Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability

Section 2702 of the Public Health Service (PHS) Act, as added by the ACA, establishes requirements for guaranteed availability of coverage in the group and individual markets.

Section 2703 of the PHS Act, as added by the ACA, and sections 2712 (former) and 2742 of the PHS Act, as added by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), require health insurance issuers in the group and individual markets to guarantee the renewability of coverage unless an exception applies.

Section 1302 of the ACA provides for the establishment of an EHB package that includes coverage of EHBs (as defined by the Secretary), cost-sharing limits, and AV requirements. Among other things, the law directs that EHBs be equal in scope to the benefits provided under a typical employer plan, and that they cover at least the following 10 general categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

Sections 1302(b)(4)(A) through (D) of the ACA establish that the Secretary must define EHB in a manner that: (1) reflects appropriate balance among the 10 categories; (2) is not designed in such a way as to discriminate based on age, disability, or expected length of life; (3) takes into account the health care needs of diverse segments of the population; and (4) does not allow denials of EHBs based on age, life expectancy, disability, degree of medical dependency, or quality of life.

To set cost-sharing limits, section 1302(c)(4) of the ACA directs the Secretary to determine an annual premium adjustment percentage, a measure of premium growth that is used to set the rate of increase for three parameters: (1) the maximum annual limitation on cost sharing (section 1302(c)(1) of the ACA); (2) the required contribution percentage used to determine whether an individual can afford minimum essential coverage (MEC) (section 5000A of the Internal Revenue Code of 1986 (the Code), as enacted by section 1501 of the ACA); and (3) the employer shared responsibility payment amounts (section 4980H of the Code, as enacted by section 1513 of the ACA).

Section 1302(d) of the ACA describes the various levels of coverage based on their AV. Consistent with section 1302(d)(2)(A) of the ACA, AV is calculated based on the provision of EHB to a standard population. Section 1302(d)(1) of the ACA requires a bronze plan to have an AV of 60 percent, a silver plan to have an AV of 70 percent, a gold plan to have an AV of 80 percent, and a platinum plan to have an AV of 90 percent. Section 1302(d)(2) of the ACA directs the Secretary to issue regulations on the calculation of AV and its application to the levels of coverage. Section 1302(d)(3) of the ACA directs

the Secretary to develop guidelines to provide for a de minimis variation in the AVs used in determining the level of coverage of a plan to account for differences in actuarial estimates.

Section 1311(c)(6)(B) of the ACA directs the Secretary to require an Exchange to provide for annual OEPs after the initial enrollment period.

Section 1311(c)(6)(C) of the ACA authorizes the Secretary to require an Exchange to provide for SEPs specified in section 9801 of the Code and other SEPs under circumstances similar to such periods under part D of title XVIII of the Act. Section 1311(c)(6)(D) of the ACA directs the Secretary to require an Exchange to provide for a monthly enrollment period for Indians, as defined by section 4 of the Indian Health Care Improvement Act.

Section 1311(c) of the ACA provides the Secretary the authority to issue regulations to establish criteria for the certification of QHPs. Section 1311(c)(1)(B) of the ACA requires among the criteria for certification that the Secretary must establish by regulation that QHPs ensure a sufficient choice of providers. Section 1311(e)(1) of the ACA grants the Exchange the authority to certify a health plan as a QHP if the health plan meets the Secretary's requirements for certification issued under section 1311(c) of the ACA, and the Exchange determines that making the plan available through the Exchange is in the interests of qualified individuals and qualified employers in the State.

Section 1312(e) of the ACA provides the Secretary with the authority to establish procedures under which a State may allow agents or brokers to (1) enroll qualified individuals and qualified employers in QHPs offered through Exchanges and (2) assist individuals in applying for APTC and CSRs for QHPs sold through an Exchange.

Sections 1312(f)(3), 1401, 1402(e), and 1412(d) of the ACA require that an individual must be either a citizen or national of the United States or an alien lawfully present in the United States to enroll in a QHP through an Exchange, to be eligible for PTC, APTC, and CSRs. Sections 1313 and 1321 of the ACA provide the Secretary with the authority to oversee the financial integrity of State Exchanges, their compliance with HHS standards, and the efficient and non-discriminatory administration of State Exchange activities. Section 1313(a)(5)(A) of the ACA directs the Secretary to provide for the efficient and non- discriminatory administration of Exchange activities and to implement any measure or procedure the Secretary determines is appropriate to reduce fraud and abuse. Section 1321 of the ACA provides for State flexibility in the operation and enforcement of Exchanges and related requirements.

Section 1321(a) of the ACA provides broad authority for the Secretary to establish standards and regulations to implement the statutory requirements related to Exchanges, QHPs and other components of title I of the ACA, including such other requirements as the HHS Secretary determines appropriate.

Section 1321(a)(1) of the ACA directs the Secretary to issue regulations that set standards for meeting the requirements of title I of the ACA with respect to, among other things, the establishment and operation of Exchanges.

Section 1331 of the ACA provides States the option to establish a BHP and provides that only “qualified individuals”, as defined in section 1312 of the ACA, are eligible for BHP coverage. Section 1312(f)(3) of the ACA provides that if an individual is not, or is not reasonably expected to be for the entire period for which enrollment is sought, a citizen or national of the United States or an alien lawfully present in the United States, the individual shall not be treated as a qualified individual. Accordingly, persons who are not lawfully present are not eligible for BHP enrollment.

Section 1401(a) of the ACA added section 36B to the Code, which, among other things, requires that a taxpayer reconcile APTC for a year of coverage with the amount of the PTC the taxpayer is allowed for the year.

Section 1402(c) of the ACA provides for, among other things, reductions in cost sharing for essential health benefits for qualified low- and moderate-income enrollees in silver level health plans offered through the individual market Exchanges, including reduction in out-of- pocket limits.

Section 1411 of the ACA directs the Secretary to make advance determinations for the PTC with respect to income eligibility for individuals enrolling in a QHP through the individual market. Section 1411 of the ACA further specifies that the Secretary verify income with the Secretary of the Treasury based on the most recent tax return information, and then implement alternative procedures to verify income on the basis of different information to the extent that a change has occurred or for individuals who were not required to file an income tax return.

Section 1411(f)(1)(B) of the ACA directs the Secretary to establish procedures to redetermine the eligibility of individuals on a periodic basis in appropriate circumstances.

Sections 1402(f)(3), 1411(b)(3) and 1412(b)(1) of the ACA provide that data from the most recent tax return information available must be the basis for determining eligibility for APTC and CSRs to the extent such tax data is available. Section 1412(c)(2)(B) of the ACA establishes requirements on issuers with regards to an individual enrolled in a health plan receiving an APTC.

Section 1412(d) of the ACA states that nothing in the law allows Federal payments, credits, or CSRs for individuals who are not lawfully present in the United States.

Section 1413 of the ACA directs the Secretary to establish, subject to minimum requirements, a streamlined enrollment process for enrollment in QHPs and all insurance affordability programs and requires Exchanges to participate in a data matching program for the determination of eligibility on the basis of reliable, third-party data.

Section 1414 of the ACA amends section 6103 of the Code to direct the Secretary of the Treasury to disclose certain tax return information to verify and determine eligibility for APTC and CSR subsidies. 1. Guaranteed Availability and Guaranteed Renewability

In the April 8, 1997 Federal Register (62 FR 16894), HHS published an interim final rule relating to the HIPAA health insurance reforms that established rules applying guaranteed availability in the small group market and guaranteed renewability in the large and small group market. Also, in the April 8, 1997 Federal Register (62 FR 16985), HHS published an interim final rule relating to the HIPAA health insurance reforms that, among other things, established rules applying guaranteed renewability in the individual market. In the February 27, 2013 Federal Register (78 FR 13406) (2014 Market Rules), we published the health insurance market rules. In the May 27, 2014 Federal Register (79 FR 30240) (2015 Market Standards Rule), we published the final rule, “Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond.” In the December 22, 2016 Federal Register (81 FR 94058) (2018 Payment Notice), we provided additional guidance on guaranteed availability and guaranteed renewability, and in the April 18, 2017 Federal Register (82 FR 18346) (Market Stabilization Rule) we provided further guidance related to guaranteed availability. In the May 6, 2022 Federal

Register (87 FR 27208) we amended the regulations regarding guaranteed availability. 2. Deferred Action for Childhood Arrivals

HHS issued an interim final rule in the July 30, 2010 Federal Register (75 FR 45014) to define “lawfully present” for the purposes of determining eligibility for the Pre-Existing Condition Insurance Plan (PCIP) program. In the March 27, 2012 Federal Register (77 FR 18310) (Exchange Establishment Rule), HHS defined lawfully present for purposes of determining eligibility to enroll in a QHP through an Exchange by cross-referencing the existing PCIP definition. In the August 30, 2012 Federal Register (77 FR 52614), HHS adjusted the previous definition of “lawfully present” used for PCIP and QHP eligibility, which had considered all recipients of “deferred action” to be lawfully present, to add an exception that excluded DACA recipients from the definition. In the March 12, 2014 Federal Register (79 FR 14112), HHS established the framework for governing a BHP, which also adopted the definition of “lawfully present” for the purpose of determining eligibility to enroll in a BHP through a cross-reference to Sec. 155.20. In the May 8, 2024 Federal Register (89 FR 39392) (DACA Rule), HHS reinterpreted “lawfully present” to include DACA recipients and certain other noncitizens for the purposes of determining eligibility to enroll in a QHP through an Exchange, PTC, APTC, CSRs, and to enroll in a BHP in States that elect to operate a BHP. 3. Program Integrity

We have finalized program integrity standards related to the Exchanges and premium stabilization programs in two rules: the “Program Integrity: Exchange, SHOP, and Eligibility Appeals Rule” published in the August 30, 2013, Federal Register (78 FR 54069), and the “Program Integrity: Exchange, Premium Stabilization Programs, and Market Standards; Amendments to the HHS Notice of Benefit and Payment Parameters for 2014 Rule” published in the October 30, 2013, Federal Register (78 FR 65045). We also refer readers to the 2019 Patient Protection and Affordable Care Act; Exchange Program Integrity final rule published in the December 27, 2019, Federal Register (84 FR 71674).

