Pre-Existing Condition Insurance Plan Program, 30218-30226 [2013-12145]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 78, Number 99 (Wednesday, May 22, 2013)]
[Rules and Regulations]
[Pages 30218-30226]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12145]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 152

[CMS-9995-IFC3]
RIN 0938-AQ70


Pre-Existing Condition Insurance Plan Program

AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of 
Health and Human Services (HHS).

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period sets the payment 
rates for covered services furnished to individuals enrolled in the 
Pre-Existing Condition Insurance Plan (PCIP) program administered 
directly by HHS beginning with covered services furnished on June 15, 
2013. This interim

[[Page 30219]]

final rule also prohibits facilities and providers who, with respect to 
dates of service beginning on June 15, 2013, accept payment for most 
covered services furnished to an enrollee in the federally-administered 
PCIP from charging the enrollee an amount greater than the enrollee's 
out-of-pocket cost for the covered service as calculated by the plan. 
The PCIP program was established under Section 1101 of Title I of the 
Patient Protection and Affordable Care Act (Affordable Care Act).

DATES: Effective date: This interim final regulation is effective on 
June 15, 2013.
    Comment date: To be assured consideration, written comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on July 22, 2013. Because of staff and resource limitations, we cannot 
accept comments by facsimile (FAX) transmission.

ADDRESSES: In commenting, please refer to file code CMS-9995-IFC3. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed).
    1. Electronically. You may submit electronic comments on this 
regulation to https://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address only: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-9995-IFC3, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-9995-IFC3, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue SW., Washington, DC 20201.

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--

Centers for Medicare & Medicaid Services, Department of Health and 
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-4492 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    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 comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: https://regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

FOR FURTHER INFORMATION CONTACT: Kevin Simpson, Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, (410) 786-
0017.

SUPPLEMENTARY INFORMATION:

I. Background

    The Patient Protection and Affordable Care Act, (Pub. L. 111-148) 
was enacted on March 23, 2010; the Health Care and Education 
Reconciliation Act of 2010 (Reconciliation Act), (Pub. L. 111-152) was 
enacted on March 30, 2010 (collectively, ``Affordable Care Act''). 
Section 1101 of the Affordable Care Act directs the Secretary of Health 
and Human Services (HHS) to establish, either directly or through 
contracts with states or nonprofit private entities, a temporary high 
risk health insurance pool program to provide access to affordable 
health insurance coverage to eligible uninsured individuals with pre-
existing conditions. A number of states elected to contract with HHS to 
establish and administer a high risk pool using PCIP funds. HHS 
directly established and administers a high risk pool in the remaining 
states and the District of Columbia. (Hereafter, we generally refer to 
this program as the Pre-Existing Condition Insurance Plan program, or 
the PCIP program. We refer to the PCIP program administered by HHS as 
the ``federally-administered PCIP'' or the ``Plan'' and a PCIP program 
administered by a state or its designated entity as a ``state-based 
PCIP.'') The PCIP program is intended to provide health insurance 
coverage to eligible uninsured individuals with pre-existing conditions 
until 2014. Beginning in 2014, most health insurance issuers will be 
required to offer coverage to all individuals, regardless of pre-
existing conditions, pursuant to section 2704 of the Public Health 
Service Act. Eligible individuals will be able to obtain health 
insurance coverage either by enrolling in a qualified health plan 
offered through the new Health Insurance Exchanges (also called 
Marketplaces) established under section 1311 or 1321 of the Affordable 
Care Act, or by enrolling in health insurance coverage offered in the 
individual or group market outside of the Exchanges.
    As a temporary bridge to the provisions that go into effect 
beginning in 2014, the PCIP program was designed to provide coverage to 
eligible individuals who have been locked out of the insurance market 
due to their health status. Since enrollment began in July 2010, the 
PCIP program has experienced significant and sustained growth, 
enrolling more than 135,000 otherwise uninsured individuals with pre-
existing conditions. Many PCIP enrollees have serious health conditions 
that require immediate and ongoing medical treatment including severe 
or life threatening conditions such as cancer. In 2012, the average 
annual claims cost paid per enrollee was $32,108. This cost per 
enrollee exceeds even that of state high risk pools that predate the 
Affordable Care Act for several reasons. Like other high risk pools, 
PCIP enrollees are limited to people that were previously considered 
uninsurable due to high expected claims cost. In contrast to many state 
high risk pools, PCIP enrollees also do not

[[Page 30220]]

