IMPLEMENTING THE AFFORDABLE CARE ACT THE STATE OF THE STATES JANUARY 2014 Katie Keith and Kevin W. Lucia The Commonwealth Fund, among the first private foundations started by a woman philanthropist—Anna M. Harkness—was established in 1918 with the broad charge to enhance the common good. The mission of The Commonwealth Fund is to promote a high performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society’s most vulnerable, including low-income people, the uninsured, minority Americans, young children, and elderly adults. The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. An international program in health policy is designed to stimulate innovative policies and practices in the United States and other industrialized countries. IMPLEMENTING THE AFFORDABLE CARE ACT THE STATE OF THE STATES Katie Keith and Kevin W. Lucia JANUARY 2014 Abstract: The Affordable Care Act is designed to improve access to coverage for millions of Americans. Because states are the primary implementers of these requirements, this report examines the status of state action on the three major components of health reform—the mar- ket reforms, the establishment of health insurance marketplaces, and Medicaid expansion. The analysis finds that nearly all states will require or encourage compliance with the market reforms, every state will have a marketplace, and more than half the states will expand their Medicaid programs. The analysis also shows that federal regulators have stepped in where states have been unable or unwilling to take action. These findings suggest that regulators will continue to help ensure consumers receive the benefits of the law—regardless of the state they live in—but raise questions about how this variation might affect consumers as state insurance markets undergo significant transition in 2014. Support for this research was provided by The Commonwealth Fund. The views presented here are those of the authors and not necessarily those of The Commonwealth Fund or its directors, officers, or staff. To learn more about new publications when they become available, visit the Fund’s website and register to receive email alerts. Commonwealth Fund pub. 1727. CONTENTS ABOUT THE AUTHORS............................................................................................................................................................ 6 ACKNOWLEDGMENTS............................................................................................................................................................. 6 EXECUTIVE SUMMARY.............................................................................................................................................................7 INTRODUCTION...................................................................................................................................................................... 9 FINDINGS...............................................................................................................................................................................12 Understanding State Implementation of the Affordable Care Act..............................................................................12 Most States Have Taken Legislative or Regulatory Action on at Least One Market Reform ......................................14 Variation in Implementation Regardless of State Marketplace Models..................................................................... 15 Medicaid Expansion More Likely in States That Opted for a State-Based Marketplace.............................................16 State Action Beyond the Affordable Care Act: Understanding Market Dynamics ......................................................16 POLICY IMPLICATIONS ......................................................................................................................................................... 17 METHODOLOGY.................................................................................................................................................................... 17 NOTES.....................................................................................................................................................................................19 LIST OF EXHIBITS EXHIBIT 1 PRIMARY MECHANISMS TO INCREASE ACCESS TO COVERAGE UNDER THE AFFORDABLE CARE ACT EXHIBIT 2 CONSUMER OPTIONS IN A TYPICAL STATE INSURANCE MARKET UNDER THE AFFORDABLE CARE ACT FOR COVERAGE IN THE INDIVIDUAL OR SMALL-GROUP MARKETS EXHIBIT 3 ENFORCEMENT OPTIONS IN THE INDIVIDUAL AND SMALL-GROUP MARKETS EXHIBIT 4 TYPES OF MARKETPLACE MODELS UNDER THE AFFORDABLE CARE ACT, JUNE 2013 EXHIBIT 5 NEW STATE ACTION TO IMPLEMENT THE AFFORDABLE CARE ACT, NOVEMBER 2013 EXHIBIT 6 NEW STATE LEGISLATIVE OR REGULATORY ACTION ON THE MARKET REFORMS UNDER THE AFFORDABLE CARE ACT, NOVEMBER 2013 EXHIBIT 7 SUMMARY OF NEW STATE LEGISLATIVE OR REGULATORY ACTION ON THE MARKET REFORMS, NOVEMBER 2013 ABOUT THE AUTHORS Katie Keith, J.D., M.P.H., is the director of research at Trimpa Group and a former assistant research professor and project director at Georgetown University Health Policy Institute’s Center on Health Insurance Reforms. Her principal research focus is tracking and monitoring implementation of the Affordable Care Act at the federal and state levels, and studying the relationship between private health insurance and public health. She received her law degree from Georgetown University Law Center and her master’s degree in public health from Johns Hopkins University. Kevin Lucia, J.D., M.H.P., is a research professor and project director at Georgetown University Health Policy Institute’s Center on Health Insurance Reforms. He focuses on the regulation of private health insurance, with an emphasis on analyzing the market reforms implemented by federal and state governments in response to the Affordable Care Act. He received his law degree from the George Washington University Law School and his master’s degree in health policy from Northeastern University. ACKNOWLEDGMENTS The authors thank the insurance department officials who participated in this study by reviewing our findings, sharing their insights, and contributing thoughtful comments. Editorial support was provided by Deborah Lorber. 