By Stephen H. Miller, CEBS
On March 12, 2012, the U.S. Department of Health and Human Services (HHS) published a final rule outlining a framework for state-run health care exchanges under the Patient Protection and Affordable Care Act (PPACA). The exchanges are intended to offer private health insurance options that meet government standards and to coordinate the eligibility of low-income individuals for premium tax credits and other assistance.
“These policies give states the flexibility they need to design an exchange that works for them,” said HHS Secretary Kathleen Sebelius in a released statement. “These new marketplaces will offer Americans one-stop shopping for health insurance where insurers will compete for your business. More competition will drive down costs and exchanges will give individuals and small businesses the same purchasing power big businesses have today.”
State-run exchanges are scheduled to become available by January 2014, with the federal government stepping in to run exchanges for states that are not ready. For 2014 and 2015, states can decide whether to include businesses with 100 or fewer or 50 or fewer employees in their exchange. In 2016, all businesses with 100 or fewer employees must be able to purchase insurance through these exchanges.
The exchanges have the option of including employers with more than 100 employees beginning in 2017.
The final rule allows states to decide whether their exchange should be operated by a nonprofit organization or a public agency, how to select plans to participate and whether to partner with HHS for some key functions. In addition, it addresses how small businesses can get coverage through the Small Business Health Options Program (SHOP), discussed in the box below.
Exchanges that are run by independent agencies or nonprofits must have governance principles that include consumer representation and that ensure freedom from conflicts of interest and promote ethical and financial disclosure standards, according to the final rule, which includes standards for:
• The establishment and operation of an exchange.
• Health insurance plans that participate in an exchange.
• Determinations of an individual’s eligibility to enroll in exchange health plans and in insurance affordability programs.
• Enrollment in health plans through exchanges.
• Employer eligibility for and participation in SHOP.
Exchanges will perform a variety of functions according to the final rule, including:
• Certifying health plans as “qualified health plans” to be offered in the exchange.
• Operating a website to facilitate comparisons among qualified health plans for consumers.
• Operating a toll-free hotline for consumer support, providing grant funding to entities called “navigators” for consumer assistance and conducting outreach and education to consumers regarding the exchange.
• Determining eligibility of consumers for enrollment in qualified health plans and for insurance affordability programs: premium tax credits, Medicaid, Children's Health Insurance Program (CHIP) and state Basic Health Plan options under the PPACA.
Qualified Health Plans
Health plans offered through an exchange must be certified as “qualified health plans.” To be certified by the exchange, health plans must meet minimum standards that are defined primarily in the law. In addition, exchanges can establish additional standards for health plans. For example, exchanges have flexibility on the:
• Number and type of health plan choices. The final rule allows exchanges to work with health insurers on structuring qualified health plan choices that are in the best interest of their customers. This could mean that the exchange allows any health plan meeting the standards to participate or that the exchange creates a competitive process for health plans to gain access to customers on the exchange.
• Standards for health plans. The final rule allows exchanges, working with state insurance departments, to set standards to ensure that each qualified health plan gives consumers access to a variety of providers within a reasonable amount of time. Exchanges will establish marketing standards to make sure that qualified health plans do not market plans in a way that discriminates against people with illnesses.
Small Business Health Options Program (SHOP)
Coverage choices under the Small Business Health Options Program (SHOP) are set to begin in 2014 on some state-run exchanges and in 2015 for all state- and federal-run exchanges.
As described in a March 2013 proposed rule and in an earlier HHS factsheet, the program will allow employers to choose the level of coverage they will provide and to offer their employees choices among qualified health plans within that level of coverage. This will let employers offer plans from multiple insurers but receive a single bill and write a single check.
Exchanges will decide how their SHOP is structured. The final rule provides flexibility with regard to:
• Size of small businesses that can participate in a SHOP. States can set the size of the small group market at 1 to 50 or 1 to 100 employees until 2016. In 2016, employers with between 1 and 100 employees can participate in a SHOP. And, starting in 2017, states have the option to let businesses with more than 100 employees buy large group coverage through the SHOP.
• Structure of choices for small businesses. Exchanges can choose to offer employers additional ways to provide coverage, including allowing their employees to choose any plan in all levels of coverage or a traditional “employer choice” offer of a single plan.
Starting in 2015 for all public exchanges (state-run exchanges have option of launching SHOP in 2014), small employers purchasing coverage through a SHOP might be eligible for a tax credit of up to 50 percent of their premium payments if they have 25 or fewer employees, pay employees an average annual wage of less than $50,000, offer all full-time employees coverage and pay at least 50 percent of the premium.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
State Insurance Exchanges: What Employers Need to Know, SHRM Online Benefits Discipline, March 2012
Large Employers Weigh Future Use of Private Exchanges, SHRM Online Benefits Discipline, March 2012
States Receive More Flexibility, Resources to Create Insurance Exchanges, SHRM Online Benefits Discipline, December 2011
Agencies Issue Proposed Rules on State Exchanges, Premium Subsidies, SHRM Online Benefits Discipline, August 2011
Health Care Exchanges Will Alter Competition and Choice, HR News, March 2010
SHRM Online Benefits DisciplineSHRM Online Health Care Reform Resource Page