Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2027; and Basic Health Program

CMS created a Frequently Asked Questions (FAQ) document to help address the issue of what is considered “taking an action” as it relates to regulatory requirements for creating documentation related to eligibility application review and consumer consent, as per Sec. 155.220(j)(2)(ii)(A) and (j)(3)(iii)(A), respectively. However, adding this language solely to sub-regulatory guidance, such as an FAQ, would not provide HHS with the necessary enforcement authority when we are reviewing documentation submitted by agents/brokers related to documenting consumer eligibility application requirements and consent documentation. Therefore, it was determined that updating the regulations in Sec. 155.220 was necessary.

When developing the finalized proposal to expand the marketing regulations to improve our enforcement authority related to misleading marketing, we considered creating an FAQ document to notify agents, brokers, and web-brokers of certain prohibited behaviors related to marketing practices. However, adding this language solely to sub- regulatory guidance, such as an FAQ document, would not provide HHS with the necessary enforcement authority when we discover misleading marketing. Therefore, it was determined that updating the regulations in Sec. 155.220 was necessary.

In developing the SEIPM policies contained in this final rule (Sec. 155.1600), we considered the lessons learned while implementing IPPTA. During IPPTA, HHS engaged with 19 State Exchanges to test measurement processes. We considered several data collection options and chose the primary option as that which provides the greatest amount of reliability and flexibility in providing the data that supports the payment decisions and calculations of APTC made by State Exchanges.

In regard to the finalized SEIPM, HHS considered several alternative approaches. For the implementation timeline, HHS considered alternative implementation timelines for SEIPM beyond the finalized January 1, 2027 effective date. Alternatives for extending the implementation timeline to 2028 or 2029 were considered as they would have provided HHS the window to evaluate all of the results from IPPTA as well as afford State Exchanges with additional preparation time. Delaying the implementation beyond 2027 would delay HHS' ability to meet PIIA requirements for comprehensive improper payment measurement across all APTC programs. The January 2027 effective date balances the need for adequate State Exchange preparation time with Federal statutory obligations, particularly given the foundational framework established through the IPPTA with the large bulk of operational processes associated with collecting information from the State Exchanges being completed. IPPTA will continue through the end of 2026 and we will continue to assess lessons learned for incorporation into the SEIPM implementation.

For the data collection requirements, HHS evaluated alternate approaches that would have required more limited data submissions from State Exchanges. One alternative considered was limiting data collection to only basic enrollment and payment information, which would have reduced State Exchange burden but would not have provided sufficient detail to conduct comprehensive improper payment reviews that meet PIIA standards. For sampling methodology, HHS considered alternative approaches to the proposed stratified random sampling methodology. One alternative considered was using a simple random sampling approach without stratification, which would have been easier to implement but would have been less efficient in detecting errors and would have required larger sample sizes to achieve the same level of statistical precision. HHS also considered implementing a static sample size approach that would have applied the same sample size across all State Exchanges regardless of their APTC volume or operational characteristics. While this approach would have simplified program administration and ensured consistent measurement effort across all participating Exchanges, it would have resulted in imprecise estimates for smaller State Exchanges and inefficient resource allocation for larger Exchanges, failing to optimize statistical precision relative to program risk and Federal investment. HHS also evaluated implementing more prescriptive enforcement mechanisms with automatic penalties for noncompliance but determined that the proposed graduated enforcement approach with due process protections and opportunities for corrective action better supports the collaborative relationship necessary for successful program implementation while maintaining appropriate accountability for State Exchange compliance with Federal oversight requirements.

Finally, in considering the SEIPM, we evaluated the option of publishing individual rates for each SBE, rather than an aggregate rate for all State Exchanges. Achieving an appropriate level of precision (that is, a margin of error less than +/-5 percent) for such an approach, however, would require doubling the sample sizes used which would incur an additional $25 million Federal and $1.5 million State cost annually. Therefore, we did not adopt this approach.

In considering modifications to the programmatic audit requirements under Sec. 155.1200(c), HHS evaluated several alternatives. These included maintaining the existing audit requirement for State Exchanges that

complete the SEIPM for a given benefit year, as well as allowing SEIPM to fully satisfy the audit requirement under Sec. 155.1200. Maintaining the current audit requirement would have resulted in duplicative reviews and increased administrative burden for State Exchanges, while allowing SEIPM to replace the audit entirely would have reduced the comprehensiveness of oversight currently provided.

