Update: Draft Blueprint for Approval of Affordable State-based and State Partnership Insurance Exchanges, General Guidance on Federally-facilitated Exchanges
Posted on May 25, 2012 | Comment (1)
On May 16, 2012, the United States Department of Health and Human Services issued a Draft Blueprint for Approval of Affordable State-based Exchanges (SBEs) and State Partnership Exchanges (SPEs). HHS also issued General Guidance on Federally Facilitated Exchanges (FFEs). Together, these two documents provide additional implementation information related to the final Exchange regulations issued by HHS on March 27, 2012, (click here for the regulations) which broadly describe the structural and operational requirements for state Exchanges, specify the Exchange approval process, and provide for FFEs in states that do not elect to operate a state Exchange. The newest guidance amplifies on the approval process for both state-based Exchanges (SBEs) and state Partnership Exchanges (SPEs) as a sub-class of FFEs but with state election to retain authority over certain Exchange activities. The Blueprint process is designed to assure that SPEs and SBEs are approved for operation by January 1, 2013 so that they can begin offering coverage through qualified health plans (QHPs) on January 1, 2014.
The FFE guidance describes the principles under which FFEs will operate in states that do not elect an SBE approach. States electing a SPE approach must undergo the Blueprint process.
Draft Blueprint for Approval of Affordable State-based and State Partnership Insurance Exchanges
The guidance clarifies and amplifies on a number of different aspects of the May 27th rule:
State Exchange Options
- States can choose to operate as an SBE, but in states that do not make this election, the federal government will operate a FFE. Where an FFE operates, a state “may pursue” a SPE variation in which the state operates plan management “and/or” consumer assistance activities in both the individual and small group markets.
- SBEs and SPEs that intend to operate for the 2014 plan year must be approved or conditionally approved by January 1, 2013. By that date, the Secretary also must approve whether the state will operate reinsurance “and/or” risk adjustment programs or “will use Federal government services for these activities.
- In order to receive HHS Approval or Conditional Approval for either a SBE or a SPE, a state must “complete and submit an Exchange Blueprint” that “documents how its Exchange meets or will meet all legal and operational requirements associated with the model it chooses”. The state also will demonstrate “operational readiness to execute Exchange activities.”
Summary of State Options (Table 1)
Option 1. State-based Exchange: State operates all aspects of the Exchange but may use federal services for premium tax credits and cost sharing reduction determinations, exemptions, and risk-adjustment and reinsurance Programs
Option 2. State Partnership Exchange: State operates plan management and/or consumer assistance activities and may elect or can use Federal government services for reinsurance program and Medicaid and CHIP eligibility assessment or determination.
Option 3. Federally-facilitated Exchange. HHS operates. States may elect to perform or use federal government services for reinsurance program and Medicaid and CHIP eligibility assessment or determination.
- In cases in which states choose a SPE, HHS will “need to ratify inherently governmental decisions made by the state partner.”
- Technical Assistance and Establishment Grant funding under the ACA continues to be available through 2014 for SBEs, SPEs, and states that “are building linkages to the Federally-facilitated Exchange.”
State-based Exchanges (SBEs)
- A State-based Exchange can elect to use certain “Federal government services”: determination of advance premium tax credit (APTC) and cost sharing reduction (CSR), individual responsibility requirement and payment exemption (to be defined in future rulemaking), reinsurance, and risk reduction.
State Partnership Exchanges (SPEs)
- In a SPE model, a state can elect to carry out Plan Management and/or Consumer Assistance activities (i.e., one or both). The Blueprint guidance defines a Plan Management Partnership as one in which the state will “conduct all analyses and reviews necessary to support QHP certification, collect and transmit necessary data to HHS, and manage certified QHPs.” The Blueprint defined a Consumer Assistance Partnership as one in which “a state will provide in-person application and other assistance to consumers.” In-person assistance “may” include “supporting consumers in filing an application, obtaining an eligibility determination or reporting a change in status, comparing coverage options, and selecting and enrolling in a QHP.” In addition, an SPE can elect to perform reinsurance and Medicaid and CHIP eligibility “assessment or determination.” Thus in a SPE, the federal government would perform risk adjustment services, but the state could retain responsibility for Medicaid and CHIP eligibility determinations or assessments within the Exchange.
