December 12, 2011

Pre-existing Condition Exclusions et. al.

Interim Final Rule

Score: 17 / 60

Additional details
Department of Health and Human Services
Regulatory Identification Number
Agency Name
Department of Health and Human Services, Department of Labor, Treasury
Rule Publication Date


This document contains interim final regulations implementing the rules for group health plans and health insurance coverage in the group and individual markets under provisions of the Patient Protection and Affordable Care Act regarding preexisting condition exclusions, lifetime and annual dollar limits on benefits, rescissions, and patient protections.


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


1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
The regulations turn up readily on using an RIN or a keyword search. The RIA is apparently just a section of the notice. The regulation is findable on the HHS webpage, but one must know to go to the page of the Center for Consumer Information and Insurance Oversight. An RIN or keyword search on the website does not lead to the regulation, and there is no intuitive series of links.
2. How verifiable are the data used in the analysis?
Data are usually cited and sometimes linked. Occasionally vague—e.g., "The Departments’ estimates in this section are based on the 2004–2006 Medical Expenditure Panel Survey Household Component (MEPS–HC) which was projected to 2010 and calibrated to be consistent with the National Health Accounts projections." Data often not reported at fine enough level of detail to allow the reader to assess quality of analysis. For example, all children reporting "fair" health are counted as having preexisting conditions, but the number and percent in this category are not reported.
3. How verifiable are the models and assumptions used in the analysis?
Calculations not always described in enough detail to be replicable. Elimination of annual and lifetime limits is expected to increase premiums, but only the results, not the calculations, are given. Many assumptions are judgment calls without empirical support— e.g., uninsured children whose parents have individual policies are assumed to have been denied coverage due to preexisting conditions. Children with "fair" health are all assumed to have preexisting conditions, without a shred of evidence presented to justify this assumption. Many effects asserted to be "small" with no support. Studies cited in support of benefits are a mix of peer-reviewed articles, consultant studies, and think tank studies, usually linked.
4. Was the analysis comprehensible to an informed layperson?
Analysis is not too difficult to read, and it uses only a few acronyms. Most of the calculations are not very transparent; they are described in a general way and the results furnished.


