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Lots of Regs, but What About the Federal Exchange?

By John Reichard, CQ HealthBeat Editor

November 20, 2012 -- Missing from last week's massive release of hundreds of pages of proposed rules filling in the details of the sweeping redesign of the insurance market, set in motion 32 months ago by passage of the health care law, were details on an entity looming ever larger in delivering the fruits of that legislation: the federally facilitated exchange.

By the end of the day, however, it appeared that officials had made considerable progress on the regulatory front, with insurers and states now having to scramble to conform to the new mandates.

During a press call about the rules that are ushering in unprecedented changes in the cost and components of health coverage, Gary Cohen, a senior official at the Centers for Medicare and Medicaid Services (CMS), said that "we will be putting out additional guidance on the federally facilitated exchange in the near future."

Cohen did not elaborate.

How that exchange will operate, and how and whether it will be adequately funded early on, remains largely a mystery, even as the number of states opting to send their residents to the federal exchange increases.

The list of states that say they won't help implement the health care law (PL 111-148, PL 111-152) by opening their own exchanges or by partnering with federal officials to do so grows almost by the day—and makes up huge swaths of red-state America. That means the federal government will call the shots in those areas when it comes to the terms and conditions of subsidized coverage offered to small businesses and uninsured residents.

Federal officials, meanwhile, have continued to press the case in recent days for states to build their own exchanges by extending deadlines for developing and submitting plans to open the new marketplaces.

Cohen, who heads the Center for Consumer Information and Insurance Oversight at CMS, said during the briefing that it makes a big difference whether a state runs its own exchange or the federal government does it. There are "many" differences, he said.

For example, "the determination of what products are sold in the exchange has to be made by the exchange. So if the state is running the exchange, it can decide what products are available to be sold in the exchange. If a state isn't running the exchange, then we at CMS will be making that decision."

Another difference Cohen added relates to how the costs of running the exchange are assessed and collected. "If a state is running an exchange, a state gets to decide how those costs should be assessed. Should it be assessed only on companies that are selling products in the exchange? Should it be assessed on the entire insurance market? Should it be assessed in taxes. That's totally up to a state. Otherwise, it's going to be up to us to determine," he said.

But "there will be no difference for consumers," he asserted. Consumers "will have the same access to quality affordable care whether the state is running the exchange or whether the federal government is running the exchange."

Cohen also was unable to provide details yet on nationally available plans that have to be offered in each exchange. "We're expecting something out on that shortly," he said.

Cohen voiced no uncertainty, however, that even with slipping deadlines and missing details, coverage will expand as scheduled under the law.

That "absolutely" will happen on time, Cohen said. "Absolutely, we will be ready," he said. "There will be an exchange in every state open for business on October 1st next year."

But will insurers that are preparing under still-emerging rules and guidance documents have plans ready to sell by then, too?

"Yes," he said.

Following the release of the proposals on insurance rules, essential health benefits and wellness programs, the big questions about implementation may be shifting away from the lack of regulatory guidance toward other issues, such as the cost of the coverage that will be available in the exchanges given all the new requirements.

Tim Jost, a Washington and Lee University law school professor, said his preliminary read on the regs was that they "seem pretty comprehensive." Asked what remains to be done on the regulatory side, Jost said, "The only thing I can think of is further information on the federally facilitated exchange. Also, no rules yet on the individual and employer responsibility provision, and [there are] still some gaps in the premium tax credit rules."

The recently released proposed rules revealed some new requirements insurers will be facing in addition to those they had been anxiously waiting for because of the Obama administration's pre-election holdup of regulatory proposals.

For example, insurers will now have to submit all rate hikes to HHS even though the department will only review planned increases for reasonableness in states that do not now conduct such reviews.

"We've changed the reporting requirements although not the review requirements," Cohen said.

He said the reason all rate hikes will have to be submitted to HHS in 2014 is because a provision of the health law requires the HHS secretary to monitor premiums both inside and outside of exchanges. "We need to look at rates across the market," he said. The data is needed to implement "premium stabilization" provisions that limit insurer losses initially stemming from high cost cases, he added.

Insurers meanwhile said the regulations and other health law requirements would have consequences in the form of often unaffordable premiums in exchanges.

"We appreciate that the proposed rules issued today seek to minimize coverage disruption and we look forward to working with the department to achieve this goal," said Karen Ignagni, president of America's Health Insurance Plans.

But "for health insurance exchanges and new insurance market rules to work, coverage needs to be affordable and there needs to be broad participation in the system," she cautioned. "We remain concerned that many families and small businesses will be required to purchase coverage that is more costly than they have today."

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