experience any waiting periods or pre-existing condition exclusions 
upon enrollment in the program.
    The combined effect of the number of individuals enrolled in the 
program, particularly very sick individuals, their high utilization of 
covered services, and the statutory limitations on enrollee cost-
sharing (which limits the maximum amount an enrollee pays out-of-pocket 
for covered services to $6,250 in 2013) has led to a situation where 
the overall cost of the PCIP program is higher than originally 
projected. While the actuarial estimates that HHS relies on to manage 
the program fluctuate as new claims data is received and processed, 
given the current enrollment projections and the current rate of claims 
payment, the aggregate amount needed for the payment of the expenses of 
the PCIP program is estimated to exceed the amount of remaining funding 
appropriated by Congress to pay for such expenses until the statutory 
end to the program in 2014, unless we implement the policy changes 
being announced in this interim final rule.
    We have already taken measures to contain costs, with the intent of 
sustaining the program until 2014. In May of 2012, the federally-
administered PCIP ceased paying referral fees to agents and brokers in 
connection with enrolled individuals they had referred to the program 
and began requiring that applications for enrollment include 
documentation showing that the individual had been denied health 
insurance coverage due to the existence of a pre-existing condition. On 
August 1, 2012, the federally-administered PCIP switched provider 
networks, reducing both its negotiated and out-of-network payment rates 
to providers. This network change was followed by a targeted effort to 
negotiate additional discounts from in-network inpatient facilities 
that were treating a large number of PCIP enrollees. Additionally in 
2012, the federally-administered PCIP limited the specialty drug 
benefit such that the plan would only cover specialty drugs dispensed 
by in-network pharmacies.
    Beginning January 1, 2013, the federally-administered PCIP 
implemented additional cost containment measures, including--(1) The 
elimination of two of three former plan options in favor of a single 
plan option; (2) an increase in the maximum out-of-pocket limit from 
$4,000 to $6,250 for in-network services; and (3) an increase in 
coinsurance, once the deductible has been met, from 20 percent to 30 
percent of the plan allowance for in-network covered services. 
Furthermore, on February 15, 2013, the federally-administered PCIP 
suspended its acceptance of new enrollment applications until further 
notice.
    State-based PCIPs suspended their acceptance of new enrollment 
applications received after March 2, 2013. Additionally, a number of 
state-based PCIPs have taken measures to constrain costs in their 
programs, for example, by renegotiating their facility and physician 
reimbursement rates or by setting their payment rates at levels similar 
to the rates paid by Medicare. Lastly, in May 2013 HHS began 
negotiations with state-based PCIPs on a final program contract, with a 
period of performance running from June 1, 2013 through December 31, 
2013. The contract HHS will offer to state-based PCIPs will be a cost 
reimbursement contract up to, but not exceeding, the funding obligated 
in the contract.
    Based on estimates, HHS believes it is prudent and necessary to 
make additional adjustments in the federally-administered PCIP with 
respect to payment rates for covered services in order to ensure that 
there is sufficient funding available to provide coverage to currently 
enrolled individuals until the program ends in 2014.

II. Provisions of the Interim Final Rule

    This interim final rule specifies that we are using our authority 
under section 1101(g)(2) of the Affordable Care Act to set the payment 
rates for covered services in the federally-administered PCIP for dates 
of service beginning on June 15, 2013. As explained below, with the 
exception of covered services furnished under the prescription drug, 
organ/tissue transplant, dialysis and durable medical equipment 
benefits, covered services furnished to enrollees in the federally-
administered PCIP program will be paid at--(1) 100 percent of Medicare 
payment rates, or (2) where Medicare payment rates cannot be 
implemented by the federally-administered PCIP, 50 percent of billed 
charges or a rate generated pricing methodology using a relative value 
scale which is generally based on the difficulty, time, work, risk and 
resources of the service. (Hereafter, we generally refer to this 
pricing methodology as ``relative value scale'' pricing.) These rates 
will become the new plan allowances for the covered services, with the 
Plan being responsible for reimbursing the facility or a provider for a 
portion and the enrollee being responsible for reimbursing the facility 
or provider for the remainder, as calculated by the Plan using the 
current cost sharing rules described in the Plan brochure.
    Furthermore, to protect enrollees in the federally-administered 
PCIP from having to shoulder potentially significant costs that could 
be shifted to them as a result of this new payment policy, we are also 
adopting a policy that prohibits any facility or provider who, with 
respect to dates of service beginning on June 15, 2013, accepts payment 
for a covered service provided to an enrollee in the federally-
administered PCIP (excepting only the four benefit categories discussed 
below) from charging the enrollee an amount greater than the enrollee's 
out-of-pocket cost for the covered service as calculated by the Plan 
based on the plan allowance for the covered service. In other words, as 
a condition of accepting payment for most covered services, facilities 
and providers will be prohibited from ``balance billing'' enrollees in 
the federally-administered PCIP for the difference between the plan 
allowance for those covered services and the charge for the covered 
service that they might otherwise bill to a patient who is not a 
federally-administered PCIP enrollee.
    Presented below is a discussion of the specific regulatory 
provisions set forth in this interim final rule.

A. Insufficient Funds (Sec.  152.35(c))

    Section 1101(g)(2) of the Affordable Care Act states that ``[i]f 
the Secretary estimates for any fiscal year that the aggregate amounts 
available for the payment of the expenses of the high risk pool will be 
less than the actual amount of such expenses, the Secretary shall make 
such adjustments as are necessary to eliminate such deficit.'' We have 
codified this provision at 45 CFR 152.35(b).
    Since enrollment began in July 2010, the PCIP program has 
experienced significant and sustained growth, providing affordable 
health care insurance to more than 135,000 of the sickest and most 
vulnerable uninsured individuals with pre-existing conditions. As a 
result, claims paid by the PCIP program are, on average, 2.5 times 
higher than claims paid by state high risk pools that predate the PCIP 
program. Based on enrollment and claims data, current HHS estimates 
indicate that the aggregate amount needed to pay for PCIP program 
expenses may be greater than the remaining funding appropriated by 
Congress to pay for such expenses until coverage under the program ends 
in 2014. Thus, to ensure that there is sufficient funding to pay for 
the expenses of the PCIP program until 2014, as directed by the 
statute, we are adding a new Sec.  152.35(c) to our

