is the entity that is responsible for making all determinations regarding the eligibility for QHP coverage and insurance affordability programs regardless of whether an individual files an application for enrollment in a QHP on the Exchange's website (or, for SBE-FPs, on the Federal eligibility and enrollment platform), or on a website operated by a non-Exchange website allowed for under § 155.220 or § 155.221. We also clarify that only entities that an Exchange elects to contract with to operate its centralized eligibility and enrollment platform can perform this function on behalf of an Exchange, such that Exchanges would not be able to solely rely on non-Exchange entities, including a web-broker (defined at § 155.20) or other entities under § 155.220 or § 155.221, from making such eligibility determinations on behalf on the Exchanges.

We also propose to amend § 155.205(b)(5) to require that an Exchange operate a centralized eligibility and enrollment platform on the Exchange's website (or, for an SBE-FP, the Federal eligibility and enrollment platform) so that the Exchange (or, for an SBE-FP, the Federal eligibility and enrollment platform) meets the requirement under § 155.400(c) to maintain record of all effectuated enrollments in QHPs, including changes in effectuated QHP enrollments.

We propose to amend § 155.220(h) to specify that the HHS reconsideration entity is the CMS Administrator, who is a principal officer. This proposal would ensure agents, brokers, and web-brokers utilizing the FFEs and SBE-FPs can submit a request to the CMS Administrator to reconsider HHS' decision to terminate their Exchange agreement(s) for cause.

We propose changes to §§ 155.220 and 155.221 to apply certain standards to web-brokers and Direct Enrollment (DE) entities assisting consumers and applicants across all Exchanges, including in States with State Exchanges. We seek to ensure that certain current minimum Federal standards applicable in the FFEs and SBE-FPs, related to web-broker website display of standardized QHP comparative information, disclaimer language, information on eligibility for APTC/CSRs, operational readiness, and access by downstream agents and brokers, also apply to web-brokers in States with State Exchanges. We similarly propose to extend certain DE entity requirements applicable in the FFEs and SBE-FPs related to marketing and display of QHPs, providing consumers with correct information and refraining from certain conduct, marketing of non-QHPs, website disclaimer language, and operational readiness to DE entities across all Exchanges, to newly apply to DE entities in States with State Exchanges. These proposals would help establish greater general uniformity with respect to these requirements for web-brokers and DE entities operating in the Exchanges and establish minimum Federal consumer protections in all States, regardless of the Exchange model.

We propose to update regulations in § 155.221(b) to mandate

HealthCare.gov

changes be reflected on DE entity non-Exchange websites within a notice period set by HHS. We also propose requiring that DE entities make these display changes in a manner consistent with what is adopted by HHS for display on

HealthCare.gov

by meeting standards defined by HHS, unless HHS approves a deviation from those standards. This proposal would codify our existing practice of communicating important changes to the

HealthCare.

gov display to EDE entities, expand our existing change request processes to permit entities to request deviations from the required display changes, and require DE entities that do not participate in EDE to comply with these practices. Additionally, this proposal would also require that all display changes which affect the visual aspects of the website that users see and interact with must be prominently displayed on the non-Exchange website such that the changes are clear, noticeable, and understandable to consumers. Finally, this proposal would also require State Exchanges to require their DE entities to implement and prominently display changes adopted for display on the State Exchanges' websites on their non-Exchange websites for purposes of assisting consumers with DE in QHPs offered through the Exchange.

We propose in connection with the failure to file and reconcile process at § 155.305(f)(4) that Exchanges be required to send notices to tax filers for the first year in which they have been determined to have failed to reconcile APTC as an initial warning to inform and educate tax filers that they need to file and reconcile, or risk being determined ineligible for APTC if they fail to file and reconcile for a second consecutive year. Currently, the regulation does not describe notification procedures for tax filers who have failed to reconcile for 1 year. We propose to require that all Exchanges be required to send informative notices at least annually to tax filers who have failed to reconcile.

We propose to amend § 155.315(e) to provide that all Exchanges can accept applicant incarceration status attestations without further verification, and Exchanges may verify applicant incarceration status using an HHS-approved verification data source. HHS would approve an alternative electronic data source for State Exchanges to use for incarceration verification if it provides data that are current and accurate, and if its use minimizes administrative costs and burdens.

We propose to reinterpret State Exchange and State Medicaid and Children's Health Insurance Program (CHIP) agency use of the Federal Data Services Hub to access and use the income data provided by the Verify Current Income (VCI) Hub service as a State Exchange or a State Medicaid and CHIP agency function because these State entities use this optional service to implement eligibility verification requirements applicable to them. More specifically, State Exchanges and State Medicaid and CHIP agencies have the option to use this information to verify a tax household's annual income attestation for Exchange QHP eligibility and the Medicaid applicant's current household income as required to make insurance affordability program eligibility determinations. We propose to amend § 155.320(c) to reflect this reinterpretation for the Exchanges but are not proposing to amend the Medicaid regulations as the Medicaid regulations already address Medicaid agency verification requirements and are not typically used to delineate Medicaid agency operations in this manner.

We propose to revise § 155.330(d) to require Exchanges to conduct periodic checks for deceased enrollees twice yearly and subsequently end deceased enrollees' QHP coverage. Additionally, we propose to revise § 155.330(d)(3) to grant the Secretary the authority to temporarily suspend the periodic data matching (PDM) requirement during certain situations (for example, a declared national public health emergency). These proposals would align § 155.330(d) with current Federal Exchange policy and operations, prevent overpayment of QHP premiums, and accurately capture household QHP eligibility based on household size.

We propose to amend § 155.335(j)(1) and (2) to require Exchanges to re-enroll individuals who are enrolled in catastrophic coverage, as defined in section 1302(e) of the ACA, into a new

QHP for the coming plan year. Incorporating these individuals enrolled in catastrophic coverage into the auto re-enrollment hierarchy rules at § 155.335(j) would help ensure continuity of coverage in cases where the issuer does not continue to offer a catastrophic plan for the new plan year, or these individuals are no longer eligible for enrollment in a catastrophic plan for the new year, and these individuals do not actively select a different QHP. We also propose to add a new paragraph (j)(5) to § 155.335 to establish that an Exchange may not newly auto re-enroll into catastrophic coverage an enrollee who is currently enrolled in coverage of a metal level as defined in section 1302(d) of the ACA. This change reflects our current practice for Exchanges on the Federal platform.

We propose to amend § 155.400(e)(2) to codify that the flexibility for issuers experiencing billing or enrollment problems due to high volume or technical errors is not limited to extensions of the binder payment.

We propose to amend § 155.410(e)(4)(ii) to revise parameters around the adoption of an alternative open enrollment period by a State Exchange. Specifically, we propose for benefit years beginning on or after January 1, 2025, State Exchanges must adopt an open enrollment period that begins on November 1 of the calendar year preceding the benefit year and ends no earlier than January 15 of the applicable benefit year, with the option to extend the open enrollment period beyond January 15 of the applicable benefit year. We believe this proposal would ensure consumers are not subjected to plan cost increases that they may not be notified about until after open enrollment ends, give Navigators, certified application counselors, and agents and brokers ample time to assist all interested applicants, provide State Exchanges with additional flexibility, reduce consumer confusion, and improve access to health coverage.

At § 155.420(b), we propose to align the effective dates of coverage after selecting a plan during certain special enrollment periods across all Exchanges, including State Exchanges. We would require all State Exchanges to provide coverage that is effective on the first day of the month following plan selection, if a consumer enrolls in a QHP during certain special enrollment periods. This proposal would prevent coverage gaps, particularly for consumers transitioning between different Exchanges or from other insurance coverage.

We propose to amend paragraph § 155.420(d)(16) to revise the parameters around the availability of a special enrollment period for APTC-eligible qualified individuals with a projected household income no greater than 150 percent of the Federal Poverty Level (FPL). Specifically, we are proposing to remove the limitation that this special enrollment period is only available during periods of time when APTC benefits are available such that the applicable taxpayers' applicable percentage is set to zero and that Exchanges have the option to permanently provide this special enrollment period. We believe this proposal would provide affordable coverage available to more uninsured people and additional enrollment opportunities to low-income consumers.

