New regulations that were released by HHS on March 12, 2012, concerning health insurance exchanges, have worried many consumer advocates. The two most contentious issues that have advocates concerned are brokers and their role in the new marketplace and the placement of insurance companies on the governing boards of these exchanges. The administration has touted 28 states as making progress on establishing exchanges. States are eligible for federal grants to set up these new marketplaces and the government has set aside $1 billion dollars for their implementation. Insurance Exchanges have been likened to an Orbitz for health insurance. An online marketplace where consumers can go for a one-stop shopping experience. "The exchanges will also determine whether consumers are eligible for Medicaid, which will be expanded to cover people earning near-poverty wages, or for subsidies to reduce the cost of private premiums." Many state governments are taking a 'wait-and-see' approach, anticipating the Supreme Court ruling in June. Many commenters have stated that this approach might 'haunt' states that wait for the decision. "It’s hard to imagine how a state could take all the necessary legislative, policy, operational, and IT system development steps needed to meet this compressed timeline if it doesn’t start work until the summer." Many governors have delayed waiting because they believe the exchange will cost their states millions of dollars to operate after the federal grant has been spent. In this light, HHS has released these new regulations and have been quick to paint them as tailorable to the states specific situation. "These policies give states the flexibility they need to design an exchange that works for them," said Health and Human Services Secretary Kathleen Sebelius. The worry is that in order to coax more reluctant states into setting up an exchange the administration might be watering down the power of consumers to make informed decisions.
Regulations -
The new regulations issued in March finalized many rules and asked for comment on some interim rules. "The Obama administration touted the 644-page rules as granting states great flexibility in how they design their exchanges, the types of organizations – nonprofit or public agency – that will oversee them and whether to partner with the federal government to operate parts of it." The rules appear to be integrating thousands of comments and providing states to move forward with setting up their exchanges. No rules have been released on the federal government coming into states to set up an exchange in situations where the state has failed to act. Many commentators believe that the exchanges will survive in many states no matter the ruling from the Supreme Court. In this respect, it is important to understand the provisions that apply to brokers and board governance, because these rules might remain in effect for the foreseeable future.
The new regulations issued in March finalized many rules and asked for comment on some interim rules. "The Obama administration touted the 644-page rules as granting states great flexibility in how they design their exchanges, the types of organizations – nonprofit or public agency – that will oversee them and whether to partner with the federal government to operate parts of it." The rules appear to be integrating thousands of comments and providing states to move forward with setting up their exchanges. No rules have been released on the federal government coming into states to set up an exchange in situations where the state has failed to act. Many commentators believe that the exchanges will survive in many states no matter the ruling from the Supreme Court. In this respect, it is important to understand the provisions that apply to brokers and board governance, because these rules might remain in effect for the foreseeable future.
Brokers –
Brokers and other third-party administrators will be allowed to direct people to the exchanges, even those that qualify for federal subsidies under new proposed regulations. Many worry that this policy might increase the cost of insurance premiums. This rule has given a new model to brokers in terms of compensation. Many brokers were worried that the medical loss ratio requirements and the exchanges would cut them out of the insurance system altogether. There has also been confusion as to whether brokers would be allowed to be navigators or if states would only allow brokers to be navigators, which would create conflicts of interest between themselves and the very consumers they are tasked with helping. "Under the ACA, navigators will educate and inform health insurance consumers and assist them in navigating the exchanges. The final rule considerably sharpens the focus of the navigator program. Although agents and brokers can be navigators, the rule prohibits states from requiring navigators to be licensed agents and brokers or to carry errors and omissions insurance, typically carried by agents and brokers."
Brokers and other third-party administrators will be allowed to direct people to the exchanges, even those that qualify for federal subsidies under new proposed regulations. Many worry that this policy might increase the cost of insurance premiums. This rule has given a new model to brokers in terms of compensation. Many brokers were worried that the medical loss ratio requirements and the exchanges would cut them out of the insurance system altogether. There has also been confusion as to whether brokers would be allowed to be navigators or if states would only allow brokers to be navigators, which would create conflicts of interest between themselves and the very consumers they are tasked with helping. "Under the ACA, navigators will educate and inform health insurance consumers and assist them in navigating the exchanges. The final rule considerably sharpens the focus of the navigator program. Although agents and brokers can be navigators, the rule prohibits states from requiring navigators to be licensed agents and brokers or to carry errors and omissions insurance, typically carried by agents and brokers."
