PATIENT 

PROTECTION AND 

AFFORDABLE CARE 

ACT

HHS’s Process for 

Awarding and 

Overseeing Exchange 

and Rate Review 

Grants to States

Report to Congressional Requesters

May 2013

GAO-13-543

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-543, a report to 

congressional requesters

May 2013

PATIENT PROTECTION AND AFFORDABLE 

CARE ACT

HHS’s Process for Awarding and Overseeing 

Exchange and Rate Review Grants to States

Why GAO Did This Study

PPACA required the establishment of 

health insurance exchanges and a 

process for the annual review of 

unreasonable increases in insurance 

premiums charged by issuers of health 

coverage in each state. To assist 

states in establishing exchanges and in 

enhancing their ability to review 

issuers’ premium rate increases, the 

law established new grant programs 

under which HHS is authorized to 

award grants to states through 2014. 

The law appropriated an unspecified 

amount of funds for exchange grants, 

and appropriated $250 million to HHS 

for rate review grants. GAO was asked 

to provide information on HHS’s 

processes to award and oversee these 

grants. In this report, GAO describes 

(1) the process HHS uses to award 

exchange and rate review grants to 

states; (2) the amounts of grants and 

key activities states funded through the 

grants; and (3) HHS’s process for 

overseeing states’ use of the grants.

GAO reviewed laws, regulations, and 

HHS’s procedures that established the 

processes for awarding the grants. 

GAO obtained and analyzed data on 

all exchange and rate review grants 

awarded from August 2010 through 

March 2013. GAO also reviewed 

HHS’s procedures for overseeing the 

grants, and interviewed officials 

responsible for grants oversight. HHS 

provided technical comments on a 

draft of this report, which GAO 

incorporated as appropriate. 

What GAO Found

The Department of Health and Human Services (HHS) has a structured process 

for awarding Patient Protection and Affordable Care Act (PPACA) exchange and 

rate review grants to states. These grants are designed to help states establish 

exchanges—new health insurance marketplaces through which individuals and 

small businesses can obtain insurance—and review issuers’ proposed rate 

increases. The grant award process consists of a series of steps during which 

the agency solicits, screens, and evaluates grant applications, and then makes 

funding awards. Once HHS deems that applications meet program eligibility 

criteria, applications go through various reviews, including a review by 

independent experts and HHS officials. On the basis of these reviews, HHS 

determines whether states’ proposed activities are allowable, and if so, whether 

the associated requests for grant funding are reasonable. Based on 

recommendations from the reviews, HHS determines whether to award grants to 

states, and if so, the amounts of any grants to be awarded.

As of March 27, 2013, HHS had awarded about $3.8 billion in PPACA exchange 

and rate review grants that states have used or plan to use to develop 

exchanges and enhance rate review capabilities. This includes nearly $3.7 billion 

in exchange grants awarded to 49 states and the District of Columbia. Among 

states that have received exchange grants, the amount of funding provided to 

states ranges from $0.8 million (Wyoming) to about $911 million (California). 

Approximately half the states were awarded under $30 million in exchange grant 

funding, while 10 states were awarded over $100 million. As of February 2013, 

states had drawn down approximately $380 million of their exchange grant funds. 

GAO’s review of a subset of exchange grantee financial reports indicated that 

nearly 80 percent of expenditures have been for contracts and consulting 

services, much of which states spent on key activities for developing exchange 

information technology systems. HHS also awarded about $159 million in rate 

review grants to 46 states and the District of Columbia, much of which has 

funded five key activities, including expanding the scope of rate review programs 

and enhancing the transparency of the rate review process.

HHS’s process for overseeing states’ use of PPACA grant funds consists of 

several mechanisms. The agency regularly monitors states’ grant activities 

though its review of program and financial information reported by states, as well 

as ongoing communication with grantees. HHS’s process also includes 

mechanisms to periodically verify state-reported information, including its 

analysis of states’ withdrawal of grant funds and site visits. To date, however, 

use of site visits has been limited. HHS has a number of mechanisms it can 

utilize, such as restricting a grantee’s access to funds, if its monitoring identifies 

concerns or compliance issues, but agency officials indicated they have not 

identified any misuse of grant funds or compliance issues to date. 

View GAO-13-543. For more information, 

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

dickenj@gao.gov.
Page i GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Letter 1 

Background 4

HHS Follows a Multistep Process to Award PPACA Exchange and 

Rate Review Grants to States 11

HHS Has Awarded about $3.8 Billion in PPACA Exchange and Rate 

Review Grants, Which States Are Using for Activities Related to 

Exchanges and to Enhance Rate Review Capabilities 20

HHS’s Process for Overseeing PPACA Exchange and Rate Review 

Grants Consists of Several Key Mechanisms 28

Agency Comments 35

Appendix I Overview of PPACA Exchange and Rate Review Grants 

to States 36

Appendix II PPACA Exchange Grant Types Awarded by State as of 

March 27, 2013 38

Appendix III Projected Exchange Type and PPACA Exchange Grant 

Funding Awarded, Drawn Down, and Returned by State 39

Appendix IV PPACA Rate Review Grant Funding Awarded, Drawn Down, 

and Returned by State 41

Appendix V GAO Contact and Staff Acknowledgments 43

Tables

Table 1: Key Eligibility Criteria for PPACA Exchange and Rate 

Review Grants 13

Table 2: Objective Review Rating System for PPACA Exchange 

Establishment Grants 15

Table 3: Total PPACA Exchange Grants Awarded to States as of 

March 27, 2013 21

Contents 
Page ii GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Table 4: Total PPACA Rate Review Grants Awarded to States as of 

March 27, 2013 25

Table 5: The Center for Consumer Information and Insurance 

Oversight’s (CCIIO) Mechanisms for Overseeing PPACA 

Exchange and Rate Review Grantees 28

Table 6: Listing of Routine PPACA Exchange and Rate Review 

Grantee-Initiated Postaward Action Requests 34

Figures

Figure 1: Federal Grant Life Cycle 10

Figure 2: Range of PPACA Exchange Grants Awarded by State as 

of March 27, 2013 22

Figure 3: Proportion of States’ PPACA Establishment Grant 

Expenditures, by Budget Category 24

Figure 4: States Reporting Taking Certain Actions with PPACA 

Rate Review Grant Funds as of February 2013 27

Figure 5: Five Tiers of Center for Consumer Information and 

Insurance Oversight (CCIIO) Responses to PPACA 

Exchange and Rate Review Grantee Noncompliance 33

Abbreviations

CCIIO Center for Consumer Information and Insurance Oversight

CMS Centers for Medicare & Medicaid Services

FOA funding opportunity announcement

HHS Department of Health and Human Services

IT information technology

OAGM Office of Acquisition and Grants Management

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 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately.
Page 1 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

441 G St. N.W.

Washington, DC 20548

May 31, 2013

The Honorable Lamar Alexander

Ranking Member

Committee on Health, Education, Labor, and Pensions

United States Senate

The Honorable Michael B. Enzi

Ranking Member

Subcommittee on Children and Families

Committee on Health, Education, Labor, and Pensions

United States Senate

The Patient Protection and Affordable Care Act (PPACA),1

To assist states both in preparing to set up health insurance exchanges 

and in enhancing their ability to review issuers’ premium rate increases, 

PPACA established new grant programs under which HHS is authorized 

enacted in 

March 2010, contains a number of provisions that may influence the 

availability and affordability of health insurance coverage. A central 

provision of the law requires the establishment of health insurance 

exchanges, referred to as “exchanges,” in each state, through which 

qualified individuals and small employers can compare, select, and 

purchase health coverage from participating issuers. If a state chooses 

not to establish and operate an exchange, PPACA requires the federal 

government to do so. Under PPACA, states and the federal government 

must establish exchanges by January 1, 2014. PPACA also emphasized 

a need to increase the scrutiny of premium rates—actuarial estimates of 

the cost of providing coverage over a period to policyholders and 

enrollees in a health plan. In doing so, PPACA requires the Secretary of 

Health and Human Services to work with states to establish a process for 

the annual review of unreasonable insurance premium increases (“rate 

review”). PPACA directed the Department of Health and Human Services 

(HHS) and the states to implement the rate review process for the plan 

year beginning in 2010. If a state is unable to implement an adequate rate 

review process, HHS will review issuers’ proposed increases.

 

1

Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and 

Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (2010)

(hereafter, “PPACA”). 

 
 

Page 2 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

to award multiple grants to states through 2014. PPACA appropriated an 

unspecified amount to HHS for exchange grants, and appropriated 

$250 million for rate review grants. HHS began awarding these grants in 

2010, and plans to award grants through 2014.

In light of the significant federal dollars available for award through 

exchange and rate review grants, you asked that we examine how HHS 

awards and oversees the grants, as well as how states have used the 

funding. In this report, we describe

1. the process HHS uses to award exchange and rate review grants to 

states;

2. the amounts of exchange and rate review grants awarded by HHS, 

and the key activities states have funded through these grants; and

3. HHS’s process for overseeing states’ use of these grants, and the key 

mechanisms it uses to ensure that states are using the funds in 

accordance with program goals and requirements.

To describe HHS’s exchange and rate review grant awarding process, we 

reviewed relevant portions of PPACA, HHS’s Grants Policy Statement,2

and other federal regulations and guidance that are relevant to the grantawarding processes. We also interviewed officials from HHS’s Center for 

Consumer Information and Insurance Oversight (CCIIO)3

 

2

HHS’s Grants Policy Statement provides information on the terms and conditions of HHS 

discretionary grant and cooperative agreement awards. Among other things, it specifies 

recipient and HHS staff responsibilities; outlines the grant application and review 

processes; and explains the various resources available to those interested in the HHS 

grants process.

and reviewed 

supporting grant program documentation focusing on the agency’s award 

processes. In doing so, we identified the officials, guidance, 

documentation, and other outputs that corresponded to each key activity 

involved in CCIIO’s grant award process. We reviewed key documents, 

including HHS-issued funding opportunity announcements (FOA), which 

provided applicants with information about grants for each program, and 

CCIIO’s standard operating procedures for awarding grants.

3

Within HHS’s Center for Medicare & Medicaid Services (CMS), CCIIO officials are 

responsible for administering and overseeing the exchange and rate review grant 

programs.
 

