Proposed Rule2026-02769
Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2027; and Basic Health Program
Primary source
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Published
February 11, 2026
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This proposed rule contains provisions to improve implementation of the Patient Protection and Affordable Care Act, including payment parameters and provisions related to the HHS-operated risk adjustment and risk adjustment data validation (HHS-RADV) programs, as well as 2027 user fee rates for issuers offering qualified health plans (QHPs) through Federally-facilitated Exchanges (FFEs) and State-based Exchanges on the Federal platform (SBE-FPs). This proposed rule also includes provisions related to civil money penalties (CMPs) for noncompliant issuers and other responsible entities; standards governing agents, brokers, and web-brokers; the expansion and codification of hardship exemption eligibility; implementation of the State Exchange Improper Payment Measurement (SEIPM); provider access standards and essential community provider standards for QHP certification; QHP certification of non-network plans; a prohibition on issuers from including routine non-pediatric dental services as an Essential Health Benefit (EHB); cost-sharing flexibilities for catastrophic and individual market bronze plans; establishment of catastrophic plans with plan terms of up to 10 consecutive years; QHP issuer quality improvement strategies (QISs); revisions affecting which enrollees are included in Federal Basic Health Program (BHP) payment calculations to States; and seeks comment on potential adjustments to other Federal standards, including the Federal medical loss ratio (MLR) standard in the individual market. This proposed rule also includes amendments to implement certain provisions of the Working Families Tax Cut (WFTC) legislation.
Full Text
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[Federal Register Volume 91, Number 28 (Wednesday, February 11, 2026)]
[Proposed Rules]
[Pages 6292-6486]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-02769]
[[Page 6291]]
Vol. 91
Wednesday,
No. 28
February 11, 2026
Part II
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 600
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Office of the Secretary
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45 CFR Parts 153, 154, 155, et al.
Patient Protection and Affordable Care Act, HHS Notice of Benefit and
Payment Parameters for 2027; and Basic Health Program; Proposed Rule
Federal Register / Vol. 91 , No. 28 / Wednesday, February 11, 2026 /
Proposed Rules
[[Page 6292]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 600
Office of the Secretary
45 CFR Parts 153, 154, 155, 156, and 158
[CMS-9883-P]
RIN 0938-AV62
Patient Protection and Affordable Care Act, HHS Notice of Benefit
and Payment Parameters for 2027; and Basic Health Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This proposed rule contains provisions to improve
implementation of the Patient Protection and Affordable Care Act,
including payment parameters and provisions related to the HHS-operated
risk adjustment and risk adjustment data validation (HHS-RADV)
programs, as well as 2027 user fee rates for issuers offering qualified
health plans (QHPs) through Federally-facilitated Exchanges (FFEs) and
State-based Exchanges on the Federal platform (SBE-FPs). This proposed
rule also includes provisions related to civil money penalties (CMPs)
for noncompliant issuers and other responsible entities; standards
governing agents, brokers, and web-brokers; the expansion and
codification of hardship exemption eligibility; implementation of the
State Exchange Improper Payment Measurement (SEIPM); provider access
standards and essential community provider standards for QHP
certification; QHP certification of non-network plans; a prohibition on
issuers from including routine non-pediatric dental services as an
Essential Health Benefit (EHB); cost-sharing flexibilities for
catastrophic and individual market bronze plans; establishment of
catastrophic plans with plan terms of up to 10 consecutive years; QHP
issuer quality improvement strategies (QISs); revisions affecting which
enrollees are included in Federal Basic Health Program (BHP) payment
calculations to States; and seeks comment on potential adjustments to
other Federal standards, including the Federal medical loss ratio (MLR)
standard in the individual market. This proposed rule also includes
amendments to implement certain provisions of the Working Families Tax
Cut (WFTC) legislation.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, by March 13, 2026.
ADDRESSES: In commenting, please refer to file code CMS-9883-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-9883-P, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9883-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Jeff Wu, (301) 492-4305, Rogelyn McLean, (410) 786-1524, Grace
Bristol, (410) 786-8437, for general information.
Ayesha Anwar, (301) 448-3625, or Joshua Paul, (301) 492-4347, for
matters related to HHS-operated risk adjustment and HHS-operated risk
adjustment data validation.
Aaron Franz, (410) 786-8027 for matters related to user fees.
Brian Gubin, (410) 786-1659, for matters related to agent, broker,
and web-broker guidelines.
Zarin Ahmed, (301) 492-4400, for matters related to enrollment of
qualified individuals into QHPs and termination of Exchange enrollment
or coverage for qualified individuals.
Ken Buerger, (410) 786-1190, for matters related to certification
standards for QHPs, cost-sharing requirements, and dental coverage as
EHB.
Kelly Carda, (312) 886-5210, or Cassandra Thompson, (667) 414-0870,
for matters related to Provider Access standards.
Ariana Koenitzer, (410) 786-0724, or Samantha Nguyen Kella, (816)
426-6339, for matters related to Essential Community Provider
Standards.
Ariana Koenitzer, (410) 786-0724, or Cassandra Thompson, (667) 414-
0870, for matters related to QHP Certification of Non-Network Plans.
Nikolas Berkobien, (667) 290-9903, for matters related to
standardized plan options, non-standardized plan option limits and
exceptions.
Jenny Chen, (301) 492-5156, or Shilpa Gogna, (301) 492-4257, for
matters related to State Exchange and State Exchange Blueprint
requirements.
Rebecca Braun-Harrison, (667) 290-8846, or Nia Blasingame, (470)
890-4178, for matters related to civil money penalties of issuers and
non-Federal governmental group health plans.
Preeti Hans, (301) 492-5144, for matters related to the Quality
Improvement Strategy.
Beth Freshcorn, (410) 786-3831, for matters related to
administrative actions against agents, brokers, and web-brokers.
Jennifer McIlvaine, (410) 786-0947, for matters related to the
Basic Health Program.
Christina Whitefield, (301) 492-4172, for matters related to the
medical loss ratio (MLR) program.
David Mlawsky, (410) 786-6851, for matters related to catastrophic
plans with multi-year plan terms.
Jessica Veffer, (301) 492-4827, for matters related to expanding
hardship exemptions for individuals ineligible for APTC or CSRs due to
projected household income.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received before the close
of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post comments received
before the close of the comment period on the following website as soon
as possible after they have been received: <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
Follow the search instructions on that website to view public comments.
CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public comments that make threats
to individuals or institutions or suggest that the commenter will take
actions to harm an individual. CMS continues to encourage individuals
not to submit duplicative comments. We will post acceptable comments
from multiple unique commenters even if the content is identical or
nearly identical to other comments. We encourage commenters to include
supporting facts, research, and evidence in their comments. When doing
so, commenters are encouraged to provide citations to the published
materials referenced, including active
[[Page 6293]]
hyperlinks. Likewise, commenters who reference materials which have not
been published are encouraged to upload relevant data collection
instruments, data sets, and detailed findings as a part of their
comment. Providing such citations and documentation will assist us in
analyzing the comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
summary of not more than 100 words in length of this proposed rule, in
plain language, may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
Table of Contents
I. Executive Summary
II. Background
A. Legislative and Regulatory Overview
B. Summary of Major Provisions
III. Provisions of the Proposed Regulations
A. Part 150--CMS Enforcement in Group and Individual Insurance
Markets
B. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment
C. Part 154--Health Insurance Issuer Rate Increases: Disclosures
and Review Requirements
D. Part 155--Exchange Establishment Standards and Other Related
Standards
E. Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act Including Standards Related to Exchanges
F. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
G. Severability
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding Rate Filing Justification (Sec. 154.215)
C. ICRs Regarding Mandating the HHS-Approved and Created Form
(Sec. 155.220)
D. ICRs Regarding Misleading Marketing (Sec. 155.220)
E. ICRs Regarding State Exchange Enhanced Direct Enrollment
(SBE-EDE) Option (Sec. 155.221)
F. ICRs Regarding Limiting APTC Eligibility to ``Eligible
Noncitizens'' (Sec. Sec. 155.20, 155.305(f)(1), and 155.320)
G. ICRs Regarding the Prohibition of APTC for Individuals Who
Are Ineligible for Medicaid Due to Their Immigration Status and Have
Income Below 100 Percent of the Federal Poverty Level (FPL) (Sec.
155.305(f)(2))
H. ICRs Regarding Failure To File and Reconcile (Sec. 155.305)
I. ICRs Regarding Income Verification When Data Sources Indicate
Income Less Than 100 Percent of the FPL (Sec. 155.320(c)(3)(iii))
J. ICRs Regarding Income Verification When Tax Data is
Unavailable (Sec. 155.320(c)(5))
K. ICRs Regarding Pre-Enrollment SEP Verification (Sec.
155.420(g))
L. ICRs Regarding Expansion of Hardship Exemption Eligibility
(Sec. 155.605(d)(1))
M. ICRs Regarding Amendment of Exchange Network Adequacy
Standards (Sec. 155.1050)
N. ICRs Regarding General Program Integrity and Oversight
Requirements (Sec. 155.1200)
O. ICRs Regarding the State Exchange Improper Payment
Measurement (SEIPM) (Sec. Sec. 155.1600-155.1650)
P. ICRs Regarding the Discontinuation of Standardized Plan
Options (Sec. Sec. 155.20, 155.205(b)(1), 155.220(c)(3)(i)(H),
156.201, and 156.265(b)(3)(iv))
Q. ICRs Regarding the Discontinuation of Non-Standardized Plan
Option Limits and Exceptions (Sec. 156.202)
R. ICRs Regarding Network Adequacy Reviews (Sec. 156.230)
S. ICRs Regarding Essential Community Providers (Sec. 155.1051
and Sec. 156.235)
T. ICRs Regarding QHP Certification of Non-Network Plans
(Sec. Sec. 155.1050, 156.230, 156.235, 156.236, 156.275, and
156.810)
U. ICRs Regarding Quality Improvement Strategy Information
(Sec. 156.1130)
V. ICRs Regarding Medical Loss Ratio--OMB Control Number 0938-
1164 (Sec. Sec. 158.103, 158.120, 158.210, 158.220)
W. Summary of Annual Burden Estimates for Proposed Requirements
X. Submission of PRA-Related Comments
V. Response to Comments
VI. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Proposed Payment Notice Provisions
and Accounting Table
D. Regulatory Alternatives Considered
E. Regulatory Flexibility Act (RFA)
F. Unfunded Mandates Reform Act (UMRA)
G. Federalism
H. E.O. 14192, ``Unleashing Prosperity Through Deregulation''
I. Executive Summary
We propose changes to the provisions and parameters implemented
through prior rulemaking to implement the Patient Protection and
Affordable Care Act and propose to implement new provisions.\1\ These
requirements are published under the authority granted to the Secretary
of HHS (the Secretary) by the Affordable Care Act and the Public Health
Service (PHS) Act.\2\ In this document, we are proposing changes
related to some of the Affordable Care Act provisions and parameters we
previously implemented under the authority granted to the Secretary by
Public Law (Pub. L.) 119-21, which CMS refers to as the Working
Families Tax Cut (WFTC) legislation.\3\ Our goal with these
requirements is providing quality, more affordable coverage to
consumers while minimizing administrative burden and ensuring program
integrity. The changes proposed in this rule are also intended to
enhance the role of States in these programs, provide issuers and
States with additional flexibilities, reduce unnecessary regulatory
burden on interested parties, and improve affordability.
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\1\ The Patient Protection and Affordable Care Act (Pub. L. 111-
148) was enacted on March 23, 2010. The Healthcare and Education
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and
revised several provisions of the Patient Protection and Affordable
Care Act, was enacted on March 30, 2010. In this rulemaking, the two
statutes are referred to collectively as the ``Patient Protection
and Affordable Care Act'' or ``Affordable Care Act.''
\2\ See sections 1301, 1302, 1311, 1312, 1313, 1321, 1331, and
1343 of the Affordable Care Act and section 2792 of the PHS Act.
\3\ The WFTC legislation (Pub. L. 119-21) was enacted on July 4,
2025.
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II. Background
A. Legislative and Regulatory Overview
Title I of the Health Insurance Portability and Accountability Act
of 1996 (HIPAA) added a new title XXVII to the PHS Act to establish
various reforms to the group and individual health insurance markets.
These provisions of the PHS Act were later augmented by other laws,
including the Affordable Care Act. Subtitles A and C of title I of the
Affordable Care Act reorganized, amended, and added to the provisions
of part A of title XXVII of the PHS Act relating to group health plans
and health insurance issuers in the group and individual markets. The
term ``group health plan'' includes both insured and self-insured group
health plans.
In the upcoming sections, we summarize sections of the PHS Act,
Affordable Care Act, and WFTC legislation that are relevant to this
proposed rule.
Section 1301(a)(1)(B) of the Affordable Care Act directs all
issuers of qualified health plans (QHPs) to cover the Essential Health
Benefit (EHB) package described in section 1302(a) of the Affordable
Care Act, including coverage of the services described in section
1302(b) of the Affordable Care Act, adherence to the cost-sharing
limits described in section 1302(c) of the Affordable Care Act, and
meeting the Actuarial Value (AV) levels established in section 1302(d)
of the Affordable Care Act. Section 2707(a) of the PHS Act, which is
effective for plan or policy years beginning on or after January 1,
2014, extends the requirement to cover the EHB package to non-
grandfathered individual and small group health insurance coverage,
irrespective of whether such coverage is offered through an Exchange.
In addition, section 2707(b) of the PHS Act directs non-grandfathered
group health plans to ensure that cost sharing under the plan does not
exceed the limitations
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described in section 1302(c)(1) of the Affordable Care Act.
Section 1302 of the Affordable Care Act provides for the
establishment of an EHB package that includes coverage of EHB (as
defined by the Secretary), cost-sharing limits, and AV requirements.
The law directs that EHB be equal in scope to the benefits provided
under a typical employer plan, and that they cover at least the
following 10 general categories: ambulatory patient services; emergency
services; hospitalization; maternity and newborn care; mental health
and substance use disorder services, including behavioral health
treatment; prescription drugs; rehabilitative and habilitative services
and devices; laboratory services; preventive and wellness services and
chronic disease management; and pediatric services, including oral and
vision care.
Section 1302(b)(4)(A) through (D) of the Affordable Care Act
establish that the Secretary must define EHB in a manner that: (1)
reflects appropriate balance among the 10 categories; (2) is not
designed in such a way as to discriminate based on age, disability, or
expected length of life; (3) takes into account the health care needs
of diverse segments of the population; and (4) does not allow denials
of EHB based on age, life expectancy, disability, degree of medical
dependency, or quality of life.
Section 1302(e) of the Affordable Care Act establishes that
catastrophic coverage may only be offered to individuals who: (1) are
under the age of 30 before the beginning of the plan year; (2) have
been certified as exempt from the individual responsibility requirement
because coverage is unaffordable; or (3) have been certified as
experiencing a hardship with respect to obtaining coverage under a
qualified health plan (QHP).
Section 1311(c) of the Affordable Care Act provides the Secretary
the authority to issue regulations to establish criteria for the
certification of QHPs. Among the criteria for certification that the
Secretary must establish by regulation is that QHPs ensure a sufficient
choice of providers (section 1311(c)(1)(B) of the Affordable Care Act)
and include essential community providers that serve predominately low-
income, medically-underserved individuals (section 1311(c)(1)(C)).
Section 1311(d)(4)(A) of the Affordable Care Act requires the Exchange
to implement procedures for the certification, recertification, and
decertification of health plans as QHPs, consistent with guidelines
developed by the Secretary under section 1311(c) of the Affordable Care
Act. Section 1311(e)(1) of the Affordable Care Act grants the Exchange
the authority to certify a health plan as a QHP if the health plan
meets the Secretary's requirements for certification issued under
section 1311(c) of the Affordable Care Act, and the Exchange determines
that making the plan available through the Exchange is in the interests
of qualified individuals and qualified employers in the State. Section
1311(c)(6)(C) of the Affordable Care Act directs the Secretary to
require an Exchange to provide for special enrollment periods (SEPs)
and section 1311(c)(6)(D) of the Affordable Care Act directs the
Secretary to require an Exchange to provide for American Indians and
Alaska Natives (AI/AN), as defined by section 4 of the Indian Health
Care Improvement Act.
Section 1311(d)(3)(B) of the Affordable Care Act permits a State,
at its option, to require QHPs to cover benefits in addition to EHB.
This section also requires a State to make payments, either to the
individual enrollee or to the issuer on behalf of the enrollee, to
defray the cost of these additional State-required benefits.
Section 1312(c) of the Affordable Care Act generally requires a
health insurance issuer to consider all enrollees in all health plans
(except grandfathered health plans) offered by such issuer to be
members of a single risk pool for each of its individual and small
group markets. States have the option to merge the individual and small
group market risk pools under section 1312(c)(3) of the Affordable Care
Act.
Section 1312(e) of the Affordable Care Act provides the Secretary
with the authority to establish procedures under which a State may
allow agents or brokers to (1) enroll qualified individuals and
qualified employers in QHPs offered through Exchanges and (2) assist
individuals in applying for advance payments of the premium tax credit
(APTC) and cost sharing reductions (CSRs) for QHPs sold through an
Exchange.
Sections 1313 and 1321 of the Affordable Care Act provide the
Secretary with the authority to oversee the financial integrity of
State Exchanges, their compliance with HHS standards, and the efficient
and non-discriminatory administration of State Exchange activities.
Section 1313(a)(5)(A) of the Affordable Care Act provides the Secretary
with the authority to implement any measure or procedure that the
Secretary determines is appropriate to reduce fraud and abuse in the
administration of the Exchanges. Section 1321 of the Affordable Care
Act provides for State flexibility in the operation and enforcement of
Exchanges and related requirements.
Section 1321(a) of the Affordable Care Act provides broad authority
for the Secretary to establish standards and regulations to implement
the statutory requirements related to Exchanges, QHPs and other
components of title I of the Affordable Care Act, including such other
requirements as the Secretary determines appropriate. When operating an
FFE under section 1321(c)(1) of the Affordable Care Act, HHS has the
authority under sections 1321(c)(1) and 1311(d)(5)(A) of the Affordable
Care Act to collect and spend user fees. Office of Management and
Budget (OMB) Circular No. A-25 Revised establishes Federal policy
regarding user fees and specifies that a user charge will be assessed
against each identifiable recipient for special benefits derived from
Federal activities beyond those received by the public.\4\
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\4\ See OMB, Circular No. A-25 Revised (1993). <a href="https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf">https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf</a>.
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Section 1321(d) of the Affordable Care Act provides that nothing in
title I of the Affordable Care Act must be construed to preempt any
State law that does not prevent the application of title I of the
Affordable Care Act. Section 1311(k) of the Affordable Care Act
specifies that Exchanges may not establish rules that conflict with or
prevent the application of regulations issued by the Secretary.
Section 1331 of the Affordable Care Act provides States with an
option to establish a BHP. In the States that elect to operate a BHP,
the BHP makes affordable health benefits coverage available for
individuals under age 65 with household incomes between 133 percent and
200 percent of the FPL who are not otherwise eligible for Medicaid, the
Children's Health Insurance Program (CHIP), or affordable employer-
sponsored coverage, or for noncitizens whose income is equal to or
below 200 percent of FPL but are ineligible for Medicaid benefits that
at a minimum consist of the EHB described in section 1302(b) of the
Affordable Care Act. For those States that have expanded Medicaid
coverage under section 1902(a)(10)(A)(i)(VIII) of the Social Security
Act (the Act), the lower income threshold for BHP eligibility is
effectively 138 percent of the FPL due to the application of a required
5 percent income disregard in determining the upper limits of Medicaid
income eligibility (section 1902(e)(14)(I) of the Act).
