[Federal Register Volume 90, Number 52 (Wednesday, March 19, 2025)]
[Proposed Rules]
[Pages 12942-13032]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-04083]



[[Page 12941]]

Vol. 90

Wednesday,

No. 52

March 19, 2025

Part II





Department of Health and Human Services





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45 CFR Parts 147, 155 and 156





Patient Protection and Affordable Care Act; Marketplace Integrity and 
Affordability; Proposed Rule

Federal Register / Vol. 90, No. 52 / Wednesday, March 19, 2025 / 
Proposed Rules

[[Page 12942]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 147, 155, and 156

[CMS-9884-P]
RIN 0938-AV61


Patient Protection and Affordable Care Act; Marketplace Integrity 
and Affordability

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise standards relating to past-due 
premium payments; exclude Deferred Action for Childhood Arrivals 
recipients from the definition of ``lawfully present''; the evidentiary 
standard HHS uses to assess an agent's, broker's, or web-broker's 
potential noncompliance; failure to file and reconcile; income 
eligibility verifications for premium tax credits and cost-sharing 
reductions; annual eligibility redetermination; the automatic 
reenrollment hierarchy; the annual open enrollment period; special 
enrollment periods; de minimis thresholds for the actuarial value for 
plans subject to essential health benefits (EHB) requirements and for 
income-based cost-sharing reduction plan variations; and the premium 
adjustment percentage methodology; and prohibit issuers of coverage 
subject to EHB requirements from providing coverage for sex-trait 
modification as an EHB.

DATES: To be assured consideration, comments must be received by April 
11, 2025.

ADDRESSES: In commenting, please refer to file code CMS-9884-P.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9884-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9884-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Jeff Wu, (301) 492-4305, Rogelyn 
McLean, (410) 786-1524, Grace Bristol, (410) 786-8437, for general 
information.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: Comments received before the close 
of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post comments received 
before the close of the comment period on the following website as soon 
as possible after they have been received: http://www.regulations.gov. 
Follow the search instructions on that website to view public comments. 
We will not post on Regulations.gov public comments that make threats 
to individuals or institutions or suggest that the commenter will take 
actions to harm an individual. We continue to encourage individuals not 
to submit duplicative comments. We will post acceptable comments from 
multiple unique commenters even if the content is identical or nearly 
identical to other comments.
    Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a 
summary of not more than 100 words in length of this proposed rule, in 
plain language, may be found at https://www.regulations.gov/.

I. Executive Summary

    On January 20, 2025, President Trump issued a memorandum entitled 
``Delivering Emergency Price Relief for American Families and Defeating 
the Cost-of-Living Crisis.'' \1\ This memorandum instructed all 
executive departments and agencies to deliver emergency price relief 
for the American people and to increase the prosperity of the American 
worker. Health care represents a substantial portion of a family's 
budget and a tremendous cost to Federal taxpayers. To provide relief 
from rising health care costs, we propose several regulatory actions 
aimed at strengthening the integrity of the Patient Protection and 
Affordable Care Act (ACA) eligibility and enrollment systems to reduce 
waste, fraud, and abuse. We expect these actions would provide premium 
relief to families who do not qualify for Federal premium subsidies and 
reduce the burden of the ACA premium subsidy expenditures to the 
Federal taxpayer.
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    \1\ Executive Office of the President. (January 20, 2025). 
Delivering Emergency Price Relief for American Families and 
Defeating the Cost-of-Living Crisis. https://www.federalregister.gov/documents/2025/01/28/2025-01904/delivering-emergency-price-relief-for-american-families-and-defeating-the-cost-of-living-crisis.
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    Based on our review of enrollment data and our experience fielding 
consumer complaints, we believe several regulatory policies recently 
put in place to make it easier to enroll in subsidized coverage 
severely weakened program integrity and put consumers at risk from 
improper enrollment. In particular, these policies put consumers at 
risk for accumulating surprise tax liabilities and substantial 
inconveniences from resolving these liabilities, as well as other 
issues related to coverage changes and access to care, due to the 
improper enrollment. The substantial increase in consumer complaints 
from people who were unaware that they had been enrolled by an agent, 
broker, or web-broker in Exchange coverage suggests many of these 
improper enrollments are due to fraud.\2\ We note, fraudulent 
enrollments involve enrollments obtained through willful 
misrepresentations whereas improper enrollments involve any enrollment 
determination that was made incorrectly for any reason which can 
include fraud.\3\
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    \2\ For example, from January 2024 through August 2024, CMS 
received 90,863 complaints that consumers had their FFE plan changed 
without their consent (also known as an ``unauthorized plan 
switch''). CMS (2024, October). CMS Update on Action to Prevent 
Unauthorized Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity. See also, U.S. 
Department of Justice. (2025, February 19). President of insurance 
brokerage firm and CEO of marketing company charged in $161M 
Affordable Care Act enrollment fraud scheme [Press release]. https://www.justice.gov/opa/pr/president-insurance-brokerage-firm-and-ceo-marketing-company-charged-161m-affordable-care.
    \3\ See U.S. Government Accountability Office, Improper Payments 
and Fraud: How They Are Related but Different, December 7, 2023, 
https://www.gao.gov/products/gao-24-106608.
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    Because Federal law limits the amount that enrollees with lower 
household incomes must repay when they reconcile advance payments of 
the premium tax credit (APTC) received, these improper enrollments 
ended up costing Federal taxpayers billions of dollars. One analysis of 
improper enrollments estimated the Federal Government may have spent up 
to $26 billion on improper enrollments in 2024, before reconciling 
enrollment data.\4\ The proposed provisions here aim

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to address these serious program integrity problems while at the same 
time delivering a streamlined enrollment and eligibility determination 
process for individual market consumers.
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    \4\ Blase, B.; Gonshorowski, D. (2024, June). The Great 
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
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    Before summarizing these proposed rules, we believe it is important 
to review the interlocking policies the ACA put in place to expand 
access to coverage on the individual market.\5\ A full understanding of 
how ACA individual market policies interact helps frame why we believe 
the program integrity and premium relief policies contained within 
these proposed rules are necessary to improve the individual health 
insurance market. As a starting point, the ACA establishes American 
Health Benefit Exchanges, or ``Exchanges'' to facilitate the purchase 
of qualified health plans (QHPs). Many individuals who enroll in QHPs 
through individual market Exchanges are eligible to receive a premium 
tax credit (PTC) to reduce their costs for health insurance premiums 
and have their out-of-pocket expenses for health care services reduced 
through cost-sharing reductions (CSR). Most individuals who claim PTCs 
receive APTC, which subsidizes lower monthly premiums, before they must 
file taxes. Taxpayers must then reconcile APTC paid to issuers on their 
behalf when they file taxes. The ACA includes limits on how much excess 
APTC a taxpayer must repay based on household income.
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    \5\ The Patient Protection and Affordable Care Act (Pub. L. 111-
148, 124 Stat. 119) was enacted on March 23, 2010. The Healthcare 
and Education Reconciliation Act of 2010 (Pub. L. 111-152, 124 Stat. 
1049), which amended and revised several provisions of the Patient 
Protection and Affordable Care Act, was enacted on March 30, 2010. 
In this rulemaking, the two statutes are referred to collectively as 
the ``Patient Protection and Affordable Care Act,'' ``Affordable 
Care Act,'' or ``ACA''.
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    The ACA's individual market rules require issuers to guarantee 
coverage to all applicants regardless of pre-existing conditions and 
restrict issuers from setting premiums based on health status. These 
requirements create an inherent bias towards adverse selection--a 
situation where individuals with higher risk are more likely to select 
coverage than healthy individuals--by allowing people to wait to enroll 
in coverage until they need health services. In such situations, health 
insurance issuers offering coverage to a larger proportion of higher 
risk enrollees raise premiums, which causes healthier people to drop 
coverage. Enough cycles of rising premiums and healthier people 
dropping coverage would create a ``death spiral'' and undermine the 
viability of the individual market for everyone.
    To discourage people from waiting until they need health care 
services to sign up for coverage, the ACA permits issuers to limit 
enrollment periods to certain times. The ACA also provides PTC for 
plans sold through Exchanges to subsidize coverage for certain 
households.
    Several policies included in the ACA attempt to address its adverse 
selection bias. For example, adverse selection between plans can occur 
when one plan enrolls a disproportionate number of people with high 
risks. The ACA's risk adjustment program transfers funds from issuers 
with relatively low-risk enrollees to issuers with relatively high-risk 
enrollees, though implementation of the risk adjustment program has 
been criticized by some commenters for creating further distortions 
that limit incentives for issuers to attract lower-risk enrollees.\6\ 
In addition, to avoid adverse selection between plans sold on and off 
the Exchanges, the ACA requires issuers to keep issuers to keep all 
individual market plans subject to the law's main coverage mandates in 
the same risk pool.
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    \6\ Cruz, D; Fann, G. (2024, Sept.). It's Not Just the Prices: 
ACA Plans Have Declined in Quality Over the Past Decade. Paragon 
Health Institute. https://paragoninstitute.org/private-health/its-not-just-the-prices-aca-plans-have-declined-in-quality-over-the-past-decade/.
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    By tying an issuer's on-Exchange and off-Exchange individual market 
risk pools together, the ACA's unsubsidized off-Exchange market was 
intended to help anchor the subsidized Exchange enrollees to a more 
competitive and efficient market. A well-functioning market depends on 
consumers actively shopping for the best deal based on price and 
quality.\7\ In practice, however, the high premiums of off-Exchange 
plans have made these options largely unattractive to unsubsidized 
consumers, with only an estimated 2.5 million people enrolling in 
unsubsidized off-Exchange coverage (including some in plans not subject 
to all of the ACA's market rules, like grandfathered and short-term 
plans) nationwide in 2023.\8\ Further, subsidies, especially price-
linked subsidies like PTCs, generally distort markets and weaken 
competition because the subsidized enrollee is no longer price 
sensitive to the full cost.\9\ In a market where everyone is 
subsidized, prices would generally be much higher due to the subsidized 
consumers' lower level of price sensitivity.\10\ When Congress enacted 
the ACA, the Congressional Budget Office (CBO) projected the law would 
enroll 15 million unsubsidized consumers--about the same as without the 
law--and another 19 million subsidized consumers.\11\ Those 15 million 
unsubsidized consumers actively shopping for the best deal were 
expected to support a competitive and efficient market. In turn, the 
benefits from this competition would spill over to the subsidized 
consumers who benefit from the availability of higher quality health 
plans and the Federal taxpayers funding the subsidies who benefit from 
lower premium subsidies.
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    \7\ Garrod, L.; Waddams, C.; Hvvid, M.; and Loomes, G. (2009). 
Competition Remedies in Consumer Markets. Loyola Consumer Law 
Review. 21. 439-495. https://www.researchgate.net/publication/271701344_Competition_Remedies_in_Consumer_Markets (last accessed 
Feb. 23, 2025).
    \8\ Ortaliza, J.; Amin, K.; and Cox, C. (2023). As ACA 
Marketplace Enrollment Reaches Record High, Fewer Are Buying 
Individual Market Coverage Elsewhere. https://www.kff.org/private-insurance/issue-brief/as-aca-marketplace-enrollment-reaches-record-high-fewer-are-buying-individual-market-coverage-elsewhere/#.
    \9\ See Sonia Jaffe and Mark Shepard, ``Price-Linked Subsidies 
and Imperfect Competition in Health Insurance,'' American Economic 
Journal: Economic Policy, Vol 12, No. 3, August 2020.
    \10\ While subsidized consumers are willing to tolerate higher 
prices than unsubsidized consumers, there are certain limits on how 
much prices can rise overall. The ACA's rate review provision 
(section 2794 of the Public Health Service Act (PHS Act)) restrains 
prices prospectively by placing scrutiny on proposed premium rate 
increases before they go into effect, which can discourage or 
prevent issuers from implementing unreasonable rate increases. The 
ACA's medical loss ratio provision (section 2718 of the PHS Act) 
limits prices retrospectively by requiring issuers to pay rebates to 
consumers if premium rates end up being excessive relative to actual 
medical costs.
    \11\ Congressional Budget Office. (2010, March 20) Letter to 
Nancy Pelosi. Congress of the U.S. Table 4, https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf.
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    The ACA did not roll out as intended when the ACA's main coverage 
mandates went into effect in 2014. Premiums increased much more and 
enrollment levels among both the subsidized and the unsubsidized were 
much lower than projected. Higher premiums then led to a substantial 
decline in unsubsidized enrollment, which undermined the 
competitiveness of the market. By 2019, our data showed that subsidized 
enrollment on the Exchanges had reached only 8.3 million while 
unsubsidized enrollment across the entire individual market subject to 
the ACA's market rules had dropped to 3.4 million.\12\ To improve the

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attractiveness of the market, several States implemented reinsurance 
programs that lowered premiums for the unsubsidized by funding high-
cost claims across the individual market. These policies helped retain 
unsubsidized enrollees who anchor the market in a more competitive and 
efficient position.
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    \12\ CMS. (2020, Oct. 9). Trends in Subsidized and Unsubsidized 
Enrollment. p. 11. https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/Trends-Subsidized-Unsubsidized-Enrollment-BY18-19.pdf. Note that, in 2019, an 
additional 1.4 million unsubsidized people remained enrolled in 
grandfathered and grandmothered individual market plans that were 
not subject to all of the ACA's market rules. Grandmothered coverage 
refers to certain non-grandfathered health insurance coverage in the 
individual and small group market with respect to which CMS has 
announced it will not take enforcement action even though the 
coverage is out of compliance with certain specified market rules. 
See CMS. (2022, March 23). Extended Non-Enforcement of Affordable 
Care Act-Compliance with Respect to Certain Policies. https://www.cms.gov/files/document/extension-limited-non-enforcement-policy-through-calendar-year-2023-and-later-benefit-years.pdf.
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    After reviewing individual market data and responding to a 
substantial increase in consumer complaints, we believe several rules 
we have implemented removed necessary program integrity protections and 
facilitated the substantial increase in improper enrollments on the 
Exchanges. Some of those rules removed or reduced eligibility 
verifications related to qualifying for APTC and CSR subsidies. Other 
rules amended enrollment period policies by removing verifications and 
expanding when and under what conditions a consumer can enroll. We 
believe the data and analysis presented in this preamble show how these 
rules have led to higher premiums and costs for consumers and taxpayers 
alike. Therefore, we propose the following regulatory changes to 
improve program integrity and protect against adverse selection, while 
at the same time keeping the enrollment process streamlined and 
accessible, especially for low-income consumers who utilize Exchanges 
for subsidized individual market coverage.
    We propose to remove Sec.  147.104(i), which would reverse the 
policy restricting an issuer from attributing payment of premium for 
new coverage to past-due premiums from prior coverage. This current 
policy, in effect, restricts issuers from establishing premium payment 
policies that require enrollees to pay past-due premiums to effectuate 
new coverage. While we previously concluded that this restriction would 
remove an unnecessary barrier and make it easier for consumers to 
enroll in coverage, recent enrollment data suggest people are 
manipulating guaranteed availability and grace periods to time coverage 
to when they need health care services. Alongside the removal of this 
restriction, we propose to allow issuers, subject to applicable State 
law, to add past-due premium amounts owed to the issuer to the initial 
premium the enrollee must pay to effectuate new coverage and to not 
effectuate new coverage if the past-due and initial premium amounts are 
not paid in full. We believe this change would strengthen the risk pool 
and lower gross premiums.
    We propose to modify the definition of ``lawfully present'' 
currently articulated at Sec.  155.20 and used for the purpose of 
determining whether a consumer is eligible to enroll in a QHP through 
an Exchange or a Basic Health Program (BHP) in States that elect to 
operate a BHP.\13\ The BHP regulations at 42 CFR 600.5 cross-reference 
the definition of lawfully present at 45 CFR 155.20. This change would 
reflect the explicit statutory requirements of the ACA by once again 
excluding ``Deferred Action for Childhood Arrivals'' (DACA) recipients 
from the definition of ``lawfully present'' that is used to determine 
eligibility to enroll in a QHP through an Exchange, for APTC and CSRs, 
and for a BHP in States that elect to operate a BHP.
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    \13\ Currently, Minnesota and Oregon operate a BHP. See their 
approved BHP Blueprints, available at: https://www.medicaid.gov/basic-health-program/index.html.
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    We propose to revise Sec.  155.220(g)(2) to require HHS to apply a 
``preponderance of the evidence'' standard of proof for terminations 
for cause by HHS of an agent's, broker's, or web-broker's Exchange 
agreements under Sec.  155.220(g)(1). We also propose to add a 
definition for ``preponderance of the evidence'' to Sec.  155.20. We 
believe this change would improve transparency in the process for 
holding agents, brokers, and web-brokers accountable for compliance 
with applicable law, regulatory requirements, and the terms and 
conditions of their Exchange agreements.
    We propose to revise the failure to file and reconcile (FTR) 
process at Sec.  155.305(f)(4) to reinstate the policy that Exchanges 
must determine a tax filer ineligible for APTC if: (1) HHS notifies the 
Exchange that the tax filer (or their spouse if the tax filer is a 
married couple) received APTC for a prior year for which tax data would 
be utilized for verification of income, and (2) the tax filer or tax 
filer's spouse did not comply with the requirement to file a Federal 
income tax return and reconcile APTC for that year. This proposed 
process would replace the existing requirement that Exchanges may not 
determine a tax filer eligible for APTC if HHS notifies the Exchanges 
that the tax filer (or either spouse if the tax filer is a married 
couple) received APTC for two consecutive years for which tax data 
would be utilized for verification of income, and (2) the tax filer or 
tax filer's spouse did not comply with the requirement to file a 
Federal income tax return and reconcile APTC for that year and the 
previous year. We believe this change would reduce the number of 
ineligible enrollees who continue to receive APTC, which would, in 
turn, lower APTC expenditures and protect ineligible enrollees from 
accumulating surprise tax liabilities. We also propose to amend the 
notice requirement at Sec.  155.305(f)(4)(i) and remove the notice 
requirement at Sec.  155.305(f)(4)(ii) to conform with the notice 
policy under the previous FTR policy.
    To further protect against consumers receiving APTC and CSR 
subsidies when they do not meet eligibility requirements, we propose 
policies to strengthen the verification process when there is an income 
inconsistency with trusted data sources. We propose to remove Sec.  
155.315(f)(7) which requires that applicants receive an automatic 60-
day extension to the 90-day period set forth in section 1411(e)(4)(A) 
of the ACA to provide documentation to verify household income when 
there is an income inconsistency. Removing Sec.  155.315(f)(7) would 
end APTC payments to individuals who have failed to provide 
documentation verifying their eligibility for APTC within 90 days and 
further protect them from surprise tax liabilities if they are 
ineligible. We also propose to revise Sec.  155.320(c)(3)(iii) to 
specify that all Exchanges must generate annual household income 
inconsistencies when a tax filer's attested projected annual household 
income is greater than or equal to 100 percent and not more than 400 
percent of the Federal poverty level (FPL) and trusted data sources 
indicate that projected household income is under 100 percent of the 
FPL. Finally, we propose to remove Sec.  155.320(c)(5) which would 
remove the exception to the standard household income inconsistency 
process that requires the Exchange to accept an applicant's attestation 
of household income and family size without verification when the 
Internal Revenue Service (IRS) does not have tax return data to verify 
household income and family size. Removing this exception would in most 
circumstances require Exchanges to verify household income with other 
trusted data sources when a tax return is unavailable and follow the 
alternative verification process to verify the income, which would 
strengthen

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program integrity by improving the accuracy of eligibility 
determinations across all Exchanges.
    To prevent fully subsidized enrollees from being automatically re-
enrolled without taking an action to confirm their eligibility 
information, we propose an amendment to the annual eligibility 
redetermination regulation and are seeking comment on a range of 
potential measures to ensure program integrity with respect to re-
enrollments. We propose that, when an enrollee does not contact an 
Exchange to obtain an updated eligibility determination and select a 
plan on or before the last day to do so for January 1 coverage, in 
accordance with the effective dates specified in Sec. Sec.  155.410(f) 
and 155.420(b), as applicable, and the enrollee's portion of the 
premium for the entire policy would be zero dollars after application 
of APTC through the Exchange's annual redetermination process, all 
Exchanges must decrease the amount of the APTC applied to the policy 
such that the remaining monthly premium owed by the enrollee for the 
entire policy equals $5 for the first month and for every following 
month that the enrollee does not confirm their eligibility for APTC. 
Consistent with Sec.  155.310(c) and (f), enrollees automatically 
reenrolled with a $5 monthly premium after APTC under this policy would 
be able to update their Exchange application at any point to confirm 
eligibility for APTC that covers the entire premium, and re-confirm 
their plan to thereby reinstate the full amount of APTC for which the 
enrollee is eligible on a prospective basis. We propose that the 
Federally-facilitated Exchanges (FFEs) and the State-based Exchanges on 
the Federal platform (SBE-FPs) must implement this change starting with 
annual redeterminations for benefit year 2026. We propose that the 
State Exchanges must implement it starting with annual redeterminations 
for benefit year 2027. We believe these proposals would strengthen the 
program integrity of the Exchanges and protect consumers.
    We are also seeking comment on a range of other options to ensure 
program integrity with respect to automatic re-enrollment that would 
provide a more meaningful incentive to confirm eligibility for APTC, as 
the millions estimated to currently receive improper APTC could simply 
pay the $5 premium while continuing to improperly receive generous 
subsidies on their behalf, potentially incurring significant future 
surprise tax liabilities in the process. As such, we are seeking 
comment on whether $5 is the appropriate premium amount for affected 
individuals to pay under the proposed policy. Another such option could 
include requiring individuals who qualify for fully subsidized plans to 
re-confirm their plan and re-verify their income before they are 
eligible to receive APTC. Finally, we are seeking comment on removing 
the option for Exchanges to auto-reenroll individuals who qualify for 
fully or partially subsidized plans, ensuring individuals affirmatively 
choose their plan and verify their income during the open enrollment 
period, dramatically reducing the likelihood of improper payments of 
the APTC.
    We propose to amend the automatic reenrollment hierarchy by 
removing Sec.  155.335(j)(4) which currently allows Exchanges to move a 
CSR-eligible enrollee from a bronze QHP and re-enroll them into a 
silver QHP for an upcoming plan year, if a silver QHP is available in 
the same product, with the same provider network, and with a lower or 
equivalent net premium after the application of APTC as the bronze plan 
into which the enrollee would otherwise have been re-enrolled. We 
believe the consumer awareness problem the current policy aimed to 
address is substantially less today and, therefore, no longer outweighs 
the negative consequences from not automatically re-enrolling consumers 
whose current plan remains available for an upcoming plan year without 
the active consent of the consumer, including that the policy could 
confuse consumers, undermine consumer choice, and create unexpected tax 
liability.
    We propose to modify Sec.  155.400(g) to remove paragraphs (2) and 
(3), which establish an option for issuers to implement a fixed dollar 
and/or gross percentage-based premium payment threshold. To preserve 
the integrity of the Exchanges, we believe it is important to ensure 
that enrollees do not remain enrolled in coverage without paying at 
least some of the premium owed, as there are situations where the fixed 
dollar and/or gross percentage-based thresholds would allow an enrollee 
to remain enrolled in coverage for extended periods of time after 
payment of the binder. Therefore, we propose to limit issuers to the 
net percentage-based premium payment threshold at Sec.  155.400(g)(1).
    For benefit years starting January 1, 2026, and beyond, we propose 
to change the annual Open Enrollment Period (OEP) for coverage through 
all individual market Exchanges from November 1 through January 15 to 
November 1 through December 15 of the calendar year preceding the 
benefit year of enrollment. This change would also apply to non-
grandfathered individual health insurance coverage offered outside of 
an Exchange.
    We propose to remove Sec.  155.420(d)(16) and make conforming 
changes to repeal the monthly special enrollment period (SEP) for 
qualified individuals or enrollees, or the dependents of a qualified 
individual or enrollee, who are eligible for APTC and whose projected 
household income is at or below 150 percent of the FPL. We believe this 
proposal and the proposal to change the length of the OEP would improve 
the risk pool by reducing adverse selection from people who may 
otherwise wait to enroll until they need health care services and would 
encourage enrollees to maintain continuous coverage for the full year. 
We also anticipate this would lower premiums.
    Based on recent evidence \14\ suggesting an increase in the misuse 
and abuse of SEPs to gain coverage outside the OEP, we propose to amend 
Sec.  155.420(g) to enable HHS to reinstate pre-enrollment verification 
of eligibility of applicants for all categories of individual market 
SEPs. We propose to further amend Sec.  155.420(g) to require all 
Exchanges to conduct pre-enrollment verification of eligibility for at 
least 75 percent of new enrollments through SEPs. We understand that 
most Exchanges most likely would be able to meet this requirement by 
verifying just two of their most used SEPs.
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    \14\ This conclusion is drawn from current and historic SEP data 
available to the Exchanges on the Federal platform through the 
Monthly SEP report and is current as of 1/03/2025.
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    We propose to amend Sec.  156.115(d) to provide that an issuer of 
coverage subject to EHB requirements may not provide sex-trait 
modification as an EHB beginning with Plan Year (PY) 2026.
    We propose to update the premium adjustment percentage methodology 
to establish a premium growth measure that comprehensively reflects 
premium growth in all affected markets. This premium growth measure is 
used to ensure that certain parameters change with health insurance 
market premiums over time, including parameters related to annual 
limits on cost sharing, eligibility for certain exemptions based on 
access to affordable premiums, and employer shared responsibility 
payment amounts. The premium adjustment percentage is also used as part 
of the calculation of the reduced annual limitation on cost sharing 
applicable to silver plan variations. This proposed change would re-
adopt the premium growth measure that was in place for PY

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2020 and PY 2021 and apply it to the related parameters starting with 
PY 2026. As such, we also propose the PY 2026 maximum annual limitation 
on cost sharing, reduced maximum annual limitations on cost sharing, 
and required contribution percentage under Sec.  155.605(d)(2) using 
the proposed premium adjustment percentage methodology.
    Beginning in PY 2026, we propose changing the de minimis thresholds 
for the AV for plans subject to EHB requirements to +2/-4 percentage 
points for all individual and small group market plans subject to the 
AV requirements under the EHB package, other than for expanded bronze 
plans,\15\ for which we propose a de minimis range of +5/-4 percentage 
points, as well as establishing wider de minimis thresholds for income-
based CSR plan variations.
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    \15\ Expanded bronze plans are bronze plans currently referenced 
in Sec.  156.140(c) that cover and pay for at least one major 
service, other than preventive services, before the deductible or 
meet the requirements to be a high deductible health plan within the 
meaning of section 223(c)(2) of the Internal Revenue Code of 1986.
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II. Background

A. Legislative and Regulatory Overview

    Section 2702 of the Public Health Service (PHS) Act, as added by 
the ACA, establishes requirements for guaranteed availability of 
coverage in the group and individual markets.
    Section 2703 of the PHS Act, as added by the ACA, and sections 2712 
(former) and 2741 of the PHS Act, as added by the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA), require health 
insurance issuers in the group and individual markets to guarantee the 
renewability of coverage unless an exception applies.
    Section 1302 of the ACA provides for the establishment of an EHB 
package that includes coverage of EHBs (as defined by the Secretary of 
Health and Human Services (the Secretary)), cost-sharing limits, and AV 
requirements. Among other things, the law directs that EHBs be equal in 
scope to the benefits provided under a typical employer plan, and that 
they cover at least the following 10 general categories: ambulatory 
patient services; emergency services; hospitalization; maternity and 
newborn care; mental health and substance use disorder services, 
including behavioral health treatment; prescription drugs; 
rehabilitative and habilitative services and devices; laboratory 
services; preventive and wellness services and chronic disease 
management; and pediatric services, including oral and vision care.
    Sections 1302(b)(4)(A) through (D) of the ACA establish that the 
Secretary must define EHB in a manner that: (1) reflects appropriate 
balance among the 10 categories; (2) is not designed in such a way as 
to discriminate based on age, disability, or expected length of life; 
(3) takes into account the health care needs of diverse segments of the 
population; and (4) does not allow denials of EHBs based on age, life 
expectancy, disability, degree of medical dependency, or quality of 
life.
    To set cost-sharing limits, section 1302(c)(4) of the ACA directs 
the Secretary to determine an annual premium adjustment percentage, a 
measure of premium growth that is used to set the rate of increase for 
three parameters: (1) The maximum annual limitation on cost sharing 
(section 1302(c)(1) of the ACA); (2) the required contribution 
percentage used to determine whether an individual can afford minimum 
essential coverage (MEC) (section 5000A of the Internal Revenue Code of 
1986 (the Code), as enacted by section 1501 of the ACA); and (3) the 
employer shared responsibility payment amounts (section 4980H of the 
Code, as enacted by section 1513 of the ACA).
    Section 1302(d) of the ACA describes the various levels of coverage 
based on their AV. Consistent with section 1302(d)(2)(A) of the ACA, AV 
is calculated based on the provision of EHB to a standard population. 
Section 1302(d)(1) of the ACA requires a bronze plan to have an AV of 
60 percent, a silver plan to have an AV of 70 percent, a gold plan to 
have an AV of 80 percent, and a platinum plan to have an AV of 90 
percent. Section 1302(d)(2) of the ACA directs the Secretary of HHS to 
issue regulations on the calculation of AV and its application to the 
levels of coverage. Section 1302(d)(3) of the ACA directs the Secretary 
to develop guidelines to provide for a de minimis variation in the AVs 
used in determining the level of coverage of a plan to account for 
differences in actuarial estimates.
    Section 1311(c)(6)(B) of the ACA directs the Secretary to require 
an Exchange to provide for annual OEPs after the initial enrollment 
period.
    Section 1311(c)(6)(C) of the ACA authorizes the Secretary to 
require an Exchange to provide for SEPs specified in section 9801 of 
the Code and other SEPs under circumstances similar to such periods 
under part D of title XVIII of the Social Security Act (the Act). 
Section 1311(c)(6)(D) of the ACA directs the Secretary to require an 
Exchange to provide for a monthly enrollment period for Indians, as 
defined by section 4 of the Indian Health Care Improvement Act.
    Section 1311(c) of the ACA provides the Secretary the authority to 
issue regulations to establish criteria for the certification of QHPs. 
Section 1311(c)(1)(B) of the ACA requires among the criteria for 
certification that the Secretary must establish by regulation that QHPs 
ensure a sufficient choice of providers. Section 1311(e)(1) of the ACA 
grants the Exchange the authority to certify a health plan as a QHP if 
the health plan meets the Secretary's requirements for certification 
issued under section 1311(c) of the ACA, and the Exchange determines 
that making the plan available through the Exchange is in the interests 
of qualified individuals and qualified employers in the State.
    Section 1312(e) of the ACA provides the Secretary with the 
authority to establish procedures under which a State may allow agents 
or brokers to (1) enroll qualified individuals and qualified employers 
in QHPs offered through Exchanges and (2) assist individuals in 
applying for APTC and CSRs for QHPs sold through an Exchange.
    Sections 1312(f)(3), 1401, 1402(e), and 1412(d) of the ACA require 
that an individual must be either a citizen or national of the United 
States or be lawfully present in the United States to enroll in a QHP 
through an Exchange, to be eligible for PTC, APTC, and CSRs. Sections 
1313 and 1321 of the ACA provide the Secretary with the authority to 
oversee the financial integrity of State Exchanges, their compliance 
with HHS standards, and the efficient and non-discriminatory 
administration of State Exchange activities. Section 1313(a)(5)(A) of 
the ACA directs the Secretary to provide for the efficient and non-
discriminatory administration of Exchange activities and to implement 
any measure or procedure the Secretary determines is appropriate to 
reduce fraud and abuse. Section 1321 of the ACA provides for State 
flexibility in the operation and enforcement of Exchanges and related 
requirements.
    Section 1321(a) of the ACA provides broad authority for the 
Secretary to establish standards and regulations to implement the 
statutory requirements related to Exchanges, QHPs and other components 
of title I of the ACA, including such other requirements as the HHS 
Secretary determines appropriate.
    Section 1321(a)(1) of the ACA directs the Secretary to issue 
regulations that set standards for meeting the requirements of title I 
of the ACA with respect to, among other things, the

[[Page 12947]]

establishment and operation of Exchanges.
    Section 1331 of the ACA provides States the option to establish a 
BHP, and more specifically, section 1331(e) requires that an individual 
must either be a citizen or national of the United States or be 
lawfully present in the United States to enroll in a BHP in States that 
elect to operate a BHP.
    Section 1401(a) of the ACA added section 36B to the Code, which, 
among other things, requires that a taxpayer reconcile APTC for a year 
of coverage with the amount of the PTC the taxpayer is allowed for the 
year.
    Section 1402(c) of the ACA provides for, among other things, 
reductions in cost sharing for essential health benefits for qualified 
low- and moderate-income enrollees in silver level health plans offered 
through the individual market Exchanges, including reduction in out-of-
pocket limits.
    Section 1411 the ACA directs the Secretary to make advance 
determinations for the PTC with respect to income eligibility for 
individuals enrolling in a QHP through the individual market. Section 
1411 of the ACA further specifies that the Secretary verify income with 
the Secretary of the Treasury based on the most recent tax return 
information, and then implement alternative procedures to verify income 
on the basis of different information to the extent that a change has 
occurred or for individuals who were not required to file an income tax 
return.
    Section 1411(f)(1)(B) of the ACA directs the Secretary to establish 
procedures to redetermine the eligibility of individuals on a periodic 
basis in appropriate circumstances.
    Sections 1402(f)(3), 1411(b)(3) and 1412(b)(1) of the ACA provide 
that data from the most recent tax return information available must be 
the basis for determining eligibility for APTC and CSRs to the extent 
such tax data is available. Section 1412(c)(2)(B) of the ACA 
establishes requirements on issuers with regards to an individual 
enrolled in a health plan receiving an APTC.
    Section 1412(d) of the ACA states that nothing in the law allows 
Federal payments, credits, or CSRs for individuals who are not lawfully 
present in the United States.
    Section 1413 of the ACA directs the Secretary to establish, subject 
to minimum requirements, a streamlined enrollment process for 
enrollment in QHPs and all insurance affordability programs and 
requires Exchanges to participate in a data matching program for the 
determination of eligibility on the basis of reliable, third-party 
data.
    Section 1414 of the ACA amends section 6103 of the Code to direct 
the Secretary of the Treasury to disclose certain tax return 
information to verify and determine eligibility for APTC and CSR 
subsidies.
1. Guaranteed Availability and Guaranteed Renewability
    In the April 8, 1997 Federal Register (62 FR 16894), HHS published 
an interim final rule relating to the HIPAA health insurance reforms 
that established rules applying guaranteed availability in the small 
group market and guaranteed renewability in the large and small group 
market. Also, in the April 8, 1997 Federal Register (62 FR 16985), HHS 
published an interim final rule relating to the HIPAA health insurance 
reforms that, among other things, established rules applying guaranteed 
renewability in the individual market. In the February 27, 2013 Federal 
Register (78 FR 13406) (2014 Market Rules), we published the health 
insurance market rules. In the May 27, 2014 Federal Register (79 FR 
30240) (2015 Market Standards Rule), we published the final rule, 
``Patient Protection and Affordable Care Act; Exchange and Insurance 
Market Standards for 2015 and Beyond.'' In the December 22, 2016 
Federal Register (81 FR 94058) (2018 Payment Notice), we provided 
additional guidance on guaranteed availability and guaranteed 
renewability, and in the April 18, 2017 Federal Register (82 FR 18346) 
(Market Stabilization Rule) we provided further guidance related to 
guaranteed availability. In the May 6, 2022 Federal Register (87 FR 
27208) we amended the regulations regarding guaranteed availability.
2. Deferred Action for Childhood Arrivals
    HHS issued an interim final rule in the July 30, 2010 Federal 
Register (75 FR 45014) to define ``lawfully present'' for the purposes 
of determining eligibility for the Pre-Existing Condition Insurance 
Plan (PCIP) program. In the March 27, 2012 Federal Register (77 FR 
18310) (Exchange Establishment Rule), HHS defined lawfully present for 
purposes of determining eligibility to enroll in a QHP through an 
Exchange by cross-referencing the existing PCIP definition. In the 
August 30, 2012 Federal Register (77 FR 52614), HHS adjusted the 
previous definition of ``lawfully present'' used for PCIP and QHP 
eligibility, which had considered all recipients of ``deferred action'' 
to be lawfully present, to add an exception that excluded DACA 
recipients from the definition. In the March 12, 2014 Federal Register 
(79 FR 14112), HHS established the framework for governing a BHP, which 
also adopted the definition of ``lawfully present'' for the purpose of 
determining eligibility to enroll in a BHP through a cross-reference to 
Sec.  155.20. In the May 8, 2024 Federal Register (89 FR 39392) (DACA 
Rule), HHS reinterpreted ``lawfully present'' to include DACA 
recipients and certain other noncitizens for the purposes of 
determining eligibility to enroll in a QHP through an Exchange, PTC, 
APTC, CSRs, and to enroll in a BHP in States that elect to operate a 
BHP.
3. Program Integrity
    We have finalized program integrity standards related to the 
Exchanges and premium stabilization programs in two rules: the ``first 
Program Integrity Rule'' published in the August 30, 2013 Federal 
Register (78 FR 54069), and the ``second Program Integrity Rule'' 
published in the October 30, 2013 Federal Register (78 FR 65045). We 
also refer readers to the 2019 Patient Protection and Affordable Care 
Act; Exchange Program Integrity final rule (2019 Program Integrity 
Rule) published in the December 27, 2019 Federal Register (84 FR 
71674).
    In the May 6, 2022 Federal Register (87 FR 27208), we finalized 
policies to address certain agent, broker, and web-broker practices and 
conduct. In the April 27, 2023 Federal Register (88 FR 25740) (2024 
Payment Notice), we finalized allowing additional time for HHS to 
review evidence submitted by agents and brokers to rebut allegations 
pertaining to Exchange agreement suspensions or terminations. We also 
introduced consent and eligibility documentation requirements for 
agents and brokers. In the 2025 Payment Notice, issued in the April 15, 
2024 Federal Register (89 FR 26218), we finalized that the CMS 
Administrator, who is a principal officer, is the entity responsible 
for handling requests by agents, brokers, and web-brokers for 
reconsideration of HHS' decision to terminate their Exchange 
agreement(s) for cause. We also finalized changes to Sec. Sec.  155.220 
and 155.221 to apply certain standards to web-brokers and Direct 
Enrollment (DE) entities assisting consumers and applicants across all 
Exchanges. In the January 15, 2025 Federal Register (90 FR 4424) (2026 
Payment Notice), we addressed our authority to investigate and 
undertake compliance reviews and enforcement actions in response to 
misconduct or noncompliance with applicable agent, broker, and web-
broker Exchange requirements or standards occurring at

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the insurance agency level to hold lead agents of insurance agencies 
accountable. We also finalized changes to Sec.  155.220(k)(3) to 
reflect our authority to suspend an agent's or broker's ability to 
transact information with the Exchange in instances where HHS discovers 
circumstances that pose unacceptable risk to accuracy of Exchange 
eligibility determinations, Exchange operations, applicants, or 
enrollees, or Exchange information technology systems until the 
circumstances of the incident, breach, or noncompliance are remedied or 
sufficiently mitigated to HHS' satisfaction.
4. Premium Adjustment Percentage
    In the March 11, 2014 Federal Register (79 FR 13744) HHS 
established a methodology for estimating the average per capita premium 
for purposes of calculating the premium adjustment percentage. 
Beginning with PY 2015, we calculated the premium adjustment percentage 
based on the estimates and projections of average per enrollee 
employer-sponsored insurance premiums from the National Health 
Expenditure Accounts (NHEA), which are calculated by the CMS Office of 
the Actuary. In the April 25, 2019 Federal Register (84 FR 17454) HHS 
amended the methodology for calculating the premium adjustment 
percentage by estimating per capita insurance premiums as private 
health insurance premiums, minus premiums paid for Medigap insurance 
and property and casualty insurance, divided by the unrounded number of 
unique private health insurance enrollees, excluding all Medigap 
enrollees. Additionally, in response to public comments to the 2021 
Payment Notice proposed rule (85 FR 7088), in the May 14, 2020 Federal 
Register (85 FR 29164) HHS stated that we will finalize payment 
parameters that depend on NHEA data, including the premium adjustment 
percentage, based on the data that are available as of the publication 
of the proposed rule for that plan year, even if NHEA data are updated 
between the proposed and final rules. In the December 15, 2020 Federal 
Register (85 FR 81097), HHS published the Grandfathered Group Health 
Plans and Grandfathered Group Health Insurance Coverage final rule, 
along with the Departments of Labor and the Treasury, that finalized 
using the premium adjustment percentage as one alternative in setting 
the parameters for permissible increases in fixed-amount cost-sharing 
requirements for grandfathered group health plans. In the May 5, 2021 
Federal Register (86 FR 24140), Part 2 of the 2022 Payment Notice 
amended the methodology for calculating the premium adjustment 
percentage by reverting to using the NHEA employer-sponsored insurance 
(ESI) premium measure previously used for PY 2015 to PY 2019 and 
established that the premium adjustment percentage could be established 
in guidance for plan years in which the premium adjustment percentage 
is not methodologically changing.
5. Failure To File Taxes and Reconcile APTC
    In the March 27, 2012 Exchange Establishment Rule (77 FR 18310), we 
required the Exchange to determine a primary taxpayer ineligible to 
receive APTC if HHS notifies the Exchange that the taxpayer received 
APTC from a prior year for which tax data would be utilized for income 
verification and did not file a tax return and reconcile APTC as 
required by implementing regulations proposed by the Department of the 
Treasury. In the May 23, 2012 Federal Register (77 FR 30377), the 
Department of the Treasury finalized implementing regulations to 
require every taxpayer receiving APTC to file an income tax return.
    In the December 22, 2016 Federal Register (81 FR 94058) (2018 
Payment Notice), we provided that Exchanges cannot determine a taxpayer 
ineligible for APTC due to failure to file a tax return unless the 
Exchanges send a direct notification to that tax filer stating that 
their eligibility will be discontinued for failure to comply with the 
requirement to file taxes. We then revisited this notice requirement in 
the April 17, 2018 Federal Register (83 FR 16930) (2019 Payment Notice) 
and removed the notice requirement.
    In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment 
Notice) we required Exchanges to wait to discontinue APTC until the tax 
filer has failed to file a tax return and reconcile their past APTC for 
2-consecutive years rather than ending APTC after a single year. In the 
April 15, 2024 Federal Register (89 FR 26218) (2025 Payment Notice), we 
required Exchanges to send notices to tax filers for the first year in 
which they have been identified by the IRS as failing to reconcile 
APTC. In the January 15, 2025 Federal Register (90 FR 4424) (2026 
Payment Notice), we required Exchanges to send notices to tax filers 
for the second year in which they have been identified by the IRS as 
failing to reconcile APTC.
6. Income Inconsistencies
    In the April 17, 2018, Federal Register (83 FR 16930) (2019 Payment 
Notice), we revised income verification provisions in Sec.  
155.320(c)(3)(iii) to require the Exchange to generate annual household 
income inconsistencies in certain circumstances when a tax filer's 
attested projected annual household income is greater than the income 
amount represented by income data returned by IRS and the Social 
Security Administration (SSA) and current income data sources. On March 
4, 2021, the United States District Court for the District of Maryland 
decided City of Columbus, et al. v. Cochran, No. 523 F. Supp. 3d 731 
(D. Md. 2021) and vacated these revisions to income verification. We 
then implemented the court's decision in the May 5, 2021 Federal 
Register (86 FR 24140) (Part 2 of the 2022 Payment Notice) and 
rescinded the income verification provisions in Sec.  
155.320(c)(3)(iii) that the court invalidated.
    In the March 27, 2012 Federal Register (77 FR 18310) (Exchange 
Establishment Rule), we established the alternative verification 
process in Sec.  155.320(c) for situations when a household income 
inconsistency occurs with IRS data or when tax return data is 
unavailable. This process required the Exchange to provide the 
applicant notice of the income inconsistency and requires applicants to 
provide documentary evidence to verify their income or otherwise 
resolve the inconsistency within a period of 90 days from which notice 
is sent. In the April 27, 2023 Federal Register (88 FR 25740) (2024 
Payment Notice), we revised this process to require Exchanges to accept 
an applicant's or enrollee's self-attestation of annual household 
income when a call to IRS is completed but tax return data is 
unavailable and add that household income inconsistencies must receive 
an automatic 60-day extension in addition to the 90 days provided to 
applicants to resolve their income inconsistency.
7. Annual Eligibility Redetermination
    In the March 27, 2012 Federal Register (77 FR 18310) (Exchange 
Establishment Rule), we implemented the Affordable Insurance Exchanges 
(``Exchanges''), consistent with title I of the ACA. This included 
standards for annual eligibility redeterminations and renewals of 
coverage. In the January 22, 2013 Federal Register (78 FR 4594), we 
sought comment on whether the redetermination notice should describe 
how the enrollee's deductibles, co-pays, coinsurance, and other forms 
of cost sharing would change. In the July 15, 2013 Federal Register (78 
FR 42160) (2013 Eligibility Final Rule), we amended the notice to 
remove the requirement to provide the data used for

[[Page 12949]]

the eligibility redetermination and the data used for the most recent 
eligibility determination, even though we did not previously propose to 
change the annual redetermination notice. In the September 5, 2014 
Federal Register (79 FR 52994), we amended the annual redetermination 
standards to allow for an Exchange to choose from one of three methods 
for conducting annual redeterminations. In the January 24, 2019 Federal 
Register (84 FR 227) (2020 Payment Notice proposed rule), we sought 
comment on the automatic re-enrollment processes to address program 
integrity concerns. In the February 6, 2020 Federal Register (85 FR 
7088) (2021 Payment Notice proposed rule), we solicited comment on 
modifying the automatic re-enrollment process such that any enrollee 
who would be automatically re-enrolled with APTC that would cover the 
enrollee's entire premium would instead be automatically re-enrolled 
without APTC, and we solicited comments on a variation where APTC for 
this population would be reduced to a level that would result in an 
enrollee premium that is greater than zero dollars, but not eliminated 
entirely. We did not finalize any changes in the final rules.
8. Automatic Re-Enrollment Hierarchy
    In the March 27, 2012 Federal Register (77 FR 18309) (Exchange 
Establishment Rule), we implemented the Exchanges, consistent with 
Title I of the ACA. This included implementation of components of the 
Exchanges and standards for annual eligibility redetermination and 
renewal of coverage. In the September 5, 2014 Federal Register (79 FR 
52994) (Annual Eligibility Redeterminations Rule), we modified the 
standards for re-enrollment in coverage by adding a re-enrollment 
hierarchy to address situations when the enrollee's plan or product is 
not available through the Exchange for renewal. In the March 8, 2016 
Federal Register (81 FR 12204) (2017 Payment Notice), we amended the 
hierarchy to give Exchanges flexibility to prioritize re-enrollment 
into silver plans for all enrollees in a silver-level QHP that is no 
longer available for re-enrollment, and re-enroll consumers into plans 
of other Exchange issuers if the consumer is enrolled in a plan from an 
issuer that does not have another plan available for re-enrollment 
through the Exchange.
    In the January 5, 2022 Federal Register (87 FR 584) (2023 Payment 
Notice proposed rule), we solicited comments on revising the re-
enrollment hierarchy at Sec.  155.335(j) at a later date. After 
considering comments, we proposed and finalized amendments and 
additions to the re-enrollment hierarchy in the April 27, 2023 Federal 
Register (88 FR 25740) (2024 Payment Notice), including changes to 
allow Exchanges to direct re-enrollment for enrollees who are eligible 
for CSRs from a bronze QHP to a silver QHP, if certain conditions are 
met.
9. Premium Payment Threshold
    In the December 2, 2015 Federal Register (80 FR 75532), we 
published a proposed rule to allow issuers to adopt an optional premium 
payment threshold policy under which issuers could collect a minimal 
amount of premium, less than that which is owed, without triggering the 
consequences for non-payment of premiums. We established the option for 
issuers to implement a net premium percentage-based premium payment 
threshold in the 2017 Payment Notice (81 FR 12271 through 12272). In 
the October 10, 2024 Federal Register (89 FR 82366 through 82369), we 
proposed to add additional optional premium payment threshold 
flexibilities, proposing an option for issuers to adopt a fixed dollar 
premium threshold amount of $5 or less and/or a percentage-based 
threshold based on the gross premium of 99 percent or more or the 
existing net premium of 95 percent or more of the premium after 
application of APTC. We modified and finalized this proposal in the 
2026 Payment Notice (90 FR 4475 through 4480), allowing issuers to 
adopt a fixed dollar premium threshold amount of $10 or less and/or a 
percentage-based threshold based on the gross premium of 98 percent or 
more or net premium of 95 percent or more of the premium after 
application of APTC.
10. Special Enrollment Periods
    In the July 15, 2011 Federal Register (76 FR 41865), we published a 
proposed rule establishing SEPs for the Exchange. We implemented these 
SEPs in the Exchange Establishment Rule (77 FR 18309). In the January 
22, 2013 Federal Register (78 FR 4594), we published a proposed rule 
amending certain SEPs, including the SEPs described in Sec.  
155.420(d)(3) and (7). We finalized these rules in the July 15, 2013 
Federal Register (78 FR 42321).
    In the June 19, 2013 Federal Register (78 FR 37032), we proposed to 
add an SEP when the Federally Facilitated Exchange (FFE) determines 
that a consumer has been incorrectly or inappropriately enrolled in 
coverage due to misconduct on the part of a non-Exchange entity. We 
finalized this proposal in the October 30, 2013 Federal Register (78 FR 
65095). In the March 21, 2014 Federal Register (79 FR 15808), we 
proposed to amend various SEPs. In particular, we proposed to clarify 
that later coverage effective dates for birth, adoption, placement for 
adoption, or placement for foster care would be effective the first of 
the month. The rule also proposed to clarify that earlier effective 
dates would be allowed if all issuers in an Exchange agree to 
effectuate coverage only on the first day of the specified month. 
Finally, that rule proposed adding that consumers may report a move in 
advance of the date of the move and established an SEP for individuals 
losing medically needy coverage under the Medicaid program even if the 
medically needy coverage is not recognized as minimum essential 
coverage (individuals losing medically needy coverage that is 
recognized as minimum essential coverage already were eligible for an 
SEP under the regulation). We finalized these provisions in the May 27, 
2014 Federal Register (79 FR 30348). In the October 1, 2014 Federal 
Register (79 FR 59137), we published a correcting amendment related to 
codifying the coverage effective dates for plan selections made during 
an SEP and clarifying a consumer's ability to select a plan 60 days 
before and after a loss of coverage.
    In the November 26, 2014 Federal Register (79 FR 70673), we 
proposed to amend effective dates for SEPs, the availability and length 
of SEPs, the specific types of SEPs, and the option for consumers to 
choose a coverage effective date of the first of the month following 
the birth, adoption, placement for adoption, or placement in foster 
care. We finalized these provisions in the February 27, 2015 Federal 
Register (80 FR 10866). In the July 7, 2015 Federal Register (80 FR 
38653), we issued a correcting amendment to include those who become 
newly eligible for a QHP due to a release from incarceration. In the 
December 2, 2015 Federal Register (80 FR 75487) (2017 Payment Notice 
proposed rule), we sought comment and data related to existing SEPs, 
including data relating to the potential abuse of SEPs. In the 2017 
Payment Notice, we stated that in order to review the integrity of 
SEPs, the FFE will conduct an assessment by collecting and reviewing 
documents from consumers to confirm their eligibility for the SEPs 
under which they enrolled.
    In an interim final rule with comment published in the May 11, 2016 
Federal Register (81 FR 29146), we made amendments to the parameters of 
certain SEPs (2016 Interim Final Rule).

[[Page 12950]]

We finalized these in the 2018 Payment Notice, published in the 
December 22, 2016 Federal Register (81 FR 94058). In the April 18, 2017 
Market Stabilization Rule (82 FR 18346), we amended standards relating 
to SEPs and announced HHS would begin pre-enrollment verifications for 
all categories of SEPs in June 2017. In the 2019 Payment Notice, 
published in the April 17, 2018 Federal Register (83 FR 16930), we 
clarified that certain exceptions to the SEPs only apply to coverage 
offered outside of the Exchange in the individual market. In the April 
25, 2019 Federal Register (84 FR 17454), the final 2020 Payment Notice 
established a new SEP. In part 2 of the 2022 Payment Notice, in the May 
5, 2021 Federal Register (86 FR 24140), we made additional amendments 
and clarifications to the parameters of certain SEPs and established 
new SEPs related to untimely notice of triggering events, cessation of 
employer contributions or government subsidies to COBRA continuation 
coverage, and loss of APTC eligibility. In part 3 of the 2022 Payment 
Notice, in the September 27, 2021 Federal Register (86 FR 53412), which 
was published by HHS and the Department of the Treasury, we established 
a temporary new monthly SEP for those eligible for APTC with projected 
household incomes at or below 150 percent of the FPL. In the May 6, 
2022 Federal Register (87 FR 27208), we finalized updates to the 
requirement that all Exchanges conduct SEP verifications and limited 
pre-enrollment verification for Exchanges on the Federal platform to 
only consumers who attest to losing minimum essential coverage. In the 
April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we 
lengthened the SEP from 60 to 90 days to those who lose Medicaid 
coverage. In the April 15, 2024 Federal Register (89 FR 26218) (2025 
Payment Notice), we aligned effective dates for coverage after 
selecting certain SEPs across all Exchanges and removed limitations on 
the monthly SEP for those eligible for APTC with incomes up to 150 
percent of the FPL.
11. Essential Health Benefits
    We established requirements relating to EHBs in the Standards 
Related to Essential Health Benefits, Actuarial Value (AV), and 
Accreditation Final Rule, which was published in the February 25, 2013 
Federal Register (78 FR 12834) (EHB Rule). In the EHB Rule, we included 
at Sec.  156.115 a prohibition on issuers from providing routine non-
pediatric dental services, routine non-pediatric eye exam services, 
long-term/custodial nursing home care benefits, or non-medically 
necessary orthodontia as EHB. In the 2019 Payment Notice, published in 
the April 17, 2018 Federal Register (83 FR 16930), we added Sec.  
156.111 to provide States with additional options from which to select 
an EHB-benchmark plan for PY 2020 and subsequent plan years. In the 
2023 Payment Notice, published in the May 6, 2022 Federal Register (87 
FR 27208), we revised Sec.  156.111 to require States to notify HHS of 
the selection of a new EHB-benchmark plan by the first Wednesday in May 
of the year that is 2 years before the effective date of the new EHB-
benchmark plan, otherwise the State's EHB-benchmark plan for the 
applicable plan year will be that State's EHB-benchmark plan applicable 
for the prior year. We displayed the Request for Information; Essential 
Health Benefits (EHB RFI), published in the December 2, 2022 Federal 
Register (87 FR 74097), to solicit public comment on a variety of 
topics related to the coverage of benefits in health plans subject to 
the EHB requirements of the ACA. In the 2025 Payment Notice (89 FR 
26218), we removed the regulatory prohibition at Sec.  156.115(d) on 
issuers from providing routine non-pediatric dental services as an EHB 
beginning with PY 2027.
    In the 2026 Payment Notice, published in the January 15, 2025 
Federal Register (90 FR 4424), we revised Sec.  156.80(d)(2)(i) to 
require the actuarially justified plan-specific factors by which an 
issuer may vary premium rates for a particular plan from its market-
wide index rate include the AV and cost-sharing design of the plan, 
including, if permitted by the applicable State authority, accounting 
for CSR amounts provided to eligible enrollees under Sec.  156.410, 
provided the issuer does not otherwise receive reimbursement for such 
amounts.

