Patient Protection and Affordable Care Act, HHS Notice of Benefit

Notice: This HHS-approved document has been submitted to the Office

of the Federal Register (OFR) for publication and has not yet been placed

on public display or published in the Federal Register. The document

may vary slightly from the published document if minor editorial changes

have been made during the OFR review process. The document published

in the Federal Register is the official HHS-approved document.

[Billing Code: 4120-01-P]

DEPARTMENT OF THE TREASURY

31 CFR Part 33

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 435 and 600

Office of the Secretary

45 CFR Parts 153, 155, and 156

[CMS-9895-F]

RIN 0938-AV22

Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment

Parameters for 2025; Updating Section 1332 Waiver Public Notice Procedures; Medicaid;

Consumer Operated and Oriented Plan (CO-OP) Program; and Basic Health Program

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of Health and

Human Services (HHS); Department of the Treasury.

ACTION: Final rule.

SUMMARY: This final rule includes payment parameters and provisions related to the HHS-

operated risk adjustment program, as well as 2025 user fee rates for issuers offering qualified

health plans (QHPs) through Federally-facilitated Exchanges (FFEs) and State-based Exchanges

on the Federal platform (SBE-FPs). This final rule also includes requirements related to the auto

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re-enrollment hierarchy; essential health benefits; failure to file Federal income taxes to reconcile

advance payments of the premium tax credit (APTC); non-standardized plan option limits in the

FFEs and SBE-FPs and a related exceptions process; standardized plan options in the FFEs and

SBE-FPs; special enrollment periods (SEPs); direct enrollment (DE) entities supporting

Exchange applications and enrollments; the Insurance Affordability Program enrollment

eligibility verification process; requirements for agents, brokers, web-brokers, and DE entities

assisting Exchange consumers; network adequacy; public notice procedures for section 1332

waivers; prescription drug benefits; updates to the Consumer Operated and Oriented Plan (CO-

OP) Program; and State flexibility on the effective date of coverage in the Basic Health Program

(BHP).

DATES: These regulations are effective on [insert 60 days after the date of display in the

Federal Register].

FOR FURTHER INFORMATION CONTACT:

Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace Bristol, (410) 786-

8437, for general information.

Debbie Noymer, (301) 448-3755, and John Barfield, (301) 492-4433 for matters related

to HHS-operated risk adjustment.

John Barfield, (301) 492-4433, or 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.

Marisa Beatley, (301) 492-4307, for matters related to the verification process related to

eligibility for insurance affordability programs and current sources of income.

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

Exchanges.

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.

Claire Curtin, (301) 492-4400, for matters related to the monthly 150 percent

Federal poverty level special enrollment period.

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

Nikolas Berkobien, (667) 290-9903, for matters related to standardized plan

options and non-standardized plan option limits.

LeAnn Brodhead, (667) 290-8805, for matters related to the essential health

benefits prescription drug benefit.

Carolyn Sabini, (667) 290-9750, for matters related to the essential health

benefits benchmark plan policy.

Ken Buerger, (410) 786-1190, for matters related to mandates in addition to the

essential health benefits.

Emily Martin, (301) 492-4423, Deborah Hunter, (443) 386-3651, or Emma Vasilak,

(774) 551-6157, for matters related to establishment of Exchange network adequacy standards

and ECPs.

Shilpa Gogna, (301) 492-4257, or Jenny Chen, (301) 492-5156, for matters related to

approval of a State Exchange and State Exchange Blueprint requirements.

Joe Fitzpatrick, (410) 786-2761, for matters related to establishment of additional

minimum standards for Exchange call center operations.

John Allison, (828) 513-1323, for matters related to Exchange operation of a centralized

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eligibility and enrollment platform.

Courtney De La Mater, (301) 492-4400, for matters related to the Failure to Reconcile

process.

Robert Yates, (301) 492-5151, for matters related to State Exchange annual open

enrollment periods.

Daniel Rosinsky-Larsson, (301) 492-4400, for matters related to SEP effective dates of

coverage.

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

section 1332 waivers.

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

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

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

provision.

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

Arshdeep Dhanoa, (301) 492-4400, for matters related to incarceration verification for

QHP eligibility and periodic data matching for dual and deceased enrollees.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary

II. Background

A. Legislative and Regulatory Overview

B. Summary of Major Provisions

III. Summary of the Provisions of the Proposed Regulations

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

B. 42 CFR Parts 435 and 600 – Medicaid Eligibility for the States, District of Columbia,

the Northern Mariana Islands and American Samoa, and Administrative Practice and Procedure,

Health Care, Health insurance, Intergovernmental Relations, Penalties, Reporting and

Recordkeeping Requirements.

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

Adjustment

D. 45 CFR Part 155 – Exchange Establishment Standards and Other Related Standards

under the Affordable Care Act

E. 45 CFR Part 156 – Health Insurance Issuer Standards under the Affordable Care Act,

Including Standards Related to Exchanges

IV. Collection of Information Requirements

A. Wage Estimates

B. ICRs Regarding Proposed Amendments to Normal Public Notice Requirements (31

CFR 33.112, 31 CFR 33.120 and 45 CFR Part 155.1312, and 45 CFR 155.1320)

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

D. ICRs Regarding Election to Operate an Exchange after 2014 (45 CFR 155.106)

E. ICRs Regarding Adding and Amending Language to Ensure Web-brokers Operating

in State Exchanges Meet Certain Requirements Applicable in the FFEs and SBE-FPs (45 CFR

155.220)

F. ICRs Regarding Establishing Requirements for DE Entities Mandating

HealthCare.gov Changes to Be Reflected on DE Entity Non-Exchange Websites within a Notice

Period Set by HHS (45 CFR 155.221(b)(6))

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G. ICRs Regarding Ensuing DE Entities Operating in State Exchanges Meet Certain

Standards Applicable in the FFEs and SBE-FPs (45 CFR 155.221)

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

I. ICRs Regarding Verification Process Related to Eligibility for Enrollment in a QHP

through the Exchange (45 CFR 155.315(e))

J. ICRs Regarding Eligibility Redetermination During a Benefit Year (45 CFR

155.330(d))

K. ICRs Regarding Establishment of Exchange Network Adequacy Standards (45 CFR

155.1050)

L. ICRs Regarding the State Selection of EHB-benchmark Plans for Plan Years

Beginning on or after January 1, 2026 (45 CFR 156.111)

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

N. Summary of Annual Burden Estimates for Proposed Requirements

V. Response to Comments

VI. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

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

D. Regulatory Alternatives Considered

E. Regulatory Flexibility Act (RFA)

F. Unfunded Mandates Reform Act (UMRA)

G. Federalism

I. Executive Summary

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We are finalizing changes to the provisions and parameters implemented through prior

rulemaking to implement the Patient Protection and Affordable Care Act (ACA).

These

proposals are published under the authority granted to the Secretary by the ACA and the Public

Health Service (PHS) Act.

In this final rule, we are finalizing changes related to some of the

ACA provisions and parameters we previously implemented and are implementing new

provisions. Our goal with these requirements is to provide consumers access to quality,

affordable coverage, while minimizing administrative burden and ensuring program integrity.

The changes finalized in this rule are also intended to help increase transparency, advance health

equity, and mitigate health disparities.

II. Background

A. Legislative and Regulatory Overview

Title I of the Health Insurance Portability and Accountability Act of 1996 (HIPAA)

added a new title XXVII to the Public Health Service (PHS) Act to establish various reforms to

the group and individual health insurance markets.

These provisions of the PHS Act were later augmented by other laws, including the ACA.

Subtitles A and C of title I of the ACA reorganized, amended, and added to the provisions of part

A of title XXVII of the PHS Act relating to group health plans and health insurance issuers in the

group and individual markets. The term “group health plan” includes both insured and self-

insured group health plans.

Section 2702 of the PHS Act, as added by the ACA, establishes requirements for

The Patient Protection and Affordable Care Act (Pub. L. 111–148) was enacted on March 23, 2010. The Health

Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised several provisions of

the Patient Protection and Affordable Care Act, was enacted on March 30, 2010. In this rulemaking, the two statutes

are referred to collectively as the “Patient Protection and Affordable Care Act,” “Affordable Care Act,” or “ACA.”

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

CMS-9895-F 8

guaranteed availability of coverage in the group and individual markets.

Section 1301(a)(1)(B) of the ACA directs all issuers of qualified health plans (QHPs) to

cover the essential health benefit (EHB) package described in section 1302(a) of the ACA,

including coverage of the services described in section 1302(b) of the ACA, adherence to the

cost-sharing limits described in section 1302(c) of the ACA, and meeting the Actuarial Value

(AV) levels established in section 1302(d) of the ACA. Section 2707(a) of the PHS Act, which is

effective for plan or policy years beginning on or after January 1, 2014, extends the requirement

to cover the EHB package to non-grandfathered individual and small group health insurance

coverage, irrespective of whether such coverage is offered through an Exchange. In addition,

section 2707(b) of the PHS Act directs non-grandfathered group health plans to ensure that cost

sharing under the plan does not exceed the limitations described in section 1302(c)(1) of the

ACA.

Section 1302 of the ACA provides for the establishment of an EHB package that includes

coverage of EHBs (as defined by the Secretary of HHS), cost-sharing limits, and AV

requirements. The law directs that EHBs be equal in scope to the benefits provided under a

typical employer plan, and that they cover at least the following 10 general categories:

ambulatory patient services; emergency services; hospitalization; maternity and newborn care;

mental health and substance use disorder services, including behavioral health treatment;

prescription drugs; rehabilitative and habilitative services and devices; laboratory services;

preventive and wellness services and chronic disease management; and pediatric services,

including oral and vision care. Section 1302(d) of the ACA describes the various levels of

coverage based on AV. Consistent with section 1302(d)(2)(A) of the ACA, AV is calculated

based on the provision of EHB to a standard population. Section 1302(d)(3) of the ACA directs

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the Secretary of HHS to develop guidelines that allow for de minimis variation in AV

calculations. Sections 1302(b)(4)(A) through (D) of the ACA establish that the Secretary must

define EHB in a manner that: (1) reflects appropriate balance among the 10 categories; (2) is not

designed in such a way as to discriminate based on age, disability, or expected length of life; (3)

takes into account the health care needs of diverse segments of the population; and (4) does not

allow denials of EHBs based on age, life expectancy, disability, degree of medical dependency,

or quality of life.

Section 1311(c) of the ACA provides the Secretary the authority to issue regulations to

establish criteria for the certification of QHPs. Section 1311(c)(1)(B) of the ACA requires,

among the criteria for certification that the Secretary must establish by regulation, that QHPs

ensure a sufficient choice of providers. Section 1311(e)(1) of the ACA grants the Exchange the

authority to certify a health plan as a QHP if the health plan meets the Secretary’s requirements

for certification issued under section 1311(c) of the ACA, and the Exchange determines that

making the plan available through the Exchange is in the interests of qualified individuals and

qualified employers in the State. Section 1311(c)(6)(C) of the ACA directs the Secretary of HHS

to require an Exchange to provide for special enrollment periods and section 1311(c)(6)(D) of

the ACA directs the Secretary of HHS to require an Exchange to provide for a monthly

enrollment period for Indians, as defined by section 4 of the Indian Health Care Improvement

Act.

Section 1311(d)(3)(B) of the ACA permits a State, at its option, to require QHPs to cover

benefits in addition to EHB. This section also requires a State to make payments, either to the

individual enrollee or to the issuer on behalf of the enrollee, to defray the cost of these additional

State-required benefits.

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Section 1312(c) of the ACA generally requires a health insurance issuer to consider all

enrollees in all health plans (except grandfathered health plans) offered by such issuer to be

members of a single risk pool for each of its individual and small group markets. States have the

option to merge the individual and small group market risk pools under section 1312(c)(3) of the

ACA.

Section 1312(e) of the ACA provides the Secretary with the authority to establish

procedures under which a State may allow agents or brokers to (1) enroll qualified individuals

and qualified employers in QHPs offered through Exchanges and (2) assist individuals in

applying for advance payments of the premium tax credit (APTC) and cost-sharing reductions

(CSRs) for QHPs sold through an Exchange.

Section 1312(f)(1)(B) of the ACA provides that an individual shall not be treated as a

qualified individual for enrollment in a QHP if, at the time of enrollment, the individual is

incarcerated, other than incarceration pending the disposition of charges.

Sections 1313 and 1321 of the ACA provide the Secretary with the authority to oversee

the financial integrity of State Exchanges, their compliance with HHS standards, and the

efficient and non-discriminatory administration of State Exchange activities. Section

1313(a)(5)(A) of the ACA provides the Secretary with the authority to implement any measure

or procedure that the Secretary determines is appropriate to reduce fraud and abuse in the

administration of the Exchanges. Section 1321 of the ACA provides for State flexibility in the

operation and enforcement of Exchanges and related requirements.

Section 1321(a) of the ACA provides broad authority for the Secretary to establish

standards and regulations to implement the statutory requirements related to Exchanges, QHPs

and other components of title I of the ACA, including such other requirements as the Secretary

CMS-9895-F 11

determines appropriate. When operating an FFE under section 1321(c)(1) of the ACA, HHS has

the authority under sections 1321(c)(1) and 1311(d)(5)(A) of the ACA to collect and spend user

fees. Office of Management and Budget (OMB) Circular A-25 Revised establishes Federal

policy regarding user fees and specifies that a user charge will be assessed against each

identifiable recipient for special benefits derived from Federal activities beyond those received

by the public.

Section 1321(d) of the ACA provides that nothing in title I of the ACA must be construed

to preempt any State law that does not prevent the application of title I of the ACA. Section

1311(k) of the ACA specifies that Exchanges may not establish rules that conflict with or

prevent the application of regulations issued by the Secretary.

Section 1322 of the ACA establishes the Consumer Operated and Oriented Plan (CO-OP)

program, which is a loan program that funds the establishment of private, non-profit, consumer-

operated, consumer-oriented health plan issuers of QHPs. The ACA requires, among other

requirements, that substantially all of a CO-OP’s activities consist of issuing QHPs in the

individual and small group markets, and that a CO-OP be governed by a board of directors where

a majority is elected by members covered by policies issued by the CO-OP.

Section 1331 of the ACA provides States with the option to operate a Basic Health

Program (BHP).

Section 1332 of the ACA provides the Secretary of HHS and the Secretary of the

Treasury (collectively, the Secretaries) with the discretion to approve a State's proposal to waive

specific provisions of the ACA, provided the State's section 1332 waiver plan meets certain

requirements. Section 1332(a)(4)(B) of the ACA requires the Secretaries to issue regulations

regarding procedures for the application and approval of section 1332 waivers.

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Section 1343 of the ACA establishes a permanent risk adjustment program to provide

payments to health insurance issuers that attract higher-than-average risk populations, such as

those with chronic conditions, funded by charges collected from those issuers that attract lower-

than-average risk populations, thereby reducing incentives for issuers to avoid higher-risk

enrollees. Section 1343(b) of the ACA provides that the Secretary, in consultation with States,

shall establish criteria and methods to be used in carrying out the risk adjustment activities under

this section. Consistent with section 1321(c) of the ACA, the Secretary is responsible for

operating the HHS risk adjustment program in any State that fails to do so.

Section 1401(a) of the ACA added section 36B to the Internal Revenue Code (the Code),

which, among other things, requires that a taxpayer reconcile APTC for a year of coverage with

the amount of the premium tax credit (PTC) the taxpayer is allowed for the year.

Section 1402 of the ACA provides for, among other things, reductions in cost sharing for

EHB for qualified low- and moderate-income enrollees in silver level QHPs offered through the

individual market Exchanges. This section also provides for reductions in cost sharing for

Indians enrolled in QHPs at any metal level.

Section 1411(c) of the ACA requires the Secretary to submit certain information provided

by applicants under section 1411(b) of the ACA to other Federal officials for verification,

including income and family size information to the Secretary of the Treasury. Section 1411(d)

of the ACA provides that the Secretary must verify the accuracy of information provided by

applicants under section 1411(b) of the ACA, for which section 1411(c) of the ACA does not

prescribe a specific verification procedure, in such manner as the Secretary determines

In the 2014 through 2016 benefit years, HHS operated the risk adjustment program in every State and the District

of Columbia, except Massachusetts. Beginning with the 2017 benefit year, HHS has operated the risk adjustment

program in all 50 States and the District of Columbia.

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appropriate.

Section 1411(f) of the ACA requires the Secretary, in consultation with the Secretary of

the Treasury and the Secretary of Homeland Security, and the Commissioner of Social Security,

to establish procedures for hearing and making decisions governing appeals of Exchange

eligibility determinations. Section 1411(f)(1)(B) of the ACA requires the Secretary to establish

procedures to redetermine eligibility on a periodic basis, in appropriate circumstances, including

eligibility to purchase a QHP through the Exchange and for APTC and CSRs.

Section 1411(g) of the ACA allows the use of applicant information only for the limited

purpose of, and to the extent necessary for ensuring the efficient operation of the Exchange,

including by verifying eligibility to enroll through the Exchange and for APTC and CSRs, and

limits the disclosure of such information.

Section 1413 of the ACA directs the Secretary to establish, subject to minimum

requirements, a streamlined enrollment process for enrollment in QHPs and all insurance

affordability programs.

Section 5000A of the Code, as added by section 1501(b) of the ACA, requires individuals

to have minimum essential coverage (MEC) for each month, qualify for an exemption, or make

an individual shared responsibility payment. Under the Tax Cuts and Jobs Act, which was

enacted on December 22, 2017, the individual shared responsibility payment is reduced to $0,

effective for months beginning after December 31, 2018. Notwithstanding that reduction, certain

exemptions are still relevant to determine whether individuals aged 30 and above qualify to

enroll in catastrophic coverage under §§ 155.305(h) and 156.155(a)(5).

Section 1902(r)(2)(A) of the Social Security Act (the Act), which permits States to apply

less restrictive methodologies than cash assistance program methodologies in determining

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eligibility for certain eligibility groups.

1. Premium Stabilization Programs

The premium stabilization programs refer to the HHS risk adjustment, risk corridors, and

reinsurance programs established by the ACA.

For past rulemaking, we refer readers to the

following rules:

● In the March 23, 2012 Federal Register (77 FR 17219) (Premium Stabilization Rule),

we implemented the premium stabilization programs.

● In the March 11, 2013 Federal Register (78 FR 15409) (2014 Payment Notice), we

finalized the benefit and payment parameters for the 2014 benefit year to expand the provisions

related to the premium stabilization programs and set forth payment parameters in those

programs.

● In the October 30, 2013 Federal Register (78 FR 65046), we finalized the

modification to the HHS risk adjustment methodology related to community rating States.

● In the November 6, 2013 Federal Register (78 FR 66653), we published a correcting

amendment to the 2014 Payment Notice to address how an enrollee’s age for the risk score

calculation would be determined under the HHS risk adjustment methodology.

● In the March 11, 2014 Federal Register (79 FR 13743) (2015 Payment Notice), we

finalized the benefit and payment parameters for the 2015 benefit year to expand the provisions

related to the premium stabilization programs, set forth certain oversight provisions, and

establish payment parameters in those programs.

● In the May 27, 2014 Federal Register (79 FR 30240), we announced the 2015 fiscal

year sequestration rate for the HHS-operated risk adjustment program.

See ACA section 1341 (transitional reinsurance program), ACA section 1342 (risk corridors program), and ACA

section 1343 (HHS risk adjustment program).

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● In the February 27, 2015 Federal Register (80 FR 10749) (2016 Payment Notice), we

finalized the benefit and payment parameters for the 2016 benefit year to expand the provisions

related to the premium stabilization programs, set forth certain oversight provisions, and

establish the payment parameters in those programs.

● In the March 8, 2016 Federal Register (81 FR 12203) (2017 Payment Notice), we

finalized the benefit and payment parameters for the 2017 benefit year to expand the provisions

related to the premium stabilization programs, set forth certain oversight provisions, and

establish the payment parameters in those programs.

● In the December 22, 2016 Federal Register (81 FR 94058) (2018 Payment Notice),

we finalized the benefit and payment parameters for the 2018 benefit year, added the high-cost

risk pool parameters to the HHS risk adjustment methodology, incorporated prescription drug

factors in the adult models, established enrollment duration factors for the adult models, and

finalized policies related to the collection and use of enrollee-level External Data Gathering

Environment (EDGE) data.

● In the April 17, 2018 Federal Register (83 FR 16930) (2019 Payment Notice), we

finalized the benefit and payment parameters for the 2019 benefit year, created the State

flexibility framework permitting States to request a reduction in risk adjustment State transfers

calculated by HHS, and adopted a new error rate methodology for HHS-RADV adjustments to

transfers.

● In the May 11, 2018 Federal Register (83 FR 21925), we published a correction to

the 2019 HHS risk adjustment coefficients in the 2019 Payment Notice.

● On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i), we updated the 2019

benefit year final HHS risk adjustment model coefficients to reflect an additional recalibration

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related to an update to the 2016 enrollee-level EDGE data set.

● In the July 30, 2018 Federal Register (83 FR 36456), we adopted the 2017 benefit

year HHS risk adjustment methodology as established in the final rules published in the March

23, 2012 (77 FR 17220 through 17252) and March 8, 2016 (81 FR 12204 through 12352)

editions of the Federal Register. The final rule set forth an additional explanation of the

rationale supporting the use of Statewide average premium in the State payment transfer formula

for the 2017 benefit year, including the reasons why the program is operated by HHS in a

budget-neutral manner. The final rule also permitted HHS to resume 2017 benefit year HHS risk

adjustment payments and charges. HHS also provided guidance as to the operation of the HHS-

operated risk adjustment program for the 2017 benefit year in light of the publication of the final

rule.

● In the December 10, 2018 Federal Register (83 FR 63419), we adopted the 2018

benefit year HHS risk adjustment methodology as established in the final rules published in the

March 23, 2012 (77 FR 17219) and the December 22, 2016 (81 FR 94058) editions of the

Federal Register. In the rule, we set forth an additional explanation of the rationale supporting

the use of Statewide average premium in the State payment transfer formula for the 2018 benefit

year, including the reasons why the program is operated by HHS in a budget-neutral manner.

● In the April 25, 2019 Federal Register (84 FR 17454) (2020 Payment Notice), we

finalized the benefit and payment parameters for the 2020 benefit year, as well as the policies

related to making the enrollee-level EDGE data available as a limited data set for research

purposes and expanding the HHS uses of the enrollee-level EDGE data, approval of the request

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.

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from Alabama to reduce HHS risk adjustment transfers by 50 percent in the small group market

for the 2020 benefit year, and updates to HHS-RADV program requirements.

● On May 12, 2020, consistent with § 153.320(b)(1)(i), we published the 2021 Benefit

Year Final HHS Risk Adjustment Model Coefficients on the CCIIO website.

● In the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment Notice), we

finalized the benefit and payment parameters for the 2021 benefit year, as well as adopted

updates to the HHS risk adjustment models’ hierarchical condition categories (HCCs) to

transition to ICD-10 codes, approved the request from Alabama to reduce HHS risk adjustment

transfers by 50 percent in the small group market for the 2021 benefit year, and modified the

outlier identification process under the HHS-RADV program.

● In the December 1, 2020 Federal Register (85 FR 76979) (Amendments to the HHS-

Operated Risk Adjustment Data Validation Under the Patient Protection and Affordable Care

Act’s HHS-Operated Risk Adjustment Program (2020 HHS-RADV Amendments Rule)), we

adopted the creation and application of Super HCCs in the sorting step that assigns HCCs to

failure rate groups, finalized a sliding scale adjustment in HHS-RADV error rate calculation, and

added a constraint for negative error rate outliers with a negative error rate. We also established a

transition from the prospective application of HHS-RADV adjustments to apply HHS-RADV

results to risk scores from the same benefit year as that being audited.

● In the September 2, 2020 Federal Register (85 FR 54820), we issued an interim final

rule containing certain policy and regulatory revisions in response to the COVID–19 public

health emergency (PHE), wherein we set forth HHS risk adjustment reporting requirements for

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.

CMS-9895-F 18

issuers offering temporary premium credits in the 2020 benefit year.

● In the May 5, 2021 Federal Register (86 FR 24140) (part 2 of the 2022 Payment

Notice), we finalized a subset of proposals from the 2022 Payment Notice proposed rule,

including policy and regulatory revisions related to the HHS-operated risk adjustment program,

finalization of the benefit and payment parameters for the 2022 benefit year, and approval of the

request from Alabama to reduce HHS risk adjustment transfers by 50 percent in the individual

and small group markets for the 2022 benefit year. In addition, this final rule established a

revised schedule of collections for HHS-RADV and updated the provisions regulating second

validation audit (SVA) and initial validation audit (IVA) entities.

● On July 19, 2021, consistent with § 153.320(b)(1)(i), we released Updated 2022

Benefit Year Final HHS Risk Adjustment Model Coefficients on the CCIIO website, announcing

some minor revisions to the 2022 benefit year final HHS risk adjustment adult model

coefficients.

● In the May 6, 2022 Federal Register (87 FR 27208) (2023 Payment Notice), we

finalized revisions related to the HHS-operated risk adjustment program, including the benefit

and payment parameters for the 2023 benefit year, HHS risk adjustment model recalibration, and

policies related to the collection and extraction of enrollee-level EDGE data. We also finalized

the adoption of the interacted HCC count specification for the adult and child models, along with

modified enrollment duration factors for the adult model models, beginning with the 2023

benefit year.

We also repealed the ability for States, other than prior participants, to request a

See CMS. (2021, July 19). 2022 Benefit Year Final HHS Risk Adjustment Model Coefficients.

https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-

version-508.pdf.

On May 6, 2022, we also published the 2023 Benefit Year Final HHS Risk Adjustment Model Coefficients at

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

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reduction in HHS risk adjustment State transfers starting with the 2024 benefit year. In addition,

we approved a 25 percent reduction to 2023 benefit year HHS risk adjustment transfers in

Alabama’s individual market and a 10 percent reduction to 2023 benefit year HHS risk

adjustment transfers in Alabama’s small group market. We also finalized further refinements to

the HHS-RADV error rate calculation methodology beginning with the 2021 benefit year.

● In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we

finalized the benefit and payment parameters for the 2024 benefit year, amended the EDGE

discrepancy materiality threshold and data collection requirements, and reduced the risk

adjustment user fee. For the 2024 benefit year, we repealed the State flexibility policy, including

for prior participant States, and approved 50 percent reductions to HHS risk adjustment transfers

for Alabama’s individual and small group markets. In addition, we finalized several refinements

to HHS-RADV program requirements, such as shortening the window to confirm SVA findings

or file a discrepancy report, changing the HHS-RADV materiality threshold for random and

targeted sampling, and no longer exempting exiting issuers from adjustments to risk scores and

HHS risk adjustment transfers when they are negative error rate outliers. We also announced the

discontinuance of the Lifelong Permanent Condition List (LLPC) and Non-EDGE Claims (NEC)

in HHS-RADV beginning with the 2022 benefit year.

2. Program Integrity

We have finalized program integrity standards related to the Exchanges and premium

stabilization programs in two rules: the “first Program Integrity Rule” published in the August

30, 2013 Federal Register (78 FR 54069), and the “second Program Integrity Rule” published in

the October 30, 2013 Federal Register (78 FR 65045). We also refer readers to the 2019 Patient

Protection and Affordable Care Act; Exchange Program Integrity final rule (2019 Program

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Integrity Rule) published in the December 27, 2019 Federal Register (84 FR 71674).

In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we

finalized a policy to implement improper payment pre-testing and assessment (IPPTA)

requirements for State Exchanges to ensure adherence to the Payment Integrity Information Act

of 2019. In addition, we finalized allowing additional time for HHS to review evidence

submitted by agents and brokers to rebut allegations pertaining to Exchange agreement

suspensions or terminations. We also introduced consent and eligibility documentation

requirements for agents and brokers.

3. Market Rules

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

● In the April 8, 1997 Federal Register (62 FR 16894), HHS, with the Department of

Labor and Department of the Treasury, published an interim final rule relating to the HIPAA

health insurance reforms. In the February 27, 2013 Federal Register (78 FR 13406) (2014

Market Rules), we published the health insurance market rules.

● In the May 27, 2014 Federal Register (79 FR 30240) (2015 Market Standards Rule),

we published the Exchange and insurance market standards for 2015 and beyond.

● In the December 22, 2016 Federal Register (81 FR 94058), we provided additional

guidance on guaranteed availability and guaranteed renewability.

● In the April 18, 2017 Federal Register (82 FR 18346) (Market Stabilization final

rule), we further interpreted the guaranteed availability provision.

● In the April 17, 2018 Federal Register (83 FR 17058) (2019 Payment Notice), we

clarified that certain exceptions to the special enrollment periods only apply to coverage offered

outside of the Exchange in the individual market.

CMS-9895-F 21

● In the June 19, 2020 Federal Register (85 FR 37160) (2020 section 1557 final rule),

in which HHS discussed section 1557 of the ACA, HHS removed nondiscrimination protections

based on gender identity and sexual orientation from the guaranteed availability regulation.

● In part 2 of the 2022 Payment Notice, in the May 5, 2021 Federal Register (86 FR

24140), we made additional amendments to the guaranteed availability regulation regarding

special enrollment periods and finalized new special enrollment periods related to untimely

notice of triggering events, cessation of employer contributions or government subsidies to

COBRA continuation coverage, and loss of APTC eligibility.

● In the September 27, 2021 Federal Register (86 FR 53412) (part 3 of the 2022

Payment Notice), which was published by HHS and the Department of the Treasury, we

finalized additional amendments to the guaranteed availability regulations regarding special

enrollment periods.

● In the May 6, 2022 Federal Register (87 FR 27208), we finalized a revision to our

interpretation of the guaranteed availability requirement to prohibit issuers from applying a

premium payment to an individual's or employer's past debt owed for coverage and refusing to

effectuate enrollment in new coverage.

4. Exchanges

We published a request for comment relating to Exchanges in the August 3, 2010

Federal Register (75 FR 45584). We issued initial guidance to States on Exchanges on

November 18, 2010. In the March 27, 2012 Federal Register (77 FR 18310) (Exchange

Establishment Rule), we implemented the Affordable Insurance Exchanges (Exchanges),

consistent with title I of the ACA, to provide competitive marketplaces for individuals and small

employers to directly compare available private health insurance options on the basis of price,

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quality, and other factors. This included implementation of components of the Exchanges and

standards for eligibility for Exchanges, as well as network adequacy and essential community

provider (ECP) certification standards.

In the August 17, 2011, Federal Register (76 FR 51201) we published a proposed rule

regarding eligibility determinations, including the regulatory requirement to verify incarceration

status. In the March 27, 2012, Federal Register (77 FR 18309) we finalized the regulatory

requirement to verify incarceration attestation using an approved electronic data source that is

current and accurate, and when attestations are not reasonably compatible with information in an

approved data source, to resolve the inconsistency.

In the 2014 Payment Notice and the Amendments to the HHS Notice of Benefit and

Payment Parameters for 2014 interim final rule, published in the March 11, 2013 Federal

adjustment to the FFE user fee in the Coverage of Certain Preventive Services under the

Affordable Care Act final rule, published in the July 2, 2013 Federal Register (78 FR 39869)

(Preventive Services Rule).

In the 2016 Payment Notice, we also set forth the ECP certification standard at §

156.235, with revisions in the 2017 Payment Notice in the March 8, 2016 Federal Register (81

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

94058).

In an interim final rule, published in the May 11, 2016 Federal Register (81 FR 29146),

we made amendments to the parameters of certain special enrollment periods (2016 Interim Final

Rule). We finalized these in the 2018 Payment Notice, published in the December 22, 2016

Federal Register (81 FR 94058).

CMS-9895-F 23

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

(82 FR 18346), we amended standards relating to special enrollment periods and QHP

certification. In the 2019 Payment Notice, published in the April 17, 2018 Federal Register (83

FR 16930), we modified parameters around certain special enrollment periods. In the April 25,

2019 Federal Register (84 FR 17454), the 2020 Payment Notice established a new special

enrollment period.

We published the final rule in the May 14, 2020 Federal Register (85 FR 29164) (2021

Payment Notice).

In the January 19, 2021 Federal Register (86 FR 6138) (part 1 of the 2022 Payment

Notice), we finalized only a subset of the proposals in the 2022 Payment Notice proposed rule. In

the May 5, 2021 Federal Register (86 FR 24140), we published part 2 of the 2022 Payment

Notice. In the September 27, 2021 Federal Register (86 FR 53412) (part 3 of the 2022 Payment

Notice), in conjunction with the Department of the Treasury, we finalized amendments to certain

policies in part 1 of the 2022 Payment Notice.

In the May 6, 2022 Federal Register (87 FR 27208), we finalized changes to maintain

the user fee rate for issuers offering plans through the FFEs and maintain the user fee rate for

issuers offering plans through the SBE-FPs for the 2023 benefit year. We also finalized various

policies to address certain agent, broker, and web-broker practices and conduct. We also

finalized updates to the requirement that all Exchanges conduct special enrollment period

verifications.

In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we

revised Exchange Blueprint approval timelines, lowered the user rate fee for QHPs in the FFEs

and SBE-FPs, and amended re-enrollment hierarchies for enrollees. We also finalized policies to

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update FFE and SBE-FP standardized plan options; further reduce the risk of plan choice

overload on the FFEs and SBE-FPs by lowering the limit on non-standardized plan options that

issuers may offer from four to two; introduce an exceptions process to the limitation on non-

standardized plan options in FFEs and SBE-FPs; and ensure correct QHP information. In

addition, to prevent gaps in coverage, we amended coverage effective date rules, lengthened the

special enrollment period from 60 to 90 days to those who lose Medicaid coverage, and

prohibited QHPs on FFEs and SBE-FPs from terminating coverage mid-year for dependent

children who reach the applicable maximum age. We also finalized policies on verifying

consumer income and permitting door-to-door assisters to solicit consumers. To ensure provider

network adequacy, we finalized provider network and ECP policies for QHPs.

5. Essential Health Benefits

We established requirements relating to EHBs in the Standards Related to Essential

Health Benefits, Actuarial Value, and Accreditation Final Rule, which was published in the

February 25, 2013 Federal Register (78 FR 12834) (EHB Rule). In the 2019 Payment Notice,

published in the April 17, 2018 Federal Register (83 FR 16930), we added § 156.111 to provide

States with additional options from which to select an EHB-benchmark plan for plan year (PY)

2020 and subsequent plan years. In the 2023 Payment Notice, published in the May 6, 2022

Federal Register (87 FR 27208), we revised § 156.111 to require States to notify HHS of the

selection of a new EHB-benchmark plan by the first Wednesday in May of the year that is 2

years before the effective date of the new EHB-benchmark plan, otherwise the State’s EHB-

benchmark plan for the applicable plan year will be that State’s EHB-benchmark plan applicable

for the prior year. We displayed the Request for Information; Essential Health Benefits (EHB

RFI), published in the December 2, 2022 Federal Register (87 FR 74097) to solicit public

CMS-9895-F 25

comment on a variety of topics related to the coverage of benefits in health plans subject to the

EHB requirements of the ACA.

6. State Innovation Waivers

In the March 14, 2011 Federal Register (76 FR 13553), HHS and the Department of the

Treasury (collectively, the Departments) published the “Application, Review, and Reporting

Process for Waivers for State Innovation” proposed rule

to implement section 1332(a)(4)(B) of

the ACA.

In the February 27, 2012 Federal Register (77 FR 11700), the Departments published

the “Application, Review, and Reporting Process for Waivers for State Innovation” final rule

(2012 Final Rule).

In the October 24, 2018 Federal Register (83 FR 53575), the Departments issued the

2018 Guidance, which superseded the previous guidance

published in the December 16, 2015

Federal Register (80 FR 78131) (2015 Guidance) and set forth requirements that States must

meet for waivers, application review procedures, pass-through funding determinations, certain

analytical requirements, and operational considerations.

In the November 6, 2020 Federal Register (85 FR 71142), the Departments issued an

interim final rule

(November 2020 IFC), which set forth flexibilities for waivers under section

1332 during the COVID-19 Public Health Emergency.

In the December 4, 2020 Federal Register (85 FR 78572), the Departments published

the “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment

Parameters for 2022 and Pharmacy Benefit Manager Standards; Updates to State Innovation

Waiver (Section 1332 Waiver) Implementing Regulations” proposed rule

(2022 Payment Notice

proposed rule) which proposed to codify certain policies and interpretations of the 2018

CMS-9895-F 26

Guidance.

In the January 19, 2021 Federal Register (86 FR 6138), the Departments published the

“Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters

for 2022; Updates to State Innovation Waiver (Section 1332 Waiver) Implementing Regulations”

final rule

(part 1 of the 2022 Payment Notice) which codified many of the policies and

interpretations of the 2018 Guidance.

In the September 27, 2021 Federal Register (86 FR 53412), part 3 of the 2022 Payment

Notice, the Departments published the “Patient Protection and Affordable Care Act; Updating

Payment Parameters, Section 1332 Waiver Implementing Regulations, and Improving Health

Insurance Markets for 2022 and Beyond” final rule (September 2021 Final Rule), which

superseded and rescinded the policies and interpretations outlined in the 2018 Guidance and

repealed the previous codification of the interpretations of statutory guidelines in part 1 of the

2022 Payment Notice. The Departments also finalized flexibilities in the public notice

requirements and post-award public participation requirements for section 1332 waivers under

certain emergent situations and processes and procedures for amendments and extensions for

approved waiver plans.

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

In the December 13, 2011 Federal Register (76 FR 77392), we published the “Patient

Protection and Affordable Care Act; Establishment of Consumer Operated and Oriented Plan

(CO–OP) Program” final rule (2011 CO-OP Rule), which established the rules governing the

CO-OP program to make loans to capitalize eligible prospective CO-OPs. In the May 11, 2016

Federal Register (81 FR 29146), we amended several CO-OP standards related to governance

requirements to provide greater flexibility, and to facilitate private market transactions that

CMS-9895-F 27

would assist efforts of CO-OPs to arrange access to new sources of needed capital.

8. Basic Health Program (BHP)

In the March 12, 2014, Federal Register (79 FR 14111), we published a final rule

entitled “Basic Health Program: State Administration of Basic Health Programs; Eligibility and

Enrollment in Standard Health Plans; Essential Health Benefits in Standard Health Plans;

Performance Standards for Basic Health Programs; Premium and Cost Sharing for Basic Health

Programs; Federal Funding Process; Trust Fund and Financial Integrity," implementing section

1331 of the ACA, which governs the establishment of BHPs.

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

In the January 19, 1993 Federal Register (58 FR 4929), we published a final rule with

comment period entitled “Medicaid Program; Eligibility and Coverage Requirements,” in which

we prescribed, at 42 CFR 435.601, the financial methodologies State Medicaid agencies must

apply in determining eligibility for Medicaid, with options to apply less restrictive income and

resource methodologies for the eligibility groups specified in section 1902(r)(2) of the Act.

In the August 22, 1994 Federal Register (59 FR 43052), we published a final rule

entitled “Medicaid Program; Eligibility and Coverage Requirements,” in which we amended 42

CFR 435.601(f)(1) to delete cross-references to other regulatory provisions that had been

removed from the CFR.

In the November 30, 2016 Federal Register (81 FR 86456), we published a final rule

entitled “Medicaid and Children’s Health Insurance Programs: Eligibility Notices, Fair Hearing

and Appeal Processes for Medicaid and Other Provisions Related to Eligibility and Enrollment

for Medicaid and CHIP,” in which we amended 42 CFR 435.601(b) to confirm that its provisions

govern only individuals who are excepted from application of modified adjusted gross income

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financial methodologies (MAGI) in accordance with 42 CFR 435.603(j) (relating to “Eligibility

Groups for which MAGI-based methods do not apply”). We also established in 42 CFR

435.601(d)(1) the authority for States to apply less restrictive methodologies for medically needy

individuals whose income eligibility is determined under 42 CFR 435.831(b)(1) (including

medically needy individuals whose eligibility is determined under MAGI-based methodologies

that comply with certain rules relating to the financial responsibility of relatives and other

individuals described in 42 CFR 435.602).

B. Summary of Major Provisions

The regulations outlined in this final rule will be codified in 31 CFR part 33, 42 CFR part

600, and 45 CFR parts 153, 155, and 156.

1. 31 CFR Part 33 and 45 CFR Part 155

This final rule amends section 1332 Waivers for State Innovation (referred to throughout

this final rule as section 1332 waivers) implementing regulations regarding State public notice

and comment procedures. The Departments are finalizing changes in 31 CFR part 33 and 45

CFR part 155 to allow States the flexibility to hold a State public hearing or post-award forum in

a virtual format, or hybrid format, which would be considered as the equivalent of holding an in-

person meeting. Specifically, the Departments are finalizing changes to 31 CFR 33.112(c) and 45

CFR 155.1312(c) and 31 CFR 33.120(c) and 45 CFR 155.1320(c). These changes are effective

immediately upon publication of this final rule.

2. 42 CFR Part 435

We are not finalizing the proposed amendment to 42 CFR 435.601(d) to remove

paragraph (d)(4) at this time. The removal of this paragraph would have provided States with

greater flexibility to adopt income and/or resource disregards in determining Medicaid financial

CMS-9895-F 29

eligibility for individuals excepted from the application of financial methodologies based on

MAGI (“non-MAGI” methodologies). States are already permitted to expand eligibility for

individuals who are subject to non-MAGI methodologies by disregarding income and resources

that would otherwise be required to be considered in determining an individual’s eligibility.

However, under current rules, States must apply such income and resource disregards to all

individuals within each Medicaid eligibility group. Removing paragraph (d)(4) would have

allowed States, when considering expanding eligibility for non-MAGI individuals, to target

disregards at discrete individuals within an eligibility group. As described more fully below,

many commenters raised concerns about this proposal and recommended that we impose

“safeguards,” “guardrails,” or “no-harm” requirements in expanding the States’ disregard-related

flexibility. These commenters asserted that such requirements are necessary to ensure that States

do not use the flexibility to reduce eligibility or harm beneficiaries. We are not finalizing this

proposal at this time to allow for further consideration of commenter concerns.

3. 42 CFR Part 600

We are finalizing the amendment, with modifications, to 42 CFR 600.320(c) to allow

States a third option when choosing the effective date of eligibility for enrollment for BHP

applicants. Under current rules, States have the option to choose between following: either the

Medicaid rules at 42 CFR 435.915 or the Exchange rules at 45 CFR 155.420(b)(1). We are

finalizing to add an option to the effective date of coverage rules that would allow States to start

coverage on the first day of the month following the date of application. In addition, we are

adding another option under 42 CFR 600.320(c) that, subject to HHS approval, a State may

establish its own effective date of eligibility for enrollment policy.

4. 45 CFR Part 153

CMS-9895-F 30

In accordance with the OMB Report to Congress on the Joint Committee Reductions for

Fiscal Year 2024, the HHS-operated risk adjustment program is subject to the fiscal year 2024

sequestration.

Therefore, the HHS-operated risk adjustment program will sequester payments

made from fiscal year 2024 resources (that is, funds collected during the 2024 fiscal year) at a

rate of 5.7 percent.

We are finalizing the recalibration of the 2025 benefit year HHS risk adjustment models

using the 2019, 2020, and 2021 benefit year enrollee-level EDGE data. For the 2025 benefit

year, we are finalizing the continued application of a market pricing adjustment to the plan

liability associated with Hepatitis C drugs in the HHS risk adjustment models (see, for example,

84 FR 17463 through 17466). We are finalizing a modification to the adjustment factors for the

receipt of CSRs in the HHS risk adjustment models to improve predictive accuracy for the

American Indian and Alaska Native (AI/AN) subpopulation who are enrolled in zero and limited

cost-sharing plans and retaining the other CSR adjustment factors in HHS risk adjustment. We

are also finalizing a risk adjustment user fee for the 2025 benefit year of $0.18 per member per

month (PMPM). Additionally, we are finalizing that in certain cases, we may require a corrective

action plan to address an observation identified in an HHS risk adjustment audit.

5. 45 CFR Part 155

In part 155, we are finalizing the amendment to § 155.105(b) to require that a State

seeking to operate a State Exchange must first operate an SBE-FP for at least one plan year,

including its open enrollment period. We believe this requirement will give States sufficient time

to create, staff, and structure a State Exchange that could transition to operating its own platform

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

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

2024.pdf.

CMS-9895-F 31

and establish relationships with interested parties critical to a State Exchange’s success in

operating a Navigator and consumer outreach program, assuming plan management

responsibilities, and communicating effectively with consumers to support enrollment and avoid

health care coverage gaps.

We are finalizing the revision to § 155.106(a)(2) as it pertains to Exchange Blueprint

requirements for States transitioning to a State Exchange. Specifically, we are finalizing the

addition that we may require that a State submitting a Blueprint application seeking to operate a

State Exchange provide, upon request, supplemental documentation to HHS detailing the State’s

implementation of its State Exchange functionality, including information regarding the State’s

ability to implement and comply with Federal requirements for operating an Exchange, as laid

out in the State Exchange Blueprint. This could include a State submitting detailed plans

regarding its State Exchange consumer assistance programs and activities, such as information

on its direct outreach plans. Further, we are finalizing a requirement that a State applying to

transition to a State Exchange must provide the public with a notice and copy of its State

Exchange Blueprint application, as well as conduct periodic public engagements whereby

interested parties can learn about the status of a State’s transition to a State Exchange and

provide input on that transition.

We are finalizing the amendment to § 155.170(a)(2) to codify that benefits covered in a

State’s EHB benchmark plan will not be considered in addition to EHB, even if they had been

required by State action taking place after December 31, 2011, other than for purposes of

compliance with Federal requirements. Under this policy, there would be no obligation for the

State to defray the cost of a State mandate enacted after December 31, 2011, that requires

coverage of a benefit if that benefit is included in the State’s EHB-benchmark plan. Benefits that

CMS-9895-F 32

are covered in a State’s EHB-benchmark plan will not be considered in addition to EHB and will

remain subject to the various rules applicable to the EHB, including the prohibition on

discrimination in accordance with § 156.125, limitations on cost sharing in accordance with §

156.130, and restrictions on annual or lifetime dollar limits in accordance with § 147.126. We

believe that this change would promote consumer protections and facilitate compliance with the

defrayal requirement by making the identification of benefits in addition to EHB more intuitive.

At § 155.205(a), we are finalizing, with modifications, the establishment of additional

minimum standards for Exchange call center operations. Specifically, we are finalizing the

requirement that all Exchange call centers, other than those of SBE-FPs and Small Business

Health Options Program (SHOP) Exchanges that do not provide for enrollment in SHOP

coverage through an online SHOP enrollment platform, provide consumer access to a live call

center representative during an Exchange’s published hours of operation to assist with submitting

their Exchange application. We believe speaking to a live representative will help troubleshoot

consumer Exchange application issues, provide a real time opportunity for a live representative

to explain Exchange application terminology to a consumer, ensure the consumer provides the

most correct information for the Exchange application, alleviate unnecessary follow-up, and

provide greater overall consumer satisfaction.

We are finalizing the amendment to § 155.205(b)(4) to require that an Exchange operate

a centralized eligibility and enrollment platform on the Exchange’s website (or, for an SBE-FP,

the Federal eligibility and enrollment platform) such that the Exchange allows for the submission

of the single, streamlined application for enrollment in a QHP and insurance affordability

programs through the Exchange’s website and performs eligibility determinations for all

consumers based on submissions of the single, streamlined application. Further, we are finalizing

CMS-9895-F 33

the amendment to § 155.302(a)(1) to clarify that the Exchange, through the centralized eligibility

and enrollment platform operated on the Exchange’s website (or, for an SBE-FP, the Federal

eligibility and enrollment platform), is the entity that is responsible for making all determinations

regarding the eligibility for QHP coverage and insurance affordability programs regardless of

whether an individual files an application for enrollment in a QHP on the Exchange’s website

(or, for SBE-FPs, on the Federal eligibility and enrollment platform), or on a website operated by

a non-Exchange website allowed for under § 155.220 or § 155.221. We are also clarifying that

only entities that an Exchange elects to contract with to operate its centralized eligibility and

enrollment platform can perform this function on behalf of an Exchange, such that Exchanges

will not be able to solely rely on non-Exchange entities, including a web-broker (defined at §

155.20) or other entities under § 155.220 or § 155.221, to make such eligibility determinations

on behalf of the Exchanges.

We are also finalizing the amendment to § 155.205(b)(5) to require that an Exchange

operate a centralized eligibility and enrollment platform on the Exchange’s website (or, for an

SBE-FP, the Federal eligibility and enrollment platform) so that the Exchange (or, for an SBE-

FP, the Federal eligibility and enrollment platform) meets the requirement under § 155.400(c) to

maintain record of all effectuated enrollments in QHPs, including changes in effectuated QHP

enrollments.

We are finalizing the amendment to § 155.220(h) specifying that the CMS Administrator,

who is a principal officer, 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. This amendment will improve transparency by specifying who would review

reconsideration requests under § 155.220(h).

CMS-9895-F 34

We are finalizing changes to §§ 155.220 and 155.221 to apply certain standards to web-

brokers and Direct Enrollment (DE) entities assisting consumers and applicants across all

Exchanges, including State Exchanges, for both the State Exchange’s Individual Exchange and

SHOP. We seek to ensure that certain current minimum HHS standards applicable in the FFEs

and SBE-FPs, related to web-broker website display of standardized QHP comparative

information, disclaimer language, information on eligibility for APTC/CSRs, operational

readiness, and access by downstream agents and brokers, also apply to web-brokers in State

Exchanges. Similarly, we are finalizing the extension of certain DE entity requirements

applicable in the FFEs and SBE-FPs related to marketing and display of QHPs, providing

consumers with correct information and refraining from certain conduct, marketing of non-

QHPs, website disclaimer language, and operational readiness to DE entities across all

Exchanges, to newly apply to DE entities in State Exchanges. These policies will help establish

greater general uniformity with respect to these requirements for web-brokers and DE entities

operating in the Exchanges and establish minimum Federal consumer protections in all States,

regardless of the Exchange model.

We are finalizing updates to § 155.221(b) to require that HealthCare.gov changes be

reflected and prominently displayed on DE entity non-Exchange websites assisting consumers in

FFEs and SBE-FPs within a notice period

set by HHS. We are also finalizing the requirement

that DE entities make these display changes in a manner consistent with display changes made

by HHS to HealthCare.gov by meeting standards communicated and defined by HHS within a

time period set by HHS, unless HHS approves a deviation from those standards. This approach

codifies our existing practice of communicating important changes to the HealthCare.gov

“Notice period” refers to the time period that DE entities have to reflect and prominently display HealthCare.gov

changes communicated to them by HHS pursuant to this proposal.

CMS-9895-F 35

display to EDE entities to ensure their EDE websites conform to those changes and provide the

same vital information to consumers, expands our existing change request processes to permit

entities to request deviations from the required display changes, and requires DE entities that do

not participate in EDE to also comply with this practice. Additionally, this approach will also

require that all display changes which affect the visual aspects of the website that users see and

interact with must be prominently displayed on the non-Exchange websites. Finally, we are also

finalizing the extension of this policy to require State Exchanges that choose to implement a DE

program to require their DE entities to implement and prominently display website changes in a

manner that is consistent with display changes made by State Exchanges to State Exchanges’

websites on their non-Exchange websites, unless the State Exchange approves a deviation from

those standards should the State Exchange elect to permit deviation requests.

We are finalizing, in connection with the failure to file and reconcile process at

§ 155.305(f)(4), that Exchanges be required to send notices to tax filers for the first year in which

they have been determined to have failed to reconcile APTC as an initial warning to inform and

educate tax filers that they need to file and reconcile, or risk being determined ineligible for

APTC if they fail to file and reconcile for a second consecutive year. We clarify in the rule that

an Exchange must either send a direct notice to a tax filer as described above or send a more

general notice to an enrollee or their tax filer explaining that they are at risk of losing APTC.

Currently, the regulation does not detail notification procedures for tax filers who have failed to

reconcile for 1 year. We intend to provide implementation guidance and sample notices prior to

the restart of FTR processes. We are finalizing the requirement that all Exchanges be required to

send informative notices for the first year in which tax filers have been identified as failing to file

and reconcile.

CMS-9895-F 36

We are finalizing the amendment to § 155.315(e) to provide that all Exchanges can

accept applicant incarceration status attestations without further verification, and Exchanges may

verify applicant incarceration status using an HHS-approved verification data source. HHS

would approve an alternative electronic data source for State Exchanges to use for incarceration

verification if it provides data that are current and accurate, and if its use minimizes

administrative costs and burdens.

We are finalizing the proposal to reinterpret State Exchange and State Medicaid and

Children’s Health Insurance Program (CHIP) agency use of the Federal Data Services Hub to

access and use the income data provided by the Verify Current Income (VCI) Hub service as a

State Exchange or a State Medicaid and CHIP agency function because these State entities use

this optional service to implement eligibility verification requirements applicable to them. More

specifically, State Exchanges and State Medicaid and CHIP agencies have the option to use this

information to verify a tax household’s annual income attestation for Exchange QHP eligibility

and the Medicaid applicant’s current household income as required to make insurance

affordability program eligibility determinations. We are also finalizing that these State agencies

must pay for their use of the VCI Hub Service, and HHS will invoice them monthly for the

amount they must pay to reimburse HHS for the costs of their access and actual utilization of

CSI income data from the prior month, including an administrative fee amount. In accordance

with these policies, we are finalizing the amendment to § 155.320(c) to reflect this

reinterpretation for the Exchanges but did not propose to amend the Medicaid regulations as the

Medicaid regulations already address Medicaid agency verification requirements and are not

typically used to delineate Medicaid agency operations in this manner.

CMS-9895-F 37

We are finalizing the revision to § 155.330(d) to require Exchanges to conduct periodic

checks for deceased enrollees twice yearly and subsequently end deceased enrollees’ QHP

coverage. Additionally, we are finalizing the revision to § 155.330(d)(3) to grant the Secretary

the authority to temporarily suspend the periodic data matching (PDM) requirement during

certain situations or circumstances that lead to the limited availability of data needed to conduct

PDM or of documentation needed for an enrollee to notify the Exchange that the result of PDM

is inaccurate, as described in §155.330(e)(2)(i)(C). These policies will align § 155.330(d) with

current Federal Exchange policy and operations, prevent overpayment of QHP premiums, and

accurately capture household QHP eligibility based on household size.

We are finalizing, as proposed, the amendment to § 155.335(j)(1) and (2) to require

Exchanges to re-enroll individuals who are enrolled in catastrophic coverage, as defined in

section 1302(e) of the ACA, into a new QHP for the coming plan year, except that we are

amending the new language that we proposed at § 155.335(j)(1)(v) and (j)(2)(iv) to incorporate

the phrase, “to the extent permitted by applicable State law.” Incorporating these individuals

enrolled in catastrophic coverage into the auto re-enrollment hierarchy rules at § 155.335(j) will

help ensure continuity of coverage in cases where the issuer does not continue to offer a

catastrophic plan for the new plan year, or these individuals are no longer eligible for enrollment

in a catastrophic plan for the new year, and these individuals do not actively select a different

QHP. We are also finalizing the addition of a new paragraph (j)(5) to § 155.335 to establish that

an Exchange may not newly auto re-enroll into catastrophic coverage an enrollee who is

currently enrolled in coverage of a metal level as defined in section 1302(d) of the ACA. This

change reflects our current practice for Exchanges on the Federal platform.

CMS-9895-F 38

We are finalizing the amendment to § 155.400(e)(2) to codify that the flexibility for

issuers experiencing billing or enrollment problems due to high volume or technical errors is not

limited to extensions of the binder payment.

We are finalizing, with modifications, the amendment to § 155.410(e)(4)(ii) to revise

parameters around the adoption of an alternative open enrollment period by a State Exchange.

Specifically, we are finalizing that for benefit years beginning on or after January 1, 2025, State

Exchanges must adopt an open enrollment period that begins on November 1 of the calendar

year preceding the benefit year and ends January 15 of the applicable benefit year or later.

Additionally, as a modification, we are finalizing new paragraph (e)(4)(iii), which provides

flexibility for any State Exchange that held an open enrollment period that began before

November 1, 2023, and ended before January 15, 2024, for the 2024 benefit year to continue to

begin open enrollment before November 1 for consecutive future benefit years, so long as the

open enrollment period continues uninterrupted for at least 11 weeks. If the State Exchange

changes the dates of the annual open enrollment period after the effective date of this rule, it

must comply with paragraphs (e)(4)(i) and (ii) for all future annual open enrollment periods.

Finally, we have also finalized a modification to amend § 155.410(e)(4)(i) to reference new

paragraph (e)(4)(iii). We believe these policies will give consumers ample time to enroll in

coverage; provide Navigators, certified application counselors, and agents and brokers ample

time to assist all interested applicants; balance consistency against providing State Exchanges

with additional flexibility; reduce disruption to current Exchange operations; reduce consumer

confusion; and improve access to health coverage.

At § 155.420(b), we are finalizing aligning the effective dates of coverage after selecting

a plan during certain special enrollment periods across all Exchanges, including State Exchanges.

CMS-9895-F 39

We are requiring all State Exchanges to provide coverage that is effective on the first day of the

month following plan selection, or an earlier date, if a consumer enrolls in a QHP during special

enrollment periods that follow the regular effective dates of coverage in 45 CFR 155.420(b).

This policy will prevent coverage gaps, particularly for consumers transitioning between

different Exchanges or from other insurance coverage.

We are finalizing the amendment to paragraph § 155.420(d)(16) to revise the parameters

around the availability of a special enrollment period for APTC-eligible qualified individuals

with a projected annual household income no greater than 150 percent of the Federal Poverty

Level (FPL). Specifically, we are finalizing to remove the limitation that this special enrollment

period is only available to a consumer whose applicable taxpayer’s applicable percentage, which

is used to determine the amount of the consumer’s premium not covered by APTC, is 0 percent,

and to give Exchanges the option to permanently provide this special enrollment period. We

believe this policy will provide affordable coverage to more uninsured people and additional

enrollment opportunities to low-income consumers.

We are finalizing the addition of § 155.430(b)(1)(iv)(D) to permit an enrollee to

retroactively terminate the enrollee’s enrollment in a QHP through an Exchange on the Federal

platform when the enrollee enrolls in Medicare Parts A or B (including enrollment in Parts A and

B through a Medicare Advantage plan). The effective date of the retroactive termination must be

no earlier than the later of (1) the day before the first day of coverage under Medicare Parts A or

B or a Medicare Advantage plan, and (2) the day is 6 months before retroactive termination of

QHP coverage is requested. Enrollees must request retroactive termination of coverage within 60

days of the date they retroactively enroll in Medicare (the date the enrollment occurs, not the

Medicare coverage effective date). We are also finalizing that retroactive terminations are not

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permitted for stand-alone dental plans (SADPs). This policy will allow consumers to avoid

overlapping coverage and paying unnecessary premiums. HHS has the option to elect whether to

implement this provision for Exchanges on the Federal platform, and State Exchanges will have

the option of implementing this policy.

Under § 155.1050(a)(2)(i)(A), we are finalizing that for plans years beginning on or after

January 1, 2026, State Exchanges and SBE-FPs must establish and impose quantitative time and

distance network adequacy standards for QHPs that are at least as stringent as standards for

QHPs participating on the FFEs under § 156.230(a)(2)(i)(A). Additionally, we are finalizing that,

for plans years beginning on or after January 1, 2026, State Exchanges and SBE-FPs must

conduct quantitative network adequacy reviews prior to certifying any plan as a QHP, consistent

with the reviews conducted by the FFEs under § 156.230. Specifically, we are finalizing at §

155.1050(a)(2)(i)(B) that, for plans years beginning on or after January 1, 2026, State Exchanges

and SBE-FPs must conduct network adequacy reviews to evaluate a plan’s compliance with

network adequacy standards under § 156.230(a)(1)(ii), (a)(1)(iii), and (a)(2)(i)(A) prior to

certifying any plan as a QHP, while providing QHP certification applicants the flexibilities

described under § 156.230(a)(2)(ii) and (a)(3) and (4). We are also finalizing § 155.1050(a)(2)(ii)

to provide that, for plan years beginning on or after January 1, 2026, HHS may grant an

exception to the requirements described under § 155.1050(a)(2)(i) to a State Exchange or SBE-

FP that demonstrates with evidence-based data, in a form and manner specified by HHS, that (1)

the Exchange applies and enforces alternate quantitative network adequacy standards that are

reasonably calculated to ensure a level of access to providers that is as great as that ensured by

the Federal network adequacy standards established for QHPs under § 156.230(a)(1)(iii),

(a)(2)(i)(A), and (a)(4); and (2) the Exchange evaluates whether plans comply with applicable

CMS-9895-F 41

network adequacy standards prior to certifying any plan as a QHP. Lastly, we are finalizing §

155.1050(a)(2)(i)(C) to provide that, for plan years beginning on or after January 1, 2026, State

Exchanges and SBE-FPs must require that all issuers seeking certification of a plan as a QHP

submit information to the Exchange reporting whether or not network providers offer telehealth

services.

6. 45 CFR Part 156

In part 156, after reviewing the public comments and revising our projections based on

newly available data that impacted our enrollment projections, we are finalizing an FFE user fee

rate of 1.5 percent of total monthly premiums and an SBE-FP user fee rate of 1.2 percent of total

monthly premiums. On November 15, 2023, we issued the 2025 benefit year premium

adjustment percentage index and related payment parameters in guidance, consistent with the

policy finalized in part 2 of the 2022 Payment Notice.

For benefit years beginning on or after January 1, 2026, we are finalizing three revisions

to the standards for State selection of EHB-benchmark plans at § 156.111. First, we are finalizing

our proposal to consolidate the options for States to change EHB-benchmark plans at §

156.111(a) to reduce the burden on States to decide between three functionally identical choices.

Second, we are finalizing revisions to the typicality standard at § 156.111(b)(2) so that, in

demonstrating that a State’s new EHB-benchmark plan provides a scope of benefits that is equal

to the scope of benefits of a typical employer plan in the State, the scope of benefits of a typical

employer plan in the State will be defined as any scope of benefits that is as or more generous

than the scope of benefits in the State’s least generous typical employer plan (supplemented by

the State as necessary to provide coverage within each EHB category at § 156.110(a)), and as or

https://www.cms.gov/files/document/2025-papi-parameters-guidance-2023-11-15.pdf.

CMS-9895-F 42

less generous than the scope of benefits in the State’s most generous typical employer plan

(supplemented by the State as necessary to provide coverage within each EHB category at §

156.110(a)), among the typical employer plans currently defined at § 156.111(b)(2)(i)(A) and

(B). We are also finalizing the removal of the generosity standard at § 156.111(b)(2)(ii) and a

technical revision to the language regarding supplementation at § 156.111(b)(2)(i). Third, we are

finalizing revisions to § 156.111(e)(3) to require States to submit a formulary drug list as part of

their application to change EHB-benchmark plans only if the State is seeking to change its

prescription drug EHB.

We are finalizing the removal of the regulatory prohibition at § 156.115(d) on issuers

from including routine non-pediatric dental services as an EHB beginning with PY 2027, which

would provide States the option to add routine adult dental services as an EHB by updating their

EHB-benchmark plans pursuant to § 156.111.

We are finalizing the amendment to § 156.122 to codify that prescription drugs in excess

of those covered by a State’s EHB-benchmark plan are considered EHB. As a result, they would

be subject to requirements including the annual limitation on cost sharing and the restriction on

annual and lifetime dollar limits, unless the coverage of the drug is mandated by State action and

is in addition to EHB pursuant to § 155.170, in which case the drug will not be considered EHB.

In addition, for plan years beginning on or after January 1, 2026, we are finalizing the

amendment to § 156.122 to provide that the Pharmacy & Therapeutics (P&T) committee must

include a patient representative. We also sought and received comments on a possible future

policy proposal to replace the United States Pharmacopeia (USP) Medicare Model Guidelines

(MMG) with the USP Drug Classification system (DC) to classify the prescription drugs

required to be covered as EHB under § 156.122(a)(1).

CMS-9895-F 43

For PY 2025, we are finalizing the proposal to follow the approach finalized in the 2024

Payment Notice concerning standardized plan option metal levels, and to otherwise maintain

continuity with our approach to standardized plan options finalized in the 2023 and 2024

Payment Notices.

We are finalizing only minor updates to the plan designs for PY 2025 to

ensure these plans have AVs within the permissible de minimis range for each metal level. Our

updates to plan designs for PY 2025 are detailed in the discussion of § 156.201 in the preamble

of this final rule, specifically in Tables 12 and 13.

We are finalizing an exceptions process at § 156.202 that will allow issuers in the FFEs

and SBE-FPs to offer additional non-standardized plan options per product network type, metal

level, inclusion of dental and vision benefit coverage, and service area for PY 2025 and

subsequent plan years, if the issuer can demonstrate that these additional non-standardized plans

have specific design features that will substantially benefit consumers with chronic and high-cost

conditions and meet other requirements.

We are finalizing a new regulatory provision that would permit us to allow a CO-OP loan

recipient to voluntarily terminate its loan agreement with us and cease to constitute a qualified

non-profit health insurance issuer (QNHII), for the purpose of pursuing innovative business

plans that are not otherwise consistent with the governance requirements and business standards

applicable to a CO-OP borrower. Under the new regulatory provision, we will be able to

consider a request by a CO-OP to voluntarily terminate its loan agreement for reasons other than

financial viability, provided all outstanding CO-OP loans issued to the loan recipient are repaid

in full prior to termination, and we believe granting the request would meaningfully enhance

This includes continuation of the differential display of standardized plan options on HealthCare.gov and

enforcement of the standardized plan options display requirements for approved web-brokers and QHP issuers using

a direct enrollment pathway to facilitate enrollment through an FFE or SBE–FP— including both the Classic Direct

Enrollment (Classic DE) and Enhanced Direct Enrollment (EDE) Pathways.

CMS-9895-F 44

consumer access to quality, affordable, member-focused, non-profit health care options in

affected markets.

We are finalizing conforming amendments to the payment and collections process set

forth at § 156.1215 to align with the policies and regulations proposed in the Federal

Independent Dispute Resolution Operations proposed rule (88 FR 75744) and that are contingent

on their finalization. This provision will provide that administrative fees for utilizing the No

Surprises Act Federal independent dispute resolution (IDR) process for health insurance issuers

that participate in financial programs under the ACA would be subject to netting as part of HHS’

integrated monthly payment and collections cycle. Additionally, we are finalizing the

amendment to § 156.1215 to provide that any amount owed to the Federal Government by an

issuer and its affiliates for unpaid administrative fees due to the Federal Government from these

issuers and their affiliates for utilizing the Federal IDR process in accordance with §

149.510(d)(2), after HHS nets amounts owed by the Federal Government under these programs,

would be the basis for calculating a debt owed to the Federal Government.

III. Summary of the Provisions of the Proposed Regulations

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

1. Background

Section 1332 of the ACA permits States to apply for a section 1332 waiver to pursue

innovative strategies for providing their residents with access to higher value, more affordable

health insurance coverage. To allow for greater flexibility in communicating with the public, we

are finalizing updates to the public hearing process requirements for section 1332 waivers.

Under section 1332(b) of the ACA, the Secretary of HHS and the Secretary of the

Treasury (collectively, the Secretaries) may exercise their discretion to approve a request for a

CMS-9895-F 45

section 1332 waiver only if the Secretaries determine that the proposal for the section 1332

waiver meets the following four requirements, referred to as the statutory guardrails: (1) the

proposal provides coverage that is at least as comprehensive as coverage defined in section

1302(b) of the ACA and offered through Exchanges established under title I of the ACA, as

certified by the Office of the Actuary of CMS, based on sufficient data from the State and from

comparable States about their experience with programs created by the ACA and the provisions

of the ACA that would be waived; (2) the proposal provides coverage and cost-sharing

protections against excessive out-of-pocket spending that are at least as affordable for the State's

residents as would be provided under title I of the ACA; (3) the proposal provides coverage to at

least a comparable number of the State's residents as would be provided under title I of the ACA;

and (4) the proposal does not increase the Federal deficit. The Secretaries retain their

discretionary authority to deny requested section 1332 waivers when appropriate given

consideration of the application, as a whole, even if a proposal for a section 1332 waiver meets

the four statutory guardrails.

The Departments are responsible for monitoring an approved section 1332 waiver’s

compliance with the statutory guardrails and for conducting evaluations to determine the impact

of the section 1332 waiver. Specifically, section 1332(a)(4)(B)(v) of the ACA requires the

Secretaries to promulgate regulations that provide for a process for the periodic evaluation of

approved section 1332 waivers. The Secretaries must also promulgate regulations that provide

for a process under which States with approved section 1332 waivers submit to the Secretaries

periodic reports concerning the implementation of the State’s waiver program.

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

CMS-9895-F 46

2. Finalized Amendments to Normal Public Notice Requirements (31 CFR 33.112, 31 CFR

33.120, 45 CFR 155.1312, and 45 CFR 155.1320)

Sections 1332(a)(4)(B)(i) and (iii) of the ACA provide that the Secretaries shall

promulgate regulations that provide for a process for public notice and comment at the State

level, including public hearings, and a process for providing public notice and comment at the

Federal level after the section 1332 waiver application is received by the Secretaries,

respectively, that are both sufficient to ensure a meaningful level of public input. Current

regulations at 31 CFR 33.112 and 45 CFR 155.1312 specify State public notice and comment

period and participation requirements for proposed section 1332 waiver requests, and 31 CFR

33.116(b) and 45 CFR 155.1316(b) specify the public notice and comment period and approval

requirements under the accompanying Federal process.

In the November 2020 IFC (85 FR 71142), the Departments revised regulations to set

forth flexibilities in the public notice requirements and post-award public participation

requirements for section 1332 waivers during the COVID-19 PHE. In the September 2021 Final

Rule (86 FR 53502), the Departments extended those changes beyond the COVID-19 PHE to

allow similar flexibilities in the event of future natural disasters; PHEs; or other emergent

situations that threaten consumers' access to health insurance coverage, consumers' access to

health care, or human life. Currently, in such an event, States may submit a request to the

Departments to modify, in part, the State public notice requirements specified in 31 CFR

33.112(a)(1), (b), (c), and (d) and 45 CFR 155.1312(a)(1), (b), (c), and (d), and the Federal

public notice requirement specified in 31 CFR 33.116(b) and 45 CFR 155.1316(b), pursuant to

31 CFR 33.118(a) and 45 CFR 155.1318(a).

CMS-9895-F 47

The criteria to request a modification from the normal public notice requirements during

an emergent situation are set forth in 31 CFR 33.118(b)(1) through (5) and 45 CFR

155.1318(b)(1) through (5). Pursuant to 31 CFR 33.118(b)(3) and 45 CFR 155.1318(b)(3), the

State’s request to modify normal public notice procedures is required to include: the justification

for the requested modification from the State public notice procedures as it relates to the

emergent situation and the alternative public notice procedures, including public hearings, that it

proposes to implement at the State level and that are designed to provide the greatest opportunity

for and level of meaningful public input from impacted interested parties that is practicable given

the emergent circumstances motivating the State’s request for a modification.

Since the finalization of the flexibilities in 31 CFR 33.118(b)(1) through (5) and 45 CFR

155.1318(b)(1) through (5), almost all States with approved section 1332 waivers (“section 1332

waiver States”) submitted requests that were granted by the Departments to conduct their annual

post-award forums virtually instead of in-person during the COVID-19 PHE to reduce the risk of

transmission of COVID-19. Similarly, during the COVID-19 PHE, States submitting new section

1332 waiver applications, waiver extension requests, or waiver amendment requests also

requested to host their State public hearings virtually and these requests were also granted by the

Departments. However, with the recent expiration of the Federal COVID-19 PHE

(and many

State COVID-19 PHEs)

and in line with the requirements of 31 CFR 33.120(c) and 45 CFR

155.1320(c) and 31 CFR 33.112(c) and 45 CFR 155.1312(c), the Departments have ceased

The Federal COVID-19 PHE ended on May 11, 2023. https://www.hhs.gov/about/news/2023/05/09/fact-sheet-

end-of-the-covid-19-public-health-

emergency.html#:~:text=That%20means%20with%20the%20COVID,the%20expiration%20of%20the%20PHE.

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

(https://health.alaska.gov/PHE/Pages/default.aspx); in Colorado the Disaster Recovery Order ended on April 27,

2023 (https://hcpf.colorado.gov/covid-19-phe-planning); in Georgia the State of Emergency ended on May 11, 2023

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

and in Rhode Island the State’s COVID-19 Disaster Emergency ended on May 11, 2023

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

CMS-9895-F 48

granting States’ requests to hold public hearings or post-award forums virtually instead of in-

person on the basis of the Federal COVID-19 PHE.

Upon review and consideration of the lessons learned during the COVID-19 PHE, the

Departments have determined that some current provisions regarding normal State public notice

procedures are outdated given the increased accessibility that technology has provided for virtual

and telephonic meetings. States have shared that their residents benefitted from the States’

opportunity to host public hearings and post-award forums virtually, and that they would like to

continue doing so to facilitate attendance. States have also reported to the Departments that

hosting meetings virtually during the COVID-19 PHE did not decrease the amount or quality of

meaningful input received. States’ experiences during this time demonstrated that interested

parties were able to virtually attend meetings and submit public comments verbally or in-writing,

and States did not report any significant issues relating to virtual platforms that impeded public

attendance or participation. States continued to share with the Departments summaries of their

post-award forums, as well as all public comments received and actions taken in response to

concerns or comments, in accordance with section 1332 waiver annual reporting requirements. In

States’ new waiver applications, waiver extension requests, and waiver amendment requests,

States also shared with the Departments summaries of virtually conducted hearings from their

State public comment periods and addressed public comments or concerns received.

Beyond mitigating the spread of COVID-19, information shared by section 1332 waiver

States has demonstrated that the opportunity to host post-award forums and public hearings on

virtual platforms facilitated comparable or higher levels of public attendance when compared to

previously held in-person meetings. For example, at Maryland’s annual post-award forums held

in 2019 (in-person) and 2020-2022 (virtual), the State saw comparable participation across the

CMS-9895-F 49

years from interested parties. Minnesota also reported comparable attendance at its post-award

forums across the years: 4 attendees in 2018 (in-person), 1 in 2019 (in-person), 4 in 2020

(virtual), 9 in 2021 (virtual),

and 2 in 2022 (virtual). Likewise, Wisconsin had 6 attendees at its

post-award forum in 2019 (in-person), 24 in 2020 (virtual),

11 in 2021 (virtual), and 7 in 2022

(virtual). Wisconsin noted that using a virtual format has allowed individuals who would

otherwise not be able to attend in-person to view the State’s presentation and that this has proven

to be a convenient means for individuals to attend the forum.

States that began waiver implementation after the start of the COVID-19 PHE have also

reported successfully hosting virtual post-award forums. For example, Colorado conducted its

first post-award forum entirely virtually in 2020 and reported 79 attendees.

Pennsylvania had 2

attendees at its first post-award forum in 2021 (virtual) and 4 in 2022 (virtual). Pennsylvania

noted that due to the expansiveness of the State’s geography, there has historically been low in-

person attendance, as observed at its in-person public hearings in 2019 for its waiver application,

where no members of the public attended the first meeting, and two members of the public

attended the second meeting.

States submitting new waiver applications, waiver extension requests, or waiver

amendment requests during the COVID-19 PHE also reported successfully conducting their

public hearings on virtual platforms. For example, in January 2022, Alaska held a combined

post-award forum and State public hearing for its waiver extension application both in-person

and with a telephonic option, which 3 members of the public attended either in-person or

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

increased attendance.

Note that attendance was relatively higher in 2020 likely due to the forum following the State’s first full year of

implementing its reinsurance program.

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

increased attendance.

CMS-9895-F 50

virtually. In April 2022, Washington held two State public hearings virtually, in which 9

representatives from organizations attended and shared public comments.

There are other Federal programs and agencies that permitted a virtual option in place of

in-person public hearings prior to the COVID-19 PHE or that have more recently amended their

policies for public input to continue virtual and telephonic options that were first implemented

during the COVID-19 PHE. For example, States that are applying for Medicaid section 1115

demonstrations are permitted to use telephonic and web-based conference capabilities for public

meetings. In fact, per 42 CFR 431.408(a)(3), a State must use telephonic and/or web conference

capabilities for at least one of the two required public hearings to ensure Statewide accessibility

to the public hearing, unless it can document it has afforded the public throughout the State the

opportunity to provide comment, such as holding the two public hearings in geographically

distinct areas of the State.

As another example, during the COVID-19 PHE, the Internal Revenue Service (IRS)

began holding public hearings on notices of proposed rulemaking telephonically instead of in-

person. Following the end of the Federal COVID-19 PHE, the IRS recently announced that, for

proposed regulations published in the Federal Register after May 11, 2023,

public hearings

would be conducted in-person but that a telephonic option would remain available for those who

prefer to attend or testify by telephone.

The Departments considered whether to propose requiring States to hold at least one of

the required public hearings for waiver applications in-person. However, as explained above,

States have successfully hosted post-award forums and public hearings for section 1332 waiver

applications virtually to allow for meaningful public input over the last several years.

Internal Revenue Service, Public Hearings on Proposed Regulations to Be Conducted in Person with Telephone

Options Available, Announcement 2023-16. Accessed at https://www.irs.gov/pub/irs-drop/a-23-16.pdf.

CMS-9895-F 51

Furthermore, by allowing States the ability to hold all of their meetings virtually, States may

better allow for input across different geographies, communities, and populations. We a lso

considered proposing the standard under section 1115 demonstrations where one hearing is

required to be done virtually. However, given the successful hosting of virtual meetings with

public participation by States for section 1332 waivers, it does not seem necessary to continue to

require in-person meetings to solicit public input on section 1332 waivers.

The Departments believe that by allowing States the opportunity to hold post-award

forums and public hearings virtually and through digital platforms, States would be able to

continue facilitating attendance and participation from interested parties and the public to

provide meaningful input. As such, the Departments are of the view that updating the State

public notice procedures would enhance public participation in the section 1332 waiver review

and monitoring process. This approach would help remove barriers to participation and increase

opportunities for engagement in policymaking for communities and local partners who may face

barriers to in-person participation (for example, those in rural areas). This approach is also

consistent with Executive Order 14094, Executive Order on Modernizing Regulatory Review, as

it would affirm States’ abilities to be inclusive in seeking public input from interested or affected

parties, including members of underserved communities, and promote best practices for

information accessibility and engagement with interested or affected parties through the use of

alternative platforms and media for engaging the public.

Further, this approach may improve

States’ abilities to understand and eliminate barriers experienced by underserved or under-

represented communities, and identify opportunities to advance health equity, while diminishing

administrative burden related to the integration of in-person and virtual formats.

88 FR 21879. https://www.govinfo.gov/content/pkg/FR-2023-04-11/pdf/2023-07760.pdf.

CMS-9895-F 52

Therefore, in this final rule, the Departments are finalizing as proposed that a virtual (that

is, one that uses telephonic, digital, and/or web-based platforms) or hybrid (that is, one that

provides for both in-person and virtual attendance) public hearing or forum be considered as the

equivalent of holding an in-person meeting. In the 2012 Final Rule (77 FR 11700), the

Departments noted that as set forth in 31 CFR 33.112(c)(1) and (2) and 45 CFR 155.1312(c)(1)

and (2), a State must hold at least two public hearings in distinct locations. Under this policy,

States would still need to hold at least two public hearings in distinct locations. For example, the

Departments clarify that under this final rule, a State would not be permitted to count a public

hearing in which there is simultaneously an in-person location and virtual platform as two

hearings (or two locations). Instead, one virtual or hybrid meeting would still count as one public

hearing, and two virtual or hybrid meetings would count as two public hearings.

In this final rule, we are finalizing as proposed in the 2025 Payment Notice proposed rule

(88 FR 82510, 82520), to amend 31 CFR 33.112(c) and 45 CFR 155.1312(c) and 31 CFR

33.120(c) and 45 CFR 155.1320(c). More specifically, the Departments are finalizing

modifications to 31 CFR 33.112(c) and 45 CFR 155.1312(c) to permit States to conduct public

hearings in a virtual or hybrid format in lieu of conducting an in-person meeting. The

Departments also finalize as proposed amending 31 CFR 33.120(c) and 45 CFR 155.1320(c) to

provide that for a State’s annual post-award forum, the public forum shall be conducted in an in-

person, virtual (that is, one that uses telephonic, digital, and/or web-based platforms), or hybrid

(that is, one that provides for both in-person and virtual attendance) format. These changes will

go into effect upon publication of this final rule.

This policy is limited to allowing flexibility to host required meetings virtually. States

would still be required to continue to abide by all other public notice requirements, including

CMS-9895-F 53

public notice procedural requirements for waiver applications, waiver extension and waiver

amendment requests, and post-award forums. For example, States would still be required to have

a process to consult and collaborate with Federally-recognized tribes,

as applicable, as well as

take reasonable steps to provide meaningful access for individuals with limited English

proficiency (LEP) (for example, language assistance services that may include interpretation in

non-English languages provided in-person or remotely by a qualified interpreter, translated

written content in paper or electronic form into or from languages other than English, and written

notice of availability of language assistance services), and appropriate steps to ensure effective

access for and communication with individuals with disabilities (for example, accessibility of

information and communication technology).

States should recognize that virtual meetings

may present additional accessibility challenges for people with communications and other

disabilities, as well as to those who lack broadband access. Complying with the requirement to

ensure effective communication may entail providing American Sign Language interpretation

and real-time captioning, as well as ensuring that the virtual platform is interoperable with

assistive technology for people with disabilities.

Finally, the Departments clarify that under this final rule, States shall have a process by

which members of the public can request in-person meetings for the annual post-award forum or

State public hearings on waiver applications, waiver extension requests, or waiver amendments

requests, and that States shall accommodate those requests whenever possible. In addition, States

with approved section 1332 waivers and States seeking approval for proposed waivers would

continue to have flexibility to submit requests to the Departments during emergent situations to

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

See Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d, 45 CFR part 80), Section 1557 of the ACA (42

U.S.C. 18116, 45 CFR part 92), Section 504 of the Rehabilitation Act of 1973 (29 U.S.C 794, 45 CFR part 84), and

Title II of the Americans with Disabilities Act (42 U.S.C. 1213 et seq., 28 CFR part 35).

CMS-9895-F 54

modify certain public participation requirements as set forth in 31 CFR 33.118(b)(1) through (5)

and 45 CFR 155.1318(b)(1) through (5).

The Departments sought comment on these proposals and received 29 comments on the

section 1332 waiver proposals from various interested parties, including States, health and

disease advocacy organizations, general advocacy organizations, health care provider

organizations, and research organizations. All comments generally expressed support for the

proposed changes, though some raised additional considerations related to accessibility.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing these provisions as proposed. We summarize and

respond to public comments received on the proposed amendments to normal public notice

requirements (31 CFR 33.112, 31 CFR 33.120, 45 CFR 155.1312, and 45 CFR 155.1320)

below.

Comment: The Departments received comments supporting the additional flexibilities for

States to conduct public hearings and post-award forums in a virtual or hybrid format.

Commenters agreed that these updates would facilitate public participation on section 1332

waivers by increasing access to meetings for people who would otherwise face barriers to

attending in-person meetings (for example, due to geographic distance, transportation, childcare,

limited mobility, chronic health conditions). Commenters also agreed with the Departments’

clarification that one meeting held in a hybrid format does not meet the existing requirement that

States hold at least two such events in separate locations, and that States would still need to hold

at least two public hearings in distinct locations (for example, one virtual or hybrid meeting

counts as one meeting, and two virtual or hybrid meetings count as two meetings).

CMS-9895-F 55

Several comments from States shared their own positive experiences with hosting public

hearings and post-award forums virtually during the COVID-19 pandemic. They explained that

public participation did not suffer because the meetings were held virtually. These States also

noted that the ability to hold virtual public hearings and post-award forums without needing to

request a modification from the normal public notice requirements due to an emergent situation

(as they would have done under previous guidance) would reduce administrative hurdles.

However, one State asserted that there is no benefit from requiring States to hold public forums

in-person and that it is an inefficient use of State resources.

Response: The Departments appreciate the support and have finalized the rule as

proposed.

Comment: We received several comments expressing concern that virtual or hybrid

meetings may simultaneously pose additional challenges for States to comply with Federal civil

rights protections and requirements for accessibility. These commenters voiced concern that

people with disabilities, people with LEP, and people with limited broadband access may

experience barriers to participation. These commenters encouraged the Departments to issue

additional subregulatory guidance to States that clarify related Federal civil rights protections

and requirements and to provide examples of compliance strategies to ensure that people with

accessibility needs can meaningfully participate in the public comment process. Similarly, one

commenter recommended that CMS include in the final rule accessibility standards for virtual

and hybrid meetings, such as practices related to pre-event information, live captioning, assistive

technology, and document and platform accessibility; and another commenter proposed that the

Departments codify essential accessibility practices in the final rule, such as closed captioning,

simultaneous interpretation, option to dial in to meetings, and ensuring that the technology used

CMS-9895-F 56

is compatible with assistive technologies used by people with disabilities. Finally, one

commenter recommended that the Departments require States to include a virtual option when

public hearings are held in-person, which would allow for participation from people who cannot

safely attend in-person (for example, people who are immunocompromised). This commenter

also requested that States posting public notice for these meetings should ensure the notices are

easily accessible and prominently displayed on their websites.

Response: The Departments agree with commenters that despite the additional

flexibilities for States to host meetings in a virtual or hybrid format, it continues to be important

for States to comply with applicable Federal civil rights law and ensure accessibility in the public

notice and comment process. Regarding commenters’ suggestion that the Departments issue

additional subregulatory guidance and provide examples of compliance strategies, or to codify

accessibility standards and practices into the final rule, we emphasize that the finalization of

these provisions does not change requirements for States to ensure Federal civil rights

protections and meet applicable accessibility needs. Indeed, in the 2021 Final Rule, the

Departments reiterated that any public participation processes must comply with applicable

Federal civil rights laws.

The Departments expect that States will continue to take accessibility

considerations into account to ensure a meaningful level of public input during State notice and

comment periods and post-award forums. States may reference the HHS Office for Civil Rights

for information on Federal civil rights laws and protections.

Additionally, comments on issuing

subregulatory guidance and codifying accessibility standards and practices are not directly in

Patient Protection and Affordable Care Act; Updating Payment Parameters, Section 1332 Waiver Implementing

Regulations, and Improving Health Insurance Markets for 2022 and Beyond (86 FR 53412, 53457)

https://www.govinfo.gov/content/pkg/FR-2021-09-27/pdf/2021-20509.pdf.

https://www.hhs.gov/civil-rights/for-individuals/index.html.

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response to the proposed rule and are out-of-scope. As such we have finalized this rule as

proposed.

Finally, the Departments remind States that they must publish the date, time, and location

of the public forum in a prominent location on the State’s public website, at least 30 days prior to

the date of the planned public forum. Consistent with Federal civil rights law, including section

1557 of the ACA, section 504 of the Rehabilitation Act of 1973, and Title II of the Americans

with Disabilities Act, section 1332 waiver applications must be accessible to individuals with

disabilities, including when such applications are posted online. To assist with ensuring website

accessibility, States may look to national standards issued by the Architectural and

Transportation Barriers Compliance Board (often referred to as ‘‘section 508 standards’’),

alternatively, to standards issued by the World Wide Web Consortium’s (W3C).

Comment: One commenter who supported the proposed provisions also encouraged the

Departments to consider the benefits of in-person meetings by gathering feedback from States to

provide guidance on best practices, as in-person meetings may offer a greater level of participant

engagement compared to virtual meetings (for example, in-person public testimonies during the

State legislative process can have more meaningful impact than virtual testimonies).

Response: As noted in the proposed rule, the Departments considered whether to propose

requiring States to hold at least one of the required public hearings for waiver applications in-

person. Some States had previously expressed to the Departments and in public comments on

this proposed rule that they appreciated the flexibility to virtually conduct public hearings and

forums. As demonstrated over the last several years, States have successfully hosted post-award

forums and public hearings for section 1332 waiver applications virtually to allow for

For more information on section 508 standards, see https://www.section508.gov/develop/web-content/.

For more information, see https://www.w3.org.

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meaningful public input. Furthermore, States continue to have the option to conduct all public

hearings or post-award forums in-person. We encourage States to consider where other

opportunities for consumer involvement exist. We believe that the proposed State and Federal

public notice and comment processes, along with the post-award public forum provision, ensure

meaningful opportunities for participation.

Comment: One commenter suggested that the Departments provide flexibility on whether

or not to conduct post-award forums due to what the commenter asserts is a lack of statutory

authority, a history of low attendance at post-award forums, the belief that this input could be

gathered at a much lower cost with written comments, and the view that the forums are

duplicative of other State evaluation processes.

Response: The Departments require post-award forums under their authority under

section 1332 (a)(4)(B)(iv) and (v), 31 CFR 33.120, and 45 CFR 155.1320 to require States to

submit periodic reports and conduct periodic evaluations to monitor States’ compliance with

Federal and regulatory requirements for section 1332 waivers. Further, we believe that the public

should have an opportunity to comment at a post-award public forum as reflected in 31 CFR

33.120(c) and 45 CFR 155.1320(c) and note that the requirement for a post-award forum is part

of the periodic monitoring and evaluation of waivers. This comment is outside the scope of this

rulemaking.

B. 42 CFR Parts 435 and 600

1. Increase State Flexibility in the Use of Income and Resource Disregards for Non-MAGI

Populations (42 CFR 435.601)

In the proposed rule, we proposed to provide States with greater flexibility to adopt

income and/or resource disregards in determining financial eligibility under section 1902(r)(2) of

CMS-9895-F 59

the Act for individuals excepted from application of modified adjusted gross income financial

methodologies (“MAGI-based methodologies”).

Specifically, we proposed to remove the current 42 CFR 435.601(d)(4), which was first

adopted in 1993. As explained in the preamble to the proposed rule, the current rule describes the

eligibility groups to which States may apply less restrictive methodologies and requires that any

less restrictive methodologies elected by a State be “comparable for all persons within each

category of assistance within an eligibility group.” As further explained in 42 CFR

435.601(d)(4), for example, if the agency chooses to apply a less restrictive income or resource

methodology to an eligibility group of aged individuals, it must apply that methodology to all

aged individuals within the selected group.

In the preamble to the proposed rule, we noted that, upon further review, we recognize

that section 1902(r)(2)(A) of the Act does not expressly impose a comparability mandate, and

that we did not identify a specific legal rationale for the mandate when we originally proposed

and finalized 42 CFR 435.601(d)(4), 54 FR 39421, 39433 (September 26, 1989); 58 FR 4908,

4919 (January 19, 1993). We thus concluded that the inclusion of the mandate was a policy

choice. We further considered that section (3)(b) of the Sustaining Excellence in Medicaid Act of

2019, Pub. L. No. 116-39, permits States to target income and/or resource disregards to people

who need home and community-based services (HCBS).

In light of this analysis, and given that

States over the years have expressed interest in targeting income and/or resource disregards to

subpopulations within eligibility groups, we proposed to eliminate paragraph (4) from 42 CFR

435.601(d).

For further information, see CMS State Medicaid Director Letter 21-004, “State Flexibilities to Determine

Financial Eligibility for Individuals in Need of Home and Community-Based Services.”

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

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We explained that we believed that eliminating this provision would: increase State

flexibility; provide States more options to extend eligibility to specific populations based on a

State’s circumstances; and enable States to achieve targeted expansions of coverage that best

meet their needs, in contrast to the all-or-nothing approach for income and resource disregards

that is effectively required by 42 CFR 435.601(d)(4). We acknowledged, however, that it was

possible that eliminating the comparability requirement from 42 CFR 435.601(d)(4) might

enable a State to narrow an existing disregard that is broadly available to an eligibility group at

present to discrete members of the group instead. We indicated that we had not received inquiries

from States on the permissibility of such an approach, and that we believed States would utilize

the elimination of 42 CFR 435.601(d)(4) to expand eligibility. We invited comment on our

proposal.

Comment: We received many comments on our proposal. A majority of the commenters

expressed either conditional or outright support for the proposal. Commenters agreed that the

proposal would increase State flexibility and facilitate targeted expansions of Medicaid coverage.

Commenters also indicated that the proposal would foster State development of innovative

pathways to Medicaid eligibility and help low-income and vulnerable populations. Many

commenters also agreed that States would most likely use the flexibility to increase Medicaid

eligibility.

However, many commenters who expressed support for the proposal (and some who

opposed it) emphasized that, as the proposal leaves open the possibility that States could use the

offered flexibility to narrow existing disregards, CMS should impose “safeguards,” “guardrails,”

or “no-harm” requirements that would effectively prohibit the States’ use of the flexibility in this

manner. Some of these commenters noted that the proposal should not be finalized without these

CMS-9895-F 61

requirements. A number of commenters suggested that States’ exercise of the flexibility be

closely monitored, with one recommending that the proposal, if finalized, should be reexamined

if States use it in a manner that adversely affects beneficiaries. A few commenters suggested that

we were underestimating the likelihood of States using the additional flexibility to reduce

eligibility, and that, as an example, such a course of action might be attractive for States facing

budget pressure.

Response: We appreciate the support we received for the general concept of providing

States with additional flexibility in this area. However, given the significant concerns and

comments that we received, we have decided that we should consider this proposal further and

any necessary beneficiary protections, and we are not finalizing it at this time. As we indicated in

the preamble to the proposed rule, we believe the proposal would provide States more options to

extend eligibility. It is not our intent, however, to offer methods by which States may be likely to

reduce it in practice or otherwise harm beneficiaries. We therefore intend to further evaluate the

comments regarding the additional flexibility we proposed for States. We will consider the

commenters’ recommendations regarding the use of “guardrails,” or other beneficiary

protections as well as the need for other modifications to our proposal that would address these

commenters’ concerns regarding adequate beneficiary protections in a proposal in the future.

Comment: Many commenters who supported the proposal specifically noted its potential

to benefit “at-risk” or “vulnerable” populations, people 65 years old and older, people with

blindness or disabilities, “dually eligible” individuals, and prospective medically needy

individuals. Commenters also indicated that the proposal could: allow States to develop

innovative pathways to Medicaid eligibility; potentially ease the application process for

applicants and thereby allow access to coverage more quickly; stabilize coverage for individuals

CMS-9895-F 62

who may experience minor changes in income and/or resources that might otherwise render them

ineligible; and possibly produce important information about current eligibility barriers that

could lead to broader reforms. One commenter suggested that the flexibility offered by the

proposal would be a “commonsense change” that would allow States both to improve care for

non-MAGI populations and address “nonsensical, unintended situations that have resulted from

different eligibility groups having different income and resource limits.”

Response: We agree that the proposal could benefit the various populations described in

these comments. We also agree that the proposal could facilitate State innovation in expanding

Medicaid eligibility pathways and support more seamless transitions between eligibility groups.

As explained above, however, we are continuing to consider the comments we received and are

not finalizing the proposal at this time.

Comment: We received many comments that raised concerns with States using the

additional flexibility offered by the proposal to reduce existing disregards. Nearly all

commenters who raised these concerns recommended that, if we finalized the proposal, we

should prohibit States from reducing or narrowing existing disregards for portions of eligibility

groups. Some commenters also suggested that the regulatory text, if the proposal is finalized,

should require that any targeting criteria be both grounded on a sound rationale and not

discriminate based on race, gender, sexual orientation, disability, age, or health condition. A few

other commenters recommended that, at the very least, we should include in the regulation a

requirement that individuals who may lose eligibility due to a State reducing or narrowing

existing disregards be offered a “transitional period” so that they are not immediately terminated

and instead have time to potentially conform to new eligibility rules. A few commenters

questioned the legal basis for our proposed change.

CMS-9895-F 63

Response: We appreciate this input. As we noted in the preamble to the proposed rule,

State inquiries on the scope of the comparability rule in 42 CFR 435.601(d)(4) have generally

centered on ideas on how to expand eligibility instead of reducing it. However, as we explained

above, we are not finalizing our proposal at this time in order to further consider our proposal in

light of these comments.

Comment: A few commenters raised operational concerns about implementation of our

proposal. A few others expressed concern that we should obtain additional input from interested

parties before moving forward with our proposal. We also received comments not directly

related to the proposal, such as comments asserting a need for periodic adjustments in resource

standards and for working with States to identify the most appropriate resource standards for

different Medicaid populations.

Response: We appreciate this input. As explained above, we are not finalizing our

proposal at this time to further consider our proposal considering the comments received on the

proposal.

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

Section 1331 of the Patient Protection and Affordable Care Act, as amended by the

Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted March 30,

2010), provides States with the option to operate a Basic Health Program (BHP). In the States

that elect to operate a BHP, the State’s BHP makes affordable health benefits coverage available

for lawfully present individuals under age 65 with household incomes between 133 and 200

percent of the Federal poverty level (FPL) (or in the case of a lawfully present non-citizen,

ineligible for Medicaid or the Children’s Health Insurance Program (CHIP) due to immigration

status, with household incomes between zero and 200 percent of the FPL) who are not eligible

CMS-9895-F 64

for Medicaid, CHIP, or other minimum essential coverage. As of the date of this final rule, only

Minnesota is implementing a B HP. Oregon has submitted a Blueprint with a proposed BHP

implementation date of July 1, 2024.

Under current 42 CFR 600.320(c), States must establish a uniform method of determining

the effective date of eligibility for enrollment in a standard health plan following either the

Medicaid process at 42 CFR 435.915 exclusive of 42 CFR 435.915(a) or the Exchange standards

at 45 CFR 155.420(b)(1).

Although the current BHP regulation provides States with some flexibility in establishing

an effective eligibility date for enrollment, it does not permit a State to select an effective date of

coverage standard for eligible individuals as of the first day of the month following the month of

application or eligibility determination regardless of when they apply or are found eligible to

enroll in a standard health plan in the BHP. We believe eligible individuals should have access to

coverage as soon as feasible.

While the Medicaid process at 42 CFR 435.915, exclusive of paragraph (a), allows for a

State operating a BHP to have the earliest possible effective date for its enrollees, we understand

that some States may have operational or regulatory constraints that do not allow them to follow

the Medicaid process, but may be able to implement an effective date for all eligible applicants

the first day of the month after the month in which the eligibility determination is made,

regardless of which day of the month such determination occurs.

We are finalizing the proposed rule to revise § 600.320(c) to add a third option at

paragraph (c)(3) that would allow a State operating a BHP to establish an effective date of

eligibility for enrollment for all enrollees on the first day of the month following the month in

which BHP eligibility is determined. Under § 600.320(c)(1), States would continue to have the

CMS-9895-F 65

option to follow the Exchange standards at 45 CFR 155.420(b)(1), and under 42 CFR

600.320(c)(2), a State may follow Medicaid standards at 42 CFR 435.915 exclusive of paragraph

(a).

We sought comment on the proposed additional option for determining the effective date

of eligibility for enrollment in a standard health plan as well as an alternative option of allowing

a State to establish its own uniform effective date policy.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision with the following modifications: we

are adding § 600.320(c)(4) to specify that subject to HHS approval, a State may establish its own

effective date of eligibility for enrollment policy as long as it is (1) no later than the first day of

the second month following the date that an individual has been determined BHP-eligible; and

(2) no more restrictive than § 600.320(c)(1) through (3). We summarize and respond to public

comments received on the proposed BHP effective date policy below.

Comment: Many comments supported the additional flexibility for States operating a

BHP to follow an effective date of eligibility for enrollment on the first day of the month

following the month in which BHP eligibility is determined.

Response: We appreciate the comments supporting our proposal, and for reasons

discussed below, we are finalizing the regulation changes as proposed with only minor

modifications.

Comment: A few commenters supported an option to allow a State to establish its own

effective date of eligibility policy, which we had sought comment on.

Response: We appreciate the comments and agree that individual States’ needs should be

taken into account. Therefore, we are adding an option that allows a State to establish its own

CMS-9895-F 66

effective date of eligibility for enrollment policy. We have added § 600.320(c)(4), which

specifies that subject to HHS approval, a State may establish its own effective date of eligibility

policy. We specify that a State-developed effective date must be no later than the first date of the

second month following the date that an individual has been determined BHP-eligible. In

addition, the effective date of eligibility for enrollment must be no more restrictive than §

600.320(c)(1) through (3). This effective date policy should provide greater flexibility for a State

to meet its own population’s needs and not cause delays in coverage. We expect this request to

be submitted via a Blueprint revision.

Comment: One commenter questioned our discussion of the intersection of premium

payments and enrollment in a BHP. The commenter was concerned that we were suggesting that

the proposed option at § 600.320(c)(3) would require enrollment after an eligibility

determination was made, regardless of whether a premium payment was received.

Response: This regulation sets out the allowable effective dates of coverage but does not

describe all of the processes surrounding enrollment of an individual into coverage. The lack of

mention of premium payment was not intended to preclude a State from requiring premium

payments prior to enrollment. States may require payment of premiums prior to enrolling an

individual int o BH P. A State that wishes to be particularly clear about its enrollment policies may

adopt the option under § 600.320(c)(4) and specify in the BHP Blueprint that it is providing

additional time to account for a BHP-individual to pay a premium.

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

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section 1343 of the ACA that transfers funds from lower-than-average risk, risk adjustment

covered plans to higher-than-average risk, risk adjustment covered plans in the individual, small

group markets, or merged markets, inside and outside the Exchanges. In accordance with

§ 153.310(a), a State that is approved or conditionally approved by the Secretary to operate an

Exchange may establish a risk adjustment program or have HHS do so on its behalf.

HHS did

not receive any requests from States to establish and operate a risk adjustment program for the

2025 benefit year. Therefore, HHS will operate risk adjustment in every State and the District of

Columbia for the 2025 benefit year.

1. Sequestration

In accordance with the OMB Report to Congress on the Joint Committee Reductions for

Fiscal Year 2024, the HHS-operated risk adjustment program is subject to the fiscal year 2024

sequestration.

The Federal Government's 2024 fiscal year began on October 1, 2023.

Therefore, the HHS-operated risk adjustment program will be sequestered at a rate of 5.7 percent

for payments made from fiscal year 2024 resources (that is, funds collected during the 2024

fiscal year).

HHS, in coordination with OMB, has determined that, under section 256(k)(6) of the

Balanced Budget and Emergency Deficit Control Act of 1985,

as amended, and the underlying

authority for the HHS-operated risk adjustment program, the funds that are sequestered in fiscal

year 2024 from the HHS-operated risk adjustment program will become available for payment to

issuers in fiscal year 2025 without further Congressional action. If Congress does not enact

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

Office of Management and Budget. (2023, March 13). OMB Report to the Congress on the BBEDCA 251A

Sequestration for Fiscal Year 2024. https://www.whitehouse.gov/wp-

content/uploads/2023/03/BBEDCA_Sequestration_Report_and_Letter_3-13-2024.pdf.

Pub. L. 99-177 (1985).

CMS-9895-F 68

deficit reduction provisions that replace the Joint Committee reductions, the program would be

sequestered in future fiscal years, and any sequestered funding would become available in the

fiscal year following that in which it was sequestered.

Additionally, we note that the Infrastructure Investment and Jobs Act

amended section

251A(6) of the Balanced Budget and Emergency Deficit Control Act of 1985 and extended

sequestration for the HHS-operated risk adjustment program through fiscal year 2031 at a rate of

5.7 percent per fiscal year.

After consideration of the comment and for the reasons outlined in the proposed rule, the

HHS-operated risk adjustment program will sequester payments made from fiscal year 2024

resources at a rate of 5.7 percent. We summarize and respond to the public comment received on

the fiscal year 2024 sequestration rate below.

Comment: One commenter acknowledged the sequestration rate for the HHS-operated

risk adjustment program.

Response: The HHS-operated risk adjustment program will sequester payments made

from fiscal year 2024 resources at a rate of 5.7 percent.

2. HHS Risk Adjustment (§ 153.320)

The HHS risk adjustment models predict plan liability for an average enrollee based on

that person’s age, sex, and diagnoses (also referred to as hierarchical condition categories

(HCCs)), producing a risk score. The HHS risk adjustment methodology utilizes separate models

for adults, children, and infants to account for clinical and cost differences in each age group. In

the adult and child models, the relative risk assigned to an individual’s age, sex, and diagnoses

are added together to produce an individual risk score. Additionally, to calculate enrollee risk

Pub. L. 117-58, 135 Stat. 429 (2021).

2 U.S.C. 901a.

CMS-9895-F 69

scores in the adult models, we added enrollment duration factors beginning with the 2017 benefit

year,

and prescription drug categories (RXCs) beginning with the 2018 benefit year.

Starting

with the 2023 benefit year, we removed the severity illness factors in the adult models and added

interacted HCC count factors (that is, additional factors that express the presence of a severity or

transplant HCC in combination with a specified number of total payment HCCs or HCC groups

on the enrollee’s record) to the adult and child models

applicable to certain severity and

transplant HCCs.

Infant risk scores are determined by inclusion in one of 25 mutually exclusive groups,

based on the infant’s maturity and the severity of diagnoses. If applicable, the risk score for

adults, children, or infants is multiplied by a cost sharing reduction (CSR) adjustment factor. The

enrollment-weighted average risk score of all enrollees in a particular risk adjustment covered

plan (also referred to as the plan liability risk score (PLRS)) within a geographic rating area is

one of the inputs into the State payment transfer formula,

which determines the State transfer

payment or charge that an issuer will receive or be required to pay for that plan for the applicable

State market risk pool for a given benefit year. Thus, the HHS risk adjustment models predict

average group costs to account for risk across plans, in keeping with the Actuarial Standards

Board’s Actuarial Standards of Practice for risk classification.

For the 2017 through 2022 benefit years, there is a set of 11 binary enrollment duration factors in the adult models

that decrease monotonically from one to 11 months, reflecting the increased annualized costs associated with fewer

months of enrollments. See, for example, 81 FR 94071 through 94074. These enrollment duration factors were

replaced beginning with the 2023 benefit year with HCC-contingent enrollment duration factors for up to 6 months

in the adult models. See, for example, 87 FR 27228 through 27230.

For the 2018 benefit year, there were 12 RXCs, but starting with the 2019 benefit year, the two severity-only

RXCs were removed from the adult models. See, for example, 83 FR 16941.

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

See 87 FR 27224 through 27228.

The State payment transfer formula refers to the part of the Federally certified risk adjustment methodology that

applies in States where HHS is responsible for operating the program. The formula calculates payments and charges

at the State market risk pool level (prior to the calculation of the high-cost risk pool payment and charge terms that

apply beginning with the 2018 benefit year). See, for example, 81 FR 94080.

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

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82527), we proposed to recalibrate the 2025 benefit year HHS risk adjustment models

with the 2019, 2020, and 2021 enrollee-level EDGE data. In the proposed rule, we explained the

history of recalibrating the risk adjustment models with enrollee-level EDGE data and why we

use three years of blended data for recalibration.

Given this history and reasoning, we proposed

to determine coefficients for the 2025 benefit year based on a blend of separately solved

coefficients from the 2019, 2020, and 2021 benefit years’ enrollee-level EDGE data, with the

costs of services identified from the data trended between the relevant year of data and the 2025

benefit year.

The coefficients listed in Tables 1 through 6 reflect the use of trended 2019, 2020,

and 2021 benefit year enrollee-level EDGE data, as well as other HHS risk adjustment model

updates finalized in this final rule (including, for example, the pricing adjustment for Hepatitis C

drugs).

We sought comment on the proposal to determine 2025 benefit year coefficients for the

HHS risk adjustment models based on a blend of separately solved coefficients from the 2019,

2020, and 2021 enrollee-level EDGE data.

After consideration of comments and for the reasons outlined in the proposed rule and our

responses to comments, we are finalizing this approach as proposed. We summarize and respond

88 FR 82510 at 82527 through 82528.

As described in the 2016 Risk Adjustment White Paper (https://www.cms.gov/cciio/resources/forms-reports-and-

other-resources/downloads/ra-march-31-white-paper-032416.pdf) and the 2017 Payment Notice (81 FR 12218), we

subdivide expenditures into traditional drugs, specialty drugs, medical services, and preventive services and

determine trend factors separately for each category of expenditure. In determining these trend factors, we consult

our actuarial experts, review relevant Unified Rate Review Template (URRT) submission data, analyze multiple

years of enrollee-level EDGE data, and consult National Health Expenditure Accounts (NHEA) data as well as

external reports and documents published by third parties. In this process, we aim to determine trends that reflect

changes in cost of care rather than gross growth in expenditures. As such, we believe the trend factors we used for

each expenditure category for the 2025 benefit year are appropriate for the most recent changes in cost of care that

we have seen in the market.

CMS-9895-F 71

to public comments received on the proposed enrollee-level EDGE data to be used for HHS risk

adjustment model recalibration for the 2025 benefit year below.

Comment: A few commenters supported utilizing the 2019, 2020, and 2021 enrollee-level

EDGE data to recalibrate the risk adjustment models for the 2025 benefit year as proposed. Other

commenters opposed using these years of enrollee-level EDGE data due to concerns about the

impact of the COVID-19 PHE on 2020 and 2021 benefit year enrollee-level EDGE data.

Response: We are finalizing the use of the 2019, 2020, and 2021 enrollee-level EDGE

data to recalibrate the 2025 risk adjustment models as proposed. As detailed further below, our

analyses found the 2020 and 2021 benefit year enrollee-level EDGE data is sufficiently similar to

prior years of enrollee-level EDGE data such that exclusion of these data years from the risk

adjustment model recalibration is not warranted.

We recognize that if a benefit year of enrollee-level EDGE data has significant changes

that differentially impact certain conditions or populations relative to others or is sufficiently

anomalous relative to expected future patterns of care, we should carefully consider what impact

that benefit year of data could have if it is used in the annual model recalibration for the HHS-

operated risk adjustment program.

This includes consideration of whether to exclude or adjust

that benefit year of data to increase the models' predictive validity or otherwise limit the impact

of anomalous trends. For this reason, we conducted extensive analysis on the 2020 benefit year

enrollee-level EDGE data to consider its inclusion in the recalibration of the 2024 benefit year

risk adjustment models. In the 2024 Payment Notice proposed rule

and final rule

Since the start of model calibration for the HHS risk adjustment models in benefit year 2014, the COVID–19

PHE has been the only such situation to date. Other events and policy changes have not risen to the same level of

uniqueness or impact.

87 FR 78214 through 78218.

88 FR 25749 through 25754.

CMS-9895-F 72

discussed our analysis of the 2020 benefit year data to identify possible impacts of the COVID-

19 PHE.

Likewise, when we were developing the proposal for recalibration of the 2025 benefit

year risk adjustment models, we conducted similar analyses on the 2021 benefit year enrollee-

level EDGE data as we did to the 2020 benefit year enrollee-level EDGE data to examine the

potential impact of the COVID-19 PHE. We did not find any notable anomalous trends,

especially when considering that every year of data can be unique, and therefore, some level of

deviation from year to year is expected. Specifically, our analysis found:

● The total sample size in the recalibration data set was similar between the 2019, 2020,

and 2021 benefit years, with the individual market at the national level seeing an increase in

enrollment in the 2021 benefit year and the small group market at the national level seeing a

slight decrease in enrollment in the 2021 benefit year.

● In the 2021 EDGE enrollee-level recalibration data set, PMPM spending increased

substantially relative to the 2020 benefit year. The increased percentage was similar for

institutional and professional services, preventive services, and drugs. While the year-over-year

increase was larger than usual, the 2-year increase in spending between 2019 and 2021 was more

consistent with historical trends. For both 2020 and 2021, year-over-year spending changes were

consistent across enrollee risk factors and thus did not skew the relative factors used in the HHS

risk adjustment models.

● Across all data submitted through issuer's EDGE servers between 2019 to 2020 benefit

years for enrollees in our recalibration sample, there was a 3,681 percent increase in claims with

telehealth services, whereas between the 2020 and 2021 benefit years, we observed a 1.25

percent increase in claims with telehealth services. Thus, use of telehealth services remained

This analysis included assessing how the 2020 benefit year enrollee-level EDGE recalibration data compares to

2019 benefit year enrollee-level EDGE recalibration data.

CMS-9895-F 73

much higher in the 2021 benefit year than in the 2019 benefit year. While it is likely the

continued higher use of telehealth services in 2021 was in part a response to the ongoing COVID

pandemic in 2021, it is also at least in part due to changes in patterns of care that can be expected

to continue into future benefit years. We therefore expect that the use of telehealth services may

continue at a level somewhere between the higher levels observed in the 2020 and 2021 benefit

years and the lower 2019 benefit year levels in the 2025 benefit year, as would be appropriately

reflected by including all three data years in the 2025 EDGE data recalibration.

● The percentage of enrollees with one or more HCCs was similar between the 2019 and

2020 benefit year enrollee-level EDGE recalibration data. The percentage of enrollees with one

or more HCC increased slightly between the 2020 and 2021 benefit year enrollee-level EDGE

recalibration data sets in both the recalibration and full data sets, as is the usual historical trend.

● Individual HCC frequencies and costs generally remained stable between the 2019,

2020, and 2021 benefit year enrollee-level EDGE recalibration data sets, even for the HCCs

related to the severe manifestations of COVID–19. One exception was a notable increase in

frequency for HCC 127 Cardio-Respiratory Failure and Shock, Including Respiratory Distress

Syndromes, which was likely coded for cases in which acute respiratory distress syndrome

(ARDS) was a manifestation of COVID-19, but relative allowed charges, and therefore, risk

adjustment model coefficients, for HCC 127 (Cardio-Respiratory Failure and Shock, Including

Respiratory Distress Syndromes) remained similar in 2021 compared to 2019 and 2020. We

expect that as least some severe manifestations of COVID-19 are likely to continue to occur

through the 2025 benefit year and those enrollees would continue to receive HCC 127 (Cardio-

Respiratory Failure and Shock, Including Respiratory Distress Syndromes).

CMS-9895-F 74

● RXC frequencies and costs were generally stable between the 2019, 2020, and 2021

benefit year enrollee-level EDGE recalibration data sets, with the exception of RXC 10 Cystic

Fibrosis Agents, for which a new drug was introduced that increased costs in the 2020 and 2021

data compared to the 2019 data. We expect the continued use of this new drug to cause RXC 10

(Cystic Fibrosis Agents) costs to remain at the higher levels reflected in the 2020 and 2021

benefit years through the 2025 benefit year.

● The coefficients for the 2021 benefit year enrollee-level EDGE recalibration data are

similar to the 2019 and 2020 benefit year's coefficients and are consistent with typical changes in

coefficients for new years of data. A major benefit of blending separately solved models across

three benefit years of data (that is, 2019, 2020, and 2021) is that unique features specific to one

benefit year are captured but not over-emphasized.

Thus, after analyzing our results, we concluded there were no significant anomalies in the

2021 benefit year enrollee-level EDGE data to warrant precluding its inclusion from the 2025

benefit year HHS risk adjustment model recalibration. This is consistent with how we ultimately

concluded there were no significant anomalies in the 2020 benefit year enrollee-level EDGE data

to warrant precluding its inclusion from risk adjustment model recalibration.

In fact, the

analysis we conducted confirmed that its inclusion was within the range of previous year-to-year

coefficient changes, and that many of the changes observed are likely to persist through the 2025

benefit year, as intended when transitioning to more recent years of data in model recalibration.

Further, the blending of the coefficients from the separately solved models for benefit years 2020

and 2021, with benefit year 2019, also helps promote stability and we believe would sufficiently

account for any differences resulting from the COVID-19 PHE.

87 FR 25749 through 25754.

CMS-9895-F 75

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments above, we are finalizing the approach for recalibrating the HHS risk

adjustment models for the 2025 benefit year as proposed. The model coefficients for the 2025

benefit year listed in Tables 1 through 6 of this final rule are based on a blend of equally-

weighted, separately solved coefficients from the 2019, 2020, and 2021 benefit years of enrollee-

level EDGE data for all coefficients.

b. Pricing Adjustment for the Hepatitis C Drugs

For the 2025 benefit year, we proposed to continue applying a market pricing adjustment

to the plan liability associated with Hepatitis C drugs in the HHS risk adjustment models.

Since

the 2020 benefit year HHS risk adjustment models, we have been making a market pricing

adjustment to the plan liability associated with Hepatitis C drugs to reflect future market pricing

prior to solving for coefficients for the models.

The purpose of this market pricing adjustment

is to account for significant pricing changes between the data years used for recalibrating the

models and the applicable benefit year of risk adjustment as a result of the introduction of new

and generic Hepatitis C drugs.

We sought comment on our proposal to apply a market pricing adjustment to the plan

liability associated with Hepatitis C drugs for the 2025 benefit year.

After consideration of comments and for the reasons outlined in the proposed rule and our

responses to comments, we are finalizing this adjustment as proposed. We summarize and

See, for example, 84 FR 17463 through 17466.

The Hepatitis C drugs market pricing adjustment to plan liability is applied for all enrollees taking drugs mapped

to RXC 2: Anti-Hepatitis C (HCV) Agents, Direct Acting Agents in the data used for recalibration.

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

Milliman White Paper. https://www.milliman.com/-/media/milliman/pdfs/2021-articles/6-11-21-analysis-

prescription-drugs-treatment-hepatitis-c-us.ashx.

CMS-9895-F 76

respond to public comments received on the proposed pricing adjustment for Hepatitis C drugs

below.

Comment: A few commenters supported the proposed Hepatitis C pricing adjustment in

the risk adjustment models and noted that a pricing adjustment was still warranted for Hepatitis

C drugs. Other commenters expressed concern about the Hepatitis C pricing adjustment and

cautioned against reducing the Hepatitis C RXC coefficient more than the expected decrease in

cost as reducing the coefficient in such a manner may incentivize issuers to reduce the

availability of treatment.

Response: We agree with commenters that continuing to apply the Hepatitis C pricing

adjustment in the 2025 benefit year HHS risk adjustment models remains appropriate and are

finalizing the Hepatitis C pricing adjustment as proposed. As discussed in the proposed rule, as

part of the 2025 benefit year model recalibration analysis, we reassessed the cost trend for

Hepatitis C drugs using available enrollee-level EDGE data (including 2021 benefit year data) to

consider whether the adjustment was still needed and if it is still needed, whether it should be

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

2019,

and therefore were available for all 3 years of data (2019-2021) used for the 2025 benefit

year model recalibration, our analysis of the data continued to observe that costs for Hepatitis C

drugs are not increasing at the same rate as other drug costs between the recalibration data years

and the applicable benefit year of risk adjustment, likely due to continued increases in the

proportion of Hepatitis C drug prescriptions for generic versions of the drugs. As such, we do not

believe that the trends used to reflect growth in the prescription drug costs due to inflation and

related factors for recalibrating the models would appropriately reflect the average cost of

Hepatitis C treatments expected in the 2025 benefit year. Therefore, we believe a market pricing

CMS-9895-F 77

adjustment specific to Hepatitis C drugs in the HHS risk adjustment models for the 2025 benefit

year is necessary to account for the lack of growth in Hepatitis C drug prices relative to other

prescription drugs in the market between the data years used for recalibrating the models and the

applicable benefit year of risk adjustment due to the introduction of new and generic Hepatitis C

drugs in recent years. In making this determination, HHS consulted its actuarial experts and

analyzed the most recent enrollee-level EDGE data available to further assess the changing costs

associated with Hepatitis C enrollees. In developing the Hepatitis C RXC pricing adjustment for

the 2025 benefit year, we considered that we had moved into the data years (2019-2021) under

which the generic Hepatitis C drugs were available in the market for all of the data years used for

model recalibration, and therefore, to avoid over-adjusting the Hepatitis C RXC, our pricing

adjustment for the 2025 benefit year does not reduce the coefficient as much as prior benefit

years. Instead, our pricing adjustment trends the Hepatitis C drugs at a lower rate than the other

prescription drugs in the risk adjustment models to reflect the lack of cost increases observed in

the Hepatitis C drugs in 2021.

Thus, we believe that the Hepatitis C pricing adjustment we are finalizing accurately

captures the anticipated costs of Hepatitis C drugs for the 2025 benefit year using the most

recently available enrollee-level EDGE data, balances the need to deter gaming practices with

the need to ensure that issuers are adequately compensated, and does not undermine recent

progress in the treatment of Hepatitis C. We intend to continue to reassess this pricing

adjustment as part of future benefit years' model recalibrations using additional years of available

enrollee-level EDGE data and plan to propose phasing out the market adjustment if and when

appropriate.

CMS-9895-F 78

c. List of Factors to be Employed in the HHS Risk Adjustment Models (§ 153.320)

The 2025 benefit year HHS risk adjustment model factors resulting from the equally

weighted (averaged) blended factors from separately solved models using the 2019, 2020, and

2021 enrollee-level EDGE data are shown in Tables 1 through 6. The adult, child, and infant

models have been adjusted to account for the high-cost risk pool payment parameters by

removing 60 percent of costs above the $1 million threshold.

Table 1 contains factors for each

adult model, including the age-sex, HCCs, RXCs, RXC-HCC interactions, interacted HCC

counts, and enrollment duration coefficients. Table 2 contains the factors for each child model,

including the age-sex, HCCs, and interacted HCC counts coefficients. Table 3 lists the HCCs

selected for the interacted HCC counts factors that would apply to the adult and child models.

Table 4 contains the factors for each infant model. Tables 5 and 6 contain the HCCs included in

the infant models’ maturity and severity categories, respectively.

TABLE 1: Adult HHS Risk Adjustment Model Factors for the 2025 Benefit Year

HCC or

RXC No.

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

Demographic Factors

Age 21-24, Male

0.189

0.128

0.086

0.057

0.056

Age 25-29, Male

0.197

0.133

0.088

0.056

0.055

Age 30-34, Male

0.230

0.160

0.110

0.073

0.072

Age 35-39, Male

0.249

0.174

0.119

0.077

0.076

Age 40-44, Male

0.282

0.203

0.143

0.095

0.094

Age 45-49, Male

0.312

0.228

0.164

0.112

0.111

Age 50-54, Male

0.381

0.290

0.218

0.161

0.160

Age 55-59, Male

0.428

0.330

0.254

0.191

0.189

Age 60-64, Male

0.472

0.365

0.282

0.212

0.210

Age 21-24, Female

0.285

0.196

0.127

0.078

0.076

Age 25-29, Female

0.308

0.212

0.137

0.082

0.081

Age 30-34, Female

0.370

0.268

0.188

0.126

0.125

Age 35-39, Female

0.428

0.323

0.239

0.174

0.172

Age 40-44, Female

0.482

0.372

0.284

0.211

0.209

Age 45-49, Female

0.481

0.369

0.277

0.200

0.198

Age 50-54, Female

0.519

0.404

0.307

0.226

0.224

Age 55-59, Female

0.482

0.368

0.271

0.191

0.189

Age 60-64, Female

0.475

0.358

0.261

0.179

0.176

We did not propose any changes to the high-cost risk pool parameters for the 2025 benefit year. Therefore, we are

maintaining the $1 million attachment point and 60 percent coinsurance rate for the 2025 benefit year.

CMS-9895-F 79

HCC or

RXC No.

