States Moving on Health Insurance Exchanges

E-newsletter Issue #83 | Dec. 8, 2011

States are, by many accounts, “taking action to move the exchange ball down the field.”

That’s according to Steve Larsen, deputy administrator and director of the Center for Consumer Information and Insurance Oversight, Centers for Medicare & Medicaid Services, U.S. Department of Health and Human Services, who took part in a Dec. 6 webinar, “Health Exchanges: Understanding State Options and Deadlines,” sponsored by The Council of State Governments.

Twenty-eight states have received establishment grants that will help them set up the state-run health insurance exchanges under the Affordable Care Act. Under the law, states must receive approval for their exchange by Jan. 1, 2013, and have the exchanges ready for operation by Jan. 1, 2014.

The goals of the exchanges include expanding health insurance coverage; promoting competition in the marketplace; providing affordable options to those who couldn’t previously afford health insurance; and improving quality in the health care system.

The exchanges will be state-based competitive marketplaces that allow individuals and small businesses to compare qualified health plans; determine eligibility for tax credits for private insurance or health programs like the Children’s Health Insurance Program, or CHIP; and easily enroll in a qualified health insurance plan that meets their needs.

Larsen said HHS expects to release the application for approval of state-run exchanges in late summer/early fall of 2012. The department will provide technical assistance to states throughout the process to have the exchanges approved by the 2013 deadline.

 “We’ve been very encouraged with the level of activity in the states,” said Larsen.

Consider these numbers:

  • More than 40 states have contracted for the necessary background research in their markets, and 21 of them have completed the research as part of planning grants;

  • 38 states have consulted with stakeholders, including insurance industry agents and brokers, as well as consumer groups;

  • 36 states have initiated an information technology gap analysis—assessing their current IT platform to help them determine needed improvements or modifications to run a state-based health exchange--and 20 states have completed that analysis;

  • Around 20 states have developed governance models, and 13 have appointed some form of governing body to oversee their health insurance exchanges.

In states that miss the deadline or that choose not to run a health insurance exchange, the federal government will run one for them.

“Only if the state opts not to operate an exchange would HHS step in to operate the exchange,” said Larsen.

While the law sets certain requirements for the exchanges, Larsen said states have a lot of flexibility in determining how to implement an exchange that best fits their needs and is responsive to local market conditions. That flexibility includes the structure of the exchange, selection of qualified health plans, network adequacy standards, marketing standards, and the role of agents and brokers in the exchange.

“They control their own destiny in setting up an exchange,” he said.

Larsen said he expects many states to take action in the 2012 legislative sessions, although action by the legislature is not a requirement for state participation.

“There’s a lot of opportunity there, and I think time as well, for states to take whatever necessary legal action they may have to take to get authority in place,” he said.

Larsen said the Affordable Care Act simply requires legal authority under state law to implement the exchange. That could be existing law, legislative action or executive order.

While states have the option of participating in an exchange operated by the federal government, if policymakers are interested in a state-run exchange, they would benefit by acting now.

“The benefit of moving forward now with an exchange is the availability of federal funding,” Larsen said. Those funds will be available through 2014. “After 2014, we are not going to be in a position to be able to make awards for a state exchange.”

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