Source: https://www.federalregister.gov/articles/2010/07/30/2010-18691/pre-existing-condition-insurance-plan-program
Timestamp: 2015-03-30 20:02:31
Document Index: 231096503

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-45033 (21 pages)
Document Number: 2010-18691
Shorter URL: https://federalregister.gov/a/2010-18691 Related Topics
Pre-Existing Condition Insurance Plan Program 3 actions from July 30th, 2010 to September 28th, 2010
Merged With 0950-AA05
A. General Provisions (Subpart A, § 152.1 Through § 152.2)
B. PCIP Program Administration (Subpart B, § 152.6 and § 152.7)
B. Eligibility and Enrollment (Subpart C, § 152.14 Through § 152.15)
Enrollment and Disenrollment Process (§ 152.15)
Covered Benefits (§ 152.19)
Required Benefits (§ 152.19(a))
Excluded Services (§ 152.19(b))
Pre-Existing Conditions Exclusions (§ 152.20)
Premiums and Cost-Sharing (§ 152.21)
Access to Services (§ 152.22)
Appeals Procedures (§ 152.26)
Fraud, Waste, and Abuse (§ 152.27)
Preventing Insurer Dumping (§ 152.28)
Use of Funds (§ 152.32)
Initial Allocation of Funds (§ 152.33)
Reallocation of Funds (§ 152.34)
Insufficient Funds (§ 152.35)
G. Relationship to Existing Laws and Programs (Subpart G, § 152.39 Through § 152.40)
Maintenance of Effort (§ 152.39)
Relation to State Laws (§ 152.40)
H. Transition to Exchanges (Subpart H, § 152.44 Through § 152.45)
End of PCIP Coverage (§ 152.44)
Transition to the Exchanges (§ 145.45)
A. ICRs Regarding Proposal Process (§ 152.7)
B. ICRs Regarding Eligibility (§ 152.14)
C. ICRs Regarding Enrollment and Disenrollment Process (§ 152.15)
D. ICRs Regarding Access to Services (§ 152.22)
E. ICRs Regarding Appeals Procedures (§ 152.26)
F. ICRs Regarding Fraud, Waste, and Abuse (§ 152.27)
G. ICRs Regarding Preventing Insurer Dumping (§ 152.28)
H. ICRs Regarding Use of Funds (§ 152.32)
I. ICRs Regarding Maintenance of Effort (§ 152.39)
States and the Congress through the Affordable Care Act have also elected to use insurance reforms to address the accessibility and availability of health insurance coverage for high risk populations. Seven States have adopted guaranteed issue to ensure access to coverage, and two States prohibit health status from being a factor in setting premiums.
The Patient Protection and Affordable Care Act of 2010, (the Affordable Care Act or “the Act”), Public Law 111-148 applies a ban on pre-existing condition exclusions and “rate-ups” based on health status starting in 2014 and prohibits the use of pre-existing condition exclusions for children starting in plan or policy years that begin on or after September 23, 2010.
This temporary Federal program provides coverage to uninsured Americans with pre-existing conditions until the Affordable Care Act is fully implemented in 2014.
Section 1101(d) of the Affordable Care Act provides the basic eligibility criteria for the PCIP program, which are set forth under § 152.14. In addition, consistent with the Secretary's general authority under section 1101(c)(2)(D) of the Act to establish requirements for a PCIP, we set forth enrollment and disenrollment requirements in § 152.15.
Eligibility for the PCIP program is limited to citizens or nationals of the United States and individuals who are lawfully present in the United States. For the purpose of this regulation, lawfully present has the meaning presently used under the Children's Health Insurance Program, provided in the State Health Official letter issued by the Centers for Medicare and Medicaid Services (CMS) on July 1, 2010. Section 1101(d)(1) directs the Secretary to make a determination of citizenship and immigration status in accordance with section 1411 of the Act, which describes procedures to be employed for determining eligibility for the Exchanges and provides for these procedures also to be used in determining eligibility for the PCIP program. This section sets forth detailed requirements governing the type of information that applicants must provide and specific verification procedures that the Secretary of Health and Human Services, Commissioner of Social Security, and Secretary of Homeland Security would be required to follow to establish eligibility. Section 1411(c)(4) of the Affordable Care Act further provides that the Secretary shall conduct verifications and determinations “through the use of an on-line system or otherwise for the electronic submission of, and response to, the information submitted * * * with respect to an applicant,” or by “such other method as is approved by the Secretary” that determines “the consistency of the information submitted with the information maintained in the records of the Secretary of the Treasury, the Secretary of Homeland Security, and the Commissioner of Social Security”.
Under this authority, § 152.15(a)(3) specifies that a PCIP must verify that an individual is a United States citizen or national, or lawfully present in the United States. A PCIP can verify an individual's citizenship or immigration status through the Social Security Administration or, if applicable, the Department of Homeland Security. In many cases, States may be able to automate verification of citizenship and immigration status by leveraging existing data exchanges that are currently in place for other programs, such as Medicaid and the Children's Health Insurance Program. The Department of Homeland Security's U.S. Citizenship and Immigration Services (USCIS) Systematic Alien Verification for Entitlements (SAVE) program provides online system to verify an individual's immigration status. States can access this system after entering into the necessary Memorandum of Understanding with USCIS. An automated verification process will be used in all States where HHS is administering the PCIP program.