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

Diagnosis Factors

HCC001

HIV/AIDS

0.342

0.265

0.234

0.197

0.196

HCC002

Septicemia, Sepsis, Systemic

Inflammatory Response

Syndrome/Shock

9.075

8.875

8.830

8.740

8.739

HCC003

Central Nervous System Infections,

Except Viral Meningitis

8.379

8.276

8.229

8.151

8.149

HCC004

Viral or Unspecified Meningitis

8.328

8.217

8.161

8.071

8.068

HCC006

Opportunistic Infections

8.532

8.478

8.419

8.333

8.330

HCC008

Metastatic Cancer

23.002

22.629

22.616

22.506

HCC009

Lung, Brain, and Other Severe Cancers,

Including Pediatric Acute Lymphoid

Leukemia

12.575

12.312

12.271

12.156

12.155

HCC010

Non-Hodgkin Lymphomas and Other

Cancers and Tumors

5.705

5.535

5.473

5.362

5.360

HCC011

Colorectal, Breast (Age < 50), Kidney,

and Other Cancers

3.651

3.476

3.405

3.283

3.280

HCC012

Breast (Age 50+) and Prostate Cancer,

Benign/Uncertain Brain Tumors, and

Other Cancers and Tumors

2.424

2.295

2.230

2.129

2.127

HCC013

Thyroid Cancer, Melanoma,

Neurofibromatosis, and Other Cancers

and Tumors

0.967

0.875

0.785

0.677

0.674

HCC018

Pancreas Transplant Status

6.320

6.253

6.239

6.228

6.219

HCC019

Diabetes with Acute Complications

0.259

0.214

0.172

0.130

0.128

HCC020

Diabetes with Chronic Complications

0.259

0.214

0.172

0.130

0.128

HCC021

Diabetes without Complication

0.259

0.214

0.172

0.130

0.128

HCC022

Type 1 Diabetes Mellitus, add-on to

Diabetes HCCs 19-21

0.311

0.282

0.244

0.180

0.178

HCC023

Protein-Calorie Malnutrition

11.342

11.221

11.179

11.105

11.104

HCC026

Mucopolysaccharidosis

23.821

23.642

23.619

23.556

HCC027

Lipidoses and Glycogenosis

23.821

23.642

23.619

23.556

HCC029

Amyloidosis, Porphyria, and Other

Metabolic Disorders

6.512

6.413

6.373

6.305

6.303

HCC030

Adrenal, Pituitary, and Other

Significant Endocrine Disorders

1.314

1.237

1.184

1.108

1.104

HCC034

Liver Transplant Status/Complications

6.014

6.070

6.119

6.189

HCC035_1

Acute Liver Failure/Disease, Including

Neonatal Hepatitis

7.464

7.288

7.254

7.181

7.184

HCC035_2

Chronic Liver Failure/End-Stage Liver

Disorders

2.319

2.160

2.125

2.042

2.041

HCC036

Cirrhosis of Liver

0.613

0.534

0.490

0.417

0.416

HCC037_1

Chronic Viral Hepatitis C

0.514

0.454

0.403

0.348

0.347

HCC037_2

Chronic Hepatitis, Except Chronic

Viral Hepatitis C

0.514

0.454

0.403

0.348

0.347

HCC041

Intestine Transplant

Status/Complications

6.014

6.070

6.119

6.189

HCC042

Peritonitis/Gastrointestinal

Perforation/Necrotizing Enterocolitis

11.053

10.907

10.903

10.857

HCC045

Intestinal Obstruction

5.038

4.837

4.783

4.669

4.668

HCC046

Chronic Pancreatitis

2.467

2.298

2.253

2.167

2.166

HCC047

Acute Pancreatitis

2.467

2.298

2.251

2.147

2.146

CMS-9895-F 80

HCC or

RXC No.

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

HCC048

Inflammatory Bowel Disease

1.108

1.023

0.944

0.820

0.816

HCC054

Necrotizing Fasciitis

8.617

8.468

8.446

8.388

HCC055

Bone/Joint/Muscle Infections/Necrosis

4.567

4.401

4.381

4.321

4.322

HCC056

Rheumatoid Arthritis and Specified

Autoimmune Disorders

1.082

0.993

0.930

0.845

0.843

HCC057

Systemic Lupus Erythematosus and

Other Autoimmune Disorders

0.399

0.329

0.249

0.146

0.142

HCC061

Osteogenesis Imperfecta and Other

Osteodystrophies

1.924

1.801

1.740

1.639

1.637

HCC062

Congenital/Developmental Skeletal and

Connective Tissue Disorders

1.924

1.801

1.740

1.639

1.637

HCC063

Cleft Lip/Cleft Palate

0.922

0.819

0.759

0.678

0.676

HCC066

Hemophilia

72.761

72.491

72.466

72.379

72.380

HCC067

Myelodysplastic Syndromes and

Myelofibrosis

11.237

11.118

11.090

11.024

11.020

HCC068

Aplastic Anemia

11.237

11.118

11.090

11.024

11.020

HCC069

Acquired Hemolytic Anemia, Including

Hemolytic Disease of Newborn

11.237

11.118

11.090

11.024

11.020

HCC070

Sickle Cell Anemia (Hb-SS) and

Thalassemia Beta Zero

1.690

1.607

1.553

1.479

1.477

HCC071

Sickle-Cell Disorders, Except Sickle-

Cell Anemia (Hb-SS) and Thalassemia

Beta Zero; Beta Thalassemia Major

1.690

1.607

1.553

1.479

1.477

HCC073

Combined and Other Severe

Immunodeficiencies

4.065

3.975

3.947

3.887

3.885

HCC074

Disorders of the Immune Mechanism

4.065

3.975

3.947

3.887

3.885

HCC075

Coagulation Defects and Other

Specified Hematological Disorders

2.148

2.068

2.020

1.947

1.946

HCC081

Drug Use with Psychotic

Complications

1.602

1.472

1.377

1.233

1.229

HCC082

Drug Use Disorder, Moderate/Severe,

or Drug Use with Non-Psychotic

Complications

1.602

1.472

1.377

1.233

1.229

HCC083

Alcohol Use with Psychotic

Complications

0.902

0.788

0.716

0.612

0.610

HCC084

Alcohol Use Disorder,

Moderate/Severe, or Alcohol Use with

Specified Non-Psychotic

Complications

0.902

0.788

0.716

0.612

0.610

HCC087_1

Schizophrenia

2.227

2.063

1.986

1.864

1.862

HCC087_2

Delusional and Other Specified

Psychotic Disorders, Unspecified

Psychosis

2.190

2.030

1.951

1.820

1.818

HCC088

Major Depressive Disorder, Severe,

and Bipolar Disorders

0.969

0.871

0.786

0.672

0.669

HCC090

Personality Disorders

0.663

0.586

0.492

0.379

0.376

HCC094

Anorexia/Bulimia Nervosa

2.000

1.894

1.827

1.722

1.719

HCC096

Prader-Willi, Patau, Edwards, and

Autosomal Deletion Syndromes

8.590

8.557

8.527

8.484

8.481

HCC097

Down Syndrome, Fragile X, Other

Chromosomal Anomalies, and

Congenital Malformation Syndromes

0.938

0.875

0.826

0.764

0.763

HCC102

Autistic Disorder

0.718

0.641

0.553

0.455

0.452

CMS-9895-F 81

HCC or

RXC No.

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

HCC103

Pervasive Developmental Disorders,

Except Autistic Disorder

0.663

0.586

0.492

0.379

0.376

HCC106

Traumatic Complete Lesion Cervical

Spinal Cord

9.112

8.957

8.905

8.806

8.805

HCC107

Quadriplegia

9.112

8.957

8.905

8.806

8.805

HCC108

Traumatic Complete Lesion Dorsal

Spinal Cord

6.380

6.241

6.187

6.089

6.087

HCC109

Paraplegia

6.380

6.241

6.187

6.089

6.087

HCC110

Spinal Cord Disorders/Injuries

5.153

4.975

4.928

4.826

4.824

HCC111

Amyotrophic Lateral Sclerosis and

Other Anterior Horn Cell Disease

5.090

4.946

4.876

4.755

4.753

HCC112

Quadriplegic Cerebral Palsy

0.730

0.629

0.565

0.467

0.465

HCC113

Cerebral Palsy, Except Quadriplegic

0.424

0.355

0.299

0.219

0.217

HCC114

Spina Bifida and Other

Brain/Spinal/Nervous System

Congenital Anomalies

1.205

1.120

1.063

0.972

0.969

HCC115

Myasthenia Gravis/Myoneural

Disorders and Guillain-Barre

Syndrome/Inflammatory and Toxic

Neuropathy

5.216

5.134

5.117

5.076

HCC117

Muscular Dystrophy

1.393

1.304

1.236

1.136

1.134

HCC118

Multiple Sclerosis

2.218

2.101

2.042

1.944

1.941

HCC119

Parkinson’s, Huntington’s, and

Spinocerebellar Disease, and Other

Neurodegenerative Disorders

1.393

1.304

1.236

1.136

1.134

HCC120

Seizure Disorders and Convulsions

1.040

0.948

0.884

0.792

0.789

HCC121

Hydrocephalus

9.585

9.491

9.440

9.362

9.360

HCC122

Nontraumatic Coma, Except Diabetic,

Hepatic, or Hypoglycemic;

Nontraumatic Brain

Compression/Anoxic Damage

10.181

10.044

9.986

9.886

9.884

HCC123

Narcolepsy and Cataplexy

4.533

4.405

4.340

4.237

4.235

HCC125

Respirator Dependence/Tracheostomy

Status

21.869

21.665

21.623

21.532

21.534

HCC126

Respiratory Arrest

8.558

8.341

8.300

8.210

8.209

HCC127

Cardio-Respiratory Failure and Shock,

Including Respiratory Distress

Syndromes

8.558

8.341

8.300

8.210

8.209

HCC128

Heart Assistive Device/Artificial Heart

17.404

17.301

17.262

17.214

17.224

HCC129

Heart Transplant Status/Complications

17.404

17.301

17.262

17.214

17.224

HCC130

Heart Failure

1.896

1.809

1.773

1.707

1.705

HCC131

Acute Myocardial Infarction

4.955

4.737

4.720

4.652

4.653

HCC132

Unstable Angina and Other Acute

Ischemic Heart Disease

3.690

3.489

3.452

3.355

HCC135

Heart Infection/Inflammation, Except

Rheumatic

8.848

8.756

8.695

8.602

8.599

HCC137

Hypoplastic Left Heart Syndrome and

Other Severe Congenital Heart

Disorders

2.122

2.033

1.975

1.895

1.893

HCC138

Major Congenital Heart/Circulatory

Disorders

2.122

2.033

1.975

1.895

1.893

CMS-9895-F 82

HCC or

RXC No.

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

HCC139

Atrial and Ventricular Septal Defects,

Patent Ductus Arteriosus, and Other

Congenital Heart/Circulatory Disorders

2.122

2.033

1.975

1.895

1.893

HCC142

Specified Heart Arrhythmias

1.921

1.819

1.752

1.645

HCC145

Intracranial Hemorrhage

10.648

10.490

10.444

10.356

10.355

HCC146

Ischemic or Unspecified Stroke

1.428

1.314

1.282

1.212

HCC149

Cerebral Aneurysm and Arteriovenous

Malformation

2.218

2.102

2.044

1.944

1.941

HCC150

Hemiplegia/Hemiparesis

3.309

3.190

3.178

3.134

HCC151

Monoplegia, Other Paralytic

Syndromes

2.494

2.386

2.342

2.264

2.262

HCC153

Atherosclerosis of the Extremities with

Ulceration or Gangrene

7.988

7.837

7.849

7.827

7.828

HCC154

Vascular Disease with Complications

5.128

4.989

4.949

4.869

4.868

HCC156

Pulmonary Embolism and Deep Vein

Thrombosis

7.621

7.535

7.461

7.345

7.341

HCC158

Lung Transplant Status/Complications

11.099

10.994

10.963

10.924

10.930

HCC159

Cystic Fibrosis

4.156

4.021

3.969

3.883

3.881

HCC160

Chronic Obstructive Pulmonary

Disease, Including Bronchiectasis

0.643

0.567

0.491

0.395

0.392

HCC161_1

Severe Asthma

0.643

0.567

0.491

0.395

0.392

HCC161_2

Asthma, Except Severe

0.643

0.567

0.491

0.395

0.392

HCC162

Fibrosis of Lung and Other Lung

Disorders

1.615

1.529

1.476

1.391

1.388

HCC163

Aspiration and Specified Bacterial

Pneumonias and Other Severe Lung

Infections

7.187

7.124

7.105

7.067

HCC174

Exudative Macular Degeneration

1.224

1.097

1.010

0.878

0.874

HCC183

Kidney Transplant

Status/Complications

6.320

6.253

6.239

6.228

6.219

HCC184

End Stage Renal Disease

20.669

20.237

20.330

20.158

20.046

HCC187

Chronic Kidney Disease, Stage 5

0.773

0.689

0.685

0.645

0.633

HCC188

Chronic Kidney Disease, Severe (Stage

0.773

0.689

0.685

0.645

0.633

HCC203

Ectopic and Molar Pregnancy

1.850

1.673

1.534

1.319

1.314

HCC204

Miscarriage with Complications

0.646

0.565

0.439

0.260

0.254

HCC205

Miscarriage with No or Minor

Complications

0.646

0.565

0.439

0.260

0.254

HCC207

Pregnancy with Delivery with Major

Complications

3.756

3.470

3.289

2.991

2.985

HCC208

Pregnancy with Delivery with

Complications

3.756

3.470

3.289

2.991

2.985

HCC209

Pregnancy with Delivery with No or

Minor Complications

2.769

2.554

2.335

1.972

1.962

HCC210

(Ongoing) Pregnancy without Delivery

with Major Complications

0.815

0.714

0.561

0.370

0.363

HCC211

(Ongoing) Pregnancy without Delivery

with Complications

0.530

0.454

0.318

0.170

0.166

HCC212

(Ongoing) Pregnancy without Delivery

with No or Minor Complications

0.018

0.005

0.000

HCC217

Chronic Ulcer of Skin, Except Pressure

1.557

1.464

1.433

1.375

1.374

HCC218

Extensive Third-Degree Burns

23.714

23.524

23.474

23.384

23.383

CMS-9895-F 83

HCC or

RXC No.

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

HCC219

Major Skin Burn or Condition

2.604

2.484

2.428

2.345

2.344

HCC223

Severe Head Injury

18.201

18.057

17.990

17.882

17.879

HCC226

Hip and Pelvic Fractures

8.018

7.783

7.765

7.688

HCC228

Vertebral Fractures without Spinal

Cord Injury

4.277

4.116

4.047

3.925

3.922

HCC234

Traumatic Amputations and

Amputation Complications

4.861

4.706

4.682

4.619

4.618

HCC251

Stem Cell, Including Bone Marrow,

Transplant Status/Complications

18.571

18.584

18.547

18.531

18.535

HCC253

Artificial Openings for Feeding or

Elimination

5.697

5.584

5.563

5.511

HCC254

Amputation Status, Upper Limb or

Lower Limb

0.936

0.835

0.799

0.738

0.736

Interacted HCC Counts Factors

Severe illness, 1 payment HCC

-6.014

-6.070

-6.119

-6.189

Severe illness, 2 payment HCCs

-5.733

-5.806

-5.833

-5.886

Severe illness, 3 payment HCCs

-4.904

-4.952

-4.891

-4.846

-4.844

Severe illness, 4 payment HCCs

-4.190

-4.178

-4.033

-3.871

-3.865

Severe illness, 5 payment HCCs

-3.522

-3.432

-3.216

-2.954

-2.945

Severe illness, 6 payment HCCs

-3.024

-2.835

-2.557

-2.202

-2.192

Severe illness, 7 payment HCCs

-2.432

-2.116

-1.780

-1.330

-1.318

Severe illness, 8 payment HCCs

-2.179

-1.784

-1.416

-0.910

-0.896

Severe illness, 9 payment HCCs

-0.287

0.253

0.676

1.279

1.294

Severe illness, 10 or more payment

HCCs

7.398

8.299

8.836

9.657

9.679

Transplant severe illness, 4 payment

HCCs

3.792

3.704

3.651

3.531

3.516

Transplant severe illness, 5 payment

HCCs

7.054

6.949

6.906

6.792

6.775

Transplant severe illness, 6 payment

HCCs

12.584

12.463

12.431

12.324

12.304

Transplant severe illness, 7 payment

HCCs

15.636

15.506

15.473

15.364

15.346

Transplant severe illness, 8 or more

payment HCCs

31.955

31.916

31.908

31.845

31.825

Enrollment Duration Factors

Enrolled for 1 month, at least one

payment HCC

11.208

9.742

8.808

7.844

7.818

Enrolled for 2 months, at least one

payment HCC

5.197

4.458

3.958

3.479

3.466

Enrolled for 3 months, at least one

payment HCC

3.378

2.898

2.549

2.224

2.216

Enrolled for 4 months, at least one

payment HCC

2.129

1.799

1.545

1.313

1.307

Enrolled for 5 months, at least one

payment HCC

1.586

1.340

1.143

0.959

0.955

Enrolled for 6 months, at least one

payment HCC

1.039

0.857

0.705

0.560

0.556

Prescription Drug Factors

RXC 01

Anti-HIV Agents

5.097

4.612

4.345

3.920

3.908

CMS-9895-F 84

HCC or

RXC No.

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

RXC 02

Anti-Hepatitis C (HCV) Agents, Direct

Acting Agents

8.273

7.809

7.812

7.711

7.714

RXC 03

Antiarrhythmics

0.080

0.072

0.064

0.051

0.036

RXC 04

Phosphate Binders

0.901

1.115

1.007

1.206

1.390

RXC 05

Inflammatory Bowel Disease Agents

1.324

1.227

1.105

0.941

0.936

RXC 06

Insulin

1.366

1.193

1.018

0.844

0.838

RXC 07

Anti-Diabetic Agents, Except Insulin

and Metformin Only

0.800

0.702

0.582

0.409

0.403

RXC 08

Multiple Sclerosis Agents

15.175

14.409

14.206

13.774

13.767

RXC 09

Immune Suppressants and

Immunomodulators

12.005

11.495

11.478

11.335

11.337

RXC 10

Cystic Fibrosis Agents

17.441

17.041

17.022

16.903

16.902

RXC 01 x

HCC001

Additional effect for enrollees with

RXC 01 and HCC 001

2.467

2.521

2.790

3.101

3.115

RXC 02 x

HCC037_1,

036, 035_2,

035_1, 034

Additional effect for enrollees with

RXC 02 and (HCC 037_1 or 036 or

035_2 or 035_1 or 034)

-0.514

-0.454

-0.403

-0.348

-0.347

RXC 03 x

HCC142

Additional effect for enrollees with

RXC 03 and HCC 142

0.000

RXC 04 x

HCC184,

183, 187,

188

Additional effect for enrollees with

RXC 04 and (HCC 184 or 183 or 187

or 188)

0.000

RXC 05 x

HCC048,

041

Additional effect for enrollees with

RXC 05 and (HCC 048 or 041)

-0.688

-0.631

-0.570

-0.471

-0.468

RXC 06 x

HCC018,

019, 020,

021

Additional effect for enrollees with

RXC 06 and (HCC 018 or 019 or 020

or 021)

0.402

0.444

0.532

0.544

0.546

RXC 07 x

HCC018,

019, 020,

021

Additional effect for enrollees with

RXC 07 and (HCC 018 or 019 or 020

or 021)

-0.258

-0.213

-0.172

-0.130

-0.128

RXC 08 x

HCC118

Additional effect for enrollees with

RXC 08 and HCC 118

-0.132

0.227

0.497

0.902

0.914

RXC 09 x

HCC056 or

057 and 048

or 041

Additional effect for enrollees with

RXC 09 and (HCC 048 or 041) and

(HCC 056 or 057)

0.343

0.396

0.433

0.492

0.494

RXC 09 x

HCC056

Additional effect for enrollees with

RXC 09 and HCC 056

-1.082

-0.993

-0.930

-0.845

-0.843

RXC 09 x

HCC057

Additional effect for enrollees with

RXC 09 and HCC 057

-0.399

-0.329

-0.249

-0.146

-0.142

RXC 09 x

HCC048,

041

Additional effect for enrollees with

RXC 09 and (HCC 048 or 041)

1.315

1.406

1.499

1.634

1.638

CMS-9895-F 85

HCC or

RXC No.

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

RXC 10 x

HCC159,

158

Additional effect for enrollees with

RXC 10 and (HCC 159 or 158)

42.562

42.609

42.695

42.807

42.812

a/ HCC numbers that appear with an underscore in this document will appear without the underscore in the “Do It

Yourself (DIY)” software. For example, HCC 35_1 in this table will appear as HCC 351 in the DIY software.

b/ For the 2025 benefit year HHS risk adjustment models, we made the following changes to improve the prediction

of sickle cell disease costs: (1) updated mappings for sickle cell disease so that additional diagnosis codes are

included in the model (within HCC 71); (2) ungrouped HCCs 70 and 71 in the adult and child models; and (3)

reassigned HCC 70 and 71 to a higher severity in the infant models. To reflect these changes, we also relabeled

HCC 70 and HCC 71. These updated mapping and HCC label changes parallel the reclassified Medicare Part C V28

CMS-HCCs. See, for example, the Advance Notice of Methodological Changes for Calendar Year (CY) 2024 for

Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (February 1, 2023).

https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.

c/ Consistent with fiscal year 2024 updates to ICD-10 codes (effective October 1, 2023; see

https://www.cms.gov/medicare/coding-billing/icd-10-codes/2024-icd-10-cm), we updated the label for HCC 122

from “Coma, Brain Compression/Anoxic Damage” to “Nontraumatic Coma, Except Diabetic, Hepatic, or

Hypoglycemic; Nontraumatic Brain Compression/Anoxic Damage.” The specific ICD-10 code update that prompted

this label change was the addition of code R402A “Nontraumatic coma due to underlying condition”, which we have

mapped to HCC 122. HCC 122 is only assigned to enrollees who do not also have a head injury code, because HCC

223 (Severe Head Injury) captures codes for head injury with loss of consciousness and supersedes HCC 122 in a

hierarchy. As such, the scope of HCC 122 is better reflected by the updated label. Because this ICD-10 update is

effective October 1, 2023, future releases of benefit year 2023 and benefit year 2024 DIY software will also reflect

the updated label and diagnosis-to-HCC mapping.

d/ We constrain RXC 03 to be equal to average plan liability for RXC 03 drugs, RXC 04 to be equal to the average

plan liability for RXC 04 drugs, and we constrain RXC 03 x HCC142 and RXC 04 x HCC184, 183, 187, 188 to be

equal to 0. See March 2016 Risk Adjustment Methodology Discussion Paper (March 24, 2016), available at:

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

032416.pdf (where we previously discussed the use of constraints in the HHS risk adjustment models).

e/ Similar to recalibration of the 2023 and 2024 benefit year HHS risk adjustment adult models and consistent with

the policies adopted in the 2023 and 2024 Payment Notices, the 2025 benefit year factors in this rule reflect the

removal of the mapping of hydroxychloroquine sulfate to RXC 09 (Immune Suppressants and Immunomodulators)

and the related RXC 09 interactions (RXC 09 x HCC056 or 057 and 048 or 041; RXC 09 x HCC056; RXC 09 x

HCC 057; RXC 09x HCC048, 041) from the 2019 benefit year enrollee-level EDGE data sets for purposes of

recalibrating the 2025 benefit year adult models. See 87 FR 27232 through 27235. Additionally, the factors for the

adult models reflect the use of the final, fourth quarter (Q4) RXC mapping document that was applicable for each

benefit year of data included in the current year’s model recalibration (except under extenuating circumstances that

can result in targeted changes to RXC mappings). See 87 FR 27231 through 27232.

CMS-9895-F 86

TABLE 2: Child HHS Risk Adjustment Model Factors for the 2025 Benefit Year

Factor Platinum Gold Silver Bronze Catastrophic

Demographic Factors

Age 2-4, Male

0.270

0.191

0.141

0.105

0.104

Age 5-9, Male

0.204

0.135

0.096

0.071

Age 10-14, Male

0.224

0.156

0.115

0.090

0.089

Age 15-20, Male

0.260

0.187

0.137

0.102

0.101

Age 2-4, Female

0.223

0.153

0.113

0.089

0.088

Age 5-9, Female

0.149

0.086

0.053

0.034

Age 10-14, Female

0.222

0.153

0.113

0.089

0.088

Age 15-20, Female

0.300

0.212

0.145

0.097

0.095

Diagnosis Factors

HIV/AIDS

4.355

3.942

3.856

3.659

3.657

Septicemia, Sepsis, Systemic Inflammatory

Response Syndrome/Shock

14.567

14.370

14.294

14.176

14.174

Central Nervous System Infections, Except

Viral Meningitis

13.944

13.811

13.745

13.658

13.656

Viral or Unspecified Meningitis

12.972

12.833

12.741

12.617

12.614

Opportunistic Infections

18.957

18.895

18.813

18.719

18.716

Metastatic Cancer

30.530

30.304

30.243

30.137

30.136

Lung, Brain, and Other Severe Cancers,

Including Pediatric Acute Lymphoid

Leukemia

8.962

8.738

8.640

8.486

8.484

Non-Hodgkin Lymphomas and Other Cancers

and Tumors

7.708

7.523

7.421

7.266

7.263

Colorectal, Breast (Age < 50), Kidney, and

Other Cancers

4.194

4.057

3.972

3.844

3.841

Breast (Age 50+) and Prostate Cancer,

Benign/Uncertain Brain Tumors, and Other

Cancers and Tumors

4.194

4.057

3.972

3.844

3.841

Thyroid Cancer, Melanoma,

Neurofibromatosis, and Other Cancers and

Tumors

1.265

1.155

1.058

0.937

0.933

Pancreas Transplant Status

11.660

11.580

11.544

11.505

11.503

Diabetes with Acute Complications

2.364

2.121

1.914

1.622

1.615

Diabetes with Chronic Complications

2.364

2.121

1.914

1.622

1.615

Diabetes without Complication

2.364

2.121

1.914

1.622

1.615

Protein-Calorie Malnutrition

19.614

19.505

19.457

19.397

19.396

Mucopolysaccharidosis

34.440

34.213

34.169

34.070

Lipidoses and Glycogenosis

34.440

34.213

34.169

34.070

Congenital Metabolic Disorders, Not

Elsewhere Classified

4.690

4.583

4.523

4.442

4.439

Amyloidosis, Porphyria, and Other Metabolic

Disorders

4.690

4.583

4.523

4.442

4.439

Adrenal, Pituitary, and Other Significant

Endocrine Disorders

5.289

5.072

5.007

4.902

4.901

Liver Transplant Status/Complications

11.660

11.580

11.544

11.505

11.503

Acute Liver Failure/Disease, Including

Neonatal Hepatitis

7.742

7.607

7.570

7.488

7.487

Chronic Liver Failure/End-Stage Liver

Disorders

7.742

7.607

7.570

7.488

7.487

CMS-9895-F 87

Factor Platinum Gold Silver Bronze Catastrophic

Cirrhosis of Liver

3.999

3.881

3.835

3.764

3.763

Chronic Viral Hepatitis C

1.257

1.152

1.093

1.027

1.025

Chronic Hepatitis, Except Chronic Viral

Hepatitis C

0.294

0.249

0.198

0.140

0.138

Intestine Transplant Status/Complications

13.387

13.303

13.228

13.137

13.135

Peritonitis/Gastrointestinal

Perforation/Necrotizing Enterocolitis

19.019

18.756

18.703

18.597

Intestinal Obstruction

4.601

4.431

4.343

4.208

4.205

Chronic Pancreatitis

10.235

10.115

10.085

10.007

Acute Pancreatitis

4.988

4.771

4.687

4.541

4.538

Inflammatory Bowel Disease

9.947

9.582

9.498

9.313

9.311

Necrotizing Fasciitis

4.144

3.957

3.872

3.746

3.745

Bone/Joint/Muscle Infections/Necrosis

4.144

3.957

3.872

3.746

3.745

Rheumatoid Arthritis and Specified

Autoimmune Disorders

4.632

4.397

4.315

4.181

4.179

Systemic Lupus Erythematosus and Other

Autoimmune Disorders

0.878

0.777

0.679

0.559

0.555

Osteogenesis Imperfecta and Other

Osteodystrophies

1.241

1.140

1.069

0.981

0.979

Congenital/Developmental Skeletal and

Connective Tissue Disorders

1.241

1.140

1.069

0.981

0.979

Cleft Lip/Cleft Palate

0.972

0.841

0.742

0.616

0.613

Hemophilia

64.093

63.672

63.604

63.429

63.427

Myelodysplastic Syndromes and

Myelofibrosis

12.305

12.163

12.117

12.039

12.038

Aplastic Anemia

12.305

12.163

12.117

12.039

12.038

Acquired Hemolytic Anemia, Including

Hemolytic Disease of Newborn

12.305

12.163

12.117

12.039

12.038

Sickle Cell Anemia (Hb-SS) and Thalassemia

Beta Zero

3.564

3.400

3.303

3.173

3.170

Sickle-Cell Disorders, Except Sickle-Cell

Anemia (Hb-SS) and Thalassemia Beta Zero;

Beta Thalassemia Major

3.369

3.233

3.160

3.055

3.053

Combined and Other Severe

Immunodeficiencies

5.105

4.975

4.918

4.826

4.824

Disorders of the Immune Mechanism

5.105

4.975

4.918

4.826

4.824

Coagulation Defects and Other Specified

Hematological Disorders

4.043

3.938

3.869

3.779

3.777

Drug Use with Psychotic Complications

2.350

2.204

2.111

1.972

1.969

Drug Use Disorder, Moderate/Severe, or Drug

Use with Non-Psychotic Complications

2.350

2.204

2.111

1.972

1.969

Alcohol Use with Psychotic Complications

0.899

0.765

0.658

0.502

0.499

Alcohol Use Disorder, Moderate/Severe, or

Alcohol Use with Specified Non-Psychotic

Complications

0.899

0.765

0.658

0.502

0.499

Schizophrenia

3.545

3.304

3.188

3.007

3.004

Delusional and Other Specified Psychotic

Disorders, Unspecified Psychosis

3.289

3.067

2.940

2.745

2.741

Major Depressive Disorder, Severe, and

Bipolar Disorders

2.506

2.319

2.191

2.017

2.013

Personality Disorders

0.348

0.263

0.159

0.043

0.040

Anorexia/Bulimia Nervosa

2.207

2.070

1.977

1.846

1.843

CMS-9895-F 88

Factor Platinum Gold Silver Bronze Catastrophic

Prader-Willi, Patau, Edwards, and Autosomal

Deletion Syndromes

12.082

12.007

11.947

11.870

11.868

Down Syndrome, Fragile X, Other

Chromosomal Anomalies, and Congenital

Malformation Syndromes

0.867

0.758

0.686

0.583

0.581

Autistic Disorder

2.506

2.319

2.191

2.017

2.013

Pervasive Developmental Disorders, Except

Autistic Disorder

0.374

0.303

0.222

0.140

0.139

Traumatic Complete Lesion Cervical Spinal

Cord

10.147

9.959

9.908

9.810

9.809

Quadriplegia

10.147

9.959

9.908

9.810

9.809

Traumatic Complete Lesion Dorsal Spinal

Cord

9.868

9.664

9.615

9.515

9.514

Paraplegia

9.868

9.664

9.615

9.515

9.514

Spinal Cord Disorders/Injuries

4.750

4.568

4.457

4.285

4.280

Amyotrophic Lateral Sclerosis and Other

Anterior Horn Cell Disease

49.556

49.316

49.259

49.139

49.137

Quadriplegic Cerebral Palsy

0.638

0.454

0.383

0.266

0.265

Cerebral Palsy, Except Quadriplegic

0.254

0.134

0.073

0.029

0.028

Spina Bifida and Other Brain/Spinal/Nervous

System Congenital Anomalies

1.624

1.514

1.448

1.345

1.342

Myasthenia Gravis/Myoneural Disorders and

Guillain-Barre Syndrome/Inflammatory and

Toxic Neuropathy

10.278

10.133

10.111

10.053

Muscular Dystrophy

5.546

5.399

5.326

5.206

5.203

Multiple Sclerosis

9.135

8.789

8.736

8.602

8.604

Parkinson’s, Huntington’s, and

Spinocerebellar Disease, and Other

Neurodegenerative Disorders

5.546

5.399

5.326

5.206

5.203

Seizure Disorders and Convulsions

1.556

1.429

1.316

1.169

1.165

Hydrocephalus

11.666

11.630

11.604

11.580

11.579

Nontraumatic Coma, Except Diabetic,

Hepatic, or Hypoglycemic; Nontraumatic

Brain Compression/Anoxic Damage

11.216

11.250

11.261

11.287

Narcolepsy and Cataplexy

4.058

3.911

3.807

3.664

3.659

Respirator Dependence/Tracheostomy Status

24.720

24.506

24.442

24.337

24.336

Respiratory Arrest

15.720

15.472

15.398

15.267

15.266

Cardio-Respiratory Failure and Shock,

Including Respiratory Distress Syndromes

15.720

15.472

15.398

15.267

15.266

Heart Assistive Device/Artificial Heart

13.387

13.303

13.228

13.137

13.135

Heart Transplant Status/Complications

13.387

13.303

13.228

13.137

13.135

Heart Failure

4.067

3.968

3.914

3.830

3.828

Acute Myocardial Infarction

1.060

1.025

1.005

0.979

Unstable Angina and Other Acute Ischemic

Heart Disease

1.060

1.025

1.005

0.979

Heart Infection/Inflammation, Except

Rheumatic

17.077

16.964

16.888

16.786

16.783

Hypoplastic Left Heart Syndrome and Other

Severe Congenital Heart Disorders

3.938

3.796

3.682

3.540

3.536

Major Congenital Heart/Circulatory Disorders

0.986

0.896

0.790

0.685

0.682

Atrial and Ventricular Septal Defects, Patent

Ductus Arteriosus, and Other Congenital

Heart/Circulatory Disorders

0.590

0.506

0.425

0.347

0.345

CMS-9895-F 89

Factor Platinum Gold Silver Bronze Catastrophic

Specified Heart Arrhythmias

3.118

2.980

2.899

2.785

2.783

Intracranial Hemorrhage

12.686

12.611

12.565

12.497

12.495

Ischemic or Unspecified Stroke

1.470

1.362

1.304

1.210

1.208

Cerebral Aneurysm and Arteriovenous

Malformation

1.049

0.952

0.899

0.807

0.804

Hemiplegia/Hemiparesis

5.471

5.353

5.295

5.207

5.205

Monoplegia, Other Paralytic Syndromes

1.374

1.253

1.183

1.072

1.070

Atherosclerosis of the Extremities with

Ulceration or Gangrene

11.860

11.625

11.557

11.424

11.422

Vascular Disease with Complications

8.127

7.988

7.947

7.872

7.871

Pulmonary Embolism and Deep Vein

Thrombosis

19.738

19.604

19.533

19.426

19.425

Lung Transplant Status/Complications

13.387

13.303

13.228

13.137

13.135

Cystic Fibrosis

48.718

48.241

48.201

48.054

48.055

Chronic Obstructive Pulmonary Disease,

Including Bronchiectasis

1.658

1.507

1.403

1.267

1.264

Severe Asthma

1.323

1.171

1.045

0.889

0.885

Asthma, Except Severe

0.320

0.250

0.170

0.102

0.100

Fibrosis of Lung and Other Lung Disorders

1.490

1.361

1.249

1.115

1.111

Aspiration and Specified Bacterial

Pneumonias and Other Severe Lung Infections

11.216

11.250

11.261

11.287

Kidney Transplant Status/Complications

11.660

11.580

11.544

11.505

11.503

End Stage Renal Disease

29.641

29.391

29.371

29.278

Chronic Kidney Disease, Stage 5

0.787

0.749

0.722

0.685

0.683

Chronic Kidney Disease, Severe (Stage 4)

0.787

0.749

0.722

0.685

0.683

Ectopic and Molar Pregnancy

0.864

0.731

0.565

0.411

0.406

Miscarriage with Complications

0.474

0.369

0.227

0.089

0.086

Miscarriage with No or Minor Complications

0.474

0.369

0.227

0.089

0.086

Pregnancy with Delivery with Major

Complications

3.166

2.876

2.634

2.231

2.219

Pregnancy with Delivery with Complications

3.166

2.876

2.634

2.231

2.219

Pregnancy with Delivery with No or Minor

Complications

2.399

2.179

1.914

1.475

1.460

(Ongoing) Pregnancy without Delivery with

Major Complications

0.420

0.308

0.152

0.039

0.036

(Ongoing) Pregnancy without Delivery with

Complications

0.420

0.308

0.152

0.039

0.036

(Ongoing) Pregnancy without Delivery with

No or Minor Complications

0.276

0.187

0.079

0.037

0.036

Chronic Ulcer of Skin, Except Pressure

1.877

1.782

1.712

1.634

1.632

Extensive Third-Degree Burns

22.876

22.657

22.576

22.440

22.437

Major Skin Burn or Condition

2.441

2.286

2.187

2.056

2.053

Severe Head Injury

22.876

22.657

22.576

22.440

22.437

Hip and Pelvic Fractures

4.636

4.428

4.327

4.191

4.188

Vertebral Fractures without Spinal Cord

Injury

4.483

4.293

4.176

3.999

3.994

Traumatic Amputations and Amputation

Complications

3.818

3.627

3.528

3.362

3.357

Stem Cell, Including Bone Marrow,

Transplant Status/Complications

13.387

13.303

13.228

13.137

13.135

Artificial Openings for Feeding or Elimination

5.711

5.551

5.525

5.451

5.450

CMS-9895-F 90

Factor Platinum Gold Silver Bronze Catastrophic

Amputation Status, Upper Limb or Lower

Limb

3.818

3.627

3.528

3.362

3.357

Interacted HCC Counts Factors

Severe illness, 1 payment HCC

-11.216

-11.250

-11.261

-11.287

Severe illness, 2 payment HCCs

-11.137

-11.200

-11.218

-11.265

-11.266

Severe illness, 3 payment HCCs

-9.692

-9.760

-9.689

-9.658

-9.655

Severe illness, 4 payment HCCs

-8.984

-8.987

-8.809

-8.652

-8.645

Severe illness, 5 payment HCCs

-6.593

-6.543

-6.303

-6.068

-6.059

Severe illness, 6 or 7 payment HCCs

-2.061

-1.828

-1.468

-1.064

-1.051

Severe illness, 8 or more payment HCCs

17.868

18.550

19.132

19.858

19.877

Transplant severe illness, 4 or more payment

HCCs

14.488

14.558

14.580

14.612

14.613

a/ For the 2025 benefit year HHS risk adjustment models, we made the following changes to improve the prediction

of sickle cell disease costs: (1) updated mappings for sickle cell disease so that additional diagnosis codes are

included in the model (within HCC 71); (2) ungrouped HCCs 70 and 71 in the adult and child models; and (3)

reassigned HCC 70 and 71 to a higher severity in the infant models. To reflect these changes, we also relabeled

HCC 70 and HCC 71. These updated mapping and HCC label changes parallel the reclassified Medicare Part C V28

CMS-HCCs. See, for example, the Advance Notice of Methodological Changes for Calendar Year (CY) 2024 for

Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (February 1, 2023).

https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.

b/ Consistent with fiscal year 2024 updates to ICD-10 codes (effective October 1, 2023; see

https://www.cms.gov/medicare/coding-billing/icd-10-codes/2024-icd-10-cm), we updated the label for HCC 122

from “Coma, Brain Compression/Anoxic Damage” to “Nontraumatic Coma, Except Diabetic, Hepatic, or

Hypoglycemic; Nontraumatic Brain Compression/Anoxic Damage.” The specific ICD-10 code update that prompted

this label change was the addition of code R402A “Nontraumatic coma due to underlying condition”, which we have

mapped to HCC 122. HCC 122 is only assigned to enrollees who do not also have a head injury code, because HCC

223 (Severe Head Injury) captures codes for head injury with loss of consciousness and supersedes HCC 122 in a

hierarchy. As such, the scope of HCC 122 is better reflected by the updated label. Because this ICD-10 update is

effective October 1, 2023, future releases of the benefit year 2023 and benefit year 2024 DIY software will also

reflect the updated label and diagnosis-to-HCC mapping.

CMS-9895-F 91

TABLE 3: HCCs Selected for the HCC Interacted Counts Variables for the Adult and

Child Models for the 2025 Benefit Year

Payment HCC

Severity Illness

Indicator

Transplant Indicator

HCC 2 Septicemia, Sepsis, Systemic Inflammatory

Response Syndrome/Shock

HCC 3 Central Nervous System Infections, Except Viral

Meningitis

HCC 4 Viral or Unspecified Meningitis

HCC 6 Opportunistic Infections

HCC 23 Protein-Calorie Malnutrition

HCC 34 Liver Transplant Status/Complications

HCC 41 Intestine Transplant Status/Complications

HCC 42 Peritonitis/Gastrointestinal Perforation/Necrotizing

Enterocolitis

HCC 96 Prader-Willi, Patau, Edwards, and Autosomal

Deletion Syndromes

HCC 121 Hydrocephalus

HCC 122 Nontraumatic Coma, Except Diabetic, Hepatic, or

Hypoglycemic; Nontraumatic Brain Compression/Anoxic

Damage

HCC 125 Respirator Dependence/Tracheostomy Status

HCC 135 Heart Infection/Inflammation, Except Rheumatic

HCC 145 Intracranial Hemorrhage

HCC 156 Pulmonary Embolism and Deep Vein Thrombosis

HCC 158 Lung Transplant Status/Complications

HCC 163 Aspiration and Specified Bacterial Pneumonias

and Other Severe Lung Infections

HCC 218 Extensive Third-Degree Burns

HCC 223 Severe Head Injury

HCC 251 Stem Cell, Including Bone Marrow, Transplant

Status/Complications

X X

G13 (Includes HCC 126 Respiratory Arrest and HCC 127

Cardio-Respiratory Failure and Shock, Including Respiratory

Distress Syndromes)

G14 (Includes HCC 128 Heart Assistive Device/Artificial

Heart and HCC 129 Heart Transplant Status/Complications)

X X

G24 (Includes HCC 18 Pancreas Transplant Status and HCC

183 Kidney Transplant Status/Complications)

X X

CMS-9895-F 92

TABLE 4: Infant HHS Risk Adjustment Model Factors for the 2025 Benefit Year

Group Platinum Gold Silver Bronze Catastrophic

Extremely Immature * Severity Level 5

(Highest)

204.040

202.652

202.406

201.915

201.913

Extremely Immature * Severity Level 4

149.999

148.437

148.051

147.377

147.372

Extremely Immature * Severity Level 3

32.887

31.619

31.251

30.693

30.687

Extremely Immature * Severity Level 2

32.887

31.619

31.251

30.693

30.687

Extremely Immature * Severity Level 1

(Lowest)

32.887

31.619

31.251

30.693

30.687

Immature * Severity Level 5 (Highest)

121.913

120.553

120.309

119.828

119.827

Immature * Severity Level 4

71.026

69.564

69.264

68.692

68.689

Immature * Severity Level 3

32.887

31.619

31.251

30.693

30.687

Immature * Severity Level 2

30.558

29.332

28.960

28.403

28.398

Immature * Severity Level 1 (Lowest)

25.110

23.887

23.485

22.871

22.863

Premature/Multiples * Severity Level 5

(Highest)

108.585

107.335

107.096

106.631

106.628

Premature/Multiples * Severity Level 4

29.666

28.404

28.060

27.490

27.486

Premature/Multiples * Severity Level 3

13.527

12.617

12.148

11.482

11.467

Premature/Multiples * Severity Level 2

8.071

7.368

6.849

6.149

6.131

Premature/Multiples * Severity Level 1

(Lowest)

5.765

5.167

4.644

4.023

4.005

Term * Severity Level 5 (Highest)

81.884

80.752

80.438

79.915

79.909

Term * Severity Level 4

16.190

15.254

14.803

14.170

14.158

Term * Severity Level 3

5.770

5.207

4.688

4.061

4.041

Term * Severity Level 2

3.712

3.231

2.707

2.109

2.092

Term * Severity Level 1 (Lowest)

1.968

1.597

1.135

0.784

0.776

Age1 * Severity Level 5 (Highest)

69.391

68.741

68.568

68.287

68.284

Age1 * Severity Level 4

12.653

12.170

11.942

11.641

11.635

Age1 * Severity Level 3

2.829

2.569

2.374

2.179

2.174

Age1 * Severity Level 2

1.855

1.628

1.423

1.216

1.210

Age1 * Severity Level 1 (Lowest)

0.581

0.487

0.431

0.394

0.393

Age 0 Male

0.604

0.566

0.539

0.475

0.473

Age 1 Male

0.090

0.076

0.060

0.042

0.041

CMS-9895-F 93

TABLE 5: HHS HCCs Included in Infant Model Maturity Categories

Maturity Category

HCC/Description

Extremely Immature

Extremely Immature Newborns, Birth weight < 500 Grams

Extremely Immature

Extremely Immature Newborns, Including Birth weight 500-749 Grams

Extremely Immature

Extremely Immature Newborns, Including Birth weight 750-999 Grams

Immature

Premature Newborns, Including Birth weight 1000-1499 Grams

Immature

Premature Newborns, Including Birth weight 1500-1999 Grams

Premature/Multiples

Premature Newborns, Including Birth weight 2000-2499 Grams

Premature/Multiples

Other Premature, Low Birth weight, Malnourished, or Multiple Birth Newborns

Term

Term or Post-Term Singleton Newborn, Normal or High Birth weight

Age 1

All age 1 infants

TABLE 6: HHS HCCs Included in Infant Model Severity Categories

Severity Category

HCC/Description

Severity Level 5 (Highest)

Metastatic Cancer

Severity Level 5

Pancreas Transplant Status

Severity Level 5

Liver Transplant Status/Complications

Severity Level 5

Intestine Transplant Status/Complications

Severity Level 5

Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis

Severity Level 5

Respirator Dependence/Tracheostomy Status

Severity Level 5

Heart Assistive Device/Artificial Heart

Severity Level 5

Heart Transplant Status/Complications

Severity Level 5

Heart Failure

Severity Level 5

Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders

Severity Level 5

Lung Transplant Status/Complications

Severity Level 5

Kidney Transplant Status/Complications

Severity Level 5

End Stage Renal Disease

Severity Level 5

Stem Cell, Including Bone Marrow, Transplant Status/Complications

Severity Level 4

Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock

Severity Level 4

Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia

Severity Level 4

Mucopolysaccharidosis

Severity Level 4

Adrenal, Pituitary, and Other Significant Endocrine Disorders

Severity Level 4

Acute Liver Failure/Disease, Including Neonatal Hepatitis

Severity Level 4

Chronic Liver Failure/End-Stage Liver Disorders

Severity Level 4

Major Congenital Anomalies of Diaphragm, Abdominal Wall, and Esophagus, Age < 2

Severity Level 4

Myelodysplastic Syndromes and Myelofibrosis

Severity Level 4

Aplastic Anemia

Severity Level 4

Combined and Other Severe Immunodeficiencies

Severity Level 4

Traumatic Complete Lesion Cervical Spinal Cord

Severity Level 4

Quadriplegia

Severity Level 4

Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease

Severity Level 4

Quadriplegic Cerebral Palsy

Severity Level 4

Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory

and Toxic Neuropathy

Severity Level 4

Nontraumatic Coma, Except Diabetic, Hepatic, or Hypoglycemic; Nontraumatic Brain

Compression/Anoxic Damage

Severity Level 4

Respiratory Arrest

Severity Level 4

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes

Severity Level 4

Acute Myocardial Infarction

Severity Level 4

Heart Infection/Inflammation, Except Rheumatic

Severity Level 4

Major Congenital Heart/Circulatory Disorders

CMS-9895-F 94

Severity Category

HCC/Description

Severity Level 4

Intracranial Hemorrhage

Severity Level 4

Ischemic or Unspecified Stroke

Severity Level 4

Vascular Disease with Complications

Severity Level 4

Pulmonary Embolism and Deep Vein Thrombosis

Severity Level 4

Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections

Severity Level 4

Chronic Kidney Disease, Stage 5

Severity Level 4

Artificial Openings for Feeding or Elimination

Severity Level 3

HIV/AIDS

Severity Level 3

Central Nervous System Infections, Except Viral Meningitis

Severity Level 3

Opportunistic Infections

Severity Level 3

Non-Hodgkin Lymphomas and Other Cancers and Tumors

Severity Level 3

Colorectal, Breast (Age < 50), Kidney and Other Cancers

Severity Level 3

Breast (Age 50+) and Prostate Cancer, Benign/Uncertain Brain Tumors, and Other

Cancers and Tumors

Severity Level 3

Lipidoses and Glycogenosis

Severity Level 3

Intestinal Obstruction

Severity Level 3

Necrotizing Fasciitis

Severity Level 3

Bone/Joint/Muscle Infections/Necrosis

Severity Level 3

Osteogenesis Imperfecta and Other Osteodystrophies

Severity Level 3

Cleft Lip/Cleft Palate

Severity Level 3

Hemophilia

Severity Level 3

Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero

Severity Level 3

Disorders of the Immune Mechanism

Severity Level 3

Coagulation Defects and Other Specified Hematological Disorders

Severity Level 3

Drug Use with Psychotic Complications

Severity Level 3

Drug Use Disorder, Moderate/Severe, or Drug Use with Non-Psychotic Complications

Severity Level 3

Alcohol Use with Psychotic Complications

Severity Level 3

Alcohol Use Disorder, Moderate/Severe, or Alcohol Use with Specified Non-Psychotic

Complications

Severity Level 3

Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes

Severity Level 3

Traumatic Complete Lesion Dorsal Spinal Cord

Severity Level 3

Paraplegia

Severity Level 3

Spinal Cord Disorders/Injuries

Severity Level 3

Cerebral Palsy, Except Quadriplegic

Severity Level 3

Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies

Severity Level 3

Muscular Dystrophy

Severity Level 3

Parkinson’s, Huntington’s, and Spinocerebellar Disease, and Other Neurodegenerative

Disorders

Severity Level 3

Hydrocephalus

Severity Level 3

Unstable Angina and Other Acute Ischemic Heart Disease

Severity Level 3

Atrial and Ventricular Septal Defects, Patent Ductus Arteriosus, and Other Congenital

Heart/Circulatory Disorders

Severity Level 3

Specified Heart Arrhythmias

Severity Level 3

Cerebral Aneurysm and Arteriovenous Malformation

Severity Level 3

Hemiplegia/Hemiparesis

Severity Level 3

Cystic Fibrosis

Severity Level 3

Extensive Third-Degree Burns

Severity Level 3

Severe Head Injury

Severity Level 3

Hip and Pelvic Fractures

Severity Level 3

Vertebral Fractures without Spinal Cord Injury

Severity Level 2

Viral or Unspecified Meningitis

Severity Level 2

Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and Tumors

Severity Level 2

Diabetes with Acute Complications

CMS-9895-F 95

Severity Category

HCC/Description

Severity Level 2

Diabetes with Chronic Complications

Severity Level 2

Diabetes without Complication

Severity Level 2

Protein-Calorie Malnutrition

Severity Level 2

Congenital Metabolic Disorders, Not Elsewhere Classified

Severity Level 2

Amyloidosis, Porphyria, and Other Metabolic Disorders

Severity Level 2

Cirrhosis of Liver

Severity Level 2

Chronic Pancreatitis

Severity Level 2

Acute Pancreatitis

Severity Level 2

Inflammatory Bowel Disease

Severity Level 2

Rheumatoid Arthritis and Specified Autoimmune Disorders

Severity Level 2

Systemic Lupus Erythematosus and Other Autoimmune Disorders

Severity Level 2

Congenital/Developmental Skeletal and Connective Tissue Disorders

Severity Level 2

Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn

Severity Level 2

Sickle-Cell Disorders, Except Sickle-Cell Anemia (Hb-SS) and Thalassemia Beta Zero;

Beta Thalassemia Major

Severity Level 2

Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital

Malformation Syndromes

Severity Level 2

Seizure Disorders and Convulsions

Severity Level 2

Monoplegia, Other Paralytic Syndromes

Severity Level 2

Atherosclerosis of the Extremities with Ulceration or Gangrene

Severity Level 2

Chronic Obstructive Pulmonary Disease, Including Bronchiectasis

Severity Level 2

Severe Asthma

Severity Level 2

Fibrosis of Lung and Other Lung Disorders

Severity Level 2

Chronic Kidney Disease, Severe (Stage 4)

Severity Level 2

Chronic Ulcer of Skin, Except Pressure

Severity Level 2

Major Skin Burn or Condition

Severity Level 1 (Lowest)

Chronic Viral Hepatitis C

Severity Level 1

Chronic Hepatitis, Except Chronic Viral Hepatitis C

Severity Level 1

Autistic Disorder

Severity Level 1

Pervasive Developmental Disorders, Except Autistic Disorder

Severity Level 1

Multiple Sclerosis

Severity Level 1

Asthma, Except Severe

Severity Level 1

Traumatic Amputations and Amputation Complications

Severity Level 1

Amputation Status, Upper Limb or Lower Limb

a/ Consistent with fiscal year 2024 updates to ICD-10 codes (effective October 1, 2023; see

https://www.cms.gov/medicare/coding-billing/icd-10-codes/2024-icd-10-cm), we updated the label for HCC 122 from

“Coma, Brain Compression/Anoxic Damage” to “Nontraumatic Coma, Except Diabetic, Hepatic, or Hypoglycemic;

Nontraumatic Brain Compression/Anoxic Damage.” The specific ICD-10 code update that prompted this label change

was the addition of code R402A “Nontraumatic coma due to underlying condition”, which we have mapped to HCC

122. HCC 122 is only assigned to enrollees who do not also have a head injury code, because HCC 223 (Severe Head

Injury) captures codes for head injury with loss of consciousness and supersedes HCC 122 in a hierarchy. As such, the

scope of HCC 122 is better reflected by the updated label. Because this ICD-10 update is effective October 1, 2023,

future releases of the benefit year 2023 and benefit year 2024 DIY software will also reflect the updated label and

diagnosis-to-HCC mapping.

b/ For the 2025 benefit year HHS risk adjustment models, we made the following changes to improve the prediction of

sickle cell disease costs: (1) updated mappings for sickle cell disease so that additional diagnosis codes are included in

the model (within HCC 71); 2) ungrouped HCCs 70 and 71 in the adult and child models; and (3) reassigned HCC 70

and 71 to a higher severity in the infant models. To reflect these changes, we also relabeled HCC 70 and HCC 71.

These updated mapping and HCC label changes parallel the reclassified Medicare Part C V28 CMS-HCCs. See, for

example, the Advance Notice of Methodological Changes for Calendar Year (CY) 2024 for Medicare Advantage

(MA) Capitation Rates and Part C and Part D Payment Policies (February 1, 2023).

https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.

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After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing the 2025 benefit year risk adjustment model factors

as proposed. We summarize and respond to public comments received on the proposed 2025

benefit year risk adjustment model factors below.

Comment: Many commenters were concerned about the treatment of high-cost

prescription drugs, such as gene therapy drugs, in the risk adjustment model factors. One

commenter was specifically concerned about the changes to the classification of Sickle Cell

Disorders and the HCC mapping changes that align with the CMS-HCC model used for

Medicare Advantage. This commenter recommended adding a new RXC for gene therapy for

sickle-cell anemia and Beta Thalassemia in the adult models, stating that a gene therapy RXC

would be a more reliable indicator of the presence of sickle cell disease or its severity. For

similar reasons, this commenter also recommended continuing to group HCCs 70 (Sickle-Cell

Anemia (Hb-SS) and Thalassemia Beta Zero) and 71 (Sickle-Cell Disorders, Except Sickle Cell

Anemia (Hb-SS) and Thalassemia Beta Zero; Beta Thalassemia Major) in both the adult and

child models. The commenter further recommended that we avoid relying on coding specificity

where the diagnostic severity relies on measures of pain, which is why they state a gene therapy

RXC would be more reliable. The commenter also stated any changes to HCC 70 (Sickle-Cell

Anemia (Hb-SS) and Thalassemia Beta Zero) and HCC 71 (Sickle-Cell Disorders, Except Sickle

Cell Anemia (Hb-SS) and Thalassemia Beta Zero; Beta Thalassemia Major) should anticipate the

impact of gene therapy treatments for sickle cell disease by having enrollees with a condition

treatable by the same therapy grouped together.

Another commenter recommended the creation of a new, separate RXC for pre-exposure

prophylaxis (PrEP) and one commenter recommended mapping Tepezza (a new treatment for

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thyroid eye disease) to an RXC in the risk adjustment models due to its high costs. Several

commenters also expressed concern about the decline in RXC 01 (Anti-HIV Agents) and RXC

01 x HCC001 (Additional Effects for enrollees with RXC 01 and HCC 01) coefficients since the

2023 benefit year HHS risk adjustment adult models were adopted in the 2023 Payment Notice.

Another commenter suggested creating a new, separate high-cost reimbursement pool for ultra-

high-cost drugs, including mostly cell and gene therapy drugs.

Response: We did not propose to change the treatment of high-cost drugs, such as gene

therapy drugs, in the 2025 benefit year risk adjustment models in the proposed rule and are not

finalizing such updates in this rule. As we discussed in the 2022 Payment Notice (86 FR 24163),

we recognize that the data used to recalibrate the risk adjustment models lag by several benefit

years behind the applicable benefit year for risk adjustment and therefore do not account for the

costs of new, expensive drugs, such as gene therapy drugs, that are expected to be available in

the market by the applicable benefit year of risk adjustment. Thus, we have continued to consider

ways that we could better account for high-cost drugs in the risk adjustment models and, as part

of this effort, analyze new data as they become available. For example, when we were analyzing

the changes to the sickle cell disorder related HCCs in the 2025 benefit year risk adjustment

models, we considered whether to add a RXC for existing high-cost sickle cell drugs and new

gene therapy treatments, but we found that we need to continue to analyze the evolution and

availability of drug treatments for sickle cell disease. Specifically, the new gene therapy drugs

for sickle cell disease were not approved for the market when we were developing the proposed

2025 benefit year risk adjustment models and coefficients.

Therefore, there were no data

We published the proposed 2025 benefit year coefficients in the 2025 Payment Notice proposed rule in November

2023. The first gene therapy treatment for sickle cell disease were not approved for use until December 2023. See

https://www.fda.gov/news-events/press-announcements/fda-approves-first-gene-therapies-treat-patients-sickle-cell-

disease.

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available on the use of the new gene therapy drugs for sickle cell disease when we were

developing the 2025 benefit year proposals and with this final rule, there currently continues to

be a general lack of data on the use of gene therapy drugs for sickle cell disease in the individual,

small group, and merged markets. We are committed to continuing to analyze new data as they

become available and, consistent with § 153.320(b)(1), we would propose the addition of any

new RXCs to the risk adjustment models through notice and comment rulemaking. We also note

that if an enrollee in an issuer's risk adjustment covered plan has claims for gene therapy, other

high-cost drugs, or other expensive treatments, that enrollee would be eligible for the high-cost

risk pool payments if claims for that enrollee are over $1 million.

Considering the absence of adequate data at the time of development of the proposed

2025 benefit year risk adjustment models and coefficients for inclusion in the 2025 Payment

Notice proposed rule, we did not propose and are not finalizing a new RXC or other model

adjustments for sickle cell gene therapy drugs for the 2025 benefit year. We intend to continue to

assess sickle cell gene therapy drugs to consider whether model updates for future benefit years

are warranted to address their anticipated costs. In response to the comment that HHS should

continue to group HCCs 70 (Sickle-Cell Anemia (Hb-SS) and Thalassemia Beta Zero) and 71

(Sickle-Cell Disorders, Except Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero; Beta

Thalassemia Major), we note that we removed the grouping of HCC 70 (Sickle-Cell Anemia

(Hb-SS) and Thalassemia Beta Zero) and HCC 71 (Sickle-Cell Disorders, Except Sickle Cell

Anemia (Hb-SS) and Thalassemia Beta Zero; Beta Thalassemia Major) in the adult and child

For example, the new sickle cell gene therapy treatments are expected to exceed the high-cost risk pool payment

threshold. See, DeMartino P, Haag MB, Hersh AR, Caughey AB, Roth JA. A Budget Impact Analysis of Gene

Therapy for Sickle Cell Disease: The Medicaid Perspective. JAMA Pediatr. 2021 Jun 1;175(6):617-623. doi:

10.1001/jamapediatrics.2020.7140. Erratum in: JAMA Pediatr. 2021 Jun 1;175(6):647. PMID: 33749717; PMCID:

PMC7985816. Accessed at https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7985816/.

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models in the 2025 benefit year risk adjustment model factors because we found in our analysis

that HCC 70 (Sickle-Cell Anemia (Hb-SS) and Thalassemia Beta Zero) and HCC 71(Sickle-Cell

Disorders, Except Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero; Beta Thalassemia

Major) each pose sufficient independent risk characteristics to sever the grouping. Additionally,

we kept the hierarchical relationship between the HCC 70 (Sickle-Cell Anemia (Hb-SS) and

Thalassemia Beta Zero) and 71 (Sickle-Cell Disorders, Except Sickle Cell Anemia (Hb-SS) and

Thalassemia Beta Zero; Beta Thalassemia Major), therefore, we do not allow the coefficient for

HCC 71 (Sickle-Cell Disorders, Except Sickle Cell Anemia (Hb-SS) and Thalassemia Beta Zero;

Beta Thalassemia Major) to be higher than HCC 70 (Sickle-Cell Anemia (Hb-SS) and

Thalassemia Beta Zero). These updates to HCCs 70 (Sickle-Cell Anemia (Hb-SS) and

Thalassemia Beta Zero) and 71 (Sickle-Cell Disorders, Except Sickle Cell Anemia (Hb-SS) and

Thalassemia Beta Zero; Beta Thalassemia Major) were also informed by and align with the

reclassified Medicare Part C V28 CMS-HCCs.

We also did not propose and are not finalizing the addition of PrEP as an RXC in the

2025 benefit year adult risk adjustment models. As explained in the 2021 Payment Notice (85 FR

29164, 29187), we have not incorporated PrEP as an RXC because, as a general principle, RXCs

are incorporated into the HHS risk adjustment adult models to impute a missing diagnosis or

indicate severity of a diagnosis. Since the use of PrEP is currently recommended as a preventive

service for persons who are not infected with HIV and are at high risk of HIV infection, the use

of PrEP does not adequately represent risk due to an active condition and would be inconsistent

with this principle (that RXCs are incorporated into HHS risk adjustment adult models to impute

See, for example, the Advance Notice of Methodological Changes for Calendar Year (CY) 2024 for Medicare

Advantage (MA) Capitation Rates and Part C and Part D Payment Policies (February 1, 2023).

https://www.cms.gov/files/document/2024-advance-notice-pdf.pdf.

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a missing diagnosis) to add it as an RXC at this time. However, like previous years, we

reassessed the use and availability of the different types of PrEP in the market as we developed

the 2025 benefit year risk adjustments models. Our most recent analysis affirmed our prior

findings that the use of PrEP does not represent an active condition. In addition, as we have done

in previous years, we incorporated 100 percent of the PrEP costs for enrollees without HIV

diagnosis or treatment in the simulation of plan liability for purposes of recalibrating the adult

and child models. We further note that enrollees in risk adjustment covered plans that use PrEP

drugs in combination with another HIV treatment drug that map to RXC 01 (HIV/AIDS) will

still receive credit for RXC 01 (HIV/AIDS) in the 2025 benefit year of risk adjustment. We

intend to continue to explore the treatment of PrEP in the risk adjustment models to consider

whether changes are needed in future benefit years, as appropriate.

We also did not propose and are not finalizing changes to add an RXC to the HHS risk

adjustment model’s treatment for Tepezza, which treats thyroid eye disease. Under the HHS risk

adjustment models, thyroid eye disease (thyrotoxicosis) is currently captured within the non-

payment HCC, HCC33 (Other Endocrine/Metabolic/ Nutritional Disorders) and all RXCs in the

HHS risk adjustment adult models are associated with a payment HCC. For this reason, HHS did

not propose and is not finalizing any changes with respect to the treatment of Tepezza for thyroid

eye disease in the 2025 benefit year risk adjustment models. However, HHS intends to continue

analysis of thyrotoxicosis and the use of Tepezza as more data becomes available and consider

its treatment in risk adjustment models for future benefit years.

Lastly, the change identified by some commenters in the RXC coefficients relative to the

2023 benefit year is due to decisions we made starting in the 2024 benefit year regarding the

trending costs for traditional and specialty drugs, which have been trended separately from

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medical expenditures since the 2017 benefit year.

As stated in the 2024 Payment Notice,

our annual assessment of the trending factors for the 2024 HHS risk adjustment models, we

determined that the trend factors used for specialty drugs were higher than the market data

supported. Therefore, for the 2024 benefit year, we used trend factors for specialty drugs that

aligned with the market data rather than continuing use of the historical, higher trend factors. In

determining these trend factors, we consulted our actuarial experts, reviewed relevant URRT

submission data, analyzed multiple years of enrollee-level EDGE data, and consulted NHEA

data as well as external reports and documents

published by third parties. In this process, we

also ensured that the trends we used reflected changes in cost of care rather than gross growth in

expenditures.

In our annual recalibration of the 2025 risk adjustment models, we continued the

approach used for the 2024 benefit year, again reflecting the lower market-supported trend

factors for specialty drugs rather than the historical, higher trend factors we used in benefit years

prior to 2024. While there was a change to RXC 01 (HIV/AIDS) between the 2023 benefit year

and the 2024 benefit year, the decrease between the final 2024 risk adjustment models and the

2025 risk adjustment models was much smaller in magnitude (from 4.669 to 4.345 for silver

plans; a 6.9 percent decrease) and is consistent with normal year-to-year variation. For example,

over the period between 2018 model recalibration (when RXCs were first introduced) and 2023

model recalibration (the last model recalibration before the change to the trending approach), the

See 81 FR 12218.

See 88 FR 25753.

See, for example, “How much is health spending expected to grow?” by the Peterson-Kaiser Family Foundation,

available at https://www.healthsystemtracker.org/chart-collection/how-much-is-health-spending-expected-to-grow/.

See also “Medical cost trend: Behind the numbers 2024” by PwC Health Research Institute, available at

https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-behind-the-numbers-2024.pdf. See also

“MBB Health Trends 2023” by MercerMarsh Benefits, available at https://www.marsh.com/na/services/employee-

health-benefits/insights/health-trends-report.html.

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median year-to-year absolute change (that is, increase or decrease) across all silver RXC

coefficients was 10.7 percent. The 6.9 percent decrease seen in RXC 01 (HIV/AIDS) between

the 2024 and 2025 model recalibrations is therefore well within the range of changes that we

normally see year-to-year.

For these reasons, we believe the trend factors we currently use for specialty drugs are

appropriate and reflect the most recent trends we have seen in the market, and that the prior

model trend factors were too high relative to the actual state of the current market. We believe

the RXC coefficient values that we finalize in this rule reflect the appropriate amount of growth

between the data years used to fit the models and the 2025 benefit year. As part of our annual

model recalibration activities, we intend to continue to reassess the trend factors used to update

the HHS risk adjustment models, including those specific to specialty drugs, in future benefit

years.

Comment: Some commenters requested HHS not remove GLP-1 drugs from RXC 07

(Anti Diabetic Agents, Except Insulin and Metformin Only) and instead make market pricing

adjustments to RXC 07 (Anti Diabetic Agents, Except Insulin and Metformin Only) due to the

expanded use of GLP-1 drugs in the market. Commenters mentioned the significant pricing

changes that occurred between the data years used to recalibrate the models and the applicable

benefit year of risk adjustment as support for making market pricing adjustments or other

updates to RXC 07 (Anti Diabetic Agents, Except Insulin and Metformin Only) to account for

the costs and expanded use of GLP-1 drugs. These commenters stated they did not believe the

current HHS risk adjustment models represent the increase in cost of diabetes treatment using

GLP-1 drugs due to increased utilization since the 2021 benefit year. These commenters noted

that cost and utilization trends for GLP-1 drugs are expected to continue to change, as GLP-1

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drugs are relatively new treatment for chronic weight management. Another commenter

expressed concerns about the off-label usage of GLP-1 drugs and preserving the integrity of

RXC 07 (Anti Diabetic Agents, Except Insulin and Metformin Only).

Response: We did not change the inclusion of GLP-1 drugs in RXC 07 (Anti Diabetic

Agents, Except Insulin and Metformin Only), or propose to change our current approach to RXC

inclusion in recalibrating the adult models using the final, fourth quarter (Q4) RXC mapping

document that was applicable for each benefit year of data that is included in the current year’s

model recalibration.

However, in developing the proposed 2025 benefit year risk adjustment

models and coefficients, we considered our treatment of GLP-1 drugs using our previous

established criteria on inclusion and exclusion of drugs in model recalibration. Specifically, as

we explained in the 2023 Payment Notice (87 FR 27208, 27231 through 27235), in extenuating

circumstances where HHS believes there would be a significant impact from a change in an

RxNorm Concept Unique Identifiers (RXCUI) to RXC mapping, we will consider whether

changes to the RXCUI to RXC mapping from the applicable data year crosswalk are appropriate.

As background, RXC 07 (Anti Diabetic Agents, Except Insulin and Metformin Only) is a

pharmacotherapeutic class of drugs, which contains a broad array of anti-diabetic medications

that vary in cost. RXC 07 (Anti Diabetic Agents, Except Insulin and Metformin Only) does not

include all GLP-1 drugs currently on the market; drugs that carry an FDA indication for chronic

weight management are excluded from RXC 07 (Anti Diabetic Agents, Except Insulin and

Metformin Only). The RXC 07 (Anti Diabetic Agents, Except Insulin and Metformin Only)

coefficient in the HHS risk adjustment adult models is meant to reflect the average enrollee cost

for individuals being treated by any of the drugs in this class. To assess the current mapping of

87 FR 27231 through 27235

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certain GLP-1 drugs to RXC 07 (Anti Diabetic Agents, Except Insulin and Metformin Only) and

whether any changes were warranted, we considered the positive predictive value (PPV) of these

drugs. The PPV is a conditional proportion of patients who are diagnosed with the HCC and

prescribed a drug (“drug” defined as a single RXCUI)

to the total patients prescribed that drug.

A PPV of 100 percent means that all enrollees taking a drug within a RXCUI had the associated

HCC, and a PPV of 0 percent means that none of the enrollees taking a drug within a RXCUI

had the associated HCC. In our analysis for the proposed rule, we found a marginal downward

trend in the PPVs for the GLP-1 drugs mapping to RXC 07 (Anti Diabetic Agents, Except

Insulin and Metformin Only) in the enrollee-level EDGE data years used to recalibrate the 2025

benefit year risk adjustment models. Based on comments received for the proposed rule, we

reassessed PPVs for the GLP-1 mapping to RXC 07 (Anti Diabetic Agents, Except Insulin and

Metformin Only) using the 2022 benefit year enrollee-level EDGE data, and we found that the

GLP-1 drugs have high enough PPVs that they did not warrant exclusion under our criteria and

that the enrollees’ use of certain GLP-1 drugs in the market remains indicative of the condition,

meaning we do not see PPVs indicative of a large enough change in clinical indications or

practice patterns to warrant a change to the current mapping of GLP-1 drugs to RXC 07 (Anti

Diabetic Agents, Except Insulin and Metformin Only). It is not clear how the trend in PPV of

these drugs will continue, but we believe that further years of enrollee-level EDGE data are

needed to evaluate this trend. For these reasons, at this time, we did not propose and are not

making mapping changes for GLP-1 drugs to RXC 07 (Anti Diabetic Agents, Except Insulin and

Metformin Only). As more enrollee-level EDGE data becomes available, HHS will continue to

Drugs that appear on claims data, either through National Drug Codes (NDCs) or Healthcare Common Procedural

Coding System (HCPCS), are cross walked to RXCUIs.

RXCUI mappings are always matched to the NDCs and

HCPCS applicable to the particular EDGE data year as the NDC and HCPCS reflect the drugs that were available in

the market during the benefit year.

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reassess the PPVs of GLP-1 drugs for potential future targeted changes as part of our ongoing

efforts to continually improve the precision of the HHS risk adjustment models.

In addition, HHS did not propose and is not finalizing the application of a pricing

adjustment for GLP-1 drugs in the risk adjustment models. As discussed above, the only such

adjustment that HHS currently applies is the market pricing adjustment to the plan liability

associated with Hepatitis C drugs in the HHS risk adjustment models for the narrow purpose of

accounting for significant pricing changes between the data years used for recalibrating the

models and the applicable benefit year of risk adjustment as a result of the introduction of new

and generic Hepatitis C drugs. We do not expect similar significant pricing changes of GLP-1

drugs between the data years used to recalibrate the models and the applicable benefit year of

risk adjustment to justify applying a similar pricing adjustment to GLP-1 drugs under RXC 07

(Anti Diabetic Agents, Except Insulin and Metformin Only) at this time. We understand GLP-1

drug utilization patterns are changing and HHS will continue to assess any new drugs and any

change in costs as more enrollee-level EDGE data become available for potential targeted

refinements to the HHS risk adjustment models, as appropriate.

Comment: A few commenters recommended assessing the behavioral HCC coefficients,

such as HCC 102 (Autistic Disorder), to consider the impact of State benefit mandates in

creating cost and utilization differentials that reduce the ability of HCC coefficients to accurately

reflect costs. These commenters suggested the State-to-State differences in plan liabilities for

treating autistic disorder are likely the result of State coverage mandates for behavioral analysis.

These commenters recommended HHS consider remedies that might be appropriate to mitigate

coefficients that are too low to cover treatment costs in States with these benefit mandates. One

commenter specifically noted that we should ensure that the HCC 102 (Autistic Disorder)

CMS-9895-F 106

coefficient fully reflects the cost of treating children with this diagnosis.

Response: HHS did not propose and is not finalizing changes to the behavioral HCC

factors. The HHS risk adjustment models are national models developed using nationwide data

that apply in all States where the HHS-operated risk adjustment program exists, which for the

2025 benefit year includes all States and the District of Columbia. Because these models are used

nationally, they are intended to reflect the relative national average costs for HCCs and do not

produce separate results based on State variations in plan liability, actuarial risk, or costs. Based

on our experience in developing the HHS risk adjustment models, we have found that use of the

nationwide dataset is often necessary to ensure that we have adequate sample size and stability in

our risk adjustment models, including the models’ factors and coefficients. We note that while

the 2021 benefit year enrollee-level EDGE data has a field that allows the data to be aggregated

by State, the 2019 and 2020 benefit years of enrollee-level EDGE data being used to recalibrate

the risk adjustment models for the 2025 benefit year do not contain the State field.

Therefore,

our ability to analyze potential State variations and trends in the recalibration sample is currently

limited. We intend to analyze additional years of enrollee-level EDGE data, which will contain

the State indicator in the future. We also note that HHS continuously performs analysis on model

performance to ensure the current model coefficients are appropriate. For example, we conduct

regular out-of-sample model evaluations that support continued model improvement efforts to

evaluate how accurately the models predict plan liability for various groups of enrollees and

health plans. Using out-of-sample 2021 data, we evaluated the final payment year 2024 blended

factors (calibrated using 2018-2020 data) and the final payment year 2021 blended factors

87 FR 27241 through 27244. In the 2024 Payment Notice at 88 FR 25781, we finalized the proposal to extract plan

ID and rating area data elements issuers have submitted to their EDGE servers from certain benefit years prior to

2021. However, at this time, HHS has not completed that the extraction and development of updated datasets for

model recalibration using plan ID and rating area data from the benefit years prior to 2021.

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(calibrated using 2015-2017 data). Outcomes of these evaluations were generally as expected

and indicate that the national risk adjustment models are performing at a reasonable level.

Comment: Several commenters stated that the 2025 benefit year risk adjustment models

will undercompensate issuers for enrollees with serious chronic conditions where coefficients

have declined, which they stated would incentivize issuers to avoid these enrollees. A few

commenters recommended that we update the risk adjustment models so that the coefficients are

additive rather than hierarchical for the HCCs for kidney failure and transplant hierarchy,

including HCCs 183 (Kidney Transplant Status/Complications), 184 (End Stage Renal Disease),

187 (Chronic Kidney Disease, Stage 5), and 188 (Chronic Kidney Disease, Severe (Stage 4)).

One commenter stated that over the past several model recalibrations, they observed a steady

decline in the proportion of aggregate issuer risk scores that are attributable to clinical factors

and an increase in the proportion of risk scores attributable to demographic factors.

Response: We understand commenters' concerns about ensuring the HHS risk adjustment

models adequately compensate issuers of risk adjustment covered plans for enrollees with

serious chronic conditions. Several factors may contribute to the trend commenters observed

with respect to declining HCC coefficients. For example, such a decline is expected in HHS risk

adjustment models as diagnostic coding trends toward being more thorough and complete which

results in capturing more HCCs per enrollee over time.

As a result of this improved coding,

some enrollees would have more HCCs count towards their risk score with each HCC

individually contributing a smaller amount towards the enrollee’s overall risk score.

Consequently, because enrollees are likely to have more HCCs, the lower coefficients do not

necessarily result in lower risk scores for enrollees with multiple HCCs.

See Figure 4. Summary Report on Permanent Risk Adjustment Transfer for the 2022 Benefit Year

https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf

CMS-9895-F 108

Additionally, the observed decreases in coefficients can also be attributed to the revised

interacted HCC counts model specification that was introduced beginning with the 2023 benefit

year HHS risk adjustment adult and child models because this model specification shifts some of

the predicted risk score away from the individual HCC coefficients and towards the severe

interacted counts for the sickest enrollees. Specifically, in the 2023 Payment Notice (87 FR

27208, 27221 through 27230), HHS finalized major changes to add the interacted HCC counts

model specifications to the adult and child models.

As discussed in the 2021 HHS-Operated

Risk Adjustment Technical Paper on Possible Model Changes,

the purpose of the interacted

HCC counts model specifications is to address the identified underprediction of plan liability in

the adult and child models for the very highest-risk enrollees (that is, those in the top 0.1

percentile and those enrollees with the most HCCs) because while this highest-risk

subpopulation represents a small number of enrollees, it represents a large portion of

expenditures. However, the impact of the interacted HCC counts model specification is that risk

scores for some severe HCCs and for enrollees with severe HCCs and fewer comorbidities

decrease, while risk scores for enrollees with severe HCCs and more comorbidities increase.

Therefore, overall coefficient changes due to trends in coding and model changes such as the

interacted HCC counts model specification would lead to lower risk scores for some enrollees

and higher risk scores for others.

As part of our effort to strive for continual improvement of the precision of the HHS risk

adjustment models, our intention is to monitor the impact of changes in the risk adjustment

See also Chapter 4 on Improving Predictive Accuracy for the Very Highest-Risk Enrollees – Interacted HCC

Counts in the HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes (2021, October 26) at:

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

HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS.

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

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models over the years to consider whether additional changes or modifications are needed. To do

this, we will continue to conduct analysis on the models and the models’ predictions before

considering whether changes are needed. Similarly, if we were to consider making changes to the

models to restructure hierarchies (that would change whether certain HCCs could be additive)

we would need to further assess the impact of those changes before proposing those changes. As

major risk adjustment model changes were finalized beginning with the 2023 benefit year, we

seek to observe and analyze the outcome of those changes before considering other major

changes to the HHS risk adjustment models and therefore, we are not considering changes to the

kidney transplant HCCs at this time as the kidney transplant HCC is part of the interacted HCC

counts model specification.

Lastly, we note that beginning with the 2023 benefit year, we also made substantial

model changes intended to address observed underprediction of healthy enrollees that included

the inclusion of the interacted HCC counts model specification in the adult and child models and

the HCC-contingent enrollment duration factor updates in the adult models. For example, since

the 2023 benefit year risk adjustment models, all costs for partial year with no-HCC-or-RXC

enrollees are recalibrated into the age-sex factors.

Thus, as a result of these model specification

changes, the age-sex factors increased in the 2023 benefit year risk adjustment models. Since the

2023 benefit year, we have observed that on average, age-sex coefficient values have remained

stable, suggesting that the total risk attributable to these factors for the average enrollee is

unchanged. We do not yet have the data for risk adjustment benefit years 2024 or 2025, but any

proportional changes in risk attributable to demographic factors would likely depend on changes

Prior to the adoption of the HCC-contingent enrollment duration factors, risk from partial year, no-HCC-or-RXC

enrollees was split between the age-sex factors and the enrollment duration factors defined using the previous model

structure.

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in the population being enrolled and model changes.

Comment: A few commenters requested additional transparency in the determination of

coefficients for the HHS risk adjustment models by making the full details of the methodology

used for recalibration of the risk adjustment models publicly available to increase predictability

for plans and therefore reduce plan incentives for discriminatory behavior used to protect the

plans from future changes and for interested parties to have a better understanding of the

rationale behind the updates to the HHS risk adjustment models. These commenters stated that

this enhanced transparency would increase public confidence in the coefficients.

Response: We understand the importance of transparency, but do not believe it is

necessary to release additional information on the risk adjustment model recalibration

methodology at this time. Since the program’s inception, we have released several risk

adjustment technical papers

62, 63,64,65

and rules that describe the key program goals that informed

development of the HHS risk adjustment models, explain our HCC diagnostic classification,

provide information on the data and methods used to develop the models for each age group

(adult, child, and infant) and metal level (platinum, gold, silver, bronze, as well as catastrophic

plans), and discuss updates to the models over the years. We share similar information as part of

the discussion of the annual model recalibration proposals in the applicable benefit year’s

Payment Notice, and when we identify areas for targeted refinements to improve model

prediction along with potential options to address the identified issues, including the rationale for

HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS.

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

2016 Risk Adjustment White Paper (2016, March 31). CMS. https://www.cms.gov/cciio/resources/forms-reports-

and-other-resources/downloads/ra-march-31-white-paper-032416.pdf.

Potential Updates to HHS-HCCs for the HHS-operated Risk Adjustment Program. (2019, June 18). CMS.

https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/potential-updates-to-hhs-hccs-hhs-

operated-risk-adjustment-program.pdf.

Risk Adjustment Implementation Issues. (2011, September 12). CMS.

https://www.cms.gov/CCIIO/Resources/Files/Downloads/riskadjustment_whitepaper_web.pdf.

CMS-9895-F 111

those options. Whether engaging in the annual model recalibration activities or identifying

potential refinements and options to address identified issues, we are mindful of the role risk

adjustment can play in reducing plan incentives for discriminatory behavior. By way of example,

the current HHS risk adjustment adult and child models aim to reduce plan incentives for

discriminatory behavior through methods like the recently adopted interacted HCC counts model

specification that seeks to more accurately reflect anticipated plan liability for the sickest

enrollees. The current HHS risk adjustment adult models were also recently updated with new

HCC-contingent enrollment duration factors that seek to improve the prediction of plan liability

for partial year enrollees. We provided a technical paper on these changes

and also addressed

them in notice and comment rulemakings.

Our intention is to continue to provide technical

papers where appropriate, such as when considering major modeling changes and engage in

rulemaking to share a complete description of the applicable benefit year’s models and any

applicable updates to increase predictability for plans where possible. We also remain committed

to continuing to test the performance of the models as part of our ongoing efforts to identify

potential areas for targeted refinements to improve the prediction of the HHS risk adjustment

models. We also provide background in this rule on the data used for recalibrating the 2025

benefit year models, including the analyses of the 2021 benefit year enrollee-level EDGE data to

examine the potential impact of the COVID-19 PHE. As noted, we did not find any notable

anomalous trends, especially when considering that every year of data can be unique, and

therefore, some level of deviation from year to year is expected. We also provided extensive

HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS.

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

86 FR 24155 through 24162 and 87 FR 27221 through 27231.

CMS-9895-F 112

background when making significant model updates in the 2021 Payment Notice,

as well as in

the technical paper released in 2019 that considered potential future HCC changes and our

associated analyses of those changes.

Comment: Several commenters supported the continued inclusion of HCC 23 (Protein-

Calorie Malnutrition) as a payment HCC in the 2025 benefit risk adjustment models due to the

high-costs of malnutrition care, and malnutrition’s negative effect on health care utilization and

outcomes. These commenters also expressed concern about health equity related to malnutrition

and the importance of prioritizing policies that identify and treat malnutrition.

Response: We agree with the commenters and continue to believe HCC 23 (Protein-

Calorie Malnutrition) is appropriate for continued inclusion in the HHS risk adjustment models

for the individual, small group, and merged markets as a predictor of costs. We recognize that

the CMS-HCC risk adjustment models used for Medicare Advantage recently removed this HCC

from its models; however, we did not propose any changes to the treatment of HCC 23 (Protein-

Calorie Malnutrition) in the 2025 benefit year HHS risk adjustment models, and therefore, HCC

23 (Protein-Calorie Malnutrition) will continue to be included as a payment HCC and 2025

benefit year model factor as proposed for the adult, child, and infant models for the HHS-

operated risk adjustment program applicable to the individual, small group, and merged markets.

Comment: One commenter recommended allowing capitated claims without diagnoses to

be submitted to the EDGE server, stating that the claims costs associated with capitated claims

without diagnoses represent a large portion of medical costs. This commenter stated that this

exclusion of capitated claims without diagnoses exacerbates the HHS-operated risk adjustment

85 FR 29164 at 29173 through 29185

Potential Updates to HHS-HCCs for the HHS-operated Risk Adjustment Program. (2019, June 18). CMS.

https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/potential-updates-to-hhs-hccs-hhs-

operated-risk-adjustment-program.pdf.

CMS-9895-F 113

program’s underprediction of lower-cost enrollees.

Response: A critical component of the HHS-operated risk adjustment program is

mapping of diagnosis codes from the EDGE server to HCCs in the risk adjustment models and

therefore, only claims with diagnosis codes

are allowed to be submitted to an issuer’s EDGE

server as these diagnosis codes are a critical component to the HHS-operated risk adjustment

program’s determination of actuarial risk and consideration for risk adjustment transfers. Should

a capitated claim have a diagnosis, issuers may submit the claim to their EDGE server. Should a

capitated claim not have a diagnosis, issuers may obtain diagnosis code(s) for the claim as

directed in HHS guidance published in the EDGE Server Business Rules (ESBR)

Section 8

Supplemental Diagnosis Code File Processing, which includes specific guidelines regarding

acceptable sources of diagnosis code(s) for claims data submissions to EDGE servers that

accounts for unique health delivery models. Certain issuers who mainly submit capitated claims

to their EDGE server should therefore ensure those claims have diagnosis codes and can use the

ESBR to identify acceptable sources of diagnosis codes for claims data submitted to their

respective EDGE servers.

HHS encourages all issuers of risk adjustment covered plans,

whether they submit capitated or non-capitated claims, to work with providers to ensure claims

contain the relevant diagnosis code(s).

We also note that while HHS currently excludes enrollees with capitated claims for

purposes of the risk adjustment model recalibration activities,

we plan to continue to evaluate

The only exception to this use of diagnosis codes to determine actuarial risk is the High-Cost Risk Pool, which

uses claims costs.

Centers for Medicare & Medicaid Services, Center for Consumer Information and Insurance Oversight (CCIIO).

(Dec. 2023). EDGE Server Business Rules (ESBR) Version 24.0. https://regtap.cms.gov/reg_librarye.php?i=3765

(Login Required).

https://regtap.cms.gov/reg_library_openfile.php?id=2183&type=k&pid=3(Login Required).

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.

CMS-9895-F 114

this data and whether to include these enrollees in recalibrating the models in future benefit

years.

d. Cost-Sharing Reduction Adjustments

We proposed to recalibrate the CSR adjustment factors for AI/AN zero-cost sharing and

limited cost sharing CSR plan variant enrollees for the 2025 benefit year, and to retain these

proposed AI/AN CSR adjustment factors, if finalized, for all future benefit years unless changed

through notice and comment rulemaking. We also proposed to maintain the current CSR

adjustment factors for silver plan variant enrollees (70 percent, 73 percent, 87 percent, and 94

percent AV plan variants)

for the 2025 benefit year, as well as proposed to retain the same

factors for the 2026 benefit year and beyond, unless changed through notice and comment

rulemaking. The proposed 2025 Payment Notice provided our reasoning for our proposals and

the history of inclusion of the CSR adjustment factors in HHS-operated risk adjustment as well

as our analysis of these factors’ performance.

In short, based on analysis of all CSR adjustment

factors, HHS proposed to not make changes to the CSR adjustment factors, with the exception of

the AI/AN CSR plan variant factors.

As explained in the proposed rule, our continued study of

CSR adjustment factors found that adjustments for AI/AN CSR plan variant enrollees were

needed and would be appropriate

because the AI/AN CSR plan variant enrollees experienced

See 83 FR 16930 at 16953; 84 FR 17478 through 17479; 85 FR 29190; 86 FR 24181; 87 FR 27235 through

27236; and 88 FR 25772 through 25774.

88 FR 82510 at 82545 through 82548.

In the 2021 Risk Adjustment Technical Paper, we concluded that, in aggregate, most of the current CSR

adjustment factors contribute to a reasonable prediction of what plans are paying for CSR enrollees, with the

exception of CSR adjustment factors for AI/AN enrollees. Our continued study of these issues, including the more

recent analysis of 2021 benefit year data, affirmed these initial conclusions. Therefore, we proposed and are

finalizing in this rulemaking updates to the CSR adjustment factors for AI/AN zero-cost sharing and limited cost

sharing plan variants while maintaining the existing CSR adjustment factors for other enrollees. See 88 FR 82510 at

82545 through- 82548. Also see Appendix A, HHS-Operated Risk Adjustment Technical Paper on Possible Model

Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/ 2021-ra-technical-paper.pdf.

88 FR 82510 at 82545 through 82548.

CMS-9895-F 115

higher expenditures than non-CSR silver enrollees, which may reflect increased demand

associated with enrollee receipt of the AI/AN zero cost sharing or limited cost sharing CSR plan

variants or risk characteristics specific to the AI/AN population which are not specifically

captured by HCCs or other model factors.

To address concerns about this observed

underprediction among AI/AN CSR plan variant enrollees, we proposed to update the CSR

adjustment factors for AI/AN zero-cost sharing and limited cost sharing plan variants and use the

proposed factors for these enrollees as shown in Table 7.

TABLE 7: CSR Adjustment Factors for the 2025 Benefit Year and Beyond

Plan AV

Current Adjustment Factors for the

2024 Benefit Year

Adjustment Factors for the 2025

Benefit Year and Beyond

Silver Plan Variant Recipients (and Enrollees in State wrap-around or Medicaid-expansion plans of any metal

level, as applicable)

Plan Variation 94%

1.12

Plan Variation 87%

1.12

Plan Variation 73%

1.00

Standard Plan 70%

1.00

Zero Cost Sharing Plan Variant Recipients (that is, AI/AN Recipients)

Platinum (90%)

1.00

1.31

Gold (80%)

1.07

1.39

Silver (70%)

1.12

1.46

Bronze (60%)

1.15

1.51

Limited Cost Sharing Plan Variant Recipients (that is, AI/AN Recipients)

Platinum (90%)

1.00

1.04

Gold (80%)

1.07

1.10

Silver (70%)

1.12

1.15

Bronze (60%)

1.15

1.19

Lastly, separate from the policy pertaining to AI/AN CSR adjustment factors, we noted

that for all plan liability risk score calculations under the State payment transfer formula, we use

the CSR adjustment factor that aligns with the AV of the applicable plan for the enrollee. Thus,

for unique State-specific plans, we apply the CSR adjustment factors that correspond to each

plan’s AV. However, this approach does not apply in the case of States whose State-specific

HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS.

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

CMS-9895-F 116

plans take the form of Medicaid expansion plans offered on the Exchange (for example,

Arkansas), because these 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 and sources of funding.

As we identify unique

State-specific plans that have higher plan liability than the standard plan variants, such as those

in Massachusetts, we work with the relevant State Department of Insurance and other relevant

State agencies to identify the applicable CSR adjustment factor that corresponds to the unique

State-specific plan’s AV.

We explained that we will continue to follow this approach, working

with the State to identify the applicable CSR adjustment factor that corresponds to that State’s

unique State-specific plan’s AV, unless changed through notice and comment rulemaking.

We sought comment on these proposals and policies. After consideration of comments

and for the reasons outlined in the proposed rule and our responses to comments, we are

The structure of wrap-around plans in some States, such as Massachusetts, differs from the coverage in States who

offer Medicaid expansion plans on the Exchange. For example, in Massachusetts, the higher cost sharing wrap-

around plans are variations of lower cost sharing plans. As such, the Massachusetts wrap-around plans do not have

the same AVs as their comparable plans. That is why we use a CSR adjustment factor of 1.12 for all Massachusetts

wrap-around plans with AVs above 94 percent. In contrast, Arkansas’ Medicaid expansion plans are identical to

other 94 percent and 100 percent AV CSR plan variants offered on the Exchange and are distinguished from these

identical plans only in their sources of funding and eligibility criteria. As such, we presently direct issuers in

Arkansas who provide Medicaid expansion plans with AVs of 94 percent and 100 percent to use specified plan

variant codes for their Medicaid expansion plans only to differentiate the sources of funding and to differentiate

between populations eligible for the Medicaid expansion plans from those who are eligible for standard 94 percent

and 100 percent AV CSR plan variants. Because the Arkansas Medicaid expansion plans are identical to other 94

percent and 100 percent AV CSR plan variants available in Arkansas and therefore have the same AVs, 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 CMS approval of Arkansas’s section 1115(a)

demonstration, “Arkansas Health and Opportunity for Me.” https://www.medicaid.gov/sites/default/files/2021-12/ar-

arhome-ca.pdf.

For a list of the unique State-specific CSR levels that have higher plan liability than the standard plan variants, for

which we utilize the corresponding CSR adjustment factor that maps to the plan’s AV, refer to the applicable benefit

year’s DIY Software on the CMS Website. See, for example, the 2023 Benefit Year DIY Software on the CMS

website (January 9, 2024). https://www.cms.gov/files/zip/hhs-hcc-software-v0723141c3.zip.

CMS-9895-F 117

finalizing these provisions and policies as proposed. We summarize and respond to public

comments received on the proposed CSR adjustment factors and related policies below.

Comment: Several commenters supported the proposed recalibration of the CSR

adjustment factors for AI/AN zero-cost sharing and limited cost sharing plan variant enrollees

for the 2025 benefit year and beyond because the recalibration would better capture increased

utilization from zero-cost sharing and limited cost sharing enrollments and mitigate incentives

that could discourage issuers from enrolling AI/AN populations. These commenters stated that

the adjustments will have the effect of stabilizing premiums and incentivizing issuers to enroll

the AI/AN population. Another commenter recommended HHS continue to monitor the

predictive ratios of the CSR adjustment factors for the AI/AN population to ensure that they

accurately estimate additional plan liabilities associated with these enrollments and to make

further adjustments, as needed.

One commenter, who did not oppose recalibrating the CSR adjustment factors for AI/AN

zero-cost sharing and limited cost sharing plan variant enrollees, preferred to comprehensively

reform how CSR variants are handled in HHS-operated risk adjustment program, such as

creating CSR specific risk adjustment models and modifying the rating term

to reflect issuer

silver loading practices.

The State payment transfer formula may be understood to be composed of two key higher-level terms, the risk

term and the rating term. The risk term generally defines the revenue required by a plan (relative to the Statewide

market average). It is determined by three component variables, the plan liability risk score (PLRS), which reflects

the plan’s AV as well as the plan’s enrollee health status risk; the induced demand factors (IDF), which reflects the

anticipated induced demand associated with the plan’s cost-sharing (metal) level, and the geographic cost factor

(GCF), which accounts for differences in premium due to allowable geographic rating variation. The rating term

defines the revenue that a plan can be expected to generate given the allowable rating factors (relative to the

Statewide market average). It is determined by four component variables: AV, which adjusts for relative differences

between the plan actuarial value in a market; an Allowable Rating Factor (ARF), which accounts for the impact of

allowable rating factors (age or family tier) based on State rating method; an IDF; and a GCF. For more information

see section 1.2.3 of the in the HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes (2021,

October 26) at: https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.

CMS-9895-F 118

Response: We are finalizing as proposed the updates to the CSR adjustment factors for

AI/AN zero-cost sharing and limited cost sharing CSR plan variant enrollees for the 2025 benefit

year, and to retain these AI/AN CSR adjustment factors, along with the CSR adjustment factors

for other enrollees, for future benefit years unless changed through notice and comment

rulemaking. We agree with commenters that these targeted refinements to the AI/AN CSR

adjustment factors would better capture increased utilization from zero-cost sharing and limited

cost-sharing enrollments and help mitigate incentives that could discourage issuers from

enrolling AI/AN populations. We also intend to continue to study the non-AI/AN CSR

adjustment factors for potential updates in future benefit years, as may be appropriate.

We did not propose and are not finalizing comprehensive changes to risk adjustment,

such as changes to the rating term in the State payment transfer formula,

to account for CSR

plans and silver loading in this final rule. In Appendix A of the 2021 HHS-Operated Risk

Adjustment Technical Paper on Possible Model Change,

we outlined a variety of policy

options, including a change to the rating term in the State payment transfer formula, that we have

considered to improve the precision of the HHS risk adjustment models and better account for

CSR plan variants and issuer silver loading practices. We continue to consider policy options and

conduct additional analyses on potential changes in this area before considering whether to

propose any comprehensive reform of how CSR plan variants are handled in the HHS-operated

risk adjustment program. If we were to pursue such comprehensive changes to the treatment of

CSR plans in the HHS-operated risk adjustment program, we would propose and solicit

comments on those types of changes in future notice and comment rulemaking.

Id.

See CMS. (2021, October 26). HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes.

Appendix A. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.

CMS-9895-F 119

Comment: One commenter recommended that HHS increase the Massachusetts wrap-

around CSR adjustment factor from the current 1.12 factor (which aligns with the CSR

adjustment factor for plans with actuarial value (AV) of 94 percent) because Massachusetts

wrap-around plans have higher AVs (99.7 percent and 96.1 percent AVs) than a 94 percent AV

plan. This commenter explained that Massachusetts used higher CSR adjustment factors between

2014 and 2016 benefit years when the State operated its own risk adjustment program, and those

factors were lowered when Massachusetts transitioned into the HHS-operated risk adjustment

program beginning with the 2017 benefit year.

Another commenter appreciated that the HHS

Federally certified risk adjustment methodology accounts for Massachusetts-specific market

factors resulting from the design of the ConnectorCare program.

Response: As we noted in the proposed rule, for all plan liability risk score calculations

under the State payment transfer formula, we use the CSR adjustment factor that aligns with the

AV of the applicable plan for the enrollee. Thus, for unique State-specific plans, we apply the

CSR adjustment factors that correspond to each plan’s AV. When we identify unique State-

specific plans that have higher plan liability than the standard plan variants, we work with the

relevant State Department of Insurance and other relevant State agencies to identify the

applicable CSR adjustment factor that corresponds to the unique State-specific plan’s AV.

HHS worked with Massachusetts for the 2014 through 2016 benefit years when the State

established its CSR adjustment factors for use in its State-based risk adjustment program to

This commenter also stated a recent study on AI/AN zero cost sharing plans’ CSR adjustment factors suggests

that higher CSR adjustment factors are needed for the three ConnectorCare plans, but the commenter did not cite the

study; therefore, we were not able to verify the study’s findings that the commenter was highlighting.

For a list of the unique State-specific CSR levels that have higher plan liability than the standard plan variants, for

which we utilize the corresponding CSR adjustment factor that maps to the plan's AV, refer to the applicable benefit

year's DIY Software on the CMS website. See, for example, the 2023 Benefit Year DIY Software on the CMS

website (January 9, 2024). https://www.cms.gov/files/zip/hhs-hcc-software-v0723141c3.zip.

CMS-9895-F 120

account for its wraparound plans

and when Massachusetts transitioned into the HHS-operated

risk adjustment program beginning in the 2017 benefit year, we continued to work with

Massachusetts to incorporate CSR adjustment factors into the HHS-operated risk adjustment

program for Massachusetts’ wraparound plans and set them as a 1.12 factor.

As detailed in the

2014 Payment Notice,

the CSR adjustment factors in the Federally certified risk adjustment

methodology applicable in States where HHS operates the risk adjustment program (specifically

calibrated for target AVs of 73 percent, 87 percent and 94 percent) may not be adequate for

Massachusetts. To overcome this limitation, Massachusetts fit a polynomial trend line to the

HHS proposed CSR adjustment factors by metal level, which Massachusetts extended to 100

percent.

Since then, the Massachusetts Health Connector, Massachusetts’ Exchange, has

consistently supported continued use of the 1.12 factor for their wraparound plans

and has not

indicated that a change is needed. Therefore, we do not believe that it is necessary to make

changes to Massachusetts wraparound CSR adjustment plan factor at this time and will continue

to apply the 1.12 factor for the 2025 benefit year.

e. 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 measures

the percentage of individual variation explained by the model. The PRs measure how accurate

the model’s predictions are for specific subpopulations. For a given population, the PR is defined

See 78 FR 15442,

See 81 FR 12228-12229.

78 FR 15442.

For examples, see for Massachusetts Health Connector’s comments on the proposed 2025 Payment Notice at:

https://www.regulations.gov/comment/CMS-2023-0191-0081; also, see the Massachusetts Health Connector’s

comments on the proposed 2024 Payment Notice at: https://www.regulations.gov/comment/CMS-2022-0192-0102.

CMS-9895-F 121

as the ratio of the weighted mean predicted plan liability to the weighted mean actual plan

liability.

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.

Because we are

finalizing a blend of the coefficients from separately solved models based on the 2019, 2020, and

2021 benefit years’ enrollee-level EDGE data, we are publishing the R-squared statistic for each

model separately to verify their statistical validity. The R-squared statistics for the final 2025

benefit year HHS risk adjustment models are shown in Table 8.

TABLE 8: R-Squared Statistic for the 2025 HHS Risk Adjustment Models

Models

2019 Enrollee-

Level EDGE Data

2020 Enrollee-

Level EDGE Data

2021 Enrollee-

Level EDGE Data

Platinum Adult

0.4448

0.4360

0.4174

Gold Adult

0.4394

0.4302

0.4118

Silver Adult

0.4371

0.4278

0.4094

Bronze Adult

0.4330

0.4236

0.4051

Catastrophic Adult

0.4329

0.4236

0.4051

Platinum Child

0.3569

0.3436

0.3539

Gold Child

0.3541

0.3404

0.3511

Silver Child

0.3522

0.3383

0.3491

Bronze Child

0.3491

0.3351

0.3459

Catastrophic Child

0.3490

0.3350

0.3458

Platinum Infant

0.3165

0.2913

0.3059

Gold Infant

0.3133

0.2878

0.3025

Silver Infant

0.3122

0.2865

0.3012

Bronze Infant

0.3101

0.2842

0.2989

Catastrophic Infant

0.3101

0.2842

0.2989

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

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.

CMS-9895-F 122

Notice for the 2022 benefit year and beyond, unless changed through notice and comment

rulemaking. We explained that under this approach, we will no longer republish these formulas

in future annual HHS notice of benefit and payment parameter rules unless changes are being

proposed. We did not propose any changes to the formula in this rule, and therefore will continue

to apply the formula as finalized in the 2021 Payment Notice (85 FR 29191 through 29193

) in

the States where HHS operates the risk adjustment program in the 2025 benefit year. We also

will not republish the formulas in this rule. Additionally, as finalized in the 2020 Payment Notice

(84 FR 17466 through 17468), we will maintain the high-cost risk pool parameters for the 2020

benefit year and beyond, unless amended through notice and comment rulemaking. We did not

propose any changes to the high-cost risk pool parameters for the 2025 benefit year; therefore,

we are maintaining the $1 million attachment point and 60 percent coinsurance rate.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing the 2025 benefit year risk adjustment methodology

as proposed. We summarize and respond to public comments received on the State payment

transfer formula below.

Comment: One commenter recommended updating the State payment transfer formula to

scale risk adjustment State transfers using State-average claims multiplied by a ratio of claims to

actuarial risk, relying on medical loss ratio (MLR) claims data rather than data issuers submit to

their respective distributed data environments (EDGE servers). A few commenters expressed

concern that overall risk adjustment transfers are too small. Several commenters expressed

concern about the potential negative consequences risk adjustment can have on new or small

health insurance issuers attempting to enter the market. These commenters referred to recent plan

Discussion provided an illustration and further details on the State payment transfer formula.

See 81 FR 94081. See also 84 FR 17467.

CMS-9895-F 123

failures that affected other carriers who are owed risk adjustment payments.

Response: We did not propose and are not finalizing changes to the use of the Statewide

average premium as the scaling factor in the State payment transfer formula. We also did not

propose and are not finalizing the use of MLR data instead of issuers’ EDGE data to calculate

risk adjustment transfers. As detailed in prior rulemakings,

HHS chose to use Statewide

average premium to convert required revenue and allowable premium State average factors in

the State payment transfer formula from relative factors to dollar amounts so that the total

calculated payment amounts equal total calculated charges in each State market risk pool. Thus,

each plan in the State market risk pool receives a risk adjustment State transfer payment or

charge that is scaled based on the determination of plan average risk within a State market risk

pool, resulting in balanced, budget-neutral transfers. Furthermore, as detailed in the 2018

Payment Notice

, we adopted a 14 percent reduction to the Statewide average premium to

account for administrative costs that are unrelated to the claims risk of the enrollee population.

To derive this parameter, we analyzed administrative and other non-claims expenses in the MLR

Annual Reporting Form and estimated, by category, the extent to which the expenses varied with

claims. We compared those expenses to the total costs that issuers finance through premiums,

including claims, administrative expenses, and taxes, and determined that the mean

administrative cost percentage in the individual, small group and merged markets is

approximately 14 percent. We believe this amount represents a reasonable percentage of

administrative costs on which risk adjustment should not be calculated. This approach supports

See, for example, the Adoption of the Methodology for the HHS-operated Risk Adjustment Program under the

Patient Protection and Affordable Care Act for the 2017 Benefit Year; Final Rule, 83 FR 36456 (July 31, 2018); and

the Adoption of the Methodology for the HHS-operated Risk Adjustment Program for the 2018 Benefit Year; Final

Rule, 83 FR 63419 (December 10, 2018). Also see the HHS Notice of Benefit and Payment Parameters for 2020;

Final Rule, 84 FR 17454 at 17480 through 17484 (April 25, 2019).

83 FR 63419 at 63422 through 63427.

CMS-9895-F 124

the overall goal of the risk adjustment program to encourage issuers to rate for average risk and

mitigates incentives for issuers to operate less efficiently, or to develop benefit designs or create

marketing strategies to avoid high-risk enrollees. And, while we have not tested using Statewide

average MLR claims data in the State payment transfer formula, we have concerns about

whether we could operationally use MLR data for this purpose and the limitations of using the

MLR data especially when compared to the benefits of using data issuers submit to their EDGE

server for this purpose. For example, it would not be feasible to use current MLR data as the

timelines for reporting for a particular benefit year of MLR data by July 31 of the year following

the applicable benefit year does not align with the regulatory timeline at § 153.310(e) that

requires States and HHS to notify issuers of risk adjustment payment due and charges owed by

June 30 of the year following the applicable benefit year. Additionally, using the MLR data’s

usable claims fields for this purpose would need to be further investigated as the “Claims Paid”

data field has several exclusions and deductions.

More importantly, we have previously

researched using Statewide average claims as a scaling factor in the State payment transfer

formula and found that it was a volatile measure, both across States within a year and across

years within a State and would be sensitive to unexpected claims experience. Furthermore,

unexpected claims experience could particularly cause instability for smaller issuers, thereby

reducing the predictability of risk adjustment transfers.

For these reasons, we did not propose

or otherwise consider proposing updates to use Statewide average claims or relying on MLR

claims data for calculating transfers under the State payment transfer formula. We will continue

to scale risk adjustment transfers based on Statewide average premiums, as they are less subject

See CMS MLR Annual Reporting Form Filing Instructions for 2022 MLR Reporting Year at:

https://www.cms.gov/files/document/2022-mlr-form-instructions.pdf.

84 FR 17454 at 17480 through 17482.

CMS-9895-F 125

to the instability of Statewide average claims.

We continue to believe that the State payment transfer formula is working as intended by

more evenly spreading the financial risk carried by health insurance issuers that enroll higher-

risk individuals in a particular State market risk pool, thereby protecting issuers against adverse

selection and supporting them in offering products that serve all types of consumers.

We also

continue to find that risk adjustment transfers calculated under the State payment transfer

formula as a percent of total premiums correlate with the amount of paid claims rather than

issuer size

, and that per-member-per-month risk adjustment transfer amounts tend to be similar

for smaller and larger issuers. Although we do not agree that risk adjustment is biased against

new and small issuers, we have implemented policies as part of the HHS-operated risk

adjustment program to assist small issuers, such as allowing issuers with 500 or fewer billable

member months Statewide to be assessed a lower, separate default risk adjustment charge if they

fail to set up an EDGE server, fail to submit sufficient data for HHS to calculate transfers, or

otherwise opt to accept the default risk adjustment charge for a particular benefit year of risk

adjustment.

We also do not agree with commenters that risk adjustment transfers are too

See, for example, Summary Report on Permanent Risk Adjustment Transfer for the 2022 Benefit Year. (2023, June

30). CMS. https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-

year.pdf; Summary Report on Permanent Risk Adjustment Transfer for the 2021 Benefit Year (Revised). (2022, July

19). CMS. https://www.cms.gov/cciio/programs-and-initiatives/premium-stabilization-programs/downloads/ra-

report-by2021.pdf; and Summary Report on Permanent Risk Adjustment Transfer for the 2020 Benefit Year. (2021,

June 30). CMS. https://www.cms.gov/cciio/programs-and-initiatives/premium-stabilization-programs/downloads/ra-

report-by2020.pdf.

We recently reconducted this analysis. Also, see the Summary Report on Permanent Risk Adjustment Transfer for

the 2022 Benefit Year at: https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-

transfers-2022-benefit-year.pdf.

Other examples of HHS policies to assist small issuers including exempting small issuers under 45 CFR

153.630(g)(1) and 45 CFR 153.630(g)(2) from being required to participate in risk adjustment data validation under

certain circumstances.

CMS-9895-F 126

small,

100

and we note that risk adjustment transfers as a percent of premium have been

increasing, which is indicative of risk adjustment transfers growing, as detailed in the Summary

Report on Permanent Risk Adjustment Transfer for the 2022 Benefit Year:

101

● Nationwide, the absolute value of risk adjustment State transfers across all State

market risk pools (excluding the high-cost risk pool) was about 10.4 percent of total premiums,

as compared to the absolute value of 2021 benefit year State transfers, which was 8.7 percent of

total premiums.

● In the 2021 benefit year, the absolute value of risk adjustment State transfers as a

percent of premiums averaged 11.7 percent of premiums in the individual non-catastrophic risk

pool, and 4.4 percent of premiums in the small group risk pool.

● In the 2022 benefit year, the absolute value of risk adjustment State transfers increased

to 14.2 percent of premiums in the individual non-catastrophic risk pool and 4.5 percent of

premiums in the small group risk pool.

We acknowledge that large risk adjustment charges can be unpredictable for small, new,

or fast-growing issuers. We will continue to monitor risk adjustment implications and challenges

for these issuers. HHS has regularly discussed with issuers and State regulators ways to

encourage new participation in the health insurance markets and to mitigate any disruptive

effects of substantial risk adjustment charges. We intend to continue these discussions and note

that HHS remains committed to working with States and other interested parties to encourage

new market participants, mitigate adverse selection, and promote stable insurance markets

100

We note that, prior to the 2018 benefit year, HHS used 100 percent of Statewide average premium in the transfer

formula but reduced it to 84 percent of Statewide average premium in order to account for administrative costs that

do not vary with claims. See 81 FR 94099 through 94101.

101

Summary Report on Permanent Risk Adjustment Transfer for the 2022 Benefit Year. (2023, June 30). CMS.

https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf.

CMS-9895-F 127

through strong risk adjustment programs. Finally, we note that to minimize the impact of issuers

that fail to pay charges owed to the risk adjustment program, HHS will use all available debt

collection tools to fully collect risk adjustment charges from issuers with plan failures that

affected other issuers who are owed risk adjustment payments, which includes netting those

charges against certain other payments owed to the issuer

102

, where applicable.

4. HHS Risk Adjustment User Fee for the 2025 Benefit Year

In the 2025 Payment Notice proposed rule (88 FR 82510, 82549), HHS proposed a risk

adjustment user fee for the 2025 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 2025 benefit year, HHS will operate risk

adjustment in every State and the District of Columbia. As described in the 2014 Payment Notice

(78 FR 15416 through 15417), HHS’ operation of risk adjustment on behalf of States is funded

through a risk adjustment user fee. 45 CFR 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.

103

The HHS-operated risk

adjustment program provides special benefits as defined in section 6(a)(1)(B) of OMB Circular

102

See 45 CFR 156.1215.

103

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

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No. A-25 to issuers of risk adjustment covered plans because it mitigates the financial instability

associate with potential adverse risk selection.

104

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.

To calculate the HHS risk adjustment user fee, we divided HHS’ projected total costs for

administering the HHS risk adjustment program on behalf of States by the expected number of

billable member months (BMM) in risk adjustment covered plans in States where the HHS-

operated risk adjustment program will apply in the 2025 benefit year. We estimated that the total

cost for HHS to operate the risk adjustment program on behalf of States for the 2025 benefit year

will be approximately $66 million, which is more than the approximately $60 million estimated

for the 2024 benefit year. We projected increased costs due to increased contracting costs

combined with increased labor costs.

We also projected higher enrollment than our prior estimates in the 2024 and 2025

benefit years based on the increased enrollment, as measured by BMM, between the 2021 and

2022 benefit years in the individual non-catastrophic market risk pool in most States, likely due

to the increased PTC subsidies provided for in the American Rescue Plan Act of 2021

(ARP).

105,106

In light of the passage of the Inflation Reduction Act of 2022 (IRA), in which

section 12001 extended the enhanced PTC subsidies in section 9661 of the ARP through the

2025 benefit year, we projected there will continue to be increased enrollment levels through the

2025 benefit year.

107

Because we projected an increased budget to operate the HHS-operated risk

104

Id.

105

ARP. Pub. L. 117–2 (2021).

106

CMS. (2023, June 30). Summary Report on Permanent Risk Adjustment Transfers for the 2022 Benefit Year. (p.

8). https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-

year.pdf.

107

Inflation Reduction Act. Pub. L. 1217–169 (2022).

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adjustment program and estimated higher enrollment through the end of the 2025 benefit year,

we proposed a HHS risk adjustment user fee of $0.20 PMPM for the 2025 benefit year.

We sought comment on the proposed HHS risk adjustment user fee for the 2025 benefit

year.

After reviewing public comments and revising our projections based on newly available

data that impacted our enrollment projections, we are finalizing a risk adjustment user fee rate of

$0.18 PMPM for the 2025 benefit year. We summarize and respond to public comments received

on the proposed 2025 benefit year risk adjustment user fee rate below.

Comment: Some commenters supported lowering the risk adjustment user fee rate.

Several commenters supported a risk adjustment user fee rate that adequately funds Federal

programs.

Response: We are finalizing a risk adjustment user fee rate for benefit year 2025 of $0.18

PMPM. The final 2025 benefit year risk adjustment user fee rate is lower than the proposed 2025

benefit year user fee rate because we revised our enrollment projections based on newly

available data from the 2024 benefit year individual market Open Enrollment (OE) period, which

occurred between November 2023 and January 2024. In particular, the 2024 OE cycle saw larger

than projected plan selections, which resulted in us increasing our projected BMMs for the risk

adjustment user fee for the 2025 benefit year,

108

and with a projected budget of $66 million, it

resulted in a lower risk adjustment user fee.

5. Audits and Compliance Reviews of Risk Adjustment Covered Plans (§ 153.620(c))

We proposed amending § 153.620(c)(4) to require issuers of risk adjustment covered

plans to complete, implement, and provide to HHS written documentation of any corrective

108

For additional information, see https://www.cms.gov/newsroom/fact-sheets/marketplace-2024-open-enrollment-

period-report-final-national-snapshot.

CMS-9895-F 130

action plans when required by HHS if a high-cost risk pool audit results in the inclusion of

certain observations

109

in the final audit report. Currently, under § 153.620(c)(4), a corrective

action plan is only required, at HHS’ direction, if the audit results in the inclusion of a finding in

the final audit report. Upon completion of the first benefit year of high-cost risk pool audits

(2018 benefit year audits), HHS found that some issuers of risk adjustment covered plans made

data submission errors to their EDGE servers that constituted instances of noncompliance but did

not result in a financial impact and were therefore recorded as observations in the final audit

report. Under this proposal, HHS would communicate to the issuer, as part of the final audit

report, which findings and observations require a corrective action plan.

Under this policy, consistent with the existing framework in § 153.620(c)(4), HHS would

require an issuer of a risk adjustment covered plan to provide, within 45 calendar days of the

issuance of the final audit report, a written corrective action plan for any audit findings, as well

as audit observations when there is evidence of non-compliance with applicable Federal

requirements, to HHS for approval, implement that plan, and provide to HHS written

documentation of the corrective actions taken to resolve the root cause of the non-compliance

identified.

110

We proposed to apply this change beginning with 2020 benefit year high-cost risk

pool audits, which we anticipate beginning in 2024.

111

We sought comment on this proposal.

109

In the context of high-cost risk pool audits, an “observation” results from the identification of areas for

improvement when there is no evidence of actual non-compliance with applicable Federal requirements or when

there may be evidence of non-compliance with applicable Federal requirements that does not require recoupment of

these payments. Centers for Medicare & Medicaid Services, Center for Consumer Information and Insurance

Oversight (CCIIO). (Dec. 2022). Best Practices Overview: Benefit Year (BY) 2018 HCRP Payment Audits and

General EDGE Server Requirements. https://regtap.cms.gov/reg_library_openfile.php?id=4234&type=l (Login

Required). This amendment and accompanying policies are limited to observations where there may be evidence of

non-compliance with applicable Federal requirements.

110

See 45 CFR 153.620(c)(4). Also see 86 FR 24192 through 24194.

111

If 2020 benefit year high-cost risk pool audits begin in early 2024, we anticipate the final audit reports would be

completed, with findings and observations identified, in early 2025.

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After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this amendment and the accompanying policies as

proposed. We summarize and respond to public comments received on the proposed

amendments to § 153.620(c)(4) to require a corrective action plan for audit observations under

certain circumstances below.

Comment: Several commenters supported the proposal. One commenter agreed that

allowing instances of non-compliance to be unaddressed could impact EDGE data integrity and

that a corrective action plan is an effective tool to address this concern. Other commenters

generally supported the proposed policy, noting that it allows HHS to run sufficiently and

efficiently, and provide oversight of, its risk adjustment program, which aligns with professional

industry organizations’ goals to support continuous improvement in their members’ compliance

with local, State, and Federal requirements and their own policies and procedures.

Other commenters opposed the proposal stating concerns that the changes to the audit

would be applied retrospectively to observations that do not have monetary impacts. Other

commenters were concerned about a perceived lack of rights and processes available for issuers

to appeal audit findings or observations that require completion of corrective action plans. These

commenters were concerned that there is not enough information regarding how HHS uses data

collected during the audit processes. Commenters were also concerned that the use of corrective

action plans in this manner would require issuers to provide data they do not readily have

available in order to take the necessary corrective actions and that this access and use of data

goes beyond what is necessary for the HHS-operated risk adjustment program. Commenters

were also concerned that the timing of the amendments would not give issuers sufficient time to

prepare and implement new processes. One commenter also raised concerns that the proposal

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lacked details on the audit process and asked that interested parties receive more information

about the risk adjustment, specifically high-cost risk pool, audits.

Response: We are finalizing the proposal to require issuers to complete corrective action

for certain risk adjustment audit observations as proposed. We agree with commenters that

requiring the implementation of corrective action plans if a risk adjustment audit results in the

inclusion of observations in the final audit report when there is evidence of non-compliance with

applicable Federal requirements would help to ensure that HHS is able to efficiently run and

provide oversight of its risk adjustment program.

As stated in the proposed rule, since enrollee-level data that HHS extracts from issuers’

EDGE servers is also used for HHS risk adjustment model recalibration, updates to the AV

methodology and calculator, and other analyses for the commercial individual and small group

(including merged) market, and Federal HHS related programs (for example, Medicaid

expansion, QHP population, and non-Federal governmental plans),

112

it is important that issuers

of risk adjustment covered plans also take corrective action to address instances of non-

compliance, which may have material impacts to the enrollee-level data, even if they did not

result in a financial impact and were therefore recorded as observations in the final audit report.

We do not believe this change goes beyond the data uses and access necessary for the risk

adjustment program, because the primary purpose of this policy is to strengthen the program

integrity tools available to HHS when conducting risk adjustment audits to ensure the integrity of

the data used for the HHS-operated risk adjustment program.

113

A major goal of requiring

corrective action plans for observations where there is evidence of non-compliance with

112

See, for example, 84 FR 17488 and 87 FR 27243.

113

As previously noted, HHS uses data issuers submit to their EDGE servers to calculate transfers under the State

payment transfer formula and the high-cost risk pool parameters, as well as for recalibration of the HHS risk

adjustment models and for development of risk adjustment policies, among other permitted uses.

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applicable Federal requirements is to ensure data use and integrity issues identified via audits are

corrected timely; otherwise, these issues may have material impact on the enrollee-level EDGE

data or data submission for future benefit years if they persist. We also note that this policy is not

being retrospectively or retroactively applied. We are finalizing, as proposed, that this change

will apply beginning with 2020 benefit year high-cost risk pool audits, which we anticipate

beginning in 2024 with audit findings and observations being communicated to issuers in early

2025. Additionally, the requirements evaluated in the 2020 benefit year audits will reflect the

standards that issuers were required to comply with at the time of the 2020 benefit year EDGE

data submission deadline (April 30, 2021). Further, current audit processes use corrective action

plans as a tool to provide evidence that an issuer has sufficiently remediated an error or instance

of non-compliance identified through an audit finding. Amending the regulation to capture the

ability for HHS to require a corrective action plan for certain audit observations where there is

evidence of non-compliance with Federal requirements would help to enhance data and program

integrity by ensuring that issuers remedy EDGE data submission issues identified through audit,

including those that did not result in a financial impact, so identified issues do not persist and

impact future data submission years. Consistent with current requirements for addressing late-

filed discrepancies to address errors identified in EDGE data submission, if the issuer, after

conducting an impact analysis of the data submission error that covers the period of non-

compliance, identifies a potential overpayment resulting from the error, the issuer is required to

report the overpayment to HHS as a prior benefit year discrepancy.

114

See 86 FR 24195. Also see Distributed Data Collection (DDC) for Risk Adjustment (RA) Including High Cost

Risk Pool (HCRP): EDGE Server Announcements webinar presentation slides from August 18, 2020 on “EDGE/RA

Discrepancy Reporting: Prior Benefit Year Discrepancy Web Form,” available at

https://regtap.cms.gov/reg_librarye.php?prog=3&page=1&i=3357.

CMS-9895-F 134

We also do not believe that issuers would need to provide data that is not readily

available. The audit process validates the accuracy of the data submitted by issuers of risk

adjustment covered plans to their respective EDGE servers.

115

With data coming from the EDGE

servers, issuers should not have to provide additional data beyond what is required for the audit

process, which are the same data necessary to administer the HHS-operated risk adjustment

program.

We understand concerns regarding time to implement new processes to properly respond

to corrective action plans. As stated in the proposed rule, we proposed to amend the established

audit process to require corrective action plans for certain audit observations identified through

HHS risk adjustment (including high-cost risk pool) audits (88 FR 82510) and the process would

align with the existing framework detailed in § 155.620(c)(4).

116

The only change to the existing

framework is that HHS, at its discretion, may require a corrective action plan for certain audit

observations identified through the risk adjustment audits where there is evidence of non-

compliance with applicable Federal requirements. As previously stated, this amendment does not

alter the requirements evaluated through the risk adjustment audit. For example, 2020 benefit

year high-cost risk pool audits will evaluate issuer compliance with the 2020 benefit year data

submission requirements for their respective 2020 benefit year EDGE data.

117

The amendment to

§ 155.620(c)(4) to also require corrective action plans for certain audit observations aligns with

previously established regulations requiring corrective action plans for audit findings for risk

adjustment audits. Issuers can find more information about corrective action plans and the

115

See CMS. (2023, September 06). 2018 Benefit Year (BY) High-Cost Risk Pool (HCRP) Audit Report. (p. 3).

https://www.cms.gov/files/document/2018-hcrp-audit-summary-publish-508.pdf.

116

See 45 CFR 153.620(c)(4).

117

The deadline for issuers to submit 2020 benefit year data to their respective EDGE servers was April 30, 2021.

See 45 CFR 153.730.

CMS-9895-F 135

general high-cost risk pool audit process by reviewing past audit reports

118

and high-cost risk

pool audit summary reports.

119

An issuer selected for a high-cost risk pool audit will also have

the opportunity to ask questions during the entrance conference

120

and throughout the audit

process. Additionally, we will continue to communicate with issuers selected for audit

throughout the audit process to ensure they understand the process and to respond to any

questions if issuers are required to address findings or certain observations in final audit reports

through a corrective action plan.

