HHS's Proposed Regulation for Health Insurance Exchanges: An Emphasis on State Flexibility, Part II
Last week the U.S. Department of Health and Human Services issued its proposed regulation for several features of the new health insurance exchanges that states are to establish by 2014 under the Affordable Care Act. Guidance on additional provisions related to exchanges are expected in the months ahead. In general, the rule provides states maximum flexibility to tailor the exchanges to their particular insurance markets, employer communities, and populations within the boundaries established by the health reform law.
The state insurance exchanges will be organized markets in which individuals and small businesses can purchase health insurance plans starting in 2014. For people without access to employer-sponsored or public insurance, the exchanges will be the main portals for finding a health plan and learning about and applying for any federal subsidies for which they are eligible.
The proposed regulation closely adheres to the provisions of the Affordable Care Act, which sets a floor of minimum requirements for state exchanges. At the same time, states have considerable flexibility and options when designing their exchanges, a process that requires difficult tradeoffs with uncertain impacts on premium costs and enrollment by individuals and small businesses.1 The regulation clarifies those options and, in some cases, offers guidance to states.
In this second part of a two-part post, I highlight the following selected aspects of the proposed rule that provide new flexibility for states or answer key questions about how the exchanges will operate in practice:2
- Who will govern the exchanges?
- What standards must health plans meet?
- Will there be enough health care providers in plan networks offered through the exchanges?
- Will there be essential community providers in every network?
Who Will Govern the Exchanges?
The rule offers some guidance to states that have yet to determine the governance structure of their exchanges. Under the Affordable Care Act, exchanges must be a governmental agency—an existing executive branch agency or an independent public agency—or a non-profit entity established by the state. The rule notes that states should consider the costs and benefits of utilizing the accountability structure within an existing agency versus establishing a governing body for a new independent public agency. States considering nonprofit governance should recognize that while nonprofits may be able to operate without some of the restrictions governmental agencies face, they may encounter limitations performing functions that are typically governmental in nature, such as facilitating the issuance of guidance or regulations on provisions in state law establishing the exchanges.3 As a result, states might consider establishing independent public/governmental agencies with flexible hiring and operational practices. Or states might choose to establish nonprofit entities with governing bodies that are appointed and overseen by states.
According to the rule, if the exchange is an independent state agency or nonprofit established by the state, it must have a clearly defined governing board that meets a set of minimum requirements. The accountability structure must be administered under a formal, publicly adopted operating charter or by-laws. The board must hold regular public meetings for which the public is provided advance notice with invitations to comment on exchange policies and procedures.
HHS emphasizes that the exchanges are meant to support consumers and small businesses and thus the majority of the voting members should represent their interests. The majority of the membership may not consist of health insurance issuers, agents, brokers, or anyone else licensed to sell health insurance. HHS invites comment on this proposal, and notes that states may elect to impose more stringent or specialized conflict of interest requirements. California's new exchange board, for example, excludes anyone who receives money from an organization that could receive funds through an exchange, such as a provider or insurance carrier.4 Tim Jost points out that even restricting membership of insurance carriers to a minority might still allow them to exert significant control over board decisions.5
What Standards Must Health Plans Meet to Be Offered Through Exchanges?
Exchanges are responsible for certifying health plans that are offered through exchanges, except for multistate plans offered in each state that the federal Office of Personnel Management will certify. HHS will establish minimum criteria for certification of health plans as qualified health plans that will "foster direct competition on the basis of price and quality and which will increase access to high quality, affordable health care for individuals and employers." Those standards include:
- offering the essential benefit package (to be determined in regulations later this year);
- adhering to cost-sharing limits;
- being licensed and in good standing to offer health insurance;
- compliance with quality standards established in the law, including required quality data reporting, quality improvement strategies, and enrollee satisfaction surveys, all of which will be addressed in future regulations;
- offering at least one qualified health plan at the silver and gold benefit levels;
- for any non-catastrophic plan offered, a participating insurance carrier must offer an identical child-only plan to children under 21; and
- no discrimination on basis of race, color, national origin, disability, age, sex, gender identity and sexual orientation.
In addition, the rule requires that exchanges consider trends in plans' premium rates in the certification process. This would include considering recommendations by state insurance commissioners regarding the participation of plans in the exchanges with histories of excessive or unjustified rate increase, as well as plans' justification of rate increases. States must also monitor any excess rate of growth in carriers' premiums outside the exchange as compared to inside the exchange.
The rule allows states to decide whether they will allow all plans that meet the minimum qualified health plan standards to participate in the exchanges or if they will require more stringent requirements in determining whether offering a plan is in the interests of individuals and employers. HHS lays out some different options for states including:
- "any qualified health plan" strategy where an exchange would certify all health plans that meet the minimum required standards;
- competitive bidding or selective contracting process, limiting qualified health plan participation to those ranked highest on a set of criteria established by the exchange, such as achievement of health care quality and value objectives sought by the exchange;
- case-by-case negotiation with insurance carriers on qualified health plans offered.
