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Life Health > Health Insurance > Health Insurance

Health Care Exchanges Start Taking Shape

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With health care reform implementation an ever-present concern for the industry, the NAIC has drawn up the American Health Benefit Exchange Model Act, which it hopes will supply states with a framework with which they can build mandated health care exchange systems. The exchanges are online portals that will become an integral component to purchasing health insurance both in the individual market as well as in the small group market. Health agents have considered the exchanges a clear and present danger to their livelihoods, and so the exchanges themselves have become the subject of much political wrangling. As the NAIC released its Model Act, it provides not only clarity on implementing exchanges, but laying the groundwork for what the exchanges themselves are meant to be.

Section 1311(d) of the PPACA stipulates that any Exchange has to be established as either a governmental agency or a nonprofit entity. There are advantages and disadvantages to both. If a state were to establish its exchange as a governmental agency, they would have the relative leisure of housing the exchange in a current state agency, with ready access to state administrators and coordinating agencies, such as the state Medicaid department. Possible downsides to making the exchange a governmental agency include the potential for operations to become politicized as well as becoming confined by stringent state hiring policies.

If a state were to set up the exchange as non profit entity it would not be directly under the state’s purview and would depoliticize potential staffing and decision-making challenges. Disadvantages to having the exchange set up as a non profit include a disconnect with state policymakers. The option to have the exchange located at an independent public agency or quasi governmental agency with a board appointed for the daily facilitation of the exchange is also incorporated into the model act.

PPACA Section 1311(f) allows states, with the approval of the federal department of HHS, to establish interstate or regional exchanges. This makes sense when you look at states like Vermont and New Hampshire that are geographically close and contain relatively sparse populations. An interstate exchange would streamline administrative costs. Regional exchanges can be equally as important with a state like New York that may find it advantageous to construct a regional exchange for New York City to keep it lithe and prevent it from becoming overburdened by bureaucracy. The model act does not specify how to establish these exchanges but the NAIC, through their Exchanges B subgroup, will undertake the issue and establish a paper on it for states that wish to examine this option.

The model act leaves open the possibility that states may have to go through producer or consulting licensing depending on how they establish their exchanges but does not explain what states would have to do to be required to get licensed.

The Model Act suggests that funding for the exchanges be derived from charging fees to health carriers that offer their plans through the state exchange. The exchanges will publish their costs on a website in order to establish transparency with consumers.


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