By Sara Rosenbaum

This Update summarizes the CMS Frequently Asked Questions (FAQ) document issued on December 10, 2012.

Exchanges and Market Reforms

• Deadlines. CMS does not plan to further extend the deadlines for states to determine their level of involvement in implementing Exchanges. States that wish to operate a state-based exchange must notify the Department by December 14, 2012. States that wish to pursue a state partnership exchange may submit their letters and Blueprint Applications on a rolling basis and the HHS Secretary will similarly approve on a rolling basis. A Blueprint is due by February 15, 2012.
• Application timelines. Grants to establish an Exchange and test their operations during 2014 will be awarded through 2014, and grants may be awarded until December 31, 2014 for approved establishment activities that fund first-year start-up activities. Grants are available for state Partnership exchanges, for state activities in connection with a Partnership. States will not be required to repay these funds as long as they are used for approved activities in the grant and cooperative agreement awards.
• Charges for the use of the federal data hub. HHS will not impose charges on states for use of the federally-managed data services hub to support information exchange between Exchanges, Medicaid, and CHIP agencies and relevant federal agencies.
• Partnership exchanges. By February 15, 2013, states must submit a declaration letter and the relevant portions of the Blueprint to receive approval or conditional approval. In a Partnership, the focus is on plan management and consumer activities.

Federally Facilitated Exchanges (FFEs)

• Aligning FFEs with state law. “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 Exchange 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 the certification of qualified health plans by a FFE.” HHS is working with the National Association of Insurance Commissioners (NAIC) to utilize the System for Electronic Rate and Form Filing (http://www.serff.com, operated by NAIC) as part of the QHP certification process. HHS will also collect Medicaid and CHIP state policy data.
• Familiarity of FFE staff with state rules. FFE and State Partnership call center personnel and the website will provide information consistent with state law. Partnership states will oversee the Navigators program and may also provide additional outreach. Navigators will advise consumers, in a culturally and linguistically appropriate fashion, about QHPs, insurance affordability programs, and ombudsman help.
• State enforcement powers. Where the enforcement of state insurance law is concerned, FFEs are limited to certifying and managing QHPs and will not engage in general state enforcement activities. These will remain the purview of state insurance departments. HHS will defer to states on matters of licensure and will also verify QHP compliance with federal certification standards.
• Funding FFEs. FFEs will be funded by a 3.5 percent premium tax, although this number may be adjusted once final state-based Exchange financing decisions are made. Exchange 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 FFE or operate a Partnership.
• State support for serving FFEs. Under “certain circumstances” HHS will use ACA funding for Exchange establishment (§1311) to fund state support activities such as developing a data system interface, coordinating the transfer of insurance licensure information, and other activities needed to support the FFE. HHS will continue this funding after §1311 funds are gone and will make FFE tools available to all state-based and Partnership exchanges.

Market Issues

• How will market competition be promoted? HHS believes that the combination of subsidies, quality standards, and performance ratings will ensure quality and competition.
• Final regulations. HHS intends to publish final regulations on essential health benefits early in 2013, as well as regulations on actuarial value and market reforms.
• Benefit levels for EHBs. In order for a state EHB benchmark plan to satisfy the requirement that all EHBs be covered, states may choose from widely available products in their states and then supplement the benchmark in situations in which the state’s “base benchmark” (that is, the plan chosen as its benchmark starting point) “does not cover any items and services within an essential health benefits category.” Supplementation may be accomplished “by adding that particular category in its entirety from another base-benchmark plan option.” The resulting hybrid plan also would need to be adjusted so that it meets standards for non-discrimination and balance. HHS also will use a process to supplement a default plan in states that elect not to develop their own EHB benchmark. The agency will begin with the largest plan by enrollment in the second largest product in the state’s small group market. Supplementation would be drawn from the third largest product, the largest national plan by enrollment across states that is offered to federal employees, the largest pediatric vision and dental plans in the FEHBP market, and habilitative services as defined in the proposed EHB rules.

Multi-state Plans

• Multi-state plan compliance with state law and fair competition. OPM intends to use the same standards that apply to other QHPs. There are certain adjustments that OPM has proposed to the general QHP certification standards as part of its NPRM.

Bridge Plan

• Can bridge plans serving both Medicaid/CHIP and Exchange populations – and limited to these populations — be certified under the ACA? An Exchange may allow Medicaid managed care organizations to offer a QHP as a bridge plan as long as the QHP offered by the MCO complies with all applicable laws governing QHPs. The plan may, without violating the ACA’s guaranteed issue requirements, specify that its enrollment is limited to individuals whose income moves them between Medicaid and the Exchange and may limit its network under §2702 of the Public Health Service Act to individuals and families whose subsidy basis changes. The contract also would need to bar cost shifting from the non-Medicaid to the Medicaid population. In order for a bridge plan to operate, the plan must sign a legally binding contractual agreement to serve the crossover population. Individuals who enroll in a bridge plan also must not be “disadvantaged in terms of the buying power of their advance premium tax credits.” CMS indicates that additional guidance is forthcoming and that the states in which bridge plans are the most viable are those that operate their own exchanges.

