On February 11, 2026, the U.S. Department of Health and Human Services (“HHS”), through the Centers for Medicare & Medicaid Services (CMS), published the proposed “Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2027; and Basic Health Program” (2027 Payment Notice proposed rule). CMS also published a fact sheet summarizing major provisions from the proposed rule. CMS seeks comments from stakeholders during the 30-day comment period on all elements of the proposed regulations. The deadline to submit comments is March 13, 2026.
Overview
The 2027 Payment Notice proposed rule is an annual rule implementing aspects of the Affordable Care Act (“ACA”) for issuers offering qualified health plans (QHPs) through Federally-facilitated Exchanges (“FFE”s) and State-based Exchanges on the Federal platform (“SBE-FP”s). It contains provisions on payment parameters and provisions related to the HHS-operated risk adjustment and risk adjustment data validation (“HHS-RADV”) programs, as well as 2027 user fee rates. The proposed rule also includes potential changes to Essential Health Benefits (“EHB”s); civil money penalties (“CMP”s); QHPs; increased enforcement standards for agents, brokers, and web-brokers; and seeks comment on potential adjustments to the Federal medical loss ratio (“MLR”) standard in the individual market. It also includes updates needed to align regulations with changes made in the Working Families Tax Cut (“WFTC”) legislation (Public Law (Pub. L.) 119-21).
The following highlights a few specific proposals that may be of particular interest. For additional questions about these or any other proposals included in the proposed rule, please contact any of the authors or your Groom attorney.
Essential Health Benefits
Routine Non-Pediatric Dental Services
CMS proposes to prohibit issuers from including routing non-pediatric dental services as EHB. Routine non-pediatric dental services include cleanings, diagnostic X-rays, and restorative services like fillings and root canals. CMS seeks comment on this proposal, including the impact that finalizing this proposal would have on health insurance coverage in the individual (off-exchange) market, the small group market, the large group market and self-funded plans (the latter two are only impacted to the extent such a plan chooses to cover an EHB). If finalized as proposed, the prohibition of coverage of routine non-pediatric dental services as an EHB would be effective upon the effective date of the final rule.
GROOM INSIGHT: This is a reversal of the policy finalized in the 2025 Payment Notice which removed the prohibition on including routine non-pediatric dental services for plan years beginning on or after January 1, 2027.
State-Mandated Benefits and Defrayal
CMS proposes that beginning with plan year 2027, a State-required benefit would be considered “in addition to EHB” if it is:
- Required by a State action taking place after December 31, 2011
- Applicable to the small group and individual markets
- Specific to required care, treatment or services
- Not required by State action for purposes of compliance with Federal requirements.
Such State-required benefits would be considered in addition to EHB regardless of whether the required benefits are embedded in the State’s EHB benchmark plan. If finalized, states that have added such benefits since December 31, 2011 would have to defray their cost by making payments to individual enrollees or to the QHP issuer on behalf of enrollees beginning in plan year 2027. Likewise, these added benefits would no longer be subject to the requirements applicable to EHBs—including the prohibition on discrimination, the annual limitation on cost-sharing, and the prohibition on annual or lifetime dollar limits.
CMS also indicated that it is pausing review of State applications to select EHB-benchmark plans. CMS notes that it is reviewing ACA Section 1302 and is considering future rulemaking to revise EHB standards more broadly.
GROOM INSIGHT: This is a reversal of policy finalized in the 2025 Payment Notice. CMS had stated that, beginning in PY 2025, covered benefits in a State’s EHB-benchmark plan are EHBs and, thus, do not require defrayal by the State. In this proposed rule, CMS notes that it has reevaluated this policy.
If finalized, the policy also could impact health plans that are not directly impacted by EHB requirements. This includes self-insured group health plans and large-group market fully insured plans that must follow the annual and lifetime dollar-limit restrictions on EHB and annual cost-sharing limitation requirements. The policy would affect plan sponsors to the extent that a plan sponsor selects a certain State’s EHB-benchmark plan for purposes of complying with the annual and lifetime dollar-limit restrictions on EHB and annual cost-sharing limitation requirements and that State changes benefits in its EHB-benchmark plan.
Risk Adjustment
For the 2027 benefit year, CMS stated that it will continue to operate the risk adjustment program applicable to the individual, small group, and merged markets (applicable inside and outside the Exchanges) in every State and the District of Columbia.
