New Rules Unveiled for Health Care Exchanges

Saying “flexibility is the name of the game,” Department of Health and Human Services officials unveiled a broad framework for states to follow as they build their health insurance exchanges under the health reform law. The new regulations give states wide latitude in setting up their exchanges and more time to plan and execute them.

A key provision of the reform law, the new exchange marketplaces are meant to make shopping for affordable health insurance as easy as buying a plane ticket online.

The draft regulations offer states guidance on how to get there, including the basic framework, how to control premiums and how to certify health plans for participation. They also offer guidance for states deciding whether their exchanges should be local, regional or operated by a nonprofit organization and specifics on partnering with HHS to split up the work.

The exchanges should be built so that “insurance companies will compete for business on a transparent, level playing field, driving down costs,” HHS Secretary Kathleen Sebelius said. “Exchanges will give individuals and small businesses the same purchasing power as big businesses and a choice of plans to fit their needs.”

Under the reform law, states have until January 2013 to get their exchange plans approved by HHS and until January 2014 to get them up and running. But the regulations issued Monday provide for a “conditional” approval process that gives the states more time to develop their exchange plans and more time to get them operating so long as they can prove they are operating in good faith. The federal government will run exchanges for states that fail to implement their own.

So far, only 11 states have set in motion plans to develop exchanges where consumers can shop for health insurance. Other states have been dragging their feet, and Florida has bluntly refused to take action. But HHS officials said they thought it was “normal” for the states to move at different paces, adding “one size doesn’t fit all.” They also noted that 49 states, D.C., and four territories have accepted grants to help plan and operate the exchanges.

Under the federal health care reform law, HHS could have been more heavy handed in writing the rules with stronger federal government involvement but instead officials said they wanted to create an atmosphere that encourages states to participate instead of putting out ” an all or nothing” process.

Sebelius outlined the general framework for the new rules at Frager’s Hardware on Capitol Hill. She promised that the exchanges would not only offer millions of uninsured Americans “a one-stop shop” for accessing coverage, but would also be key to “putting small businesses like Frager’s on equal footing with their competition,” she said. At the moment, she added, small companies often pay up to 18 percent more for the same insurance than large chains.

Nick Kaplanis, the store manager, liked what he heard but said he would reserve judgment until Frager’s sees an impact. The hardware store pays half the cost of coverage for its 25 full-time employees and has dealt with rising health care costs by raising their annual deductible from $1,000 to $2,500, he said.

Frager’s co-owner John Weintraub told Kaiser Health News he is “not confident at all that Obamacare will lower my costs,” but Kaplanis said the “increased competition and transparency” might hold promise.

“Here in our store or in any other business, we adjust our prices based upon competition,” Kaplanis told the NewsHour. “Right now, that competition is not there for health insurance and it forces us to go for the lowest priced plan we can find.”