The health care reform law calls for the creation of state-based insurance Exchanges. This Legislative Brief provides an overview of state progress toward creating the Exchanges and the role of entities typically involved with the insurance placement process (such as brokers and agents) under the Exchanges. It also discusses the emergence of private health insurance Exchanges.

1. Brought to you by The Gardner Group
Health Insurance Exchanges
The Affordable Care Act (ACA) calls for the creation of state-based competitive marketplaces, known as Affordable
Health Insurance Exchanges (Exchanges), for individuals and small businesses to purchase private health
insurance. According to the Department of Health and Human Services (HHS), the Exchanges will allow for direct
comparisons of private health insurance options on the basis of price, quality and other factors and will coordinate
eligibility for premium tax credits and other affordability programs. ACA requires the Exchanges to become operational
in 2014.
Due to a number of factors, states’ progress toward developing the Exchanges has been far from uniform. There has
also been uncertainty surrounding the structure of the Exchanges and the role of entities that have been traditionally
involved with the insurance placement process, such as brokers and agents.
On March 27, 2012, HHS issued final regulations to provide a framework for states on important aspects of
Exchanges.
In addition to ACA’s Exchanges, private health insurance exchanges are emerging to provide another way for
employers to provide health insurance coverage for employees.
STATE PROGRESS ON EXCHANGES
According to HHS, since ACA was passed in March 2010, all states have taken some action to implement the health
care reform law. For example, 49 states are participating in ACA’s premium rate review system where insurers must
justify the rationale behind any double-digit increases in insurance premiums. However, states have not made nearly
as much progress toward establishing their Exchanges.
Exchanges must be ready to accept enrollees on Oct. 1, 2013. To meet this deadline, a state’s plan to operate its own
Exchange must be approved by HHS no later than Jan. 1, 2013. HHS will give conditional approval for a state’s plan
if the state is advanced in its preparation but cannot demonstrate complete readiness by Jan. 1, 2013. If a state fails
to meet this deadline, HHS will operate the federally-run exchange for residents of that state.
HHS provided a Blueprint for states to use to receive federal approval for a state-based Exchange or a state-
partnership Exchange. HHS also issued guidance on its approach to implementing a federally-run Exchange in any
state where a state-based Exchange is not operating.
Some states, such as Oregon, Colorado and Maryland, plus the District of Columbia, have already established
Exchanges and received HHS’ conditional approval for their Exchange plans. Other states that intend to operate their
own Exchanges starting in 2014 include Kentucky, New York, Connecticut, Washington, Nevada, Idaho, Utah, New
Mexico, Minnesota, California, Vermont and Rhode Island.
Some states have announced that they do not intend to create their own Exchanges, but will partner with HHS to
develop an Exchange. These states include Iowa, Arkansas, Illinois, Michigan, West Virginia, Delaware and New
Hampshire.
A majority of states will let HHS run an Exchange for their residents starting in 2014, including Arizona, Texas,
Louisiana, Wisconsin, Florida, Georgia, Ohio and Pennsylvania.

2. Health Insurance Exchanges
This Legislative Brief provided by The Gardner Group is not intended to be exhaustive nor should any discussion or opinions be
construed as legal advice. Readers should contact legal counsel for legal advice.
© 2012-2013 Zywave, Inc. All rights reserved.
4/12, 2/13
2
EXCHANGE FUNCTIONS AND ROLES
The Exchanges will perform a variety of functions, including:
 Certifying health plans as qualified health plans (QHPs) to be offered in the Exchange;
 Operating a website to facilitate comparisons among QHPs for consumers;
 Operating a toll-free hotline for consumer support, providing grant funding to entities called “Navigators” for
consumer assistance and conducting consumer outreach and education;
 Determining eligibility of consumers for enrollment in QHPs and for insurance affordability programs (such as
premium tax credits, Medicaid and CHIP state-established basic health plans); and
 Facilitating the enrollment of consumers in QHPs.
States have flexibility in determining the design of their Exchanges. For example, states may decide whether their
Exchanges will be operated by a non-profit organization or a public agency. States may also select the number and
type of health plans available in their Exchanges and may determine some of the standards for QHPs, including the
definition of required essential health benefits. In addition, states have flexibility to determine a role for agents and
brokers, including the use of online brokers, in connection with the Exchanges.
Navigator Program
The Navigator program is an essential component of an Exchange. Navigators will help consumers learn about and
choose health coverage through the Exchanges. For example, a Navigator will provide information regarding various
health programs and will provide information in a manner that is culturally and linguistically appropriate to the needs
of the populations being served by the Exchange.
States have flexibility to design their Navigator programs, including selecting the entities that will serve as Navigators,
within the framework contained in HHS’s final regulations. The final regulations provide the following guidance for the
Navigator program:
 Exchanges must have at least two entities serve as Navigators, and one of the entities must be a community
and consumer-focused nonprofit group.
 Exchanges must have conflict of interest standards for Navigators. These standards must prohibit a Navigator
from receiving any kind of compensation from a health insurance or stop loss insurance issuer for enrolling
individuals in health insurance plans. This prohibition applies to both plans offered through an Exchange, and
plans offered outside of an Exchange. However, Navigators who sell lines of insurance that are not health or
stop loss insurance would not be prohibited from receiving consideration from the sale of those other lines of
insurance while serving as Navigators, so long as they disclose this to consumers.
 Exchanges must have a set of training standards for Navigators to ensure expertise in the needs of
underserved and vulnerable populations, eligibility and enrollment procedures, the range of QHPs and public
programs and the Exchange’s privacy and security standards.
Exchanges will award grants to Navigators in FFEs and state partnership Exchanges. On April 9, 2013, HHS announced
that this funding is now available. Applications are due by June 7, 2013, and must be submitted electronically.
Brokers and Agents
States have flexibility to determine what role brokers and agents will serve in their Exchanges. Licensed brokers and
agents are eligible to serve as Navigators under the final regulations. However, the responsibilities of a Navigator
differ from the traditional activities of a broker or agent. Also, the conflict of interest standards would preclude brokers