In the May 6, 2022 Federal Register (87 FR 27208), we finalized policies to address certain agent, broker, and web-broker practices and conduct. In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we finalized allowing additional time for HHS to review evidence submitted by agents and brokers to rebut allegations pertaining to Exchange agreement suspensions or terminations. We also introduced consent and eligibility documentation requirements for agents and brokers. In the 2025 Payment Notice, issued in the April 15, 2024 Federal Register (89 FR 26218), we finalized that the CMS Administrator, who is a principal officer, is the entity responsible for handling requests by agents, brokers, and web-brokers for reconsideration of HHS' decision to terminate their Exchange agreement(s) for cause. We also finalized changes to Sec. Sec. 155.220 and 155.221 to apply certain standards to web-brokers and Direct Enrollment (DE) entities assisting consumers and applicants across all Exchanges. In the January 15, 2025 Federal Register (90 FR 4424) (2026 Payment Notice), we addressed our authority to investigate and undertake compliance reviews and enforcement actions in response to misconduct or noncompliance with applicable agent, broker, and web- broker Exchange requirements or standards occurring at the insurance agency level to hold lead agents of insurance agencies accountable. We also finalized changes to Sec. 155.220(k)(3) to reflect our authority to suspend an agent's or broker's ability to transact information with the Exchange in instances where HHS discovers circumstances that pose unacceptable risk to accuracy of Exchange eligibility determinations, Exchange operations, applicants, or enrollees, or Exchange information technology systems until the circumstances of the incident, breach, or noncompliance are remedied or sufficiently mitigated to HHS' satisfaction. 4. Premium Adjustment Percentage

In the March 11, 2014 Federal Register (79 FR 13744), HHS established a methodology for estimating the average per capita premium for purposes of calculating the premium adjustment percentage. Beginning with PY 2015, we calculated the premium adjustment percentage-based on the estimates and projections of average per enrollee employer-sponsored insurance premiums from the National Health Expenditure Accounts (NHEA), which are calculated by the CMS Office of the Actuary. In the April 25, 2019 Federal Register (84 FR 17454), HHS amended the methodology for calculating the premium adjustment percentage by estimating per capita insurance premiums as private health insurance premiums, minus premiums paid for Medigap insurance and property and casualty insurance, divided by the unrounded number of unique private health insurance enrollees, excluding all Medigap enrollees. Additionally, in response to public comments to the 2021 Payment Notice proposed rule (85 FR 7088), in the May 14, 2020 Federal Register (85 FR 29164), HHS stated that we will finalize payment parameters that depend on NHEA data, including the premium adjustment percentage, based on the data that are available as of the publication of the proposed rule for that plan year, even if NHEA data are updated between the proposed and final rules. In the December 15, 2020 Federal Register (85 FR 81097), HHS published the Grandfathered Group Health Plans and Grandfathered Group Health Insurance Coverage final rule, along with the Departments of Labor and the Treasury, that finalized using the premium adjustment percentage as one alternative in setting the parameters for permissible increases in fixed-amount cost-sharing requirements for grandfathered group health plans. In the May 5, 2021 Federal Register (86 FR 24140), Part 2 of the 2022 Payment Notice amended the methodology for calculating the premium adjustment percentage by reverting to using the NHEA employer-sponsored insurance (ESI) premium measure previously used for PY 2015 to PY 2019 and established that the premium adjustment percentage could be established in guidance for plan years in which the premium adjustment percentage is not methodologically changing. 5. Failure To File Taxes and Reconcile APTC

In the March 27, 2012 Exchange Establishment Rule (77 FR 18310), we required the Exchange to determine a primary taxpayer ineligible to receive APTC if HHS notifies the Exchange that the taxpayer received APTC from a prior year for which tax data would be utilized for income verification and did not file a tax return and reconcile APTC as required by implementing regulations proposed by the Department of the Treasury. In the May 23, 2012 Federal Register (77 FR 30377), the Department of the Treasury finalized implementing regulations to require every taxpayer receiving APTC to file an income tax return.

In the December 22, 2016 Federal Register (81 FR 94058) (2018 Payment Notice), we provided that Exchanges cannot determine a taxpayer ineligible for APTC due to failure to file a tax return unless the Exchanges send a direct notification to that tax filer stating

that their eligibility will be discontinued for failure to comply with the requirement to file taxes. We then revisited this notice requirement in the April 17, 2018 Federal Register (83 FR 16930) (2019 Payment Notice) and removed the notice requirement.

In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice) we required Exchanges to wait to discontinue APTC until the tax filer has failed to file a tax return and reconcile their past APTC for 2 consecutive years rather than ending APTC after a single year. In the April 15, 2024 Federal Register (89 FR 26218) (2025 Payment Notice), we required Exchanges to send notices to tax filers for the first year in which they have been identified by the IRS as failing to reconcile APTC. In the January 15, 2025 Federal Register (90 FR 4424) (2026 Payment Notice), we required Exchanges to send notices to tax filers for the second year in which they have been identified by the IRS as failing to reconcile APTC. 6. Income Inconsistencies

In the April 17, 2018 Federal Register (83 FR 16930) (2019 Payment Notice), we revised income verification provisions in Sec. 155.320(c)(3)(iii) to require the Exchange to generate annual household income inconsistencies in certain circumstances when a tax filer's attested projected annual household income is greater than the income amount represented by income data returned by IRS and the Social Security Administration (SSA) and current income data sources. On March 4, 2021, the United States District Court for the District of Maryland decided City of Columbus v. Cochran, 523 F. Supp. 3d 731 (D. Md. 2021) and vacated these revisions to income verification. We then implemented the court's decision in the May 5, 2021 Federal Register (86 FR 24140) (Part 2 of the 2022 Payment Notice) and rescinded the income verification provisions in Sec. 155.320(c)(3)(iii) that the court invalidated.

In the March 27, 2012 Federal Register (77 FR 18310) (Exchange Establishment Rule), we established the alternative verification process in Sec. 155.320(c) for situations when a household income inconsistency occurs with IRS data or when tax return data is unavailable. This process required the Exchange to provide the applicant notice of the income inconsistency and requires applicants to provide documentary evidence to verify their income or otherwise resolve the inconsistency within a period of 90 days from which notice is sent. In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we revised this process to require Exchanges to accept an applicant's or enrollee's self-attestation of annual household income when a call to IRS is completed but tax return data is unavailable and add that household income inconsistencies must receive an automatic 60-day extension in addition to the 90 days provided to applicants to resolve their income inconsistency. 7. Annual Eligibility Redetermination

In the March 27, 2012 Federal Register (77 FR 18310) (Exchange Establishment Rule), we implemented the Affordable Insurance Exchanges (“Exchanges”), consistent with title I of the ACA. This included standards for annual eligibility redeterminations and renewals of coverage. In the January 22, 2013 Federal Register (78 FR 4594), we sought comment on whether the redetermination notice should describe how the enrollee's deductibles, co-pays, coinsurance, and other forms of cost sharing would change. In the July 15, 2013 Federal Register (78 FR 42160) (2013 Eligibility Final Rule), we amended the notice to remove the requirement to provide the data used for the eligibility redetermination and the data used for the most recent eligibility determination, even though we did not previously propose to change the annual redetermination notice. In the September 5, 2014 Federal Register (79 FR 52994), we amended the annual redetermination standards to allow for an Exchange to choose from one of three methods for conducting annual redeterminations. In the January 24, 2019 Federal Register (84 FR 227) (2020 Payment Notice proposed rule), we sought comment on the automatic re-enrollment processes to address program integrity concerns. In the February 6, 2020 Federal Register (85 FR 7088) (2021 Payment Notice proposed rule), we solicited comment on modifying the automatic re-enrollment process such that any enrollee who would be automatically re-enrolled with APTC that would cover the enrollee's entire premium would instead be automatically re-enrolled without APTC, and we solicited comments on a variation where APTC for this population would be reduced to a level that would result in an enrollee premium that is greater than zero dollars, but not eliminated entirely. We did not finalize any changes in the final rules. 8. Automatic Re-Enrollment Hierarchy

In the March 27, 2012 Federal Register (77 FR 18309) (Exchange Establishment Rule), we implemented the Exchanges, consistent with Title I of the ACA. This included implementation of components of the Exchanges and standards for annual eligibility redetermination and renewal of coverage. In the September 5, 2014 Federal Register (79 FR 52994) (Annual Eligibility Redeterminations Rule), we modified the standards for re-enrollment in coverage by adding a re-enrollment hierarchy to address situations when the enrollee's plan or product is not available through the Exchange for renewal. In the March 8, 2016 Federal Register (81 FR 12204) (2017 Payment Notice), we amended the hierarchy to give Exchanges flexibility to prioritize re-enrollment into silver plans for all enrollees in a silver-level QHP that is no longer available for re-enrollment, and re-enroll consumers into plans of other Exchange issuers if the consumer is enrolled in a plan from an issuer that does not have another plan available for re-enrollment through the Exchange.

In the January 5, 2022 Federal Register (87 FR 584) (2023 Payment Notice proposed rule), we solicited comments on revising the re- enrollment hierarchy at Sec. 155.335(j) at a later date. After considering comments, we proposed and finalized amendments and additions to the re-enrollment hierarchy in the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), including changes to allow Exchanges to direct re-enrollment for enrollees who are eligible for CSRs from a bronze QHP to a silver QHP, if certain conditions are met. 9. Premium Payment Threshold

In the December 2, 2015 Federal Register (80 FR 75532), we published a proposed rule to allow issuers to adopt an optional premium payment threshold policy under which issuers could collect a minimal amount of premium, less than that which is owed, without triggering the consequences for non-payment of premiums. We established the option for issuers to implement a net premium percentage-based premium payment threshold in the 2017 Payment Notice (81 FR 12271 through 12272). In the October 10, 2024 Federal Register (89 FR 82366 through 82369), we proposed to add additional optional premium payment threshold flexibilities, proposing an option for issuers to adopt a fixed-dollar premium threshold amount of $5 or less and/or a percentage-based threshold based on the gross premium of 99 percent or more or the existing net premium of 95 percent or more of the premium after application of APTC. We modified and finalized this proposal in the 2026

Payment Notice (90 FR 4475 through 4480), allowing issuers to adopt a fixed-dollar premium threshold amount of $10 or less and/or a percentage-based threshold based on the gross premium of 98 percent or more or net premium of 95 percent or more of the premium after application of APTC. 10. Special Enrollment Periods (SEPs)

In the July 15, 2011 Federal Register (76 FR 41865), we published a proposed rule establishing SEPs for the Exchange. We implemented these SEPs in the Exchange Establishment Rule (77 FR 18309). In the January 22, 2013 Federal Register (78 FR 4594), we published a proposed rule amending certain SEPs, including the SEPs described in Sec. 155.420(d)(3) and (7). We finalized these rules in the July 15, 2013 Federal Register (78 FR 42321).

In the June 19, 2013 Federal Register (78 FR 37032), we proposed to add an SEP when the Federally Facilitated Exchange (FFE) determines that a consumer has been incorrectly or inappropriately enrolled in coverage due to misconduct on the part of a non-Exchange entity. We finalized this proposal in the October 30, 2013 Federal Register (78 FR 65095). In the March 21, 2014 Federal Register (79 FR 15808), we proposed to amend various SEPs. In particular, we proposed to clarify that later coverage effective dates for birth, adoption, placement for adoption, or placement for foster care would be effective the first of the month. The rule also proposed to clarify that earlier effective dates would be allowed if all issuers in an Exchange agree to effectuate coverage only on the first day of the specified month. Finally, that rule proposed adding that consumers may report a move in advance of the date of the move and established an SEP for individuals losing medically needy coverage under the Medicaid program even if the medically needy coverage is not recognized as minimum essential coverage (individuals losing medically needy coverage that is recognized as minimum essential coverage already were eligible for an SEP under the regulation). We finalized these provisions in the May 27, 2014 Federal Register (79 FR 30348). In the October 1, 2014 Federal Register (79 FR 59137), we published a correcting amendment related to codifying the coverage effective dates for plan selections made during an SEP and clarifying a consumer's ability to select a plan 60 days before and after a loss of coverage.

In the November 26, 2014 Federal Register (79 FR 70673), we proposed to amend effective dates for SEPs, the availability and length of SEPs, the specific types of SEPs, and the option for consumers to choose a coverage effective date of the first of the month following the birth, adoption, placement for adoption, or placement in foster care. We finalized these provisions in the February 27, 2015 Federal Register (80 FR 10866). In the July 7, 2015 Federal Register (80 FR 38653), we issued a correcting amendment to include those who become newly eligible for a QHP due to a release from incarceration. In the December 2, 2015 Federal Register (80 FR 75487) (2017 Payment Notice proposed rule), we sought comment and data related to existing SEPs, including data relating to the potential abuse of SEPs. In the 2017 Payment Notice, we stated that in order to review the integrity of SEPs, the FFE will conduct an assessment by collecting and reviewing documents from consumers to confirm their eligibility for the SEPs under which they enrolled.

