States Have “Great Deal Of Latitude” When Setting Up Exchanges, CRS Reports

from Spencer’s Benefits Reports: The Patient Protection and Affordable Care Act (ACA) requires states to establish and run state-based health benefit exchanges by Jan. 1, 2014. According to the Congressional Research Service’s (CRS) report, Health Insurance Exchanges Under the Patient Protection and Affordable Care Act, the ACA allows for a “great deal of latitude, and therefore variance,” in the number and scope of responsibilities covered under each state’s exchange.

A health insurance exchange should be viewed as a structured marketplace for the sale and purchase of health insurance, according to the CRS. Exchanges are not issuers of health insurance; rather, exchanges should be designed to contract with issuers who will make insurance products available for purchase through an exchange. This will bring together buyers and sellers of insurance, and the ultimate goal is to increase access to coverage. Because of this broad definition, there are many different ways that each state can structure its exchange.

The CRS explained that the role of an exchange may be more or less administrative: facilitating the sale and purchase of health insurance. At the other end of the spectrum, an exchange may have multiple functions beyond the role of insurance marketplace, such as having the responsibility for implementing regulatory standards, determining eligibility for exchange plans and government-provided subsidies.

States can independently operate an exchange, or enter into a contract with other states to operate a regional exchange. States also have the option of partnering with the Department of Health and Human Services (HHS), or having the HHS run a federally-facilitated exchange. States have until Dec. 14, 2012, to decide if it will run its own exchange and until Feb. 15, 2013, to decide if it will partner with the HHS.

Employer Responsibility. Beginning in 2014, the ACA assesses payments on certain large employers with 50 or more employees, including employers that do and do not offer health coverage. In addition, large employers may be penalized if any of their full-time workers receive a premium credit and receive coverage through an exchange, rather than from the employer’s health care plan.

The CRS report noted that exchanges will be responsible for notifying an employer if an employee has been found eligible for advance payment of premium credits or cost-sharing subsidies. The exchange must identify the employee, indicate the employee’s eligibility, explain that the employer may be subject to penalty, and notify the employer of the right to appeal the determination.

The CRS report outlines the required minimum functions of exchanges, and explains how exchanges are expected to be established and administered under ACA. For more information on the report, visit http://www.fas.org/sgp/crs/misc/R42663.pdf.

For more information, visit http://www.errp.gov.

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