New healthcare exchange rules issued for states

The Obama administration on Monday released broad new operating rules for state-run health insurance exchanges, which form a key part of the 2010 federal healthcare reform law that will face landmark Supreme Court hearings in just two weeks.

The long-awaited regulations, released by the Department of Health and Human Services, are intended to provide state lawmakers and officials flexibility on federal deadlines as they meet the complex task of building state and regional insurance markets before a January 1, 2014, deadline.

In a 642-page final rule, the government provides guidance on how states should establish exchanges, qualify health plans for participation and determine the eligibility of both individuals and small business that want to use exchanges to provide health coverage to their employees.

Industry and consumer groups welcomed the regulations, saying they provided states with the flexibility necessary to meet consumer needs for choice and quality protections. They also said the regulations shift policy focus to the state level, where the new rules must be implemented.

State exchanges are part of a two-pronged effort to provide health coverage for about 30 million uninsured Americans under the Patient Protection and Affordable Care Act, which also calls for a dramatic expansion of the joint federal-state Medicaid program for the poor.

The exchanges amount to federally subsidized state-run insurance markets designed to operate like Amazon.com by providing consumers Web-based access to affordable health plans that meet minimum quality standards.

But how state exchanges perform could be determined by a high profile Supreme Court case in which 26 states and a business group claim healthcare reform should be overturned as unconstitutional because it requires most adults to buy private health insurance or pay a penalty.

That requirement, known as the individual mandate, is intended to limit insurance risk in the exchanges by ensuring that younger, healthier adults participate. Otherwise, analysts say, the exchanges could become dominated by older, sicker adults, which would mean higher costs and fewer participating plans.

The Supreme Court will hear oral arguments March 26-28 and is expected to issue a ruling by July 1.