The U.S. Department of Health and Human Services (HHS) had a busy month, issuing proposed regulations in the following three areas: Establishment of Exchanges and Qualified Health Plans (QHPs), Standards Related to Reinsurance, Risk Corridors and Risk Adjustment, and Establishment of Consumer Operated and Oriented Plan (CO–OP)Program.
Exchanges and Qualified Health Plans
On the whole, the proposed rule related to the establishment of exchanges would give states significant flexibility, except for the standards set forth in the law. A few highlights of the proposed rule are:
- The new concept of “conditional approval” for states that can show that they have made significant progress toward operational readiness, but are not able to meet all the requirements by January 1, 2013. If the state cannot meet the requirements, HHS is willing to work with and monitor progress as they move toward implementation;
- The possibility for state-federal partnerships in which the state and the federal government could work together to implement an exchange. This provides an alternative to the choice offered in the legislation of either a state or a federal exchange;
- A provision that prohibits states from having an exchange board with a majority of members that are defined as having a conflict of interest, which includes representatives of health insurers and brokers;
- For individual enrollees, exchanges have several options of how to collect or pass-through premiums to plans; in the small business market, the exchange must offer to collect premiums;
- A proposed initial enrollment period in the individual market of October 1, 2013 – February 28, 2014, with a shortened open enrollment period thereafter; the Small Business Health Options Program (SHOP) exchange would make enrollment continuously available to employers, but employees should have an open enrollment period that reflects the one in the individual market;
- The SHOP exchange must allow employers to have the option of choosing a level (e.g., Silver level) of coverage and allowing the employee to select the plan within that level. The SHOP is also permitted to let employers select one or more QHPs to offer as coverage to their employees; and
- A distinction between plans that are offered as QHPs and those that are accredited, allowing for a grace period so that some plans can be offered on the exchange before they have met full accreditation standards.
Risk Adjustment, Risk Corridors, and Reinsurance
The risk adjustment, risk corridors, and reinsurance proposed rule states that HHS is developing a risk adjustment model for all plans in the individual and small group market, except grandfathered plans, both inside and outside the exchange. States can use the federal model wholesale, with adaptations, or they can develop their own models, which will need federal approval. The rule indicates that the HHS model will use demographic data, medical diagnoses, and pharmacy codes.
The reinsurance model being proposed would be funded with an assessment on all insurance carriers in the market, both fully insured and self-funded. Reinsurance payments will be based on actual claims. States will have flexibility to vary the thresholds for when reinsurance begins and ends. The risk corridor program will be operated by HHS from 2014-2016.
A more detailed summary of the proposed rules (from the George Washington HealthReformGPS program) can be found here.
CO-OPs
The proposed rule on the establishment of CO-OPs lays out a plan for how the federal government will distribute $3.8 billion in loans to nonprofit health insurance entities that would be run by and for consumers. The rules propose that CO-OPs would be required to meet the same regulatory standards as other plans in the exchange. In order to qualify for start-up loans, the Centers for Medicare and Medicaid Services would have to determine their financial viability based on evaluations of their legal, operational, and business plans.
On Thursday, July 28, HHS announced that they are accepting applications for CO-OP start-up funding. The first deadline is October 17, 2011, with quarterly deadlines thereafter on December 31, 2011; March 31, 2012; June 30, 2012; September 30, 2012; and December 31, 2012.