Page 3 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

To describe the amounts of exchange and rate review grants CCIIO has 

awarded, as well as key activities states funded with the grants, we 

analyzed information provided by CCIIO. We obtained data from CCIIO 

on all grant applications and grants awarded to states from August 2010 

through March 27, 2013.4

• the total amount of funding awarded for exchange and rate review 

grants;

This information represented the universe of all 

applications submitted and HHS grants awarded at the time of our 

request. We conducted various analyses, and produced information 

including

• for each state, the types and amounts of grant funding originally 

requested, and amounts HHS awarded; and

• the types and amount of grant funding that states have returned to 

HHS.

To assess the reliability of this information, we asked officials responsible 

for entering and reviewing the grants information a series of questions 

about the data, including questions about actions they take to ensure the 

data are accurate and reliable. We also conducted electronic checks to 

determine if there were any outliers and other obvious errors in the data.

On the basis of CCIIO officials’ answers to our questions, and results of 

our checks, we determined that the grants data were sufficiently reliable 

for the purpose of our review.

We also obtained from CCIIO information about key activities that states 

funded with their grants. For exchange grants, we reviewed financial 

reports that states submitted to CCIIO that highlighted expenditures 

across key budget categories. For rate review grants, we reviewed CCIIO 

summaries of state-reported information on actions they have taken or 

plan to take with the various grants. We analyzed the summaries and 

identified key categories of actions states have generally pursued with the 

grant funding. To assess the reliability of the financial reports, we 

obtained and reviewed instructions CCIIO provided to states for reporting 

this information and we conducted electronic checks to determine if there 

were outliers or other obvious errors in the data. On the basis of our 

 

4

In this report, we use the term “states” to refer to the 50 states and the District of 

Columbia, unless otherwise indicated.
 

Page 4 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

review, we determined that information contained in the reports was 

sufficiently reliable for the purpose of our review.

To describe HHS’s oversight process and key mechanisms, we analyzed 

several key documents. These included HHS’s Grants Policy Statement; 

standard operating procedures for the oversight of exchange and rate 

review grants; sample progress and financial reports prepared by states 

and submitted to CCIIO; and routine programmatic monitoring tools that 

CCIIO officials use to track the status of grants, including monthly 

summaries of grantee progress, regular analyses of progress reports, and 

regular financial reports. We also interviewed CCIIO officials responsible 

for the day-to-day oversight of the grants, including those responsible for 

monitoring and summarizing grantees’ progress in meeting grant program 

goals and requirements.

As part of our review, we identified key mechanisms and internal controls 

that HHS uses when evaluating grant applications and overseeing states’ 

use of grant funds. We did not, however, evaluate HHS’s internal controls 

for awarding and overseeing grants, nor did we assess the effectiveness 

of HHS’s processes, as such an assessment was beyond the scope of 

this review.

We conducted this performance audit from October 2012 to May 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.

PPACA includes provisions that are designed to make health insurance 

more accessible and affordable for millions of Americans. These include 

provisions for establishing health insurance exchanges in each state, and 

enhancing processes for the annual review of health insurance premiums. 

To facilitate these activities, PPACA created new responsibilities for 

states and the federal government, and provided financial resources to 

states in the form of federal grant funding. 

Background 
 

Page 5 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

PPACA mandated the establishment of exchanges—new health 

insurance marketplaces in each state through which qualified individuals 

and small businesses can compare, select, and purchase standardized 

health coverage from among participating issuers of health coverage. 

These exchanges must begin enrolling consumers by October 1, 2013, 

into coverage that begins January 1, 2014. Core exchange functions 

include determining eligibility and enrolling individuals, plan management 

(certifying qualified health plans), consumer assistance and outreach, and 

developing the necessary information technology (IT) infrastructure to 

support the exchange. These exchanges may be established and 

operated by a state itself as a “state-based exchange.” Such states must 

also establish a governing board and standards of conduct. Where a state 

is unable or unwilling to establish and operate an exchange, PPACA 

directs HHS to establish an exchange—referred to by HHS as a “federally 

facilitated exchange.” States in which a federally facilitated exchange will 

operate may also enter into arrangements with HHS to assist it with

certain of the exchange’s plan management or consumer assistance 

functions. HHS refers to such exchanges as “partnership exchanges.”5 As 

of March 2013, HHS indicates that 18 states will establish their own statebased exchanges and 33 will have a federally facilitated exchange, of 

which 7 states are planning to have a partnership exchange.6

 

5

PPACA requires states to establish exchanges by January 1, 2014. PPACA, § 1311(b), 

124 Stat. at 173. The Secretary of Health and Human Services must establish and 

operate an exchange in states that do not elect to operate an exchange or in states where 

the Secretary determines, by January 1, 2013, that a state has failed to take actions 

necessary to establish an exchange. PPACA, § 1321(c), 124 Stat. at 186. Through 

subsequent guidance, HHS has identified options for states to assist HHS with certain 

functions when it establishes and operates a federally facilitated exchange.

6

States choosing to establish state-based exchanges in 2014 were required to submit 

applications to HHS by December 14, 2012. Out of the 19 states that submitted 

applications by this date, HHS conditionally approved 18, with final approval pending the 

states' successful completion of key milestones. The remaining state, Mississippi, was not 

approved to establish a state-based exchange, in part because its governor opposed the 

establishment of an exchange. Similarly, states choosing to participate in partnership 

exchanges in 2014 were required to submit applications to HHS by February 15, 2013. 

HHS conditionally approved all 7 states that submitted applications by this date to 

participate in partnership exchanges in 2014. Additionally, HHS told us that 7 other states 

in which a federally facilitated exchange will operate have formally notified HHS that they 

will be assisting it in carrying out certain plan management functions in-state, and thus in 

this manner will be partnering with the federal government. However, for the purposes of 

this report, we refer to partnership states as only those that have been conditionally 

approved as such.

Health Insurance 

Exchanges and Related 

Grants
 

Page 6 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

To assist states in developing exchanges, PPACA authorized HHS to 

award grants to states for the planning and establishment of insurance 

exchanges. PPACA did not provide a specific amount of exchange grant 

funding, but rather, appropriated to HHS, out of any moneys in the 

Treasury not otherwise appropriated, an amount necessary to make grant 

awards. In doing so, it directed HHS to determine the total amount of 

funding that it will make available to each state for each fiscal year.

PPACA authorized HHS to award grants to states through December 

2014, and, on the basis of this authority, HHS established four separate 

programs for awarding exchange grants to states:7

• Planning Grants: Provided states with resources to conduct the initial 

research and planning needed to build an exchange and determine 

how it will be operated and governed. Once awarded, the grant funds 

were available for 1 year, and a state could only receive one grant.8

• Early Innovator Grants: Provided funding to a state or group of 

states that were early leaders in building their exchanges to design 

and implement the IT infrastructure needed to operate the exchanges. 

All exchange IT components, including software and data models, 

developed with these grants could be adopted and modified by other 

states to fit their specific needs. Once awarded, the grant funds were 

available for 2 years, and a state or group of states could only receive 

one grant.9

• Establishment Grants (Level 1): Provide funding to states pursuing 

any exchange model. Funding is designed to help states undertake

additional exchange establishment activities, such as making 

legislative/regulatory changes, establishing IT systems, and 

consulting with key stakeholders. Once awarded, the grant funds are 

available for 1 year, and a state may apply for multiple grants.

 

7

Early Innovator and Establishment program funds were awarded in the form of 

cooperative agreements, which are a form of financial assistance similar to grants, but 

where the federal agency is more involved with the recipient in implementing the program. 

However, for the purposes of this report, we refer to all forms of financial assistance 

including these cooperative agreements as grants.

8

Exchange Planning grants were awarded to states in 2010 and 2011, and, according to 

CCIIO officials, are no longer being awarded.

9

Early Innovator grants were awarded to states in 2011, and, according to CCIIO officials, 

are no longer being awarded.
 

Page 7 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

• Establishment Grants (Level 2): Provide funding to states that have 

legal authority to implement an exchange and are further along in 

exchange development and pursuing a state-based exchange. 

Funding is designed to help states develop all exchange activities, 

including consumer and stakeholder engagement and support, 

eligibility and enrollment, plan management, and technology. Once 

awarded, the grant funds are available for up to 3 years, and a state 

can only receive one grant.

Health insurance premium rates are generally established on the basis of 

actuarial estimates of the cost of providing coverage over a period to 

enrollees in a private health insurance plan. Insurance issuers generally 

submit these rates to states as a formula that describes how to calculate 

a premium for each person or family covered on the basis of factors such 

as age, gender, and geographic location. Individual states are primarily 

responsible for ensuring that the rates within their state are reasonable—

that is, adequate, not excessive, reasonable in relation to benefits 

provided, and not unfairly discriminatory—and they do so by establishing 

standards and defining state insurance departments’ authority to help 

enforce them. Most states require carriers to submit rate filings to state 

insurance departments for review prior to implementation of new rates or 

rate changes, although the authority of the departments to approve or 

disapprove the filings can vary by state. Some state insurance 

departments have the authority to approve or disapprove rate filings 

before they go into effect, while others do not have any authority to 

approve or disapprove rate filings.

Oversight of premium rates charged by insurance issuers historically has 

been primarily a state responsibility; however, PPACA established a role 

for HHS by requiring the Secretary of Health and Human Services to work 

with states to establish a process for the annual review of unreasonable 

premium increases in the individual and small group insurance markets. 

HHS has since issued regulations that established a threshold for 

determining whether rate increases proposed by insurance issuers 

require review, and requiring insurance issuers to report information to 

Premium Rate Review and 

Related Grants
 

Page 8 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

HHS on proposed rate increases.10 The regulations also establish criteria 

and a process by which HHS will determine whether a state has an 

effective rate review program and thus meets HHS’s standards for 

conducting the rate reviews. Under the regulations, an effective rate 

review program must, among other things, utilize sufficient data and 

documentation concerning rate increases to conduct an examination of 

the reasonableness of the proposed increases, and make a determination 

of the reasonableness of the rate increase under a standard set forth in 

state statute or regulation. If HHS determines that a state does not have 

an effective rate review program, then HHS will conduct the rate reviews.