Section 1343 of the Affordable Care Act establishes a permanent
risk
[[Page 6295]]
adjustment program to provide payments to health insurance issuers that
attract higher-than-average risk enrollees, such as those with chronic
conditions, funded by charges collected from those issuers that attract
lower-than-average risk enrollees, thereby reducing incentives for
issuers to avoid higher-risk enrollees. Section 1343(b) of the
Affordable Care Act provides that the Secretary, in consultation with
States, shall establish criteria and methods to be used in carrying out
the risk adjustment activities under this section. Consistent with
section 1321(c) of the Affordable Care Act, the Secretary is
responsible for operating the HHS risk adjustment program in any State
that fails to do so.\5\
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\5\ See Affordable Care Act section 1341 (transitional
reinsurance program), Affordable Care Act section 1342 (risk
corridors program), and Affordable Care Act section 1343 (HHS risk
adjustment program).
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Section 1401(a) of the Affordable Care Act added section 36B to the
Internal Revenue Code (the Code), which, among other things, requires
that a taxpayer reconcile APTC for a year of coverage with the amount
of the premium tax credit (PTC) the taxpayer is allowed for the year.
Section 1402 of the Affordable Care Act provides for, among other
things, reductions in cost sharing for EHB for qualified low- and
moderate-income enrollees in silver level QHPs offered through the
individual market Exchanges. This section also provides for reductions
in cost sharing for American Indians and Alaska Natives (AI/AN)
enrolled in QHPs at any metal level.
Section 1411(f) of the Affordable Care Act requires the Secretary,
in consultation with the Secretary of the Treasury and the Secretary of
Homeland Security, and the Commissioner of Social Security, to
establish procedures for hearing and making decisions governing appeals
of Exchange eligibility determinations. Section 1411(f)(1)(B) of the
Affordable Care Act requires the Secretary to establish procedures to
redetermine eligibility on a periodic basis, in appropriate
circumstances, including eligibility to purchase a QHP through the
Exchange and for APTC and CSRs.
Section 1411(g) of the Affordable Care Act allows the use of
applicant information only for the limited purpose of, and to the
extent necessary for, ensuring the efficient operation of the Exchange,
including by verifying eligibility to enroll through the Exchange and
for APTC and CSRs, and limits the disclosure of such information.
Section 1413 of the Affordable Care Act directs the Secretary to
establish, subject to minimum requirements, a streamlined enrollment
process for enrollment in QHPs and all insurance affordability
programs.
Section 2718 of the PHS Act, as added by the Affordable Care Act,
generally requires health insurance issuers to submit an annual medical
loss ratio (MLR) report to HHS and provide rebates to enrollees if the
issuers do not achieve specified MLR thresholds.
Section 5000A of the Code, as added by section 1501(b) of the
Affordable Care Act, requires individuals to have minimum essential
coverage (MEC) for each month, qualify for an exemption, or make an
individual shared responsibility payment. Under the Tax Cuts and Jobs
Act, which was enacted on December 22, 2017, the individual shared
responsibility payment is reduced to $0, effective for months beginning
after December 31, 2018. Notwithstanding that reduction, certain
exemptions are still relevant to determine whether individuals aged 30
and above qualify to enroll in catastrophic coverage under Sec. Sec.
155.305(h) and 156.155(a)(5).
Section 5000A(e) of the Internal Revenue Code defines exemptions
from the individual shared responsibility penalty. Section 5000A(e)(5)
of the Internal Revenue Code defines a hardship exemption as a
situation in which an individual experiences difficulty obtaining QHP
coverage and provides the HHS Secretary the authority to determine
whether an individual has experienced a hardship.
Section 71301 of WFTC legislation amends 26 U.S.C. 36B(e),
effective with respect to plan years beginning on or after January 1,
2027, to provide that a PTC is allowed for the coverage of a lawfully
present individual only if the individual is an ``eligible alien.''
Section 71302 of WFTC legislation removes subparagraph (B) of 26
U.S.C. 36B(c)(1), eliminating PTC eligibility for lawfully present
individuals with income below 100 percent of the FPL who are ineligible
for Medicaid due to their immigration status. Section 71302 is
effective for taxable years beginning after December 31, 2025.
Section 71303 of WFTC legislation, effective to taxable years
beginning after December 31, 2027, amends the definition of coverage
month such that it would be imprudent to maintain a 2-year failure to
file and reconcile (FTR) policy for 2028 and beyond, but it would not
be legally prohibited to do so.
Section 71304 of WFTC legislation amends section 36B of the Code,
effective with respect to plan years beginning after December 31, 2025,
such that a plan is not considered a QHP, and therefore no PTC is
allowed for coverage under the plan, if the plan is enrolled in through
a special enrollment period (SEP) that is based solely on the basis of
an individual's expected income to the FPL and not on a change in
circumstance (an ``income-based SEP''). This provision is effective
January 1, 2026.
Section 71305 of WFTC legislation eliminates, effective for taxable
years beginning after December 31, 2025, APTC repayment limits and
requires individuals whose APTC exceeds their PTC to increase their tax
liability by the amount of the excess.
Section 71307 of WFTC legislation amends the definition of ``high
deductible health plan'' to include bronze and catastrophic plans,
effective to months beginning after December 31, 2025.
1. Premium Stabilization Programs
The premium stabilization programs refer to the risk adjustment,
risk corridors, and reinsurance programs established by the Affordable
Care Act.\6\ For past rulemaking, we refer readers to the following
rules:
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\6\ See Affordable Care Act section 1341 (transitional
reinsurance program), Affordable Care Act section 1342 (risk
corridors program), and Affordable Care Act section 1343 (HHS risk
adjustment program).
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<bullet> In the March 23, 2012 Federal Register (77 FR 17219)
(Premium Stabilization Rule), we implemented the premium stabilization
programs.
<bullet> In the March 11, 2013 Federal Register (78 FR 15409) (2014
Payment Notice), we finalized the benefit and payment parameters for
the 2014 benefit year to expand the provisions related to the premium
stabilization programs and set forth payment parameters in those
programs.
<bullet> In the October 30, 2013 Federal Register (78 FR 65046), we
finalized the modification to the HHS risk adjustment methodology
related to community rating States.
<bullet> In the November 6, 2013 Federal Register (78 FR 66653), we
issued a correcting amendment to the 2014 Payment Notice to address how
an enrollee's age for the risk score calculation would be determined
under the HHS risk adjustment methodology.
<bullet> In the March 11, 2014 Federal Register (79 FR 13743) (2015
Payment Notice), we finalized the benefit and payment parameters for
the 2015 benefit year to expand the provisions related to the premium
stabilization programs, set forth certain oversight provisions, and
[[Page 6296]]
establish payment parameters in those programs.
<bullet> In the May 27, 2014 Federal Register (79 FR 30240), we
announced the fiscal year 2015 sequestration rate for the HHS-operated
risk adjustment program.
<bullet> In the February 27, 2015 Federal Register (80 FR 10749)
(2016 Payment Notice), we finalized the benefit and payment parameters
for the 2016 benefit year to expand the provisions related to the
premium stabilization programs, set forth certain oversight provisions,
and establish the payment parameters in those programs.
<bullet> In the March 8, 2016 Federal Register (81 FR 12203) (2017
Payment Notice), we finalized the benefit and payment parameters for
the 2017 benefit year to expand the provisions related to the premium
stabilization programs, set forth certain oversight provisions, and
establish the payment parameters in those programs.
<bullet> In the December 22, 2016 Federal Register (81 FR 94058)
(2018 Payment Notice), we finalized the benefit and payment parameters
for the 2018 benefit year, added the high-cost risk pool parameters to
the HHS risk adjustment methodology, incorporated prescription drug
factors in the adult models, established enrollment duration factors
for the adult models, and finalized policies related to the collection
and use of enrollee-level External Data Gathering Environment (EDGE)
data.
<bullet> In the April 17, 2018 Federal Register (83 FR 16930) (2019
Payment Notice), we finalized the benefit and payment parameters for
the 2019 benefit year, created the State flexibility framework
permitting States to request a reduction in risk adjustment State
transfers calculated by HHS, and adopted a new error rate methodology
for HHS-RADV adjustments to transfers.
<bullet> In the May 11, 2018 Federal Register (83 FR 21925), we
issued a correction to the 2019 HHS risk adjustment coefficients in the
2019 Payment Notice.
<bullet> On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i),
we updated the 2019 benefit year final HHS risk adjustment model
coefficients to reflect an additional recalibration related to an
update to the 2016 enrollee-level EDGE data set.\7\
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\7\ CMS. (2018 July, 27). Updated 2019 Benefit Year Final HHS
Risk Adjustment Model Coefficients. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf</a>.
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<bullet> In the July 30, 2018 Federal Register (83 FR 36456), we
adopted the 2017 benefit year HHS risk adjustment methodology as
established in the final rules issued in the March 23, 2012 (77 FR
17220 through 17252) and March 8, 2016 (81 FR 12204 through 12352)
editions of the Federal Register. The final rule set forth an
additional explanation of the rationale supporting the use of Statewide
average premium in the State payment transfer formula for the 2017
benefit year, including the reasons why the program is operated by HHS
in a budget-neutral manner. The final rule also permitted HHS to resume
2017 benefit year HHS risk adjustment payments and charges. HHS also
provided guidance as to the operation of the HHS-operated risk
adjustment program for the 2017 benefit year in light of the
publication of the final rule.
<bullet> In the December 10, 2018 Federal Register (83 FR 63419),
we adopted the 2018 benefit year HHS risk adjustment methodology as
established in the final rules issued in the March 23, 2012 (77 FR
17219) and the December 22, 2016 (81 FR 94058) editions of the Federal
Register. In the rule, we set forth an additional explanation of the
rationale supporting the use of Statewide average premium in the State
payment transfer formula for the 2018 benefit year, including the
reasons why the program is operated by HHS in a budget-neutral manner.
<bullet> In the April 25, 2019 Federal Register (84 FR 17454) (2020
Payment Notice), we finalized the benefit and payment parameters for
the 2020 benefit year, as well as the policies related to making the
enrollee-level EDGE data available as a limited data set for research
purposes and expanding the HHS uses of the enrollee-level EDGE data,
approval of the request from Alabama to reduce HHS risk adjustment
transfers by 50 percent in the small group market for the 2020 benefit
year, and updates to HHS-RADV program requirements.
<bullet> On May 12, 2020, consistent with Sec. 153.320(b)(1)(i),
we issued the 2021 Benefit Year Final HHS Risk Adjustment Model
Coefficients on the CCIIO website.\8\
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\8\ CMS. (2020, May 12). Final 2021 Benefit Year Final HHS Risk
Adjustment Model Coefficients. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf</a>.
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<bullet> In the May 14, 2020 Federal Register (85 FR 29164) (2021
Payment Notice), we finalized the benefit and payment parameters for
the 2021 benefit year, as well as adopted updates to the HHS risk
adjustment models' hierarchical condition categories (HCCs) to
transition to the 10th revision of the International Classification of
Diseases (ICD-10) codes, approved the request from Alabama to reduce
HHS risk adjustment transfers by 50 percent in the small group market
for the 2021 benefit year, and modified the outlier identification
process under the HHS-RADV program.
<bullet> In the December 1, 2020 Federal Register (85 FR 76979)
(Amendments to the HHS-Operated Risk Adjustment Data Validation Under
the Patient Protection and Affordable Care Act's HHS-Operated Risk
Adjustment Program (2020 HHS-RADV Amendments Rule)), we adopted the
creation and application of Super HCCs in the sorting step that assigns
HCCs to failure rate groups, finalized a sliding scale adjustment in
HHS-RADV error rate calculation, and added a constraint for negative
error rate outliers with a negative error rate. We also established a
transition from the prospective application of HHS-RADV adjustments to
apply HHS-RADV results to risk scores from the same benefit year as
that being audited.
<bullet> In the May 5, 2021 Federal Register (86 FR 24140) (part 2
of the 2022 Payment Notice), we finalized a subset of proposals from
the December 4, 2020 Federal Register (85 FR 78572) (the 2022 Payment
Notice proposed rule), including policy and regulatory revisions
related to the HHS-operated risk adjustment program, finalization of
the benefit and payment parameters for the 2022 benefit year, and
approval of the request from Alabama to reduce HHS risk adjustment
transfers by 50 percent in the individual and small group markets for
the 2022 benefit year. In addition, this final rule established a
revised schedule of collections for HHS-RADV and updated the provisions
regulating second validation audit (SVA) and initial validation audit
(IVA) entities.
<bullet> On July 19, 2021, consistent with Sec. 153.320(b)(1)(i),
we released Updated 2022 Benefit Year Final HHS Risk Adjustment Model
Coefficients on the CCIIO website, announcing some minor revisions to
the 2022 benefit year final HHS risk adjustment adult model
coefficients.\9\
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\9\ CMS. (2021, July 19). 2022 Benefit Year Final HHS Risk
Adjustment Model Coefficients. <a href="https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf">https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf</a>.
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<bullet> In the May 6, 2022 Federal Register (87 FR 27208) (2023
Payment Notice), we finalized revisions related to the HHS-operated
risk adjustment program, including the benefit and payment parameters
for the 2023 benefit year, HHS risk adjustment model recalibration, and
policies related to the collection and extraction of enrollee-level
EDGE data. We also finalized the
[[Page 6297]]
adoption of the interacted HCC count specification for the adult and
child models, along with modified enrollment duration factors for the
adult models, beginning with the 2023 benefit year.\10\ We also
repealed the ability for States, other than prior participants, to
request a reduction in HHS risk adjustment State transfers starting
with the 2024 benefit year. We approved a 25 percent reduction to 2023
benefit year HHS risk adjustment transfers in Alabama's individual
market and a 10 percent reduction to 2023 benefit year HHS risk
adjustment transfers in Alabama's small group market. We finalized
further refinements to the HHS-RADV error rate calculation methodology
beginning with the 2021 benefit year.
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\10\ On May 6, 2022, we also published the 2023 Benefit Year
Final HHS Risk Adjustment Model Coefficients. CMS. (2022, May 6).
2023 Benefit Year Final HHS Risk Adjustment Model Coefficients.
<a href="https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf">https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf</a>.
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<bullet> In the April 27, 2023 Federal Register (88 FR 25740) (2024
Payment Notice), we finalized the benefit and payment parameters for
the 2024 benefit year, amended the EDGE discrepancy materiality
threshold and data collection requirements, and reduced the risk
adjustment user fee. For the 2024 benefit year, we approved 50 percent
reductions to HHS risk adjustment transfers for Alabama's individual
and small group markets and repealed prior participant States' ability
to request reductions of their risk adjustment transfers for the 2025
benefit year and beyond. We finalized refinements to HHS-RADV program
requirements, such as shortening the window to confirm SVA findings or
file a discrepancy report, changing the HHS-RADV materiality threshold
for random and targeted sampling, and no longer exempting exiting
issuers from adjustments to risk scores and HHS risk adjustment
transfers when they are negative error rate outliers. We announced the
discontinuance of the Lifelong Permanent Condition List and Non-EDGE
Claims in HHS-RADV beginning with the 2022 benefit year.
<bullet> In the April 15, 2024 Federal Register (89 FR 26218) (2025
Payment Notice), we finalized the benefit and payment parameters for
the 2025 benefit year, including the 2025 risk adjustment models and
updated the adjustment factors for the receipt of CSRs for the AI/AN
subpopulation who are enrolled in zero and limited cost-sharing plans
to improve prediction in the HHS risk adjustment models. In addition,
we finalized that in certain cases, we may require a corrective action
plan (CAP) to address an observation identified in an HHS risk
adjustment program audit.
<bullet> In the January 15, 2025 Federal Register (90 FR 4424)
(2026 Payment Notice), we finalized the benefit and payment parameters
for the 2026 benefit year, including the 2026 risk adjustment models
and updated the adjustment factors, phased out the market pricing
adjustment to the plan liability associated with Hepatitis C drugs, and
incorporated of pre-exposure prophylaxis (PrEP) as an Affiliated Cost
Factor (ACF) starting with the 2026 benefit year. Beginning with the
2025 benefit year, we excluded enrollees without HCCs from the IVA
sample, removed the Finite Population Correction (FPC) from the IVA
sampling methodology, and replaced the source of the Neyman allocation
data used for HHS-RADV sampling with the most recent 3 consecutive
years of HHS-RADV data. Beginning with the 2024 benefit year, we
modified the SVA pairwise means test and increased the initial SVA
subsample size. At Sec. 156.1220(a), we established a new materiality
threshold for HHS-RADV appeals.
2. Program Integrity
We have finalized program integrity standards related to the
Exchanges and premium stabilization programs in two rules: the ``first
Program Integrity Rule'' issued in the August 30, 2013 Federal Register
(78 FR 54069), and the ``second Program Integrity Rule'' issued in the
October 30, 2013 Federal Register (78 FR 65045). We also refer readers
to the 2019 Patient Protection and Affordable Care Act; Exchange
Program Integrity final rule (2019 Program Integrity Rule) issued in
the December 27, 2019 Federal Register (84 FR 71674), as well as the
Patient Protection and Affordable Care Act; Marketplace Integrity and
Affordability final rule (2025 Marketplace Integrity and Affordability
final rule) issued in the June 25, 2025 Federal Register (90 FR 27074).
In the May 6, 2022 Federal Register (87 FR 27208) (2023 Payment
Notice), we finalized policies to address certain agent, broker, and
web-broker practices and conduct. In the April 27, 2023 Federal
Register (88 FR 25740) (2024 Payment Notice), we implemented the
improper payment pre-testing and assessment (IPPTA) requirements for
State Exchanges to ensure adherence to the Payment Integrity
Information Act of 2019. In addition, we finalized allowing additional
time for HHS to review evidence submitted by agents and brokers to
rebut allegations pertaining to Exchange Agreement suspensions or
terminations. We also introduced consent and eligibility application
documentation requirements for agents, brokers, and web-brokers that
assist Exchange consumers in FFE and SBE-FP States.
In the 2025 Payment Notice, issued in the April 15, 2024 Federal
Register (89 FR 26218), we finalized that the CMS Administrator is the
entity responsible for handling requests by agents, brokers, and web-
brokers for reconsideration of HHS' decision to terminate their
Exchange agreement(s) for cause. We also finalized changes to
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
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 certain
circumstances until the incident, breach, or noncompliance are remedied
or sufficiently mitigated to HHS' satisfaction.
3. Market Rules
In the February 27, 2013 Federal Register (78 FR 13406), we issued
the health insurance market rules, including provisions related to the
single risk pool. We clarified that issuers may make a plan-specific
adjustment to the market-wide index rate that accounts for differences
between catastrophic and non-catastrophic plans in expected average
enrollee gross spending and expected average risk adjustment payment
transfers. This plan-specific adjustment would be uniform across all of
an issuer's catastrophic plans (that is, risk across all catastrophic
plans must be pooled).
In that rule we also codified that a health plan is a catastrophic
plan if it: (1) meets all applicable requirements for health insurance
coverage in the individual market; (2) does not offer coverage at the
bronze, silver, gold, or platinum levels of coverage (3) does not
provide coverage of essential health benefits until the enrolled
individual reaches the annual limitation in cost sharing; and (4)
covers at least three primary care visits per year before reaching the
deductible. A catastrophic plan may not impose any cost-sharing
requirements for preventive services identified in section 2713 of the
PHS Act. We also codified the statutory
[[Page 6298]]
eligibility criteria identified in section 1302(e)(2) of the Affordable
Care Act.
We amended requirements related to index rates under the single
risk pool provision in a final rule issued in the July 2, 2013 Federal
Register (78 FR 39870). In the October 30, 2013 Federal Register (78 FR
65046), we clarified when issuers may establish and update premium
rates. In the March 8, 2016 Federal Register (81 FR 12203), we
clarified single risk pool provisions related to student health
insurance coverage. We finalized minor adjustments to the single risk
pool regulations in the 2018 Payment Notice, issued in the December 22,
2016 Federal Register (81 FR 94058).
4. Rate Review
In the May 23, 2011 Federal Register (76 FR 29963) (Rate Review
Rule), we implemented a rate review program. We amended the provisions
of the Rate Review Rule in final rules published in the September 6,
2011 Federal Register (76 FR 54969), the February 27, 2013 Federal
Register (78 FR 13405), the May 27, 2014 Federal Register (79 FR
30239), the February 27, 2015 Federal Register (80 FR 10749), the March
8, 2016 Federal Register (81 FR 12203) and the December 22, 2016
Federal Register (81 FR 94058).
