States RoleBryonna Reliford, Matthew Bulfer

PATIENT PROTECTION AND AFFORDABLE CARE ACT/TITLE 1/SUBTITLE D/PART III

PART III--STATE FLEXIBILITY RELATING TO EXCHANGES

(Section 1321) Requires the Secretary to issues regulations setting standards related to: (1) the establishment and operations of Exchanges; (2) the offering of qualified health plans through Exchanges ; and (3) the establishment of reinsurance and risk adjustment programs under part V.

Requires the Secretary to: (1) establish and operate an Exchange within a state if the state does not have one operational by January 1, 2014; and (2) presume that an Exchange operating in a state before January 1, 2010, that insures a specified percentage of its population meets the standards under this section.

(Section 1322, as modified by Section 10104) Requires the Secretary to establish the Consumer Operated and Oriented Plan (CO-OP) program to foster the creation of qualified non-profit insurance issuers to offer qualified health plans in the individual and small group markets. Requires the Secretary to provide loans and grants to persons applying to become qualified nonprofit health insurance issuers. Sets fourth provisions governing the establishment and operation of CO-OP programs plans.

(Section 1324, as modified by Section 10104) Declares that health insurance coverage offered by private health insurance issuer shall not be subject to federal or state laws if a qualified health plan offered under the CO-OP program is not subject to such law.

PATIENT PROTECTION AND AFFORDABLE CARE ACT/TITLE 1/SUBTITLE D/PART IV

PART IV: STATE FLEXIBILITY TO ESTABLISH ALTERNATIVE PROGRAMS

(Section 1331, as modified by Section 10104) Requires the Secretary to establish a basic health program under which a state may enter into contracts to offer one or more standard health plans providing at least the essential health benefits to eligible individuals in lieu of offering such individuals coverage through an Exchange. Sets fourth requirements for such a plan. Transfers funds that would have gone to the Exchange for such individuals in the state.

(Section 1332) Authorize a state to apply to the Secretary for the waiver of specified requirements under this Act with respect to health insurance coverage within the state for plan years beginning on or after January 1, 2017. Directs the Secretary to provide for an alternative means by which the aggregate amounts of credits or reductions that would have been paid on behalf of participants in the Exchange will be paid to the state for purposes of implementing the state plan.

(Section 1333, as modified by Section 10104) Requires the Secretary to issue regulations for the creation of health care choice compact under which two or state may enter into an agreement that: (1) qualified health plans could be offered in the individual markets in all states in which the plan was written or issued; and (2) the issuer of any qualified health plan to which the compact applies would continue to be subject to certain laws of the state in which the purchaser resides, would be required to be licensed in each state, and must clearly notify consumers that the policy may not be subject to all the laws and regulations of the state in which the purchaser resides. Sets fourth provisions regarding the Secretary’s approval of such compacts.

State Role According to Law

• The proposal offers States more flexibility while ensuring that all Americans, no matter where they live have access to affordable, accessible health insurance. Additionally, the proposal includes built-in protections to ensure that these waivers do not increase the Federal budget deficit.

• The Affordable Care Act already creates a critical role for States. It provides them with the flexibility and resources necessary to innovate and implement reform in the manner that works best for them. The law has already made nearly $2.8 billion available to states and every State has taken steps – and, in some cases, bold actions – to implement the law and improve health insurance accountability and affordability for their citizens. States can design their own Exchanges, shape their Medicaid programs, and take the lead in enforcing patient protections and reviewing rates increases of private insurers.

