Just as the final tally was coming in for state decisions on health insurance exchanges, the Department of Health and Human Services sent an HIX FAQ to all 50 governors, trying to explain aspects of exchanges that've puzzled some state lawmakers and insurance regulators for months.
As of mid-December, 18 states and Washington D.C. have proposed creating their own exchanges, four have proposed state-federal partnerships, and the remaining 29 are likely to get federally-facilitated exchanges.
Some of HHS's FAQs are pretty straightforward and were noted in previous guidance, such as free use of the federal data hub for states. But there are still some final rules pending for rate review, multi-state plans and insurance mandates, and in some cases regulators are still struggling to interpret the law.
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One concern from states and insurers is exchange funding. For federally-facilitated exchanges, managed by the Center for Consumer Information and Insurance Oversight, the FAQ reiterated tentative plans to charge participating insurers a 3.5 percent premium fee, similar to current proposals from state exchange boards in California, Connecticut and elsewhere.
HHS welcomed states that will have federally-facilitated exchanges to provide some of the administrative and IT services, like data system interfaces and health plan licensing, noting the possibility for compensation.
Some Republican governrs are trying to avoid that altogether. Pennsylvania, for instance, has received – but doesn’t currently have plans to use – a $33 million federal HIX grant, and it's not clear what will happen to it. In the FAQ, HHS said only that states can still use and receive federal funding for state HIXs until 2014.
For the six state exchanges approved in early December, HHS said they can certify Medicaid bridge plans to be offered in the exchange — a way to reduce “churn” and ease transitions for people whose incomes fluctuate between eligibility for Medicaid and subsidized health plans. HHS says that Medicaid managed care organizations contracting with states can offer limited-enrollment plans through the exchange if they meet certification benchmarks.
Oregon’s HIX, called Cover Oregon, was one of the six approved and is one potential site for experimentation, with the state in the midst of a Medicaid managed care transition and home to a very competitive insurance market.
HHS’s FAQ includes 37 questions, touching on Medicaid issues as well, and it comes as pretty much every state with a Republican governor rejected a state-based HIX, with many citing a lack of adequate details on federal regulatory authority and spending requirements.
Some of those concerns are politically-driven, from lingering anti-ObamaCare activists, but there are still some ambiguities that HHS has to clarify, said Timothy Jost, a health law professor at Washington and Lee University.
For federal exchanges, HHS says that to “the greatest extent possible” it tends to preserve the "traditional responsibilities of state insurance departments” and rely on state rate review processes for certification of plans and approval of rates. “But of course there are states that don’t have any approval authority,” Jost said. “In those states, it seems to me that HHS is going to have to review the rates in some way, and I think they’re really hoping that most states establish at least a partnership exchange, so that they’re won’t be conflicts.”
Some federal and state statutes may need to be harmonized, and the agency is currently considering the extent to which state insurance rate reviews can serve as certifications for health plan qualification in federal exchanges.
A related issue involves how multi-state plans will function, and the potential for market distortions from adverse selection and risk allocation. The multi-state plans are administered by the Office of Personnel Management (OPM), directed by the Affordable Care Act to contract with at least two health plans (one a nonprofit) to offer in at least 31 states in 2014, with the goal of bringing new competition to state markets.
There's the potential, Jost said, for multi-state plans leading to adverse selection, favoring, say, young people buying lean plans. It will “require some fairly careful negotiations so that the OPM can fulfill its functions without stepping on any toes at the state level,” Jost said. The 122 pages of proposed rules for multi-state plans were recently published and are open for public comment.
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The law gives OPM some varying sceanrios for approving plans, depending on state laws. If the OPM's health plan requirements happen to be more lenient than laws in a given state, Jost said, there's a sort automatic default exempting state health plans from state rules.
“And obviously that’s a situation that nobody wants to get into, where state regulators are losing control of their insurance markets because licensed plans in the state are saying, 'Well, the multi-state plans don’t need to follow these rules, so we don’t either.'”
In an effort to produce some kind of standards amid the haze, the National Association of Insurance Commissioners has created a certification system called SERFF for health plans and states, allowing rate filing and review for both state insurance departments and the federal exchange.
“State insurance commissioners are very concerned that we not have separate rules for insurers that are playing in the same market,” Jost said.
Jost, an NAIC consumer representative, is also following details of the federal exchange’s consumer outreach and navigator functions, and the future role of brokers.
“At least one of the agent-broker organizations is lobbying very hard at the state level to adopt laws that would make it very difficult for navigators to function — that basically would prohibit navigators from doing anything that agents and brokers can legally do,” Jost said.
At the federal level, HHS is likely to leave many health organizations and observers wondering into the future. For instance, the federal exchange is going operate as an open marketplace in 2014. Thereafter, HHS says, the exchange could adopt the regulatory authority of an "active purchaser" and start negotiating rates with health plans.