For those of you keeping score of our review of the Patient Protection and Affordable Care Act at home, we are now in Title I, Subtitle D, Part III--State Flexibility Relating To Exchanges. Part III has three sections:
- State Flexibility in Operation and Enforcement of Exchanges and Related Requirements
- Federal Program to Assist Establishment and Operation of Nonprofit, Member-Run Health Insurance Issuers
- Level Playing Field
The federal Department of Health and Human Services was required to issue regulations as soon as possible after March 23, 2010 that would set standards for:
- Establishment and operation of exchanges, including SHOP exchanges
- Offering of qualified health plans through the exchanges
- Establishment of reinsurance and risk adjustment programs (to be discussed when we get to Part V)
- Other requirements as determined by HHS.
The law required HHS to consult with the NAIC and its members, health insurance carriers, consumer groups and other individuals selected in a manner "designed to ensure balanced representation among interested parties." Every state that chooses to meet the requirements for the exchanges must adopt and have in effect the federal standards issued by HHS or a law or regulation that HHS approves as implementing the standards. The states must do this by the beginning of 2014.
If a state chooses not to create an exchange, or if HHS determines by 2013 that a state will not have its exchange operational by 2014 or has not taken the necessary actions to get it operational, HHS must establish and operate the exchange for that state. HHS can create the exchange directly or it can contract with a not-for-profit entity to do it. The states have authority to enforce the federal standards, but HHS can enforce them where a state does not. However, the law explicitly states that it does not preempt any state laws that do not prevent application of the PPACA's provisions.
HHS will presume that a state exchange operating prior to 2010 meets the federal standards if it insures a percentage of the state's population at least as large as the percentage that the exchanges are projected to insure nationally. HHS must create a process to help a state's existing exchange achieve compliance.
Consumer Operated and Oriented Plan (CO-OP) Program
HHS must create the "Consumer Operated and Oriented Plan (CO-OP) Program to encourage the creation of new nonprofit health insurance carriers to offer individual and small group coverage. The program will make available grants for the new carriers to meet state solvency requirements and loans to help meet start-up costs. An advisory board, comprised of 15 unpaid members appointed by the Government Accounting Office, may recommend individuals and entities to HHS for grants and loans. Members of the board must meet "ethics and conflict of interest standards protecting against insurance industry involvement and interference." Members are unpaid but can receive reimbursements for travel expenses. The board will dissolve no later than the end of 2015.
HHS must give priority to applicants that will offer qualified plans statewide, use integrated care models, and have "significant" private support. The department must ensure that there is enough funding for at least one new nonprofit carrier; if there are enough funds, HHS may fund more than one. If no one applies in a given state, the department can use the state's funds to encourage the creation of a new nonprofit carrier or to attract an existing one from out of state.
Grant and loan recipients must agree to meet all requirements for becoming a qualified nonprofit carrier and any requirements in the grant or loan agreement. The recipients may not use the funds for propaganda, legislative lobbying or for marketing. A carrier that fails to meet the requirements (and that fails to take corrective action within a reasonable time) must repay 110 percent of the grant or loan plus interest on the aggregate amount received.
HHS must make the CO-OP program awards and begin distributing them by July 1, 2013. Before awarding them, the department must issue regulations governing the repayment of the grants and loans in manners consistent with state solvency regulations and similar state laws. Carriers will have five years to repay loans and 15 years to repay grants. Before HHS can award the grants and loans, the state must construct repayment terms must consider state reserve requirements, solvency regulations, and surplus note arrangements.
Health insurance carriers that existed on July 16, 2009 and carriers sponsored by a state or local governmental entity are ineligible for the CO-OP program. Qualified nonprofit carriers must be subject to governance by majority vote of their members; must have governing documents incorporating ethics and conflict of interest standards protecting against insurance industry involvement and interference; and must have a strong consumer focus, including timeliness, responsiveness and accountability to members. HHS will issue regulations to implement this last requirement.
The nonprofit carriers must use their profits to lower premiums, improve benefits, or for other programs intended to improve the quality of health care delivered to members. They must meet the requirements of the insurance laws in the states where they operate, including sovlency standards, licensing requirements, rules on payments to providers, rate and form filing rules, and others. To maintain eligibility, a nonprofit carrier cannot offer a health plan in a state that has not implemented the PPACA's coverage reforms.
That's more than enough for a Friday. We'll reconvene next week to look at the "private purchasing councils" that these new nonprofit carriers may create.