Exchange Rules Provide Extensive Guidance But Unresolved Challenges Remain


Exchange Rules Provide Extensive Guidance But Unresolved Challenges Remain

Monday, August 1st, 2011 - 7:42
Monday, August 1, 2011 - 07:37
Recent regulations give states many choices in establishing insurance exchanges but some outstanding thorny challenges remain.

New regulations issued by the US Department of Health and Human Services in July establish federal standards for states creating Health Insurance Exchanges and also stipulate standards that health insurers must meet to participate in the Exchanges (42 CFR Part 155 and 42 CFR Part 156, respectively).


The new standards provide plenty of useful information for states. They outline the process under which states will seek approval of their Exchanges from HHS by January 1, 2013, in order to open their doors a year later. To do this, states will have to demonstrate that they will actually be ready in October 2013 to start the initial enrollment for January 2014. States are given flexibility about offering just one Exchange for individuals and small businesses, or separate Exchanges for each, as well as the option to partner with other states in setting up a regional Exchange.


There is also much flexibility for states in how to certify health plans for the Exchanges. The regulations even seem to offer some flexibility on the role of the federal government in stepping in to operate Exchanges when states do not measure up to federal guidelines. The new regulations say that HHS is exploring various “partnership models” under which an Exchange might be partly state-based, but could build in shared business functions from either other states or the federal government. This shows considerably more flexibility from the HHS position that most people expected, which could be summarized as “either you build it or we will step in and do it for you.”


While the new regulations provide at least partial answers to a number of important questions, it is also important to note a few of the issues and challenges that remain unresolved and will likely be the subject of future regulations. One important outstanding issue is the definition of “essential health benefits.” A report from the Institute of Medicine is expected in September outlining a proposed package of benefits, and this report will be reviewed and presumably adjusted by HHS. The likely dissemination of essential benefits is expected toward the end of 2011, or at the beginning of next year. HHS must also issue rules that determine the actuarial value of health plans and quality metrics for participating plans.


We will also need more detail via new regulations on the eligibility standards for the Medicaid and CHIP programs. Finally, HHS will have to issue regulations detailing how the advance payment of the premium tax credits will work, and how to implement limits on consumers’ out-of-pocket costs. These eligibility standards and federal subsidy specifications are critically important to the success of Exchanges.


Thus, while much has been accomplished in Exchange planning, the federal government and the states face a steep uphill climb to get ready for Exchange implementation in less than two years.