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What will PPACA do to the non-exchange market?

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A team of state insurance regulators is trying to figure out how the Patient Protection and Affordable Care Act (PPACA) might affect — and not affect — health plans that operate outside the PPACA health insurance exchange system.

PPACA could have a huge effect on many categories of non-exchange plan  rules, such as underwriting rules, but it may have little direct effect on other categories of plan rules, such as marketing standards and provider network standards, according to the Health Care Reform Regulatory Alternatives Working Group.

PPACA will prohibit the “qualified health plans” (QHPs) that sell coverage through PPACA exchanges from employing “marketing practices that discourage enrollment by individuals with significant health needs,” but those PPACA provisions “only apply to QHPs” and will have no direct effect on non-exchange plans, the working group says in a draft non-exchange market paper.

Similarly, PPACA imposes quality standards on QHP provider networks and network provider directories, and it requires a QHP to give providers financial incentives to improve the quality of care. But those provisions seem to apply only QHPs, the working group says.

But PPACA will preempt or severely weaken state laws that deal with many other matters, such as rating rules and solvency rules, the working group says.

The working group, an arm of the Health Insurance and Managed Care Committee at the National Association of Insurance Commissioners (NAIC), posted the draft paper on its section of the NAIC website.

The NAIC formed the working group at its 2012 summer meeting, to give states that are not setting up PPACA exchanges a chance to share their ideas about PPACA.

Opponents of PPACA continue to try to block or delay implementation of the law. If it takes effect on schedule and works as drafters expect, it will require states to set up exchanges, or health insurance supermarkets, for individuals and small groups by Oct. 1 or let the U.S. Department of Health and Human Services (HHS) provide exchange services for their residents.

PPACA also will impose many other health insurance restrictions and mandates, such as a ban on insurers’ ability to use health status when deciding whether to issue individual coverage and tight restrictions on use of health status information on the pricing of individual coverage.

Analysts at the Congressional Budget Office (CBO) have speculated that only a few million workers will get coverage through the Small Business Health Options Program (SHOP) exchanges for small groups, and that the market for non-exchange group coverage may continue to be about as big as it is today.

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