Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2027; and Basic Health Program

DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 600 Office of the Secretary 45 CFR Parts 153, 154, 155, 156, and 158 [CMS-9883-P] RIN 0938-AV62 Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2027; and Basic Health Program AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This proposed rule contains provisions to improve implementation of the Patient Protection and Affordable Care Act, including payment parameters and provisions related to the HHS-operated risk adjustment and risk adjustment data validation (HHS-RADV) programs, as well as 2027 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 provisions related to civil money penalties (CMPs) for noncompliant issuers and other responsible entities; standards governing agents, brokers, and web-brokers; the expansion and codification of hardship exemption eligibility; implementation of the State Exchange Improper Payment Measurement (SEIPM); provider access standards and essential community provider standards for QHP certification; QHP certification of non-network plans; a prohibition on issuers from including routine non-pediatric dental services as an Essential Health Benefit (EHB); cost-sharing flexibilities for catastrophic and individual market bronze plans; establishment of catastrophic plans with plan terms of up to 10 consecutive years; QHP issuer quality improvement strategies (QISs); revisions affecting which enrollees are included in Federal Basic Health Program (BHP) payment calculations to States; and seeks comment on potential adjustments to other Federal standards, including the Federal medical loss ratio (MLR) standard in the individual market. This proposed rule also includes amendments to implement certain provisions of the Working Families Tax Cut (WFTC) legislation.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, by March 13, 2026.

ADDRESSES:

In commenting, please refer to file code CMS-9883-P.

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

1. Electronically. You may submit electronic comments on this regulation to http://www.regulations.gov. Follow the “Submit a comment” instructions.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9883-P, P.O. Box 8016, Baltimore, MD 21244-8016.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9883-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, (410) 786-1524, Grace Bristol, (410) 786-8437, for general information.

Ayesha Anwar, (301) 448-3625, or Joshua Paul, (301) 492-4347, for matters related to HHS-operated risk adjustment and HHS-operated risk adjustment data validation.

Aaron Franz, (410) 786-8027 for matters related to user fees.

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

Zarin Ahmed, (301) 492-4400, for matters related to enrollment of qualified individuals into QHPs and termination of Exchange enrollment or coverage for qualified individuals.

Ken Buerger, (410) 786-1190, for matters related to certification standards for QHPs, cost-sharing requirements, and dental coverage as EHB.

Kelly Carda, (312) 886-5210, or Cassandra Thompson, (667) 414-0870, for matters related to Provider Access standards.

Ariana Koenitzer, (410) 786-0724, or Samantha Nguyen Kella, (816) 426-6339, for matters related to Essential Community Provider Standards.

Ariana Koenitzer, (410) 786-0724, or Cassandra Thompson, (667) 414-0870, for matters related to QHP Certification of Non-Network Plans.

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

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

Rebecca Braun-Harrison, (667) 290-8846, or Nia Blasingame, (470) 890-4178, for matters related to civil money penalties of issuers and non-Federal governmental group health plans.

Preeti Hans, (301) 492-5144, for matters related to the Quality Improvement Strategy.

Beth Freshcorn, (410) 786-3831, for matters related to administrative actions against agents, brokers, and web-brokers.

Jennifer McIlvaine, (410) 786-0947, for matters related to the Basic Health Program.

Christina Whitefield, (301) 492-4172, for matters related to the medical loss ratio (MLR) program.

David Mlawsky, (410) 786-6851, for matters related to catastrophic plans with multi-year plan terms.

Jessica Veffer, (301) 492-4827, for matters related to expanding hardship exemptions for individuals ineligible for APTC or CSRs due to projected household income.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments: Comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post comments received before the close of the comment period on the following website as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that website to view public comments. CMS will not post on Regulations.gov public comments that make threats to individuals or institutions or suggest that the commenter will take actions to harm an individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments. We encourage commenters to include supporting facts, research, and evidence in their comments. When doing so, commenters are encouraged to provide citations to the published materials referenced, including active

Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a summary of not more than 100 words in length of this proposed rule, in plain language, may be found at https://www.regulations.gov/.

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. Part 150—CMS Enforcement in Group and Individual Insurance Markets B. Part 153—Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment C. Part 154—Health Insurance Issuer Rate Increases: Disclosures and Review Requirements D. Part 155—Exchange Establishment Standards and Other Related Standards E. Part 156—Health Insurance Issuer Standards Under the Affordable Care Act Including Standards Related to Exchanges F. Part 158—Issuer Use of Premium Revenue: Reporting and Rebate Requirements G. Severability IV. Collection of Information Requirements A. Wage Estimates B. ICRs Regarding Rate Filing Justification (§ 154.215) C. ICRs Regarding Mandating the HHS-Approved and Created Form (§ 155.220) D. ICRs Regarding Misleading Marketing (§ 155.220) E. ICRs Regarding State Exchange Enhanced Direct Enrollment (SBE-EDE) Option (§ 155.221) F. ICRs Regarding Limiting APTC Eligibility to “Eligible Noncitizens” (§§ 155.20, 155.305(f)(1), and 155.320) G. ICRs Regarding the Prohibition of APTC for Individuals Who Are Ineligible for Medicaid Due to Their Immigration Status and Have Income Below 100 Percent of the Federal Poverty Level (FPL) (§ 155.305(f)(2)) H. ICRs Regarding Failure To File and Reconcile (§ 155.305) I. ICRs Regarding Income Verification When Data Sources Indicate Income Less Than 100 Percent of the FPL (§ 155.320(c)(3)(iii)) J. ICRs Regarding Income Verification When Tax Data is Unavailable (§ 155.320(c)(5)) K. ICRs Regarding Pre-Enrollment SEP Verification (§ 155.420(g)) L. ICRs Regarding Expansion of Hardship Exemption Eligibility (§ 155.605(d)(1)) M. ICRs Regarding Amendment of Exchange Network Adequacy Standards (§ 155.1050) N. ICRs Regarding General Program Integrity and Oversight Requirements (§ 155.1200) O. ICRs Regarding the State Exchange Improper Payment Measurement (SEIPM) (§§ 155.1600-155.1650) P. ICRs Regarding the Discontinuation of Standardized Plan Options (§§ 155.20, 155.205(b)(1), 155.220(c)(3)(i)(H), 156.201, and 156.265(b)(3)(iv)) Q. ICRs Regarding the Discontinuation of Non-Standardized Plan Option Limits and Exceptions (§ 156.202) R. ICRs Regarding Network Adequacy Reviews (§ 156.230) S. ICRs Regarding Essential Community Providers (§ 155.1051 and § 156.235) T. ICRs Regarding QHP Certification of Non-Network Plans (§§ 155.1050, 156.230, 156.235, 156.236, 156.275, and 156.810) U. ICRs Regarding Quality Improvement Strategy Information (§ 156.1130) V. ICRs Regarding Medical Loss Ratio—OMB Control Number 0938-1164 (§§ 158.103, 158.120, 158.210, 158.220) W. Summary of Annual Burden Estimates for Proposed Requirements X. 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 Proposed Payment Notice Provisions and Accounting Table D. Regulatory Alternatives Considered E. Regulatory Flexibility Act (RFA) F. Unfunded Mandates Reform Act (UMRA) G. Federalism H. E.O. 14192, “Unleashing Prosperity Through Deregulation” I. Executive Summary

We propose changes to the provisions and parameters implemented through prior rulemaking to implement the Patient Protection and Affordable Care Act and propose to implement new provisions. 1 These requirements are published under the authority granted to the Secretary of HHS (the Secretary) by the Affordable Care Act and the Public Health Service (PHS) Act. 2 In this document, we are proposing changes related to some of the Affordable Care Act provisions and parameters we previously implemented under the authority granted to the Secretary by Public Law (Pub. L.) 119-21, which CMS refers to as the Working Families Tax Cut (WFTC) legislation. 3 Our goal with these requirements is providing quality, more affordable coverage to consumers while minimizing administrative burden and ensuring program integrity. The changes proposed in this rule are also intended to enhance the role of States in these programs, provide issuers and States with additional flexibilities, reduce unnecessary regulatory burden on interested parties, and improve affordability.

1 The Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted on March 23, 2010. The Healthcare 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” or “Affordable Care Act.”

2 See sections 1301, 1302, 1311, 1312, 1313, 1321, 1331, and 1343 of the Affordable Care Act and section 2792 of the PHS Act.

3 The WFTC legislation (Pub. L. 119-21) was enacted on July 4, 2025.

II. Background

A. Legislative and Regulatory Overview

Title I of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) added a new title XXVII to the PHS Act to establish various reforms to the group and individual health insurance markets. These provisions of the PHS Act were later augmented by other laws, including the Affordable Care Act. Subtitles A and C of title I of the Affordable Care Act 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.

In the upcoming sections, we summarize sections of the PHS Act, Affordable Care Act, and WFTC legislation that are relevant to this proposed rule.

Section 1301(a)(1)(B) of the Affordable Care Act directs all issuers of qualified health plans (QHPs) to cover the Essential Health Benefit (EHB) package described in section 1302(a) of the Affordable Care Act, including coverage of the services described in section 1302(b) of the Affordable Care Act, adherence to the cost-sharing limits described in section 1302(c) of the Affordable Care Act, and meeting the Actuarial Value (AV) levels established in section 1302(d) of the Affordable Care Act. 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

Section 1302 of the Affordable Care Act provides for the establishment of an EHB package that includes coverage of EHB (as defined by the Secretary), cost-sharing limits, and AV requirements. The law directs that EHB 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(b)(4)(A) through (D) of the Affordable Care Act 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 EHB based on age, life expectancy, disability, degree of medical dependency, or quality of life.

Section 1302(e) of the Affordable Care Act establishes that catastrophic coverage may only be offered to individuals who: (1) are under the age of 30 before the beginning of the plan year; (2) have been certified as exempt from the individual responsibility requirement because coverage is unaffordable; or (3) have been certified as experiencing a hardship with respect to obtaining coverage under a qualified health plan (QHP).

Section 1311(c) of the Affordable Care Act provides the Secretary the authority to issue regulations to establish criteria for the certification of QHPs. Among the criteria for certification that the Secretary must establish by regulation is that QHPs ensure a sufficient choice of providers (section 1311(c)(1)(B) of the Affordable Care Act) and include essential community providers that serve predominately low-income, medically-underserved individuals (section 1311(c)(1)(C)). Section 1311(d)(4)(A) of the Affordable Care Act requires the Exchange to implement procedures for the certification, recertification, and decertification of health plans as QHPs, consistent with guidelines developed by the Secretary under section 1311(c) of the Affordable Care Act. Section 1311(e)(1) of the Affordable Care Act 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 Affordable Care Act, 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 Affordable Care Act directs the Secretary to require an Exchange to provide for special enrollment periods (SEPs) and section 1311(c)(6)(D) of the Affordable Care Act directs the Secretary to require an Exchange to provide for American Indians and Alaska Natives (AI/AN), as defined by section 4 of the Indian Health Care Improvement Act.

Section 1311(d)(3)(B) of the Affordable Care Act 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 Affordable Care Act 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 Affordable Care Act.

Section 1312(e) of the Affordable Care Act 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.

Sections 1313 and 1321 of the Affordable Care Act 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 Affordable Care Act 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 Affordable Care Act provides for State flexibility in the operation and enforcement of Exchanges and related requirements.

Section 1321(a) of the Affordable Care Act 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 Affordable Care Act, including such other requirements as the Secretary determines appropriate. When operating an FFE under section 1321(c)(1) of the Affordable Care Act, HHS has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of the Affordable Care Act to collect and spend user fees. Office of Management and Budget (OMB) Circular No. 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. 4

4 See OMB, Circular No. A-25 Revised (1993). https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.

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

Section 1331 of the Affordable Care Act provides States with an option to establish a BHP. In the States that elect to operate a BHP, the BHP makes affordable health benefits coverage available for individuals under age 65 with household incomes between 133 percent and 200 percent of the FPL who are not otherwise eligible for Medicaid, the Children's Health Insurance Program (CHIP), or affordable employer-sponsored coverage, or for noncitizens whose income is equal to or below 200 percent of FPL but are ineligible for Medicaid benefits that at a minimum consist of the EHB described in section 1302(b) of the Affordable Care Act. For those States that have expanded Medicaid coverage under section 1902(a)(10)(A)(i)(VIII) of the Social Security Act (the Act), the lower income threshold for BHP eligibility is effectively 138 percent of the FPL due to the application of a required 5 percent income disregard in determining the upper limits of Medicaid income eligibility (section 1902(e)(14)(I) of the Act).

Section 1343 of the Affordable Care Act establishes a permanent risk 5

5 See Affordable Care Act section 1341 (transitional reinsurance program), Affordable Care Act section 1342 (risk corridors program), and Affordable Care Act section 1343 (HHS risk adjustment program).

Section 1401(a) of the Affordable Care Act 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 Affordable Care Act provides for, among other things, reductions in cost sharing for EHB for qualified low- and moderate-income enrollees in silver level QHPs offered through the individual market Exchanges. This section also provides for reductions in cost sharing for American Indians and Alaska Natives (AI/AN) enrolled in QHPs at any metal level.

Section 1411(f) of the Affordable Care Act requires the Secretary, in consultation with the Secretary of the Treasury and the Secretary of Homeland Security, and the Commissioner of Social Security, to establish procedures for hearing and making decisions governing appeals of Exchange eligibility determinations. Section 1411(f)(1)(B) of the Affordable Care Act 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 Affordable Care Act 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 Affordable Care Act directs the Secretary to establish, subject to minimum requirements, a streamlined enrollment process for enrollment in QHPs and all insurance affordability programs.

Section 2718 of the PHS Act, as added by the Affordable Care Act, generally requires health insurance issuers to submit an annual medical loss ratio (MLR) report to HHS and provide rebates to enrollees if the issuers do not achieve specified MLR thresholds.

Section 5000A of the Code, as added by section 1501(b) of the Affordable Care Act, 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 5000A(e) of the Internal Revenue Code defines exemptions from the individual shared responsibility penalty. Section 5000A(e)(5) of the Internal Revenue Code defines a hardship exemption as a situation in which an individual experiences difficulty obtaining QHP coverage and provides the HHS Secretary the authority to determine whether an individual has experienced a hardship.

Section 71301 of WFTC legislation amends 26 U.S.C. 36B(e), effective with respect to plan years beginning on or after January 1, 2027, to provide that a PTC is allowed for the coverage of a lawfully present individual only if the individual is an “eligible alien.”

Section 71302 of WFTC legislation removes subparagraph (B) of 26 U.S.C. 36B(c)(1), eliminating PTC eligibility for lawfully present individuals with income below 100 percent of the FPL who are ineligible for Medicaid due to their immigration status. Section 71302 is effective for taxable years beginning after December 31, 2025.

Section 71303 of WFTC legislation, effective to taxable years beginning after December 31, 2027, amends the definition of coverage month such that it would be imprudent to maintain a 2-year failure to file and reconcile (FTR) policy for 2028 and beyond, but it would not be legally prohibited to do so.

