Choices, Competition and Clout: New Proposed Regulations on Health Insurance Exchanges
Last week the U.S. Department of Health and Human Services ("HHS") released proposed regulations designed to implement the provisions of the Affordable Care Act calling for the establishment of State-based affordable insurance exchanges ("Exchanges"). As explained by HHS in the preamble to the proposed regulations, "Exchanges will offer Americans competition, choice, and clout. Insurance companies will compete for business on a level playing field, driving down costs. Consumers will have a choice of health plans to fit their needs. And Exchanges will give individuals and small businesses the same purchasing clout as big businesses." Whether those lofty goals can be met through the establishment of Exchanges remains to be seen. But the new proposed regulations certainly present a much clearer picture of what the Exchanges will look like and how they will operate.
Primary Functions of an Exchange. The primary purposes of an Exchange are to facilitate the purchase of health insurance coverage by qualified individuals through qualified health plans ("QHPs") and to assist qualified employers in enrolling their employees in QHPs. To accomplish those aims each Exchange will be expected to:
- Certify, recertify and decertify health plans as QHPs eligible to offer coverage through the Exchange.
- Assign quality and price ratings to each QHP and provide other consumer information in standardized format.
- Operate an internet website and provide a toll free telephone hotline through which individuals and small businesses can get information about QHPs.
- Allow exemptions from requirements on individuals to carry health insurance and grant approvals to individuals relating to hardship or other exemptions.
- Establish a "Navigator" program to assist consumers in making choices about health care options and accessing health insurance through the Exchange.
Flexibility for States. The preamble explains that HHS hopes to preserve as much flexibility for States as possible in establishing Exchanges, subject to the requirements of the Affordable Care Act. It also describes the considerable effort expended by HHS in consulting with stakeholders during the process of developing the regulations. These stakeholders included the National Association of Insurance Commissioners, representatives of various states, health insurance issuers, trade groups, consumer advocates, employers and other interested parties. Consistent with statutory requirements, States will be able to choose the structure and governance of their Exchanges. For example, a State may establish an Exchange as a state agency or as a non-profit organization and it may choose to contract with other eligible entities to carry out various functions of the Exchange. States may also choose to collaborate with other States to form a regional Exchange or may establish one or more subsidiary Exchanges within the State (for example to provide certain types of coverages or serve the special needs of local populations or industries). Consistent with the Affordable Care Act, the regulations propose that each Exchange be "fully operational" by January 1, 2014. The term "fully operational" means that an Exchange will be capable of beginning operations by October 1, 2013 in order to support the initial open enrollment period contemplated under the regulations. The regulations propose detailed rules and standards that HHS will apply in order to approve an Exchange and deem it to be fully operational.
Guidance Regarding Key Functions of Exchanges. The regulations contain detailed proposals regarding the ways in which an Exchange must fulfill its statutory duties, such as the granting of certifications of exemption from the individual responsibility requirement, eligibility determinations, the evaluation of quality improvement strategies and enrollee satisfaction surveys, consumer assistance tools and programs and the qualification of health plans. The proposed regulations provide considerable detail relating to the Web site that each Exchange is required to maintain. Web sites must be kept up to date and capable of:
- Providing standardized comparative information on QHPs to assist consumers in making health insurance choices.
- Including a search function to enable consumers to find information about health plan options.
- Providing contact information for Navigators and information about the services they provide.
Certification of Health Plans. In order to obtain QHP status a health plan must undergo a two part certification process to be administered by the Exchange. First, the Exchange must determine that the health plan meets certain minimum standards primarily relating to the delivery of services, including marketing, network adequacy and the health plan geographic service area. Second, the health plan must satisfy certain minimum standards relating to the affordability and quality of health care services delivered. In this regard, each Exchange is expected to develop standards appropriate to address the specific needs of the population served and the market conditions that prevail in the service area.
Privacy and Security Concerns. Since each Exchange will need to obtain "personally identifiable information," such as names, social security numbers, addresses, dates of birth, and financial information (as part of the eligibility determination process or otherwise), the proposed regulations address the privacy and security standards that Exchanges must establish and follow. Recognizing that Exchanges may engage contractors or other entities to fulfill Exchange functions or otherwise support the activities of the Exchange, the regulations propose to impose the privacy and security standards on those contractors as well. The regulations also recognize that some Exchanges may be HIPAA covered entities (health plans, health care clearing houses and health care providers that conduct electronic transactions covered by HIPAA) or business associates of HIPAA covered entities, and that some or all Exchange activities involving individually identifiable health information may be governed by HIPAA. Therefore, the regulations expressly provide that HIPAA may dictate the appropriate privacy and security standards for some Exchanges and may serve as helpful guidance on privacy and security practices even for other Exchanges that may not be subject to HIPAA. Each Exchange is expected to engage in an analysis of its operations and functions to determine the extent to which HIPAA may apply.
