PATIENT 

PROTECTION AND 

AFFORDABLE CARE 

ACT

Enrollment and 

Spending in the Early 

Retiree Reinsurance 

and Pre-existing 

Condition Insurance 

Plan Programs

Report to the Ranking Member, 

Committee on Finance, U.S. Senate

April 2013

GAO-13-391

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-13-391, a report to the 

Ranking Member, Committee on Finance, 

U.S. Senate

April 2013

PATIENT PROTECTION AND AFFORDABLE 

CARE ACT

Enrollment and Spending in the Early Retiree 

Reinsurance and Pre-existing Condition Insurance 

Plan Programs

Why GAO Did This Study

In March 2010, the Patient Protection 

and Affordable Care Act (PPACA) 

appropriated $5 billion each to 

establish and carry out two temporary 

programs—ERRP and PCIP. ERRP 

reimburses sponsors of employmentbased health plans to help cover the 

cost of providing health benefits to 

early retirees—individuals age 55 and 

older not eligible for Medicare. The 

PCIP program is a high-risk pool that 

provides access to health insurance for 

individuals unable to acquire affordable 

coverage due to a preexisting 

condition. Both programs are operated 

by CCIIO within CMS (an agency 

within the Department of Health and 

Human Services) and are intended to 

operate through 2013, after which 

PPACA will provide new insurance 

coverage options.

GAO was asked to provide updated 

information on ERRP and PCIP 

spending. This report describes the 

current status of ERRP and PCIP 

enrollment and spending as well as 

projected PCIP spending and how 

CCIIO is ensuring that program funding 

is sufficient through 2013. GAO 

obtained the most recent data 

available on ERRP and PCIP 

enrollment and spending and on 

overpayments recovered from ERRP 

plan sponsors during the claims 

adjudication process. GAO also 

obtained other supporting 

documentation where available. GAO 

interviewed CMS officials about ERRP 

and PCIP enrollment and spending as 

well as their predictions of future PCIP 

spending and steps they are taking to 

ensure the sufficiency of PCIP funding.

The Department of Health and Human 

Services provided technical comments 

on a draft of this report, which GAO 

incorporated as appropriate.

What GAO Found

The Center for Consumer Information and Insurance Oversight (CCIIO) 

discontinued enrollment in the Early Retiree Reinsurance Program (ERRP) in 

early 2011 and stopped most program reimbursements the following year to keep 

spending within the $5 billion ERRP appropriation. Specifically, anticipating 

exhaustion of funds, CCIIO stopped ERRP enrollment in May 2011. According to 

CCIIO officials, CCIIO suspended making reimbursements to plan sponsors in 

September 2012, as reimbursements had reached the $4.7 billion cap 

established for paying claims under the original appropriation, and the remainder 

was reserved for administrative expenses. When the cap was reached, 

significant demand for the program remained with 5,699 ERRP reimbursement 

requests left outstanding that accounted for about $2.5 billion in unpaid claims. 

CCIIO officials told GAO that they planned to pay some of the outstanding 

reimbursement requests by redistributing any overpayments recovered from plan 

sponsors—when, for example a plan receives a rebate that lowers the total cost 

of a prior claim—as well as money recovered from program audits. As of January 

2013, officials told GAO that CCIIO had recovered a total of $54 million and 

redistributed $20.7 million of this amount.

Enrollment and spending for the Pre-existing Condition Insurance Plan (PCIP) 

program have grown substantially. Cumulative PCIP enrollment had reached 

103,160 by the end of December 2012, more than doubling from a year earlier. 

By the end of January 2013, total PCIP spending reached about $2.6 billion, 

representing over half of the $5 billion PCIP appropriation compared to a year 

earlier when only about 16 percent of the total appropriation had been spent. 

PCIP spending has varied on a monthly basis, but overall, monthly spending also 

has increased over the life of the program. Most recently, monthly spending 

reached its highest point since the program’s inception, increasing about 

35 percent from December 2012 to January 2013.

According to CMS, PCIP spending is likely to approach the $5 billion 

appropriation by the end of 2013, and CCIIO is taking steps intended to ensure it 

does not exceed this amount. In June 2012, Office of the Actuary (OACT) within 

the Centers for Medicare & Medicaid Services (CMS) released a projection that 

the entire $5 billion in PCIP funding would be used “through 2013.” Similarly, 

CCIIO officials told GAO they anticipate total PCIP spending to closely approach 

$5 billion, and that they are taking program management steps—many of which 

are not yet reflected in spending data—to ensure appropriated funding lasts 

through 2013. For example, in the second half of 2012, CCIIO was able to obtain 

lower provider reimbursement rates for the PCIP program. Also, in January 2013, 

CCIIO instituted benefit changes that shifted more costs onto PCIP enrollees, 

including by increasing enrollee coinsurance from 20 percent to 30 percent in 

many states. Due to growing concerns about the rate of PCIP spending, in 

February 2013, CCIIO suspended PCIP enrollment to ensure the appropriated 

funding would be sufficient to cover claims for current enrollees through the end 

of the program. Officials told GAO that if spending trends begin to indicate that 

funding will not be used as quickly as they are projecting, they could reinstate 

PCIP enrollment to use remaining funds.

