Stakeholders React to Final Rule on Health Insurance Exchanges

On Monday, industry and consumer groups welcomed the release of the final rule governing state-based health insurance exchanges under the federal health reform law, Reuters reports.

States have until Jan. 1, 2013, to meet federal standards for their exchanges, though they can qualify after that date if they prove their exchanges are ready to open enrollment by Oct. 1, 2013.

The federal government will set up exchanges for states that cannot meet federal standards (Morgan, Reuters, 3/12).

Rule Specifics

The final rule guides states on:

• Setting standards for establishing an exchange, setting up a Small Business Health Options Program, performing the basic functions of an exchange and certifying participating health plans; and
• Establishing a Web-based system to allow consumers to apply for and enroll in qualified health plans and insurance affordability programs (HHS release, 3/12).

The Obama administration said the final rule differs from the preliminary rule in several ways. The proposed rule suggested that states should be responsible for determining eligibility for insurance subsidies, while the final rule allows states to choose to have HHS review eligibility.

Under the rule, states also can use their own Medicaid agencies to determine eligibility for Medicaid or the Children's Health Insurance Program. Insurance agents cannot determine Medicaid or CHIP eligibility, though they can help consumers sort through their health coverage options.

Further, the final rule says that exchange governing boards must have at least one consumer representative, though the rule retains an earlier provision allowing up to half of board members to have ties to the insurance industry.

The rule does not outline how the federal government would establish exchanges in states that do not develop their own (Appleby, Kaiser Health News/Washington Post, 3/12).

Separately, HHS officials will release a second rule on "reinsurance, risk corridors and risk adjustment" for health plans in the exchanges. Also, the Department of Treasury will release regulations governing tax credits to help people purchase insurance and Medicaid eligibility changes (Reichard, CQ HealthBeat, 3/12).

Advocacy Groups Praise Consumer Protections

Leading consumer groups praised new protections to give consumers representation in operating the exchanges, the Los Angeles Times reports (Levey, Los Angeles Times, 3/12). Consumer advocates also praised the rule for giving states flexibility. They said the rule shifts policy focus to the state level (Reuters, 3/12).

"HHS has released a menu, not a recipe," Mike Russo of the U.S. Public Interest Research Group said, adding, "States must go above the minimum requirements to empower their exchanges to negotiate on behalf of consumers for better rates and higher-value coverage."

Timothy Jost, a law professor at Washington and Lee University, said that "there were some gains for consumers" in the rule. He praised it for requiring a consumer representative on exchange governing boards, as well as focusing on network adequacy and nondiscrimination in benefit design.

Groups Question Rule on Brokers

The rule allows Web-based insurance brokers to sell plans but will not permit them to determine eligibility or offer incentives to enroll in particular plans (Bristol, CQ HealthBeat, 3/12).

Stephen Finan, senior director of policy at the American Cancer Society Cancer Action Network, asked, "By allowing these Web-based portals onto the exchange, what are the controls around them? How does the consumer continue to get balanced consistent, objective information?"  He also noted Consumers Union, the Multiple Sclerosis Society and the Center for Budget and Policy Priorities are among 10 groups that will object to the rule during the 45-day comment window.

Tim Hill, deputy director of CMS' Center for Consumer Information and Insurance Oversight, said states will regulate how brokers interact with consumers in the exchange. Hill said allowing the third-parties to access the exchanges would "generate interest and marketing ... that we want to leverage if the states choose to" (McCarthy, National Journal, 3/12).

The National Association of Insurance and Financial Advisors praised the rule for recognizing the role of agents and brokers in exchanges. However, the group had wanted navigators to be licensed by states, a proposal not adopted in the final rule (Bristol, CQ HealthBeat, 3/12).

Other Industry Groups Offer a Cautious Initial Reaction

Karen Ignagni, president and CEO of America's Health Insurance Plans, said the group will continue to review the rule and offer feedback. "Consumers will be best served if a state exchange adopts an efficient, cost-effective approach that leverages existing health plan resources, utilizes federal resources or guidance where sensible, and relies on the exchange itself to administer key functions," she said (Kaiser Health News/Washington Post, 3/12).

According to AHIP, it will be important to avoid duplication with state laws as exchanges develop, as duplication could add to complexity and increase consumer costs (Reuters, 3/12).

Neil Trautwein, a vice president of the National Retail Federation, said the group will "seriously" review the final rule but said, "On the surface, we are encouraged by the rule's focus on flexibility."

Republican Governors Slam Rule

The Republican Governors Association specifically criticized the administration for not offering details on how federally operated exchanges will work (National Journal, 3/12).

RGA Chair and Virginia Gov. Bob McDonnell said the rule "extend[s] the federal government's reach into the states and will cost the states millions of dollars annually to operate." He added, "This administration's inability to provide critical guidance to their broken health care reform mandate gives more and more credence to the necessity of the Supreme Court ruling this law unconstitutional" (Bristol, CQ HealthBeat, 3/12).

It is unclear whether the final rule will be sufficient to push Republican-led states to begin implementing exchanges, according to the Los Angeles Times (Los Angeles Times, 3/12).