Published 10/1/2011
Simit Pandya

Understanding the new Health Insurance Exchange regulations

More flexibility for states and payers; increased access for patients

In July 2011, the Centers for Medicare & Medicaid Services (CMS) published two proposed rules related to the development and implementation of state health insurance exchanges (HIX regulations).These exchanges, created under the Patient Protection and Affordable Care Act, are intended to be virtual marketplaces for buying and selling insurance in each state. Their goal is to give uninsured and underinsured individuals access to health insurance plans at competitive prices.

The first proposed rule outlines the federal requirements that states must meet if they elect to establish and operate an exchange, as well as standards related to selection and oversight of qualified health plans, standards for participation in the Small Business Health Options Program, and minimum requirements for health plans sold through the exchange. The second proposed rule establishes standards related to transitional state-based reinsurance programs for the individual health insurance market, minimum federal standards for a state-based risk adjustment program, and standards that health plans must meet related to a temporary federal risk corridors program. Stakeholders—including the American Association of Orthopaedic Surgeons (AAOS)—have until Sept. 28, 2011, to comment on these proposals.

Collectively, these programs are designed to ensure stable premiums and an equitable spread of financial risk across plans for high-cost enrollees. If a state fails to obtain approval for an exchange by 2013, the federal government will develop and run its own exchange in that state.

Cons and pros
Critics of the insurance exchanges concept fear that the federal government will implement burdensome regulations to the detriment of state governments.

Proponents, on the other hand, contend that the regulations offer states considerable flexibility in developing exchanges and determining which insurance plans will qualify for participation. For example, each state can structure its exchanges as a state-established nonprofit entity, an independent public agency, or as part of an existing state agency (Fig. 1).

A state can also choose to run its exchange in partnership with other states through a regional exchange, or it can operate subsidiary exchanges that cover areas within the state. States can also choose to develop their exchanges alone or in partnership with the federal government, to reduce duplication of effort and administrative burdens.

Health plan standards
The proposed rule also gives states substantial flexibility in establishing standards for qualified health plans that participate in the exchanges. It allows exchanges to work with local health insurers on structuring plans that are in the best interest of their enrollees. Hence, states could certify any health plan that meets minimum standards, only those offering the best benefits and prices that result from a successful competitive bidding process, or those that lie somewhere in between. Accreditation deadlines would also be flexible, enabling innovative health plans to be sold through the exchange as they are accredited.

The proposed health insurance exchange regulations directly affect the health insurance industry, but they may have little direct impact on providers. One provision within the regulations, however, requires that provider networks for qualified health plans include a sufficient number of essential community providers to serve predominantly low-income, medically underserved individuals. These entities will qualify for special pricing from prescription drug manufacturers and include children’s hospitals, federally qualified health centers, and community health centers.

Future CMS regulations are expected to cover issues of great importance to providers, including setting the standards for essential health benefits packages. The AAOS will focus efforts on ensuring that orthopaedic procedures are covered by qualified health plans as part of their essential benefits packages.

Simit Pandya is the orthopaedic quality institute specialist in the AAOS office of government relations. He can be reached at pandya@aaos.org