DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop C2-21-15 
Baltimore, Maryland 21244-1850 
 
 
 
 
 
Date
 
Subje: ct December 10, 2012 
 
  :  Frequently Asked Questions on Exchanges, Market Reforms and Medicaid 
 
EXCHANGES & MARKET REFORMS
 
State-Based Exchanges and State P artnership Exchanges
 
1.   Does HHS plan to further extend deadlines for states to  decide on their level of involvement 
in implementing Exchanges?
 
A.     
No. As mentioned in the two letters that Secretary Sebelius sent to governors in November 
2012, states have been and will continue to be partners in implementing the health care law 
  and we are committed to providing states with the flexibility, resources and time they need 
to deliver the benefits of the health care law to the American people. 
In response to various governors requests for additional time, we extended the deadline for 
a Blueprint Application to operate a State-Based Exchange from November 16, 2012 to 
December 14, 2012. If a state is pursuing a State Partnership Exchange, we will accept 
Declaration Letters and Blueprint Applications and make approval determinations for State 
Partnership Exchanges on a rolling basis. A state that plans to operate the Exchange in its 
state in partnership with the federal government starting in 2014 will need to submit its 
  Declaration Letter and Blueprint Application declaring what partnership role they would like 
to have by February 15, 2013. 
 
2.   WhaAt  sfteadteer mala fyu anpdpinlyg a its a anvya tiilmabel teo t rou ans asins tE axc shtaanteg ei nin c fruetautrien gy eaanrds.  maintaining a State- 
Based Exchange? Will a state have to return federal funding if it decides not to implement a 
State-Based Exchange?
 
A.     
By law, states operating Exchanges in 2014 must ensure that their Exchanges are financially 
self-sustaining by January 1, 2015. The costs to states for establishing a State-Based 
Exchange and testing Exchange operations during 2014 may be funded by grants under 
section 1311(a). Additionally, grants under section 1311 may be awarded until December 
31, 2014, for approved establishment activities that fund first year start-up activities (i.e., 
activities in 2014). It is also permissible that under a State Partnership Exchange, a state 
may receive grants for activities to establish and test functions that the state performs in 
support of a Federally-Facilitated Exchange. This applies whether or not a state is a State 
Partnership Exchange. Generally, states will not be required to repay funds, provided funds 
are used for activities approved in the grant and cooperative agreement awards. 
  1  3.   Will HHS charge fees to a state that utilizes federal data in connection with its State-Based
Exchange?
   
A.     
No. HHS is establishing a federally-managed data services hub to support information 
exchanges between states (Exchanges, Medicaid and CHIP agencies) and relevant federal 
agencies. In many cases, federal agencies other than HHS will be providing information 
  through the hub. As stated in previous guidance, no charge will be imposed on states for use 
4.   Whaotf  itsh eth heu abp, nporor vfoarl  tphreo creeqssu ifroerd a d sattaat aec tcheasst ewdo tuhledr eli. ke to participate in a State
Partnership Exchange?
   
A.     
To operate a State Partnership Exchange in 2014, a state must submit a declaration letter, 
complete the relevant portions of the Exchange Blueprint and be approved or conditionally 
approved by HHS for participation in a State Partnership Exchange. State Partnership 
Exchange approval standards mirror State-Based Exchange approval standards for plan 
management and the relevant consumer activities, where applicable, and include standards 
related to sharing data and coordinating processes between the state and a Federally- 
  Facilitated Exchange. States have until February 15, 2013 to submit a declaration and 
FederalBlylu-Feparciinlitt aAtpepdli Ecaxtcihona nfogre approval as a State Partnership Exchange. 
 
5.   How will HHS work with stat e policymakers to make sure that the Federally-Facilitated 
Exchange accounts for the needs of a particular state? How will the Federally-Facilitated 
Exchange for each state ensure that it accurately incorporates state-specific laws and 
procedures into its business processes?
 
A.     
To the greatest extent possible, HHS intends to work with states to preserve the traditional 
responsibilities of state insurance departments when establishing a Federally-Facilitated 
  Exchange for a particular state. Additionally, HHS will seek to harmonize Exchange policy 
with existing state programs and laws wherever possible. 
For example, qualified health plans that will be offered in a Federally-Facilitated Exchange 
must be offered by issuers that meet state licensure and solvency requirements and are in 
good standing in the state (section 1301(a)(1)(C) of the Affordable Care Act; 45 C.F.R. 
section 156.200(b)(4)). In addition, qualified health plans will be subject to requirements 
that apply to all individual and small group market products such as the proposed market 
rules. Accordingly, states continue to maintain an important responsibility with respect to 
  qualified health plans licensed and offered in their states, regardless of whether the 
Exchange is Federally-Facilitated or State-Based. 
HHS is currently working to determine the extent to which activities conducted by state 
insurance departments such as the review of rates and policy forms could be recognized as 
part of the certification of qualified health plans by a Federally-Facilitated Exchange. For 
example, most states currently have an effective rate review program in place and HHS will 
rely on such processes in connection with qualified health plan certification decisions and 
  oversight by a Federally-Facilitated Exchange. HHS will work with regulators in each state 
with a Federally-Facilitated Exchange to identity these efficiencies. 
HHS is working with the National Association of Insurance Commissioners to enable states 
to use the System for Electronic Rate and Form Filing as part of the qualified health plan 
  submission and certification process in a State Partnership Exchange. This will help ensure2     that state and federal regulators are using the same data for their reviews and simplify 
issuer compliance responsibilities. 
  HHS also will collect state-specific Medicaid and CHIP policy data so that the Federally- 
6.   WillF Faecdileitraatelldy -EFxacchialintagtee ids  aEbxlceh taon egvea cluuastteo mMeedr iscuapidp aonrdt  pCeHrIsPo nelnigeilb bileit fya. miliar with state 
rules so that they can advise consumers adequately?
 
