[Federal Register Volume 75, Number 146 (Friday, July 30, 2010)]
[Rules and Regulations]
[Pages 45014-45033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18691]
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Part II
Department of Health and Human Services
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45 CFR Part 152
Pre-Existing Condition Insurance Plan Program; Interim Final Rule
Federal Register / Vol. 75 , No. 146 / Friday, July 30, 2010 / Rules
and Regulations
[[Page 45014]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Part 152
[OCIIO-9995-IFC]
RIN 0991-AB71
Pre-Existing Condition Insurance Plan Program
AGENCY: Office of Consumer Information and Insurance Oversight, OCIIO,
Department of Health and Human Services, HHS.
ACTION: Interim final rule with comment period.
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SUMMARY: Section 1101 of Title I of the Patient Protection and
Affordable Care Act of 2010 (Affordable Care Act) requires that the
Secretary establish, either directly or through contracts with States
or nonprofit private entities, a temporary high risk health insurance
pool program to provide affordable health insurance coverage to
uninsured individuals with pre-existing conditions. This program will
continue until January 1, 2014, when Exchanges established under
sections 1311 and 1321 of the Affordable Care Act will be available for
individuals to obtain health insurance coverage. This interim final
rule implements requirements in section 1101 of the Affordable Care
Act. Key issues addressed in this interim final rule include
administration of the program, eligibility and enrollment, benefits,
premiums, funding, and appeals and oversight rules.
DATES: Effective date: This regulation is effective on July 30, 2010.
Comment date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
on September 28, 2010.
ADDRESSES: In commenting, please refer to file code OCIIO-9995-IFC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed)
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the instructions under
the ``More Search Options'' tab.
2. By regular mail. You may mail written comments to the following
address only: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-OCIIO-IFC, P.O. Box 8010,
Baltimore, MD 21244-8010.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address only: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: OCIIO-9995-IFC,
Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Room 445-G, Hubert H. Humphrey Building, 200
Independence Avenue, SW., Washington, DC 20201
(Because access to the interior of the Hubert H. Humphrey
Building is not readily available to persons without Federal
government identification, commenters are encouraged to leave their
comments in the CMS drop slots located in the main lobby of the
building. A stamp-in clock is available for persons wishing to
retain a proof of filing by stamping in and retaining an extra copy
of the comments being filed.)
b. For delivery in Baltimore, MD--
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-7195 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
Submission of comments on paperwork requirements. You may submit
comments on this document's paperwork requirements by following the
instructions at the end of the ``Collection of Information
Requirements'' section in this document.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Ariel Novick, (301) 492-4290.
SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments
received before the close of the comment period are available for
viewing by the public, including any personally identifiable or
confidential business information that is included in a comment. We
post all comments received before the close of the comment period on
the following Web site as soon as possible after they have been
received: http://regulations.gov. Follow the search instructions on
that Web site to view public comments.
Comments received timely will be also available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.
I. Background
A. General
Historically, public policy has addressed the challenges of people
with pre-existing conditions through either high risk pools or
insurance reform. In general, high risk pools provide coverage of last
resort for people who, because of their health, are denied coverage by
private insurers or are unable to purchase coverage in the individual
market except at substantially surcharged premiums due to their health
status, and are ineligible for public coverage (such as Medicare or
Medicaid). Most States that permit insurers to decline coverage for
health reasons have established high risk pools as an alternative
coverage option in their individual market. These current pools provide
safety net coverage for people who have difficulty obtaining individual
health insurance because of their pre-existing conditions. First
established in 1976, 35 State high risk pools currently provide
coverage to approximately 200,000 individuals, or about one percent of
the individual market nationwide, and vary in terms of the populations
they cover and the benefits they provide.
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.\1\ 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
[[Page 45015]]
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.\2\ This temporary Federal program provides coverage
to uninsured Americans with pre-existing conditions until the
Affordable Care Act is fully implemented in 2014.
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\1\ Kaiser Family Foundation. State Health Facts. http://www.statehealthfacts.org/.
\2\ These provisions do not apply to ``grandfathered'' plans.
For a description of these provisions, see the interim final
regulations implementing 2719A (regarding patient protections),
published in the Federal Register on June 28, 2010 (75 FR 37188).
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B. Overview: Section 1101 of the Patient Protection and Affordable Care
Act
The Affordable Care Act, was enacted on March 23, 2010. The Health
Care and Education Reconciliation Act (the Reconciliation Act), Public
Law 111-152, was enacted on March 30, 2010. Section 1101 of the
Affordable Care Act requires that the Secretary of the Department of
Health and Human Services (HHS) establish, either directly or through
contracts with States or nonprofit private entities, a temporary high
risk health insurance program to provide access to coverage for
uninsured Americans with pre-existing conditions. (Hereafter, we
generally refer to this program as the Pre-Existing Condition Insurance
Plan program, or PCIP program, to avoid confusion with the existing
State high risk pool programs, which will continue to operate
separately.)
The PCIP program is intended to remain in place from the time of
its establishment until the Exchanges established under sections 1311
or 1321 of the Act go into effect on January 1, 2014. This interim
final regulation sets policy only for this unique, temporary Federal
program with fixed Federal funding. Presented below is a general
overview of the statutory requirements for the new program. More
detailed descriptions of the specific requirements are included below
as part of the discussion of the associated regulatory provisions set
forth in this interim final rule.
II. Provisions of the Interim Final Rule
A. General Provisions (Subpart A, Sec. 152.1 Through Sec. 152.2)
Section 152.1 of this interim final rule specifies the general
statutory authority for the ensuing regulations and the scope of the
program, consistent with section 1101 of the Act. Section 152.2
provides definitions for terms that appear throughout these
regulations. Generally, the definitions are self-explanatory or taken
directly from section 1101 of the statute. The definitions set forth in
subpart A apply to all of part 152 unless otherwise indicated and are
applicable only for purposes of part 152.
The definition of ``pre-existing condition exclusion'' warrants a
brief discussion. First, it is important to note that this definition
applies only for purposes of the prohibition in section 1101(c)(2)(A)
on a PCIP ``impos[ing] any preexisting condition exclusion'' under the
coverage provided (an important protection for a program designed to
offer coverage to those with a pre-existing condition), and is separate
from the ``guidelines'' that determine pre-existing condition status
under section 1101(d)(2)(3) for purposes of eligibility for enrollment
in a PCIP. These latter eligibility provisions are set forth in subpart
C of this rule, under section 152.14.
State laws vary with regard to the definition of a pre-existing
condition exclusion. For purposes of defining a pre-existing condition
exclusion, we adopted the definition of pre-existing condition
currently used in the group market under the Health Insurance
Portability and Accountability Act of 1996 (HIPAA). We also took into
account section 1201 of the Affordable Care Act, which prohibits
denials of coverage because of a pre-existing condition. Thus, we
specify that pre-existing condition exclusion has the same meaning as
under 45 CFR 144.103. That is, the term refers to a denial of coverage,
or limitation or exclusion of benefits, based on the fact that the
individual denied coverage or benefits had a health condition that was
present before the date of enrollment for the coverage (or a denial of
enrollment), whether or not any medical advice, diagnosis, care, or
treatment was recommended or received before that date. This would
include exclusions stemming from a condition identified via a pre-
enrollment questionnaire or physical examination, or the review of
medical records during the pre-enrollment period.
B. PCIP Program Administration (Subpart B, Sec. 152.6 and Sec. 152.7)
As noted above, section 1101(b) of the Affordable Care Act provides
that HHS may ``carry out'' the temporary high risk health insurance
pool program either directly or through contracts with eligible
entities, which are States and non-profit entities. Eligible entities
must submit a proposal to carry out a PCIP in a time and manner, and
containing such information, that the Secretary requires. Section 152.6
establishes the general rules for administration through either a State
or by HHS through a non-profit private entity. Section 152.7 then
describes the proposal process and specifies that in order to contract
with HHS, the eligible entity's proposal must demonstrate capability to
perform all functions necessary for the design and operation of a PCIP,
and that its proposed PCIP is in full compliance with all of the
requirements of this part.
These standards establish minimum requirements for PCIPs, and are
supplemented by other requirements detailed in solicitation documents
(such as the descriptions of the outreach plan and consumer information
resources that each PCIP will establish) and incorporated into the
final contracts with HHS.
B. Eligibility and Enrollment (Subpart C, Sec. 152.14 Through Sec.
152.15)
Section 1101(d) of the Affordable Care Act provides the basic
eligibility criteria for the PCIP program, which are set forth under
Sec. 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 Sec. 152.15.
