This week’s column topic, on how the insurance exchanges will operate under the Patient Protection and Affordable Care Act (ACA), is reader requested and especially timely, given President Obama’s victory in last week’s election.
Until now, many governors, including Rick Perry have treated ACA as if it were something a Republican administration would promptly repeal. Even now that the ACA is the law, much about insurance exchanges remains murky.
States are allowed to set up and operate their own exchanges, partner with the federal government or leave operation entirely up to the federal government.
Thus far, 20 states have chosen to set up exchanges, according to a statement released after Tuesday’s election by Avalere Health.
The deadline for states to inform the Obama administration whether they will run their own exchange is Nov. 16.
ACA requires exchanges to be established in every state by Jan. 1. The initial open enrollment period for an exchange will be Oct. 1, 2013 - March 31, 2014.
Texas to opt for federal operatation
Two weeks ago, I contacted Tryon Lewis, a Republican legislator from Odessa, whom I trust to be 'in the know' about Texas' plans. He unequivocally stated Texas will not operate an exchange.
Assuming that stance holds, the state will rely upon the secretary of Health and Human Services (HHS) to establish one.
A Congressional Research Service Report dated Oct. 10, “Heath Insurance Exchanges Under the Patient Protection and Affordable Care Act," by Bernadette Fernandez and Annie L. Mach reveals although federally operated exchanges will be required to carry out many of the same functions as state exchanges, specific provisions have not yet been issued.
What insurance exchanges will do
Exchanges will create a competitive private health insurance market through which individuals and small businesses may obtain coverage. They are geared toward helping those who do not belong to groups that allow them to obtain purchasing power and pool risk.
The exchanges do not issue insurance. They will contract with insurers, who will make insurance available for purchase.
The exchanges will provide information about pricing, quality and physician and hospital networks.
The Congressional Research Report cited above states “…exchanges will also assist individuals with obtaining federally subsidized premium and cost-sharing assistance to help low to middle income individuals offset the cost of both purchasing and using health insurance.”
The 33-page report can be found at crs.gov R42663.
According to the report, qualified health plans (QHPs) will be comprehensive and contain all reforms specified in ACA, including no denial of coverage for pre-existing conditions.
ACA does not list specific benefits but does include categories which must be included in the QHPs: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness and chronic disease management; and pediatric services, including oral and vision care.
HHS has issued a bulletin which identifies four benchmark plans that a state could use to establish a QHP: one of the three largest plans in the state’s small group health insurance market; one of the three largest state employees health benefits plans; one of the three largest national plans offered through the Federal Employees Health Benefits Program; and the largest commercial non-Medicaid health maintenance organization in the state.
A small business health options program will allow qualified small employers to select QHPs to offer their employees and select the amount they will contribute.
The Center for Consumer Information & Insurance Oversight outlines the ways exchanges are expected to contain costs. In addition to increasing competition among private insurance plans, provisions within the law streamline administrative costs through standardized forms and reduction in paperwork for doctors.
According to the Congressional Budget Office, these savings are estimated to reduce average premiums by 7-10 percent.
Cost sharing limits
Exchanges will limit the cost insurers may pass on to enrollees. Insurers are required to provide preventive health services without a deductible.
Generally, deductibles will be limited to $2,000 for individuals and $4,000 for a family in 2014 and be adjusted annually thereafter.
Levels of expenses paid by insurer
Exchange plans must meet one of four levels expressed as a percentage of medical expenses the insurer will pay: Bronze, which pays 60 percent; Silver, which pays 70 percent; Gold, which pays 80 percent; and Platinum, which pays 90 percent.
They may offer catastrophic plans which provide less coverage with lower premiums to those under the age of 30 or those exempt from the individual mandate to purchase full coverage.
The “essential health benefits” are not specifically defined by the act, but these policies must include at least three primary care visits.
Premium tax credits
Enrolled families will be eligible for premium tax credits if their household income is between 100 and 400 percent of the federal poverty level and they are not eligible for Medicaid, Medicare or other types of minimum coverage.
The amount of credit will depend upon certain factors, including income level and the premium charged by the exchange, with the tax credit covering the entire premium in certain instances. Some who receive premiums credits may also be entitled to subsidies toward the amounts their exchange requires them to pay.
Sandra W. Reed is an attorney with Katten & Benson, an elder law firm in Fort Worth. She lives in Somervell County, near Chalk Mountain. If you have questions about this column or wish to suggest a topic of interest, she may be contacted by phone at (254) 797-0211 or firstname.lastname@example.org.