We propose to add § 155.430(b)(1)(iv)(D) to permit an enrollee to retroactively terminate the enrollee's enrollment in a QHP through an Exchange on the Federal platform when the enrollee enrolls in Medicare Parts A or B, and the termination date would be retroactively effective to the day before Medicare coverage begins. This proposal would allow consumers to avoid overlapping coverage and paying unnecessary premiums. State Exchanges would have the option of implementing this proposal, and we seek comment on whether this proposal should instead be mandatory for State Exchanges.

We propose to revise § 155.1050 to require that State Exchanges and SBE-FPs establish and impose quantitative time and distance network adequacy standards for QHPs that are at least as stringent as the FFEs' network adequacy standards established for QHPs under § 156.230. We also propose that State Exchanges and SBE-FPs be required to conduct quantitative network adequacy reviews prior to certifying any plan as a QHP, consistent with the reviews conducted by the FFEs under § 156.230. We further propose to require State Exchanges and SBE-FPs to permit issuers that are unable to meet the specified network adequacy standards to participate in a justification process after submitting their initial network adequacy data to account for variances and potentially earn QHP certification. Finally, we propose to mandate that State Exchanges and SBE-FPs require all issuers seeking QHP certification to submit information to the State Exchange or SBE-FP about whether network providers offer telehealth services. These proposals would be effective for plan years beginning on or after January 1, 2025.

6. 45 CFR part 156

In part 156, we propose user fee rates for the 2025 benefit year for all issuers participating on the Exchanges using the Federal platform. For the 2025 benefit year, we propose an FFE user fee rate of 2.2 percent of total monthly premiums and an SBE-FP user fee rate of 1.8 percent of total monthly premiums. We will issue the 2025 benefit year premium adjustment percentage index and related payment parameters in guidance, consistent with the policy finalized in part 2 of the 2022 Payment Notice.

For benefit years beginning on or after January 1, 2027, we propose three revisions to the standards for State selection of EHB-benchmark plans at § 156.111. First, we propose to consolidate the options for States to change EHB-benchmark plans at § 156.111(a) to reduce the burden on States to decide between three functionally identical choices. Second, we propose to revise the typicality standard at § 156.111(b)(2) so that, in demonstrating that a State's new EHB-benchmark plan provides a scope of benefits that is equal to the scope of benefits of a typical employer plan in the State, the scope of benefits of a typical employer plan in the State would be defined as any scope of benefits that is as or more generous than the scope of benefits in the State's least generous typical employer plan (supplemented by the State as necessary to provide coverage within each EHB category at § 156.110(a)), and as or less generous than the scope of benefits in the State's most generous typical employer plan (supplemented by the State as necessary to provide coverage within each EHB category at § 156.110(a)), among the typical employer plans currently defined at § 156.111(b)(2)(i)(A) and (B). We also propose to remove the generosity standard at § 156.111(b)(2)(ii) and to make a technical revision to the language regarding supplementation at § 156.111(b)(2)(i). Third, we propose to revise § 156.111(e)(3) to require States to submit a formulary drug list as part of their application to change EHB-benchmark plans only if the State is seeking to change their prescription drug EHB.

We propose to remove the regulatory prohibition at § 156.115(d) on issuers from including routine non-pediatric dental services as an EHB, which would provide States the option to add routine adult dental services as an EHB by updating their EHB-benchmark plans pursuant to § 156.111.

We propose to amend § 156.122 to codify that prescription drugs in excess of those covered by a State's EHB-benchmark plan are considered EHB. As a result, they would be subject to requirements including the annual limitation on cost sharing and the restriction on annual and lifetime dollar limits, consistent with § 156.130, unless the coverage of the drug is mandated by State action and is in addition to EHB pursuant to § 155.170, in which case the drug would not be considered EHB. In addition, for plan years beginning on or after January 1, 2026, we propose to amend § 156.122 to provide that the Pharmacy & Therapeutics (P&T) committee must include a consumer representative. We also seek comment on a possible future policy proposal to replace the United States Pharmacopeia (USP) Medicare Model Guidelines (MMG) with the USP Drug Classification system (DC) to classify the prescription drugs required to be covered as EHB under § 156.122(a)(1). In particular, we seek public comment to confirm or further expand our understanding of the risks and benefits associated with replacing the USP MMG with the USP DC in this context.

For PY 2025, we propose to follow the approach finalized in the 2024 Payment Notice concerning standardized plan option metal levels, and to otherwise maintain continuity with our approach to standardized plan options finalized in the 2023 and 2024 Payment Notices.

We propose to make only minor updates to the plan designs for PY 2025 to ensure these plans have AVs within the permissible

de minimis

range for each metal level. Our proposed updates to plan designs for PY 2025 are detailed in § 156.201 of the preamble of this proposed rule, specifically in Tables 12 and 13.

This includes continuation of the differential display of standardized plan options on

HealthCare.gov

and enforcement of the standardized plan options display requirements for approved web-brokers and QHP issuers using a direct enrollment pathway to facilitate enrollment through an FFE or SBE-FP— including both the Classic Direct Enrollment (Classic DE) and Enhanced Direct Enrollment (EDE) Pathways.

In the 2024 Payment Notice (88 FR 25858), we announced our intent to propose an exceptions process that would allow issuers to offer non-standardized plan options in excess of the limit of two per product network type, metal level, inclusion of dental and vision benefit coverage, and service area for PY 2025 and subsequent years. We propose an exceptions process at § 156.202 that would allow issuers to offer more than two non-standardized plan options per product network type, metal level, inclusion of dental and vision benefit coverage, and service area for PY 2025 and subsequent plan years, if the issuer can demonstrate that these additional non-standardized plans have specific design features that would substantially benefit consumers with chronic and high-cost conditions.

We propose a new regulatory provision that would permit us to allow a CO-OP loan recipient to voluntarily terminate its loan agreement with us and cease to constitute a qualified non-profit health insurance issuer (QNHII), for the purpose of pursuing innovative business plans that are not otherwise consistent with the governance requirements and business standards applicable to a CO-OP borrower. Under the proposed new regulatory provision, we would be able to consider a request by a CO-OP to voluntarily terminate its loan agreement for reasons other than financial viability, provided all outstanding CO-OP loans issued to the loan recipient are repaid in full prior to termination, and we believe granting the request would meaningfully enhance consumer access to quality, affordable, member-focused, non-profit health care options in affected markets.

We propose conforming amendments to the payment and collections process set forth at § 156.1215 to align with the policies and regulations proposed in the Federal Independent Dispute Resolution Operations proposed rule (88 FR 75744). This proposal would provide that administrative fees for utilizing the No Surprises Act Federal independent dispute resolution (IDR) process for health insurance issuers that participate in financial programs under the ACA would be subject to netting as part of HHS' integrated monthly payment and collections cycle. Additionally, we propose to amend § 156.1215 to provide that any amount owed to the Federal government by an issuer and its affiliates for unpaid administrative fees due to the Federal government from these issuers and their affiliates for utilizing the Federal IDR process in accordance with § 149.510(d)(2), after HHS nets amounts owed by the Federal government under these programs, would be the basis for calculating a debt owed to the Federal government.

III. Provisions of the Proposed Regulations

A. 31 CFR part 33 and 45 CFR Part 155—Section 1332 Waivers

1. Background

Section 1332 of the ACA permits States to apply for a section 1332 waiver to pursue innovative strategies for providing their residents with access to higher value, more affordable health insurance coverage. To allow for greater flexibility in communicating with the public, we are proposing updates to the public hearing process requirements for section 1332 waivers.

Under section 1332(b) of the ACA, the Secretary of HHS and the Secretary of the Treasury (collectively, 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 section 1302(b) of the ACA and offered through Exchanges established under title I of the ACA, as certified by the Office of the Actuary of CMS, based on sufficient data from the State and from comparable States about their experience with programs created by the ACA and the provisions of the ACA 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 the ACA; (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 the ACA; and (4) the proposal will not increase the Federal deficit. The Secretaries retain their discretionary authority to deny requested section 1332 waivers when appropriate given consideration of the application, as a whole, even if a proposal for a section 1332 waiver meets the four statutory guardrails.