In an interim final rule with comment published in the May 11, 2016 Federal Register (81 FR 29146), we made amendments to the parameters of certain SEPs (2016 Interim Final Rule). We finalized these in the 2018 Payment Notice, published in the December 22, 2016 Federal Register (81 FR 94058). In the April 18, 2017 Market Stabilization Rule (82 FR 18346), we amended standards relating to SEPs and announced HHS would begin pre-enrollment verifications for all categories of SEPs in June 2017. In the 2019 Payment Notice, published in the April 17, 2018 Federal Register (83 FR 16930), we clarified that certain exceptions to the SEPs only apply to coverage offered outside of the Exchange in the individual market. In the April 25, 2019 Federal Register (84 FR 17454), the final 2020 Payment Notice established a new SEP. In part 2 of the 2022 Payment Notice, in the May 5, 2021 Federal Register (86 FR 24140), we made additional amendments and clarifications to the parameters of certain SEPs and established new SEPs related to untimely notice of triggering events, cessation of employer contributions or government subsidies to COBRA continuation coverage, and loss of APTC eligibility. In part 3 of the 2022 Payment Notice, in the September 27, 2021 Federal Register (86 FR 53412), which was published by HHS and the Department of the Treasury, we established a temporary new monthly SEP for those eligible for APTC with projected household incomes at or below 150 percent of the FPL. In the May 6, 2022 Federal Register (87 FR 27208), we finalized updates to the requirement that all Exchanges conduct SEP verifications and limited pre-enrollment verification for Exchanges on the Federal platform to only consumers who attest to losing minimum essential coverage. In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment Notice), we lengthened the SEP from 60 to 90 days to those who lose Medicaid coverage. In the April 15, 2024 Federal Register (89 FR 26218) (2025 Payment Notice), we aligned effective dates for coverage after selecting certain SEPs across all Exchanges and removed limitations on the monthly SEP for those eligible for APTC with incomes up to 150 percent of the FPL. 11. Essential Health Benefits

We established requirements relating to EHBs in the Standards Related to Essential Health Benefits, Actuarial Value (AV), and Accreditation Final Rule, which was published in the February 25, 2013 Federal Register (78 FR 12834) (EHB Rule). In the EHB Rule, we included at Sec. 156.115 a prohibition on issuers from providing routine non- pediatric dental services, routine non-pediatric eye exam services, long-term/custodial nursing home care benefits, or non-medically necessary orthodontia as EHB. In the 2019 Payment Notice, published in the April 17, 2018 Federal Register (83 FR 16930), we added Sec. 156.111 to provide States with additional options from which to select an EHB-benchmark plan for PY 2020 and subsequent plan years. In the 2023 Payment Notice, published in the May 6, 2022 Federal Register (87 FR 27208), we revised Sec. 156.111 to require States to notify HHS of the selection of a new EHB-benchmark plan by the first Wednesday in May of the year that is 2 years before the effective date of the new EHB- benchmark plan, otherwise the State's EHB-benchmark plan for the applicable plan year will be that State's EHB-benchmark plan applicable for the prior year. We displayed the Request for Information; Essential Health Benefits (EHB RFI), published in the December 2, 2022, Federal Register (87 FR 74097), to solicit public comment on a variety of topics related to the coverage of benefits in health plans subject to the EHB requirements of the ACA. In the 2025 Payment Notice (89 FR 26218), we removed the regulatory prohibition at Sec. 156.115(d) on issuers from providing routine non-pediatric dental services as an EHB beginning with PY 2027.

In the 2026 Payment Notice, published in the January 15, 2025 Federal Register (90 FR 4424), we revised Sec. 156.80(d)(2)(i) to require the

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.

As further discussed in the 2025 Marketplace Integrity and Affordability proposed rule (90 FR 12950) and section III.B.8. of this final rule regarding the proposal to remove the monthly SEP for APTC- eligible qualified individuals with a projected household income at or below 150 percent of the FPL (Sec. 155.420(d)(16)), we proposed a conforming amendment to remove Sec. 147.104(b)(2)(i)(G), which currently excludes Sec. 155.420(d)(16) as a triggering event for a limited OEP for coverage offered outside of an Exchange. We proposed to remove Sec. 147.104(b)(2)(i)(G) to reflect the removal of the SEP at Sec. 155.420(d)(16). We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and section III.B.8. of this final rule, including our responses to comments, we are finalizing a pause of the SEP at Sec. 155.420(d)(16), and therefore are temporarily finalizing the proposed conforming change to remove Sec. 147.104(b)(2)(i)(G). We summarize and respond to public comments received on the proposed removal of the SEP at Sec. 155.420(d)(16) in section III.B.8. of this final rule. 2. Coverage Denials for Failure To Pay Premiums for Prior Coverage (Sec. 147.104(i))

In the 2025 Marketplace Integrity and Affordability proposed rule (90 FR 12950 through 12953), we proposed to remove Sec. 147.104(i) that prohibits an issuer from denying coverage due to failure of an individual or employer to pay premiums owed under prior coverage, including by attributing payment of premium for new coverage to past- due premiums from prior coverage. Similar to the policy in the Market Stabilization Rule (82 FR 18349 through 18353), we proposed to allow issuers to attribute the initial premium the enrollee pays to effectuate new coverage to past-due premium amounts owed for prior coverage and then to not effectuate new coverage if the initial premium and past-due amounts are not paid in full. Under the proposal, consistent with the Market Stabilization Rule, an issuer would be required to apply its past-due premium payment policy uniformly to all employers or individuals in similar circumstances in the applicable market regardless of health status, and consistent with applicable nondiscrimination requirements,\19\ and would be prohibited from conditioning the effectuation of new coverage on payment of past-due premiums by any individual other than the person contractually responsible for the payment of premium.

\19\ Issuers may also have obligations under other applicable Federal laws prohibiting discrimination, and issuers are responsible for ensuring compliance with all applicable laws and regulations. There may also be separate, independent nondiscrimination obligations under State law.

Unlike the policy in the Market Stabilization Rule (82 FR 18346), the proposal would not limit the policy to past-due premium amounts accruing over the prior 12 months or require the issuer to provide any notice of the policy. States would remain free to apply additional parameters governing issuers' premium payment policies, to the extent permitted under Federal law.

We sought comments on the proposal and specifically on whether we should leave other parameters to States or codify additional parameters to establish a more uniform Federal regulatory approach. We also sought comment on whether issuers should be required to establish terms of coverage that attribute the initial premium an enrollee pays for subsequent coverage to past-due premium amounts owed, and the associated costs for issuers to implement such a requirement.

After consideration of comments and for the reasons outlined in the proposed rule and this final rule, including our responses to comments, we are finalizing this policy with a modification by removing the regulatory text that prohibited this policy, and replacing it with regulatory text that codifies the proposed policy. Under the finalized policy, States may choose whether to allow issuers in their market and State to attribute the initial premium paid to effectuate new coverage to past-due premium amounts owed and to refuse to effectuate new coverage if the past-due and initial premium amounts are not paid in full. If an issuer does so, then under the final rule, it must apply its past-due premium payment policy uniformly to all employers or individuals in similar circumstances in the applicable market and State regardless of health status, and consistent with applicable nondiscrimination requirements, and are not permitted to condition the effectuation of new coverage on payment of past-due premiums by any individual other than the person contractually responsible for the payment of premium. We are codifying this policy by revising Sec. 147.104(i) instead of removing Sec. 147.104(i) as proposed. As the issue this provision is intended to resolve was not created by the expansion of APTCs that are expiring after PY 2025, this policy will not sunset. We are finalizing this policy to be applicable as of the effective date of this rule and beyond.

We summarize and respond to public comments received on the proposed policy below.

Comment: Several commenters supported the proposal, stating it would incentivize enrollees to maintain 12 months of continuous coverage, provide issuers with a tool to reduce adverse selection, reduce opportunities for enrollees to game the system by circumventing required premium payments, and allow issuers to more accurately price products. One commenter stated that the proposal would reduce premium inflation caused by gaming the rules, ultimately easing the burden on taxpayers and ensuring that ACA subsidies are better targeted.

Response: We agree that finalization of the policy contained in the proposal will help to promote continuous coverage, reduce gaming and adverse selection, ensure that ACA subsidies are targeted to those who are eligible, and allow issuers to more accurately predict costs and price plans.

Comment: Several commenters agreed with the proposal to defer to the States to determine whether issuers in their State are permitted to attribute payments for new coverage to past-due premiums and to refuse to effectuate new coverage unless both the past-due premium and the initial payment for new coverage are paid. One commenter stated that States, who maintain the closest interaction with their consumers and issuers, are best positioned to regulate issuers' premium payment policies. Another commenter acknowledged that issuers in some areas of the country are facing high fraud rates and the proposal could reduce gaming, adverse selection, and ultimately premiums by requiring payment of past-due premiums. However, the

commenter stated that issuers in areas with little evidence of gaming would likely not want to require payment of past-due premiums to effectuate new coverage.

Response: We agree that States are in the best position to decide whether it is appropriate to permit or prohibit this policy. For that reason, we proposed, and are finalizing, the policy contained in the proposal in such a way that States may choose whether to allow issuers in their State to attribute the initial premium an enrollee pays to effectuate new coverage to past-due premium amounts the issuers are owed and to refuse to effectuate new coverage if the past-due and initial premium amounts are not paid in full.

We solicited comment in the proposed rule about whether to make the premium payment policy mandatory or optional. Comments in response to that solicitation are discussed below.

Comment: Many commenters, some of whom supported and some of whom opposed the proposal, stated that if the proposal is adopted, there should be parameters around how issuers implement the policy. For example, commenters suggested the final rule should prohibit issuers that apply the past-due premium policy from collecting past-due premiums for debts older than 12 months; provide advance notice of their past-due premium policy; accept installment payments; take into account the individual's payment history; prohibit charging interest; set limits on amounts owed; allow enrollment after partial repayment; create exemptions for low-income individuals, those experiencing hardship, or those whose failure to pay was not their fault or whose enrollment was due to fraud; prohibit an issuer from insisting on payment of past-due premiums for other lines of insurance; and require issuers to allow consumers to appeal the amount of past-due premiums owed and to effectuate coverage pending appeal.

Response: Under this final rule, an issuer adopting the past-due premium policy must apply it uniformly to all employers or individuals in similar circumstances in the applicable market and State regardless of health status, and consistent with applicable nondiscrimination requirements, is not permitted to condition the effectuation of new coverage on payment of past-due premiums by any individual other than the person contractually responsible for the payment of premium, and the amount required to be paid must be subject to any premium payment threshold the issuer has adopted pursuant to 45 CFR 155.400(g). We are codifying these minimum standards in the regulation and defer to States on any additional parameters or standards that issuers must satisfy when implementing the past-due premium policy, as States are best positioned to set and oversee parameters of this nature. States that permit issuers to adopt the past-due premium policy are encouraged to require such issuers to provide advance notice of the policy to applicants. We will consider addressing acceptable past-due premium payment policies in future guidance.

Comment: One commenter noted that, based on the analysis of Exchange data in the 2026 Payment Notice, over 10 percent of enrollees, or about 180,000 consumers, were terminated for non-payments in which the amount owed was less than or equal to $10 and stated that HHS should carefully balance the goals of securing program integrity with achieving operational efficiency.

Response: While the debt owed by some individuals might be relatively small, all individuals who enroll for coverage, including those who benefit from APTC, are required to pay their share of the premium for every month of coverage. In addition, issuers of individual or small group market coverage subject to section 2701 of the PHS Act are not permitted to forgive debt owed for past-due premiums, and allowing issuers to attribute payment for new coverage to past-due premiums may create operational efficiencies for issuers in how they collect payment for such debts. We note that States and issuers have flexibility with regard to the past-due premium policy under this final rule. This includes the flexibility to decide that the policy will not apply with respect to de minimis amounts owed consistent with 45 CFR 155.400(g), as long as an issuer's past-due premium payment policy applies uniformly to all employers or individuals in similar circumstances in the applicable market and State regardless of health status and consistent with applicable nondiscrimination requirements.

Comment: One commenter stated that the best way to address the problem of people waiting to get sick before getting coverage is for the individual shared responsibility payment to be a positive dollar amount. According to the commenter, requiring individuals to make such a payment if they do not have minimum essential coverage would provide an incentive to pay premiums to maintain continuous coverage.

