[Federal Register Volume 75, Number 86 (Wednesday, May 5, 2010)]
[Rules and Regulations]
[Pages 24450-24470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-10658]
[[Page 24450]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
45 CFR Part 149
RIN 0991-AB64
Early Retiree Reinsurance Program
AGENCY: Office of the Secretary, HHS.
ACTION: Interim final rule with comment period.
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SUMMARY: This interim final rule with comment period (IFC) implements
the Early Retiree Reinsurance Program, which was established by section
1102 of the Patient Protection and Affordable Care Act (the Affordable
Care Act). The Congress appropriated funding of $5 billion for the
temporary program. Section 1102(a)(1) requires the Secretary to
establish this temporary program not later than 90 days after enactment
of the statute, which is June 21, 2010. The program ends no later than
January 1, 2014. The program provides reimbursement to participating
employment-based plans for a portion of the cost of health benefits for
early retirees and their spouses, surviving spouses and dependents. The
Secretary will reimburse plans for certain claims between $15,000 and
$90,000 (with those amounts being indexed for plan years starting on or
after October 1, 2011). The purpose of the reimbursement is to make
health benefits more affordable for plan participants and sponsors so
that health benefits are accessible to more Americans than they would
otherwise be without this program.
DATES: Effective Date: These regulations are effective on June 1, 2010.
Comment date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
EST on June 4, 2010.
ADDRESSES: In commenting, please refer to file code DHHS-9996-IFC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed).
Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions on
the home page.
By regular mail. You may mail written comments to the
following address only: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: DHHS-9996-IFC, P.O.
Box 8014, Baltimore, MD 21244-8014.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
By express or overnight mail. You may send written
comments to the following address only: Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Attention: DHHS-
9996-IFC, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD
21244-1850.
By hand or courier. If you prefer, you may deliver (by
hand or courier) your written comments before the close of the comment
period to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-9994 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: James Slade, (410) 786-1073, for
information regarding the Purpose and Basis, Requirements for Eligible
Employment-Based Plans, Use of Reimbursement Amounts, Appeals, and
Disclosure of Data Inaccuracies.
David Mlawsky, (410) 786-6851, for information regarding the
Definitions, Reinsurance Amounts, Reimbursement Methods, Including
Provision of Necessary Information, and Change of Ownership
Requirements.
SUPPLEMENTARY INFORMATION: Inspection of Public Comments. All comments
received before the close of the comment period are available for
viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. We
post all electronic comments received before the close of the comment
period on the following public Web site as soon as possible after they
have been received: http://www.regulations.gov. Follow the search
instructions on that Web site to view public comments.
Comments received timely will be available for public inspection as
they are received, generally beginning approximately 3 weeks after
publication of a document, at Room 445-G, Department of Health and
Human Services, Hubert H. Humphrey Building, 200 Independence Avenue,
SW., Washington, DC 20201, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments, call
1-800-743-3951.
I. Background
A. Overview of the Early Retiree Reinsurance Program Enacted as Part of
the Patient Protection and Affordable Care Act
On March 21, 2010, the Congress passed the Patient Protection and
Affordable Care Act (the Affordable Care Act) (Pub. L. 111-148), which
was signed into law on March 23, 2010. Included in this health
insurance reform law is a provision that establishes the temporary
Early Retiree Reinsurance Program. This provision addresses the recent
erosion in the number of employers providing health coverage to early
retirees. People in the early retiree age group often face difficulties
obtaining insurance in the individual market because of advanced age or
chronic conditions that make coverage unaffordable and inaccessible.
The Early Retiree Reinsurance Program provides needed financial help
for employer-based plans to continue to provide valuable coverage to
plan participants, and provides financial relief to plan participants.
The Early Retiree Reinsurance Program provides reimbursement to
participating sponsors for a portion of the costs of providing health
coverage to early retirees (and eligible spouses, surviving spouses,
and dependents of such retirees). Section 1102(a)(2)(B) of
[[Page 24451]]
the Affordable Care Act defines ``employment-based plan'' to include a
group benefits plan providing health benefits that is maintained by
private employers, State or local governments, employee organizations,
voluntary employees' beneficiary association, a committee or board of
individuals appointed to administer such plan, or a multiemployer plan
(as defined by Employee Retirement Income Security Act or ERISA).
Section 1102 does not differentiate between health benefits provided by
self-funded plans or through the purchase of insurance.
Section 1102(a)(1) requires the Secretary of HHS (the Secretary) to
establish the program within 90 days of enactment of the law, which is
June 21, 2010. We expect this program to be established by June 1,
2010. By law, the program will expire on January 1, 2014. Funding for
the program is limited to $5 billion.
II. Provisions of the Interim Final Rule
This regulation establishes 45 CFR part 149, ``Requirements for the
Early Retiree Reinsurance Program.'' This part implements section 1102
of the Affordable Care Act, which requires the Secretary to provide
reimbursement to sponsors with certified plans for a portion of the
cost of health benefits for early retirees and their spouses, surviving
spouses and dependents, provided funds remain available. In part 149,
we established new subparts A through H. These new subparts set forth
the framework for implementing the Early Retiree Reinsurance Program
effective June 1, 2010 through January 1, 2014. We are implementing the
statutory requirements of the program as follows:
A. General Provisions (Subpart A)
1. Purpose and Basis (Sec. 149.1)
In this section, we provide the statutory authority for
promulgating the regulation.
2. Definitions (Sec. 149.2)
Section 1102(a) of the Affordable Care Act (also referred to as the
``statute'') provides definitions for three specific terms. One of
these terms is the term ``employment-based plan'', which the statute
defines as a ``group benefits plan providing health benefits'' that
satisfies certain conditions. The statute at section 1102(a)(1) also
specifies that under the program, the Secretary shall provide
reimbursement to participating employment-based plans. However, a plan
typically constitutes merely an arrangement to provide benefits, as
opposed to a discrete entity to which payments can be directly made or
sent. Thus, the regulation interprets this provision to require
reimbursement under the program to a ``sponsor,'' and defines sponsor
as that term is defined in regulations promulgated for the Retiree Drug
Subsidy (RDS) Program at 42 CFR 423.882. That definition defines
sponsor as a plan sponsor as defined in section 3(16)(B) of ERISA, 29
U.S.C. 1002(16)(B), except that, in the case of a plan maintained
jointly by one employer and an employee organization and for which the
employer is the primary source of financing, the term means the
employer. By defining the term sponsor in the regulation, and by
specifying that sponsors are the entities that apply for and get
reimbursed under the program, we believe we are achieving two important
objectives: (1) We are ensuring that program reimbursements can be made
to actual existing entities, and (2) We are promoting consistency with
the RDS Program. This second objective is critical, as we believe that
many of the entities that will apply for the Early Retiree Reinsurance
Program are entities that participate in the RDS Program, as these two
programs have many similarities. Thus, the common use of terms across
the two programs will minimize confusion, and we believe will help to
maximize program participation.
Although we drafted the regulation to specify that a sponsor is the
entity that would be directly paid under the program, there is still a
need to use the term ``employment-based plan'' in the regulation. This
is because the statute envisions that the entity receiving
reimbursement have a benefits arrangement (that is, a plan) in place
that satisfies certain criteria (for example, implements programs and
procedures to generate cost-savings with respect to participants with
chronic and high-cost conditions.) The statute provides a definition of
``employment-based plan'' as constituting a ``group benefits plan''
that has certain characteristics. Those characteristics (for example,
must be maintained by one or more employers, can include a
multiemployer plan as defined in section 3(37) of ERISA) borrow
components of the ERISA definition of a ``group health plan''. For that
reason, we define ``employment-based plan'' as meaning a ``group health
plan'' as defined in the RDS regulations at 42 CFR 423.882 that
provides health benefits to early retirees, but excludes Federal
governmental plans. (Unlike the RDS statutory provisions, the Early
Retiree Reinsurance Program's statutory provisions do not expressly
include Federal plans). The RDS regulatory definition of ``group health
plan'' largely tracks the ERISA definition. For reasons previously
stated, we believe it is beneficial to use the same or similar
terminology, and have the same or similar requirements for the RDS
Program and the Early Retiree Reinsurance Program, when appropriate.
Because the RDS program requires a sponsor to have a benefits
arrangement that constitutes a group health plan, we believe the
benefits arrangement must be in place for purposes of the Early Retiree
Reinsurance Program (that is, an employment-based plan), should also be
a group health plan (that is, an employment-based plan, defined
generally as group health plan). Generally, the regulation uses the
term ``sponsor'' when referring to the entity that applies for and
receives reimbursement under the program, and uses the term
``employment-based plan'' when discussing the health benefits
arrangement the sponsor must offer.
In addition to introducing the definition of ``sponsor'', the
regulation also defines other terms that are not defined in the
statute, including the term ``authorized representative.'' We define
this term to mean an individual with legal authority to sign and bind a
sponsor to the terms of a contract or agreement. This term is important
in the regulatory provision relating to the program application and the
plan sponsor agreement. The regulation requires an authorized
representative to sign a plan sponsor agreement as part of the program
application.
We use the term ``benefit option'' in the regulation when
discussing the fact that there is only one cost threshold and cost
limit per early retiree per plan, regardless of how many benefit
options within that plan the early retiree is enrolled in, in a given
plan year. We define ``benefit option'' as a particular benefit design,
category of benefits, or cost-sharing arrangement offered within an
employment-based plan.
The statute at section 1102(b) requires that an employment-based
plan be certified by the Secretary, and submit an application for the
program, before the plan can participate in the program. As stated
above, under this regulation, the entity that participates in (that is,
applies for) the program, is the plan sponsor. We will not approve an
application unless the sponsor, and the employment-based plan, meet
their respective requirements under the statute and the regulation.
Therefore, we define the term ``certified'' as meaning that the sponsor
and its employment-
[[Page 24452]]
based plan or plans meet the requirements of this part and the
sponsor's application to participate in the program has been approved
by the Secretary. All elements of this requirement must be satisfied
before a sponsor can participate in the program.
The statute at section 1102(b)(2) requires employment-based plans
to have programs and procedures in place to generate cost savings for
participants with chronic and high-cost conditions. We define the term
``chronic and high-cost condition'' to mean a condition for which
$15,000 or more in health benefit claims are likely to be incurred
during a plan year by any one participant. Sponsors participating in
this program are likely to be sponsors that have offered the applicable
plan in previous years. Sponsors, therefore, will recognize which
conditions are likely to result in $15,000 in claims in a plan year for
one participant. While we expect that the employment-based plans will
have programs and procedures in place that have generated or have the
potential to generate savings for participants with these conditions,
which may vary across plans, geographic regions and due to other
factors, we do not expect plans to have programs and procedures in
place for all conditions for which claims are likely to exceed $15,000
in a plan year for a plan participant. To require that plans have
programs and procedures in place to address all chronic and high-cost
conditions could exclude many sponsors from participating in the
program and could be overly restrictive. We expect sponsors to take a
reasonable approach when identifying such conditions and selecting
programs and procedures to lower the cost of care, as well as improve
the quality of care, for such conditions.
We define ``claim'' or ``medical claim'' in order to lay out in
more detail what is required on the claim to be reimbursed under this
program, and to note that the terms ``claim'' or ``medical claim''
include medical, surgical, hospital, prescription drug and other types
of claims as determined by the Secretary. The statute at section
1102(a)(2)(A) defines ``health benefits'' as medical, surgical,
hospital, prescription drug, and such other benefits as shall be
determined by the Secretary whether self-funded, or delivered through
the purchase of insurance or otherwise. The regulatory definition of
``health benefit'' clarifies that such benefits include benefits for
the diagnosis, cure, mitigation, or prevention of physical or mental
disease or condition with respect to any structure or function of the
body. (As discussed below, health benefits do not include benefits
specified at 45 CFR 146.145(c)(2) through (4)). Therefore, per the
Secretary's authority to determine benefits for which claims may be
submitted, the terms ``claim'' or ``medical claim'' include claims for
the benefits set out in the definition of ``health benefit.'' This list
of benefits, for which the Secretary has the authority to determine are
appropriate under the program, is not exhaustive.
The statute at section 1102(a)(2)(C) defines ``early retirees'' as
individuals who are age 55 and older but are not eligible for coverage
under Medicare, and who are not active employees of an employer
maintaining, or currently contributing to, the employment-based plan or
of any employer that has made substantial contributions to fund such
plan. We have incorporated this definition into the regulation, and we
clarified that spouses, surviving spouses, and dependents are also
included in the definition of early retiree. This definition
accommodates the language in section 1102(a)(1) of the statute, which
states that reimbursement under the program is made to cover a portion
of the costs of providing health coverage to early retirees and to the
eligible spouses, surviving spouses, and dependents of such retirees.
This definition accommodates the language in section 1102(a)(1) in such
a way that reimbursement can be made under the program for the health
benefit costs of eligible spouses, surviving spouses, and dependents of
such retirees, even if they are under the age of 55, and/or are
eligible for Medicare. We believe the statute can reasonably be
interpreted to provide reimbursement for the health benefit costs of
such individuals. This interpretation will provide additional
assistance to sponsors, which will encourage them to continue to offer
coverage to the spouses, surviving spouses, and dependents of early
retirees.
The regulatory definition of early retiree also clarifies that the
determination of whether an individual is not an active employee is
made by the sponsor in accordance with the rules of its plan. However,
an individual is presumed to be an active employee if, under the
Medicare Secondary Payer (MSP) rules in 42 CFR 411.104 and related
Centers for Medicare & Medicaid Services' (CMS) guidance, the person is
considered to be receiving coverage by reason of current employment
status. The presumption would apply whether or not the MSP rules
actually apply to the sponsor. We also clarify that a sponsor may treat
a person receiving coverage under its employment-based plan as a
dependent in accordance with the rules of its plan, regardless of
whether that person constitutes a dependent for Federal or state tax
purposes. These two clarifications are also found in the RDS regulation
in the definition of ``qualifying covered retiree,'' under which, as
that term implies, an individual must be a retiree. As previously
stated, we believe that regulatory terminology and concepts should be
the same or similar between the RDS Program and the Early Retiree
Reinsurance Program when appropriate, and we believe it is appropriate
when determining whether an individual is a retiree under each program.
