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Controversy Anticipated Ahead Of Release Of Health Insurance Exchange Regulations

As the Department of Health and Human Services (HHS) prepares to release regulations in July 2011 covering what states must do to create health insurance exchanges, stakeholders are anxious to learn what the exchange system will have in store for them.

Many states are hoping that the regulations will assist them in setting up the exchanges as exchange operators will have responsibilities as varied as determining if a customer is an American citizen to figuring out a customer’s eligibility for a subsidies. Not to mention that the exchanges will require careful coordination between states, the Treasury Department, the Department of Homeland Security, health plans, and to some extent small employers to ensure timely exchange of data.

As exchange operators worry about setting up the exchanges, other stakeholders are concerned with how the regulations – and thus the exchanges – will align with their priorities.

“I think probably what most states want to see is maximum flexibility – it seems to be the key word – and as much funding as possible,” said Washington and Lee University law professor Timothy Jost.

For consumers, one main issue “is that the exchange be independent and basically not be run by the insurers and the people who market health insurance, that it be run in the interest of consumers,” Jost noted.

Another concern for consumers is the minimum benefit requirements of the exchanges. Matt Salo, executive director of the National Association of Medicaid Directors, said HHS isn’t expected to release a proposed rule for benefits packages until fall 2011. However, according to Salo, that information will be important for states as they set up their exchanges as states will have to cover the cost of any additional coverage above the federal government’s benefit offering.

Insurers will also be paying attention to how HHS determines which health plans qualify for the exchanges as well as how HHS will handle risk adjustment, according to Robert Zirkelbach, spokesman for America’s Health Insurance Plans. Risk adjustment involves shifting premium revenues between insurance plans to remove the incentive for plans to only enroll “good risk” individuals. However, risk adjustment has never on a scale as large as that of state health insurance exchanges.

While the administration risks criticism from governors and legislatures opposed to the health law if it doesn’t provide the flexibility state officials want, consumer advocates are sure to raise opposition if more flexibility for state governments in states friendly to insurers and insurance brokers means more industry influence over exchanges.

The clock is ticking for many states to pass exchange creation legislation in 2012 while also addressing the concerns of stakeholders. States have until Jan. 1, 2013, to demonstrate to HHS that they have a viable exchange ready for enrollees beginning on Jan. 1, 2014. As few states have created exchanges since the health law’s passage, many states must take action to create exchanges and address the concerns of stakeholders before the HHS deadline.