December 12, 2011

Pre-Existing Condition Insurance Plan

Interim Final Rule
Summary

Score: 21 / 60

Additional details
Agency
Department of Health and Human Services
Regulatory Identification Number
0991-AB71
Agency Name
Department of Health and Human Services
Rule Publication Date
07/30/2010

RULE 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 preexisting 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.

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 Federal Register notice turns up in regulations.gov using a keyword or an RIN search. The RIA is in the notice. The notice can also be found on the HHS website, but the reader must know to look for the Center for Consumer Information and Insurance Oversight within the Centers for Medicare and Medicaid Services.
4/5
2. How verifiable are the data used in the analysis?
Analysis does not use any original data. Instead, it cites several prior government estimates of the number of children who might receive coverage due to this program; the reader would have to consult these sources for original data. The sources are cited but not linked. Occasional numbers cited in support of some other points are sources to studies that are referenced and sometimes linked.
2/5
3. How verifiable are the models and assumptions used in the analysis?
There are no real models or assumptions because the analysis does not include any original estimates. Most research cited to justify benefits is from peer-reviewed journals, cited and linked.
3/5
4. Was the analysis comprehensible to an informed layperson?
Reasonably comprehensible. However, it is difficult to understand the benefits or compare them with the costs since the benefits were not measured or estimated.
2/5

Analysis

5. How well does the analysis identify the desired outcomes and demonstrate that the regulation will achieve them?
3/5
Does the analysis clearly identify ultimate outcomes that affect citizens’ quality of life?
Benefits mentioned include increased access to health care, better health outcomes, improved worker productivity, and reduced financial strain. Some of these are outcomes; some are means to an end. The $5 billion federal expenditure is characterized as a meaningful improvement in "equity," but equity is not defined.
4/5
Does the analysis identify how these outcomes are to be measured?
The only (intermediate) outcome measured is the number of people who might receive coverage as a result of these pools. RIA cites Congressional Budget Office and think tank studies estimating the number of people who would obtain coverage in the pools. These figures are not carried through to estimate ultimate outcomes or benefits.
2/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
People with high medical costs will receive access to insurance at subsidized rates equal to 100 percent of standard rates, and this will increase coverage. Increased coverage will lead to other outcomes listed above. Since equity is not defined, there's no explicit theory about how the regulation will improve equity.
3/5
Does the analysis present credible empirical support for the theory?
Several studies cited that estimate the increase in insurance enrollment attributable to this program. Analysis cites research showing that increased access to and use of medical care improves health outcomes. Evidence cited that access to insurance would reduce financial risk, increase productivity, and reduce cost shifting. Declines to use data from state experience with high-risk pools, which might have been helpful even though these pools are not the same as the new program.
3/5
Does the analysis adequately assess uncertainty about the outcomes?
Some uncertainties are acknowledged—primarily a range of increases in insurance coverage—but there is no formal analysis of uncertainty. One point in the range is the number of people who would receive coverage if more subsidy money were available, which seems like an odd way to project the program's effect given fixed funding. It also uses CBO's expected enrollment figure as the lower bound.
1/5
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?
Analysis asserts that individuals with preexisting conditions cannot get insurance due to "medical underwriting," but does not explain why this is a systemic problem. No attempt is made to demonstrate that this is a market failure (even though it may be); it's essentially dissatisfaction with market pricing of insurance. The notice and the analysis largely approach this as an equity issue, implying that it is unfair for people with health problems to be denied coverage or charged higher premiums due to their health. This could be presented as a systemic problem if the government could explain why the market produces results that contradict a well-defined concept of equity.
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?
The closest HHS comes to offering a theory is stating that insurers deny coverage or charge higher premiums for people who have health problems.
2/5
Does the analysis present credible empirical support for the theory?
Evidence supports the claims that some people are uninsured and that some of them are currently in high-risk pools. The fact that 35 states offer high-risk pools suggests that some people with health problems are denied coverage or would otherwise pay high premiums. Analysis cites a GAO study that estimates that there are 4 million people with health problems who lack insurance in states with high-risk pools. This says something about the size of the problem but not the cause.
2/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
Some type of systemic problem is presumed to exist with certainty; uncertainty about the number of uninsured or people affected is acknowledged.
1/5
7. How well does the analysis assess the effectiveness of alternative approaches?
2/5
Does the analysis enumerate other alternatives to address the problem?
Alternatives considered: guidance to states rather than rulemaking, certain aspects of state high-risk pools and CHIP program, uniform rules rather than allowing some state differences.
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)?
These are all alternative ways of administering the program, but not alternatives to the program.
2/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
No relevant content. Alternatives are each dismissed in a sentence or two.
0/5
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?
The only figure or measure discussed is the number of people who would obtain insurance in the new pools. Since the analysis simply cites other studies, the baseline is not clear.
0/5
8. How well does the analysis assess costs and benefits?
1/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
The federal expenditures and administrative costs of the program are quantified. Costs of alternatives are not. Analysis claims the administrative (paperwork) costs would be $1.9 million.
2/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
Federal expenditure figure is in the legislation. Source of administrative cost figure is unknown. So, it is hard to know if the agencies identified all relevant expenditures. Doesn't account for possible increases in expenditures on healthcare or paperwork by patients.
1/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
The federal subsidies would reduce insurance premiums to well below premiums in most state high-risk pools. Analysis suggests that fewer workdays lost will reduce the prices of services and/or increase wages and profits. Analysis also suggests it will reduce the cost of health care to the insured, but this doesn’t account for the effect of increased demand from increasing the number of insured.
2/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
The analysis claims the regulation will eliminate incentives for insurers to dump patients, but there is little actual analysis of this. No assessment of whether some patients will go without insurance for six months in order to receive subsidies. No discussion of whether states that have high-risk pools or insurers who participate in such pools would change their behavior in response to the subsidies. No discussion of the excess burden of raising the $5 billion in tax revenue.
1/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Costs are presented as certainties.
0/5
Does the analysis identify the alternative that maximizes net benefits?
Since benefits were not estimated, net benefits could not be calculated.
0/5
Does the analysis identify the cost-effectiveness of each alternative considered?
One analysis cited suggested that the program could cost $6000-7000 per participant per year. This is the closest the analysis comes to addressing cost-effectiveness. Since alternatives were not really analyzed, cost-effectiveness of alternatives was not estimated.
1/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Taxpayers would obviously bear most of the costs. No discussion of cost incidence. Analysis mentions that the money appropriated for the program could be used to cover states' administrative costs.
1/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
Principal beneficiaries are individuals who would receive the insurance subsidies. Analysis mentions that productivity benefits would be shared by workers, employers, and consumers, but does not estimate size or distribution of this benefit. It also claims the subsidies would reduce the "hidden tax" of higher premiums paid by people who have insurance (and states) to pay for uncompensated care. A suggestive calculation implies this latter benefit could be large.
3/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
The analysis does not appear to have motivated any decisions about the regulation. HHS issued this as an interim final rule because the high-risk pool program must be in effect three months after passage of the legislation.
1/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Since benefits were not estimated, net benefits were not estimated, and so HHS made its decisions uninformed by net benefits.
0/5
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. It would take a lot of work to get from the results of the RIA to outcome-oriented goals or measures.
0/5
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?
HHS or states will presumably have a count of the number of people who receive the new subsidies. If they can identify how many of these were not already in high-risk pools or would otherwise have received coverage, these data could at least be used to measure the number of people who obtain insurance as a result of the program.
1/5
 
Total 21 / 60