HHS Issues New Rules on Healthcare Insurance Exchanges

The Department of Health and Human Services (HHS) has issued its final rule aimed at implementing state health insurance exchange provisions of the federal healthcare law.  The rule becomes effective 60 days after it is published in the Federal Register.  The regulation outlines details of the exchanges, which are scheduled to launch on January 1, 2014, and offer insurance plan options for individuals and small businesses, as well as federal subsidies for premiums.

The final rule outlines the minimum standards states must meet in establishing and operating their exchanges, such as individual and employer eligibility for enrollment.  The rule also outlines minimum standards that health insurers must meet to participate in an exchange and the standards employers must meet to participate in the exchange.  The regulation offers states “substantial discretion” in how to design and operate their exchanges.  HHS will accept comment on nine sections of the exchange rule, including provisions regarding the ability of a state to allow agents and brokers to assist qualified individuals in applying for advance payments of the premium tax credit and cost-sharing reductions for qualified health plans; Medicaid and CHIP regulations; options for conducting eligibility determinations; and verification for applicants.  This final rule does not address all of the insurance exchange provisions of the Patient Protection and Affordable Care Act (ACA).

“These policies give states the flexibility they need to design an exchange that works for them,” said HHS Secretary Kathleen Sebelius. “These new marketplaces will offer Americans one-stop shopping for health insurance, where insurers will compete for your business.  More competition will drive down costs and Exchanges will give individuals and small businesses the same purchasing power big businesses have today.”

Among the regulations are a guide to set standards for establishing exchanges; setting up a Small Business Health Options Program (SHOP); performing the basic functions of the exchange; and certifying health plans for participation in the exchange; as well as setting up a streamlined, web-based system for consumers to apply for and enroll in qualified health plans and insurance affordability programs.  The announcement is the culmination of more than two years’ work with states, small businesses, consumers, and health insurance plans.  The administration examined models of exchanges; convened numerous meetings and regional listening sessions across the country with stakeholders; and consulted closely with state leaders, consumer advocates, employers and insurers.  To finalize the rules, HHS accepted public comment to learn from states, consumers, and other stakeholders on how to improve the rules; HHS adapted the proposals based on feedback from the American people.

Unfortunately, many state lawmakers are hesitant to move forward with creating the exchanges until the Supreme Court has ruled on the ACA’s constitutionality, according to Joy Johnson Wilson, federal affairs counsel and health policy director at the National Conference of State Legislatures.  “It’s fair to say that legislation has kind of slowed,” Johnson Wilson said, noting that many lawmakers are taking a “wait-and-see approach” in anticipation of the high court’s oral arguments this month.  Legislators do not want to make plans that have to be revisited and revised, Johnson Wilson said.

Despite the ambivalence of some states, they will be given great flexibility in setting up the exchanges. The concept is the eligibility for determining the premium tax credit is going to be done by the exchange…but also in the state-based exchange to allow — whether it’s a web-based broker or a small-business broker or agent — to interact with the exchange in an automated way,” Tim Hill, deputy director in the Centers for Medicare and Medicaid Services insurance-regulation office, said.

“Those are all relationships that are regulated on the state level…to determine the fee structure for how agents or brokers can be compensated for bringing business to the exchange,” Hill said.  “That’s something we’re going to leave to the state.”  Hill said allowing third-party companies or brokers access the exchanges will help inform people about the insurance exchanges.  “There are lots of folks out there who can generate interest and marketing…it’s a source of leverage that we want to leverage if the states choose to,” Hill said.

Writing on The Hill’s Healthwatch blog, Julian Pecquet notes that “States will have ‘substantial flexibility’ to operate a key provision of President Obama’s healthcare reform law.  The long-awaited final rules expand states’ ability to craft insurance marketplaces that meet their residents’ needs.  This includes allowing states to structure their health insurance exchange in a variety of ways — for example, as a nonprofit entity established by the state, as an independent public agency or as part of an existing state agency.  The final rules also offer each state more time to set up its exchange.  The law requires states to ‘demonstrate complete readiness’ to guarantee they’ll be operational 12 months later.  If states don’t meet the deadline, a federal exchange will take over.  The final rule, however, allows for ‘conditional approval’ if a state is ‘advanced in its preparation’ by January 1, 2013.  In addition, states that aren’t deemed ready for 2014 can apply to operate their own exchange in 2015 or any subsequent year.  ‘HHS may conditionally approve a state-based exchange upon demonstration that it is likely to be fully operationally ready by October 1, 2013, which provides States with flexibility in meeting exchange development timelines,’ according to the regulation.  ‘HHS will provide additional details in future guidance.’”

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