A.     
Yes. HHS will operate the Federally-Facilitated and State Partnership Exchange call center 
and website, and personnel will be trained on relevant state insurance laws and Medicaid 
and CHIP eligibility standards so that they can advise consumers. In a state operating in a 
State Partnership Exchange, a state will be responsible for the day-to-day management of 
the Exchange Navigators and the development and management of another separate in- 
person assistance program, and may elect to conduct additional outreach and educational 
activities. The Affordable Care Act directs Navigators to conduct public education to target 
Exchange-eligible populations, assist qualified consumers in a fair and impartial manner 
with the selection of qualified health plans and distribute information on tax credits and 
cost-sharing reductions, and refer consumers to any consumer assistance or ombudsman 
  programs that may exist in the state. Navigators must provide this information in a manner 
7.   Whatht arte isst rciuclttiuornasll wy ailnl dth leinrgeu biset iocna laly s atappter orpegriualtaet aonrd's a acucethssoirbiltey  btoy  penerfosorcnes  swtiatthe d liaswabsi wlithieesn.  
consumers purchase coverage through a Federally-Facilitated Exchange? Will states 
retain their ability to protect consumers?
 
A.     
States have significant experience and the lead role in insurance regulation, oversight, and 
enforcement. We will seek to capitalize on existing state policies, capabilities, and 
infrastructure that can also assist in implementing some of the components of a Federally- 
  Facilitated Exchange. We also encourage states interested in improving this alignment to 
apply to conduct plan management through a State Partnership Exchange. 
A Federally-Facilitated Exchanges role and authority are limited to the certification and 
management of participating qualified health plans. Its role and authority do not extend 
beyond the Exchange or affect otherwise applicable state law governing which health 
insurance products may be sold in the individual and small group markets. Several qualified 
health plans certification standards rely on reviews that some state departments of 
insurance may not currently conduct. Therefore, HHS will evaluate each potential qualified 
health plan against applicable certification standards either by deferring to the outcome of a 
states review (e.g., in the case of licensure) or by performing a review necessary to verify 
compliance with qualified health plan certification standards. Federally-Facilitated 
  Exchanges will consider completed state work to support this evaluation to the extent 
8.   Howp owsisllib tlhee.  Federally-Facilitated Exchange be funded?
 
A.     
To fund the operation of the Federally-Facilitated Exchange, we proposed for comment in 
the draft Payment Notice that participating issuers pay a monthly user fee to support the 
operation of the Federally-Facilitated Exchange. For the 2014 benefit year, we proposed a 
monthly user fee rate that is aligned with rates charged by State-Based Exchanges. While 
we proposed that this rate be 3.5 percent of premium, it may be adjusted in the final 
Payment Notice to take into account State-Based Exchange rates. Exchange user fees will 
  support activities such as the consumer outreach, information and assistance activities tha3t   health plans currently pay themselves. This policy does not affect the ability of a state to use 
grants described in section 1311 of the Affordable Care Act to develop functions that a state 
  elects to operate under a State Partnership Exchange and to support state activities to build 
9.   If a isntatetref accheoso wseitsh t oa  pFerdoevridaell ys-oFmacei lsiteartveidc eEsx tcoh aan Fgeed. erally-Facilitated Exchange, will the 
state be reimbursed for its costs?
 
A.     
Yes in certain circumstances. HHS expects that states supporting the development of a 
  Federally-Facilitated Exchange may choose to seek section 1311(a) Exchange Establishment 
co operative agreement funding for activities including, but not limited to: 
 
  Developing data system interfaces with the Federally-Facilitated Exchange; 
  Coordinating the transfer of plan information (e.g., licensure and solvency) from the 
  state insurance department to the Federally-Facilitated Exchange; and 
  Other activities necessary to support (and related to the establishment of) the effective 
operations of a Federally-Facilitated Exchange. 
After section 1311(a) funds are no longer available, HHS anticipates continued funding, 
under a different funding vehicle, for state activities performed on behalf of the Federally- 
Facilitated Exchange. To the extent permissible under applicable law, HHS intends to make 
  tools and other resources used by the Federally-Facilitated Exchange available to state 
Marketp Iasrstuneesrs in State Partnership Exchanges, as well as to State-Based Exchanges. 
 
10. How are Ex changes going to increase insurance market competition based on quality and 
cost? Some markets may be starting off from a position of having few local issuers.
 
A.     
The introduction of Exchanges and the insurance market rules in 2014 will help promote 
competition based on quality and cost since consumers will have an unprecedented ability to 
compare similar products from different issuers and will be assured the right to purchase 
these products, regardless of their health condition. Further, consumers in many states will 
have new options such as the ability to purchase coverage from the Consumer Operated and 
Oriented Plans and Multi-State Plans created under the Affordable Care Act. Additionally, 
  Exchanges can leverage market forces to drive further transformation in health care 
delivery. 
We anticipate that the number of individuals who will be eligible for advance payments of 
premium tax credits and cost-sharing reductions  which are only available in connection 
with qualified health plan coverage purchased through an Exchange  will attract issuers to 
Exchanges where the certification process will encourage and reward high quality 
affordable insurance offerings. In addition, HHS is developing a Star Ratings system for 
  qualified health plans purchased in an Exchange pursuant to section 1311(c)(3) of the 
11. WheAnff woridlla wblee  hCaavree  fAincta. l rules on essential health benefits, actuarial value, and rating?
 
A.     
The proposed rules on essential health benefits and actuarial value and the market reforms, 
including rating, were published on November 20, 2012. Public comments are due by 
  4  December 26, 2012. On November 20, 2012, we also issued a state Medicaid directors letter 
on how we will propose essential health benefits be implemented in Medicaid. HHS will 
  analyze the comments, adjust any policies accordingly, and publish final rules early next 
12. Whayte alerv. el of benefit is required in a specific benchmark to satisfy the ten essential health 
benefit categories? What process will be undertaken by HHS to select backfilling benefit 
options if a state defaults to the largest small group product?
 