As of April 2013, HHS has determined that all but nine states have an 

effective rate review program for both the individual and small group 

insurance market.11

To assist states in reviewing premium rates, PPACA also established a 

5-year premium rate review grant program beginning in 2010. PPACA 

appropriated $250 million for HHS to award grants to states from fiscal 

years 2010 through 2014.12

• Cycle I: Provided states with assistance to enhance their rate review 

processes—for example, by ensuring that increases in health 

insurance premiums and rate filings are thoroughly evaluated and, to 

the extent permitted by law, approved or disapproved through a 

On the basis of this authority, HHS 

established two separate rate review grant programs:

 

10Regulations finalized on May 23, 2011, established a 10 percent threshold, meaning 

proposed rate increases of 10 percent or more require review. Alternatively, states may 

propose state-specific thresholds for review and approval by HHS. See 45 C.F.R. 

§ 154.200. Under a final regulation issued on February 27, 2013, insurance issuers will be 

required to report to HHS all proposed rate increases, although, only proposed rate 

increases meeting the applicable threshold will require review. See 78 Fed. Reg. 13406, 

13440 (Feb. 27, 2013) (to be codified at 45 C.F.R. § 154.215).

11HHS determined that Alabama, Louisiana, Missouri, Montana, Oklahoma, Texas, and 

Wyoming did not have an effective rate review program in either market. HHS also 

determined that Arizona did not have an effective program in the small group market, and 

Virginia did not have an effective rate review program in the small group and HMO 

individual market.

12Funds appropriated that are not fully obligated under rate review grants by the end of 

fiscal year 2014 remain available to the Secretary for grants to states for planning and 

implementing insurance reforms and consumer protections enacted under PPACA. 

PPACA 1003, 124 Stat. at 139 (amending section 2794(c)(2)(B) of the Public Health 

Service Act).
 

Page 9 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

comprehensive rate review process. Once awarded, grant funds were 

available for 1 year, and a state could only receive one grant.13

• Cycle II: Further assists states in improving and enhancing their rate 

review and reporting processes, and for meeting requirements of an 

effective rate review program. Once awarded, grant funds are 

available for up to 3 years depending on the date they are awarded, 

and a state may be able to receive more than one grant.14 (See app. I 

for further details on these grant types as well as the four types of 

establishment grants.)

Federal competitive grants generally follow a life cycle that includes four 

stages and several activities within each stage, as seen in figure 1.

 

13Cycle I grants were awarded to states in 2010. According to CCIIO officials, these grants 

are no longer being awarded.

14According to CCIIO, a state can apply for a second Cycle II award if it has drawn down 

at least 60 percent of previously awarded rate review Cycle II grant funds as of August 1, 

2013, and if funding is available after all eligible and qualified applications are considered 

for an initial Cycle II award. Also, California is eligible for multiple awards because it has 

two regulatory agencies that are each primarily responsible for regulating a portion of the 

private health insurance market.

Award and Oversight of 

Federal Grants
 

Page 10 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Figure 1: Federal Grant Life Cycle

The grant process begins with the preaward stage, when the public is 

notified of the grant opportunity through a funding announcement, and 

potential grantees must submit applications for agency review. In the 

award stage, the agency identifies successful applicants and awards 

funding. The implementation stage includes grantees drawing down 

funds, agency monitoring, and grantee reporting, which may include 

financial and performance information. The closeout stage includes 

preparation of final reports, financial reconciliation, and any required 

accounting for property. Audits may occur multiple times during the life 

cycle of the grant and after closeout.

In CCIIO, officials, known as state or project officers, are assigned to 

specific grants, and are responsible for managing and overseeing the life 

cycle of grants. This includes reviewing grant applications and evaluating 

whether the projects funded by the grants are on schedule and meeting 

goals. For exchange grants, 17 CCIIO employees work as state officers, 
 

Page 11 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

and for rate review grants, 2 CCIIO employees work as project officers. 

These state or project officers also work with grants management officials 

from CMS’s Office of Acquisition and Grants Management (OAGM) to 

oversee the financial and regulatory aspects of the grants.15

HHS’s process to award PPACA exchange and rate review grants to 

states involves soliciting, screening, and evaluating applications and 

making official grant awards. The steps include the announcement of 

grant opportunities; states’ preparation and submission of applications; 

application eligibility determinations; objective reviewers’ evaluation of 

applications; HHS officials’ evaluation of applications and corresponding 

follow-up, or budget negotiations, with states; final grant 

recommendations to HHS leadership; and final award decisions and 

issuance of official awards.

CCIIO project officers, in collaboration with other HHS officials, review 

statutory requirements as well as federal regulations to develop an FOA 

to solicit applications for each exchange and rate review grant type. The 

FOA contains key items a state needs to review and understand prior to 

submitting an application. These include the program eligibility criteria, 

the amount of funding available for award, the types of activities that may 

be funded under the grants, the instructions for completing applications, 

and the process and criteria for evaluating applications. Once completed, 

the FOA is posted on the HHS website and Grants.gov, a website run by 

the federal government through which states and other entities can find 

and apply for federal grants. After posting the FOA, CCIIO project officers 

may conduct a conference call to provide guidance to interested states on 

items such as the grant review criteria, instructions on preparing project 

budget proposals, and other application procedures. Information on this 

call is provided in the FOA, and a transcript and recording of the call may 

be posted afterward on the HHS website.

 

15We refer to both state and project officers as project officers throughout the remainder of 

this report.

HHS Follows a 

Multistep Process to 

Award PPACA 

Exchange and Rate 

Review Grants to 

States 

Announcement and 

Assistance 
 

Page 12 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

States must prepare and submit application materials to HHS through 

Grants.gov, as outlined in the FOA. The application must include the 

amount of federal grant funding being requested, as well as other 

materials including various federal forms; letters of support from the 

governor or other applicable state entities, or both; a project narrative; a 

work plan that contains milestones and time frames; a proposed budget 

that provides line-item costs for various categories of activities to be 

performed using grant funding; and an organizational chart of key state 

personnel.

Upon receiving applications, CCIIO project officers and OAGM officials 

conduct an initial eligibility check for all grant applications by screening 

them on the basis of specific eligibility criteria described in the FOA and 

ensuring that they contain all required documents as described above. 

The eligibility criteria vary depending on the type of exchange or rate 

review grant being awarded. Table 1 below outlines the key eligibility 

criteria for each type of exchange and rate review grant. As the table 

shows, the eligibility criteria for Level 2 exchange Establishment grants 

and Cycle II rate review grants require greater commitments from states 

as compared to the criteria for other grants—for example, to receive 

Level 2 Establishment grants, states must commit to establishing a statebased exchange and complete specified steps associated with doing so, 

such as obtaining the necessary legal authority to establish and operate 

the exchange.16 To receive Cycle II grants, states must commit to 

developing effective rate review programs that meet HHS requirements.

 

16According to CCIIO officials, states may establish this authority by means of legislative 

action or executive order.

Application Preparation 

and Submission

Eligibility Determinations
 

Page 13 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Table 1: Key Eligibility Criteria for PPACA Exchange and Rate Review Grants 

Grant type

Eligibility criteria

Planning 

(Exchange)

Early 

Innovator 

(Exchange)

Level 1 

Establishment 

(Exchange)

Level 2 

Establishment 

(Exchange)

Cycle I 

(Rate Review)

Cycle II 

(Rate Review)

Commitment to assess whether 

the state will establish a statebased exchange

● ○ ○ ○ n/a n/a

Commitment to use grant 

funding for activities associated 

with the state’s exchange model

○ ● ● ● n/a n/a

Commitment to establishing a 

state-based exchangea ○ ● ○ ● n/a n/a

Completion of several steps 

associated with establishing a 

state-based exchange, including 

obtaining the necessary legal 

authority to establish and 

operate the exchangeb

○ ○ ○ ● n/a n/a

Commitment to developing or 

enhancing the state’s rate 

review program

n/a n/a n/a n/a ● ●

Commitment to developing an 

effective rate review program 

per HHS regulationsc

n/a n/a n/a n/a ○ ●

Source: GAO analysis of HHS information.

Legend:

○ Not required

● Required

n/a = Not applicable.

a

In its initial Establishment grant FOA issued in January 2011, HHS did not indicate that states in 

which a partnership or federally facilitated exchange will operate may receive Level 1 grant funds. 

However, in updated FOAs issued in 2012, the agency indicated that states in which a partnership or 

federally facilitated exchange will operate may receive Level 1 funding for certain activities depending 

on the exchange type.

b

Steps that states must complete to be eligible for Level 2 Establishment grants include the following: 

(1) states must have the necessary legal authority to establish and operate a state-based exchange 

that complies with existing federal requirements, (2) states must have established a governance 

structure for the exchange, and (3) states must submit an initial plan discussing long-term operational 

costs of the exchange.

c

To be eligible, states that at the time of application do not have effective rate review programs in 

their individual or small group health insurance markets, or both, must commit to using grant funds to 

develop effective programs within 12 months of receiving the grant. In addition, states that at the time 

of application meet the effective rate review program requirements as defined by HHS regulations 

must commit to using grant funds to further enhance their rate review programs.
 

Page 14 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Once applications are deemed eligible, a panel of independent subjectmatter experts meets to discuss the applications’ strengths and 

weaknesses and evaluate whether they meet grant program 

requirements. These reviewers are recruited by CCIIO project officers, 

who ensure that the reviewers are unaffiliated with the exchange and rate 

review programs but have experience in a wide range of relevant fields 

and together possess the subject-matter expertise needed to review the 

applications.17

Once reviewers are selected, project officers provide them with 

instructions on the process and guidance on the relevant FOA and 

statute. In addition, OAGM officials indicated that they advise the 

reviewers on the proper procedures to follow in conducting their review. 

To then evaluate applications, the objective reviewers use various 

methods depending on grant type:

For example, according to CCIIO officials, panels for 

exchange grant application cycles always contain reviewers with 

IT-related expertise, due to the significant role IT plays in exchange 

establishment. CCIIO project officers assign three reviewers to each 

application, but the total number of reviewers within a panel depends on 

the number of submitted applications and may therefore vary between 

application cycles.

• For most exchange grants, reviewers rely on a scoring system 

outlined in the applicable FOA to assess the strengths and 

weaknesses of various sections of an application.18

 

17Reviewers are not permitted to have conflicts of interest and must complete a form 

certifying their lack of conflicts of interest prior to the start of the panel.

These application 

sections are attached to specified review criteria and point ranges, 

with a maximum total score of 100 points. For example, the project 

narrative portion of a state’s Establishment grant application can be 

awarded up to 55 points, depending on factors such as the extent to 

which the state clearly describes how its progress toward exchange 

establishment to date has informed its current grant proposal (see 

table 2 below). The reviewers document their proposed total score for 

18All Early Innovator and Establishment grant applications were (and, in the case of 

Establishment grants, continue to be) reviewed using a scoring system. However, 

Planning grant applications were not scored; rather, reviewers determined whether 

applications addressed nine specified topics related to planning for the development and 

implementation of an exchange. These topics were described in the FOA and included 

background research, stakeholder involvement, and technical infrastructure.

Objective Review
 

Page 15 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

each assigned application as well as their assessments of the 

applications’ strengths and weaknesses.

Table 2: Objective Review Rating System for PPACA Exchange Establishment Grants

Application section Rating criteria

Maximum 

score, in points

Project narrative Rated on the basis of the extent to which a state described and quantified progress 

made on exchange establishment; described how establishment progress to date has 

informed the current grant proposal; addressed program requirements as described in 

the funding opportunity announcement; provided a clear understanding of proposed 

activities to be funded under the grant; demonstrated alignment with the proposed 

budget and other sections of the application; and provided other items related to 

exchange establishment such as a high-level strategic plan for fulfilling required 

exchange establishment activities.

55

Work plan Rated on the basis of the extent to which a state addressed key exchange establishment 

activities laid out in the funding opportunity announcement; provided reasonable, 

complete milestones and associated time frames; provided details regarding the plan to 

accomplish each milestone; and distinguished activities in the current proposal from 

activities funded under previously awarded exchange grants.

25

Budget narrative Rated on the basis of the extent to which a state provided a complete, reasonable 

budget that where possible illustrates funding needed on a quarterly basis; included only 

costs for activities integral to exchange establishment and consistent with PPACA 

requirements and HHS guidance; and included a description of the state’s capacity to 

manage multiple funding streams from various grants.

20

Total possible score 100

Source: GAO analysis of HHS information.

• For rate review grants, reviewers do not utilize a scoring system. 

Rather, to assess the strengths and weaknesses of applications and 

determine whether they meet requirements, objective reviewers use a 

CCIIO-provided checklist that lists the requirements of the grant 

program. The reviewers discuss the applications and make 

recommendations as to whether the applications are strong enough to 

be funded or contain weaknesses that must be addressed prior to 

awarding the grant.19

 

19If an application contains significant weaknesses, objective reviewers can recommend 

that the rate review grant request be deferred or denied. According to HHS officials, as of 

May 17, 2013, objective reviewers have recommended deferrals of consideration of a 

state application on four occasions. Two states were able to address the reviewers' 

concerns during budget negotiations, or follow-up discussions with CMS officials, and thus 

were awarded grants; the third state also was awarded the grant but had the portion of its 

funding related to the item of concern restricted. The remaining state withdrew its 

application voluntarily.
 

Page 16 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

CCIIO project officers and OAGM officials sit on the panel meetings but 

do not participate; rather, their role is to document decisions made during 

the meetings. For example, where applicable, the officials prepare a 

rank-order list, or a list of applicants ranked by objective review score. 

The officials also prepare summaries of each application’s strengths and 

weaknesses as discussed during the review panel (including objective 

review scores, where applicable), as well as summaries of 

recommendations stemming from the reviewers’ analysis of rate review 

grant applications. These summaries serve as official documentation of 

the objective review process.

Drawing from the results of the specific objective review, CCIIO, OAGM, 

and other CMS officials evaluate states’ individual exchange or rate 

review grant applications, including budget proposals, and where 

necessary conduct follow-up discussions with states to help determine 

the amount of grant funding to award. Specifically, these processes, 

known respectively as internal reviews and budget negotiations, consist 

of the following:

• Internal Reviews: CCIIO project officers review states’ applications, 

noting where they have any questions or concerns. In addition, OAGM 

officials specifically review states’ budget proposals to determine 

whether proposed activities are allowable and consistent with laws 

and regulations, and, if so, whether their associated costs are 

necessary and reasonable.20

 

20According to OAGM officials, as part of their internal review they also review past audits 

of grantees to verify prior audit findings; as well as any information regarding entities 

debarred, suspended, proposed for debarment, excluded or disqualified under the 

nonprocurement common rule, or otherwise declared ineligible from receiving federal 

contracts, certain subcontracts, and certain federal assistance and benefits.

To do so, officials rely in part on 

requirements regarding allowable and prohibited uses of funding as 

laid out in the relevant FOA. For example, the FOA for exchange 

Establishment grants differentiates between activities that states may 

perform using Level 1 Establishment grant funding for state-based or 

Internal Reviews and 

Budget Negotiations
 

Page 17 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

federally facilitated exchanges, including partnership exchanges.

21

• Budget Negotiations: If the officials, on the basis of their review, 

identify any questions or concerns regarding proposed activities or 

costs in an application, they develop a list of questions for the state. In 

developing this list, the officials also draw from results of the objective 

review, including the descriptions of applications’ strengths and 

weaknesses. OAGM officials send the list to the state, and then follow 

up with the state by phone to discuss the questions. The state must 

then send their responses back to OAGM. These negotiations may 

lead states to change their proposed budget in order to address the 

concerns.

Officials may also provide states’ proposals to other specialized staff 

within CMS, including CMS IT experts, who specifically review the 

proposed IT budget and prepare a standardized, detailed analysis of 

the states’ proposed IT costs, and the Office of Communications, 

which reviews state outreach and education proposals. They do this in 

part because the IT and outreach and education line items are

typically the largest part of a state’s exchange grant budget proposal.

22

 

21For example, according to the Establishment grant FOA, states in which the federally 

facilitated exchange will operate may receive Level 1 grant funding for activities such as 

establishing a reinsurance program and coordinating certain plan information from the 

state’s Department of Insurance with the federally facilitated exchange. However, 

according to CCIIO officials, these states may not use Level 1 Establishment grant funding 

for IT and eligibility/enrollment-related activities that are only applicable to states 

establishing state-based exchanges. Level 2 Establishment grant funding is only available 

for states establishing state-based exchanges.

For example, HHS conducted budget negotiations with 

Arkansas regarding the state’s Level 1 grant application reviewed in 

September 2012. These negotiations consisted of 15 questions, 

which, among other items, requested that Arkansas officials specify 

their method of calculating staff travel costs, describe their policies 

and procedures for oversight of contractors, and explain an unusually 

large funding request for office supplies. In response, Arkansas 

officials provided the requested information and decreased their 

budget request by approximately $50,000. Overall, budget 

negotiations on exchange grant applications submitted by December 

2012 have resulted in a net reduction of about $186.1 million, with 

changes ranging from a decrease of about $48.1 million to an 

22Questions or concerns flagged during this review, as well as those identified during the 

objective review, can also help inform HHS officials’ future oversight of states’ use of grant 

funds.
 

Page 18 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

increase of about $9.7 million.23 Budget negotiations on rate review 

grant applications submitted by August 2012 have resulted in a net 

increase of about $8.8 million, with changes ranging from an increase 

of about $3,000 to an increase of about $2.5 million.24

After budget review and negotiations for exchange and rate review grant 

applications have concluded, project officers conduct a final analysis of 

the results of previous reviews and prepare funding recommendation 

memos for HHS leadership. These memos contain summaries of the 

awarding process thus far, including the number of submitted applications 

as well as the original budget request, revised budget request (where 

applicable), and the final recommended award amount for each applicant. 

For example, the August 2011 funding memo describing decisions on 

exchange Establishment grant applications due in June 2011 indicated 

that 14 states applied for Level 1 grants. All applications were deemed 

eligible and thus were recommended to receive awards, with 

recommended funding amounts ranging from about $4.2 million to about 

$39.4 million (due to differences in the states’ proposed activities and 

budgets). The funding memos may also include scores from the objective 

review, where applicable, as well as high-level results from any budget 

negotiations conducted with states.

In addition, according to HHS officials, before final awards are issued, 

CCIIO project officers typically recommend special terms and conditions 

 

23Exchange grant applications’ budget proposals were decreased for reasons such as 

HHS’s assessment that proposed costs in the applications were overestimated. In 

addition, budget proposals were infrequently increased as a result of budget review and 

negotiations. CCIIO officials cited states’ underestimation of costs needed for exchange IT 

systems development and education and outreach as common reasons for such an 

increase.

24CCIIO officials indicated that states often did not prepare budgets in accordance with the 

statutory requirement that states qualifying for a grant must receive at least $1 million in 

rate review grant funds in a given year, and thus underestimated costs. This required 

increases in rate review grant budget proposals and corresponding adjustments to 

application work plans. No rate review grant applications have had their proposed budgets 

reduced.

Final Recommendations
 

Page 19 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

that grantees must meet prior to receiving their full funding amount.25

These recommended terms and conditions are also included in the 

funding memo. For example, funding for contractors performing IT-related 

activities is initially restricted from all exchange Establishment grants until 

certain conditions, such as providing an itemized budget and justification 

for each contract, are met and sufficiently documented. In addition, 

Establishment grant applicants submitting applications that receive scores 

less than 70 during the objective review may have their entire funding 

amount restricted until the applicants meet certain requirements as 

specified by HHS, such as providing an updated work plan or budget 

proposal that more sufficiently meets requirements outlined in the FOA. 

For instance, the August 2011 Establishment grant funding memo 

indicated that 3 out of the 14 states’ applications received scores of less 

than 70, and that 2 of these states were able to address most of their 

application weaknesses during budget negotiations. The remaining state 

was recommended to have its entire funding amount restricted pending 

submission of updated application materials within 60 days of receiving 

the award notice.

HHS leadership reviews the funding memo and provides the final sign-off 

on decisions regarding exchange and rate review grant applications, but 

according to CCIIO officials generally does not deviate from 

recommendations in the memo. The agency issues an official notice of 

grant award to each applicant, outlining the funding amount, project 

period, budget period, applicable terms and conditions, and administrative 

 

25Depending on an application’s weaknesses, project officers can also make 

recommendations for management assessment items, which are recommended actions or 

requests that typically relate to implementation of the grant proposal. For example, the 

project officer may request that a state provide more information within a specified period 

on how it will involve stakeholders in its proposed activities. These issues are not as 

critical as those requiring a condition, and thus are not included in the final award notice 

but are instead sent separately to the state. According to CCIIO officials, each exchange 

grant award is generally associated with one or two management assessment items.

