On March 23, 2010, President Obama signed into law a comprehensive health care reform bill, the Affordable Care Act (ACA). ACA includes numerous reforms aimed at improving the U.S. health care delivery system, controlling health care costs and expanding health coverage. ACA’s reforms have staggered effective dates; some provisions are effective now, while others take effect in 2014 and later.
ACA is a federal law, which means that federal agencies, namely the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury, are primarily responsible for the law’s overall enforcement. However, ACA also creates significant responsibilities for state governments. A number of ACA’s key health care reforms will be carried out at the state level.
This Business Benefits Group Legislative Brief provides a high-level overview of selected ACA reforms to be implemented by state governments and highlights the progress being made in Washington, D.C.
HEALTH INSURANCE EXCHANGES
ACA requires each state to have a health insurance exchange (Exchange) to provide a competitive marketplace where individuals and small businesses will be able to purchase affordable private health insurance coverage, effective. According to HHS, the Exchanges will make it easier for individuals and small businesses to compare health plan options, receive answers to health coverage questions, determine eligibility for tax credits for private insurance or public health programs and enroll in suitable health coverage.
Individuals and small employers with up to 100 employees will be eligible to participate in the Exchanges. However, states may limit employers’ participation in the Exchanges to businesses with up to 50 employees until 2016. Beginning in 2017, states may allow businesses with more than 100 employees to participate in the Exchanges. Enrollment in the Exchanges is expected to begin on Oct. 1, 2013.
States have three options with respect to their Exchanges. A state may:
- Establish its own state-based Exchange;
- Have HHS operate a federally facilitated Exchange (FFE) for its residents; or
- Partner with HHS so that some FFE Exchange functions can be performed by the state.
States that intend to pursue a state-based Exchange or a state partnership Exchange must submit a blueprint to HHS by Nov. 16, 2012. The blueprint must contain a declaration letter signed by the state’s governor and an application describing readiness to perform Exchange activities and functions. If a state does not move forward with its Exchange or select the partnership model, HHS will operate the FFE in the state and will also perform the Exchange-related functions of risk adjustment and reinsurance.
Washington D.C. Mayor Vincent Gray (D) issued an executive order in May 2011 to establish a Health Reform Implementation Committee. This committee was created to ensure the smooth implementation of ACA in the District of Columbia, including the development of a state-based Exchange. In January 2012, Mayor Gray signed a bill into law to establish the District of Columbia Health Benefit Exchange Authority. This bill included many of the Health Reform Implementation Committee’s recommendations for a state-based Exchange.
The District of Columbia’s Exchange is a quasi-governmental organization governed by an 11-member board. To help establish the Exchange, Washington D.C. received federal planning and establishment grants. On Aug. 8, 2012, Mayor Gray sent a letter to HHS confirming the District of Columbia’s commitment to the establishment of a state-based Exchange.
On Oct. 3, 2012, the Exchange’s board voted unanimously to designate the Exchange as the sole health insurance marketplace for individuals and small employers (50 or fewer employees). If the Exchange’s proposal becomes law, it would effectively end the sale of health insurance outside of the Exchange for these markets in the District of Columbia. This decision by the Exchange’s board has been met with opposition from the small business community and insurance industry. At this point, however, the District Council has not approved this consolidation of health insurance markets.
TEMPORARY HIGH-RISK INSURANCE POOL
ACA requires the establishment of a temporary high-risk health insurance pool to provide affordable health insurance coverage to uninsured individuals with pre-existing conditions. ACA’s high-risk health insurance pool is called the Pre-Existing Condition Insurance Plan (PCIP). The PCIP will continue until Jan. 1, 2014, when individuals will be able to purchase health coverage through ACA’s health insurance exchanges.
HHS administers the PCIP in some states, while other states have requested to run their own PCIP. HHS administers the District of Columbia’s PCIP. PCIP enrollees can choose from three plan options, with different levels of premiums, calendar year deductibles, prescription deductibles and prescription copays. More information on the District of Columbia’s PCIP is available at:www.pciplan.com.
INSURANCE RATE REVIEW
To help hold insurance companies accountable for their proposed rate hikes, ACA required HHS to establish a process to review the reasonableness of certain premium increases.
- Effective Sept. 1, 2011, insurers seeking rate increases of 10 percent or more for non-grandfathered plans in the individual and small group markets must publicly disclose the proposed increases along with justification for the increases.
- Starting Sept. 1, 2012, the 10 percent threshold will be replaced with a state-specific threshold to reflect insurance and health care cost trends particular to each state. HHS will work with states to develop the applicable thresholds.
The proposed increases must be reviewed by either state or federal experts to determine whether they are reasonable. States with effective rate review systems will conduct their own reviews, but if a state does not have the resources or authority to conduct rate reviews, HHS will conduct them.
According to HHS, the District of Columbia has an effective system for reviewing rate increases in both the individual and small group markets. In the District of Columbia, the Department of Insurance, Securities and Banking conducts rate reviews for these markets.
HEALTH INSURANCE REFORMS
ACA requires sponsors of self-funded and insured group health plans to make changes to their plans’ design and administration over the next several years. For example, effective for plan years beginning on or after Sept. 23, 2010, ACA requires:
- Group health plans to extend dependent coverage up to age 26; and
- Non-grandfathered group health plans to follow minimum requirements for external review of claims appeals.
Dependent Coverage Requirements
Although ACA creates federal standards, the health insurance market is primarily regulated at the state level. Some states may have laws that go beyond the federal minimums established by ACA. For example, some states extend dependent coverage beyond age 26. The District of Columbia does not require insured health plans to maintain dependent coverage beyond the federal minimum age limit.
External Review Requirements
In addition, ACA requires insured plans to comply with their state’s external review process if it includes certain minimum consumer protections. If a state’s external review process does not include the required minimum consumer protections, health insurers in the state must comply with a federal process for conducting external reviews, effective Jan. 1, 2012.
HHS concluded that the District of Columbia’s external review process includes the minimum consumer protections. Thus, insured health plans in the District of Columbia must conduct external appeals in accordance with the District’s external review process.