A.     
In section 156.100 of the proposed rule on Essential Health Benefits/Actuarial 
Value/Accreditation, we propose criteria for the selection process for a state that chooses to 
select a benchmark plan. The essential health benefits benchmark plan would serve as a 
reference plan, reflecting both the scope of services and limits offered by a typical employer 
plan in that state. This approach and benchmark selection, which would apply for at least 
the 2014 and 2015 benefit years, would allow states to build on coverage that is already 
widely available, minimize market disruption, and provide consumers with familiar 
products. Since some base-benchmark plan options may not cover all ten of the statutorily 
  required essential health benefits categories, we propose standards for supplementing a 
base-benchmark plan that does not provide coverage of one or more of the categories. 
We also propose that if a base-benchmark plan option does not cover any items and 
services within an essential health benefits category, the base-benchmark plan must be 
supplemented by adding that particular category in its entirety from another base- 
benchmark plan option. The resulting plan, which would reflect a base-benchmark that 
covers all ten essential health benefits categories, must meet standards for non- 
  discrimination and balance. After meeting these standards, it would be considered the 
essential health benefits-benchmark plan. 
The proposed rule also outlines the process by which HHS would supplement a default 
base-benchmark plan, if necessary. We clarify that to the extent that the default base- 
benchmark plan option does not cover any items and services within an essential health 
benefits category, the category must be added by supplementing the base-benchmark plan 
with that particular category in its entirety from another base-benchmark plan option. 
Specifically, we propose that HHS would supplement the category of benefits in the default 
base benchmark plan with the first of the following options that offer benefits in that 
particular essential health benefits category: (1) the largest plan by enrollment in the 
second largest product in the states small group market; (2) the largest plan by enrollment 
in the third largest product in the states small group market; (3) the largest national 
Federal Employees Health Benefit Program plan by enrollment across states that is offered 
to federal employees; (4) the largest dental plan under the Federal Employees Dental and 
Vision Insurance Program, for pediatric oral care benefits; (5) the largest vision plan under 
  the Federal Employees Dental and Vision Insurance Program, for pediatric vision care 
Multi-Stbaetnee Pfiltas;n asnd (6) habilitative services as described in section 156.110(f) or 156.115(a)(4). 
 
13. The Office of P ersonnel Management is required to certify Multi-State Plans that must be 
included in every Exchange. How will you ensure that Multi-State Plans compete on a level 
playing field and are compliant with state laws?
 
A.     
The U.S. Office of Personal Management released a proposed rule implementing the  Multi- 
State Plan Program on November 30, 2012. To ensure that the Multi-State Plans are 
  competing on a level playing field with other plans in the marketplace, the proposed  5  regulation largely defers to state insurance law and the standards promulgated by HHS and 
states related to qualified health plans. Under the proposal, Multi-State Plans will be 
evaluated based largely on the same criteria as other qualified health plans operating in 
Exchanges. The few areas in which the Office of Personal Management proposes different 
regulatory standards from those applicable to qualified health plans are areas where the 
Office of Personal Management has extensive experience through its administration of the 
Federal Employees Health Benefits Program. However, in order to ensure that these few 
differences will not create any unfair advantages, the Office of Personal Management seeks 
comment from states and other stakeholders on these proposals. The regulation appeared 
  in the Federal Register on December 5, 2012, and the comment period runs through January 
Bridge 4P,l a2n013. 
 
14. Can a sta te-based Exchange certify a Medicaid bridge plan as a qualified health plan?
 
A.     
Yes. HHS has received questions about whether a state could allow an issuer that contracts 
with a state Medicaid agency as a Medicaid managed care organization to offer qualified 
health plans in the Exchange on a limited-enrollment basis to certain populations. This type 
of limited offering would permit the qualified health plan to serve as a bridge plan 
between Medicaid/CHIP coverage and private insurance. This would allow individuals 
transitioning from Medicaid or CHIP coverage to the Exchange to stay with the same issuer 
and provider network, and for family members to be covered by a single issuer with the 
  same provider network. This approach is intended to promote continuity of coverage 
between Medicaid or CHIP and the Exchange. 
In general, an Exchange may allow an issuer with a state Medicaid managed care 
  organization contract to offer a qualified health plan as a Medicaid bridge plan under the 
fo lloTwhien sgt ateterm msu: st ensure that the health insurance issuer complies with applicable laws, and 
in particular with section 2702 of the Public Health Service Act. 
Consistent with section 
2702(c) of the Public Health Service Act, a health plan whose provider network reaches 
capacity may deny new enrollment generally while continuing to permit limited 
enrollment of certain individuals in order to fulfill obligations to existing group contract 
holders and enrollees. Therefore, if the issuer demonstrates that the provider network 
serving the Medicaid managed care organization and bridge plan has sufficient capacity 
only to provide adequate services to bridge plan eligible individuals and existing 
Medicaid and/or CHIP eligible enrollees, the bridge plan could generally be closed to 
other new enrollment. However, in order to permit additional enrollment to be limited 
to bridge plan eligible individuals, the state must ensure there is a legally binding 
contractual obligation in place requiring the Medicaid managed care organization issuer 
to provide such coverage to these individuals. We note that any such contract would 
need to have provisions to prevent cost-shifting from the non-Medicaid/CHIP 
population to the Medicaid/CHIP population. We also note that the guaranteed 
availability provision of section 2702 of the Public Health Service Act is an important 
protection that provides consumer access to the individual and small group markets. 
  Accordingly, we plan to construe narrowly the network capacity exception to the 
  gTehnee Erxacl hgaunagrea nmteuesdt  eisnssuuere r ethqauti rae bmreidngt.e  plan offered by a Medicaid managed care 
organization meets the qualified health plan certification requirements, and that having
 
  6  the Medicaid managed care organization offer the bridge plan is in the interest of 
consumers
 
  As part of c. onsidering whether to certify a bridge plan as a qualified health plan, the 
Exchange must ensure that bridge plan eligible individuals are not disadvantaged in terms 
of the buying power of their advance payments of premium tax credits.
 