[[Page 30221]]

regulations. This new section states that with the exception of covered 
services furnished under the prescription drug, organ/tissue 
transplant, dialysis and durable medical equipment benefits, the 
payment rates for covered services in the federally-administered PCIP 
with dates of service beginning June 15, 2013 will be paid at--(1) 100 
percent of Medicare payment rates; or (2) where Medicare payment rates 
cannot be implemented by the federally-administered PCIP, 50 percent of 
billed charges or a rate using relative value scale pricing 
methodology. For purposes of implementing this interim final rule, we 
presume that (for covered services paid at 50 percent of billed 
charges) a facility or provider's billed charge will be reasonable. 
Such charges are subject to review. The benefit and premium provisions 
codified at 45 CFR part 152 Subpart D will not change. In addition, as 
the new payment rates will become the new plan allowances for the 
covered services, we note that the Plan will be responsible for 
reimbursing the facility or a provider for a portion of these rates, 
and the enrollee will be responsible for reimbursing the facility or 
provider for the remainder, as calculated by the Plan using the current 
cost sharing rules described in the Plan brochure.
    HHS chose to index the new payment rates that will apply to most 
covered services to the Medicare payment rate because Medicare rates 
are widely accepted, familiar, and publicly available. Since Medicare 
payment rates are well known by facilities and providers, we believe 
using a rate indexed to Medicare best informs them of what the payment 
rate for most covered services will be. Based on enrollment and claims 
data, current HHS estimates indicate that implementing a payment rate 
that is 100% percent of Medicare will allow us to ensure that there is 
sufficient funding to pay for the claims and administrative expenses of 
the PCIP program until coverage under the program ends in 2014.
    Since the federally-administered PCIP utilizes a third party 
administrator to administer the Plan, there are a few instances where 
Medicare rates cannot serve as the basis for indexing the new Plan 
rates. The payment rate for these covered services will be 50 percent 
of billed charges or calculated using a relative value scale pricing 
methodology. We have chosen to adopt a different payment rate in such 
instances to ensure that the services currently covered under the Plan 
can continue to be covered by the federally-administered PCIP while 
also addressing the need to further contain program costs. These rates 
were chosen because the federally-administered PCIP can immediately 
operationalize them. Given the short remaining life of the program, and 
the limited number of covered services to which these payment rates 
would apply, we believe, it would be inefficient and too costly for HHS 
to operationalize other payment rates that could be applied to these 
covered services. We note that a facility or provider will be able to 
contact the federally-administered PCIP directly to determine the plan 
allowance for one of these covered services before providing the 
service to a federally-administered PCIP enrollee. Below, we discuss 
the specific covered services for which payment will be 50 percent of 
billed charges or a rate generated using a relative value scale pricing 
methodology.
    To the extent to which these covered services are non-
pharmaceutical services, the payment rate will be calculated using a 
the relative value scale payment methodology that uses a relative value 
scale generally based on the difficulty, time, work, risk and resources 
of the service. For pharmaceutical services other than those 
administered under the current Plan prescription drug benefit, the 
relative value scale payment methodology is similar to the pricing 
methodology used for Medicare Part B drugs based on published 
acquisition costs or average wholesale price for pharmaceuticals as 
published in the Red Book by RJ Health Systems, Thomson Reuters. In 
these cases the plan allowance will be based on the above described 
relative value scale pricing methodology and subject to the prohibition 
on balance billing (discussed below). If no Medicare payment rate or 
relative value scale pricing methodology is available, the federally-
administered PCIP will apply the 50 percent of billed charges payment 
rate. In these cases, the plan allowance is also subject to the 
prohibition on balance billing (discussed below).
    Other instances where covered services will be paid at 50 percent 
of billed charges are--(1) Professional services where there are no 
comparable CPT codes; (2) facility based services where the facility 
does not participate in Medicare and therefore has no Medicare ID; (3) 
facility-based services where Medicare rates are not yet available or 
not yet incorporated into the payment software; (4) facility-based 
services provided in a free-standing facility for skilled nursing 
facilities, long-term acute care facilities, rehabilitation facilities, 
mental health and substance abuse facilities; (5) facility-based 
services where all data elements required to calculate the Medicare 
payment rate are not provided; (6) facility-based services for home 
health providers (UB billers only); and (7) covered services that are 
not covered by Medicare. In these cases the plan allowance will be 
based on 50 percent of billed charges and subject to the prohibition on 
balance billing (discussed below). Enrollees will, however, remain 
responsible for paying any applicable cost-sharing amounts, as 
calculated by the Plan.
    We are adopting these new payment rates for the federally-
administered PCIP based on current enrollment projections and the 
current rate of claims payment. If these enrollment and claims 
projections change after this interim final rule goes into effect, HHS 
may opt, through future rulemaking, to change the payment rate.
    Given the changes we have already made to the prescription drug 
benefit in the federally-administered PCIP as previously discussed, we 
believe that establishing new payment rates for prescription drugs is 
not administratively feasible or cost effective. Therefore, the current 
plan allowances that apply to the prescription drug benefit in the 
federally-administered PCIP will not be affected by this interim final 
rule and will continue to apply. Similarly, we will not apply the new 
payment rates to covered services furnished under the organ/tissue 
transplant benefit to ensure that enrollees continue to have access to 
the federally-administered PCIP's network of transplant centers of 
excellence, which we believe will lead to fewer complications, shorter 
lengths of stay, fewer readmissions, better health outcomes, and lower 
costs. Accordingly, the current plan allowances for covered services 
furnished under the organ/tissue transplant benefit will remain the 
same. Also, we will not apply a new payment rate to the dialysis 
services provided under the diagnostic and treatment services benefit 
because we are unable to operationalize a Medicare payment rate. We 
believe that the current negotiated rates with dialysis providers 
result in payments that are likely to be less than 50 percent of billed 
charges. Therefore, we believe maintaining our current in-network 
payment rate for this service is more competitive than if we were to 
implement a new payment rate at 50 percent of the billed charge. 
Finally, we will not apply the new payment rates to covered services 
furnished under the durable medical equipment benefit, which currently 
is provided to enrollees in the federally-

