‘Exchanges will offer Americans, competition, choice and clout.’

WASHINGTON – The Department of Health and Human Services released last month its final rule on the establishment of health insurance exchanges - online marketplaces. The rule also includes provisions for qualified health plans and exchange functions in the individual market.

The final rule, which combines what originally had been separate proposed rules published in July and August 2011, encompasses the key functions of exchanges related to eligibility, enrollment and plan participation and management.

HHS received more than 24,781 comments on the proposed rules.

It seeks further comments from the public on several sections, which are issued as interim final rules, related to options for conducting eligibility determinations, the ability of a state to permit agents and brokers to assist qualified individuals, and Medicaid and Children’s Health Insurance Program (CHIP).

The policies incorporated in the rule give states more flexibility to design and create their exchanges – a web-based system where individuals and small businesses will be able to shop for and compare health coverage. Exchanges are scheduled to go live in 2014 under the health reform law.

“Exchanges will offer Americans, competition, choice and clout,” the final rule said.

The rule offers guidance about the options on how to structure exchanges in setting standards, setting up a small business health options program (SHOP), performing the basic functions of an exchange, and certifying health plans for participation in the exchange.

The rule also provides guidance for establishing a streamlined, web-based system for consumers to apply for and enroll in qualified health plans and insurance affordability programs.

Cost is central

Insurers will have to compete for their customers’ business, said HHS Secretary Kathleen Sebelius. “More competition will drive down costs and exchanges will give individuals and small businesses the same purchasing power big businesses have today,” she said.

A new survey from KPMG Government Institute finds state governments citing cost, political concerns and legislative uncertainty as big hurdles to planning and implementing state health insurance exchanges.

According to the survey, conducted in February among almost 80 state government respondents from varying departments, 31 percent cited cost as the primary challenge their state faces in planning the exchanges, with political concerns cited by 21 percent and uncertainty regarding the future of the legislation cited by 11 percent.

“With states still dealing with tight budgets, it’s no surprise costs would be a key concern,” said Paul Hencoski, KPMG’s national health and human services leader, who advises states on setting up the exchanges.

Medicaid made easy

The final rule makes sure that exchanges will coordinate with Medicaid, CHIP, and the Basic Health Program so that an applicant experiences a seamless eligibility and enrollment process regardless of where he or she submits an application.

In response to comments, the final rule provides two ways for exchanges to interact with Medicaid agencies when making eligibility determinations. Exchanges can conduct eligibility determinations for Medicaid and for advance payment of premium tax credits, or the exchange will make a preliminary eligibility assessment and then turn it over to the state Medicaid agency for final determination.

Also, a state-based exchange may determine eligibility for advance payments of the premium tax credit and cost-sharing reductions, or it could be approved if HHS makes determinations for these functions.

HHS previously provided a total of $50 million to all states except Alaska, which refused it, to begin to plan the exchanges. Recently, 33 States and the District of Columbia have received more than $667 million in establishment grants to begin building exchanges.

The federal government will put in place an exchange for states that choose not to establish one or will not have one operational by 2014.

The health reform law also provides for a premium tax credit for eligible individuals who enroll in a qualified health plan through an exchange to reduce the cost-sharing obligation of eligible individuals.