May 22, 2013

The Patient Protection and Affordable Care Act, and Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation

Summary

Score: 23 / 60

Additional details
Agency
Department of Health and Human Services
Regulatory Identification Number
0938–AR03
Rule Publication Date
11/26/2012
Comment Closing Date
12/26/2012
Dollar Year
2012 (millions)
Time Horizon (Years)
2017

RULE SUMMARY

This proposed rule provides details of standards for health-insurance issuers consistent with Title I of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act). This proposed rule outlines exchange and issuer standards related to coverage of essential health benefits and actuarial value. This proposed rule also proposes a timeline for qualified health plans to be accredited in federally facilitated exchanges and an amendment that provides an application process for the recognition of additional accrediting entities for purposes of certification of qualified health plans.

COMMENTARY

The HHS argues that the proposed rule is necessary in order to insure more citizens. The analysis does not present benefits associated with the rule, but instead assess the general case of expanding health insurance to more citizens. It remains unclear what the optimal level of insurance coverage should be, because there is no modeling of this basic issue in the RIA. The RIA appears to be geared toward justifying the need for the proposed rule without actually attempting to guide an optimal rule. It is vulnerable to the criticism that health insurance is not that complicated and that consumers can "read the label" without the help of health exchanges.

MONETIZED COSTS & BENEFITS (AS REPORTED BY AGENCY)

Dollar Year
2012 (millions)
 
Time Horizon (Years)
2017
 
Discount Rates
3%
7%
Expected Costs (Annualized)
1.7
1.5
Expected Benefits (Annualized)
Not Reported by Agency
Not Reported by Agency
Expected Costs (Total)
Not Reported by Agency
Not Reported by Agency
Expected Benefits (Total)
Not Reported by Agency
Not Reported by Agency
Net Benefits (Annualized)
Not Reported by Agency
Not Reported by Agency
Net Benefits (Total)
Not Reported by Agency
Not Reported by Agency

METHODOLOGY

There are twelve criteria within our evaluation within three broad categories: Openness, Analysis and Use. For each criterion, the evaluators assign a score ranging from 0 (no useful content) to 5 (comprehensive analysis with potential best practices). Thus, each analysis has the opportunity to earn between 0 and 60 points.