We understand concerns regarding rights to address or remedy issues during the audit

process. Current audit procedures provide issuers with ample opportunities to raise issues or

concerns with findings and observations to HHS before the issuance of the final audit report. For

example, prior to issuing a final report, HHS shares its preliminary audit findings with issuers,

121

and issuers have the opportunity to dispute any findings or observations.

122

Additionally, if HHS

and the issuer do not agree with the final audit report, both HHS’s final audit report and the

issuer’s disagreement is publicly released. In short, the risk adjustment audits are collaborative

and involve coordination with issuers to resolve data discrepancies and address any questions or

concerns issuers may have throughout the audit process.

123

Further, not every observation will

require a corrective action plan. If, during the audit process, an issuer proactively takes steps that

HHS evaluates as sufficient to address an audit observation or finding for which HHS would

118

For additional information see CMS. (2023, December 2023). High-Cost Risk Pool (HCRP) Audits.

https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-

Resources/Exams_Audits_Reviews_Issuer_Resources-#high-costriskpool

119

For additional information see CMS. (2023, September 06). 2018 Benefit Year (BY) High-Cost Risk Pool

(HCRP) Audit Summary. https://www.cms.gov/files/document/2018-hcrp-audit-summary-publish-508.pdf.

120

See 45 CFR 153.620(c)(1)(i).

121

See 45 CFR 153.620(c)(3).

122

See 45 CFR 153.620(c)(3)(i)-(ii).

123

See 2018 Benefit Year (BY) High-Cost Risk Pool (HCRP) Audit Summary. (p. 3).

CMS-9895-F 136

have otherwise required a corrective action plan, HHS may elect to not require additional action

after the final audit report is issued.

D. 45 CFR Part 155 – Exchange Establishment Standards and Other Related Standards

1. Approval of a State Exchange (§ 155.105)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82551), we proposed to amend § 155.105(b) to require that, in addition to meeting all other

approval standards under § 155.105(b), a State seeking to operate a State Exchange must first

operate a State-based Exchange using the Federal platform (SBE-FP), meeting all requirements

under § 155.200(f), for at least one plan year, including an open enrollment period. This proposal

was intended to give States sufficient time to create, staff, and structure a State Exchange that

could transition to operating its own platform and establish relationships with interested parties

critical to a State Exchange’s success in operating an Exchange, including standing up and

operating a Navigator and consumer outreach program, assuming plan management

responsibilities, and communicating effectively with consumers to support enrollment and avoid

health care coverage gaps.

As stated in the proposed rule (88 FR 82511), over the past several years, we have

observed the benefits of States first operating an SBE-FP for at least one plan year prior to

transitioning fully from an FFE to a State Exchange. Operating an SBE-FP for at least one plan

year, including its open enrollment period, prior to transitioning to a State Exchange gives States

an opportunity to focus on investing time and resources needed to implement key Exchange

functions that involve the establishment of critical and necessary relationships with consumers,

consumer assisters, partners in the coordination of eligibility functions, issuers, and other

interested parties. Operating an SBE-FP for at least one plan year prior to transitioning to a State

CMS-9895-F 137

Exchange also affords States time to implement eligibility and enrollment functions which

require information technology platforms, call centers, and coordination with partners, such as

State Medicaid agencies. In addition, operating an SBE-FP for at least one plan year prior to

transitioning to a State Exchange gives States more time to engage with partners and interested

parties to develop various consumer-facing content and consumer outreach strategies, all while

establishing and gaining experience operating a consumer assistance program. Further, when

States operate an SBE-FP for at least one plan year before operating a State Exchange, they are

more likely to have the time and resources needed to coordinate with the State’s Department of

Insurance to establish policies and procedures associated with carrying out plan management

functions, engage with the issuer community, and develop QHP certification requirements and

processes. Finally, operating an SBE-FP for at least one plan year before transitioning to a State

Exchange allows States time to familiarize consumers, consumer assisters, partners in the

coordination of eligibility functions, issuers, and other interested parties with operations of the

new State Exchange organization ahead of engaging with that Exchange, and it mitigates the

risks and disruption associated with a transition to a State Exchange and simultaneous

replacement of HealthCare.gov as the eligibility and enrollment pathway for those parties.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed to require that a State

seeking to operate a State Exchange must first operate an SBE-FP, meeting all requirements

under § 155.200(f), for at least one plan year. We summarize and respond to public comments

received on the proposed policy below.

Comment: A majority of the comments we received supported the proposal. Many

commenters supported the policy, suggesting it would provide needed time to prepare and

CMS-9895-F 138

implement a successful Exchange, including establishing and testing technical operations,

establishing relationships with QHP issuers and other government entities, and creating greater

transparency and opportunities for public and interested party engagement with the process.

Some commenters also suggested that the extended time for State Exchange establishment would

protect consumers by ensuring network adequacy and that all functions for consumer support are

in place before a State Exchange is launched, and that the additional time would help SBE-FPs

refine their plans and processes before transitioning to a State Exchange model.

Response: We agree that the extended time afforded by this policy will help to ensure the

success of newly-established State Exchanges.

Comment: A few commenters stated that several States have successfully implemented

State Exchanges without these provisions. These commenters suggested that this may be an

indication that the proposed provisions are unnecessary, and that a State should be given

flexibility to decide its path forward. They recommended that HHS only apply these new

requirements to States that propose operating an Exchange in a way that differs significantly

from the traditional model.

Response: Over the past several years, all States that have transitioned to a State

Exchange have first operated an SBE-FP. Our experience in overseeing these transitions has

made evident the advantage a State has in operating an SBE-FP prior to transitioning to a State

Exchange. Notably, operating an SBE-FP first provides States an opportunity to implement

certain significant Exchange functions that are needed for State Exchange operations, such as

operating the State’s Navigator program and developing plan management capabilities. The

interim period operating an SBE-FP will provide States with sufficient time to continue

developing resources and establishing strong relationships with interested parties, which are both

CMS-9895-F 139

critical for implementing key State Exchange functions. We have particularly observed this in

regard to developing eligibility and enrollment functions, including implementing and operating

information technology platforms, call centers, and coordination with the State Medicaid agency

and other partners.

Furthermore, based on our work with SBE-FPs that have transitioned to State Exchanges

over the past several years, we have learned the importance of having an established consumer

assistance and outreach program as an SBE-FP prior to the implementation of a State Exchange.

State Exchanges that previously operated an SBE-FP have stated that this experience, as well as

an SBE-FP’s developed communication line with consumers, helps mitigate potential disruption

to consumer enrollment when HealthCare.gov is no longer the eligibility and enrollment

pathway for the State Exchange’s consumers, and in turn, the State Exchange takes on this role.

Given these benefits, we believe that implementing a regulatory requirement that States

must first operate an SBE-FP for at least one plan year prior to transitioning to a State Exchange

will benefit both the State’s implementation of a State Exchange, as well as the Exchange’s long-

term success.

Comment: A few commenters stated that these new rules could introduce delays in the

process for a State to establish a State Exchange. Some of these commenters expressed concern

that these delays could prevent a State from transitioning to a State Exchange due to increased

costs in meeting requirements. One commenter stated that a longer establishment period could

impede a State from standing up its own Exchange because the initial implementation of an

SBE-FP and then a subsequent State Exchange might occur over election periods, and there

would be a risk that new State executive or legislative leadership might decide to no longer

pursue the transition to a State Exchange during a State’s SBE-FP status.

CMS-9895-F 140

Response: We recognize that a State’s implementation of a State Exchange may depend

on the State’s specific needs and the decisions of its elected officials. We also understand that a

State could decide for various reasons to stop pursuing or operating a State Exchange. However,

we are of the view that requiring a State Exchange to first operate an SBE-FP is appropriate

because a State’s elected officials have always had the ability to change the State’s plans to

become or remain a State Exchange, and therefore that fact alone should not hinder adoption of

the proposed policy that aims to ensure the success of State Exchanges.

Comment: One commenter expressed concern that delays in transitioning to a State

Exchange would result in the State receiving less user fee revenue, and that the need to pay or

remit user fees to CMS as an SBE-FP could result in a State ultimately not being able to establish

a State Exchange.

Response: Our experience has shown that SBE-FPs that have transitioned to State

Exchanges are able to fund these activities, at least in part, with additional user fees that a SBE-

FP may charge issuers on top of the Federal Platform user fee. Section 1311(d)(5)(A) of the

ACA permits an Exchange to charge user fees on participating health insurance issuers as a

means of generating funding to support its operations.

124

Under § 156.50(c), a participating

issuer offering a plan through a SBE–FP must remit a user fee to HHS each month that is equal

to the product of the SBE-FP user fee rate specified in the annual HHS Notice of Benefit and

Payment Parameters for the applicable benefit year and the monthly premium charged by the

issuer for each policy where enrollment is through the SBE–FP. SBE-FPs may also assess an

additional State-level user fee, beyond the Federal Platform user fee, on issuers for the purposes

of operating their SBE-FP, which could theoretically amount to the total user fee a State would

124

If a State does not elect to operate an Exchange or does not have an approved Exchange, section 1321(c)(1) of the

ACA directs HHS to operate an Exchange within the State.

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assess issuers as a State Exchange. In our experience, SBE-FPs have utilized additional State-

level user fees assessed on issuers to support a State’s eventual State Exchange implementation.

Comment: One commenter stated that because the ACA directs States to establish an

Exchange, this proposal oversteps the authority granted to HHS by the ACA, as it could prevent

a State that felt it was prepared to take on the responsibilities of operating a State Exchange from

doing so.

Response: We seek to support States in successfully implementing State Exchanges.

Section 1321 of the ACA directs HHS to issue regulations setting standards for establishing and

operating an Exchange, which it implemented at § 155.105. States may subsequently elect to

establish and operate Exchanges, as prescribed by HHS and per the requirements of § 155.105,

which requires HHS to approve a State Exchange only if it is able to meet other required

functions of an Exchange. All States considering transitioning to a State Exchange must consider

if they are able to meet these requirements. As we stated above, our experience is that first

operating an SBE-FP is necessary for successfully implementing and operating a State

Exchange. Therefore, HHS is using the authority granted to it in section 1321 of the ACA to

include in § 155.105 the requirement for a State transitioning to operate a State Exchange to first

operate an SBE-FP for one plan year.

Comment: One commenter suggested that CMS modify this proposal so that States with

demonstrated capabilities in technology planning and Exchange management could be granted

the flexibility to transition directly to a State Exchange if they meet certain readiness criteria.

Response: Regardless of a State’s ability to meet any readiness criteria we might set from

a technological perspective, there are other factors, including establishing relationships with

other State agencies and programs, that make this technological readiness not sufficient on its

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own to bypass the 1-year-SBE-FP requirement. We agree that a key component of a State’s

readiness to implement and operate a State Exchange is being ready to implement an eligibility

platform to support key State Exchange functions, including the display and selection of QHPs

and the processing of eligibility applications and determinations for Exchange enrollment and

insurance affordability programs. However, we believe that a State that met any technology

requirements that we set would still need to demonstrate the non-technology capabilities and

functions required of a State Exchange, gained from experience, operating an SBE-FP that we

discuss above. For example, State Exchanges need to coordinate sharing of plan information and

plan management work with issuers, plan and provide training to Navigators and Assisters, and

plan and implement consumer outreach activities, such as drafting notices, providing training to

call center and other staff on relevant policies and procedures, and writing and updating website

and other consumer-facing materials.

Often, States that are transitioning from an FFE to operating a State Exchange draw on

the work of contracted vendors and companies that have assisted with other States’ Exchange

transitions in developing that State’s eligibility and enrollment platform or website. It is possible

that a State might indicate that it would be technologically ready to transition directly to

operating a State Exchange, without first operating an SBE-FP, due to its decision to contract

with vendors and companies, who would apply the same or similar plans for development and

implementation of its eligibility and enrollment platform. However, it is not possible for a State

seeking to newly establish a State Exchange to identically apply development and

implementation plans and other resources utilized for an eligibility platform in already-

established State Exchanges, because in our experience those Exchanges may operate with

partner State agencies and programs, such as Medicaid and CHIP, differently from the State that

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is seeking to newly establish a State Exchange. As Insurance Affordability Programs may require

State-specific programming for an eligibility platform to make a correct eligibility determination,

or for appropriate information to be displayed on consumer-facing resources, a State’s readiness

to operate an eligibility platform requires consideration and work on other elements than prior

demonstrated capabilities in technology planning and Exchange management. Additionally,

some States may pursue an integrated eligibility system between the State Exchange and the

State Medicaid agency in which the State Exchange’s eligibility system can determine eligibility

for non-MAGI Medicaid, as well as other State programs, while other States may have different

eligibility determination agreements between the State Exchange and the State Medicaid agency.

As a result, we believe that the experience gained from first operating an SBE-FP and

providing additional time for interoperability with other State programs and establishing

relationships with consumers and advocates makes it necessary to first operate an SBE-FP before

operating a State Exchange.

Comment: One commenter stated that although experience gained operating an SBE-FP

for States transitioning from the FFE to a State Exchange would be valuable, the options for plan

management activities provided to States operating State Exchanges are more flexible than the

options provided to States operating an SBE-FP. They also stated that relationships with

interested parties may also change when operating an SBE-FP and later operating a State

Exchange, due to the difference in responsibilities and authorities granted to SBE-FPs and those

granted to State Exchanges. They expressed concern that the need to attend to these differences

in responsibilities and flexibilities could strain the resources of smaller States whose ultimate

goal is to establish a State Exchange rather than an SBE-FP.

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Response: While we agree that some plan management responsibilities differ for a State

Exchange and an SBE-FP, the differences are relatively minor and therefore the experience

operating an SBE-FP can generally be applied to the responsibilities of State Exchanges. As an

example, both State Exchanges and SBE-FPs have the legal authority and responsibility to

establish QHP certification processes with issuers, review QHP applications, and make QHP

certification decisions, including the responsibility for coordinating with their participating QHP

issuers on plan data corrections. Given the similarity between State Exchange and SBE-FP plan

management activities, as well the significant resources and planning required for an SBE-FP to

conduct plan management activities, we believe that implementing a SBE-FP before

implementing a State Exchange will allow a State to demonstrate its capacity to manage and

implement this key Exchange functionality.

2. Election to Operate an Exchange after 2014 (§ 155.106)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82551), we proposed changes to the Exchange Blueprint (OMB control number: 0938–

1172) requirements for States seeking to operate a State Exchange. We proposed to revise §

155.106(a)(2) to add a requirement that a State, as part of its activities for its establishment of a

State Exchange, provide upon request, supplemental documentation to HHS detailing the State’s

implementation of its State Exchange functionality. Such supporting documentation would

inform HHS’s decision to approve or conditionally approve a State Exchange and could include,

for example, materials demonstrating progress toward meeting State Exchange Blueprint

requirements, documentation that details a State’s plans to implement and meet the Exchange

functional requirements as laid out in the State Exchange Blueprint, or plans to engage in

consumer assistance programs and activities. In the proposed rule (88 FR 82552) we noted, we

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would provide guidance and direction to each State with our requests for supplementary

information so that each State understands the purpose of the requests and how the requested

information would help us determine whether the State meets the functional requirements for

operating a State Exchange. Because the ability to request additional detail on a State’s

Exchange implementation plans is crucial for identifying risk areas for a State Exchange’s

operations, it is essential to determining that a State Exchange is ready to operate. 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. In order to set clear expectations, we proposed to codify that as part of the State’s

submission of a State Exchange Blueprint application, HHS has the authority to request any

evidence HHS determines necessary for the State to detail its implementation of the required

State Exchange functionality. This could include HHS requiring a State to submit detailed plans

regarding its State Exchange consumer assistance programs and activities, such as information

on its direct outreach plans. In the proposed rule we noted, we would request supporting

documentation from States with the goal of imposing minimal burden on a State’s ability to meet

its State Exchange Blueprint requirements, while maintaining the objective of gathering

sufficient information to assess a State’s readiness to operate a State Exchange and ensure that a

State is sufficiently implementing and scaling policies, procedures, operations, technology, and

administrative capacities to meet the needs of the State’s consumers. We would use the

information in a State’s State Exchange Blueprint application, as well as any supporting

documentation and evidence, to make a determination of whether to grant approval for a State’s

establishment and operation of a State Exchange for its intended first open enrollment period.

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We also proposed to add new § 155.106(a)(2)(i) and (ii) to require that when a State

submits its State Exchange Blueprint application to HHS for approval, the State must provide the

public with notice and a copy of its State Exchange Blueprint application along with certain

other information. We stated that, to facilitate such public notice, HHS would post a State

Exchange Blueprint application, submitted by a State to its public-facing website within 90

calendar days of receipt. Further, we proposed to require that at some point following a State’s

submission of its State Exchange Blueprint application to HHS and before HHS’s approval or

conditional approval of the State Exchange Blueprint application, a State must conduct at least

one public engagement event (such as a townhall meeting or public hearing) in a timeline and

manner (for instance, considering whether to conduct in-person and/or virtually) considered

effective by the State, with concurrence from HHS, at which interested parties can learn about

the State’s intent to establish a State Exchange and the State’s progress toward executing that

transition. We also proposed to require that while a State is in the process of establishing a State

Exchange and until HHS has approved or conditionally approved the State Exchange Blueprint

application, a State must conduct periodic public engagements at which interested parties would

continue to learn about the State’s progress towards establishing a State Exchange, in a timeline

and manner considered effective by the State with concurrence from HHS. We are finalizing

these provisions as proposed. However, based on comments we received, we now plan to

publicly post the State’s Blueprint application within 30 days of receipt.

The Exchange Blueprint serves as a vehicle for a State to document its progress toward

implementing its intended Exchange operational model. The submission and approval of

Exchange Blueprints is an iterative process that generally takes place over the course of 15

months prior to a State’s first open enrollment operating a State Exchange. Further, the

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establishment of a State Exchange involves significant collaboration between HHS and States to

develop plans and document readiness for the State to transition from an Exchange that uses the

Federal platform to one that operates its own eligibility and enrollment platform. State activities

as part of this transition process include completing key milestones, meeting established

deadlines, and implementing contingency measures. We believe that a mandatory process

whereby States notify the public of their plans to establish State Exchanges and provide an

opportunity to meet with interested parties to provide updates helps ensure that interested parties

are aware these activities are occurring and can provide input on how States can successfully

establish State Exchanges.

As stated in the proposed rule (88 FR 82553), a primary goal of these proposals is to

strengthen the transparency requirements of the State Exchange Blueprint review and approval

process. Based on our experience supporting and providing oversight to States in their

establishment of State Exchanges, we believe that all States establishing Exchanges would

benefit from having a more transparent process to facilitate input from interested parties,

including consumers and issuers. A more transparent process would provide opportunities for

consumers to learn more about a State’s establishment process and plans, which can build

consumer trust and help support a State’s enrollment goals. States planning to establish State

Exchanges could use public events like town halls or hearings to meet these transparency

requirements.

We further note that compliance with these transparency requirements could help States

that establish State Exchanges meet the consultation requirements with interested parties under §

155.130. Section 155.130 requires an Exchange to regularly consult on an ongoing basis with a

list of eleven stakeholder groups, including educated health care consumers who are QHP

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enrollees and, if applicable, Federally recognized Tribes, as defined in the Federally Recognized

Indian Tribe List Act of 1994, 25 U.S.C. 479a. For example, during a State’s establishment of its

Exchange, the State and these interested parties could formalize a process under which they

would continue to confer as required by § 155.130.

We sought comment on this proposal, including comments related to additional ways

States seeking to establish State Exchanges could provide greater transparency to interested

parties, including consumers, regarding the process for establishing State Exchanges. After

consideration of the comments and for the reasons outlined in the proposed rule and our

responses to comments, we are finalizing as proposed the amendment to § 155.106(a)(2) to

require as part of a State’s activities for its establishment of a State Exchange, the State provide,

upon request, supplemental documentation to HHS detailing the State’s implementation of its

State Exchange functionality. Such supplemental documentation may, for example, demonstrate

progress toward meeting State Exchange Blueprint requirements, or detail a State’s plans for

how it intends to implement and meet the Exchange functional requirements as laid out in the

State Exchange Blueprint.

We also finalize as proposed new paragraph § 155.106(a)(2)(i) which states that, upon

submitting an Exchange Blueprint application to operate a State Exchange, the State shall issue a

public notice of its Exchange Blueprint application submission through its website and include a

copy of the Exchange Blueprint application, a description of the Plan Year for which the State

seeks to transition to a State Exchange, language indicating that the State is seeking approval

from HHS to transition to a State Exchange, and information about when and where the State

will conduct public engagements regarding the State’s Exchange Blueprint application. To

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facilitate public notice, HHS will post a State Exchange Blueprint application submitted by a

State to its public-facing website within 90 calendar days of receipt.

Finally, we finalize as proposed new paragraph § 155.106(a)(2)(ii) to require that at some

point following a State’s submission of its State Exchange Blueprint application to HHS and

before HHS approves or conditionally approves the State’s Exchange Blueprint application, a

State must conduct at least one public engagement event (such as a townhall meeting or public

hearing) in a timeline and manner (for instance, considering whether to conduct in-person and/or

virtually) considered effective by the State, with concurrence from HHS, at which interested

parties can learn about the State’s intent to establish a State Exchange and the State’s progress

toward executing that transition.

After consideration of the comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing these requirements with a modification to clarify

that the State must submit supplemental information to HHS, upon request, detailing the State’s

implementation of its State Exchange functionality, including information on the ability to

implement and comply with Federal requirements for operating an Exchange. This information

will assist in CMS determining whether the State meets the functional requirements for operating

a State Exchange. We summarize and respond to public comments received on these proposals

below.

Comment: Most commenters broadly supported the proposals associated with a State’s

election to operate a State Exchange, as it relates to both the requirements for a State to submit

supporting documentation to HHS detailing the State’s implementation of its State Exchange

functionality, and, to provide the public with notice and a copy of its State Exchange Blueprint

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application and engage in periodic public hearings when a State submits its State Exchange

Blueprint application to HHS for approval.

These commenters generally believed that the proposals would help States better

implement and operate a State Exchange, provide transparency to States’ interested parties, and

improve consumer protections. One commenter stated that the resulting transparency may help

interested parties become better aware of a State’s transition plans and may submit helpful

feedback to States, which States could consider in their transition planning.

Response: We appreciate and agree with these comments, many of which summarized or

elaborated on the benefits that we described in the proposed rule.

Comment: A few commenters stated that the proposed provisions are arbitrary because all

States that have transitioned to a State Exchange in the past several years have done so without

the requirement for States to submit additional information or documentation on its State

Exchange implementation progress or plans. One of these commenters requested that CMS

provide a definitive list of additional documentation it may require from States, as well as stated

that the request for additional information may impose additional burden, in terms of time and

resources, on a State. Another commenter opposed these proposals more generally.

Response: HHS’s collection of additional information and documentation demonstrating

an Exchange’s operational readiness is logically related to setting standards for establishing a

State Exchange; thus these provisions are not arbitrary.

125

Regarding information we may require

of States seeking to establish an Exchange, we anticipate requesting additional documentation

that demonstrates a State’s ability to successfully operate a State Exchange, including

documentation that demonstrates progress toward implementing a State Exchange. Moreover, we

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See section 1321of ACA.

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disagree that States that have previously established a State Exchange did not submit such

documentation. The current State Exchange Blueprint application already includes requests for

supporting documentation that a State is progressing toward meeting State Exchange Blueprint

application requirements. Therefore, this provision codifies existing policy, which existing State

Exchanges have complied with. We believe these regulations will underscore to States the

importance of submitting supporting information that we request, which we have regularly

pursued with all States that have transitioned to State Exchanges over the past several years.

Comment: One commenter stated that although they saw the benefit in our proposal to

require that at some point following a State’s submission of its State Exchange Blueprint

application to HHS a State must conduct at least one public engagement, they did not agree with

such public engagements taking place every 3 months. The commenter noted that conducting

public engagements every 3 months could be too burdensome on a State, which would delay a

State in its State Exchange implementation plans. This commenter requested additional detail on

the significance of this proposal.

Response: We proposed that following a State’s submission of its State Exchange

Blueprint application to HHS, a State must conduct at least one public engagement (such as a

townhall meeting or public hearing) in a timeline and manner (for instance, considering whether

to conduct in-person and/or virtually) considered effective by the State. Additionally, we

proposed that during a State’s process of establishing a State Exchange, and until HHS has

approved or conditionally approved the State Exchange Blueprint application, it must

periodically conduct additional public engagements. We did not prescribe how often these public

engagements must occur, and we encourage States to hold them as frequently as would be

beneficial to its State Exchange planning and to keeping its interested parties informed.

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We believe any potential burden on States from conducting regular public engagement is

outweighed by the benefit to interested parties, such as consumers and advocate groups, in

having the opportunity to learn about, and provide input on, a State’s Exchange implementation

plans, which the State may utilize in developing its State Exchange implementation plans.

Comment: One commenter suggested that CMS require States to request feedback on its

Blueprint application during the public engagements from a set group of interested parties which

would include agents, brokers, and EDE entities.

Response: We encourage States that are establishing a State Exchange to utilize the

public engagement provisions as a pathway to fulfilling its stakeholder consultation requirements

under § 155.130, which requires a State Exchange to regularly conduct stakeholder consultations

with certain entities, including agents and brokers. In meeting the public engagement policies

being finalized in this rule, we encourage States to seek feedback from these particular groups as

specified in § 155.130, as well as other groups, such as EDE entities, so that the State’s efforts

can translate into its required stakeholder consultation requirements under § 155.130.

Comment: One commenter stated that they supported the proposal, but urged CMS to

ensure that it provides States with sufficient resources to facilitate a transitioning State’s

demands.

Response: We have established a robust program to support States that seek to establish a

State Exchange and to ensure that the transition of consumers from the Federal platform to the

State Exchange is as seamless as possible. This includes having dedicated teams to support

States in establishing a State Exchange, well defined processes for assessing a State Exchange’s

operational readiness and transitioning of the State’s consumers and Exchange functions off the

Federal platform, and a technical assistance program to ensure State Exchange functions meet

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Federal requirements. We also have the ability to adjust the support we provide to respond to

State-specific needs during a State’s process for establishing a State Exchange. We will continue

to consider these needs when supporting any State that decides to establish a State Exchange in

the future.

Comment: One commenter stated that the proposed regulations do not address

consequences if a State fails to meet Federal standards after implementing a State Exchange, and

suggested that we delineate corrective action plans, civil monetary penalties, or other actions that

would be taken if a State Exchange fails to meet Federal standards.

Response: We utilize specific oversight processes and tools (for example, the State-based

Marketplace Annual Reporting Tool, along with independent external programmatic and

financial audits), under the authority at § 155.1200, to assess State Exchange compliance with

Federal rules on an ongoing basis. This process generally involves working with States to ensure

that they are able to respond to, and take corrective action on, any identified deficiencies before

civil monetary penalties are assessed or other enforcement actions are taken. Under section

1313(a)(4) of the ACA, if HHS determines that an Exchange has engaged in serious misconduct

with respect to compliance with Exchange requirements, it has the option to rescind up to 1

percent of payments due to a State under any program administered by HHS until such

misconduct is resolved. We will also consider the development of new guidance in the future to

enhance transparency of Exchange operations and compliance by State Exchanges with Federal

requirements.

Comment: A few commenters suggested that we require States that are establishing a

State Exchange to provide a formal notice and comment period to the public after a State’s

Blueprint application is publicly posted. One commenter suggested that HHS publicly post a

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State’s Blueprint application within 30 days of receipt, instead of the 90-day period mentioned in

our proposal for this rule.

Response: We appreciate the suggestion to consider requiring that States provide a formal

notice and comment period to the public after their Blueprint application is posted. At this time,

we believe that the new requirement at § 155.106(a)(2)(ii) requiring a State to conduct at least

one public engagement at which interested parties can learn about the State’s intent to establish a

State Exchange and the State’s progress toward executing that transition, provides sufficient

notice and ability for interested parties to comment. We will consider this suggestion for future

rulemaking if we observe that the new requirement results in States being unable to obtain

feedback from interested parties on a State’s transition. Additionally, we appreciate the

suggestion that HHS publicly post a State’s Blueprint application within 30 days of receipt,

instead of the 90-day period mentioned in our proposal for this rule, and we agree that publicly

posting the application within this timeframe would benefit the public by providing more time

and opportunities for interested parties to provide comments to us and the State. Accordingly, we

intend to publicly post a State’s Blueprint application within 30 days upon receipt by HHS. HHS

would only post a State’s initial Blueprint application,

Comment: One commenter suggested that we require States, as part of their Blueprint

application, to submit documentation providing enrollment targets and plans to reduce the

uninsured population and improve coverage in the initial years following the establishment of

their State Exchange. Another commenter suggested that we require States to demonstrate clear

metrics towards meeting their Blueprint goals on a periodic basis, after completing the Blueprint

approval process.

CMS-9895-F 155

Response: We appreciate the suggestions from these commenters. We will consider the

development of new tools in future rulemaking that would enhance transparency into the

performance of Exchanges, both for

States newly transitioning to a State Exchange and for existing

State Exchanges.

3. Additional Required Benefits (§ 155.170)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82553), we proposed to amend § 155.170(a)(2) to provide that a covered benefit in a

State’s EHB-benchmark plan would be considered an EHB. We are finalizing this policy as

proposed, except for minor grammatical changes to improve clarity.

Under this policy, there will be no obligation for the State to defray the cost of a State

mandate enacted after December 31, 2011, that requires coverage of a benefit covered in the

State’s EHB-benchmark plan. Benefits that are covered in a State’s EHB-benchmark plan would

not be considered in addition to EHB and would remain subject to the various rules applicable to

the EHBs, including the prohibition on discrimination in accordance with § 156.125, limitations

on cost sharing in accordance with § 156.130, and restrictions on annual or lifetime dollar limits

in accordance with § 147.126.

Section 1311(d)(3)(B) of the ACA permits a State to require QHPs offered in the State to

cover benefits in addition to EHB, but requires the 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.

Under longstanding policy, benefits mandated after December 31, 2011, other than for

compliance with Federal requirements, are considered in addition to EHB (and thus not EHB)

without regard as to whether the mandated benefits are embedded in the State’s EHB-benchmark

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plan. Specifically, under § 155.170, a State mandate is considered ‘in addition to EHB’ if it: is

the result of State action taken after December 31, 2011;

126

requires coverage of benefits specific

to care, treatment, and services;

127

requires QHPs to cover the benefits;

128

and was not enacted to

comply with Federal requirements. As a result, States must defray the associated costs of QHP

coverage of such benefits, and those costs may not be included in the percentage of premium

attributable to coverage of EHB for purpose of calculating APTC. In addition, because the

benefits are not EHB, they are not subject to EHB nondiscrimination rules at § 156.125, the

annual limitation on cost sharing at § 156.130, and restrictions on annual or lifetime dollar limits

at § 147.126.

In the years since we finalized § 155.170, we received feedback from States and other

interested parties, including in comments submitted to the EHB RFI (87 FR 74097) that we

issued in 2022, that we should reconsider this provision. This feedback indicated that States

struggle to understand and operationalize § 155.170, and that States that seek to mandate

coverage of benefits are unintentionally removing EHB protections from benefits already

included in the State’s EHB-benchmark plan.

We believe that finalizing the proposal will promote consumer protections and facilitate

compliance with the defrayal requirement by making the identification of benefits in addition to

EHB more intuitive.

Under the policy, if a State mandates coverage of a benefit that is in its EHB-benchmark

plan, the benefit will continue to be considered EHB and the State will not have to defray the

126

EHB Rule (78 FR 12838). A State action can be by statute, regulation, guidance, or other State action. 2017

Payment Notice (81 FR 12242).

127

Requirements related to provider types, cost sharing, benefit delivery methods, or reimbursement methods are not

specific to care, treatment, and services. EHB Rule (78 FR 12838).

128

If a State action applies to the individual and small group markets, it applies to QHPs; if a State allows for the

sale of large group plans as QHPs, a State-mandated benefit for the large group market applies to QHPs. EHB

Proposed Rule (77 FR 70647 through 70648) (finalized without modification in the EHB Rule (78 FR 12838)).

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costs of that mandate. However, if at a future date the State updates its EHB-benchmark plan

under § 156.111 and removes the mandated benefit from its EHB-benchmark plan, the State may

have to defray the costs of the benefit under the factors set forth at § 155.170 as it will no longer

be an EHB after its removal from the EHB-benchmark plan. In addition, starting in PY 2025, a

State that is defraying the costs of a benefit required by a mandate that is in addition to EHB

under § 155.170 will be permitted to cease defraying the costs of that benefit if the benefit is

included in its EHB-benchmark plan or upon updating its EHB-benchmark plan in the future to

include such benefit coverage.

As stated in the proposed rule (88 FR 82553), we acknowledge that there are States that

may have been defraying the costs of benefits under the current policy that will be able to stop

defraying those costs since we are finalizing this policy. We proposed this change to be effective

starting with plan years beginning on or after January 1, 2025, to allow for issuers to make

necessary modifications to their plan designs and plan filings to reflect any possible changes in

designation of benefits as EHB as a result of this policy. For example, under this policy, if a

State ceases defraying the costs of a State-mandated benefit to issuers because it is covered in its

EHB-benchmark plan, issuers will update their plan filings accordingly beginning in PY 2025 to

reflect that the benefit is covered as an EHB and will be included in the percentage of premium

attributable to coverage of EHB for the purpose of calculating APTC. We also noted that those

States will not be able to recoup the cost of benefits they have already defrayed. In addition, we

acknowledge that the start and end dates of State legislative sessions vary greatly by State, and

that this policy may occur during State legislative sessions that are considering State actions that

will be impacted by the change.

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We noted that this policy may impact health plans that are not directly subject to the EHB

requirements, such as self-insured group health plans and fully-insured group health plans in the

large group market that are required to comply with the annual limitation on cost sharing and

restrictions on annual or lifetime dollar limits in accordance with applicable regulations with

respect to such EHBs.

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Such plans will be affected by this policy only to the extent that a State

changes benefits in its EHB-benchmark plan and such plan selects that State’s EHB-benchmark

plan for purposes of defining EHBs covered by the plan that are subject to the annual limitation

on cost sharing and prohibition on lifetime and annual dollar limits under sections 2707 and 2711

of the PHS Act, respectively. It may also impact a Basic Health Program (BHP) established

under section 1331 of the ACA and Medicaid Alternative Benefit Plans (ABPs) implemented

pursuant to section 1937 of the Act.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed with minor grammatical

changes to improve clarity. We summarize and respond to public comments received on the

proposed defrayal policy below.

Comment: Most commenters supported the proposed updates to our EHB mandate

defrayal policy. Commenters cited myriad concerns with current mandate defrayal policy that

would be alleviated by the proposal.

State regulators and advocacy groups stated that there has been confusion around

operationalizing existing Federal requirements for the defrayal of State-mandated benefits.

Commenters asserted that this policy change would alleviate an apparent inconsistency between

129

See parallel requirements to § 147.126 at 26 CFR 54.9815-2711, and 29 CFR 2590.715-2711. Additionally,

section 2707(b) of the PHS Act, as added by the ACA, was incorporated by reference into section 9815 of the Code

and section 715 of the Employee Retirement Income Security Act (ERISA).

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§§ 155.170 and 156.111 under which a benefit could be “essential” for purposes of a State’s

EHB-benchmark plan selected by each State under § 156.111, but “not essential” for purposes of

the defrayal requirement under § 155.170. Many commenters noted that the confusion related to

defrayal under current policy was deterring States from addressing benefit coverage in their

States through mandates.

A few commenters noted that, currently, it is a costly and time-intensive process for

States to conduct mandate reviews to determine whether a new benefit would be subject to

defrayal. They noted that because the proposal ultimately would make it easier to understand

what benefits are EHB, it will help State regulators ensure that patients and consumers receive

the protections that attach to EHB and facilitate decision-making by State policymakers seeking

to ensure a robust benefit package for Exchange consumers. Many commenters supported the

proposal to ensure that EHB maintain their protections, regardless of whether a State mandates it.

Many commenters noted the clarity from the proposed change will allow States to be

more responsive to the needs of their States and specifically help advance health equity, mitigate

health disparities, and improve access for those with disabilities and chronic conditions. A

commenter noted that EHBs retaining protections, such as nondiscrimination rules, limitations

on cost sharing, and restrictions on annual or lifetime dollar limits, is crucial for patients,

particularly those with chronic conditions or complex health care needs, as it ensures access to

essential health services with less financial burden.

Response: We understand that whether a State mandate will require defrayal is an

important consideration for State policymakers. We agree with commenters that amending

§ 155.170(a)(2) to provide that a covered benefit in a State’s EHB-benchmark plan is considered

an EHB will make it easier for State policymakers to make defrayal determinations because it

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will be clearer that benefits in an EHB-benchmark plan do not require defrayal. We also

anticipate that this change will help States and legislatures to understand the consequences of

mandating benefits better and make it simpler overall for States to address health equity concerns

in their States through mandates and EHB-benchmark plan updates.

Comment: State Departments of Insurance noted that the date-based cutoff for State-

mandated benefit defrayal under § 155.170(a)(2)—under which a benefit that is required by State

action taking place on or after January 1, 2012, is not EHB—inhibits State innovation in QHP

benefit design. A comment from one State’s Department of Insurance noted that, from the

perspective of a legislator, the current defrayal rules can be perceived as an impediment to

updating coverage to reflect new developments in health care delivery. One commenter stated

that the current mandate defrayal policy discourages certain States from passing life-saving

cancer-related mandates because of the cost or complications in implementing defrayal. Another

commenter noted that several initiatives to expand mandated benefits in its State have either been

unsuccessful or were delayed due to the possibility of a mandate defrayal.

Response: These comments are consistent with feedback we have received about this

provision prior to this rulemaking. In the years since we finalized § 155.170, we have received

feedback from States and other interested parties that we should reconsider the policy, including

in comments submitted to the EHB RFI (87 FR 74097) that we issued in 2022. Many

commenters to the EHB RFI specifically recommended repealing or modifying § 155.170(a)(2)

to define benefits in a State’s EHB-benchmark plan as not “in addition to EHB.” In our

experience, States often are unsure whether they are making correct defrayal determinations due

to the complexity of the current policy. Throughout the years of providing technical assistance to

States analyzing whether mandates require defrayal, one of the most common areas of confusion

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has been an apparent inconsistency between Sections §§ 155.170 and 156.111, regarding

whether a benefit can be “essential” for purposes of the Federally required EHB-benchmark plan

selected by each State, but not be an EHB for the purposes of defrayal. We agree with

commenters that States have struggled to understand and operationalize the requirements under

current mandate defrayal policy and that the amendments we propose to § 155.170 will resolve

such confusion. Therefore, we are finalizing the proposal to amend § 155.170(a)(2) to provide

that a covered benefit in a State’s EHB-benchmark plan is considered an EHB. We believe this

amendment will facilitate compliance with the defrayal requirement by making the identification

of benefits in addition to EHB more intuitive.

Comment: Many commenters expressed concern that some State efforts to mandate

certain benefits could unintentionally result in removing EHB protections from benefits already

included in the State’s EHB-benchmark plan. Several commenters noted that the current policy

has created unnecessary uncertainty related to EHB protections and financial barriers for people

enrolled in EHB coverage.

Response: The finalization of this policy will preserve EHB protections for benefits in a

State’s EHB-benchmark plan, and there would be no obligation for States to defray the cost of

any State mandate enacted after December 31, 2011 that requires coverage of a benefit covered

under a State’s EHB-benchmark plan. Benefits that are covered in a State’s EHB-benchmark

plan will be subject to the various rules applicable to EHB, including the prohibition on

discrimination in accordance with § 156.125, limitations on cost sharing in accordance with §

156.130, and restrictions on annual or lifetime dollar limits in accordance with § 147.126.

Comment: Several commenters that opposed the proposal asserted that permitting States

to deem a benefit EHB by reference to its inclusion in an EHB-benchmark plan contradicts the

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statutory intent of the ACA’s EHB framework, which the commenters asserted intended a

comprehensive assessment of typicality among commercial coverage amidst a series of clear

statutory guardrails. A commenter asserted that section 1302 of the ACA authorizes HHS to

define EHB, but noted that it does not allow it to do so in a manner that elevates State EHB-

benchmark plans to a place of prominence not envisioned by the statute. A commenter urged

CMS to be cautious of interpreting what constitutes an EHB too broadly and suggested that the

definition of “essential” health benefits should remain focused on a set of benefits that follow the

categories established in the ACA and should be representative of benefits offered in a “typical

employer plan,” as required under the statute.

A few commenters that opposed the proposal suggested that it would permit States to

avoid defraying the cost of any additional benefit so long as they updated their EHB-benchmark

plans, effectively nullifies the cost defrayal obligation, and cannot be squared with the statute’s

requirements. Those commenters asserted that Congress struck a careful balance in section

1311(d)(3)(B) of the ACA; it afforded States the authority to mandate additional benefits but

required them to defray costs when doing so.

Commenters who supported the proposal noted that the proposal is more consistent with

the plain language and intent of section 1311(d)(3)(B) of the ACA which requires States to

defray the cost of benefits that are “in addition to the essential health benefits” than the existing

requirements related to defrayal. One commenter noted the proposal will benefit consumers by

ensuring that QHPs include the full range of benefits commonly included in typical employer

plans in a State, consistent with the intent of the ACA’s EHB provision. A few commenters

noted that limiting EHB-benchmark benefits that do not require defrayal only to those enacted on

or before December 31, 2011, was arbitrary and limits the ability of States to ensure plans meet

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the current needs of consumers. Another commenter noted that requiring a State to defray a

mandate for coverage of a benefit for which coverage was already required under the State’s

EHB-benchmark plan makes little sense and it also does not comport with the language of the

ACA. Several commenters noted that the proposal applied a commonsense approach and would

make the identification of benefits in addition to EHB more intuitive and innate.

Response: This policy change aligns with the plain language and intent of the ACA.

Section 1311(d)(3)(B)(ii)(II) of the ACA requires States to defray the cost of any additional

benefits described in clause (i), which refers to any benefits that the State requires a QHP to offer

in addition to the essential health benefits specified under section 1302(b). Section 1302 of the

ACA grants the Secretary broad authority to define EHB, directs that the EHB be equal in scope

to the benefits provided under a typical employer plan, and that they include items and services

in at least 10 general categories of EHB. Exercising the authority under section 1302(b), in 2013

we defined EHB using a benchmark-based approach whereby the State selects an EHB-

benchmark plan that is utilized as a reference document for all plans subject to the EHB

requirements in the State. Even after revisions to the EHB-benchmark policy over the years,

States remain primarily responsible for selecting an EHB-benchmark plan that complies with

scope of benefit requirements that ensure the EHB-benchmark is equal to the scope of benefits

provided under a typical employer plan. This EHB-benchmark selection process is the

cornerstone of how States define EHB, and we believe finalizing a policy whereby all benefits

covered in a State’s EHB-benchmark plan remain EHB revises the defrayal policy in a manner

more consistent with the ACA, as well as the EHB-benchmark plan selection process. States will

continue to be required to defray the cost of State mandated benefits that are in addition to EHB

under the finalized standard.

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We further note that this proposal is not introducing a change regarding benefits in an

EHB-benchmark plan generally being EHB. Under longstanding policy, EHB are defined by

HHS with a State benchmark-based framework, such that an issuer subject to EHB requirements

must provide benefits that are substantially equal to the benefits selected by the State in its EHB-

benchmark plan. Furthermore, statutory guardrails on States expanding EHB in their States

remain in place. As described in the preamble to § 156.111, the typicality standard functions as

both a ceiling and floor to limit a State’s EHB-benchmark plan selections. Benefits can be

defined as EHB in a State through two avenues: (1) they were mandated by State action prior to

December 31, 2011, and/or (2) they are included in a State’s EHB-benchmark plan or otherwise

required as EHB pursuant to § 156.115. The distinction of which avenue defines a benefit as an

EHB is meaningless for all purposes except for the analysis of defrayal obligations arising from

State mandates and for whether the benefit can be substituted under § 156.115(b). Under the

prior policy, a benefit that was selected as an EHB in a State’s EHB-benchmark plan could shift

to being a benefit that is “in addition to EHB” for purposes of defrayal if the State mandates such

coverage after December 31, 2011, and the State did not have a mandate for such coverage in

place prior to December 31, 2011. Under the finalized policy, there will be no obligation for the

State to defray the cost of a State mandate enacted after December 31, 2011, that requires

coverage of a benefit covered in the State’s EHB-benchmark plan.

Comment: One commenter suggested that the proposed change to the additional benefits

rule is impermissibly arbitrary and capricious under the Administrative Procedure Act (APA)

because it fails to address how the current rule is designed to guard against the concern,

previously recognized by the agency, that a State could “embed any desired benefit mandate into

the EHB-benchmark plan, without any requirement to defray the obligation” (83 FR 17010).

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Another commenter commended HHS for responding to interested party comments submitted to

the EHB RFI (87 FR 74097). Another commenter suggested that the statutory language does not

contain an exception to the defrayal process for benefits that become EHB because of their

inclusion in a State’s EHB-benchmark plan. That commenter asserted that the proposal departs

from the plain language of the ACA, as well as the defrayal framework as developed through

years of rulemaking and guidance, and suggested that, rather than introducing further ambiguity

into the EHB cost defrayal process, CMS reiterate the position it articulated in the 2019 Notice

of Benefit and Payment Parameters that State-required benefits mandated by State action taking

place after December 31, 2011, other than for purposes of compliance with Federal requirements,

would continue to be considered in addition to EHB even if embedded in the State’s newly

selected EHB-benchmark plan under the proposals at § 156.111.

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Response: We acknowledge that a concern over States embedding any desired benefit

mandate into their EHB-benchmark plan without any requirement to defray the obligation

informed the finalization of the requirements in the 2019 Payment Notice. However, in the

5 years since that rule was finalized, we have received consistent feedback that the standard was

confusing and hindering State compliance with defrayal requirements. Many commenters to the

EHB RFI in 2022 specifically recommended repealing or modifying § 155.170(a)(2) to define

benefits in a State’s EHB-benchmark plan as not “in addition to EHB.” Further, States are

limited in the benefits that they can embed in their EHB-benchmark plans, as they must continue

to meet the requirements as finalized in this rule at § 156.111(b)(2)(ii). We believe the consumer

protections resulting from this policy change outweigh the prior concern over States embedding

any desired benefit mandate into their EHB-benchmark plan without any requirement to defray.

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85 FR 29164, 29218.

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Comment: Many commenters that opposed the proposal expressed concerns that it would

lead to a dramatic increase in the volume of State benefit mandates and drive-up premiums for

consumers and employers, increase costs for the Federal Government and taxpayers, and reduce

the availability of affordable Exchange plan options. A few commenters who supported the

proposal also noted that State policymakers must be cognizant of the impact any new mandates

could have on premiums and Federal tax credits. A State’s Department of Insurance noted that

allowing the State to require QHPs to cover additional benefits without defrayal of costs provides

the State needed flexibility over plan benefits to optimize affordability and health benefit

comprehensiveness.

Response: Based on experience providing technical assistance to States that are

considering State-mandated benefits or changes to its EHB-benchmark plans, we believe that

States appropriately balance the need for coverage of a specific benefit with the potential impact

it may have on costs. This analysis typically includes a consideration of the impact on premiums

and the corresponding impact on tax credits. We do not disagree with commenters that this

amendment may result in increased Federal outlays in the form of higher APTC; however, this

defrayal rule does not increase the opportunity for States to increase the generosity of their EHB-

benchmark plans more than is already theoretically possible, as States have been always

permitted to add benefits to their EHB-benchmark plan, provided those additions comply with

the scope of benefits requirements at 45 CFR 156.111(b)(2). In States that update EHB-

benchmark plans to add benefits, the costs of which are currently being defrayed by the State, the

percentage of premium attributable to coverage of EHB for purpose of calculating would

increase just as if the State updated its EHB-benchmark plan through the process set forth in

§ 156.111 and in compliance with the scope of benefits requirements. In a State that enacts a

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mandate for a benefit that is currently covered in its EHB-benchmark plan, there will be no effect

on premium tax credits as the benefit was already included in the percentage of premium

attributable to coverage of EHB for purpose of calculating since it was EHB.

Comment: A few commenters expressed concern that under the proposed rule, there is no

guardrail to prevent manipulation of the EHB-benchmark plan to avoid cost defrayal—especially

because the agency is also proposing to eliminate the generosity standard at § 156.111 that limits

the selection of benefits in EHB-benchmark plans. A commenter stated that in light of removing

the generosity standard it is negligent of CMS to propose rules that do not require a financial

analysis of the costs that may be incurred by mandates and expressed concern that without such

financial analysis, CMS has no method of determining the cost of the new plan, which, with

enhanced benefits, may have substantially higher premiums and increase the cost of APTC that

will be incurred by the Federal Government.

A commenter articulated a sequence of events this commenter believes could lead to

States manipulating the EHB-benchmark plan update process to avoid defrayal. The commenter

supposed that a State enacts a mandate applicable only to large group health plans (and not

QHPs) which would not require defrayal. Afterwards, the State updates its-EHB-benchmark to

cover that benefit, using the large group plans that were required to cover it as a reference point

for a “typical” employer plan. Individual and small group plans would then be required to cover

the benefit as an EHB, with no cost defrayal—even though the benefit was not included in any

typical employer plan before the State mandated it. The commenter stated that CMS has

provided no reasonable justification for opening the door to such manipulation, nor any

alternative guardrails. A different commenter noted a similar concern that under the proposal,

States could seamlessly switch from State action to benchmarking for mandates without

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incurring costs, and existing mandates could transition into EHBs through EHB-benchmark plan

updates.

Another commenter remarked that changes to a State’s EHB-benchmark plan take a long

time (noting that if a State identifies a particular need in the summer of 2024, it would not be

able to adopt a new EHB-benchmark plan that addressed that need until, at a minimum, plan year

2027). The commenter stated that States may legitimately believe that the EHB-benchmark

update timeline is unacceptable when lack of coverage for a particular service is contributing to

health disparities and worsening the health of the State’s population. As a result, the commenter

explained that some States have contemplated the option of enacting a mandate through

legislation or administrative action that has immediate effect, while at the same time pursuing

changes to the EHB-benchmark for a later date. While these States will likely be subject to

defrayal requirements for the period of time that the State mandates coverage of a benefit

without that benefit being covered under the State’s EHB-benchmark plan, a State may be

willing to assume temporarily the costs of mandated benefits in order for the benefit to be

available to State residents sooner than the benefit can or will be added to the State’s EHB-

benchmark plan. The commenter noted that the policy, however, seems to indicate that once a

State is subject to defrayal, it will continue to have to defray even if a benchmark change is

subsequently adopted. The commenter suggested this result seems to be an unintended loophole

in the current rules that is not necessary to advance the goals of the ACA, and its only effect is to

deter States from seeking necessary coverage changes.

Response: We are not persuaded that States will use the additional flexibility afforded by

this proposal to add unbounded benefits as EHB. In our experience providing technical

assistance to States regarding State-mandated benefits and EHB-benchmark plan updates, States

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approach the provision of health benefits in good faith and with great consideration for ensuring

balance between an appropriate scope of covered benefits with any corresponding increase in

costs. States must continue to operate within the overall EHB framework established by HHS,

and we intend to continue to provide robust technical assistance to States to ensure their

compliance.

Further, we believe that the generosity standard is not necessary to ensure the State EHB-

benchmark plan selections are not unbounded given that, as described in the preamble to section

156.111, the typicality standard functions as both a ceiling and floor to limit a State's EHB-

benchmark plan selections. Specifically, the typicality standard alone limits the potential

generosity of a State’s EHB-benchmark plan to be no greater than the generosity provided by the

most generous typical employer plan, because a State would be unable to demonstrate that a

more generous plan was equal in scope to any of the typical employer plans defined at

§ 156.111(b)(2)(i).

The scenario the commenter was concerned about would allow for manipulation of the

EHB-benchmark plan update process would not, in practice, present an opportunity for

manipulation. States have been able to add individual benefits to their EHB-benchmark plans

through the update process outlined at § 156.111 since the 2019 Payment Notice (83 FR 16930,

17009), which provided States with additional flexibility with respect to the benefits and

coverage in the EHB-benchmark plans. In addition, we note that the EHB-benchmark plan

update process is not instantaneous, and States incur costs to update their EHB-benchmark plans.

We believe there is a high likelihood that confusion related to the existing mandate

defrayal policy has made it difficult for interested parties to discern whether States are

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complying with the defrayal requirements. With clearer standards, there will be less confusion

about State defrayal obligations.

We agree that the policy subjecting a State to defrayal of a benefit even if the State

subsequently adds coverage of that benefit to the State’s EHB-benchmark plan is counterintuitive

and does not advance the goals of the ACA.

Comment: A commenter suggested that if the proposal is finalized, it would only apply to

benefits that are “already covered in the State’s EHB [benchmark plan]” at the time the mandate

is passed rather than applying prospectively to benefits added to a benchmark plan after the

mandate is passed.

Response: We believe this commenter’s approach would not sufficiently address the

concerns about benefits that States, issuers, and consumers believe are subject to EHB

protections (based on their inclusion in a State’s EHB-benchmark plan) not being EHB because

of the defrayal provision. The approach would also further perpetuate a complex and confusing

standard. Furthermore, under the commenter’s suggestion, a State mandate would result in

certain benefits never being able to become EHB (regardless of whether they are added to the

EHB-benchmark plan in the future).

Comment: A commenter requested that HHS reiterate that State legislation stating that a

benefit mandate is not to be considered an addition to EHB does not override the defrayal

requirement. The commenter also expressed concern over the increasing trend for States to pass

legislation with clauses stating that a benefit mandate will not be operative if there is a finding

that the mandate requires defrayal under the requirements in § 155.170.

Response: States may not exempt themselves from the Federal requirement to defray

State mandated benefits that are in addition to EHB through State legislation. While clauses

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stating that a benefit mandate will not be operative if there is a finding that the mandate requires

defrayal are not prohibited by § 155.170, we caution States that, absent clear direction from the

State following the bill’s passing as to whether or not the State has identified the required benefit

as in addition to or not in addition to EHB, such clauses cause confusion for issuers about

whether a benefit mandate is in effect and whether the benefit is in addition to EHB (and

therefore whether the benefit is subject to the various rules applicable to the EHBs, including the

prohibition on discrimination in accordance with § 156.125, limitations on cost sharing in

accordance with § 156.130, and restrictions on annual or lifetime dollar limits in accordance with

§ 147.126). We recommend that States issue bulletins or guidance for issuers with a

determination of whether the benefit mandate is in effect as soon as possible after conducting an

analysis of whether the benefit mandate requires defrayal.

We have also noticed State legislative bills that include clauses stating that the

requirement to defray mandates is precluded if HHS fails to respond to the State’s request for

confirmation of whether new mandates require defrayal within a certain time. Under § 155.170,

such provisions do not comply with § 155.170 as they inappropriately put the onus on HHS to

decide whether the mandate is in addition to EHB rather than on the State. Failure by HHS to

respond to State requests asking for a determination of whether new mandates require defrayal

does not excuse States from defrayal requirements. Under § 155.170, it is the State’s

responsibility to identify which State required benefits require defrayal. While States are

encouraged to reach out to us concerning State defrayal questions in advance of passing and

implementing benefit mandates, HHS does not provide determination of whether a benefit

mandate requires defrayal.

4. Consumer Assistance Tools and Programs of an Exchange (§ 155.205)

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In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82554), we proposed at § 155.205(a) to establish additional minimum standards for

Exchange call center operations, including requirements that all Exchanges, other than SBE-FPs

and SHOP Exchanges that do not provide for enrollment in SHOP coverage through an online

SHOP enrollment platform, meet the following additional requirements: their call center must

provide consumers with access to a live call center representative during the Exchanges'

published hours of operation; and their live call center representatives must be able to assist

consumers with their QHP application, which includes providing consumers information on their

APTC and CSR eligibility, helping consumers understand their QHP options, helping consumers

select a QHP, and helping consumers submit QHP enrollment applications to the Exchange. We

are finalizing these standards with modifications.

Currently, § 155.205(a) requires that Exchanges provide for operation of a consumer-

accessible, toll-free call center that addresses the needs of consumers requesting assistance. For a

State requesting to establish a State Exchange, we review its plans to implement and meet call

center requirements under § 155.205(a) as described in the State Exchange Blueprint application.

Through the Blueprint process, we review and assess a State’s call center operational plan for

consistency with standards governing its hours of operation, staffing levels, and service level

goals (including wait times and abandonment rates), as well as for consistency with best

practices utilized by existing Exchanges, including the FFEs’ call center. Once a State Exchange

has been established and is operating, HHS monitors Exchange call center operations through the

annual collection of performance monitoring data, as specified at § 155.1200(b)(3). The data

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collected includes call center volume, wait times, calls abandoned, and average call center handle

time.

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As stated in the proposed rule (88 FR 82554), we recognize the value in each Exchange

being able to tailor customer service level expectations based on their experience in the areas

they serve, including setting hours of operation that meet the needs of their consumers. As such,

we did not propose to establish minimum standards for customer service staffing levels. We will

continue to assess and monitor Exchanges’ compliance with § 155.205(a) through the Blueprint

process and annual collection of compliance reports, as specified at § 155.1200(b)(2). We also

intend to utilize the finalized requirement that transitioning States submit documentation through

their Blueprint application, which will strengthen our review of Exchange call center plans.

In this final rule, we are requiring that all Exchanges, other than SBE-FPs and SHOP

Exchanges that do not provide for enrollment in SHOP coverage through an online SHOP

enrollment platform, meet the following additional requirements: their call center must provide

consumers with access to a live call center representative during the Exchanges’ published hours

of operation; and their live call center representatives must be able to assist consumers with their

Exchange application, which includes providing consumers information on their APTC and CSR

eligibility, facilitating a consumer’s comparison of QHPs, and helping consumers submit their

Exchange applications to the Exchange.

Sections 1311(d)(4)(B) and 1321 of the ACA require that Exchanges provide for the

operation of a toll-free telephone hotline to respond to requests for assistance, and section

1413(b)(1)(A)(ii) of the ACA requires that a consumer’s application for QHP coverage can be

filed by telephone. We believe that our policy will support these statutory requirements by

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OMB Control Number: 0938-1119.

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ensuring that consumers have access to live representatives with Exchange call centers, during a

reliable window of time, who can assist consumers with their Exchange applications.

We believe that all State Exchange call centers already meet the minimum standards that

were proposed, and we know that the call center for the Exchanges on the Federal platform are

meeting them. As such, this policy seeks to standardize and strengthen Exchange consumer

assistance capabilities without imposing additional burden on current Exchanges or hindering

Exchanges’ ability to be innovative in their call center functions. The changes finalized here will

ensure that regardless of where a consumer is in the United States, the consumer will be able to

speak to a live representative who can assist the consumer with the Exchange application process

during the hours of operation for that State's call center. We also want to ensure that a State does

not solely rely on an automated telephone system for Exchange application assistance because

we believe speaking to a live representative will help troubleshoot consumer Exchange

application issues, provide in real time an opportunity for a live representative to explain

Exchange application terminology to a consumer, ensure the consumer provides the most correct

information in the QHP application to alleviate unnecessary follow-up, and provide greater

overall consumer satisfaction. We believe that call centers should have a basic level of customer

service especially as they relate to hours and operations and staffing levels to limit wait times for

Exchange application assistance. We also know based on our work with State Exchanges and the

Exchanges on the Federal platform that the Exchanges have created and continue to maintain

robust call centers.

We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision with modifications to the proposed

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language at § 155.205(a) to clarify the role of a live call center representative during the

Exchanges' published hours of operation is to assist consumers with submitting their Exchange

application as required at § 155.405(c)(2)(ii).

We summarize and respond to public comments received on the proposed minimum

standards for Exchange call center operations below.

Comment: Some commenters expressed concerns that the proposed requirement was

meant to replace or duplicate the act of insurance sales or to significantly increase the scope of

the assistance currently provided through an Exchange’s live call center representatives.

Response: The intent of the proposal was not to revise the scope of assistance currently

provided by live call center representatives, and instead was meant to bolster the consumer

experience while Exchanges meet the basic statutory requirements at sections 1311(d)(4)(B) and

1413(b)(1)(A)(ii) of the ACA, which requires Exchanges to provide for the operation of a toll-

free telephone hotline to respond to requests for assistance and to provide consumers with the

ability to file an Exchange application by telephone.

Comment: Several commenters cited benefits to the proposal including increased

consumer understanding of the Exchange application process through real-time conversation;

continuity of coverage across health insurance programs since call centers often also support

Medicaid enrollment assistance; and increased assistance to those with limited health insurance

literacy, computer literacy, or limited internet access.

Response: We agree with the consumer assistance benefits highlighted in these comments

and believe the finalized live call center representative requirement will aid consumers in these

ways.

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Comment: Several commenters requested CMS also consider establishing a standard for

call center wait times and abandonment rates.

Response: We did not consider wait times or abandonment rates in this proposal as we

believe our current oversight mechanisms enable us to sufficiently review call center

performance. Currently, § 155.205(a) requires that Exchanges provide for operation of a

consumer-accessible, toll-free call center that addresses the needs of consumers requesting

assistance. For a State requesting to establish a State Exchange, we review its plans to implement

and meet call center requirements under § 155.205(a) as described in the State Exchange

Blueprint application. Aside from the call center requirements under § 155.205(a), we utilize the

Blueprint process to review and assess a State’s call center operational plan for consistency with

standards governing its hours of operation, staffing levels, and service level goals (including wait

times and abandonment rates), as well as for consistency with best practices utilized by existing

Exchanges, including the FFEs’ call center. Once a State Exchange has been established and is

operating, HHS monitors Exchange call center operations through the annual collection of

performance monitoring data, as specified at § 155.1200(b)(3).

Comment: Several commenters requested CMS also consider establishing a standard

requiring all call centers provide dedicated lines for consumers with disabilities and/or limited

English proficiency.

Response: We did not consider dedicated lines for consumers living with disabilities

and/or with limited English proficiency in this proposal. However, to ensure compliance with

155.205(a), we review to ensure that all Exchange call centers have a TTY line service available

for consumers living with disabilities, a Spanish version of their website, and a dedicated line for

oral interpretation services in at least 105 languages. Further, §§ 155.205(c)(1), (c)(2)(i), and

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(c)(3) require Exchanges, QHP issuers, and web brokers to provide both written translations and

oral interpretations of information in plain language in a manner accessible to consumers with

disabilities and limited English proficiency.

Comment: Several commenters stated that alignment of call center standards provides

consumers with a more uniform experience regardless of Exchange model type or geography.

Response: We agree that the minimum standard finalized in this proposal will secure a

more level consumer call center experience regardless of where in the country a consumer is

located or what Exchange model is operating in their State.

Comment: A few commenters requested CMS make all call center data public similar to

the release of Medicaid Unwinding call center data.

Response: We appreciate commenters’ interest in publishing Exchange call center data.

We are committed to providing transparency into Exchange operations and are exploring the

release of call center data at a future time. Additionally, in the interest of transparency, we are

considering the development of new tools, potentially through future rulemaking, that will

provide further public understanding into the performance of Exchanges.

Comment: A few commenters opposed the proposal citing the need for State flexibility in

establishing call center standards including the incorporation of new call center technology to

assist consumers.

Response: We appreciate and understand the need for State flexibility to meet the needs

of their consumers. This policy does not aim to replace any technological investment States are

willing to make to expand their call center offerings. Recognizing that budgetary constraints

exist, and States often have to choose how to spend limited resources, we maintain that live call

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center representatives to assist consumers remains the minimum necessary to ensure sections

1311(d)(4)(B) and 1413(b)(1)(A)(ii) of the ACA are satisfied.

Comment: A few commenters opposed the proposal citing that CMS did not properly

justify why the new live representative standard was needed.

Response: We disagree that this live call center representative minimum standard was not

properly justified. We recognized and stated in the proposed rule that all Exchanges currently

meet the newly proposed standard. However, we cannot guarantee that the minimum standard

being finalized will continue to be met in future years by the present Exchanges or by States

looking to transition to State Exchanges in the future. As we stated in the proposed rule, we

believe speaking to a live representative would help troubleshoot consumer Exchange

application issues, provide in real time an opportunity for a live representative to explain

Exchange application terminology to a consumer, ensure the consumer provides the most correct

information in the Exchange application to alleviate unnecessary follow-up, and provide greater

overall consumer satisfaction. Thus, to ensure continuity of the live call center representative

standard, we have decided to finalize this proposal with the modifications noted above.

Comment: A few commenters opposed the proposal stating that requiring live call center

representatives to assist a consumer with “selecting a QHP” violated their State laws since only

licensed agents and brokers are permitted to engage in the business of insurance product

solicitation in that State, and that the proposed standard would create de facto minimum staffing

levels.

Response: As we previously explained in this final rule, the intent of this policy was not

to revise the scope of assistance currently provided by live call center representatives and was

instead meant to bolster the consumer experience while Exchanges meet the basic statutory

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requirements at sections 1311(d)(4)(B) and 1413(b)(1)(A)(ii) of the ACA, which requires

Exchanges to provide for the operation of a toll-free telephone hotline to respond to requests for

assistance and to provide consumers with the ability to file an Exchange application by

telephone. This policy does not direct live call center representatives to solicit or sell insurance

or engage in any similar practice related to insurance that generally requires a license under State

law. As such, for the purpose of clarity, we have amended the regulatory language initially

proposed in § 155.205(a) to clarify that live call center representatives will be required to

facilitate a consumer’s comparison of QHPs.

We recognize the value in each Exchange being able to tailor customer service level

expectations based on their experience in the areas they serve. Consequently, we did not propose

to establish minimum standards for customer service staffing levels. We will continue to assess

and monitor Exchanges’ compliance with § 155.205(a) through the Blueprint process and annual

collection of compliance reports, as specified at § 155.1200(b)(2). As such, we are finalizing this

provision with some changes to clarify that the role of a live call center representative during the

Exchanges' published hours of operation is to assist consumers with their Exchange application

as required at § 155.405(c)(2)(ii).

5. Requirement for Exchanges to Operate a Centralized Eligibility and Enrollment Platform on

the Exchange’s Website (§§ 155.205(b); 155.302(a)(1))

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82554), we proposed to amend § 155.205(b)(4) to require that an Exchange operate a

centralized eligibility and enrollment platform on the Exchange’s website (or, for an SBE-FP, the

Federal eligibility and enrollment platform), such that the Exchange allows for the submission of

the single, streamlined application for enrollment in a QHP and insurance affordability programs

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by consumers, in accordance with § 155.405, through the Exchange’s website, and that the

Exchange performs eligibility determinations for all consumers based on submissions of the

single, streamlined application. Further, we proposed to amend § 155.302(a)(1) to clarify that the

Exchange, through the centralized eligibility and enrollment platform operated on the

Exchange’s website (or, for an SBE-FP, the Federal eligibility and enrollment platform), is the

entity responsible for making all determinations regarding the eligibility for QHP coverage and

insurance affordability programs regardless of whether an individual files an application for

enrollment in a QHP on the Exchange’s website or on a non-Exchange website operated by an

entity described under § 155.220, such as a web-broker defined at § 155.20, or a DE entity or

QHP issuer described under § 155.221. As we believe the eligibility determination function is

inherently a function that should only be performed by the Exchange, the amendment to §

155.302(a)(1) also clarifies that only the private vendors or State entities that an Exchange

contracts with to operate its centralized eligibility and enrollment platform can perform this

function on behalf of an Exchange, and prohibits an Exchange from solely relying on non-

Exchange entities, including a web-broker (defined at § 155.20) or other entities under §§

155.220 or 155.221, to make such eligibility determinations on behalf of an Exchange.

We also proposed to amend § 155.205(b)(5) to require that an Exchange operate a

centralized eligibility and enrollment platform on the Exchange’s website (or, for an SBE-FP, by

relying on the Federal eligibility and enrollment platform) so that the Exchange (or, for an SBE-

FP, the Federal eligibility and enrollment platform) meets the requirement under § 155.400(c) to

maintain records of all effectuated enrollments in QHPs, including changes in effectuated QHP

enrollments.

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As background for these amendments, § 155.205(b) states that an Exchange must

maintain an up-to-date website that allows consumers to receive eligibility determinations for

QHPs and insurance affordability programs and provides standardized comparative information

on each available QHP and a calculator to facilitate the comparison of available QHPs after the

application of any APTC and any CSRs. Section 1413(c)(1) of the ACA also requires that

Exchanges develop a secure electronic interface that allows consumers to apply for health

insurance coverage online and electronically receive an eligibility determination and that

Exchanges conduct verifications of eligibility through electronic data interfaces. However,

currently, there is no explicit regulatory or statutory requirement that Exchanges operate a

centralized eligibility and enrollment platform on their website for performing all eligibility

determinations for QHPs and insurance affordability programs. Nonetheless, all Exchanges

currently provide access to a centralized eligibility and enrollment platform and process for

consumers that they serve, and all Exchanges also currently perform all eligibility determinations

through the operation of a centralized eligibility and enrollment platform on their websites. In

order to codify existing policy and practices and help set clear expectations for existing

Exchanges and States that may seek to operate State Exchanges in the future, we proposed these

amendments to require that Exchanges may not allow eligibility determinations to be made

outside of the Exchanges’ own centralized eligibility and enrollment platform by another entity

for applications for QHP coverage nor for selections for enrollment in a QHP.

We also proposed to amend § 155.302(a) to codify the Exchange’s obligation and role as

the sole entity responsible for conducting eligibility determinations. For example, if an Exchange

permits an eligible web-broker to operate a non-Exchange website that interfaces with an

Exchange to assist consumers with DE in QHPs offered through the Exchange as described in §§

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155.220(c)(3) and 155.221, the Exchange must ensure that the Exchange continues to maintain

responsibility for conducting all eligibility determinations for applications submitted for QHP

coverage and related insurance affordability programs. While HHS has not delegated these

functions to DE entities in FFE and SBE-FP States, currently, Exchanges may allow entities

described in § 155.220, among others that meet applicable requirements, to be able to function as

an eligible contracting entity under § 155.110(a) that can carry out determinations regarding

QHP coverage eligibility and eligibility for related insurance affordability programs on behalf of

the Exchange. This amendment to § 155.302(a) prohibits Exchanges from delegating the

responsibility to conduct eligibility determinations to any non-Exchange entities, besides entities

that the Exchanges have elected to contract with to operate the centralized eligibility and

enrollment platform. Consistent with these amendments, we proposed to maintain the current

requirement under § 155.302(a) that SBE-FPs rely on HHS, through the operation of the

centralized HealthCare.gov eligibility and enrollment platform, to carry out all eligibility

determinations for their Exchanges.

As we also stated in the proposed rule (88 FR 82555), this proposal ties together the

disparate, but related, requirements that exist across 45 CFR part 155 that speak to the real-time

and tightly integrated nature of the online eligibility functions that Exchanges are required to

perform (specifically the tight integration needed between the Exchange-operated website, single

streamlined application, and back-end automated eligibility verifications based on information

provided by applicants to arrive at an eligibility determination), by clearly stating the principle

that Exchanges are solely responsible for conducting eligibility determinations, and that

Exchanges need to meet the required eligibility functions that exist across 45 CFR part 155

through operating a centralized eligibility and enrollment platform on their website, regardless of

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whether an application is submitted through the Exchanges’ website or through eligible non-

Exchange entities that are assisting an individual in enrolling in a QHP.

We believe the lack of a clear statement in the regulations at 45 CFR part 155 affirming

the requirement that the Exchange must make all determinations regarding eligibility for QHP

coverage and related insurance affordability programs through a centralized eligibility and

enrollment platform on the Exchange’s website are oversights, as other sections of the

regulations implementing the ACA in title 45 of the CFR allude to a requirement or expectation

that an Exchange operates in this way already, or the regulations are written in a way such that it

would be difficult to fulfill their requirements if an Exchange did not operate as proposed in

these amendments.

As an example of an implementing regulation of the ACA that would require an

Exchange to operate in this manner, § 155.220 permits qualified individuals to be enrolled in a

QHP through the Exchange with the assistance of a web-broker, while § 155.220(c)(3)(ii)(A),

and by reference § 155.220(c)(3)(i)(F), require that if the non-Exchange website of a web-broker

is used to complete an Exchange eligibility application, that web-broker’s website must also

provide consumers with the ability to withdraw from the process and use the Exchange’s website

described in § 155.205(b) instead at any time. If an Exchange did not provide an ability on its

website for a consumer to complete an eligibility application, then it would not be possible to

fulfill the requirements of §§ 155.220(c)(3)(ii)(A) and (i)(F).

To ensure that the requirements of §§ 155.220(c)(3)(ii)(A) and (i)(F), and 155.205(b) are

fulfilled, we believe it is important that Exchanges allow a consumer to continue the application

process through the centralized eligibility and enrollment platform operated on the Exchange’s

own website should the consumer chose to withdraw from the application process that was begun

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on a web-broker’s non-Exchange website; or, if the Exchange is an SBE-FP, allow the consumer

to continue the application process through the website of the Federal platform.

As another example, QHP issuers that assist consumers with enrollment in QHPs are

currently required under § 156.265(b)(2) to either direct the consumer to the Exchange’s website

to file an eligibility application or ensure that the consumer’s eligibility application is completed

through the Exchange website or submitted through Exchange-approved web services in order

for the Exchange to conduct an eligibility determination. To align with these requirements, we

believe that it is important to finalize the amendment to § 155.302(a)(1) to provide that an

Exchange must perform all eligibility determinations through operating a centralized eligibility

and enrollment platform on the Exchange’s website, and that only those entities that an

Exchange chooses to enter into an agreement with to operate its centralized eligibility and

enrollment platform, as allowed for under § 155.110(a), can carry out this function on behalf of

the Exchange.

In addition to these examples of how current regulations may require an Exchange to

operate according to the proposed amendments to §§ 155.205 and 155.302, we believe that

consumers may be harmed without these policies in place. If an entity other than the Exchange

conducted eligibility determinations, consumers might receive incorrect or inconsistent eligibility

determinations, as entities other than the Exchange may not update their systems with the same

eligibility determination rules or logic as the Exchange itself when Federal or State policies or

regulations impacting eligibility for QHP coverage and insurance affordability programs come

into effect or are updated, including the implementation and maintenance of State-specific

eligibility rules and logic for Medicaid and CHIP programs. As a result, a non-centralized

eligibility system model introduces increased program integrity risk as to the accuracy of

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eligibility determinations, which introduces increased risk of inaccurate APTC payments to QHP

issuers and increased risk to consumers of potential tax liability when filing taxes and reconciling

their APTC with the PTC allowed.

In addition, the websites and eligibility platforms provided by non-Exchange entities may

not include the same informational content for consumers that an Exchange provides to

consumers through the Exchange’s website, such as information related to Medicaid and CHIP

programs or the availability of special enrollment periods before or after the open enrollment

period. As a result, some consumers might not provide information in their application in such a

manner as to receive a correct eligibility determination and thus, enroll in the wrong coverage or

not enroll in any coverage. Lastly, consumers may prefer to enroll directly through the eligibility

and enrollment platform hosted and operated on an Exchange’s website because they are more

comfortable with sharing their personal information through a platform hosted by the Exchange.

In light of these considerations, we proposed to amend §§ 155.205(b)(4) and (5), and

155.302(a)(1) to address these gaps. Since all Exchanges currently provide access to a

centralized eligibility and enrollment platform and process for consumers that they serve, and all

Exchanges also currently perform all eligibility determinations through the operation of a

centralized eligibility and enrollment platform on their websites, we believe the impact of these

policies are minimal.

We sought comment on these proposals.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed. We summarize and

respond to public comments received on the proposed requirement that an Exchange operate a

centralized eligibility and enrollment platform on the Exchange’s website below.

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Comment: Several commenters opposed the proposed policy requiring a State Exchange

to operate a centralized eligibility and enrollment platform on the Exchange’s website, citing that

it undermines State flexibility to operate their own Exchanges. One commenter noted that State

flexibility is the hallmark of the State Exchange model, and if HHS’ goal is for more States to

implement State Exchanges, then this proposal should not be implemented. A few commenters

opposed to the proposal asserted that HHS is dictating a specific technical approach that will

potentially restrict States from employing innovative or more suitable solutions.

Response: As we noted in the preamble to this provision, this proposal codifies and ties

together existing regulatory requirements under 45 CFR part 155 that require a State Exchange to

operate a centralized eligibility and enrollment platform on the Exchange’s website.

Furthermore, all Exchanges currently provide access to a centralized eligibility and enrollment

platform and process for the consumers that they serve, and all Exchanges also currently perform

all eligibility determinations through the operation of a centralized eligibility and enrollment

platform on their websites. While this proposal is consistent with current policy and State

practice, there may be States transitioning to State Exchanges in the future that would not

prioritize establishing a centralized eligibility and enrollment platform in the absence of this

policy. This standard will ensure State Exchange accountability for conducting eligibility

determinations, and ensure program integrity in adjudicating eligibility applications, while

preserving State flexibility to allow consumers access to DE entity application assisters and

permitting web-brokers and QHP issuers to assist consumers with direct enrollment in QHPs.

Additionally, this provision does not limit State flexibility to contract with an eligible vendor,

State Medicaid agency, or other State agency that may offer various technical solutions for

eligibility system operations.

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Based upon current State initiatives to transition from an FFE to a State Exchange, as

well as ongoing interest in the State Exchange model from other FFE States, we do not believe

that finalizing this policy will meaningfully discourage States from transitioning to or

maintaining their status as a State Exchange.

Finally, we disagree that the proposal could limit States’ ability to employ innovative or

more suitable technical solutions. While the proposal obligates a State Exchange to operate a

centralized eligibility and enrollment platform on the Exchange’s website, it is not prescriptive

concerning the technical infrastructure supporting the system, nor does it regulate the number

and types of entities an Exchange may contract with to develop and operate a centralized

eligibility and enrollment platform.

Comment: A few commenters opposed the proposal clarifying that the State Exchange is

the entity responsible for making all determinations regarding eligibility for QHP coverage,

citing that State Exchanges should have the flexibility to support eligibility and enrollment

functions through contractual arrangements with web-brokers or DE entities.

One commenter opposed to the proposal sought clarification regarding whether State

Exchanges could leverage EDE entities to support eligibility and enrollment operations, and

questioned whether a State Exchange can contract with multiple entities to fulfill the requirement

for an Exchange to operate a centralized eligibility and enrollment platform on the Exchange’s

website. Relatedly, a few commenters opposed to the proposal observed that some State

Exchanges’ eligibility and enrollment platforms are provided by private entities that serve as

web-brokers in other States; these commenters requested HHS clarify that this arrangement is

allowable.

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One commenter opposed this proposal noting it “conflicts with current regulations that

allow web brokers to enroll people in QHPs ‘in a manner that constitutes enrollment through the

Exchange.’” The commenter asserted that through the regulation’s use of the word “constitutes,”

this regulation allows State Exchanges to establish enrollment pathways that qualify as

enrollment through the Exchange, but do not actually enroll consumers through the Exchange.

Response: We are amending § 155.302(a)(1) to clarify that the State Exchange, through

the centralized eligibility and enrollment platform operated on the Exchange’s website, is the

entity responsible for making all determinations regarding eligibility for QHP coverage and

insurance affordability programs, regardless of whether an individual files an application for

enrollment in a QHP on the Exchange’s website or on a non-Exchange website operated by an

entity described under § 155.220, such as a web-broker defined at § 155.20, a DE entity per §

155.221, or a QHP issuer described under §§ 155.221 and 156.1230.

It is necessary to elucidate the Exchange’s obligation and role as the sole entity

responsible for conducting eligibility determinations to ensure accountability for eligibility

determinations, accuracy and uniformity in the eligibility determination process, and consistency

with existing regulatory requirements under 45 CFR part 155.

In response to the comment seeking clarification regarding whether State Exchanges can

contract with EDE entities for the centralized eligibility and enrollment platform on the

Exchange’s website, we point to the amendment at § 155.302(a)(1) that prohibits an Exchange

from relying on an entity described under § 155.220, such as a web-broker defined at § 155.20,

or a DE entity (which includes EDE entities) described under § 155.221, from making eligibility

determinations on behalf of the Exchange. Therefore, this regulation precludes DE and EDE

entities from entering into arrangements with an Exchange to operate its centralized eligibility

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and enrollment platform. However, §§ 155.220 and 155.221 detail the scope of the eligibility-

and enrollment-related support functions DE and EDE entities can perform on behalf of an

Exchange, through an agreement with the Exchange.

In response to the comment inquiring whether a State Exchange can contract with

multiple entities to fulfill the requirement for an Exchange to operate a centralized eligibility and

enrollment platform on the Exchange’s website, we confirm that a State Exchange can enter into

an agreement with one or more entities to operate its centralized eligibility and enrollment

platform, as allowed for under § 155.110(a), and in accordance with the regulation at §

155.302(a)(1).

As we believe the eligibility determination function is inherently a function that should

only be performed by the Exchange, the amendment to § 155.302(a)(1) clarifies that only the

private vendors or State entities that an Exchange contracts with to operate its centralized

eligibility and enrollment platform can perform this function on behalf of an Exchange, and

prohibits an Exchange from solely relying on non-Exchange entities, including a web-broker

(defined at § 155.20) or other entities under §§ 155.220 or 155.221, to make such eligibility

determinations on behalf of an Exchange.

In response to the comments observing that some State Exchanges’ eligibility and

enrollment platforms are provided by private entities that serve as web-brokers in other States,

we note that only those entities that an Exchange chooses to enter into an agreement with to

operate its centralized eligibility and enrollment platform, as allowed for under §§ 155.110(a)

and 155.302(a), can perform eligibility determinations on behalf of the Exchange. In turn, private

entities that an Exchange has contractual relationships with outside of operating its centralized

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eligibility and enrollment platform, would not be allowed to perform eligibility determinations

on behalf of the Exchange.

Finally, concerning the comment charging that this proposal conflicts with current

regulations allowing web-brokers to enroll qualified individuals in QHPs in a manner that

constitutes enrollment through the Exchange, we disagree that the requirement for an Exchange

to operate a centralized eligibility and enrollment platform on the Exchange’s website is

inconsistent with web-brokers’ ability to assist consumers with direct enrollment in QHPs, as

described in § 155.220(a)(2). A web-broker’s ability to assist consumers with their eligibility

application submission and enrollment in QHPs is separate and distinct from the eligibility

determination function reserved for the State Exchange’s centralized eligibility and enrollment

platform on the Exchange’s website (which can be delivered by a private vendor or State entity

under contract with the State Exchange). The requirement for an Exchange to operate a

centralized eligibility and enrollment platform does not preclude web-brokers’ ability to assist

consumers with enrollment in QHPs in a manner that constitutes enrollment through the State

Exchange.

While § 155.220(a)(2) allows web-brokers to enroll qualified individuals in a QHP in a

manner that constitutes enrollment through the Exchange, the web-broker’s non-Exchange

website must interface with the State Exchange’s centralized eligibility and enrollment platform

to assist consumers with direct enrollment in QHPs. The State’s centralized eligibility and

enrollment platform serves as the system of record for all effectuated enrollments in QHPs, in

accordance with § 155.400. Therefore, the amendments to §§ 155.205(b)(4) and 155.302(a)(1)

requiring that an Exchange operate a centralized eligibility and enrollment platform on the

Exchange’s website, and setting forth that the Exchange, through the centralized eligibility and

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enrollment platform, is the entity responsible for making all eligibility determinations for QHP

coverage and insurance affordability programs, are codifying existing policy and practice, and

are not limiting or negating the ability of web-brokers to enroll qualified individuals in a QHP in

a manner that constitutes enrollment through the Exchange, or otherwise restricting opportunities

for State Exchanges to expand enrollment pathways. As Exchange enrollment channels continue

to diversify, we are providing this clarification for DE entities, existing Exchanges, and States

that may seek to operate State Exchanges in the future.

Comment: A few commenters opposed the proposal requiring a State Exchange to operate

a centralized eligibility and enrollment platform on the Exchange’s website, stating that the

proposal is too vague (which could lead to inconsistent State interpretation and implementation)

or is not supported by CMS’ rationale.

Response: We disagree with these comments, as the intent of the proposal is to codify and

tie together existing regulations at 45 CFR part 155 that require an Exchange to operate a

centralized eligibility and enrollment platform on the Exchange’s website (or, for an SBE-FP, the

Federal eligibility and enrollment platform), such that the Exchange allows for the submission of

the single, streamlined application for enrollment in a QHP and insurance affordability programs

by consumers, and the Exchange performs eligibility determinations for all consumers based on

submissions of the single, streamlined application.

Further, with this proposal we are making clear that the Exchange, through the

centralized eligibility and enrollment platform operated on the Exchange’s website (or, for an

SBE-FP, the Federal eligibility and enrollment platform), is the entity responsible for making all

determinations regarding the eligibility for QHP coverage and—in coordination with State

Medicaid and CHIP agencies—insurance affordability programs, regardless of whether an

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individual files an application for enrollment in a QHP on the Exchange’s website or on a non-

Exchange website operated by an entity described under § 155.220, such as a web-broker defined

at § 155.20, or a DE entity or QHP issuer described under § 155.221.

Comment: One commenter opposed the proposal and stated that it will increase the cost

of health insurance.

Response: We disagree that this proposal will increase the cost of health insurance. The

proposal codifies and ties together existing regulatory requirements across 45 CFR part 155 that

require a State Exchange to operate a centralized eligibility and enrollment platform on the

Exchange’s website. Furthermore, all Exchanges currently provide access to a centralized

eligibility and enrollment platform and process for the consumers that they serve, and all

Exchanges also currently perform all eligibility determinations through the operation of a

centralized eligibility and enrollment platform on their websites. As the commenter did not

explain how this proposal would increase the cost of health insurance, we cannot further address

the commenter’s assertion.

Comment: Many commenters supported the proposal requiring a State Exchange to

operate a centralized eligibility and enrollment platform on the Exchange’s website and stated

that it will increase consumer protections and reduce consumer risk. Several commenters

emphasized the risk of individuals receiving inconsistent, confusing, or inaccurate results and

information if entities other than the Exchange conduct eligibility determinations, including

potential impact to consumers regarding their receipt of financial assistance, their plan choice, or

their tax liability.

Response: We agree that consumers may be harmed without this policy in place. As we

stated in the preamble, if an entity other than the Exchange conducts eligibility determinations,

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consumers might receive incorrect or inconsistent eligibility determinations, as entities other than

the Exchange may not update their systems with the same eligibility determination rules or logic

as the Exchange itself when Federal or State policies or regulations impacting eligibility for QHP

coverage and insurance affordability programs come into effect or are updated, including the

implementation and maintenance of State-specific eligibility rules and logic for Medicaid and

CHIP programs. As a result, a non-centralized eligibility system model introduces increased

program integrity risk as to the accuracy of eligibility determinations, increased risk of

inaccurate APTC payments to QHP issuers, and increased risk to consumers of potential tax

liability when filing taxes and reconciling their APTC with the PTC allowed.

Comment: Many commenters supported the proposal clarifying that a State Exchange,

through the centralized eligibility and enrollment platform operated on the Exchange’s website,

is solely responsible for making all determinations regarding consumer eligibility for QHP

coverage and insurance affordability programs. Several commenters supported codifying the

prohibition on non-Exchange entities (such as web-brokers or DE entities) rendering eligibility

determinations.

Response: As noted in the preamble, we agree that the Exchange, through the centralized

eligibility and enrollment platform operated on the Exchange’s website (or, for an SBE-FP, the

Federal eligibility and enrollment platform), is the entity responsible for making all

determinations regarding the eligibility for QHP coverage and insurance affordability programs

regardless of whether an individual files an application for enrollment in a QHP on the

Exchange’s website or on a non-Exchange website operated by an entity described under §

155.220, such as a web-broker defined at § 155.20, or a DE entity or QHP issuer described under

§ 155.221.

CMS-9895-F 194

As we believe the eligibility determination function is inherently a function that should

only be performed by the Exchange, the policy also clarifies that only the private vendors or

State entities that an Exchange contracts with to operate its centralized eligibility and enrollment

platform can perform this function on behalf of an Exchange, and prohibits an Exchange from

solely relying on non-Exchange entities, including a web-broker (defined at § 155.20) or other

entities under §§ 155.220 or 155.221, to make such eligibility determinations on behalf of an

Exchange.

Comment: Several commenters stated that the proposed policy will make enrollment into

coverage easier, more streamlined, or more efficient for consumers, will ensure transparency,

accountability, and accuracy for applicants, or will help reduce administrative barriers for

individuals seeking coverage through an Exchange.

Response: We agree that the proposal requiring a State Exchange to operate a centralized

eligibility and enrollment platform on the Exchange’s website will support a more accurate and

efficient eligibility determination and enrollment experience for applicants and reduce

administrative barriers for consumers pursuing coverage through an Exchange. As noted in the

preamble, an Exchange must maintain an up-to-date website that allows consumers to receive

eligibility determinations for QHPs and insurance affordability programs. This proposal codifies

existing policy and practices and helps set clear expectations for current Exchanges and States

that may seek to operate State Exchanges in the future.

Comment: Several commenters supported the proposal requiring a State Exchange to

operate a centralized eligibility and enrollment platform on the Exchange’s website and noted

that it would provide applicants with flexibility to continue applying for, and enrolling in,

coverage through the centralized eligibility and enrollment platform on an Exchange’s website, if

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they choose to withdraw an application initiated on the website of a non-Exchange entity. A few

commenters observed that this flexibility is consistent with the “no wrong door” application

process promoted by the ACA.

Response: To ensure that the requirements of §§ 155.220(c)(3)(ii)(A) and (i)(F), and

155.205(b) are fulfilled, we agree it is important that Exchanges allow a consumer to continue

the application process through the centralized eligibility and enrollment platform operated on

the Exchange’s own website should the consumer choose to withdraw from the application

process that was initiated on a web-broker’s non-Exchange website (or, if the Exchange is an

SBE-FP, allow the consumer to continue the application process through the website of the

Federal platform). We also agree that by facilitating multiple pathways through which consumers

can submit a single, streamlined application for QHP coverage and insurance affordability

programs—whether through the State Exchange’s centralized eligibility and enrollment platform

on the Exchange’s website, through non-Exchange websites hosted by web-brokers and DE

entities (as allowed by the State Exchange), or through Medicaid and CHIP programs operating

eligibility systems that aren’t integrated with the State Exchange—this flexibility around

application pathways for enrollment in QHP coverage and insurance affordability programs

aligns with the ACA’s “no wrong door” principle.

Comment: A few commenters supported the proposed policy requiring a State Exchange

to operate a centralized eligibility and enrollment platform on the Exchange’s website and stated

that it would make it easier for State Exchanges to monitor and evaluate Exchange efficiency and

effectiveness, as well as implement and maintain State-specific Medicaid and CHIP program

rules.

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Response: We agree that a State Exchange’s centralized eligibility and enrollment

platform, through which the Exchange conducts all eligibility determinations and maintains all

records of effectuated QHP enrollments, should facilitate State oversight and review of

Exchange eligibility and enrollment efficacy. We also agree that an Exchange’s centralized

eligibility and enrollment platform should enable timely system updates reflecting changes to

State-specific eligibility rules and logic for the Medicaid and CHIP programs.

6. Ability of States to Permit Agents and Brokers and Web-Brokers to Assist Qualified

Individuals, Qualified Employers, or Qualified Employees Enrolling in QHPs (§ 155.220(h))

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82556 and 82557), we proposed to amend §§ 155.220(h)(2) and (3) by deleting the current

references to “the HHS reconsideration entity” and replacing them with “the CMS

Administrator” and by specifying that, instead of the HHS reconsideration entity, the CMS

Administrator, who is a principal officer, would be the entity responsible for handling these

reconsideration decisions. Agents, brokers, and web-brokers whose Exchange agreement(s) to

participate in the FFEs or SBE-FPs have been terminated for cause would continue to have the

ability to request a reconsideration of such action in the manner and form established by HHS by

requesting a reconsideration within 30 calendar days of the date of the written termination notice

from HHS. We proposed that the request for reconsideration would be made to the CMS

Administrator. In the proposed rule, we stated this proposal would improve transparency by

specifying who would review reconsideration requests under § 155.220(h).

Exchange agreement suspensions and terminations play a critical role in stopping

potentially fraudulent enrollments or other fraudulent behavior in the FFEs and SBE-FPs.

Currently, § 155.220(g) establishes the framework for suspension and termination of an agent’s,

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broker’s, or web-broker’s Exchange agreement(s) for cause in four instances.

132

First, §

155.220(g)(1) allows HHS to terminate an agent’s, broker’s, or web-broker’s Exchange

agreement(s) when there is a specific finding of noncompliance or pattern of noncompliance that

is sufficiently severe. Second, § 155.220(g)(3)(ii) enables HHS to terminate an agent’s or

broker’s Exchange agreement(s) when an agent or broker fails to maintain the appropriate

license in every State in which the agent or broker actively assists consumers with applying for

APTC and CSRs or with enrolling in QHPs through the FFEs and SBE-FPs. Third, HHS will

terminate an agent’s, broker’s, or web-broker’s Exchange agreement(s) under § 155.220(g)(5)(ii)

when there is a finding or determination by a Federal or State entity that an agent, broker, or

web-broker engaged in fraud or abusive conduct that may result in imminent or ongoing

consumer harm using personally identifiable information (PII) of Exchange enrollees or

applicants or in connection with an Exchange enrollment or application. Fourth, under §

155.220(g)(5)(i)(B), HHS may terminate an agent’s, broker’s, or web-broker’s Exchange

agreement(s) following a suspension of the agreement(s) under § 155.220(g)(5)(i)(A) if the

agent, broker, or web-broker submitted rebuttal evidence that does not persuade HHS to lift the

suspension, or if the agent, broker, or web-broker fails to submit rebuttal evidence during the

suspension period.

If an agent’s, broker’s, or web-broker’s Exchange agreement(s) has been terminated for

cause, under § 155.220(h)(1), the agent, broker, or web-broker can request reconsideration of

such action in the manner and form established by HHS. The agent, broker, or web-broker must

132

Section 155.220(f) establishes the framework for an agent, broker, or web-broker to terminate an agent’s,

broker’s, or web-broker’s Exchange agreement(s) with HHS. We did not propose any changes with respect to the

terminations under § 155.220(f). These terminations are not eligible for reconsideration under § 155.220(h) because

they are agent, broker, or web-broker initiated actions.

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submit the reconsideration request to the HHS reconsideration entity within 30 calendar days of

the date of the written termination notice from HHS.

133

Current regulations also require the HHS

reconsideration entity to notify the agent, broker, or web-broker of its decision, in writing, within

60 calendar days of the date it receives the request for reconsideration.

134

Currently, §

155.220(h)(3) further provides that this decision constitutes HHS’ final determination.

The current framework in § 155.220(h) does not define or identify “the HHS

reconsideration entity” responsible for making these decisions. As noted earlier in this final rule,

we proposed revising §§ 155.220(h)(2) and (3) by deleting the existing references to “the HHS

reconsideration entity” and replacing them with “the CMS Administrator.” This policy would

ensure that authority to review requests for reconsideration of decisions to terminate an agent’s,

brokers, or web-broker’s Exchange agreement(s) for cause are vested in a principal officer.

We sought comments on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this proposal without modification. We summarize

and respond to public comments we received on this proposal below.

Comment: A few commenters expressed their support for the proposal by stating their

approval of the clarification and improved transparency it will provide.

Response: We appreciate these comments in support of the amendments to § 155.220(h).

As previously noted, this amendment specifies that agents, brokers, and web-brokers assisting

consumers on the FFEs and SBE-FPs can submit a request to the CMS Administrator to

reconsider HHS’ decision to terminate their Exchange agreement(s) for cause.

133

45 CFR 155.220(h)(2).

134

45 CFR 155.220(h)(3).

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7. Adding and Amending Language to Ensure Web-brokers Operating in State Exchanges Meet

Certain HHS Standards Applicable in the FFEs and SBE-FPs (§ 155.220)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82557), we proposed to amend § 155.220 to apply certain existing HHS standards for

Exchanges that use the Federal platform that apply to web-brokers

135

assisting the FFEs’ and

SBE-FPs’

136

consumers with enrolling in QHPs and/or assisting consumers with applying for

APTC/CSRs in State Exchanges, for both the State Exchange’s Individual Exchange and SHOP.

In the proposed rule, we stated our proposals would ensure that minimum HHS standards

governing web-broker non-Exchange website display of standardized QHP comparative

information, disclaimer language, information on eligibility for APTC/CSRs, operational

readiness, standards of conduct, and access by web-broker downstream agents and brokers apply

to web-brokers across all Exchanges.

137

We believe that extending these standards across all

Exchanges, to newly apply to State Exchanges, is important given the increased interest from

State Exchanges in using web-brokers to assist consumers with enrollment in QHPs offered

through Exchanges to maximize enrollment opportunities. The ability of consumers and

applicants to have consistent, reliable information from web-brokers who, to the extent permitted

by the State and the applicable Exchange, assist consumers with enrolling and applying for

135

Web-broker is defined at § 155.20 as “an individual agent or broker, group of agents or brokers, or business

entity registered with an Exchange under § 155.220(d)(1) that develops and hosts a non-Exchange website that

interfaces with an Exchange to assist consumers with direct enrollment in QHPs offered through the Exchange as

described in § 155.220(c)(3) or § 155.221. The term also includes an agent or broker direct enrollment technology

provider.”

136

See § 155.220(l).

137

The amendments to § 155.220 we are finalizing will not impact how agents, brokers, or web-brokers may assist

consumers and applicants in SBE-FP States. Section 155.220(l) currently provides that an agent, broker, or web-

broker who enrolls qualified individuals, qualified employers, or qualified employees in coverage in a manner that

constitutes enrollment through an SBE-FP or assists individual market consumers with submission of applications

for APTC and CSRs through an SBE-FP, must comply with all applicable FFE standards in § 155.220. We did not

propose and are not finalizing any changes to this existing framework for agents, brokers, or web-brokers who

provide assistance in SBE-FP States.

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QHPs offered on the Exchange, with or without APTC and CSRs, in a manner that constitutes

enrollment through the Exchange

138

is an important consumer safeguard, particularly given that

web-brokers may operate across Exchange models. These proposals are intended to ensure that

certain HHS standards are extended to protect State Exchange consumers as minimum

requirements while also providing State Exchanges with continued flexibility and discretion to

decide whether and how to utilize web-brokers to assist State Exchange consumers and

applicants with enrolling in QHPs and applying for APTC/CSRs. Finally, these proposals align

with other proposed changes to extend certain existing HHS standards at § 155.221 that currently

apply to DE entities

139

assisting the FFEs’ and SBE-FPs’ consumers and applicants with direct

enrollment in QHPs and applying for APTC/CSRs to also apply in State Exchanges. We

proposed that these proposed changes would be effective on the date of publication of this final

rule.

Section 1312(e) of the ACA provides that the HHS Secretary shall establish procedures

under which a State may allow agents, brokers, and web-brokers to enroll individuals and small

employers in QHPs offered through an Exchange and to assist individuals in applying for

APTC/CSRs for QHPs sold through an Exchange.

The Secretary also has authority under section

1321(a) of the ACA to promulgate regulations with respect to the establishment and operation of

Exchanges, the offering of QHPs through such Exchanges, and such other requirements as the

Secretary determines appropriate.

140

HHS previously leveraged these authorities to establish the

138

See 77 FR 18334 through 18336.

139

DE entities permitted to participate in the FFEs and SBE-FPs include, to the extent permitted by applicable State

law: (1) QHP issuers that meet the applicable requirements in §§ 155.221 and 156.1230, and (2) web-brokers that

meet the applicable requirements in §§ 155.220 and 155.221. 45 CFR 155.221(a).

140

Section 1321(a)(1)(A), (B), and (D) of the ACA.

CMS-9895-F 201

existing agent, broker, and web-broker standards applicable in FFE and SBE-FP States codified

in § 155.220.

141

In new paragraph (n), we proposed to apply the web-broker standardized QHP

comparative information and the accompanying Enrollment Support disclaimer requirements in §

155.220(c)(3)(i)(A) to web-brokers operating in State Exchanges, and consequently to these

State Exchanges. Consistent with § 155.220(c)(3)(i)(A)(1) through (6), web-broker non-

Exchange websites used to complete the QHP selection must disclose and display the

standardized comparative QHP information provided by the Exchange or directly by QHP

issuers, consistent with the requirements of § 155.205(c) for all QHPs, including Qualified

Dental Plans (QDPs),

142

offered through the Exchange. The standardized comparative

information on each available QHP that must be displayed by the web-broker on its non-

Exchange website is the following information provided by the Exchange or directly by QHP

issuers: (1) premium and cost-sharing information (total and net premium based on APTC and

CSR, if applicable);

143

(2) the summary of benefits and coverage; (3) identification of whether

the QHP is a bronze, silver, gold or platinum level plan, or a catastrophic plan; (4) the results of

the enrollee satisfaction survey; (5) quality ratings assigned by HHS; and (6) the provider

directory made available to the Exchange. The results of the enrollee satisfaction survey should

141

See 77 FR 18444, as amended at 78 FR 15533; 78 FR 54134; 79 FR 13837; 81 FR 12338; 81 FR 94176; 84 FR

17563; 85 FR 37248; 86 FR 24288; 87 FR 27388; and 88 FR 25917.

142

With some limited exceptions, QDPs are considered a type of QHP. See 77 FR 18315. Web-brokers assisting

consumers in the FFEs and SBE-FPs are expected to follow the same requirements for QDPs as for QHPs, including

display of all applicable QDPs offered through the Exchange and all available information specific to each QDP on

their websites. However, because it is not possible to enroll in QDPs through DE unless also enrolling in medical

QHPs, web-brokers are permitted to modify their QDP displays accordingly (for example, by displaying QDPs after

medical QHPs to ensure a consumer has first selected a medical QHP). See CMS. (2023, July 12). Federally-

facilitated Exchange (FFE) Enrollment Manual. CMS. Section 4.3, p.47 and Section 4.4.2, p. 52.

https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf. Under this proposal, these same

standards governing QDPs would apply to web-brokers in State Exchanges.

143

See CMS. (2023, July 12). Federally-facilitated Exchange (FFE) Enrollment Manual. CMS. Section 4.4.2, p. 52.

https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.

CMS-9895-F 202

be displayed in accordance with instructions in the CMS Quality Rating Information Bulletin.

144

As described in the CMS Quality Rating Information Bulletin, State Exchanges already have

some flexibility to customize the display of quality ratings assigned by HHS for their respective

QHPs.

145

For example, State Exchanges can make some State-specific customizations, such as to

incorporate additional State or local quality information or to modify the display names of the

quality ratings assigned by HHS. Under this proposal, web-brokers in State Exchanges should

use the same consumer-facing labels for the quality ratings that HHS displays on HealthCare.gov

(that is, “Overall Rating,” “Medical Care,” “Member Experience,” and “Plan Administration”)

unless the State Exchange modified the display names for these labels. If the State Exchange has

modified the display names, web-brokers operating in State Exchanges should use the display

names used on the State Exchange website. Web-brokers operating in State Exchanges should

also align their display of the quality ratings to reflect any permitted State-specific

customizations, such as the addition of State or local quality information. Additionally,

consistent with the approach for display of quality ratings by web-brokers in the FFEs and SBE-

FPs and by State Exchanges, if a QHP was not eligible to receive a rating or did not receive a

rating for other reasons, web-brokers participating in State Exchanges would need to display

“New plan – Not Rated” or “Not Rated” in place of the quality ratings.

146

When displaying the

quality rating assigned by HHS on their non-Exchange websites, web-brokers operating in State

Exchanges would be required to prominently display the disclaimer language specified in the

144

See CMS. (2023, May 2). Quality Rating Information Bulletin. CMS. Section III, p. 3.

https://www.cms.gov/files/document/py2024-qrs-display-bulletin.pdf. See Exchange and Insurance Market Standards

for 2015 and Beyond; Final Rule, 79 FR 30240 at 30310 – 30311 (May 27, 2014).

145

§§ 155.1400 and 155.1405. Also see 85 FR 29214 through 29216.

146

See CMS. (2023, May 2). Quality Rating Information Bulletin. CMS. Section III, p. 3.

https://www.cms.gov/files/document/py2024-qrs-display-bulletin.pdf.

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CMS Quality Rating Information Bulletin, which mirrors the language that web-brokers in the

FFEs and SBE-FPs must display on their non-Exchange websites.

147

State Exchanges are also currently required to display the quality ratings assigned by

HHS and the results of the enrollee satisfaction survey, in the form and manner specified by the

Secretary.

148

This includes prominently displaying the same disclaimer language on the State

Exchange website or a static website when displaying the quality ratings assigned by HHS and

the results of the enrollee satisfaction survey.

149

Web-brokers would be able to access QHP

quality rating information for a State Exchange they are operating in, including the quality

ratings assigned by HHS and enrollee satisfaction survey results,

150

from the State Exchange.

This list of standardized QHP comparative information that web-brokers must disclose

and display on their non-Exchange websites used to complete QHP selection in FFE and SBE-FP

States mirrors the information that Exchanges are required to disclose and display on their

respective websites.

151

This approach ensures consumers have access to the same QHP

comparative information whether they elect to enroll through the Exchange’s website or through

a web-broker’s non-Exchange website. We proposed to extend these same standardized

comparative information requirements, as minimum HHS standards, that would need to be met

by web-brokers participating in State Exchanges and consequently to these State Exchanges. We

similarly proposed to extend the Enrollment Support disclaimer referenced in §

147

Id.

148

See §§ 155.1400 and 155.1405. Also see § 155.205(b)(1)(iv) and (v). Exchanges can satisfy the requirement to

display the enrollee satisfaction survey results by displaying the quality ratings assigned by HHS (which incorporate

member experience data from the survey). See 79 FR 30310 through 30311.

149

See CMS. (2023, May 2). Quality Rating Information Bulletin. CMS. Section III, p. 3.

https://www.cms.gov/files/document/py2024-qrs-display-bulletin.pdf.

150

Consistent with the approach for Exchanges, for purposes of compliance with the HHS minimum standards, web-

brokers would be able to satisfy the requirement to display the enrollee satisfaction survey results by displaying the

quality ratings assigned by HHS (which incorporate member experience data from the survey).

151

See § 155.205(b)(1). Also see 87 FR 642 (explaining that “(i)ncluding this [list of] information within § 155.220,

instead of through a cross-reference to § 155.205(b)(1), would provide better clarity and ease of reference…”).

CMS-9895-F 204

155.220(c)(3)(i)(A) beyond FFE and SBE-FP States to also extend to web-brokers participating

in State Exchanges and consequently to these State Exchanges. The goal of this disclaimer is to

ensure consumers are clearly informed about any enrollment limitations on a web-broker’s non-

Exchange website and similarly have clear instructions for accessing the Exchange website if

they wish to enroll in those QHPs. In particular, when a website of a web-broker is used in FFE

or SBE-FP States to complete the QHP selection, but it does not support enrollment for a

QHP,

152

the web-broker’s website must prominently display the standardized Enrollment

Support disclaimer

153

provided by HHS, as follows:

“(Name of Company) does not support enrollment in this Qualified Health Plan at this

time. To enroll in this Qualified Health Plan, visit the Health Insurance Marketplace®

154

website at HealthCare.gov.”

To prominently display the disclaimer, it must be written in a font size no smaller than

the majority of text on the website page and must be noticeable in the context of the website by

(for example) using a font color that contrasts with the background of the website page.

155

addition, the Enrollment Support disclaimer must appear on the web-broker’s non-Exchange

website in close proximity to where the QHP information is displayed if the web-broker does not

support enrollment in any such QHP, so it is noticeable to the consumer.

156

Web-brokers can

152

A web-broker’s non-Exchange website may not support enrollment in a QHP if a web-broker does not have an

appointment with a QHP issuer, and therefore, is not permitted under State law to enroll consumers in coverage

offered by that issuer.

153

CMS. (2023, July 12). Federally-facilitated Exchange (FFE) Enrollment Manual. CMS. Section 4.4.2, p. 52.

https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.

154

Health Insurance Marketplace® is a registered service mark of the HHS.

155

See 78 FR 27260. Also see CMS. (2023, July 12). Federally-facilitated Exchange (FFE) Enrollment Manual.

CMS. Section 4.4.1, p. 49-50 and Section 4.4.2, p. 54-55. https://www.cms.gov/files/document/ffe-enrollment-

manual-2023-5cr-071323.pdf.

156

See 78 FR 27260. Also see CMS. (2023, July 12). Federally-facilitated Exchange (FFE) Enrollment Manual.

CMS. Section 4.4.2, p. 52. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.

CMS-9895-F 205

also meet this prominent display requirement if a visual cue is displayed where the enrollment

button (or another similar mechanism) would otherwise appear for a particular QHP that clearly

directs the consumer to the required disclaimer on the same website page or otherwise displays

the required disclaimer (for example, in a pop-up bubble that appears while hovering over the

visual cue).

157

We proposed to require web-brokers assisting consumers in State Exchanges to

comply with these same requirements, while also providing these State Exchanges some

flexibility regarding the disclaimer language required to be displayed by their web-brokers.

For State flexibility, under this proposal, the HHS-provided disclaimer language must be

used as a minimum starting point, but State Exchanges may add State-specific language to the

Enrollment Support disclaimer, provided the additional language does not conflict with the HHS-

provided standardized disclaimer. This would permit a State Exchange to replace references and

links to the Health Insurance Marketplace

and HealthCare.gov in the HHS-provided disclaimer

language with the appropriate reference or links to the State Exchange’s website for the

Enrollment Support disclaimer that web-brokers assisting consumers in the State Exchange

would be required to prominently display on their non-Exchange websites. Additionally, State

Exchanges may require web-brokers operating in their State to translate the disclaimer text into

languages appropriate for the State as this type of additional requirement would not conflict with

the HHS-provided disclaimer language or minimum standards. As with all informational

materials, standard plain language practice is to write at or near a fourth-grade reading level and

not to exceed an eighth-grade reading level. We explained that we expect that any additional

State-specific customizations to this disclaimer would be written accordingly, and that we would

157

Id.

CMS-9895-F 206

be available to provide technical assistance to State Exchanges that want to add State-specific

language. We proposed to codify this State flexibility at new paragraph (n)(1).

In addition, consistent with § 155.220(c)(3)(i)(G), when used to assist FFE consumers,

the web-broker’s non-Exchange website must also prominently display a standardized

disclaimer

158

provided by HHS, referred to as the General non-FFE disclaimer, that informs

consumers and applicants that the web-broker’s website is not the Exchange website, notes that

the web-broker’s non-Exchange website may not support enrollment in all QHPs, and provides a

web link to the Exchange’s website. This same requirement extends beyond the FFEs and also

applies to SBE-FPs today.

159

In new paragraph (n), we proposed to extend this disclaimer

requirement to also apply to web-brokers operating in State Exchanges, and consequently to

these State Exchanges, while providing these State Exchanges some flexibility to add State-

specific language to this disclaimer, provided the additional language does not conflict with the

HHS-provided disclaimer language. We proposed to codify this State flexibility in new

paragraph (n)(1). Similar to the adoption of this disclaimer for consumers in an FFE or an SBE-

FP,

160

we stated in the proposed rule that we continue to believe this additional standard is in the

best interest of consumers, as it would help them distinguish between the Exchange website and

web-broker non-Exchange websites. We therefore also identified it as an important baseline

consumer protection that should extend to consumers across all Exchanges.

The General non-FFE disclaimer provided by HHS that must be prominently displayed

by web-brokers participating in the FFEs and SBE-FPs reads:

158

CMS. (2023, July 12). Federally-facilitated Exchange (FFE) Enrollment Manual. CMS. Section 4.4.2, p. 54.

https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.

159

45 CFR 155.220(l).

160

78 FR 37046.

CMS-9895-F 207

“Attention: This website is operated by (Name of Company) and is not the Health

Insurance Marketplace® website. In offering this website, (Name of Company) is

required to comply with all applicable Federal law, including the standards established

under 45 CFR 155.220(c) and (d) and standards established under 45 CFR 155.260 to

protect the privacy and security of personally identifiable information. This website may

not support enrollment in all Qualified Health Plans (QHPs) being offered in your State

through the Health Insurance Marketplace® website. For enrollment support in all

available QHP options in your State, go to the Health Insurance Marketplace® website at

HealthCare.gov.

Also, you should visit the Health Insurance Marketplace® website at HealthCare.gov if:

● You want to select a catastrophic health plan. (This only needs to be included if the

web-broker does not offer catastrophic plans.)

● You want to enroll members of your household in separate QHPs. (This only needs to

be included if the web-broker does not allow multiple enrollment groups for its Classic DE

pathway; note that EDE Entities are required to support multiple enrollment groups.)

● You want to enroll members of your household in dental coverage. The plans offered

here do not offer pediatric dental coverage and you want to choose a QHP offered by a different

issuer that covers pediatric dental services or a separate dental plan with pediatric coverage.

(This only needs to be included if the web-broker does not offer assistance with enrollment in

adult coverage or pediatric dental coverage.)

(Name of web-broker’s website) offers the opportunity to enroll in either QHPs or off-

Marketplace coverage. Please visit HealthCare.gov for information on the benefits of

enrolling in a QHP. Off-Marketplace coverage is not eligible for the cost savings offered

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for coverage through the Marketplaces. (This final paragraph must be displayed if the

web-broker offers consumers assistance with off-Marketplace coverage options.)”

To prominently display this disclaimer, it must be written in a font size no smaller than

the majority of text on the website page and must be noticeable in the context of the website by

(for example) using a font color that contrasts with the background of the website page.

161

addition, the disclaimer must be prominently displayed on both the initial user landing page and

on the landing page displaying QHP options that appear before the applicant makes a decision to

purchase coverage (QHP selection page). In FFE and SBE-FP States, the disclaimer must use the

exact language provided by HHS, must include a functioning web link to HealthCare.gov, and

must be viewable without requiring the user to select or click on an additional link. The

disclaimer must also be displayed in the same non-English language as any language(s) the web-

broker maintains screens for on its website.

162

The web-broker may change the font color, size,

or graphic context of the information to ensure that it is noticeable to the user in the context of its

website or the other written material. We proposed to require web-brokers assisting consumers in

State Exchanges must comply with these same requirements for prominent display of this

disclaimer.

Consistent with the policy for the extension of the Enrollment Support disclaimer to State

Exchanges and their web-brokers, under this proposal, the HHS-provided disclaimer language

must be used as a minimum starting point, but State Exchanges may add State-specific language,

provided the additional language does not conflict with the HHS-provided standardized

disclaimer.

161

See 78 FR 27260. Also see CMS. (2023, July 12). Federally-facilitated Exchange (FFE) Enrollment Manual.

CMS. Section 4.4.1, p. 49-50 and Section 4.4.2, p. 54-55. https://www.cms.gov/files/document/ffe-enrollment-

manual-2023-5cr-071323.pdf.

162

See 45 CFR 155.205(c)(2)(iv)(C).

CMS-9895-F 209

This would permit State Exchanges to replace references and links to the Health

Insurance Marketplace

and HealthCare.gov in the HHS-provided disclaimer language with the

appropriate reference or links to the State Exchange’s website for the disclaimer under

§ 155.220(c)(3)(i)(G) that web-brokers assisting consumers in State Exchanges would be

required to prominently display on their non-Exchange websites. Additionally, while web-

brokers assisting consumers in State Exchanges would be required to specify in their disclaimer

that they are subject to applicable Federal requirements, under this policy, we anticipate State

Exchanges would leverage this flexibility to direct their web-brokers to omit citations to Federal

requirements included in the HHS-provided language to the extent those provisions do not apply,

such as § 155.220(d). State Exchanges would also be permitted under this proposal to modify the

disclaimer required under § 155.220(c)(3)(i)(G) to specify applicable provisions of State law.

Further, to the extent that web-brokers in State Exchanges may offer off-Exchange coverage

options, we would require them to include the HHS-provided disclaimer language that

distinguishes between such coverage options and QHPs sold through the Exchange, noting in

particular that such off-Exchange coverage options are not eligible for cost savings offered with

a QHP sold through the Exchange, and providing a link to the State Exchange website for more

information. Similar to the approach adopted for web-brokers participating in FFE and SBE-FP

States, bracketed language included in the HHS-provided disclaimer language would not be

required for web-brokers assisting consumers in State Exchanges to comply with the HHS

minimum standards unless applicable or otherwise required by the State Exchange. State

Exchanges could also require web-brokers operating in their State to translate the disclaimer text

required under § 155.220(c)(3)(i)(G) into languages appropriate for the State as this type of

additional requirement would not conflict with the HHS-provided disclaimer language or

CMS-9895-F 210

minimum standards. As with all informational materials, standard plain language practice is to

write at or near a fourth-grade reading level and not to exceed an eighth-grade reading level. We

explained that HHS expects that any State-specific additions or customizations to this disclaimer

would be written accordingly, and that we would be available to provide technical assistance to

State Exchanges that want to add State-specific language to this disclaimer.

In new paragraph (n), we also proposed to extend the requirement in §

155.220(c)(3)(i)(I), which requires the prominent display by web-brokers of the information

provided by HHS pertaining to a consumer’s eligibility for APTC or CSRs on the web-broker’s

non-Exchange website, to web-brokers operating in State Exchanges and, consequently, to these

State Exchanges. We established this requirement for web-brokers in FFE and SBE-FP States to

increase the likelihood that consumers understand their potential eligibility for APTC and CSRs

and potential liability for excess APTC repayment and can factor those determinations into their

QHP selection and the amount of APTC they elect to take.

163

We identified this as another

important consumer protection that should be part of the HHS minimum web-broker standards in

§ 155.220 that also extends to web-brokers in State Exchanges. Consistent with the proposals

described above to extend the requirements at § 155.220(c)(3)(i)(A) and (G), we proposed to also

extend the display obligations in § 155.220(c)(3)(i)(I) to apply to web-brokers in State

Exchanges. As such, to prominently display this information, it must appear in a font size no

smaller than the majority of text on the website page and must be noticeable in the context of the

website by (for example) using a font color that contrasts with the background of the website

page.

164

We similarly proposed to require web-brokers in State Exchanges to display information

163

81 FR 61499.

164

See 78 FR 27260. Also see CMS. (2023, July 12). Federally-facilitated Exchange (FFE) Enrollment Manual.

CMS. Section 4.4.1, p. 49-50 and Section 4.4.2, p. 54-55. https://www.cms.gov/files/document/ffe-enrollment-

manual-2023-5cr-071323.pdf.

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provided by, and as specified by, the State Exchange regarding a consumer's eligibility for APTC

or CSRs. Additionally, we proposed flexibility in how consumer eligibility information for

APTC or CSRs is displayed on websites by web-brokers in State Exchanges, at the direction of

the State Exchange on the display of that information. This flexibility is intended to provide State

Exchanges the ability to define how consumer education information about the State Exchanges,

including the consumer eligibility information for APTC or CSRs, is customized and presented

on their web-brokers’ websites. For example, we recognize that State Exchanges may wish to

require their web-brokers include additional consumer educational information or State-specific

content to meet the needs of their consumers and applicants. We explained that we believe

allowing the flexibility for State Exchanges and their web-brokers to customize the consumer

eligibility information for APTC or CSRs that must be prominently displayed on the web-

broker’s non-Exchange website would provide a necessary baseline. More specifically, meeting

these standards would provide consistency for all Exchange consumers receiving assistance from

web-brokers through their non-Exchange websites and would ensure that all Exchange

consumers are provided accurate and sufficient information on potential eligibility for APTC and

CSRs and the potential liability for excess APTC repayment, whether they apply and enroll for

coverage through the applicable Exchange’s website or through a web-broker’s non-Exchange

website. We proposed to codify this State flexibility in new proposed paragraph (n)(1).

In the proposed rule (88 FR 82560 and 82561), we also proposed to add new §

155.220(c)(4)(iii) to extend certain downstream agent and broker requirements at §

155.220(c)(4)(i) that currently apply to web-brokers in FFE and SBE-FP States and govern the

use of the web-broker’s non-Exchange website by other agents or brokers assisting Exchange

consumers to also apply to web-brokers, and their downstream agents and brokers, in States with

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State Exchanges, and consequently to these State Exchanges. Under the proposed new provision,

web-brokers that permit other agents or brokers, through a contract or other arrangement, to use

the web-broker’s non-Exchange website to help an applicant or enrollee complete a QHP

selection or complete the Exchange eligibility application would be required to meet the

standards at § 155.220(c)(4)(i)(A), (B), (D), and (F) when assisting consumers in States with a

State Exchange. To extend this framework to also apply in State Exchanges, we proposed to

capture in new § 155.220(c)(4)(iii) that all references to “HHS” and “Federally-facilitated

Exchange” in § 155.220(c)(4)(i)(A), (B), (D), and (F) would be understood to mean and be

replaced with a reference to the applicable State Exchange.

The goal of the downstream agent and broker framework codified in § 155.220(c)(4)(i) is

to ensure that agents or brokers who utilize a web-broker’s non-Exchange website to help

applicants complete a QHP selection or complete the Exchange eligibility application comply

with necessary safeguards related to transparency, oversight, and consumer support. It ensures

appropriate oversight by the web-broker and allows for closer monitoring by the applicable

Exchange. In the proposed rule (88 FR 82561), we explained that we believe the extension of the

identified HHS minimum standards to State Exchanges and their web-brokers is especially

important since some agents, brokers, and web-brokers operate in multiple States and would

benefit from a standardized framework and set of requirements.

As part of the State Exchanges’ oversight of the use of web-broker non-Exchange

websites, we also encouraged State Exchanges to adopt a temporary suspension framework

similar to § 155.220(c)(4)(ii) that applies in FFE and SBE-FP States. This provision permits HHS

to temporarily suspend the ability of a web-broker to make its non-Exchange website available to

its downstream agents and brokers to transact information with HHS if HHS discovers a security

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or privacy incident or breach. The suspension extends for the period in which HHS begins to

conduct an investigation and until the incident or breach is remedied to HHS’ satisfaction. It is

another important feature of HHS’ oversight of the use of web-broker non-Exchange websites in

FFE and SBE-FP States that protects consumers data and safeguards Exchange operations and

systems. State Exchanges that choose to permit web-brokers to host non-Exchange websites to

assist consumers with QHP selections and submission of Exchange eligibility applications should

consider adoption of similar measures.

In the proposed rule (88 FR 82561 and 82562), we proposed to add new paragraph (n)(2)

to extend web-broker operational readiness requirements to State Exchanges and their web-

brokers. Under this proposal, web-brokers operating in State Exchanges would be required to

demonstrate operational readiness to the applicable State Exchange prior to the web-broker’s

website being used to complete an Exchange eligibility application or a QHP selection. The

standards under § 155.220(c)(6) applicable to operational readiness reviews performed by HHS

of web-brokers’ non-Exchange websites used to assist the FFEs’ and SBE-FPs’ consumers to

apply and enroll in QHP coverage through the Exchange, with or without APTC and CSRs, is a

critical part of the oversight framework for HHS’ Direct Enrollment (DE) program (including

both Classic DE and Enhanced Direct Enrollment (EDE)).

In the 2018 Payment Notice final rule, we adopted rules to capture operational readiness

requirements applicable to web-brokers that host non-Exchange websites to complete QHP

selection.

165

In the 2020 Payment Notice final rule, we finalized amendments that moved the

parallel operational readiness requirements for web-brokers and QHP issuers to § 155.221(b)(4),

accounting for the fact that DE entities participating in EDE in the FFEs and SBE-FPs host the

165

81 FR 94120.

CMS-9895-F 214

Eligibility application in addition to QHP selection.

166

In the 2022 Payment Notice final rule, we

finalized amendments to codify more detail describing the operational readiness reviews

applicable to web-brokers participating in FFE and SBE-FP States by adding a new §

155.220(c)(6).

167

We identified these operational readiness requirements as necessary safeguards

to protect consumer data and the efficient and effective operation of the Exchange while also

supporting innovation and the creation of additional approved pathways for FFE and SBE-FP

consumers to enroll in QHP coverage in a manner that constitutes enrollment through the

Exchange.

