Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability

The following changes will be submitted for review under OMB Control Number 0938-1191 (CMS-10440).

We are temporarily finalizing amendments to Sec. 155.420(g) to require all Exchanges to conduct eligibility verification for SEPs. Specifically, are finalizing removal of the limit on Exchanges on the Federal platform to conducting pre-enrollment verifications for only the loss of minimum essential coverage SEP. With this limitation removed, we are finalizing the requirement to conduct pre-enrollment verifications for most categories of SEPs for Exchanges on the Federal platform in line with operations prior to the implementation of the 2023 Payment Notice. At this time, we are finalizing this policy for PY 2026 only, with a reversion to the previous policy for PY 2027 and beyond.

We are also temporarily finalizing that Exchanges must conduct SEP verification for at least 75 percent of new enrollments through SEPs for consumers not already enrolled in coverage through the applicable Exchange. We are finalizing that Exchanges must verify at least 75 percent of such new enrollments based on the current implementation of SEP verification by Exchanges. At this time, we are finalizing this policy for PY 2026 only, with a reversion to the previous policy for PY 2027 and beyond. A discussion of the proposed ICRs for this policy may be found in the 2025 Marketplace Integrity and Affordability proposed rule (90 FR 13003). We are updating the ICRs for this policy in this final rule to account for updated wage rates available after the publication of the proposed rule.

We anticipate that adding this expansion of pre-enrollment verification for SEPs will result in approximately 1 hour of time spent by consumers to complete associated questions in the application or submit supporting documentation. Based on historical data from the FFE, we estimate that approximately 293,073 new SEP verification issues will be generated at the household level for Exchanges on the Federal platform. Therefore, adding these inconsistencies will increase burden on consumers by approximately 293,073 hours. Using the estimate of the hourly value of time for changes in time use for unpaid activities calculated at $24.05 per hour in section IV.A. of this final rule, we estimate that the increase in cost for each consumer will be

approximately $24.05 in 2026, and the cost increase for all consumers who generate this income inconsistency will be approximately $7,048,406 in 2026.

Additionally, we estimate that expanding pre-enrollment verification for SEPs will result in an increase in burden on Exchanges using the Federal platform and State Exchanges. Based on historical FFE data, we anticipate that approximately 293,073 inconsistencies will be generated at the household level for Exchanges using the Federal platform, and 179,625 inconsistencies will be generated at the household level for Exchanges not using the Federal platform. Once households have submitted the required verification documents, we estimate that it will take approximately 12 minutes for an eligibility support staff person (BLS occupation code 43-4061), at an hourly cost of $49.52, to review and verify submitted verification documents. Therefore, expanding verification will result in an increase in burden on Exchanges using the Federal platform of 58,615 hours (293,073 verifications x 0.2 hours per verification) at a cost of $2,902,615 (58,615 hours x $49.52 per hour) in 2026.

We sought comment on the proposed estimates and assumptions.

As discussed, after careful consideration of public comments, we have decided to finalize and implement these policies with a significant modification--for Exchanges on the Federal platform, each of the rules outlined in this section will sunset by their terms after the completion of one new coverage year, PY 2026, on December 31, 2026. We are declining to finalize these proposals for State Exchanges. We have also added the one-time development cost estimate to this section.

Comment: States, providers, actuaries, labor groups, general advocacy groups, individuals, and one health insurance issuer raised general concern about the administrative burden and cost on States of implementing pre-enrollment SEP verification and expressed that States do not experience the same level of fraud cited for Exchanges on the Federal platform.

Response: We acknowledge commenters' concerns. However, after careful consideration of public comments, we have decided to finalize and implement the proposed policy with a significant modification--for all Exchanges, each of the rules outlined in this section will sunset by their terms after the completion of one new coverage year, PY 2026, on December 31, 2026 with a reversion to the previous policy for PY 2027 and beyond. We will not be finalizing these proposals for State Exchanges in an effort to address concerns around increased burdens and costs.

We are finalizing the exclusion of DACA recipients from the definitions of “lawfully present” that are used to determine eligibility to enroll in a QHP through an Exchange, for PTC, APTC, and CSRs, and to enroll in a BHP in States that elect to operate a BHP, which will be applicable as of the effective date of this rule and beyond. This rule also finalizes the policy contained in the proposed rule to reverse the policy restricting an issuer from denying coverage due to an individual's or employer's failure to pay premiums owed for prior coverage, including by attributing payment of premium for new coverage to past-due premiums from prior coverage, which will be applicable as of the effective date of this rule and beyond. Additionally, we are finalizing temporary revisions to the FTR process at Sec. 155.305(f)(4) to reinstate the policy that Exchanges must determine enrollees ineligible for APTC when HHS notifies the Exchange that they or their tax filer has failed to file a Federal income tax return and reconcile their past APTC for a year for which their tax data would be utilized to verify their eligibility. This policy is effective for PY 2026, and we are sunsetting this policy at the end of PY 2026 with a reversion to the previous policy for PY 2027 and beyond. We also are finalizing policies to strengthen the verification process around annual household income, which will be applicable as of the effective date of this rule, and we are sunsetting these policies pertaining to income verification when data sources indicate income less than 100 percent of the FPL and income verification when tax data is unavailable for State Exchanges at the end of PY 2026 with a reversion to the previous policies for PY 2027 and beyond. We are further finalizing a temporary requirement for Exchanges on the Federal platform that enrollees who would otherwise be automatically re- enrolled in a QHP with a zero dollar premium after application of APTC (“fully-subsidized”) will instead be automatically re-enrolled with APTC applied to the policy reduced such that the enrollees owe a 5- dollar premium if they do not submit an application for an updated eligibility determination to the Exchanges on the Federal platform. This requirement is being finalized as effective for PY 2026 only, with a reversion to the previous policy for PY 2027 and beyond. We also are finalizing an amendment to the automatic reenrollment hierarchy by removing Sec. 155.335(j)(4) which currently allows Exchanges to move an enrollee from a bronze QHP to a silver QHP if the silver QHP has a lower or equivalent net premium after the application of APTC, and if the silver QHP is in the same product and has the same provider network as the bronze plan into which the enrollee would otherwise have been re-enrolled. We are finalizing this policy to be effective for

PY 2026 and beyond. We also are finalizing a temporary removal of the fixed-dollar and gross percentage-based premium payment thresholds at Sec. 155.400(g), which will be applicable as of the effective date of this rule and we are sunsetting this policy at the end of PY 2026 with a reversion to the previous policy for PY 2027 and beyond. We are finalizing changing the annual OEP for coverage through all individual market Exchanges beginning with the PY 2027 OEP. We are finalizing flexibility for Exchanges to set their own OEP as long as: the start date is no later than November 1, the end date is no later than December 31, the OEP does not exceed 9 weeks, and all coverage pursuant to enrollments during the OEP begins January 1. Additionally, we are finalizing a pause of Sec. 155.420(d)(16) and making conforming changes to repeal the monthly SEP for qualified individuals or enrollees, or the dependents of a qualified individual or enrollee, who are eligible for APTC, and whose projected household income is at or below 150 percent of the FPL. This finalized policy will be applicable as of the effective date of this rule, and we are sunsetting this policy at the end of PY 2026 with a reversion to the previous policy for PY 2027 and beyond. We also are finalizing an amendment to Sec. 155.420(g) to enable HHS to temporarily reinstate (with modifications) pre-enrollment verification of eligibility of applicants for all categories of individual market SEPs. This policy is effective for PY 2026, and we are sunsetting this policy at the end of PY 2026 with a reversion to the previous policy for PY 2027 and beyond. Additionally, we are finalizing a prohibition on covering specified sex-trait modification procedures as an EHB and adding a definition of “specified sex-trait modification procedure,” which will be effective for PY 2026 and beyond. Finally, we are finalizing a change to the premium adjustment percentage methodology to establish a premium growth measure that comprehensively reflects premium growth in all affected markets, and we are finalizing revised AV de minimis ranges. These finalized policies will be effective for PY 2026 and beyond.

We have examined the impacts of this rule as required by Executive Order 12866, “Regulatory Planning and Review Executive Order 13132, “Federalism”; Executive Order 13563, “Improving Regulation and Regulatory Review”; the Regulatory Flexibility Act (RFA) (Pub. L. 96- 354); section 1102(b) of the Social Security Act; section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4); and the Congressional Review Act (5 U.S.C. 804(2)).

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select those regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety, and other advantages; distributive impacts). Section 3(f) of Executive Order 12866 defines a “significant regulatory action” as any regulatory action that is likely to result in a rule that may: (1) have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or Tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, or the President's priorities.

A regulatory impact analysis (RIA) must be prepared for a regulatory action that is significant under Executive Order 12866. Based on our estimates, OMB's Office of Information and Regulatory Affairs (OIRA) has determined this rulemaking is significant under section 3(f)(1). Pursuant to Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (also known as the Congressional Review Act), OIRA has also determined that this is a rule as defined under 5 U.S.C. 804(2).

Consistent with OMB Circular A-4,\266\ we have prepared an accounting statement in Table 10 showing the classification of the impact associated with the provisions of this final rule. We have included the undiscounted annual impacts in Table 11.

\266\ Available at https://trumpwhitehouse.archives.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf.

This final rule implements standards for programs that will have numerous effects, including supporting program integrity, reducing the impact of adverse selection, and stabilizing premiums in the individual and small group health insurance markets and in Exchanges. We are unable to quantify and monetize all the benefits and costs of this final rule. The effects in Table 10 reflect qualitative assessment of impacts and estimated direct monetary costs and transfers resulting from the provisions of this final rule for Exchanges, health insurance issuers, and consumers. The individual effects of each provision in this final rule are presented separately in Table 10 and collectively in Table 11, but we anticipate these estimates may overlap, as some individuals could be impacted by multiple provisions. Therefore, in section V.C.18. of this final rule, we present overall impact estimates of all provisions considered jointly. Due to the sunsetting of certain provisions, there is a risk that some improper enrollment returns with an adverse impact on the risk pool. This level of risk is not certain and difficult to estimate, but we have accounted for this uncertainty by providing a range of estimates in this analysis.

