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Final Regulations on Health Insurance Exchanges
Beginning in 2014, individuals and small businesses will be able to purchase private health insurance through statebased competitive marketplaces, known as Affordable Health Insurance Exchanges (Exchanges). The ACA
requires the Exchanges to become operational in 2014, with enrollment beginning Oct. 1, 2013.
On March 12, 2012, the Department of Health and Human Services (HHS) released a final rule on the Exchanges.
The final rule combines policies from two separate Notices of Proposed Rulemaking (NPRMs) published in summer
2011, and sets forth minimum standards for:

States that elect to establish and operate an Exchange, including standards related to individual and employer
eligibility for and enrollment in the Exchange and insurance affordability programs;

Health insurance issuers to participate in an Exchange and offer qualified health plans (QHPs); and

Employers to participate in the Small Business Health Options Program (SHOP).
In addition, on Aug. 30, 2013, HHS published a separate final rule on the Exchanges. This rule, which generally
finalizes provisions in proposed rules without significant changes, outlines Exchange standards with respect to
eligibility appeals, privacy and security, agents and brokers, issuer direct enrollment and the handling of consumer
cases. It also sets forth standards with respect to a State's operation of the Exchange and Small Business Health
Options Program (SHOP). The final rule takes effect on Sept. 30, 2013.
EXCHANGE OPTIONS AND APPROVAL OF STATE EXCHANGE PLANS
States have a few options available to them with respect to the establishment of their Exchanges.
State Options
for Exchange

Create and operate its own Exchange (state-based Exchange)

Have HHS operate the federally-facilitated Exchange (FFE) for its
residents

Partner with HHS so that the state is involved with the operation of
the FFE
As a default, HHS will operate the FFE in any state that does not establish a state-based Exchange or elect a
partnership Exchange.
Also, each Exchange will have an individual market component and a component for small employers, which is called
the Small Business Health Options Program (SHOP). The August final rule allows a state that has received conditional
approval for its state-based Exchange for 2014 to operate a state-based SHOP and let the federal government run the
individual market Exchange as an FFE. Due to implementation time constraints, this option is unavailable for the 2014
plan year to states that have not received conditional approval for a state-based Exchange for 2014. For the 2015
plan year and beyond, HHS will consider new applications from states proposing to operate only the SHOP.
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Final Regulations on Health Insurance Exchanges
To operate a state-based Exchange for 2014, a state was required to submit a blueprint application and declaration
letter to HHS by Dec. 14, 2012 for approval. States establishing a partnership Exchange had until Feb. 15, 2013 to
submit a blueprint application and declaration letter for 2014. A state may transition between Exchange models each
year.
ACA provides that a state’s plan to operate an Exchange must be approved by HHS no later than Jan. 1, 2013.
However, the final rules allow for conditional approval if the state is advanced in its preparation but cannot
demonstrate complete readiness by Jan. 1, 2013. The rules also allow states that are not ready for 2014 to apply to
operate the Exchange for 2015 or any subsequent year.
EXCHANGE FUNCTIONS AND ROLES
Exchanges will perform a variety of functions, including:

Certifying health plans as QHPs to be offered in the Exchange;

Consumer assistance, including operating a website to facilitate comparisons among QHPs for consumers,
operating a toll-free hotline for consumer support, providing grant funding to entities called “Navigators” for
consumer assistance and conducting outreach and education to consumers regarding Exchanges;

Determining consumer eligibility for enrollment in QHPs and for insurance affordability programs (premium tax
credits, Medicaid, CHIP and the Basic Health Plan); and