As part of the proposal to extend an operational readiness review requirement to State

Exchanges and their web-brokers, we proposed in new paragraph (n)(2) to require these State

Exchanges to establish the form and manner for their web-brokers to demonstrate operational

readiness, which may include submission or completion of the same items addressed in §

155.220(c)(6)(i)-(v) to the State Exchanges, in the form and manner specified by the applicable

State Exchanges. These standards, which apply in FFE and SBE-FP States, ensure operational

readiness and compliance with all applicable requirements prior to the web-broker’s non-

Exchange website being used to complete Exchange eligibility application or a QHP selection.

They make sure consumers and applicants are not able to enroll in Exchange coverage nor

submit an Exchange application via a web-broker’s non-Exchange website that is not

operationally ready. Websites that have not been tested to see if they are operationally ready may

not provide consumers and applicants with proper eligibility determinations or may have security

flaws that could make a breach involving consumer PII more likely. Mandating that web-brokers

participating in State Exchanges meet standards set by the applicable State Exchange to

166

84 FR 17522 through 17525.

167

86 FR 24208 through 24209.

CMS-9895-F 215

demonstrate operational readiness helps reduce this risk in all Exchanges. In the proposed rule

(88 FR 82562), we encouraged State Exchanges to adopt operational readiness review standards

consistent with the requirements captured in § 155.220(c)(6)(i)-(v) and to also consider

leveraging the audits that web-brokers use to demonstrate compliance with the operational

readiness review requirements applicable in FFE and SBE-FP States. Such an approach would

promote standardization across Exchanges in terms of operational readiness requirements

applicable for web-brokers while building in flexibility for State Exchanges. We explained that

we recognize it is important to provide State Exchanges flexibility to tailor the operational

readiness review process to best serve their operational and business needs. For example, State

Exchanges may have the need to structure their operational readiness reviews to emphasize or

prioritize different web-broker functionalities that meet State-specific needs and rules. Therefore,

we proposed the requirement that State Exchanges must establish operational readiness

requirements for their web-brokers to demonstrate compliance with applicable requirements and

technological readiness prior to the web-broker’s website being used to complete an Exchange

eligibility application or a QHP selection, while providing these State Exchanges with flexibility

to define the contours of those requirements. We proposed to capture at the end of the new

paragraph (n) the accompanying proposed requirement that web-brokers in States with State

Exchanges comply with the applicable State Exchanges’ operational readiness standards under

paragraph (n)(2).

Finally, in the proposed rule (88 FR 82562), we proposed in new paragraph (n)(1) to

extend the current web-broker FFE standard of conduct established at § 155.220(j)(2)(i) to also

apply to web-brokers assisting consumers in State Exchanges, and consequently to these State

Exchanges. This FFE standard already extends to web-brokers assisting consumers in SBE-FP

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States.

168

As proposed to be applied in State Exchanges, web-brokers would be required to

provide consumers with correct information, without omission of material fact, regarding the

applicable State Exchange, QHPs offered through the applicable State Exchange, and insurance

affordability programs.

169

In addition, web-brokers who assist with or facilitate enrollment of

qualified individuals, qualified employers, or qualified employees, in coverage in a manner that

constitutes enrollment through a State Exchange, or assist individuals in applying for APTC and

CSRs for QHPs sold through a State Exchange, would also be required to refrain from marketing

or conduct that is misleading (including by having a website that the State Exchange determines

could mislead a consumer into believing they are visiting the State Exchange’s website),

coercive, or discriminates based on race, color, national origin, disability, age, or sex. To extend

this FFE standard of conduct to State Exchanges, we proposed in the last sentence of new

paragraph (n) that all references to “HHS” and “the Federally-facilitated Exchanges” in §

155.220(j)(2)(i) would be understood to mean and be replaced with a reference to "the applicable

State Exchange, applied to web-brokers,” and the reference to “HealthCare.gov” in §

155.220(j)(2)(i) would be understood to mean and be replaced with a reference to “the State

Exchange website, applied to web-brokers.”

We sought comment on these proposals, especially from States operating, or seeking to

operate, State Exchanges. We also sought comment on which of the other current provisions at §

155.220 should or should not apply to State Exchanges and web-brokers that assist consumers in

State Exchanges.

168

See 45 CFR 155.220(l). A parallel requirement also applies to QHP issuer DE entities in FFE and SBE-FP States.

See 45 CFR 155.221(a)(1) and (i), and 156.1230(b)(2). As discussed below, in this rulemaking, we proposed and are

finalizing the extension of the parallel QHP issuer DE entity requirement to State Exchanges and their QHP issuer

DE entities.

169

See 42 CFR 435.4 for the definition of insurance affordability programs.

CMS-9895-F 217

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing these proposals without modification. Below, we

summarize and respond to public comments received on the proposals to require web-brokers

operating in State Exchanges meet certain HHS standards applicable in the FFEs and SBE-FPs.

Comment: Most commenters were broadly supportive of these proposals. Several

commenters specifically cited that the provisions extending web-broker website display of

standardized QHP comparative information, disclaimer language, information on eligibility for

APTC/CSRs, operational readiness, standards of conduct, and access by web-broker downstream

agents and brokers across all Exchange types are all important consumer safeguards. Several

commenters stated these provisions would generally enhance the consumer shopping experience,

by providing consumers with a higher-quality and more consistent user experience that allows

them access to accurate information about coverage and insurance affordability programs,

whether they utilize the Exchange’s website or web-brokers’ non-Exchange websites.

A few commenters stated that if State Exchanges leveraged, where appropriate, HHS

operational readiness reviews conducted for FFE and SBE-FP web-brokers, this may both help to

alleviate the compliance burden on web-brokers participating in State Exchanges and on those

State Exchanges, which would help increase the likelihood of web-broker participation in State

Exchanges. One commenter further expanded on this, stating that the proposals to encourage

streamlined operational readiness and compliance activities across State Exchanges via States

leveraging HHS operational readiness reviews and artifacts (that is, findings) for web-brokers

will make it easier for a web-broker to participate in multiple State Exchanges.

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A few commenters expressed appreciation that the proposals afford State Exchanges

sufficient flexibility, such as the ability to implement State-specific operational readiness

assessments or to incorporate State-specific information into the standardized disclaimers.

Response: We appreciate and agree with these comments, many of which summarized or

elaborated on these proposals’ benefits that we described in the proposed rule.

Comment: Several commenters that expressed general support for these proposals also

suggested that CMS should consider requiring web-brokers to implement additional consumer

protection standards and other consumer-oriented tools and information on their websites in the

future, citing that it is especially important that web-brokers provide streamlined and approved

information on State Exchange coverage on their websites. These commenters, however, did not

identify which additional standards in § 155.220 we should consider requiring web-brokers

participating in State Exchange to meet for future benefit years nor did the commenters

otherwise offer specific suggestions for other standards, tools, or information, that should

similarly be considered for implementation in the future.

Response: We appreciate commenters’ feedback and agree that adoption of consumer

protection standards applicable to the use of web-broker non-Exchange websites to enroll

consumers in QHPs and help consumers apply for APTC/CSRs via State Exchanges is important.

As we explained in the proposed rule (88 FR 82557 and 82558), section 1312(e) of the ACA

provides that

the HHS shall establish procedures under which a State may allow agents, brokers,

and web-brokers to enroll individuals in QHPs offered through Exchanges. In the proposed rule,

we sought comment on which of the current provisions at § 155.220 should or should not apply

to State Exchanges and web-brokers that assist consumers in State Exchanges, and we continue

to encourage specific feedback from interested parties on additional consumer protection

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standards, consumer-orientated tools, or information that we should consider adopting in the

future, particularly from State Exchanges and web-brokers operating in Exchanges.

Comment: One commenter suggested that if State Exchanges wish to adopt standards for

web-brokers that are different from the minimum HHS standards that HHS proposed to extend to

web-brokers assisting consumers in State Exchanges and, consequently, those State Exchanges,

HHS should establish a process to allow States to apply standards that are different from the

HHS default minimum standards. This commenter noted the HHS standards are a reasonable

starting point, but that States should have the flexibility to enforce their own standards.

Response: We appreciate the commenter’s recommendation that State Exchanges should

have the flexibility to establish and enforce their own standards for web-brokers. As explained in

the proposed rule (88 FR 82557), the HHS standards we are finalizing as applicable to State

Exchanges and their web-brokers are intended to serve as a starting point by extending certain

baseline critical protections to consumers in all Exchanges. These standards focus on ensuring

proper eligibility determinations, protecting against security breaches or incidents through

implementation of operational readiness reviews, and minimizing consumer confusion. State

Exchanges can establish additional standards for web-brokers that are more stringent than the

HHS standards, as long as any standard established by the State for its web-brokers does not

prevent, or conflict with, the application of the HHS standards

170

applicable to web-brokers

operating in State Exchanges. For example, while a State Exchange could not forego requiring

their web-brokers to participate in operational readiness activities, as required under new §

155.220(n)(2), a State Exchange may establish the form and manner for their web-brokers to

demonstrate operational readiness, including requiring their web-brokers to submit

170

See section 1311(k) of the ACA.

CMS-9895-F 220

documentation the State Exchange believes would support its evaluation of a web-broker’s

operational readiness. If a State Exchange wants to replace an otherwise applicable HHS

standard with an alternative State standard for its web-brokers, the State can consider using the

existing process under section 1332 of the ACA to pursue such change, provided the State is able

to do so in accordance with section 1332 requirements. Section 1332 of the ACA permits States

to apply for a waiver from certain ACA requirements

171

to implement innovative and

individualized State strategies to provide State residents with access to high quality, affordable

health insurance coverage. Section 1312(e) of the ACA is among the provisions that a State can

seek to waive under section 1332 of the ACA.

172

Therefore, a State with a State Exchange that

wants to amend the new HHS minimum standards under § 155.220 applicable to its web-brokers

and replace it with an alternative State standard can apply for a section 1332 waiver to pursue

such a change. For a section 1332 waiver to be approved, the Departments must determine that

the waiver meets certain statutory guardrails

173

and other applicable requirements.

174

For more

information on the process to submit section 1332 waiver applications, see

https://www.cms.gov/marketplace/states/section-1332-state-innovation-waivers. In addition, as

outlined above, the framework adopted in this final rule as applicable to State Exchanges and

their web-brokers incorporates certain flexibilities for State Exchanges. For example, State

171

The following provisions can be waived under section 1332 of the ACA: (1) Part I of subtitle D of Title I of the

ACA (relating to the establishment of QHPs); (2) Part II of subtitle D of Title I of the ACA (relating to consumer

choices and insurance competition through Health Benefit Exchanges); (3) Section 1402 of the ACA (relating to

reduced cost sharing for individuals enrolling in QHPs); and (4) Sections 36B (relating to refundable credits for

coverage under a QHP), 4980H (relating to shared responsibility for employers regarding health care coverage), and

5000A (relating to the requirement to maintain minimum essential coverage) of the Internal Revenue Code (Code)

172

See section 1332(a)(2)(B) of the ACA.

173

In order for a section 1332 waiver to be approved, the Departments must determine that the waiver meets the

guardrails such that the waiver will provide coverage that is at least as comprehensive as the coverage provided

without the waiver; provide coverage and cost-sharing protections against excessive out-of-pocket spending that are

at least as affordable as without the waiver; provide coverage to at least a comparable number of residents as without

the waiver; and not increase the Federal deficit. See section 1332(b)(1)(A)-(D) of the ACA.

174

See 45 CFR 155.1300 – 155.1332 and 31 CFR 33.100 - 33.132.

CMS-9895-F 221

Exchanges may add State-specific information to the standardized disclaimers required to be

displayed by their web-brokers. As another example, State Exchanges may specify the form and

manner for their web-brokers to demonstrate operational readiness prior to the web-broker’s

internet website being used to complete an Exchange eligibility application or a QHP selection.

Finally, to the extent that a State Exchange permits web-brokers to assist its consumers,

the State Exchange will remain the entity with primary responsibility for oversight and

enforcement of applicable standards.

Comment: A few supporting commenters requested that HHS share information on how

the Department would track compliance by State Exchange web-brokers with the HHS minimum

standards.

Response: An Exchange is the primary entity responsible for overseeing and ensuring

compliance by their web-brokers with applicable Federal and State rules and regulations, while

HHS has the authority to oversee the implementation and operation of Exchanges, including

optional web-broker programs that a State Exchange may elect to operate, and Exchange

compliance with Federal requirements. For new State Exchanges, under § 155.105, States that

seek to operate a State Exchange must complete and submit an Exchange Blueprint application.

The Exchange Blueprint application documents that an Exchange will meet the legal and

operational readiness requirements required of a State Exchange. As part of a State’s Blueprint

submission, the State also agrees to demonstrate operational readiness to implement and execute

the Federal requirements applicable to State Exchanges, which would include the new

requirements under § 155.220 applicable to State Exchange that elect to implement a web-broker

program. A State Exchange that elects to operate an optional web-broker program would be

required to include information in its Blueprint to demonstrate operational readiness to

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implement and support ongoing operations of an optional web-broker program consistent with

applicable requirements in § 155.220. As discussed in other sections of this rule, we are also

codifying requirements related to the approval of a State Exchange whereby we will require a

State seeking to establish a State Exchange to provide supplemental information in its Blueprint

application to demonstrate its ability to implement and comply with the requirements for

operating a State Exchange, including requirements associated with the operation of a web-

broker program. Such supporting information would inform HHS’s decision to approve or

conditionally approve a State Exchange and would help facilitate HHS’ oversight of compliance

with Federal requirements applicable to State Exchanges and their web-brokers.

Additionally, under § 155.105, an existing State Exchange must notify HHS in writing

before making a significant change to its approved Exchange Blueprint, and no significant

change to an Exchange Blueprint may be effective until it is approved by HHS in writing or 60

days after HHS receipt of a completed request. Accordingly, for existing State Exchanges that

seek to newly implement and operate an optional web-broker program, we would require the

State to submit an updated Exchange Blueprint and participate in operational readiness reviews

related to the implementation and ongoing operation of such a web-broker program because we

would consider a State Exchange implementing a web-broker program to be a significant change.

Once implemented, for a State Exchange operating a web-broker program, HHS would monitor

the operations of a State Exchange through the annual reporting by State Exchanges related to

compliance with Federal requirements, consistent with our oversight authority at §

155.1200(b)(2). Specifically, HHS would use this oversight authority to evaluate State Exchange

compliance with the policies we are finalizing at § 155.220 for those State Exchanges that elect

to operate a web-broker program, as HHS does with other aspects of State Exchange operations

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on an annual basis. If there is information suggesting a State Exchange or one of its web-brokers

does not meet the requirements of the policies we are finalizing at § 155.220, we would notify

the State Exchange and give them an opportunity to address the potential non-compliance. We

will consider the development of new, additional tools to assist with oversight that could enhance

transparency into compliance by State Exchanges, including their web-broker programs, with

applicable Federal requirements

. We may also consider use of other oversight tools and authority,

including those under Part 155 of our regulations, as appropriate.

Comment: A few commenters who opposed the proposals broadly stated that State

Exchanges should maintain their current flexibility for establishing rules governing their web-

broker programs, given that State Exchanges understand their markets best. One of these

commenters further stated that the proposals may hinder web-broker creativity with how web-

brokers display information on their non-Exchange websites in States with State Exchanges, but

the commenter did not offer more specific feedback to explain how the proposal would hinder

creativity or innovation by web-brokers. Another opposing commenter generally stated that HHS

should focus on developing regulations that encourage web-broker participation in the

Exchanges. One commenter who broadly supported the goals of the proposals stated that while

measures should be taken in State Exchanges with regard to web-broker operations to

incorporate necessary consumer safeguards, HHS should provide State Exchanges flexibility in

identifying how to implement such safeguards.

Response: We agree that States and State Exchanges understand their market dynamics

best, and as such, our goal with these proposals was to identify the subset of existing HHS

minimum standards that should apply across all Exchanges to provide baseline consumer

protections while also maximizing opportunities for State Exchange flexibility and encouraging

broad web-broker participation. For example, while we are requiring that web-brokers in State

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Exchanges display specific disclaimers to provide consumers with clear and consistent

information, we also are providing flexibility for State Exchanges to incorporate State-specific

information into these website disclaimers, provided the additional language does not conflict

with the HHS-provided standardized disclaimer. These disclaimers provide standardized

information to consumers on important topics, such as the consumer’s eligibility for APTC/CSRs

and limitations on the choice of QHPs that consumers may enroll in on a web-broker's non-

Exchange website.

We do not believe that the requirement for web-brokers to display such disclaimers

should hinder web-broker participation, particularly since all web-brokers participating in a

particular State Exchange will need to display the same disclaimers and will need to display

similar disclaimers across all Exchanges. As another example, while we are requiring that web-

brokers in State Exchanges demonstrate operational readiness to the applicable State Exchange,

we are also providing State Exchanges flexibility in how they establish their operational

readiness requirements and assessment process, while at the same time encouraging State

Exchanges to leverage HHS operational readiness activities for web-brokers participating in FFE

and SBE-FPs where appropriate.

We believe that the application of these HHS minimum standards across all Exchanges

will encourage web-broker participation, as State Exchanges implementing operational readiness

requirements for web-brokers that align with the HHS framework would facilitate web-broker

participation across multiple State Exchanges leveraging the same standards. While the HHS

minimum standards we are finalizing as applicable to State Exchanges and their web-brokers

provides a common set of baseline requirements, the framework adopted in this rule also

provides State Exchanges flexibility to implement additional web-broker requirements based on

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the specific needs of their markets.

Additionally, we disagree that the HHS minimum standards we are extending to State

Exchanges and their web-brokers will hinder creativity with respect to how web-brokers

participating in State Exchanges display information on their non-Exchange websites. While

these proposals represent a minimum set of standards for how information is presented on web-

broker non-Exchange websites across all Exchanges, the standards are not prescriptive

concerning how web-brokers can further customize their websites to better appeal to and serve

consumers. For example, some web-brokers assisting consumers in the FFEs and SBE-FPs have

implemented additional website functionalities that do not conflict with the minimum set of HHS

standards concerning how information must be presented on web-broker websites, such as novel

plan recommendation algorithms, affordability estimates, and plan filters.

8. Establishing Requirements for DE Entities Mandating HealthCare.gov Changes be Reflected

on DE Entity Non-Exchange Websites within a Notice Period Set by HHS (§ 155.221(b))

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82562), we proposed to revise § 155.221(b) to require that HealthCare.gov changes be

reflected and prominently displayed on DE entity non-Exchange websites assisting consumers in

FFEs and SBE-FPs within a specific notice period

175

set by HHS. We explained that we conduct

various DE entity monitoring programs, including website display reviews, and routinely

identify areas where DE entity non-Exchange websites can improve the user experience and

more closely align with HealthCare.gov. The changes that we proposed to require DE entities to

make to their non-Exchange websites included changes that enhance the consumer experience,

simplify the plan selection process, and increase consumer understanding of plan benefits, cost-

175

“Notice period” refers to the time period that DE entities have to reflect and prominently display HealthCare.gov

changes communicated to them by HHS pursuant to this proposal.

CMS-9895-F 226

sharing responsibilities, and eligibility for financial assistance. This proposal would codify our

existing practice of communicating important changes to the HealthCare.gov display to EDE

entities to ensure their EDE websites conform to those changes and provide the same vital

information to consumers, expand our existing change requests processes to permit entities to

request deviations from required display changes, require DE entities that do not participate in

EDE to comply with this practice, and require State Exchanges that choose to implement a DE

program to require their DE entities to implement and prominently display website changes in a

manner that is consistent with display changes made to the State Exchanges’ websites on their

non-Exchange websites for purposes of assisting consumers with DE in QHPs offered through

the Exchange in a manner that constitutes enrollment through the Exchange.

The display requirements for DE entity non-Exchange websites are captured in §§

155.220, 155.221, 156.265, and 156.1230. The website display requirements are often technical

in nature and can require subsequent release of guidance to provide technical and operational

details to support their implementation. When HHS makes changes to the HealthCare.gov

display, we notify EDE entities assisting consumers in the FFEs and SBE-FPs of these changes

and require that they make them to their non-Exchange websites via the HHS-initiated change

request process outlined in the Third-Party Auditor Operational Readiness Reviews for the

Enhanced Direct Enrollment Pathway and Related Oversight Requirements guidance document

referred to as the “Third-Party Auditor Guidelines.”

176

This process helps ensure consumers

receive vital information they need in a timely fashion. We refer readers to the 2025 Payment

Notice proposed rule (88 FR 82563) for further discussion of the background for this proposal.

176

CMS. (2023, March 1). Third-party Auditor Operational Readiness Reviews for the Enhanced Direct Enrollment

Pathway and Related Oversight Requirements. CMS. Section IX.B., pp. 72-74.

https://www.cms.gov/files/document/guidelines-enhanced-direct-enrollment-audits-year-6-final.pdf.

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As stated in the proposed rule (88 FR 82563), this proposal codifies and expands this

existing, HHS-initiated change request practice for EDE entities non-Exchange websites and

supports consistency as to the timing of display changes across enrollment platforms, which will

help ensure all Exchange consumers have timely access to accurate, clear information as they

navigate the QHP selection and enrollment processes. Most DE partners in FFE and SBE-FP

States participate in EDE and therefore are already familiar with and complying with this

proposal because it is part of the existing requirements, as outlined in the Third-Party Auditor

Guidelines. However, this will be new for some DE partners, such as those that only participate

in Classic DE, because they are not currently subject to these requirements, which currently only

apply to DE entities that participate in EDE in FFE and SBE-FP States. It is especially important

that changes to the HealthCare.gov display are reflected on non-Exchange websites, including

websites used for both Classic DE and EDE, as a steadily increasing number of the FFEs’ and

SBE-FPs’ consumers enroll in Exchange plans via these DE pathways. This proposal will help

ensure consumers using these DE pathways benefit from the policies we introduce to improve

the HealthCare.gov website display by enhancing the consumer experience, increasing consumer

understanding, and simplifying the plan selection process.

We recognize that the technical details necessary to implement website display changes

must be communicated to DE entities with sufficient notice for development prior to

implementation. As such, we proposed that HHS would provide DE entities with advance notice

to give them time to implement the changes on their non-Exchange websites. We explained that

we intend for the duration of the advance notice period to correspond to the complexity of the

change and the urgency with which the change must be reflected on the DE entity’s non-

Exchange website (that is, we intend to provide a longer advance notice period for

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implementation of changes requiring more complex website-development work, or for lower-

urgency changes). We explained that we would categorize display changes as simpler versus

more complex based on a combination of factors, including, but not limited to, consideration of

the following: number of website pages affected; number of data fields affected; nature of the

change (that is, text-based versus data-based); whether the change is static or dynamic based on

user input; whether the change updates QHP data provided by us

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or involves the display of

new data not previously provided by us (that is, new data types would be considered a more

complex change due to the web-development work required to integrate a new PUF data field or

MAPI data variable); and whether the change may affect backend algorithms for plan sorting,

filtering, or recommendations. The complexity of the change would be the primary factor

determining the length of the advance notice period. Generally, we would expect to provide

approximately 30 calendar days’ advance notice of simpler display changes and up to 90 or more

calendar days’ advance notice for more complex changes. However, in situations where we have

determined that it is urgent that HealthCare.gov display changes are similarly made to DE

entities’ non-Exchange websites to communicate necessary information to consumers regarding

their plan selection or enrollment, we explained that we may provide fewer than 30 days’

advance notice, but not less than 5 business days’ advance notice. When considering the urgency

of a display change, we further explained that we would consider a number of factors, including,

but not limited to, the following: potential to impact consumers’ understanding of plan benefits

and cost-sharing responsibilities; potential for consumers to receive an incorrect eligibility

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We provide DE entities with the QHP comparative information that must be displayed in accordance with §

155.220(c)(3)(i)(A) and § 156.1230(a)(1)(ii). We provide this data via the Public Use Files (PUF)

(https://www.cms.gov/cciio/resources/data-resources/marketplace-puf) and through non-Exchange website

integration with the Marketplace Application Program Interface (MAPI) (https://developer.cms.gov/marketplace-

api/). In this context, website integration refers to connecting the non-Exchange website with Exchange data by

using the MAPI.

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determination; potential impact to the consumer’s understanding of their eligibility for financial

assistance (that is, APTC or CSR); proximity to the Open Enrollment period (with changes

becoming more urgent as Open Enrollment nears, as implementing changes prior to Open

Enrollment is critical for ensuring the greatest number of consumers are able to benefit from the

changes); and whether failure to implement the change may result in a display that is misleading

or confusing to consumers.

We proposed to amend § 155.221 to add new paragraph (b)(6), which would require DE

entities in FFE States to implement and prominently display website changes in a manner that is

consistent with display changes made by HHS to HealthCare.gov by meeting standards

communicated and defined by HHS within a time period set by HHS, unless HHS approves a

deviation from those standards. Consistent with § 155.221(i), this new DE entity non-Exchange

website display requirement would also apply to DE entities that enroll qualified individuals in

coverage in a manner that constitutes enrollment through an SBE-FP or assist individual market

consumers with submission of applications for APTC and CSRs through an SBE-FP.

We are cognizant of, and support, DE entity non-Exchange websites’ use of innovative

decision-support tools and user interface design to help consumers shop for and select QHPs that

best meet their needs. This proposal is not intended to prohibit or otherwise stand in the way of

DE entities’ development of such tools and consumer interfaces. Consistent with the existing

approach for implementation of HHS-initiated changes described in the Third-Party Auditor

Guidelines, we explained that we would implement this requirement with a focus on requiring

DE entities in FFE and SBE-FP States to mirror any display changes made to HealthCare.gov

that impact a consumer’s understanding of plan benefits, cost-sharing responsibilities, and

eligibility for financial assistance. For each required change, DE entities in FFE and SBE-FP

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States would need to implement on their non-Exchange websites conforming display changes in

a manner that is consistent with display changes made by HHS to HealthCare.gov by meeting

standards defined by HHS. We explained that we would provide DE entities flexibility in their

user interface graphic design, provided that their design complies with the standards defined by

HHS in the notification of required change(s). As part of this proposal, we would require that all

front-end website changes (that is, website changes that would affect the visual aspects of the

website that users see and interact with) be prominently displayed on DE entity non-Exchange

websites. As used in this context, “prominently displayed” means that text must be written in a

font size no smaller than the majority of the text on the webpage, text must be displayed in the

same non-English language as any language(s) the DE entity maintains translations for on its

website,

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and any display changes must be noticeable in the context of the website (that is, DE

entity non-Exchange websites must use a font or graphic color that contrasts with the background

of the webpage and ensure any graphics and iconography that they are required to display are

readable without requiring the user to increase their magnification percentage greater than 100

percent). The DE entity may change the font color, size, or graphic context of the information to

ensure that it is noticeable to the user in the context of its website or other written material.

For example, in a scenario where HealthCare.gov is updated to display new help text

communicating educational content to consumers that is designed to help a consumer better

understand plan benefits, cost-sharing responsibility, or eligibility for financial assistance, we

would require the DE entity’s non-Exchange website to display that help text or similar text.

When notifying DE entities about the required change, we would establish and communicate the

standards that must be met for display of the required change, such as the new help text that must

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45 CFR 155.205(c)(2)(iv).

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be prominently displayed on their websites. If the standards allow the DE entity to display

similar text to the language used on HealthCare.gov (for example, when information must be

communicated but there is a low risk of misinterpretation of the information such that we will

not require DE entities to display the exact language used on HealthCare.gov), we would provide

DE entities with information on how the help text is displayed on HealthCare.gov, along with

the standards that must be met, while also outlining the flexibility for DE entities to adapt the

language to reflect their own entity branding if it generally conveys the same information and

meaning as the help text displayed on HealthCare.gov. In this example, we would also allow

flexibility as to the location of the help text if it adheres to the prominent display requirements

discussed earlier in this proposal. In this scenario, DE entities would be able to adjust the

language and decide on the location of the help text on the QHP selection page(s) without

seeking prior approval from HHS. However, we would monitor implementation through existing

periodic website review monitoring per § 155.220(c)(5) and, as described in the Third-Party

Auditor Guidelines,

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may notify the DE entity if we find that their language does not convey

the same meaning as the help text displayed on HealthCare.gov or if we find the help text is not

prominently displayed. Such notification would occur via a letter that would provide the DE

entity with feedback explaining the noncompliance and required corrective actions (such letter is

referred to as “Technical Assistance”). If Technical Assistance fails, we may potentially take

enforcement action to address the identified instances of non-compliance, which could include

temporarily suspending the DE entity’s ability to transact information with the Exchange if we

179

CMS. (2023, March 1). Third-party Auditor Operational Readiness Reviews for the Enhanced Direct Enrollment

Pathway and Related Oversight Requirements. CMS. Section X.F., p. 69.

https://www.cms.gov/files/document/guidelines-enhanced-direct-enrollment-audits-year-6-final.pdf.

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discover circumstances that pose unacceptable risk to eligibility determination, Exchange

operations, or Exchange systems, if warranted.

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Additionally, we explained that we recognize that some DE entities may have system

constraints that prevent them from precisely mirroring the HealthCare.gov display approach, and

so we proposed that if a DE entity is unable to implement the standards defined by HHS, or the

DE entity has an idea for implementation that does not meet the standards but would effectively

communicate the same information to consumers, we may permit a deviation. We proposed that

DE entities that are interested in pursuing a deviation must submit deviation requests to HHS and

proposed that such requests would be subject to review by HHS in advance of implementation of

any alternative display approaches. We explained that deviation requests must include a

proposed alternative display and accompanying rationale. The rationale must explain why the

DE entity is unable to implement the standards or how the DE entity’s idea for implementation

that does not meet the HHS standards would effectively communicate the same information to

consumers. Therefore, similar to the differential website display requirements for standardized

plans applicable to web-broker and QHP issuer DE entities at §§ 155.220(c)(3)(i)(H) and

156.265(b)(3)(iv) and the HHS-initiated change request process, we proposed to allow DE

entities to request a deviation from the standards communicated by HHS for required display

changes to align with HealthCare.gov by submitting a proposed alternative display and

accompanying rationale or explanation for why a deviation is necessary. In reviewing deviation

requests, HHS would consider whether the same level of differentiation and clarity is being

provided under the deviation requested by the DE entity as is provided on HealthCare.gov. Other

factors and criteria HHS would consider include, but are not limited to, whether the proposed

180

45 CFR 155.221(e).

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alternative website display adheres to the standards for prominent display described in this

proposal and whether the display provides correct information, without omission of material fact,

that does not have the potential to be misleading to consumers.

Under the proposed approach, the deviation request would have to be submitted and

approved by HHS before DE entities would be permitted to implement any alternative website

displays. Deviation requests would not toll the advance notice period. This deviation request

process is separate and distinct from the flexibilities in user interface graphic design that we

would allow without preapproval as long as the design and display otherwise meets the

applicable standards defined and communicated by HHS for the display change. DE entities

would only need to request a deviation from the requirements of the standards communicated by

HHS if the DE entity seeks to deviate from those standards or specifications when it implements

a display change to its Non-Exchange website that is required by HHS pursuant to this proposal.

We also proposed in new § 155.221(j)(3) to extend this new proposed DE entity non-

Exchange website display requirement to require State Exchanges that choose to implement a

DE program to require their DE entities to implement and prominently display website changes

in a manner that is consistent with display changes made by State Exchanges to the State

Exchanges’ website on their non-Exchange websites. We believe it is necessary for consumers

utilizing DE entities in States with State Exchanges to have access to the same vital information

pertaining to their plan selection and enrollment process as they would have if they were

enrolling via the State Exchanges’ websites. Under this proposal, we would require State

Exchanges to establish and communicate standards for required display changes and to set the

time period within which display changes must be implemented on DE entities’ non-Exchange

websites. State Exchanges would also be required to review deviation requests submitted by DE

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entities and establish their own deviation request process should the State Exchange elect to

permit deviation requests. DE entities are required to follow the process established by the State

Exchange. We would provide flexibility for State Exchanges to develop their own process for

communicating those standards, setting advance notice periods, and establishing a deviation

request process as needed to meet the business needs of the State Exchange. We would

encourage State Exchanges that choose to implement a DE program to consider the same factors

described above (that is, urgency and complexity of the change) when determining the advance

notice period. Similarly, we would encourage State Exchanges to provide their DE entities with

examples of the State Exchange website display change and technical assistance, including

technical implementation guidance, to ease the burden of implementing and prominently

displaying required changes. We would require State Exchanges to apply HHS’s standard for

“prominently display,” explained earlier in this section of this final rule, to help ensure that

important enrollment, eligibility, and other information is as noticeable and clear to consumers

using DE entities’ websites in State Exchanges as it is to consumers using State Exchange

websites or HealthCare.gov, which we believe will enhance the user experience, increase

understanding, and simplify the plan selection process for all consumers.

As part of this proposal to extend the requirement for DE entities to reflect Exchange

website changes on their non-Exchange websites to State Exchanges and their DE entities, we

would rely on State Exchanges that choose to implement a DE program to enforce compliance

with these requirements and take enforcement action when their DE entities fail to comply and

update their non-Exchange websites to mirror changes made to the State Exchange website. We

would be available to provide technical assistance to support the State Exchanges’ efforts to take

appropriate enforcement action as needed to ensure compliance with applicable requirements.

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There may exist scenarios where the website display requirements may differ between the FFEs

or SBE-FPs versus the State Exchanges (for example, in scenarios where a State Exchange uses

the HealthCare.gov disclaimer language and adds State-specific information such as replacing a

HealthCare.gov hyperlink with the State Exchange hyperlink). In such scenarios, DE entities

would be required to tailor their non-Exchange website display to the requirements of the

Exchange through which the consumer is seeking assistance. Based on our experience providing

oversight of DE entity website displays in FFE and SBE-FP States, we understand that many DE

entities are familiar with and have the capability to tailor website displays based on different

scenarios and, as such, we anticipate DE entities will have the capability to tailor website

displays to mirror the website of the Exchange the consumer is shopping for coverage in.

With an increasing number of consumers utilizing the DE pathways to enroll in coverage

through the Exchanges, we believe it is important to codify a requirement to mandate changes

made to HealthCare.gov (or for State Exchanges, the State Exchanges’ websites) be

implemented on DE entity non-Exchange websites within a timeframe specified by HHS (or, for

DE entities assisting consumers in State Exchanges, within a timeframe specified by the State

Exchange). These proposals would ensure consumers using DE entity non-Exchange websites

have a similar user experience, with access to the same information in a similar manner as

provided on HealthCare.gov and State Exchange websites.

We sought comment on all aspects of these proposals.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing these proposals without modification but with

technical changes to the regulatory text. These changes clarify that DE entities in States with

State Exchanges must implement and prominently display website changes in a manner

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consistent with display changes made to the State Exchange website, unless the State Exchange

approves a deviation from those standards under the deviation request process that the State

Exchange is required to establish, should the State Exchange elect to permit deviation requests.

We acknowledge that the language in the proposed rule, including its regulatory text, may have

been confusing and subject to different interpretations, and accordingly, we clarify our intent and

the regulatory text in this final rule. The approach, as clarified by these technical changes, is

consistent with the proposal as discussed in the preamble to the proposed rule (88 FR 82565),

which stated that the State Exchange would be required to establish a deviation request process

and review deviation requests submitted by DE entities, should the State Exchange want to

permit deviations. The commenters appear to have interpreted the proposed rule consistent with

these technical changes, with one commenter specifically suggesting HHS encourage State

Exchanges to consider deviation requests. For clarity, we also are making technical changes to

the regulatory text at § 155.221(j)(3), which stated in the proposed rule (88 FR 82651) that State

Exchanges must require their direct enrollment entities to implement and prominently display

“changes adopted for display on the State Exchanges’ websites.” The revised regulatory text now

states that State Exchanges must require their DE entities to implement and prominently display

“website changes in a manner that is consistent with the display changes made by State

Exchanges to the State Exchanges’ websites.” This technical change aligns the regulatory text of

§ 155.221(j)(3) with paragraph (b)(6) but does not represent a change in the policy discussed in

the proposed rule (88 FR 82565).

We summarize and respond below to public comments received on the proposed

requirement that HealthCare.gov or State Exchange website changes be reflected and

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prominently displayed on DE entity non-Exchange websites within a specific notice period set

by HHS or the State Exchange.

Comment: Most commenters who addressed these proposals supported their adoption as

proposed, stating benefits such as enhanced consumer protection, accuracy, efficiency, and

consistency across Exchanges. One commenter noted these changes will also establish

consistency between Classic DE and EDE websites in FFE and SBE-FP States. A few

commenters noted these proposals expand HHS’ existing practice of ensuring adequate

communication of HealthCare.gov changes to consumers across platforms and Exchange types.

One commenter stated these proposals will limit consumer confusion or consumer action based

on “outdated eligibility or plan availability information.” A few commenters recommended that

web-brokers be required to display all plan information in a manner that exactly replicates the

HealthCare.gov or State Exchange website display. One commenter emphasized that providing

DE entities with technical and operational assistance is vital for ensuring changes are executed

correctly and effectively. One commenter opposed these proposals, stating that it diminishes the

value of DE and contradicts the ability for DE entities to tailor their experience to best suit

consumers.

Response: We appreciate the comments in support of these requirements and agree they

will ultimately minimize consumer confusion, support consistency across Exchanges, and

promote increased consumer understanding by mandating that DE entity non-Exchange websites

reflect and prominently display changes made to the applicable Exchange’s website within the

notice period set by HHS or the State Exchange, as applicable. As described above and in the

proposed rule (88 FR 82563 through 82565), we agree that this approach will codify our existing

HHS-initiated change request practices for communicating HealthCare.gov changes to EDE

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partners and expand it to apply across all DE non-Exchange websites in FFE and SBE-FP States

for both Classic DE and EDE.

We agree this policy may limit consumer confusion or consumer action based on

outdated eligibility or plan information insofar as this policy requires DE entities to reflect and

prominently display changes that increase consumer understanding of eligibility for financial

assistance or plan information on their non-Exchange websites (for example, making plan

information – or a link to it – more conspicuous on a web page). We note that this policy does

not impact existing requirements for web-broker websites used to complete QHP selection in

FFE and SBE-FP States

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to provide consumers the ability to view all QHPs offered through the

Exchange.

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This policy also does not impact existing requirements for web-broker websites

used to complete QHP selection in FFE and SBE-FP States to display QHP information and

information pertaining to a consumer’s eligibility for APTC or CSRs under §§

155.220(c)(3)(i)(A) and (I), which also extends to web-brokers assisting consumers in State

Exchanges under new § 155.220(n). We note that under § 155.221(a)(2), these requirements also

apply to DE entity non-Exchange websites in the FFEs and SBE-FPs

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to the extent those DE

entities are web-brokers, and under proposed § 155.220(n), these requirements would apply to

DE entity non-Exchange websites operating in State Exchanges to the extent those DE entities

are web-brokers.

We appreciate the emphasis on the need for HHS to provide technical and operational

assistance and are committed to providing such assistance to ensure DE entities in the FFEs and

SBE-FPs have the tools and information required to implement the required display changes

181

See § 155.220(l).

182

See § 155.220(c)(3)(i)(B).

183

See § 155.221(i).

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accurately and efficiently. We encourage State Exchanges that choose to implement DE

programs to provide similar support to their DE entities.

We acknowledge the comments requesting that web-brokers be required to exactly

replicate the HealthCare.gov or State Exchange website display. However, we did not propose

nor are we finalizing such a requirement.

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As described above and in the proposed rule (88 FR

82564), we support DE entity non-Exchange websites’ use of innovative decision-support tools

and user interface design, and we believe that requiring an exact replication of HealthCare.gov

or State Exchange websites would hinder such innovation. We believe the approach we are

adopting, including permitting flexibility in DE entity non-Exchange website user interface

graphic design

185

when implementing required HealthCare.gov or State Exchange website

display changes and the deviation requests process,

186

will allow DE entities sufficient flexibility

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We note that under § 155.220(c)(3)(i)(A), (B) and (D) web-brokers operating in FFEs are required to disclose and

display QHP information provided by the Exchange or directly by QHP issuers consistent with the requirements of §

155.205(c), and to the extent that enrollment support for a QHP is not available using the web-broker’s website,

prominently display a standardized disclaimer provided by HHS stating that enrollment support for the QHP is

available on the Exchange website, and provide a Web link to the Exchange website, provide consumers the ability

to view all QHPs offered through the Exchange, and display all QHP data provided by the Exchange. These same

requirements currently apply to web-brokers operated in SBE-FPs. See 45 CFR 155.220(l). As finalized in this rule

and reflected in new § 155.220(n), the web-broker requirement in § 155.220(c)(3)(i)(A) that web-brokers disclose

and display on their non-Exchange website the standardized QHP information provided by the Exchange or directly

by QHP issuers also extends to web-brokers in State Exchanges.

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This approach does not require entities to directly mirror the Exchange website displays. Rather, Exchanges will

define and communicate standards that DE entities must meet when implementing and prominently displaying

website display changes in a manner that is consistent with the display changes made to the Exchange websites. DE

entities will have flexibility in how they reflect and incorporate those changes within the context of their user

interface graphic design, provided their display meets the standards communicated by the Exchanges. For further

discussion and an example of how this flexibility will be applied. See 2025 Payment Notice proposed rule (88 FR

82564-82566).

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In the proposed rule (88 FR 82565), we proposed that if a DE entity is unable to implement the standards defined

by HHS, or the DE entity has an idea for implementation that does not meet the standards but would effectively

communicate the same information to consumers, HHS may permit a deviation. We proposed that DE entities that

are interested in pursuing a deviation must submit deviation requests to HHS and proposed that such requests would

be subject to review by HHS in advance of implementation of any alternative display approaches. We explained that

deviation requests must include a proposed alternative display and accompanying rationale. The rationale must

explain why the DE entity is unable to implement the standards or how the DE entity’s idea for implementation that

does not meet the standards would effectively communicate the same information to consumers. Finally, we

proposed that State Exchanges would also be required to establish their own deviation request process and review

deviation requests submitted by their DE entities should the State Exchange elect to permit deviation requests. State

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to integrate required changes within the context of their non-Exchange website. The approach

will simultaneously provide necessary consumer protections by requiring the DE entity’s user

interface design to comply with the standards defined by HHS or the State Exchange or, in the

case of deviation requests submitted to HHS, by requiring HHS to consider whether the same

level of differentiation and clarity is provided under the deviation requested by the DE entity as

is provided on HealthCare.gov when considering deviation requests. We encourage State

Exchanges to establish a deviation request process, and we expect that State Exchanges will

consider the business needs of their Exchange and the interests of consumers in their State,

including consumer protection, when they review deviation requests, should the State Exchange

elect to permit deviation requests.

We do not agree with the commenter that suggested these requirements diminish the

value of DE or contradict the ability for DE entities to tailor their experience to best suit

consumers. As discussed previously in this section of this final rule, these requirements support

flexibility in the implementation of required changes by DE entities. They are not intended to

impair DE entities’ ability to tailor their user interface design. For example, DE entities are

allowed to make changes to the font color, size, or graphic context of the information to ensure

that it is noticeable in the context of its website. Rather, they establish a pathway for DE entities

to innovate while ensuring that DE entity non-Exchange websites provide the same level of

differentiation and clarification for consumers as is provided on HealthCare.gov or a State

Exchange’s website. We continue to believe that, as explained in the proposed rule (88 FR

82563), these requirements will help ensure all Exchange consumers have timely access to

Exchanges would have flexibility to establish a deviation request process as needed to meet the business needs of

the State Exchange and would have discretion to approve or reject a deviation request from one of its DE entities.

We are finalizing this approach as proposed but with technical changes to affirm that State Exchanges must establish

a deviation request process should the State Exchange elect to permit deviation requests.

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accurate, clear information as they navigate the QHP selection and enrollment processes. As a

result, we expect they will help make DE an accessible, valuable tool for all Exchange

consumers.

Comment: A few commenters expressed concern that the deviation request process could

be used to circumvent Federal policy. The commenters requested that HHS only grant deviations

upon a demonstration of a special need and that HHS clarify that it may request additional

documentation to periodically reassess whether the deviation remains justified.

Response: We acknowledge the concern that the deviation request process could be used

to circumvent Federal policy. However, we do not share this concern. As described above and in

the proposed rule (88 FR 82565), we intend to review all deviation requests submitted by DE

entities assisting consumers in the FFEs and SBE-FPs to ensure the deviation, at a minimum,

provides the same level of differentiation and clarification as is provided on HealthCare.gov. We

do not intend to approve deviation requests for display approaches that are inconsistent with the

display change made to HealthCare.gov. We encourage State Exchanges to establish deviation

requests processes and anticipate State Exchanges that opt to establish such a process will adopt

a similar framework to review deviations requests and monitor implementation of approved

deviations to ensure compliance by their DE entities.

Although we appreciate the suggestion that deviation requests should be limited to

demonstration of special need, we note that the commenter did not define what they meant by

“special need” in this context. If the commenter means to suggest that deviation requests should

only be granted when system constraints prevent DE entities from precisely mirroring the

HealthCare.gov display approach, and that deviation requests should not be granted when a DE

entity has an innovative idea for implementation that does not meet the standards but would

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effectively communicate the same information to consumers, then we do not agree with this

suggestion. This suggestion, if implemented, would be in opposition to our longstanding support

for and encouragement of innovation by DE entities because it would prohibit the ability of DE

entities to use the deviation request process to propose innovative website displays, decision-

support tools, and user interface designs. Our experience operating the DE program in the FFE

and SBE-FPs, particularly in soliciting feedback from DE entities regarding the effects of

innovative website displays, decision support tools, and user interfaces, has helped inform

display updates to HealthCare.gov.

We acknowledge the comment requesting we clarify that we may request additional

documentation to periodically reassess whether the deviation remains justified. As described

above and in the proposed rule (88 FR 82564), for DE entities assisting consumers in the FFEs

and SBE-FPs, we will monitor DE entity implementation through existing periodic website

review monitoring per § 155.220(c)(5) and as described in the Third-Party Auditor Guidelines.

Our periodic reviews will include review of DE entities’ implementation of approved deviations

and may also include a review of the documentation submitted in connection with the deviation

request. We may request updated documentation from DE entities if our review suggests that the

deviation no longer remains justified. For example, if the initial approval was granted based on a

factor which appears no longer relevant (for example, if approval was granted for the DE entity

to implement an alternative display while the entity was in the process of switching to a new DE

Technology Provider

187

), we would request updated documentation from the DE entity

confirming whether the initial approval conditions are still relevant (for example, has the entity

completed its transition to a new DE Technology Provider, using the previous example). We

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See § 155.20 for definitions of an “Agent or broker direct enrollment technology provider” and “Qualified health

plan issuer direct enrollment technology provider.”

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encourage State Exchanges to adopt these same practices in reviewing deviation requests and

monitoring implementation of approved deviations to ensure compliance by their DE entities.

Comment: One commenter noted that members of the web-broker and DE community

appreciate the general regulatory framework offered by HHS for the FFEs and SBE-FPs under

§§ 155.220 and 155.221 and would appreciate the adoption of uniform regulatory standards by

State Exchanges, including as to DE entity non-Exchange website implementation of Exchange

website display changes under new § 155.221(b)(6) and (j)(3). One commenter requested that

HHS clarify what would happen in instances where State Exchanges that choose to implement a

DE program do not meet the requirements associated with this proposal. One commenter

supported the proposal to require DE entities operating in States with State Exchanges to

implement State Exchange website display changes on their non-Exchange websites but wanted

HHS to encourage these States to implement the following practices when requiring DE entities

to make changes to their websites: solicit feedback from industry partners; provide ample

advance notice; provide flexibility in website user interfaces; and permit deviations subject to the

approval of the State Exchange. One commenter similarly supported the proposal to require DE

entities utilized by State Exchanges to implement State Exchange website display changes on

their non-Exchange websites but encouraged HHS “to grant the maximum amount of flexibility

to State Exchanges in how they implement that process,” explaining that this would allow State

Exchanges to “innovate and reduce the burden needed for EDE entities to produce novel tools to

benefit consumers and agents.”

Response: We generally agree with the commenter that suggested State Exchanges

should adopt web-broker and DE entity standards consistent with the standards for web-brokers

and DE entities in the FFEs and SBE-FPs. In the proposed rule (88 FR 82564 through 82565),

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we proposed extending the requirements under § 155.221(b)(6) to State Exchanges and DE

entities assisting consumers in those State Exchanges. We also proposed extending certain HHS

minimum standards applicable to web-brokers (88 FR 82557 through 82562) and DE entities (88

FR 82566 through 82571) operating in the FFEs and SBE-FPs to web-brokers and DE entities in

States with State Exchanges and, consequently, those State Exchanges.

If there is information that suggests a State Exchange or one of its DE entities does not

meet the requirements of § 155.221(j) and in particular, (j)(3), we would notify the State

Exchange and give them an opportunity to address the concerns. We intend to consider the

development of new, additional tools to assist with oversight that could enhance transparency

into compliance by State Exchanges, including their DE programs, with applicable HHS

requirements including those relating to DE under § 155.221(j)(3). We may also consider use of

other oversight tools and authority, including those under part 155 of our regulations, as

appropriate.

As described in the responses to comments received on the proposals to require that DE

entities and web-brokers operating in State Exchanges meet certain standards applicable in the

FFEs and SBE-FPs (sections III.D.7 and III.D.9 of this final rule), pursuant to § 155.105, States

that seek to operate a State Exchange must complete and submit an Exchange Blueprint

application. The Exchange Blueprint application documents that an Exchange will meet the legal

and operational readiness requirements required of a State Exchange. As part of a State’s

Blueprint submission, the State also agrees to demonstrate operational readiness to implement

and execute the Federal requirements applicable to State Exchanges, which would include the

new requirements under §§ 155.220 and 155.221 applicable to State Exchanges that elect to

implement a web-broker or DE program. A State Exchange that elects to operate an optional

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web-broker or DE program would be required to include information in its Blueprint to

demonstrate operational readiness to implement and support ongoing operations of an optional

web-broker or DE programs consistent with applicable requirements in §§ 155.220 and 155.221.

As discussed in other sections of this final rule, we are also codifying requirements at § 155.105

related to the approval of a State Exchange whereby we will require a State seeking to establish a

State Exchange to provide supplemental information in its Blueprint application to demonstrate

its ability to implement and comply with the requirements for operating a State Exchange,

including requirements associated with the operation of a DE program should a State elect to

operate one. Such supporting information would inform HHS’s decision to approve or

conditionally approve a State Exchange and would help facilitate HHS’ oversight of compliance

with Federal requirements applicable to State Exchanges and their DE entities. Additionally,

under § 155.105(e), an existing State Exchange must notify HHS in writing before making a

significant change to its approved Exchange Blueprint, and no significant change to an Exchange

Blueprint may be effective until it is approved by HHS in writing or 60 days after HHS receipt of

a completed request.

Accordingly, for existing State Exchanges that seek to newly implement and operate a

DE program, HHS would require the State to submit an updated Exchange Blueprint and

participate in operational readiness reviews related to the implementation and ongoing operation

of such a DE program, as we would consider a State Exchange implementing a DE program a

significant change. We would also use this information in the Blueprint Application from a State

Exchange on how they intend to implement the DE entity non-Exchange website display update

requirements to assess a State Exchange’s compliance with § 155.221(j)(3), and we would

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generally look to the State Exchange to oversee implementation by DE entities of non-Exchange

website display changes pursuant to § 155.221(j)(3) on an ongoing basis.

We acknowledge the commenter’s suggestion that we encourage State Exchanges to

solicit feedback from industry partners, provide ample advance notice, provide flexibility in

website user interfaces, and permit deviations subject to the approval of the State Exchange.

Although we also acknowledge the commenter's suggestion that we should grant the maximum

amount of flexibility to State Exchanges in how they implement these requirements, we note the

commenter did not provide further details or clarification on what additional flexibilities, if any,

should be granted to State Exchanges. As a result, we are unsure what the commenter is referring

to. However, we agree with several of the commenter’s points. As we explained in the proposed

rule (88 FR 82565), we encourage State Exchanges to develop their own processes that best meet

their business needs. Consistent with the commenter’s suggestion, we encourage State

Exchanges to solicit feedback from industry partners, including web-brokers and DE entities, and

provide an advance notice period whose length corresponds to the complexity of the required

display change and the urgency with which the change must be reflected on the DE entity’s non-

Exchange website. Also consistent with the commenter’s suggestion, our policy requires State

Exchanges to establish a deviation request process while providing the State Exchange discretion

to approve or reject deviation requests, should the State Exchange elect to permit deviation

requests. If the State Exchange permits deviation requests, we encourage State Exchanges to

consider granting deviation requests if the DE entity is unable to implement the standards

defined by the State Exchange or has an idea for implementation that does not meet those

standards but would effectively communicate the same information to consumers. We also agree

that State Exchanges should permit DE entities flexibility in how they reflect and incorporate

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required display changes within the context of their user interface graphic design, provided their

display meets the standards communicated by the Exchanges. We also encourage State

Exchanges to adopt the same requirements and framework HHS will follow for DE entity non-

Exchange website display updates for the FFEs and SBE-FPs, whenever possible.

9. Ensuring DE Entities Operating in State Exchanges Meet Certain Standards Applicable in the

FFEs and SBE-FPs (§ 155.221)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82566), we proposed to amend § 155.221 to extend certain existing HHS standards

applicable to DE entities assisting the FFEs’ and SBE-FPs’

188

consumers and applicants with

direct enrollment in QHPs and applying for APTC/CSRs to DE entities operating in State

Exchanges, in both the Individual Market Exchanges and SHOPs. These policies would extend

certain HHS DE program standards to DE entities operating in State Exchanges, and

consequently to those State Exchanges that, to the extent permitted by applicable State law,

permit DE entities to assist their consumers and applicants with direct enrollment in QHPs and

applying for APTC/CSRs in a manner that constitutes enrollment through an Exchange.

189

These

policies would also ensure that certain minimum HHS standards would apply to DE entities

across all Exchanges, including standards governing DE entity marketing and display of QHPs

and non-QHPs, providing consumers with correct information and refraining from certain

conduct

190

marketing of non-QHPs, website disclaimer language, and operational readiness.

188

See 45 CFR 155.221(i) (“A direct enrollment entity that enrolls qualified individuals in coverage in a manner that

constitutes enrollment through a State Exchange using the Federal platform, or assists individual market consumers

with submission of applications for advance payments of the premium tax credit and cost-sharing reductions through

a State Exchange using a Federal platform must comply with all applicable Federally-facilitated Exchange standards

in this section.”).

189

See 78 FR 37065 through 37066 and 78 FR 54124 through 54126.

190

Consistent with the amendments and policies adopted in this final rule, this standard applies to both QHP issuer

DE entities, as well as web-brokers DE entities, across all Exchange types. For QHP issuer DE entities, see 45 CFR

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Notably, we stated in the proposed rule (88 FR 82566) that our regulations do not

currently address whether and how DE entities may assist consumers and applicants with DE in

QHPs and submission of applications for APTC/CSRs in a manner that constitutes enrollment

through a State Exchange. We believe that current and future State Exchanges may seek to

implement DE programs similar to the FFEs and SBE-FPs. As such, we believe that DE entities

seeking to assist State Exchange consumers with DE in QHPs and submission of applications for

APTC/CSRs in a manner that constitutes enrollment through an Exchange should meet the same

or, at a minimum, similar standards that DE entities in the FFEs and SBE-FPs are required to

meet to protect consumers and safeguard Exchange operations. These standards would mitigate

the potential for consumer confusion of QHPs with non-QHPs (including eligibility for APTC

and/or CSR as it relates to QHPs versus non-QHPs) and about which products are or are not

available through the Exchange, helping to ensure proper eligibility determinations and protect

against security incidents through implementation of operational readiness reviews (as websites

that have not been tested for operational readiness may provide improper eligibility

determinations or have security flaws that could increase the likelihood of a breach involving

consumer PII).

191

We recognize that, to date, no State Exchanges have implemented DE programs;

however, as we stated in the proposed rule (88 FR 82566 and 82567), we anticipate that there

may be growing interest in doing so. As such, we recognize a potential burden on State

155.221(a)(1) and (i), and 156.1230(b)(2). For web-broker DE entities, see 45 CFR 155.220(j)(2)(i), (l), and (n), and

155.221(a)(2).

191

The amendments to § 155.221 we are finalizing will not impact how DE entities may assist consumers and

applicants in SBE-FP States. Section 155.221(i) provides that a DE entity that enrolls qualified individuals in

coverage in a manner that constitutes enrollment through an SBE-FP or assists individual market consumers with

submission of applications for APTC and CSRs through an SBE-FP, must comply with all applicable HHS

standards in § 155.221. We did not propose and are not finalizing any changes to this existing framework for DE

entities who assist consumers and applicants in SBE-FP States.

CMS-9895-F 249

Exchanges that would newly be subject to the standards being proposed, if they choose to

implement DE programs. This would include drafting new policies, updating standards, and

potentially hiring additional staff to perform functions not currently being performed by the State

Exchanges, including providing technical assistance during development and implementation of

DE programs in the State Exchanges, creating the framework for and conducting operational

readiness reviews, including developing and maintaining documentation needed to complete the

operational readiness reviews, as well as conducting ongoing oversight and taking appropriate

enforcement action in response to DE entity non-compliance with applicable requirements. This

potential burden would also include requiring and overseeing web-development and the hosting

of non-Exchange websites by DE entities participating in these State Exchanges to ensure

compliance with the proposed minimum standards outlined in this rulemaking.

Similar to the agent, broker and web-broker requirements under § 155.220, currently, §

155.221 only applies to DE entities assisting consumers and applicants in the FFEs and SBE-

FPs. Section 155.221(a) provides that the FFEs will permit the following entities to assist

consumers with DE in QHPs offered through the Exchange in a manner that is considered to be

through the Exchange, to the extent permitted by applicable State law: (1) QHP issuers that meet

the applicable requirements in §§ 155.221 and 156.1230, and (2) web-brokers that meet the

applicable requirements in §§ 155.220 and 155.221. These same entities are permitted to assist

consumers with DE in QHPs offered through the Exchange in a manner that is considered to be

through the Exchange, to the extent permitted by applicable State law, in SBE-FP States.

192

The

HHS DE Program includes two DE pathways: Classic DE and EDE. The proposal to extend

certain existing HHS standards applicable to DE entities participating in FFE and SBE-FP States

192

45 CFR 155.221(i).

CMS-9895-F 250

to State Exchanges and their DE entities would also apply to the operation of Classic DE and

EDE within these State Exchanges. That is, under this policy, State Exchanges that choose to

implement DE programs in their States would be permitted to adopt the same pathways or tailor

their configuration in a manner best suited to their operational and business needs, so long as

their DE programs meet the HHS minimum standards under § 155.221 that we proposed to

extend to State Exchanges and their DE entities. We explained that we would be available to

provide extensive technical assistance to State Exchanges that choose to implement DE

programs.

As detailed further below, we proposed to add paragraph (j) to § 155.221 to extend

certain HHS minimum DE entity standards in § 155.221 to DE entities operating in State

Exchanges and, consequently, to these State Exchanges that choose to implement DE programs

in their States. Through this proposed approach, we seek to ensure that DE entities assisting

these State Exchanges’ consumers with DE in QHPs and applying for APTC/CSRs in a manner

that constitutes enrollment through the Exchange meet HHS minimum standards governing DE

entity marketing and display of QHPs, providing consumers with correct information and

refraining from certain conduct, marketing of non-QHPs, website disclaimer language, and

operational readiness. We explained that, under this proposed approach, we would encourage

State Exchanges to require DE entities to engage a third-party auditor to perform the operational

readiness review audits of their DE entities, consistent with the operational readiness framework

adopted by HHS for the FFEs and SBE-FPs. As stated earlier, we recognize that there may be a

growing interest from State Exchanges to operate DE programs, and we seek to establish a set of

HHS minimum standards to ensure appropriate safeguards are in place, regardless of the

Exchange model. Further, the proposed approach to establish a minimum set of HHS standards

CMS-9895-F 251

that would apply to DE entities across all Exchanges would support efficiency in DE entity

operations across all Exchanges, including State Exchanges, while also providing flexibility for

State Exchanges to tailor their DE program and establish their own standards with respect to

operational readiness demonstrations by their DE entities, including whether to require third-

party audits of DE entities and to impose additional requirements beyond the proposed HHS

minimum standards as they determine may be appropriate based on their operational or business

needs. As described above, if they choose to implement DE programs, the State Exchanges

would be required to draft policies, update standards, and potentially hire additional staff to

perform functions and activities not currently being performed by the State Exchanges in order to

comply with these policies.

We proposed to update § 155.221(a), which identifies the entities permitted to be DE

entities in FFE and SBE-FP States, to apply across all Exchanges, including State Exchanges.

Under this proposal, State Exchanges that choose to implement a DE program may permit QHP

issuers and web-brokers that meet applicable requirements to assist consumers with submitting

applications for APTC/CSRs and DE in QHPs offered through the Exchange in a manner that is

considered to be through the Exchange. Under the framework proposed in the proposed rule, the

applicable requirements that would extend to web-broker DE entities in States with State

Exchanges would include certain paragraphs of §§ 155.220(c) and (j) and 155.221(a), (b), (c),

(d), and (j). We describe above the extension of certain HHS web-broker standards in

§155.220(c) and (j) to State Exchanges and their web-brokers and detail below the HHS web-

broker DE entity standards in § 155.221(a), (b), (c), (d), and (j) we proposed extending to web-

broker DE entities in State Exchanges. As described further below, we proposed that the

applicable requirements that would apply to QHP issuer DE entities in State Exchanges would be

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certain HHS QHP issuer DE entity standards in §§ 155.221(a), (b), (c), (d), and (j) and

156.1230(b).

The proposals to extend certain HHS requirements in § 155.221 to these State

Exchanges’ web-broker DE entities are intended to align with the proposals described above to

extend certain HHS standards and consumer protections in § 155.220 to these State Exchanges’

web-brokers.

193

The proposals to extend certain HHS requirements to QHP issuer DE entities are

similarly intended to establish a minimum set of standards and consumer protections, with the

HHS requirements generally serving as a floor for State Exchanges that choose to implement DE

programs. As detailed further below, as part of these proposals to extend certain HHS

requirements to DE entities, we would rely on State Exchanges to enforce compliance with these

requirements and take enforcement action as needed when a DE entity fails to comply with

applicable requirements. However, we would provide technical assistance to support State

Exchange efforts to take appropriate enforcement action as needed to ensure compliance with

applicable requirements.

Consistent with the cross-reference in § 155.221(a)(1), we proposed to extend the HHS

requirements of § 156.1230(b) governing QHP issuer DE entities to also apply to QHP issuer DE

entities assisting consumers with submitting applications for APTC/CSRs and DE in QHPs

offered through the Exchange in States with State Exchanges. As reflected in new section §

155.221(a)(1)(i), for purposes of extending the HHS requirements of § 156.1230(b) to these

States Exchanges and their QHP issuer DE entities, references in § 156.1230(b) to “Federally-

facilitated Exchange,” “HHS,” and “HealthCare.gov” would be understood to mean “the

applicable State Exchange,” “the applicable State Exchange,” and “the applicable State

Exchange website,” respectively. Consistent with §§ 156.1230(b)(1) and (2), to directly enroll

193

As previously noted, the HHS requirements for web-brokers in §§ 155.220 and 155.221 also currently extend to

web-brokers participating in SBE-FPs. See 45 CFR 155.220(l) and 155.221(i).

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consumers in a manner that is considered to be through the Exchange, QHP issuer DE entities

are required to comply with the applicable requirements in § 155.221 and provide consumers

with correct information, without omission of material fact, regarding the Exchanges, QHPs

offered through the Exchanges, and insurance affordability programs,

194

and refrain from

marketing or conduct that is misleading (including by having a DE website that HHS determines

could mislead a consumer into believing they are visiting HealthCare.gov), coercive, or

discriminates based on race, color, national origin, disability, age, or sex. These HHS standards

already extend to QHP issuer DE entities in SBE-FP States.

195

We proposed to extend these HHS

requirements to also apply them to QHP issuer DE entities in State Exchanges. State Exchanges’

QHP issuer DE entities would similarly be required to provide consumers with correct

information, without omission of material fact, regarding the Exchanges, QHPs offered through

the Exchanges, and insurance affordability programs.

196

In addition, QHP issuer DE entities in

State Exchanges would also be required to refrain from marketing or conduct that is misleading

(including by having a DE website that the State Exchange determines could mislead a consumer

into believing they are visiting the Exchange’s website), coercive, or discriminates based on race,

color, national origin, disability, age, or sex. We solicited comments on whether § 156.1230

should also be amended to affirm its applicability to these State Exchanges and their QHP issuer

DE entities.

197

In addition, we proposed that all Exchanges, including State Exchanges that choose to

implement DE programs, must require their DE entities, both web-broker and QHP issuer DE

194

See 42 CFR 435.4 for the definition of insurance affordability programs.

195

See 45 CFR 155.221(a)(1) and (i).

196

Id.

197

We noted in the proposed rule (88 FR 82568) that if § 156.1230 were amended to affirm its applicability to these

State Exchanges and their QHP issuer DE entities, parallel revisions may be made to § 156.1230 in the final rule to

also capture and affirm its applicability to SBE-FPs and their QHP issuer DE entities.

CMS-9895-F 254

entities, to meet the HHS standards under § 155.221(b)(1) governing plan display and marketing

for QHPs and any other products offered on the Exchange. These HHS standards governing plan

display and marketing for QHPs and any other products offered on the Exchange currently apply

today to approved web-broker and QHP issuer DE entities in FFE and SBE-FP States.

198

such, in new paragraph (j), we proposed to extend § 155.221(b)(1), and the exceptions in §

155.221(c), to DE entities participating in State Exchanges and, consequently, to these State

Exchanges. Under this proposal, DE entities participating in State Exchanges would be required

to display and market QHPs offered through the Exchange, individual health insurance coverage

as defined in § 144.103 offered outside the Exchange (including QHPs and non-QHPs other than

excepted benefits), and any other products, such as excepted benefits, on at least three separate

website pages on its non-Exchange website, except as permitted under § 155.221(c). Pursuant to

the exception under § 155.221(c)(1), a DE entity operating in a State Exchange would be

permitted to display and market individual health insurance coverage offered outside the

Exchange (including QHPs and non-QHPs other than excepted benefits) on the same website

pages when assisting individuals who have communicated receipt of an offer of an individual

coverage health reimbursement arrangement as described in § 146.123(c) (as a standalone

benefit, or in addition to an offer of an arrangement under which the individual may pay the

portion of the premium for individual health insurance coverage that is not covered by an

individual coverage health reimbursement arrangement using a salary arrangement pursuant to a

cafeteria plan under section 125 of the Internal Revenue Code) but would be required to clearly

distinguish between the QHPs offered through the Exchange and individual health insurance

coverage offered outside the Exchange (including QHPs and non-QHPs other than excepted

198

45 CFR 155.221(b)(1) and (i).

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benefits), and prominently communicate that APTC and CSRs are available only for QHPs

purchased through the Exchange, that APTC are not available to individuals who accept an offer

of an individual coverage health reimbursement arrangement or opt out of an individual coverage

health reimbursement arrangement that is considered affordable, and that a salary reduction

arrangement under a cafeteria plan may only be used toward the cost of premiums for plans

purchased outside the Exchange. Under this proposal, pursuant to the exception in §

155.221(c)(2), DE entities operating in States with State Exchanges would be permitted to

display and market Exchange-certified stand-alone dental plans offered outside the Exchange

and non-certified stand-alone dental plans on the same website pages.

In new paragraph (j), we also proposed to extend the HHS marketing standard at §

155.221(b)(3) to DE entities participating in State Exchanges and, consequently, to State

Exchanges that choose to implement a DE program, such that these DE entities would also be

required to limit marketing of non-QHPs during the Exchange eligibility application and QHP

selection process in a manner that minimizes the likelihood that consumers will be confused as to

which products and plans are available through the Exchange and which products and plans are

not, except as permitted under § 155.221(c)(1). Refer to the discussion above regarding the

exception in § 155.221(c)(1) pertaining to DE entities assisting individuals who have

communicated receipt of an offer of an individual coverage health reimbursement arrangement

as described in § 146.123(c), as a standalone benefit or in addition to an offer of an arrangement

under which the individual may pay the portion of the premium for individual health insurance

coverage that is not covered by an individual coverage health reimbursement arrangement using

a salary arrangement pursuant to a cafeteria plan under section 125 of the Internal Revenue

Code.

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As we explained in the proposed rule (88 FR 82568 and 82569), we believe requiring DE

entities participating in all Exchanges to meet the plan display and marketing requirements in §

155.221(b)(1) and (3) adopted by HHS for FFE and SBE-FP States would provide necessary

safeguards for consumers who may participate in DE programs across all Exchange models,

including in State Exchanges. Requiring DE entities across all Exchanges to meet these HHS

plan display and marketing requirements would protect consumers by minimizing their

confusion regarding which products and plans are available through the Exchange, which

products and plans are not, and which products and plans are eligible for APTC and CSRs.

Further, the adoption of uniform requirements across Exchanges in this regard can also alleviate

burden on DE entities from having to build different programs and comply with a unique set of

requirements for each State Exchange that chooses to implement a DE program, as well as

burden on a State Exchange from having to develop an entirely new set of requirements for DE

entities that participate in their State Exchange. We recognize that elsewhere in this rulemaking,

we have built in flexibility for State Exchanges to tailor certain aspects of their DE programs and

associated oversight processes to best suit their State-specific needs and requirements (for

instance, the operational readiness review requirements for web-brokers and DE entities

participating in State Exchanges). In this case, however, we believe that the benefits to

consumers of uniformly applying the plan display and marketing requirements in §

155.221(b)(1) and (3) to ensure they apply to all Exchanges as minimum standards outweigh the

potential drawbacks of reducing discretion and flexibility to State Exchanges with respect to

modifying these baseline requirements. We solicited comments on whether State Exchanges

should instead be provided with broader discretion and flexibility to establish their own plan

display and marketing requirements tailored to their consumers or local needs.

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In new paragraph (j), we also proposed to extend the existing standardized disclaimer

requirement in § 155.221(b)(2) to apply to DE entities participating in State Exchanges and,

consequently, to these State Exchanges that choose to implement a DE program. Pursuant to §

155.221(b)(2) and (i), DE entities in FFE and SBE-FP States are required to prominently

display a standardized disclaimer in the form and manner provided by HHS.

199

This disclaimer

is separate from the Enrollment Support and General non-FFE standardized disclaimers under

§ 155.220(c)(3)(i)(A) and (G), respectively, that web-brokers are required to display when

their non-Exchange websites are used to complete a QHP selection or complete the Exchange

eligibility application.

200

The standardized disclaimer required under § 155.221(b)(2) instead is

intended to help consumers understand the difference between QHPs and non-QHPs, and that

financial assistance (that is, APTC and CSRs) is only available for QHPs. Under this proposal,

DE entities in State Exchanges, like DE entities in FFEs and SBE-FPs under existing §

155.221(b)(2), would also be required to prominently display a standardized disclaimer that

similarly informs consumers about the differences between QHPs and non-QHPs, and that

financial assistance is only available for QHPs. The purpose of this standardized disclaimer is

to assist consumers in distinguishing between DE entity non-Exchange website pages that

display QHPs and those that display non-QHPs, and for which products APTC and CSRs are

available. Consistent with the current practice for the other standardized disclaimers provided

by HHS under §§ 155.220 and 156.1230, we would provide further details on the HHS

standards for the text and other display details for the standardized disclaimer in technical

guidance.

199

See 84 FR 17523.

200

As detailed above, we proposed to extend the Enrollment Support and General non-FFE standardized disclaimers

to State Exchanges and web-brokers participating in those State Exchanges and are finalizing these proposals

without modification.

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This proposal would require that the disclaimer be prominently displayed on the non-

Exchange website of a DE entity assisting consumers in State Exchanges when a consumer

navigates away from any website page that markets or displays QHPs offered through the

Exchange (that is, on-Exchange QHPs) to any website page that markets or displays QHPs

offered outside the Exchange (that is, off-Exchange QHPs) or non-QHPs. Each DE entity

would be required to display this disclaimer on its own interstitial website page or on a pop-

up window.

We proposed in paragraph (j)(1) to provide State Exchanges with flexibility regarding the

standardized disclaimer language that would be required to be displayed by their DE entities,

provided that the additional language does not conflict with the HHS-provided standardized

disclaimer. This proposed flexibility is similar to the flexibility we are finalizing in section

III.D.7 of this final rule for State Exchanges to modify the web-broker Enrollment Support and

General non-FFE standardized disclaimers under § 155.220(c)(3)(i)(A) and (G), such that the

HHS-provided language for the standardized disclaimer under § 155.221(b)(2) must be used as a

minimum starting point but State Exchanges may add State-specific information to the

disclaimers, provided the additional language does not conflict with the HHS-provided

standardized disclaimer.

201

This would permit State Exchanges to replace references to the

Exchange or Marketplace with the appropriate reference to the State-specific Exchange name.

Under this proposal, State Exchanges may also require web-brokers and QHP issuers operating

as DE entities in their States to translate the disclaimer text into languages appropriate for the

States, as this type of additional requirement would not conflict with the HHS-provided

disclaimer language or minimum standards. As with all informational materials, standard plain

201

Consistent with the current practice for the other HHS-provided standardized disclaimers under §§ 155.220 and

156.1230, we will provide details on the text for the standardized disclaimer under § 155.221(b)(2) in guidance.

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language practice is to write at or near a fourth-grade reading level and not to exceed an eighth-

grade reading level. We explained that we expect that any State-specific additions or

customizations to this disclaimer would be written accordingly. As we explained in the proposed

rule (88 FR 82569), we would be available to provide technical assistance to State Exchanges

that want to add State-specific language to the standardized disclaimer under § 155.221(b)(2). In

using HHS-provided disclaimer language as a minimum starting point, DE entities in State

Exchanges would be required to display a disclaimer that provides information to assist

consumers in distinguishing between DE entity non-Exchange website pages that display QHPs

and those that display non-QHPs and for which products APTC and CSRs are available, all

during a single shopping experience for consumers.

We believe establishing the HHS language as a minimum standard for the standardized

disclaimer under § 155.221(b)(2) that DE entities must display across all Exchanges would

provide a necessary baseline. We also believe that meeting these standards would ensure

consumers and applicants are receiving sufficient information to help them distinguish between

DE entity website pages displaying QHPs versus pages displaying non-QHPs and provide

general uniformity among the different Exchange models when enrollment or enrollment

information is provided outside of the Exchange through a DE entity’s non-Exchange website.

Similar to the proposed requirement to extend operational readiness requirements to web-

brokers in States with State Exchanges, we also proposed to extend operational readiness

requirements to DE entities in State Exchanges and, consequently, to these State Exchanges. DE

entities that participate in FFE and SBE-FP States are required, pursuant to § 155.221(b)(4) and

(i), to demonstrate to HHS operational readiness and compliance with applicable requirements

prior to the DE entity’s non-Exchange website being used to complete an Exchange eligibility

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application or a QHP selection. In new paragraph (j)(2), we proposed to extend DE entity

operational readiness requirements to State Exchanges. Under this policy, DE entities

participating in State Exchanges would be required to demonstrate operational readiness and

compliance with applicable requirements to the State Exchange prior to the DE entity’s website

being used to complete an Exchange eligibility application or a QHP selection. We also proposed

in new paragraph (j)(2) to require these State Exchanges to establish the form and manner for

their DE entities to demonstrate operational readiness and compliance with applicable

requirements, which may include submission or completion of the same items business audit

documentation or security and privacy audit documentation in § 155.221(b)(4)(i) and (ii) to the

State Exchange, in the form and manner specified by the applicable State Exchange. Pursuant to

§ 155.221(b)(4)(i) and (ii), HHS may request a DE entity submit a number of documents to

demonstrate compliance with applicable requirements, as well as the operational readiness of its

non-Exchange website. The required documentation may include privacy questionnaires, privacy

policy statements, and terms of services, business audit reports, interconnection security

agreements, security and privacy controls assessment and plans, security, and privacy assessment

reports, plans of action and milestones, privacy impact assessments, system security and privacy

plans, incident response plans, and vulnerability scan results. We proposed to codify these

documentation standards in new paragraphs (j)(2)(i) and (ii) as illustrative examples of the type

of requirements that we encourage State Exchanges that choose to implement a DE program to

adopt as part of their operational readiness and compliance reviews of DE entities non-Exchange

websites.

This proposal would require DE entities participating in State Exchanges to meet

operational readiness requirements established by the State Exchanges, and State Exchanges

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would have flexibility when establishing operational readiness requirements for their respective

DE programs, potentially leveraging the items in § 155.220(b)(4)(i) and (ii) as the starting point

for their operational readiness requirements and associated reviews. Similar to the web-broker

operational readiness reviews under § 155.220(c)(6), the standards under § 155.221(b)(4)

governing the HHS operational readiness reviews of DE entity non-Exchange websites are also a

critical part of the oversight framework for HHS’ DE program (both Classic DE and EDE)

available in the FFEs and SBE-FPs. These standards as they apply to DE entities participating in

FFE and SBE-FP States help ensure operational readiness and compliance with applicable

requirements prior to the DE entity’s non-Exchange website being used to complete Exchange

eligibility application or a QHP selection and help ensure consumers would not be able to enroll

via a DE entity’s website that is not operationally ready. Websites that have not been tested to

see if they are operationally ready may not provide consumers with proper eligibility

determinations or may have security flaws that could make a breach involving consumer PII

more likely. Mandating DE entities that participate in State Exchanges meet minimum standards

set by the State Exchanges for operational readiness would help reduce this risk in all Exchanges.

We recognize that some State Exchanges that choose to implement a DE program may

seek to utilize DE entities already participating in DE in the FFEs or SBE-FPs. As part of

establishing its operational readiness requirements for participating DE entities, we specifically

encourage those State Exchanges to adopt the same operational readiness requirements for DE

entities established by HHS, including the third-party auditor framework adopted by HHS

pursuant to § 155.221(f) and (g). We also encourage those State Exchanges to leverage HHS’

review of those third-party audits and determinations made as to the DE entities’ functionality

and operational readiness to operate with the Federal platform (HealthCare.gov) as part of their

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assessment of DE entity compliance and readiness to operate in their State Exchange. We

recognize that leveraging HHS’ reviews may supplement other State-specific operational

readiness reviews and requirements that State Exchanges that choose to implement a DE

program might develop.

Adopting HHS’s operational readiness requirements for DE entities under §

155.221(b)(4), (f), and (g) and leveraging HHS’s review of third-party audits and determinations

made as to DE entities’ functionality and operational readiness would support State Exchanges in

having confidence in the ability of those DE entities to also participate in State Exchanges when

HHS determined that those DE entities have already demonstrated operational readiness and

compliance with applicable requirements to operate with the Federal platform (HealthCare.gov).

This approach would also help minimize the burden of operational readiness reviews on State

Exchanges and on their DE entities. For example, if the State Exchange uses the single

streamlined eligibility application described in § 155.405 and the DE entity has already been

approved to participate in the FFEs or SBE-FPs, we would encourage State Exchanges to accept

HHS’ review of and determinations made as to the DE entity’s audit documentation without

conducting further review to confirm operational readiness of the DE entity’s non-Exchange

website and compliance with the HHS minimum standards. However, we also recognize that to-

date, all State Exchanges have implemented (or intend on implementing) alternative single,

streamlined eligibility applications and eligibility systems that are tailored to their State-specific

needs and rules. Thus, it is important to provide State Exchanges with flexibility to establish

their own operational readiness requirements and associated reviews in a manner that is tailored

to best meet their State-specific needs, since State Exchanges are best positioned to make those

decisions. In the proposed rule (88 FR 82570), we therefore encouraged, but did not propose to

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require, these State Exchanges to adopt the same operational readiness requirements and third-

party auditor framework that HHS adopted under § 155.221(b)(4), (f), and (g) for DE entities

assisting FFE and SBE-FP consumers.

We explained that we would also encourage State Exchanges that choose to implement a

DE program to consider requiring their DE entities to engage a third-party auditor, consistent

with standards adopted by HHS at § 155.221(f) and (g) that apply in FFE and SBE-FP States,

to perform the operational readiness reviews, for example, to provide an unbiased confirmation

that the DE entities are able to appropriately conduct eligibility determinations. However, we

did not propose to mandate that State Exchanges require their DE entities to perform such

third-party audits as we recognize that State Exchanges may want to establish their own State-

specific requirements and mechanisms to confirm DE entity operational readiness and

compliance with applicable requirements (both HHS and State-specific standards), and we

want to ensure State Exchanges have the flexibility to establish operational readiness review

requirements that are tailored to meet State-specific rules and requirements. For example, as

noted above in this section of this final rule, if the State Exchange uses an alternative to the

single streamlined application described in § 155.405, we would not recommend leveraging

HHS’ eligibility application audit under § 155.221(b)(4)(iii), as the HHS audit results may not

be applicable to the State Exchange’s alternative eligibility applications and associated State-

developed eligibility systems. However, if the State Exchange uses the single streamlined

application described in § 155.405 we would encourage the State Exchange to use the same

third-party auditor framework and requirements that HHS adopted for FFE and SBE-FP States,

as well as accept HHS’ review of the third-party audits and determinations made as to the DE

entity’s operational readiness and compliance with the HHS minimum standards without

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conducting further review for DE entities that have already been approved to participate in the

FFEs or SBE-FPs, unless there are other unique State-specific requirements that warrant

further, targeted review.

As State Exchanges establish DE programs, we recognized that it may be in their interest

to permit a DE entity to provide consumers with access to DE entity application assisters, as

defined at § 155.20, to provide assistance with applying for a determination or redetermination of

eligibility for individual market coverage through the Exchange and insurance affordability

programs. As such, in new paragraph (j), we proposed to extend § 155.221(d) to State Exchanges

and their DE entities to allow DE entity application assisters, when permitted by the applicable

State Exchange and only to the extent permitted by applicable State law, to assist individuals in

the individual market with applying for a determination or redetermination of eligibility for

coverage through the Exchange and for insurance affordability programs, provided that such DE

entities ensure that each of its DE entity application assisters meets the requirements in §

155.415(b). Section 155.415(b) establishes minimum standards for QHP issuer and DE entity

application assisters regarding required training on QHP options and insurance affordability

programs, eligibility, benefits rules and regulations, and compliance with the Exchange’s privacy

and security standards and applicable State laws related to the sale, solicitation and negotiation

of insurance products, including any applicable State licensure laws and State laws related to

confidentiality and conflict of interest.

Although § 155.415(b) is generally applicable to all Exchanges, paragraph (b)(1)

establishes required training on QHP options and insurance affordability programs, eligibility,

and benefits rules and regulations with respect to providing assistance in the FFEs or SBE-FPs.

As proposed to be applied in State Exchanges, DE entities and their application assisters would

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be required under new paragraph (j) to complete appropriate State-required training and

registration in a manner specified by the State Exchange consistent with § 155.415(b)(1). This

State-required training and registration should similarly include training on QHP options and

insurance affordability programs, eligibility, and benefits rules and regulations, as training on

these topics would be necessary to ensure consumers are provided with vital information about

these topics if DE entities and their application assisters were permitted to assist consumers with

QHP shopping and DE in coverage offered through State Exchanges.

In addition, under this proposal, to meet the requirements of § 155.415(b)(2) and (3), DE

entities that participate in a State Exchange and want to use DE entity application assisters

would be required to coordinate with the State Exchange and appropriate State agencies to

ensure they are meet the Exchange privacy and security standards at § 155.260 consistent with

§ 155.415(b)(2), as well as comply with State laws related to the sale, solicitation, and

negotiations of health insurance products consistent with § 155.415(b)(3).

In the proposed rule (88 FR 82571), we also encouraged State Exchanges, as part of their

establishment of DE programs, to adopt an immediate suspension framework, similar to §

155.221(e) that applies in FFE and SBE-FP States, that provides for the immediate suspension

of a DE entity’s ability to transact information with the State Exchange if the State Exchange

discovers circumstances that pose unacceptable risk to the accuracy of the State Exchange’s

eligibility determinations, operations, or information-technology systems until the incident or

breach is remedied or sufficiently mitigated to the State Exchange’s satisfaction. This

provision is an important feature of HHS’ oversight of the use of DE entity non-Exchange

websites in FFE and SBE-FP States that protects consumer data and safeguards Exchange

operations and systems. State Exchanges that choose to establish a DE program and permit DE

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entities to use non-Exchange websites to assist consumers with QHP selection and submission

of Exchange eligibility applications should consider adoption of similar measures.

Finally, under new proposed § 155.221(j)(3), we proposed to extend the new requirement

that would be applicable in FFE and SBE-FP States under proposed § 155.221(b)(6) (the

proposal discussed in section III.D.8 of this final rule to mandate that DE entities implement

and prominently display website changes in a manner that is consistent with display changes

made by HHS to HealthCare.gov by meeting standards communicated and defined by HHS

within a time period set by HHS) to apply to DE entities operating in State Exchanges and,

consequently, to these State Exchanges. As reflected in the last clause of new proposed §

155.221(j)(3), for the purposes of extending this requirement to DE entities operating in the

State Exchanges, references to an FFE website would be understood to mean the State

Exchange website, references to HHS would be understood to mean the State Exchange, and

references to “unless HHS approves a deviation from those standards” would be understood to

mean “unless the State Exchange approves a deviation from those standards under the

deviation request process the State Exchange is required to establish should the State Exchange

elect to permit deviation requests.” Refer to the discussion in section III.D.8 of this final rule

for additional details on the extension of this proposal to State Exchanges and their DE entities.

We sought comment on these proposals, especially from States operating, or seeking to

operate, State Exchanges. We were particularly interested in comments regarding which of the

other current HHS standards at § 155.221 should or should not apply to State Exchanges that

choose to implement a DE program.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing these provisions as proposed. Below, we

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summarize and respond to public comments received on our proposal to amend § 155.221 to

extend certain existing HHS standards applicable to DE entities assisting the FFEs’ and SBE-

FPs’ consumers and applicants with direct enrollment in QHPs and applying for APTC/CSRs to

DE entities operating in State Exchanges, in both the Individual Market Exchanges and SHOPs.

Comment: Most commenters were broadly supportive of these proposals. Several

commenters specifically cited that requiring DE entities to display and market QHPs through the

Exchange, individual health insurance coverage as defined in § 144.103 offered outside the

Exchange (including QHPs and non-QHPs other than excepted benefits), and any other products

on separate website pages (except as permitted under § 155.221(c)), and requiring DE entities to

limit marketing of non-QHPs during the Exchange eligibility application and QHP selection

process, were important consumer safeguards. Several commenters additionally cited that the

proposals would generally enhance the consumer shopping experience by providing consumers

with a higher-quality and more consistent user experience that allows them to access accurate

coverage information whether they utilize the Exchange’s website or a DE entity’s non-

Exchange website.

A few commenters stated that if State Exchanges leveraged HHS’s review of third-party

audits and determinations made as to DE entities’ operational readiness and compliance with

applicable requirements, particularly with respect to security and privacy, that would help reduce

duplication of efforts and alleviate the compliance burden of operational readiness activities on

DE entities participating in State Exchanges and those State Exchanges, helping to increase the

likelihood of DE entity participation in State Exchanges. Some of these commenters further

expanded on this, stating that if State Exchanges leveraged HHS’s review of third-party audits

and determinations made as to DE entities’ operational readiness and compliance with applicable

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requirements, that would help DE entities avoid having to comply with a unique set of

operational readiness requirements for each State Exchange that chooses to implement a DE

program. This could provide consistency, and it may facilitate DE entities’ increased

participation across Exchanges by potentially allowing them to leverage some of their

operational readiness activities for FFE States in State Exchange States.

Response: We appreciate commenters’ support for these proposals. For the reasons we

explained in the proposed rule (88 FR 82568), we agree that requiring DE entities to display and

market QHPs through the Exchange, individual health insurance coverage as defined in §

144.103 offered outside the Exchange (including QHPs and non-QHPs other than excepted

benefits), and any other products on separate website pages (except as permitted under §

155.221(c)), and requiring DE entities to limit marketing of non-QHPs during the Exchange

eligibility application and QHP selection process, are important consumer safeguards that will

help provide consumers across all Exchanges with a more consistent shopping experience. These

safeguards are particularly important as there is increasing interest among State Exchanges in

pursuing DE, which, absent this proposal, may result in divergence across Exchanges in terms of

both DE plan display and marketing practices and the consumer experience.

We also agree that with the commenters that if State Exchanges that choose to implement

a DE program leveraged HHS’s review of third-party audits and determinations made as to DE

entities’ operational readiness and compliance with applicable requirements, that would help

alleviate the burden of operational readiness activities on DE entities in participating in State

Exchanges and those State Exchanges. We further agree that the reduced burden may encourage

DE entity participation in the State Exchanges. As we explained in the proposed rule (88 FR

82562), we generally encourage any State Exchange that elects to implement a DE program to

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leverage our operational readiness reviews conducted for DE entities in the FFEs and SBE-FPs,

as appropriate.

We note that in establishing the standards for their DE programs, State Exchanges that

elect to implement a DE program must develop criteria and a process for assessing the

operational readiness and compliance of their DE entities with applicable rules, and these State

Exchanges may develop operational readiness requirements that address or reflect State-specific

needs and requirements. Notably, our policy provides State Exchanges with the flexibility to

tailor their criteria and process to reflect such State-specific needs and requirements. For

example, a State may develop standards and processes for testing the State-specific interfaces

and associated functionality between their DE entity non-Exchange websites and the State

Exchange’s centralized eligibility and enrollment platform that go beyond what is required by

the HHS standards under § 155.221(b)(4), to ensure that eligibility applications completed on DE

entity non-Exchange websites result in accurate eligibility determinations based on State-specific

rules for eligibility. Similarly, a State may decide to develop processes to confirm a DE entity is

able to effectively carry out eligibility functions with the State Medicaid agency that go beyond

what is required by the HHS standards under § 155.221(b)(4), to ensure that an eligibility

application completed on a DE entity non-Exchange website results in accurate eligibility

determinations based on State-specific rules for Medicaid eligibility.

Comment: A few commenters who supported the proposals stated that the final rule

should indicate how CMS will track compliance with the requirements applicable to State

Exchanges that choose to implement DE programs under § 155.221(j).

Response: We monitor State Exchange compliance with Exchange requirements under

Part 155 of our regulations through the annual collection and review of State-submitted

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information, performance monitoring data, financial reporting, and independent external audits,

as specified at § 155.1200. We will use that information and data to drive our efforts to monitor

compliance with § 155.221(j) by State Exchanges that choose to implement DE programs. We

also rely on regular communications with the State Exchanges to assess compliance with

applicable requirements, as well as to gather information and provide technical assistance as

needed. We may also consider the development of new additional tools to assist with oversight

that could enhance transparency into compliance by State Exchanges with applicable

requirements, including those applicable to their DE entities under § 155.221(j).

In addition, pursuant to § 155.105, States that seek to operate a State Exchange must

complete and submit an Exchange Blueprint application. The Exchange Blueprint application

documents that an Exchange will meet the legal and operational readiness requirements required

of a State Exchange. As part of a State’s Blueprint submission, the State also agrees to

demonstrate operational readiness to implement and execute the HHS requirements applicable to

State Exchanges, which would include the new requirements under § 155.221(j) applicable to

State Exchanges that choose to implement a DE program. As discussed in other sections of this

rule, HHS is also codifying requirements related to the approval of a State Exchange whereby

HHS will require a State seeking to establish a State Exchange to provide supplemental

information in its Blueprint application to demonstrate its ability to implement and comply with

the requirements for a State Exchange, which would include the provision of information from

State Exchanges that choose to implement a DE program on how they intend to implement the

new requirements in § 155.221(j) and oversee compliance going forward. Such supporting

information would inform HHS’s decision to approve or conditionally approve a State Exchange

and would help facilitate HHS’ oversight of compliance with HHS requirements applicable to

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State Exchanges that choose to implement a DE program. Additionally, under § 155.105, an

existing State Exchange must notify HHS in writing before making a significant change to its

approved Exchange Blueprint, and no significant change to an Exchange Blueprint may be

effective until it is approved by HHS in writing or 60 days after HHS receipt of a completed

request. Accordingly, for existing State Exchanges that seek to newly implement a DE program,

HHS would require the State to submit an updated Exchange Blueprint and participate in

operational readiness reviews related to the implementation and ongoing operation of such a DE

program, as we would consider a State Exchange implementing a DE program a significant

change. Once implemented, for State Exchange ongoing operation of a DE program, HHS would

monitor State Exchange operations through the annual reporting by State Exchanges related to

compliance with Federal requirements, consistent with our oversight authority at §

155.1200(b)(2). Specifically, HHS would use this oversight authority to evaluate State Exchange

compliance with the policies we are finalizing at § 155.221 for those State Exchanges that elect

to operate a DE program, as HHS does with other aspects of State Exchange operations on an

annual basis. If there is information suggesting a State Exchange or one of its DE entities does

not meet the requirements of § 155.221(j), we would notify the State Exchange and give them an

opportunity to address the potential non-compliance. HHS intends to consider the development

of new, additional tools to assist with oversight that could enhance transparency into compliance

by State Exchanges, including their DE programs, with applicable Federal requirements. We

may also consider use of other oversight tools and authority, including those under Part 155 of

our regulations, as appropriate.

Comment: A few commenters suggested that CMS should implement even more stringent

standards in the future, citing that it is especially important that DE entities provide consumers

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with clear, correct information about QHPs and insurance affordability programs, particularly

that they display all plans in their cost comparison tools and not segregate plans that they do not

sell.

Response: We agree with commenters that it is crucial that DE entities provide

consumers with clear, correct information about QHPs and insurance affordability programs. The

extension of certain standards applicable to DE entities assisting the FFEs’ and SBE-FPs’

consumers and applicants to DE entities operating in State Exchanges will help ensure that all

DE entities consistently provide consumers with clear, correct information about their Exchange

coverage options. The framework adopted in this final rule will do so by requiring that DE

entities across all Exchanges meet minimum standards governing DE entity marketing and

display of QHPs and non-QHPs, providing consumers with correct information and refraining

from certain conduct, marketing of non-QHPs, website disclaimer language, and operational

readiness.

While there are other standards under § 155.221 that are applicable to DE entity

operations in FFE and SBE-FP States, for the reasons stated in the proposed rule (88 FR 82566)

and earlier in this section of this final rule, we are extending to DE entities in State Exchanges

the subset of critical standards that we believe help ensure proper eligibility determinations,

protect against security breaches or incidents through implementation of operational readiness

reviews, and minimize consumer confusion. At the same time, for the reasons stated in the

proposed rule (88 FR 82567) and earlier in this section of this final rule, our approach preserves

flexibility for State Exchanges that choose to implement a DE program to tailor their programs

and establish their own standards with respect to certain aspects of their DE programs, such as

operational readiness demonstrations and suspension frameworks. We believe this flexibility will

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help ensure that State Exchanges’ DE programs and their standards are designed to meet the

particular operational and business needs of the State Exchanges.

In the proposed rule, we sought comment on which of the current provisions at § 155.221

should or should not apply to State Exchanges and DE entities that assist consumers in State

Exchanges. We continue to encourage specific feedback from interested parties, particularly

from State Exchanges and DE entities operating in State Exchanges, on additional provisions in

§ 155.221 we should consider extending to State Exchanges and their DE entities or new

standards that we should consider adopting for all Exchanges and DE entities in the future.

Comment: Several commenters opposed the extension of certain HHS standards under §

155.221 to State Exchanges and their DE entities, with a majority of those commenters stating

that it generally hinders State Exchanges’ flexibility in establishing their own rules that govern

their DE programs. One commenter who supported the proposal stated it supports measures to

protect necessary consumer safeguards to ensure access to consistent, reliable information from

DE entities. However, this commenter suggested that CMS permit State Exchanges additional

flexibility to implement measures that they determine will best support those consumer

safeguards to ensure consumers can more easily access enrollment assistance from web-broker

DE entities. A few commenters stated that State Exchanges best understand their market

dynamics and can be the most creative in regulating a DE program in their States. Further, a few

commenters stated that the proposed approach imposes an unnecessary burden on State

Exchanges, which will now have to develop policies and procedures to enforce the HHS DE

standards extended to them and their DE entities under § 155.221(j). One commenter requested

that CMS provide additional detail on why current State Exchange standards related to DE

programs are insufficient.

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Response: We agree that State Exchanges are best positioned to make certain judgments

about how to regulate DE programs in their States, and the framework we are finalizing gives

them flexibility to do so. For example, as we stated in the proposed rule (88 FR 82570), we

recognize that it is important to provide State Exchanges with flexibility to adopt their own

operational readiness requirements in a manner that is tailored to best meet the State-specific

needs and requirements of the State Exchanges. Accordingly, we encouraged, but did not

propose to require, State Exchanges to adopt the same operational readiness requirements and

third-party auditor framework that HHS adopted under § 155.221(b)(4), (f), and (g) for DE

entities assisting FFE and SBE-FP consumers. Similarly, we also encouraged, but did not

propose to require, State Exchanges to adopt an immediate suspension framework, similar to §

155.221(e) that applies in FFE and SBE-FP States, that provides for the immediate suspension of

a DE entity’s ability to transact information with the State Exchange if the State Exchange

discovers circumstances that pose unacceptable risk to the accuracy of the State Exchange’s

eligibility determinations, operations, or information-technology systems until the incident or

breach is remedied or sufficiently mitigated to the State Exchange’s satisfaction.

At the same time, however, we continue to believe, for the reasons stated in the proposed

rule (88 FR 82566) and earlier in this section of this final rule, that it is important to extend to

DE entities in State Exchanges – and, consequently, those State Exchanges that choose to

implement a DE program – certain HHS standards that we identified as critical consumer

protections to help ensure proper eligibility determinations, protect against security breaches or

incidents through implementation of operational readiness reviews, and minimize consumer

confusion. Still, we appreciate commenters’ input on the degree of flexibility that should be

afforded to State Exchanges, and we may consider that feedback to inform potential additional

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proposals or changes in this area in future rulemaking.

We recognize that this approach may impose a burden on State Exchanges that choose to

implement DE programs, since they would newly be subject to the HHS standards being

extended to them and their DE entities. We document that burden in the Regulatory Impact

Analysis and Information Collection Requirement sections of this final rule.

202

However, we see

potential for State Exchanges to realize benefits from implementing DE entity programs and

adhering to the HHS standards being extended to them. For example, implementing DE

programs would diversify and expand enrollment channels that State Exchange consumers could

use to enroll in QHPs offered through the Exchange and apply for APTC/CSRs. As a result,

more consumers may enroll in coverage offered on those State Exchanges, which would lead

State Exchanges receiving a greater amount of user fees from issuers on their Exchanges.

Furthermore, State Exchanges may benefit from reduced consumer traffic on their websites,

given a shift in some consumer traffic to DE entity non-Exchange websites. That may reduce

State Exchanges’ website maintenance costs, as well as costs related to providing assistance to

consumers with using those websites.

In response to the commenter who requested that we provide additional detail on why

current State Exchange standards related to DE programs are insufficient, as we explained in the

proposed rule (88 FR 82566) and noted earlier in this final rule, our regulations do not currently

address whether and how DE entities may assist consumers and applicants with enrollment in

QHPs and submission of applications for APTC/CSRs in State Exchanges, and to-date, no State

Exchange has implemented a DE program. We pursued these proposals as we anticipate State

Exchanges will be interested in exploring such programs to expand the available channels for

202

Also see 88 FR 82615 through 82617, 82625, and 82633.

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consumers to apply for and enroll in Exchange coverage, and it is important for baseline

consumer protections and Exchange operation safeguards to apply across all Exchange types.

Comment: One commenter stated that the proposal could be viewed as overreaching,

exceeding the statutory authority granted to HHS under the ACA. The commenter suggested that

the ACA allows significant leeway for State Exchanges to manage their Exchange programs,

including the operation of web-brokers and DE programs. This commenter stated that by

imposing rigid HHS standards, CMS may inadvertently hinder the growth and success of DE

pathways.

Response: We appreciate the commenter’s feedback. As we explained in the proposed

rule (88 FR 82566), section 1312(e) of the ACA provides that

the HHS Secretary shall establish

procedures under which a State may allow agents, brokers, and web-brokers to enroll individuals

in QHPs. The Secretary also has authority under section 1321(a) of the ACA to promulgate

regulations with respect to the establishment and operation of Exchanges, the offering of QHPs

through such Exchanges, and such other requirements as the HHS Secretary determines

appropriate.

203

HHS previously leveraged these authorities to establish the existing agent, broker,

and web-broker standards applicable in FFE and SBE-FP States, which are currently codified in

§§ 155.220 and 155.221.

204

In addition, section 1413 of the ACA directs the Secretary to

establish, subject to minimum requirements, a streamlined enrollment process for enrollment in

QHPs and all insurance affordability programs. This authority, along with the Secretary’s

rulemaking authority under section 1321(a) of the ACA, was previously leveraged to establish

the existing QHP issuer DE entity requirements applicable in FFE and SBE-FP States, which are

203

Section 1321(a)(1)(A), (B) and (D) of the ACA.

204

See 77 FR 18334 through 18336; 78 FR 15533; 78 FR 54134; 79 FR 13837; 81 FR 12338; 81 FR 94176; 83 FR

16981 through 16982; 84 FR 17563; 85 FR 37248; 86 FR 24288; 87 FR 27388; and 88 FR 25917.

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codified in §§ 155.221, 156.265, and 156.1230.

205

We therefore disagree that the amendments to

§ 155.221 exceed the authority granted to HHS under the ACA.

We do not intend, or expect, for the extension of certain HHS standards applicable to DE

entities assisting the FFEs’ and SBE-FPs’ consumers and applicants to DE entities operating in

State Exchanges that choose to implement a DE program to hinder the growth or success of DE

pathways. Notably, to date, no State Exchanges have implemented DE programs. As we

explained in the proposed rule (88 FR 82566) and earlier in this section of this final rule, we are

extending to DE entities in State Exchanges (that choose to implement DE programs) the

standards that we identified as critical safeguards to help ensure proper eligibility determinations,

protect against security breaches or incidents through implementation of operational readiness

reviews, and minimize consumer confusion. At the same time, for the reasons stated in the

proposed rule (88 FR 82567) and earlier in this section of this final rule, our policies preserve

flexibility for State Exchanges to tailor their DE programs and establish their own standards with

respect to certain aspects of their DE programs, such as operational readiness demonstrations and

suspension frameworks. We believe this flexibility will help ensure that State Exchange DE

programs and their standards are designed to meet the particular operational and business needs

of the State Exchanges, while also protecting consumers and safeguarding Exchange operations.

We also note that if State Exchanges leverage HHS’s review of third-party audits and

determinations made as to DE entities’ operational readiness and compliance with applicable

requirements, as our approach encourages them to, that would alleviate the burden of operational

readiness activities on DE entities in participating in State Exchanges and those State Exchanges,

205

See 77 FR 18425 through 18246; 78 FR 54124 through 54126; 81 FR 12309 through 12310; 81 FR 94152; 81 FR

94184; 83 FR 16981 through 16982, 17030; 84 FR 17521 through 17525, 17546 through 17547; and 86 FR 24209

through 24214.

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which would encourage DE entity participation in those State Exchanges.

Comment: A few commenters suggested that in the future, CMS should require State

Exchanges to implement DE programs. These commenters stated that Exchange DE programs

can have a positive impact on enrollment in QHPs offered through those Exchanges given recent

enrollment growth among FFE and SBE-FP States, which can be attributed in some part to the

DE program HHS adopted for FFEs and SBE-FPs. One commenter requested that CMS regularly

publish statistics on the number of consumers who select a plan and enroll in QHPs offered on

the FFEs or SBE-FPs through DE entity non-Exchange websites, to support the ability of

interested parties, particularly State Exchanges, to assess whether DE may benefit their

consumers in the future.

Response: We appreciate commenters’ feedback and agree that DE programs can have a

positive impact on enrollment in QHPs offered through Exchanges. As we explained in the

proposed rule and earlier in this section of this final rule, section 1312(e) of the ACA provides

that

the HHS shall establish procedures under which a State may allow agents, brokers, and web-

brokers to enroll individuals in QHPs. Accordingly, § 155.221(a), as finalized by this final rule,

provides that Exchanges may permit QHP issuers and web-brokers that meet applicable

requirements to assist consumers with direct enrollment in QHPs offered through the Exchange

in a manner that is considered to be through the Exchange, to the extent permitted by applicable

State law. We did not propose to require State Exchanges to implement a DE program and

decline to adopt such a requirement in this final rule. As finalized, the amendments to § 155.221

establish HHS minimum standards to ensure key consumer safeguards also apply to State

Exchange consumers if the State Exchange elects to operate a DE program.

We note that we published data on the impact of the DE program HHS adopted for FFE

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and SBE-FP States and encourage interested parties to review such data.

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For example, we

published a comparison of plan year 2020 and plan year 2021 open enrollment plan selection

data by enrollment channel at https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-

Resources/Downloads/Impact-EDE-OEP-2021-Coverage.pdf.

10. Failure to Reconcile (FTR) Process (§ 155.305(f)(4))

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82571), we proposed changes and updates to § 155.305(f)(4). We proposed, in

connection with the FTR process described in § 155.305(f)(4), to require all Exchanges,

including State Exchanges, to send notices to tax filers for the first year in which they failed to

reconcile APTC starting in PY 2025 as an initial warning to inform and educate tax filers that

they need to file and reconcile or risk being determined ineligible for APTC if they fail to file

and reconcile for a second consecutive year. We are finalizing this policy as proposed, except

that we have modified paragraph (f)(4)(i) and added paragraphs (f)(4)(i)(A) and (B) to clarify

that an Exchange must either send a notice to a tax filer as described above or send a more

general notice to an enrollee or their tax filer explaining that they are at risk of losing APTC.

This modification does not impact any substantive rights or obligations described in the proposed

rule, but rather clarifies in regulation text the method by which Exchanges can comply with the

requirement.

As part of the 2024 Payment Notice (88 FR 25814 through 25816), we changed the FTR

process such that an Exchange may only determine enrollees ineligible for APTC after a tax filer

(or a tax filer’s spouse, if married) has failed to file a Federal income tax return and reconcile

their past APTC for two consecutive years (specifically, years for which tax data will be utilized

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https://www.cms.gov/marketplace/resources/forms-reports-other.

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for verification of household income and family size). However, in that rule, we did not impose a

requirement for Exchanges to notify enrollees during the first year that the applicable tax filer

failed to file and reconcile.

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule, we

proposed to require that all Exchanges be required to send informative notices at least annually

to tax filers who have failed to file and reconcile. Since Exchanges are prohibited from sending

protected Federal tax information (FTI) to an individual who may not be the tax filer, only the

FTR Open Enrollment notices sent directly to the tax filer may directly state that the IRS data

indicates the tax filer failed to file and reconcile, consistent with standards applicable protection

of FTI. An Exchange may not always be able to send FTR Open Enrollment notices directly to

the tax filer because Exchange notices may be sent to the household contact or enrollee on the

household’s Exchange account or insurance policy, as is done in the Exchanges on the Federal

platform, and this person is not necessarily the tax filer. Therefore, to comply with the

prohibition on sending FTI (including information about failing to file and reconcile) in cases

where the household contact or enrollee is not the tax filer, the Exchange may send notices that

contain broad, general language regarding FTR referred to as “combined notices.” For example,

an Exchange can send the same Exchange Open Enrollment Notice to multiple groups of

consumers at risk for APTC discontinuation in the upcoming coverage year such as those flagged

as having FTR status, those for whom the Exchange has received updated income information

that suggests the consumers may have income too high to qualify for APTC, and those who did

not permit the Exchange to check IRS data. Because the combined notices are sent to some

consumers who are currently unaffected by FTR, and not exclusively to individuals who are

affected by FTR, they are generally not considered FTI under IRS rules and may be sent using

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the standard notice functionality without the protections required for FTI.

As background, Exchange enrollees whose tax filer fails to comply with current §

155.305(f)(4) are referred to as having failed to “file and reconcile.” These individuals are

referred to as having FTR status, and the Exchanges conduct the FTR process to identify such

individuals. In the 2024 Payment Notice (88 FR 25814 through 25816), we finalized a new

process for Exchanges to conduct FTR to address concerns that the pre-existing FTR process

requiring Exchanges to determine an enrollee ineligible for APTC after one year of having an

FTR status could be overly punitive. Under the previous policy, enrollees occasionally had their

APTC ended due to delayed data processing, in which case their only remedy was to appeal to

get their APTC reinstated. Enrollees or their tax filers also may have been confused by or

received inadequate education on the requirement to file and reconcile. HHS’ and the State

Exchanges’ experiences with running FTR operations showed that Exchange enrollees often do

not understand the requirement that their tax filer must file a Federal income tax return and

reconcile their APTC or that they must also submit IRS Form 8962 to properly reconcile their

APTC, even though both the single, streamlined application used by Exchanges on the Federal

platform and the QHP enrollment process require a consumer to attest to understanding the

requirement to file and reconcile. Note, the updated policy in the 2024 Payment Notice does not

relieve tax filers from their requirement to reconcile each year nor any potential tax liability. By

making these changes to the FTR processes in the 2024 Payment Notice and requiring

Exchanges to determine an enrollee ineligible for APTC only after having an FTR status for two

consecutive years (specifically, years for which tax data will be utilized for verification of

household income and family size), Exchanges now have more opportunity to conduct outreach

and send notices to enrollees or their tax filers for whom data indicate the tax filer has failed to

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file and reconcile and to prevent erroneous terminations of APTC, as well as to provide access to

APTC for an additional year even when APTC would have been correctly terminated under the

original FTR process.

There are limitations to these notices; notices that are sent directly to the tax filers and

explicitly describe their FTR status must be compliant with IRS requirements for disclosing FTI,

which can be a complex process and incompatible with some Exchanges’ infrastructure.

Alternatively, combined notices, which do not contain FTI, have limitations in that they do not

explicitly inform the recipients that they are at risk of losing APTC due to the household tax filer

being found to have failed to file and reconcile. However, both types of notices will create an

opportunity for State Exchanges to educate enrollees or their tax filers on the requirement to

reconcile their APTC with the PTC allowed. This will address the consumer confusion and

knowledge gaps that were identified by both HHS and State Exchanges, which were key

considerations in making the changes to the FTR process described in the 2024 Payment Notice,

wherein tax filers now must be identified as FTR status for two years prior to having their APTC

removed. With this additional year for tax filers to correct their FTR status, consumers will be

better able to take appropriate action prior to losing their APTC and file and reconcile in

response to these notices.

Under the policy finalized in this rule, Exchanges on the Federal platform will continue

to send notices to enrollees and their tax filers for the year in which the tax filer has failed to

reconcile APTC. Direct notices to the tax filer will provide an initial warning to inform and

educate them that they need to file and reconcile, or risk being determined ineligible for APTC if

they fail to file and reconcile for a second consecutive tax year. A combined notice to the

enrollee will provide more general information about the risk of losing APTC. State Exchanges

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will be required to send either one of these notices and may send a combined notice to the tax

filer if desired. Our policy to codify this practice for Exchanges on the Federal platform and

require State Exchanges to notify either an enrollee or their tax filer as described above, ensures

that tax filers who have been determined to have FTR status for one year are adequately educated

on the file and reconcile requirement, and have ample opportunity to address the issue and file

and reconcile their APTC before they are determined to have FTR status for two consecutive

years. This policy supports compliance with the filing and reconciling requirement under section

36B(f) of the Code and its implementing regulations at 26 CFR 1.36B–4(a)(1)(i) and

(a)(1)(ii)(A), minimizes the potential for APTC recipients to incur large tax liabilities over time,

and supports eligible enrollees’ continuous enrollment in Exchange coverage with APTC by

avoiding situations where enrollees become uninsured when their APTC is terminated.

Additionally, this policy better aligns State Exchanges’ Failure to Reconcile processes with that

of the Exchanges on the Federal platform.

We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision with modifications to require all

Exchanges to either send informative notices directly to a tax filer alerting them of their FTR

status, or to send informative notices that do not contain FTI either to the enrollee or their tax

filer if through the income verification processes described in § 155.320, they have been found to

have failed to reconcile their APTC for only one year. We are reorganizing the regulatory text at

§ 155.305(f)(4)(i) to create paragraphs (f)(4)(i)(A) and (f)(4)(i)(B) for ease of readability, and are

clarifying that new paragraph (f)(4)(i)(B) describes the notifications Exchanges may send to an

enrollee or their tax filer that informs them that they may be at risk of being determined

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ineligible for APTC in the future, but does so without conveying FTI. We are also clarifying in

this final rule that we will provide Exchanges with additional guidance on implementation, in

particular around notice language, which is informative to the consumer without sharing

protected FTI. We summarize and respond to public comments received on the proposed policy

below.

Comment: The majority of commenters supported the proposal requiring an Exchange to

notify enrollees and their tax filers of their FTR status when they are identified as having failed

to reconcile for one year. Several of these commenters in particular cited its positive impact on

continuity of coverage for consumers enrolled in Exchange coverage.

Response: We agree that the proposed FTR policy will have a positive impact on enrollee

retention of APTC and coverage by ensuring enrollees and their tax filers are well informed of

the tax reconciliation requirement and/or of a potential FTR status.

Comment: A few commenters opposed the proposal requiring all Exchanges to check

FTR and send FTR notices on an annual basis to enrollees, or their tax filers, who have an FTR

status. These commenters stated that it is prohibitively difficult to send notices containing

protected FTI to enrollees or their tax filers. One of these commenters agreed with the

importance of informing tax filers of the tax credit reconciliation requirement but disagreed with

the proposed method. This commenter stated that Exchanges and their consumers are better

served by flexible real-time education, rather than annual mandatory notices.

Response: We recognize the complexity of sharing FTI with enrollees, which is why the

proposed requirement allows for the use of combined notices. These combined notices may

contain broad, general language, and can be sent to multiple groups of consumers at risk for

APTC discontinuation in the following coverage year. We currently provide samples of such

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combined notices amongst other resources online at Marketplace.cms.gov. Additionally, we will

provide technical assistance, guidance, and updated sample notice language to Exchanges in

advance of implementation for plan year 2025.

While we are finalizing the requirement for Exchanges to send on an annual basis FTR

notices to consumers identified as having an FTR status, we appreciate that there are other

approaches to educating consumers on the FTR requirements. We wish to note that Exchanges

will have flexibility in the notice content and process. While annual notices are a minimum

requirement, Exchanges are welcome to expand on these with real-time education and other

consumer outreach.

Comment: A few commenters opposed this proposal, citing the need for State flexibility

in Exchange operations.

Response: Exchanges will still have flexibility in the manner of sending and content of

FTR notices, but this policy provides important consumer protections by ensuring that enrollees

and/or their tax filers are at a minimum informed of the APTC reconciliation requirement as well

as the potential for loss of APTC eligibility each year. While Exchanges will have the

opportunity to provide additional outreach and education, we see these annual notices as a

minimum standard.

Comment: One commenter opposed this proposal, stating that they did not consider

Exchanges to be the optimal choice to send annual FTR notices. This commenter suggested that

the IRS would be a better agency to create and send out these notices, in particular due to the

protections around FTI.

Response: The IRS has existing processes under which tax filers may be contacted if they

file a tax return without reconciling APTC. However, Exchanges are also well-suited to send

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these FTR notices. Exchanges are already equipped to send a variety of different notice types to

QHP enrollees, both through mail and Exchange portals. Furthermore, we know through the

“Annual Eligibility Redetermination Plans” shared by State Exchanges with HHS that prior to

HHS pausing FTR operations for all Exchanges in 2020 due to the effects of the COVID-19

public health emergency, the majority of State Exchanges were already sending out either direct

or combined FTR notices to enrollees or their tax filer, similar to the ones being described in this

rule. Exchanges will be able to utilize these existing structures to develop and send FTR notices

in compliance with this rule. Additionally, Exchanges are allowed to send out informative,

combined notices that do not contain protected FTI.

Comment: Many commenters expressed support for the proposal, or support for the

intention of the proposal, but also expressed the need for CMS to provide further guidance and

support on best-practices and clear, actionable language for the notices. In particular, they

requested that HHS provide guidance in developing the combined notices that do not contain

protected FTI. Several of these commenters shared concerns that since these notices cannot

explicitly state that the enrollee or their tax filer has FTR status due to FTI privacy rules, the

notices may be confusing or ineffective, in particular since they will be warning about the

possibility of losing APTC as far as one year out. Several of these commenters requested that

HHS refine this language and provide templates to other Exchanges to ensure that notices are

consistent. One of these commenters also suggested that these consumers would not be able to

gain clarity by contacting the Exchange call-center, as its employees are similarly bound by rules

surrounding the disclosure of FTI.

Response: We appreciate these comments and acknowledge that the tax reconciliation

requirement is complex and can be complicated to convey to consumers. We are developing

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updated FTR notices for enrollees or their tax filers who are found with a one-year FTR status as

well as for those found with a two-year FTR status. These notices will be posted publicly at

Marketplace.cms.gov once finalized, in advance of implementation for the PY 2025 open

enrollment period. Exchanges will be able to use this notice language to train and educate their

call-center staff on different ways to educate consumers of the APTC reconciliation requirement,

without disclosing FTI. We will also work with Exchanges to provide technical assistance and

guidance in advance of the restart of FTR operations.

In the meantime, sample notices that were sent out to individuals with FTR status prior to

the pause in 2020 are available at Marketplace.cms.gov and can help guide Exchanges as they

prepare for implementation and further develop their own notices. We also would like to note

that many State Exchanges have already developed FTR notices and noticing processes that were

utilized prior to the FTR pause.

Comment: A few commenters expressed support for the current proposal, acknowledging

that educating consumers through annual FTR notices protects them and their coverage.

However, these commenters also stated that the FTR process overall is flawed, overly punitive to

consumers, and a threat to continuity of coverage. As such these commenters urged its repeal.

Response: We believe that the changes finalized in the 2024 Notice of Benefit and

Payment Parameters, along with the changes finalized in this rule, properly balance consumer

protections and program integrity concerns, and therefore support that we should continue to

improve the FTR process rather than repeal it entirely.

11. Verification Process Related to Eligibility for Enrollment in a QHP through the Exchange (§

155.315(e))

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

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82510, 82572), we proposed changes and updates to § 155.315. We proposed to amend §

155.315(e) by revising paragraph (e)(1) to permit all Exchanges to accept an applicant’s

attestation of incarceration status and paragraph (e)(2) to allow Exchanges to electronically

verify a consumer’s current incarceration status using an HHS-approved verification data source.

We also proposed to amend the reference in paragraph (e)(3) to reflect that if an Exchange

verifies an applicant’s attestation of incarceration status using an approved data source and the

attestation is not reasonably compatible with the information provided from the stated data

source or other information provided by the applicant or in the records of the Exchange, then the

Exchange must follow the data matching issue (DMI) process set forth in § 155.315(f). We noted

in the proposed rule that if the proposed policy was finalized, Exchanges using the Federal

eligibility and enrollment platform, including SBE-FPs, that currently use the incarceration

verification data source offered through the Federal Data Services Hub (the “Hub”) would be

able to accept consumer attestation of incarceration status without further verification of

incarceration status.

As background, section 1312(f)(1)(B) of the ACA states that an individual shall not be

treated as a qualified individual for enrollment in a QHP if, at the time of enrollment, the

individual is incarcerated, other than incarceration pending the disposition of charges. Sections

155.315(e) and (e)(1) currently state that Exchanges must verify incarceration status with a data

source approved by HHS and deemed accurate, current, and offering less administrative

complexity than paper verification. When an individual’s incarceration attestation conflicts with

information from an approved data source or other information provided by the applicant or in

the records of the Exchange, § 155.315(e)(3) requires Exchanges to create a DMI as outlined in §

155.315(f). However, if an approved data source is unavailable, an Exchange may accept

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attestation of incarceration without further verification under § 155.315(e)(2).

Under proposed paragraphs (e)(1) and (2), an Exchange would be able to accept a

consumer’s attestation of incarceration status or propose an electronic data source for

incarceration verification to HHS for approval and use that approved source to verify

incarceration status. Should a State Exchange choose to propose use of an alternative electronic

data source for verifying incarceration status, HHS would review such proposals in accordance

with the process under § 155.315(h), through which HHS would make a determination based on

the proposed use of the alternative data source and whether it minimizes administrative costs and

burdens on individuals while it maintains accuracy and minimizes delay. We proposed at

paragraph (e)(3) that if an Exchange verifies an applicant’s attestation of incarceration status

using an approved data source as provided under proposed paragraph (e)(2), to the extent that the

applicant’s attestation is not reasonably compatible with information from the approved data

source or other information provided by the applicant or in the records of the Exchange, the

Exchange would be required to follow the DMI procedures at § 155.315(f).

In the Exchange Establishment Rule (77 FR 18362), we recognized that there may be

challenges in the availability of electronic incarceration verification data but believed that so

long as an incarceration verification data source existed that has been approved by HHS, it

should be used to verify incarceration status. We also recognized that requesting consumer

attestation of incarceration status and accepting such attestation without further verification when

an accurate data source was unavailable is necessary since incarceration status is a statutory

standard for eligibility to enroll in a QHP.

Exchanges using the Federal eligibility and enrollment platform, including SBE-FPs,

currently verify whether an applicant is incarcerated through the Hub by using the Social

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Security Administration’s (SSA) Prisoner Update Processing System (PUPS). PUPS is currently

maintained by SSA and is the only national database that reflects information from Federal,

State, and local correctional records. Our experience administering the Federal eligibility and

enrollment platform, along with the experience from the State Exchanges that have used the

PUPS data, have demonstrated that verifying incarceration data using PUPS has resulted in a

high number of DMIs, few of which identify QHP applicants who are incarcerated. For example,

we conducted an internal study and found that out of 110,802 incarceration DMIs generated

between PYs 2018 to 2019, 96.5 percent of them were resolved in favor of the applicant. More

importantly of those 3,878 applicants whose DMIs were not resolved in their favor (3.5 percent

of 110,802), we found that only a total of 2,469 applied for QHP coverage during PYs 2018 and

2019. Of these 2,469 ineligible applicants, 950 applicants were released from either prison or jail

within 90 days after the application submission date. Excluding these individuals leaves 1,519

QHP-ineligible individuals, of which 921 applicants effectuated coverage (that is, made the

binder payment), which is allowed while awaiting DMI clearance, thus resulting in an improper

APTC payment. An average annual APTC per individual of $1,569 was estimated for the 921

QHP ineligible applicants with effectuated policies.

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This yields potential improper payments

of approximately $361,262.25 over 3 months. Because only a very small number of incarcerated

individuals apply to enroll in QHPs, verifying incarceration status using PUPs and conducting

the DMI process outlined at § 155.315(f) results in Exchanges saving only a fraction of improper

207

This per-person per-year estimate was calculated by multiplying the monthly APTC benefit that each ineligible

and effectuated applicant was estimated to receive in their FFE application by the maximum number of months the

applicant could have been enrolled in a QHP while still incarcerated and pending DMI clearance. For open

enrollment applications, an enrollment start date of January 1 was used (45 CFR 155.410). For special enrollment

period applicants, the previous coverage effective date rules were used where if the applicant applied between the 1

and 15

of the month, an enrollment start date of the 1

of the following month was used. If the applicant applied

after the 16

of the month, an enrollment start date of the 1

of the month 2 months following the application month

was used. 45 CFR 155.420.

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overpayment of APTC, and those savings are dwarfed by the administrative costs imposed by

using PUPs and conducting the DMI process.

We conducted a cost-benefit assessment and determined that the cost to verify

incarceration status electronically far exceeds potential savings. Should the Exchange conduct an

electronic incarceration verification check, such as a verification check of a consumer’s

attestation using PUPS data, it would cost more than $4 million to operate yearly, along with a

one-time implementation startup cost of approximately $200,000. Furthermore, connecting to an

alternative incarceration data source, such as PUPS, and conducting the DMI process outlined at

§ 155.315(f) can be very costly to Exchanges. In PY 2019, nearly 38,000 out of 78,000

applicants with an incarceration DMI submitted documents to attempt to resolve the

incarceration DMI. To process DMIs, the Exchange incurs costs for the eligibility-verification

contractor on a fixed-price basis totaling about $0.57 million per year for verification of

incarceration. This figure does not include other costs related to sending notices to consumers,

processing appeals, and handling call center transactions. Our 2019 study concluded that those

who receive an incarceration DMI are statistically likely to be eligible to enroll in a QHP as the

applicants were released from either prison or jail within 90 days after the application submission

date. However, an unresolved incarcerated DMI can result in a complete loss of coverage.