\267\ Regarding references to APTC transfers from the Federal Government to issuers in this table and Accounting Table 11 in the proposed rule (90 FR 13006 through 13009), the Department notes that some of these dollars ultimately flow from issuers to other entities like providers and jurisdictions that reimburse uncompensated care, as referenced earlier in this table where we discuss potential costs to State governments and private hospitals in the form of charity care for individuals who become uninsured as a result of policies in this final rule.

Table 10--Accounting Table

Estimate (million) Year dollar Discount rate Period

(percent) covered

Benefits:

Annualized Monetized ($/year) $0.2 2025 7 2025-2029

Annualized Monetized ($/year) $0.2 2025 3 2025-2029

Quantified:

Annual reduction in costs starting in 2025 of $41,250 in application processing savings for the

Federal Government and $51,352 total for State Exchanges and States that choose to operate BHPs as a result

of fewer individuals applying for coverage associated with the policy regarding the definition of

“lawfully present.”......................................................................................

Annual reduction in costs starting in 2025 of $10,102 total for State Exchanges and $9,706 for the

Federal Government as a result of fewer individuals generating immigration status inconsistencies

associated with the policy regarding the definition of “lawfully present.”...............................

One-time reduction in costs in 2026 of $92,400 total for States and $292,000 for the Federal

Government as a result of not sending an additional 2-tax year notice to consumers found as failing to file

and reconcile..............................................................................................

Non-quantified:

Reduction in the risk of adverse selection associated with the policy to permit attribution of

payment for new coverage to past-due premium amounts.......................................................

Reduction in outstanding premium debt amount for enrollees resulting in potential improvement in

their financial standing over time and a reduced likelihood of any debt being placed into collections

associated with the policy to permit attribution of payment for new coverage to past-due premium amounts...

Improved continuous coverage for enrollees and premium collection rates and reduced administrative

costs for issuers associated with the policy to permit attribution of payment for new coverage to past-due

premium amounts............................................................................................

Increased transparency for agents, brokers, and web-brokers by establishing an evidentiary standard

to be used during investigations of agent, broker, or web-broker noncompliance under Sec. 155.220(g)(1)-

(3)........................................................................................................

Reduced potential for APTC recipients to incur large tax liabilities in 2026 as a result of the

policies regarding FTR and income verification in this final rule..........................................

Simplified operational processes for issuers and the Exchanges associated with the policy regarding

the annual OEP length......................................................................................

Improved continuous coverage for the full year and improved risk pool associated with the policy

regarding the annual OEP length............................................................................

Increased issuer participation and improved coverage options, resulting in an improved overall risk

pool and reduced overall costs associated with the policy to revise the AV de minimis ranges...............

Better matches between consumers' coverage preferences and available coverage offerings and a

reduction in financial burden due to improper enrollment associated with the policies in this rule.........

Reduction in improper enrollments of fully-subsidized enrollees by agents, brokers, and web-brokers

associated with the policies in this rule..................................................................

Estimate (million) Year dollar Discount rate Period

(percent) covered

Costs:

Annualized Monetized ($/year) $132.0 2025 7 2025-2029

Annualized Monetized ($/year) $125.6 2025 3 2025-2029

Quantified:

One-time costs in 2025 of $1,959,299 total for State Exchanges and States operating BHPs and

$96,995 for the Federal Government to make changes to eligibility systems regarding the definition of

“lawfully present” finalized in this rule................................................................

One-time costs in 2025 of $1,648,915 total for State Exchanges and $96,995 for the Federal

Government to end QHP coverage for individuals no longer considered “lawfully present” due to policies in

this final rule............................................................................................

One-time costs in 2025 of $969,950 for the Federal Government and $19,399,000 total for State

Exchanges to develop and code changes to the eligibility systems to evaluate and verify FTR status under

the revised FTR process finalized in this rule, plus an additional cost of $1,939,900 for two additional

States that plan to transition to State Exchanges to complete system builds for FTR........................

One-time costs in 2026 of $969,950 for the Federal Government and $19,399,000 total for State

Exchanges to develop and code changes to the eligibility systems to evaluate and verify FTR status under

the 2-year process that this rule would sunset back to.....................................................

One-time costs in 2025 of approximately $14.7 million total for State Exchanges and $775,960 for

the Federal Government to complete the necessary system changes and other technical changes to implement

the policy regarding creating annual income DMIs when applicants attest to income that would qualify the

taxpayer as an applicable taxpayer per 26 CFR 1.36B-2(b) but trusted data sources show income below 100

percent of the FPL.........................................................................................

One-time costs in 2026 of approximately $14.7 million total for State Exchanges and $775,960 for

the Federal Government to complete the necessary system changes and other technical changes to sunset the

policy regarding creating annual income DMIs when applicants attest to income that would qualify the

taxpayer as an applicable taxpayer per 26 CFR 1.36B-2(b) but trusted data sources show income below 100

percent of the FPL.........................................................................................

One-time operating costs of approximately $20.2 million for the Federal Government and

approximately $12.4 million total for State Exchanges in 2026 to review and verify submitted documents,

communicate with consumers, and process DMIs for applicants with incomes below 100 percent of the FPL......

Increase in burden of $13,179,400 in 2026 for consumers with incomes below 100 percent of the FPL

to fulfill income verification requirements addressing DMIs................................................

One-time costs in 2025 of approximately $16.6 million total for State Exchanges and approximately

$873,000 for the Federal Government to complete the necessary system changes and other technical changes to

implement the policy to no longer permit Exchanges to accept an applicant's income attestation without

further verification when tax return data is unavailable...................................................

One-time costs in 2026 of approximately $16.6 million total for State Exchanges and approximately

$873,000 for the Federal Government to complete the necessary system changes and other technical changes to

reimplement the policy to require Exchanges to accept an applicant's income attestation without further

verification when tax return data is unavailable...........................................................

Increase in burden of approximately $102.3 million for the Federal Government and approximately

$62.8 million total for State Exchanges in 2026 to review and verify submitted documents, communicate with

consumers, and process DMIs for applicants whose tax return data is unavailable............................

Increase in burden of $66.8 million in 2026 for consumers whose tax return data is unavailable to

fulfill income verification requirements addressing DMIs...................................................

One-time costs in 2025 of approximately $9,500,000 total for State Exchanges and approximately

$500,000 for the Federal Government to complete the necessary changes to implement the policy to remove the

automatic 60-day extension to resolve income DMIs..........................................................

One-time costs in 2025 of $969,950 for the Federal Government to complete the necessary system

changes and other technical changes for Exchanges on the Federal platform associated with the temporary

amendment to the annual eligibility redetermination regulation.............................................

One-time costs in 2026 of $969,950 for the Federal Government to complete the necessary system

changes and other technical changes for Exchanges on the Federal platform associated with the sunsetting of

the temporary amendment to the annual eligibility redetermination regulation...............................

One-time costs in 2026 of $387,980 for the Federal Government and $7,371,620 total for State

Exchanges associated with the policy to shorten the OEP....................................................

One-time costs in 2025 of approximately $390,000 for the Federal Government and approximately $7

million total for State Exchanges to pause the functionality to grant the 150 percent FPL SEP and make any

necessary updates to Exchange eligibility logic systems....................................................

One-time cost in 2026 of approximately $390,000 for the Federal Government and approximately $7

million total for State Exchanges to re-add functionality to grant the 150 percent FPL SEP and make any

necessary updates to Exchange eligibility logic systems in accordance with sunsetting the policy to pause

this SEP until the end of 2026.............................................................................

One-time processing cost in 2026 of approximately $11,675,000 for Exchanges on the Federal platform

to comply with finalized pre-enrollment verification requirements..........................................

One-time labor cost increase for the Federal Government of $2,902,615 in 2026 associated with the

policies regarding SEP verification........................................................................

One-time cost increase for consumers of approximately $7,048,406 in 2026 associated with the

policies regarding SEP verification........................................................................

One-time cost in 2025 of $2,973,300 to the Federal Government to develop and code changes

associated with the policies regarding SEP verification....................................................

Regulatory review costs of $15,493,869 for interested parties to review and analyze this final rule

in 2025....................................................................................................

Non-quantified:

Total reduced annual enrollment between 725,000 and 1,800,000 individuals in PY 2026, including:...

[cir] Reduced annual QHP enrollment of 10,000 and annual BHP enrollment of 1,000 associated with the

policy to exclude DACA recipients from the definition of “lawfully present” used to determine

eligibility for enrollment in a QHP through an Exchange, for APTC and CSRs, and for a BHP in States

that operate BHPs......................................................................................

[cir] Potential increase in the number of people who owe past-due premiums who may be deterred from

enrolling in new coverage due to a higher initial premium payment associated with the policy to permit

attribution of payment for new coverage to past-due premium amounts....................................

[cir] Potential loss of coverage for PY 2026 only due to non-payment of premiums for some automatically

re-enrolled, fully-subsidized enrollees associated with the annual eligibility redetermination

provision, if these enrollees do not submit an application for an updated eligibility determination and

subsequently experience a decrease in the amount of APTC applied to their policy such that the

remaining monthly premium owed by the enrollee for the entire policy equals $5 for the first month and

for every following month that the enrollee does not confirm or update the eligibility determination,

and fail to make payment of the premium amount due.....................................................

[cir] Reduced annual enrollment by 80,000 beginning in 2026 due to decreases in PTC subsidies for

enrollees, based on an assumption that the Department of the Treasury and the IRS will adopt the use of

the same premium measure finalized for the calculation of the premium adjustment percentage in this

rule for purposes of calculating the indexing of the PTC applicable percentage and the required

contribution percentage under section 36B of the Code..................................................