III. Provisions of the Individual Health Insurance Market and Exchange 
Program Integrity Proposed Rule

A. Part 147--Health Insurance Reform Requirements for the Group and 
Individual Health Insurance Markets

1. Limited Open Enrollment Periods (Sec.  147.104(b)(2))
    As further discussed in section III.B.8. of this preamble regarding 
the proposal to remove the monthly SEP for APTC-eligible qualified 
individuals with a projected household income at or below 150 percent 
of the FPL (Sec.  155.420(d)(16)), we propose a conforming amendment to 
remove Sec.  147.104(b)(2)(i)(G), which currently excludes Sec.  
155.420(d)(16) as a triggering event for a limited open enrollment 
period (OEP) for coverage offered outside of an Exchange. In proposing 
the removal of Sec.  147.104(b)(2)(i)(G), we do not intend to include 
Sec.  155.420(d)(16) as a triggering event for a limited OEP for 
coverage offered outside of an Exchange; rather, we are proposing to 
remove Sec.  147.104(b)(2)(i)(G) to reflect the removal of the SEP at 
Sec.  155.420(d)(16). We request comment on this proposal.
2. Coverage Denials for Failure To Pay Premiums for Prior Coverage 
(Sec.  147.104(i))
    We propose to remove Sec.  147.104(i) that restricts an issuer from 
attributing payment of premium for new coverage to past-due premiums 
from prior coverage. Similar to the policy we articulated in the Market 
Stabilization Rule (82 FR 18349 through 18353), we also propose to 
allow issuers to attribute to past-due premium amounts they are owed 
the initial premium the enrollee pays to effectuate new coverage. 
Unlike the policy articulated in the Market Stabilization Rule (82 FR 
18349 through 18353), the proposal would not limit the policy to past-
due premium amounts accruing over the prior 12 months. States would 
remain free to impose such a limitation and apply additional parameters 
governing issuers' premium payment policies, to the extent permitted 
under Federal law.
    As background, when we initially proposed the guaranteed 
availability regulations in the proposed 2014 Market Rules (77 FR 
70584, 70599), we noted concerns about the ability of individuals to 
manipulate guaranteed availability each year. We also noted how 
guaranteed renewability requirements under section 2703 of the PHS Act 
allow issuers to non-renew or discontinue coverage for non-payment of 
premiums while the guaranteed availability requirements under section 
2702 of the PHS Act do not include an exception allowing issuers to 
refuse to cover individuals with histories of non-payment under other 
policies with the same issuer or other issuers. We then solicited 
comments on ways to discourage people from gaming guaranteed 
availability rights while, at the same time, ensuring consumers 
retained the right afforded by law. In response, commenters, including 
the National Association of Insurance Commissioners (NAIC), suggested 
that there are several tools States use to limit adverse selection.\16\ 
In the 2014 Market

[[Page 12951]]

Rules (78 FR 13406, 13416 through 13417), we did not provide any 
further guidance on what the statute's guaranteed availability 
provision requires and took no further actions to address these 
concerns over gaming the guaranteed availability requirement.
---------------------------------------------------------------------------

    \16\ Tools identified by commenters included, for example, (1) 
allowing issuers to require pre-payment of premiums each month; (2) 
allowing issuers to require payment of all outstanding premiums 
before enrollees can re-enroll in coverage after termination due to 
non-payment of premiums; (3) allowing late enrollment penalties or 
surcharges (similar to those in Medicare Parts B and D); (4) 
allowing issuers to establish waiting periods or delayed effective 
dates of coverage; (5) allowing issuers to offset claims payments by 
the amount of any owed premiums; (6) allowing issuers to prohibit 
individuals who have canceled coverage or failed to renew from 
enrolling until the second open enrollment period after their 
coverage ceased (unless they replace coverage with other creditable 
coverage); (7) restricting product availability (for example, to a 
catastrophic, bronze, or silver level plan) outside of enrollment 
periods to prevent high-risk individuals from enrolling in more 
generous coverage when medical needs arise; and (8) allowing 
individuals to move up one metal level each year through the 
Exchange shopping portal (78 FR 13406, 13416).
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    After finalizing the 2014 Market Rules (78 FR 13406), we published 
instructions in annual Exchange enrollment manuals that interpreted the 
guaranteed availability requirement to mean that an issuer may not 
apply any premium payment made for coverage under a new enrollment to 
any outstanding debt owed from any previous coverage that has been 
terminated for non-payment of premiums and then refuse to effectuate 
the new enrollment based on failure to pay premiums.\17\ Under that 
interpretation, enrollment under an SEP or annual OEP subsequent to a 
termination for non-payment of premium would be considered a new 
enrollment that would fall under the guaranteed availability 
requirements and the consumer must be allowed to purchase coverage 
without having to pay past-due premiums. However, we also provided 
guidance that in situations where an enrollee's grace period for non-
payment of premiums spans 2 plan years,\18\ and the individual seeks to 
renew prior coverage with the same issuer in the same product, the 
issuer could attribute the enrollee's premium payments to the oldest 
outstanding debt in the existing grace period (that is, the prior non-
payments).\19\
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    \17\ CMS. (version as of 2016, July 19). Federally-facilitated 
Marketplace and Federally-facilitated Small Business Health Options 
Program Enrollment Manual. Section 6.3 Terminations for Non-Payment 
of Premiums. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf (stating that if a 
consumer selects a QHP from which they had been previously 
terminated for non-payment of premium by qualifying for another SEP 
or during the next OEP, then the QHP cannot attribute any payment 
from the individual toward the outstanding debt from the prior, 
terminated enrollment and then refuse to enroll the applicant based 
on failure to pay premiums); and CMS. (version as of 2015, Oct. 1). 
Federally-facilitated Marketplace and Federally-facilitated Small 
Business Health Options Program Enrollment Manual. Section 6.3 
Terminations for Non-Payment of Premiums. https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/updated_enr_manual.pdf. 
See also, CMS. (2013, Oct. 3). Federally Facilitated Marketplace, 
Enrollment Operational Policy & Guidance. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_OperationsPolicyandGuidance_5CR_100313.pdf (stating that ``If 
the [qualified individual] selects the same QHP from which he or she 
was previously terminated [for non-payment of premiums], the QHP 
cannot terminate enrollment in the QHP in which the [qualified 
individual] newly enrolled based on failure to pay for any 
previously owed and unpaid premium.'').
    \18\ This could occur if enrollees who are receiving APTC fail 
to timely pay their premium in full or in an amount necessary to 
satisfy a payment threshold, if applicable, for November or December 
coverage.
    \19\ CMS. (version as of 2016, July 19). Federally-facilitated 
Marketplace (FFM) and Federally-facilitated Small Business Health 
Options Program Enrollment Manual. Section 6.5.2 Grace Period 
Spanning Two Plan Years, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf.
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    Due to substantial market instability and data confirming prior 
concerns over consumers gaming the guaranteed availability requirement, 
we revisited these Exchange enrollment instructions through formal 
rulemaking in the Market Stabilization Rule (82 FR 18346). In that 
rule, we modified our interpretation of the guaranteed availability 
requirement with respect to non-payment of premiums. Under that 
modification, we allowed issuers, subject to applicable State law, to 
apply a premium payment to an individual's past debt owed for coverage 
from the same issuer or a different issuer in the same controlled group 
within the prior 12 months before applying the payment toward a new 
enrollment. The Market Stabilization Rule (82 FR 18346) cited third-
party research and our own internal analysis showing a substantial 
portion of enrollees' coverage had been terminated due to non-payment 
of premium and, among these terminations, a large portion repurchased 
plans the following plan year from the same issuer.
    In the Market Stabilization Rule (82 FR 18350 through 18351), we 
noted it is clear from reading the guaranteed availability provision in 
section 2702 of the PHS Act, together with the guaranteed renewability 
provision in section 2703 of the PHS Act, that an issuer's sale and 
continuation in force of an insurance policy is contingent upon payment 
of premiums. Notably, this recognizes how the guaranteed renewability 
requirement is not just about renewals but also includes a requirement 
on issuers to continue the coverage in force throughout the year. Read 
together, we concluded that the guaranteed availability provision is 
not intended to require issuers to provide coverage to applicants who 
have not paid for such coverage. To the extent an individual or 
employer makes payment in the amount required to effectuate new 
coverage, but the issuer lawfully credits all or part of that amount 
toward past-due premiums, we conclude that the consumer has not made 
sufficient initial payment for the new coverage.
    On January 28, 2021, President Biden issued Executive Order (E.O.) 
14009,\20\ directing the Department of Health and Human Services (HHS), 
and the heads of all other executive departments and agencies with 
authorities and responsibilities related to the ACA, to review all 
existing regulations, orders, guidance documents, policies, and any 
other similar agency actions to determine whether such agency actions 
were inconsistent with that Administration's policy with respect to the 
ACA. After reviewing the interpretation of guaranteed availability that 
we codified in the Market Stabilization Rule (82 FR 18349 through 
18353), we concluded that interpretation had the unintended consequence 
of creating barriers to health coverage that disproportionately affect 
low-income individuals. In the 2023 Payment Notice (87 FR 27208), 
consistent with section 3(iv) of E.O. 14009 and section 2(a) of E.O. 
14070, we then re-interpreted the guaranteed availability requirement 
and added a new Sec.  147.104(i) to specify that a health insurance 
issuer that denies coverage to an individual or employer due to the 
individual's or employer's failure to pay premium owed under a prior 
policy, certificate, or contract of insurance, including by attributing 
payment of premium for a new policy, certificate, or contract of 
insurance to the prior policy, certificate, or contract of insurance, 
violates Sec.  147.104(a).
---------------------------------------------------------------------------

    \20\ 86 FR 7793. E.O. 14009 was subsequently revoked by E.O. 
14148, ``Initial Rescissions of Harmful Executive Orders and 
Actions.'' See 90 FR 8237.
---------------------------------------------------------------------------

    In finalizing that current interpretation, we attempted to assess 
the policy impact of our prior interpretation. In the 2023 Payment 
Notice (87 FR 27369), we conducted an internal analysis and estimated 
the percent of enrollees in Exchanges using the Federal platform that 
had their coverage terminated for non-payment of premiums was 17.3 
percent in 2017, 12.4 percent in 2018, 10.7 percent in

[[Page 12952]]

2019, and 7.8 percent in 2020.\21\ This steady decline is consistent 
with what would be expected to happen if the Market Stabilization Rule 
(82 FR 18346) successfully encouraged enrollees to continue paying 
premiums. However, due to data limitations we concluded that we were 
unable to directly attribute any changes in enrollment behavior in the 
Exchanges using the Federal platform to the interpretation of the 
guaranteed availability requirement stated in the Market Stabilization 
Rule (82 FR 18346).
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    \21\ The regulatory impact analysis stated that these annual 
figures should not necessarily be interpreted as trends, as some 
States moved from Exchanges using the Federal platform to State 
Exchanges and the overall composition of the dataset may have 
changed (87 FR 27369, fn 381).
---------------------------------------------------------------------------

    It is possible, however, that this decline in the rate of enrollees 
who had their coverage terminated from 2017 to 2020 happened in part 
because the interpretation of the guaranteed availability requirement 
adopted in the Market Stabilization Rule (82 FR 18349 through 18353) 
successfully encouraged enrollees to continue paying premiums. Actions 
by issuers to require enrollees to pay initial and past-due premiums to 
obtain coverage may have contributed to an improved risk pool by 
keeping healthier people enrolled who may have otherwise stopped 
payment if they anticipated they would not need covered health services 
for the rest of the plan year.
    We previously determined that reversing the Market Stabilization 
Rule's policy would increase access to health insurance coverage for 
individuals who stop paying premiums due to reasons such as financial 
hardship or affordability and who are currently unable to enroll in 
coverage because they cannot afford to pay both past-due premiums and 
the first month premium for new coverage. Given the availability of 
premium support for many who experience financial hardship, we 
anticipate that enrollment loss from requiring payment of past-due 
premiums would be minimal. Enrollment losses should be minimal because 
the amount most individuals owe in past-due premiums is relatively 
small and thus having to pay those amounts generally would not impose a 
substantial financial burden to enroll in coverage. Because of rules 
regarding grace periods and termination of coverage, individuals with 
past-due premiums who receive APTC would generally owe no more than 1 
to 3 months of past-due premium amounts.\22\ Furthermore, for 
individuals on whose behalf the issuer received APTC, their past-due 
premiums would be net of any APTC that was paid on the individual's 
behalf to the issuer, with respect to any months for which the 
individual is paying past-due premiums, and thus, the typical past-due 
premium is quite small. We continue to believe that allowing issuers to 
require payment of past-due premiums to effectuate coverage is aligned 
with the statutory text in section 2702 of the PHS Act and is 
consistent with section 2703 of the PHS Act regarding guaranteed 
renewability.
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    \22\ Section 156.270(d) requires issuers to observe a 3-
consecutive month grace period before terminating coverage for those 
enrollees who when failing to timely pay their premiums are 
receiving APTC. Section 155.430(d)(4) requires that when coverage is 
terminated following this grace period, the last day of enrollment 
in a QHP through the Exchange is the last day of the first month of 
the grace period. Therefore, individuals whose coverage is 
terminated at the conclusion of a grace period would owe at most 1 
month of premiums, net of any APTC paid on their behalf to the 
issuer. Individuals who attempt to enroll in new coverage while in a 
grace period (and whose coverage has not yet been terminated) could 
owe up to 3 months of premium, net of any APTC paid on their behalf 
to the issuer.
---------------------------------------------------------------------------

    Under section 2702(a) of the PHS Act, issuers are generally 
required to accept every individual and employer in the State that 
applies for coverage, subject to certain exceptions. These exceptions 
allow issuers to uniformly limit enrollment: (1) to certain open 
enrollment periods and SEPs; (2) to an employer with eligible employees 
who live, work, or reside in the service area of a network plan; (3) if 
the capacity of a network plan cannot provide adequate services to new 
enrollees; and (4) if the issuer does not have the financial reserves 
necessary to underwrite additional coverage. Under this framework, the 
PHS Act's guaranteed availability requirements focus on regulating 
matters under the control of the issuer to accept every individual and 
employer that applies for coverage except under a limited set of 
exceptions where a uniform enrollment limit protects the viability of 
the market and individual issuers.
    Section 2703 of the PHS Act requires an issuer that offers health 
insurance coverage in the group or individual market to renew or 
continue in force such coverage at the option of the plan sponsor or 
individual, unless certain exceptions apply. These exceptions allow 
issuers to non-renew or discontinue coverage for non-payment of 
premium, committing fraud, violating employer participation or 
contribution rules, moving outside the network service area, or ceasing 
the membership of an employer in an association. In addition, an issuer 
may also uniformly terminate coverage by following a specific set of 
requirements. These guaranteed renewability exceptions focus on 
allowing issuers to respond to individual and employer behavior after 
their coverage is in force. Under this framework, the guaranteed 
renewability requirements cover both renewals and the continuing of 
coverage in force throughout the year.
    Whether or not an exception applies would depend on the issuer's 
terms of coverage, and applicable State and Federal law. Section 2703 
of the PHS Act gives issuers broad flexibility to establish terms of 
coverage related to most of the exceptions. In traditional insurance 
contracts, there are typically provisions related to premium payments, 
fraud, employer participation and contribution rates, and living, 
residing, or working in the network service area. By enrolling in 
coverage, the applicant accepts the terms of coverage. After coverage 
is in force (including in instances where an enrollee is renewing prior 
coverage), the issuer may discontinue coverage if the individual fails 
to follow the terms of coverage for one of the exceptions provided 
under the law.
    Consistent with section 2702 of the PHS Act, we propose to allow 
issuers to establish terms of coverage that attribute the initial 
premium an enrollee pays to effectuate new coverage to past-due premium 
amounts owed to an issuer and then to refuse to effectuate coverage if 
the payment does not equal the outstanding debt and the new monthly 
premium amount. Assuming State law does not prohibit such action, this 
would permit an issuer to establish terms of coverage that require a 
policyholder whose coverage is terminated for non-payment of premium in 
the individual or group market to pay all past-due premium owed to that 
issuer in order to purchase new coverage from that issuer. Under this 
proposal, similar to the policy in the Market Stabilization Rule, an 
issuer would be required to apply its premium payment policy uniformly 
to all employers or individuals in similar circumstances in the 
applicable market regardless of health status, and consistent with 
applicable nondiscrimination requirements.\23\ The proposal would not 
permit an issuer to condition the effectuation of new coverage on 
payment of past-due premiums by any individual other than

[[Page 12953]]

the person contractually responsible for the payment of premium.
---------------------------------------------------------------------------

    \23\ Issuers may also have obligations under other applicable 
Federal laws prohibiting discrimination, and issuers are responsible 
for ensuring compliance with all applicable laws and regulations. 
There may also be separate, independent non-discrimination 
obligations under State law.
---------------------------------------------------------------------------

    This interpretation also avoids the perverse incentives introduced 
under the current interpretation. Under the current interpretation, an 
enrollee who is receiving APTC and who renews and owes past-due 
payments at the start of the plan year (because the individual failed 
to pay the full amount due starting in November or December) will be in 
a 3-month grace period in January and must pay the full amount owed by 
the end of the grace period to prevent termination.\24\ In contrast, 
someone who is not renewing coverage under the same product but instead 
selects coverage under a different product and owes past-due premiums 
would be able to pay the binder payment to effectuate new coverage 
without being in a grace period or paying past-due premiums. Therefore, 
by choosing new coverage versus continuing in the same coverage, the 
enrollee can avoid paying the outstanding debt before starting coverage 
for the next plan year. While the enrollee still owes a debt to the 
issuer related to the prior coverage, this strategy makes the debt far 
harder for the issuer to collect and buys the enrollee more flexibility 
to game their coverage period. Under our proposal, the obligation to 
pay the past debt does not change based on whether the annual contract 
is new or a renewal.
---------------------------------------------------------------------------

    \24\ See, Federally-facilitated Exchange (FFE) Enrollment 
Manual, Section 6.3 Terminations for Non-Payment of Premiums 
(version effective as of Aug. 19, 2024), available at https://www.cms.gov/files/document/ffe-enrollment-manual-2024-5cr-082024.pdf 
(stating that for individuals whose grace period for non-payment of 
premiums extends past the end of the annual OEP and who either auto-
renews or makes an active plan selection that is a continuation of 
the same coverage, the issuer may attribute enrollee payments to the 
oldest outstanding debt in the existing grace period for the current 
coverage).
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    In the 2016 Payment Notice (80 FR 10750, 10794), we revised Sec.  
155.400(e) to establish a standard policy for premium payment deadlines 
in the FFEs, while leaving other Exchanges the option of establishing 
such policies. In particular, we set a uniform deadline for the payment 
of the first month's premium to effectuate an enrollment. When setting 
this policy, we received several comments recommending that HHS give 
issuers flexibility surrounding payment deadlines and, in response, we 
recognized that decisions regarding payment of the first month's 
premium (the binder payment) have traditionally been business decisions 
made by issuers, subject to State rules. While we have established 
certain uniform standards for premium payment deadlines, premium 
payment policies are generally business decisions made by issuers, 
subject to State rules. We therefore propose to allow issuers, to the 
extent permitted by applicable State law, to establish terms of health 
insurance coverage that attribute to past-due premium amounts owed to 
an issuer the initial premium the enrollee pays to effectuate new 
coverage. We propose that this policy would apply starting on the 
effective date of the final rule. We seek comment on this proposal.
    In the Market Stabilization Rule (82 FR 18349 through 18353), we 
also set additional parameters around this flexibility. These 
parameters allowed an issuer to attribute payments to effectuate new 
coverage to past-due premiums amounts owed to any other issuer that is 
a member of the same controlled group. For this purpose, a controlled 
group was a group of two or more persons that is treated as a single 
employer under sections 52(a), 52(b), 414(m), or 414(o) of the Code, 
which is the same definition used for other purposes related to the 
guaranteed renewability provision. HHS limited the issuer to 
attributing premium payments to past-due premiums for coverage within 
the prior 12 months. In addition, we also required issuers that adopted 
this premium payment policy (as well as any issuers that do not adopt 
the policy but are within an adopting issuer's controlled group) to 
provide notice of the consequences of non-payment on future enrollment 
in enrollment application materials and in any notice that is provided 
regarding non-payment of premiums. While these are reasonable 
parameters, we believe States are better situated to set and oversee 
parameters of this nature and therefore do not believe a uniform 
national policy on these elements is warranted. We clarify that our 
proposal to permit issuers to establish terms of coverage that 
attribute the initial premium an enrollee pays to effectuate new 
coverage to past-due premium amounts owed to an issuer, and then to 
refuse to effectuate coverage if the payment does not equal the 
outstanding debt plus the new monthly premium amount, would permit them 
to include past-due premium amounts owed to another issuer in the same 
controlled group, if permitted by applicable State law. We seek 
comments on whether we should leave such parameters to States or codify 
these and any other parameters to establish a more uniform Federal 
regulatory approach. We also seek comment on whether issuers should be 
required to establish terms of coverage that attribute to past-due 
premium amounts owed to an issuer the premium the enrollee initially 
pays for subsequent coverage, and the associated costs for issuers to 
implement such a requirement.
    Here and throughout this proposed rule we encourage commenters to 
include supporting facts, research, and evidence in their comments. 
When doing so, commenters are encouraged to provide citations to the 
materials referenced, including active hyperlinks. Likewise, commenters 
who reference materials which have not been published are encouraged to 
upload relevant data collection instruments, data sets, and detailed 
findings as a part of their comment. Providing such citations and 
documentation will assist HHS in analyzing the comments.

B. Part 155--Exchange Establishment Standards and Other Related 
Standards Under the Affordable Care Act

1. Definitions; Deferred Action for Childhood Arrivals (Sec.  155.20)
    Section 1312 of the ACA specifically excludes individuals who are 
not ``lawfully present'' from eligibility for enrollment in a QHP or 
for insurance affordability programs.\25\ Section 36B of the Code, and 
sections 1412, 1402, and 1331 of the ACA, exclude individuals who are 
not ``lawfully present'' from eligibility for PTC,\26\ APTC,\27\ 
CSRs,\28\ and enrollment in a BHP in States that elect to operate a 
BHP,\29\ respectively. From 2012 through 2024, HHS long took the 
position that a noncitizen in the United States under the Deferred 
Action for Childhood Arrivals (DACA) policy was not ``lawfully 
present'' for purposes of determining eligibility to enroll in a QHP or 
for these insurance affordability programs.\30\ However, in the DACA 
Rule (89 FR 39392), HHS updated the definition of ``lawfully present'' 
to include DACA recipients for purposes of determining eligibility to 
enroll in a QHP through an Exchange, to be eligible for PTC, APTC, and 
CSRs, and to enroll in a BHP in States that elect to operate a BHP. The 
agency now proposes to realign our policy with the text of the ACA by 
updating the definition of ``lawfully present'' such that DACA 
recipients are no longer considered ``lawfully present'' for purposes 
of enrollment in a QHP, eligibility for PTC, APTC, and CSRs, and for 
BHP coverage.
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    \25\ 42 U.S.C. 18032(f)(3).
    \26\ 42 U.S.C. 18082(d); 26 U.S.C. 36B(e)(2).
    \27\ 42 U.S.C. 18082(d).
    \28\ 42 U.S.C. 18071(e).
    \29\ 42 U.S.C. 18051(e).
    \30\ See the definition of ``insurance affordability program'' 
at 45 CFR 155.300(a) and 42 CFR 435.4.

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[[Page 12954]]

    On June 15, 2012, the United States Department of Homeland Security 
(DHS) issued a memorandum entitled ``Exercising Prosecutorial 
Discretion with Respect to Individuals who Came to the United States as 
Children'' (``DHS Memo'').\31\ The DHS Memo established, for the first 
time, the DACA policy, and it set forth three principles. First, 
certain individuals who were brought to the United States as children 
from another country and who were in the United States in violation of 
immigration laws were not considered to be an immigration enforcement 
priority. Second, with respect to these individuals, DHS officials were 
instructed to exercise enforcement discretion and generally defer from 
placing them into removal proceedings. Finally, United States 
Citizenship and Immigration Services (USCIS) was instructed to accept 
applications to determine whether these individuals were eligible for 
work authorization during a period of deferred action.
---------------------------------------------------------------------------

    \31\ Napolitano, J. (2012, June 15). Exercising Prosecutorial 
Discretion with Respect to Individuals Who Came to the United States 
as Children. U.S. Department of Homeland Security. https://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-who-came-to-us-as-children.pdf.
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    On August 30, 2012, HHS issued an Interim Final Rule (77 FR 52615 
through 52616) that amended the definition of ``lawfully present'' at 
Sec.  155.20 to conform with the law as enacted by the ACA by making 
clear that an individual whose case had been deferred under the DACA 
policy ``will not be able to enroll in coverage through the Affordable 
Insurance Exchanges and, therefore, will not receive coverage that 
could make them eligible for premium tax credits.'' The Interim Final 
Rule noted at that time (77 FR 52615) that ``the reasons that DHS 
offered for adopting the DACA process do not pertain to . . . 
extend[ing] health insurance subsidies under the Affordable Care Act to 
these individuals.'' For that reason, the HHS explained (77 FR 52615), 
it did not intend to ``inadvertently expand the scope of the DACA 
process.''
    On May 8, 2024, after notice and comment, HHS issued the DACA Rule 
(89 FR 39392) reversing this longstanding interpretation. In the final 
rule, HHS announced that it had chosen to ``reconsider'' the prior 
interpretation from 2012. The DACA Rule, which became effective on 
November 1, 2024, advanced several arguments for reversing the agency's 
prior interpretation.\32\
---------------------------------------------------------------------------

    \32\ On December 9, 2024, the United States District Court for 
the District of North Dakota issued a preliminary injunction in 
Kansas v. United States of America (Case No. 1:24-cv-00150) 
partially blocking implementation of the 2024 final rule at 89 FR 
39392.
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    In light of recent Executive Orders, ``Protecting the American 
People Against Invasion'' \33\ and ``Ending Taxpayer Subsidization of 
Open Borders,'' \34\ and consistent with our statutory authority to 
define ``lawfully present'' for use in determining eligibility for our 
programs, we are now reconsidering these arguments.
---------------------------------------------------------------------------

    \33\ ``Protecting the American People Against Invasion,'' Exec. 
Order No. 14,159, 90 FR 8443 (Jan. 20, 2025). https://www.federalregister.gov/documents/2025/01/29/2025-02006/protecting-the-american-people-against-invasion. https://www.federalregister.gov/documents/2025/01/29/2025-02006/protecting-the-american-people-against-invasion.
    \34\ ``Ending Taxpayer Subsidization of Open Borders.'' (Feb. 
19, 2025). https://www.whitehouse.gov/presidential-actions/2025/02/ending-taxpayer-subsidization-of-open-borders/. https://www.whitehouse.gov/presidential-actions/2025/02/ending-taxpayer-subsidization-of-open-borders/.
---------------------------------------------------------------------------

    In the DACA Rule (89 FR 39392 through 39395), HHS concluded that 
because DHS had determined that a DACA recipient is ``lawfully 
present'' for purposes of eligibility for certain Social Security 
benefits under 8 U.S.C. 1611(b)(2), that the agency should ``align'' 
its position to that of DHS, even while acknowledging that we were 
operating under separate statutory and policy considerations. However, 
as demonstrated by HHS' prior policy with regard to DACA recipients (89 
FR 39392 through 39395), the ``separate statutory authority and policy 
considerations'' did not compel HHS to ``align'' its position on DACA 
recipients with the position that DHS took with regard to DACA 
recipients' eligibility for certain Social Security benefits.
    In the DACA Final Rule (89 FR 39395), HHS also posited that it saw 
``no statutory mandate to distinguish between recipients of deferred 
action under the DACA policy and other deferred action recipients.'' 
The final rule noted that Federal agencies have long considered 
deferred action recipients to be ``lawfully present'' for purposes of 
certain Social Security benefits since 1996.\35\ However, DACA 
recipients, unlike other deferred action-recipients, received deferred 
action under a large-scale presidential initiative whose purposes did 
not include extending ACA access to health insurance Exchanges. As HHS 
originally explained, it is not consistent with the reasons offered for 
adopting the DACA process to extend health insurance subsidies under 
the ACA to these individuals (77 FR 52615). This original policy 
reflected the better view of the appropriate intersection of DACA and 
the ACA.
---------------------------------------------------------------------------

    \35\ See Definition of the Term Lawfully Present in the United 
States for Purposes of Applying for Title II Benefits Under Section 
401(b)(2) of Public Law 104-193, interim final rule, 61 FR 47039).
---------------------------------------------------------------------------

    The Fifth Circuit concluded in 2022 that ``Congress created an 
intricate statutory scheme for determining which classes of aliens may 
receive lawful presence, discretionary relief from removal, deferred 
action, and work authorization'' and that ``Congress's rigorous 
classification scheme forecloses the contrary scheme in the DACA 
Memorandum.'' 36 37 In the DACA Rule, HHS acknowledged the 
Fifth Circuit's opinion but proceeded to consider DACA recipients 
``lawfully present'' for purposes of eligibility to enroll in a QHP 
through an Exchange, to be eligible for PTC, APTC, CSRs, and to be 
eligible to enroll in a BHP in States that elect to operate a BHP 
because the ``rule reflects our independent statutory authority under 
the ACA to define `lawfully present.' '' Upon further reconsideration, 
we now believe it was improper for HHS to define ``lawfully present'' 
under the ACA in a way that departed from the longstanding 
understanding of that term with respect to DACA recipients.
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    \36\ Texas v. United States, 50 F.4th 498, 526 (5th Cir. 2022).
    \37\ On January 17, 2025, the U.S. Court of Appeals for the 
Fifth Circuit issued a decision (State of Texas, et al. v. U.S.A, et 
al., 23-40653) regarding DHS's final rule ``Deferred Action for 
Childhood Arrivals'' (87 FR 53152), which found the benefits 
granting provisions of the rule to be substantively unlawful, 
limited injunctive relief to the State of Texas, and remanded the 
case to the district court for further proceedings.
---------------------------------------------------------------------------

    To support the DACA Rule, HHS stated that the policy would increase 
insurance coverage, reduce delays in care, improve the ACA's risk pool, 
and make DACA recipients more productive members of society. However, 
these benefits the agency previously noted do not mean that DACA 
recipients should be considered to have met the ``lawfully present'' 
standard that Congress set in order to enroll in a QHP through an 
Exchange, to be eligible for PTC, APTC, CSRs, and to enroll in a BHP in 
States that elect to operate a BHP. We believe the use of the term 
``lawfully present'' in the ACA is best implemented by excluding DACA 
recipients for purposes of eligibility to enroll in a QHP through an 
Exchange, to be eligible for PTC, APTC, CSRs, and to be eligible to 
enroll in a BHP in States that elect to operate a BHP. DHS's decision 
that DACA recipients are not priorities for removal does not, as DHS 
has acknowledged, mean that they have ``lawful status'' within the 
United States, nor does that DHS decision control anything regarding 
``eligibility rules'' for health-related benefits administered by 
``[o]ther

[[Page 12955]]

departments and agencies, such as HHS'' (87 FR 53211 through 53212). 
Therefore, we believe it was improper for HHS to advance a policy goal 
that was contrary to the ACA's statutory limitations as they have been 
understood since the inception of DACA. Furthermore, DHS's decision 
that enforcement resources should be focused on other unlawful 
immigrants does not compel the conclusion that taxpayer dollars should 
be expended to subsidize the healthcare of those unlawful immigrants, 
as HHS recognized in its 2012 rule. Indeed, Congress has expressed a 
clear immigration policy that ``aliens within the Nation's borders not 
depend on public resources to meet their needs'' and public benefits 
should ``not constitute an incentive for immigration to the United 
States'' (8 U.S.C. 1601(2)). While HHS acknowledged this goal in 
previous rulemaking (89 FR 39399), it did not explain why the 
understanding that it had adopted prior to the DACA Rule did not better 
comport with this statutory goal.
    After reconsidering these arguments, we believe that, with respect 
to DACA recipients, defining the term ``lawfully present'' as set forth 
in the August 30, 2012 Interim Final Rule (77 FR 52614 through 52616) 
better adhered to the policy considerations underlying the statutory 
scheme. As previously noted, HHS' statutory authority and policy 
considerations for defining ``lawfully present'' with regard to its 
programs are separate from DHS's, and there is no requirement that HHS 
aligns its definition of ``lawfully present'' with DHS's. There is also 
no requirement that HHS align its treatment of DACA recipients with 
other recipients of deferred action, particularly given the fundamental 
differences between DHS's DACA policy and other policies under which 
DHS may grant deferred action. In the 2012 Interim Final Rule (77 FR 
52614 at 52615), HHS noted that the reasons DHS offered in the DHS Memo 
for adopting the DACA process did not include providing access to 
insurance affordability programs, and that any such expansion would 
``inadvertently expand the scope of the DACA process.'' Section 42 
U.S.C. 18032(f)(3), section 36B(e)(2) of the Code, 42 U.S.C. 18082(d), 
and 42 U.SC. 18071(e)(1)(A), 42 U.S.C. 18051(e) limit enrollment in a 
QHP offered on an Exchange and eligibility for PTC, APTC, CSRs, and 
enrollment in a BHP in States that elect to operate a BHP, 
respectively, to an individual who is ``lawfully present'' in the 
United States, and the better view is that a DACA recipient does not 
meet that requirement and would therefore, under this rule, be 
ineligible for these benefits.
    We seek comments on this proposal.
2. Standards for Termination of an Agent's, Broker's, or Web-Broker's 
Exchange Agreements for Cause (Sec.  155.220(g)(2))
    Later in this preamble, there is significant discussion regarding 
dramatic levels of improper enrollments involving agents, brokers, and 
web-brokers. Examining agent, broker, and web-broker practices and 
taking enforcement action against noncompliant agents, brokers, and 
web-brokers is critical to program integrity, and HHS is committed to 
holding noncompliant agents, brokers, and web-brokers accountable to 
protect Exchanges and consumers. We propose to amend Sec.  
155.220(g)(2) to improve transparency in the process for holding 
agents, brokers, and web-brokers accountable for compliance with 
applicable law, regulatory requirements, and the terms and conditions 
of their Exchange agreements.\38\
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    \38\ Consistent with Sec.  155.220(d), there are currently three 
Exchange agreements with CMS that extend to agents, brokers, and 
web-brokers assisting consumers in the FFEs and SBE-FPs: (1) the 
Agent Broker General Agreement for Individual Market FFEs and SBE-
FPs, (2) the Agent Broker Privacy and Security Agreement for 
Individual Market FFEs and SBE- FPs, and (3) the Agent Broker SHOP 
Privacy and Security Agreement. Web-brokers assisting consumers in 
the FFEs and SBE-FPs are required to sign the Web-broker General 
Agreement, and web-brokers who are primary Enhanced Direct 
Enrollment (EDE) entities that assist consumers in the FFEs and SBE-
FPs are required to sign the EDE Business Agreement and the 
Interconnection Security Agreement.
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    Section 1312(e) of the ACA provides that the Secretary shall 
establish procedures under which a State may allow agents or brokers to 
enroll individuals and employers in any QHPs in the individual or small 
group market as soon as the plan is offered through an Exchange in the 
State; and to assist individuals in applying for PTC and CSRs for plans 
sold through an Exchange. Regulations at Sec.  155.220 implement this 
statutory requirement.\39\ Among other things, Sec.  155.220 includes 
termination for cause standards in paragraphs (g)(1) through (3), which 
generally provide that if, in HHS' determination, a specific finding of 
noncompliance or pattern of noncompliance is sufficiently severe, HHS 
may terminate an agent's, broker's, or web-broker's agreements with the 
FFE for cause. Consistent with Sec.  155.220(l), the termination for 
cause standards apply to agents, brokers, and web-brokers participating 
in SBE-FPs. Paragraph (h) sets forth procedures for subsequent review 
(that is, ``reconsideration'') of the termination action.
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    \39\ Also see Sec. Sec.  155.221 and 155.222.
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    We propose to improve transparency in the process for holding 
agents, brokers, and web-brokers accountable for noncompliance with 
applicable law, regulatory requirements, and the terms and condition of 
their Exchange agreements. Specifically, we propose to add text to 
Sec.  155.220(g)(2) that clearly states that HHS would apply a 
``preponderance of the evidence'' standard of proof with respect to 
issues of fact to assess potential noncompliance under Sec.  
155.220(g)(1) and make a determination there was a specific finding or 
pattern of noncompliance that is sufficiently severe. Similar to 
definitions adopted by other HHS agencies and offices,\40\ we propose 
at Sec.  155.20 to capture this new definition, which would state that 
``preponderance of the evidence'' means proof by evidence that, 
compared with evidence opposing it, leads to the conclusion that the 
fact at issue is more likely true than not.\41\
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    \40\ See 42 CFR 93.228 (preponderance of the evidence means 
``proof by evidence that, compared with evidence opposing it, leads 
to the conclusion that the fact at issue is more likely true than 
not''); 45 CFR 412.001 (``Preponderance of the evidence means proof, 
after assessing the totality of available information, that leads to 
the conclusion that the fact at issue is more probably true than 
not.''); and 45 CFR 1641.2 (``Preponderance of the evidence means 
proof by information that, compared with that opposing it, leads to 
the conclusion that the fact at issue is more probably true than 
not.'').
    \41\ See also INS v. Cardoza-Fonseca, 480 U.S. 421 (1987) 
(defining ``more likely than not'' as a greater than 50 percent 
probability of something occurring).
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    In proposing the preponderance of the evidence standard, we 
considered the severity of the potential consequences involved in our 
termination for cause standards in Sec.  155.220(g)(1) through (3),\42\ 
and how evidentiary standards have traditionally been used in court 
cases. Federal administrative and civil cases generally use a 
preponderance of the evidence standard, while criminal cases, in order 
to sustain a conviction, demand the highest standard, guilt ``beyond a 
reasonable doubt,'' under which evidence must be so strong that there 
is no reasonable doubt about a defendant's guilt.\43\ Between those two

[[Page 12956]]

evidentiary standards are the ``clear and convincing evidence'' 
standard, under which a trier of fact must have an abiding conviction 
that the truth of the factual contention is ``highly probable,'' \44\ 
and the ``substantial evidence'' standard, which means such relevant 
evidence as a reasonable mind might accept as adequate to support a 
conclusion.\45\
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    \42\ HHS acknowledges that there are additional enforcement 
actions under 45 CFR 155.220(g) that are not addressed by this 
proposal. We are considering future rulemaking to implement 
additional regulation changes to the frameworks for those actions 
that may strengthen our oversight and the integrity of the program.
    \43\ See Maurice, R.; updated by Barrett, S. (2024, Oct. 31). 
Legal Standards of Proof. Nolo. https://www.nolo.com/legal-encyclopedia/legal-standards-proof.html (from lowest to highest 
standard: preponderance of the evidence, substantial evidence, clear 
and convincing evidence, and beyond a reasonable doubt). See 
Maurice, R., & Barrett, S. (2024, October 31). Legal standards of 
proof: You've probably heard that prosecutors have to prove criminal 
charges ``beyond a reasonable doubt.'' But do you know about the 
other legal standards of proof? NOLO. https://www.nolo.com/legal-encyclopedia/legal-standards-proof.html.
    \44\ Ibid. (citing Colorado v. New Mexico, 467 U.S. 310 at 316 
(1984)).
    \45\ See Reed v. Sec. of Health and Human Serv., 804 F. Supp. 
914 at 918 (E.D. Mich. 1992).
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    HHS is of the view that the preponderance of the evidence standard 
is appropriate in our termination for cause standards framework under 
Sec.  155.220(g)(1) through (3) because it is the standard used in most 
Federal civil cases and administrative proceedings. However, we also 
appreciate that the termination of an agent's, broker's, or web-
broker's Exchange agreements may affect their State licensure, given 
that we inform State insurance oversight agencies of these enforcement 
actions.\46\ In addition, after the applicable period in Sec.  
155.220(g)(3) elapses and the Exchange agreement(s) under Sec.  
155.220(d) are terminated, the agent, broker, or web-broker will no 
longer be permitted to assist with or facilitate enrollment of a 
qualified individual in coverage in a manner that constitutes coverage 
through an FFE or SBE-FP, or be permitted to assist individuals in 
applying for APTC and CSRs for QHPs offered through an FFE or SBE-
FP.\47\ Once an agent's, broker's, or web-broker's Exchange agreements 
are terminated, they are unable to assist with applying for or 
enrolling in QHPs offered through the Exchange in any of the more than 
30 States served by Exchanges on the Federal platform. Given these 
potential consequences, we seek comment not only on this proposal to 
use a ``preponderance of evidence'' standard of proof in assessing 
potential noncompliance under Sec.  155.220(g)(1), but also whether a 
different standard would be more appropriate to make a determination 
there was a specific finding or pattern of noncompliance by agents, 
brokers, and web-brokers that is sufficiently severe. We also solicit 
comments on our proposed definition for this new ``preponderance of 
evidence'' standard.
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    \46\ See 45 CFR 155.220(g)(6).
    \47\ See 45 CFR 155.220(g)(4) and (l).
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    In addition, we intend to provide greater specificity and precision 
in the Exchange agreements for PY 2026 and beyond regarding 
impermissible conduct by agents, brokers, and web-brokers, and to 
address the requirements for ensuring agents, brokers, and web-brokers 
have obtained and documented receipt of consumer consent to collect 
their personally identifiable information and help them apply for and/
or enroll in QHP coverage offered through the applicable FFE or SBE-FP. 
These changes will provide additional, clear guidance to agents, 
brokers, and web-brokers, as well as additional information on how HHS 
will address compliance failures. We seek input on actions or subject 
matters that interested parties believe should be specifically 
outlined, emphasized, or otherwise addressed in the Exchange agreements 
for PY 2026 and beyond.
    We are also inviting comments on the following questions:
    1. What are States' oversight practices with respect to 
impermissible conduct by agents, brokers, and web-brokers for the State 
Exchanges? How are such standards working?
    2. Would it be helpful for HHS to provide more guidance on the 
form, manner, and content requirements for obtaining and documenting 
consumer consent? If so, what guidance would be helpful?
    3. Are there other measures HHS should take to assist consumers who 
have been enrolled in QHP coverage through the FFEs or SBE-FPs, or 
switched to different coverage, without their consent to ensure they 
are held harmless for improper enrollments that are the result of 
noncompliant behavior by agents, brokers, and web-brokers?
    4. Are there other measures that HHS should pursue to enhance 
oversight of agents, brokers, and web-brokers who assist consumer apply 
for and enroll in QHP coverage through the FFEs and SBE-FPs?
    Comments are invited on these specific questions, and generally. We 
will consider public comments to help inform potential new or 
additional policies and changes to existing standards in future 
rulemaking.
3. Verification Process Related to Income Eligibility for Insurance 
Affordability Programs (Sec. Sec.  155.305, 155.315, and 155.320)
    The ACA provides Federal subsidies to reduce premium and cost 
sharing payments for lower-income households who purchase QHPs through 
the Exchanges. To guard against fraud and abuse, the ACA establishes a 
set of standards and processes to verify that consumers meet the 
eligibility requirements for APTC and CSR subsidies. We are proposing 
several changes to the processes specifically related to verifying 
income eligibility for APTC and CSR subsidies.
    Understanding the ACA's full statutory framework for making income 
eligibility determinations for APTC provides important context for 
analyzing the current regulations and the changes we are proposing. 
Each provision of the framework works in coordination with every other 
provision to strengthen the program integrity of the ACA's premium and 
cost sharing reduction program. Viewed in isolation, the importance of 
the role each provision plays can be undervalued or lost. With this in 
mind, after reviewing our recent rulemaking on the verification process 
related to income eligibility for APTC, we believe certain regulations 
do not align with this statutory framework. Therefore, before detailing 
the changes we propose, we believe it is important to first outline the 
full statutory framework and how each provision connects to increase 
the accuracy of eligibility determinations for APTC and CSR subsidies. 
Accordingly, the following discussion provides a detailed discussion of 
ACA's statutory framework for verifying and determining income 
eligibility for APTC.
    The ACA provides a PTC to lower net premiums for QHPs purchased 
through the Exchanges for eligible individuals. While taxpayers may 
choose to claim this credit on their tax return after they pay their 
premium, the ACA provides advanced payments of the premium tax credit 
(that is, APTC on behalf of eligible consumers, which the Federal 
Government pays directly to the issuer when the premium payments are 
due). The ACA contains an obligation on issuers to reduce cost-sharing 
for people with household incomes between 100 percent and 250 percent 
of the FPL who select a silver plan on an Exchange. The ACA imposes an 
obligation on the Federal Government to make periodic and timely 
payments to issuers equal to the value of the reductions. However, 
since a 2017 legal opinion determined the statute does not appropriate 
funding for CSR payments,\48\ State Departments

[[Page 12957]]

of Insurance have generally permitted or instructed their issuers to 
increase premiums only, or primarily, on silver-level QHPs, to 
compensate for the cost of offering CSRs, since the vast majority of 
eligible enrollees receiving CSRs are enrolled in silver plans. By 
loading premiums to compensate for lack of CSRs, issuers increase the 
amount of APTC the Federal Government pays them which, in turn, 
indirectly covers the cost of the CSR subsidies. Therefore, 
appropriations for APTC now effectively fund both APTC and CSR 
subsidies.
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    \48\ U.S. House of Representatives v. Burwell, 185 F. Supp. 3d 
165 (D.D.C. 2016); see also Legal Opinion Re: Payments to Issuers 
for Cost-Sharing Reductions (CSRs). Office of Attorney General. 
https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf (On 
October 12, 2017, the Attorney General issued a legal opinion that 
HHS did not have a Congressional appropriation with which to make 
CSR payments. Sessions III, J. (2017, Oct. 11)).
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    If the APTC paid on behalf of an enrollee exceeds the PTC amount 
allowed for the enrollee in a taxable year, section 36B(f)(2)(A) of the 
Code requires repayment of the excess APTC the Department of the 
Treasury paid to the issuer through an increase in the income tax on 
the enrollee by the amount of the excess. However, section 36B(f)(2)(B) 
of the Code substantially limits the amount of this tax increase or 
repayment for people with household incomes less than 400 percent of 
the FPL. Therefore, the statute does not allow the Federal Government 
to recover a substantial portion of excess APTC payments. As such, it 
is critical to establish an accurate estimate of household income 
during the application and enrollment process to most accurately set 
APTC payment amounts before the APTC payments are made. Otherwise, to 
the extent household income estimates allow people to qualify for an 
excess of APTC, a large portion of these excess APTC payments cannot be 
recovered from the enrollee. In the case of individuals who 
underestimate their income on their application, they can accumulate 
large surprise tax liabilities.
    To avoid improper payments of APTC, the ACA includes a set of 
procedures for determining income eligibility that work together to 
increase the accuracy of household income estimates provided on 
applications for APTC. Section 1411(a) of the ACA requires HHS to 
establish a program for determining, among other things, whether an 
individual claiming PTC or CSR meets the income requirements. For 
applicants claiming PTC or CSR, section 1411(b)(3)(A) of the ACA 
requires them to provide income information from their most recent tax 
return filing. If there are changes in circumstances from the most 
recent tax filing or when the tax filer was not required to file taxes, 
section 1411(b)(3)(C) of the ACA requires applicants to report 
additional income information in coordination with the program under 
section 1412 of the ACA for setting APTC amounts.
    Section 1412(b)(1)(B) of the ACA requires APTC to be set on the 
basis of the individual's household income for the most recent taxable 
year for which information is available. To determine and verify 
household income, it is imperative that consumers file a Federal income 
tax return when they are required to do so. As such, the ACA relies on 
people meeting their statutory obligations to file Federal income taxes 
under sections 6011 and 6012 of the Code. However, section 1412(b)(2) 
of the ACA establishes a separate set of procedures for determining 
APTC if there are changes in circumstances from the most recent tax 
filing or when the tax filer was not required to file taxes.
    Section 1411 of the ACA sets out procedures for verifying the 
information that enrollees provide on their application, including 
information required under both sections 1411 and 1412 of the ACA. 
Section 1411(c)(1) of the ACA requires Exchanges to submit an 
applicant's information to HHS. Section 1411(c)(3) of the ACA then 
requires HHS to submit income information to the IRS for the purposes 
of eligibility. The details of this data exchange and disclosure of 
taxpayer information are further specified at section 1414 of the ACA, 
which includes additional procedures for the exchange of information 
with Exchanges and State agencies to support income eligibility 
determinations. In the case of income information provided on an 
application that is not required to be submitted to the IRS for 
verification--that is, any income estimates that are different from the 
income reported on the applicant's previous tax return--section 1411(d) 
of the ACA requires HHS to verify its accuracy and allows HHS to 
delegate this responsibility to the Exchanges. Under section 
1411(c)(4)(A) of the ACA, HHS must conduct these income verifications 
and determinations through the electronic submission of both the 
applicant's information and responses to the applicant, except that HHS 
may use a different method for income inconsistencies than the IRS per 
section 1411(c)(4)(B) of the ACA. If the information provided by the 
applicant is verified under the foregoing procedures, HHS then 
determines the applicant is eligible and notifies the Secretary of the 
Treasury of the APTC amount to be paid, if applicable.\49\
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    \49\ Section 1411(e)(2)(A) of the ACA.
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    However, if the household income information provided by the 
applicant is inconsistent with tax filing information from the IRS or 
fails the verification under section 1411(d) of the ACA, section 
1411(e)(4) of the ACA requires Exchanges to take additional steps to 
verify income.\50\ When there is a household income inconsistency, also 
known as a data matching issue (DMI), the Exchange must make a 
reasonable effort to identify and address the causes of such 
inconsistency, including those stemming from typographical or other 
clerical errors, by contacting the applicant to confirm the accuracy of 
the information, and by taking such additional actions as HHS, through 
regulation or other guidance, may identify. If the household income 
inconsistency persists, then the Exchange must notify the applicant and 
give the applicant an opportunity within 90 calendar days from the date 
the notice was sent to either present satisfactory documentary evidence 
to the Exchange or resolve the inconsistency with the IRS or the HHS 
verification source. If the household income inconsistency is not 
resolved by the end of this 90-day period, section 1411(e)(4)(B)(ii) of 
the ACA requires the Exchange to set the APTC and CSR based on income 
information from the IRS and information provided to HHS under section 
1411(d) of the ACA.
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    \50\ The responsibility for verifying eligibility here has 
shifted entirely from HHS to the Exchanges. However, HHS retains 
responsibility in States that have not established an Exchange. In 
addition, HHS retains authority to regulate how Exchanges verify 
eligibility at this stage.
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    To support verification and eligibility determinations, section 
1413 of the ACA requires HHS to establish a system to streamline 
eligibility determinations across all applicable State health care 
subsidy programs, including QHP enrollment, PTCs, CSRs, Medicaid, the 
Children's Health Insurance Program (CHIP), and BHPs in States that 
elect to operate them. Within this system, States must develop a 
secure, electronic interface and using this interface, participate in a 
data matching program to establish, verify, and update eligibility for 
State health care subsidy programs, including the APTC, on the basis of 
reliable, third-party data. Collectively, we refer to these third-party 
data sources, such as the Social Security Administration, DHS, and the 
IRS, as trusted data sources. Importantly, this interface for 
exchanging data must be compatible with the method for data 
verification of the household income information provided on 
applications under section 1411(c)(4) of the ACA.
    In summary, under this statutory framework, HHS is responsible for

[[Page 12958]]

verifying and determining income eligibility. We are tasked with 
verifying household income information with the IRS and verifying 
household income information with other trusted data sources when the 
IRS cannot provide enough information to verify income eligibility, or 
the information they provide significantly differs from the household's 
income attestation. The ACA further directs HHS to establish compatible 
electronic information exchange systems for enrollment applications and 
eligibility verification and determination. This creates a clear 
expectation for HHS to develop a robust data matching program between 
Federal agencies, State Exchanges, and other trusted data sources to 
determine APTC payments using the most accurate income estimates. 
Giving a Federal agency like HHS primary responsibility for verifying 
and determining APTC eligibility follows from the fact that APTC 
payments are Federal expenditures.
    Exchanges operate as the intermediary between HHS and the 
applicant. They provide the applicant's information to HHS and then HHS 
has the primary responsibility for verifying the information. However, 
when the IRS cannot verify the income information, HHS may delegate its 
responsibility to verify household income to the Exchanges. Still, HHS 
retains authority to regulate and guide how Exchanges verify this 
household income information, as well as responsibility for the data 
matching program used to establish, verify and update income 
eligibility. As the intermediary, the Exchanges must also make the 
final connection with the applicant to resolve any outstanding income 
inconsistencies. The Exchanges' role here is to provide notice to the 
applicant, collect any documentary evidence from the applicant, and 
facilitate any final effort to resolve the inconsistency with the IRS 
or other trusted data sources.
    Applicants also bear important responsibilities in this process. 
This primarily includes a responsibility to file Federal income taxes 
for any year that they receive APTC and CSR and, if they have had a 
change in circumstances or were not required to file taxes, to report 
and attest to accurate income information. The ACA, however, requires 
verification of applicants' attestations of household income under 
section 1411(c) or (d), as referenced in section 1411(e)(4) of the ACA. 
There is no statutory exception to this verification process. If the 
applicant's household income cannot be verified, the applicant is 
responsible for providing satisfactory documentary evidence or taking 
further steps to resolve the inconsistency with the Federal information 
sources. If the applicant fails to resolve the inconsistency, the APTC 
amount must be based on the income data from Federal sources provided 
to HHS under section 1411(c) of the ACA.
    With that as background, we propose the following changes to the 
processes in place related to verifying income eligibility for APTC and 
CSR subsidies.
a. Failure To File Taxes and Reconcile APTC Process (Sec.  
155.305(f)(4))
i. Delay of FTR Process Until After 2-Consecutive Years of FTR Removed
    We propose to amend paragraph Sec.  155.305(f)(4) to reinstate the 
previous policy that an Exchange may not determine a tax filer or their 
enrollee eligible for APTC if: (1) HHS notifies the Exchange that APTC 
were paid on behalf of the tax filer, or their spouse if the tax filer 
is a married couple, for a year for which tax data would be utilized 
for verification of household and family size, and (2) the tax filer 
did not comply with the requirement to file a Federal income tax return 
and reconcile APTC for that year.
    In 2012, we first finalized the FTR policy in the Exchange 
Establishment Rule (77 FR 18352 through 18353) to prevent a primary tax 
filer or spouse who has failed to comply with tax filing rules from 
accumulating additional Federal tax liabilities due to overpayment of 
APTC. Since 2015, HHS has taken regulatory and operational steps to 
help increase tax filer compliance with the filing and reconciliation 
requirements under the Code as described at 26 CFR 1.36B-4(a)(1)(i) and 
(a)(1)(ii)(A) by tying eligibility for future APTC to the tax filer's 
reconciliation of past APTC paid. When the original FTR process was 
first run in December 2015, only non-filers were identified as part of 
the FTR process. IRS began to identify non-filers, non-reconcilers, and 
tax filers with a valid tax filing extension in Fall 2016, and HHS 
began taking action on non-reconcilers and extension tax filers in 
addition to non-filers in Fall 2017.
    As the operations behind the FTR process evolved, Exchanges 
struggled to communicate with enrollees about the removal of APTC due 
to their tax filing status. Due to these struggles, in the 2018 Payment 
Notice (81 FR 94124), the FTR Recheck process was carved out of the 
periodic data matching regulations at Sec.  155.330(e)(2) due to 
concerns related to the protection of Federal tax information (FTI). 
Additionally, to strengthen the FTR process, Exchanges on the Federal 
platform added an additional check of an enrollee's FTR status after 
the OEP ended. This process, referred to as FTR Recheck, is the process 
that occurs early in the coverage year where Exchanges on the Federal 
platform verify the tax filing status of enrollees who attested to 
filing and reconciling during the OEP. During the comment period, many 
State Exchanges expressed their frustration regarding their inability 
to provide direct communications related to the tax filing status of 
the tax filers or their enrollees. In response to their comments, HHS 
carved out an exception to Sec.  155.305(f)(4) that stated Exchanges 
could not deny APTC due to FTR unless ``direct notification'' was first 
sent to the tax filer that they would lose their eligibility for APTC 
related to their failure to file and reconcile. This change 
necessitated FTI compliant infrastructure for Exchanges. In the 2019 
Payment Notice (83 FR 16982), HHS updated the FTR policy to remove the 
carve-out for direct notification. However, due to the earlier 
regulations, HHS did not run FTR Recheck in Spring 2017 because HHS 
would have been out of compliance with its own rule because it did not 
yet have the infrastructure to send direct notices that contain FTI. In 
Fall 2017, Exchanges on the Federal platform began sending direct 
notices to tax filers explicitly stating that they would lose 
eligibility for APTC due to their failure to comply with the 
requirement to file their Federal income taxes and reconcile APTC.
    During the COVID-19 public health emergency (PHE), FTR operations 
were paused due to concerns that consumers who had filed and reconciled 
would lose APTC due to IRS processing delays resulting from IRS 
processing facility closures and a corresponding processing backlog of 
paper filings.
    In the 2024 Payment Notice (88 FR 25814), we amended the FTR 
process to restrict an Exchange from determining a tax filer ineligible 
for APTC until they have failed to file a Federal income tax return and 
reconcile APTC for two-consecutive tax years. We made this change to 
address operational challenges that required Exchanges to determine 
someone ineligible for APTC without having up-to-date information on 
the tax filing status of tax filers, to help consumers who may be 
confused or may have received inadequate education on the requirement 
to file and reconcile, to promote continuity of coverage for consumers 
who may not be aware of the requirement to file and reconcile, and to 
reduce the administrative burden on HHS.

[[Page 12959]]

    When we adopted this two-tax year FTR process, we acknowledged it 
could place consumers at a risk of increased tax liability. To mitigate 
this concern, in the 2025 Payment Notice (89 FR 26298 through 26299), 
we required Exchanges to issue FTR warning notices for enrollees in 
Exchanges on the Federal platform who have not filed and reconciled for 
one-tax year. We also acknowledged the risk for improper enrollment by 
consumers who know they can ignore their FTR status for an additional 
year, but concluded these instances would be limited as the majority of 
enrollees comply with FTR. Despite the potential for large tax 
liabilities and the risk of improper enrollment, we concluded that this 
policy would have a positive impact on consumers, while still ensuring 
program integrity as it would provide better continuity of coverage for 
consumers who may not be aware of the requirement to file and 
reconcile. We noted that we would continue to monitor the 
implementation of this new policy, including whether certain 
populations continue to experience large tax liabilities, and would 
consider whether additional guidance, or any additional policy changes 
in future rulemaking, are necessary.
    Upon further analysis of enrollment data, we believe the new FTR 
process places a substantially higher number of tax filers at a greater 
risk of accumulating increased tax liabilities.\51\ We believe this is 
because the current FTR process could incentivize tax filers to not 
file and reconcile because they are allowed to keep APTC eligibility 
for an additional year without filing their Federal income tax return 
and reconciling APTC. If tax filers do not file and reconcile for two-
consecutive tax years, they could have an increasing tax liability due 
to APTC that is not reconciled on the tax return. For example, if a tax 
filer had projected their household income to be less than 200 percent 
of the FPL, but had household income over 400 percent of the FPL when 
filing their Federal income tax return, the requirement to repay their 
excess APTC could constitute a major tax liability. Average APTC per 
month for those receiving it is $548 for OEP 2024. Moreover, new 
evidence shows there is a substantial risk of improper enrollment, 
which we discuss further below.\52\
---------------------------------------------------------------------------

    \51\ Marketplace Open Enrollment Period Public Use Files, 
https://www.cms.gov/data-research/statistics-trends-reports/marketplace-products/2024-marketplace-open-enrollment-period-public-use-files.
    \52\ Blase, B.; Gonshorowski, D. (2024, June). The Great 
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
---------------------------------------------------------------------------

    In our previous rulemaking, we were concerned about consumers 
losing their Exchange coverage once they lose their eligibility for 
APTC, as they would no longer be able to pay their entire premium for a 
second year under the 1 year FTR policy. This concern guided our 
thought process in the 2024 Payment Notice when we amended the FTR 
process to restrict an Exchange from determining a tax filer ineligible 
for APTC until they have failed to file a Federal income tax return and 
reconcile APTC for two-consecutive tax years.
    According to our estimates in that rule (81 FR 25902), we found 
approximately 116,000 enrollees with an FTR status were automatically 
enrolled in an Exchange QHP without APTC during the OEP for PY 2020, 
and that approximately 14,000 stayed enrolled without APTC by March 
2020. We estimated all 102,000 enrollees who dropped coverage would 
have retained coverage under the new FTR process. Among those who 
dropped coverage, we estimated 20,400 (20 percent) would be reenrolled 
in coverage without APTC due to an FTR status for two-consecutive tax 
years. We estimated the continuity of coverage for the 81,600 who 
remained covered in the second year, accounting for enrollment 
retention rates, would likely increase APTC expenditures by $373 
million beginning in 2025.
    However, considering new evidence regarding improper enrollments, 
it became apparent that the new FTR process could impede Exchange 
efforts to mitigate improper enrollments. At the time, we did not 
estimate the number of people with an FTR status who entered the OEP 
and either disenrolled, actively reenrolled without APTC, or resolved 
their FTR status and reenrolled with APTC. Due to concerns related to 
the safeguarding of FTI, the Exchanges on the Federal platform are 
unable to track specifically how many consumers originally identified 
as FTR prior to the OEP ultimately resolved their FTR status. This kind 
of information would have helped us fully understand the population 
that might take advantage of the current FTR process. Nor did we 
attempt to estimate the portion of people with FTR status who were 
likely ineligible for APTC. Rather, we assumed continuity of coverage 
with APTC was appropriate for everyone with an FTR status. Moreover, we 
did not consider how changing the notice to reflect the new FTR process 
would impact enrollment decisions. The prior FTR direct notice (for PY 
2020 and earlier) gave notice that access to APTC would end if tax 
filers failed to file and reconcile for one-tax year, while the current 
one-tax year FTR direct notice for PY 2025 provides notice for tax 
filers identified as having a one-tax year FTR status that they may 
lose their APTC in the future if they do not file and reconcile their 
APTC. Tax filers with a one-tax year FTR status or their enrollees are 
directed to file their Federal income tax returns and reconcile their 
APTC as soon as possible in the current one-tax year FTR direct notice. 
Indirect notices for tax filers in both the one-tax year and two-tax 
year FTR status cannot directly tell an enrollee that they need to file 
their Federal income tax return, but encourage doing so in order to 
ensure that they remain eligible for APTC, along with other reasons why 
they may be at risk of losing APTC to mask FTI.
    Upon further analysis of enrollment and tax filing data we believe 
the current two-year FTR process places a substantially higher number 
of consumers at risk of accumulating increased tax liabilities. We have 
revisited the enrollment and tax filing data from the OEP for PY 2020, 
as well as more recent enrollment data. During OEP 2025, the initial 
year in which FTR was resumed, the data shows that approximately 
356,000 potential reenrollments entered OEP 2025 with a two-tax year 
FTR status and approximately 1,500,000 potential reenrollments entered 
OEP 2025 with either a one-tax year FTR status, an extension of the 
deadline to file their Federal income taxes, or had filed their Federal 
income taxes but had not attached IRS Form 8962 to reconcile their 
APTC. Under the current two-year policy for PY 2025, enrollees with a 
two-tax year FTR status could have actively reenrolled (but not auto-
reenrolled) and attested to having filed and reconciled while IRS data 
still shows them as not having filed taxes for the 2022 or 2023 tax 
years, and the enrollees with a one-tax year FTR status could have 
either actively or automatically reenrolled in an Exchange QHP without 
meeting the requirement to file taxes for the 2023 tax year. 
Historically, under the one-tax year FTR process, between 15 percent 
and 20 percent of consumers originally identified at OEP as FTR end up 
losing their APTC due to the FTR Recheck process. As of February 2025, 
we do not have information on the number of consumers who were 
identified as having a two-tax year FTR status before

[[Page 12960]]

the OEP and who have filed and reconciled in order to remain eligible 
for APTC. It is probable that due to the increase in enrollment, under 
the two-tax year FTR policy, the number of consumers who would remain 
covered into the second year would be greater than the 81,600 we 
previously estimated.
    If most of these enrollees were eligible for APTC, then giving them 
some extra time to resolve their FTR status might be justified 
considering the potential confusion over the requirement to file and 
reconcile. However, in the proposed 2019 Payment Notice (82 FR 51086), 
we previously identified program integrity issues among tax filers who 
fail to file and reconcile. When people received notice regarding their 
failure to file and reconcile under the one-tax year FTR process, 
approximately 70 percent of households receiving the notification took 
appropriate action to file a tax return and reconcile associated 
APTC.\53\ However, because tax filers for approximately 30 percent of 
households receiving the notification did not take appropriate action, 
we concluded that, absent evidence that they had filed and reconciled, 
it was important for program integrity purposes that Exchanges 
discontinue their APTC. A reason that may explain why this population 
does not file their taxes and reconcile their APTC is due to the 
administrative burden. IRS has noted that filing an individual tax 
return takes an average of 8 hours and costs approximately $160.\54\ 
While there are numerous free file options as well as assistance for 
low-income taxpayers, many taxpayers do not utilize those options.\55\ 
However, we continue to believe this high rate of people who failed to 
take appropriate action to file and reconcile represents a program 
integrity issue. The current policy aggravates this program integrity 
problem by allowing those enrollees who failed to take appropriate 
action to retain coverage into the second year.
---------------------------------------------------------------------------

    \53\ Internal CMS data.
    \54\ IRS. (2024). 1040 (and 1040-SR) Instructions. Dep't of 
Treasury. https://www.irs.gov/pub/irs-pdf/i1040gi.pdf.
    \55\ GAO. (2022, May 10). Why Don't More Taxpayers Take 
Advantage of Free Help Filing Taxes Online? https://www.gao.gov/blog/why-dont-more-taxpayers-take-advantage-free-help-filing-taxes-online.
---------------------------------------------------------------------------

    Furthermore, we believe the proposed one-tax year FTR process can 
serve as a backstop to improper enrollments. The Paragon Health 
Institute provides evidence that lead generation companies are 
misleading enrollees with the promise of free coverage and other 
enticements.\56\ In these cases, some people are likely not aware they 
are enrolled in QHP coverage with APTC because, in response to 
misleading advertisements promising cash or gift cards, they provided 
enough personal information for agents, brokers, and web-brokers to 
improperly enroll them in such coverage with APTC without their 
knowledge.\57\ These schemes tend to target low-income people, many of 
whom likely earn less than the thresholds for APTC eligibility. Under 
these schemes, some agents, brokers, or web-brokers improperly enroll 
people in QHP coverage with APTC who would not otherwise qualify. 
Individuals who were improperly enrolled may not realize they are 
enrolled in Exchange coverage until they receive a Form 1095-A. These 
individuals can obtain a voided Form 1095-A and avoid improper tax 
liabilities, but the process is burdensome and could lead to delays or 
errors in tax filing. We believe that FTR status may provide a strong 
indicator that a current enrollee entering the OEP has income that 
makes the household ineligible for APTC. Generally, people with lower 
incomes do not need to file taxes unless their income is over the 
filing requirement. Because the income filing requirement for a single 
filer with no self-employment income aligns with the eligibility 
threshold for APTC--$14,600 for 2024 tax filing compared to $14,580 for 
2024 APTC eligibility--people who inflate their income to qualify for 
APTC will often have an income low enough to, absent the receipt of 
APTC, not require them to file taxes. In this case, the FTR status 
likely reflects a lack of understanding of the need to file taxes based 
on the receipt of APTC which, if they still think they do not meet the 
filing requirement based on their income, means they likely have an 
income too low to meet the APTC eligibility threshold.
---------------------------------------------------------------------------

    \56\ Blase, B; Kalisz, G. (2024, August). Unpacking The Great 
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/unpacking-the-great-obamacare-enrollment-fraud/.
    \57\ Ibid.
---------------------------------------------------------------------------

    We established the current two-tax year FTR process at the end of 
the COVID-19 PHE. At that time, we had paused the removal of APTC under 
the FTR process because the pandemic severely impacted the IRS' ability 
to process tax returns for the 2019, 2020, and 2021 tax years.\58\ 
Continuing the FTR process during that time would have removed APTC 
from substantial number of eligible enrollees who filed tax returns but 
had not had their tax returns processed yet.
---------------------------------------------------------------------------

    \58\ CMS. (2022, July 18). Failure to File and Reconcile (FTR) 
Operations Flexibilities for Plan Year 2023. https://www.cms.gov/cciio/resources/regulations-and-guidance/ftr-flexibilities-2023.pdf.
---------------------------------------------------------------------------

    While many enrollees did in fact file their Federal income taxes 
and reconcile APTC while FTR was paused during the COVID-19 PHE, in 
light of the substantial increase in improper enrollments HHS observed 
during PY 2024, we believe that reverting back to the pre-existing FTR 
policy, that is, the FTR policy in place before the COVID-19 PHE, is a 
critical program integrity measure that could further protect Exchanges 
and enrollees from improper enrollments. Specifically, we are concerned 
that the current policy of pausing removal of APTC due to an FTR status 
for an additional year could potentially let improperly enrolled 
enrollees stay enrolled for another year undetected. If an improper 
enrollment is not detected by the other methods that the Exchange has 
implemented, the proposed one-tax year FTR process should act as a 
backstop to ensure that an enrollee who is improperly enrolled loses 
APTC after 1 year of failing to file and reconcile instead of 2 years 
of failing to file and reconcile. For example, under the one-tax year 
FTR process, people received a notice that they would lose their 
eligibility for APTC unless they met the requirement to file and 
reconcile. Whereas under the current two-tax year FTR process, 
enrollees do not receive notification that they are imminently at risk 
of losing their APTC until they have had an FTR status for 2 years. As 
background, under the current process, Exchanges can choose to send (1) 
a direct notice to tax filers, (2) an indirect notice to enrollees, or 
(3) both a direct and indirect notice to enrollees with either one-tax 
year and two-tax year FTR status. Enrollees with a one-tax year FTR 
status can receive either a direct notice that they must file and 
reconcile, but they are not at risk for losing APTC for the current 
plan year if otherwise eligible, or an indirect notice that indirectly 
tells the enrollee to ensure they have done all the actions necessary 
to keep their APTC eligibility, including filing their Federal tax 
return and reconciling their APTC. It is not until an enrollee receives 
an FTR notice for the second tax year that they are instructed to file 
and reconcile as soon as possible to avoid losing APTC for the 
applicable plan year.
    After reviewing the tax filing data, we remain concerned that 
enrollees are accumulating tax liabilities due to misestimating their 
income. Before the COVID-19 PHE, over 50 percent of people who filed 
tax returns and reconciled APTC received excess APTC

[[Page 12961]]

for the 2016, 2017, 2018, and 2019 tax years.\59\ For those who filed 
their taxes and reconciled their APTC, the accumulation of any tax 
liability is limited to a single year. In 2022, excess liability 
represented 11.5 percent of total APTC payments reported on tax 
returns. This tax liability, if not paid by the taxpayer, will continue 
to be an outstanding debt to the IRS and may accrue interest and 
penalties. To mitigate any accumulation of liability, the longstanding 
FTR process had disenrolled people from APTC after giving them over 6 
months to resolve their FTR status after initial notification. The 
current process could potentially provide up to 18 months after an 
initial FTR notice is received for a tax filer to comply with the 
requirement to file and reconcile their APTC. We no longer believe this 
provides reasonable protection against accumulating tax liabilities.
---------------------------------------------------------------------------

    \59\ IRS. (2024, Dec. 30). SOI Tax Stats--Individual Income Tax 
Returns Line Item Estimates (Publications 4801 and 5385). Dep't of 
Treasury. https://www.irs.gov/statistics/soi-tax-stats-individual-income-tax-returns-line-item-estimates-publications-4801-and-5385.
---------------------------------------------------------------------------

    Furthermore, the current policy also undermines program integrity 
by increasing the burden on taxpayers because, due to repayment 
limitations discussed previously, not all ineligible enrollees are held 
fully responsible for paying back unpaid liabilities. Those unpaid 
liabilities add to Federal APTC expenditures. We did not previously 
estimate the Federal cost of the current FTR process due to providing 
coverage and APTC continuity to enrollees who were ineligible for APTC 
and not liable for repaying the full excess of their APTC. We estimate 
up to 18.5 percent of people currently in FTR status may be ineligible 
for APTC based on the overall growth in the 100 to 150 percent of the 
FPL population of the Exchanges on the Federal platform between 2019 
and 2024, if the growth is due to noncompliant agents, brokers, and 
web-brokers enrolling enrollees who are actually below the 100 percent 
FPL threshold. However, this population would also be impacted by 
numerous other proposals in this proposed rule as well as other actions 
that HHS has taken over the past year to protect the Exchanges, and we 
are unable to isolate the proposed impact of changing the FTR process 
from the other proposals included in this rule. While we previously 
assessed that the threat of IRS enforcement actions and penalties would 
mitigate improper enrollments (88 FR 25818), these data trends indicate 
that such consequences are insufficient to protect program integrity, 
and therefore, additional policy changes are necessary.
    These numbers highlight the importance of complying with the 
statutory requirement to file a tax return. As discussed previously, an 
enrollee's tax return provides a main basis for establishing an 
accurate income estimate. Not filing a tax return undermines the 
accuracy of the income estimate used to set the APTC amount. Moreover, 
sections 6011 and 6012 of the Code, as implemented under 26 CFR 1.6011-
8, requires enrollees who receive APTC to file a tax return and 
reconcile the APTC. We do not believe the ACA allows HHS to determine 
an applicant whose taxpayer has failed to meet this requirement 
eligible for APTC. As discussed previously, when the IRS does not have 
tax return information to verify an applicant's income, section 1412 of 
the ACA requires HHS to establish alternative procedures to determine 
APTC when there is a change in circumstances or ``in cases where the 
taxpayer was not required to file a return . . .''. Because the section 
1412(b)(2)(B) only references cases where a tax filer was not required 
to file a return, we do not believe an applicant who fails to meet the 
requirement to file a return qualifies for this alternative process for 
determining APTC. Therefore, under the ACA, we believe the original 
regulations implementing the eligibility requirements in 2012 correctly 
required Exchanges to determine an applicant ineligible for APTC if 
they previously received APTC and failed to file a tax return (77 FR 
18352 through 18353).
    Overall, this new analysis of the enrollment and tax filing status 
suggests a large number of people with FTR status are ineligible for 
APTC and that pausing removal of APTC due to an FTR status allows 
ineligible enrollees to accumulate tax liabilities. These additional 
liabilities create a substantial financial burden for enrollees who 
must repay the excess APTC and increase the Federal APTC expenditures. 
Moreover, we believe the ACA statute does not allow HHS to determine 
someone eligible for APTC if they failed to meet the requirement to 
file a tax return. Therefore, to align regulations with the ACA, 
protect people from accumulating additional Federal tax liabilities, 
and reduce the Federal expenditures associated with APTC expenditures 
for ineligible enrollees, we propose to reinstate the FTR process that 
requires Exchanges to determine enrollees ineligible for APTC when HHS 
notifies the Exchange that a taxpayer has failed to file a Federal 
income tax return and reconcile their past APTC for a year for which 
their tax data would be utilized to verify their eligibility.
    We propose to implement the proposed one-year FTR process beginning 
with OEP 2026 in the fall of 2025. This would allow enrollees currently 
in a one-tax year FTR status to receive appropriate noticing informing 
them of the urgent need to file their Federal income tax return and 
reconcile APTC in order to remain eligible for APTC.
    We seek comment on this proposal.