Criterion Score

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
The proposed rule was easily found on www.reginfo.gov but not on Regulations.gov.
4/5
2. How verifiable are the data used in the analysis?
The RIA itself contains little data. It relies on data from other government agencies, such as the Congressional Budget Office, that readers must find themselves.
2/5
3. How verifiable are the models and assumptions used in the analysis?
The RIA relies mostly on assumptions and models from other agencies and spends little time explaining them.
2/5
4. Was the analysis comprehensible to an informed layperson?
It is light reading for the informed layperson because so little detail is provided. Some background knowledge is needed to fill in gaps for full comprehension.
3/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
2/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
The goal of exchanges and related policies in the Affordable Care Act is to make affordable health insurance available to individuals who do not have access to affordable employer-sponsored coverage. There is no explanation of how this is supposed to make people's lives better.
3/5
Does the analysis identify how these outcomes are to be measured?
The outcome to be measured is the number of individuals who will now have affordable insurance coverage. This is not specified, but is implicit in the NPRM. There is no explanation of how this is supposed to make people's lives better.
3/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
Risk corridors encourage health insurance issuers to offer QHPs through exchanges during the first three years of their operation by ensuring that all issuers share the risk associated with initial uncertainty in the pricing of QHPs. Reinsurance protects health insurance issuers from the risk of high-cost individuals, reducing issuers' need to accumulate precautionary savings and lowering premiums. Risk adjustment plays a similar role by reducing the advantages of the selection of healthy individuals with low risk by a plan. This cannot be said to be a theory as such, since it consists of mainly asserted material.Risk corridors encourage health insurance issuers to offer QHPs through exchanges during the first three years of their operation by ensuring that all issuers share the risk associated with initial uncertainty in the pricing of QHPs. Reinsurance protects health insurance issuers from the risk of high-cost individuals, reducing issuers' need to accumulate precautionary savings and lowering premiums. Risk adjustment plays a similar role by reducing the advantages of the selection of healthy individuals with low risk by a plan. This cannot be said to be a theory as such, since it consists of mainly asserted material.
2/5
Does the analysis present credible empirical support for the theory?
HHS does not attempt to isolate benefits associated with each particular provision of Affordable Care Act. Instead, HHS discusses evidence on the benefits of affordable health insurance coverage, which is the objective of Exchanges and related provisions of the Affordable Care Act. HHS focuses on studies of the expansion of Oregon's Medicaid program that expanded access to uninsured adults and a 2002 Institute of Medicine report that found insurance coverage improves health outcomes of insured. The Oregon study focused on indigent persons and may not be representative of wider populations. Benefits are seen in terms of numbers insured.
2/5
Does the analysis adequately assess uncertainty about the outcomes?
HHS admits its estimates are based on a predictive economic model subject to fundamental uncertainty. With limited previous data and experiences, there is greater uncertainty in estimating the impacts of implementing the Affordable Care Act and the exchanges than in estimating the implications of modifying a previously existing program. Many behavioral variables are not measurable (expected income, changes in health risk, cultural norms, etc.) and changes in economic conditions or productivity would affect predictions. HHS also acknowledges uncertainty about how the Affordable Care Act will affect employer-sponsored insurance. No details on how such uncertainties might affect outcomes are provided, and there is no critical awareness of the likely impact of uncertainty.
2/5
6. How well does the analysis identify and demonstrate the existence of a market failure or other systemic problem the regulation is supposed to solve?
2/5
Does the analysis identify a market failure or other systemic problem?
The RIA states that the number of uninsured Americans is rising due to lack of affordable insurance, barriers to insurance for people with preexisting conditions, and high prices due to limited competition and market failures. The RIA does not explicitly discuss what these market failures are and confuses equity with efficiency.
2/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
HHS argues millions of people without health insurance use health care services for which they do not pay, shifting the uncompensated cost of their care to health care providers. Providers pass much of this cost to insurance companies, resulting in higher premiums that make insurance unaffordable to even more people. In reality there are many possible causes of these problems.
3/5
Does the analysis present credible empirical support for the theory?
Little is provided since there is no model of optimal insurance coverage, just that there are too few insured individuals; no convincing empirics are offered.
1/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
There is no real discussion since there is no attempt to determine how many uninsured result from market failure compared with how many from efficient reasons for not buying insurance.
0/5
7. How well does the analysis assess the effectiveness of alternative approaches?
3/5
Does the analysis enumerate other alternatives to address the problem?
Two alternatives are discussed: 1) a uniform standard for operations of exchanges and 2) a uniform standard for certifying health insurance coverage. Not much is done with the alternatives, but they are enumerated.
4/5
Is the range of alternatives considered narrow (e.g., some exemptions to a regulation) or broad (e.g., performance-based regulation vs. command and control, market mechanisms, nonbinding guidance, information disclosure, addressing any government failures that caused the original problem)?
It is very narrow, since they represent modest variation of the Affordable Care Act.
2/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
It is a qualitative assessment with little detail.
2/5
Does the analysis adequately address the baseline? That is, what the state of the world is likely to be in the absence of federal intervention not just now but in the future?
Not really: the baseline appears to be that used by the CBO, but this is not adequately discussed.
2/5
8. How well does the analysis assess costs and benefits?
1/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
Some costs are identified, but without quantification.
1/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
It identifies outlays for reinsurance and risk adjustment, and grants authority for start-ups, financial year 2012–16. Little detail is provided.
2/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
It makes some assertions but makes no attempt whatsoever to identify price changes, other than that insurance rates should fall overall.
1/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The HHS uses the CBO's assumption that employer-provided insurance will increase, but cites another study that estimated a reduction. Little discussion is provided.
2/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
In the NPRM (but not the RIA) costs are estimated using two discount rates (3 percent and 7 percent), but there is no range of estimates attempting to deal with any other uncertainty. There is really nothing here.
0/5
Does the analysis identify the alternative that maximizes net benefits?
No, there is an accounting statement with costs and benefits, but no assessment of alternatives. Benefits are not quantified.
1/5
Does the analysis identify the cost-effectiveness of each alternative considered?
No alternatives are listed, although there is a general discussion.
1/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Some social groups are identified, such as lower-income users, providers, and insurers.
2/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
It identifies the currently underinsured as beneficiaries. It asserts that "everyone" appears to gain. There is a little discussion of small versus large employers.
2/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
There is no evidence that the RIA influenced the rule and it appears to exist simply to justify the proposed rule itself. The HHS is responding to earlier comments and legislative details.
1/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
No benefits are estimated and so net benefits are not assessed. The RIA assesses benefits of expanded health insurance, but without directly focusing on the proposed rule.
1/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
While future assessment of the number of insured persons is possible, it is unclear how changes directly correspond to the proposed rule because other changes that influence coverage are likely to happen over time as well.
1/5
12. Did the agency indicate what data it will use to assess the regulation's performance in the future and establish provisions for doing so?
There is no discussion, but there is an implication that the number of persons underinsured or uninsured will fall.
1/5
 
Total 23 / 60