5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
Long list of qualitative benefits includes increased access to health care, improved health outcomes, improved worker productivity, reduced financial strain on families that receive coverage, reduced financial risk, reduced explicit or implicit taxes to pay for uncompensated care, and improved equity because most beneficiaries are especially vulnerable. Some of these are ultimate outcomes. Others are outputs.
Does the analysis identify how these outcomes are to be measured?
When the analysis measures any benefits, it just measures the number of people potentially affected, not improvements in health outcomes. Even some of the head-count figures are based on pretty shaky assumptions. Spreading costs more widely across the insured population is always counted as an improvement in "equity," with no explicit definition of equity provided.
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
The regulation is intended to expand access to health insurance. Expanding access to insurance increases access to medical care, and this improves health. Even as a matter of theory, it is not clear whether the regulation will increase the number of people covered or just alter the composition of the covered population as healthier people drop their insurance when the price goes up. Somewhat less theory provided for other benefits.
Does the analysis present credible empirical support for the theory?
Peer-reviewed studies are cited that support theories about insurance and health outcomes. These studies are used to support the claim that the regulation will be effective, but never used to calculate an expected improvement in health outcomes as a result of the regulation. Some of the other claimed benefits cite a few studies in support.
Does the analysis adequately assess uncertainty about the outcomes?
For preexisting condition coverage, analysis acknowledges that the departments do not really know the quantitative magnitudes of benefits, and so it calculates a wide range of possible estimates. In other cases, analysis acknowledges uncertainties but does not calculate ranges. Interaction of different aspects of the law is another source of acknowledged uncertainty.
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?
Does the analysis identify a market failure or other systemic problem?
Analysis asserts that preexisting condition exclusions, lifetime/annual coverage limits, policy rescissions, and non-coverage for out-of-network emergency care are problems without explaining why they occur. No explanation of why expanding insurance coverage rather than some other solution is appropriate. In each case, the main reason given for the regulation is to implement the statute.
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
There may be very good reasons why the current insurance marketplace fails to address the problems mentioned above, even though the benefits may be substantial and the costs relatively small. But no theory is offered to explain this.
Does the analysis present credible empirical support for the theory?
Since no real theory of market failure or other systemic problem was offered, no evidence was offered in support either.
Does the analysis adequately assess uncertainty about the existence or size of the problem?
These problems, whose origins are unknown, are assumed to exist with certainty. Some uncertainties about the number of people affected are acknowledged.
7. How well does the analysis assess the effectiveness of alternative approaches?
Does the analysis enumerate other alternatives to address the problem?
For the regulation limiting annual maximums, different annual limits were considered for transition years. No other alternatives analyzed.
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)?
Very narrow alternatives (and, for some regulations, no alternatives at all) were analyzed.
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
It evaluates the effect on premiums (costs), but not the effect on benefits or outcomes.
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?
Baseline not explicitly addressed, but seems to be most recent year for which data were available. Analysis explicitly declines to adjust for other changes that occur under the Affordable Care Act that will interact with this regulation to alter benefits or transfers, even though it acknowledges this is a significant source of uncertainty.
8. How well does the analysis assess costs and benefits?
Does the analysis identify and quantify incremental costs of all alternatives considered?
Analysis provides a rough calculation of costs/transfers for the preexisting condition regulation, asserts percentage premium cost figures for the regulation affecting limits, and fails to estimate costs of rescission and emergency services regulations. It estimates the premium cost percentages for alternative annual coverage limits.
Does the analysis identify all expenditures likely to arise as a result of the regulation?
Analysis repeatedly asserts that effects are difficult to estimate. For some of the regulations, it calculated the percentage change in premiums. The analysis characterizes the higher premiums as transfers and as benefits, whereas a more accurate approach would be either to count them as transfers only or to count them as both costs and benefits.
Does the analysis identify how the regulation would likely affect the prices of goods and services?
Estimates preexisting condition regulation will increase premiums by .5-1 percent, but does not calculate a total. Effect on premiums of annual and lifetime limit prohibition is also stated, but calculation is not provided. No discussion of the effects on the overall cost of medical care.
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
Analysis repeatedly acknowledges many possible behavioral effects but declines to estimate their size or effect on costs. Assumes that covering preexisting conditions will reduce chronic problems but will not reduce individuals' incentives to care for themselves.
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Many uncertainties acknowledged, but their effects on costs are not calculated.
Does the analysis identify the alternative that maximizes net benefits?
Since benefits were not estimated, net benefits could not be calculated.
Does the analysis identify the cost-effectiveness of each alternative considered?
Since benefits were not estimated, cost-effectiveness could not be calculated.
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
For the preexisting condition regulation, change in premiums is calculated separately for states that have community rating and those that don't. Analysis usually identifies who is paying for transfers, but does not calculate winners and losers.
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
Analysis identifies the parties who are expected to benefit from the regulations, but it does not calculate the size of the benefit or health outcomes.


9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The analysis did not really assess any meaningful alternatives, and even the calculations for the chosen alternative are not very complete. Most of the regulations seem to have come directly from the legislation. The analysis reads like it was written after the regulation. The notice states that these are interim final rules because there was insufficient time for notice-and-comment before the rules must go into effect on Sept. 23, 2010.
10. Did the agency maximize net benefits or explain why it chose another alternative?
Net benefits were not calculated or discussed. One could not calculate net benefits based on the information given. Thus, the regulation was written with little cognizance of net benefits.
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
No goals or measures established. Since the RIA did not estimate ultimate outcomes, one could not readily establish outcome goals using the RIA.
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?
Some data on health care coverage and premiums could be used to assess the regulation's results in the future, but the RIA does not provide a sufficient template for doing this.
Total 17 / 60