5. Exchanges
We requested comment relating to Exchanges in the August 3, 2010
Federal Register (75 FR 45584). We issued initial guidance to States on
Exchanges on November 18, 2010. In the March 27, 2012 Federal Register
(77 FR 18310) (Exchange Establishment Rule), we implemented the
Affordable Insurance Exchanges (Exchanges), consistent with title I of
the Affordable Care Act, to provide competitive marketplaces for
individuals and small employers to directly compare available private
health insurance coverage options based on price, quality, and other
factors. This included implementation of components of the Exchanges
and standards for eligibility for Exchanges, as well as network
adequacy and essential community provider (ECP) certification
standards.
In the 2014 Payment Notice and the Amendments to the HHS Notice of
Benefit and Payment Parameters for 2014 interim final rule, issued in
the March 11, 2013 Federal Register (78 FR 15541), we set forth
standards related to Exchange user fees. We established an adjustment
to the FFE user fee in the Coverage of Certain Preventive Services
under the Affordable Care Act final rule, issued in the July 2, 2013
Federal Register (78 FR 39869) (Preventive Services Rule).
In the 2016 Payment Notice, we also set forth the ECP certification
standard at Sec. 156.235, with revisions in the 2017 Payment Notice in
the March 8, 2016 Federal Register (81 FR 12203) and the 2018 Payment
Notice in the December 22, 2016 Federal Register (81 FR 94058).
In the 2018 Payment Notice, issued in the December 22, 2016 Federal
Register (81 FR 94058), we set forth the standards for the request for
reconsideration of denial of QHP certification specific to the FFEs at
Sec. 155.1090.
In an interim final rule, issued in the May 11, 2016 Federal
Register (81 FR 29146), we made amendments to the parameters of certain
SEPs (2016 Interim Final Rule).
We finalized these in the 2018 Payment Notice, issued in the
December 22, 2016 Federal Register (81 FR 94058).
In the Market Stabilization final rule, issued in the April 18,
2017 Federal Register (82 FR 18346), we amended standards relating to
SEPs and QHP certification. In the 2019 Payment Notice, issued in the
April 17, 2018 Federal Register (83 FR 16930), we modified parameters
around certain SEPs. In the April 25, 2019 Federal Register (84 FR
17454), the 2020 Payment Notice established a new SEP for certain
individuals who become newly eligible for APTC.
In the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment
Notice), we finalized revisions to the parameters of SEPs and the
quality rating information display standards for State Exchanges and
amended the periodic data matching requirements.
In the January 19, 2021 Federal Register (86 FR 6138) (part 1 of
the 2022 Payment Notice), we finalized only a subset of the proposals
in the 2022 Payment Notice proposed rule. In the May 5, 2021 Federal
Register (86 FR 24140), we issued part 2 of the 2022 Payment Notice. In
the September 27, 2021 Federal Register (86 FR 53412) (part 3 of the
2022 Payment Notice), in conjunction with the Department of the
Treasury, we finalized amendments to certain policies in part 1 of the
2022 Payment Notice.
In the May 6, 2022 Federal Register (87 FR 27208), we finalized
changes to maintain the user fee rate for issuers offering plans
through the FFEs and maintain the user fee rate for issuers offering
plans through the SBE-FPs for the 2023 benefit year. We also finalized
various policies to address certain agent, broker, and web-broker
practices and conduct. We also finalized updates to the requirement
that all Exchanges conduct SEP verifications.
In the 2024 Payment Notice, issued in the April 27, 2023 Federal
Register (88 FR 25740), we revised Exchange Blueprint approval
timelines, lowered the user fee rate for QHPs in the FFEs and SBE-FPs,
and amended re-enrollment hierarchies for enrollees. We finalized a
requirement that all plans seeking certification on the Exchanges
utilize a provider network. We also finalized policies to update FFE
and SBE-FP standardized plan options; reduce the risk of plan choice
overload on the FFEs and SBE-FPs by limiting the number of non-
standardized plan options that issuers may offer through Exchanges on
the Federal platform; and ensure correct QHP information. In addition,
we amended coverage effective date rules, lengthened the SEP from 60 to
90 days for those who lose Medicaid coverage, and prohibited QHPs on
FFEs and SBE-FPs from terminating coverage mid-year for dependent
children who reach the applicable maximum age. We also finalized
policies on verifying consumer income and permitting door-to-door
assisters to solicit consumers. We finalized provider network and ECP
policies for QHPs.
In the 2025 Payment Notice, issued in the April 15, 2024 Federal
Register (89 FR 26218), we required a State seeking to operate a State
Exchange to first operate an SBE-FP for at least one plan year, revised
Exchange Blueprint requirements for States transitioning to a State
Exchange, established additional minimum standards for Exchange call
center operations, and required an Exchange to operate a centralized
eligibility and enrollment platform on its website. We required State
Exchanges and State Medicaid agencies to remit payment to HHS for their
use of certain income data, amended re-enrollment hierarchies for
enrollees enrolled in catastrophic coverage, revised the parameters
around a State Exchange adopting an alternative open enrollment period,
and extended the availability of a SEP for APTC-eligible qualified
individuals with a projected annual household income no greater than
150 percent of the FPL. We finalized provider network adequacy policies
applicable to such Exchanges for Plan Year (PY) 2026 and subsequent
plan years. We finalized the policy to maintain FFE and SBE-FP
standardized plan option metal levels from the 2024 Payment Notice and
finalized an exceptions process to the limitation on non-standardized
plan options in FFEs and SBE-FPs. We also finalized the
[[Page 6299]]
requirement for Exchanges to provide notification to enrollees or their
tax filers who have failed to file their Federal income taxes and
reconcile APTC for 1 tax year.
In the 2026 Payment Notice, published in the January 15, 2025
Federal Register (90 FR 4424), we codified a timeliness standard for
State Exchanges to review and resolve enrollment data inaccuracies at
Sec. 155.400(d)(1), finalized at Sec. 155.1000 that an Exchange may
deny certification to any plan that does not meet the criteria at Sec.
155.1000(c), and revised the standards at Sec. 155.1090 for an issuer
to request a reconsideration of a denial of certification specific to
the FFEs. We also finalized publicly releasing certain data and
information that State Exchanges submit to HHS, affirmed that CSR
loading practices permitted by State regulators are permissible under
Federal law to the extent that they are actuarially justified and the
issuer does not receive reimbursement for such CSR, and finalized that
we will only release a single, final version of the AV Calculator. We
also updated the standardized plan option designs for PY 2026 to ensure
these plans continue to have AVs within the permissible de minimis
range for each metal level, amended Sec. 156.201 to require issuers to
meaningfully differentiate standardized plan options from one another,
and finalized that HHS would conduct ECP certification reviews in
States performing plan management functions beginning PY 2026. We also
finalized updates affecting the exchanges in the 2025 Marketplace
Integrity and Affordability final rule issued in the June 25, 2025
Federal Register (90 FR 27074).
6. Essential Health Benefits
We established requirements relating to EHB in the Standards
Related to Essential Health Benefits, Actuarial Value, and
Accreditation Final Rule, which was issued in the February 25, 2013
Federal Register (78 FR 12834) (EHB Rule). We established at Sec.
156.135(a) that AV is generally to be calculated using the AV
Calculator developed and made available by HHS for a given benefit
year. In the 2015 Payment Notice (79 FR 13743), we established at Sec.
156.135(g) provisions for updating the AV Calculator in future plan
years. In the 2017 Payment Notice (81 FR 12349), we amended the
provisions at Sec. 156.135(g) to allow for additional flexibility in
our approach and options for updating of the AV Calculator.
In the 2025 Payment Notice, issued in the April 15, 2024 Federal
Register (89 FR 26218), we revised Sec. 155.170(a) to codify that
benefits covered in a State's EHB-benchmark plan are not considered in
addition to EHB, even if they had been required by State action taking
place after December 31, 2011, other than for purposes of compliance
with Federal requirements. We finalized three revisions to the
standards for State selection of EHB-benchmark plans for benefit years
beginning on or after January 1, 2026: revising the typicality standard
at Sec. 156.111 for States to demonstrate that their new EHB-benchmark
plan provides a scope of benefits that is equal to that of a typical
employer plan in the State; revising requirements such that States do
not need to submit a formulary drug list as part of their application
unless they are changing their prescription drug EHB; and consolidating
options for States to change their EHB-benchmark plans. At Sec.
156.115(d), we removed the prohibition on issuers from including
routine non-pediatric dental services as an EHB beginning with PY 2027.
In the 2026 Payment Notice, published in the January 15, 2025
Federal Register (90 FR 4424), we revised Sec. 156.80(d)(2)(i) to
require the actuarially justified plan-specific factors by which an
issuer may vary premium rates for a particular plan from its market-
wide index rate include the AV and cost-sharing design of the plan.
7. Quality Improvement Strategy
We issued regulations in Sec. 155.200(d) to direct Exchanges to
evaluate quality improvement strategies, and Sec. 156.200(b) to direct
QHP issuers to implement and report on a quality improvement strategy
or strategies consistent with section 1311(g) standards as QHP
certification criteria for participation in an Exchange. In the 2016
Payment Notice, issued in the February 27, 2015 Federal Register (80 FR
10749), we finalized regulations at Sec. 156.1130 to establish
standards and the associated timeframe for QHP issuers to submit the
necessary information to implement quality improvement strategy
standards for QHPs offered through an Exchange. In the 2026 Payment
Notice, published in the January 15, 2025 Federal Register (90 FR
4424), we finalized sharing summary-level QIS information publicly on
an annual basis beginning on January 1, 2026, with information QHP
issuers submit during the PY 2025 QHP Application Period.
8. Medical Loss Ratio (MLR)
We published a request for comment on section 2718 of the PHS Act
in the April 14, 2010 Federal Register (75 FR 19297), and published an
interim final rule with a 60-day comment period relating to the MLR
program on December 1, 2010 (75 FR 74863). A final rule with a 30-day
comment period was published in the December 7, 2011 Federal Register
(76 FR 76573). An interim final rule with a 60-day comment period was
published in the December 7, 2011 Federal Register (76 FR 76595). A
final rule was published in the May 16, 2012 Federal Register (77 FR
28790). The MLR program requirements were amended in final rules
published in the March 11, 2014 Federal Register (79 FR 13743), the May
27, 2014 Federal Register (79 FR 30339), the February 27, 2015 Federal
Register (80 FR 10749), the March 8, 2016 Federal Register (81 FR
12203), the December 22, 2016 Federal Register (81 FR 94183), the April
17, 2018 Federal Register (83 FR 16930), the May 14, 2020 Federal
Register (85 FR 29164), the May 5, 2021 Federal Register (86 FR 24140),
and the May 6, 2022 Federal Register (87 FR 27208), and an interim
final rule that was published in the September 2, 2020 Federal Register
(85 FR 54820).
B. Summary of Major Provisions
The regulations outlined in this proposed rule would be codified in
42 CFR part 600, and 45 CFR parts 150, 153, 155, 156 and 158.
1. 42 CFR Part 600
We propose to make updates in 42 CFR 600.5 to align BHP regulations
with section 71301 of the WFTC legislation. Section 71301 of the WFTC
legislation amended section 36B of the Code to provide that a PTC is
allowed for the QHP coverage of a noncitizen lawfully present only if
he or she is an ``eligible alien'', effective for plan years beginning
on or after January 1, 2027. Because Federal BHP payments to States are
based in part on the amount of PTC an individual enrolled in the BHP is
eligible for and would have qualified for had he or she been enrolled
in a QHP through an Exchange, only lawfully present noncitizens who are
considered to be ``eligible aliens'' will generate Federal BHP payments
to the State. We propose to add a new definition of ``eligible
noncitizen at 42 CFR 600.5, cross-referencing 45 CFR 155.20.
2. 45 CFR Part 153
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2026, the HHS-operated risk
adjustment program is subject to the fiscal year 2026
[[Page 6300]]
sequestration.\11\ Therefore, the HHS-operated risk adjustment program
will sequester payments made from fiscal year 2026 resources (that is,
funds collected during the 2026 fiscal year) at a rate of 5.7 percent.
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\11\ OMB. (2025). OMB Report to the Congress on the BBEDCA 251A
Sequestration for Fiscal Year 2026. <a href="https://www.whitehouse.gov/wp-content/uploads/2025/04/OMB-Report-to-the-Congress-on-the-BBEDCA-251A-Sequestration-for-Fiscal-Year-2026.pdf">https://www.whitehouse.gov/wp-content/uploads/2025/04/OMB-Report-to-the-Congress-on-the-BBEDCA-251A-Sequestration-for-Fiscal-Year-2026.pdf</a>.
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We propose to recalibrate the 2027 benefit year HHS risk adjustment
models using the 2021, 2022, and 2023 benefit year enrollee-level EDGE
data and solicit comment on whether we should retain separate risk
adjustment transfer calculations under the State payment transfer
formula for individual catastrophic plans and individual non-
catastrophic plans. We also propose a risk adjustment user fee rate for
the 2027 benefit year of $0.20 per member per month (PMPM).
We propose to modify one intermediate step of the HHS-RADV error
estimation methodology starting with 2025 benefit year HHS-RADV to add
an additional scaling factor to appropriately estimate the proportion
of the issuer's total plan liability risk score (PLRS) that is HCC-
related after the removal of no HCC enrollees from the IVA sample
beginning with 2025 benefit year HHS-RADV, as finalized in the 2026
Payment Notice (90 FR 4424).
3. 45 CFR Part 154
We propose to require issuers that intend to load rates to account
for unpaid CSRs for the applicable rating year to submit certain
information related to CSR loading in their Unified Rate Review
Templates (URRTs) and the Actuarial Memoranda for each filing year in
which CSRs are not funded beginning with PY 2027 rate filings.\12\
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\12\ CMS 10379/OMB Control Number: 0938-1141.
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4. 45 CFR Part 155
We propose to remove the requirement at Sec. 155.105(b)(4) that a
State seeking to operate a State Exchange must first operate an SBE-FP
for at least one plan year.
We propose to amend Sec. 155.106(a)(2) to rescind the requirement
that as part of a State's activities for its establishment of a State
Exchange, the State must provide supporting documentation demonstrating
progress toward meeting or implementing State Exchange Blueprint
requirements, given preexisting processes per the State Blueprint
Application \13\ for CMS to collect supporting documentation from a
State as part of a State Exchange implementation efforts.
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\13\ CMS-10416/OMB control number: 0938-1172.
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We propose to amend Sec. 155.170(a) to provide that beginning with
PY 2027, a State-required benefit would be considered ``in addition to
EHB'' (and thus not EHB) if it is: required by a State action taking
place after December 31, 2011; applicable to the small group and/or
individual markets; specific to required care, treatment, or services;
and not required by State action for purposes of compliance with
Federal requirements. Under this proposal, such State-required benefits
would be considered in addition to EHB regardless of whether the
required benefits are embedded in the State's EHB-benchmark plan. We
also propose revisions to the regulatory text at Sec. Sec.
155.170(a)(2) and 156.115(a) to align with this proposal.
We propose amendments to Sec. 155.205(b) to amend the requirement
that a State Exchange operate a centralized eligibility and enrollment
consumer interface on the Exchange's website for an individual to
submit a single streamlined eligibility application and subsequently
select a QHP following a determination of eligibility. Under this
proposal, a State Exchange could choose to operate a centralized
eligibility and enrollment consumer interface on the Exchange's website
through which individuals may submit an application and enroll in a
QHP, or a State Exchange could provide such functionality exclusively
through one or more State Exchange-approved consumer websites operated
by a web-broker . . .
We propose at Sec. 155.221(k) that State Exchanges may elect a new
EDE option (SBE-EDE option), in which a State Exchange could seek HHS
approval to allow web-brokers to operate enrollment websites as the
exclusive pathway through which consumers can apply, receive an
eligibility determination from the Exchange, and purchase an individual
market QHP offered through the Exchange with APTC and CSRs, if
otherwise eligible.
We propose changes to the existing regulatory authority under Sec.
155.220(j)(2)(ii) and (iii) to require agents, brokers, and web-brokers
to use an HHS-approved and created consumer consent form to meet the
eligibility application review requirements and consumer consent
documentation requirements.\14\ Our proposal would eliminate the
current flexibility, which allows agents, brokers, and web-brokers to
use their own standards and templates for documentation requirements,
and instead sets a universal standard that requires agents, brokers,
and web-brokers to use the HHS-approved and created consumer consent
form.\15\ We also propose to revise Sec. 155.220(j)(2)(ii) and
(j)(2)(iii) to clarify what constitutes a consumer ``taking an action''
for eligibility application review and confirmation and providing
consumer consent.
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\14\ CMS-10840/OMB Control Number: 0938-1438.
\15\ For the current HHS-approved and created form, see CMS
Model Consent Form for Marketplace Agents, Brokers, Web-brokers, and
Agencies. Available at <a href="https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf">https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf</a>.
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We propose several new provisions at Sec. 155.220(j)(3) to
establish more robust standards of conduct related to the marketing
practices of agents, brokers, and web-brokers which would include
examples of prohibited marketing practices. Furthermore, we propose to
require agents, brokers, and web-brokers to provide HHS marketing
documentation in response to monitoring, audit, and enforcement
activities. We also propose to notify agents, brokers, and web-brokers
that they may be held responsible for marketing content created,
written, released, or otherwise produced by an entity on their behalf.
We propose to discontinue the vendor program, which allows for
certain training and information verification functions to be provided
by HHS-approved vendors. To accomplish this, we propose removing Sec.
155.222.
We propose to make updates in Sec. 155.20, Sec. 155.305(f)(1),
and Sec. 155.320 to align Exchange regulations with section 71301 of
the WFTC legislation. Section 71301 of the WFTC legislation amended
section 36B of the Code to provide that PTC is allowed for the QHP
coverage of a lawfully present noncitizen only if such noncitizen is an
``eligible alien.'' It also makes conforming amendments to section 1411
of the Affordable Care Act requiring Exchanges to verify applicants'
``eligible alien'' status effective for taxable years beginning after
December 31, 2026. We propose to add a new definition in Sec. 155.20,
to update our APTC eligibility regulations at Sec. 155.305(f)(1), and
to add to our verification regulations in Sec. 155.320 to align
Exchange eligibility and verification rules with section 71301 of the
WFTC legislation. This proposal would also impact Federal payments to
States effective January 1, 2027 for individuals enrolled in the BHP
who are lawfully present noncitizens but are not ``eligible aliens,''
as Federal payments to States for these individuals are also no longer
allowed.
[[Page 6301]]
To align Exchange regulations with section 71302 of the WFTC
legislation, we propose to remove Sec. 155.305(f)(2) and make
conforming updates to Sec. 155.320(c)(3)(iii)(A) and 155.420(d)(13).
Section 71302 of the WFTC legislation amended section 36B(c) of the
Code to provide that PTC is no longer allowed for noncitizens lawfully
present in the United States who were ineligible for Medicaid due to
their immigration status and have household income below 100 percent of
the FPL. Removing Sec. 155.305(f)(2) and updating Sec.
155.320(c)(3)(iii)(A) would align Exchange APTC eligibility and
verification rules with section 71302 of the WFTC legislation. This
proposal would also impact Federal payments to States for individuals
enrolled in the BHP who are ineligible for Medicaid due to their
immigration status and with household income below 100 percent of the
FPL, for whom Federal payments to States are also no longer allowed.
We propose to revise the failure to file and reconcile process at
Sec. 155.305(f)(4) such that Exchanges on the Federal platform would
conduct the 1-year policy beginning in PY 2027. State Exchanges would
have the option to conduct either the 1-year or 2-year policy in PY
2027, but would be required to conduct the 1-year policy beginning in
PY 2028). Under the 1-year policy, if finalized, an Exchange must
determine a tax filer ineligible for APTC if: (1) HHS notifies the
Exchange that the tax filer (or their spouse if the tax filer is a
married couple) received APTC for a prior year for which tax data will
be utilized for verification of income, and (2) the tax filer or tax
filer's spouse did not comply with the requirement to file a Federal
income tax return and reconcile APTC for that year. This proposal would
align with the statutory requirement in section 71303 of the WFTC
legislation that effectively requires Exchanges to follow the 1-year
policy as a requirement for a month to be a coverage month under
section 36B of the Code as of PY 2028. We are also proposing to remove
the notice requirement at Sec. 155.305(f)(4)(ii) for PY 2027 to
conform with the notice policy under the PY 2026 policy.
