CMS Issues Proposed Rule on Exchanges

CMS issued a proposed rule on Jan. 14 describing how states should handle eligibility determinations for Medicaid and other income assistance programs on state-based health insurance exchanges, beginning in January 2014. The proposed rule would lay out a structure and options for coordinating Medicaid, CHIP, and Exchange eligibility notices and appeals; provide additional benefits and cost-sharing flexibility for state Medicaid programs; and codify several provisions included in the Affordable Care Act and Children’s Health Insurance Program Reauthorization Act (CHIPRA). The proposed rule includes the following Key Provisions:

Process for Appeals of Eligibility Determinations
The rule proposes a coordinated Exchange and Medicaid appeals process. The rule proposes that enrollees have the opportunity for a preliminary case review by appeals staff, referred to as “informal resolution.”  If the enrollee is satisfied by the outcome, the decision stands as an official appeal decision. Enrollees who are not satisfied would have rights to a full appeal. As required by statute, a federally managed appeals process would be available to all enrollees in the individual market. State-based exchanges could implement their own appeals processes in accordance with the Notice of Proposed Rulemaking standards, with people retaining the right to a federal appeal at HHS after exhausting the state-based appeals process.

The proposed rule provides options for states to coordinate appeals of eligibility decisions across Medicaid, CHIP, and the Exchange. Specifically, states could choose between the following options:
• A state Medicaid or CHIP agency could delegate the authority to make final determinations in Medicaid and CHIP eligibility appeals to an Exchange appeals entity subject to standards.

• A state could retain the Medicaid and CHIP appeals functions, consistent with the choice offered to states with respect to permitting the Federally-facilitated Exchange to make Medicaid and CHIP eligibility determinations or assessments.

Notices to applicants and beneficiaries would include combined, clear, and accurate information about eligibility for all insurance affordability programs, including Medicaid, CHIP, advance payments of the premium tax credit and cost-sharing reductions, as well as eligibility to enroll in a qualified health plan through the Exchange.  The final combined notice would be generated by the agency that completed the last step in making the eligibility determination (which could be the Exchange or the Medicaid or CHIP agency).  This coordinated process would not have to be in place until January 1, 2015.

Medicaid Benefits
The proposed rule modifies existing “benchmark” regulations applicable to Medicaid programs to implement the benefit options available to low-income adults beginning January 1, 2014.  The Notice of Proposed Rulemaking provides guidance on the use of section 1937 benchmark and benchmark-equivalent plans (now known as Alternative Benefit Plans) for the new eligibility group for low-income adults; the relationship between Alternative Benefit Plans and Essential Health Benefits; and the relationship between section 1937 and other Title XIX provisions.

Medicaid Cost Sharing
The rule proposes to update the maximum allowable cost-sharing levels and to consolidate redundant provisions. The goal is to create one streamlined set of rules for all Medicaid premiums and cost sharing.  States could establish higher cost sharing for non-preferred drugs and impose higher cost sharing for non-emergency use of the emergency department.

Streamlining Eligibility Categories
The proposed rule would do the following:
• Define the range of eligibility groups for Medicaid and eliminate obsolete categories to reflect the existing federal statute and use of the Modified Adjusted Gross Income (MAGI) methodology to determine eligibility with most populations.
• Codify eligibility categories authorized in CHIPRA and the Affordable Care Act, such as new coverage for former foster care children up to age 26.
• Simplify and align the citizenship documentation process across Medicaid, CHIP, and the Exchange.

Verification of Employer-sponsored Coverage
The proposed rule includes detail on the procedures for the Exchange to verify access to employer-sponsored coverage.  An Exchange relying on HHS to fulfill the employer-sponsored coverage verification process.

Application Counselors
Application counselors play a key role in helping people apply for and maintain coverage in a qualified health plan through the Exchange and through insurance affordability programs. This rule proposes standards for certifying those who want to become application counselors.

You can submit comments to the proposed rule by 5:00 p.m. on February 13 at To read the proposed rule, visit

Last Updated 05/25/2022

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