  The Exchange must accurately identify bridge plan eligible consumers,  and convey to the 
consumer his or her qualified health plan coverage options.
 
  The Exchange must provide information on bridge plan elig ible individuals to the federal 
government, as it will for any other individuals who are eligible for qualified health plans 
on the Exchange, to support the administration of advance payments of premium tax 
credits. 
  This will be done using the same mechanism that will be in place for the larger 
Exchange population. 
Successful implementation of a Medicaid bridge plan will involve a high degree of 
coordination between the state Medicaid agency, department of insurance and the 
Exchange. States operating State-Based Exchanges will be best positioned to achieve the 
  level of coordination needed to implement and support the offering of a Medicaid bridge 
Pre-Exipstlainng o Cno annd Eitxicohna nIngseu. Aradndicteio Pnlaaln g uaindda nOcteh weril Hl bige his-sRuieskd  sPoooonl.s 
 
15. Does the federal government intend to maintain the Pre-Existin g Condition Insurance Plan 
program beyond 2014? How will state high risk pools be affected by the affordability and 
insurance market reforms in 2014?
 
A.     
Under the Affordable Care Act, coverage for persons under the Pre-Existing Condition 
Insurance Plan program (whether federally-run or state-run in a state) will generally not 
extend beyond January 1, 2014, which is when all individuals will be able to access coverage 
without any pre-existing condition exclusions in the individual market. The transitional 
reinsurance program is expected to help stabilize premiums in the individual market by 
  reimbursing issuers who enroll high cost individuals, such as those currently enrolled in the 
Pre-Existing Condition Insurance Plan, as they enter that market. 
In the notice of proposed rulemaking on the health insurance market rules (77 Fed. Reg. 
70584; November 26, 2012), we noted that we are exploring ways in which states could 
  continue to run their existing high risk pools (i.e., separate from the Pre-Existing Condition 
Basic HIenasluthra Pnlcaen Pool program) beyond 2014. 
 
16. Will HHS issue  federal guidance and regulation regarding implementation of the Basic
Health Plan?
   
A.     
Yes. HHS plans to issue guidance on the Basic Health Plan in the future. States interested in 
this option should continue to talk to HHS about their specific questions related to the 
implementation of the Basic Health Plan. 
  7  CONSUMERS 
Consumer Outreach
17. How does HHS pla  n to conduct outreach about the Exchanges and new coverage options?
Will outreach materials be tailored to each state? Will states be able to provide HHS with 
input in developing materials?  
 
A.     
Education and outreach are high priorities for implementing the changes coming in 2014. 
HHS plans to conduct outreach to consumers in a variety of ways, including the Navigator 
  program, in-person assistance, the internet, and call centers. States and other stakeholders 
18. Howd edfoineist eHlHy Sw pillla bne  taob olep teor aptreo vthidee N inapvuigt ainto dre pvreologprianmg  iftosr o tuhtere Faecdhe arpapllryo-aFcahc itloit caotnesdu mers. 
Exchanges? How many and what types of Navigators will there be in a particular state? 
What will their roles be? Can states require Navigators to hold a producer license? If not, 
what type of training or certification will they receive?
 
A.     
Section 1311(i) of the Affordable Care Act directs an Exchange  whether a State-Based 
Exchange or a Federally-Facilitated Exchange  to establish a program under which it 
awards grants to Navigators. Section 1311(i) and 45 C.F.R. section 155.210 articulate the 
required duties of a Navigator. In addition, section 155.210(c)(2) directs that the Exchange 
select two different types of entities as Navigators, one of which must be a community and 
  consumer-focused non-profit group. This program is further described in the General 
Guidance on Federally-facilitated Exchanges. 
The number of Navigators per state served by a Federally-Facilitated Exchange will be 
contingent upon the total amount of funding available as well as the number of applications 
that we receive in each state in response to the forthcoming Navigator Grant Funding 
  Opportunity Announcement that we plan to issue early next year to support the Federally- 
Facilitated Exchanges. 
Additionally, a state or Exchange cannot require Navigators to hold a producer license (i.e., 
a license as an agent or broker) for the purpose of carrying out any of the duties required of 
Navigators in section 1311(i)(3) of the Affordable Care Act and 45 C.F.R. section 155.210(e). 
Because the law directs Navigators to carry out all required duties, linking a producer 
license to any one of those specific duties would have the effect of requiring all Navigator 
entities, their employees, and their sub-grantees to hold a producer license. As described 
above, this would prevent the application of the standard set forth in 45 C.F.R. section 
155.210(c)(2) that at least two different types of entities must serve as Navigators. As such, 
and as provided by section 1321(d) of the Affordable Care Act, any state laws which would 
  require all Navigators to hold a producer license would be preempted by 45 C.F.R. section 
155.210(c)(2). 
In Federally-Facilitated Exchanges and State Partnership Exchanges, individuals selected to 
receive Navigator grants or working for entities selected to receive Navigator grants must 
successfully participate in an HHS-developed and administered training program, which 
will include a certification examination pursuant to 45 C.F.R. section 155.210(b). In 
addition, under state law, states may impose Navigator-specific licensing or certification 
requirements upon individuals and entities seeking to operate as Navigators, so long as 
such licenses or certifications are not preempted by the requirement to award to different 
types of entities identified in 45 C.F.R. section 155.210(c)(2), such as producer licenses. 
  8  19. What does HHS expect that states in a State Partnership Exchange must do to fulfill their 
obligations regarding in-person consumer assistance? How will the state-specific in-person 
consumer assistance programs be integrated with the Navigator program?
 
A.     
In-person assistance programs are an additional mechanism through which Exchanges may 
meet the consumer assistance responsibilities of the Exchange under 45 C.F.R. section 
155.205(d) and (e). As described in the Federally-facilitated Exchange Guidance, states 
operating under a State Partnership Exchange will build and operate an in-person 
assistance program, for which grant funding is available under section 1311 of the 
Affordable Care Act, distinct from the Navigator program for that Exchange. State-Based 
Exchanges may do so as well. The purpose of providing multiple tools for in-person 
  assistance is to ensure that all consumers can receive help when accessing health insurance 
Consumceorv eErlaiggieb tihlirtoyu agnhd a nE nErxoclhlamnegne.t 
 
20. What information will consumers  provide in the single streamlined application? What is 
the process/timeline for the approval of a state-specific single streamlined application?
 
