State of the States: Health Insurance Exchanges

May 25, 2012

Similar to last week, exchange watchers witnessed a number of developments at the federal level this week. Let’s review before diving into what’s happening in the states.

Late last Friday, the Internal Revenue Service issued a final rule on the ACA’s insurance premium tax credits. An important change was the elimination of the so-called “marriage penalty” that impacted couples who qualified individually for insurance premium tax credits, but did not qualify as a couple. Under the old rule, newlyweds that saw their income increase as a result of being married would have to repay the federal government for any subsidy overpayments. Under the new rule, couples will now make separate income calculations on their pre- and post-marriage income, which should help them avoid penalties.

Also, the IRS continues to weigh how it will determine if employer-sponsored insurance is “affordable.” As it currently stands, “affordable” employer insurance is calculated against the employee’s share of the premium for the lowest-cost, self-only coverage option proposed by the employer. Many argue this calculation should be based on family, not individual, coverage. The regulation indicates this issue will be addressed in future regulations concerning employer-sponsored insurance.

Meanwhile, at this week’s three-day exchange implementation meeting sponsored by the Center for Consumer Information and Insurance Oversight (CCIIO), participants received additional details on federally-facilitated exchanges and the state-federal partnership model. At the meeting, CCIIO encouraged states, even those pursuing a state-based exchange, to consider applying for the federal-state partnership model as a backup, in case states had unexpected problems setting up their exchanges.

After the meeting, CCIIO added a FAQ section to its website to answer previously asked questions about the blueprint process. The FAQ describes how to submit a Blueprint Application, the information required in a Blueprint Application, and lays out what reference documentation HHS will seek from states. States that receive conditional approval of their exchange from HHS will be subject to monitoring reviews by HHS to make sure the exchange is operational by the 2014 deadline. To further help address any exchange-related questions by either the states or other stakeholders, CCIIO is gearing up for a series of regional implementation forums, with the first one kicking off in Washington, DC on July 18. After DC, the forum heads to Chicago, Denver and Atlanta. 

Also, we learned this week that Virginia is taking some additional steps to plan for an exchange. The chairman of the Senate Commerce and Labor Committee, Sen. John Watkins (R), announced that he is going to re-establish a subcommittee to review potential exchange-enabling legislation. Currently, the state has the legal authority to plan for an exchange, but not the authority to create one without either legislation or an Executive Order from Governor Bob McDonnell (R). Additionally, Virginia expects to release an RFP shortly to procure a Medicaid eligibility system. The RFP is expected to include an option that will allow Virginia to procure the IT backbone for the state’s Individual and SHOP exchanges. There are also reports that Virginia is preparing a Level One grant to submit to HHS this summer.

Virginia is not the only state busy preparing grant applications for HHS. California is preparing to apply for another Level One grant in the next few months. Also, expect to see Connecticut apply for Level Two funding sometime later this year, along with Arizona, which is targeting its Level Two application for the November 1 deadline.

Finally, earlier this month, the California Health Benefit Exchange announced a preliminary decision to award First Data Corp a $9.3 million contract to manage the development of the exchange’s enrollment system. The California Health Benefit Exchange is still mulling which vendor it will choose to actually develop and implement its IT exchange backbone.

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