We seek comment on considerations for future policy development and
implementation under section 71303 of the WFTC legislation, which
imposes new requirements on Exchanges related to eligibility
verification. Specifically, we seek comment on: operational
considerations for interested parties; effective rollout and
communications; required timelines for interested parties to comply
with the law; anticipated complexity, costs, burden, enrollment
impacts; and any State-specific considerations.
We propose to revise Sec. 155.320(c) such that all Exchanges are
required to continue conducting the income verifications changes
introduced in the Patient Protection and Affordable Care Act;
Marketplace Integrity and Affordability final rule (90 FR 27074) (the
2025 Marketplace Integrity and Affordability final rule) in PY 2027 and
beyond. Specifically, we propose updating Sec. 155.320(c)(3)(iii) and
Sec. 155.320 (c)(3)(vi)(C)(2) to extend the requirement indefinitely
to create income data matching issues (DMIs) when trusted data sources
indicate that projected consumer household income is under 100 percent
of the FPL. Additionally, we propose removing Sec. 155.320(c)(5),
which outlines the requirement to accept the annual household income
attestation when no tax data is returned for a household.
We seek comment on whether we should regulate the option for
issuers to implement the fixed-dollar and/or gross percentage-based
premium payment thresholds in Sec. 155.400(g) for PY 2027 and beyond.
Currently, issuers are only able to implement a net premium percentage-
based premium threshold for PY 2026, and effective January 1, 2027,
issuers will be able to implement the fixed-dollar and/or either net or
gross premium percentage-based thresholds, which was finalized in the
2025 Marketplace Integrity and Affordability final rule.
We propose to remove Sec. 155.420(d)(16) such that Exchanges would
continue to be prohibited from offering the 150 percent FPL SEP in PY
2027 and beyond, in alignment with section 71304 of the WFTC
legislation. We propose to make conforming amendments at Sec. Sec.
155.420(a)(4)(ii)(D), 155.420(b)(2)(vii), and 155.420(a)(4)(iii).
We propose to revise Sec. 155.420(g) to remove the restriction for
Exchanges on the Federal platform to only conduct Special Enrollment
Period Verification (SEPV) for Loss of Minimum Essential Coverage
(MEC). We also propose to require Exchanges on the Federal platform to
conduct SEPV for at least 75 percent of new enrollments. These
proposals were finalized in the 2025 Marketplace Affordability and
Integrity rule but were stayed in City of Columbus et. al. v. Kennedy
et. al.\16\ We are therefore reproposing these provisions.
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\16\ City of Columbus v. Kennedy, 796 F. Supp. 3d 123, 159-60
(D. Md. 2025).
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We propose to amend Sec. 155.605 to codify and expand hardship
exemption eligibility. Specifically, this proposal would allow
individuals who are ineligible for APTC or CSRs due to projected
household income below 100 percent or above 250 percent of the FPL to
qualify for a hardship exemption under Sec. 155.605(d)(1)(iii). This
change would allow individuals aged 30 and older who receive this
hardship exemption to enroll in catastrophic coverage, if otherwise
eligible.
We propose, for plan years beginning on or after January 1, 2027,
to amend Sec. 155.1050(a)(2) to remove the requirements at Sec.
155.1050(a)(2)(i) and (ii) that State Exchanges and SBE-FPs establish
and impose quantitative time and distance network adequacy standards
that are at least as stringent as standards for QHPs participating on
the FFEs and to no longer require State Exchanges and SBE-FPs to
conduct quantitative network adequacy reviews to evaluate a plan's
compliance with certain network adequacy standards under Sec. 156.230
prior to certifying any plan as a QHP. Instead, we propose to restore
the requirement at Sec. 155.1050(a)(2) that State Exchanges and SBE-
FPs ensure that each QHP provides sufficient access to providers in a
manner that meets applicable standards consistent with Sec.
156.230(a)(1)(ii) and (a)(1)(iii) for network plans, or proposed Sec.
156.236(a) for non-network plans, as applicable. We also propose at new
Sec. 155.1050(d) to defer provider access reviews of QHP issuers, with
or without a provider network, applying for certification as a QHP to
be offered through the FFE to FFE States that elect to conduct such
reviews, should the FFE State demonstrate sufficient authority and the
technical capacity to conduct such reviews by satisfying the applicable
criteria to be considered to have an Effective Provider Access Review
Program under proposed Sec. 155.1050(d)(2) through (d)(4).
We propose to implement new requirements for an Effective Essential
Community Provider Review Program by adding Sec. 155.1051. Under this
proposal, FFE States may elect to conduct their own ECP certification
reviews of issuers with or without a provider network that are applying
for certification to be offered as a QHP through an FFE, including in
States performing plan management. In order to conduct their own
reviews, we propose that FFE States would be required to demonstrate
that they have sufficient authority and the technical capacity to
conduct these reviews by satisfying the applicable criteria to be
considered to have an Effective Essential Community Provider Review
Program under proposed Sec. 155.1051.
[[Page 6302]]
We propose to amend Sec. 155.1200(d) and add new paragraph (e) to
permit State Exchanges to satisfy certain requirements of the
independent external programmatic audit, as outlined in paragraph (d),
by completing the SEIPM process that would be established at 45 CFR
155, subpart Q.
We propose to add new subpart Q (Sec. Sec. 155.1600 through 1650)
to establish the SEIPM program. The Payment Integrity Information Act
of 2019 (PIIA) requires Federal agencies to annually review, measure,
and report on the programs they administer that have been determined to
be susceptible to significant improper payments. To satisfy the
requirements of PIIA, we are proposing to measure improper payments of
APTC that are administered by State Exchanges and to annually report
statistically valid improper payment estimates in the HHS Agency
Financial Report.
5. 45 CFR part 156
We propose the 2027 benefit year FFE and SBE-FP user fee rates of
2.5 percent and 2.0 percent of total monthly premiums, respectively.
We are pausing review of State applications to select EHB-benchmark
plans in accordance with Sec. 156.111. We are reviewing section 1302
of the Affordable Care Act and are considering future rulemaking to
revise Sec. 156.111 and EHB standards more broadly.
We propose to revise Sec. 156.115(d) to prohibit issuers from
including routine non-pediatric dental services as an EHB.
We propose to modify the requirements for catastrophic plans in
Sec. 156.155 to specify that a catastrophic plan has a plan term of
either 1 year, or of multiple consecutive years not to exceed 10 years.
We propose that catastrophic plans with terms of at least 2 years may
utilize value-based insurance designs to offer benefits for preventive
services pursuant to section 2713(c) of the PHS Act, without the
beneficiary having to first satisfy their deductible or annual cost-
sharing limitation. We also propose to amend Sec. 156.130 to specify
that, in the case of a catastrophic plan with a consecutive multi-year
term, the annual limitation on cost sharing for the initial plan year
of the contract may apply on an annual basis, or over the life of the
contract. In the latter case, the limitation applicable to the specific
plan year under each plan year of the coverage would be divided by 12
to determine the monthly limit on cost sharing under the plan. Further,
we propose to amend Sec. 156.80 to permit issuers of multi-year
catastrophic plans to make a plan-level adjustment to the index rate
that reflects the length of the entire term.
To address an issue that has arisen in the implementation of
section 1302(c) through (e) of the Affordable Care Act, we propose
changes to the permissible cost-sharing parameters for individual
market bronze plans through new proposed Sec. 156.136 and to the
required cost-sharing parameters for catastrophic plans through
revisions to Sec. 156.155(a)(3).
We propose to remove the following from our regulations effective
beginning in PY 2027: the definition of ``standardized options'' at
Sec. 155.20; all requirements pertaining to standardized plan options
at Sec. 156.201; the differential display of standardized plan options
on <a href="http://HealthCare.gov">HealthCare.gov</a> at Sec. 155.205(b)(1); the corresponding
standardized plan option differential display requirements for approved
web-broker and QHP issuer enrollment partners using a DE pathway to
facilitate consumer enrollment through an FFE or SBE-FP at Sec. Sec.
155.220(c)(3)(i)(H) and 156.265(b)(3)(iv); the annual design and
publication of these standardized plan options in the applicable
Payment Notice for each plan year; and non-standardized plan option
limits and exceptions at Sec. 156.202.
We propose to revise the network adequacy and ECP standards at
Sec. Sec. 156.230 and 156.235 to make clear that these sections
contain the provider access standards for all individual market QHPs
and stand-alone dental plans (SADPs) and all Small Business Health
Options Program (SHOP) QHPs across all QHP issuers that use a network
of providers. We also propose to revise these sections to remove the
requirement that all QHPs must use a network of providers.
Additionally, we propose to revise Sec. 156.230 to provide that
HHS would continue to conduct network adequacy reviews using standards
described at Sec. 156.230 for QHP issuers that use a provider network
in FFE States that do not elect to conduct such reviews, or in FFE
States that HHS has determined do not satisfy the criteria to be
considered to have an Effective Provider Access Review Program, as
described at proposed Sec. 155.1050(d). We also propose to add new
Sec. 156.236 to allow plans that do not use a network (non-network
plans) to receive QHP certification by demonstrating that they ensure a
sufficient choice of providers that accept the non-network plan's
benefit amount as payment in full, and reasonable and timely access to
ECPs that accept the plan's benefit amount as payment in full. Proposed
Sec. 156.236 would set forth provider access and ECP standards for
assessing whether non-network plans provide sufficient choice of
providers.
For PY 2027 and subsequent plan years, we propose changes to the
QHP certification requirements with respect to essential community
providers (ECPs) included within a network plan issuer's provider
network. First, we propose to reduce the minimum percentage requirement
from 35 to 20 percent for both medical QHP and SADP issuers, such that
issuers would be required to contract with at least 20 percent of
available ECPs in each plan's service area to participate in the plan's
network, and separately, at least 20 percent of available Federally
Qualified Health Centers (FQHCs) and 20 percent of available family
planning providers that qualify as ECPs in the plan's service area.
Additionally, we propose to modify the narrative justification
requirements at Sec. Sec. 156.235(a)(3) and 156.235(b)(3) to be
consistent with systems changes and existing QHP issuer ECP data
submission requirements as part of ECP certification reviews.
We propose to modify Sec. 156.480(c) to clarify HHS' authority to
audit or conduct a compliance review of an issuer that offers a QHP
through an Exchange for the purposes of administering and providing
oversight of the APTC, CSR, and user fee programs. We also propose that
HHS may conduct a compliance review to assess issuers' compliance with
requirements related to these programs as needed or on an annual basis
rather than only on an ad hoc basis.
We propose to amend Sec. 156.805(b) to reiterate in Sec.
156.805(b) that in determining the amount of CMPs, in addition to the
factors HHS takes into account when determining a CMP amount listed in
Sec. 156.805(b)(1) through (3), HHS would identify the lawful purpose
or purposes of the CMP. We also propose to amend the introductory text
of Sec. 150.317 to make corresponding edits with respect to the
factors HHS considers when determining the amount of CMPs as
enforcement remedies against issuers more broadly or other responsible
entities, such as a non-Federal governmental plan sponsor that is
subject to applicable PHS Act requirements. In addition, we propose to
amend Sec. 156.805(f) to reiterate that HHS has the authority to
impose CMPs against issuers in a State Exchange or SBE-FP for an
identified violation of any Exchange requirements applicable to issuers
offering a QHP in an Exchange, when a State notifies HHS that it is not
enforcing these requirements or HHS determines that a
[[Page 6303]]
State is failing to substantially enforce these requirements.
We propose to amend Sec. 156.903 to provide the option for an
administrative law judge (ALJ) to issue subpoenas, upon his or her own
motion or at the request of a party, if reasonably necessary for the
full presentation of a case and to add procedures governing the process
for issuing subpoenas. We also propose to amend Sec. 156.935 to ensure
that the discovery provisions set forth therein do not apply to
administrative appeals of proposed CMPs for violations identified
through audits of the APTC, cost sharing reduction, or user fee
programs conducted in accordance with Sec. 156.480(c).
We propose to require QHP issuers to submit QISs addressing any two
of the five topic areas listed in section 1311(g)(1) of the Affordable
Care Act, without mandating which specific topics areas a QHP issuer
would be required to address to meet the QIS statutory certification
requirement, beginning with PY 2027.
We propose to amend Sec. 156.1215(b) to provide that CMPs assessed
against health coverage issuers and their affiliates under the same
taxpayer identification (TIN) number would be subject to netting as
part of HHS' integrated monthly payment and collection cycle. We also
propose to amend Sec. 156.1215(c) to provide that any amount owed to
the Federal Government by an issuer and its affiliates for unpaid CMP
amounts, after HHS nets amounts owed by the Federal Government, would
be the basis for calculating the debt.
6. 45 CFR part 158
We solicit comment on the impact of the Federal MLR standard on
individual market stability and whether HHS should use its authority
under section 2718(b)(1)(A)(ii) of the PHS Act and Sec. 158.301 to
adjust the MLR standard in a State to promote individual market
stability. We also solicit comment on whether and how to amend
regulations allowing States to request an adjustment to the MLR
standard in their individual market to reduce burden and encourage
States to request adjustments as appropriate in their State markets.
III. Provisions of the Proposed Regulations
A. Part 150--CMS Enforcement in Group and Individual Insurance Markets
1. Factors CMS Uses To Determine the Amount of a Civil Money Penalty
(CMP) (Sec. 150.317)
To align with the proposal discussed in section III.F.14 of this
proposed rule, which would reiterate in Sec. 156.805(b) what factors
HHS considers when determining the amount of CMPs as enforcement
remedies against QHP issuers in Exchanges, we propose a conforming
amendment to Sec. 150.317 introductory text to clarify that HHS,
through CMS, will identify the lawful purpose or purposes of the
penalty, and take into account the enumerated factors as appropriate
for the circumstances. In proposing the conforming edits to Sec.
150.317, we do not propose other changes to the legal bases and
procedural processes for imposing CMPs.
We request comment on this proposal.
B. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment
In subparts A, B, D, G, and H of part 153, we established standards
for the administration of the risk adjustment program. The risk
adjustment program is a permanent program created by section 1343 of
the Affordable Care Act that transfers funds from issuers of risk
adjustment covered plans that have lower-than-average risk enrollees to
issuers of risk adjustment covered plans that have higher-than-average
risk enrollees, which includes issuers with plans in the individual,
small group, or merged markets, inside and outside the Exchanges. In
accordance with Sec. 153.310(a), a State that is approved or
conditionally approved by the Secretary to operate an Exchange may
establish a risk adjustment program or have HHS do so on the State's
behalf.\17\ HHS did not receive any requests from States to operate
risk adjustment for the 2027 benefit year. Therefore, HHS will operate
risk adjustment in every State and the District of Columbia for the
2027 benefit year.
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\17\ See also 42 U.S.C. 18041(c)(1).
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1. Sequestration
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2026, the HHS-operated risk
adjustment program is subject to the fiscal year 2026
sequestration.\18\ The Federal Government's 2026 fiscal year began on
October 1, 2025. Therefore, the HHS-operated risk adjustment program is
sequestered at a rate of 5.7 percent for payments made from fiscal year
2026 resources (that is, funds collected during the 2026 fiscal year).
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\18\ OMB. (2025). OMB Report to the Congress on the BBEDCA 251A
Sequestration for Fiscal Year 2026. <a href="https://www.whitehouse.gov/wp-content/uploads/2025/04/OMB-Report-to-the-Congress-on-the-BBEDCA-251A-Sequestration-for-Fiscal-Year-2026.pdf">https://www.whitehouse.gov/wp-content/uploads/2025/04/OMB-Report-to-the-Congress-on-the-BBEDCA-251A-Sequestration-for-Fiscal-Year-2026.pdf</a>.
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HHS, in coordination with OMB, has determined that, under section
256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of
1985 (BBEDCA),\19\ as amended, and the underlying authority for the
HHS-operated risk adjustment program, the funds that are sequestered in
fiscal year 2026 from the HHS-operated risk adjustment program will
become available for payment to issuers in fiscal year 2027 without
further congressional action. If Congress does not enact deficit
reduction provisions that replace the Joint Committee reductions, the
program would be sequestered in future fiscal years, and any
sequestered funding would become available in the fiscal year following
that year in which the funds were sequestered.
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\19\ Public Law 99-177, 99 Stat. 1037 (1985).
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Additionally, we note that the Infrastructure Investment and Jobs
Act \20\ amended section 251A(6) of the BBEDCA to extend the
sequestration first mandated under the Budget Control Act of 2011 for
all non-exempt direct spending programs, including the HHS-operated
risk adjustment program, through fiscal year 2031 at a rate of 5.7
percent per fiscal year.\21\
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\20\ Public Law 117-58, section 90001(1), 135 Stat. 429, 1341
(2021), codified at 2 U.S.C. 901a(6)(B).
\21\ Section 251A(6)(B) of the Balanced Budget and Emergency
Deficit Control Act, 2 U.S.C. 901a(6)(B), as amended, requires
sequestration of non-exempt direct spending programs, excluding
Medicare, through fiscal year 2031 at a uniform percentage
calculated by OMB to be necessary to meet certain deficit reduction
targets in fiscal year 2021. That uniform percentage was calculated
to be 5.7 percent in the OMB Report to the Congress on the Joint
Committee Reductions for Fiscal Year 2021.
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2. HHS Risk Adjustment (Sec. 153.320)
The HHS risk adjustment models predict plan liability for an
average enrollee based on that person's age, sex, and diagnoses (also
referred to as hierarchical condition categories (HCCs)), producing a
risk score. The State payment transfer formula \22\ that is
[[Page 6304]]
part of the HHS Federally certified risk adjustment methodology
utilizes separate models for adults, children, and infants to account
for clinical and cost differences in each age group.
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\22\ The State payment transfer formula refers to part of the
Federally certified risk adjustment methodology that applies in
States where HHS is responsible for operating the program. The
formula calculates payments and charges at the State market risk
pool level (prior to the calculation of the high-cost risk pool
payments and charges that apply beginning with the 2018 benefit
year). See, for example, 81 FR 94080.
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In the adult and child models, the relative risk assigned to an
individual's age, sex, and diagnoses are added together to produce an
individual risk score. Additionally, to calculate enrollee risk scores
in the adult models, we added enrollment duration factors beginning
with the 2017 benefit year,\23\ and prescription drug categories (RXCs)
beginning with the 2018 benefit year.\24\ Starting with the 2023
benefit year, we removed the severity illness factors in the adult
models and added interacted HCC count factors (that is, additional
factors that express the presence of a severity or transplant HCC in
combination with a specified number of total payment HCCs or HCC groups
on the enrollee's record) to the adult and child models \25\ applicable
to certain severity and transplant HCCs (87 FR 27224 through
27228).\26\ Starting with the 2026 benefit year (90 FR 4424 at 4438),
we added a new type of model factor in the adult and child models to
account for risk associated with non-demographic enrollee
characteristics that do not indicate the presence of a specific active
medical condition. We referred to the new type of factor as an
``affiliated cost factor'' (ACF), thereby distinguishing this new type
of factor from RXCs and HCCs, which do indicate the presence of a
specific active medical condition.
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\23\ For the 2017 through 2022 benefit years, there is a set of
11 binary enrollment duration factors in the adult models that
decrease monotonically from 1 to 11 months, reflecting the increased
annualized costs associated with fewer months of enrollments. See,
for example, 81 FR 94071 through 94074. These enrollment duration
factors were replaced beginning with the 2023 benefit year with HCC-
contingent enrollment duration factors for up to 6 months in the
adult models. See, for example, 87 FR 27228 through 27230.
\24\ For the 2018 benefit year, there were 12 RXCs, but starting
with the 2019 benefit year, the two severity-only RXCs were removed
from the adult models. See, for example, 83 FR 16941.
\25\ See Table 1 for a list of factors in the adult models and
Table 2 for a list of factors in the child models.