ii. Conforming Change to Notice Requirements

    To conform with this proposed FTR process, we also propose to 
revise the notice requirement at Sec.  155.305(f)(4)(i) and remove the 
notice requirement at Sec.  155.305(f)(4)(ii). When we finalized the 
current FTR process for PY 2025 in the 2024 Payment Notice (88 FR 
25814) to require Exchanges to wait to discontinue APTC until the tax 
filer has failed to file a tax return and reconcile their past APTC for 
two-consecutive tax years, we did not impose a requirement for 
Exchanges to notify such enrollee during the first year that they 
failed to file and reconcile. We then amended Sec.  155.305(f)(4) in 
the 2025 Payment Notice (89 FR 26298 through 26299) to require that all 
Exchanges send one of two notices to tax filers or enrollees with an 
FTR status for 1 year, and again in the 2026 Payment Notice (90 FR 4472 
through 4473) to require that all Exchanges send one of two notices to 
tax filers or enrollees with an FTR status for two-consecutive tax 
years. Accordingly, for both an enrollee's first and second year with 
an FTR status, all Exchanges must now either (1) notify the tax filer 
directly of their FTR status and educate them of the need to file and 
reconcile or risk being determined ineligible for APTC if they fail to 
file and reconcile for a second consecutive year, or (2) send an 
indirect notification to either the tax filer or their enrollee that 
informs them they are at risk of being determined ineligible for APTC 
in the future. The indirect notice must do so without indicating that 
the tax filer has failed to file and reconcile their APTC for both the 
first year and the second year that they have been found not to have 
done so in order to protect FTI.
    Because we are proposing to amend Sec.  155.305(f)(4) to require 
Exchanges to determine people ineligible for APTC after one tax year of 
FTR status rather than two consecutive tax years, the current notice 
requirement aimed at tax filers in a two-tax year FTR status would no 
longer apply. Therefore, we are proposing to revise the notice

[[Page 12962]]

requirement at Sec.  155.305(f)(4)(i) and remove the notice requirement 
at Sec.  155.305(f)(4)(ii). We invite comment on this proposal.
    To ensure tax filers and enrollees receive advanced notice of their 
FTR status and the risk for being determined ineligible for APTC after 
removing this notice requirement, we are proposing to reinstate the 
notice procedures that existed before we established the current FTR 
process for Exchanges on the Federal platform. As background, each 
year, these procedures would provide a series of notices \60\ to 
identified tax filers and enrollees beginning with two notices before 
the OEP for those tax filers or enrollees who the IRS has identified to 
HHS (and subsequently the Exchange) as not having filed and reconciled 
APTC received during a prior year. The indirect notice would be 
included in the Marketplace Open Enrollment Notice and would be sent to 
the enrollee according to the communication preference set by the 
household contact and would also be available in their online account 
and to the Exchange call center. This notice educates the enrollee on 
the requirements to file their Federal income taxes and reconcile their 
APTC. The direct notice, which would not be available online or to the 
Exchange call center, would be sent via U.S. mail directly to the tax 
filer in order to protect FTI. The direct notice would serve to 
unambiguously explain that the tax filer has been identified as having 
failed to meet the requirement to file and reconcile and must come into 
compliance to avoid termination of APTC. IRS data would then be checked 
again in December and enrollees who have not attested to filing and 
reconciling their APTC would lose their APTC for the next coverage 
year. Tax filers may have filed and reconciled, but due to IRS 
processing times, their application may still be flagged with an FTR 
status during the OEP. To address this issue, enrollees could attest to 
having filed and reconciled for a preceding tax year on their Exchange 
application. Then to confirm the enrollee's attestation, Exchanges on 
the Federal platform would perform another recheck of the IRS data in 
the new coverage year. For enrollees who are still flagged with an FTR 
status, we would send both an indirect FTR Recheck notice to the 
household contact and a direct FTR Recheck notice to the tax filer 
warning them a final time that they would lose eligibility for APTC, 
unless they complete the requirement to file and reconcile. Finally, in 
the spring, after a final recheck of the IRS data, Exchanges on the 
Federal platform would terminate APTC for households the IRS indicates 
have still not filed and reconciled. This process is summarized by 
Table 1.
---------------------------------------------------------------------------

    \60\ Notices can be found online here: https://www.cms.gov/marketplace/in-person-assisters/applications-forms-notices/notices.
[GRAPHIC] [TIFF OMITTED] TP19MR25.000

    If enrollees have attested to filing and reconciling, enrollees 
would be discontinued from APTC only after the IRS checks and rechecks 
their FTR status four times. We believe this gives ample notice to 
enrollees who may have been confused about the requirement to file and 
reconcile and provides the IRS enough time to process tax returns for 
enrollees who complied. We believe this procedure ensures that 
enrollees who are eligible for coverage continue to receive coverage. 
Under this proposed requirement at Sec.  155.305(f)(4)(i)(B), State 
Exchanges would be responsible for administering their own notice 
procedure with flexibility to send either direct notices containing 
FTI, or indirect notices which do not contain any protected FTI, or 
both.
    We seek further comment on whether State Exchanges should be 
required to align with Exchanges on the Federal platform on this 
consumer noticing and recheck process.
b. 60-Day Extension To Resolve Income Inconsistency (Sec.  155.315)
    We propose to remove Sec.  155.315(f)(7) which requires Exchanges 
to provide an automatic 60-day extension in addition to the 90 days 
currently provided by Sec.  155.315(f)(2)(ii) to allow applicants 
sufficient time to provide documentation to verify household income.
    According to section 1411(e)(4)(A) of the ACA, part of the process 
to verify the accuracy of information provided on applications requires 
Exchanges to provide applicants an opportunity to correct an 
inconsistency with HHS or other trusted data sources when the 
inconsistency or inability to verify the information is not resolved by 
the Exchange. This requires Exchanges to give applicants notice of the 
inability to resolve the inconsistency and verify the information. 
Exchanges must also provide the applicant an opportunity to either 
present satisfactory documentary evidence or resolve the inconsistency 
with HHS or other trusted data sources during the 90-day period 
beginning on the date on which the notice is sent to the applicant. 
Section 1411(e)(4)(A) of the ACA also states HHS may extend the 90-day 
period for enrollments occurring during 2014.
    When we explained the legal basis for a 60-day extension in the 
2024 Payment Notice (88 FR 25819), we stated the proposal aligns with 
current

[[Page 12963]]

Sec.  155.315(f)(3), which provides extensions to applicants beyond the 
existing 90 days if the applicant demonstrates that a good faith effort 
has been made to obtain the required documentation during the period. 
We noted that it is also consistent with the flexibility under section 
1411(c)(4)(B) of the ACA to modify methods for verification of the 
information where we determined such modifications would reduce the 
administrative costs and burdens on the applicant. However, as 
discussed previously, section 1411(c)(4)(B) of the ACA specifically 
limits modifications on how information is exchanged and verified 
between HHS and trusted data sources and does not extend to other 
aspects of the verification process. Therefore, section 1411(c)(4)(B) 
of the ACA does not provide a statutory basis to modify the length of 
the 90-day response period.
    Section 1411(e)(4)(A) of the ACA also limits modifications to the 
90-day response period. This language allows HHS to extend the 90-day 
period in 2014. This flexibility was clearly intended to accommodate 
any issues that might arise during the first year HHS administered 
eligibility determinations for premium and cost-sharing subsidies. By 
expressly including this specific allowance to extend the 90-day period 
for 2014, the language strongly suggests Congress did not intend to 
allow any further extensions to the 90-day period. Therefore, we do not 
believe Sec.  155.315(f)(7) conforms with the statute.
    Based on this reading of the statute, we question whether the 
extension of the 90-day period when an applicant demonstrates a good 
faith effort to obtain documentation during the period under Sec.  
155.315(f)(3) conforms with the statute. Due to the ad hoc nature of 
this good faith effort extension, we believe this is likely an 
appropriate use of our authority. In contrast, the automatic 60-day 
extension, in effect, categorically suspends the 90-day period and 
replaces it with a 150-day period which we believe falls well outside 
our authority.
    Even if the statute allowed an automatic 60-day extension, our 
review of how applicants used the 60-day extension shows that the 
benefits we previously anticipated have not materialized. When we 
adopted the 60-day extension in the 2024 Payment Notice (88 FR 25819 
through 25820), we determined the change would ensure consumers are 
treated equitably, ensure continuous coverage, and strengthen the risk 
pool. However, upon further review of the prior experience and the 
current experience using the 60-day extension, we find the 60-day 
extension largely does not deliver the benefits anticipated. Instead, 
we find the change weakened program integrity.
    We previously determined that 90 days is often an insufficient 
amount of time for many applicants to provide income documentation, 
since it can require multiple documents from various household members 
along with an explanation of seasonal employment or self-employment, 
including multiple jobs. The previous review of income DMI data 
indicated that when consumers receive additional time, they are more 
likely to successfully provide documentation to verify their projected 
household income. Between 2018 and 2021, over one-third of consumers 
who resolved their DMIs on the Exchange did so in more than 90 days.
    While we previously found one-third of consumers who resolve income 
DMIs used an extension between 2018 and 2021, our review from 2024 
shows that applicants who successfully used the extension represent 55 
percent of the total income DMIs. We also found that the percent of all 
applicants with an income DMI who used an extension represent 60 
percent of total income DMIs. After implementing the 60-day extension, 
we did not see that the extension improved these statistics. Of those 
who successfully resolved their income DMI in 2024, 58 percent used the 
extension which is about the same as before in 2022. This suggests 
that, before the automatic 60-day extension, anyone who needed a 60-day 
extension was granted one under Sec.  155.315(f)(3), and the automatic 
60-day extension only served to keep people who were able to provide 
documentation within 60 days (instead of 120 days) covered for a longer 
period. Additionally, we estimated this increased APTC expenditures by 
$170 million in 2024. Therefore, we determined that the automatic 60-
day extension did not provide a meaningful benefit to consumers and 
weakened program integrity.
    We welcome comment on this topic and suggestions to alleviate this 
concern.
    As we discussed in other aspects of this proposed rule, there are 
often countervailing impacts on the risk pool and program integrity 
from the policy decisions we make. In this case, we stated in the 2024 
Payment Notice (88 FR 25820) that consumers in the 25-35 age group were 
most likely to lose their APTC eligibility due to an income DMI, 
resulting in a loss of a population that, on average, has a lower 
health risk, thereby negatively impacting the risk pool. Therefore, we 
concluded that adding the automatic 60-day extension would improve the 
risk pool by making it easier for younger and healthier populations to 
enroll.
    However, we must weigh this potential positive impact on the risk 
pool against the substantial increase in APTC expenditures that we 
identified from ineligible people who stay enrolled and receive APTC 
for an additional 60 days. We believe the cost to taxpayers and decline 
in program integrity outweigh any possible benefit to the risk pool.
    Providing a 60-day extension for households with income DMIs only 
serves to increase APTC payments and tax liabilities for ineligible 
enrollees during the extension. Therefore, we believe the cost of the 
extension outweighs the benefits. We seek comment on this proposal.
c. Income Verification When Data Sources Indicate Income Less Than 100 
Percent of the FPL (Sec.  155.320(c)(3)(iii))
    We propose to revise Sec.  155.320(c)(3)(iii) to require Exchanges 
to generate annual household income inconsistencies in certain 
circumstances when a tax filer's attested projected annual household 
income is equal to or greater than 100 percent of the FPL and no more 
than 400 percent of the FPL while the income amount represented by 
income data returned by IRS and the SSA and current income data sources 
is less than 100 percent of the FPL. This change would reinstate 
provisions HHS finalized in the 2019 Payment Notice (83 FR 16985) but 
were later vacated by the United States District Court for the District 
of Maryland decided in City of Columbus, et al. v. Cochran, 523 F. 
Supp. 3d 731 (D. Md. 2021). Though we believe we had a clear legal 
basis for finalizing the provisions in the 2019 Payment Notice, we also 
believe circumstances have substantially changed since the court 
vacated the prior rulemaking, which provide justification to reinstate 
the provisions. While we previously acknowledged in the 2019 Payment 
Notice that we did not have firm data on the number of applicants who 
might be inflating their income to gain APTC eligibility, we now have 
clear evidence from enrollment data that shows potentially millions of 
applicants are inflating their incomes or having applications submitted 
on their behalf with inflated incomes.\61\

[[Page 12964]]

Additionally, while concerns were raised in City of Columbus, et al. v. 
Cochran about consumers who may project a higher income than they 
receive due to the nature of low-wage work making it difficult to 
predict their annual household income, we believe enough consumers--and 
the agents, brokers, and web-brokers helping them apply--are 
intentionally inflating their incomes that justifies the creation of 
this income DMI type, as data shows below.
---------------------------------------------------------------------------

    \61\ Hopkins, B.; Banthin, J.; and Minicozzi, A. (2024, Dec. 
19). How Did Take-Up of Marketplace Plans Vary with Price, Income, 
and Gender? American Journal of Health Economics, 1(11). https://www.journals.uchicago.edu/doi/10.1086/727785.
---------------------------------------------------------------------------

    Section 155.320(c)(3)(iii) sets forth the verification process when 
household income attestations on applications increase from the prior 
tax year or are higher than trusted data sources indicate. Generally, 
if income data from our electronic data sources indicate a tax filer's 
attested projected annual household income is more than the household 
income amount represented by income data returned by the IRS and the 
SSA and current income data sources, Sec.  155.320(c)(3)(iii) requires 
the Exchange to accept the attestation without further verification. 
Currently, Exchanges are generally not permitted to create 
inconsistencies for consumers when the consumers' attested household 
income is greater than the amount represented by income data returned 
by IRS and the SSA and other trusted data sources.
    However, in the 2019 Payment Notice (83 FR 16985), we concluded 
that where electronic data sources reflect household income under 100 
percent of the FPL and a consumer attests to household income between 
100 percent of the FPL and 400 percent of the FPL and where the 
attested household income exceeds the income reflected in trusted data 
sources by more than a reasonable threshold, it would be reasonable to 
request additional documentation to protect against overpayment of APTC 
because the consumer's attested household income could make the 
consumer eligible for APTC when income data from electronic data 
sources suggest otherwise. Still today, the risk of APTC overpayments 
under these circumstances is especially keen because tax filers may be 
eligible for PTC with household income below 100 percent of the FPL if 
APTC was paid based on the tax filer having estimated household income 
of at least 100 percent of the FPL.\62\ Barring other changes in 
circumstance, these tax filers will not have to repay any APTC. That 
taxpayers are not required to repay APTC in these situations magnifies 
the need for Exchanges to take additional reasonable steps to verify 
the household incomes of persons for whom Federal trusted data services 
report household income of less than 100 percent of the FPL.
---------------------------------------------------------------------------

    \62\ See 26 CFR 1.36B-2(b)(6)(i). This rule does not apply if 
the taxpayer, with intentional or reckless disregard for the facts, 
provided incorrect information to the Exchange for the year of 
coverage. See 26 CFR 1.36B-2(b)(6)(ii).
---------------------------------------------------------------------------

    In the 2019 Payment Notice (83 FR 16985), we concluded it would be 
reasonable to request additional documentation to protect against 
overpayment of APTC despite not having firm data on the number of 
applicants that might be inflating their income. We viewed this policy 
as a critical program integrity measure to address the findings from a 
U.S. Government Accountability Office (GAO) study on improper payments 
that determined our control activities related to the accuracy of APTC 
calculations were not properly designed.\63\ Specifically, this study 
found that ``CMS does not check for potentially overstated income 
amounts, despite the risk that individuals may do so in order to 
qualify for advance PTC.'' \64\
---------------------------------------------------------------------------

    \63\ U.S. Government Accountability Office (2017, July). 
Improper Payments: Improvements Needed in CMS and IRS Controls over 
Health Insurance Premium Tax Credit. P. 36. https://www.gao.gov/assets/d17467.pdf.
    \64\ Ibid.
---------------------------------------------------------------------------

    Based on this finding, the GAO recommended that HHS direct the CMS 
Administrator to take the following action: ``Design and implement 
procedures for verifying with IRS (1) household incomes, when attested 
income amounts significantly exceed income amounts reported by IRS or 
other third-party sources, and (2) family sizes.'' To support this 
recommendation, the GAO cited its own testing of 93 applications which 
found 11 applications for individuals residing in States that did not 
expand Medicaid where IRS data provided to CMS during application 
review indicated incomes less than 100 percent of the FPL.\65\ After 
citing these GAO findings and recommendations, we concluded in the 2019 
Payment Notice (83 FR 16986) that, particularly to the extent funds 
paid for APTC cannot be recouped through the tax reconciliation 
process, it is important to ensure these funds are not paid out 
inappropriately in the first instance.
---------------------------------------------------------------------------

    \65\ Ibid. at 37.
---------------------------------------------------------------------------

    Though we cited evidence from the GAO study in the 2019 Payment 
Notice (83 FR 16986), the United States District Court for the District 
of Maryland in City of Columbus, et al. v. Cochran stated that HHS 
``failed to point to any actual or anecdotal evidence indicating fraud 
in the record.'' \66\ The court went on to conclude that ``HHS's 
decision to prioritize a hypothetical risk of fraud over the 
substantiated risk that its decision result in immense administrative 
burdens at best, and a loss of coverage for eligible individuals at 
worst, defies logic.'' We believe the court overlooked the GAO 
recommendation in the rulemaking record which provided a clear legal 
basis for finalizing the rule in the 2019 Payment Notice.
---------------------------------------------------------------------------

    \66\ 523 F. Supp. 3d 731, 762 (D. Md. 2021).
---------------------------------------------------------------------------

    After the court vacated our income verification requirements, we 
reviewed data from the time period before the original income 
verification requirement was implemented from a recent research study, 
and believe that there is data to support that applicants inflated 
their income. A recent study analyzing CMS enrollment data for the 39 
States that used HealthCare.gov between 2015 and 2017 found that many 
people with household incomes too low to qualify for APTC in States 
that did not expand Medicaid have a strong incentive to attest to 
income just above the eligibility threshold to obtain APTC.\67\ While 
the data in the study predates the 2019 Payment Notice (83 FR 16986), 
the study was published in 2024, and identifies vulnerabilities that 
still exist today following the court's vacatur of the income 
verification requirement. The study's authors found far higher numbers 
of enrollees who reported household income just above the income 
threshold in non-Medicaid expansion States versus Medicaid expansion 
States. We believe this data is a strong indicator that increased 
enrollment volume since 2021 has exacerbated the vulnerabilities the 
study identified as existing between 2015 and 2017.
---------------------------------------------------------------------------

    \67\ Hopkins, B.; Banthin, J.; and Minicozzi, A. (2024, Dec. 
19). How Did Take-Up of Marketplace Plans Vary with Price, Income, 
and Gender? American Journal of Health Economics, 1 (11). https://www.journals.uchicago.edu/doi/10.1086/727785.
---------------------------------------------------------------------------

    In addition, the study identified that enrollees attested to very 
precise household incomes that suggested they were aware of the income 
thresholds to gain eligibility for APTC.\68\ This finding is consistent 
with applicants who did not provide their best household income 
estimate but instead provided an estimate to maximize the premium and 
CSR subsidies they receive or were assisted in their applications by 
entities who were aware of these thresholds and who could profit from 
their enrollment. This leads us to believe that while some

[[Page 12965]]

consumers may have difficulty estimating their annual household income 
due to the uncertainty present in low wage work, many consumers are 
intentionally inflating their incomes. The study's authors then 
compared actual enrollment on HealthCare.gov for enrollees who reported 
household income just above the eligibility threshold from $11,760 to 
$12,500 to estimated potential enrollment from Census surveys and found 
actual enrollment was 136 percent higher than the total population of 
potential enrollments.\69\
---------------------------------------------------------------------------

    \68\ Ibid.
    \69\ Ibid.
---------------------------------------------------------------------------

    A more recent analysis of 2024 open enrollment data shows plan 
selections on HealthCare.gov among people ages 19-64 who reported 
household income between 100 percent and 150 percent of the FPL in non-
Medicaid expansion States were 70 percent higher than potential 
enrollments estimated from Census data at that same income level.\70\ 
Based on this mismatch between enrollment and the eligible population, 
this study estimates four to five million people improperly enrolled in 
QHP coverage with APTC in 2024 at a cost of $15 to $20 billion.\71\
---------------------------------------------------------------------------

    \70\ Blase, B.; Gonshorowski, D. (2024, June). The Great 
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
    \71\ Ibid.
---------------------------------------------------------------------------

    As illustrated in Table 2, Federal tax return data also show a 
substantial increase in the percent of returns with APTC that report 
excess APTC at lower household income levels between 2019 and 2022. 
Returns with household incomes above $15,000--just higher than the 
income eligibility threshold for PTC--report largely consistent levels 
of excess APTC returns as a percent of all APTC returns between 2019 
and 2022. However, this percentage jumped for all reported incomes 
below $15,000. This suggests a substantial increase in people who earn 
less than the eligibility threshold for PTC who incorrectly report 
higher incomes and then qualify for APTC.
[GRAPHIC] [TIFF OMITTED] TP19MR25.001

    These data provide substantial evidence that applicants with 
household incomes below the APTC income eligibility threshold are 
strategically inflating their household incomes--or, based on evidence 
described elsewhere in this rule, are getting assistance from agents, 
brokers, or web-brokers who have a financial incentive to misstate 
enrollee income to secure commissions from enrollments of consumers 
who, absent financial assistance, would not enroll--when they apply for 
APTC.\72\ Moreover, we believe the scale of actual enrollments in 
excess of potential enrollments eligible for financial assistance in 
certain States suggests evidence of improper enrollments, some by 
agents and brokers.\73\ In these cases, enrollees may not even know 
they are enrolled, and agents, brokers, and web-brokers strategically 
enroll them at income levels just above the income eligibility 
threshold so they qualify for fully subsidized plans. Enrollees never 
need to pay a premium which would otherwise alert the enrollee to the 
improper enrollment.\74\ Therefore, to strengthen program integrity and 
reduce

[[Page 12966]]

the burden of APTC expenditures on taxpayers, we propose to require all 
Exchanges to generate annual household income inconsistencies in 
certain circumstances when applicants report a household income that is 
greater than the income amount represented by income data returned by 
the IRS and the SSA and current income data sources.
---------------------------------------------------------------------------

    \72\ Blase, B; Kalisz, G. (2024, August). Unpacking The Great 
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/unpacking-the-great-obamacare-enrollment-fraud/.
    \73\ See ibid.
    \74\ For example, from January 2024 through August 2024, CMS 
received 183,553 complaints that consumers were enrolled in coverage 
through an Exchange on the Federal platform without their consent 
(also known as an ``unauthorized enrollment''). Additionally, from 
June 2024 through October 2024, CMS suspended 850 agents and 
brokers' Marketplace Agreements for reasonable suspicion of 
fraudulent or abusive conduct related to unauthorized enrollments or 
unauthorized plan switches. CMS (2024, October). CMS Update on 
Action to Prevent Unauthorized Agent and Broker Marketplace 
Activity. https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity.
---------------------------------------------------------------------------

    Section 155.320(c)(3)(iii)(A) generally requires the Exchange to 
accept a consumer's attestation to projected annual household income 
when the attestation reflects a higher household income than what is 
indicated in data from the IRS and SSA. This approach makes sense from 
a program integrity perspective when both the attestation and data from 
trusted data sources are over 100 percent of the FPL, since an 
attestation that is higher than data from trusted data sources in that 
situation would reflect a lower APTC than would be provided if the 
information from trusted data were used instead. However, where 
electronic data sources reflect income under 100 percent of the FPL, a 
consumer attests to household income between 100 percent of the FPL and 
400 percent of the FPL, and the attested household income exceeds the 
income reflected in trusted data sources by more than some reasonable 
threshold, we believe it would be reasonable, prudent, and even 
necessary in light of the program integrity weaknesses just outlined to 
request additional documentation, since the consumer's attested 
household income could make the consumer eligible for APTC that would 
not be available using income data from electronic data sources. In 
cases where a consumer receives this DMI, but they do legitimately have 
annual household income above 100 percent of the FPL, we believe that 
the existing DMI process and corresponding time frame provides them 
plenty of time and opportunities to confirm their annual household 
income with minimal burden.
    As discussed previously, sections 1411 through 1414 of the ACA 
establish the framework for verifying and determining income 
eligibility for APTC and CSR subsidies. Requiring further documentation 
for verification when there is an income inconsistency between the 
household income provided on the application and the income indicated 
by the IRS and other data sources fits squarely within this statutory 
framework. The statute compels HHS to, at a minimum, submit the income 
information provided by applicants to the IRS for verification without 
exception. Without additional documentation or other supporting 
evidence, HHS would generally be compelled by statute to deny 
eligibility for APTC and CSR subsidies based on the inconsistency with 
IRS data. Importantly, this statutory framework does not include a 
specific exception for income inconsistencies when IRS data indicate 
income is below the APTC eligibility threshold and income information 
provided on applications estimates a higher income above the APTC 
eligibility threshold, and the household income attestation is lower 
than income information from data sources by more than the acceptable 
reasonable threshold. When the IRS cannot verify an applicant's income, 
the statute requires HHS to take additional steps to verify income, 
thus providing HHS clear discretion to use additional trusted data 
sources. To support these verifications, section 1413 of the ACA 
further requires HHS to establish data matching arrangements to verify 
eligibility through reliable, third-party data sources. However, HHS 
has discretion to not require the use of the data matching program if 
its administrative and other costs outweigh its expected gains in 
accuracy, efficiency, and program participation, such as when an 
applicant reports higher household income than reported by trusted data 
sources and both household income amounts are above 100 percent of the 
FPL, illustrating no financial incentive for inflating household 
income. In addition to the program integrity weaknesses discussed 
previously, we believe this statutory framework compels HHS to request 
additional documentation when applicants attest to household income 
above 100 percent of the FPL, but trusted data sources show income 
below 100 percent of the FPL. We request comments on whether adding 
these additional data matching issue requirements will outweigh its 
expected gains as described above.
    Accordingly, we propose to modify Sec.  155.320(c)(3)(iii)(D) and 
(c)(3)(vi)(C)(2) to specify that the Exchange would follow the 
procedures in Sec.  155.315(f)(1) through (4) to create an annual 
income data matching DMI for consumers if: (1) The consumer attested to 
projected annual household income between 100 percent and 400 percent 
of the FPL; (2) the Exchange has data from IRS and SSA that indicates 
household income is below 100 percent of the FPL; (3) the Exchange has 
not assessed or determined the consumer to have income within the 
Medicaid or CHIP eligibility standard; and (4) the consumer's attested 
projected annual household income exceeds the income reflected in the 
data available from electronic data sources by a reasonable threshold 
established by the Exchange and approved by HHS. We propose that a 
reasonable threshold must not be less than 10 percent and can also 
include a threshold dollar amount.\75\ We welcome comments on this 
proposed reasonable threshold, especially comments that furnish data 
that could help us ensure that it is properly calibrated to maximize 
program integrity while minimizing unnecessary administrative burden. 
Additionally, this requirement would not apply if an applicant is a 
non-citizen who is lawfully present and ineligible for Medicaid by 
reason of immigration status. In accordance with the existing process 
in Sec.  155.315(f)(1) through (4), if the applicant fails to provide 
documentation verifying their household income attestation, the 
Exchange would redetermine the applicant's eligibility for APTC and 
CSRs based on available IRS data, which under this proposal would 
typically result in discontinuing APTC and CSR as required in Sec.  
155.320(c)(3)(vi)(G). The adjustment and notification process would 
work like other inconsistency adjustments laid out in Sec.  
155.320(c)(3)(vi)(F). We are also proposing to modify Sec.  
155.320(c)(3)(iii)(A) to add a cross-reference to paragraph Sec.  
155.320(c)(3)(iii)(D).
---------------------------------------------------------------------------

    \75\ This 10 percent threshold aligns with Annual Income 
Threshold Adjustment FAQ guidance which was published on 10/22/21 
here: https://www.cms.gov/cciio/resources/regulations-and-guidance/income-threshold-faq.pdf.
---------------------------------------------------------------------------

    We estimate that answering verification questions and submitting 
supporting documents would take consumers approximately 1 hour. We 
believe such a burden is minimal and is significantly outweighed by the 
benefit of APTCs for those individuals found to be eligible for them as 
well as the benefits of reducing improper enrollment. Additionally, 
even if consumers end up needing longer than the 1-hour estimation due 
to difficulty in obtaining documentation that may be present, we 
believe that the 90-day period given to resolve this DMI gives them 
enough time, and if a consumer ends up needing more time, they are able 
to request an extension in certain circumstances.
    Finally, the statute compels HHS to verify household incomes with 
the IRS data and directs HHS and Exchanges to take further steps to 
verify income if the applicant's estimated household income is 
inconsistent with the IRS data. While HHS does have some discretion to 
use other third-party data sources for verification, we believe the 
critical program integrity benefits to Federal

[[Page 12967]]

taxpayers from limiting opportunities for people to inflate their 
income to qualify for APTC substantially exceeds the potential burden 
on some applicants. We also believe this proposal would also help limit 
tax filers' potential liability at tax reconciliation to repay excess 
APTC.
    We seek comment on this proposal.

d. Income Verification When Tax Data Is Unavailable (Sec.  
155.320(c)(5))

    We propose to remove Sec.  155.320(c)(5), which requires Exchanges 
to accept an applicant's or enrollee's self-attestation of projected 
annual household income when the Exchange requests tax return data from 
the IRS to verify attested projected annual household income, but the 
IRS confirms there is no such tax return data available. This 
requirement currently operates as an exception to the requirement to 
verify household income with other trusted data sources under Sec.  
155.320(c)(1)(ii) and the alternative verification process under Sec.  
155.320(c)(3)(vi). These provisions generally require that, in the 
event the IRS and other trusted data sources cannot resolve a DMI, 
applicants must submit documentary evidence or otherwise resolve the 
DMI with the inconsistent information source. Therefore, by removing 
this exception, this proposal would require Exchanges to verify 
household income with other trusted data sources when tax return data 
is unavailable and follow the full alternative verification process.
    As we detailed previously in this preamble, there is a growing body 
of evidence that shows a substantial number of improper enrollments on 
the Exchanges. Some agents, brokers, and web-brokers and applicants are 
taking advantage of weaknesses in the Exchanges' eligibility framework 
to enroll consumers in coverage with APTC subsidies without their 
knowledge and when consumers are not eligible. We believe the recent 
change in the 2024 Payment Notice (88 FR 25818 through 25820) to allow 
applicants to self-attest to income when IRS data is unavailable played 
a key role in weakening the Exchange eligibility system.
    We made the change to accept attestation when HHS successfully 
contacted the IRS but IRS data was unavailable because we believed that 
the standard alternative verification process was overly punitive to 
consumers and burdensome to Exchanges when IRS data is unavailable. To 
explain the punishing aspects of the prior alternative verification 
process, we itemized the legitimate reasons for a tax return to be 
unavailable aside from a consumer's failure to file a tax return, 
including tax household composition changes (such as birth, marriage, 
and divorce), name changes, or other demographic updates or mismatches. 
We then concluded the consequence of receiving an income DMI and being 
unable to provide sufficient documentation to verify projected 
household income outweighs program integrity risks as, under Sec.  
155.320(c)(3)(vi)(G), consumers are determined completely ineligible 
for APTC and CSRs.
    After revisiting this issue, we no longer believe the prior 
alternative verification process was overly punitive. Our use of the 
term punitive to characterize the process improperly suggests the 
process involved a punishment when the process solely involved 
establishing eligibility to receive a government benefit and did not 
involve a judgment to mete out consequences for bad behavior. Instead, 
the process focused on ensuring that applicants are eligible for APTC 
to both protect against making improper payments and to protect the 
applicant from accumulating unnecessary tax liabilities. As we reassess 
the current verification process, we note that the existence of 
legitimate reasons for tax return data to be unavailable does not 
diminish the need to have an accurate estimate of income. As discussed 
previously, an accurate household income estimate is a critical program 
integrity element of the ACA's framework for verifying and determining 
eligibility for APTC.
    In making our reassessment, we investigated the difficulty of 
providing documentation to verify household income and believe eligible 
applicants can meet the requirement with relative ease. People with 
legitimate reasons for not having tax data available like marriage, the 
birth of child, name changes, and other demographic updates would have 
the opportunity to be verified through other trusted data sources. 
However, if other trusted data sources cannot verify the household 
income and applicants must provide documentation, we previously 
estimated (88 FR 25893) that consumers would take 1 hour to submit 
documentation on average. We welcome comments on the accuracy of this 
estimate of administrative burden. We believe eligible applicants would 
likely have documentation to verify their household income as readily 
available to them as the standard tax filer without an income DMI.
    For these people, prior to the implementation of the 2024 Payment 
Notice, we found that half of all resolved income DMIs generated when 
IRS income data was unavailable were resolved within 90 days. 
Therefore, to the extent applicants failed to resolve their income DMI, 
we believe this largely reflects how the prior process successfully 
stopped ineligible people from enrolling.
    Regarding the burden on Exchanges, we previously estimated the 
administrative task under the prior policy accounts for approximately 
300,000 hours of labor annually on the Federal platform. We concluded 
this was proportionally mirrored by State Exchanges, which may also 
access approved State specific data sources to verify income data. We 
expect APTC subsidized enrollment to be lower in the coming years.
    Considering the amount of improper enrollments under the current 
policy, we believe this administrative burden of requiring people with 
an income DMI due to unavailable IRS data to provide documentation to 
verify income is more than offset by the program integrity benefits.
    In addition to the policy concerns mentioned above, we now believe 
this policy violates statutory requirements for verifying income under 
section 1411(d) of the ACA and addressing income inconsistencies under 
section 1411(e)(4)(A) of the ACA. We previously stated that the 
requirements for Exchanges under Sec.  155.320(c)(5) complied with 
section 1411(c)(4)(B) of the ACA and section 1412(b)(2) of the ACA. We 
address our reinterpretation of these statutes below.
    This policy violates the express requirements of section 
1411(e)(4)(A) of the ACA, which establishes a two-step process to 
address income inconsistencies. First, Exchanges must make a reasonable 
effort to identify and address the causes of income inconsistencies, 
including through typographical or other clerical errors, by contacting 
the applicant to confirm the accuracy of the information, and by taking 
such additional actions as the Secretary of HHS (the Secretary), 
through regulation or other guidance, may identify. Second, if step one 
does not resolve the inconsistency, the Exchange must notify the 
applicant of such fact and provide the applicant an opportunity to 
present documentary evidence or resolve the inconsistency with the 
source of the DMI during the 90-day period after the notice is sent.
    We implemented the requirements of section 1411(e)(4)(A) of the ACA 
at Sec.  155.315(f)(1) through (4). When tax return data and other 
trusted data sources are unavailable, Sec.  155.320(c)(3)(vi) directs 
Exchanges to

[[Page 12968]]

follow this process. There is no statutory exception to this process. 
Nonetheless, Sec.  155.320(c)(5) requires Exchanges to accept 
attestation without further verification when tax return data is 
unavailable, which restricts Exchanges from following the statutorily 
required process established under Sec.  155.315(f)(1) through (4). We 
believe restricting Exchanges from using the process under Sec.  
155.315(f)(1) through (4) violates section 1411(e)(4)(A) of the ACA.
    We also believe our previous statutory justifications for the 
current policy were mistaken. Previously, we stated the policy was 
consistent with two statutory provisions: the flexibility under section 
1411(c)(4)(B) of the ACA to modify methods for verification of the 
information where we determine such modifications will reduce the 
administrative costs and burdens on the applicant and section 
1412(b)(2) of the ACA, which allows the Exchange to utilize alternate 
verification procedures. After reviewing the statute, we no longer 
believe the current policy is consistent with either of these statutory 
provisions.
    Regarding section 1411(c)(4)(B) of the ACA, this provision gives 
HHS the authority to modify the methods used for the exchange and 
verification of information. While we previously suggested this 
provision gave HHS broad flexibility to modify any aspect of the 
verification process under section 1411 of the ACA, we believe Congress 
would have made a clearer statement if the intent were to grant such 
broad flexibility. Rather, section 1411(c)(4)(B) provides flexibility 
to ``modify the methods used under the program established by this 
section for the Exchange and verification of information,'' (emphasis 
added) which, based on the language and the surrounding context, 
suggests the flexibility relates only to the methods used to exchange 
and verify information between HHS and trusted data sources.
    Looking closer at the statutory language, a footnote included in 
the statute as published by the U.S. Government Publishing Office 
explains how the word Exchange in the text ``[p]robably should not be 
capitalized.'' \76\ We believe this is the correct reading, which then 
strongly suggests Congress intended to limit modifications to how 
information is exchanged and verified between HHS and trusted data 
sources. The use of the term ``modify'' supports this more limited 
reading. As the U.S. Supreme Court has explained, the word modify means 
``to change moderately or in minor fashion'' \77\ and ``connotes 
moderate change.'' \78\ Reading section 1411(c)(4)(B) of the ACA to 
allow HHS to suspend the verification process entirely under certain 
circumstances, as Sec.  155.320(c)(5) permits, would allow a more 
dramatic change to the verification process than the term ``modify'' 
permits. This more modest reading is supported by how section 1411 of 
the ACA appends this flexibility at the end of paragraph (c) which 
addresses the verification of information contained in records of 
specific Federal officials, including HHS under paragraph (d). Placing 
the flexibility here strongly suggests this flexibility is directly 
tied to the exchange and verification of information from the IRS, DHS, 
SSA, and other sources HHS relies on under paragraph (d). This reading 
is further strengthened by the statute's addition of a specific example 
of the flexibility envisioned which focuses on modifying how the IRS 
can provide income information under section 1411(c)(3) of the ACA.\79\ 
Because the flexibility under section 1411(c)(4)(B) of the ACA is 
limited to modifications to how information is exchanged and verified 
between HHS and trusted data sources, this flexibility does not extend 
to other aspects of the verification process. In addition, it does not 
provide flexibility to create exceptions to the requirement to verify 
the accuracy of information.
---------------------------------------------------------------------------

    \76\ Note 2 at 42 U.S.C. 18081(c)(4)(B). https://www.govinfo.gov/content/pkg/USCODE-2022-title42/html/USCODE-2022-title42-chap157-subchapIV-partB-sec18081.htm#18081_2_target.
    \77\ Biden v. Nebraska, 600 U.S. 477, 494 (2023).
    \78\ MCI Telecommunications v. AT&T, 512 U.S. 218 (1994) 
(holding the Federal Communications Commission's decision to make 
tariff filing optional for all nondominant long-distance carriers is 
not a valid exercise of its authority to ``modify any requirement'' 
of 47 U.S.C. 203).
    \79\ Presumption of Nonexclusive `Include' '':587 ``[T]he term 
`including' is not one of all-embracing definition, but connotes 
simply an illustrative application of the general principle.''
---------------------------------------------------------------------------

    Similarly, the flexibility to utilize alternative verification 
procedures under section 1412(b)(2) of the ACA when tax return 
information is not available does not change or allow exceptions to the 
basic requirement to verify the accuracy of the income information. We 
previously stated the language in section 1412(b)(2) of the ACA 
included permissive language that allowed the Exchange to utilize 
alternative verification processes when an applicant was not required 
to file a tax return. However, section 1412(b)(2) of ACA is not 
permissive and does not directly reference the alternative verification 
process. Rather, this provision mandates HHS to provide procedures for 
making advance determinations of income eligibility for premium and 
cost-sharing subsidies on the basis of information other than income 
information from the most recent tax year for which the IRS has 
information in cases where the application demonstrates substantial 
changes in income, including cases where an applicant was not required 
to file a tax return. This advanced determination program is 
coordinated with the income eligibility determination and verification 
program in section 1411 of the ACA. To comply with the application 
requirements to determine eligibility for premium and cost sharing 
subsidies under section 1411(b)(3)(C) of the ACA, applicants must 
report any additional information required for advance determination 
under section 1412(b)(2) of the ACA. As such, section 1412(b)(2) of the 
ACA adds to the requirements of section 1411 of the ACA and does not 
provide any additional flexibility to HHS.
    Importantly, section 1412(b)(2) of the ACA puts HHS in charge of 
establishing the procedures for determining APTC when there is a change 
in circumstances or no tax return information. This makes sense 
considering IRS data is limited to the taxes previously filed which 
clearly does not help when there is no tax filing. Verifying any change 
in circumstance beyond the deviation from previous tax filings also 
requires access to additional income information sources. Therefore, 
the ACA makes HHS responsible for verifying information not verified by 
other Federal agencies and establishing the data matching program under 
section 1413 of the ACA. The eligibility verification and determination 
framework established under sections 1411 through 1414 of the ACA 
clearly envisions HHS building out a robust process for verifying and 
determining eligibility for APTC. Under this framework, we do not 
believe section 1412(b)(2) of the ACA can be read to permit blanket 
exceptions across this framework.
    Because sections 1411(c)(4)(B) and 1412(b)(2) of the ACA do not 
provide HHS with flexibility to change the overall framework for 
verifying and determining eligibility for APTC, we do not believe the 
statute authorizes HHS to provide exceptions to the statutory process 
for resolving income inconsistencies with trusted data sources.
    Therefore, to strengthen the program integrity of the eligibility 
determination process for APTC, we propose to remove Sec.  
155.320(c)(5).
    We seek comment on this proposal.

[[Page 12969]]

4. Annual Eligibility Redetermination (Sec.  155.335)
    We propose an amendment to the annual eligibility redetermination 
regulation by adding Sec.  155.335(a)(3) and (n) to prevent enrollees 
from being automatically re-enrolled in coverage with APTC that fully 
covers their premium without taking an action to confirm their 
eligibility information. Specifically, we propose under our authority 
in section 1411(f)(1)(B) of the ACA, which directs the Secretary to 
establish procedures by which the Secretary redetermines eligibility on 
a periodic basis, to require at Sec.  155.335(a)(3) and (n) that when 
an enrollee does not submit an application for an updated eligibility 
determination on or before the last day to select a plan for January 1 
coverage, in accordance with the effective dates specified in Sec.  
155.410(f) and 155.420(b), as applicable, and the enrollee's portion of 
the premium for the entire policy would be zero dollars after 
application of APTC through the Exchange's annual redetermination 
process (hereafter ``fully subsidized enrollees'' for purposes of this 
section), all Exchanges must decrease the amount of the APTC applied to 
the policy such that the remaining monthly premium owed by the enrollee 
for the entire policy equals $5 for the first month and for every 
following month that the enrollee does not confirm or update the 
eligibility determination. Consistent with Sec. Sec.  155.310(c) and 
(f), enrollees automatically re-enrolled with a $5 monthly premium 
after APTC under this policy would be able to submit an application at 
any point to confirm eligibility for APTC that covers the entire 
monthly premium, and re-confirm their plan to thereby reinstate the 
full amount of APTC for which the enrollee is eligible on a prospective 
basis.
    We propose at new Sec.  155.335(n)(1) that the FFEs and the SBE-FPs 
must implement this change starting with annual redeterminations for 
benefit year 2026. We propose at new Sec.  155.335(n)(2) that the State 
Exchanges must implement it starting with annual redeterminations for 
benefit year 2027.
    We recognize that $5 may not provide a meaningful enough incentive 
for individuals to re-confirm their income and plan and, as such, seek 
comment on other options available to us to ensure program integrity in 
re-enrollments. As discussed in the preamble, we are increasingly 
concerned about the level of improper enrollments in QHPs and believe 
that automatic re-enrollment of consumers into zero premium plans poses 
a significant risk to continuing high levels of improper payments of 
the APTC. We seek comment on the appropriate dollar amount individuals 
could be required to pay under the proposed policy such that they would 
be meaningfully incentivized to re-confirm their income and desired 
plan after being automatically re-enrolled. We also seek comment on 
whether any APTC payments should be made on behalf of individuals with 
fully subsidized plans who have been automatically re-enrolled without 
confirming their plan and income consistent with the limitation on 
annual redeterminations when an Exchange does not have authorization to 
obtain tax data as part of the redetermination process. Additionally, 
we seek comment on if the program integrity concerns with automatic re-
enrollments outweigh any potential benefit of allowing exchanges to 
automatically re-enroll consumers without the consumer taking any 
action to affirmatively consent to continuing coverage for the 
following plan year.
    Previously in this preamble, we discussed the dramatic increase in 
the number of improper enrollments in QHPs with APTC through the FFEs 
and SBE-FPs. Among the most concerning problems are situations where an 
agent, broker, or web-broker improperly enrolls a consumer in a fully 
subsidized QHP without their knowledge. Because these enrollees do not 
receive a monthly premium bill requiring action on their part, they may 
not be aware they are enrolled. This lack of awareness allows agents, 
brokers, and web-brokers to continue earning monthly commission 
payments from issuers for these enrollments. Improper enrollments 
presents the most concerning situation, but the availability of fully 
subsidized QHPs that require no action on the part of enrollees also 
leads to situations where enrollees inadvertently and improperly remain 
enrolled after obtaining other coverage. As a result of either of these 
scenarios, the enrollee is at risk of accumulating surprise tax 
liabilities and the financial stress of resolving these liabilities. 
Ultimately, the financial cost of consumers unknowingly or 
inadvertently remaining enrolled in fully subsidized QHPs would fall 
almost entirely on the Federal Government as Federal law limits 
repayments of the premium tax credit for certain consumers,\80\ and the 
Federal Government only recoups APTC payments from issuers for 
enrollments that are cancelled after a consumer or other third party, 
such as an issuer, discovers an improper enrollment and reports it to 
the Exchanges.
---------------------------------------------------------------------------

    \80\ Section 1401 of the ACA; Sec. 36B(f)(2)(B) of the Code.
---------------------------------------------------------------------------

    The expansion of tax credits under the American Rescue Plan of 2021 
(ARP) \81\ and Inflation Reduction Act of 2022 (IRA),\82\ significantly 
increased the number of enrollees who initially enrolled in a fully 
subsidized QHP. As a result, this significantly increased the number of 
enrollees who remained enrolled in fully subsidized QHPs through the 
automatic re-enrollment process. For the Exchanges on the Federal 
platform, 2.68 million enrollees were automatically re-enrolled for 
benefit year 2025 with APTC that fully covered their premium, compared 
to 270,000 for benefit year 2019 (84 FR 229). The enhanced tax credits 
are set to expire at the end of benefit year 2025, which means there 
will be fewer enrollees who initially enroll in a fully subsidized QHP 
and fewer enrollees who remain enrolled in fully subsidized QHPs 
through the automatic re-enrollment process. However, fully subsidized 
QHPs became available before enhanced tax credits were passed into law 
and will continue to be available to some consumers after the 
expiration of the enhanced tax credits. As discussed earlier in 
preamble, in 2018, issuers began increasing silver plan premiums to 
compensate for the cost of offering CSRs. In 2020, 900,000 consumers 
were enrolled in fully subsidized bronze plans (89 FR 26321). 
Additionally, in 2020, 77 percent of the consumer population with 
household incomes at or below 150 percent of the FPL had access to a 
fully subsidized bronze plan with 16 percent of the same population 
having access to a fully subsidized silver plan in addition to the 
fully subsidized bronze plan (89 FR 26321).
---------------------------------------------------------------------------

    \81\ Public Law 117-2.
    \82\ Public Law 117-169.
---------------------------------------------------------------------------

    We believe the expanded availability of fully subsidized QHPs due 
to silver loading creates a need for more active engagement during the 
annual redetermination and re-enrollment process by enrollees who do 
not pay monthly premiums in order to ensure the coverage is authorized 
and desired by the enrollee. To address this issue, we believe it is 
important to require enrollees who are redetermined to be eligible for 
APTC that fully subsidizes their premium to take an active step to 
confirm their eligibility information before continuing with fully 
subsidized coverage. We believe that the changes proposed here are 
critical to reduce the financial impact to consumers and to the Federal 
Government of the

[[Page 12970]]

substantial increase in people who are improperly enrolled without 
their knowledge by an agent, broker, or web-broker on the FFEs and SBE-
FPs and are then automatically re-enrolled, also without their consent; 
or who intentionally enrolled through any Exchange but then did not 
update their eligibility prior to re-enrollment and so have an 
incorrect amount of APTC paid on their behalf. We believe the current 
annual redetermination process puts fully subsidized enrollees at risk 
of accumulating surprise tax liabilities and increases the cost of PTC 
to the Federal Government because the law limits how much of the excess 
APTC they are required to repay.\83\
---------------------------------------------------------------------------

    \83\ Section 1401 of the ACA; Sec. 36B(f)(2)(B) of the Code.
---------------------------------------------------------------------------

    In the 2021 Payment Notice proposed rule (85 FR 7088), we sought 
comment on a proposal to modify the automatic re-enrollment process 
such that any enrollee who would be automatically re-enrolled with APTC 
that would cover the enrollee's entire premium would instead be 
automatically re-enrolled without APTC. This would ensure that any 
enrollee in this situation would need to return to the Exchange and 
obtain an updated eligibility determination prior to having any APTC 
paid on the consumer's behalf for the upcoming benefit year. We also 
requested comments on a variation on this approach, in which APTC for 
this population would be reduced to a level that would result in an 
enrollee premium that is greater than zero dollars but not eliminated 
entirely. Both approaches elicit, to varying degrees, a consumer's 
active involvement in re-enrollment because any enrollment in a plan 
with an enrollee premium that is greater than zero would require the 
enrollee to take an action by making a premium payment to maintain 
coverage or else face eventual termination of coverage for non-payment.
    All but one commenter opposed modifying the automatic re-enrollment 
process in these ways. Many believed that adopting the proposed changes 
could disadvantage the lowest income group of Exchange enrollees by 
taking away financial assistance for which they are eligible without 
evidence that they are at greater risk of incurring overpayments of 
APTC. Some commenters were specifically opposed to any requirement that 
State Exchanges modify their automatic re-enrollment processes because 
it would require costly IT system reconfigurations, consumer noticing 
changes, and additional investments to support increased Exchange 
customer service capacity that would be necessary to address consumer 
confusion caused by the change.
    Most commenters supported the current automatic re-enrollment 
process, citing benefits such as the stabilization of the risk pool due 
to the retention of lower risk enrollees who are least likely to 
actively re-enroll, the increased efficiencies and reduced 
administrative costs for issuers, the reduction of the numbers of 
uninsured, lower premiums, and promotion of continuity of coverage. 
Many commenters also believed that existing processes, including annual 
eligibility redetermination, periodic data matching, and APTC 
reconciliation, sufficiently safeguard against potential eligibility 
errors and increased Federal spending. As a result, we did not finalize 
any changes to the automatic re-enrollment process in the 2021 Payment 
Notice (85 FR 29164), citing our belief that existing safeguards 
against APTC overpayments were sufficient.
    Given the heightened urgency of program integrity concerns with 
APTC and automatic re-enrollments, as previously outlined, we seek 
comment on these proposals once again. We also consider whether other 
methods--such as outreach--could sufficiently prompt fully subsidized 
enrollees to update or confirm their eligibility information and 
actively re-enroll in coverage. Current outreach methods for the FFEs 
and SBE-FPs, such as notices, emails, texts, and advertising, before 
and during the open enrollment period are extensive and already 
successfully prompt most enrollees to actively confirm or update their 
information and actively select a plan. Most enrollees on the FFEs and 
the SBE-FPs actively re-enroll by the applicable deadlines for January 
1 coverage. Based on our experience operating the Exchanges on the 
Federal platform, we do not believe additional or different 
notifications would prompt action from fully subsidized enrollees who 
choose not to submit an application for an updated eligibility 
determination and actively re-enroll. However, we seek comment on this 
idea.
    Instead, we believe that it is necessary to prompt an affirmative 
action by enrollees who would otherwise be fully subsidized through the 
automatic re-enrollment process, whether such action be through a 
premium payment or re-confirming their plan choice altogether. We are 
again considering whether to automatically re-enroll these enrollees 
without any APTC, which would require them to return to the Exchange 
and obtain an updated eligibility determination prior to having any 
APTC paid on their behalf for the upcoming year, or else be charged for 
the full-price premium during automatic re-enrollment. As described in 
this proposed rule, we propose to permit issuers to attribute past-due 
premium amounts they are owed to the initial premium the enrollee pays 
to effectuate new coverage. Removing all APTC during automatic re-
enrollment for fully subsidized enrollees is likely to create a 
significant debt to the issuer, since the enrollee is unlikely to be 
able to pay the full gross premium, which would harm the enrollee 
financially and could impact their ability to effectuate new QHP 
coverage. We therefore believe that this approach would create undue 
financial hardship for these enrollees and act as a significant barrier 
to accessing health coverage. We also believe this approach could 
result in the loss of lower-risk enrollees, who are least likely to 
actively re-enroll due to an inability to pay, which could destabilize 
the market risk pool and increase premiums and the uninsured rate. We 
seek comment on this idea and whether it would more sufficiently 
mitigate the program integrity concerns we have described.
    We then considered what enrollee portion of premium amount greater 
than zero but less than the full price of the QHP would avoid consumer 
harm but still achieve active participation by the enrollee. We are 
proposing an amount of $5, which we believe would sufficiently balance 
the need to require an enrollee to take action, without substantially 
increasing the risk of undue financial hardship, such as termination 
for non-payment of premiums, that a greater amount could cause.
    Additionally, we believe that the $5 would still achieve the 
desired effect of requiring an enrollee's active participation even if 
their issuer has adopted a net percentage-based premium payment 
threshold, under which enrollees must always pay at least 95 percent of 
the enrollee-responsible portion of the premium. If issuers adopt such 
a threshold, enrollees who have a $5 premium payment due to this 
amendment to the annual redetermination process would be required to 
pay at least $4.75 or else be placed in a grace period.
    We believe our proposal, which decreases the amount of the APTC 
applied to the policy such that the remaining premium owed by the 
enrollee for the entire policy equals $5, strikes an appropriate 
balance between encouraging active confirmation of eligibility 
information and enrollment decision making and ensuring market 
stability.

[[Page 12971]]

    We seek comment on this proposal. Specifically, we seek comment on 
whether an amount other than $5 would better address the program 
integrity concerns we have described. In addition, we seek comment on 
whether there are different policies or program measures that would 
help to reduce eligibility errors and potential Federal Government 
misspending, without adding additional burden for consumers.
    A comparison of QHP enrollments to estimates of consumer-reported 
QHP enrollments from national health insurance coverage surveys 
strongly suggests there has been a large increase in the number of 
people unknowingly enrolled in subsidized QHPs.\84\ Researchers 
regularly track and study the ``Medicaid undercount'' which represents 
the difference in actual Medicaid enrollments to what people report on 
Census surveys.\85\ This research finds that U.S. Census Bureau surveys 
undercount actual Medicaid enrollments, mostly due to people 
misreporting that they do not have Medicaid, and found an increase in 
the Medicaid undercount between 2019 and 2022. At least part of such 
undercounts may be attributable to consumer misunderstanding when 
responding to surveys--for example a Medicaid enrollee may erroneously 
report not being enrolled in Medicaid due to the enrollee's familiarity 
with the program under a different, State-specific name (for example, 
Medicaid is called DenaliCare in the State of Alaska). We undertook a 
similar analysis to assess whether there is a similar undercount for 
subsidized coverage through the Exchanges. The comparison of actual 
subsidized QHP enrollments to QHP enrollments reported on Census 
surveys confirms this undercount exists and has grown substantially 
since 2021. As Table 3 shows, the Current Population Survey (CPS) 
undercount for enrollment in a QHP with APTC grew from 25 percent in 
2021 to 50 percent in 2024. The undercount is even larger for consumers 
with incomes less than 250 percent of FPL who likely qualify for CSRs. 
The undercount for these consumers grew from 33 percent in 2021 to 57 
percent in 2024.
---------------------------------------------------------------------------

    \85\ See Peter Nelson, What the Medicaid Undercount reveals 
about the Medicaid `Unwinding' (Center of the American Experiment 
May 2024); Robert Hest, Elizabeth Lukanen, and Lynn Blewett, 
Medicaid Undercount Doubles, Likely Tied to Enrollee Misreporting of 
Coverage (SHADAC December 2022), available at https://www.shadac.org/publications/medicaid-undercount-doubles-20-21; State 
Health Access Data Assistance Center, Phase VI Research Results: 
Estimating the Medicaid Undercount in the Medical Expenditure Panel 
Survey Household Component (MEPS-HC) (January 2010), available at 
https://www.shadac.org/publications/snacc-phasevi-report; State 
Health Access Data Assistance Center, Phase IV Research Results: 
Estimating the Medicaid Undercount in the National Health Interview 
Survey (NHIS) and Comparing False-Negative Medicaid Reporting in 
NHIS to the Current Population Survey (CPS) (May 2009), available at 
https://www.shadac.org/publications/snaccphase-iv-report; and State 
Health Access Data Assistance Center, Phase II Research Results: 
Examining Discrepancies between the National Medicaid Statistical 
Information System (MSIS) and the Current Population Survey (CPS) 
Annual Social and Economic Supplement (ASEC) (March 2008), available 
at https://www.shadac.org/publications/snacc-phase-ii-report.
[GRAPHIC] [TIFF OMITTED] TP19MR25.002

    Table 4 draws a similar comparison between the reported level of 
Exchange coverage on the National Health Interview Survey (NHIS) \86\ 
and total effectuated enrollment through the Exchanges. Prior to the 
enhanced PTC becoming law in 2021, the NHIS coverage estimates roughly 
matched the actual effectuated QHP enrollment counts. But in 2022, the 
NHIS undercounted effectuated QHP enrollment through Exchanges by 14.1 
percent. This undercount increased to 19.3 percent in 2023 and edged up 
to 20.2 percent in the first quarter of 2024.
---------------------------------------------------------------------------

    \86\ OMB Control Number 0920-0214.