Navigators –
There has been some confusion about the differences between navigators and brokers since the proposed regulations were released. Navigators are instrumental in the 'no-wrong-door' approach of the ACA, guiding consumers to the right product for them, whether Medicaid or subsidized private insurance. They are also required to educate the public and provide impartial information to consumers. In return, the navigator programs are eligible for grant money to fulfill this role from the state exchanges. This excellent blog post goes through the differences between the two roles:
- a navigator cannot receive any compensation for referring a consumer to an insurance product
- a navigator must work for a community or consumer-focused non-profit
- an exchange cannot require a navigator to have a broker license and there must be at least two entities that serve as navigators
- navigators must have strong conflict of interest guidelines
- a navigator cannot receive any compensation for referring a consumer to an insurance product
- a navigator must work for a community or consumer-focused non-profit
- an exchange cannot require a navigator to have a broker license and there must be at least two entities that serve as navigators
- navigators must have strong conflict of interest guidelines
Exchange Boards –
"Insurers and other industry representatives will get to fill as many as half the seats on the governing boards for state health insurance exchanges, under final rules for the marketplaces issued today by the Department of Health and Human Services. At least one seat must be reserved for a consumer representative." This move has been decried by many consumer advocates who had hoped for governing boards that were dominated by consumers. As Prof. Timothy Jost states in the article, at least consumers are given a 'toe-hold.' This analysis by the Center on Budget and Policy Priorities from November of 2011 is the most comprehensive listing of the various froms of governance found throughout different states. Governing boards should be subject to extensive conflict-of-interest rules and any level of bias towards established insurance carriers and markets should be rooted out at the federal level.
Hawaii –
As reported on this blog: here, here, and here, Hawaii officials have come under fire for the insurance representatives on their governing board. One of the interesting things about Hawaii's exchange is that it is being implemented as a non-profit organization. "The Legislature established the Hawaii Health Connector last year as a private, non-profit organization, recognized as quasi-governmental by federal authorities. Since then, the Connector has been under construction — establishing policies, setting goals and mission, hiring staff and contractors." This status might allow the non-profit to avoid Hawaii's sunshine and ethics laws. The article further documents that the board is to write its own conflict of interest rules. This is especially problematic because three of the board members have vested interests in the plans chosen for the Exchange and because the sunshine laws do not apply, those options will not be subject to public scrutiny.
Consumer Advocates Need to Turn to Local Lobbying –
The Obama Administration seems to be loosening some of the rules that would lead to enhanced regulatory oversight in order for a state to have a 'certified' exchange. This increased flexibility will allow various 'experiments' among the states. Non-Profit (like Hawaii) or state run organizations (like Massachusetts), 'free-market' (like Utah) or a more regulated marketplace (again like Massachusetts), these various models will give states plenty of leeway to personalize the exchange to their population and politics. Consumer advocates must then turn to lobbying state legislatures and increasing awareness of this vital issue in their communities. This is not an optimal solution. HHS should continue to implement the ACA in a way that follows its original intentions and provide consumers with robust regulatory protection. Brokers should have a role to play in the marketing of the new consumer products. The rules seem to find a good common ground for both navigators and brokers. However, the situation in Hawaii deserves more scrutiny and without sunshine and ethics regulations guiding the way, consumers will be unsure as to how the insurance choices they were given were made. Thus, local involvement might include allowing powerful local insurance players to have a seat at overall regulation, a solution fraught with problems. One wonders if the Administration is trying to get any state cooperation before the election, or if the coming Supreme Court decision has affected their view on health reform in general. Of course, in some states the very idea of an exchange is so radical that the legislature has passed laws to prevent any implementation of one in their state. Way to go Missouri!