Risk Adjustment Transfer Calculations for Individual Catastrophic Plans and Individual Non-Catastrophic Plans Under the State Payment Transfer Formula
CMS solicits comment on whether CMS should retain separate risk adjustment transfer calculations under the State payment transfer formula for individual catastrophic plans and individual non-catastrophic plans. CMS also seeks comments on the potential impact of retaining separate calculation of risk adjustment transfers or whether the calculation should be combined for merged market States and non-merged market States. A merged market State is a State that has elected to merge the risk pools for individual and small group health insurance, while a non-merged market State keeps a separate risk pool for individual and small group health insurance. CMS is particularly interested in comments on maintaining the separate calculation of risk adjustment transfers under the State payment transfer formula for individual catastrophic plans and individual non-catastrophic plans (or combining them) for risk adjustment purposes in non-merged market States. Specifically, CMS is requesting comments on the impact of this policy change on risk adjustment and the resulting impact on the risk pool market composition, premiums, and risk adjustment State transfers under both scenarios, in light of the potential for increased catastrophic plan enrollment as a result of the new guidance on hardship exemptions (as noted below).
GROOM INSIGHT: Currently, risk adjustment transfers are calculated separately for individual catastrophic and non-catastrophic plans. The request for comments is to account for CMS guidance from September 4, 2025 which added an additional hardship exemption to allow individuals ineligible for APTC and Cost Sharing Reductions (CSRs) to enroll in a catastrophic plan. This policy allows a broader population to enroll in catastrophic plans starting with plan year 2025, which could impact the individual catastrophic and individual non-catastrophic market risk pools. CMS has not yet published data on the enrollment impact from the change in the hardship exemption. CMS believes that this policy will support the Administration’s general interest in offering additional alternatives for individuals to enroll in less expensive options, in particular unsubsidized enrollees. This policy, in combination with the proposal described below to allow catastrophic plan coverage for multiple years—up to 10—may impact the make-up of the risk profiles of individuals enrolled in catastrophic plans, which could impact the transfers in risk adjustment.
Enforcement
Civil Money Penalties
CMS proposes to reiterate that in determining a CMP amount, CMS will identify the lawful purpose(s) of the penalty and take into account certain factors as appropriate for the circumstances. CMS also proposes to clarify that HHS has the authority to impose CMPs against issuers in SBEs and SBE-FPs for identified violations of any Exchange requirements applicable to issuers offering a QHP in an Exchange when a State notifies HHS that it is not enforcing these requirements or when HHS determines that a State is failing to substantially enforce these requirements. Lastly, CMS proposes to net payments owed to issuers and their affiliates under the same tax identification number against certain payments and CMPs owed to the Federal government. CMS notes that these proposals seek to increase transparency into the CMP process, increase HHS’s enforcement authority, and support HHS’s continued ability to recover Federal debts owed by issuers.
GROOM INSIGHT: Recently, CMS has begun to issue CMPs in response to audits and other instances of issuer noncompliance with ACA requirements. For several years following the establishment of the Exchanges, CMS had sought voluntary compliance and corrective actions without resorting to CMPs. But as the Exchanges have matured, CMS has begun to wield a broader array of enforcement tools as part of its oversight of issuers. Issuers should evaluate their ACA compliance strategies in light of this heightened risk for CMPs.
Qualified Health Plans
QHP Certification of Non-Network Plans
CMS proposes a number of policies to allow plans that do not use a network, i.e., non-network plans, to receive QHP certification beginning with PY 2027 by demonstrating that they ensure a sufficient choice of providers. CMS proposes that a non-network QHP must ensure access to a range of providers that accept the non-network plan’s benefit amount as payment in full, including essential community providers (“ECP”s) and providers that specialize in mental health and substance use disorder services, to ensure that services will be accessible without unreasonable delay. Non-network plans would still be subject to and required to demonstrate that they meet all of the general QHP certification criteria. These general certification criteria include: compliance with benefit design standards (including providing EHB and the associated EHB cost-sharing requirements); and compliance with consumer protections that apply to individual and small group health coverage. If the proposal is finalized, these non-network plans would be eligible to receive QHP certification beginning with plan year 2027.
In line with the proposals for non-network plans, CMS also proposes to restore network adequacy authority, including review of ECPs, back to SBEs and SBE-FPs. CMS proposes to allow FFE States, including States performing plan management, to elect to conduct their own ECP certification reviews of an issuer’s plans with or without a provider network in their State applying for certification as a QHP to be offered through an FFE.
GROOM INSIGHT: The proposal to certify non-network plans as QHPs is both a reversal and an expansion of previous policies. In the 2022 Payment Notice, CMS finalized that QHPs are not required to use a network and that non-network plans do not have to comply with network adequacy standards to qualify for certification as a QHP. In the 2024 Payment Notice, however, CMS reversed this policy to require all individual market QHPs across all Exchanges to utilize a network of providers. At that time, CMS expressed concerns over whether a plan without a network would be able to comply with ACA’s requirements to offer access to ECPs. The current proposal reverts back to the 2022 Payment Notice and expands it to provide more detailed information on how a non-network plan could become a certified QHP.