6 IMPLEMENTING THE AFFORDABLE CARE ACT: THE STATE OF THE STATES EXECUTIVE SUMMARY Oklahoma, Texas, and Wyoming—fully declined to play The Affordable Care Act has the potential to increase a role in implementing these components. access to coverage for millions of Americans primar- In the middle of this spectrum, states with ily through three mechanisms: 1) the implementation state-based marketplaces were more likely to take action of market reforms; 2) the establishment of new health on the market reforms and expand their Medicaid insurance marketplaces, also known as exchanges; and programs. But states with federally facilitated market- 3) the expansion of Medicaid eligibility for low-income places were also active. Of the 34 states with federally adults. This report examines the status of state imple- facilitated marketplaces, 18 states took legislative or mentation of each of these reforms in all 50 states and regulatory action on the market reforms. Eleven states the District of Columbia. are expanding their Medicaid programs, with an addi- tional four still considering expansion. This variation Understanding State Implementation of the suggests that states have flexibility in implementing the Affordable Care Act Affordable Care Act—and are taking advantage of it. States varied significantly in their approach to imple- menting the Affordable Care Act’s three major compo- Understanding Market Dynamics nents, but states were most likely to take new action to States also amended insurance laws in response to implement the market reforms. These reforms include emerging market dynamics. For example, states actively access to coverage for young adults, a ban on preexisting repealed pre-Affordable Care Act protections, enhanced condition exclusions, the coverage of a minimum set of or diminished their authority to review rates, or adopted essential health benefits, and a ban on lifetime limits new requirements for certain products while exempting for health care coverage, among other critical consumer others from state insurance law. These changes, coupled protections. with the Affordable Care Act’s reforms, represent a To date, 32 states and the District of Columbia significant shift for many states, and the effect of these have taken new legislative or regulatory action on at changes remains unclear. Additional analysis will be least one of the market reforms. Of these, 11 states critical to understand whether such actions promote or addressed all of the reforms studied in this report. undermine the Affordable Care Act’s reforms and affect Although states may not have taken new action to the stability of state insurance markets. implement each of the reforms, state regulators in the vast majority of states will use their authority or col- laborate with federal regulators to require or encourage LOOKING FORWARD Most states have been active in preparing for the sig- compliance with the new protections. In the five states nificant changes mandated by the Affordable Care Act. that declined to enforce these reforms, federal regulators More than half took action to implement or enforce at will do so to ensure that consumers receive the benefits least one market reform, and state regulators in 32 states promised under the Affordable Care Act. and the District of Columbia chose to operate their Seven states—Connecticut, Hawaii, Maryland, own exchanges or are playing an active regulatory role Massachusetts, Minnesota, Oregon, and Vermont— by conducting plan management. fully embraced all three major components by imple- Where states have been unable or unwilling to menting the market reforms, establishing a state-based implement the Affordable Care Act, federal regulators marketplace, and expanding their Medicaid program. have stepped in to directly enforce the market reforms Other states that have actively implemented the and operate the marketplaces. As a result, nearly all Affordable Care Act—such as California, Colorado, states are requiring or encouraging compliance with the and New York—nearly met this standard. At the other market reforms, every state has a marketplace, and more end of the spectrum, five states—Alabama, Missouri, than half of states expanded their Medicaid programs. www.commonwealthfund.org7 By filling gaps and supporting state efforts to with questions about their coverage, whether additional enforce the law, federal regulators have helped ensure changes to states’ regulatory framework will promote that the market reforms and marketplaces will be or undermine the reforms, and whether states that enforced and available in every state. Yet, with no fed- declined to expand their Medicaid programs will adopt eral backup in the 20 states that declined to expand other mechanisms to provide coverage for low-income their Medicaid programs, millions of low-income adults consumers. The answers are likely to vary by state and may continue to face barriers to meaningful coverage. suggest that ongoing, holistic analysis of state insur- Given the diverse approaches to implementa- ance markets will be critical to ensuring that consumers tion, this report raises questions about the level of coor- benefit from the new protections, regardless of the state dination that will be required between state and federal they live in. regulators, where consumers in each state should turn 8 IMPLEMENTING THE AFFORDABLE CARE ACT: THE STATE OF THE STATES INTRODUCTION reforms apply to coverage offered in the individual mar- The Affordable Care Act has the potential to increase ketplaces and SHOP exchanges (known as the “inside” access to private and public health insurance for mil- market) as well as the individual and small-group mar- lions of Americans primarily through three mecha- kets that will continue to operate outside the market- nisms: 1) implementing new market reforms that set places in most states (known as the “outside” market) minimum standards for coverage; 2) establishing new (Exhibit 2). Previous studies revealed that many states health insurance marketplaces, also known as individual had not yet implemented these reforms and, as a result, exchanges and Small Business Health Options Program some states could face enforcement gaps without new (SHOP) exchanges; and 3) expanding Medicaid eligi- legislative or regulatory action.3 bility to adults with incomes up to 138 percent of the States have historically been the primary regu- federal poverty level ($15,856 for an individual and lators of private health insurance.4 Although states $32,499 for a family of four) (Exhibit 1). This report continue to play this role, the Affordable Care Act examines the status of state implementation of each establishes a federal standard for market reforms and of these reforms in all 50 states and the District of allows—but does not require—states to enforce these Columbia as of November 1, 2013. protections.5 As a result, states have three primary The Affordable Care Act contains significant options for enforcement: direct state enforcement; reforms that apply to private health insurers in the direct federal enforcement; or collaborative state–fed- individual, small-group, and large-group markets in eral enforcement (Exhibit 3). Under this framework, all 50 states and the District of Columbia. The “early states have considerable discretion regarding whether to market reforms,” which went into effect on September enforce the Affordable Care Act. 23, 2010, include expanded access to coverage for young The Affordable Care Act requires the estab- adults and a ban on lifetime limits on essential health lishment of a new individual marketplace and a SHOP benefits.1 The “2014 market reforms” went into effect exchange in each state (Exhibit 2).6 