Final Award Decision and 

Issuance 
 

Page 20 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

requirements such as financial and progress reports that grantees must 

submit on a regular basis throughout the course of their grant.26

As of March 27, 2013, HHS had awarded nearly $3.7 billion in exchange 

grants to states, much of which will be used to fund activities related to 

developing IT systems for states’ exchanges. HHS also awarded about 

$159 million in rate review grants to states, which to date has been used 

for five key activities related to enhancing states’ rate review processes, 

including enhancing the transparency of issuers’ rate review filings.

Between September 2010, when exchange grants were first awarded, 

and March 27, 2013, HHS awarded 132 exchange grants totaling nearly

$3.7 billion to 50 states.27

 

26Once awarded, funding is disbursed using the Payment Management System, which is 

an HHS-administered system that provides federal agencies and grant recipients the tools 

to manage grant payments. Grantees have access to and can draw down their 

unrestricted funds from the system on an as-needed basis, but are not able to draw down 

any restricted funds until the awarding agency deems the necessary requirements have 

been met and releases the funds in the system.

These awards included Exchange Planning, 

Early Innovator, and Level 1 and 2 Establishment grants. To date, the 

majority of funding (about $3.4 billion, or 92 percent) has been awarded in 

the form of Level 1 and Level 2 Establishment grants, while Exchange 

Planning grants make up approximately 1 percent of total exchange grant 

funding (see table 3).

27HHS also awarded four approximately $1 million Territory Establishment grants, totaling 

about $4 million, to four U.S. territories in March 2011. These awards were not issued 

under the Exchange Planning, Early Innovator, and Establishment grant FOAs for states, 

but rather were issued under a separate FOA.

HHS Has Awarded 

about $3.8 Billion in 

PPACA Exchange and 

Rate Review Grants, 

Which States Are 

Using for Activities 

Related to Exchanges 

and to Enhance Rate 

Review Capabilities

HHS Awarded nearly

$3.7 Billion in Exchange 

Grants to States, Much of 

Which Will Fund Activities 

Related to Developing 

Information Technology 

Systems
 

Page 21 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Table 3: Total PPACA Exchange Grants Awarded to States as of March 27, 2013

Grant type Number of grants Number of statesa Total funding awarded (dollars in millions)

Percentage of total

funding awarded

Exchange Planningb 50 50 $51 1%

Early Innovatorb 7 7c 262 7 

Level 1 Establishment 63 38 1,373 37

Level 2 Establishment 12 12 2,001 54

Total 132 50d $3,687 100%e

Source: GAO analysis of HHS data.

a

For the purposes of this table, we consider “states” to be the 50 states as well as the District of 

Columbia.

b

According to officials from the Center for Consumer Information and Insurance Oversight (CCIIO), 

Exchange Planning and Early Innovator grants are no longer being awarded.

c

These grants were awarded to 6 states and one 5-state consortium.

d

This total is not the sum of the above numbers because some states were awarded more than one 

type of exchange grant.

e

This total is not the exact sum of the above percentages as displayed in this table due to rounding.

All states except Alaska28

 

28Alaska has not applied for or been awarded an exchange grant.

have been awarded an exchange planning 

grant, and most states have been awarded multiple exchange grants, with 

the most common combination of grants being Exchange Planning and 

Level 1 Establishment grants (see app. II for additional information on the 

types of grants awarded to each state). Due to the variation in the types 

of grants states have applied for and been awarded, as well as the range 

of funding that may be awarded within the same grant type, there is a 

wide range in terms of the total amount of exchange grant funding 

awarded to each state. Specifically, among states that have been 

awarded exchange grants, total funding awarded to date ranges from 

$0.8 million (Wyoming) to about $911 million (California). Approximately 

half the states have been awarded under $30 million in exchange grant 

funding, while 10 states have been awarded over $100 million (see fig. 2).
 

Page 22 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Figure 2: Range of PPACA Exchange Grants Awarded by State as of March 27, 2013

Note: As of March 27, 2013, according to CCIIO, states had “returned” to HHS about 3 percent of the 

grant funding originally awarded for reasons such as a state’s decision not to pursue a state-based 

exchange.
 

Page 23 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Out of the approximately $3.7 billion awarded in exchange grants, the 

majority (about 85 percent) of funding has been awarded to states that as 

of March 7, 2013, have formally declared their intent and have received 

conditional approval from HHS to establish state-based exchanges that 

will be operationally ready for the initial open enrollment period beginning 

October 1, 2013. Conversely, states pursuing partnership exchanges 

have been awarded about 5 percent of the funding, and states in which a 

federally facilitated exchange will operate have been awarded about 

11 percent of the funding. According to CCIIO, however, several states—

largely states in which a federally facilitated exchange will operate—have 

chosen to “return” all or a portion of their grant award. CCIIO officials 

indicated that most of these grant funds were returned by states that 

decided not to undertake the activities for which the grant had been 

awarded, such as those activities states initially planned to undertake in 

order to establish a state-based exchange.29 Of the total amount awarded 

in exchange grants, about 3 percent, or $98.7 million, has been returned 

to HHS; about $96.4 million of this was returned by states in which a 

federally facilitated exchange will operate.30

According to CCIIO, as of February 29, 2013, states had drawn down 

about $380 million of the $3.7 billion in exchange grants awarded 

(approximately 10 percent). Given that exchanges must begin enrolling 

individuals by October 2013, CCIIO officials indicated that most state 

expenditures of exchange grant funds will be occurring in the near future. 

They also indicated that on the basis of their review of states’ exchange 

grant applications and communications with state officials, the majority of 

exchange grant expenditures will be used to develop the IT infrastructure 

required for the exchanges. Additionally, officials said that states 

generally have used or will use funds for other activities including 

developing exchange implementation plans, hiring staff, and undertaking 

outreach with consumers and stakeholders.

For additional detail on the 

amount of exchange grant funding awarded, drawn down, and returned, 

as well as the exchange type by state, see appendix III.

 

29According to CCIIO, a small portion of the returns occurred because grantees completed 

the project funded by the grant and returned the remaining unused portion. 

30Of the approximately $98.7 million returned as of March 27, 2013, 87 percent, or 

approximately $86.1 million, consisted of Early Innovator grant funding. The remainder 

consisted of Exchange Planning and Level 1 Establishment grant funding.
 

Page 24 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

A review of the most recent financial progress report that CCIIO had on 

file for states’ Level 1 and Level 2 Establishment grants provided 

additional information on how states have used their grant funds for key 

activities. The reports provide a listing of state expenditures by eight 

broad budget categories. We found that nearly 80 percent of states’ 

expenditures were in the categories of contracts and consulting services 

for IT and non-IT items. According to CCIIO, these expenditures were 

typically associated with key activities such as developing IT systems for 

the exchanges as well as facilitating exchange management and 

outreach with consumers. The financial progress reports also indicated 

that about 10 percent of Establishment grant expenditures have gone to 

fund state personnel costs. Figure 3 below breaks out the proportion of 

expenditures by each budget category.

Figure 3: Proportion of States’ PPACA Establishment Grant Expenditures, by Budget Category

Notes: Data are from state financial progress reports submitted to HHS. Several categories 

(Personnel, Supplies, Equipment, Contractual, and Consultant) were further divided in the financial 

progress reports into IT and non-IT related expenditures. These expenditures are combined for the 

purposes of this figure.
 

Page 25 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

In March 2013, CCIIO provided us with the most recent financial progress reports it had on file that 

were submitted by states with ongoing Level 1 or Level 2 Establishment grants, or both. Thus, the 

date of expenditure data included in this figure varies between June and December 2012, depending 

on the date of a state’s most recent financial progress report on file at CCIIO.

For the purposes of this figure, we consider “states” to be the 50 states as well as the District of 

Columbia.

Between August 2010, when rate review grants were first awarded, and 

March 27, 2013, HHS awarded 78 grants totaling about $159 million to 

47 states.31

Table 4: Total PPACA Rate Review Grants Awarded to States as of March 27, 2013

These awards included Cycle I and Cycle II grants. Of the 

$159 million in grants awarded, the majority (about $113 million, or 

71 percent) has been awarded in the form of Cycle II grants (see table 4).

Grant type

Number of 

grants

Number of 

statesa

Total funding 

awarded 

(dollars in millions)

Percentage 

of total 

funding awarded

Cycle Ib 46 46 $46 29%

Cycle II 32 30c 113 71

Total 78 47d $159 100%

Source: GAO analysis of HHS data.

a

For the purposes of this figure, we consider “states” to be the 50 states as well as the District of 

Columbia.

b

According to officials from the Center for Consumer Information and Insurance Oversight (CCIIO), 

Cycle I grants are no longer being awarded.

c

One state, California, was awarded two Cycle II grants because it has two regulatory agencies that 

are each primarily responsible for regulating a portion of the state’s private health insurance market.

d

This total is not the sum of the above numbers because some states were awarded both types of 

rate review grants.

Out of the 47 states that have been awarded rate review grants, total 

funding awarded has ranged from $1 million (16 states) to about 

$5.5 million (New York). According to CCIIO officials, 25 of these states 

have “returned” all or a portion of their Cycle I grants to HHS, with a total 

return in funding of about $13.6 million, or approximately 9 percent of total 

funding awarded. CCIIO officials told us this funding was largely returned 

because it had not been used during its period of availability to the 

 

31HHS also awarded five Cycle I grants totaling $5 million and three Cycle II grants 

totaling $6 million to five U.S. territories between 2011 and 2012.

HHS Awarded about 

$159 Million in Rate 

Review Grants to States, 

Which to Date Has Been 

Used to Fund Five Key 

Activities
 

Page 26 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

grantee.32

According to HHS, as of March 13, 2013, states had drawn down about 

$42.3 million of the $159 million in Cycle 1 and Cycle II rate review grants 

awarded (27 percent). With funds expended to date, CCIIO summaries 

indicated that states have undertaken five key activities:

For more information on premium rate review grant funding 

awarded, drawn down, and returned by state, see appendix IV.

• Enhanced transparency: States reported actions and plans including 

posting rate filings and rate review results on their websites, posting 

consumer-friendly summaries of rate information, and conducting 

outreach through town-hall meetings.

• Enhanced IT: States reported activities such as requiring that issuers 

file rate review requests electronically, making software upgrades to 

enhance rate review analytical capabilities, and establishing new rate 

review databases.

• Established Rate Review Contracts: States reported contracting for 

various rate review activities such as obtaining actuarial and legal 

services, reviews of rate review processes, and trend analyses.

• Hired staff: States reported the hiring or planned hiring of numerous 

rate review analysts and actuaries.

