Health Insurance Exchanges under the Affordable Care Act

Deborah Chollet, Ph.D.

Senior Fellow

Individual Exchanges and Small Business Health Options Programs (“SHOP” Exchanges)

Exchange design and implementation occur in the context of significant market reforms

Required duties of the individual Exchange:

– Enrollment and consumer assistance

– Eligibility determinations for public programs and subsidies

– Oversight of Qualified Health Plans

– Administration of the Exchange

State flexibility

Overview

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Facilitate the individual purchase of coverage– Consumer information and assistance– Facilitate use of income-based subsidies to buy coverage– Facilitate enrollment in public coverage, when eligible

Assist small employers that offer coverage

Encourage the development of qualified health plans that compete on price and quality

Why Exchanges?

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Market reforms

No preexisting condition exclusions for children

No lifetime benefit caps

Limited recissions

Guaranteed issue

Limits on rating:

• No rating on health status

• Limited age rating

Essential benefit standard

Individual coverage requirement

Employer shared responsibility

Ban on annual benefit caps phases in

Penalty phases in for failing to meet individual coverage requirement (2014-2016)

Annual review of premium increases

Public reporting of medical loss ratio

Insurers must spend a minimum percent of premium on medical costs in small group (85%) and individual (80%) products, or rebate the excess

Exchanges Federal regulations expected for individual and SHOP Exchanges

States adopt individual and SHOP Exchange legislation, and start implementation

State individual exchanges begin operation

Premium and cost sharing credits for Exchange plans

State option to:

• Expand SHOP Exchanges to mid-sized groups (2016)

• Design alternative coverage program (2017)

HHS determines whether states will have working individual Exchanges by 2014, or HHS will operate them

2010 2011 2013 2014 2015-2017

Market Reform and Exchange Implementation Timeline

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Facilitate initial, annual, and special open enrollment periods

Maintain internet web site with standardized information to help consumers compare plans and calculate their cost of coverage

Maintain a toll-free consumer hotline

Make eligibility determinations and enroll eligible Exchange applicants in Medicaid & CHIP

Work with the IRS to determine eligibility for and amount of individual premium or cost-sharing subsidies, if no qualified employer offer

Certify exemptions from the individual coverage requirement and notify employers and the Treasury of exemptions and individual terminations of coverage during the year

Establish a Navigator program, awarding grants to eligible entities to conduct Exchange education and enrollment

Requirements for Insurance Exchanges:

Enrollment and Consumer Assistance

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Certify qualified health plans and assign ratings based on relative quality and price

Present plan options to consumers in a standardized format with information about benefits and consumer satisfaction

Review premium increases and post carriers’ justifications on the Exchange website

Use authority to exclude plans from the Exchange if premium increases are deemed excessive

Requirements for Insurance Exchanges:

Qualified health plan administration

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Marketing that does not deter high-need individuals

Sufficient choice of providers—including essential community providers serving low-income, medically underserved individuals

Accredited with respect to local performance on– Clinical quality measures (e.g., HEDIS)– Patient experience ratings (e.g., CAPS)– Consumer access– Utilization management– Quality assurance– Provider credentialing– Complaints and appeals– Network adequacy and access– Patient information programs

Quality improvement strategy

Uniform enrollment form, standard presentation of health benefits, and consumer information about quality

What is a Qualified Health Plan?

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Individual Exchanges must be self-sustaining by Jan. 1, 2015

Consult with stakeholders—consumers, small business, self-employed, Medicaid, advocates for hard-to-reach populations

Account for all activities, receipts, and expenditures, and report annually to HHS

Publish on an Internet website average costs of licensing, regulatory fees and required payments, administrative cost

Report on all operations annually to the Exchange board, Governor, legislature, and State Auditor

Requirements for Insurance Exchanges:

Exchange Administration

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What entity to administer the Exchange? Contract functions?

Exclusive, statewide, sub-state, or multi-state Exchanges?

Merge individual and SHOP Exchanges?

Extend SHOP to groups with 51-100 employees and (in 2017) larger groups?

Allow all qualified health plans to participate in the Exchange, or only selected plans?

Allow Exchange plans to vary cost sharing, care management, other provisions consistent with federal guidelines?

Apply existing state mandates at state cost?

What entity will do risk adjustment in/outside the Exchange?

What role for agents and brokers, per federal guidelines?

What Exchange surcharge to support operations?

State flexibility

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