CMS-10379 Supporting Statement OMB-

Supporting Statement for Paperwork Reduction Act Submission Rate Increase Disclosure and Review Requirements

(45 CFR Part 154)

(CMS – 10379/OMB Control Number 0938-1141)

1. Background

The Patient Protection and Affordable Care Act (Pub. L. 111–148) was enacted on March 23, 2010 and the Health Care and Education Reconciliation Act (Pub. L. 111–152) was enacted on March 30, 2010 (collectively known as “the “Affordable Care Act.”). The Affordable Care Act reorganizes, amends, and adds to the provisions of Part A of title XXVII of the Public Health Service Act (PHS Act) relating to group health plans and health insurance issuers in the group and individual markets.

Section 1003 of the Affordable Care Act added a new section 2794 to the PHS Act which directs the Secretary of the Department of Health and Human Services (the Secretary), in conjunction with the states, to establish a process for the annual review of “unreasonable increases in premiums for health insurance coverage.” The statute provides that health insurance issuers must submit justifications for unreasonable premium increases to the Secretary and the applicable state prior to the implementation of the increases. Section 2794 also specifies that the Secretary, in conjunction with the states, shall monitor premium increases of health insurance coverage through an Exchange and outside of an Exchange.

2. Justification

1. Need and Legal Basis

45 CFR Part 154 implements the annual review of unreasonable increases in premiums for health insurance coverage called for by section 2794. The regulation established a rate review program to ensure that all rate increases that meet or exceed an established threshold are reviewed by a state or the Centers for Medicare and Medicaid Services (CMS) to determine whether the rate increases are unreasonable. Accordingly, issuers offering non-grandfathered health insurance coverage in the individual and/or small group markets are required to submit Rate Filing Justifications to CMS. Section 154.103(b) exempts grandfathered health plan coverage as defined in 45 CFR §147.140 and excepted benefits as described in section 2791(c) of the PHS Act. In the Notice of Benefit and Payment Parameters for 2019 (2019 Payment Notice) (83 FR 74, April 17, 2018), Section 154.103 was modified so that student health insurance coverage, as defined in §147.145, is also exempted from Federal rate review requirements for plans beginning on or after July 1, 2018.

Section 154.200(a)(1) previously provided that a rate increase for single risk pool coverage beginning on or after January 1, 2017 was subject to a reasonableness review if: (1) the average increase, including premium rating factors described in §147.102, for all enrollees, weighted by premium volume for any plan within the product, meets or exceeds 10 percent; or (2) the increase exceeds a state-specific threshold approved by the Secretary.

In the 2019 Payment Notice, this provision was amended to establish a 15 percent federal default threshold for reasonableness review beginning with single risk pool rate filings submitted by issuers for plan or policy years beginning on or after January 1, 2019.

The Rate Filing Justification consists of three parts. All issuers must continue to submit a Uniform Rate Review Template (URRT) (Part I of the Rate Filing Justification) for all single risk pool plans. Issuers that submit a rate filing that includes a plan that meets or exceeds the threshold must include a written description justifying the rate increase, also known as the consumer justification narrative (Part II of the Rate Filing Justification). We note that the threshold set by CMS constitutes a minimum standard and most states currently employ stricter rate review standards and may continue to do so. Issuers offering a QHP or any single risk pool submission containing a rate increase of any size must continue to submit an actuarial memorandum (Part III of the Rate Filing Justification).

Part I, (the URRT), is intended to capture information needed to monitor rate increases and ensure compliance with the single risk pool methodology and other federal rating requirements. The URRT currently in use is Version 4.3. That version contains two worksheets: Worksheet 1 “Market Experience” and Worksheet 2 “Plan & Product Information.” CMS is proposing changes to redesign the URRT in order to reduce the amount of information collected. The new URRT (Version 5.0) will be required for all plans in the single risk pool with effective dates beginning on or after July 1, 2019. Version 5.0 will include an additional worksheet (Worksheet 3 “Rating Areas”). Some fields will be removed from Worksheets 1 and 2, while some new fields will be added to Worksheets 1 and 2. Detailed changes to Worksheet 1 and Worksheet 2 are listed in Appendix A to this Supporting Statement.

2. Information Use rs

CMS will post on its website the information contained in each Rate Filing Justification for each proposed rate increase. States have the option to post at least the information in the Rate Filing Justification that CMS makes available on its website or provide a hyperlink to the publically available portions posted on the CMS website. For consumer clarity, CMS will also post on its website the final disposition of each rate increase that was subject to review under the regulation by either CMS or a state.