Finally, in the regulatory definition of ``early retiree,'' we also
clarify that for purposes of this definition, the phrase ``an employer
maintaining or currently contributing to the employment-based plan or
any employer that has made substantial contributions to fund such
plan,'' which is also found in the statutory definition of ``early
retiree,'' means a plan sponsor. Under ERISA (and the RDS Program
regulation), a plan sponsor is an entity (such as an employer) that
establishes or maintains a group health plan. Thus, because this part
of the statutory definition of early retiree in the Affordable Care Act
speaks to the relationship between the sponsor (for example, the
employer) and the employment-based plan, we believe this clarification
is appropriate.
Section 149.610 of this regulation permits the Secretary to reopen
and revise a reimbursement determination upon the Secretary's own
motion or upon the request of a sponsor within 1 year of the
reimbursement determination for any reason, within 4 years of the
reimbursement determination for good cause, or at any time in instances
of fraud or similar fault. These three standards are the same
regulatory standards that apply with respect to CMS' ability to reopen
or revise an initial or reconsidered determination under the RDS
Program, at 42 CFR 423.890(d). The RDS regulatory provision provides
examples of what constitutes ``good cause,'' and again, because of the
similarity between that program and the Early Retiree Reinsurance
Program, we believe those examples would be appropriate for the latter.
Therefore, similar to the RDS regulation, this regulation provides the
following examples of good cause: (1) New and material evidence exists
that was not readily available at the time the reimbursement
determination was made, (2) A clerical error in the computation of the
reimbursement determination was made, or (3) The
[[Page 24453]]
evidence that was considered in making the reimbursement determination
clearly shows on its face that an error was made. For example, if a
sponsor receives a post-point-of-sale price concession that was not
known at the time a reimbursement determination was made, good cause
may be found and the reimbursement determination may be reopened and
revised.
The statute at section 1102(a)(2)(A) defines ``health benefits'' as
medical, surgical, hospital, prescription drug, and such other benefits
as shall be determined by the Secretary, whether self-funded, or
delivered through the purchase of insurance or otherwise. We clarify in
the regulatory definition that such benefits include benefits for the
diagnosis, cure, mitigation, or prevention of physical or mental
disease or condition with respect to any structure or function of the
body. This is not an exhaustive list. We also specify that health
benefits do not include certain benefits designated as excepted
benefits under the regulations implementing the health insurance
portability provisions of the Health Insurance Portability and
Accountability Act (HIPAA). Those provisions impose certain
requirements on group health plans and group health insurance issuers,
but do not apply those requirements to certain arrangements that
typically are not part of a major medical plan (that is, excepted
benefits). For example, long-term care benefits are excepted benefits.
In the context of the Early Retiree Reinsurance Program, we do not
believe it would be appropriate to consider health benefits as
including benefits provided under such arrangements, as we believe the
best read of the statutory phrase ``medical, surgical, hospital, [and]
prescription drug'' means such major medical benefits.
In order to aid stakeholders in understanding when the Secretary
will make reimbursement to a sponsor, we define the term ``incurred''
to mean the point in time when the sponsor, health insurance issuer,
group health plan or plan participant, or a combination of these or
similar stakeholders, become responsible for payment of the claim. In
short, the Secretary will not pay a sponsor until a claim has been
incurred and paid, as the statute at section 1102(c)(1)(B) specifies
that claims ``shall be based on the actual amount expended.''
We define a ``negotiated price concession'' as any direct or
indirect remuneration that would serve to decrease the costs incurred
under the employment-based plan. We set out examples of what negotiated
price concessions are, which include discounts, rebates, coupons, and
goods in kind. The list at Sec. 149.2, ``Definitions,'' describing
what may constitute a negotiated price concession is not an exhaustive
list.
Because the statute does not use the terms ``early retiree'' and
``plan participant'' interchangeably, we define the term ``plan
participant'' to include all enrollees in a plan, including an early
and other retiree, an early and other retiree's spouse, surviving
spouse, and dependent, and an active employee and an active employee's
spouse and dependent.
The statute at section 1102(c)(1)(B) specifies that claims
submitted under the program ``shall be based on the actual amount
expended by the participating employment-based plan involved within the
plan year'' for the health benefits provided to early retirees and
eligible spouses, surviving spouses, and dependents. This regulation
includes a definition of plan year, and defines plan year as the year
that is designated as the plan year in the plan document of an
employment-based plan, except that if the plan document does not
designate a plan year, if the plan year is not a 12-month plan year, or
if there is no plan document, the plan year is: (1) The deductible or
limit year used under the plan, (2) the policy year, if the plan does
not impose deductibles or limits on a 12-month basis: (3) the sponsor's
taxable year, if the plan does not impose deductibles or limits on a
12-month basis, and either the plan is not insured or the insurance
policy is not renewed on a 12-month basis, or (4) the calendar year, in
any other case. We define this term in such a way to give deference to
the plan year the sponsor has already established for other purposes.
However, we balance that deference with our belief that the intent of
the statute is to calculate reimbursement amounts, and to apply the
cost threshold and cost limit, to periods of time that are 12 months in
duration. We believe most sponsors' plan years are in fact 12 months in
duration.
The term ``post point-of-sale negotiated price concession'' is
defined because not all negotiated price concessions occur at or before
the point of sale. The statute requires negotiated price concessions to
be excluded from the calculation of reimbursement, which causes
reimbursement to be based on the actual amounts paid, not an inflated
amount that may not reflect a price concession. When post point-of-sale
negotiated price concessions occur they may cause data submitted for
reimbursement to become inaccurate, resulting in ultimately, an
inaccurate reimbursement. Once these price concessions are accounted
for, a sponsor's reimbursement determination may be reopened and
revised.
For purposes of brevity, we defined the term ``program'' to mean
the Early Retiree Reinsurance Program.
We define the term ``Secretary'' to mean the Secretary of the
Department of Health & Human Services or the Secretary's designee. We
include the Secretary's designee in the definition because the
Secretary will not actually be performing the tasks set out in this
regulation, but will designate an individual or entity to act on the
Secretary's behalf.
The term ``sponsor agreement'' is based on the definition of the
term in the RDS regulation. The sponsor agreement is basically used to
ensure that the sponsor and Department are bound to comply with the
details of the program that appear in the regulation and in other
guidance, and to address any other points that must be addressed in
order to implement this program.
B. Requirements for Eligible Employment-Based Plans (Subpart B)
1. General Requirement (Sec. 149.30)
In this section, we provide the requirements that allow a sponsor
to be eligible to participate in the Early Retiree Reinsurance Program.
2. Requirements to Participate (Sec. 149.35)
Section 1102(b)(2)(A) of the Affordable Care Act requires that an
employment-based plan implement programs and procedures to generate
cost-savings with respect to participants with chronic and high-cost
conditions. We interpret this to mean that a plan must have in place
programs and procedures that have generated or have the potential to
generate cost-savings for these participants in order to participate in
the Early Retiree Reinsurance Program, not necessarily that the sponsor
has to ensure that new programs and procedures are put in place just to
participate in this program.
Proper management and treatment of chronic and high-cost conditions
may be promoted by generating cost-savings for plan participants with
these conditions because plan participants may be more apt to seek out
proper and timely treatment and management before a condition becomes
critical if treatment and management are financially manageable. As an
example of a program and procedure to generate cost savings for a
participant with a chronic condition, a sponsor may determine that
diabetes, if not managed
[[Page 24454]]
properly, is likely to lead to claims in excess of $15,000 for a plan
year for one plan participant. The sponsor may ensure implementation of
a diabetes management program that includes aggressive monitoring and
behavioral counseling to prevent complications and unnecessary
hospitalization. With respect to generating cost savings for a high-
cost condition, a sponsor may determine that cancer is a high-cost
condition for which it should generate cost savings. The sponsor may
ensure that its plan covers all or a large portion of the participant's
coinsurances or copayments, and/or it could eliminate or reduce the
plan's deductible for treatment and visits related to the condition.
Sponsors may choose other chronic and high-cost conditions to address,
but upon audit the sponsor must be able to demonstrate that its
programs and procedures have generated or had the potential to generate
cost savings, consistent with the representations the sponsor made in
its program application.
We considered various options of how best to implement this
provision and developed several options. The first option was to
further identify which specific conditions meet the chronic condition
definition and which specific conditions meet the high-cost condition
definition and identify these specific conditions in sub-regulatory
guidance to be issued at the time of, or immediately after, the
issuance of this regulation. Issues that arose with this option
consisted of:
(1) How best to define the terms ``chronic and high-cost
conditions'', which would likely involve a significant amount of data
analysis. Chronic and high-cost conditions can vary significantly
across geographic regions, age ranges, and due to other factors. We do
not think that specifying the chronic and high-cost conditions to be
addressed could effectively occur within the 90 days allowed for
establishment of this program; and
(2) Our belief that the Congress intends this to be an inclusive
program, not a program that excludes potential sponsors merely because
they did not develop programs to address the specific conditions we
might identify in our guidance. Had the Congress narrowly defined the
types of plans for which sponsors might be reimbursed, we might have
thought that this program is not an inclusive program. Instead Congress
defined the term ``employment-based plan'' broadly in the statute at
section 1102 (a)(2)(B). It defines the term as a ``group benefits plan
providing health benefits'' as a plan that ``is * * * maintained by one
or more current or former employers (including without limitation any
State or local government or political subdivision thereof), employee
organization, a voluntary employees' beneficiary association, or a
committee or board of individuals appointed to administer such plan; or
* * * a multiemployer plan * * * '' Therefore the scope of sponsors
eligible to receive this reimbursement is extremely broad, which shows
intent on behalf of Congress to be inclusive.
The inclusive nature of the program is particularly important
because this program will involve plans with plan years that began
before the effective date of the program, as will be discussed below.
This means that a plan may not have a program in place to address
certain chronic and high-cost conditions that we may have identified
after the plan year has started, which would then exclude the sponsor
from participation in the program. In such cases, sponsors would, in
effect, be penalized if we identified specific conditions. As stated
above, chronic and high-cost conditions can vary significantly across
geographic regions, age ranges, and due to other factors, so we expect
that sponsors might focus cost-saving programs and procedures on
conditions that effect enrollees in their plan or plans. Our intent is
that the regulation takes into account these differences.
The approach we decided to take was to define the term ``chronic
and high-cost condition'' as specified in Sec. 149.2--Definitions.
``Chronic and high-cost condition'' means a condition for which $15,000
or more in applicable claims are likely to be incurred during a plan
year by one participant. Therefore, a sponsor must have programs and
procedures in place that generate or have the potential to generate
cost savings for plan participants with conditions that are likely to
generate $15,000 in claims for a plan year, in order to participate in
this program. We do not require that a sponsor have programs and
procedures in place to address all conditions that may result in claims
exceeding $15,000 for one participant in a plan year. The sponsor must
take a reasonable approach to identifying which conditions it must
address. We believe this is a reasonable interpretation of the statute
because it will promote cost savings for participants with chronic and
high-cost conditions, but due to the approaches' flexibility (that is,
the fact that sponsors may choose programs and procedures that meet
this requirement that are applicable to their enrollees) will serve to
allow as many of the types of sponsors referenced in the definition of
``employment-based plan'' as possible to become certified to
participate in the program. Of course, this requirement does not
supersede requirements in other Federal laws that may apply to programs
and procedures for chronic and high-cost conditions, such as the
Americans with Disabilities Act.
In order to administer this program and to audit the program as
required by section 1102(d), we are requiring the sponsor to make
records available for these purposes. For example, when a sponsor is
audited, the auditors may request a copy of the sponsor's (or the
sponsor's health insurance issuer or group health plan's, as
applicable) policies and procedures to detect fraud, waste and abuse,
and data to substantiate the effectiveness of the policies and
procedures. Under this provision, the sponsor is required to ensure
that the applicable policies and procedures are produced.
We also require that the sponsor have a written agreement with its
health insurance issuer (as defined in 45 CFR 160.103) or employment-
based plan (as defined in 45 CFR 149.2), as applicable, requiring the
health insurance issuer or employment-based plan to disclose
information on behalf of the sponsor to the Secretary. This requirement
in part exists to accommodate the HIPAA Privacy Rule at 45 CFR part 160
and subparts A and E of part 164 (``Privacy Rule''). This rule applies
to ``covered entities,'' which include group health plans (that is,
employment-based plans) and health insurance issuers, as defined in 45
CFR 160.103. Third party administrators would be business associates,
as defined in 45 CFR 160.103, of group health plans. Sponsors would not
become covered entities by sponsoring a plan. Sponsors typically do not
perform administrative activities for their group health plans and
therefore do not have access to the claims information or similar
protected health information (PHI) we require in this regulation to
support program reimbursement. Much of the data that we would need to
support program reimbursements, as outlined above, would be PHI held by
group health plans, health insurance issuers, or third party
administrators on behalf of group health plans. The requirement for
health insurance issuers and employment-based plans to disclose
information to the Secretary encompasses information created or held by
Business Associates on behalf of the health insurance issuer or group
health plan.
We believe that we have the authority to require the disclosure of
the PHI in accordance with section 1102(c)(1)(A), which states that a
participating plan ``shall submit claims for reimbursement
[[Page 24455]]
to the Secretary which shall contain documentation of the actual costs
of the items and services for which each claim is being submitted.''
