Insight Idaho’s Health Insurance Exchange Onward and Upward

It is not news to Idaho’s business community that the state legislature recently passed the Idaho Health Insurance Exchange Act,_¹ few, however, are aware of exactly what the Act does and what steps are next for the implementation of a state-based health insurance exchange.

The recent, and often heated, de­bate over an Idaho health insurance exchange arises because the Patient Protection and Affordable Care Act of 2010,_² (hereinafter referred to collec­tively as the “ACA”) requires the estab­lishment of health insurance exchanges to serve the individual and small-em­ployer-group markets. A health insur­ance exchange is an Internet-based mar­ketplace where qualified health insur­ance plans will be sold, similar to the way travel websites typically sell airline tickets._³ In other words, the exchanges will offer standardized plans and infor­mation so customers can make “apples to apples” comparisons between com­peting health plans. Exchanges are in­tended to provide one-stop shopping for qualified health plans and make purchasing health insurance easier and more understandable. Exchanges will interactively assist individuals and small businesses by providing pricing and other information necessary to purchase health insurance.

In addition, an important function of the exchange is to direct eligible in­dividuals into a state’s Medicaid system. The exchange will verify an individual or family’s income and direct that in­dividual or family to Medicaid if eligi­bility requirements are met. For those not eligible for Medicaid, the ACA pro­vides sliding-scale premium subsidies for individuals and families who earn up to 400 percent of the poverty level ($94,200 for a family of four) — a sig­nificant portion of Idaho’s residents._⁴ But to receive premium subsidies, the private insurance must be purchased on a qualified exchange. As a result, most, if not all, individual insurance will likely eventually be purchased on an exchange.

The Act passed with the strong sup­port of Governor C.L. “Butch” Otter and the business community. Idaho’s business community recognized that an Idaho-based Exchange was a better choice than an exchange established and operated by the federal govern­ment._⁵ Beginning with the recommen­dations of the Governor’s 2012 Idaho Health Insurance Exchange Working Group (appointed by Governor Otter after the U.S. Supreme Court refused to strike down the insurance market reforms in the ACA)_⁶, the primary ar­guments advanced in favor of a state-based exchange were local control and flexibility._⁷ As the Working Group pointed out, a state-based exchange allows local stakeholders, rather than the federal government, to determine the exchange’s direction in key areas of structure, governance, financing, and operations._⁸ The Exchange’s recently-appointed board of directors has the daunting task of determining the Ex­change’s direction in these areas.

How it will work

The Act sets many of the ground rules for the Exchange’s structure and governance. For structure, the Ex­change is an independent body cor­porate and politic, created by Idaho statute and similar to other entities such as the Idaho Housing and Finance Association._⁹ But the Exchange is not a state agency.^₁₀ Exchange employees will not be state employees,_¹¹ and Ex­ change debts are not state debts._¹² The Exchange has no power to raise taxes and it is not entitled to funding from the state._¹³

For governance, the Exchange is gov­erned by a 19-person board. The board includes stakeholders who represent all areas of healthcare, insurance and government. The board is comprised of three legislators, three consumer representatives, four representatives of small employers, two representatives of the healthcare provider community, three insurance company representa­tives, two representatives of insurance agents and brokers, the director of the Idaho Department of Insurance, and the director of the Idaho Department of Health and Welfare._¹⁴ All meetings of the board will be streamed over the Internet and will be subject to Idaho’s Open Meetings Act._¹⁵ In addition, the Exchange will make an annual report to the legislature,_¹⁶ and undergo an­nual audits._¹⁷

The Act is less detailed regarding Exchange financing and operations. Although the establishment of the Ex­change is funded by the federal govern­ment, under the ACA, the Exchange must be self-sufficient by 2015._¹⁸ Under the Act, the Exchange will not receive funding from the state._¹⁹ In addition, the Act provides that the Exchange must develop procurement policies and that vendor contracts be procured through open bidding._²⁰ The Act also provides that the Exchange should favor Idaho vendors._²¹ For the most part, though, the operation of the Ex­change is left to the discretion of the Ex­change’s board, which must draft and adopt a written plan of operations that is consistent with the Act. Idaho Code § 41-6105. Accordingly, the board will determine Idaho’s direction on several key matters:

• What operations will the Exchange perform and what operations will be outsourced? For outsourced functions, who will provide these functions to the Exchange? Possible outsourced func­tions include processing applications, call center operations, and website cre­ation and hosting.
• How will the Exchange be fi­nanced? Will the Exchange rely solely on participant fees, or will the board secure other sources of revenue?
• How will the Exchange provide customer education, outreach, and sup­port, as required by the ACA to increase availability of health insurance to cer­tain groups? What will be the role of licensed brokers and agents?
• What will be the requirements for insurance plans offered on the Ex­change? Who will certify that the plans meet the requirements? How will the board exercise its discretion to deter­mine what plans are in the best interest of Idahoans?
• What will be the rules for obtain­ing and terminating individual and small employer group coverage?

Under the ACA, the board’s task is to ensure that the Exchange can accept applications for health insurance cover­age no later than October 1, 2013. This leaves only a few months to address the operational issues identified above, ne­gotiate vendor contracts, adopt policies and procedures, and actually imple­ment an exchange.

Fortunately, the legislature has placed the task in the hands of a state-established body that is directed by a board that represents a broad group of stakeholders, including consumers, the small business community and health care providers. By October of this year, individuals and small employers will have the opportunity to purchase health insurance from a marketplace that has been designed by Idahoans for Idahoans. By purchasing insurance on the exchange, those individuals and businesses will be in a position to bene­fit from the federal premium tax credits available to many purchasers of insur­ance under the ACA.

For more information please contact a member of our Health Care group or call 208.344.6000.

*Article published in the June/July 2013 edition of The Advocate.

Endnotes

1 Idaho Code § 41-6101 to -6109 (“Act”)

2 Pub. L. No. 111-148, 124 Stat. 119 § 1311 (2010) as amended by Health Care and Edu­cation Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029

3 See generally, id.

4 Treas. Reg. 1.36B(3); Dep’t of Health and Human Serv., Annual Update of the HHS Pov­erty Guidelines, 78 Fed. Reg. 5182-83 (Jan. 24, 2013).

5 Under ACA, states were given the option to establish and operate their own exchanges. If states declined to do so, the state’s exchange would be provided by the federal govern­ment. 45 C.F.R. § 155.105(f).

6 Nat’l Federation of Independent Business v. Sebelius, 132 S. Ct. 2566. (2012)

7 See C.L. “Butch” Otter, Opinion: An Idaho Health Insurance Exchange Makes Sense, But How It’s Done Makes a Big Difference (Dec. 29, 2011) available at http://gov.idaho.gov/ mediacenter/press/pr2011/prdec11/pr_064. html.

8 Health Insurance Exchange Working Group Findings (Oct. 30, 2012) available at http:// www.doi.idaho.gov/HealthExchange/Final_ report.pdf.

9 Idaho Code § 41-6104.

10 Id.

11 Id.

12 Idaho Code § 41-6105.

13 Id.

14 Idaho Code § 41-6104.

15 Id.

16 Idaho Code § 41-6106

17 Idaho Code § 41-6105.

18 45 C.F.R. § 155.160.

19 Idaho Code § 41-6105.

20 Idaho Code § 41-6104 to 6105.

21 Idaho Code § 41-6108.