Close Close

Regulation and Compliance > State Regulation

5 essentials for a minimal state-based PPACA exchange

Your article was successfully shared with the contacts you provided.

State insurance regulators heard more about their Patient Protection and Affordable Care Act (PPACA) premium tax credit emergency rescue options this week in Phoenix.

The Health Care Reform Regulatory Alternatives Working Group, a panel at the National Association of Insurance Commissioners (NAIC) for states that are not fond of PPACA, brought in two experts Sunday, to a session at the NAIC’s spring meeting, to brief them on King vs. Burwell (Case Number 14-114).

That’s the case that hinges on whether PPACA lets an exchange set up by the U.S. Department of Health and Human Services (HHS) offer the PPACA health insurance premium subsidy tax credits.

PPACA says, directly, that a “state-established” PPACA exchange can offer the tax credits, which are helping more than three-quarters of private exchange plan buyers pay their premiums.

PPACA does not explicitly say whether the HHS exchanges can offer the tax credits. HHS officials argue that the omission is an oversight. The plaintiffs in the case say that the omission was intentional, and that only a “state-established” exchange can offer the tax credit.

See also: King vs. Burwell: Does PPACA bully the states?

No one knows for sure whether the Supreme Court will hand down any substantive ruling on the case.

Some say a Supreme Court ruling that limits or eliminates the ability of the HHS exchanges to offer the tax credit this year and in 2016 could devastate some states’ individual major medical markets, by leading to huge market changes after insurers have already filed 2016 rates.

Court watchers have been trying to figure out what exactly states that have avoided running PPACA exchanges themselves might have to do to have an exchange that is “state-established” enough to keep the tax credit program going, at least on a limited, emergency basis, if the Supreme Court rules against HHS.

Joel Ario of Manatt Health Solutions gave the working group members a general update on the King vs. Burwell case and possible repercussions.

The other speaker, William Schiffbauer, talked about what a state has to do to have a “state-established exchange,” and why simply giving HHS a formal invitation to provide exchange services, along with a hug and a box of chocolates, is not enough.

For a look at some of what speakers said a state has to do to have a state-established exchange, read on. 


1. Get HHS Secretary Sylvia Mathews Burwell and her people to act fast.

Ario, the original PPACA exchange construction chief, said states could probably still set up their own state-based exchanges for 2016, as long as they and HHS act quickly.

Under the current HHS rules, blueprints for 2016 state-based exchanges are due June 15, 2015, but “most requirements are operationally based and not rooted in statutory requirements,” Ario says in a slidedeck. “HHS could make wholesale changes in this process.”

Cat and mouse play chess

2. A state has to work with the HHS exchange program to oversee health plans and provide some consumer assistance.

Some states have avoided setting up their own exchanges because they don’t want to pay for all of that work, or don’t think they’re prepared to assume that operational responsibility.

Others oppose PPACA on principle.

Some would prefer to avoid having to do business with HHS.

Ario says he believes a state that wanted a minimalist exchange that is just state-established enough to offer the PPACA tax credits will at least have to oversee the exchange qualified health plans (QHPs) and operate a consumer navigator program and other consumer assistance programs.

But even some states that have had HHS provide exchange services in their states have been overseeing the QHPs and providing consumer assistance, Ario says.

See also: Illinois picks state-HHS partnership exchange strategy


3. A state may have to meet 70 statutory requirements, and many sets of regulatory requirements.

If even most Republicans end up agreeing that states need a way to keep their PPACA premium tax credit programs going on an emergency basis, states and HHS may find a quick way around any regulatory requirements imposed by the Obama administration.

But, especially if any lingering hostility toward emergency tax credit extensions remains, and, for example, the plaintiffs in King vs. Burwell are ready to shoot into court to challenge any state failures to dot statutory I’s and cross statutory T’s, states  that want to set up minimalist exchanges will have to lawyer up, according to Schiffbauer. 

He notes, for example, that PPACA Section 1311(b)(1) requires each state to set up an American Health Benefit Exchange not later than Jan. 1, 2014, and that an exchange must be self-sustaining beginning on Jan. 1, 2015.

The statute itself says a state-based exchange must meet a number of minimum functional requirements, such as providing a toll-free telephone assistance hotline and establishing a consumer Navigator program. 

Dog listening

4. A minimalist exchange has to be a good listener.

Schiffbauer says PPACA requires an exchange to consultant with relevant stakeholders, including consumers, small business, Medicaid offices, advocates and Indian tribes.


5. A minimalist exchange has to establish a system for providing exemptions for individuals who have good excuses for getting out of the PPACA individual coverage mandate.

States that dislike the PPACA exchange system might enjoy running the operation that grants mandate exemptions.

See also: Highways to PPACA tax penalty freedom

But Schiffbauer does not distinguish between functions that a state must do itself and functions that a state must ensure that someone does. It could be that a state could hire a vendor, a neighboring state, or HHS itself to perform some of the required functions on Schiffbauer’s list.