Brave New World

According to Beth Mantz-Steindecker John J. Leppard and Ira S. Loss of Washington Analysis, the rules provide great flexibility to the states to carve out a key role for agents and brokers.

Washington Analysis is a Washington think tank that provides research and analysis to buy-side securities analysts and brokers, i.e., those who serve the institutional market.

They said that the provisions related to the private market were stipulated on an interim final basis, meaning that the federal Department of Health and Human Services will review public comments and then determine whether to finalize them, alter them, or remove them.

“Given HHS statements concerning the ability of these entities to drive interest in an exchange, we doubt they are removed,” the analysts said.

However, they added it is unlikely that private companies will be permitted to assess consumer eligibility for premium subsidies, cost-sharing arrangements, or other affordability programs.

“Compensation mechanisms for these entities will be determined by the state,” the analysts said.

The analysts also said that with Republicans currently in control of the majority of state governments, and with most Democratically-controlled states placing an emphasis on initial insurer participation rather than restrictive control, “we think that this rule sets the framework for more market-driven exchanges than some have feared.”

They cautioned that the regulation merely provides a regulatory floor, and that states are free to enact conditions of participation above and beyond those outlined by HHS.

“This could include limitations on the number of insurers permitted to offer plans via the exchange or even an active exchange model whereby exchanges “negotiate” premiums,” the analysts said. “Still, the emphasis at this point remains on participation,” Mantz-Steindecker, Leppard and Loss said.

Other sources said the functions that will be the responsibility of the states include certifying qualified health plans; operating a website for comparing plans; running a toll-free hotline for consumer support; providing grants to “navigators” to assist consumers; determining eligibility of consumers; and helping consumers enroll.

Other sources noted that certain elements will disappoint insurers and consumers. “Insurers, wanted less discretion for states,” said PoliticoPro. “They wanted HHS to prevent exchanges from imposing requirements on plans in the exchanges beyond what is included in the health care reform law.”

Another concern cited by PoliticoPro was that consumers wanted fewer insurers on the exchange board. “But under the new rules, up to half of a board can represent insurers,” Politico Pro said.

However, the final rule, which goes into effect in mid-May, mandates that representatives of insurance issuers, agents, brokers, or others licensed to sell insurance may not constitute the majority of an exchange board.

Furthermore, at least one voting member of the board must be a designated consumer advocate.

The analysts said that states will be given broad discretion in devising methods to ensure that their exchange is financially able to perform all of its required functions.

“This will likely include some manner of user fees or assessments on participating issuers,” the analysts said.

“While HHS encourages states to study the impact of various funding arrangements on risk selection, insurer participation, and provider contracting, the ultimate determination will be left up to the state,” the analysts said.

“Any assessment collected by the exchange would be reflected in plan premiums and thus subject to rate review,” they said.

The regulation finalizes the original start date of October 1, 2013 for the initial open enrollment.

But the Washington Analysis analysts said that HHS extended the effective close date to March 31, 2014 in what they see as a a positive development for insurers.

At the same time, exchanges must be either approved or conditionally approved by January 1, 2013, they said.

In keeping with the proposed rule, states able to demonstrate that their exchange is likely to be operationally viable by the initial open enrollment period will be eligible for conditional approval prior to January 1, 2013, the analysts said.

States failing to do so by that point will see HHS establish an exchange for them, the analysts said.

In recognition of this short timeframe, HHS has not pursued calls for public comment periods for state exchange applications, or so-called “exchange blueprints.”

States seeking to establish an exchange after this time must have an approved or conditionally approved exchange in place at least 12 months prior to the first effective date of coverage, or January 1 of the prior year.

One legal analysis said that a “notable change” from the proposed rules permits agents and brokers to enroll qualified individuals in QHPs through private agent/broker websites.

If a website of an agent or broker is used to complete the QHP selection, the website must meet certain minimum requirements.

The private website must: meet all disclosure standards and QHP display requirements regarding standardized comparison information and accessibility (e.g., plain language and accessible, timely disclosures), provide consumers the ability to view all QHPs offered through the exchange; not provide financial incentives, such as rebates or giveaways; and display all QHP data provided by the exchange, these lawyers say.

The private website must also maintain audit trails and records in an electronic format for a minimum of 10 years; and provide consumers with the ability to withdraw from the process and use the exchange website instead at any time.

These lawyers note that all agents and brokers enrolling qualified individuals in QHPs or assisting individuals applying for advance payments of the premium tax credit and cost-sharing reductions must enter into and abide by an agreement with the exchange.

At a minimum, the lawyers say, the agreement must require agents and brokers to register with the exchange in advance of enrolling any individuals in QHPs; receive training regarding the range of QHP options and insurance affordability programs; and comply with the Exchange’s privacy and security standards.

Agents and brokers enrolling or assisting individuals through the exchange must comply with all state laws related to agents and brokers, including laws related to confidentiality and conflicts of interest, these lawyers said.

Regarding the much-maligned Navigator program, a separate and distinct mechanism for providing education and assistance concerning the Exchanges, the final rule specifies that states may select licensed agents and brokers to serve as Navigators, one legal analysis says.

The exchanges are required to establish standards designed to prevent, minimize and mitigate any conflicts of interest that may exist for Navigators.

This analysis said that, according to the Final Rule, an agent or broker that participates as a Navigator would be precluded from accepting commissions or other payments from an insurer for enrolling companies or employees in exchange plans (although this prohibition does not extend to compensation received for activities associated with plans outside the exchange).

According to this analysis, Navigators will presumably be compensated through exchange grants but the final rule does not offer relevant specifics as to how the grant programs will operate or what the payments will be.

Therefore, this analysis cautions, “it is still an open question whether it would make sense, as an economic proposition, for agents and brokers to become Navigators.”

This analysis said the provisions in the final rule “solidify the concept that a state can involve agents and brokers in the Exchange framework if a state so chooses,” and any further decisions or requirements for agent/broker participation in the exchanges will be made at the state level.