Background: The federal Patient Protection and Affordable Care Act (PPACA), passed in March 2010, requires states to establish health insurance exchanges (Exchange) by January 1, 2014, to facilitate the purchase of individual insurance and small employer group insurance, and provide access to premium tax credits and cost-sharing reductions for individuals with family incomes between 133 percent and 400 percent of the Federal Poverty Level (FPL). Individuals with income below 133 percent will have access to expanded Medicaid programs. The federal subsidies for individuals will only be available through the Exchange, or through a federal Basic Health option that states may choose to have available for individuals with family income between 133 percent and 200 percent of the FPL.

The Exchanges are responsible for a number of functions or services, including:

certifying qualified health plans that may offer products;
seamless linking with Medicaid eligibility and enrollment;
verifying income and citizenship status;
ensuring the benefit packages offered include the essential health benefits and are available at four benefit values – 60 percent, 70 percent, 80 percent and 90 percent;
applying risk adjustment and reinsurance;
operating a toll free hotline and consumer portal that allows comparison shopping and premium calculation and facilitates enrollment; and
adjudicating appeals.

Exchanges may be administered by public agencies, private nonprofit entities, or some combination. States have a number of policy decisions about the structure and focus of the Exchange, and must demonstrate good progress toward development of an Exchange by January 1, 2013, as certified by the federal Department of Health and Human Services (HHS). HHS has made grant funding available to all states to help with the research and planning, and has recently announced the availability of additional grant opportunities to fund the development and implementation. HHS will establish an Exchange for residents and small employer groups in states that choose not to establish their own Exchange.

Summary of Bill (Recommended Substitute): The state must establish an Exchange consistent with PPACA intending to:

increase access to quality affordable health care coverage;
recognize the need for a private health insurance market to exist outside the Exchange and for a regulatory framework that applies both inside and outside the Exchange;
create an organized insurance marketplace that provides access to federal subsidies;
recognize the regulation of the insurance market should continue to be performed by the Insurance Commissioner;
strengthen the health care delivery system;
promote quality improvement, cost containment and innovative payment structures;
increase the availability of private health insurance;
encourage health insurance carrier competition based on price and quality, and not on risk selection;
promote consumer literacy;
effectively administer subsidies and determination of eligibility for all subsidized programs;
seamlessly direct consumers to information and assist with enrollment;
enhance portability of insurance coverage and ensure seamless coverage options for enrollees with income and eligibility changes; and
create opportunities to address possible future changes in federal law and funding challenges.

The Health Benefit Exchange Board (Board) is created as a nonprofit, public-private partnership consisting of nine members. By September 1, 2011, the Governor must appoint representatives of the following groups: two employee benefits specialists, a health economist or actuary, small businesses, health care consumer advocates, the administrator of the HCA, the Insurance Commissioner or designee as non-voting, and two appointments from a list of recommendations submitted by each legislative chamber, with mutually agreed on names from each caucus.

By December 1, 2011, the Board and HCA, in consultation with the Joint Select Committee on Health Reform Implementation, must develop a broad range of options for establishing and implementing a state-administered health benefit exchange. The options must develop a broad range of options for establishing and implementing a state-administered health benefit exchange. The options must include analysis and recommendations on the array of policy choices and design features for the Exchange, including:

the governance, operations, and administration;

the goals and principles;
the option of a single state-administered exchange serving all geographic areas and serving individuals and small groups;
whether the state should consider future development of a regional multi-state Exchange;
whether the exchange can serve as an aggregator of funds to gather premium contributions from multiple entities;
the development of sustainable funding for administration by 2015;
the structure needed for information technology to support the implementation of exchange activities;
whether to adopt a federal Basic Health option, who should administer the option, and whether to merge the risk pool with Medicaid;
whether to merge the individual and small group risk pools in the Exchange and in the private market;
whether the small group size should increase to 100 prior to 2016;
the role of producers and navigators, including the option of using private insurance market brokers as navigators;
effective implementation of risk management methods; and
other business recommendations, such as staffing and resources to administer an exchange.

The Board must consult with the Joint Select Committee, the Office of the Insurance Commissioner, and stakeholders including consumers, health insurance carriers, producers and navigators, small businesses, employees, publicly subsidized health care programs, actuaries, and others.

EFFECT OF CHANGES MADE BY HEALTH & LONG-TERM CARE COMMITTEE (Recommended Substitute):

Section 1: modifies reference (2)(a) on providing universal access to affordable, portable insurance and removes reference to reducing expenditures; adds (3) with a reference to demonstrating good progress in the development of an exchange to meet criteria for HHS level two grant opportunity;
Section 2: retains intent statements about the Exchange, modifies sentence in (8) on carrier competition, adds a new (12) enhance portability of insurance coverage and ensure seamless coverage options for enrollees with income and eligibility changes;
Section 4: establishment of the Health Insurance Exchange Board as a nonprofit, public-private partnership, by September 1, 2011, with nine members appointed by the Governor, with representatives of the follow groups: two health benefits specialists, health economist or actuary, heath care consumers, small business, the HCA administrator, the Insurance Commissioner or designee as non-voting, and two names chosen from list of four submitted by the Legislature, with each chamber forwarding two names mutually agreed on from each caucus; the chair of the Board is elected by the members; Board members must have no conflicts of interest; and meetings are subject to the Open Public Meetings Act;
Section 5: has HCA and the Board collaborate with the Joint Select Committee on Health Reform Implementation for all the research and developing the broad range of options for establishing the exchange. They must study the original list of areas, plus examine the role of producers and navigators including the opportunity for using private insurance market brokers as navigators; adding the need for expedience in determining the needed information technology structure to support the Exchange. The work plan must be developed in consultation with the Joint Select Committee; the Joint Select committee and the Insurance Commissioner are added to the list of stakeholders with whom HCA must consult.

Staff Summary of Public Testimony on Original Bill: PRO: We feel this is the best next step in maintaining progress toward development of an Exchange, helping us get it done right and get it done on time. We anticipate this is the first step of a three-step process to design the program and identify the legislative changes to implementation. We endorse the creation of a robust development board that allows different people than we might want for a governance board. The principles captured are the right principles. It is important to maintain local state control of the development of an Exchange. We suggest the Board may need additional representatives of small business, labor and others, and should include a no conflict of interest clause for board members, and the role of stakeholders should be more clearly articulated. The intent should more clearly direct the Exchange to be an active purchaser and it should be more clear that the state should develop one administrative entity to serve both the individual and small group markets. We suggest it should be a governance board not a development board and there should be more discussion about where it is housed. It appears it is house at the HCA. The bill should indicate where recommendations go and the next steps. We would like the option to purchase a public option through the Exchange. The Board should be subject to the open public meetings act to ensure transparency. The Board appointment process should be modified to allow a model more like the WSHIP Board. We support the offering of the federal Basic Health option and would like it to be administered by the Medicaid agency with similar or identical benefits to ensure seamless transitions.

CON: There is no need to work on this now and we should continue discussions through the Joint Select Committee which offers a bipartisan forum with broader perspectives than can be captured through a board. We should not spend the money now to develop this – let the federal government do it. The federal requirements are not out yet. It is a moving target to chase and we should let the federal government do it.