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PPACA: Will Exchanges Be Producers?

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Some states could apply insurance producer or consultant licensing rules to the new state health insurance exchange entities, according to a National Association of Insurance Commissioners (NAIC) panel.

The Exchanges Subgroup at the NAIC, Kansas City, Mo., has posted an exposure draft of the American Health Benefit Exchange Model Act on its section of the NAIC website.

The subgroup has developed the model to implement Section 1321 of the Patient Protection and Affordable Care Act (PPACA), a component of the Affordable Care Act.

Section 1321 requires the U.S. secretary of Health and Human Services to work with the NAIC Can of Wormsand member regulators, health insurers, consumer groups and others to set up a system of American Health Benefit Exchanges that will be used to distribute subsidized individual coverage, and a system of Small Business Health Options Program exchanges to distribute subsidized small group coverage.

The exchanges are supposed to go into operation in 2014, and they are supposed to set up Navigator programs. The Affordable Care Act calls for the Navigator program to help individuals and small group benefits buyers compare and enroll in the health plans sold through the exchange system.

A state can set up a whole-state exchange; divide itself into regions and create separate exchanges for each region; or join with other states to participate in multi-state exchange entities.

The National Association of Health Underwriters (NAHU), Arlington, Va., has argued that the state agencies setting up exchanges should promote the participation of licensed agents and brokers in advising exchange participants.

“All successful state-level private purchasing pools and exchanges have elected to utilize the services of agents and brokers for this reason,” NAHU says in a comment submitted to the Exchanges Subgroup. “Those did not do so initially, like the Health Insurance Plan of California, which was the longest-running state public purchasing pool to date (operational from 1993-2006), quickly found that the active participation of licensed agents and brokers was the key to the pool’s enrollment success.”

America’s Health Insurance Plans (AHIP), Washington, says the new exchanges

should supplement, not replace, existing markets, and that regulatory functions should not be duplicated.

AHIP also has asked that the same market regulations that apply outside the exchange environment apply to the plans inside the exchange system.

“This should be done to ensure that individuals and small groups can continue to purchase coverage outside of the exchange as well as inside the exchange to help avoid selection issues across the markets, and limit unintended consequences that could undermine support for the new market,” AHIP says.

Another important element will be creating standardized forms that carriers can use to give consumers accurate, easy-to-understand and easy-to-compare information about the plans sold through the exchanges, AHIP says.

Timothy Jost and Stephen Finan, who represent consumers in NAIC proceedings, note that the cost of exchanges may amount to about 3% to 4% of total coverage costs.

The exchanges “must reduce costs elsewhere for employers and insurers if they are to compete with the non-exchange market,” Jost and Finan say. “An important issue here may be brokers’ commissions, as the role of brokers will certainly change with the coming of the exchanges and brokers will probably play a diminished role in the individual market. This will undoubtedly be a contentious issue in many states, but restructuring costs and overhead in the system to meet the needs of the exchanges is critical to ensuring the exchanges’ success.”

The exposure draft does not say much about producers.

In a drafting note, officials say, “Depending on how a State establishes its Exchange, a State may need to consider whether the Exchange should be exempt from the State’s insurance producer or consultant licensing requirements or whether the Exchange needs to obtain such a license.”

Elsewhere, the draft says a health carrier qualified to offer coverage through an exchange should charge “the same premium rate for each qualified health plan without regard to whether the plan is offered through the Exchange and without regard to whether the plan is offered directly from the carrier or through an insurance producer.”

When an exchange is selecting the nonprofit entities that will serve as Navigators, it should provide grants that will help the Navigators “distribute fair and impartial information concerning enrollment in qualified health plans, and the availability of premium tax credits … and cost-sharing reductions.”

An exchange also should provide grants to help the Navigators “facilitate enrollment in qualified health plans,” and to “provide referrals to any applicable office of health insurance consumer assistance or health insurance ombudsman … for any enrollee with a grievance, complaint or question regarding their health benefit plan, coverage or a determination under that plan or coverage,” according to the draft text.


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