On May 16, 2012, the Department of Health and Human Services moved three steps closer to the implementation of the Affordable Care Act’s health insurance exchanges, which will happen on January 1, 2014. First, HHS announced the award of 5 new level 1 exchange establishment grants (Illinois, Nevada, Oregon, South Dakota, and Tennessee) and one new level 2 exchange establishment grant (Washington state), totaling $188 million and bringing to 34 the total number of states (plus the District of Columbia) that have received exchange establishment grants.
Second, HHS released a guidance describing in greater detail how the federally facilitated exchange (FFE) will function. The issuance of this guidance highlights the fact that there will be an operating exchange in every state in 2014, whether it is operated by the federal or by the state government.
Third, HHS issued a Draft Blueprint for Approval of Affordable State-Based and State Partnership Insurance Exchanges, setting out what states will need to do that seek to operate their own exchange or to operate an exchange in partnership with the federal government. States have until November 16, 2012 to notify HHS whether they want a state exchange, a partnership exchange, or a federally facilitated exchange.
Section 1321 of the ACA asks the states to establish exchanges, but charges HHS with the responsibility to establish exchanges in states that choose not to do so. The Guidance describes how HHS intends to carry out this responsibility. Because establishing the FFE is a matter of internal organization, procedure, and policy, HHS does not need to proceed through notice and comment rulemaking, although HHS is requesting comments on the Guidance. A FFE will be established for each state that HHS determines by January 1, 2013, will not have a state exchange operable by January 1, 2014.
Principles For Federally Facilitated Exchanges
The Guidance articulates four principles for the FFE:
- Ensuring that consumers in all 50 states have access to high-quality, affordable health coverage options through an exchange and experience a positive and seamless consumer experience;
- Establishing parity in markets inside and outside of the exchange and minimizing burdens on insurers while protecting consumers;
- Building on state policies, capabilities, and infrastructure to the extent a state permits; and
- Engaging with the states and with local stakeholders in each state to inform and support decision-making.
The Guidance also describes partnership exchanges, in which the federal government runs and is responsible for the exchange, but the state takes responsibility for either plan management, consumer assistance, or both. A state that takes on plan management functions must assume responsibility for all qualified health plan (QHP) certification, recertification, and decertification functions; perform QHP issuer account management and oversight and monitoring (including oversight of marketing); collect necessary data from issuers; verify accreditation status; and handle quality data, disclosure, and rating functions. States that opt to handle consumer assistance in a partnership exchange must support, administer and oversee the Navigator program and provide other in-person assistance to consumers.
HHS retains legal responsibility for partnership exchanges, including authority over inherently governmental functions carried out by a state in a partnership exchange. States electing to establish partnership exchanges can use exchange grant funding to do so and can also use the partnership exchange as a transitional stage to a state exchange.
All Qualified Insurers May Participate In FFEs Initially, But Selective Contracting Remains A Later Option
In states in which a pure FFE is established, the exchange will rely on state insurance departments to carry out their traditional regulatory functions. FFEs, however, will be responsible for exchange-specific functions, including review of compliance with QHP certification standards not addressed by state licensure law. For the first year of exchange operation, 2014, HHS has determined to permit all health plans that meet QHP standards to participate in the exchange to maximize health plan participation and consumer choice. HHS states that it will analyze the certification process during that year, however, and may “identify improvements or changes to this process going forward” — that is, change to an active purchaser or selective contracting model.
Moreover, the FFE must determine that health plans meet all QHP standards to participate. A “meaningful difference” requirement allows HHS to ensure that there are meaningful differences across QHPs offered by a single issuer, and thus a manageable number of plans. HHS will conduct plan-level analysis to ensure that benefit designs are not discriminatory and will review new rates and rate increases for reasonableness.
The ACA requires that QHPs be accredited, implement quality improvement strategies, enhance patient safety through certain contracting requirements, and publicly report patient data. It also requires HHS to develop and administer plan rating and enrollee satisfaction survey systems. The Guidance announces that HHS will take a “phased approach” to implementing these requirements. HHS intends to provisionally recognize NCQA and URAC as accrediting agencies, and to accept existing URAC or NAQA commercial or Medicaid plan accreditation for QHP certification purposes. Unaccredited plans must attain accreditation within two years.
