State Health Insurance Exchanges
The Affordable Care Act mandates that states operate insurance exchanges to enable every citizen across the country to purchase or renew health insurance. The reform legislation provides federal support for “necessary” expenses so states can plan, establish and operate the exchanges for the first year of 2014. Although it specifies several conditions that insurance products offered through the exchange must meet, it allows the states great flexibility in determining how they will regulate and how much reform they will introduce for their state insurance market. Read about what health insurance exchanges can accomplish, how state Medicaid programs will be involved and what decisions states are facing in 2011 and 2012 related to health insurance exchanges.
- Every person or employer who applies will be issued insurance that can be renewed regardless of health or disease status.
- Insurance will be priced through adjusted community rating to make it reasonably affordable for both older people and younger people. Insurance premiums will vary according to the geographic area, family composition or age, but not the health care costs, of the group or individual applying for insurance.
- The exchange will provide public education and outreach on the health insurance plans offered and health reform in general.
- Every person will obtain health insurance coverage, so the insurance products offered through the exchange will be affordable to households that are not highly subsidized by the government or an employer.
- Through increased competition, individuals and small employers will be able to obtain more affordable health insurance coverage.
- States will help people get health insurance coverage via either the state exchange or Medicaid through an integrated enrollment process.
- Federal subsidies on a sliding scale will be available through the exchange to make premiums affordable.
- States’ insurance websites will offer a single portal for individuals to determine their eligibility for and receive Medicaid, Children’s Health Insurance Program, known as CHIP, or choose another insurance coverage via the exchange. Medicaid agencies will need to collect income information from applicants so they can determine eligibility for the state-supported and subsidized insurance programs. New information technology tools for state Medicaid agencies will be required.
- State insurance departments and state Medicaid agencies, which generally work independently of each other, will need to develop these systems and procedures cooperatively.
- Health exchanges will enable continuity of insurance coverage, which is often lacking in Medicaid programs where small changes in family income can make people ineligible for coverage and eligibility can change on a month-to-month basis. Annual coverage would provide relief to about a third of the Medicaid beneficiaries who now lose eligibility within the course of a year.
- As each state develops its own eligibility procedures integrating Medicaid and the exchanges, they may lose some of the standardization now in place across state Medicaid programs. In addition, states may need to change how Medicaid eligibility is integrated with other human services programs in the state.
- Medicaid enrollees are often served by Medicaidonly health plans. These plans will need to determine whether they can offer continuing coverage to those who phase out of Medicaid eligibility and whether they are capable of collecting insurance premiums for non-Medicaid coverage.
- New federal funding for information technology developments may enable Medicaid programs to resolve administrative problems related to antiquated eligibility systems and complex definitions of income, as well as customer service for Medicaid members. Kansas, Maryland, New York, Oklahoma, Oregon, Wisconsin and a consortium of New England states will receive a total of approximately $241 million in federal funds to develop exchange IT models that can be adopted and tailored by other states.3
What decisions about exchanges do states need to make now? Regardless of what happens with the legal challenges to the Affordable Care Act, states need to act on these areas in 2011 to plan for the exchanges:
- State vs. federal: Will the state run the exchange or will officials cede control to the federal government?
- Authority: For the state exchange, states can establish the authority through legislation (California Assembly bill and California Senate bill) or executive order (as in Indiana). Model legislation is available from the National Association of Insurance Commissioners.
- Governance: Determining the governing body for the state exchange will influence how it will interact with existing state agencies, particularly Medicaid and the department of insurance. The options for governance include an existing state agency such as Medicaid or department of insurance, a new state agency, a not-for-profit association or a new quasi-governmental entity.4
- Stand-Alone Exchange—Competitive: A state public authority not in direct line of command of the governor, similar to the models used in California and Massachusetts. Under this model, health insurance plans would compete for participation in the exchange.
- Stand-Alone Exchange—Any Willing Health Plan: Similar to the previous model, this exchange would be open to any health insurance plan that would want to offer coverage in a state.
- Medicaid Exchange: Under this model, the state Medicaid program would be integrated with the exchange, and offerings would be very closely tied in with the Medicaid program.
- Integrated Super Agency: This option would include the state Medicaid recipients, state employees and teachers in one large pool for health insurance exchange purposes. Oregon uses this approach and already serves more than 1 million people.
- Policy goals: What are the exchange policy goals? What should the exchange accomplish, and should there be one or multiple exchanges? What information system changes will be needed to accomplish these goals? What regulatory procedures need to be developed?
- State vs. regional (multi-state): Should the state join a consortium of neighboring states to operate the exchange or certain aspects of the exchange’s activities?
- Transparency and sources of funding: How much information will be transparent? Will negotiations between the exchange and brokers be carried out in public? How will the exchange become selfsustaining in 2015 and will the exchange receive any state funding?
- Thou Shalt Nots: What will the legislation establishing the exchange prohibit up front? Will legislation grant latitude to exclude any insurer or select brokers?
- Timing: What temporary systems will be needed to meet the start date of Jan. 1, 2014, and what final solutions will be implemented at a later date?
- Determine individuals’ eligibility for Medicaid and the state Children’s Health Insurance Program, as well as for the federal tax credit for insurance premiums.
- Enroll individuals and businesses in the insurance coverage sold through the exchange.
- Specify the benefits insurance plans will cover and the range of cost sharing individuals will face.
- Select, review and contract with companies to offer insurance plans that can be purchased at approved premium rates.
- Conduct public education and outreach about the insurance plans offered as well as health reform in general.
- Webinars with Joel Ario, Office of Health Insurance Exchanges, Center for Consumer Exchanges, Department of Health and Human Services. February 2010.
- The Future Health Care Marketplace: Understanding Health Insurance Exchanges (presentation by Jon Kingsdale)
- Capitol Ideas: Health Insurance Exchanges
- Suggested State Legislation, included in the 2012 Volume:
National Academy for State Health Policy
- Refor(u)m Website, Implementing State Health Exchanges.
National Academy of Social Insurance.