A.     
Section 1413 of the Affordable Care Act directs HHS to develop a single, streamlined 
application that will be used to apply for coverage through qualified health plans, Medicaid 
and CHIP. In addition, it can be used by persons seeking the advance payment of premium 
tax credits and cost sharing reductions available for qualified health plans through the 
Exchange. In consultation with states and other stakeholders, and with the benefit of 
extensive consumer testing, HHS has been developing an on-line and paper version of the 
  single, streamlined application. We are releasing information on a rolling basis both to seek 
public comment and to support states in their eligibility system builds. 
In July 2012, HHS published a notice in the Federal Register outlining the initial data 
elements that will be included in the streamlined application for public comment. HHS 
received over 60 comments from states and other stakeholders that have helped inform our 
  ongoing development work. These comments, coupled with ongoing consumer testing, have 
helped us refine and improve the application. 
Consumer testing and extensive consultation with states and consumer groups continues. 
  HHS expects to provide the final version of the online and paper application in early 2013 
21. Whaatn wd iwlli lclo anlssou mwoerrks  bwei ttho lsdta itfe ist  tahpapt esaeresk  tSheecyr eatraer inalo at peplirgoivbalel  ffoorr t Mheeidr iocwaind ,a CpHplIiPca, otiro n. 
advance payments of premium tax credits?
 
A.     
A qualified individual still will have the option to purchase a qualified health plan through 
the Exchange if he or she is not eligible for Medicaid. CHIP or an advance payment of a 
premium tax credit. As outlined in 45 C.F.R. section 155.310(g), Exchanges will provide 
timely written notice to an applicant of any eligibility determination made by the Exchange. 
45 C.F.R. section 155.230(a) provides further detail on the content of notices, including that 
notices contain contact information for available customer service resources and an 
explanation of appeal rights, if applicable. 
  9  22. How will HHS help Exchanges with the eligibility process for exemptions from the shared 
responsibility payment for individuals?
 
A.     
Section 1311(d)(4)(H) of the Affordable Care Act specifies that the Exchange will issue 
certificates of exemption from the shared responsibility payment described in section 
5000A of the Internal Revenue Code, which otherwise applies to individuals who do not 
maintain minimum essential coverage. In the State Exchange Implementation Questions 
and Answers released on November 29, 2011, we indicated that a State-Based Exchange 
could either conduct this assessment itself or use a federally-managed service for 
exemptions from the shared responsibility payment. We included this option in the 
  Exchange Blueprint. State-Based Exchanges can also choose to conduct this function 
independently. 
With this service, the Exchange will accept an application for an exemption, and then 
transfer the information contained on the application to HHS through a secure, electronic 
transaction. HHS will conduct relevant verifications and return an eligibility determination 
to the Exchange, which will then notify the individual who submitted the application. The 
Exchange and HHS will share responsibility for customer service. To the extent that an 
individuals situation changes during the year, he or she would be required to submit an 
update to the Exchange, which will then transfer it to HHS to process. This configuration 
  limits the level of effort required on the part of the Exchange, while ensuring that the 
Exchange complies with the statutory direction to issue certificates of exemption. 
  HHS will provide additional information regarding exemptions shortly, including technical 
Consumsepre cEifxipcaetriioennsc feor the application and for the application transfer service. 
 
23. How will the Federa lly-Facilitated Exchange display qualified health plan options to 
consumers? Will consumers see all of their options or just those that are best for them? 
Will the Federally-Facilitated Exchange allow individuals who are eligible for Medicaid or 
CHIP to purchase qualified health plans instead?
 
A.     
Consumers will see all qualified health plans, including stand-alone dental plans, certified to 
be offered through the Federally-Facilitated Exchange, offered in their service area. HHS is 
  developing ways for consumers to sort qualified health plan options based on their 
preferences. 
Qualified individuals who are Medicaid or CHIP eligible are allowed to purchase qualified 
health plans instead of receiving coverage through the Medicaid or CHIP programs. 
However, they are not eligible to receive advance payments of premium tax credits or cost- 
  sharing reductions to help with the cost of purchasing qualified health plans through an 
Exchange. 
MEDICAID 
Expansion
 
24. Is there  a deadline for letting the federal government know if a state will be proceeding 
with the Medicaid expansion? How does that relate to the Exchange declaration deadline? 
Is HHS intending to provide guidance to states as to the process by which state plan 
amendments are used to adopt Medicaid expansion under the Affordable Care Act?
    10  A.   
No, there is no deadline by which a state must let the federal government know its intention 
regarding the Medicaid expansion. Nor is there any particular reason for a state to link its 
decision on the Exchange with its decision on the Medicaid expansion. States have a 
number of decision points in designing their Medicaid programs within the broad federal 
  framework set forth in the federal statute and regulations, and the decision regarding the 
coverage expansion for low-income adults is one of those decisions. 
As with all changes to the Medicaid state plan, a state would indicate its intention to adopt 
the new coverage group by submitting a Medicaid state plan amendment. If a state later 
chooses to discontinue coverage for the adult group, it would submit another state plan 
amendment to CMS. The state plan amendment process is itself undergoing modernization. 
As part of an overall effort to streamline business processes between CMS and states, in 
early 2013 CMS will begin implementing an online state plan amendment system to assist 
states in filing state plan amendments. We will be discussing the submission process for 
Affordable Care Act-related state plan amendments on our monthly State Operations and 
  Technical Assistance calls with states and will be available to answer questions through that 
process. 
While states have flexibility to start or stop the expansion, the applicable federal match 
rates for medical assistance provided to newly eligible individuals are tied by law to 
specific calendar years outlined in the statute: states will receive 100 percent support for 
  the newly eligible adults in 2014, 2015, and 2016; 95 percent in 2017, 94 percent in 2018, 
25. If a 9s3ta ptee raccecnetp ints 2 t0h1e9 e;x apnadn 9s0io pne, rccaenn ta b syt a2t0e2 l0a,t reerm darionpin ogu at to tfh tahte l eevxepla tnhseiroena fpterro. gram?
 