In developing this finalized policy to require issuers that make plan-level adjustments to account for unreimbursed CSRs to submit specified CSR data elements in the URRT and Actuarial Memorandum, HHS considered several alternative approaches. One alternative considered was to maintain the current policy as outlined in the 2025 Rate Filing Guidance, which would have continued to rely on reporting of CSR- related information in the Actuarial Memorandum without adding explicit URRT fields. However, this approach would not have achieved the policy goal of ensuring consistency and comparability across issuers and States in the reporting of CSR load methodologies and amounts. HHS also considered permitting issuers to use alternative or simplified methodologies for estimating CSR amounts paid on behalf of enrollees, leveraging existing internal calculations that may vary by issuer. While this approach could have reduced issuer burden, it would have resulted in inconsistent data and limited the ability of State and Federal regulators to assess whether CSR load adjustments are actuarially justified. Finally, HHS considered not requiring submission of CSR data at all, leaving such determinations entirely to State review processes. However, this would not have provided HHS and State regulators with standardized, plan-level information needed to ensure transparency and regulatory oversight of CSR loading practices. The finalized approach--requiring consistent data reporting through the URRT and Actuarial Memorandum using the standard methodology under Sec. 156.430(c)(2)--balances the need for improved data comparability and regulatory oversight with the goal of minimizing additional issuer burden by leveraging existing data and familiar calculation methodologies.

We considered maintaining the vendor program, which would allow the opportunity for approved third-party vendors to facilitate agent and broker annual registration and training in addition to having the training and registration process available through the CMS Marketplace Learning Management System (MLMS), but determined the benefits of terminating the vendor program outweighs the costs of maintaining the existing policy with both programs. As such, we did not consider other regulatory alternatives, as removing Sec. 155.222, which would allow HHS to sunset the vendor program, would maintain agent and broker accessibility to training and registration while reducing costs.

We provided examples of alternatives that we considered but did not implement when confronting the incongruence between section 1302(c) through (e) of the PPACA, such as trending the AV Calculator to account for changes in the standard population. However, we believe such a change would make the AV Calculator likely contrary to of the Affordable Care Act and generally accepted actuarial standards. Therefore, we do believe that a real conflict exists, and that the best way to solve the conflict is to give issuers the flexibility, at their option, to offer bronze plans exceeding the standard annual limitation on cost sharing as long as they offer a bronze plan that meets the standard annual limitation on cost sharing per Sec. 156.136, and further differentiate catastrophic plans through a higher required annual limitation on cost sharing per Sec. 156.155(3)(a)(ii).

We considered a range of regulatory alternatives for the finalized policy to discontinue the full suite of standardized plan options policies effective beginning in PY 2027. Under the finalized provision, we will remove the following from our regulations: the definition of “standardized option” at Sec. 155.20; all requirements pertaining to standardized plan options at Sec. 156.201 (the requirements for FFE and SBE-FP QHP issuers in the individual market to offer these plans at paragraphs (a) and (b) as well as the requirement for these plans to meaningfully differ from one another at paragraph (c)); the differential display of standardized plan options on HealthCare.gov at Sec. 155.205(b)(1); and the corresponding standardized plan option differential display requirements for approved web-broker and QHP issuer enrollment partners using a DE pathway to facilitate consumer enrollment through an FFE or SBE-FP at Sec. Sec. 155.220(c)(3)(i)(H) and 156.265(b)(3)(iv), and non-standardized plan option limits and exceptions at Sec. 156.202. Finally, we are finalizing our proposal to cease the annual design and publication of these plans in the applicable Payment Notice rulemaking for each plan year.

