Insurers Say Exchanges Should Focus On Affordability, Streamlined Processes

Health Insurance Report™ helps you track and analyze legal, legislative, and regulatory developments affecting the health-insurance industry throughout implementation of the Affordable Care Act...

By Sara Hansard

Health insurance exchanges to be created in 2014 under the health care reform law should focus on affordability and efficiency, health insurers said in comment letters filed on a proposed regulation to implement the exchanges.

“We recommend that the exchanges and regulatory structure focus on making coverage affordable and streamlining processes to ensure efficiency,” America's Health Insurance Plans (AHIP) said in its Oct. 31 comment letter, signed by Daniel Durham, executive vice president, policy and regulatory affairs; and Colleen Gallaher, vice president, state policy. AHIP represents about 1,300 insurers covering some 200 million people.

Both AHIP and the Blue Cross and Blue Shield Association (BCBSA), which represents 39 insurers covering more than 99 million people, recommended that the Department of Health and Human Services defer to states for rate reviews. “It is critical that rates be regulated only by the entity with authority to regulate solvency,” which is typically state insurance departments, BCBSA said in its Sept. 28 comment letter, signed by Justine Handelman, vice president, legislative and regulatory policy.

HHS's Centers for Medicare & Medicaid Services July 15 issued the proposed rule on implementing the exchange provision of the Patient Protection and Affordable Care Act (see previous article). Comments were due Oct. 31 on the proposed rule along with four other proposed rules governing the exchanges (see related items in this issue)LinkLink.

Under PPACA, states that operate their own exchanges may decide how exchanges should be governed. States also can operate exchanges in partnership with HHS, but in states where no exchange is established HHS will operate them.

Don't Pursue Active Purchaser Model

In states where federal exchanges are created, the federal government “should avoid reducing future state flexibility by the creation of a market mechanism that would lock a state into a particular approach,” AHIP said.

“We strongly believe that a federally-facilitated exchange should not pursue an ‘active purchaser' model, not only because it would limit the range of consumer choices that market competition can provide, but also because it could change a state's health insurance market in a way that could eliminate future options,” it said. In an active purchaser model, the exchange negotiates insurance rates and terms, rather than allowing all qualified insurers to participate.

AHIP and BCBSA also called for including insurers and insurance experts on exchange governance boards, or requiring advisory committees to get feedback from the industry. “Our members have a great deal of experience and operational know-how to offer exchanges and will be valuable contributors to the governance process,” AHIP said.

Family Contract Coverage

BCBSA recommended against requiring qualified health plans sold in the exchanges to cover tax dependents that would not currently be eligible for coverage under a family contract.

Requiring exchange plans to cover all members of a tax household would require them to cover grandparents, grandchildren, siblings, and others not normally covered in family contracts today, BCBSA said. That could lead to “gaming” insurance contracts to lower out-of-pocket costs since deductibles could be met more quickly by the extended family, it said.

BCBSA also recommended that HHS change its proposed rule to give states more flexibility to modify exchanges once they are established. A requirement in the proposed rule that states obtain HHS approval for significant changes, similar to what states now must go through to change their Medicaid plans or the Children's Health Insurance Program, undermines flexibility, BCBSA said. HHS also should defer to states concerning network adequacy standards.

Give Employers Choice, Too

Employers should be allowed to select health plans for their workers, BCBSA said. “We are concerned with HHS' interpretation that exchanges are required to offer the option of employee choices, but are not required to offer the option of employer choice,” BCBSA said.

Any health plan assessments required to fund exchange operations should be excluded from administrative expenses for the purpose of calculating medical loss ratios, BCBSA suggested. PPACA requires insurers to spend at least 80 percent of individual or small group premiums for medical claims or quality improvements or refund the difference to policyholders beginning in 2012.

HHS should issue final rules by January 2012 to give states time to implement the exchanges and to give insurers time to make product and rate changes for initial open enrollment periods in 2013, which would be required for plans sold on the exchanges to start operating in 2014, BCBSA said.

Expand Network Adequacy, AHA Says

In its Oct. 31 comment letter, the American Hospital Association recommended that network adequacy requirements be expanded for qualified health plans offered in the exchanges.

“The criteria need to ensure not only the participation of a sufficient number, mix, and geographic distribution of providers, but to also ensure that consumers actually have access to providers,” AHA said in its letter, signed by Rick Pollack, executive vice president.

In its Sept. 26 comment letter, consumer representatives to the National Association of Insurance Commissioners said that exchange governing boards should be prohibited from including anyone with a “clear conflict of interest,” including health insurers, insurance agents and brokers, and health care providers.

The expertise of industry representatives should come through other channels, such as stakeholder consultations, the consumer representatives said.

Adverse Selection Threats

States that allow agents and brokers to enroll individuals in the exchange should develop rules to minimize adverse selection threats and prohibit steering customers to plans that are not in their best interest, the consumers said. Adverse selection could occur if plans outside the exchanges attract healthy customers, leaving sicker customers to exchange plans. That would drive up prices for exchanges.

HHS should clarify that the federal government has decisionmaking authority over exchanges operated in a partnership between states and HHS, the consumer representatives said.

eHealth Proposal

In its proposed regulation, HHS asked for comments on what functions private exchange entities could perform. eHealth Insurance Inc., a web-based insurance broker based in Mountain View, Calif., that sells individual plans, suggested in comments it filed with HHS that people who are eligible for tax premium subsidies and cost-sharing reductions should be allowed to buy insurance through private web-based entities under specified conditions, according to a proposal obtained by BNA.

Under PPACA, people in households with incomes between 133 percent and 400 percent of the federal poverty level will be eligible for the aid. Private exchanges such as eHealth could face problems in continuing their operations once the exchanges are opened unless their customers can get the federal subsidies (see previous article).

Under eHealth's proposal, a “qualified web-based entity” (WBE) would provide all qualified health plans listed on the state exchanges, including plans that do not pay commissions. States would have the option to approve the private entities, and plans would be sold on the WBEs at the same premiums as in the states' exchanges, under the eHealth proposal. WBE plans also would be part of the same risk pool as qualified health plans on the state exchanges.

WBEs would be limited to enrollment functions only and would not make eligibility determinations, which would be left to state exchanges under the plan.


AHIP's comment letter is at http://op.bna.com/hl.nsf/r?Open=shad-8n7mac . BCBSA's comment letter is at http://op.bna.com/hl.nsf/r?Open=shad-8n7ppy . The American Hospital Association's comment letter is at http://op.bna.com/hl.nsf/r?Open=bbrk-8n7rss . The NAIC consumer representatives' letter is at http://op.bna.com/hl.nsf/r?Open=jcon-8n7tbu .