Category — Insurance Exchanges

The Center for Consumer Information and Insurance Oversight within the Department of Health and Human Services (HHS) issued a bulletin on December 16 to provide information and solicit comments on HHS’s approach to defining Essential Health Benefits (EHB) under the Patient Protection and Affordable Care Act (ACA).  The ACA requires non-grandfathered plans in the individual and small group markets, Medicaid benchmark and benchmark-equivalent, and Basic Health Programs to cover EHB beginning in 2014.  The scope of EHB, as defined by HHS, must equal the scope of benefits provided under a “typical” employer plan.  In the bulletin, HHS stated that it intends to define EHB through a benchmark plan that each state selects.  Significantly, HHS intends to allow states to select a benchmark plan from among the following existing health plans: 

• One of the three largest small group plans in the state;
• One of the three largest state employee health plans;
• One of the three largest federal employee health plan options; or
• The largest health maintenance organization in the state’s commercial market. 

If a state fails to select a benchmark, the default would be the state’s largest small group market plan.  Comments on the intended approach are due by January 31, 2012.

On August 12, 2011, the Department of Health and Human Services (HHS) awarded a total of over $185 million to 13 states and the District of Columbia in Exchange Establishment grants.  States can use the Exchange Establishment grants to develop their Insurance Exchanges and Small Business Health Options Program (“SHOP”) through activities such as conducting background research, consulting with stakeholders, making necessary legislative and regulatory changes, establishing information technology (“IT”) systems, performing oversight, and ensuring program integrity.  States may apply for single (Level One) or multi-year (Level Two) funding through the Exchange Establishment grant process depending on their progress in establishing Exchanges.  All awards in this cycle were single-year grants. 

HHS previously distributed Exchange Establishment grants to three states in May 2011.  Additionally, 49 states and the District of Columbia received Exchange Planning grants in March 2011 to conduct studies on the feasibility of Exchanges and to hold community forums on how Exchanges should be established.  Six states and one multi-state consortium (led by the University of Massachusetts Medical School) received Early Innovator grants to develop model Exchange IT systems.

Additional opportunities to apply for Exchange Establishment grants will be available through June 2012.  Future applications for grants will be accepted quarterly, with the last deadline on June 29, 2012.  Awards will be made approximately 45 days after the application due date.

The Department of Health and Human Services and the Department of the Treasury issued three Notices of Proposed Rulemaking (“NPRMs”) on August 12, 2011 on eligibility and enrollment in Insurance Exchanges and the Small Business Health Options Program (“SHOP”), health insurance premium tax credits, and eligibility changes to Medicaid and the Children’s Health Insurance Program (“CHIP”).  

• The Exchange Functions in the Individual Market: Eligibility Determinations and Exchange Standards for Employers (“Exchange Eligibility and Employers”) NPRM proposes processes for individual enrollment in qualified health plans (“QHPs”) and insurance affordability programs as well as standards for employer participation in SHOP. 
   
• The Health Insurance Premium Tax Credit (“Tax Credit”) NPRM outlines proposed eligibility standards for the premium tax credits for coverage purchased through the Exchanges (available to taxpayers with household incomes between 100 percent and 400 percent of the Federal Poverty Level (“FPL”) starting in 2014) and explains how such tax credits will be calculated.  
   
• The Medicaid Program: Eligibility Changes under the Affordable Care Act of 2010 (“Medicaid Eligibility”) NPRM proposes to expand Medicaid  to most adults under  the age of 65 with incomes up to 133 percent of the FPL and consolidate eligibility categories into four groups:  children, pregnant women, parents, and a new adult group.  The NPRM would also increase the Federal Matching Assistance Percentage (“FMAP”) for newly eligible individuals and to states that expanded Medicaid coverage for adults before enactment of the Affordable Care Act. 

Together, the three NPRMs establish coordination across Medicaid, CHIP and the Exchanges and create a system in which Exchanges would conduct eligibility determinations for Medicaid and premium tax credits as well as facilitate enrollment in insurance affordability program.  Comments on all three NPRMs are due by October 31, 2011.

The U.S. Department of Health and Human Services (HHS) issued two Notices of Proposed Rulemaking (NPRMs) on July 11, 2011 relating to state health insurance exchanges.  Both NPRMs will be published in the Federal Register on July 15, 2011.  Comments on both NPRMs are due by September 26, 2011.

