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Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans

Proposed Rule

Score: 25 / 60

RULE SUMMARY

This proposed rule would implement the new Affordable Insurance Exchanges (‘‘Exchanges’’), consistent with title I of the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111–148) as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111– 152), referred to collectively as the Affordable Care Act. The Exchanges will provide competitive marketplaces for individuals and small employers to directly compare available private health insurance options on the basis of price, quality, and other factors. The Exchanges, which will become operational by January 1, 2014, will help enhance competition in the health insurance market, improve choice of affordable health insurance, and give small businesses the same purchasing clout as large businesses.

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.

CriterionScore

Openness

1. How easily were the RIA , the proposed rule, and any supplementary materials found online?
RIA not found on regulations.gov. NOPR is found on regulations.gov though readers are then directed to the HHS website and then must navigate by themselves to the NOPR since the link provided does not provide direct access.
2/5
2. How verifiable are the data used in the analysis?
RIA contains very little data within the the report since it relies heavily on CBO and JCT analyses. HHS refers readers to their analyses and provides little for readers within the RIA.
3/5
3. How verifiable are the models and assumptions used in the analysis?
HHS often relies on assumptions of CBO and JCT analysis and, while it does briefly describe various assumptions and models, it rarely addresses the underlying logic or empirical nature of those assumptions and models.
3/5
4. Was the analysis comprehensible to an informed layperson?
Analysis was light reading for an informed layperson, with few abbreviations and little detail provided. Organization of RIA was a bit unclear.
4/5

