Opinion ID: 223249
Heading Depth: 3
Heading Rank: 5

Heading: Health Benefit Exchanges

Text: By January 1, 2014, all states must establish American Health Benefit Exchanges and Small Business Health Options Program Exchanges, which are insurance marketplaces where individuals, families, and small employers can shop for the Act's new insurance products. Id. § 18031(b). Consumers can compare prices and buy coverage from one of the Exchange's issuers. Id. § 18031(b), (c). Exchanges centralize information and facilitate the use of the Act's significant federal tax credits and other subsidies to purchase health insurance. See 26 U.S.C. § 36B; 42 U.S.C. §§ 18031, 18071, 18081-83. States may create and run the Exchanges through a governmental or nonprofit entity. 42 U.S.C. § 18031(d)(1). States may establish regional, interstate, or subsidiary Exchanges. Id. § 18031(f). The federal government will provide funding until January 1, 2015, to establish Exchanges. Id. § 18031(a). Insurers may offer their products inside or outside these Exchanges, or both. Id. § 18032(d). Importantly, the Exchanges draw upon the states' significant experience regulating the health insurance industry. See id. § 18041. The Act allows states some flexibility in operations and enforcement, though states must either (1) directly adopt the federal requirements set forth by HHS, or (2) adopt state regulations that effectively implement the federal standards, as determined by HHS. Id. § 18041(b). In a subsection entitled, No interference with State regulatory authority, the Act provides that [n]othing in this chapter shall be construed to preempt any State law that does not prevent the application of the provisions of this chapter. Id. § 18041(d).
The Act provides that qualified individuals and qualified employers may purchase insurance through the Exchanges. Id. § 18031(d)(2). Although qualified individuals is broadly defined, [43] qualified employers are initially limited to small employers, but in 2017, states may allow large employers to participate in their Exchanges. Id. § 18032(f)(2)(A), (B). Qualified employers can purchase group plans in or out of Exchanges. Id. § 18032(d)(1).
The Act prescribes the types of plans available in the Exchanges, known as qualified health plans. Id. § 18031(d)(2)(B)(i). A qualified health plan is a health plan that: (1) is certified as a qualified health plan in each Exchange through which the plan is offered; (2) provides an essential health benefits package; and (3) is offered by an issuer that (a) is licensed and in good standing in each state where it offers coverage, and (b) complies with HHS regulations and any requirements of the Exchange. Id. § 18021(a)(1). The issuer must agree, inter alia, to offer at least one plan in the silver level and one in the gold level in each Exchange in which it participates, as described in § 18022(d). Id. § 18021(a)(1)(C). The issuer must charge the same premium rate regardless of whether a plan is offered in an Exchange or directly. [44] Id.
The essential health benefits package is required of all qualified health plans sold in the Exchanges. Id. § 18021(a)(1)(B). States may require that a qualified health plan offered in that state cover benefits in addition to essential health benefits, but the state must defray the costs of additional coverage through payments directly to patients or insurers. Id. § 18031(d)(3)(B). One significant exception to the essential health benefits package requirement is the catastrophic plan in the individual market only. In and outside the Exchanges, insurers may offer catastrophic plans which provide no benefits until a certain level of out-of-pocket costs$5,950 for self-only coverage and $11,900 for family coverage in 2011are incurred. Id. § 18022(e); see id. § 18022(c)(1), (e)(1)(B)(i); 26 U.S.C. § 223(c)(2)(A)(ii), (g); I.R.S. Pub. 969, at 3 (2010). The level of out-of-pocket costs is equal to the current limits on out-of-pocket spending for high deductible health plans adjusted after 2014. 42 U.S.C. § 18022(e), (c)(1). This catastrophic plan exception applies only if the plan: (1) is sold in the individual market; (2) restricts enrollment to those under age 30 or certain persons exempted from the individual mandate; (3) provides the essential health benefits coverage after the out-of-pocket level is met; and (4) provides coverage for at least three primary care visits. Id. § 18022(e)(1), (2).
To reduce the number of the uninsured, the Act also establishes considerable federal tax credits for individuals and families (1) with household incomes between 1 and 4 times the federal poverty level; (2) who do not receive health insurance through an employer; and (3) who purchase health insurance through an Exchange. [45] 26 U.S.C. § 36B(a), (b), (c)(1)(A)-(C). To receive the credit, eligible individuals must enroll in a plan offered through an Exchange and report their income to the Exchange. 42 U.S.C. § 18081(b). If the individual's income level qualifies, the Treasury pays the premium tax credit amount directly to the individual's insurance plan issuer. Id. § 18082(c)(2)(A). The individual pays only the dollar difference between the premium tax credit and the total premium charged. Id. § 18082(c)(2)(B). The credit amount is tied to the cost of the second-cheapest plan in the silver level offered through an Exchange where the individual resides, though the credit may be used for any plan purchased through an Exchange. [46] See 26 U.S.C. § 36B(b)(2).
The Act also provides a variety of federal cost-sharing subsidies to reduce the out-of-pocket expenses for individuals who (1) enroll in a qualified health plan sold through an Exchange in the silver level of coverage, and (2) have a household income between 1 and 4 times the federal poverty level. 42 U.S.C. § 18071. As noted earlier, the Exchanges, with significant federal tax credits and subsidies, are predicted to make insurance available to 9 million in 2014 and 22 million by 2016. [47] We now turn to the Act's third component: the individual mandate.