CMS-10401 Supporting Statement Part A (7-20-11)

Supporting Statement For Paperwork Reduction Act Submissions: Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment

A. Background

The Patient Protection and Affordable Care Act (ACA), Public Law 111-148, enacted on March 23, 2010, and the Health Care and Education Reconciliation Act (the Reconciliation Act), Public Law 111-152, enacted on March 30, 2010, provides for a reinsurance, risk corridor, and risk adjustment program to mitigate the negative impacts of adverse selection and market uncertainty due to insurance reforms that are the subject of separate rule-making, such as guaranteed issue, modified community rating, and prohibition of medical underwriting.

The temporary reinsurance and risk corridor programs are designed to provide insurers with greater payment stability as insurance market reforms begin. The State-based reinsurance program serves to reduce the uncertainty of insurance risk in the individual market by making payments for high-cost cases. The Federally-administered risk corridor program serves to protect against rate-setting uncertainty in the Exchange by limiting the extent of issuer losses (and gains). On an ongoing basis, the State-based risk adjustment program is intended to protect health insurance issuers that attract high-risk populations (e.g., those with chronic conditions). These programs will support the effective functioning of the American Health Benefit Exchanges (“Exchanges”), which will become operational by January 1, 2014. The Exchanges are individual and small group health insurance marketplaces designed to enhance competition in the health insurance market and expand access to affordable health insurance for millions of Americans. The proposed reporting requirements and data collection addresses requirements for these programs that States and health plans must meet both inside and outside of an Exchange.

B. Justification

1. Need and Legal Basis

Section 1341 of the Affordable Care Act provides that each State must establish a transitional reinsurance program to help stabilize premiums for coverage in the individual market during the first three years of Exchange operation. Section 1342 provides for the establishment of a transitional risk corridor program that will apply to the qualified health plans in the individual and small group markets for the first three years of Exchange operation. Section 1343 provides for a program of risk adjustment for all non-grandfathered plans in the individual and small group market both inside and outside of the Exchange. These risk-spreading mechanisms, which will be implemented by the Secretary and States, are designed to mitigate adverse selection and provide stability for health insurance issuers in the individual and small group markets.

Section 1321(a) also provides broad authority for the Secretary to establish standards and regulations to implement the statutory requirements related to Exchanges, reinsurance, risk adjustment, and other components of title I of the Affordable Care Act.

2. Information Users

The proposed data collection and reporting requirements will assist HHS in minimizing the impact of adverse selection in the Exchanges.

3. Use of Information Technology

The proposed collection of information for this rule will be submitted electronically. HHS staff will analyze or review the data in the same manner by which it was submitted and communicate with States and the District of Columbia using e-mail or telephone.

4. Duplication of Efforts

This information collection does not duplicate any other Federal effort.

5. Small Businesses

No impact on small businesses.

6. Less Frequent Collection

Due to the required flow of funds for payments for health insurance coverage within the Exchange, and related to risk-reduction programs, it is necessary to collect information as indicated. If frequency is lessened, the result will be late charges to insurers, increase in back payments, and an overall stress on the organizational structure of the Exchanges.

7. Special Circumstances

In order for the flow of payments to be made in a timely manner for risk-reduction programs, it is necessary to collect information according to a time considered appropriate by the State or HHS on behalf of the State (e.g. monthly submission of risk adjustment data).

8. Federal Register/Outside Consultation

The proposed rule published on July 15, 2011 (76 FR 41930). The comments for this proposed rule are due within 60 days of publication. We have consulted with contractors, academia, States and industry of the feasibility of this information collection. We have based many of the requirements in this information collection from the consultations with outside entities.

9. Payments/Gifts to Respondents

No payments and/or gifts will be provided to respondents.

10. Confidentiality

To the extent of the law and the U.S. Department of Health and Human Services policies, we will maintain respondent privacy with respect to the information collected.

11. Sensitive Questions

There are no sensitive questions included in this information collection effort.

12. Burden Estimates (Hours & Wages)

Below is a summary of the proposed information collection requirements outlined in this regulation. Throughout this section we employ assumptions regarding the frequency of data collections as this level of detail in not proposed in regulation text, but is discussed in preamble.

