Premium Review Process; Request for Comments Regarding Section 2794 of the Public Health Service Act, 19335-19338 [2010-8600]

Agencies

• Office of the Secretary
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 75, Number 71 (Wednesday, April 14, 2010)]
[Proposed Rules]
[Pages 19335-19338]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-8600]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Parts 146 and 148


Premium Review Process; Request for Comments Regarding Section 
2794 of the Public Health Service Act

AGENCY: Office of the Secretary, HHS.

ACTION: Request for information.

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SUMMARY: This document is a request for comments regarding Section 1003 
of the Patient Protection and Affordable Care Act (PPACA), Pub. L. 111-
148, which added Section 2794 to the Public Health Service Act (the PHS 
Act). Section 2794 of the PHS Act requires the Secretary to work with 
States to establish an annual review of unreasonable rate increases, to 
monitor premium increases and to award grants to States to carry out 
their rate review process. The Department of Health and Human Services 
(HHS) invites public comments in advance of future rulemaking.

DATES: Submit written or electronic comments by May 14, 2010.

ADDRESSES: Written comments, identified by DHHS-2010-PRR, may be 
submitted to the Department of HHS by one of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Written comments (one original and two copies) may 
be mailed to: Department of Health and Human Services, Attention: DHHS-
2010-PRR, Hubert H. Humphrey Building, Room 445-G, 200 Independence 
Avenue, SW., Washington, DC 20201.
     Hand or courier delivery: Comments may be delivered to 
Room 445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201. Because access to the interior of the HHH 
Building is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the DHHS-2010-PRR drop box located in the main lobby of the building. A 
stamp-in clock is available for persons wishing to retain proof of 
filing by stamping in and retaining an extra copy of the comments being 
filed.
    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 electronic 
comments received before the close of the comment period on the 
following public Web site as soon as possible after they have been 
received: https://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments.

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    Comments received timely will be available for public inspection as 
they are received, generally beginning approximately 3 weeks after 
publication of a document, at 200 Independence Avenue, SW., Washington, 
DC 20201, Monday through Friday of each week from 8:30 a.m. to 4 p.m. 
To schedule an appointment to view public comments, call 202-690-5480.

FOR FURTHER INFORMATION CONTACT: Sharon Arnold, Centers for Medicare 
and Medicaid Services, Department of Health and Human Services, at 
(202) 690-5480. Customer Service Information: Individuals interested in 
obtaining information about the Patient Protection and Affordable Care 
Act may visit the Department of Health and Human Services' Web site 
(https://www.healthreform.gov).

SUPPLEMENTARY INFORMATION:

I. Background

    Section 1003 of the Patient Protection and Affordable Care Act 
(PPACA), Public Law 111-148, enacted on March 23, 2010, added Section 
2794 of the Public Health Service Act (PHS Act). In 1996, Congress 
enacted the Health Insurance Portability and Accountability Act of 1996 
(HIPAA), which added title XXVII to the PHS Act, and parallel 
provisions to the Employee Retirement Income Security Act of 1974 
(ERISA), and the Internal Revenue Code of 1986. These amendments 
provided for, among other things, improved portability and continuity 
of coverage with respect to health insurance coverage in the group and 
individual insurance markets, and group health plan coverage provided 
in connection with employment. Title XXVII of the PHS Act is codified 
at 42 U.S.C. 300gg, et seq. PPACA expanded Title XXVII of the PHS Act, 
redesignated several sections, and created new requirements affecting 
the individual and group markets. In particular, among other 
provisions, Section 2794 requires health insurance issuers offering 
individual or group coverage to submit to the Secretary and the 
relevant State a justification for an unreasonable premium increases.

A. Initial Premium Review Process, Public Reporting, and Justification 
of Unreasonable Premium Increases for Individual and Group Coverage

    Section 2794(a)(1) requires the Secretary, in conjunction with 
States, to establish a process for the annual review, beginning with 
the 2010 plan year, of unreasonable increases in premiums for health 
insurance coverage. Additionally, Section 2794(a)(2) provides that this 
process shall require health insurance issuers to submit to the 
Secretary and the relevant State a justification for an unreasonable 
premium increase prior to the implementation of the increase, and 
prominently post this information on their Internet Web sites. Section 
2794(a)(2) also requires the Secretary to ensure the public disclosure 
of information relating to these increases and justifications for all 
health insurance issuers.

B. Continuing Premium Review Process

    For plan years beginning in 2014, Section 2794(b)(2)(A) requires 
the Secretary, in conjunction with States to monitor premium increases 
of health insurance coverage offered through an Exchange and outside of 
an Exchange, consistent with the provisions of Section 2794(a)(2). (In 
this context, the terms ``State Exchange'' and ``Exchange'' refer to 
the State health insurance exchanges established under PPACA).
    Section 2794(b)(1) also requires that, as a condition of receiving 
a grant from the Secretary to assist in carrying out the premium review 
process, States shall provide the Secretary with information about 
trends in premium increases in health insurance coverage in premium 
rating areas in the State; and make recommendations about whether 
particular health insurance issuers should be excluded from 
participation in the Exchange based on a pattern or practice of 
excessive or unjustified premium increases.
    Additionally, Section 2794(b)(2)(B) requires States to take into 
account any excess of premium growth outside of the Exchange, as 
compared to the rate of premium growth inside the Exchange, in 
determining whether to offer qualified health plans in the large group 
market through an Exchange.

