(a) This subpart sets forth the requirements of the State Exchange Improper Payment Measurement (SEIPM) program. SEIPM is an initiative through which HHS will measure improper payments of advance payment of the premium tax credit (APTC) that are administered by State Exchanges, as described in more detail in § 155.1610. HHS will use the SEIPM program results to produce an estimate of improper payments of APTC aggregated across State Exchanges.

(b) Unless otherwise specified by HHS, all State Exchanges must submit information on an annual basis that is necessary to support the SEIPM processes.

(c) HHS will publish in the Agency Financial Report an estimate of improper payments that is aggregated across all State Exchanges.

(a) Applicability date. The requirements of this subpart are applicable beginning January 1, 2027.

(b) [Reserved]

As used in this subpart—

Annual Program Schedule means the document issued by HHS to each State Exchange that prescribes the dates by which key program milestones must be met for each SEIPM Cycle.

Administrative Appeal means the process by which a State Exchange may request HHS to review and reconsider a Difference Resolution Decision. The appeal is the second and last level for a State Exchange to contest findings of error or improper payment as it relates to APTC.

Administrative Appeal Decision means the HHS final appeal decision resulting from a State Exchange's request for an appeal of one or more error or improper payment findings in a Sampled Unit Assessment Package.

Corrective Action Plan (CAP) means the plan a State Exchange develops in order to correct errors resulting in improper payments of APTC identified through SEIPM.

Difference Resolution means the process by which a State Exchange may initially request HHS to reconsider one or more errors or improper payment findings documented in a Sampled Unit Assessment Package.

Difference Resolution Decision means the HHS decision resulting from a State Exchange's request for a difference resolution of any Sampled Unit Assessment Package.

Error means a finding by HHS that a State Exchange did not correctly apply a requirement of subparts D and E of this part related to:

(1) Eligibility for and enrollment in a Qualified Health Plan (QHP);

(2) Eligibility for APTC, and calculated amount of APTC;

(3) Redeterminations of eligibility during a plan year;

(4) Eligibility redeterminations for purposes of re-enrollment.

Measurement Year means the calendar year in which the processes described in § 155.1625 are initiated. The Measurement Year immediately follows the Plan Year and is the second year of the SEIPM Cycle.

Reporting Year means the calendar year in which HHS reports the improper payment rate for State Exchanges as required under § 155.1625(c), following completion of the measurement processes for the applicable Plan Year. The Reporting Year immediately follows the Measurement Year and is the last year of the SEIPM Cycle.

Sampled Unit Assessment Package means the collection of findings and supporting documentation that HHS prepares in order to record errors at the tax household level using the process described in § 155.1625.

State Exchange Improper Payment Measurement or SEIPM means the process for determining estimated improper payments of APTC that are administered by State Exchanges as required under the Payment Integrity Information Act of 2019, which includes a review of a State Exchange's APTC-related determinations regarding:

(1) Eligibility for and enrollment in a QHP;

(2) Eligibility for APTC, and calculated amount of APTC;

(3) Redeterminations of eligibility during a Plan Year;

(4) Annual eligibility redeterminations.

SEIPM Cycle means the 3-year period consisting of the Plan Year, Measurement Year, and Reporting Year, during which the improper payment measurement process occurs for the Plan Year that is subject to review.

Tax Household means the applicant, the applicant's spouse if the applicant is married and files a joint return, and all individuals who are dependents of the applicant or spouse as defined in 26 U.S.C. 152.

(a) HHS will issue an Annual Program Schedule to each State Exchange no later than January 5th of the Measurement Year. The Annual Program Schedule will specify the deadlines for all information submissions required under this section.

(b) On an annual basis, each State Exchange must submit or make available to HHS the following information:

(1) Program documentation. Policy, operational and technical documentation concerning business rules and APTC calculations that pertain to consumer eligibility and enrollment processes of the State Exchange as well as information that describes the data system architecture of the State Exchange such as entity relationship diagrams and data dictionaries.

