June 18, Submitted Electronically Via Re: General Guidance on Federally Facilitated Exchanges. Dear Ms.

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1 June 18, 2012 Marilyn Tavenner Acting Administrator Centers for Medicare & Medicaid Services Department of Health and Human Services Room 445-G, Hubert H. Humphrey Building 200 Independence Avenue, SW Washington, DC Submitted Electronically Via Re: General Guidance on Federally Facilitated Exchanges Dear Ms. Tavenner, I am writing on behalf of The National Association of Health Underwriters (NAHU), a professional trade association representing more than 100,000 licensed health insurance agents, brokers, consultants and employee benefit specialists nationally. We are pleased to provide comment on the General Guidance on Federally Facilitated Exchanges, released on May 16, The members of NAHU work on a daily basis to help millions of individuals and employers purchase, administer and utilize health insurance coverage. A representative group of health insurance agents and brokers that actively monitors and participates in exchange development activities in every state helped to develop these comments, so they reflect the views of experts who fully understand both consumer needs and interests as well as the various points the states are at regarding health benefit exchange implementation. NAHU appreciates the recognition HHS provides to the role health insurance agents and brokers are expected to play in either fully federally facilitated exchanges (FFEs) or partnership exchanges. Also, we support the four guiding principles supporting consumers, maintaining market parity, utilizing the expertise of states and seeking the input of key stakeholders to guide decision-making processes that you have articulated for FFEs. However, we have some comments, questions and concerns we would like to articulate about specific sections of the guidance. As requested, we have organized our comments on a section-by-section basis. State Partnership in a Federally Facilitated Exchange NAHU would like to request clarification as to where health insurance agents and brokers fall with regard to a partnership FFE. While the guidance clearly states that a state may elect to assume consumer assistance oversight as a partnership function, nowhere in the description of that function are licensed health insurance agents and brokers mentioned, although management of the navigator program is discussed in detail. Nor are agents and brokers mentioned in the plan-management functions, although the chart does indicate that the state would have oversight over QHP marketing practices. Marketing does include a portion of the role agents and brokers will play in an exchange, but it does not include the consumer and policy support services they provide to their clients over each plan year.

2 Furthermore, it s not clear that QHP marketing practices oversight includes the work of independent agents and brokers. States generally have regulatory authority over agents and brokers now, but the exchanges will be a new marketplace. The final exchange rule published in March indicates that addition to state-law compliance, brokers who wish to assist individual consumers with exchange-related premium tax credits and cost-sharing reductions will be required to register with the exchange, receive training on the full range of qualified health plan options, public health and insurance affordability programs, and comply with all relevant privacy requirements. Under a partnership FFE, who will be responsible for these requirements, how will they be conducted and enforced and who will be responsible for agent and broker oversight generally? Our recommendation would be that the state departments of insurance should continue to retain primary oversight of health insurance agents and brokers, and that future guidance or regulations should clarify this point. NAHU would also like to request clarification about a variety of financing issues. In the sections of the bulletin that describes FFEs to be run exclusively by HHS, a user fee on exchange participating health plans is mentioned as the financing mechanism. Will this be the same method used to finance a partnership FFE from January 1, 2015, on forward, when the exchanges are required to be self-sustaining? Will states entering into a partnership exchange be able and/or required to use additional means of funding that may be at their disposal but not at HHS s disposal (such as a state appropriation) to fund their portion of ongoing exchange expenses? Who will shoulder the liability of a partnership FFE, both financially and in terms of legal liability, should a consumer encounter a problem due to an exchange error and need to be made whole? Concerning the navigator program, the Partnership FFE guidance suggests that states may opt to manage their navigator programs, but HHS will select the navigator entities. Where will the navigator grant funds come from, particularly during the first year of exchange operations, given that federal exchange establishment grant monies may not be used to finance the program? How will the navigator program be financed and operational in time for the projected October 1, 2013, open enrollment start date, given that QHP selection and contracts will not be finalized until the late summer of 2012 and presumably QHPs may not be assessed before then? Who will manage the day-to-day operations of navigator grants, determine how and when funds are awarded and ensure that grant recipients meet and maintain all grant criteria? Who assumes financial and legal liability for the navigator program given that navigator entities may not be required to carry errors and omissions insurance? Will other professional-liability coverage be required of entities that receive navigator grants, or will the states and/or federal government be required to assume the financial and legal responsibility for the exchange navigator program and grant recipients? Plan Management in a Federally Facilitated Exchange NAHU supports the statement in the guidance that it is HHS intent, for at least the first year of the exchanges, to certify all qualified health plans that meet the specified standards. NAHU believes that this practice should continue indefinitely in order to provide for the maximum degree of consumer choice and competition within the FFEs. In addition, we appreciate the plan to allow states the flexibility to maintain much of their traditional insurance regulatory roles. However, we believe that states should be given greater flexibility to certify health plans for participation on the exchanges, and such criteria should promote competition and preserve consumer choice and not go beyond criteria required in federal law.

