Healthcare exchange regulations announced

By Dr. Ananya Mandal, MDMar 14 2012

The U.S. government this Monday released broad new operating rules for state-run health insurance exchanges, which form a key part of the 2010 federal healthcare reform law. The reforms would face Supreme Court hearings in just two weeks.

The Department of Health and Human Services released the much anticipated regulations that are intended to provide state lawmakers and officials flexibility on federal deadlines as they meet the complex task of building state and regional insurance markets before a January 1, 2014, deadline. In a 642-page final rule, the government provides guidance on how states should establish exchanges, qualify health plans for participation and determine the eligibility of both individuals and small business that want to use exchanges to provide health coverage to their employees.

“These policies give states the flexibility they need to design an exchange that works for them,” said Health and Human Services Secretary Kathleen Sebelius.

The regulations were welcomed by industry and consumer groups who said they provided states with the flexibility necessary to meet consumer needs for choice and quality protections. They also said the regulations shift policy focus to the state level, where the new rules must be implemented. The state level effort aims at providing health coverage for about 30 million uninsured Americans under the Patient Protection and Affordable Care Act and also means an expansion of the joint federal-state Medicaid program for the poor.

Responding to thousands of comments on earlier proposals, the administration made some changes, including setting a requirement that governing boards have at least one voting consumer representative. Earlier rules allowing up to half of the other members to have ties to the insurance industry stayed the same. That disappoints consumer advocates, who would have preferred the governing boards “be dominated by consumers,” said Timothy Jost, who speaks as a consumer representative before the National Association of Insurance Commissioners and is a professor at the Washington and Lee University School of Law. But Jost said he is pleased the final rules require at least one consumer representative. “It at least gives a toe-hold,” he said.

But it remains unclear whether the rules will be sufficient to overcome political resistance in many Republican-led states to establishing anything that would support the law. On Monday, Virginia Gov. Bob McDonnell, who chairs the Republican Governors Assn., criticized the new regulations as inadequate because they did not address key questions such as what a federal insurance exchange might look like.

Karen Ignagni, president and chief executive of America’s Health Insurance Plans, a trade group, said her organization would be reviewing the rule and offering feedback. “Exchanges will work best if they are true marketplaces that maximize choice and competition so that individuals, families, and small businesses can purchase plans that are right for them,” she said in a prepared statement. “Consumers will be best served if a state exchange adopts an efficient, cost-effective approach that leverages existing health-plan resources, utilizes federal resources or guidance where sensible, and relies on the exchange itself to administer key functions.”

But how state exchanges perform could be determined by a high profile Supreme Court case in which 26 states and a business group claim healthcare reform should be overturned as unconstitutional because it requires most adults to buy private health insurance or pay a penalty. The Supreme Court will hear oral arguments March 26-28 and is expected to issue a ruling by July 1. Many states have delayed participation until the ruling is out. About 33 states have received federal grant money to help set up exchanges.

The law says the exchanges will start taking applications in Oct. 1, 2013. Policies purchased through them would take effect Jan. 1, 2014. States that are allowed to operate their own exchanges must have approval or conditional approval from HHS by Jan. 1, 2013, according to the rules.