(2) Universe. For the Plan Year being reviewed, a listing of the population of tax households that have associated QHP enrollments and payments of APTC. For each tax household within the universe, the State Exchange must submit the following information:

(i) Exchange assigned policy identifier;

(ii) Tax household grouping identifier;

(iii) SSN inconsistency indicator;

(iv) Citizenship inconsistency indicator;

(v) Lawful presence inconsistency indicator;

(vi) Annual income inconsistency indicator;

(vii) Non-employer sponsored minimum essential coverage inconsistency indicator;

(viii) Employer sponsored minimum essential coverage inconsistency indicator;

(ix) Incarceration inconsistency indicator;

(x) Residency inconsistency indicator;

(xi) Number of tax household members; and

(xii) APTC amount paid over the duration of the benefit year.

(3) Tax household Data. For each of the sampled tax households and in a format specified by HHS:

(i) Information pertaining to the calculation of the APTC benefits paid that includes monthly enrollment premium amounts, monthly APTC payment amounts, monthly Second Lowest Cost Silver Plan Premium amounts, and the amount of each monthly premium that is attributable to essential health benefits.

(ii) Information relevant to enrollment that includes dates and amounts of effectuation payments, premium payment amount, and policy start and end dates.

(iii) Information relevant to the determination of eligibility for a special enrollment period (where applicable), which would include (where applicable) information collected by the State Exchange about consumer attestations and representations regarding special enrollment period eligibility criteria, copies of documentary evidence submitted by applicants, electronic verification information, and timing information.

(iv) Information about the timing of QHP certification or approval, the coverage area of the associated QHP, and the timing of any QHP decertification or suppression.

(v) To the extent applicable, for each person who is included in the APTC payment calculation:

(A) Information collected by the State Exchange about consumer attestations regarding QHP and APTC eligibility factors and demographic information relevant to initial QHP enrollment and eligibility.

(B) APTC eligibility and payment determinations which includes evidence of required data verifications, the electronic sources consulted, the timing of required verifications, and the results of the verification.

(C) Information relevant to QHP and APTC manual eligibility verifications and the resolution of electronic verification inconsistencies, which would include copies of documentary evidence submitted by QHP enrollees, the timing of submissions, the timing of adjudication, and information about good faith extensions.

(D) Information relevant to QHP and APTC eligibility redeterminations such as information about automatic annual redeterminations, the timing and results of periodic examinations of data sources, and policy or application changes initiated by the consumer and resultant electronic or manual eligibility verifications.

(vi) Any consumer submitted documents that were used to establish new or continued eligibility for enrollment in a QHP and APTC.

(a) Sample size. At the beginning of each SEIPM cycle, HHS will calculate a sample size in aggregate across all State Exchanges.

(1) Statistical methodology. The sample size will be calculated to estimate an improper payment rate.

(2) State-specific sample sizes. HHS will develop sample sizes specific for each State Exchange. HHS may take into consideration the following factors in determining each State Exchange's sample size for the current SEIPM cycle:

(i) Overall APTC expenditures associated with the State Exchange.

(ii) State-level precision goals for the current SEIPM cycle.

(iii) The improper payment rate from the State Exchange's previous SEIPM cycle.

(3) Sample size parameters. HHS will establish minimum and maximum sample sizes to ensure statistical validity while maintaining operational feasibility across State Exchanges of varying sizes.

(b) Sample selection procedures. On an annual basis, HHS will select samples of tax households from the data provided by each State Exchange as described in § 155.1615(b)(2).

(c) State Exchange coordination and notification—(1) Sampled records notification. Following receipt of the universe data from State Exchanges as described in § 155.1615(b)(2), HHS will notify each State Exchange of the specific records selected for review. This notification will include:

(i) The total number of sampled tax households selected for the State Exchange.

(ii) A unique identifier for each sampled tax household.