The processes of notifying consumers of their DMIs and resolving them have been

burdensome and has negatively impacted the consumer experience. When an incarceration DMI

is generated, applicants are required to provide documentation to show that they are no longer

incarcerated.

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This creates a significant enrollment burden for formerly incarcerated

208

HealthCare.gov. (n.d.) How do I resolve a Data Matching Issue. Dept. of Health and Human Services.

https://www.healthcare.gov/help/how-do-i-resolve-an-inconsistency/#incarceration-status.

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individuals, a population comprised of a significant number of people with disabilities.

209

Many

documents that can prove incarceration status cannot be obtained without an unexpired proof of

identity document, and most cannot be obtained without submitting non-refundable payments.

Incarceration may inhibit one’s financial savings, and formerly incarcerated individuals are less

likely to secure employment.

210

These findings support our beliefs that incarcerated individuals apply for QHP coverage

at very low rates, and that their applications are considered to be a very low program integrity

risk for Exchanges, which do not warrant always conducting an extensive incarceration

verification check. We also believe that previous guidance to conduct incarceration status

verification

211

may have contributed to inequity in the Exchange population, as Black adults

were imprisoned at five times the rate for White adults

212

and are more likely to face systemic

obstacles hindering their ability to secure employment post incarceration.

213

Given these concerns, we proposed to amend § 155.315(e) by revising paragraph (e)(1) to

permit all Exchanges to accept consumer attestation of incarceration status without further

electronic verification. We proposed to revise paragraph (e)(2) to permit Exchanges to verify

consumer incarceration status using an HHS-approved verification data source that is current,

accurate, and minimizes administrative costs and burdens. We believe these policies would

209

Apel, R., and Sweeten, G. (2010, Aug. 1). The Impact of Incarceration on Employment during the Transition to

Adulthood. Social Problems, 57(3), 448–479. https://doi.org/10.1525/sp.2010.57.3.448.

210

Id.

211

45 CFR 155.315(e).

212

Nellis, A. (2021). The Color of Justice: Racial and Ethnic Disparity in State Prisons. The Sentencing Project.

https://www.sentencingproject.org/app/uploads/2022/08/The-Color-of-Justice-Racial-and-Ethnic-Disparity-in-

State-Prisons.pdf; Sabol, W.J., and Johnson, T.L. (2022). Justice System Disparities: Black-White National

Imprisonment Trends, 2000 to 2020. Council on Criminal Justice. https://secure.counciloncj.org/np/viewDocument?

213

Sirios, C., and Western, B. (2017, Feb.). Racial Inequality in Employment and Earnings after Incarceration.

Harvard University.

https://scholar.harvard.edu/files/brucewestern/files/racial_inequality_in_employment_and_earnings_after_incarcer

ation.pdf.

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improve the Exchange enrollment process, reduce operational challenges for Exchanges, and

reduce burdens on applicants, all while maintaining program integrity and ensuring that the

alternative incarceration verification data source that may be used by Exchanges is not unduly

burdensome or costly to administer.

We also proposed changes to paragraph (e)(3) to reflect that if an Exchange verifies an

applicant’s attestation of incarceration status using an approved data source, and the attestation is

not reasonably compatible with the information from the approved data source or other

information provided by the applicant or in the records of the Exchange, the Exchange must then

follow the DMI process set forth in § 155.315(f).

We sought comment on this proposal, particularly from State Exchanges and other users

of PUPS data through the Hub. We also expressed particular interest in comments about whether

State Exchanges intend to continue using PUPS data to verify incarceration status. We also

sought input from any State Medicaid agency that uses PUPS data available through the Hub.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed to require Exchanges to

start accepting consumer attestation of incarceration status without further verification or for

Exchanges to use a data source for incarceration verification approved by HHS. We summarize

and respond to public comments received below.

Comment: Many commenters supported the proposal to amend the current process of

incarceration status verification by accepting consumer attestation or through the verification of

incarceration status with an alternative data source. Commentors commended CMS for

acknowledging the barriers faced by justice-involved populations and taking steps to minimize

inequitable access to health insurance coverage.

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Response: We agree that the policy to accept consumer attestation of incarceration status

without further electronic verification will reduce administrative costs and burdens associated

with verification of incarceration status. Additionally, the policy allows Exchanges the flexibility

to continue verification of incarceration status using an HHS-approved data source that is

current, accurate, and reduces administrative costs and burdens. We believe that this policy will

equitably improve access to health care coverage for justice-involved individuals.

Comment: One commenter supported the recommendation that CMS provide educational

materials and outreach for those leaving the incarceration facilities to be better informed about

their pathways to enrolling in health care.

Response: We thank the commenter for this recommendation and agree that educational

materials and outreach should be made available for those leaving the incarceration facilities. We

have resources available on HealthCare.Gov and will continue to make updates as needed for

accuracy.

Comment: One commenter recommended using commercially available incarceration

data to connect with soon-to-be-released individuals with social services.

Response: We thank the commenter for bringing up the commercially available data that

connects people with social services after their release and agree that such service could be

useful. We will take this recommendation into consideration for future rulemaking.

Comment: One commenter asked CMS to clarify the process for HHS to approve a data

source, including by listing the criteria that HHS will use to assess whether an alternative data

source should be approved.

Response: We decline to specify additional criteria HHS will use to approve an

alternative data source beyond those included in the proposal: that the data source provide data

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that are current and accurate, and that its use minimizes administrative costs and burdens. We

also note that a data source that does not timely report release from incarceration for recently

paroled individuals is unlikely to meet HHS’ standard. We would need to conduct additional

market research and secure funding for the purposes of identifying and utilizing an alternative

incarceration verification data source that is approved for all Exchanges and Medicaid and CHIP

agencies. Any State Exchange that is interested in using alternative data sources for incarceration

verification should submit its proposal to HHS for review, as an update to their Exchange

Blueprint, as described in § 155.315(h).

Comment: Some commentors stated that the proposed rule contradicts the recently

published GAO guidance

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on verification of self-attestation which was published to implement

President Biden’s Executive Order

215

for reducing improper payments, identity theft, and benefit

fraud, issued in response to fraud, waste, and abuse during the COVID-19 Public Health

Emergency.

Response: In alignment with GAO’s published guidance to reduce fraud, we provided

extensive cost benefit analysis in the proposed rule to outline the minuscule amount of improper

payments made to incarcerated individuals, contrasted with the large administrative costs and

burdens to verify incarceration status. Based on this analysis, we estimate that there would be

expected cost savings for Exchanges of approximately $20,317,000 resulting from this policy.

This means that the finalized policy change to verify incarceration status will save taxpayer

funds. Within the cost benefit analysis, we provided additional information on the potential costs

of investing in an alternative data source to verify incarceration.

214

Government Accountability Office. (2022, Feb. 10). Emergency Rental Assistance: Additional Grantee

Monitoring Needed to Manage Known Risk. https://www.gao.gov/assets/gao-22-105490.pdf.

215

https://www.whitehouse.gov/briefing-room/statements-releases/2023/03/02/fact-sheet-president-bidens-

sweeping-pandemic-anti-fraud-proposal-going-after-systemic-fraud-taking-on-identity-theft-helping-victims/.

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Comment: One commenter asked CMS to clarify whether Exchanges that currently using

PUPS comply with the proposal.

Response: As the PUPS data that is made available through the Federal Data Services

Hub has been an existing HHS-approved data source for incarceration verification, State

Exchanges may consider the PUPS data current, accurate, and its use to minimize administrative

costs and burdens for their State without seeking approval from HHS. State Exchanges that

currently use the PUPS data may continue using this data source for incarceration verification,

should they choose to do so, without seeking re-approval from HHS. We also encourage any

State Exchange that is currently using this data source to conduct a similar evaluation as we

described in the proposed rule (for the FFE and SBE-FPs), to determine whether continued use

of the PUPS data is a cost-effective approach for incarceration verification. We will provide

technical assistance to any State Exchange that is currently using PUPS data through the Federal

Data Services Hub that wishes to modify its approach to instead accept self-attestation or to use

an alternative data source for incarceration verification.

Comment: One commenter asked for an amendment to the Medicare regulation at 42

CFR 411.4(b) which describes when an individual is in custody to align with post-incarceration

coverage policies in the Exchange and Medicaid.

Response: We thank the commenter for bringing this to our attention but note that the

comment is outside the scope of this rule.

Comment: One commenter supported the proposal and noted that cost-benefit analysis for

the proposed change is sufficient but advised that CMS should amend the proposed rule to omit

any mentions of health and racial equities as it “might fall to an arbitrary and capricious

challenge under the Administrative Procedures Act”.

CMS-9895-F 297

Response: HHS has the authority to modify the incarceration verification process under

section 1411(c)(4)(B) of the ACA, as well as under our general rulemaking authority in section

1321(a) of the ACA. We maintain that we have provided several non-arbitrary rationales for the

policy described in this rule, including that mandatory verification of incarceration status is

costly to taxpayers, burdensome for applicants, and reduces access to health care for justice-

involved populations which reduces health and racial equity.

Comment: A few commenters appeared unclear about the proposal and vaguely opposed

it, claiming that HHS did not provide enough evidence as to why current practices are

insufficient, the proposal would increase the cost of health insurance, and the proposal would not

provide Exchanges with sufficient operational flexibility.

Response: We clarify that the policy allows Exchanges to start accepting consumer

attestation of incarceration status without further verification unless the Exchange chooses to

verify consumer attestation using a data source approved by HHS to be current and accurate and

minimize administrative costs and burdens. Exchanges must generate a DMI if a mismatch

between consumer attestation and the data is present. Additionally, there is no basis to believe

this rule will increase the cost of health insurance. As demonstrated in the cost benefit analysis

provided in the rule, it will be cost effective for Exchanges to accept consumer attestation of

incarceration status without further verification, and Exchanges that decline to use an alternative

data source will not incur additional costs to verify incarceration status, as explicitly

demonstrated in the RIA section of the rule. Finally, we believe that we provided sufficient

flexibility in this rule as State Exchanges may elect to accept attestation of incarceration status or

use an alternative data source approved by HHS.

12. Verification Process Related to Eligibility for Insurance Affordability Programs (§ 155.320)

CMS-9895-F 298

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82574), we proposed to reinterpret State Exchange and State Medicaid and Children’s

Health Insurance Program (CHIP) agency use of the Federal Data Services Hub (Hub) to access

and use the income data provided by the optional Verify Current Income (VCI) Hub service as a

State Exchange or a State Medicaid and CHIP agency function, because these State entities use

this optional service to implement eligibility verification requirements applicable to them. While

we proposed to redesignate use of the VCI Hub service by State Exchanges and State Medicaid

and CHIP agencies as a State function, HHS would continue to maintain contracts that make this

service available through the Hub for State Exchange and State Medicaid and CHIP agency use

as part of its ongoing implementation of sections 1411 and 1413 of the ACA. We proposed to

amend § 155.320(c) to reflect this reinterpretation for the Exchanges. Under this proposal, States

would pay annually in advance for the State Exchanges and Medicaid and CHIP agencies'

anticipated utilization of the optional VCI Hub service and be required to reconcile with HHS on

an annual basis the anticipated utilization of CSI data provided by the VCI Hub service with the

actual utilization. In the alternative, we proposed that HHS would invoice States on a monthly

basis for their actual utilization of CSI data provided by the VCI Hub service after that utilization

occurs. We noted that State Medicaid and CHIP agencies would be eligible for Federal matching

for the cost of this service, as described in this section.

Under our proposal, Exchanges and State Medicaid and CHIP agencies may opt to

continue to use the VCI Hub service to support their eligibility verification processes for

Exchange QHP coverage or Medicaid and CHIP if they pay for the cost of their use of the

service. For instance, Exchanges would still be able to use this current income information to

verify a tax household’s annual income attestation if they are unable to verify income using SSA

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Title II data, IRS income tax data, or a combination of both SSA and IRS data, in determining

eligibility for APTC. Because Exchanges and State Medicaid and CHIP agencies are permitted,

but not required to use the VCI Hub service to fulfill the mandatory eligibility determination

requirements imposed on them, accessing the CSI data via the VCI Hub service should be

characterized as an Exchange or State Medicaid and CHIP agency function.

Consistent with section 1413 of the ACA, HHS would continue to provide access to

optional data sources through the Hub to support the streamlined application processes.

However, as these functions would be considered Exchange or State Medicaid and CHIP agency

functions, and not HHS functions, HHS would no longer fund Exchange or State Medicaid and

CHIP agency use of these sources and would only provide access to States who paid for their use

of the service. HHS bears a cost for Exchange and State Medicaid and CHIP agency use of the

CSI data accessed through the VCI Hub service. Under the proposed interpretation, State

Exchanges and State Medicaid and CHIP agencies would be required to pay for their use of the

VCI Hub service. However, where applicable, State costs for State Medicaid and CHIP agencies

may be eligible for Federal matching funds at the 75 percent match of the cost of a State

Medicaid agency’s utilization of the VCI Hub service, as outlined in 42 CFR 433.116, and match

CHIP costs at a State’s enhanced Federal Medical Assistance Percentage (FMAP).

Since the VCI Hub service was established in 2013 for use by both Exchanges and State

Medicaid and CHIP agencies, utilization of the VCI Hub service has grown significantly over

time, both in the number of State Exchanges and State Medicaid and CHIP agencies using the

service, and the number of applicants and beneficiaries that require income verification as

Exchange populations have increased over time. During the first open enrollment in 2013, only

the Exchanges on the Federal platform, two State Exchanges, and eight State Medicaid and CHIP

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agencies used data from the VCI Hub service for eligibility determinations. In that first year, the

Exchanges on the Federal platform initiated about 88 percent of all requests, or “pings,” to the

VCI Hub service for income verification. In the past decade, more State Medicaid and CHIP

agencies and State Exchanges have started using the VCI Hub service; as of June 2023, 34

States, including the District of Columbia and Puerto Rico, use the VCI Hub service for their

State Medicaid and CHIP programs, and 10 of those States also use the service to verify QHP

eligibility for their State Exchanges. Our analysis shows that as of January 2024, over 76 percent

of monthly pings to the VCI Hub service were from State Medicaid and CHIP applications,

including renewals of eligibility for Medicaid or CHIP coverage, and the Exchanges on the

Federal platform now account for less than 5 percent of the total volume.

216

If new State Medicaid and CHIP agencies or State Exchanges are permitted to request

access to the VCI Hub service, we forecast that in the next 5 years, transaction volume to the

VCI Hub service would increase by over 17 percent. These trends in utilization have provided us

with a clear picture of the primary uses and utilizers of the VCI Hub service. Specifically, we

have learned that the queries submitted by States to the VCI Hub service have been for income

verification by State Medicaid and CHIP agencies to determine Medicaid and CHIP eligibility,

and by State Exchanges to assess or determine Medicaid and CHIP eligibility and determine

APTC eligibility. Accordingly, we now believe this activity that has been categorized as an HHS

function would be better categorized as: (1) a State Medicaid and CHIP agency eligibility

determination function under title XIX or title XXI of the Act when the determination is initiated

216

In the proposed rule (88 FR 82576), we reported that as of March 2023, over 70 percent of monthly pings to the

VCI Hub service were from State Medicaid and CHIP applications, including renewals of eligibility for Medicaid or

CHIP coverage, and the Exchanges on the Federal platform accounted for less than 10 percent of the total volume.

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by a State Medicaid and/or CHIP agency; and (2) as an Exchange function when the

determination is initiated by an Exchange.

While we believe the utilization of this optional data source is an Exchange or State

Medicaid and CHIP agency function, making the optional data sources available through the Hub

is consistent with the requirements at sections 1411 and 1413 of the ACA related to

establishment and participation in a coordinated eligibility and enrollment system for all

insurance affordability programs. As such, to facilitate Exchanges’ and States Medicaid and

CHIP agencies’ access to this optional CSI data that is available through the VCI Hub service,

HHS will continue to maintain contracts that make access to these resources available through

the Hub for Exchange and State Medicaid and CHIP agency use.

In making this proposal, we noted that while use of the VCI Hub service is an integral

part of the eligibility determination process in most States, Exchanges and State Medicaid and

CHIP agencies may have access to other data sources to verify income. As noted previously, we

are aware that many States have access to other comprehensive data sources, such as State

quarterly wage data. Generally, as dictated by individual State law, employers are required to

report employee information such as payroll and unemployment insurance contribution data to a

State department, such as the State Department of Labor or a similar office. In place of the

optional VCI Hub service, State Exchanges continue to have flexibility under 45 CFR

155.315(h) and 155.320(c)(3)(iv) to use an alternative verification source, like State wage data,

when income is not verified using IRS tax data or SSA title II data. We encouraged State

Exchanges, State Medicaid and CHIP agencies, and other interested parties, to submit comments

regarding any operational burden, policy, or budget challenges regarding access to other State

data sources of the proposed change.

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As part of our consideration of the policies in this rulemaking, we considered requiring

State Medicaid and CHIP agencies and State Exchanges to obtain their own contracts to

administer their CSI data usage; however, we had concerns that these services cannot be

procured reasonably and expeditiously, which would undermine the system we have

implemented under section 1413 of the ACA. We also believe that there may be benefits to the

State Medicaid and CHIP agencies and State Exchanges that prefer to use the CSI data accessible

through the VCI Hub service in their States. Therefore, we proposed to retain optional access to

the VCI Hub service on behalf of State Medicaid and CHIP agencies and State Exchanges that

prefer to continue to use this service and are willing to pay for their CSI data usage. Under this

policy, State Medicaid and CHIP agencies and State Exchanges can choose to discontinue their

use of the CSI data accessible through the VCI Hub service.

Given these considerations, we proposed to amend 45 CFR 155.320(c)(1) to add new

paragraph (c)(1)(iii) to require that beginning July 1, 2024, State Exchanges would be required to

pay for 100 percent of their utilization of the CSI income data provided by the VCI Hub

service.

217

We refer readers to the proposed rule (88 FR 82576) for an explanation of

implementation of this policy.

Similarly, we proposed to require that beginning July 1, 2024, States pay in advance for

their Medicaid and CHIP utilization of the optional, and not required, VCI Hub service to fulfill

their Medicaid and/or CHIP eligibility determination requirements. As noted above, consistent

with the requirements at section 1413 of the ACA (related to establishment and participation in a

coordinated eligibility and enrollment system for all insurance affordability programs), which is

incorporated into the Medicaid and CHIP statutes at sections 1943(b)(3) and 2107(e)(1),

217

The FFEs’ and SBE-FPs’ costs for accessing these services would be covered by the FFEs’ and SBE-FPs’ user

fees.

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respectively, of the Act, in order to facilitate States’ access to this optional CSI data that is

available through the VCI Hub service, we would continue to maintain contracts that enable

States to efficiently access CSI data through the VCI Hub service. However, under our proposal,

States would be required to pay the cost incurred by HHS when the State requests CSI data

through the VCI service offered by the Hub.

In the alternative, HHS also considered whether it could invoice States on a monthly

basis for their actual utilization of CSI data provided by the VCI Hub service after that utilization

occurs. If appropriate, this alternative policy could be adopted in the final rule. We considered

these mechanisms for implementing State Exchange and Medicaid and CHIP agency payments

for use of the VCI Hub service and solicited comments on whether a different implementation

approach would be more efficient or otherwise preferable. We refer readers to the proposed rule

(88 FR 82576 through 82577) for an explanation of implementation of this policy and an

alternative payment structure.

Finally, we proposed that the interpretation characterizing use of the VCI Hub service as

a function of State Exchanges and Medicaid and CHIP agencies and not an HHS function be

effective on July 1, 2024. We recognize that this implementation date may be difficult for States,

especially those with biennial budget cycles. However, given our determination that eligibility

verifications using CSI data by State Exchanges and Medicaid and CHIP agencies is most

appropriately characterized as a function of these agencies and not an HHS function, we believe

it is appropriate to move forward with this change as expeditiously as possible, while giving

States some time to plan for the change. For this reason, we proposed a July 1, 2024, effective

date for this provision.

CMS-9895-F 304

We sought comment on these proposed changes, including whether we should make this

interpretation effective as of July 1, 2024, or a different date. We were interested in learning

whether State Exchanges and Medicaid and CHIP agencies would seek to cease or restrict their

use of the VCI Hub service, possibly using it as a last resort, and what impact, if any, might these

proposed changes have on the amount of time it takes applicants to verify their income or the

time it takes for States to make an eligibility determination. We also sought comment on the

extent to which States may be interested in potential avenues to reduce operational burdens or

address budget challenges facing State Exchanges and Medicaid and CHIP agencies. Namely, we

were interested in whether States would be interested in opportunities to pay an additional fee

that would allow them to reuse VCI Hub service verification results across multiple Federally-

funded and State-administered human service programs (with cost allocation across those

programs); whether States have separate, direct access to the same or similar source of VCI Hub

services, and the cost of such direct access; and whether States anticipate that reuse of

verification data, coupled with cost allocation across programs, would reduce operational

burdens or address budget challenges facing State Exchanges and Medicaid and CHIP agencies.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed to reinterpret State

Exchange and State Medicaid and CHIP agency use of the Hub to access and use the income

data provided by the optional VCI Hub service as a State Exchange or a State Medicaid and

CHIP agency function, and that beginning July 1, 2024, State Exchanges and State Medicaid and

CHIP agencies will be required to pay for the costs of their access to and use of the VCI Hub

service. We are also finalizing the proposal with a modification: rather than requiring States to

pay in advance for their use of the VCI Hub Service, HHS will invoice States monthly for the

CMS-9895-F 305

amount the State must pay to reimburse HHS for the costs of their access and actual utilization of

CSI income data from the prior month. Specifically, HHS will invoice States on a monthly basis

for their actual utilization of the CSI income data accessed through the VCI Hub Service, as well

as an administrative fee to account for any direct or indirect costs of making CSI income data

accessed through the VCI Hub service available to Exchanges and State Medicaid and CHIP

agencies, in accordance with the Intergovernmental Cooperation Act and interpretive OMB

Circulars A-97 and A-25.

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As such, we have revised the regulatory text to remove language

stating that State Exchanges must pay for their utilization of the VCI Hub service annually and in

advance, as well as references to reconciliation. We summarize and respond to public comments

received on the proposed policy below.

Comment: One commenter supported our proposal to reinterpret State Exchange and

State Medicaid and CHIP agency use of the VCI Hub service to access CSI income data as a

State Exchange or a State Medicaid and CHIP agency function. The commenter stated that being

able to access CSI income data through the Hub would enhance the accuracy and efficiency of

eligibility determinations for either Exchange QHP or Medicaid and/or CHIP coverage, while

also improving the overall accuracy and protecting the integrity of the income verification

process for eligibility for either of these programs.

Response: We agree that use of the VCI Hub service and the CSI income data accessed

through the service is an integral part of the eligibility determination process in most State

Exchanges and State Medicaid and CHIP agencies and provides an optional means to improve

the overall accuracy of income verifications, especially in cases where an applicant’s annual or

current income is not verified using other Federal data sources, such as IRS income tax data or

218

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

also Circular No. A-97. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-097.pdf.

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SSA Title II income. We also agree that access and use of the VCI Hub service ensures the

program integrity of Exchanges, as the income data accessed through the VCI Hub service can

ensure that applicants who are eligible to receive APTC do so. Because of these benefits to both

State Exchanges and State Medicaid and CHIP agencies, HHS will continue to maintain existing

contracts that make access to these resources available through the Hub for State Exchange and

State Medicaid and CHIP agency use, as HHS has over the course of the last decade.

Additionally, State Exchanges and State Medicaid and CHIP agencies that do not have access to

the VCI Hub service and wish to begin utilizing and paying for CSI income data accessed

through the VCI Hub service may do so by submitting a request to HHS for review and approval

to connect to the VCI Hub services, as States are not permitted to begin using the service without

prior HHS approval. However, even though CSI income data accessed through the VCI Hub

service is optional, we still believe that it is appropriate that this service be considered a State

Exchange or State Medicaid and CHIP agency function.

Comment: Several commenters opposed the proposal to require State Exchanges and

State Medicaid and CHIP agencies to pay for their utilization of the CSI income data accessed

through the VCI Hub service as they noted that it would negatively impact consumers in various

ways. For example, some commenters were concerned that the proposal would undermine

current State efforts to improve renewals of a consumer’s eligibility for Medicaid or CHIP

coverage. In particular, these commenters were concerned that the proposal would limit States’

use of available data to determine eligibility before requesting additional income information

from the consumer, often referred to as ex parte renewals, which have been especially important

since the Medicaid continuous enrollment condition ended and Medicaid unwinding began. One

commenter noted that ex parte renewals allow a State Medicaid or CHIP agency to renew a

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consumer’s coverage without requiring the consumer to submit a renewal form, and thus reduce

the risk of loss of coverage due to procedural reasons. The commenter also noted that charging

State Medicaid and CHIP agencies for their use of the VCI Hub service would only impede

efforts to increase ex parte renewals (as has been encouraged by the Administration) because this

policy would have significant fiscal impacts for Medicaid and CHIP agencies if additional

income data is needed from the VCI Hub service. As a result, the commenter predicted that some

State Medicaid and CHIP agencies may choose to stop using the VCI Hub service, which would

impact Medicaid and CHIP renewals.

A few commenters also expressed their concern that if State Exchanges or State Medicaid

and CHIP agencies pivot to alternative data sources rather than using the CSI income data

accessed through the VCI Hub service, less accurate data may lead to inaccurate eligibility

determinations for either Exchange QHP or Medicaid and/or CHIP coverage, which could harm

consumers by causing them to incur large tax liabilities due to income inaccuracies or increasing

churn. Finally, a few commenters noted that the proposal could also lead to consumer harm due

to increases in premiums, as States make budget adjustments to pay for their use of the VCI Hub

service, whereas other commenters were concerned that charging Hub data fees could have

negative impacts, such as reducing State flexibility to operate their own Exchanges as they see

fit.

Response: We believe that this policy change, which will take effect on July 1, 2024,

should not significantly impact State Medicaid unwinding activities. After the continuous

enrollment condition ended on March 31, 2023, States were required to, over time, complete

renewals consistent with Federal requirements for all individuals enrolled in their Medicaid

program as of that date, disenroll individuals if they were no longer eligible, and determine

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potential eligibility of those individuals for certain other sources of coverage. States are required

under 42 CFR 435.916(a) to redetermine eligibility without requiring information from the

individual (that is, ex parte renewal), unless necessary. Per 42 CFR 435.948(a), States generally

have flexibility to decide what data sources are useful when conducting electronic data matches

to verify income as part of the ex parte renewal process. Examples of income data sources that

could be used in lieu of or in addition to the VCI Hub service to conduct ex parte renewals

include but are not limited to: State quarterly wage data, State unemployment compensation data,

State income tax data, Supplemental Nutrition Assistance Program (SNAP) data, and Temporary

Assistance for Needy Families (TANF) data. We encourage States to use a variety of available

data sources to maximize utilization of the ex parte process and ensure coverage is maintained

for eligible individuals. Additionally, to support States facing significant operational and

Medicaid eligibility and enrollment system issues and to help minimize procedural

disenrollments as they resumed routine operations, we have granted States section

1902(e)(14)(A) waivers to support unwinding efforts.

219,220

A number of these strategies are

focused on facilitating the renewal process by limiting the need for requests for additional

information from beneficiaries, thus leading to fewer procedural disenrollments and reducing

State administrative burdens during this transition period.

We acknowledge the concern raised by commenters that if a State chooses to reduce its

use of the VCI Hub service due to this policy change, this may result in additional requests for

additional documentation or other information from individuals to verify income. However, we

219

SHO# 22-001: Promoting Continuity of Coverage and Distributing Eligibility and Enrollment Workload in

Medicaid, the Children’s Health Insurance Program (CHIP), and Basic Health Program (BHP) Upon Conclusion of

the COVID-19 Public Health Emergency: https://www.medicaid.gov/sites/default/files/2022-03/sho22001.pdf.

220

Available State Strategies to Minimize Terminations for Procedural Reasons During the COVID-19 Unwinding

Period: Operational Considerations for Implementation, December 2023:

https://www.medicaid.gov/sites/default/files/2023-12/considerations-for-procedural-termination-strategies.pdf.

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believe there are ways to mitigate this concern. Other reliable government data sources, whether

State or Federal, are available to verify income, some of which must be accessed if useful (for

example, quarterly wage data, income information from a SNAP case file if the individual is

receiving SNAP benefits) before a State may require additional documentation from the

individual.

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Additionally, States have the flexibility to implement strategic data hierarchies,

which would allow States to implement business logic regarding how data sources and other

available information are used in making an ex parte eligibility determination, including only

requesting CSI income data from the VCI Hub service in cases where income could not be

verified using these other data sources, such as the examples listed above. Because States have

flexibility to adjust how and when they access the VCI Hub service, and because other reliable

government sources of income information are available, we do not predict the policy will result

in inaccurate eligibility determinations.

We understand the concern raised from States that up-to-date and accurate income data is

essential for both State Exchanges and State Medicaid and CHIP agencies to make accurate

eligibility determinations for Exchange QHP, Medicaid, or CHIP coverage and that this policy

may lead to consumers incurring large tax liabilities when filing their Federal income taxes or

increase churn in and out of Medicaid or CHIP coverage. However, there are consumer

protections in place to protect consumers from incurring large tax liabilities. For example, all

Exchanges are required to give consumers the opportunity to provide more up-to-date and

accurate income information through the income DMI process. There are also protections in

place to help mitigate Medicaid and CHIP churn. For example, 42 CFR 435.916 and 457.343

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We note, as discussed in the 2012 final rule on Eligibility Changes Under the Affordable Care Act of 2010, “[t]he

time lag in the availability of quarterly wage data would not justify a State concluding that such data is not useful to

verifying income eligibility and routinely relying instead on documentation provided by the individual” (77 FR

17175).

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generally require that the State Medicaid and CHIP agency provide a 90-day reconsideration

period, or a longer period elected by the State, which allows Medicaid or CHIP beneficiaries

who are disenrolled for failure to submit the renewal form or necessary information, to provide a

renewal form or necessary information to their State Medicaid and CHIP agency to reconsider

eligibility for Medicaid and/or CHIP without having to complete a new application. Furthermore,

as finalized in the 2024 Payment Notice (88 FR 25831), Exchanges now have the option under §

155.420(c)(6) to provide consumers losing Medicaid or CHIP with 90 days (instead of 60 days)

after the loss of such coverage to enroll in a QHP through an Exchange through a special

enrollment period (SEP), which could also help ease transitions into Exchange QHP coverage.

Finally, we acknowledge that this policy change may cause State Exchanges to raise their

user fees to pay for accessing CSI income data through the VCI Hub service and that this may

lead to premium increases for consumers. However, we believe that there are ways for States to

prevent this potential outcome, such as accessing alternative data sources for income verification

or implementing logic changes to their eligibility and enrollment systems to only request CSI

income data when income cannot be verified using other data sources such as IRS income data,

State quarterly wage data, etc.

Comment: Several commenters expressed concern that the proposed effective date of July

1, 2024, would give States little time to account for the VCI Hub service costs into their FY 2025

budgets, explore the viability of alternative verification methods and/or data sources, or devise

strategies to reduce their utilization of the VCI Hub service. A few of these commenters

proposed specific delayed dates for implementation, ranging from 1 to 3 years after the proposed

effective date of July 1, 2024. One commenter stated that 46 States have fiscal years that run

from July 1 to June 30, allowing little time to account for the policy change that requires States

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to pay for their utilization of the CSI income data accessed through the VCI Hub service in their

FY 2025 budgets, as some State legislatures begin this activity as early as January 2024. Another

commenter noted that its State Exchange sets its user fee each year in February, and so would not

have the opportunity to increase the user fees to pay for the policy until February 2025, and

expressed concern that increasing user fees would have a chilling effect on issuer participation.

Response: We are finalizing that beginning July 1, 2024, State Exchanges and State

Medicaid and CHIP agencies will be required to reimburse HHS for the costs of their access to

and use of the VCI Hub service. Because use of the VCI Hub service is optional for State

Exchanges and State Medicaid and CHIP agencies to verify income, we do not believe that it is

prudent to delay the implementation of this policy. State Exchanges and State Medicaid and

CHIP agencies are responsible for determining eligibility for their respective programs

(Exchange QHP coverage or Medicaid/CHIP) and thus responsible for the cost to access the

optional CSI income data accessed through the VCI Hub service used to determine eligibility.

Furthermore, States can utilize other government data sources (for example, IRS tax data and

SSA title II data) that are free and, in most cases, will verify an applicant's income without the

need to also access CSI income data accessed through the VCI Hub service.

While we recognize States’ concerns about funding this use of the CSI data by July 1,

2024, we have been proactively working with States since before the publication of the proposed

rule to prepare States for this possible transition and will continue to do so. We believe that some

of these concerns can be mitigated by strategizing ways to reduce their reliance on CSI income

data by either using alternative data sources, such as State quarterly wage data to verify income,

or only accessing CSI income data if States are unable to verify income using other available

data sources. For example, an Exchange may implement logic changes within their eligibility

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systems to only request CSI data in cases where a consumer’s current income could not be

verified using IRS income tax or SSA title II income data, which would act as a cost-saving

measure for States. To ease the transition by July 1, 2024, we will work with States to help

navigate how to pay for their use of the CSI income data, including those States with only one

VCI Hub service connection for both their State Exchange and State Medicaid and CHIP agency

which may require additional effort to allocate the payment responsibility between the State

Exchange and State Medicaid and CHIP agency.

Lastly, we reiterate that Exchanges and State Medicaid and CHIP agencies are not

required to use the VCI Hub service to fulfill the mandatory eligibility determination

requirements.

222

Comment: Commenters stated that the proposal will create numerous operational and cost

challenges for States and charging States for use of the VCI Hub service poses an unfair cost

burden on State Exchanges. One commenter stated that the policy may cause costly system

redesign or alternative arrangements, such as States establishing their own income verification

service contracts, as well as increased complexity and costs associated with identifying usage of

the VCI Hub service that is eligible for FMAP. Furthermore, the commenter stated that the new

costs introduced by this proposal could discourage States from transitioning to or maintaining

their status as a State Exchange in the future. Accordingly, these commenters suggested that

HHS should make grants available to establish alternate income verification sources for States

transitioning to a State Exchange, asserting that existing State Exchanges have had time to

charge user fees, build reserves upon which to draw, and have benefited from years of the VCI

Hub service without any cost to them. Another commenter cautioned that, given increasingly

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State Exchanges continue to have flexibility under §§ 155.315(h) and 155.320(c)(3)(iv) to use an alternative

verification source, like State wage data, when income is not verified using IRS tax data or SSA title II income data.

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tight State budgets, this policy would represent an unanticipated outlay that might draw funds

away from other critical programs.

A few commenters objected to the policy on the grounds that HHS has not given States

an estimate of the costs or historical volume of States’ use of the VCI Hub service and requested

that HHS do so before finalizing the policy. One commenter stated that HHS did not provide

enough evidence as to why Hub data use fees are necessary, especially given that States have

been successful in enrolling and protecting consumers using standards and processes that work

best for the residents of their respective States. Another commenter noted that this policy, if

finalized, would result in significant cost to States which could be detrimental to further

utilization of the VCI Hub service and stated that States with a larger Medicaid and CHIP

population will bear greater cost shift. The commenter stated that it is uncertain if the expense

will remain sustainable for those States in future budget years.

Response: It is appropriate to reinterpret State Exchange and State Medicaid and CHIP

agency use of the VCI Hub service to access and use the income data provided by the optional

VCI Hub service as a State Exchange or a State Medicaid and CHIP agency function. Therefore,

it is also appropriate for States to be responsible for the cost of administering the program.

Specifically, it is appropriate for States with greater Medicaid population and therefore higher

use of the service to bear a greater cost because the costs of the service are driven by the number

of returned data matches that the VCI Hub service initiates for consumers. Therefore, costs to

States will be calculated by multiplying the actual number of purchased transactions returned

from the VCI Hub service by the price per transaction for HHS to provide the VCI Hub service,

as well as an administrative fee to reimburse HHS for any direct or indirect costs of making CSI

income data accessed through VCI Hub service available to Exchanges and State Medicaid and

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CHIP programs. More detailed cost information will be set forth in an Intergovernmental

Cooperation Act Agreement (IGCA) between HHS and the State Exchange or State Medicaid

and CHIP agency. We acknowledge that some States may choose to reduce or discontinue their

use of the VCI Hub Service in response to the costs that the finalization of this policy represents

to States. We will continue to provide the VCI Hub Service to States that choose to continue or

begin using the VCI Hub service.

We do not believe that the finalization of this policy will meaningfully discourage States

from transitioning to, or maintaining, their status as a State Exchange. We anticipate that existing

State Exchanges, as well as States considering transitioning to a State Exchange, will employ

strategies to encourage efficient use of the VCI Hub service, as well as leverage other existing

sources of income data.

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We believe that these strategies will help to keep costs below levels

that would discourage States from transitioning to, or maintaining, their status as a State

Exchange.

Regarding the request that HHS provide grants to States newly transitioning to a State

Exchange to obtain other data sources for income verification, currently, HHS is unable to

establish such a grant program because it lacks the Congressional appropriation to do so. States

transitioning to a State Exchange should set their Exchange user fees appropriately to fund their

anticipated utilization of the VCI Hub Service (or establish an alternative income verification

source such as State quarterly wage data) as HHS is setting the FFE and SBE-FP user fees to

fund the FFE and SBE-FP utilization of the VCI Hub service.

We also note that, to assist States in estimating the costs of continued utilization of the

VCI Hub Service, and in anticipation that this proposal could be finalized, we made historical

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State Exchanges continue to have flexibility under §§ 155.315(h) and 155.320(c)(3)(iv) to use an alternative

verification source, like State wage data, when income is not verified using IRS tax data or SSA title II data.

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cost and utilization data of the VCI Hub service available to States with State Exchanges and

State Medicaid and CHIP agencies that currently utilize the VCI Hub Service. We may share

historical use data with other States that are considering using the VCI Hub service. However,

we note that this information may be of limited value because of the wide variation in factors,

such as individual State policy, whether or not a State Exchange shares an integrated eligibility

system with the State Medicaid and CHIP agency, etc., which greatly impacts a State's utilization

of the VCI Hub service. As noted earlier in this rule, we intend to work with States to help

navigate how to pay for their use of the CSI income data.

Comment: Several commenters stated that, should HHS finalize the proposal to

reinterpret use of the VCI Hub service as a function of State Exchanges and Medicaid and CHIP

agencies and not an HHS function, they would prefer a monthly invoice (“postpay”) approach

because billing for their actual utilization of CSI income data accessed through the VCI Hub

service would be simpler, more efficient, and would avoid additional costs associated with

prebilling and reconciliation.

A few commenters supported the proposal for HHS to charge State Exchanges and State

Medicaid and CHIP agencies in advance for their projected annual use of the VCI Hub service

(“to prepay”). One commenter stated that paying in advance for their anticipated annual usage

with an annual reconciliation process would be easier administratively and would allow for more

certainty in budgeting the State’s share of the matching costs each year. Another commenter

stated that a prepay approach may align well with a State’s budget processes and the regular

Advance Planning Document (APD) process used to obtain Federal Financial Participation

(FFP). Further, the commenter also stated that a more frequent than annual (for example,

monthly) invoicing and estimating usage of the VCI Hub service cadence would increase the

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administrative burden of maintaining the service and would be unlikely to alter the methodology

by which the State develops costs estimates related to their use of the VCI Hub service. Another

commenter stated that, if a prepay approach is finalized, it would be efficient to align the

payment to HHS with the State’s FFP schedule to allow more frequent reconciliation of VCI

Hub service usage estimates.

A few commenters suggested that, because different State Medicaid and CHIP agencies

have different preferences on how they are invoiced, that HHS should consider providing States

with several different invoicing options so that States can choose which invoicing cadence, such

as monthly, quarterly, or annually, works best for their State.

Response: In light of comments received, rather than require that States pay in advance

for their utilization of the VCI Hub service as proposed, we are finalizing the alternative

approach we proposed, whereby HHS will invoice States on a monthly basis for their actual

utilization of the CSI income data accessed through VCI Hub service, as well as an

administrative fee to account for any direct or indirect costs of making CSI income data accessed

through VCI Hub service available to State Exchanges and State Medicaid and CHIP

agencies.

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We agree with commenters that a postpay approach will reduce administrative

burden on States, increase efficiency, and reflect a State Exchange’s or State Medicaid and CHIP

agency’s actual utilization of the VCI Hub service from the month prior, rather than a yearly

estimate that could vary widely due to unforeseen events. Even though monthly invoicing

increases the frequency of invoices compared to annual invoicing, it will also allow State

Exchanges and State Medicaid and CHIP agencies to quickly realize cost savings from efficient

utilization of the VCI Hub service and allow State Exchanges and State Medicaid and CHIP

224

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

also Circular No. A-97. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-097.pdf.

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agencies to become aware of inefficient utilization trends, which an annual invoice will not

easily capture. We also agree with commenters that this alternative approach will avoid

additional costs associated with prebilling and reconciliation.

Furthermore, this alternative or “postpay” approach will negate the need for States to

establish, and for HHS to approve, an estimation methodology for their projected annual

utilization of the VCI Hub service, which we believe would be challenging for States to estimate.

While States could rely on historical utilization of the VCI Hub service to project future

utilization, as Exchange populations continue to grow, past data could become less reliable and

could result in inaccurate estimates, which could lead to an overly expensive and burdensome

reconciliation process. Each of the States will execute an IGCA with CMS that must be in effect

before the VCI Hub service can be utilized by the States. Under the terms of the IGCA, CMS

will invoice the State for the actual costs of the State’s use of CSI data provided via the VCI Hub

service for the previous month.

We also acknowledge the preference of a few commenters for a prepay approach for

administrative ease and more certainty in budgeting the State share of the matching costs each

year. However, we believe that a postpay approach will be administratively simpler for both

participating States and HHS compared to a prepay approach. Additionally, we note that, the

finalization of a postpay approach notwithstanding, States will still need to budget for the State’s

share of matching costs based on their utilization estimates of the VCI Hub service.

At this time, we are unable to facilitate a mixed approach, wherein participating States

choose between a prepay and postpay approach. A mixed approach would require administering

parallel sets of policies, timelines, and system builds. The operational complexity and

inefficiency of such an approach would increase the cost of administering the VCI Hub Service.

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Comment: One commenter asked HHS to clarify that SBE-FP States would not be

charged for VCI Hub service Exchange-related expenses as this should already be accounted for

in the SBE-FP user fees that HHS already receives. One commenter proposed a discount on the

FFE or SBE-FP user fee for States that opt to use their own verification services instead of the

VCI Hub service, stating that such an approach would encourage States to invest in alternative

verification technologies, potentially leading to more tailored and State-specific solutions. One

commenter opposed any attempt by HHS to apportion VCI Hub service fees for Exchange

verification activities that result in determination of Medicaid, CHIP, or BHP, if applicable,

eligibility, stating that these activities should be charged to the program for which the individual

is determined eligible.

Response: HHS will not invoice SBE-FPs for the cost of access to and use of the VCI

Hub service when initiated by HHS to the VCI Hub service for income verification on behalf of

SBE-FPs. Instead, a portion of the Exchange user fees that HHS already collects from issuers in

FFEs and SBE-FPs will fund HHS’ access to and use of the VCI Hub service on behalf of the

FFE and SBE-FPs. HHS will charge Medicaid and CHIP agencies in States with SBE-FPs for

their access to and use of the VCI Hub service.

We will not reduce the FFE or SBE-FP user fee in an FFE or SBE-FP State where the

State, State Medicaid and/or CHIP agency opts to use their own data source or service for

verifying income, instead of the VCI Hub Service. Because the FFE and SBE-FP user fee rates

are set as a percent of premium for all issuers in an FFE or SBE-FP and account for the cost of

all special benefits provided to the FFE and SBE-FP, we do not make specific State adjustments.

For apportionment of costs between various State programs, we clarify that in States with

a single Hub connection, the allocation between the State Exchange and State Medicaid and

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CHIP agencies will be determined by the States and reported to HHS through the Advance

Planning Document processes. Conversely, in States with multiple Hub connections, each

purchased transaction that returned matched data from the VCI Hub service will be attributed to

the Hub connection through which the purchased transaction was initiated. As previously noted,

to help States assess the potential implications of this proposed policy change, we shared data

with States on their historical usage of the VCI Hub service, broken out by Hub connection in

States with more than one connection.

Comment: A commenter stated that Congress should appropriately fund HHS and the

Hub to ensure that Medicaid and CHIP agencies can access important sources of income

data. Furthermore, that commenter sought clarification from HHS on FFP support for States that

sought a direct contracting option with a commercial vendor. Another commenter supported that

Medicaid and CHIP agencies would be eligible for Federal matching funds for the cost of the

service.

Response: We note that the finalization of this policy will fund State Exchanges’ and

State Medicaid and CHIP agencies’ use of the VCI Hub service through monthly charges to

those agencies, and fund FFE and SBE-FP use of the VCI Hub service through FFE and SBE-FP

user fees and not by a new Congressional appropriation. We also note that States that choose to

pursue a direct contracting option with a commercial vendor may be eligible for enhanced FFP

from HHS for Medicaid utilization of these types of services, but not for State Exchange

utilization of those services. We further note that States that choose to pursue a direct contracting

option with a commercial vendor for their State Medicaid usage may be eligible for 75 percent

matching for the operation of mechanized claims processing and information retrieval systems

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See 42 CFR 433.116.

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and 90 percent matching for any design, development, and installation (including for

modifications) of eligibility and enrollment systems and/or other related Medicaid Enterprise

System (MES) components used for Medicaid eligibility and determination purposes.

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For

CHIP utilization of commercial vendor services, States may be eligible for Federal matching

funds under the State’s CHIP allotment. States should work with their MES State Officers

through the APD process and ensure that any Federal cost allocation requirements (applicable

where an expenditure supports multiple benefiting programs) for the acquisition and/or contract

for these services are met.

Comment: Another commenter opposed HHS’ reinterpretation of the use of the VCI Hub

service to verify APTC eligibility as a State Exchange function and not a Federal function,

stating that section 1411 of the ACA makes HHS responsible for verification. The commenter

asserted that section 1411(d) of the ACA allows HHS to delegate responsibility for verification

to Exchanges, but not for verification of information outlined in section 1411(c) of the ACA

(which includes income), and therefore HHS cannot delegate this verification to Exchanges.

Response: We acknowledge that section 1411 of the ACA requires HHS to be responsible

for income verification and clarify that the policy at issue here does not delegate income

verification to the States. Section 1411(c)(3) of the ACA requires that the Secretary submit the

information described in subsection (b)(3)(A) provided under paragraph (3), (4), or (5) of

subsection (b) to the Secretary of the Treasury for verification of household income and family

size for purposes of eligibility. However, in some situations, if government sources of income

(like IRS tax data) indicate that the applicant(s)’ attested income is significantly different from

what IRS returns for the year for which coverage is requested, the applicant or enrollee is

226

See 42 CFR 433.112.

CMS-9895-F 321

considered to have experienced a chance in circumstances, which allows HHS to establish

procedures for determining eligibility for APTC and CSRs on information other than IRS tax

return data as described in § 155.320(c)(3)(iii)-(vi).

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In these situations, and where government

sources of income are unavailable, data on current income may be used for eligibility

determinations and redeterminations for financial assistance and is accessed through the VCI

Hub service. In other words, the purpose of the optional VCI Hub service is to verify income in

those instances where the Department of Treasury is unable to do so and would only be used

once the Department of Treasury fails to verify income. Therefore, HHS is interpreting the

statute such that the obligation of the Secretary of HHS to verify income is fulfilled once the

information has been verified against data provided by the Secretary of the Department of

Treasury, and any additional efforts to verify income (such as through the VCI Hub Service)

should be construed as being subject to section 1413 of the ACA, which gives the Secretary of

HHS broad discretion in administering the program.

Comment: A few commenters responded to our request for information regarding the

extent to which States may be interested in potential avenues to reduce operational burdens or

address budget challenges facing State Exchanges and Medicaid and CHIP agencies, including

whether the reuse of verification data, coupled with cost allocation across programs, would

reduce operational burdens or address budget challenges, and whether States have separate,

direct access to the same or similar source of VCI Hub services. One commenter stated that it is

currently using the CSI data source for all Medicaid and CHIP applications but, in the future,

will pursue streamlining by using the VCI Hub service only for a subset of applications that

require additional post-eligibility verification. Another commenter was interested in the potential

227

See section 1412(b)(2) of the ACA.

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efficiencies gained from re-using Hub information across multiple State-managed programs but

stated that more time would be needed to further evaluate such an option.

Response: We appreciate commenters’ interest in the re-use of CSI data delivered

through the VCI Hub service. We will continue to evaluate this option and confer with States

regarding efficiencies that could result from the re-use of CSI data.

13. Eligibility Redetermination During a Benefit Year (§ 155.330(d))

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82578), we proposed updates and changes to 155.330. At § 155.330, we proposed to

redesignate paragraph (d)(3) as paragraph (d)(3)(i) and add paragraph (d)(3)(ii) to require

Exchanges to conduct periodic checks for deceased enrollees twice yearly and subsequently end

deceased enrollees’ QHP coverage beginning with the 2025 calendar year. Additionally, we

proposed to add § 155.330(d)(3)(iii) to grant the Secretary the authority to temporarily suspend

the periodic data-matching (PDM) requirement during certain situations or circumstances that

lead to the unavailability of data needed to conduct PDM.

Under § 155.330(d), Exchanges are required to periodically examine available data

sources, referred to as PDM, to identify whether enrollees become deceased, and to identify

whether enrollees on whose behalf APTC or CSRs are being paid have been found eligible for or

are enrolled in Medicare, Medicaid, CHIP, or the BHP, if a BHP is operating in the service area

of the Exchange. Additionally, upon such identification, § 155.330(e)(2)(i) requires Exchanges

to notify the enrollee of the updated information and provide the notified enrollees 30 days from

the date of the notice to appeal PDM findings.

Currently, § 155.330(d)(3) defines “periodically” only for PDM activities that identify

enrollment in Medicare, Medicaid, CHIP, and, if applicable, BHP, meaning that Exchanges must

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conduct Medicare PDM, Medicaid or CHIP PDM, and, if applicable, BHP PDM, twice a year.

The current regulation does not specify the frequency by which PDM activities to identify

deceased enrollees must occur, but the 2019 Program Integrity Rule requires that Death PDM be

conducted once annually, and we noted that we intended to update the frequency for Death PDM

in future rulemaking. As explained in the 2019 Program Integrity Rule, we did not require

Exchanges to perform PDM for death at least twice in a calendar year so that Exchanges could

prioritize the implementation of the new requirement to conduct PDM for Medicare, Medicaid,

CHIP and, if applicable, BHP eligibility or enrollment at least twice yearly. In the proposed rule,

we proposed to add § 155.330(d)(3)(ii) to require Exchanges beginning with the 2025 calendar

year to conduct periodic checks for deceased enrollees twice yearly and subsequently end

deceased enrollees’ QHP coverage after following the procedure specified in § 155.330(e)(2)(i).

Periodic checks for deceased enrollees help ensure Exchange program integrity. This

policy would not only align with current FFE policy and operations but would also prevent

overpayment of QHP premiums and APTC/CSRs, and accurately capture household QHP

eligibility based on household size. Additionally, by conducting Death PDMs twice a year,

Exchanges can prevent future auto re-enrollments or policy effectuation for deceased enrollees

for the next plan year.

Additionally, we proposed to add § 155.330(d)(3)(iii) to grant the Secretary the authority

to temporarily suspend the PDM requirement during certain situations or circumstances that lead

to an unavailability of data needed to conduct PDM. PDMs are conducted as a program integrity

measure where the prerequisite for conducting a proper PDM is assurance of data quality. We

recognize that during certain circumstances data quality may be incomplete or lagging. For

example, during the COVID-19 Public Health Emergency, State and local agencies had to strain

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their resources to address backlogs due to job losses and other administrative gaps further

slowing down response times,

228

thereby, increasing the risk of the Exchanges making inaccurate

eligibility determinations due to potential data lags. In such cases, using such data could pose a

risk of improper termination of coverage or APTC/CSRs for large numbers of enrollees. These

improper terminations may be particularly harmful to the consumers. These potential harms can

be even more likely to occur when the additional burdens of DMI resolution are imposed on

Medicare and Medicaid beneficiaries, who can be vulnerable and underserved and more likely to

encounter gaps in coverage or a complete lack of coverage as a result of failing to resolve the

DMIs.

229

Allowing the Secretary the flexibility to temporarily suspend the PDM requirement

during certain situations where there may be enrollment or data lags may be able to prevent an

inadvertent increase in the uninsured population, which largely consists of vulnerable consumers.

We will notify Exchanges of such a suspension of PDM activities, and a resumption of PDM

activities, through subregulatory guidance.

We anticipate most State Exchanges would be able to meet the proposed requirements for

Death PDM based on operations already reported through the State-based Marketplace Annual

Reporting Tool (SMART) as well as discussions we have had with the State Exchanges on PDM.

We also anticipate that changes, including a suspension of the PDM requirement, would be well

received by the Exchanges and issuers, as it is important that consumer information, such as

eligibility for APTC or QHP coverage, be accurate to avoid expending administrative resources

on complex processes to correct errors. Eleven State Exchanges reported in their 2022 SMART

228

McDerrmott, D., Cox, C., Rudowitz, R, and Garfield, R. (2020, Dec. 9). How Has the Pandemic Affected Health

Coverage in the U.S.? KFF. https://www.kff.org/policy-watch/how-has-the-pandemic-affected-health-coverage-in-

the-u-s/.

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Hirsch, M. (1994). Health Care of Vulnerable Populations Covered by Medicare and Medicaid. Health Care

Finance Rev.,15(4):1-5. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4193433/.

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submissions that they curtailed PDM checks only due to the exigency resulting from the COVID-

19 Public Health Emergency, which expired in May of 2023. Furthermore, we do not anticipate

the new periodicity requirement for the Death PDM to result in a significant administrative

burden for State Exchanges because States previously conducted PDM checks for deceased

enrollees.

Under section 1313(a)(4) of the ACA, if HHS determines that an Exchange has engaged

in serious misconduct with respect to compliance with Exchange requirements, it has the option

to rescind up to 1 percent of payments due to a State under any program administered by HHS

until such misconduct is resolved. These existing authorities apply to the PDM requirements in §

155.330(d). If HHS were to determine that it is necessary to apply this authority due to non-

compliance by an Exchange with § 155.330(d), HHS would also determine the HHS-

administered program from which it would rescind payments that are due to that State. However,

if State Exchanges do not comply with the PDM requirements, we generally first direct a State

Exchange to take corrective action. We utilize specific oversight tools (for example, the

SMART, independent external programmatic & financial audits) to ensure compliance and that

State Exchanges take appropriate corrective action. HHS also provides technical assistance and

ongoing monitoring to track those actions until the State Exchange remediates the issue fully.

We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision with modifications. The final rule

will require Exchanges to start conducting Death PDMs two times a year beginning calendar

year 2025 and will allow the Secretary to temporarily pause PDM during certain situations or

circumstances that lead to the limited availability of data (instead of the unavailability of data, as

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proposed) needed to conduct PDM. We are also adding that the Secretary may temporarily pause

PDM during certain situations or circumstances that lead to the limited availability of

documentation needed for an enrollee to notify the Exchange that the result of PDM is

inaccurate, as described in paragraph (e)(2)(i)(C). We summarize and respond to public

comments received on the proposed policy below.

Comment: Many commenters supported the proposal to allow the Secretary of HHS to

temporarily pause PDMs in the event data is unavailable to conduct PDM, which may harm

consumer enrollment, and for the Exchanges to start conducting Death PDMs twice a year

starting PY 2025, in compliance with the ACA requirement.

Response: We thank the commenters for their support of the proposed rule to allow the

Secretary of HHS to temporarily pause PDMs in certain situations that lead to the unavailability

of data needed to conduct PDM to limit inadvertent harm to the consumers, and for the

Exchanges to conduct Death PDMs two times a year and end coverage for identified deceased

enrollees, thus stopping premium payments and ending coverage after proper notification. In the

proposed rule, we proposed the “unavailability” of data is when the Secretary would exercise the

authority to temporarily pause PDMs. In this final rule, we are changing “unavailability” to

“limited” availability. From an operational and consumer experience standpoint, if complete data

is not readily available for either the Exchanges or consumers, running a PDM may cause

inadvertent harm. As a PDM results in termination of coverage or complete cessation of financial

assistance, Exchanges may be rendering consumers uninsured and consumers may also not have

sufficient documentation to appeal their dual enrollment or deceased status due to limited data

available from the respective entities.

Comment: One commenter asked for a clarification that the requirement to conduct

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PDMs is an Exchange requirement and not an issuer or DE requirement. The commenter

proposed that CMS create unique transaction codes to communicate identified deceased enrollee

amongst entities.

Response: This policy is for Exchanges to maintain program integrity of its operations by

identifying and removing deceased enrollees twice a year. We ask issuers in Exchanges on the

Federal platform to direct callers who wish to report a deceased enrollee to the Marketplace Call

Center at 1-800-318-2596 (TTY: 1-855-889-4325). We thank the commenter for the

recommendation to implement unique transaction codes so Exchanges and issuers can

communicate identified deceased enrollees. If an enrollee has been verified as deceased through

the Death PDM process, Exchanges on the Federal platform send the issuer an Outbound 834

with a Maintenance Reason Code of “Term-PDM” or “Cancel-PDM” which notifies the issuer of

upcoming termination or cancellation of the deceased enrollee’s Exchange coverage, unless

otherwise resolved within 30 days of initial notification to the consumer.

Comment: A few commenters supported the proposal and asked CMS to provide clarity

and specific examples and scenarios as to when the Secretary of HHS can pause PDM

operations, as poor enrollment data can occur outside a public health emergency.

Response: This policy will allow the Secretary to pause PDM operations under certain

circumstances that lead to the limited availability of data needed to conduct PDM. Outside of a

public health emergency, such circumstances may include enrollment or data lags. We are also

finalizing that the Secretary may temporarily pause PDM during certain situations or

circumstances that lead to the limited availability of documentation needed for an enrollee to

notify the Exchange that the result of PDM is inaccurate, as described in paragraph (e)(2)(i)(C),

If a consumer cannot provide sufficient documentation to appeal the PDM findings, they are

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likely to remain uninsured as the PDM process will likely cause the termination of their coverage

or financial assistance.

Comment: One commenter stated that requiring States to conduct PDM two times a year

limits States’ flexibility. A few commenters firmly opposed the proposed amendment, claiming

that the rationale provided does not justify additional Federal requirements and that Death PDM

is unlikely to identify inappropriate enrollments such that the program integrity benefits

outweigh the cost.

Response: Based on our experience operating the Federal Platform, running Death PDMs

two times per year has proven to identify a substantial number of deceased enrollees. We believe

that this two-times-a-year requirement is a vital program integrity measure to reduce the amount

of QHP premiums paid by the deceased enrollees and the amount of APTC paid on behalf of the

deceased enrollees. As allowed under § 155.315(h), State Exchanges have the ability to propose

to HHS alternative approaches for verifying the consumer information required under 45 CFR

part 155, subpart D, which includes the periodic verification of death status by Exchanges. Per §

155.315(h), HHS’ criteria for evaluating these alternative approaches include reduction of

administrative costs and burdens on individuals while maintaining accuracy and minimizing

delay, as well as maintaining coordination of eligibility with Medicaid and CHIP.

14. Incorporation of Catastrophic Coverage into the Auto Re-enrollment Hierarchy (§

155.335(j))

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82579), we proposed to incorporate catastrophic coverage as defined in section 1302(e)

of the ACA into the auto re-enrollment hierarchy at § 155.335(j). We proposed this policy

because the regulation did not address auto re-enrollment for catastrophic coverage enrollees, nor

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did it address a scenario in which a catastrophic coverage enrollee would lose eligibility for

catastrophic coverage in the coming plan year either because they exceeded the 30-year age limit

or lost eligibility for the exemption that allowed them to enroll in a catastrophic plan in spite of

exceeding the age limit.

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Specifically, we proposed to amend § 155.335(j)(1) and (2) to require

Exchanges to re-enroll individuals who are enrolled in catastrophic coverage, and who no longer

meet the criteria for enrollment in a catastrophic plan, into a bronze metal level QHP in the same

product as the enrollee’s current QHP (in the case of paragraph (j)(1)), or in the product offered

that is the most similar to (in the case of paragraph (j)(2)) the enrollee's current product, and that

has the most similar network compared to the enrollee's current QHP; or if no bronze plan is

available through this product, in the QHP with the lowest coverage level offered under this

product and that has the most similar network compared to the enrollee's current QHP. We also

proposed to amend § 155.335(j)(1)(ii) to (iv) and § 155.335(j)(2)(i) to (iii) to use the term

“coverage level” instead of “metal level” so that the rules in this section are inclusive of

catastrophic coverage enrollees. Finally, we proposed to add new § 155.335(j)(5) to establish that

an Exchange may not newly auto re-enroll into catastrophic coverage an enrollee who is

currently enrolled in coverage of a metal level as defined in section 1302(d) of the ACA. We

stated that as part of this proposed policy, we would update the Federally-facilitated Exchange

(FFE) Enrollment Manual to incorporate catastrophic coverage into the re-enrollment hierarchy

for alternate enrollments, sometimes referred to as cross issuer enrollments.

231

230

See § 155.305(h).

231

The FFE Enrollment Manual includes the hierarchy that we use to implement § 155.335(j)(3) in Exchanges using

the Federal platform to crosswalk enrollees whose current issuer no longer offer plans available to them through the

Exchange. For example, see CMS. (2023, July 12). Federally-facilitated Exchange (FFE) Enrollment Manual.

CMS. Section 3.2.4, pp 29-30. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.

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We solicited comment on these proposals, including whether they reflected the State

Exchanges’ current practices, whether we should consider proposing changes to the auto re-

enrollment hierarchy to prioritize re-enrollment in catastrophic coverage for enrollees who

remain eligible for catastrophic coverage in a way that is similar to current prioritization of silver

level coverage per § 155.335(j)(1)(ii), and whether there are additional strategies to help ensure

continuity of coverage for enrollees in catastrophic QHPs.

After consideration of comments and for the reasons outlined in the proposed rule and in

our responses to comments, we are finalizing this policy as proposed, except that we are

amending the new language that we proposed at § 155.335(j)(1)(v) and (j)(2)(iv) to incorporate

the phrase, “to the extent permitted by applicable State law.” This change aligns these new

policies with existing re-enrollment hierarchy rules, including § 155.335(j)(2) and (j)(3), which

include this phrase to indicate that Exchanges must take into account applicable State law when

implementing auto re-enrollment. As discussed in further detail below, this change is also in

response to a public comment that said Connecticut State law does not permit auto re-enrolling

catastrophic coverage enrollees losing eligibility for catastrophic coverage. We summarize and

respond to public comments below.

Comment: Many commenters supported the proposed policy because they agreed that it

would help promote continuous coverage for Exchange enrollees with catastrophic coverage who

do not actively select a plan for the upcoming plan year, including enrollees who lose eligibility

for catastrophic coverage. Several commenters cited State Exchanges, including Washington

Healthplanfinder and MNsure, that already automatically re-enroll catastrophic coverage

enrollees.

Response: We appreciate the information that some State Exchanges already auto re-

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enroll catastrophic coverage enrollees. We agree that the policy will help promote continuity of

coverage, and as noted in the proposed rule, believe that it will also promote transparency and

clarity for all Exchanges’ interested parties.

Comment: One commenter stated that CMS should explain why current State Exchange

practices are insufficient. Another commenter stated that the proposal did not appear to address

an industry issue. Many commenters recommended that CMS provide State Exchanges with

flexibility in terms of whether or when to implement the policy, including a number of

commenters who otherwise supported the goal of helping enrollees maintain continuous

coverage. A few commenters that opposed the proposal cited their general opposition to limits on

State flexibility.

One commenter stated that the Idaho State Exchange had already addressed the problems

that the proposed rule intended to solve, including this proposal. A few commenters stated that

the proposal would not be effective because several State Exchanges do not currently have the

ability to auto re-enrollee catastrophic coverage enrollees. Another commenter stated that

Connecticut law prohibits auto re-enrolling enrollees losing eligibility for their catastrophic

coverage, because a law specifies that only a licensed producer or agent may recommend a

specific plan to a consumer.

Several commenters recommended that, rather than requiring State Exchanges to

automatically re-enroll catastrophic coverage enrollees, CMS should allow Exchanges to

encourage these consumers to actively select a new plan, especially in cases where an enrollee

would lose eligibility for catastrophic coverage. One commenter stated that Connect for Health

Colorado does not auto re-enroll enrollees losing eligibility for catastrophic coverage, and

instead performs outreach encouraging them to choose a plan that works best for them.

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Several commenters asked that, if the proposal is finalized, CMS continue allowing

Exchanges to determine their own auto re-enrollment hierarchy.

Response: In response to the comment that Connecticut State law does not permit auto re-

enrolling catastrophic coverage enrollees losing eligibility for catastrophic coverage, we are

amending the proposed language at § 155.335(j)(1)(v) and (2)(iv) to incorporate the phrase, “to

the extent permitted by applicable State law,” to reflect that Exchanges must take into account

applicable State law when implementing auto re-enrollment. This language aligns paragraph

(j)(1)(v) with the rest of § 155.335(j); for example, the language at paragraphs (j)(2) and (3)

specifies that those policies are subject to applicable State law. CMS’ technical assistance

materials also account for the fact that Exchange re-enrollment practices may vary based on

applicable State law. For example, the Frequently Asked Questions for the 2023 Marketplace

Open Enrollment Period Public Use Files explains that certain plan crosswalk metrics are not

reported for State Exchanges because since not all State Exchanges allow for consumers whose

product is discontinued or whose issuer no longer offers any QHPs to be automatically re-

enrolled in a new plan.

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We are otherwise finalizing the policy as proposed, because we believe that automatically

re-enrolling all Exchange enrollees who do not actively select a plan or terminate their coverage

is important to help ensure continuity of coverage. We intended this policy to protect against

disruptions in care that could be avoided through implementation of a re-enrollment hierarchy

for enrollees in catastrophic coverage. We explained in the proposed rule (88 FR 82579) that

while Exchanges on the Federal platform generally already auto re-enroll these enrollees, the

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See 2023 Public Use Files FAQs (PDF) (https://www.cms.gov/files/document/2023-public-use-files-faqs.pdf),

and 2023 Marketplace Open Enrollment Period Public Use Files

(https://www.cms.gov/data-research/statistics-trends-and-reports/marketplace-products/2023-marketplace-open-

enrollment-period-public-use-files).

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absence of a re-enrollment hierarchy in regulation for catastrophic coverage enrollees meant that

we could not, as operator of Exchanges on the Federal platform, require issuers to provide plan

crosswalk information for enrollees losing eligibility for catastrophic coverage. We are of the

view that this consumer-protective policy is reasonable and appropriate regardless of whether it

addresses an industry issue.

State Exchanges that cannot implement or choose not to implement the re-enrollment

hierarchy as described in this rule may seek approval from the Secretary to conduct their own

annual eligibility redetermination process, as described in § 155.335(a)(2)(iii). We already

consider State Exchanges’ requests for flexibility in this area on an annual basis, as part of their

submission of their eligibility re-determination and re-enrollment plans, both in order to mitigate

burden and to permit innovation that allows Exchanges to best serve their enrollees.

We also appreciate the additional detail from commenters on the extent to which State

Exchanges do or do not incorporate enrollees in catastrophic coverage into their auto re-

enrollment processes, including that some Exchanges do not currently auto re-enroll catastrophic

coverage enrollees, or do not automatically re-enroll those who will lose eligibility for

catastrophic coverage. We agree that an ideal enrollment experience is one in which an enrollee

actively chooses a plan that best fits their needs for the coming year, and we note that auto re-

enrollment does not prevent Exchanges from also performing robust outreach and engagement

encouraging all enrollees, including those with catastrophic coverage, to actively select a new

plan for the coming year. This policy, like the rest of the auto re-enrollment hierarchy at §

155.335(j), is a safeguard to prevent enrollees from losing coverage if they do not actively select

a plan or cancel their coverage by the end of the annual open enrollment period.

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Comment: Two commenters said that this proposal would increase health insurance

premiums due to increased burden on State Exchanges and QHP issuers.

Response: We disagree that this policy will increase health insurance premiums due to

increased burden on QHP issuers or State Exchanges. As discussed in the proposed rule (88 FR

82580), as the operator of Exchanges on the Federal platform, we already include almost all

catastrophic coverage enrollees in our annual auto re-enrollment process; therefore, this policy

will not increase burden on us or on issuers that participate in Exchanges on the Federal

platform. Furthermore, while two commenters raised general concerns associated with increased

costs of health insurance, they did not specify how or why an Exchange or issuer would incur

costs associated with incorporating catastrophic coverage enrollees into existing auto re-

enrollment processes already required by §155.335(j). Thus, we do not anticipate that

finalization of this policy will result in sufficient Exchange or issuer burden to cause premium

increases. Nevertheless, we note that in the unlikely event that compliance with this policy would

be burdensome for an Exchange to the point that it would result in increased premiums, as

discussed earlier, Exchanges may seek approval from the Secretary for flexibility as described in

§ 155.335(a)(2)(iii).

We also do not anticipate that implementation of this policy would increase QHP issuer

burden that would lead to increases in premiums, because issuers participating in Exchanges on

the Federal platform have not raised concerns about supporting auto re-enrollment for

catastrophic coverage enrollees. As discussed in the proposed rule (88 FR 82580), only one QHP

issuer participating in our auto re-enrollment process for Exchanges on the Federal platform did

not submit a crosswalk option for enrollees losing catastrophic coverage eligibility, indicating

that compliance with this policy would not increase issuers’ costs beyond those associated with

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the existing annual QHP Certification process.

Comment: A few commenters raised the concern that auto re-enrolling catastrophic

coverage enrollees into a metal level plan could increase enrollees’ monthly premium payments

without their knowledge. One commenter added that catastrophic coverage enrollees who are re-

enrolled into bronze coverage could experience further increases in premiums in the event the

more generous subsidies provided for in the ARP and extended by the IRA expire.

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Response: Section 155.335(c)(3) mitigates the risk that enrollees could be enrolled in a

metal level plan that increases their premiums without their knowledge by requiring all

Exchanges to provide a qualified individual with an annual redetermination notice that includes

projected eligibility for the following year, including, if applicable, the amount of any APTC and

the level of any CSRs or eligibility for Medicaid, CHIP or BHP. We send enrollees covered

through an Exchange on the Federal platform their first reminder to update their application and

select coverage for the upcoming plan year by November 1, the start of Open Enrollment. Also,

re-enrollment notices that we send to enrollees in all Exchanges on the Federal platform are

already designed to advise enrollees of the possibility of increased cost when applicable, because

monthly premiums regularly increase from year to year, even for the same plan.

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Finally, we acknowledge that catastrophic coverage enrollees who are re-enrolled into

bronze coverage could experience increases in premiums, including in the event the more

generous subsidies provided for in the ARP and the IRA expire, and that the expiration of the

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Section 9661 of the ARP amended section 36B(b)(3)(A) of the Internal Revenue Code for tax years 2021 and

2022 to decrease the applicable percentages used to calculate the amount of household income a taxpayer is required

to contribute to their second lowest cost silver plan, which generally result in increased PTC for PTC-eligible

taxpayers. For those with household incomes no greater than 150 percent of the FPL, the new applicable percentage

is zero, resulting in availability of one or more silver-level plans with a net premium of $0, if the lowest or second-

lowest cost silver plan covers only EHBs. The Inflation Reduction Act of 2022 extended these changes through tax

year 2025.

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For a more detailed discussion of CMS annual auto re-enrollment noticing practices see the HHS Notice of

Benefit and Payment Parameters for 2024 Final Rule (88 FR 25824).

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more generous subsidies may cause the amount of premium that must be paid directly by the

catastrophic coverage enrollee to increase. This, however, would be true for enrollees at all metal

levels, and the risk of increased out-of-pocket premium costs for enrollees does not outweigh the

benefits of this policy, which is intended to ensure continuity of coverage for as many people as

possible, including catastrophic coverage enrollees who do not return to the Exchange to actively

re-enroll in coverage.

Comment: A few commenters supported the goal of maintaining continuous coverage but

raised concerns that auto re-enrollment hierarchies may not take into account certain important

factors. One commenter stated that the current auto re-enrollment hierarchy might not adequately

account for children’s unique health care needs because of its focus on providing continuity

regarding cost-sharing requirements. This commenter recommended stronger universal standards

for benefits and provider networks, and additional mechanisms to ensure alignment between

enrollees’ current and future plans. Another commenter stated that a metal level QHP might not

be affordable for enrollees who previously had catastrophic coverage and suggested that CMS

consider a limit on premium or out-of-pocket cost increases for automatic enrollment or require

plans to provide appropriate notification before auto re-enrolling. One commenter asked CMS to

consider the importance of non-EHB benefits in the auto re-enrollment hierarchy, such as dental,

vision, or allergy testing benefits.

Response: We did not propose changes to the re-enrollment hierarchy other than

incorporating catastrophic coverage into § 155.335(j); therefore, any comments on other

elements of the re-enrollment hierarchy are outside the scope of this rulemaking. We also note

that this policy does not impact potential issues of benefit or network continuity. We

acknowledge comments on potential drawbacks to the current re-enrollment hierarchy and

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recommendations to improve continuity of coverage based on prioritization of factors that

enrollees may value. In particular, we will consider potential future parameters based on total

out-of-pocket cost, though we note that this consideration may in some cases conflict with

prioritizing plan benefit, network type, or product continuity.

Comment: Several commenters stated that CMS should also allow Exchanges to

automatically re-enroll enrollees losing catastrophic coverage eligibility into a higher metal level

QHP when possible, without increasing the enrollee’s monthly premiums or changing their

provider network. Some of these commenters added that this would be especially helpful for

enrollees in catastrophic coverage who would qualify for CSRs if automatically re-enrolled in a

silver plan. One commenter stated that Washington Healthplanfinder already implements this

policy and has auto re-enrolled more than 50 people aging out of catastrophic coverage into a

silver QHP with the same or lower premium and same carrier and network. The commenter

noted that this was possible due to a State-based subsidy of up to $250 per month for those with

incomes under 250 percent FPL who enroll in a silver or gold level standard plan.

Response: We appreciate comments on potential benefits of amending the re-enrollment

hierarchy to allow Exchanges to auto re-enroll catastrophic coverage enrollees into a silver level

QHP based on financial assistance eligibility. We are not finalizing this policy as we need more

time to explore the benefits and detriments of such a policy. We will consider these comments

for future rulemaking. Additionally, as discussed earlier, an Exchange may request to apply a

modified hierarchy to its auto re-enrollment process if approved by the Secretary pursuant to §

155.335(a)(2)(iii), including to auto re-enroll catastrophic enrollees into a higher metal level.

Comment: One commenter stated that an SEP for former catastrophic coverage enrollees

who are auto re-enrolled to a bronze plan could help consumers avoid a tax liability if they are

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auto re-enrolled in a plan with a higher premium.

Response: We did not propose and will not finalize any changes to SEPs related to

incorporating catastrophic coverage into the re-enrollment hierarchy at § 155.335(j). We

appreciate and will take the comment under consideration.

Comment: A few commenters recommended that CMS delay the implementation

deadline for the policy. One commenter stated that a delayed deadline would be helpful because

of the 9–12-month lead time needed to implement most changes to State Exchanges’ IT systems.

A few commenters stated that flexibility would be helpful given that CMS was also proposing a

number of other requirements with which Exchanges would be required to comply. Another

commenter stated that Exchanges might need additional time to implement this and other

proposed policies given increases in enrollment of new or returning consumers whose Medicaid

coverage is ending due to the expiration of the Medicaid continuous enrollment condition in

section 6008(b)(3) of the Families First Coronavirus Response Act (Pub. L. 116–127).

Response: We are finalizing this policy with the implementation deadline proposed

because we believe that automatically re-enrolling all Exchange enrollees who do not actively

select a plan or terminate their coverage is important to help ensure continuity of coverage. As

discussed previously, State Exchanges that cannot implement or choose not to implement the re-

enrollment hierarchy as described in this rule make seek approval from the Secretary to conduct

their own annual eligibility redetermination process, as described in § 155.335(a)(2)(iii),

including to defer implementation of this policy to a plan year after 2025.

Comment: A few commenters supported prioritizing auto re-enrollment in catastrophic

coverage the same way that the current hierarchy prioritizes auto re-enrollment in a silver plan –

that is, if a silver level plan is no longer available in the same product, the Exchange must

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crosswalk to a silver plan in another product that is most similar.

Response: We appreciate these comments in response to our solicitation for comments.

We did not propose and therefore are not incorporating this policy into the final rule but may

consider proposing this policy in future rulemaking.

15. Premium Payment Deadline Extensions (§ 155.400(e)(2))

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82581), we proposed to amend § 155.400(e)(2) to codify that the flexibility for issuers

experiencing billing or enrollment problems due to high volume or technical errors, or issuers

directed to do so by applicable State or Federal authorities, is not limited to extensions of the

binder payment.

Section 155.400(e) specifies that Exchanges may require, and the FFEs and SBE-FPs will

require, enrollees to make a binder payment to effectuate enrollment, and paragraph (e)(1)

specifies the range of dates within which an issuer may establish a deadline to pay binder,

depending on whether coverage is being effectuated under regular, prospective, or retroactive

effective dates. In the 2018 Payment Notice (81 FR 94058), we added paragraph (e)(2) to

address situations in which an issuer is unable to timely process binder payments submitted by

enrollees, which may impact an enrollee’s ability to effectuate coverage. Specifically, we noted

that based on our experience during several open enrollment periods, issuers occasionally

experience technical errors, or a processing backlog caused by an unusually high volume of

enrollments. As a result, enrollees may be temporarily unable to submit premium payments, or

the issuer may be unable to process payments in a timely manner. We thus established an option

for issuers to implement a reasonable extension of binder payment deadlines,

235

which ensures

235

We also stated that we do not anticipate extensions to be greater than 45 calendar days.

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that enrollees do not have coverage cancelled due to non-payment when the enrollee did not have

adequate time to pay the binder payment.

Although we only addressed extensions to the binder payment deadlines in

§ 155.400(e)(1), we did not intend to exclude other premium payment scenarios in which

Exchanges could, and the Exchanges on the Federal platform would, provide similar flexibility.

In published guidance, such as the 2023 Federally-facilitated Exchange (FFE) Enrollment

Manual,

236

we stated that we will exercise enforcement discretion with regard to regulatory

requirements, such as the binder payment and the deadline for payment of premiums under grace

periods if an issuer is complying with a State regulatory authority’s request to extend premium

payment deadlines and delay termination of coverage due to a natural disaster or other

emergency within the State.

For example, in connection with the COVID-19 Public Health Emergency declared by

the Secretary, HHS exercised enforcement discretion

237

regarding issuers extending premium

payment deadlines and delaying cancellations or terminations of coverage with the permission of

the applicable State regulatory authority. We proposed to codify that Exchanges may, and

Exchanges on the Federal platform would, provide flexibility in such circumstances, including

circumstances in which an issuer is directed to do so by applicable State or Federal authorities.

Because current paragraph (e)(2) may be read to limit the flexibility Exchanges could

provide issuers regarding payments other than the binder payment, we also proposed to add the

phrase “and other premium payment deadlines.” Doing so clarifies for interested parties,

particularly issuers, that Exchanges may, and Exchanges on the Federal platform will, provide

236

CMS. (2023, July 12). 2023 Federally-facilitated Exchange (FFE) Enrollment Manual. CMS. Section 6.1.3, p.

89, and Section 6.10, p. 110. https://www.cms.gov/files/document/ffe-enrollment-manual-2023-5cr-071323.pdf.

237

Pate, R. (2020, March 24). Payment and Grace Period Flexibilities Associated with the COVID-19 National

Emergency. CMS. https://www.cms.gov/files/document/faqs-payment-and-grace-period-covid-19.pdf.

CMS-9895-F 341

flexibility regarding premium payment requirements other than the binder payment, such as the

requirement to trigger a grace period to enrollees receiving APTC under § 156.270(d) if enrollees

fail to pay premiums timely.

We requested comments on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed to amend

§ 155.400(e)(2) to codify that the flexibility for issuers experiencing billing or enrollment

problems due to high volume or technical errors is not limited to extensions of the binder

payment. We summarize and respond to public comments received on the proposed policy

below.

Comment: Most commenters who weighed in on the proposal supported it, and stated that

it would benefit States, consumers, and issuers. One commenter stated that the proposal would

make it easier for State Exchanges to explore options to improve the consumer experience.

Another commenter stated that the proposal would allow consumers to maintain continuous

coverage when technical issues arise that are beyond the consumer’s control. Finally, another

commenter stated that the proposal would help issuers experiencing billing or enrollment

problems due to high volume or technical errors.

Response: We agree that codifying that the flexibility for issuers experiencing billing or

enrollment problems due to high volume or technical errors is not limited to extensions of the

binder payment will help support States, consumers, and issuers by allowing consumers to

maintain continuous coverage when they are unable to satisfy premium payment deadlines for

certain reasons outside of their control.

Comment: A few commenters supported the proposal but with limitations. One

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commenter supported the proposal but only in meaningfully extenuating circumstances. Another

commenter stated that they support the proposal but are concerned about consumers falling too

far behind in payments and requested that the length of the extension be kept to a minimum.

Response: We agree that it is important for this flexibility to be limited to specific

circumstances where an issuer requires a reasonable extension of a binder or premium payment

deadline, such as a State declaration of natural disaster, and we note that such flexibility is

always time limited in scope. We expect that payment extensions would extend until the high

volume or technical errors have been corrected or until a reasonable period of time thereafter.

We also generally do not anticipate extensions due to high volume or technical errors to be

greater than 45 calendar days based on previous experience with binder payment extensions,

though extensions related to a State declaration of a natural disaster or public health emergency

may be longer.

Comment: One commenter supported the proposal but opposed implementing the policy

in a manner that creates retroactive terminations or otherwise places consumers at risk for non-

coverage and providers at risk for non-payment during any payment deadline extension. The

commenter recommended that CMS clarify that any premium payment deadline extension must

be exhausted before any 3-month grace period begins and cannot operate to extend the grace

period. In other words, the commenter recommended that an APTC-eligible consumer has not

“fail[ed] to timely pay premiums” under § 156.270(d) unless and until any premium payment

deadline extension has been exhausted, meaning that coverage could be maintained during the

extension period and the 3-month grace period (if applicable). One commenter supported the

proposal but proposed additional flexibility for plans to hold payments for prescriptions in a

pending status during any extension period.

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Response: We clarify that this proposal would not allow retroactive termination beyond

that already allowed under § 156.270(d). We also clarify that we would not consider the 3-month

grace period to have begun until a consumer has failed to pay any required premium by the end

of any premium payment deadline extension, consistent with this commenter’s recommendation.

Although we may allow an issuer, in connection with a billing or enrollment problem due to high

volume or technical errors, or at the direction of State or Federal authorities (such as the

declaration of natural disaster or other emergency), to delay placing an enrollee in delinquency,

once the grace period has begun, issuers must allow enrollees no more than 3 months to pay

outstanding premium. If the enrollee does not pay all past due premium by the end of the third

month coverage, subject to any applicable threshold policy consistent with § 155.400(g), the

issuer must terminate the enrollee’s coverage retroactively to the end of the first month. We also

require, in accordance with § 156.270(d)(1), that during the grace period, the QHP issuer must

pay all appropriate claims for services rendered to the enrollee during the first month of the grace

period, including for prescription drugs, and may pend claims for services rendered to the

enrollee in the second and third months of the grace period, including prescription drugs. We do

not see a reason to treat prescription drugs differently from other claims during the grace period.

For example, in connection with the COVID-19 Public Health Emergency declared by the

Secretary, issuers complying with a State’s Department of Insurance order or recommendation to

not terminate individual market health insurance coverage through a specified date were

informed that once a grace period was triggered, the requirements applicable to the grace period

would remain unchanged and would follow the rules outlined in § 156.270(d).

Comment: A few commenters stated that the proposal would be especially helpful to low-

income enrollees who may be impacted by factors such as unstable housing or lack of reliable

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broadband access.

Response: While we agree that the flexibility codified by this proposal may aid

consumers, many of whom may be low-income and impacted by factors such as housing or lack

of reliable broadband access, these conditions would not trigger the flexibilities allowed by this

policy. However, consumers who experience certain hardships may benefit from this policy

when State or Federal authorities direct issuers to provide an extension on payments, such as due

to a natural disaster or other emergencies in which extenuating circumstances would prevent an

issuer from being able to receive payment.

16. Initial and Annual Open Enrollment Periods (§ 155.410)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82581), we proposed changes and updates to § 155.410. At § 155.410, we proposed to

amend paragraph (e)(4)(ii) to revise parameters around the adoption of an alternative open

enrollment period by a State Exchange. We proposed to require that for benefit years beginning

on or after January 1, 2025, State Exchanges must adopt an open enrollment period that begins

on November 1 of the calendar year preceding the benefit year and ends no earlier than January

15 of the applicable benefit year, with the option to extend the open enrollment period beyond

January 15 of the applicable benefit year.

In part 3 of the 2022 Payment Notice (86 FR 53429 through 53432), where we extended

the open enrollment period for the Exchanges on the Federal platform to January 15, we noted

several observations regarding a 6-week open enrollment period ending on December 15

including that certain consumers may be subjected to unexpected plan cost increases that they

may not be notified about until January, after open enrollment concludes. We also observed that

extending the open enrollment period for the Exchanges on the Federal platform to January 15

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would ensure ample time for Navigators, assisters, certified application counselors, agents, and

brokers to fully assist all interested consumers. We further noted that ending open enrollment on

January 15 would give consumers additional time to react to updated plan cost information and

more time to seek enrollment assistance, which could improve access to health care coverage,

particularly for those in underserved communities who face additional barriers to accessing

health care coverage.

In the proposed rule (88 FR 82851), we expressed that these observations hold true as to

State Exchanges and warrant requiring that their open enrollment periods also end no earlier than

January 15. Since we extended the open enrollment period for Exchanges on the Federal

platform in part 3 of the 2022 Payment Notice final rule, four States have transitioned to the

State Exchange model, and we anticipate that there will be additional State Exchanges in future

benefit years, which increases the potential for differing open enrollment periods. While most of

the State Exchanges already hold an open enrollment period that ends on or after January 15 of

the benefit year, we expressed our belief that the risk of shorter open enrollment periods in the

future requires ensuring a minimum open enrollment period across all Exchanges, including

State Exchanges. We predicted that this policy would impose a minimal burden on most of the

State Exchanges.

Additionally, we stated that ensuring State Exchanges’ open enrollment periods begin on

November 1 of the calendar year and continue through at least January 15 of the benefit year –

thereby ensuring substantial overlap among all Exchange open enrollment periods – would

reduce consumer confusion in States with State Exchanges that currently hold open enrollment

periods that are shorter than the open enrollment period for the Exchanges on the Federal

platform, or that begin before November 1 and end earlier than January 15. Consumers in these

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States would have more time to enroll in coverage and would be less likely to miss opportunities

to enroll due to confusion about the duration of the open enrollment period. The combined

benefits of this policy in terms of reducing consumer confusion and building in additional time

for consumers to enroll could further increase Exchange enrollment and potentially have

downstream impacts like improving the uninsured rate in States.

We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing the provision that for benefit years beginning on or

after January 1, 2025, State Exchanges must adopt an open enrollment period that begins on

November 1 of the calendar year preceding the benefit year and ends January 15 of the

applicable benefit year or later. However, we are finalizing the rule with an addition: we are

adding paragraph (e)(4)(iii) to grandfather the open enrollment period of any State Exchange that

held an open enrollment period that began before November 1, 2023, and ended before January

15, 2024, for the 2024 benefit year so that it can continue to begin open enrollment before

November 1 in consecutive future benefit years, so long as that State Exchange’s open

enrollment period continues uninterrupted for at least 11 weeks. If the State Exchange changes

the dates of its open enrollment period after the effective date of this rule, it must for that and

subsequent benefit years hold an open enrollment period that is compliant with the requirements

of (e)(4)(i) and (ii). We are also amending 155.410(e)(4)(i) to add a reference to new paragraph

(e)(4)(iii).

We are providing this flexibility in recognition of several commenters who cited the

operational success of certain State Exchanges that have recently held open enrollment periods

earlier than November 1 and requested that we reconsider providing an additional measure of

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flexibility. We do not intend to discourage operational success or generate negative downstream

impacts (for instance, decreased enrollment or revenue) for any State Exchanges that held an

open enrollment period that began before November 1, 2023, and ended before January 15, 2024,

for the 2024 benefit year. We also seek to minimize the potential for significant disruption to

Exchange operations currently in place to the extent possible consistent with this policy, as well

as to minimize potential burden to Exchanges, consumers, and other interested parties (for

instance, navigators, assisters, and issuers) acting in reliance on existing Exchange operations.

We believe this modification to allow State Exchanges to grandfather the dates of their open

enrollment period as described above strikes an appropriate balance between standardizing a

minimum open enrollment period across Exchanges while minimizing operational disruption.

This flexibility does not extend to State Exchanges that began open enrollment before November

1, 2023, and ended before January 15, 2024, for any benefit year other than the 2024 benefit

year.

We summarize and respond to public comments received on the proposed policy below.

Comment: Many commenters cited the potential benefits of this policy, echoing some

rationales that CMS provided including: helping to maximize the time consumers need to

navigate plans and get assistance from Navigators/assisters; creating a more consistent window

of consumer outreach; providing more time for consumers to take into account potential plan

cost increases in January before enrolling; reducing consumer confusion about open enrollment

periods due to consistency across Exchanges, including after an Exchange transition, and more

seamless nationwide messaging to consumers given this consistency; allowing consumers to

shop for coverage after the holiday season during which they may be busy and/or more

financially-burdened; reducing administrative burdens on plans, assisters, and regulators;

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allowing for easier plan switching for auto-re-enrolled consumers; helping to increase Exchange

enrollment; and eliminating the probability of truncated open enrollment periods in future benefit

years. Several commenters asserted that this proposal would help maximize enrollment through

greater alignment with the open enrollment periods for Medicare and employer-sponsored

coverage.

Response: We thank commenters for their support of this proposal. We considered many

of these potential benefits and appreciate the insight on others.

Comment: Many commenters appreciated that this policy provides the flexibility to

extend open enrollment beyond January 15 of the benefit year. However, one commenter noted

that allowing variation beyond January 15 of the benefit year undercuts the stated benefits of

aligning open enrollment periods across Exchanges.

Response: While we acknowledge that there is, and may continue to be, variation in open

enrollment end dates under this policy, we underscore that the policy still generally prescribes a

consistent minimum time-period during which open enrollment will occur across Exchanges,

which includes the 11 weeks between November 1 through January 15 for the vast majority

Exchanges, as required under (e)(4)(ii), and at least 11 weeks for any State Exchange that has

grandfathered its open enrollment period. We think this minimum period provides ample

opportunity for consumers to select a plan and will provide an appropriate measure of

consistency. We believe this policy strikes the appropriate balance of standardization and

flexibility for State Exchanges since it allows for flexible open enrollment period end dates and

grandfathering of existing open enrollment periods, while generally codifying a national

minimum open enrollment period. We appreciate commenters that supported this aspect of the

policy.

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Comment: Many commenters, including those both opposing and supporting the

proposal, asserted that States should have the flexibility to set their own open enrollment periods,

stating that States are best positioned to decide on an open enrollment period that suits the needs

of local markets and consumers, and/or that the proposal unnecessarily curtails State flexibility to

set an appropriate open enrollment period. Several commenters argued specifically that States

should maintain the flexibility to begin their open enrollment periods earlier than November 1 of

the benefit year.

Response: We reiterate that this rule properly balances flexibility with uniformity.

Currently, all Exchanges except one, including 18 State Exchanges, begin their annual open

enrollment periods on November 1 of the calendar year preceding the benefit year, and therefore

we thought that a mandatory November 1 open enrollment start date would minimize disruption

for Exchanges while promoting consistency. Additionally, for the reasons described above and in

the proposed rule, we believed it was important to extend the open enrollment period to January

15 for all Exchanges, but we are allowing States to end their open enrollment period later, if

desired. Finally, paragraph (e)(4)(iii) provides flexibility by grandfathering the open enrollment

periods for certain Exchanges, as described in more detail in this rule.

Comment: A few commenters expressed concern that the proposal provides too much

flexibility to continue open enrollment indefinitely and should prescribe a deadline to prevent

States from operationalizing a continuous open enrollment period throughout the year, which

could impose financial burden and create adverse selection.

Response: We thank commenters for highlighting an important consideration. We believe

States are best positioned to balance the benefits to their consumers of a longer open enrollment

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period with the market impacts of adverse selection when deciding when, on or after January 15,

to end their open enrollment period.

Comment: One commenter recommended that Exchanges be prohibited from extending

the annual open enrollment deadlines at the last minute, particularly toward the end of the open

enrollment period, and that Exchanges should not deviate from their publicized open enrollment

timeframes, to help prevent undue administrative burden and potential consumer confusion.

Response: We thank the commenter for highlighting an important operational

consideration that Exchanges may wish to take into account in choosing when and how to end

their open enrollment periods. We are not prohibiting State Exchanges from providing additional

flexibility because unforeseen or exceptional circumstances (for instance, technical system issues

that impact consumers’ ability to enroll in coverage) may necessitate extending open enrollment

to ensure consumers have the opportunity to enroll.

Comment: One commenter recommended that State Exchanges be provided the flexibility

to set their own open enrollment periods after the first year of operating a State Exchange

following a State Exchange transition.

Response: We are finalizing this policy to generally make consistent the open enrollment

period across Exchanges, in part because it will reduce consumer confusion, especially after a

State Exchange transition. While we have allowed some flexibility for Exchanges in the

grandfathering provision of paragraph (e)(4)(iii), we have done so only to minimize disruption of

existing open enrollment periods, and believe that moving towards more aligned open enrollment

periods going forward will benefit consumers and increase enrollment.

Comment: One commenter suggested that they would be amenable to a more flexible

policy that simply prescribed a minimum number of open enrollment days or weeks. This

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commenter suggested that longer open hours or concentrated promotion during open enrollment

may have a more significant impact than simply prescribing a specific time-period.

Response: We considered, but did not propose, this type of approach. We believe that the

proposed policy better balances State flexibility with the benefits of consistency for consumers

of generally requiring a national minimum open enrollment period upon which consumers can

rely. We note one exception to this which will allow certain Exchanges to hold an 11 week open

enrollment period consistent with the requirements of in paragraph (e)(4)(iii).

Comment: One commenter suggested that current regulations already “partially achieve”

the alignment of open enrollment periods across Exchanges and that this policy is, therefore,

unnecessary.

Response: The goals of this policy are to largely align open enrollment periods across

Exchanges and to capitalize on the benefits to consumers of a longer open enrollment period.

Even if open enrollment periods are currently partially aligned, this rule will ensure that in the

future, all Exchanges hold their open enrollment period between November 1 and January 15.

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Comment: Several commenters recommended that States be provided the flexibility to, or

that CMS instead prescribe, an open enrollment period that ends no later than December 31 of

the calendar year preceding the benefit year, to encourage consumers to enroll in a full 12

months of coverage.

Response: We reiterate the various benefits of requiring the open enrollment period to

continue until at least January 15 of the benefit year. These include ensuring consumers are not

subjected to plan cost increases that they may not be notified about until after open enrollment

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Any Exchange availing itself of the grandfathering provision described in § 155.410(e)(4)(iii) will be required to

hold an open enrollment period at least between November 1 and January 15 if their open enrollment period deviates

from that set beginning after the effective date of this rule.

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ends; giving Navigators, certified application counselors, and agents and brokers ample time to

assist all interested applicants; providing consumers with additional time to enroll in coverage

after the holiday season when they otherwise might be unable to as a result of financial or other

limitations; and improving access to health coverage. Consumers who would like to, and are able

to, enroll before December 31 still have that option, and Exchanges and interested parties may

encourage consumers, through marketing, outreach, or other means, to obtain coverage for 12

months by enrolling before January 1. Therefore, we believe that requiring the annual open

enrollment period to continue until at least January 15 of the benefit year best accommodates

different consumer’s needs.

Comment: A few commenters recommended that, in other rulemaking, CMS should

consider requiring that short-term limited duration insurance coverage end by December 31 of a

given plan year or that CMS should lengthen the period of short-term limited duration insurance

beyond 3 months.

Response: We appreciate these comments on short-term limited duration insurance but

note that term limits for such insurance is outside the scope of this rulemaking.

Comment: One commenter asserted that this proposal is unnecessary, as only the Idaho

State Exchange held a shorter open enrollment period for the 2024 benefit year than what is

required under this new policy, and that even Idaho’s open enrollment period was sufficient in

length.

Response: We thank the commenter for highlighting that this policy primarily would

impact the operations of one State Exchange among all Exchanges nationally. To minimize

disruption, we have finalized this policy by providing the flexibility for any State Exchange that

began open enrollment before November 1, 2023, and ended before January 15, 2024, for the

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2024 benefit year to continue to begin open enrollment before November 1 and end before

January 15 for consecutive future benefit years, so long as the open enrollment period continues

uninterrupted for at least 11 weeks, and unless this State Exchange later changes their open

enrollment dates. This is to ensure alignment with the minimum number of weeks prescribed at

paragraphs (e)(4)(i) and (ii) for any State Exchange that grandfathers its open enrollment period

while not requiring that such a State Exchange hold a longer open enrollment period than other

Exchanges. Aside from this flexibility, requiring a national minimum open enrollment period

across Exchanges for the 11 weeks between November 1 and January 15 strikes an appropriate

balance between providing State flexibility and ensuring substantial overlap of Exchange open

enrollment periods nationwide. Finally, we underscore that this policy will generally codify this

national minimum open enrollment standard moving forward.

17. Special Enrollment Periods

a. Effective Dates of Coverage (§ 155.420(b))

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82582), we proposed amending § 155.420(b)(1) and (b)(3)(i) to align the effective dates

of coverage after selecting a plan during certain SEPs across all Exchanges, including State

Exchanges, so that qualifying individuals or enrollees who select and enroll in a QHP during

certain SEPs receive coverage beginning the first day of the month after the consumer selects a

QHP. In order to consolidate and integrate the requirements in § 155.420(b)(3), without affecting

any rights or obligations, we also proposed to include the requirements currently in paragraph

(b)(3)(ii) into proposed paragraph (b)(3)(i) and to delete paragraph (b)(3)(ii).

In accordance with § 155.420(b)(3)(i), in the FFEs, SBE-FPs, as well as several State

Exchanges, during a SEP, consumers who select a QHP through the Exchange to which regular

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effective dates specified in § 155.420(b) apply have the plan’s coverage begin on the first day of

the month after the consumer’s selection. For example, if a consumer selects a QHP on March

31, their QHP coverage would start April 1.

However, in some State Exchanges, a consumer’s coverage is only made effective on the

first day of the month after the consumer has selected a plan during a SEP to which regular

effective dates specified in § 155.420(b) apply if the consumer selects their plan between the 1

day and the 15

day of the previous month, per § 155.420(b)(1). In these State Exchanges, if a

consumer selects a plan between the 16

day and the last day of the month, coverage will not

become effective until the first day of the second month after plan selection. For example, for

these State Exchanges, if a consumer selects a plan on March 1, Exchange QHP coverage would

start April 1, but if that consumer selected a plan on March 16, their Exchange QHP coverage

would start on May 1. This may result in a coverage gap of more than a month for these

consumers.

As consumers typically qualify for SEPs due to a life event that may disrupt their

previous coverage (such as a move to a new State, or a change in household size due to birth or

divorce, or a loss of other health insurance, such as a loss of Medicaid), these consumers are less

likely to have health insurance coverage while they wait for their selected QHP coverage to

begin.

In addition, when transitioning between Exchanges, such as from an Exchange in a State

that operates on the Federal platform to a State Exchange that does not offer first-of-the-

following-month coverage, consumers may expect that their coverage becomes effective on the

first day of the month after selecting a QHP. These consumers might not be aware that the

effective dates of coverage may differ between Exchanges, and they might not take appropriate

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steps to maintain or access alternate coverage while waiting for their QHP to become effective.

As a result, these consumers may be at risk of coverage gaps due to the existing policies

governing effective dates of coverage.

To address this, we proposed amending § 155.420(b)(1) and (b)(3)(i) to align effective

dates of coverage across all Exchanges under these SEPs. We noted that the proposal would

require all State Exchanges, beginning on January 1, 2025, or an earlier date at the option of the

Exchange to provide coverage that is effective on the first day of the month following plan

selection, if a consumer enrolls in a QHP during a SEP to which regular effective dates specified

in § 155.420(b) apply.

We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed to amend §

155.420(b)(1) and (b)(3)(i) to align the effective dates of coverage after selecting a plan during

certain SEPs across all Exchanges, including State Exchanges, and to require qualifying

individuals or enrollees who select and enroll in a QHP during certain SEPs to receive coverage

beginning the first day of the month after the consumer selects a QHP. We are also finalizing the

proposed modifications to incorporate section § 155.420(b)(3)(ii) into the proposed paragraph

(b)(3)(i) and deleting paragraph (b)(3)(ii) for purposes of simplifying and streamlining this

section. We summarize and respond to public comments received on the proposed policy below.

Comment: There was broad support for this proposal from many commenters, including

health care providers, issuers, disease and general advocacy groups, and State Exchanges. Many

of these commenters agreed with our assertion that requiring a regular effective date of coverage

for SEPs that is no later than the first day of the month after plan selection would reduce the

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number of consumers who experience gaps in coverage. Several commenters also agreed that

this proposal would ease the experience and reduce potential confusion for consumers who

transition between Exchanges in different States, due to the standardization across States of when

QHPs become effective under a SEP subject to regular coverage effective date rules. Some

current State Exchanges noted that they observed that consumers in their States experienced

fewer gaps in coverage after they adopted the effective dates of coverage that we propose here to

require in all Exchanges.

Response: We appreciate, and agree with, the comments and additional information

provided on how adoption of this proposal may benefit consumers.

Comment: One commenter opposed this proposal, stating that State Exchanges are best

able to determine the appropriate coverage effective dates, and that State Exchanges should

retain the flexibility to adopt earlier effective dates as they see appropriate. Another commenter

supported the proposal but encouraged CMS to consider allowing States to have more flexibility

in determining their own effective dates.

Response: This proposal does not change the existing ability for State Exchanges to elect

an earlier coverage effective date under § 155.420(b)(3)(i) (as currently exists and as proposed).

Due to the potential for consumers to face gaps in coverage under the existing policies governing

regular SEP coverage effective dates in certain State Exchanges, we believe a regular SEP

coverage effective date of no later than the first day of the month after plan selection is in the

best interest of consumers.

Comment: One commenter stated that this policy would increase costs for State

Exchanges. One commenter opposed this proposal, stating that we had not provided evidence as

to why this rule change was needed. Another commenter opposed this proposal because it would

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expand the availability of SEPs, stating generally that SEPs encourage adverse selection, which

may increase costs for health insurance issuers.

Response: As we note in the proposed rule, we expect that any costs to Exchanges and

issuers would be minimal. We provided a cost estimate in section IV.C of the proposed rule that

showed that issuers would not incur substantial new costs. The commenter did not provide

evidence or examples of why a first of the month coverage effective date would cause adverse

selection, nor have we received information from issuers that operate in State Exchanges that

such coverage effective dates cause adverse selection. In addition, we believe the benefit of

reducing coverage gaps among consumers outweighs any speculative harm.

Comment: One commenter stated that health insurance issuers may have operational

concerns regarding State Exchanges that collect premium payments from enrollees on behalf of

QHP issuers. The commenter stated that in these States, issuers sometimes face difficulty with

data-sharing and determining if a consumer has made a binder payment for their coverage to

become effective. As such, they are concerned that the shorter time until the effective date will

not provide enough time to ensure a binder payment is paid prior to effectuating coverage.

Response: Although we did not hear from any current State Exchanges that they would

have difficulty in implementing this proposal, we will provide any State Exchange with the

appropriate technical assistance to ensure that they are able to implement this proposal while also

promptly providing issuers with updates to Exchange enrollment or enrollee data so as not to

adversely affect effectuation of coverage. If issuers receive binder payment confirmations after

the effective date required by this new provision, they would be permitted to effectuate

enrollment after the effective date, with coverage beginning retroactively to the required

effective date. This is consistent with the premium payment policy for Exchanges on the Federal

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platform at § 155.400(e), which permits issuers to set binder payment deadlines after the

coverage effective date.

Comment: One commenter suggested that HHS require that this policy begin in the 2024

plan year, rather than the 2025 plan year, stating that consumers now would benefit from an

earlier implementation date. Another commenter requested that HHS delay the required

implementation of this policy until January 1, 2026, so that State Exchanges would have more

time to implement any needed technical changes in their enrollment systems. Finally, a

commenter urged HHS to assist QHPs in addressing any operational challenges that come with

the alignment of effective coverage dates.

Response: Because it will take time for the State Exchanges to update their enrollment

systems to comply with this change, we do not believe it is appropriate to require State

Exchanges to implement this policy before January 1, 2025, which is the date that many other

provisions of this rule will go into effect. We believe that a January 1, 2025, effective date will

give State Exchanges adequate time to make any system changes necessary to implement this

rule. Additionally, we note that State Exchanges maintain the ability to offer an earlier coverage

effective date under § 155.420(b)(3)(i) (as currently exists and as proposed) if desired. We will

continue to provide technical assistance to State Exchanges to ensure that they are able to

effectively implement this policy in coordination with their issuers.

Comment: One commenter suggested that we also permit Exchanges to provide an SEP

when Medicaid ends before the end of the month and when a health provider leaves the QHP

network mid-plan-year.

Response: In the Notice of Benefit and Payment Parameters for 2024, we finalized a

modification to 45 CFR 155.420(b)(2)(iv) to allow Exchanges to offer earlier coverage effective

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dates for consumers attesting to a future loss of Minimum Essential Coverage (MEC) under §

155.420(d)(1). Specifically, we added language stating that if a consumer loses Medicaid or

CHIP that is MEC, and a plan selection is made on or before the last day of the month preceding

the loss of MEC, the Exchange must ensure that coverage is effective on the first day of the

month in which the loss of MEC occurs.

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This policy change was intended to mitigate coverage

gaps and allow for a more seamless transition between coverage when consumers lose MEC

mid-month. With regard to the second comment, we appreciate the suggestion to permit

Exchanges to provide an SEP when a health provider leaves the QHP network mid-plan-year but

note that it is not within the scope of this rulemaking.

b. Monthly Special Enrollment Period for APTC-Eligible Qualified Individuals with a Projected

Annual Household Income at or Below 150 Percent of the Federal Poverty Level

At § 155.420, we proposed to amend paragraph (d)(16) to revise the parameters around

the availability of a SEP for APTC-eligible qualified individuals with a projected annual

household income at or below 150 percent of the Federal Poverty Level (FPL), hereinafter

referred to as the “150 percent FPL SEP.” We proposed an amendment to the current text from

“no greater than” to “at or below” for improved readability and understanding. Specifically, we

proposed the removal of the limitation that this SEP is only available to a consumer whose

applicable percentage, which is used to determine the amount of the consumer’s premium not

covered by APTC, is zero.

As background, in part 3 of the 2022 Notice of Benefit and Payment Parameters (86 FR

53429 through 53432), we finalized, at the option of an Exchange, a monthly SEP for APTC-

eligible qualified individuals with a projected annual household income at or below 150 percent

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We note that this modification is not limited to situations where a consumer loses Medicaid or CHIP. For more

information, see 88 FR. 25740, 25827.

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of the FPL. We also finalized a provision stating that this SEP is available only during periods of

time during which APTC is available such that the applicable taxpayers’ applicable percentage is

set at zero, such as during tax years 2021 through 2025, as provided by section 9661 of the ARP

and extended by the IRA.

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We also amended § 147.104(b)(2)(i) to specify that issuers are not

required to provide the SEP in the individual market with respect to coverage offered outside of

an Exchange.

As a result of the enhanced financial assistance established by the ARP and extended by

the IRA until December 31, 2025, many consumers with a projected annual household income at

or below 150 percent of the FPL, have the opportunity to enroll in a much wider range of

affordable coverage. Specifically, as a result of the legislative changes passed by Congress in the

ARP and IRA, more consumers have access to Exchange and QHP coverage with zero-dollar

premiums after financial subsidies, including more opportunities to enroll in zero-dollar silver-

level plans with significant levels of CSRs. To provide these consumers – many of whom might

have had difficulty enrolling during standard SEP timelines due to lack of awareness or other

logistical difficulties – with the chance to access this generous Exchange coverage, we finalized

the 150 percent FPL SEP.

We remain committed to ensuring that affordable Exchange coverage is available for

individuals with lower household incomes and who are uninsured, and we believe that the

availability of the 150 percent FPL SEP has made significant strides in ensuring that this

population has real opportunities to enroll in free or extremely low-cost Exchange coverage.

Executive Order (EO) 14070, signed on April 5, 2022 (which expanded upon EO 15009

signed on January 28, 2021), directs Federal agencies to identify ways to continue to expand the

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Pub. L. 117-169.

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availability of affordable health care coverage, to improve the quality of coverage, to strengthen

benefits, and to help more Americans enroll in quality health care coverage. To that end, this

proposed change may further ensure continued improved access to affordable coverage for this

population.

Continuing to make this SEP available also may continue to help consumers who lose

other MEC coverage, especially those disenrolling from Medicaid or CHIP coverage to regain

health care coverage. We are aware of the challenges many consumers disenrolling from

Medicaid or CHIP coverage have faced due to the end of the Medicaid continuous enrollment

condition as of March 31, 2023. During this time period, we have observed, and expect to

continue to observe, a higher than usual volume of individuals with lower household incomes

transitioning from Medicaid or CHIP coverage to coverage through Exchanges due to the end of

the Medicaid continuous enrollment condition. As discussed in our guidance released on January

27, 2023, consumers disenrolling from Medicaid or CHIP because of the Medicaid continuous

enrollment condition are especially vulnerable and may face challenges with transitioning from

Medicaid or CHIP into other forms of coverage, such as Exchange coverage.

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These challenges

may include consumers’ confusion as to why their Medicaid coverage is ending due to irregular

or untimely communications from State Medicaid agencies about the termination of coverage or

coverage options for individuals with lower household incomes. Due to these factors, consumers

may be unable to make an informed decision about their coverage options within the 60-day

window provided by the SEPs at § 155.420(c)(1) and (d)(1) or within the 90-day window

provided at the option of the Exchange at § 155.420(c)(6) beginning on January 1, 2024. Given

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CMS. (2023, Jan. 27). Temporary Special Enrollment Period (SEP) for Consumers Losing Medicaid or the

Children’s Health Insurance Program (CHIP) Coverage Due to Unwinding of the Medicaid Continuous Enrollment

Condition– Frequently Asked Questions (FAQ). CMS. https://www.cms.gov/technical-assistance-resources/temp-

sep-unwinding-faq.pdf

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our observations of these challenges, we believe that the existence of the 150 percent FPL SEP

provides an additional safety-net, particularly for consumers impacted by the Medicaid

continuous enrollment condition, but also generally for those who have historically faced

challenges transitioning from Medicaid or CHIP into other coverage, like Exchange coverage.

Finally, our experience with the 150 percent FPL SEP suggests that the policy has been

successful. Based on our analysis, between October 2022 and August 2023, about 1.3 million

consumers who reside in States with Exchanges on the Federal platform were APTC-eligible,

had projected annual household incomes at or below 150 percent of the FPL, and enrolled in

Exchange coverage under the 150 percent FPL SEP. In 2022, 41.8 percent of enrollees on

Exchanges on the Federal platform had a projected annual household income of less than 150

percent of the FPL, compared to 46.9 percent of Exchange enrollees in 2023, after the

implementation of the 150 percent FPL SEP. We believe the current 150 percent FPL SEP is one

factor that significantly contributed to the increase in the enrollees on the Federal platform with a

projected annual household income at or below 150 percent of the FPL.

In previous rulemaking, we expressed concern about offering the 150 percent FPL SEP

when APTC does not always reduce the applicable percentage of a taxpayer with projected

annual household income at or below 150 percent FPL to zero. We were also receptive to

concerns raised by issuers that this SEP would impact the Exchange risk pool, lead to higher

premiums, and impact the population with household incomes above 400 percent FPL with

higher premium contributions as the APTC phases out. The possible increasing premiums also

present a risk of financial hardship for consumers who purchase insurance off Exchange

including those who are not eligible for APTC due to immigration status, or any other consumers

who would purchase unsubsidized plans, or only receive small subsidies. At the time, we

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believed that the risk for adverse selection was mitigated because consumers would not have an

incentive to drop their Exchange plans when healthy and resume coverage when sick using the

150 percent FPL SEP since they would be enrolled in zero-dollar premium plans due to the

enhanced financial subsidies provided by the ARP and IRA. Previously, we estimated that the

adverse selection risk may result in issuers increasing premiums by approximately 0.5 to 2

percent, and a corresponding increase in APTC outlays and decrease in income tax revenues of

approximately $250 million to $1 billion annually, when the enhanced APTC provisions of the

ARP (and later extended by the IRA) are in effect. While it is challenging to predict the future

nature of the Exchanges in 2026, we estimate that some adverse selection, though unknowable at

this time, may occur once enhanced subsidies sunset on December 31, 2025, and may result in

issuers increasing premiums. We acknowledge that there is a wide range of predictions for an

increase to premiums due to the adverse selection risk associated with this proposed change and

discuss this further in the regulatory impact analysis section of this rule.

However, an analysis of the plans available to consumers in 2020, just before

implementation of the enhanced subsidies, suggests that the risk of adverse selection we

acknowledged may be lower than expected, and therefore, downstream impacts of that risk may

be mitigated. When consumers with household incomes at or below 150 percent of the FPL are

no longer eligible for enhanced subsidies, these consumers may still be eligible for low-cost

silver or bronze plans with zero-dollar premiums after regular subsidies. In 2020, before the ARP

provided enhanced financial assistance in the form of enhanced subsidies, about 900,000

consumers were enrolled in bronze plans, which were fully subsidized by APTC and where the

consumer portion of premium was zero dollars. Additionally, in 2020, 77 percent of the

consumer population at or below 150 percent FPL had access to a zero-dollar bronze plan with

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16 percent of the same population having access to a zero-dollar silver plan in addition to the

zero-dollar bronze plan. We believe that if the majority of consumers with income at or below

150 percent FPL would be eligible for a zero-dollar premium plan absent the enhanced subsidies

provided under the ARP and IRA, then such consumers would be unlikely to use the proposed

150 percent FPL SEP in a way that caused adverse selection. In other words, we believe that the

availability of these zero-dollar bronze plans for consumers at or below 150 percent FPL

mitigates the risk pool impact this proposed change might cause in addition to mitigating

downstream hardships for consumers who purchase insurance without subsidies or with only

small subsidies.

We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed to remove the

requirement that the SEP only be available during periods of time when the applicable taxpayer’s

applicable percentage for purposes of calculating the premium assistance amount, as defined in

section 36B(b)(3)(A) of the Code, is set at zero. We summarize and respond to public comments

received on the proposal below.

Comment: Many commenters agreed with the proposed removal of the limitation that this

SEP is only available to a consumer whose applicable percentage, which is used to determine the

amount of the consumer’s premium not covered by APTC, is zero. Commenters agreed that this

proposal reduces coverage gaps and promotes expanded access to affordable coverage, providing

a needed benefit to those with the highest need for coverage. A few commenters stated that

consistency of care is linked to improved health outcomes, particularly for cancer patients and

survivors with limited incomes. One commenter specifically pointed out that the proposal helps

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promote equitable coverage. Additionally, several commenters believed that the availability of

the 150 percent FPL SEP would help consumers facing a loss of Medicaid or CHIP coverage

transition into Exchange coverage. Finally, a commenter also stated that the proposal would

protect consumers from future changes to tax credit policy.

Response: We agree with commenters that the policy will benefit consumers by

improving continuity of affordable coverage, which is vital for consumers with chronic health

conditions, such as cancer, and especially benefits lower-income consumers. We also agree that

the policy will help improve the transition from Medicaid and CHIP coverage to Exchange

coverage for consumers facing a loss of Medicaid and CHIP coverage.

Comment: One commenter supported the proposed policy, but expressed concern that

administrative hurdles, such as confusing qualification criteria, enrollment deadlines, and a lack

of available information, prevent consumers from utilizing the 150 percent FPL SEP.

Response: We agree that the process for enrolling in coverage can be daunting, especially

for lower-income consumers who may not be familiar with all of their options nor have the tools

available to learn about them. We will continue to work with assisters, agents, brokers, and

Navigators to educate consumers about this SEP and how to access it when applying for

Exchange coverage.

Comment: Several commenters supported the proposed policy but asked HHS to consider

increasing the income limit to benefit a greater number of consumers and to better align with

Medicaid and CHIP income limits, citing a lack of plan options with affordable premiums for

consumers with projected annual household incomes between 150 to 250 percent of FPL. A

commenter also urged HHS to consider expanding the SEP to consumers with projected annual

household incomes up to 250 percent FPL so that more consumers could benefit from it.

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Response: We acknowledge commenters’ suggestion to make the 150 percent FPL SEP

available to consumers with projected annual household incomes up to 250 percent of the FPL

and appreciate the goal of broadening the pool of consumers who can access Exchange coverage.

However, broadening the annual household income limit of the 150 percent FPL SEP may lead

to adverse selection and cause unintended consequences, such as premium increases, for all

Exchange enrollees with a projected annual household income above the SEP eligibility limit,

particularly for those with a projected annual household income above the APTC eligibility limit

(as any premium increases would not be offset by APTC). Thus, we believe that designing the

SEP to target consumers with the lowest income—those with a projected annual household

income at or below 150 percent FPL—allows for the greatest impact on the portion of the

population that is generally vulnerable, as they are most likely to churn between Medicaid, CHIP

and Exchange coverage, or experience gaps in coverage due to seasonal or temporary

unemployment, if they have access to other coverage at all. Those who do not have access to

other coverage may not seek out Exchange coverage for fear of the inability to pay, especially

because their income tends to fluctuate. While consumers losing Medicaid, CHIP, or employer-

sponsored coverage are eligible for an SEP under § 155.420(d)(1), consumers might be unaware

that a loss of Medicaid or CHIP coverage is a qualifying life event and they may not report that

loss of coverage to an Exchange and remain uninsured for potentially long periods of time until

the next annual Open Enrollment period. The 150 percent FPL SEP provides an additional safety

net for these vulnerable populations who often have lower health literacy and more frequent life

stressors than other populations that would prevent them from enrolling in coverage when

otherwise eligible. In addition, consumers with the lowest incomes are most likely to be eligible

for zero-dollar plan options through the Exchange (if they are not eligible for Medicaid or

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CHIP), which may reduce the risk for adverse selection. Because the majority of otherwise

eligible consumers with household incomes at or below 150 percent FPL would be eligible for a

zero-dollar premium plan absent the enhanced subsidies provided under the ARP and IRA, then

such consumers would be unlikely to use the proposed 150 percent FPL SEP in a way that causes

adverse selection. In other words, the availability of zero-dollar bronze plans for consumers with

household incomes at or below 150 percent FPL mitigates the risk pool impact of this policy in

addition to mitigating downstream hardships for consumers who purchase insurance without

subsidies or with only small subsidies.

Comment: A few commenters supported the proposed policy but asked HHS to consider

requiring State Exchanges to adopt the SEP instead of allowing it to be elective, citing benefits

such as a reduced number of uninsured consumers and decreased racial disparities in coverage.

Response: We believe in promoting health equity and reducing disparities when possible

and appreciate commenters’ suggestions that State Exchanges be required to adopt the 150

percent FPL SEP. However, we believe continuing to allow the adoption of the 150 percent FPL

SEP to be elective for State Exchanges is the correct approach at this time because many States

with State Exchanges have expanded Medicaid to cover individuals with current monthly

household income up to 138 percent FPL, allowing a greater number of consumers to enroll in

Medicaid, and thus have access to affordable coverage. Because of this, many States with State

Exchanges have had less of a need to provide an Exchange enrollment pathway for consumers

with projected annual household income below 150 percent FPL. We will continue to evaluate

this policy and whether it would be beneficial to require State Exchanges to adopt the 150

percent FPL SEP in the future.

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Comment: One neutral commenter acknowledged the improved readability of the

proposed policy’s change from “no greater than” to “at or below” 150 percent FPL.

Response: We thank the commenter for their response and agree the change in wording

improves readability and understanding of which consumers are affected by the proposed policy

change.

Comment: A commenter who neither supported nor opposed the proposed policy

requested that HHS take additional time to evaluate the impact on premiums before finalizing the

proposed policy change. The commenter cited concerns about adverse plan selection and impacts

on the risk pool following the implementation of the proposal and recommended that HHS delay

the proposal to gather additional data. Additionally, several commenters who were opposed to

the proposed policy cited related concerns about the possible risk of “anti-selection” (a term we

understand to refer to adverse selection) resulting in premium increases for consumers. A few

commenters pointed out that implementing the policy change would encourage consumers to

enroll in coverage only once they become sick or are in need of health care. Commenters pointed

out that the resulting churn in and out of plans would ultimately harm the consumer, as it disrupts

continuity of coverage. Commenters also expressed concerns that the policy as proposed would

negatively impact the risk pool, disincentivize issuers from offering robust plan options given the

challenges of managing the stability of the risk pool, and ultimately lead to narrower networks

and limited consumer choice.

Response: As discussed in the proposed rule, our analysis of the plans available to

consumers in 2020, just before implementation of the enhanced subsidies, suggested the risk of

adverse selection may be lower than expected. This analysis, conducted in 2020 before the ARP

provided enhanced financial assistance in the form of enhanced subsidies, found that about

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900,000 consumers were enrolled in bronze plans, which were fully subsidized by APTC and

where the consumer portion of the premium was zero dollars (referred to as zero-dollar bronze

plans). Additionally, in 2020, 77 percent of Exchange consumers with projected annual

household incomes at or below 150 percent FPL had access to a zero-dollar bronze plan with 16

percent of the same population having access to a zero-dollar silver plan in addition to the zero-

dollar bronze plan. We believe that if the majority of consumers with projected annual household

income at or below 150 percent FPL would be eligible for a zero-dollar plan absent the enhanced

subsidies provided under the ARP and IRA, then such consumers would be unlikely to use the

proposed 150 percent FPL SEP in a way that caused adverse selection because they would have

no incentive to disenroll from a zero-dollar plan when healthy. In other words, we believe that

the availability of these zero-dollar bronze plans for consumers with projected annual household

incomes at or below 150 percent FPL mitigates the risk pool impact of this change and the

downstream hardships for consumers who purchase insurance without, or with limited, subsidies

who would bear the cost of rising premiums. While there is a risk of adverse selection by the

minority of consumers with projected annual household income at or below 150 percent FPL

who would not be eligible for a zero-dollar plan, such adverse selection is projected to increase

premiums by only 3 to 4 percent absent IRA subsidies, and therefore the benefits of this policy in

increased access to coverage for low-income consumers outweighs the risk of premium increases

for higher income consumers.

Given that the risks of premium increases and adverse selection are challenging to

predict, we will work to ensure that any effects of these risks are minimal by continuing to

promote strong enrollment on the Exchanges through outreach and advertising efforts.

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Comment: A few commenters cautioned against the increased frequency and availability

of SEPs, and overall eligibility enforcement, stating that the 150 percent FPL SEP currently

exists alongside too many other similar SEPs, such as the Medicaid Unwinding SEP and the Loss

of MEC SEP.

