Reform Alert - News from the Blues' Office of National Health Reform

Proposed rules outline state-based competitive health insurance exchanges

Oct. 17, 2011

The U.S. Department of Health and Human Services provided a proposed rule for establishing state exchanges enabling individuals and small businesses to shop, compare, and enroll in plans that best meet their needs.

Work is underway to design and implement the exchanges. The proposed regulations lay out a timeframe under which states must submit their applications to the federal government. In order to be fully operational on Jan. 1, 2014, Michigan must receive approval from HHS by Jan. 1, 2013. Michigan must submit a plan and undergo a business readiness assessment ensuring that its entire geographic area is covered by one or more exchanges, and must notify HHS and receive approval for any changes. If a state is not running its own exchange, HHS will step in and run the exchange in that state. 

If Michigan is not completely ready by Jan. 1, 2013, but is still aiming to have a fully operational state-run exchange by Jan. 1, 2014, HHS may issue a conditional approval. Alternatively, Michigan may seek approval to begin operations on Jan. 1, 2015, or on Jan. 1 of a subsequent year. States must receive HHS approval at least 12 months prior to the proposed effective date of a state-run exchange, and must be able to transition to a state-operated exchange if the exchange is initially federally operated. If a state does not expect that it can run all of the exchange functions itself, states can enter into a partnership with HHS or other states to help administer the exchange or can rely completely on the federal fall back. Federal funds are available for states that are working to implement an exchange, but no federal funding will be provided after Jan. 1, 2015.

Exchanges must be a governmental agency or a non-profit entity established by the state. The HHS-proposed rule envisions exchanges having governing boards consisting of health experts, including representatives from health insurance issuers. The exchange must regularly consult with certain stakeholders including health insurance issuers. 

The following are requirements of the exchange:

  • Must accept applications directly from an applicant, an authorized representative of an applicant, or someone acting responsibly for an applicant. 
  • Must allow application filing via an Internet portal, a call center, by mail and in person. 
  • Must provide consumer support, including a toll-free call center, website with comparison tools, and personalized calculator to determine subsidies and cost of coverage.

Small Business Health Options Program Exchange - Employer options

In order to purchase coverage on the SHOP Exchange, an employer must be a small employer and must offer coverage to all its full-time employees. Small employer must be defined as one to 100 employees beginning 2016; prior to 2016, states can limit to the small employer definition to one to 50 employees. If the employer chooses to offer coverage to employees based on the employee's primary worksite, rather than the employer's principal place of business, the SHOP exchange must allow the employer to offer coverage to those employees whose primary worksite is in the SHOP's service area.

SHOP Exchange - Employee choice

The SHOP exchange must allow a qualified employer to select a metal level of coverage (bronze, silver, gold or platinum), in which all health plans sold at that level of coverage on the exchange are available to the employer's qualified employees. The SHOP exchanges have the option of permitting employers to make one or more health plans available through other means.

For example, the SHOP exchange could allow employers to have the option of picking a single plan for their employees, to pick from several specific plans at one or more metal levels, or to pick from any plan available on the exchange.


Navigators minimum duties include: maintain expertise in eligibility, enrollment, and program specifications; conduct education activities to raise awareness about the exchange; provide information in a fair, accurate and impartial manner; facilitate enrollment; provide referrals for any enrollee with a grievance; and provide information in a culturally and linguistically appropriate manner. 

  • Navigators will be paid by the exchange. 
  • Navigators cannot receive a commission for sales of coverage on an exchange. 
  • However, at state discretion, navigators may be able to receive commissions from health insurance issuers for sales of products off the exchange. 
  • The state or exchange may enforce existing and establish new standards or licensing requirements tailored to navigators. 
  • Navigators performing Medicaid and CHIP administrative functions may claim federal funding for a share of expenditures incurred.

Agents and Brokers

  • States have the option to permit agents or brokers to assist qualified individuals, qualified employers, or qualified employees with enrollment on an exchange. 
  • States have the option to allow agents and brokers to assist individuals with applications for advance payments of the premium tax credit and cost-sharing reductions. 
  • The exchange may provide agent and broker information on its website. 

The proposed regulation is open to public comments until Oct. 31, 2011 at which time modifications may be made prior to the issuance of final regulations. Blue Cross Blue Shield of Michigan will continue to monitor the regulation.

For more information about insurance exchanges, visit


The information on this website is based on BCBSM's review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.