GOP Lawmaker Wants Changes in HHS Rule for Health Exchanges
By Emily Ethridge, Congressional Quarterly
August 30, 2011

A House subcommittee chairwoman is urging the Obama administration to clarify its proposed rule on the health care law’s state insurance exchanges to prevent small businesses from being unduly burdened and to keep small insurers in the market.

The Department of Health and Human Services (HHS) unveiled in July a proposed rule for the state-run exchanges, which will begin operation in 2014 and are a major component of last year’s health care law (PL 111-148 , PL 111-152).

In a letter to HHS Secretary Kathleen Sebelius , Renee Ellmers of North Carolina reiterated GOP concerns that the law imposes hardships on small companies and asked that the final rule include standards that do not exclude small insurers from the marketplace.

“HHS has failed to take into account the considerable impact of the proposed rule on small insurers and small employers, particularly small insurers’ inability to meet the medical loss ratio standard, and the resulting loss of competition, options and higher premiums,” said Ellmers, who chairs the Small Business Subcommittee on Healthcare and Technology.

The law requires insurers to spend at least 80 percent of their premium revenue on medical care, a standard known as the medical loss ratio. The Government Accountability Office recently concluded that the regulation will result in lower premiums. But some small insurers say they cannot meet the standard.

Ellmers said the proposed rule does not address several aspects of how the federal government will operate an exchange if states do not set up their own. Only 10 states have enacted legislation to fully establish exchanges, while such bills are pending in 7 states and have failed or expired in 16 others, according to the Center on Budget and Policy Priorities.

An estimated 8.9 million people will enroll in exchanges in 2014, with the number growing to 23.4 million in 2018, according to Congressional Budget Office estimates.

Ellmers also said the administration has not defined a “qualified health plan” for the exchange program that will offer plans to small employers. And she said the proposed rule does not specify whether small businesses must select a plan through that special program, or if they can pick one through the general exchange.

But Ellmers praised the administration for giving states flexibility in designing the exchanges and for keeping deadlines loose. Although the law requires that states have the exchanges ready for approval by Jan. 1, 2013, the proposed rule said HHS could issue “conditional approval” for some states then.

Ellmers’ subcommittee held a hearing in late July on whether small businesses will be able to maintain existing insurance coverage under the law.