States get 'substantial flexibility' in running health law exchanges

States will have "substantial flexibility" to operate a key provision of President Obama's healthcare reform law under federal regulations issued Monday.

The long-awaited final rules expand states' ability to craft insurance marketplaces that meet their residents' needs, according to a fact sheet from the Department of Health and Human Services. This includes allowing states to structure their health insurance exchange in a variety of ways — for example, as a nonprofit entity established by the state, as an independent public agency or as part of an existing state agency.

The final rules also offer each state more time to set up its exchange. The law requires states to "demonstrate complete readiness" by Jan. 1, 2013, in order to guarantee they'll be operational 12 months later. If states that don't meet the deadline, a federal exchange will take over.

The final rule, however, allows for "conditional approval" if a state is "advanced in its preparation" by Jan. 1, 2013. In addition, states that aren't deemed ready for 2014 can apply to operate their own exchange in 2015 or any subsequent year.

"HHS may conditionally approve a State-based Exchange upon demonstration that it is likely to be fully operationally ready by October 1, 2013, which provides States with flexibility in meeting Exchange development timelines," the regulation states. "HHS will provide additional details in future guidance."

The new rules, according to HHS, cover:

• The establishment and operation of an Exchange;

• Health insurance plans that participate in an Exchange; 

• Determinations of an individual's eligibility to enroll in Exchange health plans and in insurance affordability programs; 

• Enrollment in health plans through Exchanges; and 

• Employer eligibility for and participation in the Small Business Health Options Program (SHOP).

"These policies give States the flexibility they need to design an Exchange that works for them," HHS Secretary Kathleen Sebelius said in a statement announcing the regulations. "These new marketplaces will offer Americans one-stop shopping for health insurance, where insurers will compete for your business. More competition will drive down costs and Exchanges will give individuals and small businesses the same purchasing power big businesses have today."

HHS has waded through almost 25,000 comments since proposing regulations last August.

Check back with Healthwatch for more details later today.

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