Individual mar- for plan or policy years beginning on or after January ketplaces are expected to provide a seamless, one-stop 1, 2014, and include guaranteed access to coverage experience for individuals to apply for federal premium and a minimum set of essential health benefits.2 These tax credits and cost-sharing subsidies; compare the EXHIBIT 1. PRIMARY MECHANISMS TO INCREASE ACCESS TO COVERAGE UNDER THE AFFORDABLE CARE ACT MARKETPLACES MARKET MEDICAID REFORMS EXPANSION ACCESS TO COVERAGE www.commonwealthfund.org9 EXHIBIT 2. CONSUMER OPTIONS IN A TYPICAL STATE INSURANCE MARKET UNDER THE AFFORDABLE CARE ACT FOR COVERAGE IN THE INDIVIDUAL OR SMALL-GROUP MARKETS INDIVIDUALS SMALL EMPLOYERS Health insurance marketplaces Traditional Individual SHOP Traditional individual Marketplace Marketplace small-group market market The “Inside” Market The “Outside” Market cost, quality, and value of private health insurance; and marketplace model), while 34 states defaulted to mar- ultimately purchase private coverage or enroll in public ketplaces run by the federal government with varying coverage.7 Similarly, SHOP exchanges are designed to degrees of state participation (Exhibit 4).10 States with aggregate the purchasing power of small businesses; a federally facilitated marketplace can opt to play no enable employers and employees to compare a wider formal role or enter into a partnership model or a plan range of coverage choices; and reduce administrative management model.11 States can also adopt a bifur- costs.8 cated model, in which the state operates the SHOP States can choose to establish a state-based exchange only.12 Although the market reforms apply to marketplace or default to a federally facilitated market- coverage offered inside and outside the marketplaces, place.9 To date, 16 states and the District of Columbia plans offered inside a marketplace—known as quali- chose to establish a state-based marketplace (with fied health plans—must meet additional certification two of these states opting for a supported state-based requirements.13 EXHIBIT 3. ENFORCEMENT OPTIONS IN THE INDIVIDUAL AND SMALL-GROUP MARKETS Enforcement Option Definition Direct state State regulators perform regulatory functions such as collecting and reviewing policy forms for enforcement compliance, responding to consumer inquiries and complaints, and taking enforcement action as necessary. Direct federal Federal regulators perform regulatory functions because state regulators lack enforcement enforcement authority or fail to substantially enforce all or parts of federal law; requires federal regulators to collect and review policy forms for compliance, respond to consumer inquiries and complaints, and take enforcement action as necessary. Collaborative state– Agreement between federal and state regulators in which states perform regulatory functions federal enforcement but lack enforcement authority; typically requires the state to monitor for compliance with state and federal law, respond to consumer inquiries and complaints, and refer violations of federal law to federal regulators for enforcement action if unable to obtain voluntary compliance. 10 IMPLEMENTING THE AFFORDABLE CARE ACT: THE STATE OF THE STATES Most marketplaces will rely on their state’s The Affordable Care Act established a uni- insurance departments to conduct “plan manage- form eligibility level for state Medicaid programs by ment”—that is, the process in which regulators assess expanding coverage to most adults with incomes up to plans’ compliance with marketplace standards.14 State 138 percent of the federal poverty level ($15,856 for regulators will do so even in states with a federally an individual and $32,499 for a family of four).17 The facilitated marketplace if the state opted for a partner- costs of covering this population will be fully funded ship model, a marketplace plan management model, or by the federal government in most states through 2016, a bifurcated model.15 In states that opted not to conduct with federal funding phasing down to 90 percent for plan management, federal regulators will ensure that all states by 2020.18 Following a decision by the U.S. qualified health plans meet these standards but have Supreme Court, states can choose whether to expand indicated that they will defer to state review where Medicaid eligibility to this new population or main- possible.16 tain their traditional eligibility criteria.19 In states that Because the market reforms apply both inside do not expand Medicaid programs, individuals with and outside the marketplaces, state decisions to imple- income over 100 percent of the federal poverty level ment the market reforms or operate marketplaces have will be eligible for federal tax credits and other subsidies significant implications for the role of state regulators in to purchase private coverage through the marketplace; implementing the Affordable Care Act. however, this assistance will not be available for those with incomes below this level.20 As a result, many low- income adults may be left without access to affordable public or private coverage.21 EXHIBIT 4. TYPES OF MARKETPLACE MODELS UNDER THE AFFORDABLE CARE ACT, JUNE 2013 Marketplace Model Description of Marketplace Activity State-based marketplace State operates all core functions; may use federal services for certain functions Supported state-based marketplace State operates most core functions; uses federal information technology infrastructure Federally facilitated marketplace Federal government operates all core functions State partnership marketplace State conducts plan management and/or consumer assistance, outreach, and education functions on behalf of federal government; federal government operates remaining core functions Marketplace plan management State conducts plan management on behalf of federal government; federal government operates remaining core functions Bifurcated marketplace State operates all core functions for small-business marketplaces and conducts plan management on behalf of federal government for individual marketplace; federal government operates remaining core functions for individual marketplace Source: S. Dash, C. Monahan, and K. W. Lucia, Health Insurance Exchanges and State Decisions (Washington, D.C.: Health Affairs and Robert Wood Johnson Foundation, July 18, 2013). www.commonwealthfund.org11 FINDINGS all of the market reforms, established a state-based marketplace, and will expand their Medicaid pro- Understanding State Implementation of the gram. Other states that have actively implemented the Affordable Care Act Affordable Care Act—such as California, Colorado, Implementation of the Affordable Care Act has varied and New York—nearly met this standard. California across states (Exhibit 5). In this section, we identify the and Colorado implemented all but a few early market decisions that all 50 states and the District of Columbia reforms while New York has not yet implemented all have made in implementing the law’s three major com- of the 2014 market reforms but had a reformed market ponents—the market reforms, the establishment of new prior to the Affordable Care Act. All of these states will marketplaces, and Medicaid expansion. We found that expand their Medicaid programs. nearly all states will require or encourage compliance At the other end, five states—Alabama, with the market reforms, every state will have a mar- Missouri, Oklahoma, Texas, and Wyoming—declined ketplace, and more than half of states will expand their to play a role in implementing the law’s three major Medicaid programs. components. These states will not enforce the market At one end of the spectrum, seven states— reforms, will have a federally facilitated marketplace Connecticut, Hawaii, Maryland, Massachusetts, where the state will play no formal role, and declined to Minnesota, Oregon, and Vermont—implemented expand Medicaid. 12 IMPLEMENTING THE AFFORDABLE CARE ACT: THE STATE OF THE STATES EXHIBIT 5. NEW STATE ACTION TO IMPLEMENT THE AFFORDABLE CARE ACT, NOVEMBER 2013 Market Reforms1 Enforcement of Market Reforms Early Market Reforms 2014 Market Reforms Outside the Marketplace Establishment Medicaid State (10 reforms total) (7 reforms total) Marketplace Decision2 Expansion3 Symbol Definition 4 AL None None Federal Federally facilitated No L The state passed a new AK R—1 reform RR—all reforms State Federally facilitated No law on one or more 5 AZ FR—all reforms RR—all reforms State Federally facilitated Yes reforms. AR G—all reforms R—1 reform State Federally facilitated—partnership model Yes—customized R The state issued a new CA L—7 reforms L—all reforms State State-based Yes regulation on one or CO L—7 reforms L—all reforms State State-based Yes more reforms. CT L—all reforms L—all reforms State State-based Yes DE L—7 reforms L—all reforms State Federally facilitated—partnership model Yes G The state did not pass DC L—2 reforms L—3 reforms State State-based Yes a new law or issue a new regulation, but did FL FR—all reforms RR—4 reforms Collaborative Federally facilitated No issue subregulatory GA G—all reforms RR—all reforms State Federally facilitated No guidance on one or HI L—all reforms L—all reforms State State-based Yes more reforms. 6 ID FR—all reforms G—1 reform State Supported state-based No IL R—6 reforms R—6 reforms State Federally facilitated—partnership model Yes FR The state did not IN L—all reforms 5 G—1 reform State Federally facilitated Undecided pass a new law, issue IA L—all reforms 5 RR—all reforms State Federally facilitated—partnership model Yes—customized a new regulation, or issue subregulatory KS FR—all reforms RR—all reforms State Federally facilitated—plan management model No 7 guidance, but officials KY G—all reforms R—4 reforms State State-based Yes report that they are LA L—2 reforms G—all reforms Collaborative Federally facilitated No reviewing insurance ME L—all reforms L—all reforms State Federally facilitated—plan management model No policy forms for MD L—9 reforms, R—1 reform L—all reforms State State-based Yes compliance with one 5 MA L—all reforms L—4 reforms, R—3 reforms State State-based Yes or more reforms. MI G—all reforms L—2 reforms State Federally facilitated– partnership model Yes—customized RR The state did not MN L—all reforms L—all reforms State State-based Yes pass a new law, issue MS FR—all reforms RR—all reforms State Federally facilitated—bifurcated model No 4 a new regulation, or MO None None Federal Federally facilitated No issue subregulatory MT G—all reforms G—all reforms Collaborative Federally facilitated—plan management model Undecided guidance, but officials 5 NE L—all reforms G—5 reforms State Federally facilitated—plan management model No report that they are NV L—1 reform L—4 reforms State State-based Yes reviewing insurance NH L—1 reform L—1 reform State Federally facilitated—partnership model Undecided policy forms, rates, NJ R—3 reforms RR—all reforms State Federally facilitated Yes and/or other materials NM G—all reforms RR—all reforms State Supported state-based Yes for compliance with NY L—all reforms L—2 reforms State State-based Yes one or more reforms. NC L—all reforms L—all reforms State Federally facilitated No None The state has taken no 5 ND L—all reforms RR—all reforms State Federally facilitated Yes noted new action. OH FR—all reforms RR—all reforms State Federally facilitated—plan management model Yes OK None None Federal Federally facilitated No 7 OR L—all reforms L—5 reforms, R—2 reforms State State-based Yes PA G—all reforms G—all reforms State Federally facilitated Yes—customized RI L—9 reforms L—1 reform State State-based Yes SC G—all reforms G—all reforms State Federally facilitated No SD L—2 reforms, R—8 reforms R—all reforms State Federally facilitated—plan management model No TN FR—all reforms RR—all reforms State Federally facilitated Undecided 4 TX None None Federal Federally facilitated No UT L—8 reforms L—4 reforms State Federally facilitated—bifurcated model No VT L—all reforms L—all reforms State State-based Yes VA L—all reforms L—all reforms State Federally facilitated—plan management model No WA L—2 reforms, R—3 reforms L—3 reforms, R—2 reforms State State-based Yes WV FR—all reforms G—1 reform State Federally facilitated—partnership model Yes WI L—1 reform, R—1 reform G—2 reforms State Federally facilitated No WY None None Federal Federally facilitated No 1 States may have decided not to address a particular reform because state law is already consistent with it or because the state has the authority to enforce federal law. For example, Maine, Massachusetts, New Jersey, New York, and Vermont already required insurers to provide coverage to individuals on a guaranteed basis. The exhibit does not take into account such existing laws or authority. In addition, states may have taken action in addition to what is listed above (for example, a state that passed legislation might have also issued a regulation or subregulatory guidance on the same reform); for purposes of this exhibit, we listed the primary state action only. Finally, states may have addressed the provisions differently in each market or may be relying on explicit authority to enforce the early market reforms. For a more detailed description of state implementation of each of the reforms, see the Web tools on The Commonwealth Fund’s website. 2 States can establish their own state-based marketplace or default to a federally facilitated marketplace. States with a federally facilitated marketplace can decline to play any formal role or choose to pursue a partnership model or a plan management model. States may also opt for a bifurcated model. The data in this column are incorporated from S. Dash, C. Monahan, and K. W. Lucia, “Evolving Dynamics of Health Insurance Exchange Implementation,” The Commonwealth Fund Blog, June 19, 2013. 3 Following a decision by the U.S. Supreme Court, states can choose whether to expand eligibility for their Medicaid program to individuals with incomes up to 138 percent of the federal poverty level. The data in this column are incorporated from “State Participation in the Affordable Care Act’s Expansion of Medicaid Eligibility” (New York: The Commonwealth Fund, Aug. 2013). Some states, such as Arkansas, Iowa, and Michigan, have applied to use the premium assistance model to cover their Medicaid expansion populations; not all of these applications have been approved by federal regulators at this time. 4 Alabama, Missouri, and Texas previously issued subregulatory guidance regarding the early market reforms. Although this guidance does not appear to have been repealed, the state will not directly enforce the early market reforms and we did not reflect this guidance in the exhibit. 5 The state passed new legislation that explicitly requires (or allows) state regulators to enforce or issue regulations regarding some or all of the Affordable Care Act’s market reforms. Regulators reported that they will rely on this authority for enforcement but the state has not otherwise implemented these reforms. 6 The governor of Idaho issued Executive Order 2011–03 prohibiting executive agencies from implementing any provisions of the Affordable Care Act. 7 State action applies only to qualified health plans sold through the marketplace. www.commonwealthfund.org13 Most States Have Taken Legislative or but five issued subregulatory guidance or reported that Regulatory Action on at Least One Market regulators are reviewing policy forms, rates, and other Reform materials for compliance.22 Of the law’s three major components, states were most Despite mixed progress in implementation, likely to take new legislative or regulatory action to 45 states and the District of Columbia will require or implement the market reforms. To date, 32 states and encourage compliance with the market reforms. Of the District of Columbia have taken legislative or regu- these, 17 states passed new legislation that explicitly latory action on at least one of the Affordable Care requires or allows state regulators to enforce or issue Act’s market reforms (Exhibit 6). Of these, 11 states— regulations regarding some or all of the Affordable Connecticut, Hawaii, Maine, Maryland, Massachusetts, Care Act’s market reforms.23 An additional 25 states Minnesota, North Carolina, Oregon, South Dakota, and the District of Columbia will directly enforce the Vermont, and Virginia—addressed all 10 of the early market reforms. In these states, regulators may not need market reforms and all seven of the 2014 market explicit authority to enforce the Affordable Care Act or reforms studied. the state may have addressed some or all of the market States were more likely to take action on the reforms but did not enact enforcement authority.24 early market reforms (29 states and the District of Three states took advantage of a new option Columbia) than the 2014 market reforms (24 states and announced by federal regulators in March 2013.25 the District of Columbia) (Exhibit 7). States are also Florida, Louisiana, and Montana passed new legisla- requiring or encouraging compliance through the form tion or issued subregulatory guidance regarding a col- and rate review process. Of the states that did not take laborative enforcement arrangement.26 In these states, new legislative or regulatory action on the reforms, all regulators lack enforcement authority but are willing to EXHIBIT 6. NEW STATE LEGISLATIVE OR REGULATORY ACTION ON THE MARKET REFORMS UNDER THE AFFORDABLE CARE ACT, NOVEMBER 2013 Passed new law or issued new regulation WA on all 10 early market reforms and all MT NDˇ VT* ME* seven 2014 market reforms OR MN NH MA* Passed new law or issued new regulation ID SD WI NY* ˇ WY CT on all 10 early market reforms MI RI IAˇ PA NV NEˇ OH NJ* Passed new law or issued new regulation UT IL INˇ DE on all seven 2014 market reforms CA CO WV VA MD KS MO KY DC Passed new law or issued new regulation NC on at least one early market reform and TN AZˇ OK one 2014 market reform NM AR SC MS AL GA Passed new law or issued new regulation TX LA on at least one early market reform or one 2014 market reform AK FL Did not pass new law or issue new HI regulation on the early market reforms or 2014 market reforms * States may have decided not to address a particular reform because state law is already consistent with it or because the state has the authority to enforce federal law. For example, Maine, Massachusetts, New Jersey, New York, and Vermont already required insurers to provide coverage to individuals on a guaranteed basis. The exhibit does not take into account such existing laws or authority. ˇ The state did not pass conforming legislation to implement all or some of the early market reforms but is relying on explicit authority to enforce the early market reforms. Source: Authors’ analysis. For a more detailed description of state implementation of the market reforms, see the Web tools on The Commonwealth Fund’s website. 14 IMPLEMENTING THE AFFORDABLE CARE ACT: THE STATE OF THE STATES EXHIBIT 7. SUMMARY OF NEW STATE LEGISLATIVE OR REGULATORY ACTION ON THE MARKET REFORMS, NOVEMBER 2013 Type of Reform State Action to Date Early Market Reforms 2014 Market Reforms Summary State passed a new law or 16 states: 14 states: 11 states took action on all of the issued a new regulation on all CT, HI, IA, IN, MA, ME, CT, CA, CO, DE, HI, MA, early market reforms and all of the of the market reforms MD, MN, NE, NY, NC, ME, MD, MN, NC, OR, 2014 market reforms ND, OR, SD, VA, VT SD, VA, VT State passed a new law or 13 states and DC: 10 states and DC: 10 states and DC took action on issued a new regulation on at AK, CA, CO, DE, DC, IL, AR, DC, IL, KY, MI, NV, at least one of the early market least one market reform LA, NV, NH, NJ, RI, UT, NH, NY, RI, UT, WA reforms and at least one of the WA, WI 2014 market reforms Summary 29 states and DC took 24 states and DC took 32 states and DC took action on at action on at least one action on at least one least one early market reform or early market reform 2014 market reform 2014 market reform Note: States may have decided not to address a particular reform because state law is already consistent with it or because the state has the authority to enforce federal law. The exhibit does not take into account such existing laws or authority. States may have addressed the provisions differently in each market or may be relying on explicit authority to enforce the reforms. In addition, states may have applied certain requirements only to qualified health plans sold through the marketplace. monitor for compliance with the Affordable Care Act, market reform. Of these, Maine, South Dakota, and respond to consumer complaints, and refer violations to Virginia addressed all the reforms studied. Only Kansas, federal regulators for enforcement.27 Mississippi, Montana, Ohio, and West Virginia took no Federal regulators will directly enforce the law new legislative or regulatory action. in five states: Alabama, Missouri, Oklahoma, Texas, and Of the 18 states that will play no