Proposed Rule2025-04083
Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 19, 2025
Issuing agencies
Health and Human Services Department
Abstract
This proposed rule would revise standards relating to past-due premium payments; exclude Deferred Action for Childhood Arrivals recipients from the definition of "lawfully present"; the evidentiary standard HHS uses to assess an agent's, broker's, or web-broker's potential noncompliance; failure to file and reconcile; income eligibility verifications for premium tax credits and cost-sharing reductions; annual eligibility redetermination; the automatic reenrollment hierarchy; the annual open enrollment period; special enrollment periods; de minimis thresholds for the actuarial value for plans subject to essential health benefits (EHB) requirements and for income-based cost-sharing reduction plan variations; and the premium adjustment percentage methodology; and prohibit issuers of coverage subject to EHB requirements from providing coverage for sex-trait modification as an EHB.
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<title>Federal Register, Volume 90 Issue 52 (Wednesday, March 19, 2025)</title>
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[Federal Register Volume 90, Number 52 (Wednesday, March 19, 2025)]
[Proposed Rules]
[Pages 12942-13032]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-04083]
[[Page 12941]]
Vol. 90
Wednesday,
No. 52
March 19, 2025
Part II
Department of Health and Human Services
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45 CFR Parts 147, 155 and 156
Patient Protection and Affordable Care Act; Marketplace Integrity and
Affordability; Proposed Rule
Federal Register / Vol. 90, No. 52 / Wednesday, March 19, 2025 /
Proposed Rules
[[Page 12942]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 147, 155, and 156
[CMS-9884-P]
RIN 0938-AV61
Patient Protection and Affordable Care Act; Marketplace Integrity
and Affordability
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This proposed rule would revise standards relating to past-due
premium payments; exclude Deferred Action for Childhood Arrivals
recipients from the definition of ``lawfully present''; the evidentiary
standard HHS uses to assess an agent's, broker's, or web-broker's
potential noncompliance; failure to file and reconcile; income
eligibility verifications for premium tax credits and cost-sharing
reductions; annual eligibility redetermination; the automatic
reenrollment hierarchy; the annual open enrollment period; special
enrollment periods; de minimis thresholds for the actuarial value for
plans subject to essential health benefits (EHB) requirements and for
income-based cost-sharing reduction plan variations; and the premium
adjustment percentage methodology; and prohibit issuers of coverage
subject to EHB requirements from providing coverage for sex-trait
modification as an EHB.
DATES: To be assured consideration, comments must be received by April
11, 2025.
ADDRESSES: In commenting, please refer to file code CMS-9884-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-9884-P, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9884-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Jeff Wu, (301) 492-4305, Rogelyn
McLean, (410) 786-1524, Grace Bristol, (410) 786-8437, for general
information.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received before the close
of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post comments received
before the close of the comment period on the following website as soon
as possible after they have been received: <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
Follow the search instructions on that website to view public comments.
We will not post on <a href="http://Regulations.gov">Regulations.gov</a> public comments that make threats
to individuals or institutions or suggest that the commenter will take
actions to harm an individual. We continue to encourage individuals not
to submit duplicative comments. We will post acceptable comments from
multiple unique commenters even if the content is identical or nearly
identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
summary of not more than 100 words in length of this proposed rule, in
plain language, may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
I. Executive Summary
On January 20, 2025, President Trump issued a memorandum entitled
``Delivering Emergency Price Relief for American Families and Defeating
the Cost-of-Living Crisis.'' \1\ This memorandum instructed all
executive departments and agencies to deliver emergency price relief
for the American people and to increase the prosperity of the American
worker. Health care represents a substantial portion of a family's
budget and a tremendous cost to Federal taxpayers. To provide relief
from rising health care costs, we propose several regulatory actions
aimed at strengthening the integrity of the Patient Protection and
Affordable Care Act (ACA) eligibility and enrollment systems to reduce
waste, fraud, and abuse. We expect these actions would provide premium
relief to families who do not qualify for Federal premium subsidies and
reduce the burden of the ACA premium subsidy expenditures to the
Federal taxpayer.
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\1\ Executive Office of the President. (January 20, 2025).
Delivering Emergency Price Relief for American Families and
Defeating the Cost-of-Living Crisis. <a href="https://www.federalregister.gov/documents/2025/01/28/2025-01904/delivering-emergency-price-relief-for-american-families-and-defeating-the-cost-of-living-crisis">https://www.federalregister.gov/documents/2025/01/28/2025-01904/delivering-emergency-price-relief-for-american-families-and-defeating-the-cost-of-living-crisis</a>.
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Based on our review of enrollment data and our experience fielding
consumer complaints, we believe several regulatory policies recently
put in place to make it easier to enroll in subsidized coverage
severely weakened program integrity and put consumers at risk from
improper enrollment. In particular, these policies put consumers at
risk for accumulating surprise tax liabilities and substantial
inconveniences from resolving these liabilities, as well as other
issues related to coverage changes and access to care, due to the
improper enrollment. The substantial increase in consumer complaints
from people who were unaware that they had been enrolled by an agent,
broker, or web-broker in Exchange coverage suggests many of these
improper enrollments are due to fraud.\2\ We note, fraudulent
enrollments involve enrollments obtained through willful
misrepresentations whereas improper enrollments involve any enrollment
determination that was made incorrectly for any reason which can
include fraud.\3\
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\2\ For example, from January 2024 through August 2024, CMS
received 90,863 complaints that consumers had their FFE plan changed
without their consent (also known as an ``unauthorized plan
switch''). CMS (2024, October). CMS Update on Action to Prevent
Unauthorized Agent and Broker Marketplace Activity. <a href="https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity">https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity</a>. See also, U.S.
Department of Justice. (2025, February 19). President of insurance
brokerage firm and CEO of marketing company charged in $161M
Affordable Care Act enrollment fraud scheme [Press release]. <a href="https://www.justice.gov/opa/pr/president-insurance-brokerage-firm-and-ceo-marketing-company-charged-161m-affordable-care">https://www.justice.gov/opa/pr/president-insurance-brokerage-firm-and-ceo-marketing-company-charged-161m-affordable-care</a>.
\3\ See U.S. Government Accountability Office, Improper Payments
and Fraud: How They Are Related but Different, December 7, 2023,
<a href="https://www.gao.gov/products/gao-24-106608">https://www.gao.gov/products/gao-24-106608</a>.
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Because Federal law limits the amount that enrollees with lower
household incomes must repay when they reconcile advance payments of
the premium tax credit (APTC) received, these improper enrollments
ended up costing Federal taxpayers billions of dollars. One analysis of
improper enrollments estimated the Federal Government may have spent up
to $26 billion on improper enrollments in 2024, before reconciling
enrollment data.\4\ The proposed provisions here aim
[[Page 12943]]
to address these serious program integrity problems while at the same
time delivering a streamlined enrollment and eligibility determination
process for individual market consumers.
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\4\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. <a href="https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud">https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud</a>.
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Before summarizing these proposed rules, we believe it is important
to review the interlocking policies the ACA put in place to expand
access to coverage on the individual market.\5\ A full understanding of
how ACA individual market policies interact helps frame why we believe
the program integrity and premium relief policies contained within
these proposed rules are necessary to improve the individual health
insurance market. As a starting point, the ACA establishes American
Health Benefit Exchanges, or ``Exchanges'' to facilitate the purchase
of qualified health plans (QHPs). Many individuals who enroll in QHPs
through individual market Exchanges are eligible to receive a premium
tax credit (PTC) to reduce their costs for health insurance premiums
and have their out-of-pocket expenses for health care services reduced
through cost-sharing reductions (CSR). Most individuals who claim PTCs
receive APTC, which subsidizes lower monthly premiums, before they must
file taxes. Taxpayers must then reconcile APTC paid to issuers on their
behalf when they file taxes. The ACA includes limits on how much excess
APTC a taxpayer must repay based on household income.
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\5\ The Patient Protection and Affordable Care Act (Pub. L. 111-
148, 124 Stat. 119) was enacted on March 23, 2010. The Healthcare
and Education Reconciliation Act of 2010 (Pub. L. 111-152, 124 Stat.
1049), 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''.
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The ACA's individual market rules require issuers to guarantee
coverage to all applicants regardless of pre-existing conditions and
restrict issuers from setting premiums based on health status. These
requirements create an inherent bias towards adverse selection--a
situation where individuals with higher risk are more likely to select
coverage than healthy individuals--by allowing people to wait to enroll
in coverage until they need health services. In such situations, health
insurance issuers offering coverage to a larger proportion of higher
risk enrollees raise premiums, which causes healthier people to drop
coverage. Enough cycles of rising premiums and healthier people
dropping coverage would create a ``death spiral'' and undermine the
viability of the individual market for everyone.
To discourage people from waiting until they need health care
services to sign up for coverage, the ACA permits issuers to limit
enrollment periods to certain times. The ACA also provides PTC for
plans sold through Exchanges to subsidize coverage for certain
households.
Several policies included in the ACA attempt to address its adverse
selection bias. For example, adverse selection between plans can occur
when one plan enrolls a disproportionate number of people with high
risks. The ACA's risk adjustment program transfers funds from issuers
with relatively low-risk enrollees to issuers with relatively high-risk
enrollees, though implementation of the risk adjustment program has
been criticized by some commenters for creating further distortions
that limit incentives for issuers to attract lower-risk enrollees.\6\
In addition, to avoid adverse selection between plans sold on and off
the Exchanges, the ACA requires issuers to keep issuers to keep all
individual market plans subject to the law's main coverage mandates in
the same risk pool.
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\6\ Cruz, D; Fann, G. (2024, Sept.). It's Not Just the Prices:
ACA Plans Have Declined in Quality Over the Past Decade. Paragon
Health Institute. <a href="https://paragoninstitute.org/private-health/its-not-just-the-prices-aca-plans-have-declined-in-quality-over-the-past-decade/">https://paragoninstitute.org/private-health/its-not-just-the-prices-aca-plans-have-declined-in-quality-over-the-past-decade/</a>.
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By tying an issuer's on-Exchange and off-Exchange individual market
risk pools together, the ACA's unsubsidized off-Exchange market was
intended to help anchor the subsidized Exchange enrollees to a more
competitive and efficient market. A well-functioning market depends on
consumers actively shopping for the best deal based on price and
quality.\7\ In practice, however, the high premiums of off-Exchange
plans have made these options largely unattractive to unsubsidized
consumers, with only an estimated 2.5 million people enrolling in
unsubsidized off-Exchange coverage (including some in plans not subject
to all of the ACA's market rules, like grandfathered and short-term
plans) nationwide in 2023.\8\ Further, subsidies, especially price-
linked subsidies like PTCs, generally distort markets and weaken
competition because the subsidized enrollee is no longer price
sensitive to the full cost.\9\ In a market where everyone is
subsidized, prices would generally be much higher due to the subsidized
consumers' lower level of price sensitivity.\10\ When Congress enacted
the ACA, the Congressional Budget Office (CBO) projected the law would
enroll 15 million unsubsidized consumers--about the same as without the
law--and another 19 million subsidized consumers.\11\ Those 15 million
unsubsidized consumers actively shopping for the best deal were
expected to support a competitive and efficient market. In turn, the
benefits from this competition would spill over to the subsidized
consumers who benefit from the availability of higher quality health
plans and the Federal taxpayers funding the subsidies who benefit from
lower premium subsidies.
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\7\ Garrod, L.; Waddams, C.; Hvvid, M.; and Loomes, G. (2009).
Competition Remedies in Consumer Markets. Loyola Consumer Law
Review. 21. 439-495. <a href="https://www.researchgate.net/publication/271701344_Competition_Remedies_in_Consumer_Markets">https://www.researchgate.net/publication/271701344_Competition_Remedies_in_Consumer_Markets</a> (last accessed
Feb. 23, 2025).
\8\ Ortaliza, J.; Amin, K.; and Cox, C. (2023). As ACA
Marketplace Enrollment Reaches Record High, Fewer Are Buying
Individual Market Coverage Elsewhere. <a href="https://www.kff.org/private-insurance/issue-brief/as-aca-marketplace-enrollment-reaches-record-high-fewer-are-buying-individual-market-coverage-elsewhere/#">https://www.kff.org/private-insurance/issue-brief/as-aca-marketplace-enrollment-reaches-record-high-fewer-are-buying-individual-market-coverage-elsewhere/#</a>.
\9\ See Sonia Jaffe and Mark Shepard, ``Price-Linked Subsidies
and Imperfect Competition in Health Insurance,'' American Economic
Journal: Economic Policy, Vol 12, No. 3, August 2020.
\10\ While subsidized consumers are willing to tolerate higher
prices than unsubsidized consumers, there are certain limits on how
much prices can rise overall. The ACA's rate review provision
(section 2794 of the Public Health Service Act (PHS Act)) restrains
prices prospectively by placing scrutiny on proposed premium rate
increases before they go into effect, which can discourage or
prevent issuers from implementing unreasonable rate increases. The
ACA's medical loss ratio provision (section 2718 of the PHS Act)
limits prices retrospectively by requiring issuers to pay rebates to
consumers if premium rates end up being excessive relative to actual
medical costs.
\11\ Congressional Budget Office. (2010, March 20) Letter to
Nancy Pelosi. Congress of the U.S. Table 4, <a href="https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf">https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf</a>.
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The ACA did not roll out as intended when the ACA's main coverage
mandates went into effect in 2014. Premiums increased much more and
enrollment levels among both the subsidized and the unsubsidized were
much lower than projected. Higher premiums then led to a substantial
decline in unsubsidized enrollment, which undermined the
competitiveness of the market. By 2019, our data showed that subsidized
enrollment on the Exchanges had reached only 8.3 million while
unsubsidized enrollment across the entire individual market subject to
the ACA's market rules had dropped to 3.4 million.\12\ To improve the
[[Page 12944]]
attractiveness of the market, several States implemented reinsurance
programs that lowered premiums for the unsubsidized by funding high-
cost claims across the individual market. These policies helped retain
unsubsidized enrollees who anchor the market in a more competitive and
efficient position.
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\12\ CMS. (2020, Oct. 9). Trends in Subsidized and Unsubsidized
Enrollment. p. 11. <a href="https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Trends-Subsidized-Unsubsidized-Enrollment-BY18-19.pdf">https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Trends-Subsidized-Unsubsidized-Enrollment-BY18-19.pdf</a>. Note that, in 2019, an
additional 1.4 million unsubsidized people remained enrolled in
grandfathered and grandmothered individual market plans that were
not subject to all of the ACA's market rules. Grandmothered coverage
refers to certain non-grandfathered health insurance coverage in the
individual and small group market with respect to which CMS has
announced it will not take enforcement action even though the
coverage is out of compliance with certain specified market rules.
See CMS. (2022, March 23). Extended Non-Enforcement of Affordable
Care Act-Compliance with Respect to Certain Policies. <a href="https://www.cms.gov/files/document/extension-limited-non-enforcement-policy-through-calendar-year-2023-and-later-benefit-years.pdf">https://www.cms.gov/files/document/extension-limited-non-enforcement-policy-through-calendar-year-2023-and-later-benefit-years.pdf</a>.
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After reviewing individual market data and responding to a
substantial increase in consumer complaints, we believe several rules
we have implemented removed necessary program integrity protections and
facilitated the substantial increase in improper enrollments on the
Exchanges. Some of those rules removed or reduced eligibility
verifications related to qualifying for APTC and CSR subsidies. Other
rules amended enrollment period policies by removing verifications and
expanding when and under what conditions a consumer can enroll. We
believe the data and analysis presented in this preamble show how these
rules have led to higher premiums and costs for consumers and taxpayers
alike. Therefore, we propose the following regulatory changes to
improve program integrity and protect against adverse selection, while
at the same time keeping the enrollment process streamlined and
accessible, especially for low-income consumers who utilize Exchanges
for subsidized individual market coverage.
We propose to remove Sec. 147.104(i), which would reverse the
policy restricting an issuer from attributing payment of premium for
new coverage to past-due premiums from prior coverage. This current
policy, in effect, restricts issuers from establishing premium payment
policies that require enrollees to pay past-due premiums to effectuate
new coverage. While we previously concluded that this restriction would
remove an unnecessary barrier and make it easier for consumers to
enroll in coverage, recent enrollment data suggest people are
manipulating guaranteed availability and grace periods to time coverage
to when they need health care services. Alongside the removal of this
restriction, we propose to allow issuers, subject to applicable State
law, to add past-due premium amounts owed to the issuer to the initial
premium the enrollee must pay to effectuate new coverage and to not
effectuate new coverage if the past-due and initial premium amounts are
not paid in full. We believe this change would strengthen the risk pool
and lower gross premiums.
We propose to modify the definition of ``lawfully present''
currently articulated at Sec. 155.20 and used for the purpose of
determining whether a consumer is eligible to enroll in a QHP through
an Exchange or a Basic Health Program (BHP) in States that elect to
operate a BHP.\13\ The BHP regulations at 42 CFR 600.5 cross-reference
the definition of lawfully present at 45 CFR 155.20. This change would
reflect the explicit statutory requirements of the ACA by once again
excluding ``Deferred Action for Childhood Arrivals'' (DACA) recipients
from the definition of ``lawfully present'' that is used to determine
eligibility to enroll in a QHP through an Exchange, for APTC and CSRs,
and for a BHP in States that elect to operate a BHP.
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\13\ Currently, Minnesota and Oregon operate a BHP. See their
approved BHP Blueprints, available at: <a href="https://www.medicaid.gov/basic-health-program/index.html">https://www.medicaid.gov/basic-health-program/index.html</a>.
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We propose to revise Sec. 155.220(g)(2) to require HHS to apply a
``preponderance of the evidence'' standard of proof for terminations
for cause by HHS of an agent's, broker's, or web-broker's Exchange
agreements under Sec. 155.220(g)(1). We also propose to add a
definition for ``preponderance of the evidence'' to Sec. 155.20. We
believe this change would improve transparency in the process for
holding agents, brokers, and web-brokers accountable for compliance
with applicable law, regulatory requirements, and the terms and
conditions of their Exchange agreements.
We propose to revise the failure to file and reconcile (FTR)
process at Sec. 155.305(f)(4) to reinstate the policy that Exchanges
must determine a tax filer ineligible for APTC if: (1) HHS notifies the
Exchange that the tax filer (or their spouse if the tax filer is a
married couple) received APTC for a prior year for which tax data would
be utilized for verification of income, and (2) the tax filer or tax
filer's spouse did not comply with the requirement to file a Federal
income tax return and reconcile APTC for that year. This proposed
process would replace the existing requirement that Exchanges may not
determine a tax filer eligible for APTC if HHS notifies the Exchanges
that the tax filer (or either spouse if the tax filer is a married
couple) received APTC for two consecutive years for which tax data
would be utilized for verification of income, and (2) the tax filer or
tax filer's spouse did not comply with the requirement to file a
Federal income tax return and reconcile APTC for that year and the
previous year. We believe this change would reduce the number of
ineligible enrollees who continue to receive APTC, which would, in
turn, lower APTC expenditures and protect ineligible enrollees from
accumulating surprise tax liabilities. We also propose to amend the
notice requirement at Sec. 155.305(f)(4)(i) and remove the notice
requirement at Sec. 155.305(f)(4)(ii) to conform with the notice
policy under the previous FTR policy.