Section 71304 of WFTC legislation amends section 36B of the Code, effective with respect to plan years beginning after December 31, 2025, such that a plan is not considered a QHP, and therefore no PTC is allowed for coverage under the plan, if the plan is enrolled in through a special enrollment period (SEP) that is based solely on the basis of an individual's expected income to the FPL and not on a change in circumstance (an “income-based SEP”). This provision is effective January 1, 2026.

Section 71305 of WFTC legislation eliminates, effective for taxable years beginning after December 31, 2025, APTC repayment limits and requires individuals whose APTC exceeds their PTC to increase their tax liability by the amount of the excess.

Section 71307 of WFTC legislation amends the definition of “high deductible health plan” to include bronze and catastrophic plans, effective to months beginning after December 31, 2025.

1. Premium Stabilization Programs

The premium stabilization programs refer to the risk adjustment, risk corridors, and reinsurance programs established by the Affordable Care Act. 6 For past rulemaking, we refer readers to the following rules:

6 See Affordable Care Act section 1341 (transitional reinsurance program), Affordable Care Act section 1342 (risk corridors program), and Affordable Care Act 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 issued a correcting amendment to the 2014 Payment Notice to address how an enrollee's age for the risk score calculation would be determined under the HHS risk adjustment methodology.

• In the March 11, 2014 Federal Register (79 FR 13743) (2015 Payment Notice), we finalized the benefit and payment parameters for the 2015 benefit year to expand the provisions related to the premium stabilization programs, set forth certain oversight provisions, and

• In the May 27, 2014 Federal Register (79 FR 30240), we announced the fiscal year 2015 sequestration rate for the HHS-operated risk adjustment program.

• In the February 27, 2015 Federal Register (80 FR 10749) (2016 Payment Notice), we finalized the benefit and payment parameters for the 2016 benefit year to expand the provisions related to the premium stabilization programs, set forth certain oversight provisions, and establish the payment parameters in those programs.

• In the March 8, 2016 Federal Register (81 FR 12203) (2017 Payment Notice), we finalized the benefit and payment parameters for the 2017 benefit year to expand the provisions related to the premium stabilization programs, set forth certain oversight provisions, and establish the payment parameters in those programs.

• In the December 22, 2016 Federal Register (81 FR 94058) (2018 Payment Notice), we finalized the benefit and payment parameters for the 2018 benefit year, added the high-cost risk pool parameters to the HHS risk adjustment methodology, incorporated prescription drug factors in the adult models, established enrollment duration factors for the adult models, and finalized policies related to the collection and use of enrollee-level External Data Gathering Environment (EDGE) data.

• In the April 17, 2018 Federal Register (83 FR 16930) (2019 Payment Notice), we finalized the benefit and payment parameters for the 2019 benefit year, created the State flexibility framework permitting States to request a reduction in risk adjustment State transfers calculated by HHS, and adopted a new error rate methodology for HHS-RADV adjustments to transfers.

• In the May 11, 2018 Federal Register (83 FR 21925), we issued a correction to the 2019 HHS risk adjustment coefficients in the 2019 Payment Notice.

• On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i), we updated the 2019 benefit year final HHS risk adjustment model coefficients to reflect an additional recalibration related to an update to the 2016 enrollee-level EDGE data set. 7

7 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 issued in the March 23, 2012 (77 FR 17220 through 17252) and March 8, 2016 (81 FR 12204 through 12352) editions of the Federal Register . The final rule set forth an additional explanation of the rationale supporting the use of Statewide average premium in the State payment transfer formula for the 2017 benefit year, including the reasons why the program is operated by HHS in a budget-neutral manner. The final rule also permitted HHS to resume 2017 benefit year HHS risk adjustment payments and charges. HHS also provided guidance as to the operation of the HHS-operated risk adjustment program for the 2017 benefit year in light of the publication of the final rule.

• In the December 10, 2018 Federal Register (83 FR 63419), we adopted the 2018 benefit year HHS risk adjustment methodology as established in the final rules issued in the March 23, 2012 (77 FR 17219) and the December 22, 2016 (81 FR 94058) editions of the Federal Register . In the rule, we set forth an additional explanation of the rationale supporting the use of Statewide average premium in the State payment transfer formula for the 2018 benefit year, including the reasons why the program is operated by HHS in a budget-neutral manner.

• In the April 25, 2019 Federal Register (84 FR 17454) (2020 Payment Notice), we finalized the benefit and payment parameters for the 2020 benefit year, as well as the policies related to making the enrollee-level EDGE data available as a limited data set for research purposes and expanding the HHS uses of the enrollee-level EDGE data, approval of the request from Alabama to reduce HHS risk adjustment transfers by 50 percent in the small group market for the 2020 benefit year, and updates to HHS-RADV program requirements.

• On May 12, 2020, consistent with § 153.320(b)(1)(i), we issued the 2021 Benefit Year Final HHS Risk Adjustment Model Coefficients on the CCIIO website. 8

8 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 the 10th revision of the International Classification of Diseases (ICD-10) codes, approved the request from Alabama to reduce HHS risk adjustment transfers by 50 percent in the small group market for the 2021 benefit year, and modified the outlier identification process under the HHS-RADV program.

• In the December 1, 2020 Federal Register (85 FR 76979) (Amendments to the HHS-Operated Risk Adjustment Data Validation Under the Patient Protection and Affordable Care Act's HHS-Operated Risk Adjustment Program (2020 HHS-RADV Amendments Rule)), we adopted the creation and application of Super HCCs in the sorting step that assigns HCCs to failure rate groups, finalized a sliding scale adjustment in HHS-RADV error rate calculation, and added a constraint for negative error rate outliers with a negative error rate. We also established a transition from the prospective application of HHS-RADV adjustments to apply HHS-RADV results to risk scores from the same benefit year as that being audited.

• In the May 5, 2021 Federal Register (86 FR 24140) (part 2 of the 2022 Payment Notice), we finalized a subset of proposals from the December 4, 2020 Federal Register (85 FR 78572) (the 2022 Payment Notice proposed rule), including policy and regulatory revisions related to the HHS-operated risk adjustment program, finalization of the benefit and payment parameters for the 2022 benefit year, and approval of the request from Alabama to reduce HHS risk adjustment transfers by 50 percent in the individual and small group markets for the 2022 benefit year. In addition, this final rule established a revised schedule of collections for HHS-RADV and updated the provisions regulating second validation audit (SVA) and initial validation audit (IVA) entities.

• On July 19, 2021, consistent with § 153.320(b)(1)(i), we released Updated 2022 Benefit Year Final HHS Risk Adjustment Model Coefficients on the CCIIO website, announcing some minor revisions to the 2022 benefit year final HHS risk adjustment adult model coefficients. 9

9 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 10 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. 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 finalized further refinements to the HHS-RADV error rate calculation methodology beginning with the 2021 benefit year.

10 On May 6, 2022, we also published the 2023 Benefit Year Final HHS Risk Adjustment Model Coefficients. CMS. (2022, May 6). 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 approved 50 percent reductions to HHS risk adjustment transfers for Alabama's individual and small group markets and repealed prior participant States' ability to request reductions of their risk adjustment transfers for the 2025 benefit year and beyond. We finalized 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 announced the discontinuance of the Lifelong Permanent Condition List and Non-EDGE Claims in HHS-RADV beginning with the 2022 benefit year.

• In the April 15, 2024 Federal Register (89 FR 26218) (2025 Payment Notice), we finalized the benefit and payment parameters for the 2025 benefit year, including the 2025 risk adjustment models and updated the adjustment factors for the receipt of CSRs for the AI/AN subpopulation who are enrolled in zero and limited cost-sharing plans to improve prediction in the HHS risk adjustment models. In addition, we finalized that in certain cases, we may require a corrective action plan (CAP) to address an observation identified in an HHS risk adjustment program audit.

• In the January 15, 2025 Federal Register (90 FR 4424) (2026 Payment Notice), we finalized the benefit and payment parameters for the 2026 benefit year, including the 2026 risk adjustment models and updated the adjustment factors, phased out the market pricing adjustment to the plan liability associated with Hepatitis C drugs, and incorporated of pre-exposure prophylaxis (PrEP) as an Affiliated Cost Factor (ACF) starting with the 2026 benefit year. Beginning with the 2025 benefit year, we excluded enrollees without HCCs from the IVA sample, removed the Finite Population Correction (FPC) from the IVA sampling methodology, and replaced the source of the Neyman allocation data used for HHS-RADV sampling with the most recent 3 consecutive years of HHS-RADV data. Beginning with the 2024 benefit year, we modified the SVA pairwise means test and increased the initial SVA subsample size. At § 156.1220(a), we established a new materiality threshold for HHS-RADV appeals.

2. Program Integrity

We have finalized program integrity standards related to the Exchanges and premium stabilization programs in two rules: the “first Program Integrity Rule” issued in the August 30, 2013 Federal Register (78 FR 54069), and the “second Program Integrity Rule” issued in the October 30, 2013 Federal Register (78 FR 65045). We also refer readers to the 2019 Patient Protection and Affordable Care Act; Exchange Program Integrity final rule (2019 Program Integrity Rule) issued in the December 27, 2019 Federal Register (84 FR 71674), as well as the Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability final rule (2025 Marketplace Integrity and Affordability final rule) issued in the June 25, 2025 Federal Register (90 FR 27074).

In the May 6, 2022 Federal Register (87 FR 27208) (2023 Payment Notice), we finalized policies to address certain agent, broker, and web-broker practices and conduct. In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we implemented the improper payment pre-testing and assessment (IPPTA) requirements for State Exchanges to ensure adherence to the Payment Integrity Information Act of 2019. In addition, we finalized allowing additional time for HHS to review evidence submitted by agents and brokers to rebut allegations pertaining to Exchange Agreement suspensions or terminations. We also introduced consent and eligibility application documentation requirements for agents, brokers, and web-brokers that assist Exchange consumers in FFE and SBE-FP States.

In the 2025 Payment Notice, issued in the April 15, 2024 Federal Register (89 FR 26218), we finalized that the CMS Administrator is the entity responsible for handling requests by agents, brokers, and web-brokers for reconsideration of HHS' decision to terminate their Exchange agreement(s) for cause. We also finalized 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. In the January 15, 2025 Federal Register (90 FR 4424) (2026 Payment Notice), we addressed our authority to investigate and undertake compliance reviews and enforcement actions occurring at the insurance agency level to hold lead agents of insurance agencies accountable. We also finalized changes to § 155.220(k)(3) to reflect our authority to suspend an agent's or broker's ability to transact information with the Exchange in certain circumstances until the incident, breach, or noncompliance are remedied or sufficiently mitigated to HHS' satisfaction.

3. Market Rules

In the February 27, 2013 Federal Register (78 FR 13406), we issued the health insurance market rules, including provisions related to the single risk pool. We clarified that issuers may make a plan-specific adjustment to the market-wide index rate that accounts for differences between catastrophic and non-catastrophic plans in expected average enrollee gross spending and expected average risk adjustment payment transfers. This plan-specific adjustment would be uniform across all of an issuer's catastrophic plans (that is, risk across all catastrophic plans must be pooled).

In that rule we also codified that a health plan is a catastrophic plan if it: (1) meets all applicable requirements for health insurance coverage in the individual market; (2) does not offer coverage at the bronze, silver, gold, or platinum levels of coverage (3) does not provide coverage of essential health benefits until the enrolled individual reaches the annual limitation in cost sharing; and (4) covers at least three primary care visits per year before reaching the deductible. A catastrophic plan may not impose any cost-sharing requirements for preventive services identified in section 2713 of the PHS Act. We also codified the statutory

We amended requirements related to index rates under the single risk pool provision in a final rule issued in the July 2, 2013 Federal Register (78 FR 39870). In the October 30, 2013 Federal Register (78 FR 65046), we clarified when issuers may establish and update premium rates. In the March 8, 2016 Federal Register (81 FR 12203), we clarified single risk pool provisions related to student health insurance coverage. We finalized minor adjustments to the single risk pool regulations in the 2018 Payment Notice, issued in the December 22, 2016 Federal Register (81 FR 94058).

4. Rate Review

In the May 23, 2011 Federal Register (76 FR 29963) (Rate Review Rule), we implemented a rate review program. We amended the provisions of the Rate Review Rule in final rules published in the September 6, 2011 Federal Register (76 FR 54969), the February 27, 2013 Federal Register (78 FR 13405), the May 27, 2014 Federal Register (79 FR 30239), the February 27, 2015 Federal Register (80 FR 10749), the March 8, 2016 Federal Register (81 FR 12203) and the December 22, 2016 Federal Register (81 FR 94058).

5. Exchanges

We requested comment relating to Exchanges in the August 3, 2010 Federal Register (75 FR 45584). We issued initial guidance to States on Exchanges on November 18, 2010. In the March 27, 2012 Federal Register (77 FR 18310) (Exchange Establishment Rule), we implemented the Affordable Insurance Exchanges (Exchanges), consistent with title I of the Affordable Care Act, to provide competitive marketplaces for individuals and small employers to directly compare available private health insurance coverage options based on price, quality, and other factors. This included implementation of components of the Exchanges and standards for eligibility for Exchanges, as well as network adequacy and essential community provider (ECP) certification standards.

In the 2014 Payment Notice and the Amendments to the HHS Notice of Benefit and Payment Parameters for 2014 interim final rule, issued in the March 11, 2013 Federal Register (78 FR 15541), we set forth standards related to Exchange user fees. We established an adjustment to the FFE user fee in the Coverage of Certain Preventive Services under the Affordable Care Act final rule, issued in the July 2, 2013 Federal Register (78 FR 39869) (Preventive Services Rule).

In the 2016 Payment Notice, we also set forth the ECP certification standard at § 156.235, with revisions in the 2017 Payment Notice in the March 8, 2016 Federal Register (81 FR 12203) and the 2018 Payment Notice in the December 22, 2016 Federal Register (81 FR 94058).

In the 2018 Payment Notice, issued in the December 22, 2016 Federal Register (81 FR 94058), we set forth the standards for the request for reconsideration of denial of QHP certification specific to the FFEs at § 155.1090.

In an interim final rule, issued in the May 11, 2016 Federal Register (81 FR 29146), we made amendments to the parameters of certain SEPs (2016 Interim Final Rule).

We finalized these in the 2018 Payment Notice, issued in the December 22, 2016 Federal Register (81 FR 94058).

In the Market Stabilization final rule, issued in the April 18, 2017 Federal Register (82 FR 18346), we amended standards relating to SEPs and QHP certification. In the 2019 Payment Notice, issued in the April 17, 2018 Federal Register (83 FR 16930), we modified parameters around certain SEPs. In the April 25, 2019 Federal Register (84 FR 17454), the 2020 Payment Notice established a new SEP for certain individuals who become newly eligible for APTC.