• Expanded the scope of rate review: States reported actions such as 

requiring rate reviews for additional insurers and markets, increasing 

the categories of information included in rate reviews.

Figure 4 shows the number of states which, according to CCIIO February 

2013 summaries, reported undertaking these activities with Cycle I or II 

grants.33

 

32According to CCIIO officials, awarded Cycle I rate review funds were returned in 

connection with 3 of the 25 grants because the states chose to no longer participate in the 

grant program. For the other 22 grants, the states completed the project funded by the 

grant and returned the remaining portion of awarded funds that were not used during their 

period of availability to the grantee. Of the approximately $13.6 million returned, about 

$2.9 million came from states that chose to no longer participate in the program, and 

about $10.7 million came from states completing their projects.

As the figure shows, almost all states receiving Cycle I grants 

33Our analysis includes some actions taken by U.S. territories using their Cycle I rate 

review grants.
 

Page 27 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

reported enhancing the transparency of their rate review process, 

enhancing IT, and establishing rate review contracts. Fewer states were 

awarded Cycle II grants, but most reported using grants for these same 

activities.

Figure 4: States Reporting Taking Certain Actions with PPACA Rate Review Grant 

Funds as of February 2013

Note: For the purposes of this figure, we consider “states” to be the 50 states and the District of 

Columbia. However, our analysis for Cycle I rate review grants also includes some actions taken by 

U.S. territories.
 

Page 28 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

HHS oversees states’ use of grant funds by reviewing and analyzing 

state-reported information and conducting some limited verification of 

state data. HHS has several mechanisms to address identified concerns 

or noncompliance identified through routine monitoring and to respond to 

requests to amend grants’ terms.

CCIIO’s regular oversight process for exchange and rate review grants 

consists of a variety of mechanisms through which project officers 

regularly review information reported by grantees as well as communicate 

with grantees. Additionally, this oversight is supplemented by 

independent verification through internal analysis and periodic reviews. 

CCIIO’s regular oversight mechanisms are listed below in table 5.

Table 5: The Center for Consumer Information and Insurance Oversight’s (CCIIO) Mechanisms for Overseeing PPACA 

Exchange and Rate Review Grantees

Oversight mechanism Source of information

Exchange 

oversight schedule

Rate review 

oversight schedule

Regular review of 

information 

reported by 

grantees and 

communication 

with grantees

Progress reports Grantee Semiannually Quarterly

Financial reports Grantee Quarterly Quarterly

Regular phone communication Grantee At least quarterly At least quarterly

Internal project officer 

summaries

CCIIO prepares on the basis 

of grantee reports

Weekly and monthly Weekly and quarterly

Independent 

verification through 

internal analysis, 

and periodic 

reviews

Monitor draw down of grant 

funds

CCIIO monitoring of grant 

accounts

Weekly Weekly

Site visits CCIIO At least once for each 

state before exchange 

certification

No set schedule

Establishment reviews and 

postestablishment reports

CCIIO Three reviews, 

schedule based on 

grantee progress

n/a

A-133 Auditsa Independent third-party review 

of grantee

Annual Annual

Source: GAO analysis of CCIIO information.

Notes: n/a = Not applicable for rate review oversight.

a

The Single Audit Act, as amended, requires each reporting entity that expends $500,000 or more in 

federal awards, including grants and other assistance, in a fiscal year to obtain an annual “single 

audit,” which includes an audit of the entity’s financial statements and a schedule of the expenditure 

HHS’s Process for 

Overseeing PPACA 

Exchange and Rate 

Review Grants 

Consists of Several 

Key Mechanisms

Regular Oversight of 

Exchange and Rate Review 

Grants to Date Is Primarily 

Based on Review of StateReported Information and 

Some Limited Independent 

Verification
 

Page 29 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

of federal awards, and review of related internal controls. See 31 U.S.C. §§ 7501 et seq. To assist the 

single audit community in carrying out its respective audit responsibilities, the Office of Management 

and Budget performs several activities, including issuing guidance for implementing single audit 

requirements as described in Office of Management and Budget Circular No. A-133, Audits of States, 

Local Governments, and Non-Profit Organizations, and the Compliance Supplement.

As a condition of receiving an exchange or rate review grant, CCIIO 

requires grantees to prepare and submit regular progress reports 

covering programmatic activities, progress in meeting program goals, and 

details about expenditures. CCIIO requires exchange program grantees 

to provide progress reports describing the current status of their activities 

in areas such as making legislative/regulatory changes, establishing IT 

systems, building organizational infrastructure and staffing resources, 

establishing an operational budget and management plan, and consulting 

with key stakeholders. Originally, states were required to submit these 

reports quarterly, but officials indicated that they changed the reporting to 

semiannually to reduce the burden on states, since states were providing 

information and communicating with project officers frequently. As part of 

this progress report, CCIIO requires exchange program grantees to 

provide information on the amount of grant funds spent over the life of the 

grant across key budget categories. These categories include state 

personnel, travel, contractors and consultants. CCIIO also requires 

grantees to identify the individual contracts they have awarded with grant 

funds. As with exchange grants, CCIIO requires rate review grantees to 

provide quarterly progress reports, which include data on their rate review 

activities, the grantees’ original goals, deviations or changes to original 

goals, accomplishments to date, significant activities undertaken and 

planned, and any relevant issues or setbacks that occurred over the prior 

12 months. These reports also include expenditure information similar to 

that reported by exchange grantees. Further, CCIIO requires that, each 

quarter, both exchange and rate review grantees provide financial reports 

that detail financial activities, including the amount of cash transactions 

grantees made with grant funds during the quarter.

In addition to requiring regular reports, CCIIO project officers have regular 

phone communication with grantees to discuss grantee reports and 

activities, clarify guidance, and provide technical assistance to grantees 

with challenges they encounter, and, according to officials, thereby 

maintain an awareness of grantees’ ongoing activities. According to the 

standard operating procedures for both programs, project officers call 

each grantee at least quarterly. According to CCIIO officials, these 

contacts are in practice much more frequent than the minimum for many 

grantees under both programs. For example, according to CCIIO officials, 

Regular Review of Grantee 

Information and 

Communication with Grantees
 

Page 30 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

project officers generally communicate at least twice per week with 

exchange grant recipients.

As part of their ongoing monitoring, CCIIO officials regularly review and 

summarize the programmatic and financial information obtained from 

grantees’ progress reports and monitoring calls. For exchange grants, 

CCIIO officials indicated that each week, project officers submit internal 

project office summaries about the status of the states’ exchange 

implementation efforts. Additionally, each month, project officers also 

develop detailed narratives for exchange grants, which include 

information on how much grant funding the state has spent, the states’ 

progress, barriers they may face, and any action items to be taken over 

the next 30 days. For rate review grants, project officers also prepare 

weekly summaries of grantee activities, and quarterly they summarize 

each state’s progress in an Excel tracking sheet. This analysis includes 

information on how much the grantee has spent, grantee 

accomplishments, and issues requiring follow-up. Finally, on a quarterly 

basis program staff provide briefings to CCIIO leadership, and issues 

regarding grantees’ progress are discussed.

According to CCIIO officials, project officers routinely oversee and assess 

exchange and rate review grantees’ financial activities by monitoring the 

amount and pace of the states’ drawdown of grants. Each week, OAGM 

staff provides project officers with reports from OAGM’s financial system 

on the amount of funding each grantee has withdrawn from the grant 

account, according to officials. Project officers use the reports to look for 

unusual events such as large drawdowns or no drawdowns. Withdrawals 

are reported at the overall grant level, not by specific expenditures or 

general categories of expenditures. According to CCIIO officials, if review 

of these reports highlights potential issues, they will follow up with 

grantees and determine whether further action is warranted.34

In addition to analysis of grantee drawdowns, CCIIO has other 

mechanisms that can provide independent assessments of grantees’ use 

of funds. CCIIO officials also indicated that they conduct site visits—onsite assessments of exchange and rate review grantees’ activities—and 

that this provides a measure of independent verification of grantee 

 

34In addition, when the grant period is complete, states are required to make a final report 

to CCIIO on their completion of grant activities and expenditures over the entire span of 

the grant.

Independent Verification 

through Internal Analysis, and 

Periodic Reviews 
 

Page 31 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

activities. CCIIO officials indicated that exchange grant site visits are in 

their early stages and have been utilized to provide technical assistance 

to help grantees establish their exchanges. For example, CCIIO officials 

indicated that as of April 11, 2013, they have conducted 26 technical 

assistance site visits at exchange grantees. CCIIO’s draft procedures for 

conducting site visits indicate that they will ultimately conduct a site visit 

to each state at least once prior to certification of a state’s exchange. The 

procedures indicate that the visit should be conducted by a team 

consisting of a project officer and key CCIIO and CMS staff, and the site 

visit team will review operational aspects of the proposed exchange 

including its enrollment process and financial management. Within 

4 weeks of completing the site visit, the project officer should prepare a 

written report that will include a summary of the site visit, and 

recommendations to the state, if applicable.

For rate review grantees, CCIIO’s procedures do not address the 

frequency of site visits, but indicate site visits are used to further engage 

grantees, monitor programmatic progress toward established milestones, 

track fiscal performance, ensure compliance with programmatic and 

statutory requirements, and mitigate programmatic risks. The procedures 

indicate that selecting grantees for site visits will be determined by a 

number of factors including the stage of programmatic implementation 

and complexity of the grantee’s rate review proposal, and the need for 

more hands-on auditing or budget review, or both. CCIIO officials 

indicated that as of April 11, 2013, CCIIO has conducted two site visits to 

rate review grantees.

CCIIO requires each state receiving exchange grants to undergo three 

Establishment Reviews over the course of its grant period. CCIIO uses 

these reviews to assess states’ activities and provide systematic 

feedback on their progress towards development of an exchange. The 

reviews are conducted at certain readiness benchmarks, rather than 

specific times.

• Planning. The first review is the planning review generally in the first 

quarter after the grant is awarded. The state must demonstrate 

preliminary progress towards establishing an exchange, and receives 

feedback. The review results in a list of tasks for the state to complete 

before the design review.

• Design. The second review is the design review, which occurs after 

states have selected their key contractors for exchange 

establishment, typically about 6 to 9 months after the planning review.
 

Page 32 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

States are expected to have established business requirements and 

developed detailed plans and procedures for key activities for their 

exchange.

