Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability

We are finalizing modifications to Sec. 155.400(g) to remove paragraphs (2) and (3), which establish an option for issuers to implement a fixed-dollar and/or gross percentage-based premium payment threshold (if the issuer has not also adopted a net percentage-based premium threshold), and modify Sec. 155.400(g) to reflect the removal of paragraphs (2) and (3), with the following modification: the removal of the fixed-dollar and gross-premium threshold flexibilities will sunset after the completion of one new coverage year, PY 2026, on December 31, 2026. Thereafter, the FFE and SBE-FPs will, and State Exchanges may, offer issuers the flexibility to implement the premium payment thresholds outlined in the 2026 Payment Notice (90 FR 4424). Removing the options for issuers to implement either a fixed-dollar and/or gross percentage will help address program integrity concerns by ensuring that enrollees cannot remain enrolled in coverage for extended periods of time without paying any premium, increasing the likelihood that consumers who were improperly enrolled become aware of their enrollment.

We anticipate that there will be some costs for issuers in PY 2026 who had already implemented a fixed-dollar or gross premium percentage- based threshold and will have to remove those policies or replace them with the remaining net premium percentage-based thresholds.

Since these threshold policies are optional, we do not know how many issuers adopted them. In the 2026 Payment Notice, we estimated that based on a fixed-dollar threshold of $10 or less, utilizing PY 2023 counts of 135,185 QHP policies terminated for non-payment where the enrollee had a member responsibility amount of $0.01-$10.00, with an average monthly APTC of $604.78 per enrollee (for PY 2023), that would at most result in a one-time APTC payment of $817,571,843 in 2026 for 10 months that excludes the binder payment and first month of the grace period (for which the issuer already received APTC and would not have to return it) that issuers would retain, rather than being returned to the Federal Government. We now estimate that this cost will not be incurred in 2026 with the removal of the fixed-dollar and gross premium percentage-based thresholds.

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. For the reasons outlined in the final rule, we are finalizing these estimates as proposed. 11. Annual Open Enrollment Period (Sec. 155.410(e) and (f))

We are finalizing amendments to Sec. 155.410(e)(5) with a modification to change the annual OEP for PY 2027 and beyond to begin no later than November 1 and end no later than December 31 of the calendar year preceding the benefit year. Additionally, paragraph (e)(5)(ii) specifies that the Exchange OEP has a maximum length of 9 weeks. Newly added paragraph (f)(4) ensures that all OEP enrollees have full year coverage effective January 1 of the plan year beginning in benefit year 2027. This is expected to have a positive impact on the risk pool by reducing the risk of adverse selection. Although we cannot quantify Federal savings, by reducing adverse selection, we expect premiums will decline and, in turn, reduce the cost of PTC to the Federal Government. Lower premiums may also increase enrollment among unsubsidized consumers and help lower the uninsured rate. In addition, we expect a higher proportion of Exchange enrollees to be covered continuously for the full year beginning in January.

While the final rule does provide flexibility for Exchanges, 19 of 20 of the State Exchanges would need to shorten their OEP because their OEPs for PY 2025 either extended past December 31 or exceeded 9 weeks in duration. We estimated in the 2025 Marketplace Integrity and Affordability proposed rule that it would take the Federal Government and each impacted State Exchange 4,000 hours to develop and code the changes to their IT systems. Of those 4,000 hours, we estimated it would take a database and network administrator and architect 1,000 hours and a computer programmer 3,000 hours. The median wage rates used in the proposed rule were $101.66 per hour for a database and network administrator and architect and $95.88 per hour for a computer programmer. The median wage rates used for our estimates were updated after the proposed rule was published to reflect the latest available rates. In this final rule, we use the updated median wages of $103.34 per hour for a database and network administrator and architect and $94.88 per hour for a computer programmer for the final rule as discussed in section IV.A. of this final rule. We did not expect States operating SBE-FPs to incur any implementation costs. These estimates were based on past experience with similar system changes.

For the Federal Government, we estimate a one-time burden in 2026 of 4,000 hours at a cost of $387,980 (1,000 hours x $103.34 per hour) + (3,000 hours x $94.88 per hour), which is a decrease from the proposed rule's estimate of $389,300. In aggregate, for State Exchanges, we estimate a one-time burden in 2026 of 76,000 hours (19 State Exchanges x 4,000) at a cost of $7,371,620 (19 States x [(1,000 hours x $103.34 per hour) + (3,000 hours x $94.88 per hour)]), which is a decrease from the proposed rule's estimate of $7,786,000. In total, the burden associated with all system updates would be 80,000 hours at a cost of $7,759,600, which is a decrease from the proposed rule's estimate of $8,175,580. We recognized the burden that the proposed policy would have placed on State Exchanges and modified the policy while keeping intact its impact on program integrity.

We did not anticipate that the change to the OEP end date would have a negative impact on enrollment or the consumer experience due to the maturity of the enrollment systems. This change is expected to simplify operational processes for the Exchanges by eliminating the burden of supporting an extra month of open enrollment and addressing consumer confusion related to administering two enrollment deadlines. Lower administrative costs may also contribute to lower premiums, but we noted that there also may be administrative costs for issuers and Exchanges associated with an increase in SEP casework. Consumers will benefit from clearer enrollment rules that will encourage all annual enrollment activities to be complete by a December OE end date and therefore ensure coverage for the month of January. The Federal Government, State Exchanges, and issuers may incur costs if additional consumer outreach is needed to educate people on the new policy. However, this should be temporary and largely offset by the elimination of the ongoing outreach necessary to educate people on the second January 15 deadline.

We 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 these impact estimates for this policy with the following modifications. As stated above, the new OEP dates will apply for PY 2027 instead of PY 2026, and we are allowing Exchanges to adopt their preferred OEP dates subject to timing and durational parameters. This delay and flexibility is aimed at

mitigating the operational burden and consumer experience and timeline concerns expressed by commenters, including State Exchanges. Because comments on these estimates were combined with general comments on this policy, we summarize and respond to public comments received on the proposed estimates in section III.B.7. of this final rule. 12. Monthly SEP for APTC-Eligible Qualified Individuals With a Projected Annual Household Income at or Below 150 Percent of the Federal Poverty Level (Sec. 155.420(d)(16))

We are finalizing the removal of Sec. 155.420(d)(16) and pausing the 150 percent FPL SEP for all Exchanges only until the end of PY 2026. This includes making conforming changes to regulations established to support this SEP, including removing Sec. Sec. 147.104(b)(2)(i)(G), 155.420(a)(4)(ii)(D), and 155.420(b)(2)(vii), as well as amending Sec. 155.420(a)(4)(iii) introductory text.

As discussed in this final rule, the expanded availability of fully-subsidized plans combined with easier access to these fully- subsidized plans through the 150 percent FPL SEP (which allows people to enroll in fully-subsidized plans at any time during the year) opened substantial opportunities for improper enrollments. As discussed earlier in preamble, recent litigation from April 2024, Turner v. Enhance Health, LLC, higher numbers of consumer complaints, and a sharp increase in enrollment relative to the eligible population with household income under 150 percent of the FPL in PY 2024 all suggest a substantial increase in improper enrollments among consumers reporting incomes between 100 and 150 percent of the FPL on their application. We are working hard to reduce the level of improper enrollments, and we believe that these efforts necessitate repealing the 150 percent FPL SEP. However, we acknowledge that it is challenging to predict the level of improper enrollments in future years, as we are still in the process of taking enforcement actions to reduce the initial spike in improper enrollments that occurred after we established the 150 percent FPL SEP.

We believe that pausing the 150 percent FPL SEP will reduce adverse selection and, as a result, reduce premiums. Previous rulemaking projected the 150 percent FPL SEP would increase premiums by 0.5 to 2 percent with enhanced premium subsidies in place and projected the SEP would increase premiums from 3 to 4 percent if the enhanced premium subsidies expire. Based on our analysis of recent enrollment data, we believe these previous estimates underestimated the premium impact and overestimated the enrollment impact of the 150 percent FPL SEP. As discussed in the preamble, we believe that the 150 FPL SEP has substantially increased the level of improper enrollments, as well as increased the risk for adverse selection as this SEP incentivizes consumers to wait until they are sick to enroll in Exchange coverage. Unknown factors continue to make these impacts difficult to estimate, including the utilization of this SEP by healthy and unhealthy enrollees and the impact to the average duration of coverage for enrollees. However, we estimate pausing this SEP could decrease premiums by 3 to 4 percent compared to baseline premiums, and therefore decrease annual APTC outlays by approximately $3.4 billion in 2026. In the proposed rule, we sought comment on how this policy would impact premiums and APTC/PTC outlays.

However, quantifying the impact of the 150 percent FPL SEP on enrollment remains difficult to estimate. Although we can quantify the number of people who enroll through this SEP, the enrollment impact is likely less than the number of people who use the SEP. Some people may use this SEP as an alternative to an SEP they would have otherwise used. Without this SEP, consumers may have otherwise enrolled through the OEP. The substantial level of improper enrollments associated with fully-subsidized plans also obscures the number of eligible individuals who used the SEP.

For these reasons, and for the reasons outlined in section III.B.8. of this final rule, we are finalizing that this SEP will be paused through the end of PY 2026.

To repeal the monthly 150 percent FPL SEP, we estimated a one-time cost of approximately $387,980 to pause the functionality to grant the 150 percent FPL SEP and make any necessary updates to eligibility logic systems for Exchanges on the Federal platform. This is based on our estimate that it will take the Federal Government 4,000 hours in 2025 to remove the SEP. Here, we are assuming that 25 percent of the hours needed to end the 150 percent FPL SEP are being performed by a database and network administrator (hourly wage of $103.34) and 75 percent of the work is being performed by a computer programmer (hourly wage of $94.88). This estimate was informed by our experience with past system changes.

We sought comment on this proposed impact.

Because we are sunsetting the repeal of the 150 FPL SEP after PY 2026, we estimate a new additional one-time cost of $387,980 for Exchanges on the Federal platform to reinstate the 150 percent FPL SEP for years after PY 2026. This is based on our estimate that it will take the Federal Government 4,000 hours in 2026 to reinstate the SEP. Here, we are assuming that 25 percent of the hours needed to end the 150 percent FPL SEP are being performed by a database and network administrator (hourly wage of $103.34) and 75 percent of the work is being performed by a computer programmer (hourly wage of $94.88). This estimate was informed by our experience with past system changes.

We estimate a new one-time cost for State Exchanges that operate their own eligibility and enrollment systems and currently offer the 150 percent FPL SEP to pause the SEP. Based on public comments received, we believe that 18 State Exchanges are currently offering the 150 percent FPL SEP or other income-based SEPs that would need to be discontinued. We estimate a one-time cost in 2025 of approximately $387,980 for each of these 18 State Exchanges to pause the functionality granting the 150 percent FPL SEP and make any necessary updates to State Exchange eligibility logic systems. This results in a total cost of $6,983,640 for State Exchanges to pause the 150 percent FPL SEP in 2025. This is based on our estimate that it will take each State Exchange 4,000 hours in 2025 to pause the SEP. Here, we are assuming that 25 percent of the hours needed to end the 150 percent FPL SEP are being performed by a database and network administrator (hourly wage of $103.34) and 75 percent of the work is being performed by a computer programmer (hourly wage of $94.88). This estimate was informed by our experience with past system changes.

We also estimate a new one-time cost for State Exchanges that operate their own eligibility and enrollment systems and currently offer the 150 percent FPL SEP to reinstate the SEP after PY 2026. We assume that all 18 State Exchanges that currently offer the 150 percent FPL SEP will elect to reinstate it once the pause of this SEP sunsets at the end of 2026. We estimate a one-time cost in 2026 of approximately $387,980 for each of the 18 State Exchanges currently offering the SEP to reinstate their functionality to grant the 150 percent FPL SEP and make any necessary updates to State Exchange eligibility logic systems. This results in a total cost of $6,983,640 for State Exchanges to reinstate the 150 percent FPL SEP. This

is based on our estimate that it will take each State Exchange 4,000 hours in 2026 to reinstate the SEP. Here, we are assuming that 25 percent of the hours needed to end the 150 percent FPL SEP are being performed by a database and network administrator (hourly wage of $103.34) and 75 percent of the work is being performed by a computer programmer (hourly wage of $94.88). This estimate was informed by our experience with past system changes.

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 with the addition of SEP reinstatement costs and State Exchange costs. We summarize and respond to public comments received on our proposed estimates below.

Comment: Commenters from local and State governments expressed that nearly all State Exchanges currently offer the 150 percent FPL SEP or income-based SEPs with higher income thresholds. The commenter expressed concerns about the resources needed for IT and messaging campaign changes for State Exchanges to dismantle these SEPs. They stated that requiring State Exchanges to terminate the 150 percent FPL SEP within 60 days of the final rule would impose major costs, and failure to account for these costs makes the proposal arbitrary and capricious under the APA.

