Health Benefit Exchanges
- Details
A Provision of the Patient Protection and Affordable Care Act (PPACA)
Exchanges Timeline
The Exchange Marketplace
There are several key things to know about the exchanges, including:
- Governance and Models – Exchanges will vary from state to state but they all must conform to established requirements, which are to be determined by the Health and Human Services (HHS) and states.
- Plan Requirements – Any plan offered by an insurer or HMO through an exchange must be a Qualified Health Benefits Plan (QHBP).
- Individuals – Who might use the exchanges? Who is eligible for a subsidy?
- Employers – Which small employers will consider sending their employees to the exchange?
2014 Models
There are three types of exchange models
- Clearinghouses are places where employers and individuals can go to find a range of coverage offerings and compare price, quality and service levels. Participating plans compete for exchange enrollees based on cost and quality.
- Active Purchasers negotiate and contract with select insurers to provide coverage.
- Market Organizers do not directly negotiate prices or selectively contract but may define standard benefit packages, provide some degree of endorsement, and otherwise encourage health plans to offer high-value coverage.
Funding
The overall cost of getting exchanges up and running is expected to be $4.4 billion nationwide, although some federal funds will offset the cost; $51 million in federal grants was announced in 2010, with additional grants now available in 2011. All state exchanges must be self-sustaining by 2015.
Governance and Models
States have a number of things to consider as they develop their exchange. While more details are yet to come, here is some important information:
Each state must establish an individual and a small business exchange. States may choose to establish a single exchange that performs both functions.
Small Business Health Options Program (SHOP) exchanges are established to assist “small employers.” Prior to plan years beginning on or after 1/1/16, states have the option of defining “small employer” as 1-50. For plan years beginning on or after 1/1/16, it’s uniformly 1-100. States may operate multiple exchanges within a state. States may jointly form regional exchanges.
A federal exchange will be established for those states that choose not to build one.
Exchanges must be operational for open enrollment by July 2013. It’s expected that HHS will certify state or regional exchanges by January 1, 2013, confirming which ones are approved and prepared for open enrollment in mid-2013. States that aren’t ready for certification by January 1, 2013, (or those that opt out) will instead participate in the federal exchange.
Governance
Exchange governance models options include:
Public Agency Model: Governed and administered by a state agency
Public Non-Profit Model: Independent nonprofit or authority separate from state government
Quasi-Governmental Model: Administered by a state agency and governed by an independent board
Plan Requirements and Offerings
Exchanges will vary from state to state with regard to plan options and requirements. However, PPACA requires that a plan offered on the exchange must be a Qualified Health Benefit Plan (QHBP). The legislation defines a QHBP as an insurance plan that is certified by an exchange, provides essential health benefits, follows established limits on cost sharing (like deductibles, copayments, and out of-pocket maximum amounts), and meets other requirements. A QHBP will be certified by each exchange in which it is sold.
The benefit plans sold or offered on the exchange must include the following:
- Essential health benefits
- Fully insured plans only
- Accreditation on clinical quality measures
- No pre-existing conditions for all ages
- No annual limits on essential health benefits
- No lifetime dollar limits on essential health benefits
- Minimum of five levels of coverage (see box)
- QHBP must provide at least one offering in the gold and silver categories to participate on the exchange.
- Subsidies will be based on the second lowest cost silver plan available. See individual section.
Essential Health Benefits
Essential health benefits are yet to be defined, but the following items are likely to be included:
- Ambulatory patient services
- Emergency services
- Hospitalization
- Laboratory services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services, and devices
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
Plan Minimum Values
- Bronze 60%
- Silver 70%
- Gold 80%
- Platinum 90%
* Plans provide essential health benefits and pay for the noted percentage of the costs of the plan with the Health Savings Account (HSA) out-of-pocket limits.
