Introduction

Health insurance Marketplaces – the term now used to describe the health insurance Exchanges established under the Affordable Care Act – represent a central element of the law. The ACA envisioned a system of state-based Exchanges, but it also provided for operation of a federal Exchange in the event that a state did not elect to administer its own Marketplace. As of January, 2013, 18 States and the District of Columbia had applied to operate a state-based Marketplace, while 6 States had applied to operate what is termed a Partnership Marketplace. Of these, HHS had given conditional approval to the District of Columbia and 17 States (California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, New Mexico, New York, Nevada, Oregon, Rhode Island, Utah, Vermont, and Washington) to operate state-based Marketplaces. HHS also has approved Arkansas and Delaware to operate Partnership models. As matters now stand, a federally-facilitated Marketplace will operate without a formal Partnership in another 25 states (Alabama, Alaska, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Missouri, Montana, Nebraska, New Hampshire, New Jersey, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Virginia, Wisconsin, and Wyoming).

Regardless of who runs it, a Marketplace for state-licensed health insurance products, and which also offers financial subsidies for low and moderate income people as is the case under the ACA, necessarily must work in tandem with key state agencies. The importance of Marketplace coordination is particularly high in the case of state insurance departments, which oversee health insurance licensure, as well as state Medicaid and CHIP agencies, which also offer subsidized insurance coverage, eligibility for which takes precedence over subsidized Marketplace coverage under the terms of the ACA.

This Update begins with a summary of federal policy guidance on health insurance Marketplaces that has been issued to date. It then presents in its entirety an interview with Gary Cohen, conducted by Professor Sara Rosenbaum of GW on January 29, 2013. The Update concludes with some observations about key issues that will arise as implementation of the federal Marketplace proceeds.

Summary Overview of Federal Marketplace Guidance Issued to Date

HHS has issued a series of policies related to Health Insurance Marketplaces. The HHS guidance specifies two types of Marketplaces: State-based Marketplaces; and “federally-facilitated” Marketplaces established and operated by the federal government. Regulations issued by HHS in 2012^[1] permit States that elect not to establish a State-based Marketplace to choose a “Partnership” Marketplace.

Thus, States have the option of establishing a Health Insurance Marketplace as: (1) a State-based Marketplace; (2) a federally-facilitated Marketplace; or (3) a Partnership Marketplace, under which a State formally assumes responsibility for carrying out certain operational functions (consumer assistance and outreach, plan management, or both), while the federal government is responsible for all remaining Marketplace functions. Whatever approach to Marketplace establishment and operation is selected, Marketplaces are expected to begin open enrollment for individuals and small businesses as of October 1, 2013. Applications for State-based Marketplaces were due by December 14, 2012; applications for Partnership Marketplaces are due by February 15, 2013.

To date, HHS has issued several key resources which provide considerable information regarding federally-facilitated Marketplace establishment and operations. But important questions remain. Key documents are as follows:

1. Final Exchange Regulations (77Fed. Reg. 18310, March 27, 2012).

2. Draft Blueprint for Approval of Affordable State-based and State Partnership Insurance Exchanges, as well as a series of answers to Frequently Asked Questions (May 16, 2012);^[2] Guidance on Federally-Facilitated Exchanges (May 16, 2012).^[3]

3. Blueprint for Approval of Affordable State-based and State Partnership Insurance Exchanges (August 14, 2012).^[4]

4. CMS: Frequently Asked Questions on Exchanges, Market Reforms, and Medicaid (December 10, 2012).^[5]

5. CMS: Affordable Insurance Exchange Guidance on the State Partnership Exchange (January 3, 2013).^[6]

In addition, a number of proposed regulations issued in 2012 and 2013 bear on Marketplaces, including federally-facilitated Marketplaces (Essential Health Benefits;^[7] HHS Notice of Benefit and Payment Parameters;^[8] and regulations addressing a range of eligibility, enrollment, and coverage issues applicable to Medicaid and Exchanges^[9]).

Operations

HHS policies regarding federally-facilitated Marketplace operations, gleaned from both proposed and final rules and sub-regulatory guidance, can be summarized as follows:

