Health Insurance Exchange Framework Beginning To Take Shape

A key part of expanding access to health insurance coverage under the Patient Protection and Affordable Care Act ("PPACA") is the establishment of state-level "exchanges" where individuals and small employers will be able to purchase health insurance coverage effective January 1, 2014. The Department of Health and Human Services ("HHS") has issued two sets of proposed regulations which begin to establish the framework for the creation and operation of the exchanges.

The first set of proposed regulations, issued on July 11, 2011, (1) sets out federal requirements that states must meet if they elect to establish and operate an exchange, and (2) outlines minimum requirements that health insurance issuers must meet to participate in an exchange and offer qualified health plans.

Both the statute and the proposed regulations give the states flexibility in establishing and operating an exchange. For example, an exchange may be established as a state agency or as a nonprofit organization; a state can partner with other states to create a regional exchange; or a state can establish one or more subsidiary exchanges in a state. If a state does not take steps to establish an exchange by January 1, 2013, the federal government will operate the exchange in that state.

Some of the functions of an exchange include:

• Determining whether an individual or small employer is eligible to purchase health insurance through the exchange;
• Implementing quality activities such as quality improvement strategies and enrollee satisfaction surveys;
• Providing for the operation of a toll-free call center;
• Maintaining an up-to-date internet website providing information on qualified health plans;
• Having a consumer assistance function (including a navigator program);
• Establishing privacy and security standards for the use and disclosure of personally identifiable information; and
• Establishing a process for enrolling eligible persons into qualified health plans during annual or special enrollment periods and for facilitating premium payments.

An exchange must also establish procedures for the certification, decertification, and recertification of qualified health plans. The basic standard is that a health plan may be certified if the exchange determines that it is in the interest of qualified individuals and qualified employers in the state. An exchange may establish other criteria for certification. To give a state flexibility in operating its exchange, exchanges may utilize "any willing plan" for certifying qualified health plans, or they may undertake a competitive bidding or selective contracting process and limit certification to only those plans that meet exchange criteria. Further, an exchange could negotiate with issuers on a case-by-case basis.

The following are some of the minimum requirements that will apply to qualified health plan issuers who participate in the exchange:

• The issuer must have a certification issued or recognized by the exchange to demonstrate that each health plan it offers in the exchange is a qualified health plan and that the issuer meets all requirements applicable to qualified health plan issuers.
• The issuer must comply with any exchange processes, procedures, and standards for the small group market.
• Each qualified health plan offered by the issuer must cover essential health benefits and comply with other benefit design standards set forth in PPACA.
• The issuer must be licensed and in good standing to offer health insurance coverage in each state in which the issuer offers health insurance coverage.
• Qualified health plan issuers must comply with quality standards set forth in PPACA.
• The qualified health plan issuer must offer at least one qualified health plan at the silver coverage level and one qualified health plan at the gold coverage level.
• Qualified health plan issuers must submit qualified health plan rate and benefit information to the exchange, including rate increase justifications.
• Qualified health plan issuers must comply with broad "transparency" standards, which means that they must make a range of information relating to the plan's quality and cost available to the public, the exchange, HHS, and the state insurance commissioner.
• Qualified health plan issuers must maintain networks that comply with any network adequacy standards established by the exchange.
• Qualified health plan issuers must charge the same premium rate without regard to whether the plan is offered through an exchange or whether the plan is offered directly from the issuer or through an agent.

A state-operated exchange must be financially self-sustaining by January 1, 2015, and is permitted to apply state user fee assessments on participating health insurance issuers or other methods of funding to support state exchange functions.

The second set of proposed regulations, issued on August 12, 2011, sets out standards by which the exchange is to determine whether an individual or a small employer is eligible to enroll in a qualified health plan. The exchange must also determine whether an individual is eligible for "insurance affordability programs," which include advance payment of the premium tax credit, cost-sharing reductions, Medicaid, CHIP, and any state-established Basic Health Program. HHS visualizes a "one stop shop" approach, where consumers can apply for enrollment in a qualified health plan and receive a determination of eligibility for the insurance affordability programs.

Many states are moving forward to enact legislation which will create the exchange in that state. On September 14, 2011, Michigan Governor Rick Snyder delivered a Special Message to the Legislature on Health and Wellness. Among many other items, Governor Snyder strongly supports the establishment of a Michigan-based online health insurance exchange to be called "MI Health Marketplace." The exchange will emphasize free market principles and serve as a competitive marketplace for individuals and businesses to obtain health insurance. Governor Snyder identified four guiding principles to be used in structuring MI Health Marketplace:

• It must empower individuals and small businesses by enabling them to easily compare health insurance options.
• It must not add bureaucracy and complexity that increases the cost to customers.
• It should be another tool for health insurance customers, but not the only available option for purchasing health insurance coverage.
• It must be customer-service oriented, accountable, reliable, transparent, and expedient.

Governor Snyder is asking the Legislature to enact legislation creating MI Health Marketplace by Thanksgiving. Senate Health Policy Committee Chair James Marleau introduced Senate Bill 693, which would authorize the creation of the MI Health Marketplace, on September 22, 2011.

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