Response: We appreciate the commenters' concerns regarding the repeal of the 150 percent FPL SEP and the timeline for Exchanges to implement this policy change, however, we are finalizing to pause the availability of 150 percent FPL SEP for PY 2026. We believe that this policy change and timeline are critical to protect all Exchanges from fraudulent activity and to ensure that only consumers who are eligible to receive APTC continue to do so. We also wish to reiterate that we do not consider having a low income to meet the definition of an exceptional circumstance per Sec. 155.420(d)(9); therefore, State Exchanges are not permitted to use exceptional circumstances SEP authority to continue to offer a 150 percent FPL-like SEP, or any SEPs based on income for that matter. In response to not accounting for the full costs for State Exchanges, we have updated the estimates in this proposal.

Comment: One commenter expressed specific concerns regarding the methodology that HHS used to estimate the premium impacts of the proposal to rescind the 150 percent FPL SEP. The commenter expressed confusion about how HHS arrived at the assumption that removing the current monthly SEP for people with incomes below 150 percent of the FPL would reduce premiums by 3.4 percent. The commenter stated that in the preamble of the proposed rule, HHS referenced a prior estimate that the monthly SEP policy would result in premium increases of 3 to 4 percent in the absence of the IRA subsidies, then provided a revised range of 0.5 to 3.6 percent based on more recent data. Then, however, in the regulatory impact analysis, HHS reverted to the discarded 3 to 4 percent estimate, before adopting 3.4 percent as a point estimate. The commenter asked for clarification as to how HHS arrived at this point estimate.

Response: We appreciate the commenter bringing this discrepancy to our attention, and we would like to clarify we believe pausing the current monthly SEP for people with incomes below 150 percent of the FPL will result in premiums being 3 to 4 percent lower than they would be if the SEP were to remain in place. A point estimate of 3.4 percent is used in the RIA. With the expiration of enhanced subsidies, enrollees at this income level will see an increase in net premiums for the same coverage they can receive currently at $0 net premium. The ability to enroll in Exchange coverage every month creates an incentive for healthy enrollees to forego health insurance coverage and wait to enroll when they believe they will need coverage. We estimated the SEP would decrease the average number of months of enrollment from 10 months to around 9 months with minimal reduction in program costs, since these enrollees would be enrolled when they needed coverage. Overall, the expected claims impact and shift in average months of enrollment is estimated at 3.4 percent of premium. Pausing this provision is expected to have the opposite impact and reduce premiums by 3.4 percent for 2026. We believe this premium reduction will wear off with the sunset of this provision and have accounted for this in the RIA. 13. Pre-Enrollment Verification for Special Enrollment Periods (Sec. 155.420)

We are finalizing amendments to Sec. 155.420(g) to require Exchanges on the Federal platform to conduct pre-enrollment eligibility verification for SEPs. Specifically, we are finalizing the 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 conducting pre-enrollment verifications for most categories of SEPs for Exchanges on the Federal platform in line with operations prior to the implementation of the 2023 Payment Notice.

We are also finalizing the requirement that Exchanges on the Federal platform conduct pre-enrollment SEP verification for at least 75 percent of new enrollments through SEPs for consumers not already enrolled in coverage through the applicable Exchange. We are finalizing that Exchanges must verify at least 75 percent of such new enrollments based on the current implementation of SEP verification by Exchanges. 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 RIA for this policy may be found at 90 FR 13016 through 13017.

Both of the proposals 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 provisions for State Exchanges.

We anticipate that revisions to Sec. 155.420 will have a positive impact on program integrity by verifying eligibility for SEPs. Increasing program integrity through this policy will reduce improper subsidy payments and could contribute to keeping premiums low and therefore, further protecting taxpayer dollars. This policy may deter enrollments among younger people at higher rates, which could worsen the risk pool and increase premiums. However, we expect any such deterrence will impact a very small number of young people and, therefore, have only a minimal impact on the risk pool and premiums. We estimate that the net effect of pre-enrollment verification will reduce premiums by approximately 0.5-1.0 percent for PY 2026 and will reduce APTC spending by approximately $105.4 million.\274\

\274\ The reduction in APTC was calculated by multiplying the estimated new SVIs by the previous SVI expiration rate (293,073 x .137 = 40,151) and then multiplying that number by the estimated annual APTC amount per SEP consumer (40,151 x $2,625 = $105,396,375).

We anticipate this policy will moderately increase the regulatory burden on Exchanges using the Federal platform. Based on past experience, we estimate that the expansion in pre-enrollment verification to most individuals seeking to enroll in coverage through all applicable SEPs offered through Exchanges on the Federal platform will result in an additional 293,073 individuals having their enrollment delayed or “pended” annually until eligibility verification is

completed, although for the vast majority of individuals the delays would be less than 1-3 days. As discussed further in section IV.G. of this final rule, we anticipate that the expansion of SEP verification will result in increased income inconsistencies, with an associated cost increase for consumers of approximately $7,048,406 in 2026. There will also be an increase in ongoing costs for Exchanges on the Federal platform due to an increase in the number of SEP enrollments for which they must conduct verification. We estimate that the total increase in ongoing processing costs to comply with this requirement for the FFE will be approximately $11.7 million for PY 2026. Furthermore, as discussed in section IV.G. of this final rule, we anticipate that expanding verification will result in an increase in annual burden in labor costs on Exchanges using the Federal platform at a cost of $2,902,615 for PY 2026.

Additionally, we anticipate that the expansion of SEP verification will have a one-time development cost in 2025 for Exchanges using the Federal platform of $2,973,300 (30,000 hours x $99.11). This assumes that 25 percent of the hours needed to expand SEP verification are being performed by a database and network administrator (hourly wage $103.34) and 75 percent of the work is being performed by a computer programmer (hourly wage $94.88). This allocation of work between network administrator and computer programmer was informed by our experience with past system changes. We do not anticipate this policy will increase regulatory burden or costs on issuers. We sought comment on the proposed impacts and assumptions.

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 provisions for State Exchanges. We summarize and respond to public comments received on the proposed adjustments to pre- enrollment SEP verification below.

Comment: States, providers, actuaries, labor groups, general advocacy groups, individuals, and one health insurance issuer expressed general concern about the 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 the commenters' concerns. After careful consideration of public comments, 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 provisions for State Exchanges. 14. Prohibition on Covering Specified Sex-Trait Modification Procedures as an EHB (Sec. Sec. 156.115(d) and 156.400)

We are finalizing an amendment to Sec. 156.115(d) to provide that an issuer of a plan subject to EHB requirements may not provide coverage for specified sex-trait modification procedures as an EHB beginning with PY 2026 and are finalizing the addition of a definition of “specific sex-trait modification procedure” at Sec. 156.400. Finalization of this policy will mean that beginning with PY 2026, issuers of plans subject to EHB requirements may not provide coverage for specified sex-trait modification procedures that fall within the definition at Sec. 156.400 as EHB. The EHB are subject to various protections under the ACA, including the prohibition on annual and lifetime dollar limits and the requirement to accrue enrollee cost sharing towards the annual limitation on cost sharing. As finalized, the prohibition on annual and lifetime dollar limits and requirement to accrue enrollee cost sharing towards the annual limitation on cost sharing will not apply to specified sex-trait modification procedures to the extent such care is included in health plans as non-EHB, including in large group market and self-insured group health plans. This includes a prohibition on covering specified sex-trait modification procedures as an EHB in the five States that currently include coverage for sex-trait modification services in their EHB- benchmark plans, as well as in States that do not have such coverage expressly mentioned in the State's EHB-benchmark plan.\275\

\275\ California, Colorado, New Mexico, Vermont, and Washington EHB-benchmark plans specifically include coverage of some sex-trait modification services. Six other States do not expressly include or exclude coverage of sex-trait modification services in EHB-benchmark plans. Forty States include language that excludes coverage of sex- trait modification services in EHB-benchmark plans.

As we noted in the 2025 Marketplace Integrity and Affordability proposed rule, utilization of sex-trait modification services is low; therefore, the impact of this policy will be limited. As we noted, approximately 0.11 percent of enrollees in the EDGE data set gathered from issuers as part of the HHS-operated risk adjustment program utilized specified sex-trait modification procedures between PYs 2022 and 2023. In the aggregate, the total allowed cost of specified sex- trait modification procedures amounts to 0.08 to 0.09 percent of all claims in the EDGE data set for these years. Although EDGE does not distinguish between whether a benefit is EHB, we believe that a substantial majority of such claims are being covered as EHB by issuers submitting claims data to the EDGE server.

Given that a QHP's percentage of premium attributable to the EHB is used to determine the amount of available tax credits under the ACA, we expect an impact on the amount of available PTC. We believe, however, that finalizing a definition of specified sex-trait modification procedure at Sec. 156.400 will help to further minimize premium impacts, since the definition adds needed clarity to what procedures cannot be covered as EHB and there will therefore be less opportunity for issuers to price for any uncertainty. Under our final policy, plans that stop covering specified sex-trait modification procedures as EHB will see premiums and PTC decrease as the generosity of plan benefit coverage decreases. Plans that decide to cover specified sex-trait modification procedures as non-EHB will see premiums rise or stay the same to account for this benefit generosity, but will see any existing PTC decrease as the benefits will no longer be covered as EHB. States that choose to mandate such coverage as a benefit in addition to the EHB will be required to defray its cost pursuant to Sec. 155.170; in this circumstance, we expect premiums and PTCs to decrease to account for the State's defrayal obligations.

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

Comment: Some commenters supported a prohibition on coverage of sex-trait modification services as an EHB because they stated it will prevent tax credits from applying to medical procedures they believe are dangerous or cosmetic in nature. One commenter incorrectly noted that costs associated with sex-trait modification services would not be borne by States if they mandate coverage. One commenter stated that an issuer's ongoing implementation costs by virtue of, for

example, having to modify its claims processes and systems, will be more costly than what the issuer would reimburse providers for the sex- trait modification services themselves, if these services were covered benefits, and that such implementation costs are not minuscule.

Response: This final rule will ensure that Federal tax credits are not used to pay for services that fall under the definition of “specified sex-trait modification procedure” at Sec. 156.400. This will better align the statutory requirement that EHB be equal in scope to those benefits provided in a typical employer plan. If a State mandates coverage of specified sex-trait modification procedures, then it will need to defray that cost to the issuer or the enrollee pursuant to Sec. 155.170(b). Though we recognize comments that stated costs associated with specified sex-trait modification procedures are relatively minor, which aligns with the data we provided in this rule, we are not persuaded that costs associated with implementation of this policy are costlier than paying for those services themselves. Issuers offering QHPs are required to ensure that benefits that are not EHB are appropriately designated as such in their plan filings as part of QHP certification. Based on this, there is good indication issuers internally have the capability of determining which benefits are not EHB, as evidenced by current requirements for issuers to note which benefits, if any, are not EHB, and will vary from issuer to issuer.

Regardless, we are required to adhere to the statute and believe that the policy finalized in this rule better aligns with the plain language of section 1302(b)(2)(A) of the ACA.

Comment: Several commenters opposing the proposal stated that it will increase overall healthcare costs for States and local governments, issuers, providers, and consumers as further detailed below. One commenter noted increased out-of-pocket consumer costs due to issuers dropping this coverage entirely as a result of this proposal and therefore shifting the cost for care to consumers. Other commenters noted that covering sex-trait modification services in insurance plans is cost-neutral or cost-saving as there is no actuarial basis to price sex-trait modification surgeries separately from any other type of surgery. Commenters also expressed concerns that this proposal would block consumers from accessing sex-trait modification services with the same cost-sharing and benefit design protections as the same services covered for non-sex-trait modification still included in the EHB package. Commenters also expressed concern that costs would shift to States or local governments if they want to continue to ensure sex- trait modification services are covered. Another commenter expressed concern that the proposal would increase overall costs by shifting current treatment from the community to the hospital and uncompensated care, with increased prevalence of more costly conditions, like severe depression or osteoporosis. This commenter also stated concerns that the proposal could lead to increased risk of psychiatric symptoms leading to more utilization of psychiatric services, including psychiatric hospitalizations for these patients if current treatments were no longer affordable.

Response: We acknowledge commenters' concerns that smaller issuers often have outsized costs when new requirements are put into place that apply to all issuers, because they lack economies of scale that some of their larger, nationwide counterparts may have. However, as we have noted in other parts of the finalized rule, we believe that this final rule does not require issuers to undergo complex system builds or process changes to implement it and are not persuaded that the burden of any changes to processes and systems is a basis for not finalizing this proposal. Specifically, issuers are already required to ensure that benefits that are not EHB are appropriately designated as such in the Plans & Benefits Template completed as part of the QHP certification application and that the percentage of premium attributable to EHB is accurately reflected, so that APTC does not erroneously subsidize non-EHB. Although under this final rule, there could be services that can be covered as EHB or not as EHB depending on diagnosis, we believe that issuers should already have the capability to differentiate between these claims since they already have to make these distinctions today. For example, currently issuers must ensure that benefits that can never be EHB, such as routine non-pediatric eye exam services or non-medically necessary orthodontia pursuant to Sec. 156.115(d), are not erroneously noted as EHB in plan filings and claims processing. We believe that what an issuer is required to do under this final policy to exclude coverage for specified sex-trait modification procedures as EHB is similar to how issuers currently handle coverage for other claims.

