State Health Insurance Exchanges Moving Forward

As we all await the Supreme Court’s decision on whether the Patient Protection and Affordable Care Act (“Healthcare Reform Act”) requirement for each individual to purchase insurance is deemed constitutional or unconstitutional, the Healthcare Reform Act implementation continues. One of the touted purposes of the Healthcare Reform Act is to increase the number of insured individuals. In order to support this purpose, the Federal Government provided resources for individuals to access health insurance. Specifically, as of June 2011, 2.5 million young adults under the age of 26 were eligible for insurance coverage through their parent’s insurance, because the Healthcare Reform Act expanded insurance coverage eligibility to dependent adults under the age of 26. Starting in 2014, individuals who have income less than 133% of the Federal Poverty Level will be eligible for Medicaid coverage. Further, small employers, who serve as a critical resource for offering insurance to individuals, are eligible for tax credits if the small employer purchases insurance for its employees. Another resource is the State Insurance Exchanges. State Insurance Exchanges are intended to offer insurance plans for individuals who do not satisfy the eligibility requirements for Medicare or Medicaid; individuals who cannot afford the insurance provided by their employer; individuals whose employer does not purchase insurance and the unemployed. State Insurance Exchanges are new and required by the Healthcare Reform Act regulations to commence in 2014.

In order to support State Insurance Exchange development, on May 16, 2012, the Department of Health and Human Services published a draft Blueprint for Approval of Affordable State Based and State Partnership Insurance Exchanges. This Blueprint provided guidance on how to design a State Insurance Exchange. The Blueprint also provided guidance on the State application and approval process. Each State must apply and receive approval before offering services.

State Insurance Exchanges are required to offer certain levels of insurance with a minimum health benefit offering. The States have flexibility in the design of the State Exchange operations to address the State’s specific population health and community needs. If a State refuses or fails to implement a State Insurance Exchange, the Federal Government will implement a Federally facilitated exchange. Therefore, the Federal Government would have an insurance program in each and every State where a State Insurance Exchange was not created.

Based upon the guidance, there are three options for the States. First, States may create a State Based Exchange which will operate all the activities of the State Insurance Exchange. The Federal Government could provide some services. However, for the most part, the State Based Insurance Exchanges are implemented and administered at the State level. The second type of exchange would be a State Partnership Exchange. Under a State Partnership Exchange, the State will provide some selected activities, but the exchange will be operated in partnership with the Federal government. The final model is the Federal Facilitated Exchange. This type of exchange applies when a State does not intend to and does not implement a State Insurance Exchange. In that instance, the Department of Health and Human Services would operate an insurance exchange. The State can elect to perform some of the services, but overall it would be a Federal program.

Further in accordance with the Healthcare Reform Act’s drive to expand the availability of insurance, the Federal Government also dedicated millions of dollars through grant monies to the individual States to facilitate State Insurance Exchanges. In May 2012, the Federal Government announced that it was providing $181 Million Dollars to 6 States to assist them in creating their State Insurance Exchanges. The majority of the States also received a million dollar grant to assist with administrative costs of evaluating a proper State Insurance Exchange design. At this time, the grant funds provided to the individual States have widely varied.

Likewise, the individual State’s reaction to creating a State Insurance Exchange has varied. Some States have been reluctant to implement the State Insurance Exchange, waiting to see whether or not the Supreme Court strikes down the entire Healthcare Reform Act. Other States have promulgated potential regulations, but have not implemented. While still other States have evaluated the creation of State Insurance Exchanges and created a insurance exchange design. Therefore, the level of preparedness for each State dramatically differs depending upon the region and each State legislature’s activities.

Today, it is imperative that States evaluate whether or not they plan to implement State Insurance Exchanges or whether or not they plan to partner with the Federal Government and to what extent. If a State fails to submit a declaration letter to the Department of Health and Human Services by November 16, 2012, the Federal Government will anticipate that the Federal Government will be implementing a State Insurance Exchange in that State. Accordingly, while the States have been awaiting the Supreme Court’s decision as to whether or not the Healthcare Reform Act will remain in play, States should start evaluating how the Blueprint of its insurance exchange would function, unless they intend for the Federally Facilitated Exchange to operate within its State and control these operations.

From a consumer’s standpoint, individual consumers should evaluate whether or not the State has established a Insurance Exchange. The Federal Government has provided websites that try to assess State options for insurance and coverage for individuals. However, this will likely change over time and is completely dependent upon the changes in the insurance industry which may have a completely different landscape following the Supreme Court’s decision. The State Insurance Exchange is just one of many programs that continues to implement the Healthcare Reform Act initiatives, notwithstanding, the ongoing judicial process.

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