In the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment Notice), we finalized revisions to the parameters of SEPs and the quality rating information display standards for State Exchanges and amended the periodic data matching requirements.

In the January 19, 2021 Federal Register (86 FR 6138) (part 1 of the 2022 Payment Notice), we finalized only a subset of the proposals in the 2022 Payment Notice proposed rule. In the May 5, 2021 Federal Register (86 FR 24140), we issued part 2 of the 2022 Payment Notice. In 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 SEP verifications.

In the 2024 Payment Notice, issued in the April 27, 2023 Federal Register (88 FR 25740), we revised Exchange Blueprint approval timelines, lowered the user fee rate for QHPs in the FFEs and SBE-FPs, and amended re-enrollment hierarchies for enrollees. We finalized a requirement that all plans seeking certification on the Exchanges utilize a provider network. We also finalized policies to update FFE and SBE-FP standardized plan options; reduce the risk of plan choice overload on the FFEs and SBE-FPs by limiting the number of non-standardized plan options that issuers may offer through Exchanges on the Federal platform; and ensure correct QHP information. In addition, we amended coverage effective date rules, lengthened the SEP from 60 to 90 days for those who lose Medicaid coverage, and prohibited QHPs on FFEs and SBE-FPs from terminating coverage mid-year for dependent children who reach the applicable maximum age. We also finalized policies on verifying consumer income and permitting door-to-door assisters to solicit consumers. We finalized provider network and ECP policies for QHPs.

In the 2025 Payment Notice, issued in the April 15, 2024 Federal Register (89 FR 26218), we required a State seeking to operate a State Exchange to first operate an SBE-FP for at least one plan year, revised Exchange Blueprint requirements for States transitioning to a State Exchange, established additional minimum standards for Exchange call center operations, and required an Exchange to operate a centralized eligibility and enrollment platform on its website. We required State Exchanges and State Medicaid agencies to remit payment to HHS for their use of certain income data, amended re-enrollment hierarchies for enrollees enrolled in catastrophic coverage, revised the parameters around a State Exchange adopting an alternative open enrollment period, and extended the availability of a SEP for APTC-eligible qualified individuals with a projected annual household income no greater than 150 percent of the FPL. We finalized provider network adequacy policies applicable to such Exchanges for Plan Year (PY) 2026 and subsequent plan years. We finalized the policy to maintain FFE and SBE-FP standardized plan option metal levels from the 2024 Payment Notice and finalized an exceptions process to the limitation on non-standardized plan options in FFEs and SBE-FPs. We also finalized the

In the 2026 Payment Notice, published in the January 15, 2025 Federal Register (90 FR 4424), we codified a timeliness standard for State Exchanges to review and resolve enrollment data inaccuracies at § 155.400(d)(1), finalized at § 155.1000 that an Exchange may deny certification to any plan that does not meet the criteria at § 155.1000(c), and revised the standards at § 155.1090 for an issuer to request a reconsideration of a denial of certification specific to the FFEs. We also finalized publicly releasing certain data and information that State Exchanges submit to HHS, affirmed that CSR loading practices permitted by State regulators are permissible under Federal law to the extent that they are actuarially justified and the issuer does not receive reimbursement for such CSR, and finalized that we will only release a single, final version of the AV Calculator. We also updated the standardized plan option designs for PY 2026 to ensure these plans continue to have AVs within the permissible de minimis range for each metal level, amended § 156.201 to require issuers to meaningfully differentiate standardized plan options from one another, and finalized that HHS would conduct ECP certification reviews in States performing plan management functions beginning PY 2026. We also finalized updates affecting the exchanges in the 2025 Marketplace Integrity and Affordability final rule issued in the June 25, 2025 Federal Register (90 FR 27074).

6. Essential Health Benefits

We established requirements relating to EHB in the Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation Final Rule, which was issued in the February 25, 2013 Federal Register (78 FR 12834) (EHB Rule). We established at § 156.135(a) that AV is generally to be calculated using the AV Calculator developed and made available by HHS for a given benefit year. In the 2015 Payment Notice (79 FR 13743), we established at § 156.135(g) provisions for updating the AV Calculator in future plan years. In the 2017 Payment Notice (81 FR 12349), we amended the provisions at § 156.135(g) to allow for additional flexibility in our approach and options for updating of the AV Calculator.

In the 2025 Payment Notice, issued in the April 15, 2024 Federal Register (89 FR 26218), we revised § 155.170(a) to codify that benefits covered in a State's EHB-benchmark plan are not considered in addition to EHB, even if they had been required by State action taking place after December 31, 2011, other than for purposes of compliance with Federal requirements. We finalized three revisions to the standards for State selection of EHB-benchmark plans for benefit years beginning on or after January 1, 2026: revising the typicality standard at § 156.111 for States to demonstrate that their new EHB-benchmark plan provides a scope of benefits that is equal to that of a typical employer plan in the State; revising requirements such that States do not need to submit a formulary drug list as part of their application unless they are changing their prescription drug EHB; and consolidating options for States to change their EHB-benchmark plans. At § 156.115(d), we removed the prohibition on issuers from including routine non-pediatric dental services as an EHB beginning with PY 2027.

In the 2026 Payment Notice, published in the January 15, 2025 Federal Register (90 FR 4424), we revised § 156.80(d)(2)(i) to require the actuarially justified plan-specific factors by which an issuer may vary premium rates for a particular plan from its market-wide index rate include the AV and cost-sharing design of the plan.

7. Quality Improvement Strategy

We issued regulations in § 155.200(d) to direct Exchanges to evaluate quality improvement strategies, and § 156.200(b) to direct QHP issuers to implement and report on a quality improvement strategy or strategies consistent with section 1311(g) standards as QHP certification criteria for participation in an Exchange. In the 2016 Payment Notice, issued in the February 27, 2015 Federal Register (80 FR 10749), we finalized regulations at § 156.1130 to establish standards and the associated timeframe for QHP issuers to submit the necessary information to implement quality improvement strategy standards for QHPs offered through an Exchange. In the 2026 Payment Notice, published in the January 15, 2025 Federal Register (90 FR 4424), we finalized sharing summary-level QIS information publicly on an annual basis beginning on January 1, 2026, with information QHP issuers submit during the PY 2025 QHP Application Period.

8. Medical Loss Ratio (MLR)

We published a request for comment on section 2718 of the PHS Act in the April 14, 2010 Federal Register (75 FR 19297), and published an interim final rule with a 60-day comment period relating to the MLR program on December 1, 2010 (75 FR 74863). A final rule with a 30-day comment period was published in the December 7, 2011 Federal Register (76 FR 76573). An interim final rule with a 60-day comment period was published in the December 7, 2011 Federal Register (76 FR 76595). A final rule was published in the May 16, 2012 Federal Register (77 FR 28790). The MLR program requirements were amended in final rules published in the March 11, 2014 Federal Register (79 FR 13743), the May 27, 2014 Federal Register (79 FR 30339), the February 27, 2015 Federal Register (80 FR 10749), the March 8, 2016 Federal Register (81 FR 12203), the December 22, 2016 Federal Register (81 FR 94183), the April 17, 2018 Federal Register (83 FR 16930), the May 14, 2020 Federal Register (85 FR 29164), the May 5, 2021 Federal Register (86 FR 24140), and the May 6, 2022 Federal Register (87 FR 27208), and an interim final rule that was published in the September 2, 2020 Federal Register (85 FR 54820).

B. Summary of Major Provisions

The regulations outlined in this proposed rule would be codified in 42 CFR part 600, and 45 CFR parts 150, 153, 155, 156 and 158.

1. 42 CFR Part 600

We propose to make updates in 42 CFR 600.5 to align BHP regulations with section 71301 of the WFTC legislation. Section 71301 of the WFTC legislation amended section 36B of the Code to provide that a PTC is allowed for the QHP coverage of a noncitizen lawfully present only if he or she is an “eligible alien”, effective for plan years beginning on or after January 1, 2027. Because Federal BHP payments to States are based in part on the amount of PTC an individual enrolled in the BHP is eligible for and would have qualified for had he or she been enrolled in a QHP through an Exchange, only lawfully present noncitizens who are considered to be “eligible aliens” will generate Federal BHP payments to the State. We propose to add a new definition of “eligible noncitizen at 42 CFR 600.5, cross-referencing 45 CFR 155.20.

2. 45 CFR Part 153

In accordance with the OMB Report to Congress on the Joint Committee Reductions for Fiscal Year 2026, the HHS-operated risk adjustment program is subject to the fiscal year 2026 11 Therefore, the HHS-operated risk adjustment program will sequester payments made from fiscal year 2026 resources (that is, funds collected during the 2026 fiscal year) at a rate of 5.7 percent.

11 OMB. (2025). OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2026. https://www.whitehouse.gov/wp-content/uploads/2025/04/OMB-Report-to-the-Congress-on-the-BBEDCA-251A-Sequestration-for-Fiscal-Year-2026.pdf.

We propose to recalibrate the 2027 benefit year HHS risk adjustment models using the 2021, 2022, and 2023 benefit year enrollee-level EDGE data and solicit comment on whether we should retain separate risk adjustment transfer calculations under the State payment transfer formula for individual catastrophic plans and individual non-catastrophic plans. We also propose a risk adjustment user fee rate for the 2027 benefit year of $0.20 per member per month (PMPM).

We propose to modify one intermediate step of the HHS-RADV error estimation methodology starting with 2025 benefit year HHS-RADV to add an additional scaling factor to appropriately estimate the proportion of the issuer's total plan liability risk score (PLRS) that is HCC-related after the removal of no HCC enrollees from the IVA sample beginning with 2025 benefit year HHS-RADV, as finalized in the 2026 Payment Notice (90 FR 4424).

3. 45 CFR Part 154

We propose to require issuers that intend to load rates to account for unpaid CSRs for the applicable rating year to submit certain information related to CSR loading in their Unified Rate Review Templates (URRTs) and the Actuarial Memoranda for each filing year in which CSRs are not funded beginning with PY 2027 rate filings. 12

12 CMS 10379/OMB Control Number: 0938-1141.

4. 45 CFR Part 155

We propose to remove the requirement at § 155.105(b)(4) that a State seeking to operate a State Exchange must first operate an SBE-FP for at least one plan year.

We propose to amend § 155.106(a)(2) to rescind the requirement that as part of a State's activities for its establishment of a State Exchange, the State must provide supporting documentation demonstrating progress toward meeting or implementing State Exchange Blueprint requirements, given preexisting processes per the State Blueprint Application 13 for CMS to collect supporting documentation from a State as part of a State Exchange implementation efforts.

13 CMS-10416/OMB control number: 0938-1172.

We propose to amend § 155.170(a) to provide that beginning with PY 2027, a State-required benefit would be considered “in addition to EHB” (and thus not EHB) if it is: required by a State action taking place after December 31, 2011; applicable to the small group and/or individual markets; specific to required care, treatment, or services; and not required by State action for purposes of compliance with Federal requirements. Under this proposal, such State-required benefits would be considered in addition to EHB regardless of whether the required benefits are embedded in the State's EHB-benchmark plan. We also propose revisions to the regulatory text at §§ 155.170(a)(2) and 156.115(a) to align with this proposal.

We propose amendments to § 155.205(b) to amend the requirement that a State Exchange operate a centralized eligibility and enrollment consumer interface on the Exchange's website for an individual to submit a single streamlined eligibility application and subsequently select a QHP following a determination of eligibility. Under this proposal, a State Exchange could choose to operate a centralized eligibility and enrollment consumer interface on the Exchange's website through which individuals may submit an application and enroll in a QHP, or a State Exchange could provide such functionality exclusively through one or more State Exchange-approved consumer websites operated by a web-broker . . .

We propose at § 155.221(k) that State Exchanges may elect a new EDE option (SBE-EDE option), in which a State Exchange could seek HHS approval to allow web-brokers to operate enrollment websites as the exclusive pathway through which consumers can apply, receive an eligibility determination from the Exchange, and purchase an individual market QHP offered through the Exchange with APTC and CSRs, if otherwise eligible.

We propose changes to the existing regulatory authority under § 155.220(j)(2)(ii) and (iii) to require agents, brokers, and web-brokers to use an HHS-approved and created consumer consent form to meet the eligibility application review requirements and consumer consent documentation requirements. 14 Our proposal would eliminate the current flexibility, which allows agents, brokers, and web-brokers to use their own standards and templates for documentation requirements, and instead sets a universal standard that requires agents, brokers, and web-brokers to use the HHS-approved and created consumer consent form. 15 We also propose to revise § 155.220(j)(2)(ii) and (j)(2)(iii) to clarify what constitutes a consumer “taking an action” for eligibility application review and confirmation and providing consumer consent.

14 CMS-10840/OMB Control Number: 0938-1438.

15 For the current HHS-approved and created form, see CMS Model Consent Form for Marketplace Agents, Brokers, Web-brokers, and Agencies. Available at https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf.

We propose several new provisions at § 155.220(j)(3) to establish more robust standards of conduct related to the marketing practices of agents, brokers, and web-brokers which would include examples of prohibited marketing practices. Furthermore, we propose to require agents, brokers, and web-brokers to provide HHS marketing documentation in response to monitoring, audit, and enforcement activities. We also propose to notify agents, brokers, and web-brokers that they may be held responsible for marketing content created, written, released, or otherwise produced by an entity on their behalf.

We propose to discontinue the vendor program, which allows for certain training and information verification functions to be provided by HHS-approved vendors. To accomplish this, we propose removing § 155.222.

We propose to make updates in § 155.20, § 155.305(f)(1), and § 155.320 to align Exchange regulations with section 71301 of the WFTC legislation. Section 71301 of the WFTC legislation amended section 36B of the Code to provide that PTC is allowed for the QHP coverage of a lawfully present noncitizen only if such noncitizen is an “eligible alien.” It also makes conforming amendments to section 1411 of the Affordable Care Act requiring Exchanges to verify applicants' “eligible alien” status effective for taxable years beginning after December 31, 2026. We propose to add a new definition in § 155.20, to update our APTC eligibility regulations at § 155.305(f)(1), and to add to our verification regulations in § 155.320 to align Exchange eligibility and verification rules with section 71301 of the WFTC legislation. This proposal would also impact Federal payments to States effective January 1, 2027 for individuals enrolled in the BHP who are lawfully present noncitizens but are not “eligible aliens,” as Federal payments to States for these individuals are also no longer allowed.

To align Exchange regulations with section 71302 of the WFTC legislation, we propose to remove § 155.305(f)(2) and make conforming updates to § 155.320(c)(3)(iii)(A) and 155.420(d)(13). Section 71302 of the WFTC legislation amended section 36B(c) of the Code to provide that PTC is no longer allowed for noncitizens lawfully present in the United States who were ineligible for Medicaid due to their immigration status and have household income below 100 percent of the FPL. Removing § 155.305(f)(2) and updating § 155.320(c)(3)(iii)(A) would align Exchange APTC eligibility and verification rules with section 71302 of the WFTC legislation. This proposal would also impact Federal payments to States for individuals enrolled in the BHP who are ineligible for Medicaid due to their immigration status and with household income below 100 percent of the FPL, for whom Federal payments to States are also no longer allowed.

