State insurance exchanges are probably the most important and challenging components the administration faces in implementing the Affordable Care Act. By 2014, individuals and small businesses need to have access to affordable coverage through a competitive health insurance market. Without a competitive marketplace, it will be difficult to enforce the Affordable Healthcare Act penalties for individuals. State based affordable insurance exchanges will provide individuals and small businesses a resource to compare affordable health insurance options. The administration intends to create competition between insurance companies allowing individuals and small businesses combined purchasing power to lower costs. States across the country have received federal grants to decide how they will run their affordable insurance exchanges. Here is what we know to date.
- These grants will be available through 2014 as states decide how they will meet the requirements.
- Many details of the Affordable Care Act are yet to be established by the Secretary of Health and Human Services.
- 49 states have received up to 1 million dollars in exchange planning grants to determine feasibility.
- Several states and a multi-state consortium led by the University of Massachusetts medical School have received over 241 million dollars in Early Innovator grants to develop model IT systems.
It would seem we have already spent millions of dollars to develop state insurance exchanges before we even have the details of how they will operate. I’ve worked in small business my whole life in operations and I can’t say that I have ever received money from investors without having a detailed operating model for a proposal.
The secretary of Health and Human Services plans to issue a template outlining the required components of an exchange. This exchange must be a government agency or non-profit entity that is established by the state. States may establish and operate their own exchange or states may choose to have the federal government facilitate an exchange on their behalf. States will be able to supplement the exchange components they already have with services offered by private sector contractors. The main functions of an exchange will include;
- Certifying, re-certifying, and de-certifying health plans offering coverage through the exchange by creating “Qualified Health Plans”
- Assigning ratings to each plan offered through state insurance exchanges on the basis of quality and price.
- Providing consumer information on qualified health plans in a standardized format.
- Creating a calculator to give consumers the ability to assess the cost of coverage after application of any tax credits or cost sharing reductions.
- Operate an internet website and toll-free telephone hotline offering comparative information on qualified health plans and the ability to apply for and purchase coverage.
- Determining eligibility for the affordable exchange, tax credits, cost sharing reductions for private insurance, other public health coverage programs, and assist with enrolling individuals in those programs.
- Determining exemption from requirements on individuals to carry health insurance, and granting approvals to individuals applying for hardship or other exemptions.
- Establishing a Navigator program to assist consumers in making choices about their healthcare options.
An exchange must certify a health plan before it can be sold through the exchange. A qualified health plan certification has two components.
- An exchange determines that the health plan meets minimum standards outlined in the Affordable Care Act.
- The exchange will then determine if offering the plan is in the interest of individuals and small business.
State insurance exchanges will develop qualifying standards such as quality and price to serve their populations. The Secretary of Health and Human Services will determine if a state exchange will be operational by January 1, 2014. There will most likely be an approval process to provide some flexibility to states and ensure the exchanges ability to operate within the minimum requirements. States will most likely submit a readiness assessment 12 months prior to operating. These exchanges will have the flexibility to determine the role of insurance agents and brokers and will determine their role working with individuals and small groups. Exchanges will be expected to be self-sustaining by 2015 using assessments and fees from issuers as a revenue stream to sustain operations. Other broad based funding (State Revenue) will be needed to sustain the exchange.
It’s a bit scary when you break it down and see the gaps in the implementation plan. The government (U.S. Citizens) has spent millions of dollars implementing the act without important details being defined, much less an efficient operating model to show the sustainability of these exchanges. State insurance exchanges are to be operational by 2014 and serve as a critical component to certify, deliver, and monitor many provisions of the Affordable Care Act. Many details will unfold in the coming months from the Secretary of health and Human Services. Many private entities will have a role in the states ability to operate their exchanges. One cannot help but ask the million dollar question…will they be sustainable? We’ll have to wait and see how states attempt to meet the requirements and what we are offered as a resource to avoid Affordable Healthcare Act penalties.