---------------------------------------------------------------------------

[[Page 12972]]

[GRAPHIC] [TIFF OMITTED] TP19MR25.003

    The research on the Medicaid undercount referenced previously links 
people with Medicaid coverage to their Census survey responses, which 
shows most people who misreport not being enrolled in Medicaid report 
having another form of coverage. Among this group, the largest portion 
reports having employer coverage, followed by Medicare coverage, and 
then Exchange coverage.\87\ Some of these people may have confused 
their Medicaid coverage for Medicare or Exchange coverage. But these 
findings suggest many people who misreport not having Medicaid 
unknowingly retained multiple forms of coverage after assuming they 
lost Medicaid coverage when they enrolled in new private coverage or 
aged into Medicare.
---------------------------------------------------------------------------

    \87\ Blewett, Lynn A. et al. State Health Data Assistance 
Center, (2022, December) Medicaid Undercount Doubles, Likely Tied to 
Enrollee Misreporting of Coverage. Available at: https://www.shadac.org/publications/medicaid-undercount-doubles-20-21.
---------------------------------------------------------------------------

    Similar to the experience with the Medicaid undercount, the 
increase in the undercount of people with APTC-subsidized coverage is 
likely due to the increase in people with multiple forms of coverage. 
CBO estimates that in 2023, approximately 28.7 million people \88\ had 
multiple types of coverage, up from 27.7 million people in 2022 \89\ 
and 18 million in 2021.\90\ Considering that research identifies 
response errors from survey participants as the main reason for the 
Medicaid undercount, it is reasonable to assume the same is true for 
the Exchange undercount. Both Medicaid managed care plans and 
subsidized QHPs can have very low to no premium, can go unused by 
healthier people, can be confused for other types of coverage, and are 
available through the Exchanges. In addition, subsidized QHP enrollees 
tend to share similar characteristics with Medicaid enrollees who 
misreport at higher rates. This includes Medicaid enrollees who are 
adults,\91\ employed,\92\ at higher income levels overlapping with APTC 
income eligibility levels,\93\ and qualify for automatic re-
enrollment.\94\ Therefore, the dramatic increase in the Exchange 
undercount after 2021 in both the CPS and NHIS strongly suggests a 
substantial increase in the number of individuals with subsidized 
Exchange coverage who misreport not having such coverage on surveys. 
People may misreport coverage for various reasons, but the most likely 
reason for the increase in this level of misreporting in 2022 is the 
statutory change in 2021 expanding access to fully subsidized QHPs.\95\ 
Research on the increase in the Medicaid undercount links the increase 
to the Medicaid continuous coverage condition under the COVID-19 PHE 
that kept people unknowingly covered after they obtained other 
coverage.\96\ Similar to the Medicaid continuous coverage condition, 
under the current Exchange annual eligibility redetermination process, 
someone with a fully subsidized QHP can remain continuously enrolled in 
a QHP from year to year.\97\ The 2022 OEP was the first year where 
people with fully

[[Page 12973]]

subsidized QHPs provided under the ARP entered the annual 
redetermination process. Other policy changes and factors may have 
contributed to the dramatic change in the Exchange undercount in 2022. 
However, based on the similar experience with the Medicaid undercount, 
we believe the ARP's expansion of fully subsidized QHP coverage in 
combination with the existing annual eligibility redetermination 
process--a process that does not require active participation from the 
qualified enrollee--further allowed individuals to remain enrolled 
without their knowledge.
---------------------------------------------------------------------------

    \88\ Congressional Budget Office, (2004, June) Health Insurance 
and Its Federal Subsidies: CBO and JCT's June 2024 Baseline 
Projections. Available at: https://www.cbo.gov/system/files/2024-06/51298-2024-06-healthinsurance.pdf.
    \89\ Congressional Budget Office, (2003, May) Health Insurance 
and Its Federal Subsidies: CBO and JCT's May 2023 Baseline 
Projections. Available at: https://www.cbo.gov/system/files/2023-09/51298-2023-09-healthinsurance.pdf.
    \90\ Congressional Budget Office, (2002, May) Federal Subsidies 
for Health Insurance Coverage for People Under Age 65: CBO and JCT's 
May 2022 Baseline Projections. Available at: https://www.cbo.gov/system/files/2022-06/51298-2022-06-healthinsurance.pdf.
    \91\ Davern M, Klerman JA, Baugh DK, Call KT, Greenberg GD. An 
examination of the Medicaid undercount in the current population 
survey: preliminary results from record linking. Health Serv Res. 
2009 Jun;44(3):965-87. doi: 10.1111/j.1475-6773.2008.00941.x. Epub 
2009 Jan 28. PMID: 19187185; PMCID: PMC2699917. Available at: 
https://pmc.ncbi.nlm.nih.gov/articles/PMC2699917/ /PMC2699917/.
    \92\ Boudreaux MH, Call KT, Turner J, Fried B, O'Hara B. 
Measurement Error in Public Health Insurance Reporting in the 
American Community Survey: Evidence from Record Linkage. Health Serv 
Res. 2015 Dec;50(6):1973-95. doi: 10.1111/1475-6773.12308. Epub 2015 
Apr 12. PMID: 25865628; PMCID: PMC4693849. Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC4693849/.
    \93\ Davern M, Klerman JA, Baugh DK, Call KT, Greenberg GD. An 
examination of the Medicaid undercount in the current population 
survey: preliminary results from record linking. Health Serv Res. 
2009 Jun;44(3):965-87. doi: 10.1111/j.1475-6773.2008.00941.x. Epub 
2009 Jan 28. PMID: 19187185; PMCID: PMC2699917. Available at: 
https://pmc.ncbi.nlm.nih.gov/articles/PMC2699917/ /PMC2699917/; and Boudreaux 
MH, Call KT, Turner J, Fried B, O'Hara B. Measurement Error in 
Public Health Insurance Reporting in the American Community Survey: 
Evidence from Record Linkage. Health Serv Res. 2015 Dec;50(6):1973-
95. doi: 10.1111/1475-6773.12308. Epub 2015 Apr 12. PMID: 25865628; 
PMCID: PMC4693849. Available at: https://pmc.ncbi.nlm.nih.gov/articles/PMC4693849/.
    \94\ Kincheloe, Jennifer, et al. Health Affairs (2006), 
GrantWatch: Report Can We Trust Population Surveys To Count Medicaid 
Enrollees And The Uninsured? Volume 25, Number 4. Available at: 
https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.25.4.1163.
    \95\ Pub. L. 117-2.
    \96\ Robert Hest, Elizabeth Lukanen, and Lynn Blewett, Medicaid 
Undercount Doubles, Likely Tied to Enrollee Misreporting of Coverage 
(SHADAC December 2022), available at https://www.shadac.org/publications/medicaid-undercount-doubles-20-21.
    \97\ Note that existing procedures under Sec.  155.335 prohibit 
the indefinite continuation of APTC through auto re-enrollment in 
various circumstances, including for tax filers who do not comply 
with the failure to file and reconcile rules or whose authorization 
for the Exchange to obtain tax data from the IRS has expired (which 
is limited to 5 years).
---------------------------------------------------------------------------

    As the data discussed previously shows, individuals with Exchange 
coverage appear increasingly less likely to accurately report their 
coverage in survey data. Recent APTC changes that increased the 
availability of fully subsidized coverage likely enabled more people to 
stay enrolled in Exchange coverage without their knowledge, which is a 
clear program integrity issue. To address this issue, we believe it is 
important to require qualified enrollees who are redetermined to be 
eligible for APTC that fully subsidizes their premium to take an active 
step to confirm their eligibility information before continuing with 
fully subsidized coverage. We seek comment on this proposal.
5. Annual Eligibility Redetermination (Sec.  155.335(j))
    We propose to amend the automatic re-enrollment hierarchy by 
removing Sec.  155.335(j)(4), which currently allows Exchanges to move 
a CSR-eligible enrollee from a bronze QHP and re-enroll them into a 
silver QHP for an upcoming plan year, if a silver QHP is available in 
the same product with the same provider network and with a lower or 
equivalent net premium after the application of APTC as the bronze plan 
into which the enrollee would otherwise have been re-enrolled. In 
effect, this current policy allows Exchanges to terminate an enrollee's 
coverage through a bronze QHP without the enrollee's active 
participation. These proposals would leave in place the requirements 
for Exchanges to take into account network similarity to the enrollee's 
current year plan when re-enrolling enrollees whose current year plans 
are no longer available, but would remove the re-enrollment hierarchy 
standards at Sec.  155.335(j)(4) that require Exchanges to take into 
account differences between the consumer's current plan and new plan in 
situations where the renewal process places a consumer in a different 
plan (88 FR 25822). Accordingly, these amendments would better support 
consumer choice and restrict Exchanges from enrolling consumers in a 
new plan based on factors beyond the retention of the most similar plan 
available. We also propose amendments to Sec.  155.335(j)(1) and (2) to 
conform with the removal of Sec.  155.335(j)(4).
    In the Exchange Establishment Rule (77 FR 18374), we implemented 
standards for annual eligibility redetermination and renewal of 
coverage under Sec.  155.335(j) which required Exchanges to, if an 
enrollee remains eligible for coverage in a QHP upon annual 
redetermination, automatically re-enroll the enrollee in the QHP 
selected the previous year unless the enrollee terminates coverage, 
including termination of coverage in connection with enrollment in a 
different QHP. This rulemaking implemented procedures to redetermine 
the eligibility of individuals on a periodic basis in appropriate 
circumstances as required by section 1411(f)(1)(B) of the ACA.
    We later adopted amendments to Sec.  155.335(j) in the Annual 
Eligibility Redeterminations Rule (79 FR 52998 through 53001) which 
added a re-enrollment hierarchy to address situations where an issuer 
cannot re-enroll an enrollee in the plan they chose the previous year 
because the plan is no longer available. This hierarchy provided a 
structured process for renewal and re-enrollment into a new plan when 
the current plan was no longer available. We designed the process to 
limit the differences between the consumer's current plan and new plan. 
In response to this proposed rule, commenters expressed concern over 
consumers losing access to APTC and CSRs if they are re-enrolled into a 
product outside the Exchange. In response, we affirmed that while the 
guaranteed renewability requirements under section 2703(c) of the PHS 
Act and Sec.  147.106(c) would require the issuer, at the option of the 
individual, to re-enroll a current enrollee in their same product 
outside the Exchange if the issuer stopped offering that product 
through the Exchange but continued to offer it outside of the Exchange, 
issuers would still be subject to the re-enrollment hierarchy with 
regards to an enrollee's on-Exchange coverage and therefore must, 
subject to applicable State law, re-enroll in accordance with the 
hierarchy even if it results in re-enrollment in a plan under a 
different product offered by the same issuer. To harmonize these 
requirements, we stated that an enrollment completed pursuant to the 
re-enrollment hierarchy in Sec.  155.335(j) would be considered a 
renewal of the enrollee's coverage, provided the enrollee also is given 
the option to renew coverage within the consumer's current product 
outside the Exchange. We further noted our intent to evaluate this 
policy and potentially provide future guidance on how an issuer 
continuing to offer an enrollee's product outside the Exchange can 
comply with the guaranteed renewability provisions.
    In the 2017 Payment Notice (81 FR 12270), we amended the hierarchy 
to give Exchanges flexibility to re-enroll consumers into plans of 
other Exchange issuers if the consumer is enrolled in a plan from an 
issuer that does not have another plan available for re-enrollment 
through the Exchange. In the 2024 Payment Notice (88 FR 25821 through 
25822), we further amended the hierarchy and established the ``bronze 
to silver crosswalk policy'' to allow Exchanges to direct re-enrollment 
for enrollees who are eligible for CSRs from a bronze QHP to a silver 
QHP if a silver QHP is available within the same product, with the same 
provider network, and with a lower or equivalent premium after the 
application of APTC as the bronze level QHP into which the Exchange 
would otherwise re-enroll the enrollee (in other words, if the silver 
QHP has a lower or equivalent ``net premium''). In effect, this change 
allowed Exchanges to terminate an enrollee's coverage in a bronze QHP 
and re-enroll them in a silver QHP. We made this change after 
concluding the bronze to silver crosswalk would help to ensure that 
additional enrollees are able to benefit from more generous coverage at 
a lower cost to the enrollee that provides the same benefits and 
provider network. Some commenters on this rule (88 FR 25823) expressed 
concerns that re-enrolling a consumer into an alternative QHP when the 
consumer's current plan remains available on the Exchange would violate 
the guaranteed renewability requirements with which issuers must 
comply. In response, we explained in the 2024 Payment Notice (88 FR 
25823 through 25824) how the change is consistent with the explanation 
of the guaranteed renewability requirements in the Annual Eligibility 
Redeterminations Rule discussed previously.
    We have revisited whether the consumer benefits that motivated the 
current requirements at Sec.  155.335(j)(4) continue to outweigh the 
problems we previously acknowledged some consumers would face if the 
Exchange terminated a consumer's prior choice in coverage. In 2024 
Payment Notice proposed rule (87 FR 78206, 78259), we proposed to amend 
Sec.  155.335(j) to

[[Page 12974]]

provide greater financial security to bronze plan enrollees who do not 
actively re-enroll and may not be aware that a more generous silver 
plan at the same or lesser cost may be available with dramatically more 
costs covered by the plan. At the time, we highlighted that some of 
these consumers may have been initially enrolled before the more 
generous APTC became available with the passage of the ARP as extended 
by the IRA,\98\ and may not have been initially income-based CSR-
eligible when they first enrolled, or may have been helped by an agent, 
broker, web-broker, or Navigators who did not adequately explain the 
benefits of silver enrollment for CSR-eligible enrollees. Today, this 
lack of awareness of more generous subsidies due to their newness is no 
longer an issue. We believe consumers and the agents, brokers, web-
brokers, and Navigators who help them are largely aware of the more 
generous subsidies.\99\ Therefore, we believe the consumer awareness 
problem the bronze to silver crosswalk policy aimed to address is 
substantially less today. Moreover, since the enhanced subsidies under 
the IRA expire at the end of this year, this policy's goal of 
increasing consumer awareness of these enhanced subsidies is no longer 
relevant.
---------------------------------------------------------------------------

    \98\ With the passage of the IRA, these enhanced subsidies were 
extended for an additional 3 years (through 2025).
    \99\ For example, see the January 2025 Marketplace 2025 Open 
Enrollment Period Report: National Snapshot (https://www.cms.gov/newsroom/fact-sheets/marketplace-2025-open-enrollment-period-report-national-snapshot-2) and informational materials such as those 
available on HealthCare.gov: https://www.healthcare.gov/more-savings/.
---------------------------------------------------------------------------

    With fewer people benefiting from the policy today, we believe 
there is now a greater harm to enrollees when the Exchange terminates 
an enrollee's enrollment in a bronze QHP which they had previously 
chosen. After we proposed the crosswalk policy currently at Sec.  
155.335(j)(4), as noted in the 2024 Payment Notice (88 FR 25823), 
several commenters expressed concerns about the bronze to silver 
crosswalk proposal. Some commenters expressed concern that the proposal 
would cause consumer confusion, and they cautioned against interpreting 
consumer inaction as indifference. In particular, these commenters 
noted that consumers sometimes research their options and make a 
decision to allow themselves to be auto re-enrolled, without taking 
action on HealthCare.gov. These commenters also noted that consumers 
select plans for many reasons other than the monthly premium amount, 
including provider network, benefit structure, and health savings 
account (HSA) eligibility, and raised the concern that auto re-
enrolling some consumers from a bronze plan to a silver plan would 
disregard these consumer priorities. Some commenters also expressed 
concern that consumers who are auto re-enrolled into a silver plan 
could incur unexpected tax liability, including consumers aware of 
their auto re-enrollment, if their APTC amount was determined based on 
inaccurate household income for the future year, which is a particular 
risk for hourly workers.
    We explained in the 2024 Payment Notice (88 FR 25824) that 
consumers auto re-enrolled from a bronze to a silver QHP because of 
this new policy would not experience network changes or benefit changes 
because of the policy, since Sec.  155.335(j)(5) only permits Exchanges 
to apply the policy for consumers who have access to a silver plan in 
the same product and with a Provider Network ID that matches that of 
their future year bronze plan. However, considering there is now 
substantially more consumer awareness around the availability of more 
generous subsidies, we believe the concerns commenters expressed over 
creating consumer confusion, respecting consumer choice, and the 
potential for enrollees to incur unexpected tax liability outweigh the 
benefits of moving from bronze to silver plans enrollees who may not be 
aware that the silver plan provides lower cost sharing at the same or 
lesser premium.\100\ Moreover, we acknowledge how the current rule 
terminates coverage that the consumer may have actively chosen, or, if 
they were auto re-enrolled into the plan, may reasonably expect to be 
auto re-enrolled into it again, which represents a major intervention 
and interference with the consumer experience. We believe this level of 
interference requires a stronger policy basis than we previously 
acknowledged. We agree with commenters on the 2024 Payment Notice (88 
FR 25823) who raised the concern that consumers should be able to rely 
on an assumption that the Exchange will re-enroll them in the same plan 
as the enrollee's current QHP if it is still available through the 
Exchange, and who advocated for HHS to improve decision-making tools on 
HealthCare.gov instead of changing consumers' default plan selections. 
Providing consumers with the information they need to make informed 
choices, and then honoring consumer choices, is a matter of trust. We 
believe the current requirements unnecessarily risks undermining this 
trust, and we will continue to explore and work to improve upon 
strategies that help consumers to make decisions that are best for 
themselves and their families based on their financial situations and 
health care needs.
---------------------------------------------------------------------------

    \100\ As discussed in the 2024 Payment Notice, enrollees who 
were auto re-enrolled from a bronze to a silver QHP under Sec.  
155.335(j)(4) could incur unexpected tax liability if their APTC 
amount was determined based on inaccurate household income for the 
future year, either because an enrollee did not update their 
household income in advance of the new plan year or because they 
estimated their income incorrectly. An enrollee in bronze coverage 
who does not need to use the entire amount of the APTC for which 
they qualify towards their premiums during the year has some 
protection against tax liability in the event of an unexpected 
increase in household income, and they may have a larger tax 
liability upon tax filing if the APTC they apply to a monthly silver 
plan premium is greater than the amount they would have had to apply 
to a monthly bronze plan premium, and this APTC exceeds the PTC 
amount for which they ultimately qualify when they file their taxes.
---------------------------------------------------------------------------

    Because we believe Sec.  155.335(j)(4) unnecessarily risks harming 
the consumer experience without sufficient benefit, we propose to 
remove Sec.  155.335(j)(4).
    We seek comment on this proposal.
6. Premium Payment Threshold (Sec.  155.400)
    We propose to modify Sec.  155.400(g) to remove paragraphs (2) and 
(3), which establish an option for issuers to implement a fixed dollar 
and gross percentage-based premium payment threshold (if the issuer has 
not also adopted a net percentage-based premium threshold), and modify 
155.400(g) to reflect the removal of paragraphs (2) and (3). Under 
these provisions, issuers on the Exchanges can implement (1) a 
percentage-based premium payment threshold policy; and (2) a fixed-
dollar premium payment threshold policy. However, to preserve the 
integrity of the Exchanges, we believe it is important to ensure that 
enrollees do not remain enrolled in coverage for extended periods of 
time without paying at least some of the premium owed, and therefore 
propose to limit issuers to the net percentage-based premium payment 
threshold established in the 2017 Payment Notice (81 FR 12271), and 
modified in the 2026 Payment Notice (90 FR 4475 through 4478) to allow 
issuers to set at 95 percent of the net premium or higher.
    In the 2026 Payment Notice (90 FR 4475 through 4478), we 
implemented an option for issuers to establish a fixed-dollar premium 
payment threshold policy, under which issuers can consider enrollees to 
have paid all amounts due during the following circumstance: the 
enrollees pay an amount that is less than the total premium owed and 
the unpaid remainder of which is equal to or less

[[Page 12975]]

than a fixed-dollar amount of $10 or less, adjusted for inflation, as 
prescribed by the issuer. In addition, we implemented a gross 
percentage-based premium payment threshold policy, under which issuers 
can consider enrollees to have paid all amounts due when the enrollee 
pays an amount that is equal to or greater than 98 percent of the gross 
premium, including payments of APTC, as prescribed by the issuer. If an 
enrollee satisfies the fixed-dollar or gross percentage-based premium 
payment threshold policy, the issuer may avoid triggering a grace 
period for non-payment of premium or avoid terminating the enrollment 
for non-payment of premium. However, these premium payment thresholds 
may not be applied to the binder payment.
    In the 2017 Payment Notice (81 FR 12271 through 12272), in which 
HHS established the option for issuers to implement a percentage-based 
premium payment threshold, we received a comment requesting that 
issuers be allowed to establish a flat dollar amount threshold. At that 
time, we stated that we did not consider implementing such a threshold 
because there may be cases in which even a low flat dollar amount may 
represent a large percentage of an enrollee's portion of the premium 
less APTC (81 FR 12272).
    In the 2026 Payment Notice (90 FR 4478), we stated that it was 
important to give issuers additional flexibility to maintain coverage 
for enrollees who owe only de minimis amounts of premium. In addition, 
we also stated that even though the fixed dollar threshold amount may 
represent a large percentage of an enrollee's portion of the premium 
less APTC, triggering a grace period or terminating enrollment through 
the Exchange was too severe a consequence for non-payment of such 
limited dollar amounts.
    Since the publication of the 2026 Payment Notice (90 FR 4478), the 
open enrollment period for 2025 individual market coverage has ended 
and we have compiled data regarding enrollments effectuated during the 
open enrollment period. Those data reflect a continuing increase in 
improper enrollments on the Exchanges. For example, in December 2024 
HHS received 7,134 consumer complaints of improper enrollments, an 
increase from the 5,032 complaints received in December 2023.Although 
these numbers represent a decrease from the high of 39,985 complaints 
received in February 2024,\101\ the fact that the number of complaints 
for 2024 remains substantially higher than for 2023 demonstrates that 
previous program integrity measures \102\ have not resulted in a 
decrease in improper enrollments such that additional measures are not 
necessary. This has caused us to reconsider the need for additional 
program integrity measures, as reflected throughout this proposed rule, 
and in particular whether the new premium threshold provisions 
appropriately safeguard program integrity and whether the value of the 
new premium threshold provisions outweighs the potential harms to 
program integrity. Given the increased need to protect program 
integrity reflected in the enrollment data, and the limited probability 
that any issuer has implemented one of the new types of available 
premium threshold policies, we believe the burden of eliminating these 
policies on issuers and consumers is outweighed by the potential 
increase in program integrity.
---------------------------------------------------------------------------

    \101\ From internal HHS data, using the most recent numbers 
available. HHS has previously published data on consumer complaints 
of unauthorized enrollments, such as in the update published in 
October 2024. CMS (2024, October). CMS Update on Action to Prevent 
Unauthorized Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity.
    \102\ Measures such as those announced in our update from 
October 2024 on preventing unauthorized agent and broker activity. 
CMS (2024, October). CMS Update on Action to Prevent Unauthorized 
Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity.
---------------------------------------------------------------------------

    Under both the fixed dollar and gross percentage-based thresholds, 
it is possible for enrollees in certain circumstances to avoid paying 
premium for multiple months before entering delinquency or losing 
coverage. For example, an enrollee whose premium after the application 
of APTC was $1 (and where the issuer had adopted a $10 premium 
threshold policy) could, after paying binder, not pay any premium for 
the next 9 months before they would enter delinquency, and due to the 
APTC grace period would not have coverage terminated for an additional 
3 months (though the termination would be effective the last day of the 
first month of grace). In instances where an issuer implemented a gross 
premium threshold of 98 percent, an enrollee's gross premium might be 
$600, making their threshold $12; if the consumer owed $2 after 
application of APTC, they could, after paying binder, not pay any 
premium for the next 6 months before they would enter delinquency, and 
due to the APTC grace period would not have coverage terminated for an 
additional 3 months (though the termination would be effective the last 
day of the first month of grace). This policy therefore increases the 
risk that improper enrollments remain undetected, since the enrollee is 
less likely to receive invoices, and a delinquency \103\ or termination 
notice alerting them to the improper enrollment in the case that the 
individual or entity submitting the improper enrollment used false 
contact information. In addition, an enrollee who stops paying premium 
in the belief that this would lead to termination of coverage may 
instead find that the coverage has continued for several months due to 
the issuer having implemented a fixed dollar or gross percentage-based 
premium threshold, with the additional risk that the enrollee has 
accumulated a large amount of debt if the issuer has adopted a gross 
premium percentage-based threshold and the enrollee's pre-APTC premium 
is much higher than the de minimis $10 fixed dollar threshold. In 
contrast, this is not the case with the long-established net 
percentage-based threshold, under which enrollees must always pay at 
least some premium to avoid delinquency or loss of coverage (in cases 
where the premium is not covered 100 percent by APTC).
---------------------------------------------------------------------------

    \103\ Per Sec.  156.270(f), if an enrollee is delinquent on 
premium payment, the QHP issuer must provide the enrollee with 
notice of such payment delinquency. Issuers offering QHPs in 
Exchanges on the Federal platform must provide such notices promptly 
and without undue delay, within 10 business days of the date the 
issuer should have discovered the delinquency.
---------------------------------------------------------------------------

    We also received and addressed one comment in the 2026 Payment 
Notice (90 FR 4479 through 4480) \104\ that stated that the fixed-
dollar threshold would incentivize improper activity directed at the 
most flexible premium payment threshold policies and that a flexible 
threshold would lead to agents, brokers, or web-brokers leveraging 
these unique carrier-specific policies as a marketing lever. The 
commenter suggested that agents, brokers, or web-brokers would be 
incentivized to enroll consumers in an Exchange plan with a generous 
premium policy threshold (such as the gross premium percentage-based 
threshold), in which the consumer would be less likely to lose coverage 
due to not paying premiums, to secure a commission each time the policy 
is renewed. At the time we disagreed with this statement, as we did not 
believe that the fixed-dollar and gross-premium percentage-based 
thresholds alone would cause an increase in the incidences of improper 
enrollments by agents, brokers, and

[[Page 12976]]

web-brokers, but we do recognize that there is an incentive for agents, 
brokers, or web-brokers to enroll consumers in plans with a generous 
premium policy since they would allow collection of monthly commission 
for a longer period of time. We believed that our efforts in calendar 
year 2024 to implement certain system changes \105\ and strengthen 
oversight of agents and brokers would substantially reduce incidences 
of improper enrollments. However, as noted previously, due to the 
continued high number of complaints of improper enrollments, it has 
become apparent that additional program integrity measures are 
necessary. Given the multiple avenues that some agents and brokers to 
date have taken to improperly enroll consumers in QHPs offered on 
Exchanges, we are now reconsidering the impact that the fixed-dollar 
and gross-premium percentage-based thresholds may have in obscuring 
improper enrollments from the victim of the improper enrollment by 
delaying the time it would take for the consumer to be placed in the 
grace period and informed of their delinquency.
---------------------------------------------------------------------------

    \104\ Comment ID CMS-2024-0210, 11/12/2025, available at https://www.regulations.gov/comment/CMS-2024-0311-0210.
    \105\ See CMS. (2024, Oct. 14). CMS Update on Actions to Prevent 
Unauthorized Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity.
---------------------------------------------------------------------------

    We also received and addressed several comments in the 2026 Payment 
Notice (90 FR 4478) that stated that the fixed-dollar and gross-premium 
percentage-based thresholds would prevent disruptions of care caused by 
terminating enrollees for owing small amounts of premium.
    However, because of the program integrity concerns we have stated, 
we remain concerned that these policies allow enrollees to unknowingly 
remain in coverage they did not consent to be enrolled in or remain in 
coverage that they no longer need or are utilizing, if a third party or 
agent, broker, or web broker paid the enrollee's binder payment on 
their behalf in order to effectuate enrollment. In the October 10, 2024 
Federal Register (89 FR 82366 through 82369), we provided an analysis 
of Exchange data for PY 2023, where we found that there were 184,111 
total policies terminated for non-payment in which $10 or less was owed 
by the enrollee, representing approximately 12.25 percent of the total 
number of policies terminated for non-payment that year. As such, we 
estimate that, if finalized, this rule would likely result in about 
184,111 policy terminations after application of the available grace 
period. This would likely be representative of both enrollees who 
desired coverage but failed to take the necessary action, and enrollees 
who were unaware of their coverage either because they had intended for 
it to terminate due to nonpayment, or because they were improperly 
enrolled by agents, brokers, or web-brokers.
    We have also become aware of instances in which consumers who are 
enrolled in Medicaid are, without their knowledge or consent, enrolled 
into unwanted QHP coverage with APTC for which they are not eligible. 
In 2024, we received 44,151 complaints alleging that Medicaid 
beneficiaries were enrolled without their consent into QHP plans, of 
which 12,954 were deemed medically urgent.\106\ These cases have caused 
disruptions in coverage for consumers, due to Medicaid's refusal to pay 
for services \107\ when the consumer is enrolled in a QHP, and has also 
caused delays in payments to health care providers. As noted above, we 
expect that the removal of these premium threshold options will make it 
more difficult for some agents, brokers, and web-brokers to keep 
consumers enrolled without their knowledge or consent, and thereby 
reduce the potential for these kinds of disruptions in coverage.
---------------------------------------------------------------------------

    \106\ See Sec.  156.1010(e).
    \107\ As required by section 1902(a)(25) of the Social Security 
Act, Medicaid is the payer of last resort.
---------------------------------------------------------------------------

    HHS has also previously taken steps to address concerns about 
enrollees losing their coverage, such as the requirement at Sec.  
156.270(d) that issuers must provide a grace period of 3 consecutive 
months for an enrollee who is receiving the benefit of APTC and fails 
to timely pay premiums. In addition, Sec.  156.270(f) requires QHP 
issuers to provide enrollees with notice of payment delinquency when an 
enrollee is delinquent on premium payment, promptly and without undue 
delay, within 10 business days of the date the issuer should have 
discovered the delinquency. These requirements ensure that enrollees 
receive notice and are thus aware well in advance of the risk of losing 
their coverage if they do not take action to pay their past due 
premiums.
    We seek comments on this proposal.
7. Annual Open Enrollment Period (Sec.  155.410)
    We propose to amend Sec.  155.410(e), which provides the dates for 
the annual individual market Exchange OEP in which qualified 
individuals and enrollees may apply for or change coverage in a QHP. 
Specifically, we propose to add Sec.  155.410(e)(5) and (f)(4) to 
change the OEP for benefit years starting January 1, 2026, and beyond 
so that it begins on November 1 and runs through December 15 of the 
calendar year preceding the benefit year and to set an effective date 
of January 1 for QHP selections received by the Exchange on or before 
this December 15 OEP end date. The Exchange OEP is extended by cross-
reference to non-grandfathered individual health insurance coverage, 
both inside and outside of an Exchange, under the guaranteed 
availability regulations at Sec.  147.104(b)(1)(ii). We also are making 
conforming revisions to Sec.  155.410(e)(4) and (f)(3).
    In previous rulemaking, we have adjusted the length of the OEP to 
account for various circumstances impacting the stability of the risk 
pool, Exchange operations, and the consumer experience (see Table 5 
below). In setting the OEP, as we explained when we set the initial 
enrollment period in the Exchange Establishment Rule (77 FR 18387), we 
attempt to balance the risk of adverse selection--a situation where 
individuals with higher risk are more likely to select coverage than 
healthy individuals--with the need to ensure that consumers have 
adequate opportunity to enroll in QHPs through an Exchange. We 
established a lengthy initial enrollment period lasting from October 1, 
2013, to March 31, 2014, to allow time for individuals and families to 
explore their new coverage options and provide outreach and education 
to raise awareness. However, recognizing the need to limit adverse 
selection, we established a much shorter OEP for the PY 2015 and beyond 
running from October 15 to December 7. Due to challenges in the first 
year, in the 2015 Payment Notice (79 FR 13796 through 13797, 13838), 
the PY 2015 OEP was delayed and extended to run from November 15 to 
February 15 to give more time to collect additional rating experience 
to help reduce 2015 premium rates. The change also gave issuers another 
month to prepare to accept applications and staggered the Exchange OEP 
from that of Medicare Advantage. In the 2016 Payment Notice (80 FR 
10795 through 10797, 10866), for PY 2016, we set the OEP to run from 
November 1 to January 31. While we had proposed a shorter OEP, we 
finalized this more modest change primarily to limit the burden of a 
shift on Exchanges still experiencing implementation challenges. As 
Exchange operations became more stable, in the 2017 Payment Notice (81 
FR 12273, 12343), we removed the prior extensions to the OEP and set it 
to run from November 1 to December 15 for PY

[[Page 12977]]

2019 and beyond. We gave Exchanges and issuers 2 years to prepare for 
this shift by extending the PY 2016 OEP start and end dates to PY 2017. 
This reestablished a permanent policy of a December 15 OEP end date for 
PY 2019 and beyond to support a full year of coverage and reduce 
adverse selection risk for issuers. However, in response to increasing 
challenges to the stability of the individual market and after 
concluding the market and issuers were ready for the adjustment sooner, 
we decided in the Market Stabilization Rule (82 FR 18353, 18381) to 
implement this permanent OEP policy a year ahead of schedule for PY 
2018. At the time, we acknowledged the shorter period could lead to a 
reduction in enrollees, primarily younger and healthier enrollees who 
usually enroll late in the enrollment period. However, we concluded the 
positive impacts on consumers and market stability outweighed this 
potential decline in enrollment.
---------------------------------------------------------------------------

    \108\ See CMS (2018). Public Use Files: FAQs, https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/marketplace-products/downloads/2018_public_use_file_faqs.pdf.
    \109\ See CMS (2019). Public Use Files: FAQs. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/marketplace-products/downloads/2019publicusefilesfaqs.pdf.
    \110\ See CMS (2020). Public Use Files: FAQs. https://www.cms.gov/files/document/2020-public-use-files-faqs.pdf.
    \111\ See CMS (2021). Public Use Files: FAQs. https://www.cms.gov/files/document/2021-public-use-files-faqs.pdf.
[GRAPHIC] [TIFF OMITTED] TP19MR25.004

    Consistent with our original policy establishing a December OEP end 
date for PY 2015 that promotes a full year of coverage, we maintained 
an OEP set to November 1 to December 15 for PYs 2018, 2019, 2020, and 
2021. During this

[[Page 12978]]

time, we observed several benefits from a 45-day OEP that ends on 
December 15 for coverage starting January 1 compared to OEPs ending on 
February 15 for benefit year 2015 and January 31 for benefit years 2016 
and 2017. As discussed in the 2022 Payment Notice proposed rule (86 FR 
35167 through 35168), prior enrollment data suggested that the majority 
of new consumers to the Exchange selected plans prior to December 15 so 
they had coverage beginning January 1. We believe this data shows 
consumers became accustomed to the deadline. Also, it reduces consumer 
confusion by aligning more closely with the open enrollment dates for 
other coverage for many employer-based health plans. We also observed 
that consumer casework volumes related to coverage start dates and 
inadvertent dual enrollment decreased in the years after the December 
15 end date was adopted, suggesting that the consumer experience, as 
well as program integrity, was improved by having a singular deadline 
of December 15 to enroll in coverage for the upcoming plan year. We 
noted how confusion over the deadline could cause someone to wait until 
January 15 and miss out on a whole month of coverage. In addition, the 
extended OEP requires enrollment assisters to stretch budget resources 
over an additional month.
    In the 2022 Payment Notice proposed rule (86 FR 35168), we also 
identified negative impacts from a 45-day OEP that ends December 15. In 
particular, we observed that consumers who receive financial 
assistance, who do not actively update their applications during the 
OEP, and who are automatically re-enrolled into a plan are subject to 
unexpected plan cost increases if they live in areas where the second 
lowest-cost silver plan has dropped in price relative to other 
available plans. In this situation, consumers would experience a 
reduction in their allocation of APTC based on the second lowest-cost 
silver plan price but are often unaware of their increased plan 
liabilities until they receive a bill from the issuer in early January, 
after the OEP has concluded. We noted that extending the OEP end date 
to January 15 would allow these consumers the opportunity to change 
plans after receiving updated plan cost information from their issuer 
and to select a new plan that is more affordable to them. We also noted 
concerns from some Navigators, certified application counselors (CACs), 
agents, and brokers regarding a lack of time to fully assist all 
interested Exchange applicants with comparing their different plan 
choices. In light of these negative impacts, we sought comment on 
whether an extended OEP would provide a balanced approach to provide 
consumers additional time to make informed choices and increase access 
to health coverage, while mitigating risks of adverse selection, 
consumer confusion, and issuer and Exchange operational burden. While 
some commenters expressed substantial concern over these risks, we 
concluded the experience from State Exchanges that extend their OEP 
suggested an extension in January does result in increased enrollments 
and would not introduce adverse selection into the market. Therefore, 
we concluded the negative impacts of an OEP ending in December 
justified extending the OEP to end on January 15 for PY 2022 and 
beyond. This extension to the OEP has now been in place for PYs 2022, 
2023, 2024, and 2025. We refer readers to Table 5 for a summary of OEPs 
in effect from PY 2014 to PY 2025.
    With our experience implementing this extended OEP over the past 4 
years, we have had the opportunity to more closely assess whether this 
extension achieves the right balance between an adequate opportunity to 
enroll in a QHP and the added risk for adverse selection, consumer 
confusion, and unnecessary burden on issuers and Exchanges. This 
assessment reveals that only a small number of consumers took advantage 
of the additional time to switch to a lower-cost plan after receiving a 
bill from their issuer in January with higher plan costs. During the 
most recent OEP, fewer than 3 percent of enrollees (470,000 
individuals) ended their FFE or SBE-FP coverage between December 15, 
2024, and January 15, 2025, including those enrollees who switched to 
other plans as well as those who did not. We also compared the 
enrollment growth for Exchanges on the Federal platform to State 
Exchanges under the previous December 15 end date. While most State 
Exchanges (12 out of 20) use the same enrollment schedule as Exchanges 
on the Federal platform, 7 State Exchanges use enrollment windows past 
January 15.\112\ For the best comparison, we focused on enrollment 
among people enrolled in APTC subsidized plans without CSRs. This 
controlled for the variable of whether States expanded Medicaid or 
not.\113\ From 2017 (the year before the end date changed to December 
15) to 2021 (the last year of the December 15 end date), we found that 
Exchanges on the Federal Platform experienced a larger (47 percent) 
growth in enrollment among people who enrolled in coverage with only 
APTC compared to 28 percent growth among people enrolled with only APTC 
through State Exchanges. This suggests the change to the December 15 
OEP end date did not compromise access to coverage for people selecting 
plans through the Exchanges on the Federal platform.
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    \112\ See CMS. (2024, Oct. 17). State-based Marketplaces: 2025 
Open Enrollment. https://www.cms.gov/files/document/state-exchange-oe-chart-py-2025.pdf.
    \113\ Whether or not a State expanded Medicaid can have a 
substantial impact on enrollment between States.
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    Our analysis found that 3 percent of enrollees in Exchanges on the 
Federal platform did drop their coverage renewals after December 15 
during the most recent extended OEP. Some of these people may have 
switched to a more affordable plan after receiving a bill in January 
with unexpected plan costs. However, we expect that upon finalizing the 
proposed addition of Sec.  155.335(n), a higher proportion of enrollees 
will actively re-enroll and compare their plan options prior to 
December 15, reducing the need for changes after December 15. To the 
extent people are switching coverage during the extended period, this 
may also be due, in part, to improper plan switching. As we have noted 
elsewhere, we recently began receiving substantially more consumer 
complaints alleging improper enrollments by agents and brokers who 
switch enrollees to new QHPs offered on the Exchange or update 
enrollees' current policies without their knowledge, to capture their 
commissions.\114\ However, we also note that when the enhanced 
subsidies made available under the ARP and IRA expire at the end of 
2025, plan costs for the majority of Exchange enrollees will increase, 
so there may be an increase in the proportion of enrollees seeking to 
drop coverage or change plans for PY 2026 after December 15, 2025. Due 
to changing plan costs, enrollees may need more time to make their PY 
2026 plan selections. We request comment on whether to delay the 
effective date for the proposal to update the OEP end date until the 
OEP preceding PY 2027, given the special circumstances for PY 2026 
financial assistance.
---------------------------------------------------------------------------

    \114\ Based on internal CMS data, in the first 3 months of 2024, 
we received 50,000 complaints of improper enrollments and 40,000 
complaints of improper plan switches attributed due to agent or 
broker noncompliant behavior.
---------------------------------------------------------------------------

    Based on the foregoing analysis, we do not anticipate that changing 
the OEP end date from January 15 to December 15 would have a negative 
impact on a consumer's opportunity to enroll in QHPs through an 
Exchange. We do believe the change would reduce

[[Page 12979]]

consumer confusion over the two deadlines under the current OEP that 
can increase administrative burdens and lead people to miss a whole 
month of coverage in January. Consistent with our observations after 
the December 15 end date was adopted for the 2018 OEP, we expect that 
consumer casework volumes related to coverage start dates and 
inadvertent dual enrollment would decrease if the same policy is put in 
place for the 2026 OEP. Reducing the OEP by a month should also reduce 
burdens on Exchanges, issuers, and people who assist with plan 
selections; however, the Federal government, State Exchanges, and 
issuers may incur costs if additional outreach is needed to alert 
consumers of the change in OEP end date. We will continue to leverage 
various methods to inform consumers before and during the Open 
Enrollment Period of key items and changes, including sending 
Marketplace Open Enrollment and Annual Redetermination Notices; 
developing advertising campaigns on television, radio, social media, 
and other platforms; collaborating with assistors; and utilizing the 
HealthCare.gov website as a central hub of information. We seek comment 
on how changing the OEP end date to December 15 would impact QHP 
enrollment opportunities, consumer confusion, and burden.
    In making this proposal, we note the crucial role the OEP plays in 
protecting the stability of the individual market risk pool within the 
structure of the ACA. Adverse selection remains a serious concern under 
the ACA's guaranteed availability and modified community rating 
requirements. The average plan liability risk score in the individual 
market remains substantially higher than the small group market, 
showing that higher-than-average risks continue to select into the 
individual market. This higher risk leads to higher premiums for those 
who purchase coverage through the individual market. Enrollment periods 
are one of the few tools established by the ACA to mitigate adverse 
selection and contribute to a more stable, affordable market.
    We previously noted that the experience from State Exchanges 
operating their own eligibility and enrollment platforms suggests that 
extending the OEP into January does not introduce adverse selection 
into the market. However, this conclusion was based largely on comments 
we received from State Exchanges that did not include supporting 
evidence. Other commenters expressed the opposite view that the risk of 
adverse selection warranted keeping the December 15 end date. We 
understood there was still an ongoing risk of adverse selection when we 
decided to extend the OEP end date to January 15. However, we concluded 
this risk of adverse selection was outweighed by the benefits of 
increased consumer enrollments and opportunities to switch plans for 
consumers with unexpected plan costs.
    Our new analysis of this experience extending the OEP to end 
January 15 suggests that these benefits did not materialize. 
Accordingly, without any clear benefit, we no longer believe the 
benefits of the OEP extension outweigh the risk of adverse selection. 
We welcome comments on whether the risk of adverse selection supports 
changing the OEP end date to December 15.
    We anticipate that if an OEP end date of December 15 were 
finalized, this change would apply to all Exchanges, including State 
Exchanges, for the 2026 coverage year and beyond. While we have 
previously given State Exchanges the flexibility to extend their OEPs, 
the previous analysis suggests these extensions do not increase 
enrollment. Accordingly, we believe all extensions, regardless of the 
Exchange platform, present an unnecessary risk of adverse selection. 
Any increase in adverse selection due to these extensions may increase 
premiums which, in turn, increases the Federal cost of PTC subsidies 
and undermines affordability for people who do not qualify for 
subsidies. Applying this proposal to State Exchanges would be 
consistent with our decision to apply the December 15 end date for the 
2018 OEP and beyond on a nationwide basis.
    We recognize that the proposal to adopt and transition to a 
consistent OEP start and end date might lead to operational 
difficulties for State Exchanges. We have previously recognized that 
State Exchanges could use existing regulatory authority to supplement 
the OEP with an SEP as a transitional measure. Given our proposal to 
adopt a standard OEP, we seek comment on whether we should also 
prohibit Exchanges from extending an OEP through application of a 
blanket special enrollment period. Where available, we request that 
comments include data demonstrating the impact of the OEP end date on 
enrollment and adverse selection. Additionally, we seek comment on the 
overall effects and impacts of OEP duration and OEP placement within 
the calendar year, including suggestions regarding the ideal duration 
and placement to minimize adverse selection and maximize consumer 
choice.
8. Monthly Special Enrollment Period for APTC-Eligible Qualified 
Individuals with a Projected Household Income at or Below 150 Percent 
of the Federal Poverty Level (Sec.  155.420)
    We propose to remove Sec.  155.420(d)(16) to repeal the monthly SEP 
for APTC-eligible qualified individuals with a projected annual 
household income at or below 150 percent of the FPL, which we refer to 
as the ``150 percent FPL SEP.'' To conform existing regulations to the 
repeal of this SEP, we also propose to remove Sec.  
155.420(a)(4)(ii)(D) (which adds plan category limitations and permits 
eligible enrollees and their dependents to use the 150 percent FPL SEP 
to change to a silver level plan), Sec.  155.420(b)(2)(vii) (regarding 
when coverage is effective for this SEP), and Sec.  147.104(b)(2)(i)(G) 
(as discussed in section III.A.1 of this preamble). We also propose to 
amend the introductory text of Sec.  155.420(a)(4)(iii) to remove 
reference to paragraph (d)(16). Finally, we also propose to revise 
paragraphs (a)(4)(ii)(B) and (a)(4)(ii)(C) to move the placement of the 
word ``or'' for clarity given the proposed removal of paragraph 
(a)(4)(ii)(D).
    We created the 150 percent FPL SEP to provide additional 
opportunities for low-income consumers to take advantage of free or 
low-cost coverage that section 9661 of the ARP made available on a 
temporary basis during the COVID-19 PHE. When we first finalized this 
SEP and then made it permanent in the 2025 Payment Notice (89 FR 
26320), we projected it would increase premiums due to adverse 
selection and, as a result, increase both the financial hardship on 
consumers who pay the full premium and the Federal cost of APTC. While 
we previously concluded the enrollment benefits of this SEP outweighed 
these costs and risks for adverse selection, more experience with this 
SEP suggests it has substantially increased the level of improper 
enrollments, as well as increased the risk for adverse selection, as 
the 150 percent FPL SEP incentivizes consumers to wait until they are 
sick to enroll in Exchange coverage. We encourage commenters and other 
interested parties to provide comments on whether and how the 150 
percent FPL SEP has exacerbated these issues. Finally, we believe that 
the single, best interpretation of the statute is that it does not 
authorize the Secretary to add the 150 percent FPL SEP to the list of 
SEPs enumerated at sections 1311(c)(6)(C) and (D) of the ACA.
    As background, section 9661 of the ARP amended section 36B(b)(3)(A) 
of

[[Page 12980]]

the Code to decrease the applicable percentages used to calculate the 
amount of household income a taxpayer is required to contribute to 
their second lowest cost silver plan for tax years 2021 and 2022.\115\ 
For those with household incomes at or below 150 percent of the FPL, 
the new applicable percentage is zero. The IRA extended this provision 
to the end of PY 2025. As a result of these changes, many low-income 
consumers whose QHP coverage can be fully subsidized by the APTC have 
one or more options to enroll in a silver-level plan without needing to 
pay a premium after the application of APTC.
---------------------------------------------------------------------------

    \115\ Public Law 117-2.
---------------------------------------------------------------------------

    To provide certain low-income individuals with additional 
opportunities to newly enroll in this fully subsidized or low-cost 
coverage, in part 3 of the 2022 Payment Notice (86 FR 53429 through 
53432), we finalized, at the option of the Exchange, a new monthly SEP 
for APTC-eligible qualified individuals with projected household income 
at or below 150 percent of the FPL. We also finalized a provision 
stating that this SEP is available only during periods of time when a 
taxpayer's applicable percentage, which is used to calculate the amount 
of household income a tax filer is required to contribute to their 
second lowest cost silver plan, is set at zero, such as during tax 
years 2021 through 2025, as provided by section 9661 of the ARP and 
extended by the IRA. As background, the applicable percentages are used 
in combination with other factors, including annual household income 
and the cost of the benchmark plan, to determine the PTC amount for 
which a taxpayer can qualify to help pay for a QHP on an Exchange for 
themselves and their dependents. These decreased percentages generally 
result in increased PTC for PTC-eligible tax filers.
    In the 2025 Payment Notice (89 FR 26320), we removed the limitation 
that the 150 percent FPL SEP is available only during periods of time 
when the applicable percentage is set to zero. However, given concerns 
regarding the growth of improper enrollments using this SEP, we are 
proposing that this SEP would end as of the effective date of the final 
rule, and not in December 2025, when the provisions extended by the IRA 
sunset. We believe ending the 150 percent FPL SEP across all Exchanges 
immediately is necessary due to the rise in improper enrollments, as 
the 150 percent FPL SEP was one of the primary mechanisms that certain 
agents, brokers, and web-brokers used to conduct unauthorized 
enrollments to improperly enroll consumers in fully subsidized Exchange 
plans.
    While we previously concluded that the benefits of increased access 
outweighed the risk of premium increases, new information suggests the 
expanded availability of fully subsidized plans (referred to as zero-
dollar plans in previous rulemaking),\116\ combined with easier access 
to these fully subsidized plans through the 150 percent FPL SEP, led to 
a substantial increase in improper enrollments. The existence of fully 
subsidized plans by itself creates an opportunity for some agents, 
brokers, and web-brokers to conduct improper enrollments of consumers 
in Exchange coverage without them knowing, because without a premium, 
there is no ongoing need for consumer engagement following completed 
enrollment in an Exchange plan. Based on our own analysis, we have 
identified various mechanisms that some agents, brokers, and web-
brokers have exploited to conduct unauthorized enrollments to 
improperly enroll consumers in Exchange coverage without their consent. 
For example, an agent, broker, or web-broker can enroll a consumer 
without the consumer's knowledge and earn a commission for each 
consumer enrolled. An agent, broker, or web-broker can also change the 
agent of record for an existing enrollee and take the commission from 
the existing agent, broker, or web-broker. An agent, broker, or web-
broker can switch an enrollee to a new health plan without the 
consumer's consent to capture the new commission. An agent, broker, or 
web-broker can also split up a household and enroll them in multiple 
plans to capture multiple commissions.
---------------------------------------------------------------------------

    \116\ In previous rulemaking, we referred to fully subsidized 
plans as zero-dollar plans. This former characterization suggested 
there is no premium. But health issuers do receive a full premium 
for every plan they sell. For people with incomes between 100 and 
150 percent of the FPL, this premium is fully subsidized by the 
Federal taxpayer.
---------------------------------------------------------------------------

    Because of these practices, in 2024, we implemented various system 
and logic changes to decrease and/or prevent some agent, broker, and 
web-broker behavior in an effort to mitigate improper enrollments, and 
we have observed some improvements. However, we believe that so long as 
there is no premium cost for the consumer, these enrollments can 
continue to go unnoticed until an enrollee tries to use a health plan 
the agent, broker, or web-broker canceled or eventually learns they 
must reconcile surprise APTC on their taxes. In December 2024 we 
received 7,134 consumer complaints of improper enrollments, an increase 
from the 5,032 complaints received in December 2023. Although these 
numbers represent a decrease from the high of 39,985 complaints 
received in February 2024, the fact that the number of complaints for 
2024 remains substantially higher than for 2023 demonstrates that 
previous program integrity measures have not resulted in a decrease in 
potential improper enrollments such that additional measures are not 
necessary. This has caused us to reconsider the existence of the 150 
percent FPL SEP as it continues to serve as a mechanism for some 
agents, brokers, and web-brokers to circumvent the protections that we 
have put into place, and even reverse some of the gains we have made in 
mitigating agent, broker, and web-broker improper enrollments.
    On April 12, 2024, a class of plaintiffs, including Exchange 
consumers and insurance agents, filed a complaint against certain 
agents and marketing companies alleging a conspiracy to conduct 
unauthorized enrollments and change enrollments to improperly capture 
commissions.\117\ The complaint alleges that the false ads created by 
the defendants ``resulted in hundreds of thousands of enrollments by 
class members.'' \118\ Enrollment data for the 2024 OEP suggest 
improper enrollments may be significantly more widespread than the 
parties involved in this case. A comparison of plan selections during 
the 2024 OEP and U.S. Census Bureau population estimates show the 
number of plan selections among people reporting household incomes 
between 100 and 150 percent of the FPL exceeded the number of potential 
enrollees within this FPL range in nine States.\119\ This analysis 
estimates between 4 to 5 million improper enrollments in 2024 at a cost 
of $15 to $26 billion in improper PTC payments.\120\
---------------------------------------------------------------------------

    \117\ Complaint, Conswallo Turner et al. v. Enhance Health, et 
al., Case 0:24-cv-60591-MD. (S.D. Fla.2024).
    \118\ Ibid. at 56.
    \119\ Blase, B.; Gonshorowski, D. (2024, June). The Great 
Obamacare Enrollment Fraud. Paragon Health Institute. https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud.
    \120\ Ibid.
---------------------------------------------------------------------------

    Our own analysis confirms that the number of plan selections for 
people with household incomes between 100 and 150 percent of the FPL 
exceeds the population of people at that income level based on U.S. 
Census Bureau surveys. At the extreme, 2.7 million Floridians claimed a 
household income between 100 and 150 percent of the FPL and selected 
plans through HealthCare.gov during the 2024 OEP.

[[Page 12981]]

Yet, 2022 Census surveys estimate that only 1.5 million people who live 
in Florida fall within that income level.\121\ Unlike the previously 
cited analysis by the Paragon Health Institute (see footnote 35), our 
comparison includes everyone under the age of 65 and therefore includes 
people who are unlikely Exchange enrollees such as Medicaid-eligible 
children, people with disabilities on Medicaid and Medicare, and people 
who receive coverage through their employer. Therefore, it 
underrepresents the level of improper enrollments. This disparity 
between the number of plan selections and Census population estimates 
suggests there were likely over 1 million improper enrollments in 
Florida alone. Several other States have similar patterns of more 
enrollees reporting household income between 100 and 150 percent of the 
FPL than people who would be eligible in the State for Exchange 
coverage with income in that category.\122\ We encourage commenters and 
other interested parties to share their experiences in their respective 
States, including the extent of improper enrollments and other data 
disparities.
---------------------------------------------------------------------------

    \121\ U.S. Census Bureau (2022). American Community Survey. 
Dep't of Commerce. https://www.census.gov/programs-surveys/acs/data.html.
    \122\ Ibid.
---------------------------------------------------------------------------

    As such, the 150 percent FPL SEP expands the opportunities for some 
agents, brokers, and web-brokers to conduct unauthorized enrollments 
for people in fully subsidized plans at any time during the year. By 
design, anyone who reports a projected household income at or below 150 
percent of the FPL on their application can enroll in a QHP or change 
from one QHP to another at any time during the year. This allows 
agents, brokers, and web-brokers to conduct unauthorized enrollments or 
change enrollments any time during the year when they gain access to 
the personally identifiable information that allows them to falsely 
represent someone. Before the implementation of the 150 percent FPL 
SEP, we received a handful of complaints from consumers about improper 
enrollments or plan switching. In contrast, in the first 3 months of 
2024, we received 50,000 complaints of improper enrollments and 40,000 
complaints of unauthorized plan switches attributed due to agent or 
broker noncompliant conduct and improper enrollments. For these 
reasons, we believe that by immediately ending this SEP as of the 
effective date of the final rule, the Exchanges would be protecting 
consumers by preventing improper enrollments in addition to working to 
stem the negative effects of adverse selection on the risk pool, thus 
moving towards a more stable individual market risk pool.
    In addition to concerns over improper enrollments, we remain 
concerned over the ability of consumers at or below 150 percent of the 
FPL to wait to enroll until they need health care services, resulting 
in adverse selection. Additional research is necessary to accurately 
quantify the negative impacts of this behavior to the risk pool, and we 
seek comment on this issue from the public. With respect to improper 
enrollments, we recognized the need to revise the Federal platform 
process for pre-enrollment verification for SEPs and to reinforce that 
process so that SEPs are not being abused and misused. This 
reinforcement of pre-enrollment verification for SEPs would strengthen 
program integrity measures, deter agents, brokers, and web-brokers from 
engaging in improper enrollments and enrolling unsuspecting consumers 
in QHP coverage through the Exchanges without their knowledge or 
consent, and stabilize the individual market risk pool. We propose 
changes to pre-enrollment verification for SEPs at Sec.  155.420(g) of 
this proposed rule.
    Our concern over people waiting to enroll is substantially 
heightened by the flexibility consumers, as well as agents, brokers, 
and web-brokers acting on behalf of consumers, receive when estimating 
their annual household income on their application, along with the 
limits on how much low-income people must pay to reconcile any 
misestimate on their taxes. While a tax filer would need to reconcile a 
poor income estimate on their taxes, under statute, some tax filers 
need only repay a small portion of excess APTC. This is referred to as 
the excess APTC repayment limit. For single filers with household 
incomes less than 200 percent of the FPL, the amount they must pay back 
is limited to $375 in 2024.\123\ The limit is $950 for single filers 
with household incomes from 200 to less than 300 percent of the FPL and 
$1,575 for single filers with household incomes from 300 to less than 
400 percent of the FPL. With wide flexibility in estimating household 
income and minimal penalties for misestimates, the 150 percent FPL SEP 
is an ideal enrollment loophole for some agents, brokers, and web-
brokers seeking to increase enrollment commissions. Additionally, it 
can result in a large portion of people who fail to enroll in coverage 
until they incur significant health care expenses, introducing high 
adverse selection risks for issuers, which are then reflected in higher 
premiums and associated Federal spending on premium subsidies. This SEP 
has certainly been abused by some agents, brokers, and web-brokers, who 
are aware of the excess APTC repayment limits and who have 
inappropriately marketed ``free'' plans to enrollees.124 125
---------------------------------------------------------------------------

    \123\ IRS (n.d.) Rev. Proc. 2023-34. Dep't of Treasury. https://www.irs.gov/pub/irs-drop/rp-23-34.pdf.
    \124\ Appleby, J. (2024, April 8). Rising Complaints of 
Unauthorized Obamacare Plan-Switching and Sign-Ups Trigger Concern. 
KFF Health News. https://kffhealthnews.org/news/article/aca-unauthorized-obamacare-plan-switching-concern/.
    \125\ Chang, D. (2023, June 12). Florida Homeless People Duped 
into Affordable Care Act Plans They Can't Afford. Tampa Bay Times. 
https://www.tampabay.com/news/florida-politics/2023/06/12/florida-homeless-people-duped-into-affordable-care-act-plans-they-cant-afford/.
---------------------------------------------------------------------------

    This wide flexibility in estimating income may also be open to 
misuse by Navigators and CACs. While Navigators and CACs may not 
receive a direct financial incentive for improper enrollments, they may 
still have incentives to encourage or allow applicants to underestimate 
their income to take advantage of fully subsidized plans outside of the 
OEP. Navigators and CACs, for example, still have incentives to hit and 
exceed enrollment targets. The number of consumers assisted with 
enrollment or re-enrollment in a QHP is one of the project goals we 
list in the Navigator grant application.\126\ Navigators must provide 
progress reports to CMS and future grant funding levels are based in 
part on progress toward this goal.\127\ Navigators and CACs may even 
believe it is their mission to encourage or allow applicants to 
aggressively understate their income to gain more affordable coverage. 
We seek comments on this issue and the proposal generally.
    We are working hard to address the increase in improper enrollments 
to ensure only eligible people enroll in all plans, but especially 
fully subsidized plans. While we believe stronger enforcement measures 
can substantially reduce improper enrollments, we believe improper 
enrollments would continue to be a problem so long as there is access 
to fully subsidized plans combined with even easier access through the 
150 percent FPL SEP. Even if we were able to reduce the problem of some 
agents, brokers, and web-brokers enrolling consumers in Exchange 
coverage without their knowledge or consent, substantial issues remain 
with consumers taking advantage of the 150 percent FPL SEP by falsely 
representing their household income on their Exchange applications. 
Because of this, we believe that ending the 150 percent FPL SEP remains 
one of

[[Page 12982]]

the most critical ways to mitigate this risk of improper enrollments 
and protect the individual risk pool. We also believe that the 
loopholes and incentives created by the 150 percent FPL SEP are too 
large to simply police retrospectively.
    In the 2025 Payment Notice (89 FR 26321), we reviewed the 
enrollment experience and found that the percent of Exchange enrollees 
on the Federal platform who had projected annual household income of 
less than 150 percent of the FPL increased from 41.8 percent in 2022 to 
46.9 percent in 2023, after the implementation of the 150 percent FPL 
SEP. At the time, we concluded this suggested the policy was 
successful. We also analyzed the availability of fully subsidized plans 
in 2020 before enhanced subsidies became temporarily available under 
the ARP and IRA. We found 77 percent of the consumer population at or 
below 150 percent of the FPL had access to fully subsidized bronze 
plans and 16 percent had access to fully subsidized silver plans. Based 
on this finding, we concluded the risk of adverse selection was 
mitigated by the broad access to fully subsidized plans because 
consumers with fully subsidized plans would not have a financial 
incentive to drop their Exchange plan when healthy and resume coverage 
when sick. Nevertheless, we still projected the 150 percent FPL SEP 
would increase premiums by 3 to 4 percent (89 FR 26405).
    These conclusions no longer seem valid considering the recent 
Conswallo Turner et al. v. Enhance Health, et al., litigation, higher 
numbers of consumer complaints about to unauthorized plan switching and 
improper enrollments, and a sharp increase in enrollment relative to 
the population with household income under 150 percent of the FPL in PY 
2024. This new information suggests the increase in the portion of 
Exchange enrollees who report household incomes under 150 percent of 
the FPL is driven by improper enrollments. In addition, it highlights 
how the adverse selection issue for the 150 percent FPL SEP does not 
primarily involve concerns over consumers dropping coverage when 
healthy and resuming coverage when sick. People already enrolled in 
fully subsidized plans clearly have little incentive to drop their 
plan. The adverse selection issue surfaces from people who do not 
enroll in a fully subsidized plan during the OEP and, instead, wait to 
enroll when sick. People who wait can avoid enrollment if they never 
become sick and, therefore, avoid contributing when healthy. Many 
consumers can also wait and know, if they do become sick, they would 
qualify for the 150 percent FPL SEP, due to the widespread evidence 
that millions of people have enrolled in this income level who do not 
have such household income and are subject to limitations on repayments 
of excess tax credits.
    Based on this analysis, we believe the impact of the 150 percent 
FPL SEP on premiums absent IRA subsidies is less than the 3 to 4 
percent we previously projected in the 2025 Payment Notice. After fully 
accounting for the impact of people not enrolling during the OEP and 
waiting to enroll until sick, we project the premium impact of the 
current policy is between 0.5 to 3.6 percent. Based on the premium 
increase and the increase in improper enrollments which was exacerbated 
by our previous SEP policy, we do not believe that the benefits of 
increased access to coverage for low-income consumers outweighs the 
risk of higher premiums and improper enrollments. In fact, we believe 
that the costs may exceed the benefits and we encourage commenters and 
other interested parties to provide comments on the cost impact the 150 
percent FPL SEP.
    We note that improper enrollments resulting from the 150 percent 
FPL SEP may mitigate premium increases caused by adverse selection from 
this SEP. Individuals who are unknowingly enrolled through the 150 
percent FPL SEP would not file insurance claims and, therefore, would 
improve the risk pool. While these negative impacts from the 150 
percent FPL SEP are related, we do account for them separately in our 
consideration. The ACA authorizes the Secretary only to require an 
Exchange to provide for the SEPs listed at sections 1311(c)(6)(C) and 
(D) of the ACA, and nothing more. Where a statute such as sections 
1311(c)(6)(C) and (D) of the ACA provides a list, the ``specific and 
comprehensive statutory list necessarily controls over the 
[Secretary's] general authorization,'' \128\ such as the one in in 
sections 1321(a)(1)(A), (B), and (C) of the ACA, which authorizes the 
Secretary to ``issue regulations setting standards for meeting the 
requirements . . . with respect to'' the establishment and operation of 
Exchanges, the offering of qualified health plans through Exchanges, 
and ``such other requirements as the Secretary determines 
appropriate.''
---------------------------------------------------------------------------

    \128\ Texas Med. Ass'n v. U.S. Dep't of Health and Human 
Servs.,--F.4th--, 2024 WL 3633795, *8 (Aug. 2, 2024) (citing Nat'l 
Pork Producers Council v. EPA, 635 F.3d 738, 753 (5th Cir. 2011); 
Texas v. U.S., 809 F.3d 134, 179, 186 (5th Cir. 2015), aff'd by an 
equally divided court, 579 U.S. 547 (2016)).
---------------------------------------------------------------------------

    Section 1311(c)(6)(C) of the ACA mandates that the Secretary 
require an Exchange to provide for ``special enrollment periods 
specified in section 9801 of the Code of 1986 and other special 
enrollment periods under circumstances similar to such periods under 
part D of title XVIII of the Social Security Act.'' The circumstances 
underlying the 150 percent FPL SEP are dissimilar to the circumstances 
for Medicare Part D SEPs under section 1860D-1(b)(3) of the Act, which 
are: involuntary loss of creditable prescription drug coverage; errors 
in enrollment; exceptional conditions; Medicaid coverage; and 
discontinuance of a Medicare Advantage Prescription Drug (MA-PD) 
election during the first year of eligibility. The 150 percent FPL SEP 
is likewise not one of the SEPs specified in section 9801 of the Code, 
nor similar to such SEPs.
    This interpretation aligns with our overall experience regarding 
the role that enrollment periods play in mitigating adverse selection 
within the structure of the ACA. We have thoroughly considered our 
experience with the program before and after the implementation of the 
150 percent FPL SEP and assessed the fit between the rationale for this 
SEP and the policy consequences that flow from it. Based on this 
expanded body of experience, we believe that Congress was prescient to 
provide the Secretary with a comprehensive statutory list of SEPs that 
omitted the 150 percent FPL SEP. We seek comments on this proposal.
    A commenter on the 2025 Payment Notice (89 FR 26323) also 
questioned whether it was lawful for HHS to implement the 150 percent 
FPL SEP. The statute requires a specific set of SEPs that focus on 
giving people an opportunity to enroll mid-year if they experience a 
change in their life circumstances, such as a move or the loss of job. 
In contrast, the 150 percent FPL SEP allows people to enroll at any 
time during the year based on their existing income, not a change in 
their income. We request further comment on this proposal.
9. Pre-enrollment Verification for Special Enrollment Period (Sec.  
155.420(g))
    We propose to amend Sec.  155.420(g) to reinstate (with 
modifications) the requirement that Exchanges on the Federal platform 
must conduct pre-enrollment verification of eligibility of applicants 
for other categories of individual market SEPs in line with operations 
prior to the implementation of the 2023 Payment Notice and to eliminate 
the provision that states that Exchanges on the Federal platform will

[[Page 12983]]

conduct pre-enrollment special enrollment verification of eligibility 
only for special enrollment periods under paragraph (d)(1) of this 
section.\129\ We propose to further amend Sec.  155.420(g) to require 
all Exchanges to conduct pre-enrollment verification of eligibility for 
at least 75 percent of new enrollments through SEPs.
---------------------------------------------------------------------------

    \129\ Currently, Sec.  155.420(g) provides that Exchanges on the 
Federal platform will conduct pre-enrollment special enrollment 
verification of eligibility only for special enrollment periods for 
loss of minimum essential coverage. Prior to the implementation of 
the 2023 Payment Notice, Exchanges on the Federal platform conducted 
manual verification for five SEPs: marriage, adoption, moving to a 
new coverage area, loss of minimum essential coverage, and Medicaid/
CHIP Denial.
---------------------------------------------------------------------------

    In the 2018 Payment Notice proposed rule (81 FR 61456, 61502), we 
expressed a commitment to making sure that SEPs are available to those 
who are eligible for them and equally committed to avoiding any misuse 
or abuse of SEPs. To avoid misuse and abuse, we implemented 
verification processes for SEPs in the Market Stabilization Rule (82 FR 
18357 through 18358).\130\ In setting these processes, we acknowledged 
in the Market Stabilization Rule (82 FR 18357 through 18358) competing 
concerns over how verification can impact the individual market risk 
pool and, in turn, impact premium affordability.
---------------------------------------------------------------------------

    \130\ 82 FR 18346.
---------------------------------------------------------------------------

    Verification protects the risk pool from ineligible individuals 
enrolling only after they become sick or otherwise need expensive 
health care services or medical products/equipment. However, 
verification can also undermine the risk pool by imposing a barrier to 
eligible enrollees, which may deter healthier, less motivated 
individuals from enrolling. After analyzing enrollment and risk pool 
data against these competing concerns, we believe the current SEP 
verification requirements do not provide enough protection against 
misuse and abuse. This negatively impacts both the risk pool and 
program integrity around determining eligibility for APTC and CSR 
subsidies. We believe the positive impact of verification on the risk 
pool far exceeds the potential negative impact on the risk pool. 
Therefore, we propose to amend Sec.  155.420(g) to remove the provision 
that limits Exchanges on the Federal platform to conducting pre-
enrollment verification for only the loss of minimum essential coverage 
SEP, which would allow us to reinstate pre-enrollment verification for 
other SEPs on Exchanges on the Federal platform. We further propose to 
amend Sec.  155.420(g) to require all Exchanges to conduct pre-
enrollment eligibility verification for SEPs.
    Section 1311(c)(6) of the ACA requires that Exchanges establish 
enrollment periods, including SEPs for qualified individuals, for 
enrollment in QHPs. Section 1311(c)(6)(C) of the ACA directs the 
Secretary to require Exchanges to provide for the SEPs specified in 
section 9801 of the Code and other SEPs under circumstances similar to 
such periods under part D of title XVIII of the Act. Section 2702(b)(2) 
of the PHS Act also directs issuers in the individual and group market 
to establish SEPs for qualifying events under section 603 of the 
Employee Retirement Income Security Act of 1974. Section 1321(a)(1)(A) 
of the ACA and section 2792(b)(3) of the PHS Act directs the Secretary 
to issue regulations with respect to these requirements.
    Prior to June 2016, we largely permitted individuals seeking 
coverage through the Exchanges to self-attest to their eligibility for 
most SEPs and to enroll in coverage without further verification of 
their eligibility or without submitting proof of prior coverage. After 
a GAO undercover testing study of SEPs observed that self-attestation 
could allow applicants to obtain subsidized coverage they would 
otherwise not qualify for and then found 9 of 12 of GAO's fictitious 
applicants were approved for coverage on the Federal and selected State 
Exchanges, we began implementing policies to curb potential abuses of 
SEPs.\131\ In 2016 we added warnings on HealthCare.gov regarding 
inappropriate use of SEPs. We also eliminated several SEPs and 
tightened certain eligibility rules.\132\ Also in 2016, we announced 
retrospective audits of a random sampling of enrollments through SEPs 
for loss of minimum essential coverage and permanent move, two commonly 
used SEPs. Additionally, we created the Special Enrollment Confirmation 
Process under which consumers enrolling through common SEPs were 
directed to provide documentation to confirm their eligibility.\133\ 
Finally, we proposed to implement (beginning in June 2017) a pilot 
program for conducting pre-enrollment verification of eligibility for 
certain SEPs.\134\
---------------------------------------------------------------------------

