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Health Insurance Exchange 101

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Affordable Care Act Fair Draws Floridians As Enrollmnent Deadline Looms
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Although Health Insurance Exchanges are not going to actually be implemented until January of 2014 it will be helpful for you to have ready answers for clients and insurance prospects you advise in the interim. And by January 2013 states are required to inform the federal government if they will be ready to operate an insurance exchange one year later.

So let’s take a closer look at the Health Insurance Exchange rules set forth in the Affordable Care Act (ACA).

The ACA creates state-based Health Insurance Exchanges administered by a governmental agency or non-profit organization, through which individuals and small businesses with up to 100 employees can purchase qualified coverage. In 2014 and beyond most Americans who work for small businesses or obtain their coverage in the individual health insurance market will do so through health insurance exchanges.

Exceptions:

  • Those covered by grandfathered plans and
  • Those covered by self-funded plans (this will apply to very few businesses)

States also have discretion to allow businesses with more than 100 employees to purchase coverage in the Exchanges beginning in 2017. In addition, states may opt to allow the federal government to establish an Exchange in their state rather than implement their own. Another possibility allowed by the ACA is for states to form regional Exchanges or allow more than one Exchange to operate in a state as long as each Exchange serves a distinct geographic area.

The ACA specifically requires all new policies (except stand-alone dental, vision, and long-term care insurance plans), including those offered through the Exchanges and those offered outside of the Exchanges, to comply with one of the four benefit categories. Existing individual and employer-sponsored plans that achieve Grandfather Status do not have to meet the new benefit standards. This provision becomes effective January 1, 2014 at the same time the Exchanges become operational.

Benefit Mandates (also effective Jan. 1, 2014):

  • Limit deductibles for health plans in the small group market to $2,000 for individuals and $4,000 for families unless contributions are offered that offset deductible amounts above these limits. This deductible limit will not affect the actuarial value of any plans.
  • Limit any waiting periods for coverage to 90 days.
  • Allow states the option of merging the individual and small group markets.
  • Create an essential health benefits package that provides a comprehensive set of services, covers at least 60% of the actuarial value of the covered benefits, limits annual cost-sharing to the current law HSA limits ($5,950/individual and $11,900/family in 2010), and is not more extensive than the typical employer plan.
  • Require all qualified health benefits plans, including those offered through the Exchanges and those offered in the individual and small group markets outside the Exchanges, except grandfathered individual and employer-sponsored plans, to offer at least the essential health benefits package.
  • The states are also required in the individual and small group markets (including the Exchnages) to offer four distinct benefit tiers that cover at least 90%, 80%, 70%, and 60% respectively of the actuarial value of the covered benefits similar to what is listed above in describing the essential benefits package.

State Implementation Decisions:

It is unclear at this point if states can or will include their individual state benefit mandates in the essential benefit packages described earlier. Will Minnesota health plans in the Exchange be required to provide coverage of wigs for cancer patients as they are for small groups now? Will Louisiana continue in the Health Insurance Exchanges to be the only state to mandate coverage for attention deficit disorder?

These are important decisions as states grapple with building their Exchanges. Advocates fought hard to gain these benefit mandate provisions and one can only assume they will be actively lobbying legislatures to include them again.

Of course states can also decide to opt out of implementing its own Exchange and give up control by letting the federal government do it. Obviously some states will allow the federal government in, but others like Wisconsin may not want to give up control.

Then there are decisions like implementing Exchanges regionally or across an entire state, opening them up to employer groups as large as 200 employees in 2017, and others.

This is a huge effort and it will be very interesting to see what nuances states develop. Hopefully, they will be largely similar and easily navigated by consumers, agents, and others.

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