HHS Issues Proposed Guidance on State Insurance Exchanges

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As you know, every state is mandated to establish its own exchange by Jan. 1, 2014, or have the federal government run a health insurance exchange on its behalf under PPACA. In addition, states must have detailed operating plans in place at least one year prior to the full implementation of the insurance exchange. This month, HHS issued two proposed rules to provide a framework for states to implement these marketplaces.

The proposed rule sets forth the federal requirements that states must meet if they elect to establish and operate an exchange. It also outlines the minimum requirements health insurance issuers must meet to participate in an exchange and offer qualified health plans, and provides basic standards employers must meet to participate in the Small Business Health Options Program (SHOP).

The proposed rule leaves most key decisions up to the states, though it sets some minimum standards for every exchange – including limits on the role of insurance companies and agents. The marketplaces must post information online about price and quality, offer specific standardized plans and set an annual open enrollment period. Those who qualify for assistance also will use the exchanges to receive federal subsidies or tax credits to purchase insurance, or to gain access to Medicaid.

States have until Jan. 1, 2013 to show they will have an exchange up and running the next year, although the proposal suggests that states showing progress will be granted "conditional approval." Still, states that can't – or won't – set up their own marketplaces will have the federal government step in and do it for them. States that get ready later can still set up their own exchange as long as they give the federal government a year's notice, the rules say.

The exchanges will officially open Jan. 1, 2014, but consumers will be able to begin the process of signing up for coverage before, during an "open enrollment" period similar to those currently set up by employers offering health insurance. Such enrollment periods are designed to encourage people to sign up for coverage right away, rather than waiting until they become ill. That's important because in 2014, not only does the law require nearly all Americans to carry coverage, it also requires insurers to take all applicants, even those with medical conditions.

To give people time to understand the exchanges and make their choices, the initial open enrollment period will begin Oct. 1, 2013 and run through Feb. 28, 2014. In subsequent years, open enrollment will run from Oct. 15 to Dec. 7. People will be able to purchase insurance outside of open enrollment under specific circumstances, such as when adding a child by birth or adoption, or in cases where they lose employer coverage or coverage through a spouse.

HHS is accepting public comments, and final regulations are expected later this year. 

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