View GAO-13-391. For more information, 

contact John E.Dicken at (202) 512-7114 or 

dickenj@gao.gov.
Page i GAO-13-391 ERRP and PCIP Enrollment and Spending

Letter 1 

Background 5

CCIIO Discontinued ERRP Enrollment in Early 2011 and Stopped 

Most Reimbursements the Following Year to Keep Spending 

within the $5 Billion Appropriation 9

PCIP Enrollment and Spending Have Grown Substantially 10

PCIP Spending Is Likely to Approach the $5 Billion Appropriation 

in 2013, and CCIIO Is Taking Steps Intended to Ensure Spending 

Does Not Exceed This Amount 15

Agency Comments 16

Appendix I GAO Contact and Staff Acknowledgments 18

Related GAO Products 19

Figures

Figure 1: Cumulative Pre-existing Condition Insurance Plan (PCIP) 

Enrollment, July 2010 through December 2012 12

Figure 2: Cumulative Pre-existing Condition Insurance Plan (PCIP) 

Spending, December 2010 to January 2013 13

Figure 3: Monthly Pre-existing Condition Insurance Plan (PCIP) 

Spending, January 2011 to January 2013 14

Contents 
Page ii GAO-13-391 ERRP and PCIP Enrollment and Spending

Abbreviations

CCIIO Center for Consumer Information and Insurance

 Oversight

CMS Centers for Medicare & Medicaid Services

ERRP Early Retiree Reinsurance Program

GEHA Government Employees Health Association, Inc.

HHS Department of Health and Human Services

OACT Office of the Actuary

PCIP Pre-existing Condition Insurance Plan

PPACA Patient Protection and Affordable Care Act

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-13-391 ERRP and PCIP Enrollment and Spending

United States Government Accountability Office

Washington, DC 20548

April 30, 2013

The Honorable Orrin G. Hatch

Ranking Member

Committee on Finance

United States Senate

Dear Senator Hatch:

In March 2010, the Patient Protection and Affordable Care Act (PPACA) 

appropriated $5 billion each to establish and carry out two temporary 

programs, the Early Retiree Reinsurance Program (ERRP) and the 

Pre-existing Condition Insurance Plan (PCIP) program.1 The programs 

are intended to provide access to health insurance coverage for early 

retirees—individuals age 55 and older who are not eligible for Medicare—

and individuals with preexisting medical conditions, respectively.2 Both 

populations historically have faced challenges obtaining health insurance 

in the individual market due, among other things, to being charged higher 

premiums than younger or healthier individuals on the basis of age or 

health status, or to being denied coverage altogether.3

 

1

Pub. L. No. 111-148, §§ 1102(e) and1101(g), 124 Stat.143, 145 (2010).The funds are 

available without fiscal year limitation.

In addition, while 

some early retirees may have access to health insurance through their 

employer, the number of large employers offering retiree coverage has 

2

Medicare is the federal health insurance program for persons aged 65 or over, individuals 

under the age of 65 with certain disabilities, and individuals with end-stage renal disease.

3

Individuals without employment-based group coverage may buy coverage in the private 

individual market directly from insurers. In addition to early retirees, these include the selfemployed; those whose employers do not offer health insurance coverage; individuals not 

in the labor force; and individuals who lose their jobs and are either ineligible for or have 

exhausted the right to continue their employer-based coverage for 18 months.

We previously reported that 19 percent of applicants in the individual market were denied 

enrollment and a quarter of insurers had denial rates of 40 percent or higher, using data 

collected by the Department of Health and Human Services (HHS) for the first quarter of 

2010. See GAO, Private Health Insurance: Data on Application and Coverage Denials, 

GAO-11-268 (Washington, D.C.: Mar. 16, 2011).

 
 

Page 2 GAO-13-391 ERRP and PCIP Enrollment and Spending

been declining.4 ERRP and the PCIP program are intended to operate 

through December 31, 2013, after which new coverage options will 

become available through PPACA’s health insurance Exchanges.5

ERRP provides reimbursement to participating employment-based health 

plans that is intended to cover a portion of the cost of providing health 

benefits to early retirees in order to help employers continue to offer these 

benefits and provide financial relief to plan participants.6 Under the 

program, sponsors of health plans—which can include commercial 

organizations, government entities, nonprofit organizations, religious 

organizations, and unions—may use ERRP reimbursements to reduce 

their costs for providing health benefits, plan participants’ health benefit 

costs, or any combination of these costs.7

 

4

The number of large employers offering health insurance coverage to retirees was 

66 percent in 1988, 34 percent in 2000, and 25 percent in 2012. See Henry J. Kaiser 

Family Foundation and Health Research & Educational Trust, Employer Health Benefits 

2012 Annual Survey (Menlo Park, Calif. and Chicago, Ill.: September 2012). Large 

employers were defined as firms with 200 or more employees.

