HHS Provides Further Guidance on Insurance Exchanges

The Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148)  requires most Americans to carry health insurance starting in 2014, either through their employer, through a public program like Medicare or Medicaid, or by purchasing an individual health insurance policy. To help make it easier for individuals to purchase individual health insurance, PPACA provided for the establishment of state-based Affordable Insurance Exchanges.

Since PPACA passed in 2010, the federal government has provided over $1 billion to 49 states and the District of Columbia to help the states establish Exchanges. Most states, however, have taken only baby steps in establishing an Exchange. At least three state legislatures have vetoed legislation that would have established exchanges in those states.

The Exchanges are intended to create a competitive marketplace for state residents and small employers to purchase health insurance. The policies provided through the Exchanges have to meet minimum coverage and affordability requirements. The Exchanges also will facilitate the process for individuals to demonstrate financial need and eligibility for coverage by public insurance programs such as Medicaid.

On May 16, 2012, HHS released new guidance  for states on the different options that are available regarding Exchanges. States have three choices:

(1) they can create a state-based Exchange, where the state controls all aspects of the Exchange (although the state can obtain federal assistance for activities such as determining who is eligible for premium or cost sharing assistance)

(2) they can create a state partnership Exchange, where the state controls health plan management and consumer assistance activities, but can use federal assistance for activities such as determining eligibility for Medicaid or the Children’s Health Insurance Program;

(3) they can do nothing and let HHS manage a federally facilitated Exchange.

States must get approval for their Exchanges by January 1, 2013, so the operations of the Exchange can benefit state residents and employers in time for the 2014 health insurance enrollment period later in 2013. If a state does not have an approved Exchange in place by the beginning of 2013, then HHS will take control of operating the Exchange in that state.

HHS also has released new guidance  on how it will implement federally-facilitated Exchanges (FFE). The guidance indicates that HHS is prepared to establish an Exchange in a given state whether that state provides some assistance in the process or no assistance at all. But HHS indicates that even where a state refuses to participate in the roll-out of an Exchange it will work with local stakeholders and capitalize on the existing state health insurance market in creating new insurance options for individuals and small businesses. .

As noted above, while some states have moved far down the road in establishing an Exchange, others are taking their, or openly refusing to create an Exchange. Both New Mexico Governor Susana Martinez and New Jersey Governor Chris Christie (both Republicans) have vetoed legislation  that would have established exchanges in their states. When Christie vetoed his state’s legislation on May 10, he noted that in light of the upcoming U.S. Supreme Court decision on PPACA, it was “premature” for the state legislature to act. In his veto message he wrote, “Indeed, the very constitutionality of the Affordable Care Act is cloaked in uncertainty, as both the individual mandate to procure health insurance as well as the jurisdictional mandate to establish an exchange may not survive scrutiny by the Supreme Court.”

When the New York State Legislature failed to pass a bill to establish an Exchange, Governor Andrew Cuomo signed an executive order  to establish an Exchange.