Small negative impact on the individual market risk pool associated with the policy to exclude DACA

recipients from the definition of “lawfully present” for purposes of enrolling in a QHP offered through

an Exchange, APTC, PTC, CSRs, or BHP coverage in States that elect to operate a BHP, as well as the return

to the FTR 1-year policy for QHPs offered on an Exchange, which is likely offset by the improvement in the

risk pool as a result of the reduced premiums anticipated to result from this final rule...................

Potential costs to the Federal Government and to States to provide limited Medicaid coverage for

the treatment of an emergency medical condition for DACA recipients who have an emergency medical condition

and meet all other Medicaid eligibility requirements in their State, applicable to those DACA recipients

who would become uninsured due to the policy regarding the definition of “lawfully present.”.............

Potential increase in costs and medical debt for individuals who are deterred from enrolling due to

a higher initial premium payment, which could in turn lead to increased costs incurred by hospitals and

municipalities associated with the policy to permit attribution of payment for new coverage to past-due

premium amount.............................................................................................

Potential costs to State governments and private hospitals in the form of charity care for

individuals who become uninsured as a result of the policies in this final rule............................

Potential increase in Federal and State Medicaid expenditures by enrolling more people in Medicaid

who would otherwise have enrolled in APTC-subsidized QHP coverage due to the policy regarding income

verification for individuals with incomes below 100 percent of the FPL.....................................

Time costs to enrollees who would be automatically re-enrolled in their QHP with a $0 premium after

application of APTC to submit an application for an updated eligibility determination to the Exchanges on

the Federal platform associated with the annual eligibility redetermination provision for PY 2026 only.....

Costs to the Federal Government, State Exchanges, and issuers for outreach activities associated

with the shortened OEP.....................................................................................

Enrollment for 293,073 enrollees potentially delayed for 1-3 days for SEP verification.............

Low High Year dollar Discount rate Period

(billion) (billion) (percent) covered

Transfers:

Annualized Monetized ($/year) -$3.8 -$3.9 2025 7 2025-2029

Annualized Monetized ($/year) -$3.7 -$3.8 2025 3 2025-2029

Quantified:

Reduced annual transfers from the Federal Government to issuers \267\ of $34 million in APTC

payments and $3.2 million in BHP payments associated with the policy to exclude DACA recipients from the

definition of “lawfully present” for purposes of enrolling in a QHP offered through an Exchange, APTC,

PTC, CSRs, or BHP coverage in States that elect to operate a BHP, beginning in 2026........................

Reduced one-time APTC transfers from the Federal Government to issuers of up to $1.28 billion

associated with the policies regarding FTR in 2026.........................................................

Annual reduction in APTC transfers from the Federal Government to issuers of $266 million beginning

in 2025 for households across all Exchanges who receive fewer months of APTC due to no longer receiving an

automatic 60 days of additional time to resolve their income DMI...........................................

Reduction in APTC transfers from the Federal Government to issuers of $191 million in 2026 for

consumers across all Exchanges who receive fewer months of APTC due to reinstatement of DMIs where

households attest to income that would qualify the tax payer as an applicable taxpayer per 26 CFR 1.36B-

2(b) and data sources show income below 100 percent of the FPL.............................................

Reduction in APTC transfers from the Federal Government to issuers of $957 million in 2026 for

households across all Exchanges who receive fewer months of APTC due to reinstatement of DMIs when IRS data

is not available...........................................................................................

One-time reduction in APTC transfers from the Federal Government to issuers of $817,571,843 in 2026

associated with the policy regarding premium payment thresholds............................................

Reduction in APTC transfers from the Federal Government to issuers of approximately $3.4 billion in

2026 associated with the policy to pause the 150 percent FPL SEP, which is anticipated to reduce premiums

by 3 to 4 percent..........................................................................................

Reduction in APTC transfers from the Federal Government to issuers of approximately $105.4 million

in 2026 associated with the policy to revise pre-enrollment verification requirements for SEPs, associated

with a reduction in premiums of approximately 0.5-1.0 percent for PY.......................................

Reduced annual transfers from the Federal Government to issuers of between $1.27 billion and $1.55

billion in APTC payments beginning in 2026, assuming that the Department of the Treasury and the IRS will

adopt the use of the same premium measure finalized for the calculation of the premium adjustment

percentage in this rule for purposes of calculating the indexing of the PTC applicable percentage and the

required contribution percentage under section 36B of the Code.............................................

Increased annual transfers from large employers to the Federal Government of between $3 million and

$20 million in Employer Shared Responsibility Payments annually over the period of 2028 to 2030, based on

an assumption that the Department of the Treasury and the IRS will adopt the use of the same premium

measure finalized for the calculation of the premium adjustment percentage in this rule for purposes of

calculating the indexing of the PTC applicable percentage and the required contribution percentage under

section 36B of the Code....................................................................................

Reduced annual APTC transfers from the Federal Government to issuers of approximately $1.22 billion

in 2026, $1.28 billion in 2027, $1.33 billion in 2028, and $1.40 billion in 2029 associated with an

estimated 1 percent premium decrease on average for individuals eligible for PTC due to the policy to

require individual market silver QHPs to provide an AV between 66-72 percent and associated income-based

CSR plan variations to follow a de minimis range of +1/-1..................................................

Non-quantified:

Reduction in net Federal PTC spending associated with policy terminations during PY 2026 if

enrollees do not pay their portion of the premium and a reduction in improper enrollments occurs due to the

temporary annual eligibility redetermination provision.....................................................

Reduced premiums and APTC cost to the Federal Government associated with the policy regarding the

annual OEP length..........................................................................................

Decreased premiums for plans that do not cover specified sex-trait modification procedures as an

EHB as a result of this final rule.........................................................................

Reduction in commission payments from issuers to agents, brokers, and web-brokers associated with a

reduction in improper enrollments of fully-subsidized enrollees by agents, brokers, and web-brokers due to

the policies in this final rule............................................................................

Table 11--Summary of Undiscounted Annual Impacts Reported in Accounting Table

2025 2026 2027 2028 2029

Benefits........................... $0.1 million.................. $0.5 million.................. $0.1 million................. $0.1 million................. $0.1 million. Costs.............................. $234.7 million................ $368.7 million................ $0........................... $0........................... $0. Transfers--Low..................... $0............................ -$10.3 billion................ -$3.8 billion................ -$2.1 billion................ -$2.2 billion. Transfers--High.................... $0............................ -$12.4 billion................ -$3.6 billion................ -$1.4 billion................ -$1.5 billion.

This final rule revises Sec. 147.104(i) to reverse the policy prohibiting an issuer from denying coverage due to an individual's or employer's failure to pay premiums owed for prior coverage, including by attributing payment of premium for new coverage to past-due premiums from prior coverage. The final rule allows an issuer, to the extent permitted by applicable State law, to establish terms of coverage that add past-due premium amounts owed to the issuer (or owed to another issuer in the same controlled group) to the initial premium the applicant must pay to effectuate new coverage and to refuse to effectuate new coverage if the initial and past-due premium amounts are not paid in full. An issuer adopting this policy must apply its past- due premium payment policy uniformly to all individuals or employers in similar circumstances in the applicable market and State regardless of health status, and consistent with applicable nondiscrimination requirements, and 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. The amount of the past-due premium an issuer may require for this purpose is subject to any premium payment threshold the issuer has adopted pursuant to 45 CFR 155.400(g).

This policy aims to promote continuous coverage while providing issuers with an additional mechanism for past-due premium collection. The policy may help reduce outstanding premium debt amounts for enrollees, potentially benefiting their financial standing over time and reducing the likelihood of any debt being placed into collections. Additionally, this final rule may potentially improve premium collection rates and reduce administrative costs associated with repeated enrollment-termination cycles and other collection methods.

The comments and our responses are summarized below.

Comment: Some commenters highlighted important operational considerations, including the cost-benefit analysis issuers must undertake when implementing collection practices, and noted that some issuers may find that the implementation costs outweigh potential revenue from collections, particularly for nominal amounts.

Response: We acknowledge and recognize that, should the State in which an issuer operates allow issuers to collect past-due premiums to effectuate coverage, the final business decision will remain at the discretion of individual issuers and what they feel is in their best interest.

Comment: Some commenters expressed their support for the proposed

policy. One commenter specifically identified positive aspects of the policy, notably its potential to reduce administrative burden and address adverse selection.

Response: We recognize that the ability to require past-due premium payments to effectuate new coverage can assist in maintaining stable risk pools by promoting continuous coverage and, consequently, help to moderate premium costs for all enrollees.

Past-due premiums can influence both issuer operations and market dynamics. This can occur if enrollees choose to move in and out of coverage based on anticipated health care needs by taking advantage of certain features in the insurance system, such as the regulatory grace period provisions, and allowing coverage to lapse without addressing premium obligations even when seeking to enroll in new coverage. By addressing these circumstances, this policy encourages continuous coverage and reduces the burden on issuers to collect past-due premiums in other ways. This policy reduces the risk of adverse selection by consumers.

Comment: Many 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 serving that geographic area, and noted the potential for varying effects in different market contexts.

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.

This policy may also increase enrollment by encouraging enrollees to maintain continuous coverage. These enrollment gains may be partially offset by people who owe past-due premiums and who may be deterred from enrolling in new coverage due to a higher initial premium payment. Some enrollees, particularly those facing financial constraints, may need to adjust their household budgets to maintain coverage or, if they are not able to, become uninsured. Depending on the circumstances, these enrollees, if they become uninsured, may face higher costs for care and medical debt if care is needed. These costs may, in turn, be incurred by hospitals and municipalities in the form of uncompensated care. While some consumers may face challenges paying past-due premiums and may become or remain uninsured, the longer-term effects can include more stable risk pools and potentially more moderate premium trends.

Comment: Many commenters expressed concerns about the potential impacts on vulnerable populations and healthcare access, particularly for low-income individuals, rural communities, and those facing unexpected financial hardships. These commenters highlighted specific challenges faced by individuals who miss payments due to unexpected life circumstances, economic hardship, or administrative confusion.

