	Background

Exchanges are online marketplaces where eligible individuals and small  businesses can purchase health insurance. Under PPACA, an exchange must be operational in each state by  January 1, 2014. States have some flexibility with respect to exchanges,  by choosing to establish and operate an exchange themselves (referred  to as a state-based exchange) or by ceding this authority to HHS  (referred to as a federally facilitated exchange). According to HHS,  a partnership exchange is a variation of a federally facilitated exchange,  whereby HHS establishes and generally operates the exchange and the  state assists HHS with operating various functions of the exchange. States’ Responsibilities for Establishing Exchanges Vary, Depending on the Type of Exchange

PPACA and HHS implementing regulations and guidance require states  and exchanges to carry out a number of key functions, for which state  responsibilities vary by exchange type. A state that chooses to run its own  exchange is responsible for: establishing an operating and governance  structure, ensuring QHPs are certified and available to qualified  individuals, streamlining eligibility and enrollment systems, conducting  consumer outreach and assistance, and ensuring the financial  sustainability of the exchange. States that  partner with HHS may assume some aspects of this function. Despite Some Challenges, Selected States Have Taken Action to Establish Exchanges and Report They Will Be Ready for Enrollment by October 2013

		Nearly All Selected States Have Created an Operating and Governance Structure

Six of the seven states in our study were conditionally approved by HHS  to create a state-based exchange. Iowa officials also reported  that, by assuming responsibility over certain exchange activities, such as  overseeing and certifying qualified health plans, partnering with HHS  allows the state to maintain regulatory control over its insurance market. Two states have decided whether their exchanges will have the  authority to actively select which QHPs may participate in the exchange. All seven states included in our review have taken steps to invite health  insurers to participate in their exchanges. In addition to upgrading eligibility and enrollment systems, six of the  seven states are in various stages of building the exchange IT  infrastructure needed to integrate these systems and allow consumers to  navigate among health programs and purchase QHPs through a variety  of access points, using a single streamlined application. Despite the challenges associated with  developing the IT systems, officials in six states reported their systems  will be ready for enrollment by October 1, 2013. States are Developing Outreach and Assistance Programs to Help Consumers Enroll in the Exchange

Six of the seven states included in our review are in various stages of  developing a consumer outreach and assistance program to reach out to  potential consumers and help them enroll. As a partnership state, Iowa  has not yet decided whether and to what extent it will assist HHS with  aspects of this function. While states reported they are considering options to fund ongoing  exchange costs, such as salaries and benefits, consulting services,  outreach and marketing, and information technology, three states will  charge fees to insurance carriers participating in the exchange. While the states in our review have developed financing options, some  state officials identified challenges with developing these options, given  uncertainties related to exchange enrollment. In response, HHS provided technical comments, which we  incorporated as appropriate. To identify states’ responsibilities for establishing exchanges and the  challenges they encountered, we reviewed selected Patient Protection  and Affordable Care Act (PPACA) provisions and Department of Health  and Human Services (HHS) implementing regulations and guidance  related to the following categories: establishing a governance and operating structure; ensuring exchanges will be capable of certifying qualified health ensuring the financial sustainability of the exchange. To identify actions selected states have taken to create exchanges and  the challenges they encountered, we conducted semistructured  interviews with officials in seven states: the District of Columbia, Iowa,  Minnesota, Nevada, New York, Oregon, and Rhode Island. The percentage of the uninsured population in states based on a 3- year average (2008 to 2010);  2. Geographic dispersion; and  5.
Why GAO Did This Study

A central provision of PPACA requires the establishment of exchanges in each state--online marketplaces through which eligible individuals and small business employers can compare and select health insurance coverage from participating health plans. Exchanges are to begin enrollment by October 1, 2013, with coverage to commence January 1, 2014. States have some flexibility with respect to exchanges by choosing to establish and operate an exchange themselves (i.e., state-based), or by ceding this authority to HHS (i.e., federally facilitated). States may also choose to enter into a partnership with HHS whereby HHS establishes the exchange and the state assists with operating various functions. According to HHS, 18 states will establish a statebased exchange, while 26 will have a federally facilitated exchange. Seven states will partner with HHS.
GAO was asked to report on (1) states' responsibilities for establishing exchanges, and (2) actions selected states have taken to establish exchanges and challenges they have encountered. To do this work, GAO reviewed PPACA provisions and HHS implementing regulations and guidance. GAO also conducted semistructured interviews with state officials in the District of Columbia, Iowa, Minnesota, Nevada, New York, Oregon, and Rhode Island. For this review, GAO refers to the District of Columbia as a state. GAO selected these states based on several criteria, such as a 3-year average of states' uninsured population and geographic dispersion. HHS and the seven states in our review provided technical comments on this report, which GAO incorporated as appropriate.

What GAO Found

The Patient Protection and Affordable Care Act (PPACA) and the Department of Health and Human Services (HHS) regulations, supplemented by HHS guidance, require states and American Health Benefit Exchanges (exchanges) to carry out a number of key functions, for which state responsibilities vary by exchange type. A state that chooses to operate its exchange is responsible for: (1) establishing an operating and governance structure, (2) ensuring exchanges are capable of certifying qualified health plans and making them available to qualified individuals, (3) developing electronic, streamlined, and coordinated eligibility and enrollment systems, (4) conducting consumer outreach and assistance, and (5) ensuring the financial sustainability of the exchange. A state that partners with HHS may assist HHS with certain functions, such as making qualified health plan recommendations and conducting aspects of consumer outreach and assistance.
Despite some challenges, the seven selected states in GAO's review reported they have taken actions to create exchanges, which they expect will be ready for enrollment by the deadline of October 1, 2013. For example:
Six states will operate as a state-based exchange, with most choosing this option as a way to maintain control of their insurance markets and better meet the needs of their state's residents. The seventh state-- Iowa--will--partner with HHS.
All seven states have taken steps toward deciding which qualified health plans would be included in the exchange. Two states have decided that their exchanges will have the authority to actively select which qualified health plans may participate in the exchange, while the remaining five states will allow all qualified health plans to participate in the exchange.
All states are in various stages of developing an information technology (IT) infrastructure, including redesigning, upgrading, or replacing their outdated Medicaid and Children's Health Insurance Program eligibility and enrollment systems. Six states are also building the exchange IT infrastructure needed to integrate systems and allow consumers to navigate among health programs, but identified challenges with the complexity and magnitude of the IT projects, time constraints, and guidance for developing their systems.
Six of the seven states included in our review are in various stages of developing a consumer outreach and assistance program to reach out to and help enroll potential consumers. As a partnership state, Iowa has not yet decided whether and to what extent it will assume responsibility for aspects of this function.
Officials in the six state-based exchanges reported they are considering revenue options for financially sustaining their exchange. For example, three states plan to charge fees to insurance carriers participating in the exchange. However, some states reported challenges with developing these options, given uncertainties related to exchange enrollment, on which the fees are based.