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States Grapple With Structure, Rules for Insurance Exchanges

State health and insurance officials are struggling to devise the rules and formats of the state-based health insurance exchanges mandated under the federal health reform law, Politico reports.

Background on Exchanges

Under the overhaul, states by January 2014 must create insurance exchanges that provide coverage options for individuals and small businesses. The exchanges are intended to foster a competitive market and hold insurers to strict new standards while attracting consumers, according to Politico.

States can choose to administer their own exchanges, for which they must have some infrastructure in place by January 2013, or ask the government to run the exchanges for them.

HHS To Offer Guidance

Jay Angoff, director of the Office of Consumer Information and Insurance Oversight at HHS, said, "The biggest concern for all states is how to create a marketplace on the exchange." He said the marketplace "has to be sustainable, financially viable options that provide meaningful coverage," adding that "as states contemplate the regulation around an exchange, [the] regulation has to be designed with that objective."

Angoff said that HHS is working with and soliciting comments from states until Oct. 4. HHS is helping states on various subjects related to the exchanges, such as "standards for ensuring a sufficient choice of providers" and factors that could affect the level of competition.

Chiquita Brooks-LaSure of OCIIO said, "The states are all at very different places on how much thinking they've done," adding, "Some are trying to figure out who is going to be running it, what the relationship is like with Medicaid, while others are beyond that."

States' Competing Views on a Competitive Marketplace

State officials have varying ideas on how to develop the most competitive insurance marketplace.

At the National Association of Insurance Commissioners' annual meeting in August, state insurance commissioners were divided over whether the marketplaces would benefit from an insurance market outside the exchanges. Some commissioners favored an insurance market outside the exchange that would be subject to the same rules and regulations.

State officials also have expressed concerns over whether their states, particularly smaller states, can sustain an insurance market that supports an exchange. They also must decide the type of role they will be play in selecting who is qualified to sell on the exchanges.

In August, California became the first state to approve legislation that would set up the state's insurance exchange and delineate the duties of the exchange. The legislation is awaiting Gov. Arnold Schwarzenegger's (R) signature.

NAIC, NASI Working on Model Exchange Laws

The health reform law offers a broad outline for what the exchanges must be able to do, but states also have some leeway in crafting them to fit their purposes.

In October, NAIC's exchanges task force is expected to release a draft of a model exchange, which states can use for guidance. Meanwhile, the National Academy of Social Insurance also is developing its own model legislation, according to Politico (Kliff, Politico, 9/13).

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