    \131\ GAO. (2016 Nov.). Patient Protection and Affordable Care 
Act: Results of Enrollment Testing for the 2016 Special Enrollment 
Period, GAO-17-78. https://www.gao.gov/products/gao-17-78.
    \132\ CMS. (2016, Feb. 24). Fact Sheet: Special Enrollment 
Confirmation Process. https://www.cms.gov/newsroom/fact-sheets/fact-sheet-special-enrollment-confirmation-process.
    \133\ Ibid.
    \134\ CMS. (n.d.). Pre-Enrollment Verification for Special 
Enrollment Periods. https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/pre-enrollment-sep-fact-sheet-final.pdf.
---------------------------------------------------------------------------

    In response to the deteriorating stability of the individual health 
insurance market leading into PY 2017, we implemented the Market 
Stabilization Rule (82 FR 18355 through 18356) in 2017 which 
sidestepped the pilot program and, instead, took quick action to 
require pre-enrollment verification for most SEPs. Understanding the 
potential for verifications to deter eligible people from enrolling, we 
studied the initial consumer experience with this pre-enrollment 
verification process and published our findings in 2018.\135\ For PY 
2017, this report showed that we averaged a response time of 1-to-3 
days to review consumer-submitted documents. In addition, the vast 
majority (over 90 percent) of SEP applicants who made a plan selection 
and were required to submit documents to complete enrollment were able 
to successfully verify their eligibility for the SEP. We conducted 
additional research for the following plan years through 2021. Based on 
data from PY 2019, the last year prior to the PHE which greatly 
impacted SEPV processing, the majority of consumers (73 percent) were 
able to submit documents within 14 days of their SEP verification issue 
(SVI) being generated. Also, we found that the majority of consumers 
(63 percent) were able to fully resolve their SVI within 14 days of it 
being generated. That resolution percentage increases to 86 percent by 
30 days.\136\ We also found that for PY 2019, only approximately 14 
percent or 75,500 individuals were unable to resolve their SVI out of 
the total population of SEP consumers who received an SVI.
---------------------------------------------------------------------------

    \135\ CMS. (2018, July 2). The Exchanges Trends Report. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2018-07-02-Trends-Report-3.pdf.
    \136\ More consumers resolve passed 30 days due to extensions 
that they are eligible to receive.
---------------------------------------------------------------------------

    In the 2023 Payment Notice (87 FR 27278), we noted that pre-
enrollment verification can also negatively impact the risk pool. At 
that time, we did not analyze the experience of people applying for 
SEPs to assess the impact on the risk pool. Rather, it was our 
perception that the extra step required by verification can deter 
eligible consumers from enrolling in coverage through an SEP, which in 
turn, can negatively impact the risk pool because younger, often 
healthier, consumers submit acceptable documentation to verify their 
SEP eligibility at much lower rates than older consumers. To mitigate 
this potential negative impact on the risk pool and streamline the

[[Page 12984]]

consumer experience, we then eliminated pre-enrollment verification for 
every SEP with the exception of the SEP for new consumers who attest to 
losing minimum essential coverage.
    Since the implementation of pre-enrollment verification for SEPs in 
the Market Stabilization Rule, we continue to monitor pre-enrollment 
verification to determine its impact, including on enrollments by 
different groups of individuals affected by the process. After three 
years of experience applying pre-enrollment verification to only the 
SEP for losing minimum essential coverage, we reviewed whether this 
policy achieves the right balance between reducing enrollment barriers 
and protecting against abuse and misuse of SEPs. This review shows the 
prior use of pre-enrollment verification for all SEPs achieved the 
better balance. As noted previously in this section, our initial review 
of pre-enrollment verification during PY 2017 did not find any 
substantial enrollment barrier. We applied this same analysis to PY 
2018 and PY 2019 before the COVID-19 PHE changed patterns of the SEP 
use and found pre-enrollment verification continued to not present any 
substantial enrollment barrier. We also compared the use of SEPs before 
and after the implementation of pre-enrollment verification for PY 
2017. This comparison revealed a substantial shift to SEPs that were 
not subject to pre-enrollment verification that required consumers to 
submit documentation, suggesting agents, brokers, and people had been 
previously abusing SEPs and shifted to special enrollment that did not 
require document submissions to continue this potential abuse of SEPs.
    When we sought feedback on the proposal to reduce pre-enrollment 
verification for SEPs in PY 2023 in the 2023 Payment Notice (88 FR 
27278 through 27279), one commenter pointed out that data from the HHS-
operated risk adjustment model, specifically the factors related to 
partial-year enrollments, showed a significant decrease in the negative 
impact of these enrollments on the overall risk pool from 2017 to 
2022.\137\ This suggests that individuals who enroll for only part of 
the year--who are more likely to use SEPs--now pose a smaller risk to 
the insurance pool than they did in the past. The commenter concluded 
that a likely factor is that fewer people are abusing SEPs to wait to 
get coverage until they need care due to pre-enrollment SEP 
verification. Another commenter noted how loss ratios for SEP 
enrollments, as compared to OEP enrollments, increased after pre-
enrollment verifications were relaxed during the COVID-19 public health 
emergency.\138\ We reviewed enrollment patterns and found there was a 
substantial increase in the enrollment duration after the 
implementation of pre-enrollment verification for all SEPs, which adds 
another data point suggesting pre-enrollment verification helped 
encourage continuous enrollment by making it more difficult to engage 
in strategic enrollment and disenrollment. Consistent with the comment 
to the 2023 Payment Notice, partial year enrollment factors did improve 
after PY 2017. Issuer-level enrollment data similarly shows a decline 
in the percent of disenrollments as a percent of total enrollments from 
about 20 percent in PY 2017 to about 12 percent in PY 2019.\139\ After 
we reduced pre-enrollment verification for SEPs for PY 2023, the 
average number of months enrolled per consumer declined from 4.5 months 
in PY 2022 to 4.3 months in PY 2023.\140\ While this decline may be 
due, in part, to an increase in mid-year enrollments from people being 
disenrolled from Medicaid after the Medicaid continuous enrollment 
condition ended on April 1, 2023, it may also be linked to the 
reduction in pre-enrollment verification for SEPs.
---------------------------------------------------------------------------

    \137\ Comment ID CMS-2021-0196-0196, 01/27/2022 available at 
https://www.regulations.gov/comment/CMS-2021-0196-0196.
    \138\ Comment ID CMS-2021-0196-0222, 01/27/2022 available at 
https://www.regulations.gov/comment/CMS-2021-0196-0222.
    \139\ Derived from issuer enrollment data, CMS. (2024, Sept. 
10). Issuer Enrollment Data. https://www.cms.gov/marketplace/resources/data/issuer-level-enrollment-data.
    \140\ Ibid.
---------------------------------------------------------------------------

    We acknowledge pre-enrollment verification can deter eligible 
consumers from enrolling in coverage through an SEP because of the 
burden of document verification. However, as noted previously, our 
prior analyses show the verification process does not impose a 
substantial burden and therefore should not be a barrier to enrollment. 
We also note that documentation to verify SEPs is generally easy for 
applicants to access and provide to Exchanges. Applicants should have 
ready access to official documents acknowledging employer separations, 
loss of minimum essential coverage, marriage, divorce, births, 
adoptions, death, gaining lawful presence or citizenship certificates, 
a new address, or a release from incarceration. Pre-Enrollment SEP 
Verification takes place simultaneously with the consumer's SEP 
timeline on the Federal platform currently. This means that Pre-
Enrollment SEP Verification takes place while the consumer's SEP 
timeline is running.\141\ Typically, the SEP window on the Exchanges on 
the Federal platform is 60 days from when a consumer experiences a 
qualifying event and a Special Enrollment Period Verification Issue 
(SVI) is triggered when a consumer selects a plan during that 
timeframe.
---------------------------------------------------------------------------

    \141\ Descriptions and information on the length of SEPs can be 
found at 45 CFR 155.420(c).
---------------------------------------------------------------------------

    In addition, we previously found younger people submit acceptable 
documentation to verify their SEP eligibility at lower rates than older 
consumers, which can negatively impact the risk pool as younger 
consumers use less health care on average.\142\ While successful 
submission rates might be lower for younger people, the overall effect 
on the risk pool is minimal because it is a very small number of 
younger enrollees relative to older enrollees. This small impact on the 
total enrollment among younger people from SEPs would not lead to a 
meaningful increase in the proportion of young people enrolled and, as 
a result, not lead to a meaningful improvement to the risk pool. 
Therefore, we expect any negative impact on the risk pool would be 
minimal and substantially outweighed by the reductions in people 
misusing and abusing SEPs.
---------------------------------------------------------------------------

    \142\ This statistic is based on SEPV resolution data from PY 
2019.
---------------------------------------------------------------------------

    The weight of the data analysis presented here shows how the 
implementation of pre-enrollment verification for applicable SEPs 
reduced misuse and abuse of SEPs without deterring eligible people from 
enrolling in coverage in a measurable way. This improves the risk pool 
by restricting people from gaming SEPs to wait to enroll until they 
need health care services. An improved risk pool lowers premiums which, 
in turn, makes health coverage more affordable for unsubsidized 
enrollees and lowers the average APTC by lowering the average premium 
for the benchmark plan used to set APTC. Moreover, pre-enrollment 
verification for SEPs strengthens program integrity by denying 
ineligible enrollments and discouraging ineligible enrollees who know 
they cannot meet verification standards from attempting to enroll 
which, in turn, reduces Federal subsidies to ineligible consumers who 
would otherwise enroll and receive APTC and CSR subsidies. 
Consequently, this proposal would reduce Federal expenditures by both 
lowering the average APTC paid due to a reduction in the benchmark plan 
premium used to calculate APTC and reducing the number of ineligible 
people who would otherwise improperly enroll in APTC-

[[Page 12985]]

and CSR-subsidized coverage. Therefore, we propose to amend Sec.  
155.420(g) to remove the limitation on Exchanges on the Federal 
platform to conduct pre-enrollment verification for only the loss of 
minimum essential coverage special enrollment and also reinstate (with 
modifications) pre-enrollment verification requirement for other 
categories of SEPs.
    In implementing pre-enrollment verifications for SEPs in the Market 
Stabilization Rule (82 FR at 18356), HHS did not require that all 
Exchanges conduct SEP verifications, in order to allow State Exchanges 
to determine the most appropriate way to ensure the integrity of the 
SEPs. Currently, all State Exchanges have flexibility under Sec.  
155.420(g) to conduct pre-enrollment verification of SEPs. Based on our 
analysis of the data showing how SEP verifications successfully 
encouraged continuous enrollment on Exchanges on the Federal platform, 
we believe State Exchange enrollments would benefit from implementing a 
similar policy.
    We also believe State Exchanges now have more experience with 
conducting SEP verifications, which would make broader implementation 
less burdensome than before. We welcome comments regarding this 
proposal including State Exchanges' expectations regarding the time and 
expense needed to comply. Currently, all but four State Exchanges 
conduct either pre- or post-enrollment verification of at least one 
special enrollment type, and most State Exchanges had previously 
implemented a process to verify the vast majority of SEPs requested by 
consumers. Therefore, we propose to amend Sec.  155.420(g) to require 
all Exchanges to conduct eligibility verification for SEPs.
    We also propose to require that Exchanges, including all State 
Exchanges, conduct SEP verification for at least 75 percent of new 
enrollments through SEPs for consumers not already enrolled in coverage 
through the applicable Exchange. We are proposing that Exchanges must 
verify at least 75 percent of such new enrollments based on the current 
volume of SEP verification by Exchanges. The 75 percent threshold was 
chosen since we believe that most States would be able to meet this 
threshold by verifying at least their two or three largest SEP types 
based on current SEP volumes. If the Exchange is unable to verify the 
consumer's eligibility for enrollment through the SEP, then the 
consumer is not eligible for enrollment through the Exchange under that 
SEP, and any plan selection under that SEP would have to be canceled. 
Should an enrollment under an SEP for which eligibility cannot be 
verified become effectuated, the enrollment through the Exchange may be 
terminated in accordance with Sec.  155.430(b)(2)(i). If an Exchange 
chooses to pend a plan selection prior to enrollment, and the Exchange 
cannot verify eligibility for the SEP, then the consumer would be found 
ineligible for the SEP, and the plan selection would not result in an 
enrollment. The determination of how many enrollments would constitute 
75 percent would be required to be based on enrollment through all 
SEPs. This would provide Exchanges with implementation flexibility so 
they can continue to decide which special enrollment types to verify 
and the best way to conduct that verification. Exchanges would not be 
required to verify eligibility for all SEPs, since the cost to verify 
eligibility for SEP triggering events with very low volumes could be 
greater than the benefit of verifying eligibility for them.
    While we propose to eliminate the current flexibility Exchanges 
have under Sec.  155.420(g) to provide exceptions to SEP verification 
processes, we continue certain flexibilities that State Exchanges 
currently have to design eligibility verification processes that are 
appropriate for their market and Exchange consumers, such that State 
Exchanges may have such flexibility in their approaches for meeting the 
requirement proposed at Sec.  155.420(g) to verify eligibility for an 
SEP. Specifically, under Sec.  155.315(h), State Exchanges have the 
flexibility to propose alternative methods for conducting required 
verifications to determine eligibility for enrollment in a QHP under 
subpart D, such that the alternative methods proposed reduce the 
administrative costs and burdens on individuals while maintaining 
accuracy and minimizing delay. We propose to use the existing authority 
at Sec.  155.315(h) to allow State Exchanges to request HHS approval 
for use of alternative processes for verifying eligibility for SEPs as 
part of determining eligibility for SEPs under Sec.  155.305(b).\143\ 
This would allow, for instance, the State Exchanges that have 
administrative burden and cost concerns the option to coordinate with 
HHS to devise and agree upon the best approach for SEP verification for 
their specific population. We recognize that State Exchanges may vary 
in their approach and technical capabilities relating to verification 
of SEPs and may need additional time to implement this requirement. 
Therefore, we are proposing to allow Exchanges until PY 2026 to 
implement SEP verification. We welcome comment on this topic and 
suggestions to alleviate this concern.
---------------------------------------------------------------------------

    \143\ Such requests would be made through the State-based 
Marketplace Annual Reporting Tool (SMART; OMB Control Number 0938-
1244).
---------------------------------------------------------------------------

    We seek comment on these proposals. With respect to SEP 
verification, we seek comment from States about the 75 percent 
verification threshold and whether it should be based on past year SEP 
enrollments or some other appropriate metric such as future year 
projections understanding that unforeseen events may occur that may 
drive up or down enrollments from year-to-year. We also understand that 
State Exchanges have matured and that even smaller State Exchanges may 
find applying pre-verification to all new enrollments through SEPs less 
burdensome than the first time we proposed this policy. Therefore, we 
also invite comment on whether State Exchanges believe it to be 
feasible to apply pre-enrollment verification to enrollments through 
SEPs beyond the stated 75 percent in alignment with our proposed goal 
for Exchanges on the Federal platform.

C. Part 156--Health Insurance Issuer Standards Under the Affordable 
Care Act, Including Standards Related to Exchanges

1. Prohibition on Coverage of Sex-Trait Modification as an EHB (Sec.  
156.115(d))
    We propose to amend Sec.  156.115(d) to provide that issuers of 
non-grandfathered individual and small group market health insurance 
coverage--that is, issuers of coverage subject to EHB requirements--may 
not provide coverage for sex-trait modification as an EHB beginning 
with PY 2026.
    Section 1302(a) of the ACA provides for the establishment of an EHB 
package that includes coverage of EHB (as defined by the Secretary of 
HHS), cost-sharing limits, and AV requirements. Among other things, the 
law directs that the scope of the EHB be equal in scope to the benefits 
provided under a typical employer plan and that they include at least 
the 10 general categories outlined in the statute and the items and 
services covered within those categories.\144\
---------------------------------------------------------------------------

    \144\ See section 1302(b)(2)(A) of the ACA. See also section 
1302(b)(1) of the ACA, delineating the 10 general categories of EHB: 
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 156.115(d) currently provides that for plan years beginning 
on or before January 1, 2026, an issuer of a

[[Page 12986]]

plan offering EHB may not include routine non-pediatric dental 
services, routine non-pediatric eye exam services, long-term/custodial 
nursing home care benefits, or non-medically necessary orthodontia as 
EHB; and, for plan years beginning on or after January 1, 2027, an 
issuer of a plan offering EHB may not include routine non-pediatric eye 
exam services, long-term/custodial nursing home care benefits, or non-
medically necessary orthodontia as EHB. In the EHB Rule (78 FR 12845), 
we stated that routine non-pediatric dental services are not typically 
included in the medical plans offered by employers and are often 
provided as excepted benefits by the employer. We accordingly proposed 
and finalized the rule prohibiting issuers from covering these services 
as EHB.145 146
---------------------------------------------------------------------------

    \145\ 78 FR 12845.
    \146\ In the 2025 Payment Notice (89 FR at 26343), we removed 
routine non-pediatric dental services from Sec.  156.115(d).
---------------------------------------------------------------------------

    On January 20, 2025, President Trump issued Executive Order 14168, 
``Defending Women From Gender Ideology Extremism and Restoring 
Biological Truth to the Federal Government'' (E.O. 14168) that requires 
agencies to ``take all necessary steps, as permitted by law, to end the 
Federal funding of gender ideology.'' Then, on January 28, 2025, 
President Trump issued Executive Order 14187, ``Protecting Children 
From Chemical and Surgical Mutilation'' (E.O. 14187) that directs the 
Secretary of HHS to take all appropriate actions consistent with 
applicable law to end the chemical and surgical mutilation of children. 
The phrase ``chemical and surgical mutilation'' in E.O. 14187 means the 
use of puberty blockers, sex hormones, and surgical procedures that 
attempt to transform an individual's physical appearance to align with 
an identity that differs from his or her sex or that attempt to alter 
or remove an individual's sexual organs to minimize or destroy their 
natural biological functions. As noted in the definition of ``chemical 
and surgical mutilation'' in E.O. 14187, this phrase sometimes is 
referred to as ``gender affirming care,'' and is referred to in this 
proposed rule as ``sex-trait modification.'' For purposes of this 
definition, the term ``sex'' is a person's immutable biological 
classification as either male or female; the term ``female'' is a 
person of the sex characterized by a reproductive system with the 
biological function of producing eggs (ova); and the term ``male'' is a 
person of the sex characterized by a reproductive system with the 
biological function of producing sperm.\147\ Because coverage of sex-
trait modification is not typically included in employer-sponsored 
plans, and EHB must be equal in scope to a typical employer plan, we 
propose to add ``sex-trait modification'' to the list of items and 
services that may not be covered as EHB beginning in PY 2026.
---------------------------------------------------------------------------

    \147\ Office of Women's Health (2025, Feb. 19). Sex-Based 
Definitions. Dep't of Health and Human Services. Retrieved March 6, 
2025, from https://womenshealth.gov/article/sex-based-definitions.
---------------------------------------------------------------------------

    Although the fact that sex-trait modification is not typically 
included in employer-sponsored plans is an independent, sufficient, and 
legally compelled reason for this rule, the agency acknowledges recent 
executive orders that have been subject to preliminary injunctions. The 
agency makes this proposal independently of the executive orders 
because sex-trait modification is not typically included in employer 
health plans and therefore cannot legally be covered as EHB. The agency 
acknowledges that two courts have issued preliminary injunctions 
relating to the executive orders described above, and the agency does 
not rely on the enjoined sections of the executive orders in making 
this proposal.
    In particular, the United States District Court for the Western 
District of Washington has issued a preliminary injunction that 
enjoined defendant agencies ``from enforcing or implementing section 4 
of Executive Order 14187 within the Plaintiff States,'' as well as 
``sections 3(e) or 3(g) of Executive Order 14168 to condition or 
withhold Federal funding based on the fact that a health care entity or 
health professional provides gender-affirming care within the Plaintiff 
States.'' Washington v. Trump, No. 2:25-CV-00244-LK, 2025 WL 659057, at 
*28 (W.D. Wash. Feb. 28, 2025). The United States District Court for 
the District of Maryland has issued a preliminary injunction that 
enjoins the Federal defendants in that case ``from conditioning, 
withholding, or terminating Federal funding under section 3(g) of 
Executive Order 14168 and section 4 of Executive Order 14187, based on 
the fact that a healthcare entity or health professional provides 
gender-affirming medical care to a patient under the age of nineteen'' 
and required a written notice ``instruct[ing] the aforementioned groups 
that Defendants may not take any steps to implement, give effect to, or 
reinstate under a different name the directives in section 3(g) of 
Executive Order 14168 or section 4 of Executive Order 14187 that 
condition or withhold Federal funding based on the fact that a 
healthcare entity or health professional provides gender-affirming 
medical care to a patient under the age of nineteen.'' PFLAG, Inc. v. 
Trump, No. CV 25-337-BAH, 2025 WL 685124, at *33 (D. Md. Mar. 4, 2025). 
If finalized, the rule proposed here would not conflict with those 
preliminary injunctions because, among other things, it would be based 
on independent legal authority and reasons and not the enjoined 
sections of the executive orders. In any event, any final rule on this 
issue would not be effective until PY 2026, and would not be 
implemented, made effective, or enforced in contravention of any court 
orders.
    With regard to whether or not sex-trait modification is typically 
included in an employer-sponsored plan, we are aware that employer-
sponsored plans often exclude coverage for some or all sex-trait 
modification, and it is our understanding that these exclusions may 
include use of puberty blockers, sex hormones, and surgical procedures 
identified in E.O. 14187. This includes many small group plans that do 
not cover such services; we note that 42 States chose or defaulted to 
small group plans as their EHB-benchmark plan selections in 2014 and 
2017.\148\ In addition, of those employer-sponsored plans that do cover 
sex-trait modification, these EHB-benchmark plan documents would 
indicate that there is inconsistency nationwide with respect to the 
scope of benefits included. The infrequent and inconsistent coverage of 
such benefits is also apparent in the treatment of sex-trait 
modification by the States and territories, which provides further 
support that coverage of these benefits is not typical: our 
understanding is that the majority of States and territories do not 
include coverage for sex-trait modification in State employee health 
benefit plans or mandate its coverage in private health insurance 
coverage.\149\ In addition, 12 States and 5 territories do not mention 
or have no clear policy regarding sex-trait modification in their 
employee health benefit plans, and 14 States explicitly exclude sex-
trait modification from their State employee health benefit plans.\150\
---------------------------------------------------------------------------

    \148\ CMS. (2016, April 8). Final List of BMPs. https://www.cms.gov/cciio/resources/data-resources/downloads/final-list-of-bmps_4816.pdf.
    \149\ Movement Advancement Project. 2025. ``Equality Maps: 
Healthcare Laws and Policies.'' https://www.mapresearch.org/equality-maps/healthcare_laws_and_policies. Accessed Feb. 23, 2025.
    \150\ Ibid.
---------------------------------------------------------------------------

    We believe that coverage of sex-trait modification may be sparse 
among

[[Page 12987]]

typical employer plans because the rate of individuals utilizing sex-
trait modification is very low; less than 1 percent of the U.S. 
population seeks forms of sex-trait modification; \151\ this low 
utilization is apparent in the External Data Gathering Environment 
(EDGE) limited data set.\152\ In this data set, which encompasses the 
majority of health insurance enrollees covered outside of large group 
plans, approximately 0.11 percent of enrollees in non-grandfathered 
individual and small group market plans utilized sex-trait modification 
during PYs 2022 and 2023.\153\
---------------------------------------------------------------------------

    \151\ See, Hughes, L.; Charlton, B.; Berzansky, I.; et. al. 
(2025, Jan. 6). Gender-Affirming Medications Among Transgender 
Adolescents in the US, 2018-2022. JAMA Pediatr. 179(3):342-344. 
https://jamanetwork.com/journals/jamapediatrics/fullarticle/2828427; 
see also, Dai, D.; Charlton, B.; Boskey, E.; et. al. (2024, June 
27). Prevalence of Gender-Affirming Surgical Procedures Among Minors 
and Adults in the US. JAMA Netw Open. 7(6):e2418814. https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2820437.
    \152\ The EDGE limited data set contains certain masked 
enrollment and claims data for on- and off-Exchange enrollees in 
risk adjustment covered plans in the individual and small group 
(including merged) markets, in States where HHS operated the risk 
adjustment program required by section 1343 of the ACA, and is 
derived from the data collected and used for the HHS-operated risk 
adjustment program.
    \153\ See https://www.cms.gov/data-research/files-order/limited-data-set-lds-files/enrollee-level-external-data-gathering-environment-edge-limited-data-set-lds. To request the EDGE limited 
data set, refer to the instructions at https://www.cms.gov/data-research/files-for-order/limited-data-set-lds-files.
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    We note that nothing in this proposal would prohibit health plans 
from voluntarily covering sex-trait modification as a non-EHB 
consistent with applicable State law, nor would it prohibit States from 
requiring the coverage of sex-trait modification, subject to the rules 
related to State-mandated benefits at Sec.  155.170.
    We are also aware that some stakeholders do not believe that sex-
trait modification services fit into any of the 10 categories of EHB 
and, therefore, do not fit within the EHB framework even if some 
employers cover such services.\154\ As discussed later, the items and 
services that comprise sex-trait modification are performed to align or 
transform an individual's physical appearance with an identity that 
differs from his or her sex. We are also concerned about the scientific 
integrity of claims made to support their use in health care settings. 
As such, we seek comment on whether it would be appropriate to exclude 
sex-trait modification as an EHB.
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    \154\ EHB categories defined in Section 1302(b) are ambulatory 
patient services, emergency services, hospitalization, maternity and 
newborn care, mental health and substance use disorders--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.
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    Consistent with the other listed benefits that issuers must not 
cover as an EHB at Sec.  156.115(d), we are not proposing a definition 
of ``sex-trait modification.'' However, we solicit comment on whether 
we should adopt a formal definition of ``sex-trait modification,'' 
whether there are current issuer standards with regards to what is 
considered ``sex trait modification''; and how such a definition could 
best account for the items and services currently covered or excluded 
as sex-trait modification by plans subject to the EHB requirement.
    We also recognize that there are some medical conditions, such as 
precocious puberty, or therapy subsequent to a traumatic injury, where 
items and services that are also used for sex-trait modification may be 
appropriate. We seek comments regarding whether we should define 
explicit exceptions to permit the coverage of such items and services 
as EHB for other medical conditions, and what those conditions are, for 
potential inclusion in finalizing as part of this rule.
    Pursuant to Sec.  155.170(a)(2), a covered benefit in a State's 
EHB-benchmark plan is considered an EHB. There is no obligation for the 
State to defray the cost of a State mandate enacted after December 31, 
2011, that requires coverage of a benefit covered in the State's EHB-
benchmark plan. If a State mandates coverage of a benefit that is in 
its EHB-benchmark plan, the benefit will continue to be considered EHB 
and the State will not have to defray the costs of that mandate. 
However, if at a future date the State updates its EHB-benchmark plan 
under Sec.  156.111 and removes the mandated benefit from its EHB-
benchmark plan, the State may have to defray the costs of the benefit 
under the factors set forth at Sec.  155.170 as it will no longer be an 
EHB after its removal from the EHB-benchmark plan.
    There are some State EHB-benchmark plans that currently cover sex-
trait modification as an EHB. Other State EHB benchmark plans provide 
coverage for sex-trait modification, but do not explicitly mention sex-
trait modification or any similar term.\155\ If this proposal is 
finalized as proposed, health insurance issuers will be prohibited from 
providing coverage for sex-trait modification as an EHB in any State 
beginning in PY 2026. If any State separately mandates coverage for 
sex-trait modification outside of its EHB-benchmark plan, the State 
would be required to defray the cost of that State mandated benefit as 
it would be considered in addition to EHB pursuant to Sec.  155.170. 
However, if any such State does not separately mandate coverage of sex-
trait modification outside of its EHB-benchmark plan, there would be no 
defrayal obligation. States may consider mandating coverage of sex-
trait modification in the future, in which case defrayal obligations at 
Sec.  155.170 would apply, and CMS would enforce the defrayal 
obligations appropriately. Further, issuers in States in which sex-
trait modification is currently an EHB would also be prohibited from 
covering it as an EHB beginning in PY 2026. However, they may opt to 
continue covering sex-trait modification consistent with applicable 
State law, but not as an EHB. We seek comment on whether additional 
program integrity measures are necessary to ensure Federal subsidies do 
not continue to fund sex-trait modification if this proposal is 
finalized.
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    \155\ The EHB-benchmark plans for California, Colorado, New 
Mexico, Vermont, and Washington specifically include coverage of 
some sex-trait modification. The EHB-benchmark plans of six other 
States do not expressly include or exclude coverage of sex-trait 
modification. The EHB-benchmark plans of 40 States include language 
that excludes coverage of sex-trait modification.
---------------------------------------------------------------------------

    Lastly, we seek comment on the proposed effective date of this 
proposal. We are proposing PY 2026 as the beginning effective date for 
when issuers subject to EHB requirements would be prohibited from 
covering sex-trait modification as an EHB. We seek comment specifically 
on the impact that this proposal would have, if finalized, on health 
insurance coverage in the individual, small group, and large group 
markets for PY 2026, or whether an earlier or later effective date is 
justified.
    We seek comment on this proposal.
2. Premium Adjustment Percentage (Sec.  156.130(e))
    We propose to update the premium adjustment percentage methodology 
to establish a premium growth measure that captures premium changes in 
the individual market in addition to employer-sponsored insurance (ESI) 
premiums for PY 2026 and beyond. Based on the proposed update to the 
premium adjustment methodology, we propose values for the PY 2026 
premium adjustment percentage, maximum annual limitation on cost 
sharing, reduced maximum annual limitations on cost sharing, and 
required contribution percentage. If this proposal is finalized as 
proposed, the values for the PY 2026 premium adjustment percentage, 
maximum annual limitation

[[Page 12988]]

on cost sharing, reduced maximum annual limitations on cost sharing, 
and required contribution percentage proposed in this rule would 
supersede the values published in the guidance document ``Premium 
Adjustment Percentage, Maximum Annual Limitation on Cost Sharing, 
Reduced Maximum Annual Limitation on Cost Sharing, and Required 
Contribution Percentage for the 2026 Benefit Year'' published on CMS' 
website on October 8, 2024 (October 2024 PAPI Guidance).\156\
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    \156\ See CMS. (2024, Oct. 8). Premium Adjustment Percentage, 
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual 
Limitation on Cost Sharing, and Required Contribution Percentage for 
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
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    Section 1302(c)(4) of the ACA directs the Secretary to determine an 
annual premium adjustment percentage, the measure of premium growth 
that is used to set the rate of increase for the following three 
parameters: (1) the maximum annual limitation on cost sharing (defined 
at Sec.  156.130(a)); (2) the required contribution percentage used to 
determine eligibility for certain exemptions under section 5000A of the 
Code (defined at Sec.  155.605(d)(2)(iii)); and (3) the employer shared 
responsibility payment amounts under section 4980H(a) and (b) of the 
Code (see section 4980H(c)(5) of the Code). Section 1302(c)(4) of the 
ACA and Sec.  156.130(e) provide that the premium adjustment percentage 
is the percentage (if any) by which the average per capita premium for 
health insurance coverage for the preceding calendar year exceeds such 
average per capita premium for health insurance for 2013. Section 
156.130(e) also provides that this percentage will be published in 
guidance in January of the calendar year preceding the benefit year for 
which the premium adjustment percentage is applicable, unless HHS 
proposes changes to the methodology, in which case, HHS will publish 
the annual premium adjustment percentage in an annual HHS notice of 
benefit and payment parameters or another appropriate rulemaking.
    The 2015 Payment Notice (79 FR 13744) and 2015 Market Standards 
Rule (79 FR 30240) established a methodology for estimating the average 
per capita premium for purposes of calculating the premium adjustment 
percentage for PY 2015 and beyond. Beginning with PY 2015, the premium 
adjustment percentage was calculated based on the estimates and 
projections of average per enrollee ESI premiums from the NHEA, which 
are calculated by the CMS Office of the Actuary. In the 2015 Payment 
Notice proposed rule (78 FR 72359 through 72361), we proposed that the 
premium adjustment percentage be calculated based on the projections of 
average per enrollee private health insurance premiums from the NHEA. 
Based on comments received, we finalized in the 2015 Payment Notice (79 
FR 13801 through 13804) use of per enrollee ESI premiums from the NHEA 
in the premium adjustment percentage methodology. We finalized use of 
per enrollee ESI premiums because these premiums reflected trends in 
health care costs without being skewed by individual market premium 
fluctuations resulting from the early years of implementation of the 
ACA market rules. However, recognizing that ESI premiums did not 
comprehensively reflect premiums for the entire market, we noted in the 
2015 Payment Notice (79 FR 13801 through 13804) that we may propose to 
change our methodology after the initial years of implementation of the 
market rules, once the premium trend is more stable.
    In the 2020 Payment Notice proposed rule (84 FR 285 through 289), 
we noted that we believed the premium trend in the individual market 
had stabilized and, therefore, proposed to change the premium 
adjustment percentage methodology to comprehensively reflect premium 
changes across all affected markets as we had suggested in the 2015 
Payment Notice (79 FR 13801 through 13804). Based on the general trend 
of stabilizing premiums and our conclusion that including individual 
market premium changes going forward would more accurately reflect true 
premium growth, in the 2020 Payment Notice (84 FR 17537 through 17541), 
we finalized the proposal to use per enrollee private health insurance 
premiums from the NHEA (excluding Medigap and property and casualty 
insurance) in the premium adjustment percentage calculation.
    In the 2022 Payment Notice proposed rule (85 FR 78633 through 
78635), we proposed a premium adjustment percentage using the 
methodology adopted in the 2020 Payment Notice (84 FR 17537 through 
17541). In addition, we proposed to amend Sec.  156.130(e) to, 
beginning with PY 2023, set the premium adjustment percentage in 
guidance separate from the annual notice of benefit and payment 
parameters, unless we were to propose a change to the methodology for 
calculating the parameters, in which case, we would do so through 
notice-and-comment rulemaking. We finalized this latter proposal in 
part 2 of the 2022 Payment Notice (86 FR 24237 through 24238). Although 
we did not propose to change the methodology for calculating the 
premium adjustment percentage in this proposed rule, we finalized a new 
methodology in part 2 of the 2022 Payment Notice (86 FR 24233 through 
24237) that readopted the measure of premium growth for PY 2022 and 
beyond using the NHEA projections of average per enrollee ESI premium, 
which was the methodology used for PY 2015 through PY 2019. Although we 
did not propose to change the methodology in the 2022 Payment Notice 
proposed rule, we nonetheless received comments requesting that we 
revert to the use of the NHEA ESI premium measure to estimate premium 
growth. We finalized this change after concluding it was consistent 
with the will and interest of interested parties and would mitigate the 
uncertainty regarding premium growth during the COVID-19 PHE. 
Additionally, we concluded that this methodology aligned with the 
policy objectives in the January 28, 2021 Executive Order on 
Strengthening the Affordable Care Act and Medicaid (86 FR 7793) \157\ 
and the ARP,\158\ which both emphasized making health coverage 
accessible and affordable for consumers of all income levels.
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    \157\ We note that the January 20, 2025 Executive Order on 
Initial Rescissions of Harmful Executive Orders and Actions (90 FR 
8237) revoked Executive Order 14009 of January 28, 2021 
(Strengthening Medicaid and the Affordable Care Act).
    \158\ ARP, Public Law 117-2.
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    Because the COVID-19 PHE has ended \159\ and should no longer 
impact the premium adjustment percentage, and because evidence 
described below now suggests that the COVID-19 PHE did not impact 
premiums as we anticipated in part 2 of the 2022 Payment Notice (86 FR 
24233 through 24237), we now propose to revert to the methodology for 
calculating the premium adjustment percentage that we established in 
the 2020 Payment Notice (84 FR 17537 through 17541). Specifically, we 
propose to calculate the premium adjustment percentage for PY 2026 and 
beyond using an adjusted private individual and group market health 
insurance premium measure, which is similar to NHEA's private health 
insurance premium measure.\160\ NHEA's private health insurance premium 
measure includes premiums

[[Page 12989]]

for ESI, ``direct purchase insurance,'' which includes individual 
market health insurance purchased directly by consumers from health 
insurance issuers, both on and off the Exchanges, Medigap insurance, 
and the medical portion of accident insurance (``property and 
casualty'' insurance). The measure we propose to use includes NHEA 
estimates and projections of ESI and direct purchase insurance 
premiums, but would exclude premiums for Medigap and property and 
casualty insurance (we refer to the proposed measure as ``private 
health insurance (excluding Medigap and property and casualty 
insurance),'' consistent with the approach finalized in the 2020 
Payment Notice (84 FR 17537 through 17541).
---------------------------------------------------------------------------

    \159\ HHS. (2023, May 11). HHS Secretary Xavier Becerra 
Statement on End of the COVID-19 Public Health Emergency. https://public3.pagefreezer.com/browse/HHS.gov/02-01-2024T03:56/https://www.hhs.gov/about/news/2023/05/11/hhs-secretary-xavier-becerra-statement-on-end-of-the-covid-19-public-health-emergency.html.
    \160\ See Table 17 of the ``NHE Projections--Tables (ZIP)'' link 
available at https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/projected.
---------------------------------------------------------------------------

    We are proposing to exclude Medigap and property and casualty 
insurance from the premium measure since these types of coverage are 
not considered primary medical coverage for individuals who elect to 
enroll.\161\ For example, Medigap coverage supplements Original 
Medicare \162\ Plan coverage by helping to pay certain out-of-pocket 
costs not covered by Original Medicare such as co-payments, 
coinsurance, and deductibles. Specifically, to calculate the premium 
adjustment percentage for PY 2026, the measures for 2013 and 2025 would 
be calculated as private health insurance premiums minus premiums paid 
for Medigap insurance and property and casualty insurance, divided by 
the unrounded number of unique private health insurance enrollees with 
comprehensive coverage (that is, excluding supplemental coverage such 
as Medigap and property and casualty insurance from the count of 
enrollees in the denominator). These results would then be rounded to 
the nearest $1 followed by a division of the 2025 figure by the 2013 
figure rounded to 10 significant digits. The proposed premium measure 
would reflect cumulative, historic growth in premiums for private 
health insurance markets (excluding Medigap and property and casualty 
insurance) from 2013 onwards.
---------------------------------------------------------------------------

    \161\ Section 1302(c)(4) of the ACA refers to ``the average per 
capita premium for health insurance coverage in the United States.'' 
The term ``health insurance coverage'' is defined in 42 U.S.C. 
300gg-91(b)(1) as ``benefits consisting of medical care (provided 
directly, through insurance or reimbursement, or otherwise and 
including items and services paid for as medical care) under any 
hospital or medical service policy or certificate, hospital or 
medical service plan contract, or health maintenance organization 
contract offered by a health insurance issuer.''
    \162\ Original Medicare includes Medicare Part A (Hospital 
Insurance) and Medicare Part B (Medical Insurance) and covers 
services such as inpatient hospital care, outpatient services and 
office visits, tests, and preventive services. See, for example, 
CMS. (n.d.). What Original Medicare Covers. https://www.medicare.gov/providers-services/original-medicare.
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    We believe this proposal aligns closely with the criteria we have 
previously used for establishing the premium adjustment percentage 
methodology. As discussed in the 2015 Payment Notice (79 FR 13801 
through 13804) and 2020 Payment Notice (84 FR 17537 through 17541), we 
considered four criteria when finalizing the premium adjustment 
percentage methodology for those plan years:
    (1) Comprehensiveness--the premium adjustment percentage should be 
calculated based on the average per capita premium for health insurance 
coverage for the entire market, including the individual and group 
markets, and both fully insured and self-insured group health plans;
    (2) Availability--the data underlying the calculation should be 
available by the summer of the year that is prior to the calendar year 
so that the premium adjustment percentage can be published in the 
annual HHS notice of benefit and payment parameters in time for issuers 
to develop their plan designs;
    (3) Transparency--the methodology for estimating the average 
premium should be easily understandable and predictable; and
    (4) Accuracy--the methodology should have a record of accurately 
estimating average premiums.
    Using this methodology, we originally proposed a more comprehensive 
measure that reflected the entire market in the 2015 Payment Notice 
proposed rule (78 FR 72359 through 72361). We only deviated from fully 
following the comprehensiveness criteria in the 2015 Payment Notice (79 
FR 13801 through 13804) to account for the significant changes 
occurring in the individual market during the initial years of the 
implementation of the ACA's insurance market rules. As we noted at that 
time, under these market rules, the individual market was likely to be 
the most affected by changes in benefit design and market composition. 
Due to the uncertainty over how these changes would impact enrollment 
and enrollee claims experience, the individual market was also more 
likely to be subject to risk premium pricing to account for this 
uncertainty. Thus, we anticipated a level of premium volatility in the 
individual market that may compromise the criteria for accuracy in 
estimating the premium for the entire market. As noted previously, we 
further anticipated changing the methodology once the premium trend was 
more stable and, accordingly, we then changed the methodology in the 
2020 Payment Notice (84 FR 17537 through 17541) to include individual 
market premiums after premium trends stabilized.
    When we established the current premium adjustment percentage 
methodology in part 2 of the 2022 Payment Notice (86 FR 24233 through 
24237), we focused on how we believed the change would mitigate the 
uncertainty regarding premium growth during the COVID-19 PHE and 
outlined similar concerns over the accuracy of premium estimates as we 
had during the initial years of the ACA's market rules. Specifically, 
we referenced that private health insurance premiums are more likely to 
be influenced by risk premium pricing, or premium pricing based on 
changes in benefit design and market composition in the individual 
market. Particularly during times of economic uncertainty, such as that 
experienced as a result of the COVID-19 PHE, we noted how private 
health insurance premium growth could reflect issuer uncertainty in 
market developments and could be reflected in the NHEA private 
insurance premium measure (excluding Medigap and property and casualty 
insurance). Due to these concerns, we noted that we believed NHEA ESI 
premium data would provide a more stable premium measure. Therefore, we 
concluded that using the NHEA ESI premium measure would provide a more 
appropriate and fair measure of average per capita premiums for health 
insurance coverage when considering the goal of consumer protection.
    We published the current premium adjustment percentage methodology 
in part 2 of the 2022 Payment Notice (86 FR 24233 through 24237) on May 
5, 2021, during the COVID-19 PHE. As noted above, we finalized this 
methodology after concluding in part that it was consistent with the 
will and interest of interested parties. After taking into 
consideration changes in circumstances since this time (including the 
end of the COVID-19 PHE) and examining new data on health insurance 
premiums that have since become available, we believe it is appropriate 
to add individual market premiums back to the premium adjustment 
percentage methodology. We acknowledge that a higher number of comments 
can suggest a position we should consider more closely. However, we 
must also consider that many parties who comment on rulemaking may 
represent the will of special interests who do not necessarily 
represent all special interests or the general public interest in the 
faithful and efficient administration of the

[[Page 12990]]

statute. It is not uncommon to receive comments that only represent one 
side and no opposing comments that might represent other special 
interests or a more general interest in good governance or the equities 
of the taxpayer. As our constitutional role is to faithfully execute 
the statute, we are responsible for considering all comments, as well 
as perspectives that may not be fully represented in comments, within 
the context of what the statute requires.
    We have also revisited the rationale for establishing the current 
premium adjustment percentage based, in part, on how it aligns with 
certain policy objectives, such as objectives that emphasize making 
health coverage accessible and affordable for consumers of all income 
levels. Specifically, the ACA directs the Secretary to base the premium 
adjustment percentage on ``the average per capita premium for health 
insurance coverage in the United States'' \163\ and does not provide 
further direction on the premium measure to use, giving the Secretary 
discretion over what premium measure to select. Consideration of other 
policy objectives in selecting this premium measure should not 
undermine or weaken the specific objective that Congress intended for 
the statutory provision to meet. Here, the premium adjustment 
percentage is the mechanism in the ACA meant to ensure that certain 
parameters of the ACA change with health insurance premiums over time. 
As such, the premium adjustment percentage serves a specific objective 
to ensure that annual limits on cost sharing, eligibility for hardship 
exemptions, and employer shared responsibility payment amounts remain 
aligned with premium growth to account for future inflation. We believe 
accounting for other policy objectives, such as making coverage more 
accessible and affordable or reducing the burden on taxpayers, can only 
serve to distort the alignment the ACA requires HHS to maintain between 
premium growth and the parameters subject to the premium adjustment 
percentage. Therefore, we continue to believe the four criteria of 
comprehensiveness, availability, transparency, and accuracy that we 
first identified in the 2015 Payment Notice (79 FR 13801 through 13804) 
remain the best guide for setting a methodology that supports the 
objective of the premium adjustment percentage within the statute.
---------------------------------------------------------------------------

    \163\ See Section 1302(c)(4) of the ACA.
---------------------------------------------------------------------------

    Although we did not reference these criteria in part 2 of the 2022 
Payment Notice (86 FR 24233 through 24237), part of our justification 
did align with how we used the criteria in the 2015 Payment Notice (79 
FR 13801 through 13804). Specifically, we were concerned that there was 
a potential for uncertainty in the private health insurance premium 
measure that includes the individual market due to issuer responses to 
the COVID-19 PHE, impacting the accuracy of a premium measure that 
included individual market premiums. However, we now have evidence that 
the COVID-19 PHE did not create the same uncertainty in the individual 
market that was present during the initial implementation of the ACA. 
As discussed previously, we decided to not use individual market 
premiums in the 2015 Payment Notice (79 FR 13801 through 13804) due to 
the uncertainty over how the ACA's market rules would change benefit 
designs and market composition of the individual market and how this 
uncertainty would be more likely to subject the individual market to 
risk premium pricing than the ESI market. We largely made the same 
points in part 2 of the 2022 Payment Notice (86 FR 24233 through 24237) 
to justify not using individual market premiums due to uncertainty 
around the COVID-19 PHE. Yet, the COVID-19 PHE did not introduce new 
benefit designs as the implementation of the ACA's market rules did. 
The COVID-19 PHE also did not introduce a clear and distinctive risk to 
the market composition of the individual market. Individual and group 
markets were similarly exposed to the health risks associated with the 
COVID-19 PHE. Although there was uncertainty over whether the 
individual market would enroll more people who lost ESI due to COVID-19 
PHE-related job losses, there was no reason to believe this population 
would introduce a higher risk to the individual market pool. By 
comparison, in the early period of implementation, the ACA's market 
rules were expected to shift large numbers of people with potentially 
high claims costs who lacked insurance or were covered in State high-
risk pools into the individual market risk pool. Consequently, the 
individual market premiums were not subject to any more uncertainty due 
to the COVID-19 PHE than ESI premiums and each market would, therefore, 
likely face similar levels of risk premium pricing due to the COVID-19 
PHE. Based on this analysis, we do not believe that the rationales we 
cited in part 2 of the 2022 Payment Notice (86 FR 24233 through 24237) 
continue to justify removing individual market premiums from the 
premium adjustment methodology.
    After reviewing trends between individual premiums and ESI 
premiums, we now believe that individual premiums remained stable 
during the COVID-19 PHE. As shown in Table 6, per enrollee expenditure 
growth from the NHEA historical tables was actually more stable in the 
on-Exchange individual market than ESI during the COVID-19 PHE, with 
significantly lower premium growth rates in every year from 2019 
through 2023.\164\ Moreover, premiums for other forms of direct 
purchase insurance,\165\ which would also be included in the private 
health insurance premiums (excluding Medigap and property and casualty 
insurance) measure have had lower growth rates than ESI from 2021 
through 2023 and have experienced lower growth rates since 2019 than in

[[Page 12991]]

years prior to the COVID-19 PHE. Similarly, a comparison of premiums 
from medical loss ratio data \166\ in Table 7 shows individual market 
premiums remained more stable than small group and large group premiums 
from 2019 through 2023. In addition, based on our review of premium 
trends before 2014, individual market premium trends were also 
comparably stable to ESI. Taken together, these data suggest that the 
COVID-19 PHE did not result in greater volatility in the individual 
market than in the ESI market as had been anticipated in part 2 of the 
2022 Payment Notice (86 FR 24233 through 24237). Instead, the premium 
data show premium trends remained generally stable between individual 
and ESI markets outside the initial years of the ACA's market rules 
including years impacted by the COVID-19 PHE, suggesting that a more 
comprehensive measure of premium growth for these years would also be a 
more accurate measure. As such, we do not believe there is a 
justification for de-prioritizing the comprehensiveness criterion by 
excluding individual market premiums from the premium adjustment 
percentage methodology for PY 2026 and beyond.
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    \164\ See the ``NHE Tables'' link under the ``Downloads 
Section'' at CMS. (2024, Dec. 18). NHE Historical Data. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical (Page Updated December 18, 2024; 
Retrieved January 29, 2025). We use the historical tables for this 
analysis because they reflect estimates of actual 2023 values and 
have been updated more recently than the projected tables used to 
calculate the premium adjustment percentage. The historical tables 
do not include a grouped measure of private health insurance 
premiums (excluding Medigap and property and casualty insurance), so 
we have separate columns for On Exchange and Other Direct Purchase, 
which are the major components of the proposed premium measure. The 
projected tables include a measure of private health insurance 
premiums (excluding Medigap and property and casualty insurance), 
but do not include separate measures of On Exchange and Other Direct 
Purchase premiums and only include projections of values (that is, 
non-historical values) after 2022. The projected tables are expected 
to be updated in the summer 2025 to match the values in the 
historical tables through 2023 for ESI premiums and will also 
include updated historical values for private health insurance 
premiums (excluding Medigap and property and casualty insurance) at 
that time. Consistent with the policy finalized in the 2021 Payment 
Notice (85 FR 29227 through 29229), even if the NHEA projected 
tables are updated before the publication of the final rule, we will 
finalize the payment parameters that depend on the NHEA projected 
tables data, including the premium adjustment percentage and 
required contribution percentage, based on the data that are 
available as of the publication of the proposed rule to increase the 
predictability of benefit design.
    \165\ This category of insurance premiums includes insurance 
purchased on the private market that is not associated with an 
employer or a Medigap or Exchange plan. Examples of direct purchase 
insurance include group plans purchased through AARP or other 
associations, individual market plans (both plans that are subject 
to the ACA market rules and those that are not subject to all the 
ACA market rules, such as grandfather and grandmother plans), Short-
Term Limited Duration (STLD) health plans, and the Basic Health 
Program (BHP). See the Definitions, Sources, and Methods used for 
the OACT estimates, available at: CMS. (December 18, 2024). NHE 
Historical Data. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical.
    \166\ See the Public Use Files for Medical Loss Ratio reporting 
available at CMS. (December 23, 2024). Medical Loss Ratio Data and 
System Resources. https://www.cms.gov/marketplace/resources/data/medical-loss-ratio-data-systems-resources.
[GRAPHIC] [TIFF OMITTED] TP19MR25.005

[GRAPHIC] [TIFF OMITTED] TP19MR25.006

    We believe removing individual market premiums from the premium 
adjustment percentage methodology was an unnecessary policy change that 
seemed reasonable during the COVID-19 PHE. As noted previously, this 
deviation from the full application of the four criteria we first 
identified in the 2015 Payment Notice (79 FR 13801 through 13804) was 
intended to favor accuracy over comprehensiveness. However, our 
analysis of recent data suggests that the justification we cited in 
part 2 of the 2022 Payment Notice (86 FR 24233 through 24237) that 
individual market premiums were at greater risk of a volatile response 
to the COVID-19 PHE did not prove to be correct.
    Using the private health insurance premium measure data (excluding 
Medigap and property and casualty insurance) proposed above, we propose 
that the premium adjustment percentage for PY 2026 be the percentage 
(if any) by which the most recent NHEA projection of per enrollee 
premiums for private health insurance (excluding Medigap and property 
and casualty

[[Page 12992]]

insurance) for 2025 ($7,885) exceeds the most recent NHEA estimate of 
per enrollee premiums for private health insurance (excluding Medigap 
and property and casualty insurance) for 2013 ($4,714).\167\ Using this 
formula, the proposed premium adjustment percentage for 2026 would be 
1.6726771319 ($7,885/$4,714), which would be an increase in private 
health insurance (excluding Medigap and property and casualty 
insurance) premiums of approximately 67.3 percent over the period from 
2013 to 2025 and would reflect an overall growth rate for this period 
that would be approximately 7.2 percentage points higher than the 
overall growth rate reflected by the previously published PY 2026 
premium adjustment percentage \168\ (1.6002042901).
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    \167\ The 2013 and 2025 premiums used for this calculation 
reflect the latest NHEA data. The series used in the determinations 
of the adjustment percentages can be found in Tables 1 and 17 on the 
CMS website, which can be accessed by clicking the ``NHE Projections 
2023-2032--Tables'' link located in the Downloads section at https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/projected. A detailed description of the NHE 
projection methodology is available at CMS. (2024, June 12). 
Projections of National Health Expenditures and Health Insurance 
Enrollment: Methodology and Model Specification. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/downloads/projectionsmethodology.pdf
    \168\ See CMS. (2024, Oct. 8). Premium Adjustment Percentage, 
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual 
Limitation on Cost Sharing, and Required Contribution Percentage for 
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
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    We believe that our proposal to use per enrollee private health 
insurance premiums (excluding Medigap and property and casualty 
insurance) in the premium adjustment percentage calculation could 
result in a more comprehensive and higher overall estimate of premium 
growth rate for the foreseeable future than if we continued to use only 
ESI premiums as in prior plan years. This higher overall growth rate is 
driven by the fact that, between 2015 and 2018, private individual 
health insurance market per enrollee premiums offered on-Exchange grew 
faster than ESI premiums, most notably in PY 2017 and PY 2018 (See 
Table 6). However, we note that on-Exchange individual market premiums 
\169\ have grown more slowly than ESI premiums since 2019. If this 
trend continues, then the immediate impact of a higher overall premium 
growth rate for PY 2026 could be reduced in the future, which may lead 
to a lower overall growth rate over the long-term.
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    \169\ See the ``NHE Tables'' link under the ``Downloads 
Section'' at CMS. (2024, Dec. 18). NHE Historical Data. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/historical (Page Updated December 18, 2024; 
Retrieved January 29, 2025). We use the historical tables for this 
analysis because they reflect estimates of actual 2023 values and 
have been updated more recently than the projected tables used to 
calculate the premium adjustment percentage. The historical tables 
do not include a grouped measure of private health insurance 
premiums (excluding Medigap and property and casualty insurance), so 
we have separate columns for On Exchange and Other Direct Purchase, 
which are the major components of the proposed premium measure. The 
projected tables include a measure of private health insurance 
premiums (excluding Medigap and property and casualty insurance), 
but do not include separate measures of On Exchange and Other Direct 
Purchase premiums and only include projections of values (that is, 
non-historical values) after 2022. The projected tables are expected 
to be updated in the summer 2025 to match the values in the 
historical tables through 2023 for ESI premiums and will also 
include updated historical values for private health insurance 
premiums (excluding Medigap and property and casualty insurance) at 
that time. Consistent with the policy finalized in the 2021 Payment 
Notice (85 FR 29227 through 29229), even if the NHEA projected 
tables are updated before the publication of the final rule, we will 
finalize the payment parameters that depend on the NHEA projected 
tables data, including the premium adjustment percentage and 
required contribution percentage, based on the data that are 
available as of the publication of the proposed rule to increase the 
predictability of benefit design.
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    We anticipate that this proposed change could have several impacts 
on the health insurance market. As explained above, the premium 
adjustment percentage is used to set the rate of increase for the 
maximum annual limitation on cost sharing, the required contribution 
percentage used to determine eligibility for certain exemptions under 
section 5000A of the Code, and the employer shared responsibility 
payment amounts under section 4980H(a) and (b) of the Code. 
Accordingly, a more comprehensive premium adjustment percentage that 
reflects a faster premium growth rate would result in a higher maximum 
annual limitation on cost sharing, higher reduced annual limitations on 
cost sharing, a higher required contribution percentage, and higher 
employer shared responsibility payment amounts than if the current 
premium adjustment percentage premium measure (ESI only) were used for 
PY 2026.
    Furthermore, to date the Department of the Treasury and the IRS 
have used the same measures for determining the applicable percentage 
in section 36B(b)(3)(A) of the Code and the required contribution 
percentage in section 36B(c)(2)(C) of the Code as those selected by HHS 
for the calculation of the premium adjustment percentage.\170\ The 
applicable percentage in section 36B(b)(3)(A) of the Code is used to 
determine the amount an individual must contribute to the cost of an 
Exchange QHP and thus relates to the amount of the individual's PTC. 
This is because, in general, an individual's PTC is the lesser of (1) 
the premiums paid for the Exchange QHP, and (2) the excess of the 
premium for the benchmark plan over the contribution amount. The 
contribution amount is the product of the individual's household income 
and the applicable percentage.
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    \170\ Section 36B(b)(3)(A)(ii) of the Code generally provides 
that the applicable percentages are to be adjusted after 2014 to 
reflect the excess of the rate of premium growth over the rate of 
income growth for the preceding year. Section 36B(c)(2)(C) of the 
Code provides that the required contribution percentage is to be 
adjusted after 2014 in the same manner as the applicable percentages 
are adjusted in section 36B(b)(3)(A)(ii) of the Code. The Department 
of the Treasury and the IRS has provided in annual guidance that the 
rate of premium growth for purposes of the section 36B provisions 
would be based on the same measures HHS selected following HHS' 
establishment of the methodology for calculating premium growth for 
purposes of the premium adjustment percentage using NHEA ESI for 
benefit years 2015-2019 (See IRS Rev. Proc. 2014-37), NHEA private 
health insurance (excluding Medigap and property and casualty 
insurance) for PYs 2020-2021 (See IRS Rev. Proc. 2019-29), and NHEA 
ESI for PYs 2022-2025 (See IRS Rev. Proc. 2021-36).
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    The required contribution percentage in section 36B(c)(2)(C) of the 
Code is used to determine whether an offer of ESI is considered 
affordable for an individual, which relates to eligibility for the PTC 
because an individual with an offer of affordable ESI that provides 
minimum value is ineligible for the PTC. Specifically, an offer of ESI 
is considered affordable for an individual if the employee's required 
contribution for ESI is less than or equal to the required contribution 
percentage (set at 9.5 percent in 2014) of the individual's household 
income.\171\
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    \171\ See also IRS Notice 2015-87, Q&A 12 for discussion of the 
adjustment of the required contribution percentage as applied for 
certain purposes under sections 4980H and 6056 of the Code.
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    Section 36B(b)(3)(A)(ii) of the Code generally provides that the 
applicable percentages are to be adjusted after 2014 to reflect the 
excess of the rate of premium growth over the rate of income growth for 
the preceding year. Section 36B(c)(2)(C) of the Code provides that the 
required contribution percentage is to be adjusted after 2014 in the 
same manner as the applicable percentages are adjusted in section 
36B(b)(3)(A)(ii) of the Code. As noted above, the Department of the 
Treasury and the IRS have provided in annual guidance that the rate of 
premium growth for purposes of these section 36B provisions is based on 
the same measures as those selected by HHS for the calculation of the

[[Page 12993]]

premium adjustment percentage.\172\ If we finalize a change to the 
premium measure used in the premium adjustment percentage for PY 2026, 
we expect the Department of the Treasury and the IRS to adopt the same 
premium measure for purposes of future indexing of the applicable 
percentage and required contribution percentage under section 36B of 
the Code.
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    \172\ Section 36B(b)(3)(A)(ii) of the Code generally provides 
that the applicable percentages are to be adjusted after 2014 to 
reflect the excess of the rate of premium growth over the rate of 
income growth for the preceding year. Section 36B(c)(2)(C) of the 
Code provides that the required contribution percentage is to be 
adjusted after 2014 in the same manner as the applicable percentages 
are adjusted in section 36B(b)(3)(A)(ii) of the Code. The Department 
of the Treasury and the IRS has provided in annual guidance that the 
rate of premium growth for purposes of the section 36B provisions 
would be based on the same measures HHS selected following HHS' 
establishment of the methodology for calculating premium growth for 
purposes of the premium adjustment percentage using NHEA ESI for 
benefit years 2015-2019 (See IRS Rev. Proc. 2014-37), NHEA private 
health insurance (excluding Medigap and property and casualty 
insurance) for PYs 2020-2021 (See IRS Rev. Proc. 2019-29), and NHEA 
ESI for PYs 2022-2025 (See IRS Rev. Proc. 2021-36).
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    We anticipate that a measure of premium growth that reflects a 
faster premium growth rate would increase the portion of the premium 
the consumer is responsible for paying and therefore would decrease the 
amount of PTC for which consumers qualify under section 36B(b)(3)(A) of 
the Code. It also would increase the required contribution percentage 
under section 36B(c)(2)(C) of the Code, such that individuals with an 
offer of ESI would be more likely to be ineligible for the PTC. 
Therefore, we anticipate that adding individual premiums to the premium 
adjustment methodology would reduce the tax expenditure associated with 
PTCs. However, we anticipate this reduction in the availability of PTC 
would increase net premiums for consumers who are currently eligible 
for PTC and, as a result, contribute to a small decline in Exchange 
enrollment. It is possible that this could ultimately result in small 
net premium increases for enrollees that remain in the individual 
market, both on and off the Exchanges, if healthier enrollees elect not 
to purchase Exchange coverage.
    Additionally, we are aware that the annual limitation on cost 
sharing is often a limiting factor for issuers in designing plan 
parameters that meet the permissible de minimis ranges for bronze plans 
at Sec.  156.140.\173\ The increase in the premium adjustment 
percentage and maximum annual limitation on cost sharing created by 
incorporating the more comprehensive measure of private health 
insurance premiums (excluding Medigap and property and casualty 
insurance) may help to provide additional flexibility for issuers to 
design plans at the bronze metal level by allowing issuers to meet AV 
requirements through lower deductibles, coinsurance, and copay 
parameters rather than through setting a maximum out-of-pocket limit 
equal or less than the lower maximum annual limitation on cost sharing 
calculated using the ESI-based premium adjustment percentage.
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    \173\ Section 156.140 defines bronze health plans as a health 
plan that has an AV of 60 percent.
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    We seek comment on the proposal to revert to the premium adjustment 
percentage methodology finalized in the 2020 Payment Notice (84 FR 
17537 through 17541) using private health insurance premiums (excluding 
Medigap and property and casualty insurance premiums) to estimate the 
growth in premiums for PY 2026 and beyond. We also seek comment on the 
proposed premium adjustment percentage for PY 2026 of 1.6726771319.
    Additionally, based on the proposed PY 2026 premium adjustment 
percentage, we propose the following cost-sharing parameters for PY 
2026, including the maximum annual limitation on cost sharing, the 
reduced maximum annual limitations on cost sharing, and the required 
contribution percentage in the following subsections.
a. Maximum Annual Limitation on Cost Sharing for PY 2026
    Under Sec.  156.130(a)(2)(i), for PY 2026, cost sharing for self-
only coverage may not exceed the dollar limit for calendar year 2014 
increased by an amount equal to the product of that amount and the 
premium adjustment percentage for PY 2026. Under Sec.  
156.130(a)(2)(ii), for other than self-only coverage, the limit is 
twice the dollar limit for self-only coverage. Under Sec.  156.130(d), 
these amounts must be rounded down to the next lowest multiple of $50. 
Using the proposed premium adjustment percentage of 1.6726771319 for PY 
2026, and the 2014 maximum annual limitation on cost sharing of $6,350 
for self-only coverage, which was published by the IRS on May 2, 
2013,\174\ we propose that the PY 2026 maximum annual limitation on 
cost sharing would be $10,600 for self-only coverage and $21,200 for 
other than self-only coverage. This represents approximately a 15.2 
percent increase from the PY 2025 parameters of $9,200 for self-only 
coverage and $18,400 for other than self-only coverage and 
approximately a 4.4 percent increase from the previously published PY 
2026 parameters of $10,150 for self-only coverage and $20,300 for other 
than self-only coverage.\175\
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    \174\ See IRS. (n.d.) Rev. Proc. 2013-25. Dep't of Treasury. 
http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
    \175\ CMS. (2024, Oct. 8). Premium Adjustment Percentage, 
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual 
Limitation on Cost Sharing, and Required Contribution Percentage for 
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
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    We seek comment on this proposal.

b. Reduced Maximum Annual Limitation on Cost Sharing for PY 2026

    The reduced maximum annual limitations on cost sharing for cost-
sharing plan variations are determined using the methodology we 
established in the 2014 Payment Notice. In the 2014 Payment Notice (78 
FR 15410), we established standards related to the provision of these 
cost-sharing reductions (CSRs). Specifically, in 45 CFR part 156, 
subpart E, we specified that QHP issuers must provide CSRs by 
developing plan variations, which are separate cost-sharing structures 
for each eligibility category that change how the cost sharing required 
under the QHP is to be shared between the enrollee and the Federal 
Government.\176\ At Sec.  156.420(a), we detailed the structure of 
these plan variations and specified that QHP issuers must ensure that 
each silver plan variation has an annual limitation on cost sharing no 
greater than the applicable reduced maximum annual limitation on cost 
sharing specified in the annual HHS guidance or HHS notice of benefit 
and payment parameters. Although the amount of the reduction in the 
maximum annual limitation on cost sharing is specified in section 
1402(c)(1)(A) of the ACA, section 1402(c)(1)(B)(ii) of the ACA states 
that the Secretary may adjust the cost sharing limits to ensure that 
the resulting limits do not cause the AV of the health plans to exceed 
the levels specified in section 1402(c)(1)(B)(i) of the ACA (that is, 
70 percent, 73 percent, 87 percent, or 94 percent, depending on the 
income of the enrollee).
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    \176\ On October 12, 2017, the Attorney General issued a legal 
opinion that HHS did not have a Congressional appropriation with 
which to make CSR payments. Sessions III, J. (2017, Oct. 11). Legal 
Opinion Re: Payments to Issuers for Cost-Sharing Reductions (CSRs). 
Office of Attorney General. https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
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    We note that for PY 2026, as described in Sec.  156.135(d), States 
are permitted to request HHS approval of State-specific datasets for 
use as the standard population to calculate AV.

