HHS Issues Final Rule to Implement Health Insurance Exchange Markets

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By Sara Hansard and Rhonda Smith  

The Department of Health and Human Services March 12 issued a final rule implementing a key component of the Patient Protection and Affordable Care Act—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 HHS's 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.”

The 644-page final rule (CMS-9989-F), slated for publication in the March 27 Federal Register, includes standards for:

  • establishing and operating the “one-stop marketplaces”;
  • health insurance plans that participate in the exchanges;
  • determinations of individuals' eligibility to enroll in exchange health plans and subsidy programs;
  • enrollment in health plans through exchanges; and
  • small business eligibility and participation in the exchanges

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.

Combines Two Proposals.

The final rule combines two exchange rules proposed in 2011 under PPACA. An “establishment” proposed rule, published July 15, 2011, outlined a framework for states to build their exchanges. 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 and cost-sharing subsidies for low- and moderate-income individuals (29 HRR 880, 8/15/11).

Impact on Employers.

Although the final rule has a more immediate impact on individuals and small businesses, it also has implications for large employers, human resources and public policy experts told Bloomberg BNA.

“This matters to large employers in a less explicit manner, but it is important because states will have the option of opening their exchanges in 2017 to large employers,” Shawn Nowicki, director of public policy at HealthPass, told Bloomberg BNA March 15. HealthPass is a commercial, private health insurance exchange that works with small businesses in the New York area.

Michael Thompson, a principal in PricewaterhouseCoopers's Human Resource Services practice in New York City, told Bloomberg BNA March 14 that “most larger employers are taking a wait-and-see attitude as it relates to the health insurance exchanges in general.”

But, he added, “because the state exchanges are set up on a state-by-state basis,” national employers have a hard time dealing with multiple state exchanges.

“So private exchanges are helping national employers facilitate access to the state exchanges for their employees,” Thompson said, “and at times are also offering coverage on top of what's available in the state exchanges.”

Debbie Harrison, senior manager of public policy at the Washington, D.C.-based National Business Group on Health, a membership organization for large employers, said March 14 that for its approximately 340 members, and large employers in general, “a lot of the main questions are still not answered in this particular set of regulations.”

“If they have individual employees who might want to get coverage through the exchanges, this begins in 2014,” Harrison said. “So most questions are going to be about: ‘What do we have to do on our end if we have employees who might want to get coverage through the exchanges?' These regulations provide some information for them about this.”

Flexibility for States.

According to Chiquita Brooks-LaSure, director of coverage policy in HHS's Office of Health Reform, the most significant change in the final rule from the proposed rule is that it allows additional flexibility for states regarding eligibility determinations. She said the final rule codified guidance issued by HHS in November 2011. More than 24,000 comments were filed on the proposed rule, Hill said.

Changes made to the proposed rule 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.

Some States Expected to Need More Time.

“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 eligibility for enrollment 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,” she said.

Consumers will be able to sign up for coverage through websites, 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 strengthens 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.

Small Businesses Can Access Multiple Issuers.

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.

Tax Credits, Subsidies.

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. 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 Can Enroll Consumers.

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.

By Sara Hansard and Rhonda Smith  

Text of the final rule is available at http://op.bna.com/hl.nsf/r?Open=bbrk-8sbkze. Text of the fact sheet is available at http://www.healthcare.gov/news/factsheets/2011/07/exchanges07112011a.html.