HCR Health Insurance Exchanges


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The health care reform law calls for the creation of state-based insurance Exchanges. This Legislative Brief provides an overview of state progress toward creating the Exchanges and the role of entities typically involved with the insurance placement process (such as brokers and agents) under the Exchanges. It also discusses the emergence of private health insurance Exchanges.

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HCR Health Insurance Exchanges

  1. 1. Brought to you by The Gardner GroupHealth Insurance ExchangesThe Affordable Care Act (ACA) calls for the creation of state-based competitive marketplaces, known as AffordableHealth Insurance Exchanges (Exchanges), for individuals and small businesses to purchase private healthinsurance. According to the Department of Health and Human Services (HHS), the Exchanges will allow for directcomparisons of private health insurance options on the basis of price, quality and other factors and will coordinateeligibility for premium tax credits and other affordability programs. ACA requires the Exchanges to become operationalin 2014.Due to a number of factors, states’ progress toward developing the Exchanges has been far from uniform. There hasalso been uncertainty surrounding the structure of the Exchanges and the role of entities that have been traditionallyinvolved with the insurance placement process, such as brokers and agents.On March 27, 2012, HHS issued final regulations to provide a framework for states on important aspects ofExchanges.In addition to ACA’s Exchanges, private health insurance exchanges are emerging to provide another way foremployers to provide health insurance coverage for employees.STATE PROGRESS ON EXCHANGESAccording to HHS, since ACA was passed in March 2010, all states have taken some action to implement the healthcare reform law. For example, 49 states are participating in ACA’s premium rate review system where insurers mustjustify the rationale behind any double-digit increases in insurance premiums. However, states have not made nearlyas much progress toward establishing their Exchanges.Exchanges must be ready to accept enrollees on Oct. 1, 2013. To meet this deadline, a state’s plan to operate its ownExchange must be approved by HHS no later than Jan. 1, 2013. HHS will give conditional approval for a state’s planif the state is advanced in its preparation but cannot demonstrate complete readiness by Jan. 1, 2013. If a state failsto meet this deadline, HHS will operate the federally-run exchange for residents of that state.HHS provided a Blueprint for states to use to receive federal approval for a state-based Exchange or a state-partnership Exchange. HHS also issued guidance on its approach to implementing a federally-run Exchange in anystate where a state-based Exchange is not operating.Some states, such as Oregon, Colorado and Maryland, plus the District of Columbia, have already establishedExchanges and received HHS’ conditional approval for their Exchange plans. Other states that intend to operate theirown Exchanges starting in 2014 include Kentucky, New York, Connecticut, Washington, Nevada, Idaho, Utah, NewMexico, Minnesota, California, Vermont and Rhode Island.Some states have announced that they do not intend to create their own Exchanges, but will partner with HHS todevelop an Exchange. These states include Iowa, Arkansas, Illinois, Michigan, West Virginia, Delaware and NewHampshire.A majority of states will let HHS run an Exchange for their residents starting in 2014, including Arizona, Texas,Louisiana, Wisconsin, Florida, Georgia, Ohio and Pennsylvania.
  2. 2. Health Insurance ExchangesThis Legislative Brief provided by The Gardner Group is not intended to be exhaustive nor should any discussion or opinions beconstrued as legal advice. Readers should contact legal counsel for legal advice.© 2012-2013 Zywave, Inc. All rights reserved.4/12, 2/132EXCHANGE FUNCTIONS AND ROLESThe Exchanges will perform a variety of functions, including: Certifying health plans as qualified health plans (QHPs) to be offered in the Exchange; Operating a website to facilitate comparisons among QHPs for consumers; Operating a toll-free hotline for consumer support, providing grant funding to entities called “Navigators” forconsumer assistance and conducting consumer outreach and education; Determining eligibility of consumers for enrollment in QHPs and for insurance affordability programs (such aspremium tax credits, Medicaid and CHIP state-established basic health plans); and Facilitating the enrollment of consumers in QHPs.States have flexibility in determining the design of their Exchanges. For example, states may decide whether theirExchanges will be operated by a non-profit organization or a public agency. States may also select the number andtype of health plans available in their Exchanges and may determine some of the standards for QHPs, including thedefinition of required essential health benefits. In addition, states have flexibility to determine a role for agents andbrokers, including the use of online brokers, in connection with the Exchanges.Navigator ProgramThe Navigator program is an essential component of an Exchange. Navigators will help consumers learn about andchoose health coverage through the Exchanges. For example, a Navigator will provide information regarding varioushealth programs and will provide information in a manner that is culturally and linguistically appropriate to the needsof the populations being served by the Exchange.States have flexibility to