Federally Facilitated Insurance Exchanges Under the Affordable Care Act: Implications for Public Health Policy and Practice

This installment of Law and the Public's Health examines the implementation of federally facilitated Health Insurance Exchanges² (FFEs), a key component of the Patient Protection and Affordable Care Act (ACA).¹ Following an overview of the law, this analysis discusses its implications for public health policy and practice.

BACKGROUND

Health Insurance Exchanges (renamed Health Insurance Marketplaces² by the Centers for Medicare & Medicaid Services [CMS]) are designed to make health insurance coverage accessible and affordable for individuals and small employer groups that traditionally have faced barriers in the market. The insurance products sold to qualified individuals and employers who meet Exchange eligibility requirements are known as qualified health plans (QHPs); QHPs must undergo a certification process prior to market entry and are subject to ongoing state and federal oversight.

Although the ACA originally envisioned a state-based Exchange system, the law gives states the option of either establishing their own Exchange or relying on the U.S. Department of Health and Human Services (HHS) Secretary to do so.³ As of October 1, 2013, 15 states and the District of Columbia have been conditionally approved to operate a state-based Exchange (both the individual Exchange and the small business Exchange). Another six states have entered into formal Partnerships with an FFE (FFE-Partnerships) for both their individual and small business markets. Three states (Mississippi, New Mexico, and Utah) have elected to operate their own small business Exchanges while opting for an FFE in the individual market, and 26 states have chosen an FFE without any formal partnership arrangement.

Because the ACA originally envisioned states as the creators and operators of Health Insurance Exchanges, the emerging emphasis on an FFE model has the potential to create significant implementation issues, given the extent to which the new Exchange market is really an extension of the state-regulated health insurance market. Nothing about the Exchanges alters states' role as the primary regulators of insurance; instead, the Exchange system is designed to offer a special marketplace in which individuals and small employers can shop for coverage and in which federal coverage subsidies (through premium tax credits) can be secured.

Insurance reform lies at the heart of the ACA, which contains a broad slate of market-wide insurance policy reforms that apply to health insurance plans sold inside and outside of Exchanges. The first set of reforms, which already has taken effect, includes premium rate reviews aimed at controlling costs, coverage of young adults as dependents up to 26 years of age, a bar on annual and lifetime limits on coverage, coverage of certain preventive health services, a ban on unjustified rescissions, quality performance measurement and reporting, the use of uniform explanations of coverage, certain patient protections such as coverage of emergency care out of network, and new appeals procedures.⁴

The second set of market-wide insurance reforms, which is far more ambitious, is designed to take effect January 1, 2014, when the individual and employer responsibility obligations commence. These far-reaching reforms include a ban on preexisting condition exclusions and coverage discrimination based on health status (the law contains a limited exception for employer-sponsored wellness programs); guaranteed issue and renewal of policies; a ban on discrimination against certain types of health-care providers; a ban on discriminatory premiums that account for factors other than age, family size, geographic location, and use of tobacco; and coverage of routine health care furnished as part of a clinical trial.⁵ Moreover, health plans sold in the individual and small group markets also must comply with broader “essential health benefit” coverage standards, which consist of 10 basic coverage categories and rules regarding actuarial value and cost sharing.⁶

Effectively designed to operate as a market within the state's overall health insurance market, Health Insurance Exchanges must operate in accordance with extensive requirements related to enrollment, eligibility determinations, consumer and patient assistance through the use of Navigators (i.e., federally funded individuals and groups trained to help and guide Exchange users), transparency, QHP certification and oversight, and other matters. QHPs sold in Exchanges must meet all state and federal insurance requirements and also comply with special rules applicable to the Exchange market. As a result, Exchanges, including the FFEs operating without state Partnerships, must carry out several functions: perform eligibility determinations of those seeking to buy coverage in the Exchange; if eligible, enroll those qualified individuals in QHPs; conduct plan management functions, including QHP certification; provide numerous consumer assistance services; and perform financial management functions.^7,8 Because these functions are so intertwined with health insurance oversight generally, special challenges arise in states in which the FFE operates without a formal state Partnership.

THREE KEY CHALLENGES FACED BY FFEs

Making the new Exchange market work under any set of factors is challenging, as this new subsidized insurance market is complex to operate and must mesh with other critical state policies, in particular, state insurance regulation and Medicaid operations. Furthermore, millions of consumers will need help understanding the new market and learning how to use its benefits. But special considerations arise in the case of FFEs, because the ACA envisions such a strongly state-based approach to health reform implementation. Three of the biggest challenges are discussed hereafter.