\26\ Also see Table 3.
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Infant risk scores are determined by inclusion in one of 25
mutually exclusive groups, based on the infant's maturity and the
severity of diagnoses. If applicable, the risk score for adults,
children, or infants is multiplied by a cost-sharing reduction (CSR)
adjustment factor.\27\ The enrollment-weighted average risk score of
all enrollees in a particular risk adjustment covered plan (also
referred to as the plan liability risk score (PLRS)) within a
geographic rating area is one of the inputs into the State payment
transfer formula, which determines the State transfer payment or charge
that an issuer will receive or be required to pay for that plan for the
applicable State market risk pool for a given benefit year. Thus, the
HHS risk adjustment models predict average group costs to account for
risk across plans, in keeping with the Actuarial Standards Board's
Actuarial Standards of Practice for risk classification.
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\27\ For unique State-specific plans, we apply the CSR
adjustment factors that correspond to each plan's AV. See, e.g., the
2025 Payment Notice, 89 FR at 26252-26253. However, a different
approach is taken for States whose State-specific plans take the
form of Medicaid expansion plans offered on the Exchange (for
example, Arkansas), because these Medicaid-expansion plans are
identical in all their parameters, including AV and degree of plan
liability, to other plans offered on the Exchange in those States
and are differentiated from their comparable plans only in
eligibility criteria, plan enrollment selection, and sources of
funding. Ibid. Footnote 79 of the 2025 Payment Notice (89 FR 26253),
erroneously stated that, ``we would use the proposed CSR adjustment
factor of 1.12 for Arkansas 94 percent AV Medicaid-expansion plans
and the proposed CSR adjustment factor that corresponds to the
silver metal level zero cost sharing variants (that is, the proposed
1.46 CSR adjustment factor for zero cost sharing variants) for
Arkansas 100 percent AV Medicaid-expansion plans in the plan
liability risk score calculation.'' See <a href="https://regtap.cms.gov/reg_librarye.php?i=4690">https://regtap.cms.gov/reg_librarye.php?i=4690</a>. Arkansas 100 percent AV Medicaid-expansion
plan features remain more similar to the 94 percent silver plan
variant than to the silver metal level zero cost sharing variant for
AI/AN enrollees. Therefore, for both the 94 and 100 percent
Medicaid-expansion plans in Arkansas, we use the same CSR adjustment
factor of 1.12 used for the 94 percent silver plan variant CSR
adjustment factor in the plan liability risk score calculation. We
will continue to align the CSR adjustment factor for both the 94 and
100 percent Medicaid-expansion plans in Arkansas with the 94 percent
silver plan variant CSR adjustment factor for the 2027 benefit year
and beyond unless the AVs for these unique Arkansas-specific plans
change. More information on the CSR factors used for CSR plan
variants, including state program CSR variants, can be found in the
applicable Risk Adjustment HHS-Developed Risk Adjustment Model
Algorithm ``Do It Yourself (DIY)'' Software instructions, available
at: <a href="https://www.cms.gov/marketplace/resources/regulations-guidance#Premium-Stabilization-Programs">https://www.cms.gov/marketplace/resources/regulations-guidance#Premium-Stabilization-Programs</a>.
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a. Data for HHS Risk Adjustment Model Recalibration for the 2027
Benefit Year
We propose to recalibrate the 2027 benefit year HHS risk adjustment
models with the 2021, 2022, and 2023 benefit years' enrollee-level EDGE
data. Consistent with the approach outlined in the 2020 Payment Notice
(84 FR 17454, 17464), we propose to recalibrate the HHS risk adjustment
models for the 2027 benefit year using only enrollee-level EDGE data,
and to continue to use blended, or averaged, coefficients from 3 years
of separately solved models for the 2027 benefit year model
recalibration. Additionally, as outlined in the 2022 Payment Notice (86
FR 24140, 24152), we propose to use the 3 most recent consecutive years
of enrollee-level EDGE data that are available at the time we estimate
the draft recalibrated coefficients published in the proposed rule for
the applicable benefit year.\28\ We believe this promotes stability,
meets the goal of the HHS-operated risk adjustment program, and allows
issuers more time to incorporate this information when pricing their
plans for the upcoming benefit year.
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\28\ Although we do receive the next year of enrollee-level EDGE
data prior to the proposed rule, that data must go through several
quality and analysis checks before it is useable for HHS risk
adjustment model calibration.
\29\ See, for example, the 2024 Payment Notice proposed rule (87
FR 78215 through 78216) and final rule (88 FR 25749 through 25753).
\30\ Because EDGE data do not generally account for drug rebates
per the EDGE Server Business Rules (ESBR) (available at <a href="https://regtap.cms.gov/reg_librarye.php?i=3765">https://regtap.cms.gov/reg_librarye.php?i=3765</a>), for the purposes of risk
adjustment recalibration, we also incorporate assumptions about drug
rebates in our trending of prescription drug data.
\31\ We note that we apply some standard data exclusions to all
years of enrollee-level EDGE data for the purposes of risk
adjustment recalibration. For example, enrollees with at least one
capitated claim in EDGE are excluded from recalibration because we
have some concerns that the methods for computing and reporting
derived amounts from capitated claims could be inconsistent across
issuers and would not provide reliable or comparable data. See,
e.g., the 2025 Payment Notice (89 FR 26252).
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Consistent with our prior approach when a new benefit year of
enrollee-level EDGE data becomes available,\29\ we performed reviews of
the 2023 benefit year enrollee-level EDGE data to identify potential
anomalies prior to incorporating the 2023 benefit year enrollee-level
EDGE data as part of the proposed recalibration of the HHS risk
adjustment models. Our review did not identify systematic anomalies in
the 2023 benefit year enrollee-level EDGE data. Therefore, after
considering these analyses, we propose to determine coefficients for
the 2027 benefit year HHS risk adjustment models based on a blend of
separately solved coefficients from the 2021, 2022, and 2023 benefit
years' enrollee-level EDGE data, with the costs of services identified
from the data trended between the relevant year of data and the 2027
benefit year.<SUP>30 31</SUP> The draft coefficients tables reflect the
use of trended 2021, 2022, and 2023 benefit year enrollee-level EDGE
data, as well as other HHS risk adjustment model updates (including,
for example, the multi-year approach finalized in the 2026 Payment
Notice (90 FR 4438 through 4440) to phase out the market
[[Page 6305]]
pricing adjustment to the plan liability associated with Hepatitis C
drugs in the HHS risk adjustment models and align Hepatitis C drugs'
trending with the trending approach for specialty drugs \32\). However,
we note that the draft coefficients could change between the proposed
and final rule if we identify an error after publication of this
proposed rule or if any proposed models are modified or not finalized
in response to comments.\33\ In addition, consistent with Sec.
153.320(b)(1)(i), if we are unable to finalize the final coefficients
in time for publication in the final rule, we would publish the final
coefficients for the 2027 benefit year in guidance soon after the
publication of the final rule.
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\32\ To begin this transition for the 2026 benefit year HHS risk
adjustment models, we applied the specialty drug trend to 1 year of
trending Hepatitis C treatment costs (that is, the trend from 2025
to 2026) for all 3 years of enrollee-level EDGE data used (that is,
2020, 2021, and 2022 benefit year enrollee-level EDGE data) in 2026
benefit year HHS risk adjustment model recalibration. To continue
this transition for the 2027 benefit year HHS risk adjustment
models, we would apply the specialty drug trend to 2 years of
trending Hepatitis C treatment costs (that is, the trend from 2025
to 2026 and from 2026 to 2027) for all 3 years of enrollee-level
EDGE data (that is, 2021, 2022, and 2023 benefit year enrollee-level
EDGE data) proposed to be used in 2027 benefit year HHS risk
adjustment model recalibration.
\33\ If an error were identified after publication of a proposed
rule or any proposed changes to the HHS risk adjustment models are
modified or not finalized, updated coefficients would be published
in the final rule or in guidance after the publication of the final
rule consistent with Sec. 153.320(b)(1)(i).
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We seek comment on the proposal to determine 2027 benefit year
coefficients for the HHS risk adjustment models based on a blend of
separately solved coefficients from the 2021, 2022, and 2023 benefit
year enrollee-level EDGE data.
b. Proposed List of Factors To Be Employed in the HHS Risk Adjustment
Models (Sec. 153.320)
The proposed 2027 benefit year HHS risk adjustment model factors
resulting from the equally weighted (averaged) blended factors from
separately solved models using the 2021, 2022, and 2023 benefit year
enrollee-level EDGE data are shown in Tables 1 through 6. The HHS risk
adjustment adult, child, and infant models have been truncated to
account for the high-cost risk pool payment parameters by removing 60
percent of costs above the $1 million threshold.\34\ Table 1 contains
proposed factors for each adult model, including the age-sex, HCC,
RXC,\35\ RXC-HCC interaction, interacted HCC count, ACF, and enrollment
duration coefficients. Table 2 contains the proposed factors for each
child model, including the age-sex, HCC, interacted HCC count, and ACF
coefficients. Table 3 lists the proposed HCCs selected for the
interacted HCC count factors that would apply to the HHS risk
adjustment adult and child models. Table 4 contains the proposed
factors for each HHS risk adjustment infant model. Tables 5 and 6
contain the HCCs included in the HHS risk adjustment infant models'
maturity and severity categories, respectively.
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\34\ As finalized in the 2020 Payment Notice (84 FR 17466
through 17468), we will maintain the high-cost risk pool parameters
for the 2020 benefit year and beyond, unless amended through notice-
and-comment rulemaking. We do not propose changes to the high-cost
risk pool parameters for the 2027 benefit year. Therefore, we will
maintain the $1 million threshold and 60 percent coinsurance rate
for the 2027 benefit year.
\35\ In the 2026 Payment Notice, we incorrectly stated that for
RXC eligibility (including medically administered injectable
claims), a professional or outpatient medical claim does not need to
have a risk adjustment eligible service code or bill type code. We
subsequently updated the January 2025 version of the 2024 Benefit
Year Risk Adjustment DIY software instructions (<a href="https://www.cms.gov/files/document/cy2024-diy-instructions-01072025.pdf">https://www.cms.gov/files/document/cy2024-diy-instructions-01072025.pdf</a>) to reflect this
erroneous statement. In the Final 2024 Risk Adjustment DIY software
instructions updated April 9, 2025 (<a href="https://www.cms.gov/files/document/cy2024-diy-instructions-04092025.pdf">https://www.cms.gov/files/document/cy2024-diy-instructions-04092025.pdf</a>), we corrected this
error and clarified that the HCPCS-level file for RXC assignment can
only be sourced from institutional inpatient and outpatient claims
with RA-eligible bill types. We expect ACFs related to prescription
drugs will be sourced using the same criteria as RXCs. We will
announce changes to ESBR concerning RXC or ACF eligibility in future
guidance documents or notice and comment rulemakings, as
appropriate.
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BILLING CODE 4120-01-P
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BILLING CODE 4120-01-C
c. Model Performance Statistics
Each benefit year, to evaluate the HHS risk adjustment model
performance, we examine each model's R-squared statistic and predictive
ratios (PRs). The R-squared statistic, which calculates the percentage
of individual variation explained by a model, measures the predictive
accuracy of the model overall. The PR for each of the HHS risk
adjustment models is the ratio of the weighted mean predicted plan
liability for the model sample population to the weighted mean actual
plan liability for the model sample population. The PR represents how
well the model does on average at predicting plan liability for that
subpopulation.
A subpopulation that is predicted perfectly would have a PR of 1.0.
For each of the current and proposed HHS risk adjustment models, the R-
squared statistic and the PRs are in the range of published estimates
for concurrent HHS risk adjustment models.\36\ Because we propose to
blend the coefficients from separately solved models based on the 2021,
2022, and 2023 benefit years' enrollee-level EDGE data, we are
publishing the R-squared statistic for each model separately to assess
model performance. The R-squared statistics for the proposed 2027
benefit HHS risk adjustment models are shown in Table 7.
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\36\ Hileman, G., & Steele, S. (2016). Accuracy of Claims-Based
Risk Scoring Models. Society of Actuaries. <a href="https://www.soa.org/4937b5/globalassets/assets/files/research/research-2016-accuracy-claims-based-risk-scoring-models.pdf">https://www.soa.org/4937b5/globalassets/assets/files/research/research-2016-accuracy-claims-based-risk-scoring-models.pdf</a>.
[GRAPHIC] [TIFF OMITTED] TP11FE26.019
[[Page 6322]]
3. Overview of the HHS Risk Adjustment Methodology (Sec. 153.320)
In part 2 of the 2022 Payment Notice (86 FR 24183 through 24186),
we finalized the proposal to continue to use the State payment transfer
formula finalized in the 2021 Payment Notice for the 2022 benefit year
and beyond, unless changed through notice-and-comment rulemaking. We
are not proposing changes to the formula in this rule. We therefore
would continue to apply the formula as finalized in the 2021 Payment
Notice (86 FR 24183 through 24186) in the States where HHS operates the
risk adjustment program in the 2027 benefit year.
Additionally, as finalized in the 2020 Payment Notice (84 FR 17466
through 17468), we will maintain the high-cost risk pool parameters for
the 2020 benefit year and beyond, unless amended through notice-and-
comment rulemaking. We are not proposing changes to the high-cost risk
pool parameters for the 2027 benefit year; therefore, we would maintain
the $1 million threshold and 60 percent coinsurance rate.\37\
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\37\ See for example, the 2018 Payment Notice (81 FR 94081) and
2020 Payment Notice (84 FR 17467).
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a. Comment Solicitation on Retaining Separate Risk Adjustment Transfer
Calculations for Individual Catastrophic Plans and Individual Non-
Catastrophic Plans Under the State Payment Transfer Formula
We are soliciting comment on whether we should retain separate risk
adjustment transfer calculations under the State payment transfer
formula for individual catastrophic plans and individual non-
catastrophic plans or whether we should calculate State transfers for
these plans together.
On September 4, 2025, CMS released guidance entitled ``Guidance on
Hardship Exemptions for Individuals Ineligible for Advance Payment of
the Premium Tax Credit or Cost-sharing Reductions Due to Income, and
Streamlining Exemption Pathways to Coverage,'' \38\ which expands upon
prior FFE hardship exemption policy by expanding eligibility for
catastrophic plans starting with PY 2026.\39\ Specifically, this
guidance allows consumers in applicable States to qualify for an
exemption to purchase a catastrophic plan on or off an Exchange in
accordance with Sec. 155.605(d)(1)(iii) if they are determined or
expect to be ineligible for APTC or CSRs based on their projected
annual household income.
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\38\ See CMS. (2025). Guidance on Hardship Exemptions for
Individuals Ineligible for Advance Payment of the Premium Tax Credit
or Cost-sharing Reductions Due to Income, and Streamlining Exemption
Pathways to Coverage. <a href="https://www.cms.gov/files/document/guidance-hardship-exemptions.pdf">https://www.cms.gov/files/document/guidance-hardship-exemptions.pdf</a>.
\39\ This guidance applies to consumers in FFE States and in SBE
States that choose to have exemptions processed through the FFE,
which currently include all SBEs except California, Connecticut,
Maryland, and the District of Columbia. We note that there is a
proposal elsewhere at III.D.17. of this proposed rule to expand
Sec. 155.605(d)(1) to codify the expansion of hardship exemption
eligibility to consumers ineligible for APTC or CSRs due to
projected household income below 100 percent or above 250 percent
FPL in all States.
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In light of this guidance and feedback from interested parties
concerning this guidance and the potential for increased enrollment in
catastrophic coverage starting with PY 2026, we seek comment on the
impact of this policy on the HHS-operated risk adjustment program.
Currently, risk adjustment transfers under the State payment transfer
formula are calculated separately for individual catastrophic plans and
individual non-catastrophic plans.<SUP>40 41</SUP> By adding this
additional hardship exemption that allows individuals ineligible for
APTC or CSRs due to projected household income to enroll in a
catastrophic plan, a broader population will be permitted to enroll in
catastrophic plans starting with PY 2026, which has the potential to
impact the individual catastrophic and individual non-catastrophic
market risk pools.
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\40\ Risk adjustment State transfers are calculated separately
for individual catastrophic plans, individual non-catastrophic plans
and small group market plans for non-merged market States. In merged
market States, while individual catastrophic plans' risk adjustment
State transfers are still calculated separately, individual non-
catastrophic plans and small group market plans are treated as part
of the same market risk pool and risk adjustment transfers under the
State payment transfer formula are calculated jointly across all of
these plans. See the 2014 Payment Notice (77 FR 73118). See, also,
Pope et al. (2014). Risk Transfer Formula for Individual and Small
Group Markets Under the Affordable Care Act. Medicare & Medicaid
Research Review, 4(3). Available at: <a href="https://www.cms.gov/mmrr/downloads/mmrr2014_004_03_a04.pdf">https://www.cms.gov/mmrr/downloads/mmrr2014_004_03_a04.pdf</a>.
\41\ We note that for the adjustment to the State payment
transfer formula made by the high-cost risk pool (HCRP) is made for
all issuers of risk adjustment covered plans in the HCRP national
individual (including catastrophic and non-catastrophic plans and
merged market plans), or small group market, across all States and
the District of Columbia where HHS is responsible for operating the
program, based on total premiums in the respective market. As such
we adjust risk adjustment State transfers for two high-cost risk
pools across all States: one for the individual market (including
catastrophic, non-catastrophic, and merged market plans), and one
for the small group market. This differs from our implementation of
the risk adjustment State payment transfer formula for general risk
adjustment transfers, which calculates transfers separately for the
individual catastrophic, individual non-catastrophic, and merged
markets. See the 2018 Payment Notice (81 FR 61471 through 94082).
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Thus, although we are not proposing to make changes to the State
payment transfer formula in light of this guidance for the 2026 benefit
year or 2027 benefit year, HHS seeks comments on the potential impact
of retaining the separate calculation of risk adjustment transfers
under the State payment transfer formula for individual catastrophic
plans and individual non-catastrophic plans or whether the calculation
of State transfers for individual catastrophic plans should be combined
with the calculation of State transfers for individual non-catastrophic
plans in non-merged market States or combined with the calculation of
State transfers for individual non-catastrophic and small group market
plans in merged market States. We are particularly interested in
comments on maintaining the separate calculation of risk adjustment
transfers under the State payment transfer formula for individual
catastrophic plans and individual non-catastrophic plans (or combining
them) for risk adjustment purposes in non-merged market States \42\ and
the impact on risk adjustment and the resulting impact on the risk pool
market composition, premiums, and risk adjustment State transfers under
both scenarios, in light of the potential for increased catastrophic
plan enrollment as a result of the aforementioned guidance on hardship
exemptions.
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\42\ We are similarly interested in comments on maintaining the
calculation of risk adjustment State transfers for individual
catastrophic plans separate from the calculation of individual non-
catastrophic and small group market plans (or combining them) in
merged market states.
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4. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (HHS-RADV) (Sec. Sec. 153.350 and 153.630)
HHS will conduct HHS-RADV under Sec. Sec. 153.350 and 153.630 in
any State where HHS is operating risk adjustment on the State's
behalf.\43\ The purpose of HHS-RADV is to ensure issuers are providing
accurate high-quality information to HHS, which is crucial for the
proper functioning of the HHS-operated risk adjustment program. HHS-
RADV also ensures that risk adjustment transfers reflect verifiable
actuarial risk differences among issuers, rather than risk score
calculations that are based on poor quality data, thereby helping to
ensure that the HHS-operated risk adjustment program assesses charges
to issuers with plans with
[[Page 6323]]
lower-than-average actuarial risk while making payments to issuers with
plans with higher-than-average actuarial risk. HHS-RADV consists of an
initial validation audit (IVA) and a second validation audit (SVA).
Under Sec. 153.630, each issuer of a risk adjustment covered plan must
engage an independent IVA entity. The issuer provides demographic,
enrollment, and medical record documentation for a sample of enrollees
selected by HHS to its IVA entity for data validation. Each issuer's
IVA is followed by an SVA, which is conducted by an entity HHS retains
to verify the accuracy of the findings of the IVA. Based on the
findings from the IVA, or SVA (as applicable), HHS conducts error
estimation to calculate an HHS-RADV error rate. The HHS-RADV error rate
is then applied to adjust the plan liability risk scores (PLRSs) of
outlier issuers, as well as the risk adjustment transfers calculated
under the State payment transfer formula for the applicable State
market risk pools, for the benefit year being audited.