Response: In 2017, the Tax Cuts and Jobs Act \20\ set the amount of the individual shared responsibility payment to zero dollars, effective 2019, for non-exempt individuals who do not maintain minimum essential coverage. Statutory changes would be needed to change that amount.

\20\ Public Law 115-97.

Comment: One commenter asserted that once coverage is terminated, the enrollee would be responsible for paying his or her own medical bills. Therefore, according to the commenter, if enrollees are required to pay for any outstanding premiums for any plan year, they are likely paying for coverage from which they will not benefit. By contrast, another commenter expressed concerns that individuals could owe a large bill because they followed instructions to stop paying premiums in order to terminate coverage. One commenter stated that if the proposal is adopted, issuers should be required to effectuate new coverage without requiring payment of past-due premiums if no claims were made during the period of delinquency.

Response: For any period of time after coverage is terminated, no premium would be due. Therefore, “past-due premiums” under this final rule refers to premiums due but not paid for periods during which the individual was covered, such as during a grace period. During such a coverage period, individuals have the benefit of financial protection from unforeseen medical expenses, even if they do not ultimately receive covered benefits. However, the grace period rules function in a manner that allows enrollees to avoid paying their premium while maintaining that financial protection for a short period of time. The policy finalized in this rule provides issuers with an additional tool to collect payments owed for months of coverage, regardless of whether the individual incurs medical expenses during the period for which they owe premiums.

Because applying the past-due premium policy with regard to claims history would discriminate based on health status, we do not adopt the commenter's suggestion to require issuers that adopt the past-due premium policy to create exceptions for instances in which no claims are incurred during the period in which past-due premiums are owed. These practices are not permitted under this final rule.

Comment: One commenter asked how the policy related to past-due premiums would impact claims payment.

Response: If an individual pays past-due premiums for months during which

the individual was covered, the issuer must pay any unpaid claims incurred during such month. For example, if an individual seeks to enroll in new coverage while in the 3-month grace period and pays past- due premiums owed for prior coverage, any claims that a QHP issuer pended for services rendered to the enrollee in the second and third months of the grace period, as permitted under Sec. 156.270(d)(1), must be paid in accordance with the terms of the coverage.\21\

\21\ Section 156.270(d) requires issuers to observe a 3- consecutive month grace period before terminating coverage for those enrollees who when failing to timely pay their premiums are receiving APTC. Section 155.430(d)(4) requires that when coverage is terminated following this grace period, the last day of enrollment in a QHP through the Exchange is the last day of the first month of the grace period. Therefore, individuals whose coverage is terminated at the conclusion of a grace period would owe at most 1 month of premiums, net of any APTC paid on their behalf to the issuer. Individuals who attempt to enroll in new coverage while in a grace period (and whose coverage has not yet been terminated) could owe up to 3 months of premium, net of any APTC paid on their behalf to the issuer.

Comment: One commenter asked how the policy would impact enrollment in new coverage.

Response: Under the past-due premium policy in this final rule, an issuer, to the extent permitted by applicable State law, may attribute a payment for new coverage to past-due premiums for prior coverage. The issuer then could lawfully refuse to effectuate new coverage unless the individual or employer, as applicable, pays any past-due premium amounts owed for prior coverage and the initial premium (also known as a binder payment) for new coverage by the applicable payment deadline. For example, if an individual applies for coverage during the individual market open enrollment period and owes 1 month of premiums in the amount of $10, and the individual fails to pay past-due premiums of $10 and the binder payment for new coverage by the applicable premium payment deadline, the issuer could refuse to effectuate the individual's enrollment in coverage, subject to any premium payment threshold the issuer has adopted pursuant to 45 CFR 155.400(g). Following the open enrollment period, the individual could enroll in coverage for that benefit year only through a special enrollment period and may be required to satisfy any past-due premium obligations at that time.

Comment: Many commenters, while acknowledging incentives for individuals not to pay premiums and enroll in coverage only when medical needs arise, asserted that the guardrails in place, such as short grace periods and requirements to retroactively pay medical expenses, limit these incentives.

Response: We believe that those who seek to circumvent paying premiums have already weighed their personal health and financial risks of doing so. Therefore, we believe that existing guardrails, such as the prospect of having to pay medical expenses not covered by insurance, are not sufficient to discourage individuals from taking advantage of grace period and guaranteed availability rules.

Comment: One commenter asserted that those who are unable to effectuate enrollment due to unpaid premiums may end up in other forms of “non-ACA compliant” coverage, such as short-term, limited-duration insurance, leading to market distortions and further driving up health insurance premiums in the individual market risk pool. In addition, since these types of plans do not have to cover essential health benefits, the commenter observed that increased reliance on such plans would lead to more uncompensated care, putting hospitals and emergency departments at significant risk of financial instability.

Response: We agree that individuals with unpaid past-due premiums might seek other types of coverage (for example, in markets where the types of coverage described by the commenter are more prevalent). However, in other markets, that might not be the case. This is why we defer to the States, who know their markets best, to determine whether issuers in their State are permitted to adopt the past-due payment policy set forth in this final rule.

Comment: One commenter supporting the policy related to past-due premiums stated that, in deferring to States on parameters for applying the policy uniformly and consistently, HHS should ensure States are not requiring issuers to apply the past-due premium policy, but rather allowing for the option to do so, consistent with the intent of the proposal. Some commenters commented on the applicability of the policy for issuers offering coverage through State Exchanges. One commenter asked that State Exchanges be permitted, but not required, to implement the policy. One commenter said that some State Exchanges perform premium collection, making the requirement administratively challenging for issuers that do not have premium collection capabilities, and another commenter noted that implementing a past-due premium policy would require significant configuration of the Exchange's system.

Response: This final rule removes the Federal prohibition on attributing payments for new coverage to past-due premiums owed for prior coverage and leaves it to States to determine whether to permit the practice, and if permitted, any restrictions on the practice. States are permitted, but not required, to allow issuers participating in their State Exchanges to implement a past-due premium policy. We recognize that some Exchanges may not have the functionality in place to allow QHP issuers to apply the past-due premium policy to coverage purchased through that State's Exchange. States may take these and other considerations into account in determining whether to allow the past-due payment policy finalized in this rule.

Comment: One commenter was in favor of the proposal, so long as the issuer is the party that must deal with outstanding balances, and not the agent or broker. Other commenters were concerned that agents and brokers will be forced to spend unpaid time navigating billing issues instead of focusing on helping clients get covered.

Response: This final rule does not address which entity is responsible for collecting premiums owed, including any past-due premiums. To the extent an issuer adopts the past-due premium policy in this final rule, the party that collects the past-due premium, for example, the issuer, agent, or broker, would be determined by State law or by agreement of those parties.

Comment: A few commenters expressed concern about the effects of the proposal on the individual market risk pool, asserting that young and healthy individuals are more price-sensitive and less likely to enroll if they must pay past-due premiums. One commenter also observed that these young and healthy enrollees are far more likely to have fallen out of coverage in the first place for past non-payment of premiums.

Response: We believe that, regardless of an individual's age or health status, they potentially will be more inclined to remain in their coverage if they have to pay past-due premiums in order to effectuate new coverage. In addition, to the extent young and healthy enrollees fell out of coverage due to non-payment of premium, the extra effort to resume coverage suggests they may need coverage due to a change in their health status. A policy that keeps them continuously covered is better for them and the risk pool. Moreover, there are minimum standards that must be met to enroll regardless of the impact on the risk pool. Improving the risk pool is no

argument to excuse non-payment of premium.

We also note that, under the premium rating rules in section 2701 of the PHS Act, young peoples' premiums are lower in most States, making it likely (particularly for unsubsidized individuals) that, to the extent they have accrued past-due premiums, the amount owed would be lower than it would be for older individuals.

Comment: Many commenters asserted that the proposal is inconsistent with the guaranteed availability requirements in section 2702 of the PHS Act. One commenter stated that the proposed policy is unconstitutional.

Response: We continue to believe that allowing issuers to require payment of past-due premiums is consistent with the guaranteed availability requirements in section 2702 of the PHS Act. In the Market Stabilization Rule (82 FR 18350 through 18351), we noted it is clear from reading the guaranteed availability provision in section 2702 of the PHS Act, together with the guaranteed renewability provision in section 2703 of the PHS Act, that an issuer's sale and continuation in force of an insurance policy is contingent upon payment of premiums. Notably, this recognizes how the guaranteed renewability requirement is not just about renewals but also includes a requirement on issuers to continue the coverage in force throughout the year. Read together, we concluded that the guaranteed availability provision is not intended to require issuers to provide coverage to applicants who have not paid for such coverage. To the extent an individual or employer makes payment in the amount required to effectuate new coverage, but the issuer lawfully credits all or part of that amount toward past-due premiums, we conclude that the consumer has not made sufficient initial payment for the new coverage. We also note that decisions regarding payment of the first month's premium (the binder payment) have traditionally been business decisions made by issuers, subject to State rules. Accordingly, as noted in the proposed rule (90 FR 12953), although we have established certain uniform standards for premium payment deadlines, we ultimately defer to issuers, subject to State rules. Thus, we conclude that refusing to effectuate coverage to an individual or employer who does not pay past-due premiums is indeed permissible under section 2702 of the PHS Act, though a State does not need to allow for it.

Finally, with respect to the commenter raising constitutional concerns, the commenter did not offer any rationale to explain why the proposal would be unconstitutional, and we have not identified any reason why it would be unconstitutional.

Comment: Many comments opposing the proposal asserted that the proposal would disproportionately harm marginalized people, such as individuals with lower economic status. One commenter asserted that the proposed rule did not provide evidence to support the statement that any past-due amounts would be “quite small” or “would not impose a substantial financial burden” and that the proposed rule made no attempt to quantify that amount in dollars, compare it to the incomes of affected individuals, rebut the findings in the 2023 Payment Notice, or address the potential for multiple years of lookback. One commenter challenged our assertion in the proposed rule that enrollment loss from the proposed changes would be “minimal” because a large proportion of enrollees receive APTCs and therefore would not experience financial hardship because of the proposed changes. According to the commenter, this is not accurate, because people who receive APTCs have very low incomes and lack the funds to pay multiple months of past-due premiums while also paying the premium to effectuate coverage for a new year.

Response: We anticipate that enrollment loss from requiring payment of past-due premiums would be minimal and not impose a substantial financial burden. APTCs are paid on behalf of the vast majority of individuals who enroll in coverage through the Exchanges. The APTC lowers the amount of premium that they pay out of pocket, and therefore also reduces the amount of past-due premium debt that can accrue. In addition, rules regarding grace periods and termination of coverage for individuals receiving APTC result in such individuals generally owing no more than 1 to 3 months of past-due premium amounts per year.\22\ Therefore, we conclude that past-due premium amounts generally would not impose a substantial financial burden to enroll in coverage. States can also take additional steps to limit the potential for individuals to owe significant amount of past-due premium by prohibiting the policy, or limiting the lookback period, or capping the amount of past- due premium due to effectuate coverage, based on factors including the socioeconomic demographics of their populations.

\22\ Id.

Comment: Several commenters stated that this proposal would cause the uninsured population to increase, causing more medical debt, illness, and death. Some commenters also stated that the proposed rule did not provide sufficient evidence for the assertion that the proposal would cause the uninsured population to decrease and the assertion that the similar policy implemented in the Market Stabilization Rule encouraged individuals to continue to pay their premiums and stated that HHS did not provide data to show that the proposal was needed.