Eligibility for the PCIP program is limited to individuals with no creditable coverage during the 6-month period prior to the date on which they apply for coverage through the PCIP. Section 2701(c)(1) of the Public Health Service Act on the date of enactment and 45 CFR § 146.113(a)(1) define creditable coverage as coverage of an individual under a group health plan, health insurance coverage as defined at 45 CFR 144.103, Medicare Part A or Part B, Medicaid, the Children's Health Insurance Program, the TRICARE program, a medical care program of the Indian Health Service or of a tribal organization, a State health benefits risk pool (that is, existing State high risk pool), the Federal Employee Health Benefits program, a public health plan (for example, coverage through the Veterans Administration), or a health benefit plan offered under section 5(e) of the Peace Corps Act. Such creditable coverage includes health coverage provided to certain former employees, retirees, spouses, former spouses, and dependent children who are entitled to temporary continuation of health coverage at group rates under the Consolidated Omnibus Reconciliation Act of 1985 (COBRA). We specify under § 152.14(b)(3) that if an individual has already satisfied the requirement for a 6-month period without creditable coverage in connection with qualifying for a given PCIP under section 1101 of the Act, the individual will be considered to have satisfied this eligibility requirement for purposes of a PCIP in another State, if such individual moves to a different State and wishes to enroll in that State's PCIP.
Under section 1101(d)(3), eligibility for the PCIP program is conditioned on individuals having a pre-existing condition, as “determined in a manner consistent with guidance issued by the Secretary.” We specify at § 152.14(c)(1) that a PCIP in a State, or the PCIP run by a non-profit in States that are not carrying out the PCIP program, may determine that an individual has a pre-existing condition, for purposes of PCIP eligibility, based on satisfying any one or more of the following criteria, subject to HHS approval: (1) The individual provides documented evidence that an insurer has refused, or has provided clear indication that it would refuse, to issue individual coverage on grounds related to the individual's health; (2) the individual provides documented evidence that he or she has been offered individual coverage but only with a rider that excludes coverage of benefits associated with a pre-existing condition; (3) the individual provides documented evidence that he or she has a medical or health condition specified by the State and approved by the Secretary; or (4) other criteria as defined by the PCIP and approved by HHS.
We believe that these criteria are fully consistent with the intent of section 1101(d)(3) of the Act and address the problems that individuals with pre-existing conditions face when applying for insurance coverage in the individual market. That is, individuals with pre-existing conditions are often unable to obtain coverage for reasons that include an outright denial and an exclusion of coverage for the pre-existing condition. This includes instances when an individual applies for coverage and is informed by the carrier's representative or Web site that they would be denied for coverage by the carrier due to the pre-existing condition. Providing States and non-profit entities operating a PCIP the option of using these manifestations of having a pre-existing condition, rather than relying on a list of medical conditions, is consistent with the PCIP program goal of covering people who both have a pre-existing condition and otherwise cannot access insurance. We note that in some cases, individuals with pre-existing conditions are unable to obtain outright written coverage denials, but instead are told that carriers will not accept their applications. These regulations will permit PCIPs to exercise flexibility in determining exactly what type of communication constitutes a refusal to issue coverage.
Under § 152.14(c)(3), we specify that a PCIP may determine that an individual has a pre-existing condition based on evidence of the existence or history of certain medical or health conditions, as approved by the Secretary. This provision comports with our intention to permit the continuing use of eligibility standards that States use in their existing high risk pools, and permits a State that has guaranteed issue and community rated premiums to use an alternative test to showing a denial of coverage.
Finally, we provide at § 152.14(c)(4) that HHS may approve other criteria for meeting the definition of pre-existing condition under a given PCIP.
Eligibility for a PCIP is limited to individuals who reside in the service area of the PCIP. At § 152.14(a)(4), we provide that an individual must be a resident of one of the 50 States or the District of Columbia which constitutes or is within the service area of the PCIP.
Under our authority in section 1101(c)(2)(D) of the Act to impose “appropriate” requirements that PCIPs would be required to meet, § 152.15(a) and (b) require PCIPs to establish a process for enrolling and disenrolling individuals that is approved by HHS. Our intent is to permit the use of established enrollment policies and procedures in place under existing State high risk pools, to the extent that they are consistent with the statute.
A PCIP is required to establish, consistent with § 152.15(b) of this interim final rule, a disenrollment process that is approved by HHS. As noted above, we seek to support States' ability to participate in this program by allowing them to adopt policies and procedures in use under existing high risk pool programs. We understand that current practice in State high risk pools is that an individual who does not pay his or her premiums on a timely basis may be disenrolled. We provide in § 152.15(b)(2) that, under these circumstances, the enrollee will receive sufficient notice and reasonable grace period for payment prior to any disenrollment taking effect not to exceed 61 days (the longest period currently provided for by States). The consequence of failing to pay premiums and any subsequent disenrollment is that an individual loses access to coverage and may not be able to re-enroll for 6 months. Thus, we believe that it is the PCIP's responsibility to inform its enrollees prior to making a disenrollment effective. There are other circumstances in which involuntary disenrollment is appropriate and thus we establish at § 152.15(b)(3) that a PCIP must disenroll an individual in cases of death, where an individual obtains creditable coverage or no longer resides in the PCIP's service area, and other exceptional circumstances as established by HHS. We envision that such circumstances would include cases of fraud or intentional misrepresentation of material fact, and it is our intent to work with PCIPs to develop policies in these areas via sub-regulatory guidance. As we explain under our discussion of eligibility, an individual who is disenrolled because he or she no longer resides in the service area of a PCIP does not have to satisfy another 6-month continuous period without creditable coverage before applying to enroll in a PCIP in the new State of residence.
Finally, given the capped appropriation for this program, we recognize that PCIPs need sufficient programmatic flexibility to manage their costs and enrollment, to help ensure that the PCIP program's funding allocation is sufficient to cover claims and other program costs for the entire duration of the program. Thus, we establish authority under § 152.15(d) for a PCIP program to employ strategies to manage enrollment over the course of the program that may include enrollment capacity limits, phased-in (delayed) enrollment, premium and benefit adjustments that indirectly affect enrollment, and other measures, as defined by the PCIP and approved by HHS.
