State insurance regulators are starting to think about the nuts and bolts of creating a giant new health coverage distribution system.

The American Health Benefits Exchange section of the Affordable Care Act, the new federal health system change package that includes the Patient Protection and Affordable Care Act (PPACA), will require the states to set up health insurance exchanges in 2014.

The exchanges must give individuals and small groups a mechanism for using government subsidies to buy standardized packages of health coverage, but the details are still emerging.

The Exchanges Subgroup, part of the Health Insurance and Managed Care Committee at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., held a hearing on the topic last week during the NAIC’s interim meeting in Washington.

Brian Webb, manager of health policy and legislation at the NAIC, presented an overview of how the PPACA exchange provisions will work.

An exchange must be operated by a governmental or nonprofit entity, sell only health plans that meet minimum standards, and provide initial, annual and special enrollment periods.

“Qualified health plans” can range from high-deductible catastrophic plans for the young to “platinum” plans that cover 90% of the actuarial value of the benefits used.

A state must tell the secretary of Health and Human Services (HHS) that it is setting up an exchange, or the federal government will provide access to an exchange for the state’s residents by Jan. 1, 2014.

Rick Curtis, president of the Institute for Health Policy Solutions, Washington, said a state could set up an exchange in many different ways.


A state could, for example, have a small employer send information about workers’ choice of plans to an exchange but send billing, payment and enrollment change information directly to the carriers, Curtis said.

A state also could make life easier for the employer by having the employer communicate only with the exchange, and having the exchange manage all communications with carriers, Curtis said.

Representatives from Aon Corp., Chicago (NYSE:AON), presented a report noting that health carriers will have to address issues related to intermediaries, such as the “roles and responsibilities of brokers” and the role of aggregators and navigators who will serve as consumer helpers.

Employers will have to think about issues such as the sustainability of the exchange system and decisions about whether to buy coverage through an exchange or to stick with the traditional market, according to Aon.

To get an exchange up and running by Jan. 1, 2014, a state should “blueprint” the exchange by the end of 2010, then have design and construction completed by mid-2011, Aon says.

Timothy Stoltzfus Jost, a law professor who identifies himself as a consumer advocate, said exchanges will use nonprofit “navigators” to advise consumers.

Navigators could include entities trusted by individuals and employers, including “trade, industry and professional associations, commercial fishing industry organizations, ranching and farming organizations, community and consumer-focused nonprofit groups, chambers of commerce, unions, and resource partners of the Small Business Administration,” Stoltzfus said, according to a written version of his testimony.

Insurance agents and brokers could be navigators, but “they may not receive any direct or indirect consideration from an insurer for the enrollment of an individual or employer,” Stoltzfus said.

“Financing for the navigators is expected to be part of the ongoing operating costs of the exchanges,” Stoltzfus said.

A number of speakers talked about mechanisms for preventing adverse selections for hurting either exchange plans or the remaining traditional plans.

BenefitMall, Dallas, a company that serves as a kind of health insurance exchange that does business with brokers, submitted written testimony suggesting that exchanges could outsource many service functions to private companies.

Government agencies could handle tasks such as certifying health plans as qualified and development standards for presentation of health benefits, BenefitMall says.

Private firms could handle electronic presentation of plan options, helping small businesses set up plans, updating small group enrollment, and handling billing and carrier payments, BenefitMall says.

“States may benefit from consulting with existing entities that already perform some or all of the service (but not governmental) functions for advice and assistance in setting up an exchange,” BenefitMall says.