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The Exchanges: A Discussion

The Exchanges: A Discussion

The March 1, 2013 Exchange Notice Delivery has been Postponed 

On January 24, 2013, the Department of Labor (DOL) announced that the employer-provided notice (regarding the existence of the Exchanges, the availability of premium tax credits, and related matters) has been postponed until it issues supporting regulations. It anticipates issuing the regulations in late summer or fall of 2013.


The DOL, it its announcement, cites two reasons for the delay. First, the Exchange Notice (Notice) should be coordinated with the educational efforts undertaken by the Department of Health and Human Services (HHS) and with the Internal Revenue Service (IRS) guidance on “minimum value” requirements. Delaying the Notice will achieve that goal. The DOL also cites its intent to provide employers with sufficient time to deliver the Notice at a time that will be meaningful to the employees receiving it. When ready, the DOL will produce a generic Notice which will meet the law’s requirements.

Exchanges on a Nationwide Basis

1.       The Status of the Exchanges. So far, only 18 states plus the District of Columbia have agreed to run their own Exchanges. Twenty states have agreed to have the federal government run the Exchanges. Seven states may partner up to offer Exchanges and five have made no decision. This patchwork of Exchanges will be burdensome on multi-state employers. The government has issued its notice of conditional approval (including cash) to seventeen states (including California) and has issued Level 2 approval to seven states, including California, which have demonstrated substantial progress toward implementation. The approvals so far also involve Hawaii, Idaho, Nevada, New Mexico, Vermont, and Utah.

2.       Timelines. To meet the Patient Protection and Affordable Care Act’s (ACA’s) targets, states must implement informational websites and provide transactional (enrolling capability) by October 15, 2013. States intending to operate their own Exchanges must have submitted an Exchange Blueprint by the end of 2012. The “Exchange Blueprint” is based on a government model form. If you want to read more about the approval process please visit the CCIIO’s Affordable Insurance Exchanges webpage. It’s worth noting that states which have not agreed to do their own Exchange, but may want to change their minds later, can submit a declaration letter any time before December 16, 2013 for operational dates in 2015 and beyond.

3.       The Small Business Health Options Program. All states intending to run state-based Exchanges must offer health care plan options to qualified individuals as well as to small business (SHOPs). The SHOP option is available to employers with less than 50 employees; however, the plans must meet the minimum value requirements established under ACA. The California SHOP will be available to employers from 1 to 50 employees.

The California Exchange

1.       The New Name. The new “official name” for the California Health Benefit Exchange is: COVERED CALIFORNIA.

2.       Funding. California received $674 million as a Level 2 grant for setting up and running COVERED CALIFORNIA through 2014. The non-profit known as the California Endowment has committed to provide an additional $225 million to implement Health Care Reform in California. Blue Cross set up this fund as a private foundation in 1996 at the time it went from non-profit status to for-profit with the creation of Wellpoint.

3.       Current Status. COVERED CALIFORNIA has announced its intention to launch a consumer-friendly website at the end of January. It will be informational only, in two languages (designed, ultimately, to be in 13 languages). There will be downloadable fact sheets. Once fully operational, individuals will be able to calculate premiums and enroll using the site (circa October 2013). It also will have an 800 number in place sometime in February. The next big task is negotiating contracts with health plan issuers and implementing an outreach and marketing program.

4.       Exchange’s Report to Governor Brown and the California Legislature. As required by statute, COVERED CALIFORNIA has just released its first annual report to the Governor and the state legislature. The report contains valuable statistical information about the state’s population including ages, incomes, participation in medical (Medicaid), employer-sponsored plans, and the percentages of the eligible uninsureds. For example, 74% of businesses with 10-49 employees provide health coverage. Overall, 19.2 million (55%)

Californians under age 65 currently receive health benefits through employer-provided coverage. 2.2 million (6%) have individual coverage. 4.6 million (13%) are uninsured. COVERED CALIFORNIA projects that it will cover 2 million Californians through subsidized coverage and another 2.1 million without government subsidies by 2019.

5.       Important Open Issues. The legislature is about to hold a special session on health care. It is expected that California will elect to take on the Medicaid expansion under ACA. If it does, the legislature must decide whether the state or each county will administer the changes on their own.

Additionally, ACA provides a primary care provider’s reimbursement rate hike for federally subsidized programs, originally to begin January 1, 2013. The state says it will implement the improved reimbursement as of January 1, 2013 retroactively, once it is ready to do so. The theory here is that the improved reimbursement rate levels will encourage providers to participate. At present, the state is still committed, in fact, to a reimbursement rate reduction for all Medi-Cal providers. The matter is now in litigation.


Governor Brown presented his new budget proposal on January 24, 2013 with an ambitious plan to pay down the state’s current debt, forcing the legislature to make its ACA decisions at a very difficult time.


We haven’t written much about the California Health Benefit Exchange to date. This will change. Going forward, the Exchanges will become a major component of ACA. We expect to have much more to write about regarding COVERED CALIFORNIA in 2013 and beyond.





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