Final Rule on Insurance Exchanges (from HealthAffairs Blog)

On March 12, 2012, the Department of Health and Human Services promulgated final regulations governing the establishment of the American Health Benefit Exchanges.  The exchanges are at the heart of the Affordable Care Act strategy for making health insurance available and affordable to millions of Americans in the individual (nongroup) and small group markets.

The individual and small group markets are currently dysfunctional in many states, offering inadequate choices and high prices, and to many individuals offering nothing at all.  The exchanges promise to increase competition among insurers and to focus insurer competition on price and quality rather than on risk avoidance.  The exchanges will also open the door through which lower and middle-income Americans can obtain premium tax credits and cost reduction payments to reduce the cost of health insurance and health care services, and through which low-income Americans can access Medicaid and Children’s Health Insurance Program (CHIP) coverage.


The Affordable Care Act (ACA) asks the states to establish exchanges complying with federal requirements and established with federal funding. These must be in place and operational by January 1, 2014.  HHS must, however, determine by January 1, 2013, whether or not a state will have an exchange in place by that date.   In states that fail to establish exchanges on a timely basis, the federal government must establish “federally-facilitated exchanges.”

January 1, 2013 is less than a year away.  Most states have not yet adopted legislation needed to establish an exchange, much less taken the administrative action necessary to reach the goal.  HHS realizes, therefore, that it is urgently necessary that states receive the guidance they need to proceed with establishing an exchange.

HHS published proposed exchange establishment rules on July 15, 2011 (discussed here).  On the same day it published proposed rules for the ACA risk adjustment, reinsurance, and risk corridor programs.  A month later HHS published proposed rules governing exchange determinations of individual, Medicaid, and premium tax credit eligibility.
HHS has also published interim guidance to encourage the states to proceed with planning for exchanges even while they were awaiting final regulations.  HHS has now finally published its final regulations, although several sections of the rule are in interim final status pending further opportunity for the public to comment.

A Lengthy Rule …

The most striking thing about this rule is how long it is.  At 644 pages of preamble and text, it is by far the longest of the ACA Title I rules to date.  This is in part due to the fact that the rule combines the proposed exchange establishment and eligibility regulations.  It is primarily due, however, to the seriousness with which HHS took its task.
HHS received 24,781 public comments on the proposed rule, almost 2,000 of which were substantive.  HHS has taken these comments very seriously, and about 450 pages of the preamble are dedicated to discussing and responding to them in detail.  This also–along with many difficult decisions that needed to be made–explains why it has taken almost eight months to get the final rule out, despite the urgency with which those who will be affected by the rule–most notably the states–have pleaded for guidance.

… But Some Questions Remain

Despite its length, the rule leaves a great many questions unanswered.  This is in part because HHS has concluded that some issues–such as how quality of qualified health plans (QHPs) will be assessed or how appeals from exchange decisions will be handled–do not need urgent resolution now, and can wait.  It is also due in part to a belief that some issues, such as the number of languages into which notices must be translated or how the federally-facilitated exchange will function, are better addressed through guidance.
But the primary reason is, as the preamble states repeatedly, many issues will be left to the individual exchanges to sort out, such as how network adequacy or improper marketing practices will be defined.  This is consistent with the general approach that HHS has taken throughout the regulatory process of leaving as much flexibility as possible to the states.  As it becomes increasingly obvious, however, that many states will at least initially get a federally-facilitated exchange, many of these decisions will need to be made by HHS as it implements those exchanges.  Moreover, this approach predictably leaves HHS open to criticism (from critics who could not be satisfied in any event) that the rule does not provide enough guidance.

The topics addressed by this rule include general requirements relating to the establishment of the exchange; general functions of the exchange; eligibility determinations for exchange QHP enrollment, premium tax credits, and cost-reduction payments and Medicaid eligibility assessments; enrollment of individuals in QHPs; the Small Business Health Options (SHOP) exchange; certification of QHPs; QHP requirements: and employer interactions with the SHOP exchange.  In most instances, the final rule adopts the proposed rule with minor technical changes.  This post will address only the major changes made by the March 12 final rule.

Article continues in its entirety here

About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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