The PCIP program is a highrisk pool that provides access to health insurance at standard market 

5

Starting in 2014, PPACA establishes new options for individuals to obtain health 

insurance coverage through state-based health insurance marketplaces called 

“Exchanges.” The law also will prohibit insurers in the individual market from denying 

coverage to individuals with preexisting conditions or charging them more in premiums, 

and limit how much insurers can vary what they charge for premiums based on age. See

Pub. L. No. 111-148, Title I, Subtitles C and D, 124 Stat. 154 et seq., as amended by 

§§ 10103 and 10104, 124 Stat. 892, et seq.

6

Under ERRP, health benefits provided to spouses, surviving spouses, and dependents of 

early retirees are also eligible for reimbursement, even if these individuals are under the 

age of 55 or are eligible for Medicare. Throughout this report, we use the term early 

retirees to refer to early retirees and their spouses, surviving spouses, and dependents. In 

addition to early retirees, eligible plans can also cover active employees and their spouses 

and dependents as well as retirees who are eligible for Medicare.

7

Typically, employment-based health plans are not a discrete entity to which payments 

can be directly made. Therefore, in implementing the program, the Department of Health 

and Human Services (HHS) has interpreted this provision to require reimbursement to a 

sponsor, which it has defined to mean: a “plan sponsor” as defined in § 3(16)(B) of the 

Employee Retirement Income Security Act of 1974, 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. Early Retiree 

Reinsurance Program, 75 Fed. Reg. 24450, 24451, 24467 (May 5, 2010) (definition of 

“sponsor” codified at 45 C.F.R. § 149.2).
 

Page 3 GAO-13-391 ERRP and PCIP Enrollment and Spending

rates for individuals unable to acquire affordable coverage due to a 

preexisting condition.8

In order to carry out responsibilities under various provisions of PPACA, 

including ERRP and the PCIP program, the Department of Health and 

Human Services (HHS) created the Center for Consumer Information and 

Insurance Oversight (CCIIO) in April 2010.9 CCIIO began ERRP 

enrollment in June 2010 and PCIP enrollment shortly after in July 2010. 

We reported in September 2011 on various aspects of ERRP, including 

CCIIO’s process for implementing the program, initial program 

expenditures and the types of plan sponsors enrolled, and how plan 

sponsors intended to use ERRP reimbursements.10 Also in 2011, we 

reported on various aspects of the PCIP program, including initial 

enrollment and spending trends, program features, and CCIIO’s 

oversight.11

Because ERRP and the PCIP program were each appropriated a fixed 

amount of money, questions have been raised about the rate of spending 

and how long the funding would last. For example, while enrollment in the 

PCIP program has been lower than initially projected, per member per 

 

8

The PCIP program was modeled after existing state-operated high-risk pools, which, as 

of February 2012, operated in 35 states and similarly provide access to coverage for 

individuals with preexisting conditions; however, the PCIP program differs from stateoperated high-risk pools in certain ways. For example, while the PCIP program requires 

that individuals be without health insurance coverage for 6 months to be eligible, stateoperated high-risk pools generally do not have such a requirement. Once enrolled, 

however, many state operated pools impose waiting periods of 6 to 12 months for 

coverage of the preexisting condition, while the PCIP program does not impose waiting 

periods.

PCIP premiums are set at 100 percent of the standard rate for a standard population in 

each state or market, and can vary on the basis of age by no more than a 4 to 1 ratio.

9

CCIIO was initially known as the Office of Consumer Information and Insurance 

Oversight. Its name was changed to CCIIO in January 2011 when it was transferred to the 

Centers for Medicare & Medicaid Services (CMS) within HHS.

10See GAO, Private Health Insurance: Implementation of the Early Retiree Reinsurance 

Program, GAO-11-875R (Washington, D.C.: Sept. 30, 2011).

11See GAO, Pre-Existing Condition Insurance Plans: Program Features, Early Enrollment 

and Spending Trends, and Federal Oversight Activities, GAO-11-662 (Washington, D.C.: 

July 27, 2011) and Pre-Existing Condition Insurance Plan: Comparison of Implementation 

and Early Enrollment with the Children’s Health Insurance Program, GAO-12-62R

(Washington, D.C.: Nov. 10, 2011).
 

Page 4 GAO-13-391 ERRP and PCIP Enrollment and Spending

month claim costs have been higher than expected, leading some to 

question whether spending could exhaust its $5 billion appropriation as 

enrollment continues to grow.12

1. the current status of ERRP enrollment and spending,

You asked us to provide updated 

information on spending for ERRP and the PCIP program. In this report, 

we describe

2. the current status of PCIP enrollment and spending, and

3. projected PCIP spending and how CCIIO is ensuring that program 

funding is sufficient through 2013.