Response: We acknowledge the range of concerns noted by commenters related to barriers to coverage for those experiencing financial difficulties, potential impacts on rural communities with limited issuer competition, and effects on young and healthy enrollees who contribute to a stable risk pool. However, after reviewing the comments, we are finalizing this policy contained in the proposal by codifying it in regulation text. This decision reflects our assessment that the policy provides necessary tools for maintaining market stability within the existing framework. This policy aims to balance multiple objectives, including promoting continuous coverage, maintaining stable risk pools, addressing concerns about adverse selection, and respecting States' ability to regulate their insurance markets. We recognize that some enrollees may face challenges in maintaining continuous coverage or addressing past-due premium obligations. However, this policy's flexible framework allows States and issuers to make market-specific decisions about implementation based on their understanding of local conditions and population needs. This flexibility also enables issuers to balance past-due premium practices with member retention goals and market stability considerations.

There is some uncertainty regarding the net enrollment effects of this policy--that is, whether the coverage gains from moderate premium trends and promoting continuous coverage will be higher than coverage losses due to allowing issuers to require payment of past-due premiums to effectuate new coverage. We anticipate any discouragement from enrolling will be minimal. As discussed earlier in this preamble, 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 the data analysis did not indicate any specific reason for this reduction, it is possible that the policy may have successfully encouraged more people to maintain continuous coverage. This likely reduced the number of people with past-due premium debt and lowered costs to issuers related to the collection of those past-due premiums. We expect this policy will result in similar benefits. While we lack data to quantify these effects, we believe that these effects will collectively contribute to more stable market conditions over time.

Comment: Several commenters noted their concern over the data limitations and the empirical basis for the proposed policy on past-due premium collection.

Response: We acknowledge commenters' concerns. While acknowledging these data limitations, based on our understanding of market dynamics and previous experience, we have decided to finalize the policy contained in the proposal. Although we cannot definitively quantify all effects, we have observed patterns suggesting that allowing issuers to condition the sale of new coverage on payment of past-due premiums can contribute to market stability. Additionally, as discussed in section III.A.2 of this final rule, States may choose whether to allow issuers to attribute the initial premium payment to past-due premiums and to refuse to effectuate new coverage until both amounts are paid. We believe States will make these determinations based on their specific markets, demographics, and anticipated outcomes for their constituents.

Finally, in terms of PTCs, given that this policy aims to encourage continuous coverage, we recognize that there could be varying effects in net Federal PTC spending. While some individuals might have their policies terminated due to non-payment, potentially reducing PTC spending, others might be encouraged by this policy to maintain coverage they would otherwise have dropped due to past-due premium issues, resulting in increased PTC spending for those months the individuals would otherwise not have maintained coverage. However, we do not anticipate any significant impact on PTCs. 2. Definitions; Deferred Action for Childhood Arrivals (Sec. 155.20)

We are finalizing modifications to the definition of “lawfully present” currently articulated at Sec. 155.20 and used for the purpose of determining whether a consumer is eligible to enroll in a QHP through an Exchange and to

enroll in a BHP in States that elect to operate a BHP. This change will exclude DACA recipients from the definition of “lawfully present” that is used to determine eligibility to enroll in a QHP through an Exchange, for PTC, APTC, and CSRs, and for BHP coverage. We have updated the RIA for this policy due to revised wage rates and other data estimates available between the time of the proposed and final rule publication dates. The proposed 2025 Marketplace Integrity and Affordability RIA for this policy may be found at 90 FR 13010 through 13011.

We anticipate excluding DACA recipients from the definition of “lawfully present” will reduce annual QHP enrollment through the Exchanges by 10,000 and annual BHP enrollment by 1,000 in 2025. We project this decline in enrollment in QHP enrollment through the Exchanges will reduce annual APTC expenditures by $34.0 million and the decline in enrollment in BHP will reduce annual BHP expenditures by $3.2 million beginning in 2026.

While initial estimates under the ACA expansion to DACA recipients estimated 100,000 DACA recipients would receive coverage, actual Exchange enrollment of DACA recipients has been much lower. Comparing CMS internal data for participating FFE States to the count of active DACA recipients from U.S. Citizenship and Immigration Services (USCIS) \268\ showed an enrollment rate of 2 percent among DACA recipients; however, 1.3 percent of enrollment was in States that received an injunction preventing enrollment in coverage. With this new information, we have updated our DACA enrollee assumptions to 10,000 Exchange enrollees and 1,000 BHP enrollees. With the average age of DACA recipients being 30.6, we assume an APTC amount of $283 per month, leading to an expected approximately $34 million reduction in APTC expenditures through the Exchange (10,000 x $283 x 12 months = $33,960,000). Similarly, we expect approximately $3.2 million in lower BHP expenditures (1,000 x $283 x 0.95 x 12 months = $3,226,200) in States that choose to operate BHPs.

\268\ U.S. Citizenship and Immigration Services. (n.d.) Immigration and Citizenship Data. Dep't of Homeland Security. https://www.uscis.gov/tools/reports-and-studies/immigration-and-citizenship-data?topic_id%5B%5D=33602&ddt_mon=12&ddt_yr=2024&query=approximate+active+daca&items_per_page=10.

Because DACA recipients are young,\269\ they generally tend to be healthier. We therefore anticipate that excluding DACA recipients from individual market QHP coverage offered through the Exchanges will have a small negative impact on the individual market risk pool. Some DACA recipients who lose Exchange or BHP coverage may be able to enroll in non-Exchange coverage. However, we anticipate the majority who lose Exchange or BHP coverage will become uninsured. This may result in costs to the Federal Government and to States to provide limited Medicaid coverage for the treatment of an emergency medical condition to DACA recipients who have a qualifying medical emergency and who become uninsured as a result of this rule.

\269\ Per USCIS data, the average age of DACA recipients is 30 years old. Count of Active DACA Recipients by Month of Current DACA Expiration as of September 30, 2024. U.S. Citizenship and Immigration Services. (2024, Sept. 30). Count of Active DACA Recipients by Month of Current DACA Expiration as of September 30, 2024. Dep't of Homeland Security. https://www.uscis.gov/sites/default/files/document/data/active_daca_recipients_fy2024_q4.xlsx.

We also anticipate that this change will result in costs to State Exchanges and the Federal Government to update eligibility systems in accordance with this policy. As discussed further in section IV.B. of this final rule, in aggregate for the States, we estimate a one-time cost in 2025 of $1,959,299 total ($1,939,900 for State Exchanges + $19,399 for BHPs) total and $96,995 for the Federal Government. We also estimate a one-time cost in 2025 for termination operations of $1,648,915 total for State Exchanges and $96,995 for the Federal Government, as discussed further in section IV.B.2. of this final rule. In addition, we estimate cost savings annually beginning in 2025 for State Exchanges and States that operate BHPs of $51,352 total and for the Federal Government of $41,250 associated with assisting fewer eligible beneficiaries and processing their applications as a result of this policy. We also estimate cost savings annually beginning in 2025 for State Exchanges of $10,102 in total and for the Federal Government of $9,706 associated with processing fewer immigration state inconsistencies.

We sought comment on the proposed impact estimates and assumptions, the details of which may be found in section IV.B. of the proposed rule.

Comment: Many commenters stated that CMS underestimated how many DACA recipients would apply in the next open enrollment. They stated that DACA recipient enrollment would increase over time as awareness of the coverage option grew. They further stated that enrollment was limited for PY 2025 because we published the 2024 DACA rule (89 FR 39424) only 6 months before open enrollment creating a short window for outreach campaigns, and because we cancelled 2025 enrollment for DACA recipients in 19 States to comply with Kansas v. United States.

Furthermore, one commenter stated that the estimates in the 2025 Marketplace Integrity and Affordability proposed rule, or even the estimates from the 2024 Final Rule (89 FR 39424) of 100,000 DACA recipients enrolled in the Exchanges and 1,000 enrolled in BHPs, sum to less than $345 million, which is far less than what DACA recipients contribute annually to Federal programs in taxes which is estimated at $2.1 billion. As such, this commenter believed DACA recipients should continue to remain eligible for Exchange or BHP coverage.

Response: We appreciate these commenters' concerns regarding the estimate of 11,000 DACA recipients enrolled in QHP plans or BHPs. However, our estimate of 10,000 applicants enrolling in a QHP and 1,000 applicants enrolling in a BHP are based on data from the 2024 Open Enrollment Period. We believe data from the 2024 OEP provides a reasonable estimate of DACA recipient enrollees, as that is when the majority of eligible consumers enroll in coverage. While consumers can continue to enroll throughout the year, they will need to qualify for an SEP to enroll in coverage outside of the Open Enrollment Period-- this results in fewer DACA recipients who are eligible to enroll outside of OEP. As mentioned in Section IV.B.2. and outlined by commenters, DACA recipients continue to be ineligible for coverage in nineteen states due to a preliminary injunction in Kansas v. United States,\270\ thus reducing the total number of DACA recipients enrolled in Exchange or BHP coverage. Collectively, we believe these numbers provide the most accurate representation of enrollment estimates for DACA recipients. We acknowledge that DACA recipients have valid work authorization and therefore pay taxes that fund Federal benefit programs. However, this does not impact our position that the best reading of the ACA compels us to exclude DACA

recipients from the definition of lawfully present used to determine eligibility for QHP or BHP coverage.

\270\ On December 9, 2024, the United States District Court for the District of North Dakota issued a preliminary injunction in Kansas v. United States, Case No. 1:24-cv-00150, 2024 WL 5220178 (D.N.D. Dec. 9, 2024). As a result, DACA recipients are ineligible for Exchange or BHP coverage in nineteen states. 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 of those states except Idaho, Kentucky, and Virginia are served by the Federal Marketplace platform.