Eligibility for the PCIP Program (Sec. 152.14)
Under section 1101(d) of the Affordable Care Act and subparagraphs
(1), (2) and (3) of Sec. 152.14(a) of this interim final rule, an
individual is eligible to enroll in a PCIP if he or she: (1) Is a
citizen or national of the United States or is lawfully present in the
United States as determined in accordance with section 1411 of the
Affordable Care Act; (2) has not been covered under creditable
coverage, as defined in section 2701(c)(1) of the Public Health Service
Act as of the date of enactment, during the 6-month period prior to the
date on which he or she is applying for coverage through the PCIP; and
(3) has a pre-existing condition, as determined in a manner consistent
with guidance issued by the Secretary. We further provide in Sec.
152.14(a)(4) that an individual must be a resident of a State that
falls within the service area of a PCIP.
Eligibility Conditioned on Citizenship and Immigration Status
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
[[Page 45016]]
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, Sec. 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.
Some States are not able to have an automated ``on-line system'' or
``electronic'' process in place when they start accepting enrollments
into their PCIPs. Therefore, these regulations provide, as an
``alternative method'' approved by the Secretary, that a PCIP program
may instead require the individual to provide documentation that
establishes citizenship or immigration status. Subject to HHS approval,
States using documentation procedures may switch to an automated system
in the future. If a PCIP shares such information with the Social
Security Administration or the Department of Homeland Security,
consistent with the Privacy Act, the regulation specifies that a PCIP
must include a disclosure that the information provided on the
enrollment request may be shared with other government agencies for
purposes of establishing eligibility. The type(s) of documentation
PCIPs may use is subject to approval by HHS under the terms of the
contract.
Eligibility Based on a 6-Month Period Without Insurance Coverage
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 Sec.
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 Sec. 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.
In light of the unique circumstances presented by infants who are
less than six months old, the Department will issue guidance on how the
requirement that the individual not have had creditable coverage during
the six-month period prior to the application for the PCIP program
applies to and can be satisfied by such infants. Factors to be
considered in this guidance include whether coverage in the hospital
under the mother's plan at birth counts, current practices regarding
insurers' coverage of newborns, and the anti-dumping rules that direct
the Secretary to prevent disenrollment of individuals from existing
insurance due to their health status.
Eligibility Based on Having a Pre-Existing Condition
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 Sec. 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
[[Page 45017]]
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 Sec. 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 Sec. 152.14(c)(4) that HHS may approve
other criteria for meeting the definition of pre-existing condition
under a given PCIP.
We anticipate that the first two criteria will be used in all
States where individuals may be denied coverage or offered coverage
with exclusionary riders. In the PCIP program serving States that have
elected not to play a role in operating a PCIP program, only the first
two criteria will be used, except with respect to individuals who are
guaranteed to be issued a policy. PCIPs administered by States or non-
profit entities may choose to utilize the additional criteria with HHS
approval.
Eligibility for a PCIP Conditioned on Residing in the Plan's Service
Area
Eligibility for a PCIP is limited to individuals who reside in the
service area of the PCIP. At Sec. 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.
The statute explicitly acknowledges the role of a State (defined in
section 1304(d) of the Act as the 50 States and the District of
Columbia) with respect to the administration of PCIP, with no reference
to ``Territories'' (see 1101(b)(2) and (3), 1101(e)(3), 1101(g)(3)(A)
and (5)). Unlike section 1204(a) of the Health Care and Education
Reconciliation Act of 2010, (which amended the Affordable Care Act and
clearly specified a role for territories in the operation of
Exchanges), the Congress made no similar reference to Territories in
connection with the PCIP program.
Enrollment and Disenrollment Process (Sec. 152.15)
Under our authority in section 1101(c)(2)(D) of the Act to impose
``appropriate'' requirements that PCIPs would be required to meet,
Sec. 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.
Section 152.15(a)(2) of this interim final rule specifies that a
PCIP must allow an individual to remain enrolled unless the individual
is disenrolled under specified circumstances (for example, the
individual moves out of the service area or obtains other creditable
coverage) or the PCIP program is terminated. Our intent is to promote
continuity of coverage for individuals who enroll in a PCIP until they
are able to obtain coverage through the Exchange, under which
participating insurers cannot exclude individuals with pre-existing
conditions. We understand, however, that to the extent individuals can
obtain other coverage, for example, by becoming entitled to Medicare or
enrolling in employer-based health insurance, such coverage would
obviate the need for coverage provided by the PCIP. Leveraging the
availability of such coverage, by exiting the PCIP, enables other
qualified individuals to enroll.
A PCIP is required to establish, consistent with Sec. 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 Sec. 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 Sec. 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.
Section 152.15(c) requires that a PCIP establish rules governing
effective dates of enrollments and disenrollments. In particular, a
PCIP program must specify the deadline for receiving an enrollment
application that would take effect on the first of the following month.
In general, an individual who submits a complete enrollment request by
an eligible individual by the 15th day of a month could access coverage
by the 1st day of the following month. Exceptions to this policy will
be subject to approval by HHS.
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 Sec. 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.
Benefits--(Subpart D, Sections 152.19 Through 152.22)
Covered Benefits (Sec. 152.19)
Required Benefits (Sec. 152.19(a))
The required benefit list in Sec. 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
[[Page 45018]]
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).
Excluded Services (Sec. 152.19(b))
Section 152.19(b) sets forth a list of services that shall not be
covered by any PCIP. While the specific benefits to be included and
excluded by any PCIP are generally subject to HHS approval and review
through the PCIP contracting process, this excluded services list
addresses several areas where providing coverage is unequivocally
prohibited. This list of excluded services parallels that of FEHBP.
The subject of Federal funding of abortion services with respect to
the Affordable Care Act was addressed in the Executive Order issued by
the President on March 24, 2010: The enactment of the Affordable Care
Act left in place current restrictions that prohibit the use of Federal
funds for abortion services, except in cases of rape or incest, or
where the life of the woman would be endangered. Exec. Order No.
13,535, 75 FR 15,599 (Mar. 24, 2010). These restrictions currently
apply to certain Federal programs that are similar to the PCIP program.
The PCIP program is Federally-created, funded, and administered
(whether directly or through contract); it is a temporary Federal
insurance program in which the risk is borne by the Federal government
up to a fixed appropriation. As such, the services covered by the PCIP
program shall not include abortion services except in the case of rape
or incest, or where the life of the woman would be endangered.
Pre-Existing Conditions Exclusions (Sec. 152.20)
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
Sec. 147 adopt, with minor modifications, the definition of pre-
existing condition currently used under HIPAA.
Similarly, our rule prohibits PCIPs from applying any pre-existing
condition exclusion to covered services, and consistent with the
regulations implementing section 1201 of the Act, defines a pre-
existing condition exclusion as a limitation or exclusion of benefits
based on the fact that the condition was present before the date of
enrollment in coverage (or a denial of enrollment), whether or not any
medical advice, diagnosis, care, or treatment was recommended or
received before that date.
Pursuant to the authority provided to the Secretary under section
1101(c)(2)(D), this interim final rule also prohibits PCIPs from
imposing any type of coverage waiting period upon eligible individuals.
For purposes of this rule, a waiting period is defined as the period
immediately following the effective date of enrollment in which some or
all benefits in the coverage are not provided. Accordingly, once an
individual is enrolled in a PCIP consistent with the rules set forth in
subpart C, full coverage must be provided to the individual starting
with the effective date of enrollment.
Premiums and Cost-Sharing (Sec. 152.21)
Standard Rate
Section 1101(c)(2)(C)(iii) of the Act requires that premium rates
charged for coverage under the high risk pool program be established at
``a standard rate for a standard population''. The National Association
of Insurance Commissioners (NAIC) Model Health Plan for Uninsurable
Individuals Act suggests that high risk pool plans ``determine a
standard risk rate by considering the premium rates charged by other
insurers offering health insurance coverage to individuals.''
Furthermore, section 2245(g)(2) of the Public Health Service Act
(PHSA), which governs the existing Federal high risk pool grant
program, defines the ``standard risk rate'' for the high risk pools to
mean a rate that: (1) Is determined under the State high risk pool by
considering the premium rates charged by other health insurers offering
health insurance coverage to individuals in the insurance market
served; (2) is established using reasonable actuarial techniques; and
(3) reflects anticipated claims experience and expenses for the
coverage involved.
In keeping with the methodology suggested by the NAIC Model Act and
the Federal grant program, Sec. 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.
This interim final rule does not mandate a specific formula for
calculating the standard rate. Instead, we specify that a PCIP may
calculate the standard rate using reasonable actuarial techniques, as
approved by the Secretary, that reflect anticipated experience and
expenses. This requirement should accommodate reasonable variations in
the methods that PCIPs may use to calculate a standard risk rate.
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, Sec.
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 Sec. 152.8 of this part.
Premium Variation
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
[[Page 45019]]
for the PCIP program beyond the statutory requirements. Thus, Sec.
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)(C)(i) of the Act requires that premiums in the
PCIP program may vary only as provided under section 2701 of the PHSA,
other than what is allowed in section 1101. Section 2701 permits
premiums rates to vary in the individual and group markets by a finite
number of factors. Gender rating, for example, is prohibited in the
PCIP program.