design their Navigator programs, including selecting the entities that will serve as Navigators,within the framework contained in HHS’s final regulations. The final regulations provide the following guidance for theNavigator program: Exchanges must have at least two entities serve as Navigators, and one of the entities must be a communityand consumer-focused nonprofit group. Exchanges must have conflict of interest standards for Navigators. These standards must prohibit a Navigatorfrom receiving any kind of compensation from a health insurance or stop loss insurance issuer for enrollingindividuals in health insurance plans. This prohibition applies to both plans offered through an Exchange, andplans offered outside of an Exchange. However, Navigators who sell lines of insurance that are not health orstop loss insurance would not be prohibited from receiving consideration from the sale of those other lines ofinsurance while serving as Navigators, so long as they disclose this to consumers. Exchanges must have a set of training standards for Navigators to ensure expertise in the needs ofunderserved and vulnerable populations, eligibility and enrollment procedures, the range of QHPs and publicprograms and the Exchange’s privacy and security standards.Exchanges will award grants to Navigators in FFEs and state partnership Exchanges. On April 9, 2013, HHS announcedthat this funding is now available. Applications are due by June 7, 2013, and must be submitted electronically.Brokers and AgentsStates have flexibility to determine what role brokers and agents will serve in their Exchanges. Licensed brokers andagents are eligible to serve as Navigators under the final regulations. However, the responsibilities of a Navigatordiffer from the traditional activities of a broker or agent. Also, the conflict of interest standards would preclude brokers
  3. 3. Health Insurance ExchangesThis Legislative Brief provided by The Gardner Group is not intended to be exhaustive nor should any discussion or opinions beconstrued as legal advice. Readers should contact legal counsel for legal advice.© 2012-2013 Zywave, Inc. All rights reserved.4/12, 2/133and agents who are serving as Navigators from receiving compensation from an issuer for selling health or stop lossinsurance. Thus, the Navigator role may not be the best fit for brokers and agents under the Exchanges.The final regulations give states the option of permitting brokers and agents to enroll individuals and employers inQHPs offered through the Exchanges. In addition, the regulations permit brokers to assist individuals in applying foradvance premium tax credits and cost-sharing reductions for QHPs. Exchanges may provide information about brokersand agents directly on their websites for the convenience of consumers seeking insurance through the Exchange.If an Exchange works with brokers or agents, there must be an agreement in place that requires the brokers andagents to: Register with the Exchange in advance of enrolling individuals; Receive training on the range of QHP options and insurance affordability programs; and Comply with the Exchange’s privacy and security standards.There is no overall prohibition on agents or brokers not acting as Navigators receiving commissions through anExchange. Each state that is operating its own Exchange has the authority to determine how agents and brokers willbe involved in the Exchange and how compensation will be structured. HHS has also established a standard for QHPcertification in FFEs ensuring that issuers pay the same broker compensation for QHPs in the FFE or FF-SHOP that theissuer pays for similar plans in the outside market.States are permitted to use online brokers and agents for the enrollment process. Online brokers may not providefinancial incentives (such as rebates or giveaways) that could potentially steer individuals to a specific QHP or issuer.Online brokers must also provide consumers with the ability to withdraw from the process at any time and enrolldirectly through an Exchange.PRIVATE EXCHANGESWhile ACA’s state-based Exchanges are scheduled to be effective in 2014, some private health insurance exchangestargeted at employers are already operational. As a growing trend, these private exchanges create a marketplace foremployees to compare options and shop for coverage. At the same time, they allow private health care companies tomarket their products at a single location to clients throughout the country.The private exchanges may be most useful to larger employers that will not be eligible to use ACA’s Exchanges until2017 at the earliest.Some employers may use the private exchanges to offer employees a defined contribution model of purchasing healthcoverage. Under this model, employers provide employees with a lump sum amount and direct them to an exchangewhere they can select a health plan from a large array of options. However, beginning in 2014, employers with morethan 50 workers may be subject to a penalty under ACA if they do not provide health coverage to their employees, orif the health coverage they offer is not affordable or does not provide minimum value.ADDITIONAL RESOURCESHHS’s final regulations on Exchanges are available at: www.gpo.gov/fdsys/pkg/FR-2012-03-27/pdf/2012-6125.pdf.More information on the Exchanges is available through www.healthcare.gov and http://cciio.cms.gov/index.html.
  4. 4. Health Insurance ExchangesThis Legislative Brief provided by The Gardner Group is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readersshould contact legal counsel for legal advice.© 2012 Zywave, Inc. All rights reserved.4/12, EEM 12/124