HHS Releases Final Exchange Rules

The federal Center for Consumer Information and Insurance Oversight (CCIIO) today, March 12, 2012, published a final rule on health insurance exchanges under the Affordable Care Act. This next step in the regulatory process combines policies from two separate proposed rules that were released in the summer of 2012, and includes standards for the establishment and operation of an exchange, certification of health insurance plans to participate in exchanges, determination of an individual’s eligibility to enroll in an exchange, enrollment in qualified health plans (QHP), and employer eligibility to participate in the Small Business Health Options Program (SHOP) Exchange. Over 24,000 public comments were received in response to the proposed rules.

State flexibility is a hallmark of the 644-page final rule, allowing states plasticity to craft insurance marketplaces that fit local needs and trends.

Brokers, agents, and other third-party administrators will be allowed to work with states’ exchanges. Tim Hill, a CCIIO official, encouraged states to partner with third-party entities to help market and distribute exchange-based products and noted that states will be allowed to decide how their exchange compensates participating brokers and agents.

In light of the political challenges many states have faced in establishing their exchanges,  the final rule offers states more time to set up their marketplaces. The reform law requires that the federal exchange be installed in states where the exchange does not demonstrate complete readiness by Jan. 1, 2013.  The long-awaited rule, however, allows for “conditional approval” of an exchange if it is “advanced in its preparation” by Jan. 1, 2013 and is likely to be fully ready by Oct. 1, 2013. And, states that aren’t ready for the 2014 launch date can apply to operate their own exchange in later years.

Small Business Health Options Program (SHOP) exchanges, the arm of a state’s exchange serving small businesses, will allow employers multiple options in how they offer employees coverage. Employers can select a level of coverage from which employees can choose a plan. They can also offer their employees the option of choosing any plan from the exchange that they would like, allowing them the flexibility to select a plan that fits their needs and budget. The rule requires the exchange to provide participating employers with a single bill and the ability to pay using a single check. Minimum participation rules will be met through overall coverage in any SHOP plan rather than participation in any one QHP.

The final rule preserves states’ ability to determine the size of small businesses that can participate in SHOP. States can allow firms with either 1 to 50 or 1 to 100 employees to participate until 2016. Beginning in 2016, all firms with fewer than 100 employees will be allowed in SHOP. States have the option to expand it even further in 2017 or later.

CCIIO officials noted on a conference call that specifics regarding how a federal exchange might work in states that aren’t ready or aren’t willing to operate their own exchange are still being worked on.