A legislator in a state that already has a health insurance exchange said any federal exchange rules should be as loose as possible.

Rep. David Clark, R-Santa Clara, Utah, appeared at a hearing of the Senate Health, Education, Labor and Pensions Committee at a hearing on implementation of the health insurance exchange distribution system provisions in the Patient Protection and Affordable Care Act (PPACA).

“My plea to you today is for help to ensure that as the [PPACA] is implemented, the U.S. Department of Health and Human Services (HHS) uses a light touch and resists the temptation to fill in too many of the missing details,” Clark said.

The Exchange System

Republicans are trying to block implementation of PPACA. If the act takes effect as written, it is supposed to create a health insurance exchange system in 2014.

An exchange would sell individual, family and small group insurance products on a guaranteed-issue basis. Carriers could take an insured’s age into account when pricing coverage but not the insured’s health status.

Low-income and moderate-income consumers could use a new system of tax subsidies to pay for part of the cost of the coverage.

A state could establish one or more exchanges within its borders, join a multi-state exchange program, or have the federal government provide exchange services for its residents.

The Regulators

Steven Larsen, director of the federal Center for Consumer Information and Insurance Oversight (CCIIO), an arm of the U.S. Department of Health and Human Services (HHS) that is overseeing the development of the exchange system, noted that HHS already has awarded $296 million in exchange planning grants to states and territories.

Kansas, for example, is trying to develop a national exchange information technology U.S. Capitol infrastructure, and Rhode Island, Vermont and Connecticut are in a multi-state exchange development consortium, Larsen said.

California enacted insurance exchange laws in September 2010, and states such as Maryland and Colorado are conducting research on exchanges and holding public forums, Larsen said.

Sandy Praeger, the Kansas insurance commissioner, who appeared at the hearing on behalf of the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., told lawmakers that the NAIC already has developed an American Health Benefit Exchange Model Act to serve as a framework for exchange efforts.

The NAIC tried to make the model flexible and fill in gaps with white papers that provide information and ideas, rather than more rules, Praeger said.

In Kansas, regulators are already using exchange planning money and are preparing to apply for an exchange establishment grant, Praeger said.

Some states want to follow the example of an existing exchange operating in Utah and open exchanges to any qualified, interested carriers, while others want to follow the Massachusetts model and use exchanges to negotiate on behalf of consumers, Praeger said.

One challenge is that 2014 is less than 3 years away, and another is that state regulators are still waiting for detailed HHS guidance, Praeger said.

“The sooner we receive more detailed regulatory guidance the easier our tasks will be,” Praeger said.

Qualified plans that sell through an exchange are supposed to meet “essential health benefits” standards, and state regulators are eager to see the HHS guidance on applying those standards, Praeger added.

“This information will be very important for carriers as they prepare to incorporate benefits into the coverage they sell and as they plan to offer coverage in the exchanges,” Praeger said. “It will greatly impact premiums and the cost of subsidies.”

View From Utah

Critics have argued that the Utah exchange has suffered from a relatively low enrollment level.

But the Utah Health Exchange, which was launched in September 2010, will have about 2,500 insureds in 83 employer groups starting April 1, and covered lives are growing an average of 43% per month, Clark said.

The Utah exchange offers more than 100 plans, an employer defined contribution payment program, and a tool for aggregating contributions from multiple employers.

President Obama has expressed support for the Empowering States to Innovate Act bill, a measure proposed by Sens. Ron Wyden, D-Ore., and Scott Brown, R-Mass., a bill that would let states apply for waivers from some PPACA rules starting in 2014, rather than 2017, as provided in PPACA.

The bill would let states design their own approach to expanding access to health coverage if their programs would insure about as many people, provide benefits that are at least as comprehensive as standard PPACA benefits, and not increase the federal budget deficit.

“The bill is woefully insufficient in terms of granting states meaningful flexibility,” Clark said.

“First of all, let me be clear, states were never invited to the table to give input on health care reform as that legislation was being fleshed out. Second, states must still guarantee a generous and expensive level of benefits that go well beyond basic benefits. And since the [HHS secretary] defines what constitutes ‘at least as comprehensive’ is, a state has no guarantee a waiver would be granted, even if plans in the state-proposed alternative have the same actuarial value as those specified in the PPACA. One way flexibility is, essentially, no flexibility at all.”

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