(iii) Any specific instructions or requirements that HHS determines are needed to facilitate HHS' review of the sampled records.

(2) Timing of sampled records notification. HHS will provide the sampled records notification described in paragraph (c)(1) of this section no later than 60 days after receipt of complete universe data from all State Exchanges.

(3) Extension of sampling notification timeline. (i) HHS may extend the 60-day timeline specified in paragraph (c)(2) of this section if:

(A) Technical issues prevent completion of the sampling process within the standard timeframe;

(B) Data quality issues require additional coordination with State Exchanges before sampling can be completed; or

(C) Other circumstances beyond HHS's control necessitate additional time to ensure accurate sampling methodology.

(ii) If HHS determines an extension is necessary, HHS will:

(A) Notify all affected State Exchanges in writing of the extension and the revised notification date;

(B) Provide the reason for the extension; and

(C) Confirm the impact, if any, on subsequent SEIPM cycle timelines.

(a) Review of records and error identification—(1) Systematic review process. For each sampled record, HHS will conduct a comprehensive review of all information provided by the State Exchange using standardized review criteria.

(2) Data sources. HHS will conduct reviews using the tax household information provided under § 155.1615(b)(3), supplemented by any relevant consumer-submitted documents that were gathered by the State Exchange as part of the enrollment and eligibility process and provided to HHS.

(3) Error identification. The review will identify whether the State Exchange made any errors related to the following resulting in improper payments of APTC:

(i) Enrolling or re-enrolling a consumer into a QHP for which APTC was paid.

(ii) Consumer eligibility for APTC being paid on the consumer's behalf.

(iii) Calculating the APTC amount that was paid on the consumer's behalf.

(iv) Taking required actions upon changes to a consumer's status that would affect their APTC-related eligibility or payment amount.

(4) Review standards and criteria. HHS will apply consistent review standards based on the APTC-related determination requirements established in subparts D and E of this part, and other applicable provisions of this part.

(b) Error evaluation. HHS will evaluate each error to determine an improper payment amount. For each error identified, HHS will:

(1) Calculate the correct APTC amount based on the requirements of section 36B of the Internal Revenue Code and applicable implementing regulations.

(2) Determine an improper payment amount.

(3) Document the error and improper payment amount within a Sampled Unit Assessment Package and provide the Sampled Unit Assessment Package to the State Exchange.

(4) Extrapolate the identified improper payments from the sample to estimate the total improper payment amount for the State Exchange's entire universe of APTC payments, using statistically valid methodologies that comply with OMB guidance on improper payment estimation.

(c) Reporting. HHS will report annually in the Agency Financial Report, which is made available to the public:

(1) The estimated aggregate improper payment rate for Federal and State Exchanges combined.

(2) The estimated aggregate improper payment rate for State Exchanges, and;

(3) HHS will provide to each State Exchange a report that documents the State-specific improper payment rate and error analysis.

(a) Difference Resolution. (1) The State Exchange may make a written Difference Resolution request to HHS within 30 days after the issuance of the Sampled Unit Assessment Package to dispute HHS' error and improper payment findings.

(2) Upon receipt of a Difference Resolution request, HHS will do the following:

(i) Engage with the State Exchange in a collaborative process to examine the disputed findings and any additional documentation provided by the State Exchange.

(ii) Evaluate the disputed findings by applying the same protocol used in the original review while considering whether the State Exchange's position is supported by the existing or newly provided evidence.

(iii) Prepare the Difference Resolution Decision.

(3) The Difference Resolution Decision will be communicated to the State Exchange within 90 days of receipt of the written request for a Difference Resolution. The Difference Resolution Decision will include a summary of the analysis and rationale that informed the decision.

(b) Administrative appeal. (1) To dispute a Difference Resolution Decision, the State Exchange may make a written request for an administrative appeal within 15 business days after the issuance of the Difference Resolution Decision.

(i) The State Exchange may not submit new evidence; it may use evidence that was previously submitted during Difference Resolution.