Facilitating enrollment in QHPs.
HHS intends to give states substantial discretion in designing and operating their Exchanges. Standardization between
states is provided where ACA requires or where there are compelling practical, efficiency or consumer protection
reasons. The August final rule provides that HHS will monitor any individual or entity who would be subject to the
privacy and security requirements as established and implemented by an Exchange. Exchanges will also be required
to establish accountability standards that would include the development and implementation of policies and
procedures, including incident handling and breach notification procedures.
The final rules allow states that set up their own Exchanges to have flexibility in a number of areas. For example,
states will be able to decide whether their Exchange should be operated by a non-profit organization or a public
agency, how to select plans to participate and whether to collaborate with HHS with respect to certain functions.
In addition, a state can choose to operate its Exchange in partnership with other states through a regional Exchange
or it can operate multiple Exchanges that cover distinct areas within the state.
The August final rule establishes program integrity standards for state-based Exchanges. These standards address
oversight of state-based Exchanges through monitoring, reporting and oversight of financial and Exchange activities.
These mechanisms are intended to ensure that consumers are properly given their choices of coverage available, that
consumers correctly receive advance payments of the premium tax credit or cost-sharing reductions if they qualify
and that Exchanges are meeting ACA’s standards in a transparent manner.
Navigator Program
The March final rule also provides standards for Exchanges to build partnerships with, and award grants to, entities
known as Navigators. Navigators will work with employers, employees, consumers and self-employed individuals to:

Conduct public education activities to raise awareness about QHPs;

Distribute fair and impartial information about enrollment in QHPs, premium tax credits and cost-sharing
reductions;

Assist consumers in selecting QHPs;
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
Design © 2012 Zywave, Inc. All rights reserved.
3/12; BK 8/13
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Final Regulations on Health Insurance Exchanges

Provide referrals to an applicable consumer assistance program or ombudsman in the case of grievances,
complaints or questions regarding health plans or coverage; and

Provide information in a manner that is culturally and linguistically appropriate.
Navigators will not make eligibility decisions or select QHPs for consumers. Instead, Navigators will help consumers
through the enrollment process. The final rules direct states to choose at least two Navigator organizations, one of
which must be a community- or consumer-focused non-profit organization.
In addition, Navigators must comply with conflict of interest standards. These standards prohibit a Navigator from
receiving any kind of compensation from a health insurance or stop loss insurance issuer for enrolling individuals in
health insurance plans. This prohibition applies to both plans offered through an Exchange and plans offered outside
of an Exchange. However, Navigators who sell other lines of insurance that are not health or stop loss insurance would
not be prohibited from receiving consideration from the sale of those other lines of insurance while serving as
Navigators, so long as they disclose this to consumers.
Exchanges will award grants to Navigators in FFEs and state partnership Exchanges. On April 9, 2013, HHS announced
that this funding is now available. Applications are due by June 7, 2013, and must be submitted electronically.
Brokers and Agents
States have flexibility to determine what role brokers and agents will serve in their Exchanges. Licensed brokers and
agents are eligible to serve as Navigators under the final regulations. However, the responsibilities of a Navigator
differ from the traditional activities of a broker or agent. Also, the conflict of interest standards would preclude brokers
and agents who are serving as Navigators from receiving compensation from an issuer for selling health or stop loss
insurance product. Thus, the Navigator role may not be the best fit for brokers and agents under the Exchanges.
The final regulations give states the option of permitting brokers and agents to enroll individuals and employers in
QHPs offered through the Exchanges. In addition, the regulations permit brokers to assist individuals in applying for
advance premium tax credits and cost-sharing reductions for QHPs. Exchanges may provide information about brokers
and agents directly on their websites for the convenience of consumers seeking insurance through the Exchange.
If an Exchange works with brokers or agents, there must be an agreement in place that requires the brokers and
agents to:

Register with the Exchange in advance of enrolling individuals;

Receive training on the range of QHP options and insurance affordability programs; and

Comply with the Exchange’s privacy and security standards.
There is no overall prohibition on agents or brokers not acting as Navigators receiving commissions through an
Exchange. How brokers and agents will be compensated for coverage sold through an Exchange will depend on the
type of Exchange.

In state-based Exchanges, states have the flexibility to determine what role brokers and agents will serve,
including how compensation will be structured.

