One of the techniques for making health insurance more available under the Patient Protection and Affordable Care Act (PPACA) is the establishment of insurance exchanges. Although PPACA was passed by Congress in 2010, the insurance exchanges are not scheduled to become operational until Jan. 1, 2014.
In July 2011, the U.S. Department of Health and Human Services issued proposed rules regarding insurance exchanges. After receiving and evaluating comments on the rules, the department will issue final rules in 2012.
Leveling the playing field
Insurance exchanges are designed to make insurance more available to individuals and small employers. (A “small employer” is defined as an employer with an average of 100 or fewer workers in the preceding calendar year.) When issuing the proposed rule, the department said that “[i]nsurance companies will compete for business on a level playing field” and the program will “give individuals and small businesses the same purchasing clout as big businesses.”
Health and Human Services Secretary Kathleen Sebelius said it was currently common for small employers to pay up to 18 percent more than large employers for the same level of coverage for employees.
The federal government has provided large grants to help states set up insurance exchanges. It anticipated that most states will set up their own insurance exchanges, but states also have the option of joining together to establish a regional exchange.
If a state does not set up an insurance exchange, the federal government will establish an exchange directly or will contract with a non-profit entity to establish the exchange. Although states are supposed to have a working exchange by 2014, the federal government has the option of giving states an additional year to set up the exchanges.
Qualified health plans
The insurance exchanges will offer—in the terminology of the proposed rule—“qualified health plans,” most of which are likely to be provided by private insurance companies. All plans must offer “minimum essential coverage.” That level of coverage will be set by the federal government with guidance from the Institute of Medicine, an arm of the National Academy of Sciences, which provides unbiased scientific information to the government and public.
Under the PPACA and the proposed rules, qualified health plans may not refuse coverage or discriminate against applicants for insurance on the basis of a pre-existing condition. Qualified health plans also must include in their provider networks “essential community providers” that serve predominantly low-income and medically underserved individuals. Privacy rules for electronic transactions of exchanges will be governed by the Health Insurance Portability and Accountability Act (HIPAA).
Applicants will be offered plans that pay a varying percent of covered services (90 percent for a “platinum plan,” 80 percent for a “gold plan,” 70 percent for a “silver plan,” and 60 percent for a “bronze plan”).
Insurance exchanges are required to establish “navigator programs” to provide “fair, accurate and impartial” information and services to health insurance consumers about the health plans that are available and to facilitate enrollment in those plans. (Health insurance companies cannot serve as “navigators.”) As with many private insurance programs, there will be an open enrollment period.
Tax credits are available to persons with low to middle income to purchase insurance through the exchanges. The tax credits will be based on the federal poverty level, with sliding scale tax credits being available to persons at 100 to 400 percent of the poverty level. (In 2011, a family of four in the 48 contiguous states and District of Columbia was at the poverty level with an income of $22,350 or less; four times the poverty level for a family of four would be $89,400.) In addition, under the PPACA, persons with incomes at 133 percent of the poverty level will be eligible for Medicaid.
Will insurance be affordable?
A challenge for many families will be: Will insurance through exchanges be affordable—even if there are economies of scale by obtaining insurance through the exchanges and even if the government provides tax credits for some families? Families might be able to reduce one type of health care cost by purchasing “bronze plans” instead of “platinum plans.” But if a family has significant health expenses in a given year, the savings on premiums is likely to be exceeded by the added out-of-pocket costs.
A report by the Kaiser Family Foundation said that annual health insurance premiums for employer-sponsored family health coverage increased to $15,073 in 2011. Employers, on average, paid $10,944 and workers paid $4,129. The 2011 insurance premiums were a 9 percent increase from 2010 for family coverage—a significantly higher rate of increase than the preceding several years.
Health insurance exchanges will make insurance more available and are likely to make the cost of insurance less than it would be without the exchanges. Nonetheless, a challenge will remain to control health care costs while also providing high-quality care.
Jeff Atkinson (JAtkin747@aol.com) teaches health care law at DePaul University College of Law in Chicago.