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HHS Guidance Includes Draft Blueprint for State-based Insurance Exchanges
Practical Law Legal Update 1-519-4988 (Approx. 4 pages)
HHS Guidance Includes Draft Blueprint for State-based Insurance Exchanges
by PLC Employee Benefits & Executive Compensation
| Published on 18 May 2012 • USA (National/Federal) |
The Department of Health and Human Services (HHS) released new guidance on the health insurance exchanges established by the Affordable Care Act (ACA), including state-by-state information on grants to establish insurance exchanges, a draft blueprint for approval of state-based and state partnership insurance exchanges, and general guidance on federally-facilitated exchanges.
On May 16, 2012, HHS issued new guidance on the health insurance exchanges required to be established under the Affordable Care Act (ACA). In general, the exchanges are intended to:
- Facilitate the purchase of qualified health plans (QHPs).
- Provide for a Small Business Health Options Program (SHOP) through which certain small employers can enroll their employees in QHPs offered in the small group market.
For more information on the exchanges, see Practice Note, The Health Insurance Exchange and Related Requirements under the ACA. Among the new materials are:
The guidance sets out the following types of exchanges:
- State-based Exchanges. Under this model, the state operates all exchange activities, but the state can use federal government services for certain activities (for example, premium tax credit and cost-sharing reduction determinations).
- Federally-facilitated Exchanges (FFEs). HHS will operate an FFE in any state that chooses not to operate a state-based exchange. As part of an FFE, states may opt to participate in a state partnership exchange under which the state performs activities involving plan management, consumer assistance or both.
Draft Blueprint Includes Rules for State-based Exchanges and State Partnership Exchanges
To receive HHS approval or conditional approval for a state-based exchange, the state must complete and submit an exchange blueprint that documents how the exchange will meet requirements associated with the chosen model. HHS' draft blueprint provides guidance for this process, including:
- The required content for an exchange declaration letter. For example, state-based exchanges must indicate whether they intend to administer their own reinsurance program by contracting with a nonprofit reinsurance entity.
- An application for approval of affordable state-based exchanges, including a roadmap for completing an online exchange application.
The declaration letter and exchange application requirements also apply for state partnership exchanges. For the 2014 plan year, states must submit their completed exchange blueprint by November 16, 2012.
HHS will grant conditional approval for state-based exchanges that:
- Do not meet all exchange approval requirements on January 1, 2013.
- Are making significant progress toward these requirements and will be operationally ready for the first open enrollment period under the exchanges.
Key Functions of Federally-facilitated Exchanges
Under the ACA, HHS is instructed to establish an FFE in any state that:
- Does not choose to establish a state-based exchange by the January 1, 2014, statutory deadline.
- Will not have an operable exchange in place by 2014, as determined by January 1, 2013.
For states that do not have a state partnership, the FFE will administer all exchange functions, including:
- Certifying, recertifying and decertifying QHPs.
- Determining individuals' eligibility for QHP enrollment and insurance affordability programs.
The guidance on FFEs discusses HHS' approach to implementing FFEs in states where a state-based exchange is not in operation. Additionally, the guidance addresses:
- How states can partner with HHS to implement selected functions in an FFE.
- Plan management functions to be performed by an FFE, including procedures for:
- requesting reconsideration of QHP certification decisions; and
- decertification, for QHPs that fall out of compliance with QHP certification standards.
The FFE guidance notes that:
- States will continue to carry out their traditional regulatory functions regarding insurers and health plans.
- Insurers that want to offer QHPs through an FFE must satisfy applicable state laws and requirements, in addition to QHP certification rules.
New Grants Awarded; Map Tool Reflects Awards in Each State
A US map tool available on the HHS website provides information on the grants to states for establishing insurance exchanges. The map is color-coded to reflect the types of grants awarded to each state. The grants include:
- Level One grants, which provide one year of funding to those states that have begun the exchange-implementation process. HHS announced on May 16, 2012, that Level One establishment grants were awarded to Illinois, Nevada, Oregon, South Dakota and Tennessee.
- Level Two grants, which provide multiple-year funding to those states that are further along in the exchange-building process. HHS announced that Washington State was recently awarded a Level Two establishment grant.
The map also indicates how each state plans to use its grants. In Iowa, for example, the map indicates that Level One funding will be used (in part) to conduct insurance market research and policy analysis for designing that state's exchange.
Practical Implications
The bulk of this latest exchange-related guidance addresses the role of the federally-facilitated exchange and specific requirements for the states. However, the guidance may also be of general interest to employers that currently provide health insurance coverage to their employees and are considering whether to continue offering this coverage when the exchanges become operational in 2014. The guidance notes that open enrollment for the initial 2014 coverage year under the exchanges will begin on October 1, 2013.