Health Insurance Exchange implementation moves forward
More states than expected will rely on federal exchanges
By 2014, each state and the District of Columbia must have a Health Insurance Exchange — an online portal through which individuals and small businesses can compare and choose among health insurance plans. States have three options for participating in exchanges: they can set up and run an exchange themselves, they can allow the federal government to do it for them, or they can partner with the federal government.
When the Patient Protection and Affordable Health Care Act was under development, states were anticipated to generally choose the state-run option.1 However, only 18 states and the District of Columbia have moved forward with implementing state-based exchanges. Funding for States to build their own exchanges is essentially unlimited and to date, the federal government has provided $1.8 billion in funding to help states develop and build the IT and business systems that exchanges will require. Going forward, states will have to fund the ongoing management of exchanges on their own.
Thirty-two states have notified the federal government that they will not set up their own exchanges, including highly populated Texas and Florida, which together account for nearly 20% of the uninsured in the US. As a result, the federal government will be responsible for building and operating exchanges for the majority of states. According to Dan Medleson, CEO of the Avalere Health consultancy, the Obama administration views this obligation as an opportunity to provide consistency across states in how exchanges are structured.2
Some of the states that are not setting up their own exchanges may end up participating in federal/state partnership exchanges, which allow states to tailor exchanges to local needs and market conditions. Four states have already asked to participate in partnerships, and six others have shown some signs that they may apply. States have until February 15, 2013 to choose a state/federal partnership exchange.3 Under the partnership arrangement, the federal government will build and implement the exchanges, and the states will be responsible for plan management and/or customer service.
States' Exchange Choices as of December 14, 20125
District of Columbia
Regardless of the model that states choose, exchanges will need to be operational and ready for 2014 open enrollment by October 1, 2013.
What you need to know now
- Impact on employers – Employers will need to keep track of exchange implementation in their states and understand the options available to their companies and workers. They will be responsible for communicating this information in a written notice regarding exchanges and premium credits, no later than March 1, 2013.
- Impact on brokers – As always, brokers need to stay on top of exchange-implementation information to remain aware of effects on their clients. Because state, federal, and partnership exchanges will most likely be operated differently, brokers must stay educated on how the exchanges are run in their states, so they can continue to serve as trusted advisors on key employer questions.