• State election and use of State standards. Where a State does not elect either a State-based or Partnership model, HHS will assume that the State desires a federally-facilitated Marketplace that carries out consumer assistance, health plan management, and reinsurance functions. The agency will further assume that the federally-facilitated Marketplace will use the State’s definition of “small group” market while using the federal definition of “full-time employee.” The federally-facilitated Marketplace will merge the individual and small group markets only if the State does so, and where markets are maintained separately, employee enrollment through the SHOP Marketplace will be limited to small group product.
• Administrative flexibility. In administering a federally-facilitated Marketplace, HHS will consult with stakeholders and will administer Marketplace functions in accordance with the final regulation while at the same time leaving-in flexibility to “design processes and procedures that reflect local market dynamics.”
• Interaction with State insurance departments; coordination and harmonization related to the sale and management of Qualified Health Plan (QHP) products. In establishing a federally-facilitated Marketplace, HHS will work with States “to preserve the traditional responsibilities of state insurance departments” and “will seek to harmonize [Marketplace] policies with existing state programs and laws whenever possible.” Federally-facilitated Marketplace administration relates only to the Marketplace-based health insurance market. Therefore, HHS will limit its direct review of QHP certification standards to those standards that are not captured in State insurance department administration and licensing requirements.
  • At the same time, in a federally-facilitated Marketplace, the final determination of QHP certification and ability to sell in a Marketplace lies with the federal government. Where a State insurance department’s standards overlap with those set forth in the federal QHP certification rule, HHS will confirm the outcome of the State’s review rather than conduct an independent review. “To the greatest extent possible,” HHS plans to work with states to “preserve the traditional responsibilities of state insurance departments.” HHS will “seek to harmonize [Marketplace] policy with existing state programs and laws whenever possible.”
  • HHS is “currently working to determine” the extent to which activities conducted by state insurance departments such as the review of rates and policy forms could be recognized as part of QHP certification process and is working with the National Association of Insurance Commissioners (NAIC) to utilize the System for Electronic Rate and Form Filing (http://www.serff.com/) as part of the QHP certification process.
  • Federally-facilitated Marketplace certification activities do not supplant State insurance oversight; indeed, States will “continue to perform their traditional regulatory role for issuers and health plans.” The agency does not intend to re-review QHP data or duplicate work performed by the State and will work with State to maximize the probability that HHS accepts the state’s recommendation. HHS has 14 days to respond to recommendation; the State has then 9 days to respond to HHS’s concerns and request reconsideration. Federally-facilitated Marketplaces will make final decisions within 5 days of receipt of State’s response. (Multi-state plan (MSP) insurers however, will have to undergo rate review from both State and the Office of Personnel Management (OPM); if a dispute arises and the State withholds approval of a MSP rate that OPM determines to be “arbitrary, capricious, or an abuse of discretion”, then OPM will make the final decision absent State approval.
  • HHS anticipates that QHP issuers doing business in a Partnership Marketplace will have a designated Federal Account Manager, who will be point of contact between HHS and QHP issuer. HHS expects that state’s participating in Partnership Marketplaces will have primary responsibility for QHP issuer oversight and investigating QHP performance. States will also make recommendations to HHS for a decertification process; however, HHS will monitor those issues that directly relate to other areas of the federally-facilitated Marketplace, including federal funds.
  • States operating in Partnership Marketplaces will coordinate with HHS on quality reporting and display requirements. HHS intends on making quality reporting requirements a condition of QHP certification beginning in 2016. Under current proposed regulations each federally-facilitated Marketplace collects accreditation information from issuers and plans seeking QHP certification. Until QHP-specific quality ratings are available, each federally-facilitated Marketplace website will display Consumer Assessment of Healthcare Providers and Systems data results when available.
  • States participating in the Partnership Marketplace will use a data collection tool that aligns with the federally-facilitated Marketplace infrastructure.
  • Federally-facilitated Marketplaces will certify as a QHP “any health plan that meets all certification standards.” The certification elements will consist of: (1) licensure and good standing; (2) network adequacy (“in states meeting minimum Federal standards, verify state review. Otherwise review network adequacy data submitted in QHP Issuer Application”); (3) essential community providers (“Collect information on inclusion of ECPs in provider networks and review for sufficiency”); (4) accreditation; (5) program attestations; (6) essential health benefits; (7) actuarial value standards, including variations for cost-sharing reductions; (8) discriminatory benefit design (through plan-level analysis) “targeting areas where discrimination would most likely occur;” (9) meaningful difference (reviews to determine whether there is a meaningful difference in QHPs offered by the same issuer “to ensure that a manageable number of distinct plan options are offered”); (10) service area (to confirm “that service area is at least one county or that smaller service area is necessary, nondiscriminatory, and in the interest of consumers”); and (11) rate reviews; HHS intends to release an electronic QHP Issuer Application in early 2013 that will be made publicly available. A model application was released on November 20, 2012,^[10] requesting public comment that “includes relevant issuer, rate, and benefit data standards.” Agreements between federally-facilitated Marketplaces and issuers are expected in late summer, 2013.
  • Federally-facilitated Marketplaces will use Account Managers to provide technical assistance and support to QHP issuers. The federally-facilitated Marketplace will “coordinate its oversight and management activities with state regulators to streamline processes and reduce duplication of effort to the extent possible” and will “recertify QHPs periodically in future years”; federally-facilitated Marketplaces will perform other plan management functions such as reconsidering certification decisions, creation of a decertification process, memorialization of QHP agreements, managing plan data display on the federally-facilitated Marketplace Website, recertifying QHPs, and establishing an annual issuer compliance process in the areas of licensure, solvency, accreditation data, network adequacy, plan level rate and benefit data, and changes to service areas and ownership.
• QHP accreditation and ratings. Federally-facilitated Marketplaces will use a federal four-year phased in process for ensuring that by the end of their fourth year, QHPs sold in those Marketplaces will be accredited. Federally-facilitated Marketplaces also will follow a phased federal approach to Marketplace quality reporting and display requirements, with reporting requirements for QHP issuers begin in 2016 and rating information on display in the 2016 open enrollment period for the 2017 coverage year.
