March 16, 2012
Final Regulations Regarding Insurance Exchanges
~ written by Charlene Bigelow, Employee Benefits, Willis
The U.S. Department of Health and Human Services (HHS) has issued final regulations regarding the state-based insurance exchanges that are to be established under the health care reform law. In their current form, the regulations run over six hundred pages, and detailed review will be needed to fully understand their significance for employers. It appears, however, that the regulations may provide important clues about the potential issues and opportunities that that exchanges present for employers.
The health care reform law provides that each state has the opportunity to establish insurance exchange(s) that provide a competitive, easily accessed marketplace where certain individuals and employers can purchase health insurance coverage. The exchanges are also to determine eligibility for federal financial assistance in connection with health insurance coverage. In the case of a state that will not have an exchange operable by 2014, HHS is required to establish and operate an exchange within that state. The health care reform law sets some requirements for the exchanges, but it also provides broad authority for HHS to establish standards for the exchanges and the coverage offered through them.
Employers’ Interest in Exchanges
Employers have been curious about exactly how the insurance exchanges will operate and how they will affect employer-sponsored health plans. Employers generally have no compliance obligations in connection with the exchanges (although there is a notice requirement that becomes effective in 2013). Rather, employers need to understand the exchanges’ operations for several reasons, including the following:
- For small employers, it may be desirable to qualify as an employer who is eligible to purchase coverage for employees through an exchange
- Some have argued that the availability of individual coverage through the exchanges may provide an opportunity for both small and larger employers to provide health coverage for employees in a way that is more manageable and predictable than current programs
- Others have argued that the exchanges pose a threat to the viability of employer-sponsored health plans
- The pay or play penalties that become effective in 2014 are triggered, in part, by a full-time employee receiving federal assistance to purchase coverage through an exchange, and the exchanges are charged with determining eligibility for assistance
We expect that the final regulations will answer some questions for employers, but are also likely to raise additional questions.
HHS’ New Regulations
According to an HHS fact sheet, the final regulations:
- Set minimum federal standards for the state-based exchanges, including standards related to individual and employer eligibility for, and enrollment in, exchanges and programs providing financial assistance related to health coverage
- Outline minimum standards that health insurance issuers and the plans they offer must meet to participate in an exchange
- Provide basic standards that employers must meet to participate in the Small Business Health Options Program (SHOP)
HS stresses in its materials that the intent of the final rules is to afford each state substantial discretion in the design and operation of an exchange. The regulations require standardization of exchanges, however, when required by the health care reform law or when there are “compelling practical, efficiency or consumer protection reasons.”
Willis’ National Legal & Research Group will be studying the regulations to determine how they are likely to affect employers’ interests and will provide details in a future Willis publication.
The information in this e-mail is not intended to represent legal or tax advice and has been prepared solely for informational purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication.