Report: Health insurance exchanges face implementation hurdles

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State-based health insurance exchanges should be placed within an independent agency, and management of the exchanges should be apolitical and professional, according to a Sept. 30 report issued by health policy reform research group The Commonwealth Fund.

Health insurance exchanges, an element of the Patient Protection and Affordable Care Act of 2010 (PPACA), should provide a health insurance marketplace with subsidized health insurance for small businesses and individuals without employer or public coverage by the full implementation date of 2014, noted report author Timothy Stoltzfus Jost, professor of law, at Washington and Lee University School of Law in Lexington, Va.

The report highlights eight issues that states and the federal government face in implementing the exchanges, including adverse selection avoidance, administrative costs and funding, exchanges and large-group and self-insured plan considerations and public subsidy determination.   

The recommendations in the report include:
1.) The exchange should be placed within an independent agency for each state, and the governing board of the exchange could include representatives of state agencies with which the exchanges must work, interested parties and persons with relevant expertise.

2.) To the extent possible, state regulation of the individual and small-group market should be identical outside and inside the exchange. The U.S. Department of Health and Human Services should design a sophisticated but practical risk-adjustment system allowing states to adjust risk among participating and nonparticipating insurers.

3.) The U.S. Department of Labor and Department of the Treasury should clarify that only employers who are capable of bearing the substantial risk of the cost of healthcare for their group can be self-insured. States should consider extending the requirements of the PPACA to large plans and to grandfathered plans that qualify for exchange coverage.

4.) Exchanges should offer employers the possibility of an aggregated bill covering the premiums of all employees. Employers should be able either to pay a fixed percentage of the premium for a specified level of coverage, with the employee covering the remainder of the premium, or to charge employees a premium share based on category and richness of coverage. Employers could also offer greater support to lower-income employees.

5.) Exchanges must use their certification power to ensure that health plans meet the statutory requirements for qualification and that plans do not impose unreasonable premium increases on their members. Exchanges should also standardize and limit the range of plan choices available within each tier to stimulate competition based on price and value.

6.) Exchanges should make information describing the benefits and limitations of available health insurance plans easily accessible. To permit informed selection of an appropriate health plan through the exchange internet portal, health plans should be contractually bound by information they disclose on their web sites.

7.) The allocation of responsibility for determining eligibility for premium tax credits, cost-sharing reductions, Medicaid and Children's Health Insurance Program, remains unclear and contradictory. The statute should be implemented in such a way as to permit an individual to apply initially either to the exchange or to the state Medicaid agency. Exchanges should see it as their responsibility to ensure the continued enrollment of eligible individuals and families for tax credits or public programs, rather than holding individuals responsible for continually having to work at maintaining their own eligibility.

8.) Exchanges should develop a variety of revenue sources to fund their work, including an assessment of all insurers in the market. Exchanges should seek opportunities to lower administrative costs both for insurers and for employers.