Will Consumers Have a Sufficient Choice of Health Care Providers?
The law requires HHS to establish provider network adequacy requirements, so consumers have adequate access to health care providers. In the rule, HHS proposes allowing exchanges to ensure that qualified health plan enrollees have sufficient choice of providers. This gives exchanges considerable flexibility to apply this standard to the state's existing patterns of care, establish specific standards where necessary, and leverage existing state oversight and mechanisms. But HHS is also considering requiring qualified health plan issuers to maintain:
- sufficient numbers and types of providers to assure that services are accessible without unreasonable delay;
- arrangements to ensure participating providers, including those that are accepting new patients, are within a reasonable proximity of the residence or workplace of enrollees;
- ongoing monitoring processes to ensure sufficiency of network for enrollees; and
- a process to ensure that an enrollee can obtain a covered benefit from an out-of-network provider at no additional cost, if no network provider is available for that benefit in a timely manner;
- sufficient access to care for all enrollees, including those in medically underserved areas.
Will There Be a Sufficient Number of Essential Community Providers in Every Network?
The regulation follows the Affordable Care Act by requiring qualified health plans in both the individual and small business exchanges to include in their provider networks a sufficient number of "essential community providers" who provide care to predominantly low-income and medically underserved populations. HHS defines essential community providers as all those highlighted in the law, including federally qualified health centers, public hospitals, sole community hospitals meeting disproportionate share adjustment payment thresholds, children's hospitals, and many others.6 But HHS is also considering broadening the definition to include additional providers that serve these populations.
HHS debated whether to include broad contracting language that would require a qualified health plan to contract with all essential community providers in each plan's service area. This would allow continuity of care for enrollees with existing relationships with essential community providers. In addition, to the extent that essential community providers serve people who are eligible for Medicaid, the presence of those providers in networks of qualified health plans would allow people to maintain provider relationships in the event that an income change made them eligible for tax credits and private plans in the exchange, or vice-versa. The agency invites comment on how to define a sufficient number of essential community providers in qualified health plan networks. Additionally, HHS is considering whether to develop different requirements for integrated delivery network health plans where services are provided solely "in house," such as staff-model HMOs, and where providers are employees of the plan or system. For these plans, adding new essential community providers might not be compatible with how they organize and deliver services. HHS is considering instead requiring such plans to meet other requirements such as evidence of services provided to low-income families.
Like the parts of the rule covered in Part I of this blog, these sections are straightforward interpretations of the provisions of the Affordable Care Act regarding state health insurance exchanges. HHS preserves significant state flexibility in each of these areas and provides some guidance for states in terms of trade-offs involved in key decisions, such as the entities that will govern their exchanges. The makeup of boards has been a source of controversy in Colorado and other states that have passed or attempted to pass legislation establishing their exchanges. As Tim Jost points out, it is not clear that HHS's proposed requirement to limit insurance industry participation on boards to a minority presence will resolve this, or ensure that board decisions will favor the needs of consumers and small businesses.
And while the proposed rule's broad definition of essential community providers could help ensure that those in low-income and medically underserved communities will still be able to access providers serving their areas, this potential will not be realized without strong requirements for qualified health plans to contract with adequate numbers of such providers. Such requirements may also help people maintain relationships with their providers even when changes in income affect their eligibility for Medicaid, the Basic Health Plan, and qualified health plans.
1 T. S. Jost, Health Insurance Exchanges and the Affordable Care Act: Eight Difficult Issues (New York: The Commonwealth Fund, Sept. 2010).
2 Timothy Jost highlights these and other important aspects of the rule including the proposed rule on the reinsurance, risk corridors and risk adjustment programs in three blog posts for Health Affairs at this link http://www.healthaffairs.org/.
3 M. Weinberg and L. W. Haase, State-Based Coverage Solutions: The California Health Benefit Exchange, The Commonwealth Fund, May 2011.
4 M. Weinberg and L. W. Haase, State-Based Coverage Solutions: The California Health Benefit Exchange, The Commonwealth Fund, May 2011.
5 T.S. Jost, "Implementing Health Reform: Health Insurance Exchanges," Health Affairs Blog, July 12, 2011.
6 The rule defines essential community providers to include all health care providers highlighted in the Affordable Care Act as defined in section 340B(a)(4) of the Public Health Service Act and section 1927(c)(1)(D)(i)(IV) of the Social Security Act. For a discussion of essential community providers under the Affordable Care Act, see Sara Rosenbaum, Essential Community Providers, Health Reform GPS, Navigating Implementation, March 11, 2011, http://healthreformgps.org/resources/essential-community-providers/.