The U.S. Department of Health and Human Services (HHS) has released its long-awaited final rule (pdf) implementing the new health insurance exchanges (“Exchanges”) established by the Affordable Care Act. The Exchanges, set to become operational as of January 1, 2014, are designed to work as state-based virtual health insurance marketplaces where individuals and small businesses can evaluate and purchase health insurance. The final rule, which combines the provisions of two previously-issued proposed rules, establishes the minimum standards that states must meet to create and operate an Exchange; sets forth the individual and employer eligibility and enrollment standards for the Exchange and insurance affordability programs; outlines minimum standards that health insurance issuers must meet to participate in an Exchange and offer qualified health plans (QHPs); provides basic standards that employers must meet to participate in the Small Business Health Options Program (SHOP); and establishes an online application and enrollment process for consumers. The rule does not set forth standards outlining the Exchange process for issuing certificates of exemption from the individual responsibility policy and payment; standards defining essential health benefits, actuarial value and other benefit design standards; and standards for Exchanges and QHP issuers related to quality. These issues will be addressed in separate regulations.

As discussed in a detailed fact sheet on the new rule, the final rule provides states with some flexibility as to how the Exchange will be structured and operated in each state. For example, states may choose to operate the Exchange as a non-profit entity, as an independent public agency, or as part of an existing state entity. Moreover, states are permitted to coordinate their efforts with other states through a regional Exchange program, or operate multiple Exchanges covering distinct regions within a state. States must present their plans for HHS approval by January 1, 2013. However, the final rule allows for conditional approval if the state is advanced in its preparation but cannot demonstrate complete readiness by January 1, 2013. The final rule also allows states that are not ready in time for 2014 to apply to operate the Exchange in 2015 or any subsequent year.

The Affordable Care Act requires that the health plans offered in the Exchanges meet a number of conditions to be certified as a QHP. Most of these requirements are outlined in the law itself. The rule does, however, provide that the Exchanges will have the authority to establish additional standards and determine whether a health plan meets these minimum requirements for participation. With respect to health plan standards, the rule authorizes the Exchanges to work with state insurance departments to establish standards:

to ensure that each qualified health plan gives consumers access to a variety of providers within a reasonable amount of time. Exchanges will also establish marketing standards to make sure that qualified health plans do not market plans in a way that discriminates against people with illnesses. It also gives Exchanges flexibility to set the timeframes in which health issuers need to become accredited for their quality performance (if they are not already), allowing consumers access to new and innovative health plans through the Exchange as they gain accreditation. And it amends the grace period policy to ensure that qualified health plans can provide seamless coverage without being left paying all the bills.

With respect to eligibility and enrollment, the rule creates an online system for consumers to use. Among other things, the HHS is in the process of developing a web portal “that will allow continued sharing of information, business process flows, and templates to aid states in the establishment of their Exchange.”

To assist employers, employees, and other Exchange participants in this process, the rule establishes standards for the creation of “Navigator” partnerships with Exchanges. Each state will be required to development partnerships with at least two Navigator organizations, one of which must be a community or consumer-focused non-profit organization. Exchanges will provide grants to these Navigators, charged with, among other tasks, conducting educational outreach about QHPs; providing impartial information about enrollment in qualified health plans, premium tax credits, and cost-sharing reductions; and providing referrals to a consumer assistance program or ombudsman in the case of grievances, complaints, or questions regarding health plans or coverage.

HHS-provided information on the Exchanges can be access here.

As for participation in the Small Business Health Options Program (SHOP), the final rule gives the Exchanges some leeway in determining how the program is structured. The SHOP is a program designed to enable small employers to enhance their health insurance purchasing power within the Exchanges. Businesses with up to 100 employees will be eligible to participant in the SHOP, although states can limit participation to businesses with up to 50 employees until 2016. As of 2017, states are authorized to allow businesses with more than 100 employees to participate. Employers with 25 or fewer employees who are paid an average of less than $50,000 will be eligible for a small business tax credit for up to 50% of the employer’s premium contributions toward employee coverage, provided that the employers offer all full-time employees coverage and pay at least 50% of their health premiums. The SHOP will allow employers to choose the level of coverage they will provide and offer employees a choice among all qualified health plans within that level of coverage. According to the fact sheet, employers can offer coverage from multiple insurers—just like larger companies and government employee plans—but get a single bill and write a single check. SHOP Exchanges can also allow employers to select a single plan to offer its employees. More information on the SHOP program is available here.

Portions of the rule are being issued on an interim final basis, and are therefore subject to comment. Provisions discussing the following areas are open for public input:

• §155.220(a)(3) – Related to the ability of a state to permit agents and brokers to assist qualified individuals in applying for advance payments of the premium tax credit and cost-sharing reductions for QHPs;
• §155.300(b) – Related to Medicaid and CHIP regulations;
• §155.302 – Related to options for conducting eligibility determinations;
• §155.305(g) – Related to eligibility standards for cost-sharing reductions;
• §155.310(e) – Related to timeliness standards for Exchange eligibility determinations;
• §155.315(g) – Related to verification for applicants with special circumstances;
• §155.340(d) – Related to timeliness standards for the transmission of information for the administration of advance payments of the premium tax credit and cost-sharing reductions; and
• §155.345(a) and §155.345(g) – Related to agreements between agencies administering insurance affordability programs

Comments must be submitted within 45 days of the rule’s publication in the Federal Register, which is slated for March 27, 2012. All comments must include the file code CMS–9989–F, and may be submitted electronically through the federal eRulemaking portal; by regular mail to: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9989-F, P.O. Box 8010, Baltimore, MD 21244-8010; or by express, overnight, or hand-delivery to: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9989-F, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

Photo credit: Devonyu