I’ve been getting a lot of questions from a lot of places on how insurance regulations and enforcement work in health reform. I reached out to a couple of folks who are experts on the subject to piece together how things work.

After the bill is passed, there are two phases to think about – before exchanges are set up and after they’re running in 2014.

Before exchanges are established, the Department of Health and Human Services and other related federal authorities will work with states to implement the law. First, the states will have to bring their state health insurance laws in line with the federal regulations. States are free to go farther than federal regulations if they want, but their laws must be at least as strong as the federal ones.

Every year from 2010 on, insurers will have to make public data on their business practices. The summary of the provision in the bill explains:

…plans seeking certification by Exchanges [must] publicly disclose, in plain language, information on claims payment policies, enrollment, denials, rating practices, out-of-network cost-sharing, and enrollee rights. [They must also] provide information to enrollees on the amount of cost-sharing for a specific item or service.

Using that information, HHS and the states will be required to conduct annual reviews of insurance companies looking for business in the future exchanges. Rate increases must be taken into account during this process under the law and, to gain entry into the exchanges, plans will have to meet minimum standard benefits levels set by the Secretary. Those standards will be developed in a process that the bill says has to be public and accountable to Congress. The benefit package must, by law, be equivalent to coverage you’d get in the large-group market, creating parity in benefits between the individual and large group markets that doesn’t exist now.

When it comes time to set up the exchanges, the states must use their annual reviews to determine which insurers get access to the new customers. If a state fails to make progress or follow the law in setting up an Exchange, HHS can step in and set up an exchange under federal authority.

After 2014 when the exchanges are running, HHS continues to play a role in state exchanges.

The states either run the exchanges or contract with a non-profit agency to run them. The Exchange administrators must evaluate insurance companies yearly on quality and price metrics and whether or not the insurers in the exchanges are conforming to the new regulations – no benefit caps, limits on out-of-pocket expenses, no denials for pre-existing conditions, no charging more if you’re sick, etc…

The Exchange administrators have the power to deny certification for insurance plans with unreasonable premium increases – in other words, kick them out of the state exchange – and will require a whole new level of transparency from plans, so consumers can understand their rights in plain language. And HHS oversees the operations, making sure state exchanges follow the new law.

(also posted at the NOW! blog)

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Jason Rosenbaum

Jason Rosenbaum

Writer, musician, activist. Currently consulting for Bill Halter for U.S. Senate and a fellow at the New Organizing Institute.