State of the States: Health Insurance Exchanges

May 18, 2012

On Wednesday, what was shaping up to be “just another week” for exchange watchers dramatically changed, when the Department of Health and Human Services (HHS) released additional exchange guidance on the federally facilitated exchange (FFE) and state partnership models as well as the latest round of Establishment Grant funding. Let’s recap what was announced.

First, HHS announced $181 million in Exchange Establishment Grants for 6 states – Illinois, Nevada, Oregon, South Dakota, Tennessee and Washington. The bulk of the amount, $127,852,056, was awarded to Washington as a Level 2 Establishment grant to hire additional staff for the Exchange and fund the development of its IT system. Washington is the second state to receive a Level 2 grant after Rhode Island.

Illinois received the next largest funding amount, a Level 1 award totaling $32.7 million to continue its planning operations and hire outside IT vendors and services. Nevada, Oregon, South Dakota and Tennessee will receive smaller amounts below $10 million apiece. Two of the states receiving grants, Tennessee and South Dakota, have been planning for an exchange behind the scenes, but their legislatures have not introduced exchange-enabling legislation since passage of the ACA. Watch these states closely after the Supreme Court rules on the ACA to see how their exchange planning processes evolve.

HHS also announced long-awaited information on how Federally Facilitated Exchanges (FFE) will operate. Initially all health insurance plans that meet the QHP requirements will be allowed to offer their plans on the FFE. The guidance suggests that this approach will be re-evaluated after one year. 

For states that choose the partnership model, the guidance lays out options for state participation. Specifically, the guidance revealed that state exchange “partners” can choose to manage health plans and/or in-person consumer assistance. The federal government will maintain responsibility for eligibility and enrollment, the web portal and other functions. While states can elect to be responsible for the functions outlined above, the guidance is clear that under a partnership, “HHS, by law, retains authority over each FFE.” State “blueprints” pursuing a state-based exchange or a partnership with the FFE are due November 16, 2012.

Given this rapidly approaching deadline, let’s take a look at what happened in the states this week. In Louisiana, legislation to enact a health exchange finally stalled after a vote 8-1 in the Republican-dominated Senate Finance Committee. While SB744 faced strong opposition in the legislature and from Governor Bobby Jindal (R), the bill had made progress previously when it passed the Senate Committee on Insurance with bipartisan support in late April.

In Illinois, Governor Quinn (D) continues to mull using an executive order to establish an exchange. Governor Quinn’s has indicated it is unlikely that legislators will resume negotiations to authorize an exchange before the current session ends in late May, given their current focus on Medicaid and pension reform.

Finally, Tennessee last week released an RFP to procure a new eligibility determination system to modernize the State’s Medicaid and Children’s Health Insurance Program. Without signaling the state’s intentions regarding exchanges, the RFP requires that respondents prepare for two scenarios: handling eligibility determination and premium calculations for the exchange or interfacing with the FEE, should Tennessee decide not to develop its own exchange. 

Tennessee is just the latest state to use its Medicaid IT procurement as a way to keep its exchange IT options “open” as it navigates a hazardous and conflicting web of HHS deadlines, political views and public opinion. Expect to possibly see other states adopt this strategy as they wait for additional guidance from the Supreme Court and their elected leaders. 

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