In the FFE and federally-facilitated SHOPs (FF-SHOPs), the Exchange will not establish a commission schedule
or pay commissions directly to agents or brokers. Instead, agents and brokers will be compensated by
insurers or consumers, consistent with state law. However, HHS has established a standard for broker
compensation. In order for a plan to be certified as a QHP, issuers must pay the same broker compensation
for QHPs in the FFE or FF-SHOP that the issuer pays for similar plans in the outside market.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
Design © 2012 Zywave, Inc. All rights reserved.
3/12; BK 8/13
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Final Regulations on Health Insurance Exchanges
To participate in the FFE or FF-SHOP, agents and brokers must adhere to all state requirements for licensure,
appointment and market conduct and complete applicable Exchange agreements. Additionally, agents and brokers
serving in the individual market FFE must complete online training and security authorization for FFE registration.
Training is strongly encouraged, but not required, for agents and brokers working exclusively in FF-SHOPs. Statebased Exchanges can either adopt the federal standards or develop their own training and certification requirements.
States are permitted to use online brokers and agents for the enrollment process. Online brokers may not provide
financial incentives (such as rebates or giveaways) that could potentially steer individuals to a specific QHP or issuer.
Online brokers must also provide consumers with the ability to withdraw from the process at any time and enroll
directly through an Exchange.
QUALIFIED HEALTH PLANS
Health plans offered through the Exchange must be certified as “qualified health plans” (QHPs). To be certified by the
Exchange, health plans must meet minimum standards that are primarily defined in the law. The final rules give
Exchanges the flexibility to establish additional standards for health plans offered in their Exchanges.
In addition, the August final rule prescribes standards for QHP issuers in FFEs regarding maintenance of records,
compliance reviews and enforcement.
Number and Type of Health Plan Choices
The final rules allow Exchanges to work with health insurers on structuring QHP choices. This could mean that the
Exchange allows any health plan meeting the standards to participate or that the Exchange creates a competitive
process for health plans to gain access to customers on the Exchange.
Standards for Health Plans
The final rules allow Exchanges, working with state insurance departments, to set specific standards to ensure that
each QHP gives consumers access to a variety of providers within a reasonable amount of time. Exchanges will also
establish marketing standards that prohibit discrimination against people with illnesses. It also gives Exchanges
flexibility to set the timeframes in which health issuers need to become accredited for their quality performance.
In addition, the August final rule requires QHP issuers to accept a variety of payment methods, including checks,
cashier’s checks, money orders, electronic fund transfers and prepaid debit cards. Issuers must equally present those
methods together as options for consumers to select so they may utilize their preferred payment method.
Eligibility and Enrollment
The Exchange final rules establish a web-based system through which an individual may apply for and receive a
determination of eligibility for enrollment in a QHP through the Exchange and for insurance affordability programs.
One goal of this system is reducing administration by eliminating the need for individuals to submit information to
multiple programs. The final rules require Exchanges to coordinate with Medicaid, CHIP and the Basic Health Program
when making eligibility determinations.
The Exchanges will use an integrated enrollment system to allow individuals to enroll in health coverage. The final rule
outlines the enrollment process, which will incorporate websites and toll-free call centers, along with other consumer
tools. Exchanges may also decide whether to use the single application that will be made available or design one on
their own that is comparable. The final rules impose high standards for the privacy and security of personal
information during the eligibility and enrollment processes.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
Design © 2012 Zywave, Inc. All rights reserved.
3/12; BK 8/13
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Final Regulations on Health Insurance Exchanges
Enforcement
Under the final rules, QHP issuers who do not comply with FFE standards will be subject to penalties. In certain
circumstances, including where the QHP no longer meets the conditions of the general certification criteria, the QHP
will be decertified and no longer offered through an FFE.
In the case of misconduct in the FFE or substantial non-compliance with Exchange standards applicable to issuers
offering QHPs in the FFE, the final rules allows HHS to impose monetary penalties. Penalties will be assessed per
violation in an amount up to $100 per day for each QHP issuer, for each individual adversely affected by the noncompliance.
However, the August final rule provides transition relief for 2014, where QHP issuers will not be subject to civil
penalties or decertification if they attempt in good faith to comply with Exchange standards. HHS plans to consider
extending this transition relief through 2015.
ENROLLEE SATISFACTION SURVEY
ACA requires HHS to develop an enrollee satisfaction survey that evaluates the level of enrollee satisfaction with each
QHP that is offered through an Exchange, for QHPs that had more than 500 enrollees in the previous year. The survey
will be available to the public and is intended to allow for the easy comparison of enrollee satisfaction levels among
comparable plans in the Exchange.
The final rules set forth a process for approving and overseeing survey vendors to administer the survey on behalf of
QHP issuers in the Exchange.
INDIVIDUAL ELIGIBILITY APPEALS
The final rule provides standards for the eligibility appeals process, including:

Coordination between agencies and appeals entities;