Response: We acknowledge and understand commenters’ concerns that increasing the

availability and frequency of SEPs makes it harder for Exchanges to enforce eligibility, and that

too many similar SEPs exist concurrently. The policy goal of the 150 percent FPL SEP is to

ensure that lower-income consumers are able to enroll in affordable Exchange coverage without

remaining uninsured for potentially long periods of time by having to wait to enroll in coverage

during the annual Open Enrollment period. As stated above, consumers with annual household

income at or below 150 percent FPL are likely to not have access to other coverage, such as

employer-sponsored coverage. Such consumers would generally not be eligible for other SEPs,

such as the Newly Eligible for APTC or CSRs SEP (§ 155.420(d)(6)(i-ii)), which applies only to

those currently enrolled in coverage, or the loss of minimum essential coverage SEP (§

155.420(d)(1)), which would require them to have already been enrolled in minimum essential

coverage such as Medicaid or CHIP (but not short-term limited duration plans). Additionally,

consumers with annual household income at or below 150 percent FPL may be unlikely to seek

out Exchange coverage during the annual open enrollment period due to low health literacy or a

fear of the inability to pay, especially because their incomes tend to fluctuate. Therefore, for this

population, the existence of the 150 percent FPL SEP provides an additional pathway into

Exchange coverage that otherwise would be unavailable.

Comment: One commenter urged HHS not to finalize the proposed policy, stating it is

unlawful. The commenter urged HHS instead to repeal the 150 percent FPL SEP policy.

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Response: We do not agree with commenters that the 150 percent FPL SEP is unlawful.

As discussed in prior rulemaking, section 1311(c) of the ACA requires the Secretary to establish

the minimum uniform enrollment periods across all Exchanges; and section 1321(a) of the ACA

provides broad authority for the Secretary to issue regulations setting standards to implement the

statutory requirements related to Exchanges, QHPs, and other standards under title I of the

ACA.

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18. Termination of Exchange Enrollment or Coverage (§ 155.430)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82584), we proposed to add § 155.430(b)(1)(iv)(D) to permit enrollees on Exchanges

using the Federal platform to retroactively terminate their enrollment in a QHP through the

Exchange

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when the enrollee enrolls in Medicare Parts A or B (including enrollment in Parts A

or B through a Medicare Advantage plan)

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retroactively effective to the day before the date

Medicare coverage begins. We also proposed making implementation of this proposal optional

for State Exchanges. We are finalizing this proposal with three modifications: (1) we are limiting

retroactive termination of QHP coverage to no earlier than the later of a) the day before the first

day of coverage under Medicare Parts A or B, and b) the day that is 6 months before retroactive

termination of QHP coverage is requested; (2) we are not permitting retroactive termination

under § 155.430(b)(i)(iv)(D) of stand-alone dental plans (SADPs); and (3) we are allowing HHS

to elect whether to implement this provision for Exchanges using the Federal platform. We are

also finalizing the proposal to be optional for State Exchanges.

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86 FR 53438

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When an enrollee retroactively terminates QHP coverage, State law generally requires that the premiums paid in

the months for which coverage is retroactively terminated be refunded by the QHP issuer.

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References throughout this provision to Medicare Parts A and B include Part C Medicare Advantage plans, which

provide Parts A and B benefits.

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Currently, we do not permit enrollees in Exchanges on the Federal platform to

retroactively terminate QHP coverage due to retroactive enrollment in other coverage, including

Medicare. When coverage is retroactively terminated, claims submitted during the period of

terminated coverage will be reversed by the QHP issuer and become the responsibility of the

enrollee, who must ensure claims are submitted by the health provider to the new insurance

provider, if coverage is effective retroactively.

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State law would generally require that QHP

issuers refund the enrollee any premiums paid during the months in which coverage is

retroactively terminated.

Generally, consumers who become eligible for Medicare once they turn 65 can enroll

prospectively, and those who are enrolled in Exchange coverage can normally terminate

coverage prospectively so that there is no overlap between the two. In accordance with §

155.430(d)(2)(iii), Exchange enrollees may request same-day or prospective termination of

coverage,

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and Exchange communications instruct enrollees to terminate coverage once they

learn they will be enrolled in other coverage to avoid an overlap. Exchange enrollees

approaching their 65th birthday also receive communications from the Exchange advising them

that they will be ineligible for APTC if they enroll in Medicare and instructing them to terminate

Exchange coverage if they do not wish to have an overlap between the two. However, there are

scenarios in which a consumer may retroactively enroll in Medicare Parts A or B coverage. For

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Providers are generally required to submit claims to Medicare no later than 12 months after the date of service.

However, in situations where Medicare Part A or B entitlement did not exist at the time service was furnished, or the

beneficiary receives notice of Medicare Part A or B entitlement after the date of service, the 12-month limit may be

extended for 6 months following the month in which the beneficiary receives notice of Medicare Part A or Part B

entitlement. CMS. (rev. 2023, Jan. 19). Medicare Claims Processing Manual, 100-04, Chapter 1, Section 70.7.2

“Retroactive Medicare Entitlement.” https://www.cms.gov/regulations-and-

guidance/guidance/manuals/downloads/clm104c01.pdf.

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Although this regulation permits QHP enrollees to request prospective terminations, limitations in operations in

the Exchanges on the Federal platform limit the ability of one enrollee in an enrollment group to end their coverage

prospectively when the other enrollees in the group intend to remain enrolled.

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example, consumers can become eligible for retroactive Medicare Parts A and B due to

retroactive eligibility for SSDI benefits, in which case the consumer may enroll in Medicare

Parts A and B beginning with the 25th month of SSDI entitlement (that is, receipt of the SSDI

benefit). If the SSA determines the consumer to be eligible more than 25 months back, the

consumer will receive Medicare Part A automatically beginning with the 25th month of SSDI

entitlement and will have the option of enrolling in Part B Medicare retroactive to the 25th

month of SSDI entitlement (though they also have the choice to enroll in Part B prospectively).

In addition, when a consumer has not been automatically enrolled in Medicare Part A and applies

for Medicare Part A after their 65th birthday, their entitlement to Part A begins (that is, when

coverage starts) up to 6 months prior to the date of the application but no sooner than the

consumer’s 65th birthday.

Because consumers who retroactively enroll in Medicare Parts A or B may not be able to

avoid an overlap in coverage by prospectively terminating their Exchange coverage, we believe

it is appropriate to allow them to retroactively terminate Exchange coverage. Allowing

consumers to request retroactive terminations in this scenario ensures they can minimize an

overlap between Exchange and Medicare coverage and avoid paying premium unnecessarily (if

the consumer owes premium after the application of APTC). However, we note that consumers

would not be required to request a retroactive termination and could maintain both Exchange and

Medicare coverage if they wish. Consumers who enroll in Medicare retroactively are not

categorically excluded from PTC eligibility for the period of retroactive coverage, and thus may

not be required to repay APTC for the months of overlap when they file their taxes, in

accordance with 26 CFR 1.36B-2(c)(2)(iv); however, a QHP enrollee receiving APTC who is

voluntarily requesting and is granted a retroactive QHP termination relieves the government of

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subsidizing two forms of coverage, as the APTC is recouped for the terminated QHP coverage

months.

Although it is also possible for consumers to become retroactively eligible for Medicaid,

and have an unavoidable overlap with Exchange coverage, we continue to believe it is

appropriate to limit the applicability of this provision in the Exchanges on the Federal platform

to Medicare. We previously allowed retroactive terminations of Exchange coverage due to

enrollment in Medicaid, CHIP, and the BHP, but removed this option for the FFEs in the 2019

Payment Notice (83 FR 16930). This option was retained for State Exchanges and SBE-FPs,

which as previously mentioned are more closely integrated into their State-administered

Medicaid programs. In response to commenters who opposed this change, we noted that

although consumers in these cases may wish to recoup premiums paid during the period of

overlapping coverage, there is significant risk that providers who participate in the consumer’s

Exchange coverage do not participate in Medicaid, CHIP, or BHP, which would leave the

consumer with unexpected out-of-pocket costs. However, because Medicare is accepted by

many, if not most, providers, it is less likely that a retroactive QHP disenrollment would leave

consumers responsible for claims incurred during the period of retroactive Medicare enrollment.

We note that in the FFEs and SBE-FPs, caseworkers have system-based evidence of both

QHP and Medicare eligibility dates and would be able to verify that an enrollee requesting

retroactive termination is enrolled in Medicare and approve retroactive requests. This would

ensure that enrollees cannot retroactively terminate their QHP coverage for other, unauthorized

reasons such as low utilization of coverage, which could create an adverse selection risk. We

also note that, similar to retroactive Medicaid enrollment, a consumer’s retroactive enrollment in

Medicare will not cause the consumer, when filing taxes for the year of coverage, to have to

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repay APTC for the months in which the consumer, due to the retroactive Medicare enrollment,

is enrolled in both a QHP with APTC and Medicare. See 26 CFR 1.36B-2(c)(2)(iv).

Because Medicare generally does not provide coverage for dental services, there is no

overlap in services with an SADP when an enrollee retroactively enrolls in Medicare, as there is

with a QHP, and we therefore clarify that requests for retroactive coverage under this provision

are limited to QHPs. Allowing retroactive termination of SADPs would create a much greater

risk of uncovered claims, since dental claims that were reversed by an issuer would likely not be

covered under Medicare Parts A or B. However, we clarify that, due to the requirement that

consumers must enroll in a QHP in order to enroll in an SADP, requests for retroactive

termination of QHP coverage, which also involve prospective termination of the QHP, will result

in prospective termination of SADP coverage.

Finally, in recognition of the challenges associated with retroactively adjusting coverage

for preceding years, we proposed to require that enrollees must request retroactive termination of

coverage within 60 days of the date they retroactively enroll in Medicare (that is, the date the

enrollment occurs, not the Medicare coverage effective date).

We requested comments on this proposal. Specifically, we requested comment on

whether the public benefits of this proposal to honor an enrollee’s choice, recoup APTC for

duplicative coverage, and protect the individual market risk pool outweighs the risk that an

enrollee would be left with uncovered claims for the overlapping period. We also requested

comment on the best way to ensure that enrollees have the necessary information to make an

informed decision about whether to retroactively terminate coverage. In the proposed rule we

noted that if this proposal is finalized, we intended to monitor the impact to minimize harm to

consumers. We also sought comment on whether this provision should be mandatory for State

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Exchanges, rather than optional, and if so, how State Exchanges would verify retroactive

Medicare enrollment dates.

After consideration of comments and for the reasons outlined in the proposed rule and in

our responses to comments, we are finalizing the proposal to permit enrollees on Exchanges

using the Federal platform and in State Exchanges to retroactively terminate their enrollment in a

QHP through the Exchange when the enrollee enrolls in Medicare Parts A or B retroactively with

the following modifications: (1) we are making explicit that our reference to enrollment in

Medicare Parts A or B includes enrollment through a Medicare Advantage plan; (2) retroactive

termination of QHP coverage under this provision is limited to earlier than the later of (a) the day

before the first day of coverage under Medicare Part A or B or a Medicare Advantage plan, and

(b) the day that is 6 months before retroactive termination of QHP coverage is requested; (3) we

are not permitting retroactive terminations for SAPDs; and (4) we are allowing HHS to elect

whether to implement this provision for Exchanges using the Federal platform.

As noted in the proposed rule (88 FR 82585), Exchanges on the Federal platform have

system-based evidence of both QHP and Medicare eligibility dates and can verify Medicare

enrollment. In addition, as noted in our response to commenters, we intend to explore ways to

ensure that consumers are aware of the consequences of choosing to retroactively terminate

coverage and are able to make an informed decision. Finalizing that this policy is at the option of

the Exchanges on the Federal platform provides time to ensure these processes are in place prior

to effectuation of this provision. We also are finalizing the proposal to make implementation of

this proposal optional for State Exchanges. Prior to implementation, we intend to provide

advance notice to issuers and other interested parties through interested party webinars and

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published guidance such as the Federally-facilitated Exchange Enrollment Manual. We

summarize and respond to public comments received on the proposal below.

Comment: Several commenters expressed support for the proposal, stating that it would

be beneficial for consumers by allowing them to recoup premiums and avoid coordination of

benefits issues, and would also decrease administrative burden on Exchanges and save the

Federal Government money in recouped APTC. A few commenters indicated that this flexibility

is especially important for certain groups of enrollees, such as those with disabilities and

consumers who must pay premiums for Medicare Part A, for whom the ability to recoup QHP

premiums is especially beneficial. Two State Exchange commenters stated that they had

implemented this policy and had improved the consumer experience. An additional State

Exchange and State Department of Insurance argued that this policy would give State Exchanges

the flexibility to improve the consumer experience. One commenter stated that this proposal was

important because consumers on the FFEs often have difficulty getting the correct termination

date when transitioning to off-Exchange coverage such as Medicare.

Response: We agree that these changes will benefit consumers by allowing them to

recoup premiums for Exchange coverage that overlaps with retroactive enrollment in Medicare

and will benefit the Exchanges by allowing the government to recoup APTC for the period of

retroactive termination. We also agree that these changes may be especially beneficial to certain

groups of enrollees, such as those with disabilities, for whom recouping premium and avoiding

coordination-of-benefit issues is particularly important. As noted by some commenters, it will

also give State Exchanges the ability to improve the consumer experience by allowing

retroactive terminations when desired by the enrollee. Lastly, although this proposal will enhance

the consumer experience by enabling consumers to request retroactive termination of coverage

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when they retroactively enroll in Medicare, this proposal would not apply to consumers who

become eligible for Medicare prospectively, and thus, is unlikely to impact the experience of

most enrollees transitioning from Exchange to Medicare coverage.

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We will continue to

explore ways to improve the consumer experience for enrollees transitioning from Exchange to

other coverage, including Medicare.

Comment: A few commenters opposed the proposal, stating that it would lead to

confusion among enrollees because claims for services provided during the retroactive

termination period would not be covered, and could lead to providers going unpaid if the service

is not covered by Medicare or is furnished by a provider who does not participate in Medicare or

Medicare Advantage. Several other commenters, while not opposing the proposal, expressed

concerns that enrollees would not fully understand the implications of retroactively terminating

coverage, including the reversal of claims by the QHP issuer and the impact on APTC. A few

additional commenters stated that if payment rates for services were lower under Medicare than

the QHP issuer, providers may attempt to bill enrollees for the difference. A few other

commenters stated that this proposal could create problems regarding out-of-network claims

implicated under the No Surprises Act, which would be subject to independent dispute

resolution. One commenter requested that if the proposal is finalized, HHS create guidance

materials for consumers to ensure they understand the potential benefits and drawbacks of

retroactively terminating coverage in this scenario, including potential responsibility for claims

reversed by the QHP issuer, and the fact that this scenario does not implicate APTC

reconciliation.

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Enrollees who attempt to end Exchange coverage prospectively but receive an incorrect termination due to a

technical error may already be allowed to retroactively terminate coverage under § 155.430(b)(1)(iv)(A).

CMS-9895-F 379

Response: We believe it is important to minimize confusion among consumers who

retroactively enroll in Medicare about the consequences of a decision to retroactively terminate

Exchange coverage, and we intend to explore ways to ensure that enrollees have the necessary

information to make an informed decision. In addition, we intend to closely monitor the impact

of this provision after implementation and may make changes in the future if necessary to

minimize harm to consumers, such as providing additional information on the factors consumers

should consider before making the decision to retroactively terminate QHP coverage. As noted

elsewhere, because Medicare is accepted by many, if not most, providers, we expect that claims

made during the period of retroactive enrollment will be covered by the Medicare Fee-For-

Service (FFS) program if the individual enrolls in the FFS program. However, there may be

cases in which claims are not covered by Medicare or a Medicare Advantage plan and become

the responsibility of the consumer. We intend to explore ways to ensure consumers are aware of

this potential outcome so they can make informed decisions. We emphasize that retroactively

terminating Exchange coverage is at the option of the consumer, and consumers who

retroactively enroll in Medicare could choose to maintain QHP coverage.

Regarding the potential for Medicare beneficiaries

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to be billed directly by providers

and suppliers

249

when Medicare’s payment rates are lower than those of the QHP issuer, we note

there are several Medicare regulations that prohibit providers and suppliers from directly billing

beneficiaries for amounts other than the applicable Medicare deductible and coinsurance.

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addition, in cases where a provider is not contracted with a Medicare Advantage plan, the

provider would still be required to accept the amount they would have received under traditional

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The term “beneficiaries” is used here to align with Medicare regulations, which generally use this term rather

than the term “enrollee.”

249

42 CFR 400.202 defines the terms “provider” and “supplier,” the latter of which includes physicians.

250

See 42 CFR 424.55, 414.48, and 489.21, and part 489, subpart C.

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Medicare as payment in full, and would be prohibited from billing the enrollee for the difference

between the QHP and Medicare Advantage plan rates. Where providers are contracted with a

Medicare Advantage plan, the provider is typically prohibited by the terms of their contract from

balance billing the enrollee. Thus, in general, we anticipate that enrollees will not be balance

billed, even when there is a difference between the payment rates of the old and new plans. As

noted above, we will explore ways to ensure consumers are able to make an informed decision.

In addition, as noted in the preamble to this provision, Medicare permits providers to submit

claims more than 12 months after the date of service when an enrollee retroactively enrolls in

Medicare, which minimizes the risk that providers will not be paid for claims for services

provided during the retroactive period. Finally, regarding the No Surprises Act, we note that in

the event QHP coverage is retroactively terminated pursuant to § 155.430(b)(1)(iv)(D), any

claims for items or services furnished during the retroactive period would be ineligible for the

independent dispute resolution under the No Surprises Act because the item or service would no

longer be furnished with respect to a group health plan or health insurance issuer offering group

or individual health insurance coverage.

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Comment: A few commenters opposed the proposal, stating that it could increase the

administrative burden on issuers, who would be required to recoup claim payments and reconcile

enrollment information with the FFEs, and impact issuers’ risk adjustment and payment integrity

operations. One of these commenters also suggested that the proposed policy would ultimately

lead to allowing retroactive terminations of QHP coverage for retroactive Medicaid enrollment.

A few commenters also expressed concern that the proposal did not limit the number of months

for which an enrollee can request retroactive terminations. Some of these commenters requested

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See section 2799A-1(c)(1)(A) of the PHS Act.

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that retroactive terminations be limited to 6 months, even in cases where the consumer’s

Medicare coverage began more than 6 months retroactively, to limit the administrative burden on

issuers to recoup claims and refund premiums. One of these commenters also stated that a 6-

month limit would align with the 6-month extension to the 12-month limit to submitting claims

to Medicare after the date of service.

Response: Although we recognize that QHP issuers may, in some cases, have difficulty

recovering claims payments once coverage is retroactively terminated, they are generally entitled

to do so. However, we agree that, because recovery of claims may be especially difficult for

longer periods of retroactive termination, it is appropriate to place a limit on retroactive QHP

terminations and are finalizing in this policy that requests for retroactive termination of QHP

coverage are limited to no earlier than the later of (a) the day before the first day of coverage

under Medicare Part A or B, and (b) the day that is 6 months before retroactive termination of

QHP coverage is requested. One common retroactive enrollment scenario occurs when

consumers first enroll in Medicare Part A or B after their 65th birthday, and whose entitlement to

Part A starts up to 6 months prior to the date of enrollment (but no sooner than the consumer’s

65th birthday). In this case a 6-month limit on requests for retroactive coverage would still allow

these consumers to retroactively terminate QHP coverage back to the date of Medicare

entitlement if the retroactive termination was requested on the same day as the Medicare

enrollment. Although other consumers, such as those who enroll in Medicare retroactively due to

SSDI entitlement, may not be able to retroactively terminate QHP coverage back to the date of

Medicare entitlement if it occurs more than 6 months before the request for QHP retroactive

termination, these consumers will still be able to receive up to 6 months of relief from paying

double premiums. We believe this limit appropriately balances granting enrollees retroactive

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termination of coverage when desired, while not excessively burdening issuers, who must

attempt to recoup claims payments whenever coverage is retroactively terminated.

Although providers must generally submit claims to Medicare no later than 12 months

after the date of service, in certain situations where Medicare Part A or B entitlement did not

exist at the time service was furnished and the beneficiary receives notice of retroactive

Medicare Part A or B entitlement after the date of service, the 12-month limit may be extended

through the last day of the 6th calendar month following the month in which the beneficiary

receives notice of Medicare Part A or Part B entitlement.

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Thus, this 6-month limit on

retroactive QHP terminations is not necessary to ensure that providers are able to resubmit

claims to Medicare and receive payment, and the risk that providers will not be paid for claims

for services provided during the retroactive period is minimized.

For the comment raising potential concerns about impacts to risk adjustment from

retroactive termination of coverage, we note that the EDGE server data collection requirements

have always mandated that issuers of risk adjustment covered plans provide the most recent

enrollment data for the applicable benefit year.

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This most recent enrollment data would

include any retroactive changes in enrollment, and will have the same impact on an issuer’s risk

adjustment data submission whether the retroactive enrollment changes are initiated by the

issuer, Exchange, or enrollee.

Comment: A few commenters argued that allowing retroactive terminations in this

scenario could increase the risk of adverse selection and lead to higher premiums for enrollees.

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See 42 CFR 424.44

253

45 CFR 153.710. See the EDGE Server Business Rules (ESBR) Version 24.0 (December 2023).

https://regtap.cms.gov/reg_librarye.php?i=3765.

CMS-9895-F 383

Response: We do not believe that implementation of this provision is likely to increase

the risk of adverse selection or lead to higher premiums for enrollees. As we discussed in the

preamble to this provision, we have the ability to verify Medicare enrollment and ensure that

retroactive termination of coverage is limited to those who are enrolled in Medicare, and not

consumers seeking retroactive termination due to low utilization of coverage, which could create

an adverse selection risk. Although consumers with greater numbers of claims may be less likely

to retroactively terminate QHP coverage, we note that in general the population of consumers

who are eligible for Medicare already tend to have a high number of medical expenses and

claims, and we do not expect that this policy will increase the risk of adverse selection or

increase premiums. Lastly, we expect the population of enrollees who request retroactive

termination of QHP coverage under this provision to be a small percentage of the overall

enrolled population, and thus we do not expect it to have a noticeable impact on the overall

Exchange, including the risk pool.

Comment: Several commenters, while not expressing support for or opposition to the

proposal, expressed concern that it would be difficult for QHP issuers to recoup payments for

services provided during the retroactive termination period, especially pharmaceutical,

emergency room, and out-of-country claims, which may not be possible to recoup. Another

commenter requested that, if the proposal is finalized, HHS consider reimbursing health plans at

the commercial rate for any pharmaceutical expenses incurred during the retroactive termination

period. Lastly, one commenter questioned how pharmaceutical claims would be handled for the

retroactive termination period if the consumer did not enroll in Medicare Part D.

Response: Although we recognize that QHP issuers may, in some cases, have difficulty

recovering claims payments once coverage is retroactively terminated, they are generally entitled

CMS-9895-F 384

to do so. As noted in a previous response, to limit the burden on issuers to recoup claims

payments, we are also finalizing this proposal to limit retroactive termination of QHP coverage

to no more than 6 months from the date that retroactive termination is requested.

Furthermore, we also note that issuers must, in certain circumstances, recoup payment for

medical or pharmaceutical claims, under the retroactive terminations allowed by current

regulation. Because the number of consumers who retroactively enroll in Medicare and elect to

retroactively terminate QHP coverage is limited, we do not expect this provision to significantly

increase the number of claims for which issuers must recoup payment. Although it may be

difficult for issuers to recoup payment for certain types of claims, such as pharmaceutical claims,

we do not believe it is appropriate to reimburse issuers for these unrecoverable claims, nor is

there authorization for us to do so. We note that issuers are, generally, still entitled to seek

reimbursement from providers for claims that are reversed. In addition, we expect that

consumers who retroactively enroll in traditional Medicare Parts A or B, but not a stand-alone

Part D plan, will evaluate whether retroactively terminating QHP coverage is appropriate, given

the likelihood that the costs for any pharmaceutical claims will become the consumer’s

responsibility. We also note that some Medicare Advantage plans include Part D prescription

drug benefits, and enrollees in these Medicare Advantage plans may be able to have these claims

resubmitted by the provider to the new plan. As noted elsewhere, we intend to explore ways to

convey this information to consumers.

Comment: A few commenters recommended requiring State Exchanges to adopt this

proposal, one of whom stated that all Medicare enrollees, regardless of their State of residence,

should have this option available to them. Several commenters recommended making this

proposal optional for State Exchanges, a few of whom argued that States were best positioned to

CMS-9895-F 385

evaluate their insurance markets and determine whether, and how, to implement this proposal.

One State Exchange commenter indicated that it allows consumers who enroll in Medicare Parts

A or B up to 6 months to request retroactive termination of QHP coverage and requested that

HHS allow States to exceed the 60-day requirement proposed in the rule. Another State

Exchange commenter noted that implementation of this proposal would require updates to

enrollment and eligibility systems and manual verification of Medicare eligibility, and therefore

may impose financial or operational burdens on issuers, who would be required to reverse claims

and refund premiums. This commenter also requested that, if State Exchanges are required to

implement the proposal, that the effective date be delayed so State Exchanges have additional

time to implement this policy.

Response: Based on the comments we received from State Exchanges, which indicate

that States have adopted different policies with regard to allowing consumers who retroactively

enroll in Medicare to retroactively terminate QHP coverage, we believe it is appropriate to make

adoption of this provision optional for State Exchanges. We agree with commenters who argued

that States are best positioned to determine how to implement this proposal, given the difficulties

of explaining to consumers how to decide whether to retroactively terminate QHP coverage, and

the need to update enrollment and eligibility systems. In addition, State Exchanges may not have

access to the same systems-based evidence of Medicare enrollment as the Exchanges on the

Federal platform, which may make verification of retroactive Medicare enrollment more

difficult. Because we are finalizing this rule to make implementation optional for State

Exchanges and for HHS with respect to Exchanges that use the Federal platform, we do not

believe it is necessary to delay the effective date of this provision.

CMS-9895-F 386

Comment: A few commenters expressed support for the proposal and requested that it

also be applied to enrollees who retroactively enroll in Medicaid or CHIP. Some of these

commenters indicated that this was especially important given the ongoing process of Medicaid

unwinding and the number of consumers being inappropriately disenrolled, in addition to the

need to reinstate consumers who successfully challenge a denial of Medicaid eligibility and

where there are delays in processing Medicaid applications. One of these commenters also

requested that CMS publish data on the number of children enrolled in QHPs who are

retroactively enrolled in Medicaid and CHIP, and that CMS issue guidance to States on how

consumers who were inappropriately disenrolled from Medicaid or CHIP can be reimbursed for

expenses.

Response: We recognize that consumers who are retroactively enrolled in other

government programs such as Medicaid, CHIP, or the BHP, may also wish to retroactively

terminate QHP coverage to eliminate an overlap in coverage and recoup QHP premiums.

However, as we stated in the proposed rule and above, we do not believe it is appropriate to

extend this provision to these enrollees because providers who participate in the consumer’s

Exchange coverage may not participate in Medicaid, CHIP, or BHP, increasing the risk that the

consumer would be left with unexpected out-of-pocket costs. Because Medicare is accepted by

many, if not most, providers, enrollees who retroactively enroll in Medicare and terminate

Exchange coverage are less likely to become solely responsible for reversed claims. The

comments regarding publication of Medicaid and CHIP enrollment data and reimbursement for

consumers who are inappropriately disenrolled are outside the scope of this proposal, and we

have not included substantive responses in this final rule.

CMS-9895-F 387

Comment: One commenter expressed support for the proposal and requested that CMS

allow all QHP enrollees who retroactively enroll in Medicare to retroactively terminate coverage,

regardless of whether the Medicare enrollment was prospective or retroactive, or at least allow

States to implement this. This commenter stated that it is especially important given the

difficulty many FFE consumers have with the process of transitioning to off-Exchange coverage,

where it is necessary to call the Call Center on the day the new coverage begins to end FFE

coverage. Another commenter, who opposed the proposal, recommended that HHS allow “pre-

terminations” for enrollees who become eligible for Medicare, so that they do not have to call the

Marketplace Call Center to terminate QHP coverage on the day Medicare coverage begins.

Response: We recognize that consumers who are transitioning to off-Exchange coverage

such as Medicare may, at times, have difficulty ending QHP coverage on the appropriate date.

We are working to improve this process in the Exchanges on the Federal platform so that all

enrollees have the option to terminate coverage prospectively when transitioning to off-

Exchange coverage such as Medicare. However, we do not believe it is appropriate to extend this

provision to all QHP enrollees who transition to Medicare. As we note in the preamble to this

provision, consumers generally have the opportunity to enroll in Medicare prospectively, and

Exchange enrollees approaching their 65th birthday receive communications from the Exchange

advising them that they will be ineligible for APTC if they enroll in Medicare and instructing

them to terminate Exchange coverage if they do not wish to have an overlap between the two.

Furthermore, we note that many enrollees in Exchanges on the Federal platform already have the

ability to prospectively terminate coverage either online through their HealthCare.gov account or

CMS-9895-F 388

by calling the Marketplace Call Center.

254

Lastly, we note that consumers who attempt to end

Exchange coverage and are given an incorrect coverage termination date due to a technical error

may already receive retroactive terminations to correct the error, per § 155.430(b)(1)(iv)(A). We

will continue to explore ways in which we can improve the consumer experience for those who

are transitioning from Exchange to Medicare coverage.

Comment: Several commenters requested that HHS clarify or provide guidance on certain

aspects of this proposal. A few commenters requested that HHS clarify whether issuers would

have to refund APTC and premium payments for the months of retroactive coverage that are

terminated. One of these commenters also asked HHS to provide guidance to issuers on how to

handle changes in cost-sharing for consumers for the period of retroactive coverage termination.

A third commenter requested guidance on how the proposal would impact the Medicare

requirement to timely file claims within 12 months of the date of service. Several commenters

asked that HHS provide operational guidance to issuers on how retroactive terminations under

this provision should be handled and recommended that HHS promote alignment between the

Exchanges and Medicare to ensure seamless transitions for consumers. Lastly, one commenter

requested guidance on whether issuers would be liable for claims made during the 60-day

window available to consumers to decide whether to retroactively terminate coverage.

Response: As with other retroactive terminations, issuers would be required to refund

APTC to the government when an enrollee requests retroactive termination of coverage due to

retroactive Medicare enrollment, and State law generally requires that issuers refund premiums

as well. Once coverage is retroactively terminated, enrollees are responsible for contacting

254

As noted by commenters, limitations in operations in the Exchanges on the Federal platform prevent one enrollee

in an enrollment group from ending coverage prospectively when the other enrollees in the group intend to remain

enrolled.

CMS-9895-F 389

providers to ensure that any claims made during the retroactive period are resubmitted to

Medicare, and differences in cost-sharing become the responsibility of enrollees, providers, and

Medicare, as applicable. Although providers must generally submit claims to Medicare no later

than 12 months after the date of service, in certain situations where Medicare Part A or B

entitlement did not exist at the time service was furnished and the beneficiary receives notice of

retroactive Medicare Part A or B entitlement after the date of service, the 12-month limit may be

extended through the last day of the 6th calendar month following the month in which the

beneficiary receives notice of Medicare Part A or Part B entitlement.

255

We also intend to

provide guidance to issuers on how to process these retroactive terminations of coverage. As

noted elsewhere in our response to comments, we intend to continue to work to improve the

consumer experience for enrollees transitioning from Exchanges on the Federal platform to

Medicare coverage. Lastly, with regard to the 60-day window, we note that this window is

merely the amount of time consumers have to request a retroactive termination of coverage once

they retroactively enroll in Medicare (the 60 days is from the date the consumer enrolls, not the

effective date of coverage). Issuers are only responsible for claims to the extent that the enrollee

remains in coverage, and if coverage is retroactively terminated, the issuer is generally entitled to

recover payment for claims made during the period of retroactivity.

Comment: One commenter requested that HHS clarify that the proposal would not apply

to SADPs, since Medicare Parts A and B generally do not provide dental benefits. This would

ensure that SADP issuers are not required to recoup claims payments or refund premiums, and

that enrollees must still terminate their SADP prospectively.

255

See 42 CFR 424.44

CMS-9895-F 390

Response: As noted in the preamble to this provision, because Medicare generally does

not provide coverage for dental services (although Medicare Advantage plans may include dental

benefits as supplemental benefits), there is generally no overlap in coverage with an SADP when

an enrollee retroactively enrolls in Medicare, as there is with a QHP. Therefore, we agree that it

is appropriate to limit application of this provision to retroactive termination of QHP coverage.

We clarify in this final rule that requests for retroactive coverage under this provision are limited

to QHPs, and we have finalized this proposal to prevent retroactive termination of SADP

coverage when a consumer retroactively enrolls in Medicare. Allowing retroactive termination of

SADPs would create a greater risk of uncovered claims, since dental claims that were reversed

by an issuer would likely not be covered under Medicare Parts A or B (although they may be

covered as a supplemental benefit under a Medicare Advantage plan). However, we clarify that,

on Exchanges on the Federal platform, due to the operational requirement that consumers must

enroll in a QHP in order to enroll in an SADP, requests for retroactive termination of QHP

coverage will result in prospective termination of SADP coverage.

19. Establishment of Exchange Network Adequacy Standards (§ 155.1050)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82585), we proposed to require that State Exchanges and SBE-FPs establish and impose

quantitative time and distance QHP network adequacy standards that are at least as stringent as

the FFEs’ time and distance standards established for QHPs under § 156.230. We also proposed

that State Exchanges and SBE-FPs be required to conduct quantitative network adequacy

reviews prior to certifying any plan as a QHP, consistent with the reviews conducted by the

FFEs under § 156.230. We further proposed to require State Exchanges and SBE-FPs permit

issuers that are unable to meet the specified time and distance network adequacy standards to

CMS-9895-F 391

participate in a justification process after submitting their initial network adequacy data to

account for variances and potentially earn QHP certification. In addition, we proposed a

framework for granting State Exchanges and SBE-FPs an exception to the proposed quantitative

network adequacy standards and review requirements if we determine that the Exchange applies

and enforces quantitative network adequacy standards that are different from the FFEs’ but

ensure a level of access to providers that is as great as that ensured by the FFEs’ network

adequacy standards established for QHPs under § 156.230. Finally, we proposed to mandate that

State Exchanges and SBE-FPs require all issuers seeking QHP certification to submit

information to the State Exchange or SBE-FP about whether network providers offer telehealth

services.

Understanding that some State Exchanges or SBE-FPs may need to promulgate

regulations to comply with the proposed provisions requiring State Exchanges and SBE-FPs to

impose quantitative network adequacy standards and conduct quantitative network adequacy

reviews, as well as the requirement related to QHP issuer submission of telehealth information,

we proposed that these provisions would be effective for plan years beginning on or after

January 1, 2025, to accommodate the time it may take for a State Exchange or SBE-FP to come

into compliance. We stated in the proposed rule that we are of the view that strong network

adequacy time and distance standards across all Exchanges would enhance consumer access to

quality, affordable care through the Exchanges. We refer readers to the proposed rule (88 FR

82586 through 82587) for a detailed background discussion of HHS’ network adequacy policy

and the network adequacy proposals.

a. Network Adequacy Standards and Reviews Across Exchanges

CMS-9895-F 392

In the proposed rule (88 FR 82587), we stated that network adequacy is a key factor

affecting consumers’ access to care. We explained that while the FFEs impose uniform network

adequacy standards across the States they serve that require QHP issuers to meet quantitative

metrics, a similarly uniform network adequacy standard does not exist for States served by State

Exchanges and SBE-FPs. Indeed, we further explained that these circumstances prompted the

National Association of Insurance Commissioners to develop the NAIC Health Benefit Plan

Network Access and Adequacy Model Act (Model Act).

256

The Model Act includes

recommendations for qualitative network adequacy standards to which States could hold their

issuers accountable and that require submission of access plans. We noted, however, that the

Model Act does not specify what constitutes network adequacy, and, currently, only a few State

Exchanges and SBE-FPs have adopted the full Model Act, resulting in the lack of a strong floor

for network adequacy standards among State Exchanges and SBE-FPs.

We noted in the proposed rule (88 FR 82587) that State Exchanges and SBE-FPs

currently have a mix of network adequacy policies in place, and approximately 25 percent of

those fail to impose any quantitative standard. Quantitative network adequacy standards can be

monitored relatively easily and applied objectively and may include standards that measure

provider-to-enrollee ratios, time and distance, or appointment wait times.

257

On the other hand, a

qualitative approach to network adequacy typically articulates a broad, general standard of

adequacy and typically grants regulators or insurers discretion to determine how to measure

compliance.

258

State regulators using this approach may require issuers to simply articulate how

256

Health Benefit Plan Network Access and Adequacy Model Act. (2015, 4th Quarter).

https://www.nh.gov/insurance/legal/documents/naic_model_act_network_adequacy.pdf.

257

Hall, Ginsburg. (2017, Sep.). A Better Approach to Regulating Provider Network Adequacy.

https://www.brookings.edu/wp-content/uploads/2017/09/regulatory-options-for-provider-network-adequacy.pdf.

258

Id.

CMS-9895-F 393

they determine and measure adequacy in their networks.

259

Once regulators approve an issuer’s

network adequacy plan using this approach, they then typically let issuers self-monitor their own

compliance.

260

As opposed to conducting routine audits or requiring periodic reports of

compliance, State regulators usually rely on consumer complaints to highlight situations that

might require investigation.

261

We stated in the proposed rule that, based on our experience conducting network

adequacy reviews and regulating QHPs, as well as feedback from interested parties, including

the many commenters who requested in the 2023 Payment Notice (87 FR 27334) that HHS

extend Federal network adequacy standards to State Exchanges in future rulemaking, we are

now of the view that no matter the State in which a QHP is offered, some quantitative analysis is

necessary for an Exchange to objectively monitor network adequacy and determine whether a

QHP provides enrollees in that State with access to an adequate network of providers.

Moreover, we stated that the proliferation in recent years of QHP issuers with narrower

provider networks raises several consumer protection concerns. QHPs with narrower networks

may lack access to specific provider specialties in-network, resulting in significant out-of-pocket

expenses for consumers who must seek care out-of-network or resulting in consumers forgoing

care to avoid these expenses. We noted that we have also been made aware, through

communications with interested parties, of issues faced by consumers where in-network

emergency physicians and mental health providers are in limited supply or, in the case of in-

network emergency physicians, not available at in-network hospitals. Additionally, we stated that

the proliferation of narrower networks risks consumers being enrolled in plans whose networks

259

Id.

260

Id.

261

Id.

CMS-9895-F 394

do not have sufficient capacity to serve them or whose providers are too geographically

dispersed to be reasonably accessible.

Therefore, we proposed (88 FR 82587) to establish a national floor of quantitative

network adequacy standards and network adequacy reviews. We stated in the proposed rule that

although a number of State Exchanges and SBE-FPs have taken meaningful steps towards

ensuring the adequacy of QHP networks, we are of the view that every Exchange should apply

quantitative network adequacy standards and conduct a thorough review and analysis of issuer

compliance with these standards to effectively evaluate the adequacy of QHP networks in order

to ensure that all consumers, regardless of which State they live in, have timely access to

providers to manage their health care needs.

b. Proposals Related to State Exchange and SBE-FP Network Adequacy Standards and Reviews

i. Quantitative Network Adequacy Time and Distance Standards

For plan years beginning on or after January 1, 2025 and future plan years, we proposed

that State Exchanges and SBE-FPs must (1) establish and impose quantitative time and distance

network adequacy standards for QHPs that are at least as stringent as standards for QHPs

participating on the FFEs under § 156.230; and (2) conduct reviews of a plan’s compliance with

those quantitative network adequacy standards prior to certifying any plan as a QHP, consistent

with the manner in which the FFEs review the network adequacy of plans under § 156.230. For

purposes of this proposed policy, we stated in the proposed rule that “at least as stringent as”

means time and distance standards that use a specialty list that includes at least the same

specialties as our provider specialty lists and time and distance parameters that are at least as

short as our parameters. We explained that States would be permitted to implement network

adequacy standards that are more stringent than those performed by the FFEs under § 156.230.

CMS-9895-F 395

In other words, States could use a specialty list that is broader than our specialty lists, but it must

include all the provider specialties included in our lists. Similarly, we explained that the time and

distance parameters could also be narrower than our parameters, meaning they could require

shorter time and/or distances, but they cannot be less demanding than our time and distance

parameters.

In the proposed rule, we stated that quantitative time and distance standards help

strengthen QHP enrollees’ timely access to a variety of providers to meet their health care needs,

which in turn helps ensure that enrollees can receive health care services without unreasonable

delay. Additionally, we stated that quantitative time and distance standards, when varied by

county type, provide a useful assessment of whether QHPs provide reasonable access to care and

a more comprehensive evaluation of the adequacy of QHPs’ networks.

In the 2023 Payment Notice (87 FR 27322), we adopted time and distance standards that

the FFEs would use to assess whether plans to be certified as QHPs in the FFEs meet network

adequacy standards. The proposed provider specialty lists for time and distance standards for PY

2023 were informed by prior HHS network adequacy requirements, consultation with interested

parties, and other Federal and State health care programs, such as Medicare Advantage and

Medicaid. The provider specialty lists that were finalized for PY 2023 covered more provider

types than previously evaluated under FFE standards so that QHP networks would be robust,

comprehensive, and responsive to QHP enrollees’ needs. In the proposed rule (88 FR 82588),

we stated that we believe these provider specialty lists promote access to a variety of provider

types and, as a result, strengthen consumer access to health care services without unreasonable

delay. To establish a national floor for quantitative network adequacy standards, we proposed

that the provider specialty list that State Exchanges and SBE-FPs use must include, at a

CMS-9895-F 396

minimum, the providers in the provider specialty lists for the FFEs that were applicable to PY

2023. Those lists are included in the preamble of this final rule, in Tables 9 and 10.

Consistent with the standards for the FFEs, and to strengthen QHP enrollees’ timely

access to a variety of providers to meet their health care needs, we proposed that State

Exchanges and SBE-FPs’ time and distance standards would be calculated at the county level

and vary by county designation. We proposed that State Exchanges and SBE-FPs would be

required to use a county type designation method that is based on the population size and density

parameters of individual counties. We further stated that under our proposal, the time and

distance standards State Exchanges and SBE-FPs would establish and impose would apply to the

provider specialty lists contained in the proposed rule (Tables 9 and 10 in the preamble of this

final rule). We explained that to count towards meeting the time and distance standards,

individual and facility providers listed in Tables 9 and 10 would have to be appropriately

licensed, accredited, or certified to provide services in their State, as applicable, and would need

to have in-person services available.

TABLE 9: Individual Provider Specialty List for Time and Distance Standards

Individual Specialty Types

Allergy and Immunology

Cardiology

Cardiothoracic Surgery

Chiropractor

Dental

Dermatology

Emergency Medicine

Endocrinology

ENT/Otolaryngology

Gastroenterology

General Surgery

Gynecology, OB/GYN

Infectious Diseases

Nephrology

Neurology

Neurosurgery

Occupational Therapy

Oncology – Medical, Surgical

CMS-9895-F 397

Individual Specialty Types

Oncology – Radiation

Ophthalmology

Orthopedic Surgery

Outpatient Clinical Behavioral Health (Licensed, accredited, or certified professionals)

Physical Medicine and Rehabilitation

Physical Therapy

Plastic Surgery

Podiatry

Primary Care – Adult

Primary Care – Pediatric

Psychiatry

Pulmonology

Rheumatology

Speech Therapy

Urology

Vascular Surgery

TABLE 10: Facility Specialty List for Time and Distance Standards

Facility Specialty Types

Acute Inpatient Hospitals (Must have Emergency services available 24/7)

Cardiac Catheterization Services

Cardiac Surgery Program

Critical Care Services – Intensive Care Units (ICU)

Diagnostic Radiology (Free-standing; hospital outpatient; ambulatory health facilities with Diagnostic Radiology)

Inpatient or Residential Behavioral Health Facility Services

Mammography

Outpatient Infusion/Chemotherapy

Skilled Nursing Facilities

Surgical Services (Outpatient or ASC)

Urgent Care

We stated in the proposed rule that the county-specific time and distance parameters that QHPs

would be required to meet would be detailed in future guidance, namely, the annual CMS Letter

to Issuers in the Federally-facilitated Exchanges. We stated that we would consider industry

standards in developing these standards.

ii. Quantitative Network Adequacy Reviews

For plan years beginning on or after January 1, 2025, we proposed (88 FR 82590) that

State Exchanges and SBE-FPs be required to conduct quantitative network adequacy reviews

prior to QHP certification, and that they conduct them consistent with network adequacy reviews

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conducted by the FFEs under § 156.230. Specifically, we proposed that State Exchanges and

SBE-FPs would be required to conduct, prior to QHP certification, quantitative network

adequacy reviews to evaluate compliance with requirements under § 156.230(a)(1)(ii) and (iii),

and (a)(2)(i)(A), while providing QHP certification applicants the flexibilities described under §

156.230(a)(2)(ii) and (a)(3) and (4). We stated in the proposed rule that under this proposal,

State Exchanges and SBE-FPs would be prohibited from accepting an issuer’s attestation as the

only means for plan compliance with network adequacy standards. We further proposed that

State Exchanges and SBE-FPs would make available to SADP applicants the limited exception

available to SADPs under § 156.230(a)(4) pursuant to which SADPs may not be required to

meet FFE network adequacy standards under § 156.230(a)(4), for the same reasons we made this

exception available in the FFEs in the 2024 Payment Notice (88 FR 25878 through 25879). This

exception is not available to medical QHP issuers.

iii. Quantitative Network Adequacy Review Justification Process

In the proposed rule (88 FR 82590), we acknowledged that State-specific challenges may

necessitate exceptions, and so we proposed to require State Exchanges and SBE-FPs to permit

issuers that are unable to meet the specified standards to participate in a justification process

after submitting their initial data to account for variances, consistent with the processes specified

under § 156.230(a)(2)(ii) and (a)(3) and (4). We noted that State-specific challenges could

include barriers beyond an issuer’s control, such as provider supply shortages or topographic

barriers.

We stated in the proposed rule that the issuer would include this justification as part of its

QHP application and describe how the plan's provider network provides an adequate level of

service for enrollees and how the plan's provider network will be strengthened and brought

CMS-9895-F 399

closer to compliance with the network adequacy standards prior to the start of the plan year. We

further stated that the issuer would be required to provide information as requested by the State

Exchange or SBE-FP to support this justification. We also explained that State Exchanges and

SBE-FPs would be required to review the issuer’s justification to determine whether making

such health plan available through the Exchange is in the interests of qualified individuals in the

State or States in which such Exchange operates as specified under § 156.230(a)(3). We further

explained that in making this determination, the factors State Exchanges and SBE-FPs could

consider include whether the exception is reasonable based on circumstances such as the local

availability of providers and variables reflected in local patterns of care. We stated that if the

State Exchange or SBE-FP determines that making such health plan available through its

Exchange is in the interests of qualified individuals in the State or States in which such

Exchange operates, it could then certify the plan as a QHP.

iv. Exception Process for State Exchanges and SBE-FPs

In the proposed rule (88 FR 82590), we stated that we are aware that some States

Exchanges employ robust, quantitative network adequacy standards that differ from those used

by the FFEs, but still ensure that QHPs provide consumers with reasonable, timely access to

practitioners and facilities to manage their health care needs, consistent with the ultimate aim of

these proposals. Accordingly, we proposed a framework for granting exceptions to the

requirements that State Exchanges and SBE-FPs establish and impose network adequacy time

and distance standards for QHPs that are at least as stringent as the standards applicable to QHPs

in FFEs and conduct quantitative network adequacy reviews that are consistent with those

carried out by the FFEs under § 156.230. We proposed that HHS could grant State Exchanges

and SBE-FPs an exception if it determines that the Exchange applies and enforces quantitative

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network adequacy standards that are different from the FFEs’ but ensure reasonable access as

defined under § 156.230. We also proposed that the exception would be available only to State

Exchanges and SBE-FPs that conduct quantitative reviews of network adequacy prior to

certifying plans as QHPs. We further proposed that Exchanges seeking to employ alternative

network adequacy standards would be required to submit an exception request, in a form and

manner specified by HHS, and to support their exception request with evidence-based data

demonstrating that such standards ensure access as defined under § 156.230.

For example, we explained that if a State were to provide quantitative evidence that their

network adequacy time and distance standards that measure access by service types provide

consumers with equal access to providers as the Federal network adequacy standards under §

156.230 that measure access by provider types, we may grant the respective State’s request for

an exception from measuring access by provider types. Additionally, we explained that if a State

were to use different county type designations than the five county type designations that we use

to assess QHP time and distance standards at the county level (that is, Large Metro, Metro,

Micro, Rural, CEAC), we would consider the respective State's request for an exemption from

using the same five county type designations only if the State were to provide evidence that their

alternative county type designations provide consumers with equal access to providers as the

Federal network adequacy standards under § 156.230. We stated that alternative quantitative

network adequacy standards that we would review for potentially qualifying for the exemption

must be supported by evidence-based data, demonstrating that such standards provide enrollees

with a level of access to providers that is equal to or greater than that ensured by the FFE

network adequacy standards under § 156.230.

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Although we proposed to establish minimum standards related to network adequacy in

the proposed rule, we solicited comment on how States may be able to develop a combination of

data-driven quantitative and qualitative standards, developed with input from interested parties,

to assess network adequacy. In the 2020 Medicaid Program; Medicaid and Children’s Health

Insurance Program (CHIP) Managed Care final rule (85 FR 72754, 72802), we provided States

the flexibility to develop quantitative network adequacy standards for determining network

adequacy. In that rule, we noted that in some situations, time and distance may not be the most

effective type of standard for determining network adequacy and that some States have found

that the time and distance analysis produces results that may not accurately reflect provider

availability. For example, a State that has a heavy reliance on telehealth in certain areas of the

State may find that a health care provider-to-enrollee ratio is more useful in measuring

meaningful access to all services without unreasonable delay, as the time it would take the

enrollee, and the distance the enrollee would have to travel, to access the provider in-person

could be well beyond applicable time and distance standards, but the enrollee may still be able to

easily and quickly access many different providers on a virtual basis (85 FR 72802).

In the proposed rule, we sought comment on how we should administer the process for

Exchanges to apply for these exceptions, including the appropriate timelines, and the data that

would be required to be submitted as part of the exception request. We also sought comment on

how we should evaluate the provider access offered by QHP issuers in a State that requests an

exception to establish and impose quantitative network adequacy standards that are different

from the FFEs’, whether and how to measure the access provided by those different standards

over time, and how long an approved exemption should last.

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In the proposed rule, we stated that to ensure compliance with these proposed quantitative

time and distance QHP network adequacy standards and review requirements, we would

coordinate with State Exchanges and SBE-FPs to provide technical assistance to support their

compliance with the requirements of this policy and work with them should it be necessary to

remedy any gaps in compliance. However, we stated that if a State Exchange or SBE-FP fails to

comply with these standards, we could seek to take remedial action under our authorities related

to Exchange program integrity.

c. Proposal Related to QHP Reporting on Telehealth Services

We proposed (88 FR 82591) to require State Exchanges and SBE-FPs to require that all

issuers seeking certification of plans to be offered as QHPs submit information to the respective

State Exchanges or SBE-FPs about whether network providers offer telehealth services. We

proposed that this requirement would be applicable beginning with the QHP certification cycle

for PY 2025. We stated in the proposed rule that this data would be for informational purposes;

it would be intended to help inform the future development of telehealth standards and would

not be displayed to consumers. We also stated that this information could be relevant to State

Exchange and SBE-FP analysis of whether a QHP meets network adequacy standards. We noted

that this proposal is not intended to suggest that telehealth services would be counted in place of

in-person service access for the purpose of State Exchange and SBE-FP issuers meeting time

and distance network adequacy standards for PY 2025. We explained that while we

acknowledge the growing importance of telehealth, we want to ensure that telehealth services do

not reduce the availability of in-person care.

We explained that for the purpose of this proposal, telehealth encompasses professional

consultations, office visits, and office psychiatry services delivered through technology-based

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methods, including virtual check-ins, remote evaluation of pre-recorded patient data, and inter-

professional internet consultations. We noted that, currently, for issuers in FFEs to comply with

telehealth reporting standards, issuers must indicate whether each provider offers telehealth with

the options “Yes,” “No,” or “Requested information from the provider, awaiting their response.”

We proposed that State Exchanges and SBE-FPs would be required to impose this requirement

on issuers when issuers submit provider information.

We sought comment on this proposal, including comments on how we might incorporate

telehealth availability into network adequacy standards in future plan years.

d. Additional Network Adequacy Standards

To reduce burden on State Exchanges and SBE-FPs that are not yet conducting

quantitative network adequacy reviews, we did not propose that State Exchanges and SBE-FPs

enforce appointment wait time standards or that State Exchanges and SBE-FPs ensure that the

provider network of each QHP meets applicable standards specified in § 156.230(b) through (e).

However, we sought comment to inform any potential future enforcement of appointment wait

time standards as well as the standards specified in § 156.230(b) through (e) and stated that we

looked forward to capturing a wide range of perspectives on these topics from various interested

parties. We stated that we were especially interested in comments about how State Exchanges

and SBE-FPs may enforce quantitative network adequacy standards for appointment wait times,

as well as the impact enforcing these standards may have on issuers and consumers.

We also sought comment on our proposal for State Exchanges and SBE-FPs to establish

and impose quantitative time and distance QHP network adequacy standards that are at least as

stringent as the FFEs’ time and distance standards established for QHPs under § 156.230 and to

conduct quantitative network adequacy reviews, prior to QHP certification, that are consistent

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with the reviews conducted by the FFEs under § 156.230, including comment on whether we

should amend § 156.230 in addition to § 155.1050 to directly apply the same standards

applicable to issuers on FFEs to issuers in State Exchanges and SBE-FPs for plan years

beginning on or after January 1, 2025.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing these proposals with a clarification to the exception

process and a modification to require implementation for plan years beginning on or after

January 1, 2026.

First, under § 155.1050(a)(2)(i)(A), we are finalizing that for plan years beginning on or

after January 1, 2026, State Exchanges and SBE-FPs must establish and impose quantitative time

and distance network adequacy standards for QHPs that are at least as stringent as standards for

QHPs participating on the FFEs under § 156.230(a)(2)(i)(A).

Second, we are finalizing that, for plan years beginning on or after January 1, 2026, State

Exchanges and SBE-FPs must conduct quantitative network adequacy reviews prior to certifying

any plan as a QHP, consistent with the reviews conducted by the FFEs under § 156.230.

Specifically, we are finalizing at § 155.1050(a)(2)(i)(B) that, for plan years beginning on or after

January 1, 2026, State Exchanges and SBE-FPs must conduct network adequacy reviews to

evaluate a plan’s compliance with network adequacy standards under § 156.230(a)(1)(ii),

(a)(1)(iii), and (a)(2)(i)(A) prior to certifying any plan as a QHP, while providing QHP

certification applicants the flexibilities described under § 156.230(a)(2)(ii) and (a)(3) and (4).

Third, we are finalizing § 155.1050(a)(2)(ii) to provide that, for plan years beginning on

or after January 1, 2026, HHS may grant an exception to the requirements described under §

155.1050(a)(2)(i) to a State Exchange or SBE-FP that demonstrates with evidence-based data, in

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a form and manner specified by HHS, that (1) the Exchange applies and enforces alternate

quantitative network adequacy standards that are reasonably calculated to ensure a level of

access to providers that is as great as that ensured by the Federal network adequacy standards

established for QHPs under § 156.230(a)(1)(iii), (a)(2)(i)(A), and (a)(4); and (2) the Exchange

evaluates whether plans comply with applicable network adequacy standards prior to certifying

any plan as a QHP. In this final rule, for this exception process, we are clarifying that, for (1)

above, the Exchange will need to demonstrate that it applies and enforces alternate quantitative

network adequacy standards that are reasonably calculated to ensure a level of access to

providers that is as great as that ensured by the Federal network adequacy standards established

for QHPs under § 156.230(a)(1)(iii), (a)(2)(i)(A), and (a)(4), and not § 156.230 generally, to

reinforce that issuers on the State Exchanges and SBE-FPs do not need to comply with the

appointment wait time standards under § 156.230(a)(2)(i)(B) under this policy.

Lastly, we are finalizing § 155.1050(a)(2)(i)(C) to provide that, for plan years beginning

on or after January 1, 2026, State Exchanges and SBE-FPs must require that all issuers seeking

certification of a plan as a QHP submit information to the Exchange reporting whether or not

network providers offer telehealth services.

In preparation for PY 2026, we will begin communicating and coordinating with State

Exchanges and SBE-FPs through the provision of technical assistance. Specifically, during PYs

2024 and 2025, we will work closely with State Exchanges and SBE-FPs on their plans to

comply with these network adequacy requirements for plan years beginning on or after January

1, 2026.

We summarize and respond below to public comments received on these proposals.

CMS-9895-F 406

Comment: Many commenters expressed support for the proposal that State Exchanges

and SBE-FPs: (1) establish and impose quantitative time and distance network adequacy

standards for QHPs that are at least as stringent as standards for QHPs participating on the FFEs

under § 156.230(a)(2)(i)(A); and (2) conduct reviews of a plan’s compliance with those

quantitative network adequacy standards prior to certifying any plan as a QHP, consistent with

the manner in which the FFEs review the network adequacy of plans under § 156.230.

Response: We appreciate the commenters’ support for this proposal.

Comment: Many commenters expressed general support for the creation of a Federal

floor for network adequacy standards or standardization of network adequacy standards across

States. Commenters indicated that the imposition of standardized quantitative time and distance

network adequacy requirements across States, particularly in States that do not currently impose

quantitative time and distance network adequacy requirements or that impose requirements that

are less stringent than the FFEs’, is valuable because it increases access to providers and

services. Commenters stated that the imposition of these requirements will do so by for example,

decreasing disparities in access across States, and requiring States that have not implemented

quantitative network adequacy standards to do so. One commenter also stated that “the

establishment of stringent network adequacy standards is critical in ensuring continual access to

high-quality dental care and incentivizing fair negotiations between insurers and dental providers

during the network contracting process.” Some of these commenters suggested alternatives to the

proposed approach such as suggesting that the floor be qualitative in nature, that it be methods-

based and not metrics-based, and that CMS work with State Exchanges and SBE-FPs to

harmonize standards across States rather than extending the FFE network adequacy standards as

a national floor.

CMS-9895-F 407

Response: We appreciate the support for our proposals and agree with the benefits raised

by commenters. We are finalizing these policies as proposed with a modification to the

implementation date and a clarification to the exception process, as previously discussed. While

we appreciate commenters suggesting a qualitative approach or a methods-based one, which we

believe may refer to approaches that impose standards that only require States or issuers to have

processes in place to ensure network adequacy, we believe quantitative network adequacy

standards, unlike qualitative or other methods-based approaches, can be monitored relatively

easily and applied objectively. By contrast, qualitative or other methods-based approaches to

network adequacy typically articulate a broad, general standard of adequacy and grant regulators

or insurers discretion to determine how to measure compliance. State regulators using these

approaches may require issuers to attest to meeting the network adequacy standards or allow the

issuers to self-monitor compliance with the standards in a different way. As opposed to

conducting routine audits or requiring periodic reports of compliance, State regulators using

these approaches usually also rely on consumer complaints to highlight situations that might

require investigation. Based on our experience conducting network adequacy reviews and

regulating QHPs, as well as feedback from interested parties, we are of the view that no matter

the State in which a QHP is offered, some quantitative analysis is necessary for an Exchange to

objectively monitor network adequacy and determine whether a QHP can provide enrollees

access to an adequate network of providers.

Additionally, harmonizing network adequacy standards across States would prevent

States from enforcing quantitative network adequacy standards that are more stringent than the

FFEs’ standards or from using the exception process under § 155.1050(a)(2)(ii) to enforce

standards that they determined are in the best interest of their consumers. We are of the view that

CMS-9895-F 408

setting the FFEs’ quantitative time and distance network adequacy standards as a national floor

strikes an appropriate balance of providing States with these important flexibilities while also

ensuring that all consumers, regardless of which State they live in, have timely access to

providers to manage their health care needs.

Comment: Many commenters offered recommendations about additional provider and

facility specialty types that should be subject to the time and distance standards, such as

academic cancer centers, essential community hospitals, substance use disorder treatment

providers, and reproductive health providers, as well as recommendations about changes to the

time and distance metrics such as changes to the number of minutes/miles associated with time

and distance standards for certain specialties.

Response: We are not inclined to add additional provider types to the individual and

facility provider specialty lists for time and distance standards at this time. The provider

specialty lists we proposed are the same lists we finalized for FFE issuers in the 2023 Payment

Notice (87 FR 27325). Those specialty lists were informed by prior HHS network adequacy

requirements, consultation with interested parties, and other Federal and State health care

programs, such as Medicare Advantage and Medicaid, and those lists covered more provider

specialty types than previously evaluated under FFE standards so that QHP networks would be

robust, comprehensive, and responsive to QHP enrollees’ needs. We continue to believe that

those provider specialty lists promote access to a variety of provider types and, as a result,

strengthen consumer access to health care services without unreasonable delay. Until we have

more experience with the impact of the specialty lists, we finalize in this rule on QHP issuers in

State Exchanges and SBE-FPs, adding additional providers to the specialty lists would be

premature and may impose burdens on QHP issuers that we have not fully evaluated. Therefore,

CMS-9895-F 409

at this time, we do not believe that it is appropriate to include additional provider types in these

specialty lists.

Our time and distance metrics for network adequacy are based on Medicare Advantage

standards and were designed with careful consideration of other network adequacy standards,

including those of individual States, accrediting entities, and Federal health care programs. Until

we can more fully assess the impact of the time and distance standards, we finalize in this rule on

QHP issuers in State Exchanges and SBE-FPs, we believe that modifying those standards would

also be premature and may impose burdens on QHP issuers that we have not fully evaluated. We

will further research commenters’ recommended changes to our time and distance metrics as

well as their implications and may consider them in future rulemaking.

Comment: Many commenters also opposed the proposal that State Exchanges and SBE-

FPs (1) establish and impose quantitative time and distance network adequacy standards for

QHPs that are at least as stringent as standards for QHPs participating on the FFEs under §

156.230(a)(2)(i)(A); and (2) conduct reviews of a plan’s compliance with those quantitative

network adequacy standards prior to certifying any plan as a QHP, consistent with the manner in

which the FFEs review the network adequacy of plans under § 156.230. Commenters stated that

States are best informed about local context factors that should be considered in network

adequacy standards and reviews such as provider shortages, provider quality, innovative delivery

methods, and geographic constraints. Commenters also noted that the proposal has the potential

for creating conflicting or duplicative regulations and increasing administrative burden on States

and issuers.

Response: For the reasons explained in the proposed rule (88 FR 82587 through 82588),

we continue to believe that requiring State Exchanges and SBE-FPs to establish and impose

CMS-9895-F 410

quantitative time and distance network adequacy standards for QHPs that are at least as stringent

as the FFEs’ and conduct reviews of plan compliance with those quantitative network adequacy

standards consistent with the manner in which the FFEs review plan network adequacy will

create an effective national baseline for network adequacy standards and help provide

consumers, regardless of which State they live in, with reasonable, timely access to providers

and facilities to manage their health care needs.

We acknowledge commenters’ concerns that our network adequacy proposal may create

conflicting or duplicative regulations and increase administrative burden on States Exchanges,

SBE-FPs, and their issuers. We believe that finalizing these proposals with a modification to

require implementation for plan years beginning on or after January 1, 2026, will provide States

an opportunity to revise their regulations to ensure there are no conflicting or duplicative

regulations. This modification may also lessen the administrative burden of this policy on State

Exchanges, SBE-FPs, and their issuers by providing them more time to come into compliance

with these new requirements.

In the proposed rule (88 FR 82590), we acknowledged that State-specific factors, such as

provider supply shortages, topographic barriers, or other barriers beyond an issuer’s control, may

necessitate exceptions to these requirements, and this network adequacy policy permits State

Exchanges and SBE-FPs to consider those factors as they conduct network adequacy reviews

prior to plan certification. Specifically, this final rule extends flexibility to State Exchanges and

SBE-FPs to permit issuers that are unable to meet the specified standards to participate in a

justification process after submitting their initial data to account for variances, consistent with

the processes specified under § 156.230(a)(2)(ii) and (a)(3) and (4). The issuer would include

this justification as part of its QHP application and describe how the plan's provider network

CMS-9895-F 411

provides an adequate level of service for enrollees and how the plan's provider network will be

strengthened and brought closer to compliance with the network adequacy standards prior to the

start of the plan year. State Exchanges and SBE-FPs will be required to review the issuer’s

justification to determine whether making such health plan available through the Exchange is in

the interests of qualified individuals in the State or States in which such Exchange operates as

specified under § 156.230(a)(3). In making this determination, the factors State Exchanges and

SBE-FPs could consider include local context factors that the commenters reference and may

envision, such as whether the exception is reasonable based on circumstances such as the local

availability of providers and variables reflected in local patterns of care. If the State Exchange or

SBE-FP determines that making such health plan available through its Exchange is in the

interests of qualified individuals in the State or States in which such Exchange operates, it could

then certify the plan as a QHP.

Comment: Several commenters urged CMS to delay implementation of the proposed

network adequacy standards to allow States sufficient time to assess whether their network

adequacy standards comply with the proposed requirements or need modification, and for issuers

offering QHPs through State Exchanges and SBE-FPs to modify their networks to comply with

the new national floor for network adequacy standards.

Response: In the proposed rule, we proposed that the new network adequacy standards

that State Exchanges and SBE-FPs must establish and impose would be applicable for plan years

beginning on or after January 1, 2025. We understand, however, the desire expressed by some

commenters to delay the implementation of this proposal, and we acknowledge that compliance

with the network adequacy standards finalized in this rule may require States to review and

modify their network adequacy standards and processes. In response to these concerns, CMS is

CMS-9895-F 412

finalizing that the new network adequacy standards for State Exchanges and SBE-FPs will apply

to plan years beginning on or after January 1, 2026. In preparation for PY 2026, we will begin

communicating and coordinating with State Exchanges and SBE-FPs through the provision of

technical assistance. Specifically, during PYs 2024 and 2025, we will work closely with State

Exchanges and SBE-FPs on their plans to comply with these network adequacy requirements for

plan years beginning on or after January 1, 2026.

Comment: Several commenters requested clarification about whether the proposed

network adequacy policies would apply when it is the State Department of Insurance, and not the

State Exchange or SBE-FP, conducting the network adequacy reviews.

Response: When establishing a State Exchange or SBE-FP through the Exchange

Blueprint approval process under § 155.105, a State must attest to its capacity to ensure QHPs’

compliance with market reform rules, applicable regulations, and guidance, as well as its

capacity to ensure QHPs’ ongoing compliance with QHP certification requirements.

262

As part of

this process, a State must inform CMS that network adequacy activities will be completed by the

Exchange or an Exchange’s designee through contract, agreement, or other arrangement.

Regardless of whether a State intends to designate some entity other than the Exchange to

perform network adequacy activities, under § 155.1050(a), Exchanges are ultimately responsible

for ensuring QHP network adequacy. This proposal does not alter a State’s ability to designate an

entity other than the Exchange to perform network adequacy reviews, nor does it alter any

existing agreements a State Exchange or an SBE-FP may have entered into with State regulatory

entities, including State Departments of Insurance, to perform network adequacy reviews or

other QHP certification functions. We clarify that the State Exchanges and SBE-FPs may

262

Blueprint for Approval of State-Based Health Insurance Exchanges, section III, part C. 4.0.

https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/cms-blueprint-application.pdf

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continue current relationships with entities they have designated to undertake QHP certification

functions under their approved Exchange Blueprint, including network adequacy reviews, and

that all network adequacy reviews, including reviews conducted by an Exchange’s designee,

must meet the requirements of the network adequacy policies finalized in this rule under new §

155.1050(a)(2).

Comment: Most commenters were supportive of the proposal to make a justification

process available for issuers in State Exchanges and SBE-FPs that cannot meet the FFEs’ time

and distance standards and urged CMS to work with State Exchanges and SBE-FPs to closely

scrutinize submitted justifications and ensure that issuers' justifications would only be accepted if

truly valid.

Response: We appreciate the commenters’ feedback. This final rule requires State

Exchanges and SBE-FPs to review the issuer’s justification to determine whether making such

health plan available through the Exchange is in the interests of qualified individuals in the State

or States in which such Exchange operates as specified under § 156.230(a)(3). In making this

determination, the factors State Exchanges and SBE-FPs could consider include State-specific

factors, such as provider supply shortages, topographic barriers, or other barriers beyond an

issuer’s control. Upon publication of this rule, we will begin communicating and coordinating

with State Exchanges and SBE-FPs through technical assistance, in preparation for PY 2026,

including on best practices to review and approve or deny issuer-submitted justifications.

Comment: Several commenters opposed the limited exception for SADPs because they

believe that SADPs should be held accountable for access to dental providers in the same manner

as medical QHPs.

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Response: We acknowledge the commenters’ concerns. In the 2024 Payment Notice (88

FR 25875), we finalized a limited exception to the provider network requirement for SADP

issuers that sell plans in areas where it is prohibitively difficult for the issuer to establish a

network of dental providers; this exception is not applicable to medical QHP issuers at this

time.

263

Under this exception, an area is considered “prohibitively difficult” for an SADP issuer

to establish a network of dental providers based on attestations from State Departments of

Insurance in States with at least 80% of their counties classified as CEAC, that at least one of the

following factors exists in the area of concern: a significant shortage of dental providers, a

significant number of dental providers unwilling to contract with Exchange issuers, or significant

geographic limitations impacting consumer access to dental providers. We are extending the

limited SADP exception to SADP issuers on State Exchanges and SBE-FPs to ensure that

consumers residing in all States where it is prohibitively difficult for the issuer to establish a

network of dental providers have access to dental plans. As we explained in the 2024 Payment

Notice, this limited exception follows logically from how the requirements in sections

1311(c)(1)(B) and (C) of the ACA that plans ensure a sufficient choice of providers apply in the

unique SADP context. If creating a network of dental providers is prohibitively difficult for

SADPs in certain areas in State Exchange or SBE-FP States, it is foreseeable that there may be

some areas where SADPs could not be Exchange-certified, which then risks there being no

SADPs in that area and thus no choice of dental providers through SADPs at all. Thus, in this

limited context, requiring that SADP issuers in State Exchanges and SBE-FPs establish a dental

provider network would defeat the purpose of section 1311(c)(1)(B) and (C) the ACA to ensure

that enrollees have a sufficient choice of providers.

263

See § 156.230(a)(4).

CMS-9895-F 415

Comment: Most commenters supported the availability of an exception process for State

Exchanges and SBE-FPs and urged CMS to review these exception requests quickly and to

clearly identify the criteria for acceptance.

Response: We appreciate the commenters’ support for the exception process. Upon

publication of this rule, we will begin communicating and coordinating with State Exchanges

and SBE-FPs through technical assistance in preparation for PY 2026. In reviewing exception

requests, we will seek to determine whether the State has the requisite statutory, regulatory,

and/or sub-regulatory authority to review all QHPs applying for QHP certification in the State

for network adequacy as well as the requisite authority to review all QHPs for compliance with

time and distance standards using the same specialty lists as detailed in the 2023 Payment Notice

(87 FR 27324 through 27326) (set forth at Tables 9 and 10 of this preamble to this final rule).

We will also seek to determine whether the State conducts quantitative reviews of time

and distance standards for QHP network adequacy using issuer-submitted data for all plans

applying for QHP certification and whether the State’s quantitative review of time and distance

standards for QHP network adequacy includes parameters that are at least as short as those listed

in the 2023 Letter to Issuers

264

for the specialty types listed in Tables 9 and 10 of this preamble

to this final rule. Lastly, we will seek to determine whether the State’s quantitative review of

time and distance standards occurs prior to plan certification and whether the review includes a

justification process for plans that do not meet the network adequacy standards.

Before PY 2026, we will also review the information provided by State Exchanges and

SBE-FPs to support their exception request. This information may include materials such as

guidance documents or templates that describe the State’s methodology for reviewing issuer-

264

2023 Letter to Issuers in the Federally-facilitated Exchanges: https://www.cms.gov/files/document/2023-draft-

letter-issuers-508.pdf.

CMS-9895-F 416

submitted quantitative data to assess compliance with QHP network adequacy standards,

information about the frequency and timeline for network adequacy reviews for QHP issuers in

the State, information regarding the State’s justification process for issuers not yet meeting the

network adequacy standards, and information regarding any compliance review processes the

State utilizes to follow up with issuers that complete the justification process.

Comment: Many commenters expressed support for the proposal to require collection of

information about which providers offer telehealth services and one commenter recommended

that issuers be required to ensure that a percentage of care available in their network is available

via telehealth services.

Response: We appreciate the support from these commenters. In the proposed rule, we

noted that this proposal is not intended to suggest that telehealth services would be counted in

place of in-person service access for the purpose of meeting network adequacy time and distance

standards for PY 2025. While we acknowledge the growing importance of telehealth, we want to

ensure that telehealth services do not reduce the availability of in-person care. More research

would be needed before we could analyze whether counting telehealth is appropriate for

purposes of a QHP meeting network adequacy time and distance standards.

Comment: A few commenters expressed opposition to the collection of information about

which providers offer telehealth services indicating that the proposed rule underestimated the

burden of this proposal, and that the information would not capture the availability of telehealth

services.

Response: We believe that the telehealth reporting standards, pursuant to which issuers in

State Exchanges and SBE-FPs must indicate whether each network provider offers telehealth

services with the options “Yes,” “No,” or “Requested information from the provider, awaiting

CMS-9895-F 417

their response,” would not require extensive administrative time to gather. Approximately half of

the parent companies of issuers on the State Exchanges and over two thirds of the parent

companies of issuers on SBE-FPs offer Medicare Advantage plans, and Medicare Advantage

offers a telehealth credit for network adequacy. Therefore, many more issuers on State

Exchanges and SBE-FPs likely already have access to this information. We also believe that

QHP issuers that do not currently collect this information may do so using the same means and

methods by which they already collect information from their network providers relevant to time

and distance standards and provider directories. For these reasons, we estimate that any

additional burden resulting from the requirement that QHP issuers report whether each network

provider is furnishing telehealth services would be minimal.

We stated in the proposed rule (88 FR 82591, 82638 through 82639) that this data would

be for informational purposes, would be intended to help inform the future development of

telehealth standards, and would not be displayed to consumers. We believe that the above-

described telehealth reporting standards support these objectives by providing State Exchanges

and SBE-FPs with a general picture regarding the availability of telehealth services in their State.

Additionally, at this time, since this data will not be displayed to consumers, it is not necessary

for State Exchanges and SBE-FPs to collect more granular telehealth data from their issuers.

Comment: One commenter recommended delaying collection of telehealth information to

allow the development of more efficient ways for issuers to collect that information from

providers.

Response: We acknowledge this concern and will require compliance with this network

adequacy requirement for plan years beginning on or after January 1, 2026. Upon publication of

this rule, we will begin communicating and coordinating with State Exchanges and SBE-FPs

CMS-9895-F 418

through technical assistance in preparation for PY 2026. Notably, we collect the same telehealth

information from QHP issuers in the FFEs, and all those issuers have successfully submitted it

each plan year.

Comment: Many commenters recommended that CMS extend the FFEs’ appointment

wait time standards to State Exchanges and SBE-FPs, citing that it would further provide

consumers with reasonable, timely access to practitioners and facilities to manage their health

care needs. Many commenters also sought information on appointment wait time standards and

operations, such as the use of secret shopper surveys to assess compliance with these standards.

Response: As we explained in the proposed rule (88 FR 82591), to reduce burden on

State Exchanges and SBE–FPs that are not yet conducting quantitative network adequacy

reviews, we did not propose, at this time, that State Exchanges and SBE-FPs enforce

appointment wait time standards or that State Exchanges and SBE–FPs ensure that the provider

network of each QHP meets applicable standards specified in § 156.230(b) through (e). We will

monitor the implementation of these network adequacy standards in State Exchanges and SBE-

FPs and consider whether applying the FFEs’ appointment wait time standards to issuers in State

Exchanges and SBE-FPs in future plan years is warranted. Additional information about

appointment wait time standards will appear in the 2025 Letter to Issuers and will only apply to

issuers in the FFEs in PY 2025.

We thank commenters for their feedback on these issues and will take their comments

into consideration in future rulemaking.

E. 45 CFR Part 156 – Health Insurance Issuer Standards Under the Affordable Care Act,

Including Standards Related to Exchanges

1. FFE and SBE-FP User Fee Rates for the 2025 Benefit Year (§ 156.50)

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In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82591), for the 2025 benefit year, we proposed to retain the 2024 benefit year FFE user

fee rate of 2.2 percent of total monthly premiums and an SBE-FP user fee rate of 1.8 percent of

the total monthly premiums.

Section 1311(d)(5)(A) of the ACA permits an Exchange to charge assessments or user

fees on participating health insurance issuers as a means of generating funding to support its

operations. If a State does not elect to operate an Exchange or does not have an approved

Exchange, section 1321(c)(1) of the ACA directs HHS to operate an Exchange within the State.

Accordingly, in § 156.50(c), we state that a participating issuer offering a plan through an FFE or

SBE-FP must remit a user fee to HHS each month that is equal to the product of the annual user

fee rate specified in the annual HHS notice of benefit and payment parameters for FFEs and

SBE-FPs for the applicable benefit year and the monthly premium charged by the issuer for each

policy where enrollment is through an FFE or SBE-FP. OMB Circular A-25 established Federal

policy regarding user fees and what the fees can be used for.

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OMB Circular A-25 provides

that a user fee charge will be assessed against each identifiable recipient of special benefits

derived from Federal activities beyond those received by the general public.

a. FFE User Fee Rates for the 2025 Benefit Year

Based on estimated costs, enrollment (including anticipated establishment of SBE-FPs or

shifts to State Exchanges in certain States in which FFEs or SBE-FPs currently are operating),

and premiums for the 2025 benefit year, we proposed a 2025 user fee rate for all participating

FFE issuers of 2.2 percent of total monthly premiums.

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

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Section 156.50(c)(1) provides that, to support the functions of FFEs, an issuer offering a

plan through an FFE must remit a user fee to HHS, in the timeframe and manner established by

HHS, equal to the product of the monthly user fee rate specified in the annual HHS notice of

benefit and payment parameters for the applicable benefit year and the monthly premium

charged by the issuer for each policy where enrollment is through an FFE. Issuers seeking to

participate in an FFE in the 2025 benefit year will receive two special benefits not available to

issuers offering plans in State Exchanges: (1) the certification of their plans as QHPs; and (2) the

ability to sell health insurance coverage through an FFE to individuals determined eligible for

enrollment in a QHP. For the 2025 benefit year, issuers participating in an FFE will receive

special benefits from the following Federal activities:

● Provision of consumer assistance tools;

● Consumer outreach and education;

● Management of a Navigator program;

● Regulation of agents and brokers;

● Eligibility determinations;

● Enrollment processes; and

● Certification processes for QHPs (including ongoing compliance verification,

recertification, and decertification).

Activities performed by the Federal Government that do not provide issuers participating

in an FFE with a special benefit are not covered by the FFE user fee. We expect that the user fee

rates we finalize provide adequate funding for each of the special benefits issuers participating in

an FFE receive. For a description of how estimates for costs are developed and a full description

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of how the proposed 2025 benefit year FFE user fee rate was developed see the proposed rule

(88 FR 82591 through 82592).

We noted in the proposed rule that if any events significantly changed our estimates

around costs, premiums, or enrollment projections between the proposed rule and the final rule,

we may modify the FFE and SBE-FP user fee rates that were proposed.

b. SBE-FP User Fee Rates for the 2025 Benefit Year

We proposed to charge issuers offering QHPs through an SBE-FP a user fee rate of 1.8

percent of the monthly premium charged by the issuer for each policy under plans offered

through an SBE-FP for the 2025 benefit year.

In § 156.50(c)(2), we specify that an issuer offering a plan through an SBE-FP must remit

a user fee to HHS, in the timeframe and manner established by HHS, equal to the product of the

monthly user fee rate specified in the annual HHS notice of benefit and payment parameters for

the applicable benefit year and the monthly premium charged by the issuer for each policy where

enrollment is through an SBE-FP. We expect that the user fee rates we finalize will provide

adequate funding for each of the special benefits issuers participating in an SBE-FP will receive.

See the proposed rule (88 FR 82592 through 82593) for a full description of how the user fee rate

for SBE-FPs is calculated, special benefits to issuers using the SBE-FP, and how the proposed

2025 benefit year SBE-FP user fee rate was developed.

As previously mentioned in this section, we also noted in the proposed rule that if any

events significantly change our estimates around costs, premiums, or enrollment projections

between the proposed rule and the final rule, we may modify the FFE and SBE-FP rates that

were proposed.

We sought comment on the proposed 2025 FFE and SBE-FP user fee rates.

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After the proposed rule was published, we revised our enrollment projections as a result

of newly available data based on the 2024 Open Enrollment (OE) that occurred between

November 2023 and January 2024. In particular, during the 2024 OE cycle, there were more plan

selections than expected, which resulted in an increase in our enrollment projections.

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After

consideration of comments and for the reasons outlined in the proposed rule and our responses to

comments below, and as a result of our revised enrollment projections, we are finalizing for the

2025 benefit year a user fee rate for all issuers offering QHPs through an FEE of 1.5 percent of

the monthly premium charged by the issuer for each policy under plans where enrollment is

through an FFE and a user fee rate for all issuers offering QHPs through an SBE-FP of 1.2

percent of the monthly premium charged by the issuer for each policy under plans where

enrollment is through an SBE-FP. We note that we establish FFE and SBE-FP user fee rates

annually using the latest data and assumptions available at the time to calculate our projections

around costs, premiums, and enrollment. Furthermore, FFE and SBE-FP user fee rates in future

years will be recalculated using the latest data available at the time, and will take into

consideration any changing assumptions, such as any change in the status of the enhanced

premium tax credits established by the ARP and extended by the IRA which are currently

expected to expire at the end of the 2025 benefit year.

Comment: Several commenters supported our proposal to retain FFE and SBE-FP user

fee rates at 2.2 percent and 1.8 percent, respectively, of total monthly premiums for benefit year

2025. Other commenters disagreed with the proposed user fee rates and requested that HHS

increase the user fee rates. Several of these commenters requested that HHS increase the user fee

266

For additional information, see https://www.cms.gov/newsroom/fact-sheets/marketplace-2024-open-enrollment-

period-report-final-national-snapshot.

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rates to improve Exchange functions and requested that HHS increase funding for education and

outreach, assisters, and HealthCare.gov.

Response: Due to revising our projections between the proposed and final rules based on

newly available data, we are finalizing a lower FFE user fee rate at 1.5 of total monthly

premiums and a lower SBE-FP user fee rate at 1.2 percent of total monthly premiums for the

2025 benefit year. We revised our enrollment projections based on newly available data as the

result of the 2024 OE. During this OE period, there were more plan selections than we projected

when calculating the proposed 2025 user fee rates, which resulted in an increase in our

enrollment projections. As we discussed in the proposed rule (88 FR 82591 through 82593), we

developed the user fee rates based upon estimated costs, enrollment, and premiums. We

specifically noted that the user fee rates incorporate our estimates of premium and enrollment

changes for the 2025 benefit year and are not solely a reflection of the total expenses estimated

to operate and maintain the FFE, Federal platform, and SBE-FP operations. We note that the

amount collected under these user fee rates will ensure adequate funding for all user fee eligible

Exchange and Federal platform functions.

Accordingly, we are finalizing user fee rates of 1.5 percent of monthly premiums charged

by issuers for each policy under plans offered through an FFE and 1.2 percent of monthly

premiums charged by issuers for each policy under plans offered through an SBE-FP. We will

continue to calculate the FFE and SBE–FP user fee rate annually in a manner that ensures

sufficient funding for operations, ensuring that consumers' needs are met and consumer

education and outreach, assisters, and HealthCare.gov are appropriately funded.

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We will also continue to examine cost estimates for the special benefits provided to

issuers offering QHPs on the FFEs and SBE-FPs and will continue to establish user fee rates that

are reasonable and necessary to fully fund user fee eligible Exchange operation costs.

Comment: A few commenters stated that HHS should adopt a PMPM user fee structure,

stating that administrative costs do not track with premium changes and a PMPM user fee would

avoid higher fee amounts based solely on premium increases.

Response: We did not propose any changes to the user fee structure; as such, the user fee

rates will continue to be set as a percent of the premium. We note that we propose and finalize

user fee rates each benefit year and can adjust the user fee rates to avoid higher fee amounts

based solely on premium increases. Therefore, should administrative costs not trend with

premium changes, we do not believe that such a trend would necessarily justify a PMPM user fee

cost structure. Additionally, in accordance with Circular A–25

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, issuers are charged the user fee

in exchange for receiving special benefits beyond those that accrue to the general public. Setting

the user fee as a percent of premium ensures that the user fee generally aligns with the business

generated by the issuer as a result of participation in an FFE or the Federal platform. However,

we will continue to engage with interested parties regarding how the FFE and SBE–FP user fee

policies can best support consumer access to affordable, quality health insurance coverage

through the Exchanges that use the Federal platform.

Comment: One commenter appreciated the increased transparency around user fees, and

encouraged additional transparency in the methodology used to set the user fee rates, as well as

how user fees support HHS' policy goals for the Exchanges. The same commenter recommended

267

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

CMS-9895-F 425

greater transparency in how the user fee rates are determined and requested enumerated costs of

providing Federal eligibility and enrollment platform service and infrastructure to each State.

Response: We provided additional information in the 2024 Payment Notice proposed rule

(87 FR 78272 through 78274) explaining the impact of stable contract cost estimates, the

enhanced PTC subsidies in section 9661of the ARP being extended in section 12001 of the IRA

through the 2025 benefit year, anticipated effects of the IRA on enrollment, and States

transitioning from FFEs or SBE–FPs to State Exchanges, as well as the enrollment impacts of

section 1332 State innovation waivers. This methodology was also used to develop the 2025

benefit year FFE and SBE-FP user fee rates. Additionally, we note that while there are certain

functions that HHS has historically allocated to individual entities, most costs are not currently

mapped to usage by State or individual transaction. User fees cover activities performed by the

Federal Government that provide issuers offering a plan in an FFE or SBE-FP with a special

benefit. As stated in the proposed rule, these services are generally IT, eligibility, enrollment,

and QHP certification services that are more efficiently conducted in a consolidated manner

across the Federal platform, rather than by States, so that the services, service delivery, and

infrastructure can be the same for all issuers in the FFEs and SBE-FPs. For example, all FFE and

SBE-FP issuers send their 834 enrollment transactions to the Federal platform database, which

are processed consistently regardless of State. Contracts are acquired to provide services for the

Federal platform. The services do not differ by State, and therefore, we do not calculate costs on

a State-by-State basis.

2. State Selection of EHB-Benchmark Plans for Plan Years Beginning on or after January 1,

2026 (§ 156.111)

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In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82593), we proposed to revise the standards for the State selection of EHB-benchmark

plans at § 156.111 for benefit years beginning on or after January 1, 2027, to: consolidate the

options for States to change EHB-benchmark plans at § 156.111(a); revise the scope of benefit

requirements at § 156.111(b)(2); and amend § 156.111(e)(3) to require States to submit a

formulary drug list as part of its application to change EHB-benchmark plans only if the State is

seeking to change its prescription drug EHB. We refer readers to the proposed rule (88 FR

82593) for a discussion of the statutory and regulatory background relating to these proposals.

As we explained in the proposed rule, nine States have changed their EHB-benchmark

plans since 2018 by complying with the requirements at § 156.111.

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We stated in the proposed

rule that based on interactions with these States and feedback received in response to the EHB

RFI,

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we understand that certain aspects of the process to change EHB-benchmark plans may

impose unanticipated difficulty on and create confusion for States. We stated that we understand

there are concerns that the typicality standard, as implemented, is a burdensome way to ensure a

State’s EHB-benchmark plan selection is equal in scope to a typical employer plan. In addition,

we stated that, in limiting EHB-benchmark plan selections, we understand that the generosity

standard may also impede the ability of States to select an EHB-benchmark that is equal in scope

to the benefits provided under a typical employer plan in the State, which we understand States

often find have become more generous over time. We further stated that we understand that

requiring States to submit a formulary drug list to HHS as part of the documentation required

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For more information on the changes States have made to their EHB-benchmark plans, see

https://www.cms.gov/CCIIO/Resources/Data-Resources/ehb.

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For example, see https://www.regulations.gov/comment/CMS-2022-0186-0270;

https://www.regulations.gov/comment/CMS-2022-0186-0412; and https://www.regulations.gov/comment/CMS-

2022-0186-0559.

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under § 156.111(e) can be particularly onerous when a State is not seeking to change its

prescription drug EHBs. We refer readers to the proposed rule (88 FR 82593 through 82597) for

further discussion or our proposals and related rationale.

As a result of that feedback, we proposed changes to § 156.111, as discussed in the

following subsections. We also sought comment on the effective date of these changes.

After consideration of comments and for the reasons outlined in our response to

comments, we are changing the effective date of the changes we are finalizing to 156.111 (as

further discussed in the sections below). Specifically, we are finalizing the proposed revisions to

§ 156.111 so that they will be effective for benefit years beginning on or after January 1, 2026,

rather than benefit years beginning on or after January 1, 2027, as was proposed.

Comment: Many commenters noted that the proposed amendments to § 156.111 would

first impact plans for benefit years beginning on or after January 1, 2027, which is later than the

proposed effective dates for other amendments to regulations pertaining to the EHB (§§

155.170(a)(2) and 156.122(a)(3)(i)(E)). Commenters requested aligning the effective dates

across these proposals so that the revisions to § 156.111 would become effective at the same

time to minimize confusion. Some commenters requested that CMS finalize an earlier effective

date than 2027 so that States that are considering submitting applications to change EHB-

benchmark plans in 2024, for effectiveness starting with benefit years beginning on or after

January 1, 2026, may utilize the proposed flexibilities a year earlier in order to provide

consumers with improved EHBs a year earlier.

Response: We are persuaded by commenters that suggested finalizing an earlier effective

date for the revisions to § 156.111. We agree with commenters that an earlier effective date may

allow States to take advantage of changes to § 156.111 a year earlier, so that consumers may in

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turn realize improvements to their State’s EHB-benchmark plan a year earlier, which we expect

to result in improved health outcomes. We had proposed the original January 1, 2027 effective

date with the understanding that a later effective date would reduce burden and confusion for

States that might be preparing applications for submission on May 1, 2024 that would take effect

for benefit years beginning on or after January 1, 2026. We did not want to finalize an effective

date that may materially disrupt those applications. However, having reviewed and considered

comments, we are now persuaded that an earlier effective date would not cause material

disruption to these applications. Indeed, it appears that States interested in submitting

applications to change EHB-benchmark plans by May 1, 2024 prefer the finalization of an earlier

effective date. We understand that States intending to submit an application by May 1, 2024,

have already started that process and have made assumptions based on the policy in current §

156.111. We are sympathetic to these concerns and note that nothing in the revised § 156.111

finalized in this rule prohibits such States from submitting an application by May 1, 2024.

Therefore, we are finalizing the proposed revisions to § 156.111 so that they will be

effective for benefit years beginning on or after January 1, 2026. We are otherwise finalizing the

revisions to § 156.111 as proposed, as described in the sections that follow.

a. Consolidating the State EHB-Benchmark Plan Options

We proposed to consolidate the choices for States to change their EHB-benchmark plan

by revising § 156.111(a) to add a new paragraph (a)(2) which would simply state that, subject to

paragraphs (b), (c), (d), and (e) of § 156.111, for plan years beginning on or after January 1,

2027, a State may change its EHB-benchmark plan by selecting a set of benefits that would

become the State’s EHB-benchmark plan. We stated that the language at current § 156.111(a)

would be redesignated as § 156.111(a)(1) and would be revised to provide that this paragraph

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applies to plan years beginning on or after January 1, 2020 through December 31, 2026. Further,

we stated that the language currently at § 156.111(a)(1) through (3) would be redesignated as §

156.111(a)(1)(i) through (iii).

Under 42 CFR 440.347, Medicaid ABPs authorized under section 1937 of the Act are

required to meet EHB standards. Similarly, under 42 CFR 600.405, in States that elect to operate

a BHP, the standard health plans must meet EHB standards. We explained in the proposed rule

that the changes to State EHB-benchmark plan options would also be applicable to States when

choosing an EHB-benchmark plan used to define EHBs in a Medicaid ABP or BHP standard

health plan.

We sought comment on the proposal to consolidate State EHB-benchmark plan options

under § 156.111(a).

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed, though for the reasons

described earlier, we are finalizing this change for plan years beginning on or after January 1,

2026, rather than for plan years beginning on or after January 1, 2027, as was proposed. We

summarize and respond to public comments received on the proposed consolidation of State

EHB-benchmark plan options under § 156.111(a) below.

Comment: Many commenters supported the proposal to consolidate State EHB-

benchmark plan update options at § 156.111(a), citing their belief that this simplification would

reduce confusion and burden (for example, cost and time) for States seeking to update their

EHB-benchmark plans. In turn, commenters also noted that enabling States to more easily and,

perhaps therefore more frequently, update their EHB-benchmark plans could result in expanded

coverage for, among other things, maternity care, substance use disorder care, obesity care, and

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chronic disease management. Finally, commenters also suggested that, if States can more easily

and frequently update their EHB-benchmark plans as a result, in part, of the proposed

consolidation, EHB-benchmark plans may more closely align to currently available typical

employer plans, consistent with the statutory linkage between EHB-benchmark plans and typical

employer plans.

Response: As noted earlier in this final rule, CMS has previously received feedback from

State regulators suggesting that the current EHB-benchmark plan update process can be

confusing and burdensome. We proposed to consolidate the options for EHB-benchmark plan

updates at § 156.111(a) with this feedback in mind and appreciate commenters’ indication that

they see this policy as achieving the goals of making the EHB-benchmark plan update process

easier to understand and undertake.

Comment: Several commenters opposed the proposal to consolidate State EHB-

benchmark plan update options at § 156.111(a). However, commenters opposing the proposed

consolidation spoke about their opposition to the proposed changes to the EHB-benchmark plan

update process more generally – they did not raise specific concerns regarding consolidation. For

example, one opposing commenter stated that the current EHB-benchmark plan update process is

working well and strikes an effective balance between ensuring consumers have access to needed

coverage, while also allowing States to make updates responsive to the needs of their

constituents. Thus, the commenter did not believe the proposed updates, including to §

156.111(a), should be finalized as proposed, but did not identify any specific legal or operational

issues that might result from the proposed consolidation.

Response: While we appreciate this feedback, we do not agree that the current EHB-

benchmark plan update process is adequately streamlined, given the feedback discussed earlier

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from States indicating that the current requirements are both difficult to understand and

cumbersome to implement.

b. Scope of Benefit Requirements

We proposed to revise the scope of benefit requirements at § 156.111(b)(2) for plan years

beginning on or after January 1, 2027, with corresponding proposed revisions to the actuarial

requirements at § 156.111(e)(2). Specifically, we proposed at § 156.111(b)(2)(ii) that a State’s

new EHB-benchmark plan would be required to provide a scope of benefits that is equal to the

scope of benefits of a typical employer plan in the State, and that the scope of benefits of a

typical employer plan in the State would be defined as any scope of benefits that is as or more

generous than the scope of benefits in the State’s least generous typical employer plan

(supplemented by the State as necessary to provide coverage within each EHB category at §

156.110(a)), and as or less generous than the scope of benefits in the most generous typical

employer plan in the State (supplemented by the State as necessary to provide coverage within

each EHB category at § 156.110(a)), among the typical employer plans currently defined at §

156.111(b)(2)(i)(A) and (B). We proposed to remove the generosity standard currently at §

156.111(b)(2)(ii). We also proposed a technical clarification to the language regarding

supplementation at § 156.111(b)(2)(i), which currently states that a State’s new EHB-benchmark

plan must “provide a scope of benefits equal to, or greater than, to the extent any

supplementation is required to provide coverage within each EHB category at § 156.110(a), the

scope of benefits provided under a typical employer plan” (emphasis added), to state that a

State’s EHB-benchmark plan must provide a scope of benefits equal to the scope of benefits

provided under a typical employer plan (supplemented by the State as necessary to provide

coverage within each EHB category at § 156.110(a)).

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Under 42 CFR 440.347, Medicaid ABPs authorized under section 1937 of the Act are

required to meet EHB standards. Under 42 CFR 600.405, in States that elect to operate a BHP,

the standard health plans are required to meet EHB standards. We explained in the proposed rule

that the changes to State EHB-benchmark plan requirements would also be applicable to States

when choosing an EHB-benchmark plan used to define EHBs in a Medicaid ABP or a BHP

standard health plan.

We sought comment on the proposals to revise the typicality standard at §

156.111(b)(2)(i), remove the generosity standard at § 156.111(b)(2)(ii), make corresponding

edits to § 156.111(e)(2), and make a technical revision to the language regarding

supplementation at § 156.111(b)(2)(i).

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed though, for the reasons

described earlier, we are finalizing these changes for plan years beginning on or after January 1,

2026, rather than for plan years beginning on or after January 1, 2027. We summarize and

respond to public comments received on these proposals below.

Comment: A majority of commenters supported the proposal to amend the typicality

standard at § 156.111(b)(2)(i). These commenters affirmed that moving from a typicality

standard under which States must identify a typical employer plan option that exactly matches

the value of their proposed EHB-benchmark plan to an approach that sets a lower and upper

boundary on the value of a typical employer plan will reduce the time and cost for assessing the

value of individual typical employer plan options. Moreover, commenters expressed their belief

that a range-based approach to typicality will provide States with additional flexibility to design

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innovative, responsive EHB-benchmark plans without the artificial constraint of matching with

exact precision the value of a specific typical employer plan option.

Commenters indicated that the decreased burden and increased flexibility provided by the

updates to the typicality standard will incentivize States to contemplate EHB-benchmark plan

updates more frequently to keep pace with both the needs of their consumers and the evolving

scope of benefits typically provided by employer plans. Commenters noted this is a particularly

desirable outcome, given that only nine States have updated their EHB-benchmark plans to date,

and many of those changes have been modest.

Commenters noted that, in light of the reduced costs and time States must allocate to

update their EHB-benchmark plan under the proposed change, States may consequently be able

to devote more of their attention and energy towards assessing the most optimal package of

benefits to provide under their new EHB-benchmark plan, including through more robust public

engagement efforts.

Response: We appreciate these commenters’ confirmation of our assertion that the

revised typicality standard will be conceptually and operationally more straightforward and less

burdensome. We share commenters’ interest in supporting States to contemplate EHB-

benchmark plan updates as often as may be necessary to best meet the needs of their consumers,

without needing to satisfy unnecessary or excessively burdensome typicality requirements.

Comment: A few commenters opposed the proposed updates to the typicality standard

under at § 156.111(b)(2)(i). Commenters indicated their concern that the proposed changes could

threaten the connection between the statutory requirements for typicality set forth by the ACA

and the regulatory framework implementing these requirements. Commenters also expressed that

a more flexible approach to typicality could expose the Federal Government to increased costs to

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the extent EHB-benchmark plans are more frequently updated with additional benefits.

Commenters noted that such changes would necessitate greater Federal outlays in the form of

additional Federal expenditure on subsidization of plan premiums through APTCs.

Response: We do not agree that the adjustments proposed to the typicality standard would

erode the implementation of the ACA typicality requirement in the EHB-benchmark plan update

process. We believe that the new typicality standards will strike an appropriate balance between

easing State burden and ensuring that the scope of benefits considered EHB stays closely aligned

to the scope of benefits typically provided by employers. Specifically, the typicality standard has

previously required that States identify a single typical employer plan option offering an

equivalent scope of benefits to the scope of the proposed EHB-benchmark plan, which has

required States to: (1) analyze many typical employer plan benefit offerings until a match is

identified (which could require both significant time and cost to the State), and/or (2) require

States to offer a set of benefits as EHB that they believe is not as well suited to the needs of their

population in order to achieve an exact scope of benefits that matches the scope of benefits

offered by one specific typical employer plan, rather than, for example, selecting an EHB-

benchmark plan that offers a scope of benefits that is greater than that offered by one typical

employer plan, but not as great as the next-most-generous typical employer plan. Under the

amended typicality standard, States may need to only assess the value of two typical employer

plans: the least generous and the most generous. This means that States can avoid additional time

and cost for actuarial assessment. And, once States have identified the least and most generous

typical employer plan options, they then have the flexibility to select an EHB-benchmark plan

with a scope of benefits that falls anywhere along the continuum between the scope of the least

and most generous plans. Further, we reiterate that the revised typicality standard maintains both

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a floor and a ceiling on the generosity of benefits considered EHB, which serves to ensure States

can, at most, increase the scope of benefits provided by their EHB-benchmark plan to match, or

be more generous than, to the extent supplementation is required to provide coverage within each

EHB category at § 156.110(a), the scope of benefits provided by the most generous typical

employer plan. As such, Federal expenditures in the form of APTC are constrained to increase, at

most, only as much as typical employer plans are also increasingly generous over time, which

has always been the case under the typicality standard at § 156.111.

Comment: A majority of commenters also supported the removal of the generosity

standard at § 156.111(b)(2)(ii), explaining that removing the generosity standard will make the

EHB-benchmark plan update process easier to understand, less burdensome to execute, and more

adaptable to the needs of each State’s population. Commenters also explained that the

elimination of the generosity standard will ensure that States can better incorporate in EHB-

benchmark plans any changes to the scope of benefits in typical employer plans since 2017.

Commenters noted that, with the updates to the typicality standard and the elimination of

the generosity standard, the scope of benefits provided by the most generous typical employer

plan can now reflect the scope of benefits provided by the most generous large group typical

employer plan. Commenters indicated that large group plans are more generous than the other

plan options available for use in a State’s typicality analysis, such that the updates to these

policies taken together will provide States the opportunity to provide a potentially more generous

package of EHB through their EHB-benchmark plan than they could previously.

Commenters suggested that by eliminating the generosity standard, States can better

incorporate benefits that consider the health care needs of diverse segments of the population as

EHB. Commenters note this is of particular importance given the evolution of new approaches to

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address gaps in care for members of marginalized communities and those who have traditionally

experienced inequitable health outcomes.

Several commenters opposed the proposed removal of the generosity standard at §

156.111(b)(2)(ii). These commenters suggested that removing the generosity standard could

allow the scope of benefits in EHB-benchmark plans to outpace the scope of benefits provided

by typical employer plans. Further, some commenters asserted, without the generosity standard,

there would be no constraints on how generous a State could elect to make its EHB-benchmark

plan and allow a State to manipulate the EHB-selection process to impermissibly expand the

scope of benefits beyond what the ACA intended. Specifically, a few commenters expressed

concern that, in conjunction with the proposed change at § 155.170 with regard to State-

mandated benefits included in the EHB-benchmark plan, removing any constraint on EHB-

benchmark plan generosity would enable States to subvert the requirement to defray the costs of

mandated benefits, simply by adding all existing and future mandated benefits to their

benchmark plan. Commenters expressed concerns about coverage becoming potentially

unaffordable for consumers and costly for the Federal Government, in the form of increased

APTCs.

Response: In the proposed rule (88 FR 82596), we acknowledged that the proposed

removal of the generosity standard would also establish an upper bound for State EHB-

benchmark plan selections that better tracks with the scope of benefits in typical employer plans

as they change over time. We agree with commenters that larger group plans tend to be more

representative of typical employer plans as they change over time, especially given that since

small group health plans are required to provide the EHB, it may be less appropriate to rely on

the scope of benefits in small group plans to assess the benefits typically provided in employer

CMS-9895-F 437

plans. Evidence also suggests that the generosity of larger group employer plans has moderately

increased since the passage of the ACA. We also believe that, in conjunction with the more

flexible range-based approach to typicality, a higher available upper bound for EHB-benchmark

plan generosity will allow States greater flexibility to ensure EHB-benchmark plans reflect

evolving standards of care and are well-positioned to address long-standing health disparities.

We disagree with commenters’ assertion that removing the generosity standard will

jeopardize the connection between the EHB-benchmark plan update process and the ACA’s

typicality requirement. The typicality standard, which this rule amends but does not eliminate,

ensures that EHB-benchmark plans cannot offer a scope of benefits that is more generous than

the scope of benefits provided by the most generous typical employer plan available for

comparison, except to the extent supplementation is required to provide coverage within each

EHB category at § 156.110(a). As such, we believe that commenters’ concern about affordability

are largely disproportionate to the meaningful but modest increases the proposed changes

represent to the range of plan generosity available to States when seeking to update their EHB-

benchmark plans.

Nevertheless, we understand commenters’ concerns that the amendments to §§ 155.170

and 156.111 could technically allow States to game the scope of benefits of the available typical

employer plans in the State by mandating the coverage of benefits in large group market plans in

the State. While we recognize this as a technical possibility available to States, we are not

concerned that will in occur in practice. Based on our experience working with States and their

selection of EHB, we understand that States are already motivated to minimize the cost impacts

of additional benefit coverage in all markets, and thus do not believe it likely that States would

impose benefit mandates on their large group markets solely to manipulate the typical employer

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plans available for comparison when seeking to change their EHB-benchmark plan. For those

States that do enact benefit mandates on large group markets, our expectation is that States do so

in order to improve the coverage of benefits in such plans to accommodate changes in medical

evidence and scientific advancement, and not to specifically subvert Federal guidelines for

changing EHB-benchmark plans. This is especially the case given that, in our experience, State

legislatures typically enact mandated benefits on large group market plans with little

consideration for their impact on EHB. In any event, commenters did not provide any insight on

how one might distinguish between a State mandate on large group market plans designed to

improve coverage in such plans and a mandate designed to allow the State to game the scope of

benefits of the available typical employer plans in the State.

We believe that States understand that it is implicit that applications must be submitted in

good faith, and that States may not submit applications in good faith if a State mandates the

coverage of specific benefits in large group market plans with the specific intent to manipulate

the scope of benefits of the available typical employer plans. We are likely to suspect that a State

may be gaming its typical employer plans if it enacts a mandate for the coverage of specific

benefits in large group market plans and soon thereafter seeks to add similar benefits to its EHB-

benchmark plan by utilizing a large group market plan that is impacted by the State’s mandate as

the most generous typical employer plan. We caution States that attempt to update EHB-

benchmark plans in this manner that, pursuant to § 156.111(b)(2)(ii)(B)(1) and (4) as finalized in

this rule, a large group typical employer plan must, among other things, belong to a product that

has at least 10 percent of the total enrollment of the five largest large group health insurance

products in the State and be from a plan year beginning after December 31, 2013. We interpret

that these provisions work together to mean that, while a State can select a recent large group

CMS-9895-F 439

market plan as a typical employer plan, enough time must pass between the effective date of the

coverage of all large group market plans in the State for the State to make a determination that

the selected plan’s product has at least 10 percent of total enrollment of the five largest large

group health insurance products in the State. This means a State cannot select a large group plan

with an effective date that begins in the first months of the year that the State submits an

application to change EHB-benchmark in May. Thus, from a timing perspective, States are not

able to select a large group typical employer plan that is effective in the same year or that may be

effective in a year following the year the State submits an EHB-benchmark plan application.

Given this operational constraint, at this time, we do not believe it is necessary to propose a

cooldown period that would prevent a State from using a large group market plan that is

impacted by a State’s recent benefit mandate as the most generous typical employer plan, but

will consider such a cooldown period for potential future rulemaking if necessary. In addition,

we clarify the interaction between the amendments to § 156.111 and the amendment to §

156.122 that codifies that prescription drugs in excess of those covered by a State’s EHB-

benchmark plan are considered EHB. As explained in the proposed rule and in the preamble of

this final rule addressing § 156.122, when the amendment to § 155.170 is read in conjunction

with the proposed amendment to § 156.122, any prescription drug that an issuer covers in excess

of the State’s EHB-benchmark plan is EHB unless there is a State mandate requiring such

coverage. Accordingly, a State that mandates the coverage of prescription drugs in excess of a

State’s EHB-benchmark plan cannot consider coverage of the excess drugs as EHB for purposes

of completing the actuarial analyses required under § 156.111(e).

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Comment: One commenter asserted that any changes to a State’s EHB-benchmark plan

should also apply to the process by which a State selects a benchmark plan used to determine

EHBs in a Medicaid ABP or a standard health plan in the BHP.

Response: In accordance with implementing Medicaid regulations found at 42 CFR

440.347, ABPs must contain EHB coverage in accordance with the requirements set forth at 45

CFR part 156. Similarly, BHP regulations at 42 CFR 600.405, require standard health plan

coverage to include, at a minimum, EHB as described under §§ 156.110 and 156.122 regarding

prescription drugs. Therefore, the amendments to § 156.111 will impact how States define EHBs

that apply to the ABPs and the BHP, as we explained in the proposed rule.

c. Drug Formularies

We proposed to revise § 156.111(e)(3) to require States to submit a formulary drug list as

part of their documentation provided to change EHB-benchmark plans only if the State is

seeking to change its prescription drug EHB. Currently, we require States to submit a formulary

drug list if the State is selecting its EHB-benchmark plan using the option at current §

156.111(a)(3), even if the State is not seeking to change its prescription drug EHB. We stated in

the proposed rule that we understand that creation and submission of this formulary drug list

creates a significant amount of burden for the State. Since we can carry over the State’s existing

prescription drug EHB, as defined under § 156.122, without substantial input from the State if

the State is not seeking to change its prescription drug EHB, we proposed to revise §

156.111(e)(3) as specified to reduce the burden on States.

We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision as proposed though, for the reasons

CMS-9895-F 441

described earlier, we are finalizing this change for plan years beginning on or after January 1,

2026, rather than for plan years beginning on or after January 1, 2027, as was proposed. We

summarize and respond to public comments received on this proposal below.

Comment: Several commenters supported the proposal to require States to submit

formulary drug lists as part of an EHB-benchmark plan update application only if the State is

seeking to adjust its prescription drug EHB. Commenters indicated that requiring such

submission even in the absence of any intended prescription drug EHB changes was

unnecessarily burdensome and created an additional hurdle for States seeking to update their

EHB-benchmark plans. Conversely, commenters suggested that removing this requirement

except in cases where States are seeking to change their prescription drug EHB would facilitate

easier and more frequent EHB-benchmark plan updates.

Response: We agree with commenters’ assessment that requiring a formulary drug list

even in cases where States are not seeking to change their prescription drug EHB is unnecessary,

and a poor use of a State’s resources. We also agree that reducing the barriers for States seeking

to update their EHB-benchmark plans, in this way and others, may enable States to take up more

frequent EHB-benchmark plan updates.

Comment: A few commenters opposed the proposal to require formulary drug lists only

in cases where States seek to change their prescription drug EHB. However, these commenters

did not articulate a specific objection to this proposal. Rather, for example, some of these

commenters more generally asked that CMS retain the prior policy while also seeking to provide

detailed assistance to support States as they endeavor to update their EHB-benchmark plans.

Response: We continue to believe, as was affirmed by supporting commenters, that

requiring States to submit a formulary drug list even when they do not seek changes to their

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prescription drug EHB creates burdens that can be removed without negative impact to the

comprehensiveness of an EHB-benchmark plan application. As such, we believe that removing

this requirement will reduce the cost and time needed for States to apply to update their EHB-

benchmark plans while maintaining rigorous standards for the quality of such applications.

3. Provision of EHB (§ 156.115)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82597), we proposed to remove the regulatory prohibition at § 156.115(d) on issuers

from including routine non-pediatric dental services as an EHB.

In the EHB Rule, we finalized at § 156.115(d) that issuers of a plan offering EHB may

not include, among other services and benefits, routine non-pediatric dental services as an EHB,

even if the State’s current EHB-benchmark plan includes such services as covered benefits.

Section 1302(b)(2) of the ACA directs the Secretary, in defining the EHB, to ensure that they are

equal in scope to the benefits provided under a typical employer plan. In the proposed EHB Rule

(77 FR 70644), in support of the prohibition at § 156.115(d), we stated that routine non-pediatric

dental services are not typically included in the medical plans offered by employers and are often

provided as excepted benefits by the employer. In the proposed rule, we explained that we now

believe a more natural reading of Section 1302(b)(2) of the ACA is one that considers all the

benefits typically covered by employers. This means EHB should be equal in scope to the

benefits provided under a typical employer plan, regardless of whether such benefit is

historically considered a non-excepted “health benefit” or whether such benefit is “typically

covered” by an employer’s major medical plan. Given that oral health has a significant impact on

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overall health and quality of life,

270

and several commenters on the EHB RFI

271

advocated for

non-pediatric dental EHB coverage, we proposed specifically to remove the regulatory

prohibition on issuers from including routine non-pediatric dental services as an EHB. We

sought comment on whether similar changes should be proposed with regard to routine non-

pediatric eye exam services and long-term/custodial nursing home care benefits as well.

In the proposed rule, we stated it appears that routine non-pediatric dental services are

commonly covered as an employer-sponsored or other job-based benefit to a degree that

warrants removing the prohibition on their provision as an EHB. We cited various sources to

support this assertion, including KFF’s 2019 Employer Health Benefits Survey results, which

indicated that among firms offering health benefits in 2019, 59 percent of small firms (3-199

workers) and 92 percent of large firms (200 or more workers) offered a dental insurance program

to their workers separate from the health plan(s).

272

We solicited comment on this understanding

of the inclusion of routine non-pediatric dental services in employer-sponsored or other job-

based benefits.

273

Additionally, we stated that we believe prohibiting the inclusion of routine

non-pediatric dental services as an EHB on the basis that they are not often covered by typical

employer plans is a more restrictive reading of section 1302(b)(2) of the ACA than is warranted

by a plain reading of the statute. Section 1302(b)(2) of the ACA states that, in defining the EHB,

270

Spanemberg, J.C., Cardoso, J.A., Slob, E.M.G.B, & López-López, J. (2019). Quality of life related to oral health

and its impact in adults. Journal of Stomatology, Oral and Maxillofacial Surgery, 120(3), 234-239.

https://doi.org/10.1016/j.jormas.2019.02.004.

271

For example, see https://www.regulations.gov/comment/CMS-2022-0186-0567;

https://www.regulations.gov/comment/CMS-2022-0186-0586; and https://www.regulations.gov/comment/CMS-

2022-0186-0626.

272

KFF (2019, September 25). 2019 Employer Health Benefits Survey. https://www.kff.org/report-section/ehbs-

2019-section-2-health-benefits-offer-rates/#figure217.

273

Section 156.115(d) also currently prohibits routine non-pediatric eye exam services, long-term/custodial nursing

home care benefits, and non-medically necessary orthodontia as EHB. We did not propose to remove the prohibition

on including such services as EHB in the proposed rule; however, we solicited comment on the extent to which

employer-sponsored or other job-based benefits provide coverage for these services.

CMS-9895-F 444

the Secretary shall ensure that the scope of the EHB is equal to the scope of benefits provided

under a typical employer plan, as determined by the Secretary and as informed by a survey by

the Secretary of Labor of employer-sponsored or other job-based coverage to determine the

benefits typically covered by employers. We explained that in considering the benefits typically

covered by employers, this statutory section does not require the Secretary to consider only those

benefits provided in major medical plans. We further stated that it also does not require the

Secretary to consider only those benefits that are strictly “health benefits,” if such a term

excludes coverage of routine non-pediatric dental services. Therefore, we stated that we no

longer believe the prohibition on non-pediatric dental services as an EHB is warranted.

Accordingly, we proposed to remove the regulatory prohibition on including routine non-

pediatric dental services as an EHB at § 156.115(d).

We explained in the proposed rule that removing the prohibition on issuers from

including routine non-pediatric dental services as an EHB would remove regulatory and

coverage barriers to expanding access to routine non-pediatric dental benefits for those plans that

must cover EHB. We further stated that this would allow States to work to improve adult oral

health and overall health outcomes, which are disproportionately low among marginalized

communities such as people of color and people with low incomes.

274

We refer readers to the

proposed rule (88 FR 82597 through 82598) for further discussion of the impact of oral health on

overall health and quality of life.

We explained in the proposed rule that this proposed policy would also align with CMS’

Oral Health Cross Cutting Initiative, which aims to implement policy changes and consider

274

Northridge, M. E., Kumar, A., & Kaur, R. (2020). Disparities in Access to Oral Health Care. Annual review of

public health, 41, 513–535. https://doi.org/10.1146/annurev-publhealth-040119-094318.

CMS-9895-F 445

opportunities through existing authorities to expand access to oral health coverage.

275

Additionally, we stated that it would align with the request of several commenters on the EHB

RFI (87 FR 74097) for us to remove regulatory and coverage barriers to expanding access to

routine non-pediatric dental care.

In the proposed rule, we emphasized that the removal of this prohibition would not, by

itself, mean that routine non-pediatric dental services would be an EHB, even in States with an

EHB-benchmark plan that currently describes routine non-pediatric dental services as a non-

EHB covered benefit. We stressed that this proposal would not require any State to add such

services as an EHB, nor would we consider any existing language regarding routine non-

pediatric dental services in any State’s current EHB-benchmark plan to have the effect of adding

such services as an EHB. We stated that under this proposal, a State seeking to provide any

routine non-pediatric dental services as an EHB would be required to update its EHB-benchmark

plan to include such services as an EHB pursuant to § 156.111. We explained that if a State does

not update its EHB-benchmark plan to add coverage of routine non-pediatric dental services as

an EHB, then such services would not be an EHB, even if the current EHB-benchmark plan

document includes routine non-pediatric dental services.

We explained in the proposed rule that under this proposal, we would expect States, in

determining whether it is appropriate to update their EHB-benchmark plan to add routine non-

pediatric dental services as an EHB, to weigh the advantages of expanded dental services against

the challenges of providing such services. We refer readers to the proposed rule (88 FR 82598)

for further discussion.

275

CMS. (n.d.) Strategic Plan Cross-Cutting Initiatives. https://www.cms.gov/files/document/strategic-plan-

overview-fact-sheet.pdf.

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We noted that while section 1302(b)(4)(F) of the ACA permits a medical QHP sold on

the Exchange to omit coverage of pediatric dental EHB services if a SADP is offered through an

Exchange,

276

there is no statutory basis to extend this exception to routine non-pediatric dental

services. Thus, we stated that plans subject to an EHB-benchmark plan that includes routine non-

pediatric dental services as an EHB may not omit such coverage on the basis that a SADP

already provides such coverage through an Exchange.

We explained that this proposal, if finalized, may impact plans that are not directly

subject to the EHB requirements, such as self-insured group health plans and fully-insured group

health plans in the large group market, that are required to comply with the annual limitation on

cost sharing and restrictions on annual or lifetime dollar limits in accordance with applicable

regulations with respect to such EHBs.

277

We further explained that if a State updates its EHB-

benchmark plan to add coverage of routine non-pediatric dental services as an EHB and the

sponsor of a self-insured group health plan or fully-insured group health plan in the large group

market selects that EHB-benchmark plan, any routine non-pediatric dental services covered by

such a group health plan would generally be subject to the limitation on cost sharing and

restrictions on annual or lifetime dollar limits. However, we stated that if the sponsors of such

plans offer coverage of routine non-pediatric dental services through an excepted benefit under

26 CFR 54.9831–1(c)(3), 29 CFR 2590.732(c)(3), and 45 CFR 146.145(b)(3), including a

limited-scope dental plan, that benefit is generally excepted from complying with the group

market reforms, including the limitation on cost sharing and restrictions on annual or lifetime

dollar limits.

276

See section 1311(d)(2)(B)(ii) of the ACA for more information on offering SADP benefits.

277

See parallel requirements to § 147.126 at 26 CFR 54.9815-2711, and 29 CFR 2590.715-2711. Additionally,

section 2707(b) of the PHS Act, as added by the ACA, was incorporated by reference into section 9815 of the

Internal Revenue Code and section 715 of ERISA.

CMS-9895-F 447

Additionally, under 42 CFR 440.347, Medicaid ABPs authorized under section 1937 of

the Act are required to meet EHB standards. Under 42 CFR 600.405, in States that elect to

operate a BHP, the standard health plans are required to meet EHB standards. We explained that

under this proposal, States would be permitted to include routine non-pediatric dental services as

EHB for purposes of their ABPs or BHP standard health plans.

We sought comment on the proposal to revise § 156.115(d) to remove the regulatory

prohibition on issuers from including routine non-pediatric dental services as an EHB, and

whether other impacts should be considered, including the impact this proposal would have, if

finalized, on health insurance coverage in the individual, small group, and large group markets,

as well as self-insured plans.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision, as proposed, to remove the

regulatory prohibition at § 156.115(d) on issuers from including routine non-pediatric dental

services as an EHB. We also finalize that the changes at § 156.115(d) will be effective beginning

with PY 2027. Pursuant to this effective date, if a State wants to add a routine non-pediatric

dental benefit to its EHB-benchmark plan, the earliest it can do so is with the calendar year 2025

submission cycle, for applications due to CMS on or before May 7, 2025. Therefore, if CMS

approves the application, then the changes would be effective in the State for plan years

beginning on or after January 1, 2027. Further, we acknowledge that the annual limitation on

cost-sharing for Exchange-certified stand-alone dental plans (SADPs), which is updated and

published annually in the Letter to Issuers, is applicable to only to those services that are EHB

and only to SADPs. We summarize and respond to public comments received on the proposed

policy below.

CMS-9895-F 448

Comment: A majority of commenters supported this proposal. Many of these commenters

supported the proposal in part because of the important role oral health plays in overall health

and/or quality of life. In particular, several commenters noted the important impact oral health

has on chronic conditions including but not limited to diabetes, HIV/AIDS, and cancer. Several

commenters also mentioned the importance of preventive care. A few commenters mentioned the

connection between oral health and mental health. A few commenters also mentioned the

importance of treating the “whole member.”

Response: We strongly agree with the commenters that oral health has a significant

impact on overall health and quality of life.

278

We prioritize the development and

implementation of policies that promote the health and wellbeing of enrollees and will continue

to direct our efforts towards improving overall health and quality of life. We also agree with

commenters that it is crucial to treat the “whole member,” highlighting the importance of whole

person health

279

and the need for medical-dental integration.

280

We also recognize the

importance of preventive oral health care, the connection between oral health and chronic disease

management, and the connection between oral health and mental health.

Comment: Many commenters supported this proposal because of its potential to improve

oral health disparities and further health equity. More specifically, several commenters discussed

the potential for improving low-income/economic disparities, rural disparities, racial disparities,

and maternal health. On the other hand, one commenter disagreed that this proposal will lead to

equitable access because of anticipated poor uptake by States.

278

Spanemberg, J.C., Cardoso, J.A., Slob, E.M.G.B, & López-López, J. (2019). Quality of life related to oral health

and its impact in adults. Journal of Stomatology, Oral and Maxillofacial Surgery, 120(3), 234-239.

https://doi.org/10.1016/j.jormas.2019.02.004.

279

https://www.nccih.nih.gov/health/whole-person-health-what-you-need-to-know.

280

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6618181/.

CMS-9895-F 449

Response: We strongly agree with the commenters who stated that this proposed policy

has the potential to improve oral health disparities and achieve health equity. As we stated in the

proposed rule (88 FR 82598), this amendment allows States greater flexibility to add benefits to

improve non-pediatric oral health and overall health outcomes, which are disproportionately low

among marginalized communities such as people of color and people with low incomes.

Therefore, this policy will promote health equity by addressing non-pediatric oral health

disparities and improving the health outcomes of vulnerable populations. We also agree with the

specific oral health disparities that commenters highlighted – pertaining to economic disparities,

rural disparities, racial disparities, and maternal health – which this policy can help address. We

disagree with the comment that this policy will not lead to equitable access because of poor

uptake by States, particularly in light of the other proposals finalized in this rule to alleviate State

burden in assessing the defrayal of State-mandated benefits and to change EHB-benchmark

plans. Additionally, given the feedback we have received from States and relevant stakeholders

on the EHB RFI and proposed 2025 Payment Notice, we believe States will add routine non-

pediatric dental benefits as an EHB, and this will help reduce oral health disparities and improve

health equity within these States’ populations. This final policy provides States the option to add

coverage of non-pediatric dental benefits as EHB and removes a barrier to this coverage that

previously existed.

Comment: A few commenters requested to delay the finalization of this policy and

requested the effective date be no sooner than PY 2027.