Response: We acknowledge there is always some uncertainty regarding the net effects of any new policy. Here, we cannot know with certainty whether the coverage gains resulting from more moderate premium trends and the promotion of continuous coverage will be higher than any coverage losses resulting from issuers requiring payment of past-due premiums to effectuate new coverage. However, given the importance of health coverage and the fact that most consumers are accustomed to paying in full for one contract before they are allowed to enter another with the same contracting party, we anticipate that any discouragement from enrollment will be minimal. When a similar policy was previously in place, the percentage of enrollees in Exchanges using the Federal platform who had their coverage terminated for non-payment of premiums dropped substantially. While there could have been other reasons for this substantial drop, it is reasonable to conclude the policy was, at least in part, a driving factor by encouraging more people to maintain continuous coverage.

Comment: One commenter observed that HHS had concluded in the 2023 Payment Notice that the past-due premium policy in the 2017 Market Stabilization Rule “had the unintended consequence of creating barriers to health coverage that disproportionally affect low-income individuals.” The commenter explained that the proposal to reinstate the past-due premium policy without the 12-month maximum lookback period would create even more significant barriers for low-income individuals and that HHS had not provided a reasoned explanation for its conclusion that these individuals would not be significantly impacted.

Response: In neither the proposed rule nor this final rule do we deny that the past-due premium policy as finalized in this rule will possibly have at least some negative impacts on low-income individuals. Nor does the change in policy in this final rule rely on any belief or assertion that low-income individuals will be less harmed by this policy, as compared to the policy adopted in the 2017 Market

Stabilization Rule. Rather, the change in policy in this final rule is supported by the fact that data suggest that more individuals, including low-income individuals, might maintain coverage as a result of the policy in this final rule, as compared to the current policy, which prohibits the past-due premium policy. Continued enrollment suggests that individuals, including those with lower incomes, will not be harmed by the policy, as they will remain covered for any unexpected health issues. Each State, however, including those with large numbers of low-income individuals, are free to disagree, based on their specific market dynamics, and not permit issuers to adopt the policy.

Comment: Several commenters observed that if the expanded premium subsidies sunset at the end of 2025, coverage will become less affordable for a large number of individuals, thereby exacerbating the number of individuals who will not be able to pay their premiums and making the payment of past-due premiums (plus the binder payment for new coverage) that much more difficult.

Response: At the time of publication of this final rule, the expanded subsidies will sunset on December 31, 2025, under current law. States may take this sunset into account in determining whether to permit issuers to apply the past-due premium policy finalized in this rule.

Comment: In the preamble to the proposed rule (90 FR 12951 through 12952), we noted that Exchange enrollment data show a steady decline in the percent of enrollees in Exchanges using the Federal platform that had their coverage terminated for non-payment of premiums between 2017 and 2020. Based on these enrollment trends, we suggested that the past- due premium policy in the Market Stabilization Rule (82 FR 18346) may have successfully encouraged enrollees to continue paying premiums, while acknowledging limitations on our ability to draw a causal inference. One commenter took issue with this analysis, suggesting that it failed to account for the fact that overall Exchange enrollment also fell, and premiums rose significantly, during this time period-- suggesting that a combination of policies led to fewer healthy enrollees retaining coverage, increasing the percentage of total enrollees who might be at risk of health events remaining in coverage, who are more likely to pay premiums throughout. The commenter stated that the proposed rule failed to account for these negative effects on this risk pool.

Response: In the preamble to the proposed rule, we stated that the decline in the rate of enrollees who had their coverage terminated from 2017 to 2020 might have occurred in part because of the interpretation of the guaranteed availability requirement in the Market Stabilization Rule. We acknowledged that due to data limitations, we were unable to directly attribute any changes in enrollment behavior in the Exchanges using the Federal platform to that interpretation. We continue to believe these data, though not conclusive, suggest that the past-due payment policy in the Market Stabilization Rule may have contributed to fewer individuals losing coverage due to non-payment of premiums. However, to the extent States do not believe this would be the case in their specific markets, they may refrain from allowing issuers in their State to adopt the past-due premium policy.

Comment: Several commenters disputed that there are large numbers of individuals who intentionally stop paying premiums in order to gain 1 month of free coverage through the coverage grace period when they know they will submit medical claims for that month, go without coverage for subsequent months when they are confident they will not need it, and then purchase new coverage. Rather, commenters stated that there are a number of legitimate reasons why individuals fail to pay premiums, such as illness, unemployment or job loss, caregiving responsibilities, a natural disaster, household changes that result in higher premiums, and not realizing that they missed a payment or payments. One commenter stated that some people intentionally stop paying their premiums because their eligibility changes--for example, they become eligible for Medicaid--without understanding the need to terminate their Exchange plan or how to terminate it. Many commenters stated that individuals often experience insurance churn with job loss or access to new coverage. This churn can confuse what plans, coverage, and support are available to them, and patients may not realize they need to terminate coverage, especially if they are not using the insurance.

Response: We acknowledge that many individuals cease paying premiums for various reasons, such as those mentioned by the commenters. In instances where an individual's household income decreases during the policy year, due to illness, job loss, or other circumstances, the individual has the opportunity to report their changed income to the Exchange and might qualify for new or additional APTC to help with their premiums. We also believe that in the overwhelming majority of cases where individuals cannot pay their premiums, the individual has the ability to contact their issuer and terminate coverage before becoming delinquent, avoiding the need to pay past-due premiums. We also note that, even where issuers adopt the past-due premium policy under this final rule, individuals may purchase coverage on a guaranteed issue basis from a different issuer (in all cases, outside the controlled group of the issuer to whom past-due premiums are owed), without having to pay past-due premiums.

Comment: A few commenters stated that denying individuals health insurance, due to not paying past-due premiums or other reasons, would be detrimental not only to those individuals, but to providers and health care systems, with effects reaching well beyond Exchange enrollees.

Response: As we stated in the proposed rule and reiterate in this final rule, we generally believe the past-due premium policy will result in more individuals retaining their coverage.

Comment: Under the proposed rule, an issuer could not condition the effectuation of new coverage on payment of past-due premiums by any individual other than the person contractually responsible for the payment of premium. One commenter asked which individual is considered the contractually responsible person for payment of premium with respect to a child-only policy and with respect to a family covered by an individual market policy.

Response: For purposes of the past-due premium policy in this final rule, the person contractually responsible for payment of premium is the policyholder. In the case of child-only coverage, the policyholder would typically be the covered child's parent or legal guardian. In the case of an individual market policy covering a family, the policyholder would not be one of the covered dependents. In the case of coverage in the group market, the policyholder is typically the employer or union, not covered employees or their dependents. This means, for example, that a dependent spouse on an individual market policy cannot be required to pay past-due premiums if that dependent spouse wishes to purchase coverage as a policyholder. Similarly, an employer's failure to pay premiums for group health insurance coverage would not result in an employee or dependent owing past-due premiums for coverage in the individual market.

Comment: Several commenters raised concerns that consumers enrolling in coverage with an issuer that applies a past-due premium policy would not be fully informed or would not fully understand the implications of such a policy, and noted potential consumer confusion, as well as financial harm if consumers incorrectly believe they have enrolled in coverage that was never effectuated.

Response: We encourage issuers to be transparent about the application of any past-due premium policy to help ensure that individuals understand how much they must pay to effectuate coverage as well as the consequences of non-payment. Issuers, as a matter of practice, instruct their agents and brokers on how to collect premiums in order to effectuate new coverage, how to determine the amount due in order to effectuate new coverage, and the payment due date. We anticipate that issuers adopting the past-due premium policy would continue to work with their agents and brokers to ensure that consumers understand what payments must be made, thus minimizing potential confusion.

Comment: One commenter asked whether the proposed rule would permit application of past-due premiums when enrollees switch to a plan offered by a different issuer.

Response: Under the proposed rule and this final rule, subject to applicable State law, an issuer may require a consumer to pay past-due premiums owed to that issuer, or owed to another issuer in the same controlled group, plus the initial (binder) payment for new coverage, before effectuating the new coverage. This reflects the fact that, to the extent an applicant makes payment in the amount required to effectuate new coverage, but the issuer lawfully credits all or part of that amount toward past-due premiums, the applicant has not made sufficient payment for new coverage. There is no mechanism, however, by which an issuer can credit amounts paid to premiums owed to an unrelated issuer. Therefore, an issuer cannot deny coverage under section 2702 of the PHS Act based on an individual's or employer's failure to pay past-due premiums owed to any issuer other than that same issuer or another issuer in the same controlled group.

Comment: Several commenters observed that the proposal to shorten the length of the OEP would give applicants for new coverage less time to figure out how to acquire the funds to pay past-due premiums.

Response: As explained in section III.B.7 of this final rule, the changes to the OEP will take effect beginning with the OEP for PY 2027. Because the proposal to shorten the OEP will not be implemented in PY 2026, enrollees and other interested parties will have sufficient time to adjust to the changes to the OEP such that they understand and are better prepared for the changes when the time period for active enrollment during OEP is shortened for PY 2027.

Comment: Several commenters asserted it would be inappropriate for an issuer to condition enrollment in new coverage on payment of past- due premiums where the non-payment resulted from actions of the issuer or third parties. The commenters gave examples in which non-payment of premiums was due to actions, inactions, or delays on the part of issuers, Exchanges, agents, and brokers, including cases of fraudulent enrollment, or lag time between when an individual reports information and when an Exchange processes and effectuates changes related to that information.

Response: In instances where an issuer or an Exchange was responsible for non-payment of premium, or incorrectly determined that an individual did not pay premium, we expect the issuer or Exchange to expediently work with the consumer to resolve the situation and enroll them in new coverage without requiring payment of past-due premiums. If there is a delay between when an individual reports changes to their income or household size and when that change is processed, we expect Exchanges to internally document that, so that there is evidence that the individual should not have been charged a higher premium during the lag time. We also note that in situations where an individual was improperly enrolled in coverage, and coverage is rescinded (that is, cancelled or discontinued retroactively to the date of enrollment), as permitted under Sec. 147.128, the individual would not owe any past- due premiums.

Comment: Several commenters raised concerns about the potential impacts on coverage access, particularly in markets with limited competition, where there may be a limited number of issuers servicing that geographic area.

Response: We note that this policy provides States flexibility to address adverse selection based on their specific market conditions and allows for appropriate market-specific solutions that recognize the differences between competitive and less competitive regions. We believe this flexible approach strikes an appropriate balance between preserving consumer access to coverage and accounting for varying market conditions across regions.

Comment: Several commenters observed that there are other mechanisms by which issuers can attempt to collect debt in form of past-due premiums, other than by requiring past-due premiums be paid in order to effectuate new coverage.

Response: Although issuers may have other methods to collect debt, we note that other forms of debt collection, such as placing the debt into collections, can be costly and time consuming. In addition, although the past-due premium policy will facilitate issuer premium collection efforts, it is principally intended to prevent the premium debt in the first instance by ensuring that individuals pay premiums for months in which they have coverage.

Comment: One commenter raised concerns about how the past-due premium policy would interact with an individual coverage health reimbursement arrangement (ICHRA) or a qualified small employer health reimbursement arrangement (QSEHRA). Specifically, the commenter observed that the past-due premium policy could complicate the enrollment process and necessitate additional administrative procedures and costs for employers if they are unable to make an ICHRA offer because employees cannot enroll in individual health insurance coverage. The commenter suggested this could subject the employer to a possible tax penalty if the employer has no way to make another offer of affordable health coverage to their employees. The commenter recommended that employees offered an ICHRA should not be required to pay past-due premiums.

Response: The commenter does not explain why allowing issuers to attribute initial premium payments to past-due premiums would make it so that employers cannot offer ICHRAs, and we do not see a reason why that would be the case. Therefore, we do not believe it is necessary to prohibit an issuer that chooses to apply the past-due premium policy from applying the policy to individuals offered an ICHRA or have a QSEHRA.\23\

\23\ In the event an individual is initially enrolled in individual health insurance coverage and subsequently fails to timely pay premiums for the coverage, with the result that the individual is in a grace period, the individual is considered to be enrolled in individual health insurance coverage and the ICHRA must reimburse qualified medical expenses incurred by the individual during that time period to the extent the qualified medical expenses are otherwise covered by the ICHRA.