Comment: Additionally, commenters provided detailed analysis of the negative impacts they expected this rule would have if finalized. These impacts, discussed in detail in section II.B.1. of this final rule, include decreased access to care, worsened health outcomes, increased disparities, increased reliance on uncompensated care and emergency department care, and worsened local economies. Many commenters pointed out how the provisions of this rule may negatively impact not only DACA recipients, but their families and communities as well. Commenters further noted that this rule would worsen individual market Exchange risk pools, due to DACA recipients' age and health status as compared to current Exchange enrollees, and that a weaker risk pool could result in cost increases for health insurance issuers, cost increases for hospitals, and cost increases for individuals throughout the Exchanges in the form of higher health insurance premiums.

Response: We acknowledge that these are potential negative impacts of the policy finalized in this rule. We appreciate the insight from commenters that the policy in this rule will also negatively impact the families and communities of the DACA recipients impacted by the rule. We agree that it is possible that this rule could weaken the Exchange risk pools, which could result in cost increases for issuers and individuals due to higher claims costs and premiums. We are not able to quantify these potential impacts.

Comment: Commenters expressed concern that the burden estimates did not account for the economic burden the 11,000 currently enrolled DACA recipients will place on the health care system in the future without having health insurance.

Response: We acknowledge these concerns, but are not able to quantify these potential impacts.

After consideration of public comments, we are finalizing these estimates using the methodology as proposed without modifications. 3. Standards for Termination for Cause From the FFE (Sec. 155.220(g)(2))

As discussed in the preamble to this proposal, we are finalizing improvements to the transparency in the process for holding agents, brokers, and web-brokers accountable for noncompliance with applicable law, regulatory requirements, and the terms and conditions of their Exchange agreements. Specifically, we are finalizing the addition of text to Sec. 155.220(g)(2) that clearly sets forth that HHS would apply a “preponderance of the evidence” standard of proof to assess potential noncompliance under Sec. 155.220(g)(1) and to make a determination there was a specific finding or pattern of noncompliance that is sufficiently severe. Our regulatory change will put all agents, brokers, and web-brokers assisting consumers with enrollment on the FFEs and SBE-FPs on notice of the evidentiary standard we will use in leveraging our enforcement authority under Sec. 155.220(g)(1) through (3). We believe this update will make the regulations easier to follow and more clearly articulate our enforcement process, improving transparency for agents, brokers, and web-brokers, consumers, and other interested parties.

We believe our change will have positive impacts on agents, brokers, and web-brokers. Codifying the evidentiary standard will provide agents, brokers, and web-brokers under investigation for noncompliant behavior more transparency in the process for holding agents, brokers, and web-brokers accountable for noncompliance with applicable law, regulatory requirements, and the terms and conditions of their Exchange agreements. We anticipate agents, brokers, and web- brokers will react positively to knowing more about our enforcement processes and how we determine regulatory compliance.

We do not anticipate any impact or burdens on agents, brokers, or web-brokers stemming from our policies as we did not expand the bases under which HHS may find them noncompliant under Sec. 155.220(g)(1) through (3) or otherwise require more from agents, brokers, and web- brokers as part of this enforcement framework; rather, we finalized clarifications to an evidentiary standard that is not explicit at present.

We sought comment on these proposed impacts and assumptions.

We did not receive any comments in response to the proposed impact estimates for this policy. For the reasons outlined in the proposed and in this final rule, we are finalizing these estimates as proposed. 4. Annual Eligibility Redetermination (Sec. 155.335)

We are finalizing the temporary amendment to the annual eligibility redetermination regulation to prevent enrollees from being automatically re-enrolled in coverage with APTC that fully covers their premium without taking an action to confirm their eligibility information for Exchanges on the Federal platform. Specifically, when an enrollee does not submit an application for an updated eligibility determination for the immediately forthcoming coverage year (2026) by the last day to select a plan for January 1, 2026 coverage, in accordance with the effective dates specified in Sec. 155.410(f), and the enrollee's portion of the premium for the entire policy would be zero dollars after application of APTC through the annual redetermination process, Exchanges on the Federal platform must decrease the amount of the APTC applied to the policy, consistent with Sec. 155.340(f), such that the remaining monthly premium owed by the enrollee for the entire policy equals $5 for the first month and for every following month until the enrollee confirms or updates the eligibility determination. Consistent with Sec. Sec. 155.310(c) and (f), enrollees automatically re-enrolled with a $5 monthly premium after APTC under this policy will be able to update their Exchange application at any point to confirm eligibility for APTC that covers the entire monthly premium, if eligible, and re-confirm their plan to thereby reinstate the full amount of APTC for which the enrollee is eligible on a prospective basis.

We require that Exchanges on the Federal platform must implement this change for annual redeterminations for benefit year 2026, with a reversion to the previous policy for benefit year 2027 and beyond. We are not finalizing this policy for State Exchanges for the reasons discussed in section III.B.3 of this preamble.

For Exchanges on the Federal platform, we estimate that 2.68 million enrollees were automatically re-enrolled in a QHP for benefit year 2025 with APTC that fully covered their premium. Given that the expanded PTC structure under the ARP and IRA expires at the end of 2025 and the number of Exchange enrollees, as well as the number of Exchange enrollees with APTC that fully covers their premium, is expected to decrease as a result,\271\ we view this figure to be an upper-bound estimate of the number of enrollees with coverage through Exchanges on the Federal platform who may be affected by this temporary policy.

\271\ Baseline enrollment projections are presented in Tables 15 and 16 in section V.C.18. of this final rule. Enrollment among those with APTC that fully covers their premium was not projected separately but is expected to decline following the expiration of the expanded PTC structure.

Regarding the benefits associated with this policy, we believe this change may lead to increased price sensitivity to premiums and premium changes among

enrollees whose premiums are fully subsidized and who would be automatically re-enrolled. This is because these enrollees will now pay $5 more in net premiums per month if they do not submit an application for an updated eligibility determination from an Exchange. These enrollees will therefore be incentivized to return to an Exchange, evaluate available coverage options and premiums, and make an active enrollment decision. We therefore anticipate that this policy will lead to better matches between consumers' coverage preferences and available coverage offerings in the individual market.

Comment: We received many comments expressing strong support for automatic re-enrollment as a valuable tool for maintaining continuous coverage and market stability. One commenter specifically noted that automatically re-enrolled consumers in the Washington Exchange maintain their coverage for an average of 10.3 months, compared to 9.5 months for new enrollees, demonstrating the policy's contribution to a stable risk pool.

Response: We want to reiterate that this policy maintains automatic re-enrollment while introducing a modest premium requirement to encourage active consumer engagement and participation for a specific population.

Comment: Several commenters expressed concerns about the policy's effectiveness in preventing fraud and the possibility of third-party premium payments.

Response: As noted earlier in the preamble, we are aware that some consumers have been improperly enrolled in a fully-subsidized QHP without their knowledge or consent and other consumers have remained enrolled in a fully-subsidized QHP after obtaining other coverage. This policy, as finalized (with modification), will contribute to reducing the financial stress that ineligible enrollees may experience by protecting them from accumulating surprise tax liabilities.\272\

\272\ Currently, the Exchanges on the Federal platform collaborate with the IRS to prevent surprise tax liabilities when Exchanges on the Federal platform receive reports from consumers who have been improperly enrolled.

As described earlier in this rule, Sec. 155.220(j)(2)(iii) and (l) requires agents, brokers, and web-brokers who are assisting with consumer enrollments through the Exchanges on the Federal platform to obtain and document consumer consent before making an application or enrollment update on behalf of the consumer. Additionally, our experience investigating fraudulent or improper enrollments by agents, brokers, and web-brokers does not suggest that these entities fraudulently enrolling consumers in non-zero premium plans by paying premiums on behalf of enrollees is a common occurrence. Doing so would reduce the profit available to the agent, broker, or web-broker for the fraudulent activity, as well as increase the risk that it would be identified as fraudulent activity (for example, because an issuer could identify if payment was made using a check or credit card belonging to the agent, broker, or web-broker). Rather, improper enrollments typically involve agents, brokers, or web-brokers enrolling consumers in fully-subsidized plans without their knowledge or consent. Therefore, we believe it is appropriate to target this proposal to fully-subsidized enrollments, where we know fraudulent activity by agents, brokers, and web-brokers is most likely.

Comment: We received comments from several State Exchanges reporting different experiences with improper enrollments compared to the Exchanges on the Federal platform.

Response: We acknowledge that State Exchanges report varying experiences with improper enrollments compared to the Exchanges on the Federal platform. In recognition of these differences and the need for State flexibility, as well as the appreciably smaller estimates of improper enrollments on State Exchanges, we are not finalizing this policy for State Exchanges.

Comment: One commenter noted that it is the consumer's responsibility for managing duplicate coverage and associated tax liabilities.

Response: We agree that consumers have a responsibility to report coverage changes and to ensure they avoid excess tax liabilities upon filing their annual taxes; however, we believe implementing measures that encourage active eligibility confirmation serves both the consumer protection and program integrity goals.

Comment: Many commenters expressed concerns about potential coverage impacts and market stability.

Response: We believe the small premium requirement, combined with clear communication about how to maintain full subsidies, if eligible, will help mitigate these concerns while achieving the policy's objectives of reducing improper enrollments and protecting consumers from unexpected tax liabilities.

Regarding the potential costs associated with this policy, if some enrollees with fully-subsidized premiums are unaware of the APTC adjustments that will be made and the premium amounts that will be due because they have not submitted an application for an updated eligibility determination or decide not to pay the $5 per month premium amount, this policy, as finalized, may lead some enrollees to have their coverage terminated due to non-payment of premiums. This, in turn, can lead to adverse health outcomes for those enrollees who experience loss of coverage and a coverage gap. However, we expect the number of fully-subsidized enrollees who ultimately have their coverage terminated due to non-payment of premiums as a result of this policy will be low given the nominal expense associated with the proposed APTC adjustments and the expected reduction in enrollment associated with the expiration of the PTC eligibility expansions under the IRA.

