Federal Health Reform/Exchange Update

Federal Health Reform/Exchange Update
August 2012

There has been a lot of activity since the U.S. Supreme Court ruled the PPACA constitutional in late June. Our Agent/Broker Health Reform Working Group has been busy staying on top of the issue and is doing everything possible to advocate for producer participation in the Exchange. The following is a summary of developments to date:

Illinois Health Benefit Exchange

The Illinois General Assembly passed HB 1555 (PA 97-142) in 2011 which stated Illinois’ “intent” to establish a state-based Health Benefit Exchange (HBE). It stated that the Small Business Health Options (SHOP) exchange would be limited to employers with 50 employees or less until 2017 when the size automatically increases to 100 employees or less. The legislation also created a legislative study committee which met several times to take testimony, but ultimately did not issue any recommendations.

During the 2012 session, negotiations began in earnest on legislation actually creating a HBE board and addressing other issues, including producer issues such as certification, locator and compensation. Although significant progress was made, the negotiations were put on hold until after the Supreme Court decision.

Since the court’s decision, Illinois, like many other states, is too far behind to meet the October 2013 deadline for a state-operated HBE to be ready for open enrollment.

HHS Blueprint for State-Based and State Partnership Exchanges

In Mid-August, the federal Department of Health and Human Services announced during a series of regional forums (Chicago-August 21st) that there would be at least three different options that states could choose from in order to comply with the 1/1/2014 deadline for exchanges to be fully operations. The three options are:

  1. 1.     State-based Exchange – State operates all Exchange activities; however, State may use Federal government services for the following activities:
    -Premium tax credit and cost sharing reduction determination
    -Risk adjustment program
    -Reinsurance program
  2. 2.     State Partnership Exchange – State operates activities for plan management, consumer assistance, or both. State may elect to perform or can use Federal government services for the following activities:
    -Reinsurance program
    -Medicaid and CHIP eligibility: assessment or determination*
  3. 3.     Federally-facilitated Exchange – HHS operates; however, State may elect to perform or can use Federal government services for the following activities:
    -Reinsurance program
    -Medicaid and CHIP eligibility: assessment or determination*

*Coordinates with Medicaid and CHIP Services (CMCS) on decisions and protocols

Exchanges will operate either as a State-based Exchange or a Federally-facilitated Exchange. A State may also operate in partnership with HHS as a State Partnership Exchange, which provides States with the option to administer and operate Exchange activities associated with plan management activities, some consumer-assistance activities, or both. HHS, as the party responsible for Exchange implementation, will provide as much flexibility as possible; however, HHS will need to ratify inherently governmental decisions made by the State Partner.

Illinois has chosen the State Partnership Exchange and the Quinn administration would like to pass legislation as quickly as possible to morph into a State-based Exchange.

This process raises dozens of questions which remain to be answered such as: how will all of the decisions be made (so far behind closed doors); if the Partnership Exchange is up and functioning, won’t most of the precedential decisions have been made; and why would the General Assembly event vote on the issue if they don’t have to (they may well not). The possibility also exists that if the state does not take action to create a state-based exchange then the State-Partnership Exchange defaults to a Federally Facilitated Exchange in which we and other stakeholder at the state level will have no direct input over its operations.

Where state legislation gives our coalition the opportunity for direct input on the creation of an exchange, the State-Partnership process provides much less direct input on the process. The positive news to date is that both HHS and Governor Quinn’s administration have made positive statements regarding producer participation in the Exchange.


There is a great deal of concern regarding the role of “navigators” vis a vis producers in the exchange.

A few facts:

The PPACA mandates state exchanges award grants to navigators who will perform the following roles:

–       Conduct public education activities to raise awareness of the availability of qualified health plans;

–       Distribute fair and impartial information concerning enrollment in qualified health plans, and the availability of premium tax credits and cost-sharing reductions in accordance with federal tax laws;

–       Facilitate enrollment in qualified health plans;

–       Provide referrals to any applicable office of health insurance consumer assistant or health insurance ombudsman, or any other appropriate state agency or agencies, for any enrollee with a grievance, complaint, or question regarding their health plan, coverage or a determination under such plan or coverage; and

–       Provide information in a manner that is culturally and linguistically appropriate.

Navigators will likely be comprised of representatives of trade associations, business associations, and other community-based organizations; they also may be brokers. However, PPACA prohibits navigators from accepting remuneration from an insurer. The Secretary of Health and Human Services (HHS) is charged with establishing standards for navigators.

However, there are dozens of important questions that remain unanswered and our working group has been working hard to raise those questions AND provide the answers.

In August of 2011, our working group, in collaboration with a diverse, minority community-based group located in the South Side of Chicago and South Suburbs, the Crossroads Coalitions, issued a white paper on the topic.

Bottom line from the white paper: Producers should work with individuals and small employers purchasing private insurance coverage in the exchange and navigators should primarily deal with Medicaid eligible populations.

In addition to the “white paper” our working group also submitted written comments on Health Management Associates’ (a paid consultant) report on navigators.

Finally, a letter from HHS Secretary Sebelius responding to a letter from Congressman Adam Kinzinger also addresses the subject and appears to support some of our positions.

A copy of all three documents can be found at http://www.iiaofillinois.org/Government/Federal.html.

The most recent activity regarding the role of navigators took place on August 28th during a hearing of the Governor’s Health Reform Implementation Council in Chicago. The GHRIC is comprised of the director of several state agencies including; Insurance, Public Health, Healthcare & Family Services (Medicaid), Central Management Services (Deputy Director), Aging, Human Services and the Governor’s two top deputies for health reform – Michael Gelder and Cristal Thomas.

Mike Wojcik, Executive V.P., Horton Group and Michelle Thornton, V.P., Thornton-Powell, testified on behalf of coalition regarding the role of navigators. Although we were allotted only five minutes to testify, Mike and Michelle spent almost an hour in a very informative exchange with the directors and Governor’s staff. It continues to amaze me, with a few exceptions, the complete lack of knowledge that many of these individuals have for what agents and brokers do for their clients.

Federal Grants to Date

Illinois has received three grant awards to develop a Health Benefit Exchange to date. This includes one planning grant in the amount of $1,000,000 and two Level-One Establishment Grants $5,128,454 and $32,789,377.

The last grant is intended to be used for the technology party of the exchange and an RFP was recently sent out. Nearly 40 companies, including Armonk, NY-based IMB and Redwood Shores, CA-based Oracle Corp., sent representatives to a pre-bid conference for the Illinois Health Insurance Exchange. The Quinn administration is looking for a company to set up and run the technology portion of the statewide exchange.  As mentioned above, Illinois’ exchange will be operated jointly by the state and the federal government, at least its first year, starting Jan. 1, 2014. Representatives from 39 companies attended the August 15 meeting, according to the Illinois Department of Central Management Services. Other companies at the meeting included the consulting arm of Deloitte LLP, the IT sourcing unit of Norwalk, CT-based Xerox Corp. and Ann Arbor, MI-based Truven Health Analytics Inc., formerly the health care business of Thomson Reuters Corp. until a $1.25 billion buyout by a private-equity firm. The due date for proposals has been extended to Sept. 6th.

No one has disclosed how the state is working with the federal government on this RFP and how it coordinates with a state-federal partnership.