Limits on Enrollee Costs
Section 1101(c)(2)(B) of the Act sets limits on enrollee costs in
the PCIP program. Specifically, the issuer's share of the total allowed
costs of benefits provided under such coverage cannot be less than 65
percent of such costs, subject to actuarial review and approval by the
Secretary. Section 152.21(b)(1) of this rule provides that coverage
under a plan offered by a PCIP must at a minimum meet this 65 percent
threshold.
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 Sec. 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.
Access to Services (Sec. 152.22)
As noted above, section 1101(c)(2)(D) of the Act provides that
coverage offered via a PCIP must meet any other requirements determined
appropriate by the Secretary of HHS. Section 152.22 provides that the
PCIP may specify the network of providers from whom enrollees may
obtain services, provided that the PCIP demonstrates to HHS that it has
a sufficient number and range of providers to ensure that all covered
services are reasonably available and accessible under such coverage.
Section 152.22(b) makes clear that, in the case of emergency room
services, such services must be covered out of network and out of area
if (1) the enrollee had a reasonable concern that failure to obtain
immediate treatment could present a serious risk to his or her life or
health; and (2) the services were required to assess whether a
condition requiring immediate treatment exists, or to provide such
immediate treatment where warranted. We believe these requirements are
in keeping with generally accepted standards with respect to the
provision of emergency services in plans with network limits, such as
those in place in the Medicare Advantage program under title XVIII of
the Social Security Act and the commercial health insurance market.
E. Oversight (Subpart E, Sections 152.26 Through 152.28)
Appeals Procedures (Sec. 152.26)
Section 1101(f)(1) of the Act requires the establishment of an
appeals process to enable individuals to appeal determinations under
the PCIP program. We are interpreting this provision to apply both to
determinations with respect to benefit coverage determinations and
determinations with respect to an individual's eligibility for the
program, including whether an individual is a citizen or national of
the United States, or lawfully present in the United States.
Rather than establishing detailed, proscriptive requirements with
respect to appeals procedures, Sec. 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, Sec.
152.26(b)(3) further specifies that an enrollee has the right to a
timely second-level appeal, or ``reconsideration,'' by an independent
entity.
The requirement for independent review of a plan's coverage
redetermination ensures that the entity providing the reconsideration
would have no stake of any kind in the outcome, and was not involved in
the initial or reconsidered determination being reviewed. This
requirement could be satisfied under a variety of arrangements,
including (1) An existing appeal mechanism provided for under State
law; (2) in the case of a State-administered PCIP, a review process
created by the State; or (3) an independent contractor, such as the
independent review entities with which HHS contracts to review coverage
determinations under the Medicare program.
These requirements are intended to permit States to use existing
appeals or review mechanisms provided for under State law, and to
permit other non-profit entities to utilize their existing internal
appeals mechanisms. The actual appeals mechanisms will be subject to
the Secretary's approval as part of the contracting process. Given both
the temporary nature of the program and the statutory implementation
timeframe for the new program, we believe that using these existing
mechanisms is necessary and appropriate.
Fraud, Waste, and Abuse (Sec. 152.27)
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, Sec. 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 Sec. 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.
Preventing Insurer Dumping (Sec. 152.28)
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
[[Page 45020]]
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.
Consistent with section 1101(e)(2) of the Affordable Care Act,
section 152.28(c) of the interim final rule provides that if, in
applying the criteria in section 152.28(b), it is determined that a
dumping under section 152.28(a) has occurred, the Secretary may bill
the issuer or group health plan for any medical expenses incurred by
the PCIP for such enrollees. In these situations, the interim final
rule also makes clear that the issuer or group health plan will be
referred to appropriate Federal and State authorities for other
enforcement action that may be warranted depending on the facts and
circumstances. Finally, section 152.28(d) specifies that nothing in the
subsection may be construed as constituting exclusive remedies for
violations of the section or preventing States from applying or
enforcing this section or other provisions of law with respect to
health insurance issuers, consistent with section 1101(c)(3) of the
Affordable Care Act. Additional guidance will be issued to prevent
``dumping'' from public programs like Medicaid and the Children's
Health Insurance Program.
F. Funding (Subpart F, Sections 152.32 Through 152.35)
Use of Funds (Sec. 152.32)
Section 1101(g) of the Affordable Care Act appropriates
$5,000,000,000 to pay the claims and administrative costs of the PCIP
program established under this section that are in excess of the amount
of premiums collected from enrollees. Traditionally, in State high risk
pools, as well as other insurance programs, the funds collected from
enrollees as premiums and other funding streams are expended across two
chief areas. The majority of funds collected as premiums are expended
to pay the health expenses for covered services incurred by enrollees.
Administrative expenses, the costs of operating the program, make up
the second major expense category. Section 152.32(a) of this interim
final rule thus provides that all funds awarded under this program must
be used exclusively to pay the allowable claims and administrative
costs of a PCIP established under this section. Such costs include
those incurred in the development and operation of the PCIP program, to
the extent that those costs are in excess of the amounts or premiums
collected from individuals enrolled in the program. PCIP program funds
are not available for any other uses, such as to pay expenses or defray
premiums of existing State high risk pools.
Although the Act does not specify the amount that a PCIP can spend
on administrative expenses, Sec. 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.
Initial Allocation of Funds (Sec. 152.33)
Section 1101(g) of the Act does not specify exactly how HHS should
allocate funds for the purpose of this program. At the outset of the
program, as specified under section 152.33, the Secretary has
established initial allotment ceilings for PCIPs in each State using a
methodology consistent with the funding allocation methodology used in
CHIP, as set forth under 42 CFR Part 457, subpart F, Payment to States.
(Note that, subject to these allocation ceilings, the estimated funding
amounts available under the PCIP program contracts are established
through the contracting process based on the projected number of PCIP
enrollees and their projected claims costs. Actual payments to PCIPs
will be based on their reported cost statements during the life of the
contract.)
Thus, the initial ceilings on PCIP funding allocations are based on
a blended formula based on the State population, number of uninsured
individuals under 65, and geographic health care costs. Under this
formula, one half of the available funds are allocated based on the
number of the nonelderly population in each State, compared to the
total U.S. nonelderly population. This gives more populous States more
funding and does not penalize those States that employ mechanisms to
reduce the number of uninsured persons in their States.
The health care cost index that HHS will use to adjust the funding
allocations will be based on the wages of employees in the health
services industry, and is consistent with what we have used under the
Children's Health Insurance Program. These wage data were developed by
the Bureau of Labor Statistics of the Department of Labor through its
Quarterly Census of Employment and Wages. This will include a weighted
average of the wages in the health services industry represented by
ambulatory health care services, hospitals, and nursing and residential
care facilities. As in the CHIP formula, 15 percent of the cost factor
is held constant, while 85 percent reflects how each State's average
wage compares to the U.S. average. In order to insure that the
geographic variation and cost adjustments accurately reflect statistics
on population and the number of uninsured, the same year of data will
be used to calculate population, number of uninsured, geographic health
care costs, and cost adjustments.
Reallocation of Funds (Sec. 152.34)
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
[[Page 45021]]
with respect to the need for reallocations.
Insufficient Funds (Sec. 152.35)
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, Sec. 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, Sec. 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.
G. Relationship to Existing Laws and Programs (Subpart G, Sec. 152.39
Through Sec. 152.40)
Relationship to Other Federal Health Insurance Regulation
We note that subtitles A and C of Title I of the Affordable Care
Act contain new requirements that apply to group health plans and
issuers of health insurance in the individual health insurance market
which are governed by title XXVII of the PHSA. Some of these provisions
address the same areas as the above provisions in section 1101
governing the PCIP program (e.g., premium amounts, beneficiary out-of-
pocket expenses, and pre-existing conditions). These insurance reforms
do not apply to the PCIP established under section 1101 of the
Affordable Care Act and implemented in this interim final rule since
the high risk pools do not meet the definition of a group health plan
or a health insurance issuer pursuant to sections 2791(a)(1) and
2791(b)(2) of the PHS Act.
Maintenance of Effort (Sec. 152.39)
Section 1101(b)(3) of the new law imposes a maintenance of effort
requirement, which specifies that in order for a State to enter into a
contract to administer a PCIP, a State must agree not to reduce the
annual amount it expended on the operation of an existing State high
risk pool in the year preceding the year in which a PCIP contract
begins. We believe that the clear intent of this provision is to
prohibit the shifting of costs of existing State high risk pools to the
Federal government. The maintenance of effort requirement both ensures
that the fixed $5 billion in funding is used to meet the PCIP program
goals and also reinforces the limitation of eligibility to individuals
who are uninsured, as opposed to those already insured through a State
high risk pool. At the same time, we recognize that States now use
different sources of funds to support the operation of existing high
risk pools. For example, many States rely upon assessments on the
health insurance industry or health insurance providers to support
their high risk pools, and States also commonly allow insurers to
reduce premium tax payments by all or a percentage of such assessment.