Response: We did not directly specify an effective date for this policy in the proposed

rule; therefore, by default these changes would have become effective 60 days after the

publication of the final rule in the Federal Register. We sought comment on the impact of this

CMS-9895-F 450

policy, acknowledging that issuers would need sufficient lead time in order to successfully

operationalize it, and sought comment on whether other impacts should be considered. We

acknowledged this policy is a departure from the prior policy and that issuers in States that

choose to update their EHB-benchmark plan to include non-pediatric dental services may need to

establish new networks of dental providers and address other operational needs to implement this

change. Taking into consideration the comments received, we are finalizing that the changes at §

156.115(d) will be effective beginning with PY 2027. Pursuant to this effective date, a State

seeking to add routine non-pediatric dental in PY 2027 would need to submit an EHB-

benchmark plan application under § 156.111 by the EHB-benchmark plan update deadline of

May 7, 2025, which would then be effective in the State for plan years beginning on or after

January 1, 2027. We are finalizing this date with a change in the regulation text to account for

this effective date.

We do not believe further delay of these changes is necessary. In PY 2024, approximately

9.9 percent of QHPs on the FFEs included coverage for some degree of routine non-pediatric

dental services as non-EHB; thus, it is not unprecedented for health plans, including QHPs, to

cover routine non-pediatric dental services as non-EHB. Accordingly, we expect that this

experience will mitigate any operational challenges that States may face when adding such

services as EHB.

Further, State EHB-benchmark applications are due approximately 18 months before any

change in EHB would be realized in plans. Before these applications are due, States have

typically devoted several months or years interacting with interested parties in the State to

understand what changes should be made to the EHB-benchmark plans, and what the impact of

those changes would be. Thus, we expect ample time for issuers to operationalize the provision

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of routine non-pediatric dental services as EHB. Given that the finalization of this amendment

would only begin to impact coverage beginning on January 1, 2027 in those States that might

submit EHB-benchmark plan applications during the calendar year 2025 cycle, there will be

sufficient lead time to allow issuers to build the infrastructure necessary to administer the routine

non-pediatric dental benefits that States add as EHB. If a State is considering adding routine non-

pediatric dental benefits as an EHB but believes it would be beneficial to take more time to

assess the potential cost, operational, and other implications of the policy for their State, the State

can wait to add this benefit to their EHB-benchmark plan until it is ready to do so.

Comment: The majority of commenters agreed with our reinterpretation in the proposed

rule of the typical employer plan provision at section 1302(b)(2) of the ACA as one that

considers all the benefits typically covered by employers, regardless of whether such benefit is

historically considered a “health benefit” or whether such benefit is “typically covered” by an

employer's major medical plan or, for example, by a limited scope excepted benefits plan. As

justification for their support of this reinterpretation, these commenters explained that the

statutory text requires HHS to consider the benefits typically covered by employers in employer-

sponsored coverage, without specifying whether that coverage is limited to the coverage

provided in major medical plans. As a result, these commenters agreed that the previous

interpretation was overly restrictive and unnecessarily denied access to basic and necessary

services as EHB.

However, several commenters disagreed with HHS’s reinterpretation of this provision.

These commenters asserted that the statutory text limits the EHB to those provided under a

singular typical employer plan, and not all of the benefits provided by an employer under a

combination of plans. Some of these commenters asserted that the ACA specifically excludes

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routine non-pediatric dental services, routine non-pediatric eye exam services, and long-

term/custodial nursing home care benefits from consideration as EHB. In these commenters’

view, HHS’s reinterpretation would impermissibly allow for the inclusion of any employer

benefit as EHB, including employee assistance programs, short-term disability, critical illness,

group life, legal assistance, and 401(k) benefits. These commenters also explained that, except

for pediatric oral and vision services, all of the EHB categories explicitly mentioned in statute

refer to benefits that have historically been considered “health benefits” that are typically

covered under major medical plans and not excepted benefit plans. One commenter asserted that

HHS’s reinterpretation would undermine statutory intent that the EHB be “essential benefits”, as

it would include benefits that employers do not deem necessary to include in their major medical

plan, but instead offer as a “voluntary add-on” for those employees who may desire them.

Additionally, some commenters asserted that the majority of employers actively decide to

provide routine dental services through a standalone dental plan rather than through a major

medical plan.

Response: The ACA does not exclude routine non-pediatric dental services, routine non-

pediatric eye exam services, and long-term/custodial nursing home care benefits from

consideration as EHB; only the existing regulation at § 156.115(d), which this final rule now

amends to remove the exclusion of routine non-pediatric dental services, prohibits health plans

from covering such services as EHB. The statutory term “a typical employer plan” is ambiguous

with regard to whether it references a single major medical plan, or the entire suite of benefits

provided by the employer, and our updated interpretation is supported by the statutory directive

for HHS to conduct a survey of employer-sponsored coverage to determine the benefits typically

covered by employers without distinguishing whether this coverage is provided through one or

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more plans. Given this ambiguity, we do not agree with comments that the statutory text must be

read to exclude coverage typically provided by employers through plans that are offered in

addition to major medical coverage.

We disagree with commenters that employer-sponsored dental benefits cannot be

considered an EHB simply because of the manner of the contractual arrangements by which

employers provide benefits to their employees. The impact of routine dental care on overall

health and quality of life is not in question, nor is the fact that employers clearly view dental

benefits as an essential part of the entire set of health benefits they provide for employees, given

how many employers provide dental benefits to their employees.

281

That employers happen to

provide those dental benefits through a separate contractual agreement seems a tenuous

justification for prohibiting States from allowing adults to access as EHB something that can be

as basic and impactful to overall health as routine dental care.

Further, we disagree with those commenters that claimed that employers have a choice

whether to provide routine dental services through their major medical plan or through a

standalone dental plan. We understand that, in many cases, the benefits that employers may

select to cover for employees is contingent on the decisions made by health insurance companies

on what benefits they want to make available for the employer’s selection.

We are not persuaded by commenters that insist the intent of the statute requires HHS to

define the EHB in accordance with “benefits that have historically been considered a health

benefit.” Many of the core tenets that support our modern understanding of health insurance as

providing coverage of items and services are less than a hundred years old, and there is no

281

As these commenters pointed out, 91 percent of employers offer dental coverage that is separate from the

coverage provided through their health plans. Source: Gary Claxton, Matthew Rae, Aubrey Winger, and Emma

Wager, Employer Health Benefits: 2023, Kaiser Family Foundation, 2023, page 55 (https://files.kff.org/attachment/

Employer-Health-Benefits-Survey-2023-Annual-Survey.pdf)

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universally understood set of essential items and services; even the ACA’s statutory text

recognizes that HHS’s definition of the EHB need not be limited to the enumerated categories of

EHB (“...the Secretary shall define the essential health benefits, except that such benefits shall

include at least the following general categories and the items and services covered within the

categories…” (emphasis added)).

The availability of benefits in health plans is always evolving. As a very limited example,

consider that the very first health plans in the 1920s and 1930s only provided coverage for

hospitalization, and coverage for professional services began later in the 1930s.

282

Psychiatric

care first began to be covered following World War II.

283

Then, the first efforts to create parity

between health benefits and mental health benefits began during President John F. Kennedy’s

administration with the requirement of the Federal Employees Health Benefits Program

(FEHBP) to cover psychiatric illnesses at a level equivalent to general medical care.

284

Benefits

for the elderly, retired people, and those with disabilities or low-income became available

through Medicare and Medicaid in the 1960s. Coverage for treatment of substance use disorders

rose to prominence in the 1970s and 1980s. Medicare began covering hospice care in the early

1980s, the Emergency Medical Treatment and Active Labor Act (EMTALA) was passed in 1986,

and Medicare Parts C and D were introduced in the early 2000s before the ACA was passed in

2010.

285

These are just some of the examples of how benefits have expanded over the years,

especially when such expansions have accounted for changes in medical evidence or scientific

advancement. We therefore disagree with commenters’ statement that there exists a set of

282

Institute of Medicine (US) Committee on Employment-Based Health Benefits; Field MJ, Shapiro HT, editors.

Employment and Health Benefits: A Connection at Risk. Washington (DC): National Academies Press (US); 1993.

2, Origins and Evolution of Employment-Based Health Benefits. Available from:

https://www.ncbi.nlm.nih.gov/books/NBK235989/.

283

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2950754/.

284

Id.

285

https://www.kff.org/wp-content/uploads/2011/03/5-02-13-history-of-health-reform.pdf.

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“benefits that have historically been considered a health benefit” and disagree with commenters’

concerns that it is unreasonable or unprecedented to now include routine non-pediatric dental

care in this evolution.

Regardless of how one interprets statutory text, one intent of the ACA with regard to the

EHB is clear – that enrollees should have access to a minimum set of benefits that take into

account the health care needs of diverse segments of the population.

286

Given that routine dental

services consist of relatively basic items and services rendered by licensed dentists and allied

health professionals to improve the health of an individual, it is reasonable for a State to

determine that the provision of such benefits among this minimum set of benefits as EHB is

necessary to accommodate the health care needs of its population.

We also note that commenters opposing the policy made no argument regarding the

treatment of non-routine non-pediatric dental care, such as treatment for natural teeth or dental

prostheses as a result of an injury, which are not currently prohibited as EHB by § 156.115(d).

Such non-routine dental benefits have long been included as EHB, given that they are among the

covered benefits described in the vast majority of EHB-benchmark plans. Thus, it is hardly

unprecedented for at least some non-pediatric dental benefits to be covered as EHB by health

insurance plans.

Comment: One commenter explained that HHS’s reinterpretation of the typical employer

plan provision conflicts with the typicality standard at § 156.111(b)(2) that limits the plans

available for the typicality analysis to major medical plans. This commenter also asserted that the

proposal failed to grapple with the reliance interests engendered by the interpretation that the

“typical employer plan” is a major medical plan.

286

See section 1302(b)(4)(C) of the ACA.

CMS-9895-F 456

Response: In the 2019 Payment Notice, we added § 156.111 to give States additional

options for changing EHB-benchmark plans and implemented the typicality standard with an

actuarial approach. As implemented, the typicality standard requires the State’s proposed EHB-

benchmark plan to provide a scope of benefits equal to the scope of benefits provided under a

typical employer plan, in accordance with section 1302(b)(2) of the ACA. At § 156.111(b)(2) we

selected as the specified examples of a typical employer plan: the selecting State's 10 base-

benchmark plan options established at § 156.100 and available for the selecting State's selection

for the 2017 plan year, and a set of large group health insurance plans in the State, provided

certain requirements are met under current § 156.111(b)(2)(i)(B)(1)-(4). In order for a State to

select one of these large group health insurance plans as the typical employer plan for the

typicality standard, the following requirements must be met: (1) the plan must have at least 10

percent of the total enrollment of the five largest large group health insurance products in the

State; (2) the plan must provide minimum value, as defined under § 156.145; (3) the plan’s

benefits must not be excepted benefits, as established under § 146.145(b) and § 148.220; and (4)

the benefits in the plan must be from a plan year beginning after December 31, 2013.

In the 2019 Payment Notice (83 FR 17012), we stated that “a State’s EHB-benchmark

plan may not have the exact same benefits and limits as the typical employer plan the State

identifies under this policy.” However, this actuarial approach, which restricts the range of

typical employer plans to which an EHB-benchmark plan can be compared, coupled with the

requirement that the EHB-benchmark plan cover items and services in each of the 10 specified

categories of EHB, assures that the scope of benefits of the EHB-benchmark plan is equal to that

of a typical employer plan.

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Restricting the set of group health plans for the typicality standard to major medical plans

merely establishes this actuarial benchmark for State EHB selections in a manner that balances

State flexibility, ease of implementation, and a limitation on the range of what can be considered

a typical employer plan.

When we originally implemented § 156.115(d) to prohibit issuers from covering routine

non-pediatric dental services, routine non-pediatric eye exam services, long-term/custodial

nursing home care benefits, and non-medically necessary orthodontia as EHB, we did so based

on a finding that “they are not typically included in medical plans offered by a typical

employer.” However, this finding did not conclude that such benefits are never included in such

plans. In addition, such a finding only justifies the prohibition of designating certain benefits as

EHB; it does not prohibit a State from including such benefits in their typicality analysis, to the

extent such benefits are present among the set of typical employer plans designated by HHS. Put

another way, nothing in regulation prohibits a State from including the quantitative value of

routine non-pediatric dental services, routine non-pediatric eye exam services, long-

term/custodial nursing home care benefits, or non-medically necessary orthodontia in its

typicality analysis. Rather, we simply did not include non-major-medical benefits in the selected

range of typical employer plans for ease of comparability.

Comment: Many commenters supported this proposal because it promotes State

flexibility. One commenter explained that they are supportive of proposals that offer additional

flexibility to States and allow States to make decisions that best meet the needs of consumers.

Another commenter explained that determining exactly which dental benefits should include

EHB protections should be based on State needs and preferences. Several other commenters

believed HHS should require all States to include routine non-pediatric dental benefits as an

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EHB, potentially in the ambulatory or preventive services EHB categories. These commenters

argued that given HHS’s interpretation of non-pediatric dental services as commonly included as

part of typical employer-sponsored plans, adding non-pediatric dental benefits as a required

coverage category under EHB is the logical next step.

Response: We agree with the commenters who mentioned that this proposal promotes

State flexibility. This proposal aligns with CMS’ State-based approach to EHB-benchmark plans

and the ability for States to update them, in that, like any other benefit, States would have the

option to add routine non-pediatric dental services as an EHB. We stress that the finalization of

this proposal does not require any State to add such services as an EHB, nor would we consider

any existing language regarding covered routine non-pediatric dental services in any State’s

current EHB-benchmark plan to have the effect of automatically adding such services as an EHB

without further State action. We are therefore not adopting those commenters’ suggestions to

require the coverage of routine non-pediatric dental services as an EHB.

Comment: Many commenters raised potential operational impacts associated with States

adding routine non-pediatric dental as EHB. Several commenters expressed that such an addition

would present operational difficulties, including establishing new administrative and IT

capabilities, and developing networks of dental providers. A few commenters expressed concern

over issues with Current Dental Terminology (CDT) codes (for example, issuers’ lack of

experience with or infrastructure working with CDT codes, which may lead to cost concerns,

additional premiums, and an overall increase in health care spending). A few commenters also

requested to delay the finalization of this policy and requested the effective date be no sooner

than PY 2027. A few commenters expressed concern regarding the impact on stand-alone dental

premiums sold on the Exchange if routine non-pediatric dental benefits were to be included in a

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State’s EHB-benchmark plan, and potential disparities between dental plan premiums on- versus

off-Exchange. Moreover, many commenters questioned the impact this policy would have on

other Federal provisions, including but not limited to provisions addressing: AV, MLR, network

adequacy, APTC, and the premium adjustment percentage index (PAPI). One commenter

suggested a separate dental MLR for dental EHB.

Response: We acknowledge the operational concerns raised by commenters. As we stated

in the proposed rule (88 FR 82598), we expect States to weigh the advantages of expanded

dental services against the challenges of providing such services. We also acknowledged the

need for States to consider that issuers may need to establish new networks of dental providers

and that some plans may not currently have infrastructure or experience working with CDT

codes. We agree that, for health plans that do not directly reimburse using dental codes, the

transition to new coding would require investments in technology, staff, and internal expertise.

We also agree this may lead to additional premiums and an overall increase in health care

spending. However, as we emphasized in the proposed rule, a contract arrangement with issuers

of stand-alone dental plans to administer these services is an option that issuers could pursue,

which could mitigate some of the need to establish new administrative and IT capabilities. We

emphasize that for States planning to update their EHB-benchmark plan to include routine non-

pediatric dental benefits, it will be up to those States to work with issuers and other interested

parties to determine to what extent operational challenges exist and whether it is feasible to

overcome such challenges. In addition, any State considering the addition of such benefits should

specifically seek feedback from interested parties on operational challenges as part of the public

notice and an opportunity for public comment requirement at § 156.111(c).

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We do not disagree with commenters that this policy may be disruptive to those issuers in

States that add routine non-pediatric dental services as EHB; indeed, the intent of this policy was

to effect a change in the availability of high-priority, high-impact, and relative low-cost benefits

as EHB in order to improve the overall health of large segments of the population, and we cited

several of these challenges in the proposed rule. We are sympathetic to the upfront costs that

may be incurred by issuers to create the infrastructure necessary to administer routine dental

benefits, or to contract with third parties to administer such a benefit on the health plan’s behalf.

However, we believe action is justified given the likelihood that it results in significant public

health improvements. In addition, we expect States to take these burdens into account in

determining whether to add routine non-pediatric dental services as EHB.

We also do not agree with the commenters’ concerns regarding this amendment’s impact

on stand-alone dental premiums sold on the Exchange if a State adds routine non-pediatric dental

benefits as EHB, and potential disparities between dental plan premiums on- versus off-

Exchange. Under §§ 146.145(b)(3) and 148.220(b)(1), limited-scope dental plans are considered

excepted benefits that are not required to provide the EHB. Thus, if a State adds routine non-

pediatric dental benefits as EHB, stand-alone dental plans are not required to cover such benefits,

whether on- or off- Exchange.

We also acknowledge the commenters that questioned the impact this policy will have on

other Federal provisions, including but not limited to provisions addressing AV, MLR, network

adequacy, APTC, and PAPI. This final provision will not affect these programs any differently

than any other benefits that a State adds to its EHB-benchmark plan, since States that seek to add

routine non-pediatric dental services will need to adhere to the same requirements for updating

their EHB-benchmark plans as they would for other benefits. We do encourage States adding

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routine non-pediatric dental services to ensure that issuers’ networks include sufficient dental

providers so that enrollees can access the benefit.

Comment: A few commenters explained that the risk profile of adults seeking dental care

poses challenges for issuers, including the potential for adverse selection. This commenter

expressed that enrollees could delay care until they have coverage, seek care for expensive

procedures, and then drop coverage when the work is complete.

Response: We do not foresee that adverse selection will be a significant problem and

would like to emphasize that the ACA has established means to help prevent unchecked adverse

selection, including the risk adjustment program, premium subsidies, and limited enrollment

windows. Specifically, enrollees must enroll during open enrollment or a special enrollment

period. There is nothing specific or unique to dental coverage that would cause an enrollee to

drop coverage midyear, other than possible pent-up demand for services due to the fact that

coverage as EHB was previously not possible. However, based on prior experience under the

ACA, and given that States will have to make difficult and careful decisions regarding which

benefits to add given the regulatory requirements for EHB-benchmark plan updates, we do not

believe that the addition of benefits will cause significant adverse selection. Additionally,

adverse selection has not been a significant concern in prior EHB-benchmark plan applications.

Comment: A few commenters argued that CMS should allow for standalone non-pediatric

dental plans to provide benefits as EHB on the Exchanges.

Response: Although we appreciate commenters’ request to allow standalone non-

pediatric dental plans to provide benefits as EHB and to permit such plans on the Exchanges, as

explained in the proposed rule, there is no statutory authority to do so. While section

1302(b)(4)(F) of the ACA permits a medical QHP sold on the Exchange to omit coverage of

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pediatric dental EHB services if an SADP is offered through an Exchange,

287

there is no

statutory basis to extend this exception to routine non-pediatric dental services. Non-pediatric

dental services would fall under ambulatory patient services, § 1302(b)(1)(A), and not pediatric

services, § 1302(b)(1)(J). Thus, plans subject to an EHB-benchmark plan that include routine

non-pediatric dental services as an EHB may not omit such coverage on the basis that a

standalone dental plan already provides such coverage through an Exchange.

Comment: Many commenters noted cost impacts to consider when implementing this

proposal. More specifically, many commenters expressed cost concerns, including the cost

impacts the proposal could have on networks. Commenters noted this includes outsized impacts

on small group health plans. These commenters explained that this proposal could result in

issuers leaving the market. A few commenters expressed concerns over lack of cost controls if

non-pediatric dental is an EHB. For example, these commenters expressed concern that no

annual or lifetime coverage limits would apply to non-pediatric dental services if they were to be

added as an EHB, which could drive up prices. One commenter noted that increased costs would

have implications for QHPs in the individual and small group markets, including making it more

difficult to offer standalone dental benefits at a price that is attractive to consumers, making

QHPs with embedded dental benefits less affordable for consumers who do not qualify for a

premium subsidy, and increasing the cost of Federal subsidies. Another commenter encouraged

CMS to carefully weigh the benefit of expanded access to routine non-pediatric dental benefits

versus the impact increased premiums may have on coverage retention. On the other hand, a few

commenters mentioned the positive impact this policy could have on reducing health care costs.

A few commenters explained how routine dental care may yield downstream savings in overall

287

See section 1311(d)(2)(B)(ii) of the ACA for more information on offering SADP benefits.

CMS-9895-F 463

health care expenditures given its potential to impede disease burden. Another commenter also

explained how emergency room department visits are very costly, and how if oral health

problems are diverted to local dentist offices, large savings would ensue.

Response: We acknowledge the cost concerns raised by commenters, including the cost

impacts it could have on networks. As we stated in the proposed rule (88 FR 82598), we expect

States to weigh the advantages of expanded dental services against the challenges of providing

such services. We also mentioned that States should consider the ability of plans to add such

services as an EHB, which, as with pediatric oral care, may require plans to establish new

networks of dental providers. Moreover, we mentioned that given the potential need for plans to

establish new networks of dental providers, issuers could comply with this policy by contracting

with issuers of standalone dental plans to administer these services, as long as it is seamless to

the enrollee. This contracting arrangement would not be required, but it is permitted as an option.

Furthermore, we agree with the commenters who stated that this policy would reduce health care

costs by yielding downstream savings in overall health care expenditures and reducing costly

emergency room department visits for dental care. We believe that the required public comment

period that States must have when proposing to update their EHB-benchmark plans will become

even more important considering this policy change. We also encourage States to work with

issuers and other affected parties in their States before, during, and after applying to change their

EHB-benchmark plan. Despite the prohibition on annual and lifetime dollar limits for benefits

that are EHB and that States can choose how comprehensive the routine non-pediatric dental

EHB will be, we are not swayed that this final policy will significantly increase premiums, and

consequently, meaningfully increase Federal outlays, given that States’ ability to increase benefit

generosity is limited pursuant to the policy finalized at § 156.111(b)(2)(i). As we finalized in this

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final rule at § 156.111(b)(2)(i), we are revising the typicality standard so that the scope of

benefits of a typical employer plan in a State would be defined as any scope of benefits that is as

or more generous than the scope of benefits in the State’s least generous typical employer plan,

and as or less generous than the scope of benefits in the State’s most generous typical employer

plan. Therefore, a State interested in adding routine non-pediatric dental services as an EHB may

need to consider removing and/or adjusting other benefits to make room for the non-pediatric

dental services to fit into the scope of benefits within the State, to ensure the scope of benefits

falls within the typicality range.

Comment: A few commenters responded to our solicitation for comment on the potential

impact of this proposed policy on health insurance coverage in the large group and self-insured

markets and on grandfathered plans. A few of these commenters expressed concern over the

unintended cost impacts this policy would have on these groups, given that the prohibition in

PHS Act section 2711 on imposing annual and lifetime dollar limits on EHB also generally

applies to self-insured group health plans, large group market health plans, and grandfathered

health plans. In particular, one commenter expressed concern that the proposal may have an

outsized impact on employer-sponsored coverage that may be subject to greater than anticipated

costs, given such coverage is not subject to risk adjustment. Another commenter expressed

concern that increasing costs for those employers that do choose to include non-pediatric dental

benefits in their major medical plans is not a desirable result.

Response: Self-insured group health plans, large group market health plans, and

grandfathered group and individual health insurance coverage are not required to provide

coverage of EHB. Accordingly, even where a State updates its EHB-benchmark plan to include

routine non-pediatric dental coverage as EHB, self-insured group health plans, large group

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market health insurance coverage, and grandfathered plans would not be required to cover such

services. We also note that, as highlighted in the preamble to the proposed rule, if a sponsor of a

self-insured group health plan, large group market health insurance coverage, or grandfathered

plan offers coverage of routine non-pediatric dental services through an excepted benefit under

26 CFR 54.9831–1(c)(3), 29 CFR 2590.732(c)(3), and 45 CFR 146.145(b)(3), including a

limited-scope dental plan, that benefit is generally excepted from complying with the group

market reforms, including the annual limitation on cost sharing and restrictions on annual or

lifetime dollar limits. Therefore, a self-insured group health plan, large group market health

insurance coverage, or grandfathered plan may only be impacted by the finalization of this policy

if it covers routine non-pediatric dental services. For the purpose of the prohibition in PHS Act

section 2711 on imposing annual and lifetime dollar limits on EHB, a plan or issuer that is not

required to provide EHB must define EHB in a manner consistent with an EHB-benchmark plan

selected by a State in accordance with § 156.111, including coverage of any additional required

benefits that are considered EHB consistent with § 155.170(a)(2).

288

Therefore, a plan sponsor

could select an EHB-benchmark plan in a State that has not chosen to update its EHB-benchmark

plan to include routine non-pediatric dental services as EHB.

However, section 2707(b) of the PHS Act requires all non-grandfathered group health

plans, including non-grandfathered self-insured and non-grandfathered insured small and large

group market health plans, to limit cost sharing imposed by the plan on EHB in accordance with

the annual limitation on cost sharing, and section 2711(a)(1)(A) and (B) of the PHS Act

generally prohibits all group health plans and group or individual health insurance coverage from

establishing annual or lifetime dollar limits on the dollar value of EHB for any participant,

288

26 CFR 54.9815-2711(c)(2), 29 CFR 2590.715-2711(c)(2), and 45 CFR 147.126(c)(2).

CMS-9895-F 466

beneficiary, or enrollee.

289

Previous guidance has stated that the Departments interpret PHS Act

section 2707(b) as requiring all non-grandfathered group health plans to comply with the annual

limitation on out-of-pocket maximums described in section 1302(c)(1) of the ACA,

290

and that

the Departments will consider self-insured group health plans or large group market health plans

to have used a permissible definition of EHB under section 1302(b) of the ACA if the definition

is one that is authorized by the Secretary of HHS.

291

Thus, for purposes of compliance with PHS Act sections 2707(b) and 2711, as applicable,

a self-insured group health plan, large group market health insurance coverage, or grandfathered

plan that selects an EHB-benchmark plan from a State that has updated its EHB-benchmark plan

pursuant to this finalized policy to include routine non-pediatric dental services as an EHB would

be required to treat routine non-pediatric dental services as EHB as they would with any other

benefit that is an EHB in the selected benchmark plan. However, if the selected plan is from a

State that has not updated its EHB-benchmark plan to include routine non-pediatric dental

services as EHB, then those plans and issuers would not be required to treat routine non-pediatric

dental services as EHB for purposes of complying with the annual limitation on cost sharing in

PHS Act section 2707(b) or the prohibition in PHS Act section 2711 on imposing annual and

lifetime dollar limits on EHB, as applicable, even if such benefits appear in the EHB-benchmark

plan. As we stated in the proposed rule (88 FR 82598), we would not consider any existing

language regarding routine non-pediatric dental services in any State’s current EHB-benchmark

plan to have the effect of adding such services as an EHB. Rather, States interested in covering

289

The provisions of PHS Act section 2711 apply to both grandfathered and non-grandfathered health plans, except

the annual dollar limits prohibition does not apply to grandfathered individual health insurance coverage.

290

FAQs Part XII, Q2 (February 20, 2013); see also the EHB Rule (78 FR 12835 through 12837).

291

FAQs Part XVIII, Q2 (January 9, 2014); see also the 2019 Payment Notice (83 FR 17013).

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routine non-pediatric dental services as EHB must proactively update their EHB-benchmark

plans pursuant to § 156.111 to add such benefits.

We acknowledge that this policy could impact non-grandfathered self-insured group

health plans, and large group market health insurance coverage that cover routine non-pediatric

dental benefits with respect to their compliance with the annual limitation on cost sharing and

this policy could impact all such plans, as well as grandfathered health plans, with respect to the

prohibition on annual or lifetime dollar limits; however, we believe the advantages of this policy

outweigh the disadvantages. Particularly, we believe the advantages – including improving

access to routine non-pediatric dental care, reducing oral health disparities, improving health

equity, and improving overall health and quality of life in these markets– are worth the potential

cost or operational impacts to health plans.

Comment: Several commenters agreed with the proposal to remove the prohibition on

including routine non-pediatric dental services as EHB. These commenters noted that the

proposal would also apply to Medicaid ABPs and BHP standard health plans.

Response: We appreciate these comments and agree with their understanding of the

applicability of this amendment to Medicaid ABPs and BHP standard health plans.

Comment: Several commenters responded to our solicitation for comment on whether

similar changes should be proposed regarding the removal of the prohibition at § 156.115(d) on

issuers from including routine non-pediatric eye exam services and long-term/custodial nursing

home care benefits. Several commenters also responded to our solicitation for comment on our

updated understanding on the inclusion of routine non-pediatric dental services in employer-

sponsored or other job-based benefits. As we stated in the proposed rule (88 FR 82597), our

updated understanding is that routine non-pediatric dental services are commonly covered as an

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employer-sponsored or other job-based benefit to a degree that warrants removing the

prohibition on their provision as an EHB.

Response: For the reasons described in this section, we are finalizing removing routine

non-pediatric dental services from the list of benefits at § 156.115(d) that a plan cannot include

as EHB. As for the remaining list of benefits in § 156.115(d), we appreciate these comments and

will continue to consider them for potential future rulemaking.

4. Prescription Drug Benefits (§ 156.122)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82599), we proposed revisions to certain EHB prescription drug benefit requirements at §

156.122, and requested comments on a possible future policy proposal, as further discussed

below.

a. Classifying the Prescription Drug EHB

In the proposed rule, we requested information to confirm or further expand our

understanding of the risks and benefits associated with replacing the reference to the USP MMG

with a reference to the USP DC as a means of classifying the drugs required to be covered as

EHB under § 156.122(a)(1). We thank commenters for their feedback and will take these

comments into consideration if we pursue potential updates for future benefit years through

notice and comment rulemaking.

b. Coverage of Prescription Drugs as EHB

We proposed to amend § 156.122 to codify that prescription drugs in excess of those

covered by a State’s EHB-benchmark plan are considered EHB. We stated that, as a result, they

would be subject to the annual limitation on cost sharing and the restriction on annual and

lifetime dollar limits, unless the coverage of the drug is mandated by State action and is in

CMS-9895-F 469

addition to EHB pursuant to § 155.170, in which case the drug would not be considered EHB.

When § 155.170 is read in conjunction with the proposed amendment to § 156.122, this means

that any prescription drug that an issuer voluntarily covers in excess of the minimum number of

drugs required to be covered under the State’s EHB-benchmark plan is EHB unless there is a

State mandate requiring such coverage.

In the EHB Rule (78 FR 12845), in response to commenter concerns regarding how plans

must address new prescription drugs that come onto the market during the course of a plan year

pursuant to § 156.122, we stated that while plans must offer at least the greater of one drug for

each USP category and class or the number of drugs in the EHB-benchmark plan, plans are

permitted to go beyond the number of drugs offered by the EHB-benchmark plan without

exceeding EHB. We clarified in the preamble of the 2016 Payment Notice (80 FR 10749) in a

discussion of requirements related to § 156.122(c) that this meant that if the plan is covering

drugs beyond the number of drugs covered by the EHB-benchmark, all prescription drugs in

excess of the drug count standard at § 156.122(a) are considered EHB, such that they are subject

to EHB protections and must count towards the annual limitation on cost sharing.

In the proposed rule, we stated that we believed that this policy as noted in both the EHB

Rule and preamble of the 2016 Payment Notice was clearly understood by issuers until we

received comments in response to the EHB RFI that included a significant number of requests

from interested parties to clarify this policy in rulemaking. In addition, a small number of

commenters in response to the EHB RFI noted concerns regarding some plans that have stated

that some prescription drugs in excess of the drug count standard at § 156.122(a) are not EHB

and have developed programs to provide some drugs as “non-EHB,” outside of the terms of the

rest of the coverage. We sought comment regarding how widespread these practices are.

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To resolve these concerns, we proposed to amend § 156.122 to add paragraph (f), which

would explicitly state that prescription drugs in excess of the EHB-benchmark plan are

considered EHB. We stated that, to the extent that a health plan covers prescription drugs, in any

circumstance, in excess of the EHB-benchmark plan, these drugs would be considered an EHB

and would be required to count towards the annual limitation on cost sharing. We explained that

this policy would apply unless the coverage of the drug is mandated by State action and is in

addition to EHB pursuant to § 155.170, in which case the drug would not be considered EHB.

We noted that we had been made aware of a few plans within the individual and small

group markets that have either developed or are offering programs that provide some drugs as

“non-EHB.” We stated that, as we had only recently begun receiving comments from interested

parties regarding this issue, we did not believe that there are a large number of plans that offer

these types of programs; however, we sought comment regarding how widespread these

programs are.

We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision with a technical edit to the regulation

text to clarify the entire scope of cost-sharing requirements that apply to these prescription drugs.

In the proposed rule, we proposed that the prescription drugs in excess of those covered by a

State’s EHB-benchmark plan are considered EHB, and thus subject to both the annual limitation

on cost sharing and the restriction on annual and lifetime dollar limits. The proposed regulation

text at § 156.122(f), however, referenced the annual limitation on cost sharing at § 156.130 as the

only applicable cost-sharing requirement. We are finalizing the regulation text to reflect that

prescription drugs in excess of those covered by a State’s EHB-benchmark plan are considered

CMS-9895-F 471

EHB, and thus subject to both the annual limitation on cost sharing and the restriction on annual

and lifetime dollar limits.

We summarize and respond below to public comments received on the proposal to amend

§ 156.122 to codify that prescription drugs in excess of those covered by a State’s EHB-

benchmark plan are considered EHB such that they are subject to EHB protections, including the

annual limitation on cost sharing and the restriction on annual and lifetime dollar limits, unless

the coverage of the drug is mandated by State action and is in addition to EHB (in which case the

drug would not be considered EHB). We also point readers to the preamble discussion above of

§ 155.170 regarding defrayal of State-mandated benefits, in which we clarified that a covered

benefit in a State’s EHB-benchmark plan is considered an EHB even if mandated by State action

after 2011.

Comment: A majority of commenters supported the proposal to amend § 156.122 to

codify that prescription drugs in excess of those covered by a State’s EHB-benchmark plan are

EHB. Several of these commenters expressed concern with any drugs being designated as “non-

EHB” and noted that this was in conflict with HHS’ longstanding policy that covered

prescription drugs in excess of the minimum drug count standard at § 156.122(a)(1) are still

EHB. A few commenters believed that the proposed rule did not explicitly state that issuers

cannot designate certain drugs as “non-EHB” and encouraged HHS to further clarify that drugs

cannot be classified as such and be in compliance with the regulation. Some commenters

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expressed concern that copay maximizers

292

and alternative funding programs

293

are working

with issuers and PBMs to designate drugs as “non-EHB,” and when a drug is no longer a covered

benefit and EHB, even if it is theoretically available through a copay maximizer or alternative

funding program, consumers lose State and Federal protections such as the annual limitation on

cost sharing, the restriction on annual and lifetime dollar limits, and protection against exposure

to discriminatory benefit designs. Some commenters also noted that these copay maximizers and

alternative funding programs argue that specialty drugs are not required to be covered under the

ACA, and that all specialty drugs can therefore be excluded.

In response to our request for comment regarding how widespread programs to provide

some drugs as non-EHB are, a few commenters noted that these types of programs have been

identified more frequently in self-insured group health plans and large group market health plans.

Response: We are finalizing this proposal to amend § 156.122 as proposed. As stated in

this rule, given the prevalence of these programs, we are concerned that consumers lose

important protections if a covered drug is no longer considered EHB. The impacts of these

practices, including additional out-of-pocket costs and loss of consumer protections, justify the

finalization of this policy.

292

With a copayment maximizer, select drugs are categorized as non-EHBs, allowing plans to exclude drug

manufacturer assistance payments from counting toward the patient’s deductible and out-of-pocket limitation.

Zuckerman AD, Schneider MP, Dusetzina SB. Health Insurer Strategies to Reduce Specialty Drug Spending—

Copayment Adjustment and Alternative Funding Programs. JAMA Intern Med. 2023;183(7):635–636.

Doi:10.1001/jamainternmed.2023.1829.

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Under alternative funding programs, payers exclude some or all specialty drugs, such as some used for cancer,

arthritis, psoriasis, and hemophilia, from their defined benefit. Patients are then referred to a third-party organization

contracted by the plan’s PBM to identify alternative funding options to obtain these excluded drugs, typically

manufacturer patient assistance programs or other charitable assistance. When patients fail to meet the established

criteria for manufacturer assistance, PBMs may reconsider drug coverage or, in some circumstances, source the

medication from a pharmacy outside the U.S. at a lower cost. As a result, patients may face delays in starting a

medication or may not be able to obtain the drug at all. Id.

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We first stated that prescription drugs in excess of the minimum drug count do not

exceed EHB in the EHB Rule (78 FR 12845), which was finalized over a decade ago, and we

made clear in the 2016 Payment Notice (80 FR 10817) that “if the plan is covering drugs beyond

the number of drugs covered by the benchmark, all of these drugs are EHB and must count

towards the annual limitation on cost sharing.” In the proposed rule, we proposed to codify that,

to the extent that a health plan covers prescription drugs, in any circumstance, in excess of the

EHB-benchmark plan, these drugs would be considered EHB and would be required to count

towards the annual limitation on cost sharing, unless the coverage of the drug is mandated by

State action and is in addition to EHB pursuant to § 155.170, in which case the drug would not

be considered EHB. Consequently, we now clarify that this interpretation means that issuers

subject to the requirement to cover EHB will be considered to be failing to provide EHB if they

do not treat those drugs as EHB, including by subjecting them to the annual limitation on cost

sharing, by not applying annual or lifetime dollar limits, and by factoring them in the availability

of APTCs, unless the drugs are mandated by State action. We agree with commenters’ concerns

that coverage is diminished if a drug is no longer considered EHB. For example, a plan might

designate certain drugs as “non-EHB,” but indicate that the member can obtain coverage of such

drugs so long as they enroll into a third-party program. If the member declines to enroll in the

program or fills a prescription for a “non-EHB” drug outside of the program, they risk assuming

responsibility for cost sharing that does not count towards the member’s deductible or annual

limitation on cost sharing.

From an operational perspective, it is not apparent on what basis issuers make

distinctions between covered drugs that are EHB and “non-EHB,” including at what point certain

drugs become “too costly” for the plan to consider them EHB. Further, it is not apparent that

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issuers are capable of readily explaining the rationale behind designations of “non-EHB” for

specific drugs to consumers in advance of their enrollment in the plan. Even if an issuer is

capable of explaining that rationale and providing any amount of notice to affected consumers in

advance of their enrollment, we believe it is unreasonable to expect enrollees to be able to

understand the complicated impacts that getting coverage for specific “non-EHB” drugs would

have on enrollee out-of-pocket costs and consumer protections. This is especially true

considering that those drugs most likely to be designated as “non-EHB” are drugs that are more

likely to be prescribed for members of particularly vulnerable segments of the population.

294

The

fact that the consumers that would be most affected by allowing drug coverage as “non-EHB”

would be most negatively impacted by additional out-of-pocket costs and loss of consumer

protections is further justification for the finalization of this policy.

We also find uncompelling the argument that issuers may classify drugs as specialty

drugs or apply another similar label and thus designate them as “non-EHB.” We have not defined

“specialty drug” for the purposes of EHB and formulary standards; rather, issuers must meet the

formulary requirements at § 156.122. Accordingly, while the ACA does not explicitly identify

specialty drugs within the category of prescription drugs that must be covered, the ACA also

does not provide for a blanket exclusion from the EHB coverage requirement for such drugs, and

therefore the requirements under § 156.122 apply to such drugs. Additionally, although EHB

standards do not prohibit issuers from designating certain drugs as “specialty” drugs or tiering

them as such if non-discriminatory, we believe it would be difficult, if not impossible, for an

issuer to remove all drugs it currently deems “specialty” from the formulary and still be in

compliance with § 156.122.

294

Assessment of racial and ethnic inequities in copay card utilization and enrollment in copay adjustment

programs. J Manag Care Spec Pharm. 2023 Sep;29(9):1084-1092. Doi: 10.18553/jmcp.

CMS-9895-F 475

Comment: Some commenters stated that HHS lacks the statutory authority to include

prescription drugs covered by plans in excess of those covered by a State’s EHB-benchmark plan

as EHB.

Response: Section 1302(b)(1) authorizes HHS to define the EHB, including items and

services within the prescription drug category at § 1302(b)(1)(F). In this rule, we are exercising

this authority to further define the prescription drugs that are considered EHB, which is clearly

within HHS’s statutory authority to define the EHB.

Comment: Some commenters stated that the final rule should make clear whether this

policy applies to large group market and self-funded plans and suggested that it should.

Conversely, several commenters urged HHS to clarify that this policy, if adopted, would not

apply to self-insured and large group market plans. These commenters expressed concern that if

the rule is extended to large group market and self-funded group health plans, it would be

disruptive to formulary design, and plans may be forced to eliminate certain prescription drugs

from their formularies due to increased plan costs. One commenter requested that if the policy

were to apply to large group market and self-funded plans, the government provide a cost

estimate to reflect the projected impact.

Response: The proposed rule primarily addressed the application of this policy with

respect to issuers of non-grandfathered individual and small group market plans subject to the

requirement to provide EHB. We are finalizing this proposal as proposed. This final rule does

not address the application of this policy to large group market health plans and self-insured

group health plans. While health insurance issuers offering non-grandfathered coverage in the

individual and small group market are required to cover EHBs, self-insured group health plans

and large group market health plans are not required to cover any EHBs. However, to the extent

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self-insured group health plans and large group market health plans cover EHBs, such plans must

comply with the annual limitation on cost sharing under PHS Act section 2707(b) and annual and

lifetime limit prohibitions under PHS Act section 2711, as applicable, with respect to those

benefits.

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HHS shares interpretative jurisdiction with the Department of Labor and the

Department of the Treasury (collectively, the Departments) of the relevant requirements that are

included in PHS Act sections 2707 and 2711, which are incorporated by reference into the

Employee Retirement Income Security Act (ERISA) through section 715 of ERISA and into the

Internal Revenue Code (Code) through section 9815 of the Code. The Departments understand

the questions raised by commenters with respect to large group market health plans and self-

insured group health plans and intend to address the applicability of this policy to those plans in

future notice-and-comment rulemaking. Specifically, the Departments intend to propose

rulemaking that would align the standards applicable to large group market health plans and self-

insured group health plans with those applicable to individual and small group market plans, so

that all group health plans and health insurance coverage subject to sections 2711 and 2707(b) of

the PHS Act, as applicable, would be required to treat prescription drugs covered by the plan or

coverage in excess of the applicable EHB-benchmark plan as EHB for purposes of the

prohibition of lifetime and annual limits and the annual limitation on cost sharing, which would

further strengthen the consumer protections in the ACA.

Comment: A few commenters asserted that the proposal may impact the viability of

copay maximizer programs, which could cause enrollee cost sharing and plan premiums to

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The provisions of PHS Act section 2707(b) apply to all non-grandfathered group health plans, including non-

grandfathered self-insured and non-grandfathered insured small and large group market plans. The provisions of

PHS Act section 2711 apply to both non-grandfathered and grandfathered group health plans and group or

individual health insurance coverage, except the annual limits prohibition does not apply to grandfathered individual

health insurance coverage.

CMS-9895-F 477

increase, particularly for cost sharing related to specialty drugs. One commenter stated that these

programs maximize the value of coupons to benefit the patient, taxpayers, and plan sponsors, and

bring manufacturers to the table to negotiate on fair prices, particularly for self-insured plans,

and urged HHS to consider this proposed policy change in the context of the broader policy

debates related to manufacturers’ use of copay coupons and copay assistance programs.

Response: As noted above, this policy was first stated in the EHB Rule in 2013 and

addressed again in the 2016 Payment Notice and so we disagree that codification of a long-

standing policy should cause significant changes for plans in the individual and small group

markets. We will consider copay maximizer programs, as relevant, in any subsequent policy

making about drug manufacturer assistance programs.

Comment: Some commenters noted that the policy may impact issuers’ ability to manage

prescription drug costs, which may lead to increased premiums and cost sharing. Commenters

suggested that HHS consider whether the risk adjustment methodology appropriately supports

this policy, and whether issuers may need additional benefit design flexibilities or other

assistance to help contain costs. One commenter encouraged HHS to carefully consider how this

policy change may inappropriately benefit manufacturers by encouraging them to increase list

prices for certain drugs.

Response: We encourage issuers to continue to exceed minimum drug count requirements

and remind them of P&T committee obligations at § 156.122(a)(3)(iii). Based on our review of

formularies as part of QHP certification and as part of the form review for direct enforcement

States, it is our understanding that issuers routinely exceed minimum requirements when

developing formularies. We expect P&T committees to exercise sound decision-making and

balance cost considerations with consumer needs. We share commenters’ concerns about the

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increasing cost of prescription drugs in general. Therefore, we hope that drug manufacturers will

negotiate with issuers and PBMs so that additional drugs can be included in formularies.

Additionally, since this policy does not change the current treatment of prescription drugs in the

individual and small group markets, codifying this policy will not impact the risk adjustment

methodology.

Comment: Some commenters recommended that HHS monitor unintended consequences

of this policy, if finalized as proposed, such as a potential decrease in the breadth of formularies

beyond what is required by current regulation.

Response: We intend to monitor the breadth of formularies and will consider whether

further regulation is warranted. However, we also note that this policy has been in place since at

least the 2016 Payment Notice, so this is not a new interpretation. As noted in the proposed rule,

we do not believe that the designation of drugs as “non-EHB” is currently pervasive in the

individual and small group markets. Further, this provision is intended to operate in tandem with

the other regulatory requirements at § 156.122, which impose other standards for prescription

drug coverage. In particular, we highlight the requirements at § 156.122(a)(3)(iii), which place

requirements on P&T committees to, among other things, ensure that formularies cover a range

of drugs across a broad distribution of therapeutic categories and classes and provide appropriate

access to drugs that are included in broadly accepted treatment guidelines and that are indicative

of general best practices at the time.

Comment: One commenter requested clarification on how the proposed amendment to

“Additional Required Benefits (45 CFR 155.170)” will impact the proposed amendment to §

156.122. The commenter noted that, as proposed, it appears there would be an exception to the

codification in § 156.122 that prescription drugs in excess of the EHB-benchmark plan are

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considered EHB if a drug is mandated by State action and considered in addition to EHB

pursuant to the defrayal standards at § 155.170. The commenter stated that this outcome appears

to conflict with the proposed amendment to § 155.170(a)(2) which would provide that drug

benefits covered in a State’s EHB-benchmark plan would not be considered in addition to EHB

and maintain its status as EHB.

Response: Pursuant to the finalized policy at § 155.170, any prescription drug that is

covered in a State’s EHB-benchmark plan is EHB, even if there is a State mandate requiring that

specific drug to be covered. When read in conjunction with our clarification at § 156.122, this

means that any prescription drug that an issuer voluntarily covers in excess of the State’s EHB-

benchmark plan is EHB unless there is a State mandate requiring such coverage.

c. Pharmacy and Therapeutics Committee Standards

For plan years beginning on or after January 1, 2026, we proposed to amend § 156.122 to

provide that the P&T committee must include a consumer representative.

In the 2016 Payment Notice (80 FR 10749), we required plans providing EHB to

establish P&T committees to review and update plan formularies in conjunction with the USP

MMG. At § 156.122(a)(3)(i), we require P&T committees to: (a) have members that represent a

sufficient number of clinical specialties to adequately meet the needs of enrollees; (b) consist of

a majority of individuals who are practicing physicians, practicing pharmacists, and other

practicing health care professionals who are licensed to prescribe drugs; (c) prohibit any member

with a conflict of interest with respect to the issuer or a pharmaceutical manufacturer from voting

on any matters for which the conflict exists; and (d) require at least 20 percent of its membership

to have no conflict of interest with respect to the issuer and any pharmaceutical manufacturer.

CMS-9895-F 480

We noted in the proposed rule that many of the P&T committee requirements are also

found in the Principles of a Sound Drug Formulary System, which was first developed in

September 1999 by a coalition of national organizations representing health care professionals,

government, and business leaders and later adopted in 2000 by the Academy of Managed Care

Pharmacy (AMCP), Alliance of Community Health Plans, American Medical Association,

American Society of Health-Systems Pharmacists, Department of Veterans Affairs, Pharmacy

Benefits Management Strategic Healthcare Group, National Business Coalition on Health, and

U.S. Pharmacopeia.

296

We further noted that since that time, best practices for P&T committees

have matured throughout the health care system. In 2019, AMCP convened a group of thought

leaders, clinicians, academics, patient advocacy organizations, payer organizations, and members

of the pharmaceutical industry to consider P&T committee best practices in today’s evolving

health care system.

297

Specifically, the group provided perspectives on: (a) P&T committee

composition and relevant interested parties, (b) evaluation of emerging evidence for formulary

decisions and recommendations around training of P&T committee members, and (c)

characteristics and best practices of successful committees.

While a P&T committee is usually composed of actively practicing physicians,

pharmacists, and other health care professionals, forum participants stated that a well-structured

committee should also include patient representation since it provides additional insight into the

patient perspective regarding the practical use of therapies and effects on quality-of-life

outcomes, which can be a helpful component of the formulary evaluation process. Additionally,

296

Hawkins, B., ed. (2011). Principles of a sound drug formulary system. Best Practices for Hospital and Health

System Pharmacy: Positions and Guidance Documents of ASHP. American Society of Health-System Pharmacists.

https://www.ashp.org/-/media/assets/policy-guidelines/docs/endorsed-documents/endorsed-documents-principles-

sound-drug-formulary-system.pdf.

297

AMCP Partnership Forum: Principles for Sound Pharmacy and Therapeutics (P&T) Committee Practices: What’s

Next? (2020). J Manag Care Spec Pharm, 26(1), 48-53. https://doi.org/10.18553/jmcp.2020.26.1.48.

CMS-9895-F 481

participants noted that the patient perspective should be considered a key voice in formulary

decisions as they are directly affected by P&T committee decisions and can assist the committee

in better understanding the value of different treatments and medications for patients.

We stated in the proposed rule that while we are aware that the inclusion of consumers in

the P&T committee process is not common, it has been observed in different health care systems.

We noted that one example of this practice includes the Uniform Formulary Beneficiary

Advisory Panel (UFBAP), which provides independent advice and recommendation on the

development of the TRICARE Uniform formulary.

298

Members of the UFBAP include

nongovernmental organizations and associations that represent the views and interests of a large

number of eligible covered beneficiaries, contractors responsible for the TRICARE retail

pharmacy program, contractors responsible for the national mail-order pharmacy program, and

TRICARE network providers. We further noted additional examples of States that include

clinicians such as physicians, pharmacists, and other specialists along with consumer or patient

representatives as members of their respective P&T committees, including Pennsylvania,

299

Connecticut,

300

and New York.

301

We explained in the proposed rule that P&T committee decisions have the power to

impact a consumer’s overall quality of life and encompass important elements of care and cost

for the consumer. Therefore, we proposed to add paragraph (a)(3)(i)(E) to § 156.122 to update

P&T membership standards to require the P&T committee to include a consumer representative

298

Charter: Uniform Formulary Beneficiary Advisory Panel. https://health.mil/Military-Health-Topics/Access-Cost-

Quality-and-Safety/Pharmacy-Operations/BAP.

299

The Pennsylvania Department of Human Services Pharmacy and Therapeutics Committee. See

https://www.dhs.pa.gov/about/DHS-Information/Pages/Stakeholders/Pharmacy-Committee.aspx.

300

The Connecticut Medical Assistance Program Pharmaceutical and Therapeutics Committee. See

https://www.cga.ct.gov/current/pub/chap_319v.htm#sec_17b-274d and

https://www.ctdssmap.com/CTPortal/Portals/0/StaticContent/Publications/CT_PT_COMMITTEE_BYLAWS_v2.pdf.

301

New York State Department of Health Drug Utilization Review (DUR). See

https://www.health.ny.gov/health_care/medicaid/program/dur/docs/board_membership.pdf.

CMS-9895-F 482

as part of its membership for plan years beginning on or after January 1, 2026. In addition, we

proposed to specify at § 156.122(a)(3)(E)(1) through (4) membership standards for consumer

representatives. Specifically, we stated that the consumer representative would be required to

represent the consumer perspective as a member of the P&T committee and would be required to

have an affiliation with and/or demonstrate active participation in consumer or community-based

organizations. We stated that some examples of these types of organizations include those that

are representative of a community, or significant segments of a community, that provide

educational or related direct services to individuals in the community, and organizations that

protect consumer rights via advocacy, research, or outreach efforts. We explained that as a P&T

committee member, the consumer representative would assume responsibility for highlighting

and addressing any potential risks and benefits to consumers that could result from P&T

committee actions. In addition, we explained that an affiliation with and/or active participation in

a consumer or community-based organization would provide the consumer representative with

the necessary background to represent consumers’ perspectives. We further stated that if the

proposed rule were finalized as proposed, issuers would also be required to select a consumer

representative who has experience in the analysis and interpretation of complex data and is able

to understand its public health significance, bearing in mind that one of the duties as a member of

a P&T committee would include thoughtful consideration of clinical criteria, such as drug safety

and efficacy data, when making a recommendation about products under review. We further

stated that this individual would also be required to have no fiduciary obligation to a health

facility or other health agency and no material financial interest in the rendering of health care

services. We explained that this conflict-of-interest standard is intended to ensure that, as a

member of the P&T committee, the consumer representative is free from financial interests or

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other relationships that could compromise the objectivity of committee members as they perform

their duties. We also noted that nothing in this proposal would prevent the P&T committee from

defining additional membership standards pertaining to the position of consumer representative.

We stated in the proposed rule that we believe the proposed addition of §

156.122(a)(3)(i)(E) would ensure that the consumer experience with a disease or condition is

considered in the design of formulary benefits. We explained that consumer representatives

would offer insights into real consumer experiences unknown to P&T committees, which would

educate the committee on consumer challenges related to medication use and assist the

committee in exploring solutions to these challenges during the formulary development process.

We also noted that broader inclusion of perspectives on the P&T committee would align with

other groups, including the AMCP.

We sought comment on these proposals. We stated that the consumer representative, as a

member of the P&T committee, would be subject to the conflict-of-interest standards as specified

in § 156.122(a)(3); however, we stated we were interested in comments regarding whether we

should further define additional membership standards for the consumer representative. In

particular, we sought comments on the qualifications necessary to serve as a consumer

representative on a P&T committee, to include if the representative should have a clinical

background, have served as a representative of organizations with a regional or Statewide

constituency, or have been involved in activities related to health care consumer advocacy,

including issues affecting individual and small group market enrollees. We also sought comment

on whether the current conflict-of-interest provision is sufficient as applied to this proposed role,

or whether the consumer representative role should be subject to additional conflict-of-interest

standards. We sought comment on whether a consumer representative should have a background

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for more than one condition or disease to sufficiently represent the concerns of a diverse

population. Additionally, we sought comment on the number of consumer representatives who

should be included on a committee and if that number should be directly proportional to the size

of the committee. We also recognized that a requirement to develop additional P&T committee

standards, solicit for applicants for this new position, and provide any necessary training to new

members would require lead time for States, issuers, and pharmacy benefit managers to

implement and we sought comment on the proposed timing for implementation.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision with the following modifications: (1)

we are making a change to § 156.122(a)(3)(i)(E) introductory text, § 156.122(a)(3)(i)(E)(1), and

§ 156.122(a)(3)(i)(E)(2) to replace “consumer” with “patient”; (2) we are amending §

156.122(a)(3)(i)(E) introductory text to include the term “at minimum one” to reflect that at least

one patient representative is required, and that additional patient representatives may serve on a

P&T committee; (3) we are modifying § 156.122(a)(3)(i)(E)(2) to broaden the experience

requirement to serve as a patient representative by requiring that the patient representative have

relevant experience or participation in patient or community-based organizations; (4) we are

modifying § 156.122(a)(3)(i)(E)(3) to broaden the clinical requirement to serve as a patient

representative by requiring that the patient representative be able to demonstrate the ability to

integrate data interpretations with practical patient considerations; (5) we are adding §

156.122(a)(3)(i)(E)(5) to reflect an education requirement to serve as a patient representative in

which the patient representative is required to have a broad understanding of one or more

conditions or diseases, associated treatment options, and research; and (6) we are adding §

156.122(a)(3)(i)(E)(6) to require the patient representative to disclose financial interests on their

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conflict-of-interest statements. Disclosed financial interests must include all interests with any

entity that would benefit from decisions regarding plan formularies as well as specific

information about these financial interests, such as the nature of the relationship and the value of

the financial interest. We summarize and respond below to public comments received on the

proposal to amend § 156.122 to provide that the P&T committee must include a consumer

representative.

Comment: Two commenters encouraged CMS to amend the language of §

156.122(a)(3)(i)(E) to use the term “patient representative” as opposed to “consumer

representative.” Both commenters noted that patient-centered approaches aim to ensure clinical

care meets patients’ needs and preferences, which is different from a consumer orientation,

which calls on patients to be prudent purchasers of medical care.

Response: We agree that the term “consumer representative” may not accurately

represent the full scope of the insight that such a representative offers to a P&T committee and

may not be primarily associated with a patient-centered role. We acknowledge that the use of the

term “consumer” to some, may be more closely associated with purchases and consumption.

However, we believe the proposed rule was clear in our intention that the term “consumer

representative” did not limit the scope of this representative’s role to only “consumer” concerns.

As discussed in the preamble, this representative will serve on a P&T committee to provide

additional insight into the patient perspective regarding the practical use of therapies and effect

on quality-of-life outcomes as part of the formulary evaluation process and assist the committee

in better understanding the value of different treatments and medications for patients. We also

did not intend to require the representative and the P&T committee to make overly technical

distinctions between “consumer” and “patient” concerns, when both are necessary for this

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representative to ensure that the experience of people with a given disease or condition is

considered in the design of formulary benefits which should help the committee better

understand the challenges of those impacted related to medication use as well as assist the

committee in exploring solutions to these challenges during the formulary development process.

Nevertheless, we agree with commenters that the term “patient representative” is a more

appropriate term in this context. As such, we are finalizing this proposal with a change to replace

“consumer” with “patient” at § 156.122(a)(3)(i)(E) introductory text and § 156.122(a)(3)(i)(E)(1)

and (2).

Comment: We received many comments in response to our request for comments (88 FR

82602) regarding whether we should further define additional membership standards for the

patient representative in this rule, including what qualifications and conflict-of-interest standards

may be necessary to effectively implement the proposal. One commenter urged CMS to require

that the patient representative have clinical experience. One commenter noted that while a

clinical background should be encouraged, it should not be required, as it could exclude highly

qualified patient representatives who have other expertise to contribute, such as from experience

in public or community health, health care policy development, or administration. Additionally,

one commenter noted that limiting the position to only those with a clinical background may

negatively impact the value of adding patients’ voices to these committees. Two commenters

recommended that the patient representative have a background in one or more conditions or

diseases. Conversely, several commenters argued that the addition of a member without medical

and scientific training to offer meaningful input on committee decisions would significantly and

negatively impact the scientific rigor of P&T committee discussions, which are aimed to develop

prescription drug formularies.

CMS-9895-F 487

Finally, a few commenters recommended that the patient representative should function

in an advisory or non-voting capacity. Two commenters suggested that patient representatives

serving on the P&T committees must have clinical experience to have voting rights. One

commenter recommended that patient representatives meet existing P&T committee membership

criteria or be barred from voting rights.

Response: First, we are finalizing our proposal with modification to include an additional

standard at § 156.122 (a)(3)(i)(E)(5) to require the patient representative to have a broad

understanding of one or more conditions or diseases, associated treatment options, and research.

In the proposed rule, we specifically sought comment on what the qualifications may be

necessary to serve as a patient representative on a P&T committee, including whether the

representative should have a clinical background and whether the patient representative should

have a background for more than one condition or disease to sufficiently represent the concerns

of a diverse population. Although we agree with commenters that while a clinical background

can be beneficial for a patient representative, this need not be a regulatory requirement for the

patient representative, as their role on the committee is to provide insights from a patient

perspective and not necessarily with a clinical background. Additionally, we do not agree that the

addition of a patient representative to a P&T committee will hinder the quality of scientific

exchange that occurs between members of the committee. The addition of a patient

representative is meant to enhance the committee’s ability to make well-informed decisions by

incorporating the perspectives and experiences of the individuals directly affected by

pharmaceutical and therapeutic choices. The inclusion of this member role will promote

transparency, accountability, and a more patient-centered approach to health care.

CMS-9895-F 488

However, we agree with commenters that noted that a patient representative should have

background knowledge related to more than one condition or disease to sufficiently represent the

concerns of a diverse population. Background knowledge of a given condition or disease can

include but is not limited to information about the causes, symptoms, risk factors, diagnostic

methods, available treatments, and potential outcomes associated with a specific medical

condition or disease. The addition of the standard at §156.122(a)(3)(i)(E)(5) will ensure that the

patient representative is able to effectively communicate and collaborate with other clinically

focused committee members as a result of the requirement that they have a foundational

knowledge related to the treatment and management of a more than one condition or disease

while also representing the needs and experiences of patients.

We disagree that patient representatives should function in an advisory role or non-voting

capacity or that the voting rights of a patient representative be dependent upon clinical

experience. Unlike members of the P&T committee who serve in a clinical capacity, such as the

physician, pharmacist, or nurse, the patient representative is included as a member of the P&T

committee to serve in a non-clinical capacity to offer insight into real patient experiences that

P&T committees may be unaware of that would help the committee better understand patient

challenges related to medication use as well as assist them in exploring solutions to these

challenges during the formulary development process. Additionally, in States where P&T

committees already include patient representatives, such as Pennsylvania, Connecticut, and New

York, which include clinicians along with consumer or patient representatives, voting rights are

extended to all members. We are not aware of States that require P&T committees to include

patient representatives where those members are not afforded voting privileges. These examples

demonstrate to us that, once a qualified candidate has been identified to serve as a patient

CMS-9895-F 489

representative and becomes a member of the P&T committee, this member should be granted

voting privileges like all other committee members who meet member requirements and fulfill

the duties associated with their role.

Comment: A few commenters recommended that the number of patient representatives

should be proportional to the size of the P&T committee, to help ensure adequate patient

representation. Conversely, a few commenters recommended that, if finalized, the requirement

should be to include only one patient representative on the P&T committee.

Response: We appreciate the commenters’ suggestions, but we will not revise the

regulatory text to require additional patient representatives at this time because we want to

ensure that plans are able to successfully identify and incorporate at least one patient

representative on their P&T committees without inflicting undue burden on issuers to implement

this new requirement. We are finalizing a non-substantive revision to specify that a health plan

must include “at minimum one” patient representative to allow health plans the ability to use

additional patient representatives at their option. We will continue to monitor this requirement

and may consider increasing the number of patient representatives required on a P&T committee

in the future.

Comment: In the proposed rule, we noted that we were interested in comments regarding

whether the current conflict-of-interest provision at § 156.122(a)(3) is sufficient as applied to the

proposed role, or whether the patient representative role should be subject to additional conflict-

of-interest standards. We received several comments regarding how we should further define this

membership standard in this rule. Several commenters stated that patient representatives attached

to a patient or consumer advocacy organization may pose conflict-of-interest concerns as this

could be an avenue for individuals affiliated, either explicitly or otherwise, with pharmaceutical

CMS-9895-F 490

manufacturers to gain representation on a P&T committee. Additionally, a few commenters

recommended that CMS strengthen provisions to ensure that an individual has no link (direct or

indirect) to a drug manufacturer. One commenter recommended that HHS collaborate with

patient organizations and other interested parties to develop additional standards to appropriately

safeguard against potential conflicts of interest and encouraged HHS to review resources from

the NHC on best practices for integrating the patient voice into health care decision making.

Response: We acknowledge that the requirement that the patient representative have

relevant experience or participation in patient or community-based organizations could result in

financial conflicts of interest if, for example, the community-based organization the patient

representative is affiliated with has a financial or material arrangement with pharmaceutical

manufacturers. Additionally, we reiterate that the patient representative serves on the P&T

committee to help the committee better understand the challenges of those impacted related to

medication use as well as assist the committee in exploring solutions to these challenges during

the formulary development process and should not be considered a role to be used by

pharmaceutical manufacturers to gain representation on the P&T committee resulting in the

prioritization of access over appropriate clinical evidence. We agree with commenters that the

conflict-of-interest standards should include safeguards from inappropriate direct or indirect

pharmaceutical manufacturer influence on P&T committee decisions and, as such, we are

finalizing a new conflict-of-interest standard at § 156.122(a)(3)(i)(E)(6) that will require the

patient representative to disclose financial interests on their conflict-of-interest statements.

Disclosed financial interests must include all interests with any entity that would benefit from

CMS-9895-F 491

decisions regarding plan formularies as well as specific information about these financial

interests, such as the nature of the relationship and the value of the financial interest.

302

Finally, we appreciate the suggestion to collaborate with patient organizations and

interested parties to enhance standards and address potential conflicts of interest. We may

consider developing additional standards to be applied to patient representatives on the P&T

committee in the future and will consider such collaboration.

Comment: Several commenters recommended that CMS encourage alternative

mechanisms for patient engagement with P&T committees, such as requiring annual training

sessions for P&T committees that discuss the patient perspective, allowing existing members to

attest to a consumer interest, requiring P&T committees to publish a plain language summary of

the principles used to establish a formulary, or requiring issuers to hold consumer forums to

capture patient feedback that can be shared with clinical teams.

Response: We do not believe that the alternative mechanisms suggested by commenters

for patient engagement with P&T committees would be as effective as the addition of a patient

representative to serve as a member of the P&T committee. The addition of this member to the

P&T committee will offer the opportunity for members to be consistently engaged at every

meeting in the discussion of topics related to patient experiences, patient challenges related to

medication access and use, as well as exploring solutions to these challenges during the

formulary benefit design process.

Comment: A few commenters expressed concerns that the criteria set forth for the patient

representative in the proposed regulation are too stringent and will limit the ability of plans and

issuers to recruit a qualified consumer representative if required to do so. One commenter noted

302

Department of Health and Human Services. Office of Inspector General. Gaps in Oversight of Conflicts of

Interest In Medicare Prescription Drug Decisions. March 2013. https://oig.hhs.gov/oei/reports/oei-05-10-00450.pdf.

CMS-9895-F 492

that the requirement for a patient representative to have an affiliation with or participation in a

consumer group should not be a strict standard given the difficulty that issuers may encounter

identifying qualifying patient representatives. This same commenter also noted that it may be

difficult to find patient representatives who are working or participating in consumer or

community-based organizations that have sufficient experience to analyze, interpret, and

understand the public health impact of complex scientific data. Additionally, the commenter

recommended amending the criteria to reflect the demands of the role to listen to interpretations

of the data and be thoughtful in marrying those interpretations with the practical considerations

that impact consumers. A few commenters recommended that HHS consider an exceptions

process from meeting this standard for an issuer that makes a good faith effort but is unable to

find a qualified consumer representative. Two commenters recommended that HHS allow

adequate time for implementation of this policy, if finalized, for plans and issuers to locate and

onboard new consumer representatives without delaying pressing P&T meetings and approvals.

Response: In general, we agree with commenters that requiring that the patient

representative have an affiliation with and/or demonstrate active participation in consumer or

community-based organizations is restrictive. We did not intend for this requirement to limit the

ability of issuers to recruit a qualified patient representative. As noted in the preamble, we

believe the inclusion of a patient representative on the P&T committee is necessary to ensure that

the patient experience with a disease or condition is considered in the design of formulary

benefits. While an affiliation with and/or the ability to demonstrate active participation in

consumer or community-based organizations may be an ideal path for a candidate to have

obtained the necessary experience to serve as a patient representative, we acknowledge that the

relevant experience necessary to serve as a patient representative can also be obtained from

CMS-9895-F 493

working in roles that directly impact or support patient care and well-being. This could include

positions in health care administration, patient advocacy, nursing, medical social work, or roles

focused on improving patient experience and outcomes. We are amending §

156.122(a)(3)(i)(E)(2) to state that the patient representative must have relevant experience or

participation in patient or community-based organizations. We believe that broadening the

background experience necessary to serve as a patient representative will expand the pool of

qualified candidates when searching for a patient representative to serve on the P&T committee

which should further reduce any barriers for issuers to meet this requirement.

Further, we agree with commenters that requiring the patient representative to have

experience in the analysis and interpretation of complex data and be able to understand its public

health significance is also restrictive. The background requirement as proposed may not easily be

identified in candidates who only have relevant experience or participation in patient or

community-based organizations unless they have additional background experience in

interdisciplinary fields such as epidemiology, biostatistics, or data science where they would

have gained the expertise needed to analyze and interpret complex data with a focus on public

health significance. While this level of experience could be beneficial, we agree that it should not

be a prerequisite for serving as a patient representative on a P&T committee considering that this

member will serve in a non-clinical capacity to provide additional insight into the patient

perspective regarding the practical use of therapies and effect on quality-of-life outcomes. We

acknowledge that the proposed requirements may not accurately reflect the practical demands of

the role and therefore may hinder issuer recruitment of qualified candidates to serve as a patient

representative on the P&T committee, which was not our intent. However, we believe the patient

representative should be able to demonstrate the ability to attentively consider data

CMS-9895-F 494

interpretations and thoughtfully integrate them with practical considerations affecting patients in

order to help them contribute meaningfully to P&T committee member discussions and to assist

the committee in better understanding the value of different treatments and medications for

patients. Therefore, we are amending § 156.122(a)(3)(i)(E)(3) to require that the patient

representative be able to demonstrate the ability to integrate data interpretations with practical

patient considerations. We believe broadening this requirement will help to further assist issuers

in identifying qualified candidates to serve as patient representatives.

In response to comments, we considered the establishment of an exception process

should a health plan make a good faith effort and is unable to find a qualified candidate to serve

as a patient representative. However, we are concerned that if we allow an exception process,

this may incentivize some issuers to identify loopholes to obtain an exception to the rule and not

make a meaningful attempt to comply with the requirements set forth to seek out a qualified

candidate to serve as a patient representative on the P&T committee. Not implementing an

exception process ensures consistent application of the policy, minimizes potential loopholes,

and maintains a clear and standardized approach for all issuers.

As noted above, we are finalizing this policy with modifications to broaden certain

requirements to further assist issuers in identifying qualified candidates to serve as patient

representatives. We recognize the challenges that plans and issuers may encounter while

recruiting a qualified candidate to serve as a patient representative. However, several States

currently include at least one patient representative as a member of their P&T committee which

indicates that these committees were able to identify qualified candidates who are willing to

serve in this role. We encourage issuers to reach out to their State should they experience

challenges while making a good faith effort to identify a qualified candidate to serve as a patient

CMS-9895-F 495

representative and comply with this new requirement, as the State is responsible for the oversight

and enforcement of the P&T committee standards.

Comment: One commenter encouraged CMS to consider including additional flexibility

to account for the possibility that health plan P&T committees already include patient

representatives. The commenter also recommended that CMS allow for the flexibility to combine

consumer representative positions under State requirements that may already be in place so that

one or more consumer advocates can advocate for both Medicaid and commercial health plan

members.

Response: We do not believe that the requirement for health plans in the non-

grandfathered individual and small group market to include a patient representative materially

conflicts with any existing State requirements on these markets. No commenter identified any

existing State requirements related to similar P&T committee membership standards, which

comports with our own research of any potential conflicts in this space. Thus, we do not believe

it is necessary to revise the proposal to accommodate any such potential conflicts. To the extent

any may exist, we expect to work closely with any State regulators and provide technical

assistance to affected health plans to ensure that P&T committee membership standards come

into compliance with this rule with minimal burden. In addition, to the extent a health plan in

these markets currently voluntarily has a patient representative on its P&T committees, we

expect such health plans to ensure that any existing patient representatives meet the minimum

membership standards imposed by this rule.

Comment: One commenter recommended that CMS maintain the ability for issuers to

include additional standards for consumer representatives noting that issuers should have the

CMS-9895-F 496

flexibility to establish criteria to demonstrate the individual’s ability to participate on the P&T

committee and standards to handle conflicts of interests.

Response: As noted in the proposed rule, nothing in this proposal would prevent the P&T

committee from defining additional membership standards pertaining to the position of patient

representative.

5. Publication of the 2025 Premium Adjustment Percentage, Maximum Annual Limitation on

Cost Sharing, Reduced Maximum Annual Limitation on Cost Sharing, and Required

Contribution Percentage in Guidance (§ 156.130)

As established in part 2 of the 2022 Payment Notice (86 FR 24238), we publish the

premium adjustment percentage, the required contribution percentage, and maximum annual

limitations on cost sharing and reduced maximum annual limitation on cost sharing in guidance

annually starting with the 2023 benefit year. We note that these parameters are not included in

this rulemaking, as we did not propose to change the methodology for these parameters for the

2025 benefit year. Instead, on November 15, 2023, we published these 2025 benefit year

parameters in guidance in accordance our 2022 Payment Notice regulations.

303

6. Standardized Plan Options (§ 156.201)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82603), HHS proposed to exercise its authority under sections 1311(c)(1) and

1321(a)(1)(B) of the ACA to make minor updates to the standardized plan options for PY 2025.

Section 1311(c)(1) of the ACA directs the Secretary to establish criteria for the certification of

health plans as QHPs. Section 1321(a)(1)(B) of the ACA directs the Secretary to issue

303

https://www.cms.gov/files/document/2025-papi-parameters-guidance-2023-11-15.pdf.

CMS-9895-F 497

regulations that set standards for meeting the requirements of title I of the ACA for, among other

things, the offering of QHPs through such Exchanges.

Specifically, we proposed to make minor updates to the plan designs for PY 2025 to

ensure these plans have AVs within the permissible de minimis range for each metal level. We

proposed to otherwise maintain continuity regarding the approach to standardized plan options

finalized in the 2023 and 2024 Payment Notices. Our proposed updates to plan designs for PY

2025 were detailed in Tables 12 and 13 in the proposed rule. We did not propose to amend §

156.201. We refer readers to the proposed rule (88 FR 82603 through 82604) for background

discussion regarding our proposed approach to standardized plan options, and to the preambles

of the 2023 and 2024 Payment Notices discussing § 156.201 (87 FR 27310 through 27322 and

88 FR 25847 through 25855, respectively) for a detailed discussion regarding the approaches to

standardized plan options finalized in those Payment Notices.

We proposed this approach for several reasons. In the proposed rule (88 FR 82604), we

explained that we intended to continue to require FFE and SBE-FP issuers to offer standardized

plan options in large part due to continued plan proliferation, which has only increased since the

standardized plan option requirements were finalized in the 2023 Payment Notice. We stated

that, in light of this continued plan proliferation, it is increasingly important to continue to

attempt to streamline and simplify the plan selection process for consumers on the Exchanges.

We explained that we believe these standardized plan options continue to play a meaningful role

in that simplification by reducing the number of variables that consumers must consider when

selecting a plan option, making it easier for consumers to compare available plan options.

More specifically, we stated that with these standardized plan options, consumers

continue to be able to more easily consider meaningful factors, such as networks, formularies,

CMS-9895-F 498

and premiums, when selecting a plan. We stated that we further believe these standardized plan

options include several distinctive features, such as enhanced pre-deductible coverage for several

benefit categories and copayments instead of coinsurance rates for a greater number of benefit

categories, that will continue to play an important role in reducing barriers to access, combatting

discriminatory benefit designs, and advancing health equity.

We explained that including enhanced pre-deductible coverage for these benefit

categories (specifically, primary care visits, specialist visits, speech therapy, occupational and

physical therapy, and generic drugs at all metal levels, with an increasing number of benefit

categories exempt at higher metal levels) ensures consumers are more easily able to access these

services without first meeting their deductibles. Additionally, we explained that using

copayments instead of coinsurance rates for a greater number of benefit categories reduces the

risk of unexpected financial expenses sometimes associated with coinsurance rates.

Furthermore, we proposed to maintain a high degree of continuity with many aspects of

the standardized plan option policy finalized in the 2024 Payment Notice to reduce the risk of

disruption for all involved interested parties, including issuers, agents, brokers, States, and

enrollees. We stated that we believe making major departures from the methodology used to

create the standardized plan options finalized in the 2023 and 2024 Payment Notices could result

in drastic changes in these plan designs that may create undue burden for interested parties. For

example, we noted that if the standardized plan options that we create vary significantly from

year to year, those enrolled in these plans could experience unexpected financial harm if the cost

sharing for services they rely upon differs substantially from the previous year. We stated that we

ultimately believe consistency in standardized plan options is important to allow issuers and

enrollees to become accustomed to these plan designs.

CMS-9895-F 499

We sought comment on our proposed approach to standardized plan options for PY 2025.

Additionally, we sought comment on requiring issuers offering QHPs in individual market State

Exchanges to offer, in a future plan year, some version of standardized plan options, while not

necessarily subjecting them to the full scope of standardized plan option requirements applicable

to issuers offering QHPs through the FFEs or SBE-FPs under § 156.201.

In particular, we sought comment on requiring issuers offering QHPs in individual

market State Exchanges that are not already required to offer standardized plan options under

State requirements to offer some version of standardized plan options, even if these plan designs

differ from the requirements of those included in the applicable Payment Notice for that plan

year. We also sought comment on requiring States that intend to transition their Exchange model

type from an FFE or SBE-FP to a State Exchange to require their issuers to offer standardized

plan options as one condition of this transition. As such, we stated that we were particularly

interested in comments from individual market State Exchanges that do not currently require

QHP issuers to offer standardized plan options, States with an FFE or SBE-FP Exchange model

type that intend to transition their Exchange model type to a State Exchange, and issuers offering

QHPs through such Exchanges.

We explained that while we recognize that State Exchanges are generally best positioned

to set the requirements that serve the nuances of their respective individual markets, we

underscored the benefits of offering at least some version of standardized plan options, which we

discussed in greater detail in the preamble discussion of § 156.201 in the 2023 Payment Notice

(87 FR 27316). We also explained that we believe the fact that over half of all State Exchanges

currently require issuers to offer standardized plan options in one form or another suggests that

they, too, see value in standardized plan options.

CMS-9895-F 500

TABLE 11: 2025 Standardized Options Set One (For All FFE and SBE-FP Issuers,

Excluding Issuers in Delaware, Louisiana, and Oregon)

Expanded

Bronze

Standard

Silver

73 CSR

Silver

87 CSR

Silver

94 CSR

Gold Platinum

Actuarial Value

63.81%

70.01%

73.09%

87.33%

94.14%

78.06%

88.04%

Deductible

$7,500

$5,000

$3,000

$500

$1,500

Maximum Out-of-Pocket

Limitation

$9,200

$8,000

$6,400

$3,000

$2,000

$7,800

$4,300

Emergency Room Services

50%

40%

30%

25%*

25%

$100*

Inpatient Hospital Services

(Including Mental Health &

Substance Use Disorder)

50%

40%

30%

25%*

25%

$350*

Primary Care Visit

$50*

$40*

$20*

$0*

$30*

$10*

Urgent Care

$75*

$60*

$30*

$5*

$45*

$15*

Specialist Visit

$100*

$80*

$40*

$10*

$60*

$20*

Mental Health & Substance

Use Disorder Outpatient

Office Visit

$50*

$40*

$20*

$0*

$30*

$10*

Imaging (CT/PET Scans,

MRIs)

50%

40%

30%

25%*

25%

$100*

Speech Therapy

$50*

$40*

$20*

$0*

$30*

$10*

Occupational, Physical

Therapy

$50*

$40*

$20*

$0*

$30*

$10*

Laboratory Services

50%

40%

30%

25%*

25%

$30*

X-rays/Diagnostic Imaging

50%

40%

30%

25%*

25%

$30*

Skilled Nursing Facility

50%

40%

30%

25%*

25%

$150*

Outpatient Facility Fee

(Ambulatory Surgery

Center)

50%

40%

30%

25%*

25%

$150*

Outpatient Surgery

Physician & Services

50%

40%

30%

25%*

25%

$150*

Generic Drugs

$25*

$20*

$10*

$0*

$15*

$5*

Preferred Brand Drugs

$50

$40*

$20*

$15*

$30*

$10*

Non-Preferred Brand Drugs

$100

$80

$60

$50*

$60*

$50*

Specialty Drugs

$500

$350

$250

$150*

$250*

$150*

*Benefit category not subject to the deductible.

CMS-9895-F 501

TABLE 12: 2025 Standardized Options Set Two (For Issuers in Delaware and Louisiana)

Expanded

Bronze

Standard

Silver

73 CSR

Silver

87 CSR

Silver

94 CSR

Gold Platinum

Actuarial Value

63.81%

70.01%

73.10%

87.36%

94.37%

78.10%

88.07%

Deductible

$7,500

$5,000

$3,000

$500

$1,500

Maximum Out-of-Pocket

Limitation

$9,200

$8,000

$6,400

$3,000

$2,000

$7,800

$4,300

Emergency Room Services

50%

40%

30%

25%*

25%

$100*

Inpatient Hospital Services

(Including Mental Health

& Substance Use Disorder)

50%

40%

30%

25%*

25%

$350*

Primary Care Visit

$50*

$40*

$20*

$0*

$30*

$10*

Urgent Care

$75*

$60*

$30*

$5*

$45*

$15*

Specialist Visit

$100*

$80*

$40*

$10*

$60*

$20*

Mental Health &

Substance Use Disorder

Outpatient Office Visit

$50*

$40*

$20*

$0*

$30*

$10*

Imaging (CT/PET Scans,

MRIs)

50%

40%

30%

25%*

25%

$100*

Speech Therapy

$50*

$40*

$20*

$0*

$30*

$10*

Occupational, Physical

Therapy

$50*

$40*

$20*

$0*

$30*

$10*

Laboratory Services

50%

40%

30%

25%*

25%

$30*

X-rays/Diagnostic Imaging

50%

40%

30%

25%*

25%

$30*

Skilled Nursing Facility

50%

40%

30%

25%*

25%

$150*

Outpatient Facility Fee

(Ambulatory Surgery

Center)

50%

40%

30%

25%*

25%

$150*

Outpatient Surgery

Physician & Services

50%

40%

30%

25%*

25%

$150*

Generic Drugs

$25*

$20*

$10*

$0*

$15*

$5*

Preferred Brand Drugs

$50

$40*

$20*

$5*

$30*

$10*

Non-Preferred Brand

Drugs

$100

$80

$60

$10*

$60*

$50*

Specialty Drugs

$150

$125

$100

$20*

$100*

$75*

*Benefit category not subject to the deductible.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing our proposed approach with respect to standardized

plan options, as proposed. Our finalized plan designs for PY 2025 are detailed in Tables 11 and

12 of this final rule and reflect no changes to the plan designs in Tables 12 and 13 of the

proposed rule. We summarize and respond to public comments received on the proposed

approach to standardized plan options below.

CMS-9895-F 502

Comment: Many commenters supported continuing to require FFE and SBE-FP QHP

issuers to offer standardized plan options. These commenters explained that with continued plan

proliferation, the risk persists that consumers may experience plan choice overload as they

attempt to navigate the plan selection process. Commenters explained that these standardized

plan options continue to play an important role in streamlining the plan selection process by

reducing the number of variables consumers must consider when selecting a plan that best fits

their unique health care needs.

In particular, commenters explained that standardizing the cost sharing parameters for

these plans allows consumers to focus on other important plan attributes, such as networks,

formularies, quality ratings, and premiums, when selecting a plan. This in turn allows consumers

to ensure the health plan they ultimately select has a network that includes providers important to

them, a formulary that includes critical prescription drug coverage, and quality ratings that meet

consumers’ desired standards. Commenters further explained that promoting informed decision-

making reduces the risk of plan choice overload, suboptimal plan selection, and unexpected

financial harm for those consumers least able to afford it.

Several commenters also supported the continuation of differential display of these

standardized plan options on HealthCare.gov to further facilitate the plan selection process.

These commenters explained that continuing to differentially display these plans would help

make it easier for consumers to make meaningful comparisons of available plan options. Several

commenters also recommended making “additional enhancements” to choice architecture and the

user experience on HealthCare.gov to further streamline consumer decision-making.

Response: We agree that standardized plan options continue to serve as one important

facet of HHS’ multifaceted strategy of reducing the rate of plan proliferation, the risk of plan

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choice overload, the frequency of suboptimal plan selection, and incidences of unexpected

financial harm for consumers. We believe that continuing to require issuers to offer these

standardized plan options, reducing the non-standardized plan option limit, introducing the non-

standardized plan option limit exceptions process (which is described in more detail in section

III.E.7 of the preamble of this final rule), continuing to differentially display these standardized

plan options on HealthCare.gov, and enhancing choice architecture and the user experience on

HealthCare.gov represent a comprehensive approach to improving Exchange coverage.

Regarding the comments recommending that we make “additional enhancements” to

choice architecture and the user experience on HealthCare.gov to further streamline consumer

decision-making, the commenters did not specify, and we are unsure, what they mean by

“additional enhancements.” However, as noted earlier, we agree that enhancing choice

architecture and the user experience on HealthCare.gov will help improve Exchange coverage,

including by streamlining consumer decision-making, and we will consider additional ways to do

so in the future.

Comment: Several commenters opposed continuing to require issuers to offer these

standardized plan options. These commenters explained that continuing to subject issuers to

these requirements inhibits issuer innovation in plan designs. These commenters explained that

issuers are most familiar with the unique health care needs of their enrollees and that they should

therefore be given the leeway to design plans that meet these needs. Several of these commenters

also recommended the cessation of the differential display of these standardized plan options,

explaining that these plans should not be given preferential treatment over non-standardized plan

options.

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Response: We disagree that continuing to require issuers in the FFEs and SBE-FPs to

offer standardized plan options will inhibit issuer innovation in plan design, even with the

reduction in the non-standardized plan option limit described in more detail in section III.E.7 of

the preamble to this final rule. This is because, in PY 2025 and subsequent plan years, issuers

will be permitted to offer two non-standardized plan options per product type, metal level,

inclusion of dental and/or vision benefit coverage, and service area, as well as additional non-

standardized plan options per product network type, metal level, inclusion of dental and/or vision

benefit coverage, and service area, so long as these additional plans substantially benefit

consumers with chronic and high-cost conditions and meet the other criteria for the exceptions

process finalized in this rule, as explained in more detail in section III.E.7 of the preamble to this

final rule.

We believe the fact that issuers continue to be permitted to offer these non-standardized

plan options ensures that consumers will continue to have access to a sufficiently broad range of

plan designs that meet their diverse needs and that issuers can continue to offer innovative plan

designs. We further believe that continuing to require issuers to offer standardized plan options,

reducing the non-standardized plan option limit, and introducing an exceptions process for this

limit strikes an appropriate balance between limiting the risk of plan choice overload while

simultaneously continuing to permit issuers a sufficient degree of flexibility to offer innovative

plan designs.

Further, we reiterate that issuers are not limited in the number of standardized plan

options they may offer, meaning issuers continue to retain the ability to offer standardized plan

options with different benefit packages, networks, and formulary variations, so long as they

conform to the required cost sharing parameters for these plans.

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Finally, differential display of these standardized plan options on HealthCare.gov does

not result in the preferential display of standardized plan options over non-standardized plan

options, and we believe that this differential display strikes an appropriate balance between

facilitating the plan selection process while still allowing consumers the opportunity to consider

all available non-standardized plan options. The form of differential display currently employed

on HealthCare.gov distinguishes standardized plan options from non-standardized plan options

by assigning standardized plan options a visual icon and a corresponding label. That form of

differential display also permits consumers to filter all available plan choices to see only

standardized plan options. However, consumers must actively choose to employ this filter.

Furthermore, this form of differential display does not elevate standardized plan options

to the top of the sorting feature over non-standardized plan options such that they would always

be the first plans that consumers see regardless of premium, as would be done if standardized

plan options were preferentially displayed. Thus, although standardized plan options are

distinguished from non-standardized plan options, the form of differential display currently

employed on HealthCare.gov allows consumers to easily see and compare all available plan

options, including non-standardized plan options.

Comment: Many commenters supported our approach to the design of these standardized

plan options for PY 2025. Specifically, commenters supported maintaining a high degree of

continuity in these plan designs year over year to reduce the risk of unnecessary disruption for

enrollees and issuers. Commenters explained that drastically modifying the plan designs from

year to year could result in avoidable financial harm if the cost sharing for benefits that

consumers depend upon increases unexpectedly, which may result in consumers forgoing

obtaining medical care and, consequently, experiencing poorer health outcomes.

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Response: We agree that maintaining a high degree of continuity in our standardized plan

options from year to year is desirable for several reasons. Specifically, we agree that having

consistent year-to-year plan designs allows enrollees to become better acquainted with these

plans, increasing both consumer understanding and financial certainty. We also agree that

drastically modifying the plan designs from year to year could result in avoidable financial harm

if the cost sharing for benefits that consumers depend upon increases unexpectedly, which could

also result in consumers forgoing obtaining medical care. Although we believe that, today, the

benefits that may arise from making major modifications to these plan designs are outweighed by

the risk that doing so could result in undue burden for issuers and enrollees, we may consider

making major modifications to the design of these standardized plan options in future

rulemakings if our assessment changes.

Comment: Several commenters made specific recommendations regarding particular

aspects of the standardized plan options. Specifically, several of these commenters recommended

lowering the maximum out-of-pocket values in these plan designs. We clarify that in this

context, a plan’s “maximum out-of-pocket” value refers to the plan’s specific annual limitation

on cost sharing value. These commenters explained that a high maximum out-of-pocket

limitation on cost sharing places unreasonable burden on consumers with chronic and high-cost

conditions. These commenters also explained that lowering the maximum out-of-pocket

limitation on cost sharing values for these plans would advance health equity by reducing the

amount that consumers from disadvantaged populations, whom commenters explained are

disproportionately affected by chronic and high-cost conditions, must pay for the treatment of

these conditions.

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Several commenters also recommended lowering the deductibles and expanding pre-

deductible coverage to include additional benefit categories. These commenters explained that

high deductibles often act as an obstacle that prevents consumers from obtaining the health care

they need. These commenters further explained that lowering the deductibles for these plans and

expanding pre-deductible coverage would reduce barriers to access to health care, reducing the

risk of consumers forgoing obtaining medical care and, consequently, experiencing poorer health

outcomes.

Several commenters supported the decision to continue including copayments instead of

coinsurance rates for a range of benefit categories within these plan designs. Several of these

commenters recommended expanding the use of copayments to apply to a greater number of

benefit categories. These commenters explained that utilizing copayments instead of coinsurance

rates increases financial certainty for consumers when they obtain the health care they need.

Other commenters recommended standardizing the cost-sharing parameters for additional benefit

categories not already standardized within these plan designs to further enhance plan

comparability and reduce financial uncertainty. Several commenters recommended including

health savings account (HSA)-compliant high-deductible health plan (HDHP) designs in each of

these sets of standardized plan options.

Response: We acknowledge that high maximum out-of-pocket limitation on cost sharing

values, high deductibles, and limited pre-deductible coverage can sometimes act as barriers that

prevent consumers, including those with chronic and high-cost conditions, from obtaining the

health care they need. We also acknowledge that coinsurance rates can potentially increase

consumer uncertainty regarding how much particular services may cost.

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However, due to AV constraints arising from the permissible de minimis range restriction

for each metal level in accordance with § 156.140(c)(2), we are unable to substantially lower the

maximum out-of-pocket limitation or deductible values, expand pre-deductible coverage to

include additional benefits, or include copayments as the form of cost sharing for a broader range

of benefit categories without a corresponding increase in the AV of each plan. Making some

combination of these modifications would increase the generosity of these plans, potentially to

the point of each plan’s AV exceeding the permissible de minimis range for its respective metal

level. Furthermore, even if making some combination of these changes resulted in an AV within

the permissible de minimis range for each metal level, there would still be a corresponding

increase in premiums that would render these plans costlier for consumers and potentially

uncompetitive.

Finally, we note that although it may be possible to make some combination of these

modifications to these plan designs while maintaining an AV near the floor of the de minimis

range for each metal level, doing so would require a corresponding increase in cost sharing for

other benefits or subjecting additional benefits to the deductible to offset this increase in

generosity. Since the benefits that we have exempted from the deductible as well as the benefits

for which we have reduced cost sharing are some of the most frequently utilized benefits, we

believe that the disadvantages of subjecting these benefits to the deductible or increasing the cost

sharing for these benefits would outweigh the benefit that may arise from exempting other

benefits from the deductible or reducing cost sharing for other benefits. Those disadvantages

include risks that these plans would become uncompetitive and that consumers would forego

obtaining medical services covered by these frequently utilized benefits which would be newly

subject to the deductible or have increased cost sharing.

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We also note that we are not standardizing the cost sharing for additional benefit

categories beyond those already included in these plan designs since EHB-benchmark plans vary

significantly by State, and we do not wish to standardize the cost sharing for benefits that issuers

may not be required to offer in particular States. We also note that we have not included an

HSA-eligible HDHP in these sets of plan designs due to decreased enrollment in these plans in

the last several plan years, which suggests they may be less competitive and in-demand than

traditional health insurance plans.

We thus declined to include HSA-eligible HDHPs in these sets of plan designs because

our approach is to design standardized plan options that reflect the most popular QHPs offered

through the Exchanges (87 FR 27319). We also declined to include an HSA-eligible HDHP in

these sets of plan designs because we have not included these types of plans in the sets of

standardized plan options for PY 2023 or PY 2024, and we want to maintain a high degree of

continuity with the standardized plan option policies and designs finalized in the 2023 and 2024

Payment Notices. However, we note that QHP issuers in the FFEs and SBE-FPs continue to be

permitted to offer HSA-eligible HDHPs as non-standardized plan options, if so desired.

Comment: Many commenters supported expanding the requirement for issuers to offer

standardized plan options to also apply to State Exchange issuers in a future plan year. Several of

these commenters supported requiring all State Exchange issuers to offer some version of

standardized plan options – including those issuers that are offering QHPs through already-

established State Exchanges and are not currently subject to such a requirement. Other

commenters supported requiring States that intend to transition their Exchange model type from

an FFE or SBE-FP to a State Exchange to require their issuers to offer standardized plan options

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as a condition of that transition, while exempting issuers that are currently offering QHPs

through State Exchanges and are not currently subject to such a requirement.

Many commenters pointed to the fact that many State Exchange issuers are already

required to offer standardized plan options, which commenters argued demonstrates the utility of

standardized plan options. These commenters further explained that the benefits of standardized

plan options should not be limited to consumers purchasing health insurance coverage through

FFEs and SBE-FPs – and instead, that these benefits should also be extended to consumers

purchasing health insurance coverage through State Exchanges. Several of these commenters

explained that the trend of plan proliferation that has been present in the FFEs and SBE-FPs for

several years has also been present in many State Exchanges. These commenters thus explained

that HHS should employ the same measures to address plan proliferation in State Exchanges that

it utilizes in the FFEs and SBE-FPs.

Conversely, many commenters opposed requiring State Exchange issuers to offer some

version of standardized plan options in a future plan year. Some of these commenters opposed

expanding this requirement to all State Exchange issuers, while others only opposed expanding

this requirement to State Exchange issuers not already subject to such a requirement. Other

commenters only opposed expanding this requirement to State Exchange issuers as a condition

of a State transitioning its Exchange model type from an FFE or SBE-FP to a State Exchange in

a future plan year.

These commenters explained that expanding this requirement to apply to State Exchange

issuers would unnecessarily constrain a State’s flexibility in operating its Exchange. These

commenters highlighted the importance of the flexibility inherent to the State Exchange model

type as one of the primary factors that motivates States to pursue this model type. These

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commenters further explained that requiring State Exchange issuers to offer some version of

standardized plan options would make it more difficult for issuers to tailor health plans to meet

the unique needs of each State’s population. These commenters also explained that State

regulators’ and issuers’ experience with and insight into their respective individual markets

makes them uniquely suited to determine whether standardized plan options fit the health care

coverage needs of their consumers.

Response: We acknowledge the potential advantages and disadvantages of expanding the

requirement that QHP issuers offer standardized plan options to State Exchange issuers,

including the advantages and disadvantages of expanding this requirement to all State Exchange

issuers not already subject to such a requirement, as well as the advantages and disadvantages of

expanding this requirement only to issuers that offer QHPs through an Exchange that transitions

from an FFE or SBE-FP to a State Exchange in a future plan year.

Consistent with our rationale for not expanding the requirement that QHP issuers offer

standardized plan options to State Exchange issuers in the 2023 Payment Notice (87 FR 27311),

we continue to believe that expanding this requirement to State Exchange issuers would

unnecessarily constrain a State’s flexibility in operating its Exchange. We further continue to

believe that State Exchanges’ experience with and insight into their respective individual markets

makes them uniquely suited to determine whether standardized plan options fit the health care

coverage needs of their consumers and, if so, how those plans should be designed. In addition,

imposing duplicative standardized plan option requirements on issuers in State Exchanges that

already have existing State standardized plan option requirements runs counter to our goals of

enhancing the consumer experience, increasing consumer understanding, simplifying the plan

selection process, combatting discriminatory benefit designs, and advancing health equity.

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We note that we will consider the potential advantages and disadvantages of expanding

the requirement that QHP issuers offer standardized plan options to State Exchange issuers,

including the advantages and disadvantages of expanding this requirement to all State Exchange

issuers not already subject to such a requirement, as well as the advantages and disadvantages of

expanding this requirement only to issuers that offer QHPs through an Exchange that transitions

from an FFE or SBE-FP to a State Exchange in a future plan year. These considerations may

inform our approach in any future rulemaking regarding standardized plan options.

7. Non-Standardized Plan Option Limits (§ 156.202)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82606), HHS proposed to exercise its authority under sections 1311(c)(1) and

1321(a)(1)(B) of the ACA to amend § 156.202 by adding paragraphs (d) and (e) to introduce an

exceptions process that would allow issuers to offer additional non-standardized plan options per

product network type, metal level, inclusion of dental and/or vision benefit coverage, and service

area for PY 2025 and subsequent plan years, if issuers demonstrate that these additional non-

standardized plans have specific design features that would substantially benefit consumers with

chronic and high-cost conditions. Section 1311(c)(1) of the ACA directs the Secretary to

establish criteria for the certification of health plans as QHPs. Section 1321(a)(1)(B) of the ACA

directs the Secretary to issue regulations that set standards for meeting the requirements of title I

of the ACA for, among other things, the offering of QHPs through such Exchanges.

In the 2024 Payment Notice (88 FR 25855 through 25865), we finalized requirements

limiting the number of non-standardized plan options that issuers of QHPs can offer through

Exchanges on the Federal platform (including SBE-FPs) to four non-standardized plan options

per product network type (as described in the definition of “product” at § 144.103), metal level

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(excluding catastrophic plans), inclusion of dental and/or vision benefit coverage, and service

area for PY 2024, and two for PY 2025 and subsequent plan years. In the 2025 Payment Notice

proposed rule, we did not propose to amend these non-standardized plan option limits at §

156.202(a) through (b).

In the 2024 Payment Notice, we explained that we phased in this limit over 2 plan years

(instead of adopting the limit of two in PY 2024) primarily to decrease the risk of disruption for

both issuers and enrollees and to provide increased flexibility to issuers. We explained that many

commenters supported adopting a more gradual approach in which the number of non-

standardized plan options that issuers can offer is incrementally decreased over a span of 2 plan

years, instead of adopting a limit of two for PY 2024. We referred readers to the preamble of the

2024 Payment Notice discussing § 156.202 (88 FR 25855 through 25865) for more detailed

discussion of our approach to non-standardized plan option limits for PY 2024 and related

background.

As a result of the limit on the number of non-standardized plan options that issuers can

offer through the Exchanges being reduced from four in PY 2024 to two in PY 2025, in the

proposed rule (88 FR 82607), we estimated (based on then-current PY 2024 plan offering data)

that the weighted average number of non-standardized plan options available to each consumer

would be reduced from 67.3 in PY 2024 to approximately 41.7 in PY 2025. We also estimated

that the weighted average total number of plans, including both standardized and non-

standardized plan options, available to each consumer would be reduced from 91.8 in PY 2024 to

approximately 66.2 in PY 2025.

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The weighted average total number of plans available to each consumer was 107.8 in PY 2022, prior to the

introduction of standardized plan option requirements, and 113.6 in PY 2023, the first year that standardized plan

option requirements were introduced.

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Furthermore, in the proposed rule, we estimated that approximately 28,275 of the total

109,229 non-standardized plan option plan-county combinations

305

(25.9 percent) would be

discontinued as a result of this limit in PY 2025. Relatedly, based on trended enrollment data

from PY 2023 (which we relied on for purposes of this estimate because PY 2024 enrollment

data was unavailable when we finalized the proposed rule), we estimated that approximately 1.78

million of the 14.94 million enrollees on the FFEs and SBE-FPs (11.9 percent) would be affected

by these discontinuations in PY 2025.

However, based on updated PY 2024 plan offering and enrollment data, we now estimate

that the weighted average number of non-standardized plan options available to each consumer

will be reduced from 71.4 in PY 2024 to approximately 48.5 in PY 2025. Additionally, we

estimate that the weighted average total number of plans, including standardized and non-

standardized plan options, available to each consumer will be reduced from 99.5 in PY 2024 to

approximately 76.6 in PY 2025.

Furthermore, based on this updated data, we estimate that approximately 27,660 of the

total 87,620 non-standardized plan option plan-county combinations (31.6 percent) will be

discontinued as a result of this limit in PY 2025. Relatedly, we estimate that approximately 1.43

million of the 16.34 million enrollees on the FFEs and SBE-FPs (8.7 percent) will be affected by

these discontinuations in PY 2025.

In the proposed rule (88 FR 82607), we proposed an exceptions process at new § 156.202(d) and

(e) that would permit FFE and SBE-FP issuers to offer more than two non-standardized plan

305

Plan-county combinations are the count of unique plan ID and FIPS code combinations. This measure was used

because a single plan may be available in multiple counties, and specific limits on non-standardized plan options or

specific dollar deductible difference thresholds may have different impacts on one county where there are four plans

of the same product network type and metal level versus another county where there are only two plans of the same

product network type and metal level, for example.

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options per product network type, metal level, inclusion of dental and/or vision benefit coverage,

and service area for PY 2025 and subsequent plan years, if issuers demonstrate that these

additional non-standardized plans beyond the limit at § 156.202(b) have specific design features

that would substantially benefit consumers with chronic and high-cost conditions. We further

proposed that issuers would not be limited in the number of exceptions permitted per product

network type, metal level, inclusion of dental and/or vision benefit coverage, and service area, so

long as they meet specified criteria.

Specifically, we stated in the proposed rule that pursuant to proposed § 156.202(d),

issuers would be permitted to offer more than two non-standardized plan options if these

additional plans’ cost sharing for benefits pertaining to the treatment of chronic and high-cost

conditions (including benefits in the form of prescription drugs, if pertaining to the treatment of

the condition(s)) is at least 25 percent lower, as applied without restriction in scope throughout

the plan year, than the cost sharing for the same corresponding benefits in an issuer’s other non-

standardized plan option offerings in the same product network type, metal level, and service

area.

We stated that the reduction could not be limited to a part of the year, or an otherwise

limited scope of benefits. Instead, we stated that issuers would be required to apply the reduced

cost sharing for these benefits any time the covered item or service is furnished. For example, we

explained that an issuer could not reduce cost sharing for the first three office visits or drug fills

and then increase it for remaining visits or drug fills. Furthermore, we stated that issuers would

be prohibited from conditioning reduced cost sharing for these benefits on a particular diagnosis.

That is, we stated that although the benefit design would have reduced cost sharing to address

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one or more articulated conditions, the reduced cost sharing must be available to all enrolled in

the plan who receive the service(s) covered by the benefit.

We explained in the proposed rule that no other plan design features (such as the

inclusion of additional benefit coverage, different provider networks, different formularies, or

reduced cost sharing for benefits provided through the telehealth modality) would be evaluated

under this exceptions process, meaning no other differences in plan design features would allow

issuers to be excepted from the limit to the number of non-standardized plan options offered per

product network type, metal level, inclusion of dental and/or vision benefit coverage, and service

area.

Additionally, we stated in the proposed rule that, as part of this exceptions process,

issuers would be required, under proposed § 156.202(e), to submit a written justification in a

form and manner and at a time prescribed by HHS that provides additional details and explains

how the particular plan design the issuer desires to offer above the non-standardized plan option

limit of two satisfies the proposed standards for receiving an exception to this limit – namely,

how the particular plan would substantially benefit consumers with chronic and high-cost

conditions. We noted that we would provide issuers with a justification form upon publication of

the final rule and when the QHP templates for the applicable plan year are released.

We proposed that this justification form would ask the issuer to (1) identify the specific

condition(s) for which cost sharing is reduced, (2) explain which benefits would have reduced

annual enrollee cost sharing (as opposed to reduced cost sharing for a limited number of visits)

for the treatment of the specified condition(s) by 25 percent or more relative to the cost sharing

for the same corresponding benefits in an issuer’s other non-standardized plan offerings in the

same product network type, metal level, and service area, and (3) explain how the reduced cost

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sharing for these services pertains to clinically indicated guidelines for treatment of the specified

chronic and high-cost condition(s).

Additionally, we stated that to allow the Exchange adequate time to review these

justification forms, issuers would need to submit their QHP application in a form and manner

and at a time specified by us. We further stated that we anticipated requesting that issuers submit

QHP applications for non-standardized plan options that exceed the two-plan limit by the QHP

certification Early Bird deadline.

We proposed to allow exceptions only for plans that meet the previously described

requirements for benefits pertaining to the treatment of conditions that are chronic and high-cost

in nature. We clarified that, for purposes of this standard, chronic conditions are those that have

an average duration of one year or more and require ongoing medical attention or limit activities

of daily living, or both.

306

We also clarified that, for purposes of this standard, high-cost

conditions are those that account for a disproportionately high portion of total Federal health

expenditures. We noted that the four chronic and high-cost conditions included in the

prescription drug adverse tiering for PY 2025 (specifically, hepatitis C virus, HIV, multiple

sclerosis, and rheumatoid arthritis) are examples of conditions that we would consider to be

chronic and high-cost in nature for purposes of this standard.

However, for purposes of this standard, we clarified that we would also consider

additional conditions to be chronic and high-cost in nature. We stated that additional

representative examples of conditions that we would consider to be chronic and high-cost in

nature for purposes of this proposal include Alzheimer’s disease, kidney disease, osteoporosis,

heart disease, diabetes, and all kinds of cancer. We further stated that examples of conditions that

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National Center for Chronic Disease Prevention and Health Promotion. About Chronic Diseases, July 21, 2022,

https://www.cdc.gov/chronicdisease/about/index.htm.

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we would not consider chronic and high-cost in nature would be those that are generally acute in

nature, including bronchitis, the flu, pneumonia, strep throat, and respiratory infections.

We proposed this approach for several reasons. Considering that chronic and high-cost

conditions (including the examples previously discussed) affect a comparatively low number of

consumers, we stated that we anticipated that a significant portion of the non-standardized plan

options that may be discontinued due to having comparatively lower rates of enrollment among

each issuer’s portfolio of offerings could potentially be those that have plan design features that

benefit consumers with these chronic and high-cost conditions (such as plans with some

combination of enhanced pre-deductible coverage for relevant services, reduced cost sharing for

relevant benefits, lower maximum out-of-pocket limitations, lower deductibles, more

comprehensive provider networks with more specialized providers, more generous formularies

with more specialized medications, higher AVs, and higher premiums).

We explained in the proposed rule (88 FR 82608) that even with comparatively lower

rates of enrollment, these non-standardized plan options can still fulfill an important role in

addressing chronic and high-cost conditions, which are responsible for a disproportionate amount

of health care expenditures.

307

Thus, we stated that this proposed exceptions process could play

an important role in enhancing the quality of life for those affected by these conditions,

combatting health disparities, advancing health equity, and reducing health care expenditures.

We further stated that introducing such an exceptions process while also reducing the non-

standardized plan option limit to two for PY 2025 would balance the dual aims of reducing the

risk of plan choice overload while simultaneously ensuring that truly innovative plan designs that

may benefit consumers with chronic and high-cost conditions can continue to be offered.

307

Waters, H, & Graf, M. (2018). The Cost of Chronic Disease in the U.S. Milken Institute.

https://milkeninstitute.org/sites/default/files/reports-pdf/ChronicDiseases-HighRes-FINAL2.pdf.

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We stated in the proposed rule that not limiting the number of permitted exceptions per

issuer, product network type, metal level, inclusion of dental and/or vision benefit coverage, and

service area (instead of allowing exceptions for only two such plans, for example) would ensure

that issuers are not restricted in the number of innovative plans they can offer. We noted that this

would in turn help ensure that a greater portion of consumers with chronic and high-cost

conditions have access to plans that reduce barriers to access to care for services critical to the

treatment of their conditions.

We further stated in the proposed rule (88 FR 82608), that although issuers would not be

limited in the number of exceptions they may be granted under this proposal, we anticipated that

most issuers would determine that the burden of creating and certifying additional non-

standardized plans intended to benefit a comparatively small population of consumers would

outweigh the benefit of doing so. We noted that we also previously solicited comments on

innovative plan designs, such as in the 2024 Payment Notice proposed rule.

We stated that in response to this comment solicitation, we received only two examples

of plan designs that commenters considered to be innovative in nature: plan designs that have

reduced cost sharing for benefits provided through telehealth, and plan designs that have reduced

cost sharing for services and medications related to the treatment of diabetes (such as in the form

of insulin). We clarified that the former example (reduced cost sharing for benefits provided

through the telehealth) would not qualify for this exceptions process, while the latter example

(reduced cost sharing for benefits related to the treatment of diabetes) could potentially qualify

for this exceptions process, if the specified criteria are met.

Regardless, we stated that given that we only received two examples of plan designs that

particular issuers considered to be innovative in nature, we did not anticipate that issuers would

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seek to have a substantial number of non-standardized plan options excepted from the non-

standardized plan option limit. As a result, we explained that we did not anticipate this proposal

would result in an increased risk of plan choice overload for consumers interested in plans with

better benefits for qualifying conditions.

We stated in the proposed rule (88 FR 82608), that permitting exceptions solely based on

whether a non-standardized plan option has reduced cost sharing of 25 percent or more for

benefits pertaining to the treatment of chronic and high-cost conditions, as opposed to

considering other factors (such as specialized networks, specialized formularies, or specialized

benefit packages), is appropriate since the current standardized plan option requirements do not

limit issuers in the number of standardized plan options they can offer per product network type,

metal level, or service area.

However, we noted that standardized plan option requirements do not permit issuers to

deviate from the specified cost sharing parameters for standardized plan options – meaning

issuers would not be able to offer standardized plan options with reduced cost sharing of 25

percent or more for the treatment of specific conditions if the benefit category’s cost sharing

does not comply with the specified standards. Thus, we noted that under the current standardized

plan option framework, issuers already have the flexibility to offer specialized provider

networks, formularies, and benefit packages (including those that decrease barriers to access for

the treatment of chronic and high-cost conditions – such as by including additional specialized

providers, prescription drugs, or benefits) as standardized plan options.

We further stated that the cost sharing difference threshold of 25 percent or more is

appropriate since we have observed that cost sharing differences below this threshold represent

normal variation within a particular metal level, while differences at or above this threshold are

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more often associated with cost sharing differences between different metal levels. We do not

believe that a difference in a cost sharing amount that is of the same magnitude as normal

variation within a particular metal level (specifically, less than 25 percent) would warrant being

excepted from the non-standardized plan option limit.

We noted that under this proposed exceptions process, if additional plans were permitted

to be offered in excess of the limit of two non-standardized plan options, in accordance with the

guaranteed availability requirements at § 147.104(a), these plans would also be required to be

made available on the same basis to consumers without these chronic and high-cost conditions.

Further, we emphasized that these plans would be prohibited from discriminating in accordance

with the nondiscrimination requirements at §§ 147.104(e), 156.125, and 156.200(e).

308

We noted

that to meet these non-discrimination requirements, these plans would be required to apply

preferential cost sharing to all enrolled in the plan, without regard to diagnosis.

Furthermore, although we acknowledged that non-standardized plan options excepted under this

proposal would primarily benefit consumers with chronic and high-cost conditions, we stated

that a sufficiently satisfactory range of both non-standardized and standardized plan options

currently exist that are primarily intended for consumers without chronic and high-cost

conditions. As a result, we explained that were not concerned that any risk of discrimination

created by this exceptions process would negatively impact consumers, including but not limited

to consumers with chronic and high-cost conditions.

We sought comment on this proposed approach. Specifically, we sought comment on the

proposed exceptions process, and whether there should be any exceptions at all to the limit on

308

The nondiscrimination requirements at § 147.104(e) apply to health insurance issuers offering non-grandfathered

group or individual health insurance coverage, and their officials, employees, agents, and representatives. The

nondiscrimination requirements at § 156.200(e) apply to QHPs in the individual and small-group markets, and the

nondiscrimination requirements at § 156.125(b) apply to issuers providing EHB.

CMS-9895-F 522

the number of non-standardized plan options that issuers can offer through the Exchanges. In

addition, we noted that we were particularly interested in comments on the following topics:

whether exceptions should be permitted only for a specific set of chronic and high-cost

conditions as opposed to any chronic and high-cost condition; whether there are other plan

attributes we should consider outside of sufficiently differentiated cost sharing, such as the

inclusion of alternative payment models or sufficiently differentiated benefits, networks, or

formularies; the specific difference threshold for these cost-sharing amounts, including whether a

threshold higher or lower than 25 percent would be more appropriate; the specific components of

the justification form that issuers would be required to submit; the deadline for issuers to submit

the materials necessary for us to consider whether non-standardized plan options should be

excepted from the limit; and whether we should require that non-standardized plan options

excepted from the limit be visually differentiated from other non-standardized plan options not

excepted from the limit – such as by differentially displaying these excepted plans on

HealthCare.gov, or by requiring these excepted plans to adopt a particular plan marketing name

that accurately conveys how these plans would substantially benefit consumers with chronic and

high-cost conditions (for example, by requiring that an excepted plan that reduces cost sharing

for the treatment of diabetes have a corresponding plan marketing name related to diabetes).

We also sought comment on other ways to balance the dual aims of reducing the risk of

plan choice overload while simultaneously ensuring that truly innovative plan designs that may

benefit consumers with chronic and high-cost conditions can continue to be offered. Specifically,

we sought comment on whether we should limit the number of exceptions available such that

issuers are only permitted to offer one or several additional plans pursuant to the proposed

exceptions process above the limit of two non-standardized plans – as opposed to not limiting the

CMS-9895-F 523

number of exceptions permitted per product network type, metal level, inclusion of dental and/or

vision benefit coverage, and service area.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing this provision with the following modifications. In

particular, we are finalizing at new § 156.202(d)(1) that a 25 percent reduction in cost sharing for

benefits pertaining to the treatment of chronic and high-cost conditions will be evaluated at the

level of total out-of-pocket costs for the treatment of the chronic and high-cost condition for a

population of enrollees with the relevant chronic and high-cost condition.

In addition, we are moving the requirement that the reduction in cost sharing must not be

limited to a part of the year, or an otherwise limited scope of benefits, from § 156.202(d) in the

proposed regulation text to § 156.202(d)(2) in the final regulation text. We are also moving the

requirement that the reduction in cost sharing for these benefits cannot be conditioned on a

consumer having a particular diagnosis from § 156.202(d) in the proposed regulation text to §

156.202(d)(3) in the final regulation text.

We are also finalizing at new § 156.202(d)(4) that the required reduction in cost sharing

only applies to the standard variant of the plan for which an issuer seeks an exception, and not to

the income-based cost-sharing reduction plan variations required by § 156.420(a), nor to the zero

and limited cost-sharing plan variations required by § 156.420(b). In addition, we are finalizing

at new § 156.202(d)(5) that issuers are limited to one exception per product network type, metal

level, inclusion of dental and/or vision benefit coverage, and service area, for each chronic and

high-cost condition. We are also moving the requirement that the chronic and high-cost

conditions that may qualify an issuer for this exception will be determined by HHS from §

156.202(d) in the proposed regulation text to § 156.202(d)(6) in the final regulation text.

CMS-9895-F 524

Furthermore, we are modifying the regulation text describing requirements related to the

written justification issuers will be required to submit to utilize this exceptions process at §

156.202(e)(1) through (3), to more accurately reflect how the reduction in cost sharing will be

evaluated under this exceptions process. Finally, we are adding a requirement at § 156.202(e)(4)

for issuers to submit a corresponding actuarial memorandum demonstrating the underlying

actuarial assumptions made in the design of the plan the issuer is requesting to except, which

includes a confirmatory actuarial opinion. These modifications are discussed in greater detail

later in this section.

In addition, we note that we no longer anticipate requesting that issuers submit exception

requests and accompanying justification forms by the QHP certification Early Bird deadline.

Instead, we anticipate that the exception request and justification form submission deadline for

issuers seeking to utilize this exceptions process will be the initial submission deadline for QHP

certification applications, aligning the exception request deadline with the submission deadlines

for QHP certification applications for standardized and non-standardized plan option offerings.

We also clarify that the example included in the 2024 Payment Notice that illustrated

issuer flexibility to vary the inclusion of dental and/or vision benefit coverage in accordance with

§ 156.202(c) under the non-standardized plan option limits at § 156.202(a) through (b) failed to

distinguish between the adult and pediatric dental benefit coverage categories.

In the 2024 Payment Notice (88 FR 25858), we stated that for PY 2025, for example, an

issuer will be permitted to offer two non-standardized gold HMOs with no additional dental or

vision benefit coverage, two non-standardized gold HMOs with additional dental benefit

coverage, two non-standardized gold HMOs with additional vision benefit coverage, and two

non-standardized gold HMOs with additional dental and vision benefit coverage, as well as two

CMS-9895-F 525

non-standardized gold PPOs with no additional dental or vision benefit coverage, two non-

standardized gold PPOs with additional dental benefit coverage, two non-standardized gold

PPOs with additional vision benefit coverage, and two non-standardized gold PPOs with

additional dental and vision benefit coverage, in the same service area.

However, in PY 2024, issuers had the ability to vary the inclusion of dental and/or vision

benefit coverage (including varying the inclusion of the distinct adult and pediatric dental benefit

coverage categories), such that issuers could offer plans in the manner reflected in Table 13,

instead of in the more limited manner reflected in the incomplete example in the 2024 Payment

Notice.

We affirm that issuers continue to retain this flexibility for PY 2025. Thus, under the

non-standardized plan option limit of two for PY 2025, if an issuer desires to offer the theoretical

maximum number of plans, and if that issuer varies the inclusion of dental and/or vision benefit

coverage in these plans in accordance with the flexibility provided for at § 156.202(c)(1) through

(3), that issuer could offer a theoretical maximum of 16 plans in a given product network type,

metal level, and service area in the manner demonstrated in Table 13. Furthermore, if an issuer

offers QHPs with two product network types (for example, HMO and PPO), that issuer could

offer a theoretical maximum of 32 plans in a given metal level and service area in the manner

demonstrated in Table 13.

TABLE 13. Issuer Flexibility Under the Non-Standardized Plan Option Limit of Two for

PY 2025 and Subsequent Years

Plan

Network

Type

Cost Sharing

Structure

Adult Dental

Pediatric Dental

Adult Vision

HMO

Covered

HMO

Covered

HMO

Covered

HMO

Covered

HMO

Covered

CMS-9895-F 526

HMO

Covered

HMO

Covered

HMO

Covered

HMO

Covered

HMO

Covered

HMO

Covered

HMO

Covered

HMO

Covered

HMO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

PPO

Covered

Below, we summarize and respond to public comments received on the proposed non-

standardized plan option limit exceptions process and the related issues we sought comment on.

Comment: Many commenters supported introducing an exceptions process that would

allow issuers to offer non-standardized plan options exceeding the limit of two if the specified

requirements are met. Several commenters explained that reducing the non-standardized plan

option limit from four in PY 2024 to two in PY 2025 will cause issuers to discontinue plans with

lower enrollment, which would likely be plans with designs that are attractive to a smaller

number of enrollees that have relatively less common and high-cost health care needs.

Commenters thus explained that many of the plans that would likely be discontinued would be

those that benefit consumers with chronic and high-cost conditions. As such, commenters

explained that permitting issuers to offer additional non-standardized plan options that provide

CMS-9895-F 527

targeted coverage specifically for medically complex populations with chronic and high-cost

conditions supports health equity and allows for more targeted innovation by issuers, while still

achieving the reduction in plan proliferation HHS has sought.

Many of these commenters noted that individuals with chronic and high-cost conditions

are especially price-sensitive, and that, relative to the average enrollee, these individuals often

encounter significantly higher out-of-pocket costs associated with the higher rates of utilization

of the services related to treatment of these conditions. Commenters thus explained that plans

reducing cost sharing for these services would allow consumers to more easily obtain the

medical care they need, resulting in improved patient outcomes. Commenters further explained

that this exceptions process could play an important role in advancing health equity by reducing

cost sharing for conditions that disproportionately affect disadvantaged populations. Commenters

specifically cited diabetes, COPD, HIV, hepatitis C, and rheumatoid arthritis as chronic and

high-cost conditions that could be effectively targeted by issuers under this exceptions process.

Conversely, many commenters opposed introducing an exceptions process. Several of

these commenters explained that introducing an exceptions process that would allow issuers to

exceed the non-standardized plan option limit would contradict the action HHS has taken to

reduce the rate of plan proliferation. Additionally, many commenters explained that prioritizing

the treatment of chronic and high-cost conditions does not necessarily require HHS to permit

issuers to offer additional non-standardized plans above the non-standardized plan option limit.

They explained that plans could still be designed to include specialized benefits and cost sharing

for those with chronic and high-cost health conditions within the non-standardized plan option

limit.

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Many commenters also explained that plans designed specifically to reduce cost sharing

for services pertaining to the treatment of chronic and high-cost conditions are likely to involve

trade-offs in the form of increasing cost sharing for other services. Commenters noted that

consumers with chronic and high-cost conditions are still likely to experience other health needs

and may be unlikely to realize a net benefit from the excepted plan if that plan precludes them

from appropriately generous cost sharing for a broader set of services.

Response: We acknowledge that reducing the non-standardized plan option limit from

four in PY 2024 to two in PY 2025 will cause issuers to discontinue plans, which will likely be

those plans with lower rates of enrollment. We also acknowledge that these discontinued plans

will likely be those with designs that are attractive to a smaller number of enrollees that have

relatively less common and high-cost health care needs.

However, we agree that reducing the non-standardized plan option limit while

simultaneously introducing a targeted exceptions process that will allow issuers to offer

additional non-standardized plan options that substantially benefit consumers with chronic and

high-cost conditions, including consumers who have relatively less common and high-cost health

care needs, strikes an appropriate balance between reducing plan proliferation and the risk of

plan choice overload while still permitting issuers a sufficient degree of flexibility to innovate as

well as a sufficiently ensure a diverse range of plan offerings for consumers to select from.

We also agree that reducing cost sharing for benefits that pertain to the treatment of

chronic and high-cost conditions will significantly reduce the total out-of-pocket costs for

consumers with these conditions. We further agree that this reduction in out-of-pocket costs will

allow consumers to more easily obtain the medical care they need, resulting in improved health

outcomes. We also agree that improving health outcomes for consumers with chronic and high-

CMS-9895-F 529

cost conditions that disproportionately affect disadvantaged populations – including diabetes,

COPD, HIV, hepatitis C, and rheumatoid arthritis – would advance health equity. Accordingly,

we believe that the risk that these types of plans will be discontinued as a result of the reduction

in the non-standardized plan option limit from four in PY 2024 to two in PY 2025 is sufficiently

mitigated by the targeted exceptions process we are finalizing in this rule.

We also believe the criteria that we have set forth in the exceptions process finalized in

this rule, such as requiring issuers to demonstrate that the additional plans’ cost sharing for

benefits pertaining to the treatment of chronic and high-cost conditions is at least 25 percent

lower than the cost sharing for the same corresponding benefits in an issuer’s other non-

standardized plan option offerings in the same product network type, metal level, and service

area, ensures that any excepted plans will be meaningfully different from other non-standardized

plan options. We also believe these criteria will ensure that this exceptions process will not be

utilized as a means to simply offer duplicative non-standardized plan options similar to existing

plan offerings. Furthermore, in the last several plan years, the majority of FFE and SBE-FP

issuers have not offered plans that would have been eligible for this exceptions process.