A.     
  Yes. A state may choose whether and when to expand, and, if a state covers the expansion 
26. Cang ar osutapt, eit e mxpaay ndde ctiod lee lsast ethr aton  d1r3o3p% th oef c FoPvLer aangde.  still receive 100% federal matching 
funds?
 
A.     
No. Congress directed that the enhanced matching rate be used to expand coverage to 
133% of FPL.  The law does not provide for a phased-in or partial expansion. As such, we 
will not consider partial expansions for populations eligible for the 100 percent matching 
rate in 2014 through 2016.  If a state that declines to expand coverage to 133% of FPL 
would like to propose a demonstration that includes a partial expansion, we would consider 
such a proposal to the extent that it furthers the purposes of the program, subject to the 
regular federal matching rate. For the newly eligible adults, states will have flexibility 
under the statute to provide benefits benchmarked to commercial plans and they can design 
  different benefit packages for different populations. We also intend to propose further 
changes related to cost sharing. 
In 2017, when the 100% federal funding is slightly reduced, further demonstration 
opportunities will become available to states under State Innovation Waivers with respect 
to the Exchanges, and the law contemplates that such demonstrations may be coupled with 
section 1115 Medicaid demonstrations. This demonstration authority offers states 
significant flexibility while ensuring the same level of coverage, affordability, and 
comprehensive coverage at no additional costs for the federal government.  We will 
consider section 1115 Medicaid demonstrations, with the enhanced federal matching rates, 
in the context of these overall system demonstrations. 
  11  27. Do you still support the Medicaid blended FMAP (matching rate) proposal in your budget?
 
A.     
No. We continue to seek efficiencies and identify opportunities to reduce waste, fraud and 
abuse in Medicaid, and we want to work with Congress, states, and stakeholders to achieve 
those goals while expanding access to affordable health care.  The Supreme Court decision 
has made the higher matching rates available in the Affordable Care Act for the new groups 
covered even more important to incentivize states to expand Medicaid coverage.  The 
  Administration is focused on implementing the Affordable Care Act and providing 
28. Howa sdsoisetsa tnhcee  Stou pstraetmese i nC othueritr r euflfionrgts a tfofe ecxtp tahned i nMteedraiccatiido nco bveetrwageee nto t hthee Esexc nheawn ggeros uapnsd.  
Medicaid? Will a states decision whether or not to proceed with the Medicaid expansion 
have implications for the Exchanges ability to make Medicaid eligibility determinations?
 
A.     
As the letter from Secretary Sebelius to Governors sent on July 10, 2012 and the letter from 
the CMS Acting Administrator Marilyn Tavenner sent on July 13, 2012 stated, the Supreme 
Courts decision affects the financial penalty that applies to a state that does not expand 
Medicaid coverage to 133% of the federal poverty level under the Affordable Care Act. No 
other provisions of the law were affected. Thus regardless of whether a state adopts the 
Medicaid expansion, the provisions related to coordination with the Exchange, including the 
use of standard income eligibility methods, apply. An Exchange in each state will make 
either a Medicaid eligibility determination or a Medicaid eligibility assessment (at the 
  states option) based on the Medicaid rules in the state, including the income levels at which 
29. Whatht eh estlapt wesil Ml beed aicvaaidil apbroleg rtaom st partoesv itdoe as cccoovmermagoed. ate the added administrative burdens 
and costs they will have to bear if they expand coverage in Medicaid?
 
A.     
We have provided 90 percent federal matching funds for the new or improved eligibility 
systems that states are developing to accommodate the new modified adjusted gross 
income rules and to coordinate coverage with the Exchange. To further reduce system 
costs, we have promoted ways for states to share elements of their system builds with each 
other, and we will be sharing the business rules for adopting modified adjusted gross 
income in the new eligibility systems. In addition we are designing, with extensive state 
and stakeholder consultation, a new combined and streamlined application that states can 
adopt (or modify subject to Secretarial approval). And, we will continue exploring 
opportunities to provide States additional support for the administrative costs of eligibility 
  changes. These and other initiatives relating to state systems development will lower 
administrative costs. 
Implementation of the on-line application system, the new data-based eligibility rules, 
verification and renewal procedures and states access to the federally-managed data 
services hub (the hub) will collectively help defray states ongoing costs and result in 
greater efficiency in the long term. For example, states will be able to electronically verify 
eligibility factors through the hub, where previously they had to verify through multiple 
federal venues. This is expected to lower the per-person administrative costs of enrollment 
and renewal for both newly and currently eligible individuals. As stated in previous 
guidance, no charge will be imposed on states for use of the hub, nor for the required data 
accessed there. In addition, it is anticipated that many individualsboth those who are 
eligible under current state eligibility rules as well as those who are eligible under the adult 
expansionwill apply for coverage via the Exchange. Our rules provide states the option to 
have the Exchange determine eligibility for Medicaid or to assess eligibility for Medicaid, in 
  both cases using the states eligibility rules and subject to certain standards. No charge wil1l 2    be imposed on states for the Medicaid determinations or assessments conducted by the 
30. CMSE hxachs arnegleeas.s ed 90/10 funding in order for states to improve their eligibility systems for
Medicaid. Will that funding continue?
   
