Blueprint for Exchanges is released

With less than two years until the Health Insurance Exchanges must be up and running, The U.S. Department of Health and Human Services has released final guidelines that explain how they must work.

Overall, the regulations released on March 12, 2012 give the individual states more flexibility in the design and operation of the Exchanges. And they require standardized practices only when they would be most practical or when they involve a mandate already required by the law.

The state Exchanges, which must be operational by October 1, 2013, will allow individual consumers and small businesses to comparison shop online for medical coverage, while comparing plan designs on an apples-to-apples basis.

The broker role
One interim rule provides some clarity on the role of brokers in the Exchanges, allowing them to direct people to state insurance Exchanges and check to see if they are qualified for tax credits or health insurance subsidies. However, it ultimately gives states the power to determine the specific role of agents and brokers in the Exchange process.

The broker rule is subject to a public comment period which will end in late April 2012. Consumer and insurance groups are expected to weigh in on the topic during this time. While their specific role has yet to be fully defined, brokers will continue to play a critical role by helping employers and employees to navigate the new landscape.

Need-to-know news for employers
The rules do not add any substantial new responsibilities for employers, but by the same token, they do not remove the important decisions and calculations employers must make by 2014 when the Exchanges become active. To get an overview of those responsibilities, listen to the Unum podcast “The Health Insurance Exchanges and workplace benefits”.

The new regulations keep intact the small business tax credit of up to 50% for employers offering health insurance through the SHOP (Small Business Health Options Program) Exchanges. To qualify for this credit, a small business must:

• Have no more than 25 employees
• Pay employees an average annual wage of $50,000 or less
• Offer all full-time employees coverage
• Pay at least 50% of the premium

Currently, health care reform offers a tax credit of up to 35% for small employers who pay at least 50% of employee health insurance premium.

The final Exchange rules set forth several requirements for small business employers who choose to participate in the SHOP Exchanges. In particular, small employers must distribute information on the SHOP to all employees and to their dependents whose eligibility for coverage has changed.

The SHOP exchange requirements allow for rolling, employer-based open enrollment periods. They also stipulate that an employer must be allowed to select a level of coverage from the Bronze, Silver, Gold and Platinum levels of coverage. Employees would have access to select any plan within that level. For more information on those levels, see the article “Actuarial value and cost-sharing update,” on this website.

Impact on employers — Beginning in March 2013, employers covered under the Fair Labor Standard Act will be required to communicate information about the individual Exchanges to employees. Eligible small business employers who choose to purchase employee benefits through the SHOP exchanges will need to comply with communication and data requirements mandated by the exchange provisions.

Impact on brokers — The most recent Exchange rules provide states with the flexibility to determine the role of agents and brokers in their state Exchange. This means brokers could conceivably play different roles in the Exchanges in various states they do business in. It will be important for brokers to follow these developments.

While the specific role has yet to be fully defined, brokers will continue to play a critical role by helping employers and employees to navigate the new landscape, as expressed in the comments published with the final regulations.

For brokers and employers — It will be important to know where your state stands in Exchange development so you are able to communicate the offerings available to your employees or clients.

To track Exchange progress in your state, you may find it helpful to use this tool provided by the Kaiser Family Foundation.

For full details on the new Exchange regulations, visit this government website.

For more background information on the Exchanges, see the thought leadership brochure “Health Insurance Exchanges, A Marketplace for the future”.

For a list of key dates, see the Exchange timelines below.

A timeline for the Exchanges

• January 1, 2013 — State Exchanges must have written or conditional approval from HHS by this date. If a state fails to meet this deadline, the law calls for HHS to establish and operate an Exchange with the state.
• October 1, 2013 — State Exchanges must be fully operational for enrollment
• January 1, 2014 — Exchange plan coverage begins for the first enrollees

SHOP Exchange timeline

2014 — Small businesses with one to 50 employees can participate in the Exchange. States will have the flexibility to include businesses with up to 100 employees
2017 — The SHOP Exchanges will open for employers with more than 100 employees.