We considered several regulatory alternatives that could potentially allow us to achieve the same goals of simplifying the plan selection process and reducing burden without discontinuing this suite of policies in its entirety. In particular, we considered continuing to require issuers to offer standardized plan options but only at particular metal levels, such as the bronze and silver metal levels (instead of at every metal level at which they offer non-standardized plan options). We also considered requiring issuers to offer standardized plan options only in certain service areas in which they offer a certain number of non-standardized plan options. We also considered transitioning from requiring issuers to offer these standardized plan options to once more allowing issuers to voluntarily offer them--as was the approach with the previous iteration of the policy--while we continue to maintain the differential display of these plans on HealthCare.gov and the DE pathways. We also considered resuming a revised version of the meaningful difference standard, which was previously codified at Sec. 156.298.

However, based on our experience administering this suite of policies from PY 2023 through PY 2026, we have determined that this suite of policies has failed to meaningfully enhance the consumer experience, increase consumer understanding, and simplify the plan selection process--our originally articulated objectives. Furthermore, imposing these requirements has increased burden for both issuers and HHS (for example, by requiring issuers to create and submit certification applications for additional plans), impeded issuer innovation in plan design, unnecessarily constrained consumer choice, and caused significant market disruption. Additionally, based on our experience administering the previous iteration of this suite of policies from PY 2017 through 2019 (when standardized plan options were voluntary and when there was no non-standardized plan option limit), we do not believe it would be an effective approach to once more revert to making it voluntary for issuers to offer these plans. This is primarily because when there was no requirement for issuers to offer these plans, few issuers chose to offer them, and fewer consumers chose to enroll in them.

Furthermore, we do not believe HHS is positioned to impose a “one size fits all” approach standardized plan option designs for an environment as heterogenous as the FFEs (such as in terms of consumer demographics, health care needs, and preferences). We refer readers to the preamble section for the finalized policy to discontinue

standardized plan options (Sec. Sec. 155.20, 155.205(b)(1), 155.220(c)(3)(i)(H), 156.201, and 156.265(b)(3)(iv)) for a detailed discussion of relevant literature we considered in our finalized policy to discontinue the full suite of standardized plan option limits policies. Finally, given that we previously discontinued standardized plan options at a time when the individual market was considered to be at risk of destabilization, and given that there are a range of substantive changes in the present environment, we believe that now is not an appropriate time to once again add to that complexity.

We considered making the provisions requiring income verification when tax data is unavailable and income verification when trusted data sources indicate income less than 100 percent of the FPL optional for State Exchanges that demonstrate improper payment rates (that is, SEIPM) below the Federal rate (that is, FEIPM). Under the current finalized policy, we will impose these requirements on all Exchanges starting in PY 2027. We considered this regulatory alternative in light of the fact that some analysis \408\ has shown that erroneous or improper enrollments are less widespread in State Exchanges than in Exchanges on the Federal platform and due to the significant annual administrative costs (that is, a combined $75 million annually) that would be incurred by States in implementing these provisions. Under this regulatory alternative these provisions would be optional for State Exchanges so long as they maintained a SEIPM below the FEIPM in any given year. If a State Exchange's SEIPM meets or exceeds the FEIPM in any year then, under this regulatory alternative, these integrity provisions would be imposed on that State Exchange in the subsequent year and would remain in effect unless the State Exchange demonstrated a SEIPM below the FEIPM for three subsequent consecutive years (at which point these provisions would revert to being optional for the State Exchange). While this approach could strike a balance between the need to safeguard program integrity and mitigate administrative costs, the SEIPM will not be fully implemented until at least PY 2029. Additionally, we note that implementation of this regulatory alternative would be administratively burdensome and would require a doubling of sample sizes (resulting in an additional $25 million Federal and $1.5 million State costs annually) to ensure a sufficiently precise margin of error. Since this regulatory alternative would significantly delay implementation of these vital program integrity measures, would impose additional administrative cost and complexity, and would fail to fully address known program integrity issues, it was determined to impose these requirements on all Exchanges starting in PY 2027.

\408\ See, for example, Table 14 of the Patient Protection and Affordable Care Act; Marketplace Integrity and Affordability final rule.

We considered taking no action regarding modifications to Sec. 155.400(g), which would have allowed the FFE, SBE-FPs, and State Based Exchanges to allow issuers to adopt a fixed-dollar premium payment threshold and/or a gross premium-based percentage payment threshold. We also considered removing just the gross premium fixed-dollar threshold policy and allowing issuers the option to utilize the fixed-dollar premium threshold, since the gross premium percentage-based threshold could allow an enrollee with a larger gross premium to remain enrolled in coverage for a longer period of time and accumulate a higher amount of debt. However, given the continued 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.