Federally-facilitated Exchanges (FFEs) without a Partnership
- “For states that do not seek to operate a State-based Exchange or a Partnership with the Federally-facilitated Exchange,” HHS will establish and operate an FFE. In this model, a state may elect to run the reinsurance program and may “coordinate” with CMCS on “decisions and protocols” for either an eligibility determination or assessment in the FFE.
Overview of Exchange Approval Requirements
- HHS “may” approve an SBE or an SPE based on the state’s “Blueprint” submission. The Blueprint consists of a “Declaration” and an “Exchange Application.” For both SBEs and SPEs, the complete Exchange Blueprint must be submitted “no later than 30 business days prior to the required Approval date of [January 1, 2013]” (i.e., by November 16, 2012). States may submit their Declaration letters prior to the Blueprint and may request an “Exchange Application consultation” with CMS.
- States that do not elect to operate an SBE or an SPE “are invited to” submit a Declaration letter and need not file an application.
- States that seek to begin Exchange operations after the 2014 Plan Year also must submit a Declaration letter and a Blueprint Application.
Initial Exchange Approval Determinations
- HHS approval of a SBE is conditioned on whether a “state has demonstrated its ability to satisfactorily perform all required Exchange activities.” At the same time, HHS “recognizes that States depend on HHS and other Federal Agencies for guidance associated with their Exchange establishment” and therefore notes that it will take into account timelines for guidance and infrastructure development. HHS also notes that it “expects that States will be in various stages of the Exchange development lifecycle when Blueprints are submitted.” Thus HHS will give “conditional approval” to SBEs that “do not meet all” approval requirements as of January 1, 2013, but “are making significant progress” and “will be operationally ready for the initial open enrollment period” beginning October 1, 2013.
- The Conditional Approval will include a “comprehensive agreement that sets out expected future milestones and dates for operational readiness reviews.” Conditional Approval will “continue as long as a State continues to meet expected progress milestones and until a state successfully demonstrates it ability to perform all required Exchange activities.”
- In order to be conditionally approved, the SBE “must be able to provide consumer support for coverage decisions, facilitate eligibility determinations for individuals, provide for enrollment in QHPs, certify health plans as QHPs, and operate a SHOP.”
Section 1. Declaration Letter
- The purpose of the Declaration Letter is to declare the type of model the state intends to pursue (SBE or SPE). States not pursuing either are “invited” to complete the Letter “at their option.”
- The letter must be signed by the Governor and provide basic information “associated with its designated Exchange model.” Including the name of the designated individual who will be the primary point of contact for HHS and who will be authorized to “bind the state” and sign the Exchange application.
- The Declaration Letter for SBEs:
- Confirms the state’s intent to apply to operate an SBE;
- Indicates whether the state intends to operate its own risk adjustment program or will use federal government services, along with information about its risk adjustment entity and methodology if it plans on carrying out its own risk adjustment function
- Indicates whether the state will establish its own reinsurance program and if so, how (i.e., directly or through a contract with a nonprofit entity)
- Indicates whether it will carry out its own APTC and CSR functions or use Federal government services
- Designates the person who is the primary point of contact and empowered to bind the state by signing the Exchange Application.
- The Declaration Letter for SPEs:
- Confirms state intent of an FFE, as well as the partnerships the State wants to pursue (i.e., plan management and/or consumer assistance)
- Designates the collaborating state official for Exchange implementation (HHS assumes that the State Medicaid and separately administered CHIP Directors will serve as points of contact).
- Indicates whether the states will operate its own reinsurance program.
