The Department of Health and Human Services (HHS) recently rolled out the initial regulations regarding the establishment of State Health Insurance Exchanges1 under the Patient Protection & Affordable Care Act (PPACA). At first glance, these mandates – which are being issued in several phases – appear to grant states a great deal of flexibility…BUT, they also raise a host of complex questions that probably won’t be answered until sometime next year.
In general, the rules establish the requirements that an Exchange must satisfy in order to be approved, the minimum requirements that health insurers must satisfy in order to participate in an Exchange, and the eligibility small employers must meet if they wish to participate in the Small Business Health Options Program (SHOP). Notable guidance includes the following:
Approval Deadline – January 1, 2013 is the deadline for an Exchange to be approved by HHS as demonstrating “operational readiness.” If a state elects not to establish an Exchange or has not been approved by that date, HHS will intervene and establish the Exchange in that particular state. Meanwhile, HHS may grant a “conditional” certification to a state that is unable to meet the initial / original deadline, but making progress toward being fully operational by 2014.
Structure & Governing Board – States may opt to establish the Exchange as part of an existing state agency/office, as an independent public agency or as a non-profit entity. The governing board should favor individuals who support the interests of consumers, and cannot have a majority of voting representatives with a “conflict of interest”…including health insurance issuers, agents, brokers, etc.
Regional/Subsidiary Exchanges – States can participate in a Regional Exchange spanning two or more states (regardless of whether they are contiguous), as long as HHS approval is granted. Additionally, a state may instead establish one or more Subsidiary Exchanges, which would serve distinct geographic areas.
General Functions – At a minimum, an Exchange must perform certain requirements, including issuing exemption certificates; performing eligibility determinations; establishing an appeals process; and providing both oversight and financial integrity functions. The proposal also provides instructions regarding the role of “Navigators.”2
SHOP Exchange – Each state would also be required to establish insurance options for qualifying small businesses through a SHOP, although participation by small employers is voluntary. A SHOP is intended to ensure that small employers have the same purchasing power as large employers, and to allow them to offer employees a choice of plans. Certain small employers participating in a SHOP will be eligible to receive a small business tax credit for contributions they make toward employees’ premiums.
Needless to say, the proposed regulations cover a lot of ground – AND A LOT OF PAGES! TASC is now in the process of analyzing a second set of instructions that lay out how these new marketplaces will deal with enrollment, provide subsidies for low to middle income American and interact with the Medicaid program. More to come…
1 Exchanges are state-based competitive health insurance marketplaces through which individuals and small businesses (with fewer than 100 employees) can purchase private health insurance.
2 Navigators: the public / private entities expected to assist individuals / small businesses find coverage for insurance, conduct outreach and provide education about the Exchanges. They must have knowledge of the market, but cannot receive compensation from an insurer for enrolling eligible candidates in a Qualified Health Plan (QHP).