States may get substantial power over health insurance exchanges
■ The Obama administration stresses state flexibility in the first proposed federal regulations on the health plan marketplaces that will launch by 2014.
Washington -- States will have leeway in determining who operates their health insurance exchanges and which health plans qualify for sale in the exchanges, among other state powers outlined in proposed guidelines unveiled July 11 by the Dept. of Health and Human Services.
"This isn't a one-size-fits-all solution," said HHS Secretary Kathleen Sebelius.
Health insurance exchange officials will carry out key functions as the health reform law expands coverage by about 30 million Americans beginning in 2014. These tasks include certifying the health plans that will be sold in the state marketplaces. Enrollees in qualified plans earning up to 400% of the federal poverty level -- or $43,560 for an individual -- will be eligible for federal subsidies on a sliding scale to help buy the coverage.
The exchanges also will operate websites, toll-free phone lines and brick-and-mortar offices to explain the available health plan choices and help consumers enroll in coverage, including through Medicaid and other public plans. "Insurance companies will compete for business on a transparent, level playing field, driving down costs," Sebelius said.
The level of state control over the exchanges that is being proposed by the administration will apply to states that decide to operate their own exchanges. The federal government will operate an exchange in any state that is not ready to do so by 2014. Some state leaders have shown little interest in setting up their own marketplaces or have expressed opposition to the idea.
Steve Larsen, director of the HHS Center for Consumer Information and Insurance Oversight, clarified details about deadlines. The health reform law sets a deadline of January 2013 for states to have their health insurance exchanges certified by HHS before launching the following year. States that aren't ready by the deadline but have made significant progress could receive conditional approval in January 2013 and final approval in the following months.
States in which the government operates a federal exchange starting in 2014 could launch their own exchanges later if they provide 12 months' notice, Larsen said.
Flexibility with responsibility
Initial reaction to the proposed exchange rule generally was positive, although some stakeholder groups expressed concern about the flexibility states would have in operating the exchanges. Members of Congress generally reacted along partisan lines, with Republicans critical of the effort.
"Overall we're fairly satisfied with the rule," said Roland Goertz, MD, president of the American Academy of Family Physicians. "It does provide flexibility." The AAFP, however, wants HHS to require that at least one consumer or primary care physician serve on each governing board that will run an exchange. This would "make the exchanges stronger in their decision-making," he said.
The proposed rule did not, as some anticipated, prohibit insurance industry representatives from serving on health exchange governing boards. Instead, the rule left the decisions about board composition up to states, with the only stipulation being that boards cannot be made up of a majority of people in the business of selling health insurance.
The HHS proposal does not require health exchanges to negotiate with plans on price or benefit offerings, but states may do so if they choose. The rule also would allow states to develop additional standards for plans to qualify for the exchanges.
The proposal drew praise from Families USA, a liberal consumer advocacy organization based in Washington, D.C. The regulation appropriately would require health exchanges to assist consumers with comparison shopping and enrollment on the phone, online and in person, said Cheryl Fish-Parcham, Families USA deputy director of health policy. The rule also suggests that all health exchanges follow the same open-enrollment schedule, which would prevent confusion, she said.
Regardless of state control, some basic federal requirements would apply to the insurers offering products on exchanges. Health plans, for instance, must offer a minimum package of benefits, the details of which HHS plans to finalize this year, the CCIIO's Larsen said.
The state flexibility in the proposed rule means that states will be the ones responsible for making sure exchanges work for patients, several organizations said. States must create exchanges, for example, that meet the wide-ranging needs of people with cancer and other life-threatening chronic diseases, said Stephen Finan, senior policy director of the American Cancer Society Cancer Action Network.
HHS officials said they spent more than a year discussing the health exchange regulation with states, small businesses, consumers and health insurers. The department is accepting comments on the proposed rules until Sept. 28.
Nonprofit plans in the mix
The proposed rule on health insurance exchanges is just one of several regulations the Obama administration is crafting to guide implementation of the health system reform law through 2014 and beyond.
On July 11, HHS also released a proposed rule laying out temporary reinsurance and risk adjustment programs to help health plans adapt to health insurance market changes beginning in 2014. The risk adjustment program temporarily will redistribute money from insurers that cover fewer high-risk people to those that cover more. The reinsurance program will require states to provide temporary assistance to individual market insurers to cover expenses associated with higher-risk enrollees.
On July 18, the Centers for Medicare & Medicaid Services proposed standards for creating private, nonprofit, consumer-governed health insurance plans that also will be offered in the exchanges. The coverage, known as Consumer Oriented and Operated Plans, will be eligible for $3.8 billion in startup loans through the health reform law. These loans must be repaid with interest.
Other private plans in the health insurance exchanges will compete against these CO-OPs, which must have plan members making up a majority on their boards. Any CO-OP profits must be used to lower premiums or improve benefits or health care quality for enrollees.
"CO-OPs will provide consumers more choices, greater plan accountability, and help ensure a more competitive insurance market," Larsen said. The health reform law states a goal of having at least one CO-OP in each state. CMS is accepting comments on the CO-OP rule until Sept. 16.