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. 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.” As of March 2013, HHS indicates that 18 states will establish their own state- based exchanges and 33 will have a federally facilitated exchange, of which 7 states are planning to have a partnership exchange. 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: 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. 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. 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. 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 HHS on proposed rate increases. 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. 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. On the basis of this authority, HHS established two separate rate review grant programs: 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 comprehensive rate review process. Once awarded, grant funds were available for 1 year, and a state could only receive one grant. 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. (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. 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, 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. 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.