Additionally, section 1102(d) requires the Secretary to conduct audits
of claims data submitted by, or on behalf of, sponsors participating in
the program, to ensure that such plans are in compliance with the
statute, and this simply cannot be done without mandating disclosure of
PHI. Thus, covered entities can comply with the mandate (without first
obtaining specific authorization from individuals) pursuant to ``the
required by law'' provisions of the Privacy Rule (45 CFR 164.512(a)).
As noted above, typically group health plans and health insurance
issuers or third party administrators acting on behalf of group health
plans, have PHI that the Secretary requires for the submission of
claims data for reimbursement under the program pursuant to the
regulations. In these situations, it may be unlawful, under the Privacy
Rule, for PHI to be shared with the sponsors. This regulation does not
authorize disclosure of PHI to sponsors. Therefore, for purposes of
this subpart, the sponsor must have a written agreement with the group
health plan (that is, the employment-based plan) or health insurance
issuer, as applicable, regarding disclosure of records, and the plan or
issuer must disclose to us, on the sponsor's behalf, the information,
data, documents, and records necessary for the sponsor to comply with
this program, part, and guidance, at a time and in a manner specified
by the Secretary. Sponsors of self-funded plans with legal access to
such data will be able to either provide this data to us themselves or
have a group health plan or insurer provide the data to us on their
behalf.
Section 1102 (c)(6) of the Affordable Care Act requires the
Secretary to establish procedures to protect against fraud, waste and
abuse. In order to implement this provision, the Secretary will, for
example, check the exclusions lists developed by the HHS' Office of the
Inspector General and the U.S. General Services Administration before
allowing an entity to participate, or play a role, in the program, and
will take other steps such as verifying the identities of the early
retirees for whom claims are being submitted. The Secretary may also
verify the identities of the individuals associated with the sponsor
and health insurance issuer, or group health plan, as applicable, and
will examine claims before reimbursement is made, to ensure, among
other things, that instances of fraud, waste and abuse are minimized.
Furthermore, the Secretary will perform audits per section 1102(d) of
the Affordable Care Act. To aid the Secretary in detecting and reducing
fraud, waste and abuse, we are requiring that sponsors ensure that
there are policies and procedures in place to detect and reduce fraud,
waste and abuse. While the policies and procedures may be maintained by
the sponsor's health insurance issuer or group health plan, the sponsor
will have to attest that these policies and procedures are in place in
the application. The sponsor must comply with requests from the
Secretary to produce the policies and procedures and any documents or
data to substantiate the implementation, and the effectiveness, of the
procedures. We believe we meet the requirements of the statute by
taking actions to detect and reduce fraud, waste, and abuse, by
requiring sponsors to have such policies and procedures in place, and
by requiring a sponsor to produce the policies and procedures upon
request (such as for the purposes of an audit). If it is found that a
sponsor committed fraud, waste or abuse, or allowed fraud, waste, and
abuse to occur under its plan or plans, the Secretary may recoup from
the sponsor some or all of the reimbursements paid under the program,
and/or may revoke a sponsor's certification to participate in the
program. Of course, there are other laws relating to fraud, waste, and
abuse, with which sponsors and their health insurance issuers or group
health plans must comply.
3. Application (Sec. 149.40)
Section 1102(b)(1)(B) requires the sponsor to submit ``an
application for participation in the program, at such time, in such
manner, and containing such information as the Secretary shall
require.'' In order to implement this provision, a sponsor must submit
one application per plan, and identify the plan year cycle for which
the sponsor is applying (that is, starting month and day, and ending
month and day; no year is required). One application must be filed for
each plan. Filing a different application for each plan will aid in
tracking the plan as this program progresses to ensure proper
reimbursement and compliance with program requirements.
In order to verify the accuracy of the information contained in the
application, the application will have to be signed by an authorized
representative of the applicant and the authorized representative will
have to certify that the information contained in the application is
true and accurate to the best of the authorized representative's
knowledge and belief, among other certifications. We use the term
applicant in this section to refer to any sponsor that has filed an
application that has not yet been certified under the program. The term
applicant is used to clarify that the applicant is not entitled to the
privileges of a certified sponsor, such as the ability to submit a
reimbursement request or appeal a reimbursement determination. Before a
sponsor may submit claims and make a reimbursement request, the
sponsor's application must be approved by the Secretary. Applications
will be processed in the order in which they are received. Because
funding for this program is limited, we expect more requests for
reimbursement than there are funds to pay the requests. Therefore we
expect an applicant to perform its due diligence when applying, which
should result in the submission of a complete application upon the
first submission. Because it is important that applicants submit
complete applications the first time, we will be providing assistance.
If an application is incomplete, it will be denied and the applicant
will have to submit a new application, which will be processed based on
when the new application is received. If we were to allow an applicant
to cure defects in the application, it would likely result in an
extended application process, which would hinder the efficient
implementation of this program. We must be prepared to exercise our
authority under section 1102(f) to stop accepting applications based on
the availability of the $5 billion appropriated for the program. It is
therefore of paramount importance to applicants that they submit
complete applications upon their first submission, otherwise there may
not be an opportunity to submit a new and complete application.
An application for a given plan does not have to be submitted each
year. To require a separate application for a plan each year would only
complicate the process and would place unneeded burden on applicants
and the Secretary. The application will request the plan year cycles
(that is, the start month and day and the end month and day; no year
required), which for our purposes will provide the information we need
to calculate reimbursement based on reimbursement requests. We do not
think that an annual application approval is required. Once a plan is
certified, the application approved, and the sponsor continues to meet
the requirements of the statute, this part,
[[Page 24456]]
and applicable guidance, the plan and sponsor will continue to be
certified and the application approved.
We set out in Sec. 149.40 what we believe we will need in order to
approve an application. The application must include the applicant's
Tax Identification Number, the applicant's name and address, and
contact information for the applicant. To ensure compliance with the
requirements of the statute, an applicant must provide a summary in its
application of how it will use the reimbursement to meet the
requirements of the program, including how it will use the
reimbursement to reduce plan participant or sponsor costs, or any
combination of these costs, and its plans to implement programs and
procedures to generate savings for plan participants with chronic and
high-cost conditions. Because the statute requires that the funds
dispersed under this program not be used as general revenue, we are
requiring sponsors to maintain the level of effort in contributing to
support their applicable plan or plans. Otherwise, sponsors might
circumvent the prohibition on using the program funds as general
revenue by using, dollar for dollar, sponsors' funds not otherwise used
for health benefits due to the program reimbursement, as general
revenue. We expect that sponsors will use the reimbursement to pay for
increases in, for example, the sponsor's premium, or increases in other
health benefit costs (or to reduce plan participants' costs). Therefore
the sponsor's summary of how it will use the program's reimbursement
must also explain how the reimbursement will be applied to maintain the
sponsor's level of effort in contributing to support the applicable
plan. We do not expect a sponsor to explain every detail of their
programs and procedures and use of program funds but to give us an idea
of how it will meet these requirements. We understand that these
submissions may vary because applicants' situations with respect to
their plans may vary widely. For example, reimbursements received in
the first year that a sponsor participates may be applied the second
year of participation because many plans will have already been
negotiated, agreed to, and implemented upon the effective date of this
regulation. Other sponsors may have more flexibility to use these
reimbursements immediately to lower costs.
We will also require applicants to project their reimbursement
amounts for the first two plan-year cycles in the application so that
we can project total reimbursement amounts. To help us with our funding
projections, we will need sponsors to identify specific projected
reimbursement amounts for each of the two plan-year cycles. This
assessment will help us determine if and when we should stop accepting
applications due to funding limitations. We will also require
applicants to identify all benefit options under the employment-based
plan that any early retiree, for whom the applicant may receive program
reimbursement, may be claimed. This is necessary for us to track where
funds are being spent and to otherwise manage the program. We will also
require sponsors to attest that there are fraud, waste and abuse
policies and procedures in place.
As is required in the RDS program, as a condition of participation,
the sponsor will be required to sign a plan sponsor agreement, which
will include certain assurances made by the sponsor. Included in this
agreement will be a provision stating that reimbursement is based on
information and data submitted by the sponsor and if the information
and data are found to be inaccurate, incomplete or otherwise incorrect,
the Secretary may reopen and revise a reimbursement determination,
including recouping reimbursement from the sponsor. The sponsor will be
required to specifically agree to comply with the terms and conditions
for participation in the program, and acknowledge that information in
the application is being provided for the purpose of obtaining federal
funds. This list of application requirements is not exhaustive. Due to
the compressed timeline for implementing this program, we may need to
request additional information in the application.
Finally, we allow the Secretary to reopen a determination under
which an application had been approved or denied so that if it is later
determined that a sponsor committed fraud or otherwise was untruthful
in the application, the Secretary can revisit the determination.
4. Consequences of Non-Compliance, Fraud or Similar Fault (Sec.
149.41)
To clarify the actions the Secretary may take in instances when
non-compliance, fraud, waste, and abuse, or similar fault are found, we
include a regulation that states that failure to comply with the
requirements of this part, or if fraud, waste, and abuse, or similar
fault are found, the Secretary may recoup or withhold funds, terminate
or deny an application, or take any combination of these actions. We
include termination of an application because, depending upon the
specific situation involved, if it is found that a sponsor committed
fraud or otherwise was untruthful in the application, the determination
to approve an application can be revised under Sec. 149.40. We believe
it is important to set out what actions the Secretary may take so that
sponsors are aware of the ramifications of non-compliance, fraud, waste
and abuse, or similar fault. This regulation does not, of course,
supersede other Federal laws or consequences of non-compliance fraud,
waste and abuse, or similar fault.
5. Funding Limitation (Sec. 149.45)
Section 1102(f) authorizes the Secretary to stop accepting
applications based on the availability of funds. We clarify that a
reimbursement request made on behalf of a certified plan may also be
denied, in whole or in part, due to limitation of funds. Determinations
based on funding limitations are final, binding and cannot be appealed,
because any appeal, even if a sponsor is successful, would not result
in reimbursement to a sponsor. Once the program funds are exhausted
there will be no funds to reimburse a sponsor that may have been
successful upon appeal.
C. Reinsurance Amounts (Subpart C)
1. Amount of Reimbursement (Sec. 149.100)
The statute at section 1102(c) requires the Secretary, upon receipt
of a valid claim for health benefits, to make reimbursement in an
amount of 80 percent of the portion of the health benefit costs (net of
negotiated price concessions) attributable to the claims that exceed
$15,000, but are below $90,000. We interpret the statute to mean that
cumulative health benefits incurred in a given plan year and paid for a
given early retiree, as defined in Sec. 149.2, that fall between those
amounts will receive reimbursement, rather than reimbursement being
made only for discrete health benefit items or services whose
reimbursement total falls between those amounts. This interpretation
will get much needed program funds to plan sponsors more quickly. The
statute also specifies that in determining the amount of claims, the
costs paid by the early retiree (or his or her spouse, surviving
spouse, or dependent) in the form of deductibles, copayments, or
coinsurance shall be included in the amounts paid by the participating
employment-based plan. As an initial matter, we clarify in the
regulation that reimbursement will be made under the program only for
claims that are incurred during the applicable plan year, and paid.
The regulation refers to the $15,000 lower limit and the $90,000
ceiling as
[[Page 24457]]
the ``cost threshold'' and ``cost limit'', respectively, and indicates
that reimbursement under the program is calculated by first determining
the costs for health benefits net of negotiated price concessions,
within the applicable plan year for each early retiree, and then
subtracting amounts below the cost threshold and above the cost limit
within the applicable plan year for each early retiree. We also clarify
that for purposes of determining the amounts below the cost threshold
and above the cost limit for any given early retiree, all costs for
health benefits paid by the plan or by the early retiree for all
benefit options the early retiree is enrolled in with respect to a
given certified employment-based plan for a given plan year, will be
combined. We make this clarification because the statute, at section
1102(c)(3), specifies that ``a claim submitted by a participating
employment-based plan shall not be less than $15,000 nor greater than
$90,000'' (emphasis added). For example, an early retiree is
simultaneously enrolled in two different benefit options within one
group health plan--Option 1 as a retiree, and Option 2 as a spouse of a
retiree. For purposes of determining when the early retiree satisfies
the cost threshold, all claims incurred and paid for that early retiree
by both benefit options within the applicable plan year, will be
counted. The claims for that early retiree under each benefit option
will not be separately counted. For purposes of determining if and when
the early enrollee has satisfied the cost limit, the same principle
applies. In other words, within one employment-based plan for a given
plan year, there is one threshold limit, and one cost limit, per early
retiree.
We also indicate that the reimbursement formula specified in the
regulation applies to insured plans as well as self-funded plans, and
that with respect to insured plans, costs for health benefits means
costs the insurer and the early retiree pay for health benefits net of
negotiated price concessions the insurer receives for health benefits.
Thus, for insured plans, the amount of premium the sponsor pays (and
the amount of premium contribution the early retiree pays) is
irrelevant for purposes of calculating reimbursement under the program.
We believe this is the correct interpretation because section
1102(c)(1)(A) states that claims for reimbursement must ``contain
documentation of actual costs of items and services * * *.'' Premiums
are not costs for items and services.
2. Transition (Sec. 149.105)
The program becomes effective June 1, 2010. We carefully considered
whether to allow sponsors to participate in the program for plan years
that ended before the program's effective date, but decided that such
an approach would seem inconsistent with the program's effective date.
We also considered whether to permit sponsors to participate only for
plan years that start on or after the program's effective date, but
decided that such an approach would arbitrarily favor sponsors with
plan years that start soon after June 1, 2010. Therefore, we decided to
allow sponsors to apply for plan years that start before June 1, 2010,
provided they end after that date (for example, calendar year 2010
plans).\1\ This raised the question of how claims incurred during such
a plan year, but before June 1, 2010, would be dealt with under the
program. Under one approach considered, any such claims would count
toward the cost threshold, and any such claims exceeding the threshold,
but below the cost limit, would be eligible for program reimbursement.