To further protect against consumers receiving APTC and CSR
subsidies when they do not meet eligibility requirements, we propose
policies to strengthen the verification process when there is an income
inconsistency with trusted data sources. We propose to remove Sec.
155.315(f)(7) which requires that applicants receive an automatic 60-
day extension to the 90-day period set forth in section 1411(e)(4)(A)
of the ACA to provide documentation to verify household income when
there is an income inconsistency. Removing Sec. 155.315(f)(7) would
end APTC payments to individuals who have failed to provide
documentation verifying their eligibility for APTC within 90 days and
further protect them from surprise tax liabilities if they are
ineligible. We also propose to revise Sec. 155.320(c)(3)(iii) to
specify that all Exchanges must generate annual household income
inconsistencies when a tax filer's attested projected annual household
income is greater than or equal to 100 percent and not more than 400
percent of the Federal poverty level (FPL) and trusted data sources
indicate that projected household income is under 100 percent of the
FPL. Finally, we propose to remove Sec. 155.320(c)(5) which would
remove the exception to the standard household income inconsistency
process that requires the Exchange to accept an applicant's attestation
of household income and family size without verification when the
Internal Revenue Service (IRS) does not have tax return data to verify
household income and family size. Removing this exception would in most
circumstances require Exchanges to verify household income with other
trusted data sources when a tax return is unavailable and follow the
alternative verification process to verify the income, which would
strengthen
[[Page 12945]]
program integrity by improving the accuracy of eligibility
determinations across all Exchanges.
To prevent fully subsidized enrollees from being automatically re-
enrolled without taking an action to confirm their eligibility
information, we propose an amendment to the annual eligibility
redetermination regulation and are seeking comment on a range of
potential measures to ensure program integrity with respect to re-
enrollments. We propose that, when an enrollee does not contact an
Exchange to obtain an updated eligibility determination and select a
plan on or before the last day to do so for January 1 coverage, in
accordance with the effective dates specified in Sec. Sec. 155.410(f)
and 155.420(b), as applicable, and the enrollee's portion of the
premium for the entire policy would be zero dollars after application
of APTC through the Exchange's annual redetermination process, all
Exchanges must decrease the amount of the APTC applied to the policy
such that the remaining monthly premium owed by the enrollee for the
entire policy equals $5 for the first month and for every following
month that the enrollee does not confirm their eligibility for APTC.
Consistent with Sec. 155.310(c) and (f), enrollees automatically
reenrolled with a $5 monthly premium after APTC under this policy would
be able to update their Exchange application at any point to confirm
eligibility for APTC that covers the entire premium, and re-confirm
their plan to thereby reinstate the full amount of APTC for which the
enrollee is eligible on a prospective basis. We propose that the
Federally-facilitated Exchanges (FFEs) and the State-based Exchanges on
the Federal platform (SBE-FPs) must implement this change starting with
annual redeterminations for benefit year 2026. We propose that the
State Exchanges must implement it starting with annual redeterminations
for benefit year 2027. We believe these proposals would strengthen the
program integrity of the Exchanges and protect consumers.
We are also seeking comment on a range of other options to ensure
program integrity with respect to automatic re-enrollment that would
provide a more meaningful incentive to confirm eligibility for APTC, as
the millions estimated to currently receive improper APTC could simply
pay the $5 premium while continuing to improperly receive generous
subsidies on their behalf, potentially incurring significant future
surprise tax liabilities in the process. As such, we are seeking
comment on whether $5 is the appropriate premium amount for affected
individuals to pay under the proposed policy. Another such option could
include requiring individuals who qualify for fully subsidized plans to
re-confirm their plan and re-verify their income before they are
eligible to receive APTC. Finally, we are seeking comment on removing
the option for Exchanges to auto-reenroll individuals who qualify for
fully or partially subsidized plans, ensuring individuals affirmatively
choose their plan and verify their income during the open enrollment
period, dramatically reducing the likelihood of improper payments of
the APTC.
We propose to amend the automatic reenrollment hierarchy by
removing Sec. 155.335(j)(4) which currently allows Exchanges to move a
CSR-eligible enrollee from a bronze QHP and re-enroll them into a
silver QHP for an upcoming plan year, if a silver QHP is available in
the same product, with the same provider network, and with a lower or
equivalent net premium after the application of APTC as the bronze plan
into which the enrollee would otherwise have been re-enrolled. We
believe the consumer awareness problem the current policy aimed to
address is substantially less today and, therefore, no longer outweighs
the negative consequences from not automatically re-enrolling consumers
whose current plan remains available for an upcoming plan year without
the active consent of the consumer, including that the policy could
confuse consumers, undermine consumer choice, and create unexpected tax
liability.
We propose to modify Sec. 155.400(g) to remove paragraphs (2) and
(3), which establish an option for issuers to implement a fixed dollar
and/or gross percentage-based premium payment threshold. To preserve
the integrity of the Exchanges, we believe it is important to ensure
that enrollees do not remain enrolled in coverage without paying at
least some of the premium owed, as there are situations where the fixed
dollar and/or gross percentage-based thresholds would allow an enrollee
to remain enrolled in coverage for extended periods of time after
payment of the binder. Therefore, we propose to limit issuers to the
net percentage-based premium payment threshold at Sec. 155.400(g)(1).
For benefit years starting January 1, 2026, and beyond, we propose
to change the annual Open Enrollment Period (OEP) for coverage through
all individual market Exchanges from November 1 through January 15 to
November 1 through December 15 of the calendar year preceding the
benefit year of enrollment. This change would also apply to non-
grandfathered individual health insurance coverage offered outside of
an Exchange.
We propose to remove Sec. 155.420(d)(16) and make conforming
changes to repeal the monthly special enrollment period (SEP) for
qualified individuals or enrollees, or the dependents of a qualified
individual or enrollee, who are eligible for APTC and whose projected
household income is at or below 150 percent of the FPL. We believe this
proposal and the proposal to change the length of the OEP would improve
the risk pool by reducing adverse selection from people who may
otherwise wait to enroll until they need health care services and would
encourage enrollees to maintain continuous coverage for the full year.
We also anticipate this would lower premiums.
Based on recent evidence \14\ suggesting an increase in the misuse
and abuse of SEPs to gain coverage outside the OEP, we propose to amend
Sec. 155.420(g) to enable HHS to reinstate pre-enrollment verification
of eligibility of applicants for all categories of individual market
SEPs. We propose to further amend Sec. 155.420(g) to require all
Exchanges to conduct pre-enrollment verification of eligibility for at
least 75 percent of new enrollments through SEPs. We understand that
most Exchanges most likely would be able to meet this requirement by
verifying just two of their most used SEPs.
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\14\ This conclusion is drawn from current and historic SEP data
available to the Exchanges on the Federal platform through the
Monthly SEP report and is current as of 1/03/2025.
---------------------------------------------------------------------------
We propose to amend Sec. 156.115(d) to provide that an issuer of
coverage subject to EHB requirements may not provide sex-trait
modification as an EHB beginning with Plan Year (PY) 2026.
We propose to update the premium adjustment percentage methodology
to establish a premium growth measure that comprehensively reflects
premium growth in all affected markets. This premium growth measure is
used to ensure that certain parameters change with health insurance
market premiums over time, including parameters related to annual
limits on cost sharing, eligibility for certain exemptions based on
access to affordable premiums, and employer shared responsibility
payment amounts. The premium adjustment percentage is also used as part
of the calculation of the reduced annual limitation on cost sharing
applicable to silver plan variations. This proposed change would re-
adopt the premium growth measure that was in place for PY
[[Page 12946]]
2020 and PY 2021 and apply it to the related parameters starting with
PY 2026. As such, we also propose the PY 2026 maximum annual limitation
on cost sharing, reduced maximum annual limitations on cost sharing,
and required contribution percentage under Sec. 155.605(d)(2) using
the proposed premium adjustment percentage methodology.
Beginning in PY 2026, we propose changing the de minimis thresholds
for the AV for plans subject to EHB requirements to +2/-4 percentage
points for all individual and small group market plans subject to the
AV requirements under the EHB package, other than for expanded bronze
plans,\15\ for which we propose a de minimis range of +5/-4 percentage
points, as well as establishing wider de minimis thresholds for income-
based CSR plan variations.
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\15\ Expanded bronze plans are bronze plans currently referenced
in Sec. 156.140(c) that cover and pay for at least one major
service, other than preventive services, before the deductible or
meet the requirements to be a high deductible health plan within the
meaning of section 223(c)(2) of the Internal Revenue Code of 1986.
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II. Background
A. Legislative and Regulatory Overview
Section 2702 of the Public Health Service (PHS) Act, as added by
the ACA, establishes requirements for guaranteed availability of
coverage in the group and individual markets.
Section 2703 of the PHS Act, as added by the ACA, and sections 2712
(former) and 2741 of the PHS Act, as added by the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), require health
insurance issuers in the group and individual markets to guarantee the
renewability of coverage unless an exception applies.
Section 1302 of the ACA provides for the establishment of an EHB
package that includes coverage of EHBs (as defined by the Secretary of
Health and Human Services (the Secretary)), cost-sharing limits, and AV
requirements. Among other things, 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.
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.
To set cost-sharing limits, section 1302(c)(4) of the ACA directs
the Secretary to determine an annual premium adjustment percentage, a
measure of premium growth that is used to set the rate of increase for
three parameters: (1) The maximum annual limitation on cost sharing
(section 1302(c)(1) of the ACA); (2) the required contribution
percentage used to determine whether an individual can afford minimum
essential coverage (MEC) (section 5000A of the Internal Revenue Code of
1986 (the Code), as enacted by section 1501 of the ACA); and (3) the
employer shared responsibility payment amounts (section 4980H of the
Code, as enacted by section 1513 of the ACA).
Section 1302(d) of the ACA describes the various levels of coverage
based on their 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)(1) of the ACA requires a bronze plan to have an AV of
60 percent, a silver plan to have an AV of 70 percent, a gold plan to
have an AV of 80 percent, and a platinum plan to have an AV of 90
percent. Section 1302(d)(2) of the ACA directs the Secretary of HHS to
issue regulations on the calculation of AV and its application to the
levels of coverage. Section 1302(d)(3) of the ACA directs the Secretary
to develop guidelines to provide for a de minimis variation in the AVs
used in determining the level of coverage of a plan to account for
differences in actuarial estimates.
Section 1311(c)(6)(B) of the ACA directs the Secretary to require
an Exchange to provide for annual OEPs after the initial enrollment
period.
Section 1311(c)(6)(C) of the ACA authorizes the Secretary to
require an Exchange to provide for SEPs specified in section 9801 of
the Code and other SEPs under circumstances similar to such periods
under part D of title XVIII of the Social Security Act (the Act).
Section 1311(c)(6)(D) of the ACA directs the Secretary 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(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 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 APTC and CSRs for QHPs sold through an Exchange.
Sections 1312(f)(3), 1401, 1402(e), and 1412(d) of the ACA require
that an individual must be either a citizen or national of the United
States or be lawfully present in the United States to enroll in a QHP
through an Exchange, to be eligible for PTC, APTC, and CSRs. 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 directs the Secretary to provide for the efficient and non-
discriminatory administration of Exchange activities and to implement
any measure or procedure the Secretary determines is appropriate to
reduce fraud and abuse. 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 HHS
Secretary determines appropriate.
Section 1321(a)(1) of the ACA directs the Secretary to issue
regulations that set standards for meeting the requirements of title I
of the ACA with respect to, among other things, the
[[Page 12947]]
establishment and operation of Exchanges.
Section 1331 of the ACA provides States the option to establish a
BHP, and more specifically, section 1331(e) requires that an individual
must either be a citizen or national of the United States or be
lawfully present in the United States to enroll in a BHP in States that
elect to operate a BHP.
Section 1401(a) of the ACA added section 36B to the Code, which,
among other things, requires that a taxpayer reconcile APTC for a year
of coverage with the amount of the PTC the taxpayer is allowed for the
year.
Section 1402(c) of the ACA provides for, among other things,
reductions in cost sharing for essential health benefits for qualified
low- and moderate-income enrollees in silver level health plans offered
through the individual market Exchanges, including reduction in out-of-
pocket limits.
Section 1411 the ACA directs the Secretary to make advance
determinations for the PTC with respect to income eligibility for
individuals enrolling in a QHP through the individual market. Section
1411 of the ACA further specifies that the Secretary verify income with
the Secretary of the Treasury based on the most recent tax return
information, and then implement alternative procedures to verify income
on the basis of different information to the extent that a change has
occurred or for individuals who were not required to file an income tax
return.
Section 1411(f)(1)(B) of the ACA directs the Secretary to establish
procedures to redetermine the eligibility of individuals on a periodic
basis in appropriate circumstances.
Sections 1402(f)(3), 1411(b)(3) and 1412(b)(1) of the ACA provide
that data from the most recent tax return information available must be
the basis for determining eligibility for APTC and CSRs to the extent
such tax data is available. Section 1412(c)(2)(B) of the ACA
establishes requirements on issuers with regards to an individual
enrolled in a health plan receiving an APTC.
Section 1412(d) of the ACA states that nothing in the law allows
Federal payments, credits, or CSRs for individuals who are not lawfully
present in the United States.
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 and
requires Exchanges to participate in a data matching program for the
determination of eligibility on the basis of reliable, third-party
data.
Section 1414 of the ACA amends section 6103 of the Code to direct
the Secretary of the Treasury to disclose certain tax return
information to verify and determine eligibility for APTC and CSR
subsidies.
1. Guaranteed Availability and Guaranteed Renewability
In the April 8, 1997 Federal Register (62 FR 16894), HHS published
an interim final rule relating to the HIPAA health insurance reforms
that established rules applying guaranteed availability in the small
group market and guaranteed renewability in the large and small group
market. Also, in the April 8, 1997 Federal Register (62 FR 16985), HHS
published an interim final rule relating to the HIPAA health insurance
reforms that, among other things, established rules applying guaranteed
renewability in the individual market. 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 final rule,
``Patient Protection and Affordable Care Act; Exchange and Insurance
Market Standards for 2015 and Beyond.'' In the December 22, 2016
Federal Register (81 FR 94058) (2018 Payment Notice), we provided
additional guidance on guaranteed availability and guaranteed
renewability, and in the April 18, 2017 Federal Register (82 FR 18346)
(Market Stabilization Rule) we provided further guidance related to
guaranteed availability. In the May 6, 2022 Federal Register (87 FR
27208) we amended the regulations regarding guaranteed availability.
2. Deferred Action for Childhood Arrivals
HHS issued an interim final rule in the July 30, 2010 Federal
Register (75 FR 45014) to define ``lawfully present'' for the purposes
of determining eligibility for the Pre-Existing Condition Insurance
Plan (PCIP) program. In the March 27, 2012 Federal Register (77 FR
18310) (Exchange Establishment Rule), HHS defined lawfully present for
purposes of determining eligibility to enroll in a QHP through an
Exchange by cross-referencing the existing PCIP definition. In the
August 30, 2012 Federal Register (77 FR 52614), HHS adjusted the
previous definition of ``lawfully present'' used for PCIP and QHP
eligibility, which had considered all recipients of ``deferred action''
to be lawfully present, to add an exception that excluded DACA
recipients from the definition. In the March 12, 2014 Federal Register
(79 FR 14112), HHS established the framework for governing a BHP, which
also adopted the definition of ``lawfully present'' for the purpose of
determining eligibility to enroll in a BHP through a cross-reference to
Sec. 155.20. In the May 8, 2024 Federal Register (89 FR 39392) (DACA
Rule), HHS reinterpreted ``lawfully present'' to include DACA
recipients and certain other noncitizens for the purposes of
determining eligibility to enroll in a QHP through an Exchange, PTC,
APTC, CSRs, and to enroll in a BHP in States that elect to operate a
BHP.
3. Program Integrity
We have finalized program integrity standards related to the
Exchanges and premium stabilization programs in two rules: the ``first
Program Integrity Rule'' published in the August 30, 2013 Federal
Register (78 FR 54069), and the ``second Program Integrity Rule''
published in the October 30, 2013 Federal Register (78 FR 65045). We
also refer readers to the 2019 Patient Protection and Affordable Care
Act; Exchange Program Integrity final rule (2019 Program Integrity
Rule) published in the December 27, 2019 Federal Register (84 FR
71674).
In the May 6, 2022 Federal Register (87 FR 27208), we finalized
policies to address certain agent, broker, and web-broker practices and
conduct. In the April 27, 2023 Federal Register (88 FR 25740) (2024
Payment Notice), we 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. In the 2025 Payment Notice, issued in the April 15,
2024 Federal Register (89 FR 26218), we finalized 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. We also finalized changes to Sec. Sec. 155.220
and 155.221 to apply certain standards to web-brokers and Direct
Enrollment (DE) entities assisting consumers and applicants across all
Exchanges. In the January 15, 2025 Federal Register (90 FR 4424) (2026
Payment Notice), we addressed our authority to investigate and
undertake compliance reviews and enforcement actions in response to
misconduct or noncompliance with applicable agent, broker, and web-
broker Exchange requirements or standards occurring at
[[Page 12948]]
the insurance agency level to hold lead agents of insurance agencies
accountable. We also finalized changes to Sec. 155.220(k)(3) to
reflect our authority to suspend an agent's or broker's ability to
transact information with the Exchange in instances where HHS discovers
circumstances that pose unacceptable risk to accuracy of Exchange
eligibility determinations, Exchange operations, applicants, or
enrollees, or Exchange information technology systems until the
circumstances of the incident, breach, or noncompliance are remedied or
sufficiently mitigated to HHS' satisfaction.
4. Premium Adjustment Percentage
In the March 11, 2014 Federal Register (79 FR 13744) HHS
established a methodology for estimating the average per capita premium
for purposes of calculating the premium adjustment percentage.
Beginning with PY 2015, we calculated the premium adjustment percentage
based on the estimates and projections of average per enrollee
employer-sponsored insurance premiums from the National Health
Expenditure Accounts (NHEA), which are calculated by the CMS Office of
the Actuary. In the April 25, 2019 Federal Register (84 FR 17454) HHS
amended the methodology for calculating the premium adjustment
percentage by estimating per capita insurance premiums as private
health insurance premiums, minus premiums paid for Medigap insurance
and property and casualty insurance, divided by the unrounded number of
unique private health insurance enrollees, excluding all Medigap
enrollees. Additionally, in response to public comments to the 2021
Payment Notice proposed rule (85 FR 7088), in the May 14, 2020 Federal
Register (85 FR 29164) HHS stated that we will finalize payment
parameters that depend on NHEA data, including the premium adjustment
percentage, based on the data that are available as of the publication
of the proposed rule for that plan year, even if NHEA data are updated
between the proposed and final rules. In the December 15, 2020 Federal
Register (85 FR 81097), HHS published the Grandfathered Group Health
Plans and Grandfathered Group Health Insurance Coverage final rule,
along with the Departments of Labor and the Treasury, that finalized
using the premium adjustment percentage as one alternative in setting
the parameters for permissible increases in fixed-amount cost-sharing
requirements for grandfathered group health plans. In the May 5, 2021
Federal Register (86 FR 24140), Part 2 of the 2022 Payment Notice
amended the methodology for calculating the premium adjustment
percentage by reverting to using the NHEA employer-sponsored insurance
(ESI) premium measure previously used for PY 2015 to PY 2019 and
established that the premium adjustment percentage could be established
in guidance for plan years in which the premium adjustment percentage
is not methodologically changing.