Assuring compliance with federal insurance standards

One challenge has to do with assuring that all QHPs (as well as insurers operating in the state more generally) comply with both state insurance laws and the new federal market reforms. Just as the ACA gives states the option to operate their own Exchanges, the ACA continues prior federal policies in which oversight of the insurance market more generally is concerned and gives states the option of taking the lead in enforcing the federal reforms.⁹ In states that either refuse to enforce these reforms or else fail to do so, the HHS Secretary steps in following an elaborate process of negotiation with the state. In other words, the law allows HHS to directly enforce federal standards if states, after extensive negotiations, fail to do so. Thus, in FFE states with no established Partnerships, the state also may be one that either declines to or else fails to enforce broader market reforms, leaving HHS in a position of running the entire health insurance market in the state, not just the Exchange.¹⁰ As of February 2013, only Connecticut had enacted comprehensive legislation fully incorporating the federal insurance reforms into its state laws and authorizing their enforcement, and only 10 other states and DC had shown some movement on one or more reforms.¹¹

Consumer assistance

The consumer assistance functions of an Exchange are vast. The FFE must develop a user-friendly website as a portal into the FFE,¹² as well as operate in-person assistance centers,¹³ and conduct outreach and educational efforts to inform the public about the existence of available comprehensive and subsidized QHPs through the FFE.¹⁴ The FFE is also required to run a Navigator program to help individuals understand their options.¹⁵ At a minimum, the FFE must be able to help people shop for QHPs, compare premiums through the use of an electronic calculator,¹⁶ calculate any available subsidies, and enroll qualified applicants in a plan.

With FFEs and state Partnership Exchanges operating in 35 states, funding for these activities has become a major concern. In April 2013, HHS announced that only $54 million would be made available to support Navigators in FFEs and state Partnership Exchanges, and that each Navigator grant applicant is eligible for only one, nonrenewable one-year award.¹⁷ Moreover, CMS has indicated that funding will be available for the various non-Navigator consumer assistance functions (e.g., the law's accessibility standards for plain language and access by people with disabilities and those whose primary language is not English) for state-based Exchanges only, not the FFEs.¹⁸ Without adequate funding, accomplishing these tasks will be difficult.

Exchange coordination with Medicaid and CHIP

Coordination among the Exchange, Medicaid, and Children's Health Insurance Program (CHIP) agencies will be critical. Under the no wrong door policy embodied in the law, Exchanges will be expected to determine and redetermine eligibility across the full range of insurance affordability programs, including the advance premium tax subsidies offered through the Exchange as well as Medicaid and CHIP, and then transmit that information to the applicable state agency for further processing. Because of income fluctuation, millions of individuals are expected to move (or “churn”) frequently among sources of insurance affordability. Eligibility determination and enrollment procedures must be aligned, as must be the products sold in the Medicaid, CHIP, and Exchange markets, so that changes in subsidy sources can be managed smoothly and plan enrollment can remain relatively stable. Even in states that have opted for state-based Exchanges, market alignment will be difficult. In FFE states that even lack a partnership, the challenges increase because of the tight communications needed among agencies. Whether the FFE is able to develop cross-functional teams covering the business, administrative, and legal aspects of coordination¹⁹ remains an open question.

IMPLICATIONS FOR PUBLIC HEALTH POLICY AND PRACTICE

The creation of FFEs in more than half of the states carries enormous implications for public health policy and practice. Public health outreach and education about insurance coverage and options are crucial in all states, but are particularly crucial in FFE states, where states have opted for an implementation approach that increases rather than reduces coordination challenges. Without adequate enrollment assistance across the full affordability program marketplace, large numbers of potentially eligible people will miss the opportunity to gain coverage, and the FFEs risk an adverse selection problem wherein only the sickest and costliest enroll.

Public health agencies might also focus on health plan networks and their sufficiency in medically underserved communities, which disproportionately account for the uninsured people who will enroll in coverage. The ACA provides for the inclusion of essential community providers (ECPs) in QHPs offered through Exchanges. ECPs include many different classes of providers, with a specific focus on health-care providers that participate in the 340B prescription drug discount program; their common feature is a strong orientation to provision of care to medically underserved populations. Yet, federal guidelines issued in April 2013 suggest that inclusion of as few as 10% of all ECPs in a service area will suffice to meet the network adequacy requirements.¹⁹ This low level of inclusion may in turn raise access problems in medically underserved communities. Public health agencies may play a crucial role in monitoring access to care in these communities as implementation moves forward, so that network structures can be properly adjusted if needed.