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?
Proposed regulation is intended to (1) improve public health of citizens by expanding insurance coverage; (2) improve financial security of citizens by providing a safety net against the potentially high cost of medical care; (3) decrease uncompensated care costs of medical providers; and (4) decrease health insurance premiums.
5/5
Does the analysis identify how these outcomes are to be measured?
RIA provides estimates of the number of people enrolled in Exchanges from 2012-2015: nearly 22 million by 2016 and there will be 32 million fewer uninsured. There is no attempt to quantify the ultimate outcomes specified above-apparently because RIA implicitly assumes they are highly correlated.
3/5
Does the analysis provide a coherent and testable theory showing how the regulation will produce the desired outcomes?
HHS argues the proposed regulation expands access to health insurance coverage through establishment of "Exchanges." Starting 2014, individuals and small businesses can purchase private health insurance through state-based competitive marketplaces called Affordable Insurance Exchanges, or “Exchanges.” Exchange standards aim to: promote a level playing field that promotes insurers competing on price and quality, ensure the maximum number of eligible people enroll in the Exchange, minimize the number of ineligible individuals who are able to enroll, minimize the total cost of establishing Exchange functions, and provide Exchanges with flexibility to cater to the specific needs of their populations.
3/5
Does the analysis present credible empirical support for the theory?
HHS states best evidence comes from a recent evaluation of an expansion of Oregon’s Medicaid program in 2008 where it conducted a lottery to expand access to uninsured adults with incomes below 100 percent of Federal Poverty Level. Approximately 10,000 low-income adults were newly enrolled in Medicaid as a result. Comparing outcomes for those who won lottery with those who did not win yields estimate of benefits of coverage. Despite claims the Oregon experience provides solid evidence of quantifiable health and financial benefits associated with coverage expansions for a population of non-elderly adults, it is unclear where evidence exists in the RIA. Nor is evidence provided in the case of uninsured adults with incomes above the Federal Poverty Level. The only other evidence presented is a 2002 Institute of Medicine report that found insurance coverage improves health outcomes of insured.
2/5
Does the analysis adequately assess uncertainty about the outcomes?
HHS admits uncertainty in estimating impacts due to unpredictable behavior of economic actors and that many variables contributing to decisions are not measurable including future income, changes in health risk and cultural norms. Future health care cost trends could also differ from projections. There is also uncertainty about how it will affect employer-sponsored insurance and, even though CBO assumes a slight decrease in employer-sponsored insurance, HHS admits other analyses suggest increases. RIA does not go into detail on how these issues might affect outcomes estimated in RIA.
3/5
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?
3/5
Does the analysis identify a market failure or other systemic problem?
RIA states the number of uninsured Americans is rising due to lack of affordable insurance, barriers to insurance for people with pre-existing conditions, and high prices due to limited competition and market failures. RIA does not explicitly discuss what these market failures are.
4/5
Does the analysis outline a coherent and testable theory that explains why the problem (associated with the outcome above) is systemic rather than anecdotal?
While RIA lists "market failures" (see above), it does not spell out what these "market failures" are. Rather their argument appears to focus on the fact that millions of people without health insurance use health care services for which they do not pay, shifting the uncompensated cost of their care to health care providers. Providers pass much of this cost to insurance companies, resulting in higher premiums that make insurance unaffordable to even more people.
3/5
Does the analysis present credible empirical support for the theory?
The empirical support appears to be the fact that there are "too many" uninsured citizens, but RIA does not clearly present empirical support based on their theory or estimate or even discuss what an efficient level of insured citizens might be.
2/5
Does the analysis adequately assess uncertainty about the existence or size of the problem?
RIA does not present ranges on estimated numbers of uninsured citizens that apparently are uninsured due to "market failures" or other problems.
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?
Alternative ways to operate Exchanges are briefly discussed. Analysis vaguely discusses state flexibility for the operation of Exchanges such as flexibility in how they structure the governance of an Exchange. States also have flexibility in determining how many Exchanges will cover the state’s service area. The state can join with other states to form a regional Exchange or operate a number of smaller, geographically distinct subsidiary Exchanges.
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)?
Very narrow since they all rely on implementation of the Affordable Care Act. Single-payer, subsidies to citizens or providers within the existing insurance market and other ways of providing health care to citizens are not discussed.
2/5
Does the analysis evaluate how alternative approaches would affect the amount of the outcome achieved?
Provides qualitiative discussion regarding how alternatives might affect outcomes compared to their proposed regulation.
2/5
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?
No. RIA mentions the future state of health care and its costs are uncertain, but does not integrate these issues into their discussion. Presumably, CBO uses a baseline in their estimates used within RIA, but this is not discussed in the RIA.
1/5
8. How well does the analysis assess costs and benefits?
2/5
Does the analysis identify and quantify incremental costs of all alternatives considered?
Some costs of alternatives "identified," but not quantified.
1/5
Does the analysis identify all expenditures likely to arise as a result of the regulation?
Two major expenditures are identified. CBO estimated outlays in two areas: reinsurance and risk adjustment programs, and estimates of State Planning and Establishment Grants for implementation of State Exchanges.
2/5
Does the analysis identify how the regulation would likely affect the prices of goods and services?
RIA has a goal of reducing insurance premiums and raising compensation to medical providers who previously were uncompensated. No attempt is made to identify whether proposed regulation would impact different consumers or producers differently. However, RIA states CBO estimates that premiums for small businesses purchasing through the Exchanges would be up to 2 percent lower than they would be without the Affordable Care Act. Exchanges are estimated to pay 7-10 percent less due to healthier risk pool.
3/5
Does the analysis examine costs that stem from changes in human behavior as consumers and producers respond to the regulation?
RIA assumes proposed regulation will produce a slight decrease in employer-sponsored insurance, but HHS admits other analyses suggest increases.
2/5
If costs are uncertain, does the analysis present a range of estimates and/or perform a sensitivity analysis?
Costs are estimated using two discount rates (3 percent and 7 percent), but there is no range of estimates provided attempting to deal with any other uncertainly.
1/5
Does the analysis identify the alternative that maximizes net benefits?
No, there is an "accounting statement" provided (without discussion) at conclusion of RIA that merely lists estimated costs with no estimates of benefits. No alternatives are presented.
1/5
Does the analysis identify the cost-effectiveness of each alternative considered?
No, there was no estimate of cost-effectiveness for any of the considered alternatives.
0/5
Does the analysis identify all parties who would bear costs and assess the incidence of costs?
Costs are estimated but there is no effort to determine who ultimately bears burdens (taxpayers, consumers or producers). The implicit assumption appears to be that all citizens gain (lower insurance premiums, better public health), but this is never directly stated.
2/5
Does the analysis identify all parties who would receive benefits and assess the incidence of benefits?
While benefits are described [(1) improve public health of citizens by expanding insurance coverage; (2) improve financial security of citizens by providing a safety net against potentially high cost of medical care; (3) decrease uncompensated care costs of medical providers; and (4) decrease health insurance premiums], the assumption appears to be that previously uninsured citizens gain as well as all citizens. Differential assessment of benefits is not directly explored other than possible differences between small and large businesses.
3/5

Use

9. Does the proposed rule or the RIA present evidence that the agency used the analysis?
There is no evidence that the RIA influenced the proposed rule. RIA appears mandatory and was not intended to help design the proposed rule.
1/5
10. Did the agency maximize net benefits or explain why it chose another alternative?
Benefits are not estimated and so net benefits are not developed. The agency simply provided an "accounting statement" at the end of the RIA in which there is no discussion. That statement only lists costs from 2012-2016 evaluated at two discount rates.
1/5
11. Does the proposed rule establish measures and goals that can be used to track the regulation's results in the future?
The numbers of uninsured citiens can be measured to determine if predictions are accurate, but it is unclear exactly what such predictions might actually mean for public health or whether more insured citizens are entirely the result of the proposed rule. Insurance price changes could also be assessed, but again it is problematic to interpret how such changes correspond to the regulation given other possible factors that might affect future prices.
1/5
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?
No discussion.
0/5
 
Total25 / 60

Additional details

Agency
Department of Health and Human Services
Regulatory Identification Number
0938-AQ67
Agency Name
Department of Health and Human Services www.hhs.gov
Rule Publication Date
07/01/2011
Comment Closing Date
09/28/2011