Health Insurance Exchanges
The ACA requires states to establish health insurance Exchanges for individuals, small groups, and small businesses by 2014. States currently fall into three categories: states that operate state-based Exchanges, states that have entered into state-federal partnerships, and states with federally-facilitated Exchanges. The ACA directs the Secretary of HHS to establish and operate a federally-facilitated Exchange in any state that is not able or willing to establish a state-based Exchange. States operating Exchanges under state-federal partnerships may administer plan management functions, in-person consumer assistance functions, or both, and HHS will perform the remaining functions.
According to regulations promulgated by HHS, plans offered on the Exchanges must meet the following requirements:
- Plans must be certified as a “qualified health plan” by each Exchange through which it is offered. To be a qualified health plan:
- The plan must offer a defined set of “essential health benefits”;
- Its issuer must be licensed and in good standing with each state in which the plan is offered;
- Its issuer must offer at least one silver plan and one gold plan through the Exchange; and
- Premiums must be the same whether the plan is sold through the Exchange or outside of it.
- Plans must establish defined limitations on cost sharing and deductibles for essential health benefits.
- Each plan must fall in one of four defined levels of coverage: Bronze, Silver, Gold, and Platinum, based on ratio of equivalence of benefits to actuarial value.
- Plans offered must also be available at the same level of coverage as a plan available to individuals under 21 years old.
- For fully insured large group plans, rating may be based only on age, tobacco use, geographic area and individual vs. family coverage.
In order to ensure that Exchanges function properly, each state was required to establish a reinsurance program for the individual market by 2014 that will run through 2016. All health insurance issuers and third party administrators will be required to contribute to the temporary reinsurance program. HHS will also establish and administer temporary risk corridors from 2014 to 2016. Finally, each state will be required to adopt a risk adjustment model to be developed by HHS for health plans in the individual and small group markets. Low-risk plans will be subject to an assessment, and high-risk plans will receive a payment.
States have a fair amount of flexibility in establishing their Exchanges. Decisions that are within the purview of state authorities include the following:
- Whether governance of the Exchange shall be by a state government agency, or by a non-profit entity established by the state;
- Whether to merge individual and small group (“SHOP”) Exchanges;
- Whether to form interstate regional Exchanges or subsidiary, intrastate Exchanges that serve discrete geographical areas;
- Whether to prohibit coverage of abortions by qualified health plans offered through the Exchange;
- Whether to restrict eligibility for SHOP Exchanges to 50 employees or fewer until 2016; and
- Whether to forgo establishment of an Exchange, in which case a state’s residents will be eligible to participate in a federally-operated Exchange.
The ACA makes funding available to states to assist with the costs of establishing an Exchange, although Exchanges are expected to be self-sustaining beginning in 2015. As of April 19, 2014:
- Sixteen states and the District of Columbia have established Exchanges;
- Twenty-seven states have deferred management of their Exchange to the federal government; and
- Seven states have taken a variation on the approach by partnering with another state or the federal government.
The first open enrollment period in the Exchanges went from October 1, 2013, to March 31, 2014. The next open enrollment period will begin on November 15, 2014. HHS is currently developing options for annual eligibility redeterminations and renewal and re-enrollment notice requirements for qualified health plans offered through the Exchange.