Affordable Insurance Exchanges: Information for Health Plans

On July 11, 2011, the U.S. Department of Health and Human Services (HHS) published two Notices of Proposed Rulemaking (NPRM). The first proposed rule, the Exchange NPRM, outlines a framework that will enable States to build Affordable Insurance Exchanges, new competitive marketplaces created under the Affordable Care Act. The second NPRM addresses standards related to reinsurance, risk corridors, and risk adjustment to provide stability in these new insurance markets. These proposed rules are a major step forward in implementing the Exchanges.

Starting in 2014, individuals and small businesses will have the same affordable insurance choices as Members of Congress and will be able to purchase private health insurance through State-based competitive marketplaces called Affordable Insurance Exchanges.  Exchanges will make it easy for individual consumers and small businesses to compare health plans, get answers to questions, and enroll in or offer to their employees a health insurance plan that meets their needs.  Individuals will be able to find out if they are eligible for advance payments of premium tax credits and cost sharing reductions or health programs like the Children’s Health Insurance Program (CHIP); small businesses will be eligible for a tax credit for coverage purchased for employees through the Exchange.

Exchanges offer Americans competition, choice, and clout. Insurance companies will compete for business on a level playing field, driving down costs. Exchanges will have the same purchasing clout as big businesses and will give consumers a choice of plans to fit their needs.

Overview

Affordable Insurance Exchanges will offer 25 million consumers health plan options that provide high quality, comprehensive coverage.  Exchanges will give consumers information that allows them to shop for qualified health plans and a simple, seamless way to enroll in a plan.  To offer insurance through an Exchange, health plans must be certified as Qualified Health Plans (QHPs).  To be certified, QHPs must meet minimum standards proposed in the rule but primarily set out in the law.  The proposed rule gives Exchanges significant flexibility in setting QHP standards that may reflect market conditions in a particular State.

Flexibility for Innovation

In the proposed Exchange rule, qualified health plans may have the flexibility to offer innovative plans to their customers, with the ability to respond and adapt to the types of care and access that their customers desire.  These offerings are likely to include Accountable Care Organizations, medical homes, and other innovative delivery models and network designs.  Specifically, the proposal offers:

• Flexibility on Plan Participation: The proposed rule allows Exchanges to work with local health insurers on structuring qualified health plan choices that are in the best interest of their enrollees.  This could mean that any health plan that meets the standards can participate, that plans with successful competitive bids can participate, or anywhere in between.  It also gives Exchanges flexibility on accreditation deadlines, allowing new and innovative health plans to sell through the Exchange as they gain accreditation.
  
• Flexibility on Plan’s Network Design:  The proposed rule allows Exchanges, working with State insurance departments, to set the standards to ensure that consumers have a choice of health care providers within each qualified health plan. 
  
• Flexibility on Plan’s Marketing Practices:  As with network adequacy standards, marketing standards would be set by States and Exchanges in the proposed rule.  This allows Exchanges to align their marketing standards and practices with other existing practices in a State.  However, qualified health plans cannot in their marketing discourage enrollment of individuals with significant health conditions or discriminate against potential enrollees on the basis of characteristics like race or age.

Protection from Market Uncertainty and Risk Selection

To help protect health plans offering coverage through the Exchange against risk selection and market uncertainty, the Affordable Care Act establishes three programs starting in 2014: temporary reinsurance and risk corridor programs  to give insurers financial stability as insurance market reforms begin, and a permanent risk adjustment program that will make additional payments to health plans to provide incentives to them to enroll higher-risk populations (e.g., those with chronic conditions) to more evenly spread the financial risk borne by health plans.  These programs will help ensure that health plans compete for coverage on the basis of price, quality and service.  The proposed rule implementing this policy:

• Simplifies reinsurance and risk corridors: Rather than a list of 50 to 100 conditions to set reinsurance policy, the proposed rule opts for a simpler system that helps offset the claims for high-cost enrollees, enabling health plans to offer premiums at a lower cost.  Similarly, since the risk corridor program, like reinsurance, is temporary, it proposes to align reporting and payment rules to ensure that the systems work to efficiently stabilize premiums as Exchanges are implemented.
  
• Balances standards for data for health plans with State flexibility in methodologies for risk adjustment:  Risk adjustment plays an ongoing role in ensuring a level playing field across health plans in a market, balancing payments if high-cost individuals disproportionately enroll in a plan.  The proposed rule provides the framework for a strong risk adjustment methodology, establishing a Federal methodology but allowing for States to propose effective alternatives.  In addition, we propose a standard set of data for risk adjustment, so that health insurers that offer qualified health plans in different States will not face different reporting requirements.  And while a Federal risk adjustment methodology would be developed, States could use an approved alternative.

Public Comment

Over the next 75 days, HHS is accepting public comment on the proposed rules in order to hear from States, consumers and other stakeholders. To facilitate that public comment process, HHS will be holding a series of regional meetings and listening sessions and expects to modify the proposal based on public comments received. Health insurance health plans are encouraged to submit comments through this process.

Posted on: July 11, 2011