We propose to revise the failure to file and reconcile process at § 155.305(f)(4) such that Exchanges on the Federal platform would conduct the 1-year policy beginning in PY 2027. State Exchanges would have the option to conduct either the 1-year or 2-year policy in PY 2027, but would be required to conduct the 1-year policy beginning in PY 2028). Under the 1-year policy, if finalized, an Exchange must determine a tax filer ineligible for APTC if: (1) HHS notifies the Exchange that the tax filer (or their spouse if the tax filer is a married couple) received APTC for a prior year for which tax data will be utilized for verification of income, and (2) the tax filer or tax filer's spouse did not comply with the requirement to file a Federal income tax return and reconcile APTC for that year. This proposal would align with the statutory requirement in section 71303 of the WFTC legislation that effectively requires Exchanges to follow the 1-year policy as a requirement for a month to be a coverage month under section 36B of the Code as of PY 2028. We are also proposing to remove the notice requirement at § 155.305(f)(4)(ii) for PY 2027 to conform with the notice policy under the PY 2026 policy.

We seek comment on considerations for future policy development and implementation under section 71303 of the WFTC legislation, which imposes new requirements on Exchanges related to eligibility verification. Specifically, we seek comment on: operational considerations for interested parties; effective rollout and communications; required timelines for interested parties to comply with the law; anticipated complexity, costs, burden, enrollment impacts; and any State-specific considerations.

We propose to revise § 155.320(c) such that all Exchanges are required to continue conducting the income verifications changes introduced in the Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability final rule (90 FR 27074) (the 2025 Marketplace Integrity and Affordability final rule) in PY 2027 and beyond. Specifically, we propose updating § 155.320(c)(3)(iii) and § 155.320 (c)(3)(vi)(C)(2) to extend the requirement indefinitely to create income data matching issues (DMIs) when trusted data sources indicate that projected consumer household income is under 100 percent of the FPL. Additionally, we propose removing § 155.320(c)(5), which outlines the requirement to accept the annual household income attestation when no tax data is returned for a household.

We seek comment on whether we should regulate the option for issuers to implement the fixed-dollar and/or gross percentage-based premium payment thresholds in § 155.400(g) for PY 2027 and beyond. Currently, issuers are only able to implement a net premium percentage-based premium threshold for PY 2026, and effective January 1, 2027, issuers will be able to implement the fixed-dollar and/or either net or gross premium percentage-based thresholds, which was finalized in the 2025 Marketplace Integrity and Affordability final rule.

We propose to remove § 155.420(d)(16) such that Exchanges would continue to be prohibited from offering the 150 percent FPL SEP in PY 2027 and beyond, in alignment with section 71304 of the WFTC legislation. We propose to make conforming amendments at §§ 155.420(a)(4)(ii)(D), 155.420(b)(2)(vii), and 155.420(a)(4)(iii).

We propose to revise § 155.420(g) to remove the restriction for Exchanges on the Federal platform to only conduct Special Enrollment Period Verification (SEPV) for Loss of Minimum Essential Coverage (MEC). We also propose to require Exchanges on the Federal platform to conduct SEPV for at least 75 percent of new enrollments. These proposals were finalized in the 2025 Marketplace Affordability and Integrity rule but were stayed in City of Columbus et. al. v. Kennedy et. al. 16 We are therefore reproposing these provisions.

16 City of Columbus v. Kennedy, 796 F. Supp. 3d 123, 159-60 (D. Md. 2025).

We propose to amend § 155.605 to codify and expand hardship exemption eligibility. Specifically, this proposal would allow individuals who are ineligible for APTC or CSRs due to projected household income below 100 percent or above 250 percent of the FPL to qualify for a hardship exemption under § 155.605(d)(1)(iii). This change would allow individuals aged 30 and older who receive this hardship exemption to enroll in catastrophic coverage, if otherwise eligible.

We propose, for plan years beginning on or after January 1, 2027, to amend § 155.1050(a)(2) to remove the requirements at § 155.1050(a)(2)(i) and (ii) that State Exchanges and SBE-FPs establish and impose quantitative time and distance network adequacy standards that are at least as stringent as standards for QHPs participating on the FFEs and to no longer require State Exchanges and SBE-FPs to conduct quantitative network adequacy reviews to evaluate a plan's compliance with certain network adequacy standards under § 156.230 prior to certifying any plan as a QHP. Instead, we propose to restore the requirement at § 155.1050(a)(2) that State Exchanges and SBE-FPs ensure that each QHP provides sufficient access to providers in a manner that meets applicable standards consistent with § 156.230(a)(1)(ii) and (a)(1)(iii) for network plans, or proposed § 156.236(a) for non-network plans, as applicable. We also propose at new § 155.1050(d) to defer provider access reviews of QHP issuers, with or without a provider network, applying for certification as a QHP to be offered through the FFE to FFE States that elect to conduct such reviews, should the FFE State demonstrate sufficient authority and the technical capacity to conduct such reviews by satisfying the applicable criteria to be considered to have an Effective Provider Access Review Program under proposed § 155.1050(d)(2) through (d)(4).

We propose to implement new requirements for an Effective Essential Community Provider Review Program by adding § 155.1051. Under this proposal, FFE States may elect to conduct their own ECP certification reviews of issuers with or without a provider network that are applying for certification to be offered as a QHP through an FFE, including in States performing plan management. In order to conduct their own reviews, we propose that FFE States would be required to demonstrate that they have sufficient authority and the technical capacity to conduct these reviews by satisfying the applicable criteria to be considered to have an Effective Essential Community Provider Review Program under proposed § 155.1051.

We propose to amend § 155.1200(d) and add new paragraph (e) to permit State Exchanges to satisfy certain requirements of the independent external programmatic audit, as outlined in paragraph (d), by completing the SEIPM process that would be established at 45 CFR 155, subpart Q.

We propose to add new subpart Q (§§ 155.1600 through 1650) to establish the SEIPM program. The Payment Integrity Information Act of 2019 (PIIA) requires Federal agencies to annually review, measure, and report on the programs they administer that have been determined to be susceptible to significant improper payments. To satisfy the requirements of PIIA, we are proposing to measure improper payments of APTC that are administered by State Exchanges and to annually report statistically valid improper payment estimates in the HHS Agency Financial Report.

5. 45 CFR part 156

We propose the 2027 benefit year FFE and SBE-FP user fee rates of 2.5 percent and 2.0 percent of total monthly premiums, respectively.

We are pausing review of State applications to select EHB-benchmark plans in accordance with § 156.111. We are reviewing section 1302 of the Affordable Care Act and are considering future rulemaking to revise § 156.111 and EHB standards more broadly.

We propose to revise § 156.115(d) to prohibit issuers from including routine non-pediatric dental services as an EHB.

We propose to modify the requirements for catastrophic plans in § 156.155 to specify that a catastrophic plan has a plan term of either 1 year, or of multiple consecutive years not to exceed 10 years. We propose that catastrophic plans with terms of at least 2 years may utilize value-based insurance designs to offer benefits for preventive services pursuant to section 2713(c) of the PHS Act, without the beneficiary having to first satisfy their deductible or annual cost-sharing limitation. We also propose to amend § 156.130 to specify that, in the case of a catastrophic plan with a consecutive multi-year term, the annual limitation on cost sharing for the initial plan year of the contract may apply on an annual basis, or over the life of the contract. In the latter case, the limitation applicable to the specific plan year under each plan year of the coverage would be divided by 12 to determine the monthly limit on cost sharing under the plan. Further, we propose to amend § 156.80 to permit issuers of multi-year catastrophic plans to make a plan-level adjustment to the index rate that reflects the length of the entire term.

To address an issue that has arisen in the implementation of section 1302(c) through (e) of the Affordable Care Act, we propose changes to the permissible cost-sharing parameters for individual market bronze plans through new proposed § 156.136 and to the required cost-sharing parameters for catastrophic plans through revisions to § 156.155(a)(3).

We propose to remove the following from our regulations effective beginning in PY 2027: the definition of “standardized options” at § 155.20; all requirements pertaining to standardized plan options at § 156.201; the differential display of standardized plan options on HealthCare.gov at § 155.205(b)(1); the corresponding standardized plan option differential display requirements for approved web-broker and QHP issuer enrollment partners using a DE pathway to facilitate consumer enrollment through an FFE or SBE-FP at §§ 155.220(c)(3)(i)(H) and 156.265(b)(3)(iv); the annual design and publication of these standardized plan options in the applicable Payment Notice for each plan year; and non-standardized plan option limits and exceptions at § 156.202.

We propose to revise the network adequacy and ECP standards at §§ 156.230 and 156.235 to make clear that these sections contain the provider access standards for all individual market QHPs and stand-alone dental plans (SADPs) and all Small Business Health Options Program (SHOP) QHPs across all QHP issuers that use a network of providers. We also propose to revise these sections to remove the requirement that all QHPs must use a network of providers.

Additionally, we propose to revise § 156.230 to provide that HHS would continue to conduct network adequacy reviews using standards described at § 156.230 for QHP issuers that use a provider network in FFE States that do not elect to conduct such reviews, or in FFE States that HHS has determined do not satisfy the criteria to be considered to have an Effective Provider Access Review Program, as described at proposed § 155.1050(d). We also propose to add new § 156.236 to allow plans that do not use a network (non-network plans) to receive QHP certification by demonstrating that they ensure a sufficient choice of providers that accept the non-network plan's benefit amount as payment in full, and reasonable and timely access to ECPs that accept the plan's benefit amount as payment in full. Proposed § 156.236 would set forth provider access and ECP standards for assessing whether non-network plans provide sufficient choice of providers.

For PY 2027 and subsequent plan years, we propose changes to the QHP certification requirements with respect to essential community providers (ECPs) included within a network plan issuer's provider network. First, we propose to reduce the minimum percentage requirement from 35 to 20 percent for both medical QHP and SADP issuers, such that issuers would be required to contract with at least 20 percent of available ECPs in each plan's service area to participate in the plan's network, and separately, at least 20 percent of available Federally Qualified Health Centers (FQHCs) and 20 percent of available family planning providers that qualify as ECPs in the plan's service area. Additionally, we propose to modify the narrative justification requirements at §§ 156.235(a)(3) and 156.235(b)(3) to be consistent with systems changes and existing QHP issuer ECP data submission requirements as part of ECP certification reviews.

We propose to modify § 156.480(c) to clarify HHS' authority to audit or conduct a compliance review of an issuer that offers a QHP through an Exchange for the purposes of administering and providing oversight of the APTC, CSR, and user fee programs. We also propose that HHS may conduct a compliance review to assess issuers' compliance with requirements related to these programs as needed or on an annual basis rather than only on an ad hoc basis.

We propose to amend § 156.805(b) to reiterate in § 156.805(b) that in determining the amount of CMPs, in addition to the factors HHS takes into account when determining a CMP amount listed in § 156.805(b)(1) through (3), HHS would identify the lawful purpose or purposes of the CMP. We also propose to amend the introductory text of § 150.317 to make corresponding edits with respect to the factors HHS considers when determining the amount of CMPs as enforcement remedies against issuers more broadly or other responsible entities, such as a non-Federal governmental plan sponsor that is subject to applicable PHS Act requirements. In addition, we propose to amend § 156.805(f) to reiterate that HHS has the authority to impose CMPs against issuers in a State Exchange or SBE-FP for an identified violation of any Exchange requirements applicable to issuers offering a QHP in an Exchange, when a State notifies HHS that it is not enforcing these requirements or HHS determines that a

We propose to amend § 156.903 to provide the option for an administrative law judge (ALJ) to issue subpoenas, upon his or her own motion or at the request of a party, if reasonably necessary for the full presentation of a case and to add procedures governing the process for issuing subpoenas. We also propose to amend § 156.935 to ensure that the discovery provisions set forth therein do not apply to administrative appeals of proposed CMPs for violations identified through audits of the APTC, cost sharing reduction, or user fee programs conducted in accordance with § 156.480(c).

We propose to require QHP issuers to submit QISs addressing any two of the five topic areas listed in section 1311(g)(1) of the Affordable Care Act, without mandating which specific topics areas a QHP issuer would be required to address to meet the QIS statutory certification requirement, beginning with PY 2027.

We propose to amend § 156.1215(b) to provide that CMPs assessed against health coverage issuers and their affiliates under the same taxpayer identification (TIN) number would be subject to netting as part of HHS' integrated monthly payment and collection cycle. We also propose to amend § 156.1215(c) to provide that any amount owed to the Federal Government by an issuer and its affiliates for unpaid CMP amounts, after HHS nets amounts owed by the Federal Government, would be the basis for calculating the debt.

6. 45 CFR part 158

We solicit comment on the impact of the Federal MLR standard on individual market stability and whether HHS should use its authority under section 2718(b)(1)(A)(ii) of the PHS Act and § 158.301 to adjust the MLR standard in a State to promote individual market stability. We also solicit comment on whether and how to amend regulations allowing States to request an adjustment to the MLR standard in their individual market to reduce burden and encourage States to request adjustments as appropriate in their State markets.

III. Provisions of the Proposed Regulations

A. Part 150—CMS Enforcement in Group and Individual Insurance Markets

1. Factors CMS Uses To Determine the Amount of a Civil Money Penalty (CMP) (§ 150.317)

To align with the proposal discussed in section III.F.14 of this proposed rule, which would reiterate in § 156.805(b) what factors HHS considers when determining the amount of CMPs as enforcement remedies against QHP issuers in Exchanges, we propose a conforming amendment to § 150.317 introductory text to clarify that HHS, through CMS, will identify the lawful purpose or purposes of the penalty, and take into account the enumerated factors as appropriate for the circumstances. In proposing the conforming edits to § 150.317, we do not propose other changes to the legal bases and procedural processes for imposing CMPs.

We request comment on this proposal.

B. Part 153—Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment

In subparts A, B, D, G, and H of part 153, we established standards for the administration of the risk adjustment program. The risk adjustment program is a permanent program created by section 1343 of the Affordable Care Act that transfers funds from issuers of risk adjustment covered plans that have lower-than-average risk enrollees to issuers of risk adjustment covered plans that have higher-than-average risk enrollees, which includes issuers with plans in the individual, small group, 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 the State's behalf. 17 HHS did not receive any requests from States to operate risk adjustment for the 2027 benefit year. Therefore, HHS will operate risk adjustment in every State and the District of Columbia for the 2027 benefit year.

17 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 2026, the HHS-operated risk adjustment program is subject to the fiscal year 2026 sequestration. 18 The Federal Government's 2026 fiscal year began on October 1, 2025. Therefore, the HHS-operated risk adjustment program is sequestered at a rate of 5.7 percent for payments made from fiscal year 2026 resources (that is, funds collected during the 2026 fiscal year).