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. Individuals and States are not included in the definition of a “small entity.” 1. Legislative and Regulatory Overview

Title I of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) added a new title XXVII to the PHS Act to establish various reforms to the group and individual health insurance markets. These provisions of the PHS Act were later augmented by other laws, including the Affordable Care Act. Subtitles A and C of title I of the Affordable Care Act reorganized, amended, and added to the provisions of part A of title XXVII of the PHS Act relating to group health plans and health insurance issuers in the group and individual markets. The term “group health plan” includes both insured and self-insured group health plans. For summarized sections of the PHS Act and Affordable Care Act, please see section II.A. of this final rule.

These finalized provisions revise current regulations, and HHS does not anticipate any duplication, overlap, or conflict with other rules and regulations associated with these rules. 2. Need for Regulatory Action and Objectives

For the purposes of the RFA, we believe the following provisions could impact smaller agent, broker, and web broker firms. a. Mandating the HHS-Approved and -Created Consumer Consent Form-- Eligibility Application Review and Documenting Receipt of Consumer Consent (Sec. 155.220(j))

We are finalizing amendments to Sec. Sec. 155.220(j)(2)(ii)(A) and (j)(2)(iii)(A) to require agents, brokers, and web-brokers to use the HHS-approved and -created consumer consent form to meet the eligibility application review requirements and consent documentation requirements. Our finalized policy will eliminate the current broad allowances for meeting these requirements. The language in the regulation will also be changed to clarify what types of actions constitute “taking an action” to meet the regulatory requirements. The goal of this policy is to reduce confusion among agents, brokers, and web-brokers on what constitutes compliant eligibility application review documentation and what constitutes compliant consumer consent by ensuring objective standards, which protects consumers ultimately. These policies also greatly improve HHS' investigative abilities into agent, broker, and web-broker eligibility application review and consumer consent review by creating a clear and objective standard for all applications clearly outlining what HHS deems

complaint. More information about this provision is available in section V.C.8. of this final rule. b. Misleading Marketing (Sec. 155.220(j)(3))

The finalized regulatory amendments create a new standards of conduct section in Sec. 155.220(j) describing marketing requirements. These requirements will list certain prohibited practices, provide HHS audit authority, and put agents, brokers, and web-brokers on notice that they are responsible for marketing created by their downstream entities. This finalized policy will allow HHS to increase its efforts to engage in compliance actions for misleading marketing by providing agents, brokers, and web-brokers notice of the types of activities that are prohibited, allowing HHS to review marketing materials for compliance, and ensure agents, brokers, and web-brokers are not able to push responsibility to third-parties. Creating a marketing standards of conduct section is necessary to protect consumers and maintain the integrity of the Exchanges. More information about this provision is available at section V.C.9. of this final rule.

For the purposes of the RFA, we believe the following provisions could impact smaller insurers. c. Submission of Rate Filing Justification (Sec. 154.215)

The final rule will require issuers to report actual CSR amounts paid in the Market Experience section (2 years prior, using the standard methodology), projected CSR amounts in the current filing year in the Projections section, and CSR load factors in a new dedicated line item, among other proposed requirements. Issuers would also be required to provide an explanation of how these data points were used to determine the CSR load as part of the Actuarial Memorandum.

The finalized provisions will primarily affect health insurance issuers offering qualified health plans in the individual market, Federal and State regulators in their review capacity, and indirectly, Marketplace enrollees who receive cost-sharing reductions. The enhanced CSR reporting will enable issuers to more accurately determine their CSR payment amounts and improve future projections for rate setting. This could result in more appropriate premium levels if current CSR load factors are inaccurate or unreasonable, enabling issuers to better calibrate their load factors to adequately cover actual CSR costs, potentially leading to more stable and accurate premium pricing over time. More information is available at section V.C.3. of this final rule. d. Amendments To Strengthen HHS' Oversight of the Administration of the Advanced Payments of the Premium Tax Credit, Cost-Sharing Reductions, and User Fee Programs and Clarifying HHS' Compliance Review Authority (Sec. 156.480)