The Departments are responsible for monitoring an approved section 1332 waiver's compliance with the statutory guardrails and for conducting evaluations to determine the impact of the section 1332 waiver. Specifically, section 1332(a)(4)(B)(v) of the ACA requires the Secretaries to promulgate regulations that provide for a process for the periodic evaluation of approved section 1332 waivers. The Secretaries must also promulgate regulations that provide for a process under which States with approved section 1332 waivers submit to the Secretaries periodic reports concerning the implementation of the State's waiver program.

See ACA section 1332(a)(4)(B)(iv).

2. Proposed Amendments to Normal Public Notice Requirements (31 CFR 33.112, 31 CFR 33.120, 45 CFR 155.1312, and 45 CFR 155.1320)

Sections 1332(a)(4)(B)(i) and (iii) of the ACA provide that the Secretaries shall promulgate regulations that provide for a process for public notice and comment at the State level, including public hearings, and a process for providing public notice and comment at the Federal level after the section 1332 waiver application is received by the Secretaries, respectively, that are both sufficient to ensure a meaningful level of public input. Current regulations at 31 CFR 33.112 and 45 CFR 155.1312 specify State public notice and comment period and participation requirements for proposed section 1332 waiver requests, and 31 CFR 33.116(b) and 45 CFR 155.1316(b) specify the public notice and comment period and approval requirements under the accompanying Federal process.

In the November 2020 interim final rule (85 FR 71142), the Departments revised regulations to set forth flexibilities in the public notice requirements and post-award public participation requirements for section 1332 waivers during the COVID-19 PHE. In the September 2021 final rule (86 FR 53502), the Departments extended those changes beyond the COVID-19 PHE to allow similar flexibilities in the event of future natural disasters; PHEs; or other emergent situations that threaten consumers' access to health insurance coverage, consumers' access to health care, or human life. Currently, in such an event, States may submit a request to the Departments to modify, in part, the State public notice requirements specified in 31 CFR 33.112(a)(1), (b), (c), and (d) and 45 CFR 155.1312(a)(1), (b), (c), and (d), and the Federal public notice requirement specified in 31 CFR 33.116(b) and 45 CFR 155.1316(b), pursuant to 31 CFR 33.118(a) and 45 CFR 155.1318(a).

The criteria to request a modification from the normal public notice requirements during an emergent situation are set forth in 31 CFR 33.118(b)(1) through (5) and 45 CFR 155.1318(b)(1) through (5). Pursuant to 31 CFR 33.118(b)(3) and 45 CFR 155.1318(b)(3), the State's request to modify normal public notice procedures is required to include: the justification for the requested modification from the State public notice procedures as it relates to the emergent situation and the alternative public notice procedures, including public hearings, that it proposes to implement at the State level and that are designed to provide the greatest opportunity for and level of meaningful public input from impacted interested parties that is practicable given the emergent circumstances motivating the State's request for a modification.

Since the finalization of the flexibilities in 31 CFR 33.118(b)(1) through (5) and 45 CFR 155.1318(b)(1) through (5), almost all States with approved section 1332 waivers (“section 1332 waiver States”) submitted requests that were granted by the Departments to conduct their annual post-award forums virtually instead of in-person during the COVID-19 PHE to reduce the risk of transmission of COVID-19. Similarly, during the COVID-19 PHE, States submitting new section 1332 waiver applications, waiver extension requests, or waiver amendment requests also requested to host their State public hearings virtually and these requests were also granted by the Departments. However, with the recent expiration of the Federal COVID-19 PHE

(and many State COVID-19 PHEs)

and in line with the requirements of 31 CFR 33.120(c) and 45 CFR 155.1320(c) and 31 CFR 33.112(c) and 45 CFR 155.1312(c), the Departments have ceased granting States' requests to hold public hearings or post-award forums virtually instead of in-person on the basis of the Federal COVID-19 PHE.

The Federal COVID-19 PHE ended on May 11, 2023.

https://www.hhs.gov/about/news/2023/05/09/fact-sheet-end-of-the-covid-19-public-health-emergency.html#:~:text=That%20means%20with%20the%20COVID,the%20expiration%20of%20the%20PHE.

For example, in Alaska the State's PHE ended on July 1, 2022 (

https://health.alaska.gov/PHE/Pages/default.aspx

); in Colorado the Disaster Recovery Order ended on April 27, 2023 (

https://hcpf.colorado.gov/covid-19-phe-planning

); in Georgia the State of Emergency ended on May 11, 2023 (

https://dph.georgia.gov/press-releases/2023-05-11/dph-news-release-end-public-health-emergency-declaration

); and in Rhode Island the State's COVID-19 Disaster Emergency ended on May 11, 2023 (

https://governor.ri.gov/executive-orders/executive-order-23-05

Upon review and consideration of the lessons learned during the COVID-19 PHE, the Departments have determined that some current provisions regarding normal State public notice procedures are outdated given the increased accessibility that technology has provided for virtual and telephonic meetings. States have shared that their residents benefitted from the States' opportunity to host public hearings and post-award forums virtually, and that they would like to continue doing so to facilitate attendance. States have also reported to the Departments that hosting meetings virtually during the COVID-19 PHE did not decrease the amount or quality of meaningful input received. States' experience during this time demonstrated that interested parties were able to virtually attend meetings and submit public comments verbally or in-writing, and States did not report any significant issues relating to virtual platforms that impeded public attendance or participation. States continued to share with the Departments summaries of their post-award forums, as well as all public comments received and actions taken in response to concerns or comments, in accordance with section 1332 waiver annual reporting requirements. In States' new waiver applications, waiver extension requests, and waiver amendment requests, States also shared with the Departments summaries of virtually conducted hearings from their State public comment periods and addressed public comments or concerns received.

Beyond mitigating the spread of COVID-19, information shared by section 1332 waiver States has demonstrated that the opportunity to host post-award forums and public hearings on virtual platforms facilitated comparable or higher levels of public attendance when compared to previously held in-person meetings. For example, at Maryland's annual post-award forums held in 2019 (in-person) and 2020-2022 (virtual), the State saw comparable participation across the years from interested parties. Minnesota also reported comparable attendance at its post-award forums across the years: 4 attendees in 2018 (in-person), 1 in 2019 (in-person), 4 in 2020 (virtual), 9 in 2021 (virtual),

and 2 in 2022 (virtual). Likewise, Wisconsin had 6 attendees at its post-award forum in 2019 (in-person), 24 in 2020 (virtual),

11 in 2021 (virtual), and 7 in 2022 (virtual). Wisconsin noted that using a virtual format has allowed individuals who would otherwise not be able to attend in-person to view the State's presentation and that this has proven to be a convenient means for individuals to attend the forum.

Note that this post-award hearing was also a hearing for the State's waiver extension application, which likely increased attendance.

Note that attendance was relatively higher in 2020 likely due to the forum following the State's first full year of implementing its reinsurance program.

States that began waiver implementation after the start of the COVID-19 PHE have also reported successfully hosting virtual post-award forums. For example, Colorado conducted its first post-award forum entirely virtually in 2020 and reported

79 attendees.

Pennsylvania had 2 attendees at its first post-award forum in 2021 (virtual) and 4 in 2022 (virtual). Pennsylvania noted that due to the expansiveness of the State's geography, there has historically been low in-person attendance, as observed at its in-person public hearings in 2019 for its waiver application, where no members of the public attended the first meeting, and two members of the public attended the second meeting.

Note that this post-award forum was also a hearing for the State's waiver extension application, which likely increased attendance.

States submitting new waiver applications, waiver extension requests, or waiver amendment requests during the COVID-19 PHE also reported successfully conducting their public hearings on virtual platforms. For example, in January 2022, Alaska held a combined post-award forum and State public hearing for its waiver extension application both in-person and with a telephonic option, which 3 members of the public attended either in-person or virtually. In April 2022, Washington held two State public hearings virtually, in which 9 representatives from organizations attended and shared public comments.