18 OMB. (2025). OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2026. https://www.whitehouse.gov/wp-content/uploads/2025/04/OMB-Report-to-the-Congress-on-the-BBEDCA-251A-Sequestration-for-Fiscal-Year-2026.pdf.

HHS, in coordination with OMB, has determined that, under section 256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), 19 as amended, and the underlying authority for the HHS-operated risk adjustment program, the funds that are sequestered in fiscal year 2026 from the HHS-operated risk adjustment program will become available for payment to issuers in fiscal year 2027 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 year in which the funds were sequestered.

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

Additionally, we note that the Infrastructure Investment and Jobs Act 20 amended section 251A(6) of the BBEDCA to extend the sequestration first mandated under the Budget Control Act of 2011 for all non-exempt direct spending programs, including the HHS-operated risk adjustment program, through fiscal year 2031 at a rate of 5.7 percent per fiscal year. 21

20 Public Law 117-58, section 90001(1), 135 Stat. 429, 1341 (2021), codified at 2 U.S.C. 901a(6)(B).

21 Section 251A(6)(B) of the Balanced Budget and Emergency Deficit Control Act, 2 U.S.C. 901a(6)(B), as amended, requires sequestration of non-exempt direct spending programs, excluding Medicare, through fiscal year 2031 at a uniform percentage calculated by OMB to be necessary to meet certain deficit reduction targets in fiscal year 2021. That uniform percentage was calculated to be 5.7 percent in the OMB Report to the Congress on the Joint Committee Reductions for Fiscal Year 2021.

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 State payment transfer formula 22 that is

22 The State payment transfer formula refers to part of the Federally certified risk adjustment methodology that applies in States where HHS is responsible for operating the program. The formula calculates payments and charges at the State market

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, 23 and prescription drug categories (RXCs) beginning with the 2018 benefit year. 24 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 25 applicable to certain severity and transplant HCCs (87 FR 27224 through 27228). 26 Starting with the 2026 benefit year (90 FR 4424 at 4438), we added a new type of model factor in the adult and child models to account for risk associated with non-demographic enrollee characteristics that do not indicate the presence of a specific active medical condition. We referred to the new type of factor as an “affiliated cost factor” (ACF), thereby distinguishing this new type of factor from RXCs and HCCs, which do indicate the presence of a specific active medical condition.

23 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 1 to 11 months, reflecting the increased annualized costs associated with fewer months of enrollments. See, for example, 81 FR 94071 through 94074. These enrollment duration factors were replaced beginning with the 2023 benefit year with HCC-contingent enrollment duration factors for up to 6 months in the adult models. See, for example, 87 FR 27228 through 27230.

24 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.

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

26 Also see Table 3.

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. 27 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.

27 For unique State-specific plans, we apply the CSR adjustment factors that correspond to each plan's AV. See, e.g., the 2025 Payment Notice, 89 FR at 26252-26253. However, a different approach is taken for States whose State-specific plans take the form of Medicaid expansion plans offered on the Exchange (for example, Arkansas), because these Medicaid-expansion plans are identical in all their parameters, including AV and degree of plan liability, to other plans offered on the Exchange in those States and are differentiated from their comparable plans only in eligibility criteria, plan enrollment selection, and sources of funding. Ibid. Footnote 79 of the 2025 Payment Notice (89 FR 26253), erroneously stated that, “we would use the proposed CSR adjustment factor of 1.12 for Arkansas 94 percent AV Medicaid-expansion plans and the proposed CSR adjustment factor that corresponds to the silver metal level zero cost sharing variants (that is, the proposed 1.46 CSR adjustment factor for zero cost sharing variants) for Arkansas 100 percent AV Medicaid-expansion plans in the plan liability risk score calculation.” See https://regtap.cms.gov/reg_librarye.php?i=4690. Arkansas 100 percent AV Medicaid-expansion plan features remain more similar to the 94 percent silver plan variant than to the silver metal level zero cost sharing variant for AI/AN enrollees. Therefore, for both the 94 and 100 percent Medicaid-expansion plans in Arkansas, we use the same CSR adjustment factor of 1.12 used for the 94 percent silver plan variant CSR adjustment factor in the plan liability risk score calculation. We will continue to align the CSR adjustment factor for both the 94 and 100 percent Medicaid-expansion plans in Arkansas with the 94 percent silver plan variant CSR adjustment factor for the 2027 benefit year and beyond unless the AVs for these unique Arkansas-specific plans change. More information on the CSR factors used for CSR plan variants, including state program CSR variants, can be found in the applicable Risk Adjustment HHS-Developed Risk Adjustment Model Algorithm “Do It Yourself (DIY)” Software instructions, available at: https://www.cms.gov/marketplace/resources/regulations-guidance#Premium-Stabilization-Programs.

a. Data for HHS Risk Adjustment Model Recalibration for the 2027 Benefit Year

We propose to recalibrate the 2027 benefit year HHS risk adjustment models with the 2021, 2022, and 2023 benefit years' enrollee-level EDGE data. Consistent with the approach outlined in the 2020 Payment Notice (84 FR 17454, 17464), we propose to recalibrate the HHS risk adjustment models for the 2027 benefit year using only enrollee-level EDGE data, and to continue to use blended, or averaged, coefficients from 3 years of separately solved models for the 2027 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 estimate the draft recalibrated coefficients published in the proposed rule for the applicable benefit year. 28 We believe this promotes stability, 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.

28 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 calibration.

29 See, for example, the 2024 Payment Notice proposed rule (87 FR 78215 through 78216) and final rule (88 FR 25749 through 25753).

30 Because EDGE data do not generally account for drug rebates per the EDGE Server Business Rules (ESBR) (available at https://regtap.cms.gov/reg_librarye.php?i=3765 ), for the purposes of risk adjustment recalibration, we also incorporate assumptions about drug rebates in our trending of prescription drug data.

31 We note that we apply some standard data exclusions to all years of enrollee-level EDGE data for the purposes of risk adjustment recalibration. For example, enrollees with at least one capitated claim in EDGE are excluded from recalibration because we have some concerns that the methods for computing and reporting derived amounts from capitated claims could be inconsistent across issuers and would not provide reliable or comparable data. See, e.g., the 2025 Payment Notice (89 FR 26252).

Consistent with our prior approach when a new benefit year of enrollee-level EDGE data becomes available, 29 we performed reviews of the 2023 benefit year enrollee-level EDGE data to identify potential anomalies prior to incorporating the 2023 benefit year enrollee-level EDGE data as part of the proposed recalibration of the HHS risk adjustment models. Our review did not identify systematic anomalies in the 2023 benefit year enrollee-level EDGE data. Therefore, after considering these analyses, we propose to determine coefficients for the 2027 benefit year HHS risk adjustment models based on a blend of separately solved coefficients from the 2021, 2022, and 2023 benefit years' enrollee-level EDGE data, with the costs of services identified from the data trended between the relevant year of data and the 2027 benefit year. 30 31 The draft coefficients tables reflect the use of trended 2021, 2022, and 2023 benefit year enrollee-level EDGE data, as well as other HHS risk adjustment model updates (including, for example, the multi-year approach finalized in the 2026 Payment Notice (90 FR 4438 through 4440) to phase out the market 32 ). However, we note that the draft coefficients could change between the proposed and final rule if we identify an error after publication of this proposed rule or if any proposed models are modified or not finalized in response to comments. 33 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 2027 benefit year in guidance soon after the publication of the final rule.

32 To begin this transition for the 2026 benefit year HHS risk adjustment models, we applied the specialty drug trend to 1 year of trending Hepatitis C treatment costs (that is, the trend from 2025 to 2026) for all 3 years of enrollee-level EDGE data used (that is, 2020, 2021, and 2022 benefit year enrollee-level EDGE data) in 2026 benefit year HHS risk adjustment model recalibration. To continue this transition for the 2027 benefit year HHS risk adjustment models, we would apply the specialty drug trend to 2 years of trending Hepatitis C treatment costs (that is, the trend from 2025 to 2026 and from 2026 to 2027) for all 3 years of enrollee-level EDGE data (that is, 2021, 2022, and 2023 benefit year enrollee-level EDGE data) proposed to be used in 2027 benefit year HHS risk adjustment model recalibration.

33 If an error were identified after publication of a proposed rule or any proposed changes to the HHS risk adjustment models are modified or not finalized, updated coefficients would be published in the final rule or in guidance after the publication of the final rule consistent with § 153.320(b)(1)(i).

We seek comment on the proposal to determine 2027 benefit year coefficients for the HHS risk adjustment models based on a blend of separately solved coefficients from the 2021, 2022, and 2023 benefit year enrollee-level EDGE data.

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

The proposed 2027 benefit year HHS risk adjustment model factors resulting from the equally weighted (averaged) blended factors from separately solved models using the 2021, 2022, and 2023 benefit year enrollee-level EDGE data are shown in Tables 1 through 6. The HHS risk adjustment 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. 34 Table 1 contains proposed factors for each adult model, including the age-sex, HCC, RXC, 35 RXC-HCC interaction, interacted HCC count, ACF, and enrollment duration coefficients. Table 2 contains the proposed factors for each child model, including the age-sex, HCC, interacted HCC count, and ACF coefficients. Table 3 lists the proposed HCCs selected for the interacted HCC count factors that would apply to the HHS risk adjustment adult and child models. Table 4 contains the proposed factors for each HHS risk adjustment infant model. Tables 5 and 6 contain the HCCs included in the HHS risk adjustment infant models' maturity and severity categories, respectively.

34 As finalized in the 2020 Payment Notice (84 FR 17466 through 17468), we will maintain the high-cost risk pool parameters for the 2020 benefit year and beyond, unless amended through notice-and-comment rulemaking. We do not propose changes to the high-cost risk pool parameters for the 2027 benefit year. Therefore, we will maintain the $1 million threshold and 60 percent coinsurance rate for the 2027 benefit year.

35 In the 2026 Payment Notice, we incorrectly stated that for RXC eligibility (including medically administered injectable claims), a professional or outpatient medical claim does not need to have a risk adjustment eligible service code or bill type code. We subsequently updated the January 2025 version of the 2024 Benefit Year Risk Adjustment DIY software instructions ( https://www.cms.gov/files/document/cy2024-diy-instructions-01072025.pdf ) to reflect this erroneous statement. In the Final 2024 Risk Adjustment DIY software instructions updated April 9, 2025 ( https://www.cms.gov/files/document/cy2024-diy-instructions-04092025.pdf ), we corrected this error and clarified that the HCPCS-level file for RXC assignment can only be sourced from institutional inpatient and outpatient claims with RA-eligible bill types. We expect ACFs related to prescription drugs will be sourced using the same criteria as RXCs. We will announce changes to ESBR concerning RXC or ACF eligibility in future guidance documents or notice and comment rulemakings, as appropriate.

BILLING CODE 4120-01-P EP11FE26.002

EP11FE26.003

EP11FE26.004

EP11FE26.005

EP11FE26.006

EP11FE26.007

EP11FE26.008

EP11FE26.009

EP11FE26.010

EP11FE26.011

EP11FE26.012

EP11FE26.013

EP11FE26.014

EP11FE26.015

EP11FE26.016

EP11FE26.017

EP11FE26.018

BILLING CODE 4120-01-C c. Model Performance Statistics

Each benefit year, to evaluate the HHS risk adjustment model performance, we examine each model's R-squared statistic and predictive ratios (PRs). The R-squared statistic, which calculates the percentage of individual variation explained by a model, measures the predictive accuracy of the model overall. The PR for each of the HHS risk adjustment models is the ratio of the weighted mean predicted plan liability for the model sample population to the weighted mean actual plan liability for the model sample population. The PR represents how well the model does on average at predicting plan liability for that subpopulation.

A subpopulation that is predicted perfectly would have a PR of 1.0. For each of the current and proposed HHS risk adjustment models, the R-squared statistic and the PRs are in the range of published estimates for concurrent HHS risk adjustment models. 36 Because we propose to blend the coefficients from separately solved models based on the 2021, 2022, and 2023 benefit years' enrollee-level EDGE data, we are publishing the R-squared statistic for each model separately to assess model performance. The R-squared statistics for the proposed 2027 benefit HHS risk adjustment models are shown in Table 7.

36 Hileman, G., & Steele, S. (2016). Accuracy of Claims-Based Risk Scoring Models. Society of Actuaries. https://www.soa.org/4937b5/globalassets/assets/files/research/research-2016-accuracy-claims-based-risk-scoring-models.pdf.

EP11FE26.019

3. Overview of the HHS Risk Adjustment Methodology (§ 153.320)

In part 2 of the 2022 Payment Notice (86 FR 24183 through 24186), we finalized the proposal to continue to use the State payment transfer formula finalized in the 2021 Payment Notice for the 2022 benefit year and beyond, unless changed through notice-and-comment rulemaking. We are not proposing changes to the formula in this rule. We therefore would continue to apply the formula as finalized in the 2021 Payment Notice (86 FR 24183 through 24186) in the States where HHS operates the risk adjustment program in the 2027 benefit year.

Additionally, as finalized in the 2020 Payment Notice (84 FR 17466 through 17468), we will maintain the high-cost risk pool parameters for the 2020 benefit year and beyond, unless amended through notice-and-comment rulemaking. We are not proposing changes to the high-cost risk pool parameters for the 2027 benefit year; therefore, we would maintain the $1 million threshold and 60 percent coinsurance rate. 37

37 See for example, the 2018 Payment Notice (81 FR 94081) and 2020 Payment Notice (84 FR 17467).

a. Comment Solicitation on Retaining Separate Risk Adjustment Transfer Calculations for Individual Catastrophic Plans and Individual Non-Catastrophic Plans Under the State Payment Transfer Formula

We are soliciting comment on whether we should retain separate risk adjustment transfer calculations under the State payment transfer formula for individual catastrophic plans and individual non-catastrophic plans or whether we should calculate State transfers for these plans together.

On September 4, 2025, CMS released guidance entitled “ Guidance on Hardship Exemptions for Individuals Ineligible for Advance Payment of the Premium Tax Credit or Cost-sharing Reductions Due to Income, and Streamlining Exemption Pathways to Coverage, ” 38 which expands upon prior FFE hardship exemption policy by expanding eligibility for catastrophic plans starting with PY 2026. 39 Specifically, this guidance allows consumers in applicable States to qualify for an exemption to purchase a catastrophic plan on or off an Exchange in accordance with § 155.605(d)(1)(iii) if they are determined or expect to be ineligible for APTC or CSRs based on their projected annual household income.

38 See CMS. (2025). Guidance on Hardship Exemptions for Individuals Ineligible for Advance Payment of the Premium Tax Credit or Cost-sharing Reductions Due to Income, and Streamlining Exemption Pathways to Coverage. https://www.cms.gov/files/document/guidance-hardship-exemptions.pdf.

