HHS Grants $220 Million For Health Insurance Exchanges

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The Department of Health and Human Services (HHS) has awarded 13 states nearly $220 million in Affordable Insurance Exchange grants to help them create fully operational online exchanges by 2014 that individuals and small businesses will use to select health insurance plans.

The recently announced Affordable Insurance Exchange grants bring to 29 the number of states HHS deems as having made significant progress in developing these exchanges. The new states receiving funding are: Alabama, Arizona, Delaware, Hawaii, Idaho, Iowa, Maine, Michigan, Nebraska, New Mexico, Rhode Island, Tennessee, and Vermont.

Affordable Insurance Exchanges, which are mandated under the Patient Protection and Affordable Care Act (PPACA), will allow individuals and small businesses to go online to find and compare private health insurance plans. The role of these state health insurance exchanges is to bring transparency to the health insurance marketplace, as well as enable consumers to compare plans based on price and quality, which will spur competition and help lower costs.

[ HHS will give healthcare providers an additional year to meet Meaningful Use Stage 2 requirements. Learn more: Doctors Get Timeline Extension For EHR Meaningful Use. ]

For example, Delaware's health insurance exchange received $3.4 million to help the state advance its Eligibility and IT Gap Analysis Technical Assessment, which assesses how ready Delaware's IT systems are to meet PPACA compliance.

Under guidance from the Delaware Department of Health and Social Services and the Public Consulting Group (PCG), a consulting firm, Delaware's exchange has received assistance to determine the exchange framework that best fits the state and addresses the needs of its citizens.

Crystal English, Delaware's health insurance exchange project director, told InformationWeek Healthcare that the task of implementing an exchange that supports a deluge of data from health insurance plans, as well as state and federal governments, has not been easy.

"From the beginning, the timeline for Affordable Care Act implementation has been a challenge. Compounding this is not having information on key aspects of the exchange, simply because the information has yet to be released by the federal government," English said. "Looking forward, a key consideration and challenge is ensuring the long-term sustainability of the exchange once federal support subsides."

English also said federal funding has made it possible for Delaware to access expertise and secure consulting services from talented experts in the fields of healthcare, insurance, Medicaid eligibility and enrollment, and IT systems. She noted that like most states, Delaware's eligibility and enrollment system is a legacy system that does not possess all the functionality required for PPACA compliance. English said she welcomes federal funds which support needed IT upgrades as Delaware builds a system that can handle issues of eligibility and enrolment for individuals and small businesses to select the health plan of their choice.

At the same time that HHS announced the grants, the department also answered a set of frequently asked questions intended to guide state legislative sessions that begin in January. The department said answers to these questions will help advance state policy development around exchanges.

For example, the FAQ clarifies that exchange grants can be used to build a state exchange that is operational after 2014; that state-based exchanges will not be charged for accessing federal data needed to run exchanges in 2014; and that state insurance rules and operations will continue even if the federal government facilitates a state's exchange. HHS will also provide greater flexibility in eligibility determinations, for example, to allow a state-based exchange to enable the federal government to determine eligibility for premium tax credits.

"We are committed to giving states the flexibility to implement the Affordable Care Act in the way that works for them," HHS secretary Kathleen Sebelius said in a statement. "Exchanges will give consumers more choices and make it easy to compare and shop for insurance plans."

Of the 13 states awarded grants, 12 are receiving level one grants, which provide one year of funding to states that have already made progress using their exchange planning grant. The 13th state, Rhode Island, received the first level two grant of $58 million. A level two grant provides multi-year funding to states further along in the planning process.

HHS also said 49 states and the District of Columbia have already received planning grants, and 45 states have consulted with consumer advocates and insurance companies.

Thirteen states have passed legislation to create a health insurance exchange.

More and more insurers are investing in modernizing their policy administration capabilities, but joint research by SMA and Insurance & Technology has found that projects remain challenged because of poor understanding of needed business capabilities, deficient project management, and over-reliance on outside expertise. Download the report here (registration required).