By the fourth year of certification, all QHPs must be accredited as QHPs and submit performance data. Quality reporting requirements will be become effective in 2016 and quality rating will be available for 2017 open enrollment. In the interim, the FFE will display Consumer Assessments of Healthcare Providers Systems (CAHPS) data where available. It is disappointing that implementation of ACA quality requirements are put off until 2016, but HHS apparently decided it needed to establish priorities and quality failed to make the cut.
Making eligibility determinations for affordability programs and enrolling individuals in QHPs is an essential exchange function and will be carried out by the FFE. Regardless of whether states play any role in running exchanges, state Medicaid programs will need to coordinate with the exchange (unless a state decides to opt out of Medicaid as well). The FFE can either make Medicaid and CHIP eligibility determinations for a state or it can “assess” eligibility for Medicaid and CHIP based on modified adjusted gross household income (MAGI), and transmit the assessment to the state, which will make the final determination. States will also have to work with the FFE to verify Medicaid eligibility and provide access to state databases to verify wage and employment information.
Revisiting The Idea Of Allowing Private Entities To Determine Medicaid Eligibility
In an important development, the Guidance announces in a footnote that HHS will revisit a provision in the exchange final rule that would have allowed private entities, such as nonprofit exchanges or private contractors, to make Medicaid eligibility determinations. As has always previously been the case, final Medicaid determinations will have to be made by a governmental entity, although private entities may assist in eligibility evaluation. Consumer organizations had been surprised and upset by the provision allowing private Medicaid eligibility determinations in the final rule, which has apparently now been abandoned.
The FFE will provide a call center and other exchange customer services. FFEs will award grants to establish Navigator programs to assist consumers in understanding insurance affordability programs, comparing and selecting QHPs, and interacting with QHP issuers, and otherwise provide public education and outreach. Where permitted by state law, agents and brokers, including web-based agents and brokers, will be allowed to enroll individuals in QHPs, although the actual enrollment must be done “through an Exchange,” as required by the ACA.
Finally, the FFE will run a SHOP exchange, fulfilling the SHOP functions set out in the final rule. The Guidance clarifies that the FFE will adopt state definitions of small group for 2014 and 2015, which means that “small group” will be defined in most FFEs as groups with 50 or fewer employees rather than 100 or fewer. The FFE will be funded by user fees collected from participating issuers.
The Draft Blueprint
The Draft Blueprint, also published on May 16, describes state, partnership, and FFE exchange alternatives. A state that chooses to establish a state exchange can still delegate to the federal government responsibility for making premium tax credit and cost-sharing reduction payment eligibility and individual responsibility requirement exemption determinations, and for running the reinsurance and risk adjustment programs. States that elect partnership exchanges can, as previously noted, take responsibility for all plan management or consumer assistance functions, or both, and can run the reinsurance program. States with FFEs can still opt to run the reinsurance program.
States that decide to have a state or a partnership exchange running on January 1, 2014, must submit a declaration letter, signed by the state’s governor, and file an exchange application by November 16, 2012. States that do not meet all exchange requirements by January 1, 2013 but that are making significant progress toward meeting these requirements and will be operationally ready by October 1, 2013, when open enrollment begins, can be conditionally approved. The declaration letter must indicate the state’s intentions with respect to the exchange, and also with respect to running the reinsurance and risk adjustment programs. HHS requests that states notify it as soon as possible as to their intentions.
The Blueprint application sets out very clearly the information that states that intend to run their own exchanges or to participate in partnership exchanges must provide to the federal government. These requirements track closely the final rule, and also dovetail with the information that states are providing for obtaining establishment grants. The Blueprint lists not only requirements that must be met but also supporting documentation that must be provided. It provides for testing and validation of exchange readiness, as well as for on-site or virtual assessments and verifications by HHS. A public transparency section of the Blueprint lists a number of sections of a state’s application that must be made publicly available.
The application requirements contain few surprises. One issue they do clarify, however, is that a state must submit either a copy of legislation establishing an exchange or of legislation that gives the executive specific or general authority to establish an exchange, plus a statement by legal counsel of the applicant, the governor’s legal counsel, or the state attorney general certifying that legal authority exists to establish an exchange.