We do not believe that whether a benefit is neutral from an actuarial perspective has bearing on whether it should be an EHB. A benefits package is comprised of numerous benefits, some of which are neutral or even cost-saving, and some of which are not. If issuers seek to voluntarily cover specified sex-trait modification procedures as non-EHB, they would need to price the services accordingly.

We agree with commenters that for those States that wish to mandate coverage of specified sex-trait modification procedures, they will be responsible for defraying this cost pursuant to Sec. 155.170(b). We appreciate the concerns commenters, including States, raised. However, there is nothing inherently unique about sex-trait modification services as related to the overall defrayal policy; if a State wishes to mandate a benefit that is not EHB, it must defray the cost of that benefit, regardless of what that benefit is. This is longstanding EHB policy and furthers State flexibility to regulate their own markets and ensure coverage of benefits that are most critical in their State.

We also agree that there may be some people enrolled in plans that must cover EHB who seek specified sex-trait modification procedures who will now need to pay for the full cost out-of-pocket, unless the coverage is State-mandated or an issuer voluntarily offers such coverage. We understand that this is not what many commenters advocated for. However, this is the case with any benefit that is not EHB. The framework for EHB as established in section 1302(b)(2) of the ACA requires EHB to be “equal to the scope of benefits provided under a typical employer plan.” There will necessarily be some benefits that are not EHB. This final rule better aligns coverage with the statutory requirements. We understand commenters' concerns that people seeking sex-trait modification services are often lower-income and more economically vulnerable than the general population. In defining the EHB, we have attempted to balance coverage generosity and affordability, with the realization that what makes coverage more affordable for some may in turn make certain benefits less affordable for others

We also appreciate comments that expressed concerns about costs being shifted to local governments and hospital uncompensated care. Nothing in this final rule prohibits local governments or hospitals from voluntarily funding specified sex-trait modification procedures. However, nothing in this final rule requires States or hospitals to develop programs to fund specified sex-trait modification procedures. We think that additional uncompensated care for mental health services will be minimal if any, and we

reiterate that mental health services will continue to be available, including for persons with gender dysphoria and those seeking specified sex-trait modification procedures.

Comment: Several commenters objecting to the proposal agreed that utilization of sex-trait modification services procedures is low, given the small size of the population with gender dysphoria and the fact that individual medical needs will vary. Other commenters objecting to the proposal agreed that the cost of providing sex-trait modification services is minimal in light of such low utilization. One commenter noted as evidence that some States added sex-trait modification services to their EHB-benchmark plans without exceeding the actuarial limitations imposed by HHS and that the addition of such services had negligible impact on premiums. One supporting commenter stated that the proposal would reduce overall coverage by issuers for sex-trait modification procedures, reducing complications stemming from such procedures that could still be covered as EHB, and that this would lead to a small reduction in both premiums and premium tax credits and well as improvements in the health of these enrollees.

Response: We agree with commenters that utilization of specified sex-trait modification procedures is low. As we stated in the proposed rule, less than 1 percent of the U.S. population seeks forms of sex- trait modification \276\ and this low utilization is also apparent in the EDGE limited data set.\277\ We agree with commenters that, as result of this low utilization, we anticipate the premium impact of this policy will be minimal. This includes only minimal cost effects to the extent this policy results in decreased complications requiring care due to fewer sex-trait modification procedures.

\276\ See, Hughes, L.; Charlton, B.; Berzansky, I.; et. al. (2025, Jan. 6). Gender-Affirming Medications Among Transgender Adolescents in the U.S., 2018-2022. JAMA Pediatr. 179(3):342-344. https://jamanetwork.com/journals/jamapediatrics/fullarticle/2828427; see also, Dai, D.; Charlton, B.; Boskey, E.; et. al. (2024, June 27). Prevalence of Gender-Affirming Surgical Procedures Among Minors and Adults in the US. JAMA Netw Open. 7(6):e2418814. https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2820437.

\277\ The EDGE limited data set contains certain masked enrollment and claims data for on- and off-Exchange enrollees in risk adjustment covered plans in the individual and small group (including merged) markets, in States where HHS operated the risk adjustment program required by section 1343 of the ACA, and is derived from the data collected and used for the HHS-operated risk adjustment program.

We are finalizing a premium adjustment percentage of 1.6726771319 for PY 2026 based on the change to the premium measure for calculating the premium adjustment percentage that we are finalizing in this rule. Under Sec. 156.130(e), we are finalizing the use of average per enrollee private health insurance premiums (excluding Medigap and property and casualty insurance), instead of ESI premiums, which were used in the calculation since PY 2022, for purposes of calculating the premium adjustment percentage for PY 2026 and beyond. The annual premium adjustment percentage sets the rate of change for several parameters detailed in the ACA, including the annual limitation on cost sharing (defined at Sec. 156.130(a)); the reduced annual limitations on cost sharing; the required contribution percentage used to determine eligibility for certain exemptions under section 5000A of the Code (defined at Sec. 155.605(d)(2)); and the employer shared responsibility payments under sections 4980H(a) and 4980H(b) of the Code.

As explained in the 2025 Marketplace Integrity and Affordability proposed rule, our policy to use private health insurance premiums (excluding Medigap and property and casualty insurance) in the premium adjustment percentage calculation will result in a higher overall premium growth rate measure than if we continued to use ESI premiums as was used for prior plan years and in the October 2024 PAPI Guidance.\278\ To further elaborate on the potential impacts of this policy change, in Sec. 155.605(d)(2), we are finalizing a required contribution of 8.05 percent for PY 2026 using the finalized premium adjustment percentage in Sec. 156.130 to supersede the previous required contribution of 7.70 percent for PY 2026 calculated from ESI premiums previously published in the October 2024 PAPI Guidance.\279\ Pursuant to Sec. 156.130(a)(2), we are finalizing a maximum annual limitation on cost sharing of $10,600 for self-only coverage for PY 2026 to supersede the maximum annual limitation on cost sharing of $10,150 for self-only coverage for PY 2026 calculated from ESI premiums previously published in the October 2024 PAPI Guidance.\280\ The CMS Office of the Actuary estimates that the change in methodology for the calculation of the premium adjustment percentage may have the following impacts between PY 2026 and PY 2030: \281\

\278\ CMS. (2024, Oct. 8). Premium Adjustment Percentage, Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost Sharing, and Required Contribution Percentage for the 2026 Benefit Year. https://www.cms.gov/files/document/2026-papi-parameters-guidance-2024-10-08.pdf.

\279\ Ibid.

\280\ Ibid.

\281\ CMS Office of the Actuary's estimates are based on their health reform model, which is an amalgam of various estimation approaches involving Federal programs, ESI, and individual insurance choice models that ensure consistent estimates of coverage and spending in considering legislative changes to current law.

Table 12--Impacts of Final Modifications to the Premium Adjustment Percentage Methodology, PYs 2026-2030

Calendar year 2026 2027 2028 2029 2030

Exchange Enrollment Impact -80 -80 -80 -80 -80

(enrollees, thousands)......... Premium Impacts:

Gross Premium Impact (%).... 0% 0% 0% 0% 0%

Net Premium Impact (%)...... 2% 2% 2% 2% 2% Federal Impacts:

PTC (million, $)............ -1,270 -1,340 -1,410 -1,480 -1,550

Employer Shared 0 0 3 11 20

Responsibility Payment

(million, $)...............

Total Federal Impact -1,270 -1,340 -1,413 -1,491 -1,570

(million, $) *.........

* Note: While the PTC impact figures are negative to signify reductions in Federal outlays, and the employer

shared responsibility payment figures are positive to signify increased revenue to the Federal Government,

they are totaled together to indicate savings for the Federal Government.

As noted in Table 12, we expect that the change in measure of premium growth used to calculate the premium adjustment percentage for PY 2026 may result in:

Net premium increases of approximately $530 million per year for PY 2026 through PY 2030, which is approximately 2 percent of PY 2024 net premiums. Net premiums are calculated for Exchange enrollees as premium charged by issuers minus APTC.

A decrease in Federal PTC spending of between $1.27 billion and $1.55 billion annually from 2026 to 2030, due to an increase in the PTC applicable percentage and a decline in Exchange enrollment of approximately 80,000 individuals in PY 2026, based on an assumption that the Department of the Treasury and the IRS will adopt the use of the same premium measure finalized for the calculation of the premium adjustment percentage in this final rule for purposes of calculating the indexing of the PTC applicable percentage and the required contribution percentage under section 36B of the Code. We anticipate that enrollment may decline by 80,000 individuals in PY 2026, and enrollment will remain lower by 80,000 individuals in each year between 2026 and 2030 than it would if there were no change in premium measure for the premium adjustment percentage for PY 2026 and beyond.

Increased Employer Shared Responsibility Payments of $3 to $20 million each year between 2028 and 2030.

The small increase in net premiums will reduce the number of people who qualify for fully-subsidized plans through the Exchanges. Therefore, by reducing the number of people who qualify for fully- subsidized plans, we anticipate this premium measure will reduce enrollments in APTC coverage and, in turn, reduce APTC expenditures.

Some of the 80,000 individuals estimated to not enroll in Exchange coverage as a result of the change in the measure of premium growth used to calculate the premium adjustment percentage may purchase short- term, limited-duration insurance, catastrophic coverage, or join a spouse's health plan, though some will become uninsured. Any of these transitions may result in greater exposure to health care costs, which previous research suggests reduces utilization of health care services, including unnecessary or counterproductive services.\282\ However, some individuals who transition into short-term plans, catastrophic health plans, or who join their spouses' coverage may also experience an increase in health utilization because the provider networks for such plans tend to be more expansive than plans on the individual market.\283\ \284\ This means that such individuals may be able to better access providers who can address their specific health needs. However, the increased number of uninsured may increase Federal and State uncompensated care costs and may contribute to negative public health outcomes.\285\ We sought feedback from interested parties about these impacts and the magnitude of these changes in the proposed rule.

\282\ Manning, W.G., Newhouse, J.P., Duan, N., Keeler, E.B., & Leibowitz, A. (1987). Health insurance and the demand for medical care: evidence from a randomized experiment. The American economic review, 251-277; Keeler, E.B., & Rolph, J.E. (1988). The demand for episodes of treatment in the health insurance experiment. Journal of health economics, 7(4), 337-367; Buntin, M.B., Haviland, A., McDevitt, R. & Stood, N. (2011). Healthcare Spending and Preventive Care in High-Deductible and Consumer-Directed Health Plans. The American Journal of Managed Care, 17(3), 222-230; Finkelstein, A., et al. (2012). The Oregon health insurance experiment: evidence from the first year. The Quarterly journal of economics, 127(3), 1057- 1106; Brot-Goldberg, Z.C., Chandra, A., Handel, B.R., & Kolstad, J.T. (2017). What does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics. The Quarterly Journal of Economics, 132(3). 1261-1318.

\283\ Burns, A. et. al. (2019, Jan.) How CBO and JCT Analyzed Coverage Effects of New Rules for Association Health Plans and Short-Term Plans. Congressional Budget Office. p. 6. https://www.cbo.gov/system/files/2019-01/54915-New_Rules_for_AHPs_STPs.pdf.

\284\ Cruz, D; Fann, G. (2024, Sept.). It's Not Just the Prices: ACA Plans Have Declined in Quality Over the Past Decade. Paragon Health Institute. https://paragoninstitute.org/private-health/its-not-just-the-prices-aca-plans-have-declined-in-quality-over-the-past-decade/.

\285\ See, for example, Goldin, J., Lurie, I.Z., & McCubbin, J. (2021). Health Insurance and Mortality: Experimental Evidence from Taxpayer Outreach. The Quarterly Journal of Economics, 136(1), 1-49.

As noted previously in this final rule, the premium adjustment percentage is the measure of premium growth that is used to set the rate of increase for the maximum annual limitation on cost sharing, defined at Sec. 156.130(a). Pursuant to Sec. 156.130(a)(2), we finalized a maximum annual limitation on cost sharing of $10,600 for self-only coverage for PY 2026. Additionally, we finalized reductions in the maximum annual limitation on cost sharing for silver plan variations (Table 5 in section III.C.2.b. of this final rule).

We sought comment on these proposed impact estimates and assumptions related to the proposed change to the premium measure for calculating the premium adjustment percentage for PY 2026 and beyond.

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. Because comments on these estimates were combined with general comments on this policy, we summarize and respond to public comments received on these proposed estimates in section III.C.2. of this final rule. 16. Levels of Coverage (Actuarial Value) (Sec. Sec. 156.140, 156.200, 156.400)

We are finalizing changing the de minimis ranges at Sec. 156.140(c) beginning in PY 2026 to +2/-4 percentage points for all individual and small group market plans subject to the AV requirements under the EHB package, other than for expanded bronze plans,\286\ for which we are finalizing a de minimis range of +5/-4 percentage points. We are also finalizing revisions to Sec. 156.200(b)(3) to remove from the conditions of QHP certification the de minimis range of +2/0 percentage points for individual market silver QHPs. We are also finalizing amendments to the definition of “de minimis variation for a silver plan variation” in Sec. 156.400 to specify a de minimis range of +1/-1 percentage points for income-based silver CSR plan variations.