[[Page 30222]]

administered PCIP on an in-network basis only. We believe that the 
rates currently paid for durable medical equipment are at least as 
competitive as Medicare payment rates.
    This interim final rule establishes new payment rates for most 
covered services furnished in the federally-administered PCIP. The 
federally-administered PCIP is administered directly by HHS. We note 
that HHS can implement this interim final rule quickly and efficiently. 
The state-based PCIPs have previously indicated to HHS that they are 
unable to implement new facility and provider rates quickly. Therefore, 
we have taken the contracting strategy outlined herein with state-based 
PCIPs.

B. Premiums and Cost-Sharing (Sec.  152.21(c))

    Section 1101(c)(2)(D) of the Affordable Care Act requires that a 
PCIP program established under this section meet ``any other 
requirements determined appropriate'' by the Secretary. We are using 
this authority to adopt a new requirement for the federally-
administered PCIP that conditions a facility or provider's acceptance 
of the new payment rates discussed above for most covered services on 
the facility or provider's agreement not to balance bill the enrollee 
for an amount greater than the cost-sharing amount calculated by the 
Plan.
    Balance billing is a term generally used to describe the practice 
of billing a patient for the difference between the plan allowance for 
a covered service and the amount that the facility or provider would 
otherwise charge for the service. Although the federally-administered 
PCIP currently contracts with a network of facilities and providers 
that have agreed not to balance bill, it may not be able to sustain 
that contractual arrangement as it currently exists, or otherwise enter 
into new contracts with networks that will accept as payment in full 
the payment rates we are adopting in this interim final rule. Thus, the 
federally-administered PCIP may operate without a network for most 
covered services, and the corresponding protection against balance 
billing that has, to date, been available to enrollees who choose to 
use network facilities and providers.
    Without such protection, enrollees in the federally-administered 
PCIP could become liable to pay significant out-of-pocket costs for 
many covered services. We understand that facility and provider charges 
will often be higher than the rates we are setting in this interim 
final rule. Allowing this financial liability to transfer to the 
enrollee could leave federally-administered PCIP enrollees no better 
off than they would have been if they had no PCIP coverage, and runs 
counter to the entire PCIP concept, which is to provide affordable 
health insurance coverage to those who need it most. Also, we believe 
that the payment rates we are setting in this interim final rule are 
still better than the alternative, which is leaving facilities and 
providers with the possibility of having to decide whether to furnish 
uncompensated care.
    Accordingly, to safeguard federally-administered PCIP enrollees 
from experiencing potentially significant increases in their out-of-
pocket costs due to balance billing, we are adding a new Sec.  
152.21(c) to our regulations. Beginning with June 15, 2013 dates of 
service, this new section requires all facilities and providers that 
accept payment from the federally-administered PCIP for furnishing a 
covered service to an enrollee (with the exception of covered services 
furnished under the prescription drug, organ/tissue transplant, 
dialysis and durable medical equipment benefits) to accept as payment 
in full the plan allowance for the covered service, which includes the 
cost-sharing amount calculated by the Plan for the covered service. 
With respect to these covered services, facilities or providers may not 
bill the enrollee for an amount greater than the amount determined by 
the Plan to be the enrollee's cost-sharing amount for the covered 
service.
    The prohibition on balance billing will not apply to covered 
services furnished under the prescription drug, organ/tissue 
transplant, dialysis and durable medical equipment benefits because, as 
explained above, covered services furnished under these benefits will 
continued to be paid at the existing in-network payment rates. We do 
not apply the balance billing prohibition to these covered services 
because it is our desire to encourage federally-administered enrollees 
to continue to seek treatment for these covered services from in 
network facilities and providers for the cost-containment reasons 
described above.

III. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

IV. Waiver of Proposed Rulemaking and the 60-Day Delay in the Effective 
Date

    Under the Administrative Procedure Act (APA) (5 U.S.C. 551, et 
seq.), a notice of proposed rulemaking and an opportunity for public 
comment are generally required before promulgation of a regulation. We 
also ordinarily provide a 60-day delay in the effective date of the 
provisions of a rule in accordance with the APA (5 U.S.C. 553(d)), 
which requires a 30-day delayed effective date and the Congressional 
Review Act (5 U.S.C. 801(a)(3)), which requires a 60-day delayed 
effective date for major rules.
    However, this procedure can be waived if the agency, for good 
cause, finds that notice and public comment and delay in effective date 
are impracticable, unnecessary, or contrary to the public interest and 
incorporates a statement of the finding and its reasons in the rule 
issued. 5 U.S.C. 553(d)(3); 5 U.S.C. 808(2).
    HHS has determined that issuing this regulation in proposed form, 
such that it would not become effective until after public comments are 
submitted, considered, and responded to in a final rule, would be 
impracticable and contrary to the public interest. The PCIP program is 
intended to provide benefits to eligible uninsured individuals with 
pre-existing conditions until 2014. However, the funding available to 
pay claims against, and the administrative costs of, the PCIP program 
is limited by statute, and HHS estimates that, at the current rate of 
expenditure, the aggregate amount needed for the payment of program 
expenses may be greater than the amount of remaining funding 
appropriated by the Congress to pay such expenses. Moreover, for 
individuals with pre-existing conditions enrolled in the PCIP program, 
the program may be their only available source of health coverage 
before prohibitions on discrimination by health insurance issuers based 
on pre-existing conditions go into effect in January 2014. It is 
critical to the continued sustainability of the program that the new 
payment rates go into effect as soon as operationally possible. A delay 
in the implementation of the new reimbursement rates beyond June 15, 
2013 would risk program funds being exhausted prior to 2014.
    We also believe that it would be impracticable and contrary to the 
public interest to delay the implementation of a policy that prohibits 
facilities and providers from billing federally-

[[Page 30223]]

administered PCIP enrollees for the difference between the plan 
allowance for most covered services and the amount they would otherwise 
charge for the covered services. The PCIP program is a program of last 
resort for individuals who, because of their pre-existing conditions, 
are either denied coverage in the individual market altogether, or can 
only obtain coverage that excludes their pre-existing condition (often 
at substantially higher premium rates than those paid by other 
individuals). The Affordable Care Act not only makes coverage available 
to these individuals until the more general pre-existing condition 
protections become available in 2014, but does so at a lower cost than 
they otherwise would likely have to pay if they did not have health 
coverage. Furthermore, if the network currently in place in the 
federally-administered PCIP became unavailable as a result of the new 
payment rates being set in this interim final rule, we are concerned 
that the balance billed charges could cause irreparable financial harm 
to enrollees and deter them from seeking services at all. Because we 
want not only to preserve the program benefit structure as intended by 
the Congress, but also meet the needs of enrollees in the federally-
administered PCIP who expect that their out-of-pocket costs will be 
limited, we believe that it would be impracticable and contrary to the 
public interest to create a situation in which these enrollees are 
either deterred from seeking covered benefits under the program 
altogether, or are forced to pay substantially higher out-of-pocket 
costs than they would have otherwise had to pay absent our adoption of 
a policy prohibiting balance billing in this interim final rule.
    For the foregoing reasons, we find good cause to waive the notice 
of proposed rulemaking and 60-day delay in the effective date and to 
issue this final rule on an interim basis.
    We are providing a 60-day public comment period, and this 
regulation will be effective on June 15, 2013.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval.
    We are not soliciting public comment on these issues addressed in 
this interim final rule because we are not making changes to the 
information collections associated with this program, which are covered 
under OMB Control Number OMB-0938-1100.

