By Jane Norman, CQ Roll Call
December 19, 2012 – The idea of a health insurance exchange as laid out in President Barack Obama's signature law seems straightforward: an online marketplace where people will shop for private health insurance, like buying an airline ticket or a hotel room. But making sure exchanges in every state are ready for business by the law's deadline of 2014 has been anything but easy given the legal, technical and political questions surrounding them.
States had until Dec. 14 to tell the Obama administration whether they would be building their own exchanges. The answer was yes for 18 states and the District of Columbia. The remaining states, most led by Republican governors, will either have their exchanges run by the Department of Health and Human Services or take part in federal-state partnerships. One of the 18, Utah, is trying to gain permission to keep its current exchange even though it doesn't conform to the federal law.
Even with all that's been written about the 2010 law (PL 111-148, PL 111-152), a lot of confusion still exists about the exchanges and the process required to set them up. Following are some answers to a few basic questions that have been asked.
What does a health insurance exchange do and who joins one?
Each exchange will offer a selection of health care plans that meet standards for quality and affordability set by the health care law. The idea is that insurers will compete in the exchange to offer the best plans, reducing costs for consumers.
The exchanges will serve the 19 million people who don't have group health insurance through their employers and instead buy health care policies directly from insurance companies. Exchanges are not intended to replace the group coverage offered by large employers to about 60 percent of Americans.
Small businesses also will obtain insurance for their employees through the exchanges' Small Business Health Options Program. In addition, some states will have insurance plans in the exchange offered by nonprofit, consumer-run co-ops. The Congressional Budget Office estimates that 25 million to 26 million Americans will eventually buy their insurance through an exchange.
How do people take part in an exchange?
Enrollment will open in October and end in March 2014. Consumers will look at health insurance plans on an exchange website or obtain details over the phone from a call center. Prescription drug coverage, in-network doctors, co-payments and more will be spelled out.
Consumers also will be able to find out from the exchange whether they qualify for federal subsidies to buy insurance, which will be available to single people and families earning up to 400 percent of the federal poverty level. And they'll find out if they or their children qualify for Medicaid or the Children's Health Insurance Program. One of the IT challenges is how to communicate that information between the states and the federal government.
In states in which exchanges are run by the federal government, how will they be different?
HHS officials say the federal role will be limited to certifying and managing the health care plans offered in the exchanges, although that's a big task. States will continue their traditional roles in private insurance regulation and enforcement. Plans that are offered in federal exchanges must meet state licensing requirements and be considered in good standing with state insurance officials.
In each state, the federal government will operate a call center and website with a chat function. Call center employees will be trained on the details of insurance plans offered in the state as well as eligibility standards for each state's Medicaid program and Children's Health Insurance Program.
In working with states and in setting up the federal exchange, HHS officials in the last month alone have issued five proposed rules and notices dealing with exchanges, sent three letters to governors and other state officials and posted draft applications for public comment. Earlier this year, the agency issued 11 guidance documents for states as well as three final regulations and held 21 public meetings in 13 states that were open for public comment and questions.
Who will pay for operation of the exchanges?
HHS has distributed more than $2 billion in grant funding to states for planning and establishing exchanges. Once exchanges are up and running, they are supposed to be self-sufficient by Jan. 1, 2015, and raise enough money to pay for their administrative costs. In exchanges run by the federal government, federal officials have proposed imposing a fee on insurers in exchanges to pay those costs. States that will run their own exchanges also could levy user fees; the Massachusetts exchange that serves as a model for the health care law exchanges assesses a fee.
It's likely these fees will be passed on to consumers in the insurance premiums they pay.
What kinds of benefits will be included in the plans sold on the exchanges?
Any health care plan that is sold through an exchange will have to be a qualified health plan. That means it must meet requirements for a minimum level of value to consumers so it can be compared to other options.
Plans also must include an essential health care benefits package. Each state picks a typical employer plan in its state that serves as a model for that package. There must be coverage in 10 broad categories of health care: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse disorder services; prescription drugs; rehabilitative services and devices; lab services; preventive and wellness services; and pediatric services including dental and vision care.
What's next?
More deadlines. By Jan. 1, HHS has to issue approval of any state exchanges that will operate in 2014. On Feb. 15, states that intend to run state-federal partnerships in that first year have to submit their complete applications to HHS. Insurers start handing in applications in April to offer their plans in any of the exchanges. Consumer enrollment starts in October. And on Jan. 1, 2014, all 51 exchanges are to be up and running.
Also, because so many states will use a federal exchange or go with a federal-state partnership, pressure will increase on HHS to supply more details in coming months about how those types of exchanges will be operated.
HHS has yet to issue a detailed proposed rule on how the federal exchanges will operate, although a document with additional guidance was published in late November. A team from the agency in charge of eligibility and enrollment in the federal exchanges is expected to begin testing its processes soon with the help of insurance plans.
The agency also is working on how federal exchange websites will work to help consumers sort through their choices of health care plans based on their preferences.
And HHS must set up a program to establish the "navigators" in its exchanges—groups or individuals who get grants to help consumers pick plans.