5. Failure To File Taxes and Reconcile APTC
In the March 27, 2012 Exchange Establishment Rule (77 FR 18310), we
required the Exchange to determine a primary taxpayer ineligible to
receive APTC if HHS notifies the Exchange that the taxpayer received
APTC from a prior year for which tax data would be utilized for income
verification and did not file a tax return and reconcile APTC as
required by implementing regulations proposed by the Department of the
Treasury. In the May 23, 2012 Federal Register (77 FR 30377), the
Department of the Treasury finalized implementing regulations to
require every taxpayer receiving APTC to file an income tax return.
In the December 22, 2016 Federal Register (81 FR 94058) (2018
Payment Notice), we provided that Exchanges cannot determine a taxpayer
ineligible for APTC due to failure to file a tax return unless the
Exchanges send a direct notification to that tax filer stating that
their eligibility will be discontinued for failure to comply with the
requirement to file taxes. We then revisited this notice requirement in
the April 17, 2018 Federal Register (83 FR 16930) (2019 Payment Notice)
and removed the notice requirement.
In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment
Notice) we required Exchanges to wait to discontinue APTC until the tax
filer has failed to file a tax return and reconcile their past APTC for
2-consecutive years rather than ending APTC after a single year. In the
April 15, 2024 Federal Register (89 FR 26218) (2025 Payment Notice), we
required Exchanges to send notices to tax filers for the first year in
which they have been identified by the IRS as failing to reconcile
APTC. In the January 15, 2025 Federal Register (90 FR 4424) (2026
Payment Notice), we required Exchanges to send notices to tax filers
for the second year in which they have been identified by the IRS as
failing to reconcile APTC.
6. Income Inconsistencies
In the April 17, 2018, Federal Register (83 FR 16930) (2019 Payment
Notice), we revised income verification provisions in Sec.
155.320(c)(3)(iii) to require the Exchange to generate annual household
income inconsistencies in certain circumstances when a tax filer's
attested projected annual household income is greater than the income
amount represented by income data returned by IRS and the Social
Security Administration (SSA) and current income data sources. On March
4, 2021, the United States District Court for the District of Maryland
decided City of Columbus, et al. v. Cochran, No. 523 F. Supp. 3d 731
(D. Md. 2021) and vacated these revisions to income verification. We
then implemented the court's decision in the May 5, 2021 Federal
Register (86 FR 24140) (Part 2 of the 2022 Payment Notice) and
rescinded the income verification provisions in Sec.
155.320(c)(3)(iii) that the court invalidated.
In the March 27, 2012 Federal Register (77 FR 18310) (Exchange
Establishment Rule), we established the alternative verification
process in Sec. 155.320(c) for situations when a household income
inconsistency occurs with IRS data or when tax return data is
unavailable. This process required the Exchange to provide the
applicant notice of the income inconsistency and requires applicants to
provide documentary evidence to verify their income or otherwise
resolve the inconsistency within a period of 90 days from which notice
is sent. In the April 27, 2023 Federal Register (88 FR 25740) (2024
Payment Notice), we revised this process to require Exchanges to accept
an applicant's or enrollee's self-attestation of annual household
income when a call to IRS is completed but tax return data is
unavailable and add that household income inconsistencies must receive
an automatic 60-day extension in addition to the 90 days provided to
applicants to resolve their income inconsistency.
7. Annual Eligibility Redetermination
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. This included
standards for annual eligibility redeterminations and renewals of
coverage. In the January 22, 2013 Federal Register (78 FR 4594), we
sought comment on whether the redetermination notice should describe
how the enrollee's deductibles, co-pays, coinsurance, and other forms
of cost sharing would change. In the July 15, 2013 Federal Register (78
FR 42160) (2013 Eligibility Final Rule), we amended the notice to
remove the requirement to provide the data used for
[[Page 12949]]
the eligibility redetermination and the data used for the most recent
eligibility determination, even though we did not previously propose to
change the annual redetermination notice. In the September 5, 2014
Federal Register (79 FR 52994), we amended the annual redetermination
standards to allow for an Exchange to choose from one of three methods
for conducting annual redeterminations. In the January 24, 2019 Federal
Register (84 FR 227) (2020 Payment Notice proposed rule), we sought
comment on the automatic re-enrollment processes to address program
integrity concerns. In the February 6, 2020 Federal Register (85 FR
7088) (2021 Payment Notice proposed rule), we solicited comment on
modifying the automatic re-enrollment process such that any enrollee
who would be automatically re-enrolled with APTC that would cover the
enrollee's entire premium would instead be automatically re-enrolled
without APTC, and we solicited comments on a variation where APTC for
this population would be reduced to a level that would result in an
enrollee premium that is greater than zero dollars, but not eliminated
entirely. We did not finalize any changes in the final rules.
8. Automatic Re-Enrollment Hierarchy
In the March 27, 2012 Federal Register (77 FR 18309) (Exchange
Establishment Rule), we implemented the Exchanges, consistent with
Title I of the ACA. This included implementation of components of the
Exchanges and standards for annual eligibility redetermination and
renewal of coverage. In the September 5, 2014 Federal Register (79 FR
52994) (Annual Eligibility Redeterminations Rule), we modified the
standards for re-enrollment in coverage by adding a re-enrollment
hierarchy to address situations when the enrollee's plan or product is
not available through the Exchange for renewal. In the March 8, 2016
Federal Register (81 FR 12204) (2017 Payment Notice), we amended the
hierarchy to give Exchanges flexibility to prioritize re-enrollment
into silver plans for all enrollees in a silver-level QHP that is no
longer available for re-enrollment, and re-enroll consumers into plans
of other Exchange issuers if the consumer is enrolled in a plan from an
issuer that does not have another plan available for re-enrollment
through the Exchange.
In the January 5, 2022 Federal Register (87 FR 584) (2023 Payment
Notice proposed rule), we solicited comments on revising the re-
enrollment hierarchy at Sec. 155.335(j) at a later date. After
considering comments, we proposed and finalized amendments and
additions to the re-enrollment hierarchy in the April 27, 2023 Federal
Register (88 FR 25740) (2024 Payment Notice), including changes to
allow Exchanges to direct re-enrollment for enrollees who are eligible
for CSRs from a bronze QHP to a silver QHP, if certain conditions are
met.
9. Premium Payment Threshold
In the December 2, 2015 Federal Register (80 FR 75532), we
published a proposed rule to allow issuers to adopt an optional premium
payment threshold policy under which issuers could collect a minimal
amount of premium, less than that which is owed, without triggering the
consequences for non-payment of premiums. We established the option for
issuers to implement a net premium percentage-based premium payment
threshold in the 2017 Payment Notice (81 FR 12271 through 12272). In
the October 10, 2024 Federal Register (89 FR 82366 through 82369), we
proposed to add additional optional premium payment threshold
flexibilities, proposing an option for issuers to adopt a fixed dollar
premium threshold amount of $5 or less and/or a percentage-based
threshold based on the gross premium of 99 percent or more or the
existing net premium of 95 percent or more of the premium after
application of APTC. We modified and finalized this proposal in the
2026 Payment Notice (90 FR 4475 through 4480), allowing issuers to
adopt a fixed dollar premium threshold amount of $10 or less and/or a
percentage-based threshold based on the gross premium of 98 percent or
more or net premium of 95 percent or more of the premium after
application of APTC.
10. Special Enrollment Periods
In the July 15, 2011 Federal Register (76 FR 41865), we published a
proposed rule establishing SEPs for the Exchange. We implemented these
SEPs in the Exchange Establishment Rule (77 FR 18309). In the January
22, 2013 Federal Register (78 FR 4594), we published a proposed rule
amending certain SEPs, including the SEPs described in Sec.
155.420(d)(3) and (7). We finalized these rules in the July 15, 2013
Federal Register (78 FR 42321).
In the June 19, 2013 Federal Register (78 FR 37032), we proposed to
add an SEP when the Federally Facilitated Exchange (FFE) determines
that a consumer has been incorrectly or inappropriately enrolled in
coverage due to misconduct on the part of a non-Exchange entity. We
finalized this proposal in the October 30, 2013 Federal Register (78 FR
65095). In the March 21, 2014 Federal Register (79 FR 15808), we
proposed to amend various SEPs. In particular, we proposed to clarify
that later coverage effective dates for birth, adoption, placement for
adoption, or placement for foster care would be effective the first of
the month. The rule also proposed to clarify that earlier effective
dates would be allowed if all issuers in an Exchange agree to
effectuate coverage only on the first day of the specified month.
Finally, that rule proposed adding that consumers may report a move in
advance of the date of the move and established an SEP for individuals
losing medically needy coverage under the Medicaid program even if the
medically needy coverage is not recognized as minimum essential
coverage (individuals losing medically needy coverage that is
recognized as minimum essential coverage already were eligible for an
SEP under the regulation). We finalized these provisions in the May 27,
2014 Federal Register (79 FR 30348). In the October 1, 2014 Federal
Register (79 FR 59137), we published a correcting amendment related to
codifying the coverage effective dates for plan selections made during
an SEP and clarifying a consumer's ability to select a plan 60 days
before and after a loss of coverage.
In the November 26, 2014 Federal Register (79 FR 70673), we
proposed to amend effective dates for SEPs, the availability and length
of SEPs, the specific types of SEPs, and the option for consumers to
choose a coverage effective date of the first of the month following
the birth, adoption, placement for adoption, or placement in foster
care. We finalized these provisions in the February 27, 2015 Federal
Register (80 FR 10866). In the July 7, 2015 Federal Register (80 FR
38653), we issued a correcting amendment to include those who become
newly eligible for a QHP due to a release from incarceration. In the
December 2, 2015 Federal Register (80 FR 75487) (2017 Payment Notice
proposed rule), we sought comment and data related to existing SEPs,
including data relating to the potential abuse of SEPs. In the 2017
Payment Notice, we stated that in order to review the integrity of
SEPs, the FFE will conduct an assessment by collecting and reviewing
documents from consumers to confirm their eligibility for the SEPs
under which they enrolled.
In an interim final rule with comment published in the May 11, 2016
Federal Register (81 FR 29146), we made amendments to the parameters of
certain SEPs (2016 Interim Final Rule).
[[Page 12950]]
We finalized these in the 2018 Payment Notice, published in the
December 22, 2016 Federal Register (81 FR 94058). In the April 18, 2017
Market Stabilization Rule (82 FR 18346), we amended standards relating
to SEPs and announced HHS would begin pre-enrollment verifications for
all categories of SEPs in June 2017. In the 2019 Payment Notice,
published in the April 17, 2018 Federal Register (83 FR 16930), we
clarified that certain exceptions to the SEPs only apply to coverage
offered outside of the Exchange in the individual market. In the April
25, 2019 Federal Register (84 FR 17454), the final 2020 Payment Notice
established a new SEP. In part 2 of the 2022 Payment Notice, in the May
5, 2021 Federal Register (86 FR 24140), we made additional amendments
and clarifications to the parameters of certain SEPs and established
new SEPs related to untimely notice of triggering events, cessation of
employer contributions or government subsidies to COBRA continuation
coverage, and loss of APTC eligibility. In part 3 of the 2022 Payment
Notice, in the September 27, 2021 Federal Register (86 FR 53412), which
was published by HHS and the Department of the Treasury, we established
a temporary new monthly SEP for those eligible for APTC with projected
household incomes at or below 150 percent of the FPL. In the May 6,
2022 Federal Register (87 FR 27208), we finalized updates to the
requirement that all Exchanges conduct SEP verifications and limited
pre-enrollment verification for Exchanges on the Federal platform to
only consumers who attest to losing minimum essential coverage. In the
April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we
lengthened the SEP from 60 to 90 days to those who lose Medicaid
coverage. In the April 15, 2024 Federal Register (89 FR 26218) (2025
Payment Notice), we aligned effective dates for coverage after
selecting certain SEPs across all Exchanges and removed limitations on
the monthly SEP for those eligible for APTC with incomes up to 150
percent of the FPL.
11. Essential Health Benefits
We established requirements relating to EHBs in the Standards
Related to Essential Health Benefits, Actuarial Value (AV), and
Accreditation Final Rule, which was published in the February 25, 2013
Federal Register (78 FR 12834) (EHB Rule). In the EHB Rule, we included
at Sec. 156.115 a prohibition on issuers from providing routine non-
pediatric dental services, routine non-pediatric eye exam services,
long-term/custodial nursing home care benefits, or non-medically
necessary orthodontia as EHB. In the 2019 Payment Notice, published in
the April 17, 2018 Federal Register (83 FR 16930), we added Sec.
156.111 to provide States with additional options from which to select
an EHB-benchmark plan for PY 2020 and subsequent plan years. In the
2023 Payment Notice, published in the May 6, 2022 Federal Register (87
FR 27208), we revised Sec. 156.111 to require States to notify HHS of
the selection of a new EHB-benchmark plan by the first Wednesday in May
of the year that is 2 years before the effective date of the new EHB-
benchmark plan, otherwise the State's EHB-benchmark plan for the
applicable plan year will be that State's EHB-benchmark plan applicable
for the prior year. We displayed the Request for Information; Essential
Health Benefits (EHB RFI), published in the December 2, 2022 Federal
Register (87 FR 74097), to solicit public comment on a variety of
topics related to the coverage of benefits in health plans subject to
the EHB requirements of the ACA. In the 2025 Payment Notice (89 FR
26218), we removed the regulatory prohibition at Sec. 156.115(d) on
issuers from providing routine non-pediatric dental services as an EHB
beginning with PY 2027.
In the 2026 Payment Notice, published in the January 15, 2025
Federal Register (90 FR 4424), we revised Sec. 156.80(d)(2)(i) to
require the actuarially justified plan-specific factors by which an
issuer may vary premium rates for a particular plan from its market-
wide index rate include the AV and cost-sharing design of the plan,
including, if permitted by the applicable State authority, accounting
for CSR amounts provided to eligible enrollees under Sec. 156.410,
provided the issuer does not otherwise receive reimbursement for such
amounts.
III. Provisions of the Individual Health Insurance Market and Exchange
Program Integrity Proposed Rule
A. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Limited Open Enrollment Periods (Sec. 147.104(b)(2))
As further discussed in section III.B.8. of this preamble regarding
the proposal to remove the monthly SEP for APTC-eligible qualified
individuals with a projected household income at or below 150 percent
of the FPL (Sec. 155.420(d)(16)), we propose a conforming amendment to
remove Sec. 147.104(b)(2)(i)(G), which currently excludes Sec.
155.420(d)(16) as a triggering event for a limited open enrollment
period (OEP) for coverage offered outside of an Exchange. In proposing
the removal of Sec. 147.104(b)(2)(i)(G), we do not intend to include
Sec. 155.420(d)(16) as a triggering event for a limited OEP for
coverage offered outside of an Exchange; rather, we are proposing to
remove Sec. 147.104(b)(2)(i)(G) to reflect the removal of the SEP at
Sec. 155.420(d)(16). We request comment on this proposal.
2. Coverage Denials for Failure To Pay Premiums for Prior Coverage
(Sec. 147.104(i))
We propose to remove Sec. 147.104(i) that restricts an issuer from
attributing payment of premium for new coverage to past-due premiums
from prior coverage. Similar to the policy we articulated in the Market
Stabilization Rule (82 FR 18349 through 18353), we also propose to
allow issuers to attribute to past-due premium amounts they are owed
the initial premium the enrollee pays to effectuate new coverage.
Unlike the policy articulated in the Market Stabilization Rule (82 FR
18349 through 18353), the proposal would not limit the policy to past-
due premium amounts accruing over the prior 12 months. States would
remain free to impose such a limitation and apply additional parameters
governing issuers' premium payment policies, to the extent permitted
under Federal law.
As background, when we initially proposed the guaranteed
availability regulations in the proposed 2014 Market Rules (77 FR
70584, 70599), we noted concerns about the ability of individuals to
manipulate guaranteed availability each year. We also noted how
guaranteed renewability requirements under section 2703 of the PHS Act
allow issuers to non-renew or discontinue coverage for non-payment of
premiums while the guaranteed availability requirements under section
2702 of the PHS Act do not include an exception allowing issuers to
refuse to cover individuals with histories of non-payment under other
policies with the same issuer or other issuers. We then solicited
comments on ways to discourage people from gaming guaranteed
availability rights while, at the same time, ensuring consumers
retained the right afforded by law. In response, commenters, including
the National Association of Insurance Commissioners (NAIC), suggested
that there are several tools States use to limit adverse selection.\16\
In the 2014 Market
[[Page 12951]]
Rules (78 FR 13406, 13416 through 13417), we did not provide any
further guidance on what the statute's guaranteed availability
provision requires and took no further actions to address these
concerns over gaming the guaranteed availability requirement.
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\16\ Tools identified by commenters included, for example, (1)
allowing issuers to require pre-payment of premiums each month; (2)
allowing issuers to require payment of all outstanding premiums
before enrollees can re-enroll in coverage after termination due to
non-payment of premiums; (3) allowing late enrollment penalties or
surcharges (similar to those in Medicare Parts B and D); (4)
allowing issuers to establish waiting periods or delayed effective
dates of coverage; (5) allowing issuers to offset claims payments by
the amount of any owed premiums; (6) allowing issuers to prohibit
individuals who have canceled coverage or failed to renew from
enrolling until the second open enrollment period after their
coverage ceased (unless they replace coverage with other creditable
coverage); (7) restricting product availability (for example, to a
catastrophic, bronze, or silver level plan) outside of enrollment
periods to prevent high-risk individuals from enrolling in more
generous coverage when medical needs arise; and (8) allowing
individuals to move up one metal level each year through the
Exchange shopping portal (78 FR 13406, 13416).
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After finalizing the 2014 Market Rules (78 FR 13406), we published
instructions in annual Exchange enrollment manuals that interpreted the
guaranteed availability requirement to mean that an issuer may not
apply any premium payment made for coverage under a new enrollment to
any outstanding debt owed from any previous coverage that has been
terminated for non-payment of premiums and then refuse to effectuate
the new enrollment based on failure to pay premiums.\17\ Under that
interpretation, enrollment under an SEP or annual OEP subsequent to a
termination for non-payment of premium would be considered a new
enrollment that would fall under the guaranteed availability
requirements and the consumer must be allowed to purchase coverage
without having to pay past-due premiums. However, we also provided
guidance that in situations where an enrollee's grace period for non-
payment of premiums spans 2 plan years,\18\ and the individual seeks to
renew prior coverage with the same issuer in the same product, the
issuer could attribute the enrollee's premium payments to the oldest
outstanding debt in the existing grace period (that is, the prior non-
payments).\19\
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\17\ CMS. (version as of 2016, July 19). Federally-facilitated
Marketplace and Federally-facilitated Small Business Health Options
Program Enrollment Manual. Section 6.3 Terminations for Non-Payment
of Premiums. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf</a> (stating that if a
consumer selects a QHP from which they had been previously
terminated for non-payment of premium by qualifying for another SEP
or during the next OEP, then the QHP cannot attribute any payment
from the individual toward the outstanding debt from the prior,
terminated enrollment and then refuse to enroll the applicant based
on failure to pay premiums); and CMS. (version as of 2015, Oct. 1).
