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HHS Keeps Exchange Rulemaking Moving Via Staggered Approach

By John Reichard, CQ HealthBeat Editor

March 12, 2012 -- The Obama administration has resorted to various tactics over the past two years to keep rulemaking moving under the health law despite the enormity of the job. On Monday it struck again, moving long-awaited final health insurance exchange regulations out the door, thanks to a staggered approach.

It was a little like giving a college professor a big chunk of a mammoth final term paper to read while promising to turn in the rest before she finished reading the first part.

The 644-page final rule released by Health and Human Services (HHS)combined into a single document, two sets of exchange-related regulations proposed last summer, while saying that other exchange-related proposals would be issued “shortly” as final regulations.

The rule sets standards for creating and operating exchanges, certifying the health plans they can offer and for creating streamlined ways to enroll in plans using Web-based systems and other approaches.

HHS said that a second rule on “reinsurance, risk corridors, and risk adjustment” for plans sold in exchanges will be published separately as a final rule. Also to be published separately are Treasury Department regulations relating to the issuance of premium tax credits that will help people buy coverage and a regulation governing Medicaid eligibility changes. Those rules will be out “shortly,” HHS officials say.

Missing Monday, however, were any details on what a federally operated exchange will look like, something officials in a number of states want to know before deciding if and when to create their own exchanges.

Federal Exchange Info Coming
In a noon press call, HHS officials said they are working hard to get information out about the federally run exchange. Describing what that exchange will look like “is a huge priority,” said Tim Hill, deputy director of the Center for Consumer Information and Insurance Oversight (CCIIO) at the Centers for Medicare and Medicaid Services (CMS). But he didn’t specify when those details would be available.

HHS is anxious to avoid being blamed for the laggardly pace at which many states are creating exchanges. It has used tactics such as bulletins and guidance documents, for example, to keep feeding states information on what they should be doing, even as proposed and final regulations haven’t materialized as quickly as states want.

In truth, states have delayed for other reasons. But the administration is anxious to avoid any perception that it should bear most of the blame. Ron Pollack, executive director of Families USA, said in that regard that the administration is off the hook.

“Today’s regulations are a major milestone,” he said. “They will help put families in the driver’s seat as they seek high quality and affordable health coverage.” But Pollack said his “biggest takeaway” from the release Monday of the regs is that it “makes clear that the ACA will be implemented effectively and on a timely basis.”

Just as they did in proposing exchange requirements last summer, federal officials emphasized the flexibility they are giving states to create the new marketplaces the health law (PL 111-148, PL 111-152) created for individual and small group policies. And the flexibility approach appears to be succeeded in muting stakeholder criticism of the regulations.

For example, the new rule makes clear that states can get federal money to create exchanges as late as the fall of 2014, even though under the health overhaul expanded coverage begins at the start of that year.

In a news release, HHS Secretary Kathleen Sebelius emphasized that the regulation provides states “the guidance and certainty they need” to structure exchanges in two key areas. One is “establishing a streamlined, web-based system for consumers to apply for and enroll in qualified health plans and insurance affordability programs.” The other is the standards for establishing the exchanges, including exchanges for small business, and certifying plan participation.

The regulation estimated that 8.9 million people will get their coverage through exchanges in 2014, 14.3 million will be covered by exchanges in 2015 and 21.7 million will use exchanges in 2016.

The rule said premiums for people buying individual policies through exchanges would be 14 percent to 20 percent lower than without these new marketplaces. Of that, 7 percent to 10 percent of the savings will be “due to the healthier risk pool that results from the coverage expansion.” And, the regulation said, “An additional 7 to 10 percent in savings would result from gains in economies of scale in purchasing insurance and lower administrative costs from elimination of underwriting, decreased marketing costs, and the exchanges’ simpler system for finding and enrolling individuals in health insurance plans.” The Congressional Budget Office developed these estimates.

The regulation estimated that the federal government will pay out $47 billion in 2014 through 2016 to insurers offering coverage in exchanges through “risk adjustment” and “reinsurance payments” (these were included in the regulatory impact analysis even though they will be addressed in a separate rule.) The former compensate plans hit with enrollment by “bad risks” — an unusually large number of sickly, expensive-to-cover patients. The latter payments aim to cushion insurers initially against unexpected losses as they enter the new and unfamiliar exchange market. But the rule says that because of other revenue these payments will be budget-neutral.

Rule Courts Consumers
The final language seeks to appeal to consumers.

For example, the regulation says that businesses that use new “SHOP” exchanges created for small employers under the health law will be able to give their workers a choice of plans. Workers need not all enroll with the same insurer, as is now typically the case.

And if workers do exercise different choices, the employer won’t be stuck with the administrative nightmare of having to deal with multiple plans. The exchange will. In that instance, the employer “will get a single bill and write a single check,” said Chiquita Brooks-LaSure, director of coverage policy in the Office of Health Reform at the Department of Health and Human Services.

On the other hand, there is no requirement that a small business offer its workers a choice of plans.

“Exchanges may also offer employers the opportunity to contract with a single plan if the exchange chooses to do so,” she said. Some consumer advocates fear that many small business employees will end up without a choice of plans because of this option.

But Pollack lauded aspects of the regulation as a step forward for consumers. He said, for example, that it adds a month to the initial open enrollment period during which exchange customers sign up for health plans. The period will run from Oct. 1, 2013 through March 31, 2014 instead of ending Feb. 28, 2014. He added that each exchange board must have at least one voting member who represents consumer interests. “We were not certain there would be such a requirement,” he said.

Under the regulation, consumers will be able to buy coverage “through an outside Web-based entity,” other than the exchange site itself, said Hill. That entity must meet “the standards and requirements set by the exchange for privacy and security and protecting personally identifiable information” such as income and the amount of the premium tax credit available, he added.

“The eligibility for determining the premium tax credit is going to be done by the exchange,” he said. “It is also the case that we have provided the state-based exchanges the flexibility to allow... a Web-based broker or a small business, Mom-and-Pop broker or agent, to interact with the exchange in an automated way so that they can get consumers enrolled in the exchange seamlessly and quickly,” Hill said. “There are lots of folks out there who can generate . . . interest and marketing to make the exchange available to consumers.”

Hill stopped short of saying private exchanges could do the enrolling. “I don’t know that I would use the words private exchange . . . but there is a facility for a Web-based entity to enroll somebody into the exchange,” he said.

The regulation aims to help consumers through grants to entities called “navigators.” They will distribute “fair and impartial information” about plans offered in exchanges and help consumers pick a plan, officials said. The standards that navigators will be subject to will not be same as broker licensing standards.

The regulation also says that exchanges can conduct eligibility determinations for Medicaid or make a preliminary eligibility assessment and turn it over to the state Medicaid agency for final determination.

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