HHS published two Notices of Proposed Rulemaking (NPRM) a few weeks ago relating to developing a framework for Insurance Exchanges. The first rule serves as a basis for the creation of state-based competitive marketplaces. The second rule addresses standards related to reinsurance, risk corridors, and risk adjustment to ensure stability in the insurance marketplace once the Exchange is offered. The rules are being touted by the administration as promoting state flexibility, while creating a level and transparent playing field driving down costs and ensuring quality.
States will have the option of determining how to establish their Exchange. Only one Exchange may operate in one geographic area, but states may establish more than one Exchange. For example, they could have a regional Exchange with another state that encompasses a major metropolitan area, but also a local Exchange that services the remainder of the state. Or, a state may choose to offer two Exchanges, one for the northern part of the state and one for the south, just as long as they do not overlap.
The state also has options regarding governance. An Exchange must be a governmental or non-profit entity that has the flexibility to design and oversee the program. This could be an existing state executive branch agency or an independent agency as well as a new or existing non-profit organization or corporation established by the state. If a state chooses not to run the Exchange through an administrative agency, the rules propose that the entity should be administered under a formal, publicly-adopted operating charter or by-laws, hold regular public meetings, and offer opportunity for public comment as well as disclosure of financial interests for board members. Additionally, the state may choose to operate the Exchange in partnership with the federal government—which essentially means they can elect not to administer their own Exchange—or can allow the feds to administer a portion of certain functions, such as enrollment.
While each state can establish the Exchange in various ways, there is a core set of functions a state will be required to perform. Each Exchange must certify health plans as Qualified Health Plans (QHPs), operate a website to facilitate plan comparisons, manage toll-free hotlines and provide grant funding for “navigator” organizations that help people access coverage and facilitate enrollment in health plans. States will also be required to assign quality ratings to plans and standardize consumer information. In addition, the Exchange must also create an electronic calculator to allow consumers to assess the cost of their coverage. The website should also allow individuals to determine eligibility for the Exchange, including tax credits and cost-sharing reductions for private insurance, as well as to determine exemption from requirements on individuals carrying health insurance.
States must also establish the Small Business Health Options Program (SHOP), which is a market place for small businesses and their employees. The SHOP program will allow employers to determine what tier of coverage they will provide for their workers. Businesses can offer multiple tiers, just one tier or plan, or a mixture of both, but still only receive one bill and write one check for their employees’ coverage. In addition to providing the structure of choices for small businesses, states are responsible for determining the size of business that can participate in the program.
For an Exchange to be operational by January 1, 2014, a state must receive approval of its Exchange Plan from HHS by January 1, 2013. Since it is likely that a state could still be operational in time for open enrollment to begin on October 1, 2013, HHS may also issue conditional approval to a state on January 1, 2013 even if they are not entirely prepared. If conditional approval is issued, HHS would conduct additional assessments on the state’s progress to determine if the state is able to meet the benchmarks. If approval or conditional approval is not received by January 1, 2014, a state may choose to establish an Exchange for 2015 or later. An Exchange must receive HHS approval no later than 12 months prior to the first date of effective coverage.
CMS is proposing an approval process designed to account for state flexibility, while also ensuring that Exchanges can meet the standards established in health reform and the rules. States would be required to submit an Exchange Plan that demonstrates how they meet the minimum standards and a “readiness assessment.” At a minimum, this will require an Exchange to show it is capable of certifying health plans, providing required communication to potential enrollees, administering premium tax credits, an agreement to implement a transitional reinsurance program, and assurances that the entire geographic area of the state is covered by an Exchange.
The rule provides states with the flexibility to determine what kind of plans can be offered through the Exchange. While entities are required to be accredited, the rule gives the Exchange flexibility to allow new and innovative health plans to sell through the Exchange as they pursue accreditation. The rule specifically allows for some non-traditional products, such as Accountable Care Organizations, medical homes and other innovative delivery models. States would set both network adequacy and marketing standards and hold plans accountable to these requirements. (See our blog from last week for more on this topic.)
Protecting the Insurance Marketplace
To help ensure plans offered through the Exchange are protected against risk selection and market uncertainty during the transition, three programs were established and will start in 2014: temporary reinsurance and risk corridor programs will provide financial stability as reforms begin, and a permanent risk adjustment program. The proposed rule allows plans to help offset the claims for high-cost enrollees through reinsurance to ensure health plans offer low-cost premiums to members. Like the reinsurance program, the risk corridor program is also temporary and aligns reporting and payment rules to stabilize premiums. The rule also provides the framework for a risk adjustment methodology, establishing a federal methodology, but also allowing states to propose alternatives. The rule sets up a standard data set for risk adjustment, to provide some uniformity to health insurers that participate in Exchanges in multiple states.
Public comments on the proposed rules are due 75 days from the date of publication in the federal register—roughly the end of September. Topics not covered by the rule include the process for eligibility determinations, premium tax credits, cost-sharing reductions and other public programs. The feds still have yet to publish standards with respect to ongoing federal oversight of the program. In addition, they also need to provide further guidance on ensuring program and financial integrity, as well as benefit design standards, quality data reporting requirements and standards outlining the issuance of certificates of exemption from individual responsibility requirements. The administration is releasing proposed rules and guidance on a rolling basis to ensure robust public input while ensuring timely guidance for states, health plans, consumers and others.