The U.S. Department of Health and Human Services (HHS) has posted draft health insurance regulations that would let an exchange work with agents and brokers, provide producer listings on its website, and include producers in Navigator programs.

HHS officials have given states a chance to open their health insurance exchange programs to producers in a proposed rule implementing exchange establishment and qualified health plan provisions of the Patient Protection and Affordable Care Act of 2010 (PPACA).

Health insurance producers have been saying they were afraid that HHS and state officials PPACA toolkitwould try to shut them out of participating in the new, exchange-based health insurance distribution system by, for example, preventing them from acting as “Navigators,” or guides to the new system.

But HHS says a state can decide for itself what role it wants producers to play.

Section 1312(e) of PPACA “gives states the option to permit agents or brokers to assist individuals enrolling in [qualified health plans (QHPs)]through the exchange,” officials say in a preamble to the proposed rule. “This includes allowing agents and brokers to enroll qualified individuals, qualified employers, or qualified employees in QHPs and to assist individuals with applications for advance payments of the premium tax credit and cost-sharing reductions.”

HHS also has released another proposed rule dealing with exchange risk adjustment provisions.

Health Insurance Exchanges

If PPACA takes effect as written and works as supporters hope, it will create a system of state-supervised health insurance distribution exchanges that will help individuals and small groups buy health coverage using a new system of subsidies starting in 2014.

The Internal Revenue Service will provide the subsidies through a new system of tax credits.

PPACA also is supposed to create a new system of Navigators, who are supposed to be independent from health insurers, to help individuals buy coverage.

States will provide exchange services for small employers through the Small Business Health Options Program (SHOP).

A state can let several exchanges operate within its borders, set up one exchange, join a multi-state exchange consortium, or let the federal government provide exchange services for its residents.

The District of Columbia, 49 states and 4 territories have accepted preliminary exchange planning grants, and more than half of the jurisdictions have taken additional steps toward setting up exchange programs, HHS officials say. Only Alaska has taken no steps at all toward looking at the possibility of participating in the exchange program.

The Proposed Rules

HHS wants to give states a great deal of flexibility in exchange design and administration, officials say.

Under the terms of the proposed exchange establishment rule, a state could choose whether to put an existing state agency, a new independent agency or a nonprofit organization in charge of any exchange,

or exchanges, it starts.

A state also could choose whether to open an exchange to any QHP, open exchanges only to winners of competitive bidding processes, or adopt a hybrid approach.

An insurance agent or broker that wanted to participate in a Navigator program could not receive compensation from a QHP for enrolling individuals or qualified employees in QHPs — but, in theory, the producers could receive compensation from the insurer selling the QHP for enrolling individuals or employees in non-QHP coverage.

“We seek comment on this issue and whether there are ways to manage any potential conflict of interest that might arise,” HHS officials say.

An exchange also could hire a Web-based enrollment firm or other enrollment entity to help with exchange plan enrollment, as long as it abided by proposed requirements for eligible contracting entities, officials say.

The majority of the members of an exchange board could not be agents, brokers, health insurer executives and others with an interest in selling health insurance, but a state could let producers and insurer representatives serve on exchange boards.

The second proposed rule, the risk adjustment rule, is supposed to create mechanisms that would protect exchanges and their plans against the risk that exchange-distributed plans might attract unusually sickly insureds.

PPACA is supposed to require all carriers to sell major medical coverage through a guaranteed-issue, mostly community-rated basis starting in 2014, but some have suggested that carriers could use other mechanisms, such as provider network design, to attract healthier insureds and repel sicker insureds.

The proposed risk adjustment rule would let states use temporary reinsurance and risk corridor programs, and a permanent risk adjustment program, to protect their exchanges, and the proposed rule would give states flexibility in designing and administering the programs, HHS officials say.

A state could create a reinsurance program even if it does not establish an exchange, and it could get permission from HHS to use a homegrown risk adjustment program, officials say.

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