39 This guidance applies to consumers in FFE States and in SBE States that choose to have exemptions processed through the FFE, which currently include all SBEs except California, Connecticut, Maryland, and the District of Columbia. We note that there is a proposal elsewhere at III.D.17. of this proposed rule to expand § 155.605(d)(1) to codify the expansion of hardship exemption eligibility to consumers ineligible for APTC or CSRs due to projected household income below 100 percent or above 250 percent FPL in all States.

In light of this guidance and feedback from interested parties concerning this guidance and the potential for increased enrollment in catastrophic coverage starting with PY 2026, we seek comment on the impact of this policy on the HHS-operated risk adjustment program. Currently, risk adjustment transfers under the State payment transfer formula are calculated separately for individual catastrophic plans and individual non-catastrophic plans. 40 41 By adding this additional hardship exemption that allows individuals ineligible for APTC or CSRs due to projected household income to enroll in a catastrophic plan, a broader population will be permitted to enroll in catastrophic plans starting with PY 2026, which has the potential to impact the individual catastrophic and individual non-catastrophic market risk pools.

40 Risk adjustment State transfers are calculated separately for individual catastrophic plans, individual non-catastrophic plans and small group market plans for non-merged market States. In merged market States, while individual catastrophic plans' risk adjustment State transfers are still calculated separately, individual non-catastrophic plans and small group market plans are treated as part of the same market risk pool and risk adjustment transfers under the State payment transfer formula are calculated jointly across all of these plans. See the 2014 Payment Notice (77 FR 73118). See, also, Pope et al. (2014). Risk Transfer Formula for Individual and Small Group Markets Under the Affordable Care Act. Medicare & Medicaid Research Review, 4 (3). Available at: https://www.cms.gov/mmrr/downloads/mmrr2014_004_03_a04.pdf.

41 We note that for the adjustment to the State payment transfer formula made by the high-cost risk pool (HCRP) is made for all issuers of risk adjustment covered plans in the HCRP national individual (including catastrophic and non-catastrophic plans and merged market plans), or small group market, across all States and the District of Columbia where HHS is responsible for operating the program, based on total premiums in the respective market. As such we adjust risk adjustment State transfers for two high-cost risk pools across all States: one for the individual market (including catastrophic, non-catastrophic, and merged market plans), and one for the small group market. This differs from our implementation of the risk adjustment State payment transfer formula for general risk adjustment transfers, which calculates transfers separately for the individual catastrophic, individual non-catastrophic, and merged markets. See the 2018 Payment Notice (81 FR 61471 through 94082).

Thus, although we are not proposing to make changes to the State payment transfer formula in light of this guidance for the 2026 benefit year or 2027 benefit year, HHS seeks comments on the potential impact of retaining the separate calculation of risk adjustment transfers under the State payment transfer formula for individual catastrophic plans and individual non-catastrophic plans or whether the calculation of State transfers for individual catastrophic plans should be combined with the calculation of State transfers for individual non-catastrophic plans in non-merged market States or combined with the calculation of State transfers for individual non-catastrophic and small group market plans in merged market States. We are particularly interested in comments on maintaining the separate calculation of risk adjustment transfers under the State payment transfer formula for individual catastrophic plans and individual non-catastrophic plans (or combining them) for risk adjustment purposes in non-merged market States 42 and the impact on risk adjustment and the resulting impact on the risk pool market composition, premiums, and risk adjustment State transfers under both scenarios, in light of the potential for increased catastrophic plan enrollment as a result of the aforementioned guidance on hardship exemptions.

42 We are similarly interested in comments on maintaining the calculation of risk adjustment State transfers for individual catastrophic plans separate from the calculation of individual non-catastrophic and small group market plans (or combining them) in merged market states.

4. Risk Adjustment Data Validation Requirements When HHS Operates Risk Adjustment (HHS-RADV) (§§ 153.350 and 153.630)

HHS will conduct HHS-RADV under §§ 153.350 and 153.630 in any State where HHS is operating risk adjustment on the State's behalf. 43 The purpose of HHS-RADV is to ensure issuers are providing accurate high-quality information to HHS, which is crucial for the proper functioning of the HHS-operated risk adjustment program. HHS-RADV also ensures that risk adjustment transfers reflect verifiable actuarial risk differences among issuers, rather than risk score calculations that are based on poor quality data, thereby helping to ensure that the HHS-operated risk adjustment program assesses charges to issuers with plans with

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

a. HHS-RADV Error Estimation Modification To Incorporate IVA Sampling Changes

We propose to modify one intermediate step of the HHS-RADV error estimation methodology starting with 2025 benefit year HHS-RADV. In the 2026 Payment Notice (90 FR 4449 through 4452), we finalized excluding enrollees without HCCs from IVA sampling beginning with 2025 benefit year HHS-RADV. We noted that this policy will impact the steps in the error estimation methodology during which HCC-associated error rates are applied to adjust issuers' PLRSs, and stated our intent to seek comments on potential modifications to the intermediate steps in the error estimation methodology to ensure that HCC-associated error rates continue to apply to only the proportion of total PLRSs that are associated with HCC-components of EDGE risk scores. As such, we now propose to add an additional scaling factor, α i , to the error estimation methodology to address this and capture the proportion of an issuer's total risk for the entire population that is associated with enrollees with HCCs. This scaling factor would be added to the final steps of error estimation in which HCC-associated error rates are applied to adjust issuers' PLRSs, and therefore, its addition would not impact the majority of the error estimation methodology, including the calculation of group failure rates, enrollee-level adjustments or HCC-associated error rates.

The formula for the existing scaling factor HccPLRSweight i is the sum of sampled enrollee's stratum-weighted adjusted HCC-associated portion of EDGE risk scores divided by the sum of sampled enrollees' stratum-weighted total EDGE risk score. Because this formula is based on the issuer's sample, it depends on having enrollees with and without HCCs in the audit sample to appropriately estimate the proportion of the issuer's total PLRS that is HCC-related. However, as explained in the 2026 Payment Notice (90 FR 4452), when enrollees without HCCs are excluded from issuers' audit samples beginning with 2025 benefit year HHS-RADV, this formula will only estimate the proportion of enrollees' total EDGE risk scores that is HCC-related for enrollees with HCCs. 44 Therefore, we are proposing to create another scaling factor beginning with benefit year 2025 HHS-RADV that estimates the proportion of the issuer's total PLRS that is associated with enrollees with HCCs using the issuer's EDGE data. Together, these two scaling factors would capture the proportion of the issuer's total PLRS that is HCC-related.

44 In other words, this will factor out the contribution of demographic factors, enrollee RXCs, HCC-RXC interaction factors, CSR adjustment factors, HCC-contingent enrollment duration factors, and interacted HCC counts factors towards the EDGE risk scores of enrollees with HCCs. As previously explained, these factors are not included in the calculation of the HCC-associated error rate during HHS-RADV error estimation. See Section 13.3.1.3.3 Calculate Error Rates of the BY24 HHS-RADV Protocols available at https://regtap.cms.gov/uploads/library/HHS-RADV_2024_Benefit_Year_Protocols_v1_5CR_060625.pdf.

Therefore, we propose to introduce an additional scaling factor, α i , as follows:

EP11FE26.020

Where: meanRiskScore i,h is the average risk score for all enrollees in stratum h in issuer i' s EDGE population strBMM i,h is the total stratum billable member months (BMM) for all enrollees in stratum h in issuer i' s EDGE population Applying the scaling factor α i to the intermediate steps in the error estimation methodology as follows:

TotalER i = HccER i * HccPLRSWeight i * α i The numerator in the formula for the scaling factor sums the product of each stratum's mean risk score and total BMM for strata 1 through 9, thereby creating an aggregate risk score for all enrollees with EDGE HCCs in an issuer's EDGE population. 45 The denominator sums the product of each stratum's mean risk score and total BMM for strata 1 through 10. This includes all enrollees in the issuer's EDGE population including enrollees without HCCs, and thereby creates an aggregate risk score for the issuer. 46 Overall, the scaling factor α i estimates the proportion of the issuer's total PLRS that is associated with enrollees with HCCs and, by combining it with the HCC PLRS weighting factor, we could continue to estimate the proportion of the issuer's total PLRS that is HCC-related after the removal of no HCC enrollees from the IVA sample beginning with 2025 benefit year HHS-RADV. After leveraging EDGE data from the relevant benefit year to calculate the scaling factor and the total error rate , we would continue to adjust issuers' PLRSs using the following formula:

45 An issuer's EDGE population only consists of enrollees in their risk adjustment covered plans. See §§ 153.610(a) and 153.700(a).

46 Although enrollees without HCCs will be excluded from IVA sampling beginning with 2025 benefit year HHS-RADV, enrollees without HCCs on EDGE will be categorized into stratum 10 for these operational purposes.

AdjPLRS i = (1 − TotalER i ) * PLRS i Without adding this additional scaling factor to the error estimation methodology beginning with 2025 benefit year HHS-RADV, the error rate would adjust elements of issuers' total PLRSs that are associated with enrollees' without HCCs and are not intended to be adjusted during error estimation. 47 We believe these adjustments would be inappropriate, and moreover, could result in double adjustments for any identified data errors of non-HCC components, such as demographic and enrollment factors, that are adjusted through separate 48 Therefore, starting with the 2025 benefit year of HHS-RADV, we propose to add an additional scaling factor, α i , to the error estimation methodology to ensure that HCC-associated error rates continue to apply to only the proportion of total PLRSs that are associated with HCC-components of EDGE risk scores.

47 Enrollees without HCCs may contribute to the PLRS through demographic factors, enrollee RXCs, and CSR risk adjustment factors. As previously explained, these enrollees are not included in the calculation of the HCC-associated error rate during HHS-RADV error estimation.

48 While HHS-RADV also includes processes for validating RXCs and demographic and enrollment factors, any errors regarding these factors are treated as materially incorrect EDGE server data submissions. See 83 FR 16970 through 16971. Also see 84 FR 17501 and 85 FR 77002 through 77005.

We seek comments on this proposal.

5. HHS Risk Adjustment User Fee for the 2027 Benefit Year (§ 153.610(f))

We propose an HHS risk adjustment user fee for the 2027 benefit year of $0.20 PMPM. Under § 153.310, if a State is not approved to operate, or chooses to forgo operating, its own risk adjustment program, HHS will operate risk adjustment on its behalf. For the 2027 benefit year, HHS will operate risk adjustment in every State and the District of Columbia. As described in the 2014 Payment Notice (78 FR 15416 through 15417), HHS' operation of the risk adjustment program on behalf of States is funded through a risk adjustment user fee. Section 153.610(f)(2) provides that, where HHS operates a risk adjustment program on behalf of a State, an issuer of a risk adjustment covered plan must remit a user fee to HHS equal to the product of its monthly billable member enrollment in the plan and the PMPM risk adjustment user fee specified in the annual HHS notice of benefit and payment parameters for the applicable benefit year.

OMB Circular No. A-25 established Federal policy regarding user fees, and specifies that a user charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the general public. 49 The HHS-operated risk adjustment program provides special benefits as defined in section 6(a)(1)(B) of OMB Circular No. A-25 to issuers of risk adjustment covered plans because it mitigates the financial instability associate with potential adverse risk selection. 50 The HHS-operated risk adjustment program also contributes to consumer confidence in the health insurance industry by helping to stabilize premiums across the individual, merged, and small group markets.

49 See Circular No. A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf.

50 Id.

In the 2026 Payment Notice (89 FR 26218), we calculated the Federal administrative expenses of operating the HHS risk adjustment program for the 2026 benefit year to result in a risk adjustment user fee rate of $0.20 PMPM based on our estimated costs for HHS risk adjustment operations and estimated BMM for individuals enrolled in risk adjustment covered plans. For the 2027 benefit year, HHS proposes to use the same methodology to estimate our administrative expenses to operate the program. These costs cover development of the models and methodology, collections, payments, account management, data collection, data validation, program integrity and audit functions, operational analytics, interested parties training, operational support, and administrative and personnel costs dedicated to HHS-operated risk adjustment program activities. To calculate the risk adjustment user fee, we divided HHS' projected total costs for administering the program on behalf of States by the expected number of BMM in risk adjustment covered plans in States where the HHS-operated risk adjustment program will apply in the 2027 benefit year.

We estimate that the total cost for HHS to operate the risk adjustment program on behalf of all States and the District of Columbia for the 2027 benefit year will be slightly more than $65 million, which is similar to the 2026 benefit year budget. 51

51 We estimated that the total costs for HHS to operate the risk adjustment program on behalf of States for the 2026 calendar year would be approximately $65 million. See, 2026 Payment Notice (90 FR 4424 at 4448).

Similar to prior benefit years, we projected risk adjustment enrollment scenarios for the 2027 benefit year. Based on our estimates, for the 2027 benefit year, we do not expect enrollment changes to significantly impact collections under this user fee rate.

Our intention is to reconsider the enrollment estimates for the final rule. If these newer enrollment estimates are too low in comparison to our proposed user fee estimates, the final user fee may be higher. If these enrollment estimates are higher in comparison to our proposed user fee estimates, the final user fee may be lower. We also note that if any events result in a deviation from our expectations of current conditions that would significantly change our estimates around costs, enrollment projections, or the finalization of proposed risk adjustment policies between this proposed rule and the final rule, we may modify the HHS risk adjustment user fee rate proposed in this rule in the final rule. Because we project a similar budget to operate the HHS-operated risk adjustment program for the 2027 benefit year as for the 2026 benefit year, we propose an HHS risk adjustment user fee of $0.20 PMPM for the 2027 benefit year.

We seek comment on the proposed HHS risk adjustment user fee for the 2027 benefit year.

C. Part 154—Health Insurance Issuer Rate Increases: Disclosure and Review Requirements

1. Submission of Rate Filing Justification (§ 154.215)

a. CSR Reimbursement

Section 1402 of the Affordable Care Act requires issuers to provide cost-sharing reductions (CSRs) to increase the actuarial value for consumers with incomes between 100 and 250 percent of Federal poverty level (FPL) who enroll in silver level QHPs in the individual market, as well as eligible AI/AN consumers who enroll in QHPs at any metal level. Section 1402 of the Affordable Care Act also states that HHS will reimburse issuers for the cost of providing CSRs to eligible enrollees but does not include a valid appropriation to make such payments. 52

52 Until October 2017, HHS relied on the permanent appropriation at 31 U.S.C. 1324 as the source of funds for Federal CSR reimbursement to issuers.

On October 11, 2017, the Attorney General of the United States provided a legal opinion stating that HHS and the Department of the Treasury could no longer use the permanent appropriation at 31 U.S.C. 1324 to fund CSR reimbursements to issuers. 53 In accordance with that opinion, HHS directed CMS to discontinue CSR reimbursements to issuers until Congress provides an appropriation. In response to the termination of CSR reimbursement, State Departments of Insurance either allowed or instructed issuers to increase (or “load”) premiums either primarily, or only, on silver-level QHPs to offset the issuers' cost of providing CSRs. 54

53 See Verma, Seema. (2017, October 12). Letter to Acting Secretary Eric Hagan Regarding Payments to Issuers for Cost-Sharing Reductions (CSRs), https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf, relying on US. House of Reps. v. Burwell, 185 F. Supp. 3d 165 (D.D.C. 2016). Available at https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.

