States-Eye View for Creating Insurance Exchanges: Sandy Praeger
The U.S. Department of Health and Human Services published last week its long-awaited rules for the health-insurance exchanges that states are to set up under the 2010 Affordable Care Act.
There are many key things I had hoped this document would address, but doesn’t, including which benefits the participating insurers should be required to cover and how Medicaid and other federal subsidies will be coordinated with the exchanges. But for the most part the new regulations are useful. They give officials like me the direction we need to establish an insurance exchange that’s right for our states.
In Kansas, as in many other states, we have not yet decided whether to go ahead and create an exchange. My office is now analyzing whether we can design one that meets the needs of Kansans and still foster a competitive marketplace. The new regulations are encouraging.
Based on my initial review, I was pleased to find the rules are not overly prescriptive and leave most of the key decisions up to the states. A state may create an exchange that is very open, where all qualified health plans are able to participate and consumers have many choices. Or, it may limit participation to those insurers that are willing to negotiate with the state.
States are also provided considerable flexibility in establishing what role agents and brokers will play. Registered agents and brokers provide consumers critical assistance in determining the best plan for their needs. In Kansas we have no intention of pushing them out of the system and leaving consumers without their guidance.
Key State Decisions
On the administrative side, the federal government will not restrict key state decisions on how the exchanges will be funded or what role the exchanges will play in collecting people’s premiums. This flexibility is critical, especially in times of tight state budgets.
The rules provide a number of options for the structure of an exchange. It can be set up as a state agency, or as an independent (quasi-governmental) or nonprofit organization. Of course, the agency’s board must represent the concerns of individual consumers and small-business owners. Conflicts of interest are not allowed.
A state may also choose to enter a contract with organizations that have expertise on health insurance, partner with other states or even delegate some responsibility for the exchange to the federal government. Or, a state may just let the federal government run the entire marketplace. However, this is a level of federal authority that I do not believe Kansans should or will accept.
Of particular interest to me as the chief regulator in Kansas has been the way the health-care law granted HHS Secretary Kathleen Sebelius the authority to establish, for insurance plans sold through exchanges, rules on network adequacy (that is, whether the companies are able to deliver the care their policyholders pay for), marketing and service areas. Kansas already has regulations in these areas, and I was very concerned that the federal standards would conflict with ours.
So it was a relief to see that the regulations from the secretary, who is our former governor and insurance commissioner, preserve state regulations by simply requiring plans in the exchange to comply with state rules. This shows a deep understanding of state regulation and acknowledges that states are best equipped to protect consumers and ensure a competitive insurance market.
Although I am pleased with much of what I see in the new federal rules, I do have some concerns. In particular, I would like more information on how a state can amend its program in the future. The rules envision a process in which significant changes must be approved by the secretary, and offer as a model the amendment procedure for state Medicaid plans. But I worry that this process may be tedious and frustrating. States need greater assurance that they will always be able to act quickly to make improvements in their exchanges.
Gaming the System
Also, I have some apprehension about the number of special enrollment periods the rules have created, and about the time periods established for coverage. We need to ensure that some people do not game the system by waiting to buy coverage until they are ill, leading to higher premiums for everyone else.
Finally, I hope HHS will provide additional guidance on what kinds of health care insurers should be required to cover and how the exchanges can be coordinated with Medicaid and other federal programs. That would give states, as they review their options, a more complete picture of how exchanges are to operate.
Time is limited. If a state decides to establish an exchange, its officials must make significant progress by Jan. 1, 2013, and must have a fully operational exchange in place by Oct. 1, 2013, so individuals and small-business owners can begin purchasing coverage.
Before then, many critical decisions must be made and difficult tasks completed, not the least of which is developing information technology that will enable coordination among state agencies, federal agencies and insurance carriers. Kansas is one of six states (or groups of states) that received a special federal grant to develop options for state information technology, and that work must continue if states are going to meet the deadlines.
Overall, I am pleased that the rules include the flexibility states need to establish exchanges that will be effective for their individual populations and marketplaces. What may work in Massachusetts or California is not likely to work in Kansas.
The ball is now in the states’ hands. Those that want to create exchanges must move quickly to design and establish systems that will best meet their objectives. I hope Kansas will accept this challenge, because if the state doesn’t, the federal government will.
(Sandy Praeger, a Republican, is the Kansas commissioner of insurance. The opinions expressed are her own.)
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