By Sara Hansard
The Department of Health and Human Services March 12 issued a final rule implementing a key component of the health care reform law—creation of health insurance exchange markets in all states in 2014 through which millions of individuals and small businesses can buy coverage and receive premium assistance subsidies.
“Exchanges will offer Americans competition, choice, and clout,” Tim Hill, deputy director of the Center for Consumer Information and Insurance Oversight in the Centers for Medicare & Medicaid Services, said during a press call to announce the rule. “Insurance companies will compete for business on a level playing field, driving down costs, and through exchanges, the public will have the same insurance choices as members of Congress,” he said.
The 644-page final rule (CMS-9989-F), to be published in the Federal Register March 27, includes standards for:
Parts of the final rule were issued as an interim final rule with a 45-day comment period from date of publication in the Federal Register.
The final rule combines two exchange rules proposed in 2011 under the Patient Protection and Affordable Care Act. An “establishment” proposed rule, published July 15, 2011, outlined a framework for states to build their exchanges (see previous article). Another proposed rule, published Aug. 17, 2011, included standards for eligibility and enrollment in health plans, which must be certified as “qualified health plans” to be offered in the exchanges, as well as standards for tax credit premium subsidies and cost-sharing subsidies for low- and moderate-income individuals (see previous article).
The most significant change from the proposed rules allows additional flexibility for states regarding eligibility determinations, said Chiquita Brooks-LaSure, director of coverage policy in HHS's Office of Health Reform. She said the final rule codified guidance issued by HHS in November 2011 (see previous article). More than 24,000 comments were filed on the proposed rules, Hill said.
Changes made to the proposed rules also allow states to determine a role for agents and brokers, including the use of online brokers, Hill said.
The final rule codifies a process for conditional approval of a state-based exchange if the state has made significant progress but will not be ready by Jan. 1, 2013, when HHS must certify states to operate their own exchanges, Hill said. Further guidance will be issued on the timeline for states to apply for certification, he said. HHS will set up federal exchanges in states that do not have their own exchanges in place in 2014, but the rule issued March 12 does not include implementation of the federal exchange.
The final rule also clarifies standards for privacy and security of personal information, Hill said.
The rule “builds on the significant progress most states have already made,” Hill said. Thirty-three states and the District of Columbia have received more than $667 million in “establishment” grants to begin building their exchanges, and 49 states and the District of Columbia have received $50 million to begin planning for their exchanges, he said. The final rule estimates federal grants to states to start exchanges will total $3.4 billion between 2012 and 2016.
“We know that some states will still need more time and assistance before being ready to run their own exchange, and we are moving forward to set up a federally facilitated exchange for those states to use in 2014,” Hill said. The deadline for exchange establishment grants has been extended to fall 2014.
The final rule “guarantees a simple process to make this new marketplace a reality,” Brooks-LaSure said. Consumers should be able to easily determine their enrollment eligibility and quickly enroll in “the coverage that is right for them,” she said.
The web-based system will have a single application, she said. “This means that consumers won't have to guess which program they're eligible for, but instead they'll use the same application and receive a consistent eligibility determination without the need to submit information to multiple programs.”
Consumers will be able to sign up for coverage through websites, by using toll-free numbers, or by getting help from the new navigators created by PPACA who will distribute information about plan enrollment and assist consumers in selecting plans, Brooks-LaSure said. The final rule strengthened standards for navigators, but they do not have to meet the same requirements as agents and brokers, who are regulated by state insurance departments, she said.
In addition, the final rule helps small business owners “get the same clout that large businesses have when buying and providing insurance to their employees,” Brooks-LaSure said. PPACA allows for the creation of American Health Benefit Exchanges for individuals and Small Business Health Options Program (SHOP) exchanges, and states can choose to combine the two programs into one exchange.
The SHOP exchanges will allow small businesses, which states can define as having up to 100 employees, to offer coverage from multiple issuers while getting a single bill, Brooks-LaSure said. Small businesses also can access temporary tax credits only through the public exchanges.
Exchanges must offer small businesses the option to choose plans within a “tier” of coverage—labeled platinum, gold, silver, or bronze, based on actuarial value, Brooks-LaSure said. Exchanges have the option of giving small businesses the opportunity to contract with a single plan for the business's employees or they could require small businesses to give employees more choices, she said.