54 For purposes of this preamble, we use the term “CSR loading” to refer to any rating practices to increase premiums to offset amounts of unreimbursed CSRs whether that is “silver loading” or “broad loading.”

There are several ways that issuers have determined the CSR load factor.

b. Rate Filing Justifications Regarding CSRs

Section 2794 of the PHS Act directs the Secretary, in conjunction with the States, to establish a process for the annual review of premium increases for health coverage prior to the implementation of the increase. HHS has historically interpreted this requirement with respect to premiums as referring to the underlying rates that are used to develop premiums. Section 154.215 requires issuers to submit rate filing justifications to CMS and the applicable State. 55

55 See 76 FR 29964, 29969 (May 23, 2011).

Pursuant to § 154.215(b)(1) through (3), the rate filing justification has three parts. The Unified Rate Review Template (URRT) (Part I of the rate filing justification) is required for all single risk pool products, including new products and products with plans that experience rate increases, rate decreases, or no rate change. It is intended to capture information needed to monitor premium increases of health insurance coverage offered through and outside the Exchanges and ensure compliance with the single risk pool methodology, including allowable market level index rate adjustments to reflect risk adjustment payments and charges, and other Federal rating requirements. 56

56 See Unified Rate Review Instructions at: https://www.cms.gov/files/document/unified-rate-review-instructions.pdf.

Part II of the rate filing justification is the Written Description Justifying the Rate Increase (Consumer Justification Narrative). Part II is required only for rate increases in single risk pool products that are subject to review (that is, a plan within the product that has a rate increase of 15 percent or greater). Part II is a consumer-friendly narrative that provides the justification for the rate increase, describes the relevant Part I data, the assumptions used to develop the rate increase, and an explanation of the most significant factors causing the rate increase. 57

57 Id.

An actuarial memorandum (Part III of the rate filing justification) is required for any rate increase in a single risk pool plan. It is also required for any rate filing containing QHPs or whenever a State requires it to be submitted. Further, an actuarial memorandum is required for all plans in States that do not have an Effective Rate Review Program and for which CMS is responsible for reviewing the rate filing. 58 The Part III actuarial memorandum includes the actuarial reasoning and assumptions, justifications, and methodologies that support the entries in the URRT. 59 The actuarial memorandum must also capture appropriate actuarial certifications related to the development of the index rate in accordance with Federal regulations, and the development of plan specific premium rates using allowable modifiers to the index rate. 60 The issuer is required to provide an explanation of how these modifiers are developed and applied to the market-wide adjusted index rate to derive the plan-adjusted index rate.

58 CMS reviews rate filing justifications from issuers in States without an Effective Rate Review Program—currently Oklahoma, Tennessee, and Wyoming.

59 See Unified Rate Review Instructions at: https://www.cms.gov/files/document/unified-rate-review-instructions.pdf.

60 Id.

In a Bulletin issued on May 2, 2025 (PY26 Rate Filing Guidance), 61 we instructed issuers that make permitted plan-level adjustments to account for CSR amounts provided to eligible enrollees for which the issuer does not otherwise receive reimbursement 62 (that is, that load premiums) to specify the amount of unreimbursed CSRs in the actuarial memorandum of their PY 2026 rate filing. Issuers report plan-level adjustments when they submit a rate filing justification to the State or CMS for review. States or CMS review those rate filing justifications to ensure compliance with the Federal rating rules, including 45 CFR 156.80. 63

61 CMS. (2025, May 2). Plan Year 2026 Individual Market Rate Filing Instructions. https://www.cms.gov/files/document/py-26-individual-market-rate-filing-instructions.pdf.

62 See 45 CFR 156.80(d)(2)(i).

63 If the rate filing contains a proposed increase that meets or exceeds the threshold at § 154.200(a)(1) (currently 15 percent), then the State or CMS also reviews the proposed increase to determine if it is an unreasonable rate increase. Also see 45 CFR 154.205(a). When CMS reviews a rate increase subject to review under § 154.210(a), CMS will determine that the rate increase is an unreasonable rate increase if the increase is an excessive rate increase, an unjustified rate increase, or an unfairly discriminatory rate increase.

Specifically, through the PY 26 Rate Filing Guidance, and pursuant to our authority under § 154.215(a)(2) and (3), we directed issuers that loaded for unreimbursed CSRs to: (1) specify the actual CSRs the issuer paid on behalf of enrollees for PY 2024 (in dollars); (2) specify the CSR load factor for PY 2026 and explain how it was determined; and (3) explain how the additional revenue to be collected from the applied CSR load compares to the expected amount of CSRs that will be provided to enrollees in PY 2026.

Following issuance of the PY26 Rate Filing Guidance, CMS issued additional guidance entitled, “Frequently Asked Questions on Plan Year 2026 Individual Market Rate Filing Instructions,” on May 27, 2025. 64 We noted that if an issuer was not able to calculate the precise amount of actual CSRs paid for enrollees for PY 2024 by the applicable rate filing deadline, CMS would accept an estimate developed using a reasonable methodology that enables it to estimate the value of CSRs provided for PY 2024 as accurately as possible, detailed in the actuarial memorandum. 65

64 CMS. (2025, May 7). Frequently Asked Questions on Plan Year 2026 Individual Market Rate Filing Instructions. https://regtap.cms.gov/reg_librarye.php?i=5894.

65 Under § 156.80(d)(2)(i), an issuer may vary premium rates for a particular plan from its market-wide index rate for a relevant State market based on the actuarial value and cost-sharing design of the plan, including accounting for, if permitted by the applicable State authority, CSR amounts provided to eligible enrollees under § 156.410, provided the issuer does not otherwise receive reimbursement for such amounts. Therefore, if there is a valid appropriation such that HHS and the Department of the Treasury resume making advance payments of CSRs, issuers may not apply any CSR load to QHPs receiving advance CSR payments. In addition, in the event that advance payments of CSRs are made to issuers to reimburse them for CSRs provided, HHS will calculate these monthly advance payments using the formula finalized in the 2015 Payment Notice and using the standard methodology as set forth in 45 CFR 156.430(c)(2) for

Starting with rate filings for the 2027 plan year, we are proposing to continue to require issuers that make a plan-level adjustment to account for unreimbursed CSRs to submit certain information specified in the PY26 Rate Filing Guidance in their URRTs and actuarial memoranda for each plan year in which CSRs are not funded. Specifically, in the URRT for the upcoming plan year, issuers would report CSR amounts paid on behalf of enrollees and the additional revenue collected from the previously applied CSR load using the most recent annual data that is available prior to the applicable filing year, using the standard methodology set forth in § 156.430(c)(2). In most cases, the most recent annual CSR data would reflect the plan year that is two years before the upcoming plan year (for example, CSRs paid for eligible enrollees and the additional revenue collected from the CSR load applied in PY 2025 would be reported during the 2026 filing year on rate filings for PY 2027).

As described by the Secretary in applicable guidance, 66 under the CMS standard methodology, issuers re-adjudicate the actual complete set of claims incurred by an enrollee in the cost-sharing reduction plan variation as if they had been enrolled in the associated standard plan to determine the difference the enrollee would have paid in deductibles, copayments, coinsurance, and other out-of-pocket expenses for EHBs (other than premiums and balance billing). The difference equals the amount of CSRs provided by the issuer. 67 As stated in the 2016 Payment Notice, we believe that the standard methodology is the most accurate method for calculating the actual value of CSRs that the issuer has provided on behalf of enrollees in a plan year. 68 Additionally, we believe that most issuers are familiar with that methodology, which was required to calculate CSRs paid on behalf of enrollees for the 2017 plan year, the most recent year in which CMS provided advance CSR payments to issuers.

66 See Manual for Reconciliation of the Cost-Sharing Reduction Component of Advance Payments for Benefit Year 2017 (March 29, 2018) at https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/final-csr-reconciliation-guidance-by2017.pdf.

67 CMS. (2018, March 29). Manual for Reconciliation of the Cost-Sharing Reduction Component of Advance Payments for Benefit Year 2017. https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/final-csr-reconciliation-guidance-by2017.pdf.

68 HHS Notice of Benefit and Payment Parameters for 2016 Final Rule, 80 FR 10750, 10842 (February 27, 2015), available at: https://www.govinfo.gov/content/pkg/FR-2015-02-27/pdf/2015-03751.pdf.

We note that although CMS is proposing that issuers use the standard methodology to calculate CSR amounts paid on behalf of enrollees and to submit an aggregate amount of CSRs provided at the plan level on the URRT, this proposed data submission would not require issuers to use the CSR reconciliation process implemented by CMS, as described in § 156.430(c)(2). We believe this proposal would result in lower burden on issuers as compared to the burden that would be associated with submitting policy-level CSR data to CMS through the CSR reconciliation process. Submission of policy-level CSR data would require direct electronic submissions of data that must conform with our business rules, data element validations, and required file formats. When HHS previously collected such data, it resulted in issuers attempting submissions multiple times before the submission could be accepted by the system. The proposed process would leverage the existing URRT submission process and be much less burdensome.

We also propose that issuers would include in the URRT the applicable CSR load factor for each plan that would be applied to the market adjusted index rate to calculate the calibrated plan adjusted index rate for the upcoming plan year. We are proposing to collect the CSR load factor, if any, to fulfill our responsibility to ensure compliance with § 156.80(d), which requires all permitted plan-level adjustments to be “actuarially justified.” In addition, we propose that issuers would include in the actuarial memorandum an explanation of the methodology used to determine the load factor. We propose that issuers would also include in the URRT the additional revenue expected to be collected from the applied CSR load factor and the expected amount of CSRs that will be paid for enrollees for the upcoming plan year. We also propose that issuers would include in the actuarial memorandum an explanation comparing these amounts. This explanation would allow the State or CMS, as applicable, to determine whether the load factor is actuarially justified and not excessive in relation to the amount expected to be paid for unreimbursed CSRs.

In the 2026 Payment Notice, we stated our expectation that CSR loading practices, to the extent permitted by State regulators, are intended to account for unpaid CSRs. We also noted that, while there is no requirement that a State permit CSR loading, in States that have an Effective Rate Review Program, the State has the responsibility to determine whether an issuer's adjustments to the market-wide index rate for plan-specific factors (including accounting for CSR amounts) are actuarially justified. 69 We further propose that an actuarially justified CSR load factor is one that is calibrated on actual experience and that only accounts for the projected revenue loss of unreimbursed CSR payments without materially exceeding that amount. As such, we believe that this proposal to collect through the URRT and actuarial memoranda information on paid CSRs, additional revenue collected from the previously applied CSR load, CSRs expected to be paid, the CSR load factor and expected resultant additional revenue for the upcoming plan year, the underlying methodology for determining the CSR load factor that would be applied for the upcoming plan year, and an explanation of how the expected additional revenue compares to the amount of CSRs expected to be paid, will benefit State regulators (and CMS in States where CMS functions as the primary reviewer of rates) by providing regulators the data necessary to determine whether CSR load amounts are actuarially justified plan-level adjustments to the index rate under § 156.80.

69 HHS Notice of Benefit and Payment Parameters for 2026 Final Rule, 90 FR 4424, 4489 (January 15, 2025) available at: https://www.govinfo.gov/content/pkg/FR-2025-01-15/pdf/2025-00640.pdf.

While we recognize the additional burden on issuers to provide this information, given the significant impact of CSR loading on Federal expenditures through additional premium tax credit (PTC) spending, we believe collection of this information is an important program integrity measure that will help ensure that CSR loads are appropriate to recover lost CSR payments and are not inappropriately inflating Federal expenditures or undermining Federal rating rules.

Therefore, starting with rate filings for the 2027 plan year, we are proposing to collect as part of the rate filing justification information on adjustments to the index rate to account for unreimbursed CSRs. Specifically, we propose to collect data regarding the amount of CSRs previously paid on behalf of eligible enrollees using the most recent annual data that is available prior to the applicable filing year (generally data from the plan year that is two years before the upcoming plan year), the amount previously generated by any load factors from the most recent annual data available, the amount of CSRs expected to be paid on behalf of enrollees in the upcoming plan year, the 70 We are not proposing changes to any regulation text as the collection of these data is already captured under § 154.215(d)(1), which states that historical and projected claims experience must be included in the URRT. Additionally, § 156.80(d)(2)(i) states that plan-level adjustments to account for unreimbursed CSR payments provided to eligible enrollees are permissible only if actuarially justified and permitted by the applicable state authority. We request comment on all aspects of our proposal to require issuers that intend to load premium rates to account for unpaid CSRs for the upcoming plan year to submit this information in their URRTs and the actuarial memoranda for each plan year in which CSRs are not funded, beginning with PY 2027 rate filings.

70 The information collection described in this section will be submitted as a revision to the currently approved PRA package CMS-10379 (OMB Control Number 0938-1141) for OMB review under the Paperwork Reduction Act.

D. Part 155—Exchange Establishment Standards and Other Related Standards

1. Standardized Plan Options (§§ 155.20, 155.205(b)(1), 155.220(c)(3)(i)(H), 156.201, and 156.265(b)(3)(iv))

We propose to exercise our authority under sections 1311(c)(1) and 1321(a)(1)(B) of the Affordable Care Act to discontinue the full suite of standardized plan option policies effective beginning in PY 2027. As discussed in greater detail in the preamble section of this proposed rule addressing § 156.201, we propose to remove the following from our regulations: the definition of “standardized option” at § 155.20; all requirements pertaining to standardized plan options at § 156.201 (the requirements for FFE and SBE-FP QHP issuers in the individual market to offer these plans at paragraphs (a) and (b) as well as the requirement for these plans to meaningfully differ from one another at paragraph (c)); the differential display of standardized plan options on HealthCare.gov at § 155.205(b)(1); and the corresponding standardized plan option differential display requirements for approved web-broker and QHP issuer enrollment partners using a DE pathway to facilitate consumer enrollment through an FFE or SBE-FP at §§ 155.220(c)(3)(i)(H) and 156.265(b)(3)(iv). We also propose to redesignate paragraphs (c)(3)(i)(I) through (M) of § 155.220 as paragraphs (c)(3)(i)(H) through (L), respectively. Finally, we propose to cease the annual design and publication of these standardized plan options in the applicable Payment Notice rulemaking for each plan year.

2. Approval of a State Exchange (§ 155.105)

We propose to remove § 155.105(b)(4) to rescind a requirement made in the 2025 Payment Notice (89 FR 26259 through 26261), that a State seeking to operate a State Exchange must first operate, for at least 1 plan year, a State-based Exchange on the Federal platform (SBE-FP). The original amendment was intended to give States sufficient time to create, staff, and structure a State Exchange. However, we recognize that requiring States to first operate as an SBE-FP for at least 1 plan year could potentially create unnecessary barriers for States that are well-prepared to implement a State Exchange more immediately.