C. Availability of Grants to States in Support of the Premium Review 
Process

    Section 2794(c)(1) directs the Secretary to carry out a program to 
award grants to States during the five-year period beginning with 
fiscal year 2010 to assist in carrying out the requirements of Section 
2794(a). For example, these grants can be used to assist States in 
reviewing and, if appropriate under State law, approving premium 
increases for health insurance coverage; and providing information and 
recommendations to the Secretary under Section 2794(b)(1).
    Section 2794(c)(2)(A) provides for an appropriation to the 
Secretary of $250,000,000 out of all funds in the Treasury not 
otherwise appropriated, to be available for expenditure for the State 
grants. Section 2794(c)(2)(C) requires the Secretary to establish a 
formula for determining the amount of any grant to a State under this 
subsection that considers the number of plans of health insurance 
coverage offered in each State and the population of the State (with 
the requirement that no State qualifying for a grant shall receive less 
than $1,000,000 or more than $5,000,000 for a grant year).
    Additionally, Section 2794(c)(2)(B) provides that if these 
appropriated amounts are not fully obligated under the above mentioned 
State grants by the end of fiscal year 2014, any remaining funds are to 
remain available to the Secretary for grants to States for planning and 
implementing the insurance reforms and consumer protections under Part 
A of the PPACA.

D. Effective Dates

    Section 1004(a) of the PPACA provides that the provisions of 
Section 2794 of the PHS Act shall become effective for fiscal years 
beginning with fiscal year 2010.

II. Solicitation of Comments

A. Information Regarding Regulatory Guidance

    The Department is inviting public comment to aid in the development 
of regulations regarding Section 2794 of the PHS Act, and is especially 
interested in the perspectives of researchers, policy analysts, health 
insurance issuers, and States. To assist interested parties in 
responding, this request for comments describes specific areas in which 
the Department is particularly interested.
    This request for comments identifies a wide range of issues that 
are of interest to the Department. Commenters should use the questions 
below to assist in providing the Department with useful information 
relating to the development of regulations regarding Section 2794 of 
the PHS Act. However, it is not necessary for commenters to address 
every question. Individuals, groups, and organizations interested in 
providing information relating to one or more of the topics discussed 
herein may do so at their discretion by following the above mentioned 
instructions.
    Specific Areas in which the Department is interested include the 
following:
1. Rate Filings and Review of Rate Increases
    The Act requires the Secretary, in conjunction with States, to 
establish a process for the annual review of unreasonable increases in 
health

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insurance premiums. A justification for an unreasonable premium 
increase is also required.
    a. To what extent do States currently have processes in place to 
review premium rates and rate increases?
    1. What kinds of methodologies are used by States to determine 
whether or not to approve or modify a rate or a rate increase? What are 
the pros and cons of these differing methodologies?
    2. Are special considerations needed for certain kinds of plans 
(for example, HMOs, high deductible health plans, new policies, and 
closed blocks of business)? If so, what special considerations are 
typically employed and under what circumstances?
    b. Where applicable, do health insurance issuers currently provide 
actuarial memorandums and supporting documentation relating to premium 
rate calculations, such as trend assumptions, for all premium rates and 
rate increases that are submitted, and/or for all premium rates and 
rate increases that are reviewed?
    1. How is medical trend typically calculated?
    2. Are specific exhibits, worksheets or other documents typically 
required? If so, are these documents generally submitted to the State 
Insurance Department directly, and if so, in what format?
    3. To what extent do issuers use the following categories to 
develop justifications for rate increases: cost-sharing, enrollee 
population including health risk status, utilization increases, 
provider prices, administrative costs, medical loss ratios, reserves, 
and surplus levels? Are there other factors that are considered?
    c. What level(s) of aggregation (for example, by policy form level, 
by plan type, by line of business, or by company) are generally used 
for rate filings, rate approvals, and any corrective actions? What are 
the pros and cons associated with each level of aggregation in these 
various contexts?
    d. What requirements do States currently have relating to medical 
trend and rating calculations? What are the pros and cons of these 
different requirements, and what additional requirements could 
potentially be set?
    1. Do States generally allow enrollees under the same policy form 
to be further subdivided for purposes of calculating medical trends and 
rates?
    2. Do States generally allow enrollees under different policy forms 
to be grouped together for these calculations, and if so, how?
2. Defining Unreasonable Premium Rate Increases
    The Act provides that the initial and continuing rate review 
process under Section 2794 is only to be undertaken for unreasonable 
premium rate increases.
    a. In States that currently have rate review processes, are all 
rates or rate increases generally reviewed? If so, for what markets 
and/or products? If not, what criteria do these States typically use 
when determining which rates or rate increases will be reviewed? To 
what extent do States require that these reviews take place before the 
proposed rate increases can be implemented?
    b. To what extent have States developed definitions of what 
constitutes a premium rate increase warranting review?
3. Public Disclosure
    The Act requires that health insurance issuers prominently post the 
justification for an unreasonable premium increase on their Internet 
Web sites prior to implementation of the increase.
    a. To what extent is information on premium rates and premium rate 
increases, and related justifications, currently made available to the 
public?
    1. To what extent are annual summaries of premium rate increases 
currently made available to the public on State or consumer Web sites, 
and/or made available by request? Where available, to what extent is 
this information generally provided by policy form, type of product, 
line of business, or some other grouping?
    2. To what extent are rate filings with actuarial justification and 
supporting documentation generally made available to the public? In 
what format(s) are rate filings currently made available to the public? 
What format(s) would be most useful to the public?
    3. What kinds of supporting documentation are necessary for 
consumers to interpret these kinds of information?
    b. What kinds of information relating to justification for an 
unreasonable premium increase could potentially be made available?
4. Exclusion From Exchange
    For plan years beginning in 2014, States receiving grants in 
support of the rate review process must make recommendations, as 
appropriate, to the State Exchange about whether particular insurance 
issuers should be excluded from participation in the Exchange based on 
a pattern or practice of excessive or unjustified premium increases.
    a. To what extent have States developed definitions of what 
constitutes an excessive or unjustified premium rate increase and/or a 
pattern or practice of such increases? How could a pattern or practice 
of excessive unjustified premium increases be defined in this context, 
and what are some of the pros and cons of the various approaches that 
are available?
    b. What criteria could be established to determine whether insurers 
have engaged in a pattern or practice of excessive or unjustified 
premium increases?
5. Grant Allocation
    The Act directs the Secretary to allocate $250 million in grant 
money to States to carry out the rate review process.
    a. What factors could be considered in grant allocation?
    b. What weighting could be given to different factors and why?