There are other Federal programs and agencies that permitted a virtual option in place of in-person public hearings prior to the COVID-19 PHE or that have more recently amended their policies for public input to continue virtual and telephonic options that were first implemented during the COVID-19 PHE. For example, States that are applying for Medicaid section 1115 demonstrations are permitted to use telephonic and web-based conference capabilities for public meetings. In fact, per 42 CFR 431.408(a)(3), a State must use telephonic and/or web conference capabilities for at least one of the two required public hearings to ensure statewide accessibility to the public hearing, unless it can document it has afforded the public throughout the State the opportunity to provide comment, such as holding the two public hearings in geographically distinct areas of the State.

As another example, during the COVID-19 PHE, the Internal Revenue Service (IRS) began holding public hearings on notices of proposed rulemaking telephonically instead of in-person. Following the end of the Federal COVID-19 PHE, the IRS recently announced that, for proposed regulations published in the

Federal Register

after May 11, 2023,

public hearings would be conducted in-person but that a telephonic option would remain available for those who prefer to attend or testify by telephone.

Internal Revenue Service, Public Hearings on Proposed Regulations to Be Conducted in Person with Telephone Options Available, Announcement 2023-16. Accessed at

https://www.irs.gov/pub/irs-drop/a-23-16.pdf.

The Departments considered whether to propose requiring States to hold at least one of the required public hearings for waiver applications in-person. However, as explained above, States have successfully hosted post-award forums and public hearings for section 1332 waiver applications virtually to allow for meaningful public input over the last several years. Furthermore, by allowing States the ability to hold all of their meetings virtually, States may better allow for input across different geographies, communities, and populations. We also considered proposing the standard under section 1115 demonstrations where one hearing is required to be done virtually. However, given the successful hosting of virtual meetings with public participation by States for section 1332 waivers, it does not seem necessary to continue to require in-person meetings to solicit public input on section 1332 waivers.

The Departments believe that by allowing States the opportunity to hold post-award forums and public hearings virtually and through digital platforms, States would be able to continue facilitating attendance and participation from interested parties and the public to provide meaningful input. As such, the Departments are of the view that updating the State public notice procedures would enhance public participation in the section 1332 waiver review and monitoring process. This approach would help remove barriers to participation and increase opportunities for engagement in policymaking for communities and local partners who may face barriers to in-person participation (for example, those in rural areas). This approach is also consistent with Executive Order 14094, Executive Order on Modernizing Regulatory Review, as it would proactively engage interested or affected parties, including members of underserved communities, and promote best practices for information accessibility and engagement with interested or affected parties through the use of alternative platforms and media for engaging the public.

Further, this approach may improve States' ability to understand and eliminate barriers experienced by underserved or under-represented communities, and identify opportunities to advance health equity, while diminishing administrative burden related to the integration of in-person and virtual formats.

88 FR 21879.

https://www.govinfo.gov/content/pkg/FR-2023-04-11/pdf/2023-07760.pdf.

Therefore, we propose that a virtual (that is, one that uses telephonic, digital, and/or web-based platforms) or hybrid (that is, one that provides for both in-person and virtual attendance) public hearing or forum be considered as the equivalent of holding an in-person meeting. In the 2012 final rule (77 FR 11700), the Departments noted that as set forth in 31 CFR 33.112(c)(1) and 45 CFR 155.1312(c)(1), a State must hold at least two public hearings in distinct locations. Under the proposal in this rule to modify the normal public notice procedures, States would still need to hold at least two public hearings in distinct locations. For example, the Departments clarify that under this rule's proposal to allow flexibility to host these meetings virtually, a State would not be permitted to count a public hearing in which there is simultaneously an in-person location and virtual platform as two hearings (or two locations). Instead, one virtual or hybrid meeting would still count as one public hearing, and two virtual or hybrid meetings would count as two public hearings.

To codify these new proposed policies, we propose to amend 31 CFR 33.112(c) and 45 CFR 155.1312(c) and 31 CFR 33.120(c) and 45 CFR 155.1320(c). More specifically, the Departments propose to amend 31 CFR 33.112(c) and 45 CFR 155.1312(c) to permit States to conduct public hearings in a virtual (that is, one that uses telephonic, digital, and/or web-based platforms) or hybrid (that is, one that provides for both in-person and virtual attendance) format in lieu of conducting an in-person meeting. The Departments also propose to amend 31 CFR 33.120(c) and 45 CFR 155.1320(c) to provide that for a State's annual post-award forum, the public forum shall be conducted in an in-person, virtual (that is, one that uses telephonic, digital, and/or web-based platforms), or hybrid (that is, one that provides for both in-person and virtual attendance) format. The Departments propose that these changes go into effect upon finalization of this rule. Because these changes would relieve a regulatory restriction, the Departments anticipate that they would be made effective immediately upon publication of a final rule.

This proposal is limited to allowing flexibility to host required meetings virtually. States would be required to continue to abide all other public notice requirements, including public notice

procedural requirements for waiver applications, waiver extension and waiver amendment requests, and post-award forums. For example, States would still be required to have a process to consult and collaborate with Federally-recognized tribes,

as applicable, as well as take reasonable steps to provide meaningful access for individuals with limited English proficiency and appropriate steps to ensure effective access for and communication with individuals with disabilities, including accessibility of information and communication technology.

States should recognize that virtual meetings may present additional accessibility challenges for people with communications and mobility disabilities, as well as to those who lack broadband access. Complying with the requirement to ensure effective communication may entail providing American Sign Language interpretation and real-time captioning and ensuring that the virtual platform is interoperable with assistive technology for those with mobility difficulties.

See 31 CFR 33.112(a)(2) and 45 CFR 155.1312(a)(2).

See Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d, 45 CFR part 80), Section 1557 of the ACA (42 U.S.C. 18116), Section 504 of the Rehabilitation Act of 1973 (29 U.S.C 794, 45 CFR part 84), and Title II of the Americans with Disabilities Act (42 U.S.C. 1213

et seq.,

28 CFR part 35). The HHS Office for Civil Rights enforces applicable Federal civil rights laws that prohibit discrimination on the basis of race, color, national origin, sex, age, or disability, as well as laws protecting the exercise of conscience and religious freedom, including the Religious Freedom Restoration Act (Pub. L 103-141) (42 U.S.C. 2000bb through 2000bb-4).

Finally, the Departments clarify that under this proposal, States should have a process by which members of the public can request in-person meetings for the annual post-award forum or State public hearings on waiver applications, waiver extension requests, or waiver amendments requests, and that States should accommodate those requests whenever possible. In addition, States with approved section 1332 waivers and States seeking approval for proposed waivers would continue to have flexibility to submit requests to the Departments during emergent situations to modify certain public participation requirements as set forth in 31 CFR 33.118(b)(1) through (5) and 45 CFR 155.1318(b)(1) through (5).

The Departments seek comment on these proposals.

B. 42 CFR Parts 435 and 600

1. Increase State Flexibility in the Use of Income and Resource Disregards for Non-MAGI Populations (42 CFR 435.601)

We propose to provide States with greater flexibility to adopt income and/or resource disregards in determining financial eligibility under section 1902(r)(2) of the Act for individuals excepted from application of financial methodologies based on modified adjusted gross income (“MAGI-based methodologies”).

Section 1902(r)(2) of the Act requires that States, in determining Medicaid financial eligibility, apply a methodology that may be less restrictive, but which may not be more restrictive, than in the case of individuals seeking eligibility on the basis of being 65 years old or older, having blindness or a disability, under the supplemental security income (SSI) program. In the case for other individuals, the methodology may be less restrictive, but may not be more restrictive than the methodology applied to determine eligibility “under the State plan most closely categorically related.” For the latter populations, prior to the enactment of the ACA, the aid to families with dependent child AFDC program methodologies were generally used (42 CFR 435.601(a), (b), and (d)(2)(ii)). However, section 2002(a) of the ACA amended section 1902(e) of the Act which, at paragraph (14)(A), requires that, notwithstanding section 1902(r)(2) of the Act (or any other provision of title XIX of the Act), States use MAGI-based methodologies in determining individuals' Medicaid eligibility unless the individual is excepted from such methodologies under section 1902(e)(14)(D) of the Act.