Comment: Many commenters provided evidence about premium sensitivity among Exchange enrollees, including research showing that even nominal premium increases can affect enrollment decisions, with one commenter citing a study that indicated a 14-percent attrition rate when enrollees transition from zero-dollar to positive premiums. These commenters stated that auto-enrollment plays a significant role in maintaining a balanced risk pool. Another commenter referenced a study by the National Bureau of Economic Research that found that eliminating auto-enrollment reduced coverage by 33 percent, particularly among young, healthy, and economically disadvantaged individuals. Another commenter referenced research from the Massachusetts Exchange showing that auto-enrolled individuals typically have medical costs 44 percent below average.

Response: We acknowledge the research cited by commenters regarding premium sensitivity and its potential impact on enrollment decisions. While we previously determined that a $5 premium would be nominal enough to minimize coverage disruption, we recognize and acknowledge the evidence suggesting even small premium increases may affect enrollment patterns and risk pool composition and the potential effects this could have on enrollees and enrollment. We are finalizing the policy, with modifications described in section III.B.3 of this preamble, to achieve our program integrity objectives and believe the $5 premium will prompt enrollees to act without being cost prohibitive and balances debt consideration for low-income enrollees.

Comment: Some commenters expressed concerns regarding the potential impact on uncompensated care in the healthcare system, noting that coverage disruptions may result in increased uncompensated care, particularly as individuals who lose coverage may still require medical services but lack the means to pay for them.

Response: We acknowledge commenters' concerns. While we understand these concerns, we believe the policy's design--including clear communication about maintaining full subsidies and minimal premium requirements--will help minimize coverage disruptions. Additionally, the ability for consumers to reinstate full APTC, if still eligible, by confirming eligibility at any time provides an important safeguard against prolonged coverage gaps that could lead to uncompensated care.

Enrollees who otherwise would not have obtained an updated eligibility determination will also incur time costs associated with the need to submit an application to the Exchanges on the Federal platform to obtain an updated eligibility determination notice and confirm their plan in order to obtain a $0 premium, if they are still eligible for one.

Comment: Some commenters noted the administrative burden and potential barriers associated with requiring consumers to submit updated eligibility determinations. These commenters raised concerns about the practical challenges consumers may face in completing this process. They noted specific barriers including limited access to technology and internet services and consumer confusion, to name a few.

Response: We acknowledge commenters' concerns. However, we would like to note that enrollees will continue to be able to update this information through the call center for Exchanges on the Federal platform. Because consumers have various ways in which they can update their eligibility information, we believe this policy will balance program integrity objectives with maintaining accessible coverage.

In the 2025 Marketplace Integrity and Affordability proposed rule, we estimated that Exchanges would incur costs to comply with this policy. Specifically, we estimated that Exchanges would need to make changes to their IT systems to be able to identify enrollees who will be automatically re-enrolled with a zero-dollar premium after annual redetermination procedures and decrease the amount of APTC applied to the policy such that the remaining premium owed by the enrollee equals $5, if the enrollee does not submit an application for an updated eligibility determination to the Exchange. We estimated that it would take the Federal Government and each of the State Exchanges 10,000 hours to develop and code the changes to their IT systems. Of those 10,000 hours, we estimated it would take a database and network administrator and architect 2,500 hours (at $103.34 per hour) and a computer programmer 7,500 hours (at $94.88 per hour). These estimates were based on past experience with similar system changes. However, as noted earlier in this preamble, we are only finalizing this policy for Exchanges on the Federal platform, and only for benefit year 2026.

We therefore estimate a burden to the Federal Government, in 2025, of 10,000 hours with an estimated cost of $969,950 ((2,500 hours x $103.34 per hour) + (7,500 hours x $94.88 per hour)). Because there will be a reversion to the previous policy for PY 2027 and beyond, the Federal Government will also incur a burden in 2026 to reverse the IT systems changes and other technical changes made in support of this temporary policy. We expect that the burden to reverse these changes will be comparable to the burden to initiate them. Relying on the same assumptions, we therefore estimate a burden to the Federal Government in 2026 of 10,000 hours, with an estimated cost of $969,950.

We recognized the burden the proposed policy would place on State Exchanges and sought comment on the impact of this burden estimated in the proposed rule.

Comment: No comments were received specifically related to our cost estimate above; however, many commenters identified several additional implementation components to State Exchange IT systems as a result of this policy. These include new APTC calculation logic development, billing process modifications, batch auto-renewal coding changes, and enrollment reconciliation system updates.

Response: As discussed previously in this preamble, we are not finalizing this policy for State Exchanges.

Comment: We received numerous comments related to additional costs associated with customer service, outreach, and education to implement this policy. Many commenters raised concerns about operational impacts across multiple interested parties and potential downstream effects on consumer experience. Specifically, many commenters noted the potential impacts to customer service, including the increased call center volume, the need for enhanced customer service capacity, and additional staffing and training requirements. Other commenters noted challenges related to education and outreach, specifically the substantial consumer education needs, resource constraints (especially regarding Navigator funding), and complex messaging requirements across multiple interested parties. Additional administrative burden concerns focused on new notification requirements and process changes for issuers and Exchanges.

Response: We acknowledge the commenters' concerns. As discussed previously in this preamble, we are not finalizing this policy for State Exchanges. We recognize that depending on the level of customer service, outreach, and education efforts, this policy could result in increased costs to Exchanges on the Federal platform.

Regarding the potential economic transfers associated with this policy, this policy is expected to reduce net Federal PTC spending if an enrollee's policy is terminated because the enrollee does not pay their portion of the premium.\273\ The need for fully-subsidized enrollees to actively re-enroll in QHP coverage to continue with fully- subsidized coverage may also reduce improper enrollments that are not reported to CMS by consumers and reduce the likelihood that an enrollee who obtained other coverage errantly retains their current fully- subsidized QHP, which will also reduce net Federal PTC spending. These reductions represent transfers from consumers or other payers (such as providers of charity care) who would have directly or indirectly received improper APTC from the Federal Government. Lastly, this policy will reduce commission payments from issuers to agents, brokers, and web-brokers due to the expected reduction in improper enrollments of fully-subsidized enrollees by agents, brokers, and web-brokers. This represents a transfer from agents, brokers, and web-brokers to issuers. These transfer effects will be realized for PY 2026 only.

\273\ In the regulatory impact analysis, a transfer is a shift in resources from one party (for example, the government) to another (for example, individuals) for which the quantification does not reflect a change in use of resources (such as goods or services).

Comment: One commenter noted that the implementation requirements create additional connections between regulatory effects, as issuers must redirect resources to cover system

updates, notification requirements, and premium collection processes. These administrative costs represent an indirect link from issuers to various service providers and operational entities, all of which must be managed within existing MLR requirements. The commenter argues that this effectively shifts resources from other issuer activities to administrative functions. While the $5 premium appears to be a direct transfer from PTC to direct consumer payment, the administrative costs create a net negative effect for issuers, as they must redirect resources to implement and maintain these new requirements without receiving offsetting revenue, which may be offset by increased premiums paid for by consumers (and potential APTC increases).

Response: We acknowledge the commenter's concerns. We understand that administrative costs create additional financial implications for issuers operating under MLR requirements. We believe that any potential broad increases in premiums and PTCs will be minimal and will be offset by the provisions of this final rule. 5. Annual Eligibility Redetermination (Sec. 155.335(j)(4))

We are finalizing an amendment to the automatic reenrollment hierarchy by removing Sec. 155.335(j)(4) which currently allows Exchanges to move a CSR-eligible enrollee from a bronze QHP and re- enroll them into a silver QHP for an upcoming plan year, if a silver QHP is available in the same product, with the same provider network, and with a lower or equivalent net premium after the application of APTC as the bronze plan into which the enrollee would otherwise have been re-enrolled. These amendments will leave in place the policy to require Exchanges to take into account network similarity to current year plan when re-enrolling enrollees whose current year plans are no longer available, but would remove the re-enrollment hierarchy standards at Sec. 155.335(j)(4) that allows Exchanges to move a CSR- eligible enrollee from a bronze QHP and re-enroll them into a silver QHP for an upcoming plan year, if a silver QHP is available in the same product with the same provider network and with a lower or equivalent net premium after the application of APTC as the bronze plan into which the enrollee would otherwise have been re-enrolled. We believe this change will improve the consumer experience by retaining consumer choice and reducing consumer confusion. In the 2025 Marketplace Integrity and Affordability proposed rule, we explained that we believe the removal of the bronze to silver crosswalk criteria in the Federal hierarchy for re-enrollment will result in some burden for Exchanges that have already implemented this policy, including for CMS as the operator of Exchanges on the Federal platform, because it will require operational and system changes to reverse the policy including related consumer outreach. We do not anticipate that these changes will result in significant burden to issuers, because, as discussed in the 2024 Payment Notice (88 FR 25822), Exchanges were primarily responsible for the policy's implementation, though we solicited comment on that assumption.

By retaining consumer choice, we also anticipated that this policy would lead to fewer low-income bronze enrollees being switched to silver QHPs. Because these silver QHPs have higher premiums than bronze QHPs and indirectly fund CSR subsidies, they require higher APTC subsidies. Therefore, we anticipate the reduction in people being switched to silver QHPs will reduce APTC expenditures. We are not able to quantify the reduction in APTC expenditures because we do not expect the current policy would have led to a substantial number of people switching from a bronze QHP to a silver QHP during the 2026 OEP. Therefore, we anticipate only a small reduction in APTC expenditures.

