Federal guidance needed as deadline approaches
Under the Patient Protection and Affordable Care Act (PPACA), American Health Benefit Exchanges (exchanges) must be up and running by Jan. 1, 2014. These exchanges are designed to facilitate the purchase of individual health insurance coverage for those who qualify. In addition, the PPACA also requires the creation of Small Business Health Options Programs (SHOPs) to enable small businesses with up to 100 employees to purchase coverage.
States, including the District of Columbia, and U.S. territories, can choose to operate an exchange that includes a SHOP, or to run two separate exchanges for individuals and businesses. States can also choose to establish a single exchange, multiple exchanges within a geographic area, a multistate exchange, or a partnership exchange with the federal government.
Exchanges must be run within a government agency (eg, state department of health) or a nonprofit entity. States that intend to establish an exchange must notify the U.S. Department of Health and Human Services (HHS) and submit a plan detailing how they will meet the 2014 deadline for its implementation and operation. HHS will determine, by Jan. 1, 2013, if a state’s plan will enable it to operate a qualified exchange by 2014. If a state is unable to meet the 2014 deadline of running a fully operational exchange, HHS will intervene and run the exchange. In addition, if a state chooses not to create its own exchange, HHS will intervene.
The PPACA provided states with a basic framework for establishing plans to operate an exchange. According to the law, public and private stakeholders must collaborate to create a transparent marketplace that offers coverage to individuals and small businesses (with up to 100 workers) via a web portal and a customer assistance hotline. The exchange must also ensure an ample choice of providers, including some that serve low-income individuals; be able to screen for eligibility; and use a standardized enrollment form with multiple enrollment periods for Medicaid, the Children’s Health Insurance Program (CHIP), and other public and nonpublic plans. In addition, exchanges must meet marketing requirements and insurance market regulations to ensure that they do not discriminate based on age or deny coverage based on pre-existing conditions.
A proposed rule released in July provided some additional guidance on structuring SHOPs, certifying health plans, and ensuring premium stability for plans and enrollees in the exchange. (See “Second Look—Advocacy,” AAOS Now August 2011.)
Types of exchanges
States have several models to choose from when establishing an exchange. States can either select a model in its entirety or create a hybrid model. The following are types of exchanges.
- A clearinghouse exchange can be compared to the widely used purchasing website, CraigslistTM. Like Craigslist, a clearinghouse provides purchasers with a variety of options—in this case, insurance plans—from which to choose. Purchasers can choose a plan that best suits their needs based on cost, quality, accessibility, and service. In clearinghouse models, the highest quality, cost-efficient plans would control the market and obtain the most purchasers.
- Under the active purchaser model, states establish criteria for participating plans. States then negotiate and contract with insurers that meet the qualifications.
- A hybrid model uses elements from the clearinghouse and active purchaser models to meet the needs of providers and small businesses within a state or multistate exchange.
- In the partnership model, the state shares responsibility with the federal government (HHS) for running an exchange, although the state will have the opportunity to fully take over the exchange. Under the partnership model, HHS and the state operate different functions of the exchange. States can choose from several collaborative options. HHS is expected to provide more details on this model.
According to the PPACA, exchanges must be self-sustaining by Jan. 1, 2015. The federal government is currently offering planning, establishment, and innovator grants to states to cover the initial costs of constructing an exchange.
Planning grants provide states with funds to evaluate and determine whether or not to establish exchanges, while establishment grants provides financing to states to develop their own exchanges, and innovator grants offer funding for states to develop the information technology systems required to run an exchange. Thus far, 49 states and the District of Columbia have received planning grants, 16 states have received establishment grants, and seven states have received innovator grants. HHS expects to award more grants in the coming months.
Both Massachusetts and Utah had established exchanges prior to the passage of the PPACA. Both states will have to alter their exchanges to meet the PPACA’s mandated requirements and receive federal certification. States may choose to emulate either of these models or choose qualities from them to establish a unique model.
The Massachusetts Health Connector, established in 2006, acts as a hybrid active purchaser. The Connector is a privately operated website governed by a board of public and private stakeholders. It offers coverage to both individuals and businesses. Insurance providers must meet strict requirements to participate in the Connector, including a standardized benefits package, which makes it easy for purchasers to compare plan offerings and costs.
The Utah Health Exchange, established in 2009 for small businesses, uses the clearinghouse model. The Utah Exchange is operated by the state office of consumer health services and uses an Internet portal to connect businesses with health insurers and plan information. Although the Exchange does not require participating plans to meet strict qualifications, it runs a defined contribution market to facilitate cost predictability for small businesses. The exchange is monitored by a risk adjuster board and an advisory board of public and private stakeholders.
Current state exchange efforts
Following the PPACA’s passage, 11 states enacted laws establishing exchanges, four states declared their intent to establish an exchange, and three states have designated a committee or panel to study the establishment of an exchange (Table 1).
But frustration levels in the states are high. In September 2011, the National Governors Association hosted a 2-day workshop focusing on how states are managing the PPACA’s requirements, including the expansion of Medicaid programs and the creation of health insurance exchanges. Meeting participants agreed that the absence of definition and clarity regarding the components of a certified Exchange is hampering states from making vital decisions necessary to ensure they meet the 2014 deadline.
Governors face the dilemma of trying to meet the rigid federal deadlines without knowing the final elements each exchange must have. They continue, not because they have sufficient information, but because failure to proceed will ultimately mandate federal intervention.
States are especially concerned with the quantity and cost of the information technology (IT) required to run an exchange and to develop the data center that individuals will use to determine their eligibility for plans and/or subsidies. IT design and implementation requires both time and staffing and usually costs more than expected—bad news for governors who already have had to tighten their budgets.
Although some states would not mind a federal takeover of their exchanges, others are pleading for clarity and design details so that they can create their own exchanges. Until those specifics are clarified, they will continue to progress on an uncertain, and potentially destructive, course.
Madeleine Lovette is the communications specialist in the AAOS office of government relations. She can be reached at email@example.com