[[Page 12994]]

For PY 2026, no State submitted a dataset by the September 1, 2024 
deadline.
    As indicated in Table 8, we are proposing the values of the PY 2026 
reduced maximum annual limitation on cost sharing for self-only 
coverage at $3,500 for enrollees with household income greater than or 
equal to 100 percent of the FPL and less than or equal to 150 percent 
of the FPL, $3,500 for enrollees with household income greater than 150 
percent of the FPL and less than or equal to 200 percent of the FPL, 
and $8,450 for enrollees with household income greater than 200 and 
less than or equal to 250 percent of the FPL, as calculated using the 
proposed PY 2026 premium adjustment percentage and proposed PY 2026 
maximum annual limitation on cost sharing. These proposed values 
reflect 4.3 to 4.5 percent increases relative to the previously 
published PY 2026 parameters.\177\
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    \177\ See CMS. (2024, Oct. 8). Premium Adjustment Percentage, 
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual 
Limitation on Cost Sharing, and Required Contribution Percentage for 
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
[GRAPHIC] [TIFF OMITTED] TP19MR25.007

    Generally, to confirm consistency with past results of the analysis 
for the reduced maximum annual limitation on cost sharing, we tested 
the proposed PY 2026 reduced maximum annual limitations for cost 
sharing on the AV levels of silver level QHPs with varying cost sharing 
structures. We previously conducted this analysis in the October 2024 
PAPI Guidance \178\ with the following parameters for PY 2026 test 
plans: the test QHPs included a preferred provider organization (PPO) 
with typical cost sharing structure ($8,850 annual limitation on cost 
sharing, $3,250 deductible, and 25 percent in-network coinsurance 
rate); a PPO with a lower annual limitation on cost sharing ($6,650 
annual limitation on cost sharing, $4,500 deductible, and 25 percent 
in-network coinsurance rate); and a health maintenance organization 
(HMO) ($8,850 annual limitation on cost sharing, $3,700 deductible, 25 
percent in-network coinsurance rate, and the following services with 
copayments that are not subject to the deductible or coinsurance: $2500 
inpatient stay per day, $1200 emergency department visit, $35 primary 
care office visit, and $80 specialist office visit). We repeated this 
analysis for the proposed PY 2026 reduced annual limitations on cost 
sharing using the same test plans used in the October 2024 PAPI 
Guidance.\179\
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    \178\ CMS. (2024, Oct. 8). Premium Adjustment Percentage, 
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual 
Limitation on Cost Sharing, and Required Contribution Percentage for 
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
    \179\ Ibid.
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    We entered these test plans into a draft version of PY 2026 AV 
Calculator and observed how the proposed PY 2026 reductions in the 
maximum annual limitation on cost sharing specified in the ACA affected 
the AVs of the plans. We found that the proposed PY 2026 reductions in 
the maximum annual limitation on cost sharing using the parameters 
specified in section 1402(c)(1)(A)(i) the ACA for enrollees with a 
household income greater than or equal to 100 percent of the FPL and 
less than or equal to 150 percent of the FPL (\2/3\ reduction in the 
maximum annual limitation on cost sharing), and greater than 150 
percent of the FPL and less than or equal to 200 percent of the FPL 
(\2/3\ reduction), would not cause the AV of any of the model QHPs to 
exceed the AV levels of 94 and 87 percent, specified in sections 
1402(c)(2)(A) and (B) of the ACA for each of these income bands, 
respectively.

[[Page 12995]]

    As with prior years, and as with the findings described in the 
October 2024 PAPI Guidance,\180\ we continue to find that using the 
reduction in the maximum annual limitation on cost sharing specified in 
section 1402(c)(1)(A)(ii) of the ACA for enrollees with a household 
income greater than 200 percent of the FPL and less than or equal to 
250 percent of the FPL (\1/2\ reduction) would cause the AVs of 
multiple of the test QHPs to exceed the AV level of 73 percent 
specified for this income band in section 1402(c)(1)(B)(i)(III) of the 
ACA. Furthermore, as with prior years, for individuals with household 
incomes greater than 250 and less than or equal to 300 percent of the 
FPL, or greater than 300 and less than or equal to 400 percent of the 
FPL without any change in other forms of cost sharing, the reductions 
in the maximum annual limitation on cost sharing specified in sections 
1402(c)(1)(A)(ii) and (iii) of the ACA would cause an increase in AV 
for multiple of the test QHPs that exceeds the maximum 70 percent level 
set forth for these income bands in section 1402(c)(1)(B)(i)(IV) of the 
ACA.
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    \180\ Ibid.
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    Therefore, as has been the case since the 2015 Payment Notice (79 
FR 13803 through 13804), we propose to continue to reduce the maximum 
annual limitation on cost sharing by \2/3\ for enrollees with a 
household income greater than or equal to 100 percent of the FPL and 
less than or equal to 200 percent of the FPL, \1/5\ for enrollees with 
a household income greater than 200 percent of the FPL and less than or 
equal to 250 percent of the FPL, and no reduction for individuals with 
household incomes greater than 250 percent of the FPL and less than or 
equal to 400 percent of the FPL for PY 2026. The resulting proposed PY 
2026 reduced maximum annual limitations on cost sharing are displayed 
in Table 8 above.
c. Proposed Required Contribution Percentage at Sec.  155.605(d)(2) for 
PY 2026
    We calculate the required contribution percentage for each plan 
year using the most recent projections and estimates of premium growth 
and income growth over the period from 2013 to the preceding calendar 
year (that is, the 2025 calendar year, in the case of PY 2026 required 
contribution percentage). Accordingly, we are proposing the required 
contribution percentage for PY 2026, calculated using income and 
premium growth data for the 2013 and 2025 calendar years.
    Section 5000A of the Code imposes an individual shared 
responsibility payment on non-exempt individuals who do not have MEC 
for each month. Under Sec.  155.605(d)(2), an individual is allowed a 
coverage exemption (the affordability exemption) for months in which 
the amount the individual would pay for MEC exceeds a percentage, 
called the required contribution percentage, of the individual's 
household income. Although the Tax Cuts and Jobs Act \181\ reduced the 
individual shared responsibility payment to $0 for months beginning 
after December 31, 2018, the required contribution percentage is still 
used to determine whether individuals ages 30 and above qualify for an 
affordability exemption that would enable them to enroll in 
catastrophic coverage under Sec.  155.305(h).
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    \181\ Public Law 115-97, 131 Stat, 2054.
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    The initial 2014 required contribution percentage under section 
5000A of the Code was 8 percent. For plan years after 2014, section 
5000A(e)(1)(D) of the Code and Treasury regulations at 26 CFR 1.5000A-
3(e)(2)(ii) provide that the required contribution percentage is the 
percentage determined by the Secretary that reflects the excess of the 
rate of premium growth between the preceding calendar year and 2013, 
over the rate of income growth for that period.
    As the measure of income growth for a calendar year, we established 
in the 2017 Payment Notice (81 FR 12281 through 12282) that we would 
use NHEA projections of per capita personal income (PI). The rate of 
income growth for PY 2026 is the percentage (if any) by which the NHEA 
Projections 2023-2032 value for per capita PI for the preceding 
calendar year ($74,083 for 2025) exceeds the NHEA Projections 2023-2032 
value for per capita PI for 2013 ($44,559), carried out to ten 
significant digits. The rate of income growth from 2013 to 2025 is 
therefore 1.6625821944 ($74,083/$44,559). Using PY 2026 premium 
adjustment percentage proposed in this rule, the excess of the rate of 
premium growth over the rate of income growth for 2013 to 2025 would be 
1.6726771319 / 1.6625821944, or 1.0060718427. This results in the 
proposed PY 2026 required contribution percentage under section 5000A 
of the Code of 8.00 x 1.0060718427 or 8.05 percent, when rounded to the 
nearest one-hundredth of 1 percent, an increase of approximately 0.77 
percentage points above the 2025 value (7.28 percent) and an increase 
of approximately 0.35 percentage points above the previously published 
PY 2026 value \182\ (7.70 percent).
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    \182\ See CMS. (2024, Oct. 8). Premium Adjustment Percentage, 
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual 
Limitation on Cost Sharing, and Required Contribution Percentage for 
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
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    We note that these proposals do not alter the policy established in 
the 2022 Payment Notice (86 FR 24237 through 24238) that we will 
publish the premium adjustment percentage, along with the maximum 
annual limitation on cost sharing, the reduced maximum annual 
limitation on cost sharing, and the required contribution percentage, 
in guidance by January of the year preceding the applicable plan year, 
unless we are amending the methodology to calculate these parameters, 
in which case we would amend the methodology and publish the parameters 
through notice-and-comment rulemaking.
    If finalized as proposed, the values for the PY 2026 premium 
adjustment percentage, maximum annual limitation on cost sharing, 
reduced maximum annual limitations on cost sharing and required 
contribution percentage proposed in this rule would supersede the 
values published in the October 2024 PAPI Guidance.\183\ We seek 
comment on the proposal to revert to the premium adjustment percentage 
methodology finalized in the 2020 Payment Notice (84 FR 17537 through 
17541) using private health insurance premiums (excluding Medigap and 
property and casualty insurance premiums) to estimate the growth in 
premiums for PY 2026 and beyond. We also seek comment on the values for 
the PY 2026 premium adjustment percentage, maximum annual limitation on 
cost sharing, reduced maximum annual limitations on cost sharing and 
required contribution percentage proposed in this rule.
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    \183\ Ibid.
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3. Levels of Coverage (Actuarial Value) (Sec. Sec.  156.140, 156.200, 
156.400)
    We propose to change the de minimis ranges at Sec.  156.140(c) 
beginning in PY 2026 to +2/-4 percentage points for all individual and 
small group market plans subject to the AV requirements under the EHB 
package, other than for expanded bronze plans, for which we propose a 
de minimis range of +5/-4 percentage points. We also propose to revise 
Sec.  156.200(b)(3) to remove from the conditions of QHP certification 
the de minimis range of +2/0 percentage points for individual market 
silver QHPs. We also propose to amend the

[[Page 12996]]

definition of ``de minimis variation for a silver plan variation'' in 
Sec.  156.400 to specify a de minimis range of +1/-1 percentage points 
for income-based silver CSR plan variations.
    Section 2707(a) of the PHS Act and section 1302 of the ACA direct 
issuers of non-grandfathered individual and small group health 
insurance plans (including QHPs) to ensure that these plans adhere to 
the levels of coverage specified in section 1302(d)(1) of the ACA. 
Section 1302(d)(2) of the ACA provides that a level of coverage of a 
plan, or its actuarial value (AV), is determined based on its coverage 
of the EHB for a standard population. Sections 1302(d)(1)(A)-(D) of the 
ACA require a bronze plan to have an AV of 60 percent, a silver plan to 
have an AV of 70 percent, a gold plan to have an AV of 80 percent, and 
a platinum plan to have an AV of 90 percent. Section 1302(d)(2) of the 
ACA directs the Secretary to issue regulations on the calculation of AV 
and its application to the levels of coverage. Section 1302(d)(3) of 
the ACA authorizes the Secretary to develop guidelines to provide for a 
de minimis variation in the AVs used in determining the level of 
coverage of a plan to account for differences in actuarial estimates.
    In the EHB Rule (78 FR 12834), we established at Sec.  156.140(c) 
that the allowable de minimis variation in the AV of a health plan that 
does not result in a material difference in the true dollar value of 
the health plan was +2/-2 percentage points. In the 2018 Payment 
Notice, we revised Sec.  156.140(c) to permit a de minimis variation of 
+5/-2 percentage points for bronze plans that either cover and pay for 
at least one major service other than preventive services before the 
deductible or meet the requirements to be a high deductible health plan 
within the meaning of section 223(c)(2) of the Code.
    In the 2017 Market Stabilization Rule, effective beginning in PY 
2018, we expanded the de minimis range for standard bronze, silver, 
gold, and platinum plans to +2/-4 percentage points.\184\ In that final 
rule (82 FR 18368), we stated that we believed that flexibility was 
needed for the AV de minimis range for metal levels to help issuers 
design new plans for future plan years, thereby promoting competition 
in the market. In addition, we noted that changing the de minimis range 
would allow more plans to keep their cost sharing the same as well as 
provide additional flexibility for issuers to make adjustments to their 
plans within the same metal level. We stated our view that a de minimis 
range of +2/-4 percentage points provided the flexibility necessary for 
issuers to design new plans while ensuring comparability of plans 
within each metal level.
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    \184\ We did not in that rule modify the de minimis range for 
the income-based silver CSR plan variations (the plans with an AV of 
73, 87 and 94 percent) under Sec. Sec.  156.400 and 156.420. The de 
minimis variation for an income-based silver CSR plan variation is a 
single percentage point. In the Actuarial Value and Cost-Sharing 
Reductions Bulletin (2012 Bulletin) issued on February 24, 2012, we 
explained why we did not intend to require issuers to offer a silver 
CSR plan variation with an AV of 70 percent; to align with this 
change, we also modified the de minimis range for expanded bronze 
plans from +5/-2 to +5/-4.
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    In the 2023 Payment Notice (87 FR 27306 through 27308), effective 
beginning in PY 2023, we narrowed the de minimis range for standard 
bronze, silver, gold, and platinum plans to +2/-2 percentage points, 
narrowed the de minimis range for expanded bronze to +5/-2 percentage 
points, and narrowed the de minimis range for income-based silver CSR 
plan variations to +1/0 percentage points. We also established, as a 
condition of QHP certification, that individual market silver QHPs must 
have an AV of 70 percent with a de minimis allowable AV variation of 
+2/0 percentage points. As discussed in the 2023 Payment Notice (87 FR 
27307), we made these changes due to concerns that a wider de minimis 
range jeopardized the meaningful comparison of plans between the silver 
and bronze levels of coverage. In that rule (87 FR 27307), we also 
narrowed the de minimis range for individual market silver QHPs in 
order to maximize PTC and APTC for subsidized enrollees, noting that 
narrowing the de minimis range of individual market silver QHPs would 
influence the generosity of the SLCSP, the benchmark plan for 
calculating PTC and APTC.
    Since we finalized these de minimis ranges in the 2023 Payment 
Notice, we have received considerable feedback from issuers that 
indicates narrower de minimis ranges substantially reduce issuer 
flexibility in establishing plan cost sharing. These issuers have 
expressed that any benefit to consumers that result from improvements 
to the comparability between the levels of coverage is outweighed by 
the harm to consumers caused by reduced issuer flexibility in setting 
non-standardized cost-sharing parameters, and as a result, harm to the 
health of the overall risk pool. Due to these effects, issuers have 
also voiced concern about their ability to continue to participate in 
the market generally. Sustained, robust issuer participation in the 
market is key to ensuring overall market stability and keeping costs 
down.
    Based on this feedback, we are proposing to change the de minimis 
ranges at Sec.  156.140(c) beginning in PY 2026 to +2/-4 percentage 
points for all individual and small group market plans subject to the 
AV requirement, other than for expanded bronze plans,\185\ for which we 
propose a de minimis range of +5/-4 percentage points. We believe that 
reverting to the de minimis ranges in effect from PYs 2018 to 2022 
offers the best balance between comparability between the levels of 
coverage and issuer flexibility in establishing competitive cost-
sharing designs that appeal to wide segments of the population. With 
this proposal, we note that an expansion of the universe of permissible 
plan AVs would not preclude issuers from continuing to design plans 
with an AV that is closer to the middle of the applicable de minimis 
ranges instead of plans at the outer limits. To the extent that issuers 
believe that plan designs that have a higher AV would attract 
enrollment, they would remain free to do so under this proposal.
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    \185\ Expanded bronze plans are bronze plans currently 
referenced in Sec.  156.140(c) that cover and pay for at least one 
major service, other than preventive services, before the deductible 
or meet the requirements to be a high deductible health plan within 
the meaning of section 223(c)(2) of the Code.
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    We also propose, through the authority granted to HHS in sections 
1311(c) and 1321(a) of the ACA to establish minimum requirements for 
QHP certification, to revise Sec.  156.200(b)(3) to remove from the 
conditions of QHP certification the de minimis range of +2/0 percentage 
points for individual market silver QHPs. Under this proposal, we would 
amend Sec.  156.200(b)(3) to revert to the original regulatory text 
finalized in the 2012 Exchange Establishment rule (77 FR 18469), which 
states that, as a condition of QHP certification, issuers must 
``[e]nsure that each QHP complies with benefit design standards, as 
defined in Sec.  156.20.'' We believe that the removal of this QHP 
certification requirement is justified because we are no longer of the 
view that this certification requirement, which was finalized in the 
2023 Payment Notice, is in the best interests of the overall risk pool.
    In that rule, we explained narrowing the de minimis range of 
individual market silver QHPs would influence the generosity of the 
SLCSP, the benchmark plan for calculating PTC and APTC for subsidized 
consumers. While narrowing the de minimis range in this way has such an 
effect on PTC and APTC to improve affordability for subsidized 
consumers, it comes at the expense of

[[Page 12997]]

affordability for unsubsidized consumers. We believe attracting these 
unsubsidized consumers to participate in the risk pool may help to 
drive down overall costs by expanding the risk pool. In turn, we 
believe premiums for all consumers in the risk pool may be lower.
    Maximizing premium tax credits with a +2/0 percentage point de 
minimis range for individual market silver QHPs created imbalance 
between access and affordability for all consumers, particularly for 
unsubsidized ones. We believe this certification requirement can have 
the effect of damaging the overall health of the risk pool, which in 
turn may make coverage less affordable overall than it could have been 
as healthier, unsubsidized enrollees are priced out of the market. 
While pushing for increased subsidies may make coverage more affordable 
for certain consumers in the very short term, this is a short-sighted 
approach to regulating the AV de minimis ranges. We believe that lower 
AVs would lead to lower premiums, and in turn potentially improve the 
risk pool as coverage becomes more affordable for generally healthy 
people who currently may opt to forgo coverage altogether. Although 
this may mean that those eligible for APTCs receive less money in tax 
credits, we believe that in the long term there would be a sufficient 
choice of affordable plans. We also believe reverting the de minimis 
range of individual market silver QHPs back to +2/-4 percentage points 
is the best method for balancing the affordability of health plans for 
all segments of the population enrolled in non-grandfathered individual 
and small group market plans with the long-term viability of the 
overall risk pool.
    Finally, we propose to revise the definition of ``de minimis 
variation for a silver plan variation'' at Sec.  156.400 to change the 
de minimis variation for individual market income-based silver CSR plan 
variations from +1/0 percentage points to +1/-1 percentage points. 
Similar to the removal of the de minimis certification requirement for 
individual market silver QHPs, this proposal would deliver further 
balance between affordability and market stabilization. We do not 
propose edits to the minimum AV differential in Sec.  156.420(f) for 
silver QHPs and 73 percent income-based plan variations, where the AVs 
must differ by at least 2 percentage points. We would note for issuers 
that, similar to the current de minimis ranges, standard silver QHPs 
with plan AVs between 71 and 72 percent would require the corresponding 
73 percent income-based plan variation AV to be at least 2 percentage 
points above the standard plan's AV.
    We seek comment on this proposal.

D. Applicability

    Some proposals in this rule, if finalized, would become applicable 
beginning on or after January 1, 2026. These proposal include the 
proposed provisions requiring all Exchanges to conduct pre-enrollment 
verification of eligibility for individual market SEPs and to verify at 
least 75 percent of new enrollments through SEPs, as well as the 
proposed prohibition on issuers of coverage subject to EHB requirements 
covering sex trait modification as EHB, would be applicable for plan 
years beginning on or after January 1, 2026. Also, if finalized, the 
proposal to update the premium adjustment percentage methodology would 
apply beginning with PY 2026 limits. If finalized, the proposal to 
prevent enrollees from being automatically re-enrolled in coverage with 
APTC that fully covers their premium without taking an action to 
confirm their eligibility information would be applicable starting with 
annual redeterminations for PY 2027. The proposal to prevent enrollees 
from being automatically re-enrolled in coverage with APTC that fully 
covers their premium without taking an action to confirm their 
eligibility information would be applicable beginning with 
redetermination for PY 2027. We believe this applicability date 
provides issuers and Exchanges ample time to prepare for these changes. 
However, we understand that different States and issuers face different 
resource issues and implementation hurdles. We therefore seek comment 
on whether regulated entities would require additional time to comply 
with these proposals.
    The remaining proposals in this rule, if finalized, would become 
applicable upon the effective date of the final rule. These proposals 
include, among others, the proposed provision to repeal the monthly SEP 
for APTC-eligible qualified individuals with a projected annual 
household income at or below 150 percent of the FPL. Our experience 
with this SEP suggests it has substantially increased the level of 
improper enrollments, as well as increased the risk for adverse 
selection. The remaining proposals aim to increase the program 
integrity of the Exchange and protect Federal tax dollars. We therefore 
believe it is appropriate for these provisions to become applicable 
immediately upon the effective date of the final rule. We seek comment 
on any operational considerations or other issues that may impede 
compliance by the proposed applicability date.

E. Severability

    As demonstrated by the number of distinct programs addressed in 
this rulemaking and the structure of this proposed rule in addressing 
them independently, HHS generally intends the rule's provisions if 
finalized to be severable from each other. For example, the proposed 
rule refines the interpretation of ``lawfully present'' as applicable 
for eligibility to enroll in a QHP offered on an Exchange or BHP 
coverage in States that elect to operate a BHP. It also outlines the 
proposed discontinuation of the SEP for individuals with an income less 
than 150 percent of the FPL and makes a proposed change in the 
calculation of the premium adjustment percentage. It also proposes an 
update in the automatic re-enrollment hierarchy and makes a proposed 
change in the process of income verification where tax return data is 
unavailable. HHS believes that these provisions are generally capable 
of functioning sensibly on an independent basis. It is HHS' intent that 
if any provision of these proposed rules, if finalized, is held to be 
invalid or unenforceable by its terms, or as applied to any person or 
circumstance, the other provisions in the rule shall be construed so as 
to continue to give maximum effect as permitted by law, unless the 
holding shall be one of utter invalidity or unenforceability. In the 
event a provision as finalized is found to be utterly invalid or 
unenforceable, HHS intends that that provision to be severable. HHS 
solicits comment on the severability of these provisions.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), we are required to 
provide a 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. To 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comments on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of the agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.

[[Page 12998]]

     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We solicit public comment on each of these issues for the following 
sections of this document that contain information collection requests 
(ICRs).

A. Wage Estimates

    To derive wage estimates, we generally use data from the Bureau of 
Labor Statistics to derive labor costs (including a 100 percent 
increase for the cost of fringe benefits and overhead) for estimating 
the burden associated with the ICRs.\186\ Table 9 presents the median 
hourly wage, the cost of fringe benefits and overhead, and the adjusted 
hourly wage.
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    \186\ See U.S. Bureau of Labor Statistics (2024, April 3). 
Occupational Employment and Wage Statistics, May 2023 Occupation 
Profiles. Dep't. of Labor. https://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------

    As indicated, employee hourly wage estimates have been adjusted by 
a factor of 100 percent. This is necessarily a rough adjustment, both 
because fringe benefits and overhead costs vary significantly across 
employers, and because methods of estimating these costs vary widely 
across studies. Nonetheless, there is no practical alternative, and we 
believe that doubling the hourly wage to estimate total cost is a 
reasonably accurate estimation method.
[GRAPHIC] [TIFF OMITTED] TP19MR25.008

    We adopt an hourly value of time based on after-tax wages to 
quantify the opportunity cost of changes in time use for unpaid 
activities. This approach matches the default assumptions for valuing 
changes in time use for individuals undertaking administrative and 
other tasks on their own time, which are outlined in an Assistant 
Secretary for Planning and Evaluation (ASPE) report on ``Valuing Time 
in U.S. Department of Health and Human Services Regulatory Impact 
Analyses: Conceptual Framework and Best Practices.'' \187\ We started 
with a measurement of the usual weekly earnings of wage and salary 
workers of $1,185.\188\ We divided this weekly rate by 40 hours to 
calculate an hourly pre-tax wage rate of approximately $29.63. We 
adjusted this hourly rate downwards by an estimate of the effective tax 
rate for median income households of about 17 percent, resulting in a 
post-tax hourly wage rate of approximately $24.59. We adopt this as our 
estimate of the hourly value of time for changes in time use for unpaid 
activities and seek comment on these estimates and assumptions.
---------------------------------------------------------------------------

    \187\ Office of the Assistant Secretary for Planning and 
Evaluation. (2017, Sept. 17). Valuing Time in U.S. Department of 
Health and Human Services Regulatory Impact Analyses: Conceptual 
Framework and Best Practices. Dep't of HHS. https://aspe.hhs.gov/reports/valuing-time-us-department-health-human-services-regulatory-impact-analyses-conceptual-framework.
    \188\ U.S. Bureau of Labor Statistics. Employed full time: 
Median usual weekly nominal earnings (second quartile): Wage and 
salary workers: 16 years and over [LEU0252881500A], retrieved from 
FRED, Federal Reserve Bank of St. Louis. https://fred.stlouisfed.org/series/LES1252881500Q. Annual Estimate, 2024.
---------------------------------------------------------------------------

B. ICRs Regarding Deferred Action for Childhood Arrivals

1. Basic Health Program (42 CFR 600.5)
    The following proposed changes will be submitted for review under 
OMB Control Number 0938-1218 (CMS-10510).
    The proposed changes to 42 CFR 600.5 would again exclude DACA 
recipients from the definition of ``lawfully present'' used to 
determine eligibility for a BHP in those States that elect to operate 
the program, if otherwise eligible. The impact of this change would be 
with regards to the two States that currently operate a BHP--Minnesota 
and Oregon. We assume for the purposes of this estimate that both 
States have completed the updates from the 2024 DACA Rule. We estimate 
that it would take each State 100 hours to develop and code the changes 
to its BHP eligibility and verification system to correctly evaluate 
eligibility under the revised definition of ``lawfully present'' to 
once again exclude DACA recipients as outlined in section III.B.1. of 
this proposed rule. To be conservative in our estimates, we are 
assuming 100 hours per State, but it is important to note that it may 
take each State less than 100 hours given that the work required to 
implement this rule for Minnesota's and Oregon's State Exchange systems 
may also be able to be leveraged for its BHPs.
    Of those 100 hours, we estimate it would take a database and 
network administrator and architect 25 hours at $101.66 per hour and a 
computer programmer 75 hours at $95.88 per hour.\189\ In the aggregate, 
we estimate a one-time burden of 200 hours (2 States x 100 hours) at a 
cost of $19,465 (2 States x [(25 hours x $101.66 per hour) + (75 hours 
x $95.88 per hour)]) for completing the necessary updates to the 
application for BHP coverage.
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    \189\ See U.S. Bureau of Labor Statistics (2024, April 3). 
Occupational Employment and Wage Statistics, May 2023 Occupation 
Profiles. Dep't. of Labor. https://www.bls.gov/oes/current/oes_stru.htm.
---------------------------------------------------------------------------

    These proposed changes, if finalized, would reduce costs on States 
related to the decrease in applications for individuals who would have 
applied for coverage if not for this proposed change. Those impacts are 
accounted for under OMB Control Number 0938-1191 (Data

[[Page 12999]]

Collection to Support Eligibility Determinations for Insurance 
Affordability Programs and Enrollment through Health Insurance 
Marketplaces, Medicaid and Children's Health Insurance Program Agencies 
(CMS-10440)), discussed in section IV.B.3. of this proposed rule, which 
pertains to the streamlined application.
2. Exchanges and Processing Streamlined Applications (Sec.  155.20)
    The following proposed changes will be submitted for review under 
OMB Control Number 0938-1191 (CMS-10440). As discussed previously, we 
propose to modify the definition of ``lawfully present'' at Sec.  
155.20 to exclude DACA recipients from the definition of ``lawfully 
present'' that is used to determine eligibility to enroll in a QHP 
through an Exchange, for PTC, APTC, and CSRs, and to enroll in a BHP in 
States that elect to operate a BHP. This proposed change would apply to 
the 20 State Exchanges, as well as Exchanges on the Federal platform.
    On December 9, 2024, the United States District Court for the 
District of North Dakota issued a preliminary injunction in Kansas v. 
United States of America (Case No. 1:24-cv-00150). Per the district 
court's ruling, the 2024 DACA Rule is enjoined in three States that 
operate State Exchanges--Kentucky, Idaho, and Virginia. Even though 
DACA recipients are not currently eligible for Exchange coverage in 
these three States, we are still estimating that these State Exchanges 
may still need to make eligibility system changes in order to correctly 
implement this rule. This is because these State Exchanges may need to 
make changes in order to correctly re-implement the clarifying and 
technical changes to the definition of ``lawfully present'' that were 
included in the 2024 DACA Rule, and that are not altered by this 
proposed rule, but that are currently blocked in these three State 
Exchanges due to the court's injunction. We estimate that it would take 
the Federal Government and each of the State Exchanges 1,000 hours in 
2025 to develop and code changes to their eligibility systems to 
correctly evaluate and verify eligibility under the revised definition 
of ``lawfully present,'' such that DACA recipients are no longer 
considered lawfully present for purposes of enrolling in a QHP offered 
through an Exchange, APTC, PTC, CSRs, or BHP coverage in States that 
elect to operate a BHP, as outlined in section III.B.1. of this 
proposed rule. This estimate is informed by the FFE's prior experience 
implementing similar system changes. Of those 1,000 hours, we estimate 
it would take a database and network administrator and architect 250 
hours at $101.66 per hour and a computer programmer 750 hours at $95.88 
per hour. In aggregate for the States, we estimate a one-time burden in 
2025 of 20,000 hours (20 State Exchanges x 1,000 hours) at a cost of 
$1,946,500 (20 States x [(250 hours x $101.66 per hour) + (750 hours x 
$95.88 per hour)]) for completing the necessary updates to State 
Exchange eligibility systems.\190\ For the Federal Government, we 
estimate a one-time burden in 2025 of 1,000 hours at a cost of $97,325 
((250 hours x $101.66 per hour) + (750 hours x $95.88 per hour)). In 
total, the burden associated with all system updates would be 21,000 
hours at a cost of $2,043,825.
---------------------------------------------------------------------------

    \190\ On December 9, 2024, the United States District Court for 
the District of North Dakota issued a preliminary injunction in 
Kansas v. United States of America (Case No. 1:24-cv-00150). Per the 
district court's ruling DACA recipients in three State Exchanges--
Kentucky, Idaho, and Virginia--are not eligible to enroll in 
Exchange coverage. As a result, these three States may have already 
incorporated the necessary changes to their eligibility system and 
mailed any required notices to impacted consumers.
---------------------------------------------------------------------------

    Next, we estimate costs associated with termination operations to 
end Exchange coverage for any DACA recipients who are already enrolled. 
This work would need to be done by the Federal Government, which would 
take steps to end coverage for DACA recipients enrolled in States with 
FFEs and SBE-FPs and ensure that DACA recipients are not renewed for 
future coverage years. Additionally, we anticipate that termination 
operations would occur in the 17 States that operate State Exchanges 
where the 2024 DACA Rule is not currently enjoined. We assume that in 
the three States that operate State Exchanges where the 2024 DACA Rule 
is enjoined, the State has already undertaken the work necessary to end 
coverage for DACA recipients and therefore would not need to perform 
additional work as a result of this rule.
    We estimate that it would take the Federal Government and each of 
the 17 State Exchanges 1,000 hours in 2025 to terminate Exchange 
coverage for DACA recipients.191 192 This estimate is 
informed by the FFE's prior experience implementing similar system 
changes. Of those 1,000 hours, we estimate it would take a database and 
network administrator and architect 250 hours at $101.66 per hour and a 
computer programmer 750 hours at $95.88 per hour. In aggregate for the 
States, we estimate a one-time burden in 2025 of 17,000 hours at a cost 
of $1,654,525 (17 States x [(250 hours x $101.66 per hour) + (750 hours 
x $95.88 per hour)]) in 2025 for all termination operations. For the 
Federal Government, we estimate a one-time burden in 2025 of 1,000 
hours at a cost of $97,325 ((250 hours x $101.66 per hour) + (750 hours 
x $95.88 per hour)). Collectively, we estimate that it would take the 
Federal Government and each of the State Exchanges 18,000 hours at an 
associated cost of $1,751,850 to end coverage for DACA recipients. We 
seek comments on these burden estimates, including regarding additional 
costs and benefits anticipated as a result of this proposal.
---------------------------------------------------------------------------

    \191\ Section 155.310(g).
    \192\ On December 9, 2024, the United States District Court for 
the District of North Dakota issued a preliminary injunction in 
Kansas v. United States of America (Case No. 1:24-cv-00150). In 
compliance with the Court's order, CMS terminated enrollments for PY 
2025 for DACA recipients in 16 States that are served by the Federal 
platform. All impacted consumers received notices regarding their 
ineligibility for Exchange coverage. These States are Alabama, 
Arkansas, Florida, Indiana, Iowa, Kansas, Missouri, Montana, 
Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, South 
Dakota, Tennessee, and Texas.
---------------------------------------------------------------------------

    ``Data Collection to Support Eligibility Determinations for 
Insurance Affordability Programs and Enrollment through Health Benefits 
Exchanges, Medicaid and CHIP Agencies,'' OMB Control Number 0938-1191 
(CMS-10440) accounts for burdens associated with the streamlined 
application for enrollment in the programs impacted by this rule. As 
such, the following information collection addresses the burden of 
processing applications and assisting enrollees with BHP and Exchange 
QHP enrollment, and those impacts are not reflected in the ICRs for 
BHP, discussed in section IV.B.1. of this proposed rule.
    For assisting eligible enrollees and processing their applications, 
we estimate this would take a government programs eligibility 
interviewer 10 minutes (0.17 hours) per application at a rate of $48.34 
per hour, for a cost of approximately $8.22 per application. This 
estimate is based on past experience with similar application changes. 
As outlined further in section IV.B.3. of this final rule, we 
anticipate that approximately 11,000 fewer individuals impacted by this 
proposal would complete the application annually. Therefore, the total 
application processing burden associated with this proposal would be 
reduced by 1,870 hours (0.17 hours x 11,000 applications) for a total 
cost savings of $90,396 (1,870 hours x $48.34 per hour). As discussed 
further in this section, we anticipate an overall reduction in 
application processing burden for States and the Federal Government. We 
estimate these proportions as follows and seek

[[Page 13000]]

comment on these estimates and the methodology and assumptions used to 
calculate them.
    As outlined in section VI.C.1. of this proposed rule, we estimate 
that as a result of this proposal, if finalized, 10,000 fewer 
individuals would enroll in QHP coverage and 1,000 fewer individuals 
would enroll in a BHP on average each year, including redeterminations 
and re-enrollments.
    The entire information collection savings associated with changes 
to BHPs falls on the two States that currently operate a BHP--Minnesota 
and Oregon.\193\ As such, we assume 100 percent of the BHP application 
processing savings would fall on these two States. Using the per-
application processing burden of 10 minutes (0.17 hours) per 
application at a rate of $48.34 per hour, and the estimate that 1,000 
fewer individuals would apply for BHP, we anticipate a burden reduction 
of 170 hours with an associated cost savings of $8,218, for States to 
process BHP applications.
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    \193\ Minnesota's BHP began January 1, 2015. Oregon's BHP began 
July 1, 2024. For more information, see CMS. (n.d.) Basic Health 
Program. https://www.medicaid.gov/basic-health-program/index.html.
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    For the Exchanges, we use data from the 2024 Open Enrollment Period 
to estimate the proportion of applications that are processed by States 
compared to the Federal Government, and we determined that 49 percent 
of Exchange applications were submitted to FFEs/SBE-FPs, and are 
therefore processed by the Federal Government, while 51 percent were 
submitted to and processed by the 20 State Exchanges.\194\ As such, we 
anticipate that 49 percent of Exchange application processing savings 
would be attributed to the Federal Government and 51 percent of 
Exchange application processing savings would be attributed to States 
using their own eligibility and enrollment platforms.
---------------------------------------------------------------------------

    \194\ CMS. (2024, March 27). Health Insurance Markets 2024 Open 
Enrollment Report. https://www.cms.gov/files/document/health-insurance-exchanges-2024-open-enrollment-report-final.pdf.
---------------------------------------------------------------------------

    For the Exchanges, if we estimate 10,000 fewer applications would 
be processed, 51 percent of those (5,100) would no longer be processed 
by State Exchanges and 49 percent (4,900) would no longer be processed 
by the Federal Government. Using the per-application processing burden 
of 10 minutes (0.17 hours) per application at a rate of $48.34 per 
hour, we anticipate cost savings of $41,911 or a reduction by 867 hours 
for State Exchanges to process applications. Additionally, we estimate 
cost savings of $40,267 or a reduction by 833 hours for the Federal 
Government to process applications at a rate of $48.34 per hour. 
Therefore, the total burden on State Exchanges to assist eligible 
beneficiaries and process their applications would be reduced by 1,037 
hours annually beginning in 2025 (170 hours for BHP + 867 hours for 
State Exchanges) with a net cost reduction of $50,129. The total burden 
on the Federal Government would be reduced by 833 hours annually 
beginning in 2025 (entirely for Exchanges), with a net cost reduction 
of $40,267.
    In addition, Exchanges would have required individuals completing 
the application to submit supporting documentation to confirm their 
lawful presence if it was unable to be verified electronically through 
a data match with DHS via the Hub using DHS' Systematic Alien 
Verification for Entitlements (SAVE) system.\195\ An applicant's lawful 
presence may not be able to be verified if, for example, the applicant 
opts to not include information about their immigration documentation 
such as their alien number or employment authorization document (EAD) 
number when they fill out the application. Therefore, we anticipate 
cost savings for Exchanges due to the reduction in lawful presence 
inconsistencies for DACA recipients who were not able to have their 
immigration status verified electronically during the application 
process.
---------------------------------------------------------------------------

    \195\ Section 155.315(f).
---------------------------------------------------------------------------

    Of the 10,000 fewer DACA recipients who would apply for Exchange 
coverage as a result of this rule, we estimate that 20 percent, or 
2,000, would have generated an immigration status inconsistency.\196\ 
Of these 2,000 inconsistencies, we assume that 51 percent of those 
(1,020) would no longer be processed by State Exchanges and 49 percent 
(980) would no longer be processed by the Federal Government.\197\ To 
adjudicate an inconsistency, we estimate that it would have taken an 
eligibility support worker (BLS occupation code 43-4061) 12 minutes, or 
0.2 hours, at an hourly rate of $48.34 to review submitted 
documentation. Therefore, for State Exchanges, we anticipate a net 
burden reduction of 204 hours (0.2 hours x 1,020 inconsistencies) with 
an equivalent cost savings of $9,861 (204 hours x $48.34 per hour). For 
the Federal Government, we anticipate a net burden reduction of 196 
hours (0.2 hours x 980 inconsistencies), with an equivalent cost 
savings of $9,475 (196 hours x $48.34 per hour). In sum, we expect a 
burden reduction due to processing fewer immigration status 
inconsistencies of 400 hours (204 hours + 196 hours), with cost savings 
of $19,336 (400 hours x $48.34 per hour).
---------------------------------------------------------------------------

    \196\ Estimates are based on internal CMS data comparing the 
number of immigration DMIs generated to the number of noncitizen 
enrollees during similar time periods during 2024, rounded to the 
nearest 5 percent.
    \197\ CMS. (2024, March 27). Health Insurance Markets 2024 Open 
Enrollment Report. https://www.cms.gov/files/document/health-insurance-exchanges-2024-open-enrollment-report-final.pdf.
---------------------------------------------------------------------------

    We seek comment on these estimates and the methodology and 
assumptions used to calculate them.
3. Application Process for Applicants
    The following proposed changes will be submitted for review under 
OMB Control Number 0938-1191 (CMS-10440).
    As required by the ACA, there is one application through which 
individuals may apply for health coverage in a QHP through an Exchange 
and for other insurance affordability programs like Medicaid, CHIP, and 
a BHP in a State that chooses to operate a BHP.\198\ We note that this 
proposed rule proposes no changes to the eligibility application for 
Medicaid and CHIP. Hence, this section only includes data on the burden 
associated with completing an application and submitting additional 
information to verify lawful presence, if necessary, for health 
coverage in a QHP through an Exchange and for BHP coverage.\199\
---------------------------------------------------------------------------

    \198\ 42 U.S.C. 18083.
    \199\ We assume that the burden of completing an application is 
essentially the same regardless of whether the individual were to 
apply directly with the State agency responsible for administering 
the BHP or with an Exchange.
---------------------------------------------------------------------------

    In the existing information collection request for this application 
(OMB Control Number 0938-1191), we estimate that the application 
process would take an average of 30 minutes (0.5 hours) to complete for 
those applying for insurance affordability programs and 15 minutes 
(0.25 hours) for those applying without consideration for insurance 
affordability programs.\200\ Based on internal data from the previous 
open enrollment period when DACA recipients were eligible to complete 
the application, we estimate that approximately 11,000 such individuals 
would have completed the application. We estimate that of the 11,000 
fewer individuals who would have applied for QHP coverage through an 
Exchange or for BHP coverage were it not for these proposed changes, 98 
percent would have applied for

[[Page 13001]]

insurance affordability programs and 2 percent would have applied 
without consideration of insurance affordability programs. Using the 
hourly value of time for changes in time use for unpaid activities 
discussed in section IV.A. of this proposed rule (at an hourly rate of 
$24.59), the average opportunity cost to an individual for completing 
this task is estimated to be approximately 0.495 hours [(0.5 hours x 98 
percent) + (0.25 hours x 2 percent)] at a cost of $12.17. Therefore, 
given the proposed changes to the definition of ``lawfully present'' 
and the impact on the 11,000 individuals who may have otherwise 
completed the application, we anticipate net annual cost savings of 
approximately $133,870, or a reduction of approximately 5,445 hours.
---------------------------------------------------------------------------

    \200\ We note that this analysis includes estimates for 
completing electronic applications only. Internal CMS data show that 
less than 1 percent of applicants utilize the paper application.
---------------------------------------------------------------------------

    As discussed above, based on recent internal data from the Federal 
platform, we estimate that of the 11,000 individuals impacted by the 
changes proposed to the definition of ``lawfully present'' in this 
rule, approximately 80 percent (or 8,800) of applicants would have been 
able to have their lawful presence electronically verified, and the 
remaining 20 percent (or 2,200) of applicants would have been unable to 
have their lawful presence electronically verified and would therefore 
have had to submit supporting documentation to confirm their lawful 
presence.\201\ We estimate that a consumer would have, on average, 
spent approximately 1 hour gathering and submitting required 
documentation. Using the hourly value of time for changes in time use 
for unpaid activities discussed in section IV.A. of this proposed rule 
(at an hourly rate of $24.59), the opportunity cost for an individual 
to complete this task would have been approximately $24.59. Therefore, 
we anticipate a net annual burden reduction of approximately 2,200 
hours with an equivalent cost savings of approximately $54,098 for the 
2,200 individuals who would have been unable to electronically verify 
their lawful presence and therefore would have needed to submit 
supporting documentation.
---------------------------------------------------------------------------

    \201\ Estimates are based on internal CMS data comparing the 
number of immigration data matching issues (DMIs) generated to the 
number of noncitizen enrollees during similar time periods during 
2024, rounded to the nearest 5 percent.
---------------------------------------------------------------------------

    As previously stated, for the 11,000 individuals impacted by the 
proposal regarding the definition of ``lawfully present'' this rule, 
the annual additional burden of completing the application would be 
0.495 hours per individual on average. Under this proposed rule, if 
finalized, we anticipate a net reduction of 5,445 hours or cost savings 
of $66,266. For the 2,200 individuals who would have been unable to 
electronically verify their lawful presence, the total annual burden of 
submitting documentation to verify their lawful presence would have 
been 2,200 hours at a cost savings of $54,098. The average annual 
burden per respondent would have been 0.695 hours ((0.495 hours x 80 
percent of individuals) + (1.495 hours x 20 percent of individuals)). 
Under this proposed rule, if finalized, we anticipate a net reduction 
of annual burden equaling 7,645 hours (5,445 hours + 2,200 hours) with 
an associated cost savings of $187,991 ($133,893 + $54,098).
    We seek comment on these burden estimates.

C. ICRs Regarding Failure To File and Reconcile (Sec.  155.305(f)(4))

    We are proposing to amend current regulation at Sec.  155.305(f)(4) 
under which an Exchange may not find an enrollee eligible for APTC 
where an enrollee or their tax filer has failed to file a Federal 
income tax return reconciling their APTC for two-consecutive tax years 
to increase the program integrity of the Exchange. We are proposing to 
require Exchanges to find enrollees ineligible for APTC after they or 
their tax filer has failed to file and reconcile their APTC for one tax 
year. For Exchanges on the Federal platform, the FTR process would 
otherwise be conducted similarly to the previous iterations of FTR 
prior to the 2024 Payment Notice, except that those identified as being 
in a one-tax year FTR status would be at risk for removal of APTC and 
there would no longer be a two-tax year FTR status population. Minimal 
changes to the language of the Exchange application questions would be 
necessary to obtain relevant information; as such, we anticipate that 
the proposed amendment would not impact the information collection 
burden for consumers. We anticipate that there would no longer be a 2 
year FTR population, and thus the notices sent to the FTR population 
would be similar in inciting an urgency to act to the current two-tax 
year FTR notices, but that all consumers with an FTR status would be in 
a one-tax year FTR status. Due to this, we do not anticipate PRA 
impacts related to noticing requirements.
    We seek comment on these assumptions and any information collection 
burdens not identified in this section.

D. ICRs Regarding Income Verification When Data Sources Indicate Income 
Less Than 100 Percent of the FPL (Sec.  155.320(c)(3)(iii))

    The following proposed changes will be submitted for review under 
OMB Control Number 0938-1191 (CMS-10440). We seek comment on these 
burden estimates.
    We are proposing amendments to Sec.  155.320(c)(3)(iii) to specify 
that all Exchanges must generate annual income inconsistencies when a 
tax filer's attested projected annual income is greater than or equal 
to 100 percent and not more than 400 percent of the FPL and trusted 
data sources indicate that projected income is under 100 percent of the 
FPL.
    We anticipate that adding this income verification requirement 
would result in approximately 1 hour time spent by consumers to 
complete associated questions in the application or submit supporting 
documentation. Based on historical data from the FFE, HHS estimates 
that approximately 548,000 inconsistencies would be generated at the 
household level across all Exchanges. Therefore, adding these 
inconsistencies would increase burden on consumers by approximately 
548,000 hours. Using the estimate of the hourly value of time for 
changes in time use for unpaid activities calculated at $24.59 per hour 
in section IV.A. of this preamble, we estimate that the annual increase 
in cost for each consumer would be approximately $24.59, and the annual 
cost increase for all consumers who would generate this income 
inconsistency would be approximately $13,475,320.
    Additionally, we estimate that adding this income verification 
requirement would result in an increase in burden on all Exchanges. 
Based on historical FFE data, we anticipate that approximately 340,000 
inconsistencies would be generated at the household level for Exchanges 
using the Federal platform, and 208,000 inconsistencies would be 
generated at the household level for State Exchanges. Once households 
have submitted the required verification documents, we estimate that it 
would take approximately 1 hour and 12 minutes for an eligibility 
support staff person (Eligibility Interviewers, Government Programs--
BLS occupation code 43-4061), at an hourly cost of $48.34, to receive, 
review, and verify submitted verification documents as well as conduct 
outreach and determine DMI outcomes. Therefore, adding these 
inconsistencies would result in an increase in annual burden on the 
Federal Government of 408,000 hours

[[Page 13002]]

(340,000 verifications x 1.2 hours per verification) at a cost of 
$19,722,720 (408,000 hours x $48.34 per hour) and an increase in annual 
burden on State Exchanges of 249,600 hours (208,000 verifications x 1.2 
hours per verification) at a cost of $12,065,664 (249,600 hours x 
$48.34 per hour).
    Finally, we estimate that adding this income requirement would 
require costs related to updating the technical systems, including the 
eligibility system. We estimate that it would take the Federal Exchange 
and each State Exchange 8,000 hours in 2025 to make these updates. Of 
those 8,000 hours, we estimate it would take a database and network 
administrator and architect 2,000 hours at $101.66 per hour and a 
computer programmer 6,000 hours at $95.88 per hour. Given this, we 
estimate that the Federal Exchange would incur a one-time burden of 
$778,600 (2,000 x $101.66 + 6,000 x $95.88) to make these eligibility 
system updates. State Exchanges would incur a one-time burden of 
$14,793,400 ($778,600 x 19) total associated with a total of 123,500 
(8,000 x 19) burden hours.
    We seek comment on these burden estimates and assumptions.

E. ICRs Regarding Income Verification When Tax Data Is Unavailable 
(Sec.  155.320(c)(5))

    The following proposed changes will be submitted for review under 
OMB Control Number 0938-1191 (CMS-10440). We seek comment on these 
burden estimates.
    We are proposing amendments to remove Sec.  155.320(c)(5) which 
currently requires Exchanges to accept attestations, and not set an 
Income DMI, when the Exchange requests tax return data from the IRS to 
verify attested projected annual household income, but the IRS confirms 
there is no such tax return data available.
    Based on internal historical DMI data, we estimate that 
approximately 1,313,000 inconsistencies would be generated at the 
household level for Exchanges using the Federal platform, and 805,000 
would be generated at the household level for State Exchanges if this 
proposal were finalized. Once households have submitted the required 
verification documents, we estimate that it would take approximately 1 
hour and 12 minutes for an eligibility support staff person (BLS 
occupation code 43-4061), at an hourly cost of $48.34, to receive, 
review, and verify submitted verification documents as well as conduct 
outreach and determine DMI outcomes. Therefore, the removal of Sec.  
155.320(c)(5) would result in an increase in annual burden for the 
Federal Government of 1,575,600 hours (1,313,000 verifications x 1.2 
hours per verification) at a cost of $76,164,504 (1,575,600 hours x 
$48.34 per hour) and an increase in annual burden on State Exchanges of 
966,000 hours (805,000 verifications x 1.2 hours per verification) at a 
cost of $46,696,440 (966,000 hours x $48.34 per hour).
    In addition to the increased administrative burden on Exchanges, if 
finalized, the change would increase the number of consumers who are 
required to submit documentation to verify their income. We estimate 
that consumers would each spend 1 hour to answer the associated 
questions and submit documentation. Based on historical data from the 
FFE, we estimate that approximately 2,118,000 inconsistencies would be 
generated at the household level across all Exchanges. Using the 
estimate of the hourly value of time for changes in time use for unpaid 
activities calculated at $24.59 per hour in section IV.A. of this 
preamble, we estimate that the annual increase in cost for each 
consumer would be approximately $24.59 and that the proposed change 
would increase burden on consumers by 2,118,000 hours per year at an 
associated cost of $52,081,620 (2,118,000 hours x $24.59 per hour).
    Finally, we estimate that removing the current process of verifying 
income attestations when IRS returns no data would require costs 
related to updating the eligibility system. We estimate that it would 
take the Federal Exchange and each State Exchange 9,000 hours in 2025 
to make these updates. Of those 9,000 hours, we estimate it would take 
a database and network administrator and architect 2,250 hours at 
$101.66 per hour and a computer programmer 6,750 hours at $95.88 per 
hour. Given this, we estimate that the Federal Government would incur a 
one-time burden of $875,925 (2,250 x $101.66 + 6,750 x $95.88) to make 
these eligibility system updates. State Exchanges would incur a one-
time burden total of $16,642,575 ($875,925 x 19) associated with a 
total of 171,000 (9,000 x 19) burden hours.
    We seek comment on these estimates and assumptions.

F. ICRs Regarding Annual Eligibility Redetermination (Sec.  155.335)

    Under Sec.  147.106(c) and (f), health insurance issuers that 
discontinue or renew non-grandfathered coverage under a product in the 
individual market (including coverage offered through the Exchanges) 
(including a renewal with uniform modifications), or that non-renew or 
terminate coverage under a product in the individual market (including 
coverage offered through the Exchanges) based on movement of all 
enrollees in a plan or policy outside the product's service area, are 
required to provide written notices to enrollees, in a form and manner 
specified by the Secretary.\202\ Under Sec.  156.1255, QHP issuers in 
the individual market must include certain information in the 
applicable renewal and discontinuation notices.\203\ To satisfy these 
notice requirements, issuers in the individual market must use Federal 
standard notices, unless a State develops and requires the use of a 
different form consistent with CMS guidance.
---------------------------------------------------------------------------

    \202\ The requirement to provide notices of renewal applies to 
issuers in the individual or small group market. The requirement to 
provide notices of product discontinuation and notices of non-
renewal or termination based on enrollees' movement outside the 
service area applies to issuers in the individual or group market. 
See section 2703 of the PHS Act and Sec.  147.106. These 
requirements also apply with respect to grandfathered coverage 
pursuant to sections 2712 (former) and 2742 of the PHS Act and 
Sec. Sec.  146.152 and 148.122.
    \203\ Section 156.1255(a) through (d).
---------------------------------------------------------------------------

    This proposed rule proposes to amend the automatic re-enrollment 
hierarchy by removing Sec.  155.335(j)(4), which currently allows 
Exchanges to direct re-enrollment for enrollees who are eligible for 
CSRs from a bronze QHP to a silver QHP in the same product if the 
silver QHP has a lower or equivalent net premium after the application 
of APTC, and if the silver QHP has the same provider network as the 
bronze plan into which the enrollee would otherwise have been re-
enrolled. To align with this proposed change, we propose to remove 
language related to the bronze to silver crosswalk from the Federal 
standard notices.
    This proposed rule also proposes to require enrollees who would 
otherwise be automatically re-enrolled in a QHP with a zero-dollar 
premium after application of APTC (``fully subsidized'') to instead be 
automatically re-enrolled with APTC applied to the policy reduced such 
that the enrollee owes a five-dollar premium. We propose to update the 
Federal standard notices to include language related to this proposed 
requirement.
    The burden to issuers related to sending the Federal standard 
notices is currently approved under OMB Control Number 0938-1254 (CMS-
10527).\204\ CMS will revise the information collection to incorporate 
the necessary language modifications in the Federal standard notices 
due to the changes proposed in this proposed rule.

[[Page 13003]]

However, we do not anticipate any change in burden to issuers.
---------------------------------------------------------------------------

    \204\ OMB Control Number 0938-1254 (CMS-10527, Annual 
Eligibility Redetermination, Product Discontinuation and Renewal 
Notices).
---------------------------------------------------------------------------

G. ICRs Regarding Pre-Enrollment Verification for Special Enrollment 
Periods (Sec.  155.420)

    The following proposed changes will be submitted for review under 
OMB Control Number 0938-1191 (CMS-10440). We seek comment on these 
burden estimates.
    We are proposing to amend Sec.  155.420(g) to require all Exchanges 
to conduct eligibility verification for SEPs. Specifically, we propose 
to remove the limit on Exchanges on the Federal platform to conducting 
pre-enrollment verifications for only the loss of minimum essential 
coverage SEP. With this limitation removed, we propose to conduct pre-
enrollment verifications for most categories of SEPs for Exchanges on 
the Federal platform in line with operations prior to the 
implementation of the 2023 Payment Notice.
    We also propose to require that Exchanges, including all State 
Exchanges, conduct SEP verification for at least 75 percent of new 
enrollments through SEPs for consumers not already enrolled in coverage 
through the applicable Exchange. We propose that Exchanges must verify 
at least 75 percent of such new enrollments based on the current 
implementation of SEP verification by Exchanges.
    We anticipate that adding this expansion of pre-enrollment 
verification for SEPs would result in approximately 1 hour of time 
spent by consumers to complete associated questions in the application 
or submit supporting documentation. Based on historical data from the 
FFE, we estimate that approximately 293,073 new SEP verification issues 
would be generated at the household level on the Federal Exchange. 
Therefore, adding these inconsistencies would increase burden on 
consumers by approximately 293,073 hours. Using the estimate of the 
hourly value of time for changes in time use for unpaid activities 
calculated at $24.59 per hour in section IV.A. of this preamble, we 
estimate that the annual increase in cost for each consumer would be 
approximately $24.59, and the annual cost increase for all consumers 
who would generate this income inconsistency would be approximately 
$7,206,665.
    Additionally, we estimate that expanding pre-enrollment 
verification for SEPs would result in an increase in burden on 
Exchanges using the Federal platform and State Exchanges. Based on 
historical FFE data, we anticipate that approximately 293,073 
inconsistencies would be generated at the household level for Exchanges 
using the Federal platform, and 179,625 inconsistencies would be 
generated at the household level for Exchanges not using the Federal 
platform. Once households have submitted the required verification 
documents, we estimate that it would take approximately 12 minutes for 
an eligibility support staff person (BLS occupation code 43-4061), at 
an hourly cost of $48.34, to review and verify submitted verification 
documents. Therefore, expanding verification would result in an 
increase in annual burden on Exchanges using the Federal platform of 
58,615 hours (293,073 verifications x 0.2 hours per verification) at a 
cost of $2,833,449 (58,615 hours x $48.34 per hour) and an increase in 
annual burden on Exchanges not using the Federal platform of 35,925 
hours (179,625 verifications x 0.2 hours per verification) at a cost of 
$1,736,615 (35,925 hours x $48.34 per hour).
    We seek comment on these burden estimates and assumptions.

H. Summary of Annual Burden Estimates for Finalized Requirements
[GRAPHIC] [TIFF OMITTED] TP19MR25.009


[[Page 13004]]



I. Submission of PRA-Related Comments

    We have submitted a copy of this proposed rule to OMB for its 
review of the rule's information collection and recordkeeping 
requirements. These requirements are not effective until they have been 
approved by the OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed collections discussed above, please visit CMS' website 
at www.cms.hhs.gov/PaperworkReductionActof1995, or call the Reports 
Clearance Office at 410-786-1326.

V. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

VI. Regulatory Impact Analysis

A. Statement of Need

    We propose to exclude DACA recipients from the definitions of 
``lawfully present'' that are used to determine eligibility to enroll 
in a QHP through an Exchange, for PTC, APTC, and CSRs, and to enroll in 
a BHP in States that elect to operate a BHP. This proposed rule also 
proposes to reverse the policy restricting an issuer from attributing 
payment of premium for new coverage to past-due premiums from prior 
coverage. Additionally, we propose to revise the FTR process at Sec.  
155.305(f)(4) to reinstate the policy that Exchanges must determine 
enrollees ineligible for APTC when HHS notifies the Exchange that they 
or their tax filer has failed to file a Federal income tax return and 
reconcile their past APTC for a year for which their tax data would be 
utilized to verify their eligibility. We also propose policies to 
strengthen the verification process around annual household income. We 
further propose to require enrollees who would otherwise be 
automatically re-enrolled in a QHP with a zero-dollar premium after 
application of APTC (``fully-subsidized'') to instead be automatically 
re-enrolled with APTC applied to the policy reduced such that the 
enrollees owe a five-dollar premium, if they do not submit an 
application for an updated eligibility determination to an Exchange. We 
also propose to amend the automatic reenrollment hierarchy by removing 
Sec.  155.335(j)(4) which currently allows Exchanges to move an 
enrollee from a bronze QHP to a silver QHP if the silver QHP has a 
lower or equivalent net premium after the application of APTC, and if 
the silver QHP is in the same product and has the same provider network 
as the bronze plan into which the enrollee would otherwise have been 
re-enrolled. We also propose to remove the fixed-dollar and gross 
percentage-based premium payment thresholds at Sec.  155.400(g). We 
further propose to change the annual OEP for coverage through all 
individual market Exchanges from November 1 through January 15 to 
November 1 through December 15 of the calendar year preceding the plan 
year. Additionally, we propose to repeal Sec.  155.420(d)(16) and make 
conforming changes to repeal the monthly SEP for qualified individuals 
or enrollees, or the dependents of a qualified individual or enrollee, 
who are eligible for APTC, and whose projected household income is at 
or below 150 percent of the FPL. We also propose to amend Sec.  
155.420(g) to enable HHS to reinstate (with modifications) pre-
enrollment verification of eligibility of applicants for all categories 
of individual market SEPs and to require all State Exchanges to conduct 
pre-enrollment verification of eligibility for at least 75 percent of 
new enrollments through SEPs. Finally, we propose to update the premium 
adjustment percentage methodology to establish a premium growth measure 
that comprehensively reflects premium growth in all affected markets.

B. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866, ``Regulatory Planning and Review''; Executive Order 13132, 
``Federalism''; Executive Order 13563, ``Improving Regulation and 
Regulatory Review''; Executive Order 14192, ``Unleashing Prosperity 
Through Deregulation''; the Regulatory Flexibility Act (RFA) (Pub. L. 
96-354); section 1102(b) of the Social Security Act; and section 202 of 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select those regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety, and other advantages; distributive impacts; 
and equity). Section 3(f) of Executive Order 12866 defines a 
``significant regulatory action'' as any regulatory action that is 
likely to result in a rule that may: (1) have an annual effect on the 
economy of $100 million or more or adversely affect in a material way 
the economy, a sector of the economy, productivity, competition, jobs, 
the environment, public health or safety, or State, local, or tribal 
governments or communities; (2) create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) raise novel legal or policy issues arising out of legal 
mandates, or the President's priorities.
    A regulatory impact analysis (RIA) must be prepared for a 
regulatory action that is significant under section 3(f)(1) of E.O. 
12866. The Office of Management and Budget's (OMB) Office of 
Information and Regulatory Affairs (OIRA) has determined that this 
rulemaking is significant per section 3(f)(1). Accordingly, we have 
prepared an RIA that to the best of our ability presents the costs and 
benefits of the rulemaking. OMB has reviewed these proposed regulations 
under E.O. 12866, and the Department has provided the following 
assessment of their impact.
    Executive Order 14192, titled ``Unleashing Prosperity Through 
Deregulation,'' was issued on January 31, 2025. Section 3(a) of 
Executive Order 14192 requires an agency, unless prohibited by law, to 
identify at least ten existing regulations to be repealed when the 
agency issues a new regulation. In furtherance of this requirement, 
section 3(c) of Executive Order 14192 requires that the new incremental 
costs associated with new regulations shall, to the extent permitted by 
law, be offset by the elimination of existing costs associated with 
prior regulations. A significant regulatory action (as defined in 
section 3(f) of Executive Order 12866) that would impose total costs 
greater than zero is considered an Executive Order 14192 regulatory 
action. This proposed rule, if finalized as proposed, is, therefore, 
expected to be an Executive Order 14192 regulatory action. Details on 
the estimated costs appear in the preceding analysis.

C. Impact Estimates of the Proposed Individual Market Program Integrity 
Provisions and Accounting Table

    Consistent with OMB Circular A-4 (available at https://trumpwhitehouse.archives.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf), we have prepared an accounting statement in Table 11 
showing the classification of

[[Page 13005]]

the impact associated with the provisions of this proposed rule. We 
have included the undiscounted annual impacts in Table 12.
    This proposed rule would implement standards for programs that 
would have numerous effects, including supporting program integrity, 
reducing the impact of adverse selection, and stabilizing premiums in 
the individual and small group health insurance markets and in 
Exchanges. We are unable to quantify and monetize all the benefits and 
costs of this proposed rule. The effects in Table 11 reflect 
qualitative assessment of impacts and estimated direct monetary costs 
and transfers resulting from the provisions of this proposed rule for 
Exchanges, health insurance issuers, and consumers. The individual 
effects of each provision in this proposed rule are presented 
separately in Table 11 and collectively in Table 12, but we anticipate 
these estimates may overlap, as some individuals could be impacted by 
multiple provisions. Therefore, in section VI.C.18 of this RIA, we 
present overall impact estimates of all provisions considered jointly.

