Rate Review Cycle III Funding Opportunity: Frequently Asked Questions

This page contains frequently asked questions about the funding opportunity announcement: Grants to States to Support Health Insurance Rate Review and Increase Transparency in Health Care Pricing, Cycle III of the Rate Review Grant Program.

Previously, the Rate Review Grants Program was only open to insurance departments. In Cycle III, it appears that agencies and state-based entities other than insurance departments are also eligible. Is a state health agency, territory health agency, or a state university eligible to apply for the Cycle III Funding Opportunity?

Yes, a state health agency, territory health agency, or state university may be eligible to apply for this funding opportunity. This Funding Opportunity Announcement (FOA) is open to all 50 states, the District of Columbia and the five U.S. territories to develop or enhance their respective rate review programs and/or establish Data Centers. Only one application per State is permitted, except in a state in which there are two regulating entities, each with a primary responsibility over the regulation of a portion of the private health insurance market. For additional information regarding eligibility criteria, please see Section III, Eligibility Information, of the FOA.

Can a state agency act as the Data Center under this grant opportunity? Our agency has the authority to organize the All-Payers Claim Database and we contract with private sector vendors in the development and collection of medical claims data. We are considering expanding our capability to present, publish, and disseminate pricing information under this grant. Some of the grant funds would be provided to private vendors to enhance our data center capabilities. Would such an approach be permitted?

We’re glad to hear that you are interested in expanding the publication and dissemination of pricing data through this grant.

To clarify, there are statutory requirements that apply to Data Centers established or enhanced through the Rate Review Grant Program. Specifically, section 2794 of the Public Health Service (PHS) Act requires that Data Centers must be located at academic or other non-profit institutions. In order to establish or enhance a Data Center, states may contract with existing non-profit organizations. Such non-profit organizations can be located in the applicant’s state or in another state and serve as a Data Center for multiple states, as long as the non-profit organization possesses or will expeditiously obtain pricing data sets that satisfy two criteria. First, the data sets must include fair and accurate pricing and reimbursement data from providers or issuers in the applicant state. Second, the dataset must include a sufficiently representative subset of claims from the applicant state in order to be useful to consumers, employers, researchers, and the general public when comparing prices.

In addition, Data Centers must adopt by-laws that comply with the conflict of interest requirements established by section 2794 of the PHS Act. Appendix F of the Funding Opportunity Announcement contains new guidance in order to assist states seeking to comply with the requirements established by section 2794.

As part of Data Center activities, Cycle III funds can be used directly by the state on pricing activities, as long as the state also establishes or enhances a Data Center.

Can a grant application focus on price transparency or must the application link Cycle III grant funding to enhanced rate review?

A potential applicant can propose to expend Cycle III funds only on pricing transparency under the Data Center activities category. However, all Rate Review Grant recipients, even those that only apply for Data Center funding, must fulfill two requirements that relate to rate review:

1) Submission of data: As established by section 2794(b)(1), all states are required to submit certain rate filing data to HHS and to the relevant Exchange as a condition of participating in the Cycle III Rate Review Grant Program. First, section 2794(b)(1) of the PHS Act requires all grant participants to make recommendations, as appropriate, to the applicable Exchange about whether particular health insurers should be excluded from participation in the Exchange based on a pattern or practice of excessive or unjustified rate increases. The applicant should discuss plans to provide such recommendations to the relevant Exchange serving its state. Second, section 2794(b)(1) requires all grant participants to report rate and premium information to the Secretary. See Section IV, Application and Submission Information, of the Funding Opportunity Announcement (FOA) for additional information. States can choose to apply for Cycle III funding for this purpose or use their existing resources for these reporting functions.

2) Provision of pricing data to the relevant rate review agency: All states will be required to provide pricing data to the relevant agency or sub-agency that performs rate review activities.

Can grant funds be used to work with an existing All-Payer Claims Database and focus on price transparency as part of a rate review program?

Yes, states can use grant funds to work with an existing All-Payer Claims Database to expand pricing transparency as part of Rate Review activities.

As noted on page 14 of the Cycle III Funding Opportunity Announcement, states can choose to apply for funds for “Rate Review activities”, under section 2794(c)(1)(A). States may use such grant funds to develop or enhance their current capacity to review and, to the extent permitted by state law, approve or deny rate increases in the individual and group markets through an Effective Rate Review Program. In addition, states can use section 2794(c)(1)(A) funds to collect and analyze health care pricing data, as part of their Rate Review activities.