• Medicaid and CHIP eligibility determinations and agency coordination. Federally-facilitated Marketplaces will determine eligibility across insurance affordability programs using a single streamlined application, and will either determine or “assess” eligibility based on Modified Adjusted Gross Income (MAGI). Where the process is assessment rather than determination, the federally-facilitated Marketplace will electronically transmit the information to each State Medicaid and CHIP agency for final determination and notification of eligibility or ineligibility.
  • Decisions will be based on “MAGI-based income standards,^[11] citizenship and immigration status, other eligibility requirements, and standard verification rules and procedures.” Federally-facilitated Marketplaces will “connect with” State Medicaid and CHIP agencies and will collect agency policies, in order to reduce the administrative burden associated with access to verification data, transmission of data, and information related to whether dual applications exist for the same individual. QHP products will not be made available for either Medicaid or CHIP purchase. The federally-facilitated Marketplace will engage with the Medicaid and CHIP agencies on a range of issues: outreach, eligibility determinations and appeals; exchange of information; procedures for individuals who transition among insurance affordability programs; policies for cases in which family members are insured through different affordability programs, and call center services. The federally-facilitated Marketplaces will develop cross-functional teams covering the business, administrative, and legal aspects of coordination.
  • Under proposed Medicaid and CHIP eligibility regulations, a State agency must specify in the State plan whether it is delegating authority to conduct fair hearings to the Marketplace and the scope of the delegated authority (for example, if delegation is limited to fair hearings for individuals determined ineligible for Medicaid by the Marketplace or whether the delegation includes individuals determined ineligible by the Medicaid agency). “We note that an [Marketplace] must agree to any delegation of authority and we do not expect that either the federally-facilitated [Marketplace] or the HHS appeals entity will accept delegated authority to adjudicate appeals of any Medicaid eligibility determinations which were not made by the federally-facilitated [Marketplace] due to resource constraints.” Medicaid agencies entering into eligibility determination delegation agreements will be expected to issue a combined eligibility notice. The combined process will be effective January 1, 2015.” States with a federally-facilitated Marketplace will only be able to provide a combined eligibility notice prior to January 1, 2015 for eligibility determinations made by the Marketplace. Exemptions from CHIP waiting period determinations will be made by CHIP agencies under a transfer agreement from the federally-facilitated Marketplace to the agency of cases in which CHIP eligibility is likely pending the outcome of the exemption assessment.
• Navigators and in-person assistance. Federally-facilitated Marketplaces will have fully functioning Navigator programs and will supplement these services with in-person assistance from a variety of other resources including agents and brokers. HHS will provide agents and brokers with a portal to the Marketplace Website “if applicable standards are met” and federally-facilitated Marketplaces will offer Web broker capabilities. Federally-facilitated Marketplaces will select at least one Navigator that is “a community and consumer-focused non-profit group.”^[12] A Navigator Grant Funding Opportunity will be issued in early 2013, and States cannot require Navigators to hold a producer [agent or broker] license. However, States may impose Navigator-specific licensing and certification requirements so long as the requirements do not amount to a producer license. Both federally-facilitated Marketplace and Partnership Marketplace Navigators will be required to undergo training. In Partnership Marketplaces, the State is responsible for day-to-day management of Navigators and a separate in-person assistance program that operates through a contract with the federal government. Agents and brokers in all federally-facilitated Marketplace States will use the agent and broker web portal and complete Marketplace training and registration. In addition to, but distinct from, the Navigator program, HHS proposes that States participating in State-Based Marketplaces or consumer support Partnership Marketplaces also will build in-person assistance programs to assist consumers during the initial enrollment period. The HHS policies specify that consumer assistance can be funded from establishment grants and will have the same training and standards that apply to Navigators.
• SHOP Marketplace. Federally-facilitated Marketplaces will assist both employers and agents and brokers, and employers will be able to “model various choice scenarios (such as by changing the employer contribution percentage) before making a final selection. They will perform plan purchasing functions, collecting single aggregated payments from employers and paying QHP issuers selected by employers. Federally-facilitated Marketplaces will also collect data on health plan rates and provide support for multi-state employers. HHS anticipates stakeholder input on SHOP policies and operations.
• Familiarity of staff with State policies. Federally-facilitated Marketplace call center personnel and the website will provide information consistent with State law and Medicaid and CHIP eligibility standards. States choosing a Partnership Marketplace will oversee the Navigators program and may also provide additional outreach.
• Federal and State enforcement. Federally-facilitated Marketplaces certify plans, and do not enforce State law standards. Their role is to defer to States on matters of licensure and to verify QHP compliance with federal certification standards.
• Funding. CMS proposes that federally-facilitated Marketplaces will be funded by a 3.5 percent premium tax, although this number may be adjusted to take into account State-Based Exchange rates. Marketplace user fees will support activities such as consumer outreach, information, and assistance activities. These funds are separate from grants States receive to build interfaces with the federally-facilitated Marketplace or to operate a Partnership Marketplace.
• State support for serving federally-facilitated Marketplaces. Under “certain circumstances” HHS will use Marketplace establishment funding to support State activities, such as developing a data system interface, coordinating the transfer of insurance licensure information, and other Marketplace support activities. HHS will continue this funding after ACA establishment funds are gone and will make federally-facilitated Marketplace tools available to all State-based and Partnership Marketplaces.
• HHS Role in State Partnership. Because the statute does not provide for divided authority, HHS will take an approach in Partnership Marketplaces that will maximize the State role, even where responsibility cannot fully be delegated. HHS will attempt to “maximize the probability that the agency will accept State recommendations without the need for duplicative reviews.”^[13] The federal government will carry out all Marketplace functions not performed by States in the partnership model, including enrollment, establishment and maintenance of the Marketplace Internet website, and the call center. The risk adjustment program will be operated by HHS for any state without an approved State-based Marketplace (see 45 CFR 153.310(a)(2)). The federal government will be responsible for conducting stakeholder as well as regular and meaningful Tribal consultations consistent with the HHS Tribal Consultation Policy, in states with a Partnership Marketplace.

