At the heart of the health insurance reform under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) is the health insurance exchange (HIE). For individuals and small businesses with little or no access to employer-sponsored group coverage, the HIE is supposed to be the “go-to” source for affordable coverage.
The individual mandate and the HIE form a carrot and stick approach to achieving essential coverage for everyone. The consumers who don’t participate face a financial penalty, but those who do are guaranteed a certain level of coverage, tax credits for their premiums and, if necessary, help with paying the premiums. Employers must contribute a minimum amount to help their employees buy coverage. If they choose, they can offer the benefits through the HIE. During the first two years, a tax credit is available. The health insurance companies have to offer essential coverage and aren’t allowed to use some of their more egregious techniques to avoid paying for the more expensive policyholders. In return, they have a captive market, likely to include younger, healthier workers.
How is this supposed to work? States may house the HIE within an existing government agency, they may create a new government agency or they may set up not-for-profit organization to operate the exchanges. Grants are available to get states started. The computer systems needed are to be shared with, and partially funded by, state Medicaid and Children’s Health Insurance Program (CHIP) agencies and others sharing the system.
HHS must determine by October 2013 whether state exchanges will be operational by the January 1, 2014 deadline. HIEs must be up and running by January 1, 2014 and must be self-supporting by the next year. If a state does not establish an exchange, HHS will establish one for them.
So, how are states moving toward this goal? Massachusetts and Utah had them before PPACA. According to a recent report by the Kaiser Foundation, least nine states have enacted legislation establishing HIEs. In two, Alabama and Georgia, the governors ordered a study of the feasibility of establishing an exchange. Legislatures in Mississippi and Wyoming passed laws that require feasibility studies. A few more passed laws stating their intent to establish an HIE.
As they establish the exchanges, states also must decide:
- what form the organization will take, public, private nonprofit, or “quasi-governmental”
- the composition of its governing body, including the relative strength of consumer representatives, the insurance industry or healthcare providers
- how to contract with qualified plans, as a state exchange may actively purchase one or more plans, or it may serve as a clearinghouse for information about qualified plans.
- whether to impose requirements in addition to those set by HHS for qualified health plans
- how to finance the work of the exchange beginning January 1, 2015.
States were given almost four years to establish their exchanges. Then they have one year to make the exchanges self-supporting. It sounds like a tall order, but if the enactment of Medicare could end racial segregation in hospitals in one year, anything is possible.