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U.S. Health Department lays out flexible timetable for state insurance exchanges

Arizona lawmakers who are hesitant about creating a state-run health insurance exchange, a key provision of President Barack Obama’s health care overhaul, will have some extra time to debate the issue.

Officials from the U.S. Department of Health and Human Services today released a set of regulations that will govern the health insurance exchanges, including a flexible timeline for states that aren’t quite ready for the federal deadlines. Under the Affordable Care Act, every state must have either a state-run or federally run health insurance exchange.

In order to meet the January 2014 deadline for implementing the health insurance marketplaces, states that wish to run their own exchange must have them ready for federal certification by January 2013. But HHS officials said states that haven’t completely finished their work can get conditional certification for their exchanges if they can show that they’re “making progress,” and that states that have a federally run exchange can shift back to a state-run model after the 2014 deadline.

“The fact that a state, maybe as we sit here today, maybe hadn’t made strong progress compared to some of the other states certainly doesn’t rule out them being positioned in either 2013, 2014 or even later. And I think that’s one of the strong points of this reg is providing that flexibility for states,” Steve Larsen, the director of HHS’s Center for Consumer Information and Insurance Oversight, told reporters on a conference call today.

The regulations outline states’ abilities to run their exchanges in partnerships with the federal government, nonprofit groups or other states. Another area of flexibility the states have under the regulations is the ability to decide what role insurance agents and brokers will have under the new system.

HHS Secretary Kathleen Sebelius said the system is designed to give states a great deal of leeway while ensuring that they all meet certain minimum standards. She said all state exchanges will have three mandatory features that they must include – implementing a “one-stop shop” where all individuals and small businesses can buy coverage; be transparent in terms of cost and coverage; and provide a basic level of coverage, similar to the health plans offered by employers.

“This isn’t a one-size-fits-all solution. Each state will have the flexibility to design its exchange. And they will also have the option to partner with each other and with our department in order to meet the goals they have for their exchange. But all exchanges will have certain features in common,” Sebelius said.

Rep. Nancy McLain, who sponsored a failed bill to create a state-run health insurance exchange during the 2011 legislative session, said the flexible timetable has always been an implied part of the Affordable Care Act. But the Bullhead City Republican said it’s good for Arizona’s insurers to have the guidelines officially codified so they know how to proceed.

“As I understand it, there was a lot of ambiguity. Until they actually set the policies and procedures there were some things that the insurance folks weren’t absolutely sure on. They were trying to make educated guesses on the way it would go,” said McLain, whose HB2666 never received a vote of the full House. “The timelines were set in stone, but as far as just being able to show progress by 2013 was the assumption that they were working under.”

HHS still has not released the highly anticipated “essential health benefits” guidelines, which will detail the minimum coverage standards for insurers in the exchanges. Agency officials said the agency would release those regulations later this year.

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