3. Health Insurance Exchanges
This Legislative Brief provided by The Gardner Group is not intended to be exhaustive nor should any discussion or opinions be
construed as legal advice. Readers should contact legal counsel for legal advice.
© 2012-2013 Zywave, Inc. All rights reserved.
4/12, 2/13
3
and agents who are serving as Navigators from receiving compensation from an issuer for selling health or stop loss
insurance. Thus, the Navigator role may not be the best fit for brokers and agents under the Exchanges.
The final regulations give states the option of permitting brokers and agents to enroll individuals and employers in
QHPs offered through the Exchanges. In addition, the regulations permit brokers to assist individuals in applying for
advance premium tax credits and cost-sharing reductions for QHPs. Exchanges may provide information about brokers
and agents directly on their websites for the convenience of consumers seeking insurance through the Exchange.
If an Exchange works with brokers or agents, there must be an agreement in place that requires the brokers and
agents to:
 Register with the Exchange in advance of enrolling individuals;
 Receive training on the range of QHP options and insurance affordability programs; and
 Comply with the Exchange’s privacy and security standards.
There is no overall prohibition on agents or brokers not acting as Navigators receiving commissions through an
Exchange. Each state that is operating its own Exchange has the authority to determine how agents and brokers will
be involved in the Exchange and how compensation will be structured. HHS has also established a standard for QHP
certification in FFEs ensuring that issuers pay the same broker compensation for QHPs in the FFE or FF-SHOP that the
issuer pays for similar plans in the outside market.
States are permitted to use online brokers and agents for the enrollment process. Online brokers may not provide
financial incentives (such as rebates or giveaways) that could potentially steer individuals to a specific QHP or issuer.
Online brokers must also provide consumers with the ability to withdraw from the process at any time and enroll
directly through an Exchange.
PRIVATE EXCHANGES
While ACA’s state-based Exchanges are scheduled to be effective in 2014, some private health insurance exchanges
targeted at employers are already operational. As a growing trend, these private exchanges create a marketplace for
employees to compare options and shop for coverage. At the same time, they allow private health care companies to
market their products at a single location to clients throughout the country.
The private exchanges may be most useful to larger employers that will not be eligible to use ACA’s Exchanges until
2017 at the earliest.
Some employers may use the private exchanges to offer employees a defined contribution model of purchasing health
coverage. Under this model, employers provide employees with a lump sum amount and direct them to an exchange
where they can select a health plan from a large array of options. However, beginning in 2014, employers with more
than 50 workers may be subject to a penalty under ACA if they do not provide health coverage to their employees, or
if the health coverage they offer is not affordable or does not provide minimum value.
ADDITIONAL RESOURCES
HHS’s final regulations on Exchanges are available at: www.gpo.gov/fdsys/pkg/FR-2012-03-27/pdf/2012-6125.pdf.
More information on the Exchanges is available through www.healthcare.gov and http://cciio.cms.gov/index.html.

4. Health Insurance Exchanges
This Legislative Brief provided by The Gardner Group is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers
should contact legal counsel for legal advice.
© 2012 Zywave, Inc. All rights reserved.
4/12, EEM 12/12
4