[[Page 13006]]

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[GRAPHIC] [TIFF OMITTED] TP19MR25.014

1. Guaranteed Availability of Coverage (Sec.  147.104(i))
    This proposed rule would remove Sec.  147.104(i), which would 
reverse the policy prohibiting an issuer from attributing payment of 
premium for new coverage to past-due premiums from prior coverage. We 
propose that an issuer may, to the extent permitted by applicable State 
law, establish terms of coverage that add past-due premium amounts owed 
to the issuer to the initial premium the enrollee must pay to 
effectuate new coverage and to refuse to effectuate new coverage if the 
initial and past-due premium amounts are not paid in full.
    The proposed policy aims to promote continuous coverage while 
providing issuers with an additional mechanism for past-due premium 
collection. The proposed policy could help reduce outstanding premium 
debt amount for enrollees, potentially benefiting their financial 
standing over time and reduce the likelihood of any debt being placed 
into collections. Additionally, the proposed rule could potentially 
improve premium collection rates and reduce administrative costs 
associated with repeated enrollment-termination cycles and other 
collection methods.
    Past-due premiums can influence both issuer operations and market 
dynamics. This can occur if enrollees choose to move in and out of 
coverage based on anticipated health care needs by exploiting or 
utilizing loopholes in the insurance system, such as extended grace 
periods and allowing coverage to lapse without addressing premium 
obligations even when seeking to enroll in new coverage. By addressing 
these circumstances, the proposed policy would encourage continuous 
coverage and reduce the burden on issuers to collect past-due premiums 
in other ways. The proposed policy would reduce the risk of gaming and 
adverse selection by consumers.
    The proposed policy could also increase enrollment by encouraging 
enrollees to maintain continuous

[[Page 13010]]

coverage. These enrollment gains may be partially offset by people who 
owe past-due premiums and who may be deterred from enrolling due to a 
higher initial premium payment. Some enrollees, particularly those 
facing financial constraints, might need to adjust their household 
budgeting to maintain coverage or, if they are not able to, become 
uninsured. Depending on the circumstances, these enrollees, if they 
become uninsured, could face higher costs for care and medical debt if 
care is needed. These costs could in turn be incurred by hospitals and 
municipalities in the form of uncompensated care. The proposed policy 
aims to encourage continuous coverage, reduce coverage gaps, and 
promote consistent payment of premiums by reducing consumers' ability 
to game the guaranteed availability requirement. However, others might 
face additional barriers to regaining coverage due to owing past-due 
premiums. The proposed policy seeks to balance market stability 
considerations by maintaining appropriate access to coverage and 
promoting continuity of coverage amongst enrollees. While some 
consumers may face challenges paying past-due premiums and could become 
or remain uninsured, the longer-term effects could include more stable 
risk pools and potentially more moderate premium trends. We seek 
comment on these impacts and assumptions.
    There is some uncertainty regarding whether the coverage gains from 
moderate premium trends and promoting continuous coverage would be 
higher than coverage losses due to the proposed policy that would allow 
issuers to require payment of past-due premiums. We anticipate any 
discouragement from enrolling would be minimal. As discussed earlier in 
this preamble, when this proposed policy was previously in place, the 
percentage of enrollees in Exchanges using the Federal platform who had 
their coverage terminated for non-payment of premiums dropped 
substantially. While the data analysis did not indicate any specific 
reason for this reduction, it is possible that the policy may have 
successfully encouraged more people to maintain continuous coverage. 
This likely reduced the number of people with past-due premium debt and 
lowered cost to issuers related to collection of past-due premiums. We 
expect this proposed policy would result in similar benefits. While we 
lack data to quantify these effects, we believe that these effects 
could collectively contribute to more stable market conditions over 
time. We seek comment on these impacts and assumptions.
    This proposed policy aims to encourage continuous coverage. 
Therefore, we do not anticipate any significant impact on PTCs. We seek 
comment on this impact estimate and assumptions.
    The projected impacts of this proposed policy reflect current 
understanding of market dynamics while acknowledging the uncertainty 
inherent in predicting response to the proposed policy.
2. Deferred Action for Childhood Arrivals (Sec.  155.20)
    We propose to modify the definition of ``lawfully present'' 
currently articulated at Sec.  155.20 and used for the purpose of 
determining whether a consumer is eligible to enroll in a QHP through 
an Exchange and to enroll in a BHP in States that elect to operate a 
BHP. This change would exclude DACA recipients from the definition of 
``lawfully present'' that is used to determine eligibility to enroll in 
a QHP through an Exchange, for PTC, APTC, and CSRs, and for BHP 
coverage. We anticipate excluding DACA recipients from the definition 
of ``lawfully present'' would reduce annual QHP enrollment through the 
Exchanges by 10,000 and annual BHP enrollment by 1,000 beginning in 
2025. We project this decline in enrollment in QHP enrollment through 
the Exchanges would reduce annual APTC expenditures by $34.0 million 
and the decline in enrollment in BHP would reduce annual BHP 
expenditures by $3.2 million beginning in 2026.
    While initial estimates under the ACA expansion to DACA recipients 
estimated 100,000 DACA recipients would receive coverage, actual 
exchange enrollment of DACA recipients has been much lower. Comparing 
CMS internal data for participating FFE States to the count of active 
DACA recipients from U.S. Citizenship and Immigration Services \205\ 
showed an enrollment rate of 2 percent among DACA recipients; however, 
1.3 percent of enrollment was in States that received an injunction 
preventing enrollment in coverage. With this new information, we have 
updated our DACA enrollee assumptions to 10,000 Exchange enrollees and 
1,000 BHP enrollees. With the average age of DACA recipients being 
30.6, we assume an APTC amount of $283 per month, leading to an 
expected approximately $34 million reduction in APTC expenditures 
through the Exchange (10,000 x $283 x 12 months = $33,960,000). 
Similarly, we expect approximately $3.2 million in lower BHP 
expenditures (1,000 x $283 x 0.95 x 12 months = $3,226,200) in States 
that choose to operate BHPs.
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    \205\ U.S. Citizenship and Immigration Services. (n.d.) 
Immigration and Citizenship Data. Dep't of Homeland Security. 
https://www.uscis.gov/tools/reports-and-studies/immigration-and-citizenship-data?topic_id%5B%5D=33602&ddt_mon=12&ddt_yr=2024&query=approximate+active+daca&items_per_page=10.
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    Because DACA recipients are young,\206\ they generally tend to be 
healthier. We therefore anticipate that excluding DACA recipients from 
individual market QHP coverage offered through the Exchanges would have 
a small negative impact on the individual market risk pool. Some DACA 
recipients who lose Exchange or BHP coverage may be able to enroll in 
non-Exchange coverage. However, we anticipate the majority who lose 
Exchange or BHP coverage would become uninsured. This may result in 
costs to the Federal Government and to States to provide limited 
Medicaid coverage for the treatment of an emergency medical condition 
to DACA recipients who have a qualifying medical emergency and who 
become uninsured as a result of this rule.
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    \206\ Per USCIS data, the average age of DACA recipients is 30 
years old. Count of Active DACA Recipients by Month of Current DACA 
Expiration as of September 30, 2024. U.S. Citizenship and 
Immigration Services. (2024, Sept. 30). Count of Active DACA 
Recipients by Month of Current DACA Expiration as of September 30, 
2024. Dep't of Homeland Security. https://www.uscis.gov/sites/default/files/document/data/active_daca_recipients_fy2024_q4.xlsx.
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    We also anticipate that this proposed change would result in costs 
to State Exchanges and the Federal Government to update eligibility 
systems in accordance with this proposal. As discussed further in 
section IV.B. of this proposed rule, in aggregate for the States, we 
estimate a one-time cost in 2025 of $1,965,965 total ($1,946,500 for 
State Exchanges + $19,465 for BHPs) total and $97,325 for the Federal 
Government. We also estimate a one-time cost in 2025 for termination 
operations of $1,654,525 total for State Exchanges and $97,325 for the 
Federal Government, as discussed further in section IV.B.2. of this 
proposed rule. In addition, we estimate cost savings annually beginning 
in 2025 for State Exchanges and States that operate BHPs of $50,129 
total and for the Federal Government of $40,267 associated with 
assisting fewer eligible beneficiaries and processing their 
applications as a result of this proposal. We also estimate cost 
savings annually beginning in 2025 for State Exchanges of $9,861 total 
and for the Federal Government of $9,745 associated with processing 
fewer

[[Page 13011]]

immigration status inconsistencies. Finally, we anticipate a net 
reduction in costs to individuals to complete the application of 
$187,991 annually, as discussed further in section IV.B.3. of this 
proposed rule. We seek comment on these impact estimates and 
assumptions, the details of which may be found in section IV.B. of this 
proposed rule.
3. Standards for Termination for Cause From the FFE (Sec.  
155.220(g)(2))
    As discussed in the preamble to this proposal, we propose to 
improve transparency in the process for holding agents, brokers, and 
web-brokers accountable for noncompliance with applicable law, 
regulatory requirements, and the terms and conditions of their Exchange 
agreements. Specifically, we propose to add text to Sec.  155.220(g)(2) 
that clearly sets forth that HHS would apply a ``preponderance of the 
evidence'' standard of proof to assess potential noncompliance under 
Sec.  155.220(g)(1) and make a determination there was a specific 
finding or pattern of noncompliance that is sufficiently severe. Our 
proposed regulatory change would put all agents, brokers, and web-
brokers assisting consumers with enrollment on the FFEs and SBE-FPs on 
notice of the evidentiary standard we would use in leveraging our 
enforcement authority under Sec.  155.220(g)(1) through (3). We believe 
this proposed update would make the regulations easier to follow and 
more clearly articulate our enforcement process improving transparency 
for agents, brokers, and web-brokers, consumers, and other interested 
parties.
    We believe our proposed change would have positive impacts on 
agents, brokers, and web-brokers. Codifying the evidentiary standard 
would provide agents, brokers, and web-brokers under investigation for 
noncompliant behavior more transparency into HHS' evidentiary 
expectations. We anticipate agents, brokers, and web-brokers would 
react positively to knowing more about our enforcement processes and 
how we determine regulatory compliance.
    We do not anticipate any impact or burdens on agents, brokers, or 
web-brokers stemming from our proposals as we are not proposing to 
expand the bases under which HHS may find them noncompliance under 
Sec.  155.220(g)(1) through (3) or otherwise require more from agents 
and brokers as part of this enforcement framework; rather, we are 
proposing to clarify an evidentiary standard that is not explicit at 
present.
    We seek comment on these impact estimates and assumptions.
4. Failure To File and Reconcile (Sec.  155.305(f)(4))
    We are proposing to amend the FTR process at Sec.  155.305(f)(4) to 
require Exchanges to determine a tax filer ineligible for APTC if HHS 
notifies the Exchange that the tax filer failed to file a Federal 
income tax return and reconcile APTC for any year for which tax data 
would be used to verify APTC eligibility. This proposal would remove 
the current flexibility that gives tax filers two-consecutive tax years 
to file and reconcile before removing APTC. To conform with this 
proposal, we further propose to amend the notice requirement at Sec.  
155.305(f)(4)(i) aimed at addressing the gap in notice from giving tax 
filers a second consecutive tax year to comply with the requirement to 
file Federal income taxes and reconcile APTC received under the current 
policy and remove the notice requirement at Sec.  155.305(f)(4)(ii) 
that requires notification for enrollees and tax filers that are found 
to be in a two-tax year FTR status.
    Previously, we estimated the cost of giving enrollees two-
consecutive tax years to meet the requirement to file and reconcile 
would increase APTC expenditures by approximately $373 million per year 
beginning in PY 2025 for those enrollees who have not filed and 
reconciled for only one tax year and retain their APTC eligibility. 
Since making that estimate, the number of improper enrollments has 
increased dramatically, and we believe a lack of enforcement under the 
current FTR policy has contributed to this increase. In 2024, HHS 
implemented various system and logic changes to decrease and/or prevent 
certain agent, broker, and web-broker noncompliant conduct in an effort 
to mitigate unauthorized enrollments, and we have observed some 
improvements. Due to these recent safeguards, as well as the FTR 
notices that were provided in the Fall 2024, it is likely that the FTR 
population identified prior to OEP 2025 represents a peak in the FTR 
population. In addition, it is likely that if enhanced subsidies are 
not extended, the total Exchange population would most likely drop, 
thereby also decreasing the FTR population. Due to these competing 
influences, it is difficult to determine the overall impact that this 
proposal would have on APTC expenditures. While the current two-tax 
year FTR process may inadvertently shield some unauthorized enrollments 
during PY 2025 for consumers who may have enrolled in Exchange coverage 
in PY 2023 (as most Exchange activity to mitigate unauthorized 
enrollments was implemented in PY 2024), the two-tax year FTR process 
would catch those consumers for PY 2026, as would this proposed change 
to the FTR process. Therefore, it is likely that the APTC savings 
resulting from this proposed policy change would not be derived from 
the decrease in unauthorized enrollments, but rather from the 
proportion of consumers who are not eligible for APTC for income 
eligibility related reasons. Taking all of these considerations into 
account, we still anticipate that APTC expenditures would decrease by 
more than what we previously estimated due to the increase in the 
overall Exchange population. While we initially sent out almost 1.8 
million FTR notices prior to OEP 2025, our initial run of FTR Recheck 
in January 2025, has already reduced this number to approximately 
690,000 households.
    It is difficult to draw historically similar comparisons for 
multiple reasons: FTR had been inactive for three consecutive filing 
seasons prior to this point due to the COVID-19 PHE, the increase in 
improper enrollments, and the newly implemented two-tax year FTR 
process. However, historically, between removal of APTC at auto-
reenrollment and the FTR Recheck process, the overall population of 
enrollees that has ended up losing APTC compared to the initially 
identified population prior to OEP has ranged from 18 percent to 43 
percent from 2016 to 2020. On average, 30 percent of enrollees lost 
their APTC due to FTR. Reasonable expectations of the proportion of 
one-tax year FTR enrollees as a percentage of our currently identified 
FTR population could range from 50 percent of the 690,000 to 
approximately 80 percent of the 690,000 remaining FTR enrollees. 
Historically, approximately 55 percent of those identified at FTR 
Recheck go on to lose their APTC for FTR reasons. Therefore, based on 
our current knowledge of this year's FTR population, the range of one-
tax year FTR consumers who would lose APTC under this proposed policy 
could be approximately 189,000 to 303,000 households. The average APTC 
received per consumer per month for 2024 among those receiving APTC is 
$548, and the average household has 1.4 consumers. Removing APTC after 
FTR Recheck can save up to 8 months of APTC. Therefore, the average 
Federal APTC savings could range from $1.16 billion to $1.86 billion 
annually; however, these impacts likely overstate the possible savings 
available in the future due to the competing impact of implementing the 
program integrity

[[Page 13012]]

measures in the Exchange, the resumption of FTR noticing for PY 2025, 
as well as the other impacts of this proposed rule that would impact a 
similar population as the FTR population.
    This proposal would support compliance with the filing and 
reconciling requirement under 36B(f) of the Code and its implementing 
regulations at 26 CFR 1.36B-4(a)(1)(i) and (a)(1)(ii)(A). By supporting 
greater compliance, this proposal would also minimize the potential for 
APTC recipients to incur large tax liabilities.
    Using the proposed notice policy that is similar to our prior 
notice procedure before FTR was paused, we anticipate eligible 
enrollees would respond and take appropriate action to file and 
reconcile to maintain continuous coverage. To the extent enrollees are 
not aware of or confused by the requirement to file and reconcile, 
enrollees would receive an indirect notice that protects FTI prior to 
Open Enrollment as well as a notice at the time of FTR Recheck. The tax 
filer (and enrollee if they are the same person) would also receive a 
direct notice prior to Open Enrollment as well as a direct notice at 
the time of FTR Recheck. Enrollees whose APTC is terminated as a result 
of the FTR process would receive an updated eligibility determination 
notice that contains a full explanation of appeal rights. Enrollees who 
appeal may request to continue receiving financial assistance during 
the appeal, consistent with Sec.  155.525. We believe the notices and 
appeal rights protect continuity of coverage for eligible enrollees 
and, therefore, anticipate the proposal would continue to avoid 
situations where eligible enrollees become uninsured when their APTC is 
terminated. Because the proposal would discontinue APTC for a larger 
number of enrollees, we anticipate a portion of those enrollees would 
drop coverage and become uninsured. This may result in costs to State 
governments and private hospitals in the form of charity care for 
individuals who become uninsured because of this rule and have medical 
emergencies.
    Currently, Exchanges must send separate notices to people with one-
tax year FTR status and two-consecutive tax years of FTR status. This 
proposal streamlines the notice process by eliminating the separate 
notice for enrollees in their second year of FTR status. Therefore, we 
anticipate this proposal would also reduce the burden of providing 
notice to enrollees with an FTR status. In the 2026 Payment Notice (90 
FR 4524), we estimated that sending two-year notices would cost the 
Federal Government approximately $292,000 and cost State Exchanges 
approximately $92,400 (cost of $0.84 per notice for FY 2025 which is 
based on the cost for the Exchanges on the Federal platform to send an 
average notice x 110,000 FTR notices) annually through 2029. With 
respect to costs to the Federal Government, HHS is not publishing 
specific future contract estimates in this rule because publishing 
those contract estimates could undermine future contract procurements. 
For example, if we were to publish the projected future cost of the 
contracts used to provide print notifications, the Federal Government 
would be meaningfully disadvantaged in future contract negotiations 
related to Federal notice printing activities, as bidders would know 
how much we anticipate such a future contract being worth. We noted 
that this estimate could decrease specifically depending on the overall 
population size of the Exchange in response to whether increased 
subsidies are continued or not. By removing the additional year of APTC 
eligibility for FTR consumers, we would remove at least some of the 
associated noticing requirements and corresponding two-tax year FTR 
population so this cost savings would provide a benefit to the Federal 
Government and State Exchanges.
    We estimate that it would take the Federal Government and each 
State Exchange approximately 10,000 hours in 2025 to develop and code 
changes to the eligibility systems to evaluate and verify FTR status 
under the revised FTR process, such that enrollees are found to be FTR 
after one tax year of failing to file and reconcile their APTC. Of 
those approximately 10,000 hours, we estimate it would take a database 
and network administrator and architect 2,500 hours at $101.66 per hour 
and a computer programmer 7,500 hours at $95.88 per hour based on our 
prior experience with system changes. In aggregate for the State 
Exchanges, we estimate a one-time burden in 2025 of 200,000 hours (20 
State Exchanges x 10,000 hours) at a cost of $19,465,000 (20 States x 
[(50,000 hours x $101.66 per hour) + (150,000 hours x $95.88 per 
hour)]) for completing the necessary updates to State Exchange 
eligibility systems.\207\ For the Federal Government, we estimate a 
one-time burden in 2025 of 10,000 hours at a cost of $973,250 ((2,500 
hours x $101.66 per hour) + (7,500 hours x $95.88 per hour)). In total, 
the burden associated with all system updates would be 210,000 hours at 
a cost of $20,438,250. We recognize the burden this proposal may place 
on State Exchanges, if finalized, and seek comment on the impact of 
this burden and potential less burdensome alternatives that would still 
further the program integrity goals of this proposal.
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    \207\ On December 9, 2024, the United States District Court for 
the District of North Dakota issued a preliminary injunction in 
Kansas v. United States of America (Case No. 1:24-cv-00150). Per the 
district court's ruling DACA recipients in three State Exchanges--
Kentucky, Idaho, and Virginia--are not eligible to enroll in 
Exchange coverage. As a result, these three States may have already 
incorporated the necessary changes to their eligibility system and 
mailed any required notices to impacted consumers.
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    We seek comment on these impact estimates and assumptions.
5. 60-Day Extension To Resolve Income Inconsistency (Sec.  
155.315(f)(7))
    We propose to remove Sec.  155.315(f)(7) which requires that 
applicants must receive an automatic 60-day extension in addition to 
the 90 days currently provided by Sec.  155.315(f)(2)(ii) to allow 
applicants sufficient time to provide documentation to verify any DMI, 
including income inconsistencies. Using previous costs associated with 
implementing this policy and similar policies, we anticipate that 
taking out this extension would result in a one-time cost of 
approximately $500,000 to Exchanges. For the 19 State Exchanges, we 
anticipate this would be a total cost of approximately $9,500,000 
($500,000 x 19). We recognize the burden this proposal may place on 
State Exchanges, if finalized, and seek comment on the impact of this 
burden and potential less burdensome alternatives that would still 
further the program integrity goals of this proposal.
    By reducing the period to provide documentation to verify income 
from 150 days to 90 days, we anticipate households using the Exchanges 
on the Federal platform to experience a reduction in the number of 
months they receive APTC, and that, using our internal analysis of 
historical enrollment and DMI data, approximately 140,000 enrollees 
will lose APTC eligibility. For State Exchanges, we also anticipate 
households may experience a reduction in the number of months they 
receive APTC, resulting in approximately 86,000 enrollees losing APTC 
eligibility. In total, using the average monthly APTC amount of $588.07 
and 2 months reduced APTC, this would result in $266 million (140,000 x 
$588.07 x 2 + 86,000 x $588.07 x 2) less APTC expenditures annually 
across all Exchanges. We accept comments on whether this number may be 
slightly less because of potential decreased enrollment if the enhanced 
premium tax credits are no longer in effect.

[[Page 13013]]

    We seek comment on these impact estimates and assumptions.
6. Income Verification When Data Sources Indicate Income Less Than 100 
Percent of the FPL (Sec.  155.320(c)(3)(iii))
    This proposed rule would amend Sec.  155.320(c)(3)(iii) to create 
annual income DMIs when applicants attest to income above 100 percent 
of the FPL, but trusted data sources show income below 100 percent of 
the FPL. As discussed further in section IV.D. of this proposed rule, 
we also estimate an approximate increase in annual burden costs of 
$19.7 million for the Federal Government and $12.1 million total for 
State Exchanges to receive, review, and verify submitted verification 
documents as well as conduct outreach and determine DMI outcomes for 
applicants below 100 percent of the FPL, as well as approximate one-
time costs to update the eligibility systems and perform other 
technical updates for this change of $778,600 for the Federal 
Government and approximately $14.8 million total for State Exchanges. 
Finally, as also discussed further in section IV.D. of this preamble, 
we estimate an increase in annual burden of $13,475,320 for consumers 
to submit documentation to fulfill income verification requirements. We 
recognize the burden this proposal may place on State Exchanges, if 
finalized, and seek comment on the impact of this burden and potential 
less burdensome alternatives that would still further the program 
integrity goals of this proposal.
    By reducing the number of applicants who inflate income to qualify 
for APTC and the opportunities for improper enrollments, we anticipate 
this proposal would substantially reduce Federal APTC expenditures. 
Based on our analysis of enrollment data from DMI generation numbers 
from when this DMI was previously in place, we estimate creating DMIs 
that require additional verification would reduce the number of people 
who receive APTC by 50,000 for Exchanges on the Federal platform, and 
by 31,000 for State Exchanges. Using an estimated average four months 
reduced APTC and an average monthly APTC rate of $588.07 per person, we 
estimate total APTC expenditures would be reduced by approximately $189 
million annually (50,000 x $588.07 x 4 + 31,000 x $588.07 x 4 months).
    We also anticipate that stronger income verification standards 
would increase Federal and State Medicaid expenditures by enrolling 
more people in Medicaid who would otherwise have enrolled in APTC 
subsidized coverage. We do not have the data necessary to provide 
specific estimates on the increase in Medicaid expenditures and seek 
comment on data sources we could use to further this analysis.
    We anticipate the stronger income verification standards would have 
only a minimal impact on the number of eligible tax filers who enroll 
in APTC subsidized coverage. Although we acknowledge that income 
verification can be more challenging for lower-income tax filers due to 
less consistent employment, our experience with income verifications 
suggests the process does not impose a substantial burden. Moreover, 
the generosity of the subsidy for lower-income households creates a 
strong incentive for applicants to follow through and meet the 
verification requirements. We seek comment on these impact estimates 
and assumptions.
7. Income Verification When Tax Data Is Unavailable (Sec.  
155.320(c)(5))
    We propose to remove Sec.  155.320(c)(5) which requires Exchanges 
to accept an applicant's income attestation without further 
verification when tax return data is unavailable. As further discussed 
in section IV.E. of this proposed rule, we estimate an increase in 
annual burden costs of approximately $76.2 million for the Federal 
Government and approximately $46.7 million total for State Exchanges to 
receive, review, and verify submitted verification documents as well as 
conduct outreach and determine DMI outcomes for applicants whose tax 
return data is unavailable, as well as approximate one-time costs to 
update the eligibility systems and perform other technical updates for 
this change of approximately $876,000 for the Federal Government and 
approximately $16.6 million total for State Exchanges. As also further 
discussed in section IV.E. of this proposed rule, we also estimate an 
increase in annual burden of $52,081,620 for consumers to submit 
documentation to fulfill income verification requirements associated 
with this proposal. We recognize the burden this proposal may place on 
State Exchanges, if finalized, and seek comment on the impact of this 
burden and potential less burdensome alternatives that would still 
further the program integrity goals of this proposal.
    The prior alternative verification process for applicants without 
tax return data in place from 2013 to 2023 provided a basic, frontline 
protection against improper APTC payments. Based on our analysis of 
enrollment data from DMI generation numbers from when this DMI was 
previously in place, as well as historical enrollment data, we estimate 
creating DMIs that require additional verification would result in a 
decrease in APTC, potentially to nothing, by 252,000 enrollees for 
Exchanges on the Federal platform, and by 155,000 enrollees for State 
Exchanges. Using an estimated average four months reduced APTC and with 
an average monthly APTC rate of $588.07 per person, we anticipate that 
this proposed change could result in a reduction of $956 million 
(252,000 x $588.07 x 4 + 155,000 x $588.07 x 4) in annual APTC 
expenditures. We accept comments on whether this number may be slightly 
less because of potential decreased enrollment if the enhanced premium 
tax credits are no longer in effect.
    Although reintroducing income verification for applicants with no 
tax return data would increase the burden on some applicants, we do not 
anticipate this burden would deter many eligible people from enrolling.
    We seek comment on these impact estimates and assumptions.
8. Annual Eligibility Redetermination (Sec.  155.335)
    We propose an amendment to the annual eligibility redetermination 
regulation to prevent enrollees from being automatically re-enrolled in 
coverage with APTC that fully covers their premium without taking an 
action to confirm their eligibility information. Specifically, when an 
enrollee does not submit an application for an updated eligibility 
determination on or before the last day to select a plan for January 1 
coverage, in accordance with the effective dates specified in Sec.  
155.410(f) and 155.420(b), as applicable, and the enrollee's portion of 
the premium for the entire policy would be zero dollars after 
application of APTC through the Exchange's annual redetermination 
process, we propose to require all Exchanges to decrease the amount of 
the APTC applied to the policy such that the remaining monthly premium 
owed by the enrollee for the entire policy equals $5 for the first 
month and for every following month that the enrollee does not confirm 
their eligibility for APTC. Consistent with Sec. Sec.  155.310(c) and 
(f), enrollees automatically re-enrolled with a $5 monthly premium 
after APTC under this policy would be able to update their Exchange 
application and re-confirm their plan at any point to confirm 
eligibility for APTC that covers the entire monthly premium, and re-
confirm their plan to thereby reinstate the full amount of APTC for 
which the enrollee is eligible on a prospective basis. We propose that 
the FFEs and the SBE-FPs must implement this change starting with

[[Page 13014]]

annual redeterminations for benefit year 2026. We propose that the 
State Exchanges must implement it starting with annual redeterminations 
for benefit year 2027.
    For Exchanges on the Federal platform, we estimate that 2.68 
million enrollees were automatically re-enrolled in a QHP for benefit 
year 2025 with APTC that fully covered their premium. Given that the 
expanded PTC structure under the ARP and IRA expires at the end of 2025 
and the number of Exchange enrollees, as well as the number of Exchange 
enrollees with APTC that fully covers their premium, is expected to 
decrease as a result,\208\ we view this figure to be an upper-bound 
estimate of the number of enrollees with coverage through Exchanges on 
the Federal platform who could be affected by this proposed provision. 
Due to a lack of data, we are unable to estimate the number of fully 
subsidized, automatically re-enrolled enrollees on State Exchanges, and 
request comment on this figure.
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    \208\ Baseline enrollment projections are presented in Table 11 
in section VI.C.18 of this preamble. Enrollment among those with 
APTC that fully covers their premium was not projected separately 
but is expected to decline following the expiration of the expanded 
PTC structure.
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    Regarding the benefits associated with this proposed provision, we 
believe this proposed change would lead to increased price sensitivity 
to premiums and premium changes among enrollees whose premiums are 
fully subsidized and who would be automatically re-enrolled in their 
current policies. This is because these enrollees would pay $5 more in 
net premiums per month if they do not submit an application for an 
updated eligibility determination from an Exchange. Enrollees would 
therefore be incentivized to return to an Exchange, evaluate available 
coverage options and premiums, and make an active enrollment decision. 
We therefore anticipate that this proposed provision would lead to 
better matches between consumers' coverage preferences and available 
coverage offerings in the individual market.
    As noted in the preamble, we are aware that some consumers have 
been improperly enrolled in a fully subsidized QHP without their 
knowledge or consent and other consumers have remained enrolled in a 
fully subsidized QHP after obtaining other coverage. This proposed 
policy would contribute to reducing the financial stress that 
ineligible enrollees may experience by protecting them from 
accumulating surprise tax liabilities.\209\ Additionally, we anticipate 
that this proposed provision would reduce the number of improper 
enrollments of fully subsidized enrollees by agents, brokers, and web-
brokers.
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    \209\ Currently, the Exchanges on the Federal platform 
collaborate with the IRS to prevent surprise tax liabilities when 
Exchanges on the Federal platform receive reports from consumers who 
have been improperly enrolled.
---------------------------------------------------------------------------

    Regarding the potential costs associated with this proposed 
provision, if some enrollees with fully subsidized premiums are unaware 
of the APTC adjustments that would be made and the premium amounts that 
would be due because they have not submitted an application for an 
updated eligibility determination or decide not to pay the $5 per month 
premium amount, this proposed provision could lead some enrollees to 
have their coverage terminated due to non-payment of premiums. This, in 
turn, could lead to adverse health outcomes for those enrollees who 
experience a coverage gap. However, we expect the number of fully 
subsidized enrollees who ultimately have their coverage terminated due 
to non-payment of premiums would be low given the nominal expense 
associated with the proposed APTC adjustments and the expected 
reduction in enrollment associated with the expiration of the PTC 
eligibility expansions under the IRA. We request comment on this 
assumption.
    Enrollees who otherwise would not have obtained an updated 
eligibility determination would also incur time costs associated with 
the need to submit an application to an Exchange to obtain an updated 
determination notice in order to obtain a zero-dollar premium, if they 
are still eligible for one.
    Exchanges would incur costs to comply with this proposed provision. 
Specifically, Exchanges would need to make changes to their IT systems 
to be able to identify enrollees who would be automatically re-enrolled 
with a zero-dollar premium after annual redetermination procedures and 
decrease the amount of APTC applied to the policy such that the 
remaining premium owed by the enrollee equals $5, if the enrollee does 
submit an application for an updated eligibility determination to the 
Exchange. We estimate that it would take the Federal Government and 
each of the State Exchanges not on the Federal platform 10,000 hours to 
develop and code the changes to their IT systems. We do not expect 
States operating SBE-FPs to incur any implementation costs. These 
estimates are based on past experience with similar system changes.
    Of those 10,000 hours, we estimate it would take a database and 
network administrator and architect 2,500 hours at $101.66 per hour and 
a computer programmer 7,500 hours at $95.88 per hour. In aggregate for 
the State Exchanges not on the Federal platform, we estimate a one-time 
burden in 2025 or 2026 of 200,000 hours (20 State Exchanges x 10,000 
hours) at a cost of $19,465,000 (20 States x [(2,500 hours x $101.66 
per hour) + (7,500 hours x $95.88 per hour)]) for completing the 
necessary updates to State Exchange systems. For the Federal 
Government, we estimate a one-time burden in 2025 of 10,000 hours at a 
cost of $973,250 ((2,500 hours x $101.66 per hour) + (7,500 hours x 
$95.88 per hour)). In total, the burden associated with all system 
updates would be 210,000 hours at a cost of $20,438,250. We recognize 
the burden this proposal may place on State Exchanges, if finalized, 
and seek comment on the impact of this burden and potential less 
burdensome alternatives that would still further the program integrity 
goals of this proposal.
    Exchanges would also likely incur costs associated with responding 
to customer service requests related to this change. Exchanges could 
also incur costs associated with outreach and enrollee, agent/broker/
web-broker and Navigator, and issuer education regarding this proposed 
provision.
    Regarding the potential transfers associated with this proposed 
provision, this proposed provision is expected to reduce net Federal 
PTC spending if an enrollee's policy is terminated because the enrollee 
does not pay their portion of the premium. The need for fully 
subsidized enrollees to actively re-enroll in their current policies to 
continue with fully subsidized coverage could also reduce improper 
enrollments that are not reported to CMS by consumers and reduce the 
likelihood that an enrollee who obtained other coverage errantly 
retains their current fully subsidized QHP, which would also reduce net 
Federal PTC spending. Lastly, this proposed provision would reduce 
commission payments from issuers to agents, brokers, and web-brokers 
due to the expected reduction in improper enrollments of fully 
subsidized enrollees by agents, brokers, and web-brokers.
    Due to a lack of data, we are unable to quantify all anticipated 
benefits, costs, and transfers associated with this proposed provision, 
and request comment and data on the potential impacts.

[[Page 13015]]

9. Annual Eligibility Redetermination (Sec.  155.335(j)(4))
    We propose to amend the automatic reenrollment hierarchy by 
removing Sec.  155.335(j)(4) which currently allows Exchanges to move a 
CSR-eligible enrollee from a bronze QHP and re-enroll them into a 
silver QHP for an upcoming plan year, if a silver QHP is available in 
the same product, with the same provider network, and with a lower or 
equivalent net premium after the application of APTC as the bronze plan 
into which the enrollee would otherwise have been re-enrolled. These 
amendments would leave in place the policy to require Exchanges to take 
into account network similarity to current year plan when re-enrolling 
enrollees whose current year plans are no longer available, but revert 
to the prior re-enrollment hierarchy standards in place before the 2024 
OEP that were structured to limit the differences between the 
consumer's current plan and new plan in situations where the renewal 
process places a consumer in a different plan (88 FR 25822). We believe 
this proposed change would improve the consumer experience by retaining 
consumer choice, reducing consumer confusion, and removing the risk of 
accumulating tax liabilities created by the policy. We believe the 
removal of the bronze to silver crosswalk criteria in the Federal 
hierarchy for re-enrollment would result in some burden for Exchanges 
that have already implemented this policy, including for CMS as the 
operator of Exchanges on the Federal platform, because it would require 
operational and system changes to reverse the policy including related 
consumer outreach. We do not anticipate that these changes would result 
in significant burden to issuers, because, as discussed in the 2024 
Payment Notice (88 FR 25822), Exchanges were primarily responsible for 
the policy's implementation, though we solicit comment on that 
assumption.
    By retaining consumer choice, we anticipate this proposal would 
lead to fewer low-income bronze enrollees being switched to silver 
QHPs. Because these silver QHPs have higher premiums than bronze QHPs 
and indirectly fund CSR subsidies, they require higher APTC subsidies. 
Therefore, we anticipate the reduction in people being switched to 
silver QHPs would reduce APTC expenditures. We are not able to quantify 
the reduction in APTC expenditures because, we do not expect the 
current policy would lead to a substantial number of people switching 
from a bronze QHP to a silver QHP during the 2026 OEP. Therefore, we 
anticipate only a small reduction in APTC expenditures.
    We seek comment on these impact estimates and assumptions.
10. Premium Payment Threshold (Sec.  155.400(g))
    We propose to modify Sec.  155.400(g) to remove paragraphs (2) and 
(3), which establish an option for issuers to implement a fixed dollar 
and/or gross percentage-based premium payment threshold, (if the issuer 
has not also adopted a net percentage-based premium threshold) and 
modify 155.400(g) to reflect the removal of paragraphs (2) and (3). 
Removing the options for issuers to implement either a fixed dollar 
and/or gross percentage would help address concerns about program 
integrity by ensuring that enrollees cannot remain enrolled in coverage 
for extended periods of time without paying any premium. We anticipate 
that there would be some costs for issuers who had already implemented 
a fixed-dollar or gross premium percentage-based threshold and would 
have to remove those policies or replace them with the remaining net 
premium percentage-based thresholds.
    Since these threshold policies are optional, we do not know how 
many issuers adopted them. In the 2026 Payment Notice, we estimated 
that based on a fixed-dollar threshold of $10 or less, utilizing PY 
2023 counts of 135,185 QHP policies terminated for non-payment where 
the enrollee had a member responsibility amount of $0.01-$10.00, with 
an average monthly APTC of $604.78 per enrollee (for PY 2023), that 
would at most result in $817,571,843 in APTC payments for 10 months 
that excludes the binder payment and first month of the grace period 
(for which the issuer already received APTC and would not have to 
return it) that issuers would retain, rather than being returned to the 
Federal Government. We now estimate that this cost would not be 
incurred with the removal of the fixed dollar and gross premium 
percentage-based thresholds.
    We seek comment on these impact estimates and assumptions.
11. Annual Open Enrollment Period (Sec.  155.410(e))
    We propose to amend Sec.  155.410(e) to change the annual OEP for 
the benefit years starting January 1, 2026 and beyond to begin on 
November 1 and end on December 15 of the calendar year preceding the 
benefit year. This is expected to have a positive impact on the risk 
pool by reducing the risk of adverse selection. Although we cannot 
quantify Federal savings, by reducing adverse selection, we expect 
premiums would decline and, in turn, reduce the cost of PTC to the 
Federal Government. Lower premiums may also increase enrollment among 
unsubsidized consumers and help lower the uninsured rate. In addition, 
we expect a higher proportion of Exchange enrollees to be covered 
continuously for the full year beginning in January.
    We estimate that it would take the Federal Government and each of 
the State Exchanges 4,000 hours to develop and code the changes to 
their IT systems. Of those 4,000 hours, we estimate it would take a 
database and network administrator and architect 1,000 hours at $101.66 
per hour and a computer programmer 3,000 hours at $95.88 per hour. We 
do not expect States operating SBE-FPs to incur any implementation 
costs. These estimates are based on past experience with similar system 
changes. For the Federal Government, we estimate a one-time burden in 
2025 of 4,000 hours at a cost of $389,300 (1,000 hours x $101.66 per 
hour) + (3,000 hours x $95.88 per hour). In aggregate, for State 
Exchanges, we estimate a one-time burden in 2025 of 80,000 hours (20 
State Exchanges x 4,000) at a cost of $7,786,000 (20 States x [(1,000 
hours x $101.66 per hour) + (3,000 hours x $95.88 per hour)]). In 
total, the burden associated with all system updates would be 84,000 
hours at a cost of $8,175,300. We recognize the burden this proposal 
may place on State Exchanges, if finalized, and seek comment on the 
impact of this burden and potential less burdensome alternatives that 
would still further the program integrity goals of this proposal.
    We do not anticipate that the proposed change to the OEP end date 
to December 15 would have a negative impact on enrollment or the 
consumer experience due to the maturity of the enrollment systems. This 
proposed change is expected to simplify operational processes for 
issuers and the Exchanges by eliminating the burden of supporting an 
extra month of open enrollment and addressing consumer confusion 
related to administering two enrollment deadlines. Lower administrative 
costs may also contribute to lower premiums, but we note that there 
also may be administrative costs for issuers and Exchanges associated 
with an increase in SEP casework. Consumers would benefit from clearer 
enrollment rules that would encourage all annual enrollment activities 
to be complete by December 15 and therefore ensure coverage for the 
month of January. The Federal Government, State Exchanges, and issuers 
may incur costs

[[Page 13016]]

if additional consumer outreach is needed to educate people on the new 
policy. However, this should be temporary and largely offset by the 
elimination of the ongoing outreach necessary to educate people on the 
second January 15 deadline.
    We seek comment on these impact estimates and assumptions.
12. Monthly SEP for APTC-Eligible Qualified Individuals with a 
Projected Annual Household Income at or Below 150 Percent of the 
Federal Poverty Level (Sec.  155.420(d)(16))
    We are proposing to remove Sec.  155.420(d)(16) and repeal the 150 
percent FPL SEP. This includes making conforming changes to regulations 
established to support this SEP, including removing Sec. Sec.  
147.104(b)(2)(i)(G), 155.420(a)(4)(ii)(D), and 155.420(b)(2)(vii), as 
well as amending Sec.  155.420(a)(4)(iii) introductory text.
    As discussed in the preamble of this proposed rule, the expanded 
availability of fully subsidized plans combined with easier access to 
these fully-subsidized plans through the 150 percent FPL SEP (which 
allows people to enroll in fully subsidized plans at any time during 
the year) opened substantial opportunities for improper enrollments. As 
discussed earlier in preamble, recent litigation from April 2024, 
Conswallo Turner et al. v. Enhance Health, et al, higher numbers of 
consumer complaints, and a sharp increase in enrollment relative to the 
eligible population with household income under 150 percent of the FPL 
in PY 2024 all suggest a substantial increase in improper enrollments 
among consumers reporting incomes between 100 and 150 percent of the 
FPL on their application. We are working hard to reduce the level of 
improper enrollments, but we believe improper enrollments would 
continue to be a problem so long as access to fully subsidized plans is 
made easier through the 150 percent FPL SEP. It is hard to predict the 
level of improper enrollments in the years ahead as we are still in the 
process of taking enforcement actions to reduce the initial spike in 
improper enrollments that occurred after we established the 150 percent 
FPL SEP.
    We also believe repealing the 150 percent FPL SEP would reduce 
adverse selection and, as a result, reduce premiums. Previous 
rulemaking projected the 150 percent FPL SEP would increase premiums by 
0.5 to 2 percent with enhanced premium subsidies in place and projected 
the SEP would increase premiums from 3 to 4 percent if the enhanced 
premium subsidies expire. Based on our analysis of recent enrollment 
data, we believe these previous estimates underestimated the premium 
impact and overestimated the enrollment impact of the 150 percent FPL 
SEP. As discussed in the preamble, we believe that the 150 FPL SEP has 
substantially increased the level of improper enrollments, as well as 
increased the risk for adverse selection as this SEP incentivizes 
consumers to wait until they are sick to enroll in Exchange coverage. 
Unknown factors continue to make these impacts difficult to estimate, 
including the utilization of this SEP by healthy and unhealthy 
enrollees and the impact to the average duration of coverage for 
enrollees. However, we estimate repealing this SEP could decrease 
premiums by 3 to 4 percent compared to baseline premiums if this rule 
is finalized, and therefore annual APTC outlays would decrease by 
approximately $3.4 billion in 2026, $3.6 billion in 2027, $3.8 billion 
in 2028, and $4.0 billion in 2029. We seek comment on how this policy 
would impact premiums and APTC/PTC outlays.
    Quantifying the impact of the 150 percent FPL SEP on enrollment 
also remains difficult to estimate. Although we can quantify the number 
of people who enroll through this SEP, the enrollment impact is likely 
less than the number of people who use the SEP. Some people may use 
this SEP as an alternative to an SEP they would have otherwise used. 
Without this SEP, consumers may have otherwise enrolled through the 
OEP. The substantial level of improper enrollments associated with 
fully subsidized plans also obscures the number of eligible individuals 
who used the SEP. Our analysis of the SEPs suggests that the 150 
percent FPL SEP did offset the use of other SEPs, which suggests it may 
have less enrollment impact than previously expected.
    To repeal the monthly 150 percent FPL SEP, we estimate a one-time 
cost of approximately $390,000 to remove functionality to grant the 150 
percent FPL SEP and make any necessary updates to eligibility logic 
systems for Exchanges on the Federal platform. Here, we are assuming 
that 25 percent of the hours needed to end the 150 percent FPL SEP are 
being performed by a database and network administrator (hourly wage of 
$101.66) and 75 percent of the work is being performed by a computer 
programmer (hourly wage of $95.88). This allocation of work between a 
network administrator and computer programmer was informed by our 
experience with past system changes.
    We also estimate a similar one-time cost for any State Exchanges 
that operate their own eligibility and enrollment systems and currently 
offer the 150 percent FPL SEP. However, as of February 2025, we do not 
believe that any State Exchange has offered the 150 percent FPL SEP as 
this SEP was optional for all Exchanges.
    We seek comment on these impact estimates and assumptions.
13. Pre-Enrollment Verification for Special Enrollment Periods (Sec.  
155.420)
    We are proposing to amend Sec.  155.420(g) to require all Exchanges 
to conduct pre-enrollment eligibility verification for SEPs. 
Specifically, we propose to remove the limit on Exchanges on the 
Federal platform to conducting pre-enrollment verifications for only 
the loss of minimum essential coverage SEP. With this limitation 
removed, we propose to conduct pre-enrollment verifications for most 
categories of SEPs for Exchanges on the Federal platform in line with 
operations prior to the implementation of the 2023 Payment Notice.
    We also propose to require that Exchanges, including all State 
Exchanges, conduct pre-enrollment SEP verification for at least 75 
percent of new enrollments through SEPs for consumers not already 
enrolled in coverage through the applicable Exchange. We are proposing 
that Exchanges must verify at least 75 percent of such new enrollments 
based on the current implementation of SEP verification by Exchanges.
    We anticipate that revisions to Sec.  155.420 would have a positive 
impact on program integrity by verifying eligibility for SEPs. 
Increasing program integrity through this proposal would reduce 
improper subsidy payments and could contribute to keeping premiums low 
and therefore, further protecting taxpayer dollars. However, the 
premium impact would likely be minimal for State Exchanges that already 
conduct SEP verification largely in accordance with this proposal. This 
proposal may deter enrollments among younger people at higher rates, 
which could worsen the risk pool and increase premiums. However, we 
expect any such deterrence would impact a very small number of young 
people and, therefore, have only a minimal impact on the risk pool and 
premiums. We estimate that the net effect of pre-enrollment 
verification would reduce premiums by approximately 0.5-1.0 percent for 
PY 2026 and 1.0-2.0 percent for PY 2027 and beyond, and would

[[Page 13017]]

reduce APTC spending by approximately $105.4 million.\210\
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    \210\ The reduction in APTC was calculated by multiplying the 
estimated new SVIs by the previous SVI expiration rate (293,073 x 
.137 = 40,151) and then multiplying that number by the estimated 
annual APTC amount per SEP consumer (40,151 x $2,625 = 
$105,396,375).
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    We anticipate this proposal would moderately increase the 
regulatory burden on Exchanges using the Federal platform and on 
existing State Exchanges that conduct the additional pre-enrollment 
verifications. Based on information included in State Exchange SMART 
tools, a majority of State Exchanges had conducted SEP verification for 
the same SEP types for which the FFEs had conduct SEP verifications 
before the limit on verifying only the loss of minimum essential 
coverage SEP was put in place for PY 2023. Therefore, we expect most 
Exchanges continue to have the infrastructure in place to conduct 
verifications. Of the 15 State Exchanges that currently attest to 
verifying at least one SEP, seven State Exchanges attested to verifying 
loss of minimum essential coverage.\211\
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    \211\ This information was provided to CMS through SMART 
attestations encompassing PY2023.
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    As of PY 2025, only one State Exchange conducts SEP verifications 
for only one type of SEP. The five State Exchanges established since 
2021 vary in how they conduct SEP verification with four State 
Exchanges verifying at least one type of SEP (three of those four State 
Exchanges verify loss of minimum essential coverage). State Exchanges 
bear the full cost of the SEP verification activities they conduct. 
Eleven State Exchanges that conduct verifications for SEPs are 
verifying at least 75 percent or more of their respective SEP 
enrollments. \212\ For five State Exchanges that conduct SEP 
verifications for at least one type of SEP, a single SEP type 
consistently represents over 60 percent of all SEP enrollments. An 
additional three State Exchanges reach the same consistent 60 percent 
threshold when accounting for their top two SEP types.\213\
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    \212\ SMART attestations encompassing PY2023; Operational 
Readiness Assessment performed by Georgia in preparation for their 
transition to an SBE-FP.
    \213\ This is based on internal enrollment metrics data provided 
from State Exchanges to CMS and reflects SEP enrollment from 1/1/23-
6/30/23. S
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    Based on the implementation of pre-enrollment SEP verification in 
the Exchanges using the Federal platform, we estimate that the overall 
one-time cost of implementing pre-enrollment SEP verification by an 
Exchange would be approximately $12 million. Therefore, we estimate 
that the total cost to comply with this requirement for the five State 
Exchanges that did not previously conduct SEP verification for at least 
75 percent of enrollments for newly enrolling consumers enrolling 
through SEPs would be $60 million for PY 2026.
    Based on past experience, we estimate that the expansion in pre-
enrollment verification to most individuals seeking to enroll in 
coverage through all applicable SEPs offered through Exchanges on the 
Federal platform would result in an additional 293,073 individuals 
having their enrollment delayed or ``pended'' annually until 
eligibility verification is completed, although for the vast majority 
of individuals the delays would be less than 1-3 days. As discussed 
further in section IV.G. of this preamble, we anticipate that the 
expansion of SEP verification would result in increased income 
inconsistencies, with an associated annual cost increase for consumers 
of approximately $7,206,665. There would also be an increase in ongoing 
costs for Exchanges on the Federal platform and State Exchanges due to 
an increase in the number of SEP enrollments for which they must 
conduct verification. We estimate that the total increase in ongoing 
processing costs to comply with this requirement for the FFE would be 
approximately $46.7 million for PY 2026 to PY 2029. Furthermore, as 
discussed in section IV.G. of this preamble, we anticipate that 
expanding verification would result in an increase in annual burden in 
labor costs on Exchanges using the Federal platform at a cost of 
$2,833,449 and an increase in annual burden on State Exchanges at a 
cost of $ 1,736,615 total. We recognize the burden this proposal may 
place on State Exchanges, if finalized, and seek comment on the impact 
of this burden and potential less burdensome alternatives that would 
still further the program integrity goals of this proposal.
    Additionally, we anticipate that the expansion of SEP verification 
would have a one-time development cost for Exchanges using the Federal 
Platform of $1,849,270 (19,000 hours x $97.33). This assumes that 25 
percent of the hours needed to expand SEP verification are being 
performed by a database and network administrator (hourly wage $101.66) 
and 75 percent of the work is being performed by a computer programmer 
(hourly wage $95.88). This allocation of work between network 
administrator and computer programmer was informed by our experience 
with past system changes. We do not anticipate this proposal would 
increase regulatory burden or costs on issuers. We seek comment on 
these impact estimates and assumptions.
14. Prohibition on Sex-Trait Modification as an EHB (Sec. Sec.  156.50 
and 156.115(d))
    We propose to amend Sec.  156.115(d) to provide that an issuer of a 
plan offering EHB may not provide sex-trait modification as an EHB. If 
finalized as proposed, this proposal would mean that individuals 
currently seeking or considering seeking sex-trait modification could 
not access such care as EHB. The EHB are subject to various protections 
under the ACA, including the prohibition on annual and lifetime dollar 
limits and the requirement to accrue enrollee cost sharing towards the 
annual limitation on cost sharing. If this proposed policy is finalized 
as proposed, these provisions would not apply to sex-trait modification 
to the extent such care is included in health plans, including in large 
group market and self-insured group health plans. This includes a 
prohibition of sex-trait modification in the five States that include 
sex-trait modification in their EHB-benchmark plans, as well as in 
States that do not have such coverage expressly mentioned in the 
State's EHB-benchmark plan document.\214\
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    \214\ California, Colorado, New Mexico, Vermont, and Washington 
EHB-benchmark plans specifically include coverage of some sex-trait 
modification. Six other States do not expressly include or exclude 
coverage of sex-trait modification in EHB-benchmark plans. Forty 
States include language that excludes coverage of sex-trait 
modification in EHB-benchmark plans.
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    Utilization of sex-trait modification is low; therefore, the impact 
of this proposal would be limited. Approximately 0.11 percent of 
enrollees in the EDGE data set gathered from issuers as part of the 
HHS-operated risk adjustment program utilized sex-trait modification 
between PYs 2022 and 2023. In the aggregate, the total allowed cost of 
sex-trait modification amounts to 0.08 to 0.09 percent of all claims in 
the EDGE data set for these years. Although EDGE does not distinguish 
between whether a benefit is EHB or not, we believe that a substantial 
majority of such claims are being covered as EHB by issuers submitting 
claims data to the EDGE server.
    Given that a QHP's percentage of premium attributable to the EHB is 
used to determine the amount of available tax credits under the ACA, we 
would expect an impact to the amount of PTC. Plans that stop coverage 
of sex-trait modification would see premiums and PTC decrease as the 
generosity of plan benefit coverage decreases. Plans that

[[Page 13018]]

decide to cover sex-trait modification as non-EHB would see premiums 
rise or stay the same to account for this benefit generosity, but would 
see any existing PTC decrease as the benefits would no longer be EHB. 
States that choose to mandate such coverage as a benefit in addition to 
the EHB would be required to defray its cost pursuant to Sec.  155.170; 
in this circumstance, we would expect premiums and tax credits to 
decrease to account for the State's defrayal obligations. We seek 
comment on these impact estimates and assumptions.
15. Premium Adjustment Percentage Index (Sec.  156.130(e))
    We propose a premium adjustment percentage of 1.6726771319 for PY 
2026 based on our proposed change to the premium measure for 
calculating the premium adjustment percentage. Under Sec.  156.130(e), 
we propose to use average per enrollee private health insurance 
premiums (excluding Medigap and property and casualty insurance), 
instead of ESI premiums, which were used in the calculation since PY 
2022, for purposes of calculating the premium adjustment percentage for 
PY 2026 and beyond. The annual premium adjustment percentage sets the 
rate of change for several parameters detailed in the ACA, including 
the annual limitation on cost sharing (defined at Sec.  156.130(a)); 
the reduced annual limitations on cost sharing; the required 
contribution percentage used to determine eligibility for certain 
exemptions under section 5000A of the Code (defined at Sec.  
155.605(d)(2)); and the employer shared responsibility payments under 
sections 4980H(a) and 4980H(b) of the Code.
    As explained earlier in the preamble, our proposal to use private 
health insurance premiums (excluding Medigap and property and casualty 
insurance) in the premium adjustment percentage calculation would 
result in a higher overall premium growth rate measure than if we 
continued to use employer-sponsored insurance premiums as was used for 
prior plan years and in the October 2024 PAPI Guidance.\215\ To further 
elaborate on the potential impacts of this proposed policy change, in 
Sec.  155.605(d)(2), we propose a required contribution of 8.05 percent 
for PY 2026 using the proposed premium adjustment percentage in Sec.  
156.130 to supersede the required contribution of 7.70 percent for PY 
2026 calculated from employer-sponsored insurance premiums previously 
published in the October 2024 PAPI Guidance.\216\ In Sec.  
156.130(a)(2), we propose a maximum annual limitation on cost sharing 
of $10,600 for self-only coverage for PY 2026 to supersede the maximum 
annual limitation on cost sharing of $10,150 for self-only coverage for 
PY 2026 calculated from employer-sponsored insurance premiums 
previously published in the October 2024 PAPI Guidance.\217\ The CMS 
Office of the Actuary estimates that the proposed change in methodology 
for the calculation of the premium adjustment percentage may have the 
following impacts between 2026 and 2030:\218\
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    \215\ CMS. (2024, Oct. 8). Premium Adjustment Percentage, 
Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual 
Limitation on Cost Sharing, and Required Contribution Percentage for 
the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.
    \216\ Ibid.
    \217\ Ibid.
    \218\ CMS Office of the Actuary's estimates are based on their 
health reform model, which is an amalgam of various estimation 
approaches involving Federal programs, employer-sponsored insurance, 
and individual insurance choice models that ensure consistent 
estimates of coverage and spending in considering legislative 
changes to current law.
[GRAPHIC] [TIFF OMITTED] TP19MR25.015

    As noted in Table 13, we expect that the proposed change in measure 
of premium growth used to calculate the premium adjustment percentage 
for PY 2026 may result in:
     Net premium increases of approximately $530 million per 
year for PY 2026 through PY 2030, which is approximately 2 percent of 
PY 2024 net premiums. Net premiums are calculated for Exchange 
enrollees as premium charged by issuers minus APTC.
     A decrease in Federal PTC spending of between $1.27 
billion and $1.55 billion annually from 2026 to 2030, due to an 
increase in the PTC applicable percentage and a decline in Exchange 
enrollment of approximately 80,000 individuals in PY 2026, based on an 
assumption that the Department of the Treasury and the IRS would adopt 
the use of the same premium measure proposed for the calculation of the 
premium adjustment percentage in this rule for purposes of calculating 
the indexing of the PTC applicable percentage and the required 
contribution percentage under section 36B of the Code. We anticipate 
that enrollment may decline by 80,000 individuals in PY 2026, and 
enrollment would remain lower by 80,000

[[Page 13019]]

individuals in each year between 2026 and 2030 than it would if there 
were no proposed change in premium measure for the premium adjustment 
percentage for PY 2026 and beyond.
     Increased Employer Shared Responsibility Payments of $3 to 
$20 million each year between 2028 and 2030.
    The small increase in net premiums would reduce the number of 
people who qualify for fully subsidized plans through the Exchanges. 
Therefore, by reducing the number of people who qualify for fully 
subsidized plans, we anticipate this proposed premium measure would 
reduce enrollments in APTC coverage and, in turn, reduce APTC 
expenditures.
    Some of the 80,000 individuals estimated to not enroll in Exchange 
coverage as a result of the proposed change in the measure of premium 
growth used to calculate the premium adjustment percentage may purchase 
short-term, limited-duration insurance, catastrophic coverage, or join 
a spouse's health plan, though some would become uninsured. Any of 
these transitions may result in greater exposure to health care costs, 
which previous research suggests reduces utilization of health care 
services, including unnecessary or counterproductive services.\219\ 
However, some individuals who transition into short-term plans, 
catastrophic health plans, or who join their spouses' coverage may also 
experience an increase in health utilization because the provider 
networks for such plans tend to be more expansive than plans on the 
individual market.220 221 This means that such individuals 
may be able to better access providers who can address their specific 
health needs. However, the increased number of uninsured may increase 
Federal and State uncompensated care costs and may contribute to 
negative public health outcomes.\222\ We seek feedback from interested 
parties about these impacts and the magnitude of these changes.
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    \219\ Manning, W.G., Newhouse, J.P., Duan, N., Keeler, E.B., & 
Leibowitz, A. (1987). Health insurance and the demand for medical 
care: evidence from a randomized experiment. The American economic 
review, 251-277; Keeler, E.B., & Rolph, J.E. (1988). The demand for 
episodes of treatment in the health insurance experiment. Journal of 
health economics, 7(4), 337-367; Buntin, M.B., Haviland, A., 
McDevitt, R. & Stood, N. (2011). Healthcare Spending and Preventive 
Care in High-Deductible and Consumer-Directed Health Plans. The 
American Journal of Managed Care, 17(3), 222-230; Finkelstein, A., 
et al. (2012). The Oregon health insurance experiment: evidence from 
the first year. The Quarterly journal of economics, 127(3), 1057-
1106; Brot-Goldberg, Z.C., Chandra, A., Handel, B.R., & Kolstad, 
J.T. (2017). What does a Deductible Do? The Impact of Cost-Sharing 
on Health Care Prices, Quantities, and Spending Dynamics. The 
Quarterly Journal of Economics, 132(3). 1261-1318.
    \220\ Burns, A. et. al. (2019, Jan.) How CBO and JCT Analyzed 
Coverage Effects of New Rules for Association Health Plans and 
Short-Term Plans. Congressional Budget Office. p. 6. https://www.cbo.gov/system/files/2019-01/54915-New_Rules_for_AHPs_STPs.pdf.
    \221\ Cruz, D; Fann, G. (2024, Sept.). It's Not Just the Prices: 
ACA Plans Have Declined in Quality Over the Past Decade. Paragon 
Health Institute. https://paragoninstitute.org/private-health/its-not-just-the-prices-aca-plans-have-declined-in-quality-over-the-past-decade/.
    \222\ See, for example, Goldin, J., Lurie, I.Z., & McCubbin, J. 
(2021). Health Insurance and Mortality: Experimental Evidence from 
Taxpayer Outreach. The Quarterly Journal of Economics, 136(1), 1-49.
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    As noted previously in this proposed rule, the premium adjustment 
percentage is the measure of premium growth that is used to set the 
rate of increase for the maximum annual limitation on cost sharing, 
defined at Sec.  156.130(a). In Sec.  156.130(a)(2), we propose a 
maximum annual limitation on cost sharing of $10,600 for self-only 
coverage for PY 2026. Additionally, we propose reductions in the 
maximum annual limitation on cost sharing for silver plan variations 
(Table 8 in section III.C.2.b. of this proposed rule). Consistent with 
our analyses in previous Payment Notices, we developed three test 
silver level QHPs and analyzed the impact on their AVs of the 
reductions described in the ACA to the proposed PY 2026 maximum annual 
limitation on cost sharing for self-only coverage. Beyond the impacts 
to APTC highlighted above, which overlap with impacts related to the 
increased reduced limitations on cost sharing applicable to silver plan 
variations \223\ applicable to plans offered on Exchange in the 
individual market, we do not believe the proposed changes to the 
maximum annual limitation on cost sharing would result in a significant 
economic impact as the plans required to comply with the maximum annual 
limitation on cost sharing are generally required to comply with AV (or 
with minimum value), constraining the range of cost-sharing parameter 
values that issuers can offer for those plans. However, we seek comment 
on these impact estimates and assumptions related to the proposed 
change to the premium measure for calculating the premium adjustment 
percentage.
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    \223\ On October 12, 2017, the Attorney General issued a legal 
opinion that HHS did not have a Congressional appropriation with 
which to make CSR payments. Sessions III, J. (2017, Oct. 11). Legal 
Opinion Re: Payments to Issuers for Cost-Sharing Reductions (CSRs). 
Office of Attorney General. https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf.
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16. Levels of Coverage (Actuarial Value) (Sec.  156.140, 156.200, 
156.400)
    We are proposing to change the de minimis ranges at Sec.  
156.140(c) beginning in PY 2026 to +2/-4 percentage points for all 
individual and small group market plans subject to the AV requirements 
under the EHB package, other than for expanded bronze plans,\224\ for 
which we propose a de minimis range of +5/-4 percentage points. We also 
propose to revise Sec.  156.200(b)(3) to remove from the conditions of 
QHP certification the de minimis range of +2/0 percentage points for 
individual market silver QHPs. We also propose to amend the definition 
of ``de minimis variation for a silver plan variation'' in Sec.  
156.400 to specify a de minimis range of +1/-1 percentage points for 
income-based silver CSR plan variations.
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    \224\ Expanded bronze plans are bronze plans currently 
referenced in Sec.  156.140(c) that cover and pay for at least one 
major service, other than preventive services, before the deductible 
or meet the requirements to be a high deductible health plan within 
the meaning of section 223(c)(2) of the Code.
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    We believe that changing the de minimis ranges for standard metal 
level plans (except for individual market silver QHPs) would not 
generate a transfer of costs for consumers overall. Wider de minimis 
ranges would allow issuers to design plans with a lower AV than is 
possible currently, which would reduce the generosity in health plan 
coverage for out-of-pocket costs. However, we expect that issuers 
would, in turn, lower overall premiums. We estimate the premiums could 
decrease approximately 1.0 percent on average because of benefit 
changes issuers would make with a wider de minimis range. Lower overall 
premiums would have positive effects for consumers over the longer term 
as issuer participation increases and coverage options improved, which 
would attract more young and healthy enrollees into health plans, 
improving the overall risk pool and reducing overall costs that could 
mitigate any increase in consumer out-of-pocket costs.
    As shown in Table 14 below, the proposal to widen the de minimis 
range for individual market silver QHPs to +2/-4 percentage points 
would generate a transfer of costs in the short-term from consumers to 
the government and issuers in the form of decreased APTC, because 
widening the de minimis range for silver plans can affect the 
generosity of the SLCSP. The SLCSP is the benchmark plan used to 
determine an individual's PTC. A subsidized enrollee in any county that 
has a SLCSP that is currently at or above 70 percent AV

[[Page 13020]]

would see the generosity of their current SLCSP decrease, resulting in 
a decrease in PTC.
[GRAPHIC] [TIFF OMITTED] TP19MR25.016