3 Furthermore, we are very concerned about the timeframe outlined in the guidance for QHP certification. Exchange open enrollment is only 16 months away. The timeline proposed indicates that QHP plan agreements will not be finalized until late summer of While our organization represents health insurance agents and brokers, not health plan issuers, based on our observations of how issuers have entered new markets and created new health plan products up until this point, this schedule seems to be ambitious at best. We have concerns that unless it can be accelerated and more definitive information is provided to potential QHPs soon, particularly about the user fees and risk-adjustment mechanisms, exchange participation in terms of issuers may be negatively affected. From the perspective of marketing exchange products to potential exchange individual and particularly small-business consumers, we cannot stress enough that a month or two of lead time as to what health plans will be offering products and what those product designs and premium pricing and passed-through user fee costs might be is insufficient. Small employers, in particular, plan out their benefit offerings months in advance; a lack of clear information at the outset of their decision-making processes will be a strong disincentive to purchase coverage through the exchanges, particularly in the first year. The health insurance agent and broker community believes that at least six months of lead time is required to adequately educate individual and particularly group health care consumers about these specific new product offerings prior to any open enrollment period. This is particularly important when dealing with the new insurance products, rating rules, benefit mandates, actuarial tiers, pricing changes, plan designs, subsidies and other changes the exchange insurance marketplace will bring. Accreditation and Quality Reporting NAHU supports the phased-in approach HHS intends to adopt with regard to QHP accreditation and quality reporting standards and requirements. We also hope this flexibility will be extended to partnership FFEs and that it is clearly communicated to the states and District of Columbia that are moving ahead with state-based health benefit exchanges that phasing in such requirements is both acceptable and appropriate. NAHU urges HHS to consider phasing in other aspects of the exchange requirements as well. The two states that currently have operating exchanges, Massachusetts and Utah, have implemented their programs in stages. Pilot programs might be an entirely appropriate way to test exchange concepts in the different states and FFEs; NAHU believes HHS should both allow and encourage their use both in state-operated exchanges and in FFEs. Eligibility for Insurance Affordability Programs and Enrollment in the Individual Market NAHU appreciates the acknowledgement that traditional agents and brokers will continue to assist consumers in accessing health insurance and the assurance that HHS will work with agents and brokers to promote enrollment through FFEs. However, we would appreciate greater clarification as to what HHS means by the statement To the extent permitted by a state, an FFE will permit agents and brokers to enroll individuals in a QHP through an exchange. Current laws in every state allow licensed health insurance agents and brokers to sell and service all health insurance policies offered in the state, provided that they meet all state requirements, such as licensure and continuing education. We believe these existing state laws would cover all exchange-based QHPs unless a state or the FFE specifically acted to exclude traditional agents and brokers from their exchanges. To date, no state has taken action to specifically exclude agents and brokers from selling and servicing exchange-based coverage. In fact, all states taking action to establish their own exchanges or investigate a state exchange or partnership model have welcomed broker participation. We do not