We sought comment on the proposed impacts and assumptions, and we received some comments citing concerns about persisting consumer confusion, which are further discussed in the preamble. 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 these impact estimates for this policy as proposed. 6. Failure To File and Reconcile (Sec. 155.305(f)(4))

We are finalizing the proposed amendments to the FTR process at Sec. 155.305(f)(4) with a modification under which the amendments will only be effective through PY 2026. Under this modified policy, all Exchanges are required to determine a tax filer ineligible for APTC if HHS notifies the Exchange that the tax filer failed to file a Federal income tax return and reconcile APTC for any year for which tax data would be used to verify APTC eligibility for coverage year 2026 only. For PY 2027 onward, the current rule that requires Exchanges to disallow APTC eligibility when an enrollee or their tax filer has failed to file a Federal income tax return reconciling their APTC for 2 consecutive tax years will apply. Putting the 1-year policy in place through PY 2026 only will allow Exchanges to collect data on the 1-year FTR policy. This policy will remove the current flexibility that gives tax filers 2 consecutive tax years to file and reconcile before removing APTC for coverage year 2026, while allowing for data collection to determine the correct FTR policy for coverage year 2027 and beyond. To conform with this policy, we are finalizing amending the notice requirement at Sec. 155.305(f)(4)(i) aimed at addressing the gap in notice from giving tax filers a second consecutive tax year to comply with the requirement to file Federal income taxes and reconcile APTC received under the current policy and to remove the notice requirement at Sec. 155.305(f)(4)(ii) that requires notification for enrollees and tax filers that are found to be in a 2-tax year FTR status for coverage year 2026, while allowing for flexibility in coverage years 2027 and beyond. We have updated the RIA for this policy due to revised wage rate and other data estimates available between the time of the 2025 Marketplace Integrity and Affordability proposed and final rule publication dates. The proposed RIA for this policy may be found at 90 FR 13011 through 13012.

Previously, we estimated the cost of giving enrollees 2 consecutive tax years to meet the requirement to file and reconcile would increase APTC expenditures by approximately $373 million per year beginning in PY 2025 for those enrollees who have not filed and reconciled for only 1 tax year and retain their APTC eligibility. In 2024, we implemented various system and logic changes to decrease and/or prevent certain agent, broker, and web-broker noncompliant conduct in an effort to mitigate unauthorized enrollments, and we have observed some improvements. Due to these recent safeguards, as well as the fact that FTR notices were provided in the Fall 2024, it is likely that the FTR population identified prior to OEP 2025 represents a peak in the FTR population. In addition, it is likely that if enhanced subsidies are not extended, the total Exchange population would most likely drop, thereby also decreasing the FTR population. Due to these competing influences, it is difficult to determine the overall impact that this policy will have on APTC expenditures. While the current 2-tax year FTR process may inadvertently shield some unauthorized enrollments during PY 2025 for consumers who may have enrolled in Exchange coverage in PY 2023 (as most Exchange activity to

mitigate unauthorized enrollments was implemented in PY 2024), the 2- tax year FTR process will catch those fraudulently enrolled consumers for PY 2026, as will this change to the FTR process. Therefore, it is likely that the APTC savings resulting from this policy change will not be derived from the enrollees who lose their APTC eligibility after being found as failing to file their income taxes and reconcile their APTC, but rather from the decrease in unauthorized enrollments that will result from other provisions of this rule that we are finalizing. Taking all of these considerations into account, we still anticipate that APTC expenditures will decrease by more than what we previously estimated due to the increase in the overall Exchange population. While we initially sent out almost 1.8 million FTR notices (both the 1-year and 2-year notices) prior to OEP 2025, our run of FTR Recheck in March 2025 has reduced this number to approximately 670,000 households that we provided notices to this spring.

Approximately 270,000 households had a 2-year FTR status after FTR Recheck, which is a decrease from the OEP of approximately 85,000 households. In addition, the total 1-year FTR population of non-filers, non-reconcilers, and extension tax-filers dropped from almost 1,500,000 prior to the OEP to less than 420,000 during FTR Recheck, a decline of over seventy percent. While a significant percentage of that population was due to the number of households whose extension to file their Federal income tax expired, both 1-year non-filers and non-reconcilers also saw significant drops in the number of households.

It is difficult to draw historically similar comparisons for multiple reasons: FTR had been inactive for three consecutive plan years prior to PY 2025 due to the COVID-19 PHE, the increase in improper enrollments, and the newly implemented 2-tax year FTR process. However, historically, between removal of APTC at OEP and the FTR Recheck process, the overall population of enrollees that lose APTC has ranged from 18 percent to 43 percent from 2016 to 2020. On average, 30 percent of enrollees lost their APTC due to FTR between OEP and FTR Recheck. After accounting for a portion of the 420,000 households with a 1- year FTR status during FTR Recheck this year whose extension to file their Federal income tax has not expired, we estimate that approximately 210,000 current households with a 1-year FTR status will lose APTC due to FTR when Exchanges on the Federal platform revert back to a 1-year FTR policy for the 2026 coverage year. The average APTC received per consumer per month for 2024 among those receiving APTC is $548, and the average household has 1.4 consumers. Removing APTC after FTR Recheck can save up to 8 months of APTC. Therefore, it is possible that the average Federal APTC savings could be as much as $1.28 billion in 2026 (210,000 x $548 x 1.4 x 8); however, this policy change is not occurring on its own and this estimate is most likely an overstatement of the possible savings available in future years. This is due to the negative impact on enrollment of implementing the program integrity measures in the Exchange in response to unauthorized enrollment as well as the resumption of FTR noticing and termination of APTC eligibility for PY 2025. There are also other sections of this rule that will likely negatively impact the enrollment of the same population that is affected by the finalized 1-year FTR policy for coverage year 2026, as discussed further in section V.C.18. of this final rule.

This policy will support compliance with the filing and reconciling requirement under 36B(f) of the Code and its implementing regulations at 26 CFR 1.36B-4(a)(1)(i) and (a)(1)(ii)(A). By supporting greater compliance, this policy will also minimize the potential for APTC recipients to incur large tax liabilities for coverage year 2026.

Using the final notice policy for 2026 that is similar to our prior notice procedure before FTR was paused, we anticipate eligible enrollees will respond and take appropriate action to file and reconcile to maintain continuous coverage. To the extent enrollees are not aware of or confused by the requirement to file and reconcile, enrollees would receive an indirect notice that protects FTI prior to the OEP as well as a notice at the time of FTR Recheck. The tax filer (and enrollee if they are the same person) will also receive a direct notice prior to the OEP as well as a direct notice at the time of FTR Recheck. Enrollees whose APTC is terminated as a result of the FTR process would receive an updated eligibility determination notice that contains a full explanation of appeal rights. Enrollees who appeal may request to continue receiving financial assistance during the appeal, consistent with Sec. 155.525. We believe the notices and appeal rights protect continuity of coverage for eligible enrollees that have complied with their requirement to file an income tax return and reconcile APTC and, therefore, anticipate the proposal would continue to avoid situations where eligible enrollees become uninsured when their APTC is terminated. Because the policy will discontinue APTC for a larger number of enrollees who are not eligible, we anticipate a portion of those enrollees would drop coverage and become uninsured. This may result in costs to State and county governments and private hospitals in the form of charity care for individuals who become uninsured because of this rule and have medical emergencies.

Currently, Exchanges must send separate notices to people with 1- tax year FTR status and 2 tax years of FTR status. This policy conforms the notice process to the finalized policy by eliminating the separate notice for enrollees in their second year of FTR status for 2026. Therefore, we anticipate this policy will also reduce the burden of providing notice to enrollees with an FTR status in 2026. In the 2026 Payment Notice (90 FR 4524), we estimated that sending 2-year notices would cost the Federal Government approximately $292,000 and cost State Exchanges approximately $92,400 (cost of $0.84 per notice for FY 2025 which is based on the cost for the Exchanges on the Federal platform to send an average notice x 110,000 FTR notices) annually through 2029. With respect to costs to the Federal Government, we are not publishing specific future contract estimates in this rule because publishing those contract estimates could undermine future contract procurements. For example, if we were to publish the projected future cost of the contracts used to provide print notifications, the Federal Government would be meaningfully disadvantaged in future contract negotiations related to Federal notice printing activities, as bidders would know how much we anticipate such a future contract being worth. We noted that this estimate could decrease specifically depending on the overall population size of the Exchange in response to whether increased subsidies are continued or not. By removing the additional year of APTC eligibility for FTR consumers in 2026, we will remove at least some of the associated noticing requirements and corresponding 2-tax year FTR population, yielding a cost savings that will provide a benefit to the Federal Government and State Exchanges for 2026.

We estimate that it will take the Federal Government and each State Exchange approximately 10,000 hours in 2025 to develop and code changes to the eligibility systems to evaluate and verify FTR status under the revised FTR process, such that enrollees are found to be FTR after 1- tax year of failing to file and reconcile their APTC. Of those

approximately 10,000 hours, we estimate it would take a database and network administrator and architect 2,500 hours at $103.34 per hour and a computer programmer 7,500 hours at $94.88 per hour based on our prior experience with system changes. In aggregate for the State Exchanges, we estimate a one-time burden in 2025 of 200,000 hours (20 State Exchanges x 10,000 hours) at a cost of $19,399,000 (20 States x [(50,000 hours x $103.34 per hour) + (150,000 hours x $94.88 per hour)]) for completing the necessary updates to State Exchange eligibility systems. We are aware of one additional State that is planning to transition to a State Exchange in 2026. If they do finalize their transition, we estimate that their cost would be an additional $969,950 in 2025. For the Federal Government, we estimate a one-time burden in 2025 of 10,000 hours at a cost of $969,950 ((2,500 hours x $103.34 per hour) + (7,500 hours x $94.88 per hour)). However, Exchanges would need to revert this cost in 2026 as the provision sunsets for 2027, and we assume the same estimates as 2025 would also apply in 2026.

We recognize the burden this policy may place on State Exchanges, and sought comment in the proposed rule on the impact of this burden and potential less burdensome alternatives that would still further the program integrity goals of this policy. The majority of State Exchanges expressed in comments that they could not make the technological changes to revert back to a 1-year FTR policy in time for OEP 2026. However, we are finalizing the effective date of the FTR policy so that all Exchanges must impose a 1-year FTR requirement beginning for PY 2026 to gather data from this plan year.

