The State Corporation Commission will assume a new role on July 1 to manage insurance plans that will be sold on a health benefits exchange the federal government will begin operating in Virginia in 2014.
But the commission and its Bureau of Insurance already have taken big steps to get ready for a major shift in the way health insurance policies are underwritten, sold and regulated in Virginia.
The SCC has adopted regulations to manage plans on the exchange and carry out other insurance reforms under the Patient Protection and Affordable Care Act. It also has ordered presentations by participating insurers on July 16 to guard against big increases in rates.
“Given the importance of the cost of health insurance to Virginia’s small businesses and individuals (many of whom are self-employed), the commission intends to review closely, prior to approval, rates for health insurance that may represent a significant impact on small businesses and individuals,” the SCC said in a scheduling order on May 24.
New state laws will expand the responsibilities and authority of the Bureau of Insurance to certify that health plans qualify for selling policies on the exchange, and review and approve the rates they charge.
The regulatory agency also will ensure, among other things, that:
• policies include the “essential health benefits” required under federal law;
• insurers devote a specified portion of premiums to paying benefits instead of profits and administrative costs; and
• consumers are protected from being denied policies because of pre-existing medical conditions and having their medical histories used for setting insurance rates.
“It’s a new world of health care,” said Jill Hanken, senior attorney at the Virginia Poverty Law Center.
Nine health plans have applied to participate in the individual insurance market on the health benefits exchange, which the federal government will begin operating on Jan. 1, and six have applied for the Small Business Health Options Program for small group insurance coverage. The SCC has until July 31 to certify plans and approve rates, which then undergo federal review.
“We’ve been real busy,” said Jaqueline K. Cunningham, the state’s commissioner of insurance.
State lawmakers gave the SCC the new role this year in lieu of Virginia operating its own exchange under the Affordable Care Act, but now they are nervous about whether the federal government will be ready to begin enrolling people on Oct. 1 in advance of the electronic exchange opening its virtual doors.
“I’m not worried about the SCC. I’m not worried about the (insurance companies). I’m not worried about the (health and human resources) secretariat,” said state Sen. John Watkins, R-Powhatan, who preferred a state-run exchange. “I’m worried about the feds. I don’t think they’ll be ready.”
If federal officials are worried, they aren’t showing it.
“When open enrollment begins on October 1, consumers in Virginia and across the nation will have access to a new insurance marketplace where they will be able to compare insurance options and enroll in health plans that meet their needs,” said Fabien M. Levy, press secretary at the U.S. Department of Health and Human Services.
The federal government will establish and operate exchanges in 26 states, including Virginia, and participate in a partnership with states in seven others. Seventeen states and the District of Columbia will operate their own exchanges.
The new marketplaces will serve small businesses and people with incomes from 100 to 400 percent of the federal poverty level, with a sliding scale of subsidies depending on how much people earn.
Gov. Bob McDonnell and the General Assembly wanted no part of either a state-operated exchange or a formal partnership with the federal government, but the state will play a number of crucial roles in the exchange’s operation.
The biggest state role will be played by the SCC under two laws adopted by the General Assembly this year.
The laws give the commission authority to certify and manage health plans on the exchange, and to enforce insurance reforms required by the Affordable Care Act.
Among those reforms is a change in how insurers can rate customers. Ratings can reflect differences in geography, age and tobacco use, but not much else.
“You’re not really underwriting in any way for underlying health status,” Cunningham said.
The laws will expand the Bureau of Insurance’s authority to review and approve insurance premium rates.
The review will include whether the actuarial value of the plans — measuring whether consumers get the coverage they pay for — meets the requirements of the federal tier system of bronze, silver, gold and platinum coverage.
Insurance regulators are working with the Virginia Department of Health to make sure participating health plans have adequate networks of medical providers to serve the customers they enroll.
The General Assembly approved $1.3 million to help the SCC get started, subject to reimbursement under a federal grant for which the bureau has applied. So far, the work has required a modest increase in staffing and upgrade in technology.
“We’re trying to be careful about making the best of our existing resources right now,” Cunningham said.