The emerging state insurance exchanges suggest that states’ rights are alive and well.
As the implementation of portions of the Patient Protection and Affordable Care Act approaches, state exchanges are beginning to take form and substance. The Commonwealth Fund surveyed all 50 states and the District of Columbia to see how things were going, and found plenty of diversity among the characteristics of the various exchanges.
One message that came through loud and clear: About a third of the states are moving much faster than the feds to provide coverage to individuals and small-business workers through their exchanges.
The Commonwealth Fund focused on the 17 states and the District of Columbia that have decided to establish state-based exchanges rather than go through the federal program to offer coverage.
There was plenty of meat in the report for insurers, as well as anyone in the business of selling or buying employee benefit plans. Some highlights:
1. States are deciding how to fund their exchanges, and some will assess insurers to do so. The report says:
Seven states and the District of Columbia remain undecided on their long-term revenue source; most of the remaining states will assess insurers that offer coverage in the exchanges. State officials reported that decisions in these areas often reflected compressed timelines, political realities, and the state’s long-term vision for the exchange.
2. In some states, if insurers don’t participate this year, they’ll be barred from future participation. The report says:
Ten states and the District of Columbia adopted formal requirements regarding exchange participation or alignment of coverage options inside and outside the exchange. These mechanisms include establishing a single marketplace, prohibiting insurers from entering the exchange if the insurer did not participate in 2014, and requiring insurers to offer the same coverage inside and outside the exchange.
3. Insurers are going to have to be flexible, and get used to increased government oversight, when it comes to meeting the needs of small business employees. The report says:
Nearly all SHOP exchanges are expected to offer “employee choice” options that give employees a choice of more than one plan, and eight states provided maximum flexibility by allowing employers to give employees the choice of any plan on the SHOP exchange. State officials emphasized the importance of employee choice models for ensuring that the SHOP exchange is attractive to small employers.
Nine states limited the number of plans per insurer or required insurers to offer some standardized plans in the exchange. Of the remaining states, only two and the District of Columbia adopted a meaningful difference standard of review to ensure that plans are substantially distinct from other plans offered in the same market by the same insurer.
4. Exchanges are not going to force insurance agents to find a new line of work. The study says:
Thirteen states and the District of Columbia established both a navigator and in-person assistance program while two states will operate only a navigator program for 2014. An additional two states have not yet finalized their approach. … Every exchange allowed producers — otherwise known as or agents and brokers — to help consumers enroll through the exchange. While some exchanges planned to set and pay commissions, most allowed insurers to set producer compensation.
5. State-run exchanges confer considerable power on state officials to design their exchanges, and these states are, in general, moving quickly to complete their exchange structure by the October deadline. The report says:
States operating their own exchanges had significant flexibility in designing their exchanges to meet state needs. Overall, states made significant progress in structuring and operationalizing their exchanges, and made design decisions with an eye toward minimizing market disruption, promoting exchange viability, and providing value for consumers.
6. This group of 18 governing bodies is highly likely to continue to use its states-rights power to fine-tune the state exchanges going forward. They may well hold insurers to higher standards than they have been accustomed to. The report says:
Many states expect to exceed some federal requirements — to collect and display quality data, for instance — for 2014. These findings suggest that states capitalized on the flexibility provided by the Affordable Care Act to tailor their exchanges to their unique needs and made decisions with an eye towards outcomes, such as enrollment, consumer experience, and sustainability. These findings also suggest that states’ initial decisions will inform future exchange implementation and that states will adjust their decisions while continuing to adopt innovative approaches to accomplish policy goals.