We are finalizing our proposal to modify Sec. 156.480 to clarify HHS' authority to audit or conduct a compliance review to assess issuers' compliance with requirements related to the APTC, CSR, and user fee programs. Specifically, we are clarifying that under Sec. 156.480(c), HHS or its designee may audit or conduct a compliance review to assess compliance with all requirements related to APTC, CSR, and user fee programs applicable to issuers offering a QHP in an Exchange. For consistency, we also are finalizing conforming changes to Sec. 156.480(c)(6) to provide that in instances where HHS enforces compliance with any requirements related to APTC, CSR, and user fee programs for QHP issuers participating in State Exchanges or SBE-FPs, HHS may do so in accordance with Sec. 156.805. We also are clarifying that the compliance review authority in Sec. 156.480(c) allows for compliance reviews as needed or on an annual basis. More information about this provision is available at section V.C.32. of this final rule. 3. Number of Affected Small Entities

For purposes of the RFA, we believe that health insurance issuers and group health plans would be classified under the North American Industry Classification System (NAICS) code 524114 (Direct Health and Medical Insurance Carriers) or possibly be classified in 621491 (HMO Medical Centers). Based on latest available Statistics of U.S. Businesses (SUSB) data, 1,071 and 146 total firms fall under NAIC codes 524114 and 621491, respectively.\409\ According to SBA size standards, entities with average annual receipts of $47 million or less would be considered small entities for NAICS code 524114 and $44.5 million or less for NAICS code 621491.\410\ SUSB data confirms there are no small firms within NAIC code 621491. However, 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) 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.\411\ Furthermore, it should be noted 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.\412\ Therefore, 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. We sought comment on these estimates.

\409\ United States Census Bureau. (April 2025). 2022 SUSB Annual Data Tables by Establishment Industry. https://www.census.gov/data/tables/2022/econ/susb/2022-susb-annual.html.

\410\ SBA. (n.d.). Table of size standards. https://www.sba.gov/document/support--table-size-standards.

\411\ CMS. (n.d.). Medical Loss Ratio Data and System Resources. https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.

\412\ Based on internal calculations. Source: CMS, Medical Loss Ratio Data and System Resources, available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.

For purposes of the RFA, the Department consider agents, brokers, and web brokers classified under NAICS code 524210 (Insurance Agencies and Brokerages) that have annual receipts of $15 million or less to be small entities. According to the 2022 Statistics of U.S. Businesses data,\413\ there are 120,434 firms in the Insurance Agencies and Brokerages industry, of which 119,114, or approximately 99 percent, had annual receipts below the $15 million size standard. Nearly all agents, brokers, and web brokers affected by this final rule would therefore be small entities.\414\

\413\ U.S. Census Bureau (April 2025). 2022 SUSB Annual Data Tables by Establishment Industry, Data by Enterprise Receipts Size. https://www.census.gov/data/tables/2022/econ/susb/2022-susb-annual.html.

\414\ Previously, in 86 FR 51730, 51756, the Departments noted that a total of 55,541 agents and brokers work with issuers.

For the purposes of this RFA, the costs per agent, broker, and web broker summarized in sections V.C.8. and V.C.9. are expected to be representative of the average costs that would be incurred by small agents, brokers, and web brokers to comply with the provisions in this final rule. We outline

those assumptions and estimates later in this section.

Regarding the costs related to requiring small agents, brokers, and web-brokers to use the HHS-approved and -created consumer consent form to meet the eligibility application review documentation requirements and the consumer consent documentation requirements, we estimate it would take approximately 10 minutes of time for an enrolling agent, broker or web-broker to meet eligibility application review documentation requirements and to obtain consumer, or their authorized representative, affirmation of their consent. Using the current adjusted hourly wage rate of $58.04 \415\ for an insurance sales agent, each enrollment using the HHS-approved and -created consumer consent form would have approximately $9.87 (10 minutes, or 0.17 hours, at an hourly wage rate of $58.04) in additional cost associated with it based on the extra time commitment from these finalized policy changes. The total cost for small agents, brokers, and web-brokers would be contingent on the number of policies enrolled by each small firm, with the upper bound estimate being 9.8 million policies estimated for all agents, brokers, and web brokers regardless of firm size. Please see sections IV.C. and V.C.8. of this final rule for more information.