Implemented in our regulations at 42 CFR 435.603(j), these exceptions include, but are not limited to, individuals who are age 65 years old or older; have blindness or a disability; are being evaluated for coverage as medically needy; or request need for coverage of long-term services and supports (LTSS). This means, for example, that in determining financial eligibility for an optional eligibility group in which being at least 65 years old is a requirement, SSI-based methodologies (as the most closely related cash assistance program) and not MAGI-based methodologies apply, and States must apply a methodology no more restrictive than the methodology of the SSI program. Similarly, in determining eligibility for a medically needy group of parents and caretaker relatives, States must apply a methodology no more restrictive than the methodology of the former AFDC program.

MAGI-based methodologies are the rules described in section 36B(d)(2)(B) of the U.S. Internal Revenue Code.

Because the AFDC program no longer exists, we have permitted States, where AFDC methodologies otherwise apply, to use MAGI-like methodologies instead of AFDC methodologies in determining eligibility for the medically needy. 42 CFR 435.831(b)(1)(ii). Disregards under section 1902(r)(2)(A) of the Act may be applied to individuals whose eligibility is determined using these “MAGI-like” methodologies. For a discussion of MAGI-like methodologies, see 81 FR 86382, 86415-86418 (November 30, 2016). We have proposed that States have the option to apply MAGI-like methodologies in all circumstances in which AFDC methodologies otherwise apply. 87 FR 54842.

Importantly, for any group to which SSI, AFDC, or MAGI-like methodologies apply, States may utilize the authority under section 1902(r)(2)(A) of the Act to apply a “less restrictive” methodology; that is, they may elect to

disregard

income and/or resources that would otherwise be countable under the relevant methodology. For example, under SSI methodologies, $20 of an individual's otherwise countable monthly income is disregarded in determining income eligibility. A State Medicaid agency, using the authority under section 1902(r)(2)(A) of the Act, could adopt an additional monthly income disregard of $100 for an eligibility group to which SSI methodologies apply.

Section 1902(r)(2) of the Act does not limit the amount of an income or a resource disregard. States could, for example, disregard all countable income and/or resources for an eligibility under the authority of section 1902(r)(2) of the Act. Under 42 CFR 435.1007(e), the Federal financial participation (FFP)-related income limits are applied after application of cash assistance income deductions and any disregards in the State plan authorized under section 1902(r)(2) of the Act.

In 1993, we implemented the less-restrictive methodology authority in section 1902(r)(2)(A) of the Act at 42 CFR 435.601(d)(4) (58 FR 4908-01, 4929-4930 (January 19, 1993)). We confirmed in the regulation the eligibility groups to which States may apply less restrictive methodologies, which include: optional categorically needy groups described in section 1902(a)(10)(A)(ii) of the Act; medically needy groups described in section 1902(a)(10)(C) of the Act; the mandatory group serving individuals 65 years old or older; who have blindness or disabilities in States that have exercised the option in section 1902(f) of the Act to apply more restrictive criteria to these populations than SSI (so-called “section 209(b) States”); and Qualified Medicare Beneficiaries described in sections

1902(a)(10)(E) and 1905(p) of the Act. Additionally, the current regulation requires that any less restrictive methodologies elected by a State must be “comparable for all persons within each category of assistance within an eligibility group.” As further explained in 42 CFR 435.601(d)(4): “For example, if the agency chooses to apply less restrictive income or resource methodology to an eligibility group of aged individuals, it must apply that methodology to all aged individuals within the selected group.”

In 2001, we issued guidance on the use of less restrictive methodologies by States (“Medicaid Eligibility Groups and Less Restrictive Methods of Determining Countable Income and Resources Questions and Answers,” May 11, 2001 (May 2001 guidance)). As explained in the May 2001 guidance, an “eligibility group” under section 1902(a)(10)(A)(ii) of the Act for purposes of less restrictive methodologies is created by applying the eligibility requirements described in any of the clauses of section 1902(a)(10)(A)(ii) of the Act (for example, section 1902(a)(10)(A)(ii)(I) of the Act) to one of the categorical populations described in section 1905(a) of the Act (for example, individuals under the age of 21, or at the option of a State, under the age of 20, 19, or 18, as described in section 1905(a)(i) of the Act).

For example, a State could elect to apply the eligibility criteria described in section 1902(a)(10)(A)(ii)(V) of the Act (relating to individuals in medical institutions for at least 30 consecutive days whose incomes do not exceed 300 percent of the SSI Federal benefit rate) to individuals 65 years old or older (the population described in section 1905(a)(iii) of the Act). A State similarly could apply the eligibility criteria described in section 1902(a)(10)(A)(ii)(V) of the Act to other categorical populations described in section 1905(a) of the Act, such as individuals who have blindness or disabilities (section 1905(a)(vii) of the Act) or individuals under age 21 (section 1905(a)(i) of the Act). As explained in the May 2001 guidance, the election of the optional eligibility category at section 1902(a)(10)(A)(ii)(V) of the Act and a population in section 1905(a) of the Act (for example, individuals 65 years old or older) forms a singular

eligibility group.

As also explained in the May 2001 guidance, medically needy groups are created in the same manner; for example, a State that has adopted the medically needy category in section 1902(a)(10)(C) of the Act (that is, the medically needy) and elects to include the population described in section 1905(a)(ii) of the Act (parents and caretaker relatives) forms a singular medically needy group. Section 1902(a)(10)(C) of the Act requires that States that select the medically needy category must adopt a medically needy group for children under 18 and a medically needy group for pregnant individuals.

Thus, consistent with 42 CFR 435.601(d)(4), if a State that covers an eligibility group of individuals 65 years old and older who have been in a medical institution for at least 30 consecutive days wants to adopt a resource disregard of $5,000 of otherwise countable resources, the State must apply the disregard to all 65 and older individuals who are seeking coverage under the group; the State could not target the disregard at only certain 65 and older individuals seeking eligibility in the group, for example individuals age 65 and older with a diagnosed cognitive impairment.

Section 1902(r)(2)(A) of the Act does not expressly impose, and we did not identify a specific legal rationale in the proposed or final rule requiring, the “comparability” mandate that we incorporated into 42 CFR 435.601(d)(4). 54 FR 39421, 39433 (September 26, 1989); 58 FR 4908, 4919 (January 19, 1993). Section 1902 of the Act contains two separate provisions which are commonly referred to as “comparability” rules: section 1902(a)(10)(B) of the Act, which requires that the amount, duration, and scope of the medical assistance available to any categorically needy individuals must not be less than the medical assistance available to any other categorically needy individuals (subject to express exceptions in the statute); and section 1902(a)(17) of the Act, which requires that eligibility standards, subject to certain exceptions, must be “comparable for all groups.”

Upon further analysis, we conclude that neither section 1902(a)(10)(B) of the Act nor section 1902(a)(17) of the Act requires that a State adopting a less restrictive methodology for a given eligibility group apply such methodology to all individuals seeking coverage under the group. First, a State's use of a less restrictive methodology for an eligibility group would never alter the amount, duration, and scope of medical assistance available within the group, which means the comparability mandate in section 1902(a)(10)(B) of the Act would never be implicated by a less restrictive methodology. Second, the comparability mandate in section 1902(a)(17) of the Act refers to

standards,

not

methodologies,

which are different terms and which we have in the past expressly defined differently. “Standard” refers to the dollar level that a person's income or resources cannot exceed to qualify for Medicaid; “methodology” refers to the rules for determining what sources and amounts of income and resources will be counted in determining whether a person's income exceeds the income and resource standard. 54 FR 39421-01, 39430 (September 26, 1989). Thus, we conclude that the incorporation of a comparability mandate into 42 CFR 435.601(d)(4) was a policy choice that was not mandated by Federal law.

