One of the centerpieces of the Patient Protection and Affordable Care Act (PPACA) was a requirement that states either establish and operate their own health insurance exchange or leave it up to the federal government. In all, 18 states and the District of Columbia submitted the necessary paperwork requesting to run their own programs.
Health insurance exchanges are essentially online marketplaces for individuals and employers to purchase coverage through pre-approved qualified health plans with specific levels of covered benefits. The PPACA also calls for the exchanges to be used to determine eligibility for new subsidies (for taxpayers with incomes of up to 400% of the poverty level), Medicaid and the Children’s Health Insurance Program.
The Department of Health and Human Services was tasked with approving, conditionally approving or denying the applications submitted by the 19 jurisdictions (California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Mississippi, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont, Washington and the District of Columbia). Each exchange must be ready for open enrollment on Oct. 1, 2013 and fully operational on Jan. 1, 2014.
Most states chose not to pursue the establishment of a state-based exchange, so the federal government will establish exchanges 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 including a lack of clear guidance from the federal government, the prohibitive cost associated with running an exchange and the political liability of appearing to comply with an unpopular law. These states have the option to establish their own exchange at a later date, but there is a one-year waiting period before an exchange for one of these states will be permitted to be operational.
States with federally run exchanges have the option of performing plan management and/or consumer assistance functions for the exchanges (under the “partnership exchange” model) or allowing the federal government to operate the exchange without any significant state involvement (commonly referred to as 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—are expected to seek such approval to operate one or both of the areas of responsibility available to states under the partnership model.