The Navigator Program. The Affordable Care Act requires each Exchange to establish a "navigator program." Navigators are intended to inform and guide individuals and small employers regarding the availability of QHPs offered through the Exchange and facilitate the enrollment of qualified individuals into the health plans. Navigators are expected to engage in outreach and education efforts and provide assistance in obtaining coverage under health plans. Navigators will be required to provide unbiased and accurate information and will have to satisfy certain conflicts of interest requirements in order to assure that their operations and services are consumer friendly and have the best interest of individuals and small businesses in mind.
The Small Business Health Options Program. The Affordable Care Act requires each Exchange to establish affordable health insurance options for employees of small businesses through a Small Business Health Options Program ("SHOP"). The SHOP will improve access to information about plan benefits, quality and premiums and is intended to give small businesses the types of choices and purchasing power that large businesses typically enjoy. Through SHOPs, at a minimum, a small employer will be able to choose a level of coverage suitable for its workforce and allow qualified employees to choose an available plan at that level of coverage. But SHOPs may also provide greater flexibility to small employers in making health insurance available to employees. For example, an Exchange may (1) allow all employees to choose any QHP offered in the SHOP at any level; (2) allow employers to select specific levels from which an employee may choose a QHP; (3) allow employers to select specific QHPs from different levels of coverage from which an employee may choose a QHP; or (4) allow employers to select a single QHP to offer to employees. In general, for purposes of participating in a SHOP an employer is considered a "small employer" if it employs no more than 100 employees on an average business day during the preceding calendar year. A State may, however, elect to limit enrollment through a SHOP to employers with no more than 50 employees (determined under the same standard) until January 1, 2016. Additionally, beginning in 2017 States will have the option to allow issuers to offer QHPs in the large group market through the SHOP.
Transparency and Governance Standards. The proposed regulations require an Exchange established as an independent State agency or non-profit entity (rather than an existing State agency) have a clearly defined governing board that meets certain minimum requirements. For example, the Exchange accountability structure must be administered under a formal, publicly-adopted operating charter or bylaws. This provision is intended to ensure transparency of the governing board's structure for the public. The regulations contain standards regarding the management qualifications of members of an Exchange governing board and rules designed to avoid conflicts of interest. According to HHS, Exchanges are intended to support consumers, including small businesses, and as such, the majority of the voting members of the governing board should be individuals who represent those interests. The regulations specifically provide that membership may not contain a majority of representatives of health insurance issuers, agents or brokers. The regulations also require each Exchange to publish a set of guiding governance principles that include ethical and conflict of interest standards, as well as disclosure of financial interests.
Funding of Exchanges. The Affordable Care Act calls for federal funding to states that establish Exchanges for planning and establishment activities through the end of 2014. Exchanges are expected to be self-sustaining by January 1, 2015. The Affordable Care Act lists specific assessments and user fees that can be implemented as one means of securing operational funding for Exchanges, but states are free to use more broad-based funding to the extent that is available within the state.
Approval of an Exchange by HHS. The regulations propose an approval process designed to assure that Exchanges will meet the standards established under the Affordable Care Act and become operational by January 1, 2014. States will have to submit plans demonstrating how their Exchanges meet minimum standards and will have to pass a "readiness assessment" to demonstrate their operational capabilities. HHS expects to continue to develop operational standards for Exchanges in future guidance. In particular, HHS plans to develop a template outlining the required components of an Exchange plan and providing guidance as to satisfying the readiness assessment requirements. The regulations empower HHS either to grant full approval to an Exchange or to grant conditional approval in the case of an Exchange that may still have some additional work to do in order to fully satisfy the applicable requirements.
More Guidance to Come. The new proposed regulations do not cover all items that are relevant to the establishment and operation of Exchanges. In particular, the following will be addressed by HHS in separate rule making: (i) standards for individual eligibility for participation in the Exchange, advance payments of the premium tax credit, cost-sharing reductions, and related health programs and appeals of eligibility determination; (ii) standards for the issuance of exemption certificates from the individual responsibility requirements; (iii) defining essential health benefits, actuarial value and other benefit design standards; and (iv) standards for Exchanges and QHP issuers related to quality.
In the meantime, comments on the proposed regulations are due by September 28, 2011.