The Patient Protection and Affordable Care Act (PPACA) requires each state to establish by January 2014 an American Health Benefit Exchange and a Small Business Health Options Program (“SHOP”) to facilitate health insurance purchasing by individuals and small employers.  Under PPACA, if a state fails to establish an Exchange and/or a SHOP by January 1, 2014, the Secretary of HHS must establish and operate the Exchange and/or SHIP  in that state.  PPACA provides that each Exchange will:  certify health plans that can offer coverage through the Exchange; assign ratings to each plan based on price and quality; provide consumer information on each plan (including an electronic calculator that consumers can use to assess the cost of coverage); determine eligibility for the Exchange, tax credits and cost-sharing programs, public health coverage programs (including Medicare, Medicaid, and CHIP), and exemptions from the individual mandate; and establish a “Navigator” program to assist consumers in making choices about their health care.

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On May 19, the Department of Health and Human Services (HHS) issued a final regulation implementing section 1003 of the Patient Protection and Affordable Care Act that requires review of certain health insurance premium increases.  Starting September 1, 2011,  premium increases of ten percent or more for non-grandfathered individual and small group health plans must be disclosed and reviewed by relevant officials.  States will primarily have the responsibility for reviewing rate increases and have already been awarded approximately $44 million in grants to obtain the necessary resources to conduct the reviews.  In September 2012, the ten-percent threshold will be replaced by state-specific percentages based on state cost trends.  The final rule also requires insurance companies to provide consumers with information and justifications for the rate increases in order to ensure transparency about consumer costs.  The rule does not provide HHS and states with authority to approve or reject the rate increases, but instead allows officials to enhance transparency in the insurance marketplace.

As has been widely reported, on December 13, 2010, federal Judge Henry E. Hudson of the U.S. District Court for the Eastern District of Virginia ruled in favor of the motion for summary judgment filed by  Virginia’s Attorney General, Kenneth Cuccinelli, and invalidated the so-called “individual mandate” in the health care reform legislation.  There is no doubt that this case, which struck down one of the central provisions of the legislation, will make its way through the United States Court of Appeals for the Fourth Circuit and end up before the Supreme Court.  In his 42-page decision, Judge Hudson ruled as unconstitutional PPACA Section 1501, which requires that starting in 2014 virtually every American must have a minimum level of health insurance coverage or be subject to a tax penalty.   Although the court found that this provision exceeded Congress’s powers under the commerce and general welfare clauses of the U.S. Constitution, as a remedy, the court determined that it was appropriate to sever that section from the rest of the health care reform legislation instead of invalidating the entire health reform law. For additional analysis of this decision, please see the article on our sister-site, SCOTUSblog.”

The Department of Health and Human Services (HHS) has granted 30 waivers to companies, unions and other groups that asked for a one-year extension in implementing a key health plan reform provision that phases out annual limits on health insurance coverage.  HHS offered the waivers under a provision of the Affordable Care Act designed to prevent organizations from eliminating their insurance programs and to ensure that people would retain access to health care services during the transition period to full implementation of the Act in 2014.  The waivers are in effect for one year; organizations that wish to extend the waiver will need to reapply before any additional extensions are granted.

• List of Approved Applications for Waivers

• HHS Memo on Process for Obtaining Waivers

The Department of Health and Human Services awarded grants totaling $49 million to 48 states and the District of Columbia to help establish Health Insurance Exchanges.  The Affordable Care Act requires each state to establish an Exchange by 2014 to help individuals and small businesses purchase affordable insurance coverage that includes essential benefits.  The grants will allow states to undertake research and planning activities to establish exchanges, including evaluating information technology needs, building community partnerships, hiring key staff, and developing monitoring and evaluation processes.  Exchanges must be self-sustaining by January 1, 2015.  More information about Health Insurance Exchanges is available through the federal health reform website and in the AG Health Reform legislation summary.

Several important provision aimed at protecting insurance consumers will soon be required.  Specifically, for plan years beginning on or after September 23, 2010, insurers can no longer:

• Deny coverage to children with pre-existing conditions;
• Impose lifetime limits on benefits;
• Retroactively cancel insurance coverage without proving fraud;
• Deny claims without a chance for appeal;
• Charge out-of-pocket costs for preventive health services; or
• Require prior approval or charge higher copayments or coinsurance for emergency room services outside the network.  

Insurers must also provide coverage for a beneficiary’s dependent child who is under 26 and unable to obtain coverage from an employer.  For more information, see the federal health reform website and the AG Health Reform insurance reform summary.

The Department of Labor (DOL) posted  a factsheet on its website on September 21, 2010, clarifying its interpretation of several provisions in the Affordable Care Act relating to grandfathered health plans, coverage of dependents up to age 26, and out-of-network coverage.  DOL stated that it plans to issue final regulations relating to grandfathered plans in early 2011.