Given the various funding models that are now in place in different
States, we believe it is appropriate to permit States some latitude in
terms of ways in which they can satisfy this requirement subject to
Secretarial approval. Accordingly, section 152.39(a) specifies that in
order for a State to enter into a contract with the Secretary it must
comply with the maintenance of effort requirement set forth in section
1101(b)(3) of the Affordable Care Act in a manner approved by the
Secretary. We anticipate that permissible methods of meeting this
requirement would include, but are not limited to, maintaining either
the total amount or the total per capita amount of State funding for
the operation of an existing high risk pool (given that a State would
be maintaining its effort per enrollee, and cannot control
disenrollment), maintaining the same formula for providing funding for
a State high risk pool, or establishing an altered formula that the
Secretary determines will not reduce the total funds expended on the
existing high risk pool. (Note that options such as the per capita
approach would need to be evaluated in terms of other policies in
effect in a State that could negatively influence enrollment in an
existing State high risk pool.) Again, all such approaches are subject
to the approval of the Secretary.
Section 152.39(b) specifies that in situations where a State enters
into a contract with HHS under this part, HHS shall take appropriate
action, such as terminating the PCIP contract, against any State that
fails to maintain funding levels for existing State high risk pools.
Relation to State Laws (Sec. 152.40)
Section 152.40 of this interim final rule reflects the provision in
section 1101(g)(5) that specifies State standards that might otherwise
apply to the coverage offered under a PCIP program are pre-empted, 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
PCIP program in a manner similar to the way HHS has applied it under
those programs.
H. Transition to Exchanges (Subpart H, Sec. 152.44 Through Sec.
152.45)
End of PCIP Coverage (Sec. 152.44)
Section of 152.44 of this interim final rule specifies that,
consistent with section 1101(g)(3)(A) of the Affordable Care Act,
enrollee coverage under the PCIP program will end effective January 1,
2014, because affordable coverage will be available under the Exchanges
and insurance plans will no longer be permitted to exclude coverage for
pre-existing conditions. Note that PCIP program contracts will remain
in effect to provide for appropriate contractual close out periods, but
coverage of claims under the PCIP program will extend only to the costs
of covered services provided up through December 31, 2013.
Transition to the Exchanges (Sec. 145.45)
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
[[Page 45022]]
comments on the best ways to carry out the transition.
III. Response to Comments
Because of the large number of public comments we normally receive
on Federal Register documents, we are not able to acknowledge or
respond to them individually. We will consider all comments we receive
by the date and time specified in the DATES section of this preamble,
and, when we proceed with a subsequent document, we will respond to the
comments in the preamble to that document.
IV. Waiver of Proposed Rulemaking
We ordinarily publish a notice of proposed rulemaking (NPRM) in the
Federal Register and invite public comment on the proposed rule before
publishing a final rule that responds to comments and sets forth final
regulations that generally take effect sixty days later. This procedure
can be waived, however, if an agency finds good cause that a notice-
and-comment procedure is impracticable, unnecessary, or contrary to the
public interest and incorporates a statement of the finding and its
reasons in the rule issued.
The Affordable Care Act was enacted on March 23, 2010, and requires
that a temporary high risk pool program be in place ``not later than 90
days'' after enactment. The publication of proposed regulations in an
NPRM could not govern implementation of the high risk pool program, as
they would constitute mere proposals with no force of law. The normal
sixty-day public comment period provided for in the case of regulations
proposed in an NPRM would by itself consume two-thirds of the time the
statute provides for implementation. Under these circumstances, it
would be impracticable and contrary to the public interest to delay
putting regulations into effect that are necessary to implement the
program until the rules have been subjected to prior notice and comment
procedures.
Therefore, we find good cause to waive the notice of proposed
rulemaking and to issue this final rule on an interim basis. We are
providing a 60-day public comment period. Also, because these
regulations need to be in effect in order to undertake full
implementation of the program, we also find good cause for waiving the
normal delay in effective date that would apply, and these regulations
are effective on July 30, 2010.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this document that contain information collection
requirements (ICRs):
A. ICRs Regarding Proposal Process (Sec. 152.7)
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 Sec. 152.7(a)(1) through (9).
If there are States that do not submit acceptable proposals as
described in Sec. 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.
The burden associated with this requirement is the time and effort
necessary for a State or nonprofit entity to develop and submit a
proposal to operate a PCIP, which is a one-time information collection
burden. We estimate that it would take a State or nonprofit entity 684
hours to compile the necessary information to comply with this
requirement. While this one-time requirement is subject to the PRA, the
associated burden is approved under OMB control number 0938-1085.
B. ICRs Regarding Eligibility (Sec. 152.14)
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 Sec. 152.14(a)(1), demonstrating they are a citizen or
national of the United States or lawfully present in the United States
and Sec. 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.
C. ICRs Regarding Enrollment and Disenrollment Process (Sec. 152.15)
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 Sec. 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
[[Page 45023]]
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.
D. ICRs Regarding Access to Services (Sec. 152.22)
Section Sec. 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 Sec. 152.7.
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
access to covered services, 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.
E. ICRs Regarding Appeals Procedures (Sec. 152.26)
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
Sec. 152.7. The aforementioned information collection requirements and
associated burden are currently 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
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.
F. ICRs Regarding Fraud, Waste, and Abuse (Sec. 152.27)
As stated in Sec. 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, Sec. 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 Sec. 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.
G. ICRs Regarding Preventing Insurer Dumping (Sec. 152.28)
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 Sec. 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.
H. ICRs Regarding Use of Funds (Sec. 152.32)
Section 152.32 states that all funds awarded through the contracts
established under this program must be used exclusively to pay
allowable claims and administrative costs incurred in the development
and operation of the PCIP that are in excess of the amounts of premiums
collected from individuals enrolled in the program. The burden
associated with this requirement is the time and effort necessary for a
State to collect allowable cost information, review and submit such
information to HHS for payment. We estimate that it will take each
PCIPs 16 hours each month, per State to comply with this requirement.
The estimated annual burden associated with this requirement is 9,792
hours at a cost of $323,136.
I. ICRs Regarding Maintenance of Effort (Sec. 152.39)
Section 152.39(a) requires a State that enters into a contract with
HHS under this part to demonstrate, subject to approval by HHS, that it
will continue to provide funding of any existing high risk pools in the
State at a level that is not reduced from the amount provided for in
the year prior to the year in which the contract is entered. The burden
associated with this requirement is the time and effort necessary for a
State to demonstrate maintenance of effort to HHS. The burden
associated with this one-time requirement is included in the 684 burden
hour estimate for compiling the necessary information to comply with
the proposal requirement as stated in our earlier discussion of Sec.
152.7. While this requirement is subject to the PRA, the associated
burden is approved under OMB control number 0938-1085.
[[Page 45024]]
Table 1--Annual Reporting and Recordkeeping Burden
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly Total
OMB Burden per Total labor cost labor cost Total
Regulation Section(s) Control Respondents Responses response annual of of capital/ Total cost
No. (hours) burden reporting reporting maintenance ($)
(hours) ($) ($) costs ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 152.7, Sec. 152.15, Sec. 0938-1085 51 51 684 34,884 ** 1,421,268 0 1,421,268
152.22, Sec. 152.26, Sec. 152.39.
Sec. 152.15, Sec. 152.22, Sec. 0938-1100 51 51 24 1,224 ** 28,152 0 28,152
152.26...............................
Sec. 152.14......................... 0938-1095 100,000 100,000 .5 50,000 ** N/A 0 N/A
Sec. 152.27......................... 0938-1100 51 612 4 2,448 ** 56,304 0 56,304
Sec. 152.28......................... 0938-1100 51 612 8 4,896 ** 110,160 0 110,160
Sec. 152.32......................... 0938-1100 51 612 16 9,792 ** 323,136 0 323,136
-----------------------------------------------------------------------------------------------------------------
Total............................. .......... 100,051 101,887 .......... 103,244 ........... ........... ............ 1,939,020
--------------------------------------------------------------------------------------------------------------------------------------------------------
**Wage rates vary by level of staff involved in complying with information collection request (ICR). Wage rates are detailed in the Supporting Statement
Part A for this (ICR). Wage rates vary from $12 to $60 hourly salary. Supporting Statement Part A for this (ICR).
We will accept comments for both the new information collection
requirements contained in this interim final rule and the requirements
previously approved under 0938-1085 and 0938-1095, respectively, for 60
days from the date of display for this interim final rule. At the
conclusion of the 60-day comment period, we will publish an additional
notice announcing the submission of the information collection request
associated with this final rule for OMB approval. At that time, the
public will have an additional 30 days to submit public comments to OMB
for consideration.
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget,
Attention: CMS Desk Officer, [OCIIO-9995-IFC]
Fax: (202) 395-6974; or
E-mail: [email protected].