Standards for appeal notices and requests, pended benefits, informal resolution, hearings and appeal
decisions; and

The appellant’s due process and procedural rights.
The final rules set forth a federal appeals process for the individual market Exchanges. Appellants will first undergo a
preliminary case review, known as “informal resolution.” If the appellant is satisfied with the outcome of the informal
resolution, it will be the final decision in the matter. However, the appellant retains the right to a hearing if he or she
is dissatisfied with the outcome of informal resolution.
In addition, under the final rules, state Exchanges have the flexibility to implement their own appeals process, as long
as it meets certain requirements. However, state Exchange appellants in the individual market retain the right to
escalate their appeal to the federal appeal process if they are dissatisfied with the state appeals decision. Like the
federal appeals process, state-based appeals processes may also include an informal resolution process.
EMPLOYER APPEALS IN THE INDIVIDUAL MARKET
ACA requires a separate appeals process to be established for employers that wish to contest an Exchange
determination that the employer does not provide minimum essential coverage (MEC) that meets both minimum value
and affordability standards.
Under the final rules, state Exchanges will have the flexibility to establish a state-based appeals process for employer
appeals. HHS will provide this process if the state does not opt to do so or does not operate a state Exchange.
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
Design © 2012 Zywave, Inc. All rights reserved.
3/12; BK 8/13
5
Final Regulations on Health Insurance Exchanges
SHOP ELIGIBILITY APPEALS
Under the final rules, employer and employee applicants to the SHOP may appeal denials of eligibility to purchase
coverage through the SHOP. The final rules provide standards for this appeals process.
The final rules also specify that any state that operates a SHOP will also operate the SHOP appeals process. HHS will
provide the appeals process for states that do not operate a SHOP.
SMALL BUSINESS HEALTH OPTIONS PROGRAM (SHOP)
ACA directs each state that chooses to operate an Exchange to establish insurance options for small businesses
through a Small Business Health Options Program (SHOP). States that choose to operate an Exchange may merge the
SHOP with the individual market Exchange.
According to HHS, SHOPs will allow small employers to provide their employees with a choice of health plan options
and will give small businesses the same purchasing power as large businesses. Each Exchange will decide how a SHOP
is structured.
Eligible Small Employers
The final rules provide flexibility with regard to the size of small businesses that can participate in SHOP. Until 2016,
states can set the size of the small group market at either 1 to 50 or 1 to 100 employees. In 2016, employers with
between 1 and 100 employees will be allowed to participate in a SHOP. Starting in 2017, states have the option to let
businesses with more than 100 employees buy large group coverage through the SHOP.
Employer Choice Model and Transition Policy
A SHOP must allow employers the option to offer employees all QHPs at a level of coverage chosen by the employer—
bronze, silver, gold or platinum. This is called the “employee choice model.” Under the employee choice model, the
employer chooses a level of coverage and a contribution amount and employees then select any QHP at that level.
In addition, SHOPs may allow a qualified employer to choose one QHP for its employees. HHS has indicated that the
FF-SHOP will give employers the option of offering only a single QHP, as many employers do today, in addition to the
employee choice model. The final rules allow minimum participation rules to be met through coverage in any SHOP
plan, not a single one.
On May, 31, 2013, HHS issued a final rule that will delay implementation of the employee choice model as a
requirement for all SHOPs for one year, until 2015. According to HHS, this approach provides all SHOPs (both
state SHOPs and the FF-SHOP) with additional time to prepare for the employee choice model. Under the transition
approach:

State-run Exchanges: A state-run Exchange’s SHOP may provide the employee choice model for small
employers in 2014, but is not required to provide this model until 2015.

FF Exchanges: The FF-SHOP will not provide the employee choice model for small employers until 2015. For
2014 plan years, the FF-SHOP will assist employers in choosing a single QHP to offer their qualified
employees.
Tax Credit
Starting in 2014, small employers purchasing coverage through SHOP may be eligible for a tax credit of up to 50
percent of their premium payments if they have 25 or fewer employees, pay employees an average annual wage of
less than $50,000, offer all full-time employees coverage and pay at least 50 percent of the premium.
Source: Department of Health and Human Services
This Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
Design © 2012 Zywave, Inc. All rights reserved.
3/12; BK 8/13
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