By Sarah Dash, Georgetown University Center on Health Insurance Reform

On Monday, December 10^th, the Department of Health and Human Services granted conditional approval to six states seeking to establish state-based health insurance exchanges: Colorado, Connecticut, Maryland, Massachusetts, Oregon, and Washington.

The decisions came earlier than the January 1, 2013, statutory deadline for HHS to approve or conditionally approve state-based exchanges. The approvals are “conditional” because, while they indicate that HHS believes these states are on track to be ready for open enrollment on October 1, 2013, work remains to be done. Specifically, for all the states, approval is contingent upon:

1)     Timely demonstration of the ability to perform all required exchange activities in line with the attestations made by states in their Blueprint applications;

2)     Ongoing compliance with future guidance and regulation.

Maryland’s conditional approval is also contingent on the state obtaining legal authority by April 30, 2013, to generate revenue to ensure operational sustainability.

Along with the conditional approvals, HHS also released a letter to the nation’s governors and a set of FAQs to respond to numerous questions from state officials about exchange establishment and the Medicaid expansion.  My colleagues at the Center for Children and Families have posted a separate blog on the big Medicaid expansion news announced Monday – namely, that states must do the full expansion in order to obtain enhanced federal matching funds for their expansion population.

Here are a few of the key takeaways on the exchange side of the equation:

• HHS is encouraging states to establish their own exchanges, or take on some exchange functions: As Secretary Sebelius noted in her letter to governors, “It is my hope that all states will seriously consider establishing a State-based Exchange, or running components of an Exchange, but regardless of a state’s decision, my Department stands ready to help.”  Even if they choose not to pursue a state-based exchange, states have critical decisions to make about whether to maintain control over key functions such as consumer assistance and plan management – decisions that could have a significant impact on which plans are offered in a state and how consumers interact with the new system.  States that opt for a federal exchange must also make important decisions about how to conduct eligibility determinations and whether or not to administer the ACA’s reinsurance program themselves.
• There will be no more deadline extensions for states to declare their intentions for 2014 – but states have room to maneuver next year: HHS made it clear that the December 14, 2012 deadline for state-based exchanges and the February 15, 2013 deadline for partnership exchanges are firm. States wishing to pursue either type of exchange must submit a declaration letter and complete the relevant portions of the Exchange Blueprint by these deadlines.  However, states may transition to different exchange models in 2015 and beyond – and we are expecting that some will do so.  As Secretary Sebelius noted in her accompanying blog, “if states decide they want to play a larger role in running the new marketplace in their state in 2015, 2016 and beyond, we will work with them so they can have the opportunity to take on that role.”
• Federally facilitated exchanges and the states will have to coordinate on insurance regulation and consumer assistance:   We already knew this, but it bears repeating. As the FAQs note, “states have significant experience and the lead role in insurance regulation, oversight, and enforcement.” Regardless of the exchange model each state pursues, state insurance regulators will continue to have regulatory authority over the insurance market outside the exchanges, as well as a key role to play in making sure plans offered on the exchanges are licensed and comply with applicable state laws. HHS reiterated that it will “seek to capitalize on existing state policies, capabilities, and infrastructure” when implementing a federally facilitated exchange – and encouraged states “interested in improving this alignment” to pursue the plan management option through a partnership exchange. In addition, HHS noted that customer support personnel for the federally-operated call center and website in both federal and partnership exchange states will be trained in each state’s insurance laws and Medicaid and CHIP eligibility.  However, states opting for the partnership model will be able to manage the day-to-day operations of Exchange Navigators and run in-person assistance programs to help their residents access coverage.
• The exchanges can certify Medicaid bridge plans as qualified health plans: One of the most significant challenges to seamless, continuous coverage under the Affordable Care Act will be minimizing coverage transitions between Medicaid and the exchanges when individual or family income changes. Through its FAQs, HHS clarified that states can use a new tool – a so-called “bridge plan” – to promote continuity of care between Medicaid, CHIP, and the Exchanges. Under this approach, a state exchange would allow an issuer that contracts with a state Medicaid agency as a Medicaid managed care organization to offer qualified health plans through the exchange on a limited-enrollment basis to certain populations.  However, the exchange must make sure that bridge plans comply with all applicable laws and qualified health plan certification requirements, and identify “bridge plan eligible individuals.”
• States won’t have to repay grant funds or pay to use the federal data hub: HHS clarified that as long as states use health insurance exchange grant funds for activities approved in their grant and cooperative agreement awards, they won’t have to repay funds, even if they later choose not to establish a state-based or partnership exchange. HHS also reiterated its previous guidance that states will not have to pay to use the federal data services hub that HHS is establishing, and again noted that the recently-released draft Payment Notice proposed a monthly user fee of 3.5% of premiums to support operations of the Federally-Facilitated Exchange.

The FAQs included lots more information to keep CHIRblog readers busy, including on navigators, multi-state plans, the Basic Health Plan (yes, regulations are coming), and more.  And with nearly 20 states so far having expressed their intention to establish a state-based exchange (not counting any more that may come in by Friday, December 14^th), we’ll be watching for more plenty more news on this front before we ring in the New Year.