Interview with CCIIO Director Gary Cohen

Sara Rosenbaum (SR): In those states not running their own Marketplaces, will the federally-facilitated Marketplace be ready to operate in time for open enrollment on the 1st of October, 2013?

Gary Cohen (GC): Yes, they will. HHS is hard at work now building the infrastructure processes and information technology that’s necessary to support the federally-facilitated Marketplace, and we’ve made great progress. We’re on track so that consumers in every state will have access to affordable high quality coverage through the Marketplace for open enrollment October 1, 2013, and then coverage beginning January 1, 2014.

SR: And that date you’re assuming is good regardless of whether it’s a partnership Marketplace of a federally-facilitated Marketplace?

GC: That’s correct, there won’t be any difference.

SR: How many states do you think will use the federally-facilitated Marketplace at this point, and will the Marketplace be able to accommodate all the states that might want to use it?

GC: As you know, there are a number of states that are making progress toward establishing state-based Marketplaces, but at the same time, we’re committed to ensuring that everyone throughout the country will have access to qualified health plan coverage through a Marketplace beginning October 1, 2013 open enrollment and January 1, 2014 for coverage, if they’re eligible. We won’t know until later this year how many states are going to be in the federally-facilitated Marketplace, but we’ve designed it in a way so that’s it scalable and can operate in every state that won’t have its own state-based Marketplace.

SR: So in a state pursuing a state-based Marketplace, if the state realized that it was going to need extra time, the federal Marketplace could come in and backstop the state?

GC: That’s right.

SR: Could you describe for us the activities that are now underway, with a little bit of detail, which are part of getting the Marketplace ready to go live?

GC: Sure, I’d be happy to. So first, obviously, we have to have products that are going to be available to be sold in the Marketplace. And we have an application that issuers are going to submit beginning in April, and then we’ll be using tools that we’re developing to evaluate those products to determine whether they can qualify to be offered in the Marketplace. Those decisions will obviously be made in advance of the October 1, 2013 open enrollment date, so that we’ll have the products available for consumers as of that point.

The next step is that consumers are going to have to have the ability to both shop for products in the Marketplace and to get a determination of whether they’re eligible for tax credits, reduced cost sharing, or whether they’re eligible for Medicaid or CHIP. So we’ve developed a single streamlined application that consumers will be able to access either online or in paper form, if necessary. We actually published those applications last Friday for comment. So when consumers apply, no matter where they are, whatever state they’re in, in the federally-facilitated Marketplace, they’ll have the same experience of being able to go online and enter information to determine whether or not they might be eligible for subsidies, and then proceed on to looking at the plans that are available to them in their location, and make a choice as to what coverage might be best for them or their family or their business. In addition, we’ll be providing consumer support to help purchasers through that process. We’re building a website that will have chat capability. We’re developing a 24-hour call center so that consumers will be able to use those tools to get information on the process, find out what they’re eligible for, compare plans, and then get enrolled.

Finally, as part of this process to determine eligibility, we’ll need to verify certain information that consumers will be providing to us. We’re building what we call the Data Services Hub, which will provide one connection to common federal data sources that are needed to verify information, such as income, citizenship, immigration status, and access to minimum essential coverage. We’ve completed the technical design and reference architecture for the Hub and we are establishing cross-agency security frameworks as well as protocols for connectivity between the different agencies, and we’ve begun testing the hub.

And then, obviously we also need to get out there and make sure that people know about what’s available to them and what the federal Marketplace offers to them. Drawing on CMS’ experience with implementation of Medicare Part-D and CHIP, and from the coordination work that we’ve been doing with states and stakeholders, we have a comprehensive and multi-channeled plan for consumer education and outreach that is rooted in consumer research, and you’ll see those efforts beginning to gear up soon.

SR: What steps is HHS now taking to encourage states that did not pursue a state-based Marketplace to pursue a partnership?

GC: From the beginning, this process and really all the implementation of the ACA has been guided by our belief that states know their own needs and the needs of their residents better than anyone else. That’s why we’ve worked so hard to give states both the flexibility and the resources to create Marketplaces that work best for their citizens. In addition, we respect the states’ traditional role in regulating the insurance market. In conversations that we’ve been having with the states with respect to the partnership we emphasize that those options give states the most flexibility and the most ability to continue to do the things that they’ve done traditionally with respect to regulating their insurance market and providing assistance to their own citizens.

The Partnership option provides a pathway to states that may want to operate a state-based Marketplace in the future. On January 3, 2012, we announced the release of additional information on how the partnership option can work for states that are not yet ready to operate a state-based Marketplace. The partnership guidance that we published provides valuable information on those details, and breaks down how states would work with us to perform certain activities that are inherent in operating the Marketplace. In addition to the partnership guidance we released, we have been and continue to provide states directly with assistance that they need in order to design and build a Marketplace that works best for them and for their residents.