We did not adopt that approach, as it arguably would unfairly favor
sponsors with plan years that started significantly before the
program's effective date, especially in light of the program's limited
funding.
---------------------------------------------------------------------------
\1\ Sponsors can also apply for plan years that start after June
1, 2010.
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We decided upon the following approach. For claims incurred before
June 1, 2010, the amount of such claims up to $15,000 count toward the
cost threshold and the cost limit. The amount of claims incurred before
June 1, 2010 that exceed $15,000 are not eligible for reimbursement and
do not count toward the cost limit. The reinsurance amount to be paid
is based solely on claims incurred on and after June 1, 2010, and that
fall between the cost threshold and cost limit for the plan year. As an
example, for a plan with a plan year that began July 1, 2009, with an
end date of June 30, 2010, with an early retiree for which it has spent
$120,000 in health benefit claims before June 1, 2010, and it then
spends another $30,000 in health benefit claims on the early retiree
between June 1, 2010 and June 30, 2010, the sponsor would receive
credit for $15,000 in claims incurred before June 1 and receive
reimbursement of 80 percent of the $30,000 (for the claims incurred
after June 1, 2010), or $24,000. We believe this is a reasonable
approach because it provides as much relief as possible as soon as
possible to sponsors, while giving meaning to the effective date of the
program. A sponsor should therefore not submit claims above the $15,000
cost threshold that were incurred before June 1, 2010, for
reimbursement, as submission of such claims is outside the scope of the
regulation. Also, to submit these claims for reimbursement will make
the reimbursement process more complex than it needs to be.
3. Negotiated Price Concessions (Sec. 149.110) and Cost Threshold and
Cost Limit (Sec. 149.115)
Section 1102(c)(1)(B) states that any negotiated price concessions
obtained by an employment-based plan with respect to a health benefit
must be reflected in claims submitted for program reimbursement. We
recognize that sponsors and insurers sometimes do not receive certain
negotiated price concessions until after payment is made, and in many
cases, after the plan year during which the claim is incurred and paid,
has ended. For example, this is typically the case with prescription
drug rebates. Thus, we specify in the regulation that sponsors must
disclose such ``post-point-of-sale'' negotiated price concessions, in a
form and manner to be specified by the Secretary. We expect to specify
the form and manner of such disclosures in future guidance. This will
ensure that sponsors ultimately submit accurate claims data, and thus
ultimately receive accurate reimbursement.
Finally, the statute indicates that the $15,000 and $90,000 figures
shall be adjusted each fiscal year based on the percentage increase in
the Medical Care Component of the Consumer Price Index for all urban
consumers (rounded to the nearest multiple of $1,000) for the year
involved. We specify in the regulations that for plan years starting on
or after October 1, 2011, the figures will be so adjusted.
D. Use of Reimbursements (Subpart D)
Use of Reimbursements (Sec. 149.200)
Section 1102(c)(4) requires that the reimbursement ``shall be used
to lower costs for the plan. Such payments may be used to reduce
premium costs for an entity'' receiving a reimbursement or to reduce
premium contributions, co-payments, deductibles, co-insurance, or other
out-of-pocket costs for plan participants. We encourage sponsors to use
their reimbursement under the program for both of the following
purposes: (1) To reduce the sponsor's health benefit premiums or health
benefit costs, and (2) To reduce health benefit premium contributions,
co-payments, deductibles, coinsurance, or
[[Page 24458]]
other out-of-pocket costs, or any combination of these costs, for plan
participants. We expect that sponsors will continue to provide at least
the same level of contribution to support the applicable plan, as it
did before this program. For example, for a sponsor that pays a premium
to an insurer, if the premium increases, program funds may be used to
pay the sponsor's share of the premium increase from year to year,
which reduces the sponsor's premium costs. Section 1102(c)(4) sets
forth the requirements for use of reimbursements under this section and
envisions a role for the Secretary in developing a mechanism to monitor
the appropriate use of such reimbursements. Additional information
about this mechanism will be disseminated as it is developed.
The statute does not appear to use the terms ``early retiree'' and
``plan participants'' interchangeably. Therefore, we interpret this
provision to mean that a sponsor may only receive program funds for
claims of early retirees or their spouses, surviving spouses or
dependents, but the funds may be used to lower health benefit costs for
all participants in the plan, including retirees, and their spouses and
dependents, and active employees and their spouses and dependents. At
Sec. 149.200 (b), we clarify the statutory prohibition on using the
funds as general revenue of the sponsor.
E. Reimbursement Methods (Subpart E)
1. General Reimbursement Rules (Sec. 149.300), Timing (Sec. 149.310),
Reimbursement Conditioned Upon Available Funds (Sec. 149.315),
Universe of Claims That Must Be Submitted (Sec. 149.320), Requirements
for Eligibility of Claims (Sec. 149.325), and Content of Claims (Sec.
149.330)
Section 1102(c)(1) of the Affordable Care Act states that a
participating employment-based plan shall submit claims for
reimbursement to the Secretary which shall contain documentation of the
actual costs of the items and services for which each claim is being
submitted. As noted above, we define ``claim'' as documentation
specifying the health benefit provided, the provider or supplier, the
incurred date, the individual for whom the health benefit was provided,
the date and amount of payment net any known negotiated price
concessions, and the employment-based plan and benefit option under
which the health benefit was provided. The terms ``claim'' or ``medical
claim'' include medical, surgical, hospital, prescription drug and
other such claims as determined by the Secretary. We clarify in the
regulation that claims for benefits for the diagnosis, cure,
mitigation, or prevention of physical or mental disease or condition
with respect to any structure or function of the body, may be filed.
This clarification is not an exhaustive list of claims that the
Secretary may determine are appropriate.
The regulation also specifies that claims cannot be submitted for a
given plan year until the application that is associated with the claim
and that references the applicable plan year cycle has been approved.
With respect to a given early retiree, claims cannot be submitted until
the early retiree's total paid costs for health benefits incurred for
the plan year exceed the applicable cost threshold. Once that threshold
has been reached, claims can be submitted, but they must include all
claims below the applicable cost threshold for the plan year in order
to verify that the cost threshold has been met. Claims must be
submitted based on the amounts actually paid, which may include the
amounts paid by the early retiree. Once the cumulative claims of an
early retiree, as defined in Sec. 149.2, exceed $90,000 for a plan
year, a sponsor should not submit claims above this claims limit for
that early retiree because no reimbursement will be paid on these
claims.
2. Documentation of the Actual Cost of Medical Claims Involved (Sec.
149.335), Rule for Insured Plans (Sec. 149.340), and Use of
Information Provided (Sec. 149.345)
All claims submissions must include a list of early retirees for
whom claims are being submitted. Both the documentation of actual costs
of claims and the list of early retirees must be submitted in a form
and manner to be specified by the Secretary. Claims submissions will be
processed on a first-in, first-out basis until program funding is
expended.
We also specify that with respect to insured plans, the claims and
the list of early retirees can be submitted directly to the Secretary
by the insurer.
In order for a sponsor to receive credit for the cost-sharing
amounts paid by the early retiree or the early retiree's spouse,
surviving spouse or dependent, the sponsor must provide prima facie
evidence that the early retiree or the early retiree's spouse,
surviving spouse or dependent, paid his or her portion of the costs.
Such evidence may include an actual payment receipt. If a sponsor
cannot provide prima facie evidence, it may receive credit under the
program only for the portion of the claim the sponsor actually paid.
There may be instances when a sponsor contracts with, for example,
a staff-model health maintenance organization, that either has its own
provider(s) on-staff or pays providers a capitated payment to care for
plan participants. In these instances, claims might not ordinarily be
produced. However, in order for the Secretary to calculate
reimbursement under this program for such sponsors, the sponsor will be
required to ensure that the insurer submit the information required in
a claim as specified in Sec. 149.330 and Sec. 149. 335. The
information submitted by the insurer must be reasonable in light of the
specific market that the insurer is serving.
3. Maintenance of Records (Sec. 149.350)
The regulations also specify how the Secretary may use the
information collected for purposes of the program, and the records
maintenance requirements that apply to the sponsor. The specified
records must be maintained for 6 years after the expiration of the plan
year in which the costs were incurred, or longer if otherwise required
by law. The sponsor must require its health insurance issuer or
employment-based health plan, as applicable, to maintain and produce
upon request records to satisfy the maintenance of records
requirements.
F. Appeals (Subpart F)
1. Appeals (Sec. 149.500)
Section 1102(c)(6) of the Affordable Care Act requires the
Secretary to establish an appeals process to permit sponsors to appeal
a determination made by the Secretary with respect to claims submitted
under the program. Due to the limited funding and temporary nature of
the program, we have established a one-step appeal process. A sponsor
may appeal directly to the Secretary within 15 calendar days of receipt
of the determination at issue. Section 149.500 sets out what we
consider to be an adverse reimbursement determination, which is a
determination relating to the amount of reimbursement paid under the
program.
2. Content of Request for Appeal (Sec. 149.510)
The request for appeal must specify the findings or issues with
which the sponsor disagrees and the reasons for the disagreements. The
request for appeal may include supporting documentary evidence the
sponsor wishes the Secretary to consider. Essentially the sponsor must
provide the Secretary with its issues and arguments and any supporting
documentation that it has to support its
[[Page 24459]]
arguments. The Secretary may accept subsequent supporting documentation
if, for example, the sponsor did not have time during the 15-day window
to perform a comprehensive data analysis of the issue. It would be
helpful in the request for appeal if the sponsor notes that further
information will be provided to support the request for appeal and a
date by which the information will be received by the Secretary.
3. Review of Appeals (Sec. 149.520)
The regulation sets out generally the process the Secretary will
use when reviewing the appeal and clarifies that the Secretary's
decision will be final and binding, unless fraud or similar fault are
involved. The Secretary will not accept oral argument or oral
testimony, either in person or on the telephone.
If all or part of a reimbursement request is denied based on the
unavailability of funds, the sponsor may not appeal because an appeal
would serve no purpose. If funds are exhausted, there will be no funds
to reimburse a sponsor if it is found that the sponsor should otherwise
be eligible for reimbursement. Allowing an appeal when funds are
exhausted only serves to add burden to sponsors that have received an
adverse determination, because, if we allow such an appeal, an
aggrieved sponsor may feel that it must appeal in order to exhaust its
remedies and to protect its interests. Once the funds for the program
are exhausted, there is no interest for the sponsor to protect because
there will be no chance of reimbursement, even upon a successful
appeal. It will also serve to increase the Secretary's burden because
the Secretary will have to process and respond to each of these
appeals, when there would be no possibility of a reimbursement
adjustment in favor of the sponsor.
The Secretary will inform the sponsor and the applicable HHS
designee of the Secretary's decision. Because time is of the essence
with respect to funding, we do not specify how the Secretary will
inform these stakeholders of the decision because it may be in writing,
via electronic means or orally. The response process will be further
reviewed to ensure that stakeholders receive appropriate notice of a
decision. Of course, we do specify that if the sponsor requests a
written response, the Secretary will provide a written response.
G. Disclosure of Data Inaccuracies (Subpart G)
1. Sponsor's Duty To Report Data Inaccuracies (Sec. 149.600)
Claims submitted for reimbursement may change after the 15-day
appeal-request period has expired. For example, if a provider reverses
a claim after the appeal-request period has expired, data would need to
be updated to reflect the reversal. However, in order to make accurate
reimbursements (reopen and revise reimbursement determinations that
have already been made), sponsors are required to submit accurate data
for reimbursement purposes. We understand that claims may be reversed
or otherwise altered and that data that was accurate when submitted for
reimbursement under the program may become inaccurate. Furthermore,
reimbursement under this program is based on claims that are net of
negotiated price concessions. Because negotiated price concessions
include post-point-of-sale price concessions, data submitted for
reimbursement may become inaccurate once the price concessions are
finalized for a given plan year.
We do not believe it is necessary to require a sponsor to submit a
formal appeal under Sec. 149.500 to the Secretary merely because data
changes due to the natural course of business. Also, we realize that
certain changes in data due to the normal course of business might not
become evident to a sponsor within 15 days after a reimbursement
determination. Therefore, we are establishing a process that will give
sponsors the ability to update us on any data inaccuracies and will
allow us to reopen and revise a reimbursement determination as
necessary, based on the updated data. We believe this would be the most
efficient way to administer this program, particularly because of the
limited nature of the program funds and the uncertain length of time
that an appeal to the Secretary may involve.
2. Secretary's Authority To Reopen and Revise Reimbursement
Determination Amounts (Sec. 149.610)
While the details of this process will be developed in sub-
regulatory guidance, we state that the Secretary may reopen and revise
a reimbursement determination upon its own motion or upon the request
of a sponsor, within 1 year of a reimbursement determination, for any
reason, within 4 years of a reimbursement determination for good cause,
or at any time in instances fraud or similar fault. We define the term
``good cause'' in Sec. 149.2, and discuss in the regulation what we
believe is not good cause for revising the reimbursement. This
regulation tracks the language in the RDS and Part D reconciliation
reopening regulations at Sec. 423.890 and Sec. 423.346, respectively.
We specify in this section that the Secretary may reopen and revise
a reimbursement determination on the Secretary's own motion. If the
Secretary becomes aware that a reimbursement determination was made
based upon inaccurate data, this will allow the Secretary to reopen and
revise the reimbursement determination without the sponsor having to
make a request. Reimbursement determinations may be reopened and
revised to pay out more funds to a sponsor assuming such funds exist or
to recoup funds that were already paid, or to withhold funds from a
future reimbursement to offset a sponsor's liability.