\286\ Expanded bronze plans are bronze plans currently referenced in Sec. 156.140(c) that cover and pay for at least one major service, other than preventive services, before the deductible or meet the requirements to be a high deductible health plan within the meaning of section 223(c)(2) of the Code.

As noted in the 2025 Marketplace Integrity and Affordability proposed rule, we believe that changing the de minimis ranges for standard metal level plans (except for individual market silver QHPs) will not generate a transfer of costs for consumers overall. Wider de minimis ranges will allow issuers to design plans with a lower AV than is possible currently, which will reduce the generosity in health plan coverage for out-of-pocket costs. However, we expect that issuers will, in turn, lower overall premiums. We estimate the premiums could decrease approximately 1.0 percent on average because of benefit changes issuers will make with a wider de minimis range. Lower overall premiums will have positive effects for consumers over the longer term as issuer participation increases and coverage options improved, which will attract more young and healthy enrollees into health plans, improving the overall risk pool and reducing overall costs that could

mitigate any increase in consumer out-of-pocket costs.

As shown in Table 13, the policy to widen the de minimis range for individual market silver QHPs to +2/-4 percentage points will generate a transfer of costs in the short-term from consumers to the government and issuers in the form of decreased APTC, because widening the de minimis range for silver plans can affect the generosity of the SLCSP. The SLCSP is the benchmark plan used to determine an individual's PTC. A subsidized enrollee in any county that has a SLCSP that is currently at or above 70 percent AV will see the generosity of their current SLCSP decrease, resulting in a decrease in PTC.

Table 13--PTC Impact of +2/-4 Silver De Minimis Plan AVs, 2026-2029

Calendar year 2026 2027 2028 2029

Change in PTC................... -$1.22 billion.... -$1.28 billion.... -$1.33 billion.... -$1.40 billion.

Fiscal year 2026.............. 2027.............. 2028.............. 2029

Change in PTC................... -$0.92 billion.... -$1.27 billion.... -$1.32 billion.... -$1.38 billion.

This policy, by itself, would not invalidate the cost-sharing design of any health plan an issuer currently plans to offer in PY 2026. As explained above, this policy only expands the universe of permissible plan AVs and will not preclude issuers from continuing to design plans with an AV that is closer to the middle of the applicable de minimis ranges instead of plans at the outer limits. To the extent that issuers believe that plan designs that have a particular AV will attract more enrollment, they will remain free to do so under this policy.

In addition, changing the de minimis range for standard silver plans will impact Individual Coverage Health Reimbursement Arrangements (ICHRAs), which use the Lowest Cost Silver Plan (LCSP) as the benchmark to determine whether an ICHRA is considered affordable to an employee. Under this policy, as premiums decrease, an employer will have to contribute less to an ICHRA to have it be considered affordable. This could encourage large employer use of ICHRAs because large employers need to offer affordable coverage to satisfy the employer shared responsibility provisions.

We sought comment on the proposed impact estimates and assumptions, as well as any timing considerations with its proposed implementation.

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

Comment: A few commenters estimated that PTCs would decrease between $327 and $714 per year for a typical family of four as a result of this proposal.

Response: We thank these commenters for their estimates, and do not find these estimates to be incomparable to the PTC impact estimates in Table 13. Therefore, we have taken these estimates into account in deciding to finalize the widened de minimis ranges as proposed. 17. Regulatory Review Cost Estimation

Due to the uncertainty involved with accurately quantifying the number of entities that will review the rule, we assume that the total number of unique commenters on the 2025 Marketplace Integrity and Affordability proposed rule will be the number of reviewers of this final rule. We acknowledge that this assumption may understate or overstate the costs of reviewing this rule. It is possible that not all commenters reviewed the proposed rule in detail, and it is also possible that some reviewers chose not to comment on the proposed rule. For these reasons, we believe that the number of commenters to the proposed rule would be a fair estimate of the number of reviewers of this rule. We welcomed any public comments on the approach in estimating the number of entities that would review the proposed rule. We did not receive any public comments specific to our solicitation.

We also recognize that different types of entities are in many cases affected by mutually exclusive sections of this proposed rule, and therefore for the purposes of our estimate, we assume that each reviewer reads approximately 50 percent of the rule. We sought public comments on this assumption. We did not receive any public comments specific to our solicitation.

Using the wage information from the BLS for medical and health service managers (Code 11-9111), we estimate that the cost of reviewing this final rule is $113.42 per hour, including overhead and fringe benefits.\287\ Assuming an average reading speed of 250 words per minute, we estimate that it would take approximately 5.25 hours for the staff to review half of this final rule. For each entity that reviews the rule, the estimated cost is approximately $595.46 (5.25 hours x $113.42). Therefore, we estimate that the total cost of reviewing this regulation is approximately $15,493,869 ($595.46 x 26,020 reviewers).

\287\ U.S. Bureau of Labor Statistics. (n.d.). Occupational Employment and Wage Statistics. Dep't. of Labor. https://www.bls.gov/oes/current/oes_nat.htm.

We sought comment on the analysis in the proposed rule.

We did not receive any comments in response to the analysis in the proposed rule. Therefore, we are finalizing this analysis as presented in the preceding paragraphs. 18. Overall Impact of the Final Individual Market Program Integrity Provisions

In the regulatory impact analysis of this final rule, we include impact analyses and estimates for each policy separately, as we intend for each provision to be severable from the rest. Please see section III.F. of this final rule for a more detailed discussion on the severability of the provisions of this rule. However, we anticipate that the provisions of this final rule, while severable, may work in concert with each other and affect many of the same individuals seeking coverage through the individual health insurance market. Therefore, the overall impact of this final rule will likely be less than the simple accumulation of the individual provisions' impact analyses. To the best of our ability, we provide overall impact estimates of these provisions with respect to enrollment, premiums, and APTC, that minimize the overlap of individuals affected. These estimates use a baseline of current law such that a reduction in enrollment attributable to the expiration of enhanced PTCs in the

IRA on December 31, 2025, is generally accounted for separately from these estimates, as such a reduction would not be due to the provisions in this final rule. These estimates consider the enrollment, premium, and APTC impact solely due to the provisions in this final rule, compared to what would occur if these provisions were not finalized. We have updated this analysis due to revised policies in this final rule compared to the proposals in the 2025 Marketplace Integrity and Affordability proposed rule. The proposed analysis may be found at 90 FR 13020 through 13026.

As this updated analysis shows, we expect the provisions of this final rule that sunset after PY 2026 will work to more quickly remove improper enrollments that exploited the availability of fully- subsidized coverage. The Department acknowledges, however, that there are numerous uncertainties regarding how the expiration of enhanced subsidies and the policies in this final rule will affect market conditions and coverage, especially following the sunset of certain policies finalized in this rule. Although there is data available from which we can draw reasonable conclusions regarding the causes of improper enrollments over recent years, there are many unknowns. As the Department and commenters agree, it is not possible to know with certainty which $0 premium plan enrollments were for persons who improperly took advantage of enhanced subsidies and the availability of $0 premium plans, and which represent improper exploitation of those benefits. The inability to trace the causes of potentially millions of unauthorized enrollments is exacerbated by data collection challenges and infrastructure gaps caused and identified after March 2020 when the COVID-19 public health emergency started and today when various temporary policies are still in the process of being ended and their impact understood. For instance, under the Medicaid continuous coverage requirements, States were required to maintain Medicaid enrollment for beneficiaries (who may have been otherwise eligible for Exchange coverage) and were prohibited from disenrolling consumers in limited circumstances. This policy potentially increased dual enrollments in both Medicaid and Exchanges in prior years while the continuous coverage requirement was in place. The end of the continuous coverage requirement reasonably could have caused spikes in enrollment in $0 premium plans. These circumstances have led the Department to conclude that it is reasonable to codifying certain policies through the end of PY 2026 in response to commenter concerns. The estimates presented in this section consider the increased instability of the health care and insurance markets that resulted from these changes and the massive amounts of improper Exchange enrollments.

The estimates we present were calculated as follows. CMS Marketplace Open Enrollment Period (OEP) Public Use Files (PUFs) contain data on individual Marketplace activity, including the demographic characteristics of consumers who made a plan selection. The Integrated Public Use Microdata Series (IPUMS) USA data provides access to samples of the American population drawn from sixteen Federal censuses, including the U.S. Census Bureau's American Community Survey (ACS). A 2024 study published in the American Journal of Health Economics (AJHE) estimated and analyzed the take-up rate of Marketplace insurance in the 39 States that used Healthcare.gov by comparing confidential microdata on all FFE enrollees who selected a plan during an open or SEP and effectuated their enrollment between 2015 and 2017 with the ACS 5-year public-use microdata sample for 2013-2017.\288\ This methodology was adapted in a 2024 paper by the Paragon Health Institute to calculate erroneous and improper enrollments for 2024 by comparing CMS Marketplace OEP PUF data with ACS 1-year microdata.\289\ Both of these approaches use ACS data to identify the non-elderly adult population that is potentially eligible for Exchange coverage and exclude individuals who are enrolled in Medicare or Medicaid. The AJHE study additionally excludes individuals receiving health insurance through an employer or TRICARE. There are also methodological differences between the two studies in how income eligibility for subsidized Exchange coverage is determined with the AJHE study estimating and imputing modified adjusted gross income (MAGI) for ACS survey respondents. We have carefully considered both these sources and used the Paragon Health Institute methodology in the following analysis as a way to quantify erroneous and improper enrollments using CMS Marketplace OEP PUFs data and IPUMS USA data using the best available data.

\288\ Hopkins, B. et al. (2024). How Did Take-Up of Marketplace Plans Vary with Price, Income, and Gender? American Journal of Health Economics, 11(1 winter 2025). Retrieved from https://doi.org/10.1086/727785.

\289\ Blase, B. & Gonshorowski, D. (n.d.). The Great Obamacare Enrollment Fraud. Retrieved from https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud/.

The analysis in Table 14 below compares sign-ups during the OEP for people with expected income between 100 and 150 percent of the FPL by State to the number of State residents in this income range who are eligible for Exchange coverage for the years 2019, 2023, and 2024. The number of plan selections on the Exchanges among people with expected incomes between 100 and 150 percent of the FPL are from the CMS Marketplace OEP PUFs data.\290\ This information is based on the consumer's attestation of income for those who actively submitted an application for coverage for the specified plan year. For PYs 2023 and 2024, it reflects verified data on the prior year's income for those consumers who were auto re-enrolled without actively submitting an application for the current plan year.\291\ The number of State residents in the 100 to 150 percent of the FPL income range who are potentially eligible for Exchange coverage in each year is estimated using the 2019 and 2023 1-year ACS files from IPUMS USA.\292\ State residents ages 19-64 with household incomes between 100 and 150 percent of the FPL who are not enrolled in Medicaid or Medicare are considered potentially eligible for Exchange coverage. This follows a methodology used in prior research and excludes children age 18 and under who are eligible for Medicaid or the Children's Health Insurance Program (CHIP) if their incomes are in this range,\293\ as well as adults ages 65 and older who are likely eligible for Medicare.\294\ Because the 2024 ACS microdata is not yet available, the number of individuals potentially eligible for Exchange coverage in this income range for each State during 2024 was estimated by applying State-level estimates of population change from

2023 to 2024 from the United States Census Bureau to the 2023 ACS estimates.\295\ This adjustment assumes that changes in population within the 100 to 150 percent of the FPL range are similar to those within the State and ignores any potential distributional changes. Minnesota, New York,\296\ and Oregon were excluded from the analysis due the presence of a BHP for low-income residents during at least part of the analysis period.\297\ The District of Columbia was excluded from the analysis due to insufficient income information available in the OEP PUF. In addition, a 2019 estimate for Idaho is not reported due to unavailable income information in the OEP PUF for this year.\298\

\290\ Marketplace Products. (n.d.). Retrieved from https://www.cms.gov/data-research/statistics-trends-and-reports/marketplace-products.

\291\ Public Use Files: Definitions. (2024). Retrieved from https://www.cms.gov/files/document/2024-public-use-files-definitions.pdf; https://www.cms.gov/files/document/2023-public-use-files-definitions.pdf.

\292\ Ruggles, S., et al. (2023). IPUMS USA: Version 15.0 [dataset]. Retrieved from https://www.ipums.org/projects/ipums-usa/d010.V15.0.

\293\ Medicaid/CHIP Upper Income Eligibility Limits for Children, 2000-2024. (n.d.). Retrieved from https://www.kff.org/medicaid/state-indicator/medicaidchip-upper-income-eligibility-limits-for-children/.

\294\ Blase, B. & Gonshorowski, D. (n.d.). The Great Obamacare Enrollment Fraud. Retrieved from https://paragoninstitute.org/private-health/the-great-obamacare-enrollment-fraud/.

\295\ State Population Totals and Components of Change: 2023- 2024[Vintage 2024]. https://www.census.gov/data/tables/time-series/demo/popest/2020s-state-total.html#v2024.

\296\ New York operated a BHP from April 1, 2015, through April 1, 2024. See https://www.medicaid.gov/basic-health-program.

\297\ Basic Health Program. (n.d.). Retrieved from https://www.medicaid.gov/basic-health-program/index.html.