States using funds under section 2794(c)(1)(A) for the analysis of pricing data will need to clearly explain the connection between their work and rate review. Examples of pricing data-related activities allowable under section 2794(c)(1)(A), include: procuring pricing data from an external data source; integrating pricing data with rate filings in order to better evaluate rate submissions; analyzing and publishing pricing data in coordination with premium and rate filing information; and enhancing the transparency of pricing, cost, and rate information through web-based transparency initiatives.

Are there any existing Data Centers that were supported by Cycle I and/or Cycle II grant funding? Have any Cycle I or Cycle II grants used funds for pricing transparency in connection with rate review?

Grant recipients have used Rate Review Grant funds for health care pricing data activities, either through Rate Review or Data Center activities. The FOA provides a few examples of how states have used Rate Review Grant funds for pricing transparency activities.

New Hampshire serves as an example of a state that used pricing data as part of a Data Center project. New Hampshire enhanced the pricing information available on its “HealthCost” website. The “HealthCost” website allows commercially insured and uninsured residents to look up the cost of a specific service (an ankle x-ray, for instance) in a given zip code and determine how the cost varies according to plan type and insurance status. This new public data will help consumers and businesses to understand, and potentially negotiate, better prices for themselves and their employees.

Maryland serves as an example of a state that used pricing data as part of their Rate Review activities. During Cycle II of the Rate Review Grant Program, the Maryland Insurance Administration (MIA) contracted with the Maryland Health Care Commission (MHCC) and the Health Services Cost Review Commission (HSCRC) to identify opportunities to incorporate data and information available from both organizations into the rate review process. The MHCC collects claims information for all service categories from carriers and Medicare and the HSCRC regulates all hospital rates in Maryland. The MIA is using data from MHCC and HSCRC to develop appropriate benchmarks for use in reviewing a carrier’s premium pricing. These purposes are allowable under the Rate Review activities category.

Does CMS retain a list of “qualified” Data Centers?

No, CMS does not maintain a list of “qualified” Data Centers. However, the Funding Opportunity Announcement does identify some resources that may be used by states to identify organizations and entities that collect and disseminate medical claims data, including the Healthcare Cost and Utilization Project (HCUP) and the National Association of All-Payer Claims Databases (APCD) Council. It is important to note that this does not imply that the organizations participating in the APCD Council or HCUP meet the requirements that apply to “Data Centers.”

In addition to these resources, non-profit organizations that already collect multi-payer data for other uses may be able to serve as a Data Center for a state if they already possess or will expeditiously obtain pricing datasets that satisfy two criteria. First, the datasets must include fair and accurate pricing and reimbursement data from providers or issuers in the applicant state. Second, the dataset must include a sufficiently representative subset of claims from the applicant state in order to be useful to consumers, employers, researchers, and the general public when comparing prices. Such organizations may be located outside of the state, but they must have or adopt by-laws that comply with the conflict of interest requirements established by section 2794 of the PHS Act.

For previous recipients of Cycle II, do we just need to meet one of the eligibility requirements that apply solely to Cycle II recipients?

A previous recipient of Cycle II funds is eligible for Cycle III if it meets one or more of the following criteria:

1. The state plans to establish, enhance, or contract with a Data Center and provide medical pricing data in a transparent, accessible way to consumers, employers, researchers, and the general public. In addition, all Data Center applicants must make pricing data available to the relevant state-based authority that performs rate review; or
2. The state provides a comprehensive plan to invest $500,000 or greater to expand the health care pricing data collected, analyzed, and displayed as part of its Rate Review activities under section 2794(c)(1)(A). That plan must (a) include detailed documentation of how the medical pricing data will be analyzed and presented to the public in an easily accessible manner and useable format; and (b) clearly document the connection between the use of pricing data and the state’s rate review activities. For more information about pricing initiatives eligible under section 2794(c)(1)(A), please see Section I.3.c., Rate Review Activities; or
3. The state received Cycle II funding and drew down fifty-five (55) percent of Cycle II funds through the Payment Management System (PMS) by July 15, 2013. Such states can elect to expend their funds on Rate Review Activities, Required Rate Reporting, and/or Data Centers.

Cycle II recipients only need to meet one of the criteria listed above. In addition, Cycle II recipients must meet all of the other eligibility requirements that apply to all grantees, as described in Section III, Eligibility Information.