- Optional Declaration Letter for a FFE with no SPE
- Declares (at state option) am intent for an FFE, even if no partnership
- Designates “collaborating” state officials (state Medicaid and CHIP officials are presumed by HHS)
- Indicates whether the state will operate its own reinsurance program
- In the absence of a Declaration Letter, HHS “will operate a Federally-facilitated Exchange for the state under the following assumptions:
- The state will not administer its own reinsurance program;
- The state’s individual and small group markets will be merged in the FFE only if the current individual and small group markets are merged. If a state does not merge these markets, HHS will operate separate SHOP and individual markets, and the SHOP “will permit each qualified employee to enroll only in QHPs in the small group market”;
- The state’s definition of small group (up to 50 or up to 100 employees) will be used, while the ACA’s definition of “fulltime employee” will govern.
II. Application for Approval
The Blueprint Guidance sets out the full application that HHS will receive from states and on which its approval will be based.
- The Application covers both SBEs and SPEs, designating particular portions for completion in the case of SPEs.
- States applying to operate SBEs are “also encouraged to complete activities associated with the Plan Management Partnership model” in order to ensure that in the event that a state receives its Conditional Approval but nonetheless cannot meet its Milestones during 2013 to full approval, the state nonetheless can participate as a Plan Management Partner in 2014.
- The Application covers 13 information domains:
1. Legal Authority and Governance
2. Consumer and Stakeholder Engagement and Support
3. Eligibility and Enrollment
4. Plan Management
5. Risk Adjustment and Reinsurance
6. Small Business Health Options Program (SHOP)
7. Organization and Human Resources
8. Finance and Accounting
10. Privacy and Security
11. Oversight and Monitoring
12. Contracting, Outsourcing, and Agreements
13. State Partnership Exchange Activities
Each domain encompasses numerous sub-domains (e.g., 1.1, 1.2, etc.)
HHS further clarifies that states that have furnished certain information relevant to the Application for Approval as part of the Establishment Grant Review Process will not have to duplicate their submissions as part of their Applications for Approval. The following supporting documentation and test files are identified as required:
- Testing files: as part of a “standard systems development process” states and their vendors will develop testing and validation programs; some of these files may be required, specifically, those that summarize results form state-developed testing, the results of state execution of HHS-developed test scenarios, and summaries of independent verification and validation (IV&V) of applicable system components.
- Operational Readiness Assessment and Additional Information Requests: HHS also notes that in addition to reviewing a completed Exchange Application, the agency “may conduct on-site or virtual Exchange assessments as part of its verification of an Exchange’s Operational Readiness” (i.e., its “capacity to conduct Exchange business”). HHS further notes that the “objective of the Operational Readiness assessment is to assure that an Exchange’s policies, procedures, operations, technology, and other administrative capabilities have been implemented and scaled to meet the needs of the State’s Exchange population.”
- Public transparency. HHS notes that Exchanges that are either independent public entities or nonprofit corporations will be required to hold “regular public governing board meetings” and will be required to include consumer representatives on its board. Exchanges also will be required to “develop and implement a comprehensive stakeholder engagement plan that includes meaningful engagements with consumers, advocates, employers, and members of Federally-recognized Indian tribes (where applicable)”.