To describe the current status of ERRP enrollment and spending, we 

obtained cumulative enrollment and spending data from CCIIO through 

October 2012 or the most recent data available at the time of our 

analysis.13

To describe the current status of PCIP enrollment and spending, we 

obtained monthly enrollment data through December 2012 and spending 

data through January 2013 from CCIIO, the most recent data available at 

the time of our analysis. We interviewed CCIIO officials about PCIP 

enrollment and spending and obtained supporting documentation where 

available, such as PCIP policies and procedures. We also interviewed 

knowledgeable agency officials about their efforts to ensure the quality of 

We also obtained information as of January 2013 on funds 

recovered from ERRP plan sponsors from overpayments identified 

through the claims adjudication process. We interviewed CCIIO officials 

about ERRP enrollment and spending and obtained supporting 

documentation where available, such as answers to frequently asked 

questions on ERRP’s website. We also interviewed knowledgeable 

agency officials about their efforts to ensure the quality of the enrollment 

and spending data and checked for anomalies. We determined these 

data were sufficiently reliable for our purposes.

 

12For example, the Office of the Actuary within CMS initially projected that PCIP 

enrollment would be 375,000 by the end of 2010, but the actual number was 9,042. At the 

same time, in February 2012, CCIIO reported that, on average, the PCIP program 

experienced claims costs 2.5 times higher than anticipated. See CCIIO, Covering People 

with Pre-Existing Conditions: Report on the Implementation and Operation of the PreExisting Condition Insurance Plan Program (Washington, D.C: Feb. 23, 2012).

13In addition, we accessed earlier information on ERRP enrollment and spending from our 

2011 report on ERRP, GAO-11-875R, and CCIIO’s website.
 

Page 5 GAO-13-391 ERRP and PCIP Enrollment and Spending

the enrollment and spending data and checked for anomalies. We 

determined these data were sufficiently reliable for our purposes.

To describe projected PCIP spending and how CCIIO is ensuring that 

program funding is sufficient through 2013, we interviewed CCIIO officials 

about their estimates of future PCIP spending as well as steps they are 

taking to ensure program funding is sufficient through 2013. In addition, 

we discussed estimates of PCIP spending through 2013 with officials 

from the Office of the Actuary (OACT) within the Centers for Medicare & 

Medicaid Services (CMS). We obtained supporting documentation where 

possible, such as documents containing PCIP benefit changes.

We conducted this performance audit from December 2012 to March 

2013 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

In implementing ERRP, CCIIO is responsible for, among other things, 

determining which plan sponsors are eligible to participate in the program 

and providing reimbursements to the participating sponsors. Eligibility for 

participation is determined by a plan sponsor meeting a number of 

requirements, including being able to document claims, implement 

programs and procedures that have the potential to generate cost savings 

for plan participants with chronic and high-cost conditions, and having 

policies and procedures in place to detect and reduce fraud, waste, and 

abuse. When requesting reimbursement, sponsors must provide 

documentation of the cost of medical claims,14

 

14Health costs that are eligible for ERRP reimbursement under PPACA include those 

covered by medical, surgical, hospital, prescription drug, and other health benefits as 

determined by the Secretary of Health and Human Services. See Pub. L. No. 111-148, 

§ 1102(a)(2)(A), 124 Stat. 143. In general, CCIIO applies the Medicare benefit standard to 

determine whether a given item or service is a health benefit and thus eligible for ERRP 

reimbursement.

which can include costs 

Background 

ERRP 
 

Page 6 GAO-13-391 ERRP and PCIP Enrollment and Spending

paid by early retirees in the form of deductibles, copayments, or 

coinsurance. For eligible claims paid by a plan on behalf of each early 

retiree, CCIIO will reimburse 80 percent of the amount that exceeded 

$15,000 (the cost threshold) but was not greater than $90,000 (the cost 

limit) in a given year.15 ERRP reimbursement requests are paid in the 

order in which they are received, and CCIIO may stop taking ERRP 

applications or, if an application is approved, deny all or part of a 

reimbursement request, based on the availability of funding.16

Plan sponsors are not required to use ERRP reimbursements by the end 

of the plan year in which they are provided, but are expected to use 

reimbursements as soon as possible and no later than December 31, 

2014.17 Under PPACA, plan sponsors can use the reimbursements to 

reduce their own premium contributions or other health benefit costs; 

reduce plan participants’ premium contributions, copayments, 

deductibles, coinsurance, or other out-of-pocket costs; or reduce any 

combination of these costs.18 However, sponsors are not permitted to use 

the funds received as general revenue, and thus must maintain the same 

level of contribution toward the plan as they did prior to applying to enroll 

in ERRP. CCIIO may conduct audits of plan sponsors to verify their 

compliance with this and other program requirements.

To be eligible for PCIP, individuals must have a preexisting condition and 

have been without creditable coverage for at least 6 months prior to 

 

15Pub. L. No. 111-148, § 1102(c), 124 Stat. 144. Eligible claims must be calculated 

excluding any negotiated price concessions. The $15,000 cost threshold and $90,000 cost 

limit are to be adjusted each fiscal year based on the percentage increase in the Medical 

Care Component of the Consumer Price Index for all urban consumers. For plan years 

that started on or after October 1, 2011, the annual cost threshold was adjusted to 

$16,000 and the annual cost limit to $93,000.