Previously, Part II (consumer justification narrative) was only required when an issuer submitted a rate increase for single risk pool coverage and (1) the average increase, including premium rating factors described in §147.102, for all enrollees, weighted by premium volume for any plan within the product, met or exceeded 10 percent; or (2) the increase exceeded a state-specific threshold approved by the Secretary. CMS has narrowed the information collection so that Part II will now only be required for rate changes for single risk pool coverage when (1) the average increase, including premium rating factors described in §147.102, for all enrollees, weighted by premium volume for any plan within the product, meets or exceeds 15 percent; or (2) the increase exceeds a state-specific threshold approved by the Secretary.

3. Use of Information Technology

Health insurance issuers and states will provide rate review information via the Health Insurance Oversight System (HIOS)—a web-based data collection system that is already being used by states and issuers to provide information for the healthcare.gov website (additional PRA-related information regarding HIOS is provided in the Web Portal PRA package (Health Care Reform Insurance Web Portal Requirements 45 CFR part 159, OMB control number 0938-1086) including all current rate review submissions exceeding the review threshold since September 1, 2011. All data submissions will be made electronically and no paper submissions are permitted.

Issuers and states will continue to use HIOS to upload their rate review reporting submissions (these submissions are described in detail below). The burden estimates provided in this Supporting Statement include the time and effort that will be dedicated to uploading information in HIOS. For example, the issuer burden estimate for completing and submitting Part I of the Rate Filing Justification (the URRT) includes the time associated with uploading the record in HIOS (2-3 minutes).

The rate review information that is uploaded and stored in HIOS will also be used to provide consumer-oriented information about rate increases on the Healthcare.gov website.

4. Duplication of Similar Information

There is no duplication of information requirements in any other collection.

5. Small Businesses

Small businesses are not affected by this collection as health insurance issuers are generally not small businesses.

6. Less Fre que nt Collection

Health insurance issuers must provide the Rate Filing Justification prior to implementing any proposed rate increase and may not deviate from this collection schedule or provide the information on a less frequent basis given the time-sensitive nature of the information that is provided (the statute requires health insurance issuers to provide justifications for rate increases prior to implementation). Annual filings (and quarterly filings for products in the small group market) will be provided to CMS and states with information related to premium increases of health insurance coverage in their Exchange and outside of their Exchange as well as the justifications for rates that meet or exceed the 15 percent federal threshold (or a state-specific threshold approved by the Secretary).

7. Special Circumstances

No special circumstances exist for this information collection.

8. Federal Register Notice/Outside Consultation

A Federal Register Notice was published on January 24, 2019 (84 FR 16), providing the public with a 60-day period to submit written comments on the information collection requirements (ICRs). Two commenters submitted letters regarding the ICR and their comments resulted in changes to the instructions to complete URRT v.5.

9. Payments/Gifts To Responde nts

There will be no payments or gifts to respondents.

10. Confidentiality

CMS will make available to the public on its website the information contained in each Rate Filing Justification that is not considered a trade secret or confidential commercial or financial information and is approved for release under the Freedom of Information Act.

11. Sensitive Questions

There are no sensitive questions included in this collection effort. The Department of Health and Human Services (HHS) does not propose to collect any private information.

12. Burden Estimates (Hours & Wages)

Adjusted Hourly Wages Used in Burden Estimates

Occupation Title	Occupational Code	Mean Hourly Wage ($/hour)	Fringe Benefits and Overhead ($/hour)	Adjusted Hourly Wage ($/hour)
Actuary	15-2011	$55.21	$55.21	$110.42
Actuary (State Government)	15-2011	$41.38	$41.38	$82.76

Average labor costs (doubled to include fringe benefits and other associated costs) are calculated using data available from the Bureau of Labor Statistics.¹ As indicated, we are adjusting the employee mean hourly wage estimates by a factor of 100 percent to account for benefits and overhead.

Part I. Student Health Insurance Coverage

Health Insurance Issuer Submission of Student Health Insurance Coverage Rate Filings

Because student health insurance coverage is exempted from federal rate review requirements, we expect to collect less information than was collected in previous years. This will reduce the burden related to the submission and review for issuers and states. We estimate that 75 student health insurance issuers will no longer be required to submit rate increases to HHS for review.

We estimate that each rate review submission would have taken approximately 11 hours for an actuary (at an hourly rate of $110.42) to prepare and submit the appropriate documents in HIOS, and that each issuer would have submitted an average of 0.53 plans (total of 40 plans per year).

¹ May 2017 Occupational Employment Statistics found at https://www.bls.gov/oes/current/oes_nat.htm). To account for fringe and overhead, HHS is using 100% of the mean hourly wage.

The total annual burden for all 40 submissions would have been 440 hours with an associated cost of approximately $48,585, resulting in an estimated burden of approximately 6 hours per issuer with an associated cost of approximately $648.