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 these impact estimates for this policy. We summarize and respond to public comments received on the proposed estimates below.

Comment: Many State Exchanges expressed concern that implementing the 1-year policy after just switching to the 2-year policy would be costly and burdensome. They also expressed the fact that their planning for this year has already commenced, and it would be very hard to make the technical changes needed at this point for PY 2026. In addition, many State Exchanges noted that they have much lower incidences of fraud as compared to Exchanges on the Federal platform, so the return on their investment for the technical changes would not be as impactful.

Response: We appreciate the concern from these commenters. While we appreciate that State Exchanges do not currently have the levels of fraudulent activity that Exchanges on the Federal platform do, we believe that the 1-year FTR policy will also help to ensure that there is less of a risk of fraud in coverage year 2026. As mentioned above, we believe that the potential costs of paying APTC to those who have not filed and reconciled for a second consecutive tax year outweigh the benefits for State Exchanges. 7. 60-Day Extension To Resolve Income Inconsistency (Sec. 155.315(f)(7))

We are finalizing the removal of Sec. 155.315(f)(7) which requires that applicants must receive an automatic 60-day extension in addition to the 90 days currently provided by Sec. 155.315(f)(2)(ii) to allow applicants sufficient time to provide documentation to verify any DMI, including income inconsistencies. Using previous costs associated with implementing this policy and similar policies, we anticipate that taking out this extension will result in a one-time cost of approximately $500,000 to Exchanges. For the 19 State Exchanges, we anticipate this will be a total cost of approximately $9,500,000 ($500,000 x 19). We recognize the burden this policy may place on State Exchanges and sought comment in the 2025 Marketplace Integrity and Affordability proposed rule on the impact of this burden and potential less burdensome alternatives that would still further the program integrity goals of this policy.

By reducing the period to provide documentation to verify income from 150 days to 90 days, we anticipate households using the Exchanges on the Federal platform to experience a reduction in the number of months they receive APTC, and that, using our internal analysis of historical enrollment and DMI data, approximately 140,000 enrollees will lose APTC eligibility. For State Exchanges, we also anticipate households may experience a reduction in the number of months they receive APTC, resulting in approximately 86,000 enrollees losing APTC eligibility. In total, using the average monthly APTC amount of $588.07 and 2 months reduced APTC, this will result in approximately $266 million (140,000 x $588.07 x 2 + 86,000 x $588.07 x 2) less APTC expenditures annually across all Exchanges.

In the proposed rule, we sought comments on whether this number may be slightly less because of potential decreased enrollment if the enhanced PTC are no longer in effect.

We did not receive any comments in response to the proposed impact estimates for this policy. For the reasons outlined in the final rule, we are finalizing these estimates as proposed. 8. Income Verification When Data Sources Indicate Income Less Than 100 Percent of the FPL (Sec. 155.320(c)(3)(iii))

This final rule amends Sec. 155.320(c)(3)(iii) to create annual income DMIs when applicants attest to income that would qualify the taxpayer as an applicable taxpayer per 26 CFR 1.36B-2(b), but trusted data sources show income below 100 percent of the FPL. We are finalizing this policy to become effective on the effective date of this rule, but with a modification under which the policy and related requirements will sunset for all Exchanges at the end of PY 2026. Thereafter, this policy will no longer be effective. We have updated the RIA for this policy due to revised wage rate and other data estimates available between the time of the proposed and final rule publication dates. The proposed 2025 Marketplace Integrity and Affordability RIA for this policy may be found at 90 FR 13013.

As discussed further in section IV.D. of this proposed and the final rule, we estimate an approximate increase in burden costs of $20.2 million for the Federal Government and $12.4 million in 2026 for State Exchanges to receive, review, and verify submitted verification documents as well as conduct outreach and determine DMI outcomes for applicants below 100 percent of the FPL, as well as approximate one- time costs in 2025 to update the eligibility systems and perform other technical updates for this change of $775,960 for the Federal Government and $14,743,240 for State Exchanges. Exchanges would incur the same one-time costs at the time of sunsetting this policy at the end of 2026, resulting in a one-time burden of $775,960 to the Federal Government and $14,743,240 to State Exchanges in 2026 as well. Finally, as also discussed further in section IV.D. of this final rule, we estimate an increase in burden of $13,179,400 across all Exchanges in 2026 for consumers to submit documentation to fulfill income verification requirements. We recognize the burden this policy may place on State Exchanges and sought comment in the proposed rule on the impact of this burden and potential less burdensome alternatives that would still further the program integrity goals of this policy.

By reducing the number of applicants who inflate income to qualify for APTC and the opportunities for improper enrollments, we anticipate this policy will substantially reduce Federal APTC expenditures. Based on our analysis of enrollment data from DMI generation numbers from when this DMI was previously in place, we estimate creating DMIs that require additional verification will reduce the number of people who receive APTC by 50,000 for Exchanges on the Federal platform. We estimate the reduction of people who receive APTC in the State Exchanges to be 31,000. Using an estimated average four months reduced APTC and an average monthly APTC rate of $588.07 per person, we estimate total APTC expenditures will be reduced by approximately $191 million in 2026 (50,000 x $588.07 x 4 + 31,000 x $588.07 x 4).

We also anticipate that stronger income verification standards will increase Federal and State Medicaid expenditures by enrolling more people in Medicaid who, by intentionally or unintentionally overestimating their annual household income and being unable to verify that overestimated income, would otherwise have enrolled in APTC subsidized coverage. We do not have the data necessary to provide specific estimates on the increase in Medicaid expenditures and sought comment in the proposed rule on the data sources we could use to further this analysis.

We anticipate the stronger income verification standards would have only a minimal impact on the number of eligible tax filers who enroll in APTC subsidized coverage. Although we acknowledge that income verification can be more challenging for lower-income tax filers due to less consistent employment, our experience with income verifications suggests the process does not impose a substantial burden. Moreover, the generosity of the subsidy for lower-income households creates a strong incentive for applicants to follow through and meet the verification requirements.

We sought comment on the proposed impacts and assumptions.

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 to become effective upon the effective date of this rule, but with a modification under which the policy and related requirements will be sunset for all Exchanges at the end of PY 2026. Thereafter, this policy will no longer be effective. We also made modifications to account for general updated occupational costs in this rule. We summarize and respond to public comments received on the proposed estimates below.

Comment: Many State Exchanges, as well as other commenters, expressed concerns with the burden this would place on their Exchanges. They emphasized that the program integrity gains that may justify this burden would be extremely minimal to non-existent, given that they have identified improper income estimates to the same extent as Exchanges on the Federal platform. Many State Exchanges pointed out that they already have implemented robust additional income verification processes, including leveraging additional income data sources, that make real-time verification of income much more effective. Finally, some State Exchanges stated they simply do not have the resources to implement and maintain this policy currently. Given this, State Exchanges and other commenters requested that we make this policy optional for State Exchanges.

Response: We acknowledge the commenters' concerns. However, we believe the program integrity concerns, which, while potentially less in number, are still present in State Exchanges including those that have expanded Medicaid, that this policy attempts to address outweigh the cost and burdens to Exchanges. Additionally, because this policy will sunset after PY 2026, the costs and benefits outlined in this rule will only occur for the reminder of PY 2025 after this rule's effective date and for PY 2026. 9. Income Verification When Tax Data Is Unavailable (Sec. 155.320(c)(5))

We are finalizing the removal of Sec. 155.320(c)(5) which requires Exchanges to accept an applicant's income attestation without further verification when tax return data is unavailable. We are finalizing this with a modification under which Sec. 155.320(c)(5), which this final policy is removing upon the effective date of this rule, will be reinstated for all Exchanges at the end of PY 2026. As further discussed in section IV.E. of the proposed and this final rule, we estimate an increase in burden costs of approximately $102.3 million for the Federal Government and approximately $62.8 million total for State Exchanges in 2026 to receive, review, and verify submitted verification documents as well as conduct outreach and determine DMI outcomes for applicants whose tax return data is unavailable, as well as approximate one-time costs to update the eligibility systems and perform other technical updates for this change of approximately $872,955 for the Federal Government and approximately $16.6 million total for State Exchanges in 2025. These costs would also be incurred at the sunset of this program at the end of 2026, resulting in a one- time burden of $872,955 to the Federal Government and approximately $16.6 million total State Exchanges in 2026 as well. As also further discussed in section IV.E. of this proposed and this final rule, we also estimate an increase in burden of $66,778,850 for consumers in 2026 to submit documentation to fulfill income verification requirements associated with this proposal. We recognize the burden this policy may place on State Exchanges, and in the proposed rule sought comment on the impact of this burden and potential less burdensome alternatives that would still further the program integrity goals of this policy.

The prior alternative verification process for applicants without tax return data in place from 2013 to 2023 provided a basic, frontline protection against improper APTC payments. Based on our analysis of enrollment data from DMI generation numbers from when this DMI was previously in place, as well as historical enrollment data, we estimate creating DMIs that require additional verification will result in a decrease in APTC, potentially to zero, for 252,000 enrollees for Exchanges on the Federal platform and 155,000 enrollees on State Exchanges. Using an estimated average 4 months reduced APTC and with an average monthly APTC rate of $588.07 per person, we anticipate that this change could result in a reduction of $957 million (252,000 x $588.07 x 4 + 155,000 x $588.07 x 4) in APTC expenditures in 2026. We accept comments on whether this number may be slightly less because of potential decreased enrollment if the enhanced PTC are no longer in effect.

Although reintroducing income verification for applicants with no tax return data will increase the burden on some applicants, we do not anticipate this burden will deter many eligible people from enrolling.

We sought comment on the proposed impacts and assumptions.

We did not receive any comments in response to the proposed impact estimates for this policy. We are finalizing these estimates with modifications as noted earlier in this section related to updated general occupational estimated costs as well as reinstating the policy as outlined in Sec. 155.320(c)(5) for all Exchanges after the completion of PY 2026 on December 31, 2026.