In addition, section 3(b) of the Sustaining Excellence in Medicaid Act (Pub. L. 116-39, enacted in 2019) directed that nothing in section 1902(a)(17) of the Act should be construed as prohibiting a State from adopting income or resource disregards under section 1902(r)(2) of the Act exclusively for people who need home and community-based services (HCBS) authorized under various authorities. In other words, section 3(b) of the Sustaining Excellence in Medicaid Act confirmed that, at least with regard to the use of section 1902(r)(2)-related authority to target income and/or resource disregards at people who need HCBS, the comparability mandate in section 1902(a)(17) of the Act does not impose a bar. We believe that this provides further support for the view that the comparability mandate in section 1902(a)(17) of the Act should not be considered to require comparability in the use of less restrictive methodologies under section 1902(r)(2)(A) of the Act.

For further information, see CMS State Medicaid Director Letter 21-004, “State Flexibilities to Determine Financial Eligibility for Individuals in Need of Home and Community-Based Services.”

https://www.medicaid.gov/sites/default/files/2021-12/smd21004_0.pdf.

Over the years, a number of States also have sought to target income and/or resource disregards to other populations within an eligibility group without applying the disregard to all, including, for example, individuals with disabilities who have accumulated resources through saving their earned income. Under this example, the eligibility group serving individuals with disabilities who have earned income has comparatively higher resource standard than other eligibility groups with a resource standard to allow these individuals to save their earned income. When these individuals stop working and must qualify in a separate eligibility group to maintain their Medicaid, most typically one with a much lower resource standard, they may be faced with the choice of forgoing Medicaid coverage or exhausting the savings they were effectively incentivized to accumulate in their

original eligibility group in order to retain their Medicaid eligibility. States cannot address this predicament without effectively increasing the resource standard for everyone in the new group because States currently cannot, consistent with the comparability mandate in 42 CFR 435.601(d)(4), target a resource disregard at applicants for a particular eligibility group based on their previous eligibility in a separate group.

For these reasons, we are proposing to eliminate paragraph (d)(4) from 42 CFR 435.601, which would allow States to target income and/or resource disregards at discrete subpopulations in the same eligibility group, provided the subpopulation is reasonable and does not violate other Federal statutes (for example, it does not discriminate based on race, gender, sexual orientation or disability). We believe this would increase State flexibility and provide States more options to extend eligibility to specific populations based on the State's circumstances. As noted above, this proposed regulatory change would not be applicable to eligibility groups to which MAGI-based financial methodologies apply but could be applied to most non-MAGI eligibility groups. In enacting the Sustaining Excellence in Medicaid Act, Congress recognized that the ability to target income and resource disregards at people who need HCBS provides States a critical tool in their efforts to “rebalance” their LTSS programs and move institutionalized individuals to community-based care. We similarly believe that more broadly eliminating the comparability rule in the use of income and/or resource disregards would enable States to achieve targeted expansions of coverage that best meet their needs, in contrast to the all-or-nothing approach that is effectively required by the current regulation.

It is possible that, in eliminating the comparability rule from 42 CFR 435.601(d), a State might narrow an existing disregard that is broadly available to an eligibility group to discrete members of the group. However, CMS has not received inquiries from States on the feasibility of such an approach to the same extent that we have received questions from States on whether they may use income and/or resource disregards to expand eligibility in a targeted manner. CMS believes that, in the absence of a comparability rule in 42 CFR 435.601(d), States would on the whole utilize disregard-related authority to expand eligibility instead of contracting it.

Consistent with 42 CFR 435.601(f)(2), under the proposed revisions to 42 CFR 435.601(d), States would continue to be required to submit a State plan amendment describing any new less restrictive methodologies the State seeks to apply and the groups to which it seeks to apply such methodologies. We also confirm that eliminating paragraph (d)(4) from 42 CFR 435.601 would not mean that States would be required to target any new income or resource disregards or modify any existing ones. The proposed change simply provides States with additional flexibility to do so.

We propose to amend 42 CFR 435.601 to: eliminate the current language of paragraph (d)(4); and redesignate the current paragraph (d)(5) as paragraph (d)(4). We seek comment on our proposal.

2. Changes to the Basic Health Program Regulations (42 CFR 600.320)

Section 1331 of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted March 30, 2010), provides States with the option to operate a Basic Health Program (BHP). In the States that elect to operate a BHP, the State's BHP makes affordable health benefits coverage available for lawfully present individuals under age 65 with household incomes between 133 and 200 percent of the Federal poverty level (FPL) (or in the case of a lawfully present non-citizen, ineligible for Medicaid or the Children's Health Insurance Program (CHIP) due to immigration status, with household incomes between zero and 200 percent of the FPL) who are not eligible for Medicaid, CHIP, or other minimum essential coverage. As of the date of this proposed rule, only New York and Minnesota have implemented a BHP.

Under current 42 CFR 600.320(c), States must establish a uniform method of determining the effective date of eligibility for enrollment in a standard health plan following either the Medicaid process at 42 CFR 435.915 exclusive of § 435.915(a) or the Exchange standards at 45 CFR 155.420(b)(1).

Under the Medicaid rules at § 435.915, the effective date of an individual's eligibility is also the effective date of coverage. Under the Exchange rules at 45 CFR 155.420(b)(1), an individual must first be determined to be a qualified individual (that is, eligible to enroll in a QHP through an Exchange). After that determination is made, the individual can make a plan selection. The Exchange coverage effective date is then determined based on when the qualified individual selects their plan. If the plan selection is made between the first and fifteenth day of the month, coverage will be effective the first day of the month following the plan selection month. If the plan selection is made between the sixteenth and the last day of the month, coverage will be effective the first day of the second month following the plan selection month.

In States selecting the Medicaid process at 42 CFR 435.915 exclusive of § 435.915(a), eligibility for enrollment in a standard health plan in the BHP can be effective on either the date the application was submitted or the first day of the month of such month. In States selecting the Exchange standards at 45 CFR 155.420(b)(1), an individual is eligible to enroll in a standard health plan in the BHP on the first day of the month following the month of application if that individual is found eligible to enroll in a standard health plan between the first and the fifteenth of such month. Furthermore, under the Exchange standards if an individual is found eligible to enroll in a standard health plan between the sixteenth and the last day of any month, the individual will have an eligibility effective date of the first day of the second following month. A State operating a BHP may require an eligible individual to select a plan and/or pay a premium prior to the coverage.

Although the current BHP regulation provides States with some flexibility in establishing an effective eligibility date, it does not permit a State to select a standard in which all applicants who meet all requirements are eligible to enroll in a standard health plan in the BHP effective the first day of the month following the month of application or eligibility determination regardless of when they apply or are found eligible to enroll in a standard health plan in the BHP. As an example, to help to illustrate this point, if an individual applied on July 7, Medicaid rules would allow a BHP to determine an individual eligible for enrollment in a standard health plan on July 1 or July 7. If an individual applied on July 7 and was determined BHP-eligible on July 15, in a State that follows Exchange rules, the individual would be eligible for enrollment in a standard health plan on August 1. If the individual was determined BHP-eligible on July 23 in a State that follows Exchange rules, the individual would be eligible for enrollment in a standard health plan on September 1; the State could not choose to have coverage start on August 1, regardless of the date of application.

Even in a State with real-time eligibility determinations, if the State follows Exchange rules and the application is on July 23, the individual would be eligible for enrollment in a standard health plan on September 1.

We believe eligible individuals should have access to coverage as soon as is feasible. Since the BHP and Exchange standards were first established, HHS has taken steps to provide further flexibility for States to reduce barriers to enrollment and eliminate coverage gaps. Additionally, system improvements have provided faster and more accurate eligibility determinations. For example, in practice, all special enrollment periods on the FFEs now allow coverage to start at the beginning of the month after the qualifying individual's triggering event regardless of the plan selection date.