VI. Regulatory Impact Analysis
A. Summary and Need for Regulatory Action
Section 1101 of Title I of the Patient Protection and Affordable
Care Act of 2010 (Affordable Care Act), Public Law 111-148, requires
that the Secretary establish, either directly or through contracts with
States or nonprofit private entities, a temporary high risk health
insurance pool program to provide affordable health insurance coverage
to uninsured individuals with pre-existing conditions. (We generally
refer to this program as the Pre-Existing Condition Insurance Plan
program, or PCIP program, to avoid confusion with the existing State
high risk pool programs, which will continue to operate separately.)
This program will continue until January 1, 2014, when Exchanges
established under sections 1311 and 1321 of the Affordable Care Act
will be available for individuals to obtain health insurance coverage
without regard to their pre-existing condition. This interim final rule
sets forth the initial regulations with respect to this new program,
and is needed for its implementation. The rule addresses key issues
regarding administration of the program, eligibility and enrollment,
benefits, premiums, funding, appeals rules, and enforcement provisions
related to anti-dumping and fraud waste and abuse.
Executive Order 12866 explicitly requires agencies to take account
of ``distributive impacts'' and ``equity.'' Offering health coverage to
uninsured Americans with pre-existing conditions at an affordable
premium is needed to provide the opportunity for coverage to
individuals that cannot otherwise obtain insurance in the market. It is
a temporary program to provide a transition to the Affordable Care Act
policies that take effect in 2014 that ban the use of pre-existing
conditions in determining access, benefit and premiums. The $5 billion
in Federal funding appropriated for this program will yield a
meaningful increase in equity, and is a benefit of this interim final
regulation.
B. Executive Order 12866
Under Executive Order 12866 (58 FR 51735), a ``significant''
regulatory action is subject to review by the Office of Management and
Budget (OMB). Section 3(f) of the Executive Order defines a
``significant regulatory action'' as an action that is likely to result
in a rule (1) having an annual effect on the economy of $100 million or
more in any one year, or adversely and materially affecting a sector of
the economy, productivity, competition, jobs, the environment, public
health or safety, or State, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order. OMB has
determined that this regulation is economically significant within the
meaning of section 3(f)(1) of the Executive Order, because it is likely
to have an annual effect on the economy of $100 million in any one
year. Accordingly, OMB has reviewed this rule pursuant to the Executive
Order.
The Department provides an assessment of the potential costs,
benefits, and transfers associated with these interim final
regulations, summarized in the following table.
[[Page 45025]]
Table 1.1--Accounting Table
------------------------------------------------------------------------
------------------------------------------------------------------------
Benefits
------------------------------------------------------------------------
Qualitative: The Pre-existing Condition Insurance Plan will provide
uninsured Americans with preexisting conditions that have been denied
coverage or otherwise excluded from purchasing insurance coverage with
an opportunity to obtain coverage. Providing this insurance option will
increase access to health care and reduce financial strain for
participants. It is also likely to improve health outcomes and worker
productivity. Individuals who are especially vulnerable as a result of
existing health problems and financial status may receive the greatest
benefit from this program.
------------------------------------------------------------------------
Costs................................. $1,939,020 annually for
reporting and recordkeeping.
------------------------------------------------------------------------
Qualitative: To the extent PCIP increases access to health care
services, increased health care utilization and costs will result due
to increased uptake. Administrative costs include: the cost of
contractors to apply, the time cost for individuals to apply, and the
contractors' costs of complying with program rules (e.g., conducting
appeals, preventing fraud).
------------------------------------------------------------------------
Transfers............................. $5,000,000,000 for the period
from July 1, 2010 to December
31, 2013.
------------------------------------------------------------------------
Qualitative: The $5 billion in Federal funds is a transfer from the
Secretary to contractors to aid in administering the program.
------------------------------------------------------------------------
a. Estimated Number of Affected Entities
This rule provides guidance for the States and nonprofit private
entities that contract with HHS to establish PCIPs to provide
affordable health insurance coverage to uninsured individuals with pre-
existing conditions within each State. The States or nonprofit private
entities that voluntarily participate in the PCIP program will be
directly affected by this regulation as well as the terms of their
contracts.
There are 35 State-based high risk pool programs today.\3\ 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.\4\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
The Affordable Care Act establishes a program that is similar in
some respects to these programs, but has notable differences in terms
of eligibility criteria, benefits, and premiums. These differences make
it difficult to extrapolate potential enrollment in the PCIP program
from the experience of existing State 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.\5\
---------------------------------------------------------------------------
\5\ ``The Uninsured: A Primer,'' Kaiser Commission on Medicaid
and the Uninsured (2006), http://www.kff.org/uninsured/upload/7451.pdf.
---------------------------------------------------------------------------
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.\6\ 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.\7\ 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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.\8\ 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.\9\
The lower premium may lead to a more favorable health mix of enrollees,
because the higher premiums in existing pools make the pools less
[[Page 45026]]
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.
---------------------------------------------------------------------------
\8\ National Association of State Comprehensive Health Insurance
Plans. Comprehensive Health Insurance for High-Risk Individuals: A
State-by-State Analysis, 2009/2010.
\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.
---------------------------------------------------------------------------
Fourth, fifteen States and the District of Columbia lack a high
risk pool program today. These States do not have a high risk pool for
a variety of reasons. Some States, such as New York, Massachusetts, and
Vermont, have enacted insurance reforms that require plans to accept
people with pre-existing conditions into the individual insurance
market (through guaranteed issue and rating rules) instead of
segregating them into high risk pools. Others, like Arizona and Nevada,
do not have extensive insurance reforms. There is no common profile to
States that lack high risk pools today.
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.\10\ 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.\11\ For
these reasons, the Department concludes that the experience in existing
high risk pools is not a good basis for estimating PCIP enrollment.
---------------------------------------------------------------------------
\10\ Data from State Health Facts.org, Kaiser Family Foundation.
\11\ ``State High Risk Pools: An Overview.'' State Health Access
Data Assistance Center (2008).
---------------------------------------------------------------------------
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.\12\ 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
Second, the Centers for Medicare and Medicaid Services' Office of
the Actuary (OAct) estimated participation based on demand, without
assuming that Federal funding would be limited to $1.3 to $1.4 billion
in each year. It estimated that participation in the program in 2010
would be 375,000, assuming the program would be fully implemented
within the year. Given this enrollment rate, it projected that the $5
billion in Federal funding would not last through 2013.
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).\13\
---------------------------------------------------------------------------
\13\ Congressional Budget Office. Health Care Budget Options
Volume I. December 2008.
---------------------------------------------------------------------------
In addition, in June, 2010, CBO provided information on PCIP in
response to a request from Congress.\14\ 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.
---------------------------------------------------------------------------
\14\ Congressional Budget Office Director Douglas W. Elmendorf,
letter to Senator Michael B. Enzi, June 21, 2010.
---------------------------------------------------------------------------
For purpose of this analysis, the Department has not produced its
own estimates of the number of individuals likely to enroll in the PCIP
program but believes that it will fall in the range of the other
estimates, from 200,000 to 400,000. The lower bound of this range is
consistent with the numbers estimated by the Center for Studying Health
System Change and by CBO in June 2010. The upper bound of this range is
approximately the enrollment estimate from the Office of the Actuary
and CBO when they assume that PCIPs do not immediately impose
enrollment constraints to extend the limited Federal funding. We expect
that efficient program implementation, effective cost control, targeted
benefit design, and enrollment patterns that are different than
projected will mitigate the need for enrollment constraints, and
Federal funding will be sufficient to meet program demand. Even
assuming the lower estimate of enrollment of 200,000, the PCIP program
could double the number of Americans with pre-existing conditions
insured through high risk pool programs.
c. Benefits
A key premise for the establishment of the Pre-Existing Condition
Insurance Plan is that those who are unable to purchase health
insurance in the private sector due to medical underwriting and are not
eligible for public insurance programs are potentially disadvantaged
through both poor health and loss of income. We expect that the PCIP
program will help such individuals by providing access to affordable
health insurance coverage.
This interim final regulation could generate significant benefits
to consumers. These benefits could take the form of reductions in
mortality and morbidity, reductions in medical expenditure risk,
increases in worker productivity, and decreases in the cross-subsidy in
premiums to offset uncompensated care, sometimes referred to as the
``hidden tax.'' Each of these effects is described below.
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
[[Page 45027]]
spending more on at-risk individuals and by expanding health insurance
coverage. For example, Almond et al.\15\ 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 \16\ found that
uninsured individuals receive less care and have a substantially higher
mortality rate. Currie and Gruber \17\ 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.\18\ 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) \19\ 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.\20\
---------------------------------------------------------------------------
\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/
~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&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).
---------------------------------------------------------------------------
This interim final regulation will expand access to currently
uninsured individuals with pre-existing conditions. These newly insured
populations will likely achieve both mortality and morbidity reductions
from the regulation greater than those found in the studies, since
these populations are, on average, in worse health than the population
at large and thus likely to benefit even more from insurance coverage
than uninsured individuals in general.