A.     
Yes. 90/10 funding remains available through December 31, 2015 for Medicaid eligibility 
system design and development, and the enhanced 75 percent matching rate will be 
  available indefinitely for maintenance and operations of such systems as long as the 
systems meet applicable program requirements. 
In previous guidance, we have assured states that the 90/10 and 75/25 percent funding for 
eligibility systems will be available without regard to whether a state decides to expand its 
program to cover newly eligible low-income adults. We reiterate that system 
modernization will be supported and the enhanced matching funds will be available 
regardless of a states decision on expansion. Additionally, we will continue exploring 
  opportunities to provide States additional support for the administrative costs of eligibility 
31. Willc lhoawn-giensc. ome residents in states that do not expand Medicaid to 133 percent of the FPL 
be eligible for cost sharing subsidies and tax credits to purchase coverage through an 
Exchange?
 
A.     
Yes, in part. Individuals with incomes above 100 percent of the federal poverty level who 
are not eligible for Medicaid, the Childrens Health Insurance Program (CHIP) or other 
minimum essential coverage will be eligible for premium tax credits and cost sharing 
  reductions, assuming they also meet other requirements to purchase coverage in the 
32. CanE sxtcahteasn gthesa.t  are expansion states under the law receive newly eligible matching rate 
for some populations in their state?
 
A.     
Yes. The expansion state Federal Medical Assistance Percentage, or matching rate, 
described in section 1905(z)(2) of the Social Security Act is available to some states that 
expanded Medicaid coverage prior to enactment of the Affordable Care Act, but does not 
exclude those states from receiving the increased newly eligible match for expenditures for 
beneficiaries who meet the statutory qualifications. If a population covered by a state that 
qualifies as an expansion state meets the criteria for the newly eligible matching rate, the 
state will receive the newly eligible matching rate for that population. States will receive 
  the highest matching rate possible for a given population; being an expansion state will 
never disadvantage the state in terms of matching rates for that population. 
The f ollowing are several examples of circumstances in which an expansion state will 
receive the newly eligible matching rate for some beneficiaries: 
States are considered expansion states if, as of March 23, 2010, they provided 
coverage that meets the standards specified in section 1905(z)(3) of the Act to both 
childless adults and parents up to at least 100 percent of the federal poverty level.  If 
a state provided Medicaid coverage up to 100 percent of the federal poverty level 
  but not above, expenditures for individuals between 100 and 133 percent of the 
federal poverty level would qualify for the newly eligible matching rate. 
States that qualify as expansion states may have offered less than full benefits, 
benchmark benefits, or benchmark-equivalent benefits.  Individuals who received 
  13    limited benefits under a Medicaid expansion will qualify as newly eligible 
individuals and the newly eligible matching rate will apply. 
States that qualify as expansion states based on the provision of state-funded 
  coverage will receive the newly eligible matching rate for people previously covered 
by the state-only program, since they will be newly eligible for Medicaid coverage. 
The expansion state matching rate is only available for expenditures for non-pregnant, 
childless adult populations described in the new low-income adult group.  CMS will work 
  with states to ensure that the correct matching rate is applied to expenditures for 
Flexibilpitoyp fuolar tSiotantse isn expansion states that qualify as newly eligible. 
 
33. What specific pla ns and timeline do you have for enacting the reforms and flexibility 
options for Medicaid that you spoke of in 2009? When can states give further input on the 
needed reforms?
 
A.     
CMS continues to work closely with states to provide options and tools that make it easier 
for states to make changes in their Medicaid programs to improve care and lower costs. In 
the last six months, we have released guidance giving states flexibility in structuring 
payments to better incentivize higher-quality and lower-cost care, provided enhanced 
matching funds for health home care coordination services for those with chronic illnesses, 
designed new templates to make it easier to submit section 1115 demonstrations and to 
make it easier for a state to adopt selective contracting in the program, and developed a 
detailed tool to help support states interested in extending managed care arrangements to 
long term services and supports. We have also established six learning collaboratives with 
states to consider together improvements in data analytics, value-based purchasing and 
other topics of key concern to states and stakeholders, and the Center for Medicare and 
Medicaid Innovation has released several new initiatives to test new models of care relating 
to Medicaid populations. Information about these and many other initiatives are available 
on Medicaid.gov. We welcome continued input and ideas from states and others. 
States can implement delivery system and payment reforms in their programs whether or 
not they adopt the low-income adult expansion. With respect to the expansion group in 
particular, states have considerable flexibility regarding coverage for these individuals. For 
example, states can choose a benefit package benchmarked to a commercial package or 
design an equivalent package. States also have significant cost-sharing flexibility for 
  individuals above 100% of the federal poverty level, and we intend to propose other cost- 
34. Wills thhaer ifnegd cehraanl ggeosv tehrantm weinllt m suopdepronritz oe patniodn usp fdoart eth oeu Mr reudliecsa. id expansion population that 
encourage personal responsibility?
 
A.     
Yes, depending on its design. We are interested in working with states to promote better 
health and health care at lower costs and have been supporting, under a demonstration 
established by the Affordable Care Act, state initiatives that are specifically aimed at 
promoting healthy behaviors. Promoting better health and healthier behaviors is a matter 
of importance to the health care system generally, and state Medicaid programs, like other 
payers, can shape their benefit design to encourage such behaviors while ensuring that the 
lowest income Americans have access to affordable quality care. We invite states to 
continue to come to us with their ideas, including those that promote value and individual 
ownership in health care decisions as well as accountability tied to improvement in health 
outcomes. We note in particular that states have considerable flexibility under the law to 
  14  design benefits for the new adult group and to impose cost-sharing, particularly for those 
  individuals above 100% of the federal poverty level, to accomplish these objectives, 
35. Willi nCcMluSd ainpgp rSoecvree gtaloryb-aalp wpraoivveerds b wenitchh amna rakg gcorveegraatgee a llotment, state flexibility, and 
accountability if states are willing to initiate a portion of the expansion?
 
A.     
Consistent with the guidance provided above with respect to demonstrations available 
under the regular and the enhanced matching rates, CMS will work with states on their 
  proposals and review them consistent with the statutory standard of furthering the 
MAGI interests of the program. 
 
36. W ill states still be required to convert their income counting methodology to Modified 
Adjusted Gross Income (MAGI) for purposes of determining eligibility regardless of 
whether they expand to the adult group? If so, how do states link the categorical eligibility 
criteria to the MAGI?
 