VI. Regulatory Impact Analysis

A. Summary and Need for Regulatory Action

    Section 1101 of Title I of the Affordable Care Act requires that 
the Secretary establish, either directly or through contracts with 
states or nonprofit private entities, a temporary high risk pool 
program to provide affordable health insurance benefits to eligible 
uninsured individuals with pre-existing conditions. The Affordable Care 
Act envisions that this program will provide coverage to eligible 
uninsured individuals with preexisting conditions until 2014, when 
these individuals will begin to have access to a broader range of 
affordable health coverage options, including qualified health plans 
offered through new Health Insurance Exchanges established under 
sections 1311 or 1321 of the Affordable Care Act. An interim final rule 
published July 10, 2010 (75 FR 45014) set forth and addressed key 
issues regarding administration of the program, eligibility and 
enrollment, benefits, premiums, funding, appeals rules, and enforcement 
provisions related to anti-dumping and fraud, waste, and abuse. This 
interim final rule sets forth new payment rates that apply to most 
covered services with dates of service beginning June 15, 2013, in the 
federally-administered PCIP. Payment rates for covered services--with 
the exception of covered services furnished under the prescription 
drug, organ/tissue transplant, dialysis and durable medical equipment 
benefits will be--(1) 100 percent of Medicare payment rates; or (2) 
where Medicare payment rates cannot be implemented by the federally-
administered PCIP, 50 percent of billed charges or a rate generated 
using a relative value scale pricing methodology. This interim final 
rule is an exercise of our authority to make program changes that we 
have determined are prudent and necessary to ensure that there is 
sufficient funding to pay for program expenses until 2014.
    Additionally, to protect federally-administered PCIP enrollees from 
potentially becoming financially liable to pay significant costs for 
covered services as an unintended consequence of this interim final 
rule, we are adopting a policy that prohibits facilities and providers 
from billing an enrollee for the difference between the plan allowance 
for a covered service (with the exception of covered services furnished 
under the prescription drug, organ/tissue transplant, dialysis and 
durable medical equipment benefits) and the amount that they would 
otherwise charge for the covered service. In other words, facilities 
and providers that furnish covered services to federally-administered 
PCIP enrollees must accept, as payment in full, the plan allowance for 
most of those covered services (as determined by the Plan) and not bill 
the enrollee for an amount greater than the cost-sharing amount that 
the federally-administered PCIP has calculated for the covered service.
    Executive Order 12866 explicitly requires agencies to take account 
of ``distributive impacts'' and ``equity.'' Setting the federally-
administered PCIP payment rates applicable to most covered services 
with dates of service beginning on June 15, 2013, is prudent and 
necessary to ensure the PCIP program continues to provide benefits to 
enrolled individuals with pre-existing conditions who cannot obtain 
health coverage in the existing insurance market until 2014, when these 
individuals will begin to have access to a broader range of coverage 
options, including qualified health plans offered through new health 
insurance marketplaces established under sections 1311 or 1321 of the 
Affordable Care Act. Based on enrollment and claims data, current HHS 
estimates indicate that the aggregate amount needed to pay for PCIP 
expenses may be greater than the remaining funding appropriated by 
Congress to pay for such expenses until coverage under the program ends 
in 2014. Therefore, it is critical that we set the new payment rates 
and prohibit balance billing under the federally-administered PCIP as 
soon as operationally possible so that we can ensure that funding 
remains available to provide benefits to PCIP enrollees until 2014 and 
enrollees are protected from potentially significant out-of-pocket 
costs.

B. Executive Order 12866

    Under Executive Order 12866 (58 FR 51735), a ``significant'' 
regulatory action is subject to review by the Office of Management and 
Budget (OMB). Section 3(f) of the Executive Order defines a 
``significant regulatory action'' as an action that is likely to result 
in a rule-- (1) having an annual effect on the economy of $100 million 
or more in any one year, or adversely and materially affecting a sector 
of the economy, productivity, competition, jobs, the environment, 
public health or safety, or state, local or tribal governments or 
communities (also referred to as ``economically significant''); (2) 
creating

[[Page 30224]]

a serious inconsistency or otherwise interfering with an action taken 
or planned by another agency; (3) materially altering the budgetary 
impacts of entitlement grants, user fees, or loan programs or the 
rights and obligations of recipients thereof; or (4) raising novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order. OMB has 
determined that this regulation is economically significant within the 
meaning of section 3(f)(1) of the Executive Order, because it is likely 
to have an annual effect on the economy of $100 million in at least 1 
year. Accordingly, OMB has reviewed this rule pursuant to the Executive 
Order.
    HHS provides an assessment of the potential costs, benefits, and 
transfers associated with this interim final regulation, summarized in 
the following table.

                      Table 1.1-- Accounting Table
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Benefits:
    Qualitative: The reduction in per-claim costs paid by the federally-
     administered Pre[dash]Existing Condition Insurance Plan will help
     to ensure that the PCIP program can continue providing benefits to
     current enrollees who were previously denied health coverage due to
     their pre-existing condition. Facilities and providers serving
     enrollees in the Plan will continue to receive payment for such
     care, rather than risk receiving no payment for such care should
     they choose to continue treating the enrollee and PCIP program
     funding is exhausted prior to 2014.
Costs:
    Qualitative: Health care facilities and providers will get paid less
     by the Plan for the same covered services, although given the small
     number of PCIP enrollees and large amount of uncompensated care
     that might otherwise be sought by these enrollees, we estimate this
     cost is minimal.
------------------------------------------------------------------------