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.\21\ 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.\22\ In a Commonwealth Fund report \23\ 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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.\24\ 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.\25\ 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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.\26\ 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.
---------------------------------------------------------------------------
\26\ Council of Economic Advisers. ``The Economic Case for
Health Reform.'' (2009).
---------------------------------------------------------------------------
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
[[Page 45028]]
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.\27\ 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,\28\ 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.\29\
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\27\ Federal Register June 28, 2010: http://frwebgate1.access.gpo.gov/cgi-bin/TEXTgate.cgi?WAISdocID=3HyQcj/5/1/0&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.
\29\ The Departments first estimated the proportion of the
population in group and individual markets using the Medical
Expenditure Panel Survey (2008). Next, information from 75 FR 34538
(June 17, 2010) was used to estimate the proportion of employer and
individual plans that maintain or lose grandfather status by 2013.
Projections of national health expenditures from the National Health
Expenditure Accounts to 2013 were distributed among these groups,
and premium impacts as discussed in this regulatory impact analysis
were applied. Potential premium reductions secondary to reductions
in the cost-shifting of uncompensated care were then calculated
using the information from the economic literature as presented in
this discussion. The Departments note that to the extent that not
all of the reductions in uncompensated care costs are passed onto
insured populations, these estimates may be an overestimate.
---------------------------------------------------------------------------
Assuming an enrollment range of 200,000 to 400,000 in the PCIP
program, the effect on uncompensated care could be over twice to four
times as high as prior estimates associated with the patient
protections. This increased impact is due to the fact that the primary
effect on coverage of the patient protections interim final regulations
was the ban on pre-existing condition exclusions for children. Those
rules estimated that 90,000 children would gain coverage. Given the
differing scopes of these two interim final regulations, it is likely
that more uninsured will be helped by PCIP than the patient protections
policies and interim final regulations. Moreover, savings per person
will likely be higher for the PCIP population compared to children with
pre-existing conditions. This is because most enrollees in PCIP are
likely to be adults, whose average cost of health care is higher than
that of children.
In addition, we believe that PCIP will help local and State
governments. Since much of the uncompensated health care is provided
through State and locally funded public health facilities, by enabling
a portion of those who would seek care at a public facility to enroll
in the high risk pool, the program could help reduce the drain on
scarce State and local resources. We welcome public comment on this
analysis.
d. Costs and Transfers
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.\30\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
There will also be administrative costs associated with the PCIP
program. This takes the form of the cost to contractors to apply, the
time cost for individuals to apply, and the contractors' costs of
complying with program rules (for example, conducting appeals,
preventing fraud). The Department estimates that the annual
administrative cost would be $1.9 million. Note that any State
administrative costs incurred that are allowable under this program may
be paid for by Federal and premium funds.
e. Conclusion
Under section 1101 of the Affordable Care Act, the Department is
authorized to spend $5 billion via States and third party
administrators for the purpose of funding the PCIP program. The
transfer of this amount of funds will have a significant, positive
financial impact on individuals who enroll in the program, States, and
health care providers. We anticipate that individuals who are currently
uninsured will benefit from having lower out-of-pocket costs for health
care, less financial strain, and improved access to health services. We
also anticipate that insured individuals will benefit indirectly
through paying lower premiums because of a reduced burden on the plans
to subsidize uncompensated care. In addition, we believe that
establishing the PCIP program will reduce the burden on local and State
governments to pay health care providers for uncompensated care.
The direct costs of this regulation is a transfer of $5 billion
from the Federal government to the PCIPs that will be established in
each State. Administrative costs are expected to be $1.9 million per
year. In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
VII. Other Sections
Regulatory Alternatives
Under the Executive Order, we must consider alternatives to issuing
regulations and alternative regulatory approaches. Section 1101
establishes broad requirements regarding contracting, eligibility,
benefits, payments, insurer dumping, and the control of fraud, waste,
and abuse.
We considered implementing the PCIP through some form of guidance
to States and other interested parties. However, we believe that it is
in the best interest of States, contractors, enrollees, and other
interested parties to establish this program through the rulemaking
process. As discussed in detail above, there are several areas where
the statute clearly anticipates that the Secretary will exercise
discretion in implementing the program, most notably the definition of
a pre-existing condition for purpose of establishing eligibility. We
also need to issue regulations to establish the legal framework for the
contracting mechanism that sets the specific terms for the State-
administered pools and for the organizations that will operate the
pools in the States that do not contract with HHS. Establishing these
rules through rulemaking ensures that the public has ample opportunity
to understand and comment on these rules and establishes clear
authority to enforce them.
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
[[Page 45029]]
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.
Given the fixed Federal funding for the PCIP program, these
regulatory alternatives will not affect Federal outlays. They are also
unlikely to have measurable national health spending implications since
the Federal funding constraint is accompanied by a fixed standard for
private premiums--100 percent of a standard rate for benefits that
cover at least 65 percent of the cost of coverage.
Regulatory Flexibility Act
The RFA requires agencies that issue a regulation to analyze
options for regulatory relief of small businesses if a rule has a
significant impact on a substantial number of small entities. The Act
generally defines a ``small entity'' as (1) A proprietary firm meeting
the size standards of the Small Business Administration (SBA), (2) a
nonprofit organization that is not dominant in its field, or (3) a
small government jurisdiction with a population of less than 50,000.
States and individuals are not included in the definition of ``small
entity.'' These regulations apply to the States, both those that
contract with HHS to establish PCIPs and those States in which HHS
contracts with another entity to establish the program, no small
entities will be affected. Therefore, the Secretary certifies that the
regulations will not have significant impact on a substantial number of
small entities.
Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates would require spending in any one year
$100 million in 1995 dollars, updated annually for inflation. In 2010,
that threshold is approximately $135 million.
UMRA does not address the total cost of a rule. Rather, it focuses
on certain categories of cost, mainly those ``Federal mandate'' costs
resulting from: (1) Imposing enforceable duties on State, local, or
tribal governments, or on the private sector; or (2) increasing the
stringency of conditions in, or decreasing the funding of, State,
local, or tribal governments under entitlement programs.
Under the Affordable Care Act, States may choose to participate in
the PCIPs and receive Federal funding for administering and paying
benefits. If they do not choose to participate, the Federal government
will establish a PCIPs in the State. Thus, the law and these
regulations do not impose an unfunded mandate on States.
Individuals will have to pay a premium and incur out-of-pocket
expenses to join the PCIPs that either a State or the Federal
government establishes. However, individuals are free to join based on
their evaluation of the costs and benefits of belonging to the program.
There is no automatic enrollment and no requirement to join a PCIP.
Thus, the law, and these regulations do not impose an unfunded mandate
on the private sector.
Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications.
This rule does not impose any direct costs on State or local
governments. Consistent with section 1101(g)(5) of the Act, Sec.
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.
List of Subjects in 45 CFR Part 152
Administrative practice and procedure, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.
0
For the reasons set forth in the preamble, the Department of Health and
Human Services amends 45 CFR subtitle A, subchapter B, by adding a new
part 152 to read as follows:
PART 152--PRE-EXISTING CONDITION INSURANCE PLAN PROGRAM
Subpart A--General Provisions
Sec.
152.1 Statutory basis.
152.2 Definitions.
Subpart B--PCIP Program Administration
152.6 Program administration.
152.7 PCIP proposal process.
Subpart C--Eligibility and Enrollment
152.14 Eligibility.
152.15 Enrollment and disenrollment process.
Subpart D--Benefits
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.
Subpart E--Oversight
152.26 Appeals procedures.
152.27 Fraud, waste, and abuse.
152.28 Preventing insurer dumping.
Subpart F--Funding
152.32 Use of funds.
152.33 Initial allocation of funds.
152.34 Reallocation of funds.
152.35 Insufficient funds.
Subpart G--Relationship to Existing Laws and Programs
152.39 Maintenance of effort.
152.40 Relation to State laws.
Subpart H--Transition to Exchanges
152.44 End of PCIP program coverage.
152.45 Transition to the exchanges.
Authority: Sec. 1101 of the Patient Protection and Affordable
Care Act (Pub. L. 111-148).
Subpart A--General Provisions
Sec. 152.1 Statutory basis.
(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 Sec. 152.14 of this part.
(b) Scope. This part establishes standards and sets forth the
requirements, limitations, and procedures for the temporary high risk
health insurance pool program, hereafter referred to as the ``Pre-
Existing Condition Insurance Plan'' (PCIP) program.
Sec. 152.2 Definitions.
For purposes of this part the following definitions apply:
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).
[[Page 45030]]
Enrollee means an individual receiving coverage from a PCIP
established under this section.