H. Change of Ownership Requirements (Subpart H)
1. Change of Ownership Requirements (Sec. 149.700)
We include in this regulation requirements for a sponsor to provide
the Secretary with advance notice of any change of ownership of the
sponsor. Complying with this requirement is critically important, as it
helps to ensure that program reimbursement is being made only to
legitimate entities, and only to such entities that are actually
complying with the requirements of the program. The requirements mirror
the change of ownership requirements that are found in the RDS
regulation, which we believe are appropriate for the Early Retiree
Reinsurance Program, in light of the fact that we expect many sponsors
to participate in both programs. Complying with the change of ownership
requirements is especially critical with respect to the Early Retiree
Reinsurance Program, in light of the program's limited funding.
The regulations define a change of ownership as any of the
following:
(1) The removal, addition, or substitution of a partner, unless the
partners expressly agree otherwise as permitted by applicable state
law.
(2) Transfer of all or substantially all of the assets of the
sponsor to another party.
(3) The merger of the sponsor's corporation into another
corporation or the consolidation of the sponsor's organization with one
or more other corporations, resulting in a new corporate body.
Transfer of corporate stock or the merger of another corporation
into the sponsor's corporation, with the sponsor
[[Page 24460]]
surviving, does not ordinarily constitute change of ownership.
A sponsor that has a sponsor agreement in effect and is considering
or negotiating a change in ownership must notify the Secretary at least
60 days before the anticipated effective date of the change. When there
is a change of ownership that results in a transfer of the liability
for health benefit costs, the existing sponsor agreement is
automatically assigned to the new owner. This requirement is necessary
because there may be obligations under the plan sponsor agreement that
do not surface until some time after the change of ownership. The
Secretary must ensure that there is a party to the plan sponsor
agreement that can satisfy those obligations, which may include the
return of program reimbursement. The new owner to whom a sponsor
agreement is assigned is subject to all applicable statutes,
regulations, and guidance, and to the terms and conditions of the
sponsor agreement. Failure to notify the Secretary at least 60 days
before the anticipated effective date of the change may result in the
Secretary recovering funds paid under the program.
III. Waiver of Proposed Rulemaking and Delay in Effective Date
A. Waiver of Notice-and-Comment Procedure
We ordinarily publish a notice of proposed rulemaking in the
Federal Register and invite public comment on the proposed rule. The
notice of proposed rulemaking includes a reference to the legal
authority under which the rule is proposed, and the terms and
substances of the proposed rule or a description of the subjects and
issues involved. This procedure can be waived under section
553(b)(3)(B) of the Administrative Procedure Act, however, if an agency
finds good cause that notice-and-comment procedure is impracticable,
unnecessary, or contrary to the public interest and incorporates a
statement of the finding and its reasons in the rule issued. Below, we
discuss our reasons for the waiver of notice-and-comment procedure.
Section 1102(a)(1) of the Affordable Care Act requires the
Secretary, not later than 90 days after enactment of the Act, to
establish a temporary Early Retiree Reinsurance Program. The Affordable
Care Act was enacted on March 23, 2010, which means that the Secretary
must implement the Early Retiree Reinsurance Program by June 21, 2010.
We believe this is insufficient time for notice-and-comment rulemaking.
The 90 days Congress specified does not allow for development of the
rule, a meaningful public comment period, and agency analysis of, and
response to, those comments before this rule can be made final.
Moreover, we need to actually establish a temporary Early Retiree
Reinsurance Program--not simply issue this interim final rule--by June
1, 2010, in order to align the effective date of the program with some
sponsors' plan year start dates and to simplify accounting for sponsors
and the Secretary, as is discussed below. We must finalize this rule in
order to take the multiple other steps necessary to establish the
program. Within the time frame contemplated in the statute, we need to
have regulations effective in time for applicants to be able to review
them and begin to put together their information so that they can apply
(once the application process is finalized). The application process
cannot be finalized until the regulations are close to being finalized
in this Interim Final Rule. Furthermore, the Secretary needs to have
established the rules by which she is going to implement this program
so that she can move forward with actually administering it, which
includes contracting with a contractor to aid with administering the
program. The regulations have to be close to finalized before the
Secretary can draft a comprehensive scope of work for the contract that
will be issued to aid the Secretary with administering this program.
Therefore, we find good cause to waive the notice of proposed
rulemaking and to issue this final rule on an interim basis without
prior comment. While we are not providing prior comment, we are
providing a 30-day public comment period.
B. Waiver of Delay of Effective Date
In addition, section 553(d) of the APA ordinarily requires that a
regulation be effective no earlier than 30 days after publication.
Under section 553(d)(3) this requirement can be waived for good cause.
As explained above, Section 1102(a)(1) of the Affordable Care Act
requires the Secretary to establish the Early Retiree Reinsurance
Program by June 21, 2010. In order to better align the effective date
of some sponsors' plan and/or fiscal years with the effective date of
the program, to allow sponsors to be credited for claims starting at
the beginning of a month in order to simplify accounting for sponsors
and the Secretary, and to allow sponsors to be credited for claims
incurred before June 21, 2010, we need to actually establish the
program--not simply issue this Interim Final Rule--by June 1, 2010, as
opposed to June 21, 2010. As a result, we find good cause to waive the
30-day delay in effective date that would otherwise apply under section
553(d) of the Administrative Procedure Act (APA) for this rule
implementing the Early Retiree Reinsurance Program. This Interim Final
Rule will become effective on June 1, 2010.
In addition, 5 U.S.C. 801 generally requires that agencies submit
major rules to the Congress 60 days before the rules are scheduled to
become effective. This delay does not apply, however, when there has
been a finding of good cause for waiver of prior notice and comment as
set forth above.
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs).
A. ICRs Regarding Requirements To Participate (Sec. 149.35)
Section 149.35(b)(1) requires plan sponsors to make available
documentation, data, and other information related to this part and any
other records specified by the Secretary, as stated in Sec. 149.350.
The burden associated with this requirement is detailed in our
discussion of Sec. 149.350.
Section 149.35(b)(2) states that a plan sponsor must have a written
agreement with its health insurance issuer (as defined in 45 CFR
160.103) or employment-based plan (as applicable) regarding disclosure
of information, data, documents, and records to the Secretary, and the
health insurance issuer or employment-based plan must
[[Page 24461]]
disclose to the Secretary, on behalf of the sponsor, the information
necessary for the sponsor to comply with the program, this part, and
program guidance. The burden associated with this requirement is the
time and effort necessary for a plan sponsor to develop, sign, and
maintain the aforementioned written agreement with its health insurance
issuer or employment-based plan. We estimate that it will take 1 hour
to develop, sign, and maintain one such written agreement. We also
estimate that each plan sponsor on average will need to maintain and
sign 3 such agreements. Using the RDS Program as a baseline, we
estimate that 4,500 Early Retiree Reinsurance Program plan sponsors
must comply with this requirement. The estimated annual burden
associated with this requirement is 13,500 hours. The estimate cost of
compliance with this requirement is $1,005,885, for the first year of
the program. For the subsequent four years, we estimate that roughly
one-quarter of the 4,500 sponsors (1,125) will contract with one
different entity each year to disclose information, data, etc., to the
Secretary. For each of those years, the estimated cost of compliance
with this requirement is $83,824.
Section 149.35(b)(3) requires plan sponsors to have procedures to
protect against fraud, waste and abuse under this program, and must
comply timely with requests from the Secretary to produce the
procedures and any documents or data to substantiate the implementation
of the procedures and their effectiveness. Additionally, Sec.
149.35(b)(5) requires plan sponsors to comply timely with requests from
the Secretary to produce the procedures and any documents or data to
substantiate the implementation of the procedures and their
effectiveness. The burden associated with the requirements in Sec.
149.35(b)(3) is the time and effort necessary to develop, implement,
and maintain procedures to protect against fraud, waste and abuse under
this program. There is also burden associated with producing the
procedures and any supporting documentation up request by the
Secretary. We estimate that it will take 20 hours for each plan sponsor
or designee to develop, implement and maintain one set of such policies
and procedures. We also estimate that with respect to each plan
sponsor, an average of three separate sets of policies and procedures
will have to be developed, implemented and maintained, to account for
the fact that many sponsors will have multiple benefit options, each
using a different entity that is submitting claims to the program on
their behalf. However, we estimate that one-third of the 4,500 expected
plan sponsors will be contracting with entities that submit claims to
the program that already have fraud, waste and abuse programs and
procedures in place. Therefore, we estimate that 3,000 plan sponsors
will have to newly develop, implement, and maintain such program and
procedures. The estimated annual burden for these requirements is 20
hours per set of fraud, waste and abuse procedures. The estimated cost
associated with this requirement is $9,982,800 for the first year of
the program. For the subsequent four years of the program, we estimate
that roughly one quarter of the estimated 4,500 sponsors (roughly
1,125) will contract with one new entity each year, to submit claims to
the program on the sponsor's behalf. For each of those years, the
estimated annual burden associated with this burden is 1,125 sponsors
multiplied by 20 hours, or 22,500 hours, with estimated costs equal to
$1,247,850.
Section 149.35(b)(4) also requires plan sponsors to submit an
application to the Secretary in the manner, and at the time, required
by the Secretary, as specified in Sec. 149.40. The burden associated
with this requirement is detailed in our discussion of Sec. 149.40.
B. ICRs Regarding Application (Sec. 149.40)
Section 149.40 discusses the application process for the early
retiree reinsurance program. As stated in Sec. 149.40(a) requires an
applicant to submit an application to participate in this program to
the Secretary, which is signed by an authorized representative of the
applicant who certifies that the information contained in the
application is true and accurate to the best of the authorized
representative's knowledge and belief. Section 149.40(e) states that an
applicant must submit an application for each plan for which it will
submit a reimbursement request. Furthermore, as part of the application
process, every application must be accompanied by the information
listed in Sec. 149.40(f).
The burden associated with the requirements in this section is the
time and effort necessary for a plan sponsor or its designee to
complete an application for each plan for which it will submit a
reimbursement request. In addition, there is burden associated with
compiling and submitting the required ancillary information listed in
Sec. 149.40(f). We estimate that the program will receive an average
of 1 application each, from 4,500 plan sponsors or their designees. We
further estimate that it will take 35 hours for a plan sponsor or
designee to complete one application package. The total estimated
annual burden associated with this requirement is 157,500 hours. The
total estimated annual cost associated with this requirement is
$8,820,675. This is a one-time burden, as sponsors are not required to
submit a new application for each plan year.
C. ICRs Regarding Documentation of Actual Costs of Medical Claims
Involved (Sec. 149.335)
Section Sec. 149.335 requires that sponsors must submit claims,
with each submission consisting of a list of early retirees for whom
claims are being submitted, and documentation of the actual costs of
the items and services for each claim being submitted. These material
must be submitted in a form and manner specified by the Secretary.
Additionally, in order for a sponsor to receive reimbursement for the
portion of a claim that an early retiree paid, the sponsor must submit
prima facie evidence that the early enrollee paid his or her portion of
the claim. The burden associated with the requirements in this section
is the time and effort necessary for sponsors to assemble and submit
the aforementioned information. We estimate that it will take each
sponsor an average of 45 hours to comply with these requirements, with
the number of hours varying based upon the number of early retirees for
whom claims are submitted, the number of claims, the technology used to
generate the required information, etc. We estimate that each of the
4,500 participating sponsors will make two submissions annually. The
total estimated annual burden associated with this requirement is
405,000 hours. The total estimated annual cost associated with these
requirements is $15,758,550.
D. ICRs Regarding Maintenance of Records (Sec. 149.350)
Section 149.350(a) requires the sponsor of the certified plan (or a
subcontractor, as applicable) must maintain and furnish to the
Secretary, or its designee, upon request the records as specified in
Sec. 149.350(b). The records must be maintained for 6 years after the
expiration of the plan year in which the costs were incurred, or longer
if otherwise required by law. Similarly, as required by Sec.
149.350(d), the sponsor must require its health insurance issuer or
employment-based plan, as applicable, to maintain and produce upon
request records to satisfy subparagraph (c) of this regulation. The
[[Page 24462]]
burden associated with the requirements in this section is the time and
effort necessary to retain the specified records. We estimate that each
of the estimated 4,500 sponsors will require 6 hours to retain the
records. The total estimated annual burden associated with this
requirement is 27,000 hours. The total estimated annual cost associated
with this requirement is $1,050,570.
E. ICRs Regarding Appeals (Sec. 149.500 and Sec. 149.510)
Section 149.500(d) states that if a sponsor appeals an adverse
reimbursement determination, the sponsor must submit the appeal in
writing to the Secretary within 15 days of receipt of the
determination. Section 149.510 requires a request for appeal to specify
the findings or issues with which the sponsor disagrees and the reasons
for the disagreements. In addition, the request for appeal may include
supporting documentary evidence the sponsor wishes the Secretary to
consider. The burden associated with the aforementioned requirements is
the time and effort necessary for a sponsor to draft and submit an
appeal, including supporting documentation. While this requirement is
subject to the PRA, we believe the associated burden is exempt under 5
CFR 1320.4. In this case, the information associated with an appeal
would be collected subsequent to an administrative action, that is, an
adverse reimbursement determination or an application denial.
F. ICRs Regarding Sponsor's Duty To Report Data Inaccuracies (Sec.
149.600)
Section 149.600 requires a sponsor to disclose any data
inaccuracies on which a reimbursement request has been made, including
inaccurate claims data and negotiated price concessions, in a manner
and at a time specified by the Secretary in guidance. The burden
associated with this requirement is the time and effort necessary for a
sponsor to comply with the reporting requirement. We estimate that
1,500 sponsors annually will be subject to this requirement, and that
burden associated with this requirement is 32 hours per sponsor (two
disclosures per year per sponsor, each disclosure having an estimated
burden of 16 hours). The estimated annual burden associated with this
requirement is 48,000 hours. The total estimated annual cost associated
with this burden is $1,867,680.