\415\ See the U.S. Bureau of Labor Statistics (n.d.). Occupational Employment and Wage Statistics, May 2024 Occupation Profiles. Dep't. of Labor. https://www.bls.gov/oes/current/oes_stru.htm.

As stated in IV.D of this final rule, we do not anticipate many costs for the agents, brokers, or web-brokers we investigate for misleading marketing. We believe responding to HHS requests to provide confirmation they removed the ads and/or reviewed the marketing guidelines would not be overly time-consuming or burdensome. Our notifications to the agents, brokers, or web-brokers detail what response is required and provide hyperlinks to the noncompliant ad(s). We estimate it would take each agent, broker, or web-broker one hour to remove any noncompliant ad(s), and/or review the marketing guidelines, and respond to HHS via email. This estimate incorporates the potential of HHS asking these agents, brokers, and web-brokers to provide advertisements for HHS' review. Using the hourly wage rate for an insurance sales agent from Table 14 in section IV.A. of this final rule ($58.04), the cost of responding to HHS would be $58.04 per response. The total cost for small agents, brokers, and web-brokers would be contingent on the number of responses from these smaller firms, with the upper bound estimate being 24 responses estimated for all agents, brokers, and web brokers regardless of firm size. Please see sections IV.D. and V.C.9. of this final rule for more information.

For the purposes of this RFA, the costs per issuer summarized in sections V.C.3. and V.C.32 of this final rule are expected to be representative of the average costs that would be incurred by small issuers to comply with the provisions in this final rule. We outline those proposed assumptions and estimates later in this section.

As discussed in section III.C. of this final rule, this rule is finalizing our proposal to change the instructions for the URRT so that issuers will enter the actual amount of CSRs they paid for enrollees (2 years prior), the amount of CSRs they expect to provide to enrollees, and add a new field to gather the “load amount.” Issuers will incur ongoing burden to gather the three required values and enter them into the URRT in their appropriate places. The annual cost and burden per issuer to update and run the standard methodology calculations is $572,118 at 5,700 hours. The annual cost and burden per issuer to provide CSR related information in the URRT is $429.47 at 3.6 hours. The annual cost and burden per issuer to provide CSR calculation explanations in the Actuarial Memorandum is $1,718.27 at 14.2 hours. The total annual ongoing cost for 16 small issuers is $9,188,251.84 at 91,488 hours. We estimate that each issuer will incur an initial one- time cost of $1,114,236 at 11,400 burden hours in 2026 to develop and implement a claim-level re-adjudication process using the standard methodology set forth in Sec. 156.430 to produce the required values, which totals $17,827,776 at 182,400 for 16 small issuers. Please see sections IV.B. and V.C.3. of this final rule for more information.

In regard to modifying Sec. 156.480 to clarify HHS' authority to audit or conduct a compliance review to assess issuers' compliance with requirements related to the APTC, CSR, and user fee programs, we estimate that the audits that we conduct under this authority will not impose additional costs beyond what is already accounted for in the audit review process (86 FR 24140, 24281). We estimate that it will take a business operations specialist 10 hours (at a rate of $78.14 per hour) to compile and submit data and other information necessary for a compliance review. We estimate it will take a compliance officer (at a rate of $75.40 per hour) 4 hours to review and sign off on the submission. The cost per issuer to develop and submit the compliance information would be approximately $1,083. The total cost for small issuers is contingent on the number of small issuers selected for a compliance review each year (out of the 150 estimated regardless of firm size in section V.C.32. of this final rule). Please see section V.C.32. of this final rule for more information.

We anticipate small issuers could be impacted by other provisions in this final rule. However, 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 would not be a significant change in revenue for issuers as a reduction in APTC payments would mean consumers would be responsible for the balance of the premium not covered by APTC. Yet, we also acknowledge that due to the reductions in enrollment anticipated to result from the policies in this final rule, including the potential reduction in APTC to consumers resulting in increased premiums and choosing not to maintain coverage due to affordability constraints, 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.