1675 Fed. Reg. 24450, 24466 (May 5, 2010) (codified at 45 C.F.R. § 149.45(a)).

17While ERRP is scheduled to operate through December 31, 2013, CCIIO will allow 

sponsors until December 31, 2014 to use their reimbursements.

18Although plan sponsors can only receive reimbursement for health benefit costs paid on 

behalf of early retirees, plan sponsors who use the reimbursements to reduce plan 

participants’ costs must reduce costs for all participants, including retirees who are eligible 

for Medicare, active employees, and their spouses and dependents.

PCIP 
 

Page 7 GAO-13-391 ERRP and PCIP Enrollment and Spending

application.19 This requirement effectively prevents enrollment by those 

who were already insured, thus limiting the program to individuals who 

likely have been unable to access insurance because of their preexisting 

condition.20 PCIP programs must not impose waiting periods for coverage 

based on the enrollee’s preexisting condition, and plan benefits must 

cover at least 65 percent of the total cost of coverage until enrollees hit a 

statutory out-of-pocket spending limit, at which point PCIP covers 

100 percent of the cost. PPACA requires that HHS develop procedures to 

transition PCIP enrollees from the program to the Exchanges when they 

begin in 2014 and that such procedures ensure these enrollees do not 

experience a lapse in coverage.21 At the same time, if HHS estimates 

that, for any fiscal year, PCIP funding will be insufficient to cover the 

payment of claims, PPACA authorizes it to make such adjustments as are 

necessary to eliminate this deficit and to stop PCIP enrollment.22

To begin implementing the PCIP program, CCIIO determined a state-bystate allocation of the total $5 billion PCIP appropriation. The initial 

allocations were based on a formula similar to that used for the Children’s 

Health Insurance Program, using factors that reflected each state’s 

population, number of uninsured individuals under age 65, and a

geographic variation in the cost of care.23

 

19Pub. L. No. 111-148, § 1101(d), 124 Stat.142. Creditable coverage is defined for this 

purpose as coverage for an individual under: a group health plan, health insurance, 

Medicare Part A or B, Medicaid, the military health care system, the Indian Health Service, 

a state health benefits high-risk pool, the Federal Employees Health Benefits Program, the 

Peace Corps health benefit plan, or a public health plan as defined in regulations. See

Public Health Service Act, § 2701(c)(1).

In addition, states were given 

the option to operate their own PCIP with federal funding, or to allow HHS 

20To be eligible for PCIP, individuals must also be citizens, nationals, or lawfully present in 

the United States, as well as residents of the state in which they enroll in the PCIP 

program.

21Pub. L. No. 111-148 §1101(g)(3)(B), 124 Stat.143.

22Pub. L. No. 111-148 §1101(g)(2),(4), 124 Stat.143.

23The Children’s Health Insurance Program is a joint state and federal program for 

uninsured children in families whose incomes are too high for Medicaid, but too low to 

afford private coverage.

Initial PCIP allocations ranged from $8 million for North Dakota, Vermont, and Wyoming to 

$761 million for California. CCIIO reserves the right to reallocate unused funds to states in 

future years from initial allocations and make adjustments as necessary to eliminate any 

potential deficit due to projected expenses exceeding a state’s allocation.
 

Page 8 GAO-13-391 ERRP and PCIP Enrollment and Spending

to operate the PCIP in their state. Twenty-seven states elected to operate 

a PCIP for their residents, while 23 states and the District of Columbia 

opted to allow HHS to operate their PCIPs. For the 27 states that chose 

to operate their own PCIPs, HHS directly contracted with states or their 

designated nonprofit entities. The contracts established that HHS would 

reimburse states or their designated entities for claims and administrative 

costs incurred in excess of the premiums they collected. To implement 

the federally run PCIP for the 24 states that opted not to operate their 

own PCIP, HHS coordinated with other federal agencies and selected the 

Government Employees Health Association, Inc. (GEHA) to help operate 

the program. GEHA was awarded a cost-plus-award fee contract, which 

established that HHS would reimburse GEHA for claims and 

administrative costs in addition to granting fixed and performance-based 

award fees.24 For both the federally and state-run PCIPs, HHS 

established a limit on administrative costs of no more than 10 percent of 

total spending over the lifetime of the program.

 

24The fixed award fee was set at 5 percent of annual projected administrative costs. The 

incentive award fee was based on performance measures such as claims processing 

timeliness and accuracy, care management, and cost containment. See 48 C.F.R. 

§ 16.405-2 (2010) (Federal Acquisition Regulation §16.405-2) (definition of cost-pusaward-fee contracts).
 

