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Last Friday marked the deadline for states to declare whether they will establish and run their own health insurance exchanges under the Patient Protection and Affordable Care Act (PPACA). In all, 18 states and the District of Columbia declared their intentions to operate their own state exchanges and submitted the required applications to federal officials. 

Health insurance exchanges are seen by many observers as the centerpiece of the PPACA. These are the online marketplaces for individuals and employers to purchase coverage through preapproved qualified health plans with specific levels of covered benefits. In addition, the exchanges will be used to determine eligibility for new subsidies for taxpayers with incomes of up to 400% of the poverty level, as well as Medicaid and the Children’s Health Insurance Program. 

The Department of Health and Human Services must now approve, conditionally approve or deny applications submitted by the 19 jurisdictions:

  • California
  • Colorado
  • Connecticut
  • District of Columbia
  • Hawaii
  • Idaho
  • Kentucky
  • Maryland
  • Massachusetts
  • Minnesota
  • Mississippi
  • Nevada
  • New Mexico
  • New York
  • Oregon
  • Rhode Island
  • Utah
  • Vermont
  • Washington

These decisions must be made no later than Jan. 1, 2013. Each exchange must be ready for open enrollment on Oct. 1, 2013, and fully operational on Jan. 1, 2014.

HHS has already granted conditional approval for Colorado, Connecticut, the District of Columbia, Kentucky, Massachusetts, Maryland, New York, Oregon and Washington to run their own exchanges. The other states seeking approval to operate their own exchanges have made varying levels of progress in enacting necessary legislation and satisfying the requirements imposed on exchanges by the PPACA.

It is possible that the applications of at least some states will be denied.  

Most states have chosen not to pursue the establishment of a state-based exchange, so the federal government will establish an exchange in these remaining states and in any jurisdiction whose application is denied by HHS.

The states that have elected not to create exchanges cite a variety of reasons for their decision, such as a lack of clear guidance from the federal government and the prohibitive cost associated with running an exchange. For many states, the bigger issue was the political liability of appearing to comply with an unpopular law. 

These states may establish their own exchanges at a later date. However, there is a one-year waiting period before one will be permitted to be operational.

States with federally operated exchanges have the option of performing plan management and/or consumer assistance functions for the exchanges, under the “partnership exchange” model. Or, they may allow the federal government to operate the exchange without any significant state involvement through the “federally-facilitated exchange” model. 

States that intend to cooperate with HHS on the operation of a partnership exchange must submit an application for approval by Feb. 15, 2013.

Several states—including Arkansas, Delaware, Illinois, Iowa, Michigan, North Carolina and West Virginia—appear likely to seek such approval to operate one or both of the areas of responsibility available to states under the partnership model. 

Source:  Independent Agent Magazine
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