(ii) The State Exchange may provide additional context regarding information that was submitted during Difference Resolution.

(2) Upon receipt of an appeal request, HHS will do the following:

(i) Assign the appeal request to one or more administrative appeal reviewers who were not involved in the original review;

(ii) Conduct a comprehensive review of the disputed findings using the administrative record established during the Difference Resolution process;

(iii) Independently evaluate the disputed findings by applying the same protocol used in the original review while considering whether the State Exchange's position is supported by the evidence; and

(iv) Prepare an appeal decision for the completed review based on a preponderance of the evidence.

(3) HHS will issue the appeal decision within 90 days of receipt of the written request for appeal. The appeal decision will include a summary of the analysis and rationale that informed the decision.

(c) Difference Resolution and administrative appeal submission requirements. All Difference Resolution and appeal requests must be filed in a form and manner specified by HHS and contain the following:

(1) A clear statement of the specific finding(s) being challenged.

(2) All factual and legal bases for filing the request.

(3) Evidence directly related to the finding(s), which may include:

(i) Clarifying information regarding data interpretation.

(ii) Legal citations supporting the State Exchange's position.

(d) Timing of Difference Resolution and Administrative Appeal decisions. (1) For Difference Resolution Requests or administrative appeals resolved in favor of the State Exchange during the current SEIPM cycle:

(i) HHS will adjust the affected improper payment rate calculations for the SEIPM cycle.

(ii) Updated aggregate rates will be reflected in current cycle reporting.

(2) For Difference Resolution Requests or administrative appeals resolved in favor of the State Exchange after completion of the SEIPM cycle:

(i) If Difference Resolution or administrative appeal decisions result in material changes to aggregate rates, HHS will publish amended aggregate improper payment rates in subsequent Agency Financial Reports or other appropriate public reporting mechanisms as well as notify affected State Exchanges of any amendments to previously published rates.

(ii) If HHS determines, at its discretion, that the Difference Resolution or administrative appeal decisions do not result in material changes to aggregate rates, no action will be taken to publish amended aggregated improper payment rates or notify affected State Exchanges.

(e) Good cause exception. For good cause, HHS may extend the timelines for accepting a Difference Resolution request or administrative appeal request or for issuing a Difference Resolution Decision or Administrative Appeal Decision. The failure of HHS to timely issue a Difference Resolution or Administrative Appeal decision does not indicate an acceptance of the State Exchange's position and is not a basis to decide in favor of the State Exchange.

(a) CAP. HHS may require the State Exchange to develop and submit a proposed CAP to correct errors resulting in improper payments.

(b) Development of proposed CAP. A State Exchange's proposed CAP must address errors that are included in the State Exchange improper payment report described in § 155.1625(c)(2) and must be developed in accordance with HHS requirements.

(1) In developing a proposed CAP, the State Exchange must conduct an error analysis such as reviewing causes, characteristics, and frequency of errors that are associated with improper payments. The State Exchange must review the findings of the analysis to determine the causes of the errors included in the State Exchange improper payment rate, if any, and to identify the root causes of the resulting improper payments.

(i) If a State Exchange has a pending Difference Resolution request or administrative appeal and HHS requests a CAP, HHS may provide a new timeline for CAP submission after the Difference Resolution or Administrative Appeal Decision and calculation of the final improper payment rate.

(ii) [Reserved]

(2) The State Exchange must determine the corrective actions to be implemented to correct causes of the errors included in the State Exchange improper payment rate and to prevent them from occurring again.

(3) The proposed CAP must include measurable milestones, accountability mechanisms, regular monitoring and validation of progress, documentation of implemented corrective actions, and regular status updates. The CAP must include all the following for each identified error:

(i) The specific corrective action.

(ii) Status of the corrective action.

(iii) Scheduled or actual implementation date of the corrective action.

(iv) Key personnel responsible for implementing each corrective action.