The required benefit list in § 152.19(a) builds off of the essential health benefits under the new section 2707 of the Public Health Service Act, as enacted in the Affordable Care Act, for which guidance has yet to be issued. The list is consistent with the most commonly covered services offered in existing State high risk pools, according to a survey conducted by the National Association of State Comprehensive Health Insurance Plans (NASCHIP) in 2009. Its benefits are also parallel to the benefits offered by the Federal Employees Health Benefits Plan (FEHBP).
Section 1101(c)(2)(A) of the Act requires that a PCIP established under this section not impose any pre-existing condition exclusions with respect to covered services. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) includes limitations for pre-existing conditions in the group market. This protection was expanded under section 1201 of the Affordable Care Act, which prohibits any pre-existing condition exclusions from being imposed by group health plans or group and individual health insurance coverage beginning January 1, 2014. The interim final rules issued pursuant to section 2704 of the Public Health Service Act (as amended by the Affordable Care Act) under § 147 adopt, with minor modifications, the definition of pre-existing condition currently used under HIPAA.
In keeping with the methodology suggested by the NAIC Model Act and the Federal grant program, § 152.21 of this interim final rule generally interprets the phrase “standard rate for a standard population” to refer to the premium rates offered in the individual market in a given State. While existing State high risk pools' premiums vary between 105-250 percent of the standard rate of the individual market, the Act requires that premiums in the PCIP program be at the standard rate, rather than a higher proportion of that rate. Therefore, this rule provides that a PCIP established under this section must not offer enrollees premiums at a rate that exceeds 100 percent of the standard individual market rate in the PCIP service area.
We also recognize that individual market rates in each State can vary as a consequence of individual State insurance laws. For example, some States require that insurers issue all applicants a policy or offer coverage at a community rate. In such situations, the standard individual rate may be considerably higher than in a State that permits insurers to reject applicants or set premiums on the basis of health status or other factors. To account for these variations, § 152.21(a) of these rules provides that, subject to approval by HHS, a PCIP may use other methods of determining the standard rate in the State. The exact methodology must be submitted and approved through the proposal process as specified in § 152.8 of this part.
Section 1101(c)(2)(C)(ii) of the Act specifies that premium rates in a PCIP can vary on the basis of age by a factor not greater than 4 to 1. Section 2701(a)(3) of the PHSA as amended by the Affordable Care Act requires HHS, in consultation with NAIC, to define permissible age bands for rating purposes in the individual and group markets. However, the rating bands established under section 2701 will not be effective until January 1, 2014, and no such requirement exists for the PCIP program. Given these factors, this rule does not establish standard age bands for the PCIP program beyond the statutory requirements. Thus, § 152.21(a)(2) of this rule simply follows the statutory requirement of section 1101(c)(2)(C)(ii) of the Act and provides that premiums charged in the PCIP can vary by age on a factor of not greater than 4 to 1. Specific age band rating will be established through the PCIP contracting process.
Section 1101(c)(2)(B)(ii) of the Act requires that coverage provided by PCIPs not have an out-of-pocket limit greater than the applicable amount described in section 223(c)(2) of the Internal Revenue Code, which sets the out-of-pocket limit for high deductible health plans associated with a tax favored health savings accounts. (This amount is $5,950 for 2010.) Under § 152.2, we define out-of-pocket costs as the sum of the annual deductible and the other annual out-of-pocket expenses, other than for premiums, required to be paid under the plan. Section 152.21(b)(2) also notes that, consistent with IRS rules, the out-of-pocket limit may be applied only for in-network providers, consistent with the terms of PCIP plan benefit package.
Rather than establishing detailed, proscriptive requirements with respect to appeals procedures, § 152.26 of this interim final rule establishes minimum requirements that all PCIPS must meet. Section 152.26(b) specifies that a PCIP must provide for a timely redetermination of an eligibility or coverage determination; coverage determinations include both whether an item or service is covered and the amount paid by the PCIP. For coverage determinations, § 152.26(b)(3) further specifies that an enrollee has the right to a timely second-level appeal, or “reconsideration,” by an independent entity.
Section 1101(f)(2) of the Affordable Care Act requires the Secretary to establish procedures to protect against fraud, waste, and abuse. To that end, § 152.27(a) of this interim final rule requires the PCIP to develop, implement, and execute operating procedures to prevent, detect, recover payments (when applicable or allowable), and promptly report to HHS incidences of waste, fraud, and abuse. These procedures are required to include identifying situations in which enrollees, potential enrollees, or their family members had access to employer-based coverage, and may have been discouraged from enrolling in that coverage. Should HHS become aware of instances involving fraud, waste, or abuse within the PCIP's operation, HHS will take appropriate action within the terms of the contract, or as otherwise provided by law. As stated in § 152.27(b), the PCIP shall cooperate with Federal law enforcement and oversight authorities in cases involving waste, fraud and abuse, and shall report cases in which an individual may have been discouraged from enrolling in other coverage to appropriate authorities. For example, if the coverage was an employer group health plan subject to ERISA, which prohibits discrimination based on health status, the matter should be reported to the Department of Labor for investigation and possible enforcement action.
There is an incentive for employers and issuers to single out high risk and thus high-cost individuals and offer incentives for them to disenroll from their coverage and obtain coverage in PCIPs which offer such individuals guaranteed access to coverage without pre-existing condition exclusion at a standard premium, if they are uninsured for at least six months. Congress recognized this potential issue and directed the Secretary under section 1101(e)(2) of the Act to establish criteria for determining whether health insurance issuers and employment-based health plans have discouraged individuals from remaining enrolled in prior coverage based on the health status of those individuals, and specifies certain criteria that shall be included in those established by the Secretary. Section 152.28 of this interim final rule thus sets forth these criteria, and requires that PCIPs establish procedures to identify and report to HHS instances where health insurance issuers or group health plans are discouraging high-risk individuals from remaining enrolled in their current coverage, in instances where such individuals subsequently are eligible to enroll in the PCIP.
Although the Act does not specify the amount that a PCIP can spend on administrative expenses, § 152.32(b) of this rule permits PCIPs to spend no more than 10 percent of its total allotted funds towards administrative expenses. The 10 percent limitation is similar to what is imposed under the Children's Health Insurance Program (CHIP). Typical examples of the types of administrative costs and expenses that we expect to be incurred by PCIPs include: Start-up and program implementation activities, the production and distribution of information and outreach materials, eligibility determination and enrollment processing, claims processing, costs associated with prevention and detection of fraud, waste and abuse, and other ancillary services such as operation of a customer service call center, account maintenance, and appeals. We note that, given the start-up costs for the new PCIPs established under this program, and the need for expeditious implementation, this 10 percent cap applies to the total allotment for the duration of the program, as opposed to spending in a given year.
As noted above, over time, spending under the PCIP program will be determined based on the actual enrollment and cost experience of the PCIPs across the country. Thus, we recognize that there may be a need to reallocate funds if actual experience indicates that, in a given State, not all of funds available under the allocation formula will be used. Section 152.34 accounts for this possibility by giving HHS explicit authority to reallocate funds among States if HHS determines that the PCIP in a given State will not make use of the total estimated funding originally allotted to that State. HHS will be receiving monthly reports on the program costs of each PCIP and will consult closely with PCIPs in evaluating these reports and making any decisions with respect to the need for reallocations.
Section 1101(g)(2) of the Affordable Care Act states that if HHS estimates for any fiscal year that the aggregate amounts available for the payment of the expenses of the high risk pool will be less than the actual amount of such expenses, HHS shall make such adjustments as are necessary to eliminate this deficit. Further, section 1101(g)(4) of this Act states that HHS has the authority to stop taking applications for participation in the program to comply with the funding limitations. Accordingly, § 152.35(c) of this rule provides that the PCIP, subject to HHS approval, may adjust premiums, alter required benefits, limit PCIP applications or take other measures to eliminate a projected deficit. Particularly in view of the capped appropriation for the PCIP program, HHS is committed to working very closely with the PCIPs to monitor PCIP enrollment and claims experience. To that end, the PCIP contracts include detailed reporting responsibilities with respect to PCIP enrollment and spending, as well as spelling out PCIP responsibilities for the development of mitigation strategies and recommended adjustments should the amounts available under a contract be less than the projected expenses. Lastly, § 152.35(d) ensures that, if the Secretary estimates that aggregate amounts available for PCIP expenses will be less than the actual amount of expenses, HHS reserves the right to make such adjustments as are necessary to eliminate such deficit, consistent with the terms of the PCIP contract.
As provided by section 1101(g)(3)(B) of the Affordable Care Act, HHS will develop procedures to transition PCIP enrollees to the Exchanges (exchanges) that are established under sections 1311 or 1321 of the Act, in order to ensure there are no lapses in coverage for individuals enrolled in the PCIP program. Since these exchanges are still in the developmental stages, we believe it would be premature to specify transition procedures in this interim final rule. Thus, section 152.45 simply establishes that HHS will develop such transition procedures, and we encourage comments on the best ways to carry out the transition.
Section 152.7 states that a proposal from a State or from a nonprofit private entity shall demonstrate that the eligible entity has the capacity and technical capability to perform all functions necessary for the design and operation of a Pre-Existing Condition Insurance Plan (PCIP), and that its proposed PCIP is in full compliance with all of the requirements of this part. Specifically, the proposal shall demonstrate that the proposed PCIP satisfies at least the conditions listed at § 152.7(a)(1) through (9).
If there are States that do not submit acceptable proposals as described in § 152.7, HHS will solicit proposals from nonprofit entities to contract with HHS to operate a PCIP in those States. Nonprofits may submit proposals to contract directly with HHS to operate a PCIP program.
Section 152.14 discusses eligibility to enroll in a PCIP program. An individual who enrolls in a PCIP must meet both the requirements listed at § 152.14(a)(1), demonstrating they are a citizen or national of the United States or lawfully present in the United States and § 152.14(a)(3), providing evidence that they have a pre-existing condition as established under paragraph (c) of this section. The burden associated with this requirement includes the process of obtaining such information and forwarding the information to the appropriate party at the PCIP. We estimate this information could be submitted either electronically or hard copy in accordance with directions furnished by the PCIP and approved by HHS. We estimate that it will take approximately 30 minutes per applicant to obtain, review and submit the above proof(s) of eligibility. Although the Department has not estimated program participation, for the purpose of this calculation, we assume that within the first six months of the program approximately 100,000 potential enrollees will submit eligibility information to the PCIP program. The estimated one-time burden associated with this requirement is 50,000 hours. As the program progresses beyond 2010, we assume that we will receive fewer inquiries based on the experience with existing State high risk pool programs. In 2011 and beyond, we assume that approximately 50,000 potential enrollees will submit eligibility information to the PCIP program. The estimated annual burden associated with this requirement is 25,000 hours.
Section 152.15(a) and (b) require a PCIP to develop and implement enrollment and disenrollment processes, respectively. The burden associated with these requirements is the time and effort necessary for a PCIP program to establish enrollment and disenrollment procedures. The burden associated with the establishment of enrollment and disenrollment procedures is a one-time burden that was included in the 684 burden hour estimate in our earlier discussion of § 152.7. While these requirements are subject to the PRA, the associated burden is approved under OMB control number 0938-1085.
In regards to ongoing reporting under the PCIP contract, any State or entity selected to administer the PCIP program may later decide it is in the best interest of their State to propose amendments to the previously agreed upon contract. We estimate that, while uncommon, such instances may occur and permissible proposed changes would be allowed. When considering all aspects of the contract, which would include the enrollment and disenrollment process, access to services, and the appeals process, we estimate that it will take approximately 24 hours per contractor to submit a revised proposal and implement any approved amendments. The estimated annual burden associated with this requirement is 1,224 hours at a cost of $28,152.
