State Exchange Frequently Asked Questions
An important component of the Affordable Care Act (ACA) is the establishment of State Exchanges. The ACA requires that states establish an insurance exchange by January 1, 2014. Although it is difficult to determine how exchanges will affect sleep medicine specifically, it is important that members have an understanding of how exchanges will be operated.
What is an Exchange?
The fundamental purpose of a health insurance exchange is to provide a marketplace to individuals and businesses for the sale and purchase of health insurance. An exchange allows for “one-stop shopping” and may be a physical location or may conduct its business online. The insurance options offered through an exchange include large group, small group and individual markets.
Insurance companies that choose to sell their products through an exchange will be required to comply with consumer protections in the ACA, such as offering insurance to every qualified applicant. Exchanges will contract with the insurance companies, who will in turn, make their products available for purchase. Exchanges will direct people to appropriate Qualified Health Plan products that fit their financial requirements or direct them to the Medicaid product for which they may be eligible. To make exchange coverage more affordable, certain individuals will receive premium assistance in the form of federal tax credits. In addition, some recipients of premium credits may also receive subsidies toward cost-sharing expenses.
There will be three types of exchanges: A state operated exchange, a partnership exchange through which the state and federal government assume responsibility for a defined set of activities within the exchange, and a federally operated exchange. The ACA directs the HHS Secretary to establish and operate a federally-facilitated exchange in any state that is not able or willing to establish a state-based exchange. In a federally-facilitated exchange, HHS will perform all exchange functions. States entering into a state-federal partnership exchange may administer plan management functions, in-person consumer assistance functions, or both, and HHS will perform the remaining exchange functions. If a state opts for a state-federal partnership exchange, it has until February 15, 2013, to submit an exchange blueprint to HHS.
An exchange can help small businesses provide affordable coverage choices to their workers and allow employees to choose the plan that is best for them and their families. Employees will be able to use contributions from one or more employers to purchase coverage for them and their families and keep that coverage if they become self-employed, lose their job, or if they change jobs. An exchange can also simplify the administration of health insurance for small businesses and allow them to focus on growing their business instead of managing health insurance.
What is the difference between a federal insurance exchange and a state-run health insurance exchange?
In general, federal and state exchanges should work the same way. Consumers shopping in either type of exchange will choose among insurance plans. However, differences between federal and state exchanges are likely to be subtle, but important to some consumers.
States that establish their own exchanges, for example, can decide which insurers participate and whether to require benefits beyond those set under federal law. They can accept all insurers whose policies meet the law's requirements, for instance, or limit participation by requiring that insurers meet specific quality or pricing guidelines.
California, for example, has chosen to limit the number of insurers, which they say allows them to choose the highest value plans, while Colorado's model will accept all plans that meet the requirements. The federal exchanges will accept all qualifying plans.
States that build their own exchanges can also decide whether to be more proactive in selecting insurers that offer benefits targeted to a state's particular needs. For example, a state with a high rate of diabetes might select insurers with special programs to combat diabetes.
Some exchanges and state insurance commissioners will be able to recommend whether specific insurers should be allowed to sell in the exchange, partly based on their patterns of rate increases.
What functions will an Exchange perform?
An exchange will perform a number of functions, including:
- Operating a toll-free hotline and website for providing information
- Ensuring that health insurance plans meet certain standards (for example, related to marketing, access to health care providers, and reporting on quality of care).
- Providing information in a standard format to help consumers compare insurance companies and benefit plans
- Determining eligibility for individual premium tax credits, cost-sharing assistance, and coverage requirement exemptions
- Determining eligibility for Medical Assistance
- Determining eligibility for small business premium tax credits
- Providing real-time enrollment in health benefit plans
- Making an electronic calculator available to display the cost of coverage
- Communicating with employers regarding employee tax credit eligibility, cancellation of coverage, etc.
- Establishing a Navigator program that connects applicants to an individual or organization who assists consumers and businesses to navigate an exchange.
Who will be eligible to use an Exchange?
An exchange will be available to individual consumers and small businesses with up to 100 employees when it opens for enrollment effective January 1, 2014. Exchanges may limit small business eligibility to those with less than 50 employees prior to 2016. Large employers may be allowed to participate in 2017.
What is a Qualified Health Plan (QHP)?
A qualified health plan is an insurance plan certified by the exchange and provides the essential benefits package.
What are the Essential Health Benefits Requirements (EHB)?
The essential health benefits package must cover the following 10 general categories of services:
- Ambulatory patient services
- Emergency services
- Maternity and newborn care
- Mental health and substance abuse disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory Services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
Beginning Jan. 1, 2014, coverage provided for the essential health benefits package will provide four levels of coverage. The four levels of coverage are based on “actuarial value.” Actuarial value is a measure of the level of protection a health insurance policy offers and indicates the percentage of health costs that, for an average population, would be covered by the health plan. The four levels provided are:
- Bronze: 60%
- Silver: 70%
- Gold: 80%
- Platinum: 90%
For a bronze plan, the health plan would cover 60% of the cost and enrollees (on average) would cover 40%. For a platinum plan, an average individual would pay 10% out of pocket for their covered benefits and the plan would pay 90%.
The ACA will require the Health and Human Services (HHS) Secretary to define and periodically update coverage that provides essential health benefits. The HHS Secretary will ensure that the scope of essential health benefits is equal to the scope of benefits under a typical employer-provided health plan (as certified by the Chief Actuary of the Centers for Medicare and Medicaid Services). A health plan will be allowed to provide benefits in excess of the essential health benefits defined by the HHS Secretary. However, if a state requires such additional benefits in QHPs, the state must reimburse individuals for the additional costs of those benefits.
Who will be eligible for cost assistance/tax credits?
To make exchange coverage more affordable, certain individuals will receive premium assistance in the form of federal tax credits. Some recipients of premium credits also may receive subsidies toward cost-sharing expenses. Exchanges have some responsibilities in regard to determining an individual’s eligibility for cost assistance and calculating the amount of cost assistance provided.
Beginning in 2014, federal tax credits will be authorized to help low- to middle-income individuals pay for insurance coverage. To be eligible for a premium credit in an exchange, an individual must:
- Have household income between 100% and 400% of the federal poverty level; not be eligible for Medicaid or Medicare or other types of “minimum essential coverage” (other than through the individual health insurance market);
- Enrolled in an exchange plan; and
- Part of a tax-filing unit.
The amount of the tax credit will vary from person to person depending on household income, the premium for the exchange plan, and other factors. In certain instances, the credit amount may cover the entire premium. In other instances, the individual may be required to pay part or the entire premium.
Certain individuals who are eligible for premium credits in the exchanges also will be eligible for subsidies toward service-related cost-sharing. Exchanges are required either to determine an individual’s eligibility for cost-sharing subsidies or implement a determination made by HHS.