After Proposed Rules, Health Exchange Questions Remain: Milliman

Earlier this week, the Department of Health and Human Services proposed rules for how states can set up and run the insurance exchanges mandated by the healthcare reform law.

Following that release, Seattle-based actuarial and consulting firm Milliman, which has a healthcare practice, released what it considers to be the biggest questions still out there following those rules.

Excerpted from here (note: link leads to PDF), the questions are:

• How firm is the deadline? Exchanges are supposed to be established by the open enrollment period that begins on October 1, 2013. However, the regulations indicate that some states could miss the 2013 deadline and then receive regular or conditional approval for an exchange in subsequent years.

• How will essential benefit regulations shake out? Many of the plan design and cost considerations that will influence the insurance policies sold through an exchange begin with the question of which benefits are offered and at what level. The exact nature of insurance policies sold through exchanges will remain vague until these regulations are introduced.

• What rating role will be played by exchanges? The exchange regulations suggest that exchanges may have a larger role in the rate review process, on top of a full review currently performed by state departments of insurance. Is there redundancy and, if so, how will that redundancy be reconciled? Yet another complexity involves methodologies used for rating individuals versus rating families. The discussion in the exchange regulations is not conclusive and leaves open a variety of different approaches that may allow flexibility or may just foment confusion.

• What about smaller insurers? The regulations indicate that health plans sold through the exchange can no longer determine their own geographic area, which introduces a new rating wrinkle. The same areas must be used within and outside of the exchanges. What should a health plan do if a state introduces a geographic area that is larger than the area served by a health plan?

• How will Federal exchanges operate? The Federal government will create an exchange for any state that does not create its own exchange by the deadline, but the Federal exchange concept remains undefined. Who will pay for Federal exchanges? Will Federal exchanges need to be financially self-sufficient, as is the case with state-run exchanges?

• What should we expect from Navigators? Navigators are entities intended to help consumers make insurance purchasing decisions in the exchange. To date, little detail on Navigators exists. The regulations help by clarifying that Navigators must be in place by the exchange's first open enrollment period on October 1, 2013. The proposed rules now require that an exchange include two types of entities as Navigators. The proposed rules ensure that a community-based or consumer-focused group will fill one of these slots. Navigators will need to demonstrate an existing relationship to consumers before appointment. Brokers and agents may act as Navigators as long as they are not receiving compensation from a qualified health plan.

• How will exchanges interact with CO-OPs? PPACA allows for the creation of Consumer Operated and Oriented Plans (CO-OPs), but details of these plans are still unclear since CO-OP regulations are still pending. CO-OPs in theory will be sold on exchanges but they have some unique requirements; how will this interaction take place?

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• What does success look like? The criteria for determining the success of an exchange are still unclear. Presumably there will be milestones for measuring such criteria, but these too are undefined. The regulations also do not get into quality measurement, though quality will likely feed success criteria; forthcoming regulations will pick up on the quality topic.

We'll be looking more into the health exchange topic Monday with a special section in the I&T Daily.

Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio