What is the Status of Guidance on Insurance Exchanges?

August 8, 2011 (PLANSPONSOR.com) - What is the status of PPACA guidance on the State health insurance Exchanges that are supposed to be available to individuals and small employers beginning in 2014?


On July 11, 2011, the Department of Health and Human Services (“HHS”) issued a proposed regulation on the establishment of Exchanges and Qualified Health Plans (QHPs) under PPACA.  In general, the proposed regulation establishes the general requirements that a State Exchange must satisfy to be approved by HHS, the minimum requirements that health insurers must satisfy to participate and offer QHPs through an Exchange, and the general requirements eligible small employers must meet to participate in the Small Business Health Options Program (“SHOP” Exchange). 

For employers, notable guidance in the proposed regulation includes the following:

1.         Exchange Approval Deadline.  As provided in PPACA, January 1, 2013 is the deadline for a State Exchange to be approved by HHS as demonstrating “operational readiness.”  HHS will establish an Exchange in any State that elects not to establish an Exchange or has not been approved by January 1, 2013.  HHS may issue a “conditional” approval for a State that cannot meet the operational readiness deadline of January 1, 2013 but is making progress toward being fully operational by January 1, 2014. 

2.         Exchange Governing Board.  A State Exchange may be an independent governmental agency or a non-profit entity.  The governing board of the entity could not have a majority of voting representatives with a “conflict of interest, including representatives of health insurance issuers or agents or brokers.” 

3.         Regional and Subsidiary Exchanges.  A State could participate in a Regional Exchange spanning two or more States, regardless of whether they are contiguous, so long as HHS approves.  A State also could establish one or more Subsidiary Exchanges serving distinct geographic areas.   

4.         General Exchange Functions.  At a minimum, an Exchange must perform certain requirements, including issuing certificates of exemption; performing eligibility determinations; establishing an appeals process for eligibility determinations; providing oversight and financial integrity functions; and evaluating quality activities.  The proposed regulation emphasizes state flexibility in providing supplemental functions and provides guidance regarding Navigators, the role of agents and brokers, and exchange notices.

5.         Payment of Premiums.  The proposed regulation provides guidance on options for individuals and employers regarding the payment of premiums for Exchange coverage.   In the SHOP Exchange, the Exchange must accept aggregated premium payments made by a qualified employer and is not required to permit payments by an employer or employee directly to the health insurer.

6.         SHOP Exchange Functions.  In addition to the general Exchange requirements, SHOP Exchanges also are required to (1) allow a qualified employer to select a level of coverage (e.g., bronze level) in which all QHPs in that level will be available to qualified employees (but a SHOP Exchange could permit a qualified employer to select one specific QHP or a menu of specific QHPs from different levels available to employees); (2) bill (on a monthly basis) an employer for the total aggregate premiums (both employer and employee portions) due to QHP issuers, collect the funds and then make payments to each applicable QHP; and (3) make rate changes uniform (either monthly, quarterly or annually) and not permit rates to vary during a plan year.  To be eligible, an employer must be a small employer that makes all full-time employees eligible for Exchange coverage and either (1) has its principal place of business in the Exchange service area and offers all employees coverage through that SHOP Exchange, or (2) offers coverage to each eligible employee through the SHOP Exchange serving that employee’s primary worksite.  Among other things, the SHOP Exchange must verify eligibility, provide a process and timeline for SHOP enrollment, provide for initial and annual (employer and employee) enrollment periods, and use a single application form for employers and one for employees. 

The preamble to the proposed regulation notes that it does not address all of the PPACA Exchange provisions and that additional guidance on the establishment and operation of Exchanges will be provided in future proposed regulations.  Among other things, the proposed regulation does not provide guidance on –

  • the definition of essential health benefits or determining the actuarial value of Exchange insurance options and other benefit design requirements;
  • employer reporting requirements and the operation of the employer "pay or play" mandate penalty rules; or
  • eligibility standards for individuals to purchase Exchange coverage, advance payments of premium subsidy tax credits and cost-sharing reductions, and appeals of eligibility determinations.

The proposed regulation was published in the Federal Register on July 15, 2011; comments can be submitted on the proposed regulation until September 28, 2011. 

Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions  

You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html   


Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.