formal role Wyoming.28 In these states, insurers will submit policy in federally facilitated marketplaces, seven—Alaska, forms to federal regulators who will notify insurers of Indiana, Louisiana, New Jersey, North Carolina, North any concerns, conduct targeted investigations of market Dakota, and Wisconsin—took new legislative or regu- practices, and respond to consumer inquiries and com- latory action on the early market reforms. In addition, plaints.29 Federal regulators can assess significant fines Arizona, Indiana, North Carolina, and North Dakota for violations of the Affordable Care Act.30 enacted general authority to enforce the Affordable Care Act while most of the other states addressed only Variation in Implementation Regardless of one or two early market reforms. The remaining states State Marketplace Models issued subregulatory guidance or are reviewing forms States that opted to establish a state-based marketplace and rates for compliance but did not take additional were more likely to take new action on the market action. reforms. But states with a federally facilitated market- There was also variation among the states with place also took action: we found that 18 of the 34 states state-based marketplaces. Idaho, Kentucky, and New with a federally facilitated marketplace took new legis- Mexico, for instance, took no legislative action on the lative or regulatory action on the market reforms. market reforms while Nevada passed legislation that In particular, states that will perform plan man- addressed most of the 2014 market reforms. In the agement were more likely to have taken action on the District of Columbia, most health insurance will be sold market reforms than states that will play no formal role through the marketplace so regulators will enforce the in a federally facilitated marketplace. Of the 16 states market reforms through marketplace certification stan- with a partnership model, a plan management model, dards even though the District has not yet adopted all or a bifurcated model, most—11 states—passed new the reforms.31 legislation or issued a new regulation on at least one www.commonwealthfund.org15 Medicaid Expansion More Likely in States State Action Beyond the Affordable Care Act: That Opted for a State-Based Marketplace Understanding Market Dynamics To date, 26 states and the District of Columbia are The Affordable Care Act brings significant changes expected to expand their Medicaid programs while 20 to the health insurance market. In response to these states have declined to do so. Of those that will expand emerging market dynamics, states are amending existing their Medicaid programs, 11 states have federally facili- insurance laws. For example, some states have repealed tated marketplaces; the remaining 15 states and the pre-Affordable Care Act protections, such as stan- District of Columbia have state-based marketplaces. dards related to the Health Insurance Portability and Every state with a state-based marketplace except Idaho Accountability Act of 1996 (HIPAA), which requires opted to expand their Medicaid program. Four states guaranteed access to coverage for certain individuals.35 with federally facilitated marketplaces continue to con- Because the Affordable Care Act eliminates the bar- sider the expansion. riers that HIPAA was designed to address, states are States that will perform plan management in repealing existing protections, closing high-risk pools, a federally facilitated marketplace were more likely to or establishing mechanisms to transition consumers out expand their Medicaid programs than states that did of HIPAA coverage.36 And some states have amended not assume this role. Seven of the 16 states that will their authority to review rates to meet federal standards perform plan management are expected to expand while others exempted plans from rate approval require- Medicaid; Montana and New Hampshire are still ments or lost their designation as “effective” rate review undecided. Of the remaining 18 states with a feder- programs under the Affordable Care Act.37 ally facilitated marketplace, only four—Arizona, New States are also changing the way they regulate Jersey, North Dakota, and Pennsylvania—will expand certain products in the outside market. Some states their Medicaid program, with ongoing consideration in adopted new requirements to regulate products that are Indiana and Tennessee. exempt from the Affordable Care Act’s requirements. Of those states that will expand, many will For example, some states took new action to regulate do so by enrolling eligible adults in their traditional stop–loss coverage (insurance purchased by self-insured Medicaid program while others hope to gain federal small employers to protect against losses above a certain approval for a premium assistance model. Under a pre- level) and coverage purchased through an association, mium assistance model, states hope to use federal fund- which has traditionally been exempt from certain state ing for eligible individuals to purchase private coverage requirements.38 States may have done so to ensure that through the marketplaces, rather than enrolling them all insurers operate on a level playing field within the in traditional Medicaid coverage.32 These states include state. Arkansas, Iowa, Michigan, and Pennsylvania. While these states imposed additional require- In the 24 states that declined to expand or ments, others exempted products, such as “health care are still undecided, an estimated 4.5 million people sharing ministries,” from state insurance law.39 As a would be eligible for expanded Medicaid coverage.33 result, health care sharing ministries (where members Of these, most have incomes below 100 percent of the pay a monthly “share” that is matched with another federal poverty level and thus are ineligible for finan- member’s eligible medical bills with support for current cial subsidies to purchase private coverage through the health needs shared among members) do not have to marketplace.34 meet state or federal requirements for health insurance, including the Affordable Care Act. These changes to a state’s regulatory frame- work, coupled with the Affordable Care Act’s reforms, represent a significant shift for many states. As of now, 16 IMPLEMENTING THE AFFORDABLE CARE ACT: THE STATE OF THE STATES it is unclear what effect these types of changes will cannot play a similar role with respect to the third have on the state’s insurance market. For example, will mechanism—Medicaid expansion. As a result, millions a state’s decision to close its high-risk pool result in of low-income adults may continue to face coverage higher enrollment of sicker individuals in the state’s gaps and experience barriers to obtaining coverage. marketplace? Will we see increased enrollment in self- Questions remain as stakeholders experi- insured plans or health care sharing ministries as a way ence these changes. What level of coordination will be of avoiding the Affordable Care Act’s requirements? required