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PPACA: CBO, NAIC Tackle Health Exchange Issues

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The Congressional Budget Office (CBO) has taken another look at how federal health insurance subsidies might perform in a health exchange environment, and the National Association of Insurance Commissioners (NAIC) has updated an exchange governance draft.

Provisions in the Patient Protection and Affordable Care Act (PPACA) are supposed to create a new system of health insurance exchanges in 2014. Individuals are supposed to be able to use a new tax credit subsidy system to buy coverage through the exchanges.

PPACA opponents are trying to block implementation of part or all of the act, but members of Congress asked the CBO to look at how changes in the federal exchange subsidies might compare with the overall Consumer Price Index if the exchange and subsidy provisions take effect as written and work as expected.

The CBO analysts focus in a new paper on the considerations that went into their efforts to come up with baseline exchange subsidy cost projections.

The analysts consider only insurance premium subsidies and do not talk about the subsidies for cost sharing that are supposed to go to low-income individuals and families.

The CBO analyst notes that PPACA calls for the government to apply a “regular indexing method” to adjusting subsidies for cost increases, and that the law also has another provision that seems to permit the government to add a second, “additional indexing” method in 2010.

The “additional adjustment” would adjust for the difference between the growth in premiums, as calculated for the regular indexing provision, the percentage change in the Consumer Price Index for all urban consumers, officials say.

Overall federal premium subsidies could grow to $118 billion in 2021, from $21 billion in 2014, because of increasing use of the exchange system and an increase in the average subsidy per enrolleee, officials say.

The subsidy per enrollee likely would grow faster for all families than the general inflation rate, but the “additional indexing” method probably would slow the rate of increase, especially for higher-income subsidy recipients, officials say.

In related news, the Exchanges Subgroup at the NAIC, Kansas City, Mo., has revised a draft

document that describes some of the considerations state insurance regulators might have to consider when helping to oversee exchange operations.

In the new version, regulators have added a provision that would emphasize that a state could establish an exchange either as a governmental agency or nonprofit entity but would have to make provisions to make any exchange meet health and tax data security and privacy standards.

“Regardless of its organizational form, the exchange must be publicly accountable, transparent, and have technically competent leadership,” regulators say.

Regulators also have added sections dealing with matters such as the kind of board that might oversee a nonprofit entity exchange and strategies for avoiding conflicts of interest.

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