B. Information Regarding Economic Analysis, Paperwork Reduction Act, 
and Regulatory Flexibility Act

    Executive Order 12866 requires an assessment of the anticipated 
costs and benefits of a significant rulemaking action and the 
alternatives considered, using the guidance provided by the Office of 
Management and Budget. These costs and benefits are not limited to the 
Federal government, but pertain to the affected public as a whole. 
Under Executive Order 12866, a determination must be made whether 
implementation of Section 2794 of the PHS Act will be economically 
significant. A rule that has an annual effect on the economy of $100 
million or more is considered economically significant.
    In addition, the Regulatory Flexibility Act may require the 
preparation of an analysis of the economic impact on small entities of 
proposed rules and regulatory alternatives. An analysis under the 
Regulatory Flexibility Act must generally include, among other things, 
an estimate of the number of small entities subject to the regulations 
(for this purpose, plans, employers, and issuers and, in some contexts 
small governmental entities), the expense of the reporting, 
recordkeeping, and other compliance requirements (including the expense 
of using professional expertise), and a description of any significant 
regulatory alternatives considered that would accomplish the stated 
objectives of the statute and minimize the impact on small entities.
    The Paperwork Reduction Act requires an estimate of how many 
``respondents'' will be required to comply with any ``collection of

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information'' requirements contained in regulations and how much time 
and cost will be incurred as a result. A collection of information 
includes recordkeeping, reporting to governmental agencies, and third-
party disclosures.
    Furthermore, Section 202 of the Unfunded Mandates Reform Act of 
1995 (UMRA) requires that agencies assess anticipated costs and 
benefits and take certain other actions before issuing a final rule 
that includes any Federal mandate that may result in expenditure in any 
one year by State, local, or tribal governments, in the aggregate, or 
by the private sector, of $135 million.
    The Department is requesting comments that may contribute to the 
analyses that will be performed under these requirements, both 
generally and with respect to the following specific areas:
    1. What policies, procedures, or practices of health insurance 
issuers and States may be affected by Section 2794 of the PHS Act?
    a. What direct or indirect costs and benefits would result?
    b. Which stakeholders will be impacted by such benefits and costs?
    c. Are these impacts likely to vary by insurance market, plan type, 
or geographic area?
    2. Are there unique costs and benefits for small entities subject 
to Section 2794 of the PHS Act?
    a. What special consideration, if any, is needed for these health 
insurance issuers or plans that they sell?
    b. What costs and benefits have issuers experienced in implementing 
requirements relating to rate review under State insurance laws or 
otherwise?
    3. Are there additional paperwork burdens related to Section 2794 
of the PHS Act, and, if so, what estimated hours and costs are 
associated with those additional burdens?

    Signed at Washington, DC this 8th day of April, 2010.
Donald B. Moulds,
Acting Assistant Secretary for Planning and Evaluation, Office of the 
Secretary, Department of Health and Human Services.
[FR Doc. 2010-8600 Filed 4-12-10; 10:15 am]
BILLING CODE 4150-03-P