(v) A plan for monitoring the effectiveness of the corrective action.

(c) Implementation and evaluation of a CAP. A State Exchange must develop an implementation schedule for its CAP, implement the plan in accordance with that schedule, and regularly evaluate whether the initiatives are effective at reducing or eliminating error causes. The State Exchange must provide updates on CAP implementation progress in a manner and frequency specified by HHS, but at least annually.

(d) Failures in the CAP process. If a State Exchange does not submit a CAP when one has been required, submits an incomplete CAP that does not address all the required parts of a CAP as specified in paragraph (b)(3) of this section, fails to follow the implementation schedule referenced in paragraph (c), or submits a CAP that is otherwise unacceptable following technical assistance from HHS, HHS may take actions consistent with § 155.1650.

(a) Any State Exchange in its first year of operation must participate in a 1-year SEIPM preparation phase prior to participating in SEIPM in the subsequent year.

(b) To satisfy the requirements of the SEIPM preparation phase, a State Exchange must:

(1) Complete the information submission requirements in § 155.1615(b)(1) and (3) using information from the most current Plan Year for a sample size not to exceed 10 unique tax households that address scenarios specified by HHS.

(2) Undergo the review procedures in § 155.1625(a) and (b).

(3) Participate in technical assistance activities provided by HHS, which may include:

(i) Training on SEIPM requirements and procedures;

(ii) System readiness assessments;

(iii) Data quality validation exercises; and

(iv) Process improvement recommendations.

(c) At the beginning of each calendar year, HHS will provide any State Exchange that meets the conditions in paragraph (a) of this section with a schedule that spans a 12-month period that specifies when the requirements of this section must be completed.

HHS will minimize potential duplicate requirements of the annual independent external programmatic audit described at § 155.1200(c) and (d) and SEIPM, such that, as determined by HHS, a State Exchange may be deemed to satisfy certain requirements of § 155.1200(c) and (d), particularly the review of compliance with subparts D and E, as identified in HHS sub-regulatory guidance, for a particular plan year by successfully completing the SEIPM process.

(a) General principle. For purposes of improper payment measurement under this subpart, HHS will classify APTC payments as improper when a State Exchange fails to provide adequate documentation demonstrating that such payments were made in accordance with applicable Federal requirements.

(b) Determination of substantial noncompliance. HHS will determine that a State Exchange has failed to substantially comply with this subpart if the State Exchange:

(1) Fails to submit required data or documentation within the timelines specified in the Annual Program Schedule.

(2) Submits data or documentation that is incomplete, inaccurate, or in a format that would reasonably prevent effective review.

(3) Fails to implement the CAP process as set out in § 155.1635(d).

(4) Demonstrates a pattern of more than five instances during a SEIPM cycle in which the State Exchange fails to respond within 30 calendar days, or provides a non-responsive answer, to HHS requests for clarification or additional information.

(c) Notice and opportunity to cure. Before implementing measures under paragraph (d) of this section, HHS will:

(1) Provide written notice to the State Exchange specifying the nature of the noncompliance and the potential consequences.

(2) Allow the State Exchange a reasonable opportunity, not less than 30 days, to cure the noncompliance or demonstrate that compliance has been achieved.

(d) Remedial measures. If a State Exchange fails to substantially comply with the data collection requirements, the CAP provisions contained in this subpart, or HHS requests for clarification or additional information, and HHS finds that such failures undermine or prohibit HHS's efficient administration of Exchange improper payment measurement activities, HHS may implement measures or procedures for:

(1) Enhanced monitoring and reporting.

(2) Mandatory implementation of specific operational procedures or controls.

(3) On-site visits to State Exchange facilities to assess operational procedures, data systems, and compliance with program requirements.

(e) Escalation procedures. If a State Exchange continues to fail to comply after implementation of initial remedial measures under paragraph (d) of this section, HHS may initiate proceedings to revoke the State Exchange's authority to operate in accordance with applicable law.