Affordable Insurance Exchanges: Seamless Access to Affordable Coverage – Overview

On August 12, 2011, the Departments of Health and Human Services and Treasury took the next step to establishing Affordable Insurance Exchanges – state-based competitive marketplace where individuals and small businesses will be able to purchase affordable private health insurance and have the same insurance choices as Members of Congress. States are already working to establish Exchanges.  Already, over half of all states have taken actions to build an Exchange. Today, the Departments:

  • Awarded $185 million to 13 states and the District of Columbia to help them build Affordable Insurance Exchanges.
  • Issued three proposed rules that will provide consumers with access to affordable health coverage. In the weeks ahead, the Departments will conduct an aggressive outreach campaign to take public comment on these rules and the Departments expect to modify these proposals based on the feedback they receive.
  • Sent a letter to Governors outlining the options and resources for states to work with HHS to set up Exchanges while making more efficient use of shared resources.

The Benefits of Exchanges

Exchanges offer Americans choice and clout through competition among insurance companies:

  • Insurance companies will compete for business on a level playing field.
  • Individual consumers and small businesses will be able to easily compare qualified health plans to chose the plan that is right for them.
  • Small business owners will be able to offer their employees health insurance that meets their needs, and some will be eligible for a tax credit for coverage purchased for employees through the Exchange.

Through the Exchanges, individuals will be able to find out if they are eligible for programs to make insurance more affordable, such as advance payments of the premium tax credit, cost-sharing reductions, or health programs like Medicaid and the Children’s’ Health Insurance Program (CHIP).  Also, the Small Business Health Options Program (SHOP) will provide a new way for small employers to offer their employees choices among health plans, giving small businesses the clout that big businesses already enjoy when purchasing insurance.

Proposed Rules

The U.S. Department of Health and Human Services (HHS) along with the Department of the Treasury released three proposed rules to build on existing momentum toward Exchange development in states. The rules seek to create a path to a simple, seamless and affordable system of coverage:

  • Exchange Eligibility and Employer Standards: An HHS proposed rule details the standards and process for enrolling in qualified health plans and insurance affordability programs.It also outlines basic standards for employer participation in SHOP.
  • Health Insurance Premium Tax Credit: Treasury Department proposed regulations lay out how individuals and families will receive premium tax credits to help defray insurance costs.  The premium tax credits assist millions of middle-class Americans to make it easier for them to purchase affordable health insurance.
  • Medicaid Eligibility: Another HHS proposed rule expands and simplifies Medicaid eligibility and promotes a simple, seamless system of affordable coverage by coordinating Medicaid and CHIP with the new Exchanges.

Together, these proposed rules will offer consumers an easy system to access whether they are eligible for the Exchange, premium tax credits or other insurance affordability programs without the need to submit multiple applications or burdensome paperwork.

These draft proposals complement proposed rules HHS released on July 11, 2011 that would create a framework with significant flexibility to help states set up Exchanges that work for them. These rules build on over a year of work with states, large and small businesses, consumer advocates, and health insurance providers and plans, among others. Administration officials held numerous meetings with stakeholders to develop policy.  Those meetings will continue.

Exchange Eligibility and Employer Standards

The Exchange Eligibility and Employer Standards rule proposes standards and processes for enrolling in qualified health plans and insurance affordability programs through the Exchange that will be:

  • Easy and Fast: The eligibility process will minimize burden on states and individuals by relying on electronic data sources to verify applicant information wherever possible. In most cases, this will allow for a near real-time eligibility process so that individuals can receive an eligibility determination and enroll in a plan in a single session.  Like the banking and travel industries, Exchanges will use standards for information technology to make the system easy for consumers while encouraging innovation and competition.
  • Coordinated: By using the same simplified eligibility rules for premium tax credits, Medicaid and CHIP, individuals can enroll in the program that best fits their needs without unnecessary steps or redundant paperwork.
  • Seamless: The proposed rule simplifies the redetermination process to help enrollees maintain coverage year after year without unnecessary disruptions.

Lastly, this proposed rule describes standards for employer participation in SHOP, which provides a new way for small employers to provide affordable health insurance to their employees.

To learn more about this proposed rule, visit

Health Insurance Premium Tax Credit

In 2014, taxpayers with household incomes between 100 percent and 400 percent of the Federal Poverty Level will be eligible for premium tax credits for coverage purchased through the Exchanges for themselves and members of their family who are not eligible for other health care coverage.  These premium tax credits are paid on an advance basis to the health insurance provider, which will reduce the monthly premiums owed by families to purchase coverage. The Congressional Budget Office estimates that when the Affordable Care Act is fully phased in, individuals receiving premium tax credits will get an average subsidy of over $5,000 per year.

The Treasury Department proposed regulations outline eligibility standards for the premium tax credit and how such tax credits will be calculated. The Exchange will follow these standards in determining eligibility and calculating advance payments of the premium tax credit.  The coverage taxpayers may acquire with the assistance of the premium tax credits will supplement – not supersede – existing employer-sponsored health programs, allowing Americans to keep the coverage they have.

To learn more about this proposed rule, visit

Medicaid Eligibility

Under the Affordable Care Act, Medicaid coverage is extended to adults under the age of 65 earning up to 133 percent of the Federal poverty level.  This proposed rule simplifies eligibility rules to make it easier for individuals and families obtain coverage, including ensuring Medicaid uses the same eligibility standards as other insurance affordability programs available through the Exchange, as directed by law. The proposed rule also outlines how Medicaid and CHIP will coordinate closely with the Exchange, including sharing data to ensure that individuals are determined eligible for the appropriate insurance affordability program regardless of where an application is submitted.

The proposed rule also sets out the increased Federal Medical Assistance Percentage (FMAP) rates that will be available for state medical assistance expenditures relating to “newly eligible” individuals and certain medical assistance expenditures in “expansion states” beginning January 1, 2014, including three proposed alternative methodologies for states to use for purposes of applying the appropriate FMAP for expenditures.

To learn more about this proposed rule, visit

Support for States

HHS also announced the award of over $185 million in establishment grants to 13 states and the District of Columbia to help them build their Exchanges.  The Exchange Establishment grants build on the work underway in states.  In 2010, HHS awarded 49 states and the District of Columbia a total of $50 million to begin planning for the establishment of Exchanges.  States can choose when to apply for grant funding based on their needs and planned expenditures and states will have multiple opportunities to apply for funding.  HHS previously issued establishment grants to three states in May.  To see a detailed list of awardees please visit:

Secretary Sebelius also sent a letter to Governors laying out an innovative partnership opportunity that will allow states to work with the Department of Health and Human Services to set up Exchanges. This letter solicits comments from states and describes how the partnership model could provide states with freedom to innovate and resources to design an Exchange that is right for them. A copy of the letter is available here:

Outreach to Stakeholders

In the weeks ahead, the Departments of Health and Human Services and Treasury will conduct an aggressive outreach campaign and solicit public comment on the three proposed rules from employers, consumers, state leaders, health care providers and insurers, and the American people. In addition to accepting written public comments for the next 75 days, the Departments will hold forums in:

  • Atlanta, GA
  • Chicago, IL
  • Denver, CO
  • New York, NY
  • Portland, OR
  • Sacramento, CA

These forums will help ensure more Americans have the opportunity to share their views regarding the establishment of Affordable Insurance Exchanges.The Departments expect to modify the proposed rules issued today based on the feedback we receive from the American people.

Posted on: August 12, 2011


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