Deciding Who’s the Boss: States Tackle Exchange Governance

Most states are in the thick of their legislative sessions and one issue that many states are working on is health benefit Exchange enabling legislation. Governance structure is an issue addressed by many of these exchange bills. Governance choices will shape Exchange operations, accountability, and the impact on health insurance markets.
The ACA requires that the Exchange be a nonprofit entity or governmental agency established by a state, but gives states great flexibility within these broad parameters. States can set up the Exchange within an existing state agency, create a new agency or quasi-governmental entity, or set up an independent nonprofit entity. Currently, we have fifteen state Exchange bills posted on State Refor(u)m that highlight the different governance models.

• Quasi-Governmental Entity: In this model, the state establishes the Exchange as an independent public entity. The Exchange performs state functions, but can be exempt from certain state contracting and procedural rules, as well as salary caps, so that it functions more like a private sector organization. A majority of introduced legislation we have received so far follows this model.
  • For example, introduced legislation from Connecticut, Rhode Island and Maryland would establish an Exchange as a quasi-governmental entity that carries out state functions, but still retains some independence.

• State Agency: Establishing the Exchange in an existing or new state agency allows states to take advantage of existing infrastructure and resources, but could also subject it to slower processes, administrative requirements, and political concerns.
  • Mississippi’s House of Representatives has passed legislation that would establish a new Exchange state agency.

• Nonprofit: In this model, the Exchange is an independent, nonprofit entity that is separate from the state government. A nonprofit Exchange would have greater flexibility and independence, but that independence could make it more difficult to coordinate with state agencies.
  • North Carolina’s introduced legislation would create the Exchange as a nonprofit that is legally separate from the state and under the control of a board of directors.

As states continue to draft their Exchange legislation, examine various governance options, and decide what to include in enabling legislation the following resources may be helpful:

• The National Association of Insurance Commissioners (NAIC) has released model legislative language on establishing Health Benefit Exchanges.

• The National Academy for Social Insurance released its Toolkit for State Policymakers,containing legislative options that build on NAIC’s model legislation. The first of four accompanying briefs on governance structure is also available.

• The latest issue of St@teside from State Coverage Initiatives highlights the reasons why many states are planning to establish the Exchange as a quasi-governmental entity.

• As states consider their legislation, a review of the requirements for Exchanges as set forth by the ACA may be helpful. NASHP recently released a brief that sets forth the general parameters of these requirements.

At State Refor(u)m, we plan to probe deeper and examine governing board composition in an upcoming blog post.
Is your state tackling Exchange governance decisions? Please send draft legislation—and any other Exchange or health reform-related materials—to State Refor(u)m atstatereforum@oldsite.nashp.org.