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Health Insurance Exchanges: State Planning and Establishment Grants

On September 30th, HHS announced $49 million dollars in grants to help 48 States and the District of Columbia plan for the establishment of health insurance Exchanges.  These grants of up to $1 million each will give States resources to conduct the research and planning needed to build a better health insurance marketplace and determine how their Exchanges will be operated and governed. Future funding will support development and implementation activities that States will undertake through 2014.

Today, many individuals and small businesses are on their own when trying to find affordable health insurance.  The lack of transparency in the insurance market, combined with the inability of individuals and small businesses to band together to pool risk, results in higher insurance premiums.   Health insurance companies can use the current market rules to disadvantage individuals and small businesses by differentiating their products to avoid covering people who may need care, leading to confusion and higher prices for consumers. 

These planning grants begin the path toward 2014 when health insurance Exchanges will take what is now a very complicated and confusing process and turn it into a simple, easy to navigate experience that benefits consumers, not insurance companies.  Health insurance Exchanges will create:

  • Lower Costs:  Exchanges will increase competition among private insurance plans through greater comparative shopping and more informed consumers.  They will also provide small businesses the same purchasing power in Exchanges as large businesses.
  • One-Stop Shopping:  Exchanges will make purchasing health insurance easier by providing eligible consumers and businesses with tools to compare benefits, pricing, and quality – to help make the best choice for themselves, their families, or their employees.
  • Greater Benefits and Protections:  Exchanges will create a health insurance marketplace that will allow employers and consumers to choose from plans offering high quality benefits.  Individuals and families purchasing health insurance through Exchanges may also qualify for tax credits and reduced cost-sharing depending on their income.

Although State-based Exchanges are not required to be operational until 2014, work is already underway to conduct the necessary market research and planning.   The State Planning and Establishment grants announced today will give States the resources they need to conduct the research and planning needed to build a better health insurance marketplace and determine how their Exchanges will be operated and governed.

Q. How were the grant applications evaluated?

States were required to submit a narrative of their planning activities, a workplan timetable and a budget.  They were evaluated based on their planning activities, which included plans for background research, stakeholder involvement, financing of the Exchange, governance, technical infrastructure, business operations, resources and capabilities, public program integration and any regulatory action needed.

Q. How will States use this money?

States have proposed to use these funds in a variety of initial planning activities.  Some ways that States have proposed to use this funding include, but are not limited to:

  • Assessing current information technology (IT) systems and infrastructure and determining new requirements.
  • Developing partnerships with relevant stakeholders to gain public input into the Exchange planning process.
  • Planning for consumer call centers to answer questions from their residents.
  • Determining needed State statutory and administrative changes, including changes that may be necessary to set up the governance structure, facilitate health plan contracting, consumer outreach, etc.).
  • Hiring key staff and determining ongoing staffing needs.
  • Planning the coordination of eligibility and enrollment systems across Medicaid, CHIP, and the Exchanges.
  • Developing performance metrics, milestones, and ongoing evaluation

Q.  How many States applied for the first round of grants?  How many States received awards?

Forty-eight States and the District of Columbia applied for the first round of grants.  All 49 applicants were awarded up to $1 million each.

Q. Will all 48 States and the District of Columbia end up operating their own Exchange?

The purpose of these grants is to give States the resources they need to conduct the research and planning required to build a better health insurance marketplace and determine how their Exchanges will be operated and governed.  As part of this process, some States may decide to operate their own Exchange, while other States may elect to have the federal government run the Exchange in their State.

No matter the decision, the end result is the same – starting in 2014, individuals and small businesses in every State will be offered through health insurance Exchanges – new, competitive, State-run and consumer-centered health insurance marketplaces. 

Q. What States did not apply? 

Minnesota and Alaska chose not to apply for these grants.

Q. What will happen with the States that did not apply for the first round of funding?

All States, regardless of whether they applied for this first round of grants, will be eligible to apply for future rounds of funding.  By 2014, individuals and small businesses in every State will be able to purchase health insurance through an Exchange. 

Q. Why aren’t all States receiving grants?  Isn’t this just another example of States resisting the implementation of the Affordable Care Act?

Forty-eight States and the District of Columbia have applied for, and will receive, grants through this program – clearly demonstrating the need and desire for new resources and tools to help them protect consumers.  Given the current fiscal restraints of many States, we find the response to this grant program to be very strong.  This is just the first round of grants, so States that did not apply for funds now will be able to request funds in the future.

Q. What do these grants require of StatesWhat do they have to report to HHS?

All successful applicants must submit:

  1. Quarterly Project Reports
  2. Final Project Report
  3. Public Report
  4. Federal Financial Report (an accounting of expenditures made)
  5. Quarterly reports to comply with Payment Management regulations

Grantees must also comply with performance review and audit requirements.

Q: When will the States actually receive the money from the grant?

The grant cycle starts on September 30, 2010 and ends after one year.

Q: Some States already operate an Exchange. Do these States qualify for Exchange planning and establishment grants?

Yes. States that already have an Exchange may use Exchange grants to fund activities related to planning and implementing changes necessary to bring their existing Exchange into compliance with the Exchange requirements set forth in the Affordable Care Act.

Q: After the States have been awarded funding and conduct their Exchange planning activities, does HHS have plans to share best practices?

We anticipate convening States for this purpose and will announce such plans when they are finalized.  We also plan on hosting several webinars on topics identified by grantees as well as several other venues to share best practices. 

Q: Where will funding come from for Exchange IT functions?

The funding for the planning of Exchange IT functions should come from the Exchange Planning and Establishment Grants. Funds from this grant solicitation can be used to plan how an IT system will interface with Medicaid, for example.  Future funds will be made available for the implementation of Exchange IT functions.