HHS specifies that it will post certain portions of the Exchange Application for each state within 10 days of approval or conditional approval. Posted portions to be made directly available by HHS following approval are as follows:
- 1.2 Exchange board and governance structure
- 2.1 Stakeholder consultation plan
- 2.2 Tribal consultation policy
- 2.3 Outreach and education plan
- 2.6 Navigators
- 2.7 Role of agents and brokers
- 2.8 Role of web agents and brokers
- 3.1 State-developed single –streamlined application (if applicable)
- 3.2 Coordination strategy
- 3.14 High risk transition plan
- 4.4 Integration between Exchange and other State entities with respect to QHP issuer oversight
- 8.1 Long term operational cost plan
HHS does not identify the following required Exchange Application sections as accessible through its public posting system:
- 2.4. Toll-free telephone numbers, requests for assistance, and translation and oral interpretation services, and auxiliary aids and services to the public;
- 2.5 the availability of the Internet Website and its provision of information in an accessible manner;
- 3.3. The Exchange’s capacity to accept and process applications, updates and responses to redeterminations from applicants and enrollees, including applicants and enrollees with disabilities or LEP, through all required communication channels;
- 3.4. Exchange capacity to send notices in alternate formats and multiple languages;
- 3.5. Exchange capacity to conduct verifications and connect to data sources such as the Data Hub;
- 3.6. Exchange privacy protections;
- 3.7. Exchange capacity to make individual eligibility determinations for QHP enrollment in both the individual and SHOP Exchanges;
- 3.8. Exchange capacity to make APTC and CSR determinations;
- 3.9. Exchange capacity to independently send notices to individuals and employers in plain language;
- 3.10. Exchange capacity to accept applications and updates, conduct versifications, and determine eligibility for individual responsibility requirement and payment exemptions, either independently or through Federally-managed services;
- 3.11. Exchange capacity to manage appeals;
- 3.12. Exchange capacity to manage QHP selections and engage in reconciliation;
- 3.13. Exchange capacity to electronically report the results of its eligibility and exemption determinations and assessments to federal agencies
- 4.1. Exchange authority to perform QHP certification.
- 4.2. Exchange authority to certify QHPs as compliant with all aspects of federal law;
- 4.3. Exchange ability to use a management system that supports data collection, facilitates the certification process, manages plans and issuers, and integrates with other Exchange business as needed;
- 4.5. Exchange capacity to support issuers and provide QHP technical assistance;
- 4.6. Exchange capacity to conduct QHP recertification
- Sections 5-7 and 9-13 inclusive, covering risk adjustment and reinsurance capabilities, SHOP operations, Organization and Human Resources, privacy and security, oversight and monitoring, contracting, outsourcing and agreements, and SPE activities
General Guidance on Federally-facilitated Exchanges
General Approach and State Partnership Exchanges
FFPs will operate in states that elect not to operate a SBE or whose SBE will not be “operable” in the 2014 coverage year (i.e., not approved for the five basic activities identified in the Draft Blueprint document as basic to conditional approval: consumer support for coverage decisions; facilitating eligibility determinations for individuals; provide for enrollment in QHPs; certifying health plans as QHPs; and operating a SHOP).
- “To the greatest extent possible,” HHS intends to work with states “to preserve the traditional responsibilities of state insurance department when establishing an FFE” and “will seek to harmonize FFE policies with existing state programs and laws whenever possible.”
- HHS will:
- consult with stakeholders and participate in formal consultation with Indian tribes.
- certify, recertify, and decertify QHPs
- determine individual eligibility for QHP enrollment and for insurance affordability program assistance
- support consumers, issuers, and other stakeholders through technical assistance and enrollment facilitation “resources”;
- administer Exchange functions “consistent with the Exchange final rule, which established minimum Federal standards for major Exchange business areas while leaving much flexibility and discretion to Exchanges to design processes and procedures that reflect local market dynamics.
- An FFE will operate in accordance with four “guiding principles”: (1) commitment to consumers; (2) market parity “to promote the competitiveness of each FFE, minimize administrative burdens of issuers, and ensure consumer protections; (3) leveraging the traditional State role to “capitalize on existing State policies, capabilities, and infrastructure that can also assist in implementing some of the components of an FFE; and (4) engagement with states and other stakeholders.
- An FFE will encourage state partnerships in the areas of consumer assistance and Plan management, although “HHS, by law, retains authority over each FFE.”
Approach to Key Exchange Functions in a Federally Facilitated Exchange
- Although HHS is developing a “unified FFE administrative infrastructure,” it will “look to states, consumers, issuers, health care providers, employers, and other local stakeholders to provide input on the development of an FFE”.
