Health Insurance Exchange Rules Under Final Review

Long-awaited final rules governing the establishment of state health insurance exchanges mandated under the health care reform law are under review by the White House Office of Management and Budget (OMB), typically the last step before a regulation is published. The Department of Health and Human Services (HHS) issued the proposed rule in August to coordinate the public programs and the exchanges. Under the law, beginning in 2014 states must extend Medicaid to all residents age 65 and younger who earn up to 133 percent of the federal poverty level.

The final rule arrived at OMB on February 3, but when it will emerge and be released publicly via the Federal Register is anybody’s guess. Review times range from days to weeks to months.

The Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) helps create a competitive private health insurance market through the creation of “Affordable Insurance Exchanges.” According to HHS’ website, these state-based, competitive marketplaces are designed to provide millions of Americans and small businesses with “one-stop shopping” where consumers can choose a private health insurance plan that fits their health needs. Exchanges will select health plans qualified to offer coverage; facilitate consumer assistance, shopping and enrollment; and coordinate eligibility for the Exchange and potential premium assistance.

The exchanges will serve a key role in the health reform law’s expansion of coverage to an additional 30 million people, split about equally between private health plans and Medicaid. These tasks include selecting private health plans to be offered in the exchanges and guiding consumers seeking to enroll in coverage. Exchanges of this type were intended as a governmental or quasi-governmental entity to help insurers comply with consumer protection and to compete in cost-efficient ways, and to facilitate the expansion of insurance coverage to more people.

Exchanges are not designed to be insurers, so they do not bear risk themselves, but determine the insurance companies that are allowed to participate in them. Ideally, a well-designed exchange will promote insurance transparency and accountability, facilitate increased enrollment and the delivery of subsidies, and play roles in spreading risk to ensure that the costs associated with those with high medical needs are shared more broadly across large groups rather than spread across just a few beneficiaries. Some hope that insurance exchanges also will help to contain overall health costs.

PPACA gives States the resources and power to build and run their own Exchange. Forty-nine states and the District of Columbia have received at least a basic health exchange planning grant. Thirteen states have adopted legislation to create an exchange.

Although a majority of states are creating their own health insurance exchanges, a few other states explicitly have declined to create their own exchanges and instead will rely on a national exchange to be administered by federal health officials. The health reform law requires states to show significant progress in creating their own exchanges by January 2013. If federal health officials judge that a state will not be ready to operate an exchange by January 2014, the federal government will operate a national exchange to serve these residents.

And, of course, some state governments may choose to wait until the U.S. Supreme Court rules on the constitutionality of the health reform law before deciding whether, when and how to proceed with setting up health insurance exchanges. Already facing political strife over implementation of health reform, some states are wondering if they should sit tight on exchange decisions until the court rules, probably in June.
Even without the uncertainty surrounding the Supreme Court, states are already on a tight timeline to get exchanges in working condition. Though the exchanges open in January 2014, HHS must determine by January 1, 2013, whether a state will be ready to run one. The last opportunity for states to receive federal financial assistance for building an exchange is the end of June 2012 — right around the time of the Supreme Court ruling.

Most state legislative sessions are already in full swing. Decisions on setting up health insurance exchanges – or not – are facing state lawmakers. Timely review by OMB of the final rules is critical.