New Exchange Guidance Says States Can’t Accept Every Health Insurer Into Exchanges

Washington and Lee law professor Timothy Jost adds one more important point to the federal governments’ initial guidance on how states can establish exchanges under the Affordable Care Act. It expands on this notion that so-called “red” states and “blue” states will likely adopt very different kinds of exchanges that will accomplish very different things:

In perhaps the most noteworthy paragraph of the Guidance, HHS clarifies that both an “active purchaser” (Massachusetts or California) or “open marketplace” (Utah) model are acceptable under the ACA. Many consumer advocates favor an active exchange that would demand value for money from health plans, while insurers favor an “any willing insurer” model. While the Guidance blesses both, it should be noted that, in the prior paragraph, the Guidance notes that the exchange must have “discretion to determine whether health plans offered through the Exchange are ‘in the best interests of qualified individuals and qualified employers” as Section 1311(e)(1) [of the ACA] requires.” A state statute that required an exchange to certify any health plan that met all other explicit statutory requirements could not, therefore, be in compliance with the ACA.

Progressive states want the exchange — likely governed by an independent authority — to act like an active purchaser of insurance: restrict inefficient and poor quality plans from entering and bargain with insurance companies on behalf of consumers. The so-called “open marketplace” model is very different. Here, consumers will compare a wide variety of plans sold by any insurers that want to participate, meaning that they may be overwhelmed by the choice and sold some not very good products.

The government’s guidance is important for two reasons. First, it confirms what Joel Ario, the Director of the Office of Insurance Exchanges at HHS, has been saying publicly for quite some time — states will have a great deal of flexibility in establishing their own exchanges. But — and this is the second point — they won’t, as Jost points out, be able to just invite anyone into the new market place. A certain floor of standards will be established.


It’s also worth reiterating that insurers are very obviously (and publicly) lobbying for the latter structure — touting out a whole series of poll testes phrases about enabling “competition” and promoting “consumer choice.” It will be interesting to see how they respond to this federal guidance.