4 anticipate state-level actions to ban traditional broker participation being an issue, particularly in those states that opt for a FFE. We also would welcome confirmation that qualified agents and brokers may assist consumers with all the private and public insurance options covered by the exchanges via the single streamlined application described in both this guidance and the final exchange rule. This would include Medicaid and CHIP coverage as wells as subsidized and non-subsidized QHP coverage. We believe that it was the intent of the statute to allow for this kind of assistance, and that further regulatory clarification in this area supports the no wrong door premise of providing coverage that is established by section 1413 of PPACA. Allowing for agents and brokers to assist all clients in obtaining whatever coverage may be available via the common application and to them will only increase the overall insured population. NAHU member agents and brokers welcome the opportunity to help all exchange consumers, regardless of income level, meet their health insurance needs. Agents and brokers provide consumers with needed assistance both at the point of enrollment and throughout the health coverage plan year since problems that require the assistance of a trained and licensed professional can occur at any time during the coverage cycle. NAHU appreciates the guidance provided about HHS intent to develop an Internet portal to the FFE for qualified agents and brokers if applicable standards are met. The guidance specifies that the portal will allow agents and brokers to help individuals apply for eligibility for enrollment in a QHP and for insurance affordability programs and, if applicable, select and enroll in a QHP through an FFE. Again, we request that this interface be expanded to allow for Medicaid and CHIP enrollment as well. We are eager to see additional guidance about these web portals and believe that there needs to be means in place to track and maintain accountability for agents and brokers who perform exchange services, both in person and online. We hope these matters will be addressed either in further guidance or in the finalized regulation. Our association would welcome the opportunity to work with HHS in more detail on how insurance agents and brokers can most efficiently assist health insurance exchange consumers within the FFE framework. With regard to agent compensation, NAHU believes that HHS should establish that health insurance agents and brokers working with FFEs outside of the navigator program will be compensated at prevailing market rates and that these rates will be established and handled by the private health insurance carriers offering QHPs through the FFEs. This is the standard used to compensate health insurance agents and brokers in the Utah Exchange and the Massachusetts Connector, as well as in private health insurance exchanges operating around the country. Fairly compensated agents and brokers will help ensure exchange success by bringing individuals and businesses to the exchange and, more importantly, ensure their continuous coverage and health plan service. Health insurance carriers should also retain the ability to contract with independent producers to sell and service QHPs and should be responsible for verifying agent licensure and other compliance matters. FFEs may want to consider utilizing something similar to the appointment process that carriers and most state insurance departments employ today in order to verify that agents and brokers are appropriately certified and able to do business with the FFEs. If states, carriers, agents, brokers and HHS were able to share this information via the National Insurance Producer Registry (NIPR), we believe it would be very helpful for all concerned.