Pre-Existing Condition Insurance Plan and Other High Risk Pools

• “Generally,” the pre-existing condition insurance pool will not exist past 2014, since the transitional reinsurance program should stabilize the transition of persons enrolled in high risk pools into Exchanges. However, HHS is now considering ways to enable states to continue their pools

Basic Health Plan

• HHS plans to issue guidance, but no date is specified.

Consumers

• HHS places a “high priorit[y]” on consumer outreach through the Navigator program, in-person assistance, and call centers. States and stakeholders “definitely” will have input.
• FFEs will offer Navigator programs. Consistent with the ACA, at least one of the FFE Navigators selected will be “a community and consumer-focused non-profit group.” A Navigator Grant Funding Opportunity will be issued in early 2013. States cannot require Navigators to hold a producer [agent or broker] license. Navigators will be required to go through federal training if they are operating in an FFE, whether wholly federally administered or a state Partnership. States may impose Navigator specific licensing and certification requirements so long as the requirements do not include a producer license.
• States operating in state Partnership Exchanges will be expected to build and operate an in-person assistance program, which is distinct from the Navigator program, and for which funding is available under §1311. The emphasis is on multiple tools.

Consumer Eligibility and Enrollment

• HHS is developing an online and paper single application that permits enrollment in QHPs, Medicaid plans, and CHIP plans. The single application will also support all insurance affordability programs. HHS sought comments in a July 2012 notice and is going through consumer testing. The final version is expected in early 2013 and HHS will also work with states that desire to develop their own applications.
• Consumers who are denied assistance under any insurance affordability program will have the option to pay full price for a QHP and will receive timely written notices containing appeals rights.
• A special HHS-administered system will determine shared responsibility exemptions and transmit the results of the determination back to state-based Exchanges, which will then notify individuals who seek exemptions. Exchanges will also notify individuals of their obligation to report changed circumstances that might affect the exemption. HHS intends to “shortly” issue more information on the exemption process, including applications and transfers.
• In FFEs, qualified individuals will be able to view and purchase QHPs. However, if individuals are Medicaid or CHIP-eligible, QHP purchase will not be permitted.

Medicaid

• There is no deadline for states to make a Medicaid expansion determination; a state’s Medicaid decision is independent of its decision regarding whether to operate an Exchange or apply for a state Partnership with the FFE. In early 2013 HHS will go operational with an online plan amendment system.
• States will have flexibility to start or stop their expansions, although the enhanced FMAP rates are fixed by statute (100% in 2014-2016, 95% in 2017, 94% in 2018, 93% in 2019, and 90% in 2020 and thereafter).
• States will not be permitted to partially implement the expansion group but must cover all individuals described in the group in order to receive the enhanced FMAP. States may seek partial expansion demonstrations, but if approved, demonstrations would receive only the normal FMAP. Beginning in 2017, HHS may consider alternatives to the full Medicaid expansion, when federal funding begins to drop “slightly,” as part of an Innovation Waiver application that states may wish to submit.
• The Administration no longer supports a blended FMAP proposal as part of the federal budget, particularly given the Supreme Court’s decision, which ties the enhanced FMAP to the new eligibility category as a “new program.”
• The Court’s decision affects only the eligibility expansion. Therefore, all other Medicaid amendments in the ACA that relate to the Medicaid/Exchange interaction and enrollment simplification are fully in effect. Exchanges will make either an eligibility determination or an eligibility assessment, depending on a state’s choice.
• In order to help states address added costs and administrative burdens associated with Medicaid eligibility expansion, 90% federal matching funds are available for new and improved eligibility systems capable of making MAGI determinations. HHS will be sharing system build information as well as business rules related to MAGI determinations. HHS also will “continue exploring opportunities” to provide states with additional support for the administrative costs of eligibility changes. Online applications, data-based eligibility rules, verification and renewal procedures, and the new federally-managed data services hub will also help defray state costs. The existence of one data hub will ease state verification procedures. Furthermore, in FFE states, the Exchange can, at state option, perform Medicaid eligibility determinations. Special 90/10 and 75/25 federal match rates remain available through 2015 for system modernization, and these enhanced rates are not contingent on adoption of the eligibility expansion.
• Individuals with incomes at 100% FPL who apply for coverage through state Exchanges in non-Medicaid expansion states will face premiums and cost sharing.
• States will receive the “highest matching rate possible” for the enrolled population. Thus, expansion states that implemented expansions before the 2014 effective date will receive the highest match to which they are entitled as of January, 2014. Thus, a state that expanded to all adults up to 100% FPL prior to January 2014 would receive the full enhanced rate for populations with incomes between 100 and 133%. Similarly, states that offered less than full benchmark benefits to the expansion population prior to January 2014 will receive enhanced match for the population, since the benefit design has changed. Finally, states that funded coverage for low income adults out of state funding prior to January 2014 will qualify for the full enhanced match since the population is considered newly eligible for Medicaid.