Page 9 GAO-13-391 ERRP and PCIP Enrollment and Spending

CCIIO stopped accepting applications for ERRP enrollment in May 2011, 

anticipating the $5 billion appropriation would be exhausted. As we 

previously reported, at that time the total number of approved plan 

sponsors was more than 6,000—most of which enrolled within the first 

6 months of the program—and CCIIO had already spent $2.4 billion 

reimbursing plan sponsors for claims incurred.25 Officials told us that in 

September 2012, CCIIO suspended making reimbursements to plan 

sponsors, with reimbursements having exceeded the $4.7 billion cap 

established for paying claims under the original appropriation nearly a 

year earlier.26 In anticipation of exceeding the cap, CCIIO had issued 

guidance on December 13, 2011, stating that it would not accept 

reimbursement requests for ERRP claims incurred after December 31, 

2011.27 However, the program continued to accept requests for claims 

incurred on or before this date and officials explained that a number of 

factors led to it taking until September 2012 for all $4.7 billion to be spent, 

including that reimbursements must go through a clearance process to 

make sure funds are paid appropriately. When the $4.7 billion was 

reached, significant demand for the program remained with 5,699 ERRP 

reimbursement requests left outstanding that accounted for about 

$2.5 billion in unreimbursed claims.28

 

25See GAO-11-875R for more information on initial ERRP enrollment and expenditures.

While more than 6,000 plan sponsors were approved for ERRP enrollment, by the end of 

October 2012, payments had been made to 2,858 unique plan sponsors, which officials 

said was in part because not all sponsors who were approved ended up submitting a 

reimbursement request. 

26Officials told us that at the start of ERRP, CCIIO allocated $4.7 billion to cover payments 

to plan sponsors for reimbursement requests and the remaining $300 million to cover 

administrative expenses, such as staff salaries, overhead, and contracts for information 

technology and other support services. CCIIO officials told us that they expected $300 

million to be sufficient to cover administrative expenses through the end of the program, 

noting that such expenses would continue through fiscal year 2015. Through the end of 

fiscal year 2012, CCIIO had paid $61.2 million for administrative expenses.

27See Early Retiree Reinsurance Program, Notice, 76 Fed. Reg. 77537 (Dec. 13, 2011).

28According to CCIIO officials, one reason for the large number of outstanding 

reimbursement requests was that as funding for ERRP ran low and CCIIO put out notice 

that it would no longer be accepting claims incurred after December 31, 2011, sponsors 

rushed to submit claims so that they could get paid. Officials also noted that some of the 

outstanding requests are corrections to previously submitted claims. By January 2013, 

75 reimbursement requests had been made in addition to those outstanding when the 

$4.7 billion cap was reached in September 2012, 12 of which were new and 63 of which 

revised previous claims.

CCIIO Discontinued 

ERRP Enrollment in 

Early 2011 and 

Stopped Most 

Reimbursements the 

Following Year to 

Keep Spending within 

the $5 Billion 

Appropriation 
 

Page 10 GAO-13-391 ERRP and PCIP Enrollment and Spending

CCIIO is recovering portions of the $4.7 billion from plan sponsors that 

were overpaid and using those funds to pay outstanding reimbursement 

requests in the order in which they were received. Overpayments are 

identified through the claims adjudication process and can happen when, 

for example, a plan receives a rebate from a provider that lowers the total 

cost of a claim after the claim was initially submitted to ERRP. In addition, 

because early reimbursement requests were based on summary claims 

data, CCIIO required plan sponsors to submit a more detailed accounting 

of the actual costs of these requests by April 27, 2012.

29

In addition to recovering overpayments, officials told us that any money 

recovered from program audits would also be used to pay outstanding 

reimbursement requests. CCIIO hired a contractor with a goal of 

conducting audits of 30 ERRP plan sponsors that officials said account 

for 30 percent of program reimbursements. As of January 2013, CCIIO 

had initiated 17 audits, but had not yet received any audit reports from the 

contractor. Consequently, officials told us that they were not yet able to 

estimate how much recovered ERRP funds would be identified through 

this process.

Officials told us 

that if an overpayment was identified for a reimbursement request, or if 

sponsors failed to meet the April deadline, costs associated with that 

request were to be recovered by CCIIO. As of January 2013, CCIIO had 

identified $60.2 million in overpayments and recovered $54 million of this 

amount. CCIIO was pursuing collection of the remaining $6.2 million and 

estimated that as much as an additional $15 million in overpayments may 

be identified and collected in fiscal year 2013. 

PCIP enrollment has grown substantially. By the end of December 2012, 

cumulative enrollment had reached 103,160, up more than 50,000 from a 

year earlier when enrollment was 48,862. (See fig. 1.) Enrollment in staterun PCIPs represents a larger percentage of total enrollment compared to 

the federally run PCIP; however, the federally run PCIP has accounted for 

an increasing percentage of the total over time. When we last reported on 

 

29CCIIO officials said that in submitting reimbursement requests based on summary 

claims data, plan sponsors were required to aggregate eligible claims for early retirees 

and provide a Summary Cost Report that calculated the ERRP reimbursement amount. 

Subsequently, CCIIO required plan sponsors to also submit detailed data for each claim in 

these reimbursement requests in order to substantiate the reimbursement amount plan 

sponsors were paid.