We estimate that states will no longer submit rate increases for 40 student health insurance plans to HHS annually. We estimate a burden reduction for states of one hour per plan for an actuary (at an hourly rate of $82.76) to prepare and electronically submit the appropriate materials, for a total annual burden reduction of approximately 40 hours with an associated cost reduction of approximately $3,310 annually.

Table 12.1 Estimated Annual Total Reduction in Burden Hours and Costs for Issuers

Number of Issuers	Number of Submissions per Issuer	Total Number of Submissions	Burden Hours per Issuer	Cost per Issuer	Total Burden Hours	Total Cost
75	0.53	40	5.87	$647.80	440	$48,584.80

Table 12.2 Estimated Total Annual Reduction in Burden Hours and Costs for States

Total Number of Submissions	Burden Hours per State	Cost per Submission	Total Burden Hours	Total Cost
40	1	$82.76	40	$3,310.40

Part II. Single Risk Pool Rate Filings

Submission of Unified Rate Review Template (Part I of Rate Filing Justification)

Based on the number of submissions received in the 2018 plan year, we expect to receive approximately 916 URRT submissions per year. Based on current experience, we estimate that approximately 589 issuers will submit, on average, 1.6 filings each year. Due to the changes proposed to the URRT and the adoption of version 5.0, we anticipate each submission will require 9 hours of work by an actuary (at an hourly rate of $110.42) including minimal time required for recordkeeping. We estimate that each issuer will incur an annual burden of approximately 14 hours with an associated cost of approximately $1,546. Therefore, we estimate the total annual burden and costs for all 916 submissions from 589 issuers to be approximately 8,244 hours with an associated cost of $910,302. Using the newly adopted URRT version we estimate that issuers will experience an average reduction of 2 hours per submission, or a total burden reduction of 1,832 hours.

Submission of Written Description Justifying the Increase (Part II of Rate Filing Justification)

Based on submission data from 2018, we estimate that the number of annual written justifications will be received will be approximately 661; a decrease of approximately 125 submissions. In order to determine this estimate we counted the number of submissions with a product subject to review due to a premium increase between 10 percent and 15 percent. For the 2018 plan year, CMS received 786 submissions; 579 of which included a rate increase at or above 10 percent; while 454 of those included a rate increase at or above 15 percent, resulting in 125 submissions falling between 10 percent and 15 percent.

We estimate that each written justification will require 1.5 hours for an actuary (at an hourly rate of $110.42) to prepare and electronically transmit the appropriate documentation, resulting in an estimated cost per submission of approximately $166. Therefore, each issuer would incur an annual burden of approximately 1.7 hours and an associated cost of approximately $186. For all 589 issuers, we estimate a total annual burden to prepare and submit 661 Rate Filing Justifications to be approximately 991.5 hours with an associated annual cost of approximately$109,481. We estimate that annual burden for all issuers will be reduced by 187.5 hours, with an estimated annual savings of approximately $20,704.

As stated above, we estimate 125 fewer submissions with rate increases will be subject to review. Assuming that states adopt the Federal default threshold, we expect the number of state reviews will decrease by 123 submissions². We expect 48 states will conduct 619 reviews and CMS will review 42 submissions. We estimate that each state review will require 38.5 hours of work by an actuary (at an hourly rate of $82.76) to review each submission. We estimate that each state will incur an annual burden of approximately 496.5 hours with an associated annual cost of approximately $41,090; resulting in a total annual burden for 48 states of approximately 23,832 hours with an associated cost of approximately $1,972,295. We further estimate that each state will realize an average annual decrease in burden of approximately 99 hours and an associated reduction in cost of approximately $8,165; resulting in a total annual reduction in burden for 48 states of approximately 4,736 hours with an associated annual cost savings of approximately $391,910.

Submission of Actuarial Memorandum (Part III of Rate Filing Justification)

For the 2018 plan year, issuers submitted 786 actuarial memoranda. Since issuers must submit an Actuarial Memorandum for rate increases only and there are no changes to that requirement, we estimate that the number of Actuarial Memoranda that will be submitted during 2019 and beyond will not increase. We estimate that each Actuarial Memorandum requires 14 hours of work by an actuary (at an hourly rate of $110.42). We estimate that each issuer will incur an annual burden of approximately 19 hours with an associated annual cost of approximately $2,063. The total annual burden, for all issuers will be approximately 11,004 hours with an associated annual cost of approximately $1,215,062.

Health Insurance Issuer Submission of Final Justification for Unreasonable Rate Increases

Pursuant to §154.230(c), if a health insurance issuer implements a rate increase that has been determined to be unreasonable, the issuer is required to submit to CMS and the relevant state a Final Justification and to display this information on their websites. Based on current experience, we estimate there will be approximately 3 justifications submitted and posted annually.

