The new federal exchange regulations use the word “flexibility” at least 38 times to describe the wide latitude states will have in both establishing their exchanges and choosing which insurance plans should offer health care coverage within them. The much-anticipated rules will govern the Affordable Care Act’s central provision: the new state-based insurance markets that will allow individuals, families, and small businesses to compare and purchase quality coverage from an array of private health insurance plans all competing for their business. The federal government will establish exchanges in states that choose not to build their own markets.
“These proposed rules set minimum standards for Exchanges, give states the flexibility they need to design Exchanges that best fit their unique insurance markets,” the Department of Health and Human Services press release reads. “[I]t allows states to decide whether their Exchanges should be local, regional, or operated by a non-profit organization, how to select plans to participate, and whether to partner with HHS to split up the work.”
On the question of which plans could be certified as Quality Health Plans (QHPs) and sell their policies in the exchange, the federal government establishes minimum standards, but allows states a strong voice in forming their own rules. For instance:
– States determine the number of plans offered: “This could mean that any health plan that meets the standards can participate, that health plan issuers with successful competitive bids can participate, or anywhere in between.”
– States establish rules relating to provider adequacy and marketing standards: The exchanges will set “standards to ensure that consumers have a choice of health care providers within each qualified health plan rather than proposing a national standard. As with network adequacy standards, marketing standards would be set by States and Exchanges in the proposed rule.”
– States can operate reinsurance even if they don’t establish an exchange: They can “modify the payment rules to tailor them to their States. States can also tailor the risk adjustment program, for example, using their own methodology if approved by HHS and determine when and how payments to plans get made.”
Allowing states maximum flexibility should encourage governors — even Republican governors who oppose large sections of the law — to design their own exchanges that not only meet the needs of their unique markets but also are also in line with their ideological inclinations. For instance, we’ll see blue states allowing exchanges the authority that governs the exchange to bargain with insurance companies on behalf of consumers, while red states would open the exchange to a wide variety of health plans. These markets may also be slow to adopt conflict of interest rules that prohibit powerful players in the health care sector — like insurance companies — from influencing the operations of the new markets.
For a map of where all the states stand in establishing their exchanges, click here.