The creation of state-based health insurance exchanges is the magic elixir for what ails healthcare reform. At least that’s what supporters hope.
The Department of Health and Human Service (HHS) released the first of undoubtedly many versions of proposed rules for the insurance exchanges.
If you can’t wait to read the 244 pages, you can download a pdf version here.
What Are Health Insurance Exchanges?
Here is a quick recap on health insurance exchanges.
- Defined – A marketplace where individuals and small employers (Small Business Health Options Program, “SHOP”) can purchase health coverage – depending on the state, small employers are those with 50 or fewer or 100 or fewer full-time equivalent employees
- Implementation – Must be set up by January 1, 2014
- State Exchanges – Each state decides if it a) sets up its own exchange, b) forms a coalition with other states, c) creates a regional exchange, or d) opts out
- Federal – The government creates an exchange for residents where states opt out of offering this coverage
HHS published two Notices of Proposed Rulemaking (NPRM) –
- Exchange NPRM – contains the standards for the states and insurance plans that participate, as well as qualifying individuals and employers who purchase insurance
- Premium Stabilization NPRM - contains the standards for the 3 Rs – Reinsurance, Risk Corridor and Risk Adjustment.
The purpose of the 3 Rs is to spread the financial risk of high-cost enrollees across the plans so the programs remain viable.
In health insurance, reinsurance is where the insurer purchases an insurance policy from another insurer (the reinsurer) to protect against the cost of catastrophic claims. Reinsurance reimburses the cost of those unusually high claims.
Risk corridors limit the loss or profit to a specified percentage. The health plans set a target for total premiums, minus the administrative costs. If the result is within that targeted percentage – for example plus or minus 3 percent – then the plan absorbs the loss or keeps the gain. If it falls outside the target, the government shares in the loss or gain.
A risk adjustment is another tool to share the risk by transferring funds between health plans based on the level of risk for those enrolled in their plans. Various factors used to figure out the amount of adjustment include age, gender, health status, and the utilization of healthcare services.
Time Will Tell
You can bet a lot will change between now and 2014.
States and insurers have much to say about the insurance exchanges. HHS is allowing 75 days for comments on the proposed rules and expects the Final Rules later this year.
Hang onto your seats.
Notice of Disclaimer –Cathy Miller is not an attorney and cannot provide legal advice. The information provided is for your general background only, and is not intended to constitute legal advice as to your specific circumstances. We recommend you review legislation with legal counsel.
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