For purposes of presenting an estimate of paperwork burden for States, we reflect full participation of all States and the District of Columbia in operating an Exchange which is a requirement for the operation of the reinsurance, risk corridor, and risk adjustment programs. However, we recognize that not all States will elect to operate their own Exchanges, so these estimates should be considered an upper bound of burden estimates. These estimates may be adjusted proportionally in the final rule based upon additional information as States progress in their Exchange development processes.

A number of assumptions are made regarding the wages of personnel needed to accomplish the proposed collection of information. Wage rates are based on based on the Employer Costs for Employee Compensation report by U.S Bureau of Labor Statistics and represent a national average. Some states or employers may face higher or lower wage burdens. Wage rates estimates include a 35% fringe benefit estimate for state employees and a 30% fringe benefit estimate for private sector employees.

State Notice of Insurance Benefits and Payment Parameters

States are required to issue an annual notice of benefits and payment parameters specific to that State as described in §153.100. We estimate a minimum burden for the development of the State notice as States have the option to adopt the parameters in the forthcoming annual Federal notice of benefits and payments parameters would only have to indicate their intention of using these parameters in their annual notice.

We estimate that all 50 States and the District of Columbia will be subject to these reporting requirements. Again, this estimate should be considered an upper bound, and we may revise these estimates in the final rule based upon additional information as States progress in their Exchange development process. We estimate that it will take each State approximately 160 hours to meet the requirements of this subpart with a total estimated burden of 8,160 hours. We presume that it will take a financial analyst 120 hours (at an average wage rate of $62 an hour) and a senior manager 40 hours (at $77 an hour) to meet these requirements. The cost estimate for each State is $2,630 for a total estimated cost burden is $536,520.

Forms (if necessary)	Type of Respondent	Number of Respondents	Number of Responses per Respondent	Average Burden Hours per Response	Total Burden Hours
State Notice	State	51	1	160	8,160
Total				160	8,160

Type of Respondent	Hourly Labor Cost of Reporting ($)	Total Burden Hours	Average Labor Cost per Response	Number of Respondents	Total Labor Costs (All Respondents)
Financial Analysts	$62.00	120	$7,440.00	51	$379,440
Senior Manager	$77.00	40	$3,080.00	51	$157,080
Total			$10,520.00		$536,520.00

State Standards for the Transitional Reinsurance Program in the Individual Market

Within Part 153, subpart C we describe reporting requirements and maintenance of records for States for reinsurance. We require States to ensure that the applicable reinsurance entity collects the data required from issuers to make reinsurance payments. The type of data required is currently not described in this proposed rule to allow for State flexibility in determining the data type and collection method. However, the type of data that might be used to make reinsurance payments may include claims data or encounter data. We estimate that it will take about 12 hours on an annual basis for the applicable reinsurance entity to collect this information in an electronic format from issuers on an annual basis. This estimate is similar to estimates provided in Medicare Part D rule for data submission. For example, Medicare Part D estimated that it would take plan sponsors approximately 10 hours annually for plan sponsors to submit data on aggregated negotiated drug pricing from pharmaceutical companies described in §423.104. We provide a slightly higher estimate for the collection of data from issuers for reinsurance payments due to the complexity of the program.

We also require States that operate an Exchange to maintain any records associated with the reinsurance program. For this requirement, we estimate that it will take approximately 52 hours annually for States to maintain records. This is a broad estimate that includes not only the maintenance of data for the reinsurance program, but all books, records, documents, and other evidence of accounting procedures and practices related to the reinsurance program. This estimate is similar to Medicare Part D, where is was estimated that it will take 52 hours on an annual basis for plan sponsors to maintain books, records, and documents on accounting procedures and practices as described in §423.505.

We estimate that 50 States and the District of Columbia will be subject to the reporting requirements in this subpart. This estimate is an upper bound of burden as a result of the reporting requirements in this subpart; we will revise these estimates in the final rule as States progress in their Exchange development. We estimate that it will take each State approximately 64 hours to meet the provisions of this subpart for a total burden estimate of 3,264 hours. We presume that it will take a financial analyst 54 hours (at $55 an hour) and a senior manager 10 hours (at $77 an hour) to meet the reporting requirements. The burden cost estimate for each State is $3,740 for a total burden cost estimate of $190,740.