Illinois State Facts

• Total Population: 12,708,600• Population living in poverty:

2,256,800 (18%)• Unemployment Rate: 10%

• Uninsured Population: 1,764,600 (14%)• Uninsured Children: 272,600

(8%)• Mean Annual Income:

$53,413

Illinois/National Health Insurance Coverage

Illinois-• Employer: 55%• Individual: 5%• Medicaid: 15%• Medicare: 12%• Other Public: 1%• Uninsured: 14%

National-• Employer: 49%• Individual: 5%• Medicaid: 16%• Medicare: 12%• Other Public: 1%• Uninsured: 17%

Designing Health Exchanges State by State

• http://www.youtube.com/watch?v=CMxXOAOTgw0

American Health Benefits Exchange and SHOP

• The Health Benefits Exchange will overall determine the success of the federal health care reform• State governments have a major role in this success by

operating the exchanges and expanding Medicaid coverage • Exchanges and SHOP will allow millions of individuals

and small employers to have access to commercial health insurance

Key Issues to Determine

• Governing board structure and administration • Functions and responsibilities • Operating the Exchange alongside the states current

health insurance markets• Rules to the participation of carriers • The type and level of customer service that the exchange

will need to provide• Whether states should establish their own exchange or let

the federal government set it up

Establishing a State-Based Exchange

• Values of creating a State-Based Exchange:• Maintaining regular authority over a large share of the

health insurance market• Allow for greater coordination of benefits and eligibility

rules across health coverage programs • Ex: Medicaid and CHIP policies

• Promoting state health reform strategies through the exchanges

Establishing a State-Based Exchange

• Risks of creating a State-Based Exchange:• There is a challenge of creating a new program in a time

when money is tight• States are struggling to keep up with their budgets already

• The requirement for the Exchange to be self-sustaining by 2015

• The issue of tension that will be created between keeping administrative fees low while trying to satisfy the demands of high customer service

Policy and Regulation Issues

• Health insurance regulation has been, and will continue to be, the responsibility of the state government

• However, if the state chooses not to set up an exchange and leaves it for the federal government, its authority over the exchanges will be compromised• This would require carriers to two sets of regulations and

reporting requirements- those policies sold within the exchange (federal) and those sold outside of the exchange (state)

Policy andRegulation Issues

• For Example:• A small business purchasing coverage through an exchange

(federal-state) needs to meet participation requirements (percentage of employees covered)

• These participation requirements could vary between purchasing coverage outside of the exchange or within the exchange • Small businesses may be at an advantage or disadvantage when

purchasing through and exchange or outside of an exchange.• This issue results from the federal government needing to set

up State-Based Exchanges

State v. Federal Exchange

• Exchanges operated by the federal government, alongside a state-regulated market will increase the likelihood of inconsistent rules

• This inconsistency can result in a distribution channel by a market attracting less healthy individuals, ultimately resulting in those premiums going higher

• A state-administered exchange would allow for consistency of the rules and regulations within a state and avoid distribution channels

Governance Structure

• How the governing board of an exchange is made up is a key issue that needs to be addressed by States

• The governing board will determine:• The management and extent to which the exchange will be

allowed to operate outside the confines of state government• The manner by which goods and services will be produced• Staffing levels and hiring procedures• The criteria to selecting a health plan• The intersection between publicly-subsidized coverage and

non-subsidized commercial insurance

Governance Structure

• A state could operate the exchange like any other state program and designate an executive agency to run it• Under this operation the states secretary of health and

human services or commissioner of insurance (for example) would be responsible for overseeing the exchanges and management of them

• An advisory board might be established to provide input and advice on exchange policies and procedures • But the ultimate decision making authority would rest with

the executive branch agency

Alternative Approach to Governance Structure

• Establish a governing body that is separate and apart from state agencies to serve as the policy-making body • A governing board responsible for setting the policies and

overseeing operations will help establish the independence of an exchange, allow for an easier transition between administration if needed, and include all individuals with business, insurance, and political expertise

Board Structure

• Governing board would be beneficial to include:• State officials • Individuals with health insurance experience• Experienced Consumer representatives • Persons familiar with small group markets

Responsibility of Governing Board

• The exchanges governing board is responsible for setting broad policy for the exchange, approving major contracts, setting carrier selection criteria, and overseeing the exchange staff

• The exchange will need to be adaptive and flexible in order to respond to an ever changing marketplace and evolving set of federal rules and regulations