Section § 152.22(a) states that a PCIP may specify the networks of providers from whom enrollees may obtain plan services. The PCIP must demonstrate to HHS that it has a sufficient number and range of providers to ensure that all covered services are reasonably available and accessible to its enrollees. The burden associated with this requirement is the time and effort necessary for a PCIP to demonstrate to HHS that it has a sufficient number and range of providers to ensure that all covered services are reasonably available and accessible to its enrollees. The burden associated with these requirements is included in the 684 burden hour estimate for compiling the necessary information to comply with this requirement as stated in our earlier discussion of § 152.7.
Section 152.26(a) requires a PCIP to establish and maintain procedures for individuals to appeal eligibility and coverage determinations. Section 152.26(b) lists the minimum requirements for appeals procedures. The burden associated with this requirement is the time and effort necessary for a PCIP to develop and maintain appeals procedures. The burden associated with these requirements is included in the 684 burden hour estimate for compiling the necessary information to comply with this requirement as stated in our earlier discussion of § 152.7. The aforementioned information collection requirements and associated burden are currently approved under OMB control number 0938-1085.
As stated in § 152.27(a), a PCIP shall develop, implement, and execute operating procedures to prevent, detect, recover (when applicable or allowable), and promptly report to HHS incidences of waste, fraud and abuse. Additionally, § 152.27(b) states that a PCIP program shall cooperate with Federal law enforcement authorities in cases involving waste, fraud, and abuse. The burden associated with the requirement contained in § 152.27 is the time and effort necessary to submit the required information on an ongoing basis. We estimate that it will take PCIPs 4 hours each month, per State, to report all required information to HHS and/or Federal law enforcement authorities which would include any identified instances of waste, fraud, and abuse. The estimated annual burden associated with this requirement is 2,448 hours at a cost of $56,304.
Section 152.28(b) requires a PCIP to establish procedures to identify and report to HHS instances in which health insurance issuers or group health plans are discouraging high-risk individuals from remaining enrolled in their current coverage and in instances in which such individuals subsequently are eligible to enroll in the qualified high risk pool. The required procedures shall include methods to identify circumstances described in § 152.28(b)(1) through (4). The burden associated with this requirement is the time and effort necessary for a PCIP to establish procedures for identifying insurer dumping and for reporting dumping practices to HHS. We estimate that it will take PCIPs 8 hours each month, per State, to develop and report information to HHS of any health insurance issuer or group health plan they have identified as discouraging an individual from remaining enrolled in coverage offered by such issuer or health plan based on the individual's health status. The estimated annual burden associated with this requirement is 4,896 hours at a cost of $110,160.
Section 152.39(a) requires a State that enters into a contract with HHS under this part to demonstrate, subject to approval by HHS, that it will continue to provide funding of any existing high risk pools in the State at a level that is not reduced from the amount provided for in the year prior to the year in which the contract is entered. The burden associated with this requirement is the time and effort necessary for a State to demonstrate maintenance of effort to HHS. The burden associated with this one-time requirement is included in the 684 burden hour estimate for compiling the necessary information to comply with the proposal requirement as stated in our earlier discussion of § 152.7. While this requirement is subject to the PRA, the associated burden is approved under OMB control number 0938-1085. Table 1—Annual Reporting and Recordkeeping Burden Back to Top
Total capital/maintenance costs
§ 152.7, § 152.15, § 152.22, § 152.26, § 152.39
0938-1085
§ 152.15, § 152.22, § 152.26
0938-1100
0938-1095
1,939,020
The Department provides an assessment of the potential costs, benefits, and transfers associated with these interim final regulations, summarized in the following table. Table 1.1—Accounting Table Back to Top
$1,939,020 annually for reporting and recordkeeping.
$5,000,000,000 for the period from July 1, 2010 to December 31, 2013.
There are 35 State-based high risk pool programs today.
First created in the 1970s, States adopted these programs to address insurance market failures for people with pre-existing conditions. The number of such existing State programs grew with the enactment of a Federal law, the Health Insurance Portability and Accountability Act of 1996 (HIPAA), that requires States to provide either guaranteed issue policies in the individual market to a certain set of people who have been continuously covered or access to an acceptable alternative mechanism, such as a high risk pool. In addition, beginning in 2002, Federal grants provided seed money and a limited amount of loss subsidies for such programs. Ongoing financial support for State-based high risk pools varies, but is generally provided through assessments on issuers, enrollee premiums, State general revenue, and, recently, Federal grants. Each program also has different eligibility rules, benefits, premiums, and/or cost controls (e.g., pre-existing condition waiting lists, disease management). As of the end of 2008, there were approximately 200,000 enrollees in the 35 State high risk pools. The Government Accountability Office (GAO) estimated that there were approximately 4 million uninsured people with health problems in States with high risk pools.
First, none of the existing pools limit eligibility to people who have been uninsured for a minimum of six months whereas this is a pre-requisite for enrollment in the PCIP program. In general, the uninsured have different health problems, economic statuses, and demands for health care and health insurance than the insured population.
Second, while the State programs and Federal program cover roughly the same benefit categories, the PCIP program bars both benefit carve-outs and waiting periods for pre-existing conditions, which 30 State programs employ.
In addition, PCIP limits annual out-of-pocket spending to $5,950 nationwide, whereas two State programs have no specified annual limits and six States have limits that exceed $5,950 within each State's most popular high risk pool plan.
These distinctions in benefits affect both the cost of health insurance per capita as well as the mix of enrollees. For example, a person with cancer may decide it is not worth the premiums to sign up for a State high risk pool that will not cover her chemotherapy in the first year of enrollment due to a waiting period. Immediate coverage of pre-existing conditions should increase demand in the new program relative to the existing pools, and may also lead to a somewhat less favorable mix of health risks, because people with problems requiring substantial medical care will receive more benefit from the new program than the existing pools.