Forms (if necessary)	Type of Respondent	Number of Respondents	Number of Responses per Respondent	Average Burden Hours per Response	Total Burden Hours
Collect data for reinsurance payment	State/ Applicable Reinsurance Entity	51	1	12	612
Maintenance of records	State	51	1	52	2,652
Total				64	3,264

Type of Respondent	Hourly Labor Cost of Reporting ($)	Total Burden Hours	Average Labor Cost per Response	Number of Respondents	Total Labor Costs (All Respondents)
Operations Analyst	$55.00	54	$2,970.00	51	$151,470
Senior Manager	$77.00	10	$770.00	51	$39,270
Total			$3,740.00		$190,740.00

State Standards for the Risk Adjustment Program

Part 153, subpart D describes reporting requirements for States related to the risk adjustment program. We provide minimum burden estimates in this section for the collection and submission of risk-related data, particularly encounter data, as States would be required to collect this information for Medicaid beginning in 2012.

States would be required to implement privacy standards for all data to be collected for the risk adjustment program. We estimate it will take States approximately 40 hours to create and implement privacy standards for this data collection. This estimate presumes it will take a policy analyst 10 hours (at $55 per hour), an operations analyst 25 hours (at $55 per hour) and a senior manager 5 hours (at $77 per hour). We expect it will cost each state $2,310 to create and implement privacy standards. The total burden of this requirement is $117,810.

States are also required to collect risk-related data from health insurance issuers. This risk-related data includes claims, encounter, demographic, and enrollment data as described in §153.340. While we do not specify the data collection timeframe for risk adjustment data, we provide an assumption on the timing of submission of this data. We estimate that it will take an issuer approximately 12 hours to collect this data electronically on an annual basis. We estimate that it will take an operations analyst 12 hours (at $55 per hour) to collect this data annually.

States are also required to submit to HHS de-identified claims and encounter data for use in recalibrating Federally-certified risk adjustment models. We estimate that it will take 3 hours for States to submit this information to HHS. This estimate is slightly lower that Medicare Part D estimates for data submission as discussed previously and is a minimum burden estimate for this requirement since States will have already collected this data in the format requested for the risk adjustment program. States are required to submit summarized claims cost for use in verifying risk corridor submissions. Again we provide a minimum burden estimate of 2 hours since States would have already collected this information for risk adjustment. States are required to submit summarized and individual-level claims and encounter data from reinsurance-eligible plans for audit purpose. We estimate a minimum burden of 2 hours for States to submit this information to HHS. Finally, States are required to provide claims and encounter data for Exchange-related activities such as cost-sharing requirements and quality reporting. We estimate a minimum burden of 3 hours for States to submit this information for this purpose.

We estimate that all 50 States and the District of Columbia will be subject to these reporting requirements. This estimate is an upper bound of burden as a result of the reporting requirements in this subpart; we will revise these estimates in the final rule as States progress in their Exchange development. We estimate that it will take each State approximately 22 hours to meet these requirements with a total estimated burden of 1,122 hours. We presume that it will take an operations analyst 15 hours (at $55 an hour) and a senior manager 7 hours (at $77 an hour) to meet these requirements for a cost estimate of $1,826. The total estimated cost burden is $93,126.

Forms (if necessary)	Type of Respondent	Number of Respondents	Number of Responses per Respondent	Average Burden Hours per Response	Total Burden Hours
Privacy standards for all data to be collected	State	51	1	40	2,040
Minimum data collection standards exception	State	5	1	17	85
Collect risk-related data	State	51	1	12	612
Submit de-identified claims data	State	51	1	3	153
Submit summarized claims cost for risk corridors	State	51	1	2	102
Submit summarized and individual-level claims and encounter data	State	51	1	2	102
Submit claims and encounter data for Exchange-related activities	State	51	1	3	153
Total				79	3,247

Type of Respondent	Hourly Labor Cost of Reporting ($)	Total Burden Hours	Average Labor Cost per Response	Number of Respondents	Total Labor Costs (All Respondents)
Operations Analyst	$55.00	22	$1,210.00	51	$61,710.00
Senior Manager	$77.00	8	$616.00	51	$31,416.00
Total			$1,826.00		$93,126.00

States are also required to submit a request to HHS for review and approval of an alternate risk adjustment methodology. We estimate that 5 States may request an approval for an alternate risk adjustment methodology. We further estimate that it will take approximately 28 hours for a State to meet this requirement with a total estimated burden of 80 hours. We presume that it will take an operations analyst 22 hours (at $55 an hour) and a senior manager 6 hours (at $77 an hour) to meet this requirement.. We presume all states requesting approval of an alternative risk adjustment methodology will update their methodology once. Updating the methodology is expected to take an operations analyst 8 hours and a senior manager 2 hours.