between state and federal regulators to ensure If so, what effect will this have on the sustainability that the market reforms are enforced consistently in of marketplaces? Additional analysis will be critical to both the inside and outside markets? Where should understanding how other state action may promote or consumers in each state turn to raise issues or ask ques- undermine implementation of the Affordable Care Act tions about their coverage? Does this vary based on a and the stability of state insurance markets. state’s marketplace model and whether state regulators are enforcing the market reforms? Will states make other changes that promote or undermine the reforms? POLICY IMPLICATIONS How will these changes affect critical outcomes, such as The Affordable Care Act ushers in significant changes enrollment, cost, and marketplace sustainability? And, that are designed to improve access to coverage for for those states that chose not to expand Medicaid, will millions of consumers. Despite variation in their policymakers adopt other mechanisms to provide cover- approaches, most states have actively prepared for these age for low-income consumers or will these individuals changes. In particular, a core group of states—including be left without access? California, Colorado, Connecticut, Hawaii, Maryland, The answers are likely to vary by state, suggest- Massachusetts, Minnesota, New York, Oregon, and ing a continued need for ongoing, holistic analysis of Vermont—has committed to systematic implementa- state insurance markets. With much at stake for regula- tion of the most significant aspects of health reform. tors, insurers, and consumers, ongoing analysis will be Another set of states—including Maine, South Dakota, critical to ensuring that consumers benefit from the new and Virginia—emerged as leaders in implementing the protections regardless of the state they live in. market reforms even though each will have a feder- ally facilitated marketplace and will not expand their Medicaid program. And still another group—includ- METHODOLOGY ing Arizona, New Jersey, and West Virginia—opted to This analysis is based on a review of new actions taken expand their Medicaid programs but did not take action by all 50 states and the District of Columbia between on all of the market reforms or establish their own January 1, 2010, and November 1, 2013, to imple- marketplaces. ment or enforce the Affordable Care Act’s market Where states have been unable or unwilling reforms. The market reforms studied include 1) the to take action to implement the Affordable Care Act, “early market reforms,” often collectively referred to as federal regulators have stepped in. Indeed, federal regu- the “Patient’s Bill of Rights,” which went into effect lators will directly enforce the market reforms in five for health insurance plan or policy years beginning on states, collaborate with state regulators in an additional or after September 23, 2010; and 2) the “2014 market three states, and operate the marketplaces in 34 states. reforms,” which include seven of the Affordable Care By filling gaps in state implementation or supporting Act’s most critical consumer protections that went into state efforts to enforce the law, federal regulators have effect for health insurance plan or policy years begin- helped to promote two of the law’s mechanisms to ning on or after January 1, 2014. Our review included increase access to coverage—the market reforms and new state laws, regulations, and subregulatory guidance. the marketplaces—in every state. Yet, federal regulators www.commonwealthfund.org17 The resulting assessments of state action were con- firmed by state regulators in all but seven states. A state may not have taken action on the mar- ket reforms if existing state law is consistent with the Affordable Care Act, or if the state already has author- ity to enforce federal law. Because our findings are lim- ited to new state action since January 1, 2010, we did not analyze whether existing state laws are consistent with federal requirements. We incorporated previously published data on states’ decisions to establish health insurance market- places and expand their Medicaid programs. These data are cited where they appear. 18 IMPLEMENTING THE AFFORDABLE CARE ACT: THE STATE OF THE STATES 6 NOTES Pub. L. 111-148, 124 Stat. 782 (2010) § 1321 (codified at 42 U.S.C. § 18041 (2012)). 7 T. S. Jost, Health Insurance Exchanges and the Affordable 1 Pub. L. 111-148, 124 Stat. 782 (2010) §§ 2711-2714, 2719A, Care Act: Key Policy Issues (New York: The 10103; Pub. L. 111–152, 124 Stat. 1029 (2010). Most of Commonwealth Fund, July 2010). the early market reforms were included in legislation 8 introduced and debated in prior congresses, such as S. R. Collins, K. Davis, J. L. Nicholson et al., Realizing S.2706/H.R. 6528, “Health Insurance Coverage Health Reform’s Potential: Small Businesses and the Protection Act” (2008) (restricting lifetime limits), Affordable Care Act of 2010 (New York: The S.3115/H.R. 2842, “Children’s Health Protection Act of Commonwealth Fund, Sept. 2010). 2007” (prohibiting preexisting condition exclusions for 9 children under 19), and S.114/H.R. 1668, “KIDS First Act Pub. L. 111-148, 124 Stat. 782 § 1321(c) (codified at 42 of 2005” (requiring coverage for young adults on a par- U.S.C. § 18041); 45 C.F.R. §§ 155.100 et seq. ent’s health plan). In addition, some of the reforms 10 S. Dash, C. Monahan, and K. W. Lucia, Implementing the dated to provisions included in earlier legislation gener- Affordable Care Act: State Decisions About Health ally known as the “Patient Bill of Rights.” J. P. Hearne Insurance Exchange Establishment (Washington, D.C.: and H. R. Chaikind, Patient Protection and Managed Care Georgetown University Health Policy Institute, April (Washington, D.C.: Congressional Research Service, 2013). See also S. Dash, C. Monahan, and K. W. Lucia, Oct. 25, 2002); and President’s Advisory Commission Health Insurance Exchanges and State Decisions on Consumer Protection and Quality in the Health Care (Washington, D.C.: Health Affairs and Robert Wood Industry, Appendix A: Consumer Bill of Rights and Johnson Foundation, July 18, 2013). Responsibilities, www.hcqualitycommission.gov/final/ append_a.html. 11 Ibid. 2 Pub. L. 111-148, 124 Stat. 782 (2010) §§ 1201, 1302 and 12 Ibid. Public Health Service Act §§ 2701 et seq.; Pub. L. 111-152, 13 124 Stat. 1029 (2010). These requirements include implementing a quality improvement strategy and meeting network adequacy 3 K. Keith, K. W. Lucia, and S. Corlette, Implementing the standards which are used to ensure that plans include a Affordable Care Act: State Action on the 2014 Market sufficient number and type of health care providers, Reforms (New York: The Commonwealth Fund, Feb. among other certification requirements. 2013); and K. Keith, K. W. Lucia, and S. Corlette, 14 Implementing the Affordable Care Act: State Action on Dash, Monahan, and Lucia, Implementing the Affordable Early Market Reforms (New York: The Commonwealth Care Act: State Decisions, 2013. Fund, March 2012). 