Federally-facilitated Marketplace and Federally-facilitated Small
Business Health Options Program Enrollment Manual. Section 6.3
Terminations for Non-Payment of Premiums. <a href="https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/updated_enr_manual.pdf">https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/updated_enr_manual.pdf</a>.
See also, CMS. (2013, Oct. 3). Federally Facilitated Marketplace,
Enrollment Operational Policy & Guidance. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_OperationsPolicyandGuidance_5CR_100313.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_OperationsPolicyandGuidance_5CR_100313.pdf</a> (stating that ``If
the [qualified individual] selects the same QHP from which he or she
was previously terminated [for non-payment of premiums], the QHP
cannot terminate enrollment in the QHP in which the [qualified
individual] newly enrolled based on failure to pay for any
previously owed and unpaid premium.'').
\18\ This could occur if enrollees who are receiving APTC fail
to timely pay their premium in full or in an amount necessary to
satisfy a payment threshold, if applicable, for November or December
coverage.
\19\ CMS. (version as of 2016, July 19). Federally-facilitated
Marketplace (FFM) and Federally-facilitated Small Business Health
Options Program Enrollment Manual. Section 6.5.2 Grace Period
Spanning Two Plan Years, <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf</a>.
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Due to substantial market instability and data confirming prior
concerns over consumers gaming the guaranteed availability requirement,
we revisited these Exchange enrollment instructions through formal
rulemaking in the Market Stabilization Rule (82 FR 18346). In that
rule, we modified our interpretation of the guaranteed availability
requirement with respect to non-payment of premiums. Under that
modification, we allowed issuers, subject to applicable State law, to
apply a premium payment to an individual's past debt owed for coverage
from the same issuer or a different issuer in the same controlled group
within the prior 12 months before applying the payment toward a new
enrollment. The Market Stabilization Rule (82 FR 18346) cited third-
party research and our own internal analysis showing a substantial
portion of enrollees' coverage had been terminated due to non-payment
of premium and, among these terminations, a large portion repurchased
plans the following plan year from the same issuer.
In the Market Stabilization Rule (82 FR 18350 through 18351), we
noted it is clear from reading the guaranteed availability provision in
section 2702 of the PHS Act, together with the guaranteed renewability
provision in section 2703 of the PHS Act, that an issuer's sale and
continuation in force of an insurance policy is contingent upon payment
of premiums. Notably, this recognizes how the guaranteed renewability
requirement is not just about renewals but also includes a requirement
on issuers to continue the coverage in force throughout the year. Read
together, we concluded that the guaranteed availability provision is
not intended to require issuers to provide coverage to applicants who
have not paid for such coverage. To the extent an individual or
employer makes payment in the amount required to effectuate new
coverage, but the issuer lawfully credits all or part of that amount
toward past-due premiums, we conclude that the consumer has not made
sufficient initial payment for the new coverage.
On January 28, 2021, President Biden issued Executive Order (E.O.)
14009,\20\ directing the Department of Health and Human Services (HHS),
and the heads of all other executive departments and agencies with
authorities and responsibilities related to the ACA, to review all
existing regulations, orders, guidance documents, policies, and any
other similar agency actions to determine whether such agency actions
were inconsistent with that Administration's policy with respect to the
ACA. After reviewing the interpretation of guaranteed availability that
we codified in the Market Stabilization Rule (82 FR 18349 through
18353), we concluded that interpretation had the unintended consequence
of creating barriers to health coverage that disproportionately affect
low-income individuals. In the 2023 Payment Notice (87 FR 27208),
consistent with section 3(iv) of E.O. 14009 and section 2(a) of E.O.
14070, we then re-interpreted the guaranteed availability requirement
and added a new Sec. 147.104(i) to specify that a health insurance
issuer that denies coverage to an individual or employer due to the
individual's or employer's failure to pay premium owed under a prior
policy, certificate, or contract of insurance, including by attributing
payment of premium for a new policy, certificate, or contract of
insurance to the prior policy, certificate, or contract of insurance,
violates Sec. 147.104(a).
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\20\ 86 FR 7793. E.O. 14009 was subsequently revoked by E.O.
14148, ``Initial Rescissions of Harmful Executive Orders and
Actions.'' See 90 FR 8237.
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In finalizing that current interpretation, we attempted to assess
the policy impact of our prior interpretation. In the 2023 Payment
Notice (87 FR 27369), we conducted an internal analysis and estimated
the percent of enrollees in Exchanges using the Federal platform that
had their coverage terminated for non-payment of premiums was 17.3
percent in 2017, 12.4 percent in 2018, 10.7 percent in
[[Page 12952]]
2019, and 7.8 percent in 2020.\21\ This steady decline is consistent
with what would be expected to happen if the Market Stabilization Rule
(82 FR 18346) successfully encouraged enrollees to continue paying
premiums. However, due to data limitations we concluded that we were
unable to directly attribute any changes in enrollment behavior in the
Exchanges using the Federal platform to the interpretation of the
guaranteed availability requirement stated in the Market Stabilization
Rule (82 FR 18346).
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\21\ The regulatory impact analysis stated that these annual
figures should not necessarily be interpreted as trends, as some
States moved from Exchanges using the Federal platform to State
Exchanges and the overall composition of the dataset may have
changed (87 FR 27369, fn 381).
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It is possible, however, that this decline in the rate of enrollees
who had their coverage terminated from 2017 to 2020 happened in part
because the interpretation of the guaranteed availability requirement
adopted in the Market Stabilization Rule (82 FR 18349 through 18353)
successfully encouraged enrollees to continue paying premiums. Actions
by issuers to require enrollees to pay initial and past-due premiums to
obtain coverage may have contributed to an improved risk pool by
keeping healthier people enrolled who may have otherwise stopped
payment if they anticipated they would not need covered health services
for the rest of the plan year.
We previously determined that reversing the Market Stabilization
Rule's policy would increase access to health insurance coverage for
individuals who stop paying premiums due to reasons such as financial
hardship or affordability and who are currently unable to enroll in
coverage because they cannot afford to pay both past-due premiums and
the first month premium for new coverage. Given the availability of
premium support for many who experience financial hardship, we
anticipate that enrollment loss from requiring payment of past-due
premiums would be minimal. Enrollment losses should be minimal because
the amount most individuals owe in past-due premiums is relatively
small and thus having to pay those amounts generally would not impose a
substantial financial burden to enroll in coverage. Because of rules
regarding grace periods and termination of coverage, individuals with
past-due premiums who receive APTC would generally owe no more than 1
to 3 months of past-due premium amounts.\22\ Furthermore, for
individuals on whose behalf the issuer received APTC, their past-due
premiums would be net of any APTC that was paid on the individual's
behalf to the issuer, with respect to any months for which the
individual is paying past-due premiums, and thus, the typical past-due
premium is quite small. We continue to believe that allowing issuers to
require payment of past-due premiums to effectuate coverage is aligned
with the statutory text in section 2702 of the PHS Act and is
consistent with section 2703 of the PHS Act regarding guaranteed
renewability.
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\22\ Section 156.270(d) requires issuers to observe a 3-
consecutive month grace period before terminating coverage for those
enrollees who when failing to timely pay their premiums are
receiving APTC. Section 155.430(d)(4) requires that when coverage is
terminated following this grace period, the last day of enrollment
in a QHP through the Exchange is the last day of the first month of
the grace period. Therefore, individuals whose coverage is
terminated at the conclusion of a grace period would owe at most 1
month of premiums, net of any APTC paid on their behalf to the
issuer. Individuals who attempt to enroll in new coverage while in a
grace period (and whose coverage has not yet been terminated) could
owe up to 3 months of premium, net of any APTC paid on their behalf
to the issuer.
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Under section 2702(a) of the PHS Act, issuers are generally
required to accept every individual and employer in the State that
applies for coverage, subject to certain exceptions. These exceptions
allow issuers to uniformly limit enrollment: (1) to certain open
enrollment periods and SEPs; (2) to an employer with eligible employees
who live, work, or reside in the service area of a network plan; (3) if
the capacity of a network plan cannot provide adequate services to new
enrollees; and (4) if the issuer does not have the financial reserves
necessary to underwrite additional coverage. Under this framework, the
PHS Act's guaranteed availability requirements focus on regulating
matters under the control of the issuer to accept every individual and
employer that applies for coverage except under a limited set of
exceptions where a uniform enrollment limit protects the viability of
the market and individual issuers.
Section 2703 of the PHS Act requires an issuer that offers health
insurance coverage in the group or individual market to renew or
continue in force such coverage at the option of the plan sponsor or
individual, unless certain exceptions apply. These exceptions allow
issuers to non-renew or discontinue coverage for non-payment of
premium, committing fraud, violating employer participation or
contribution rules, moving outside the network service area, or ceasing
the membership of an employer in an association. In addition, an issuer
may also uniformly terminate coverage by following a specific set of
requirements. These guaranteed renewability exceptions focus on
allowing issuers to respond to individual and employer behavior after
their coverage is in force. Under this framework, the guaranteed
renewability requirements cover both renewals and the continuing of
coverage in force throughout the year.
Whether or not an exception applies would depend on the issuer's
terms of coverage, and applicable State and Federal law. Section 2703
of the PHS Act gives issuers broad flexibility to establish terms of
coverage related to most of the exceptions. In traditional insurance
contracts, there are typically provisions related to premium payments,
fraud, employer participation and contribution rates, and living,
residing, or working in the network service area. By enrolling in
coverage, the applicant accepts the terms of coverage. After coverage
is in force (including in instances where an enrollee is renewing prior
coverage), the issuer may discontinue coverage if the individual fails
to follow the terms of coverage for one of the exceptions provided
under the law.
Consistent with section 2702 of the PHS Act, we propose to allow
issuers to establish terms of coverage that attribute the initial
premium an enrollee pays to effectuate new coverage to past-due premium
amounts owed to an issuer and then to refuse to effectuate coverage if
the payment does not equal the outstanding debt and the new monthly
premium amount. Assuming State law does not prohibit such action, this
would permit an issuer to establish terms of coverage that require a
policyholder whose coverage is terminated for non-payment of premium in
the individual or group market to pay all past-due premium owed to that
issuer in order to purchase new coverage from that issuer. Under this
proposal, similar to the policy in the Market Stabilization Rule, an
issuer would be required to apply its premium payment policy uniformly
to all employers or individuals in similar circumstances in the
applicable market regardless of health status, and consistent with
applicable nondiscrimination requirements.\23\ The proposal would not
permit an issuer to condition the effectuation of new coverage on
payment of past-due premiums by any individual other than
[[Page 12953]]
the person contractually responsible for the payment of premium.
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\23\ Issuers may also have obligations under other applicable
Federal laws prohibiting discrimination, and issuers are responsible
for ensuring compliance with all applicable laws and regulations.
There may also be separate, independent non-discrimination
obligations under State law.
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This interpretation also avoids the perverse incentives introduced
under the current interpretation. Under the current interpretation, an
enrollee who is receiving APTC and who renews and owes past-due
payments at the start of the plan year (because the individual failed
to pay the full amount due starting in November or December) will be in
a 3-month grace period in January and must pay the full amount owed by
the end of the grace period to prevent termination.\24\ In contrast,
someone who is not renewing coverage under the same product but instead
selects coverage under a different product and owes past-due premiums
would be able to pay the binder payment to effectuate new coverage
without being in a grace period or paying past-due premiums. Therefore,
by choosing new coverage versus continuing in the same coverage, the
enrollee can avoid paying the outstanding debt before starting coverage
for the next plan year. While the enrollee still owes a debt to the
issuer related to the prior coverage, this strategy makes the debt far
harder for the issuer to collect and buys the enrollee more flexibility
to game their coverage period. Under our proposal, the obligation to
pay the past debt does not change based on whether the annual contract
is new or a renewal.
---------------------------------------------------------------------------
\24\ See, Federally-facilitated Exchange (FFE) Enrollment
Manual, Section 6.3 Terminations for Non-Payment of Premiums
(version effective as of Aug. 19, 2024), available at <a href="https://www.cms.gov/files/document/ffe-enrollment-manual-2024-5cr-082024.pdf">https://www.cms.gov/files/document/ffe-enrollment-manual-2024-5cr-082024.pdf</a>
(stating that for individuals whose grace period for non-payment of
premiums extends past the end of the annual OEP and who either auto-
renews or makes an active plan selection that is a continuation of
the same coverage, the issuer may attribute enrollee payments to the
oldest outstanding debt in the existing grace period for the current
coverage).
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In the 2016 Payment Notice (80 FR 10750, 10794), we revised Sec.
155.400(e) to establish a standard policy for premium payment deadlines
in the FFEs, while leaving other Exchanges the option of establishing
such policies. In particular, we set a uniform deadline for the payment
of the first month's premium to effectuate an enrollment. When setting
this policy, we received several comments recommending that HHS give
issuers flexibility surrounding payment deadlines and, in response, we
recognized that decisions regarding payment of the first month's
premium (the binder payment) have traditionally been business decisions
made by issuers, subject to State rules. While we have established
certain uniform standards for premium payment deadlines, premium
payment policies are generally business decisions made by issuers,
subject to State rules. We therefore propose to allow issuers, to the
extent permitted by applicable State law, to establish terms of health
insurance coverage that attribute to past-due premium amounts owed to
an issuer the initial premium the enrollee pays to effectuate new
coverage. We propose that this policy would apply starting on the
effective date of the final rule. We seek comment on this proposal.
In the Market Stabilization Rule (82 FR 18349 through 18353), we
also set additional parameters around this flexibility. These
parameters allowed an issuer to attribute payments to effectuate new
coverage to past-due premiums amounts owed to any other issuer that is
a member of the same controlled group. For this purpose, a controlled
group was a group of two or more persons that is treated as a single
employer under sections 52(a), 52(b), 414(m), or 414(o) of the Code,
which is the same definition used for other purposes related to the
guaranteed renewability provision. HHS limited the issuer to
attributing premium payments to past-due premiums for coverage within
the prior 12 months. In addition, we also required issuers that adopted
this premium payment policy (as well as any issuers that do not adopt
the policy but are within an adopting issuer's controlled group) to
provide notice of the consequences of non-payment on future enrollment
in enrollment application materials and in any notice that is provided
regarding non-payment of premiums. While these are reasonable
parameters, we believe States are better situated to set and oversee
parameters of this nature and therefore do not believe a uniform
national policy on these elements is warranted. We clarify that our
proposal to permit issuers to establish terms of coverage that
attribute the initial premium an enrollee pays to effectuate new
coverage to past-due premium amounts owed to an issuer, and then to
refuse to effectuate coverage if the payment does not equal the
outstanding debt plus the new monthly premium amount, would permit them
to include past-due premium amounts owed to another issuer in the same
controlled group, if permitted by applicable State law. We seek
comments on whether we should leave such parameters to States or codify
these and any other parameters to establish a more uniform Federal
regulatory approach. We also seek comment on whether issuers should be
required to establish terms of coverage that attribute to past-due
premium amounts owed to an issuer the premium the enrollee initially
pays for subsequent coverage, and the associated costs for issuers to
implement such a requirement.
Here and throughout this proposed rule we encourage commenters to
include supporting facts, research, and evidence in their comments.
When doing so, commenters are encouraged to provide citations to the
materials referenced, including active hyperlinks. Likewise, commenters
who reference materials which have not been published are encouraged to
upload relevant data collection instruments, data sets, and detailed
findings as a part of their comment. Providing such citations and
documentation will assist HHS in analyzing the comments.
B. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
1. Definitions; Deferred Action for Childhood Arrivals (Sec. 155.20)
Section 1312 of the ACA specifically excludes individuals who are
not ``lawfully present'' from eligibility for enrollment in a QHP or
for insurance affordability programs.\25\ Section 36B of the Code, and
sections 1412, 1402, and 1331 of the ACA, exclude individuals who are
not ``lawfully present'' from eligibility for PTC,\26\ APTC,\27\
CSRs,\28\ and enrollment in a BHP in States that elect to operate a
BHP,\29\ respectively. From 2012 through 2024, HHS long took the
position that a noncitizen in the United States under the Deferred
Action for Childhood Arrivals (DACA) policy was not ``lawfully
present'' for purposes of determining eligibility to enroll in a QHP or
for these insurance affordability programs.\30\ However, in the DACA
Rule (89 FR 39392), HHS updated the definition of ``lawfully present''
to include DACA recipients for purposes of determining eligibility to
enroll in a QHP through an Exchange, to be eligible for PTC, APTC, and
CSRs, and to enroll in a BHP in States that elect to operate a BHP. The
agency now proposes to realign our policy with the text of the ACA by
updating the definition of ``lawfully present'' such that DACA
recipients are no longer considered ``lawfully present'' for purposes
of enrollment in a QHP, eligibility for PTC, APTC, and CSRs, and for
BHP coverage.
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\25\ 42 U.S.C. 18032(f)(3).
\26\ 42 U.S.C. 18082(d); 26 U.S.C. 36B(e)(2).
\27\ 42 U.S.C. 18082(d).
\28\ 42 U.S.C. 18071(e).
\29\ 42 U.S.C. 18051(e).
\30\ See the definition of ``insurance affordability program''
at 45 CFR 155.300(a) and 42 CFR 435.4.
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[[Page 12954]]
On June 15, 2012, the United States Department of Homeland Security
(DHS) issued a memorandum entitled ``Exercising Prosecutorial
Discretion with Respect to Individuals who Came to the United States as
Children'' (``DHS Memo'').\31\ The DHS Memo established, for the first
time, the DACA policy, and it set forth three principles. First,
certain individuals who were brought to the United States as children
from another country and who were in the United States in violation of
immigration laws were not considered to be an immigration enforcement
priority. Second, with respect to these individuals, DHS officials were
instructed to exercise enforcement discretion and generally defer from
placing them into removal proceedings. Finally, United States
Citizenship and Immigration Services (USCIS) was instructed to accept
applications to determine whether these individuals were eligible for
work authorization during a period of deferred action.
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\31\ Napolitano, J. (2012, June 15). Exercising Prosecutorial
Discretion with Respect to Individuals Who Came to the United States
as Children. U.S. Department of Homeland Security. <a href="https://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-who-came-to-us-as-children.pdf">https://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-who-came-to-us-as-children.pdf</a>.
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On August 30, 2012, HHS issued an Interim Final Rule (77 FR 52615
through 52616) that amended the definition of ``lawfully present'' at
Sec. 155.20 to conform with the law as enacted by the ACA by making
clear that an individual whose case had been deferred under the DACA
policy ``will not be able to enroll in coverage through the Affordable
Insurance Exchanges and, therefore, will not receive coverage that
could make them eligible for premium tax credits.'' The Interim Final
Rule noted at that time (77 FR 52615) that ``the reasons that DHS
offered for adopting the DACA process do not pertain to . . .
extend[ing] health insurance subsidies under the Affordable Care Act to
these individuals.'' For that reason, the HHS explained (77 FR 52615),
it did not intend to ``inadvertently expand the scope of the DACA
process.''
On May 8, 2024, after notice and comment, HHS issued the DACA Rule
(89 FR 39392) reversing this longstanding interpretation. In the final
rule, HHS announced that it had chosen to ``reconsider'' the prior
interpretation from 2012. The DACA Rule, which became effective on
November 1, 2024, advanced several arguments for reversing the agency's
prior interpretation.\32\
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\32\ On December 9, 2024, the United States District Court for
the District of North Dakota issued a preliminary injunction in
Kansas v. United States of America (Case No. 1:24-cv-00150)
partially blocking implementation of the 2024 final rule at 89 FR
39392.
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In light of recent Executive Orders, ``Protecting the American
People Against Invasion'' \33\ and ``Ending Taxpayer Subsidization of
Open Borders,'' \34\ and consistent with our statutory authority to
define ``lawfully present'' for use in determining eligibility for our
programs, we are now reconsidering these arguments.
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\33\ ``Protecting the American People Against Invasion,'' Exec.
Order No. 14,159, 90 FR 8443 (Jan. 20, 2025). <a href="https://www.federalregister.gov/documents/2025/01/29/2025-02006/protecting-the-american-people-against-invasion">https://www.federalregister.gov/documents/2025/01/29/2025-02006/protecting-the-american-people-against-invasion</a>. <a href="https://www.federalregister.gov/documents/2025/01/29/2025-02006/protecting-the-american-people-against-invasion">https://www.federalregister.gov/documents/2025/01/29/2025-02006/protecting-the-american-people-against-invasion</a>.
\34\ ``Ending Taxpayer Subsidization of Open Borders.'' (Feb.
19, 2025). <a href="https://www.whitehouse.gov/presidential-actions/2025/02/ending-taxpayer-subsidization-of-open-borders/">https://www.whitehouse.gov/presidential-actions/2025/02/ending-taxpayer-subsidization-of-open-borders/</a>. <a href="https://www.whitehouse.gov/presidential-actions/2025/02/ending-taxpayer-subsidization-of-open-borders/">https://www.whitehouse.gov/presidential-actions/2025/02/ending-taxpayer-subsidization-of-open-borders/</a>.
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In the DACA Rule (89 FR 39392 through 39395), HHS concluded that
because DHS had determined that a DACA recipient is ``lawfully
present'' for purposes of eligibility for certain Social Security
benefits under 8 U.S.C. 1611(b)(2), that the agency should ``align''
its position to that of DHS, even while acknowledging that we were
operating under separate statutory and policy considerations. However,
as demonstrated by HHS' prior policy with regard to DACA recipients (89
FR 39392 through 39395), the ``separate statutory authority and policy
considerations'' did not compel HHS to ``align'' its position on DACA
recipients with the position that DHS took with regard to DACA
recipients' eligibility for certain Social Security benefits.
In the DACA Final Rule (89 FR 39395), HHS also posited that it saw
``no statutory mandate to distinguish between recipients of deferred
action under the DACA policy and other deferred action recipients.''
The final rule noted that Federal agencies have long considered
deferred action recipients to be ``lawfully present'' for purposes of
certain Social Security benefits since 1996.\35\ However, DACA
recipients, unlike other deferred action-recipients, received deferred
action under a large-scale presidential initiative whose purposes did
not include extending ACA access to health insurance Exchanges. As HHS
originally explained, it is not consistent with the reasons offered for
adopting the DACA process to extend health insurance subsidies under
the ACA to these individuals (77 FR 52615). This original policy
reflected the better view of the appropriate intersection of DACA and
the ACA.
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\35\ See Definition of the Term Lawfully Present in the United
States for Purposes of Applying for Title II Benefits Under Section
401(b)(2) of Public Law 104-193, interim final rule, 61 FR 47039).
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The Fifth Circuit concluded in 2022 that ``Congress created an
intricate statutory scheme for determining which classes of aliens may
receive lawful presence, discretionary relief from removal, deferred
action, and work authorization'' and that ``Congress's rigorous
classification scheme forecloses the contrary scheme in the DACA
Memorandum.'' <SUP>36 37</SUP> In the DACA Rule, HHS acknowledged the
Fifth Circuit's opinion but proceeded to consider DACA recipients
``lawfully present'' for purposes of eligibility to enroll in a QHP
through an Exchange, to be eligible for PTC, APTC, CSRs, and to be
eligible to enroll in a BHP in States that elect to operate a BHP
because the ``rule reflects our independent statutory authority under
the ACA to define `lawfully present.' '' Upon further reconsideration,
we now believe it was improper for HHS to define ``lawfully present''
under the ACA in a way that departed from the longstanding
understanding of that term with respect to DACA recipients.
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\36\ Texas v. United States, 50 F.4th 498, 526 (5th Cir. 2022).
\37\ On January 17, 2025, the U.S. Court of Appeals for the
Fifth Circuit issued a decision (State of Texas, et al. v. U.S.A, et
al., 23-40653) regarding DHS's final rule ``Deferred Action for
Childhood Arrivals'' (87 FR 53152), which found the benefits
granting provisions of the rule to be substantively unlawful,
limited injunctive relief to the State of Texas, and remanded the
case to the district court for further proceedings.
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To support the DACA Rule, HHS stated that the policy would increase
insurance coverage, reduce delays in care, improve the ACA's risk pool,
and make DACA recipients more productive members of society. However,
these benefits the agency previously noted do not mean that DACA
recipients should be considered to have met the ``lawfully present''
standard that Congress set in order to enroll in a QHP through an
Exchange, to be eligible for PTC, APTC, CSRs, and to enroll in a BHP in
States that elect to operate a BHP. We believe the use of the term
``lawfully present'' in the ACA is best implemented by excluding DACA
recipients for purposes of eligibility to enroll in a QHP through an
Exchange, to be eligible for PTC, APTC, CSRs, and to be eligible to
enroll in a BHP in States that elect to operate a BHP. DHS's decision
that DACA recipients are not priorities for removal does not, as DHS
has acknowledged, mean that they have ``lawful status'' within the
United States, nor does that DHS decision control anything regarding
``eligibility rules'' for health-related benefits administered by
``[o]ther
[[Page 12955]]
departments and agencies, such as HHS'' (87 FR 53211 through 53212).
Therefore, we believe it was improper for HHS to advance a policy goal
that was contrary to the ACA's statutory limitations as they have been
understood since the inception of DACA. Furthermore, DHS's decision
that enforcement resources should be focused on other unlawful
immigrants does not compel the conclusion that taxpayer dollars should
be expended to subsidize the healthcare of those unlawful immigrants,
as HHS recognized in its 2012 rule. Indeed, Congress has expressed a
clear immigration policy that ``aliens within the Nation's borders not
depend on public resources to meet their needs'' and public benefits
should ``not constitute an incentive for immigration to the United
States'' (8 U.S.C. 1601(2)). While HHS acknowledged this goal in
previous rulemaking (89 FR 39399), it did not explain why the
understanding that it had adopted prior to the DACA Rule did not better
comport with this statutory goal.
After reconsidering these arguments, we believe that, with respect
to DACA recipients, defining the term ``lawfully present'' as set forth
in the August 30, 2012 Interim Final Rule (77 FR 52614 through 52616)
better adhered to the policy considerations underlying the statutory
scheme. As previously noted, HHS' statutory authority and policy
considerations for defining ``lawfully present'' with regard to its
programs are separate from DHS's, and there is no requirement that HHS
aligns its definition of ``lawfully present'' with DHS's. There is also
no requirement that HHS align its treatment of DACA recipients with
other recipients of deferred action, particularly given the fundamental
differences between DHS's DACA policy and other policies under which
DHS may grant deferred action. In the 2012 Interim Final Rule (77 FR
52614 at 52615), HHS noted that the reasons DHS offered in the DHS Memo
for adopting the DACA process did not include providing access to
insurance affordability programs, and that any such expansion would
``inadvertently expand the scope of the DACA process.'' Section 42
U.S.C. 18032(f)(3), section 36B(e)(2) of the Code, 42 U.S.C. 18082(d),
and 42 U.SC. 18071(e)(1)(A), 42 U.S.C. 18051(e) limit enrollment in a
QHP offered on an Exchange and eligibility for PTC, APTC, CSRs, and
enrollment in a BHP in States that elect to operate a BHP,
respectively, to an individual who is ``lawfully present'' in the
United States, and the better view is that a DACA recipient does not
meet that requirement and would therefore, under this rule, be
ineligible for these benefits.
We seek comments on this proposal.
2. Standards for Termination of an Agent's, Broker's, or Web-Broker's
Exchange Agreements for Cause (Sec. 155.220(g)(2))
Later in this preamble, there is significant discussion regarding
dramatic levels of improper enrollments involving agents, brokers, and
web-brokers. Examining agent, broker, and web-broker practices and
taking enforcement action against noncompliant agents, brokers, and
web-brokers is critical to program integrity, and HHS is committed to
holding noncompliant agents, brokers, and web-brokers accountable to
protect Exchanges and consumers. We propose to amend Sec.
155.220(g)(2) to improve transparency in the process for holding
agents, brokers, and web-brokers accountable for compliance with
applicable law, regulatory requirements, and the terms and conditions
of their Exchange agreements.\38\
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\38\ Consistent with Sec. 155.220(d), there are currently three
Exchange agreements with CMS that extend to agents, brokers, and
web-brokers assisting consumers in the FFEs and SBE-FPs: (1) the
Agent Broker General Agreement for Individual Market FFEs and SBE-
FPs, (2) the Agent Broker Privacy and Security Agreement for
Individual Market FFEs and SBE- FPs, and (3) the Agent Broker SHOP
Privacy and Security Agreement. Web-brokers assisting consumers in
the FFEs and SBE-FPs are required to sign the Web-broker General
Agreement, and web-brokers who are primary Enhanced Direct
Enrollment (EDE) entities that assist consumers in the FFEs and SBE-
FPs are required to sign the EDE Business Agreement and the
Interconnection Security Agreement.
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Section 1312(e) of the ACA provides that the Secretary shall
establish procedures under which a State may allow agents or brokers to
enroll individuals and employers in any QHPs in the individual or small
group market as soon as the plan is offered through an Exchange in the
State; and to assist individuals in applying for PTC and CSRs for plans
sold through an Exchange. Regulations at Sec. 155.220 implement this
statutory requirement.\39\ Among other things, Sec. 155.220 includes
termination for cause standards in paragraphs (g)(1) through (3), which
generally provide that if, in HHS' determination, a specific finding of
noncompliance or pattern of noncompliance is sufficiently severe, HHS
may terminate an agent's, broker's, or web-broker's agreements with the
FFE for cause. Consistent with Sec. 155.220(l), the termination for
cause standards apply to agents, brokers, and web-brokers participating
in SBE-FPs. Paragraph (h) sets forth procedures for subsequent review
(that is, ``reconsideration'') of the termination action.
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\39\ Also see Sec. Sec. 155.221 and 155.222.
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We propose to improve transparency in the process for holding
agents, brokers, and web-brokers accountable for noncompliance with
applicable law, regulatory requirements, and the terms and condition of
their Exchange agreements. Specifically, we propose to add text to
Sec. 155.220(g)(2) that clearly states that HHS would apply a
``preponderance of the evidence'' standard of proof with respect to
issues of fact to assess potential noncompliance under Sec.
155.220(g)(1) and make a determination there was a specific finding or
pattern of noncompliance that is sufficiently severe. Similar to
definitions adopted by other HHS agencies and offices,\40\ we propose
at Sec. 155.20 to capture this new definition, which would state that
``preponderance of the evidence'' means proof by evidence that,
compared with evidence opposing it, leads to the conclusion that the
fact at issue is more likely true than not.\41\
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\40\ See 42 CFR 93.228 (preponderance of the evidence means
``proof by evidence that, compared with evidence opposing it, leads
to the conclusion that the fact at issue is more likely true than
not''); 45 CFR 412.001 (``Preponderance of the evidence means proof,
after assessing the totality of available information, that leads to
the conclusion that the fact at issue is more probably true than
not.''); and 45 CFR 1641.2 (``Preponderance of the evidence means
proof by information that, compared with that opposing it, leads to
the conclusion that the fact at issue is more probably true than
not.'').
\41\ See also INS v. Cardoza-Fonseca, 480 U.S. 421 (1987)
(defining ``more likely than not'' as a greater than 50 percent
probability of something occurring).
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In proposing the preponderance of the evidence standard, we
considered the severity of the potential consequences involved in our
termination for cause standards in Sec. 155.220(g)(1) through (3),\42\
and how evidentiary standards have traditionally been used in court
cases. Federal administrative and civil cases generally use a
preponderance of the evidence standard, while criminal cases, in order
to sustain a conviction, demand the highest standard, guilt ``beyond a
reasonable doubt,'' under which evidence must be so strong that there
is no reasonable doubt about a defendant's guilt.\43\ Between those two
[[Page 12956]]
evidentiary standards are the ``clear and convincing evidence''
standard, under which a trier of fact must have an abiding conviction
that the truth of the factual contention is ``highly probable,'' \44\
and the ``substantial evidence'' standard, which means such relevant
evidence as a reasonable mind might accept as adequate to support a
conclusion.\45\
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\42\ HHS acknowledges that there are additional enforcement
actions under 45 CFR 155.220(g) that are not addressed by this
proposal. We are considering future rulemaking to implement
additional regulation changes to the frameworks for those actions
that may strengthen our oversight and the integrity of the program.
\43\ See Maurice, R.; updated by Barrett, S. (2024, Oct. 31).
Legal Standards of Proof. Nolo. <a href="https://www.nolo.com/legal-encyclopedia/legal-standards-proof.html">https://www.nolo.com/legal-encyclopedia/legal-standards-proof.html</a> (from lowest to highest
standard: preponderance of the evidence, substantial evidence, clear
and convincing evidence, and beyond a reasonable doubt). See
Maurice, R., & Barrett, S. (2024, October 31). Legal standards of
proof: You've probably heard that prosecutors have to prove criminal
charges ``beyond a reasonable doubt.'' But do you know about the
other legal standards of proof? NOLO. <a href="https://www.nolo.com/legal-encyclopedia/legal-standards-proof.html">https://www.nolo.com/legal-encyclopedia/legal-standards-proof.html</a>.
\44\ Ibid. (citing Colorado v. New Mexico, 467 U.S. 310 at 316
(1984)).
\45\ See Reed v. Sec. of Health and Human Serv., 804 F. Supp.
914 at 918 (E.D. Mich. 1992).
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HHS is of the view that the preponderance of the evidence standard
is appropriate in our termination for cause standards framework under
Sec. 155.220(g)(1) through (3) because it is the standard used in most
Federal civil cases and administrative proceedings. However, we also
appreciate that the termination of an agent's, broker's, or web-
broker's Exchange agreements may affect their State licensure, given
that we inform State insurance oversight agencies of these enforcement
actions.\46\ In addition, after the applicable period in Sec.
155.220(g)(3) elapses and the Exchange agreement(s) under Sec.
155.220(d) are terminated, the agent, broker, or web-broker will no
longer be permitted to assist with or facilitate enrollment of a
qualified individual in coverage in a manner that constitutes coverage
through an FFE or SBE-FP, or be permitted to assist individuals in
applying for APTC and CSRs for QHPs offered through an FFE or SBE-
FP.\47\ Once an agent's, broker's, or web-broker's Exchange agreements
are terminated, they are unable to assist with applying for or
enrolling in QHPs offered through the Exchange in any of the more than
30 States served by Exchanges on the Federal platform. Given these
potential consequences, we seek comment not only on this proposal to
use a ``preponderance of evidence'' standard of proof in assessing
potential noncompliance under Sec. 155.220(g)(1), but also whether a
different standard would be more appropriate to make a determination
there was a specific finding or pattern of noncompliance by agents,
brokers, and web-brokers that is sufficiently severe. We also solicit
comments on our proposed definition for this new ``preponderance of
evidence'' standard.
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\46\ See 45 CFR 155.220(g)(6).
\47\ See 45 CFR 155.220(g)(4) and (l).
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In addition, we intend to provide greater specificity and precision
in the Exchange agreements for PY 2026 and beyond regarding
impermissible conduct by agents, brokers, and web-brokers, and to
address the requirements for ensuring agents, brokers, and web-brokers
have obtained and documented receipt of consumer consent to collect
their personally identifiable information and help them apply for and/
or enroll in QHP coverage offered through the applicable FFE or SBE-FP.
These changes will provide additional, clear guidance to agents,
brokers, and web-brokers, as well as additional information on how HHS
will address compliance failures. We seek input on actions or subject
matters that interested parties believe should be specifically
outlined, emphasized, or otherwise addressed in the Exchange agreements
for PY 2026 and beyond.
We are also inviting comments on the following questions:
1. What are States' oversight practices with respect to
impermissible conduct by agents, brokers, and web-brokers for the State
Exchanges? How are such standards working?
2. Would it be helpful for HHS to provide more guidance on the
form, manner, and content requirements for obtaining and documenting
consumer consent? If so, what guidance would be helpful?
3. Are there other measures HHS should take to assist consumers who
have been enrolled in QHP coverage through the FFEs or SBE-FPs, or
switched to different coverage, without their consent to ensure they
are held harmless for improper enrollments that are the result of
noncompliant behavior by agents, brokers, and web-brokers?
4. Are there other measures that HHS should pursue to enhance
oversight of agents, brokers, and web-brokers who assist consumer apply
for and enroll in QHP coverage through the FFEs and SBE-FPs?
Comments are invited on these specific questions, and generally. We
will consider public comments to help inform potential new or
additional policies and changes to existing standards in future
rulemaking.
3. Verification Process Related to Income Eligibility for Insurance
Affordability Programs (Sec. Sec. 155.305, 155.315, and 155.320)
The ACA provides Federal subsidies to reduce premium and cost
sharing payments for lower-income households who purchase QHPs through
the Exchanges. To guard against fraud and abuse, the ACA establishes a
set of standards and processes to verify that consumers meet the
eligibility requirements for APTC and CSR subsidies. We are proposing
several changes to the processes specifically related to verifying
income eligibility for APTC and CSR subsidies.
Understanding the ACA's full statutory framework for making income
eligibility determinations for APTC provides important context for
analyzing the current regulations and the changes we are proposing.
Each provision of the framework works in coordination with every other
provision to strengthen the program integrity of the ACA's premium and
cost sharing reduction program. Viewed in isolation, the importance of
the role each provision plays can be undervalued or lost. With this in
mind, after reviewing our recent rulemaking on the verification process
related to income eligibility for APTC, we believe certain regulations
do not align with this statutory framework. Therefore, before detailing
the changes we propose, we believe it is important to first outline the
full statutory framework and how each provision connects to increase
the accuracy of eligibility determinations for APTC and CSR subsidies.
Accordingly, the following discussion provides a detailed discussion of
ACA's statutory framework for verifying and determining income
eligibility for APTC.
The ACA provides a PTC to lower net premiums for QHPs purchased
through the Exchanges for eligible individuals. While taxpayers may
choose to claim this credit on their tax return after they pay their
premium, the ACA provides advanced payments of the premium tax credit
(that is, APTC on behalf of eligible consumers, which the Federal
Government pays directly to the issuer when the premium payments are
due). The ACA contains an obligation on issuers to reduce cost-sharing
for people with household incomes between 100 percent and 250 percent
of the FPL who select a silver plan on an Exchange. The ACA imposes an
obligation on the Federal Government to make periodic and timely
payments to issuers equal to the value of the reductions. However,
since a 2017 legal opinion determined the statute does not appropriate
funding for CSR payments,\48\ State Departments
[[Page 12957]]
of Insurance have generally permitted or instructed their issuers to
increase premiums only, or primarily, on silver-level QHPs, to
compensate for the cost of offering CSRs, since the vast majority of
eligible enrollees receiving CSRs are enrolled in silver plans. By
loading premiums to compensate for lack of CSRs, issuers increase the
amount of APTC the Federal Government pays them which, in turn,
indirectly covers the cost of the CSR subsidies. Therefore,
appropriations for APTC now effectively fund both APTC and CSR
subsidies.
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\48\ U.S. House of Representatives v. Burwell, 185 F. Supp. 3d
165 (D.D.C. 2016); see also Legal Opinion Re: Payments to Issuers
for Cost-Sharing Reductions (CSRs). Office of Attorney General.
<a href="https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf">https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf</a> (On
October 12, 2017, the Attorney General issued a legal opinion that
HHS did not have a Congressional appropriation with which to make
CSR payments. Sessions III, J. (2017, Oct. 11)).
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If the APTC paid on behalf of an enrollee exceeds the PTC amount
allowed for the enrollee in a taxable year, section 36B(f)(2)(A) of the
Code requires repayment of the excess APTC the Department of the
Treasury paid to the issuer through an increase in the income tax on
the enrollee by the amount of the excess. However, section 36B(f)(2)(B)
of the Code substantially limits the amount of this tax increase or
repayment for people with household incomes less than 400 percent of
the FPL. Therefore, the statute does not allow the Federal Government
to recover a substantial portion of excess APTC payments. As such, it
is critical to establish an accurate estimate of household income
during the application and enrollment process to most accurately set
APTC payment amounts before the APTC payments are made. Otherwise, to
the extent household income estimates allow people to qualify for an
excess of APTC, a large portion of these excess APTC payments cannot be
recovered from the enrollee. In the case of individuals who
underestimate their income on their application, they can accumulate
large surprise tax liabilities.
To avoid improper payments of APTC, the ACA includes a set of
procedures for determining income eligibility that work together to
increase the accuracy of household income estimates provided on
applications for APTC. Section 1411(a) of the ACA requires HHS to
establish a program for determining, among other things, whether an
individual claiming PTC or CSR meets the income requirements. For
applicants claiming PTC or CSR, section 1411(b)(3)(A) of the ACA
requires them to provide income information from their most recent tax
return filing. If there are changes in circumstances from the most
recent tax filing or when the tax filer was not required to file taxes,
section 1411(b)(3)(C) of the ACA requires applicants to report
additional income information in coordination with the program under
section 1412 of the ACA for setting APTC amounts.
Section 1412(b)(1)(B) of the ACA requires APTC to be set on the
basis of the individual's household income for the most recent taxable
year for which information is available. To determine and verify
household income, it is imperative that consumers file a Federal income
tax return when they are required to do so. As such, the ACA relies on
people meeting their statutory obligations to file Federal income taxes
under sections 6011 and 6012 of the Code. However, section 1412(b)(2)
of the ACA establishes a separate set of procedures for determining
APTC if there are changes in circumstances from the most recent tax
filing or when the tax filer was not required to file taxes.
Section 1411 of the ACA sets out procedures for verifying the
information that enrollees provide on their application, including
information required under both sections 1411 and 1412 of the ACA.
Section 1411(c)(1) of the ACA requires Exchanges to submit an
applicant's information to HHS. Section 1411(c)(3) of the ACA then
requires HHS to submit income information to the IRS for the purposes
of eligibility. The details of this data exchange and disclosure of
taxpayer information are further specified at section 1414 of the ACA,
which includes additional procedures for the exchange of information
with Exchanges and State agencies to support income eligibility
determinations. In the case of income information provided on an
application that is not required to be submitted to the IRS for
verification--that is, any income estimates that are different from the
income reported on the applicant's previous tax return--section 1411(d)
of the ACA requires HHS to verify its accuracy and allows HHS to
delegate this responsibility to the Exchanges. Under section
1411(c)(4)(A) of the ACA, HHS must conduct these income verifications
and determinations through the electronic submission of both the
applicant's information and responses to the applicant, except that HHS
may use a different method for income inconsistencies than the IRS per
section 1411(c)(4)(B) of the ACA. If the information provided by the
applicant is verified under the foregoing procedures, HHS then
determines the applicant is eligible and notifies the Secretary of the
Treasury of the APTC amount to be paid, if applicable.\49\
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\49\ Section 1411(e)(2)(A) of the ACA.
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However, if the household income information provided by the
applicant is inconsistent with tax filing information from the IRS or
fails the verification under section 1411(d) of the ACA, section
1411(e)(4) of the ACA requires Exchanges to take additional steps to
verify income.\50\ When there is a household income inconsistency, also
known as a data matching issue (DMI), the Exchange must make a
reasonable effort to identify and address the causes of such
inconsistency, including those stemming from typographical or other
clerical errors, by contacting the applicant to confirm the accuracy of
the information, and by taking such additional actions as HHS, through
regulation or other guidance, may identify. If the household income
inconsistency persists, then the Exchange must notify the applicant and
give the applicant an opportunity within 90 calendar days from the date
the notice was sent to either present satisfactory documentary evidence
to the Exchange or resolve the inconsistency with the IRS or the HHS
verification source. If the household income inconsistency is not
resolved by the end of this 90-day period, section 1411(e)(4)(B)(ii) of
the ACA requires the Exchange to set the APTC and CSR based on income
information from the IRS and information provided to HHS under section
1411(d) of the ACA.
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\50\ The responsibility for verifying eligibility here has
shifted entirely from HHS to the Exchanges. However, HHS retains
responsibility in States that have not established an Exchange. In
addition, HHS retains authority to regulate how Exchanges verify
eligibility at this stage.
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To support verification and eligibility determinations, section
1413 of the ACA requires HHS to establish a system to streamline
eligibility determinations across all applicable State health care
subsidy programs, including QHP enrollment, PTCs, CSRs, Medicaid, the
Children's Health Insurance Program (CHIP), and BHPs in States that
elect to operate them. Within this system, States must develop a
secure, electronic interface and using this interface, participate in a
data matching program to establish, verify, and update eligibility for
State health care subsidy programs, including the APTC, on the basis of
reliable, third-party data. Collectively, we refer to these third-party
data sources, such as the Social Security Administration, DHS, and the
IRS, as trusted data sources. Importantly, this interface for
exchanging data must be compatible with the method for data
verification of the household income information provided on
applications under section 1411(c)(4) of the ACA.
In summary, under this statutory framework, HHS is responsible for
[[Page 12958]]
verifying and determining income eligibility. We are tasked with
verifying household income information with the IRS and verifying
household income information with other trusted data sources when the
IRS cannot provide enough information to verify income eligibility, or
the information they provide significantly differs from the household's
income attestation. The ACA further directs HHS to establish compatible
electronic information exchange systems for enrollment applications and
eligibility verification and determination. This creates a clear
expectation for HHS to develop a robust data matching program between
Federal agencies, State Exchanges, and other trusted data sources to
determine APTC payments using the most accurate income estimates.
Giving a Federal agency like HHS primary responsibility for verifying
and determining APTC eligibility follows from the fact that APTC
payments are Federal expenditures.
Exchanges operate as the intermediary between HHS and the
applicant. They provide the applicant's information to HHS and then HHS
has the primary responsibility for verifying the information. However,
when the IRS cannot verify the income information, HHS may delegate its
responsibility to verify household income to the Exchanges. Still, HHS
retains authority to regulate and guide how Exchanges verify this
household income information, as well as responsibility for the data
matching program used to establish, verify and update income
eligibility. As the intermediary, the Exchanges must also make the
final connection with the applicant to resolve any outstanding income
inconsistencies. The Exchanges' role here is to provide notice to the
applicant, collect any documentary evidence from the applicant, and
facilitate any final effort to resolve the inconsistency with the IRS
or other trusted data sources.
Applicants also bear important responsibilities in this process.
This primarily includes a responsibility to file Federal income taxes
for any year that they receive APTC and CSR and, if they have had a
change in circumstances or were not required to file taxes, to report
and attest to accurate income information. The ACA, however, requires
verification of applicants' attestations of household income under
section 1411(c) or (d), as referenced in section 1411(e)(4) of the ACA.
There is no statutory exception to this verification process. If the
applicant's household income cannot be verified, the applicant is
responsible for providing satisfactory documentary evidence or taking
further steps to resolve the inconsistency with the Federal information
sources. If the applicant fails to resolve the inconsistency, the APTC
amount must be based on the income data from Federal sources provided
to HHS under section 1411(c) of the ACA.
With that as background, we propose the following changes to the
processes in place related to verifying income eligibility for APTC and
CSR subsidies.
a. Failure To File Taxes and Reconcile APTC Process (Sec.
155.305(f)(4))
i. Delay of FTR Process Until After 2-Consecutive Years of FTR Removed
We propose to amend paragraph Sec. 155.305(f)(4) to reinstate the
previous policy that an Exchange may not determine a tax filer or their
enrollee eligible for APTC if: (1) HHS notifies the Exchange that APTC
were paid on behalf of the tax filer, or their spouse if the tax filer
is a married couple, for a year for which tax data would be utilized
for verification of household and family size, and (2) the tax filer
did not comply with the requirement to file a Federal income tax return
and reconcile APTC for that year.
In 2012, we first finalized the FTR policy in the Exchange
Establishment Rule (77 FR 18352 through 18353) to prevent a primary tax
filer or spouse who has failed to comply with tax filing rules from
accumulating additional Federal tax liabilities due to overpayment of
APTC. Since 2015, HHS has taken regulatory and operational steps to
help increase tax filer compliance with the filing and reconciliation
requirements under the Code as described at 26 CFR 1.36B-4(a)(1)(i) and
(a)(1)(ii)(A) by tying eligibility for future APTC to the tax filer's
reconciliation of past APTC paid. When the original FTR process was
first run in December 2015, only non-filers were identified as part of
the FTR process. IRS began to identify non-filers, non-reconcilers, and
tax filers with a valid tax filing extension in Fall 2016, and HHS
began taking action on non-reconcilers and extension tax filers in
addition to non-filers in Fall 2017.
As the operations behind the FTR process evolved, Exchanges
struggled to communicate with enrollees about the removal of APTC due
to their tax filing status. Due to these struggles, in the 2018 Payment
Notice (81 FR 94124), the FTR Recheck process was carved out of the
periodic data matching regulations at Sec. 155.330(e)(2) due to
concerns related to the protection of Federal tax information (FTI).
Additionally, to strengthen the FTR process, Exchanges on the Federal
platform added an additional check of an enrollee's FTR status after
the OEP ended. This process, referred to as FTR Recheck, is the process
that occurs early in the coverage year where Exchanges on the Federal
platform verify the tax filing status of enrollees who attested to
filing and reconciling during the OEP. During the comment period, many
State Exchanges expressed their frustration regarding their inability
to provide direct communications related to the tax filing status of
the tax filers or their enrollees. In response to their comments, HHS
carved out an exception to Sec. 155.305(f)(4) that stated Exchanges
could not deny APTC due to FTR unless ``direct notification'' was first
sent to the tax filer that they would lose their eligibility for APTC
related to their failure to file and reconcile. This change
necessitated FTI compliant infrastructure for Exchanges. In the 2019
Payment Notice (83 FR 16982), HHS updated the FTR policy to remove the
carve-out for direct notification. However, due to the earlier
regulations, HHS did not run FTR Recheck in Spring 2017 because HHS
would have been out of compliance with its own rule because it did not
yet have the infrastructure to send direct notices that contain FTI. In
Fall 2017, Exchanges on the Federal platform began sending direct
notices to tax filers explicitly stating that they would lose
eligibility for APTC due to their failure to comply with the
requirement to file their Federal income taxes and reconcile APTC.
During the COVID-19 public health emergency (PHE), FTR operations
were paused due to concerns that consumers who had filed and reconciled
would lose APTC due to IRS processing delays resulting from IRS
processing facility closures and a corresponding processing backlog of
paper filings.
In the 2024 Payment Notice (88 FR 25814), we amended the FTR
process to restrict an Exchange from determining a tax filer ineligible
for APTC until they have failed to file a Federal income tax return and
reconcile APTC for two-consecutive tax years. We made this change to
address operational challenges that required Exchanges to determine
someone ineligible for APTC without having up-to-date information on
the tax filing status of tax filers, to help consumers who may be
confused or may have received inadequate education on the requirement
to file and reconcile, to promote continuity of coverage for consumers
who may not be aware of the requirement to file and reconcile, and to
reduce the administrative burden on HHS.
[[Page 12959]]
When we adopted this two-tax year FTR process, we acknowledged it
could place consumers at a risk of increased tax liability. To mitigate
this concern, in the 2025 Payment Notice (89 FR 26298 through 26299),
we required Exchanges to issue FTR warning notices for enrollees in
Exchanges on the Federal platform who have not filed and reconciled for
one-tax year. We also acknowledged the risk for improper enrollment by
consumers who know they can ignore their FTR status for an additional
year, but concluded these instances would be limited as the majority of
enrollees comply with FTR. Despite the potential for large tax
liabilities and the risk of improper enrollment, we concluded that this
policy would have a positive impact on consumers, while still ensuring
program integrity as it would provide better continuity of coverage for
consumers who may not be aware of the requirement to file and
reconcile. We noted that we would continue to monitor the
implementation of this new policy, including whether certain
populations continue to experience large tax liabilities, and would
consider whether additional guidance, or any additional policy changes
in future rulemaking, are necessary.
Upon further analysis of enrollment data, we believe the new FTR
process places a substantially higher number of tax filers at a greater
risk of accumulating increased tax liabilities.\51\ We believe this is
because the current FTR process could incentivize tax filers to not
file and reconcile because they are allowed to keep APTC eligibility
for an additional year without filing their Federal income tax return
and reconciling APTC. If tax filers do not file and reconcile for two-
consecutive tax years, they could have an increasing tax liability due
to APTC that is not reconciled on the tax return. For example, if a tax
filer had projected their household income to be less than 200 percent
of the FPL, but had household income over 400 percent of the FPL when
filing their Federal income tax return, the requirement to repay their
excess APTC could constitute a major tax liability. Average APTC per
month for those receiving it is $548 for OEP 2024. Moreover, new
evidence shows there is a substantial risk of improper enrollment,
which we discuss further below.\52\
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\51\ Marketplace Open Enrollment Period Public Use Files,
<a href="https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2024-marketplace-open-enrollment-period-public-use-files">https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2024-marketplace-open-enrollment-period-public-use-files</a>.
\52\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. <a href="https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud">https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud</a>.
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In our previous rulemaking, we were concerned about consumers
losing their Exchange coverage once they lose their eligibility for
APTC, as they would no longer be able to pay their entire premium for a
second year under the 1 year FTR policy. This concern guided our
thought process in the 2024 Payment Notice when we amended the FTR
process to restrict an Exchange from determining a tax filer ineligible
for APTC until they have failed to file a Federal income tax return and
reconcile APTC for two-consecutive tax years.
According to our estimates in that rule (81 FR 25902), we found
approximately 116,000 enrollees with an FTR status were automatically
enrolled in an Exchange QHP without APTC during the OEP for PY 2020,
and that approximately 14,000 stayed enrolled without APTC by March
2020. We estimated all 102,000 enrollees who dropped coverage would
have retained coverage under the new FTR process. Among those who
dropped coverage, we estimated 20,400 (20 percent) would be reenrolled
in coverage without APTC due to an FTR status for two-consecutive tax
years. We estimated the continuity of coverage for the 81,600 who
remained covered in the second year, accounting for enrollment
retention rates, would likely increase APTC expenditures by $373
million beginning in 2025.
However, considering new evidence regarding improper enrollments,
it became apparent that the new FTR process could impede Exchange
efforts to mitigate improper enrollments. At the time, we did not
estimate the number of people with an FTR status who entered the OEP
and either disenrolled, actively reenrolled without APTC, or resolved
their FTR status and reenrolled with APTC. Due to concerns related to
the safeguarding of FTI, the Exchanges on the Federal platform are
unable to track specifically how many consumers originally identified
as FTR prior to the OEP ultimately resolved their FTR status. This kind
of information would have helped us fully understand the population
that might take advantage of the current FTR process. Nor did we
attempt to estimate the portion of people with FTR status who were
likely ineligible for APTC. Rather, we assumed continuity of coverage
with APTC was appropriate for everyone with an FTR status. Moreover, we
did not consider how changing the notice to reflect the new FTR process
would impact enrollment decisions. The prior FTR direct notice (for PY
2020 and earlier) gave notice that access to APTC would end if tax
filers failed to file and reconcile for one-tax year, while the current
one-tax year FTR direct notice for PY 2025 provides notice for tax
filers identified as having a one-tax year FTR status that they may
lose their APTC in the future if they do not file and reconcile their
APTC. Tax filers with a one-tax year FTR status or their enrollees are
directed to file their Federal income tax returns and reconcile their
APTC as soon as possible in the current one-tax year FTR direct notice.
Indirect notices for tax filers in both the one-tax year and two-tax
year FTR status cannot directly tell an enrollee that they need to file
their Federal income tax return, but encourage doing so in order to
ensure that they remain eligible for APTC, along with other reasons why
they may be at risk of losing APTC to mask FTI.
Upon further analysis of enrollment and tax filing data we believe
the current two-year FTR process places a substantially higher number
of consumers at risk of accumulating increased tax liabilities. We have
revisited the enrollment and tax filing data from the OEP for PY 2020,
as well as more recent enrollment data. During OEP 2025, the initial
year in which FTR was resumed, the data shows that approximately
356,000 potential reenrollments entered OEP 2025 with a two-tax year
FTR status and approximately 1,500,000 potential reenrollments entered
OEP 2025 with either a one-tax year FTR status, an extension of the
deadline to file their Federal income taxes, or had filed their Federal
income taxes but had not attached IRS Form 8962 to reconcile their
APTC. Under the current two-year policy for PY 2025, enrollees with a
two-tax year FTR status could have actively reenrolled (but not auto-
reenrolled) and attested to having filed and reconciled while IRS data
still shows them as not having filed taxes for the 2022 or 2023 tax
years, and the enrollees with a one-tax year FTR status could have
either actively or automatically reenrolled in an Exchange QHP without
meeting the requirement to file taxes for the 2023 tax year.
Historically, under the one-tax year FTR process, between 15 percent
and 20 percent of consumers originally identified at OEP as FTR end up
losing their APTC due to the FTR Recheck process. As of February 2025,
we do not have information on the number of consumers who were
identified as having a two-tax year FTR status before
[[Page 12960]]
the OEP and who have filed and reconciled in order to remain eligible
for APTC. It is probable that due to the increase in enrollment, under
the two-tax year FTR policy, the number of consumers who would remain
covered into the second year would be greater than the 81,600 we
previously estimated.
If most of these enrollees were eligible for APTC, then giving them
some extra time to resolve their FTR status might be justified
considering the potential confusion over the requirement to file and
reconcile. However, in the proposed 2019 Payment Notice (82 FR 51086),
we previously identified program integrity issues among tax filers who
fail to file and reconcile. When people received notice regarding their
failure to file and reconcile under the one-tax year FTR process,
approximately 70 percent of households receiving the notification took
appropriate action to file a tax return and reconcile associated
APTC.\53\ However, because tax filers for approximately 30 percent of
households receiving the notification did not take appropriate action,
we concluded that, absent evidence that they had filed and reconciled,
it was important for program integrity purposes that Exchanges
discontinue their APTC. A reason that may explain why this population
does not file their taxes and reconcile their APTC is due to the
administrative burden. IRS has noted that filing an individual tax
return takes an average of 8 hours and costs approximately $160.\54\
While there are numerous free file options as well as assistance for
low-income taxpayers, many taxpayers do not utilize those options.\55\
However, we continue to believe this high rate of people who failed to
take appropriate action to file and reconcile represents a program
integrity issue. The current policy aggravates this program integrity
problem by allowing those enrollees who failed to take appropriate
action to retain coverage into the second year.
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\53\ Internal CMS data.
\54\ IRS. (2024). 1040 (and 1040-SR) Instructions. Dep't of
Treasury. <a href="https://www.irs.gov/pub/irs-pdf/i1040gi.pdf">https://www.irs.gov/pub/irs-pdf/i1040gi.pdf</a>.
\55\ GAO. (2022, May 10). Why Don't More Taxpayers Take
Advantage of Free Help Filing Taxes Online? <a href="https://www.gao.gov/blog/why-dont-more-taxpayers-take-advantage-free-help-filing-taxes-online">https://www.gao.gov/blog/why-dont-more-taxpayers-take-advantage-free-help-filing-taxes-online</a>.
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Furthermore, we believe the proposed one-tax year FTR process can
serve as a backstop to improper enrollments. The Paragon Health
Institute provides evidence that lead generation companies are
misleading enrollees with the promise of free coverage and other
enticements.\56\ In these cases, some people are likely not aware they
are enrolled in QHP coverage with APTC because, in response to
misleading advertisements promising cash or gift cards, they provided
enough personal information for agents, brokers, and web-brokers to
improperly enroll them in such coverage with APTC without their
knowledge.\57\ These schemes tend to target low-income people, many of
whom likely earn less than the thresholds for APTC eligibility. Under
these schemes, some agents, brokers, or web-brokers improperly enroll
people in QHP coverage with APTC who would not otherwise qualify.
Individuals who were improperly enrolled may not realize they are
enrolled in Exchange coverage until they receive a Form 1095-A. These
individuals can obtain a voided Form 1095-A and avoid improper tax
liabilities, but the process is burdensome and could lead to delays or
errors in tax filing. We believe that FTR status may provide a strong
indicator that a current enrollee entering the OEP has income that
makes the household ineligible for APTC. Generally, people with lower
incomes do not need to file taxes unless their income is over the
filing requirement. Because the income filing requirement for a single
filer with no self-employment income aligns with the eligibility
threshold for APTC--$14,600 for 2024 tax filing compared to $14,580 for
2024 APTC eligibility--people who inflate their income to qualify for
APTC will often have an income low enough to, absent the receipt of
APTC, not require them to file taxes. In this case, the FTR status
likely reflects a lack of understanding of the need to file taxes based
on the receipt of APTC which, if they still think they do not meet the
filing requirement based on their income, means they likely have an
income too low to meet the APTC eligibility threshold.
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\56\ Blase, B; Kalisz, G. (2024, August). Unpacking The Great
Obamacare Enrollment Fraud. Paragon Health Institute. <a href="https://paragoninstitute.org/private-health/unpacking-the-great-obamacare-enrollment-fraud/">https://paragoninstitute.org/private-health/unpacking-the-great-obamacare-enrollment-fraud/</a>.
\57\ Ibid.
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We established the current two-tax year FTR process at the end of
the COVID-19 PHE. At that time, we had paused the removal of APTC under
the FTR process because the pandemic severely impacted the IRS' ability
to process tax returns for the 2019, 2020, and 2021 tax years.\58\
Continuing the FTR process during that time would have removed APTC
from substantial number of eligible enrollees who filed tax returns but
had not had their tax returns processed yet.
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\58\ CMS. (2022, July 18). Failure to File and Reconcile (FTR)
Operations Flexibilities for Plan Year 2023. <a href="https://www.cms.gov/cciio/resources/regulations-and-guidance/ftr-flexibilities-2023.pdf">https://www.cms.gov/cciio/resources/regulations-and-guidance/ftr-flexibilities-2023.pdf</a>.
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While many enrollees did in fact file their Federal income taxes
and reconcile APTC while FTR was paused during the COVID-19 PHE, in
light of the substantial increase in improper enrollments HHS observed
during PY 2024, we believe that reverting back to the pre-existing FTR
policy, that is, the FTR policy in place before the COVID-19 PHE, is a
critical program integrity measure that could further protect Exchanges
and enrollees from improper enrollments. Specifically, we are concerned
that the current policy of pausing removal of APTC due to an FTR status
for an additional year could potentially let improperly enrolled
enrollees stay enrolled for another year undetected. If an improper
enrollment is not detected by the other methods that the Exchange has
implemented, the proposed one-tax year FTR process should act as a
backstop to ensure that an enrollee who is improperly enrolled loses
APTC after 1 year of failing to file and reconcile instead of 2 years
of failing to file and reconcile. For example, under the one-tax year
FTR process, people received a notice that they would lose their
eligibility for APTC unless they met the requirement to file and
reconcile. Whereas under the current two-tax year FTR process,
enrollees do not receive notification that they are imminently at risk
of losing their APTC until they have had an FTR status for 2 years. As
background, under the current process, Exchanges can choose to send (1)
a direct notice to tax filers, (2) an indirect notice to enrollees, or
(3) both a direct and indirect notice to enrollees with either one-tax
year and two-tax year FTR status. Enrollees with a one-tax year FTR
status can receive either a direct notice that they must file and
reconcile, but they are not at risk for losing APTC for the current
plan year if otherwise eligible, or an indirect notice that indirectly
tells the enrollee to ensure they have done all the actions necessary
to keep their APTC eligibility, including filing their Federal tax
return and reconciling their APTC. It is not until an enrollee receives
an FTR notice for the second tax year that they are instructed to file
and reconcile as soon as possible to avoid losing APTC for the
applicable plan year.
After reviewing the tax filing data, we remain concerned that
enrollees are accumulating tax liabilities due to misestimating their
income. Before the COVID-19 PHE, over 50 percent of people who filed
tax returns and reconciled APTC received excess APTC
[[Page 12961]]
for the 2016, 2017, 2018, and 2019 tax years.\59\ For those who filed
their taxes and reconciled their APTC, the accumulation of any tax
liability is limited to a single year. In 2022, excess liability
represented 11.5 percent of total APTC payments reported on tax
returns. This tax liability, if not paid by the taxpayer, will continue
to be an outstanding debt to the IRS and may accrue interest and
penalties. To mitigate any accumulation of liability, the longstanding
FTR process had disenrolled people from APTC after giving them over 6
months to resolve their FTR status after initial notification. The
current process could potentially provide up to 18 months after an
initial FTR notice is received for a tax filer to comply with the
requirement to file and reconcile their APTC. We no longer believe this
provides reasonable protection against accumulating tax liabilities.
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\59\ IRS. (2024, Dec. 30). SOI Tax Stats--Individual Income Tax
Returns Line Item Estimates (Publications 4801 and 5385). Dep't of
Treasury. <a href="https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates-publications-4801-and-5385">https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates-publications-4801-and-5385</a>.
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Furthermore, the current policy also undermines program integrity
by increasing the burden on taxpayers because, due to repayment
limitations discussed previously, not all ineligible enrollees are held
fully responsible for paying back unpaid liabilities. Those unpaid
liabilities add to Federal APTC expenditures. We did not previously
estimate the Federal cost of the current FTR process due to providing
coverage and APTC continuity to enrollees who were ineligible for APTC
and not liable for repaying the full excess of their APTC. We estimate
up to 18.5 percent of people currently in FTR status may be ineligible
for APTC based on the overall growth in the 100 to 150 percent of the
FPL population of the Exchanges on the Federal platform between 2019
and 2024, if the growth is due to noncompliant agents, brokers, and
web-brokers enrolling enrollees who are actually below the 100 percent
FPL threshold. However, this population would also be impacted by
numerous other proposals in this proposed rule as well as other actions
that HHS has taken over the past year to protect the Exchanges, and we
are unable to isolate the proposed impact of changing the FTR process
from the other proposals included in this rule. While we previously
assessed that the threat of IRS enforcement actions and penalties would
mitigate improper enrollments (88 FR 25818), these data trends indicate
that such consequences are insufficient to protect program integrity,
and therefore, additional policy changes are necessary.
These numbers highlight the importance of complying with the
statutory requirement to file a tax return. As discussed previously, an
enrollee's tax return provides a main basis for establishing an
accurate income estimate. Not filing a tax return undermines the
accuracy of the income estimate used to set the APTC amount. Moreover,
sections 6011 and 6012 of the Code, as implemented under 26 CFR 1.6011-
8, requires enrollees who receive APTC to file a tax return and
reconcile the APTC. We do not believe the ACA allows HHS to determine
an applicant whose taxpayer has failed to meet this requirement
eligible for APTC. As discussed previously, when the IRS does not have
tax return information to verify an applicant's income, section 1412 of
the ACA requires HHS to establish alternative procedures to determine
APTC when there is a change in circumstances or ``in cases where the
taxpayer was not required to file a return . . .''. Because the section
1412(b)(2)(B) only references cases where a tax filer was not required
to file a return, we do not believe an applicant who fails to meet the
requirement to file a return qualifies for this alternative process for
determining APTC. Therefore, under the ACA, we believe the original
regulations implementing the eligibility requirements in 2012 correctly
required Exchanges to determine an applicant ineligible for APTC if
they previously received APTC and failed to file a tax return (77 FR
18352 through 18353).
Overall, this new analysis of the enrollment and tax filing status
suggests a large number of people with FTR status are ineligible for
APTC and that pausing removal of APTC due to an FTR status allows
ineligible enrollees to accumulate tax liabilities. These additional
liabilities create a substantial financial burden for enrollees who
must repay the excess APTC and increase the Federal APTC expenditures.
Moreover, we believe the ACA statute does not allow HHS to determine
someone eligible for APTC if they failed to meet the requirement to
file a tax return. Therefore, to align regulations with the ACA,
protect people from accumulating additional Federal tax liabilities,
and reduce the Federal expenditures associated with APTC expenditures
for ineligible enrollees, we propose to reinstate the FTR process that
requires Exchanges to determine enrollees ineligible for APTC when HHS
notifies the Exchange that a taxpayer has failed to file a Federal
income tax return and reconcile their past APTC for a year for which
their tax data would be utilized to verify their eligibility.
We propose to implement the proposed one-year FTR process beginning
with OEP 2026 in the fall of 2025. This would allow enrollees currently
in a one-tax year FTR status to receive appropriate noticing informing
them of the urgent need to file their Federal income tax return and
reconcile APTC in order to remain eligible for APTC.
We seek comment on this proposal.
ii. Conforming Change to Notice Requirements
To conform with this proposed FTR process, we also propose to
revise the notice requirement at Sec. 155.305(f)(4)(i) and remove the
notice requirement at Sec. 155.305(f)(4)(ii). When we finalized the
current FTR process for PY 2025 in the 2024 Payment Notice (88 FR
25814) to require Exchanges to wait to discontinue APTC until the tax
filer has failed to file a tax return and reconcile their past APTC for
two-consecutive tax years, we did not impose a requirement for
Exchanges to notify such enrollee during the first year that they
failed to file and reconcile. We then amended Sec. 155.305(f)(4) in
the 2025 Payment Notice (89 FR 26298 through 26299) to require that all
Exchanges send one of two notices to tax filers or enrollees with an
FTR status for 1 year, and again in the 2026 Payment Notice (90 FR 4472
through 4473) to require that all Exchanges send one of two notices to
tax filers or enrollees with an FTR status for two-consecutive tax
years. Accordingly, for both an enrollee's first and second year with
an FTR status, all Exchanges must now either (1) notify the tax filer
directly of their FTR status and educate them of the need to file and
reconcile or risk being determined ineligible for APTC if they fail to
file and reconcile for a second consecutive year, or (2) send an
indirect notification to either the tax filer or their enrollee that
informs them they are at risk of being determined ineligible for APTC
in the future. The indirect notice must do so without indicating that
the tax filer has failed to file and reconcile their APTC for both the
first year and the second year that they have been found not to have
done so in order to protect FTI.
Because we are proposing to amend Sec. 155.305(f)(4) to require
Exchanges to determine people ineligible for APTC after one tax year of
FTR status rather than two consecutive tax years, the current notice
requirement aimed at tax filers in a two-tax year FTR status would no
longer apply. Therefore, we are proposing to revise the notice
[[Page 12962]]
requirement at Sec. 155.305(f)(4)(i) and remove the notice requirement
at Sec. 155.305(f)(4)(ii). We invite comment on this proposal.
To ensure tax filers and enrollees receive advanced notice of their
FTR status and the risk for being determined ineligible for APTC after
removing this notice requirement, we are proposing to reinstate the
notice procedures that existed before we established the current FTR
process for Exchanges on the Federal platform. As background, each
year, these procedures would provide a series of notices \60\ to
identified tax filers and enrollees beginning with two notices before
the OEP for those tax filers or enrollees who the IRS has identified to
HHS (and subsequently the Exchange) as not having filed and reconciled
APTC received during a prior year. The indirect notice would be
included in the Marketplace Open Enrollment Notice and would be sent to
the enrollee according to the communication preference set by the
household contact and would also be available in their online account
and to the Exchange call center. This notice educates the enrollee on
the requirements to file their Federal income taxes and reconcile their
APTC. The direct notice, which would not be available online or to the
Exchange call center, would be sent via U.S. mail directly to the tax
filer in order to protect FTI. The direct notice would serve to
unambiguously explain that the tax filer has been identified as having
failed to meet the requirement to file and reconcile and must come into
compliance to avoid termination of APTC. IRS data would then be checked
again in December and enrollees who have not attested to filing and
reconciling their APTC would lose their APTC for the next coverage
year. Tax filers may have filed and reconciled, but due to IRS
processing times, their application may still be flagged with an FTR
status during the OEP. To address this issue, enrollees could attest to
having filed and reconciled for a preceding tax year on their Exchange
application. Then to confirm the enrollee's attestation, Exchanges on
the Federal platform would perform another recheck of the IRS data in
the new coverage year. For enrollees who are still flagged with an FTR
status, we would send both an indirect FTR Recheck notice to the
household contact and a direct FTR Recheck notice to the tax filer
warning them a final time that they would lose eligibility for APTC,
unless they complete the requirement to file and reconcile. Finally, in
the spring, after a final recheck of the IRS data, Exchanges on the
Federal platform would terminate APTC for households the IRS indicates
have still not filed and reconciled. This process is summarized by
Table 1.
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\60\ Notices can be found online here: <a href="https://www.cms.gov/marketplace/in-person-assisters/applications-forms-notices/notices">https://www.cms.gov/marketplace/in-person-assisters/applications-forms-notices/notices</a>.
[GRAPHIC] [TIFF OMITTED] TP19MR25.000
If enrollees have attested to filing and reconciling, enrollees
would be discontinued from APTC only after the IRS checks and rechecks
their FTR status four times. We believe this gives ample notice to
enrollees who may have been confused about the requirement to file and
reconcile and provides the IRS enough time to process tax returns for
enrollees who complied. We believe this procedure ensures that
enrollees who are eligible for coverage continue to receive coverage.
Under this proposed requirement at Sec. 155.305(f)(4)(i)(B), State
Exchanges would be responsible for administering their own notice
procedure with flexibility to send either direct notices containing
FTI, or indirect notices which do not contain any protected FTI, or
both.
We seek further comment on whether State Exchanges should be
required to align with Exchanges on the Federal platform on this
consumer noticing and recheck process.
b. 60-Day Extension To Resolve Income Inconsistency (Sec. 155.315)
We propose to remove Sec. 155.315(f)(7) which requires Exchanges
to provide an automatic 60-day extension in addition to the 90 days
currently provided by Sec. 155.315(f)(2)(ii) to allow applicants
sufficient time to provide documentation to verify household income.
According to section 1411(e)(4)(A) of the ACA, part of the process
to verify the accuracy of information provided on applications requires
Exchanges to provide applicants an opportunity to correct an
inconsistency with HHS or other trusted data sources when the
inconsistency or inability to verify the information is not resolved by
the Exchange. This requires Exchanges to give applicants notice of the
inability to resolve the inconsistency and verify the information.
Exchanges must also provide the applicant an opportunity to either
present satisfactory documentary evidence or resolve the inconsistency
with HHS or other trusted data sources during the 90-day period
beginning on the date on which the notice is sent to the applicant.
Section 1411(e)(4)(A) of the ACA also states HHS may extend the 90-day
period for enrollments occurring during 2014.
When we explained the legal basis for a 60-day extension in the
2024 Payment Notice (88 FR 25819), we stated the proposal aligns with
current
[[Page 12963]]
Sec. 155.315(f)(3), which provides extensions to applicants beyond the
existing 90 days if the applicant demonstrates that a good faith effort
has been made to obtain the required documentation during the period.
We noted that it is also consistent with the flexibility under section
1411(c)(4)(B) of the ACA to modify methods for verification of the
information where we determined such modifications would reduce the
administrative costs and burdens on the applicant. However, as
discussed previously, section 1411(c)(4)(B) of the ACA specifically
limits modifications on how information is exchanged and verified
between HHS and trusted data sources and does not extend to other
aspects of the verification process. Therefore, section 1411(c)(4)(B)
of the ACA does not provide a statutory basis to modify the length of
the 90-day response period.
Section 1411(e)(4)(A) of the ACA also limits modifications to the
90-day response period. This language allows HHS to extend the 90-day
period in 2014. This flexibility was clearly intended to accommodate
any issues that might arise during the first year HHS administered
eligibility determinations for premium and cost-sharing subsidies. By
expressly including this specific allowance to extend the 90-day period
for 2014, the language strongly suggests Congress did not intend to
allow any further extensions to the 90-day period. Therefore, we do not
believe Sec. 155.315(f)(7) conforms with the statute.
Based on this reading of the statute, we question whether the
extension of the 90-day period when an applicant demonstrates a good
faith effort to obtain documentation during the period under Sec.
155.315(f)(3) conforms with the statute. Due to the ad hoc nature of
this good faith effort extension, we believe this is likely an
appropriate use of our authority. In contrast, the automatic 60-day
extension, in effect, categorically suspends the 90-day period and
replaces it with a 150-day period which we believe falls well outside
our authority.
Even if the statute allowed an automatic 60-day extension, our
review of how applicants used the 60-day extension shows that the
benefits we previously anticipated have not materialized. When we
adopted the 60-day extension in the 2024 Payment Notice (88 FR 25819
through 25820), we determined the change would ensure consumers are
treated equitably, ensure continuous coverage, and strengthen the risk
pool. However, upon further review of the prior experience and the
current experience using the 60-day extension, we find the 60-day
extension largely does not deliver the benefits anticipated. Instead,
we find the change weakened program integrity.
We previously determined that 90 days is often an insufficient
amount of time for many applicants to provide income documentation,
since it can require multiple documents from various household members
along with an explanation of seasonal employment or self-employment,
including multiple jobs. The previous review of income DMI data
indicated that when consumers receive additional time, they are more
likely to successfully provide documentation to verify their projected
household income. Between 2018 and 2021, over one-third of consumers
who resolved their DMIs on the Exchange did so in more than 90 days.
While we previously found one-third of consumers who resolve income
DMIs used an extension between 2018 and 2021, our review from 2024
shows that applicants who successfully used the extension represent 55
percent of the total income DMIs. We also found that the percent of all
applicants with an income DMI who used an extension represent 60
percent of total income DMIs. After implementing the 60-day extension,
we did not see that the extension improved these statistics. Of those
who successfully resolved their income DMI in 2024, 58 percent used the
extension which is about the same as before in 2022. This suggests
that, before the automatic 60-day extension, anyone who needed a 60-day
extension was granted one under Sec. 155.315(f)(3), and the automatic
60-day extension only served to keep people who were able to provide
documentation within 60 days (instead of 120 days) covered for a longer
period. Additionally, we estimated this increased APTC expenditures by
$170 million in 2024. Therefore, we determined that the automatic 60-
day extension did not provide a meaningful benefit to consumers and
weakened program integrity.
We welcome comment on this topic and suggestions to alleviate this
concern.
As we discussed in other aspects of this proposed rule, there are
often countervailing impacts on the risk pool and program integrity
from the policy decisions we make. In this case, we stated in the 2024
Payment Notice (88 FR 25820) that consumers in the 25-35 age group were
most likely to lose their APTC eligibility due to an income DMI,
resulting in a loss of a population that, on average, has a lower
health risk, thereby negatively impacting the risk pool. Therefore, we
concluded that adding the automatic 60-day extension would improve the
risk pool by making it easier for younger and healthier populations to
enroll.
However, we must weigh this potential positive impact on the risk
pool against the substantial increase in APTC expenditures that we
identified from ineligible people who stay enrolled and receive APTC
for an additional 60 days. We believe the cost to taxpayers and decline
in program integrity outweigh any possible benefit to the risk pool.
Providing a 60-day extension for households with income DMIs only
serves to increase APTC payments and tax liabilities for ineligible
enrollees during the extension. Therefore, we believe the cost of the
extension outweighs the benefits. We seek comment on this proposal.
c. Income Verification When Data Sources Indicate Income Less Than 100
Percent of the FPL (Sec. 155.320(c)(3)(iii))
We propose to revise Sec. 155.320(c)(3)(iii) to require Exchanges
to generate annual household income inconsistencies in certain
circumstances when a tax filer's attested projected annual household
income is equal to or greater than 100 percent of the FPL and no more
than 400 percent of the FPL while the income amount represented by
income data returned by IRS and the SSA and current income data sources
is less than 100 percent of the FPL. This change would reinstate
provisions HHS finalized in the 2019 Payment Notice (83 FR 16985) but
were later vacated by the United States District Court for the District
of Maryland decided in City of Columbus, et al. v. Cochran, 523 F.
Supp. 3d 731 (D. Md. 2021). Though we believe we had a clear legal
basis for finalizing the provisions in the 2019 Payment Notice, we also
believe circumstances have substantially changed since the court
vacated the prior rulemaking, which provide justification to reinstate
the provisions. While we previously acknowledged in the 2019 Payment
Notice that we did not have firm data on the number of applicants who
might be inflating their income to gain APTC eligibility, we now have
clear evidence from enrollment data that shows potentially millions of
applicants are inflating their incomes or having applications submitted
on their behalf with inflated incomes.\61\
[[Page 12964]]
Additionally, while concerns were raised in City of Columbus, et al. v.
Cochran about consumers who may project a higher income than they
receive due to the nature of low-wage work making it difficult to
predict their annual household income, we believe enough consumers--and
the agents, brokers, and web-brokers helping them apply--are
intentionally inflating their incomes that justifies the creation of
this income DMI type, as data shows below.
---------------------------------------------------------------------------
\61\ Hopkins, B.; Banthin, J.; and Minicozzi, A. (2024, Dec.
19). How Did Take-Up of Marketplace Plans Vary with Price, Income,
and Gender? American Journal of Health Economics, 1(11). <a href="https://www.journals.uchicago.edu/doi/10.1086/727785">https://www.journals.uchicago.edu/doi/10.1086/727785</a>.
---------------------------------------------------------------------------
Section 155.320(c)(3)(iii) sets forth the verification process when
household income attestations on applications increase from the prior
tax year or are higher than trusted data sources indicate. Generally,
if income data from our electronic data sources indicate a tax filer's
attested projected annual household income is more than the household
income amount represented by income data returned by the IRS and the
SSA and current income data sources, Sec. 155.320(c)(3)(iii) requires
the Exchange to accept the attestation without further verification.
Currently, Exchanges are generally not permitted to create
inconsistencies for consumers when the consumers' attested household
income is greater than the amount represented by income data returned
by IRS and the SSA and other trusted data sources.
However, in the 2019 Payment Notice (83 FR 16985), we concluded
that where electronic data sources reflect household income under 100
percent of the FPL and a consumer attests to household income between
100 percent of the FPL and 400 percent of the FPL and where the
attested household income exceeds the income reflected in trusted data
sources by more than a reasonable threshold, it would be reasonable to
request additional documentation to protect against overpayment of APTC
because the consumer's attested household income could make the
consumer eligible for APTC when income data from electronic data
sources suggest otherwise. Still today, the risk of APTC overpayments
under these circumstances is especially keen because tax filers may be
eligible for PTC with household income below 100 percent of the FPL if
APTC was paid based on the tax filer having estimated household income
of at least 100 percent of the FPL.\62\ Barring other changes in
circumstance, these tax filers will not have to repay any APTC. That
taxpayers are not required to repay APTC in these situations magnifies
the need for Exchanges to take additional reasonable steps to verify
the household incomes of persons for whom Federal trusted data services
report household income of less than 100 percent of the FPL.
---------------------------------------------------------------------------
\62\ See 26 CFR 1.36B-2(b)(6)(i). This rule does not apply if
the taxpayer, with intentional or reckless disregard for the facts,
provided incorrect information to the Exchange for the year of
coverage. See 26 CFR 1.36B-2(b)(6)(ii).
---------------------------------------------------------------------------
In the 2019 Payment Notice (83 FR 16985), we concluded it would be
reasonable to request additional documentation to protect against
overpayment of APTC despite not having firm data on the number of
applicants that might be inflating their income. We viewed this policy
as a critical program integrity measure to address the findings from a
U.S. Government Accountability Office (GAO) study on improper payments
that determined our control activities related to the accuracy of APTC
calculations were not properly designed.\63\ Specifically, this study
found that ``CMS does not check for potentially overstated income
amounts, despite the risk that individuals may do so in order to
qualify for advance PTC.'' \64\
---------------------------------------------------------------------------
\63\ U.S. Government Accountability Office (2017, July).
Improper Payments: Improvements Needed in CMS and IRS Controls over
Health Insurance Premium Tax Credit. P. 36. <a href="https://www.gao.gov/assets/d17467.pdf">https://www.gao.gov/assets/d17467.pdf</a>.
\64\ Ibid.
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Based on this finding, the GAO recommended that HHS direct the CMS
Administrator to take the following action: ``Design and implement
procedures for verifying with IRS (1) household incomes, when attested
income amounts significantly exceed income amounts reported by IRS or
other third-party sources, and (2) family sizes.'' To support this
recommendation, the GAO cited its own testing of 93 applications which
found 11 applications for individuals residing in States that did not
expand Medicaid where IRS data provided to CMS during application
review indicated incomes less than 100 percent of the FPL.\65\ After
citing these GAO findings and recommendations, we concluded in the 2019
Payment Notice (83 FR 16986) that, particularly to the extent funds
paid for APTC cannot be recouped through the tax reconciliation
process, it is important to ensure these funds are not paid out
inappropriately in the first instance.
---------------------------------------------------------------------------
\65\ Ibid. at 37.
---------------------------------------------------------------------------
Though we cited evidence from the GAO study in the 2019 Payment
Notice (83 FR 16986), the United States District Court for the District
of Maryland in City of Columbus, et al. v. Cochran stated that HHS
``failed to point to any actual or anecdotal evidence indicating fraud
in the record.'' \66\ The court went on to conclude that ``HHS's
decision to prioritize a hypothetical risk of fraud over the
substantiated risk that its decision result in immense administrative
burdens at best, and a loss of coverage for eligible individuals at
worst, defies logic.'' We believe the court overlooked the GAO
recommendation in the rulemaking record which provided a clear legal
basis for finalizing the rule in the 2019 Payment Notice.
---------------------------------------------------------------------------
\66\ 523 F. Supp. 3d 731, 762 (D. Md. 2021).
---------------------------------------------------------------------------
After the court vacated our income verification requirements, we
reviewed data from the time period before the original income
verification requirement was implemented from a recent research study,
and believe that there is data to support that applicants inflated
their income. A recent study analyzing CMS enrollment data for the 39
States that used <a href="http://HealthCare.gov">HealthCare.gov</a> between 2015 and 2017 found that many
people with household incomes too low to qualify for APTC in States
that did not expand Medicaid have a strong incentive to attest to
income just above the eligibility threshold to obtain APTC.\67\ While
the data in the study predates the 2019 Payment Notice (83 FR 16986),
the study was published in 2024, and identifies vulnerabilities that
still exist today following the court's vacatur of the income
verification requirement. The study's authors found far higher numbers
of enrollees who reported household income just above the income
threshold in non-Medicaid expansion States versus Medicaid expansion
States. We believe this data is a strong indicator that increased
enrollment volume since 2021 has exacerbated the vulnerabilities the
study identified as existing between 2015 and 2017.
---------------------------------------------------------------------------
\67\ Hopkins, B.; Banthin, J.; and Minicozzi, A. (2024, Dec.
19). How Did Take-Up of Marketplace Plans Vary with Price, Income,
and Gender? American Journal of Health Economics, 1 (11). <a href="https://www.journals.uchicago.edu/doi/10.1086/727785">https://www.journals.uchicago.edu/doi/10.1086/727785</a>.
---------------------------------------------------------------------------
In addition, the study identified that enrollees attested to very
precise household incomes that suggested they were aware of the income
thresholds to gain eligibility for APTC.\68\ This finding is consistent
with applicants who did not provide their best household income
estimate but instead provided an estimate to maximize the premium and
CSR subsidies they receive or were assisted in their applications by
entities who were aware of these thresholds and who could profit from
their enrollment. This leads us to believe that while some
[[Page 12965]]
consumers may have difficulty estimating their annual household income
due to the uncertainty present in low wage work, many consumers are
intentionally inflating their incomes. The study's authors then
compared actual enrollment on <a href="http://HealthCare.gov">HealthCare.gov</a> for enrollees who reported
household income just above the eligibility threshold from $11,760 to
$12,500 to estimated potential enrollment from Census surveys and found
actual enrollment was 136 percent higher than the total population of
potential enrollments.\69\
---------------------------------------------------------------------------
\68\ Ibid.
\69\ Ibid.
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A more recent analysis of 2024 open enrollment data shows plan
selections on <a href="http://HealthCare.gov">HealthCare.gov</a> among people ages 19-64 who reported
household income between 100 percent and 150 percent of the FPL in non-
Medicaid expansion States were 70 percent higher than potential
enrollments estimated from Census data at that same income level.\70\
Based on this mismatch between enrollment and the eligible population,
this study estimates four to five million people improperly enrolled in
QHP coverage with APTC in 2024 at a cost of $15 to $20 billion.\71\
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\70\ Blase, B.; Gonshorowski, D. (2024, June). The Great
Obamacare Enrollment Fraud. Paragon Health Institute. <a href="https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud">https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud</a>.
\71\ Ibid.
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As illustrated in Table 2, Federal tax return data also show a
substantial increase in the percent of returns with APTC that report
excess APTC at lower household income levels between 2019 and 2022.
Returns with household incomes above $15,000--just higher than the
income eligibility threshold for PTC--report largely consistent levels
of excess APTC returns as a percent of all APTC returns between 2019
and 2022. However, this percentage jumped for all reported incomes
below $15,000. This suggests a substantial increase in people who earn
less than the eligibility threshold for PTC who incorrectly report
higher incomes and then qualify for APTC.
[GRAPHIC] [TIFF OMITTED] TP19MR25.001
These data provide substantial evidence that applicants with
household incomes below the APTC income eligibility threshold are
strategically inflating their household incomes--or, based on evidence
described elsewhere in this rule, are getting assistance from agents,
brokers, or web-brokers who have a financial incentive to misstate
enrollee income to secure commissions from enrollments of consumers
who, absent financial assistance, would not enroll--when they apply for
APTC.\72\ Moreover, we believe the scale of actual enrollments in
excess of potential enrollments eligible for financial assistance in
certain States suggests evidence of improper enrollments, some by
agents and brokers.\73\ In these cases, enrollees may not even know
they are enrolled, and agents, brokers, and web-brokers strategically
enroll them at income levels just above the income eligibility
threshold so they qualify for fully subsidized plans. Enrollees never
need to pay a premium which would otherwise alert the enrollee to the
improper enrollment.\74\ Therefore, to strengthen program integrity and
reduce
[[Page 12966]]
the burden of APTC expenditures on taxpayers, we propose to require all
Exchanges to generate annual household income inconsistencies in
certain circumstances when applicants report a household income that is
greater than the income amount represented by income data returned by
the IRS and the SSA and current income data sources.
---------------------------------------------------------------------------
\72\ Blase, B; Kalisz, G. (2024, August). Unpacking The Great
Obamacare Enrollment Fraud. Paragon Health Institute. <a href="https://paragoninstitute.org/private-health/unpacking-the-great-obamacare-enrollment-fraud/">https://paragoninstitute.org/private-health/unpacking-the-great-obamacare-enrollment-fraud/</a>.
\73\ See ibid.
\74\ For example, from January 2024 through August 2024, CMS
received 183,553 complaints that consumers were enrolled in coverage
through an Exchange on the Federal platform without their consent
(also known as an ``unauthorized enrollment''). Additionally, from
June 2024 through October 2024, CMS suspended 850 agents and
brokers' Marketplace Agreements for reasonable suspicion of
fraudulent or abusive conduct related to unauthorized enrollments or
unauthorized plan switches. CMS (2024, October). CMS Update on
Action to Prevent Unauthorized Agent and Broker Marketplace
Activity. <a href="https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity">https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity</a>.
---------------------------------------------------------------------------
Section 155.320(c)(3)(iii)(A) generally requires the Exchange to
accept a consumer's attestation to projected annual household income
when the attestation reflects a higher household income than what is
indicated in data from the IRS and SSA. This approach makes sense from
a program integrity perspective when both the attestation and data from
trusted data sources are over 100 percent of the FPL, since an
attestation that is higher than data from trusted data sources in that
situation would reflect a lower APTC than would be provided if the
information from trusted data were used instead. However, where
electronic data sources reflect income under 100 percent of the FPL, a
consumer attests to household income between 100 percent of the FPL and
400 percent of the FPL, and the attested household income exceeds the
income reflected in trusted data sources by more than some reasonable
threshold, we believe it would be reasonable, prudent, and even
necessary in light of the program integrity weaknesses just outlined to
request additional documentation, since the consumer's attested
household income could make the consumer eligible for APTC that would
not be available using income data from electronic data sources. In
cases where a consumer receives this DMI, but they do legitimately have
annual household income above 100 percent of the FPL, we believe that
the existing DMI process and corresponding time frame provides them
plenty of time and opportunities to confirm their annual household
income with minimal burden.
As discussed previously, sections 1411 through 1414 of the ACA
establish the framework for verifying and determining income
eligibility for APTC and CSR subsidies. Requiring further documentation
for verification when there is an income inconsistency between the
household income provided on the application and the income indicated
by the IRS and other data sources fits squarely within this statutory
framework. The statute compels HHS to, at a minimum, submit the income
information provided by applicants to the IRS for verification without
exception. Without additional documentation or other supporting
evidence, HHS would generally be compelled by statute to deny
eligibility for APTC and CSR subsidies based on the inconsistency with
IRS data. Importantly, this statutory framework does not include a
specific exception for income inconsistencies when IRS data indicate
income is below the APTC eligibility threshold and income information
provided on applications estimates a higher income above the APTC
eligibility threshold, and the household income attestation is lower
than income information from data sources by more than the acceptable
reasonable threshold. When the IRS cannot verify an applicant's income,
the statute requires HHS to take additional steps to verify income,
thus providing HHS clear discretion to use additional trusted data
sources. To support these verifications, section 1413 of the ACA
further requires HHS to establish data matching arrangements to verify
eligibility through reliable, third-party data sources. However, HHS
has discretion to not require the use of the data matching program if
its administrative and other costs outweigh its expected gains in
accuracy, efficiency, and program participation, such as when an
applicant reports higher household income than reported by trusted data
sources and both household income amounts are above 100 percent of the
FPL, illustrating no financial incentive for inflating household
income. In addition to the program integrity weaknesses discussed
previously, we believe this statutory framework compels HHS to request
additional documentation when applicants attest to household income
above 100 percent of the FPL, but trusted data sources show income
below 100 percent of the FPL. We request comments on whether adding
these additional data matching issue requirements will outweigh its
expected gains as described above.
Accordingly, we propose to modify Sec. 155.320(c)(3)(iii)(D) and
(c)(3)(vi)(C)(2) to specify that the Exchange would follow the
procedures in Sec. 155.315(f)(1) through (4) to create an annual
income data matching DMI for consumers if: (1) The consumer attested to
projected annual household income between 100 percent and 400 percent
of the FPL; (2) the Exchange has data from IRS and SSA that indicates
household income is below 100 percent of the FPL; (3) the Exchange has
not assessed or determined the consumer to have income within the
Medicaid or CHIP eligibility standard; and (4) the consumer's attested
projected annual household income exceeds the income reflected in the
data available from electronic data sources by a reasonable threshold
established by the Exchange and approved by HHS. We propose that a
reasonable threshold must not be less than 10 percent and can also
include a threshold dollar amount.\75\ We welcome comments on this
proposed reasonable threshold, especially comments that furnish data
that could help us ensure that it is properly calibrated to maximize
program integrity while minimizing unnecessary administrative burden.
Additionally, this requirement would not apply if an applicant is a
non-citizen who is lawfully present and ineligible for Medicaid by
reason of immigration status. In accordance with the existing process
in Sec. 155.315(f)(1) through (4), if the applicant fails to provide
documentation verifying their household income attestation, the
Exchange would redetermine the applicant's eligibility for APTC and
CSRs based on available IRS data, which under this proposal would
typically result in discontinuing APTC and CSR as required in Sec.
155.320(c)(3)(vi)(G). The adjustment and notification process would
[…truncated; see source link]Indexed from Federal Register on March 19, 2025.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.