In total, we estimate that it will take approximately 38 hours for a State electing to establish an alternate risk adjustment methodology to meet the reporting requirements with a total estimated burden of 190 hours. We expect it will cost each state $2,266 to meet these requirements... The total estimated cost burden for five States is $11,330.

States choosing to run a risk adjustment program must validate their risk adjustment data annually. We estimate data collection and validation will take an operations analyst 25 hours (at $55 per hour) and a senior manager 5 hours (at $77 per hour). The cost estimate for validating the risk adjustment data annually is $1,760 per state and a total burden of $89,760.

Forms (if necessary)	Type of Respondent	Number of Respondents	Number of Responses per Respondent	Average Burden Hours per Response	Total Burden Hours
Request for alternate methodology	State	5	1	28	140
Update alternate methodology	State	5	1	10	50
Validate Risk Adjustment	State	51	1	30	1,530
Total				68	1,720

Type of Respondent	Hourly Labor Cost of Reporting ($)	Total Burden Hours	Average Labor Cost per Response	Number of Respondents	Total Labor Costs (All Respondents)
Operations Analyst	$55.00	55	$3,025.00	5	$15,125.00
Senior Manager	$77.00	13	$1,001.00	5	$5,005.00
Total			$4,026.00		$20,130.00

Health Insurance Issuer Standards Related to the Transitional Reinsurance Program

We require all health insurance issuers both inside and outside of the exchange to provide enrollment and premium data (covered lives and total expenses for the self-insured market) to the applicable reinsurance entity for the estimation and collection of contributions. We also require that health insurance issuers of reinsurance-eligible plans submit data necessary in order to receive reinsurance payment.

For the purpose of this estimate and whenever we refer to burden requirements for issuers, we utilize estimates of the number of issuers provided by the Healthcare.gov website as this site provides the best estimate of possible issuers at this time. Based on preliminary findings there are approximately 1827 issuers in the individual and small group markets. While we recognize that not all issuers will offer QHPs, we use the estimate of 1827 issuers as the upper bound of participation and burden.

We further estimate that it will take each issuer approximately 12 hours to submit enrollment and premium data electronically on an annual basis and 12 hours to submit data for reinsurance payment on an annual basis. This estimate is similar to Medicare Part D estimates as discussed previously.

As such, we estimate that it will take each issuer approximately 24 hours to comply with these requirements for a total estimated annual burden of 43,848 hours. We presume that it will take a financial analyst 16 hours (at $57 an hour) and a senior manager 8 hours (at $72 an hour) to meet these requirements. These wage rate estimates include a 30% fringe benefit rate for the private sector as reported by the U.S. Bureau of Labor Statistics in the March 2011 Employer Costs for Employee Compensation report. A 30% fringe benefit rate will be used for all issuer personnel discussed in this section. The cost estimate for meeting these requirements for each issuer is of $1,488. The total burden cost estimate for all issuers is $2,718,576.

Forms (if necessary)	Type of Respondent	Number of Respondents	Number of Responses per Respondent	Average Burden Hours per Response	Total Burden Hours
Submit enrollment and premium data for reinsurance contributions	Issuer	1827	1	12	21,924
Submit data for reinsurance payment	Issuer	1827	1	12	21,924
Total				24	43,848

Type of Respondent	Hourly Labor Cost of Reporting ($)	Total Burden Hours	Average Labor Cost per Response	Number of Respondents	Total Labor Costs (All Respondents)
Financial Analysts	$57.00	16	$912.00	1827	$1,666,224.00
Senior Manager	$72.00	8	$576.00	1827	$1,052,352.00
Total			$1,488.00		$2,718,576.00

Health Insurance Issuer Standards Related to the Temporary Risk Corridors Program

Qualified health plan issuers are required to submit data on premiums collected and allowable costs. While we recognize that not all issuers will offer QHPs, we use the estimate of 1827 issuers as the upper bound of participation and burden. We further estimate that it will take each issuer approximately 12 hours to comply with this requirement on an annual basis. This estimate is similar to estimates for data submission in Medicare Part D as discussed previously with a slight increase due to the complexity of the risk corridor program. The total estimated annual burden is 21, 924 hours. We presume that it will take a financial analyst 8 hours (at $57 an hour) and a senior manager 4 hours (at $72 an hour) for a cost estimate of $744. The total burden cost estimate for all issuers is $1,359,288.