Although it is our hope that issuers will take advantage of this exceptions process as a

means of advancing health equity, we also anticipate that issuers will carefully consider applying

for such exceptions in general, particularly given the stringent requirements of the exceptions

process. Furthermore, we note, in particular, that under § 156.202(d)(5), issuers are limited to

one exception per product network type, metal level, inclusion of dental and/or vision benefit

coverage, and service area, for each chronic and high-cost condition. Thus, we believe there will

be a very limited increase in the number of non-standardized plan options as a result of this

CMS-9895-F 530

exceptions process, and that the risk of the exceptions process causing a meaningful increase in

plan proliferation is very low.

We also recognize the importance of plans designed specifically to improve cost sharing

for services pertaining to the treatment of chronic and high-cost conditions, and we acknowledge

the trade-offs that will likely be required for issuers to create and maintain these plans – namely,

increased cost sharing for other services. We also acknowledge that plans could still technically

be designed to include specialized benefits and cost sharing for those with chronic and high-cost

health conditions within the non-standardized plan option limit.

However, we note that the plans that will likely be discontinued as a result of the

reduction in the non-standardized plan option limit for PY 2025 and subsequent years will be

those tailored to appeal to a smaller segment of the population – such as those with chronic and

high-cost conditions. Thus, we believe this targeted exceptions process will effectively

counterbalance the impact that the reduction of this limit may have on these types of plans and

the consumers who rely on them. Consumers without the chronic and high-cost conditions

targeted by plans that are likely to be discontinued can continue to select among the many

available plans that have broader appeal.

Comment: Several commenters recommended limiting the number of exceptions that

each issuer may be permitted under this process. These commenters explained that the intent of

the non-standardized plan option limit is to mitigate the risk of uncontrolled plan proliferation

that leads to consumer confusion, and that to not limit the number of potential exceptions each

issuer may receive would counteract this intent. Relatedly, many commenters expressed concern

that the number of non-standardized plan options in PY 2025 could exceed the number of non-

standardized plan options in PY 2024 without a limit on the number of exceptions.

CMS-9895-F 531

Conversely, several commenters opposed limiting the number of potential exceptions.

These commenters stated that limiting the number of potential exceptions permitted for each

issuer would unnecessarily restrict issuer innovation and may harm consumers who have a

comparatively less common chronic and high-cost condition that issuers may choose to not target

with this exceptions process, which could hinder efforts to advance health equity.

Response: In the proposed rule (88 FR 82609), we proposed that issuers would not be

limited in the number of excepted plans they could offer but solicited comment on the utility of

limiting the number of potential exceptions. We considered such a limitation at the time of the

proposed rulemaking.

Upon consideration of comments, we share commenters’ concerns that permitting an

unlimited number of exceptions for each issuer runs counter to our goal of reducing the risk of

plan proliferation, a non-standardized plan option policy goal we explained in the proposed rule

(88 FR 82608). Without a limit on the number of exceptions permitted, issuers could choose to

submit multiple exception requests for non-standardized plan options that reduce cost sharing for

benefits pertaining to the treatment of the same chronic and high-cost condition – with minor or

no differences between the benefits with reduced cost sharing, or with minor or no difference in

the amount that cost sharing is reduced for these benefits.

For example, without a limit on the number of exceptions permitted, issuers could submit

exception requests for two identical non-standardized plan options that reduce cost sharing for

benefits pertaining to the treatment of diabetes – each of which reduce cost sharing for the same

benefits by the same amount. We do not believe it would be in consumers’ interest to permit

issuers to offer both of these plans due to their duplicative nature. Specifically, we believe that

permitting issuers to offer both of these plans creates significant risk of plan choice overload,

CMS-9895-F 532

which, as we noted in the proposed rule (88 FR 82608), we want to minimize. However, we also

agree that limiting the total number of exceptions could harm consumers who have a

comparatively less common chronic and high-cost condition that issuers may choose to not target

with this exceptions process, which would hinder efforts to advance health equity.

To balance these concerns, at § 156.202(d)(5), we are limiting issuers to one exception

per chronic and high-cost condition, in each product network type, metal level, inclusion of

dental and/or vision benefit coverage, and service area. Under this limitation, one exception

would be permitted for each separate non-standardized plan option that reduces cost sharing for

benefits pertaining to the treatment of a different chronic and high-cost condition – so long as the

specified requirements are met.

For example, if an issuer submits exception requests for three separate plans in a given

product network type, metal level, inclusion of dental and/or vision benefit coverage, and service

area (such as one plan that reduces cost sharing for benefits pertaining to the treatment of

diabetes, one plan that reduces cost sharing for benefits pertaining to the treatment of COPD, and

one plan that reduces cost sharing for benefits pertaining to the treatment of hepatitis C), we

would permit exceptions for each of these plans, assuming these plans meet all other certification

and exception requirements.

However, under this limitation, multiple exceptions will not be permitted for separate

plans that reduce cost sharing for benefits pertaining to the treatment of the same chronic and

high-cost condition, regardless of whether these benefits with reduced cost sharing vary between

the separate plans. Thus, under this limitation, for example, if an issuer submits two exception

requests for two separate plans that have reduced cost sharing for benefits pertaining to the

treatment of diabetes (and both plans reduce cost sharing for insulin), only one exception would

CMS-9895-F 533

be permitted. Similarly, if an issuer submits exception requests for two separate plans with

reduced cost sharing for different benefits pertaining to the treatment of diabetes (with one plan

reducing cost sharing for insulin, and the other reducing cost sharing for diabetic foot care,

diabetic retinal exam, and diabetic lab testing), the issuer would be permitted only one exception.

We believe adopting this approach will ensure that issuers do not offer duplicative

exceptions plans with only minor differences in cost sharing, and that the exceptions process will

instead encourage issuers to focus on reducing cost sharing for the most impactful benefits

pertaining to the treatment of particular chronic and high-cost conditions. We believe that these

exceptions will be an important way for issuers to further health equity and address pressing

health needs in their service areas, and we believe that this limit will encourage issuers to focus

their time and efforts on creating the strongest plan designs for these conditions as possible. We

also believe this limit is congruent with existing market trends and will not impede issuers’

ability to use non-standardized plan options to develop and offer the full desired scope of

innovative plan designs.

Comment: Several commenters requested further clarification on the particular chronic

and high-cost conditions eligible for consideration under this exceptions process.

Response: Similar to our stance in the proposed rule (88 FR 82608), we clarify that, for

purposes of this standard, high-cost conditions are those that account for a disproportionately

high portion of total Federal health expenditures. We note that the four chronic and high-cost

conditions included in the prescription drug adverse tiering review for PY 2025 (specifically,

hepatitis C virus, HIV, multiple sclerosis, and rheumatoid arthritis) are examples of conditions

that we would consider to be chronic and high-cost in nature for purposes of this standard.

CMS-9895-F 534

However, we note that we would also consider additional conditions to be chronic and

high cost in nature for purposes of this standard. As we explained in the proposed rule (88 FR

82608), additional representative examples of conditions that we would consider to be chronic

and high cost in nature include, but are not limited to, Alzheimer’s disease, kidney disease,

osteoporosis, heart disease, diabetes, and all kinds of cancer. Examples of conditions that we

would not consider chronic and high cost in nature for purposes of this standard would be those

that are generally acute in nature, including bronchitis, the flu, pneumonia, strep throat, and

respiratory infections.

Comment: Several commenters recommended expanding the criteria considered in the

exceptions process. Many commenters explained that the criteria included in the proposed

exceptions process fail to consider the impact of different variations of benefit packages,

provider networks, formularies, and the inclusion of telehealth services on the accessibility of

services for individuals with chronic and high-cost conditions.

Several commenters thus recommended modifying the exceptions process to consider

product ID, network ID instead of product network type, formulary ID, and inclusion of

telehealth services. One commenter recommended expanding the exceptions process criteria to

allow issuers to offer plan design options with benefits tailored to address documented health

disparities in underserved communities (such as non-standardized plan options that include

benefits designed to improve access to “critical services,” enhance the quality of care for “critical

services,” and/or lower out-of-pocket costs for “critical services,” as well as provide access to

wellness programs and promote native-language inclusivity to increase engagement and health

literacy).

CMS-9895-F 535

Response: While we agree that different benefit packages, provider networks,

formularies, and the inclusion of telehealth services are all important factors that pertain to the

treatment of chronic and high-cost conditions, we believe restricting eligibility for this

exceptions process based solely on a reduction in cost sharing for benefits pertaining to the

treatment of chronic and high-cost conditions is the most appropriate approach. We believe the

inclusion of those additional factors would compromise how precisely tailored the current

standard is in ensuring that excepted plans indeed target the unique health care needs of

consumers with high-cost and chronic conditions.

Specifically, considering these criteria in determining eligibility for an exception would

allow issuers to slightly vary included provider IDs, formulary IDs, and the inclusion of

telehealth services, which could result in these plans having a different product IDs, network

IDs, formulary IDs and telehealth benefits while still failing to provide meaningfully different

coverage between excepted plans. We do not believe that including one different provider in a

plan’s network, for example, should result in that plan being permitted an exception on that basis

alone. We believe such an approach would weigh against our goals of reducing plan proliferation

and choice overload (88 FR 82608).

In response to the commenter who recommended incorporating additional criteria to

allow issuers to better address health disparities documented in underserved communities, we

note that we continue to believe that the criteria that we will consider under § 156.202(d) in

determining whether to grant an exception will help ensure that non-standardized plan options

offered pursuant to this exceptions process are well-designed to address health disparities in

underserved communities. As we explained in the proposed rule (88 FR 82608), we believe this

exceptions process could play an important role in combatting health disparities and supporting

CMS-9895-F 536

health equity. Furthermore, since we did not restrict the chronic and high-cost conditions

potentially eligible for this exceptions process to a discrete list of conditions, we believe issuers

will have sufficient flexibility to address health disparities in underserved communities through

the exceptions process.

Relatedly, we believe that since members of underserved communities suffer from the

type of chronic and high-cost conditions that may qualify an issuer for an exception at greater

rates than the general population, and since this exceptions process permits issuers to offer

innovative non-standardized plan options that include substantially reduced cost sharing for

services related to treatment of those conditions, we believe the criteria considered under this

exceptions process will improve this population’s access to care and, subsequently, their health

outcomes.

Finally, we note that issuers are not limited in the number of standardized plan options

they can offer. Given this flexibility, issuers are permitted to offer different standardized plan

options with different product IDs, network IDs, and formulary IDs, so long as they conform to

the required cost-sharing parameters for these plans.

Comment: Many commenters noted the concern that permitting exceptions solely on the

basis of a reduction in cost sharing for benefits pertaining to the treatment of chronic and high-

cost conditions could significantly impact risk pools and risk adjustment transfers – such as by

attracting a higher number of enrollees with chronic and high-cost conditions into these plans,

leading to a corresponding increase in actuarial risk insufficiently considered in the current

structure and operation of HHS-operated risk adjustment program.

Response: We do not agree with commenters’ concerns about the impact of these

excepted plans on the risk pool and risk adjustment. First, issuers are not required to offer these

CMS-9895-F 537

excepted plans. Similar to what we explained in the proposed rule (88 FR 82608), we continue to

anticipate that most issuers would determine that the burden of creating and certifying additional

non-standardized plan options intended to benefit a comparatively small population of

consumers would outweigh the benefit, meaning we do not anticipate a substantial number of

exceptions requests. With a limited number of issuers requesting exceptions under this

exceptions process, we anticipate a correspondingly limited impact on the risk pool. Second,

these excepted plans are subject to the AV de minimis range requirements under §§ 156.140,

156.200, and 156.400, meaning issuers are limited in the extent in which they can vary allowable

cost sharing within these excepted plans.

Third, if an issuer does choose to offer an excepted plan, we believe the current structure

and operation of HHS-operated risk adjustment program

309

accounts for the actuarial risk

associated with enrollment in these plans. This is because the chronic and high-cost conditions

we anticipate issuers will target with this exception process are already accounted for in the HHS

risk adjustment models under the hierarchical condition categories (HCCs) used in the models to

assess an enrollee’s actuarial risk

310

, and subsequent plan liability.

For example, HCC 01 (HIV/AIDS), HCC 118 (Multiple Sclerosis), and multiple HCCs

for diabetes related diagnoses, HCC 19 (Diabetes with Acute Complications), HCC 20 (Diabetes

with Chronic Complications), HCC 21 (Diabetes without Complication), and HCC 22 (Type 1

Diabetes Mellitus, add-on to Diabetes HCC 19-21) are payment HCCs that account for chronic

and high-cost conditions targeted with this exceptions process. Therefore, we believe the current

structure and operation of HHS-operated risk adjustment program sufficiently accounts for the

309

Since the 2017 benefit year, HHS has operated the risk adjustment program for the individual, small group, and

merged markets in all 50 States and the District of Columbia.

310

See Tables 1 through 6 of this final rule.

CMS-9895-F 538

risk that may arise from attracting a higher number of enrollees with chronic and high-cost

conditions into these plans.

Lastly, these excepted plans are limited to the individual markets, and the HHS risk

adjustment models are national models that are used in all States where the HHS-operated risk

adjustment program applicable to the individual, small group, and merged markets is operated.

These models are intended to reflect the relative national average costs for HCCs and have not

been developed to account for specific State or market specific variation in plan liability. We

have found, based on our experience in modeling, that the nationwide dataset is often necessary

to ensure that we have adequate sample size and stability in our risk adjustment models,

including the models’ factors and coefficients. If an issuer offers excepted non-standardized plan

options that attract a higher number of enrollees with chronic and high-cost conditions, the issuer

would receive credit for the increased actuarial risk as part the risk score and transfer

calculations for the applicable benefit year.

Comment: Several commenters supported maintaining the 25 percent reduction in cost

sharing as the difference threshold for the proposed exceptions process. These commenters

explained that reducing this cost sharing difference threshold below 25 percent would make it

difficult for consumers with chronic and high-cost conditions to obtain meaningful benefit from

enrolling in an excepted plan. These commenters also explained that reducing the cost sharing

difference threshold would allow issuers to offer non-standardized plan options that are not

meaningfully different from existing offerings, which runs counter to the goal of reducing the

rate of plan proliferation.

Conversely, several commenters expressed concern with the proposed cost sharing

difference threshold. These commenters noted that it would be difficult to demonstrate a 25

CMS-9895-F 539

percent reduction in cost sharing for benefits associated with the treatment of chronic and high-

cost conditions while maintaining an AV for these plans within the permissible de minimis range

for each metal level. Several commenters thus recommended reducing the cost sharing difference

threshold, such as to 10 percent, to allow issuers to submit exception requests that more easily

meet the required cost sharing difference threshold under the standard.

Response: We agree that reducing the cost sharing difference threshold to less than 25

percent may make it difficult for consumers with chronic and high-cost conditions to obtain

meaningful benefit from enrolling in an excepted plan. As we explained in the proposed rule (88

FR 82608), we continue to believe that the cost sharing difference threshold of 25 percent or

more is appropriate since we have observed that cost sharing differences below this threshold

represent normal variation within a particular metal level, while differences at or above this

threshold are more often associated with cost sharing differences between different metal levels.

Altogether, we do not believe that a difference in a cost sharing amount that is of the

same magnitude as normal variation within a particular metal level (specifically, less than 25

percent) would warrant being excepted from the non-standardized plan option limit. We further

agree that reducing the cost sharing difference threshold to below 25 percent may allow issuers

to utilize this exceptions process to offer non-standardized plans that are not meaningfully

different from existing non-standardized plan offerings, which runs counter to our goal of

reducing the rate of plan proliferation.

Finally, we note that it will be possible for issuers to reduce cost sharing for benefits

pertaining to the treatment of a chronic and high-cost condition by at least 25 percent in these

plans while maintaining AVs within the permissible de minimis range for each metal level, but

doing so will require issuers to make deliberate and thoughtful decisions about their plan designs

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(such as prioritizing the benefits that will yield the greatest impact on cost sharing for the

treatment of a given chronic and high-cost condition). We also believe that requiring issuers to

make these deliberate and thoughtful decisions will increase the likelihood that non-standardized

plan options offered under this exceptions process support our dual aims of ensuring that truly

innovative plan designs that substantially benefit consumers with chronic and high-cost

conditions continue to be offered and reducing the risk of plan choice overload.

Comment: Many commenters expressed concerns about our statement in the proposed

rule that we anticipated requesting that issuers submit QHP applications for non-standardized

plan options that exceed the two-plan limit by the QHP certification Early Bird deadline. These

commenters cited difficulties incurred by issuers in designing plans that would comply with the

requirements of this exceptions process in the time afforded between the publication of this final

rule and the Early Bird submission deadline. Many commenters noted that constructing plans

that would fulfill the exceptions process’ criteria would require not only finalizing unique

benefits coverage, including cost-sharing features, but would also require securing network

agreements and conducting market reviews needed to bring the novel plan designs to market.

Many commenters also noted that, historically, the Early Bird submission deadline does

not offer issuers sufficient time to conduct all these activities while meeting the individual

market filing deadlines imposed by their respective States. Commenters explained that imposing

too early a submission deadline would substantially reduce the likelihood that issuers would

apply for exceptions, resulting in fewer non-standardized plan options targeting chronic and

high-cost conditions being submitted for possible inclusion above the limit.

Several commenters also cited operational concerns related to interfacing with State

Departments of Insurance that would make it difficult for issuers to be able to submit complete

CMS-9895-F 541

exception requests by the Early Bird deadline. In particular, many commenters noted that

although it may be possible for issuers to submit exception requests by the Early Bird deadline,

depending on the publication date of this final rule and related QHP certification materials, it

would be difficult for State Departments of Insurance that transfer plan submission data to CMS

on behalf of their respective issuers to do so prior to the Early Bird submission deadline.

This is because issuers in some States are required to first submit plan data to their State

Department of Insurance before the State Department of Insurance transfers the plan submission

data to CMS. This process may take several weeks to complete from beginning to end, which

would effectively require issuers to submit complete plan portfolios – including these exception

requests – to their State Departments of Insurance several weeks in advance of the Early Bird

deadline, possibly only several weeks after the Payment Notice is published. Accordingly, some

commenters do not believe that it is feasible for State Departments of Insurance that transfer plan

submission data to CMS on behalf of their respective issuers to do so prior to the Early Bird

submission deadline.

Several commenters suggested alternatives to requiring issuers to submit QHP

applications for non-standardized plan options that exceed the two-plan limit by the QHP

certification Early Bird deadline. One commenter recommended that exception requests be

approved or rejected in concept by CMS prior to the formal submission of the complete QHP

certification application by the Initial Application Deadline. The commenter suggested that this

approach would mitigate any operational burden imposed on the issuer while reducing the risks

associated with coordinating with State Departments of Insurance and managing varying filing

deadlines (such as issuers being unable to submit complete plan portfolios and exception

requests to their State Departments of Insurance in advance of the Early Bird deadline). The

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commenter stated this approach would also allow CMS to provide feedback on the proposed

excepted plan, helping to circumvent any quality assurance challenges (such as issuers formally

submitting exception requests that do not meet the requirements of the exceptions process).

Response: We acknowledge the commenters’ concerns with requesting that issuers

submit QHP applications, including exception requests, for non-standardized plan options that

exceed the two-plan limit by the QHP certification Early Bird deadline, and we agree with many

of the points commenters made. Specifically, we agree that it would be difficult for issuers to

compile a complete portfolio of plans, as well as related exception requests, only several weeks

after the publication of the final rule in order to transfer this data to their State Departments of

Insurance sufficiently in advance of the Early Bird deadline. We also agree that the Early Bird

submission deadline may not offer issuers sufficient time to conduct all required activities while

meeting the individual market filing deadlines imposed by their respective States.

As such, we anticipate that the exception request submission deadline for issuers will be

the Initial Application Deadline for QHP certification, aligning the exception request submission

deadline with the Initial Application Deadline for QHP certification applications for standardized

and non-standardized plan option offerings. We note that the Initial Application Deadline for

QHP certification for each plan year will continue to be communicated in sub-regulatory

guidance. We believe adopting this approach will permit issuers sufficient time to finalize unique

benefits coverage and cost sharing, secure network agreements, and conduct market reviews

necessary to bring these novel plan designs to the market in a feasible timeframe. We also

believe that adopting this approach obviates the need for CMS to approve or reject exception

request materials in advance of the deadline for submitting a complete QHP certification

application.

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Comment: Several commenters suggested that interested parties should be given the

opportunity to review and provide feedback on the application materials and justification forms.

Response: We agree that providing interested parties the opportunity to review and

provide feedback on the exception request form is critical to ensuring the success of the

implementation of this exceptions process. As such, we note that interested parties had the

opportunity to review these materials in the 60-day PRA package associated with this rule

(CMS-10878).

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We encourage interested parties to review any future iterations of such

materials in subsequent PRA packages when they are published. Finally, we note that we intend

to solicit feedback on these forms in future interested party listening sessions.

Comment: Some commenters suggested that the proposed exceptions process be

accompanied by additional functionalities on HealthCare.gov and DE entity non-Exchange

websites to enable consumers to more easily identify non-standardized plan options that offer

specialized cost sharing offerings intended to benefit the treatment of the corresponding chronic

and high-cost conditions. Other commenters noted that differential display for non-standardized

plan options that are offered pursuant to the exceptions process may confuse or overwhelm

consumers with information that is not meaningful to them.

One commenter recommended imposing restrictions on mentioning specific chronic and

high-cost conditions in the plan marketing names of non-excepted plans. The commenter noted

that currently available QHPs that are marketed as being uniquely relevant to a certain chronic

and high-cost condition may not actually provide substantial benefits to individuals seeking

treatment for that condition. The commenter suggested that some plans with references to

diabetes in their planned marketing names may fail to substantially reduce cost sharing for

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https://www.cms.gov/medicare/regulations-guidance/legislation/paperwork-reduction-act-1995/pra-listing/cms-

10878.

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benefits related to diabetes treatment, for example. The commenter stated that, therefore, issuers

should not be permitted to display a plan marketing name that markets a non-excepted QHP as if

it had been approved under this exceptions process.

Response: We intend to explore the benefit and feasibility of requiring some form of

visual differentiation of these excepted plans in the form of differential display on

HealthCare.gov, in conjunction with our continued work on choice architecture. We will also

consider whether any future differential display requirements related to excepted plans should

also apply to DE entity non-Exchange websites. At this time, we are not finalizing any

requirements for excepted or non-excepted plans related to particular plan marketing names,

since both excepted and non-excepted plans are already subject to the plan marketing name

requirements at § 156.225. We encourage issuers offering excepted plans to adopt plan

marketing names that reflect the chronic and high-cost condition for which the plan offers

substantially reduced cost sharing, if so desired.

Comment: Several commenters requested clarification on the interaction between the

reduction in cost sharing for benefits pertaining to the treatment of chronic and high-cost

conditions, deductibles, and annual limitations on cost sharing. Several commenters also

requested clarification of how a 25 percent reduction in cost sharing for benefits pertaining to the

treatment of a chronic and high-cost condition would be evaluated under this exceptions process.

Response: We clarify that deductibles and annual limitations on cost sharing (as well as their

interactions with copayments and coinsurance rates) will be considered when evaluating the 25

percent reduction in cost sharing for benefits pertaining to the treatment of chronic and high-cost

conditions under this exceptions process. We believe that excluding deductibles and annual

limitations on cost sharing from consideration when evaluating the difference in cost sharing for

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relevant benefits would make accurate comparisons between the in-limit non-standardized plan

option the issuer is using as a baseline and the non-standardized plan option the issuer is

requesting to be excepted more difficult, since the cost sharing type (specifically, coinsurance

rate or copayment subject to or exempt from the deductible) for the same benefit may differ

between plans.

For example, without considering deductibles and annual limitations on cost sharing and

their interactions with coinsurance rates and copayments when evaluating the 25 percent

reduction in cost sharing for benefits pertaining to the treatment of chronic and high-cost

conditions under this exceptions process, it would be difficult to assess whether the required

reduction in cost sharing is achieved if the in-limit non-standardized plan option the issuer is

using as a comparison has a coinsurance rate of 50 percent subject to the deductible as the form

of cost sharing for a particular benefit, whereas the corresponding benefit in the non-standardized

plan option the issuer requests to be excepted has a copayment of $30 exempt from the

deductible as the form of cost sharing. It would similarly be difficult to assess whether the

required reduction in cost sharing is achieved if the two plans have different deductibles and/or

annual limitations on cost sharing.

We also clarify that under new § 156.202(d)(1), a 25 percent reduction in cost sharing for

benefits pertaining to the treatment of a chronic and high-cost condition will not be evaluated at

the individual benefit level, but will instead be evaluated at the level of total out-of-pocket costs

for the treatment of the particular chronic and high-cost condition for a population of enrollees

with that particular chronic and high-cost condition.

This is because if we were to adopt an approach that evaluated this difference in cost

sharing at the individual benefit level, issuers may reduce cost sharing for only one or several

CMS-9895-F 546

already relatively inexpensive or infrequently utilized benefits – which may technically meet the

required difference in cost sharing threshold under the standard but may not actually

meaningfully reduce cost sharing for enrollees with that chronic and high-cost condition. For

example, if this difference in cost sharing were evaluated at the individual benefit category level,

an issuer would be able to reduce cost sharing for a particular prescription drug used to treat a

chronic and high-cost condition from a $20 copay exempt from the deductible to a $15 copay

exempt from the deductible to meet the required cost sharing difference threshold under the

standard. We do not believe this reduction in cost sharing would substantially benefit consumers

with the relevant chronic and high-cost condition.

Thus, we believe evaluating the required difference in cost sharing at the level of total

out-of-pocket costs for the treatment of the chronic and high-cost condition for a population of

enrollees with the relevant chronic and high-cost condition represents a more comprehensive and

holistic approach in ensuring that excepted plans substantially benefit consumers with chronic

and high-cost conditions. As we explained in the proposed rule (88 FR 82607), one of our goals

with the proposed exceptions process is to ensure that excepted plans substantially benefit

consumers with chronic and high-cost conditions.

Consider the following hypothetical scenario as an illustration of how the 25 percent

reduction in cost sharing for benefits pertaining to the treatment of a chronic and high-cost

condition will be evaluated. In this scenario, an issuer desires to offer two non-standardized plan

options per product network type, metal level, and inclusion of dental and/or vision benefit

coverage. This issuer also desires to submit an exception request for an additional non-

standardized plan option that reduces cost sharing for benefits pertaining to the treatment of

diabetes. As part of the request for the additional non-standardized plan option to be excepted,

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the issuer chooses one of its non-standardized plan options within the limit of two for PY 2025 in

the same product network type, metal level, inclusion of dental and/or vision benefit coverage,

and service area to serve as a point of comparison. The issuer will utilize one of these non-

standardized plan options within the limit of two for PY 2025 as the comparison for evaluating

whether the required 25 percent reduction in cost sharing is achieved relative to the plan the

issuer is requesting to except from the non-standardized plan option limit.

The cost sharing structure in the non-standardized plan option the issuer has chosen as the

in-limit comparison includes a $40 copayment exempt from the deductible for each primary care

visit, an $80 copayment exempt from the deductible for each podiatrist specialist visit, an $80

copayment exempt from the deductible for each ophthalmologist specialist visit, and a 40 percent

coinsurance rate exempt from the deductible for each utilization of laboratory services. The cost

sharing structure in the non-standardized plan option that the issuer requests be excepted from

the limit includes a $20 copayment exempt from the deductible for each primary care visit, a $70

copayment exempt from the deductible for each podiatrist visit, a $70 copayment exempt from

the deductible for each ophthalmologist visit, and a 20 percent coinsurance rate exempt from the

deductible for each utilization of laboratory services, with the cost sharing for all other benefits

remaining the same between both plans.

Under this exceptions process, the 25 percent reduction in cost sharing for benefits

pertaining to the treatment of a chronic and high-cost condition will not be evaluated at the

individual benefit category level (in this case, primary care visit, podiatrist specialist visit,

ophthalmologist specialist visit, and laboratory services) between the in-limit non-standardized

plan option the issuer is using as a point of comparison and the additional non-standardized plan

option the issuer is requesting to have excepted from the limit. Rather, the required reduction in

CMS-9895-F 548

cost sharing will be evaluated at the level of total out-of-pocket costs for a representative

treatment scenario for the relevant chronic and high-cost condition. In this hypothetical scenario,

for example, a representative treatment scenario for the treatment of diabetes is comprised of

four primary care visits, one podiatrist specialist visit, one ophthalmologist specialist visit, and

the utilization of laboratory services one time.

Under the cost sharing structure in the non-standardized plan option the issuer has chosen

as an in-limit point of comparison, this representative treatment scenario would result in the

enrollee paying the $40 copayment exempt from the deductible for a primary care visit four

times, amounting to $160; the $80 copayment exempt from the deductible for a podiatrist

specialist visit one time; the $80 copayment exempt from the deductible for an ophthalmologist

specialist visit one time; and, assuming a total cost of $200 for each utilization of laboratory

services and a coinsurance rate of 40 percent exempt from the deductible for this service, one

utilization of laboratory services amounting to $80. Altogether, the total out-of-pocket costs for

this representative treatment scenario under the cost-sharing structure in the non-standardized

plan option the issuer has chosen as an in-limit point of comparison would amount to $400.

Under the cost sharing structure in the non-standardized plan option that the issuer

requests be excepted from the limit, the representative treatment scenario would result in the

enrollee paying the $20 copayment exempt from the deductible for a primary care visit four

times, amounting to $80; the $70 copayment exempt from the deductible for a podiatrist

specialist visit one time; the $70 copayment exempt from the deductible for an ophthalmologist

specialist visit one time; and, assuming a total cost of laboratory services of $200 for each

utilization of laboratory services and a coinsurance rate of 20 percent exempt from the deductible

for this service, one utilization of laboratory services amounting to $40. Altogether, the total out-

CMS-9895-F 549

of-pocket costs for this representative treatment scenario under the cost-sharing structure in the

non-standardized plan option the issuer is requesting to be excepted from the limit would amount

to $260.

Thus, although there is not necessarily a 25 percent reduction when comparing each

individual benefit category between these two plans, the standard would still be satisfied, so long

as the overall cost sharing (in the form of total out-of-pocket costs, which takes into

consideration maximum out-of-pocket limitations and deductibles) for a population of enrollees

with diabetes will still be reduced by at least 25 percent under the excepted non-standardized

plan option (which in this case would be $260) compared to the non-standardized plan option

being used as an in-limit point of comparison (which in this case would be $400). We note that

an issuer seeking to utilize this exceptions process must demonstrate underlying actuarial

assumptions in the required actuarial memorandum (which includes corresponding actuarial

attestation) as part of the exception request that we explain later in this section of this final rule.

We are also making several changes to the requirements related to the written

justification form that issuers will be required to submit to utilize this exceptions process at §

156.202(e)(1) through (3), to more accurately reflect how the reduction in cost sharing will be

evaluated under this exceptions process and ensure that excepted non-standardized plan options

have specific design features that will substantially benefit consumers with chronic and high-cost

conditions, a goal we explained in the proposed rule (88 FR 82606). We also introduced new

paragraph (4) to ensure that the form issuers submit adequately explains the underlying actuarial

assumptions made in designing the proposed excepted plan.

In particular, under proposed § 156.202(e)(1), an issuer seeking to utilize this exception

request process would have been required to identify the specific condition(s) for which cost

CMS-9895-F 550

sharing is reduced. However, under finalized § 156.202(e)(1), an issuer seeking to utilize this

exceptions request process must identify the specific chronic and high-cost condition that their

additional non-standardized plan option offers substantially reduced cost sharing for, in

accordance with the definition of “cost sharing” at § 156.20.

We made this change to reflect the fact that each excepted non-standardized plan option

should be tailored to the treatment of one chronic and high-cost condition, since we believe it

will be both difficult and impractical for issuers to reduce cost sharing for benefits pertaining to

the treatment of two or more chronic and high-cost conditions while maintaining AVs within the

permissible de minimis range for each metal level within the same excepted plan design. This is

because the required cost sharing reduction is 25 percent, and for an issuer to reduce the

treatment-specific cost sharing for the treatment of two separate chronic and high-cost conditions

within the same plan design would likely result in that plan having an AV exceeding the

permissible de minimis range, or at least having an AV that would render the plan costly and

uncompetitive at a minimum.

Under proposed § 156.202(e)(2), an issuer seeking to utilize this exception request would

have been required to explain which benefit(s) would have reduced annual enrollee cost sharing

(as opposed to reduced cost sharing for a limited number of visits) for the treatment of the

specified condition(s) relative to the same corresponding benefits in an issuer’s other non-

standardized plan offerings in the same product network type, metal level, and service area.

However, this requirement would not have enabled accurate assessment of whether an excepted

plan reduces cost sharing at the level of total out-of-pocket costs for the treatment of a particular

chronic and high-cost condition, in accordance with § 156.202(d)(1).

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As such, under finalized § 156.202(e)(2), an issuer seeking to utilize this exceptions

process must identify which specific benefits in the Plans and Benefits Template are discounted

to provide reduced treatment-specific cost sharing for individuals with the specified chronic and

high-cost condition. These discounts must be relative to the treatment-specific cost sharing for

the same corresponding benefits in the issuer’s other non-standardized plan option offerings in

the same product network type, metal level, inclusion of dental and/or vision benefit coverage,

and service area.

For the purposes of this standard, “treatment specific cost sharing” consists of the costs

for obtaining services that pertain to the treatment of a particular chronic and high-cost disease –

but not the costs for obtaining services that do not pertain to the treatment of the relevant

condition. For example, costs for obtaining chemotherapy would not be considered treatment-

specific cost sharing for a plan designed to address diabetes for the purposes of this standard.

However, as an additional clarifying example, a primary care visit would pertain to the treatment

of the diabetes to the extent that this visit entails the treatment of the relevant condition.

We also clarified in this paragraph (e)(2) that the issuer must identify all services for

which the benefits substantially reduce cost sharing in the Plans and Benefits Template. These

benefits must encompass a complete list of relevant services pertaining to the treatment of the

relevant condition. For example, if an issuer intends to offer a plan that is designed to address

diabetes, the issuer should list only the benefits with reduced cost sharing for services pertaining

to the treatment of diabetes. We made these modifications to ensure that the written justification

that issuers will be required to submit as part of this exceptions process accurately explains how

the excepted plan substantially reduces cost sharing at the level of total out-of-pocket costs for

the treatment of a particular chronic and high-cost condition, in accordance with § 156.202(d)(1).

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Under proposed § 156.202(e)(3), an issuer seeking to utilize this exceptions process

would have been required to explain how the reduced cost sharing for these benefits pertain to

clinically indicated guidelines for treatment of the specified chronic and high-cost condition(s).

However, under finalized § 156.202(e)(3), an issuer seeking to utilize this exceptions process

must explain how the reduced cost sharing for these services pertains to clinically indicated

guidelines and a representative treatment scenario for treatment of the specified chronic and

high-cost condition. We also clarified in this paragraph that the issuer must include any relevant

studies, guidelines, or supplementary documents to support the application, as applicable. In

addition, we clarified in this paragraph that for purposes of this standard, a representative

treatment scenario is an annual course of treatment for a chronic and high-cost condition (for

example, osteoporosis, diabetes, cancer).

We made this modification to ensure that each excepted non-standardized plan option is

tailored to the treatment of one chronic and high-cost condition. We also made this modification

to ensure that issuers would not be able to simply reduce cost sharing for one already relatively

inexpensive or relatively infrequently utilized service by 25 percent or more to meet the

standard, which could result in the plan failing to substantially benefit consumers with a chronic

and high-cost condition. Instead, under the final requirement in this paragraph, issuers will be

required to reduce cost sharing for a representative treatment scenario in order to reduce cost

sharing for the treatment of that particular condition by 25 percent or more, which we believe

ensures the plan would substantially benefit consumers with the relevant chronic and high-cost

condition.

We also finalized new § 156.202(e)(4) requiring that issuers include a corresponding

actuarial memorandum that explains the underlying actuarial assumptions made in the design of

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the plan the issuer is requesting to except. In this memorandum, an issuer must demonstrate how

the benefits that are discounted to provide reduced treatment-specific cost sharing of at least 25

percent identified at § 156.202(e)(2) for the treatment of the condition identified at §

156.202(e)(1) under the excepted plan compare to the identified in-limit offering in the same

product network type, metal level, inclusion of dental and/or vision coverage, and service area.

We also clarified in this paragraph that this demonstration must specifically be in

reference to the specific population that would be seeking treatment for the relevant condition

and not the general population. We also clarified that this memorandum also must include an

actuarial opinion confirming that this analysis was prepared in accordance with the appropriate

Actuarial Standards of Practice and the profession’s Code of Professional Conduct. We made

these modifications to ensure issuers’ exception requests accurately explain how the excepted

plans substantially reduce cost sharing at the level of total cost sharing for the treatment of a

particular chronic and high cost condition, which enables the assessment of whether the required

difference in cost sharing is achieved in accordance with § 156.202(d)(1).

Comment: Several commenters requested clarification of how the cost sharing difference

threshold applies when there is no cost sharing for a benefit under the in-limit non-standardized

plan option the issuer is comparing against. These commenters noted that it is impossible to

reduce cost sharing for a benefit in the excepted non-standardized plan option if the in-limit non-

standardized plan option being utilized as a comparison already offers that benefit at no cost.

These commenters recommended requiring that any proposed excepted non-standardized plan

options being compared to an in-limit non-standardized plan option that offers a given benefit at

no cost to the consumer also offer that benefit at no cost to the consumer.

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Response: We acknowledge this concern, and we believe the approach we are adopting in

which we evaluate the 25 percent reduction in cost sharing at the level of total out-of-pocket

costs for benefits pertaining to the treatment of the particular chronic and high-cost condition for

a population of enrollees with the particular chronic and high-cost condition – instead of

evaluating the reduction in cost sharing at the individual benefit category level – sufficiently

mitigates this concern.

This modification avoids requirements on issuers that would be unworkable, such as

requiring the issuer to further reduce the cost sharing for a particular benefit in the excepted non-

standardized plan option when there is no cost sharing for the benefit in the in-limit non-

standardized plan option. For example, if there is no cost sharing for primary care visits in the in-

limit non-standardized plan option being utilized as a comparison, and there is similarly no cost

sharing for primary care visits in the non-standardized plan option the issuer is requesting to be

excepted, it would be impossible for the issuer to further reduce cost sharing for this benefit

category in the excepted plan. However, so long as the total out-of-pocket costs for benefits

pertaining to the treatment of the particular chronic and high-cost condition are reduced by 25

percent or more, the standard would be satisfied.

Comment: Several commenters recommended that the cost sharing difference threshold

only be applied to the standard variant of the plan for which the issuer is seeking an exception

and not to the income-based cost sharing reduction (CSR) variants or American Indian

(AI)/Alaska Native (AN) limited or zero cost share variants. The commenter noted that it would

be difficult for issuers to design plans with the necessary reduction in cost sharing in these plan

variants while maintaining AVs within the permissible de minimis ranges due to the restricted de

minimis ranges for these plan variants.

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Response: We agree it would be difficult to reduce cost sharing by 25 percent for benefits

pertaining to the treatment of chronic and high-cost conditions in the more generous income-

based CSR variants and the AI/AN limited or zero cost share variants of excepted plans, due to

the restricted AV de minimis range of these plans. This is because under the definition of “de

minimis variation for a silver plan variation” at § 156.400, there is a -0 percentage point and +1

percentage point allowable AV de minimis variation for these plans – compared to a permissible

AV de minimis variation of -2 percentage points and +2 percentage points for standard variants

under § 156.140(c)(2), and a permissible AV de minimis range of -0 percentage points and +2

percentage points for individual market silver QHPs under § 156.200(b)(3).

Furthermore, since the AI/AN zero cost share variant at § 156.420(b)(1) eliminates cost

sharing for all services, while the AI/AN limited cost share variant at § 156.420(b)(2) eliminates

cost sharing on any item or service that is an EHB furnished directly by the Indian Health

Service, an Indian Tribe, Tribal Organization, or Urban Indian Organization (each as defined in

25 U.S.C. 1603), or through referral under contract health services, cost sharing cannot be further

reduced.

As such, we are finalizing at § 156.202(d)(4) that the reduced cost sharing requirement

that excepted plans must meet only applies to the standard variant of the plan for which the

issuer is seeking exception, and not to the income-based CSR plan variations required by §

156.420(a) or the zero and limited cost sharing plan variations required by § 156.420(b). We are

making this change to ensure that issuers can achieve the required reduction in cost sharing

between the non-standardized plan option the issuer chooses as an in-limit comparison and the

non-standardized plan option the issuer requests to be excepted.

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Comment: Several commenters requested additional clarification on how the proposed

exceptions process would comply with existing guidance under the Paul Wellstone and Pete

Domenici Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

Response: In general, MHPAEA and its implementing regulations apply to group health

plans and health insurance issuers offering group or individual health insurance coverage that

provide both medical and surgical benefits and mental health or substance use disorder benefits

and require, in relevant part, that the financial requirements (such as coinsurance and

copayments) and treatment limitations (such as visit limits) imposed on mental health or

substance use disorder benefits cannot be more restrictive than the predominant financial

requirements and treatment limitations that apply to substantially all medical/surgical benefits in

the same classification.

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The regulations under MHPAEA set forth six classifications of benefits for applying the

parity rules for financial requirements and treatment limitations.

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Under MHPAEA regulations,

a type of financial requirement or quantitative treatment limitation is considered to apply to

substantially all medical/surgical benefits in a classification if it applies to at least two-thirds of

all medical/surgical benefits in the classification. If a type of financial requirement or treatment

limitation does not apply to at least two-thirds of medical/surgical benefits in a classification, it

cannot apply to mental health or substance use disorder benefits in that classification. If the type

of requirement or limitation does apply to at least two-thirds of medical/surgical benefits in a

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Section 9812 of the Code, section 712 of ERISA, and section 2726 of the PHS Act. 26 CFR 54.9812-1, 29 CFR

2590.712, and 45 CFR 146.136 and 147.160.

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The six classifications of benefits are (1) inpatient, in-network; (2) inpatient, out-of-network; (3) outpatient, in-

network; (3) outpatient, out-of-network; (4) emergency care; and (6) prescriptions drugs. In addition, sub-

classifications are permitted for office visits, separate from other outpatient services. 26 CFR 54.9812-1(c)(2)(ii) and

(c)(3)(iii); 29 CFR 2590.712(c)(2)(ii) and (c)(3)(iii); and 45 CFR 146.136(c)(2)(ii) and (c)(3)(iii).

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classification, the predominant level that may be applied to mental health or substance use

disorder benefits in the classification is the one that applies to more than one half of

medical/surgical benefits within the classification subject to the financial requirement or

treatment limitation.

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The determination of the portion of medical/surgical benefits subject to

the financial requirement or treatment limitation is based on the dollar amount of all plan

payments for medical/surgical benefits in the classification expected to be paid under the plan for

the plan year.

QHP issuers seeking to reduce cost sharing in non-standardized plans under the

exceptions process will need to carefully evaluate whether and how designing a plan with

reduced cost sharing for certain chronic or high-cost conditions can be achieved consistent with

MHPAEA and its implementing regulations. Depending on the extent to which reducing cost

sharing for medical/surgical benefits in a benefit classification (or any other design feature of the

excepted plan) affects the results of the substantially all/predominant analysis under MHPAEA,

the QHP issuer may not be permitted to impose the cost-sharing (or other unique) requirement on

mental health or substance use disorder benefits in that classification, or may be required to

reduce cost sharing for mental health and substance use disorder benefits in the classification, to

ensure compliance with MHPAEA. Further, the issuer must comply in all other regards with

applicable requirements under MHPAEA and its implementing regulations.

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If no single level applies to more than one-half of medical/surgical benefits subject to a financial requirement or

quantitative treatment limitation in a classification, the plan or issuer may combine levels until the combination of

levels applies to more than one-half of medical/surgical benefits subject to the financial requirement or quantitative

treatment limitation in the classification. The least restrictive level within the combination is considered the

predominant level of that type in the classification. 26 CFR 54.9812-1(c)(3)(i)(B), 29 CFR 2590.712(c)(3)(i)(B), and

45 CFR 146.136(c)(3)(i)(B).

CMS-9895-F 558

Comment: Several commenters requested further clarification on how the excepted plan

designs would be consistent with the nondiscrimination standards, including the EHB non-

discrimination standards at § 156.125.

Response: As we explained in the proposed rule (88 FR 86208 through 88 FR 86209), if

additional plans are permitted to be offered exceeding the limit of two non-standardized plan

options, in accordance with the guaranteed availability requirements at § 147.104(a), these plans

will also be required to be made available on the same basis to consumers without these chronic

and high-cost conditions. Further, we emphasize that these plans will be prohibited from

discriminating in accordance with the nondiscrimination requirements at §§ 147.104(e), 156.125,

and 156.200(e). To meet these nondiscrimination requirements, these plans will be required to

apply reductions in cost sharing to all enrolled in the plan, without regard to diagnosis.

Furthermore, although we acknowledge that non-standardized plan options excepted under this

proposal will primarily benefit consumers with chronic and high-cost conditions, we believe that

a sufficiently satisfactory range of both non-standardized and standardized plan options currently

exist that are primarily intended for consumers without chronic and high-cost

conditions. As a result, we are not concerned that any risk of discrimination created by this

exceptions process will negatively impact consumers, including but not limited to consumers

with chronic and high-cost conditions.

Comment: Several commenters requested clarification on how enrollees affected by plan

discontinuations arising from the reduction of the non-standardized plan option limit at §

156.202(b) will be re-enrolled into new plans.

Response: Similar to what we explained in the 2024 Payment Notice (88 FR 25856), we

will continue to utilize the existing discontinuation notices and process as well as the current re-

CMS-9895-F 559

enrollment hierarchy at § 155.335(j) to ensure a seamless transition and continuity of coverage

for enrollees affected by discontinuations.

8. CO-OP Loan Terms (§ 156.520)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82609), we proposed to amend § 156.520(f) to enable CMS to approve requests by CO-

OP borrowers to voluntarily terminate their loan agreement with CMS, and thereby cease to

constitute a qualified non-profit health insurance issuer (QNHII),

315

for the purpose of permitting

the loan recipient to pursue innovative business plans that are not otherwise consistent with the

governance requirements and business standards applicable to a CO-OP borrower, provided

certain conditions are met as described in this section.

Section 1322 of the ACA requires a CO-OP loan recipient, or qualified nonprofit health

insurance issuer (QNHII), to be, among other things, an entity “substantially all of the activities

of which consist of the issuance of qualified health plans in the individual and small group

markets in each State in which it is licensed to issue such plans.”

316

This requirement is set forth

in regulations which require that at least two-thirds of the policies or contracts for health

insurance coverage issued by a CO–OP in each State in which it is licensed be qualified health

plans offered in the individual and small group markets.

317

The ACA also mandates that a QNHII be subject to governance by “a majority vote of its

members.”

318

Accordingly, § 156.515(b) imposes governance requirements for each CO-OP that

include a requirement that the entity remain under member control, such that a majority of its

315

Section 1322 (c)(1)(B) of the ACA and 42 U.S.C. 18042(c)(1)(B) define a QNHII.

316

42 U.S.C. 18042(c)(1)(B).

317

See § 156.515(c)(1).

318

ACA section 1322(c)(3)(A); 42 U.S.C. 18042(c)(3)(A).

CMS-9895-F 560

directors are elected by a majority vote of the CO-OP’s members. A CO-OP “member” is an

individual covered by a health insurance policy issued by a CO-OP.

319

A CO-OP’s voting

members consist of all persons covered by health insurance policies issued by the CO-OP who

are 18 years of age or older.

320

Section 1322 of the ACA mandates that the Secretary require an entity receiving a CO-

OP loan to enter into a loan agreement with the Secretary. The required loan agreement must

obligate the borrower to “meet, and to continue to meet” the requirements of a QNHII, and “any

other requirements contained in the agreement.”

321

No more is specified concerning the required

contents of the loan agreement.

322

The requirement that a CO-OP be subject to a majority vote of

its members is, accordingly, imposed by regulation, at § 156.515(b), as well as the CO-OP loan

agreement. Specifically, Section 18.2 of the CO-OP loan agreement prohibits any

“[o]rganizational [c]hange...that would result in...implementing a governance structure that does

not meet the governance standards codified at 45 CFR 156.515(b).”

We explained in the proposed rule that as a result of these requirements, a CO-OP cannot

pursue new business arrangements that would impose a governance structure under which it is

possible for a majority of directors to be elected by a majority vote of persons who are not

covered by health insurance policies issued by the CO-OP. We further explained that a CO-OP

also cannot enter into new business arrangements under which voting members need not be

individuals covered by policies issued by the CO-OP. We stated that it is also not possible for a

CO-OP to enter into a business plan under which potentially less than two-thirds of the

company’s activities may consist of issuing qualified health plans.

319

See § 156.505.

320

See § 156.515(b)(1).

321

42 U.S.C. 18042(b)(2)(C).

322

42 U.S.C. 18042(b)(2)(C)(iii) contains specific prohibitions, and concomitant penalty, that are not relevant here.

CMS-9895-F 561

In the proposed rule, we explained that the loan agreements currently in force only permit

a CO-OP to initiate voluntary termination of its loan agreement on grounds that the loan

recipient believes that it cannot create a viable and sustainable CO-OP.

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We noted that the

inability to create a viable or sustainable CO-OP would consist of a failure to become or remain

licensed as a health insurance company, a failure to qualify as a QHP issuer, or a failure to

become or remain financially solvent. We explained that there is no avenue currently for a CO-

OP to request to terminate its loan agreement for the purpose of pursuing new business ventures

that involve a governance structure or business model inconsistent with CO-OP governance or

operational standards.

We stated that, informed by 8 years of experience with business operations for the CO-

OP program, we have become aware of opportunities that may be available to CO-OPs to

terminate their loan agreement, cease to constitute a QNHII, and thus become able pursue new

opportunities that appear well-calculated to expand operations from regional areas within a State

to Statewide operations, and also improve consumer access to other health insurance products,

while remaining a non-profit, member-focused entity.

We therefore proposed to amend § 156.520(f) to add § 156.520(f)(2) which would enable

CMS, in its sole discretion, to approve requests by CO-OP borrowers to voluntarily terminate

their loan agreement with CMS, and thereby cease to constitute a QNHII, for the purpose of

permitting the loan recipient to pursue innovative business plans that are not otherwise consistent

with the governance requirements and business standards of a CO-OP borrower, provided that

(1) all outstanding CO-OP loans issued to the loan recipient are repaid in full prior to termination

of the loan agreement, and (2) we believe granting the request would meaningfully enhance

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CO-OP loan agreement, section 16.1.1(a).

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consumer access to quality, affordable, member-focused, non-profit health care options in

affected markets. We proposed to move the current regulation text at § 156.520(f) to new §

156.520(f)(1).

As a general matter, we anticipated that plans could be deemed innovative and likely to

enhance consumer access to quality, affordable, member-focused health care if they appear to be

well-calculated to lead directly to marketing non-profit, member-focused health plans in new

regions of a State, or to offer health plans on a Statewide basis for the first time, or to expand

operations into new States, or to enhance consumer access to new non-profit products that are

not qualified health plans. We noted that these examples of innovative business plans are

illustrative, and not exclusive.

After consideration of comments, and for the reasons outlined in the proposed rule and

our responses to comments below, we are finalizing this provision as proposed. We summarize

and respond below to public comments received on the proposed amendments § 156.520(f).

Comment: Three commenters expressed support for the proposal to revise CO-OP

regulations to permit CO-OP loan recipients to seek voluntary termination for the purpose of

pursuing business opportunities that would not otherwise be available to a CO-OP. The

commenters believed the proposal, if finalized, would potentially benefit consumers by

improving access to non-profit, member-focused health care options in affected markets. One

commenter acknowledged the proposal but did not articulate any position.

Response: We agree with commenters who believe the proposal could benefit consumers

by making available potential business opportunities that can benefit consumers and are not

otherwise feasible for a CO-OP to consider.

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Comment: One commenter expressed uncertainty as to whether the proposal could have

significant impact, since only three CO-OPs remain in operation.

Response: We acknowledge that three CO-OPs remain, operating across five States.

Efforts to expand operations within a State, and to expand operations to new States, depend on

several factors. While it is true that the population affected by the proposed regulation is limited

in the near-term, its impact over time could be significant since it will remove certain obstacles

to business opportunities that could ultimately impact many consumers by improving access to

non-profit, member-focused health care options.

9. Conforming Amendment to Netting Regulation to Include Federal IDR Administrative Fees

(§ 156.1215)

In the HHS Notice of Benefit and Payment Parameters for 2025 proposed rule (88 FR

82510, 82610), we proposed conforming amendments to the payment and collections process set

forth at § 156.1215 to align with the policies and regulations proposed in the Federal Independent

Dispute Resolution Operations proposed rules (88 FR 75744). We proposed that the

administrative fees for utilizing the No Surprises Act

324

Federal IDR process charged to health

insurance issuers that participate in financial programs under the ACA would be subject to

netting as part of HHS’ integrated monthly payment and collections cycle, assuming the policies

related to HHS collection of the IDR administrative fees in the Federal Independent Dispute

Resolution Operations proposed rules (88 FR 75744) are finalized.

325

324

The Consolidated Appropriations Act, 2021 (CAA) was enacted on December 27, 2020. Both title I, also known

as the No Surprises Act, and title II (Transparency) of Division BB of the CAA amended chapter 100 of the Code,

Part 7 of ERISA, and title XXVII of the PHS Act. Administrative fees are charged in accordance with 45 CFR

149.510(d)(2), 26 CFR 54.9816-8T(d)(2), and 29 CFR 2590.716-8(d)(2).

325

We stated in the 2025 Payment Notice proposed rule (88 FR 82610) that the effective date of any finalized

proposal related to netting of amounts owed to the Federal Government from health insurance issuers for

administrative fees for utilizing the No Surprises Act Federal IDR process would not be earlier than a time at which

both the proposals related to the manner of administrative fee collection and netting proposed in the Federal

CMS-9895-F 564

To implement this policy, we proposed to amend § 156.1215(b) to allow HHS to net

payments owed to issuers and their affiliates

326

operating under the same tax identification

number (TIN) against amounts due to the Federal Government from the issuers and their

affiliates operating under the same TIN for APTC, advance payments of and reconciliation of

CSRs (as applicable), payment of FFE or SBE-FP user fees, HHS risk adjustment, reinsurance,

and risk corridors payments and charges, and administrative fees from these issuers and their

affiliates for utilizing the Federal IDR process in accordance with § 149.510(d)(2). Additionally,

we proposed to amend § 156.1215(c) to provide that any amount owed to the Federal

Government by an issuer and its affiliates for unpaid administrative fees due to the Federal

Government from these issuers and their affiliates for utilizing the Federal IDR process in

accordance with § 149.510(d)(2), after HHS nets amounts owed by the Federal Government

under these programs, would be the basis for calculating a debt owed to the Federal Government.

We sought comment on the proposed amendments to § 156.1215(b) and (c).

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to the comments, we are finalizing this provision as proposed. We summarize and

respond below to public comments received on the proposed amendments to the payment and

collections process at § 156.1215(b) and (c).

Comment: Some commenters opposed the proposal to allow HHS to net unpaid Federal

IDR administrative fees with payments owed to issuers for certain other specified HHS ACA

programs. Several of these commenters raised concerns regarding the proposal’s impact on the

Independent Dispute Resolution Operations proposed rule and the proposed amendments to § 156.1215 in this

proposed rule are finalized.

326

“Affiliate” refers to any affiliated issuer that operates under the same taxpayer identification number as an issuer,

such as when there are multiple Health Insurance Oversight System (HIOS) identifiers operating under the same

taxpayer identification number. See the 2015 Payment Notice proposed rule (78 FR 72371).

CMS-9895-F 565

current integrated payment and collections processes with a few of these commenters expressing

concerns that modifying any payment and collections process prior to stabilizing the Federal IDR

process could create substantial administrative burdens and unintended challenges for issuers.

Additionally, some commenters expressed concern that without detailed accounting from HHS,

netting would hinder issuers’ ability to determine which disputes the administrative fee is being

collected for and to which entities, who are involved in a dispute, the IDR administrative fee

should be attributed. Finally, one commenter requested the netting process be delayed until

issuers are required to pay the Federal IDR administrative fee directly to HHS.

Response: We are finalizing amendments to the payment and collections process set forth

at § 156.1215 as proposed. We will not begin netting Federal IDR administrative fees until

disputing parties are required to pay Federal IDR administrative fees directly to HHS, if the

proposal in Federal Independent Dispute Resolution Operations proposed rules (88 FR 75744) is

finalized.

To further explain this netting process, HHS will include amounts owed to the Federal

Government from issuers and their affiliates operating under the same TIN for administrative

fees for utilizing the Federal IDR process in accordance with § 149.510(d)(2) when netting

payments owed to issuers and their affiliates operating under the same tax identification number

against amounts due to the Federal Government from the issuers and their affiliates under the

same taxpayer identification number for advance payments of the premium tax credit, advance

payments of and reconciliation of cost-sharing reductions, payment of Federally-facilitated

Exchange user fees, payment of State Exchanges utilizing the Federal platform user fees, and

risk adjustment, reinsurance, and risk corridors payments and charges.

CMS-9895-F 566

As part of this netting policy, we will also provide that any amount owed to the Federal

Government by an issuer and its affiliates for unpaid administrative fees due to the Federal

Government from these issuers and their affiliates for utilizing the Federal IDR process in

accordance with § 149.510(d)(2), after HHS nets amounts owed by the Federal Government

under these programs, would be the basis for calculating a debt owed to the Federal Government.

Should the parallel related proposals related to the manner of the administrative fee collection

and netting be finalized in the Federal Independent Dispute Resolution Operations proposed

rules, we will work with issuers to prevent additional administrative burdens or unintended

challenges for HHS and issuers in implementing this netting policy. Specifically, we intend to

leverage our current integrated payment and collections process and reporting to simplify the

implementation of this netting policy, to assist issuers in identifying debts owed through its

current invoice process, and to keep issuers informed of updates to the integrated payment and

collections processes.

Comment: One commenter recommended that if HHS finalizes the proposal to allow

HHS to net unpaid IDR administrative fees with other HHS program funds owed to issuers,

issuers should be allowed to file a request for reconsideration to contest errors, application of the

relevant methodology, or mathematical errors with respect to the amount of an IDR

administrative fee by HHS.

Response: We do not believe that additional dispute processes, such as the appeal process

under § 156.1220, are needed. If HHS were to directly collect IDR administrative fees, issuers

will be able to dispute charges or raise issues, such as mathematical errors, under existing

processes as provided in § 30.12. Accordingly, all issuers’ invoices for all programs identified

under § 156.1215 provide instructions for how issuers can submit a written dispute of their

CMS-9895-F 567

invoices and request that HHS review the determination of the debt. Under this process, issuers

have the right to inspect HHS records related to the invoice and present evidence that all or part

of their debt is not past due or not legally enforceable. Once a written request presenting the

evidence is submitted to HHS, we review the determination of the debt and work with issuers to

resolve any issues or inconsistencies.

IV. Collection of Information Requirements

Under the Paperwork Reduction F of 1995, we are required to provide 60-day notice in

the Federal Register and solicit public comment before a collection of information requirement

is submitted to the Office of Management and Budget (OMB) for review and approval. To fairly

evaluate whether an information collection should be approved by OMB, section 3506(c)(2)(A)

of the Paperwork Reduction Act of 1995 requires that we solicit comment on the following

issues:

● The need for the information collection and its usefulness in carrying out the proper

functions of the agency.

● The accuracy of our estimate of the information collection burden.

● The quality, utility, and clarity of the information to be collected.

● Recommendations to minimize the information collection burden on the affected

public, including automated collection techniques.

We solicited public comment on each of these issues for the following sections of this

document that contain information collection requirements (ICRs). The public comments and our

responses appear in this section, and in the applicable ICR sections that follow.

Comment: Regarding the Collection of Information requirements, one commenter stated

that paperwork burden and information collection estimates concentrate on the design of

CMS-9895-F 568

products such as forms without also devoting attention to recordkeeping requirements, training,

and legitimate private sector concerns over exposure to new enforcement actions. The

commenter suggested that CMS can minimize these problems by ensuring adequate

implementation periods, proposing major changes that start from a common and familiar

knowledge base, soliciting feedback more often than annually, closely examining the “regulatory

sandbox” concept, and designing and promulgating “safe harbor” guidance for entities.

Response: We appreciate the commenter’s general feedback on ways that HHS can

continually improve the accuracy of its cost estimates. We emphasize that HHS adheres to the

Administrative Procedure Act

327

standards of notice and comment rulemaking and that HHS

strives to estimate information collection burden as accurately as possible given the data

available to inform its estimates, and incorporates feedback and input from interested parties,

both through notice and comment rulemaking and informal feedback throughout the year.

A. Wage Estimates

To derive wage estimates, we generally use data from the Bureau of Labor Statistics to

derive average labor costs (including a 100 percent increase for the cost of fringe benefits and

overhead) for estimating the burden associated with the ICRs.

328

Table 14 presents the median

hourly wage, the cost of fringe benefits and overhead, and the adjusted hourly wage.

As indicated, employee hourly wage estimates have been adjusted by a factor of 100

percent. This is necessarily a rough adjustment, both because fringe benefits and overhead costs

vary significantly across employers, and because methods of estimating these costs vary widely

across studies. Nonetheless, there is no practical alternative, and we believe that doubling the

327

Pub. L. 79–404.

328

See May 2022 Bureau of Labor Statistics, Occupational Employment Statistics, National Occupational

Employment and Wage Estimates. https://www.bls.gov/oes/current/oes_stru.htm.

CMS-9895-F 569

hourly wage to estimate total cost is a reasonably accurate estimation method.

TABLE 14: Adjusted Hourly Wages Used in Burden Estimates

Occupation Title

Occupational

Code

Median Hourly

Wage ($/hr.)

Fringe

Benefits and

Overhead

($/hr.)

Adjusted Hourly

Wage ($/hr.)

Business Operations Specialist

13-1000

$36.56

$73.12

Web and Digital Interface

Designer

15-1255

$40.02

$80.04

Web Developer

15-1254

$37.78

$75.56

Compliance Officer

13-1041

$34.47

$68.94

Accountant and Auditor

13-2011

$37.50

$75.00

Management Analyst

13-1111

$45.81

$91.62

Chief Executive

11-1011

$91.12

$182.24

Computer Systems Analyst

15-1211

$49.15

$98.30

Financial Examiners (State

Government, excluding schools

and hospitals)

13-2061

$39.52

$79.04

Actuary (Member of American

Academy of Actuaries)

15-2011

$54.80

$109.60

General and Operations Manager

11-1021

$47.16

$94.32

General Internal Medicine

Physician

29-1216

$103.11

$10.113

$206.22

Computer Programmers

15-1251

$47.02

$94.04

B. ICRs Regarding Finalized Amendments to Normal Public Notice Requirements (31 CFR

33.112, 31 CFR 33.120 and 45 CFR Part 155.1312, and 45 CFR 155.1320)

We are finalizing amendments to the section 1332 waiver implementing regulations to set

forth flexibilities related to State public notice requirements and post-award public participation

requirements. Current regulations at 31 CFR 33.112 and 45 CFR 155.1312 specify State public

notice and comment period and participation requirements for finalized section 1332 waiver

requests, and 31 CFR 33.116(b) and 45 CFR 155.1316(b) specify the public notice and comment

period and approval requirements under the accompanying Federal process.

However, this final rule does alter any of the requirements related to section 1332 waiver

applications, compliance and monitoring, or evaluation in a way that would impose any

additional costs or burdens for States seeking waiver approval or those States with approved

CMS-9895-F 570

waiver plans that have not already been captured in prior burden estimates. The Departments

anticipate that implementing these provisions will not significantly change or decrease the

associated burden currently approved under OMB control number: 0938-1389, expiration date:

February 29, 2024.

We did not receive any comments on ICRs regarding the amendments to normal public

notice requirements for section 1332 waivers.

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

We are finalizing requirements at 42 CFR 600.320(c)(1) through (3) that a State

operating a BHP must establish a uniform method of determining the effective date of eligibility

for enrollment in a standard health plan which follows: (1) the Exchange coverage effective date

standards at 45 CFR 155.420(b)(1); (2) the Medicaid effective date standards at 42 CFR

435.915 exclusive of § 435.915(a); or (3) an effective date of eligibility of the first day of the

month following the month in which BHP eligibility is determined. We are also adding 42 CFR

600.320(c)(4) which allows for a State to establish its own effective date of eligibility for

enrollment policy subject to HHS approval. We note that only 42 CFR 600.320(c)(3) and (4) are

newly finalized. The options under 42 CFR 600.320(c)(1) and (2) currently exist.

We estimate that the policies under 42 CFR 600.320(c)(3) and (4) will have no impact on

the information collection burden. We note that any cost would be incurred 100 percent by the

State, as Federal BHP funds cannot be used for program administration.

We sought comment on these assumptions.

We did not receive any comments in response to the burden estimates for this policy

change. We are finalizing these estimates as proposed.

CMS-9895-F 571

D. ICRs Regarding Election to Operate an Exchange after 2014 (45 CFR 155.106)

We are finalizing amendments to § 155.106(a)(2) to add new paragraphs (a)(2)(i) and (ii).

Specifically, we are finalizing that as part of a State’s activities for its establishment of a State

Exchange, the State provide upon request, supplemental documentation to HHS detailing the

State’s implementation of its State Exchange functionality, including information regarding the

State’s ability to implement and comply with Federal requirements for operating an Exchange.

Such supporting documentation would inform HHS’s decision to approve or conditionally

approve a State Exchange and could include, for example, materials demonstrating progress

toward meeting State Exchange Blueprint application requirements, documentation that details a

State’s plans to implement and meet the Exchange functional requirements as laid out in the

State Exchange Blueprint application, or plans to engage in consumer assistance programs and

activities. Additionally, we are finalizing the requirement that when a State submits its State

Exchange Blueprint application to HHS for approval, the State must provide the public with

notice and a copy of its State Exchange Blueprint application. Further, at some point following a

State’s submission of its State Exchange Blueprint application to HHS, a State must conduct at

least one public engagement (such as a townhall meeting or public hearing), in a timeline and

manner considered effective by the State, with concurrence from HHS, at which interested

parties can learn about the State’s intent to establish a State Exchange and the State’s progress

toward executing that transition. We are also finalizing the requirement that while a State is in

the process of establishing a State Exchange and until HHS has approved or conditionally

approved the State Exchange Blueprint application, the State conduct periodic public

engagements at which interested parties can continue to learn about the State’s progress towards

establishing a State Exchange, in a timeline and manner considered effective by the State, with

CMS-9895-F 572

concurrence from HHS. These finalized requirements will impact States that are considering, or

are in the process of, establishing a State Exchange for PY 2025 and subsequent years. We

anticipate minimal burden on these States, as we believe they will have sufficient time to plan for

such public-facing State Exchange engagements and activities if not already in their plans.

We did not receive any comments in response to the burden estimates for this policy. We

are finalizing these estimates as proposed.

E. ICRs Regarding Adding and Amending Language to Ensure Web-brokers Operating in State

Exchanges Meet Certain HHS Standards Applicable in the FFEs and SBE-FPs (45 CFR

155.220)

We are finalizing amendments to § 155.220 to apply to web-brokers operating in State

Exchanges, and consequently in State Exchanges, in both the Individual Market Exchanges and

SHOPs, certain existing HHS standards governing web-brokers’ use of non-Exchange websites

to assist consumers with enrolling in QHPs and applying for APTC/CSRs in a manner that

constitutes enrollment through the Exchange. The burden associated with these amendments

includes costs for web-brokers assisting consumers in State Exchanges to meet the requirements

in finalized § 155.220(n) and for State Exchanges related to the development and oversight of

web-broker programs within their State. We anticipate that the same number of web-brokers

operating in the Exchanges on the Federal platform (20) will also operate in the 5 State

Exchanges and will be required to incur this burden for each of the 5 State Exchanges they may

operate in. We estimate the relevant costs based on current Federal costs. These estimates are

described below.

These amendments will impose burdens on web-brokers assisting consumers in State

Exchanges for costs related to web-development to meet the finalized website display

CMS-9895-F 573

requirements to be extended to web-brokers operating in these State Exchanges and costs

associated with creating and submitting audit documentation for the applicable Exchange’s

review. We solicited feedback from State Exchanges regarding these burden estimates and the

number of web-brokers expected to participate in State Exchanges pursuant to this proposal.

Although we have allowed certain flexibility for State Exchanges to tailor their web-broker

program and establish their own standards with respect to operational readiness demonstrations

by their web-brokers, we expect the costs can be reasonably estimated based on the Federal costs

as follows.

We estimate it will take 5 hours for a Business Operations Specialist at an hourly rate of

$73.12 to implement the standardized disclaimers required under § 155.220(c)(3)(i)(A) and (G),

along with 30 hours at an hourly rate of $80.04 for a Web and Digital Interface Designer to

modify the website to implement the standardized disclaimers across 5 State Exchanges.

Therefore, for the standardized disclaimers under § 155.220(c)(3)(i)(A) and (G), we estimate

each web-broker assisting consumers in State Exchanges will incur a cost of $2,766.80 (5 hours

x $73.12 per hour + 30 hours x $80.04 per hour). We estimate a cumulative burden of $55,336

for the anticipated 20 web-brokers operating across the State Exchanges ($2,766.80 x 20 web-

brokers). Additionally, finalized new paragraph §155.220(n)(1) allows State Exchanges the

flexibility to add State-specific language to the standardized disclaimers, provided the additional

language does not conflict with the HHS-provided standardized disclaimers. We solicited

feedback from State Exchanges regarding how these flexibilities would impact these burden

estimates.

Additionally, we anticipate it will take up to 100 hours at an hourly rate of $80.04 for a

Web and Digital Interface Designer to modify the website to implement and display the

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standardized QHP comparative information required under § 155.220(c)(3)(i)(A) (including the

quality ratings assigned by HHS and enrollee satisfaction survey) across 5 State Exchanges.

Therefore, for the display of the QHP comparative information on web-broker non-Exchange

websites, we estimate each web-broker operating in State Exchanges will incur a cost of $8,004

(100 hours x $80.04 per hour). We estimate a cumulative burden of $160,080 for the anticipated

20 web-brokers operating across the State Exchanges ($8,400 x 20 web-brokers).

We anticipate it will take 25 hours for a Web and Digital Interface Designer at an hourly

rate of $80.04 to modify the website to display the APTC and CSR eligibility information

required under § 155.220(c)(3)(i)(I) across 5 State Exchanges. Therefore, for changes related to

implementation of the HHS minimum web-broker standards related to display of consumer

APTC and CSR eligibility information, we estimate each web-broker operating in States with

State Exchanges will incur a cost of $2,001 (25 hours x $80.04). We therefore estimate a

cumulative burden of $40,020 for the anticipated 20 web-brokers operating across the 5 State

Exchanges ($2,001 x 20 web-brokers). Additionally, as discussed in the proposed rule (88 FR

82560), we allow State Exchanges flexibility in how consumer eligibility information for APTC

or CSRs is displayed on websites by web-brokers in State Exchanges, at the discretion of the

State Exchange on the display of that information. We solicited feedback from State Exchanges

regarding how these flexibilities would impact these burden estimates.

Finalized paragraph § 155.220(c)(4)(iii) will extend certain downstream agent and broker

requirements at § 155.220(c)(4)(i) that currently apply to web-brokers in FFE and SBE-FP States

and govern the use of the web-broker’s non-Exchange website by other agents or brokers

assisting Exchange consumers to also apply to web-brokers, and their downstream agents and

brokers in State Exchanges, and consequently to these State Exchanges. Under the finalized

CMS-9895-F 575

provision, web-brokers that permit other agents or brokers, through a contract or other

arrangement, to use the web-broker’s non-Exchange website to help an applicant or enrollee

complete a QHP selection or complete the Exchange eligibility application will be required to

meet the standards at § 155.220(c)(4)(i)(A), (B), (D), and (F) when assisting consumers in States

with State Exchanges. This includes extension of requirements for web-brokers to verify that any

agent or broker accessing or using the website is licensed in the State in which the consumer is

selecting the QHP and has completed training and registration and has signed all required

agreements with the applicable State Exchange. It will also require web-brokers to terminate the

agent or broker’s access to its website if the applicable State Exchange determines the agent or

broker is in violation of the provisions described in this section and/or if the applicable State

Exchange terminates any required agreement with the agent or broker. In addition, it will also

extend a requirement for web-brokers to provide State Exchanges with a list of agents and

brokers who enter into such a contract or other arrangement to use the web-broker’s non-

Exchange website, in a form and manner to be specified by the State Exchanges similar to the

requirement in § 155.220(c)(4)(i)(A) for web-brokers in FFE and SBE-FP States to report the

same information to HHS. We understand that web-brokers who work with and allow other

agents and brokers to use the web-brokers’ non-Exchange websites to assist Exchange

consumers typically obtain and manage information on each of their downstream agents or

brokers as part of an onboarding process. As a result, we expect web-brokers will already have

the necessary data to provide a list to the applicable State Exchange of each of the other agents or

brokers that are allowed to use the web-brokers’ non-Exchange websites to assist Exchange

consumers. We estimate that it will take up to 240 hours at an hourly cost of $94.04 for a

computer programmer to perform the necessary programming to comply with these requirements

CMS-9895-F 576

in § 155.220(c)(4)(i)(A), (B), and (D), and 10 hours at an hourly cost of $73.12 for a Business

Operations Specialist to develop a listing of affiliated third-party agents and brokers across all 5

State Exchanges. Therefore, for changes related to implementation of these HHS minimum web-

broker standards related to downstream agents or brokers, we estimate each web-broker

operating in State Exchanges will incur a cost of $23,300.80 per web-broker (($94.04 x 240

hours) + ($73.12 x 10 hours)). We estimate a cumulative burden of $466,016 for an anticipated

20 web-brokers operating across the State Exchanges ($23,300.80 x 20 web-brokers).

We estimate it will take 95 hours for a Business Operations Specialist at an hourly rate of

$73.12 to oversee and monitor compliance with the operational readiness requirements

established by State Exchanges, as required by new § 155.220(n)(2) across 5 State Exchanges.

Therefore, for compliance requirements, we estimate each web-broker operating in States with

State Exchanges will incur a cost of $6,946.40 (95 hours x $73.12) for the finalized operational

readiness requirements. We estimate a cumulative burden of $138,928 for the anticipated 20

web-brokers operating across the 5 State Exchanges ($6,946.40 x 20 web-brokers). These burden

estimates are provided based on the estimates of the cost for DE entities to comply with the

operational readiness requirements established by HHS. Finalized paragraph §155.220(n)(2) will

allow State Exchanges to define and establish the form and manner for their web-brokers to

establish operational readiness. Although we anticipate State Exchanges would establish

requirements similar to the requirements for demonstrating operational readiness to operate in

the FFE or SBE-FPs, we solicited feedback from State Exchanges regarding how well these

burden estimates reflect their anticipated requirements.

Therefore, we estimate each web-broker operating in all 5 State Exchanges will incur a

one-time burden in PY 2025 of 505 hours at a cost of $43,019. We estimate a cumulative burden

CMS-9895-F 577

of 10,100 hours at an estimated cost of $860,380 for all 20 web-brokers operating across the 5

State Exchanges. We sought comment on the number of State Exchanges that would be

interested in establishing a web-broker program to allow web-brokers to host non-Exchange

websites to assist Exchange consumers in their State and on the number of web-brokers

interested in operating in those State Exchanges.

Finalized paragraph 155.220(n) will require State Exchanges to comply with the HHS

standards described above and in the preamble. Finalized paragraph 155.220(n)(1) will allow

State Exchanges the flexibility to add State-specific language to the standardized disclaimers

provided the additional language does not conflict with the HHS-provided standardized

disclaimers and provides flexibility in how consumer eligibility information for APTC or CSRs

is displayed on websites by web-brokers in State Exchanges, at the discretion of the State

Exchange on the display of that information. Finalized paragraph (2) under this new section will

also require State Exchanges to establish the form and manner for their web-brokers to

demonstrate operational readiness, which may include submission or completion of the same

items addressed in § 155.220(c)(6)(i)-(v) to the State Exchanges, in the form and manner

specified by the Exchange. The burden associated with these finalized changes includes costs for

existing and future State Exchanges related to drafting new policy, updating standards, and

potentially hiring additional staff to perform functions not currently being performed by the State

Exchange, such as for drafting web-broker disclaimer language, drafting consumer-facing

educational content, and engaging web-brokers in operational readiness, that will now incur new

costs related to establishment of a web-broker program and ongoing monitoring of web-brokers

to enforce the minimum HHS standards and any additional State-specific requirements.

CMS-9895-F 578

We estimate the relevant costs based on current Federal costs as follows. We estimate

that 5 States will opt to host a web-broker program for their State Exchanges. We anticipate the

total burden associated with the State Exchanges developing the associated policies and

procedures, including providing web-brokers with examples and technical assistance (including

technical implementation guidance such as providing the quality ratings assigned and enrollee

satisfaction survey data) to be up to 528 hours per State. This assumes 480 hours for a GS-13,

Step 5 employee at an hourly rate of $121.66 (the hourly wage rate for a GS-13, Step 5 employee

in the Washington, D.C. area,

329

doubled to account for fringe benefits and overhead) and 48

hours for a GS-15, Step 5 employee at an hourly rate of $169.10 (the hourly wage rate for a GS-

15, Step 5 employee in the Washington, D.C. area,

330

doubled to account for fringe benefits and

overhead). In total, for the 5 State Exchanges anticipated to participate, we estimate a burden of

2,640 hours (5 State Exchanges x 528 hours per State Exchange) at a cost of $332,568 (2,400

hours x $121.66 + 240 x $169.10).

We estimate it will take 40 hours each for the State Exchange equivalent of 2 GS-13,

Step 5 employees at an hourly rate of $121.66 (the hourly wage rate for a GS-13, Step 5

employee in the Washington, D.C. area,

331

doubled to account for fringe benefits and overhead)

to complete initial documentation review related to all web-broker requirements pursuant to this

finalized policy, for a total cost to State governments of $9,732.80 (2 x 40 hours x $121.66) per

State Exchange. We estimate it will take 8 hours for the equivalent of 1 GS-15, Step 5 employee

329

OPM. (2023, January). Salary Table 2023-DCB Incorporating the 4.1% General Schedule Increase and a

Locality Payment of 32.49% For the Locality Pay Area of Washington-Baltimore-Arlington, DC-MD-VA-WV-PA

Total Increase: 4.86%. https://www.opm.gov/policy-data-oversight/pay-leave/salaries-wages/salary-

tables/pdf/2023/DCB_h.pdf.

330

Id.

331

Id.

CMS-9895-F 579

at an hourly rate of $169.10 (the hourly wage rate for a GS-15, Step 5 employee in the

Washington, D.C. area,

332

doubled to account for fringe benefits and overhead) to provide

managerial review and oversight, for a total cost to State governments of $1,352.80 (1 x 8 hours

x $169.10) per State Exchange. Additionally, we estimate the total burden for each State

government for State contract and contractors ongoing reviews for oversight will include 1,087

hours at GS-12, Step 5 with an hourly rate of $102.30 (the hourly wage rate for a GS-12, Step 5

employee in the Washington, D.C. area,

333

doubled to account for fringe benefits and overhead)

and 2,305 hours at GS-13, Step 5 with an hourly rate of $121.66 (the hourly wage rate for a GS-

13, Step 5 employee in the Washington, D.C. area,

334

doubled to account for fringe benefits and

overhead), and the total burden across all 5 States to be 16,960 hours. Therefore, we estimate a

cost to each State governments of $469,225.60, with a total estimated cost to State governments

of $2,346,128 (5 States x $469,225.60). We sought comment from State Exchanges on these

burden estimates.

We recognize that some State Exchanges may utilize web-brokers already assisting

consumers in the FFEs and SBE-FPs, and encourage State Exchanges to leverage web-broker

operational readiness demonstrated to participate in the FFEs or SBE-FPs when possible, as to

minimize the burdens on the State Exchanges and their web-brokers.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing the burden estimates with modifications to the

estimated burden hours for web-brokers to implement the requirements associated with this

policy. We summarize and respond to public comments received regarding this provision below.

332

Id.

333

Id.

334

Id.

CMS-9895-F 580

Comment: One commenter suggested that the burden estimates could be substantially

reduced if the State Exchanges leverage or choose to mirror the HHS requirements. This

commenter noted concern that it is misleading to present a separate burden analysis for web-

brokers and DE entities, as the majority of web-brokers are DE entities and the burden for

complying with web-broker standards on top of EDE standards is minimal.

Response: We appreciate the comment that the burden estimates could be substantially

reduced if the State Exchanges leverage the HHS requirements. Although we agree with this

comment, the flexibilities afforded to State Exchanges as part of this finalized policy,

particularly with regards to implementation of web-broker programs and requirements, present

the possibility of significant differences between web-broker programs in different States while

also establishing baseline consumer protections across the State Exchanges. We formulated these

burden estimates to account for a possible scenario of varied web-broker program requirements

across State Exchanges. However, we encourage State Exchanges to leverage the HHS

requirements and believe the implementation costs for both State Exchanges and web-brokers

may be substantially reduced if the State Exchanges leverage the HHS requirements. However,

the assumption that States can save money by mirroring HHS standards assumes that all entities

participating have complied and met the HHS standards, as verified by HHS, and ignores the

possibility that entities may participate in a given State’s web-broker or DE entity program as a

net new entity, with no experience or documented compliance at the Federal level. We carefully

considered this commenter’s feedback and reduced relevant burden estimates for requirements

where we believe there is a high likelihood that State Exchanges will adopt the same

requirements as the FFE. We disagree where the commenter suggested it is misleading to present

a separate burden analysis for web-brokers and DE entities. Although the majority of DE entities

CMS-9895-F 581

are web-brokers, there exist some DE entities that are not web-brokers (for example, Issuer DE

Technology Providers). For that reason, we believed it was important to provide a

comprehensive burden estimate for participating in web-broker programs and DE entity

programs. However, we acknowledge there is significant overlap between the requirements for

web-brokers and DE entities, and, accordingly, have reduced the entity burden estimates for DE

entities distinct from web-brokers. We note, however, given the State’s requirements for a DE

entity under § 155.221 may require a different burden for an entity to implement and comply

with compared to the State’s requirements for a web-broker under § 155.220.

Comment: One supporting commenter provided comments related specifically to the

portion of the burden estimate regarding costs for State Exchanges to implement web-broker

programs. This commenter noted that the cost estimates for States to implement this finalized

proposal are overstated and fail to incorporate the potential cost savings and additional user fee

revenues that States could realize through utilization of web-brokers, including reduced burdens

on State call centers and State Exchanges. The commenter expressed concern that the burden

estimates were based on salary information for Washington, DC, citing higher salaries for that

locality as compared to employees in the majority of State Exchanges. This commenter requested

clarification for how the estimated hours for contractor oversight of State Exchanges were

determined.

Response: We acknowledge the concern that the burden estimates for State Exchanges to

implement web-broker programs are overstated. As acknowledged above, this finalized policy

provides flexibility to State Exchanges in their implementation of web-broker programs. These

burden estimates account for the possibility that State Exchanges may implement web-broker

programs differing from the FFE program. We encourage State Exchanges to leverage the HHS

CMS-9895-F 582

requirements when developing their web-broker programs and we anticipate that doing so would

substantially reduce the burden for State Exchanges to develop and implement these programs.

In addition, we acknowledge the comment that web-broker programs may provide additional

user fee revenues and cost savings to State Exchanges associated with reduced burdens on State

call centers and State Exchanges. Although we acknowledge that there could be cost savings

associated with implementing web-broker programs in State Exchanges, we have not conducted

a detailed analysis on the cost savings associated with the implementation of web-broker

programs in the FFE and, therefore, cannot quantify the extent of any such savings. Furthermore,

these estimates are specific to defining the oversight policies and procedures, and the

implementation of such oversight for web-brokers and DE entities under § 155.220 and §

155.221; these estimates are not intended to calculate the total cost—or savings—for any given

State to implement a web-broker or DE program, including the costs of developing and

maintaining the technical infrastructure to maintain a web-broker and DE entity program.

However, we do recognize the potential for savings and are open to feedback as we continue to

work with our State partners on implementation of these programs. We acknowledge the concern

regarding the use of Washington, DC, labor rates in calculating these burden estimates. In the

absence of a national average pay scale, we acknowledge there will be variations in regional pay

scales among State Exchanges, including some which may be higher or lower than the rates used

to calculate these estimates. With regards to the estimates for contractor oversight of State

Exchanges, we are clarifying that these estimates were calculated by mapping labor for the

relevant requirements to GS categories based on the applicable FFE contractor support labor

costs and hours for the applicable requirements and estimated number of entities. We

acknowledge that any given State may experience a higher or lower cost for implementing these

CMS-9895-F 583

programs depending on the extent (that is, scope and frequency) of the State’s oversight

mechanisms, the scope of the State’s specific requirements for these programs, and the general

quality and compliance posture of web-brokers or DE entities intending to participate in the

State.

Comment: One supporting commenter provided comments related to the portion of the

burden estimate regarding costs for web-brokers to operate in State Exchanges. Specifically, this

commenter provided detailed feedback on the estimated burden hours based on their experience

as a web-broker operating in the FFEs. This included feedback on the burden associated with

implementing §§ 155.220(c)(3)(i)(A), 155.220(c)(3)(i)(G), 155.220(c)(3)(i)(I),

155.220(c)(4)(i)(A), 155.220(c)(4)(i)(B), 155.220(c)(4)(i)(D), and 155.220(n)(2).

Response: We appreciate the feedback on these burden estimates from a web-broker

currently operating in the FFEs. We recognize the value of feedback from an entity with

experience implementing the FFE program requirements and we carefully considered this

feedback and have adjusted the burden estimates where applicable. In making these adjustments,

we considered that the commenter has considerable experience operating in the FFE. As the

commenter acknowledged, other web-brokers may have differing levels of technical expertise

and capacity. We have accounted for the costs associated with implementing these requirements

from the perspective of web-brokers with limited experience. However, we agree that the burden

may be substantially lower for web-brokers with increased technical experience and capacity. In

considering the feedback on these burden estimates, we note there were several assumptions

made regarding the State Exchanges’ provision of data to web-brokers (for example, the

provision of QHP data and agent or broker registration data). These burden estimates account for

a scenario where there may be variability between the format of data provided across State

CMS-9895-F 584

Exchanges. We encourage State Exchanges to leverage the data formats used in the FFEs and are

committed to providing technical assistance to State Exchanges to facilitate such standardization.

F. ICRs Regarding Establishing Requirements for DE Entities Mandating HealthCare.gov

Changes to Be Reflected on DE Entity Non-Exchange Websites within a Notice Period Set by

HHS (45 CFR 155.221(b))

As discussed in the preamble of this finalized rule, we are finalizing without modification

but with technical changes additional language to § 155.221 requiring that, in FFE and SBE-FP

States, would require DE entities to implement and prominently display website display changes

made by HHS to HealthCare.gov by meeting standards communicated and defined by HHS

within a time period set by HHS, unless HHS approves a deviation from those standards. within

a time period specified by HHS, unless HHS approves a deviation.

Based on our experience with operating the DE program on the FFEs and SBE-FPs over

the past several years, we estimate that approximately three or fewer display changes will be

required annually. We estimate that a total of 100 web-brokers and QHP issuers participating in

DE in FFE and SBE-FP States will be required to comply with these requirements. These display

changes may range from changes such as, but not limited to, relatively simple text-based updates

to more complex display changes involving the website’s backend display methodology or

algorithms. We estimate approximately two simpler and one more complex display change

annually. We estimate that it will take a Web and Digital Interface Designer 30 hours annually,

at a cost of $80.04 per hour, to implement these changes, at a total annual cost of approximately

$2,401.20 ($80.04 × 30 hours) per web-broker or QHP issuer. We therefore estimate a total

annual burden of 3,000 hours (30 x 100) at a cost of $240,120 (3,000 hours × $80.04 per hour)

for all applicable web-brokers and QHP issuers.

CMS-9895-F 585

We recognize that system constraints may prevent DE entity non-Exchange websites

from precisely mirroring the HealthCare.gov display approach, and that DE entities may have an

idea for implementation that does not meet the standards defined by HHS but would effectively

communicate the same information to consumers. We are finalizing that DE entities assisting

consumers in FFE and SBE-FPs that intend to deviate from the standards defined by HHS will be

required to submit a deviation request. Those requests will be subject to review by HHS in

advance of implementation of any alternative display approaches.

Based on internal data, we estimate that 25 web-brokers and QHP issuers assisting

consumers in FFE or SBE-FP States will submit a request to deviate from the standards defined

by HHS annually. We estimate it will take a compliance officer approximately 3 hours annually,

at a rate of $68.94 per hour, to prepare and submit the request to deviate from the communicated

standards, including preparing the rationale explaining the request. We therefore estimate the

total annual burden for all web-brokers and issuers in completing and submitting a request to

deviate to be approximately $5,170.50 annually.

We do not expect this finalized policy to impose a new burden on EDE entities, as EDE

entities are already following the process outlined in this finalized policy through the change

request processes described in the Third-Party Auditor Guidelines.

Because the proposal to ensure DE entities assisting consumers in State Exchanges meet

certain standards applicable in the FFEs and SBE-FPs at new § 155.221(j) was finalized, we

estimate that DE entities may incur burden related to the website development needed to

implement and prominently display changes made to State Exchange websites per the standards

defined by the State Exchange. We anticipate that the web-development costs cited above will

apply for each DE entity assisting consumers in State Exchanges. As described in the preamble,

CMS-9895-F 586

there may be burden associated with maintaining DE environments tailored to each States

Exchanges’ display requirements. However, based on our experience conducting oversight of DE

entity non-Exchange websites assisting consumers in FFEs and SBE-FPs, it is our understanding

that DE entities are familiar with and capable of tailoring website displays based on specific

criteria and, as such, we anticipate entities are capable of tailoring website displays to the

requirements of the State the consumer is seeking assistance in. We anticipate a total annual

burden of $247,358.70 for DE entities assisting consumers in States with State Exchanges

associated with implementing display changes and submitting requests to deviate from the

standards defined by the State Exchange across 5 State Exchanges, should the State Exchange

elect to permit deviation requests. The total burden was calculated by multiplying the costs

associated with implementing display changes among 20 DE entities expected to operate across

5 State Exchanges ($2,401.20 x 5 State Exchanges x 20 DE entities) and adding this to the

expected costs for 7 DE entities operating across 5 State Exchanges to submit requests to deviate

from the standards defined by the State Exchanges ($206.82 x 5 State Exchanges x 7 DE

entities). If the State Exchange permits deviation requests, those requests will be subject to

review by the State Exchange in advance of implementation of any alternative website displays.

We sought comment on the burden of this proposal on DE entities planning to operate in State

Exchanges.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing the burden estimates as proposed. We summarize

and respond to public comment received regarding the requirements that HealthCare.gov or

State Exchange website changes be implemented and prominently displayed on DE entity non-

Exchange websites within a time notice period set by HHS below.

CMS-9895-F 587

Comment: One commenter noted they believe this proposal will propose little to no

additional burden on most DE entities because it is believed that many of the applicable entities

may already be complying with the proposed standards.

Response: We appreciate this comment and agree, as described above and in the proposed

rule, that the majority of DE entities are already complying with the requirements associated

with this policy because they are subject to the existing HHS-initiated change request practices

outlined in the Third-Party Auditor Guidelines. However, we believe the provided burden

estimates appropriately characterize the burden for the existing HHS-initiated change request

process and for the expansion of this process to Classic DE entities and to DE entities operating

in State Exchanges.

G. ICRs Regarding Ensuring DE Entities Operating in State Exchanges Meet Certain Standards

Applicable in the FFEs and SBE-FPs (45 CFR 155.221)

We are finalizing amendments to § 155.221 to apply to DE entities operating in State

Exchanges, and consequently State Exchanges that choose to implement a DE program, certain

existing HHS standards applicable to DE entities assisting consumers with enrolling in QHPs

and applying for APTC/CSRs in FFEs and SBE-FPs, in both the Individual Market Exchanges

and SHOPs. We anticipate approximately 20 DE entities will operate in the 5 State Exchanges

and will be required to incur this burden for each of the 5 State Exchanges they may operate in.

The burden associated with these changes includes costs for DE entities assisting consumers in

State Exchanges to meet the requirements described in finalized § 155.221(j) and for State

Exchanges related to the development and oversight of DE programs within their State. We

estimate relevant costs based on current Federal costs. These estimates are described below.

CMS-9895-F 588

The burden associated with operating a DE program includes costs for DE entities related

to web-development to meet the website display requirements being applied to DE entities

operating in States with State Exchanges and costs for creating, storing, and submitting

operational readiness documentation for Exchange review. Although these policies allow States

certain flexibility for State Exchanges to tailor their DE program and establish their own

standards with respect to operational readiness demonstrations by their DE entities, including

whether to require third-party audits of DE entities and to impose additional requirements

beyond the proposed HHS minimum standards as they determine may be appropriate based on

their operational or business needs, we expect the costs to reasonably be estimated based on the

Federal costs as follows.

We estimate it will take 5 hours for a DE entity’s Business Operations Specialist at an

hourly rate of $73.12 to implement the standardized disclaimer required under § 155.221(b)(2),

along with 15 hours at an hourly rate of $80.04 for a Web and Digital Interface Designer to

modify the DE entity non-Exchange website to implement the standardized disclaimer across 5

State Exchanges. Therefore, for the standardized disclaimer under § 155.221(b)(2), we estimate

each DE entity operating in State Exchanges that operate their own eligibility and enrollment

platform will incur a burden of 20 hours at an estimated cost of $1,566.20 (5 hours x $73.12 per

hour + 15 hours x $80.04 per hour). We estimate the anticipated 20 DE entities will incur a

cumulative burden of 400 hours at an estimated cost of $31,324 ($1,566.20 x 20 DE entities).

Costs related to demonstrating operational readiness at finalized § 155.221(j) will depend

on the DE entity’s desired enrollment pathway and the options made available by the State

Exchange. Although we are allowing States the flexibility to establish operational readiness

requirements, including the form and manner for their DE entities to demonstrate operational

CMS-9895-F 589

readiness, we encourage State Exchanges to leverage the existing items in § 155.220(b)(4)(i) and

(ii) as the starting point for their operational readiness reviews. If State Exchanges leverage these

items, we anticipate the burden associated with DE entity demonstration of operational readiness

can be estimated based on the Federal costs as follows. We estimate it will take up to 360 hours

for an Auditor at an hourly rate of $75.00 to submit business audit documentation across 5 State

Exchanges, and we estimate 1 DE entities will participate in a manner that would trigger this

information collection, resulting in an estimated cost of $27,000 per DE entity (360 hours x

$75.00). We estimate it will take up to 122 hours for an Auditor at an hourly rate of $75.00 to

submit security and privacy audit documentation across 5 State Exchanges, and we estimate 3

DE entities will participate in a manner that would trigger this information collection, resulting

in an estimated cost of $9,150 per DE entity (122 hours x $75.00). We estimate it will take 45

hours for a Business Operations Specialist to complete and submit a typical Enhanced Direct

Enrollment (EDE) documentation package and related information across 5 State Exchanges at

an hourly rate of $73.12, and 15 DE entities will participate in a manner that will trigger this

information collection, resulting in an estimated cost of $3,290.40 per DE entity (45 hours x

$73.12). Therefore, for a DE entity to demonstrate operational readiness and compliance with

applicable requirements to State Exchanges, we estimate each DE entity will incur a burden of

up to 527 hours at an estimated cost of up to $39,440.40 (360 hours x $75.00 per hour + 122

hours x $75.00 per hour + 45 hours x $73.12), but many DE entities will incur a lower burden

and cost due to not participating in a manner that would trigger some of these information

collection costs. We estimate a cumulative burden of 1,401 hours at an estimated cost of

$103,806 for all applicable DE entities operating across the 5 State Exchanges ($27,000 x 1 DE

entities + $9,150 x 3 DE entities + $3,290.40 x 15 entities). We solicited feedback from State

CMS-9895-F 590

Exchanges with regards to the form and manner of documentation they would require DE entities

to submit to demonstrate operational readiness, along with the estimated burden associated with

those submissions.

We estimate it will take 100 hours for a Web and Digital Interface Designer at a rate of

$80.04 per hour to modify the DE entity’s non-Exchange website to comply with the

requirements to display and market QHPs offered through the Exchange, individual health

insurance coverage, and any other products on at least three separate websites pages in

accordance with §§ 155.221(b)(1) and (3) and (c) across 5 State Exchanges. Therefore, for these

website display requirements, we estimate each DE entity operating in State Exchanges will

incur an estimated cost of $8,004 (100 hours x $80.04 per hour). We estimate 8 DE entities will

trigger this information collection with a cumulative burden of 800 hours at an estimated cost of

$64,032 across the State Exchanges ($8,004 x 8 DE entities).

The burden associated with this change also includes costs for DE entities operating in

State Exchanges with oversight of direct enrollment entity application assisters, as described in §

155.221(d) (citing § 155.415(b)), for those DE entities that opt to use these application assisters,

when permitted by the applicable State Exchange and only to the extent permitted by applicable

State law. As described in the preamble, the requirements at §§ 155.415(b)(2) and (b)(3) are

already applicable to DE entities operating in all Exchanges and therefore do not represent a new

burden for DE entities. The extension of § 155.221(d) to DE entities operating in State

Exchanges will require DE entities’ application assisters to complete appropriate State-required

training and registration in a manner specified by the State Exchange consistent with §

155.415(b)(1). We estimate that up to 1,000 application assisters will operate in each State

Exchange that opts to implement a DE program and allows DE entity application assisters to

CMS-9895-F 591

assist Exchange consumers. Accordingly, we anticipate that 5,000 application assisters across an

estimated 5 States will participate. We estimate the burden for 20 DE entities to comply with this

requirement at 3 hours per assister for a total annual burden of 750 hours for a Compliance

Officer at an hourly wage of $68.94 for a total cost of $51,705 per entity. We estimate a

cumulative burden of 15,000 hours at an estimated cost of $1,034,100 for 20 DE entities

operating across the 5 State Exchanges ($51,705 x 20 entities).

Finalized paragraph §155.221(j)(3) will extend requirements for DE entities assisting

consumers in State Exchanges to implement and prominently display changes in a manner that is

consistent with the display changes made by the State Exchange to the State Exchanges’ website

by meeting standards communicated and defined by the State Exchange within a time period set

by the State Exchange, unless the State Exchange approves a deviation from those standards

under the deviation request process it would be required to establish should the State Exchange

elect to permit deviations. The costs associated with DE entities implementing this finalized

policy in State Exchanges is discussed in the ICR section related to finalized paragraph

§155.221(b)(6).

Regarding finalized paragraph § 155.221(a) extending requirements under § 156.1230(a)

to DE QHP issuers operating in State Exchanges, we do not anticipate any additional burdens for

QHP issuers, beyond the estimated burdens for the website display requirements described

above, to provide consumers with correct information, without omission of material fact,

regarding the Exchanges, QHPs offered through the Exchanges, and insurance affordability

programs, or to refrain from marketing or conduct that is misleading, coercive, or discrimination

based on race, color, national origin, disability, age, or sex.

CMS-9895-F 592

Therefore, we estimate each DE entity operating in State Exchanges will incur a one-time

burden in PY 2025 of up to 1,397 hours at a cost of up to $100,715.60 for an overall total for all

DE entities operating across the State Exchanges of up to 17,601 hours at an estimated cost of

$1,233,262 to comply with these finalized requirements. We sought comment on the burden of

these requirements on DE entities planning to participate in State Exchanges. For the purposes of

better determining burden estimates, we also sought comment on the number of State Exchanges

that operate their own eligibility and enrollment platforms and would be interested in

implementing a DE program in their State and on the number of DE entities interested in

operating in those State Exchanges.

Finalized paragraph §155.221(j) will require State Exchanges to comply with the FFE

standards described above and in the preamble. §155.221(j)(1) allows State Exchanges the

flexibility to add State-specific information to the standardized disclaimer that does not conflict

with the HHS-provided language. Finalized paragraph (2) under this new section also requires

State Exchanges to establish the form and manner for their DE entities to demonstrate

operational readiness and compliance with applicable requirements, in the form and manner

specified by the Exchange. Finalized paragraph (3) will require State Exchanges establish

requirements for their DE entities to implement and prominently display website changes in a

manner that is consistent with display changes made by the State Exchange to State Exchanges’

websites by meeting standards communicated and defined by the State Exchange within a time

period set by the State Exchange. The burden associated with these finalized changes includes

costs for State Exchanges related to drafting new policy, updating standards, and potentially

hiring additional staff to perform functions not currently being performed by the State Exchange,

such as for drafting DE entity program requirements and guidelines, including establishment of

CMS-9895-F 593

DE entity operational readiness programs, establishment of procedures related to defining and

communicating standards for required display changes, establishment of any State-specific

disclaimer text, and ongoing monitoring of DE entity compliance with applicable HHS standards

and any additional State-specific requirements. DE entities operating in States transitioning off

of the Federal Platform to a State Exchange will likely have fewer costs as they should already

be meeting the HHS minimum requirements. No State Exchange has implemented DE to date, so

we are not able to provide precise costs estimates of the burden associated with these finalized

changes for State Exchanges. However, we anticipate that operational costs related to

establishing polices and adding staff in order to operate a compliant DE program under §

155.221 may be estimated based on Federal platform costs and will be added to the costs and

burdens of transitioning to State Exchange.

We estimate that 5 States will opt to host a DE program for their State Exchanges. We

anticipate the total burden associated with the State Exchanges developing the associated policies

and procedures to be up to 528 hours per State. This assumes 480 hours for a GS-13, Step 5

employee at an hourly rate of $121.66 (the hourly wage rate for a GS-13, Step 5 employee in the

Washington, D.C. area,

335

doubled to account for fringe benefits and overhead) and 48 hours for

a GS-15, Step 5 employee at an hourly rate of $169.10 (the hourly wage rate for a GS-15, Step 5

employee in the Washington, D.C. area,

336

doubled to account for fringe benefits and overhead).

In total, for the 5 State Exchanges anticipated to participate, we estimate a burden of 2,640 hours

335

Office of Personnel Management. (2023, January). Salary Table 2023-DCB Incorporating the 4.1% General

Schedule Increase and a Locality Payment of 32.49% For the Locality Pay Area of Washington-Baltimore-

Arlington, DC-MD-VA-WV-PA Total Increase: 4.86%. https://www.opm.gov/policy-data-oversight/pay-

leave/salaries-wages/salary-tables/pdf/2023/DCB_h.pdf.

336

Id.

CMS-9895-F 594

(5 State Exchanges x 528 hours per State Exchange) at a cost of $332,568 (2,400 hours x

$121.66 per hour + 240 hours x $169.10 per hour).

Based on the Federal platform costs, we estimate it will take 60 hours each for the State

Exchange equivalent of 2 GS-13, Step 5 employees at an hourly rate of $121.66 (the hourly wage

rate for a GS-13, Step 5 employee in the Washington, D.C. area,

337

doubled to account for fringe

benefits and overhead) to complete initial documentation review related to all DE entity

requirements pursuant to this finalized policy, for a total cost to State governments of $14,599.20

(2 employees x 60 hours per employee x $121.66 per hour) per State Exchange. We estimate it

will take 12 hours for the equivalent of 1 GS-15, Step 5 employee at an hourly rate of $169.10

(the hourly wage rate for a GS-15, Step 5 employee in the Washington, D.C. area,

338

doubled to

account for fringe benefits and overhead) to provide managerial review and oversight, for a total

cost to State governments of $2,029.20 (12 hours x $169.10 per hour) per State Exchange.

Additionally, we estimate the total burden for each State government for State contract and

contractors ongoing reviews for oversight will include 1,631 hours for a GS-12, Step 5 employee

with an hourly rate of $102.30 (the hourly wage rate for a GS-12, Step 5 employee in the

Washington, D.C. area,

339

doubled to account for fringe benefits and overhead) and 3,458 hours

for a GS-13, Step 5 employee with an hourly rate of $121.66 (the hourly wage rate for a GS-13,

Step 5 employee in the Washington, D.C. area,

340

doubled to account for fringe benefits and

overhead). We estimate a burden to each State government of 5,089 hours at an estimated cost of

$587,551.58 for State contracts and contractors ongoing reviews for oversight. Therefore, each

State will incur a burden of 5,749 hours at an estimated cost of $670,693.58 ($66,513.60 +

337

Id.

338

Id.

339

Id.

340

Id.

CMS-9895-F 595

$14,599.20 + $2,029.20 + $587,551.58) in total for these finalized policies, and all 5 States will

incur a total burden of 28,745 hours at an estimated cost of $3,353,468 (5 States x $670,693.58).

We sought comment from State Exchanges on these burden estimates.

We recognize that some State Exchanges may decide to utilize DE entities already

assisting consumers in the FFEs and SBE-FPs and encourage State Exchanges to leverage DE

operational readiness demonstrated to participate in the FFEs or SBE-FPs when possible, so as to

help minimize burden on both the State Exchanges that operate their own eligibility and

enrollment platform and their DE entities.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing the burden estimates with modifications to the

burden hours and number of entities subject to these information collection requirements. We

summarize and respond to public comments received regarding this provision below.

Comment: One commenter suggested that the burden estimates are inappropriately based

on the premise that States will implement DE programs in the same manner as the FFEs. One

commenter suggested that the burden estimates could be substantially reduced if the State

Exchanges leverage or choose to mirror the HHS requirements.

Response: We disagree with the comment that these burden estimates were

inappropriately based on the premise that States will implement DE programs in the same

manner as the FFEs. The nature of this policy requires a consideration of the baseline Federal

consumer protection requirements, while accounting for the potential variation in the ultimate

DE requirements determined by each State Exchange. These requirements will provide baseline

consumer protections across the State Exchanges but also allows flexibility with regards to State

Exchange implementation of DE requirements. Accordingly, States may implement more

CMS-9895-F 596

stringent or less stringent standards and oversight processes; these estimates intend to strike a

balance between the Federal implementation and the varied hypothetical possibilities for a

State’s requirements and oversight process. We appreciate the comment that the burden

estimates could be substantially reduced if the State Exchanges leverage the HHS requirements.

We encourage State Exchanges to leverage the HHS requirements and believe the

implementation costs for both State Exchanges and DE entities may be substantially reduced if

the State Exchanges leverage the HHS requirements. However, we note the assumption that

States can save money by mirroring HHS standards assumes that all entities participating have

complied and met the HHS standards, as verified by HHS, and ignores the possibility that

entities may participate in a given State’s web-broker or DE entity program as a net new entity,

with no experience or documented compliance at the Federal level. We have carefully considered

this commenter’s feedback and reduced relevant burden estimates for requirements where we

believe there is a high likelihood that State Exchanges will adopt the same requirements as the

FFE.

Comment: A few commenters provided comments related specifically to the portion of

the burden estimate regarding costs for State Exchanges to implement DE programs. Both

commenters noted that the cost estimates for States to implement this proposal are overstated and

fail to incorporate the potential cost savings and additional user fee revenues that States could

realize through utilization of DE entities, including reduced burdens on State call centers and

State Exchanges. One commenter expressed concern that the burden estimates were based on

salary information for Washington, DC, citing higher salaries for that locality as compared to

employees in the majority of State Exchanges. This commenter requested clarification for how

the estimated hours for contractor oversight of State Exchanges were determined.

CMS-9895-F 597

Response: We acknowledge the concern that the burden estimates for State Exchanges to

implement DE programs are overstated. As acknowledged above, this policy provides flexibility

to State Exchanges in their implementation of DE programs. These burden estimates account for

the possibility that State Exchanges may implement DE programs differing from the FFE

program. We encourage State Exchanges to leverage the HHS requirements when developing

their DE programs and we anticipate that doing so would substantially reduce the burden for

State Exchanges to develop and implement these programs. In addition, we acknowledge the

comment that DE programs may provide additional user fee revenues and cost savings to State

Exchanges associated with reduced burdens on State call centers and State Exchanges. Although

we acknowledge that there could be cost savings associated with implementing DE programs in

State Exchanges, we have not conducted a detailed analysis on the cost savings associated with

the implementation of DE programs in the FFE and, therefore, cannot quantify the extent of any

such savings. Furthermore, these estimates are specific to defining the oversight policies and

procedures, and the implementation of such oversight for web-brokers and DE entities under §

155.220 and § 155.221; these estimates are not intended to calculate the total cost—or savings—

for any given State to implement a web-broker or DE program, including the costs of developing

and maintaining the technical infrastructure to maintain a web-broker and DE entity program.

However, we do recognize the potential for savings and are open to feedback as we continue to

work with our State partners on implementation of these programs. We acknowledge the concern

regarding the use of Washington, DC, labor rates in calculating these burden estimates. In the

absence of a national average pay scale, we acknowledge there will be variations in regional pay

scales among State Exchanges, including some which may be higher or lower than the rates used

to calculate these estimates. With regards to the estimates for contractor oversight of State

CMS-9895-F 598

Exchanges, we are clarifying that these estimates were calculated by mapping labor for the

relevant requirements to GS categories based on the applicable FFE contractor support labor

costs and hours for the applicable requirements and estimated number of entities. We

acknowledge that any given State may experience a higher or lower cost for implementing these

programs depending on the extent (that is, scope and frequency) of the State’s oversight

mechanisms, the scope of the State’s specific requirements for these programs, and the general

quality and compliance posture of web-brokers or DE entities intending to participate in the

State.

Comment: One supporting commenter provided comments related to the portion of the

burden estimate regarding costs for DE entities to operate in State Exchanges. Specifically, this

commenter provided detailed feedback on the estimated burden hours based on their experience

as a DE entity operating in the FFEs. This included feedback on the burden associated with

implementing § 155.221(j) and various web-broker requirements that are relevant to DE entities

operating in the FFEs. This commenter suggested that the burden estimates should be limited to

the number of primary EDE entities expected to participate in State Exchanges.

Response: We appreciate the feedback on these burden estimates from a DE entity

currently operating in the FFEs. We recognize the value of feedback from an entity with

experience implementing the FFE program requirements and we carefully considered this

feedback and have adjusted the burden estimates where applicable. In making these adjustments,

we considered that the commenter has considerable experience operating in the FFE. As the

commenter acknowledged, other entities may have differing levels of technical expertise and

capacity. We have accounted for the costs associated with implementing these requirements from

the perspective of DE entities with limited experience. However, we agree that the burden may

CMS-9895-F 599

be substantially lower for DE entities with increased technical experience and capacity. In

considering the feedback on these burden estimates, we note there were several assumptions

made regarding the State Exchanges’ provision of data to DE entities (for example, the provision

of QHP data). These burden estimates account for a scenario where there may be variability

between the format of data provided across State Exchanges. We encourage State Exchanges to

leverage the data formats used in the FFEs and are committed to providing technical assistance

to State Exchanges to facilitate such standardization. We agree with the commenter’s suggestion

that the burden estimates should be limited to the number of primary EDE entities expected to

participate in State Exchanges. We have adjusted the burden estimates to reflect the current

number of primary entities operating in the FFEs and to account for the possibility of new

primary DE entities entering the State Exchanges.

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

We are finalizing amendments to § 155.305(f)(4) to provide that when an enrollee or

their tax filer is identified as having FTR status for one-year State Exchanges must either notify

the tax filer directly, and alert them of their FTR status, or send informative notices to the

enrollee or their tax filer that provide information on the APTC reconciliation requirement, and

lets the recipient know that they are at risk of being determined ineligible for APTC without

containing protected FTI. This requirement will ensure that State Exchanges provide

notifications, similar to how Exchanges on the Federal platform do, and that tax filers on State

Exchanges are adequately educated on the requirement to file and reconcile. This final rule will

impact State Exchange FTR noticing processes for PY 2025 and subsequent years. For State

Exchanges, FTR will be conducted in the same manner it had previously been conducted with

respect to collection of information, with minimal changes to the language of the Exchange

CMS-9895-F 600

application questions necessary to obtain relevant information; as such, we anticipate that the

finalized amendment will not impact the existing information collection requirements (OMB

control number: 0938-1191) or burden for consumers.

Under previous FTR policy, State Exchanges were already required to notify tax filers

identified as FTR at a minimum of once per year. As such, we do not anticipate this requirement

increasing State Exchanges’ burden of noticing beyond their existing FTR processes. We sought

comment on these assumptions.

We did not receive any comments in response to the burden estimates for this policy. We

are finalizing these estimates as proposed.

I. ICRs Regarding Verification Process Related to Eligibility for Enrollment in a QHP through

the Exchange (45 CFR 155.315(e))

We are finalizing several revisions to § 155.315(e) that will allow Exchanges to accept

consumer attestation of incarceration status without further verification or, alternatively, to

propose an alternative data source for incarceration verification for HHS approval. Exchanges

that elect to verify incarceration status will continue to be required to use the DMI process if the

data source provides a mismatch against the consumer attestation of incarceration status or other

information provided by the applicant or in the records of the Exchange. Should a State

Exchange choose to propose using an alternative electronic data source for verifying

incarceration status, HHS will review such proposals for consistency with the finalized standard

in § 155.315(e)(2).

Of the 18 State Exchanges (operating in 12 States and the District of Columbia) that have

incarceration verification processes, 8 conduct incarceration verifications similar to the one used

to date by Exchanges on the Federal platform, and 5 have connected to an individual State or

CMS-9895-F 601

local incarceration facility for verifications and have received approval to do so from HHS.

Additionally, 3 States are currently in process of transitioning to State Exchanges for PY 2024 or

beyond and may choose to connect to an alternative incarceration verification data source with

HHS approval. Subtracting the 5 Exchanges with preexisting approvals, we anticipate 11 State

Exchanges could connect to an alternative incarceration verification data source, should they

assess that an alternative data source exists and want to continue verification of consumer

incarceration status using it.

For the purposes of assessing whether an alternative data source should be used, we

estimate that a Management Analyst will spend 20 hours, at an hourly rate of $91.62, to

synthesize a cost-benefit analysis regarding whether the Exchange should continue to verify

incarceration status using an approved data source instead of accepting a consumer’s attestation

that they are not incarcerated. If the Exchange finds a viable alternative data source and

determines that it should be used, we anticipate that a Business Operations Specialist will take

about 2 hours, at an hourly rate of $73.12, to submit a request for HHS approval. We also

anticipate that it will take a Chief Executive equivalent for the Exchange 1 hour, at an hourly rate

of $182.24, to approve the paperwork for submission to request HHS approval of the alternative

incarceration data source. In total, the assessment of whether the Exchange should continue to

verify incarceration status using an alternative data source instead of accepting consumer

attestation will take 20 hours at a cost of $1,832.40, and the process of approving and submitting

a request for HHS approval will take 3 hours at a cost of $328.48. Therefore, the total one-time

burden for each Exchange that elects to verify incarceration status using an HHS-approved data

source in 2025 will be 23 hours at a cost of approximately $2,161, and the total burden across all

11 State Exchanges would be 253 hours at a cost of approximately $23,770.

CMS-9895-F 602

We did not receive any comments in response to the burden estimates for this policy. We

are finalizing these estimates as proposed.

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

We are finalizing amendments to §155.330(d) to require that Exchanges periodically

examine available data sources described in §§ 155.315(b)(1) and 155.320(b) to identify changes

related to death of an applicant on whose behalf APTC or CSRs are being provided. The

Exchanges have developed electronic data exchanges to support obtaining this information to

determine the applicant’s eligibility at the point of application and could reuse those data

exchanges here. Consequently, we estimate costs associated with this requirement to be minimal.

However, State Exchanges not already conducting Death PDM with the required

frequency or not deemed in compliance with the finalized PDM requirements will be required to

engage in IT system development activity to communicate with these programs and act on

enrollment data either in a new way, or in the same way more frequently. Thus, there may be

additional associated administrative cost for these State Exchanges to implement the finalized

PDM requirement.

Based on experience with other PDMs, for each State Exchange not already conducting

Death PDM at least twice a year, we estimate that it will take 40 hours by a Computer Systems

Analyst at an hourly rate of $98.30 to implement this finalized provision, for a cost of $3,932 per

State Exchange. Therefore, for all 11 State Exchanges not currently meeting the finalized

requirement, we estimate a total burden of 440 hours at a cost of $43,252. We assume that this

burden will be incurred primarily in 2025.

We did not receive any comments in response to the burden estimates for this policy. We

are finalizing these estimates as proposed.

CMS-9895-F 603

K. ICRs Regarding Establishment of Exchange Network Adequacy Standards (45 CFR

155.1050)

The burden associated with subjecting QHP issuers in State Exchanges and SBE-FPs to

time and distance standards as proposed at § 155.1050 is covered by the information collection

currently approved under OMB control number 0938-1312 (CMS-10593). We note that we are

also revising the information collection currently approved under OMB control number 0938-

1415 (CMS-10803) regarding appointment wait time standards encompassed in previously

finalized regulations at 45 CFR 156.230(a)(2)(B). We sought comment on these burden

estimates. We did not receive any comments related to this collection.

Under § 155.1050(a)(2)(i)(A), we are finalizing that for plan years beginning on or after

January 1, 2026, State Exchanges and SBE-FPs must establish and impose quantitative time and

distance network adequacy standards for QHPs that are at least as stringent as standards for

QHPs participating on the FFEs under § 156.230(a)(2)(i)(A).

Second, we are finalizing that, for plan years beginning on or after January 1, 2026, State

Exchanges and SBE-FPs must conduct quantitative network adequacy reviews prior to certifying

any plan as a QHP, consistent with the reviews conducted by the FFEs under § 156.230.

Specifically, we are finalizing at § 155.1050(a)(2)(i)(B) that, for plan years beginning on or after

January 1, 2026, State Exchanges and SBE-FPs must conduct quantitative network adequacy

reviews to evaluate a plan’s compliance with network adequacy standards under §

156.230(a)(1)(ii), (a)(1)(iii), and (a)(2)(i)(A) prior to certifying any plan as a QHP, while

providing QHP certification applicants the flexibilities described under § 156.230(a)(2)(ii) and

(a)(3) and (4). Under this policy, State Exchanges and SBE-FPs will be prohibited from

CMS-9895-F 604

accepting an issuer’s attestation as the only means for plan compliance with network adequacy

standards.

We are aware that some State Exchanges employ robust, quantitative network adequacy

standards that differ from those used by the FFEs, but still ensure that QHPs provide consumers

with reasonable, timely access to practitioners and facilities to manage their health care needs,

consistent with the ultimate aim of these policies. Therefore, we are finalizing §

155.1050(a)(2)(ii) to provide that, for plan years beginning on or after January 1, 2026, HHS

may grant an exception to the requirements described under § 155.1050(a)(2)(i) to a State

Exchange or SBE-FP that demonstrates with evidence-based data, in a form and manner

specified by HHS, that (1) the Exchange applies and enforces alternate quantitative network

adequacy standards that are reasonably calculated to ensure a level of access to providers that is

as great as that ensured by the Federal network adequacy standards established for QHPs under §

156.230(a)(1)(iii), (a)(2)(i)(A), and (a)(4); and (2) the Exchange evaluates whether plans comply

with applicable network adequacy standards prior to certifying any plan as a QHP. In this final

rule, for this exception process, we are clarifying that, for (1) above, issuers on the State

Exchanges and SBE-FPs do not need to comply with the appointment wait time standards under

§ 156.230(a)(2)(i)(B).

Lastly, we are finalizing § 155.1050(a)(2)(i)(C) to provide that, for plan years beginning

on or after January 1, 2026, State Exchanges and SBE-FPs must require that all issuers seeking

certification of a plan as a QHP submit information to the Exchange reporting whether or not

network providers offer telehealth services.

We estimate that the total annual burden associated with State Exchanges and SBE-FPs

establishing and imposing the finalized network adequacy standards, conducting the network

CMS-9895-F 605

adequacy reviews, collecting telehealth information from issuers seeking QHP certification, and

submitting any exception to be up to 900 hours. Assuming the compliance officer average hourly

rate of $68.94 per hour, we estimate the cost of the data collection, operations, and maintenance

pertaining to these requirements on each State Exchange and SBE-FP to be $62,046 per year

(900 hours x $68.94 per hour). In total, for the 19 State Exchanges and 3 SBE-FPs anticipated to

be operational in 2025, we estimate a burden of 19,800 hours (22 State Exchanges and SBE-FPs

x 900 hours per Exchange) at a cost of $1,365,012 (22 State Exchanges and SBE-FPs x 900

hours per Exchange x $68.94 per hour).

We estimate that the burden for QHP issuers in State Exchanges and SBE-FPs to gather

and submit the time and distance data, including any justification, to the respective State

Exchanges or SBE-FPs will be 10 hours in total for each medical QHP issuer (a QHP issuer that

is not an SADP issuer) and 2 hours in total for each SADP issuer submitted by a compliance

officer at a rate of $68.94 per hour. The 10-hour estimate includes the burden associated with the

requirement that all issuers seeking QHP certification submit information to the State Exchange

or SBE-FP about whether network providers offer telehealth services.

Approximately half of the parent companies of issuers on the State Exchanges and over

two thirds of the parent companies of issuers on SBE-FPs offer Medicare Advantage plans, and

Medicare Advantage offers a telehealth credit for network adequacy. Therefore, many more

issuers on State Exchanges and SBE-FPs likely already have access to this information. We also

believe that QHP issuers that do not currently collect this information may do so using the same

means and methods by which they already collect information from their network providers

relevant to time and distance standards and provider directories. For these reasons, we estimate

CMS-9895-F 606

that any additional burden resulting from the requirement that QHP issuers report whether each

network provider is furnishing telehealth services would be minimal.

The requirement that all issuers seeking QHP certification submit information to the

State Exchange or SBE-FP about whether network providers offer telehealth services will

account for 3 of the total 10 hours we estimate for gathering and submitting the time and

distance data to the respective State Exchange or SBE-FP for medical QHP issuers and 30

minutes of the total 2 hours we estimate for SADP issuers. We believe the cost estimates of 3

hours for medical QHP issuers and 30 minutes for SADP issuers to be a maximum and that the

burden could be less to issuers that are already collecting telehealth data for other purposes.

We estimate that the total annual burden associated with QHP issuers in State Exchanges

and SBE-FPs to gather and submit the time and distance and telehealth data to the respective

State Exchanges or SBE-FPs for up to 149 medical QHP issuers in State Exchanges and SBE-

FPs would be up to 1,490 hours (10 hours x 149 medical QHP issuers). Assuming the

compliance officer average hourly rate of $68.94 per hour, we estimate that the cost of gathering

and submitting this network adequacy data for an individual medical QHP issuer could be up to

$689.40 (10 hours x $68.94 per hour), and for all 149 medical QHP issuers in State Exchanges

and SBE-FPs, up to $102,720.60 (149 medical QHP issuers x 10 hours per issuer x $68.94 per

hour). We estimate that the total annual burden associated with this requirement for 89 SADP

issuers in State Exchanges and SBE-FPs will be up to 178 hours (2 hours x 89 SADP issuers).

Assuming the compliance officer average hourly rate of $68.94 per hour, we estimate that the

cost of gathering and submitting the network adequacy data for an individual SADP could be up

to $137.88 (2 hours x $68.94 per hour), and for all 89 SADP issuers in State Exchanges and

SBE-FPs, up to $12,271.32 (89 SADP issuers x 2 hours per issuer x $68.94 per hour). We

CMS-9895-F 607

estimate the total annual burden associated with this finalized requirement across both medical

QHP and SADP issuers in State Exchanges and SBE-FPs beginning in 2025 will be

approximately $114,992.

After consideration of comments and for the reasons outlined in the proposed rule and

our responses to comments, we are finalizing the burden estimates as proposed. We summarize

and respond to public comments received regarding the establishment of Exchange network

adequacy standards policy below.

Comment: A few commenters expressed opposition to the collection of information about

which providers offer telehealth services indicating that the proposed rule underestimated the

burden of this proposal and that the information would not capture the availability of telehealth