15 Although state regulators will play this role, the federal 4 T. S. Jost, “The Regulation of Private Health Insurance” government retains ultimate authority over operation of (Washington, D.C.: National Academy of Social the exchange. Insurance, National Academy of Public Administration; 16 Princeton, N.J.: Robert Wood Johnson Foundation, Jan. Center for Consumer Information and Insurance 2009). Congress reaffirmed this role in 1945, when it Oversight, Letter to Issuers on Federally Facilitated and passed the McCarran–Ferguson Act, which recognized State Partnership Exchanges (Washington, D.C.: U.S. state authority over private health insurance unless Department of Health and Human Services, April 5, Congress expressed its intent to regulate coverage. See 2013). See, for example, Center for Consumer 15 U.S.C. §§ 1011, 1012 (2006). Information and Insurance Oversight, Completing the Network Adequacy Portion of the QHP Application (on file 5 See, for example, “Request for Comments Regarding with authors), which describes whether insurers must Section 2718 of the Public Health Service Act (Medical comply with existing state standards on network ade- Loss Ratios)” (Washington, D.C.: Departments of quacy or new federal standards in order to participate in Health and Human Services and Labor, and the Internal federally facilitated exchanges; in most states, federal Revenue Service, April 8, 2010), which notes that “the regulators have deferred to existing state standards or Secretaries of HHS, Labor, and Treasury have shared review. interpretive and enforcement authority under Title XXVII 17 of the PHS Act, Part 7 of ERISA, and Chapter 100 of the Pub. L. 111-148, 124 Stat. 782 § 2001(a)(1) (codified at 42 Code.” U.S.C. § 1396a(a)(10)(A)(i)(VIII)). www.commonwealthfund.org19 18 28 Ibid. § 2001(a)(3) (codified at 42 U.S.C. § 1396d(y)(1)). Ibid. 19 29 See National Federation of Independent Businesses v. Ibid. Sebelius, 132 S. Ct. 2566 (2012). 30 Public Health Service Act § 2723 (codified at 42 U.S.C. § 20 G. M. Kenney, S. Zuckerman, L. Dubay et al., Opting in 300gg-22 (2012)); 45 C.F.R. § 150.203. to the Medicaid Expansion Under the ACA: Who Are the 31 Uninsured Adults Who Could Gain Health Insurance The District of Columbia established a single market- Coverage? (Washington, D.C.: Urban Institute, Aug. place for all individual coverage in 2014 with a transi- 2012). tion period for some small-group coverage through 2015. The small-group coverage that is offered outside 21 G. M. Kenney, L. Dubay, S. Zuckerman et al., Opting Out the exchange must meet the same standards as quali- of the Medicaid Expansion Under the ACA: How Many fied health plans sold through the exchange. Uninsured Adults Would Not Be Eligible for Medicaid? 32 (Washington, D.C.: Urban Institute, July 5, 2013). J. Piotrowski, Premium Assistance in Medicaid (Washington, D.C.: Health Affairs and Robert Wood 22 States are also leveraging the System for Electronic Rate Johnson Foundation, June 6, 2013). and Form Filing (SERFF)—an automated system devel- 33 oped by the National Association of Insurance We calculated this estimate based on the state-specific Commissioners which allows electronic submission and data displayed in Exhibit 2 of Kenney, Dubay, review of insurer form and rate filings. States have Zuckerman et al., Opting Out of the Medicaid Expansion, amended their SERFF materials, adopted SERFF filing 2013. requirements such as compliance summaries, and pro- 34 Ibid. vided guidance to insurers on how to amend their fil- ings for compliance with federal law. 35 Public Law 104–191, 110 Stat. 1936 (1996) (codified at 23 42 U.S.C. §§ 300gg, 1320d et seq. and 29 U.S.C. § 1181 These states are Arizona, Colorado, Connecticut, et seq.). Hawaii, Indiana, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, North 36 At least 12 states—Arkansas, Colorado, Florida, Indiana, Carolina, North Dakota, Oregon, Utah, Vermont, and Louisiana, Maryland, Minnesota, Montana, Texas, Utah, Virginia. Washington, and Wisconsin—passed legislation to 24 close or consider closing their high-risk pool, with some Some states rely on inherent authority to regulate insur- scheduled to close as early as December 2013. And ance or prevent unfair trade practices while others some states—such as Colorado, Georgia, Maryland, report general authority to execute all insurance laws, Minnesota, and Ohio—repealed or suspended existing including federal law. requirements related to conversion plans. 25 K. Keith and K. W. Lucia, New Guidance: Federal 37 Some states—such as Alaska, Iowa, Montana, and Regulators Allow “Collaborative Arrangements” for ACA Virginia—took new action that resulted in the designa- Enforcement, The Commonwealth Fund Blog, April 5, tion of an “effective” rate review program in the individ- 2013. ual and small-group markets. Center for Consumer 26 2013 Fla. S.B. 1842 (codified at Fla. Code § 624.06); Information and Insurance Oversight, State Effective Louisiana Department of Insurance, Enforcement Rate Review Programs, www.cms.gov/CCIIO/Resources/ Authority of the Commissioner Regarding the ACA and Fact-Sheets-and-FAQs/rate_review_fact_sheet.html. In MHPAEA, Bulletin 2013-03 (April 16, 2013); and contrast, Oklahoma and Texas lost their designation as Montana Commissioner of Securities and Insurance, “effective” rate review programs and federal regulators 2014 Health Plan Form Filings, Including will now review certain rates. Ibid. In addition, Florida Recommendations Regarding Qualified Health Plan passed legislation that exempts plans that must comply Certification, Advisory Memorandum (March 18, 2013). with the Affordable Care Act in the individual and small- group markets from undergoing rate approval or rea- 27 Center for Consumer Information and Insurance sonableness determinations for 2014 and 2015. 2013 Oversight, Ensuring Compliance with the Health Fla. S.B. 1842. Insurance Market Reforms (Washington, D.C.: CCIIO). 20 IMPLEMENTING THE AFFORDABLE CARE ACT: THE STATE OF THE STATES 38 Some states—such as Arkansas, Colorado, Connecticut, states, such as Oregon, Utah, and Washington, Delaware, Idaho, New Hampshire, Rhode Island, and addressed association health plan coverage. Utah—adopted new requirements to regulate stop–loss 39 coverage. Of these, Arkansas, Colorado, Rhode Island, At least 12 states—Alabama, Arizona, Arkansas, and Utah required stop–loss insurers to meet minimum Georgia, Illinois, Indiana, Maine, Michigan, New levels of financial protection (known as attachment Hampshire, North Carolina, South Dakota, and points) and Delaware prohibited stop–loss coverage for Washington—exempted health care sharing ministries small employers with fewer than 15 employees. Other from state insurance law since 2010. www.commonwealthfund.org21 One East 75th Street 1150 17th Street NW New York, NY 10021 Suite 600 Tel 212.606.3800 Washington, DC 20036 Tel 202.292.6700 www.commonwealthfund.org