We have engagements with states through one-on-one telephone calls; we did what we call “launch consultations,” providing an overview of the state partnership and how that works, explaining what we would expect the states to do in a partnership, and answering questions from our team here that states have as to how they might be able to function with a partnership. In addition, as part of the application process, we walk through requirements in our blueprint and have specific teams that are dedicated to different aspects of the work that’s required, who basically go through and help states figure out how they will respond to the requirements set forth in the blueprint.

SR: And a state can be partner on consumer support or plan management or both, correct?

GC: That’s correct.

SR: I assume the support teams are there to be able to help states sort of think through the relative value of partnering on one or both. Are there considerations for states in terms of partnering on one or both aspects of this that you think might be particularly important to point out to our readership?

GC: I think what’s most attractive to states with respect to the partnership model involves both of the different areas in which states can be involved. The first one, which is plan management, enables the state to retain its traditional role as having the direct relationship with the insurance companies that are offering products in their state. On the consumer assistance side, insurance departments traditionally do a really good job of responding to the needs of the citizens in their states, whether it’s responding to complaints or providing information. And the consumer assistance partnership enables a state to continue that direct relationship with the consumers, providing education and outreach to them in a way that is really tailored to the particular demographics, population, geography, etc., of their state.

SR: So these are the two elements that really play to the strength of the state.

GC: Exactly right.

SR: There are, of course, going to be a number of states that will end up opting for a full, federal Marketplace without a formal partnership. Will HHS be providing guidance on how the federal Marketplace will operate in those states? And even though it may not be a formal partnership with a formal blueprint, are there going to be opportunities for collaboration?

GC: Absolutely. We really have provided a significant amount of guidance already because most of what is contained in the Marketplace regulations applies to the federally-facilitated Marketplace as well as to a state-based Marketplace. But to answer your question, states will continue to perform the regulatory activities that they have traditionally performed, and we intend to rely on that to the greatest extent possible and not duplicate what the states are doing. For example, states will continue to review insurance products and approve them for sale in the state. To the extent that they are reviewing requirements that apply to all products that are sold in the market, whether it’s in the Marketplace or in the broader insurance market outside of the Marketplace, we are not going to duplicate those reviews. So they’ll be looking at Essential Health Benefits, they’ll be looking at actuarial value, etc., as part of their normal regulatory function, regardless of whether the product is being sold in the Marketplace or outside of it.

SR: With some of the certification standards, as one would expect, there is obviously a major overlap with the standards that a plan would have to meet in order to be licensed for sale in the state.

GC: That’s exactly right. What we’ve said is that to the extent that states are going to do that—and we expect they will—we are not going to duplicate that effort. We’re going to rely on the states carrying out their traditional regulatory activity.

SR: And what about in those cases where there may or may not be a comparable state standard, or where the assumption was that a state might’ve developed a standard? For example, my sense is that most but not necessarily all states, at this point, have standards for a provider network. And my guess is that virtually no state insurance laws have a standard for essential community providers—there may be a few states here and there, but the definition also may be different. And so I’m wondering how the federal Marketplace review process will proceed when there is simply an absence of a state standard in the licensure scheme.

GC: What we’ve done is laid out our approach to certification of qualified health plans for 2014 in the state partnership guidance that I referred to before. We expect that states will—if they are doing reviews—draw upon the interpretation of the requirements that we’ve set forward. And to the extent that they have, we will respect and defer to those determinations. We hope that by articulating a reasonable interpretation for each requirement for certification, this will improve the state-federal relationship, will streamline HHS’ process for reviewing state work, and will offer issuers additional consistency in complying with both state and federal standards.

It’s important to point out, too, that in some cases what we’ve articulated are transitional policies that will accommodate timeframes that we have to deal with for the first year. For example, with respect to the essential community providers you mentioned, in the first year we’ve said that CMS will evaluate qualified health plan provider networks for inclusion of essential community providers using a tiered approach. As part of the QHP issuer application, issuers will indicate which essential community providers participate in their provider networks. Issuers that have provider networks that include larger numbers of ECPs, and who agree to offer contracts to a variety of providers, will not have to provide any further supplemental response or justification to CMS. Issuers with provider networks that include fewer ECPs—specifically, fewer than 20% of the available ECPs in the plan service area—will need to submit an additional justification as to why they are not able to contract with more, as part of their application.

And as you noted, states do vary with respect to their standards on network adequacy, so it’s really going to be a question of us looking to see what extent states are able to do reviews that comport with the standards we’ve articulated.

SR: On a standard like network adequacy, where the federal regulation is written in a highly deferential manner, and there happens to be a state that doesn’t have a network adequacy standard in its insurance laws, what’s the strategy for the federal Marketplace with respect to QHP certification? Would you look to NAIC standards in situations where there’s just no state standard?

GC: Well for network adequacy and a number of other areas, the State Partnership Exchange Guidance explains our approach where a state does not have an effective standard. In other areas, we may publish future guidance. On network adequacy, the State Partnership Exchange Guidance establishes that if HHS determines that a state does not have an effective network adequacy review, then the FFE will accept an issuer’s attestation to meeting the network adequacy standard if the issuer is accredited for an existing line of business (commercial or Medicaid) by an HHS-recognized accrediting entity. If the issuer is not accredited, the FFE will collect an access plan for the QHP. HHS will also collect provider network data from a sampling of selected issuers following certification, and will also monitor accessibility complaints. HHS would determine whether a state has an effective network adequacy review based upon whether the state has statutory authority to review issuers’ networks, and whether the authority allows the state to determine whether the issuer/health plan maintains a network sufficient in number and type of providers to ensure that all services will be accessible without unreasonable delay.