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.

We sought comment on the estimates and assumptions.

Comment: Some commenters noted concerns that small agencies may be disproportionately affected by the compliance burdens in the rule, which could operationally impact the small agencies, reduce small agent participation, and have downstream impacts on consumers such as potentially limiting consumer choice, increasing consumer confusion, longer wait times for assistance, and lower enrollment rates. One commenter requested HHS to evaluate the administrative burdens on small agencies.

Response: We acknowledge the concerns noted by commenters that smaller entities may be disproportionately affected by the burdens in this final rule, which could ultimately impact consumers. Our impact estimates were calculated based on assumptions that would be

applicable across firm sizes, and we do not anticipate disproportionate impact on smaller entities. Similarly, we do not anticipate disproportionate impact on consumers of small agencies as a result of provisions in this final rule. Where possible to quantitatively estimate, we have provided the regulatory impacts on small entities, including the administrative burdens, in V.E.4. of this final rule.

For the reasons outlined in the proposed and final regulatory flexibility analyses, we are finalizing the previous estimates.

As discussed in section V.C.37. of this final rule, we anticipate that entities such as issuers, including small issuers and agents/ brokers, would 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 $741.77. The total cost for 16 small issuers to review this rule is estimated to be $11,868.32. We anticipate that agents, brokers, and web brokers would also incur costs to review this final rule, however, we do not have reliable data on the number of agents, brokers, and web brokers that would review this rule and therefore do not estimate the total burden for these entities. We sought comment on the number of agents, brokers, and web brokers that may review this rule and the associated costs.

We did not receive any comments in response to our proposed regulatory review costs. Therefore, we are finalizing these estimates.

For regulatory alternatives considered regarding the provisions in this final rule, please see section V.D. of this final rule. 5. Impact on Small Rural Hospitals

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact analysis if a rule may have a significant impact on the operations of a substantial number of small rural hospitals. This analysis must conform to the provisions of section 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. While this final rule is not subject to section 1102 of the Act, we have determined that this rule would not affect small rural hospitals. Therefore, we anticipate this final rule would not have a significant impact on the operations of a substantial number of small rural hospitals.

Executive Order 13132 establishes certain requirements that an agency must meet when it issues a proposed rule (and subsequent final rule) that imposes substantial direct requirement costs on State and local governments, preempts State law, or otherwise has Federalism implications.

In compliance with the requirement of E.O. 13132 that agencies examine closely any policies that may have Federalism implications or limit the policy making discretion of the States, we have engaged in efforts to consult with and work cooperatively with affected States, including participating in conference calls with and attending conferences of the NAIC, and consulting with State insurance officials on an individual basis.

While developing the proposed rule and this final rule, we attempted to balance the States' interests in regulating health insurance issuers with the need to ensure market stability. By doing so, we complied with the requirements of E.O. 13132.

Because States have flexibility in designing their Exchange and Exchange-related programs, State decisions would ultimately influence both administrative expenses and overall premiums. States are not required to establish an Exchange or risk adjustment program. For States that elected previously to operate an Exchange, those States had the opportunity to use funds under Exchange Planning and Establishment Grants to fund the development of data. Accordingly, some of the initial cost of creating programs was funded by Exchange Planning and Establishment Grants. After establishment, Exchanges must be financially self-sustaining, with revenue sources at the discretion of the State. Current State Exchanges charge user fees to issuers.

In our view, while this final rule will not impose substantial direct requirement costs on State and local governments, this regulation has Federalism implications due to potential direct effects on the distribution of power and responsibilities among the State and Federal Governments relating to determining standards relating to health insurance coverage that is offered in the individual and small group markets.

We have examined the federalism implications involved in finalizing our proposal to revise Sec. 155.170(a) to provide that any State- required benefits would be considered “in addition to EHB” (and thus not an EHB) if they are: required by a State action taking place after December 31, 2011; applicable to the small group and/or individual markets; specific to required care, treatment, or services; and not required by State action for purposes of compliance with Federal requirements. While developing this finalized policy, we considered our longstanding engagement with States regarding their benefit mandates and the operation and impact of the statutory defrayal requirement, including discussions with State insurance officials over time about how State mandates affect affordability and Federal and State financial impacts. In developing this finalized policy, we sought to balance States' interests in regulating health insurance issuers with the need to promote market stability and affordability, and we believe this approach appropriately respects State authority while advancing the objectives of the Affordable Care Act. As finalized, we expect that there would be increased costs to any States that would have to defray the cost of benefits that would be considered “in addition to EHB.”