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\43\ Since the 2017 benefit year, HHS has operated the risk
adjustment program in all 50 States and the District of Columbia.
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a. HHS-RADV Error Estimation Modification To Incorporate IVA Sampling
Changes
We propose to modify one intermediate step of the HHS-RADV error
estimation methodology starting with 2025 benefit year HHS-RADV. In the
2026 Payment Notice (90 FR 4449 through 4452), we finalized excluding
enrollees without HCCs from IVA sampling beginning with 2025 benefit
year HHS-RADV. We noted that this policy will impact the steps in the
error estimation methodology during which HCC-associated error rates
are applied to adjust issuers' PLRSs, and stated our intent to seek
comments on potential modifications to the intermediate steps in the
error estimation methodology to ensure that HCC-associated error rates
continue to apply to only the proportion of total PLRSs that are
associated with HCC-components of EDGE risk scores. As such, we now
propose to add an additional scaling factor, [alpha]i, to the error
estimation methodology to address this and capture the proportion of an
issuer's total risk for the entire population that is associated with
enrollees with HCCs. This scaling factor would be added to the final
steps of error estimation in which HCC-associated error rates are
applied to adjust issuers' PLRSs, and therefore, its addition would not
impact the majority of the error estimation methodology, including the
calculation of group failure rates, enrollee-level adjustments or HCC-
associated error rates.
The formula for the existing scaling factor HccPLRSweighti is the
sum of sampled enrollee's stratum-weighted adjusted HCC-associated
portion of EDGE risk scores divided by the sum of sampled enrollees'
stratum-weighted total EDGE risk score. Because this formula is based
on the issuer's sample, it depends on having enrollees with and without
HCCs in the audit sample to appropriately estimate the proportion of
the issuer's total PLRS that is HCC-related. However, as explained in
the 2026 Payment Notice (90 FR 4452), when enrollees without HCCs are
excluded from issuers' audit samples beginning with 2025 benefit year
HHS-RADV, this formula will only estimate the proportion of enrollees'
total EDGE risk scores that is HCC-related for enrollees with HCCs.\44\
Therefore, we are proposing to create another scaling factor beginning
with benefit year 2025 HHS-RADV that estimates the proportion of the
issuer's total PLRS that is associated with enrollees with HCCs using
the issuer's EDGE data. Together, these two scaling factors would
capture the proportion of the issuer's total PLRS that is HCC-related.
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\44\ In other words, this will factor out the contribution of
demographic factors, enrollee RXCs, HCC-RXC interaction factors, CSR
adjustment factors, HCC-contingent enrollment duration factors, and
interacted HCC counts factors towards the EDGE risk scores of
enrollees with HCCs. As previously explained, these factors are not
included in the calculation of the HCC-associated error rate during
HHS-RADV error estimation. See Section 13.3.1.3.3 Calculate Error
Rates of the BY24 HHS-RADV Protocols available at <a href="https://regtap.cms.gov/uploads/library/HHS-RADV_2024_Benefit_Year_Protocols_v1_5CR_060625.pdf">https://regtap.cms.gov/uploads/library/HHS-RADV_2024_Benefit_Year_Protocols_v1_5CR_060625.pdf</a>.
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Therefore, we propose to introduce an additional scaling factor,
[alpha]i, as follows:
[GRAPHIC] [TIFF OMITTED] TP11FE26.020
Where:
meanRiskScorei,h is the average risk score for all enrollees in
stratum h in issuer i's EDGE population
strBMMi,h is the total stratum billable member months (BMM) for all
enrollees in stratum h in issuer i's EDGE population
Applying the scaling factor [alpha]i to the intermediate steps in
the error estimation methodology as follows:
TotalERi = HccERi * HccPLRSWeighti * [alpha]i
The numerator in the formula for the scaling factor sums the
product of each stratum's mean risk score and total BMM for strata 1
through 9, thereby creating an aggregate risk score for all enrollees
with EDGE HCCs in an issuer's EDGE population.\45\ The denominator sums
the product of each stratum's mean risk score and total BMM for strata
1 through 10. This includes all enrollees in the issuer's EDGE
population including enrollees without HCCs, and thereby creates an
aggregate risk score for the issuer.\46\ Overall, the scaling factor
[alpha]i estimates the proportion of the issuer's total PLRS that is
associated with enrollees with HCCs and, by combining it with the HCC
PLRS weighting factor, we could continue to estimate the proportion of
the issuer's total PLRS that is HCC-related after the removal of no HCC
enrollees from the IVA sample beginning with 2025 benefit year HHS-
RADV. After leveraging EDGE data from the relevant benefit year to
calculate the scaling factor and the total error rate , we would
continue to adjust issuers' PLRSs using the following formula:
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\45\ An issuer's EDGE population only consists of enrollees in
their risk adjustment covered plans. See Sec. Sec. 153.610(a) and
153.700(a).
\46\ Although enrollees without HCCs will be excluded from IVA
sampling beginning with 2025 benefit year HHS-RADV, enrollees
without HCCs on EDGE will be categorized into stratum 10 for these
operational purposes.
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AdjPLRSi = (1 - TotalERi) * PLRSi
Without adding this additional scaling factor to the error
estimation methodology beginning with 2025 benefit year HHS-RADV, the
error rate would adjust elements of issuers' total PLRSs that are
associated with enrollees' without HCCs and are not intended to be
adjusted during error estimation.\47\ We believe these adjustments
would be inappropriate, and moreover, could result in double
adjustments for any identified data errors of non-HCC components, such
as demographic and enrollment factors, that are adjusted through
separate
[[Page 6324]]
processes.\48\ Therefore, starting with the 2025 benefit year of HHS-
RADV, we propose to add an additional scaling factor, [alpha]i, to the
error estimation methodology to ensure that HCC-associated error rates
continue to apply to only the proportion of total PLRSs that are
associated with HCC-components of EDGE risk scores.
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\47\ Enrollees without HCCs may contribute to the PLRS through
demographic factors, enrollee RXCs, and CSR risk adjustment factors.
As previously explained, these enrollees are not included in the
calculation of the HCC-associated error rate during HHS-RADV error
estimation.
\48\ While HHS-RADV also includes processes for validating RXCs
and demographic and enrollment factors, any errors regarding these
factors are treated as materially incorrect EDGE server data
submissions. See 83 FR 16970 through 16971. Also see 84 FR 17501 and
85 FR 77002 through 77005.
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We seek comments on this proposal.
5. HHS Risk Adjustment User Fee for the 2027 Benefit Year (Sec.
153.610(f))
We propose an HHS risk adjustment user fee for the 2027 benefit
year of $0.20 PMPM. Under Sec. 153.310, if a State is not approved to
operate, or chooses to forgo operating, its own risk adjustment
program, HHS will operate risk adjustment on its behalf. For the 2027
benefit year, HHS will operate risk adjustment in every State and the
District of Columbia. As described in the 2014 Payment Notice (78 FR
15416 through 15417), HHS' operation of the risk adjustment program on
behalf of States is funded through a risk adjustment user fee. Section
153.610(f)(2) provides that, where HHS operates a risk adjustment
program on behalf of a State, an issuer of a risk adjustment covered
plan must remit a user fee to HHS equal to the product of its monthly
billable member enrollment in the plan and the PMPM risk adjustment
user fee specified in the annual HHS notice of benefit and payment
parameters for the applicable benefit year.
OMB Circular No. A-25 established Federal policy regarding user
fees, and specifies that a user charge will be assessed against each
identifiable recipient for special benefits derived from Federal
activities beyond those received by the general public.\49\ The HHS-
operated risk adjustment program provides special benefits as defined
in section 6(a)(1)(B) of OMB Circular No. A-25 to issuers of risk
adjustment covered plans because it mitigates the financial instability
associate with potential adverse risk selection.\50\ The HHS-operated
risk adjustment program also contributes to consumer confidence in the
health insurance industry by helping to stabilize premiums across the
individual, merged, and small group markets.
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\49\ See Circular No. A-25 Revised. <a href="https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf">https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf</a>.
\50\ Id.
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In the 2026 Payment Notice (89 FR 26218), we calculated the Federal
administrative expenses of operating the HHS risk adjustment program
for the 2026 benefit year to result in a risk adjustment user fee rate
of $0.20 PMPM based on our estimated costs for HHS risk adjustment
operations and estimated BMM for individuals enrolled in risk
adjustment covered plans. For the 2027 benefit year, HHS proposes to
use the same methodology to estimate our administrative expenses to
operate the program. These costs cover development of the models and
methodology, collections, payments, account management, data
collection, data validation, program integrity and audit functions,
operational analytics, interested parties training, operational
support, and administrative and personnel costs dedicated to HHS-
operated risk adjustment program activities. To calculate the risk
adjustment user fee, we divided HHS' projected total costs for
administering the program on behalf of States by the expected number of
BMM in risk adjustment covered plans in States where the HHS-operated
risk adjustment program will apply in the 2027 benefit year.
We estimate that the total cost for HHS to operate the risk
adjustment program on behalf of all States and the District of Columbia
for the 2027 benefit year will be slightly more than $65 million, which
is similar to the 2026 benefit year budget.\51\
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\51\ We estimated that the total costs for HHS to operate the
risk adjustment program on behalf of States for the 2026 calendar
year would be approximately $65 million. See, 2026 Payment Notice
(90 FR 4424 at 4448).
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Similar to prior benefit years, we projected risk adjustment
enrollment scenarios for the 2027 benefit year. Based on our estimates,
for the 2027 benefit year, we do not expect enrollment changes to
significantly impact collections under this user fee rate.
Our intention is to reconsider the enrollment estimates for the
final rule. If these newer enrollment estimates are too low in
comparison to our proposed user fee estimates, the final user fee may
be higher. If these enrollment estimates are higher in comparison to
our proposed user fee estimates, the final user fee may be lower. We
also note that if any events result in a deviation from our
expectations of current conditions that would significantly change our
estimates around costs, enrollment projections, or the finalization of
proposed risk adjustment policies between this proposed rule and the
final rule, we may modify the HHS risk adjustment user fee rate
proposed in this rule in the final rule. Because we project a similar
budget to operate the HHS-operated risk adjustment program for the 2027
benefit year as for the 2026 benefit year, we propose an HHS risk
adjustment user fee of $0.20 PMPM for the 2027 benefit year.
We seek comment on the proposed HHS risk adjustment user fee for
the 2027 benefit year.
C. Part 154--Health Insurance Issuer Rate Increases: Disclosure and
Review Requirements
1. Submission of Rate Filing Justification (Sec. 154.215)
a. CSR Reimbursement
Section 1402 of the Affordable Care Act requires issuers to provide
cost-sharing reductions (CSRs) to increase the actuarial value for
consumers with incomes between 100 and 250 percent of Federal poverty
level (FPL) who enroll in silver level QHPs in the individual market,
as well as eligible AI/AN consumers who enroll in QHPs at any metal
level. Section 1402 of the Affordable Care Act also states that HHS
will reimburse issuers for the cost of providing CSRs to eligible
enrollees but does not include a valid appropriation to make such
payments.\52\
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\52\ Until October 2017, HHS relied on the permanent
appropriation at 31 U.S.C. 1324 as the source of funds for Federal
CSR reimbursement to issuers.
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On October 11, 2017, the Attorney General of the United States
provided a legal opinion stating that HHS and the Department of the
Treasury could no longer use the permanent appropriation at 31 U.S.C.
1324 to fund CSR reimbursements to issuers.\53\ In accordance with that
opinion, HHS directed CMS to discontinue CSR reimbursements to issuers
until Congress provides an appropriation. In response to the
termination of CSR reimbursement, State Departments of Insurance either
allowed or instructed issuers to increase (or ``load'') premiums either
primarily, or only, on silver-level QHPs to offset the issuers' cost of
providing CSRs.\54\
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\53\ See Verma, Seema. (2017, October 12). Letter to Acting
Secretary Eric Hagan Regarding Payments to Issuers for Cost-Sharing
Reductions (CSRs), <a href="https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf">https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf</a>, relying on US. House of Reps. v. Burwell, 185 F.
Supp. 3d 165 (D.D.C. 2016). Available at <a href="https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf">https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf</a>.
\54\ For purposes of this preamble, we use the term ``CSR
loading'' to refer to any rating practices to increase premiums to
offset amounts of unreimbursed CSRs whether that is ``silver
loading'' or ``broad loading.''
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There are several ways that issuers have determined the CSR load
factor.
[[Page 6325]]
For example, issuers have loaded silver plans offered on-Exchange to
recover expected lost CSRs based on experience, they have loaded silver
plans on-Exchange based on an assumed distribution of enrollment and
enrollee utilization (sometimes a set amount mandated by the State), or
they have loaded all plans at all metal levels by the same amount to
spread lost CSRs across the entire individual market. These differing
approaches may result in loads that exceed the expected amount of
unreimbursed CSRs by assuming an enrollment and claims distribution
that significantly diverges from what actually occurs. Based on our
review of actuarial memoranda submitted by issuers for PY 2026, HHS
believes these excessive loads on silver plans in particular (and in
some cases as mandated by State law) lead to inflated premiums for
silver plans, further distort pricing for bronze and gold plans
relative to silver plans, limit consumer choice, and significantly
increase the cost of the second lowest-cost silver plan available to a
consumer, which in turn increases PTC amounts and Federal expenditures.
b. Rate Filing Justifications Regarding CSRs
Section 2794 of the PHS Act directs the Secretary, in conjunction
with the States, to establish a process for the annual review of
premium increases for health coverage prior to the implementation of
the increase. HHS has historically interpreted this requirement with
respect to premiums as referring to the underlying rates that are used
to develop premiums. Section 154.215 requires issuers to submit rate
filing justifications to CMS and the applicable State.\55\
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\55\ See 76 FR 29964, 29969 (May 23, 2011).
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Pursuant to Sec. 154.215(b)(1) through (3), the rate filing
justification has three parts. The Unified Rate Review Template (URRT)
(Part I of the rate filing justification) is required for all single
risk pool products, including new products and products with plans that
experience rate increases, rate decreases, or no rate change. It is
intended to capture information needed to monitor premium increases of
health insurance coverage offered through and outside the Exchanges and
ensure compliance with the single risk pool methodology, including
allowable market level index rate adjustments to reflect risk
adjustment payments and charges, and other Federal rating
requirements.\56\
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\56\ See Unified Rate Review Instructions at: <a href="https://www.cms.gov/files/document/unified-rate-review-instructions.pdf">https://www.cms.gov/files/document/unified-rate-review-instructions.pdf</a>.
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Part II of the rate filing justification is the Written Description
Justifying the Rate Increase (Consumer Justification Narrative). Part
II is required only for rate increases in single risk pool products
that are subject to review (that is, a plan within the product that has
a rate increase of 15 percent or greater). Part II is a consumer-
friendly narrative that provides the justification for the rate
increase, describes the relevant Part I data, the assumptions used to
develop the rate increase, and an explanation of the most significant
factors causing the rate increase.\57\
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\57\ Id.
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An actuarial memorandum (Part III of the rate filing justification)
is required for any rate increase in a single risk pool plan. It is
also required for any rate filing containing QHPs or whenever a State
requires it to be submitted. Further, an actuarial memorandum is
required for all plans in States that do not have an Effective Rate
Review Program and for which CMS is responsible for reviewing the rate
filing.\58\ The Part III actuarial memorandum includes the actuarial
reasoning and assumptions, justifications, and methodologies that
support the entries in the URRT.\59\ The actuarial memorandum must also
capture appropriate actuarial certifications related to the development
of the index rate in accordance with Federal regulations, and the
development of plan specific premium rates using allowable modifiers to
the index rate.\60\ The issuer is required to provide an explanation of
how these modifiers are developed and applied to the market-wide
adjusted index rate to derive the plan-adjusted index rate.
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\58\ CMS reviews rate filing justifications from issuers in
States without an Effective Rate Review Program--currently Oklahoma,
Tennessee, and Wyoming.
\59\ See Unified Rate Review Instructions at: <a href="https://www.cms.gov/files/document/unified-rate-review-instructions.pdf">https://www.cms.gov/files/document/unified-rate-review-instructions.pdf</a>.
\60\ Id.
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In a Bulletin issued on May 2, 2025 (PY26 Rate Filing
Guidance),\61\ we instructed issuers that make permitted plan-level
adjustments to account for CSR amounts provided to eligible enrollees
for which the issuer does not otherwise receive reimbursement \62\
(that is, that load premiums) to specify the amount of unreimbursed
CSRs in the actuarial memorandum of their PY 2026 rate filing. Issuers
report plan-level adjustments when they submit a rate filing
justification to the State or CMS for review. States or CMS review
those rate filing justifications to ensure compliance with the Federal
rating rules, including 45 CFR 156.80.\63\
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\61\ CMS. (2025, May 2). Plan Year 2026 Individual Market Rate
Filing Instructions. <a href="https://www.cms.gov/files/document/py-26-individual-market-rate-filing-instructions.pdf">https://www.cms.gov/files/document/py-26-individual-market-rate-filing-instructions.pdf</a>.
\62\ See 45 CFR 156.80(d)(2)(i).
\63\ If the rate filing contains a proposed increase that meets
or exceeds the threshold at Sec. 154.200(a)(1) (currently 15
percent), then the State or CMS also reviews the proposed increase
to determine if it is an unreasonable rate increase. Also see 45 CFR
154.205(a). When CMS reviews a rate increase subject to review under
Sec. 154.210(a), CMS will determine that the rate increase is an
unreasonable rate increase if the increase is an excessive rate
increase, an unjustified rate increase, or an unfairly
discriminatory rate increase.
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Specifically, through the PY 26 Rate Filing Guidance, and pursuant
to our authority under Sec. 154.215(a)(2) and (3), we directed issuers
that loaded for unreimbursed CSRs to: (1) specify the actual CSRs the
issuer paid on behalf of enrollees for PY 2024 (in dollars); (2)
specify the CSR load factor for PY 2026 and explain how it was
determined; and (3) explain how the additional revenue to be collected
from the applied CSR load compares to the expected amount of CSRs that
will be provided to enrollees in PY 2026.
Following issuance of the PY26 Rate Filing Guidance, CMS issued
additional guidance entitled, ``Frequently Asked Questions on Plan Year
2026 Individual Market Rate Filing Instructions,'' on May 27, 2025.\64\
We noted that if an issuer was not able to calculate the precise amount
of actual CSRs paid for enrollees for PY 2024 by the applicable rate
filing deadline, CMS would accept an estimate developed using a
reasonable methodology that enables it to estimate the value of CSRs
provided for PY 2024 as accurately as possible, detailed in the
actuarial memorandum.\65\
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\64\ CMS. (2025, May 7). Frequently Asked Questions on Plan Year
2026 Individual Market Rate Filing Instructions. <a href="https://regtap.cms.gov/reg_librarye.php?i=5894">https://regtap.cms.gov/reg_librarye.php?i=5894</a>.
\65\ Under Sec. 156.80(d)(2)(i), an issuer may vary premium
rates for a particular plan from its market-wide index rate for a
relevant State market based on the actuarial value and cost-sharing
design of the plan, including accounting for, if permitted by the
applicable State authority, CSR amounts provided to eligible
enrollees under Sec. 156.410, provided the issuer does not
otherwise receive reimbursement for such amounts. Therefore, if
there is a valid appropriation such that HHS and the Department of
the Treasury resume making advance payments of CSRs, issuers may not
apply any CSR load to QHPs receiving advance CSR payments. In
addition, in the event that advance payments of CSRs are made to
issuers to reimburse them for CSRs provided, HHS will calculate
these monthly advance payments using the formula finalized in the
2015 Payment Notice and using the standard methodology as set forth
in 45 CFR 156.430(c)(2) for reconciliation of cost sharing reduction
amounts. See 79 FR 13804-13808. Also see 90 FR 4424, 4488.