Individual Responsibility
Beginning in 2014, all individuals must maintain “Minimum essential coverage” through an employer sponsored plan, or individual plan such as one purchased on an exchange. Failure to do so will result in a penalty or tax. The penalty is on a sliding scale for three years and is 1/12th of the greater of:
- 2014: $95 per uninsured adult in the household or 1% of the household income over the filing threshold
- 2015: $325 per uninsured adult in the household or 2% of the household income over the filing threshold
- 2016: $695 per uninsured adult in the household or 2.5% of the household income over the filing threshold
The penalty will be half of the amounts listed above for those under age 18. The total household penalty may not exceed 300% of the adult penalty or the national average annual premium for bronze level health coverage.
Exceptions for individual responsibility include:
- Individuals not lawfully present in the U.S.
- Those who cannot afford coverage (contributions toward coverage exceed 8% of household income)
- Taxpayers with income under 100% of the poverty level (They qualify for Medicaid)
- Those that were not covered for a period of less than three months during the year
Individuals
Beginning in 2014, the Congressional Budget Office estimates about 25 million people will shop for coverage on the individual exchanges. This group might include people who are currently in the individual marketplace, unemployed, self-employed, or work for businesses that don’t offer insurance or whose plan is unaffordable.
Financial Aid
About 19 million people who secure coverage through an exchange are likely to be eligible for a subsidy called a Federal Premium Assistance Tax Credit to help pay for their coverage. The credit is available to individuals and families with incomes between 100% and 400% of the federal poverty level (approximately $44,000 for an individual or $89,000 for a family of four). The credit amount is determined by the Secretary of Health and Human Services, based on the amount by which premiums exceed a threshold amount. The threshold rises from 2% of income for those at 100% of the federal poverty level for the family size involved to 9.5% of income for those at 400% of the federal poverty level.
Employers
In 2014, many small employers sponsoring an insured group health plan will begin using SHOP exchanges. SHOP exchanges will serve “small employers.” Prior to plan years beginning on or after 1/1/16, states have the option of defining “small employer” as 1-50. For plan years beginning on or after 1/1/16, it’s uniformly 1-100.
Assistance for Those with fewer Than 25 Employees
Beginning in 2010, tax credits will be available for small employers providing health insurance to their workers. Eligibility for this assistance is limited to firms with fewer than 25 employees and where the average annual employee compensation does not exceed $50,000. Available to a “for-profit” business at 35% of the employer’s cost of health insurance if the employer provides more than 50% of the employees’ premium expenses Available to small “not-for-profit” business at 25% of the employer’s cost of insurance and offsets any payroll taxes that employees incur. These subsidies will increase in 2014 to 50% and 35% for the “for-profit” and “not-for-profit” businesses, respectively.
Employer Responsibility
Beginning in 2014, employers with 50 or more employees may be penalized whether or not they provide health coverage. Employers with fewer than 50 employees are exempt from penalties.
Employers who DO NOT provide coverage:
Trigger - At least one employee obtains subsidized coverage from the exchange
Fee - Must pay a fee equal to $2,000 per year for each full-time (30+ hours) employee minus the first 30 employees
Employers who DO provide coverage:*
Trigger - At least one employee obtains subsidized coverage from the exchange
Fee - Must pay a fee equal to the lesser of $3,000 for each employee receiving subsidized coverage or $2,000 for each full-time (30+ hours) employee minus the first 30 employees
* But the coverage is “unaffordable” or does not provide “minimum value.”
At Alliance, we support the development of an exchange marketplace that focuses on access, cost and quality. Our guiding principles for exchanges support a level playing field that includes:
Meaningful Choice – Plans should have the flexibility in product offering, cost-sharing, and network design to participate fully and provide choice to the consumers.
Transparency – A transparent governance model includes representation by a wide range of stakeholders; an open policy for state records, meetings and policies; and a not-for-profit or trust structure that’s financed by a broad funding source.
Competition – Exchanges need to ensure competition on fundamentals and value, including the ability to offer qualified plans both on and off exchange.
Incentives for Healthy Outcomes – Exchanges should promote quality and improved health outcomes.
Here are a few suggestions of things you can do to learn more or become involved with exchanges:
- Make your views heard. Contact your senator and/or representative so that they understand what is important to you. If your state exchange development involves committees or hearings, participate wherever possible.
- Ensure your employees are engaged – in both their benefits and their health.
- Make changes as needed to achieve short- and long-term objectives.
