Obama Administration Announces Release of Standards for Health Care Exchanges

With many states lagging behind on the creation of the health insurance exchanges mandated under the 2010 Patient Protection and Affordable Care Act, the Obama administration has announced it will be issuing the standards by which the exchanges are to operate. If any state fails to or refuses to set up an exchange, the federal government will assume responsibility for the project and move forward.

The health insurance exchanges are to serve as a competitive marketplace where small businesses and consumers can buy private coverage plans. The intent is to drive down rates and to make policies more affordable. While the states will be given broad operational latitude, the establishment of the exchanges will proceed, under federal control if necessary.

States Openly Lag on Exchange Creation

Many states have openly said they will not move forward with the implementation of the required exchange pending the outcome of the Supreme Court’s review of the individual health insurance mandate contained in the Affordable Care Act. Others are waiting for the outcome of the 2012 presidential election.

The move to issue the exchange standards makes it clear the Obama administration is continuing with the scheduled implementation of the provisions of the Affordable Care Act, regardless of conservative critics or the current political climate in the nation.

Administration Officials Defend Exchanges

Testifying at a Senate hearing on Wednesday, March 7, Health and Human Services Secretary Kathleen Sebelius described the exchanges as a one-stop-shop for price and benefit comparison. If insurers want to be competitive in the marketplace, they will have to set their rates accordingly, which will be to the advantage of consumers.

On Thursday, Timothy B. Hill, a senior HHSS official, speaking at a conference held by the trade group America’s Health Insurance Plans said, “We want states to be successful in establishing their own exchanges. We are doing everything we can to help states get ready. But we are not naive. There is a likelihood that some states won’t be ready.”

Overview of the Exchange Rules

Under the rules, each exchange will certify given plans, and must establish a web site that provides cost and benefit comparisons, as well as other assistance for consumers who want to enroll. The exchange will be responsible for determining eligibility for federal subsidies, which are an option for people with annual incomes of as much as four times the federal poverty level. Currently that would be approximately $92,000 for a family of four.

States can, however, choose to operate the exchange through either a new non-profit entity or through an existing department. The marketplace can be open to all insurers and plans, or to a limited number. The role of brokers and agents can be determined by the state, and larger employers with as many as 100 employees an be allowed to participate.

Currently the implementation of state-based exchanges is spotty, with states like Connecticut, California, and Washington virtually ready to proceed, while other states, including Florida and Texas, have taken no action whatsoever.