Lawfully present means
(1) A qualified alien as defined in section 431 of the Personal
Responsibility and Work Opportunity Act (PRWORA) (8 U.S.C. 1641);
(2) An alien in nonimmigrant status who has not violated the terms
of the status under which he or she was admitted or to which he or she
has changed after admission;
(3) An alien who has been paroled into the United States pursuant
to section 212(d)(5) of the Immigration and Nationality Act (INA) (8
U.S.C. 1182(d)(5)) for less than 1 year, except for an alien paroled
for prosecution, for deferred inspection or pending removal
proceedings;
(4) An alien who belongs to one of the following classes:
(i) Aliens currently in temporary resident status pursuant to
section 210 or 245A of the INA (8 U.S.C. 1160 or 1255a, respectively);
(ii) Aliens currently under Temporary Protected Status (TPS)
pursuant to section 244 of the INA (8 U.S.C. 1254a), and pending
applicants for TPS who have been granted employment authorization;
(iii) Aliens who have been granted employment authorization under 8
CFR 274a.12(c)(9), (10), (16), (18), (20), (22), or (24);
(iv) Family Unity beneficiaries pursuant to section 301 of Public
Law 101-649 as amended;
(v) Aliens currently under Deferred Enforced Departure (DED)
pursuant to a decision made by the President;
(vi) Aliens currently in deferred action status;
(vii) Aliens whose visa petitions have been approved and who have a
pending application for adjustment of status;
(5) A pending applicant for asylum under section 208(a) of the INA
(8 U.S.C. 1158) or for withholding of removal under section 241(b)(3)
of the INA (8 U.S.C. 1231) or under the Convention Against Torture who
has been granted employment authorization, and such an applicant under
the age of 14 who has had an application pending for at least 180 days;
(6) An alien who has been granted withholding of removal under the
Convention Against Torture; or
(7) A child who has a pending application for Special Immigrant
Juvenile status as described in section 101(a)(27)(J) of the INA (8
U.S.C. 1101(a)(27)(J)).
Out-of-pocket costs means the sum of the annual deductible and the
other annual out-of-pocket expenses, other than for premiums, required
to be paid under the program.
Pre-Existing condition exclusion has the meaning given such term in
45 CFR 144.103.
Pre-Existing Condition Insurance Plan (PCIP) means the temporary
high risk health insurance pool plan (sometimes referred to as a
``qualified high risk pool'') that provides coverage in a State, or
combination of States, in accordance with the requirements of section
1101 of the Affordable Care Act and this part. The term ``PCIP
program'' is generally used to describe the national program the
Secretary is charged with carrying out, under which States or non-
profit entities operate individual PCIPs.
Resident means an individual who has been legally domiciled in a
State.
Service Area refers to the geographic area encompassing an entire
State or States in which PCIP furnishes benefits.
State refers each of the 50 States and the District of Columbia.
Subpart B--PCIP Program Administration
Sec. 152.6 Program administration.
(a) General rule. Section 1101(b)(1) of the Affordable Care Act
requires that HHS carry out the Pre-Existing Condition Insurance Plan
program directly or through contracts with eligible entities, which are
States or nonprofit private entities.
(b) Administration by State. A State (or its designated non-profit
private entity) may submit a proposal to enter into a contract with HHS
to establish and administer a PCIP in accordance with section 1101 of
the Affordable Care Act and this part.
(1) At the Secretary's discretion, a State may designate a
nonprofit entity or entities to contract with HHS to administer a PCIP.
(2) As part of its administrative approach, a State or designated
entity may subcontract with either a for-profit or nonprofit entity.
(c) Administration by HHS. If a State or its designated entity
notifies HHS that it will not establish or continue to administer a
PCIP, or does not submit an acceptable or timely proposal to do so, HHS
will contract with a nonprofit private entity or entities to administer
a PCIP in that State.
(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 Sec. 152.7(b) of this part.
Sec. 152.7 PCIP proposal process.
(a) General. A proposal from a State or nonprofit private entity to
contract with HHS shall demonstrate that the eligible entity has the
capacity and technical capability to perform all functions necessary
for the design and operation of a PCIP, and that its proposed PCIP is
in full compliance with all of the requirements of this part.
(b) Special rules for transitions in administration. (1)
Transitions from HHS administration of a PCIP to State administration
must take effect on January 1 of a given year.
(2) A State's proposal to administer a PCIP must meet all the
requirements of this section.
(3) Transitions from State administration to HHS administration
must comply with the termination procedures of the PCIP contract in
effect with the State or its designated entity.
(4) The Secretary may establish other requirements needed to ensure
a seamless transition of coverage for all existing enrollees.
Subpart C--Eligibility and Enrollment
Sec. 152.14 Eligibility.
(a) General rule. An individual is eligible to enroll in a PCIP if
he or she:
(1) Is a citizen or national of the United States or lawfully
present in the United States;
(2) Subject to paragraph (b) of this section, has not been covered
under creditable coverage for a continuous 6-month period of time prior
to the date on which such individual is applying for PCIP;
(3) Has a pre-existing condition as established under paragraph (c)
of this section; and
(4) Is a resident of one of the 50 States or the District of
Columbia which constitutes or is within the service area of the PCIP. A
PCIP may not establish any standards with regard to the duration of
residency in the PCIP service area.
(b) Satisfaction of 6-month creditable coverage requirement when an
enrollee leaves the PCIP service area. An individual who becomes
ineligible for a PCIP on the basis of no longer residing in the PCIP's
service area as described in paragraph (a)(4) of this section is deemed
to have satisfied the requirement in paragraph (a)(2) of this section
for purposes of applying to enroll in a PCIP in the new service area.
(c) Pre-existing condition requirement. For purposes of
establishing a process for determining eligibility, and subject
[[Page 45031]]
to HHS approval, a PCIP may elect to apply any one or more of the
following criteria in determining whether an individual has a pre-
existing condition for purposes of this section:
(1) Refusal of coverage. Documented evidence that an insurer has
refused, or a clear indication that the insurer would refuse, to issue
coverage to an individual on grounds related to the individual's
health.
(2) Exclusion of coverage. Documented evidence that such individual
has been offered coverage but only with a rider that excludes coverage
of benefits associated with an individuals' identified pre-existing
condition.
(3) Medical or health condition. Documented evidence of the
existence or history of certain medical or health condition, as
approved or specified by the Secretary.
(4) Other. Other criteria, as defined by a PCIP and approved by
HHS.
Sec. 152.15 Enrollment and disenrollment process.
(a) Enrollment process. (1) A PCIP must establish a process for
verifying eligibility and enrolling an individual that is approved by
HHS.
(2) A PCIP must allow an individual to remain enrolled in the PCIP
unless:
(i) The individual is disenrolled under paragraph (b) of this
section;
(ii) The individual obtains other creditable coverage;
(iii) The PCIP program terminates, or is terminated; or
(iv) As specified by the PCIP program and approved by HHS.
(3) A PCIP must verify that an individual is a United States
citizen or national or lawfully present in the United States by:
(i) Verifying the individual's citizenship, nationality, or lawful
presence with the Commissioner of Security or Secretary of Homeland
Security as applicable; or
(ii) By requiring the individual to provide documentation which
establishes the individual's citizenship, nationality, or lawful
presence.
(iii) The PCIP must provide an individual who is applying to enroll
in the PCIP with a disclosure specifying if the information will be
shared with the Department of Health and Human Services, Social
Security Administration, and if necessary, Department of Homeland
Security for purposes of establishing eligibility.
(b) Disenrollment process. (1) A PCIP must establish a
disenrollment process that is approved by HHS.
(2) A PCIP may disenroll an individual if the monthly premium is
not paid on a timely basis, following notice and a reasonable grace
period, not to exceed 61 days from when payment is due, as defined by
the PCIP and approved by HHS.
(3) A PCIP must disenroll an individual in any of the following
circumstances:
(i) The individual no longer resides in the PCIP service area.
(ii) The individual obtains other creditable coverage.
(iii) Death of the individual.
(iv) Other exceptional circumstances established by HHS.
(c) Effective dates. A PCIP must establish rules governing the
effective date of enrollment and disenrollment that are approved by
HHS. A complete enrollment request submitted by an eligible individual
by the 15th day of a month, where the individual is determined to be
eligible for enrollment, must take effect by the 1st day of the
following month, except in exceptional circumstances that are subject
to HHS approval.
(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 Sec. 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
Sec. 152.35(b).
Subpart D--Benefits
Sec. 152.19 Covered benefits.
(a) Required benefits. Each benefit plan offered by a PCIP shall
cover at least the following categories and the items and services:
(1) Hospital inpatient services
(2) Hospital outpatient services
(3) Mental health and substance abuse services
(4) Professional services for the diagnosis or treatment of injury,
illness, or condition
(5) Non-custodial skilled nursing services
(6) Home health services
(7) Durable medical equipment and supplies
(8) Diagnostic x-rays and laboratory tests
(9) Physical therapy services (occupational therapy, physical
therapy, speech therapy)
(10) Hospice
(11) Emergency services, consistent with Sec. 152.22(b), and
ambulance services
(12) Prescription drugs
(13) Preventive care
(14) Maternity care
(b) Excluded services. Benefit plans offered by a PCIP shall not
cover the following services:
(1) Cosmetic surgery or other treatment for cosmetic purposes
except to restore bodily function or correct deformity resulting from
disease.
