THE COMMONWEALTH FUND The Patient Protection and Affordable

THE COMMONWEALTH FUND The Patient Protection and Affordable Care Act: Health Insurance Exchanges Sara R. Collins, Ph. D. Vice President, Affordable Health Insurance The Commonwealth Fund Alliance for Health Reform, Briefing on Health Insurance Exchanges October 22, 2010

Timeline for ACA Implementation • Small business tax credit • State insurance • Prohibitions exchanges against lifetime • Phased-in ban on annual • Small business tax benefit caps & limits credit increases rescissions • Insurance market • Phased-in ban reforms including no on annual limits • States adopt exchange legislation • Annual review and begin implementing exchanges rating on health • Essential benefit of premium standard increases • Insurers must • HHS must • Penalty for • Premium and cost • Public reporting spend at least determine if individual sharing credits for by insurers on 85% of premiums states will have exchange plans requirement to share of (large group) or operational have insurance premiums spent 80% (small group exchanges by • Premium increases phases in (2014 on non-medical / individual) on a criteria for carrier 2014; if not, 2016) costs medical costs or exchange HHS will provide rebates to operate them • Option for state participation • Preventive enrollees waiver to design services • Individual alternative coverage requirement to have coverage programs without costinsurance (2017) sharing • Employer shared responsibility • Young adults on penalties parents’ plans THE COMMONWEALTH FUND Source: Commonwealth Fund Analysis of the The Affordable Care Act (Public Law 111 -148 and 111 -152).

Source of Insurance Coverage Pre-Reform and Under Affordable Care Act, 2019 24 M (9%) Exchanges (Private Plans) 54 M (19%) Uninsured 16 M (6%) Other 15 M (5%) Nongroup 162 M (57%) ESI 35 M (12%) Medicaid 23 M (8%) Uninsured 16 M (6%) Other 159 M (56%) ESI 10 M (4%) Nongroup 51 M (18%) Medicaid Pre-Reform Affordable Care Act Among 282 million people under age 65 * Employees whose employers provide coverage through the exchange are shown as covered by their employers (5 million), thus about 29 million people would be enrolled through plans in the exchange. Note: ESI is Employer-Sponsored Insurance. Source: Congressional Budget Office, Letter to Honorable Nancy Pelosi, March 20, 2010 http: //cbo. gov/doc. cfm? index=11379. THE COMMONWEALTH FUND

ACA Provisions for Insurance Exchanges, 2014 • • • Each state must establish an American Health Benefit Exchange and a Small Business Health Options Program (SHOP) Exchange by 2014 for individuals and small employers; states can create single exchange If HHS determines in 2013 that a state will not have an exchange operational by 2014, HHS is required to establish and operate an exchange in the state Individual and small-group markets not replaced by exchanges, but same market rules apply inside and outside Non-grandfathered plans to provide essential benefit package inside/outside Qualified health plans (QHPs) certified by exchanges; OPM to contract with carriers to offer at least two multi-state plans through exchanges, one nonprofit; $6 billion in funding for CO-OP program QHPs must sell at least silver and gold level plans; plans selling outside can sell at any level (bronze, silver, gold, platinum) Carriers selling inside and outside must pool risk of all enrollees In 2014, small businesses with up to 100 employees may provide plans for their employees through exchanges, but states can limit to 50 until 2016; may open to 100+ in 2017 Small employer tax credits (2014), premium and cost sharing subsidies, can be used only for plans purchased through the exchanges HHS to establish permanent risk adjustment mechanism and transitional reinsurance and risk corridor programs THE COMMONWEALTH FUND

Federal Responsibilities for Exchanges Under ACA • • • Establish certification criteria and marketing requirements for QHPs Define essential benefit package Ensure a sufficient choice of providers including essential community providers who serve predominantly low income/medically underserved Ensure QHPs are accredited on clinical quality measures, patient experience ratings, and other measures Develop a uniform enrollment form for individuals and employers and present plan information in a standard format Implement a quality improvement strategy for health plans Provide information on quality measures on health plan performance Develop a rating system that will rate QHPs within each benefit level on relative quality and price to be provided on the Internet portal Establish model template for an exchange's Internet portal. The portal will be used to direct individuals/employers to QHPs, to help them determine eligibility for premium/cost-sharing credits, and present standardized information about health plans to facilitate choice Determine initial, open, and special enrollment periods Establish procedures to allow brokers to enroll individuals in QHPs and assist them in applying for subsidies THE COMMONWEALTH FUND

State Responsibilities for Exchanges Under ACA • • After HHS issues regulations and sets standards for exchanges, states may adopt before Jan. 2014 the federal standard into their own laws or adopt similar standards that HHS deems equivalent HHS will award grants, March 2011 - Jan. 1 2015, to states for planning and establishing the exchanges; after that exchanges must be self-sufficient and may charge assessments or user fees to carriers or other means Once exchange is operational state responsibilities include: – Certify qualified health plans – Operate toll-free hotline and Web site – Rate qualified health plans, present plan options in a standard format – Make recommendations to exclude from exchange carriers with history of excessive premium increases (as condition of premium review grants) – Inform individuals of eligibility for Medicaid and CHIP – Provide an electronic calculator to calculate plan costs – Grant certifications of exemption from individual responsibility requirement – Provide Treasury information necessary to enforce employer payments – Award grants to "navigators" to educate the public about qualified health plans, distribute information on enrollment and subsidies, facilitate enrollment, and provide referrals on grievances In 2017, states may opt out of insurance exchanges with a 5 -year waiver, if they can offer all residents coverage at least as comprehensive/affordable. THE COMMONWEALTH FUND