a. Estimated Number of Affected Entities
    This interim final rule sets new payment rates for most covered 
services in the federally-administered Pre-Existing Condition Insurance 
Plan (PCIP) furnished beginning on June 15, 2013. It also prohibits a 
facility or provider from balance billing a federally-administered PCIP 
enrollee in most circumstances.
    Only facilities and providers furnishing covered services to 
federally-administered PCIP enrollees will be affected by the new 
payment rates and prohibition on balance billing. Although payment 
rates will be reduced, facilities and providers choosing to continue to 
furnish covered services to PCIP enrollees will continue to receive 
payment, whereas in the absence of PCIP, they might not be able to 
continue treating the individuals unless they furnish uncompensated 
care. Although the federally-administered PCIP currently includes an 
in-network benefit, enrollees are also able to receive treatment out-
of-network, thereby making it difficult to quantify the number of 
facilities and providers that will be affected by this interim final 
rule.
b. Benefits
    A key premise for the establishment of the PCIP program was that 
those who are unable to purchase private health insurance coverage due 
to a pre-existing condition are potentially disadvantaged as a result 
of both poor health and loss of income. We expect that this interim 
final regulation will help more than 100,000 current enrollees continue 
to receive coverage until 2014. According to the 2009 report entitled 
``Financial and Health Burden of Chronic Conditions Grow,'' released by 
the Center for Studying Health System Change, about 60 percent of the 
uninsured who have chronic conditions delay care or did not fill a 
prescription due to cost. Lack of health coverage often leads to 
significant medical debt, and uncompensated and expensive care at sites 
such as emergency rooms, shifting these costs in the health system to 
people with insurance coverage to offset the cost of this uncompensated 
care. Given these potential consequences of PCIP enrollees losing 
coverage and becoming uninsured prior to the coverage protections that 
will go into effect in 2014, this interim final regulation could 
generate significant benefits to enrolled individuals, for whom it will 
be possible to continue to be enrolled in the PCIP program. Absent this 
interim final rule, the PCIP program could exhaust its $5 billion in 
appropriated funding before the end of the program in 2014.
    The Regulatory Impact Analysis included in the preamble to the 2010 
PCIP interim final regulation included a discussion of the PCIP 
program's benefit to program-eligible individuals, as compared to the 
absence of the program. This interim final rule better ensures the 
continued existence of the program until 2014, as an alternative to the 
absence of the program during that time period. Therefore, we refer 
readers to the discussion of the benefits to program-eligible 
individuals that appears in the Regulatory Impact Analysis of the July 
30, 2010 interim final regulation (75 FR 45026). These benefits could 
take the form of reductions in mortality and morbidity, reductions in 
medical expenditure risk, and increases in worker productivity. Each of 
these effects is described in that Regulatory Impact Analysis.
c. Costs and Transfers
    Under Section 1101 of the Affordable Care Act, HHS is authorized to 
disperse $5 billion to pay claims and the administrative costs of the 
PCIP program that are in excess of premiums collected from enrollees.
    There will be administrative costs associated with this interim 
final rule. The federally-administered PCIP claims processing 
contractor will incur minimal administrative costs to implement the 
payment rates required by this regulation to ensure that its systems 
are properly coded to pay the payment rates established under this 
interim final rule. This cost will be minimal because the claims 
processing contractor has an existing system in place to adjust its 
payment rates to reduce the payment rates to the amount specified.
    This interim final rule will not increase or decrease costs to the 
federal government. The Congress appropriated $5 billion for the PCIP 
program, and HHS intends to spend that $5 billion for PCIP-related 
costs, although this regulation will change how a portion of the 
remaining $5 billion is distributed by spreading funding for the 
maximum period of time by setting new payment rates in the federally-
administered PCIP.
    With respect to other parties, we lack data with which to quantify 
costs associated with this regulation. Setting new payment rates for 
most covered services under the federally-administered PCIP program 
gives facilities and providers two choices. One choice is to continue 
to treat federally-administered PCIP enrollees and accept the payment 
rates set by this regulation as payment in full. We acknowledge that 
facilities and providers would, in general, be paid less to treat PCIP 
enrollees but we believe such cost is minimal (relative to facilities 
and providers' annual revenues). In the absence of this regulation, 
funding for the PCIP program may be exhausted prior to 2014, causing 
enrollees to seek from the same facilities and providers uncompensated 
and expensive care. Facilities and providers who furnish covered 
services to individuals enrolled in the federally-administered PCIP, 
the anticipated reduction in PCIP revenue per claim will not, in the 
aggregate, eliminate their overall PCIP revenue.

[[Page 30225]]

The other choice that facilities and providers have is to no longer 
treat PCIP enrollees. While we understand that the decision to no 
longer treat PCIP enrollees is possible, we believe and are hopeful 
that most facilities and providers will accept the new payment rates 
established in this interim final rule given the serious health 
conditions many federally-administered PCIP enrollees have and the 
prospect that such reduced payment is temporary until 2014 when no one 
can generally be denied health coverage because of a pre-existing 
condition. Facilities or providers who choose to not accept the payment 
rates established in this interim final rule could limit a federally-
administered PCIP enrollee's ability to access health care services. 
However, this same possibility would occur if the PCIP program were to 
end before 2014. Lastly, because the PCIP program serves such a small 
population nationwide, and the program is temporary in nature, it is 
unlikely that a facility or provider's annual revenue would be 
significantly impacted by continuing to treat PCIP enrollees at the new 
payment rate. Therefore, we believe that this interim final regulation 
has minimal cost to such providers and facilities.
d. Conclusion
    Under section 1101 of the Affordable Care Act, HHS is authorized to 
spend $5 billion for the purpose of funding the PCIP program. 
Implementing this interim final regulation, through which HHS is 
setting payment rates for most covered services under the federally-
administered PCIP program to 100 percent of Medicare payment rates, may 
not impose any substantial financial costs on any parties.
    For facilities and providers, the anticipated reduction in PCIP 
revenue per claim will likely be offset by the cost of uncompensated 
care in the absence of the PCIP program, a cost that facilities and 
providers would frequently incur if the PCIP program terminated earlier 
than 2014, due to funds being exhausted. Therefore, this interim final 
regulation has, in aggregate, minimal cost to such facilities and 
providers. By ensuing that coverage continues through the end of the 
year, when new options become available, the payment rates set forth in 
this interim final regulation will likely have a significant, positive 
financial impact on individuals enrolled in the program.
    We anticipate that PCIP enrollees, who might otherwise lose their 
PCIP coverage will benefit from this interim final rule because they 
will be able to maintain their PCIP coverage. We also anticipate that 
ensuring the PCIP program's existence through 2014 will reduce the 
burden on local and state governments to pay health care facilities and 
providers for uncompensated care and prevent shifting of uncompensated 
care costs in the health system to people with insurance coverage to 
offset the cost of such uncompensated care.