    This proposal, by itself, would not invalidate the cost-sharing 
design of any health plan an issuer currently plans to offer in PY 
2026. As explained above, this proposal only expands the universe of 
permissible plan AVs and would not preclude issuers from continuing to 
design plans with an AV that is closer to the middle of the applicable 
de minimis ranges instead of plans at the outer limits. To the extent 
that issuers believe that plan designs that have a particular AV would 
attract more enrollment, they would remain free to do so under this 
proposal.
    In addition, changing the de minimis range for standard silver 
plans would impact Individual Coverage Health Reimbursement 
Arrangements (ICHRAs), which use the Lowest Cost Silver Plan (LCSP) as 
the benchmark to determine whether an ICHRA is considered affordable to 
an employee. Under this proposal, as premiums decrease, an employer 
would have to contribute less to an ICHRA to have it be considered 
affordable. This could encourage large employer use of ICHRAs because 
large employers need to offer affordable coverage to satisfy the 
employer shared responsibility provisions.
    We seek comment on these impact estimates and assumptions, as well 
as any timing considerations with its proposed implementation.
17. Regulatory Review Cost Estimation
    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this proposed rule, we 
should estimate the cost associated with regulatory review. Due to the 
uncertainty involved with accurately quantifying the number of entities 
that will review the rule, we assume that a range of between the total 
number of unique commenters on the 2026 Payment Notice proposed rule 
(266) and the total number of page views on the 2026 Payment Notice 
proposed rule (about 13,800) will include the actual number of 
reviewers of this proposed rule. We therefore use an average number of 
approximately 7,000 reviewers of this proposed rule. We acknowledge 
that this assumption may understate or overstate the costs of reviewing 
this proposed rule. It is possible that not all commenters reviewed the 
2026 Payment Notice proposed rule in detail, and it is also possible 
that some page viewers will not actually read this proposed rule. For 
these reasons, we believe that the approximate average of the number of 
commenters and number of page viewers on the 2026 Payment Notice 
proposed rule will be a fair estimate of the number of reviewers of 
this final rule. We seek comments on the approach in estimating the 
number of entities which will review this proposed rule.
    We also recognize that different types of entities are in many 
cases affected by mutually exclusive sections of this proposed rule, 
and therefore, for the purposes of our estimate we assume that each 
reviewer reads approximately 55 percent of the rule (an average of the 
range from 10 percent to 100 percent of the rule). We seek comments on 
this assumption.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimate that the cost of reviewing 
this final rule is $106.42 per hour, including overhead and fringe 
benefits.\225\ Assuming an average reading speed of 250 words per 
minute, we estimate that it will take approximately 3.4 hours for the 
staff to review 55 percent of this proposed rule. For each entity that 
reviews the rule, the estimated cost is $361.83 (3.4 hours x $106.42 
per hour). Therefore, we estimate that the total cost of reviewing this 
regulation is approximately $2,532,810 ($351.19 per reviewer x 7,000 
reviewers).
---------------------------------------------------------------------------

    \225\ U.S. Bureau of Labor Statistics. (2024, April 9). 
Occupational Employment and Wage Statistics. Dep't. of Labor. 
https://www.bls.gov/oes/current/oes_nat.htm.
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18. Overall Impact of the Proposed Individual Market Program Integrity 
Provisions
    In the regulatory impact analysis of this proposed rule, we include 
impact analyses and estimates for each proposal separately, as we 
intend for each provision to be severable from the rest. Please see 
section III.E. for a more detailed discussion on the severability of 
the provisions of this rule. However, we anticipate that the provisions 
of this proposed rule, while severable, may work in concert with each 
other and affect many of the same individuals seeking coverage through 
the individual health insurance market. Therefore, the overall impact 
of this proposed rule would likely be less than the simple accumulation 
of the individual provisions' impact analyses. To the best of our 
ability, we provide overall impact estimates of these provisions with 
respect to enrollment, premiums, and APTC, that minimize the overlap of 
individuals affected. These estimates use a baseline of current law 
such that a reduction in enrollment attributable to the expiration of 
enhanced PTCs in the IRA on December 31, 2025, is accounted for 
separately from these estimates, as such a reduction would not be due 
to the provisions in this proposed rule, if finalized. These estimates 
consider the enrollment, premium, and APTC impact solely due to the 
provisions in this proposed rule, if finalized, compared to what would 
occur if these proposals were not finalized.
    The estimates we present were calculated as follows. CMS 
Marketplace Open Enrollment Period (OEP) Public Use Files (PUFs) 
contain data on individual Marketplace activity, including the 
demographic characteristics of consumers who made a plan selection. The 
Integrated Public Use Microdata Series (IPUMS) USA data provides access 
to samples of the American population drawn from sixteen Federal 
censuses, including the U.S. Census Bureau's American Community Survey 
(ACS). A 2024 study published in the American Journal of

[[Page 13021]]

Health Economics (AJHE) estimated and analyzed the take-up rate of 
Marketplace insurance in the 39 States that used Healthcare.gov by 
comparing confidential microdata on all FFE enrollees who selected a 
plan during an open or special enrollment period and effectuated their 
enrollment between 2015 and 2017 with the ACS five-year public-use 
microdata sample for 2013-2017.\226\ This methodology was adapted in a 
2024 paper by the Paragon Health Institute to calculate erroneous and 
improper enrollments for 2024 by comparing CMS Marketplace OEP PUF data 
with ACS 1-year microdata.\227\ Both of these approaches use ACS data 
to identify the non-elderly adult population that is potentially 
eligible for Exchange coverage and exclude individuals who are enrolled 
in Medicare or Medicaid. The AJHE study additionally excludes 
individuals receiving health insurance through an employer or TRICARE. 
There are also methodological differences between the two studies in 
how income eligibility for subsidized Exchange coverage is determined 
with the AJHE study estimating and imputing modified adjusted gross 
income (MAGI) for ACS survey respondents. HHS has carefully considered 
both of these sources and used the Paragon Health Institute methodology 
in the following analysis as a way to quantify erroneous and improper 
enrollments using CMS Marketplace OEP PUFs data and IPUMS USA data 
using the best available data.
---------------------------------------------------------------------------

    \226\ Hopkins, B. et al. (2024). How Did Take-Up of Marketplace 
Plans Vary with Price, Income, and Gender? American Journal of 
Health Economics, 11(1 winter 2025). Retrieved from https://doi.org/10.1086/727785.
    \227\ Blase, B. & Gonshorowski, D. (n.d.). The Great Obamacare 
Enrollment Fraud. Retrieved from https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud/.
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    The analysis in Table 15 below compares sign-ups during the OEP for 
people with expected income between 100-150 percent of the FPL by State 
to the number of State residents in this income range who are eligible 
for Exchange coverage for the years 2019, 2023, and 2024. The number of 
plan selections on the Exchanges among people with expected incomes 
between 100-150 percent FPL are from the CMS Marketplace OEP PUFs 
data.\228\ This information is based on the consumer's attestation of 
income for those who actively submitted an application for coverage for 
the specified plan year. For the 2023 and 2024 plan years, it reflects 
verified data on the prior year's income for those consumers who were 
auto re-enrolled without actively submitting an application for the 
current plan year.\229\ The number of State residents in the 100-150 
percent FPL income range who are potentially eligible for Exchange 
coverage in each year is estimated using the 2019 and 2023 1-year ACS 
files from IPUMS USA.\230\ State residents ages 19-64 with household 
incomes between 100-150 percent FPL who are not enrolled in Medicaid or 
Medicare are considered potentially eligible for Exchange coverage. 
This follows a methodology used in prior research and excludes children 
age 18 and under who are eligible for Medicaid or the Children's Health 
Insurance Program (CHIP) if their incomes are in this range,\231\ as 
well as adults ages 65 and older who are likely eligible for 
Medicare.\232\ Because the 2024 ACS microdata is not yet available, the 
number of individuals potentially eligible for Exchange coverage in 
this income range for each State during 2024 was estimated by applying 
State-level estimates of population change from 2023 to 2024 from the 
United States Census Bureau to the 2023 ACS estimates.\233\ This 
adjustment assumes that changes in population within the 100-150 
percent FPL range are similar to those within the State and ignores any 
potential distributional changes. Minnesota, New York, and Oregon were 
excluded from the analysis due the presence of a BHP for low-income 
residents during at least part of the analysis period.\234\ The 
District of Columbia was excluded from the analysis due to insufficient 
income information available in the OEP PUF. In addition, a 2019 
estimate for Idaho is not reported due to unavailable income 
information in the OEP PUF for this year.\235\
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    \228\ Marketplace Products. (n.d.). Retrieved from https://www.cms.gov/data-research/statistics-trends-and-reports/marketplace-products.
    \229\ Public Use Files: Definitions. (2024). Retrieved from 
https://www.cms.gov/files/document/2024-public-use-files-definitions.pdf; https://www.cms.gov/files/document/2023-public-use-files-definitions.pdf.
    \230\ Ruggles, S., et al. (2023). IPUMS USA: Version 15.0 
[dataset]. Retrieved from https://www.ipums.org/projects/ipums-usa/d010.V15.0.
    \231\ Medicaid/CHIP Upper Income Eligibility Limits for 
Children, 2000-2024. (n.d.). Retrieved from https://www.kff.org/medicaid/state-indicator/medicaidchip-upper-income-eligibility-limits-for-children/.
    \232\ Blase, B. & Gonshorowski, D. (n.d.). The Great Obamacare 
Enrollment Fraud. Retrieved from https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud/.
    \233\ State Population Totals and Components of Change: 2023-
2024[Vintage 2024]. https://www.census.gov/data/tables/time-series/demo/popest/2020s-state-total.html#v2024.
    \234\ Basic Health Program. (n.d.). Retrieved from https://www.medicaid.gov/basic-health-program/index.html.
    \235\ Public Use Files: Definitions. Retrieved from https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/marketplace-products/downloads/2019publicusefilesdefinitions-.pdf; https://www.cms.gov/data-research/statistics-trends-and-reports/marketplace-products/2019-marketplace-open-enrollment-period-public-use-files.
---------------------------------------------------------------------------

    The comparisons presented in Table 15 include columns that 
calculate the take-up of Exchange coverage by dividing Exchange 
enrollment for each State by the corresponding estimate of eligible 
State residents from the ACS and multiplying by 100. While these 
estimates are useful for understanding trends in Exchange enrollment 
over time and different patterns of enrollment across States, they 
should not be interpreted as precise measures of take-up of Exchange 
coverage for several reasons. First, this methodology relies on 1-year 
samples of the ACS to estimate eligible State populations, which 
provides a current portrait of residents meeting the 100-150 percent 
FPL criteria in each year but leads to less precise estimates than the 
use of multi-year ACS samples with larger sample sizes.\236\ Second, it 
uses the Census definition of poverty to identify residents with family 
incomes between 100-150 percent FPL, which differs from the MAGI 
relative to poverty measure that is used to determine eligibility for 
premium tax credits on the Exchanges and reported in the OEP PUFs.\237\ 
There are differences in both the sources of income that are included 
in the definition of income, as well as which household members are 
included in the calculation.\238\ In addition, the ACS is fielded 
throughout the calendar year and asks about income during the previous 
12 months,\239\ meaning that this survey measure does not align with 
income during the calendar/plan year. Third, there is a tendency for 
income to be underreported in survey data, including in the ACS.\240\ 
Fourth, the

[[Page 13022]]

eligible population estimated using the ACS includes certain 
individuals who would not be eligible for subsidized Exchange coverage, 
including those with access to affordable employer-based coverage,\241\ 
those with Medicaid coverage that they did not report on the 
survey,\242\ immigrants who are not lawfully present,\243\ and people 
enrolled in Department of Veteran Affairs (VA) health care. Finally, 
the eligible population estimated using the ACS does not include 
certain individuals who are eligible for Exchange coverage and are 
included in the enrollment counts in the OEP PUFs, such as people aged 
65 or older who do not qualify for premium-free Medicare.\244\ We 
acknowledge these limitations and seek comment on ways to improve these 
analyses in final rulemaking. For instance, possible revisions to this 
analysis could include the use of multi-year ACS samples or the 
refinement of the measures of income and family unit used in the ACS to 
more closely align with Exchange premium tax credit eligibility 
determination.
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    \236\ Using 1-Year or 5-Year American Community Survey Data. 
(2020). Retrieved from https://www.census.gov/programs-surveys/acs/guidance/estimates.html.
    \237\ What's Included as Income. (n.d.). Retrieved from 
www.healthcare.gov/income-and-household-information/income/.
    \238\ State Health Access Data Assistance Center. (2023). 
Defining Family for Studies of Health Insurance Coverage. Retrieved 
from https://shadac-pdf-files.s3.us-east-2.amazonaws.com/s3fs-public/publications/2023%20Defining%20families%20brief.pdf.
    \239\ Rothbaum, J. L. (2015). Comparing Income Aggregates: How 
do the CPS and ACS Match the National Income and Product Accounts, 
2007-2012. Retrieved from https://www.census.gov/content/dam/Census/library/working-papers/2015/demo/SEHSD-WP2015-01.pdf.
    \240\ About Income. (n.d.). Retrieved from https://www.census.gov/topics/income-poverty/income/about.html https://www.census.gov/content/dam/Census/library/working-papers/2015/demo/SEHSD-WP2015-01.pdf.
    \241\ People with coverage through a job. (n.d.) Retrieved from 
https://www.healthcare.gov/have-job-based-coverage/options/.
    \242\ O'Hara, Brett. (2009). Is there an undercount of Medicaid 
participants in the ACS Content Test? Retrieved from https://www.census.gov/content/dam/Census/library/working-papers/2009/adrm/medicaid-participants-acs-content-test.pdf.
    \243\ Coverage for lawfully present immigrants. (n.d.). 
Retrieved from https://www.healthcare.gov/immigrants/lawfully-present-immigrants/.
    \244\ FAQs: Health Insurance Marketplace and the ACA. I am 
turning 65 years old next month, but I am not entitled to Medicare 
without having to pay a premium for Part A because I have not worked 
long enough to qualify. Can I sign up for a Marketplace plan? 
(n.d.). Retrieved from https://www.kff.org/faqs/faqs-health-insurance-marketplace-and-the-aca/i-am-turning-65-years-old-next-month-but-i-am-not-entitled-to-medicare-without-having-to-pay-a-premium-for-part-a-because-i-have-not-worked-long-enough-to-qualify-can-i-sign-up-for-a-marketplace-pla/.
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    Table 15 below shows there is large variation in the take-up of 
Exchange coverage among potential enrollees across States. It also 
indicates that there has been a substantial increase in take-up from 
the estimated 43.8 percent of potential enrollees in this set of States 
who enrolled in Exchange coverage for plan year 2019. The estimates for 
2023 and 2024 are 94.2 percent and 143.9 percent, respectively. These 
overall take-up estimates by year exclude Idaho given the lack of 
income information available for this State in 2019.
    Nine States have take-up rates that exceed 100 percent for plan 
year 2024, indicating that there are a larger number of Exchange 
enrollees reporting incomes of between 100-150 percent FPL than 
residents reporting incomes in this range on the ACS. While estimates 
slightly above 100 percent could potentially be attributed to 
imprecision in population estimates or differences in the measurement 
of income as described above, these explanations seem less likely for 
take-up estimates that greatly exceed 100 percent, such as the 438 
percent observed for Florida in 2024. Other possible explanations for 
such a high take-up rate include people misestimating their income for 
the plan year at the time of open enrollment, as sign-ups typically 
occurring in the fall prior to the plan year and individuals may earn 
more or less than they expected, or people not updating their income 
information if auto re-enrolled with the prior year's income data in 
2023 and 2024. These would constitute errors. To the extent that people 
with incomes below 100 percent FPL intentionally overstate their income 
in order to qualify for subsidized Exchange coverage or are counseled 
to do so by an agent, broker, or web-broker, or if people outside this 
income range are unknowingly enrolled by an agent, broker, or web-
broker who claim their income at 100-150 percent FPL, these types of 
improper enrollments would also contribute to a take-up rate that 
exceeds 100 percent. Of note, 7 of the 9 States with take-up rates 
above 100 percent in 2024 are States that have not implemented ACA 
Medicaid expansions.\245\ Medicaid eligibility for non-elderly and non-
disabled adults in these States is limited to parents who meet a median 
income eligibility threshold of 27 percent FPL.\246\ Previous research 
presents evidence suggesting that many people with incomes that exceed 
the Medicaid eligibility limit in non-ACA Medicaid expansion States, 
especially in Florida, obtain subsidized Exchange coverage by reporting 
income just above the FPL at enrollment.\247\
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    \245\ Status of State Medicaid Expansion Decisions. (2025, 
February 12). Retrieved from https://www.kff.org/status-of-state-medicaid-expansion-decisions/.
    \246\ Medicaid Income Eligibility Limits for Adults as a Percent 
of the Federal Poverty Level. (2024, 1 May). Retrieved from https://www.kff.org/affordable-care-act/state-indicator/medicaid-income-eligibility-limits-for-adults-as-a-percent-of-the-federal-poverty-level/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D Parental income eligibility limits for parents in a 
family of three as of May 1, 2024 for each of the 7 States are 18% 
FPL in Alabama, 27% FPL in Florida, 30% FPL in Georgia, 27% FPL in 
Mississippi, 67% FPL in South Carolina, 105% FPL in Tennessee, and 
15% FPL in Texas. Other adults are not eligible.
    \247\ Hopkins, B. et al. (2024). How Did Take-Up of Marketplace 
Plans Vary with Price, Income, and Gender? American Journal of 
Health Economics, 11(1 winter 2025). Retrieved from https://doi.org/10.1086/727785.
---------------------------------------------------------------------------

    One approach to estimate the possible reduction in erroneous and 
improper enrollments under the proposed changes in this rule is to sum 
the total number of enrollments in 2024 that exceed 100 percent of 
potential enrollees in Table 15. This calculation suggests that there 
are as many as 4.4 million erroneous or improper enrollments. In 
several respects, this is expected to be an upper bound estimate of the 
scale of erroneous and improper enrollments. First, 2024 plan year 
Exchange enrollments occurred prior to recent HHS actions to improve 
program integrity (for example, from June 2024 through October 2024, 
CMS suspended 850 agents and brokers' Marketplace Agreements for 
reasonable suspicion of fraudulent or abusive conduct related to 
unauthorized enrollments or unauthorized plan switches).\248\ Such 
changes were expected to reduce the number of improper and erroneous 
enrollments prior to the implementation of the provisions in this 
proposed rule. Additionally, this estimate fully attributes excess 
enrollments to error and improper enrollments and does not adjust for 
the presence of general uncertainty around expected income among 
enrollees, which is not expected to change as a result of the proposed 
provisions, nor does it take into account the imprecision inherent in 
the use of survey data to identify and measure the population eligible 
for Exchange coverage. The excess enrollment estimate, however, does 
also ignore the potential presence of erroneous and improper 
enrollments in States with take-up rates below 100 percent and, in this 
way, could underestimate the potential impact of the proposed 
provisions. For all of these reasons, there is uncertainty present 
regarding the estimate derived from this analysis. We acknowledge this 
uncertainty and seek comment on how we may improve this estimate in 
final rulemaking.
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    \248\ CMS Update on Actions to Prevent Unauthorized Agent and 
Broker Marketplace Activity. (2024, October 17). Retrieved from 
https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity.

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[[Page 13023]]

[GRAPHIC] [TIFF OMITTED] TP19MR25.017


[[Page 13024]]


[GRAPHIC] [TIFF OMITTED] TP19MR25.018

    Furthermore, we anticipate that IRA subsidies expiring after PY 
2025 will reduce the availability of fully-subsidized plans and, 
therefore, is expected to also reduce the occurrence of improper 
enrollments. That reduction in improper enrollments is not attributable 
to the proposals in this rule, if finalized as proposed, but rather by 
current law causing IRA subsidies to expire after PY 2025. However, 
there is uncertainty regarding how many improper enrollments would be 
reduced by the expiration of IRA subsidies compared to the proposals in 
this rule, if finalized. We believe the majority of improper 
enrollments would disenroll from coverage as a result of the enhanced 
subsidies, therefore, we assume a range of approximately 750,000 to 
2,000,000 fewer individuals would enroll in QHP coverage in 2026 as a 
result of the proposals in this rule, if finalized jointly and as 
proposed. We seek comment on this estimate and assumptions.
    Starting with internal CMS data of enrollment by month, premiums, 
and APTCs, we summarize the data using average monthly amounts. These 
monthly averages are projected throughout the year using historical 
monthly patterns during a similar environment. For future years, the 
enrollment is trended by the projected growth in the under age 65 
population. Spending amounts are trended using projected growth in NHEA 
less Medicare. With the expiration of enhanced subsidies, we assume 
approximately 42 percent of recent enrollment growth will discontinue 
coverage. We believe the discontinuing enrollees are likely to be 
healthier than those remaining in the risk pool, leading to higher 
overall premiums on a per member per month (PMPM) basis ($614.44 PMPM 
in 2025 increasing to $662.13 PMPM in 2026). Based on the analysis 
presented thus far in this section, we expect average enrollment for 
2026 to decrease by approximately 750,000 to 2,000,000 enrollees 
compared to baseline estimates. Some enrollees dropping coverage would 
likely be healthier than those remaining in the risk pool, while other 
enrollees losing coverage due to improper enrollments could potentially 
be less healthy, so we estimated the claims impact to the risk pool to 
potentially range from -0.5 percent to +4 percent. The claims changes 
were then combined with the estimated 3.4 percent decrease for the 
expected impact of removing the monthly 150 percent FPL SEP, a 0.5 
percent decrease for SEP verification, and 1 percent decrease for the 
de minimis AV change. The 2026 baseline claims per member was decreased 
by 5.4 percent for the 750,000 reduced enrollment scenario and 0.9 
percent for the 2,000,000 reduced enrollment scenario. The revised 
premium was calculated assuming issuers would price to an average 84 
percent loss ratio, yielding a revised PMPM of $626.37 for the 750,000 
reduced enrollment scenario and $656.17 for the 2,000,000 reduced 
enrollment scenario for 2026 if the proposals in this rule are 
finalized jointly and as proposed. Estimated APTCs were assumed to be 
88.8 percent of the premium PMPM ($626.37 x 0.888 = $556.22 and $656.17 
x 0.888 = $582.68), and APTC enrollment was estimated to be 90.6 
percent of total enrollment for 2026. For future years under this rule, 
we assume premium growth of 3.9 percent for 2027 and 2028 and 1.9 
percent for 2029. Enrollment growth is estimated at 1.1 percent for 
2027, 1.5 percent for 2028, and 3 percent for 2029.
    Using the methodology described in the preceding paragraphs, we 
anticipate the provisions in this proposed rule, when considered 
jointly and if finalized as proposed, could reduce enrollment, 
premiums, and APTC each year beginning in 2026. We provide lower bound 
estimates in Table 16 and upper bound estimates in Table 17.

[[Page 13025]]

[GRAPHIC] [TIFF OMITTED] TP19MR25.019

[GRAPHIC] [TIFF OMITTED] TP19MR25.020

    Taken together, the provisions of this rule are expected to address 
errors and improper enrollments, which means that as presented in the 
preceding paragraphs, we would expect approximately 750,000 to 
2,000,000 individuals to lose coverage as a result of this rule, if all 
provisions are finalized as proposed. This range may overestimate the 
actual number of individuals impacted, as we believe that this range 
includes many individuals improperly enrolled by agents, brokers, and 
web-brokers without their knowledge or consent, as well enrollees with 
multiple forms of coverage. Likewise, this range may underestimate the 
actual number of individuals impacted, as eligible enrollees may lose 
coverage as a result of the administrative burdens imposed by the 
provisions of this rule. Finally, we note that coverage losses are 
expected to be concentrated in nine States where erroneous and improper 
enrollment is most noticeable (that is, Alabama, Florida, Georgia, 
Mississippi, North Carolina, South Carolina, Tennessee, Texas, and 
Utah), although we also expect minor coverage losses across all States 
as the administrative burdens associated with this rule would be 
applied uniformly across the country.
    An individual who loses coverage may be required to incur 
additional expense to obtain coverage or may go uninsured. An increase 
in the rate of uninsurance may impose greater burdens on the health 
care system through strain on emergency departments, additional costs 
to the Federal Government and to States to provide limited Medicaid 
coverage for the treatment of an emergency medical condition, and cause 
an overall reduction to labor productivity.
    In contrast, if individuals who do not maintain coverage following 
the finalizing of this rule would otherwise be subsidized QHP 
enrollees, as we anticipate, there would be a savings to the Federal 
Government in the form of reduced APTC payments, thereby saving 
taxpayer dollars. As we believe many of the individuals who would lose 
coverage as a result of the proposals in this rule, if finalized 
jointly and as proposed, may represent improper enrollments, this would 
be a benefit.
    We note that variables impacting enrollment, premiums, and APTC 
have changed over time and may continue to fluctuate. When considering 
the overall

[[Page 13026]]

impact of this proposed rule, if all provisions are finalized as 
proposed, we also recognize that the degree of impact from the 
individual provisions working in concert with each other may vary more 
than what we estimate due to the inherent uncertainty in predicting 
enrollment trends. Therefore, it is possible that the overall impact of 
this proposed rule could be outside of the estimates provided in this 
section. We seek comment on these impact estimates and assumptions.

D. Regulatory Alternatives Considered

    We considered taking no action regarding our proposal to remove 
Sec.  147.104(i), which currently prohibits an issuer from attributing 
payment of premium for new coverage to past-due premiums owed for prior 
coverage. Leaving this policy in place would provide the broadest 
enrollment rights for consumers. However, due to concerns about gaming 
and adverse selection, HHS believes that it is reasonable to allow 
issuers, to the extent permitted by applicable State law, to condition 
the sale of new coverage on payment of past-due premiums owed to the 
issuer. This proposal would improve the risk pool by promoting 
continuous coverage without imposing a significant financial burden for 
most people who owe past-due premiums.
    At Sec.  155.20, we are proposing to adjust the definition of 
``lawfully present'' used for purposes of determining eligibility to 
enroll in a QHP offered through the Exchange or a BHP in States that 
elected to operate a BHP to exclude DACA recipients. We alternatively 
considered proposing to fully revert to the definition of ``lawfully 
present'' that was in place prior to the 2024 Final Rule ``Clarifying 
the Eligibility of Deferred Action for Childhood Arrivals (DACA) 
Recipients and Certain Other Noncitizens for a Qualified Health Plan 
through an Exchange, Advance Payments of the Premium Tax Credit, Cost-
Sharing Reductions, and a Basic Health Program'' (89 FR 39392). 
However, proposing to fully reinstate the previous definition would 
have undone several technical and clarifying changes to the definition 
of ``lawfully present'' that were finalized in the 2024 rule (89 FR 
39407).
    We evaluated these technical and clarifying changes and found that 
some had no impact on who is considered ``lawfully present'' for 
purposes of enrolling in QHP coverage offered through the Exchange and 
BHP coverage.\249\ Other changes corrected unintentional errors in the 
prior definition.\250\ Finally, some changes resulted in very small 
populations being newly considered ``lawfully present.'' Unlike DACA 
recipients, the small number of individuals in these discrete 
categories generally would have entered the United States with 
inspection and would generally be able to adjust status to lawful 
permanent resident on the basis of their status.\251\ Because these 
changes were primarily technical and clarifying in nature, and because 
the small groups of noncitizens newly considered ``lawfully present'' 
as a result of these changes are different from DACA recipients in 
important ways, we are not proposing to revert or amend these 
provisions at this time.
---------------------------------------------------------------------------

    \249\ For example, technical changes to Sec.  155.20(4) and 
155.20(5) to adjust the language we use to refer to temporary 
resident status and Temporary Protected Status (TPS), as described 
in the 2024 final rule at 89 FR 39408.
    \250\ For example, technical changes to Sec.  155.20(13) to 
refer to individuals with an approved petition for Special Immigrant 
Juvenile (SIJ) status, rather than only individuals with 
applications for such status, as described in the 2024 Final Rule at 
89 FR 39411.
    \251\ For example, changes to Sec.  155.20(6) to newly include 
individuals in the process of transitioning from certain employment-
based immigrant visa petitions to lawful permanent resident (LPR) 
status, as described in the 2024 final rule at 89 FR 39408.
---------------------------------------------------------------------------

    We considered taking no action regarding our proposal to modify 
Sec.  155.305(f)(4), which currently allows Exchanges to remove APTC 
after an enrollee or their tax filer has been found as failing to file 
their income tax return and reconcile their APTC for two-consecutive 
tax years. However, due to concerns about improper enrollment as well 
as concerns related to the potential for increased tax liability for 
tax filers, HHS is proposing allowing Exchanges to remove APTC after an 
enrollee or their tax filer has been identified as failing to file and 
reconcile for one tax year. We believe that FTR serves as an important 
check on improper enrollments and would help protect low-income 
consumers from larger than expected tax liabilities.
    We considered taking no action regarding our policy to add 
amendments to Sec.  155.320(c)(3)(iii) to specify that all Exchanges 
must generate annual income inconsistencies when a tax filer's attested 
projected annual income is greater than or equal to 100 percent and not 
more than 400 percent of the FPL and trusted data sources indicate that 
projected income is under 100 percent of the FPL. However, due to 
concerns of applicants inflating their incomes or having applications 
submitted on their behalf with inflated incomes, as outlined in this 
proposed rule, we believe it would be reasonable, prudent, and even 
necessary to carry out the alternative income verification process in 
this scenario. HHS also believes that this may help limit tax filers' 
potential liability at tax reconciliation to repay excess APTC.
    We considered taking no action regarding our policy to remove Sec.  
155.320(c)(5) which currently requires Exchanges to accept 
attestations, and not set an Income DMI, when the Exchange requests tax 
return data from the IRS to verify attested projected annual household 
income, but the IRS confirms there is no such tax return data 
available. However, HHS believes that removing Sec.  155.320(c)(5) is 
crucial for program integrity and that the benefit more than offsets 
the administrative burden of requiring an income DMI in this scenario. 
We considered taking no action regarding our policy to remove Sec.  
155.315(f)(7) which requires that applicants must receive an automatic 
60-day extension in addition to the 90 days currently provided by Sec.  
155.315(f)(2)(ii) to allow applicants sufficient time to provide 
documentation to verify household income. However, we believe it is 
important we remove it to align with the 90-day statutory period. 
Additionally, we believe the cost to taxpayers caused by continued APTC 
beyond the 90-day period and decline in program integrity outweighs any 
possible benefits to the risk pool that were identified the 2024 
Payment Notice.
    We propose adding Sec.  155.335(a)(3) and (n) to require that when 
an enrollee does not submit an application for an updated eligibility 
determination on or before the last day to select a plan for January 1 
coverage and the enrollee's portion of the premium for the entire 
policy would be zero dollars after application of APTC through the 
Exchange's annual redetermination process, all Exchanges decrease the 
amount of the APTC applied to the policy such that the remaining 
monthly premium owed by the enrollee for the policy equals $5 for the 
first month and for every following month that the enrollee does not 
confirm or update the eligibility determination.
    We alternatively considered whether other methods, such as 
outreach, could sufficiently prompt fully subsidized enrollees to 
update or confirm their eligibility information and actively re-enroll 
in coverage, but most enrollees on the FFEs and the SBE-FPs actively 
re-enroll by the applicable deadlines for January 1 coverage. As 
discussed previously in this preamble, however, we do not believe 
additional or different notifications would prompt action from

[[Page 13027]]

enrollees who choose not to submit an application for an updated 
eligibility determination and actively re-enroll.
    In addition, we considered taking no action regarding our policy at 
Sec.  155.335; however, we believe that it is important to address the 
significant increase in the number of enrollees who are automatically 
re-enrolled in a fully subsidized QHP and change is critical to reduce 
the financial impact of improper enrollments in QHPs with APTC through 
the FFEs. The current annual redetermination process puts fully 
subsidized enrollees at risk of accumulating surprise tax liabilities 
and increases the cost of PTC to the Federal Government as Federal law 
limits repayments, and there is no provision to recoup overpayments 
from issuers when they follow the eligibility determinations made by 
the Exchanges. As discussed previously in this preamble, we also 
considered whether other methods--such as outreach--could sufficiently 
prompt fully subsidized enrollees to update or confirm their 
eligibility information. However, based on our experience operating the 
Exchanges on the Federal platform, the majority of enrollees update 
their information each year due to extensive outreach efforts, and we 
don't believe additional or different notifications would prompt 
enrollees to do so.
    We also considered modifying the Exchange's annual redetermination 
process to require that when an enrollee does not submit an application 
to obtain an updated eligibility determination on or before the last 
day to select a plan for January 1 coverage and the enrollee's portion 
of the premium for the entire policy would be zero dollars after 
application of APTC through the Exchange's annual redetermination 
process, the enrollee would be automatically re-enrolled without any 
APTC. This would ensure that enrollees in this situation need to return 
to the Exchange and obtain an updated eligibility determination prior 
to having any APTC paid on their behalf for the upcoming year. 
Ultimately, however, we determined that this approach would create 
undue financial hardship for these enrollees and act as a significant 
barrier to accessing health care coverage. The loss of lower-risk 
enrollees, who are least likely to actively re-enroll, due to an 
inability to pay could destabilize the market risk pool and increase 
premiums and the uninsured rate. Based on comments received on this 
approach in the 2021 Payment Notice proposed rule, we believe that our 
proposed amendment, which decreases the amount of the APTC applied to 
the policy such that the remaining premium owed by the enrollee for the 
policy equals $5, strikes an appropriate balance between encouraging 
active enrollment decision making and ensuring market stability.
    The 2024 Payment Notice updated Sec.  155.335(j) to allow Exchanges 
to move a CSR-eligible enrollee from a bronze QHP and re-enroll them 
into a silver QHP for an upcoming plan year, if a silver QHP is 
available in the same product, with the same provider network, and with 
a lower or equivalent net premium after the application of APTC as the 
bronze plan into which the enrollee would otherwise have been re-
enrolled. We considered taking no action and leaving this policy in 
place; however, for reasons further discussed in Section III.B.5. of 
this preamble, we believe that consumers, and the agents, brokers, web-
brokers, and Navigators who help them, are largely aware of the more 
generous subsidies. Therefore, we believe that the consumer awareness 
problem the bronze to silver crosswalk policy aimed to address is 
substantially less today, and therefore the possible benefits of this 
policy no longer outweigh its potential to confuse consumers, undermine 
consumer choice, and create unexpected tax liability.
    We considered taking no action regarding modifications to Sec.  
155.400(g) to remove flexibilities that would allow issuers to adopt a 
fixed-dollar premium payment threshold or a gross premium-based 
percentage payment threshold. We also considered removing just the 
fixed-dollar threshold policy and allowing issuers the option to 
utilize the gross premium-percentage based premium threshold. However, 
given the continued and increased numbers of improper enrollments and 
plan switches and other improper enrollment trends, both the fixed-
dollar and gross-premium percentage-based thresholds present program 
integrity risks that may allow consumers (and Medicaid beneficiaries 
who are victims of dual improper enrollment into a QHP) to remain in 
coverage for a much longer or indefinite amount of time, after payment 
of the binder. Consumers who never wanted, or no longer need, QHP 
coverage could remain enrolled for longer than the 3-month grace 
period, accruing premium debt and potentially facing complications when 
they file their taxes. Issuers will still have the option to implement 
the existing net premium percentage-based policy to allow consumers who 
pay the majority of their premium to avoid being put into a grace 
period.
    We considered maintaining the length of the OEP, and we considered 
providing flexibility to State Exchanges on the length of their OEPs. 
Ultimately, however, we find that reducing the potential for adverse 
selection is more important than providing additional time for plan 
changes or additional flexibility for States. We believe that efforts 
to reduce premium growth are more valuable for Exchange stability than 
additional enrollment time. Lower adverse selection should translate to 
lower premiums for QHPs. Additionally, we considered moving the OEP to 
a later date in the calendar year--beginning March 1 and running to 
April 15--as a measure to both minimize adverse selection and maximize 
consumer choice (by moving the OEP to a season in which financial 
stress is generally lessened), but we recognize that such a dramatic 
shift in the OEP would cause considerable disruption to the market. 
Therefore, we propose that the OEP for all Exchanges ends on December 
15.
    We considered not repealing the monthly 150 percent FPL SEP under 
Sec.  155.420 but decided that it was important to fully repeal this 
SEP to ensure a stable risk pool for the Exchange and to mitigate risks 
for improper enrollments. Specifically, we found that the existence of 
fully subsidized plans creates an opportunity for some agents, brokers, 
and web-brokers to capture a commission by improperly enrolling people 
without their knowledge or consent. We find that these improper 
enrollments can go unnoticed until an enrollee tries to use their 
health plan or when they eventually must reconcile surprise APTC on 
their taxes. Even if we were able to sufficiently reduce the problem of 
some agents, brokers, and web-brokers improperly enrolling consumers, 
there remain substantial issues with consumers taking advantage of the 
150 percent FPL SEP by falsely representing their income to take 
advantage of the fully subsidized plans. Additionally, we find that the 
consumers at or below the 150 percent of the FPL wait to enroll until 
they need health care services which also destabilizes the risk pool 
and increases premiums. Ultimately, we do not believe the benefits of 
increased access to coverage for low-income consumers outweighs the 
higher premiums and risks of harming program integrity because of 
improper enrollments.
    We are proposing to amend Sec.  155.420(g) to require all Exchanges 
to conduct eligibility verification for SEPs. Specifically, we propose 
to remove the limit on Exchanges on the Federal

[[Page 13028]]

platform to conducting pre-enrollment verifications for only the loss 
of minimum essential coverage SEP. With this limitation removed, we 
propose to conduct pre-enrollment verifications for most categories of 
SEPs for Exchanges on the Federal platform in line with operations 
prior to the implementation of the 2023 Payment Notice.
    We considered leaving the limitation of SEP verification to loss of 
minimum essential coverage for Exchanges on the Federal platform in 
place. We determined that the risks associated with the potential 
enrollment of ineligible individuals was greater than the potential 
benefit of reducing administrative burden on consumers by only 
verifying loss of minimum essential coverage. We also determined that 
consumers would benefit from increased verification due to its 
potential to limit improper enrollments occurring without their 
awareness and to bring down risk in the Federal Exchange by ensuring 
that only qualified individuals are enrolling through SEPs throughout 
the year.
    We are also proposing to require that Exchanges, including all 
State Exchanges, conduct pre-enrollment SEP verification for at least 
75 percent of new enrollments through SEPs for consumers not already 
enrolled in coverage through the applicable Exchange. We are proposing 
that Exchanges must verify at least 75 percent of such new enrollments 
based on the current implementation of SEP verification by State 
Exchanges.
    We considered leaving the current regulation that allows pre-
enrollment SEP verification to be at the option of each State Exchange 
in place. However, we believe that having a standard of SEP 
verification across all Exchanges will be beneficial for all States 
regarding risk reduction in their Exchanges and protecting consumers 
from improper enrollments. We believe that the 75 percent threshold 
still leaves State Exchanges a great deal of flexibility as to which 
SEPs they implement pre-enrollment verification for as we know it is 
not cost effective for each State Exchange to verify all types. 
However, we are seeking comment on whether or not to require SEP 
verification for most SEP types in line with what we are proposing in 
this Rule for Exchanges on the Federal platform.
    In proposing the change to the premium measure used in the premium 
adjustment percentage calculation under Sec.  156.130, we considered 
continuing to use the current premium measure based on NHEA's estimates 
and projections of average per enrollee employer-sponsored insurance 
premiums for purposes of calculating the premium adjustment percentage 
for PY 2026. We are proposing a change to this measure to instead use a 
private health insurance premium measure (excluding Medigap and 
property and casualty insurance), so that the premium growth measure 
more closely reflects premium trends in the private health insurance 
market since 2013. Alternatively, we considered using NHEA estimates 
and projections of average per enrollee private health insurance 
premiums. NHEA's private health insurance premium measure includes 
premiums for employer-sponsored insurance, direct purchase insurance 
(which includes Medigap insurance), and property and casualty 
insurance. However, we propose to include only those premiums for 
expenditures associated with the acquisition of one's primary health 
insurance coverage purchased through their employer or purchased 
directly from a health insurance issuer. We believe it is inappropriate 
to include Medigap premiums in the measure as this type of coverage is 
not considered primary coverage for those enrollees who supplement 
their Medicare coverage with these plans. Moreover, although total 
spending for private health insurance in the NHEAs includes the medical 
portion of accident insurance (property and casualty insurance), we do 
not believe it would be appropriate to include those expenditures for 
this purpose as they are associated with policies that do not serve as 
a primary source of health insurance coverage.
    Accordingly, in Sec.  156.130 we propose using a measure that 
includes only premiums for employer-sponsored insurance and direct 
purchase insurance, but not premiums for property and casualty, or 
Medigap insurance. We seek comment on the source of premium data we use 
in the premium adjustment percentage calculation, and specifically the 
proposal to use average per enrollee private health insurance premiums 
(excluding Medigap and property and casualty insurance) or whether we 
continue to use employer-sponsored insurance premiums for purposes of 
calculating the premium adjustment percentage for PY 2026.

E. Regulatory Flexibility Act (RFA)

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. The RFA generally defines a ``small entity'' 
as (1) a proprietary firm meeting the size standards of the Small 
Business Administration (SBA), (2) a not-for-profit organization that 
is not dominant in its field, or (3) a small government jurisdiction 
with a population of less than 50,000. States and individuals are not 
included in the definition of ``small entity.'' The data and 
conclusions presented in this section, along with the rest of the RIA, 
amount to our initial regulatory flexibility analysis under the RFA.
    For purposes of the RFA, we believe that health insurance issuers 
would be classified under the NAICS code 524114 (Direct Health and 
Medical Insurance Carriers). According to SBA size standards, entities 
with average annual receipts of $47 million or less would be considered 
small entities for this NAICS code. Issuers could possibly be 
classified in 621491 (HMO Medical Centers) and, if this is the case, 
the SBA size standard will be $44.5 million or less.\252\ We believe 
that few, if any, insurance companies underwriting comprehensive health 
insurance policies (in contrast, for example, to travel insurance 
policies or dental discount policies) would fall below these size 
thresholds. Based on data from MLR annual report submissions for the 
2023 MLR reporting year, approximately 84 out of 479 issuers of health 
insurance coverage nationwide had total premium revenue of $47 million 
or less.\253\ We estimate that approximately 80 percent of these small 
issuers belong to larger holding groups, and many, if not all, of these 
small companies are likely to have non-health lines of business that 
result in their revenues exceeding $47 million. We seek comment on 
these estimates.
---------------------------------------------------------------------------

    \252\ SBA. (n.d.). Table of size standards. https://www.sba.gov/document/support--table-size-standards.
    \253\ CMS. (n.d.). Medical Loss Ratio Data and System Resources. 
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------

    We anticipate that small issuers could be impacted by the 
provisions in this proposed rule. We are unable to quantify the impact 
of these proposed changes on small issuers due to uncertainty regarding 
their market share, market participation, membership in larger holding 
groups, enrollment and risk mix, and APTC receipts. However, we 
anticipate that there would not be a significant change in revenue for 
issuers since a reduction in APTC payments would mean consumers would 
be responsible for the balance of the premium not covered by APTC. We 
also anticipate that due to the small reduction in enrollment 
anticipated to result from the proposals in this rule, if finalized, 
issuers may experience a reduction in premium revenue.

[[Page 13029]]

However, we anticipate this could be balanced by a reduction in claims 
experience, and we are unable to quantify this impact on small issuers 
due to uncertainty and a lack of data. We seek comment on these 
estimates and assumptions.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
the purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. Although this proposed 
rule is not subject to section 1102 of the Act, we have determined that 
this proposed rule would not affect small rural hospitals.

F. Unfunded Mandates Reform Act (UMRA)

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2025, that 
threshold is approximately $187 million. Although we have not been able 
to quantify all costs, we expect that the combined impact on State, 
local, or Tribal governments and the private sector does not meet the 
UMRA definition of an unfunded mandate.

G. Federalism

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on State and 
local governments, preempts State law, or otherwise has Federalism 
implications.
    In compliance with the requirement of Executive Order 13132 that 
agencies examine closely any policies that may have Federalism 
implications or limit the policy making discretion of the States, we 
have engaged in efforts to consult with and work cooperatively with 
affected States, including participating in conference calls with and 
attending conferences of the NAIC, and consulting with State insurance 
officials on an individual basis.
    While developing this proposed rule, we attempted to balance the 
States' interests in regulating health insurance issuers with the need 
to ensure market stability. By doing so, we complied with the 
requirements of Executive Order 13132.
    Because States have flexibility in designing their Exchange and 
Exchange-related programs, State decisions will ultimately influence 
both administrative expenses and overall premiums. States are not 
required to establish an Exchange. For States that elected previously 
to operate an Exchange, those States had the opportunity to use funds 
under Exchange Planning and Establishment Grants to fund the 
development of data. Accordingly, some of the initial cost of creating 
programs was funded by Exchange Planning and Establishment Grants. 
After establishment, Exchanges must be financially self-sustaining, 
with revenue sources at the discretion of the State. Current State 
Exchanges charge user fees to issuers.
    In our view, although this proposed rule will not impose 
substantial direct requirement costs on State and local governments, 
this regulation has Federalism implications due to potential direct 
effects on the distribution of power and responsibilities among the 
State and Federal Governments relating to determining standards 
relating to health insurance that is offered in the individual and 
small group markets. For example, State Exchanges and States operating 
a BHP would be required to update their eligibility systems in order to 
no longer consider DACA recipients ``lawfully present'' for purposes of 
such programs. However, these Federalism implications may be balanced 
by the fact that we do not anticipate that these proposals would impose 
substantial direct costs on the affected States, which in any event 
have chosen to operate their own Exchanges and eligibility and 
enrollment platforms, or the optional BHP. Additionally, the proposed 
rule would start the Open Enrollment Period for Exchanges on November 1 
and end it on December 15 of the year preceding the benefit year, 
including for State Exchanges. For the 2025 annual open enrollment 
period, 19 of 20 State Exchanges ended their open enrollment period on 
or after January 15 of benefit year and one began before November 1 of 
the benefit year. This has Federalism implications because it would 
curtail flexibility in place to continue doing so. However, these 
implications may be balanced by limiting overall costs and burdens to 
State Exchanges on the basis of a truncated timeframe to hold open 
enrollment while maintaining flexibility to administer certain SEPs to 
support qualifying consumers. We intend that, if finalized, these rules 
would preempt State law only to the extent such State law would prevent 
the application of these rules.\254\
---------------------------------------------------------------------------

    \254\ See ACA Sec.  1321(d).
---------------------------------------------------------------------------

    Stephanie Carlton, Acting Administrator of the Centers for Medicare 
& Medicaid Services, approved this document on March 10, 2025.

List of Subjects

45 CFR Part 147

    Aged, Citizenship and naturalization, Civil rights, Health care, 
Health insurance, Individuals with disabilities, Intergovernmental 
relations, Reporting and record keeping requirements, Sex 
discrimination.

45 CFR Part 155

    Administrative practice and procedure, Advertising, Aged, Brokers, 
Citizenship and naturalization, Civil rights, Conflict of interests, 
Consumer protection, Grant programs--health, Grants administration, 
Health care, Health insurance, Health maintenance organizations (HMO), 
Health records, Hospitals, Indians, Individuals with disabilities, 
Intergovernmental relations, Loan programs--health, Medicaid, 
Organization and functions (Government agencies), Public assistance 
programs, Reporting and recordkeeping requirements, Sex discrimination, 
State and local governments, Taxes, Technical assistance, Women, Youth.

45 CFR Part 156

    Administrative practice and procedure, Advertising, Advisory 
committees, Brokers, Conflict of interests, Consumer protection, Grant 
programs--health, Grants administration, Health care, Health insurance, 
Health maintenance organization (HMO), Health records, Hospitals, 
Indians, Individuals with disabilities, Loan programs--health, 
Medicaid, Organization and functions (Government agencies), Public 
assistance programs, Reporting and recordkeeping requirements, State 
and local governments, Sunshine Act, Technical assistance, Women, and 
Youth.

    For the reasons set forth in the preamble, under the authority at 5 
U.S.C. 301, the Department of Health and Human Services proposes to 
amend 45 CFR subtitle A, subchapter B as set forth below.

[[Page 13030]]

PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND 
INDIVIDUAL HEALTH INSURANCE MARKETS

0
1. The authority citation for part 147 continues to read as follows:

    Authority:  42 U.S.C. 300gg through 300gg-63, 300gg-91, 300gg-
92, and 300gg-111 through 300gg-139, as amended, and section 3203, 
Pub. L. 116-136, 134 Stat. 281.

0
2. Section 147.104 is amended by--
0
a. Revising paragraphs (b)(2)(i)(E) and (F);
0
b. Removing paragraphs (b)(2)(i)(G) and (i); and
0
c. Redesignating paragraph (j) as paragraph (i).
    The revisions read as follows:


Sec.  147.104  Guaranteed availability of coverage.

* * * * *
    (b) * * *
    (2) * * *
    (i) * * *
    (E) Section 155.420(d)(12) of this subchapter (concerning plan and 
benefit display errors); and
    (F) Section 155.420(d)(13) of this subchapter (concerning 
eligibility for insurance affordability programs or enrollment in the 
Exchange).
* * * * *

PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED 
STANDARDS UNDER THE AFFORDABLE CARE ACT

0
3. The authority citation for part 155 continues to read as follows:

    Authority:  42 U.S.C. 18021-18024, 18031-18033, 18041-18042, 
18051, 18054, 18071, and 18081-18083.

0
4. Section 155.20 is amended by--
0
a. In the definition of ``Lawfully present'' revising paragraph (9) and 
adding paragraph (14); and
0
b. Adding a definition of ``Preponderance of the evidence'' in 
alphabetical order.
    The revision and addition read as follows:


Sec.  155.20  Definitions.

* * * * *
    Lawfully present * * *
    (9) Is granted deferred action;
* * * * *
    (14) An individual with deferred action under the Department of 
Homeland Security's Deferred Action for Childhood Arrivals process, as 
described at 8 CFR 236.22, shall not be considered to be lawfully 
present as described in any of the above categories in paragraphs (1) 
through (13) of this definition.
* * * * *
    Preponderance of the evidence means proof by evidence that, 
compared with evidence opposing it, leads to the conclusion that the 
fact at issue is more likely true than not.
* * * * *
0
5. Section 155.220 is amended by revising paragraph (g)(2) introductory 
text to read as follows:


Sec.  155.220  Ability of States to permit agents and brokers and web-
brokers to assist qualified individuals, qualified employers, or 
qualified employees enrolling in QHPs.

* * * * *
    (g) * * *
    (2) An agent, broker, or web-broker may be determined noncompliant 
under paragraph (g)(1) of this section if HHS finds by a preponderance 
of the evidence that the agent, broker, or web-broker violated--
* * * * *
0
6. Section 155.305 is amended by--
0
a. Revising paragraph (f)(4) introductory text and paragraph (f)(4)(i); 
and
0
b. Removing and reserving paragraph (f)(4)(ii).
    The revisions read as follows:


Sec.  155.305  Eligibility standards.

* * * * *
    (f) * * *
    (4) Compliance with filing requirement. The Exchange may not 
determine a tax filer eligible for APTC if HHS notifies the Exchange as 
part of the process described in Sec.  155.320(c)(3) that APTC were 
made on behalf of the tax filer or either spouse if the tax filer is a 
married couple for a year for which tax data would be utilized for 
verification of household income and family size in accordance with 
Sec.  155.320(c)(1)(i), and the tax filer or the tax filer's spouse did 
not comply with the requirement to file an income tax return for that 
year as required by 26 U.S.C. 6011, 6012 and implementing regulations, 
and reconcile the advance payments of the premium tax credit for that 
period.
    (i) If HHS notifies the Exchange as part of the process described 
in Sec.  155.320(c)(3) that APTC payments were made on behalf of either 
the tax filer or spouse, if the tax filer is a married couple, for a 
year for which tax data would be utilized for verification of household 
income and family size in accordance with Sec.  155.320(c)(1)(i), and 
the tax filer or the tax filer's spouse did not comply with the 
requirement to file an income tax return for that year as required by 
26 U.S.C. 6011, 6012, and their implementing regulations and reconcile 
APTC for that period (``file and reconcile''), the Exchange must:
    (A) Send a notification to the tax filer, consistent with the 
standards applicable to the protection of Federal Tax Information, that 
directly informs the tax filer that the Exchange has determined that 
the tax filer or the tax filer's spouse, if the tax filer is married, 
has failed to file and reconcile, and educate the tax filer of the need 
to file and reconcile or risk being determined ineligible for APTC if 
they fail to file and reconcile immediately upon receipt of notice; or
    (B) Send a notification to either the tax filer or their enrollee, 
that informs the tax filer or enrollee that they may be at risk of 
being determined ineligible for APTC for the applicable coverage year. 
These notices must educate tax filers or their enrollees on the 
requirement to file and reconcile, while not directly stating that the 
IRS indicates the tax filer or the tax filer's spouse, if the tax filer 
is married, has failed to file and reconcile.
* * * * *


Sec.  155.315  [Amended]

0
7. Section 155.315 is amended by removing paragraph (f)(7).
0
8. Section 155.320 is amended by--
0
a. Revising paragraphs (c)(3)(iii)(A) and (D);
0
b. Adding paragraph (c)(3)(vi)(C)(2); and
0
c. Removing paragraph (c)(5).
    The revisions and addition read as follows:


Sec.  155.320  Verification process related to eligibility for 
insurance affordability programs.

* * * * *
    (c) * * *
    (3) * * *
    (iii) * * *
    (A) Except as specified in paragraphs (c)(3)(iii)(B), (C), and (D) 
of this section, if an applicant's attestation, in accordance with 
paragraph (c)(3)(ii)(B) of this section, indicates that a tax filer's 
annual household income has increased or is reasonably expected to 
increase from the data described in paragraph (c)(3)(ii)(A) of this 
section for the plan year for which the applicant(s) in the tax filer's 
family are requesting coverage and the Exchange has not verified the 
applicant's MAGI-based income through the process specified in 
paragraph (c)(2)(ii) of this section to be within the applicable 
Medicaid or CHIP MAGI-based income standard, the Exchange must accept 
the applicant's attestation regarding a tax filer's annual household 
income without further verification.
* * * * *
    (D) If an applicant's attestation to projected annual household 
income, as described in paragraph (c)(3)(ii)(B) of

[[Page 13031]]

this section, is greater than or equal to 100 percent but not more than 
400 percent of the FPL for the plan year for which coverage is 
requested and is more than a reasonable threshold above the annual 
household income computed in accordance with paragraph (c)(3)(ii)(A) of 
this section, the data described in paragraph (c)(3)(ii)(A) of this 
section indicates that projected annual household income is under 100 
percent FPL, and the Exchange has not verified the applicant's MAGI-
based income through the process specified in paragraph (c)(2)(ii) of 
this section to be within the applicable Medicaid or CHIP MAGI-based 
income standard, the Exchange must proceed in accordance with Sec.  
155.315(f)(1) through (4). However, this paragraph does not apply if 
the applicant is a non-citizen who is lawfully present and ineligible 
for Medicaid by reason of immigration status through the process 
specified in Sec.  155.305(f)(2). For the purposes of this paragraph, a 
reasonable threshold is established by the Exchange in guidance and 
approved by HHS, but must not be less than 10 percent, and can also 
include a threshold dollar amount.
* * * * *
    (vi) * * *
    (C) * * *
    (2) The data described in paragraph (c)(3)(vi)(A) of this section 
indicates that projected annual household income is under 100 percent 
FPL and the applicant's attestation to projected household income, as 
described in paragraph (c)(3)(ii)(B) of this section, is greater than 
or equal to 100 percent but not more than 400 percent of the FPL for 
the plan year for which coverage is requested and is more than a 
reasonable threshold above the annual household income as computed 
using data sources described in paragraph (c)(3)(vi)(A) of this 
section, in which case the Exchange must follow the procedures 
specified in Sec.  155.315(f)(1) through (4). The reasonable threshold 
used under this paragraph must be equal to the reasonable threshold 
established in accordance with paragraph (c)(3)(iii)(D) of this 
section.
* * * * *
0
9. Section 155.335 is amended by--
0
a. Adding paragraph (a)(3);
0
b. Revising paragraphs (j)(1) introductory text and (j)(2) introductory 
text;
0
c. Removing paragraph (j)(4) and redesignating paragraph (j)(5) as 
paragraph (j)(4); and
0
d. Adding paragraph (n).
    The revisions and additions read as follows:


Sec.  155.335  Annual eligibility redetermination.

    (a) * * *
    (3) The annual redeterminations described in paragraph (a)(2) of 
this section are subject to the requirements in paragraph (n) of this 
section:
* * * * *
    (j) * * *
    (1) The product under which the QHP in which the enrollee is 
enrolled remains available through the Exchange for renewal, consistent 
with Sec.  147.106 of this subchapter, the Exchange will renew the 
enrollee in a QHP under that product, unless the enrollee terminates 
coverage, including termination of coverage in connection with 
voluntarily selecting a different QHP, in accordance with Sec.  
155.430, or unless otherwise provided in paragraph (j)(1)(iii)(A) of 
this section, as follows:
* * * * *
    (2) No plans under the product under which the QHP in which the 
enrollee is enrolled are available through the Exchange for renewal, 
consistent with Sec.  147.106 of this subchapter, the Exchange will 
enroll the enrollee in a QHP under a different product offered by the 
same QHP issuer, to the extent permitted by applicable State law, 
unless the enrollee terminates coverage, including termination of 
coverage in connection with voluntarily selecting a different QHP, in 
accordance with Sec.  155.430, as follows:
* * * * *
    (n) Additional consumer protections. Subject to paragraphs (n)(1) 
and (2) of this section, if an enrollee does not submit an application 
for an updated eligibility determination on or before the last day on 
which a plan selection must be made for coverage effective January 1 in 
accordance with the effective dates specified in Sec. Sec.  155.410(f) 
and 155.420(b), as applicable, and the enrollee's portion of the 
premium for a policy after the application of advance payments of the 
premium tax credit through the Exchange's annual redetermination 
process would be zero dollars, the Exchange must decrease the amount of 
the advance payment applied to the policy such that the remaining 
monthly premium owed for the policy equals $5.
    (1) A Federally facilitated Exchange or a State-based Exchange on 
the Federal platform must adhere to paragraph (n) of this section for 
annual redeterminations for benefit years on and after 2026.
    (2) A State-based Exchange must adhere to paragraph (n) of this 
section for annual redeterminations for benefit years on and after 
2027.
0
10. Section 155.400 is amended by--
0
a. Revising paragraph (g) introductory text;
0
b. Removing and reserving paragraph (g)(2); and
0
c. Removing paragraph (g)(3).
    The revision reads as follows:


Sec.  155.400  Enrollment of qualified individuals into QHPs.

* * * * *
    (g) Premium payment threshold. Exchanges may, and the Federally 
facilitated Exchanges and State-Based Exchanges on the Federal platform 
will, allow issuers to implement a percentage-based premium payment 
threshold policy which can be based on the net premium after 
application of advance payments of the premium tax credit, provided 
that the threshold policy is applied in a uniform manner to all 
applicants and enrollees.
* * * * *
0
11. Section 155.410 is amended by--
0
a. Revising paragraph (e)(4) introductory text;
0
b. Adding paragraphs (e)(5);
0
c. Revising paragraph (f)(3) introductory text; and
0
d. Adding paragraph (f)(4).
    The revisions and additions read as follows:


Sec.  155.410  Initial and annual open enrollment periods.

* * * * *
    (e) * * *
    (4) For benefit years beginning on January 1, 2022 through January 
1, 2025--
* * * * *
    (5) For the benefit years beginning on or after January 1, 2026, 
the annual open enrollment period begins on November 1 and extends 
through December 15 of the calendar year preceding the benefit year.
    (f) * * *
    (3) For benefit years beginning on January 1, 2022 through January 
1, 2025, the Exchange must ensure that coverage is effective--
* * * * *
    (4) For benefit years beginning on or after January 1, 2026, the 
Exchange must ensure that coverage is effective--
    (i) January 1, for QHP selections received by the Exchange on or 
before December 15 of the calendar year preceding the benefit year.
    (ii) [Reserved]
* * * * *
0
12. Section 155.420 is amended by--
0
a. Revising paragraphs (a)(4)(ii)(B) and (C);
0
b. Removing paragraph (a)(4)(ii)(D);
0
c. Revising paragraph (a)(4)(iii) introductory text;

[[Page 13032]]

0
d. Removing paragraphs (b)(2)(vii) and (d)(16); and
0
e. Revising paragraph (g).
    The revisions read as follows:


Sec.  155.420  Special enrollment periods.

    (a) * * *
    (4) * * *
    (ii) * * *
    (B) Beginning January 2022, if an enrollee or their dependents 
become newly ineligible for cost-sharing reductions in accordance with 
paragraph (d)(6)(i) or (ii) of this section and the enrollee or his or 
her dependents are enrolled in a silver-level QHP, the Exchange must 
allow the enrollee and their dependents to change to a QHP one metal 
level higher or lower if they elect to change their QHP enrollment; or
    (C) No later than January 1, 2024, if an enrollee or his or her 
dependents become newly ineligible for advance payments of the premium 
tax credit in accordance with paragraph (d)(6)(i) or (ii) of this 
section, the Exchange must allow the enrollee and his or her dependents 
to change to a QHP of any metal level, if they elect to change their 
QHP enrollment.
    (iii) For the other triggering events specified in paragraph (d) of 
this section, except for paragraphs (d)(2)(i), (d)(4), and (d)(6)(i) 
and (ii) of this section for becoming newly eligible or ineligible for 
CSRs and paragraphs (d)(8), (9), (10), (12), and (14) of this section:
* * * * *
    (g) Special enrollment period verification. Unless a request for 
modification is granted in accordance with Sec.  155.315(h), an 
Exchange must conduct pre-enrollment verification of applicants' 
eligibility for special enrollment periods under this section. An 
Exchange meets this requirement if it verifies eligibility for the 
number of individuals newly enrolling in Exchange coverage through 
special enrollment periods that equals at least 75 percent of all 
special enrollments. If the Exchange is unable to verify eligibility 
for individuals newly enrolling in Exchange coverage through a special 
enrollment period for which the Exchange requires verification, then 
the individuals are not eligible for enrollment through the Exchange. 
In accordance with Sec.  155.505(b)(1)(iii), individuals have the right 
to appeal the eligibility determination.

PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE 
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES

0
13. The authority citation for part 156 continues to read as follows:

    Authority:  42 U.S.C. 18021-18024, 18031-18032, 18041-18042, 
18044, 18054, 18061, 18063, 18071, 18082, and 26 U.S.C. 36B.

0
14. Section 156.115 is amended by revising paragraph (d) to read as 
follows:


Sec.  156.115  Provision of EHB.

* * * * *
    (d) For plan years beginning before January 1, 2026, an issuer of a 
plan offering EHB may not include routine non-pediatric dental 
services, routine non-pediatric eye exam services, long-term/custodial 
nursing home care benefits, or non-medically necessary orthodontia as 
EHB. For plan years beginning on any day in calendar year 2026, an 
issuer of a plan offering EHB may not include routine non-pediatric 
dental services, routine non-pediatric eye exam services, long-term/
custodial nursing home care benefits, non-medically necessary 
orthodontia, or sex-trait modification as EHB. For plan years beginning 
on or after January 1, 2027, an issuer of a plan offering EHB may not 
include routine non-pediatric eye exam services, long-term/custodial 
nursing home care benefits, non-medically necessary orthodontia, or 
sex-trait modification as EHB.
0
16. Section 156.140 is amended by revising paragraph (c) to read as 
follows:


Sec.  156.140  Levels of coverage.

* * * * *
    (c) De minimis variation. (1) The allowable variation in the AV of 
a health plan that does not result in a material difference in the true 
dollar value of the health plan is -4 percentage points and +2 
percentage points, except if a health plan under paragraph (b)(1) of 
this section (a bronze health plan) either covers and pays for at least 
one major service, other than preventive services, before the 
deductible or meets the requirements to be a high deductible health 
plan within the meaning of section 223(c)(2) of the Internal Revenue 
Code, in which case the allowable variation in AV for such plan is -4 
percentage points and +5 percentage points.
    (2) [Reserved.]
0
17. Section Sec.  156.200 is amended by revising paragraph (b)(3) to 
read as follows:


Sec.  156.200  QHP issuer participation standards.

* * * * *
    (b) * * *
    (3) Ensure that each QHP complies with benefit design standards, as 
defined in Sec.  156.20;
* * * * *
0
18. Section Sec.  156.400 is amended by revising the definition of ``De 
minimis variation for a silver plan variation'' to read as follows:


Sec.  156.400  Definitions.

* * * * *
    De minimis variation for a silver plan variation means a -1-
percentage point and +1-percentage point allowable AV variation.
* * * * *

Robert F. Kennedy, Jr.,
Secretary, Department of Health and Human Services.
[FR Doc. 2025-04083 Filed 3-12-25; 4:15 pm]
BILLING CODE 4120-01-P