Sections 1311(b) and 1321(b) of the Affordable Care Act allow States to elect to operate their own health insurance Exchanges to provide individuals and employers with health insurance coverage. Every State that has implemented a State Exchange after 2014—the year the initial 13 State Exchanges began operation—first operated an SBE-FP for at least 1 plan year. This history shows how first operating an SBE-FP has been the preferred approach. However, we recognize that States may have existing infrastructure, relationships, and expertise that could support a State's successful operation of a State Exchange, without first operating an SBE-FP. For example, FFE States are permitted to elect to perform plan management functions similar to the plan management functionality required of all SBE-FPs. 71 The infrastructure and the associated stakeholder relationships and State expertise to support such functionality could be leveraged from a direct FFE to State Exchange implementation. Additionally, the technology infrastructure available today to States for implementation of State Exchanges has become more compatible, such that the technology used to support one State Exchange implementation could be leveraged by another State Exchange. A State must demonstrate its ability to operationalize State Exchange functional requirements through a well-established and robust review process with HHS. Whether a State first operates an SBE-FP does not change our review process for determining whether a State is ultimately prepared to implement a State Exchange. For the reasons provided above, we propose to remove § 155.105(b)(4), such that a State seeking to operate a State Exchange is not required to first operate an SBE-FP for at least 1 plan year, including its first open enrollment period.

71 A state may choose to operate plan management functions within the FFE. CMS. (2012, May). Plan Management Partnership in the Federally Facilitated Exchange (FFE). Available at: https://www.cms.gov/CCIIO/Resources/Presentations/Downloads/hie-plan-management-partnership-in-the-ffe.pdf .

We seek comment on this proposal.

3. Approval of a State Exchange (§ 155.106)

In an effort to support the overall goals of Executive Order 14192, “Unleashing Prosperity through Deregulation,” 72 we propose to amend § 155.106(a)(2) to rescind a requirement we made in the 2025 Payment Notice (89 FR 26261 through 26263) that, as part of a State's activities for its establishment of a State Exchange, the State must provide, upon request, supporting documentation demonstrating progress toward meeting or implementing State Exchange Blueprint requirements. Section 155.106(a)(2) requires that States electing to operate a State Exchange submit a State Exchange Blueprint Application to HHS for approval. The current State Exchange Blueprint application provides that we may require live demonstrations of Exchange functionality on the State Exchange's platform, as well as supporting documentation, as evidence of the State's progress toward meeting State Exchange Blueprint application requirements. For clarity, we had

72 E.O. 14192, January 31, 2025 (90 FR 9065), available at https://www.federalregister.gov/documents/2025/02/06/2025-02345/unleashing-prosperity-through-deregulation.

The State Exchange Blueprint continues to serve as a vehicle for a State to document its progress toward implementing its intended Exchange operational model. HHS approves a State's Exchange Blueprint Application and subsequently provides approval for a State to operate a State Exchange, based upon a State meeting State Exchange implementation requirements noted in the Blueprint Application. The current Blueprint Application requires a State to sign and agree that HHS may require supporting documentation from a State as evidence of its progress toward meeting State Exchange Blueprint Application requirements, which is part of the overall process for providing a State with approval to operate a State Exchange. Notably, in our experience, States recognize the need for HHS to request supplemental documentation in order for HHS to assess a State's readiness to operate a State Exchange, which supports a State's successful State Exchange operation. States have provided such supplemental documentation upon HHS request both before and after this requirement was originally codified. Given this preexisting process, we do not believe deregulation in this instance is harmful, nor would it lead to burden on States. Therefore, we propose to rescind the requirement that a State provide, upon request, supporting documentation demonstrating progress toward meeting or implementing State Exchange Blueprint requirements from § 155.106(a)(2).

We seek comment on this proposal.

4. Amending Requirements for State Exchanges To Operate a Centralized Eligibility and Enrollment Infrastructure (§§ 155.205(b) and 155.221(k))

a. Amending Requirements for State Exchanges To Operate a Centralized Eligibility and Enrollment Platform on the State Exchange's Website (§ 155.205(b))

We are proposing to revise § 155.205(b)(4) and (5) to remove the requirement that all State Exchanges operate a consumer-facing centralized eligibility and enrollment platform on the State Exchange's website such that a State Exchange could choose to rely entirely on web-brokers (a type of non-Exchange entity) for implementing and operating consumer-facing websites that facilitate the eligibility and enrollment process in a State Exchange, pursuant to the proposal in section III.D.4.b. of this preamble. These consumer-facing websites operated by web-brokers would facilitate the online submission of eligibility applications by individuals seeking coverage through a State Exchange and facilitate the selection and enrollment into QHPs on a State Exchange for qualified individuals. These consumer-facing websites operated by web-brokers would also interface with the State Exchange website, which the State would still be required to operate broadly under § 155.205(b), in such a manner as to transmit information from the non-Exchange website to the State Exchange website. This would facilitate the State Exchange meeting the requirements at §§ 155.205(b)(4) and (5) which requires an Exchange to maintain a website that allows an individual to submit a single streamlined eligibility application to the State Exchange and enroll in coverage through the State Exchange. Operationally, such consumer-facing websites operated by web-brokers would be required to interface with the information technology platform that the State Exchange would still need to operate to appropriately process applicant eligibility determinations and process enrollment transactions with QHP issuers (that is, the State Exchange's `back-end' eligibility and enrollment system). Using State Exchange-approved technical specifications and/or standards for those interfaces (for example, web services) would allow the exchange of data between the consumer-facing websites operated by web-brokers and the State Exchange in a manner that is seamless to consumers. Such an interface would allow for the transmission of consumer eligibility application information and/or QHP selection and enrollment information necessary for the State Exchange to meet key Exchange functional requirements. These requirements include collecting information from applicants through an HHS-approved single, streamlined eligibility application for insurance affordability programs per §§ 155.310 and 155.405; performing eligibility verifications required at §§ 155.315 and 155.320; performing assessments or determinations of Medicaid/CHIP eligibility required at § 155.302; and performing determinations of eligibility for QHP enrollment and APTC/CSRs at §§ 155.305 and 155.310. This also includes key enrollment functions such as collecting and maintaining records of QHP enrollment for all consumers of the State Exchange as required under § 155.400 and transmitting such enrollment information to CMS and IRS. Such consumer-facing websites operated by web-brokers would also need to allow for consumers to select and enroll into a QHP (that is, through direct enrollment) in order to submit QHP selection and enrollment to the State Exchange. This model, referred to as the State Based Exchange Enhanced Direct Enrollment (SBE-EDE) model, is proposed and discussed in further detail in section III.D.4.b of this proposed rule. State Exchanges that opt to take this approach would be required to establish standards and a process for selecting the web-brokers who they may interface with in this manner, similar to the standards and criteria that we have established for direct enrollment entities at §§ 155.221(j) and 155.220(n), including a requirement that a non-Exchange web-broker entity satisfy all requirements under § 155.110(a).

When HHS finalized the requirement at § 155.205(b) that Exchanges operate a centralized eligibility and enrollment platform on the Exchange's website in the 2025 Payment Notice (89 FR 26271), HHS' intent was to tie together regulatory requirements throughout part 155 regarding the integrated nature of online, real-time automated eligibility functions that Exchanges were intended to perform. This included the intent to clearly affirm the close integration that exists and is necessary between Exchange-operated websites, the online consumer-facing single streamlined eligibility application, and the back-end eligibility system that performs automated eligibility verifications and eligibility determination functions that return real-time, online results to the consumer.

While we continue to affirm that State Exchanges are responsible for making all eligibility determinations for QHP coverage and related insurance affordability programs through a centralized eligibility processing system and enrollment records system, we have determined that requiring State Exchanges to operate a consumer-facing, centralized eligibility and enrollment consumer website that interfaces with the State Exchange's back-end eligibility processing and enrollment records system may prohibitively restrict Exchange flexibility and innovation. While all State Exchanges that do not use the Federal platform currently operate their own eligibility and enrollment consumer interface on the

We note that section 1311(c)(5) and (d)(4)(C) of Affordable Care Act, do not require Exchanges to operate a centralized consumer-facing eligibility and enrollment website that supports both eligibility determinations for, and enrollments in, QHPs. 73 Rather, section 1311(d)(4)(C) of the Affordable Care Act provides that an Exchange must maintain an internet website through which enrollees and prospective enrollees of QHPs may obtain standardized comparative information on QHPs available in the State. Exchanges must also undertake certain minimum functions to facilitate the purchase of QHPs under section 1311(b)(1)(A) of Affordable Care Act and make available QHPs to qualified individuals and employers under section 1311(d)(2)(A) of Affordable Care Act. These minimum functions facilitate the purchase of QHPs by helping to make the purchase of QHPs easier and also by administering elements of the structure necessary to make QHPs available. This approach of relying on private sector EDE entities aligns with the general Affordable Care Act framework that relies on and benefits from the government working within the existing health insurance coverage infrastructure rather than taking a purely governmental or public approach to advancing coverage for the individually insured population. The Affordable Care Act does not establish new government-provided health plans but instead creates Exchanges to facilitate the purchase of government-subsidized QHPs through the individual health insurance market. Exchanges support specific statutory functions that make QHPs available to purchase. These functions include certifying that QHPs conform to certain Federal standards in addition to State and Federal standards that govern the individual health insurance market. Exchanges must also provide certain tools to help consumers shop for QHPs, as well as support eligibility determinations and enrollment in other public health care programs such as Medicaid Affordable Care Act and CHIP. Importantly, these additional standards do not dictate any specific changes to the existing enrollment pathways on the individual market.

73 Section 1311(c)(5) of the Affordable Care Act instead requires the Secretary to make available to all Exchanges a model Exchange website template developed by the Secretary. Section 1311(d)(4)(C) of the Affordable Care Act requires the Exchanges to maintain an internet website through which enrollees and prospective enrollees of qualified health plans may obtain standardized comparative information on such plans.

In the context of operating an internet website, we interpret the statutory language at section 1311(c)(5) and (d)(4)(C) of Affordable Care Act to require that Exchanges minimally operate an informational website that provides consumers with the ability to view comparative information on QHP options, but that the Exchange may direct consumers to other entities or resources for purposes of facilitating the submission of applications for eligibility and enrolling enrollment in QHPs, with APTC and CSRs, if otherwise eligible. Accordingly, a State Exchange that elects the new SBE-EDE option would continue to be responsible for determining eligibility for, and granting exemption certifications under, section 1311(d)(4)(H) of Affordable Care Act, as applicable; making available an electronic calculator consistent with section 1311(d)(4)(G) of Affordable Care Act; establishing a Navigator program as required under section 1311(d)(4)(K) of Affordable Care Act; and providing for the operation of a toll-free telephone hotline under section 1311(d)(4)(B) of Affordable Care Act. As mentioned earlier and consistent with section 1311(d)(4)(F) of the Affordable Care Act, a State Exchange that elects to pursue this new SBE-EDE option would continue to be responsible for conducting assessments or determinations of eligibility for Medicaid and CHIP. They would use the information provided by consumers on the consumer-facing website operated by a web-broker State Exchange's approved single, streamlined eligibility application that is made available on the consumer websites operated by the web-brokers selected by the State Exchange as part of the SBE-EDE option, and for referring individuals who are assessed or determined eligible for Medicaid or CHIP to the appropriate State Medicaid agency for enrollment in those programs.

The State Exchanges that are currently operating have had to engage with private entities in a manner that would similarly translate to what a State Exchange would be doing under the SBE-EDE model, in terms of relying on the services of private entities to develop and operate a consumer-facing website (that is, online eligibility and enrollment portal) that facilitates consumers applying for and enrolling in QHPs through the State Exchange. Most State Exchanges currently in operation have competitively-procured services from a private entity to develop and operate an online eligibility and enrollment portal (including through which an applicant can submit a single, streamlined application for insurance subsidy programs) and consumer-facing QHP enrollment portal on their respective State Exchange website. These online, consumer-facing eligibility and enrollment portals on State Exchange websites facilitate the online submission of consumer eligibility applications and QHP selection and enrollments, and through web interfaces that are seamless to consumers, transmit that information to the State Exchange's back-end eligibility and enrollment processing information system. We believe that in the absence of a centralized consumer facing website for eligibility and enrollment operating on a State Exchange's website under the proposed SBE-EDE approach, web-brokers may provide that service to a State Exchange in a manner that is similar to that which currently exists between State Exchanges and the private entities they have contracted with to operate their centralized consumer-facing online eligibility and enrollment portal on the State Exchange's website. In both approaches, whether a web-broker provides the online eligibility and enrollment portal to consumers outside of the State Exchange's website, as would be the case under this proposal, or a private entity has developed and operates the consumer-facing online eligibility and enrollment portal on the State Exchange's website in a centralized fashion, the State Exchange maintains responsibility for meeting all other Federal requirements for their online consumer assistance functions. As such,

In the 2025 Payment Notice (89 FR 26271), we amended § 155.302(a) to codify the Exchange's responsibility for conducting eligibility determinations and maintaining records of all QHP enrollments on the Exchange. State Exchanges would still maintain this responsibly if it elects to pursue the new SBE-EDE option and exclusively utilize web-brokers for operating consumer websites that facilitate the eligibility and enrollment process in a State Exchange. Additionally, enrollment through such a consumer website would still be considered enrolling in a QHP through the State Exchange per § 155.220(c)(3) and proposed § 155.221(k)(2).

We note that this proposed amendment would not affect other regulatory requirements throughout 45 CFR part 155 that govern State Exchange eligibility and enrollment functions. For instance, per § 155.405, State Exchanges would still be required to obtain HHS approval for the eligibility application used on the consumer websites. HHS' review of the State Exchange's eligibility application would follow the currently established processes, including requiring that the State Exchange demonstrate appropriate functionality to make accurate determination. As such, State Exchange that does not rely on the Federal eligibility and enrollment platform can continue to meet these obligations without operating a singular, centralized consumer-facing eligibility and enrollment website.

We recognize that allowing State Exchanges to take this approach would create different consumer experiences in applying for and enrolling in coverage through State Exchanges as compared to an approach where a State Exchange implements and operates a centralized eligibility and enrollment infrastructure. We seek comment on how State Exchanges that implement such an approach can create comparable consumer experience, in addition to comments on HHS oversight and the approval requirements proposed in section III.D.4.b. of this proposed rule. We seek comment on this proposal.

b. SBE-Enhanced Direct Enrollment Option (§ 155.221(k))

To build on the success of the EDE pathways and enhance the consumer enrollment experience, we are proposing to offer additional flexibility to State Exchanges to leverage the benefits of EDE through a private sector-supported consumer engagement and enrollment strategy that is tailored to the needs of local markets. Accordingly, we propose to add a new paragraph (k) to § 155.221 to establ

This text is long and has been trimmed here. Open the source document for the complete record.