HHS Announces Funding Opportunity to Help States Build Exchanges

Health and Human Services Secretary Kathleen Sebelius has announced that states can now apply for grants to “establish” their Health Insurance Exchanges under the Affordable Care Act. These grants follow the Exchange “planning” grants awarded last September to 49 states, including DC, and will provide states with ongoing resources to move beyond planning and begin the process of implementing their Exchanges. (Heads up Alaska and Minnesota, it’s not too late get in on the action…HHS also announced another round of planning grants for the two states that did not apply for Exchange planning grants.)

In announcing the funding opportunity, Secretary Sebelius said:

 “States are moving forward, implementing the Affordable Care Act and making reform a reality. These grants will help ensure states have the resources they need to establish exchanges and ensure Americans are no longer on their own when shopping for insurance.”

Exchanges, a critical component of health reform, are expected to provide affordable coverage to an estimated 16 million individuals and employees of small business, many with tax credits to subsidize premiums. The Exchanges will enable consumers to compare plans based on price and quality and lower costs by increasing competition between insurance companies and allowing individuals and small businesses to band together to purchase insurance.

HHS has designed this funding opportunity with maximum flexibility for states. States will have multiple opportunities to apply for funds, and can either apply for multi-year funding or take a step-by-step approach by applying for annual project grants. Award amounts, sufficient to fulfill the purposes of the funding opportunity, will vary based on the proposed activities and specific needs of each state. Funds can be used for a number of different activities, including consulting with stakeholders, making legislative and regulatory changes, governing the exchange, establishing information technology (IT) systems, performing oversight and ensuring program integrity. The grant opportunity is available on a rolling basis with quarterly deadlines beginning March 30, 2011. Decisions on grant applications will be made approximately 45 days after each application due date.

In order to secure ongoing funding, each State must make progress toward establishing an Exchange, implementing market reforms and meeting other benchmarks as the Secretary may establish. Benchmarks must be identified in each of these core areas: background research; stakeholder involvement; legislative/regulatory action; governance; Exchange IT systems; program integration; financial management; oversight and program integrity; health insurance market reforms; providing assistance to individuals and small businesses, coverage appeals and complaints; and business operations/exchange functions.

Examples of critical benchmarks include evidence of collaboration between exchanges and state Medicaid agencies or submission of data collected by the state Consumer Assistance programs regarding problems consumers encounter and actions taken by the state to resolve them.

It’s good to see IT systems included among the allowable expenditures. This will be a relief to states that don’t receive one of up to five Innovator grants (which should be announced soon) for the design of model Exchange IT systems that can be adopted by other states. And while HHS has proposed complementary funding for upgrades to Medicaid eligibility systems that would receive 90% federal support, those funds are not intended to enable the functionality of the Exchange. The current funding announcement rounds out the opportunity for all states to finance their Exchange IT systems. The IT component is central to providing families, individuals and small businesses with consumer-friendly, web-enabled, paperless access to expanded health coverage options through Medicaid, CHIP and the Exchange. States are required to submit an IT gap analysis that describes their current systems and maps out the changes required to design, build and implement the needed Exchange IT infrastructure.

More information on this funding opportunity is available in this fact sheet and at www.grants.gov, under CFDA number 93.525.


Tricia Brooks
Tricia Brooks is a Senior Fellow at the Center for Children and Families