- Plan Management
- HHS notes that the FFE relates only to the Exchange market of QHPs and does not extend to other individual and small group markets. Certain QHP standards relate to reviews by state Departments of Insurance while others address issues that state Departments of Insurance do not consider. Therefore “HHS will evaluate each potential QHP against all applicable certification standards, either by confirming the outcome of a State’s review (as in the case of licensure) or by performing the review;
- HHS intends to certify as a QHP “any health plan that meets all certification standards.” The certification process (Chart 2) consists 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 (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 and that will be preceded by a model application for public comment that “includes relevant issuer, rate, and benefit data standards”. Agreements between FFEs and issuers are expected in late summer, 2013. Open enrollment will begin October, 2013;
- HHS will release both a “draft and final notice of benefit and payment parameters with additional detail on key parameters for finalizing issuers’ data submissions, including user fee, risk adjustment, risk corridor, and reinsurance methodologies;
- FFEs will use Account Managers to provide technical assistance and support to QHP issuers. The FFE will “coordinate its oversight and management activities with state regulators to streamline processes and reduce duplication of effort to the extent possible”;
- An FFE will also “recertify QHPs periodically in future years” ;
- FFEs will perform other plan management functions such as reconsideration of FFE certification decisions, “memorialize” QHP agreements, manage plan data display on the FFE Website, recertify QHPs and establish an annual compliance process with issuers in the areas of licensure, solvency, accreditation data, network adequacy, plan level rate and benefit data, and changes to service areas and ownership;
- FFEs will establish a QHP decertification process;
- HHS will establish a QHP user fee system and will include “detailed information about FFE user fees in the draft notice of payment and benefit parameters to be released in Fall, 2012;
- Accreditation and Quality Reporting: FFE-participating QHPs will be required to be accredited by an accrediting entity and to report quality data in accordance with future HHS rulemaking.
- HHS “intends to propose a phased approach to accreditation and quality data reporting and display in an FFE to accommodate new QHP issuers and Medicaid plans without Exchange or accreditation experience.” HHS also intends to take a phased approach to recognizing accrediting bodies, beginning with URAC and NCQA and expanding in future years.
- An FFE will accept “existing health plan accreditation” from NCQA or URAC on issuers’ commercial or Medicaid lines of business in the same state in which the issuer is seeking to offer Exchange coverage until the fourth year of certification.
- HHS intends to propose that QHP issuers without this existing accreditation must schedule accreditation in their first year of certification and be accredited on QHP policies and procedures by the second year of certification. By the end of the fourth year, HHS intends that QHP issuers be accredited and must have fulfilled their obligation to submit performance data to the accrediting entity.
- HHS intends to take a phased approach to new quality reporting and display requirements for all Exchanges, with reporting requirements for QHP issuers begin in 2016. HHS also intends to support the QHP quality rating system in all Exchanges. QHP quality rating information would be available for display in 2016 open enrollment for the 2017 coverage year. HHS intends to issue rules on quality reporting and to engage in stakeholder input exercises related to these standards.
- Eligibility for Insurance Affordability Programs and Enrollment in the Individual Market:
- FFEs will allow consumers “to receive eligibility determinations for multiple programs using a single, streamlined application, regardless of where consumers submit their applications.” FFEs will use the model HHS application and model notices created for all Exchanges;
- Consistent with final HHS rules issued in March, 2012, FFEs will either determine Medicaid and CHIP eligibility or assess eligibility based on MAGI as part of the APTC and CSR process. In a “determination” situation, the state Medicaid and CHIP agencies will accept the FFE determination. In an assessment process, the FFE “will electronically transmit all information for any potentially eligible applicants to the state Medicaid and CHIP agency, which will make final determinations and notify the Exchange if the state Medicaid or CHIP agency finds that the applicant is ineligible.” Under either option, the FFE will base its decision on “MAGI-based income standards, citizenship and immigration status, other eligibility requirements, and standard verification rules and procedures.”
