What's the Back-Up Plan for Health Insurance Exchanges?

Nobody knows for sure, as critical deadlines approach.
by | April 25, 2013

Yet another problem has appeared that could stymie the Affordable Care Act’s successful implementation: what if we need a back-up plan to evaluate and certify the health plans that are going to be sold on the law’s online insurance marketplaces?

As it stands now, there isn’t an official one. On and off the record, officials at the U.S. Department of Health and Human Services (HHS) assured Governing that there was a secondary plan, but they declined to provide details. Industry sources say they aren’t aware of any such back-up plan—which concerns many of them—but there are a few theories out there.

Here’s the issue: Somebody has to review and certify the health insurance plans that will be sold on the online marketplaces, formerly known as exchanges, created by the federal health reform law. In the 18 state-run exchanges, the state is responsible for doing that review and certification. In the 13 states that are partnering, openly or silently, with the federal government on their exchange, the state is also responsible. In the 19 states fully defaulting to a federal-run exchange, HHS will oversee this process, known as plan management.

That’s how it’s supposed to work. But in practice, it might not be so straightforward. At least five state-run exchanges—Colorado, Idaho, Kentucky, New Mexico and Rhode Island—have yet to start accepting plan applications. If they have serious problems in the next few months--and it is a real possibility that some of them will--they could potentially have to hand plan management over to the feds. Additionally, any of the partnership states, most of which have some degree of state-level opposition to the ACA, could theoretically drop out of that partnership and leave plan management to HHS.

If that happens, nobody is sure how review and certification will be handled. Most states and HHS are allowing several months for the full application and certification process to be completed. With the marketplaces slated to open on Oct. 1, that doesn’t leave a lot of time if things go awry. The federal government is ending its application period for the federal-run exchanges in the next few weeks. If a state doesn’t figure out until a later date that they can’t do plan management and must give that responsibility to the feds, the administration has no obvious mechanism for asking health insurers to submit their plans to HHS instead.

It’s all theoretical right now. But some insurers are worried that it could become a reality very soon.

“That’s a question we’ve been asking ourselves. Nobody’s heard a word,” says one official at a top insurer, who spoke on the condition of anonymity. “At the end of the day, we're questioning whether HHS is going to be fully ready, and we don't know what that means if they aren’t.”

What’s the worst-case scenario? If responsibility for plan management is shifted from the state to the feds at the last minute, that could possibly delay the exchange’s opening until after Oct. 1, says Caroline Pearson, who tracks ACA implementation for Avalere Health, an independent consulting firm.

That might not have a huge practical effect for those who enroll—coverage being sold on the exchanges starts Jan. 1, 2014, so there is some lag time—but it would be a significant political blow to the Obama administration, which has steadfastly insisted that the marketplaces would launch on time. It could also complicate public outreach if people don’t know when their state’s exchange is actually opening.

“That could slow down enrollment and slow down marketing. It probably reduces overall enrollment,” Pearson says. “I think we've got time before you hit that point, but I’m beginning to get nervous.”

So how does this get resolved? There are a few apparent possibilities, though HHS is staying silent on what their plan is. One rumor, relayed to Governing by a knowledgeable source, is that the feds would ask any insurer planning to sell a plan on any state’s marketplace, including state-run and partnership exchanges, to submit their information to HHS before the federal application period ends in the next few weeks. That way, if the state fails to complete its plan management, the feds already have all the information they need to review and certify the plans themselves.

One insurance industry source said that sounded “plausible,” but hadn’t received any request directly from HHS. Another said they were under the impression that this is a rumor that is floating around the industry, but there were no indications that the feds would actually take that route.

The other possibility involves the two different electronic systems that states and HHS are using to solicit plan information from insurers. The state-run and partnership exchanges are using software called SERFF, which state regulators have used for years to collect information from insurers and review plans. The federal government is using HIOS, which is a separate system but performs essentially the same function.

SERFF and HIOS are capable of transmitting information to one another, one-state level source confirmed to Governing. So, in theory, a state-run or partnership exchange worried about its ability to complete plan management could ask insurers to submit their information to SERFF. Then if the state decides later that it can’t oversee plan management, the information already in the SERFF database could then be moved to HIOS, and HHS could take over.

One insurance industry source said they had heard that this would be HHS’s back-up plan if things go wrong with plan management in some states. HHS declined to confirm that on the record. So until these issues are resolved and open enrollment arrives on Oct. 1, the uncertainty will continue to linger.

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