G. ICRs Regarding Change of Ownership Requirements (Sec. 149.700)
Section 149.700(c) requires a sponsor that has a sponsor agreement
in effect under this part and is considering or negotiating a change in
ownership to notify the Secretary at least 60 days before the
anticipated effective date of the change. The burden associated with
the requirement is the time and effort necessary for a sponsor to
comply with the reporting requirement. Based on our experience with the
RDS Program, we estimate that it will take each sponsor an average of 1
hour to comply with these requirements, and that 50 sponsors per year
will be subject to this requirement. The total estimated annual burden
associated with this requirement is 50 hours. The total estimated
annual cost associated with these requirements is $2,773.
All of the information collection requirements containing burden
were submitted to the Office of Management and Budget (OMB) for
emergency review and approval as part of a single information
collection request (ICR). As part of the emergency review and approval
process, OMB waived the notification requirements. The ICR was approved
under OMB control number 0938-1087 with an expiration date of October
31, 2010. However, we are still seeking public comments on the
information collection requirements discussed in this interim final
rule with comment. All comments will be considered as we continue to
develop the ICR as we must resubmit the ICR to obtain a standard 3-year
approval.
Table 1--Annual Recordkeeping and Reporting Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total
OMB Control Time per Total Hourly Total labor capital/ Total cost
Regulation section No. Respondents Responses response burden labor cost cost ($) maintenance ($)
(hours) (hours) ($) cost ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 149.35(b)(2)................ 0938-1087 4,500 13,500 1 13,500 74.51 1,005,885 0 1,005,885
........... 1,125 1,125 1 1,125 74.51 83,824 0 83,824
Sec. 149.35(b)(3)................ 0938-1087 3,000 9,000 20 180,000 55.46 9,982,800 0 9,982,800
........... 1,125 1,125 20 22,500 55.46 1,247,850 0 1,247,850
Sec. 149.40...................... 0938-1087 4,500 4,500 35 157,500 ** 8,820,675 0 8,820,675
Sec. 149.335..................... 0938-1087 4,500 9,000 45 405,000 38.91 15,758,550 0 15,758,550
Sec. 149.350..................... 0938-1087 4,500 4,500 6 27,000 38.91 1,050,570 0 1,050,570
Sec. 149.600..................... 0938-1087 1,500 3,000 16 48,000 38.91 1,867,680 0 1,867,680
Sec. 149.700(c).................. 0938-1087 50 50 1 50 55.46 2,773 0 2,773
--------------------------------------------------------------------------------------------------------------------
Total.......................... ........... 11,300 45,800 ........... 854,675 ........... ........... ........... 39,820,607
--------------------------------------------------------------------------------------------------------------------------------------------------------
**$74.51 per hour for 1 hour per response, $55.46 per hour for 34 hours per response.
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attn: CMS Desk Officer, CMS-
9996-IFC, fax (202) 395-6974, or via email [email protected].
V. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
VI. Regulatory Impact Analysis
A. Overall Impact
We have examined the impacts of this rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354),
section 1102(b) of the Social Security Act, section 202 of the Unfunded
[[Page 24463]]
Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)).
Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). A regulatory impact
analysis (RIA) must be prepared for major rules with economically
significant effects ($100 million or more in any 1 year). This rule
will be economically significant because it sets out the requirements
that sponsors will need to meet in order to participate in the Early
Retiree Reinsurance Program and obtain a portion of the $5 billion the
Congress appropriated for this program. While a small portion of the
funds will be used to administer the program, the remainder of the $5
billion will be paid to eligible sponsors over the life of the program,
resulting in economically significant net positive transfers to
sponsors. We believe that the costs imposed on sponsors that want to
receive the early retiree reimbursement will not be significant
relative to the payments received. The costs will consist of staff or
contractor time to complete the application to participate, to file
claims for reimbursement, and to comply with program requirements such
as any requests related to an audit, as well as any supplies necessary
to perform these tasks summarized in Table 1 above. As a result this
rulemaking is ``economically significant'' as measured by the $100
million threshold, and hence also a major rule under the Congressional
Review Act. Accordingly, we have prepared a regulatory impact analysis
that to the best of our ability presents the costs and benefits of the
rulemaking.
The RFA requires agencies to analyze options for regulatory relief
of small businesses, if a rule has a significant impact on a
substantial number of small entities. According to the Kaiser Family
Foundation and Health Research & Educational Trust's 2009 Employer
Health Benefits Survey, 5 percent of surveyed businesses with 3 to 199
workers offered retiree health benefits. See pg. 166 of the Survey.
http://ehbs.kff.org/pdf/2009/7936.pdf. It is unclear how many offered
health benefits to early retirees, but since there were about 3.3
million such firms (page 15 of the survey), even if only 5 percent
provided such benefits, over 150,000 such firms would be eligible for
the program. However, we estimate that the number of sponsors that will
actually participate in the Early Retiree Reinsurance Program, will be
similar to the number that participate in the Retiree Drug Subsidy
Program. For purposes of the RFA, we estimate that 5 percent of
sponsors are small entities as that term is used in the RFA (including
small businesses, nonprofit organizations, and small governmental
jurisdictions). Ultimately, the number of small businesses affected
will depend upon how many small businesses apply for the reimbursement,
which we do not currently know. What we do know is that we have made,
and will make, the application and claims submission processes as
simple as possible, while still protecting the integrity of the
program. Therefore, if small businesses want to participate, they may
do so.
Turning to small business providers, the great majority of
hospitals and most other health care providers and suppliers are small
entities, either by being nonprofit organizations or by meeting the
Small Business Administration (SBA) definition of a small business
(having revenues of less than $7.0 million to $34.5 million in any 1
year). While this rule does not directly impact providers (unless they
apply to be sponsors), it does increase access to health insurance,
which may then cause more individuals to be able to afford health care
and therefore be able to utilize providers' services and products more
often. Therefore, health care providers may see an increase in patients
and may not be required to deliver health care free of charge or at
reduced rates in as many instances as they may currently do.
Because much of the effect on health care providers depends upon
where plan participants choose to receive these services, which must be
from a provider that accepts the plan participant's coverage, the term
``health care provider'' is likely to include health care entities
operated by small governmental entities such as counties or towns.
Small governmental health care entities may include county hospitals,
clinics or other such entities. Regardless of the entity, we expect a
positive effect on these entities. For purposes of the RFA, a
significant number of health care providers indirectly affected by the
program are considered small businesses according to the SBA's size
standards with total revenues of $7 million to $34.5 million or less in
any 1 year and an undetermined percent are nonprofit organizations.
Individuals and States are not included in the definition of a small
entity. Uncertainty arises because we do not know how many small
businesses or other small entities will apply to participate in the
Early Retiree Reinsurance Program, nor do we know how the increased
access to health insurance will affect small businesses that provide
health care services and products to the participants affected by the
program. We believe, however, that this interim final rule will have a
significant positive economic effect on a substantial number of small
businesses. The HHS interpretation of the Regulatory Flexibility Act
has historically been that it does not trigger a regulatory flexibility
analysis as a result of positive economic impacts (the statute requires
that economic impacts be minimized, which makes no sense when applied
to positive effects). The Department nonetheless usually prepares a
voluntary regulatory flexibility analysis in such circumstances. In
addition, because a regulatory flexibility analysis is only required
for rules for which an NPRM must be prepared, there is an additional
exemption that applies to this rule. Accordingly, we conclude that a
regulatory flexibility analysis is not required. Nonetheless, we
believe that this regulatory impact section, together with the
remainder of the preamble, constitutes a voluntary analysis that meets
the requirements that would otherwise be applicable.
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. 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. We do not believe this
rule will have a significant impact on the operations of a substantial
number of small rural hospitals because the increased access to health
insurance, while positively affecting small rural hospitals' ability to
collect payment for services rendered to plan participants affected by
the program, will be unlikely to increase revenues in an economically
significant amount. Therefore, the Secretary has determined that this
interim final rule will not have a significant impact on the operations
of a substantial number of small rural hospitals. In addition, such an
analysis is not required when an NPRM is not required, as in this case.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates required spending in any 1 year of $100
[[Page 24464]]
million in 1995 dollars, updated annually for inflation. In 2010, that
threshold is approximately $135 million. This rule does not mandate any
spending by State, local, or tribal governments in the aggregate, or by
the private sector. In fact, participation in the program is voluntary
and for all sponsors participating, we expect in the aggregate that
sponsors will receive $5 billion in reimbursement, less administrative
costs.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates 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. This rule will not have a substantial direct effect on
State or local governments, preempt State laws, or otherwise have a
Federalism implication.
B. Need for Regulatory Action
As previously discussed, the Affordable Care Act, includes this
provision that establishes the temporary Early Retiree Reinsurance
Program. Section 1102(a)(1) requires the Secretary to establish the
program within 90 days of enactment of the law, which is June 21, 2010.
This interim final rule is necessary to implement this program by the
statutory deadline. The program is designed to assist people in the
early retiree age group who often face difficulties obtaining insurance
in the individual market because of advanced age or chronic conditions
that make coverage unaffordable and inaccessible. The Early Retiree
Reinsurance Program will provide financial help for employer-based
plans to continue to provide coverage to plan participants, and
provides financial relief to plan participants.
C. Anticipated Effects
1. Effects on Plan Sponsors
This rule will positively affect employers and employee
organizations that self-fund health benefits or pay premiums to insure
their early retirees' health benefits. The amount of the effects
depends upon the sponsors' determination of the use of the
reimbursement. Thus the positive effect will range from negligible if
they use the reimbursement almost exclusively for plan participants'
costs to just under $5 billion, minus the administrative costs of this
program if they maximize the amount of reimbursement used to lower plan
costs.
2. Effects on Plan Participants
We believe that this rule will have a positive effect on plan
participants. We believe that the program will encourage sponsors to
maintain coverage that they might not otherwise maintain, and will
lower health benefit costs for plan participants and sponsors. With
access to insurance, we believe, that plan participants will access
health care as needed, instead of delaying a health care encounter
until the condition progresses to a point when an encounter is
unavoidable (and then more severe and expensive). Furthermore, we
believe plan participants will not incur as much debt due to health
care costs. The amount of the effects depends upon the sponsors'
determination of the use of the reimbursement. Thus, the positive
effect will range from moderate if sponsors use almost all of the
reimbursement for sponsors' costs (in this case, the lower costs to the
sponsor encourages continued provision of retiree coverage, which is of
benefit to the retiree) to nearly $5 billion, minus administrative
costs, if sponsors use the reimbursement almost exclusively to lower
plan participants' costs.
3. Effects on Other Providers
We expect this rule to have an indirect positive effect on
providers because more individuals will have access to health
insurance, which will cause these individuals to seek health care when
needed, as may not be the case currently, and health care providers
will be able to receive payment for services provided. It is a two-fold
benefit. Providers may have more patients and more of the patients will
be able to pay for the services or products provided, whether directly
(for example, co-insurance or co-payment) or via their insurance.
4. Effects on the Medicare and Medicaid Programs
This rule does not impose any consequential costs on Medicare or
Medicaid. While sponsors may only submit claims for reimbursement for
early retirees and early retirees' spouses, surviving spouses or
dependents, the reimbursements paid to a sponsor must be used to lower
costs for all plan participants, which may include enrollees who also
have Medicare coverage. Other than increased utilization of health care
services or products for plan participants that are covered by a
certified plan, we do not expect any notable impact on Medicare. We
expect the impact due to increased utilization to be minimal.
This rule may in fact lessen the number of individuals on Medicaid,
or slow any growth in numbers of individuals eligible for Medicaid,
because sponsors that are considering dropping health insurance for
early retirees or plan participants may decide otherwise, once the
sponsor becomes eligible for the program. Furthermore, it is possible
that employers may decide to offer health insurance to early retirees
because of the program.
D. Alternatives Considered
With respect to implementing this program, there is no alternative.
The Congress requires that the program be in effect not later than 90
days after the enactment of the bill. The statute was enacted March 23,
2010. With respect to the application process, we considered numerous
requirements as to what we would need in order to protect the integrity
of the program, but ultimately settled on the requirements in the
regulation. We had originally considered requiring an attestation from
a qualified actuary, certifying that the sponsor's estimate of
projected costs is reasonable. We decided against this requirement
because the projection was merely for the purpose of letting us know if
and when we should stop taking applications. Weighing the expense of
requiring a sponsor to pay an actuary to make the certification against
the benefit the certification would provide, we decided not to require
this because we want this program to be as inclusive as possible.
We also considered how best to implement the provision relating to
participants with chronic and high-cost conditions. We considered
identifying specific conditions in sub-regulatory guidance but decided
that such a policy would ultimately work against the goals of the
program because we would not be able to do a comprehensive analysis to
identify them in the time allotted to implement this program.
Furthermore, because many sponsors' plans were initiated before the
effective date of the statute and any guidance we may have developed,
sponsors that covered what they think are chronic and high-cost
conditions, but which we did not identify as such, would have been
penalized. Because this is supposed to be an inclusive program, we
defined the term ``chronic and high-cost conditions'' to be any
condition for which the plan is likely to incur health benefits costs
of at least $15,000 for any one plan participant in a plan year. If a
sponsor has programs and procedures that have generated or have the
potential to generate cost savings in place to address
[[Page 24465]]
any such conditions, it will meet the requirement.
Ultimately, the approach we took in these regulations is intended
to balance the need to protect the integrity of the program with the
inclusive nature of the program.
E. Accounting Statement and Table
Whenever a rule is considered an economically significant rule
under Executive Order 12866, we are required to develop an Accounting
Statement. We have prepared an accounting statement below (Table 2)
showing the classification of the expenditures associated with the
provisions of this interim final rule.
The terminology from this table may be interpreted as follows:
1. Annualized--means to determine cost/benefits on a yearly basis
as opposed to quarterly. This would include both start-up and ongoing
costs amortized over the number of years used in the RIA. Due to the
uncertainty in estimating these costs/benefits we have estimated the
amortization equally over the 4 years 2010 through 2013.