ICHRAs must have reasonable procedures for covered participants and beneficiaries to substantiate that they

are enrolled in individual health insurance coverage, or enrolled in Medicare Parts A and B or Part C, for each month that they are covered under the ICHRA. ICHRAs also must require participants to forfeit the ICHRA if they are not enrolled in individual health insurance coverage or Medicare.

However, nothing prevents an employer from offering an ICHRA to employees who do not have individual health insurance coverage and reimbursement from an ICHRA for the initial payment of premiums to effectuate the coverage will often not be for the full amount owed.24 25 In addition, an employer's liability for the employer shared responsibility tax under section 4980H of the Code is determined with respect to whether the employer offered a plan (including an ICHRA) that meets certain requirements, not whether employees enrolled or received benefits under the plan.\26\ We note that QSEHRAs are similarly prohibited from providing tax-favored reimbursements to employees for any month that the employee does not have MEC and may only be offered by small employers that are not subject to the employer shared responsibility tax.\27\

\24\ The Department of the Treasury and the IRS assisted with the consideration and response to this comment. In general, the Treasury and the IRS take the position that, in the case of an HRA, sections 105 and 106 of the Code do not permit a payment to be excluded from a taxpayer's gross income in one plan year if the reimbursed expense was incurred in a different year. This is why the IRS provided a special rule in Notice 2020-33, section IV, that allows ICHRAs to pay premiums for individual health insurance coverage prior to the beginning of the plan year (for example, the plan can pay the initial premium due in December for coverage that starts in January). However, if an issuer attributes an initial premium payment to past-due premiums from the previous year, the issuer is, in effect, applying a surcharge on the initial premium needed to effectuate new coverage that is equivalent to the past-due amount, so long as the individual was covered during the period for when the premiums are past-due and there has not been a rescission. Although the issuer might have pended some claims from the period when premiums were not being paid and those claims would be freed up as a result of the payment, that is secondary to the fact that the payment is being made for the purpose of effectuating the new coverage.

\25\ An ICHRA must provide that if any individual covered by the HRA ceases to be covered by individual health insurance coverage, the HRA will not reimburse medical care expenses that are incurred by that individual after the individual health insurance coverage ceases. In addition, if the participant and all dependents covered by the participant's HRA cease to be covered by individual health insurance coverage, the participant must forfeit the HRA. Furthermore, ICHRAs are prohibited from reimbursing amounts for expenses incurred after an individual's individual health insurance coverage ceases.

\26\ 26 U.S.C. 4980H.

\27\ 26 U.S.C. 9831(d)(3)(B).

Comment: Under the proposed rule, issuers would be permitted to apply the past-due premium policy taking into account premium amounts owed to an issuer in the same controlled group. One commenter replied that this should be left to the States, while two commenters opposed allowing issuers to demand past-due premiums from an issuer in the same controlled group. One commenter recommended the final rule establish the definition of a controlled group rather than leaving the definition to the States.

Response: Consistent with the proposed rule, we are finalizing that States adopting the proposal regarding past-due premiums may determine whether to allow issuers to attribute payment for new coverage to past- due premiums owed to an issuer in the same controlled group. This is consistent with our broader objective to give States flexibility with regard to the past-due premium policy, and we believe that permitting issuers to collect past due premiums owed to other issuers in the same controlled group would be reasonable approach for States to adopt, as solvency is typically measured at the parent-company level, as opposed to the licensed-entity level. The final rule refers to the definition of controlled group in the guaranteed renewability regulations at Sec. 147.106(d)(4), which is a group of two or more persons that is treated as a single employer under sections 52(a), 52(b), 414(m), or 414(o) of the Code. States have flexibility to adopt a narrower definition of a controlled group.

Comment: We solicited comments on whether issuers should be required to establish terms of coverage that attribute the premium the enrollee initially pays for subsequent coverage to past-due premium amounts owed to an issuer. One commenter suggested that States are better situated to set and oversee parameters of this nature. One commenter stated that requiring issuers to adopt the past-due premium policy could result in more adverse selection than making the policy optional. This is because, as the commenter explained, less healthy individuals would be most likely to pay past-due premiums in order to effectuate new coverage, while healthier individuals opt for alternative coverage or no coverage. The commenter stated that the impact could be larger in markets where individuals may lack both alternative options for comprehensive coverage and the funds to repay premiums. In contrast, in areas with greater competition, the commenter stated that healthy individuals who have past-due premiums may have the option to pursue coverage with other issuers, which could reduce the overall level of anti-selection relative to regions with fewer coverage options. In these regions, issuers that choose to collect past-due premiums may benefit from lower premiums due to reduced anti-selection and potentially a reduction in uncollectable premium amounts, which could attract more enrollees into the market relative to less competitive regions. As such, adverse selection is likely to be more limited, particularly in competitive regions, where lookback periods are shorter, or where recoupment is optional. Another commenter stated that because every issuer does not have the necessary data or technology to operationalize this change, it is important to keep this provision optional for issuers, as proposed. The commenter emphasized the importance of providing issuers and State Exchanges flexibility in how they implement the proposed policy and to continue deferring to issuers on payment and business decisions. Furthermore, according to this commenter, due to the nominal amount many enrollees owe in past- due premiums, for many issuers the implementation costs may outweigh revenue from potential collections of past-due premiums. Another commenter stated that issuers need the flexibility to set billing policies based on unique factors in their environments. Another commenter stated that States maintain the closest interaction with their consumers and issuers and are best positioned to regulate issuers' premium payment policies. One commenter stated that a mandatory approach could create significant operational burdens on issuers, particularly in managing delinquent accounts, enrollment files and billing procedures. One commenter said that one particular State's existing statutes and regulations, which include grace periods, notice, and restatement of coverage requirements, aim to balance consumer protection with a health insurance issuer's fiscal health. Therefore, the commenter asserted that a uniform Federal regulatory approach is not necessary. One commenter stated that the policy should be optional, because issuers may not be able to identify enrollees whose coverage was terminated for non-payment during the enrollment process. In addition, many commenters asserted that States should be free to either permit or prohibit the practice.

Response: We agree with commenters who stated that the final rule should not require issuers to adopt the policy related to past-due premiums. States are most familiar with their local insurance markets and are therefore best

positioned to determine whether allowing issuers in their State and market to adopt the past-due premium policy is appropriate. We also recognize that some issuers' operations may not currently support such practices. For these reasons, should the State in which an issuer operates allow issuers to condition the effectuation of new coverage on payment of past-due premiums, the final business decision will remain at the discretion of individual issuers and what they determine is in their best interest.

Comment: With respect to the applicability date of the past-due premium policy, one commenter supported this provision applying on the effective date as proposed, stating that consumers will continue to have all the applicable protections of Federal and State law, including protection from discrimination in the application of this policy and Federal and State law grace periods. Several other commenters recommended delaying implementation to PY 2027, stating that issuers need time to make appropriate system and operational changes, and arguing that applying the policy any earlier would effectively change the terms of individuals' current coverage by affecting their ability to purchase future coverage.

Response: The past-due premium policy finalized in this final rule applies on the effective date of the final rule. We are not persuaded that a later applicability date is necessary because the final rule removes the current Federal regulatory prohibition and does not impose any new burdens on States or issuers. Nothing in this final rule requires States to permit, or issuers to implement, the past-due premium policy. Nor does the final rule prevent States or issuers from implementing the policy at a later date. We do not agree that allowing issuers to start applying the past-due premium policy on the effective date of the final rule changes the terms of an insured individual's current coverage, as insurance policies commonly include contract provisions addressing timely premium payment. Moreover, the past-due premium policy relates to an individual's or employer's ability to purchase a new contract of insurance rather than the existing contract.

Comment: One commenter urged HHS to actively monitor compliance with the past-due premium policy, should we finalize it, to protect both patients and providers.

Response: Under section 2723 of the PHS Act, States are the primary enforcers of the requirements of title XXVII of the PHS Act, including section 2702, with respect to health insurance issuers. We enforce against issuers in a State only if we determine that the State has failed to substantially enforce one or more of the requirements. Therefore, States with primary enforcement authority for section 2702 of the PHS Act will enforce the past-due premium policy in this final rule, to the extent they decide to permit it. We will enforce the policy against issuers in States where HHS is responsible for enforcement of the guaranteed availability requirements in section 2702.

The Marketplace Integrity and Affordability proposed rule included a number of proposed revisions to 45 CFR part 155 of title 45 of the Code of Federal Regulations that were intended to improve the integrity of the Exchanges, protect Federal funds, and protect consumers from the ill-effects of unauthorized enrollments, including surprise tax liability. We received a substantial number of comments weighing both for and against these proposals. The Department has concluded, after careful consideration of public comments, that while most of the proposals should be finalized as proposed, some proposals should not be finalized for State Exchanges, and other proposals will adopt a temporary position under which we will finalize the policies to be effective through the end of PY 2026. We address in this section policies the Department is finalizing to address acute improper and fraudulent enrollment concerns brought about by the expansion of APTC. Given the expiration of the enhanced APTC, the Department has concluded it would be reasonable to accept some risk of future improper enrollments after these policies sunset, in favor of limiting overall disruptions as the market adjusts and sheds holdover improper enrollments. The Department will finalize the following policies temporarily, requiring them to sunset at the end of PY 2026:

Failure to File Taxes and Reconcile APTC Process; Delay of FTR Process until after 2 consecutive years of FTR removed (Sec. 155.305(f)(4));

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

Income Verification When Tax Data is Unavailable (Sec. 155.320(c)(5));

Annual Eligibility Redetermination (Sec. 155.335)

Premium Payment Threshold (Sec. 155.400);

Monthly Special Enrollment Period for APTC-Eligible Qualified Individuals with a Projected Household Income at or Below 150 Percent of the Federal Poverty Level (Sec. 155.420); and

Pre-enrollment Verification for Special Enrollment Period (Sec. 155.420(g)).

The Department is of the view that immediate action to codify these proposed policies in this final rule represents the best policy to swiftly stop the substantial fraud, waste, and abuse in connection with expanded subsidies for Exchange coverage. However, based on the broad range of feedback for and against these policies and the difficulty in assigning with certainty the causes of improper enrollments, we believe there could be more efficient long-term solutions to these immediate problems. We expect that after the market has purged the massive amounts of improper and fraudulent enrollments it is currently experiencing that it would be reasonable to accept the risk that some improper enrollments will come back after the policies sunset. As such, we are finalizing these provisions only through PY 2026.

The expiration of enhanced subsidies creates a level of uncertainty within the individual health insurance market regarding the expected level of enrollment and morbidity of the risk pool for PY 2026 and beyond. Moving into PY 2021, the individual market had experienced an increasing level of stability. Since then, various policy decisions introduced a high level of uncertainty by pulling back enforcement of various regulatory requirements that had previously maintained more predictable enrollment patterns. For instance, Medicaid periodic data matching regulations have not been enforced since the fall of 2020. This nonenforcement posture likely contributed to the substantial increase in enrollment experienced over the past four years. Data presented in this rule suggest this allowed millions of additional people to enroll in the individual market risk pool with subsidized coverage who are otherwise not eligible for premium subsidies. In addition, as described throughout the rule, Federal law enacted in 2021 temporarily increased the level of premium tax credit subsidies which, in particular, made fully-subsidized health plans available to people with incomes between 100 percent and 150 percent of the Federal poverty level. This law dramatically changed the market composition as improper and fraudulent enrollments soared. This temporary policy is now set to expire at the end of PY 2025 and, as such, we believe it is

imperative to take decisive action to address improper and fraudulent enrollments to help the market shed the waste, fraud, and abuse currently obscuring evaluation of the market. These actions will help the market gradually reset in the context of a renewed subsidy environment that should inherently reduce improper and fraudulent enrollments through the lack of fully-subsidized benchmark plans.