State-based exchanges have flexibility under the final rule to allow consumers to purchase coverage through outside, web-based entities, including agents and brokers, if those entities meet standards set by the public exchanges for privacy, security, and protecting personally identifiable information, Hill said.
But eligibility determinations for premium tax credits and cost-sharing subsidies must be made through public exchanges because those determinations involve personal tax information, Hill said. “The bar will be relatively strict in terms of exchanges being able to allow web-based entities to enroll people because of the interaction with the tax system,” he said.
Private exchanges, such as eHealth Inc. of Mountain View, Calif., have pushed for being able to enroll consumers who are eligible for subsidies in qualified health plans in the public exchanges. Otherwise, they may lose much of their business (see previous article). PPACA provides subsidies for people earning between 133 percent and 400 percent of the federal poverty level. People earning below that amount qualify for Medicaid under the law.
Brokers could “interact with the exchange in an automated way so that they can get consumers enrolled into the exchange seamlessly and quickly, including making sure that their eligibility determination can be done timely so that they can get into a qualified health plan quickly,” Hill said.
Web-based brokers can generate interest in making services of the exchange available to consumers, Hill said. “We don't want to preclude it if that's something the state wants to do,” he said. State exchanges will have to determine how brokers can be compensated for bringing business to exchanges, he said.
Kansas Insurance Commissioner Sandy Praeger, who is chairman of the National Association of Insurance Commissioners' Health Insurance and Managed Care Committee, told Bloomberg BNA in a statement that NAIC is “pleased” that the final rule “provides maximum flexibility to the states in developing exchanges that work for them.”
NAIC has formed exchange model process teams that will provide white paper options for states to implement the plan management functions of the exchange, whether the states use federal exchanges or operate their own exchanges, Praeger said. “That will help states continue to build on the private insurance system we have now,” she said.
America's Health Insurance Plans, which represents about 1,300 health insurers covering 200 million people, issued a statement from Chief Executive Officer Karen Ignagni, saying that the rule “recognizes that states are in the best position to establish exchanges because they have the experience and local-market knowledge needed to best meet consumers' needs.”
Ignagni emphasized that the exchange markets should “maximize choice and competition” by using existing health plans.
The National Retail Federation (NRF), which has called for states to act in setting up exchanges, said it was encouraged by the rule's flexibility. “We hope that the rule will provide the necessary motivation for states and regulators to act and create and implement exchanges as dictated by the aggressive Affordable Care Act timetable,” NRF Vice President Neil Trautwein said in a statement.
eHealth spokesman Brian Mast told Bloomberg BNA that eHealth is “optimistic about the role of private web-based entities like ehealthinsurance.com.” The final rule “confirms our opportunity to work with states to assist in enrolling people who qualify for premium tax credits and cost-sharing subsidies.”
Jessica Waltman, senior vice president of government affairs with the National Association of Health Underwriters, which represents health insurance agents and brokers, told Bloomberg BNA that it appears the final rule “allows agents and brokers to work with all ranges of consumers, whether they are eligible for a tax subsidy or cost-sharing or not.”
National Association of Insurance and Financial Advisors President Robert Miller issued a statement saying that NAIFA, which also represents insurance agents and brokers, “is pleased that the final HHS rule acknowledges the significant role agents will play in the state health care exchanges and has incorporated our suggestion allowing exchanges to display information about the valuable role of agents and brokers on their web sites.”
But Miller said NAIFA “remains concerned that the regulations fail to adequately protect consumers by allowing well-intentioned navigators in the exchange system to forego errors and omissions coverage”—risk management insurance many businesses buy.
Timothy Jost, a law professor at Washington Lee University in Lexington, Va., and a consumer representative with NAIC, told Bloomberg BNA it is good that HHS clarified that web-based brokers and agents can enroll people in qualified health plans in the exchanges “but that they cannot make eligibility determinations for premium tax credits. It is proper that this is a function limited to the state or federal exchange.”
The final health insurance exchange rule is available at http://op.bna.com/hl.nsf/r?Open=bbrk-8sbkze. A fact sheet is available at http://www.healthcare.gov/news/factsheets/2011/07/exchanges07112011a.html.