(2) Custodial care except for hospice care associated with the
palliation of terminal illness.
(3) In vitro fertilization, artificial insemination or any other
artificial means used to cause pregnancy.
(4) Abortion services except when the life of the woman would be
endangered or when the pregnancy is the result of an act of rape or
incest.
(5) Experimental care except as part of an FDA-approved clinical
trial.
Sec. 152.20 Prohibitions on pre-existing condition exclusions and
waiting periods.
(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 Sec. 152.2) with respect to such
coverage.
(b) Waiting periods. A PCIP may not impose a waiting period with
respect to the coverage of services after the effective date of
enrollment.
Sec. 152.21 Premiums and cost-sharing.
(a) Limitation on enrollee premiums. (1) The premiums charged under
the PCIP may not exceed 100 percent of the premium for the applicable
standard risk rate that would apply to the coverage offered in the
State or States. The PCIP shall determine a standard risk rate by
considering the premium rates charged for similar benefits and cost-
sharing by other insurers offering health insurance coverage to
individuals in the applicable State or States. The standard risk rate
shall be established using reasonable actuarial techniques, that are
approved by the Secretary, and that reflect anticipated experience and
expenses. A PCIP may not use other methods of determining the standard
rate, except with the approval of the Secretary.
(2) Premiums charged to enrollees in the PCIP may vary on the basis
of age by a factor not greater than 4 to 1.
(b) Limitation on enrollee costs. (1) The PCIP's average share of
the total allowed costs of the PCIP benefits must be at least 65
percent of such costs.
(2) The out-of-pocket limit of coverage for cost-sharing for
covered services under the PCIP may not be greater than the applicable
amount described in section 223(c)(2) of the Internal Revenue
[[Page 45032]]
code of 1986 for the year involved. If the plan uses a network of
providers, this limit may be applied only for in-network providers,
consistent with the terms of PCIP benefit package.
Sec. 152.22 Access to services.
(a) General rule. 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.
(b) Emergency services. In the case of emergency services, such
services must be covered out of network if:
(1) The enrollee had a reasonable concern that failure to obtain
immediate treatment could present a serious risk to his or her life or
health; and
(2) The services were required to assess whether a condition
requiring immediate treatment exists, or to provide such immediate
treatment where warranted.
Subpart E--Oversight
Sec. 152.26 Appeals procedures.
(a) General. A PCIP shall establish and maintain procedures for
individuals to appeal eligibility and coverage determinations.
(b) Minimum requirements. The appeals procedure must, at a minimum,
provide:
(1) A potential enrollee with the right to a timely redetermination
by the PCIP or its designee of a determination regarding PCIP
eligibility, including a determination of whether the individual is a
citizen or national of the United States, or is lawfully present in the
United States.
(2) An enrollee with the right to a timely redetermination by the
PCIP or its designee of a determination regarding the coverage of a
service or the amount paid by the PCIP for a service.
(3) An enrollee with the right to a timely reconsideration of a
redetermination made under paragraph (b)(2) of this section by an
entity independent of the PCIP.
Sec. 152.27 Fraud, waste, and abuse.
(a) Procedures. The 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, and to appropriate law enforcement authorities instances of
fraud. Such procedures shall include identifying situations in which
enrollees or potential enrollees (or their family members) are
employed, and may have, or have had, access to other coverage such as
group health coverage, but were discouraged from enrolling.
(b) Cooperation. The PCIP shall cooperate with Federal law
enforcement and oversight authorities in cases involving waste, fraud
and abuse, and shall report to appropriate authorities situations in
which enrollment in other coverage may have been discouraged.
Sec. 152.28 Preventing insurer dumping.
(a) General rule. If it is determined based on the procedures and
criteria set forth in paragraph (b) of this section that a health
insurance issuer or group health plan has discouraged an individual
from remaining enrolled in coverage offered by such issuer or health
plan based on the individual's health status, if the individual
subsequently enrolls in a PCIP under this part, the issuer or health
plan will be responsible for any medical expenses incurred by the PCIP
with respect to the individual.
(b) Procedures and criteria for a determination of dumping. A PCIP
shall establish procedures to identify and report to HHS instances in
which health insurance issuers or employer-based group health plans are
discouraging high-risk individuals from remaining enrolled in their
current coverage in instances in which such individuals subsequently
are eligible to enroll in the qualified high risk pool. Such procedures
shall include methods to identify the following circumstances, either
through the PCIP enrollment application form or other vehicles:
(1) Situations where an enrollee or potential enrollee had prior
coverage obtained through a group health plan or issuer, and the
individual was provided financial consideration or other rewards for
disenrolling from their coverage, or disincentives for remaining
enrolled.
(2) Situations where enrollees or potential enrollees had prior
coverage obtained directly from an issuer or a group health plan and
either of the following occurred:
(i) The premium for the prior coverage was increased to an amount
that exceeded the premium required by the PCIP (adjusted based on the
age factors applied to the prior coverage), and this increase was not
otherwise explained;
(ii) The health plan, issuer or employer otherwise provided money
or other financial consideration to disenroll from coverage, or
disincentive to remain enrolled in such coverage. Such considerations
include payment of the PCIP premium for an enrollee or potential
enrollee.
(c) Remedies. If the Secretary determines, based on the criteria in
paragraph (b) of this section, that the rule in paragraph (a) of this
section applies, an issuer or a group health plan will be billed for
the medical expenses incurred by the PCIP. The issuer or group health
plan also will be referred to appropriate Federal and State authorities
for other enforcement actions that may be warranted based on the
behavior at issue.
(d) Other. Nothing in this section may be construed as constituting
exclusive remedies for violations of this section or as preventing
States from applying or enforcing this section or other provisions of
law with respect to health insurance issuers.
Subpart F--Funding
Sec. 152.32 Use of funds.
(a) Limitation on use of funding. All funds awarded through the
contracts established under this program must be used exclusively to
pay allowable claims and administrative costs incurred in the
development and operation of the PCIP that are in excess of the amounts
of premiums collected from individuals enrolled in the program.
(b) Limitation on administrative expenses. No more than 10 percent
of available funds shall be used for administrative expenses over the
life of the contract with the PCIP, absent approval from HHS.
Sec. 152.33 Initial allocation of funds.
HHS will establish an initial ceiling for the amount of the $5
billion in Federal funds allocated for PCIPs in each State using a
methodology consistent with that used to established allocations under
the Children's Health Insurance Program, as set forth under 42 CFR Part
457, Subpart F, Payment to States.
Sec. 152.34 Reallocation of funds.
If HHS determines, based on actual and projected enrollment and
claims experience, that the PCIP in a given State will not make use of
the total estimated funding allocated to that State, HHS may reallocate
unused funds to other States, as needed.
Sec. 152.35 Insufficient funds.
(a) Adjustments by a PCIP to eliminate a deficit. In the event that
a PCIP determines, based on actual and projected enrollment and claims
data, that its allocated funds are insufficient to cover projected PCIP
expenses, the PCIP shall report such insufficiency to HHS, and identify
and implement
[[Page 45033]]
necessary adjustments to eliminate such deficit, subject to HHS
approval.
(b) Adjustment by the Secretary. 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.
Subpart G--Relationship to Existing Laws and Programs
Sec. 152.39 Maintenance of effort.
(a) General. A State that enters into a contract with HHS under
this part must demonstrate, subject to approval by HHS, that it will
continue to provide funding of any existing high risk pool 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.
(b) Failure to maintain efforts. In situations where a State enters
into a contract with HHS under this part, HHS shall take appropriate
action, such as terminating the PCIP contract, against any State that
fails to maintain funding levels for existing State high risk pools as
required, and approved by HHS, under paragraph (a) of this section.
Sec. 152.40 Relation to State laws.
The standards established under this section shall supersede any
State law or regulation, other than State licensing laws or State laws
relating to plan solvency, with respect to PCIPs which are established
in accordance with this section.
Subpart H--Transition to Exchanges
Sec. 152.44 End of PCIP program coverage.
Effective January 1, 2014, coverage under the PCIP program (45 CFR
part 152) will end.
Sec. 152.45 Transition to the exchanges.
Prior to termination of the PCIP program, HHS will develop
procedures to transition PCIP enrollees to the Exchanges, established
under sections 1311 or 1321 of the Affordable Care Act, to ensure that
there are no lapses in health coverage for those individuals.
Dated: July 26, 2010.
Jay Angoff,
Director, Office of Consumer Information and Insurance Oversight.
Dated: July 26, 2010.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2010-18691 Filed 7-29-10; 8:45 am]
BILLING CODE 4150-03-P