2. Monetized--means to develop quantitative estimates and convert
them to dollar amounts, if possible.
3. Qualitative Benefits and Costs--means to categorize or rank the
qualitative effects in terms of their importance (for example,
certainty, likely magnitude, and reversibility).
4. Effects--means the effects on Medicare/Medicaid program,
beneficiaries, and health care facilities, taken from the impact
analysis. (We note that regulations with annual costs that are less
than one billion dollars are likely to have a minimal effect on
economic growth.)
5. All quantitative estimates must be presented as discounted flows
using 3 percent and 7 percent factors.
Table 2--Accounting Statement
--------------------------------------------------------------------------------------------------------------------------------------------------------
Period Source citation (RIA, preamble,
Category Primary estimate Year dollars Discount rate covered etc.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
BENEFITS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized monetized benefits (in Not estimated........
millions of dollars per year).
--------------------------------------------------------------------------------------------------------------------------------------------------------
COSTS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized monetized costs (in 39.8................. 2010................. 7%................... 2010-2013 Paperwork Reduction Act Burden in
millions of dollars per year). Preamble.
---------------------------------------------------------------------
39.8................. 2010................. 3%................... ............
--------------------------------------------------------------------------------------------------------------------------------------------------------
TRANSFERS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized monetized transfers: $1,250............... 2010................. 7%................... 2010-2013 Statute.
``on budget'' (in millions of
dollars per year).
$1,250............... 2010................. 3%................... ............
From whom to whom?................ From the Federal From the Federal From the Federal ............
Government to Government to Government to
eligible sponsors eligible sponsors eligible sponsors
and for and for and for
administration of administration of administration of
the program the program the program
including to including to including to
contractors. contractors. contractors.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Category Effects *Source Citation
(RIA, preamble, etc.).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Effects on State, local, and/or Positive, but ..................... ..................... ............ RIA.
tribal governments. currently unable to
be determined.
Effects on small businesses....... Positive, but ..................... ..................... ............ RIA.
currently unable to
be determined.
--------------------------------------------------------------------------------------------------------------------------------------------------------
E. Conclusion
We used statistics from the RDS Program as a model because it has
similar characteristics to the characteristics of this new Early
Retiree Reinsurance Program, and, based on this model, we expect that
approximately 4,500 sponsors will apply to participate in the Early
Retiree Reinsurance Program. Of those sponsors, we expect approximately
3,000 will be private entities and 1,500 will be State and local
governments. Alternatively, the number of applicants could be
substantially higher if small or other employers participate in this
program in higher numbers than they did in the Retiree Drug Subsidy
Program. Regardless, total spending cannot exceed the $5 billion
appropriated for this program over the four-year period. While some of
the funds allotted for the program are required to be used to implement
the program, we anticipate an overall positive transfer of $5 billion
to eligible sponsors (and indirectly a portion of those funds will be
transferred for the benefit of plan participants), less administrative
costs. The analysis above, together with the remainder of this
preamble, provides a regulatory impact analysis and meets the
[[Page 24466]]
requirements for a Final Regulatory Flexibility Analysis.
In accordance with the provisions of Executive Order 12866 the
Office of Management and Budget reviewed this regulation.
List of Subjects in 45 CFR Part 149
Administrative practice and procedure, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.
0
For the reasons set forth in the preamble, the Department of Health and
Human Services amends 45 CFR subtitle A, subchapter B, by adding a new
part 149 to read as follows:
PART 149--REQUIREMENTS FOR THE EARLY RETIREE REINSURANCE PROGRAM
Subpart A--General Provisions
Sec.
149.1 Purpose and basis.
149.2 Definitions.
Subpart B--Requirements for Eligible Employment-based Plans
149.30 General requirements.
149.35 Requirements to participate.
149.40 Application.
149.41 Consequences of Non-Compliance, Fraud, or Similar Fault
149.45 Funding limitation.
Subpart C--Reinsurance Amounts
149.100 Amount of reimbursement.
149.105 Transition provision.
149.110 Negotiated price concessions.
149.115 Cost threshold and cost limit.
Subpart D--Use of Reimbursements
149.200 Use of reimbursements.
Subpart E--Reimbursement Methods
149.300 General reimbursement rules.
149.310 Timing.
149.315 Reimbursement conditioned upon available funds.
149.320 Universe of claims that must be submitted.
149.325 Requirements for eligibility of claims.
149.330 Content of claims.
149.335 Documentation of costs of actual claims involved.
149.340 Rule for insured plans.
149.345 Use of information provided.
149.350 Maintenance of records.
Subpart F--Appeals
149.500 Appeals.
149.510 Content of request for appeal.
149.520 Review of appeals.
Subpart G--Disclosure of Inaccurate Data
149.600 Sponsor's duty to report data inaccuracies.
149.610 Secretary's authority to reopen and revise reimbursement
determination amounts.
Subpart H--Change of Ownership Requirements
149.700 Change of ownership requirements.
Authority: Section 1102 of the Patient Protection and
Affordable Care Act (Pub. L. 111-148).
Subpart A--General Provisions
Sec. 149.1 Purpose and basis.
This part implements the Early Retiree Reinsurance Program, as
required by section 1102 of the Patient Protection and Affordable Care
Act (Pub. L. 111-148).
Sec. 149.2 Definitions.
For purposes of this part, the following definitions apply:
Authorized representative means an individual with legal authority
to sign and bind a sponsor to the terms of a contract or agreement.
Benefit option means a particular benefit design, category of
benefits, or cost-sharing arrangement offered within an employment-
based plan.
Certified means that the sponsor and its employment-based plan or
plans meet the requirements of this part and the sponsor's application
to participate in the program has been approved by the Secretary.
Chronic and high-cost condition means a condition for which $15,000
or more in health benefit claims are likely to be incurred during a
plan year by one plan participant.
Claim or medical claim means documentation, in a form and manner to
be specified by the Secretary, indicating the health benefit provided,
the provider or supplier, the incurred date, the individual for whom
the health benefit was provided, the date and amount of payment net any
known negotiated price concessions, and the employment-based plan and
benefit option under which the health benefit was provided. The terms
claim or medical claim include medical, surgical, hospital,
prescription drug and other such claims as determined by the Secretary.
Early retiree means a plan participant who is age 55 and older who
is enrolled for health benefits in a certified employment-based plan,
who is not eligible for coverage under title XVIII of the Act, and who
is not an active employee of an employer maintaining, or currently
contributing to, the employment-based plan or of any employer that has
made substantial contributions to fund such plan. In this part, the
term early retiree also includes the enrolled spouse, surviving spouse,
and dependents of such individuals. The determination of whether an
individual is not an active employee is made by the sponsor in
accordance with the rules of its plan. For purposes of this subpart,
however, an individual is presumed to be an active employee if, under
the Medicare Secondary Payer rules in 42 CFR 411.104 and related
guidance published by the Centers for Medicare & Medicaid Services, the
person is considered to be receiving coverage by reason of current
employment status. This presumption applies whether or not the Medicare
Secondary Payer rules actually apply to the sponsor. For this purpose,
a sponsor may also treat a person receiving coverage under its
employment-based plan as a dependent in accordance with the rules of
its plan, regardless of whether that individual is considered a
dependent for Federal or state tax purposes. For purposes of this
definition of early retiree, an employer maintaining, or currently
contributing to, the employment-based plan or any employer that has
made substantial contributions to fund such plan, means a plan sponsor
(as defined in this section).
Employment-based plan means a group health plan as defined in this
section of the regulation.
Good cause means:
(1) New and material evidence exists that was not readily available
at the time the reimbursement determination was made;
(2) A clerical error in the computation of the reimbursement
determination was made by the Secretary; or
(3) The evidence that was considered in making the reimbursement
determination clearly shows on its face that an error was made.
Group health plan means group health plan as defined in 42 CFR
423.882 that provides health benefits to early retirees, but excludes
Federal governmental plans.
Health benefits means medical, surgical, hospital, prescription
drug, and other benefits that may be specified by the Secretary,
whether self-funded or delivered through the purchase of health
insurance or otherwise. Such benefits include benefits for the
diagnosis, cure, mitigation, or prevention of physical or mental
disease or condition with respect to any structure or function of the
body. Health benefits do not include benefits specified at 45 CFR
146.145(c)(2) through (4).
Incurred means the point in time when the sponsor, health insurance
issuer (as defined in 45 CFR 160.103), employment-based plan, plan
participant, or a combination of these or
[[Page 24467]]
similar stakeholders, become responsible for payment of the claim.
Negotiated price concession means any direct or indirect
remuneration (including discounts, direct or indirect subsidies, charge
backs or rebates, cash discounts, free goods contingent on a purchase
agreement, up-front payments, coupons, goods in kind, free or reduced-
price services, grants, or other price concessions or similar benefits)
offered to some or all purchasers, which may include a sponsor, a
health insurance issuer, or an employment-based plan) that would serve
to decrease the costs incurred under the employment-based plan.
Plan participant means anyone enrolled in an applicable plan
including an early retiree, as defined in this section, a retiree, a
retiree's spouse and dependent, an active employee and an active
employee's spouse and dependent.
Plan year means the year that is designated as the plan year in the
plan document of an employment-based plan, except that if the plan
document does not designate a plan year, if the plan year is not a 12-
month plan year, or if there is no plan document, the plan year is:
(1) The deductible or limit year used under the plan;
(2) The policy year, if the plan does not impose deductibles or
limits on a 12-month basis;
(3) The sponsor's taxable year, If the plan does not impose
deductibles or limits on a 12-month basis, and either the plan is not
insured or the insurance policy is not renewed on a 12-month basis, or;
(4) The calendar year, in any other case.
Post point-of-sale negotiated price concession means any negotiated
price concession that an employment-based plan or insurer receives with
respect to a given health benefit, after making payment for that health
benefit.
Program means the Early Retiree Reinsurance Program established in
section 1102 of the Patient Protection and Affordable Care Act.
Secretary means the Secretary of the United States Department of
Health & Human Services or the Secretary's designee.
Sponsor means a plan sponsor as defined in section 3(16)(B) of the
Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.
1002(16)(B), except that in the case of a plan maintained jointly by
one employer and an employee organization and for which the employer is
the primary source of financing, the term means the employer.
Sponsor agreement means an agreement between the sponsor and the
United States Department of Health & Human Services, or its designee,
which is made to comply with the provisions of this part.
Subpart B--Requirements for Eligible Employment-Based Plans
Sec. 149.30 General requirements.
A sponsor is eligible to participate in the program if it meets the
requirements of section 1102 of the Patient Protection and Affordable
Care Act, this part, and guidance developed by the Secretary.
Sec. 149.35 Requirements to participate.
(a) A sponsor's employment-based plan must--
(1) Be certified by the Secretary.
(2) Include programs and procedures that have generated or have the
potential to generate cost-savings with respect to plan participants
with chronic and high-cost conditions.
(b) A sponsor must--
(1) Make available information, data, documents, and records as
specified in Sec. 149.350.
(2) Have a written agreement with its health insurance issuer (as
defined in 45 CFR 160.103) or employment-based plan (as applicable)
regarding disclosure of information, data, documents, and records, to
the Secretary, and the health insurance issuer or employment-based plan
must disclose to the Secretary, on behalf of the sponsor, at a time and
in a manner specified by the Secretary in guidance, the information,
data, documents and records necessary for the sponsor to comply with
the program, this part, and program guidance.
(3) Ensure that policies and procedures to protect against fraud,
waste and abuse under this program are in place, and must comply timely
with requests from the Secretary to produce the policies and procedures
and any documents or data to substantiate the implementation of the
policies and procedures and their effectiveness.
(4) Submit an application to the Secretary in the manner, and at
the time, required by the Secretary as specified in Sec. 149.40.
Sec. 149.40 Application.
(a) The applicant must submit an application to participate in this
program to the Secretary, which is signed by an authorized
representative of the applicant who certifies that the information
contained in the application is true and accurate to the best of the
authorized representative's knowledge and belief.
(b) Applications will be processed in the order in which they are
received.
(c) An application that fails to meet all the requirements of this
part will be denied and the applicant must submit another application
if it wishes to participate in the program. The new application will be
processed based on when the new submission is received.
(d) An applicant need not submit a separate application for each
plan year but must identify in its application the plan year start and
end date cycle (starting month and day, and ending month and day) for
which it is applying.
(e) An applicant must submit an application for each plan for which
it will submit a reimbursement request.
(f) In connection with each application the applicant must submit
the following:
(1) Applicant's Tax Identification Number.
(2) Applicant's name and address.
(3) Contact name, telephone number and email address.
(4) Plan sponsor agreement signed by an authorized representative,
which includes--
(i) An assurance that the sponsor has a written agreement with its
health insurance issuer (as defined in 45 CFR 160.103) or employment-
based plan, as applicable, regarding disclosure of information to the
Secretary, and the health insurance issuer or employment-based plan
must disclose to the Secretary, on behalf of the sponsor, at a time and
in a manner specified by the Secretary in guidance, information, data,
documents, and records necessary for the sponsor to comply with the
requirements of the program.
(ii) An acknowledgment that the information in the application is
being provided to obtain Federal funds, and that all subcontractors
acknowledge that information provided in connection with a subcontract
is used for purposes of obtaining Federal funds.
(iii) An attestation that policies and procedures are in place to
detect and reduce fraud, waste, and abuse, and that the sponsor will
produce the policies and procedures, and necessary information, records
and data, upon request by the Secretary, to substantiate existence of
the policies and procedures and their effectiveness.
(iv) Other terms and conditions required by the Secretary.