Given these dynamics, coupled with extensive public feedback, the Department has determined it would be reasonable to sunset certain policies after PY 2026 and accept some risk that improper enrollments will become more likely once the policies sunset. Regulatory sunsets can be an especially useful strategy to adapt to uncertain circumstances, like those created by the vast amount of improper and fraudulent enrollments created by the subsidy expansion, which the Department feels it must address as the subsidy expansion winds down to prevent short-term consumer pain. Once those currently improperly or fraudulently enrolled have been removed, the potential for consumer harm is significantly lessened as fully-subsidized benchmark plans will no longer exist. As such, while these policies are critical short-term tools to allow the market to readjust to the expanded subsidy expiration, it is not clear that the long-term burden associated with these policies outweighs the program integrity benefits in the absence of abuse-prone fully-subsidized plans. Accordingly, we follow the example of other Federal agencies that have codified short-term, temporary rules in response to urgent needs.\28\

\28\ See, e.g., Home Mortgage Disclosure (Regulation C) Final Rule, 82 FR 43088 (Sep. 13, 2017) (in response to comments that it set a reporting threshold to low, the Consumer Financial Protection Board finalized a new, temporary rule increasing the reporting threshold for only two years to allow the agency to study the issue and consider whether to initiate another rulemaking to address the appropriate level for the reporting threshold). See also, Securities and Exchange Commission Final Rule 202T, 69 FR 48008, 48012 (August 6, 2004) (adopting a temporary rule to facilitate the collection of data sufficient to assess the effectiveness of certain regulations concerning short sale prices on securities).

We believe striking this balance will reduce improper and fraudulent enrollments in the near-term without implicating longer-term concerns over these policies, for which it is less clear that the benefits would outweigh such concerns in the absence of the high level of improper enrollments held over from the subsidy expansion. For these reasons, we are finalizing these policies for PY 2026 only, with a reversion to the previous policies for PY 2027 and beyond.

We address each of the policies we are finalizing to sunset after PY 2026 in section III. of this final rule. 1. Definitions; Deferred Action for Childhood Arrivals (Sec. 155.20)

Section 1312 of the ACA specifically excludes individuals who are not “lawfully present” from eligibility for enrollment in a QHP or for insurance affordability programs.\29\ Section 36B of the Internal Revenue Code, and sections 1412 and 1402 of the ACA provide that PTC,\30\ APTC,\31\ and CSRs,\32\ respectively, are not allowed for individuals who are not lawfully present. Section 1331 of the ACA excludes individuals who are not “lawfully present” from eligibility and enrollment in a BHP in States that elect to operate a BHP.\33\ From 2012 through 2024, HHS long took the position that a noncitizen in the United States under the Deferred Action for Childhood Arrivals (DACA) policy was not “lawfully present” for purposes of determining eligibility to enroll in a QHP through an Exchange or for these insurance affordability programs.\34\ However, in the DACA Rule (89 FR 39392), HHS updated the definition of “lawfully present” to include DACA recipients for purposes of determining eligibility to enroll in a QHP through an Exchange, to be eligible for PTC, APTC, and CSRs, and to enroll in a BHP in States that elect to operate a BHP. In the 2025 Marketplace Integrity and Affordability proposed rule (90 FR 12953 through 12955), we proposed to realign our policy with the longstanding view of the text of the ACA by updating the definition of “lawfully present” such that DACA recipients are no longer considered “lawfully present” for purposes of enrollment in a QHP through an Exchange, eligibility for PTC, APTC, and CSRs, and for BHP coverage in States that elect to operate a BHP.

\29\ 42 U.S.C. 18032(f)(3).

\30\ 42 U.S.C. 18082(d); 26 U.S.C. 36B(e)(2).

\31\ 42 U.S.C. 18082(d).

\32\ 42 U.S.C. 18071(e).

\33\ 42 U.S.C. 18051(e).

\34\ See the definition of “insurance affordability program” at 45 CFR 155.300(a) and 42 CFR 435.4.

On June 15, 2012, the United States Department of Homeland Security (DHS) issued a memorandum entitled “Exercising Prosecutorial Discretion with Respect to Individuals who Came to the United States as Children” (“DHS Memo”).\35\ The DHS Memo established, for the first time, the DACA policy, and set forth three principles. First, certain individuals who were brought to the United States as children from another country and who were in the United States in violation of immigration laws were not considered to be an immigration enforcement priority. Second, with respect to these individuals, DHS officials were instructed to exercise enforcement discretion and generally defer from placing them into removal proceedings. Finally, United States Citizenship and Immigration Services (USCIS) was instructed to accept applications to determine whether these individuals were eligible for work authorization during a period of deferred action.

\35\ Napolitano, J. (2012). Exercising Prosecutorial Discretion with Respect to Individuals Who Came to the United States as Children. U.S. Department of Homeland Security. https://www.dhs.gov/xlibrary/assets/s1-exercising-prosecutorial-discretion-individuals-who-came-to-us-as-children.pdf.

On August 30, 2012, HHS issued an Interim Final Rule (77 FR 52615 through 52616) that amended the definition of “lawfully present” at Sec. 155.20 to conform with the law as enacted by the ACA by making clear that an individual whose case had been deferred under the DACA policy “will not be able to enroll in coverage through the Affordable Insurance Exchanges and, therefore, will not receive coverage that could make them eligible for premium tax credits.” The Interim Final Rule noted at that time (77 FR 52615) that “the reasons that DHS offered for adopting the DACA process do not pertain to . . . extend[ing] health insurance subsidies under the [ACA] to these individuals.” For that reason, HHS explained that it did not intend to “inadvertently expand the scope of the DACA process” (77 FR 52615).

On May 8, 2024, after notice and comment, HHS issued the DACA Rule (89 FR 39392) reversing this longstanding interpretation. In the final rule, HHS announced that it had chosen to “reconsider” its prior interpretation from 2012. The DACA Rule, which became effective on November 1, 2024, advanced several arguments for reversing the agency's prior interpretation.\36\ Consistent with our statutory authority \37\ to define “lawfully present” for use in determining eligibility for our programs, we are now reconsidering these arguments.

\36\ On December 9, 2024, the United States District Court for the District of North Dakota issued a preliminary injunction in Kansas v. United States of America (Case No. 1:24-cv-00150) partially blocking implementation of the DACA Rule.

\37\ Sec. 1411 of the ACA, 42 U.S.C. 18081(a).

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), the agency should “align” its position to that of DHS, even while acknowledging that we were operating under separate statutory and policy considerations. However, as demonstrated by HHS' prior policy with regard to DACA recipients (89 FR 39392 through 39395), the “separate statutory authority and policy considerations” did not compel HHS to “align” its position on DACA recipients with the position that DHS took with regard to DACA recipients' eligibility for certain Social Security benefits.

In the DACA Final Rule (89 FR 39395), HHS also posited that it saw “no statutory mandate to distinguish between recipients of deferred action under the DACA policy and other deferred action recipients.” The final rule noted that Federal agencies have considered deferred action recipients to be “lawfully present” for purposes of certain Social Security benefits since 1996.\38\ However, DACA recipients, unlike other deferred action recipients, received deferred action under a large-scale presidential initiative whose purposes did not include extending ACA access to health insurance Exchanges. As HHS originally explained, it is not consistent with the reasons offered for adopting the DACA process to extend health insurance subsidies under the ACA to these individuals (77 FR 52615). This original policy reflected the better view of the appropriate intersection of DACA and the ACA.

\38\ See Definition of the Term Lawfully Present in the United States for Purposes of Applying for Title II Benefits Under Section 401(b)(2) of Public Law 104-193, interim final rule (61 FR 47039).

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.” 39 40 In the DACA Rule, HHS acknowledged the Fifth Circuit's opinion but proceeded to consider DACA recipients “lawfully present” for purposes of eligibility to enroll in a QHP through an Exchange, to be eligible for PTC, APTC, CSRs, and to be eligible to enroll in a BHP in States that elect to operate a BHP because the “rule reflects our independent statutory authority under the ACA to define `lawfully present.' ” Upon further reconsideration and as stated in the proposed rule (90 FR 12954), we now believe HHS should not have defined “lawfully present” under the ACA in a way that departed from the longstanding understanding of that term with respect to DACA recipients.

\39\ Texas v. United States, 50 F.4th 498, 526 (5th Cir. 2022).

\40\ On January 17, 2025, the U.S. Court of Appeals for the Fifth Circuit issued a decision (State of Texas, et al. v. U.S.A., et al., 23-40653) regarding DHS' final rule “Deferred Action for Childhood Arrivals” (87 FR 53152), which found the benefits granting provisions of the rule to be substantively unlawful, limited injunctive relief to the State of Texas, and remanded the case to the district court for further proceedings.

To support the DACA Rule, HHS stated that the policy would increase insurance coverage, reduce delays in care, improve the ACA's risk pool, and make DACA recipients more productive members of society. However, these benefits the agency previously noted do not mean that DACA recipients should be considered to have met the “lawfully present” standard that Congress set in order to enroll in a QHP through an Exchange, for PTC, APTC, CSRs to be allowed for their Exchange coverage, and to enroll in a BHP in States that elect to operate a BHP. In the proposed rule (90 FR 12954), we stated that we believe the use of the term “lawfully present” in the ACA is best implemented by excluding DACA recipients for purposes of eligibility to enroll in a QHP through an Exchange, for PTC, APTC, CSRs to be allowed for their Exchange coverage, and to be eligible to enroll in a BHP in States that elect to operate a BHP. DHS' decision that DACA recipients are not priorities for removal does not, as DHS has acknowledged, mean that they have “lawful status” within the United States, nor does that DHS' decision control anything regarding “eligibility rules” for health-related benefits administered by “[o]ther departments and agencies, such as HHS” (87 FR 53211 through 53212). Therefore, in the proposed rule (90 FR 12955), we stated that we believe it was improper for HHS to have advanced a policy goal that was contrary to the ACA's statutory limitations as they had been understood since the inception of DACA. Furthermore, DHS' decision that enforcement resources should be focused on other unlawful immigrants does not compel the conclusion that taxpayer dollars should be expended to subsidize the healthcare of those unlawful immigrants, as HHS recognized in its 2012 rule. Indeed, Congress has expressed a clear immigration policy that “aliens within the Nation's borders not depend on public resources to meet their needs” and public benefits should “not constitute an incentive for immigration to the United States” (8 U.S.C. 1601(2)). While HHS acknowledged this goal in previous rulemaking (89 FR 39399), it did not explain why the understanding that it had adopted prior to the DACA Rule did not better comport with this statutory goal.

After reconsidering these arguments and as stated in the proposed rule (90 FR 12955), we believe that, with respect to DACA recipients, defining the term “lawfully present” as set forth in the August 30, 2012 Interim Final Rule (77 FR 52614 through 52616) better adhered to the policy considerations underlying the statutory scheme. As previously noted, HHS' statutory authority and policy considerations for defining “lawfully present” with regard to its programs are separate from DHS', and there is no requirement that HHS aligns its definition of “lawfully present” with DHS'. There is also no requirement that HHS align its treatment of DACA recipients with other recipients of deferred action, particularly given the fundamental differences between DHS' DACA policy and other policies under which DHS may grant deferred action. In the 2012 Interim Final Rule (77 FR 52614 at 52615), HHS noted that the reasons DHS offered in the DHS Memo for adopting the DACA process did not include providing access to insurance affordability programs, and that any such expansion would “inadvertently expand the scope of the DACA process.” Under section 42 U.S.C. 18032(f)(3), section 36B(e)(2) of the Code, 42 U.S.C. 18082(d), 42 U.S.C. 18071(e)(1)(A), and 42 U.S.C. 18051(e), enrollment in a QHP offered on an Exchange, PTC, APTC, CSRs, and enrollment in a BHP in States that elect to operate a BHP, respectively, is allowed only for individuals who are “lawfully present” in the United States, and the better view is that a DACA recipient does not meet that requirement and would therefore, under this rule, be ineligible for these benefits.

