A. Statement of Need
This proposed rule proposes standards related to the premium stabilization programs (risk adjustment, reinsurance, and risk corridors) that will protect issuers from the potential effects of adverse selection and protect consumers from increases in premiums due to issuer uncertainty. The Premium Stabilization Rule and 2014 Payment Notice provided detail on the
implementation of these programs, including the specific parameters applicable to these programs. This proposed rule also proposes additional standards with respect to composite rating, privacy and security of personally identifiable information, the open enrollment period for 2015, the actuarial value calculator, the annual limitation on cost sharing for stand-alone dental plans, the meaningful difference standard for qualified health plans offered through a Federally- facilitated Exchange, patient safety standards for issuers of qualified health plans, the Small Business Health Options Program, cost sharing parameters, cost-sharing reductions, and FFE user fees.
B. Overall Impact
We have examined the impacts of this rule as required by Executive Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 13563 on Improving Regulation and Regulatory Review (January 18, 2011), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the
importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. A regulatory impact analysis (RIA) must be prepared for rules with economically significant effects ($100 million or more in any 1 year).
OMB has determined that this proposed rule is “economically significant” within the meaning of section 3(f)(1) of Executive Order 12866, because it is likely to have an annual effect of $100 million in any 1 year. Accordingly, we have prepared a RIA that presents the costs and benefits of this proposed rule.
Although it is difficult to discuss the wide-ranging effects of these provisions in isolation, the overarching goal of the premium stabilization and Exchange-related provisions and 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. The provisions within this proposed rule are integral to the goal of expanding coverage. For example, the premium stabilization programs decrease the risk of financial loss that health insurance issuers might otherwise expect in 2015 and the advance payments of the premium tax credit and cost-sharing reduction programs assist low- and moderate-income consumers and Indians in purchasing health insurance. The combined impacts of these provisions affect the private sector, issuers, and consumers, through increased access to health care services including preventive services,
decreased uncompensated care, lower premiums, establishment of patient safety standards, and increased plan transparency. Through the reduction in financial uncertainty for issuers and increased affordability for consumers, these provisions are expected to increase access to health coverage.
In this RIA, we discuss the requirements in this proposed rule related to cost sharing and FFE user fees, as well as new oversight provisions for the premium stabilization programs. C. Impact Estimates of the Payment Notice Provisions and Accounting Table
In accordance with OMB Circular A-4, Table 8 below depicts an accounting statement summarizing HHS’s assessment of the benefits, costs, and transfers associated with this regulatory action.
This proposed rule implements standards for programs that will have numerous effects, including providing consumers with affordable health insurance coverage, reducing the impact of adverse selection, and stabilizing premiums in the individual and small group health insurance markets and in an Exchange. We are unable to quantify certain benefits of this proposed rule – such as increased patient safety and improved health and longevity due to increased insurance enrollment – and certain costs – such as the cost of providing additional medical services to newly-enrolled individuals. The effects in Table 8 reflect qualitative impacts and estimated direct monetary costs and transfers resulting from the provisions of this proposed rule for
contributing entities, States, Exchanges, and health insurance issuers. The annualized monetized costs described in Table 8 reflect direct administrative costs (including costs associated with labor, capital, overhead, and fringe benefits) to States and health insurance issuers as a result of the proposed provisions, and include administrative costs estimated in the Collection of
Information section of this proposed rule. We note estimated transfers in Table 8 do not reflect any user fees paid by insurance issuers for FFEs because we cannot estimate those fee totals. We
also note that, while we are proposing a 2015 reinsurance contribution rate that is lower than the 2014 reinsurance contribution rate, total reinsurance administrative expenses, including the reinsurance contribution rate, will increase from 2014 to 2015.
TABLE 8: Accounting Table Benefits:
Qualitative:
* Increased enrollment in the individual market leading to improved access to health care for the
previously uninsured, especially individuals with medical conditions, which will result in improved health and protection from the risk of catastrophic medical expenditures
* A common marketing standard covering the entire insurance market, reducing adverse selection and increasing competition
* Robust oversight of programs that use Federal funds to ensure proper use of taxpayer dollars * Access to higher quality health care through the establishment of patient safety standards
* Increasing coverage options for small employers and part-time employees while mitigating the effect of adverse selection
Costs: Estimate Year
Dollar Discount Rate Covered Period 1.75 million 2013 7 percent 2014-
2017
Annualized Monetized ($/year)
1.82 million 2013 3 percent 2014- 2017 Qualitative:
* Costs incurred by issuers and contributing entities to comply with provisions in the proposed rule * Costs incurred by States for complying with audits of State-operated reinsurance programs
Transfers: Estimate Year
Dollar Discount Rate Period Covered 11.59 million 2013 7 percent 2014-2017
Annualized Monetized ($/year)
12.04 million 2013 3 percent 2014-2017 * Transfers reflect incremental cost increases from 2014-2015 for reinsurance administrative expenses and the risk adjustment user fee, which are transfers from contributing entities and health insurance issuers to the Federal government.
* Unquantified: Lower premium rates in the individual market due to the improved risk profile of the insured, competition, and pooling
This RIA expands upon the impact analyses of previous rules and utilizes the
Congressional Budget Office’s (CBO) analysis of the Affordable Care Act’s impact on Federal spending, revenue collection, and insurance enrollment. The CBO’s estimates remain the most comprehensive for provisions pertaining to the Affordable Care Act, and include Federal budget impact estimates for provisions that HHS has not independently estimated. The CBO’s May 2013 baseline projections estimated that 22 million enrollees will enroll in Exchange coverage
by 2016, including approximately 18 million Exchange enrollees who will be receiving subsidies.37 Participation rates among potential enrollees are expected to be lower in the first few years of Exchange availability as employers and individuals adjust to the features of the Exchanges. Table 9 summarizes the effects of the risk adjustment and reinsurance programs on the Federal budget from fiscal years 2014 through 2017, with the additional, societal effects of this proposed rule discussed in this RIA. We do not expect the provisions of this proposed rule to significantly alter CBO’s estimates of the budget impact of the risk adjustment and
reinsurance programs that are described in Table 9. For this RIA, we are shifting the estimates for the risk adjustment and reinsurance programs to reflect the 4-year period from fiscal years 2014 through 2017, because CBO’s scoring of the risk adjustment and reinsurance programs assumed that payments and charges would begin in 2014, when in fact these payments and charges will begin in 2015. CBO did not separately estimate the program costs of risk corridors, but assumed aggregate collections from some issuers would offset payments made to other issuers. We note that transfers associated with the risk adjustment and reinsurance programs were previously estimated in the Premium Stabilization Rule; therefore, to avoid double- counting, we do not include them in the accounting statement for this proposed rule (Table 8).
In addition to utilizing CBO projections, HHS conducted an internal analysis of the effects of its regulations on enrollment and premiums. Based on these internal analyses, we anticipate that the quantitative effects of the provisions proposed in this rule are consistent with our previous estimates in the 2014 Payment Notice for the impacts associated with the cost- sharing reduction program, the advance payments of the premium tax credit program, the premium stabilization programs, and FFE user fee requirements for health insurance issuers.
37 “Updated Estimates for the Insurance Coverage Provisions of the Affordable Care Act,” Congressional Budget