(5) A summary indicating how the applicant will use any
reimbursement received under the program to meet the requirements of
the program, including:
(i) How the reimbursement will be used to reduce premium
contributions, co-payments, deductibles, coinsurance, or other out-of-
pocket costs for plan
[[Page 24468]]
participants, to reduce health benefit or health benefit premium costs
for the sponsor, or to reduce any combination of these costs;
(ii) What procedures or programs the sponsor has in place that have
generated or have the potential to generate cost savings with respect
to plan participants with chronic and high-cost conditions; and
(iii) How the sponsor will use the reimbursement to maintain its
level of contribution to the applicable plan.
(6) Projected amount of reimbursement to be received under the
program for the first two plan year cycles with specific amounts for
each of the two cycles.
(7) A list of all benefit options under the employment-based plan
that any early retiree for whom the sponsor receives program
reimbursement may be claimed.
(8) Any other information the Secretary requires.
(g) An application must be approved, and the plan and the sponsor
certified, by the Secretary before a sponsor may request reimbursement
under the program.
(h) The Secretary may reopen a determination under which an
application had been approved or denied:
(1) Within 1 year of the determination for any reason;
(2) Within 4 years of the determination if the evidence that was
considered in making the determination shows on its face that an error
was made; or
(3) At any time in instances of fraud or similar fault.
Sec. 149.41 Consequences of Non-Compliance, Fraud, or Similar Fault.
Upon failure to comply with the requirements of this part, or if
fraud, waste, and abuse, or similar fault are found, the Secretary may
recoup or withhold funds, terminate or deny a sponsor's application, or
take a combination of these actions.
Sec. 149.45 Funding limitation.
(a) Based on the projected or actual availability of program
funding, the Secretary may deny applications that otherwise meet the
requirements of this part, and if an application is approved, may deny
all or part of a sponsor's reimbursement request.
(b) The Secretary's decision to stop accepting applications or
satisfying reimbursement requests based on the availability of funding
is final and binding, and is not appealable.
Subpart C--Reinsurance Amounts
Sec. 149.100 Amount of reimbursement.
(a) For each early retiree enrolled in a certified plan in a plan
year, the sponsor receives reimbursement in the amount of 80 percent of
the costs for health benefits (net of negotiated price concessions for
health benefits) for claims incurred during the plan year that are
attributed to health benefits costs between the cost threshold and cost
limit, and that are paid by the employment-based plan or by the insurer
(if an insured plan), and by the early retiree.
(b) Costs are considered paid by an early retiree, if paid by that
individual or another person on behalf of the early retiree, and the
early retiree (or person paying on behalf of the early retiree) is not
reimbursed through insurance or otherwise, or other third party payment
arrangement.
(c) Reimbursement is calculated by first determining the costs for
health benefits net of negotiated price concessions, within the
applicable plan year for each early retiree, and then subtracting
amounts below the cost threshold and above the cost limit within the
applicable plan year for each such individual.
(d) For purposes of determining amounts below the cost threshold
and above the cost limit for any given early retiree, all costs for
health benefits paid by the employment-based plan (or by the insurer,
if applicable), or by or on behalf of, an early retiree, for all
benefit options the early retiree is enrolled in with respect to a
given certified employment-based plan for a given plan year, will be
combined. For each early retiree enrolled in an employment-based plan,
there is only one cost threshold and one cost limit per plan year
regardless of the number of benefit options the early retiree is
enrolled in during that plan year.
Sec. 149.105 Transition provision.
For a certified plan that has a plan year that begins before June
1, 2010 and ends on any date thereafter, the reinsurance amount for the
plan year must be determined as follows:
(a) With respect to claims incurred before June 1, 2010, the amount
of such claims up to $15,000 count toward the cost threshold and the
cost limit. The amount of claims incurred before June 1, 2010 that
exceed $15,000 are not eligible for reimbursement and do not count
toward the cost limit.
(b) The reinsurance amount to be paid is based only on claims
incurred on and after June 1, 2010, that fall between the cost
threshold and cost limit for the plan year.
Sec. 149.110 Negotiated price concessions.
(a) The amount of negotiated price concessions that will be taken
into account in determining the reinsurance amount will reflect
negotiated price concessions that have already been subtracted from the
amount the employment-based plan or insurer paid for the cost of health
benefits and the amount of post-point-of-sale negotiated price
concessions received.
(b) At a time specified by the Secretary, sponsors are required to
disclose the amount of post-point-of-sale price concessions that were
received but not accounted for in their submitted claims.
Sec. 149.115 Cost threshold and cost limit.
The following cost threshold and cost limits apply individually, to
each early retiree as defined in Sec. 149.2:
(a) The cost threshold is equal to $15,000 for plan years that
start on any date before October 1, 2011.
(b) The cost limit is equal to $90,000 for plan years that start on
any date before October 1, 2011.
(c) The cost threshold and cost limit specified in paragraphs (a)
and (b) of this section, for plan years that start on or after October
1, 2011, will be adjusted each fiscal year based on the percentage
increase in the Medical Care Component of the Consumer Price Index for
all urban consumers (rounded to the nearest multiple of $1,000) for the
year involved.
Subpart D--Use of Reimbursements
Sec. 149.200 Use of reimbursements.
(a) A sponsor must use the proceeds under this program:
(1) To reduce the sponsor's health benefit premiums or health
benefit costs,
(2) To reduce health benefit premium contributions, copayments,
deductibles, coinsurance, or other out-of-pocket costs, or any
combination of these costs, for plan participants, or
(3) To reduce any combination of the costs in (a)(1) and (a)(2) of
this section.
(b) Proceeds under this program must not be used as general revenue
for the sponsor.
Subpart E--Reimbursement Methods
Sec. 149.300 General reimbursement rules.
Reimbursement under this program is conditioned on provision of
accurate information by the sponsor or its designee. The information
must be submitted, in a form and manner and at the times provided in
this subpart and
[[Page 24469]]
other guidance specified by the Secretary. A sponsor must provide the
information specified in section Sec. 149.335.
Sec. 149.310 Timing.
(a) An employment-based plan and a sponsor must be certified by the
Secretary before claims can be submitted and a reimbursement request
may be made. Reimbursement will be made with respect to submitted
claims for health benefits at a time and in a manner to be specified by
the Secretary, after the sponsor or its designee submits the claims to
the Secretary. Claims must satisfy the requirements of this subpart in
order to be eligible for reimbursement.
(b) Claims for health benefits may be submitted for a given plan
year only upon the approval of an application that references that plan
year cycle. Claims for an early retiree for a plan year cannot be
submitted until the total paid costs for health benefits for that early
retiree incurred for that plan year exceed the applicable cost
threshold.
(c) For employment-based plans for which a provider in the normal
course of business does not produce a claim, such as a staff-model
health maintenance organization, the information required in a claim
must be produced and provided to the Secretary, as set out in this
regulation and applicable guidance.
Sec. 149.315 Reimbursement conditioned upon available funds.
Notwithstanding a sponsor's compliance with this part,
reimbursement is conditioned upon the availability of program funds.
Sec. 149.320 Universe of claims that must be submitted.
(a) Claims submitted for an early retiree, as defined in Sec.
149.2, must include claims below the applicable cost threshold for the
plan year.
(b) Claims must not be submitted until claims are submitted for
amounts that exceed the applicable cost threshold for the plan year for
the early retiree.
(c) Sponsors must not submit claims for health benefits for an
early retiree to the extent the sponsor has already submitted claims
for the early retiree that total more than the applicable cost limit
for the applicable plan year.
Sec. 149.325 Requirements for eligibility of claims.
A claim may be submitted only if it represents costs for health
benefits for an early retiree, as defined in Sec. 149.2, has been
incurred during the applicable plan year, and has been paid.
Sec. 149.330 Content of claims.
Each claim on its face must include the information specified in,
and meet, the definition of claim or medical claim found at Sec.
149.2.
Sec. 149.335 Documentation of costs of actual claims involved.
(a) A submission of claims consists of a list of early retirees for
whom claims are being submitted, and documentation of the actual costs
of the items and services for claims being submitted, in a form and
manner specified by the Secretary.
(b) In order for a sponsor to receive reimbursement for the portion
of a claim that an early retiree paid, the sponsor must submit prima
facie evidence that the early enrollee paid his or her portion of the
claim.
Sec. 149.340 Rule for insured plans.
With respect to insured plans, the claims and data specified in the
subpart may be submitted directly to the Secretary by the insurer.
Sec. 149.345 Use of information provided.
The Secretary may use data and information collected under this
section only for the purpose of, and to the extent necessary in,
carrying out this part including, but not limited to, determining
reimbursement and reimbursement-related oversight and program integrity
activities, or as otherwise allowed by law. Nothing in this section
limits the Office of the Inspector General's authority to fulfill the
Inspector General's responsibilities in accordance with applicable
Federal law.
Sec. 149.350 Maintenance of records.
(a) The sponsor of the certified plan (or a subcontractor, as
applicable) must maintain and furnish to the Secretary, upon request
the records enumerated in paragraph (b) of this section. The records
must be maintained for 6 years after the expiration of the plan year in
which the costs were incurred, or longer if otherwise required by law.
(b) The records that must be retained are as follows--
(1) All documentation, data, and other information related to this
part.
(2) Any other records specified by the Secretary.
(c) The Secretary may issue additional guidance addressing
recordkeeping requirements, including (but not limited to) the use of
electronic media.
(d) The sponsor must require its health insurance issuer or
employment-based plan, as applicable, to maintain and produce upon
request records to satisfy subparagraph (a) of this regulation.
(e) The sponsor is responsible for ensuring that the records are
maintained and provided according to this subpart.
Subpart F--Appeals
Sec. 149.500 Appeals.
(a) An adverse reimbursement determination is final and binding
unless appealed pursuant to paragraph (e) of this section.
(b) Except as provided in paragraph (c) of this section, a sponsor
may request an appeal of an adverse reimbursement determination.
(c) A sponsor may not appeal an adverse reimbursement determination
if the denial is based on the unavailability of funds.
(d) An adverse reimbursement determination is a determination
constituting a complete or partial denial of a reimbursement request.
(e) If a sponsor appeals an adverse reimbursement determination,
the sponsor must submit the appeal in writing to the Secretary within
15 calendar days of receipt of the determination pursuant to guidance
issued by the Secretary.
Sec. 149.510 Content of request for appeal.
The request for appeal must specify the findings or issues with
which the sponsor disagrees and the reasons for the disagreements. The
request for appeal may include supporting documentary evidence the
sponsor wishes the Secretary to consider.
Sec. 149.520 Review of appeals.
(a) In conducting review of the appeal, the Secretary reviews the
appeal, the evidence and findings upon which the adverse reimbursement
determination was made, and any other written evidence submitted by the
sponsor or the Secretary's designee and will provide a ruling on the
appeal request.
(b) In conducting the review, the Secretary reviews the
determination at issue, the evidence and findings upon which it was
based, any written documents submitted to the Secretary by the sponsor
and the Secretary's designee, and determines whether to uphold, reverse
or modify the Secretary's initial reimbursement determination.
(c) A decision by the Secretary under this provision is final and
binding.
(d) Regardless of the Secretary's decision, additional
reimbursement is contingent upon the availability of funds at the time
of the Secretary's determination.
(e) The Secretary informs the sponsor and the applicable
Secretary's designee
[[Page 24470]]
of the decision. The Secretary sends a written decision to the sponsor
or the applicable Secretary's designee upon request.
Subpart G--Disclosure of Data Inaccuracies
Sec. 149.600 Sponsor's duty to report data inaccuracies.
A sponsor is required to disclose any data inaccuracies upon which
a reimbursement determination is made, including inaccurate claims data
and negotiated price concessions, in a manner and at a time specified
by the Secretary in guidance.
Sec. 149.610 Secretary's authority to reopen and revise a
reimbursement determination.
(a) The Secretary may reopen and revise a reimbursement
determination upon the Secretary's own motion or upon the request of a
sponsor:
(1) Within 1 year of the reimbursement determination for any
reason.
(2) Within 4 years of a reimbursement determination for good cause.
(3) At any time, in instances of fraud or similar fault.
(b) For purposes of this section, the Secretary does not find good
cause if the only reason for the revision is a change of legal
interpretation or administrative ruling upon which the determination to
reimburse was made.
(c) A decision by the Secretary not to revise a reimbursement
determination is final and binding (unless fraud or similar fault is
found) and cannot be appealed.
Subpart H--Change of Ownership Requirements
Sec. 149.700 Change of ownership requirements.
(a) Change of ownership consists of: (1) Partnership. The removal,
addition, or substitution of a partner, unless the partners expressly
agree otherwise as permitted by applicable state law.
(2) Asset sale. Transfer of all or substantially all of the assets
of the sponsor to another party.
(3) Corporation. The merger of the sponsor's corporation into
another corporation or the consolidation of the sponsor's organization
with one or more other corporations, resulting in a new corporate body.
(b) Change of ownership; exception. Transfer of corporate stock or
the merger of another corporation into the sponsor's corporation, with
the sponsor surviving, does not ordinarily constitute change of
ownership.
(c) Advance notice requirement. A sponsor that has a sponsor
agreement in effect under this part and is considering or negotiating a
change in ownership must notify the Secretary at least 60 days before
the anticipated effective date of the change.
(d) Assignment of agreement. When there is a change of ownership as
specified in paragraph (a) of this section, and this results in a
transfer of the liability for health benefits, the existing sponsor
agreement is automatically assigned to the new owner.
(e) Conditions that apply to assigned agreements. The new owner to
whom a sponsor agreement is assigned is subject to all applicable
statutes and regulations and to the terms and conditions of the sponsor
agreement.
(f) Failure to notify the Secretary at least 60 days before the
anticipated effective date of the change may result in the Secretary
recovering funds paid under this program.
Dated: April 29, 2010.
Jay Angoff,
Director, Office of Consumer Information and Insurance Oversight.
Dated: April 29, 2010
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-10658 Filed 5-4-10; 8:45 am]
BILLING CODE 4150-03-P