State Flexibility

• HHS welcomes input from states on how to make Medicaid administration more flexible through uses of waiver authority, learning collaboratives, model testing and other approaches.
• HHS will consider Medicaid expansion approaches that emphasize personal responsibility for health and the promotion of healthy behaviors. HHS is exploring options and “invite[s] states to continue to come to us with their ideas, including those that promote value and individual ownership in health care decisions as well as accountability tied to improvement in health outcomes.”

MAGI

• The MAGI conversion is required by law and applies regardless of whether states adopt the eligibility expansion for low income adults.

DSH

• HHS is preparing to issue a new methodology for Medicaid DSH payments. It is not clear how the new methodology may interact with state decisions not to implement the Medicaid reforms. Nor does HHS indicate whether states that reduce their uninsured by expanding Medicaid eligibility will lose DSH funding to other states.

Coordination between Exchanges and other programs

• States will be able to offer coverage through the same coverage source even in the case of families with different family members receiving different forms of affordability assistance (Medicaid, CHIP, premium tax credits). States can use Medicaid and CHIP funds to support the purchase of employer-sponsored assistance (although some wraparound assistance may be required in the case of employer-sponsored plans that impose higher cost sharing and lower benefit levels).
• In addition, states can use their Medicaid and CHIP funds to buy coverage for children whose parents are enrolled in a QHP with premium assistance, assuming that the QHP participates. This is because both Medicaid and CHIP (SSA §§1905(a) and 2105(c)(3)) permit funds to be used to purchase “group health plans and, under some authorities, for health plans in the individual market, which, in 2014, would include qualified health plans available through the Exchange.”
• The ACA envisions a coordinated system for making eligibility determinations across insurance affordability programs in order to foster continuity of care. Smooth eligibility transitions cannot wholly alleviate the issue; continuity will also depend “on whether and to what degree plans participate in both the Exchange and in Medicaid and CHIP, and the networks in such plans.” Premium assistance can help address this issue while “encouraging robust plan participation in Medicaid, CHIP, and the Exchange.” Rather than enrolling individuals in a Medicaid MCO, a state would use its premium assistance authority to buy enrollment in a QHP; this option may be most attractive for families with incomes close to the upper Medicaid limit. A premium assistance model would also be subject to Medicaid ‘wraparound’ requirements for Medicaid eligible persons for whom the state has bought QHP enrollment.

Issues

• Conflicts in state and federal law harmonization. What is the process for resolving conflicts in federal and state law harmonization in the case of FFEs? Will state insurance standards that are inconsistent with QHP certification standards simply be modified by HHS if a conflict exists with federal laws (for example, an issuer licensure standard that conflicts with a federal market reform standard)? Will HHS notify a state of the inconsistency and enter into a negotiation process? If so, how will the process operate? Who may initiate the process? Who would arbitrate the process? Will the results of the federal harmonization review process be made public?
• Non-discrimination and balance. HHS notes that in building an EHB benchmark, states must adjust their “base” plans to cover all 10 EHB classes and to satisfy standards for non-discrimination and balance. The proposed EHB regulations, however, do not define discrimination beyond repeating the prohibition in the statute. What types of coverage practices will HHS consider to amount to discrimination or the lack of balance?
• Bridge plans. Will FFEs certify bridge plans if recognized by a state Medicaid and CHIP programs and appropriately licensed by the state Department of Insurance?
• Basic Health Plan. Will guidance be forthcoming in time for states to introduce a basic health plan into their insurance markets prior to the January 1, 2014, effective date for coverage to begin?
• Single streamlined application. In what languages will the application be available? What accommodations will be made for persons with visual impairments?
• Individual responsibility exemptions. Will HHS notify the IRS that exemptions have been granted?
• Medicaid eligibility “assessments”. The FAQ restates the March 2012 regulation permitting states to opt for “assessments” of Medicaid eligibility rather than “enrollment” by Exchanges as required by the ACA itself. Will more information on how the assessment process works be forthcoming?
• Individual responsibility and Medicaid beneficiaries. Will HHS allow demonstrations that allow states to utilize premiums or higher cost-sharing in their Medicaid programs in order to promote personal responsibility, similar to the approaches now sanctioned by the ACA’s wellness program exception to the non-discrimination rule? Will HHS consider augmented benefit design to allow states to fund health promotion activities also recognized under the wellness program exception, such as YMCA membership?
• Using Medicaid as premium support for QHP enrollment. Will CMS issue additional guidance on the use of Medicaid for QHP premium support, on how the Medicaid payment rate will be determined, and on how Medicaid in a premium support role, will align with the ACA’s actuarial valuation provisions for QHPs?