February 11, 2013

The creation of Health Insurance Exchanges (HIEs) is among the most important changes to the health care system made by the Affordable Care Act (ACA).  The HIEs are marketplaces where consumers and small businesses can shop for private health insurance plans. Many anesthesia and pain medicine patients will be covered by health plans participating in HIEs beginning as soon as October 2013.  Payment rates under such plans have the potential to make or break providers.  Additionally, some group practices may choose to offer coverage through the HIEs.  A basic familiarity with HIE structure and operations is therefore in order.

Who

The ACA provides that effective January 1, 2014, there shall be at least one HIE in each of the fifty states.  States have the option of (1) setting up their own HIEs, (2) partnering with the federal government to run an exchange, or (3) opting out—in which case, the Department of Health and Human Services (HHS) will establish and run a “federally facilitated” exchange in the state. 

The HIEs will be open initially to individuals without other coverage as well as to employees of businesses having fewer than 100 (or in the states that choose the lower number, 50) employees—approximately eight million persons in the first year of operation. The Congressional Budget Office estimates that by 2022, 25 million people will enroll in health plans offered through an HIE.  It is anticipated that the majority of enrollees will receive premium subsidies. HIEs will conduct eligibility determinations for Medicaid as well as for advance payment of premium tax credits, facilitating enrollment in the appropriate insurance affordability program.

One particular and very narrow set of employed individuals will be required to obtain their health insurance through the HIEs:  Members of Congress and their staff.  This ACA detail will please many people who have questioned the presumed gold-standard coverage enjoyed by Congress to date.  It may also help to keep the HIEs on their toes.

Health plans offered through the exchanges must be certified as “qualified health plans.”  To be certified, health plans must meet minimum standards that are primarily defined in the ACA. The final regulations on  Affordable Health Insurance Exchanges, published on March 12, 2012, give HIEs the flexibility to establish additional standards for the health plans offered.

“Navigators” will conduct public education activities to raise awareness about qualified health plans and assist consumers in selecting qualified health plans.  HIEs will award grants to Navigators.  The final regulations direct states to choose at least two Navigator organizations, one of which must be a community or consumer-focused non-profit organization.

What

An HIE is an organization most frequently described as a “marketplace” for both individuals and small groups to purchase insurance from qualified health plans. It is not an insurer; rather, it determines the carriers that will be permitted to participate in the exchange.  An HIE can take the form of a non-profit entity established by the state, an independent public agency or a part of an existing state agency.  In addition, a state can choose to operate its exchange in partnership with other states through a regional exchange or it can operate multiple exchanges that cover distinct areas within the state.

Qualified health plans will be required to offer a set of “essential benefits” that will include hospital, emergency, maternity, pediatric, prescription drug, laboratory services and other care.  They may also offer broader benefit packages. The details of the benefit packages are still under development within both HHS and the states.  There will be four different levels of coverage offered: platinum, gold, silver and bronze (at least 90%, 80%, 70% and 60% respectively of the actuarial value of the covered benefits).

The ACA gives the HIEs significant flexibility regarding the number, type and standards for health plans.  An exchange may allow any health plan meeting the standards to participate.  Alternatively, it may create a competitive process for health plans to gain access to customers on the exchange.

Beginning in 2014, HIEs will operate a Small Business Health Options Program (SHOP). The SHOP will provide small employers with new ways to offer employee health coverage, better information, easier administration, and access to tax credits.  The SHOP will allow employers to choose the level of coverage they will offer and will provide the employees with choices of all qualified health plans within that level of coverage. This allows employees to select the plan that best fits their needs and their budget. Employers can offer coverage from multiple insurers, just like larger companies and government employee plans, but get a single bill and write a single check. SHOP exchanges can also allow employers to select a single plan to offer its employee, as is typically done today. 

When

The states had a final deadline of December 14, 2012 by which to submit applications to HHS to establish their own HIEs.  States that want to pursue a partnership exchange with the federal government have until February 15, 2013, to submit their applications. States that do not have exchanges ready for operation in 2014 may apply to operate the exchange in 2015 or in subsequent years.

Although only “small” employers can participate in a SHOP for the first three years, beginning in 2017, states have the option to let businesses with more than 100 employees buy large group coverage through the SHOP.  It is too early to tell whether many of them will do so, or what the effect might be on the type and level of coverage that their employees enjoy today.

Where

Eighteen states and the District of Columbia filed timely applications with HHS to operate a state-run exchange in 2014, and all have been approved.  The 18 states are identified on the map below, a more detailed interactive version of which is available at http://www.commonwealthfund.org/Blog/2011/Jun/State-Health-Insurance-Exchange-Legislation.aspx.

Legend:
Dark green—18 states pursuing state-run HIEs
Beige—23 states pursuing federally facilitated HIEs
Turquoise—6 states pursuing state-federal partnership HIEs
Brown—3 states with no official decision yet

HIEs are already in operation in several states, starting with Massachusetts.  Utah, for example, currently operates an exchange that offers 140 health insurance plans to more than 7,600 individuals in small businesses throughout the state.

How

The HIEs will perform a variety of functions, including:

• Certifying health plans as “qualified health plans” to be offered in the exchange;
• Operating a website to facilitate comparisons among qualified health plans for consumers;
• Operating a toll-free hotline for consumer support, providing grant funding to Navigators for consumer assistance, and conducting outreach and education to consumers;
• Determining eligibility of consumers for enrollment in qualified health plans and for insurance affordability programs (premium tax credits, Medicaid, CHIP and the Basic Health Plan), and
• Facilitating enrollment of consumers in qualified health plans.

The development of HIEs is still in a state of infancy and precisely “how” they will accomplish their missions remains to be seen.  Currently, according to the Kaiser Family Foundation’s November 2012 paper Establishing Health Insurance Exchanges: An Overview of State Efforts,

While many states that have established or intend to establish state-based health insurance exchanges have already made numerous policy decisions, appointed Boards, and hired staff, significant work still remains for those aiming to be ready by 2014. States moving forward with state-based exchanges are currently tackling issues such as long-term financing options, developing Navigator and consumer assistance programs, and defining the structure of the Small Business Health Options Program (SHOP) exchanges. Most have also undertaken the major task of designing and building the IT infrastructure to support the exchange, particularly the systems for determining eligibility for health coverage programs, including the premium tax credits and cost-sharing subsidies, Medicaid, and CHIP. 

The area for us to watch is the definition of the essential-benefits package.  Will it cover all anesthesia and pain services?  Think of the health plans that do not cover anesthesia for routine upper and lower GI endoscopies, or certain types or quantities of chronic pain management procedures.  When there are developments to report, you will find the information in these Alerts.

With best wishes,

Tony Mira
President and CEO