5 Federally Facilitated SHOP Exchange Just as the nation s health insurance agents and brokers stand ready to assist individual health insurance consumers with their exchange purchasing and coverage service needs, we also are ready to serve small employers who may wish to purchase coverage through a federally facilitated Small Business Health Options Exchange (FF SHOP). In fact, as the guidance notes, agents and brokers will likely be the group best equipped to serve FF SHOP exchange consumers, as virtually all small-group health insurance coverage is placed and serviced through independent agents and brokers today. Licensed and certified insurance producers will do all they can to make FF SHOPs successful ventures but, from the outset, we feel that HHS should set realistic expectations for what will constitute a successful SHOP exchange. Experience from other states that have established purchasing pools for small businesses, including the Massachusetts Connector and the Utah Exchange, shows that not all small businesses are drawn to the exchange concept and that enrollment may be very low, particularly initially. The Utah Exchange, which only serves small businesses and has been offering coverage since 2010, still only serves several hundred employers and several thousand total enrollees. A pilot program to offer coverage to larger employers that was slated to begin in 2011 has been shelved by the state. The Massachusetts Connector has also struggled to gain enrollment in its small-business sector and, on multiple occasions, delayed opening its pool to the employer market. Once the employer spectrum of the Massachusetts Connector passed the trial phase, it struggled to attract carriers to offer small employers products using the definedcontribution model that exists in Utah and would be required by the FF SHOP exchange. So after several years of study, the Connector switched to offering regular small-group products and actually resorted to purchasing books of business from insurance intermediaries to gain enrollment. Even still, the Connector serves less than 2,000 small employers and only several thousand overall employees today. In addition to these real-life market experience indicators that show difficulties a FF SHOP exchange may face, we believe that there are a variety of PPACA-specific factors that may make employers and health insurance carriers very hesitant to participate in a FF SHOP exchange, particularly initially. As we mentioned earlier, the timing process outlined by HHS with regard to SHOP exchange carrier contracting is extremely tight, and many health insurers in the state are already developing their own private exchange models that will be similar to the SHOP exchange concept. Unless the timeline in terms of providing definitive QHP product design and pricing information for consumers is significantly altered, employers will find the lack of advance information about participating carriers and product design to be a significant barrier to participation. The additional price impact of whatever FF SHOP user fees or assessment costs that will be necessary to fund the exchange but also passed on to consumers could also be a disincentive to purchase FF SHOP coverage. While the defined contribution model combined with the federal requirement for premium aggregation is likely to be an attractive idea to some employers, there still needs to be further federal and state guidance issued about the level of control employers will have over their employee s coverage options within a FF SHOP exchange. For example, NAHU believes it is critical that employers continue to have the option of keeping their employees together when selecting

6 qualified health coverage. A successful FF SHOP will allow participating employers to choose the plan or plans they will offer to their employees. Another concern we have is that small employers with locations in multiple states may find that the proposed requirement to allow employees to utilize the FF SHOP exchange in the state of the employee s primary worksite is much too complex to administer. For example, employers would have to work with multiple SHOP exchanges with respect to contribution of premiums, enrollment, reconciliation, etc, eliminating the value of premium aggregation and enrollment simplicity that SHOPs are designed to provide. If small employers are required to interact with multiple exchanges to provide coverage, they may opt not to offer group coverage and push employees into individual coverage, depriving consumers of the many benefits of group health insurance coverage. As an organization whose members routinely help their clients comply with all relevant healthcare laws, we have significant concerns and questions as to how employer SHOP exchange participation (either through a FFE or otherwise) will intersect with existing employer responsibility requirements relative to the coverage they provide to employees. Unless these concerns are addressed clearly and specifically in relatively short order, our association believes that many employers will not be able to even consider FF SHOP coverage as an option. We see compliance concerns with COBRA, ERISA, HIPAA, Medicare secondary payer rules, FMLA, Sections 125 and 105, and more. For example, will the FF SHOP coverage be considered group plan or individual coverage for the purposes of state benefit mandates, Medicare, cafeteria plan rules, etc? If it is individual coverage, significant legal concerns arise with all of these requirements. For example, Medicare does not recognize individual coverage, including COBRA coverage as creditable coverage. Permanent penalties apply if an individual does not have other creditable coverage and does not apply for Medicare in a timely fashion. There are also significant legal concerns for the use of Sections 125 and 105 for the purchase of individual