\298\ Public Use Files: Definitions. Retrieved from https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/marketplace-products/downloads/2019publicusefilesdefinitions-.pdf.; https://www.cms.gov/data-research/statistics-trends-and-reports/marketplace-products/2019-marketplace-open-enrollment-period-public-use-files.

The comparisons presented in Table 14 include columns that calculate the take-up of Exchange coverage by dividing Exchange enrollment for each State by the corresponding estimate of eligible State residents from the ACS and multiplying by 100. While these estimates are useful for understanding trends in Exchange enrollment over time and different patterns of enrollment across States, they should not be interpreted as precise measures of take-up of Exchange coverage for several reasons. First, this methodology relies on 1-year samples of the ACS to estimate eligible State populations, which provides a current portrait of residents meeting the 100 to 150 percent of the FPL criteria in each year but leads to less precise estimates than the use of multi-year ACS samples with larger sample sizes.\299\ Second, it uses the Census definition of poverty to identify residents with family incomes between 100 to 150 percent of the FPL, which differs from the MAGI relative to poverty measure that is used to determine eligibility for PTC on the Exchanges and reported in the OEP PUFs.\300\ There are differences in both the sources of income that are included in the definition of income, as well as which household members are included in the calculation.\301\ In addition, the ACS is fielded throughout the calendar year and asks about income during the previous 12 months,\302\ meaning that this survey measure does not align with income during the calendar/plan year. Third, there is a tendency for income to be underreported in survey data, including in the ACS.\303\ Fourth, the eligible population estimated using the ACS includes certain individuals who would not be eligible for subsidized Exchange coverage, including those with access to affordable employer- based coverage,\304\ those with Medicaid coverage that they did not report on the survey,\305\ immigrants who are not lawfully present,\306\ and people enrolled in Department of Veteran Affairs (VA) health care. Finally, the eligible population estimated using the ACS does not include certain individuals who are eligible for Exchange coverage and are included in the enrollment counts in the OEP PUFs, such as people aged 65 or older who do not qualify for premium-free Medicare.\307\ We acknowledge these limitations and sought comment in the proposed rule on ways to improve these analyses in the final rule. For instance, possible revisions to this analysis could include the use of multi-year ACS samples or the refinement of the measures of income and family unit used in the ACS to more closely align with Exchange PTC eligibility determination.

\299\ Using 1-Year or 5-Year American Community Survey Data. (2020). Retrieved from https://www.census.gov/programs-surveys/acs/guidance/estimates.html.

\300\ What's Included as Income. (n.d.). Retrieved from www.healthcare.gov/income-and-household-information/income/.

\301\ State Health Access Data Assistance Center. (2023). Defining Family for Studies of Health Insurance Coverage. Retrieved from https://shadac-pdf-files.s3.us-east-2.amazonaws.com/s3fs-public/publications/2023%20Defining%20families%20brief.pdf.

\302\ Rothbaum, J.L. (2015). Comparing Income Aggregates: How do the CPS and ACS Match the National Income and Product Accounts, 2007-2012. Retrieved from https://www.census.gov/content/dam/Census/library/working-papers/2015/demo/SEHSD-WP2015-01.pdf.

\303\ About Income. (n.d.). Retrieved from https://www.census.gov/topics/income-poverty/income/about.htmlhttps://www.census.gov/content/dam/Census/library/working-papers/2015/demo/SEHSD-WP2015-01.pdf.

\304\ People with coverage through a job. (n.d.) Retrieved from https://www.healthcare.gov/have-job-based-coverage/options/.

\305\ O'Hara, Brett. (2009). Is there an undercount of Medicaid participants in the ACS Content Test? Retrieved from https://www.census.gov/content/dam/Census/library/working-papers/2009/adrm/medicaid-participants-acs-content-test.pdf.

\306\ Coverage for lawfully present immigrants. (n.d.). Retrieved from https://www.healthcare.gov/immigrants/lawfully-present-immigrants/.

\307\ FAQs: Health Insurance Marketplace and the ACA. I am turning 65 years old next month, but I am not entitled to Medicare without having to pay a premium for Part A because I have not worked long enough to qualify. Can I sign up for a Marketplace plan? (n.d.). Retrieved from https://www.kff.org/faqs/faqs-health-insurance-marketplace-and-the-aca/i-am-turning-65-years-old-next-month-but-i-am-not-entitled-to-medicare-without-having-to-pay-a-premium-for-part-a-because-i-have-not-worked-long-enough-to-qualify-can-i-sign-up-for-a-marketplace-pla/.

Table 14 shows there is large variation in the take-up of Exchange coverage among potential enrollees across States. It also indicates that there has been a substantial increase in take-up from the estimated 43.8 percent of potential enrollees in this set of States who enrolled in Exchange coverage for PY 2019. The estimates for 2023 and 2024 are 94.2 percent and 143.9 percent, respectively. These overall take-up estimates by year exclude Idaho given the lack of income information available for this State in 2019.

Nine States have take-up rates that exceed 100 percent for PY 2024, indicating that there are a larger number of Exchange enrollees reporting incomes of between 100 and 150 percent of the FPL than residents reporting incomes in this range on the ACS. While estimates slightly above 100 percent could potentially be attributed to imprecision in population estimates or differences in the measurement of income as described above, these explanations seem less likely for take-up estimates that greatly exceed 100 percent, such as the 438 percent observed for Florida in 2024. Other possible explanations for such a high take-up rate include people misestimating their income for the plan year at the time of open enrollment, as sign-ups typically occurring in the fall prior to the plan year and individuals may earn more or less than they expected, or people not updating their income information if auto re-enrolled with the prior year's income data in 2023 and 2024. These would constitute errors. To the extent that people with incomes below 100 percent of the FPL intentionally overstate their income in order to qualify for subsidized Exchange coverage or are counseled to do so by an agent, broker, or web-broker, or if people outside this income range are unknowingly enrolled by an agent, broker, or web-broker who claim their income at 100 to 150 percent of the FPL, these types of improper enrollments would also contribute to a take-up rate that exceeds 100 percent. Of note, 7 of the 9 States with take-up rates above 100 percent in 2024 are States that have not implemented ACA Medicaid expansions.\308\ Medicaid eligibility for

non-elderly and non-disabled adults in these States is limited to parents who meet a median income eligibility threshold of 27 percent of the FPL.\309\ Previous research presents evidence suggesting that many people with incomes that exceed the Medicaid eligibility limit in non- ACA Medicaid expansion States, especially in Florida, obtain subsidized Exchange coverage by reporting income just above the FPL at enrollment.\310\

\308\ Status of State Medicaid Expansion Decisions. (2025, February 12). Retrieved from https://www.kff.org/status-of-state-medicaid-expansion-decisions/.

\309\ Medicaid Income Eligibility Limits for Adults as a Percent of the Federal Poverty Level. (2024, 1 May). Retrieved from https://www.kff.org/affordable-care-act/state-indicator/medicaid-income-eligibility-limits-for-adults-as-a-percent-of-the-federal-poverty-level/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D. Parental income eligibility limits for parents in a family of three as of May 1, 2024 for each of the 7 States are 18 percent of the FPL in Alabama, 27 percent of the FPL in Florida, 30 percent of the FPL in Georgia, 27 percent of the FPL in Mississippi, 67 percent of the FPL in South Carolina, 105 percent of the FPL in Tennessee, and 15 percent of the FPL in Texas. Other adults are not eligible.

\310\ Hopkins, B. et al. (2024). How Did Take-Up of Marketplace Plans Vary with Price, Income, and Gender? American Journal of Health Economics, 11(1 winter 2025). Retrieved from https://doi.org/10.1086/727785.

One approach to estimate the possible reduction in erroneous and improper enrollments under the changes in this rule is to sum the total number of enrollments in 2024 that exceed 100 percent of potential enrollees in Table 14. This calculation suggests that there are as many as 4.4 million erroneous or improper enrollments. This is expected to be an upper bound estimate of the scale of erroneous and improper enrollments. PY 2024 Exchange enrollments occurred prior to recent HHS actions to improve program integrity, which were expected to reduce the number of improper and erroneous enrollments prior to the implementation of the provisions in this final rule. Additionally, this estimate fully attributes excess enrollments to error and improper enrollments and does not adjust for the presence of general uncertainty around expected income among enrollees, which is not expected to change as a result of the provisions, nor does it take into account the imprecision inherent in the use of survey data to identify and measure the population eligible for Exchange coverage. However, despite HHS actions to improve program integrity, there was still a substantial increase in plan selections during the PY 2025 OEP, suggesting the possibility that erroneous and improper enrollments may have increased further this year. In addition, the excess enrollment estimate ignores the potential presence of erroneous and improper enrollments in States with take-up rates below 100 percent and, in this way, could underestimate the potential impact of the provisions. For all of these reasons, there is uncertainty present regarding the estimate derived from this analysis. We acknowledge this uncertainty and sought comment in the proposed rule on how we may improve this estimate in final rulemaking.

Table 14--Exchange Sign-Ups Compared to Potential Enrollees at 100-150 Percent of the FPL Income, by State and Year

2019 2023 2024

Exchange Potential Take-up rate Exchange Potential Take-up rate Exchange Potential Take-up

sign-ups enrollees (%) sign-ups enrollees (%) sign-ups enrollees rate (%)

Alabama.......................... 70,951 162,156 43.8 119,737 161,318 74.2 228,883 162,580 140.8 Alaska........................... 1,896 16,161 11.7 2,050 11,860 17.3 2,317 11,918 19.4 Arizona.......................... 20,565 177,646 11.6 49,204 153,762 32.0 114,197 156,012 73.2 Arkansas......................... 11,893 106,418 11.2 23,680 90,011 26.3 56,640 90,565 62.5 California....................... 242,016 758,412 31.9 274,117 630,793 43.5 278,204 634,536 43.8 Colorado......................... 15,222 104,067 14.6 14,327 85,286 16.8 14,786 86,098 17.2 Connecticut...................... 8,292 51,747 16.0 8,315 46,834 17.8 12,991 47,246 27.5 Delaware......................... 2,886 16,730 17.3 3,584 13,723 26.1 8,374 13,928 60.1 Florida.......................... 981,323 742,425 132.2 1,961,049 608,549 322.2 2,718,501 620,966 437.8 Georgia.......................... 219,261 362,003 60.6 496,628 326,102 152.3 834,058 329,534 253.1 Hawaii........................... 2,352 20,557 11.4 2,571 24,026 10.7 3,006 24,105 12.5 Idaho............................ NR NR NR 4,768 43,826 10.9 8,193 44,504 18.4 Illinois......................... 52,000 255,798 20.3 78,590 198,726 39.5 111,131 199,793 55.6 Indiana.......................... 19,172 173,981 11.0 41,719 131,311 31.8 112,127 132,154 84.8 Iowa............................. 6,334 53,568 11.8 12,580 49,928 25.2 23,908 50,286 47.5 Kansas........................... 28,266 88,955 31.8 47,693 83,239 57.3 82,256 83,778 98.2 Kentucky......................... 10,401 94,295 11.0 4,748 83,064 5.7 8,534 83,754 10.2 Louisiana........................ 19,207 114,770 16.7 36,199 97,572 37.1 93,833 97,778 96.0 Maine............................ 15,854 28,318 56.0 4,312 22,190 19.4 4,581 22,275 20.6 Maryland......................... 19,450 77,124 25.2 18,522 89,654 20.7 21,599 90,320 23.9 Massachusetts.................... 37,759 66,807 56.5 17,045 67,287 25.3 30,595 67,950 45.0 Michigan......................... 43,286 201,320 21.5 64,618 171,546 37.7 122,597 172,517 71.1 Mississippi...................... 53,009 116,614 45.5 124,404 110,202 112.9 210,749 110,197 191.2 Missouri......................... 83,499 195,867 42.6 90,907 159,071 57.1 154,459 160,030 96.5 Montana.......................... 4,924 25,305 19.5 4,296 23,278 18.5 8,522 23,400 36.4 Nebraska......................... 22,677 53,748 42.2 15,563 36,846 42.2 25,158 37,172 67.7 Nevada........................... 15,548 85,249 18.2 21,208 76,288 27.8 22,471 77,548 29.0 New Hampshire.................... 5,077 19,425 26.1 5,238 13,681 38.3 8,484 13,748 61.7 New Jersey....................... 37,653 142,831 26.4 53,173 135,983 39.1 69,867 137,740 50.7 New Mexico....................... 5,744 42,939 13.4 4,016 45,821 8.8 6,747 46,017 14.7 North Carolina................... 186,358 357,623 52.1 347,551 278,562 124.8 507,098 282,782 179.3 North Dakota..................... 2,149 16,765 12.8 3,019 10,854 27.8 3,770 10,957 34.4 Ohio............................. 24,792 226,871 10.9 60,101 195,405 30.8 166,814 196,385 84.9 Oklahoma......................... 51,744 144,964 35.7 70,349 124,195 56.6 120,013 125,158 95.9 Pennsylvania..................... 63,304 213,444 29.7 62,303 187,117 33.3 81,714 187,994 43.5 Rhode Island..................... 6,449 14,631 44.1 4,453 14,798 30.1 6,117 14,917 41.0 South Carolina................... 79,543 163,892 48.5 168,217 156,016 107.8 301,553 158,651 190.1 South Dakota..................... 7,752 23,691 32.7 9,898 24,736 40.0 8,821 24,907 35.4 Tennessee........................ 73,392 215,288 34.1 158,033 180,654 87.5 310,781 182,662 170.1 Texas............................ 474,670 1,115,085 42.6 1,360,433 1,037,034 131.2 2,133,460 1,056,033 202.0 Utah............................. 56,561 92,491 61.2 87,196 74,704 116.7 133,065 76,014 175.1