SR: Got it, so where a state standard exists and that standard aligns with the federal standards and definitions, then you will defer to the state review?

GC: Correct.

SR: And where there is an absence of a standard because the assumption was that it would be developed by a state, but the state has not developed a standard or doesn’t have one in its licensing scheme, you intend to issue further guidance on how a standard would be developed in those situations?

GC: Generally, that’s right. We have issued guidance outlining our approach in several areas, but for any others not included in the State Partnership Exchange Guidance, we will issue further guidance.

SR: One of the issues that generating a lot of questions has to do with navigators. Specifically, states cannot under your rules, restrict navigators to people who are licensed insurers and brokers. But what about other kinds of state laws that may define the responsibilities of navigators, or the manner in which they do their counseling—how much will you be looking to those state laws?

GC: Well, we will be publishing additional guidance on navigators soon, which of course will articulate this a little bit more. But our plan is to allow states to have some flexibility in determining what the criteria me be. For example, on training, there might be state specific requirements there. Obviously it has to be done in a way that does not prevent successful operation of a Navigator program in the state. And that was the basis for the agent/broker policy we articulated. We didn’t want to make it impossible for a Navigator program to exist. There were certain definitions of a navigator that would be inconsistent with a requirement that they have to be agents and brokers. So I think we would have to look at those and make sure they are complementary, and not creating a problem.

SR: Meaning that they didn’t conflict with the intent of federal law?

GC: Exactly.

SR: In the federally-facilitated Marketplaces, you described earlier the kinds of consumer application support that will be available. Looking at what will be the single streamlined online Marketplace application—it’s a significant application. I’m wondering what kinds of outreach will be undertaken by the federal Marketplace to community organizations, advocacy organizations, and community health providers, that will be useful as in-person consumer assistance. For example, there are over 8,000 community health center sites in the country at this point, and I’m wondering what use might be made of those, or head start programs, or other programs that are heavily embedded in the community. Because in a state-based or partnership Marketplace, these places might well be part of a community assistance infrastructure of sorts. How might the federal Marketplace deal with this issue?

GC: You’ve actually answered the question. We plan very much to try to take advantage of all those resources that are out there in the community. The call has gone out to not only to all the sister agencies here at HHS, but really throughout the administration at the cabinet level, to bring together every element of the community as part of what is really a campaign to get the word out to people as to what this law is all about and what it offers them. I think you’ll see really a multi-faceted approach. The part of it that we are most directly responsible for here is the navigator program, and there will be a navigator funding opportunity announcement coming out very soon for grants. What we expect is that the navigator grants will very much be going out to local community organizations like the ones you’ve mentioned. And then there will be a training made available that will really educate those folks as to what they need to do to be able to provide information to consumers in their local communities. We have taken the approach that we want to begin this effort in a timely way in a time when it’s close to when people can actually take action and begin to enroll. It will be building, beginning now and through the spring and into the summer, so people really have all the information and tools that they need for October 1, 2013.

SR: I think the community health centers outlet is probably your most potent outlet. They have over 8,000 sites currently and will probably grow close to 12,000 sites in the next several years. Almost half their patients at this point are uninsured, most of that group is adults, and most sites have significant experience with online application assistance.

GC: I completely agree with you. I’ve been in several meetings with HRSA about making sure we take full advantage of that.

Key Issues

A number of important issues emerge as the task of building the federally-facilitated Marketplace continues:

• More Partnerships? Will additional states opt for Partnerships before the February 15th 2013 deadline?
• Deference to state regulators. The HHS policy issuances as well as the interview with Gary Cohen all point to a decision on the part of the federal government to give maximum deference to the state licensure regulatory process and to use state standards where they exist and do not come conflict with a federal statutory or regulatory requirement. The question of course is how conflicts will be identified and differences will be resolved in those cases in which the federal government concludes that a state standard either does not exist at all or does not achieve the level of effectiveness required under federal law. The question of federal preemption of state insurance regulatory law is not a new one; the Health Insurance Portability and Accountability Act (HIPAA) raises the same questions how federal deference occurs where state regulatory standards must be aligned with federal requirements. In the case of HIPAA, the federal government has taken a highly hands-off approach. The question is whether this approach will carry over to the new Marketplace activities. How will the process of resolution work? In the case of multi-state plans, OPM has laid out a formal resolution process for situations in which it determines a state licensure standard conflicts with federal requirements and waives it. Will a similar approach be developed in the case of the Marketplace?
• Navigators. The federal guidance seems to suggest that one non-profit community based Navigator might be selected; in the interview, Gary Cohen points to the need for and the potential to utilize thousands of outlets. Will the federally-facilitated Marketplace identify multiple community Navigator organizations for certification?
• Medicaid and CHIP coordination. The federally-facilitated Marketplace will need close coordination with Medicaid and CHIP agencies, and separate proposed Medicaid regulations call for the developments of working agreements. When will this agreement process commence? Will draft agreements be made available for public comment, particularly around the question of how application referrals will be managed by the agencies in order to ensure prompt determinations with a minimum of paperwork redundancy?