While the Medicaid process at 42 CFR 435.915, exclusive of § 435.915(a), allows for a State operating a BHP to have the earliest possible effective date for its enrollees, we understand that some States may have operational or regulatory constraints that do not allow them to follow the Medicaid process, but may be able to implement an effective date for all eligible applicants the first day of the month after the month in which the eligibility determination is made, regardless of which day of the month such determination occurs.

Therefore, we propose to revise § 600.320(c) to add a third option at paragraph (c)(iii) that would allow a State operating a BHP to follow an effective date of eligibility for all enrollees on the first day of the month following the month in which BHP eligibility is determined. Because States can require individuals to pay their first month's premium prior to enrolling in a standard health plan, § 600.320(c)(iii) also reflects this State option. Under § 600.320(c)(i), States will continue to have the option to follow the Exchange standards at 45 CFR 155.420(b)(1) and under § 600.320(c)(ii), a State may follow Medicaid standards at 42 CFR 435.915 exclusive of § 435.915(a).

We considered an alternative option of whether to instead allow a State to establish its own uniform effective date policy, outside of following the three options in this proposed rule, subject to CMS approval and as long as it is no later than the first day of the second month following the date that an individual has been determined BHP-eligible. This alternative option, however, may cause delays in coverage even further. We seek comment on the proposed additional option for determining the effective date of eligibility for enrollment in a standard health plan as well as the alternative option.

C. 45 CFR Part 153—Standards Related to Reinsurance, Risk Corridors, and HHS Risk Adjustment

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

We did not receive any requests from States to establish and operate a risk adjustment program for the 2025 benefit year. Therefore, HHS will operate risk adjustment in every State and the District of Columbia for the 2025 benefit year.

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

1. Sequestration

In accordance with the OMB Report to Congress on the Joint Committee Reductions for Fiscal Year 2024, the HHS-operated risk adjustment program is subject to the fiscal year 2024 sequestration.

The Federal Government's 2024 fiscal year began on October 1, 2023. Therefore, the HHS-operated risk adjustment program will be sequestered at a rate of 5.7 percent for payments made from fiscal year 2024 resources (that is, funds collected during the 2024 fiscal year).

OMB. (2023, March 13). OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2024.

https://www.whitehouse.gov/wp-content/uploads/2023/03/BBEDCA_Sequestration_Report_and_Letter_3-13-2024.pdf.

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

as amended, and the underlying authority for the HHS-operated risk adjustment program, the funds that are sequestered in fiscal year 2024 from the HHS-operated risk adjustment program will become available for payment to issuers in fiscal year 2025 without further Congressional action. If Congress does not enact deficit reduction provisions that replace the Joint Committee reductions, the program would be sequestered in future fiscal years, and any sequestered funding would become available in the fiscal year following that in which it was sequestered.

Public Law 99-177 (1985).

Additionally, we note that the Infrastructure Investment and Jobs Act

amended section 251A(6) of the Balanced Budget and Emergency Deficit Control Act of 1985 and extended sequestration for the HHS-operated risk adjustment program through fiscal year 2031 at a rate of 5.7 percent per fiscal year.

30 31

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

2 U.S.C. 901a.

The Infrastructure Investment and Jobs Act (Pub. L. 117-58) extended sequestration for the HHS-operated risk adjustment program through 2031 at a rate of 5.7 percent per fiscal year.

2. HHS Risk Adjustment (§ 153.320)

The HHS risk adjustment models predict plan liability for an average enrollee based on that person's age, sex, and diagnoses (also referred to as 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.

Starting with the 2023 benefit year, we removed the severity illness factors in the adult models and added interacted HCC count factors (that is, additional factors that express the presence of a severity or transplant HCC in combination with a specified number of total payment HCCs or HCC groups on the enrollee's record) to the adult and child models

applicable to certain severity and transplant HCCs.

For the 2017 through 2022 benefit years, there is a set of 11 binary enrollment duration factors in the adult models that decrease monotonically from one to 11 months, reflecting the increased annualized costs associated with fewer months of enrollments. See, for example, 81 FR 94071 through 94074. These enrollment duration factors were replaced beginning with the 2023 benefit year with HCC-contingent enrollment duration factors for up to 6 months in the adult models. See, for example, 87 FR 27228 through 27230.

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

See Table 1 for a list of factors in the adult models, and Table 2 for a list of factors in the child models.

See 87 FR 27224 through 27228.

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 cost sharing reduction (CSR) adjustment factor. The enrollment-weighted average risk score of all enrollees in a particular risk adjustment covered plan (also referred to as the plan liability risk score (PLRS)) within a geographic rating area is one of the inputs into the State payment transfer formula,

which determines the State transfer payment or charge that an issuer will receive or be required to pay for that plan for the applicable State market risk pool for a given benefit year. Thus, the HHS risk adjustment models predict average group costs to account for risk across plans, in keeping with the Actuarial Standards Board's Actuarial Standards of Practice for risk classification.

The State payment transfer formula refers to the part of the Federally certified risk adjustment methodology that applies in States where HHS is responsible for operating the program. The formula calculates payments and charges at the State market risk pool level (prior to the calculation of the high-cost risk pool payment and charge terms that apply beginning with the 2018 benefit year). See, for example, 81 FR 94080.

a. Data for HHS Risk Adjustment Model Recalibration for the 2025 Benefit Year

We are proposing to recalibrate the 2025 benefit year HHS risk adjustment models with the 2019, 2020, and 2021 enrollee-level EDGE data. Consistent with the approach outlined in the 2020 Payment Notice to no longer use MarketScan® data for recalibrating the HHS risk adjustment models, we propose to recalibrate the HHS risk adjustment models for the 2025 benefit year using only enrollee-level EDGE data, and we would continue to use blended, or averaged, coefficients from the 3 years of separately solved models for the 2025 benefit year model recalibration.

Additionally, as outlined in the 2022 Payment Notice (86 FR 24140, 24152), we propose to use the 3 most recent consecutive years of enrollee-level EDGE data that are available at the time we incorporate the data in the draft recalibrated coefficients published in the proposed rule for the applicable benefit year,

and would not update the coefficients between the proposed and final rules if an additional year of enrollee-level EDGE data becomes available for incorporation. We believe this promotes stability, better meets the goal of the HHS-operated risk adjustment program and allows issuers more time to incorporate this information when pricing their plans for the upcoming benefit year.

84 FR 17463 through 17466.

Although we do receive the next year of enrollee-level EDGE data prior to the proposed rule, that data must go through several quality and analysis checks before it is useable for HHS risk adjustment model recalibration.

In the 2024 Payment Notice (88 FR 25740 through 25749), we finalized the use of 2018, 2019 and 2020 benefit year enrollee-level EDGE data for recalibration of the 2024 benefit year HHS risk adjustment models for all model coefficients, with no exceptions. As explained in the 2024 Payment Notice proposed rule

and final rule,

we analyzed the 2020 benefit year data to identify possible impacts of the COVID-19 PHE and our analysis generally found that the 2020 enrollee-level EDGE data were anomalous primarily in the volume and frequencies of certain types of claims, but that the relative costs of specific services, at least those associated with payment HCCs in the HHS risk adjustment models, were largely unaffected. Because the HHS risk adjustment models predict relative costs of care for specific conditions on an enrollee-level basis and tend not to rely on overall patterns of utilization, the minimal impacts to relative costs of care for payment HCCs likewise resulted in minimal impacts on the coefficients fitted by the 2020 enrollee-level EDGE recalibration data.

87 FR 78215 through 78216.

88 FR 25749 through 25753.

Considering that the COVID-19 PHE was still in effect throughout the 2021 benefit year,

we recognize that some interested parties may continue to be concerned about the use of either the 2020 or 2021 enrollee-level EDGE data for the purposes of HHS risk adjustment model recalibration. In this regard, we conducted additional analyses to determine whether any anomalies in the 2021 benefit year enrollee-level EDGE data were present beyond expected year-to-year variation and whether the use of two years of PHE-impacted data presented any additional concerns. We did not identify any such anomalies and note that all draft coefficients for the 2025 benefit year HHS risk adjustment models in this proposed rule vary from their values in the 2024 HHS risk adjustment models within the range of previous year-to-year coefficient changes.