Third, all State high risk pools set their premiums at a higher percent of the standard rate in the individual market than the PCIP program. In the existing pools, premiums average 140 percent of standard rate, and range from 105 percent to 250 percent of the standard rate or higher.
The PCIP program's premiums are set at 100 percent of standard rate. PCIP's lower premium is expected to increase the number of people who will want to purchase coverage. One study estimated that lowering all State high risk pool premiums to 125 percent of the standard rate would increase enrollment by one-third.
The lower premium may lead to a more favorable health mix of enrollees, because the higher premiums in existing pools make the pools less attractive to individuals with fewer health problems. Lower premiums may also attract individuals who are in poor health, but are unable to afford the premiums in the existing pools.
Lastly, there is no clear correlation between high risk pool enrollment and need. One measure of need is the number and rate of uninsured residents. A State that provides protections for its residents with high risk or low income should have a relatively low number and rate of uninsured residents, and vice versa. As such, among States that offer such pools, there should be a relatively constant relationship between a State's number of uninsured and its enrollees in high risk pools. However, experience suggests otherwise. The difference between the highest and lowest ratio of a State's uninsured population to its high risk pool enrollees is 27 to one. This is substantially larger than the disparity in the ratio of uninsured to Medicaid enrollees in a State, which is six to one.
A report that examined current State high risk pools, estimated a participation rate of 0.05 to 0.33 percent of the State population in those programs.
For these reasons, the Department concludes that the experience in existing high risk pools is not a good basis for estimating PCIP enrollment.
Several reports have estimated the likely number of enrollees in the PCIP program by using survey data and applying a participation rate to the approximate number of people eligible for the PCIP program. One analysis was conducted by the Center for Studying Health System Change.
Using the Medical Expenditure Panel Survey (MEPS), the analysis identified individuals who were uninsured and had at least one chronic condition deemed “high cost,” meaning spending exceeds 1.5 times of the average cost of the condition. This methodology generated 5.6 to 7 million people who could potentially qualify for the program. Assuming that the annual Federal cost per person is $6,000 to $7,000 and the $5 billion in Federal funding is capped in each year over the three and a half year period (roughly $1.3 to $1.4 billion per year), the analysis estimated that 200,000 people per year through 2013 could be covered.
Third, the Congressional Budget Office (CBO) conducted two analyses. In a December 2008 report, CBO estimated the cost and coverage of a national high risk pool program. This program would require that all States establish high risk pool programs, with full Federal subsidies for enrollees. Its premiums would be higher than PCIP—150 versus 100 percent of the standard rate—but its enrollment would be broader—significantly, it would not require that applicants have been uninsured for the previous six months. CBO estimated that 175,000 uninsured would gain coverage in this program, and the Federal cost would be $5.4 billion over five years (with offsetting receipts from changes in employer coverage).
In addition, in June, 2010, CBO provided information on PCIP in response to a request from Congress.
Its methodology was not explained in its letter, but it calculated that 200,000 people could be enrolled in the program for the 2010-2013 period given the fixed $5 billion appropriation. If the Federal funding cap were lifted, CBO estimated that enrollment would be 400,000 in 2011 rising to about 600,000 or 700,000 in 2013. CBO underscored the uncertainty of the estimates due to the potential variation in eligibility rules, benefits, and premiums. Since this interim final rule preserves variation and flexibility in program parameters across States, CBO's observations continue to be relevant and there may be a wide range of potential enrollees. CBO would probably continue to estimate a wide range of potential enrollees taking this interim final rule into account.
A first type of benefit is reductions in mortality and morbidity. While the empirical literature leaves many questions unresolved, a growing body of evidence convincingly demonstrates that health can be improved by spending more on at-risk individuals and by expanding health insurance coverage. For example, Almond et al.
find that newborns classified just below a medical threshold for “very low birthweight” have lower mortality rates than newborns classified as just above the threshold, despite an association between low birth weight and higher mortality in general, because they tend to receive timely and appropriate medical care. In a study of severe automobile accidents, Doyle
found that uninsured individuals receive less care and have a substantially higher mortality rate. Currie and Gruber
found that increased eligibility for Medicaid coverage expanded utilization of care for otherwise uninsured children, leading to a sizeable and significant reduction in child mortality. A study of Medicare by Card et al.
found that individuals just old enough to qualify for coverage have lower mortality rates—despite similar illness severity—than do those just too young for eligibility. Finally, a report by the Institute of Medicine (IOM)
found mortality risks for uninsured individuals that were 25 percent higher than those of observably similar insured individuals. In addition to the prospect that expanded insurance coverage will result in reductions in mortality, it will almost certainly significantly reduce morbidity, as demonstrated in extensive reviews of the literature by Hadley and the IOM.
A second type of benefit from the cumulative effects of this interim final regulation is a reduction in financial burden faced by the uninsured on account of onerous medical costs. Various studies have documented two related phenomena: (1) Averted healthcare utilization among the uninsured due to cost and (2) financial strain due to medical expenditures among the uninsured. Recent data show that 24 percent of the uninsured went without needed health care due to cost compared to 4 percent of those with private or employer-based insurance.
Given the population targeted by the PCIP program—uninsured people with pre-existing conditions—individuals currently without insurance may not be able to simply forgo needed care, leading to substantial financial strain. Approximately half of the more than 500,000 personal bankruptcies in the U.S. in 2007 were in part due to very high medical expenses.
In a Commonwealth Fund report
on medical debt, 60 percent of those having no insurance reported having difficulties paying medical care costs. In the past 12 months, they had incurred medical bills they either could not pay, were forced to make significant changes in their life styles in order to meet their obligations, had been contacted by a bill collection agency, or were forced to pay medical bills over an extended period. Exclusions from health insurance coverage based on preexisting conditions expose the uninsured to the aforementioned financial risks.