The team at Health Information & the Law has written a detailed overview of the Final Rule, which highlights the key changes to the Privacy, Security, Enforcement, and Breach Notification Rules. A longer, more comprehensive analysis piece along with a comparative table of changes included in the Final Rule is forthcoming at their website, HealthInfoLaw.org.

Health Information and the Law will enable cross-state comparisons and analysis of state and federal law on key health information issues, including how the revolution in the creation, collection, and exchange of health information affects classic legal issues such as privacy, confidentiality, and liability for the quality and safety of health care. It offers insights into key legislation, including the HIPAA Privacy Rule, the HITECH Act (part of the American Recovery and Reinvestment Act of 2009), and the Patient Protection and Affordable Care Act (ACA).  Materials related to the health information aspects of state health insurance exchanges will be included as well as they become available.

HealthInfoLaw.org is a project of Legal Barriers, a program of the Robert Wood Johnson Foundation at The George Washington University that creates resources for legal analysis to address a range of legal matters related to value-based purchasing, health information, and health-system reform aimed at quality, efficiency and information transparency.

 Two Years and Counting

March 23, 2012, marked the two-year anniversary of the Affordable Care Act (ACA), and the Administration’s two years worth of implementation efforts that span the full scope of the law.  Major areas of implementation encompass the range of reforms under the Act: improving performance in the private insurance and employer-sponsored health plan markets; strengthening Medicare, Medicaid and CHIP; improving health care access and building a stronger health workforce; improving health care quality and accountability; increasing investments in public health; strengthening health care fraud and abuse controls; and reforming federal policies applicable to tax-exempt hospitals.

Health Reform GPS reported on the first year of implementation efforts here.   This updated table includes both year-one and year-two key agency implementation actions.  Year-two actions appear in italics.

ACA implementation efforts in Year Three can be expected to reach more deeply into the core of the reforms.  Among other topics will be regulations further delineating the contours of “essential health benefits” for health plans sold in the individual and small group markets, final regulations governing state health insurance Exchanges and Qualified Health Plans (published in the Federal Register on March 23, 2012), and federal policies on the ACA’s principal Medicaid expansion to reach all low income non-elderly persons by January 2014 (published in the Federal Register on March 27, 2012). Additional regulations are also expected on the coordination of eligibility with other affordable insurance programs within the Exchanges.

Major Agency Implementation Actions Under the Affordable Care Act

One Year and Counting

March 23, 2011, marks the one-year anniversary of the Affordable Care Act, and the Administration’s first year implementation effort spans the full scope of the law. Major areas of implementation encompass the full range of reforms under the Act: improving performance in the private insurance and employer-sponsored health plan markets; strengthening Medicare, Medicaid and CHIP; improving health care access and building a stronger health workforce; improving health care quality and accountability; increasing investments in public health; strengthening health care fraud and abuse controls; and reforming federal policies applicable to tax-exempt hospitals.

Health Reform GPS reported on the first six months of implementation efforts here. This updated table sets forth the major provisions of the Act as well as key agency implementation actions since our initial implementation table was published. Updates appear in italics.

ACA implementation efforts in Year Two can be expected to begin to reach the core of the reforms. Among other topics will be regulations delineating the contours of “essential health benefits” for health plans sold in the individual and small group markets, regulations governing state health insurance Exchanges and Qualified Health Plans, and federal policies on the ACA’s principal Medicaid expansion to reach all low income non-elderly persons by January 2014. Regulations aimed at curbing payment for unnecessary hospital care also can be expected, along with federal standards governing Accountable Care Organizations and other health care integration arrangements. Federal standards aimed at promoting disclosure of nutritional content for vending machine and restaurant food are anticipated as well.

After a spring and summer of warm-up action in multiple courts, the first judicial verdict is in: health reform is constitutional. In Thomas More v Barak Hussein Obama (Case No. 10-CV 11156, E.D. Mich., October 7, 2010), Judge George Steeh quickly disposed of plaintiffs’ claims that the Affordable Care Act was unconstitutional.

As in all federal court cases, the starting point is a determination as to whether the court has the power to hear the case at all, that is, whether the plaintiffs have suffered the type of legal “injury” that allows them to seek judicial redress and whether the case is ripe for review by a court. Finding that the plaintiffs had standing given the impact of the mandate on their current financial circumstances and that no further factual development was necessary before it entered the fray, the court then turned to the merits of the claims.

In Judge Steeh’s view, extensive United States Supreme Court precedent identifies two separate but related issues in determining the constitutionality of a law under the Commerce Clause. (Because the opinion holds that the Act falls squarely within the purview of the Commerce Clause, it was unnecessary in Judge Steeh’s view to consider whether the law was a separate constitutional exercise of Congress’ taxing and spending powers under the General Welfare Clause). The first issue focuses on whether the type of activity that a federal law seeks to regulate has a direct and substantial effect on interstate commerce, in this case, the national market for health insurance. The second issue is whether regulation of the individual activity is essential to the Act’s broader regulatory scheme.