In addition, the proposal to restore network adequacy authority to states is a reversal in policy from the 2025 Payment Notice, seeking to restore authority and flexibility to the States in line with the Administration’s overall priorities. Through this proposal, CMS acknowledges that SBEs and SBE-FPs have the experience and expertise and are the best-positioned entities to develop network adequacy standards for their distinct consumer markets.
Catastrophic Plans
CMS proposes to specify that a catastrophic plan has a term of either one year or of multiple consecutive years up to 10 years, and, if finalized and depending on issuer and enrollee reaction, CMS would consider similar standards for individual market metal level plans in the future. Additionally, CMS proposes to permit issuers of multi-year catastrophic plans to make plan-level adjustments to the index rate that reflect the length of the entire term. CMS requests comment specifically on this proposal, including that issuers of multi-year catastrophic plans have the option to apply the annual limitation on cost sharing for each plan year of the contract on an annual basis, or, on average, over the life of the contract, without altering the expected actuarial value of the plan over its duration as of the plan’s start date.
GROOM INSIGHT: This policy is consistent with the Administration’s objective to offer additional alternatives for individuals—particularly unsubsidized enrollees—to enroll in coverage with lower premiums. If finalized, this policy could allow for multi-year plans to have a benefit structure that does not reset every 12 months. This could allow for deductibles and out-of-pocket limits not to reset annually. It is unclear from the proposals how an issuer would operationalize and implement this policy, and provides room for innovation amongst the industry. CMS seeks comment on how Federal policies could promote continuous coverage in multi-year plans and defray the risk of termination by either the enrollee or issuer, including by promoting continuous coverage for individuals who churn in and out of the individual market through the use of Individual Coverage Health Reimbursement Arrangements.
Medical Loss Ratio
CMS solicits comment on the impact of the Federal MLR standard on individual market stability and whether HHS should adjust the MLR standard in a State to promote individual market stability. Under the ACA the HHS Secretary may adjust the 80 percent MLR standard in the individual market with respect to a State if the Secretary determines that application of the MLR standard may destabilize the individual market in such State.
In the 2019 Payment Notice, CMS finalized policy to allow for adjustments to the individual market MLR standard in any State that demonstrates a reasonable likelihood that a different MLR standard will help stabilize its individual market, and to streamline the process for applying for such adjustments to reduce burdens for States and HHS. However, CMS has not received any requests from States to help stabilize their individual market by adjusting the MLR standard. As such, CMS also solicits comment on whether and how to amend regulations allowing States to request an adjustment to the MLR standard in their individual market to reduce burden and encourage States to request adjustments as appropriate in their State markets.
Health Insurance Issuer Rate Increases: Disclosure and Review Requirements
Submission of Rate Filing Justification
CMS proposes to codify filing instructions included in a Bulletin issued on May 2, 2025 (PY26 Rate Filing Guidance). This proposal would continue to require issuers that make a plan-level adjustment to account for unreimbursed CSRs to submit certain information specified in the PY26 Rate Filing Guidance in their Unified Rate Review Templates (“URRT”s) and actuarial memoranda for each plan year in which CSRs are not funded. Specifically, in the URRT for the upcoming plan year, issuers would report CSR amounts paid on behalf of enrollees and the additional revenue collected from the previously applied CSR load using the most recent annual data that is available prior to the applicable filing year, using the standard methodology. In most cases, the most recent annual CSR data would reflect the plan year that is two years before the upcoming plan year (for example, CSRs paid for eligible enrollees and the additional revenue collected from the CSR load applied in PY 2025 would be reported during the 2026 filing year on rate filings for PY 2027). Therefore, starting with rate filings for the 2027 plan year, CMS proposes to collect as part of the rate filing justification information on adjustments to the index rate to account for unreimbursed CSRs.
CMS believes that, based on reviews of actuarial memoranda submitted by issuers for PY 2026, the excessive loads due to CSRs on silver plans in particular (and in some cases as mandated by State law) lead to inflated premiums for silver plans. CMS asserts that this distorts pricing for bronze and gold plans relative to silver plans, limits consumer choice, and significantly increases the cost of the second lowest-cost silver plan available to a consumer—which, in turn, increases premium tax credit (“PTC”) amounts and Federal expenditures. In addition, CMS recognizes the additional burden on issuers to provide this information. Given the significant impact of CSR loading on Federal expenditures through additional PTC spending, CMS believes collection of this information is an important program integrity measure that will help ensure that CSR loads are appropriate to recover lost CSR payments and are not inappropriately inflating Federal expenditures or undermining Federal rating rules.