In addition, we believe this final rule does have Federalism implications due to system and operation costs associated with requiring the four State Exchanges that process their own hardship exemptions to process the additional hardship exemptions expected due to the amendment to Sec. 155.605(d)(1) in this final rule. However, the Federalism implications are mitigated as this final rule would not preempt State law, as it provides States with flexibility to either process hardship exemptions themselves or delegate this function to HHS under existing regulatory provisions at Sec. 155.605(d), thereby avoiding any Federalism implications that would trigger the requirements of Executive Order 13132.

Additionally, in this final rule, HHS finalizes new State flexibilities for provider access reviews and/or ECP certification reviews, which have

federalism implications for FFE States, including States performing plan management. Specifically, CMS is finalizing that FFE States may elect to conduct their own provider access reviews and/or ECP certification reviews of issuers' plans, with a provider network in PY2027, and beginning in PY2028, plans without a provider network, that apply for QHP certification to be offered through an FFE (including States that perform plan management), provided that CMS determines the State has sufficient authority and the technical capacity to conduct such reviews by satisfying the applicable criteria to be considered to have an Effective Provider Access Review Program for provider access certification reviews, and/or an Effective ECP Review Program for ECP certification reviews. An FFE State would have the choice to elect to conduct their own provider access certification reviews, ECP certification reviews, or both reviews provided the FFE State satisfies the applicable criteria for each respective effective review program it wishes to administer. For additional detailed information on the federalism impacts of these finalized policies, please reference the discussions in sections V.C.20. for Modification of Exchange Network Adequacy Standards, V.C.29 for Provider Access Standards for Network Plans, and V.C.30 Essential Community Provider Standards of this final rule.

Additionally, we believe this final rule also has Federalism implications for both policies related to income verification in cases where a consumer attests to an income at or above 100 percent of the FPL but the IRS returns data below 100 percent of the FPL as well as in cases where the IRS returns no income data for a household. Specifically, States will incur one-time implementation costs as well as annual operating costs for the policies, and, in the case of the below 100 percent FPL policy, requiring State Exchanges to set continue the income verification when IRS returns data below 100 percent of the FPL but households attest to income at or above 100 percent of the FPL. However, this is mitigated by no longer requiring Exchanges to accept attestations in cases where the IRS returns no income for a household. Additionally, the Federalism implications are mitigated by the benefits to ensuring Marketplace stability, particularly through addressing continued potential fraud.

We also believe this final rule has Federalism implications for the amendment of the failure to file and reconcile policy at Sec. 155.305(f)(4) in this final rule. Specifically, States will incur one- time implementation costs as well as annual operating costs for their failure to file and reconcile policies. Federalism implications are mitigated by the benefits to the Marketplace by removing unauthorized enrollments and lessening the potential for consumers to generate potentially large tax liabilities.

In addition, we believe this final rule's provisions related to cost sharing for catastrophic plans at Sec. 156.155(3)(a)(ii) and for some bronze plans at Sec. 156.136 present implications for State authority and impact, but do not rise to the definition set in Executive Order 13132 because Section 1302(c)(1) of the Affordable Care Act establishes the annual limitation on cost sharing that applies to health plans offered in the individual and small group markets, and we are only reiterating that States may not set a different annual limitation on cost sharing than the limitation established under section 1302(c)(1) of the Affordable Care Act, nor may States set a different limit under existing statute. States may decline to certify plans designed with the flexibility we are finalizing to allow higher annual limitation on cost sharing than previously permitted. The optionality of the sale of these plans further shows that this this rule does not impose substantial direct compliance costs on State and local governments beyond those already required by the existing statutory framework, nor does it set a standard that would preempt State law. Rather, this rule provides additional flexibility within the boundaries Congress established, and it does not alter the fundamental statutory relationship between Federal and State authority for the annual limitation on cost sharing.