We sought comment on this proposal.

After consideration of comments and for the reasons outlined in the proposed rule and this final rule, including our responses to comments, we are finalizing this policy as proposed. This policy will be applicable immediately upon the effective date of this rule as it conforms regulatory policy to the best statutory reading of the ACA. We summarize and respond to public comments received on the proposed changes to the definition of “lawfully present” below.

Comment: We received several comments in support of the proposed change to exclude DACA recipients from the definition of “lawfully present.” Commenters noted that including DACA recipients in the definition of “lawfully present” imposed additional costs on taxpayers and that reverting the definition to exclude DACA recipients would better protect taxpayers.

Response: We appreciate comments received in support of our proposal to modify the regulatory definition of “lawfully present” at Sec. 155.20 in alignment with the definition set forth in the August 30, 2012 Interim Final Rule (77 FR 52614 through 52616) to exclude DACA recipients for purposes of eligibility to enroll in a QHP through an Exchange, for PTC, APTC, CSRs to be allowed for their Exchange coverage, and to be eligible to enroll in a BHP in States that elect to operate a BHP. We agree that this proposal would result in less PTC being paid out, given that DACA recipients would no longer be eligible to enroll.

Comment: Many commenters supported that the proposed rule did not propose to modify the technical and clarifying changes to the definition of “lawfully present” at Sec. 155.20 that were made by the 2024 DACA rule (89 FR 39392). Commenters noted that these changes eliminated complexity in eligibility determinations and eased burden on service providers and consumers.

Response: We appreciate comments received in support of our proposal to retain these adjustments. We agree that these changes were primarily technical and clarifying in nature and that these changes simplify eligibility determinations. General Opposition

We received several comments opposing the proposed change to the definition of “lawfully present” in this rule. The following is a summary of the comments we received and our responses.

Comment: The majority of commenters noted general opposition to CMS' proposal to exclude DACA recipients from the definition of “lawfully present.” Many commenters noted that DACA recipients are essential members of their community that contribute to the economy and that excluding DACA recipients delegitimizes their status. Many commenters stated that individuals undergo extensive vetting to obtain and maintain their DACA status and are hence “legally present.” Commenters also noted that DACA recipients have work authorization and pay taxes and therefore should have access to Exchange coverage. One commenter noted that the opportunity to purchase Exchange coverage is consistent with the goals of the DACA policy. Similarly, another commenter noted that giving DACA recipients access to the Marketplace does not change anything about their legal immigration status, and hence DACA recipients should be allowed to buy insurance on the Marketplace. One commenter noted that the ACA only states that the Exchange is unavailable to individuals who are not “lawfully present” without explicitly referencing any categories of noncitizens, and that the ACA instead “defers to 45 CFR 155.20.”

Response: We note that individuals who are not “lawfully present” are ineligible for enrollment in a QHP through an Exchange and for insurance affordability programs.\41\ As mentioned in the proposed rule consistent with our statutory authority \42\ to define “lawfully present” for use in determining eligibility for our programs, we are reconsidering our prior interpretation from the 2024 DACA rule at 89 FR 39392. As noted in the 2012 DHS Memo, the DACA process was designed to provide temporary relief from removal for certain individuals on a case-by-case basis as a mechanism to preserve governmental resources for high-priority removal cases. We note that the reasons for adopting the DACA process did not pertain to health insurance affordability programs, such as access to Exchange coverage. We believe that the original interpretation of the term “lawfully present” better reflects the appropriate intersection of DACA and the ACA.

\41\ 42 U.S.C. 18032(f)(3), 42 U.S.C. 18032(f)(3), 42 U.S.C. 18082(d), 42 U.S.C. 18071(e)(1)(A), 42 U.S.C. 18051(e).

\42\ 42 U.S.C. 18081(a).

Comment: Some commenters noted that HHS has maintained Exchange eligibility for all other individuals with deferred action, and DACA recipients should be allowed to enroll in Exchange coverage such that eligibility standards are consistently applied to all recipients of deferred action. One commenter noted that deferred action is a long- standing administrative mechanism that predates the ACA, and that DACA recipients are therefore not unique among deferred action recipients to the extent that the policy under which they were granted deferred action was not explicitly intended to extend access to Exchange coverage. Another commenter noted that DACA recipients can be considered as having “quasi-legal” status, which warrants access to care. One commenter noted that HHS has no authority to independently define “lawfully present,” and the Congress did not intend to confer on HHS the authority to define lawful presence for immigrants.

Response: As noted in the proposed rule, DACA recipients, unlike other deferred action-recipients, received deferred action under a large-scale presidential initiative, the purpose of which did not include extending ACA access to health insurance Exchanges. We note that in prior rulemaking, the Department of Homeland Security (DHS) acknowledged that DACA has “never conferred lawful immigration status on recipients,” and further declined to label DACA as “identical” to all other forms of deferred action (87 FR 53211 through 53212). We reiterate that HHS maintains its separate and independent statutory authority to codify a regulatory definition of “lawfully present”' for use in determining eligibility to enroll in a QHP through an Exchange, in a BHP in States that elect to operate a BHP, and eligibility for PTC, APTC, CSRs. We believe that the definition of “lawfully present” as set forth in the August 30, 2012 Interim Final Rule (77 FR 52614 through 52616) best adheres to the statute and is consistent with the benefits afforded by the DACA policy, which are forbearance from removal from the United States and employment authorization. We note that HHS retains separate statutory authority and policy considerations to define the term “lawfully present” for its programs. This authority does not compel HHS to align its definition of “lawfully present” with DHS, especially since the reasons DHS offered for adopting the DACA policy do not pertain to eligibility for insurance affordability programs.\43\ We also note that other definitions of “lawfully present,” such as those by DHS, should not be used as a criterion to gauge eligibility for health insurance coverage. Therefore, extending health insurance subsidies and cost- sharing reductions to DACA recipients for Exchange coverage, or coverage through a BHP in states that elect to operate a BHP, would improperly expand the scope of the DACA process.

\43\ As defined in 45 CFR 155.300(a); 42 CFR 435.4.

We received several comments that highlighted legal concerns with the proposed change to the definition of “lawfully present” in this rule. The

following is a summary of the comments we received and our responses.

Comment: Some commenters opposed the modification of the definition of “lawfully present” and stated that the change is inconsistent with the intent and goals of the ACA. Specifically, one commenter noted that the exclusion of DACA recipients may constitute discrimination based on national origin, which is prohibited under section 1557 of the ACA. Another commenter noted that the proposed rule did not address section 1554 of the ACA, which disallows HHS from promulgating regulations that may constitute unreasonable barriers to care or impede timely access to services. Several commenters highlighted that excluding DACA recipients from the definition of “lawfully present” restricts their ability to access medical care, which violates the Equal Protection Clause of the Fourteenth Amendment of U.S. Constitution. Commenters also stated that the proposed definition of “lawfully present” denies DACA recipients' rights under title VI of the Civil Rights Act.

Response: The Department disagrees that excluding DACA recipients from the definition of lawfully present violates sections 1554 or 1557 of the ACA, the Equal Protection Clause of the Fourteenth Amendment, or title VI of the Civil Rights Act.

Section 1557 of the ACA (42 U.S.C. 18116) prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in a health program or activity, any part of which is receiving Federal financial assistance, including credits, subsidies, or contracts of insurance, except where otherwise provided in title I of the ACA. Section 1557 of the ACA also prohibits discrimination on the basis of race, color, national origin, sex, age, or disability under any program or activity that is administered by an executive agency, or any entity established under title I of the ACA or its amendments. We disagree that this rule's proposal to define “lawfully present” for purposes of HHS programs constitutes discrimination on the basis of national origin, as DACA status may be obtained by individuals who came to the United States as children regardless of their national origin, if they meet all other DHS eligibility criteria. Additionally, as outlined in prior rulemaking (89 FR 37522), section 1557 of the ACA does not include immigration status. Similarly, this proposal does not violate section 1554 of the ACA. In California v. Azar, the Ninth Circuit held that section 1554 of the ACA is intended to ensure that HHS does not “improperly impose regulatory burdens on doctors and patients,” not to restrict HHS' ability to “ensure government funds are not spent for an unauthorized purpose.” \44\

\44\ California v. Azar, 950 F.3d 1067 (9th Cir. 2020).

Furthermore, we do not agree that the proposed change to the definition of “lawfully present” violates the Equal Protection Clause of the Fourteenth Amendment or title VI of the Civil Rights Act. The Equal Protection Clause prohibits States from denying anyone within their jurisdiction the equal protection of the laws and thus is not applicable here. Nevertheless, we note that HHS' action to modify the definition of “lawfully present” is consistent with the Equal Protection Clause as the Federal government has a rational basis to distinguish between DACA recipients and other categories of “lawfully present” noncitizens, as detailed in this section.\45\ Title VI of the Civil Rights Act, 1964, likewise, is not relevant here. Title VI provides that no person shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance and reaches only acts of intentional discrimination.\46\ A rule providing that DACA recipients do not qualify as lawfully present is consistent with the premise of the DACA program under which DACA recipients have no lawful immigration status, but enjoy deferred deportations given the low priority the Federal government places on their deportations. Moreover, the policy we finalize does not constitute discrimination based on any protected ground, as it does not distinguish based on a DACA recipient's particular race, color, or national origin. As we explain earlier in this preamble, lawful presence is one of many critical eligibility criteria required by the ACA. We reiterate that HHS has the authority under the ACA to facilitate the operation of its programs, including the issuance of regulations that define “lawfully present,” and we believe the exclusion of DACA recipients represents the best interpretation of Congressional intent.

\45\ Toro v. Sec'y, U.S. Dep't of Homeland Sec., 707 F.3d 1224, 1230 (11th Cir. 2013)

\46\ Alexander v. Sandoval, 532 U.S. 275, 280 (“Title VI itself directly reach[es] only instances of intentional discrimination.”) (internal citations and quotations omitted).

Comment: A few commenters noted that there is ongoing litigation regarding HHS' 2024 DACA rule and that the proposed change to the definition of “lawfully present” is improper and attempts to prevent a judicial decision.

Response: We note that there is ongoing litigation regarding the 2024 DACA rule. In August 2024, several plaintiff States filed a lawsuit in the United States District Court for the District of North Dakota in response to the agency's 2024 DACA rule that newly included DACA recipients in the definition of “lawfully present.” \47\ On December 9, 2024, the court issued a preliminary injunction applicable to the plaintiff States, and as a result DACA recipients are ineligible for Exchange coverage in the nineteen plaintiff States involved in the lawsuit.\48\ On December 16, 2024, the preliminary injunction was appealed to the Eighth Circuit Court of Appeals. Ultimately, this rulemaking may render as moot the pending legal challenge to the DACA Rule, and the appeals court granted the Government's motion to hold the appeal in abeyance. At present, DACA recipients in all other States continue to be eligible for Exchange coverage. We disagree that it is improper to propose and finalize this change to the definition of “lawfully present.” We note that the resolution and timing of a final disposition for this litigation is unknown and without this proposed modification, the agency would fail to align with the better interpretation of the term “lawfully present” and would continue to incorrectly expend taxpayer dollars.

\47\ Kansas v. United States of America (Case No. 1:24-cv- 00150).

\48\ These States are Alabama, Arkansas, Florida, Idaho, Indiana, Iowa, Kansas, Kentucky, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, Texas, and Virginia. All States are served by Federal platform, except for Idaho, Kentucky, and Virginia, which are State Exchanges that operate their own platforms.