Although the Thomas More plaintiffs, like those in Virginia and Florida attempt to characterize the law as one that regulates economic inactivity, the court had no problem finding that the conduct – the decision to go without health insurance – was precisely the type that is reachable under the Commerce Clause. In the court’s view, “[t]he decision to forego health insurance coverage in preference to attempting to pay for health care out of pocket” is “plainly economic” and has a direct impact on the national market for health insurance; some $43 billion in cost-shifting occurs annually as a result. Flatly rejecting the assertion that the uninsured exist outside of the market, Judge Steeh concluded that all persons are “inseparable and integral members of the health care market” and furthermore, that “living breathing beings” cannot opt out. Everyone needs health care; how to pay for it is the type of economic decision that lies well within Congress’ reach.

As to the second issue – whether the mandate is part of a larger regulatory scheme, the court placed the obligation to secure coverage at the heart of the Act, finding that the mandate is explicitly designed to address insurance stabilization and the problem of cost-shifting. Without the mandate, the broader market regulations, including the bar against discrimination based on health status would not be possible; as long as people can remain outside of the insurance system, the conditions for market stability cannot exist, and costs inevitably will spiral out of control for those who do buy coverage. It was the “prospect of driving the insurance market into extinction that led Congress to find that the minimum coverage provision was essential” to the Act’s larger regulatory scheme.

The constitutional odyssey that the Affordable Care Act is traveling will continue, quite possibly for years to come. But the court’s plain-spoken analysis cuts to the heart of the matter and is the last word — for the moment.

Summary of GOP Repeal and Replace

Repeals all provisions of the ACA and would replace with: medical liability reform; prohibiting coverage denials and annual and lifetime spending caps for people with prior coverage who have or develop pre-existing conditions; allowing the purchase health insurance across state lines; expanding health savings accounts, strengthening the doctor-patient relationship, ensuring access for patients with pre-existing conditions, expanding high risk pools and reinsurance and provides incentives to states to develop programs to lower premiums and increase coverage, and permanently prohibiting taxpayer funding of abortions.

Key Differences between ACA and “Pledge” Principles

Insurance Reforms

The ACA prohibits health insurance discrimination against all individuals with pre-existing conditions and limits the ability of insurers to charge higher premiums for the sickest individuals. The GOP replacement prohibits insurance discrimination against people who had previous coverage, but does not apply to individuals who are uninsured or have breaks in coverage, and places no limits on how much more an insurer may charge for the sickest individuals. The ACA provides for temporary high-risk pools and reinsurance coverage until insurance reforms are effective, and the GOP replacement does not appear to end those programs. The ACA provides grants to states to establish insurance exchanges, a marketplace for those without employer coverage and small businesses. The GOP replacement allows the purchase of insurance across state lines and lets small groups join together to purchase coverage.

Affordability

The ACA provides tax credits to families and small businesses to help them afford premiums, and expands the Medicaid program for the poorest individuals. The GOP proposal would expand health savings accounts (HSAs) that accompany high-deductible health plans, and provide incentives to states to lower premiums and reduce the number of uninsured Americans.

Improving Quality and Lowering Health Costs

The ACA includes provisions to improve quality and lower costs through delivery system reforms such as chronic disease management, medical homes, anti-fraud initiatives and investments to improve workforce, public health and long-term care. The GOP replacement would lower costs through medical liability reform.

Impact on the Federal Deficit

The ACA reduces the deficit by $143 billion from 2010-2019. The document does not indicate whether the GOP plans to pay for the cost of repeal, which if unaddressed, will add an estimated $455 billion to the deficit over the next 10 years, the document does, however, indicate that the GOP plans to “put the government on a path to a balanced budget.”

Taxpayer Coverage of Abortion Services

Since 1976, federal appropriations law has imposed limits on the use of federal funds to finance abortions. The ACA establishes restrictions on abortion coverage in the case of individual and group health plans sold in state exchanges. The GOP replacement “permanently prohibits taxpayer finding of abortion.” For more information on ACA and abortion coverage see the implementation brief: Abortion Coverage.

Impact on Current Law

Although many provisions of the ACA do not go into effect until 2014, some provisions have already been implemented. Those provisions already in place which would be repealed include among other provisions: phase-one of closing the Medicare prescription drug “donut hole,” permitting dependents to age 26 to remain on their parents insurance policies, tax-credits to small businesses to help them afford health insurance coverage for their employees, prohibiting insurers from imposing pre-existing conditions for children, home and community-based care options for seniors and individuals with disabilities and grants to community health centers. For a complete listing of provisions that have been implemented and would be repealed, see the Editor’s Comment: Six Months and Counting.

Enacted to secure the nation’s private pension system, the Employee Retirement Income Security Act (ERISA) has become a pillar of U.S. health policy because of the legal framework it establishes for employer-sponsored group health benefit plans. Even as it creates crucial protections for workers and their families, ERISA simultaneously diminishes the power of states to regulate employee health benefits. Furthermore, the law curtails the legal rights of patients who experience death or injury as a result of the negligence or misconduct of health benefit plan administrators. The Affordable Care Act preserves the ERISA framework, expanding the federal standards applicable to employee health benefit plans while preserving the law’s shielding effects against state regulation and health plan liability. A major unanswered question under the Act remains how the ERISA shield will affect the rights of patients whose employers purchase coverage through state Exchanges.