- FFEs will “connect with” state Medicaid and CHIP agencies to reduce the administrative burden associated with access to verification data, transmission of data, and information regarding whether the applicant already has applied for benefits through another agency;
- FFEs will engage with Medicaid and CHIP agencies in order to identify roles and responsibilities related to eligibility determination, exchange of information, call center services for individuals, Medicaid and CHIP agencies, and the state Department of Insurance;
- FFEs will coordinate with other states agencies on outreach and education activities and will coordinate on consumer notices. HHS intends to issue further information on notices;
- FFEs will coordinate with Medicaid and CHIP agencies regarding consumers who transition among programs and who have family members insured through a mix of insurance affordability programs;
- FFEs will coordinate with Medicaid and CHIP agencies on appeals issues, and HHS will address appeals in a forthcoming notice;
- HHS plans to issue more detailed standards on cross program engagement among FFEs, Medicaid and CHIP agencies. “HHS plans to support the coordination effort with a cross-functional team covering eligibility operations, data sharing from the business, technology, and legal perspectives, and customer service, outreach and education. HHS will continue to reach out to States to begin these discussions, and encourages State Medicaid and CHIP agencies to initiate dialogue;”
- HHS will conduct consumer support and outreach to aid QHP enrollment in FFEs. FFEs will establish Navigator programs prior to 2012 “with the goal of establishing a fully operational Navigator program in every FFE by October 1, 2012, so that all entities and individuals serving as Navigators are fully trained, certified, and ready to serve consumers, including those with disabilities and limited English proficiency. In addition to Navigators, HHS envisions that consumers will be able to receive in-person assistance from a variety of other consumer resources, including agents and brokers;”
- HHS will provide agents and brokers with a portal to the FFE Website “if applicable standards are met.” HHS also intends to develop Web broker capabilities within FFEs;
- The FFE Web sites will provide calculators that facilitate comparison of out of pocket costs for various QHPs after application of any APTC and CSR.
- Federally Facilitated SHOP (FF-SHOPS)
- FF-SHOPS will provide tools to help agents and brokers, employers, and employees evaluate coverage options and select a plan. Employers will be able to “model various choice scenarios (such as by changing the employer contribution percentage) before making a final selection;
- The FF-SHOP will also “support employers and small group issuers by collecting a single aggregated payment from each employer and distributing that payment to QHP issuers based on participating employees’ plan selection;
- Other FF-SHOP functions include: health plan rate data collection; support for multi-state employers, either “through the FF-SHOP serving the employer’s primary place of business or through the state-based or FF-SHOP serving each employee’s primary worksite; consumer services; and assistance to agents and brokers;
- HHS intends to release future guidance on FF-SHOPs, on matters such as state small group markets, employer contribution models, and specific operational decisions, such as payment grace periods and “maximum allowable new hire waiting periods;
- HHS intends to undertake stakeholder input for “each FFE, including in States where a Partnership is operating.” HHS also “anticipates” stakeholder consultation on FF-SHOPS. HHS further intends a formal tribal consultation process pursuant to the Presidential Memorandum of Nov. 5, 2009 and HHS policy.
1. HHS suggests transparency for only a portion of approved State Blueprints, with many domains and sub-domains not covered by the transparency provision. Should the entire state Blueprint in SBE and SPE states be available for public viewing?
2. Transparency is not addressed for FFEs. Should FFE operating elements for all states be visible at as public information?
3. FFEs will attempt to “connect with” Medicaid and CHIP agencies in order to promote interagency coordination. How will this connection process work?
4. FFEs will attempt to coordinate with state regulators on overlapping issues including QHP certification, recertification, and decertification. How will this coordination process work?
5. The final Exchange rules give states numerous options to develop standards, particularly in the areas of network adequacy and inclusion of essential community providers. What specific criteria will FFEs use in states that do not develop standards, and will FFE certification criteria be made public through the QHP application process?
 45 C.F.R. §155.100(c).
 45 C.F.R. §155.105(f).
 Draft Blueprint for Affordable State-based or State Partnership Exchanges (May 18, 2012) Table 1.
 Id., p. 2.
 General Guidance on Federally-facilitated Exchanges, P. 8
 77 Fed. Reg. 17144(March 23, 2012)