coverage. Another consideration is the COBRA rights of employees and the COBRA responsibility of employers if the SHOP coverage is deemed to actually be individual coverage. If SHOP coverage is deemed to be group coverage, as we expect but are not certain, then COBRA, ERISA and Medicare secondary payer concerns come into play. Will FF SHOP offerings be subject to ERISA requirements? What about COBRA? How will employers utilizing the FF SHOP or a state SHOP, for that matter, meet all of their general election and notice requirements? Regarding the Medicare secondary payment requirements, who is the primary payer if a group is split between many QHPs and issuers? If these issues and many others like them are not immediately addressed, participation in the FF SHOP will be extraordinarily limited. Agents and brokers have a legal liability to accurately advise their clients about these matters and need to be able to answer the questions of employer clients on these topics as soon as possible to ensure any degree of employer comfort with the SHOP concept. Furthermore, until these issues are clearly resolved, the FF SHOP will not be able to meet its goal of ensuring parity with the outside market. Another significant market-parity concern we have regarding the FF SHOP is with the way that the final exchange rules specify that employees may be counted in order to establish SHOP exchange eligibility. These rules specify that while HHS has not made a final determination in this regard, you are considering requiring that all employees, regardless of their part-time or full-time status or overall coverage eligibility status, must be counted equally when determining SHOP small group eligibility. This standard of counting employees for the purposes of determining the size of an employer

7 group conflicts with most current employee benefit plan practices and is not the way small-group plan eligibility is established in most states currently. If this counting standard is used, the result may be that many employers who could have an interest in the SHOP may not actually be eligible to participate because they have too many part-time employees. Meanwhile, using the different counting standards employed by traditional health insurance carriers today would likely qualify these same employers for traditional small employer or private exchange coverage outside the exchange marketplace, raising significant parity concerns. To solve this conflict, NAHU recommends that HHS issue immediate clarification that the SHOP exchanges will mirror the existing state-specific standard of counting employees for small-group coverage eligibility when ascertaining whether or not a small employer is eligible to purchase coverage via that state's SHOP exchange. NAHU believes that all of the concerns we have identified with regard to SHOP exchanges are causing a great degree of employer hesitancy with regard to the SHOP concept and could significantly impact enrollment, particularly in the early years of exchange implementation. The availability of the federal Small Business Health Insurance Tax Credit (SBTC) only through the SHOP exchanges is supposed to be an incentive for small employers to purchase coverage via an exchange, but NAHU members are not convinced the tax credit availability will be a major draw for small businesses. The success of that SBTC has been disappointing, at best, to date. According to a recent Government Accountability Office report, a variety of mitigating factors caused only 170,300 businesses out of a pool of as many as 4 million potentially eligible to claim the SBTC in This is a take-up rate of about four percent in the current marketplace. If to claim the credit in the future, the coverage choices are restricted to the SHOP exchange, and any or all of the current concerns we anticipate employers may have with SHOP coverage exist, we do not believe the SBTC will play a strong role in attracting employers to any SHOP exchange. We urge HHS to take all of this data into consideration when weighing the potential design of any FF SHOP exchange and in developing and issuing further SHOP exchange regulations and guidance. Setting expectations appropriately from the outset with regard to enrollment and small-employer needs will allow HHS to manage resources and provide the best possible service to the limited population likely to utilize the FF SHOP in the early years of exchange implementation. Providing definitive and timely answers to the producer and small-employer communities on the many SHOP exchange questions we have raised herein will also go a long way toward ensuring that small employers consider the SHOP exchanges to be a viable coverage option for their employees. Finally, on an overall basis, we feel the need to stress to you our concerns about timing and the lack of definitive information being provided to the states, as well as the carrier and producer communities and individual and smallbusiness consumers, regarding FFEs. The FFE information is particularly important, since it increasingly appears that the bulk of states will have some type of FFE offering, at least initially. The development of the FFE and state partnership approach should be issued and finalized through the proposed rule-making process as soon as possible so that all stakeholders can make informed decisions moving forward. NAHU sincerely appreciates the opportunity to provide these comments from our Exchange Advisory Group, and we look forward to working with you as implementation of PPACA, and exchanges specifically, moves forward. If you have any questions, or if we can be of further assistance, please feel free to contact me at or

8 Alternatively, you may wish to contact our senior vice president of government affairs, Jessica Waltman, at or Sincerely, Janet Trautwein, Executive Vice President and CEO National Association of Health Underwriters