• The ACA sets broad guidelines for the Exchanges and federal regulations help to guide states in the development of their exchange• They can set up with other states to form regional exchanges• Regional and multi-state exchanges are not expected to be set

up in the near future• States will have influence over prices though because they

can choose which insures will be allowed in the exchange • Insurance companies will also have the option to not sell

through the exchanges

State Exchanges

Differences between States

• States will be able to design their exchanges in their own way- an issue of debate

• States will be allowed to set additional standards for insures beyond federal law

• The makeup of the governing boards overseeing the exchanges vary• Some states are banning insurance and sales agents from

their boards• Others have these groups on their governing boards

Challenges by States

• Organizations and lawmakers who opposed the passage of the bill threatened to take legal action against it upon its passage and several court challenges are currently at various stages of development. The target of the threatened lawsuits were several key provisions of the bill.

• Some claimed that fining individuals for failing to buy insurance is not within the scope of Congress's taxing powers.

• Several states indicated their primary basis for the challenge was a violation of state sovereignty. Their release repeated the claim challenging the federal requirement under threat of penalty, that all citizens and legal residents have qualifying health care coverage. It also claimed that the law puts an unfair financial burden on state governments. Legislators in 29 states have introduced measures to amend their constitutions to nullify portions of the health care reform law. Thirteen state statutes have been introduced to prohibit portions of the law; two states have already enacted statutory bans. Six legislatures had attempts to enact bans, but the measures were unsuccessful.

Empowering States to Innovate

Under the Affordable Care Act, State Innovation Waivers allow States to propose and test alternative ways to meet the shared goals of making health insurance affordable and accessible to all Americans, including those living with pre-existing conditions. Specifically, State Innovation Waivers are designed to allow States to implement policies that differ from the new law so long as they: • Make coverage at least as affordable as it would have been through

the Exchanges.• Do not increase the Federal deficit.• Provide coverage to at least as many residents as the Affordable Care

Act would have provided.

Empowering States to Innovate

• State Innovation Waivers are provided up to five years of certain new health insurance requirements if the state can demonstrate that is provides health coverage to all residents that is at least comprehensive as the coverage required under an Exchange plan and that the state plan does not increase the federal budget deficit. (Effective January 1, 2017)

Potential State-Based Innovations

The Affordable Care Act offers considerable flexibility to States without waivers. It also recognizes that new, creative effective ideas may emerge. While States have the freedom to develop their own proposals that may qualify for a State Innovation Waiver, some proposals that could qualify include:• A streamlined system that links tax credits for small businesses with tax credits for low-

income families.• Alternatives to the individual responsibility provision – such as automatically enrolling

individuals in health plans – that achieve similar outcomes.• Alternative health plan options to increase competition and provide consumers with

additional choices.• An increase in the number of benefit levels to provide more choices for individuals and

small businesses.• Immediately allowing large businesses interested in doing so to purchase health

insurance through the new private marketplace, the State-based health insurance Exchange.

Potential State-Based Innovations

• The law also allows States to submit a single application that includes Medicaid waiver requests which could, for example, seek to give people eligible for Medicaid the choice of enrolling in Exchange plans.

Waiver Evaluation

• Under the Affordable Care Act, the Secretaries of Health and Human Services and Treasury are responsible for evaluating State Innovation Waiver applications and ensuring proposals will meet the shared goals of making health insurance affordable and accessible to all Americans, including those with pre-existing conditions. Under the proposed legislation, the Secretaries would continue to play this role and be empowered to grant waivers beginning in 2014. Once complete, State Innovation Waiver applications must be reviewed within 180 days of being received. The Departments of Health and Human Services and Treasury will issue proposed regulations outlining the process for applying for a State Innovation Waiver this spring. The Departments will accept public comment, including comments from States, on this proposed regulation.