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[[Page 6326]]
Starting with rate filings for the 2027 plan year, we are proposing
to continue to require issuers that make a plan-level adjustment to
account for unreimbursed CSRs to submit certain information specified
in the PY26 Rate Filing Guidance in their URRTs and actuarial memoranda
for each plan year in which CSRs are not funded. Specifically, in the
URRT for the upcoming plan year, issuers would report CSR amounts paid
on behalf of enrollees and the additional revenue collected from the
previously applied CSR load using the most recent annual data that is
available prior to the applicable filing year, using the standard
methodology set forth in Sec. 156.430(c)(2). In most cases, the most
recent annual CSR data would reflect the plan year that is two years
before the upcoming plan year (for example, CSRs paid for eligible
enrollees and the additional revenue collected from the CSR load
applied in PY 2025 would be reported during the 2026 filing year on
rate filings for PY 2027).
As described by the Secretary in applicable guidance,\66\ under the
CMS standard methodology, issuers re-adjudicate the actual complete set
of claims incurred by an enrollee in the cost-sharing reduction plan
variation as if they had been enrolled in the associated standard plan
to determine the difference the enrollee would have paid in
deductibles, copayments, coinsurance, and other out-of-pocket expenses
for EHBs (other than premiums and balance billing). The difference
equals the amount of CSRs provided by the issuer.\67\ As stated in the
2016 Payment Notice, we believe that the standard methodology is the
most accurate method for calculating the actual value of CSRs that the
issuer has provided on behalf of enrollees in a plan year.\68\
Additionally, we believe that most issuers are familiar with that
methodology, which was required to calculate CSRs paid on behalf of
enrollees for the 2017 plan year, the most recent year in which CMS
provided advance CSR payments to issuers.
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\66\ See Manual for Reconciliation of the Cost-Sharing Reduction
Component of Advance Payments for Benefit Year 2017 (March 29, 2018)
at <a href="https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/final-csr-reconciliation-guidance-by2017.pdf">https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/final-csr-reconciliation-guidance-by2017.pdf</a>.
\67\ CMS. (2018, March 29). Manual for Reconciliation of the
Cost-Sharing Reduction Component of Advance Payments for Benefit
Year 2017. <a href="https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/final-csr-reconciliation-guidance-by2017.pdf">https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/final-csr-reconciliation-guidance-by2017.pdf</a>.
\68\ HHS Notice of Benefit and Payment Parameters for 2016 Final
Rule, 80 FR 10750, 10842 (February 27, 2015), available at: <a href="https://www.govinfo.gov/content/pkg/FR-2015-02-27/pdf/2015-03751.pdf">https://www.govinfo.gov/content/pkg/FR-2015-02-27/pdf/2015-03751.pdf</a>.
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We note that although CMS is proposing that issuers use the
standard methodology to calculate CSR amounts paid on behalf of
enrollees and to submit an aggregate amount of CSRs provided at the
plan level on the URRT, this proposed data submission would not require
issuers to use the CSR reconciliation process implemented by CMS, as
described in Sec. 156.430(c)(2). We believe this proposal would result
in lower burden on issuers as compared to the burden that would be
associated with submitting policy-level CSR data to CMS through the CSR
reconciliation process. Submission of policy-level CSR data would
require direct electronic submissions of data that must conform with
our business rules, data element validations, and required file
formats. When HHS previously collected such data, it resulted in
issuers attempting submissions multiple times before the submission
could be accepted by the system. The proposed process would leverage
the existing URRT submission process and be much less burdensome.
We also propose that issuers would include in the URRT the
applicable CSR load factor for each plan that would be applied to the
market adjusted index rate to calculate the calibrated plan adjusted
index rate for the upcoming plan year. We are proposing to collect the
CSR load factor, if any, to fulfill our responsibility to ensure
compliance with Sec. 156.80(d), which requires all permitted plan-
level adjustments to be ``actuarially justified.'' In addition, we
propose that issuers would include in the actuarial memorandum an
explanation of the methodology used to determine the load factor. We
propose that issuers would also include in the URRT the additional
revenue expected to be collected from the applied CSR load factor and
the expected amount of CSRs that will be paid for enrollees for the
upcoming plan year. We also propose that issuers would include in the
actuarial memorandum an explanation comparing these amounts. This
explanation would allow the State or CMS, as applicable, to determine
whether the load factor is actuarially justified and not excessive in
relation to the amount expected to be paid for unreimbursed CSRs.
In the 2026 Payment Notice, we stated our expectation that CSR
loading practices, to the extent permitted by State regulators, are
intended to account for unpaid CSRs. We also noted that, while there is
no requirement that a State permit CSR loading, in States that have an
Effective Rate Review Program, the State has the responsibility to
determine whether an issuer's adjustments to the market-wide index rate
for plan-specific factors (including accounting for CSR amounts) are
actuarially justified.\69\ We further propose that an actuarially
justified CSR load factor is one that is calibrated on actual
experience and that only accounts for the projected revenue loss of
unreimbursed CSR payments without materially exceeding that amount. As
such, we believe that this proposal to collect through the URRT and
actuarial memoranda information on paid CSRs, additional revenue
collected from the previously applied CSR load, CSRs expected to be
paid, the CSR load factor and expected resultant additional revenue for
the upcoming plan year, the underlying methodology for determining the
CSR load factor that would be applied for the upcoming plan year, and
an explanation of how the expected additional revenue compares to the
amount of CSRs expected to be paid, will benefit State regulators (and
CMS in States where CMS functions as the primary reviewer of rates) by
providing regulators the data necessary to determine whether CSR load
amounts are actuarially justified plan-level adjustments to the index
rate under Sec. 156.80.
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\69\ HHS Notice of Benefit and Payment Parameters for 2026 Final
Rule, 90 FR 4424, 4489 (January 15, 2025) available at: <a href="https://www.govinfo.gov/content/pkg/FR-2025-01-15/pdf/2025-00640.pdf">https://www.govinfo.gov/content/pkg/FR-2025-01-15/pdf/2025-00640.pdf</a>.
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While we recognize the additional burden on issuers to provide this
information, given the significant impact of CSR loading on Federal
expenditures through additional premium tax credit (PTC) spending, we
believe collection of this information is an important program
integrity measure that will help ensure that CSR loads are appropriate
to recover lost CSR payments and are not inappropriately inflating
Federal expenditures or undermining Federal rating rules.
Therefore, starting with rate filings for the 2027 plan year, we
are proposing to collect as part of the rate filing justification
information on adjustments to the index rate to account for
unreimbursed CSRs. Specifically, we propose to collect data regarding
the amount of CSRs previously paid on behalf of eligible enrollees
using the most recent annual data that is available prior to the
applicable filing year (generally data from the plan year that is two
years before the upcoming plan year), the amount previously generated
by any load factors from the most recent annual data available, the
amount of CSRs expected to be paid on behalf of enrollees in the
upcoming plan year, the
[[Page 6327]]
underlying methodology for determining the CSR load factor that would
be applied for the upcoming plan year, the load factor itself (the
expected amount generated by the load factor for the upcoming plan
year, and an explanation of how the expected amount generated by the
load factor compares to the amount of CSRs expected to be paid on
behalf of enrollees for the same period. If this proposal is finalized
as proposed, we intend to release guidance on the submission of this
information as part of revised Unified Rate Review Instructions, as we
have historically provided detailed guidance to issuers on how to
complete each field of the URRT and satisfy the criteria for the
actuarial memorandum in the Unified Rate Review Instructions.\70\ We
are not proposing changes to any regulation text as the collection of
these data is already captured under Sec. 154.215(d)(1), which states
that historical and projected claims experience must be included in the
URRT. Additionally, Sec. 156.80(d)(2)(i) states that plan-level
adjustments to account for unreimbursed CSR payments provided to
eligible enrollees are permissible only if actuarially justified and
permitted by the applicable state authority. We request comment on all
aspects of our proposal to require issuers that intend to load premium
rates to account for unpaid CSRs for the upcoming plan year to submit
this information in their URRTs and the actuarial memoranda for each
plan year in which CSRs are not funded, beginning with PY 2027 rate
filings.
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\70\ The information collection described in this section will
be submitted as a revision to the currently approved PRA package
CMS-10379 (OMB Control Number 0938-1141) for OMB review under the
Paperwork Reduction Act.
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D. Part 155--Exchange Establishment Standards and Other Related
Standards
1. Standardized Plan Options (Sec. Sec. 155.20, 155.205(b)(1),
155.220(c)(3)(i)(H), 156.201, and 156.265(b)(3)(iv))
We propose to exercise our authority under sections 1311(c)(1) and
1321(a)(1)(B) of the Affordable Care Act to discontinue the full suite
of standardized plan option policies effective beginning in PY 2027. As
discussed in greater detail in the preamble section of this proposed
rule addressing Sec. 156.201, we propose to remove the following from
our regulations: the definition of ``standardized option'' at Sec.
155.20; all requirements pertaining to standardized plan options at
Sec. 156.201 (the requirements for FFE and SBE-FP QHP issuers in the
individual market to offer these plans at paragraphs (a) and (b) as
well as the requirement for these plans to meaningfully differ from one
another at paragraph (c)); the differential display of standardized
plan options on <a href="http://HealthCare.gov">HealthCare.gov</a> at Sec. 155.205(b)(1); and the
corresponding standardized plan option differential display
requirements for approved web-broker and QHP issuer enrollment partners
using a DE pathway to facilitate consumer enrollment through an FFE or
SBE-FP at Sec. Sec. 155.220(c)(3)(i)(H) and 156.265(b)(3)(iv). We also
propose to redesignate paragraphs (c)(3)(i)(I) through (M) of Sec.
155.220 as paragraphs (c)(3)(i)(H) through (L), respectively. Finally,
we propose to cease the annual design and publication of these
standardized plan options in the applicable Payment Notice rulemaking
for each plan year.
2. Approval of a State Exchange (Sec. 155.105)
We propose to remove Sec. 155.105(b)(4) to rescind a requirement
made in the 2025 Payment Notice (89 FR 26259 through 26261), that a
State seeking to operate a State Exchange must first operate, for at
least 1 plan year, a State-based Exchange on the Federal platform (SBE-
FP). The original amendment was intended to give States sufficient time
to create, staff, and structure a State Exchange. However, we recognize
that requiring States to first operate as an SBE-FP for at least 1 plan
year could potentially create unnecessary barriers for States that are
well-prepared to implement a State Exchange more immediately.
Sections 1311(b) and 1321(b) of the Affordable Care Act allow
States to elect to operate their own health insurance Exchanges to
provide individuals and employers with health insurance coverage. Every
State that has implemented a State Exchange after 2014--the year the
initial 13 State Exchanges began operation--first operated an SBE-FP
for at least 1 plan year. This history shows how first operating an
SBE-FP has been the preferred approach. However, we recognize that
States may have existing infrastructure, relationships, and expertise
that could support a State's successful operation of a State Exchange,
without first operating an SBE-FP. For example, FFE States are
permitted to elect to perform plan management functions similar to the
plan management functionality required of all SBE-FPs.\71\ The
infrastructure and the associated stakeholder relationships and State
expertise to support such functionality could be leveraged from a
direct FFE to State Exchange implementation. Additionally, the
technology infrastructure available today to States for implementation
of State Exchanges has become more compatible, such that the technology
used to support one State Exchange implementation could be leveraged by
another State Exchange. A State must demonstrate its ability to
operationalize State Exchange functional requirements through a well-
established and robust review process with HHS. Whether a State first
operates an SBE-FP does not change our review process for determining
whether a State is ultimately prepared to implement a State Exchange.
For the reasons provided above, we propose to remove Sec.
155.105(b)(4), such that a State seeking to operate a State Exchange is
not required to first operate an SBE-FP for at least 1 plan year,
including its first open enrollment period.
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\71\ A state may choose to operate plan management functions
within the FFE. CMS. (2012, May). Plan Management Partnership in the
Federally Facilitated Exchange (FFE). Available at: <a href="https://www.cms.gov/CCIIO/Resources/Presentations/Downloads/hie-plan-management-partnership-in-the-ffe.pdf">https://www.cms.gov/CCIIO/Resources/Presentations/Downloads/hie-plan-management-partnership-in-the-ffe.pdf</a>.
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We seek comment on this proposal.
3. Approval of a State Exchange (Sec. 155.106)
In an effort to support the overall goals of Executive Order 14192,
``Unleashing Prosperity through Deregulation,'' \72\ we propose to
amend Sec. 155.106(a)(2) to rescind a requirement we made in the 2025
Payment Notice (89 FR 26261 through 26263) that, as part of a State's
activities for its establishment of a State Exchange, the State must
provide, upon request, supporting documentation demonstrating progress
toward meeting or implementing State Exchange Blueprint requirements.
Section 155.106(a)(2) requires that States electing to operate a State
Exchange submit a State Exchange Blueprint Application to HHS for
approval. The current State Exchange Blueprint application provides
that we may require live demonstrations of Exchange functionality on
the State Exchange's platform, as well as supporting documentation, as
evidence of the State's progress toward meeting State Exchange
Blueprint application requirements. For clarity, we had
[[Page 6328]]
finalized in the 2025 Payment Notice to codify that as part of the
State's submission of a State Exchange Blueprint application, CMS has
the authority to request supplemental documents it determines necessary
for the State to detail its implementation of the required State
Exchange functionality. To support deregulation where possible, we are
now proposing to remove what we codified.
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\72\ E.O. 14192, January 31, 2025 (90 FR 9065), available at
<a href="https://www.federalregister.gov/documents/2025/02/06/2025-02345/unleashing-prosperity-through-deregulation">https://www.federalregister.gov/documents/2025/02/06/2025-02345/unleashing-prosperity-through-deregulation</a>.
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The State Exchange Blueprint continues to serve as a vehicle for a
State to document its progress toward implementing its intended
Exchange operational model. HHS approves a State's Exchange Blueprint
Application and subsequently provides approval for a State to operate a
State Exchange, based upon a State meeting State Exchange
implementation requirements noted in the Blueprint Application. The
current Blueprint Application requires a State to sign and agree that
HHS may require supporting documentation from a State as evidence of
its progress toward meeting State Exchange Blueprint Application
requirements, which is part of the overall process for providing a
State with approval to operate a State Exchange. Notably, in our
experience, States recognize the need for HHS to request supplemental
documentation in order for HHS to assess a State's readiness to operate
a State Exchange, which supports a State's successful State Exchange
operation. States have provided such supplemental documentation upon
HHS request both before and after this requirement was originally
codified. Given this preexisting process, we do not believe
deregulation in this instance is harmful, nor would it lead to burden
on States. Therefore, we propose to rescind the requirement that a
State provide, upon request, supporting documentation demonstrating
progress toward meeting or implementing State Exchange Blueprint
requirements from Sec. 155.106(a)(2).
We seek comment on this proposal.
4. Amending Requirements for State Exchanges To Operate a Centralized
Eligibility and Enrollment Infrastructure (Sec. Sec. 155.205(b) and
155.221(k))
a. Amending Requirements for State Exchanges To Operate a Centralized
Eligibility and Enrollment Platform on the State Exchange's Website
(Sec. 155.205(b))
We are proposing to revise Sec. 155.205(b)(4) and (5) to remove
the requirement that all State Exchanges operate a consumer-facing
centralized eligibility and enrollment platform on the State Exchange's
website such that a State Exchange could choose to rely entirely on
web-brokers (a type of non-Exchange entity) for implementing and
operating consumer-facing websites that facilitate the eligibility and
enrollment process in a State Exchange, pursuant to the proposal in
section III.D.4.b. of this preamble. These consumer-facing websites
operated by web-brokers would facilitate the online submission of
eligibility applications by individuals seeking coverage through a
State Exchange and facilitate the selection and enrollment into QHPs on
a State Exchange for qualified individuals. These consumer-facing
websites operated by web-brokers would also interface with the State
Exchange website, which the State would still be required to operate
broadly under Sec. 155.205(b), in such a manner as to transmit
information from the non-Exchange website to the State Exchange
website. This would facilitate the State Exchange meeting the
requirements at Sec. Sec. 155.205(b)(4) and (5) which requires an
Exchange to maintain a website that allows an individual to submit a
single streamlined eligibility application to the State Exchange and
enroll in coverage through the State Exchange. Operationally, such
consumer-facing websites operated by web-brokers would be required to
interface with the information technology platform that the State
Exchange would still need to operate to appropriately process applicant
eligibility determinations and process enrollment transactions with QHP
issuers (that is, the State Exchange's `back-end' eligibility and
enrollment system). Using State Exchange-approved technical
specifications and/or standards for those interfaces (for example, web
services) would allow the exchange of data between the consumer-facing
websites operated by web-brokers and the State Exchange in a manner
that is seamless to consumers. Such an interface would allow for the
transmission of consumer eligibility application information and/or QHP
selection and enrollment information necessary for the State Exchange
to meet key Exchange functional requirements. These requirements
include collecting information from applicants through an HHS-approved
single, streamlined eligibility application for insurance affordability
programs per Sec. Sec. 155.310 and 155.405; performing eligibility
verifications required at Sec. Sec. 155.315 and 155.320; performing
assessments or determinations of Medicaid/CHIP eligibility required at
Sec. 155.302; and performing determinations of eligibility for QHP
enrollment and APTC/CSRs at Sec. Sec. 155.305 and 155.310. This also
includes key enrollment functions such as collecting and maintaining
records of QHP enrollment for all consumers of the State Exchange as
required under Sec. 155.400 and transmitting such enrollment
information to CMS and IRS. Such consumer-facing websites operated by
web-brokers would also need to allow for consumers to select and enroll
into a QHP (that is, through direct enrollment) in order to submit QHP
selection and enrollment to the State Exchange. This model, referred to
as the State Based Exchange Enhanced Direct Enrollment (SBE-EDE) model,
is proposed and discussed in further detail in section III.D.4.b of
this proposed rule. State Exchanges that opt to take this approach
would be required to establish standards and a process for selecting
the web-brokers who they may interface with in this manner, similar to
the standards and criteria that we have established for direct
enrollment entities at Sec. Sec. 155.221(j) and 155.220(n), including
a requirement that a non-Exchange web-broker entity satisfy all
requirements under Sec. 155.110(a).
When HHS finalized the requirement at Sec. 155.205(b) that
Exchanges operate a centralized eligibility and enrollment platform on
the Exchange's website in the 2025 Payment Notice (89 FR 26271), HHS'
intent was to tie together regulatory requirements throughout part 155
regarding the integrated nature of online, real-time automated
eligibility functions that Exchanges were intended to perform. This
included the intent to clearly affirm the close integration that exists
and is necessary between Exchange-operated websites, the online
consumer-facing single streamlined eligibility application, and the
back-end eligibility system that performs automated eligibility
verifications and eligibility determination functions that return real-
time, online results to the consumer.
While we continue to affirm that State Exchanges are responsible
for making all eligibility determinations for QHP coverage and related
insurance affordability programs through a centralized eligibility
processing system and enrollment records system, we have determined
that requiring State Exchanges to operate a consumer-facing,
centralized eligibility and enrollment consumer website that interfaces
with the State Exchange's back-end eligibility processing and
enrollment records system may prohibitively restrict Exchange
flexibility and innovation. While all State Exchanges that do not use
the Federal platform currently operate their own eligibility and
enrollment consumer interface on the
[[Page 6329]]
State Exchange's website, we believe that maintaining this requirement
in regulation could discourage State Exchanges from pursuing innovative
approaches that might better serve their specific populations and
enhance the consumer experience, including private sector-focused
consumer engagement and enrollment strategies. We believe that
providing State Exchanges with flexibility in how they offer their
online eligibility and enrollment consumer interface may allow State
Exchanges to develop solutions that address the unique needs of their
residents and markets. Removing the requirement for an Exchange to
operate an eligibility and enrollment consumer interface on its website
is a necessary step in order to codify the SBE-EDE option we are
proposing at Sec. 155.221(k), as described in section III.D.4.b. and
previously in this section. Under this option, the ability for State
Exchanges to exclusively utilize web-brokers to operate consumer-facing
websites that facilitate eligibility and enrollment is the key
component.