• Operational. The final operational review occurs after exchange 

development and implementation is complete, to test the exchange 

and demonstrate that it is ready to begin operation.

After each of these reviews, CCIIO’s procedures require project officers to 

prepare a postestablishment report describing deliverables by both CCIIO 

and the grantee. These reports are designed to provide a summary of the 

progress the state has made in meeting the necessary requirements 

related to establishing an exchange. The report also serves as a guide in 

identifying action items and next steps to ensure adherence to mandatory 

timelines. According to CCIIO officials, in calendar year 2012 they 

completed planning reviews for 24 grantees and design reviews for 28 

grantees, covering 31 of the 38 states with Level 1 Exchange 

Establishment grants. As of March 2013, they had not completed any 

operational reviews, but planned to complete them between August and 

September 2013.

Finally, all recipients of these grants are required to obtain an A-133 

Audit.35 According to CCIIO guidance, CCIIO reviews the audit for each 

grantee. According to CCIIO officials, they plan to use the A-133 Audit 

results as part of their Operational Establishment Reviews for exchange 

grants and as part of future Annual reviews for rate review grants. The 

guidance also calls for grantees to address any significant findings from 

the audit and to develop plans for mitigating future problems.

 

35The Single Audit Act, as amended, requires each reporting entity that expends $500,000 

or more in federal awards, including grants and other assistance, in a fiscal year to obtain 

an annual “single audit,” which includes an audit of the entity’s financial statements and a 

schedule of the expenditure of federal awards, and review of related internal controls. See 

31 U.S.C. §§ 7501 et seq. To assist the single audit community in carrying out its 

respective audit responsibilities, the Office of Management and Budget performs several 

activities, including issuing guidance for implementing single audit requirements as 

described in Office of Management and Budget Circular No. A-133, Audits of States, Local 

Governments, and Non-Profit Organizations, and the Compliance Supplement.
 

Page 33 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

CCIIO officials indicated that if CCIIO’s regular oversight process 

identifies instances when a grantee may not be complying with 

requirements of the grant, CCIIO uses a five-tier response to address 

them, in which CCIIO advances its response to the next tier if its earlier 

responses did not address the issue (see fig. 5).

Figure 5: Five Tiers of Center for Consumer Information and Insurance Oversight 

(CCIIO) Responses to PPACA Exchange and Rate Review Grantee Noncompliance

In the first tier, CCIIO officials indicated they discuss compliance issues 

with the exchange or rate review grantee and request a mitigation 

strategy, which CCIIO documents in the project records. The second tier 

calls for production of management assessment items by the state, such 

as a documented business plan to address the compliance issue in a 

specific time frame. In the third tier, CCIIO imposes conditions on the 

grant award, which identifies the reason for the condition and limits the 

grantee’s access to funds, until the grantee provides requested 

documentation. In the fourth tier, CCIIO restricts the grantee’s access to 

funds until it reviews and approves the grantee’s corrective action. 

CCIIO’s final action in the fifth tier is to terminate the grant. According to 

OAGM officials, to date they have not had to impose conditions or 

restrictions on grants based on their regular oversight. Further, OAGM 

officials said that so far they had not identified any misuse of grant funds 

on the basis of established program criteria.

HHS’s Oversight Process 

Includes Several 

Mechanisms to Address 

Concerns or 

Noncompliance Identified 

through Routine 

Monitoring and Respond to 

State Change Requests for 

Exchange and Rate Review 

Grants
 

Page 34 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

If a state seeks to make certain changes to the terms of its exchange or 

rate review grant, CCIIO requires that the state obtain prior approval, and 

has established procedures to review the appropriateness of any such 

requests. CCIIO refers to these as postaward actions, and they include 

instances such as when a state wants to alter substantially the allocation 

of funds between major activities funded by a grant (called a budget 

revision), or extend the time frames for performing grant activities without 

changing the award amount (called a no-cost extension). Eight types of 

routine, grantee-initiated postaward actions are described in table 6 

below.

Table 6: Listing of Routine PPACA Exchange and Rate Review Grantee-Initiated Postaward Action Requests

Grantee postaward request Description of grantee request

Budget revision A grantee requests approval to reallocate its budget when expenditures in a budget 

category deviate (increase or decrease) from the level established at the time of the 

award by 25 percent or more of the total amount awarded.

Remove condition A grantee requests that a condition be removed when it believes it has sufficiently 

addressed an issue of noncompliance.

No-cost extension A grantee requests extension of the original grant award period to complete the project 

goals and objectives with the remaining grant funds without changing the award amount.

Change in grantee of record A grantee requests to make a change in the grantee of record from one entity to another.

Change in key personnel or authorizing 

official

A grantee requests approval to make key personnel changes, for example due to 

resignation of a key official.

Carryover of unobligated balances A grantee with an award that may be spent over more than 1 year requests approval to 

carry over unobligated funding from one year to the next year.

Administrative supplements A grantee requests additional funding to cover costs within the original scope of the 

approved project.

Remove funds restriction A grantee requests access to funds that have been previously restricted.

Source: GAO analysis of Center for Consumer Information and Insurance Oversight (CCIIO) procedures.

For example, if a state wants to reallocate more than 25 percent of an 

exchange grant among budget categories, CCIIO requires the state to 

work with the appropriate project officer to obtain approval by OAGM.

Under its procedures, CCIIO requires the state to provide supporting 

documentation to justify the proposed rebudgeting. The project officer will 

review the request and make a recommendation to the OAGM. If 

approved, OAGM will amend the grant agreement to reflect the revised 

budget. Officials indicated that the same general procedures apply to 

other types of postaward actions.
 

Page 35 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Officials indicated that CCIIO also requires states in which the anticipated 

exchange type changes (e.g., from a state-based exchange to a federally 

facilitated exchange) to obtain approval for a change in the scope of 

services permitted under the state’s original grant or to terminate the 

grant. As of April 11, 2013, CCIIO officials indicated they are working with 

11 states to determine the appropriate adjustments for their grants to 

reflect changes in the scope of services they will provide. For example, 

CCIIO officials indicated that Arizona was originally awarded funding to 

establish a state-based exchange, but the state subsequently decided to 

default to a federally facilitated exchange. CCIIO and the state are 

currently determining the extent to which the state will continue to 

participate in the grant program.

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

HHS provided technical comments, which we incorporated as 

appropriate.

As agreed with your offices, 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 of this report to the 

Secretary of Health and Human Services. In addition, the report will be

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

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 V.

John E. Dicken

Director, Health Care

Agency Comments 
Appendix I: Overview of PPACA Exchange and 

Rate Review Grants to States

Page 36 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Grant type Grant name Purpose Award amount Award dates

Exchange Planning Provided states with 1 year of funding to assist 

with background research and initial planning 

activities related to the potential 

implementation of a state-based exchange,

including plans for stakeholder involvement, 

governance structure, technical infrastructure, 

and necessary policy actions related to the 

exchange. States could only receive one grant.

$0-1 million; depends on states’ 

proposed activities and budget 

(along with the Department of 

Health and Human Services’ 

[HHS] assessment of the 

proposal).

September 2010a

Early Innovator Provided 2 years of funding to a select number 

of states or groups of states that demonstrated 

leadership in establishing state-based 

exchanges, in particular by beginning 

development of cutting-edge, cost-effective, 

consumer-friendly IT for their exchanges. 

Awards were intended to allow the states to 

develop rigorous IT models and best practices 

that could be adopted and tailored by other 

states. States could only receive one grant.

Variable; depends on states’ 

proposed activities and budget 

(along with HHS’s assessment of 

the proposal).

February 2011

Level 1 

Establishment

Provides up to 1 year of funding to support 

states’ continued progress in carrying out 

activities in connection with a state-based or 

federally facilitated exchange, including a 

partnership exchange. Funding is awarded to 

help states undertake specific establishment 

activities relevant to a state’s chosen exchange 

model. For example, states pursing statebased exchanges may receive funding for 

activities within 12 categories, including legal 

authority and governance, consumer and 

stakeholder engagement and support, and plan 

management. States preparing to support 

federally facilitated exchanges are eligible to 

use grant funding for a subset of these 

activities, as outlined in the funding opportunity 

announcement. States may receive multiple 

grants.

Variable; depends on states’ 

proposed activities and budget 

(along with HHS’s assessment of 

the proposal). 

May 2011–

December 2014

Level 2 

Establishment

Provides up to 3 years of funding to states that 

are further in their exchange establishment 

process and are specifically establishing 

state-based exchanges. Funding is awarded to 

help states undertake all exchange activities. 

To be eligible, states must have met certain 

milestones, including (1) obtaining the 

necessary legal authority to establish and 

operate the exchange; (2) establishing a 

governance structure for the exchange; and 

(3) submitting (to HHS) an initial plan for 

funding the long-term operational costs of the 

exchange. States may only receive one grant.

Variable; depends on states’ 

proposed activities and budget 

(along with HHS’s assessment of 

the proposal).

May 2011–

December 2014

Appendix I: Overview of PPACA Exchange 

and Rate Review Grants to States
Appendix I: Overview of PPACA Exchange and 

Rate Review Grants to States

Page 37 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Grant type Grant name Purpose Award amount Award dates

Rate review Cycle I Provided 1 year of funding to states or U.S. 

territories to help develop or enhance their rate 

review processes as well as their processes for 

reporting their rate increase patterns to HHS. 

States/territories could only receive one grant. 

$1 million August 2010–

March 2011

Cycle II Provides up to 3 years of funding (depending 

on the date of award) to further assist states or 

U.S. territories with developing or enhancing 

their rate review and reporting processes, with 

the specific purpose of helping states meet 

HHS’s criteria for effective rate review 

programs. To be eligible, states that at the time 

of application do not have effective rate review 

programs in their individual or small group 

health insurance markets, or both, must 

commit to using grant funds to develop 

effective programs within 12 months of 

receiving the grant. States that at the time of 

application meet the effective rate review 

requirements must commit to using grant funds 

to further enhance their rate review programs.

States are eligible for a second Cycle II grant if 

they have drawn down at least 60 percent of 

their previous Cycle II grant by August 1, 2013, 

and if HHS determines that sufficient funding is 

available after all eligible applications are 

considered for an initial Cycle II award. 

Additionally, California is eligible for two Cycle 

II grants because it has two regulatory 

agencies that are each primarily responsible for 

regulating a portion of the state’s private health 

insurance market.