Total Annual Burden Hours: 3 justifications x 1 hour to prepare and post = 3 hours

Total Annual Costs: 3 hours x $110.42/hour = $331.26

If an issuer is legally permitted to implement an unreasonable rate increase and declines to implement the increase, the issuer will provide notice to CMS that it will not implement the increase. This submission will consist of a short, free response narrative that will take a senior actuary approximately 1 hour to prepare and post. Based on current experience, we estimate that there will be approximately 16 justifications submitted and posted annually.

Total Annual Burden Hours: 16 justifications x 1 hour to prepare and post = 16 hours

Total Annual Costs: 16 hours x $110.42 per hour = $1766.72

State Unreasonable Rate Increase Determinations

If CMS determines that a state has satisfied specific criteria for an Effective Rate Review (ERR) Program, CMS will adopt the state‘s determinations regarding whether a rate increase that meets or exceeds the established threshold is unreasonable, providing that, for each increase at or above the threshold, the state reports its final determination to CMS and explains the basis of its determination. In those cases where a state does not have an ERR Program, CMS will make its own determinations regarding whether a rate increase that meets or exceeds the established threshold is unreasonable. States with ERR Programs will be required to report on their rate review activities to the Secretary. CMS believes that this reporting requirement will involve minimal cost. CMS estimates that it will take an actuary ($80 per hour) approximately 20 minutes to prepare and submit this information to CMS.

Total Annual Burden Hours: 619 determinations x .33 hours = 204 hours

Total Annual Costs: 204 hours x $82.76 per hour = $16,883

Table 12.3 Estimated Annualized Burden Hours and Costs

² For the 2018 plan year, CMS reviewed two submissions proposing a rate increase between 10 percent and 15 percent.

	Number of Respondents	Number of Submissions per Respondent	Total Number of Submissions	Burden Hours per Respondent	Cost per Respondent	Total Burden Hours	Total Cost
Unified Rate Review Template (Part I)	589	1.55	916	14	$1,546	8,244	$910,302.48
Written Justification (Part II)	589	1.12	661	1.7	$186	991.5	$109,481.43
Actuarial Memo (Part III)	589	1.33	786	19	$2,063	11,004	$1,215,061.68
Final Justification for Unreasonable Rate Increases	19	1	19	1	$2,097.98	19	$39,861.62
State Unreasonable Rate Increase Determinations	619	1	619	.33	$16,883	204	$10,450,577
Total		6	3,001	36	$22,776	20,462	$ 12,725,103.59

13. Capital Costs

The industry and the states are not required to incur capital costs to fulfill these requirements.

14. Cost to Federal Government

If a state does not have an Effective Rate Review Program, CMS will review rate increases that meet or exceed the review threshold in those markets. This activity could be conducted with in-house resources and/or with the use of contracted services. CMS estimates that it will review 42 submissions per year (2 fewer submissions than the number reviewed in previous years). The following table provides the cost and burden for completion of these reviews.

Table 14.1 Estimated Cost to Federal Government per Review

Contractor Actuarial Rates and Time
Associated with Conducting Estimated Actuarial Rates		Rate Review
Principal Actuaries	$350.00
Support Actuaries	$234.00
Actuarial Analyst	$150.00
Administrative Support	$100.00
Estimated Time to Complete Average Review	Average Time Required
Principal Actuaries	5.50
Support Actuaries	9.50
Actuarial Analyst	14.00
Administrative Support	9.50
Actuarial Staff Hours	29.00
Total Staff Hours	38.50
Estimated Contractor Cost Per Review	$7,198

Total Annual Burden Hours: 42 reviews x 38.5 hours = 1,617 hours

Total Annual Costs: 42 reviews x $7,198 (cost per review) = $302,316

15. Changes to Burden

There is an overall decrease in burden hours from 41,213 hours to 20,462 hours.

As a result of student health coverage being exempted from Federal rate review requirements, we expect a total reduction in the annual burden to issuers of approximately 440 hours. We estimate that states will no longer submit rate increases for 40 student health insurance plans to CMS. We estimate a reduction in burden to states of approximately 40 hours annually.

We expect the adoption of URRT version 5.0 (Part I of the Rate Filing Justification) will reduce the burden for issuers by 2 hours per submission. The total issuer burden will decrease by 1,832 hours annually.

We expect the number of written justifications (Part II of the Rate Filing Justification) to decrease by 125 submissions due to the change in Federal default review threshold. The issuer burden will decrease by 187.5 hours annually and the state burden will decrease by 4735.5 hours annually.

16. Publication and Tabulation Dates

As part of consumer transparency and disclosure, information from the Rate Filing Justifications will be posted by HHS for all proposed rate increases and for all final rate changes. A final disposition of the rate review will also be posted and, if the rate change is identified as unreasonable and implemented by the issuer, the issuer must also post a final justification as defined in regulations within 10 business days.

17. Expiration Date

The expiration date will be displayed on each instrument.

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