We note that section 1311(c)(5) and (d)(4)(C) of Affordable Care
Act, do not require Exchanges to operate a centralized consumer-facing
eligibility and enrollment website that supports both eligibility
determinations for, and enrollments in, QHPs.\73\ Rather, section
1311(d)(4)(C) of the Affordable Care Act provides that an Exchange must
maintain an internet website through which enrollees and prospective
enrollees of QHPs may obtain standardized comparative information on
QHPs available in the State. Exchanges must also undertake certain
minimum functions to facilitate the purchase of QHPs under section
1311(b)(1)(A) of Affordable Care Act and make available QHPs to
qualified individuals and employers under section 1311(d)(2)(A) of
Affordable Care Act. These minimum functions facilitate the purchase of
QHPs by helping to make the purchase of QHPs easier and also by
administering elements of the structure necessary to make QHPs
available. This approach of relying on private sector EDE entities
aligns with the general Affordable Care Act framework that relies on
and benefits from the government working within the existing health
insurance coverage infrastructure rather than taking a purely
governmental or public approach to advancing coverage for the
individually insured population. The Affordable Care Act does not
establish new government-provided health plans but instead creates
Exchanges to facilitate the purchase of government-subsidized QHPs
through the individual health insurance market. Exchanges support
specific statutory functions that make QHPs available to purchase.
These functions include certifying that QHPs conform to certain Federal
standards in addition to State and Federal standards that govern the
individual health insurance market. Exchanges must also provide certain
tools to help consumers shop for QHPs, as well as support eligibility
determinations and enrollment in other public health care programs such
as Medicaid Affordable Care Act and CHIP. Importantly, these additional
standards do not dictate any specific changes to the existing
enrollment pathways on the individual market.
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\73\ Section 1311(c)(5) of the Affordable Care Act instead
requires the Secretary to make available to all Exchanges a model
Exchange website template developed by the Secretary. Section
1311(d)(4)(C) of the Affordable Care Act requires the Exchanges to
maintain an internet website through which enrollees and prospective
enrollees of qualified health plans may obtain standardized
comparative information on such plans.
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In the context of operating an internet website, we interpret the
statutory language at section 1311(c)(5) and (d)(4)(C) of Affordable
Care Act to require that Exchanges minimally operate an informational
website that provides consumers with the ability to view comparative
information on QHP options, but that the Exchange may direct consumers
to other entities or resources for purposes of facilitating the
submission of applications for eligibility and enrolling enrollment in
QHPs, with APTC and CSRs, if otherwise eligible. Accordingly, a State
Exchange that elects the new SBE-EDE option would continue to be
responsible for determining eligibility for, and granting exemption
certifications under, section 1311(d)(4)(H) of Affordable Care Act, as
applicable; making available an electronic calculator consistent with
section 1311(d)(4)(G) of Affordable Care Act; establishing a Navigator
program as required under section 1311(d)(4)(K) of Affordable Care Act;
and providing for the operation of a toll-free telephone hotline under
section 1311(d)(4)(B) of Affordable Care Act. As mentioned earlier and
consistent with section 1311(d)(4)(F) of the Affordable Care Act, a
State Exchange that elects to pursue this new SBE-EDE option would
continue to be responsible for conducting assessments or determinations
of eligibility for Medicaid and CHIP. They would use the information
provided by consumers on the consumer-facing website operated by a web-
broker State Exchange's approved single, streamlined eligibility
application that is made available on the consumer websites operated by
the web-brokers selected by the State Exchange as part of the SBE-EDE
option, and for referring individuals who are assessed or determined
eligible for Medicaid or CHIP to the appropriate State Medicaid agency
for enrollment in those programs.
The State Exchanges that are currently operating have had to engage
with private entities in a manner that would similarly translate to
what a State Exchange would be doing under the SBE-EDE model, in terms
of relying on the services of private entities to develop and operate a
consumer-facing website (that is, online eligibility and enrollment
portal) that facilitates consumers applying for and enrolling in QHPs
through the State Exchange. Most State Exchanges currently in operation
have competitively-procured services from a private entity to develop
and operate an online eligibility and enrollment portal (including
through which an applicant can submit a single, streamlined application
for insurance subsidy programs) and consumer-facing QHP enrollment
portal on their respective State Exchange website. These online,
consumer-facing eligibility and enrollment portals on State Exchange
websites facilitate the online submission of consumer eligibility
applications and QHP selection and enrollments, and through web
interfaces that are seamless to consumers, transmit that information to
the State Exchange's back-end eligibility and enrollment processing
information system. We believe that in the absence of a centralized
consumer facing website for eligibility and enrollment operating on a
State Exchange's website under the proposed SBE-EDE approach, web-
brokers may provide that service to a State Exchange in a manner that
is similar to that which currently exists between State Exchanges and
the private entities they have contracted with to operate their
centralized consumer-facing online eligibility and enrollment portal on
the State Exchange's website. In both approaches, whether a web-broker
provides the online eligibility and enrollment portal to consumers
outside of the State Exchange's website, as would be the case under
this proposal, or a private entity has developed and operates the
consumer-facing online eligibility and enrollment portal on the State
Exchange's website in a centralized fashion, the State Exchange
maintains responsibility for meeting all other Federal requirements for
their online consumer assistance functions. As such,
[[Page 6330]]
the State Exchange would still need to maintain a website that meets
all other website requirements for State Exchanges under Sec.
155.205(b), in the same manner that SBE-FPs are currently required to
maintain an informational website for consumers while relying on the
Federal eligibility and enrollment platform for eligibility and
enrollment functions. In particular, State Exchanges that elect the
SBE-EDE option would be required to meet the minimum Exchange function
requirement under section 1311(d)(4)(C) of the Affordable Care Act to
maintain a website providing standardized comparative information on
such plans to enrollees and prospective enrollees of QHPs.
In the 2025 Payment Notice (89 FR 26271), we amended Sec.
155.302(a) to codify the Exchange's responsibility for conducting
eligibility determinations and maintaining records of all QHP
enrollments on the Exchange. State Exchanges would still maintain this
responsibly if it elects to pursue the new SBE-EDE option and
exclusively utilize web-brokers for operating consumer websites that
facilitate the eligibility and enrollment process in a State Exchange.
Additionally, enrollment through such a consumer website would still be
considered enrolling in a QHP through the State Exchange per Sec.
155.220(c)(3) and proposed Sec. 155.221(k)(2).
We note that this proposed amendment would not affect other
regulatory requirements throughout 45 CFR part 155 that govern State
Exchange eligibility and enrollment functions. For instance, per Sec.
155.405, State Exchanges would still be required to obtain HHS approval
for the eligibility application used on the consumer websites. HHS'
review of the State Exchange's eligibility application would follow the
currently established processes, including requiring that the State
Exchange demonstrate appropriate functionality to make accurate
determination. As such, State Exchange that does not rely on the
Federal eligibility and enrollment platform can continue to meet these
obligations without operating a singular, centralized consumer-facing
eligibility and enrollment website.
We recognize that allowing State Exchanges to take this approach
would create different consumer experiences in applying for and
enrolling in coverage through State Exchanges as compared to an
approach where a State Exchange implements and operates a centralized
eligibility and enrollment infrastructure. We seek comment on how State
Exchanges that implement such an approach can create comparable
consumer experience, in addition to comments on HHS oversight and the
approval requirements proposed in section III.D.4.b. of this proposed
rule. We seek comment on this proposal.
b. SBE-Enhanced Direct Enrollment Option (Sec. 155.221(k))
To build on the success of the EDE pathways and enhance the
consumer enrollment experience, we are proposing to offer additional
flexibility to State Exchanges to leverage the benefits of EDE through
a private sector-supported consumer engagement and enrollment strategy
that is tailored to the needs of local markets. Accordingly, we propose
to add a new paragraph (k) to Sec. 155.221 to establish a process for
State Exchanges that do not rely on the Federal eligibility and
enrollment platform to elect a new SBE-EDE option, in which the
applicable State Exchange could seek HHS approval for web brokers to
serve as the exclusive enrollment pathways for operating consumer-
facing websites that facilitate the eligibility and enrollment process
in a State Exchange. These consumer-facing websites operated by web-
brokers would facilitate the online submission of eligibility
applications by individuals seeking an eligibility determination for,
and enrollment in, a QHP offered through the Exchange with APTC and
CSRs, if otherwise eligible. Previously, the Exchange DE option was
finalized in part 1 of the 2022 Payment Notice Final Rule (86 FR 6151)
and later repealed in part 3 of the 2022 Payment Notice (86 FR 53429).
We propose to codify this policy again and to also allow Exchanges to
offer their consumers a form of EDE in which the Exchanges rely
exclusively on web-brokers to implement and operate the consumer-facing
websites through which consumers select and enroll in a QHP without
requiring that the Exchanges also operate a centralized consumer-facing
eligibility and enrollment website. We are proposing this for State
Exchanges exclusively to gather their insight into, and leverage any
operational experience they gain in, implementing this model. This
would help inform operational considerations were we to expand this
model to the FFEs and State Exchanges that use the Federal eligibility
and enrollment platform, both of which were included in the previous
policy. Since the repeal of the Exchange DE option, many of the policy
and operational priorities, as well as then-new Federal laws cited at
that time to justify the repeal, are no longer competing for agency
resources, and this has created bandwidth to codify a version of the DE
option once again.\74\
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\74\ Policy and operational priorities and then-new Federal laws
included implementation of E.O. 13985 and E.O.14009; Affordable Care
Act-related programs under the American Rescue Plan Act of 2021
(ARP) (namely, the State Exchange Modernization Grant Program) and
the No Surprises Act; and activities undertaken by HHS to implement
the COVID-19 SEP. While activities undertaken pursuant to the No
Surprises Act continue, E.O. 13985 and 14009 have been rescinded.
Additionally, many resources needed to implement and oversee
administration of the enhanced subsidies codified under the ARP, and
later extended under the Inflation Reduction Act of 2022, are no
longer needed since they expired at the end of 2025. The State
Exchange Modernization Grant program also has concluded and States
closed out their grants between January and August of 2023.
Additionally, activities related to implementing the COVID-19 SEP,
including coordination with and oversight of State Exchanges with
respect to similar SEPs they implemented in response to the COVID-19
public health emergency (PHE), concluded before the PHE ended in
2023.
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A State Exchange electing to implement the SBE-EDE option would
continue to be responsible for meeting, and ensuring that all approved
EDE partners meet all applicable statutory and regulatory requirements
governing application for and enrollment in QHPs. The State Exchange
would also continue to be responsible for sharing eligibility
determination and enrollment information in coordination with issuers
and HHS in accordance with Sec. Sec. 155.340, 155.400, and 155.430.
The State Exchange would continue to provide HHS enrollment data to
ensure accurate APTC payments are made to issuers on behalf of
qualified individuals and in support of reconciliation of APTC on
individual income tax returns.
In connection with the SBE-EDE option, the State Exchange would
still be required to make available a website listing basic QHP
information for comparison,\75\ and a listing with links to approved
partner websites for consumer shopping, plan selection, and enrollment
activities. Consistent with section 1311(d)(4)(E) of Affordable Care
Act, the comparative plan information presented on the State Exchange's
website would need to continue to utilize a standardized format,
including the use of the uniform summary of benefits and coverage
established under section 2715 of the PHS Act.\76\ The standardized
comparative information displayed on the Exchange website would also be
required to continue to include the quality ratings assigned to each
QHP offered through the Exchange.\77\ In addition, the State
[[Page 6331]]
Exchange, along with its EDE partners, would continue to be responsible
for meeting Federal accessibility standards under Sec. 155.205(c) for
individuals living with disabilities and for individuals who have
limited English proficiency.\78\ Finally, all consumer data collected,
stored, or transmitted through web-broker platforms operating under the
SBE-EDE option would remain subject to the privacy and security
standards established at Sec. 155.260 and web-brokers participating in
the SBE-EDE option would be subject to HHS oversight and monitoring
pursuant to Sec. 155.280 as a non-Exchange entity. State Exchanges
implementing the SBE-EDE option would be required to ensure that web-
brokers comply with these protections, including, but not limited to,
encryption, access controls, and audit logging requirements.
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\75\ 45 CFR 155.205(b)(1) outlines the QHP comparative
information which must be displayed.
\76\ See Sec. 155.205(b).
\77\ See section 1311(d)(4)(D) of Affordable Care Act and 45 CFR
155.205(b). Also see sections 1311(c)(3) and (c)(4) of Affordable
Care Act and Sec. Sec. 155.1400 and 155.1405.
\78\ Covered entities such as States, recipients of Federal
financial assistance from HHS, programs or activities administered
by HHS under title I of Affordable Care Act (such as the FFE), and
programs or activities administered by any entity established under
Title I (such as State Exchanges), must comply with applicable
Federal civil rights laws that prohibit discrimination on the basis
of race, color, national origin, sex, age, and disability. These
laws include section 1557 of Affordable Care Act (42 U.S.C. 18116)
(Section 1557), Title VI of the Civil Rights Act of 1964 (42 U.S.C.
2000d et seq.) (Title VI), section 504 of the Rehabilitation Act of
1973 (29 U.S.C. 794) (Section 504), and the Americans with
Disabilities Act of 1990 (29 U.S.C. 12101 et seq.) (ADA).
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HHS would maintain oversight authority over State Exchanges under
Sec. 155.1200, which would enable enforcement of Federal requirements
associated with the SBE-EDE option and would allow HHS to take
necessary actions to mitigate program integrity risks inherent in this
model. To ensure ongoing compliance and reduce program integrity risks
under the SBE-EDE option, HHS would rely on the State-based Marketplace
Annual Reporting Tool (SMART), as a key oversight mechanism. Under
Sec. 155.1200(b), State Exchanges would be required to complete SMART
submissions annually, attesting to their compliance with relevant
Exchange operational requirements under part 155. Additionally, under
Sec. 155.1200(c), State Exchanges would need to engage independent
qualified auditing entities to perform annual external financial and
programmatic audits, which would be included with SMART submissions.
HHS would review all SMART submissions and would issue formal letters
to State Exchanges summarizing observations on areas of noncompliance
and identifying any required corrective actions. This SMART-based
compliance monitoring process would serve as a critical safeguard
against program integrity risks by providing HHS with regular, audited
documentation of State Exchange operations and would be relied on under
the SBE-EDE model.
Beyond the SMART process, HHS would employ additional oversight
mechanisms to mitigate program integrity risks. These include formal
technical assistance opportunities tailored to SBE-EDE implementation
efforts and challenges, as well as ongoing informal communications with
State Exchange leadership and staff for proactive, real-time issue
identification and resolution. Together, these oversight tools--
anchored by the SMART compliance monitoring process--would enable HHS
to exercise its enforcement authority and ensure that State Exchanges
implementing the SBE-EDE option maintain program integrity and meet all
Federal requirements.
In this proposed rule, we propose to modify Sec. 155.221(k) such
that, subject to HHS approval, a State Exchange that does not rely on
the Federal eligibility and enrollment platform may elect to engage one
or more web-brokers described in paragraph Sec. 155.221(a) to
facilitate QHP enrollments through its Exchange. Such approved entities
would enroll qualified individuals in a QHP in a manner that
constitutes enrollment through the Exchange \79\ and would also
facilitate consumer submission of eligibility applications through the
entity's consumer website to the State Exchange to receive eligibility
determinations from the State Exchange for APTCs and CSRs.
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\79\ Section 1401(a) of Affordable Care Act added new section
36B to the Code, which provides for PTCs for eligible individuals,
while section 1402 of Affordable Care Act provides for CSRs for
eligible individuals. For individuals to be eligible to receive
PTCs, among other requirements, the Affordable Care Act requires
that individuals be enrolled in a QHP through an Exchange. We have
interpreted this statutory language to allow a QHP issuer to enroll
an applicant who initiates enrollment directly with the QHP issuer.
See Sec. 156.1230, whereby individuals enrolling directly on the
website of a QHP issuer are considered enrolled ``through an
Exchange'' so long as the issuer meets applicable requirements. We
adopted a similar approach to allow a web-broker to enroll an
applicant who seeks to enroll through the web-broker's website. See
Sec. 155.220(a)(2) and (c), whereby individuals enrolling directly
through the site of a web-broker are considered enrolled ``through
an Exchange'' so long as the web-broker meets applicable
requirements.
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At Sec. 155.221(k), we propose requirements for a State Exchange
to become an SBE-EDE. We propose that a newly-transitioning or approved
State Exchange must submit an Exchange Blueprint application, or
Blueprint revision, to HHS for review at least 15 months prior to the
targeted open enrollment launch date as an SBE-EDE.\80\ For an approved
State Exchange, this would be considered a significant change to its
Blueprint.\81\ We also propose that the State Exchange must meet all
other applicable Federal statutory and regulatory requirements for the
operation of an Exchange, including for approved State Exchanges to
request and obtain HHS approval for any significant changes to its
single, streamlined eligibility application under Sec. 155.405.
Following submission of an approved State Exchange's submission of a
revised Exchange Blueprint application, in accordance with Sec.
155.105(e), HHS would have up to 90 days \82\ to review the revision
and approve or deny the change.
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\80\ This approach is consistent with the 15-month State
Exchange approval timeline requirements under Sec. 155.106(a)(2)
for States seeking to newly establish and operate a State Exchange
to submit its State Exchange Blueprint for review and approval.
While the SBE-EDE model is distinct from the State Exchange model,
we would consider a transition to the SBE-EDE model to require a
significant operational effort to implement such that a consistent
timeframe would have many benefits to the State and HHS,
particularly while the SBE-EDE model remains a new Exchange model.
\81\ This approach is consistent with the requirement that a
State notify HHS and receive written approval from HHS before
significant changes are made to the Exchange Blueprint. See, for
example, 77 FR 18316. Significant changes could include altering a
key function of Exchange operations or other changes to the Exchange
Blueprint that would have an impact on the operation of the
Exchange. This includes, but is not limited to, the process for
enrollment in a QHP. See, for example, 76 FR 41871.
\82\ As detailed in Sec. 155.105(e), HHS generally has 60 days
after receipt of a completed request to complete its review of a
significant change to an Exchange Blueprint and, for good cause, may
extend the review period by an additional 30 days up to a total of
90 days.
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Additionally, in accordance with Sec. 155.105(c)(2), we propose at
Sec. 155.221(k)(1) that a State Exchange that wants to implement the
SBE-EDE option would be required to demonstrate to HHS operational
readiness for the State Exchange to enroll qualified individuals in a
QHP in a manner that constitutes enrollment through the Exchange and to
enable individuals to apply for APTC and cost sharing for QHPs, as well
as receive assessments or determinations of Medicaid and CHIP
eligibility from the Exchange as described in Sec. 155.302, using the
eligibility application described in Sec. 155.405. We propose a new
requirement at Sec. 155.221(k)(2) that the State also would receive
approval only if it provides HHS with an implementation plan and
timeline that details the key activities, milestones, and its
communications and outreach strategy to support the transition of
enrollment operations to EDE entities. This is to ensure that HHS and
the State
[[Page 6332]]
have an opportunity to coordinate these details to maximize the chances
of a successful transition. State Exchanges that elect to implement the
SBE-EDE option would retain the flexibility to determine their own
business controls while complying with Sec. 155.220(n) and Sec.
155.221(j), which outline the applicability of Federal web-broker and
EDE requirements to State Exchanges, including requirements related to
standardized website disclaimers, web-broker operational readiness,
business audit and security and privacy documentation, and display of
website changes. We propose at Sec. 155.221(k)(3) that HHS would not
approve a State Exchange to implement the SBE-EDE option unless the
State Exchange demonstrates to HHS that at least one EDE entity
selected by the State is capable of enrolling all consumers in the
State. In particular, we believe it is critical that State Exchanges
that elect to implement the SBE-EDE option establish that at least one
EDE entity meets the minimum Federal requirements to participate in the
Federally-facilitated Exchange enhanced direct enrollment program,
including requirements at Sec. Sec. 155.220 and 155.221, partic
[…truncated; see source link]Indexed from Federal Register on February 11, 2026.
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.