Vermont.......................... 2,326 5,584 41.7 1,626 6,076 26.8 2,227 6,074 36.7 Virginia......................... 91,810 181,345 50.6 80,751 146,563 55.1 110,912 147,847 75.0 Washington....................... 20,704 122,440 16.9 16,092 112,052 14.4 21,588 113,490 19.0 West Virginia.................... 3,168 41,262 7.7 5,516 34,229 16.1 17,243 34,219 50.4 Wisconsin........................ 46,353 119,818 38.7 39,856 104,583 38.1 64,398 105,122 61.3 Wyoming.......................... 5,317 16,606 32.0 6,767 18,034 37.5 8,054 18,113 44.5

Total (excluding Idaho)...... 3,252,909 7,427,036 43.8 6,082,254 6,453,563 94.2 9,387,203 6,525,270 143.9

Sources: 2019, 2023, and 2024 CMS Marketplace Open Enrollment Period Public Use Files (OEP PUF); 2019 and 2023 1-year American Community Survey (ACS)

files from IPUMS USA. NR--Not reported. Notes: Potential enrollees by State are estimated using the ACS as State residents ages 19-64 who are not enrolled in Medicaid or Medicare. The 2024

estimates are calculated by applying a State population growth rate to the 2023 estimates. Minnesota, New York, and Oregon are excluded due to the

presence of a BHP during at least some portion of the analysis period. The District of Columbia is excluded due to the unavailability of income

information in the OEP PUF.

Furthermore, we anticipate that IRA subsidies expiring after PY 2025 will reduce the availability of fully-subsidized plans and, therefore, is expected to also reduce the occurrence of improper enrollments that exploited the availability of enhanced subsidies. That reduction in improper enrollments is not attributable to the policies in this rule, but rather by current law causing IRA subsidies to expire after PY 2025. However, there is uncertainty regarding how many improper enrollments will be reduced by the expiration of IRA subsidies compared to the policies in this rule. Moreover, in response to commenters' concerns, we finalize certain verification requirements to sunset at the end of PY 2026, creating additional uncertainty related to the level of improper enrollments in PY 2027 and beyond. We believe that coverage in connection with the majority of improper enrollments will end as a result of the enhanced subsidies; therefore, in the proposed rule, we assumed a range of approximately 750,000 to 2,000,000 fewer individuals will enroll in QHP coverage in 2026 as a result of the policies in the proposed rule. In the proposed rule, we sought comment on the estimate and assumptions and respond to such comments later in this analysis.

Based on comments and revised analysis resulting from some policy changes between the proposed and final rules, as discussed previously in this final rule, we now assume a range of approximately 725,000 to 1,800,000 fewer individuals will enroll in QHP coverage in 2026 as a result of the policies in this final rule. We use this range moving forward in this analysis. The full proposed rule analysis may be found at 90 FR 13020 through 13026.

Starting with internal CMS data of enrollment by month, premiums, and APTCs, we summarize the data using average monthly amounts. These monthly averages are projected throughout the year using historical monthly patterns during a similar environment. For future years, the enrollment is trended by the projected growth in the under age 65 population. Spending amounts are trended using projected growth in NHEA less Medicare. With the expiration of enhanced subsidies, we assume approximately 42 percent of recent enrollment growth will discontinue coverage. We believe the discontinuing enrollees are likely to be healthier than those remaining in the risk pool, leading to higher overall premiums on a per member per month (PMPM) basis ($614.44 PMPM in 2025 increasing to $662.13 PMPM in 2026). Based on the analysis presented thus far in this section, we expect average enrollment for 2026 to decrease by approximately 725,000 to 1,800,000 enrollees compared to baseline estimates. Some enrollees dropping coverage will likely be healthier than those remaining in the risk pool, while other enrollees losing coverage due to improper enrollments could potentially be less healthy, so we estimated the claims impact to the risk pool to potentially range from -0.5 percent to +4 percent. The claims changes were then combined with the estimated 3.4 percent decrease for the expected impact of removing the monthly 150 percent FPL SEP, a 0.5 percent decrease for SEP verification, and 1 percent decrease for the de minimis AV change. The 2026 baseline claims per member was decreased by 5.4 percent for the 725,000 reduced enrollment scenario and 0.9 percent for the 1,800,000 reduced enrollment scenario. The revised premium was calculated assuming issuers will price to an average 84 percent loss ratio, yielding a revised PMPM of $626.37 for the 725,000 reduced enrollment scenario and $656.17 for the 1,800,000 reduced enrollment scenario for 2026 as a result of these jointly finalized policies. Estimated APTCs were assumed to be 88.8 percent of the premium PMPM ($626.37 x 0.888 = $556.22 and $656.17 x 0.888 = $582.68), and APTC enrollment was estimated to be 90.6 percent of total enrollment for 2026. For future years under this rule, we assume premium growth of 3.9 percent for 2027 and 2028 and 1.9 percent for 2029. Enrollment growth is estimated at 1.1 percent for 2027, 1.5 percent for 2028, and 3 percent for 2029. We assume the enrollment and claims impacts from the sunsetting policies wear off over 2027 and 2028, with 80 percent of the wear-off occurring in 2027 and 20 percent occurring in 2028.

Using the methodology described in the preceding paragraphs, we anticipate the provisions in this final rule, when considered jointly, could reduce enrollment, premiums, and APTC each year beginning in 2026. We provide lower bound estimates in Table 15 and upper bound estimates in Table 16.

Table 15--Overall Enrollment and APTC Impacts of the Program Integrity Rule--Lower Bound Estimates

Calendar year 2025 2026 2027 2028 2029

Baseline:

Total Enrollment (millions)................ 21.625 17.240 17.426 17.682 18.213

APTC Enrollment (millions)................. 20.061 15.614 15.635 15.741 15.798

Premiums ($ billions)...................... 159.448 136.980 143.822 151.597 159.043

APTC ($ billions).......................... 130.960 110.188 115.911 122.564 128.584 Policies in this rule:

Total Enrollment (millions)................ 21.625 16.515 17.273 17.672 18.203

APTC Enrollment (millions)................. 20.061 14.958 15.498 15.732 15.789

Premiums ($ billions)...................... 159.448 124.134 139.070 148.953 156.270

APTC ($ billions).......................... 130.960 99.854 112.081 120.427 126.342 Change:

Total Enrollment (millions)................ ........... -0.725 -0.153 -0.010 -0.010

APTC Enrollment (millions)................. ........... -0.656 -0.137 -0.009 -0.009

Premiums ($ billions)...................... ........... -12.846 -4.752 -2.643 -2.773

APTC ($ billions).......................... ........... -10.334 -3.830 -2.137 -2.242

Table 16--Overall Enrollment and APTC Impacts of the Program Integrity Rule--Upper Bound Estimates

Calendar year 2025 2026 2027 2028 2029

Baseline:

Total Enrollment (millions)................ 21.625 17.240 17.426 17.682 18.213

APTC Enrollment (millions)................. 20.061 15.614 15.635 15.741 15.798

Premiums ($ billions)...................... 159.448 136.980 143.822 151.597 159.043

APTC ($ billions).......................... 130.960 110.188 115.911 122.564 128.584 Policies in this rule:

Total Enrollment (millions)................ 21.625 15.440 17.046 17.657 18.187

APTC Enrollment (millions)................. 20.061 13.984 15.295 15.719 15.776

Premiums ($ billions)...................... 159.448 121.574 139.313 149.870 157.231

APTC ($ billions).......................... 130.960 97.795 112.277 121.168 127.119 Change:

Total Enrollment (millions)................ ........... -1.800 -0.380 -0.025 -0.026

APTC Enrollment (millions)................. ........... -1.630 -0.340 -0.022 -0.022

Premiums ($ billions)...................... ........... -15.406 -4.509 -1.727 -1.812

APTC ($ billions).......................... ........... -12.393 -3.634 -1.396 -1.465

Taken together, the provisions of this final rule are expected to address errors and improper enrollments, which means that as presented in the preceding paragraphs, we expect approximately 725,000 to 1,800,000 individuals to lose coverage as a result of the provisions in this rule. This range may overestimate the actual number of individuals impacted, as we believe that this range includes many individuals improperly enrolled by agents, brokers, and web-brokers without their knowledge or consent, as well as enrollees with multiple forms of coverage. Likewise, this range may underestimate the actual number of individuals impacted, as eligible enrollees may lose coverage as a result of the administrative burdens imposed by the provisions of this rule. Finally, as explained by the Department in the proposed rule and this final rule, as well by commenters, estimation of the number of individuals impacted may likely be skewed due to the general difficulty in assigning with certainty the causes of improper enrollments. We note that coverage losses are expected to be concentrated in nine States where erroneous and improper enrollment is most noticeable (that is, Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Utah), although we also expect minor coverage losses across all States as the administrative burdens associated with this rule would be applied uniformly across the country.

An individual who loses coverage may be required to incur additional expense to obtain coverage or may go uninsured. An increase in the rate of uninsurance may impose greater burdens on the health care system through strain on emergency departments, additional costs to the Federal Government and to States to provide limited Medicaid coverage for the treatment of an emergency medical condition, and may cause an overall reduction to labor productivity.

In contrast, if individuals who do not maintain coverage following the finalization of this rule would otherwise be subsidized QHP enrollees, as we anticipate, there would be a savings to the Federal Government in the form of reduced APTC payments (net of increased QHP- related payments), thereby saving taxpayer dollars. As we explain earlier in this final rule, the Department has strong reason to believe many of the individuals who would lose coverage as a result of the policies in this rule may represent improper enrollments.

While we acknowledge the finalization of this rule may impact enrollment of self-employed individuals, some of whom may qualify for subsidies, we anticipate that premiums will decrease as a result of this final rule. We note that variables--including those impacting enrollment, premiums, and APTC--have changed over time and may continue to fluctuate. When considering the overall impact of the provisions in this final rule, we also recognize that the degree of impact from the individual provisions working in concert with each other may vary more than what we estimate due to the inherent uncertainty in predicting enrollment trends. Therefore, it is possible that the overall impact of this final rule could be outside of the estimates provided in this section.

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 these impact estimates for this rule with the modifications presented earlier in this section. We summarize and respond to public comments received on the proposed estimates below.

Comment: Several commenters noted that a decrease in enrollment would result in increased emergency care utilization and increased costs of uncompensated care, Medicare, and State Medicaid expenditures. These commenters also discussed how uninsurance leads to disrupted continuity of care and poorer health outcomes. A few comments from State entities provided estimates of enrollment reductions and premium increases in their specific States.

Some commenters alleged that the proposed rule would negatively impact market stability, discourage issuer participation, worsen the risk pool, and increase premiums for all enrollees. A few of these commenters stated that coverage losses would be concentrated in healthy populations, resulting in premium increases that would especially impact unsubsidized enrollees.

Response: We appreciate the additional data provided by States and have considered it in the analysis in this final rule. As discussed previously in this RIA, we acknowledge that a decrease in enrollment may have the consequences noted by commenters. However, we anticipate that most of this decrease in enrollment will be attributable to improper enrollments that should never have enrolled in Exchange coverage. As documented in a CMS press release from 2024, we received and resolved over 180,000 unauthorized enrollment complaints from January to August 2024.\311\ Therefore, we do not anticipate that the decrease in enrollment estimated in this final rule will impact many enrollees who are properly enrolled.

\311\ CMS (2024, October). CMS Update on Action to Prevent Unauthorized Agent and Broker Marketplace Activity. https://www.cms.gov/newsroom/press-releases/cms-update-actions-prevent-unauthorized-agent-and-broker-marketplace-activity.

Furthermore, as discussed earlier in this final rule, we also acknowledge that some enrollees dropping coverage will likely be healthier than those remaining in the risk pool, but other enrollees losing coverage due to improper enrollments could potentially be less healthy as well. Earlier in this RIA, we discuss our methodology for estimating a premium reduction resulting from the provisions in this rule, which we anticipate will benefit all enrollees regardless of subsidy receipt. We do not believe this rule will destabilize the market or discourage issuer participation, as issuers expressed in their comments their appreciation for the finalization of these program integrity provisions. We did not receive issuer comments that the proposed policy would discourage issuer participation.

Comment: One commenter stated that the RIA failed to account for the expiration of enhanced subsidies in the IRA.

Response: As discussed earlier in this section, we account for the expiration of enhanced subsidies in the IRA by assuming approximately 42 percent of recent enrollment growth will discontinue coverage and will be healthier than enrollees maintaining coverage. We then use higher overall premiums PMPM as a starting point for our analysis of the impact of this rule.