PCIP Enrollment and 

Spending Have Grown 

Substantially 
 

Page 11 GAO-13-391 ERRP and PCIP Enrollment and Spending

the PCIP program, as of April 2011, enrollment in the federally run PCIP 

represented about 26 percent of total enrollment; by the end of December 

2012, it represented about 43 percent.30 CCIIO officials told us that their 

decision to accept, starting in July 2011, a letter from a health care 

provider as proof of a preexisting condition in the federally run PCIP likely 

contributed to this shift—although CCIIO later reversed this decision in 

May 2012.

31 Similar to prior months, PCIP enrollment continued to vary 

widely across states, ranging from 1 in Vermont to 15,101 in California.32

 

30For information on enrollment trends in our previous report see GAO-11-662. 

31CCIIO officials explained that they initially allowed such documentation in an effort to 

increase enrollment in the federally run PCIP, as it was significantly lagging behind staterun PCIPs, many of which allowed such documentation. However, enrollment grew so 

quickly in the federally run program that CCIIO decided to reverse its decision in an 

attempt to temper enrollment growth. According to CCIIO guidance, children under age 19 

or residents of Massachusetts or Vermont were excluded from the reversal.

32Because Vermont already implemented many of the broader market reforms that will 

take effect through PPACA in 2014, commercial plans in the state already offer 

guaranteed coverage to individuals with preexisting conditions at premiums comparable to 

PCIP. 
 

Page 12 GAO-13-391 ERRP and PCIP Enrollment and Spending

Figure 1: Cumulative Pre-existing Condition Insurance Plan (PCIP) Enrollment, July 2010 through December 2012

By the end of January 2013, cumulative PCIP spending reached about 

$2.6 billion, representing over half of the $5 billion appropriated for the 

program.33

 

33Spending data do not include administrative costs for HHS staff salaries and benefits, 

compliance and oversight, general information technology, and outreach; however, 

officials estimated that these costs were approximately $12 million for fiscal years 2011 

and 2012. Spending data are net of any premium revenue collected from enrollees.

This represents a substantial increase from a year earlier 

when about $782 million had been spent, representing about 16 percent 

of the total appropriation. (See fig. 2.) Similar to the trend in enrollment, 

the federally run PCIP has accounted for an increasing percentage of 

total program spending. The percentage of PCIP spending used for 
 

Page 13 GAO-13-391 ERRP and PCIP Enrollment and Spending

administrative costs has declined over time and by the end of December 

2012 it had fallen to about 7 percent.34

Figure 2: Cumulative Pre-existing Condition Insurance Plan (PCIP) Spending, December 2010 to January 2013

Notes: Data for monthly cumulative PCIP spending are not available prior to December 2010.

Spending data do not include administrative costs for HHS staff salaries and benefits, compliance 

and oversight, general information technology, and outreach; however, officials estimated that these 

costs were approximately $12 million for fiscal years 2011 and 2012. Spending data are net of any 

premium revenue collected from enrollees.

PCIP spending has varied on a monthly basis, but overall, monthly 

spending also has increased over the life of the program. Most recently, 

monthly spending reached its highest point since the program’s inception, 

increasing about 35 percent from the end of December 2012 to the end of 

January 2013. (See fig. 3.)

 

34Data through December 2012 were the most recent available on PCIP administrative 

costs. At this time, the PCIP program had spent about $177 million of the $5 billion 

appropriation on administrative costs. 
 

Page 14 GAO-13-391 ERRP and PCIP Enrollment and Spending

Figure 3: Monthly Pre-existing Condition Insurance Plan (PCIP) Spending, January 2011 to January 2013

Notes: Data for monthly PCIP spending are not available prior to January 2011.

Spending data do not include administrative costs for HHS staff salaries and benefits, compliance 

and oversight, general information technology, and outreach; however, officials estimated that these 

costs were approximately $12 million for fiscal years 2011 and 2012. Spending data are net of any 

premium revenue collected from enrollees.

PCIP spending also varied across states, with some states spending 

more than they were originally allocated and some states spending less. 

For example, CCIIO officials said that as of January 2013, three states—

New Hampshire, South Dakota, and Utah—have spent more money than 

they were originally allocated because of higher than expected enrollment 

or per member costs. Additionally, CCIIO has obligated to five states—

Alaska, Colorado, Montana, Oregon, and New Mexico—more funding in 

2012 than was in their original allocation, but these states have yet to 

spend the additional funds. Officials also said that other states have had 

lower than expected expenditures—for example, North Carolina was 

originally allocated $145 million, but, through December 2012, had only 

spent about $26 million due primarily to lower than expected enrollment. 

Thus, officials said that CCIIO reallocated money originally intended for 

these states to the states that were exceeding their expenditure 

projections.
 

Page 15 GAO-13-391 ERRP and PCIP Enrollment and Spending

According to CMS, PCIP spending is likely to approach the $5 billion 

appropriation in 2013. In June 2012, CMS’s OACT released a projection 

of PCIP spending, and reported the entire $5 billion in funding would be 

used “through 2013.” When asked for more specifics, OACT officials told 

us that this projection was not intended to produce a point-in-time 

estimate for when the program would run out of money, but rather 

represents their expectation that the entire $5 billion appropriation would 

be needed to pay for care provided through 2013. Officials also said that 

their projection was informed by historical enrollment, cost, and utilization 

data, as well as discussions with CCIIO staff about program experience. 