A.     
Yes, as required by law. Conversion to modified adjusted gross income eligibility rules will 
apply to the nonelderly, nondisabled eligibility groups covered in each state, effective 
January 2014, without regard to whether a state expands coverage to the low-income adult 
group. The new modified adjusted gross income rules are aligned with the income rules that 
will be applied for determination of eligibility for premium tax credits and cost-sharing 
reductions through Exchanges; the application of modified adjusted gross income to 
Medicaid and CHIP will promote a simplified, accurate, fair, and coordinated approach to 
enrollment for consumers. CMS has been working with states to move forward with 
  implementation of the modified adjusted gross income rules, and consolidation and 
DSH simplification of Medicaid eligibility categories. 
 
37. T he Disproportionate Share Hospital allotments will be reduced starting in 2014 using a 
methodology based on the reduction in the number of uninsured. One, when will HHS issue 
the regulations and methodology for this reduction? Two, for a state that does not see a 
decrease in its uninsured population, will the remaining states absorb the full reduction? Is 
HHS planning any modification to the manner in which it will reduce DSH allotments as it 
relates to states that do not expand?
 
A.     
The law directs HHS to develop a methodology to reduce Disproportionate Share Hospital 
(DSH) funding over time in a way that is linked to reductions in the number of uninsured or 
how states target their funds. We have heard from states and health care providers about 
  their concerns related to this change and are exploring all options. The Department will 
 
propose this methodology for public comment early next year. 
 
COORDINATION BETWEEN EXCHANGES AND OTHER PROGRAMS
 
38. How can states use premium assistance to help families that a re split among the Exchange, 
Medicaid, and the Childrens Health Insurance Program (CHIP) enroll in the same plans?
 
A.     
In 2014, some low-income children will be covered by Medicaid or CHIP while their parents 
  obtain coverage on the Exchange with advance payments of the premium tax credit.  15  Premium assistance, an option under current law, provides an opportunity for state 
Medicaid and CHIP programs to offer coverage to such families through the same coverage 
source, even if supported by different payers.  Under Medicaid and CHIP statutory options, 
states can use federal and state Medicaid and CHIP funds to deliver Medicaid and CHIP 
coverage through the purchase of private health insurance. Most commonly, states have 
used premium assistance to help Medicaid/CHIP eligible families pay for available 
employer-based coverage that the state determines is cost effective. There are cost sharing 
assistance and benefit wrap-around coverage requirements, to the extent that the insurance 
purchased with Medicaid and/or CHIP funds does not meet Medicaid or CHIP standards. In 
both Medicaid and CHIP, premium assistance is authorized for group health coverage and, 
under some authorities, for health plans in the individual market, which, in 2014 would 
include qualified health plans available through the Exchange. Please note that advance 
payments of the premium tax credit and cost-sharing reductions are not available for an 
individual who is eligible for Medicaid or CHIP. The statutory authorities that permit use of 
title XIX or title XXI funds to be used for premium assistance for health plans in the 
  individual market, including qualified health plans in the Exchange, are sections 1905(a) 
and 2105(c)(3) of the Social Security Act. 
For example, beginning in 2014, when a child is eligible for Medicaid/CHIP and the parent is 
enrolled in a qualified health plan through the Exchange, a state Medicaid or CHIP program 
could use existing premium assistance authority to purchase coverage for a Medicaid or 
CHIP-eligible child through that qualified health plan. The premium tax credit would not be 
available to help cover the cost of coverage for these children. As noted above, with respect 
to the children, the state would adhere to federal standards for premium assistance, 
including providing wrap-around benefits, cost sharing assistance, and demonstrating cost- 
effectiveness, as appropriate. A State-Based Exchange may be able to support such an 
option, and in states where a Federally-Facilitated Exchange is operating, a State Medicaid 
or CHIP agency may be able to take this approach by making arrangements with qualified 
health plans to pay premiums for individuals. We will be working with states interested in 
  this option to consider how the state Medicaid and CHIP agency can coordinate with the 
39. HowE xcachna sntgaet etos  uesstea pbrliesmh aiunmd  saimsspislitfayn pcree tmoi purmo masostiset aconnceti anruriatnyg oefm caenrets w.  hen individuals 
move between Exchange, CHIP, and Medicaid coverage?
 
A.     
The Affordable Care Act envisions and directs that there be a coordinated system for 
making eligibility determinations between Medicaid, CHIP and the Exchange to avoid gaps 
in coverage as individuals income fluctuates. Smooth eligibility transitions will not 
necessarily prevent people from having to select a new plan and/or provider when they 
lose eligibility for one insurance affordability program and gain eligibility for another. The 
extent to which such changes in plans and providers occur will depend on whether and to 
  what degree plans participate in both the Exchange and in Medicaid and CHIP, and the 
networks in such plans. 
Premium assistance can help address this issue, while encouraging robust plan 
participation in Medicaid, CHIP, and the Exchange. As discussed above, this option permits 
state Medicaid or CHIP programs to use premium assistance to enroll a Medicaid or CHIP 
eligible individual or family in a qualified health plan through the Exchange. States may be 
most interested in this option for families close to the top of the Medicaid income limit. 
Under this arrangement, if a familys income changes such that some or all members of the 
family become ineligible for Medicaid or CHIP and eligible for a premium tax credit to help 
cover the cost of a qualified health plan through the Exchange, it would be less likely that 
  members moving into Exchange coverage would need to change plans or providers.  16  Similarly, premium assistance could help increase the likelihood that individuals moving 
  from Exchange coverage into Medicaid or CHIP may remain in the same qualified health 
plan in which they had been enrolled through the Exchange. 
As discussed above, premium assistance options in Medicaid and CHIP are subject to federal 
standards related to wrap around benefits, cost sharing and cost effectiveness. There may 
also be an opportunity for states to promote continuity of coverage through bridge plans 
as described earlier. 
  17