The Pre-Existing Condition Insurance Plan is designed to reduce the uncertainty and hardship associated with these financial risks by limiting the extent to which individuals must bear the entire cost of medical care by themselves. One study found that people who are uninsured for a full year pay for over a third of their care (35 percent) out-of-pocket, while individuals who are insured for a full or partial year paid just under 20 percent of their care out-of-pocket.
Moreover, because the PCIP program is targeted to individuals who are likely to have extensive medical needs, it is likely to have especially large economic benefits in terms of reducing financial risk. For example, uninsured individuals with two chronic conditions spent $908 out of pocket annually compared to $304 annually among the uninsured with no chronic conditions and $259 annually among the privately insured with no chronic conditions.
This program and the interim final regulation that implements it will help insurance companies more effectively protect patients from the financial hardship of illness, including bankruptcy and reduced funds for non-medical purposes.
A third type of benefit from the PCIP program and this interim final regulation is improved workplace productivity. This interim final regulation will benefit employers and workers by increasing workplace productivity and reducing absenteeism, low productivity at work due to preventable illness, and “job-lock.” A June 2009 report by the Council of Economic Advisers found that increased access to health insurance coverage improves labor market outcomes by improving worker health.
The health benefits of offering health insurance to uninsured people with pre-existing conditions will help to reduce disability, low productivity at work due to preventable illness, and absenteeism in the work place, thereby increasing workplace productivity and labor supply. Economic theory suggests that these benefits would likely be shared by workers, employers, and consumers.
Fourth, the PCIP will reduce cost shifting of uncompensated care to the privately insured, which contributes to higher premiums. The program will help expand the number of individuals who are insured and reduce the likelihood that individuals who have insurance do not bankrupt themselves by paying medical bills. Both effects will help reduce the amount of uncompensated care that imposes a “hidden tax” on consumers of health care since the costs of this care are shifted to those who are able to pay for services in the form of higher prices.
In their analysis of the interim final regulations implementing patient protections, the Departments of Labor, the Treasury, and Health and Human Services estimated an order of magnitude for the compensatory reduction in cost-shifting of uncompensated care associated with the expansion of coverage of those interim final regulations.
The analysis assumed that induced utilization due to expanded coverage would be relatively low since the uninsured populations affected by these interim final regulations tend to have worse health, greater needs for health care, and less ability to reduce utilization when they are uninsured. Second, on the basis of the economics literature on the subject,
the Departments estimated that two-thirds of the previously uncovered costs would have been uncompensated care, 25 percent of which would have been paid for by private sources. Assuming that reductions in privately-financed uncompensated care lower insurance premiums charged to consumers, the Departments estimated the patient protections' regulations' increased insurance coverage could result in reductions in insurance premiums of up to $1 billion in 2013.
Under section 1101 of the Affordable Care Act, HHS is authorized to disperse $5 billion for the purpose of funding the PCIP program, including administrative costs and contracts with States and non-profit third party administrators. This Federal funding is used to offset the cost of providing health care to enrollees that exceeds the premium revenue. According to independent studies, the Federal share of total costs could be roughly 35 to 40 percent of total spending.
The Department considered regulatory alternatives for program design, and often referred to the design features in existing State high risk pool and the Children's Health Insurance Program (CHIP) given their similarities to the PCIP goals and features. We explored setting uniform rules for eligibility for all PCIPs but rejected this approach since it did not take into account the existing markets and programs in each State.
This rule does not impose any direct costs on State or local governments. Consistent with section 1101(g)(5) of the Act, § 152.40 of this interim final rule specifies that State standards that might otherwise apply to the coverage offered under a PCIP are preempted, with the exception of laws relating to licensing or solvency. This language tracks similar language that applies to State regulation of health plans offering Medicare Advantage plans under Medicare Part C or drug coverage under Medicare Part D under title XVIII of the Social Security Act, and we would expect to interpret the language for purposes of the high risk pool program in a manner similar to the way HHS has applied it under those programs. We do not anticipate that this regulation will have significant implications, particularly since only individuals who are not now insured, and thus not directly subject to existing State insurance laws, may enroll in the program.
152.1 Statutory basis.
152.2 Definitions.
152.6 Program administration.
152.7 PCIP proposal process.
152.14 Eligibility.
152.15 Enrollment and disenrollment process.
152.19 Covered benefits.
152.20 Prohibitions on pre-existing condition exclusions and waiting periods.
152.21 Premiums and cost-sharing.
152.22 Access to services.
152.26 Appeals procedures.
152.27 Fraud, waste, and abuse.
152.28 Preventing insurer dumping.
152.32 Use of funds.
152.33 Initial allocation of funds.
152.34 Reallocation of funds.
152.35 Insufficient funds.
152.39 Maintenance of effort.
152.40 Relation to State laws.
152.44 End of PCIP program coverage.
152.45 Transition to the exchanges.
(a) Basis. This part establishes provisions needed to implement section 1101 of the Patient Protection and Affordable Care Act of 2010 (Affordable Care Act), which requires the Secretary of the Department of Health and Human Services to establish a temporary high risk health insurance pool program to provide health insurance coverage for individuals described in § 152.14 of this part.
Creditable coverage means coverage of an individual as defined in section 2701(c)(1) of the Public Health Service Act as of March 23, 2010 and 45 CFR 146.113(a)(1). Enrollee means an individual receiving coverage from a PCIP established under this section.
(iv) Family Unity beneficiaries pursuant to section 301 of 101 as amended;
Subpart B—PCIP Program Administration Back to Top
(d) Transition in administration. The Secretary may consider a request from a State to transition from administration by HHS to administration by a State or from administration by a State to administration by HHS. Such transitions shall be approved only if the Secretary determines that the transition is in the best interests of the PCIP enrollees and potential PCIP enrollees in that state, consistent with § 152.7(b) of this part.
