Health insurance exchanges, as part of the Affordable Care Act, will be providing individuals and small businesses a mechanism to obtain and compare health insurance beginning January 1, 2014. Health insurance exchanges will be operating in each state and are an integral mechanism for health coverage expansion under the Affordable Care Act. States currently have the option of setting up their own exchanges, partnering with the federal government, or having the federal government operate a federally facilitated exchange.
The U. S. Department of Health and Human Services (HHS) had extended the deadline to December 14, 2012 for states to notify HHS about intentions for operating state-based exchanges. States that expressed interest in operating a state-based exchange were to submit both a Declaration Letter and the Blueprint application that provides details of the state’s plan. To date, 18 states and the District of Columbia have indicated they plan to operate a state-based exchange, 7 states are planning to have a federal-state partnership, and 25 states are planning on a federal-facilitated exchange. For the list of states, please click here. States electing to operate a state partnership heath insurance exchange can submit their Declaration Letter and Blueprint application on a rolling basis up until February 15, 2013. Additionally, a state may apply at any time to run an exchange in future years. HHS will approve or conditionally approve the state-based exchanges by the statutory deadline of January 1, 2013 and has announced conditional approval of exchanges in Colorado, Connecticut, Kentucky, Massachusetts, Maryland, New York, Oregon, Washington, and the District of Columbia to date. State authority for the decision to operate an exchange has come from both governors’ executive orders and from legislation.
Even within the categories of a state-based exchange, a federal-state partnership, and a federally facilitated exchange there are different functions that states may choose to assume versus the federal government. For example, if a state operates a state-based exchange, the state may have the federal government operate the premium tax credits. In a state partnership, a state may operate activities for plan management and/or consumer assistance and the state may elect to have the federal government perform the Medicaid and CHIP eligibility determination. Exchanges will have a single form for applying for health programs, including coverage through the exchanges and Medicaid and CHIP programs. Some consumers will qualify for tax credits to offset premiums based on incomes of 100 percent to 400 percent of the federal poverty level.
There are many decisions about the health insurance exchanges that states are in the process of making or will make in the future. These include the governance structure of the exchange, if the exchange will be an active purchaser or serve as a clearinghouse, and how the exchange will be financed after it is operational. Governance structure would include if the exchange is quasi-governmental, operated by the state, or is a non-profit entity. Although federal funds are available for the startup costs to establish health insurance exchanges, eventually all exchanges have be self-sustaining by 2015. States that are assessing the long term financing of the exchange often are assuming a premium fee, though how it may be applied and at what level varies across states.
Each state electing to establish an exchange must adopt the federal standards in law and rule, and have in effect a state law or regulation that implements these standards. Recent federal guidance has included three proposed regulations that govern aspects of implementing the Affordable Care Act addressing insurance premiums, essential health benefits, and wellness programs affecting health insurance exchanges. Additionally, the Center for Medicaid and CHIP Services (CMCS) released a letter to State Medicaid Directors to provide guidance to states on the use of “benchmark” or alternative benefit plans for the new eligibility group of low-income adults and the relationship between alternative benefit plans and essential health benefits. Additional rules, including details on federally facilitated exchanges, are expected to be published shortly as well.
NASBO will continue to provide updates on the next steps and state decisions on health insurance exchanges.