Original article http://www.theihcc.com
By Cindy Gillespie
Exchanges are a key component of the Affordable Care Act (ACA). Here’s a snapshot of exchange developments across the country, potential regulations to watch for, and where exchanges might be by October 2013 for open enrollment and by January 1, 2014, when they are slated to “go live” nationwide.
Health Insurances Exchanges: The Vision
The ACA directed each state to establish two types of exchanges or have the federal government do so on its behalf — the American Health Benefits Exchange (AHBE) for individuals and the Small Business Health Options Program (SHOP) for small employers. Under the statute, individuals are eligible to buy insurance on the AHBE if they are:
- a U.S. citizen or legal alien
- not incarcerated
- a resident of the state in which the exchange is based
AMERICAN HEALTH BENEFITS EXCHANGE
The ACA includes robust premium and cost-sharing subsidies for individuals who purchase insurance through the individual exchange who are living at levels between 100 and 400 percent of the federal poverty level — between approximately $12,000 and $46,000 a year — and who are not eligible for other public insurance programs (i.e. Medicaid, Medicare, Tricare) and who do not receive “affordable” insurance coverage through their employers (that meets minimum value standards).
Employers which have more than 50 employees whom are eligible for tax credit subsidies, either because the employer does not offer coverage or because the coverage offered is unaffordable to the employee according to ACA standards, or not of minimum value, will be subject to a penalty.
SMALL BUSINESS HEALTH OPTIONS PROGRAM
Meanwhile, the ACA allows employers with up to 100 full-time employees to purchase insurance through SHOP, although the state has the option to limit access to employers with 50 employees or less for the first two years. Most states have taken advantage of this option in order to maintain consistency with the outside market’s definition of “small employer.” States also maintain the option to allow employers with more than 100 employees to purchase insurance through the SHOP beginning in 2017, with approval of the U.S. Department of Health and Human Services (HHS).
Tax credit subsidies are also available to employers who purchase coverage on SHOP for employers with less than 25 employees who have an average taxable wage under $50,000 per year. Employers cannot claim the tax credit for more than two consecutive years.
Health Insurances Exchanges: 3 Primary Models
Although the ACA envisioned 50 different exchanges championed by individual states, the reality of ACA implementation has been far different. Indeed, political, logistical, and operational challenges faced by both HHS and the states have led only a subset of states to embrace exchanges. The update below provides a snapshot of how exchanges are developing across the country.
1. STATE-BASED EXCHANGES
Seventeen states and the District of Columbia are developing State-based Exchanges as envisioned under the ACA. These states have received “conditional approval” from HHS to operate them for the 2014 plan year. Under these exchanges, states execute all functions but may turn to the federal government for issues such as tax-credit eligibility determination, risk adjustment, and reinsurance.
While several of these states have been making great strides toward October 1, 2013 open enrollment, others are relatively behind in the planning process and may struggle to meet the impending deadlines. For example, some states still lack legal authority to operate a State-based Exchange, while others have yet to procure any IT-related services necessary to make the exchange function.
2. STATE PARTNERSHIP EXCHANGES
Seven states have received conditional approval from HHS to operate State Partnership Exchanges. This exchange model, not envisioned under the ACA, is an option created by HHS for states that may want to play a small role in exchange operations either permanently or as they move toward a State-based Exchange. States have two primary options for pursuing State Partnership Exchanges: a plan management partnership or a consumer partnership. States also have the choice to participate in both partnership models.
States participating in a plan management partnership assume responsibility for issuer account management and issuer oversight as well as monitoring, quality reporting, and data collection. In addition, these states also play a key role in determining qualified health plan (QHP) certification. Plan management partnerships will recommend which plans should be certified as QHPs to HHS, which has the legal authority to make QHP certifications.
States also have the option to pursue a consumer partnership exchange. States choosing this approach control the day-to-day management of Navigators and in-person consumer assistors, and will have the option to engage in outreach, education, and branding activities. Navigators and in-person consumer assistors will be the “boots on the ground” in states to help educate consumers about plan choices and coverage options. For states choosing a Federally-facilitated Exchange (FFE), consumer partnership states oversee and provide technical assistance to Navigators, but HHS retains authority over the Navigator programs.
3. FEDERALLY-FACILITATED EXCHANGES
Twenty-six states have decided not to pursue a State-based or Partnership Exchange. In these states, the federal government is establishing a Federally-facilitated Exchange (FFE). Under an FFE, the federal government performs all exchange functions with states, maintaining the option to make final Medicaid determination and operate its reinsurance program. Although the option to operate reinsurance programs has yet to gain traction, many FFE states have expressed interest in maintaining the responsibility to make final Medicaid determination for individuals assessed as eligible for Medicaid.
Marketplace Plan Management
Several federal requirements necessary for health insurance plans to be qualified in order to be offered on the exchange are already criteria commonly examined as part of routine, state insurance regulatory activities. HHS has indicated that its preference is to integrate states’ existing regulatory activities into its decision-making for qualified health plan (QHP) certification, even in states with an operating FFE.
To further facilitate this relationship, HHS has indicated it will offer states a marketplace plan management option, essentially allowing states to perform activities associated with a plan management partnership but without requiring them to submit a formal exchange blueprint. HHS guidance dated February 20, 2013 also indicates that states can apply for federal funds to support these activities, similarly as it did for the State-based and State Partnership models.
3 Issues to Watch in 2013
As the clock ticks on the path to open enrollment, there are several issues still under consideration that are worth tracking, particularly for the small and large employer communities.
Recent guidance from HHS indicates that employee choice and premium aggregation will not be required of SHOP exchanges in the 2014 plan year. In the same set of proposed rules, HHS also indicates that federally-facilitated SHOPs (FF-SHOPs) will not offer these services in their first year of operation.
As you may recall, employee choice and premium aggregation (the process of collecting premiums from qualified employers and delivering a single streamlined payment to insurers) are two tools at the disposal of SHOP exchanges to help drive enrollment. This recently proposed approach could potentially undermine the viability of SHOP exchanges and the small business market nationwide.
Additional rules from HHS surrounding 10 essential health benefits indicate that to meet these requirements outside the exchange, health insurance plans will need to either embed pediatric oral services, the tenth category of essential health benefits coverage, or be “reasonably assured” that the individual has obtained dental coverage from an exchange- certified, stand-alone dental plan. This is a new proposal from HHS and is therefore receiving significant scrutiny from several stakeholder groups, as the requirements could cause operational challenges in the market. Stay tuned.
HHS released additional details regarding employers’ interface with the exchange in January. Most interestingly, the rules verify that there is no central databank containing details on employer-sponsored health insurance plans. As a result, until that information is available, exchange applicants must attest to the details surrounding their employer-sponsored health insurance plans when seeking health insurance on the exchange. The exchange will then use available data sources to attempt to verify individuals’ claims. Absent inconsistencies in available information, the exchange will be permitted to proceed to enroll the applicant in a health insurance plan along with the applicable subsidies. Employers will be notified of employees who claim a tax credit on the exchange. However, exchanges must select a valid sample of people for whom employer coverage details could not be verified and verbally call employers for additional information. If the exchange cannot obtain information within 90 days, eligibility will remain unchanged.
Looking Toward 2014
The issues described above are only a select set of developments that have emerged in recent months. Indeed, there are a host of unanswered questions and operational challenges that stand between today and open enrollment. ACA implementation process has passed the window for planned delay. Employers and the health benefits industry should expect for exchanges to “go live” and for tax credits to be available beginning January 1, 2014. The Stakeholders should prepare for implementation, albeit with hiccups along the way, as scheduled.