Since not all states will be ready to set up online health insurance markets required by 2014 under the health care reform law, the federal government will be ready to run a federally operated exchange in states that are not ready, the head of the office in charge of insurance oversight said July 27.
“Our strong preference is for states to establish a state-based exchange, giving them the maximum amount of flexibility to tailor their exchanges to the needs of their own marketplaces,” Michael Hash, interim director of the Center for Consumer Information and Insurance Oversight (CCIIO), said. Hash, whose office is part of the Department of Health and Human Services, spoke at a briefing sponsored by the Alliance for Health Reform and the Commonwealth Fund, “Health Insurance Exchanges: Can States and the Federal Government Meet the Deadline?”
“However, we realize that not all states will be ready to establish these exchanges by 2014,” Hash said. “So we're on track to set up a federally facilitated exchange in those states that aren't certified as of January 2013” by HHS for meeting standards for operating the exchanges under the Patient Protection and Affordable Care Act (PPACA), he said. “The federally facilitated exchange (FFE) is on track, on time, to go live October 2013,” when open enrollment begins for individual and small group plans that will be sold in the exchanges, he said.
Like exchanges that will be run directly by states, the federally run exchange will cover the functions required by PPACA--plan management, eligibility and enrollment functions, the determination of advance premium tax credits and cost-sharing reductions for low- and moderate-income individuals, and financial management responsibilities for payments to issuers of qualified health plans (QHPs) that will be sold in the exchanges, Hash said.
Thirty-four states and the District of Columbia have received $850 million in grants to establish state-based exchanges, Hash said. States can apply for the grants through 2014 to use to establish exchanges after that date, he said.
The federally facilitated exchange is being built “in a very collaborative manner with the states,” Hash said. HHS is using industry data standards to create a “seamless” consumer experience in enrolling in exchange plans, and the federal exchange is being built so that it is “easily accessible and scalable, so that we will be able to meet the needs in any number of states who require an FFE or a partnership model with the FFE,” he said.
Many states have hesitated to move to set up exchanges to implement the controversial health care reform law. States that plan to build their own exchanges or that plan to form partnerships with HHS in which states conduct plan management and consumer assistance functions must notify HHS of their intent by Nov. 16. In states that do not do so, HHS will operate federal exchanges.
HHS is in the first round of testing the FFE with states and insurance carriers, and HHS construction of a federal data services hub is on track, Hash said. The data services hub will be used by the FFE and state-based exchanges to validate information from applicants with other federal agencies, such as to verify income to determine eligibility for premium subsidies with the Internal Revenue Service and to validate residency status with the Department of Homeland Security.
“Soon” HHS will release the FFE implementation schedule to states so that states can align their own work with the FFE, and HHS will release additional guidance about how HHS is implementing the FFE and the partnership arrangement with states, Hash said.
Hash also said HHS plans to go through a rulemaking process for the essential health benefits (EHBs) that PPACA requires all individual and small group plans to cover by 2014, both inside and outside of exchanges.
HHS issued a guidance bulletin in December 2011, outlining its intention to allow states to choose benchmark plans offered in their markets on which the EHBs will be based (see previous article), and it has issued other “questions-and-answers” guidance, Hash noted.
HHS is using comments filed on the EHB bulletin as the basis to put together the EHB proposed rule, “which we expect to have out shortly,” he said.
HHS also is in the process of formulating guidance with more detail about the operational aspects of the FFE to be issued “later this summer” Hash said. HHS issued guidance in May describing the way in which it expects to operate the FFE (see previous article).
The upcoming FFE guidance will include details concerning actuarial value determination for QHPs, as well as reimbursement mechanisms for health plans that have higher risk policyholders than other plans, Hash said. The guidance also will detail the methodology for providing cost-sharing reductions for eligible individuals, he said.
But the guidance will not include information on funding the costs of the FFE, Hash indicated. Funding the FFE “is really a budgetary issue,” he said.
“Our expectation and desire is to leverage the resources that already exist” in state insurance departments that have the ability to certify and review QHPs, Hash said.
Krista Drobac, director of the health division at the National Governors Association's Center for Best Practices, said the cost of building the FFE is covered by PPACA. Until Jan. 1, 2015, “an essentially unlimited amount of money” could be put into building the federal exchange, she said. “The appropriations come into play on the administrative side,” she added.
The federal government can only assess user fees inside of exchanges, whereas states have the option of assessing more broad-based user fees or taxes to cover exchange costs inside or outside of exchanges, Drobac said. As a result, “In the federal exchange, it could be [a] higher cost per user for the operations of the exchange,” she said. Smaller states estimate it will cost about $5 to $8 per person to operate exchanges, while larger states estimate lower costs, she said.
Drobac said that discussions have been continuing between some states in sharing resources for operating technical operations of exchanges. “There's a lot of interest in whether one state could conduct the back-room operations of another state's exchange,” she said.
Brian Webb, manager of health policy and legislation for the National Association of Insurance Commissioners (NAIC), which represents state insurance regulators, said the task of operating exchanges in many states will be “massive for the federal government.” NAIC members “hope the states will play a major role in getting these things up and running.”
States also must institute many major market reforms of PPACA, such as the requirement that insurers cannot discriminate against people who have pre-existing medical conditions, Webb said. States that do not act will be preempted by the federal government, he said.
“If the state doesn't do something either legislatively or regulatorily or just in practice to enforce those reforms, then the federal government will have to,” Webb said.
In order to establish exchanges, states must give themselves the legal authority to do so, either through legislation or through executive orders by governors, said Sara Collins, vice president for affordable health insurance at the Commonwealth Fund. Fourteen states and the District of Columbia have done so, while eight states have decided not to establish exchanges, she said. Other states fall somewhere in between, she said.
An issue brief published July 26 by George Washington University health law and policy Professor Sara Rosenbaum and other GWU health policy analysts, State Health Insurance Exchange Laws: The First Generation, compares provisions of state exchange laws. Collins, whose group issued the brief by Rosenbaum, said that while many details are yet to be worked out by exchanges, all of the state laws that have so far been enacted have created the state exchanges as public entities with policy and market-shaping power.
By Sara Hansard
State Health Insurance Exchange Laws: The First Generation is at http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2012/Jul/1616_Rosenbaum_state_hlt_ins_exchange_laws_ib.pdf.