Subpart C—Eligibility and Enrollment Back to Top
(d) Funding limitation. A PCIP may stop taking applications for enrollment to comply with funding limitations established by the HHS under section 1101(g) of Public Law 111-148 and § 152.35 of this part. Accordingly, a PCIP may employ strategies to manage enrollment over the course of the program that may include enrollment capacity limits, phased-in (delayed) enrollment, and other measures, as defined by the PCIP and approved by HHS, including measures specified under § 152.35(b).
Subpart D—Benefits Back to Top
(11) Emergency services, consistent with § 152.22(b), and ambulance services
(a) Pre-existing condition exclusions. A PCIP must provide all enrollees with health coverage that does not impose any pre-existing condition exclusions (as defined in § 152.2) with respect to such coverage.
Subpart E—Oversight Back to Top
Subpart F—Funding Back to Top
Subpart G—Relationship to Existing Laws and Programs Back to Top
Subpart H—Transition to Exchanges Back to Top
1. Kaiser Family Foundation. State Health Facts. http://www.statehealthfacts.org/.
3. U.S. Government Accountability Office, Health Insurance: Enrollment, Benefits, Funding, and Other Characteristics of State High Risk Health Insurance Pools (2009), http://www.gao.gov/new.items/d09730r.pdf.
4. U.S. Government Accountability Office, Health Insurance: Enrollment, Benefits, Funding, and Other Characteristics of State High Risk Health Insurance Pools (2009), http://www.gao.gov/new.items/d09730r.pdf. This estimate was based on the number of individuals with at least one chronic condition, from the 2006 Medical Expenditure Panel Survey (MEPS), applied to the Current Population Survey estimates of the population in States with high risk pools.
5. “The Uninsured: A Primer,”Kaiser Commission on Medicaid and the Uninsured (2006), http://www.kff.org/uninsured/upload/7451.pdf.
6. Tanya Schwartz, “State High Risk Pools: An Overview,”Kaiser Commission on Medicaid and the Uninsured. (2010), http://www.kff.org/uninsured/8041.cfm.
7. U.S. Government Accountability Office, Health Insurance: Enrollment, Benefits, Funding, and Other Characteristics of State High Risk Health Insurance Pools (2009), http://www.gao.gov/new.items/d09730r.pdf.
9. Austin Frakt, Steve Pizer, and Martin Wrobel, “Insuring the Uninsurable: The Growth in High-Risk Pools,”Abt Associates, HSRE Working Paper (2002), http://www.abtassociates.com/reports/HSRE-W12-highrisk.pdf.
11. “State High Risk Pools: An Overview.”State Health Access Data Assistance Center (2008).
12. Mark Merlis, “Health Coverage for the High-Risk Uninsured: Policy Options for Design of the Temporary High-Risk Pool,”National Institute for Health Care Reform, Center for Studying Health System Change (2010).
15. Douglas Almond et al.,“Estimating Marginal Returns to Medical Care: Evidence from At-Risk Newborns,”The Quarterly Journal of Economics 125, No. 2 (2010): 591-634, http://www.mit.edu/&tilde;jjdoyle/vlbw.pdf.
16. Joseph J. Doyle, “Health Insurance, Treatment and Outcomes: Using Auto Accidents as Health Shocks.”The Review of Economics and Statistics 87, No. 2 (2005): 256-270, http://www.mitpressjournals.org/doi/abs/10.1162/0034653053970348.
17. Janet Currie and J. Gruber, “Health Insurance Eligibility, Utilization of Medical Care, and Child Health,”The Quarterly Journal of Economics 111, No. 2 (1996): 431-466, http://www.jstor.org/stable/2946684?cookieSet=1.
18. David Card, C. Dobkin, and N. Maestas, “Does Medicare Save Lives?”The Quarterly Journal of Economics 124, No. 2 (2009): 597-636, http://www.mitpressjournals.org/doi/abs/10.1162/qjec.2009.124.2.597.
19. Institute of Medicine, “Care Without Coverage: Too Little, Too Late,” (2002), http://books.nap.edu/openbook.php?record_id=10367&amp;page=R1.
20. Institute of Medicine, op. cit. J. Hadley, “Sicker and Poorer: The Consequences of Being Uninsured,”Medical Care Research and Review 60 (No. 2): 3S-75S, (2003).
21. Kaiser Family Foundation, “The Uninsured A Primer,” (2009), http://www.kff.org/uninsured/upload/7451-05.pdf.
22. David Himmelstein et al.,“Medical Bankruptcy in the United States, 2007: Results of a National Study,”The American Journal of Medicine (2009), http://www.pnhp.org/new_bankruptcy_study/Bankruptcy-2009.pdf.
23. Collins et al.,“The Affordability Crisis In U.S. Health Care: Findings From The Commonwealth Fund Biennial Health Insurance Survey ,” (2004): 17.
24. Jack Hadley and John Holohan, “The Cost of Care for the Uninsured,”The Kaiser Commission on Medicaid and the Uninsured (2004), http://www.kff.org/uninsured/upload/The-Cost-of-Care-for-the-Uninsured-What-Do-We-Spend-Who-Pays-and-What-Would-Full-Coverage-Add-to-Medical-Spending.pdf.
25. Hwang et al, “Out of Pocket Medical Spending for Care of Chronic Conditions,”Health Affairs (2001), http://www.partnershipforsolutions.org/DMS/files/Out-of-pocket2002.pdf.
27. Federal Register June 28, 2010: http://frwebgate1.access.gpo.gov/cgi-bin/TEXTgate.cgi?WAISdocID=3HyQcj/5/1/0&amp;WAISaction=retrieve.
28. Jack Hadley et al,“Covering the Uninsured in 2008: Current Costs, Sources of Payment, and Incremental Costs,” Health Affairs 27, No. 5 (2008): 399-415.
30. Mark Merlis, “Health Coverage for the High-Risk Uninsured: Policy Options for Design of the Temporary High-Risk Pool,”National Institute for Health Care Reform, Center for Studying Health System Change (2010).