VII. Other Sections

Regulatory Alternatives

    Under the Executive Order, we must consider alternatives to issuing 
regulations and alternative regulatory approaches. This interim final 
rule sets payment rates for covered services in the federally-
administered PCIP with dates of service beginning June 15, 2013 to 
reduce the rate of expenditures in order to eliminate the potential 
funding deficit estimated to occur in calendar year 2013. While other 
program modifications, as previously summarized, have been implemented 
to contain program costs, no other viable alternatives were identified 
that could substitute for the changes included in this interim final 
rule.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) requires agencies that issue a 
regulation to analyze options for regulatory relief of small businesses 
if a rule has a significant impact on a substantial number of small 
entities. The RFA generally defines a ``small entity'' as--(1) A 
proprietary firm meeting the size standards of the Small Business 
Administration (SBA); (2) a nonprofit organization that is not dominant 
in its field; or (3) a small government jurisdiction with a population 
of less than 50,000. States and individuals are not included in the 
definition of ``small entity.'' The Secretary certifies that this 
interim final rule will not have significant impact on a substantial 
number of small entities.

Unfunded Mandates Reform Act

    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates would require certain spending in any 1 
year of $100 million in 1995 dollars, updated annually for inflation. 
In 2013, that threshold is approximately $141 million.
    UMRA does not address the total cost of a rule. Rather, it focuses 
on certain categories of cost, mainly those ``federal mandate'' costs 
resulting from--(1) Imposing enforceable duties on state, local, or 
tribal governments, or on the private sector; or (2) increasing the 
stringency of conditions in, or decreasing the funding of, state, 
local, or tribal governments under entitlement programs.
    Under the Affordable Care Act, states (or their designated 
nonprofit, private entities) chose to contract with HHS to administer 
PCIP and receive federal funding for doing so. If they did not choose 
to administer a PCIP, HHS established a PCIP in the state. Thus, this 
interim final rule does not impose an unfunded mandate on states.
    Enrolled individuals have to pay a premium and other out-of-pocket 
expenses to maintain their enrollment in a PCIP. However, individuals 
are free to disenroll based on their evaluation of the costs and 
benefits of remaining in the program. There is no automatic enrollment 
and no requirement to enroll or remain enrolled in a PCIP. Thus, this 
interim final rule does not impose an unfunded mandate on the private 
sector.

Federalism (Executive Order 13132)

    Under the specific provisions of the Affordable Care Act, States or 
State-delegated non-profit entities are contractors of the HHS in the 
implementation of the PCIP program. HHS has given those contractors 
flexibility within the parameters provided by the Affordable Care Act 
and within the budgetary capacity of the program.

Congressional Review Act

    This proposed regulation is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq) and has been transmitted to the Congress and 
Comptroller General for review.

V. Statutory Authority

    This interim final rule is adopted pursuant to the authority 
contained in section 1101 of the Patient Protection and Affordable Care 
Act (Pub. L. 111-148).

List of Subjects in 45 CFR Part 152

    Administrative practice and procedure, Health care, Health 
insurance, Penalties, Reporting and recordkeeping requirements.
    For the reasons set forth in the preamble, the Department of Health 
and Human Services amends 45 CFR subtitle A, subchapter B, part 152 as 
set forth below:

[[Page 30226]]

PART 152--PRE-EXISTING CONDITION INSURANCE PLAN PROGRAM

0
1. The authority citation for part 152 continues to read as follows:

    Authority:  Sec. 1101 of the Patient Protection and Affordable 
Care Act (Pub. L. 111-148).

0
2. Section 152.21 is amended by adding paragraph (c) to read as 
follows.


Sec.  152.21  Premiums and cost-sharing.

* * * * *
    (c) Prohibition on balance billing in the PCIP administered by HHS. 
A facility or provider that accepts payment under Sec.  152.35(c)(2) 
for a covered service furnished to an enrollee may not bill the 
enrollee for an amount greater than the cost-sharing amount for the 
covered service calculated by the PCIP.

0
3. Section 152.35 is amended by adding paragraph (c) to read as 
follows.


Sec.  152.35.  Insufficient funds.

* * * * *
    (c) Payment rates for covered services furnished beginning June 15, 
2013 to enrollees in the PCIP administered by HHS. (1) Covered services 
furnished under the prescription drug, organ/tissue transplant, 
dialysis and durable medical equipment benefits will be paid at the 
payment rates that are in effect on June 15, 2013.
    (2) With respect to all other covered services, the payment rates 
will be--
    (i) 100 percent of Medicare payment rates; or
    (ii) Where Medicare payment rates cannot be implemented by the 
federally-administered PCIP, 50 percent of billed charges or a rate 
using a relative value scale pricing methodology.

    Dated: May 15, 2013.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: May 16, 2013.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2013-12145 Filed 5-17-13; 4:15 pm]
BILLING CODE 4150-03-P