Total award amounts are made 

up of the following subawards:

Baseline award: $3 million 

(for grants awarded in 2011) or 

$2 million (for grants awarded 

after 2011). 

Workload award: variable; 

depends on states’ population 

and the number of health 

insurance issuers with 5 percent 

or more market share in the 

state.

Performance award: 

approximately $600,000 (for 

grants awarded in 2011) or 

$400,000 (for grants awarded 

after 2011); given to states that 

have the legal authority to 

disapprove unreasonable rate 

increases in their individual or 

small group markets.

September 2011–

September 2013

Source: GAO analysis of HHS information.

Notes: For the purposes of this table, we consider “states” to include the 50 states and the District of 

Columbia.

a

HHS also issued an Exchange Planning grant funding opportunity announcement in January 2011 

for the two states (Minnesota and Alaska) that did not previously receive a Planning grant. The 

agency awarded a Planning grant to Minnesota in February 2011.
Appendix II: PPACA Exchange Grant Types 

Awarded by State as of March 27, 2013

Page 38 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Note: Eighteen states were awarded multiple Level 1 Establishment grants. In addition, Kansas, 

Maryland, New York, Oklahoma, Oregon, Wisconsin, and a multistate consortium led by the 

University of Massachusetts Medical School (and consisting of Connecticut, Maine, Massachusetts, 

Rhode Island, and Vermont) were awarded Early Innovator grants.

Appendix II: PPACA Exchange Grant Types 

Awarded by State as of March 27, 2013
Appendix III: Projected Exchange Type and 

PPACA Exchange Grant Funding Awarded, 

Drawn Down, and Returned by State

Page 39 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Projected 

exchange type as 

of March 7, 2013a Stateb

Exchange grant 

funding awarded as of 

March 27, 2013 (dollars)

Amount drawn 

down as of 

February 29, 2013 (dollars)

Amount of award 

returned to HHS as of 

March 27, 2013 (dollars)c

State-based 

exchange

California $910,606,370 $71,538,730 $470,106

New York 368,999,996 7,057,584 0 

Oregon 305,206,587 48,217,602 0 

Kentucky 253,698,351 8,155,064 530,912

Massachusettsd 179,036,455 20,477,899 0 

Maryland 157,462,123 14,086,483 0 

Washington 151,791,012 36,071,703 0 

Vermont 129,954,081 8,389,298 0 

Connecticut 118,705,826 8,005,598 1,200,683

Minnesota 113,169,007 25,558,741 0 

District of Columbia 82,186,049 4,363,877 0 

Hawaii 77,255,636 5,883,272 0 

Nevada 74,754,285 15,844,716 0 

Rhode Island 74,007,528 6,856,936 0 

Colorado 62,685,346 19,438,393 0 

New Mexico 35,279,483 3,105,794 0 

Idaho 21,376,556 998,220 0 

Utah 2,000,000 973,677 0 

Total $3,118,174,691 $305,023,587 $2,201,700

Federally facilitated 

partnership exchange

Iowa 42,221,578 10,347,769 0 

Michigan 41,517,021 919,955 0 

Illinois 38,989,615 2,508,684 71,412

Arkansas 27,461,483 3,029,520 44,928

Delaware 12,936,638 2,057,685 0 

West Virginia 10,667,694 3,091,052 0 

New Hampshire 1,894,406 919 0 

Total $175,688,435 $21,955,584 $116,340

Federally facilitated 

exchange

North Carolina 87,357,315 4,188,929 0 

Oklahoma 55,608,456 897,980 54,710,476

Wisconsin 38,757,139 5,481,783 0 

Pennsylvania 34,832,212 583,319 0 

Kansas 32,537,465 818,383 31,527,075

Arizona 30,877,097 11,894,252 0 

Missouri 21,865,716 2,279,248 0 

Appendix III: Projected Exchange Type and 

PPACA Exchange Grant Funding Awarded, 

Drawn Down, and Returned by State
Appendix III: Projected Exchange Type and 

PPACA Exchange Grant Funding Awarded, 

Drawn Down, and Returned by State 

Page 40 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Projected 

exchange type as 

of March 7, 2013a Stateb

Exchange grant 

funding awarded as of 

March 27, 2013 (dollars)

Amount drawn 

down as of 

February 29, 2013 (dollars)

Amount of award 

returned to HHS as of 

March 27, 2013 (dollars)c

Mississippi 21,143,618 5,287,692 329,875

Alabama 9,772,451 3,129,650 0 

Tennessee 9,110,165 2,142,712 0 

New Jersey 8,897,316 1,060,889 0 

Indiana 7,895,126 6,078,967 34,585

South Dakota 6,879,569 988,206 0 

Maine 6,877,676 999,841 5,877,835

Nebraska 6,481,838 1,898,981 104,925

Virginia 5,320,401 1,000,000 0 

Georgia 1,000,000 781,235 0 

North Dakota 1,000,000 231,978 0 

Montana 1,000,000 977,142 0 

Ohio 1,000,000 918,095 0 

Texas 1,000,000 96,425 903,575

Florida 1,000,000 0 1,000,000

South Carolina 1,000,000 304,996 693,004

Louisiana 998,416 29,391 969,025

Wyoming 800,000 578,652 221,348

Alaska 0 n/a n/a

Total $393,011,976 $52,648,746 $96,371,722

Grand total $3,686,875,102 $379,627,916 $98,689,762

Source: GAO analysis of HHS data.

Notes: n/a = Not applicable.

a

Projected exchange types as listed are based on the Department of Health and Human Services’ 

(HHS) conditional approval for 18 states to establish state-based exchanges and for 7 states to 

participate in partnership exchanges, which will begin operating on January 1, 2014.

b

For the purposes of this table, we consider “states” to include the 50 states and the District of 

Columbia.

c

According to CCIIO, states “returned” grant funding to HHS for reasons such as a state's decision 

not to pursue a state-based exchange.

d

The total amount awarded to Massachusetts includes a $35.6 million Early Innovator grant, which 

was awarded to the University of Massachusetts Medical School as part of a consortium of five 

states, including Connecticut, Maine, Massachusetts, Rhode Island, and Vermont.
Appendix IV: PPACA Rate Review Grant 

Funding Awarded, Drawn Down, and Returned 

by State

Page 41 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Statea

Rate review 

grant funding 

awarded as of 

March 27, 2013

Amount drawn 

down as of 

March 13, 2013

Amount of award returned 

to the Department of 

Health and Human 

Services (HHS) as of

March 27, 2013b

New York $5,469,996 $1,119,886 $0

California 5,324,242 2,028,787 176,320

Pennsylvania 5,312,084 296,868 780,158

New Jersey 5,146,261 1,369,589 138,932

Ohio 5,091,507 1,802,777 0 

Oregon 5,040,777 2,452,788 0 

Colorado 5,031,188 2,083,075 0 

Michigan 4,994,728 1,154,451 0 

North Carolina 4,984,080 1,253,111 344,439

Tennessee 4,979,002 459,904 570,893

Maryland 4,961,072 493,573 0 

Nevada 4,959,972 902,164 0 

Wisconsin 4,958,844 2,031,573 0 

Indiana 4,890,752 2,085,567 70,262

Arkansas 4,874,098 2,036,619 0 

Vermont 4,804,045 815,142 594,107

District of Columbia 4,803,324 583,669 440,894

Mississippi 4,783,208 1,355,763 559,296

Rhode Island 4,724,651 1,539,085 29,478

New Hampshire 4,564,938 1,892,066 479,804

Illinois 4,531,085 563,598 0 

Massachusetts 4,385,165 1,220,536 375,097

Utah 4,315,679 1,462,899 0 

Kentucky 4,225,170 1,085,257 531,983

South Dakota 4,000,923 283,157 911,862

Hawaii 4,000,000 131,483 979,268

West Virginia 4,000,000 294,474 819,404

New Mexico 4,000,000 785,032 0 

Minnesota 3,900,899 165,946 0 

Arizona 3,000,000 684,340 388,441

Nebraska 3,000,000 660,528 0 

South Carolina 1,000,000 669,670 0 

Virginia 1,000,000 932,800 67,200

Appendix IV: PPACA Rate Review Grant 

Funding Awarded, Drawn Down, and 

Returned by State
Appendix IV: PPACA Rate Review Grant 

Funding Awarded, Drawn Down, and Returned 

by State

Page 42 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

Statea

Rate review 

grant funding 

awarded as of 

March 27, 2013

Amount drawn 

down as of 

March 13, 2013

Amount of award returned 

to the Department of 

Health and Human 

Services (HHS) as of

March 27, 2013b

Maine 1,000,000 407,532 0 

North Dakota 1,000,000 200,137 0 

Kansas 1,000,000 415,549 0 

Florida 1,000,000 0 1,000,000

Connecticut 1,000,000 465,840 534,160

Texas 1,000,000 941,774 0 

Oklahoma 1,000,000 19,981 980,019

Delaware 1,000,000 120,013 0 

Idaho 1,000,000 40,622 959,378

Washington 1,000,000 768,535 231,465

Louisiana 1,000,000 875,475 0 

Alabama 1,000,000 226,598 773,401

Missouri 1,000,000 91,072 908,928

Montana 1,000,000 999,300 0 

Alaska 0 n/a n/a

Georgia 0 n/a n/a

Iowa 0 n/a n/a

Wyoming 0 n/a n/a

Total $159,057,690 $42,268,603 $13,645,190

Source: GAO analysis of HHS data.

Notes: n/a = Not applicable.

a

For the purposes of this table, we consider “states” to include the 50 states and the District of 

Columbia.

b

CCIIO officials told us this funding was largely "returned" because it had not been used during its 

period of availability to the grantee.
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 43 GAO-13-543 PPACA Exchange and Premium Rate Review Grants

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

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

Director; Priyanka Sethi Bansal; David Lichtenfeld; Laurie Pachter; and 

Stephen Ulrich made key contributions to this report.

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(291080)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (http://www.gao.gov). Each weekday 

afternoon, GAO posts on its website newly released reports, testimony, 

and correspondence. To have GAO e-mail you a list of newly posted 

products, go to http://www.gao.gov and select “E-mail Updates.”

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information.

Connect with GAO on Facebook, Flickr, Twitter, and YouTube. 

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts. 

Visit GAO on the web at www.gao.gov. 

Contact:

Website: http://www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548

GAO’s Mission

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Phone

Connect with GAO

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Congressional 

Relations 

Public Affairs

Please Print on Recycled Paper.