Comment: A few commenters stated that the RIA only demonstrated problems with improper enrollments in nine States, which are all on the FFE, while the policies in this rule will impact all States regardless of Exchange type. One commenter also stated that publicly available State Exchange data directly contradicted the analysis in the proposed rule. One commenter alleged that the majority of the enrollment losses estimated in the proposed rule would not be attributable to improper enrollments but did not provide evidence to support this statement.

Response: The provisions finalized in this rule were designed to reduce improper enrollments while ensuring individuals who are eligible to enroll in QHP coverage, and those who are also eligible to receive subsidies, are able to demonstrate their eligibility appropriately. As discussed previously in this analysis, we anticipate that many of the individuals who may lose coverage as a result of this rule were improperly enrolled. More importantly, we maintain that enrollees who are eligible will still be able to enroll under the provisions in this rulemaking. This would be true for both FFE and State Exchange States. We also note that as discussed elsewhere in this final rule, we are modifying the proposals regarding annual eligibility redeterminations, the annual OEP, and SEP verification to finalize policies permitting more State flexibility in recognition of these and other comments expressing concerns about State burdens, the data provided by commenters, and the results of our analysis.

Comment: A few commenters urged HHS to fully inform individuals negatively impacted by the rule of alternative care options. Another commenter stated that the proposed rule failed to consider additional costs on States of customer service and education that would result from the rule.

Response: We always conduct outreach and education campaigns around open enrollment each year, and intend to fully inform consumers about the changes finalized in this rule. Furthermore, we acknowledge that States may face additional costs for outreach and education as noted in the accounting table (Table 10 in the proposed rule and this final rule) but are unable to estimate these costs, as each State conducts such activities differently.

Comment: Some commenters stated that the proposed rule failed to identify data for many proposals.

Response: As discussed throughout the proposed rule and in this final rule, we provided data and analysis to the best of our ability that was available to us and where possible, we do provide information on the sources of data being used for the analysis. For example, in this section of the final rule, we identify that we used the CMS OEP PUFs as the basis of our analysis. Furthermore, in this final rule, we have also updated the analyses to reflect newly available data to support the provisions in this rule, which may be found in this RIA.

Comment: Several commenters alleged that the proposed rule relied on unsound data from a 2024 paper by the Paragon Health Institute which fails to mention or account for income misestimations and exaggerates the extent of possible enrollment fraud. A few of these commenters stated that the numerator of the enrollment reduction calculation uses Exchange data, which includes children, while the denominator of the calculation uses ACS data, which excludes children. These commenters also noted that using 2023 ACS data in the denominator of the calculation to estimate improper enrollments for 2024 fails to account for the Medicaid continuous coverage requirement in place in 2023 that was no longer in place for 2024, inflating the denominator. Additionally, these commenters stated that the income estimate used in Exchange data in the numerator of the calculation is for the year after the current year, while the income estimate used in ACS data in the denominator is for the current year, so they are not comparable estimates.

Finally, a few of these commenters stated that the analysis did not consider the agent/broker fraud prevention efforts CMS engaged in starting with the 2024 OEP, which has decreased improper enrollments since that time. All of these commenters alleged that these analysis flaws overstated the extent of possible enrollment fraud.

Response: We noted these limitations in the proposed rule and continue to reference them in this final rule. The Paragon report analysis informed our analysis, but we also incorporated Exchange data for a more fulsome analysis. There was a large variance between the population observed in our data for the 100 to 150 percent of the FPL income range and external survey data. This indicated a potential for a large number of enrollments that were either unauthorized or people misestimating or misrepresenting their income. Our range of enrollment lost estimated in the proposed rule was between 750,000 and 2,000,000, but we could not discern the amount of lost enrollments that were fraudulent or due to misrepresented income from those lost to other controls proposed in the proposed rule. We updated these estimates in this final rule as a result of finalizing modifications of some proposals based on these and other comments, as discussed previously in this final rule.

We considered taking no action regarding our proposal to remove Sec. 147.104(i), which currently prohibits 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 owed for prior coverage. Leaving this policy in place would provide the broadest enrollment rights for consumers. However, due to concerns about adverse selection, we believe that it is reasonable to allow issuers, to the extent permitted by applicable State law, to condition the sale of new coverage on payment of past-due premiums owed to the issuer. This policy will improve the risk pool by promoting continuous coverage without imposing a significant financial burden for most people who owe past-due premiums. We also considered prohibiting issuers from collecting past due premiums for periods of coverage dating back more than a specified time period, requiring issuers to provide enrollees notice of the past due premium policy, and other parameters. However, we decided to allow States the discretion to require and define such parameters, as they are most familiar with their markets, and to respect their traditional role of regulating insurance.

At Sec. 155.20, we are finalizing adjustments to the definition of “lawfully present” used for purposes of determining eligibility to enroll in a QHP offered through the Exchange, eligibility for PTC, APTC, and CSR, or a BHP in States that elect to operate a BHP to exclude DACA recipients. We alternatively considered proposing to fully revert to the definition of “lawfully present” that was in place prior to the 2024 Final Rule “Clarifying the Eligibility of Deferred Action for Childhood Arrivals (DACA) Recipients and Certain Other Noncitizens for a Qualified Health Plan through an Exchange, Advance Payments of the Premium Tax Credit, Cost-Sharing Reductions, and a Basic Health Program” (89 FR 39392). However, proposing to fully reinstate the previous definition would have undone several technical and clarifying changes to the definition of “lawfully present” that were finalized in the 2024 rule (89 FR 39407).

We evaluated these technical and clarifying changes and found that some had no impact on who is considered “lawfully present” for purposes of enrolling in QHP coverage offered through the Exchange, eligibility for PTC, APTC, and CSR, and BHP coverage in States that elect to operate a BHP.\312\ Other changes corrected unintentional errors in the prior definition.\313\ Finally, some changes resulted in very small populations being newly considered “lawfully present.” Unlike DACA recipients, the small number of individuals in these discrete categories generally would have entered the United States with inspection and would generally be able to adjust status to lawful permanent resident on the basis of their status.\314\ Because these changes were primarily technical and clarifying in nature, and because the small groups of noncitizens newly considered “lawfully present” as a result of these changes are different from DACA recipients in important ways, we did not propose to revert or amend these provisions at this time.

\312\ For example, technical changes to Sec. 155.20(4) and 155.20(5) to adjust the language we use to refer to temporary resident status and Temporary Protected Status (TPS), as described in the 2024 final rule at 89 FR 39408.

\313\ For example, technical changes to Sec. 155.20(13) to refer to individuals with an approved petition for Special Immigrant Juvenile (SIJ) status, rather than only individuals with applications for such status, as described in the 2024 Final Rule at 89 FR 39411.

\314\ For example, changes to Sec. 155.20(6) to newly include individuals in the process of transitioning from certain employment- based immigrant visa petitions to lawful permanent resident (LPR) status, as described in the 2024 final rule at 89 FR 39408.

We considered taking no action regarding our proposal to modify Sec. 155.305(f)(4), which currently allows Exchanges to remove APTC after an enrollee or their tax filer has been found as failing to file their income tax return and reconcile their APTC for 2 consecutive tax years. However, due to concerns about improper enrollments, as well as concerns related to the potential for increased tax liability for tax filers, we are finalizing the proposed policy that Exchanges are required to remove APTC after an enrollee or their tax filer has been identified as failing to file and reconcile for 1 tax year, but with a modification that the policy will sunset at the end of PY 2026. Exchanges will revert back to the 2-year policy for PY 2027. We believe that FTR serves as an important check on improper enrollments and will help protect low-income consumers from larger than expected tax liabilities. However, as the Department explains in Section III.B. of this final rule, sunsetting the rule responds to commenter concerns that the 2-year FTR policy we proposed would present an unreasonable impediment to continuous coverage for vulnerable persons, especially those who traditionally have not earned an amount sufficient to require them to file annual Federal tax returns. The Department shares commenter concerns that the Federal tax filing and APTC reconciliation process may be confusing to consumers who have not previously been required to file Federal tax returns. We also understand from comments by State Exchanges that the 2-year FTR policy has potentially helped avoid unnecessary gaps in some consumers' coverage. Still, the risk remains that once the 2-year FTR policy returns after PY 2026, the risk of increased consumer tax liability also returns, including for persons who genuinely believed they were eligible for the APTC paid on their behalf.

We considered taking no action regarding our policy to remove Sec. 155.315(f)(7) which requires that applicants must receive an automatic 60-day extension in addition to the 90 days currently provided by Sec. 155.315(f)(2)(ii) to allow applicants sufficient time to provide documentation to verify household income. However, we believe it is important we remove it to align with the 90-day statutory period. Additionally, we believe the cost to taxpayers caused by continued APTC beyond the 90-day period and decline in program integrity outweighs any possible benefits to the

risk pool that were identified the 2024 Payment Notice.

We considered taking no action regarding our policy to add amendments to Sec. 155.320(c)(3)(iii) to specify that all Exchanges must generate annual income inconsistencies when a tax filer's attested projected annual would qualify the taxpayer as an applicable taxpayer according to 26 CFR 1.36B-2(b) and trusted data sources indicate that projected income is under 100 percent of the FPL. Due to concerns related to applicants inflating their incomes or having applications submitted on their behalf with inflated incomes, as outlined in this final rule, the Department determined that immediate action is necessary to protect consumers and Federal funds. must take immediate action to we believe it is reasonable and necessary to carry out the alternative income verification process in this scenario. However, in response to commenter concerns and additional reasons we outline in Section III.B. of this final rule, the Department is finalizing the policy to be effective only through PY 2026. Exchanges may revert back to not setting income DMIs when an applicant's annual household income attestation would qualify the taxpayer as an applicable taxpayer according to 26 CFR 1.36B-2(b) and trusted data sources indicate that projected income is under 100 percent of the FPL for PY 2027. This will help to limit tax filers' potential liability at tax reconciliation to repay excess APTC.

We considered taking no action regarding our policy to remove Sec. 155.320(c)(5) which currently requires Exchanges to accept attestations, and not set an Income DMI, when the Exchange requests tax return data from the IRS to verify attested projected annual household income, but the IRS confirms there is no such tax return data available. However, we believe that removing Sec. 155.320(c)(5) is important for program integrity to address the level of improper enrollments due in large part to the enhanced premium subsidies. We too are cognizant of commenter concerns that this policy represents an impediment to coverage. Given this, for those reasons we outline in section III.B. of this final rule, we are finalizing this policy so that it is effective only through the end of PY 2026. Exchanges will revert back to requirements laid out in Sec. 155.320(c)(5) for PY 2027. This policy respects the Department's duty to safeguard Federal funds, while allowing the Department, Exchanges, and other interested parties to collect additional data on these newly generated income DMIs and their impacts on consumers and coverage to support future policy analysis.

We are finalizing adding Sec. 155.335(a)(3) and (n) to require that when an enrollee does not submit an application for an updated eligibility determination on or before the last day to select a plan for January 1, 2026 coverage and the enrollee's portion of the premium for the entire policy would be zero dollars after application of APTC through an Exchange on the Federal platform's annual redetermination process, all Exchanges on the Federal platform decrease the amount of the APTC applied to the policy such that the remaining monthly premium owed by the enrollee for the policy equals $5 for the first month and for every following month that the enrollee does not confirm or update the eligibility determination. This amendment is being finalized for benefit year 2026 only for Exchanges on the Federal platform, with a reversion to the previous policy for benefit year 2027 and beyond. We are not finalizing this amendment for State Exchanges.

We alternatively considered whether other methods, such as outreach, could sufficiently prompt fully-subsidized enrollees to update or confirm their eligibility information and actively re-enroll in coverage, but over half of enrollees in the Exchanges on the Federal platform actively re-enroll by the applicable deadlines for January 1 coverage. As discussed previously in this preamble, however, we do not believe additional or different notifications will prompt action from enrollees who choose not to submit an application for an updated eligibility determination and actively re-enroll.

In addition, we considered taking no action regarding our policy at Sec. 155.335; however, we believe that it is important to address the significant increase in the number of enrollees who are automatically re-enrolled in a fully-subsidized QHP, and change is critical to reduce the financial impact of improper enrollments in QHPs with APTC through the Exchanges on the Federal platform. The current annual redetermination process puts fully-subsidized enrollees at risk of accumulating surprise tax liabilities and increases the cost of PTC to the Federal Government as Federal law limits repayments, and there is no provision to recoup overpayments from issuers when they follow the eligibility determinations made by the Exchanges.

We also considered modifying the Exchange's annual redetermination process to require that when an enrollee does not submit an application to obtain an updated eligibility determination on or before the last day to select a plan for January 1 coverage and the enrollee's portion of the premium for the entire policy would be zero dollars after application of APTC through the Exchange's annual redetermination process, the enrollee would be automatically re-enrolled without any APTC. This would ensure that enrollees in this situation need to return to the Exchange and obtain an updated eligibility determination prior to having any APTC paid on their behalf for the upcoming year. Ultimately, however, we determined that this approach would create undue financial hardship for these enrollees and act as a significant barrier to accessing health care coverage. The loss of lower-risk enrollees, who are least likely to actively re-enroll, due to an inability to pay could destabilize the market risk pool and increase premiums and the uninsured rate. Based on comments received on this approach in the 2021 Payment Notice proposed rule, we believe that our temporary amendment, which decreases the amount of the APTC applied to the policy such that the remaining premium owed by the enrollee for the policy equals $5, strikes an appropriate balance between encouraging active and proper enrollment and ensuring market stability.

