HHS Final Rule on Health Care Exchanges: What does it mean for employers?
April 4, 2012
On Monday, March 12th the Department of Health and Human Services Center for Consumer Information and Insurance Oversight (CCIIO) released a set of final regulations that will govern the state-based health insurance exchanges created by the Affordable Care Act (ACA). The much-anticipated regulations will allow states to further their efforts to create marketplaces where individuals and small employers can purchase health insurance starting in 2014. What will the setup of these state-based health care exchanges mean for Extend Health clients? In this interview, our resident health care reform expert and Director of Product Marketing, John Barkett, who worked on drafting and implementing the ACA before coming to work at Extend Health, helps translate what’s going on.
Extend Health: What’s the difference between a state-based health care exchange and the ExtendExchange Medicare exchange platform operated by Extend Health? Are they the same thing?
John Barkett: They are not the same thing. The state-based exchanges and the ExtendExchange platform are both marketplaces where carriers can list their products and individuals can shop for and enroll in a plan. The New York Stock Exchange serves the same purpose for firms who wish to list and sell securities and investors who wish to buy them. But the state-based health care exchanges also have the power and responsibility to qualify plans. This is similar to how the SEC must certify a firm before it is permitted to sell its shares on a stock exchange. The regulations that were just released are 644 pages long (Download), in part because states are being tasked with setting up an insurance-world equivalent of both a stock exchange and a securities exchange commission for health insurance.
EH: You forgot an important difference. Some individuals who purchase insurance on a state-based exchange are eligible for subsidies towards their premiums. This is a new entitlement created by the ACA.
JB: That’s right. Individuals and families below 400% of the Federal Poverty Level ($89,400 for a family of four in 2011) that purchase a plan that has been qualified by the state-based health care exchange will be eligible for advance premium tax credits that will defray the cost of an individual or family’s insurance premiums. This is similar to how Medicare operates the Medicare Advantage and Medicare Part D programs as well. When a Medicare beneficiary enrolls in a Medicare Advantage or Medicare Part D plan, Medicare sends a monthly payment to the carrier that covers the majority of the premium. The beneficiary pays the difference. There is no federal premium support for Medigap policies. They must be paid for out of pocket by the beneficiary, although many of our employer clients reimburse their retirees through a Health Reimbursement Arrangement (HRA). The same dynamic will likely play out in the pre-65 markets, as health plan carriers will be allowed to sell individual and small group products subject to some federal guidelines and ultimately approved by state Departments of Insurance, but not requiring qualification by the state-based health care exchange. Individuals or employers that would like to shop for both qualified health plans and individual or small group plans will have to navigate the markets separately unless private exchanges are set up to offer them side-by-side.
EH: I see. So, was the regulation CCIIO just released the final one? What did it cover? And what does an Extend Health client need to know?
JB: There are many regulations that reform our pre-65 insurance markets on the way toward full implementation of the health care reform act, but this was a substantial one. For the most part, the rule is aimed at states, not employers. It gives states guidelines for the following:
- Establishment of health care exchange governance structure
- Minimum health care exchange capabilities
- Eligibility determinations for health care exchange participation and tax credit programs
- Enrollment into qualified health plan
- Certification of a qualified health plan
The rule provides similar guidelines for states that wish to set up Small Business Health Options Programs – “SHOP Exchanges” – which are state-based health care exchanges for employees of small businesses. The rule also details minimum certification standards that must be followed by state-based exchanges when qualifying health plans, and describes which employers will be eligible to enroll their employees into SHOP exchanges.
SHOP exchanges are designed to relieve small employers of the administrative burden of choosing a health plan for their employees by allowing them to offer a contribution that would defray the cost of their employees’ premiums. For 2014-2016, only employers with less than 100 employees (or less than 50 employees; states have the option of choosing either) will be granted access to the SHOP exchange. Starting in 2017, states can decided to grant large employers access to their SHOP exchange.
This rule marks an early but pivotal point in the creation of a well-functioning individual market. It lays a foundation that is still subject to execution risk; we still don’t know how well states will perform in standing up their health care exchanges. (Or if they will perform at all – by our last count 20 states had yet to take any action towards setting up their own exchange.) But should the states succeed they could create the first viable alternative to the group markets for a pre-65 population. This is the big picture takeaway, one that we will be following very closely.
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