Forms (if necessary)	Type of Respondent	Number of Respondents	Number of Responses per Respondent	Average Burden Hours per Response	Total Burden Hours
Submit data on adjusted premiums and allowable costs	Issuer	1827	1	12	21,924
Total				12	21,924

Type of Respondent	Hourly Labor Cost of Reporting ($)	Total Burden Hours	Average Labor Cost per Response	Number of Respondents	Total Labor Costs (All Respondents)
Financial Analysts	$57.00	8	$456.00	1827	$833,112.00
Senior Manager	$72.00	4	$288.00	1827	$526,176.00
Total			$744.00		$1,359,288.00

Health Insurance Issuer Standards for the Risk Adjustment Program

Health insurance issuers are required to submit data required for risk adjustment. This data may include claims and encounter data for items and services rendered; enrollment and demographic information; issuer rate-setting rules; and prescription drug utilization data. While we do not specify the data collection timeframe for risk adjustment data, we provide an assumption on the timing of submission of this data. We estimate that it will take an issuer approximately 20 hours to submit this data electronically on an annual basis. This estimate is a slight increase from the Medicare Advantage requirements for submitting data for drug claims as described for §423.329 for Medicare Part D and reflects the complexity of risk adjustment for the Exchange program.

Health insurance issuers are required to submit data for validation and verification activities to HHS and States. Again, we estimate that it will take an issuer approximately 12 hours to submit this data electronically on an annual basis as this should be data they already collect for risk adjustment. Finally, health insurance issuers are also required to maintain risk adjustment data for a period of ten years. We estimate that it will take approximately 2 hours annually for issuers to maintain this data.

We estimate that 1827 issuers must comply with these requirements. We further estimate that it will take each issuer approximately 34 hours to meet the reporting provisions in this subpart for a total of 62,118 hours. We presume that it will take a financial analyst 30 hours (at $57 an hour) and a senior manager 4 hours (at $72 an hour) for a cost estimate of $1,998 for each issuer. The total estimated annual burden cost for all issuers is $3,650,346.

Forms (if necessary)	Type of Respondent	Number of Respondents	Number of Responses per Respondent	Average Burden Hours per Response	Total Burden Hours
Risk adjustment data submission	Issuer	1827	1	20	36,540
Maintenance of Records	Issuer	1827	1	2	3,654
Data for validation and verification	Issuer	1827	1	12	21,924
Total				34	62,118

Type of Respondent	Hourly Labor Cost of Reporting ($)	Total Burden Hours	Average Labor Cost per Response	Number of Respondents	Total Labor Costs (All Respondents)
Financial Analysts	$57.00	30	$1,710.00	1827	$3,124,170.00
Senior Manager	$72.00	4	$28800	1827	$526,176.00
Total			$1,998.00		$3,650,346.00

Salaries were taken from the Bureau of Labor Statistics (BLS) website

(http://www.bls.gov/oco/ooh_index.htm). Fringe Benefit estimates were taken from BLS March 2011 Employer Costs for Employee Compensation report.

13. Capital Costs

There are no additional record keeping/capital costs.

14. Cost to Federal Government

The initial burden to the Federal Government for the establishment risk-related programs is $274,936. The calculations for CCIIO employees’ hourly salary was obtained from the OPM website: http://www.opm.gov/oca/10tables/html/dcb_h.asp.

Task	Estimated Cost
Review of risk data
15 GS-13: 15 x $42.66 x 160 hours	$102,384.00
Technical Assistance to States
15 GS-13: 15 x $42.66 x 240 hours	$153,576.00
Managerial Review and Oversight
2 GS-15: 2 x $59.30 x 160 hours	$18,976.00
Total Costs to Government	$274,936.00

15. Explanation for Program Changes or Adjustments

There are no changes to the burden. This is a new data collection.

16. Publication/Tabulation Dates

TBD.

17. Expiration Date

Not applicable.

18. Certification Statement

There is no exception to the certification statement identified in Item 19, "Certification for Paperwork Reduction Act Submissions," of OMB Form 83-I.

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CMS-9975-P