The 2024 Payment Notice updated Sec. 155.335(j) to allow Exchanges to move a CSR-eligible enrollee from a bronze QHP and re-enroll them into a silver QHP for an upcoming plan year, if a silver QHP is available in the same product, with the same provider network, and with a lower or equivalent net premium after the application of APTC as the bronze plan into which the enrollee would otherwise have been re- enrolled. We considered taking no action and leaving this policy in place; however, for reasons further discussed in section III.B.5. of this final rule, we believe that consumers, and the agents, brokers, web-brokers, and Navigators who help them, are largely aware of the more generous subsidies. Therefore, we believe that the consumer awareness problem the bronze to silver crosswalk policy aimed to address is substantially less today, and therefore the possible benefits of this policy no longer outweigh its potential to confuse consumers, undermine consumer choice, and create unexpected tax liability.

We considered taking no action regarding modifications to Sec. 155.400(g) to remove flexibilities that would allow issuers to adopt a fixed-dollar premium payment threshold or a gross premium-based percentage payment threshold.

We also considered removing just the fixed-dollar threshold policy and allowing issuers the option to utilize the gross premium percentage- based premium threshold. However, given the continued and increased numbers of improper enrollments and plan switches and other improper enrollment trends, both the fixed-dollar and gross-premium percentage- based thresholds present program integrity risks that may allow consumers (and Medicaid beneficiaries who are victims of dual improper enrollment into a QHP) to remain in coverage for a much longer or indefinite amount of time, after payment of the binder. Consumers who never wanted, or no longer need, QHP coverage could remain enrolled for longer than the 3-month grace period, accruing premium debt and potentially facing complications when they file their taxes. Issuers will still have the option to implement the existing net premium percentage-based policy to allow consumers who pay the majority of their premium to avoid being put into a grace period.

We also considered finalizing the modifications at Sec. 155.400(g) as proposed, instead of sunsetting the fixed-dollar and gross-premium thresholds after PY 2026. However, for the reasons specified earlier in this final rule, as well as the fact that this approach will enable interested parties to collect data regarding the impact of the removal of the fixed-dollar and gross-premium payment thresholds in order to inform future policy direction, we are finalizing this provision such that the fixed-dollar and gross-premium percentage-based thresholds will be removed as a flexibility for all Exchanges until and after PY 2026.

We considered maintaining the length of the OEP, and we considered designating November 1 to December 15 as the OEP for all Exchanges without flexibility, as proposed. However, based on comments, we are of the view that setting clear parameters for the date range and duration of the annual OEP, instead of proscribing specific OEP start and end dates, strikes the appropriate and best balance between providing flexibility for states and reducing the potential for adverse selection. Additionally, we considered moving the OEP to a different period in the calendar year--such as beginning March 1 and running to April 15--as a measure to both minimize adverse selection and maximize consumer choice (by moving the OEP to a season in which financial stress is generally lessened), but we recognize that mandating such a dramatic shift in the OEP would cause considerable disruption to the market. Instead, our final rule does allow flexibility for Exchanges to start their OEP at an earlier point in the calendar year, as long as the OEP does not extend more than 9 weeks and all plan selections made during the OEP are effective on January 1 of the plan year.

We also considered finalizing the 150 percent FPL SEP provision as proposed, instead of pausing the SEP until the end of PY 2026. However, for the reasons specified in section III.8. of this final rule, as well as the fact that this approach will enable CMS to collect data regarding the impact of the SEP discontinuation in order to inform future policy direction, we are finalizing this provision such that current regulations allowing the 150 percent FPL SEP will become effective again after PY 2026.

We are finalizing amendments to Sec. 155.420(g) to require Exchanges on the Federal platform to conduct pre-enrollment eligibility verification for SEPs. Specifically, we are finalizing the 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 conducting 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. This provision will sunset after PY 2026 and we will return to previous policy for PY 2027 as discussed in section III.B.9. of this final rule. We considered leaving the limitation of SEP verification to loss of minimum essential coverage for Exchanges on the Federal platform in place. We determined that the risks associated with the potential enrollment of ineligible individuals were greater than the potential benefits of reducing administrative burden on consumers by only verifying loss of minimum essential coverage. We also determined that consumers will benefit from increased verification due to its potential to limit improper enrollments occurring without their awareness and to bring down risk in Exchanges on the Federal platform by ensuring that only qualified individuals are enrolling through SEPs throughout the year.

We are also finalizing the requirement that Exchanges on the Federal platform conduct pre-enrollment SEP verification for at least 75 percent of new enrollments through SEPs for consumers not already enrolled in coverage through the applicable Exchange. We are finalizing that Exchanges must verify at least 75 percent of such new enrollments based on the current implementation of SEP verification by Exchanges. This provision will sunset after PY 2026 and we will return to previous policy for PY 2027 as discussed in section III.B.9. of this final rule. We are declining to finalize this proposal for State Exchanges. We considered finalizing the provision with a modification for State Exchanges to implement SEP verification for PY 2027. After consideration of comments received regarding State administrative and financial burden and the assertion by many State Exchanges that they do not have similar issues with fraud, we decline to finalize the provision for State Exchanges.

We considered not finalizing the proposal to prohibit issuers of plans subject to EHB requirements from providing coverage for sex-trait modifications as EHB. We also considered finalizing the proposal but without a definition of “specified sex-trait modification procedure.” We also considered finalizing the proposal with the addition of a definition of “specified sex-trait modification procedure” but delaying the effective date until PY 2027. Although public comments overwhelmingly did not support the proposal, we are finalizing the prohibition to more closely align with statutory requirements. We also considered finalizing the proposal exactly as proposed, that is, without a definition of “specific sex-trait modification procedure.” However, we were persuaded by comments that by finalizing a definition that includes exceptions, affected parties will have greater certainty from consumer knowledge, issuer pricing, and issuer compliance perspectives. This will also minimize premium impacts, since there will be less opportunity for issuers to price for any uncertainty. While we appreciate concerns that the provision will require issuers to modify claims and other systems at significant cost and effort, issuers should already have processes in place to determine when a service is an EHB and when it is not. Therefore, we are finalizing this policy, which will be applicable for PY 2026 and beyond.

In proposing the change to the premium measure used in the premium adjustment percentage calculation under Sec. 156.130, we considered continuing to use the current premium measure based on NHEA's estimates and projections of average per enrollee ESI premiums for purposes of calculating the premium adjustment percentage for PY 2026. We are finalizing the proposal to change this measure to instead use a private health insurance premium

measure (excluding Medigap and property and casualty insurance), so that the premium growth measure more closely reflects premium trends in the private health insurance market since 2013. Alternatively, we considered using NHEA estimates and projections of average per enrollee private health insurance premiums. NHEA's private health insurance premium measure includes premiums for ESI, direct purchase insurance (which includes Medigap insurance), and property and casualty insurance. However, we are finalizing the inclusion of only those premiums for expenditures associated with the acquisition of one's primary health insurance coverage purchased through their employer or purchased directly from a health insurance issuer. We believe it is inappropriate to include Medigap premiums in the measure as this type of coverage is not considered primary coverage for those enrollees who supplement their Medicare coverage with these plans. Moreover, although total spending for private health insurance in the NHEAs includes the medical portion of accident insurance (property and casualty insurance), we do not believe it is appropriate to include those expenditures for this purpose as they are associated with policies that do not serve as a primary source of health insurance coverage.

Accordingly, in Sec. 156.130 we are finalizing the use of a measure that includes only premiums for ESI and direct purchase insurance, but not premiums for property and casualty, or Medigap insurance. We sought comment in the proposed rule on the source of premium data we proposed to use in the premium adjustment percentage calculation, and specifically the proposal to use average per enrollee private health insurance premiums (excluding Medigap and property and casualty insurance), or whether we should continue to use ESI premiums for purposes of calculating the premium adjustment percentage for PY 2026.

We are finalizing changing the allowable de minimis ranges in Sec. 156.140 beginning in PY 2026 to +2/-4 percentage points for all individual and small group markets subject to AV requirements under the EHB package, other than for expanded bronze plans, for which we are changing to a de minimis range of +5/-4 percentage points. We are also finalizing a revision to Sec. 156.200(b)(3) to remove from the conditions of QHP certification the de minimis range of +2/0 percentage points for individual market silver QHPs. We are also finalizing amendments to the definition of “de minimis variation for a silver plan variation” in Sec. 156.400 to specify a de minimis range of +1/- 1 percentage points for income-based silver CSR plan variations. In proposing these changes, we considered delaying the implementation until PY 2027, which was recommended by some commenters who noted that the timing of this rule's release would make it difficult for some issuers to take advantage of wider de minimis ranges in PY 2026. However, we maintain that the de minimis changes proposed do not require issuers to take additional action to revise their plan designs. Additionally, finalizing these changes earlier allows more time for consumers to benefit from plan designs that are more appropriate for their needs.

The RFA requires agencies to analyze options for regulatory relief of small entities, if a rule has a significant impact on a substantial number of small entities. The RFA generally defines a “small entity” as (1) a proprietary firm meeting the size standards of the Small Business Administration (SBA), (2) a not-for-profit organization that is not dominant in its field, or (3) a small government jurisdiction with a population of less than 50,000. States and individuals are not included in the definition of “small entity.” The data and conclusions presented in this section, along with the rest of the RIA, amount to our final regulatory flexibility analysis under the RFA.

For purposes of the RFA, we believe that health insurance issuers would be classified under the NAICS code 524114 (Direct Health and Medical Insurance Carriers). According to SBA size standards, entities with average annual receipts of $47 million or less would be considered small entities for this NAICS code. Issuers could possibly be classified in 621491 (HMO Medical Centers) and, if this is the case, the SBA size standard will be $44.5 million or less.\315\ We believe that few, if any, insurance companies underwriting comprehensive health insurance policies (in contrast, for example, to travel insurance policies or dental discount policies) would fall below these size thresholds. Based on data from MLR annual report submissions for the 2023 MLR reporting year, approximately 84 out of 479 issuers of health insurance coverage nationwide had total premium revenue of $47 million or less.\316\ We estimate that approximately 80 percent of these small issuers belong to larger holding groups based on the MLR data, and many, if not all, of these small companies are likely to have non- health lines of business that result in their revenues exceeding $47 million. We sought comment on these estimates and did not receive any comments on these estimates. We are providing additional detail in this final rule that we assume approximately 20 percent, or 16, of the 84 potential small issuers are in fact small issuers for purposes of this analysis. We believe this is an overestimate, as many if not all of these small issuers are likely to have non-health lines of business that result in their revenues exceeding $47 million, but we use 16 small issuers for purposes of this analysis.

\315\ SBA. (n.d.). Table of size standards. https://www.sba.gov/document/support--table-size-standards.

\316\ CMS. (n.d.). Medical Loss Ratio Data and System Resources. https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.

We anticipate that small issuers could be impacted by the provisions in this final rule.

We are unable to quantify the impact of these changes on small issuers due to uncertainty regarding their market share, market participation, membership in larger holding groups, enrollment and risk mix, and APTC receipts. However, we anticipate that there will not be a significant change in revenue for issuers since a reduction in APTC payments will mean consumers would be responsible for the balance of the premium not covered by APTC. We also anticipate that due to the small reduction in enrollment anticipated to result from the policies in this rule, issuers may experience a reduction in premium revenue. However, we anticipate this could be balanced by a reduction in claims experience, and we are unable to quantify this impact on small issuers due to uncertainty and a lack of data. The alternative policies we considered in developing the proposed and final rules are discussed in section V.D. of this final rule. We considered not sunsetting certain policies in this final rule that would impose burdens on small issuers for operational and financial changes and therefore adopt them in perpetuity, but we determined sunsetting these policies would aid in understanding their impact on all issuers, including small issuers. We are of the view that none of these alternatives would both achieve the policy objectives and goals of this final rule as previously stated and be less burdensome to small entities.

We sought comment in the 2025 Marketplace Integrity and Affordability proposed rule on the proposed estimates

and assumptions. We did not receive any comments on the assumptions in the proposed rule.

As discussed in section V.C.17 of this final rule, we anticipate that entities such as issuers, including small issuers, will face regulatory review costs as a result of needing to familiarize themselves with this final rule. The cost per entity to review this final rule is estimated to be $595.46. The total cost for 16 small issuers to review this rule is estimated to be $9,527.36.

In addition, section 1102(b) of the Act requires us to prepare an RIA if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 604 of the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as a hospital that is located outside of a metropolitan statistical area and has fewer than 100 beds. Although we acknowledge that this final rule may increase uninsurance and therefore increase uncompensated care as discussed previously in this RIA, this final rule is not subject to section 1102 of the Act and therefore a fulsome analysis under section 1102(b) of the Act is not required.