AFFORDABLE INSURANCE EXCHANGES: SIMPLE, SEAMLESS AND AFFORDABLE COVERAGE

Starting in 2014, millions of individuals, families, and small businesses will have access to the same kind of affordable insurance choices as Members of Congress through the purchase of private health insurance through Affordable Insurance Exchanges (Exchanges).  Exchanges will offer Americans competition, choice, and clout.  Insurance companies will compete for business on a level playing field, driving down costs.  Exchanges will make it easy for individual consumers and small businesses to compare qualified health plans. And Exchanges will give individuals and small businesses the same purchasing clout as big businesses.

States are already working to establish Exchanges. Forty-nine States, the District of Columbia and four territories applied for grants to help plan and operate Exchanges.  Over half of all States have taken additional action beyond receiving a planning grant such as passing legislation or taking Administrative action to begin building exchanges.

New Proposed Rules

The U.S. Department of Health and Human Services (HHS) along with the Department of the Treasury released three proposed rules on August 12, 2011, to build on existing momentum toward Exchange development in States.  This fact sheet explains one of those rules, the Exchange Eligibility and Employer Standards. We expect to modify these rules based on feedback we receive from the public.

This rule proposes standards and systems for applying for and enrolling in qualified health plans and insurance affordability programs through the Exchange that will be:

• Easy and Fast: The eligibility process will minimize burden on States and individuals by relying on electronic data sources to verify applicant information wherever possible. In most cases, this will allow for a near real-time eligibility process so that individuals can receive an eligibility determination and enroll in a plan in a single session.
• Coordinated: By using the same simplified eligibility rules for premium tax credits, Medicaid and CHIP, individuals can enroll in the program that best fits their needs without unnecessary steps or redundant paperwork.
• Seamless: The proposed rule simplifies the redetermination process to help enrollees maintain coverage year after year without unnecessary disruptions. 
• Flexible for Employers: The SHOP Exchange provides small employers an innovative way to provide employees with a choice among affordable health insurance options while keeping costs predictable.  

Exchange Eligibility and the Affordable Care Act: Expanding Access to a Seamless System of Coverage 

The Exchange Eligibility and Employer Standards proposed rule accomplishes three main goals:

• Expanding Access to Private Insurance:   Exchanges will help millions of Americans access and afford private health insurance coverage.   The proposed rule sets the standards for applying for and signing up for private plans offered through the Exchange, including how middle-class Americans access unprecedented tax relief that will dramatically reduce the cost of coverage. 

• A Seamless System of Coverage:   Exchanges will make it simple for individuals and families to access the coverage for which they are eligible, whether that is private coverage, Medicaid or CHIP.   Application, eligibility verification and determination processes will be coordinated to make it simple to apply for coverage and efficient and affordable for States to administer.

• Using Technology to Support the Eligibility Determination Process: Exchanges will make it easy to determine what coverage families are eligible for, with the minimum amount of paperwork and red tape.  To the greatest extent possible, applicant’s information will be verified using data matching with electronic data sources.  Programs will only ask the individual to provide the minimum amount of information necessary to complete an eligibility determination accurately and quickly.  When applying, many individuals will be able to receive an eligibility determination and choose a health plan within a single session.   

Determining Eligibility

The proposed Exchange Eligibility and Employer Standards rule establishes a streamlined and coordinated system through which an individual may apply for and receive a determination of eligibility for enrollment in a qualified health plan through the Exchange and for insurance affordability programs. This means that no matter how an application is submitted or which program receives the application, an individual will use the same application and receive a consistent eligibility determination, without the need to submit information to multiple programs.  This consumer-focused approach will facilitate the enrollment of millions of Americans into affordable, high quality coverage while minimizing the administrative burden on States, individuals, and health plans. For example:

• Exchanges will consider whether consumers are eligible for all available programs based on their application – this way consumers don’t have to guess what programs they may be eligible for.
• Consumers will be able to easily update any changes that might affect their eligibility for an affordability program, including marriage, divorce or a job change.
• Exchanges will make it easy for consumers to keep their coverage year to year through a simple eligibility redetermination process.
• Consumers will have more control over their health insurance, with the right to opt out of insurance affordability programs.

Verifying Applicant Information

In order to qualify for coverage through the Exchange or insurance affordability programs, the Exchange must verify application information to determine eligibility based on household income and other factors.  To reduce paperwork and red tape for consumers, Exchanges will be able to access a single place to review and electronically verify existing application data while protecting consumer privacy.  For some individuals, paper documentation may still be needed in order to determine eligibility, but for the majority of applicants, an automated electronic data matching process should eliminate the need for paper documentation.  But like the banking and travel industries, Exchanges will use standards for information technology to make the system easy for consumers while encouraging innovation and competition.

Coordinating with Medicaid and CHIP

The verification and eligibility determination processes described in the Exchange Eligibility and Employer Standards proposed rule are designed to parallel and integrate with those in Medicaid and CHIP.   The Exchange will coordinate with Medicaid and CHIP to ensure that an applicant experiences a seamless eligibility and enrollment process regardless of where he or she submits an application. 

Employer SHOP Participation

The Small Business Health Options Program (SHOP) will provide a new way for employers to offer their employees choices among qualified health plans, giving small businesses the clout that big businesses already enjoy when purchasing insurance:

• Better Information:  The SHOP will improve employer access to information about plan benefits, quality, and premiums. 
• Tax Credits: Small employers that purchase employer-sponsored health coverage through the SHOP may also qualify to receive a small business tax credit for up to 50% of the employer’s premium contributions toward employee coverage. 
• More Choices, Less Hassle: Small employers that participate in the SHOP will benefit from reduced administrative burden and facilitated choice of qualified health plans. 

Building on Exchanges Momentum

This proposed rule is another step towards building Affordable Insurance Exchanges:

• New Proposed Rules for a Seamless System: On August 12, 2011, HHS also issued a proposed rule regarding Medicaid eligibility, and the Department of the Treasury issued a proposed rule regarding premium tax credits for the purchase of coverage through Exchanges.  The proposals seek to create a path to a simple, seamless and affordable system of coverage.

• Support for States: On August 12, 2011, HHS awarded $185 million to 13 States and the District of Columbia to help them build Affordable Insurance Exchanges.  Already, 49 States and the District of Columbia received Exchange Planning grants, and more than half of all States have taken additional action to establish an Exchange. 

1. This proposed rule complements the Exchange proposed rule and Premium Stabilization proposed rule issued on July 11, 2011, which offer a framework to assist States in setting up Exchanges and give States significant flexibility to build an Exchange that works for them.   In addition, Secretary Sebelius sent a letter on August 12 to Governors outlining the options and resources for States to work with HHS to set up Exchanges while making more efficient use of shared resources.
2. Public Input:  All of these proposed rules build on over a year’s worth of work with States, small businesses, consumers, and health insurance providers and plans, among others. In drafting these proposals, the Administration examined models of Exchanges and consulted closely with stakeholders to develop policy.

For more information about the Exchange Eligibility and Employer Standards and other proposed rules issued today, visit www.HealthCare.gov/news/factsheets/exchanges08122011a.html. 

Outreach to Stakeholders

In the weeks ahead, HHS will conduct an aggressive outreach campaign and solicit public comment on the three proposed rules from employers, consumers, State leaders, health care providers and insurers, and the American people. In addition to accepting written public comments for the next 75 days, HHS will hold forums in:

• Atlanta, GA
• Chicago, IL
• Denver, CO
• New York, NY
• Portland, OR
• Sacramento, CA

These forums will help ensure more Americans have the opportunity to share their views regarding the establishment of Affordable Insurance Exchanges.