Officials noted that the historical data they used were through February 

2012—the most recent program data available at that time.

CCIIO officials similarly told us that they anticipate total PCIP spending 

will be close to $5 billion, and that they are taking program management 

steps—many of which are not yet reflected in the spending data—

intended to ensure that the appropriated funding lasts until the end of 

2013. For example, on behalf of the federally run PCIP, GEHA contracted 

in August 2012 with United Healthcare to access lower provider 

reimbursement rates than those the federally run program had previously. 

While the extent of this rate reduction varies by state, officials said that 

there has been about a 20 percent reduction on average. To further 

reduce rates, GEHA also worked with United Healthcare to approach 

approximately the top 100 hospitals in terms of PCIP utilization to attempt 

to renegotiate federally run PCIP hospital facility fees to the same rate as 

Medicare. According to officials, about one quarter of the hospitals 

approached agreed to the renegotiation. Officials told us that some states 

have similarly approached hospitals to lower reimbursement rates, 

negotiated other discounts with providers, or implemented other cost 

control strategies, such as disease management programs.

More recently, CCIIO instituted benefit changes for the federally run PCIP 

that shifted more costs onto enrollees starting in January 2013. For 

example, it increased enrollees’ out of pocket maximum for in-network 

services from $4,000 to $6,250 and for out-of-network services from 

$7,000 to $10,000.35

 

35In-network services are those offered through a provider that has contracted with the 

PCIP program for reimbursement at a negotiated rate, while out-of-network services are 

those offered through a provider that does not have such a contract.

It also increased enrollee coinsurance from 

20 percent to 30 percent. As another step, CCIIO officials said that 

PCIP Spending Is 

Likely to Approach 

the $5 Billion 

Appropriation in 2013, 

and CCIIO Is Taking 

Steps Intended to 

Ensure Spending 

Does Not Exceed This 

Amount 
 

Page 16 GAO-13-391 ERRP and PCIP Enrollment and Spending

whereas they had previously had annual contracts with states under the 

PCIP program, in 2013, they moved to quarterly contracts that will allow 

them to allocate funding based on each state’s near-term expenditures 

and thus prevent over-obligation of funds. Finally, due to growing 

concerns about the rate of PCIP spending, in February 2013, CCIIO 

suspended PCIP enrollment to ensure the appropriated funding would be 

sufficient to cover claims for current enrollees through the end of the 

program.36 In addition, CCIIO requested that state-run PCIPs institute the 

same benefit changes that were instituted in the federally run program in 

January 2013 by April 1, 2013, or the earliest possible date thereafter for 

all of their enrollees. Officials told us that if spending trends begin to 

indicate that funding will not be used as quickly as they are projecting, 

they could reinstate PCIP enrollment to use remaining funds.37

We provided a draft of this report to HHS for comment. HHS provided 

technical comments, which we incorporated as appropriate.

As agreed with your office, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of Health 

and Human Services and other interested parties. In addition, the report 

will be available at no charge on the GAO website at http://www.gao.gov. 

 

36The enrollment suspension began on February 16, 2013, for the federally run PCIP and 

was required to begin on March 2, 2013, for state-run PCIPs; however, state-run PCIPs 

were allowed to discontinue enrollment prior to March 2, 2013, should they decide to do 

so.

The suspension will not apply to current enrollees who move to a different state and would 

like to reenroll in PCIP within 6 months.

37According to CCIIO officials, while they are not maintaining a wait list, they are keeping 

any applications they receive on file in the event that PCIP enrollment is reinstated. 

Agency Comments
 

Page 17 GAO-13-391 ERRP and PCIP Enrollment and Spending

If you or your staff have any questions about this report, please contact 

me at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made key contributions to this report 

are listed in appendix I.

Sincerely yours,

John E. Dicken

Director, Health Care
Appendix I: GAO Contact and Staff 

Acknowledgments

Page 18 GAO-13-391 ERRP and PCIP Enrollment and Spending

John E. Dicken, (202) 512-7114 or dickenj@gao.gov

In addition to the contact named above, Randy DiRosa, Assistant 

Director; George Bogart; Laura Brogan; Richard Krashevski; Yesook 

Merrill; Laurie Pachter; and Rachel Svoboda made key contributions to 

this report.

Appendix I: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 
Related GAO Products

Page 19 GAO-13-391 ERRP and PCIP Enrollment and Spending

Pre-Existing Condition Insurance Plan: Comparison of Implementation 

and Early Enrollment with the Children’s Health Insurance Program. 

GAO-12-62R. Washington, D.C.: November 10, 2011.

Private Health Insurance: Implementation of the Early Retiree 

Reinsurance Program. GAO-11-875R. Washington, D.C.: September 30, 

2011.

Pre-Existing Condition Insurance Plans: Program Features, Early 

Enrollment and Spending Trends, and Federal Oversight Activities. 

GAO-11-662. Washington, D.C.: July 27, 2011.

Related GAO Products

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