See, for example, the Renewal of Determination that a Public Health Emergency Exists dated February 9, 2023.

https://aspr.hhs.gov/legal/PHE/Pages/COVID19-9Feb2023.aspx.

As such,

we propose to determine coefficients for the 2025 benefit year based on a blend of separately solved coefficients from the 2019, 2020, and 2021 benefit years' enrollee-level EDGE data, with the costs of services identified from the data trended between the relevant year of data and the 2025 benefit year.

The draft coefficients listed in Tables 1 through 6 reflect the use of trended 2019, 2020, and 2021 benefit year enrollee-level EDGE data, as well as other HHS risk adjustment model updates proposed in this proposed rule (including, for example, the proposed pricing adjustment for Hepatitis C drugs). However, we note that the draft coefficients could change between the proposed and final rules if we identify an error after publication of this proposed rule or if any proposed model parameters are modified in response to comments. In addition, consistent with

§ 153.320(b)(1)(i), if we are unable to finalize the final coefficients in time for publication in the final rule, we would publish the final coefficients for the 2025 benefit year in guidance soon after the publication of the final rule.

As described in the 2016 Risk Adjustment White Paper (

https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf

) and the 2017 Payment Notice (81 FR at 12218), we subdivide expenditures into traditional drugs, specialty drugs, medical services, and preventive services and determine trend factors separately for each category of expenditure. In determining these trend factors, we consult our actuarial experts, review relevant Unified Rate Review Template (URRT) submission data, analyze multiple years of enrollee-level EDGE data, and consult National Health Expenditure Accounts (NHEA) data as well as external reports and documents published by third parties. In this process, we aim to determine trends that reflect changes in cost of care rather than gross growth in expenditures. As such, we believe the trend factors we used for each expenditure category for the 2025 benefit year are appropriate for the most recent changes in cost of care that we have seen in the market.

We seek comment on the proposal to determine 2025 benefit year coefficients for the HHS risk adjustment models based on a blend of separately solved coefficients from the 2019, 2020, and 2021 enrollee-level EDGE data.

b. Pricing Adjustment for the Hepatitis C Drugs

For the 2025 benefit year, we propose to continue applying a market pricing adjustment to the plan liability associated with Hepatitis C drugs in the HHS risk adjustment models.

Since the 2020 benefit year HHS risk adjustment models, we have been making a market pricing adjustment to the plan liability associated with Hepatitis C drugs to reflect future market pricing prior to solving for coefficients for the models.

The purpose of this market pricing adjustment is to account for significant pricing changes between the data years used for recalibrating the models and the applicable benefit year of HHS risk adjustment as a result of the introduction of new and generic Hepatitis C drugs.

See for example, 84 FR 17463 through 17466.

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.

Silseth, S., & Shaw, H. (2021). Analysis of prescription drugs for the treatment of hepatitis C in the United States. Milliman White Paper.

https://www.milliman.com/-/media/milliman/pdfs/2021-articles/6-11-21-analysis-prescription-drugs-treatment-hepatitis-c-us.ashx.

We have committed to reassessing this pricing adjustment with additional years of enrollee-level EDGE data, as data becomes available. As part of the 2025 benefit year model recalibration analysis, we reassessed the cost trend for Hepatitis C drugs using available enrollee-level EDGE data (including 2021 benefit year data) to consider whether the adjustment was still needed and if it is still needed, whether it should be modified. We found that the data for the Hepatitis C RXC that would be used for the 2025 benefit year recalibration still do not account for the significant pricing changes due to the introduction of new and generic Hepatitis C drugs, and therefore, do not precisely reflect the average cost of Hepatitis C treatments applicable to the benefit year in question.

Specifically, although generic Hepatitis C drugs became available on the market in 2019,

and therefore were available for all 3 years of data proposed to be used for the 2025 benefit year model recalibration, our analysis of the data continued to observe that costs for Hepatitis C drugs are not increasing at the same rate as other drug costs between the data years and the applicable benefit year of HHS risk adjustment, likely due to continued increases in the proportion of Hepatitis C drug prescriptions for generic versions of the drugs. As such, we do not believe that the trends used to reflect growth in the cost of prescription drugs due to inflation and related factors for recalibrating the models will appropriately reflect the average cost of Hepatitis C treatments expected in the 2025 benefit year. Therefore, we continue to believe a market pricing adjustment specific to Hepatitis C drugs in the HHS risk adjustment models for the 2025 benefit year is necessary to account for the lack of growth in Hepatitis C drug prices relative to other prescription drugs in the market between the data years used for recalibrating the models and the applicable benefit year of HHS risk adjustment due to the introduction of new and generic Hepatitis C drugs in recent years. We intend to continue to assess this pricing adjustment as part of future benefit year model recalibrations using available additional years of enrollee-level EDGE data.

See Miligan, J, (2018). A perspective from our CEO: Gilead Subsidiary to Launch Authorized Generics to Treat HCV. Gilead.

https://www.gilead.com/news-and-press/company-statements/authorized-generics-for-hcv.

See also AbbVie. (2017). AbbVie Receives U.S. FDA Approval of MAVYRET

(glecaprevir/pibrentasvir) for the Treatment of Chronic Hepatitis C in All Major Genotypes (GT 1-6) in as Short as 8 Weeks. Abbvie.

https://news.abbvie.com/news/abbvie-receives-us-fda-approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-6-in-as-short-as-8-weeks.htm.

We seek comment on our proposal to continue applying a market pricing adjustment to the plan liability associated with Hepatitis C drugs for the 2025 benefit year.

c. Proposed List of Factors To Be Employed in the HHS Risk Adjustment Models (§ 153.320)

The proposed 2025 benefit year HHS risk adjustment model factors resulting from the equally weighted (averaged) blended factors from separately solved models using the 2019, 2020, and 2021 enrollee-level EDGE data 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.

Table 1 contains proposed 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 proposed factors for each child model, including the age-sex, HCCs, and interacted HCC counts coefficients. Table 3 lists the proposed HCCs selected for the interacted HCC counts factors that would apply to the adult and child models. Table 4 contains the proposed factors for each infant model. Tables 5 and 6 contain the HCCs included in the infant models' maturity and severity categories, respectively.

We are not proposing changes to the high-cost risk pool parameters for the 2025 benefit year. Therefore, we would maintain the $1 million threshold and 60 percent coinsurance rate.

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d. Cost-Sharing Reduction Adjustments

We propose to recalibrate the CSR adjustment factors for AI/AN zero cost sharing and limited cost sharing CSR plan variant enrollees for the 2025 benefit year, and to retain these proposed AI/AN CSR adjustment factors, if finalized, for all future benefit years unless changed through notice-

and-comment rulemaking. We also propose to maintain the current CSR adjustment factors for silver plan variant enrollees (70 percent, 73 percent, 87 percent, and 94 percent AV plan variants)

for the 2025 benefit year and beyond, unless changed through notice-and-comment rulemaking.

See 83 FR 16930 at 16953; 84 FR 17478 through 17479; 85 FR 29190; 86 FR 24181; 87 FR 27235 through 27236; and 88 FR 25772 through 25774.

Since the beginning of the HHS-operated risk adjustment program in the 2014 benefit year, we included CSR adjustment factors in the calculations under the State payment transfer formula to account for anticipated increased demand for health care services due to lower cost sharing for CSR enrollees.

At that time, we did not have data available on the individual and small group (including merged) markets' use of services, and therefore, we based the CSR adjustment factors on the available large group market MarketScan® data.

We have proposed and finalized the same CSR adjustment factors since they were first established to maintain stability and certainty for issuers.

At the same time, we have continued to study these issues and have explored a range of options to update the CSR adjustments to improve prediction.

Interested parties have also repeatedly requested that HHS re-analyze the CSR adjustment factors and consider making updates.

78 FR 15410 at 15421 through 15422.

See 77 FR 73117 at 73127 and 78 FR 15410 at 15419 through 15420. See also HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS.