Rule2025-11606
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
June 25, 2025
Effective
August 25, 2025
Issuing agencies
Health and Human Services Department
Abstract
This final rule revises standards relating to denial of coverage for failure to pay past-due premium; excludes Deferred Action for Childhood Arrivals recipients from the definition of "lawfully present;" establishes the evidentiary standard HHS uses to assess an agent's, broker's, or web-broker's potential noncompliance; revises the Exchange automatic reenrollment hierarchy; revises standards related to the annual open enrollment period and special enrollment periods; revises standards relating to failure to file and reconcile, income eligibility verifications for premium tax credits and cost-sharing reductions, annual eligibility redeterminations, de minimis thresholds for the actuarial value for plans subject to essential health benefits (EHB) requirements, and income-based cost-sharing reduction plan variations. This final rule also revises the premium adjustment percentage methodology and prohibits issuers of coverage subject to EHB requirements from providing coverage for specified sex-trait modification procedures as an EHB.
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<title>Federal Register, Volume 90 Issue 120 (Wednesday, June 25, 2025)</title>
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[Federal Register Volume 90, Number 120 (Wednesday, June 25, 2025)]
[Rules and Regulations]
[Pages 27074-27224]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-11606]
[[Page 27073]]
Vol. 90
Wednesday,
No. 120
June 25, 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; Final Rule
Federal Register / Vol. 90 , No. 120 / Wednesday, June 25, 2025 /
Rules and Regulations
[[Page 27074]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 147, 155, and 156
[CMS-9884-F]
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: Final rule.
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SUMMARY: This final rule revises standards relating to denial of
coverage for failure to pay past-due premium; excludes Deferred Action
for Childhood Arrivals recipients from the definition of ``lawfully
present;'' establishes the evidentiary standard HHS uses to assess an
agent's, broker's, or web-broker's potential noncompliance; revises the
Exchange automatic reenrollment hierarchy; revises standards related to
the annual open enrollment period and special enrollment periods;
revises standards relating to failure to file and reconcile, income
eligibility verifications for premium tax credits and cost-sharing
reductions, annual eligibility redeterminations, de minimis thresholds
for the actuarial value for plans subject to essential health benefits
(EHB) requirements, and income-based cost-sharing reduction plan
variations. This final rule also revises the premium adjustment
percentage methodology and prohibits issuers of coverage subject to EHB
requirements from providing coverage for specified sex-trait
modification procedures as an EHB.
DATES:
Effective Date: These regulations are effective on August 25, 2025.
Applicability Dates: See section III.D. of this final rule for
further information on the applicability dates.
FOR FURTHER INFORMATION CONTACT: Jeff Wu, (301) 492-4305, Rogelyn
McLean, (410) 786-1524, Grace Bristol, (410) 786-8437, for general
information.
SUPPLEMENTARY INFORMATION:
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 emergent
relief from rising improper enrollments and health care costs, we are
finalizing 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
that we proposed in the 2025 Patient Protection and Affordable Care
Act; Marketplace Integrity and Affordability proposed rule (90 FR
12942) (``2025 Marketplace Integrity and Affordability proposed rule''
or ``proposed rule''). We expect these actions will provide immediate
premium relief to families who do not qualify for Federal premium
subsidies and reduce the burden of improper 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, the Department believes the temporary expansion of
ACA premium subsidies resulted in conditions that were exploited to
improperly gain access to fully-subsidized coverage. As we detailed in
the 2025 Marketplace Integrity and Affordability proposed rule and
reiterate in this final rule, the widespread availability of $0 premium
plans created the incentive and opportunity for fraudulent and improper
enrollments at scale, either by the enrollee's own doing or by a third
party without the enrollee's knowledge, including consumers who were
enticed to respond to misleading advertisements promising cash or gift
cards, and provided enough personal information for the agent, broker,
and web-broker to enroll the consumer in a qualified health plan (QHP).
Exchange eligibility verification policies in effect at the time
enhanced subsidies became available, as well as those adopted and
implemented since that time, were not sufficient to protect against
this consumer harm and fraud, waste, and abuse of Federal funds.
In particular, consumers are at risk for accumulating surprise tax
liabilities and substantial inconvenience from resolving these
liabilities, as well as other issues related to coverage changes and
access to care, due to improper enrollment. The substantial and
unprecedented 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, improper actions that violate agency rules and
agreements, or other improper processes that result in incorrect
determinations.\2\ Fraudulent enrollments involve enrollments obtained
through willful misrepresentations whereas improper enrollments involve
enrollments that result from or were affected by noncompliance with
agency rules and regulations, 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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The expanded subsidy regime that gave way to this environment of
fraudulent and improper enrollments is expiring at the end of this
year. Given the high and demonstrable levels of improper enrollment
creating long-term uncertainty and instability in the marketplaces,
this rule takes a carefully curated set of temporary actions to
immediately reduce the crisis-levels of improper enrollments over the
short-term as the market readjusts to the new subsidy environment in
which enhanced subsidies are no longer available. This final rule also
enacts permanent reforms to help the markets reset to the changing
subsidy environment to improve affordability and stability over the
long-term.
The temporary enactment of numerous policies within this rule
responds directly to concerns raised by commenters about potential
negative effects of making such policies permanent, while balancing the
need to address the current high levels of improper enrollments created
by the expanded subsidies and the holdover improper enrollments that
will remain in the immediate wake of the enhanced subsidy expiration.
The temporary reforms then sunset, as we share many commenter concerns.
We also considered comments that the causes of the improper enrollments
this rule aims to address are not known with certainty and that data
related to Exchange enrollments may be skewed or
[[Page 27075]]
misleading as marketplaces are still recovering from the COVID-19
public health emergency. The temporary codification of these policies
attempts to strike a balance between these commenter concerns and the
integrity of the Exchange program and the Federal funds that support
it. We believe the policies will reduce the improper enrollments that
can carry forward due to auto re-enrollment after the enhanced
subsidies expire. The absence of the enhanced subsidies, most notably
the absence of fully-subsidized plans, will substantially mitigate the
threat of future improper enrollments.
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 policies being finalized in this rule aim to
address these imminent program integrity problems while recognizing
these problems are an outgrowth of temporary policy in order to deliver
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 policies, 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 stated in
the 2025 Marketplace Integrity and Affordability proposed rule (90 FR
12943) that we believe the program integrity and premium relief
policies contained within these rules are necessary to respond to
present-day challenges in the individual health insurance market. As a
starting point, the ACA establishes American Health Benefit Exchanges,
or ``Exchanges,'' to facilitate the purchase of 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 (with limited exceptions) 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.
Several policies included in the ACA attempt to address its adverse
selection bias. For example, the ACA permits issuers to limit
enrollment periods to certain times. In addition, adverse selection
between plans can occur when one plan enrolls a disproportionate number
of people with higher risk conditions. 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\ To avoid adverse selection between
plans sold on and off the Exchanges, the ACA also requires issuers to
keep all individual market plans that are 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\ A well-functioning market also depends on there being `low
information asymmetry' where, for example, health insurance issuers,
health care providers, and consumers have comparable information,
instead of issuers and providers having more or better information than
consumers. Information asymmetry in insurance markets can lead to
imbalances in market predictions, inefficient operations, skewed
decisions, and adverse selection.\8\ Low information asymmetry
generally ensures that buyers (consumers) and sellers (issuers and
providers) are on a more equal footing, preventing one party from
taking advantage of another due to superior knowledge. In recent years,
HHS has taken steps to level the playing field between health insurance
issuers, health care providers, and consumers by adopting regulations
promoting transparency in health insurance coverage (85 FR 72158).
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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
Febuary 23, 2025).
\8\ Akerlof, George A. (August 1970). ``The Market for `Lemons':
Quality Uncertainty and the Market Mechanism''. The Quarterly
Journal of Economics. 84 (3): 488-500. doi:10.2307/1879431. JSTOR
1879431.
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Despite the ACA's intent to create more competitive and efficient
markets, in practice, 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, such as grandfathered and short-term plans) nationwide in
2023.\9\ Further, price-linked subsidies like PTCs are directly tied to
the price of a QHP such that when QHP premiums go up, PTC allowed also
increases. Such price-linked subsidies generally distort markets and
weaken competition because the subsidized enrollee is no
[[Page 27076]]
longer price sensitive to the full cost.\10\ In a market where everyone
is subsidized, prices would generally be much higher due to the
subsidized consumers' lower level of price sensitivity.\11\ 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.\12\ 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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\9\ 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>.
\10\ 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.
\11\ 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.
\12\ 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.\13\ To improve the
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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\13\ 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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In 2021, Congress passed the American Rescue Plan of 2021
(ARP),\14\ which temporarily expanded the generosity of ACA premium
subsidies. In 2022, Congress extended the enhanced subsidies through
2025 under the Inflation Reduction Act of 2022 (IRA).\15\ These
subsidies compounded the problems associated with price-linked
subsidies like PTC, but they also created the incentive and opportunity
for unprecedented fraud and improper enrollments. Specifically, the
enhanced subsidies provide ``zero-dollar premium'' benchmark silver
plans for individuals with projected annual household income between
100 and 150 percent of the Federal Poverty Level (FPL). By fully
subsidizing the premium for these plans, individuals could be enrolled
into these plans once every month through a special enrollment period
(SEP) by predatory agents and brokers without the individual's
knowledge. Individuals for whom Federal law limits the amount of PTC
they must repay also have a strong incentive to sign up for such plans
improperly. There have been widespread reports of consumers in this
income cohort having their plan switched without their knowledge. As
displayed in Table 14 of this rule, there are millions of people
improperly enrolled in fully-subsidized QHPs. These imminent concerns
prompted our rapid rulemaking and informed our nuanced response in this
final rule that balances the need to urgently reduce the high level of
improper enrollments while understanding the subsidy environment that
largely created the incentive and opportunity for such improper
enrollment is coming to an end.
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\14\ Public Law 117-2.
\15\ Public Law 117-169.
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In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12944), we stated that we believe that after reviewing
individual market data and responding to a substantial increase in
consumer complaints, we needed to implement program integrity
protections to mitigate and reverse the substantial increase in
improper enrollments on the Exchanges caused by the availability of
enhanced premium subsidies. Some of those protections included
eligibility verifications related to qualifying for APTC and CSR
subsidies. Others focused on enrollment period policies by re-thinking
when and under what conditions a consumer can enroll. We also stated
that we believe the data and analysis presented in this preamble show
how these protections could lower premiums and costs for consumers and
taxpayers alike. Therefore, we proposed regulatory changes to improve
program integrity and protect against adverse selection. We proposed
this while also emphasizing the importance of keeping the enrollment
process streamlined and accessible, especially for low-income consumers
who utilize Exchanges for subsidized individual market coverage. These
considerations helped inform our thinking as we amended our proposals
into policies being finalized in this rule. Specifically, the finalized
policies balance the urgent need to reduce the high level of improper
and fraudulent enrollments with this desire to promote an efficient
enrollment process over a longer-term.
The 2025 Marketplace Integrity and Affordability proposed rule was
published in the Federal Register on March 19, 2025, with a comment
period that ended on April 11, 2025. We received over 26,000 comments
from State governments or entities, the National Association of
Insurance Commissioners (NAIC), the American Academy of Actuaries
(AAA), issuers or issuer groups, providers/provider groups/provider
associations, general advocacy groups, individuals, and others. The
vast majority of comments were from individuals.
In section III. of this final rule, we provide a summary of each
proposed provision, a summary of the public comments received and our
responses to them, and the policies we are finalizing. Below, we
summarize the policies being finalized.
We are finalizing revisions to Sec. 147.104(i) that reverse the
current policy prohibiting an issuer from denying coverage due to an
individual's or employer's failure to pay premiums owed for prior
coverage, including by attributing payment of premium for new coverage
to past-due premiums from prior coverage. The current policy, in
effect, prohibits issuers from establishing premium payment policies
that require enrollees to pay past-due
[[Page 27077]]
premiums to effectuate new coverage. While we previously concluded that
this prohibition 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 enrollment in coverage to when they need health care services.
Under this final rule, issuers may, to the extent permitted by
applicable State law, add past-due premium amounts owed to the issuer
(or owed to another issuer in the same controlled group) to the initial
premium the applicant must pay to effectuate new coverage and not
effectuate new coverage if the past-due and initial premium amounts are
not paid in full. As this adverse selection issue was not created by
the expansion of APTCs and is not related to the levels of improper
enrollment brought on by them, we are finalizing this policy, which
will be applicable as of the effective date of this rule and beyond. We
believe this change will strengthen the risk pool and lower gross
premiums.
We are finalizing modifications to 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.\16\ The BHP regulations at 42 CFR 600.5 cross-
reference the definition of lawfully present at 45 CFR 155.20. This
change reflects the best view of the 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 PTC, APTC, and CSRs, and for a BHP in States that elect to operate
a BHP. We are finalizing this policy to be applicable upon the
effective date of this final rule and beyond.
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\16\ 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>. New York had implemented a BHP
since April 1, 2015 and suspended its implementation on April 1,
2024.
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We are finalizing revisions to 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 are also finalizing
the addition of the definition for ``preponderance of the evidence'' at
Sec. 155.20. We believe this change will 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. This change is a consumer
protection unrelated to the subsidy levels set by Congress. We finalize
this standard to be applicable upon the effective date of this final
rule and beyond.
We are finalizing revisions to the failure to file and reconcile
(FTR) process at Sec. 155.305(f)(4) to reinstate the 1-year policy in
PY 2026 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 will be utilized for verification of income, and (2)
the tax filer or tax filer's spouse did not comply with the requirement
to file a Federal income tax return and reconcile APTC for that year.
This change will reduce the number of ineligible enrollees who continue
to receive APTC in 2026 as a result of lingering improper and
fraudulent enrollments resulting from the expansion of APTCs. As such,
this policy will sunset on December 31, 2026 after addressing the
imminent improper enrollment concerns and Exchanges would revert back
to the two-year policy where 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 beginning in
coverage year 2027. We believe this change will reduce the number of
ineligible enrollees who continue to receive APTC in 2026, which will
lower APTC expenditures and protect ineligible enrollees from
accumulating surprise tax liabilities while the market and enrollment
rolls readjust to the absence of the subsidy expansion. Finally, we are
also finalizing amendments to the notice requirement at Sec.
155.305(f)(4)(i) and removing the notice requirement at Sec.
155.305(f)(4)(ii) for 2026 to conform with the notice policy under the
previous FTR policy, while the noticing requirements will revert back
to align with the 2-year policy in 2027.
We are finalizing the removal of 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) will adjust APTC payments
to individuals who have failed to provide documentation verifying their
income attestation within 90 days and further protect them from
surprise tax liabilities if they are ineligible. We no longer believe
the automatic 60-day extension is allowed by statute and we are
therefore finalizing this change, which will be applicable as of the
effective date of this rule and beyond.
To further protect against consumers receiving APTC and CSR
subsidies when they do not meet eligibility requirements and root out
the improper and fraudulent enrollments holding over from the subsidy
expansion, we are finalizing temporary policies to address immediate
concerns with the verification process when there is an income
inconsistency with trusted data sources. We also are finalizing for the
remainder of plan year (PY) 2025 starting at the effective date of the
rule and PY 2026 revisions to Sec. 155.320(c)(3)(iii) to specify that
Exchanges on the Federal platform must generate annual household income
inconsistencies when a tax filer's attested projected annual household
income would qualify the taxpayer as an applicable taxpayer according
to 26 CFR 1.36B-2(b) and trusted data sources indicate that projected
household income is under 100 percent of the FPL. Finally, we are
finalizing, for the remainder of PY 2025 starting the effective date of
the rule and PY 2026, the pause of Sec. 155.320(c)(5), which pauses
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 will 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
strengthens program integrity by improving the accuracy of eligibility
determinations across all Exchanges. These policies directly address
program integrity issues brought on by the proliferation of fully-
subsidized, zero-premium benchmark plans and therefore we are
finalizing them until PY 2027.
[[Page 27078]]
To prevent fully-subsidized enrollees from being automatically re-
enrolled without taking an action to confirm their eligibility
information, we are finalizing a temporary amendment to the annual
eligibility redetermination regulation. We are finalizing that, when an
enrollee does not submit an application for an updated eligibility
determination for the future coverage year (2026) by the last day to
select a plan for January 1, 2026 coverage, in accordance with the
effective dates specified in Sec. 155.410(f), and the enrollee's
portion of the premium for the entire policy is zero dollars after
application of APTC through the annual redetermination process,
Exchanges on the Federal platform 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 will 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
are finalizing that the Federally-facilitated Exchanges (FFEs) and the
State-based Exchanges on the Federal platform (SBE-FPs) must implement
this change with annual redeterminations for benefit year 2026. We
believe implementing these policies for 2026 will strengthen the
program integrity of the Exchanges and protect consumers by ensuring
that those fraudulently or improperly enrolled in fully-subsidized,
zero-premium plans are not unknowingly enrolled in those plans for an
additional year while the market readjusts to the expiration of the
expanded subsidies. In the 2025 Marketplace Integrity and Affordability
proposed rule, we also sought 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 sought
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 sought comment on removing the
option for Exchanges to auto-re-enroll individuals who qualify for
fully or partially subsidized plans, ensuring individuals affirmatively
choose their plan and verify their income during the Open Enrollment
Period (OEP), dramatically reducing the likelihood of improper payments
of the APTC.
We are finalizing amendments to 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 also clarify that State Exchanges may retain their
flexibility regarding their re-enrollment hierarchies at the discretion
of the Secretary of Health and Human Services (the Secretary) per Sec.
155.335(a)(2)(iii) and that Exchanges may seek approval from the
Secretary to conduct their own annual eligibility redetermination
process. We believe the consumer awareness problem the current policy
aimed to address is substantially less today than it was at the time we
adopted a re-enrollment hierarchy allowing Exchanges on the Federal
platform to switch a consumer's enrollment from a bronze to a silver
plan. As a result, consumer awareness concerns no longer outweigh the
negative consequences of not automatically re-enrolling consumers whose
current plan is still available for the upcoming plan year without
their active consent. These negative consequences include potential
consumer confusion, undermining of consumer choice, and unexpected tax
liabilities. We believe this policy is important to honor the decisions
of consumers, regardless of the subsidy environment. Given that we did
not find this policy as being substantially associated with fraudulent
and improper enrollments, we are finalizing this policy, which will be
effective for PY 2026 and beyond.
We are temporarily finalizing modifications to Sec. 155.400(g) to
pause paragraphs (2) and (3), which establish an option for issuers to
implement a fixed-dollar and/or gross percentage-based premium payment
threshold, with the following modification: the removal of the fixed-
dollar and gross-premium threshold flexibilities will sunset after the
completion of one new coverage year, PY 2026, on December 31, 2026.
Thereafter, the FFE and SBE-FP will, and State Exchanges may, offer
issuers the flexibility to implement the premium payment threshold
flexibilities that were finalized in the Patient Protection and
Affordable Care Act; HHS Notice of Benefit and Payment Parameters for
2026; and Basic Health Program final rule (2026 Payment Notice) (90 FR
4424). As previously stated, we have significant program integrity
concerns with the availability of fully-subsidized plans. Therefore, 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 have
allowed an enrollee to remain enrolled in coverage for extended periods
of time after payment of the binder. Because this problem is
effectively an outgrowth of the subsidy expansion, we are finalizing
these proposals only through PY 2026 to allow the market to readjust to
the non-expanded subsidy environment.
For benefit years starting January 1, 2027, and beyond, we are
finalizing a change to the annual OEP for coverage through all
individual market Exchanges. Rather than specifying November 1 through
December 15 as the OEP period as proposed, the final rule at Sec.
155.410(e) provides that the OEP must begin no later than November 1
and end no later than December 31 of the calendar year preceding the
benefit year of enrollment. Exchanges have flexibility to determine
their specific OEP dates within these guidelines as long as the OEP
length does not exceed 9 weeks per Sec. 155.410(e)(5)(ii) and all OEP
plan selections are effective on January 1 of the plan year per Sec.
155.410(f)(4). Beginning with benefit year 2027, the dates of the OEP
each year for Exchanges operating on the Federal platform will be
November 1 through December 15. Non-grandfathered individual health
insurance coverage offered outside of an Exchange must also align with
the OEP dates in the applicable State Exchange. The length of the open
enrollment period is fundamentally unrelated to subsidy levels and we
have not determined it to be a major source of improper and fraudulent
enrollments. Therefore, we are finalizing these
[[Page 27079]]
changes, which will be applicable for benefit year 2027 and beyond.
We are temporarily finalizing the removal of Sec. 155.420(d)(16)
and making conforming changes to pause the monthly 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 through PY 2026. This
policy is directly related to the availability of fully-subsidized
plans, as under the subsidy expansion individuals with projected annual
incomes between 100 and 150 percent of the FPL are eligible for fully-
subsidized plans and the SEP. Therefore, to fully ensure that improper
and fraudulent enrollments are fully exercised from this population, we
are pausing the SEP for PY 2026 as the market readjusts to the lack of
a subsidy expansion.
Further, based on recent evidence \17\ suggesting an increase in
the misuse and abuse of SEPs to gain coverage primarily in fully-
subsidized plans outside of the OEP, we are finalizing temporary
amendments to Sec. 155.420(g) to enable HHS to reinstate pre-
enrollment verification of eligibility of applicants for all categories
of individual market SEPs. We are further finalizing temporary
amendments to 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. Given the primary concern with fully-
subsidized plans, we are finalizing these proposals through PY 2026, to
give the market the opportunity to fully shed improper enrollments
resulting from the subsidy expansion.
---------------------------------------------------------------------------
\17\ 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 January 3, 2025.
---------------------------------------------------------------------------
We are finalizing amendments to Sec. 156.115(d) to provide that an
issuer of coverage subject to EHB requirements may not provide coverage
for specified sex-trait modification procedures as an EHB beginning
with PY 2026. In response to comments, we are also adding a definition
of ``specified sex-trait modification procedure'' at Sec. 156.400.
These changes are effective for PY 2026 and beyond, as they are a
furtherance of existing EHB requirements and are not associated with
subsidy levels or improper enrollments.
We are finalizing updates to the premium adjustment percentage
methodology to establish a premium growth measure that comprehensively
reflects premium growth in all affected markets for PY 2026 and beyond.
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 final policy re-adopts the premium growth measure that was in
place for PY 2020 and PY 2021 and applies it to the related parameters
starting with PY 2026. As such, we also are finalizing 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 premium adjustment percentage methodology
finalized in this rule.
Beginning in PY 2026, we are finalizing changes to the de minimis
thresholds for the Actuarial Value (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,\18\ for which we are
finalizing a de minimis range of +5/-4 percentage points, as well as
finalizing wider de minimis thresholds for income-based CSR plan
variations. These changes are effective for PY 2026 and beyond as they
are unrelated to the subsidy level set by Congress, but are rather
important measures to promote affordability and choice.
---------------------------------------------------------------------------
\18\ 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.
---------------------------------------------------------------------------
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 2742 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),
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 to issue
regulations on the calculation of AV and its application to the levels
of coverage. Section 1302(d)(3) of the ACA directs
[[Page 27080]]
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 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 an alien 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 establishment and
operation of Exchanges.
Section 1331 of the ACA provides States the option to establish a
BHP and provides that only ``qualified individuals'', as defined in
section 1312 of the ACA, are eligible for BHP coverage. Section
1312(f)(3) of the ACA provides that if an individual is not, or is not
reasonably expected to be for the entire period for which enrollment is
sought, a citizen or national of the United States or an alien lawfully
present in the United States, the individual shall not be treated as a
qualified individual. Accordingly, persons who are not lawfully present
are not eligible for BHP enrollment.
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 of 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
[[Page 27081]]
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
``Program Integrity: Exchange, SHOP, and Eligibility Appeals Rule''
published in the August 30, 2013, Federal Register (78 FR 54069), and
the ``Program Integrity: Exchange, Premium Stabilization Programs, and
Market Standards; Amendments to the HHS Notice of Benefit and Payment
Parameters for 2014 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 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 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
[[Page 27082]]
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 v. Cochran, 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 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
[[Page 27083]]
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 (SEPs)
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). 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
[[Page 27084]]
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. Summary of the Proposed Provisions, Public Comments, and Responses
to Comments on the Proposed Rule
A. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Limited Open Enrollment Periods (OEPs) (Sec. 147.104(b)(2))
As further discussed in the 2025 Marketplace Integrity and
Affordability proposed rule (90 FR 12950) and section III.B.8. of this
final rule 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 proposed 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 OEP for coverage offered outside of an Exchange. We proposed to
remove Sec. 147.104(b)(2)(i)(G) to reflect the removal of the SEP at
Sec. 155.420(d)(16). We sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and section III.B.8. of this final rule, including our
responses to comments, we are finalizing a pause of the SEP at Sec.
155.420(d)(16), and therefore are temporarily finalizing the proposed
conforming change to remove Sec. 147.104(b)(2)(i)(G). We summarize and
respond to public comments received on the proposed removal of the SEP
at Sec. 155.420(d)(16) in section III.B.8. of this final rule.
2. Coverage Denials for Failure To Pay Premiums for Prior Coverage
(Sec. 147.104(i))
In the 2025 Marketplace Integrity and Affordability proposed rule
(90 FR 12950 through 12953), we proposed to remove Sec. 147.104(i)
that prohibits an issuer from denying coverage due to failure of an
individual or employer to pay premiums owed under prior coverage,
including by attributing payment of premium for new coverage to past-
due premiums from prior coverage. Similar to the policy in the Market
Stabilization Rule (82 FR 18349 through 18353), we proposed to allow
issuers to attribute the initial premium the enrollee pays to
effectuate new coverage to past-due premium amounts owed for prior
coverage and then to not effectuate new coverage if the initial premium
and past-due amounts are not paid in full. Under the proposal,
consistent with the Market Stabilization Rule, an issuer would be
required to apply its past-due 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,\19\ and would be prohibited from
conditioning the effectuation of new coverage on payment of past-due
premiums by any individual other than the person contractually
responsible for the payment of premium.
---------------------------------------------------------------------------
\19\ 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 nondiscrimination
obligations under State law.
---------------------------------------------------------------------------
Unlike the policy in the Market Stabilization Rule (82 FR 18346),
the proposal would not limit the policy to past-due premium amounts
accruing over the prior 12 months or require the issuer to provide any
notice of the policy. States would remain free to apply additional
parameters governing issuers' premium payment policies, to the extent
permitted under Federal law.
We sought comments on the proposal and specifically on whether we
should leave other parameters to States or codify additional parameters
to establish a more uniform Federal regulatory approach. We also sought
comment on whether issuers should be required to establish terms of
coverage that attribute the initial premium an enrollee pays for
subsequent coverage to past-due premium amounts owed, and the
associated costs for issuers to implement such a requirement.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy with a modification by removing the
regulatory text that prohibited this policy, and replacing it with
regulatory text that codifies the proposed policy. Under the finalized
policy, States may choose whether to allow issuers in their market and
State to attribute the initial premium paid to effectuate new coverage
to past-due premium amounts owed and to refuse to effectuate new
coverage if the past-due and initial premium amounts are not paid in
full. If an issuer does so, then under the final rule, it must apply
its past-due premium payment policy uniformly to all employers or
individuals in similar circumstances in the applicable market and State
regardless of health status, and consistent with applicable
nondiscrimination requirements, and are not permitted to condition the
effectuation of new coverage on payment of past-due premiums by any
individual other than the person contractually responsible for the
payment of premium. We are codifying this policy by revising Sec.
147.104(i) instead of removing Sec. 147.104(i) as proposed. As the
issue this provision is intended to resolve was not created by the
expansion of APTCs that are expiring after PY 2025, this policy will
not sunset. We are finalizing this policy to be applicable as of the
effective date of this rule and beyond.
We summarize and respond to public comments received on the
proposed policy below.
Comment: Several commenters supported the proposal, stating it
would incentivize enrollees to maintain 12 months of continuous
coverage, provide issuers with a tool to reduce adverse selection,
reduce opportunities for enrollees to game the system by circumventing
required premium payments, and allow issuers to more accurately price
products. One commenter stated that the proposal would reduce premium
inflation caused by gaming the rules, ultimately easing the burden on
taxpayers and ensuring that ACA subsidies are better targeted.
Response: We agree that finalization of the policy contained in the
proposal will help to promote continuous coverage, reduce gaming and
adverse selection, ensure that ACA subsidies are targeted to those who
are eligible, and allow issuers to more accurately predict costs and
price plans.
Comment: Several commenters agreed with the proposal to defer to
the States to determine whether issuers in their State are permitted to
attribute payments for new coverage to past-due premiums and to refuse
to effectuate new coverage unless both the past-due premium and the
initial payment for new coverage are paid. One commenter stated that
States, who maintain the closest interaction with their consumers and
issuers, are best positioned to regulate issuers' premium payment
policies. Another commenter acknowledged that issuers in some areas of
the country are facing high fraud rates and the proposal could reduce
gaming, adverse selection, and ultimately premiums by requiring payment
of past-due premiums. However, the
[[Page 27085]]
commenter stated that issuers in areas with little evidence of gaming
would likely not want to require payment of past-due premiums to
effectuate new coverage.
Response: We agree that States are in the best position to decide
whether it is appropriate to permit or prohibit this policy. For that
reason, we proposed, and are finalizing, the policy contained in the
proposal in such a way that States may choose whether to allow issuers
in their State to attribute the initial premium an enrollee pays to
effectuate new coverage to past-due premium amounts the issuers are
owed and to refuse to effectuate new coverage if the past-due and
initial premium amounts are not paid in full.
We solicited comment in the proposed rule about whether to make the
premium payment policy mandatory or optional. Comments in response to
that solicitation are discussed below.
Comment: Many commenters, some of whom supported and some of whom
opposed the proposal, stated that if the proposal is adopted, there
should be parameters around how issuers implement the policy. For
example, commenters suggested the final rule should prohibit issuers
that apply the past-due premium policy from collecting past-due
premiums for debts older than 12 months; provide advance notice of
their past-due premium policy; accept installment payments; take into
account the individual's payment history; prohibit charging interest;
set limits on amounts owed; allow enrollment after partial repayment;
create exemptions for low-income individuals, those experiencing
hardship, or those whose failure to pay was not their fault or whose
enrollment was due to fraud; prohibit an issuer from insisting on
payment of past-due premiums for other lines of insurance; and require
issuers to allow consumers to appeal the amount of past-due premiums
owed and to effectuate coverage pending appeal.
Response: Under this final rule, an issuer adopting the past-due
premium policy must apply it uniformly to all employers or individuals
in similar circumstances in the applicable market and State regardless
of health status, and consistent with applicable nondiscrimination
requirements, is not permitted to condition the effectuation of new
coverage on payment of past-due premiums by any individual other than
the person contractually responsible for the payment of premium, and
the amount required to be paid must be subject to any premium payment
threshold the issuer has adopted pursuant to 45 CFR 155.400(g). We are
codifying these minimum standards in the regulation and defer to States
on any additional parameters or standards that issuers must satisfy
when implementing the past-due premium policy, as States are best
positioned to set and oversee parameters of this nature. States that
permit issuers to adopt the past-due premium policy are encouraged to
require such issuers to provide advance notice of the policy to
applicants. We will consider addressing acceptable past-due premium
payment policies in future guidance.
Comment: One commenter noted that, based on the analysis of
Exchange data in the 2026 Payment Notice, over 10 percent of enrollees,
or about 180,000 consumers, were terminated for non-payments in which
the amount owed was less than or equal to $10 and stated that HHS
should carefully balance the goals of securing program integrity with
achieving operational efficiency.
Response: While the debt owed by some individuals might be
relatively small, all individuals who enroll for coverage, including
those who benefit from APTC, are required to pay their share of the
premium for every month of coverage. In addition, issuers of individual
or small group market coverage subject to section 2701 of the PHS Act
are not permitted to forgive debt owed for past-due premiums, and
allowing issuers to attribute payment for new coverage to past-due
premiums may create operational efficiencies for issuers in how they
collect payment for such debts. We note that States and issuers have
flexibility with regard to the past-due premium policy under this final
rule. This includes the flexibility to decide that the policy will not
apply with respect to de minimis amounts owed consistent with 45 CFR
155.400(g), as long as an issuer's past-due premium payment policy
applies uniformly to all employers or individuals in similar
circumstances in the applicable market and State regardless of health
status and consistent with applicable nondiscrimination requirements.
Comment: One commenter stated that the best way to address the
problem of people waiting to get sick before getting coverage is for
the individual shared responsibility payment to be a positive dollar
amount. According to the commenter, requiring individuals to make such
a payment if they do not have minimum essential coverage would provide
an incentive to pay premiums to maintain continuous coverage.
Response: In 2017, the Tax Cuts and Jobs Act \20\ set the amount of
the individual shared responsibility payment to zero dollars, effective
2019, for non-exempt individuals who do not maintain minimum essential
coverage. Statutory changes would be needed to change that amount.
---------------------------------------------------------------------------
\20\ Public Law 115-97.
---------------------------------------------------------------------------
Comment: One commenter asserted that once coverage is terminated,
the enrollee would be responsible for paying his or her own medical
bills. Therefore, according to the commenter, if enrollees are required
to pay for any outstanding premiums for any plan year, they are likely
paying for coverage from which they will not benefit. By contrast,
another commenter expressed concerns that individuals could owe a large
bill because they followed instructions to stop paying premiums in
order to terminate coverage. One commenter stated that if the proposal
is adopted, issuers should be required to effectuate new coverage
without requiring payment of past-due premiums if no claims were made
during the period of delinquency.
Response: For any period of time after coverage is terminated, no
premium would be due. Therefore, ``past-due premiums'' under this final
rule refers to premiums due but not paid for periods during which the
individual was covered, such as during a grace period. During such a
coverage period, individuals have the benefit of financial protection
from unforeseen medical expenses, even if they do not ultimately
receive covered benefits. However, the grace period rules function in a
manner that allows enrollees to avoid paying their premium while
maintaining that financial protection for a short period of time. The
policy finalized in this rule provides issuers with an additional tool
to collect payments owed for months of coverage, regardless of whether
the individual incurs medical expenses during the period for which they
owe premiums.
Because applying the past-due premium policy with regard to claims
history would discriminate based on health status, we do not adopt the
commenter's suggestion to require issuers that adopt the past-due
premium policy to create exceptions for instances in which no claims
are incurred during the period in which past-due premiums are owed.
These practices are not permitted under this final rule.
Comment: One commenter asked how the policy related to past-due
premiums would impact claims payment.
Response: If an individual pays past-due premiums for months during
which
[[Page 27086]]
the individual was covered, the issuer must pay any unpaid claims
incurred during such month. For example, if an individual seeks to
enroll in new coverage while in the 3-month grace period and pays past-
due premiums owed for prior coverage, any claims that a QHP issuer
pended for services rendered to the enrollee in the second and third
months of the grace period, as permitted under Sec. 156.270(d)(1),
must be paid in accordance with the terms of the coverage.\21\
---------------------------------------------------------------------------
\21\ 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.
---------------------------------------------------------------------------
Comment: One commenter asked how the policy would impact enrollment
in new coverage.
Response: Under the past-due premium policy in this final rule, an
issuer, to the extent permitted by applicable State law, may attribute
a payment for new coverage to past-due premiums for prior coverage. The
issuer then could lawfully refuse to effectuate new coverage unless the
individual or employer, as applicable, pays any past-due premium
amounts owed for prior coverage and the initial premium (also known as
a binder payment) for new coverage by the applicable payment deadline.
For example, if an individual applies for coverage during the
individual market open enrollment period and owes 1 month of premiums
in the amount of $10, and the individual fails to pay past-due premiums
of $10 and the binder payment for new coverage by the applicable
premium payment deadline, the issuer could refuse to effectuate the
individual's enrollment in coverage, subject to any premium payment
threshold the issuer has adopted pursuant to 45 CFR 155.400(g).
Following the open enrollment period, the individual could enroll in
coverage for that benefit year only through a special enrollment period
and may be required to satisfy any past-due premium obligations at that
time.
Comment: Many commenters, while acknowledging incentives for
individuals not to pay premiums and enroll in coverage only when
medical needs arise, asserted that the guardrails in place, such as
short grace periods and requirements to retroactively pay medical
expenses, limit these incentives.
Response: We believe that those who seek to circumvent paying
premiums have already weighed their personal health and financial risks
of doing so. Therefore, we believe that existing guardrails, such as
the prospect of having to pay medical expenses not covered by
insurance, are not sufficient to discourage individuals from taking
advantage of grace period and guaranteed availability rules.
Comment: One commenter asserted that those who are unable to
effectuate enrollment due to unpaid premiums may end up in other forms
of ``non-ACA compliant'' coverage, such as short-term, limited-duration
insurance, leading to market distortions and further driving up health
insurance premiums in the individual market risk pool. In addition,
since these types of plans do not have to cover essential health
benefits, the commenter observed that increased reliance on such plans
would lead to more uncompensated care, putting hospitals and emergency
departments at significant risk of financial instability.
Response: We agree that individuals with unpaid past-due premiums
might seek other types of coverage (for example, in markets where the
types of coverage described by the commenter are more prevalent).
However, in other markets, that might not be the case. This is why we
defer to the States, who know their markets best, to determine whether
issuers in their State are permitted to adopt the past-due payment
policy set forth in this final rule.
Comment: One commenter supporting the policy related to past-due
premiums stated that, in deferring to States on parameters for applying
the policy uniformly and consistently, HHS should ensure States are not
requiring issuers to apply the past-due premium policy, but rather
allowing for the option to do so, consistent with the intent of the
proposal. Some commenters commented on the applicability of the policy
for issuers offering coverage through State Exchanges. One commenter
asked that State Exchanges be permitted, but not required, to implement
the policy. One commenter said that some State Exchanges perform
premium collection, making the requirement administratively challenging
for issuers that do not have premium collection capabilities, and
another commenter noted that implementing a past-due premium policy
would require significant configuration of the Exchange's system.
Response: This final rule removes the Federal prohibition on
attributing payments for new coverage to past-due premiums owed for
prior coverage and leaves it to States to determine whether to permit
the practice, and if permitted, any restrictions on the practice.
States are permitted, but not required, to allow issuers participating
in their State Exchanges to implement a past-due premium policy. We
recognize that some Exchanges may not have the functionality in place
to allow QHP issuers to apply the past-due premium policy to coverage
purchased through that State's Exchange. States may take these and
other considerations into account in determining whether to allow the
past-due payment policy finalized in this rule.
Comment: One commenter was in favor of the proposal, so long as the
issuer is the party that must deal with outstanding balances, and not
the agent or broker. Other commenters were concerned that agents and
brokers will be forced to spend unpaid time navigating billing issues
instead of focusing on helping clients get covered.
Response: This final rule does not address which entity is
responsible for collecting premiums owed, including any past-due
premiums. To the extent an issuer adopts the past-due premium policy in
this final rule, the party that collects the past-due premium, for
example, the issuer, agent, or broker, would be determined by State law
or by agreement of those parties.
Comment: A few commenters expressed concern about the effects of
the proposal on the individual market risk pool, asserting that young
and healthy individuals are more price-sensitive and less likely to
enroll if they must pay past-due premiums. One commenter also observed
that these young and healthy enrollees are far more likely to have
fallen out of coverage in the first place for past non-payment of
premiums.
Response: We believe that, regardless of an individual's age or
health status, they potentially will be more inclined to remain in
their coverage if they have to pay past-due premiums in order to
effectuate new coverage. In addition, to the extent young and healthy
enrollees fell out of coverage due to non-payment of premium, the extra
effort to resume coverage suggests they may need coverage due to a
change in their health status. A policy that keeps them continuously
covered is better for them and the risk pool. Moreover, there are
minimum standards that must be met to enroll regardless of the impact
on the risk pool. Improving the risk pool is no
[[Page 27087]]
argument to excuse non-payment of premium.
We also note that, under the premium rating rules in section 2701
of the PHS Act, young peoples' premiums are lower in most States,
making it likely (particularly for unsubsidized individuals) that, to
the extent they have accrued past-due premiums, the amount owed would
be lower than it would be for older individuals.
Comment: Many commenters asserted that the proposal is inconsistent
with the guaranteed availability requirements in section 2702 of the
PHS Act. One commenter stated that the proposed policy is
unconstitutional.
Response: We continue to believe that allowing issuers to require
payment of past-due premiums is consistent with the guaranteed
availability requirements in section 2702 of the PHS Act. 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. We also note 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.
Accordingly, as noted in the proposed rule (90 FR 12953), although we
have established certain uniform standards for premium payment
deadlines, we ultimately defer to issuers, subject to State rules.
Thus, we conclude that refusing to effectuate coverage to an individual
or employer who does not pay past-due premiums is indeed permissible
under section 2702 of the PHS Act, though a State does not need to
allow for it.
Finally, with respect to the commenter raising constitutional
concerns, the commenter did not offer any rationale to explain why the
proposal would be unconstitutional, and we have not identified any
reason why it would be unconstitutional.
Comment: Many comments opposing the proposal asserted that the
proposal would disproportionately harm marginalized people, such as
individuals with lower economic status. One commenter asserted that the
proposed rule did not provide evidence to support the statement that
any past-due amounts would be ``quite small'' or ``would not impose a
substantial financial burden'' and that the proposed rule made no
attempt to quantify that amount in dollars, compare it to the incomes
of affected individuals, rebut the findings in the 2023 Payment Notice,
or address the potential for multiple years of lookback. One commenter
challenged our assertion in the proposed rule that enrollment loss from
the proposed changes would be ``minimal'' because a large proportion of
enrollees receive APTCs and therefore would not experience financial
hardship because of the proposed changes. According to the commenter,
this is not accurate, because people who receive APTCs have very low
incomes and lack the funds to pay multiple months of past-due premiums
while also paying the premium to effectuate coverage for a new year.
Response: We anticipate that enrollment loss from requiring payment
of past-due premiums would be minimal and not impose a substantial
financial burden. APTCs are paid on behalf of the vast majority of
individuals who enroll in coverage through the Exchanges. The APTC
lowers the amount of premium that they pay out of pocket, and therefore
also reduces the amount of past-due premium debt that can accrue. In
addition, rules regarding grace periods and termination of coverage for
individuals receiving APTC result in such individuals generally owing
no more than 1 to 3 months of past-due premium amounts per year.\22\
Therefore, we conclude that past-due premium amounts generally would
not impose a substantial financial burden to enroll in coverage. States
can also take additional steps to limit the potential for individuals
to owe significant amount of past-due premium by prohibiting the
policy, or limiting the lookback period, or capping the amount of past-
due premium due to effectuate coverage, based on factors including the
socioeconomic demographics of their populations.
---------------------------------------------------------------------------
\22\ Id.
---------------------------------------------------------------------------
Comment: Several commenters stated that this proposal would cause
the uninsured population to increase, causing more medical debt,
illness, and death. Some commenters also stated that the proposed rule
did not provide sufficient evidence for the assertion that the proposal
would cause the uninsured population to decrease and the assertion that
the similar policy implemented in the Market Stabilization Rule
encouraged individuals to continue to pay their premiums and stated
that HHS did not provide data to show that the proposal was needed.
Response: We acknowledge there is always some uncertainty regarding
the net effects of any new policy. Here, we cannot know with certainty
whether the coverage gains resulting from more moderate premium trends
and the promotion of continuous coverage will be higher than any
coverage losses resulting from issuers requiring payment of past-due
premiums to effectuate new coverage. However, given the importance of
health coverage and the fact that most consumers are accustomed to
paying in full for one contract before they are allowed to enter
another with the same contracting party, we anticipate that any
discouragement from enrollment will be minimal. When a similar policy
was previously in place, the percentage of enrollees in Exchanges using
the Federal platform who had their coverage terminated for non-payment
of premiums dropped substantially. While there could have been other
reasons for this substantial drop, it is reasonable to conclude the
policy was, at least in part, a driving factor by encouraging more
people to maintain continuous coverage.
Comment: One commenter observed that HHS had concluded in the 2023
Payment Notice that the past-due premium policy in the 2017 Market
Stabilization Rule ``had the unintended consequence of creating
barriers to health coverage that disproportionally affect low-income
individuals.'' The commenter explained that the proposal to reinstate
the past-due premium policy without the 12-month maximum lookback
period would create even more significant barriers for low-income
individuals and that HHS had not provided a reasoned explanation for
its conclusion that these individuals would not be significantly
impacted.
Response: In neither the proposed rule nor this final rule do we
deny that the past-due premium policy as finalized in this rule will
possibly have at least some negative impacts on low-income individuals.
Nor does the change in policy in this final rule rely on any belief or
assertion that low-income individuals will be less harmed by this
policy, as compared to the policy adopted in the 2017 Market
[[Page 27088]]
Stabilization Rule. Rather, the change in policy in this final rule is
supported by the fact that data suggest that more individuals,
including low-income individuals, might maintain coverage as a result
of the policy in this final rule, as compared to the current policy,
which prohibits the past-due premium policy. Continued enrollment
suggests that individuals, including those with lower incomes, will not
be harmed by the policy, as they will remain covered for any unexpected
health issues. Each State, however, including those with large numbers
of low-income individuals, are free to disagree, based on their
specific market dynamics, and not permit issuers to adopt the policy.
Comment: Several commenters observed that if the expanded premium
subsidies sunset at the end of 2025, coverage will become less
affordable for a large number of individuals, thereby exacerbating the
number of individuals who will not be able to pay their premiums and
making the payment of past-due premiums (plus the binder payment for
new coverage) that much more difficult.
Response: At the time of publication of this final rule, the
expanded subsidies will sunset on December 31, 2025, under current law.
States may take this sunset into account in determining whether to
permit issuers to apply the past-due premium policy finalized in this
rule.
Comment: In the preamble to the proposed rule (90 FR 12951 through
12952), we noted that Exchange enrollment data show a steady decline in
the percent of enrollees in Exchanges using the Federal platform that
had their coverage terminated for non-payment of premiums between 2017
and 2020. Based on these enrollment trends, we suggested that the past-
due premium policy in the Market Stabilization Rule (82 FR 18346) may
have successfully encouraged enrollees to continue paying premiums,
while acknowledging limitations on our ability to draw a causal
inference. One commenter took issue with this analysis, suggesting that
it failed to account for the fact that overall Exchange enrollment also
fell, and premiums rose significantly, during this time period--
suggesting that a combination of policies led to fewer healthy
enrollees retaining coverage, increasing the percentage of total
enrollees who might be at risk of health events remaining in coverage,
who are more likely to pay premiums throughout. The commenter stated
that the proposed rule failed to account for these negative effects on
this risk pool.
Response: In the preamble to the proposed rule, we stated that the
decline in the rate of enrollees who had their coverage terminated from
2017 to 2020 might have occurred in part because of the interpretation
of the guaranteed availability requirement in the Market Stabilization
Rule. We acknowledged that due to data limitations, we were unable to
directly attribute any changes in enrollment behavior in the Exchanges
using the Federal platform to that interpretation. We continue to
believe these data, though not conclusive, suggest that the past-due
payment policy in the Market Stabilization Rule may have contributed to
fewer individuals losing coverage due to non-payment of premiums.
However, to the extent States do not believe this would be the case in
their specific markets, they may refrain from allowing issuers in their
State to adopt the past-due premium policy.
Comment: Several commenters disputed that there are large numbers
of individuals who intentionally stop paying premiums in order to gain
1 month of free coverage through the coverage grace period when they
know they will submit medical claims for that month, go without
coverage for subsequent months when they are confident they will not
need it, and then purchase new coverage. Rather, commenters stated that
there are a number of legitimate reasons why individuals fail to pay
premiums, such as illness, unemployment or job loss, caregiving
responsibilities, a natural disaster, household changes that result in
higher premiums, and not realizing that they missed a payment or
payments. One commenter stated that some people intentionally stop
paying their premiums because their eligibility changes--for example,
they become eligible for Medicaid--without understanding the need to
terminate their Exchange plan or how to terminate it. Many commenters
stated that individuals often experience insurance churn with job loss
or access to new coverage. This churn can confuse what plans, coverage,
and support are available to them, and patients may not realize they
need to terminate coverage, especially if they are not using the
insurance.
Response: We acknowledge that many individuals cease paying
premiums for various reasons, such as those mentioned by the
commenters. In instances where an individual's household income
decreases during the policy year, due to illness, job loss, or other
circumstances, the individual has the opportunity to report their
changed income to the Exchange and might qualify for new or additional
APTC to help with their premiums. We also believe that in the
overwhelming majority of cases where individuals cannot pay their
premiums, the individual has the ability to contact their issuer and
terminate coverage before becoming delinquent, avoiding the need to pay
past-due premiums. We also note that, even where issuers adopt the
past-due premium policy under this final rule, individuals may purchase
coverage on a guaranteed issue basis from a different issuer (in all
cases, outside the controlled group of the issuer to whom past-due
premiums are owed), without having to pay past-due premiums.
Comment: A few commenters stated that denying individuals health
insurance, due to not paying past-due premiums or other reasons, would
be detrimental not only to those individuals, but to providers and
health care systems, with effects reaching well beyond Exchange
enrollees.
Response: As we stated in the proposed rule and reiterate in this
final rule, we generally believe the past-due premium policy will
result in more individuals retaining their coverage.
Comment: Under the proposed rule, an issuer could not condition the
effectuation of new coverage on payment of past-due premiums by any
individual other than the person contractually responsible for the
payment of premium. One commenter asked which individual is considered
the contractually responsible person for payment of premium with
respect to a child-only policy and with respect to a family covered by
an individual market policy.
Response: For purposes of the past-due premium policy in this final
rule, the person contractually responsible for payment of premium is
the policyholder. In the case of child-only coverage, the policyholder
would typically be the covered child's parent or legal guardian. In the
case of an individual market policy covering a family, the policyholder
would not be one of the covered dependents. In the case of coverage in
the group market, the policyholder is typically the employer or union,
not covered employees or their dependents. This means, for example,
that a dependent spouse on an individual market policy cannot be
required to pay past-due premiums if that dependent spouse wishes to
purchase coverage as a policyholder. Similarly, an employer's failure
to pay premiums for group health insurance coverage would not result in
an employee or dependent owing past-due premiums for coverage in the
individual market.
[[Page 27089]]
Comment: Several commenters raised concerns that consumers
enrolling in coverage with an issuer that applies a past-due premium
policy would not be fully informed or would not fully understand the
implications of such a policy, and noted potential consumer confusion,
as well as financial harm if consumers incorrectly believe they have
enrolled in coverage that was never effectuated.
Response: We encourage issuers to be transparent about the
application of any past-due premium policy to help ensure that
individuals understand how much they must pay to effectuate coverage as
well as the consequences of non-payment. Issuers, as a matter of
practice, instruct their agents and brokers on how to collect premiums
in order to effectuate new coverage, how to determine the amount due in
order to effectuate new coverage, and the payment due date. We
anticipate that issuers adopting the past-due premium policy would
continue to work with their agents and brokers to ensure that consumers
understand what payments must be made, thus minimizing potential
confusion.
Comment: One commenter asked whether the proposed rule would permit
application of past-due premiums when enrollees switch to a plan
offered by a different issuer.
Response: Under the proposed rule and this final rule, subject to
applicable State law, an issuer may require a consumer to pay past-due
premiums owed to that issuer, or owed to another issuer in the same
controlled group, plus the initial (binder) payment for new coverage,
before effectuating the new coverage. This reflects the fact that, to
the extent an applicant 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, the applicant has not made
sufficient payment for new coverage. There is no mechanism, however, by
which an issuer can credit amounts paid to premiums owed to an
unrelated issuer. Therefore, an issuer cannot deny coverage under
section 2702 of the PHS Act based on an individual's or employer's
failure to pay past-due premiums owed to any issuer other than that
same issuer or another issuer in the same controlled group.
Comment: Several commenters observed that the proposal to shorten
the length of the OEP would give applicants for new coverage less time
to figure out how to acquire the funds to pay past-due premiums.
Response: As explained in section III.B.7 of this final rule, the
changes to the OEP will take effect beginning with the OEP for PY 2027.
Because the proposal to shorten the OEP will not be implemented in PY
2026, enrollees and other interested parties will have sufficient time
to adjust to the changes to the OEP such that they understand and are
better prepared for the changes when the time period for active
enrollment during OEP is shortened for PY 2027.
Comment: Several commenters asserted it would be inappropriate for
an issuer to condition enrollment in new coverage on payment of past-
due premiums where the non-payment resulted from actions of the issuer
or third parties. The commenters gave examples in which non-payment of
premiums was due to actions, inactions, or delays on the part of
issuers, Exchanges, agents, and brokers, including cases of fraudulent
enrollment, or lag time between when an individual reports information
and when an Exchange processes and effectuates changes related to that
information.
Response: In instances where an issuer or an Exchange was
responsible for non-payment of premium, or incorrectly determined that
an individual did not pay premium, we expect the issuer or Exchange to
expediently work with the consumer to resolve the situation and enroll
them in new coverage without requiring payment of past-due premiums. If
there is a delay between when an individual reports changes to their
income or household size and when that change is processed, we expect
Exchanges to internally document that, so that there is evidence that
the individual should not have been charged a higher premium during the
lag time. We also note that in situations where an individual was
improperly enrolled in coverage, and coverage is rescinded (that is,
cancelled or discontinued retroactively to the date of enrollment), as
permitted under Sec. 147.128, the individual would not owe any past-
due premiums.
Comment: Several commenters raised concerns about the potential
impacts on coverage access, particularly in markets with limited
competition, where there may be a limited number of issuers servicing
that geographic area.
Response: We note that this policy provides States flexibility to
address adverse selection based on their specific market conditions and
allows for appropriate market-specific solutions that recognize the
differences between competitive and less competitive regions. We
believe this flexible approach strikes an appropriate balance between
preserving consumer access to coverage and accounting for varying
market conditions across regions.
Comment: Several commenters observed that there are other
mechanisms by which issuers can attempt to collect debt in form of
past-due premiums, other than by requiring past-due premiums be paid in
order to effectuate new coverage.
Response: Although issuers may have other methods to collect debt,
we note that other forms of debt collection, such as placing the debt
into collections, can be costly and time consuming. In addition,
although the past-due premium policy will facilitate issuer premium
collection efforts, it is principally intended to prevent the premium
debt in the first instance by ensuring that individuals pay premiums
for months in which they have coverage.
Comment: One commenter raised concerns about how the past-due
premium policy would interact with an individual coverage health
reimbursement arrangement (ICHRA) or a qualified small employer health
reimbursement arrangement (QSEHRA). Specifically, the commenter
observed that the past-due premium policy could complicate the
enrollment process and necessitate additional administrative procedures
and costs for employers if they are unable to make an ICHRA offer
because employees cannot enroll in individual health insurance
coverage. The commenter suggested this could subject the employer to a
possible tax penalty if the employer has no way to make another offer
of affordable health coverage to their employees. The commenter
recommended that employees offered an ICHRA should not be required to
pay past-due premiums.
Response: The commenter does not explain why allowing issuers to
attribute initial premium payments to past-due premiums would make it
so that employers cannot offer ICHRAs, and we do not see a reason why
that would be the case. Therefore, we do not believe it is necessary to
prohibit an issuer that chooses to apply the past-due premium policy
from applying the policy to individuals offered an ICHRA or have a
QSEHRA.\23\
---------------------------------------------------------------------------
\23\ In the event an individual is initially enrolled in
individual health insurance coverage and subsequently fails to
timely pay premiums for the coverage, with the result that the
individual is in a grace period, the individual is considered to be
enrolled in individual health insurance coverage and the ICHRA must
reimburse qualified medical expenses incurred by the individual
during that time period to the extent the qualified medical expenses
are otherwise covered by the ICHRA.
---------------------------------------------------------------------------
ICHRAs must have reasonable procedures for covered participants and
beneficiaries to substantiate that they
[[Page 27090]]
are enrolled in individual health insurance coverage, or enrolled in
Medicare Parts A and B or Part C, for each month that they are covered
under the ICHRA. ICHRAs also must require participants to forfeit the
ICHRA if they are not enrolled in individual health insurance coverage
or Medicare.
However, nothing prevents an employer from offering an ICHRA to
employees who do not have individual health insurance coverage and
reimbursement from an ICHRA for the initial payment of premiums to
effectuate the coverage will often not be for the full amount
owed.<SUP>24 25</SUP> In addition, an employer's liability for the
employer shared responsibility tax under section 4980H of the Code is
determined with respect to whether the employer offered a plan
(including an ICHRA) that meets certain requirements, not whether
employees enrolled or received benefits under the plan.\26\ We note
that QSEHRAs are similarly prohibited from providing tax-favored
reimbursements to employees for any month that the employee does not
have MEC and may only be offered by small employers that are not
subject to the employer shared responsibility tax.\27\
---------------------------------------------------------------------------
\24\ The Department of the Treasury and the IRS assisted with
the consideration and response to this comment. In general, the
Treasury and the IRS take the position that, in the case of an HRA,
sections 105 and 106 of the Code do not permit a payment to be
excluded from a taxpayer's gross income in one plan year if the
reimbursed expense was incurred in a different year. This is why the
IRS provided a special rule in Notice 2020-33, section IV, that
allows ICHRAs to pay premiums for individual health insurance
coverage prior to the beginning of the plan year (for example, the
plan can pay the initial premium due in December for coverage that
starts in January). However, if an issuer attributes an initial
premium payment to past-due premiums from the previous year, the
issuer is, in effect, applying a surcharge on the initial premium
needed to effectuate new coverage that is equivalent to the past-due
amount, so long as the individual was covered during the period for
when the premiums are past-due and there has not been a rescission.
Although the issuer might have pended some claims from the period
when premiums were not being paid and those claims would be freed up
as a result of the payment, that is secondary to the fact that the
payment is being made for the purpose of effectuating the new
coverage.
\25\ An ICHRA must provide that if any individual covered by the
HRA ceases to be covered by individual health insurance coverage,
the HRA will not reimburse medical care expenses that are incurred
by that individual after the individual health insurance coverage
ceases. In addition, if the participant and all dependents covered
by the participant's HRA cease to be covered by individual health
insurance coverage, the participant must forfeit the HRA.
Furthermore, ICHRAs are prohibited from reimbursing amounts for
expenses incurred after an individual's individual health insurance
coverage ceases.
\26\ 26 U.S.C. 4980H.
\27\ 26 U.S.C. 9831(d)(3)(B).
---------------------------------------------------------------------------
Comment: Under the proposed rule, issuers would be permitted to
apply the past-due premium policy taking into account premium amounts
owed to an issuer in the same controlled group. One commenter replied
that this should be left to the States, while two commenters opposed
allowing issuers to demand past-due premiums from an issuer in the same
controlled group. One commenter recommended the final rule establish
the definition of a controlled group rather than leaving the definition
to the States.
Response: Consistent with the proposed rule, we are finalizing that
States adopting the proposal regarding past-due premiums may determine
whether to allow issuers to attribute payment for new coverage to past-
due premiums owed to an issuer in the same controlled group. This is
consistent with our broader objective to give States flexibility with
regard to the past-due premium policy, and we believe that permitting
issuers to collect past due premiums owed to other issuers in the same
controlled group would be reasonable approach for States to adopt, as
solvency is typically measured at the parent-company level, as opposed
to the licensed-entity level. The final rule refers to the definition
of controlled group in the guaranteed renewability regulations at Sec.
147.106(d)(4), which is 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. States have flexibility to adopt a narrower definition of a
controlled group.
Comment: We solicited comments on whether issuers should be
required to establish terms of coverage that attribute the premium the
enrollee initially pays for subsequent coverage to past-due premium
amounts owed to an issuer. One commenter suggested that States are
better situated to set and oversee parameters of this nature. One
commenter stated that requiring issuers to adopt the past-due premium
policy could result in more adverse selection than making the policy
optional. This is because, as the commenter explained, less healthy
individuals would be most likely to pay past-due premiums in order to
effectuate new coverage, while healthier individuals opt for
alternative coverage or no coverage. The commenter stated that the
impact could be larger in markets where individuals may lack both
alternative options for comprehensive coverage and the funds to repay
premiums. In contrast, in areas with greater competition, the commenter
stated that healthy individuals who have past-due premiums may have the
option to pursue coverage with other issuers, which could reduce the
overall level of anti-selection relative to regions with fewer coverage
options. In these regions, issuers that choose to collect past-due
premiums may benefit from lower premiums due to reduced anti-selection
and potentially a reduction in uncollectable premium amounts, which
could attract more enrollees into the market relative to less
competitive regions. As such, adverse selection is likely to be more
limited, particularly in competitive regions, where lookback periods
are shorter, or where recoupment is optional. Another commenter stated
that because every issuer does not have the necessary data or
technology to operationalize this change, it is important to keep this
provision optional for issuers, as proposed. The commenter emphasized
the importance of providing issuers and State Exchanges flexibility in
how they implement the proposed policy and to continue deferring to
issuers on payment and business decisions. Furthermore, according to
this commenter, due to the nominal amount many enrollees owe in past-
due premiums, for many issuers the implementation costs may outweigh
revenue from potential collections of past-due premiums. Another
commenter stated that issuers need the flexibility to set billing
policies based on unique factors in their environments. Another
commenter stated that States maintain the closest interaction with
their consumers and issuers and are best positioned to regulate
issuers' premium payment policies. One commenter stated that a
mandatory approach could create significant operational burdens on
issuers, particularly in managing delinquent accounts, enrollment files
and billing procedures. One commenter said that one particular State's
existing statutes and regulations, which include grace periods, notice,
and restatement of coverage requirements, aim to balance consumer
protection with a health insurance issuer's fiscal health. Therefore,
the commenter asserted that a uniform Federal regulatory approach is
not necessary. One commenter stated that the policy should be optional,
because issuers may not be able to identify enrollees whose coverage
was terminated for non-payment during the enrollment process. In
addition, many commenters asserted that States should be free to either
permit or prohibit the practice.
Response: We agree with commenters who stated that the final rule
should not require issuers to adopt the policy related to past-due
premiums. States are most familiar with their local insurance markets
and are therefore best
[[Page 27091]]
positioned to determine whether allowing issuers in their State and
market to adopt the past-due premium policy is appropriate. We also
recognize that some issuers' operations may not currently support such
practices. For these reasons, should the State in which an issuer
operates allow issuers to condition the effectuation of new coverage on
payment of past-due premiums, the final business decision will remain
at the discretion of individual issuers and what they determine is in
their best interest.
Comment: With respect to the applicability date of the past-due
premium policy, one commenter supported this provision applying on the
effective date as proposed, stating that consumers will continue to
have all the applicable protections of Federal and State law, including
protection from discrimination in the application of this policy and
Federal and State law grace periods. Several other commenters
recommended delaying implementation to PY 2027, stating that issuers
need time to make appropriate system and operational changes, and
arguing that applying the policy any earlier would effectively change
the terms of individuals' current coverage by affecting their ability
to purchase future coverage.
Response: The past-due premium policy finalized in this final rule
applies on the effective date of the final rule. We are not persuaded
that a later applicability date is necessary because the final rule
removes the current Federal regulatory prohibition and does not impose
any new burdens on States or issuers. Nothing in this final rule
requires States to permit, or issuers to implement, the past-due
premium policy. Nor does the final rule prevent States or issuers from
implementing the policy at a later date. We do not agree that allowing
issuers to start applying the past-due premium policy on the effective
date of the final rule changes the terms of an insured individual's
current coverage, as insurance policies commonly include contract
provisions addressing timely premium payment. Moreover, the past-due
premium policy relates to an individual's or employer's ability to
purchase a new contract of insurance rather than the existing contract.
Comment: One commenter urged HHS to actively monitor compliance
with the past-due premium policy, should we finalize it, to protect
both patients and providers.
Response: Under section 2723 of the PHS Act, States are the primary
enforcers of the requirements of title XXVII of the PHS Act, including
section 2702, with respect to health insurance issuers. We enforce
against issuers in a State only if we determine that the State has
failed to substantially enforce one or more of the requirements.
Therefore, States with primary enforcement authority for section 2702
of the PHS Act will enforce the past-due premium policy in this final
rule, to the extent they decide to permit it. We will enforce the
policy against issuers in States where HHS is responsible for
enforcement of the guaranteed availability requirements in section
2702.
B. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
The Marketplace Integrity and Affordability proposed rule included
a number of proposed revisions to 45 CFR part 155 of title 45 of the
Code of Federal Regulations that were intended to improve the integrity
of the Exchanges, protect Federal funds, and protect consumers from the
ill-effects of unauthorized enrollments, including surprise tax
liability. We received a substantial number of comments weighing both
for and against these proposals. The Department has concluded, after
careful consideration of public comments, that while most of the
proposals should be finalized as proposed, some proposals should not be
finalized for State Exchanges, and other proposals will adopt a
temporary position under which we will finalize the policies to be
effective through the end of PY 2026. We address in this section
policies the Department is finalizing to address acute improper and
fraudulent enrollment concerns brought about by the expansion of APTC.
Given the expiration of the enhanced APTC, the Department has concluded
it would be reasonable to accept some risk of future improper
enrollments after these policies sunset, in favor of limiting overall
disruptions as the market adjusts and sheds holdover improper
enrollments. The Department will finalize the following policies
temporarily, requiring them to sunset at the end of PY 2026:
<bullet> Failure to File Taxes and Reconcile APTC Process; Delay of
FTR Process until after 2 consecutive years of FTR removed (Sec.
155.305(f)(4));
<bullet> Income Verification When Data Sources Indicate Income Less
Than 100 Percent of the FPL (Sec. 155.320(c)(3)(iii));
<bullet> Income Verification When Tax Data is Unavailable (Sec.
155.320(c)(5));
<bullet> Annual Eligibility Redetermination (Sec. 155.335)
<bullet> Premium Payment Threshold (Sec. 155.400);
<bullet> Monthly Special Enrollment Period for APTC-Eligible
Qualified Individuals with a Projected Household Income at or Below 150
Percent of the Federal Poverty Level (Sec. 155.420); and
<bullet> Pre-enrollment Verification for Special Enrollment Period
(Sec. 155.420(g)).
The Department is of the view that immediate action to codify these
proposed policies in this final rule represents the best policy to
swiftly stop the substantial fraud, waste, and abuse in connection with
expanded subsidies for Exchange coverage. However, based on the broad
range of feedback for and against these policies and the difficulty in
assigning with certainty the causes of improper enrollments, we believe
there could be more efficient long-term solutions to these immediate
problems. We expect that after the market has purged the massive
amounts of improper and fraudulent enrollments it is currently
experiencing that it would be reasonable to accept the risk that some
improper enrollments will come back after the policies sunset. As such,
we are finalizing these provisions only through PY 2026.
The expiration of enhanced subsidies creates a level of uncertainty
within the individual health insurance market regarding the expected
level of enrollment and morbidity of the risk pool for PY 2026 and
beyond. Moving into PY 2021, the individual market had experienced an
increasing level of stability. Since then, various policy decisions
introduced a high level of uncertainty by pulling back enforcement of
various regulatory requirements that had previously maintained more
predictable enrollment patterns. For instance, Medicaid periodic data
matching regulations have not been enforced since the fall of 2020.
This nonenforcement posture likely contributed to the substantial
increase in enrollment experienced over the past four years. Data
presented in this rule suggest this allowed millions of additional
people to enroll in the individual market risk pool with subsidized
coverage who are otherwise not eligible for premium subsidies. In
addition, as described throughout the rule, Federal law enacted in 2021
temporarily increased the level of premium tax credit subsidies which,
in particular, made fully-subsidized health plans available to people
with incomes between 100 percent and 150 percent of the Federal poverty
level. This law dramatically changed the market composition as improper
and fraudulent enrollments soared. This temporary policy is now set to
expire at the end of PY 2025 and, as such, we believe it is
[[Page 27092]]
imperative to take decisive action to address improper and fraudulent
enrollments to help the market shed the waste, fraud, and abuse
currently obscuring evaluation of the market. These actions will help
the market gradually reset in the context of a renewed subsidy
environment that should inherently reduce improper and fraudulent
enrollments through the lack of fully-subsidized benchmark plans.
Given these dynamics, coupled with extensive public feedback, the
Department has determined it would be reasonable to sunset certain
policies after PY 2026 and accept some risk that improper enrollments
will become more likely once the policies sunset. Regulatory sunsets
can be an especially useful strategy to adapt to uncertain
circumstances, like those created by the vast amount of improper and
fraudulent enrollments created by the subsidy expansion, which the
Department feels it must address as the subsidy expansion winds down to
prevent short-term consumer pain. Once those currently improperly or
fraudulently enrolled have been removed, the potential for consumer
harm is significantly lessened as fully-subsidized benchmark plans will
no longer exist. As such, while these policies are critical short-term
tools to allow the market to readjust to the expanded subsidy
expiration, it is not clear that the long-term burden associated with
these policies outweighs the program integrity benefits in the absence
of abuse-prone fully-subsidized plans. Accordingly, we follow the
example of other Federal agencies that have codified short-term,
temporary rules in response to urgent needs.\28\
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\28\ See, e.g., Home Mortgage Disclosure (Regulation C) Final
Rule, 82 FR 43088 (Sep. 13, 2017) (in response to comments that it
set a reporting threshold to low, the Consumer Financial Protection
Board finalized a new, temporary rule increasing the reporting
threshold for only two years to allow the agency to study the issue
and consider whether to initiate another rulemaking to address the
appropriate level for the reporting threshold). See also, Securities
and Exchange Commission Final Rule 202T, 69 FR 48008, 48012 (August
6, 2004) (adopting a temporary rule to facilitate the collection of
data sufficient to assess the effectiveness of certain regulations
concerning short sale prices on securities).
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We believe striking this balance will reduce improper and
fraudulent enrollments in the near-term without implicating longer-term
concerns over these policies, for which it is less clear that the
benefits would outweigh such concerns in the absence of the high level
of improper enrollments held over from the subsidy expansion. For these
reasons, we are finalizing these policies for PY 2026 only, with a
reversion to the previous policies for PY 2027 and beyond.
We address each of the policies we are finalizing to sunset after
PY 2026 in section III. of this final rule.
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.\29\ Section 36B of the Internal
Revenue Code, and sections 1412 and 1402 of the ACA provide that
PTC,\30\ APTC,\31\ and CSRs,\32\ respectively, are not allowed for
individuals who are not lawfully present. Section 1331 of the ACA
excludes individuals who are not ``lawfully present'' from eligibility
and enrollment in a BHP in States that elect to operate a BHP.\33\ 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 through an Exchange or for these
insurance affordability programs.\34\ 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. In the 2025
Marketplace Integrity and Affordability proposed rule (90 FR 12953
through 12955), we proposed to realign our policy with the longstanding
view of 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 through an Exchange,
eligibility for PTC, APTC, and CSRs, and for BHP coverage in States
that elect to operate a BHP.
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\29\ 42 U.S.C. 18032(f)(3).
\30\ 42 U.S.C. 18082(d); 26 U.S.C. 36B(e)(2).
\31\ 42 U.S.C. 18082(d).
\32\ 42 U.S.C. 18071(e).
\33\ 42 U.S.C. 18051(e).
\34\ See the definition of ``insurance affordability program''
at 45 CFR 155.300(a) and 42 CFR 435.4.
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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'').\35\ The DHS Memo established, for the first
time, the DACA policy, and 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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\35\ Napolitano, J. (2012). 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 [ACA] to these
individuals.'' For that reason, HHS explained that it did not intend to
``inadvertently expand the scope of the DACA process'' (77 FR 52615).
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'' its prior
interpretation from 2012. The DACA Rule, which became effective on
November 1, 2024, advanced several arguments for reversing the agency's
prior interpretation.\36\ Consistent with our statutory authority \37\
to define ``lawfully present'' for use in determining eligibility for
our programs, we are now reconsidering these arguments.
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\36\ 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 DACA Rule.
\37\ Sec. 1411 of the ACA, 42 U.S.C. 18081(a).
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In the DACA Rule (89 FR 39392 through 39395), HHS concluded that
because DHS had determined that a
[[Page 27093]]
DACA recipient is ``lawfully present'' for purposes of eligibility for
certain Social Security benefits under 8 U.S.C. 1611(b)(2), 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 considered deferred
action recipients to be ``lawfully present'' for purposes of certain
Social Security benefits since 1996.\38\ 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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\38\ 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>39 40</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
and as stated in the proposed rule (90 FR 12954), we now believe HHS
should not have defined ``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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\39\ Texas v. United States, 50 F.4th 498, 526 (5th Cir. 2022).
\40\ 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' 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, for PTC, APTC, CSRs to be allowed for their Exchange
coverage, and to enroll in a BHP in States that elect to operate a BHP.
In the proposed rule (90 FR 12954), we stated that 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, for PTC, APTC, CSRs to be allowed for their
Exchange coverage, and to be eligible to enroll in a BHP in States that
elect to operate a BHP. DHS' 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 departments and
agencies, such as HHS'' (87 FR 53211 through 53212). Therefore, in the
proposed rule (90 FR 12955), we stated that we believe it was improper
for HHS to have advanced a policy goal that was contrary to the ACA's
statutory limitations as they had been understood since the inception
of DACA. Furthermore, DHS' 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 and as stated in the proposed
rule (90 FR 12955), 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', and there is no requirement that HHS aligns its
definition of ``lawfully present'' with DHS'. 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' 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.'' Under section
42 U.S.C. 18032(f)(3), section 36B(e)(2) of the Code, 42 U.S.C.
18082(d), 42 U.S.C. 18071(e)(1)(A), and 42 U.S.C. 18051(e), enrollment
in a QHP offered on an Exchange, PTC, APTC, CSRs, and enrollment in a
BHP in States that elect to operate a BHP, respectively, is allowed
only for individuals who are ``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 sought comment on this proposal.
After consideration of comments and for the reasons outlined in the
proposed rule and this final rule, including our responses to comments,
we are finalizing this policy as proposed. This policy will be
applicable immediately upon the effective date of this rule as it
conforms regulatory policy to the best statutory reading of the ACA. We
summarize and respond to public comments received on the proposed
changes to the definition of ``lawfully present'' below.
[[Page 27094]]
General Support
Comment: We received several comments in support of the proposed
change to exclude DACA recipients from the definition of ``lawfully
present.'' Commenters noted that including DACA recipients in the
definition of ``lawfully present'' imposed additional costs on
taxpayers and that reverting the definition to exclude DACA recipients
would better protect taxpayers.
Response: We appreciate comments received in support of our
proposal to modify the regulatory definition of ``lawfully present'' at
Sec. 155.20 in alignment with the definition set forth in the August
30, 2012 Interim Final Rule (77 FR 52614 through 52616) to exclude DACA
recipients for purposes of eligibility to enroll in a QHP through an
Exchange, for PTC, APTC, CSRs to be allowed for their Exchange
coverage, and to be eligible to enroll in a BHP in States that elect to
operate a BHP. We agree that this proposal would result in less PTC
being paid out, given that DACA recipients would no longer be eligible
to enroll.
Comment: Many commenters supported that the proposed rule did not
propose to modify the technical and clarifying changes to the
definition of ``lawfully present'' at Sec. 155.20 that were made by
the 2024 DACA rule (89 FR 39392). Commenters noted that these changes
eliminated complexity in eligibility determinations and eased burden on
service providers and consumers.
Response: We appreciate comments received in support of our
proposal to retain these adjustments. We agree that these changes were
primarily technical and clarifying in nature and that these changes
simplify eligibility determinations.
General Opposition
We received several comments opposing the proposed change to the
definition of ``lawfully present'' in this rule. The following is a
summary of the comments we received and our responses.
Comment: The majority of commenters noted general opposition to
CMS' proposal to exclude DACA recipients from the definition of
``lawfully present.'' Many commenters noted that DACA recipients are
essential members of their community that contribute to the economy and
that excluding DACA recipients delegitimizes their status. Many
commenters stated that individuals undergo extensive vetting to obtain
and maintain their DACA status and are hence ``legally present.''
Commenters also noted that DACA recipients have work authorization and
pay taxes and therefore should have access to Exchange coverage. One
commenter noted that the opportunity to purchase Exchange coverage is
consistent with the goals of the DACA policy. Similarly, another
commenter noted that giving DACA recipients access to the Marketplace
does not change anything about their legal immigration status, and
hence DACA recipients should be allowed to buy insurance on the
Marketplace. One commenter noted that the ACA only states that the
Exchange is unavailable to individuals who are not ``lawfully present''
without explicitly referencing any categories of noncitizens, and that
the ACA instead ``defers to 45 CFR 155.20.''
Response: We note that individuals who are not ``lawfully present''
are ineligible for enrollment in a QHP through an Exchange and for
insurance affordability programs.\41\ As mentioned in the proposed rule
consistent with our statutory authority \42\ to define ``lawfully
present'' for use in determining eligibility for our programs, we are
reconsidering our prior interpretation from the 2024 DACA rule at 89 FR
39392. As noted in the 2012 DHS Memo, the DACA process was designed to
provide temporary relief from removal for certain individuals on a
case-by-case basis as a mechanism to preserve governmental resources
for high-priority removal cases. We note that the reasons for adopting
the DACA process did not pertain to health insurance affordability
programs, such as access to Exchange coverage. We believe that the
original interpretation of the term ``lawfully present'' better
reflects the appropriate intersection of DACA and the ACA.
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\41\ 42 U.S.C. 18032(f)(3), 42 U.S.C. 18032(f)(3), 42 U.S.C.
18082(d), 42 U.S.C. 18071(e)(1)(A), 42 U.S.C. 18051(e).
\42\ 42 U.S.C. 18081(a).
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Comment: Some commenters noted that HHS has maintained Exchange
eligibility for all other individuals with deferred action, and DACA
recipients should be allowed to enroll in Exchange coverage such that
eligibility standards are consistently applied to all recipients of
deferred action. One commenter noted that deferred action is a long-
standing administrative mechanism that predates the ACA, and that DACA
recipients are therefore not unique among deferred action recipients to
the extent that the policy under which they were granted deferred
action was not explicitly intended to extend access to Exchange
coverage. Another commenter noted that DACA recipients can be
considered as having ``quasi-legal'' status, which warrants access to
care. One commenter noted that HHS has no authority to independently
define ``lawfully present,'' and the Congress did not intend to confer
on HHS the authority to define lawful presence for immigrants.
Response: As noted in the proposed rule, DACA recipients, unlike
other deferred action-recipients, received deferred action under a
large-scale presidential initiative, the purpose of which did not
include extending ACA access to health insurance Exchanges. We note
that in prior rulemaking, the Department of Homeland Security (DHS)
acknowledged that DACA has ``never conferred lawful immigration status
on recipients,'' and further declined to label DACA as ``identical'' to
all other forms of deferred action (87 FR 53211 through 53212). We
reiterate that HHS maintains its separate and independent statutory
authority to codify a regulatory definition of ``lawfully present'''
for use in determining eligibility to enroll in a QHP through an
Exchange, in a BHP in States that elect to operate a BHP, and
eligibility for PTC, APTC, CSRs. We believe that the definition of
``lawfully present'' as set forth in the August 30, 2012 Interim Final
Rule (77 FR 52614 through 52616) best adheres to the statute and is
consistent with the benefits afforded by the DACA policy, which are
forbearance from removal from the United States and employment
authorization. We note that HHS retains separate statutory authority
and policy considerations to define the term ``lawfully present'' for
its programs. This authority does not compel HHS to align its
definition of ``lawfully present'' with DHS, especially since the
reasons DHS offered for adopting the DACA policy do not pertain to
eligibility for insurance affordability programs.\43\ We also note that
other definitions of ``lawfully present,'' such as those by DHS, should
not be used as a criterion to gauge eligibility for health insurance
coverage. Therefore, extending health insurance subsidies and cost-
sharing reductions to DACA recipients for Exchange coverage, or
coverage through a BHP in states that elect to operate a BHP, would
improperly expand the scope of the DACA process.
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\43\ As defined in 45 CFR 155.300(a); 42 CFR 435.4.
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Legal Concerns
We received several comments that highlighted legal concerns with
the proposed change to the definition of ``lawfully present'' in this
rule. The
[[Page 27095]]
following is a summary of the comments we received and our responses.
Comment: Some commenters opposed the modification of the definition
of ``lawfully present'' and stated that the change is inconsistent with
the intent and goals of the ACA. Specifically, one commenter noted that
the exclusion of DACA recipients may constitute discrimination based on
national origin, which is prohibited under section 1557 of the ACA.
Another commenter noted that the proposed rule did not address section
1554 of the ACA, which disallows HHS from promulgating regulations that
may constitute unreasonable barriers to care or impede timely access to
services. Several commenters highlighted that excluding DACA recipients
from the definition of ``lawfully present'' restricts their ability to
access medical care, which violates the Equal Protection Clause of the
Fourteenth Amendment of U.S. Constitution. Commenters also stated that
the proposed definition of ``lawfully present'' denies DACA recipients'
rights under title VI of the Civil Rights Act.
Response: The Department disagrees that excluding DACA recipients
from the definition of lawfully present violates sections 1554 or 1557
of the ACA, the Equal Protection Clause of the Fourteenth Amendment, or
title VI of the Civil Rights Act.
Section 1557 of the ACA (42 U.S.C. 18116) prohibits discrimination
on the basis of race, color, national origin, sex, age, or disability
in a health program or activity, any part of which is receiving Federal
financial assistance, including credits, subsidies, or contracts of
insurance, except where otherwise provided in title I of the ACA.
Section 1557 of the ACA also prohibits discrimination on the basis of
race, color, national origin, sex, age, or disability under any program
or activity that is administered by an executive agency, or any entity
established under title I of the ACA or its amendments. We disagree
that this rule's proposal to define ``lawfully present'' for purposes
of HHS programs constitutes discrimination on the basis of national
origin, as DACA status may be obtained by individuals who came to the
United States as children regardless of their national origin, if they
meet all other DHS eligibility criteria. Additionally, as outlined in
prior rulemaking (89 FR 37522), section 1557 of the ACA does not
include immigration status. Similarly, this proposal does not violate
section 1554 of the ACA. In California v. Azar, the Ninth Circuit held
that section 1554 of the ACA is intended to ensure that HHS does not
``improperly impose regulatory burdens on doctors and patients,'' not
to restrict HHS' ability to ``ensure government funds are not spent for
an unauthorized purpose.'' \44\
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\44\ California v. Azar, 950 F.3d 1067 (9th Cir. 2020).
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Furthermore, we do not agree that the proposed change to the
definition of ``lawfully present'' violates the Equal Protection Clause
of the Fourteenth Amendment or title VI of the Civil Rights Act. The
Equal Protection Clause prohibits States from denying anyone within
their jurisdiction the equal protection of the laws and thus is not
applicable here. Nevertheless, we note that HHS' action to modify the
definition of ``lawfully present'' is consistent with the Equal
Protection Clause as the Federal government has a rational basis to
distinguish between DACA recipients and other categories of ``lawfully
present'' noncitizens, as detailed in this section.\45\ Title VI of the
Civil Rights Act, 1964, likewise, is not relevant here. Title VI
provides that no person shall, on the ground of race, color, or
national origin, be excluded from participation in, be denied the
benefits of, or be subjected to discrimination under any program or
activity receiving Federal financial assistance and reaches only acts
of intentional discrimination.\46\ A rule providing that DACA
recipients do not qualify as lawfully present is consistent with the
premise of the DACA program under which DACA recipients have no lawful
immigration status, but enjoy deferred deportations given the low
priority the Federal government places on their deportations. Moreover,
the policy we finalize does not constitute discrimination based on any
protected ground, as it does not distinguish based on a DACA
recipient's particular race, color, or national origin. As we explain
earlier in this preamble, lawful presence is one of many critical
eligibility criteria required by the ACA. We reiterate that HHS has the
authority under the ACA to facilitate the operation of its programs,
including the issuance of regulations that define ``lawfully present,''
and we believe the exclusion of DACA recipients represents the best
interpretation of Congressional intent.
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\45\ Toro v. Sec'y, U.S. Dep't of Homeland Sec., 707 F.3d 1224,
1230 (11th Cir. 2013)
\46\ Alexander v. Sandoval, 532 U.S. 275, 280 (``Title VI itself
directly reach[es] only instances of intentional discrimination.'')
(internal citations and quotations omitted).
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Comment: A few commenters noted that there is ongoing litigation
regarding HHS' 2024 DACA rule and that the proposed change to the
definition of ``lawfully present'' is improper and attempts to prevent
a judicial decision.
Response: We note that there is ongoing litigation regarding the
2024 DACA rule. In August 2024, several plaintiff States filed a
lawsuit in the United States District Court for the District of North
Dakota in response to the agency's 2024 DACA rule that newly included
DACA recipients in the definition of ``lawfully present.'' \47\ On
December 9, 2024, the court issued a preliminary injunction applicable
to the plaintiff States, and as a result DACA recipients are ineligible
for Exchange coverage in the nineteen plaintiff States involved in the
lawsuit.\48\ On December 16, 2024, the preliminary injunction was
appealed to the Eighth Circuit Court of Appeals. Ultimately, this
rulemaking may render as moot the pending legal challenge to the DACA
Rule, and the appeals court granted the Government's motion to hold the
appeal in abeyance. At present, DACA recipients in all other States
continue to be eligible for Exchange coverage. We disagree that it is
improper to propose and finalize this change to the definition of
``lawfully present.'' We note that the resolution and timing of a final
disposition for this litigation is unknown and without this proposed
modification, the agency would fail to align with the better
interpretation of the term ``lawfully present'' and would continue to
incorrectly expend taxpayer dollars.
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\47\ Kansas v. United States of America (Case No. 1:24-cv-
00150).
\48\ These States are Alabama, Arkansas, Florida, Idaho,
Indiana, Iowa, Kansas, Kentucky, Missouri, Montana, Nebraska, New
Hampshire, North Dakota, Ohio, South Carolina, South Dakota,
Tennessee, Texas, and Virginia. All States are served by Federal
platform, except for Idaho, Kentucky, and Virginia, which are State
Exchanges that operate their own platforms.
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Impact on Health and Health Care Systems
We received many comments opposing the proposed change to the
definition of ``lawfully present'' in this rule out of concern for the
health and well-being of individuals, families, communities, and health
care organizations. Commenters expressed concerns regarding increased
costs associated with shifts from preventive care to emergency room
care, a weaker individual market risk pool, and increased tax burdens
on Americans with the removal of eligibility of DACA recipients under
the ACA. The following is a summary of the comments we received and our
responses.
Comment: Many commenters shared that increasing access to health
insurance coverage and health care has positive impacts on individual
and
[[Page 27096]]
population health, and, conversely, that decreasing access to coverage
harms individual and population health.\49\ Many commenters stated that
they expected the provision would result in decreased community public
health and decreased well-being for DACA recipients as these
individuals become uninsured, noting that leaving thousands of DACA
recipients without health coverage could lead to dire health
consequences in their communities.
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\49\ American Hospital Association. Report: The Importance of
Health Coverage. https://www.aha.org/guidesreports/report-
importance-health-
coverage#:~:text=Impact%20of%20Coverage&text=Studies%20confirm%20that
%20coverage%20improves,on%20individuals%2C%20families%20and%20communi
ties.
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Commenters noted that insured individuals are more likely to have a
regular source of care and to receive timely and appropriate preventive
care and are less likely to experience certain health complications
than uninsured individuals. Nonprofit medical and advocacy
organizations commented that having access to health insurance is
associated with increased utilization of preventive care, and that
early testing is critical to detect life threatening health conditions
like lung, blood, and breast cancer, HIV/AIDS, diabetes, chronic
conditions, and disabilities.\50\ Commenters also noted that access to
health insurance is associated with preventing maternal mortality in
immigrant women.
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\50\ ``Access to Primary Care.'' Office of Disease Prevention
and Health Promotion, 2020, <a href="http://www.odphp.health.gov/healthypeople/priority-areas/social-determinants-health/literature-summaries/access-primary-care">www.odphp.health.gov/healthypeople/priority-areas/social-determinants-health/literature-summaries/access-primary-care</a>.
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Commenters expressed concerns that without access to health
insurance, the cost to treat complex health conditions within the DACA
population would be higher than if DACA recipients remained eligible
for health insurance and received preventive care. Some commenters
noted the disproportionate rate of uninsurance among DACA recipients is
due to their prior exclusion from Exchange coverage and continued
exclusion from Medicaid. Some commenters noted that taking away
eligibility for DACA recipients undermines the goal of the ACA to
expand access to health care services.
Response: We appreciate commenters' feedback and acknowledge that
one of the broad goals of the ACA is to increase access to health
insurance coverage. We also acknowledge commenters' concerns regarding
the potential impacts of the changes proposed in this rule on the
ability of some DACA recipients to access health care services. We note
that, because DACA recipients generally have employment authorization,
they may have the option to access health insurance coverage through
their employer. Additionally, we note that DACA recipients remain
eligible for limited Medicaid coverage for the treatment of an
emergency medical condition, if they meet all other eligibility
requirements for Medicaid in the state (for example, income and state
residency), except for U.S. citizenship or satisfactory immigration
status.
We reiterate that the ACA's broad goal of increasing access to
health insurance exists within a specific statutory scheme that
requires that individuals be lawfully present in order to access
coverage. HHS is obligated to promulgate regulations that best
effectuate the statutory guardrails of the ACA, and as previously
stated, we believe that the definition of ``lawfully present''
finalized in this rule best achieves Congress's intent.
Comment: Commenters noted that decreased access to health insurance
coverage and preventive care would increase the burdens on hospitals,
Federally Qualified Health Centers (FQHCs), State and community
programs, safety-net providers, and emergency departments which would
provide more urgent and emergent care to uninsured individuals as a
result. Commenters stated that visits to hospitals and emergency rooms
are more costly than preventive care visits, and commenters argued that
an increase in emergency services would increase the overall cost of
health care.\51\ Some commenters stated that an increase in emergency
room visits would put undue strain on hospitals and emergency room
providers who already face overcrowding. Other commenters noted that
FQHCs see patients regardless of insurance status and that the removal
of DACA recipients from Exchange eligibility would require FQHCs to
make challenging decisions about the services they can provide.
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\51\ American Hospital Association. Report: The Importance of
Health Coverage. https://www.aha.org/guidesreports/report-
importance-health-
coverage#:~:text=Impact%20of%20Coverage&text=Studies%20confirm%20that
%20coverage%20improves,on%20individuals%2C%20families%20and%20communi
ties.
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Commenters cited that, on average, uninsured individuals generate
over $1,000 in uncompensated costs annually, which the rest of the
health care system absorbs.\52\ In addition to the potential burdens on
providers, commenters expressed concerns that DACA recipients would
face undue financial hardship when they finally seek care. Commenters
noted DACA recipients' fear of medical debt, which contributes to
skipping needed preventive medical and dental care and difficulty
finding resources to improve their mental health.\53\
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\52\ Kaiser Family Foundation. Key Facts About the Uninsured
Population (2023). <a href="https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/">https://www.kff.org/uninsured/issue-brief/key-facts-about-the-uninsured-population/</a>.
\53\ Center for American Progress. The Demographic and Economic
Impacts of DACA Recipients: Fall 2021 Edition. (2022). <a href="https://www.americanprogress.org/article/the-demographic-and-economic-impacts-of-daca-recipients-fall-2021-edition/">https://www.americanprogress.org/article/the-demographic-and-economic-impacts-of-daca-recipients-fall-2021-edition/</a>.
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Comments from providers expressed concerns about the possibility
that DACA recipients may lose coverage in the middle of a treatment
program or may return to the emergency room or other acute care
settings after their health has deteriorated. These providers commented
that these emergency services are much more expensive and less
effective than if treatment had continued in the patients' primary care
setting. One commenter, who is a provider, noted that epilepsy has a
higher cost associated with emergency care rather than preventive care
and has higher incidence in immigrant populations. Additionally, some
commenters noted that DACA recipients face unique stressors that impact
their acute mental health and can lead to increased vulnerability to
chronic medical conditions.\54\ These stressors include trauma from
violence, persecution, and poverty in addition to general fear and
anxiety compounded by the stress of the unknown future of the DACA
program and immigration status implications.
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\54\ Henderson, S.W., & Baily, C.D. Parental deportation,
families, and mental health. Journal of the American Academy of
Child & Adolescent Psychiatry (2013). 52(5), 451-453.
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Many commenters stated that an increase in the cost of health care,
due to increased emergency room use, would mean that American taxpayers
would pay even higher amounts to insurance companies to defray these
increased costs. Commenters also stated that removing eligibility of
DACA recipients would not deliver the economic relief needed for
American families and may instead increase the financial burden on
individual, American taxpayers. Other commenters noted that HHS did not
provide evidence of how this proposed change would generate cost
savings.
Response: We acknowledge commenters' feedback regarding the
potential impact of uninsurance on DACA recipients, and that some DACA
recipients may become uninsured as a result of the changes proposed in
this rule. Although we are unable to quantify potential costs related
to shifting care to
[[Page 27097]]
emergency settings, uncompensated care, or changes to the risk pool as
a result of this provision, we expect that this proposal will result in
savings in the form of reduced PTC expenditures. We refer to this
rule's Regulatory Impact Assessment for further information regarding
these estimates. Additionally, we believe that the concerns expressed
here, such as emergency room strain or changes in coverage during a
course of treatment, represent common, existing issues that healthcare
providers are generally well-equipped to address. Finally, we note that
these concerns do not overcome Congress's direction in the ACA that
only ``lawfully present'' individuals are eligible for Exchanges
coverage.
Comment: Many commenters cited concerns about how removing access
to Exchange coverage for DACA recipients would impact the 300,000 U.S.
citizen children who have at least one parent that is a DACA
recipient.\55\ These commenters noted that insurance coverage for
parents is also tied to the health of their children, where children
are more likely to access health insurance and health care services
when their parents are insured, a phenomenon known as the ``welcome
mat'' effect.\56\ They noted that barriers to health insurance access
for parents often increases the uninsured rate of their children who
are U.S. born and U.S. citizens, but that children who have access to
preventive care often have better health outcomes as adults. Commenters
also noted that access to health insurance is linked to the financial
stability of the family as insured parents are better equipped to
support their families.\57\
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\55\ Center for American Progress. The Demographic and Economic
Impacts of DACA Recipients: Fall 2021 Edition. (2022). <a href="https://www.americanprogress.org/article/the-demographic-and-economic-impacts-of-daca-recipients-fall-2021-edition/">https://www.americanprogress.org/article/the-demographic-and-economic-impacts-of-daca-recipients-fall-2021-edition/</a>.
\56\ Hudson, Julie L., and Asako S. Moriya. ``Medicaid Expansion
for Adults Had Measurable ``Welcome Mat'' Effects on Their
Children.'' Health Affairs, vol. 36, no. 9, Sept. 2017, pp. 1643-
1651, <a href="https://doi.org/10.1377/hlthaff.2017.0347">https://doi.org/10.1377/hlthaff.2017.0347</a>.
\57\ Wright Burak, Elisabeth. ``Parents' and Caregivers' Health
Insurance Supports Children's Healthy Development.'' Society for
Research in Child Development, June 2019, <a href="https://www.srcd.org/research/parents-and-caregivers-health-insurance-supports-childrens-healthy-development">https://www.srcd.org/research/parents-and-caregivers-health-insurance-supports-childrens-healthy-development</a>.
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Response: While we acknowledge these commenters' concerns, we note
that the U.S. citizen children of DACA recipients remain eligible for
QHPs through an Exchange, for PTC, APTC, and CSRs, as well as for
Medicaid, CHIP, and BHP in States that elect to operate a BHP, if they
meet all eligibility requirements in the state. This rule's provisions
do not impact their eligibility.
Comment: Many commenters stressed the important role that DACA
recipients hold in our communities and workforce, noting that during
the COVID-19 pandemic nearly 203,000 DACA recipients worked at the
frontlines in health care, education, and food distribution.\58\
Commenters also noted that DACA recipients contribute billions of
dollars in Federal and State taxes each year, paying into the ACA
Exchanges that they would not be eligible for if this rule was
finalized as proposed. Additionally, these commenters noted that if
DACA recipients were not eligible for health insurance through the ACA,
there could be a negative impact on the economy as sickness or the need
for emergency care rather than preventive care would impact these
frontline workers and frontline communities. Commenters also noted that
studies \59\ show DACA recipients may avoid seeking medical attention
out of fear that doing so would impact their immigration status, and
these commenters express concern that this will increase for DACA
recipients when they are no longer eligible for coverage under the ACA.
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\58\ Nicole Svajlenka, A Demographic Profile of DACA Recipients
on the Frontlines of the Coronavirus Response, Ctr. for Am. Progress
(Apr. 6, 2020), <a href="https://www.americanprogress.org/article/demographic-profile-daca-recipients-frontlines-coronavirus-response/">https://www.americanprogress.org/article/demographic-profile-daca-recipients-frontlines-coronavirus-response/</a>.
\59\ National Immigration Law Center (2024, May 29). DACA
Recipients' Access to Health Care: 2024 Report. Retrieved April 8,
2025, from <a href="https://www.nilc.org/wpcontent/uploads/2024/05/NILC_DACA-Report_2024_06-27-24.pdf">https://www.nilc.org/wpcontent/uploads/2024/05/NILC_DACA-Report_2024_06-27-24.pdf</a>.
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Response: We disagree that these factors constitute a compelling
reason to maintain a regulatory definition of ``lawful presence'' that
we do not believe is consistent with the statute.
Comment: Many commenters stated that removing the eligibility of
DACA recipients from Exchange coverage would negatively impact the risk
pool. Commenters noted that DACA recipients are generally younger and
healthier, which would benefit the risk pool, citing studies of likely
eligible DACA recipient self-reporting excellent or very good
health.\60\ Commenters noted that the removal of DACA recipients from
the Exchange risk pool would increase the overall cost of the health
care system, including the cost of premiums and copays for other
consumers. One State Exchange also noted that the elimination of DACA
recipients from their Exchange would erode their merged market and
would result in premium increases for all market segments and
ultimately increasing costs for families and individuals in their
State. One commenter suggested that DACA recipients who are currently
enrolled in Exchange coverage should be ``grandfathered'' in to reduce
the impact of individuals' exclusion on the risk pool. The same
commenter noted that State Exchanges should be given the option to
allow DACA recipients in their Exchanges if doing so would benefit
their population.
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\60\ Key Facts on Deferred Action for Childhood Arrivals (DACA)
(2025), <a href="https://www.kff.org/racial-equity-and-health-policy/fact-sheet/key-facts-on-deferred-action-for-childhood-arrivals-daca/">https://www.kff.org/racial-equity-and-health-policy/fact-sheet/key-facts-on-deferred-action-for-childhood-arrivals-daca/</a>.
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Response: While we are unable to quantify the potential impacts of
this policy on Exchange risk pools, we note that HHS is obligated to
promulgate regulations that best effectuate the guardrails outlined in
the ACA. HHS believes the definition of ``lawfully present'' finalized
in this rule best achieves Congress' intent. Accordingly, granting
State Exchanges the flexibility to cover DACA recipients if they choose
is not appropriate.
Implementation Concerns and Effective Date
We received several comments that highlighted concerns with the
time within which all Exchanges would be required to exclude DACA
recipients from Exchange (or BHP) participation and the associated
operational concerns. The following is a summary of the comments we
received and our responses.
Comment: Many commenters expressed significant concerns that the
proposed modification to the definition of ``lawfully present'' would
be applicable upon the effective date of the rule, as a mid-year
eligibility change would negatively impact consumers. Many commenters
noted that due to rapid policy shifts, additional time is necessary to
identify and communicate with impacted consumers. Several State
Exchanges that do not use the Federal platform underscored the need for
additional lead time to implement changes, including information
technology (IT) system changes, modifications to business operations,
and retraining staff. Commenters noted that implementing changes
without additional lead time impacts system accuracy, market stability,
and overall member experience. Commenters also highlighted that two
State Exchanges indicated that IT system changes require lead time to
ensure alignment with other State agency partners to coordinate IT
release schedules. One State Exchange indicated that they utilize an
integrated eligibility system which requires additional time to
[[Page 27098]]
coordinate a planned technical release and testing. Several commenters
strongly urged HHS to delay the effective date of this provision until
January 1, 2026. One commenter also noted that a mid-year eligibility
change would affect assumptions that carriers make about their
enrollees in a plan year.
Several commenters noted that an effective date earlier than
January 1, 2026, would impact rate filing submissions by issuers. One
issuer noted that the proposed effective date does not provide
sufficient time for State Exchanges to accurately identify individuals,
share necessary documentation with issuers, and send termination
notices to consumers following termination. The same commenter noted
that insufficient time may result in delayed or erroneous terminations,
which may result in consumer harm and increased administrative burden
for Exchanges and issuers. Two issuer commenters noted that issuers do
not have information on the immigration status of enrollees and
requested additional clarification on how Exchanges will terminate DACA
recipients, including if the proposed change impacts current or future
enrollees. One commenter suggested that HHS consider grandfathering in
current DACA recipients for PY 2026 to promote continuity of care.
Another commenter requested flexibility in the timeline to terminate
and notify consumers for any current DACA recipient enrollees without
any penalty to the consumer.
Response: We acknowledge commenters' concerns about operational
challenges regarding the implementation of this provision, as well as
commenters' suggestions on alternative approaches. While we understand
that there are existing technical and operational constraints that
impact interested parties, including issuer concerns with rate filing
submissions for PY 2026, we reiterate that without the proposed
modification to the definition of ``lawfully present,'' the agency
would fail to align with the better interpretation of the term
``lawfully present'' and incorrectly expend taxpayer dollars. This
provision will continue to be applicable on the effective date of this
final rule and will apply to current and future enrollees who are DACA
recipients for 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. We acknowledge concerns regarding technical and
operational constraints that may hinder some State Exchanges that are
not on the Federal platform from implementing this provision. We intend
to provide technical assistance and educational materials targeted at
State Exchanges not on the Federal platform and state agencies that
operate BHPs in states that elect to operate BHPs (BHP agencies) to
assist in successful implementation of this rule. We intend to begin
providing such technical assistance after the publication date of this
rule and in advance of its effective date. Importantly, we note that
Exchanges and BHP agencies should continue to submit requests to verify
an applicant's immigration status through a data match with DHS via the
Hub using DHS' Systematic Alien Verification for Entitlements (SAVE)
system, which allows Exchanges and BHP agencies to correctly identify
enrollees who are DACA recipients. We anticipate that Exchanges and BHP
agencies will be responsible for terminating coverage for any DACA
recipients currently enrolled in coverage upon the effective date of
the rule. Pursuant to 45 CFR 156.270(b)(1), we note that issuers must
send termination notices to enrollees for all termination events, even
when a termination is initiated by an Exchange. We also acknowledge the
possibility of erroneous terminations as Exchanges implement this
provision. If Exchanges inadvertently and erroneously disenroll
eligible individuals during the course of implementing this provision,
Exchanges have broad authority to take steps to reinstate coverage
under 45 CFR 155.430(e)(3).
Out of Scope
Comment: Some commenters noted that DACA recipients pay taxes and
contribute positively to U.S. society and requested that the Federal
government create pathways for DACA recipients to obtain U.S.
citizenship.
Response: We note that this rule does not address the DACA policy
itself, only the eligibility of DACA recipients for coverage under an
Exchange (and related eligibility for insurance affordability programs)
or BHP in States that elect to operate a BHP. While these comments are
related to the DACA policy broadly, they do not seek to support or
change specific provisions set forth in the proposed rule, and no
response is required.
Comment: A few commenters stated that they opposed declaring DACA
recipients illegal and excluding DACA recipients from receiving
Medicare coverage.
Response: This rule does not add
[…truncated; see source link]Indexed from Federal Register on June 25, 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.