Maintaining Important Customers Protections

• The Affordable Care Act ends the worst insurance company abuses and gives Americans more freedom and control over their health care choices. Already, under the law, most insurance companies:

• Cannot impose lifetime limits on the dollar amount they will spend on health benefits.

• Must offer young adults without access to job-based coverage the option of remaining on their parent’s plan until their 26th birthday.

• Must cover recommended preventive services without cost sharing.• Must allow patients to choose their own doctor in their network.• Cannot drop your coverage solely due to your getting sick.• Must spend at least 80 percent of premium dollars on health care, rather

than executive salaries and administrative costs.

Maintaining Important Customers Protections

• Starting in 2014, insurance companies cannot charge more, carve-out benefits, or deny coverage because of a pre-existing condition. States that receive a State Innovation Waiver would be required to maintain these important consumer protections that prevent insurance companies from denying, capping or limiting care.

Immediate Benefits for Illinois

• Small business tax credits- small businesses in Illinois could be helped by a new small business tax credit that makes it easier for businesses to provide coverage to their workers and makes premiums more affordable. Small businesses pay, on average, 18 percent more than large businesses for the same coverage, and health insurance premiums have gone up three times faster than wages in the past 10 years. This tax credit is just the first step towards bringing those costs down and making coverage affordable for small businesses.

• Closing the Medicare Part D donut hole- Last year, Medicare beneficiaries in Illinois hit the donut hole, or gap in Medicare Part D drug coverage, and received no extra help to defray the cost of their prescription drugs. Medicare beneficiaries in Illinois who hit the gap this year will automatically be mailed a one-time $250 rebate check. These checks will begin to be mailed to beneficiaries in mid-June and will be mailed monthly throughout the year as new beneficiaries hit the donut hole. The new law continues to provide additional discounts for seniors on Medicare in the years ahead and completely closes the donut hole by 2020.

Immediate Benefits for Illinois

• Support for health coverage for early retirees- An estimated 174,000 people from Illinois retired before they were eligible for Medicare and have health coverage through their former employers. Unfortunately, the number of firms that provide health coverage to their retirees has decreased over time. Beginning June 1, 2010, a $5 billion temporary early retiree reinsurance program will help stabilize early retiree coverage and help ensure that firms continue to provide health coverage to their early retirees. Companies, unions, and state and local governments are eligible for these benefits.

• New consumer protections in the insurance market beginning on or after September 23, 2010:

Immediate Benefits for Illinois

• Insurance companies will no longer be able to place lifetime limits on the coverage they provide, ensuring that the 7.5 million Illinois residents with private insurance coverage never have to worry about their coverage running out and facing catastrophic out-of-pocket costs.

• Insurance companies will be banned from dropping people from coverage when they get sick, protecting the 612,000 individuals who purchase insurance in the individual market from dishonest insurance practices.

• Insurance companies will not be able to exclude children from coverage because of a pre-existing condition, giving parents across Illinois peace of mind.

Immediate Benefits for Illinois

• Health insurers offering new plans will have to develop an appeals process to make it easy for enrollees to dispute the denial of a medical claim.

• Patients’ choice of doctors will be protected by allowing plan members in new plans to pick any participating primary care provider, prohibiting insurers from requiring prior authorization before a woman sees an ob-gyn, and ensuring access to emergency care.

Additional Illinois Benefits

• Strengthening community health centers. Beginning October 1, 2010, increased funding for Community Health Centers will help nearly double the number of patients seen by the centers over the next five years. The funding could not only help the 570 Community Health Centers in Illinois but also support the construction of new centers.

• More doctors where people need them. Beginning October 1, 2010, the Act will provide funding for the National Health Service Corps ($1.5 billion over five years) for scholarships and loan repayments for doctors, nurses and other health care providers who work in areas with a shortage of health professionals. This will help the 17% of Illinois’s population who live in an underserved area.

• New Medicaid options for states. For the first time, Illinois has the option of Federal Medicaid funding for coverage for all low-income populations, irrespective of age, disability, or family status.

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